Antitrust Law Daily Wrap Up, ANTITRUST—S.D. Ohio: Nonparty competing medical center required to comply with subpoena in group boycott action, (Jul 29, 2013)

By Peter Reap, J.D., LL.M.

In an action brought by The Medical Center at Elizabeth Place, LLC, alleging a boycott claim against Premier Health Partners, non-party Riverview Health Institute (RHI) was ordered to testify at a deposition in the case, the federal district court in Cincinnati has ruled (Medical Center at Elizabeth Place, LLC v. Premier Health Partners, July 25, 2013, Black, T.). Thus, RHI’s motion to quash the subpoena was denied.

Background. RHI is a hospital that competes with Plaintiff and Defendant hospitals. RHI is located in the Dayton area, in the same business complex as Plaintiff, and opened its doors approximately the same time as Plaintiff. Allegedly, RHI has less than half the number of beds as Plaintiff, yet it has five times the number of patients. RHI has achieved this growth even though it does not accept commercial insurance patients. Plaintiff, by contrast, alleges that it is impossible to survive without commercial patients. Defendants request discovery from RHI to understand how it is able to do what Plaintiff says cannot be done.

Under Rule 45 of the Federal Rules of Civil Procedure, parties may command a nonparty to, inter alia, produce documents. Fed. R. Civ. P. 45(a)(1). Rule 45 further provides that “the issuing court must quash or modify a subpoena that…requires disclosure of privileged or other protected matter, if no exception or waiver applies; or subjects a person to undue burden.”

In reviewing a motion to quash, the court may consider whether (i) the subpoena was issued primarily for the purposes of harassment, (ii) there are other viable means to obtain the same evidence, and (iii) to what extent the information sought is relevant, nonprivileged, and crucial to the moving party’s case. If the documents sought by the subpoena are relevant and are sought for good cause, then the subpoena should be enforced unless the documents are privileged or the subpoenas are unreasonable, oppressive, annoying, or embarrassing.

Conflict of interest. RHI argued that the subpoena should be quashed because it was improperly informed by Faruki Ireland & Cox P.L.L. (FIC). Moreover, RHI maintained that unless FIC is disqualified from the case, it would be inappropriate to permit a subpoena to go forward.

In late December 2006, Dr. Fallang, owner of RHI, asked Mr. Ireland, partner at FIC, to assist in the analysis of possible legal claims that Dr. Fallang and RHI might have against various insurance carriers for certain accounts receivable. Mr. Ireland and an associate (who is no longer with FIC) performed the requested research and legal analysis, but FIC was never engaged to pursue any claims on behalf of Dr. Fallang or RHI. Mr. Ireland’s representation of Dr. Fallang and RHI terminated in or around February 2007.

None of the attorneys at FIC working on the instant case worked on the matter for Dr. Fallang and RHI, the court noted. In fact, Mr. Faruki was unaware of any prior representation until it was brought to his attention on May 30, 2013. While Mr. Faruki does not believe FIC has a conflict of interest that would prevent it from representing Defendants in the enforcement of the subpoena, out of an abundance of caution and to avoid wasting this Court’s time in addressing the issue, FIC withdrew from handling the enforcement of the subpoena and implemented an ethical screen that formally prohibits Mr. Ireland from working on the case and all attorneys, paralegals, and staff working on the case from accessing, reviewing, or using the closed file from Mr. Ireland’s former representation.

The Restatement provides that “a lawyer who has represented a client in a matter may not thereafter represent another client in the same or a substantially related matter in which the interests of the former client are materially adverse.” However, the Restatement (Third) of the Law Governing Lawyers has recognized the use of screens to remove the imputation of shared confidences or secrets.

As a threshold matter, a court must examine the degree to which the tainted attorney represented the former client. In this matter, Mr. Ireland was the principal attorney retained by RHI. This fact weighed in favor of disqualification, the court held. However, Mr. Ireland did not represent RHI in a lawsuit, the representation lasted less than three months, RHI is not a party to the litigation, and FIC claims the subject matter of the prior representation is distinguishable, the court observed.

Although no bright line rule exists, another pertinent consideration as to whether the presumption has been rebutted is the relative recency of the incident. Mr. Ireland’s representation of RHI terminated in February 2008, more than five years ago. The fact that extensive time has passed since Mr. Ireland’s representation weighed against FIC’s disqualification.

A party could also attempt to rebut the presumption of shared knowledge through affidavits, setting forth the tainted attorney’s recollection of any confidential information and whether the attorney shared such information with co-workers. Specifically, Mr. Faruki represents that Mr. Ireland had no involvement in the instant case. This affidavit weighed against FIC’s disqualification, according to the court.

Moreover, the presumption was further rebutted by FIC’s screen. This screen evidences Mr. Ireland and Mr. Faruki’s understanding of their ethical obligations in this matter. More importantly, it adequately isolated Mr. Ireland from the case.

Finally, the evidence supported a finding that the screen was timely erected, the court ruled. Specifically, Mr. Ireland did not work on this case and Mr. Faruki had no knowledge of his prior representation. The screen was erected immediately upon learning about the potential conflict.

