PAIN CENTER OF SE INDIANA, LLC et al v. ORIGIN HEALTHCARE SOLUTIONS LLC et al

Filing 223

ORDER OVERRULES 200 Appeal of Magistrate Judge Decision to District Court and affirms [196 Magistrate Judge's Entry and Order. Signed by Judge Richard L. Young on 5/8/2015. (TMD)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION

PAIN CENTER OF SE INDIANA, LLC;
INDIANA PAIN MEDICINE AND
REHABILITATION CENTER, P.C.; and
ANTHONY ALEXANDER, M.D.,

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

Plaintiffs,
vs.
ORIGIN HEALTHCARE SOLUTIONS
LLC; SSIMED (d/b/a SSIMED Holding,
LLC); ORIGIN HOLDINGS, INC., a
Delaware Corporation; JOHN DOES (1–
50) inclusive; and JOHN DOES (1–100)
inclusive,
Defendants.

1:13-cv-00133-RLY-DKL

ENTRY ON PLAINTIFFS’ OBJECTION TO THE MAGISTRATE JUDGE’S
JANUARY 23, 2015 ENTRY
Plaintiffs, the Pain Center of SE Indiana, LLC, the Indiana Pain Medicine and
Rehabilitation Center, P.C., and Anthony Alexander, M.D., object to the Magistrate
Judge’s January 23, 2015 Entry (Filing No. 196) denying Plaintiffs’ first motion to quash
certain subpoenas of financial records (Filing No. 163). Defendants, SSIMED, d/b/a
SSIMED Holding, LLC, Origin Healthcare Solutions, LLC, and Origin Holdings, Inc.,
served the subject subpoenas upon certain nonparties. For the reasons stated below, the
court OVERRULES Plaintiffs’ Objection and AFFIRMS the Magistrate Judge’s Entry.

1

I.

Background
Plaintiff healthcare providers have alleged various counts of fraud and breach of

contract against Defendants stemming from the performance of certain contracts.
Plaintiffs contracted to purchase billing and clinical data software packages from
SSIMED. (Filing No. 16 (“Complaint”) ¶¶ 36, 52). Origin Healthcare Solutions later
assumed the contracts as successor-in-interest to SSIMED. (See id. ¶ 4). According to
Plaintiffs, Defendants’ defective software and deficient support services led to lost
income, forcing Plaintiffs into a “vicious cycle of borrowing from banks and friends to
cover financial shortfalls.” (Id. ¶¶ 42, 70). Moreover, such shortfalls allegedly fettered
Plaintiffs’ ability to pursue lucrative business opportunities. (Id. ¶¶ 81, 91).
In December 2014, Defendants provided Plaintiffs the required notice of their
intent to serve subpoenas on various financial institutions and Plaintiffs’ CPA. (See
Filing Nos. 164-1 through 164-4). The subpoenas sought “[a]ll annual or monthly
statements, loan documentation, and documents regarding garnishments or levies on any
account held by [Plaintiffs] between January 1, 2003, and December 31, 2012.” (Id.).
Defendants also sought all communications between Plaintiffs and their CPA, and all
documents received from or produced for Plaintiffs. (Filing No. 164-3). Plaintiffs
moved to quash all of the subpoenas, asserting that (1) the subpoenas amount to a
“fishing expedition”; (2) the documents sought lack relevance to the litigation and require
impermissible disclosures; (4) the subpoenas seek privileged information; and (5) the
Magistrate Judge had previously ruled on discovery requests related to damages. (See
Filing Nos. 164 and 182). The Magistrate Judge denied Plaintiffs’ motion, finding
2

Plaintiffs’ assertions conclusory and without merit. (See Filing No. 196 at 3–5).
Plaintiffs now object to the Magistrate Judge’s ruling.
II.

Discussion
Plaintiffs object to the Magistrate Judge’s ruling on grounds that (1) she

improperly dismissed Plaintiffs’ assertion of privilege, and (2) she erroneously rejected
Plaintiffs’ position on relevancy. 1
A.

2

The court now addresses the merit of each.

