IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF PENNSYLVANIA 

__________________________________________ 

 : 

THE CHESTER COUNTY HOSPITAL : 

 : 

v. : 

: NO. 02-CV-2746 

INDEPENDENCE BLUE CROSS, : 

QCC INSURANCE COMPANY : 

KEYSTONE HEALTHPLAN EAST, and : 

KEYSTONE MERCY HEALTH PLAN : 

__________________________________________: 

[PROPOSED] ORDER1

NOW, THIS ___ day of , 2004, in consideration of defendants’ 

request of the Magistrate Judge to hold a contempt hearing and certify findings of fact for 

contempt to the District Judge, as requested in the Motion For An Order Of Contempt 

and Sanctions Against Aetna, Inc., and Nonparty Aetna Inc.’s Opposition, it is hereby 

Ordered that Defendants’ request for certification of contempt is DENIED. Such request 

by defendants is in direct violation of the controlling law stated in Taberer, 954 F.2d 888, 

891 (3d Cir. 1992)(Magistrate Judge lacks jurisdiction to hold contempt hearings; such 

hearing must be held by District Judge de novo). Defendants shall pay Aetna reasonable 

attorneys’ fees and costs incurred in connection with responding to defendants’ Motion 

within seven (7) days of Aetna submitting a certification of same. 

______________________________ 

 CHARLES B. SMITH 

 UNITED STATES MAGISTRATE JUDGE 

 

1

 Aetna submits this proposed Order with stated reasons for denying the motion without waiver of the 

jurisdictional deficiencies, which also require denial of the motion. 

Case 2:02-cv-02746-JP Document 196 Filed 01/30/2004 Page 1 of 23
IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF PENNSYLVANIA 

__________________________________________ 

 : 

THE CHESTER COUNTY HOSPITAL : 

 : 

vi. : 

: NO. 02-CV-2746 

INDEPENDENCE BLUE CROSS, : 

QCC INSURANCE COMPANY : 

KEYSTONE HEALTHPLAN EAST, and : 

KEYSTONE MERCY HEALTH PLAN : 

__________________________________________: 

[PROPOSED] ORDER2

NOW, THIS ___ day of , 2004, in consideration of defendants’ 

Motion For An Order Of Contempt and Sanctions Against Aetna, Inc., and Nonparty 

Aetna Inc.’s Opposition, it is hereby Ordered that Defendants’ Motion, including 

Defendants’ request for entry of a “Rule to Show Cause”, and their demand for a hearing 

and factfinding before the Magistrate Judge, is DENIED. Defendants shall pay Aetna 

reasonable attorneys’ fees and costs incurred in connection with responding to 

defendants’ Motion within seven (7) days of Aetna submitting a certification of same. 

______________________________ 

 JOHN R. PADOVA 

 UNITED STATES DISTRICT JUDGE 

 

2

 Aetna submits this proposed Order with stated reasons for denying the motion without waiver of the 

jurisdictional deficiencies, which also require denial of the motion. 

Case 2:02-cv-02746-JP Document 196 Filed 01/30/2004 Page 2 of 23
IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF PENNSYLVANIA 

__________________________________________ 

 : 

THE CHESTER COUNTY HOSPITAL : 

 : 

v. : 

: NO. 02-CV-2746 

INDEPENDENCE BLUE CROSS, : 

QCC INSURANCE COMPANY, : 

KEYSTONE HEALTHPLAN EAST, and : 

KEYSTONE MERCY HEALTH PLAN : 

__________________________________________: 

NON-PARTY AETNA INC.’S OPPOSITION TO IBC’S JANUARY 16, 2004 

MOTION FOR AN ORDER OF CONTEMPT AND SANCTIONS AGAINST 

AETNA, INC.

Aetna Inc. (“Aetna”) submits this Memorandum in Response to the 1/16/04 

Motion For an Order of Contempt and Sanctions Against Aetna (“IBC’s Contempt 

Motion”), which was filed by the defendants, Independence Blue Cross and affiliates 

(“IBC”). 

I. INTRODUCTION

 IBC has filed a baseless motion for contempt that reflects its underlying 

motivations in directing unnecessary and onerous discovery to get the trade secrets of its 

direct competitor, Aetna. It comes during the same time after IBC has lost thousands of 

customers to Aetna in the marketplace, and has been desperately responding with 

negative misleading attack radio ads and legislative lobbying against Aetna. 

 IBC is undeterred by any regard for burdening the District Judge, the Magistrate 

Judge and Aetna with needless motion practice and, now, baseless “contempt” hearings. 

Incredibly, IBC is actually moving for “contempt” of a Magistrate Judge’s Order that 

IBC knows has been timely objected to and appealed to the District Judge. IBC knows 

Case 2:02-cv-02746-JP Document 196 Filed 01/30/2004 Page 3 of 23
2

that the District Judge has a statutory duty to address the Objections, and knows that the 

District Judge has obviously not had a reasonable opportunity to do so when it filed the 

instant motion. Although the District Judge expeditiously ordered that IBC may file a 

response to the Objections by 1/21/04, IBC was in no rush and waited until the last day to 

do so. Aetna has expeditiously filed its Reply Memorandum on 1/27/04, including the 

Declaration of Dr. Glenn Melnick (attached as Ex. “5” of Aetna’s 1/21/04 Reply 

Memorandum), which establishes that at stake here are extremely valuable trade secrets 

that substantially outweigh interests in public disclosure. In fact, any disclosure risks 

harm to the public interest in an efficient market. Id. 

