GLOBAL LAB PARTNERS, LLC et al v. DIRECTMED DX LLC et al

Filing 25

ORDER granting in part and denying in part 18 Motion for Discovery. Signed by CHIEF JUDGE M CASEY RODGERS on 04-23-2018. (Pathan, Mohammad)

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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF FLORIDA
PENSACOLA DIVISION
GLOBAL LAB PARTNERS, LLC, et al.,
Plaintiffs,
v.

CASE NO.  3:18cv246-MCR/CJK

DIRECTMED DX, LLC, et al.,
Defendants.
_________________________________
ORDER
Pending is Plaintiffs’ Motion for Expedited Discovery in support of its Motion
for Preliminary Injunction. Plaintiffs want to depose Diane Loftin, a third-party
billing consultant for DHTX Partners, LLC (“DHTX”), and Kyle Armantrout of
Cirrus DX, LLC (“Cirrus”) on an expedited basis. They also seek documents from
both on an expedited basis. For the reasons discussed below, Plaintiffs’ motion is
granted in part and denied in part.
Plaintiffs filed a Motion for Preliminary Injunction on February 12, 2018,1
seeking to enjoin Defendants from continuing to violate various non-compete
provisions in a Membership Interest Purchase Agreement (“MIPA”) relating to the

1

Plaintiffs originally requested a temporary restraining order but the Court converted the
motion to a one for a preliminary injunction. See ECF No. 5.
CASE NO. 3:18cv246-MCR/CJK

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acquisition of DHTX, and taking any action to jeopardize the Plaintiffs’ interest in
DHTX by transferring, disposing of, encumbering, or otherwise disposing of any
assets of DHTX or ceasing any business operations of DHTX, and also requiring
Defendants Ty Bruggemann (“Bruggemann”) and Dividend Health, LLC
(“Dividend Health”) to provide Plaintiffs with reasonable access to DHTX’s
financial books and records.
Plaintiffs allege that Dividend Health and its sole owner Bruggemann induced
them to purchase 50-percent of DHTX by representing that DHTX had a letter of
intent in place with Cirrus for the transfer of proprietary laboratory testing material
to DHTX. ECF Nos. 12 at 7, 12-3 at 2. The agreement for the co-ownership of
laboratory testing material between DHTX and Cirrus never materialized, however.
Plaintiffs claim that instead Bruggemann formed DirectMed DX, LLC2
(“DirectMed”) and entered into a Product Development Agreement with Cirrus for
the same laboratory testing material. ECF No. 12 at 9. Plaintiffs also allege that
Bruggemann withdrew $22,500 from funds Plaintiffs transferred to DHTX in order
to fulfill some of DirectMed’s obligations to Cirrus.

2

According to the allegations, Plaintiffs understood that DirectMed was owned by DHTX.
Id. at 10, 12.
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Bruggemann maintains that DirectMed’s agreement with Cirrus ensured that
DHTX would be able to utilize Cirrus’s laboratory testing material and as part of
that Cirrus subsequently entered into a Lab Services Purchase Agreement with Cedar
Creek Labs, a wholly-owned subsidiary of DHTX. However, Plaintiffs claim that
despite this agreement, no profits were generated from the Lab Services Purchase
Agreement and, instead, DHTX was forced to obtain loans to fund Cedar Creek
Labs. In January 2018, Plaintiffs discovered that DirectMed was not owned by
DHTX but was instead owned and controlled by Bruggemann, which they claim
violated the non-compete provisions of the MIPA. Based on this information,
Plaintiffs requested Bruggemann to transfer his interest in DirectMed to DHTX.
Bruggemann agreed to do so for approximately six million dollars and a salary of
fifteen thousand dollars per month. According to Defendants, although the parties
negotiated on this proposal, it was not viable because Cirrus objected to GLP’s
indirect ownership of DirectMed after Cirrus found out that some of GLP’s indirect
owners allegedly had a criminal background.
Plaintiffs claim that Bruggemann ultimately failed to deposit funds under
various loan agreements and diverted over $50,000 in collections from Cedar Creek
Labs. In addition, Plaintiffs claim that although Cedar Creek Labs had average
monthly charges of $3,000,000 during the months of September 2017 through
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January 2018, Cedar Creek Labs’ monthly charges for February 2018 dropped to
$148,882.76 and no co-pay or deductible payments have been remitted from
patients. Plaintiffs analyzed the QuickBook entries for DHTX in January 2018 and
discovered that $420,000 remains unaccounted for. Id. at 12. In addition, Plaintiffs
claim that DHTX’s General Ledger reflects payments of $92,678.76 to Dividend
Health for payroll expenses for the period January through March 2017 and $45,000
to Cirrus for unspecified expenses in July and September 2017.
The Federal Rules of Civil Procedure provide that discovery may commence
before the parties have engaged in a discovery conference, if ordered by the court.
Fed. R. Civ. P. 26(d), (f). “Control of discovery is committed to the sound discretion
of the trial court and its discovery rulings will be reversed only where they are
arbitrary or clearly unreasonable.” Williamson v. U.S. Dep’t of Agriculture, 815
F.2d 368, 373 (5th Cir. 1987); see Johnson v. Bd. Of Reagents, 263 F.3d 1234, 1269
(11th Cir. 2001) (Courts have broad discretion in the scheduling of discovery). A
court may permit the parties to conduct expedited discovery where the party
establishes “good cause” for such discovery. Platinum Mfg. Intern., Inc. v. UniNet
Imaging, Inc., No. 8:08-cv-310-T-27MAP, 2008 WL 927558, at *1 (M.D. Fla. April
4, 2008). Factors to be considered in evaluating good cause include (1) whether a
motion for preliminary injunction is pending; (2) the breadth of the requested
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discovery; (3) the reason(s) for requesting expedited discovery; (4) the burden on
the opponent to comply with the request for discovery; and (5) how far in advance
of the typical discovery process the request is made. GTO Access Sys., LLC v. Ghost
Controls, LLC., No. 4:16CV355-WS/CAS, 2016 WL 4059706, at *3 (N.D. Fla. June
20, 2016).
Plaintiffs request “[a]ll records pertaining to DHTX, Cedar Creek Laboratory,
DirectMed LLC, or Cirrus DX, Inc” from Loftin. ECF No. 18-1 at 2. Plaintiffs
state that the expedited discovery is necessary because “the billing practices, and
particularly unaccounted-for money, is at the crux of the dispute between the parties
and goes to the heart of the irreparable harm claimed by Plaintiffs” and that “to date,
… Diane Loftin … has been unavailable and uncooperative.” ECF No. 18 at 6.
Although the Court finds that Plaintiffs’ request for expedited discovery as to Loftin
is overly burdensome in its current form, the Court modifies the request to meet the
needs of the case.3 Plaintiffs have specifically alleged the following: (1) payments
of $92,678.76 to Dividend Health for payroll expenses for the period January
through March 2017, (2) payments of $45,000 to Cirrus for unspecified expenses in
July and September 2017, (3) a substantial drop in the monthly charges of Cedar
Creek Labs for February 2018, and (4) non-remittance of co-payments and

