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ACI’s 7th Annual Advanced Forum on Managed Care Disputes and Litigation

Mark MichelsDirector | Deloitte AdvisoryDeloitte Transactions and Business Analytics LLP

Anti-Trust Violations: From Subpoena to CID

Michael R. GreerShareholderHall, Render, Killian, Heath & Lyman, P.C.

May 2-3, 2016

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Overview

•Enforcement Environment & Authorities•Pre-event preparation•Response execution•Discovery considerations

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Enforcement Environment & Enforcement Agencies

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Enforcement Context-The Enforcers

•Federal Trade Commission (FTC)

•Department of Justice (DOJ), Antitrust Division

•State Attorneys General

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FTC Antitrust Focus

When health care markets are competitive, consumers benefit from lower costs, better care and more innovation. The Federal Trade Commission enforces the antitrust laws in health care markets to prevent anticompetitive conduct that would deprive consumers of the benefits of competition.

https://www.ftc.gov/news-events/media-resources/mergers-competition/health-care-competition

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DOJ Antitrust Focus

[C]ompetitive health care markets serve to keep prices in check, improve quality, and spur innovation. We challenge anticompetitive conduct by both providers and insurers…Through effective enforcement, antitrust guidance, and competition advocacy, we help providers and insurers direct their creativity towards innovative ways to offer low cost, high quality health care that benefits patients while preserving competition.

--Bill Baer, Assistant Attorney General Antitrust Division, Before the Subcommittee on Regulatory Reform, Commercial and Antitrust Law Committee, May 15, 2015

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The Enforcers

• FTC and DOJ have concurrent jurisdiction to enforce the federal antitrust laws, but historically, the FTC has focused on providers and the DOJ has focused on payers.

• DOJ, Antitrust Division, Litigation I Section is responsible for civil antitrust enforcement in the area of health care.

• If a civil antitrust investigation uncovers evidence of criminal activity then one of the DOJ Criminal Sections will get involved. But there has not been a criminal antitrust case in the health care area since the early 1990s and those cases were for naked price fixing.

• FTC, Bureau of Competition, Mergers IV is responsible for investigating transactions involving hospitals.

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FTC Subpoenas

[T]he Commission, or its duly authorized agent or agents, shall at all reasonable times have access to, for the purpose of examination, and the right to copy any documentary evidence of any person, partnership, or corporation being investigated or proceeded against; and the Commission shall have power to require by subpoena the attendance and testimony of witnesses and the production of all such documentary evidence relating to any matter under investigation…

15 U.S. Code § 49

Commission representatives…are authorized to exercise and perform the duties of their office in accordance with the laws of the United States and the regulations of the Commission. Included among such duties is the administration of oaths and affirmations in any matter under investigation by the Commission.

6 CFR §2.5

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FTC Civil Investigative Demands

[T]he Commission may, before the institution of any proceedings…issue in writing…a civil investigative demand requiring such person to produce such documentary material for inspection and copying or reproduction, to submit such tangible things, to file written reports or answers to questions, to give oral testimony concerning documentary material or other information, or to furnish any combination of such material, answers, or testimony.

The production of documentary material in response to a civil investigative demand shall be made under a sworn certificate…by any person having knowledge of the facts and circumstances relating to such production, to the effect that all of the documentary material required by the demand and in the possession, custody, or control of the person to whom the demand is directed has been produced and made available to the custodian.

15 U.S. Code § 57b–1(c)(1),(11)

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DOJ Civil Investigative Demands (CIDs)

Whenever the Attorney General, or the Assistant Attorney General in charge of the Antitrust Division of the Department of Justice, has reason to believe that any person may be in possession, custody, or control of any documentary material, or may have any information, relevant to a civil antitrust investigation…he may, prior to the institution of a civil or criminal proceeding… issue in writing, and cause to be served upon such person, a civil investigative demand requiring such person to produce such documentary material for inspection any copying or reproduction, to answer in writing written interrogatories, to give oral testimony concerning documentary material or information, or to furnish any combination of such material, answers, or testimony.

