[UPDATE: In its ruling, the Third Circuit set forth the appropriate standard for sanctions and concluded the conduct was likely sanctionable, but refused to remand the case back to the District Court for further proceedings, thereby vacating the order while still criticizing the attorneys involved. The opinion is at Grider v. Keystone Health Plan Central, Inc., 580 F.3d 119 (3d Cir. 2009).]
Shockwaves reverberated through the civil defense bar in September 2007 when a federal judge imposed sanctions on several lawyers and their clients for engaging in discovery tactics that the judge said were designed to delay and drive up the costs, but that many lawyers say are nothing more than business as usual. * * *
The case has become a cause among defense lawyers who argue that if the sanctions imposed by U.S. District Judge James Knoll Gardner are not lifted, they will find it difficult to represent their clients properly.
The Philadelphia Bar Association took the rare step of filing an amicus brief in the appeal, saying Gardner’s ruling, if upheld, threatens to “increase substantially the cost of civil litigation and to chill the zealous advocacy that is every attorney’s duty and the cornerstone of our judicial system.” * * *
In his September 2007 decision, Gardner imposed sanctions on attorneys John S. Summers of Hangley Aronchick Segal & Pudlin; Daniel B. Huyett and Jeffrey D. Bukowski of Stevens & Lee; and Sandra A. Girifalco of Stradley Ronon Stevens & Young.
Gardner’s blistering 77-page opinion concluded that the lawyers and their clients — a pair of insurance companies — had acted in bad faith.
By way of background, as The Legal notes,
The underlying suit was brought by a class of doctors and alleged RICO claims against Capital Blue Cross, Highmark Inc. and their jointly formed HMO, Keystone Health Plan Central. The doctors claimed they were being cheated out of their rightful fees because the insurers “shave” capitation payments to doctors by under-reporting the number of patients enrolled in the doctors’ practice groups. … The suit also accuses the insurers of defrauding doctors by “manipulating” the medical service codes used to calculate reimbursements.
Simple, right? Sure, it’s a lot of documents, but they’re the defendants’ own payment processing documents, so they should be readily accessible.
You can read the District Court opinion here. Let’s highlight some of Judge Gardner’s findings:
The corporate defendants have repeatedly denied that they have access to the requested information, and have misrepresented the nature of their roles in the claims submission process. Moreover, defense counsel have feigned misunderstanding of words, terms and phrases clearly understood by them and their clients. * * *
As stated in Finding of Fact 26, on March 1, 2004 Attorney Summers sent a letter to the court attaching a series of Declarations which affirmatively represented to the court that plaintiffs’ allegations of bundling and downcoding lacked any factual basis, and that those claims were “without merit”. Thereafter, defendant Keystone, through its counsel, Attorney Summers, refused to produce the underlying documents and data compilations which supported the Declarations on a number of frequently changing bases. Initially, Attorney Summers withheld the underlying documents and data compilations because they allegedly constituted lay opinion. Next, Attorney Summers withheld the information on the basis that it was expert opinion and immune from discovery. Finally, Attorney Summers asserted
that the underlying information was privileged material pursuant to either the attorney-client privilege or the attorney work product doctrine.
As noted by my colleague Senior United States District Judge J. William Ditter, Jr., “It is not good faith for a lawyer to frustrate discovery requests…with successive objections like a magician pulling another and another and then still another rabbit out of a hat.” Massachusetts School of Law at Andover, Inc. v. American Bar Association, 914 F.Supp. 1172, 1177 (E.D.Pa. 1996). * * *
The most egregious instance of late production involves Keystone’s late production of claims data. Keystone claimed for years that it was unable to provide claims data. During the same time that Keystone and its counsel were feigning an inability to produce claims data (which it owned according to the ASA agreement with Synertech), Keystone was using claims data for its own self-serving purposes (i.e., the Declarations sent to the court on March 1, 2005). * * *
This case is about claims processing. To deny plaintiffs the data which Keystone owns is equivalent to denying plaintiffs their day in court. Without this data it will be more difficult for plaintiffs to prove their claims. I conclude that this is exactly what defendant Keystone hoped to accomplish by thwarting discovery in this case.
From reading the opinion, it seems the defendants’ strategy was two-pronged:
- Thwart plaintiffs’ discovery by repeatedly inventing new excuses for not producing the claims processing data, and,
- Distract, delay, and overwhelm the court and the plaintiffs by repeatedly interjecting collateral issues through “declarations.”
The beauty of this plan is that it rapidly snowballs: once you introduce a new issue through #2, you can then apply #1 to refuse any further discovery into it, complicating and delaying the case further, which is apparently what happened here:
After appointment of Special Discovery Master Blume, the parties spent a period of time productively dealing with discovery issues. Plaintiffs have accepted all the decisions of Special Discovery Master Blume. Defendants initially accepted many of her decisions, but reverted to a systematic routine of not only appealing to me most, if not all, of her substantive decisions, but also filing objections to the Master’s monthly reports which detail the proceedings before her and her impressions of the status of this case. The docket reveals the amount of activity this case has generated by virtue of nearly 850 docket entries since this cases’s inception on November 7, 2001.
The cost and difficulty of discovery, particularly in complex business cases like Grider, is one of the most important issues in American law today. Unfortunately, the institutions that should be offering solutions have failed us, typically preferring to propose heads defendants win, tails plaintiffs lose “reforms” in which defendants have neither an obligation to produce evidence on their own nor an obligation to answer anything but the most specific and limited of requests. See, for example, the American College of Trial Lawyers’ Civil Discovery Report, which proposed giving defense lawyers a blank check to file frivolous discovery objections while also eliminating most of the tools available to plaintiffs for compeling production.
The Philadelphia Bar Association stepped into this vacuum by hiring two defense firms to prepare an amicus brief (see the brief here) which seizes upon the above to argue that Judge Gardner’s sanctions create a “chilling effect” by forcing attorneys into
… a Hobson’s choice: either represent their clients in discovery matters to the limits of zealous advocacy at the risk of incurring potentially draconian sanctions; or fail to assert (or stand by) well-founded objections to arguably overreaching discovery requests, regardless of how onerous the burdens such requests may impose on their clients, for fear of incurring highly punitive sanctions.
The PBA’s amicus brief misses the point: the defendants’ discovery objections were meritless and designed to frustrate the action. All of the requested discovery was either highly relevant (and accessible) or was interjected into the litigation by defendants themselves.
Just like with claims for abuse of process and wrongful use of civil proceedings, attorneys and parties are not shielded from liability when they use a proper procedure for an improper purpose. Whether the means were justified is a question of what the ends were.
Here, defense counsel used a variety of theoretically appropriate discovery means — like objections, privilege assertions, declarations, appeals from discovery masters, and motions for reconsideration — for the illegitimate end of thwarting discovery, overwhelming the court, and delaying the action.
Fact is, discovery is going to continue to be needlessly expensive and time-consuming up until defendants have an affirmative duty to produce relevant information, since the lack of such duty forces plaintiffs to engage in fishing expeditions if they want any information at all.
If plaintiffs can’t even get sanctions for intentionally dilatory and obfuscatory conduct, then talk of “reform” is pointless, since the only “reform” on the table would give the keys to the courthouse doors to whichever defense lawyer was most willing to slam them shut.