The Arc of California, et al v. Douglas, et al

Filing 118

ORDER signed by Chief Judge Morrison C. England, Jr on 6/27/13 DENYING 59 Motion for Sanctions. (Meuleman, A)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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THE ARC OF CALIFORNIA; UNITED
CEREBRAL PALSY ASSOCIATION
OF SAN DIEGO,

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Plaintiffs,

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No. 2:11-cv-02545-MCE-CKD

ORDER

v.
TOBY DOUGLAS, in his official
capacity as Director of the California
Department of Health Care Services;
CALIFORNIA DEPARTMENT OF
HEALTH CARE SERVICE; TERRI
DELGADILLO, in her official capacity
as Director of the California
Department of Developmental
Services; CALIFORNIA
DEPARTMENT OF
DEVELOPMENTAL SERVICES; and
DOES 1-100, inclusive,
Defendants.

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This lawsuit, filed September 28, 2011, challenges several changes California has

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implemented with respect to its payment for services provided to developmentally

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disabled individuals under the federally funded Medicaid program. Plaintiffs are the ARC

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of California (“ARC”) and the Cerebral Palsy Association of San Diego (“CPA).

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ARC is a statewide organization comprised of individuals with intellectual and

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developmental disabilities (“”I/DD”), their families, and their home and community-based

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service providers. CPA is a non-profit organization serving the needs of individuals with

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cerebral palsy in San Diego and is affiliated with the national cerebral palsy association.

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Presently before the Court is Plaintiffs’ Motion for Sanctions against Defendants for

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allegedly failing to comply with the terms of this Court’s August 22, 2012 Order, which

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authorized certain discovery.

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In December of 2011, shortly after this lawsuit was filed, proceedings were

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stayed pending the result of several pending cases, as well as several anticipated new

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regulations from the Centers for Medicare and Medicaid Services (“CMS”), the federal

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agency responsible for administering Medicaid based programs. That stay was lifted on

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August 22, 2012, and authorized Plaintiffs to take certain limited depositions of state

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officials in anticipation of an expected preliminary injunction request by Plaintiffs.

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Specifically, the Court’s Order (ECF No. 48) directed that Defendants produce

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knowledgeable individuals for deposition within 45 days. That 45-day period ran on

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October 6, 2012. Defendants, filed a motion for reconsideration of the Court’s order but

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that request, along with an emergency request that the depositions scheduled for

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October 3-5 be stayed, was denied on October 3, 2012 (ECF No. 58).

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According to Defendants, in the meantime, numerous issues arose throughout the

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month of September 2012 with respect to the proper scope of the authorized

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depositions. During ongoing discussions with DDS with regard to the deposition of its

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most knowledgeable individual, James Knight, DDS determined shortly before Knight’s

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deposition was to be held that he was not the appropriate individual to testify about the

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Lanterman Act and rate-setting issues. According to Deputy Attorney General Rebecca

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Armstrong, DDS’ Chief Counsel, Hiren Patel, did not disclose this information to her until

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September 28, 2012, less than a week before Mr. Knight’s deposition was scheduled to

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commence.

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Because of continuing negotiations with respect to the topics to be covered at the

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upcoming depositions, it appears that Ms. Armstrong failed to immediately notify

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Plaintiffs’ counsel of the change with respect to the scope of Mr. Knight’s testimony.

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Instead, it was only the day before Mr. Knight’s deposition was supposed to begin when

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DDS again confirmed that Knight could not speak to all issues, that attorney Armstrong

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notified Plaintiffs’ counsel of the change in plans. Because Mr. Hutchinson was not

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available for a full deposition until the end of October, Ms. Armstrong offered to make

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him available at that time, or alternatively on October 10, 2012, for a 2-3 hour period.

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Mr. Hutchinson’s schedule, and, in particular, his key role in important budgetary

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negotiations, made him unavailable in the meantime. Plaintiffs’ counsel objected to any

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continuance of the PMK deposition.

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Despite the fact that the parties ultimately agreed to Hutchinson’s deposition and

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although Hutchinson ultimately was deposed at the end of October, Plaintiffs’ counsel

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objected to the change and refused to stipulate to extend the 45-day period, as set forth

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in your August 22, 2012 Order, to accommodate Hutchinson’s schedule. Plaintiff now

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moves for sanctions, seeking some $21,525 in additional attorney’s fees expended by

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having to again prepare for the DDS PMK deposition, and for travel costs associated

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with having to again come to Sacramento for depositions (one of Plaintiffs’ counsel has

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offices in Fresno, the other is based out of Davis). Plaintiffs claim that the redesignation

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was inexcusably requested at the last minute and on the heels of the Court’s denial of

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Defendants’ emergency motion to stay discovery.

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As Rebecca Armstrong’s deposition details, because of the breadth of the

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subjects about which Plaintiffs wanted to depose DHCS and DDS representatives,

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Defendants contend they had tremendous difficulty ascertaining the type of information

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Plaintiffs sought. Armstrong Decl., ¶ 4.

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Under Federal Rule of Civil Procedure 37(b)(2), a court may sanction a party that

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fails to comply with a discovery order by requiring the offending party to pay attorney’s

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fees and costs incurred by the other side.
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Sanctions are not warranted, however, if the court “finds that the failure was substantially

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justified or that other circumstances make an award of expenses unjust.” Fed. R. Civ. P.

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37(b)(2). A party meets the “substantially justified” standard when there is a genuine

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dispute or if reasonable people could differ as to the propriety of the contested action.

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Pierce v. Underwood, 487 U.S. 552, 565 (1988). A good faith dispute concerning

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discovery can constitute substantial justification. Liew v. Breen, 640 F.2d 1046, 1050

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(9th Cir. 1981).

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Plaintiffs contend that under the circumstances the uncertainty concerning the
scope of the DDS PMK deposition was not unreasonable. Further, Defendants contend

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they brought the issue up with opposing counsel on a timely basis, and that Plaintiffs

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refused to stipulate to an accommodation in the form of a stipulation extending the

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45-day period, even though it appears the parties almost immediately agreed to the

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proposed deposition date of October 30, 2012. Defendants argue that the short delay in

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deposing Hutchinson posed no substantial harm to Plaintiffs and certainly does not

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justify sanctions in excess of $20,000.00.

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The circumstances of this matter indicate that Defendants had a relatively short

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window of time to designate and produce PMKs for deposition, and the scope of those

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depositions appears to have been in major dispute. There is no indication here that

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defense counsel acted in bad faith, and once the PMK redesignation became necessary,

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counsel made every effort to be accommodating.

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The Court accordingly finds, in its discretion following a careful review of the papers

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submitted both in support of and in opposition to the instant Motion, that it would be

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unjust to award sanctions as a result of defense counsel’s conduct in this instance.

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Plaintiffs’ Motion for Sanctions (ECF No. 59) is accordingly DENIED.

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IT IS SO ORDERED.
Dated: June 27, 2013

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