Antitrust Law Daily Wrap Up, ANTITRUST—D. Kan.: Two-tiered protective order approved for discovery in antitrust litigation, with limitations, (Jan 3, 2014)

By Edward L. Puzzo, J.D.

Good cause existed for a protective order for “Confidential” and “Highly Confidential” information in antitrust litigation, but did not exist for inclusion of historical pricing and a “catch-all” category within the “Highly Confidential” tier, the federal district court in Topeka, Kansas has ruled (Suture Express v. Cardinal Health 200, December 31, 2013, Sebelius, G.).

Background. Defendants Cardinal Health 200, LLC and Owens & Minor Distribution, Inc. were distributors of medical and surgical single-use items (“med-surg” supplies) to acute care providers. O&M allegedly possessed 39% of the market, and Cardinal 33% of the market. Plaintiff Suture Express, Inc. distributes specialty sutures and endomechanical (endo) products.

Suture Express brought this antitrust action, alleging that the defendants employed exclusionary practices by tying and bundling the sale of med-surg supplies to sutures and endo products in order to prevent acute care providers from dealing with Suture Express. The defendants allegedly did so by entering into contracts with acute care providers that required the providers to purchase 90% or more of their sutures and endo products from Cardinal or O&M or face a financial penalty on all med-surg products purchased that was allegedly so substantial that it effectively prevented the providers from dealing with Suture Express.

After defendants moved to dismiss plaintiff’s claims, this court ruled on August 1, 2013 that Suture Express had sufficiently alleged claims for illegal tying and exclusive dealing in violation of the Sherman Act, as well as claims under the Kansas Restraint of Trade Act (KRTA).

Protective Order. The defendants subsequently moved for a protective order to protect trade secrets during discovery. Plaintiff agreed, and further agreed to a two-tiered protective order: a tier for “Confidential Information” and a second tier for “Highly Confidential” information. The parties disagreed, however, as to the scope of the “Highly Confidential” category.

The court first addressed the threshold question of whether good cause existed for the proposed two-tiered protective order agreed to by the parties. The court found good cause in that the litigation involved the disclosure of confidential proprietary information as contemplated in Fed. R. Civ. P. Rule 26(c)(1)(G) that could impact each respective party’s competitive position in the marketplace and could cause great harm if disclosed.

Next, the parties’ specific disagreements concerning the scope of the “Highly Confidential” category included (1) whether information relating to products, other than sutures and endo products, should be designated “Highly Confidential”; (2) whether contracts, pricing, and rebate information not currently in force between a defendant and its customer is “Highly Confidential”; and (3) whether the catch-all category “or similar highly sensitive and proprietary commercial information,” should be included within the “Highly Confidential” definition.

Products included. As to the first area of dispute, the court agreed with defendants’ position that the “Highly Confidential” category should include information relating to sutures and endo products as well as other med-surg products. Allowing access to this information to another competitor or potential competitor may harm the defendants, the court stated. In addition, the antitrust case involves much more than the mere pricing of sutures and endo products by themselves, the court reasoned; it also involved the pricing and contracts of an array of other med-surg products. Thus, there was good cause to restrict this information from each party’s respective key decision makers, the court ruled.

Historical contracts and pricing. As to the next area of dispute, the parties agreed that current contractual and pricing information should be designated “Highly Confidential” but disagreed as to whether past contract and pricing information between the defendants and their customers should be included. The court agreed that past contracts and related information could form a party’s current business strategy and warrant protection, but noted that the defendants had failed to provide a single instance where a historic contract or other material contained commercially sensitive information which would harm them if disclosed. Thus, the court ruled, the defendants failed to show good cause for “Highly Confidential” protection of past contractual and pricing information.

Similar proprietary information. The defendants argued that “similar sensitive or proprietary information” should be included in the “Highly Confidential” category because the parties were likely to produce categories of documents during discovery not contemplated by the current “Highly Confidential” definition. In response the court noted that protective orders should be narrowly tailored and entered only after a party sets forth good cause based up a particular demonstration of facts. Inclusion of this provision would involve speculation and is overbroad and vague. Thus, the court ruled that defendants had not established good cause for the inclusion of the catch-all subcategory within the “Highly Confidential” category.

The case is Civil Action No. 12-2760-RDR.

Attorneys: Charles W. German (Rouse Hendricks German May) and Daniel M. Abuhoff (Debevoise & Plimpton, LLP) for Suture Express, Inc. Elisa F. Kantor (Crowell & Moring LLP) for Owens & Minor Distribution, Inc. Eric P. Berlin (Jones Day) for Cardinal Health 200, LLC.

Companies: Suture Express, Inc.; Cardinal Health 200, LLC; Owens & Minor Distribution, Inc.

Cases: Antitrust KansasNews