a Delaware corporation,









Judge Leinenweber





Magistrate Judge Keys




an Illinois corporation,










Pursuant to the order of this Court dated August 12, 1998, the Association of American Physicians & Surgeons, Inc. ("AAPS"), by its attorneys, hereby submits its reply in support of its Motion for Leave to Intervene, Motion to Rescind Protective Order, and Motion for Preservation of Discovery Materials.


The AMA did not, and cannot, provide any justification for the protective order here. A protective order requires proof of "good cause." Fed. R. Civ .P. 26(c). The AMA's opposition brief, however, lacks any demonstration of the requisite good cause. There is no affidavit, no reference to specific documents needing protection, and no attempt to "clearly define the serious harm likely to result from public disclosure." Wauchop v. Domino's Pizza, Inc., 138 F.R.D. 539, 546 (N.D. Ind. 1991) (citing several precedents). Because defendant "never made a 'good cause' showing under Fed. R. Civ. P. 26(c) justifying initial protection of the [discovery]," and defendant "has not provided the court with more" justification in opposition to a motion to rescind a protective order, the protective order cannot be sustained. Beckman Indus. v. International Insur. Co., 966 F.2d 470, 476 (9th Cir. 1992) (quotations omitted). Only a few sentences in the AMA's brief even allude to any basis for protection here. AMA Br. at 3. Such cursory allusion utterly fails to satisfy the requirement that "defendant must specifically identify the potentially embarrassing information," Wauchop, 138 F.R.D. at 546 (emphasis added), or make a "particular showing of reliance with regard to" specific discovery. Beckman Indus., 966 F.2d at 476 (emphasis added).

The AMA emphasized in its Answer that its "mission is to serve as the voice of the American medical profession." AMA Answer 6. The AMA likewise reiterates in its communications to physicians that "[t]he AMA can speak with authority on your behalf." AMA Vision, reprinted in the AM News, Vol. 41, No. 12, March 23/30, 1998, at 4A. Yet the self-described AMA "Trustees" obtained a protective order here that conceals their wrongdoing from the very profession they purport to represent. In light of the AMA's failure to justify that protective order, it must be rescinded. "[E]ven if the parties agree that a protective order should be entered, they still have the burden of showing that good cause exists for issuance of that order." Jepson, Inc. v. Makita Elec. Works, Ltd., 30 F.3d 854, 858 (7th Cir. 1994) (quotations omitted).

Recent developments have amplified the need to rescind the protective order. Soon after receiving AAPS' motions here, the AMA hastily paid Sunbeam an inflated settlement of about $10 million. Sarah A. Klein, "AMA-Sunbeam Suit Settled," AM News, August 17, 1998 (The AMA delayed weeks before making the following announcement, presumably to avoid objection prior to payment: "The money, which has already been paid, settles a lawsuit 1/4.") (emphasis added). The AMA's announcement revealed that it had also paid undisclosed millions of dollars to the AMA officers fired for cause, as concealed by the protective order. See id. These inflated payments suggest a premium in "hush money" to conceal wrongdoing by current AMA Trustees, whereby silence was purchased at the direct expense of member physicians.

The AAPS, as a publisher of medical news and as a representative of about 1000 AMA members, is currently prevented by the protective order from exposing the likely breaches of fiduciary duty, which were uncontested in the AMA's opposition brief. AAPS Motion 11-13. As demonstrated below, rescission of the order is necessary.

I. The AMA's Cited Precedents Require Rescission of the Protective Order.

The AMA's own cited precedents require rescission of this court's protective order. The AMA relies on Wilk v. American Medical Ass'n, 635 F.2d 1295 (7th Cir. 1980), but that decision reversed the district court's insistence on a protective order for the AMA. See id. at 1299 ("[I]n addition to the abstract virtues of sunlight as a disinfectant, [open discovery] materially eases the tasks of courts and litigants and speeds up what may otherwise be a lengthy process."). The Wilk court emphasized "[t]hat the expense of litigation deters many from exercising that right is no reason to erect gratuitous roadblocks in the path of a litigant who finds a trail blazed by another." Id. at 1301. Moreover, the Wilk court placed the burden squarely on the AMA to prove why a protective order is necessary: "the burden must be on the parties opposing modification to establish that particular discovery materials in Wilk would be immune from eventual discovery" elsewhere. Id.; see also Jepson, Inc., quoted supra.

Indeed, courts have unanimously rejected the AMA's principal argument that an intervenor challenging a protective order should first be "a party to an existing and virtually identical lawsuit." AMA Br. at 2. Courts have repeatedly emphasized that "[m]aintaining a suitably high cost of litigation for future adversaries is not a proper purpose under Rules 1 or 26." Wauchop, 138 F.R.D. at 546-47 (citing Cipollone v. Liggett Group, Inc., 785 F.2d 1108, 1119 (3rd Cir. 1986) (emphasis added)). In Wauchop, the court considered a personal injury action involving Domino's Pizza's 30-minute delivery guarantee, and the South Bend federal court rejected defendant's demand for a protective order to insulate it against other potential plaintiffs. The court noted that a corporate party rarely has any basis for demonstrating embarrassment as a basis for a protective order: "'[T]o succeed, a business will have to show with some specificity that the embarrassment resulting from dissemination of the information would cause a significant harm to its competitive and financial position.' Domino's has made no such showing." 138 F.R.D. at 546 (quoting Cipollone, 785 F.2d at 1121). Nor has the AMA made the requisite showing here.

