SUNBEAM PRODUCTS, INC., )
a Delaware corporation, )
)No.97C6313
Plaintiff)
)Judge Leinenweber
v.)
)Magistrate Judge Keys
AMERICAN MEDICAL ASSOCIATION,)
an Illinois corporation,)
)
Defendant.)

ORAL ARGUMENT REQUESTED

MOTION FOR LEAVE TO INTERVENE, MOTION TO RESCIND CONFIDENTIALITY ORDER AND MOTION FOR PRESERVATION OF DISCOVERY MATERIALS

Movant the Association of American Physicians & Surgeons, Inc. ("AAPS"), on behalf of itself, its members, its members who are also members of the American Medical Association ("AMA"), and the medical profession, move for leave to intervene pursuant to Federal Rule of Civil Procedure 24(b) for the sole and limited purpose of challenging this Court's Order dated February 25, 1998 entitled the Stipulated Protective Order Governing Confidentiality, as amended by Order dated June 3, 1998 (attached as Exhibit A), and preserving the AMA discovery materials produced in this action. Movant respectfully requests that this Court rescind the Confidentiality Order with respect to AMA discovery, and enjoin the destruction of such discovery materials by the AMA for a reasonable time following termination of this proceeding.

In support of this Motion, Movant states:

1. AAPS is a non-profit organization that has a membership of thousands of physicians in all practices and specialties, including about 1000 current members of the AMA. AAPS was established in 1943 to preserve the practice of private medicine, and is dedicated to upholding the integrity of the medical profession. AAPS is incorporated in the State of Indiana and qualifies under Section 501(c)(6) of the Internal Revenue Code. AAPS reports and speaks out on issues important to the medical profession through its publications the AAPS News and the Medical Sentinel. AAPS brings this motion in three capacities: (1) on behalf of its AMA and non-AMA physician members, (2) on behalf of itself as a publisher of medical news, and (3) on behalf of itself as likely to be affected by a decision in this action.

2. In light of its membership, AAPS has a direct and substantial interest in promoting and preserving their rights to be informed about this civil case. Those rights have not been and will not be adequately represented by existing parties to this cause. See, e.g., Hunt v. Washington Apple Advertising Comm'n, 432 U.S. 333, 343 (1977); National Motor Freight Ass'n v. U.S., 372 U.S. 246 (1963); NAACP v. Button, 371 U.S. 415, 428 (1963).

3. As a publisher of information for the medical profession, AAPS has a direct and substantial interest in promoting and preserving its rights to be informed about and report on this case, and those rights have not been and will not be adequately represented by existing parties to this cause. See, e.g., Wiggins v. Burge, 173 F.R.D. 226 (N.D. Ill. 1997) (granting motion to obtain access to discovery by third-party intervenors); Pansy v. Borough of Stroudsburg, 23 F.3d 772, 777 (3d Cir. 1994) ("We have routinely found, as have other courts, that third parties have standing to challenge protective orders and confidentiality orders in an effort to obtain access to information or judicial proceedings.") (citing numerous precedents, footnote omitted).

4. AAPS also brings this motion as an entity likely to be affected by the outcome reached in this litigation. AAPS has criticized, and may bring a legal proceeding to challenge, an exclusive licensing contract between the AMA and the Health Care Financing Administration ("HCFA") that is analogous in legal respects to the exclusive licensing contract between the parties in this case. Discovery here will likely be relevant to the litigation concerning the validity of the AMA/HCFA contract. The AMA has argued here that the AMA/Sunbeam exclusive licensing contract should be voided as contrary to public policy, and discovery materials (including admissions) relating to that defense are relevant to AAPS's policy arguments against the AMA/HCFA exclusive licensing contract. AAPS also has a direct and substantial interest to avoid a precedent in this case that will adversely affect its rights in the dispute concerning the AMA/HCFA contract. See, e.g., Atlantis Dev.Corp. v. U.S., 379 F.2d 818 (5th Cir. 1967).

