Miller v. York Risk Services Group
Miller v. York Risk Services Group
2014 WL 11515634 (D. Ariz. 2014)
June 20, 2014
Aspey, Mark E., United States Magistrate Judge
Summary
The Court ordered the production of documents related to Defendant's financial incentives and resulting patterns of claims handling conduct, Defendant's policies and procedures for claims handling, and aggregate claims data documenting the financial incentives and resulting patterns of claims handling conduct. The Court also granted the motion to quash with regard to materials submitted to the City of Phoenix prior to beginning services, limiting the production to Defendant's marketing materials and the Request for Proposal.
Laurie Miller, Brian Dimas, Kim Mills, Anthony Soza, Bruce Campbell, Kellie Bowers, Tim Hunter, Brian Saylor, Michael Schamadan, individually and as representative of the estate of Brandi Schamadan, Plaintiffs,
v.
York Risk Services Group, Defendant
v.
York Risk Services Group, Defendant
No. CV-13-01419-PHX-JWS
Signed June 20, 2014
Aspey, Mark E., United States Magistrate Judge
ORDER
*1 In an order issued May 16, 2014, the District Court referred the motions at Doc. 98 (Plaintiffs' Motion to Compel Production of Documents), and Doc. 99 (Defendants' First Motion to Modify Subpoena Duces Tecum), and Doc. 121 (Defendants' Emergency Motion for Sanctions and to File Deposition Transcripts Under Seal), and Doc. 122 (Defendants' Motion to Compel Deposition Testimony), to the undersigned Magistrate Judge. The Magistrate Judge heard oral argument regarding Doc. 122 on May 22, 2014. At that time the parties agreed Plaintiffs' Motion for Order Regarding Deposition Conduct (Doc. 116) was properly before the Magistrate Judge. The Court denied the motion. The Magistrate Judge granted in part the motion at Doc. 122 issuing “rulings” in the form of guidance with regard to certain discovery issues and ordered additional pleading with regard to other issues presented in the motion. The remaining issues presented by way of the motion at Doc. 122 will be resolved by way of separate order. The Magistrate Judge now determines and orders as follows:
I Background
Plaintiffs are or were employed by the City of Phoenix (“City”) fire department as firefighters or engineers. Defendant is a third-party insurance administrator for the City and adjusts workers' compensation claims made by City employees. Plaintiffs, including Michael Schamadan on behalf of his late wife, allege that they sustained serious injuries or illnesses resulting from their work and filed workers' compensation claims. They allege that Defendant, with the assistance and knowledge of certain City employees, wrongfully denied and delayed workers' compensation benefits and as a result their medical care and financial condition suffered.
Plaintiffs bring two claims against Defendant. First, they allege that Defendant, acting in concert with the City, fraudulently denied their workers' compensation benefits in violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18U.S.C. §§ 1961, 1964, and 1965. Second, they allege that Defendant violated Arizona law by aiding and abetting the City's breach of its duty of good faith and fair dealing.
Doc. 23.
A Protective Order governing the disclosure and confidentiality of certain discovery was approved by the District Court on April 21, 2014. See Doc. 82 & 97.
II Law governing motions to compel discovery
Pursuant to Rule 26(b) of the Federal Rules of Civil Procedure, “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense.” This rule further provides that “[r]elevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.” On motion the Court must limit the extent of discovery otherwise allowed if it determines that “the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive;” “the party seeking discovery has had ample opportunity to obtain the information by discovery in the action;” or “the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues.”
*2 Resolution of a motion to compel discovery is a matter within the Court's discretion. See, e.g., Surfvivor Media, Inc. v. Survivor Prods., 406 F.3d 625, 635 (9th Cir. 2005); Hallett v. Morgan, 296 F.3d 732, 751 (9th Cir. 2002) (holding that compelling disclosure of information that is only minimally relevant to the plaintiff's claims was not an abuse of discretion noting that a decision to deny discovery would not be “disturbed except upon the clearest showing that denial of discovery results in actual and substantial prejudice to the complaining litigant.” (internal citations and quotations omitted)).
For purposes of discovery, relevancy has been defined as “any matter that bears on, or that reasonably could lead to other matter that could bear on, any issue that is or may be in the case.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351, 98 S.Ct. 2380, 57 L.Ed.2d 253 (1978). Discovery requests should be considered relevant if there is any possibility that the information sought is relevant to any issue in the case, and should ordinarily be allowed, unless it is clear that the information sought can have no possible bearing on the subject matter of the action. See Marker v. Union Fidelity Life Ins. Co., 125 F.R.D. 121, 124 (M.D.N.C. 1989) (stating “discovery requests may be deemed relevant if there is any possibility that the information may be relevant to the general subject matter of the action”) and Morse/Diesel, Inc. v. Fidelity & Deposit Co. of Maryland, 122 F.R.D. 447, 449 (S.D.N.Y. 1988) (stating that if there is any possibility that the information requested may be relevant to the subject matter of the lawsuit, it is proper discovery).
