IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

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

THE ASSOCIATION OF AMERICAN PHYSICIANS &
SURGEONS' MOTION TO RESTRAIN AMA AND SUNBEAM
FROM TRANSFERRING OR DISPOSING OF DOCUMENTS

The Association of American Physicians & Surgeons, Inc. ("AAPS"), by its attorneys, hereby submits its Motion To Restrain The American Medical Association ("AMA") and Sunbeam Products, Inc. ("Sunbeam") From Transferring or Disposing of Documents Produced In This Litigation.

1. AMA and Sunbeam have filed a Joint Report Of Plaintiff And Defendant Regarding Return And Preservation Of Documents. The Joint Report essentially requests approval for a proposed obstruction of justice. Neither Sunbeam nor AMA cites any authority that supports their brazen proposal, nor does any such authority exist.

2. On November 3, 1998, in response to AAPS' motion, this Court rescinded the Stipulated Protective Order previously entered to preserve the confidentiality of all documents produced in the litigation. The Court, however, denied AAPS' motion for preservation of discovery materials. It wrote:

Finally, concerning AAPS's request for an injunction, such relief is not called for under these circumstances. AMA has stated that it is aware of its general obligation not to destroy evidence, that copies of all its discovery are in storage, and that it has no plans to destroy these materials. The court finds these good faith representations to be sufficient assurance that AMA will not destroy any documents, and consequently holds that a document preservation injunction is not necessary.

November 3, 1998 Order at 4.

3. On November 6, 1998, Sunbeam filed a Motion To Alter Or Amend the Court's Order dated November 3, 1998. That motion requested that the Court hold that the Stipulated Protective Order was in effect as to the documents marked "confidential" by Sunbeam.

4. On November 9, 1998, Edward X. Clinton, Jr., counsel for AAPS, wrote to Sunbeam's counsel concerning Sunbeam's Motion To Alter Or Amend. The letter expressly requested that Sunbeam retain and preserve all documents produced in the litigation, including the documents produced by the AMA. (This letter is attached as Exhibit A to AAPS' Opposition To Sunbeam's Motion To Alter Or Amend.)

5. Sunbeam did not respond to Clinton's November 9, 1998 letter.

6. On November 10, 1998, Clinton wrote to Sunbeam's counsel and stated "it is well-established that your firm has a duty to preserve all the discovery materials" in the litigation. (The letter is attached as Exhibit B to AAPS' Opposition To Sunbeam's Motion To Alter Or Amend.)

7. Sunbeam did not respond to Clinton's November 10, 1998 letter.

8. On November 16, 1998, Clinton informed the clerk that he requested that the Court hold a hearing on Sunbeam's Motion To Alter Or Amend. By a faxed letter Clinton informed counsel for AMA and Sunbeam that he had requested a hearing on Sunbeam's Motion.

9. Sometime later that day Sunbeam's counsel called the clerk to cancel the hearing, but did not inform Clinton that the hearing had been cancelled.

10. On November 17, 1998, Clinton learned that the hearing had been cancelled when he arrived at the judge's courtroom and saw that "AMA v. Sunbeam" had been crossed off the list of cases on the Court's 9:00 a.m. status call.

11. Although not requested to do so, on November 18, 1998, AAPS filed its Opposition To Sunbeam's Motion To Alter Or Amend.

12. On November 19, 1998 the AMA and Sunbeam filed their Joint Report Of Plaintiff And Defendant Regarding Return And Preservation Of Documents ("Joint Report"). The Joint Report announced that "the AMA will return its copies of Sunbeam's documents to Sunbeam, and Sunbeam will return its copies of the AMA's documents to the AMA." The Joint Report also states:

While neither party believes that their private arrangement to return copies of documents is prohibited by this Court's order dated November 3, 1998 ("November 3 Order") or by any other order, case, rule or statute, they wish to keep the Court apprised of their intentions. The parties will, of course, also abide by their ethical obligations, to the extent applicable, to preserve the originals of their own documents.

(Joint Report at 1, emphasis supplied). Does the italicized phrase means that the parties will observe their obligations to preserve the documents unless they unilaterally decide that there are no such obligations? We respectfully suggest that the italicized sentence is deliberately ambiguous.

13. AMA and Sunbeam have a duty to preserve all the discovery materials in this case. Both parties are on notice that AAPS, or AMA members, may seek further legal relief for the AMA's breach of fiduciary duty in entering into the contract with Sunbeam. "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)). Moreover, according to published media reports, the Securities and Exchange Commission ("SEC") is investigating Sunbeam's publicly announced earnings for recent fiscal years. Any transfer of documents by either party may impede that investigation.

14. The Joint Report implicitly seeks judicial approval for the transfer of evidence likely to be subject to criminal and civil subpoenas. Sunbeam is reportedly under investigation by the SEC for potential criminal violations and the AMA has been notified here of a likely civil action for breach of fiduciary duty against its officers.

