IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF PENNSYLVANIA 

THE CHESTER COUNTY HOSPITAL

 v. 

INDEPENDENCE BLUE CROSS, 

QCC INSURANCE COMPANY, 

KEYSTONE HEALTH PLAN EAST, and 

KEYSTONE MERCY HEALTH PLAN 

NO. 02-CV-2746 

RULE TO SHOW CAUSE

AND NOW, this__________ day of _________________________, 2004, upon 

consideration of the Motion of Defendants, Independence Blue Cross, QCC Insurance Company,

Keystone Health Plan East, and Keystone Mercy Health Plan’s (collectively “IBC”), for an Order 

of Contempt and Sanctions against Aetna, Inc., it is hereby ORDERED that Aetna appear before 

Magistrate Judge Smith in Courtroom _____ in the United States Courthouse in Philadelphia on 

________, 2004, at ___ __. m. to show why it should not be held in contempt and sanctioned for 

failing to comply with this Court’s Order dated December 22, 2004. 

 BY THE COURT:

 ______________________________________ 

 Charles B. Smith, U.S.M.J 

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Case 2:02-cv-02746-JP Document 191 Filed 01/16/2004 Page 1 of 15
IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF PENNSYLVANIA 

THE CHESTER COUNTY HOSPITAL

 v. 

INDEPENDENCE BLUE CROSS, 

QCC INSURANCE COMPANY, 

KEYSTONE HEALTH PLAN EAST, and 

KEYSTONE MERCY HEALTH PLAN 

NO. 02-CV-2746 

ORDER 

AND NOW, this __________ day of _________________________, 2004, upon 

consideration of the Motion of Defendants, Independence Blue Cross, QCC Insurance Company,

Keystone Health Plan East, and Keystone Mercy Health Plan’s (collectively “IBC”), for an Order 

of Contempt and Sanctions against Aetna, Inc. (“Aetna”), and having considered the responses 

and defenses of Aetna, Inc. and the facts certified by Magistrate Judge Charles B. Smith, the 

Court finds Aetna, Inc. in civil contempt of Magistrate Judge Smith’s Order of December 22, 

2003 and enters the following ORDER: 

1. Aetna, Inc. shall pay a fine of $15,000, unless it shall, within 5 days from the 

date of this Order, produce all documents that Magistrate Judge Smith ordered 

produced in the Order dated December 22, 2003. For each day thereafter that 

Aetna, Inc. fails to comply with the Order of December 22, 2003, Aetna shall 

be fined an additional $5,000 per day.

2. Aetna shall pay IBC’s reasonable attorneys’ fees and expenses incurred in the 

preparation, filing, and litigation of the motion for an order of contempt, as the 

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Case 2:02-cv-02746-JP Document 191 Filed 01/16/2004 Page 2 of 15
Court may determine. IBC is directed to file of a bill of costs within 10 days

from the date of this order. 

BY THE COURT:

______________________________________ 

 Padova, J. 

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Case 2:02-cv-02746-JP Document 191 Filed 01/16/2004 Page 3 of 15
IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF PENNSYLVANIA 

THE CHESTER COUNTY HOSPITAL

 v. 

INDEPENDENCE BLUE CROSS, 

QCC INSURANCE COMPANY, 

KEYSTONE HEALTH PLAN EAST, and 

KEYSTONE MERCY HEALTH PLAN 

NO. 02-CV-2746 

IBC’S MOTION FOR AN ORDER OF CONTEMPT AND SANCTIONS

AGAINST AETNA, INC.

Defendants, Independence Blue Cross, QCC Insurance Company, Keystone Health Plan 

East, and Keystone Mercy Health Plan’s (collectively “IBC”), hereby move this Court, pursuant 

to 28 U.S.C.A. §636(e)(6)(B)(iii) and Federal Rule of Civil Procedure 37(b)(2), for an Order of 

Contempt and Sanctions against Aetna, Inc. (“Aetna”). Not only has Aetna failed to comply with 

this Court’s December 22, 2003 Order directing the production of documents by January 12, 

2003, but Aetna has also stated to IBC that it has no intention of complying with the Order. In

support of this motion, IBC avers as follows: 

1. On July 25, 2003, IBC issued a subpoena out of the District of Connecticut to 

non-party Aetna. The subpoena was served on Aetna in Connecticut on July 25, 2003. A copy

of IBC’s subpoena is attached hereto as Exhibit A. 

