United States of America et al v. Supervalu Inc et al

Filing 80

OPINION entered by U.S. Magistrate Judge Tom Schanzle-Haskins. Relators Tracey Schutte and Michael Yarberry's Motion to Compel 75 is ALLOWED in part and DENIED in part. See written order. (LB, ilcd)

E-FILED

Monday, 17 April, 2017 09:22:04 AM
Clerk, U.S. District Court, ILCD

IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF ILLINOIS, SPRINGFIELD DIVISION
THE UNITED STATES OF
AMERICA et al., ex rel.
TRACEY SCHUTTE and
MICHAEL YARBERRY,
Plaintiffs and Relators,
v.
SUPERVALU, INC., et al.,
Defendants.

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No. 11-cv-3290

OPINION
TOM SCHANZLE-HASKINS, U.S. MAGISTRATE JUDGE:
This matter comes before the Court on Relators Tracey Schutte and
Michael Yarberry’s Motion to Compel (d/e 75) (Motion). For the reasons
set forth below, the Motion is ALLOWED in part and DENIED in part.
BACKGROUND
Relators brought this case against Defendants Surpervalu, Inc., and
related entities (collectively Supervalu) for violation of the False Claims Act,
31 U.S.C. § 3729 et seq. Amended Complaint (d/e 33). Relators allege
that Supervalu pharmacies intentionally misrepresented the Usual and
Customary (U&C) prices that the pharmacies charged for medications in
order to receive inflated reimbursements from federally funded programs
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such as Medicare Part D, Medicaid, and federal employee and retiree
health insurance programs (collectively Federal Programs).
The Relators allege Supervalu established a Price Matching Program
in 2006 under which Supervalu pharmacies matched discount prices
offered by Walmart, Kmart, and other competitors to customers paying
cash for medications, but did not include the discounted prices in
Supervalu’s determination of its U&C prices. The U&C prices were used to
calculate the reimbursement amounts that the Federal Programs paid
Supervalu pharmacies for the medications dispensed to covered
individuals. The Relators allege that the miscalculation of the U&C prices
constituted a fraudulent misrepresentation used to secure funds from the
federal government in violation of the False Claims Act. Supervalu denied
the allegations.
Relators filed this case under seal on August 8, 2011. Relators filed
the case under seal to allow the United States and Plaintiff States the
opportunity to investigate and determine whether to intervene. See 31
U.S.C. § 3730. The United States investigated the Relators’ claims for the
next several years. During the course of the investigation, the Health and
Human Services Office of Inspector General (Inspector General) served a
Civil Investigative Demand on Supervalu for documents related to the Price
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Matching Program. Supervalu produced records dating back to January 1,
2005. On May 22, 2015, the United States elected not to intervene.
Government’s Notice of Election to Decline Intervention (d/e 20). The
Complaint was then unsealed and served on Supervalu. On October 21,
2016, the Court denied Supervalu’s Motion to Dismiss. Opinion entered
October 21, 2016 (d/e 65). On November 22, 2016, Supervalu provided
Relators with a copy of the documents produced to the Inspector General
pursuant to the Civil Investigative Demand.
On December 20, 2016, Relators served Supervalu with their First
Sets of Interrogatories and Requests to Produce (collectively Discovery
Requests). The Discovery Requests asked for responses within 30 days of
service. Memorandum in Support of Motion (d/e 76) (Relators’
Memorandum), Exhibit A, Relator’s First Set of Request for Production of
Documents to Defendants (Requests to Produce), at 1; Exhibit B, Relators’
First Set of Interrogatories to Defendants (Interrogatories), at 1. Supervalu
responded on January 20, 2017.
Supervalu argues that the response should have been made by
January 19, 2017. Relators are incorrect. The Discovery Requests were
served by mail and by email. Request to Produce, attached Certificate of
Service; Interrogatories, attached Certificate of Service. The Relators have
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not shown that email service was effective because Relators have not
shown that Supervalu consented in writing to accept service by email. See
Fed. R. Civ. P. 5(b)(2)(E).1 The Discovery Requests, therefore, were
effectively served by mail. Supervalu was required to respond by January
23, 2017 because three days are added to response times for documents
served by mail. Fed. R. Civ. P. 6(d). Supervalu’s January 20, 2017
response was timely. Relators’ arguments to the contrary are not
persuasive.
The parties attempted to resolve Supervalu’s objections to the
Discovery Requests. The following disputes remain:
(1) Supervalu proposes to produce documents on a rolling basis with
completion expected by September 2017. Relators want immediate
production of responsive documents;
(2) Supervalu proposes to produce a privilege log at the end of
production. Relators want immediate production of a privilege log;
(3) Supervalu objects to producing documents from the calendar year
2005. Relators want production of documents back to January 1,
2005;

1

Counsel agreed to electronic service through the Court’s CM/ECF system by registering with the Clerk
of Court. Local Rule 5.3(A). Relators did not serve the Discovery Requests through the CM/ECF system.

