Defendant American Medical Association ("AMA"), by its attorneys, hereby seeks leave to file a surreply in opposition to the motion of proposed intervenor Association of American Physicians & Surgeons, Inc. ("AAPS") to rescind the confidentiality order entered by this Court. In support of its motion, the AMA states:

1. AAPS, a competitor of the AMA, has moved to rescind the protective order that was agreed to by the parties, approved by this Court, and relied on by the AMA in responding to Sunbeam's document requests. For the first time in its reply brie?, AAPS also seeks an order compelling the delivery of virtually all documents produced by the AMA in this litigation.

2. In its initial motion, AAPS made three arguments, each of which was rebutted in the AMA's response brief. In its reply brie?, AAPS all but abandons its initial arguments. Instead, it faults the AMA for not submitting an affidavit showing that all of the documents covered by the protective order are properly considered confidential. In this argument, AAPS fails to recognize that it bears the heavy burden of proving that the protective order was tainted by "abuse or impropriety," a showing it has not even attempted to make. AAPS also relies on and misconstrues case law that was not cited in its opening brief. See, e.g., Wauchop v. Domino's Pizza. Inc., 138 F. R.D. 539 (N.D. Ind. 1991). Finally, in its continuing effort to smear the AMA and its trustees under the cover of legal filings (thereby shielding itself from defamation liability), AAPS groundlessly contends that members of the AMA's Board of Trustees have attempted to cover up their alleged wrongdoing --and even goes so far as to suggest, without an iota of support, that the settlement of this case was undertaken to avoid AAPS' inquiries.

3. The AMA seeks leave to submit the attached surreply instanter to rebut the arguments raised for the first time in AAPS' reply brief and to set the record straight.

WHEREFORE, defendant American Medical Association respectfully requests that this Court enter an order granting it leave to file the attached surreply instanter.

1. It might need confidential discovery materials from this case -- materials that were never even filed with the Court -- in a possible lawsuit that it was thinking about bringing against the AMA challenging a 1983 agreement between the AMA and the Health Care Financing Administration ("HCFA");

2. It wants confidential discovery materials in order to report on the Sunbeam litigation in its publications: and

3. It is somehow entitled to confidential discovery materials because some of its members are also members of the AMA.

In its reply brief, AAPS all but abandons its initial arguments. Instead, it faults the AMA for not submitting an affidavit showing that all of the documents covered by the protective order are properly considered confidential. In this argument, AAPS fails to recognize that it bears the heavy burden of proving that the protective order was tainted by "abuse or impropriety," a showing it has not even attempted to make. AAPS also relies on and misconstrues case law that was not cited in its opening brief. See, e.g., Wauchop v. Domino's Pizza. Inc., 138 F.R.D. 539 (N.D. Ind. 199 1). Finally, in its continuing effort to smear the AMA and its trustees under the cover of legal filings (thereby shielding itself from defamation liability), AAPS groundlessly contends that members of the AMA's Board of Trustees have attempted to cover up their alleged wrongdoing --and even goes so far as to suggest, without an iota of support, that the settlement of this case was undertaken to avoid AAPS' inquiries.

The AMA submits this surreply to rebut the arguments raised for the first time in AAPS' reply brief and to set the record straight.

In its reply brief, AAPS faults the AMA for not submitting an affidavit identifying with particularity the documents that are covered by the protective order and spelling out exactly why each document should be considered confidential. AAPS Reply at 1-2. This alleged failure, AAPS contends, means that "the protective order cannot be sustained." Id. at 2.