 Aside from being legally baseless, IBC’s “contempt” theory otherwise makes no 

sense at all, in that it hamstrings the District Judge from performing the statutorilymandated duty to address timely filed objections to Magistrate Judges’ Orders. Indeed, 

IBC’s position would result in preventing any District Judge from having any fair 

opportunity to perform this statutorily-mandated duty to consider the merits of such 

Orders if and when Objections are filed. 

 In this case, IBC reveals it lacks any conviction for the position that the Order in 

this case is valid, or that IBC met its burden to prove “substantial need” under Rule 45 

and applicable authority. This is demonstrated by IBC’s perceived need to file yet 

another motion to compel today.3

 As demonstrated herein, IBC’s instant motion for 

 

3

 Aetna has not had a sufficient opportunity to fully review IBC’s latest motion and, therefore, reserves the 

right to supplement this response based on further opportunity for such review. For now, however, it is 

clear that, as with other motions IBC has filed against Aetna, and apparently as it has done against other 

nonparties in this action, IBC never telephoned or made any effort to communicate with Aetna’s counsel 

before filing this latest motion today, again in violation of Local Rule 26.1(f). Indeed, before moving for 

contempt against Aetna on 1/16/04, IBC never picked up the phone or sent a letter regarding the matter, 

choosing instead to file “strike” motions with the Court without regard to the fees and costs being imposed 

on Aetna to respond. In any event, a preliminary review of the motion IBC filed today shows that IBC 

expressly acknowledges the fatal deficiencies in the proceedings underlying the 12/22/03 Order (including 

Case 2:02-cv-02746-JP Document 196 Filed 01/30/2004 Page 4 of 23
3

contempt is unfounded not only on jurisdictional grounds, which IBC expressly 

acknowledges, but under the undisputed facts and controlling law. There is no dispute 

that as of January 7, 2004, well before expiration of the 20-day period in the Order, the 

12/22/03 Order became subject to timely Objections. As a result, it became subject to the 

unique statutorily-mandatory procedures requiring review and determination by the 

District Judge. See Taberer v. Armstrong World Industries, Inc., 954 F.2d 888 (3d Cir. 

1992). 

 To this day, the Order remains under the District Judge’s consideration. Thus, it 

is clear that no “contempt” has occurred, and no “certification” is appropriate by the 

Magistrate Judge. See Continental Casualty Co. v. Dominick D’Andrea, Inc., 150 F.R.D. 

245, 250 (3d Cir. 1988) (“magistrate judge’s order has the force of law unless appealed

[if a subsection (A) referral]. . . . in a subsection (B) referral, the magistrate judge’s 

recommendation only becomes effective when the district court accepts it.”)(emphasis 

added). 

 Further, in attempting to guide the Magistrate Judge to hold a hearing and conduct 

fact-finding, IBC once again cites the wrong legal standards and misguides the 

Magistrate Judge and the District Judge to violate clear dictates of Third Circuit 

precedent under the Federal Magistrates Act. See Taberer, 954 F.2d 888, 891 (3d Cir. 

1992)(Magistrate Judge “lacked jurisdiction” to hold contempt hearings and “district 

judge erred in adjudicating the contempt based on the record of [any Magistrate Judge’s] 

hearing, instead of holding a de novo hearing.”). Again, there is absolutely no basis for 

 the jurisdictional deficiencies)—the same Order that is currently on appeal to the District Judge, and that 

forms the entire basis for the instant contempt motion against Aetna. This latest acknowledgement by IBC 

further confirms that its contempt motion is without any merit whatsoever, and should never have been 

filed at all. It certainly must be denied, and no “certification” by the Magistrate Judge is appropriate. 

Case 2:02-cv-02746-JP Document 196 Filed 01/30/2004 Page 5 of 23
4

IBC’s instant motion and the relief it seeks misdirects the Court to commit patently 

reversible error. 

 For a more complete record at this time, the District Judge and Magistrate Judge 

are referred to Aetna’s record filings regarding the underlying Order (incorporated herein 

by reference), including the Declaration of the nationally-recognized health care 

economist, Dr. Glenn Melnick (Ex. “5” of Aetna’s 1/27/04 Reply). At this point, 

everyone agrees IBC had the burden of proof in the proceedings leading up to entry of the 

12/22/03 Order. Yet, IBC produced no competent evidence at all. Even when the 

Magistrate Judge provided IBC an additional opportunity, IBC submitted nothing but the 

12/22/03 letter and exhibits that proved nothing other than the fact that Aetna’s trade 

secrets are secret and very valuable. In any event, Aetna did not even receive, let alone 

have any opportunity to rebut, the exhibits to that letter until after the Magistrate Judge’s 

12/22/03 Order had already been entered. See Aetna’s 1/27/03 Reply Memorandum.4

 Even now, in the pending Objection proceedings before the District Judge, IBC 

fails to produce a single shred of evidence to support allegedly “needing” Aetna’s trade 

secrets for this case. Despite representing to the Magistrate Judge that IBC’s 

“consultants” supposedly “need” Aetna’s trade secrets to rebut certain allegations of 

CCH, IBC still cannot muster even a single individual in its stable of a dozen or so 

“consultants”, to stand up and vouch for this representation. At this point, the only

expert evidence in the record, which Aetna was never afforded a timely opportunity to 

 

4

 Furthermore, it should be noted that IBC’s 12/22/03 letter with exhibits was never filed of record 

with the court. Thus, under IBC’s stated view that only the matters of record prior to entry of the 12/22/03 

Order may be reviewed in the presently pending appeal to the District Judge, IBC’s own 12/22/03 letter and 

exhibits should be disregarded in their entirety in the pending appeal. In any event, for the many 

compelling reasons stated in Aetna’s 1/7/04 and 1/27/04 memoranda, IBC’s 12/22/03 letter and exhibits 

utterly fail to satisfy IBC’s burden to prove any “substantial need” to get Aetna’s trade secrets to defend 

against the cited paragraphs of CCH’s amended complaint. 

