United States District Court, W.D. Missouri, St. Joseph Division
SUPPLEMENTAL DISCOVERY ORDER
action arises out of an alleged pass-through billing scheme
for laboratory tests at a rural Missouri
hospital. 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”). The
parties dispute whether additional financial records,
including Blake's and Gertz's personal financial
records, are discoverable in the face of Plaintiffs'
claims for equitable restitution under section 502(a)(3) of
the Employee Retirement Income Security Act, 29 U.S.C. §
1132(a)(3). The Court ordered (Doc. 255) the parties to brief
the issue, along with the proper scope of any such discovery.
Now, having reviewed the briefs, the Court finds in favor of
502(a)(3) claims may be pursued against both businesses and
individuals. 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.”). To prevail,
however, the plaintiff must trace its money “to
particular funds or property in the defendant's
possession.” Great-West Life & Ann. Ins. Co. v.
Knudson, 534 U.S. 204, 213 (2002). Equitable relief is
therefore unavailable when the proceeds in question have
“dissipated” and the plaintiff seeks to recover
from a defendant's general assets. Id. at 714.
contend that the lack of discovery has prevented them from
tracing their reimbursement payments past SeroDynamics and
LabMed, which closed, but not before each paid millions to
intermediate companies owned substantially by Blake and
Gertz. Information pertaining to the location of
Plaintiffs' payments is clearly relevant to
Plaintiffs' section 502(a)(3) claims, and the Discovery
Defendants offer no persuasive justification for not
producing it. See Sec. Mut. Life Ins. Co. of New York v.
Joseph, No. CIV A 06-CV-4804, 2007 WL 1944345, at *3
(E.D. Pa. July 2, 2007) (“Discovery is necessary on
this issue because it is critical to plaintiff's ability
to obtain relief to trace plaintiff's alleged
overpayments.”); Almont Ambulatory Surgery Ctr.,
LLC v. UnitedHealth Grp. Inc., No. CV-14-03053-MWF
(AFMX), 2016 WL 6821116, at *3 (C.D. Cal. June 17, 2016).
They argue that Mo. Rev. Stat. § 510.263.8 prohibits the
discovery of financial assets until Plaintiffs establish a
likelihood of obtaining punitive damages. But
“discovery in a federal court is governed only by [the
Federal Rules] and . . . state discovery practices are
irrelevant.” 8 Charles A. Wright, et al., Fed. Prac.
& Proc. Civ. § 2005 (4th ed. 2019) (citing cases).
Discovery Defendants also claim that funds received from the
hospital were deposited into general bank accounts and used
for “all sorts of business payments.” According
to them, the funds have dissipated and Plaintiffs are
pursuing their general assets. A discovery brief is not the
proper place for such an argument. See Almont, 2016
WL 6821116, at *4. In denying Defendants' motion to
dismiss, the Court held that Plaintiffs were allowed the
chance to prove whether their payments are traceable. The
Court will provide them that chance, and if, following
discovery, they are unable to do so, the Discovery Defendants
can attack the claims on summary judgment. In any event, the
Court notes that the Eighth Circuit has, at least in other
contexts, allowed parties to recover assets through
constructive trusts even when they been commingled with other
funds. See, e.g., In re MJK Clearing, Inc., 371 F.3d
397, 401 (8th Cir. 2004) (applying the “lowest
intermediate balance” test to trace mixed funds). Thus,
given that the sought-after information is relevant to both
Plaintiffs' claims and the Discovery Defendants'
defenses, the Court grants the discovery request.
the Discovery Defendants must produce, by August 23, all
statements, canceled checks, and wire and deposit details
from January 2017 to the present for accounts of intermediary
companies such as Lab Metrics, LLC, Perseverance Med, LLC,
and any other entity owned by Blake or Gertz, where such
information bears on whether the Discovery Defendants possess
or control funds or property belonging in good conscience to
Plaintiffs. To the extent these entities have transferred
such funds or property to Blake and Gertz, they too must
produce the same information.
IS SO ORDERED.
 The Court's January 23, 2019,
order (Doc. 165) describes the factual background of ...