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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
SAINT ALPHONSUS MED. CTR., et
al.,                                                                                               Case No. 1:12-cv-00560-BLW-REB
Plaintiffs,
v.                                                                                                 ORDER
ST. LUKE’S HEALTH SYSTEM,
Defendant.
INTRODUCTION
The Case Management Order required the parties to finalize and submit a proposed
protective order by January 7, 2013.   Counsel notified the Court that they have three
issues in dispute in their proposed protective order and the Court held a telephone hearing
on January 9, 2013 to consider those issues.   In short, Plaintiffs (referred to collectively as
“St. Al’s”) seek greater restrictions on disclosure of confidential and trade secret
information than does Defendant St. Luke’s Health System Ltd. (“St. Luke’s”).   Because
the parties and counsel are familiar with the factual and procedural background of this
litigation, the Court has included only the facts necessary to explain its decision.   In this
ruling, the Court has considered information in the written record, as well as the
additional information provided by counsel during the hearing.
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DISCUSSION
A.                                                                                              Legal Standards
Federal Rule of Civil Procedure 26(c) allows the court to protect parties from
“undue burden or expense” in discovery by ordering “that a trade secret or other
confidential research, development, or commercial information not be disclosed or be
disclosed only in a designated way.”  Brown Bag Software v. Symantec Corp., 960 F.2d
1465, 1470-71 (9th Cir. 1992).   See also Fed. R. Civ. P. 26(c).   The parties agree that the
Court must balance the risk of inadvertent disclosure of competitive information to a
competitor against the risk that protection of such information prevents fair prosecution or
defense of a claim.  See id.; Pls.’ Br., pp. 3-5 (Dkt. 53); Def.’s Br., pp. 2-4 (Dkt. 52).
The nature of the dispute presumes that certain information which has or is to be
produced during the discovery process is confidential or otherwise proprietary in nature
and which the producing party, in good faith, contends should be limited in how such
information is handled or disseminated.   The protective order permits a producing party to
designate documents containing such information, in whatever format as “Confidential”
(and within that designation, a subset of “Attorney’s Eyes Only”) which in turn triggers
certain limits upon how such information may be used.
B.                                                                                              Number of Individuals With Access to Confidential Information.
The first dispute concerns those persons who will have unlimited access to
documents marked “Confidential.”   St. Luke’s seeks such access for four St. Luke’s
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employees, two Saltzer Medical Group (“Saltzer”) employees, and Brian Julian, Saltzer’s
outside counsel.
The parties had made an initial agreement upon the number of persons who would
have such unlimited access prior to Chief Judge Winmill’s decision denying St. Al’s
motion for preliminary injunctive relief, which sought to restrain the acquisition by St.
Luke’s of the Saltzer Medical Group (“Saltzer”).   The details of that effort are set out in
the relevant pleadings and supporting documents filed by the parties.
St. Al’s assumes, for purposes of the instant dispute over the protective order, that
the transaction went forward in the absence of any restraining order, but also says in its
briefing that no precise answer to that question has been given to St. Al’s by St. Luke’s.
Assuming that the St. Luke’s/Saltzer transaction was completed, St. Al’s contends that
any persons previously designated as Saltzer representatives are now St. Luke’s
employees.   Therefore, St. Al’s argues that to allow St. Luke’s to have its already
designated four representatives, plus the previously agreed upon number of Saltzer
representatives, amounts to a stacking of the deck.
Because there is a distinction that can be drawn in the event that Saltzer is now
part of St. Luke’s, the Court inquired of St. Luke’s outside counsel during the hearing
about “what had happened.”   The answer was not entirely clear, but the Court understands
from the statements of Mr. Bierig that a deal of some sort was, in fact, struck.   That deal
brought Saltzer into St. Luke’s bigger tent, but in some form that would allow the parties
to return to their former tents if the result of this lawsuit were to yank the tent poles out of
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the larger tent.   Mr. Bierig said, among other things, that St. Luke’s purchased Saltzer’s
assets and its former physicians now provide medical services for St. Luke’s under a
professional services agreement, but that Saltzer “continues to exist,” that the Saltzer
nameplate will still appear on the doorways, and that one of the designated Saltzer
representatives from the prior agreement was still employed by Saltzer.
The Court discerns from the statements of Mr. Bierig that a purchase has, in fact,
taken place by St. Luke’s of the business of Saltzer, the details of which are largely
similar to the nature in which other medical practices in the area have come under the St.
