Court Opinion

ID: 2994995
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:17:48.926179+00
Date Added: 2024-06-11T18:01:24.544268
License: Public Domain

In the
United States Court of Appeals
For the Seventh Circuit

No. 00-2936

CHARLENA GRIFFITH, FANNIE BOOKER,
CAROLYN RUSSEL, et al.,

Plaintiffs-Appellees,

v.

UNIVERSITY HOSPITAL, L.L.C., UNIVERSITY
HOSPITAL LIMITED PARTNERSHIP, UNIVERSITY
HEALTH SYSTEMS, INCORPORATED, et al.,

Defendants-Appellees,

and

FREDERICK T. ALT, ALAN BERGER,
NORMAN BERGER FAMILY TRUST, et al.,

Proposed Intervenors-Appellants.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 97 C 7370--Robert W. Gettleman, Judge.

Argued FEBRUARY 14, 2001--Decided May 4, 2001

  Before POSNER, COFFEY and RIPPLE, Circuit
Judges.

  COFFEY, Circuit Judge. This appeal
concerns an attempt by the Appellants to
intervene in this class-action suit for
purposes of modifying a protective order
and settlement agreement that preclude
them from reviewing materials obtained by
the plaintiffs through discovery.
Appellants are the claimants in an
arbitration proceeding with similar
parties and issues, and they wish to
avoid the expense of duplicating the
discovery that has taken place in this
suit. The district court denied the
Appellants’ motion to intervene, finding
that modification of the confidentiality
provision of the settlement agreement
posed a danger to the settlement--the
details of which had already been
distributed to the class members.
Appellants contend that the district
court abused its discretion in denying
the motion because it did not identify a
substantial right that would be tangibly
prejudiced by allowing an intervention
solely to modify the proposed
settlement’s confidentiality provisions.
We affirm.

BACKGROUND

  On May 29, 1997, approximately 225
employees of a Chicago psychiatric
hospital lost their jobs when the
facility was permanently closed. The
hospital (University Hospital, L.L.C. and
its corporate predecessor, University
Hospital, Inc.) had been operating under
a lease from University Hospital
Association Limited Partnership
(hereinafter "UHALP"), which was formed
in 1989 specifically to purchase,
renovate and lease the facility for use
as a psychiatric hospital.

  UHALP consisted of a general partner and
four classes of limited partners,
including the Class A partners who are
the proposed intervenors in this action.
The partnership agreement named Ling
Corporation as the general partner and
Ling’s owner, Michael C. Markovitz, as
the Class C partner. The partnership
agreement contained a "sell-back option"
under which the general and Class C
partners were required to repurchase
other partners’ shares if one or more
"triggering events" occurred. One such
triggering event was the closing of the
hospital for a period in excess of thirty
days.

  In March 1997, the hospital closed for
more than thirty days. Pursuant to their
rights under the partnership agreement,
Appellants (representing a majority of
the Class A partners) issued a sell-back
demand to Ling and Markovitz. This demand
was not honored, and Ling also refused to
furnish an equitable partnership
accounting requested by certain
Appellants. On October 31, 1997, the
Class A partners filed a complaint with
the American Arbitration Association
against Ling and Markovitz seeking
enforcement of the sellback provision and
an equitable accounting.

  Meanwhile, former hospital employees
(hereinafter Griffith Plaintiffs) filed
the underlying class-action suit on
October 21, 1997, seeking damages against
the hospital, UHALP, Markovitz and
others, under statutory and common law,
including a claim arising under the
Worker Adjustment and Retraining
Notification Act, 29 U.S.C. sec. 2102, et
seq. This claim alleged that the
hospital’s failure to give employees 60-
day prior notice before closing the
hospital was a violation of federal law.
During discovery in Griffith v. UHLLC,
counsel for the plaintiffs deposed
fourteen witnesses and obtained 11,000
documents related to the reasons for
closing the hospital, the hospital’s
billing practices, and its financial
problems. The district court issued two
protective orders regarding matters under
discovery, one on July 8, 1998, and one
on July 15, 1999.

  Due to the similarity of issues in the
arbitration and the instant case,
discovery information obtained from the
hospital in this case was shared between
attorneys for the Griffith Plaintiffs and
the Class A partners in the Alt v.
Markovitz arbitration (hereafter Alt
Claimants). On March 1, 2000, however,
the Griffith parties reached a settlement
that included an agreement providing that
the parties were required to maintain the
confidentiality of "any information
produced during the course of the
Griffith litigation . . . except that
filed in the public Court record." The
district court preliminarily approved the
agreement on March 22, 2000, and directed
that members of the class be notified of
the settlement, including the
confidentiality provision.