3

A motion for preliminary injunction is pending and a hearing has yet to be scheduled.

CASE NO. 3:18cv246-MCR/CJK

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deductibles from patients. Therefore, considering the Plaintiffs’ need to prove these
allegations in support of their motion for preliminary injunction, the Court limits the
Plaintiffs’ document request to:
1.

All records pertaining to payments in the amount of $92,678.76 to

Dividend Heath for payroll expenses for the period spanning January through
March 2017;
2.

All records pertaining to payments in the amount of $45,000 to Cirrus

during July and September 2017; and
3.

All laboratory billing records and monthly charge records for the past

90 days.
This limited discovery is proportional to the needs of the case and is not overly
burdensome to Defendants or the third-party billing consultant.4 Loftin should be
prepared to produce these documents and sit for a deposition by May 31, 2018.
With respect to the Plaintiffs’ request for expedited discovery as to
Armantrout, Plaintiffs requests him to appear for a deposition and to produce “[a]ll
records, including emails, relating to the ‘Product Development and Exclusivity
Agreement’ between Cirrus … and DirectMed.” ECF No. 18-2 at 2. The Court also

4

The Court notes that the request for expedited discovery was made approximately two
months after Plaintiffs filed their motion for preliminary injunction but approximately six months
before the discovery deadline of October 5, 2018. See ECF No. 19.
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finds that this request is overly burdensome in its current form, the Court modifies
the request to meet the needs of the case. As Defendants correctly argue, Plaintiffs
request encapsulates “essentially every document that these two parties possess
related [to] their over year-long business relationship.” ECF No. 21 at 5. This is
overly broad.

However, Plaintiffs more narrowly request documents from

Armantrout to address “Bruggemann’s decision, with Armantrout, to form a contract
between

DirectMed

and

Cirrus/Tetracore,

as

opposed

to

DHTX

and

Cirrus/Tetracore. The formation of the DirectMed-Cirrus/Tetracore contract resulted
in the asserted breach of the parties non-compete agreement.” As discussed above,
Plaintiffs allege that Bruggemann breached the MIPA by separately contracting with
Cirrus for the co-ownership of the laboratory testing material. Cirrus’s decision to
end negotiations with DHTX and sign an agreement with DirectMed is relevant to
this issue. With this in mind, the Court limits the scope of the document requests to:
1.

All communications between Bruggemann and Armantrout regarding

any potential agreements between Cirrus and DHTX or Cedar Creek Labs for
the co-ownership of laboratory testing material; and
2.

All communications between Bruggemann and Armantrout regarding

Cirrus’s decision to terminate negotiations with DHTX.

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This limited discovery is also proportional to the needs of the case and is not overly
burdensome on Cirrus or Armantrout.5 Mr. Armantrout should be prepared to
produce these documents and sit for a deposition by May 31, 2018.
Accordingly, Plaintiffs’ Motion for Expedited Discovery is GRANTED in
part and DENIED in part.
DONE AND ORDERED this 23rd day of April, 2018.

M. Casey Rodgers

M. CASEY RODGERS
CHIEF UNITED STATES DISTRICT JUDGE

5

See supra note 4.

CASE NO. 3:18cv246-MCR/CJK