Beyer v. Medico Ins. Group, 266 F.R.D. 333, 338-39 (D.S.D. 2009).
Accordingly, the production sought must be: (1) not privileged; (2) relevant to the claim or defense of any party; and (3) either admissible in itself or reasonably calculated to lead to the discovery of admissible evidence. See Fed. R. Civ. P. 26(b)(1). The party seeking to avoid discovery bears the burden of establishing the information is not discoverable and, therefore, the party seeking a protective order must establish good cause.
Where a party objects to a discovery request, the “objecting party bears the burden of demonstrating ‘specifically how, despite the broad and liberal construction afforded the federal discovery rules, each [request] is not relevant or how each question is overly broad, burdensome or oppressive by submitting affidavits or offering evidence revealing the nature of the burden.’ ” McKissick v. Three Deer Ass'n Ltd. P'ship, 265 F.R.D. 55, 56–57 (D. Conn. 2010) [ ]. “General and conclusory objections as to relevance, overbreadth, or burden are insufficient to exclude discovery of requested information.” Melendez v. Greiner, 2003 WL 22434101, at *1 (S.D.N.Y. Oct. 23, 2003).
To the extent a party seeks a protective order under Rule 26(c), that party “has the burden of showing that good cause exists for issuance of that order.” Gambale v. Deutsche Bank AG, 377 F.3d 133, 142 (2d Cir. 2004) [ ]. “Ordinarily, good cause exists when a party shows that disclosure will result in a clearly defined, specific and serious injury.” In re Terrorist Attacks on Sept. 11, 2001, 454 F. Supp.2d 220, 222 (S.D.N.Y. 2006) (internal quotations and citations omitted[ ]. Additionally, “the harm must be significant, not a mere trifle.” Duling, 266 F.R.D. at 71 [ ]. The Second Circuit has cautioned that Rule 26(c) “is not a blanket authorization for the court to prohibit disclosure of information whenever it deems it advisable to do so, but is rather a grant of power to impose conditions on discovery in order to prevent injury, harassment, or abuse of the court's processes.” Bridge C.A.T. Scan Assocs. v. Technicare Corp., 710 F.2d 940, 944–45 (2d Cir. 1983).
*3 John Wiley & Sons, Inc. v. Book Dog Books, LLC, ___F.R.D. ____, 2014 WL 1243804, at *2 (S.D.N.Y. 2014). See also Schorr v. Briarwood Estates Ltd. P'hip, 178 F.R.D. 488, 491 (N.D. Ohio 1998).
To prevail on a civil Racketeer Influenced and Corrupt Organizations (“RICO”) claim, a plaintiff must provide evidence of: “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity,” that resulted in (5) injury to a business or property, and that (6) the injury was caused by the substantive RICO violation. Williams v. Mohawk Indus., Inc., 465 F.3d 1277, 1282–83 (11th Cir. 2006). A “pattern” requires at least two acts of racketeering activity. See 18 U.S.C. § 1961(5); Sanford v. MemberWorks, Inc., 625 F.3d 550, 557 (9th Cir. 2010).
III Analysis of the motions before the Magistrate Judge
A. Plaintiffs' motion at Doc. 98, docketed April 21, 2014, avers:
York has flatly refused to produce aggregate claims data documenting the financial incentives and resulting patterns of claims handling conduct at issue, despite contractually agreeing to provide this same data to Phoenix on a monthly basis. The aggregate data relates directly to the heart of Plaintiffs allegation – York's financial motivations and the resulting conduct to wrongfully deny Plaintiffs' from their owed workers' compensation benefits. Moreover, even though York has alleged that production would be unduly burdensome, York has regularly given the exact same data to Phoenix as routine reports.
In addition, York also has refused to produce its own policies and procedures for claims handling, even including its contractually-promised Best Practices manual used to direct the adjusters who handle the workers' compensation claims. Recognizing that a party's own policies and procedures should be routinely produced, courts have consistently rejected attempts to conceal these written standards of conduct in insurance bad faith litigation. York's training and procedures are intended to impact the actions of the adjusters assigned to Plaintiffs' claims, underscoring their relevance and necessity of production.
Doc. 98.