2. Upon being served with IBC’s subpoena, Aetna filed a motion in the Eastern 

District of Pennsylvania for leave to intervene in this action and for an order modifying the 

Court’s Protective Order dated May 30, 2003 (Dkt. Entry 56). 

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Case 2:02-cv-02746-JP Document 191 Filed 01/16/2004 Page 4 of 15
3. Magistrate Judge Smith allowed Aetna to intervene by Order dated July 7, 2003 

(Dkt. Entry 88) and partially granted Aetna’s proposed changes to the Protective Order. Aetna 

filed objections to the Order of July 7, 2003. 

4. On August 7, 2003, District Judge John R. Padova heard oral argument on 

Aetna’s objections to the Order of July 7, 2003. (Dkt Entry 114). On August 14, 2003, Judge 

Padova entered an Amended Protective Order. (Dkt. Entry 116). 

5. After the entry of the Amended Protective Order, IBC agreed to still further

changes requested by Aetna and submitted a revised Amended Protective Order to the Court. 

The Court entered the revised Amended Protective Order on August 19, 2003. (Dkt. Entry 121). 

The Amended Protective Order prohibited the disclosure of Aetna’s confidential material to any

IBC employees. 

6. Following the entry of the Amended Protective Order, Aetna continued to object 

to the scope of IBC’s subpoena. 

7. IBC substantially reduced the scope of its subpoena in response to Aetna’s 

objections. Still, Aetna refused to produce documents. 

8. On December 3, 2003, IBC filed a motion to compel Aetna to produce documents 

(Dkt. Entries 173 & 174). IBC’s motion sought to compel the following documents: 

Documents constituting or reflecting Aetna’s strategic business 

plans that relate to the Southeastern and Central Pennsylvania 

Counties, including but not limited to marketing plans, business 

plans, and market assessments. 

Documents sufficient to demonstrate Aetna’s reimbursement rates 

for hospital services in the Southeastern and Central Pennsylvania 

Counties. 

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Case 2:02-cv-02746-JP Document 191 Filed 01/16/2004 Page 5 of 15
9. Aetna answered IBC’s motion to compel on December 16, 2003 (Dkt. Entry 178). 

10. IBC and Aetna argued the motion before Magistrate Judge Smith on December 

16, 2003. A transcript of the oral argument is attached hereto as Exhibit B.

11. During the oral argument, Magistrate Judge Smith directed IBC to address 

Aetna’s procedural/jurisdictional objections to the subpoena by issuing a substitute subpoena out 

of the Eastern District of Pennsylvania. See Exhibit B, page 39-41. Magistrate Judge Smith 

further directed IBC to file a reply brief addressing Aetna’s substantive arguments. See Exhibit 

B, page 41. 

12. As directed, IBC issued a substitute subpoena out of the Eastern District of 

Pennsylvania on December 17, 2003. A copy thereof is attached as Exhibit C. 

13. IBC filed its reply brief on December 22, 2003. A copy thereof is attached as 

Exhibit D (without exhibits). 

14. On December 22, 2003, Magistrate Judge Smith entered an Order (Dkt. Entry

183) directing Aetna to produce the following documents by January 12, 2003: 

(1) Contracts with hospitals in the five-county Southeastern Pennsylvania 

region reflecting Aetna’s reimbursement rates to those hospitals; 

(2) Summary level documents sufficient to demonstrate Aetna’s hospital 

reimbursement rates in the Central Pennsylvania region (Adams, Berks, 

Centre, Columbia, Cumberland, Dauphin, Franklin, Fulton, Juniata, 

Lancaster, Lebanon, Lehigh, Mifflin, contour, Northampton, 

Northumberland, Perry, Schuylkill, Snyder, Union, and York counties) 

broken down by hospital type (community, teaching, or regional) and 

hospital size (by licensed bed counts), without prejudice to IBC’s right to 

later seek the complete hospital contracts in this region; and 

(3) Documents reflecting Aetna’s strategic planning for the healthcare 

insurance markets in the Southeastern Pennsylvania counties. 