Luke’s umbrella, but with special attention paid to the possibility that things might come
undone, depending upon the result of this lawsuit.   The most significant piece of that
scenario, for purposes of the dispute presently before the Court, is that-notwithstanding
whatever name may appear on the doorframe-the daily moving parts of the former Saltzer
Medical Group are now part of the daily moving parts of the St. Luke’s Health System.
Hence, Saltzer’s present interest in this dispute is either completely intertwined, or very
nearly so, with that of St. Luke’s.
At first blush, then, the argument of St. Al’s seems the most sensible.   That is, the
justification for allowing separate representatives of both St. Luke’s and Saltzer to have
complete access to confidential documents in this lawsuit no longer exists, and to
continue that framework is not necessary and potentially even prejudicial to St. Al’s.
St. Luke’s, however, points out that this particular lawsuit has wider implications than
just the immediate controversy over the transaction involving St. Luke’s and Saltzer.   Mr.
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Bierig read into the record of the hearing a recent e-mail he just had received from Mr.
Ettinger (outside counsel for St. Al’s), in which Mr. Ettinger had stated that the lawsuit
was clearly an antitrust case, and that the lawsuit implicated more “markets” than just the
Treasure Valley.   The Court takes judicial notice of the fact that both St. Luke’s and St.
Al’s have acquired, or built, new medical facilities in other geographic regions of
Southern Idaho and Eastern Oregon, and that the Saltzer transaction has appeared on the
radar of antitrust enforcement agencies.
In that context, there is legitimate argument for review of the “confidential’
documents by someone with a Saltzer knowledge base.   Those persons had previously
been identified by St. Luke’s as John Kaiser, M.D., the President of Saltzer (who remains
an employee of Saltzer, which now has a five-year Professional Services agreement with
St. Luke’s); Bill Savage, former CEO of Saltzer (now employed by St. Luke’s); and
Saltzer’s outside counsel Brian Julian, of the firm of Anderson, Julian & Hull LLP.
Of those three individuals, either Dr. Kaiser or Mr. Savage should be able to
adequately provide answers to questions about the “pre-transaction decisions and conduct
of Saltzer” that might be raised from the documents originating from Saltzer’s pre-
transaction records.   However, to allow both Dr. Kaiser and Mr. Savage, who managed
Saltzer, to be involved in that process given the changed landscape of the lawsuit created
by the completion of the transaction between St. Luke’s and Saltzer, raises the potential
for potential prejudice to St. Al’s.   Accordingly, the Court will resolve this dispute by
ordering that the protective order allow for Mr. Savage, who is currently employed by St.
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Luke’s, and Brian Julian, to review the “Confidential” documents that originate from
Saltzer’s pre-transaction records, but not other “Confidential” documents.   The Court
understands from the record that Mr. Julian’s role included the type of legal advice and
legal work that might otherwise be handled by an in-house attorney, if Saltzer had an in-
house attorney.   Because St. Luke’s has represented that Saltzer continues to exist as a
separate entity, continues to have physicians employed by Saltzer and not St. Luke’s, and
where the deal between the two entities apparently has been structured to allow it be
unwound if needed, there remain competitive sensitivities for St. Al’s that outweigh any
usefulness for St. Luke’s that might otherwise derive from a review by Mr. Julian of non-
Saltzer “Confidential” documents.
Additionally, so as to eliminate any potential ambiguity, the Court orders that Mr.
Savage’s role shall be limited solely to a review of the pre-transaction Saltzer
“Confidential” documents.   He cannot be designated additionally, or alternatively, as one
of the four St. Luke’s representatives.   He comes to this dispute having been Saltzer’s
chief executive, which means that his knowledge and experience are similar to those of
someone involved in the “competitive decision making” discussed in Brown Bag
Software.   If he is now employed by St. Luke’s, a reasonable inference can be drawn that
St. Luke’s would seek to drawn upon that knowledge and experience going forward.
C.    Should In-House Counsel Have Access to “Attorney's Eyes Only” Materials?
As described earlier, the parties have agreed to two levels of confidentiality:
“Confidential” and “Attorney’s Eyes Only” (“AEO”).   They disagree about whether in-
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house counsel should have access to documents marked AEO.   St. Al’s seeks to limit
AEO material access to experts and the parties’ outside counsel.   St. Luke’s proposes that
AEO material be available to two attorneys in the four attorney St. Luke’s in-house
counsel’s office, and represents that the two particular lawyers so-identified are not
“substantially involved” in competitive decision-making.   St. Al’s concern is the potential
for in-house counsel’s “inadvertent disclosure.”   St. Al’s argues that it and third parties
“could very likely suffer severe financial harm and competitive disadvantage if their main
competitor is granted access” to information about strategies, managed care rates and
negotiations, and physician contracting.
