PHILADELPHIA – A federal judge in Philadelphia recently ordered a Montgomery County-based elder care company to comply with document-related subpoenas by June 26, in the Federal Trade Commission’s ongoing battle to block the merger of Thomas Jefferson University Hospital and Albert Einstein Healthcare Network.
U.S. District Court for the Eastern District of Pennsylvania Judge Gerald J. Pappert approved the order on June 5, giving Shannondell, Inc. a total of 21 days to produce the requested documents.
Shannondell serves about 1400 elderly residents in care facilities located in Montgomery County, through a continuing care retirement community with independent living units, a personal care home including a dementia unit and a skilled nursing facility.
Einstein served Shannondell with a subpoena on March 30, with the FTC adding a subpoena of its own requesting the same documents. The sought-after documents included:
19 requests for data and documents related to any transactions or competition with Jefferson or Einstein; Shannondell’s rehabilitation facilities and personnel, the relevant geographic data from which Shannondell draws its patients; the rehabilitation services it offers; competition regarding rehabilitation services; and data about patient location, demographics, health plan participation and reimbursement, and claims reimbursement.
Shannondell filed a motion to quash or modify the subpoenas, arguing the documents requested are “beyond the scope of permissible discovery, the documents sought include confidential trade secrets and commercial information and the subpoenas failed to provide a reasonable time to comply.”
“Shannondell first contends that the subpoenas seek information that is not relevant because Shannondell ‘is not a direct competitor of Jefferson or Einstein’…[but] the information that the parties seek from Shannondell, however, is relevant to Einstein’s rebuttal of plaintiffs’ claims. Plaintiffs’ allegations arise under the Clayton Act, which prohibits mergers and acquisitions where ‘the effect of such acquisition may be substantially to lessen competition, or tend to create a monopoly.” Pappert said.
“According to plaintiffs’ allegations, the proposed merger between Jefferson and Einstein violates the Clayton Act because it purportedly reduces competition in distinct markets, including: (1) The market for inpatient general acute care hospital services in the ‘Northern Philadelphia Area’ and ‘Montgomery Area,’ and (2) The market for inpatient acute rehabilitation services in the ‘Philadelphia Area,” Pappert said.
But Pappert countered that the discovery requested from Shannondell is “relevant to Einstein’s defense concerning whether Shannondell, in fact, exists as a competitor for acute rehabilitation services in the proper relevant market” and because Einstein contends that Shannondell’s services compete with those of Einstein and Jefferson, the subpoena requests are “relevant to evaluating both the product and geographic market.”
“Even if Shannondell could establish a ‘clearly defined and serious injury’ by complying with the subpoenas, the relevance and need for the information weigh in favor of the subpoenaing parties. And as for Shannondell’s concerns about confidentiality and harm, the Court’s stipulated protective order serves as an adequate safeguard,” Pappert said.
Shannondell also asserted that compliance with the subpoenas imposes an undue burden and creates a serious injury because the requests require disclosure of “highly confidential and trade secret information that would irreparably damage Shannondell’s competitive position in the relevant geographic market”.
However, Pappert explained the Court’s stipulated protective order limits the disclosure of “confidential information” and further restricts the disclosure of material designated as “highly confidential”, allowing non-parties like Shannondell to “safeguard their confidential information to prevent unauthorized disclosure, subject to the Protective Order’s terms, both during and after the litigation.”
Shannondell alternatively argued the Court must quash the subpoenas on the ground that they “fail to allow a reasonable time to comply”, but Pappert devised a solution.
“The Court is, however, mindful that Shannondell – which operates as a continuing care retirement community, personal care home and skilled nursing facility – is currently serving a population of residents considered to be “the most vulnerable and…the highest risk of being affected by COVID-19,” Pappert said.
“Moreover, due to staffing shortages from illness or caring for family members, the Vice President of Health Services at Shannondell represents that the primary employee who oversees the medical records department is currently serving as a nurse’s aide to meet the needs of residents.”
As a result, rather than mandating immediate compliance with the subpoenas, the Court requires that Shannondell comply with the production requests on or before Friday, June 26. This extension accommodates Shannondell’s request for additional time without interfering with the Court’s fact discovery deadline of July 20.
U.S. District Court for the Eastern District of Pennsylvania case 2:20-cv-01113
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com