15 U.S. Code § 1312(a)

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Why CIDs?

• Prior to having the power to issue CIDs, the enforcers had insufficient tools to investigate potential antitrust violations. Either had to rely on voluntary productions or bring civil proceedings that may have been unjustified.

• CIDs are purely an investigative tool. • Upon issuance of a CID, you are not yet in litigation, so your initial

strategy should be set accordingly.

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Current Use of CIDs

• For merger investigations, the preferred investigation tool is the Second Request under the Hart-Scott-Rodino (HSR) process.

• For Sherman Act §1 or §2 cases, the DOJ will issue CIDs.• Also common currently is the FTC and DOJ issuing third-party CIDs

as part of a merger investigation. • If you are not the target of an investigation, you usually have more leeway in

complying with the CID.

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First Steps Upon Receiving a CID

• Stay calm.• There will be pain, but the goal is to minimize the pain.• Set up an internal call with in-house and outside counsel to discuss

initial strategy.• Reach out to the contact person on the CID to acknowledge receipt

of the CID and set a future date to discuss narrowing the scope of the CID.

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CIDs - Initial Concerns/Questions

• Do we have to respond?• No (but practically . . . yes).• Within 20 days you can file a motion to quash, but successful challenges are rare

and usually limited to burden and relevance issues.• If you do not respond the DOJ can petition a court to enforce the CID.

• Will our documents be kept confidential?• Yes. Documents and information produced are kept confidential and are not

subject to Freedom of Information Act (FOIA).• Exceptions: the DOJ can share documents and information with: (i) Congress, (ii)

the FTC, (iii) third parties “in connection with the taking of oral testimony,” (iv) for official use in connection with a court case.

• If litigation ensues, the documents could become public subject to any protective order.

• If any White Papers are prepared outside the scope of the CID, we will need to negotiate a separate confidentiality provision will need to be negotiated.

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CIDs - Initial Concerns/Questions

• It will be too expensive and too disruptive to comply.• As long as the scope is reasonable and tailored to the investigation, it is likely

a court will require you to comply.• The agencies tend to view compliance with a CID as a “cost of doing

business.”• What should our initial strategy be?

• Cooperation in the beginning generally goes a long way to building credibility and trust.

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CID Negotiations

[T]he Division generally serves CIDs with a cover letter inviting the respondent, or its counsel, to telephone an antitrust investigator identified in the letter in order to attempt to resolve any avoidable problems created by the CID.

U.S. Department of Justice, Antitrust Division Manual, p.III-52https://www.justice.gov/atr/division-manual

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Negotiating the Scope of the CID

• Negotiating limitations:• Limit to priority specifications (defer the rest).• Limit to certain custodians.• Limit to certain time frames.• Limit to certain legal entities.• Limit to certain time periods.

• Start to build credibility and trust by providing a copy of the Organization Chart and Management Chart before negotiating the scope.

• Be open and honest about which individuals might have responsive documents.

• At a later date, negotiate search terms.

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Coordinate Internal Stakeholders

• Importance of a Litigation Hold.• Meetings with management, legal, and IT.• Getting outside counsel and e-Discovery vendor involved early.• Prepare an internal strategy for pulling documents in a manner that is

least disruptive.• Discuss whether a Joint Defense or Common Interest Agreement is

needed with any third parties.

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DOJ CID Certificate of Compliance

The production of documentary material in response to a demand served pursuant to this section shall be made under a sworn certificate, in such form as the demand designates, by the person, if a natural person, to whom the demand is directed or, if not a natural person, by a person or persons having knowledge of the facts and circumstances relating to such production, to the effect that all of the documentary material required by the demand and in the possession, custody, or control of the person to whom the demand is directed has been produced and made available to the custodian.

