United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
ANDREA R. WOOD, District Judge.
This Court has been asked to determine whether Medline Industries, Inc. ("Medline") should be required to produce confidential, commercially-sensitive information regarding its business to three of its competitors for use in litigation to which it is not a party. Owens & Minor Distribution, Inc. ("O&M") and Cardinal Health 200, LLC ("Cardinal, " and together with O&M, "Defendants") are defendants in an antitrust lawsuit filed by Suture Express, Inc. ("Suture Express, " and together with the Defendants, the "Parties") pending in the United States District Court for the District of Kansas ("Underlying Litigation"). Suture Express, O&M, and Cardinal all compete in the market for medical and surgical single-use items, also known as the "med-surg" market. Medline also competes in the med-surg field, but it is not a party in the Underlying Litigation. During discovery in the Underlying Litigation, Suture Express and the Defendants issued subpoenas to Medline pursuant to Federal Rule of Civil Procedure 45, seeking the production of documents and deposition testimony. Medline has objected to disclosing the requested information and, accordingly, has filed the instant motion to quash the subpoenas ("Motion to Quash"). (Dkt. No. 1.) In response, Suture Express has filed a cross-motion to compel Medline to comply with its subpoena ("Motion to Compel"). (Dkt. No. 16.) Both motions are now ripe for decision. For the reasons stated below, the Court grants in part and denies in part the Motion to Quash and the Motion to Compel.
I. The Underlying Litigation
Suture Express is engaged in the business of selling and distributing sutures and endomechanical products (also known as "endo products"), which are devices used in minimally invasive surgeries, such as laparoscopic surgery. According to the complaint in the Underlying Litigation, sutures and endo products comprise a sub-set of a 10% segment of the med-surg supply market that also includes items such as needles, syringes, gloves, surgical instruments, and catheters. While Suture Express has limited its business to a portion of the med-surg category, O&M and Cardinal are broad-based distributors that purchase and distribute the full range of med-surg products.
In December 2012, Suture Express filed a seven-count complaint against the Defendants in the District of Kansas, alleging causes of action under the Sherman Antitrust Act, 15 U.S.C. § 1 et seq., the Clayton Antitrust Act, 15 U.S.C. § 12 et seq., and Kansas state law. The complaint alleges that O&M and Cardinal control 39% and 33%, respectively, of the total med-surg market. Suture Express further alleges that, beginning in 2008, the Defendants leveraged their market power in order to coerce customers to purchase the Defendants' sutures and endo products. According to Suture Express, the Defendants required their customers to purchase 90% or more of their sutures and endo products from one of the Defendants, or else the customers would pay a penalty on the entire med-surg basket purchased from that Defendant. Suture Express further contends that the amount of the "discount" offered by the Defendants was such as to bring the price of their sutures and endo products below cost, and thus constituted predatory pricing that enhanced the Defendants' market power, raised barriers to entry, and impeded the ability of Suture Express to compete.
In response to the complaint, the Defendants filed a motion to dismiss, which the district court granted in part. As a result, the Underlying Litigation now consists of three live causes of action: Count 1, claiming that the Defendants violated § 1 of the Sherman Act by engaging in illegal tying practices; Count 5, alleging that the Defendants violated § 3 of the Clayton Act by engaging in exclusive dealing; and Count 6, asserting that the Defendants violated the Kansas Restraint of Trade Act ("KRTA"), K.S.A. 50-101 et seq., based on anti-competitive tying and bundling.
The district court also entered a protective order for discovery in the Underlying Litigation (the "Protective Order") that limits dissemination of and public access to "information that the producing party or non-party... designates as Confidential' or Highly Confidential.'" (Defs.' Resp. Ex. A ¶ 3, Dkt. No. 21-1.) The Protective Order permits a broad range of information to be designated as "Confidential" or "Highly Confidential, " including the contracts, transactional data, and confidential business information that are at issue in the Underlying Litigation. ( Id. ) The Protective Order also provides that "[a]ll information produced or discovered in th[e] Litigation, regardless of whether designated confidential, shall be used solely for the prosecution or defense of this Litigation." ( Id. at ¶ 1.) Under the terms of the Protective Order, "Highly Confidential" information cannot be disclosed to any employee of the Parties except, "for each Defendant, one in-house counsel who does not play any significant role in the respective Defendant's commercial decisions." ( Id. at ¶ 10(B)(2).) However, the Parties may disclose "Highly Confidential" information to their consulting and testifying experts, so long as those experts sign an agreement under which they promise to abide by the terms of the Protective Order and acknowledge that they may be held in contempt if they violate those terms. ( Id. at ¶¶ 10(B)(7), 11 & Ex. A.) The Protective Order also expressly states that it does not cover the use of confidential discovery material at any trial or hearing in the Underlying Litigation, leaving that issue to be addressed in the final pre-trial order. ( Id. at ¶ 14(A).)