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(4) Supervalu objects to producing documents related to all
prescription drug discount programs. Relators want production of
documents related to all such discount programs;
(5) Supervalu objects to producing customer identifying information
such as names, addresses, and dates of birth. Relators want
production of this information;
(6) Relators complain that Supervalu is improperly limiting its search
of responsive documents to 23 individual custodians; and
(7) Supervalu has responded to Relators’ Interrogatory No. 5 by
producing the documents in which the information can be found.
Relators want Supervalu to review the documents to provide the
response.
The Court addresses each remaining issue in order.
1.

Time of Production

Supervalu is directed to complete the document production in
response to the Discovery requests by June 15, 2017. The Scheduling
Order (d/e 69) requires Relators to disclose expert reports by September
21, 2017. The experts need time to review the documents to prepare their
opinions. Production of documents by June 15, 2017 should provide
sufficient time to formulate expert opinions. Relators also reasonably need
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the documents to prepare for fact depositions. Fact discovery must be
completed by December 12, 2017. Delaying the production of documents
beyond June 15, 2017 will interfere with completing discovery on schedule.
2.

Privilege Log

Supervalu refers to claims of privilege in its responses and
subsequent correspondence with Relators. Supervalu, therefore, must
provide Relators with a privilege log. Fed. R. Civ. P. 26(b)(5). Supervalu is
directed to provide Relators with a complete privilege log by July 1, 2017.
The privilege log will provide the following information with respect to each
document withheld on a claim of privilege:
i.

A brief description or summary of the content of the document or

communication;
ii.

The date the document was prepared;

iii.

The name or names of the person or persons who prepared the

document;
iv.

The identity of the person who made the statements in the document;

v.

The person to whom the document was directed, or for whom it was

prepared;
vi.

The purpose for preparing the document or communication;

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vii.

The privilege or privileges asserted for the document or

communication; and
viii.

How the document or communication satisfies the asserted privilege

or privileges.
See Moore’s Federal Practice, §26.90 (Matthew Bender 3rd ed.). The Court
finds that producing one privilege log at the completion of the document
production will be efficient and effective in this case.
3.

Producing Documents back to January 1, 2005

Supervalu’s objection to producing documents back to January 1,
2005 is overruled. The Complaint alleges that the Price Matching Program
began in response to Walmart and Kmart discounts that began in 2006.
The discount programs also coincided with the commencement of
Medicare Part D prescription drug coverage. Relators allege Supervalu
secured payments from Medicare Part D in violation of the False Claims
Act. Documents created before the start of Medicare Part D and the
Walmart/Kmart discount plans may be relevant to show any planning or
intent regarding Supervalu’s plans to respond to the beginning of Medicare
Part D. The request only goes back one year from the beginning of
Medicare Part D and the Walmart/Kmart discounts. The Court finds that

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the one-year requirement is limited and proportional and appropriate in this
case. Fed. R. Civ. P. 26(b).
4.

Documents Related to all Discount Programs

Supervalu’s objection to producing documents related to Supervalu
prescription drug discount programs other than the alleged Price Matching
Program is sustained. Fraudulent misrepresentations must be pleaded
with particularity. Fed. R. Civ. P. 9(b). The Relators allege that Supervalu
made fraudulent misrepresentations because its reported U&C prices did
not include pricing under the Price Matching Program. The claim is limited
to Supervalu’s alleged fraudulent treatment of the prices in the Price
Matching Program. Likewise, the damages for the claim are limited to the
injury caused by the alleged fraudulent treatment in the Price Matching
Program. The impact of other discount programs on U&C prices is not
relevant. Therefore, the Court finds that opening up discovery to all
discount programs is not proportional to the needs of the case.
Supervalu’s objection is sustained.
The Court notes that the Relators allege that transactions were often
processed as cash transactions under the Price Matching Program. See
Amended Complaint, ¶¶ 107-13. The responsive documents to be
produced for the Price Matching Program shall include documents related
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to these cash transactions, not just claims filed for reimbursement under a
Federal Program.
5.