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Case 2:02-cv-02746-JP Document 191 Filed 01/16/2004 Page 6 of 15
A copy of the Order of December 22, 2003 attached as Exhibit E. 

15. A copy of the Order of December 22, 2003 was faxed to counsel for Aetna on 

December 22, 2003. See Exhibit E. 

16. By letter dated December 29, 2003, Aetna objected to the substitute subpoena that 

Magistrate Judge Smith had directed IBC to issue. A true and correct copy of Aetna’s letter is 

attached hereto as Exhibit F. 

17. In its letter of December 29, 2003, Aetna raised the same objections that it had 

previously raised in its answer to IBC’s motion to compel, which objections were resolved 

against Aetna in the Order of December 22, 2003. 

18. On Wednesday, January 7, 2004, Aetna filed objections to the Order of December 

22, 2003. A copy of Aetna’s objections is attached hereto as Exhibit G (without exhibits). 

19. Aetna did not at any time seek a stay of the Order of December 22, 2003. 

20. Notwithstanding the Order of December 22, 2003, Aetna stated in its letter of 

December 29, 2003 that it would not comply with the substitute subpoena. 

21. The deadline for production of documents established by the Order of December 

22, 2003 has elapsed. Aetna has not produced any of the documents ordered to be produced. 

WHEREFORE, IBC respectfully requests the issuance of a rule directing Aetna, Inc. to

show cause why it should not be held in contempt of court and sanctioned for failing to comply

with the Court’s Order of December 22, 2003. Following the hearing on the rule to show cause, 

IBC requests that the Magistrate Judge certify the facts in paragraphs 1 through 21 of this motion 

to District Judge John R. Padova for a determination of contempt. IBC further requests the 

imposition of a coercive fine in the initial amount of $15,000 if Aetna does not comply with the 

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Case 2:02-cv-02746-JP Document 191 Filed 01/16/2004 Page 7 of 15
Order of December 22, 2003 within five (5) days after a determination of contempt, with 

additional coercive fines of $5,000 per day thereafter. 

Respectfully submitted, 

______________________________________ 

THOMAS A. LEONARD 

WILLIAM J. LEONARD 

RICHARD P. LIMBURG 

One Penn Center, 19th Floor 

1617 John F. Kennedy Boulevard 

Philadelphia, PA 19103 

(215) 665-3000 

HOWREY SIMON ARNOLD & WHITE LLP

JOHN DeQ BRIGGS

JAMES G. KRESS

1299 Pennsylvania Avenue, N.W.

Washington, DC 20004 

(202) 383-7015 

Attorneys for Defendants, 

Independence Blue Cross, 

Keystone Health Plan East, 

QCC Insurance Company, and 

 Keystone Mercy Health Plan 

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Case 2:02-cv-02746-JP Document 191 Filed 01/16/2004 Page 8 of 15
IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF PENNSYLVANIA 

THE CHESTER COUNTY HOSPITAL

 v. 

INDEPENDENCE BLUE CROSS, 

QCC INSURANCE COMPANY, 

KEYSTONE HEALTH PLAN EAST, and 

KEYSTONE MERCY HEALTH PLAN 

NO. 02-CV-2746 

IBC’S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION FOR 

AN ORDER OF CONTEMPT AGAINST AETNA

Defendants Independence Blue Cross, QCC Insurance Company, Keystone Health Plan 

East, and Keystone Mercy Health Plan’s (collectively “IBC”), submit this Memorandum of Law 

in support of their attached Motion for Contempt and Sanctions against Aetna, Inc. (“Aetna”). 