Case 2:02-cv-02746-JP Document 196 Filed 01/30/2004 Page 6 of 23
5

supply in rebuttal to the 12/22/03 letter and exhibits, is the Declaration of Dr. Melnick 

submitted by Aetna. See Exhibit “5” of Aetna’s 1/27/04 Reply Memorandum. 

 For the purposes of this record, Aetna incorporates its other filings, including 

Aetna’s 12/16/03 Memorandum in Opposition to IBC’s Motion to Compel (with 

exhibits), its 1/7/04 Objections and Memorandum in Support thereof (with exhibits), and 

its 1/27/04 Reply Memorandum (with exhibits). As the facts summarized below 

establish, and in accordance with the applicable law, IBC’s motion for contempt must be 

denied. 

II. FACTUAL BACKGROUND

 The following facts are not disputed: Aetna is a nonparty whose proprietary trade 

secrets were at risk of loss absent filing timely objections to the 12/22/03 Magistrate 

Judge’s Order. Aetna filed timely objections and appealed the Order to the District Judge 

on January 7, 2004, pursuant to the unique statutorily-prescribed procedures governing 

Magistrate Judge Orders. Aetna filed its objections well before expiration of the 20-days 

that Aetna had before becoming obliged to produce any documents under the Order. 

 Of course, at that point, the Order and Aetna’s Objections became statutorily 

subject to the District Judge’s review and determination, regardless of whether the 

District Judge’s referral to the Magistrate Judge for “resolution” was intended to be under 

636(b)(1)(A), or (B), or otherwise. See Continental Casualty Co. v. Dominick D’Andrea, 

Inc., 150 F.R.D. 245, 250 (3d Cir. 1988)(“magistrate judge’s order has the force of law 

unless appealed [if a subsection (A) referral]. . . . in a subsection (B) referral, the 

Case 2:02-cv-02746-JP Document 196 Filed 01/30/2004 Page 7 of 23
6

magistrate judge’s recommendation only becomes effective when the district court 

accepts it.”)(emphasis added). 5

 Despite the fact that Aetna had filed its Objections to the Court’s 12/22/03 Order 

and that the District Judge Ordered IBC to respond thereto by January 21, 2004, IBC, 

without any communication with Aetna indicating that it would seek to compel 

compliance with the appealed Order being reviewed by the District Judge, filed its 

motion for contempt. 

 Among the many misleading statements in IBC’s motion, IBC implies that Aetna 

intervened in the case back in the summer of 2003 “[u]pon being served with IBC’s 

subpoena.” See IBC’s 1/16/04 Motion for Contempt at ¶¶ 1-2. However, the docket puts 

the lie to this misstatement, and shows that Aetna had intervened almost a month before

IBC issued the 7/25/03 subpoena upon Aetna.6

 IBC’s motion is misleading also when it asserts that “IBC agreed to still further 

changes requested by Aetna,” thereby necessitating the Court’s August 19, 2003 

Amended Protective Order. However, the parties’ failure to include relief that Magistrate 

Judge Smith ordered in his July 7, 2003 Order precipitated the need to request the Court 

 

5

 The District Court’s 12/5/03 Order did not specify which subsection under which this matter had been 

referred to the Magistrate Judge, or what ultimate authority the District Judge vested in the Magistrate 

Judge or intended for this specific Rule 45 subpoena matter against a nonparty for trade secrets. See

Docket Entry 175. As set forth in Aetna’s 1/27/04 Reply memorandum, especially under these 

circumstances where Aetna had no opportunity to review and rebut IBC’s 12/22/03 letter and exhibits 

before entry of the 12/22/03 Order, there can be no doubt that the District Judge has the express authority to 

hear the assertions and evidence of Aetna, including the Declaration of Dr. Melnick. 

6

 In fact, as IBC is well aware, Aetna intervened only after CCH represented to Aetna that it must intervene 

by May 30, 2003 or its trade secrets would be released to IBC and its inside counsel. See Exhibit “A” 

hereto. Eventually, the Court granted certain relief sought by Aetna at that time, and precluded any internal 

IBC employee, including inside counsel, from accessing of Aetna’s potential trade secrets that were in the 

possession of CCH or any other non-party providers. See Dkt. Entry 121. Also, contrary to IBC’s 

misstatements, the intervention proceedings resulting in the protective order at that time had nothing to do 

with IBC’s subpoena to Aetna. 

Case 2:02-cv-02746-JP Document 196 Filed 01/30/2004 Page 8 of 23
7

to enter an August 18, 2003 Amended Protective Order. Compare Dkt. Entries 88, 116, 

121. Also, any other “changes requested by Aetna” with regard to the protective order at 

that time, were the result of IBC’s failure to engage in a proper dialogue with Aetna, as it 

was ordered to do by Judge Padova at the August 7, 2003 oral argument, prior to the 

parties’ submission of the August 14, 2003 Protective Order to the Court. See Dkt. Entry 

117 at 38.7

 IBC’s instant motion also continues to inaccurately imply that Magistrate Judge 

Smith indicated either that IBC was to issue a “substitute” subpoena, or, that the issuance 

of IBC’s December 17, 2003 subpoena, after it had filed the instant motion to compel 

somehow cured the fatal substantive and jurisdictional defect of the 7/25/03 subpoena at 

issue. See IBC’s 1/16/04 Motion at ¶¶ 11 & 12. However, the record establishes that the 

Magistrate Judge Smith never used the term “substitute.” See Exhibit “B” to IBC’s 

1/16/04 Motion at 39-41. In fact, contrary to IBC’s position now, IBC’s counsel 

contemporaneously characterized his understanding of that subpoena as follows: “[s]o, a 

 

7

 IBC, in virtually all of its “filings,” as well as letters that it has sent to non-party hospitals, has continued 

to incorrectly imply that the Court’s observations at the August 7, 2003 hearing and subsequent 

modification of the Protective Order, peremptorily adjudicated all objections relating to the enforceability 

of all other outstanding subpoenas. See e.g. IBC’s 1/16/04 Motion, ¶ 6; IBC’s 12/22/03 letter at 1; IBC’s 

12/03/03 Memorandum at 4-5, 8-9. That hearing addressed non-party insurers’ objections to the 

production of confidential documents by CCH (and crafting a protective order that would address non-party 

insurers’ objections to the production of confidential documents by other non-parties, such as hospitals). 

