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Right Choice Managed Care, Inc. v. Hospital Partners, Inc.

United States District Court, W.D. Missouri, St. Joseph Division

July 22, 2019

HOSPITAL PARTNERS, INC., et al., Defendants.



         This action arises out of an alleged pass-through billing scheme for laboratory tests at a rural Missouri hospital.[1] Pending before the Court is a discovery dispute between Plaintiffs and Defendants SeroDynamics, LLC; LabMed Services, LLC; Mark Blake; and Beau Gertz (collectively, the “Discovery Defendants”). Plaintiffs maintain that the Discovery Defendants have failed to comply with their discovery obligations and move the Court for relief. The parties briefed the issues (Docs. 234, 237, and 243), and the Court held a telephone hearing on July 11 to further discuss them. As set forth below, the Court GRANTS IN PART and DENIES IN PART Plaintiffs' requests.


         Litigants are entitled to discover any nonprivileged matter that is relevant to their claims or defenses. Fed.R.Civ.P. 26(b)(1). District courts “broadly and liberally” interpret discovery rules “in order to fulfill discovery's purposes of providing . . . parties with information essential to the proper litigation of all relevant facts, to eliminate surprise, and to promote settlement.” Weiss v. Amoco Oil Co., 142 F.R.D. 311, 313 (S.D. Iowa 1992) (citing Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 341 (1978)) (internal quotations and other citations omitted). District courts have “very wide discretion in handling pretrial discovery, ” and their decisions will be upheld absent a “gross abuse of discretion resulting in fundamental unfairness in the trial of the case.” Voegeli v. Lewis, 568 F.2d 89, 96 (8th Cir. 1977); see also Cook v. Kartridg Pak Co., 840 F.2d 602, 604 (8th Cir. 1988) (“A district court must be free to use and control pretrial procedure in furtherance of the orderly administration of justice.”).


         I. Search Terms

         Plaintiffs first complain that the Discovery Defendants refuse to apply seventeen additional search terms to their repositories of electronic information.[2] The Discovery Defendants respond that conducting the requested searches would yield 30, 490 documents that they would then have to review. They do not specifically oppose certain search terms; rather, they generally contend that Plaintiffs' requests are overly broad, disproportionate to the needs of the case, and likely to result in documents previously produced by other parties. They state that they have already applied eight search terms and produced 9, 986 documents.

         Plaintiffs' request appears reasonable, given the nature of the case and the amount in controversy. See Fed. R. Civ. P. 26(b) (listing the factors courts consider in assessing proportionality). Plaintiffs seek to recover more than $70 million in damages, and the Discovery Defendants admit that $26 million is in dispute as to them. Moreover, Plaintiffs have explained the relevance of the suggested terms-some are other defendants' names-and the Discovery Defendants have not shown how the requested information would be unreasonably cumulative or duplicative. Id. R. 26(b)(2)(B); Country Mut. Ins. Co. v. Wade, No. 4:10-cv-193-TIA, 2010 WL 3239105, at *1 (E.D. Mo. Aug. 13, 2010) (“[A]fter the proponent of discovery makes a threshold showing of relevance, the party opposing a motion to compel has the burden of showing its objections are valid by providing specific explanations or factual support as to how each discovery request is improper.” (citing Hofer v. Mack Trucks, Inc., 981 F.2d 377, 380 (8th Cir. 1993))). The Discovery Defendants also have not, to the Court's knowledge, proposed any reasonable restrictions, limitations, or alternatives to the search terms.

         The Court thus orders the Discovery Defendants to, within seven days, provide to the Plaintiffs a “hit report” of the seventeen suggested terms. See Castle Aero Fla. Int'l, Inc. v. Innovatis Asset Mgmt., S.A., No. CV 11-2672 (PAM/JJG), 2012 WL 12902786, at *2 (D. Minn. Oct. 10, 2012) (“[H]it reports do not actually disclose substantive information, but rather, they simply give the litigants an idea of the contours of the relationship between parties and the subject matter of the discussions in which the parties were engaged.”). The parties shall then use this report to more narrowly tailor the search terms and production of retrieved documents.

         II. Financial Records

         Plaintiffs next state that the Discovery Defendants refuse to produce relevant financial records, which Plaintiffs claim are necessary to prevail on their claim for restitution under § 502(a)(3) of the Employee Retirement Income Security Act, 29 U.S.C. § 1132(a)(3). The Discovery Defendants protest that they should not be required to produce personal financial records. Section 502(a)(3), however, applies to individuals as well as corporate entities. See Harris Tr. & Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238, 239 (2000) [“Section 502(a)(3)] admits of no limit . . . on the universe of possible defendants.”). And because it affords equitable relief only, Plaintiffs will have to trace the money they seek to “particular funds or property in the [defendants'] possession.” Great-West Life Ann. Ins. Co. v. Knudson, 435 U.S. 204, 213 (2002). The Court has previously held that the Plaintiffs are entitled to an opportunity to prove whether the funds are traceable. (Doc. 171, at 9; Doc. 165, at 10-11). It sees no reason why relevant personal financial documents would be off limits, and the Discovery Defendants provide no legal authority in support of their argument. In fact, such information could show that the funds have “dissipated, ” rendering them unrecoverable under § 502(a)(3). See Montanile v. Bd. of Trs. of Nat'l Elevator Indus. Health Ben. Plan, ___U.S.___, 136 S.Ct. 651, 658-59 (2016).

         The Court is nevertheless mindful of the burden involved in permitting such broad discovery of sensitive material. It therefore directs the parties to brief the issue. The briefs, which shall not exceed three pages, shall address the legality of ordering the Discovery Defendants to produce personal financial records with respect to claims made under § 502(a)(3). The briefs shall also suggest the appropriate breadth of discovery on this issue. The parties shall submit their initial briefs no later than July 26 and shall reply to the opposing brief no later than July 31. In addition, if they have not already done so, SeroDynamics and LabMed are ordered to produce financial records relevant to the existence and location of any identifiable proceeds received from Plaintiffs that are at issue in this litigation.

         III. Text Messages

         Plaintiffs also seek to compel the production of the Discovery Defendants' senior employees' relevant text messages, at least to the extent the information contained in such messages is not available elsewhere. The Discovery Defendants respond that they are in the process of reviewing and producing Gertz's text messages. They refuse to locate or provide additional messages, however, claiming that they ...

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