Kisor v. Advantage 2000 Consultants, Inc.
Filing
80
MEMORANDUM AND ORDER granting 67 Motion for Summary Judgment. Signed by District Judge Monti L. Belot on 7/6/2012. (alm)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
EDWARD SHAWN KISOR,
Plaintiff,
v.
ADVANTAGE 2000 CONSULTANTS, INC.,
Defendant.
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CIVIL ACTION
No.
10-1045-MLB
MEMORANDUM AND ORDER
ERISA protects beneficiaries, in part by imposing certain duties
on fiduciaries and third parties.
Fiduciaries have a responsibility
to disclose material information to participants and beneficiaries.
A violation of this duty may entitle participants to equitable relief.
Contrary to Plaintiff’s claims, the contingency fee agreement, the
alleged conflict of interest, and the status of Plaintiff’s back
social security award are not material information.
Therefore,
Plaintiff is not entitled to relief and Defendant’s Motion for Summary
Judgment (Doc. 67) is granted.
I.
Facts
Plaintiff was an employee of Exide Technologies from 2001
through 2007.
He purchased Long Term Disability (“LTD”) insurance
from CIGNA through their group LTD insurance contract.
The plan
administrator was Exide and the plan fiduciary was CIGNA.
In 2002,
CIGNA entered into a contract with Advantage 2000 Consultants (“A2K”),
wherein Defendant agreed to provide Social Security representative
services to people insured by CIGNA Long Term Disability (LTD)
insurance policies.
The contract, as amended in 2004, states that
Defendant will provide “Vendor Coordinated Overpayment Reduction
Services” (COR) to CIGNA:
[A2K] will provide quality assistance in arranging for
the re-payment of any incurred overpayment for Company’s
[LTD] claimants who may be eligible for Social Security
Disability Income (SSDI) Benefits. [A2K] will educate
Company’s LTD claimants about the overpayment recovery
process, arrange for an electronic repayment transaction,
monitor SSDI benefits awards, notify Company of any such
benefits received by the claimant, inform the claimant of
any overpayment to be repaid to Company, and execute the
electronic transaction to refund the overpayment from the
claimant to Company.
CIGNA
pays
Defendant
a
flat
fee
for
its
social
security
representation services and a contingency fee equal to a percentage
of the actual dollar amount of the Social Security back award.
The
percentage amount is not disclosed by CIGNA or Defendant to the LTD
clients.
Plaintiff suffered a work injury in August, 2006, and applied
for LTD benefits under the Policy.
CIGNA encouraged Plaintiff to use
Defendant to apply for SSDI benefits.
Plaintiff was informed that if
he did not apply for SSDI benefits his LTD payments would be reduced
by the estimated amount of SSDI.
On the other hand, if Plaintiff
chose to apply for SSDI benefits, he could also choose to have CIGNA
pay full LTD benefits without the estimated social security payment
deducted.
This would result in an overpayment by CIGNA and Plaintiff
was informed that he would be obligated to pay back any overpaid LTD
benefits.
Plaintiff also was informed that Defendant, if it assisted
him in applying for SSDI, would coordinate the recovery process.
Although Plaintiff initially refused to apply for benefits through
Defendant, he eventually employed Defendant to assist him in applying
for and receiving SSDI benefits and he signed the reimbursement
-2-
agreement.
Defendant sent Plaintiff numerous documents, including a
medical release form, electronic funds transfer debit authorization,
a document answering frequently asked questions, and many letters and
correspondence relating to representation and repayment of overpaid
benefits to CIGNA.
Plaintiff was informed that CIGNA would pay Defendant’s fee for
SSDI representation, with no cost to Plaintiff. Plaintiff was awarded
SSDI benefits on January 22, 2009, from February 2007 forward.
After
Plaintiff received the back award, Defendant asked Plaintiff on
numerous occasions to sign the check over to CIGNA to reimburse LTD
overpayments.
Plaintiff refused to do so, instead cashing the check
and paying outstanding bills.
II.
Standard
The usual and primary purpose of the summary judgment rule is
to isolate and dispose of factually unsupported claims or defenses.
See Celotex Corp. V. Catrett, 477 U.S. 317, 323-24 (1986).
Federal
Rule of Civil Procedure 56(c) directs the entry of summary judgment
in favor of a party who “show[s] that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment
as a matter of law.”
An issue is “genuine” if sufficient evidence
exists on each side “so that a rational trier of fact could resolve
the issue either way” and “[a]n issue is ‘material’ if under the
substantive law it is essential to the proper disposition of the
claim.”
Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir.
1998)(citations omitted); see also Adams v. Am. Guarantee & Liab. Ins.
Co., 233 F.3d 1242, 1246 (10th Cir. 2000)(citing Adler).
The mere
existence of some factual dispute will not defeat an otherwise
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properly supported motion for summary judgment because the factual
dispute must be material.
See Renfro v. City of Emporia, 948 F.2d
1529, 1533 (10th Cir. 1991).
A defendant initially must show both an absence of a genuine
issue of material fact and entitlement to a judgment as a matter of
law.
See Adler, 144 F.3d at 670.
Because a plaintiff bears the
burden of proof at trial, a defendant need not “support [its] motion
with affidavits or other similar materials negating [a plaintiff’s]”
claims or defenses.
Celotex, 477 U.S. at 323 (emphasis in original).
Rather, a defendant can satisfy its obligation simply by pointing out
the absence of evidence on an essential element of a plaintiff’s
claim.
See Adler, 144 F.3d at 671 (citing Celotex, 477 U.S. at 325).
If the defendant properly supports its motion, the burden then
shifts to the plaintiff, who may not rest upon the mere allegation or
denials of its pleading, but must set forth specific facts showing
that there is a genuine issue for trial.
See Mitchell v. City of
Moore, Okla., 218 F.3d 1190, 1197-98 (10th Cir. 2000).
In setting
forward these specific facts, the plaintiff must identify the facts
“by reference to affidavits, deposition transcripts, or specific
exhibits incorporated therein.”
Adler, 144 F.3d at 671.
If the
evidence offered in opposition to summary judgment is merely colorable
or is not significantly probative, summary judgment may be granted.
See Cone v. Longmont United Hosp. Ass’n, 14 F.3d 526, 533 (10th Cir.
1994).
A
plaintiff
“cannot
rely
on
ignorance
of
facts,
on
speculation, or on suspicion, and may not escape summary judgment in
the mere hope that something will turn up at trial.”
Smith, 853 F.2d 789, 793 (10th Cir. 1988).
-4-
Conaway v.
Put simply, the plaintiff
must “do more than simply show there is some metaphysical doubt as to
the material facts.”
Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 586-87 (1986).
In the end, when confronted with a fully briefed motion for
summary judgment, the court must determine “whether there is the need
for a trial - whether, in other words, there are any genuine factual
issues that properly can be resolved only by a finder of fact because
they may reasonably be resolved in favor of either party.”
v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).
Anderson
If sufficient
evidence exists on which a trier of fact could reasonably find for the
plaintiff, summary judgment is inappropriate.
See Prenalta Corp. v.
Colo. Interstate Gas Co., 944 F.2d 677, 684 (10th Cir. 1991).
III.
Discussion
The basis for the suit is Plaintiff’s contention that Defendant
never disclosed significant material information, including:
1.
Defendant had a conflict of interest with Plaintiff.
2. Defendant would receive a contingency fee from CIGNA
for recovering the overpayment from Plaintiff.
3. Plaintiff’s Social Security back award was protected
from garnishment, execution, or other legal process under
federal law.
Plaintiff requests an injunction enjoining Defendant from withholding
material information from its clients.
He also seeks to bring the
case as a class action.
Defendant requests summary judgment arguing that the disclosures
were not material to decisions regarding employee benefits. Defendant
asserts that because the information is not relevant, Plaintiff has
not stated a claim under ERISA.
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Plaintiff filed this claim against Defendant, a third party nonfiduciary, not against CIGNA, the plan fiduciary.
Defendant argues
that Plaintiff has not alleged any conduct on the part of Defendant
relating to management or administration of the plan.
However,
Defendant does admit that the Supreme Court held that § 1132(a)(3)
imposes
certain
fiduciaries.
ERISA
duties
on
all
parties,
including
non-
Harris Trust & Savings Bank v. Salomon Smith Barney,
Inc., 530 U.S. 238, 246, 120 S.Ct. 2180 (2000).
Defendant asserts
there is a split in the circuits whether Harris Trust authorizes
equitable actions against non-fiduciaries charged with participating
in a breach of fiduciary duty.
Defendant does not believe this Court
needs to address this issue, since Plaintiff has failed to show that
CIGNA violated a fiduciary duty and Plaintiff has failed to state a
claim.
Plaintiff agrees that Defendant is not a fiduciary, but replies
that § 503(a)(3) authorizes injunctive relief against non-fiduciaries
who knowingly participate in a breach of fiduciary duty.