The Wauchop court quoted from numerous decisions holding likewise:

[T]he sharing of discovery materials ultimately may further the goals of Rule 1 by eliminating the time and expense involved in "rediscovery". See Williams v. Johnson & Johnson, 50 F.R.D. 31, 32 (S.D.N.Y. 1970). The efficient administration of justice should encourage such practices. Ward v. Ford Motor Co., 93 F.R.D. 579, 580 (D. Colo. 1982) ("Each plaintiff should not have to undertake to discovery [sic] anew the basic evidence that other plaintiffs have uncovered. To so require would be tantamount to holding that each litigant who wishes to ride a taxi to court must undertake the expense of inventing the wheel."); accord, Baker v. Liggett Group, Inc., 132 F.R.D. 123, 126 (D. Mass. 1990) ("To routinely require every plaintiff . . . to go through a comparable, prolonged and expensive discovery process would be inappropriate."); Patterson v. Ford Motor Co., 85 F.R.D. 152, 154 (W.D. Tex. 1980) ("The availability of the discovery information may reduce time and money which must be expended in similar proceedings, and may allow for effective, speedy, and efficient representation.").

138 F.R.D. at 546.

The AMA's reliance on American Telephone & Telegraph Co. v. Grady, 594 F.2d 594 (7th Cir. 1978), is also misplaced. That court rejected the AMA's argument here and held that "[a]s a general proposition, pretrial discovery must take place in the public unless compelling reasons exist for denying the public access to the proceedings." Id. at 596. That court affirmed the rescission of the existing protective order between the parties with respect to the request of the third-party intervenor. See id. at 595. The AMA argues that the parties' initial agreement to a protective order is somehow entitled to a presumption of validity, but the Grady court only recognized such an approach when the intervention implicated "the government's awesome powers as investigator." Id. at 597. "[O]utside the area of government intervention, courts have applied much more lenient standards for modification." Public Citizen v. Liggett Group, Inc., 858 F.2d 775, 791 (1st Cir. 1988), cert. denied, 488 U.S. 1030 (1989).

Finally, the AMA mistakenly relies on Grove Fresh Distribs., Inc. v. Everfresh Juice Co., 24 F.3d 893 (7th Cir. 1994). There, in fact, the Seventh Circuit reversed a denial by the district court of intervenors' motion to lift a protective order. Yet the AMA relies on it to argue that the AAPS has no automatic First Amendment right for accessing the pre-trial discovery. AMA Br. at 8. But Grove Fresh and the precedents it cites involved private companies operating very far afield from the public interest. Here, in contrast, the AMA purports to represent all physicians, and effectively regulates physicians under a contract with the government (HCFA). AAPS Motions 4, 6. The AMA also attempts to serve as trustee for physicians in advocating policy and managing funds. This court need not reach First Amendment issues to determine that the AMA has no justification here for the protective order. See, e.g., Wiggins, discussed infra Point II.

The AMA ultimately relies, without support, on its refrain that "the AMA has been extraordinarily open in sharing information with its members about the Sunbeam transaction." AMA Br. at 9; see also id. at 10. If that statement were true, then the AAPS would not have brought its motions. As this court likely realizes, the AMA officers have withheld the information about their wrongdoing here. For example, when the House of Delegates of the AMA simply requested to know the amounts paid to the AMA officers fired for the Sunbeam deal, the AMA withheld the information based on alleged confidentiality, even though they were fired for cause and thus have no basis for confidentiality. AMA-Sunbeam Suit Settled, AM News, supra.

II. Court Decisions Make Clear That The Party Resisting Disclosure Of Documents Must Make A Showing That It Will Suffer A Specific Injury If The Documents Are Disclosed.

The AMA attempts to distinguish Wiggins v. Burge, 173 F.R.D. 226 (N.D. Ill. 1997) on the ground that no protective order was ever entered by the court. However, Wiggins supports the AAPS' motions. In Wiggins, the plaintiff alleged that the defendant police officers tortured him pursuant to police department policy. Plaintiff's counsel agreed that the documents produced by the City of Chicago would be considered confidential under the terms of a protective order entered in another case. On the eve of trial, the case settled. After the case was dismissed with prejudice, several parties intervened and moved to strike the "confidential" designation of certain documents produced by the City. The defendants argued that four interests supported non-disclosure of the records, including: (1) the privacy of the officers; (2) the possible chilling effect on police record-keeping if the records were disclosed; (3) the possibility that the charges were false; and (4) the lack of any sufficient public interest. After noting that the defendants bore the burden of showing that there was "good cause" for the protective order, the court found that the public's interest in "know[ing] how matters concerning their daily protection are being investigated and handled" outweighed the defendants' interests in shielding the documents from public view. Id. at 230.