I. INTRODUCTION

Aetna has refused and failed to comply with an Order of this Court directing it to produce 

documents on or before January 12, 2003. The Order directed Aetna to produce a small fraction 

of the documents that IBC originally subpoenaed nearly six months ago, subject to a Protective 

Order that was expressly modified at Aetna’s request to protect Aetna’s documents from being

used to its competitive disadvantage. At the argument on IBC’s motion to compel, Magistrate

Judge Smith directed IBC to issue a substitute subpoena out of the Eastern District of 

Pennsylvania for the purpose of curing the alleged jurisdictional/procedural defects that Aetna

raised in connection with IBC’s original subpoena, which IBC had issued and served on Aetna in 

the District of Connecticut. Aetna responded to the December 22, 2003 Order and the substitute 

subpoena by unequivocally refusing to produce any documents. In a letter dated December 29, 

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Case 2:02-cv-02746-JP Document 191 Filed 01/16/2004 Page 9 of 15
2003, counsel for Aetna stated that “Aetna will not be producing documents as outlined by

[IBC’s] subpoena.” See Exhibit F to the Motion. Indeed, Aetna has not produced a single 

document in this case to date, even though it received subpoenas from Chester County Hospital 

as well as from IBC, and even though it was under a court order to produce documents. 

II. FACTUAL BACKGROUND 

On July 25, 2003, IBC issued and served in the District of Connecticut a subpoena 

seeking sensitive information concerning Aetna’s business plans and reimbursement rates in 

Southeastern and Central Pennsylvania. Aetna filed a motion in the Eastern District of 

Pennsylvania for leave to intervene and to modify the existing Protective Order in a manner that

would preserve Aetna’s proprietary information. After the Court indicated at oral argument that 

it would grant Aetna’s motion, IBC and Aetna negotiated further revisions to the Protective 

Order and IBC submitted those revisions to the Court even thought the Court had already entered 

an Amended Protective Order on August 14, 2003. The Amended Protective Order that the 

Court entered on August 19, 2003 prohibited any IBC employees from seeing Aetna confidential 

material. With Aetna’s interests thus secured, IBC renewed its request that Aetna produce 

documents. Aetna refused. IBC then conferred with Aetna and substantially reduced the scope 

of its subpoena. Aetna continued to refuse to produce any documents. 

On December 3, 2003, IBC moved the Court for an order compelling Aetna to produce 

documents (Dkt. Entries 173 & 174). Aetna opposed the motion. The Court heard oral argument 

and resolved the matter favorably to Aetna in the following respects: (a) it ordered IBC to issue a

new subpoena to cure Aetna’s procedural complaints; and (b) it ordered production of a smaller 

set of documents than IBC was seeking. The Court’s Order compelling Aetna to produce 

documents was limited as follows: 

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Case 2:02-cv-02746-JP Document 191 Filed 01/16/2004 Page 10 of 15
(1) Contracts with hospitals in the five-county Southeastern Pennsylvania 

region reflecting Aetna’s reimbursement rates to those hospitals; 

(2) Summary level documents sufficient to demonstrate Aetna’s hospital 

reimbursement rates in the Central Pennsylvania region (Adams, Berks, 

Centre, Columbia, Cumberland, Dauphin, Franklin, Fulton, Juniata, 

Lancaster, Lebanon, Lehigh, Mifflin, contour, Northampton, 

Northumberland, Perry, Schuylkill, Snyder, Union, and York counties) 

broken down by hospital type (community, teaching, or regional) and 

hospital size (by licensed bed counts), without prejudice to IBC’s right to 

later seek the complete hospital contracts in this region; and 

(3) Documents reflecting Aetna’s strategic planning for the healthcare 

insurance markets in the Southeastern Pennsylvania counties. 

The Court’s Order of December 22, 2003 directed Aetna to produce documents on or 

before January 12, 2004. The Clerk of District Court faxed a copy of the Order to counsel for 

Aetna on December 22, 2004. Notwithstanding the terms of the Order, Aetna wrote to IBC on 

December 29, 2003 objecting to the new subpoena IBC had issued at the Court’s direction (solely

because Aetna asked for it) and asserting all the same arguments that the Court had already

adjudicated in its December 22nd Order. 

On Wednesday, January 7, 2004, Aetna filed objections to the December 22, 2003 Order. 