Stated differently, if a hospital or other non-party was refusing to produce documents solely on the basis 

of, for example, Aetna’s confidentiality concerns, that alone would no longer be a valid basis for those

parties to refuse to produce such documents. However, the Court made clear that it was not deciding any 

issues not yet before it regarding other subpoenas (including any subpoena on Aetna), by further noting 

that, “. . . if you have subpoenaed documents and there is nothing out – no objection outstanding and you 

haven’t received those documents, then you come to the Court and we’ll put teeth into that subpoena so that 

you do receive those documents.” (Exhibit “E” to IBC’s 12/03/03 Memorandum at 36) (emphasis added). 

Aetna properly objected to IBC’s subpoena, and had “objections outstanding”. See Fed.R.Civ.P. 

45(c)(2)(B). The Court’s entry of the Amended Protective Order did not, as IBC asserts, relieve IBC of its 

duty to resolve “outstanding objections” through good faith discussions with subpoenaed parties who raise 

valid objections, nor did the court purport to decide by judicial fiat or in a vacuum whether IBC had met its 

burden of demonstrating “substantial need” for the particularized trade secrets in Aetna’s possession or 

pursuant to a subpoena that was not even before the Court at the time. See Aetna’s 12/16/03 Memorandum 

at Section III.C.1. 

Case 2:02-cv-02746-JP Document 196 Filed 01/30/2004 Page 9 of 23
8

new subpoena out of the Eastern District of Pennsylvania . . . .” Id. at 40 (emphasis 

added).8 

 IBC’s representations relating to its December 22, 2003 letter to Magistrate Judge 

Smith are also inaccurate. A quick review of the docket establishes that IBC never

“filed” its December 22, 2003 letter, as it now contends in the instant motion. More 

importantly, IBC’s statement regarding the “filing” of its letter, implies that that letter 

was part of the record and that Aetna was aware of it on the day it was filed. In fact, 

Aetna never received the exhibits to that letter, which contain the only proffered 

“evidence” submitted by IBC in support of any alleged “substantial need” for Aetna’s 

trade secrets, until after the Court had already ruled upon IBC’s Motion to Compel. 

 IBC’s assertions that Aetna raised the same objections in its December 29, 2003 

Rule 45 objection letter as it had in its 12/16/03 Opposition, and that “notwithstanding 

the Order of December 22, 2003, Aetna stated . . . that it would not comply with the 

substitute subpoena,” are inaccurate and irrelevant. That subpoena is not the subject of 

the instant motion, as IBC has most recently acknowledged by virtue of its filing today a 

separate motion to compel with respect to that 12/17/03 subpoena. 

 Further, IBC’s representation that the Court adjudicated Aetna’s objections to that 

12/17/03 subpoena is plainly inaccurate, because Aetna’s 12/29/03 objection letter 

specifically articulates IBC’s failure to demonstrate “substantial need”, an issue that was 

 

8

 IBC’s legally deficient subpoena out of the District of Connecticut has placed IBC in a procedural box 

where it must argue, on the one hand, that it has cured the jurisdictional deficiencies of its July 25, 2003 

subpoena, while simultaneously arguing that that subpoena has not been withdrawn. There is no way that 

IBC’s December 17, 2003 subpoena, which was issued after it filed the instant Motion to Compel, could be 

the subject of that 12/3/03 Motion. See IBC’s 1/21/03 Memorandum at 20. Accordingly, IBC essentially 

admits it now seeks to enforce its jurisdictionally and substantively defective July 25, 2003 subpoena. IBC 

confirms this more so by the filing it made today—moving to compel the 12/17/03 subpoena. 

Case 2:02-cv-02746-JP Document 196 Filed 01/30/2004 Page 10 of 23
9

not addressed, and therefore never “resolved”, by the Magistrate Judge. Compare

Exhibits “E” & “F” to IBC’s 1/16/04 Motion. 

III. ARGUMENT 

A. Upon Aetna’s Timely Objections To And Appeal From the 

Magistrate Judge’s 12/22/04 Order Before Any Obligations Arose 

Thereunder, The Order Became Subject To The StatutorilyMandated Procedures And Review Of The District Judge, And No 

Separate Motion Practice For Stay Was Necessary In Order To 

Permit The District Judge To Perform Its Statutory Mandate.

It is telling that IBC cites no authority whatsoever where a non-party, such as 

Aetna, was held in contempt for not turning over trade secret information to a direct 

competitor while a timely-filed appeal of the Magistrate Judge’s Order was pending. 

Similarly, there is no Third Circuit precedent, or any authority from any other Circuit 

Court for that matter, that supports IBC’s position. Simply put, it is not the law of this 

Circuit that a party, let alone a non-party such as Aetna, may be held in contempt of a 

Magistrate Judge’s Order if the nonparty timely objects and appeals in accordance with 

the unique statutory procedures for such matters. Once again, IBC misguides the Court 

with the wrong law. 