Here the AAPS moved to intervene before the case settled, which is more timely than the intervention allowed in Wiggins. Moreover, by seeking public disclosure of the AMA's discovery, the AAPS is attempting to inform its members (many of whom are AMA members) and other members of the medical community about the murky relationship between the AMA and Sunbeam.

The AMA attempts to distinguish Glenmede Trust Co. v. Thompson, 56 F.3d 476 (3d Cir. 1995) on the ground that the district court which ordered disclosure of the documents had not entered a protective order. However, the parties themselves entered into a confidentiality agreement and complied with its terms. See id. at 480. Following Pansy v. Borough of Stroudsburg, 23 F.3d 772 (3d Cir. 1994), the court held that the parties opposing the disclosure "have failed to sustain their burden of demonstrating they will sustain a specific injury from the public dissemination of the privileged documents sufficient to warrant the entry of an umbrella protective order." 56 F.3d at 484. The AMA has similarly failed to demonstrate that it will suffer a specific injury from the public dissemination of the confidential documents.

Finally, several courts have ordered the disclosure of confidential documents where a protective order was entered or have modified orders making certain documents confidential. See Daines v. Harrison, 838 F. Supp. 1406 (D. Co. 1993) (after a newspaper intervened seeking access to a settlement agreement, the court vacated the magistrate's order that the terms of a settlement agreement would be kept confidential); Public Citizen, 858 F.2d at 780 (affirming the district court's decision to modify a protective order and allow a public interest group access to confidential documents produced by a tobacco company where the tobacco company could not establish "any compelling need for continuing the protective order"); Bank of America v. Hotel Rittenhouse, 800 F.2d 339, 346 (3d Cir. 1986) (reversing the district court's decision to deny a contractor's motion to unseal documents filed in litigation between a bank and the developer of the project because the bank and the developer made no "particularized showing of the need for continued secrecy").

III. The AMA Must Preserve its Documents for Access by the AAPS.

Defiantly, the AMA does not agree to preserve its discovery documents even though it has notice of a likely claim for breach of fiduciary duty here. Instead, the AMA claims to be unaware of any precedent requiring it to retain its documents. To the contrary, there is a well-established duty to preserve documents upon knowledge of a potential claim, even prior to an actual filing of that claim. "The obligation to preserve evidence may arise prior to the filing of a complaint where a party is on notice that litigation is likely to commence." Cohn and RLC Enter., Inc. v. Taco Bell Corp., No. 92 C 5852, 1995 U.S. Dist. LEXIS 12645, *15 (N.D. Ill. Aug. 30, 1995) (citing Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 73 (S.D.N.Y. 1991)). The AMA's disagreement necessitates affirming this duty in a court order, as dozens of decisions in this Circuit have done likewise. See, e.g., Chicago Linen Exchange Inc. v. Adler, 888 F. Supp. 92, 94 (C.D. Ill. 1995) (ordering preservation of evidence even while transferring the case elsewhere); Ace Novelty, Co., Inc. v. Superior Toy and Novelty, Co., Inc., No. 83 C 5930, 1983 U.S. Dist. LEXIS 12095, *2 (N.D. Ill. Nov. 1, 1983) (ordering defendants to "preserve all documents"); Vaccariello v. Financial Partners Brokerate, Ltd., No. 82 C 5910, 1983 U.S. Dist. LEXIS 14293, *1 (N.D. Ill. Aug. 26, 1983) (ordering defendant to "preserve and maintain" discovery materials).

In virtually every decision that addresses the issue of document retention, the affected party had either consented to preserve evidence, or at least did not oppose the motion. See, e.g., U.S. v. Brzezinski, No. 86 CR 786, 1987 U.S. Dist. LEXIS 12490, *2 (N.D. Ill. Jan. 4, 1988) (motion to preserve evidence granted while noting lack of opposition). The AMA's argument here for the right, in effect, to discard its discovery is unprecedented. The requirements for an injunction - irreparable harm and likely of success in obtaining the documents - are plainly established here. The AMA's attempt to conceal the reasons for a $10 million transfer to Sunbeam and transfer of millions more to its fired officers, suggests that the discovery is relevant to a future breach of fiduciary action, and its destruction would cause irreparable harm to such cause of action.

Once this court grants the pending motion for intervention by the AAPS, it should then be entitled to review the discovery in this action. It would be a waste of judicial resources to require the AAPS to serve the same discovery requests on the AMA that Sunbeam already served, and to elicit the same testimony from AMA officers that Sunbeam did. Rather, the order granting intervention should simply confirm that the AAPS, as a party to this action, is entitled to review the discovery already produced. See, e.g., Beckman Indus., 966 F.2d at 476 ("[W]e see no unfair prejudice to [defendant] by allowing [intervenors'] access to the transcripts.").


For the foregoing reasons, the AAPS respectfully requests that this court grant its Motion for Leave to Intervene, Motion to Rescind the Protective Order, and Motion for Preservation of Discovery Materials.