However, Aetna did not at any time petition for a stay of the Order. 

III. ARGUMENT 

Persons who knowingly disobey discovery orders are subject to the contempt powers of 

the Court. Fed.R.Civ.P. 37(b)(2)(D); United States v. Bell, 2003 U.S.Dist. Lexis 21436 

(M.D.Pa. September 3, 2003) (Conner, J.); Edgar v. Hahneman University Hospital, 199 

U.S.Dist. Lexis 11704 (E.D.Pa. August 14, 1995) (Broderick, J.). 

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To prove that Aetna is liable for civil contempt, IBC must prove by clear and convincing

evidence (1) that a valid order of the court existed; (2) that Aetna was aware of the order; and (3) 

that Aetna disobeyed the order. Roe v. Operation Rescue, 54 F.3d 133, 137 (3d Cir. 1995). 

A magistrate judge who is appointed by a district judge pursuant to 28 U.S.C. 

§636(b)(1)(A) to adjudicate discovery disputes is empowered to certify the facts constituting a 

civil contempt to the district judge and to require a person to appear and show cause why he 

should not be adjudicated in contempt by reason of the facts so stated. 28 U.S.C. § 

636(e)(6)(B)(iii). “The proper procedure for a party moving for contempt of a magistrate judge's 

Order is to file the motion with the magistrate judge; the magistrate judge then acts as fact-finder

and ‘certifies the facts’ to the district judge for determination whether the facts establish a 

contempt of court.” Holt Cargo Sys. v. Delaware River Port Auth., 1998 U.S. Dist. LEXIS 4044, 

11-12 (E.D.Pa. March 27, 1998) (Shapiro, J.). 

Here, it is a matter of record that the Court sent Aetna’s counsel a copy of the Order of 

December 22, 2003. Thus, Aetna was aware of the Order. Likewise, it is a matter of record that 

Aetna did not at any time seek a stay of the Order of December 22, 2003. Thus, the Order is still 

in effect. Finally, there is no dispute that Aetna has not complied with the Order of December 

22, 2003. Thus, Aetna has knowingly disobeyed a discovery order and is in contempt of court. 

The fact that Aetna filed objections to the Order of December 22, 2003 on January 7, 

2003 does not excuse it from complying with the Order. The filing of objections does not 

automatically stay a magistrate judge's discovery order. See Esparza v. Bridgestone/Firestone, 

Inc., 200 F.R.D. 654, 656-657 (D.Colo. 2001). Were the law otherwise, parties could use the 

objection process simply as a device further to delay discovery. Id. “[A]llowing the automatic

stay of magistrate’s orders would not only encourage the filing of frivolous appeals, but would 

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Case 2:02-cv-02746-JP Document 191 Filed 01/16/2004 Page 12 of 15
grind the magistrate system to a halt.” Litton Industries, Inc. v. Lehman Bros. Kuhn Loeb, Inc., 

124 F.R.D. 75, 79 (S.D.N.Y. 1989). Accord, Filler v. Lernout et al., 2003 U.S.Dist. Lexis 22409 

(D.Mass. December 15, 2003); Althouse v. Hill, 2002 U.S.Dist. Lexis 19435, *3 n.2 (N.D.Tex. 

October 9, 2002); Herskowitz v. Charney, 1995 U.S.Dist. Lexis 2681, *8 - *9 (S.D.N.Y. March 

7, 1995) (Cedarbaum, J.); Williams v. Texaco, Inc., 165 B.R. 662, 673 (D.N.M. 1994). See also

E.D. Pa. Local Rule of Civil Procedure 72.1, IV(a). There is no provision in the Local Rule for 

any automatic stay or supersedeas upon the filing of objections to a magistrate judge’s order. 

Under the circumstances, it is clear that Aetna is in contempt of Magistrate Judge Smith’s

Order of December 22, 2003. Aetna knew of the Order the day it was entered. The Order has 

not been stayed and is in full force and effect. Aetna has defied the Order by failing to produce 

any of the documents that the Order required to be produced by January 12, 2004. 