In response (Doc. 112), Defendant asserts:
York has already provided all documents responsive to Plaintiffs' RFP number four (4). Plaintiffs' belief in the existence of other documents related to claims handling practices for the City of Phoenix workers' compensation claims is without any basis. With respect to Plaintiffs' RFP numbers ten (10) and fourteen (14), Plaintiffs failed to properly meet and confer and have prematurely filed this Motion to compel. In addition, the documents Plaintiffs seek are wholly irrelevant to the claims alleged in this case and are not discoverable.
Defendant argues:
... York has already produced responsive documents....the Motion actually addresses the following three Requests for Production....
***
REQUEST FOR PRODUCTION NO. 4
The written procedures or policies (including document(s) maintained in electronic form) presented to you and maintained for YORK's employees to use from the time of denial to the present in the review and handling of claims for workers' compensation insurance benefits for the City of Phoenix employees.:
*4 REQUEST FOR PRODUCTION NO. 10
The claims reserves records (or “reserves sheet”) for each Plaintiffs' on-the job injury claim.:
REQUEST FOR PRODUCTION NO. 14
The aggregate claims handling reports (e.g. cost reports, claim payout reports, reserve reports) you provided to the City of Phoenix for your work under the contract in effect at the time of the Plaintiffs' claims handling.
Defendant also argues:
As noted above, York has produced all the documents it possesses that are responsive to this Request. Plaintiffs specifically requested “procedures or policies... maintained for York's employees to usein...the review and handling of claims for workers' compensation insurance benefits for the City of Phoenix employees.” (Emphasis added.) The City of Phoenix has created its own policies and procedures for York adjusters in handling claims for City employees. This policy guide—the Workers Compensation Summarized Special Handling Instructions—outlines the guidelines regarding, among other things, intakes and claim reporting, denials, records requests, contacting claimants, taking recorded statements, IME referrals, nurse case management referrals, issuing indemnity payments, issuing medical payments, authorization for treatment, ICA notification, timelines for responses to inquiries, notifications for work restrictions, claim closures, and settlement.
Although the guide is only eight pages, as Plaintiffs point out, it nonetheless contains extremely detailed procedures and policies for handling City of Phoenix claims. Furthermore, in addition to this guide, York also produced the “Scope of Work,” which is attached as an exhibit to the City's contract with York.
Plaintiffs believe, without any basis, that there is some other policy guide in existence relevant to York's handling of the City's workers' compensation claims. Although York produced the only documents it possesses responsive to Plaintiffs' specific request, in an effort to accommodate Plaintiffs' request, it also produced York's Workers' Compensation Best Practices and York's Values, a document which contains general guidelines for handling workers' compensation claims for all clients. The Scope of Work also details the policies and procedures prescribed by the City of Phoenix regarding workers' compensation claims. Despite this production, Plaintiffs still argue that York is withholding and refusing to produce other responsive documents. Plaintiffs' counsel informed undersigned during a teleconference after this Motion was filed, that he possessed a York manual used for claims handling which they obtained through an unrelated lawsuit against York in which they are involved.
Plaintiffs reply:
The numbers driving and being driven by claims managers pushing the claims handling practices—the aggregate claims data and related communications routinely exchanged between York and Phoenix that document the impacts of the misconduct at issue—are at the heart of the RICO enterprise claims that the Court and jurors will be expected to evaluate in this case. Attempting to conceal from appropriate discovery the financial goals, results, and success of York's claim handling misconduct, how York directly profited from and measured the fruits of the misconduct, cannot be justified under any reasonable discovery standard. York's demand to conceal this discovery is improper and should be overruled. Moreover, reserves are always relevant in evaluating claims handling misconduct. Metropolitan Life Ins. Co. v. Ogandzhanova, No. 12–CV–372–PHX–GMS, 2013 WL 1442581, at *1 (D. Ariz. April 9, 2013). And York has failed to make any showing that its reserves are not created based on individual factors of the claim. Paul Johnson Drywall, Inc. v. Phoenix Ins. Co, WL 1764126, (D. Ariz. May 5, 2014). In addition, Phoenix instructions to York regarding reserves are equally relevant to this claim because York's liability can also flow from Phoenix's bad faith. Undoubtedly, York and Phoenix' conduct in reserving their monetary exposure on these underlying claims, and then defrauding the First Responders' rights to receive these benefits, bears examination by the fact finders.