As the Third Circuit has stated, a Magistrate Judge’s order does not have the force 

of law or become effective, until either such an order is not appealed or the district 

court accepts it. Continental Casualty Co. v. Dominick D’Andrea, Inc., 150 F.R.D. 245, 

250 (3d Cir. 1998). Specifically, the Third Circuit has held: 

There is an important distinction between the two types of referrals under 

the Act. In a subsection (A) referral, the magistrate judge’s order has the 

force of law unless appealed. It is final in the sense that it may be 

appealed. In contrast, in a subsection (B) referral, the magistrate judge’s 

recommendation only becomes effective when the district court accepts it. 

 

Id. (emphasis added). See also United States v. Polishan, 336 F.3d 234 (3d Cir. 2003). 

Case 2:02-cv-02746-JP Document 196 Filed 01/30/2004 Page 11 of 23
10

Indeed, once appealed, the District Court lacks the ability to refuse review: 

"Within 10 days after being served with a copy of the magistrate judge's 

order, a party may serve and file objections to the order . . . . The district 

judge to whom the case is assigned shall consider such objections and 

shall modify or set aside any portion of the magistrate judge's order found 

to be clearly erroneous or contrary to law." Fed.R.Civ.P. 72(a). The 

district court may reconsider any pretrial matter under subparagraph (A) 

of 28 U.S.C.A. § 636 where it has been shown that the magistrate judge's 

order is clearly erroneous or contrary to law.” Haines v. Liggett Group, 

Inc., 975 F.2d 81, 91 (3d Cir. 1992). “The matters handled by magistrate 

judges under subparagraph (A) are generally described as ‘nondispositive.’” Id. (citation omitted) . . . . "Under (b)(1)(A), the standard of 

review is circumscribed: ‘the district court is bound by the clearly 

erroneous rule in findings of facts; the phrase contrary to law indicates 

plenary review as to matters of law.’” Id. (citations omitted). 

Heintz Corp. v. Judson, 1995 WL 649331 at *2, No. Civ. A. 94-6916 (E.D. Pa. Nov. 3, 

1995)(Padova, J.)(footnotes omitted). 

 Indeed, the unique procedures for these kinds of “appeals”, and the unique status 

of Magistrate Judge’s under the statute, dictate that the District Judge perform this 

statutory mandate to adjudicate the validity of Objections to such Orders, without 

impediments of having Magistrate Judge’s conducting contempt proceedings during the 

process at the behest of overreaching adversaries seeking to obstruct the District Judge’s 

review. 

 There are no cases in this Circuit supporting any notion that there should be any 

“motion practice” over stays under these circumstances--and for good reason. The 

statute, the local rules and the caselaw in this Circuit dealing with these unique “appeals” 

simply do not provide for it. And, understandably, it appears no litigant in this Circuit 

(other than IBC apparently) has ever overreached to the point of taking such an 

extraordinary position—particularly against a nonparty such as Aetna, where trade 

secrets would be irreparably lost, and where the District Judge was already engaging in 

Case 2:02-cv-02746-JP Document 196 Filed 01/30/2004 Page 12 of 23
11

the statutory review. Again, IBC’s decision to stay this course raises serious concerns 

about its alternative motives in wanting to get Aetna’s trade secrets and escaping review 

of the merits. 

 To the extent IBC cites Holt Cargo Systems, Inc. v. Delaware River Port 

Authority, 1998 WL 150948 at *4 n.2, No. 94-7778 (E.D. Pa. March 27, 1998), it actually 

undermines IBC’s position in this regard. The Holt Cargo decision reinforces the 

principle that a motion for contempt could be appropriate, if at all, only where a party 

refuses to comply with an Order if and after it is affirmed by the District Judge and not 

further appealed. In Holt Cargo Systems, Judge Shapiro only referred the defendant’s 

contempt motion to the Magistrate Judge after the District Court had already affirmed 

those orders, or, where plaintiff had failed to appeal the same.9

 

 This rationale is reinforced in this case by the fact that we are dealing with trade 

secret information, where disclosure deprives Aetna of the confidentiality and exclusive 

control and therefore deprives Aetna of the value of its trade secrets. See Arthur R. 

Miller, Confidentiality, Protective Orders, and Public Access to the Courts, 105 Harv. L. 

Rev. 427, 473 (1991)(Exhibit “12” to Aetna’s December 16, 2003 Opposition 

Memorandum.) (Danger inherent in disclosure of trade secrets because “[t]he loss of 

confidentiality, the sine qua non of a trade secret, robs the owner of any advantage the 

secret may have provided.”)(citation omitted). 

 Precedent affirms that the harm to Aetna is imminent and irreparable once this 

sensitive information is out of Aetna’s exclusive control. See Powell v. Ridge, 247 F3d 

 

9

 Another court faced with an overreaching litigant such as IBC here has also indicated that a stay of 

discovery pending the District Judge’s resolution of an appeal from a Magistrate Judge’s Order is 

appropriate. See Hormel Foods Corp. v. Cereol, S.A., 2003 WL 2140261 at *1, n.1, No. 01-2243 (D. Minn. 

June 16, 2003). 

Case 2:02-cv-02746-JP Document 196 Filed 01/30/2004 Page 13 of 23
12

520, 524 (3d Cir. 2001) (absent immediate appeal of order requiring disclosure of trade 

secret, there is no way to “unscramble the egg scrambled by the disclosure”) (quoting In 

re Ford Motor Co., 110 F.3d 954, 963 (3d Cir. 1997)); ACT, Inc., 1999 WL 305300 (E.D. 