  Following approval of the settlement,
Baum Sigman, counsel for the Griffith
plaintiffs, notified counsel for the Alt
claimants that pursuant to the
confidentiality provision of the
settlement agreement he could no longer
share information he obtained during
discovery. Because the Alt Claimants had
not completed their review of Sigman’s
files, they responded in May 2000 by
obtaining a subpoena duces tecum against
Sigman in the arbitration proceeding.
After Markovitz and Ling Corporation
objected to the subpoena and requested
that it be quashed, the arbitrator
ordered Sigman to release information not
rendered confidential either by the
settlement agreement or the Griffith
court’s protective orders. However, the
arbitrator declined to enforce the
subpoena as it related to information
rendered confidential by the district
court in Griffith, and suggested the Alt
Claimants bring a motion for intervention
before the Griffith court. The motion to
intervene, including a proposed motion to
modify the protective orders and the set
tlement agreement’s confidentiality
clause, was filed on June 19, 2000.

  At a hearing held three days later, the
district court denied the motion, fearing
that intervention could potentially
derail the settlement and "change the
rules of the game for the class members,"
who had already been notified of all
provisions in the agreement (including
the confidentiality clause) two months
before. The court believed that interven
tion on the terms requested by the Alt
Claimants could upset the finality of the
settlement, thereby affecting the
Griffith Plaintiffs adversely. Although
sympathetic to the Alt Claimants’ desire
to avoid having to undertake extensive
discovery already performed by the
Griffith Plaintiffs, the court placed a
higher value on protecting the interests
of class members who had relied on the
notice of settlement they received:
"[T]hat is paramount here. It’s more
important than avoiding some duplication
in discovery efforts."

  Thus, even though the court acknowledged
that it would normally be inclined to
allow intervention, the court found that
the potential for prejudice resulting
from a change in the agreement’s terms of
confidentiality outweighed the Alt
Claimants’ interest in avoiding duplicate
discovery. In July 2000, the district
court granted final approval for the set
tlement agreement and ordered
disbursement of the settlement funds that
had been deposited in escrow.

DISCUSSION

  The Alt Claimants appeal the district
court’s decision to deny their motion to
intervene. A district court’s denial of a
motion for permissive intervention is
reviewed under the abuse of discretion
standard. Shea v. Angulo, 19 F.3d 343,
346 (7th Cir. 1994).

  The rule of law applicable to a decision
in this case provides as follows: "Where
an appropriate modification of a
protective order can place private
litigants in a position they would
otherwise reach only after repetition of
another’s discovery, such modification
can be denied only where it would
tangibly prejudice substantial rights of
the party opposing modification." Wilk v.
American Medical Association, 635 F.2d
1295, 1299 (7th Cir. 1981). "Once such
prejudice is demonstrated, however, the
District Court has broad discretion in
judging whether that injury outweighs the
benefits of any possible modification of
the protective order." Id.

  We have recognized that intervention is
"the procedurally appropriate course for
third-party challenges to protective
orders." Grove Fresh Distrib. Inc. v.
Everfresh Juice Co., 24 F.3d 893, 896
(7th Cir. 1994). Federal Rule of Civil
Procedure 24(b), governing permissive
intervention, is "sufficiently broad-
gauged to support a request of
intervention for the purposes of
challenging confidentiality orders." Jes
sup v. Luther, 227 F.3d 993, 998 (7th
Cir. 2000) (applying Rule 24(b)(2) to
newspaper’s motion to intervene in
settlement agreement that included a
confidentiality provision). However, Rule
24(b) vests district courts with
"considerable discretion" when deciding
whether to permit intervention by third
parties seeking to protect their
interests in a particular action. EEOC v.
National Children’s Center, Inc., 146
F.3d 1042, 1048 (D.C. Cir. 1998). Given
this board discretion, reversal of a
court’s denial of a Rule 24(b) motion for
permissive intervention "is a very rare
bird indeed." Id., (citing United States
v. Pitney Bowes, Inc., 22 F.3d 66, 73 (2d
Cir. 1994)).

  The Alt Claimants rely on Wilk for their
position that the district court erred in
denying their motion to intervene for the
limited purpose of modifying the
protective orders and confidentiality
agreement. Wilk involved two very similar
antitrust suits against the American
Medical Association, one brought by a
group of Illinois chiropractors and one
brought by the State of New York. Wilk,
635 F.2d at 1296. After an Illinois
district court issued a protective order
covering most of the discovery materials
obtained in the case brought by the
chiropractors, the State of New York
moved to intervene for the limited
purpose of modifying that protective
order. Id. at 1297. The Illinois court
ultimately denied New York’s motion to
modify the protective order. Id. This
Court reversed, noting that allowing the
use of discovery "in aid of collateral
litigation on similar issues . . .
materially eases the tasks of courts and
litigants and speeds up what may
otherwise be a lengthy process." Id. at
1299. We held that these policy
considerations justify intervention for
the purpose of modification of protective
orders unless such modification "would
tangibly prejudice substantial rights of
the party opposing modification." Id.