5. This is a civil action for monetary damages alleging breach of contract by defendant AMA, which purports to speak for all physicians and raises defenses based on the public interest. AAPS moves to intervene here pursuant to Federal Rule of Civil Procedure 24(b) with respect to the protective order issued in this action. See Meyer Goldberg, Inc. of Lorain v. Fisher Foods, 823 F.2d 159, 162 (6th Cir. 1987) (recognizing 24(b) intervention as proper method for nonparty to seek protected materials); Martindell v. International Tel. & Tel. Corp., 594 F.2d 291, 294 (2nd Cir. 1979) (intervention under Rule 24(b) proper method for third party challenges to protective order); In re Beef Industry Antitrust Litig., 589 F.2d 786, 789 (5th Cir. 1979) (same).

6. In its Answer in this proceeding and in its own publications, the AMA assumes a duty towards all physicians:

"AMA's mission is to serve as the voice of the American medical profession" (AMA Answer 6);

"AMA's mission is to serve physicians and their patients" (Id.);

"The AMA is the most authoritative voice and influential advocate for physicians and their patients." (AMA Vision, reprinted in the AM News, Vol. 41, No. 12, March 23/30, 1998, at 3A);

"The AMA is the acknowledged leader in setting standards for medical ethics, practice and education." (Id. at 2A); and

"The AMA can speak with authority on your behalf." (Id at 4A).

In connection with the Sunbeam transaction and otherwise, the AMA purports to act on behalf of all physicians. Indeed, the AMA's annual revenue of $200 million per year is based largely on its assertions to be the "voice" for all physicians.

7. The AMA alleges here that its contract with Sunbeam "was to enhance the AMA's reputation, credibility, and effectiveness in providing health care information to the public." AMA Affirm. Def. 3. The AMA then asserts that "performance of the Agreement would have actually undermined the reputation, credibility and effectiveness of the AMA in providing health care information as well as the public's association of the AMA with high ethical standards and credibility in the field of health care." Id. The AMA bases its defense on an argument that its contract with Sunbeam "would be contrary to public policy" and thus "should be declared void and unenforceable." Id. 1. The AMA's defense thereby encompasses its admitted duty to all physicians and to the public.

8. The AMA's public duty is further evidenced by its exclusive contract with HCFA. This contract was the subject of a recent decision in Practice Management Information Corp. v. The American Medical Ass'n, 121 F.3d 516 (9th Cir. 1997), modified on reh'g, 133 F.3d 1140 (9th Cir. 1998). Briefly, the AMA/HCFA contract provides the AMA with a monopoly over a mandatory billing system that is imposed on all physicians. Upon information and belief, this government-granted monopoly is worth up to $100 million per year in annual revenue to the AMA - which would far exceed the AMA membership dues revenue -- and imposes an extra annual cost of about $250 on each practicing physician. After examining that exclusive contract, the Ninth Circuit stated that "we conclude the AMA misused its copyright by licensing the CPT to HCFA in exchange for HCFA's agreement not to use a competing coding system. [T]he plain language of the AMA's licensing agreement requires HCFA to use the AMA's copyrighted coding system and prohibits HCFA from using any other." Id. at 520-21. By virtue of this government- granted monopoly, the AMA owes a duty to all physicians.

9. About 2/3rd of $200 million in annual revenue of the AMA is derived from sources other than membership dues, in spite of the AMA's claimed non-profit status. Many of the AMA members are non-voluntary members, by virtue of mandatory enrollment requirements. Upon information and belief, the full dues-paying membership in the AMA is less than the 275,000 physicians stated in the AMA's Answer ( 7), and constitute only a fraction of the physicians at large. Moreover, the AMA members are deprived of any meaningful voting powers, and cannot even vote on the election of the AMA President. Elections of AMA officers are determined by less than 0.3% of members.