Plaintiff
argues that since CIGNA failed to disclose material information and
Defendant also failed to disclose the material information, then the
parties together breached ERISA.
The Court agrees with the parties that non-fiduciaries may be
subject to ERISA duties.
However, as discussed below, because
Plaintiff has failed to show that CIGNA violated a fiduciary duty, the
Court need not decide whether Plaintiff can proceed with an equitable
action against Defendant.
Congress designed ERISA “to promote the interests of employees
and their beneficiaries in employee benefits plans.”
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Ingersoll-Rand
Co. V. McClendon, 498 U.S. 133, 137, 111 S.Ct. 478, 112 L.Ed.2d 474
(1990)(internal quotations and citation omitted).
ERISA § 502(a)(3)
provides:
A civil action may be brought ... by a participant,
beneficiary, or fiduciary (A) to enjoin any act or
practice which violates any provision of (Title 1 Of
ERISA) or the terms of the plan, or (B) to obtain other
appropriate equitable relief (I) to redress such
violations or (ii) to enforce any provisions of (Title 1
of ERISA) or the terms of the plan.
29 U.S.C. § 1132(a)(3).
502(a)(3).
Only equitable relief is available under §
Mertens v. Hewitt Assoc., 508 U.S. 248, 262, 113 S.Ct.
2063, 124 L.Ed.2d 161 (1993).
For the relief requested by Plaintiff,
there must be a showing of harm, although a showing of detrimental
reliance is not required.
29 U.S.C. § 1022; Tomlinson v. El Paso
Corp., 653 f.3d 1281, 1295 (10th Cir. 2011), citing CIGNA Corp. V.
Amara, 131 S.Ct. 1866, 1881, 179 L.Ed.2d 843 (2011).
An ERISA fiduciary has a duty to act “solely in the interest of
the participants and beneficiaries” for purposes of providing benefits
and administering the plan.
29 U.S.C. § 1104(a)(1)(A).
Since
Congress did not enumerate all the powers and duties for fiduciaries
when enacting ERISA, the common law of trust supplements the general
scope of authority and responsibilities of fiduciaries.
Ershick v.
United Mo. Bank of Kan. City, N.A., 948 F.2d 660, 666 (10th Cir. 1991).
“A fiduciary has a legal duty to disclose to the beneficiary only
those material facts, known to the fiduciary but unknown to the
beneficiary, which the beneficiary must know for its own protections.”
Glaziers & Glassworkers Union Local No. 252 Annuity Fund v. Newbridge
Secs., Inc., 93 F.3d 1171, 1182 (3rd Cir. 1996).
“A fiduciary’s
misrepresentation or failure to disclose is material ‘if there is a
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substantial likelihood that it would mislead a reasonable employee in
making
an
adequately
informed
...
decision.’”
Horn
v.
Cendant
Operations, Inc., 69 Fed. Appx. 421, 428 (10th Cir. 2003), citing
Jordan v. Fed. Express Corp., 116 F.3d 1005, 1015 (3rd Cir. 1997).
“ERISA’s duty of loyalty may require a fiduciary to disclose latent
conflicts of interest which affect participants’ ability to make
informed decisions about their benefits.”
Braden v. Wal-Mart Stores,
Inc., 588 F.3d 585, 600 (8th Cir. 2009).
The Court must determine whether the failure to disclose the
reimbursement agreement, the protected status of the SSDI award, or
the alleged conflict of interest qualifies as a material failure to
disclose.
Courts have considered many different factors and factual
scenarios in deciding whether a failure to disclose was material.
A number of cases have looked at the duty to disclose physician
incentives.
In Horvath v. Keystone Health Plan East, Inc., 333 F.3d
450 (3rd Cir. 2003), the Court considered whether the HMO had a
fiduciary duty to disclose the details of physician incentives.
The
Court found there was no duty to disclose “physician incentives absent
a request for such information” by the member, without facts that put
the fiduciary on notice that the member “needed such information to
prevent her from making a harmful decision with respect to her
healthcare coverage,” and absent evidence that the member “was harmed
as a result of not having such information disclosed to her.”
Id. at
463.
In another physician incentive case the Court held that the
“text, structure and legislative history of ERISA do not support the
imposition of a broad duty to disclose physician compensation plans.”
-8-
Ehlmann v. Kaiser Foundation Health Plan of Texas, 198 F.3d 552, 556
(5th Cir. 2000).
The Court found that although the common law of
trusts applied to Section 404, ERISA’s fiduciary standards did not set
forth specific disclosure requirements, and the Court was not going
to establish a disclosure requirement not enumerated in the statute.