The Court must weigh the potential harm of any inadvertent disclosure against
prejudice to the other party from denial of access.  Brown Bag Software, 960 F.2d at
1470.   In doing so, the Court should avoid making “arbitrary distinctions based on type of
counsel employed,” because “the risk of inadvertent disclosure of trade secrets obtains
equally for both kinds of counsel.”  Id. (citing U.S. Steel Corp. v. United States, 730 F.2d
1465, 1468 (Fed.Cir. 1984)).   Rather, the Court “should examine the factual
circumstances of any counsel’s relationship to the party demanding access and consider
whether in-house counsel was involved in ‘competitive decision making’”.  Id. (quoting
U.S. Steel, 730 F.2d at 1468 n. 3).
Here, St. Al’s represents that information designated as AEO under the protective
order will relate, in part or substantial whole, to the heart of the competition between St.
Al’s and St. Luke’s.   St. Al’s contends that AEO documents in this case will contain
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information about the ingredients used to make competitive business decisions and run a
competitive business (e.g., financial, marketing, and advertising data; strategic and long-
range plans; internal cost and provider charges, rates, and data) in a market or markets
where St. Al’s and St. Luke’s are the two major competitors.  See Proposed Prot. Ord. ¶ 3.
The risks of inadvertent disclosure in this setting are evident.   Even if such in-house
attorneys assure that they will comply with restrictions upon the use of information
gained from a review of their main competitor’s proprietary information, the office in
which they work is small (only four lawyers, and support staff), and the duties they
perform are myriad.   The closeness of the physical setting and the nature of the work
performed in a small, in-house counsel’s office in the current competitive environment,
create a legitimate concern over inadvertent disclosure, or internal institutional pressures
to make use of such information.   Additionally, the personnel and work assignments of
any in-house counsel’s office are subject to change, and the two attorneys who are
identified as not being “substantially involved” in competitive decision making today,
may well be called upon to be so involved in the future.   Further, as highlighted in the
Brown Bag Software decision, the very nature of competitive information makes it
difficult to compartmentalize:
“Knowledge of [the competitor’s] trade secrets would place in-house counsel in
the ‘untenable position’ of having to refuse his employer legal advice on a host of
contract, employment, and competitive marketing decisions lest he improperly or
indirectly reveal . . . trade secrets.”
Brown Bag Software, 960 F.2d at 1471.
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In such circumstances, it would be an impossible task for an in-house lawyer to try
to separate his or her business judgment or legal advice into two compartments of “With
St. Al’s Lawsuit knowledge” and “Without St. Al’s Lawsuit knowledge.”   Additionally,
although St. Luke’s states that only Christine Neuhoff, its general counsel, is substantially
involved in competitive decision-making, the distinction between “substantial”
involvement is not an adequate point of demarcation (nor is it the precise test described in
Brown Bag Software) to avoid the risk of inadvertent disclosure.   St. Luke’s argues that
the two associate in-house attorneys simply work on deals that have already been made,
and do not provide advice about whether those deals should be made.   However, St.
Luke’s proffered reason for involving those attorneys is so that outside counsel can talk to
in-house counsel who are “knowledgeable” and “in the best position to analyze and
explain to outside counsel the significance of particular documents.”   The argument loses
its focus at that point, as 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.   In the small world of St. Luke’s in-house counsel
department, particularly given the extremely competitive hospital marketplace, such
attorneys will likely continue to be involved in that work in the future, heightening the
risk of inadvertent disclosure.   These factual circumstances are of particular importance
under the test described in Brown Bag Software, where the court gave particular emphasis
to the concern over whether the in-house counsel realistically “could lock up trade secrets
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in his mind, safe from inadvertent disclosure to his employer once he had read the
documents.”  Brown Bag Software, 960 F.2d at 1471.
The Court acknowledges that some prejudice to St. Luke’s will flow from any
restriction upon the ability of in-house counsel to assist in the defense of this lawsuit.
However, St. Luke’s has experienced outside counsel at the helm of this case and that
counsel is well versed in antitrust litigation and representing medical entities.1   It is
difficult to envision a circumstance where a document containing competitive information
about the business of running a medical center cannot be understood by outside counsel
specializing in such matters, even if such counsel is not intimately familiar with the
community or communities in which St. Luke’s and St. Al’s compete with each other.
Moreover, it is only a subset of documents that will be subject to this restriction, i.e. those
marked as “Attorneys’ Eyes Only” because they contain “highly sensitive trade secrets,
the disclosure of which would result in demonstrable harm”.   Proposed Prot. Ord. ¶ 3.