In making this argument, AAPS has confused the standard for the initial entry of a protective order with the standard for revocation of an already existing order. In so doing, AAPS improperly attempts to shift its burden to the AMA. Under Seventh Circuit law, a non- party litigant has standing to challenge a protective order that has already been entered in another case only for "abuse or impropriety." Grove Fresh Distributors. Inc. v. Everfresh Juice Co., 24 F.3d 893, 898 (7th Cir. l994).2 But the burden of proving abuse or impropriety is on the non- party, and this burden weighs even more heavily where, as here, the parties have agreed to the entry of the protective order. See AT&T v. Grady, 594 F.2d 594, 597 (7th Cir. 1979) ("After a thorough review of the applicable case law, this Court notes that where a protective order is agreed to by the parties before its presentation to the court, there is a higher burden on the movant to justify the modification of the order."). Contrary to AAPS' assertion (AAPS Reply at 5), nothing in Grady limits this rule to cases implicating "the government's awesome powers as investigator." Instead, the rule recognizes that the

begin footnote 2 The standard is somewhat different when a party to a separate lawsuit seeks to modify a protective order to avoid duplicative discovery. See infra at 5. Since AAPS has not filed any lawsuit, this line of authority is inapposite.end footnote

settled expectations of the parties regarding how their confidential documents will be treated by one another should not be disrupted by an interloper absent a compelling showing.

AAPS has failed to allege any facts, much less submit any proof, suggesting that the protective order was tainted by "abuse or impropriety." For example, it has not asserted that any particular documents or categories of documents were improperly designated as confidential. (Tellingly, not once during the extensive discovery in this case did Sunbeam, despite its adversarial position, accuse the AMA of misusing the "confidential" designations permitted by the protective order.) Nor has AAPS demonstrated that the AMA failed to comply with the protective order's requirement that the parties "make a good faith effort to denominate material as Confidential or as Confidential for Attorneys' Eyes Only only where the material reasonably requires confidential treatment." See Exhibit A to AAPS Mot., 1. Instead, AAPS nakedly asserts that the entire order should be rescinded (at least with respect to documents produced by the AMA). See AAPS Reply at 2. Nowhere in its briefs does AAPS offer any competent evidence or cite any legal precedent that might justify its request fb? a wholesale revocation of the protective order.

To the contrary, the principal case cited by AAPS in its reply, Wauchop v. Domino's Pizza Inc., 138 F.R.D. 539 (N.D. Ind. 1991), demonstrates why the protective order in this case should not be rescinded. Wauchop involved the question of whether an umbrella protective order should be entered in the first instance over the objection of the plaintiff, who intended to share discovery with litigants in similar cases. Id. at 543. The court found that, in light of plaintiffs opposition, the defendant had not sufficiently demonstrated a need for a broad protective order. The court reasoned that "a litigant generally may make whatever use it wishes of information obtained through discovery." Id. at 545 (emphasis added). But the court also recognized the flip side of that proposition: "[N]on-parties have no right of access to information produced by the pre-trial discovery process." Id. (citing McCarthy v. Barnett Bank of Polk County, 876 F.2d 89, 91 (11th Cir. 1989) (emphasis added)). The Wauchop court's explicit recognition of this rule of law is conspicuously absent from AAPS' reply brief

Here, in contrast, Sunbeam and the AMA stipulated to the entry of the protective order, and Sunbeam has not sought to share any confidential discovery material with non-parties. Moreover, Wauchop involved the question of whether a protective order should be entered in the first place -- not, as here, whether one that has been entered should be rescinded, much less at the request of a non-party. As discussed above, a non-party seeking to rescind a protective order entered by stipulation of the parties carries a heavy burden of showing abuse or impropriety. The defendant in Wauchop, on the other hand, had the burden ofjustifying the initial entry of the protective order.

Wauchop also underscores another important distinction ignored by AAPS. Specifically, courts will generally modify a protective order where necessary to avoid duplicative discovery in virtually identical cases, even if the initial entry of the protective order was proper. See, e a Wilk v. AMA, 635 F.2d 1295 (7th Cir. 1980); AT&T v. Grady, 594 F.2d 594 (7th Cir. 1978). See also Beckman Indus.. Inc. v. International Ins. Co., 966 F.2d 470 (9th Cir. 1992) (cited for the first time in AAPS' reply brief). In contrast, courts generally will not modify protective orders where, as here, a non-party simply wants access to pre-trial discovery for non- litigation purposes. See Grove Fresh Distributors. Inc. v. Everfresh Juice Co., 24 F.3d 893, 898 (7th Cir. 1994) ("discovery materials are not within the scope of [non-party's] right of access").