Applicable Law

The district court reviews the non-dispositive discovery decisions of a magistrate
judge for clear error. Domanus v. Lewicki, 742 F.3d 290, 295 (7th Cir. 2014) (citation
omitted); Fed. R. Civ. P. 72(a). In other words, the court will not upset a magistrate
judge’s decision unless it runs contrary to law or leaves the court with a definite and firm

1

Plaintiffs also assert the following:
Plaintiffs also argued they currently have a pending [objection] regarding their
motion to stay Defendants [sic] discovery requests until Defendants comply with
multiple Court orders concerning a substantial and vitally critical portion of
discovery requested by Plaintiffs nearly two years ago. Defendants clearly chose
to ignore the orders to produce information relating to the underlying claims and
their financial records clearly relevant to this litigation, but were able to engage in
a fishing expedition with respect to Plaintiffs [sic] financial records. In this regard,
the Magistrate Judge’s ruling was clearly erroneous and contrary to law.

(Filing No. 200 (“Objection”) at 5–6). The court has overruled the objection to which Plaintiffs
refer (See Filing No. 220), rendering this argument moot. Secondly, this argument presumes the
impropriety of the subpoenas for financial records. As discussed below, Plaintiffs failed to
establish that premise.
2

Plaintiffs also argue that the Magistrate Judge deviated from her prior ruling “concerning
the overproduction of confidential information.” (Objection at 5). Plaintiffs do not explain how
the Magistrate Judge’s ruling (see Filing No. 196 at 3) is clearly erroneous or contrary to law.
Thus, the court declines to belabor the issue.

3

conviction that the magistrate judge made a mistake. Weeks v. Samsung Heavy Indus.
Co., 126 F.3d 926, 943 (7th Cir. 1997).
Federal Rule of Civil Procedure 45 governs the issuance of subpoenas. The
breadth of discoverable material via subpoena parallels the liberal scope permitted under
Rule 26(b) so long as the material sought is relevant, not privileged, and at least leads to
admissible evidence. Graham v. Casey’s Gen. Stores, 206 F.R.D. 251, 253–54 (S.D. Ind.
2002) (citations omitted). A court must grant a motion to quash or modify a subpoena
that “requires disclosure of privileged or other protected matter . . . or subjects a person to
undue burden.” Fed. R. Civ. P. 45(d)(3)(A)(iii)–(iv). The party seeking to quash
subpoenas bears the burden of establishing its objections. Jackson v. Brinker, 147 F.R.D.
189, 194 (S.D. Ind. 1993) (citing Holifield v. United States, 909 F.2d 201, 2014 (7th Cir.
1990)).
A party generally lacks standing to quash a nonparty subpoena unless production
of the materials sought would disclose privileged or protected information. See United
States v. Raineri, 670 F.2d 702, 712 (7th Cir. 1982) (recognizing that a party may move
to quash if subpoena infringes upon party’s “legitimate interests”); see also Malibu
Media, LLC v. John Does 1-14, No. 1:12-cv-263, 2013 WL 2285950, at *2 (N.D. Ind.
May 22, 2013). Personal rights asserted with respect to bank accounts may give a party
standing to challenge nonparty subpoenas served upon financial institutions.
Schmulovich v. 1161 Route 9, LLC, No. 07-597(FLW), 2007 WL 2362598, at *2 (D.N.J.
Aug. 15, 2007); see also Iantosca v. Benistar Admin. Servs., Inc., No. 1:11-mc-0066RLY-DML, 2011 WL 3155649, at *2 (S.D. Ind. July 26, 2011) (finding that movants—
4

both individuals and entities—had legitimate interest in the privacy of bank records
sufficient to confer standing to challenge nonparty subpoena). The court finds that
Plaintiffs have sufficient interest in their financial records and thus had standing to move
to quash the subpoenas.
B.

Accountant-Client Privilege

Plaintiffs argue that the Magistrate Judge improperly rejected their invocation of
the accountant-client privilege as conclusory. 3 Federal Rule of Evidence 501 provides
that “state law governs privilege regarding a claim or defense for which state law supplies
the rule of decision.” Only claims arising under Indiana law remain in this case; thus
Indiana law governs any assertion of privilege.
Indiana statute sets forth the accountant-client privilege:
A certified public accountant, a public accountant, an accounting
practitioner, or any employee is not required to divulge information relative
to and in connection with any professional service as a certified public
accountant, a public accountant, or an accounting practitioner.
Indiana Code § 25-2.1-14-1. Indiana courts disfavor such statutorily created privileges
and therefore strictly construe them to limit their application. Airgas Mid-Am., Inc. v.
Long, 812 N.E.2d 842, 845 (Ind. Ct. App. 2004). Not only must the party asserting
privilege establish each of its essential elements; it must also invoke the privilege on a
document-by-document basis. Id. (citing Hayworth v. Schilli Leasing, Inc., 669 N.E.2d

3

Plaintiffs make sporadic and passing references to “privileged information” and “privacy
laws” throughout their briefs. To the extent Plaintiffs intended to quash the subpoenas on other
legal authority, the court considers these arguments waived.