Pa. May 14, 1999); Mannington Mills, Inc., 206 F.R.D. 525 (D. Del. 2002); R & D 

Business Systems, 152 F.R.D. 195 (D. Col. 1993); see also PEPSICO, Inc. v. RedMond, 

1996 WL 3965, at *30, No. 94C6838 (N.D. Ill. Jan. 2, 1996) ("Just as it is impossible to 

unring a bell, once disclosed, trade secrets and confidential information lose their secrecy 

forever and, 'since the confidentiality of this information can never be regained, the 

[threatened] injuries would be irreparable'" (citation and quotation omitted 

B. Addressing IBC’s Motion For Contempt Otherwise Interferes With 

The District Court’s Inherent Power And Ultimate Authority Over 

Cases Before It.

IBC’s position is undermined also by the fact that addressing IBC’s motion for 

contempt would clearly interfere with the District Judge’s inherent and ultimate authority 

over the case. Here, the District Court’s December 5, 2004 order referring matters to the 

Magistrate Judge does not delineate whether the assignment is made under section 636 

(b)(1)(A) or section 636(b)(1)(B). See Dkt. Entry 175. Neither does the Order limit the 

Magistrate Judge’s role to only non-dispositive motions. Rather, the Order states that “all 

motions pertaining to discovery matters” are referred to the Magistrate Judge “for 

resolution.” Id. 

In substance, therefore, the Magistrate Judge’s Order (unless and until appealed) 

effectively disposed of Aetna’s entire case and controversy, and would effectively 

terminate the proceedings vis-à-vis Aetna. As to non-party Aetna, unless and until 

objections are filed, the Magistrate Judge’s ruling functions essentially the same as a 

Case 2:02-cv-02746-JP Document 196 Filed 01/30/2004 Page 14 of 23
13

ruling granting summary judgment, or other final judgment on the merits. Under such 

circumstances, without de novo review upon objection to such a “dispositive” decision 

affecting all of the rights at issue for an individual or entity, the Magistrate Judge, rather 

than fulfilling the uniquely limited statutorily-prescribed role of “aiding” the trial judge, 

becomes the trial judge. This is clearly inconsistent with the intent of the Federal 

Magistrate Judge’s Act. 

Even when characterized as a “non-dispositive” motion, however, the District 

Judge always maintains the discretion to refer the matter for a recommendation. In Delco 

Wire & Cable, Inc. v. Weinberger, defense contractors brought suit against the Secretary 

of Defense and Defense Logistics Agency over the government’s disbarment of the 

contractors from governmental contracting. 109 F.R.D. 680 (E.D.Pa. 1986). During the 

discovery period, the contractors filed motions to compel discovery. The Magistrate 

Judge recommended that most of the discovery be produced. Id. at 685. 

The defendants appealed the recommendation to the District Judge, and sought de 

novo review. Id. The contractor plaintiffs argued that the District Judge was required to 

approve the Magistrate Judge’s report under a clearly erroneous standard, alleging, “[i]n 

essence, plaintiffs argue that these provisions preclude a judge from referring a nondispositive pretrial matter to a magistrate for a report and recommendation rather than for 

determination by the magistrate subject only to review under the clearly erroneous 

standard.” See Id at 685. The Court expressly disagreed: 

[t]hat certain case dispositive matters must always be 

referred for recommendations rather than determination 

does not mandate the converse, i.e., that nondispositive 

matters must always be referred for determination rather 

then recommendations . . . [i]t is evident from the Act’s 

legislative history that the purpose of the Act’s referral and 

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review provisions is to define the limits of the powers 

which a court may allow a magistrate to exercise, not to 

restrict the ultimate authority of an Article III court over a 

case pending before it . . . . Therefore, I conclude a court 

retains the discretion to refer a non-dispositive pretrial 

matter for report and recommendation and to consider 

objections filed thereto. 

Id. at 685 (citing Societa Anomima Lucchese Olii E. Vini v. Catania Spagna Corp., 440 

F.Supp. 461, 462063 (D.Mass. 1977) (remaining citations and footnote omitted); see also 

Pauley v. United Operating Company, 606 F.Supp. 520 (E.D.Mich. 1985) (allowing 

district court to amend its previous order of reference to magistrate judge nunc pro tunc

to provide for report and recommendation under 28 U.S.C. § 636(b)(1)(B)).10

Regardless of whether the Magistrate Judge’s underlying decision is dispositive in 

nature, whether permitting the Magistrate Judge to render a recommendation under 

section 636(b)(1)(A) only, or whether the district court merely sought the Magistrate 

Judge’s recommendation on a non-dispositive motion, the end result is the same — that 

Order is deprived of the force of law until the District Judge adjudicates Aetna’s 

objections. 

C. This Court Lacks Jurisdiction To Hold Aetna In Contempt In 

Connection With IBC’s Attempts To Enforce A Subpoena Issued Out 

Of The District Of Connecticut.

Because the subject of the Court’s December 22, 2003 Order is a subpoena issued 

out of the District of Connecticut, this Court lacks jurisdiction to adjudicate a contempt 

motion. There can be no contempt of an order enforcing a subpoena over which this 

 

10 Like a recommendation under section 636(b)(1)(A), when a District Judge sends a matter to 

Magistrate Judge for recommendation, “even though the matter could have been referred for 

determination,” review is plenary. See Howe Investment, Ltd. v. Perez Y Cia. De Puerto Rico, Inc., 96 

F.Supp.2d 106 (D.Puerto Rico. 2000) (“to the extent when district court concerned about the possibility that 

assigning a nondispositive matter to the magistrate will confine his power to revise the outcome, a 

reference directing the magistrate to make recommendations is possible.”) (citation omitted). 

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Court does not have jurisdiction. As other judges in this district have noted: 

The Federal Rules specify the court from which a subpoena shall issue. 