II. The Medline Subpoenas
On March 28, 2014, Suture Express served a subpoena on Medline, which, like Cardinal and O&M, is a broad-line distributor of med-surg supplies. (Mot. to Quash Ex. 1, Dkt. No. 1-3.) Medline competes directly with the Parties in the med-surg market. Suture Express's subpoena asks for nineteen categories of documents, as well as a deposition pursuant to Federal Rule of Civil Procedure 30(b)(6). On April 11, 2014, O&M served a subpoena on behalf of the Defendants asking for fifteen categories of documents and a Rule 30(b)(6) deposition. (Mot. to Quash Ex. 2, Dkt. No. 1-4.) Both subpoenas demand responsive documents for the time period January 1, 2006 through the present. Medline timely objected to these document requests on the basis of, among other things, relevance, confidentiality, and undue burden.
The Parties' subpoenas request information that, broadly speaking, can be grouped into the following categories:
information relating to Medline's customers, sales, profits, and market share (Defendants' document requests 1, 4, 5, 6, 7, 8, 9, 10, 11, and 12, and deposition topics 2 and 5; Suture Express's document requests 12, 17, 18, and 19, and deposition topic 3);
information relating to Medline's general contracts and pricing practices (Defendants' document request 2; Suture Express's document requests 3, 4, and 7, and deposition topics 1 and 2);
information relating to Medline's "tying" of certain products to the sale of other products through price concessions, rebates, and the like (Defendants' document request 3 and deposition topics 3 and 4; Suture Express's document requests 8, 9, 10, 11, 13, and 15, and deposition topics 4, 5, and 6); and
information relating to Medline's communications with and about its competitors, including the Parties (Defendants' document requests 13, 14, and 15, and deposition topic 1; Suture Express's document request 14 and deposition topics 7 and 8).
The Parties and Medline subsequently engaged in a robust meet and confer process, during which the Parties offered certain concessions in response to Medline's objections. For example, the Defendants offered to agree that Medline may limit its production of customer contracts to those between Medline and group purchasing organizations ("GPOs") along with a random sample of Medline's customer contracts. (Lahlou Decl. ¶ 8, Dkt. No. 21-2.) The Defendants also suggested that Medline's search for responsive documents may be limited to centrally-located files, as well as a limited number of custodians. ( Id. at ¶ 9.) For its part, Suture Express offered to modify several requests for "all documents" to seek only documents "sufficient to show, " drop its request for Medline's contracts with manufacturers,  drop its request for Medline's cost information, and limit its request for Medline's contracts with customers. ( See generally Apr. 29, 2014 Ltr., Dkt. No. 18-8.) Additionally, the Parties offered to allow Medline to designate any of the documents it produced pursuant to the subpoenas as "Highly Confidential" under the Protective Order. ( See id.; Lahlou Decl. ¶ 10, Dkt. No. 21-2.) The Parties failed to reach any accommodation with Medline over the course of the meet and confer process, however.
On June 24, 2014, Medline filed its Motion to Quash, asking this Court to quash the Parties' subpoenas in their entireties and to award it costs. (Dkt. No. 1.) The Parties all opposed the Motion to Quash, and Suture Express also filed its own Motion to Compel, which was briefed concurrently with the Motion to Quash. (Dkt. No. 16.) The Motion to Compel asks the Court to order Medline to produce the documents requested by Suture's subpoena, as limited according to the terms offered by Suture Express during the meet and confer process.
I. Legal Standard
Under Federal Rule of Civil Procedure 45, "[a] party has a general right to subpoena any person to appear at a deposition or to produce documents for inspection and copying." Thayer v. Chiczewski, 257 F.R.D. 466, 469 (N.D. Ill. 2009). Nonetheless, Rule 45 also protects non-parties by giving courts discretion to quash subpoenas that seek disclosure of confidential research, development, or commercial information, and further mandates that courts quash subpoenas that subject the recipients to undue burden. See Fed.R.Civ.P. 45(c)(3)(B)(i), (d)(3)(A)(iv).
When a person seeks protection from a subpoena, a court "must apply a balancing test to determine whether the need of the party seeking disclosure outweighs the adverse effect such disclosure would have on the policies underlying the [claimed] privilege." Deitchman v. E.R. Squibb & Sons, Inc., 740 F.2d 556, 559 (7th Cir. 1984) (quoting Equal Emp't Opportunity Comm'n v. Univ. of Notre Dame du Lac, 715 F.2d 331, 338 (7th Cir. 1983)). In applying the balancing test, courts consider several factors, including "the person's status as a non-party, the relevance of the discovery sought, the subpoenaing party's need for the documents, the breadth of the request and the burden imposed on the subpoenaed party." Parker v. Four Seasons Hotels, Ltd., 291 F.R.D. 181, 188 (N.D. Ill. 2013) (quoting Last Atlantis Capital, LLC v. AGS Specialist Partners, No. 04 C 0397, 2013 WL 182792, at *1 (N.D. Ill. Jan. 17, 2013)). If confidential information is being sought, "the burden is on the party seeking discovery to establish that the information is sufficiently relevant and necessary to his case to outweigh the harm ...