5

165, 169 (Ind. 1996)). Absent an articulation as to why the accountant-client privilege
applies to the documents sought, the moving party may not use it to avoid discovery. Id.
Plaintiffs invoked the accountant-client privilege to quash the subpoenas served
upon Martens Accounting and Mark Dennis, Plaintiffs’ CPA. Yet Plaintiffs only
cursorily asserted a blanket privilege on motion before the Magistrate Judge and exerted
little more effort on objection to this court. (See Objection at 6 (“The account-client [sic]
privilege as well as federal and state privacy laws should have applied.”); Filing No. 164
(“Brief in Support of Motion to Quash”) at 2 (“In addition, these subpoenas request
impermissible disclosure [sic] from these third party entities as well as privileged
information.”)); Filing No. 182 (“Reply to Defendants Response in Opposition to Motion
to Quash”) at 2 (“Plaintiffs clearly have an interest in their financial records maintained
by banks and the concomitant privacy protections.”); see also Filing No. 213 (“[B]anking
records for all monthly statements clearly provide[ ] access to personal and confidential
information, including premature revelations about expert witnesses.”)). Courts disfavor
such blanket claims of privilege. See Hayworth, 669 N.E.2d at 169. Absent even a
minimal articulation of the privilege’s applicability, the court cannot determine that the
Magistrate Judge clearly erred in rejecting such privilege as a basis for quashing the
subpoenas.
C.

Relevance

Plaintiffs insist that permitting Defendants’ access to Plaintiffs’ financial records
for the past ten years amounts to a court-sanctioned “fishing expedition” of irrelevant
materials.
6

Federal Rule of Civil Procedure 26(b)(1) permits discovery of materials relevant
to any party’s claim or defense that “appear[ ] reasonably calculated to lead to the
discovery of admissible evidence.” Although the party issuing subpoenas must first
establish the relevance of the information sought, see, e.g., Kingsway Fin. Servs., Inc. v.
Pricewaterhouse-Coopers LLP, No. 03 Civ. 5560, 2008 WL 4452134, at *4 (S.D.N.Y.
Oct. 2, 2008), the party moving to quash bears the burden of persuasion. Malibu Media,
LLC v. John Does 1-14, 287 F.R.D. 513, 517 (N.D. Ind. 2012) (internal citations
omitted).
In opposition to the Motion to Quash, Defendants argued, and the Magistrate
Judge agreed, that Plaintiffs’ allegations of damages placed their financial conditions
directly at issue. Specifically, Plaintiffs seek $126.6 million in damages for alleged lost
profits from unpaid insurance claims, lost personnel, and missed business opportunities.
Defendants’ conduct allegedly caused Plaintiffs’ financial position to deteriorate, forcing
them into a “vicious cycle of borrowing from banks and friends to cover financial
shortfalls.” (Complaint ¶ 42). The Magistrate Judge thus deemed the subpoenaed
information relevant to Plaintiffs’ damages claims and found Plaintiffs’ bald assertions to
the contrary unpersuasive. (See Filing No. 196 at 3, 5).
On objection, Plaintiffs repeat the conclusory assertion that Defendants failed to
establish the relevance of financial records. Thus, the argument goes, the Magistrate
Judge clearly erred because she did not give “adequate weight” to Plaintiffs’ arguments.
(See Objection at 4). In support, Plaintiffs contend that the Magistrate Judge improperly
discounted Plaintiffs’ concern that Defendants’ sought information concerning tax levies
7

“for the sole purpose of establishing some wrongdoing on the part of Plaintiffs.” (Id.).
They further suggest that requests for loan documents are superfluous because Plaintiffs
had already agreed “to produce the loan documentation that would be relevant to . . . lost
profits.” (Id. at 5). Such assertions not only fall far short of establishing clear error, but
they also presume that one party (i.e. Plaintiffs) may dictate the relevance of information
and the purposes for which it may be discovered.
IV.

Conclusion
For the foregoing reasons, the court OVERRULES Plaintiffs’ Objection (Filing

No. 200) and AFFIRMS the Magistrate Judge’s Entry and Order (Filing No. 196).

SO ORDERED this 8th day of May 2015.

_________________________________
RICHARD L. YOUNG, CHIEF JUDGE
United States District Court
Southern District of Indiana

Distributed Electronically to Registered Counsel of Record.

8