Given these facts, there is no real danger that FIC may have gained or will gain an unfair advantage over non-party RHI and it would be highly unjust to disqualify each member of the FIC firm. Thus, FIC rebutted the presumption of shared confidences or secrets.

Subpoena Requests in Dispute

As narrowed, the subpoena seeks information that is relevant to the claims and defenses in this litigation, the court held. Specifically relevant is information regarding a competitor in the Dayton area that does business in a manner that Plaintiff claims is impossible. Contrary to RHI’s contention, per se rules could require considerable inquiry into market conditions before the evidence justifies a presumption of anticompetitive effect. Consistent with this ruling, Premier is entitled to discovery to establish that the rule of reason and not the per se rule is in fact the appropriate standard of analysis in this case, and the subpoena as narrowed seeks information that is directly relevant to that inquiry.

To prove its claim, Plaintiff must prove the existence of an antitrust injury. Specifically, Plaintiff must show that there has been an adverse effect on prices, output, or quality of goods in the relevant market as a result of the challenged actions. Accordingly, the court must consider the marketwide impact of the challenged conduct on competition, not merely its impact on Plaintiff. As RHI competes from the same building as Plaintiff, the competitive impact of RHI before and during the period when Plaintiff alleges that the group boycott occurred is relevant to the court’s determination of whether Plaintiff can show not just that its business has been harmed, but antitrust injury, according to the court.

Requests 1-3: identify, by name and title, the managers at Riverview. The purpose of requesting the names of “a handful” of managers at RHI is to identify relevant custodians who may have responsive documents, the court noted. Accordingly, to the extent RHI can provide a sufficient description of these managers in order to identify relevant custodians, the identities of these managers need not be disclosed. If in fact identities are required in order to identify relevant custodians, such information shall be designated as “Highly Confidential – Outside Counsel Eyes Only” to prevent any alleged harassment.

Request 4: identify the names of the physicians who regularly practice medicine at Riverview as well as their medical specialties, the level of their privileges, and the dates that Riverview granted those privileges. This information is relevant in interpreting the Ohio Hospital Association data and therefore should be produced. Moreover, this information shall be designated as “Highly Confidential – Outside Counsel Eyes Only”, thereby obviating RHI’s concern about its production, the court decided.

Request 5: Riverview’s regularly prepared financial statements. The financial reports are relevant and the documents shall be designated as “Highly Confidential – Outside Counsel Eyes Only” to protect RHI from such information being released to a competitor.

Request No. 6: Riverview’s unpublished patient discharge information. Specifically, information provided to the Ohio Hospital Association, such as information on inpatient visits, services provided (i.e., diagnostic and procedural codes), admission and discharge dates, payer category and total hospital charges. This information (which is comparable to the information Plaintiff and Premier are providing to each other) is necessary to determine the specific hospital services provided by RHI on a patient level basis. Such data shall remain confidential pursuant to the Protective Order.

Requests Nos. 7-9: all documents constituting or relating to any surveys, analyses, or studies undertaken by Riverview or on Riverview’s behalf regarding competition with MCEP, Premier or any of the Premier facilities (limited to the files of a few key custodians, i.e., the “managers” whose identifies Defendants requested in Request Nos. 1-3). Defendants do not seek all letters and emails, but more specifically the basic planning documents, strategic plans, analyses, and studies that were undertaken by RHI, the court explained. This request, as narrowed, is relevant. Accordingly, RHI shall produce such documents designated as “Highly Confidential – Outside Counsel Eyes Only.”

Request No. 11(c): documents relating to payment or reimbursement rates or other terms with any healthcare payor (limited to the files of a few key custodians, i.e., the “managers” whose identifies Defendants requested in Request Nos. 1-3). The Defendants did not request correspondence regarding payment or whether the insurers will pay a particular claim on a patient-by-patient basis. Rather, they requested the discussions or correspondence with health care payers regarding the payment or reimbursement rates or other terms on which those payers are willing to do business with RHI as an out-of-network provider. As narrowed, this request is relevant and not unduly burdensome, the court reasoned.

Protective Order

RHI claims that some of the requested information consists of trade secrets or confidential information, the court noted. While the court acknowledged the implicit concern in producing such information, RHI may designate its highly confidential information as “Highly Confidential – Outside Counsel Eyes Only,” and only outside counsel for Premier may view or discuss that information. The fact that RHI competes with Premier and Plaintiff is insufficient to thwart the free flow of information at the heart of the discovery rules.

Attorney Fees

The court declined to award attorney fees, given the fact that: (1) the court declined to quash the subpoena as narrowed; and (2) Premier engaged in a good faith effort to negotiate reasonable parameters to avoid imposing an undue burden.

The case is No. 3:12-cv-26.

Attorneys: Richard A Ripley (Hayes and Boone, LLP) for Medical Center at Elizabeth Place, LLC. Charles Joseph Faruki (Faruki Ireland & Cox PLL) for Atrium Health System.

Companies: Medical Center at Elizabeth Place, LLC; Premier Health Partners

Cases: Antitrust OhioNews