Such a designation requires a good faith basis at the outset.   If the opposing party believes
that such an AEO designation is unjustified, the protective order allows that designation
1   St. Luke’s lead outside counsel is Jack R. Bierig, of Sidley Austin LLP.   Mr.
Bierig has been a lawyer for 40 years and has “extensive experience in general
representation of associations, antitrust matters, litigation challenging government action
affecting health care providers, copyright, trademark and trade secret cases, and FDA
matters.”   Sidley Austin LLP, Jack Bierig Partner Bio, available at
http://www.sidley.com/bierig_jack/ (site last visited Jan. 9, 2013).   He has represented
numerous associations (including the American Medical Association) and health care
providers in a variety of cases, including antitrust cases, and also advises clients “on a
wide variety of antitrust, association law, and regulatory issues.”  Id.
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to be challenged.   Accordingly, the protective order is intended to protect against
gamesmanship in the first instance, and if an unjustified designation is made, the Court
stands ready to intervene to protect the interests of the party prejudiced by such
designation.   In other words, a party who seeks protections from the nature and use of the
discovery process must keep its own clean hands in the use of such protections.
Accordingly, the Court orders that the protective order include the prohibition
requested by St. Al’s, prohibiting in-house counsel from access to information in
documents designated by an opposing party as “Attorney’s Eyes Only.”   The balance of
the competing interests in this particular case, on these particular facts, weighs in favor or
restricting such access to in-house counsel.   The protections against misuse of such a
designation, and the other means available to outside counsel experienced in such
disputes to understand and handle such documents, sufficiently protect St. Luke’s ability
to fairly defend itself in this lawsuit.
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D.                                                                                             Proposed Restrictions on Showing Confidential or AEO Material to
Witnesses.
St. Al’s argues that to fully protect confidential information in this case, witness
review of documents must be constrained as well, so as to only allow a witness to review
that portion of the document for which the witness has knowledge.   St. Luke’s objects,
arguing that such a rule 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.   Further, St. Luke’s contends that such a rule will become inevitably
cumbersome and contentious, leading to “on-the-fly redacting” during depositions, and
arguments over whether a particular document “characterizes or discusses (but does not
merely report on) a communication to which the deponent or witness was a party”.
Proposed Prot. Ord., ¶ 9.
The Court agrees that the language proposed by St. Al’s will unnecessarily place
boulders in the road during the discovery process, and the likelihood of the harm
envisioned by St. Al’s is so small that the solution becomes a potential impediment to the
discovery process that outweighs the detriment of the purported harm.   This is particularly
true under the expedited litigation schedule and trial date in this case.   St. Al’s has not
made a sufficient showing that this case involves documents that create a significant risk
of this nature, and the Court is not inclined to include protection for such documents on
supposition.
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Accordingly, the Court orders that St. Luke’s position on the nature of how and
when documents may be disclosed to witnesses shall be incorporated into the protective
order.   Specifically, the Court adopts the language proposed by St. Luke’s in paragraphs
6(f) and 7(d) of the protective order and excludes St. Al’s proposed paragraph 9.   This
ruling does not, however, preclude a request by a party to make a specific ruling upon a
particular document that raises compelling concerns of the sort anticipated by St. Al’s.   In
such a circumstance, either party may seek agreement with the opposing party as to the
specific use of that particular document, and if an agreement cannot be reached, may then
ask the Court for a protective order that is more restrictive than the protective order
generally, as to the use of that particular document.
CONCLUSION
The Court finds good cause to issue an order protecting documents containing
information that is proprietary and/or confidential in nature, as set forth specifically
above.   However, the parties shall comply with the Court’s rules and procedures if they
seek to seal any information to be placed in the Court record.  See D. Idaho L. Civ. R. 5.3;
Pintos v. Pacific Creditors Ass’n, 504 F.3d 792, 802 (9th Cir. 2007) (providing that
“compelling reasons” are required to seal documents related to a dispositive motion);
Kamakana v. City and County of Honolulu, 447 F.3d 1172, 1179 (9th Cir. 2006)
(explaining that a “good cause” standard must be met in order to seal documents attached
to nondispositive motions).   In the event any conflicts arise between the Protective
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Order’s terms and the Federal Rules and/or the Court’s Local Rules, the court rules and
applicable case law shall control and will be applied to determine the outcome.
St. Al’s counsel shall revise the proposed protective order in accord with this
decision and provide it to the Court for approval and filing.   In the meantime, the terms
agreed to and those set forth in this order shall govern the parties’ conduct going forward
in the discovery process.
IT IS SO ORDERED.
DATED:   January 10, 2013.
Honorable Ronald E. Bush
U. S. Magistrate Judge
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