*5 The federal District Courts have generally held that an insurance company's reserve information and aggregate claims information is relevant and discoverable in cases alleging bad faith. See First Tennessee Bank Nat. Ass'n v. Republic Mortg. Ins. Co., 276 F.R.D. 215, 221-22 (W.D. Tenn. 2011)[1]; U.S. Fire Ins. Co. v. Bunge North America, Inc., 244 F.R.D. 638, 644 (D. Kan. 2007)[2]. Therefore, the Court will order the production as set forth in Requests for Production 10 and Requests for Production 14. Furthermore, the Court finds Requests for Production 4 to be relevant and while it is represented by Defendant that the request has been complied with, if it has not, the requested information shall be produced. At page three of Doc. 98 Plaintiffs asserts Requests for Production 5 have not been produced. Defendant has not responded to this portion of the motion. The Court likewise finds this request to be relevant and Defendant shall produce the materials, however, the request is limited to those materials utilized in training personnel who administered the City of Phoenix claims at issue in this litigation.
B. Defendant's motion to quash or limit the subpoena duces tecum (Doc. 99)
The subpoena at issue is directed to the City of Phoenix who is alleged to have acted in concert with Defendant York but is not a named defendant. Defendant York argues on behalf of the City of Phoenix that complying with the subpoena duces tecum would be unduly burdensome and that the subpoena is overly broad. Defendant asserts that the materials being sought in paragraph one of the subpoena duces tecum[3], documents submitted by Defendant to the City prior to Defendant being awarded its contract with the City, i.e., Defendant's RFP and marketing materials and information regarding claims handling and software, and Defendant's method of handling electronically stored information (“ESI”), are proprietary information subject to the Protective Order of April 15, 2014, denying Plaintiffs' motion at Doc. 42.[4] Defendant also asserts the information sought in paragraph eight of the subpoena duces tecum[5] involves the confidential medical information of individuals other than Plaintiffs. Defendant alleges the data sought involves individuals' ages, genders, addresses, and computer-identifying information and, accordingly, that disclosure would violate HIPAA and patient-doctor confidentiality.
*6 In response (Doc. 119), Plaintiffs contend:
The documents exchanged between York and Phoenix directly relate to the claims and defenses in this RICO and Bad Faith lawsuit. But even more important, the documents that York sent to Phoenix to procure the workers' compensation administration contract show York's motive and intent while handling Plaintiffs' claims. Following the Court's mandate to begin discovery by seeking substantive data, Plaintiffs have sought exactly that in this subpoena. Indeed, as opposed to an ESI deposition regarding procedure, Plaintiffs have requested the claims handling and electronic information that York used to obtain its contract with Phoenix.
Plaintiffs also aver:
HIPAA is not an absolute bar to production, and thus Phoenix should also produce the IME reports and documents of Doctors Beghin, Carter, Rockowitz, and Rowley. In fact, HIPAA allows for production under a protective order if the documents were subpoenaed, ordered by the Court, or requested through discovery. See Hutton v. City of Martinez, 219 F.R.D. 164 (N.D. Cal. 2003). In this case, Plaintiffs subpoenaed the reports, and the Court has already entered a protective order to govern all documents produced in this litigation. See Court's Order at [Doc. 82.] Finally, Plaintiffs have already agreed to redact personal identifiers. See Exhibit “B” Letter from the City dated May 8, 2014.
Documents Related to Independent Medical Exams
The subpoena seeks: “Documents related to Doctors John Beghin, Tom Carter, Neal Rockowitz and Alan Rowley and their work performing Independent Medical Exams on injured workers since January 1, 2003.” With the exception of the nine named Plaintiffs, the records are for numerous nonparty City employees' examinations and medical records going back eleven years. The parties do not dispute that the City of Phoenix, as a self-insured provider of health insurance, is a “covered entity” under HIPAA. The parties disagree as to whether HIPAA bars the production of the documents.
Irrespective of HIPAA and the regulations promulgated by the Department of Health and Human Services, the federal courts have long recognized a constitutional “zone of privacy” surrounding medical records. See Tucson Woman's Clinic v. Eden, 379 F.3d 531, 551 (9th Cir. 2004); United States v, Westinghouse, 638 F.2d 570, 577 (3rdCir. 1980); du Pont de Nemours v. Finklea, 442 F. Supp. 821, 824 (S.D.W.V. 1977). In exercising its discretion pursuant to Rule 45(d), Federal Rules of Civil Procedure, the Court must balance the non-party City of Phoenix employees' privacy rights in the medical records sought against the Plaintiffs' professed need for the records. Northwestern Memorial Hospital v. Ashcroft, 362 F.3d 923, 927-28 (7th Cir. 2004). At page 6, Doc. 119, Plaintiffs set forth the purported relevance of the broad discovery request. The Court concludes Plaintiffs' professed need for the records do not outweigh the employees' privacy rights. Additionally, the wording of the subpoena, which seeks “Documents related to Doctors ... and their work performing Independent Medical Exams on injured workers since January 1, 2003”, is ambiguous as to what is included in the term “documents.” Lastly, requiring the nonparty City of Phoenix to search and pull eleven years of records is oppressive and to require the nonparty City of Phoenix to redact the records to protect the nonparty employee” privacy rights, prior to disclosure to Plaintiffs, is oppressive. Therefore, the motion to quash with regard to this portion of the subpoena will be granted.