There is no question that the subpoena involved in this case was required 

under the rules to issue from the Eastern District of Pennsylvania. . . . On 

the standard subpoena form, the only way to ascertain the court from 

which the subpoena issues is the designation in the heading of the 

subpoena. [This Court] can only conclude that the subpoena served on 

January 3, 1994, issued from the Southern District of Georgia, the court 

designated in the heading. . . . Counsel for Mr. Lowry contends that the 

subpoena served on January 3, 1994, is a nullity; and further, since it is 

designated as issuing out of the Southern District of Georgia, the 

Eastern District of Pennsylvania court has no jurisdiction to adjudge 

Mr. Lowry in contempt, especially since no motion has been filed to hold 

him in contempt in the Southern District of Georgia. I agree that I have 

no jurisdiction to hold a contempt hearing on a subpoena issued out of 

the Southern District of Georgia.

Kupritz v. Savannah College of Art and Design, 155 F.R.D. 84, 87-88 (E.D. Pa. 

1994)(emphasis added); see also, Robbins & Myers, Inc. v. J.M. Huber Corporation, 

2003 WL 21384304 (W.D.N.Y. 2003) (“[a] motion to compel must be filed with the 

court that issued the subpoena in issue”); In Re Sealed Case, 141 F.3d. 337, 341 (D.C. 

Cir. 1998) (“[s]ubpoenas are process of the issuing court . . . and nothing in the Rules 

even hints that any other court may be given the power to quash or enforce them”); First 

Nationwide Bank v. Shur, 184 B.R. 640, 641 (E.D.N.Y. 1995) (“‘[i]t is a proper defense 

to a petition for a contempt order for failing to obey a subpoena to establish that the 

requirements of [Rule 45] which govern the validity of a subpoena were not met’”) 

(quoting In re Johnson & Johnson, 59 F.R.D. 174, 177 (D.Del. 1973)); Hecht v. Don 

Mowry Flexo Parts, Inc., 111 F.R.D. 6, 11 (N.D. Ill. 1986) (“[a] finding of criminal 

contempt falls if the underlying court order is held invalid. . . .”); Doble v. S.D. Cal. 

Central Division, 249 F.2d 734, 734 (9th Cir. 1957) (“[i]f the service of a subpoena on a 

witness outside the District and more than one hundred miles from the place of trial is 

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unjustified by any statute and is contrary to the plain language of Rule 45 . . . and 

therefore without force and void, as petitioner claims, petitioner is not without recourse. 

He may disregard it. If proceedings are then brought against him, if he is correct, he 

might have a punitive order reversed on appeal”). 

 Because this Court lacks jurisdiction over both the underlying subpoena and 

IBC’s motion for contempt, the motion must be denied. 

 D. IBC’s Request For The Magistrate Judge To Conduct Evidentiary 

 Hearings And Fact-Findings Invites The Court To Violate 

 Controlling Third Circuit Precedent. 

 In attempting to guide the Magistrate Judge to hold a hearing and conduct factfinding, IBC once again cites the wrong legal standards and misguides the Magistrate 

Judge and the District Judge to violate clear dictates of Third Circuit precedent under the 

Federal Magistrates Act. 

 In Taberer v. Armstrong World Indus. Inc., 954 F. 2d 888, 891 (3d. Cir. 1992), the 

Third Circuit proclaimed that a Magistrate Judge “lack[s] jurisdiction” to hold contempt 

hearings, and a “district judge err[s] in adjudicating the contempt based on the record of 

[any Magistrate Judge’s] hearing, instead of holding a de novo hearing.” Again, there is 

absolutely no basis for IBC’s instant motion and the motion seeks to mislead the court 

into committing legal error. 

 IBC cites Holt Cargo Systems, Inc. v. Delaware River Port Authority, 1998 WL 

150948 at *3-4. No. 94-7778 (E.D. Pa. March 27, 2003) for the proposition that “[t]he 

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 

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contempt of court.” IBC’s 1/16/04 Memorandum at 4. However, IBC’s citation to Holt is 

misguided, as Holt stands in direct contrast to Judge Becker’s opinion in Taberer. 

 In Taberer, Judge Becker engaged in a lengthy analysis of 28 U.S.C. § 636(e). 

954 F. 2d. at 895-907. The Third Circuit concluded that, in a contempt proceeding 

pursuant to 636(e), the District Judge must hold a de novo hearing and that a de novo 

determination, such as a decision that would comport with 636(b)(1)(c) “is not sufficient 

to comply with this requirement.” Id. at 904. A “de novo hearing entails a new 

proceeding at which the decision is based solely on the evidence freshly presented at the 

new proceeding.” Id. “When holding a de novo hearing, however, the district court acts 

as a trial court. “Id. 

The Third Circuit found support for its interpretation in the Fourth Circuit’s 

analysis of a civil contempt committed before a Magistrate Judge in Proctor v. State 

Government of North Carolina, 830 F. 2d. 514 (4th Cir. 1987). Id. at 906-07. The Court 

noted that: 

[o]ur interpretation of section 636(e) is consistent with Proctor’s in one 

aspect: we agree that contempts committed in proceedings before a 

magistrate judge must be adjudicated pursuant to section 636(e) and not 

some other provision of the Act. We disagree with Proctor, however, 

because it permits the district judge to act as he or she would in a section 

636(c) proceedings, except that the district judge is required, rather than 

merely permitted, to hear additional evidence upon a party’s request. In 

other words, Proctor contemplates that on remand the district judge will 

review the magistrate judge’s certification along with any additional 

evidence, rather than try the contempt de novo. We cannot follow that 

course for two reasons. First, as we have already explained, section 636(e) 

prohibits magistrate judges from trying contempts committed in 

proceedings before them. 