Because of Aetna’s knowing disobedience of the Order of December 22, 2003, IBC 

respectfully requests this Court to impose a substantial coercive monetary penalty against Aetna 

if it does not fully comply with the Order within 20 days after a determination of contempt. In

similar circumstances, courts have imposed substantial fines against entities that have knowingly

refused to comply with discovery orders. Richmark Corporation v. Timber Falling Consultants, 

959 F.2d 1468, 1481- 1482 (9th Cir. 1992), cert. denied, 506 U.S. 903 (1992) (court upheld a 

civil contempt order awarding the complainant $24,000 in attorneys fees and costs and imposing

contempt fines of $10,000 per day against a corporation for its failure to comply with the 

discovery orders); U.S. v. Darwin Construction Company, 873 F.2d 750 (11th Cir. 1989) (court 

upheld the imposition of a civil contempt fine of $5,000 per day against a corporation for its 

failure to complete document production). 

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Case 2:02-cv-02746-JP Document 191 Filed 01/16/2004 Page 13 of 15
Considering Aetna’s financial resources and the seriousness of the burden imposed on 

IBC and CCH, the record warrants the imposition of an initial coercive fine of at least $15,000 to 

coerce document production and additional coercive fines of $5,000 per day thereafter. In

addition, IBC seeks an award of legal fees pursuant to Fed.R.Civ.P. 37(b)(2), to cover the costs 

of preparing, filing, and litigating this motion as well as IBC’s earlier motion to compel. 

IV. CONCLUSION 

For all the foregoing reasons, IBC respectfully requests the issuance of a rule upon Aetna 

to show cause why it should not be held in contempt and sanctioned for failure to comply with 

the Order of December 22, 2003, in accordance with 28 U.S.C.A. §636(e)(6)(B)(iii) and Federal 

Rules of Civil Procedure 37(b)(2). 

Respectfully submitted, 

 

 THOMAS A. LEONARD 

WILLIAM J. LEONARD 

RICHARD P. LIMBURG 

One Penn Center, 19th Floor 

1617 John F. Kennedy Boulevard 

Philadelphia, PA 19103 

(215) 665-3000 

HOWREY SIMON ARNOLD & WHITE LLP

JOHN DeQ BRIGGS

JAMES G. KRESS

1299 Pennsylvania Avenue, N.W.

Washington, DC 20004 

(202) 383-7015 

Attorneys for Defendants, 

Independence Blue Cross, 

Keystone Health Plan East, 

QCC Insurance Company, and 

 Keystone Mercy Health Plan 

Dated: January 16, 2004

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Case 2:02-cv-02746-JP Document 191 Filed 01/16/2004 Page 14 of 15
IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA 

THE CHESTER COUNTY HOSPITAL 

 v. 

INDEPENDENCE BLUE CROSS, 

QCC INSURANCE COMPANY, 

KEYSTONE HEALTH PLAN EAST, and

KEYSTONE MERCY HEALTH PLAN 

 CA No. 2:02CV2746 

 

CERTIFICATE OF SERVICE

I hereby certify that copies of the foregoing Defendants’ Motion for an Order of 

Contempt and Sanctions against Aetna and Memorandum of Law in support thereof was served, 

this 16th day of January 2004 as follows: 

VIA HAND DELIVERY

James C. Crumlish, III, Esquire

Union Meeting Corporate Center V 

P.O. Box 3010 

925 Harvest Drive 

Blue Bell, PA 19422 

Counsel for Aetna, Inc. 

VIA HAND DELIVERY VIA FACSIMILE & FEDERAL EXPRESS

Lewis R. Olshin, Esquire Richard A. Feinstein, Esquire 

Duane Morris, LLP Daniel A. Kotchen, Esquire 

One Liberty Place, Suite 4200 Boies, Schiller & Flexner, LLP

Philadelphia, PA 19103-7396 5301 Wisconsin Avenue, N.W., Suite 800 

Counsel for Plaintiff, Washington, DC 20015 

Chester County Hospital Facsimile No. (202) 237-6131 

 Counsel for Plaintiff, 

 Chester County Hospital 

 

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