10. The protective order sought and obtained by the AMA in this proceeding is yet another effort by the AMA officers to withhold important information from its own members and all physicians. The AMA has repeatedly entered into concealed business transactions with HCFA and others at the expense of its own members and all physicians. The outrage expressed over the AMA/Sunbeam contract was, in fact, less than the anger recently expressed by physicians over the proposed Evaluation & Management Documentation Guidelines based on the AMA/HCFA contract, and yet the AMA officers have not raised a "public policy" argument to invalidate that contract. Rather, the AMA officers continue to enforce that contract, and even derive enormous personal compensation from the AMA that is undisclosed to its members.

11. The Board of Trustees of the AMA owes fiduciary duties of disclosure and loyalty to the physicians it purports to represent. Upon information and belief, substantial sums were paid and are continuing to be paid to the AMA officers involved in the transaction with Sunbeam, and such information is likely to be contained in the discovery materials. Upon information and belief, the AMA's conduct in negotiating and executing its contract with Sunbeam was similar to the AMA's conduct in executing similar contracts, including those relating to the AMA/HCFA contract noted above. This information is likely to be contained in the discovery materials. Upon information and belief, the AMA officers have advanced their own financial interests in a manner contrary to the interests of the physicians they purport to represent, and such information is likely to be contained in the discovery materials.

12. On February 25, 1998, this Court entered its Stipulated Protective Order Governing Confidentiality ("Confidentiality Order"), which allows the AMA - a non-profit organization -- to conceal information from the physicians it purports to represent. This Confidentiality Order permits the AMA to conceal its compensation arrangements with the officers involved in the transaction, as well as the testimony of its officers about the responsibility of current AMA executives for the breach of duty. Confidentiality Order 1-3. This Confidentiality Order allows and requires destruction of discovery materials upon settlement despite the substantial public interest in such materials, and the likelihood of a cause of action by physicians for breach of fiduciary duty. Id. 4, 12. This Confidentiality Order also requires (i) the sealing of discovery matters and pleadings filed with the Court, (ii) the prohibition of the dissemination of unfiled discovery, and (iii) the prohibition on the parties and their counsel from commenting on such matters. Id. 4-5, 7, 9, 12.

13. As the Northern District of Illinois recently reiterated, "'pretrial discovery must take place in the public unless compelling reasons exist for denying the public access to the proceeding.'" Wiggins, 173 F.R.D. at 228 (quoting American Tel. & Tel. Co. v. Grady, 594 F.2d 594, 596 (7th Cir. 1978)). The Confidentiality Order enables the AMA officers, both past and current, to conceal their breach of fiduciary duty. The Confidentiality Order prevents AAPS, as a publisher of medical news, from informing physicians about the activities AMA purportedly taken on their behalf. The Confidentiality Order infringes on the ability of AAPS to challenge other business contracts of the purportedly non-profit AMA, and in particular the AMA/HCFA contract noted above. Such a protective order must be rescinded. Wiggins, 173 F.R.D. at 230 ("[P]ublic interest far outweighs any harm to the [defendants] and thus[] there is no good cause to keep the documents confidential."); see also Pansy v. Borough of Stroudsburg, 23 F.3d 772, 785 (3rd Cir. 1994) ("Disturbingly, some courts routinely sign orders which contain confidentiality clauses without considering the propriety of such orders, or the countervailing public interests which are sacrificed by the orders."). The Confidentiality Order was entered by this Court without any notice or opportunity to be heard by AAPS, physicians, the media, or the public.

14. There is no justification for this Confidentiality Order. It operates to conceal wrongdoing by AMA officers, to the detriment of the AMA as a non-profit organization. Just as a government official has no legitimate interest in concealing wrongdoing from the public, the AMA officers have no legitimate interest in denying access by its own members and other physicians to these materials. The purpose and effect of this Confidentiality Order with respect to the AMA is to allow its Board of Trustees to withhold material information from its beneficiaries - the AMA members and physicians in general. A goal of covering up corruption by a trustee is a palpably improper basis for seeking the Confidentiality Order. "[T]here is an important public interest at stake -- the health and welfare of the general public and the integrity of the [defendant]. The public has a right to know ." Wiggins, 173 F.R.D. at 230.