15 USC 1312(g)

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CID Certificate

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18 U.S. Code § 1505 - Obstruction of proceedings before departments, agencies, and committees

Whoever, with intent to avoid, evade, prevent, or obstruct compliance, in whole or in part, with any civil investigative demand duly and properly made under the Antitrust Civil Process Act, willfully withholds, misrepresents, removes from any place, conceals, covers up, destroys, mutilates, alters, or by other means falsifies any documentary material, answers to written interrogatories, or oral testimony, which is the subject of such demand; or attempts to do so or solicits another to do so; ******************************************************Shall be fined under this title, imprisoned not more than 5 years or, if the offense involves international or domestic terrorism (as defined in section 2331), imprisoned not more than 8 years, or both.

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Antirust Investigation Response Objectives

•Optimal outcome

•Rapid resolution

•Efficient execution

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Pre-event preparation

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Readiness

•Strong information governance (IG) program

•Defensible disposition of unnecessary data

•Litigation readiness & response plan§ Likely data sources (unstructured, structured data)§ Potential key custodians

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Readiness

PreservationPeople ProcessTechnology

Early case assessmentPeople ProcessTechnology

ProfessionalsOutside CounselService Providers

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Response Execution Considerations

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Document Production

• This is typically the time consuming and expensive part.• Targeted document pull v. forensic document pull.

• Hard copy documents v. electronically stored information (ESI).• Use of search terms and other techniques to narrow the “junk.”• Make sure you have statistically valid sample.• Create a privilege protocol to protect attorney-client privilege and

attorney work product.• Use of Review Team to review documents for responsiveness.• Use analytics in document review.

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Document Production (cont.)

• Rolling production.• Continuous negotiation of the merits with the DOJ during the duration

of the document production.• Depending on the progress, will likely have one or more sit down

meetings with DOJ during the process.• Hopefully, through the review of documents and ongoing dialogue,

DOJ will decide to close its investigation.

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Initial Response

•Active litigation hold management•Internal investigation

-Early case assessment•Data assessment

-Data production alternatives

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Discovery considerations

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Federal Rule of Evidence 502. Attorney-Client Privilege and Work Product; Limitations on Waiver

The following provisions apply, in the circumstances set out, to disclosure of a communication or information covered by the attorney-client privilege or work-product protection.(a) Disclosure Made in a Federal Proceeding or to a Federal Office or Agency; Scope of a Waiver. When the disclosure is made in a federal proceeding or to a federal office or agency and waives the attorney-client privilege or work-product protection, the waiver extends to an undisclosed communication or information in a federal or state proceeding only if:(1) the waiver is intentional;(2) the disclosed and undisclosed communications or information concern the same subject matter; and(3) they ought in fairness to be considered together.

(b) Inadvertent Disclosure. When made in a federal proceeding or to a federal office or agency, the disclosure does not operate as a waiver in a federal or state proceeding if:(1) the disclosure is inadvertent;(2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and(3) the holder promptly took reasonable steps to rectify the error, including (if applicable) following Federal Rule of Civil Procedure 26 (b)(5)(B).

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Predictive Coding

We work hard to make enforcement as efficient as possible without compromising our mission. Improving electronic discovery is one promising avenue for reducing the burdens our investigations can impose. For example…the division has been a pioneer among government agencies in using predictive coding methods in large volume document productions.

--Bill Baer, Assistant Attorney General Antitrust Division, Before the Subcommittee on Regulatory Reform, Commercial and Antitrust Law Committee, May 15, 2015

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DOJ Electronic Discovery Guidance

DOJ Antitrust Division Electronic Discoveryhttps://www.justice.gov/atr/electronic-discovery

Electronic Discovery at the Antitrust Division: An Updatehttps://www.justice.gov/atr/electronic-discovery-antitrust-division-update

Technology-Assisted Review and Other Discovery Initiativeshttps://www.justice.gov/sites/default/files/atr/legacy/2014/03/27/304722.pdf

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Questions?

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This presentation contains general information only and Deloitte and Hall, Render, Killian, Heath & Lyman, P.C. are not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

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