II. AAPS' ASSERTION THAT AMA TRUSTEES VIOLATED THEIR FIDUCIARY DUTY IS BOTH FALSE AND IRRELEVANT TO THIS MOTION.

In its reply, AAPS abandons what had been its lead argument -- that it might need discovery from this case for a lawsuit that AAPS claims to have been thinking about filing to challenge the AMA's 1983 agreement with HCFA. As the AMA pointed out in its response, that agreement is wholly irrelevant to the issues in this case. Apparently recognizing that its would-be lawsuit cannot give it access to the information it seeks, AAPS now suggests, for the first time, that it might file a different lawsuit against the AMA for breach of fiduciary duty. AAPS Reply at 9-10.

While the merits of such a lawsuit are not at issue in this motion, the AMA cannot allow AAPS' defamatory assertions about breaches of fiduciary duty and attempts to cover them up to pass unrebutted. Contrary to the assertion in the reply brief that the supposed breaches of fiduciary duty are "uncontested" (AAPS Reply at 3), the AMA vigorously disputes the conclusory and defamatory assertions of wrongdoing contained in the briefs filed by AAPS. For example, the suggestion that the AMA settled this case only after receiving AAPS' motion to rescind the protective order is completely unfounded. See AAPS Reply at 2-3. As Sunbeam can verify, the AMA and Sunbeam discussed settlement for a considerable period of time, and the AMA had not even received AAPS' motion when it agreed to a settlement. The timing of the settlement and the motion was entirely coincidental. Moreover, contrary to the suggestion that the AMA agreed to the protective order as part of an elaborate scheme to cover up wrongdoing, the real reason for the order was to protect the AMA's (and Sunbeam's) legitimate interest in confidentiality of certain pre-trial discovery materials.

More fundamentally, however, regardless of how AAPS postures about bringing a lawsuit against the AMA, the mere possibility of such a lawsuit provides it with no basis for challenging the protective order here. In effect, AAPS seeks a free bite at unconstrained pre- filing discovery, much of which is irrelevant to any case that AAPS might conceivably file. This Court should see AAPS' threat of a "breach of fiduciary duty" lawsuit for the smokescreen that it is. AAPS has not brought such a lawsuit, nor could it in good faith. Of course, if AAPS did sue and somehow survived a motion to dismiss, then it would be entitled to relevant, non-privileged discovery, just as other litigants are. Unless that happens, AAPS -- an outsider to these proceedings and a competitor of the AMA -- is not entitled to review any of the AMA's files, confidential or otherwise.

III. AAPS HAS NOT SHOWN THAT IT IS ENTITLED TO AN INJUNCTION FORBIDDING THE AMA FROM DESTROYING DISCOVERY MATERIALS.

In its original motion, AAPS tacked on a request for an injunction barring the AMA from destroying any discovery materials from this case. As the AMA pointed out in its response, AAPS cited no authority supporting the proposition that an entity with no pending lawsuit of its own may obtain a court order requiring preservation of documents produced in a collateral proceeding, much less one that, as here, has already been settled and dismissed with prejudice.

In its reply, AAPS for the first time cites cases that have ordered parties to preserve evidence. AAPS Reply at 9. But each of these cases involved actual, ongoing litigation - - not, as here, a lawsuit that a potential litigant says it might file. Moreover, contrary to AAPS' statement that "the AMA claims to be unaware of any precedent requiring it to retain its documents" (id.), the AMA is fully aware of the general obligation not to destroy evidence in pending or anticipated proceedings. Indeed, for what it is worth, copies of the documents produced by the AMA in this case are currently housed in off-site storage, and there are no plans to destroy them in the near future. This fact, coupled with the fact that AAPS has not filed any of the lawsuits it says it is contemplating, shows that a document preservation order is not only legally baseless but neither necessary nor appropriate.

AMERICAN MEDICAL ASSOCIATION

Jack R. Bierig
David F. Graham
Eric S. Mattson
SIDLEY & AUSTIN
One First National Plaza
Chicago, IL 60603
(312) 853-7000

Dated: October 2, 1998