Id. at 907. 

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 Accordingly, based upon the controlling Third Circuit law, the Magistrate Judge 

may only “certify” a contempt motion to the District Judge, in appropriate circumstances, 

but cannot hear evidence or “certify facts”. Once again, IBC misdirects this Court with 

the wrong law. The troubling part in this instance, however, is that IBC wants to have the 

Magistrate Judge conducting parallel trial proceedings while the District Judge is 

proceeding with the duty to address the merits of the Order. IBC demonstrates a 

complete disregard for the burdens it has been imposing on the Court and Aetna with its 

baseless motions. 

E. The District Court Cases Cited By IBC Are Not Precedential And Are 

Otherwise Inappicable. 

 IBC wrongly argues that there must be motion practice seeking stays of the 

Magistrate Judge’s Order, even when there is a timely appeal and objections filed with 

the District Judge. For the reasons provided above, that contention is not the law of this 

Circuit, and otherwise finds no support in the Federal Magistrate Judge’s Act. 

 The cases cited by IBC are all distinguishable. See IBC’s 1/16/04 memorandum, 

at 4-5. As noted above, not a single Ciircuit Court, let alone the Third Circuit, has held 

that objections to a Magistrate Judge’s discovery order do not stay that order or suspend 

it pending an opportunity for the District Judge to perform the statutorily-mandated duty 

to address the Objections. 

 Moreover, all of the cases cited by IBC relate to disputes between parties, not 

issues involving non-parties such as Aetna. Nor do they implicate the heightened 

standard applied by Rule 45 for trade secrets. Additionally, the rationale of some of 

IBC’s cited cases rely upon explicit mechanisms governing the applicability of an 

automatic stay as set forth in the relevant local rules. See Esparza v. 

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Bridgestone/Firestone, Inc. 200 F.R.D. 654, 656 (D. Col. 2001); In re: Lernout & 

Haupsie Securities Lit., 219 F.R.D. 28, 30 (D. Mass. 2003).11 In contrast to the foregoing 

cases, the Eastern District Local Rules are silent on this issue. See E.D. Pa. Local Rule of 

Civil Procedures 72.1. 

 Moreover, in Litton Industries, Inc. v. Lehman Brothers Kuhn Loeb, Inc., 124 

F.R.D. 75, 79 (S.D.N.Y. 1989), upon which most of IBC’s other cited authority relies, the 

Court declined to impose sanctions based upon Plaintiff’s refusal to produce its expert 

witness for deposition in reliance upon an automatic stay pending resolution of 

objections. Although none of the cases cited by IBC implicate trade secrets, in L.D. 

Williams v. Texaco, Inc. 165 B.R. 662, 666-67, 673-74 (D.N.M. 1994), where Texaco had 

made false or misleading statements in pleadings, filed bad faith motions and disobeyed 

discovery orders on the basis of relevance, the Court ordered Texaco to produce only a 

privilege log, not privileged documents, even though it found Texaco’s privilege 

assertion to be “self-serving.” 

 In sum, IBC cannot cite to a single persuasive opinion from any Circuit Court, or 

any District Court in this Circuit, supporting its position. 

IV. CONCLUSION

 For the foregoing reasons, and such other reasons as may be provided at any 

hearing, IBC’s motion for contempt must be denied, and there should be no certification 

by the Magistrate Judge. Because of the significant and unnecessary expense Aetna 

incurred as a result of IBC’s vexatious motion, Aetna should be granted attorneys fees 

and costs incurred in responding thereto. 

 

11 In Lernout, rather than objecting or seeking a stay, defendant filed an ex parte proceeding in a Belgian 

court seeking an injunction against the court order. Id. Defendant only filed its objections, which are on 

their face untimely, after the Belgian court denied ex parte relief. Id.

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Respectfully submitted, 

OF COUNSEL: 

 /s/ Frederick P. Santarelli 

ELLIOTT REIHNER & JOHN M. ELLIOTT 

 SIEDZIKOWSKI, P.C. JAMES C. CRUMLISH III 

 MARK J. SCHWEMLER 

 FREDERICK P. SANTARELLI 

 JOHN P. ELLIOTT 

 Union Meeting Corporate Center V 

 925 Harvest Drive, Suite 300 

 P.O. Box 3010 

 Blue Bell, PA 19422 

 (215) 977-1000 

 Counsel for Non-party 

 Aetna Inc. 

DATED: January 30, 2004 

Case 2:02-cv-02746-JP Document 196 Filed 01/30/2004 Page 22 of 23
CERTIFICATE OF SERVICE

 The undersigned certifies that on this day a copy of the foregoing is being served 

upon the persons and in the manner indicated below: 

VIA FIRST CLASS MAIL

Lewis R. Olshin, Esquire 

Duane, Morris LLP 

One Liberty Place 

Philadelphia, PA 19103-7396 

William J. Leonard, Esquire 

Obermayer Rebmann Maxwell & Hippel, LLP 

One Penn Center, 19th Floor 

1617 John F. Kennedy Boulevard 

Philadelphia, PA 19103-1895 

Daniel A. Kotchen, Esquire 

Boies, Schiller & Flexner LLP 

5301 Wisconsin Avenue, N.W. 

Washington, D.C. 20015 

Howard T. Rosenblatt, Esquire 

Howrey Simon Arnold & White LLP 

1299 Pennsylvania Avenue, NW 

Washington, DC 20004 

 /s/ John P. Elliott 

Dated: January 30, 2004 JOHN P. ELLIOT 

Case 2:02-cv-02746-JP Document 196 Filed 01/30/2004 Page 23 of 23