15. The Joint Report proposes an illegal transfer of evidence in an obstruction of justice. As emphasized in United States v. Lundwall, 1 F. Supp. 2d 249 (S.D.N.Y. 1998), such a transfer of documents subject to civil proceedings or criminal investigations is prohibited by 18 U.S.C. § 1503. Specifically, efforts "`in preventing a litigant from learning facts which he might otherwise learn, and [thereby] preventing him from deciding for himself whether or not to make use of such facts,'" constitute obstruction of the "`due administration of justice'" under 18 U.S.C. § 1503. Lundwall, 1 F. Supp. 2d at 252 (quoting Wilder v. United States, 143 F. 433, 441 (4th Cir. 1906)). This prohibition against impeding the administration of justice applies in the context of both civil proceedings and criminal investigations. Lundwall, 1 F. Supp. 2d at 251.

16. "[T]he law is clear that neither a subpoena nor a court order directing the production of documents must be issued or served as a prerequisite to a § 1503 prosecution, and that the concealment and destruction of documents likely to be sought by subpoena is actionable under the statute." Lundwall, 1 F. Supp. 2d at 254. See also United States v. Ruggiero, 934 F.2d 440, 450 (2d Cir. 1991) (destroying documents in anticipation of a subpoena can constitute obstruction); United States v. Gravely, 840 F.2d 1156, 1160 (4th Cir. 1988) (under § 1503, documents destroyed do not have to be under subpoena to constitute obstruction; it is sufficient if the defendant is aware that the documents will be sought in a criminal investigation); Wilder, 143 F. at 442 (inducing witness not under subpoena not to testify constitutes obstruction under the statute).

17. The Joint Report proposes that the AMA transfer certain evidence to Sunbeam and that Sunbeam transfer certain evidence to the AMA, which would thereby frustrate discovery by future litigants, and possibly frustrate criminal investigations. The effect of this proposed transfer on litigants and investigators would be similar to the effect of the withholding and subsequent destruction of evidence by the defendants in Lundwall, for which they were indicted. The proposed transfer would plainly impede the "due administration of justice" under 18 U.S.C. § 1503. Neither the AMA nor Sunbeam would possess, after such transfer, a complete copy of the discovery materials relating to the AMA-Sunbeam transaction. Even depositions may be stripped of a complete set of their exhibits under the apparent terms of this document transfer, because the AMA and Sunbeam would transfer exhibits produced by the other party. The intended and actual result is to create impermissible obstacles to related civil and criminal proceedings. See Wilk v. American Medical Ass'n, 635 F.2d 1295, 1301 (7th Cir. 1980) ("That 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."). As noted in paragraph 11 above, the AMA and Sunbeam even allow for the possibility of their destruction of documents once they obtain sole custody of them.

18. Neither the AMA nor Sunbeam provides a shred of support for their proposal. Their first purported reason is that the AMA and Sunbeam "have intended to do [this] from the virtually the beginning of the lawsuit." Id. 4. But obstruction of justice is not cured merely because the parties intended it from the outset. Moreover, not even the original protective order permitted such a broad document transfer. Stipulated Protective Order 12 ("This Paragraph 12 shall not be construed to require the destruction ? of ? deposition ? exhibits ?.").

19. The other two purported reasons in the Joint Report are likewise specious. The duty to preserve documents exists regardless of whether Sunbeam or the AMA "wants to be responsible for retaining or protecting" documents. Joint Report 4. If one could legally transfer evidence whenever he did not "want[] to be responsible for retaining or protecting" documents, regardless of obligations to preserve evidence, then the administration of justice would be severely hampered. Likewise, the purported desire of Sunbeam and the AMA "to avoid becoming ensnared in any potential disputes" does not qualify as a justification for tampering with evidence. Joint Report 4. Moreover, these two purported reasons are incredible in light of the AMA's strenuous efforts to conceal its documents from its members and the public, which is the real reason for its proposed document transfer. The AMA omits this reason because it is patently insufficient to justify its proposed document transfer.

20. The Joint Report essentially requests approval for a proposed obstruction of justice. The cases cited in the Joint Report do not support or even relate to a proposed transfer of evidence. Those cases address the rights of parties to disseminate information obtained in discovery, which has no bearing on the obligations of parties to preserve evidence. The precedent sought by the AMA here would cause immeasurable harm to the "due administration of justice" embraced by 18 U.S.C. § 1503 and numerous decisions.

For the foregoing reasons, the AAPS respectfully requests that this Court enter an order: (1) prohibiting AMA and Sunbeam from transferring, disposing of, or destroying any documents produced in this litigation and requiring each party to retain and preserve all documents produced by that party; and (2) striking the Joint Report of Plaintiff and Defendant Regarding Return and Preservation of Documents.

Dated: November 20, 1998

Association of American Physicians & Surgeons, Inc. 7