Materials Submitted to the City of Phoenix Prior to Beginning Services
*7 The Court's order of April 15, 2014, protected Defendant from a Rule 30(b)(6) deposition regarding its manner of storing and maintaining electronic data. Defendant's contention that the information supplied to the City of Phoenix in response to the City's Request for Proposal is protected from production by the Court's order of April 15, 2014, is not supported. However, the Court agrees with Defendant that the production should be limited to Defendant's marketing materials and the Request for Proposal. Defendant need not produce the software, databases or manner Defendant maintains the ESI.
THEREFORE,
IT IS ORDERED that the motion at Doc. 98 is granted with regard to the Requests for Production 4, Requests for Production 10 and Requests for Production 14. The Requests for Production 5 is granted as limited by the Court.
IT IS ORDERED that the motion to quash or limit the subpoena duces tecum (Doc. 99) is granted in part as indicated by the Court but the City of Phoenix be granted an additional two weeks from the date this order is docketed to comply with the subpoena.
IT IS FURTHER ORDERED that, as stated at the hearing, Defendant's Emergency Motion for Sanctions and to File Deposition Transcripts Under Seal (Doc. 121) is granted insofar as it seek leave to file deposition transcripts under seal and for the Court to order that the deposition transcripts be subject to the Protection Order pending further review by the Court. The motion is denied without prejudice as to seeking sanctions. The motion is granted with regard to Defendant's request that the Court order Plaintiffs to immediately cease and desist from any and all dissemination of deposition transcripts via the Internet or other publicly-assessable media format pending further order of the Court.
IT IS FURTHER ORDERED denying Plaintiffs Motion for Order Regarding Deposition Conduct (Doc. 116).
Dated this 20th day of June, 2014.
Footnotes
With respect to Requests for Production 21 and 42, which pertain to RMIC's calculation of reserves, the parties do not rely on any Texas or Tennessee law for the premise that such information is discoverable. First Tennessee relies upon Bernstein v. The Travelers Insurance Company, 447 F. Supp. 2d 1100 (N.D. Cal. 2006), for the proposition that the manner in which the insurer sets reserves shows “what [the insurer] actually knew and thought, and what motives animated its conduct” and thus are “critical areas of inquiry in bad faith cases” and are “fully fair game for discovery.” Id. at 1107.
In arguing that loss reserve information is not relevant, the Insurers assert (without reference to supporting evidence) that their loss reserves, which are required by law, are not evaluations of the particular claims, but instead depend on various assumptions and business considerations. The Insurers cite cases in which the production of loss reserve information was not required.
Just as it did with respect to reinsurance information, however, the Court agrees with the Magistrate Judge that a number of cases have allowed such discovery, and that the question should be decided on a case-by-case basis with reference to the particular issues present in the case. See, e.g., Culbertson v. Shelter Mut. Ins. Co., 1998 WL 743592, at *1 (E.D. La. Oct. 21, 1998) (choosing to follow line of cases holding that reserve information is discoverable where a claim of bad faith is asserted); see also Mag. J. Order at 20 n. 36 (citing cases). The Court concludes in this case that the Magistrate Judge did not clearly err in analyzing the issues present and determining that loss reserve information may lead to the discovery of admissible evidence on those issues as identified in the Magistrate Judge's order.
“The materials submitted to the City of Phoenix by York Risk Services Group or Avizent before York Risk Services Group or Avizent began providing workers' compensation services to the City of Phoenix”.
The motion at Doc. 42 sought a Rule 30(b)(6) deposition to determine Defendant's manner and method of electronically maintaining and storing information. The Court determined that Plaintiffs' request for the deposition, which Plaintiffs' argued was calculated to allow Plaintiffs to “tailor” their discovery requests to avoid disputes, was not justified. The Court stated that discovery should begin with requests for substantive information and that, if the production of such information proved burdensome, Plaintiffs could inquire as to the manner of storing electronic information.
“Documents related to Doctors John Beghin, Tom Carter, Neal Rockowitz and Alan Rowley and their work performing Independent Medical Exams on injured workers since January 1, 2003.”