Antitrust Law Daily Wrap Up, ANTITRUST—DIda: Medical Center Attorney, Employee Access to Sensitive Documents Restricted in Antitrust Litigation, (Jan 14, 2013)

By Tobias J. Gillett, J.D., LLM.

In an antitrust challenge to Idaho hospital operator St. Luke’s Health System Ltd.’s acquisition of an independent physician group, only the acquired physician group’s chief executive officer and outside counsel can have access to confidential documents, and only to those documents pertaining to the group’s activities prior to acquisition, and St. Luke’s in-house counsel may not have access to documents marked “Attorney’s Eyes Only,” the federal district court in Boise, Idaho, has ruled (Saint Alphonsus Med. Ctr. v. St. Luke’s Health System, January 10, 2013, Bush, R.). The court did strike down a proposed limitation on the ability of counsel to show witnesses those portions of confidential documents to which the witnesses did not have knowledge.

St. Luke's Health System, Ltd. is an operator of hospitals in Idaho. St. Luke’s sought to acquire Saltzer Medical Group, an independent physician group located in Nampa, Idaho. St. Luke’s had entered into a preliminary agreement with Saltzer under which St. Luke’s acquired the assets of Saltzer and Saltzer’s physicians and employees worked for St. Luke’s under a professional services agreement, but the arrangement could be dissolved should the litigation have adverse results.

Saint Alphonsus Medical Center, which operated four hospitals, including a facility in Nampa, filed suit, claiming that the transaction would enable St. Luke’s to obtain market power in Nampa. This market power would allegedly allow St. Luke’s to negotiate higher fees with health insurers and to steer patients away from Saint Alphonsus’s facility. The present order addressed several disputes regarding aspects of a proposed protective order.

Employee Access to Confidential Information

The first dispute concerned whether two Saltzer employees, Saltzer’s CEO and president, and Saltzer’s outside counsel should have access to documents marked “Confidential.” Saint Alphonsus argued that permitting four St. Luke’s employees and the Saltzer employees and counsel access to the documents would amount to “stacking the deck” against Saint Alphonsus, since Saint Alphonsus would have access only through its own representatives. St. Luke’s argued that the litigation had broader ramifications than just the immediate transaction, as both St. Luke’s and Saint Alphonsus had expanded into other geographic markets in Idaho, and antitrust enforcement agencies had expressed an interest in the Saltzer transaction.

The court agreed that in this context some person with knowledge and experience concerning Saltzer should have access to the documents. The court determined that it would permit Saltzer’s CEO and outside counsel to review “Confidential” documents from Saltzer’s pre-transaction records, but not other confidential documents, since the CEO would have been involved in “competitive decision making,” knowledge of which St. Luke’s would likely seek to draw upon. To prevent prejudice to Saint Alphonsus, the court would not allow Saltzer’s president access to any of the documents.

In-House Counsel Access to “Attorney’s Eyes Only” Information

The second dispute involved an effort by St. Luke’s to have its in-house counsel granted access to documents marked “Attorney’s Eyes Only.” St. Alphonsus argued that permitting St. Luke’s in-house counsel to review those documents, which included strategies, managed care rates and negotiations, and physician contracting, could likely cause “severe financial harm and competitive disadvantage” to it and to third parties.

The court explained that deciding this dispute required “weigh[ing] the potential harm of any inadvertent disclosure against prejudice to the other party from denial of access.” The court concluded that allowing members of St. Luke’s “small,” four-attorney in-house counsel department to have access to such sensitive documents about information supporting competitive decision-making in litigation between major competitors had clear risks of inadvertent disclosure.

Although St. Luke’s sought access only for two attorneys it claimed were not involved in competitive decision-making, the court noted that in such a small office that arrangement could change. Moreover, the attorneys would likely have difficulty separating their advice into that with knowledge of Saint Alphonsus’s information and that without that knowledge.

The court observed that St. Luke’s reason for wanting its in-house counsel to have access to the material, so that outside counsel could confer with knowledgeable in-house counsel with the ability to “explain to outside counsel the significance of particular documents,” conflicted with its argument for permitting access, since “to have such knowledge and be in the best position to analyze and explain, the attorneys must necessarily have knowledge already acquired about competitive decision-making.”

The court also noted that St. Luke’s had very experienced outside counsel, and that the “Attorney’s Eyes Only” designation only applied to a subset of documents. The court therefore restricted the access of St. Luke’s in-house counsel to those materials, but stated its willingness to intervene should the “Attorney’s Eyes Only” designation be abused.

Witness Viewing of Confidential and Attorney’s Eyes Only Information

Saint Alphonsus also sought limitations on the ability of witnesses to review portions of documents other than those for which the witness had knowledge. St. Luke’s argued that such restrictions “would prevent counsel from showing a confidential document to a witness to determine whether and to what extent the witness had access to some or all of the document,” and would burden the discovery process.

The court agreed with St. Luke’s, determining that “the likelihood of the harm envisioned by [Saint Alphonsus] is so small that the solution becomes a potential impediment to the discovery process that outweighs the detriment of the purported harm,” particularly in expedited litigation. The court noted that the parties could request it to impose a more restrictive protective order on particular documents where a party saw “compelling concerns of the sort envisioned by” Saint Alphonsus.

The case is No. 1:12-cv-00560-BLW-REB.

David A. Ettinger (Honigman Miller Schwartz and Cohn LLP) for Saint Alphonsus Medical Center - Nampa Inc. J. Walter Sinclair (Stoel Rives) for St. Luke's Health System, Ltd.

Cases: Antitrust IdahoNews