  The Wilk test requires a district court
to determine, when faced with a motion to
intervene to modify a protective order,
(1) whether the party opposing
intervention has any substantial right at
stake, and (2) whether the proposed
modification would "tangibly prejudice"
that right. Id. at 1299; see also Grove
Fresh, 24 F.3d at 896 (remanding denial
of motion to modify a protective order
for reconsideration in light of Wilk);
Jepson, Inc. v. Makita Elec. Works, Ltd.,
30 F.3d 854 (7th Cir. 1994). If tangible
prejudice is established, the court must
decide "whether that injury outweighs the
benefits of any possible modification of
the protective order." Wilk, 635 F.2d at
1299.

  The Alt Claimants argue that the
district court abused its discretion in
holding that the Griffith parties
possessed a substantial right that would
be prejudiced by modifying the settlement
agreement and protective orders to allow
the Alt Claimants access to the discovery
material. They contend that a substantial
right is not at stake here merely because
the discovery materials might be harmful
to the Griffith defendants. They further
argue that the only possible substantial
right which could be raised in a Wilk
analysis of this case is one of
protection from transfer based on the
privileged nature of the discovery
materials. Since discovery in the
arbitration proceeding could recreate the
information, the Alt Claimants submit
that the materials are not privileged and
thus no substantial right of the parties
in Griffith is at stake.
  These arguments ignore the district
court’s clear identification of the
substantial right at issue in this case--
the right of class members affected by
the settlement to rely on its provisions,
including the confidentiality provisions.
The court also found that the proposed
intervention would tangibly prejudice
that right and might very well upset the
settlement. As the district court judge
noted at the June 22, 2000 motion
hearing, "[I]n managing a class action,
to change the rules after notice has gone
out [and] preliminary approval has been
given . . . could upset potentially that
settlement and change the rules of the
game for the class members."

  The district court recognized the Alt
Claimants’ presumptive right to intervene
and modify the settlement agreement and
protective orders, but believed that such
action would undermine the parties’
reliance on the confidentiality provision
of the settlement agreement and possibly
compromise the agreement altogether.
Indeed, the settlement agreement was
reached only after three years of complex
litigation, extensive negotiation, and
presentation to the district court for
approval. At the very late date on which
the Alt Claimants brought their motion
for intervention, in excess of 200
settlement notices had already been sent
to class members notifying them of the
terms of the settlement. Permitting
intervention on the terms requested by
the Alt Claimants, would, at the very
least, require revised notices to be
prepared and sent to all class members.
We conclude that the district court did
not abuse its discretion in denying the
Alt Claimants’ motion to intervene and in
ruling that the Griffith parties’
reliance on the negotiated terms of its
settlement was a substantial interest
that would be prejudiced by permitting
intervention on the terms requested by
the Alt Claimants.

  Our conclusion is buttressed by the fact
that the Alt Claimants make no claim that
the discovery materials obtained in the
Griffith suit, which are now rendered
confidential by the settlement agreement,
cannot be obtained through discovery in
the arbitration. While it is true that
the rule of Wilk is intended to avoid the
wastefulness of duplicating discovery
already made, this consideration,
standing alone, must not take precedence
over a court’s detailed identification of
substantial rights that would be
prejudiced by intervention for
modification purposes. Once prejudice has
been found, the district court enjoys
broad discretion to weigh such prejudice
against the benefits of permitting
modification of a protective order. Wilk,
635 F.2d at 1299. Where, as here, the
benefit to be obtained by permitting
modification consists solely of the
convenience of the moving party, as
opposed to the preservation of or access
to information otherwise unattainable, we
cannot say that the district court abused
its broad discretion in finding that
intervention was not appropriate. The
burden imposed on the Alt Claimants by
denial of their motion to intervene is no
greater than what they would have
experienced if the Griffith suit had
never been filed, or had been settled
before substantial discovery had taken
place. In light of this fact, we cannot
say that the benefit to be conferred by
granting the motion to intervene in any
manner outweighs the prejudice to the
Griffith parties identified by the
district court.

    Because we affirm the district
court’s decision to deny intervention
based on the authority of Wilk, we need
not address Appellees’ additional
argument that the Alt Claimants’ motion
to intervene and modify the settlement
agreement and protective orders was
untimely.

CONCLUSION

  We hold that the district court did not
abuse its discretion in determining that
the Appellees possessed a substantial
right that would have been prejudiced by
permitting intervention for purposes of
modifying the settlement agreement and
protective orders. The decision of the
district court is AFFIRMED.