15. "Absent a showing that a defined and serious injury will result from open proceedings, a protective order should not issue." Glenmede Trust Co. v. Thompson, 56 F.3d 476, 485 (3rd Cir. 1995). Concealing wrongdoing by officers - the only possible rationale by the AMA in this action - is simply not one of the permissible justifications for a protective order. "General allegations of injury to reputation and client relationships or embarrassment that may result from dissemination of privileged documents is insufficient to justify judicial endorsement of an umbrella confidentiality agreement." Id. at 484.

16. Because the Confidentiality Order requires the sealing of discovery matters filed with the Court, the Order contravenes both the common law and the constitutional presumption that court records and proceedings are public property. Confidentiality Order at 9. Closure of judicial records is appropriate only where a compelling governmental interest exists, only where it is likely to be effective in preserving against the perceived harm, and only after considering less restrictive alternatives. See Wiggins, 173 F.R.D. at 230 (holding that the burden is on defendants to prove that "privacy interests" or a "chilling effect" does "outweigh the significant public interest in the disclosure of these documents"). Such justifications are plainly lacking here.

17. Because the Confidentiality Order prohibits the parties from disseminating any discovery materials, the Order is unfounded given that "good cause" does not exist for any protective order restricting disclosure of discovery materials about AMA officers. F.R.Civ.P. 26(c). There has been no specific demonstration that disclosure will cause a clearly defined and serious injury to the fair trial rights of the parties, and the only possible resultant injury from dissemination would be to past and current AMA officers who breached their duties to physicians. The AMA, as a non-profit organization purportedly dedicated to the public interest, would benefit from widespread disclosure about the activities and wrongdoings of its officers, so that meaningful reform is possible.

18. Because the Confidentiality Order implicitly restricts the litigants from speaking out about discovery in this case, the Order operates as a gag on speech and interferes with the public's right to obtain information. Confidentiality Order 4, 5, 7. Such restraints can only be justified in cases of serious and imminent harm to the administration of justice. Further, such restraints cannot be imposed if they will not be effective in preserving the compelling interest at stake.

19. Regardless of the grounds and justification for the Confidentiality Order at the time it was entered, the interest of physicians and the public in the discovery proceedings has been enhanced significantly by AMA's representations that it would fully disclose to the public the results of the Sunbeam investigation. The AMA publicly announced that it "will make a full disclosure of the Sunbeam agreement investigation." AMA Press Release of December 7, 1997, Dallas, Texas, entitled "Louis Harris Poll confirms confidence in AMA after Sunbeam." The AMA even stated that 64 percent of its members felt that the AMA's promise to disclose such information "considerably improves [the] opinion" of these doctors about the AMA. Id. "When doctors learn about the steps the AMA Board has taken, their approval immediately goes up with a bang," said now-President Reardon of the AMA. Id. The Movant and the public have a legitimate right and compelling interest in following through on these representations by the current AMA leadership. This right substantially outweighs any cause that previously existed for the secrecy of pre-trial discovery matters. Indeed, this interest is all the more compelling in light of these assertions by the current AMA President.

20. The AMA enters into contracts with the government and, in this case, with Sunbeam by claiming that the AMA is "the voice of the American medical profession." AMA Answer 6. AAPS, on behalf of thousands of physicians, is entitled to learn what the AMA is actually doing on their behalf. The protective order should be rescinded and the discovery materials should be preserved for a reasonable time after termination of this proceeding.

WHEREFORE, Movant respectfully prays that this Court (a) grant them leave to intervene in this proceeding for the sole and limited purpose of challenging the Confidentiality Order; (b) rescind the Confidentiality Order with respect to AMA discovery; and (c) enjoin the destruction of such discovery materials by the AMA for a reasonable time following termination of this proceeding.

Dated: July __, 1998 Chicago, Illinois

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