Customer Identifying Information

Supervalu’s objection to providing customer identifying information is
overruled in part. Prior to January 1, 2012, the records from some
transactions processed by some Pharmacy Benefit Managers do not
indicate whether the pharmacy reimbursement claims were processed and
paid by Federal Programs or by private insurers. Relators cannot tell from
these records which claims are at issue from these particular records.
Relators want the customer identifying information to determine which
claims were paid by Federal Programs. Supervalu objects to producing
confidential information out of privacy concerns, particularly in light of the
restrictions imposed by the Health Insurance Portability and Accountability
Act of 1996 (HIPAA), 42 U.S.C. §§ 1329-d – 1320d-9; 45 C.F.R. §§
164.500-164.534.
The Court appreciates Supervalu’s privacy concerns and Relators’
desire to identify relevant transactions. The Court, therefore, directs
Supervalu to provide customer identifying information for the records of
transactions processed before January 1, 2012 by those Pharmacy Benefit
Managers who did not indicate whether the pharmacy reimbursement
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claims were processed and paid by Federal Programs or by private
insurers. The production of the customer identify information is subject to
the Protective Order entered February 7, 2017 (d/e 74). The parties
prepared the Protective Order specifically to comply with the requirements
of HIPAA. Supervalu is not required to produce any other customer
identifying information.
6.

Limitation on Custodians For Document Production

Relators are concerned that Supervalu is limiting its search for
documents to 23 individual document custodians. Supervalu states that it
is not so limiting its search for responsive documents. This aspect of the
Motion, therefore, is denied as moot.
7.

Interrogatory No. 5

Interrogatory No. 5 asked for the following:
5. For each drug in the drug formularies, price matching lists, or
similar documents identified in Your answer to the preceding
interrogatory, state all prices for each drug by effective date
of such prices and identify the state(s) and pharmacies (by
pharmacy number) in which such prices were effective.
Interrogatories, at 6. Supervalu responded, in part:
RESPONSE: Subject to and without waiver of the foregoing
privileges and/or objections(s), Defendants respond as follows:
Defendants refer Relators to Defendants’ responses to
Relators’ First Set of Requests for Production, requests 6, 7,
and 10, which are incorporated by reference, because the
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burden of deriving an answer will be substantially the same for
either party.
Relators’ Memorandum, Exhibit D, Defendants’ Objections and Responses
to Relators’ First Set of Interrogatories, at 5. Relators ask the Court to order
Supervalu to find the responsive information in the documents and prepare
a complete answer. Supervalu maintains that it may produce the
documents and let Relators find the responsive information because the
burden of deriving an answer will be substantially the same for either party.
Federal Rule of Civil Procedure 33(d) states:
(d) Option to Produce Business Records. If the answer to an
interrogatory may be determined by examining, auditing,
compiling, abstracting, or summarizing a party's business
records (including electronically stored information), and if the
burden of deriving or ascertaining the answer will be
substantially the same for either party, the responding party
may answer by:
(1) specifying the records that must be reviewed, in
sufficient detail to enable the interrogating party to locate
and identify them as readily as the responding party
could; and
(2) giving the interrogating party a reasonable opportunity
to examine and audit the records and to make copies,
compilations, abstracts, or summaries.
Fed. R. Civ. P. 33(d) (emphasis in the original). Interrogatory No. 5 seeks
prices charged at Supervalu pharmacies. This information is secured by
examining Supervalu’s business records. Supervalu may respond by
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producing the relevant records pursuant to Rule 33(d). Supervalu,
however, must provide sufficient information about the records so that the
Relators can collect the information sought. See Perez v. KDE Equine,
LLC, 2017 WL 56616, at *5 (W.D. Ken. January 4, 2017). Supervalu is
directed to specify how to find the information in the records in sufficient
detail to enable Relators to find the requested information. Relators’
motion to compel Supervalu to cull the information from the records rather
than produce the records under Rule 33(d) is denied.
THEREFORE, IT IS ORDERED that Relators Tracey Schutte and
Michael Yarberry’s Motion to Compel (d/e 75) is ALLOWED in part and
DENIED in part.
ENTER: April 17, 2017

s/ Tom Schanzle-Haskins
UNITED STATES MAGISTRATE JUDGE

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