Plaintiff relies on Shea v. Esensten, 107 F.3d 625 (8th Cir.
1997), in which the Court ruled that the fiduciary’s failure to
disclose the compensation arrangement was a violation of a duty of
loyalty.
In Shea, the plaintiff filed suit against the HMO that
administered the plan, alleging that the failure to disclose the
practice of giving primary-care physicians financial incentives to
minimize referrals to specialists caused her husband’s death.
The
court ruled that the fiduciary’s duty of loyalty required disclosure
of the compensation arrangement:
From the patient’s point of view, a financial incentive
scheme put in place to influence a treating doctor’s
referral practices when the patient needs specialized
care is certainly a material piece of information. This
kind of patient necessarily relies on the doctor’s advice
about treatment options, and the patient must know
whether the advice is influenced by self serving
financial considerations created by the health insurance
provider.
The district court believed Seagate’s
employees already realized their doctor’s pocketbooks
would be adversely affected by making referrals to
outside specialists.
Even if the district court is
right, Seagate’s employees still would not have known
their doctors were penalized for making too many
referrals and could earn a bonus by skimping on
specialized care. Thus, we conclude Mr. Shea had the
right to know Medica was offering financial incentives
that could have colored his doctor’s medical judgment
about the urgency for a cardiac referral. Health care
decisions involve matters of life and death, and an ERISA
fiduciary has a duty to speak out if it ‘knows that
silence might be harmful.’
Indeed, in this case the
danger to the plan participant’s well being was created
by the fiduciary itself. If Mr. Shea had been aware of
his doctor’s financial stakes, he could have made a fully
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informed decision about whether to trust his doctor’s
recommendation that a cardiologist’s examination was
unnecessary.
Id. at 628-629, quoting Bixler v. Central Penn Teamsters Health &
Welfare Fund, 12 F.3d 1292, 1300 (3rd Cir. 1993).
The Court went on
to state that “[W]hen an HMO’s financial incentives discourage a
treating doctor from providing essential health care referrals for
conditions covered under the plan benefit structure, the incentives
must be disclosed and the failure to do so is a breach of ERISA’s
fiduciary duties.”
Plaintiff’s
misplaced.
Id. at 629.
reliance
on
the
result
of
Shea
is completely
The language of the opinion shows that the Court was
concerned with the influence of the physician incentives on the plan
and, perhaps most important, the ability of the participant to make
an informed decision regarding healthcare. (“influence a treating
doctor’s referral practices,” “whether the advice is influenced,”
“colored his doctor’s medical judgment,” “silence might be harmful,”
“danger to the participant,” “relies on advice,” “fully informed
decision,” “trust doctor.”) None of these concerns are pertinent in
this case. Plaintiff has not alleged that the reimbursement agreement
between CIGNA and Defendant influenced the plan or the operation or
effect
of
the
plan.
Plaintiff
also
has
not
alleged
that
the
reimbursement agreement affected his ability to receive the benefits
of the plan. On the contrary, the evidence is that Plaintiff received
all the benefits to which he was entitled. Plaintiff avers that he
never would have “signed the forms” in connection with Defendant’s
representation had he been aware of the information which he claims
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should have been disclosed, but was not.
But Plaintiff does not
explain why he would not have signed or what he would have done had
he been aware of the information.
Plaintiff only alleges that
beneficiaries have a right to know how the Defendant is paid, a right
to know representation details, and a right to know the protected
status of the award.
Courts also have considered the interests of the beneficiaries
when deciding if disclosure is required.
In a case in which the plan
participants alleged a breach of fiduciary duty in failing to disclose
material information about Enron’s true financial condition to the
investing fiduciaries, the Court found a violation of an ERISA duty.
In re Enron Corp. Securities, Derivative & ERISA Litigation, 284
F.Supp.2d 511 (S.D. Tex. 2003).
The Court noted the Fifth Circuit
recognized an affirmative duty to disclose by a fiduciary in special
circumstances which would result in a “potentially extreme impact on
a plan as a whole, where plan participants generally could be
materially and negatively affected.”
removed).
the
Id. at 559 (internal quotations
The Court found that “disclosure was essential to protect
interests
(retirement
assets)
of
plan
participants
beneficiaries from the threat of substantial depletion.”
and
Specific to
Enron was the fact that the fiduciaries were selling large amounts of
their Enron holdings while failing to disclose information about
Enron’s dangerous financial condition. Id. at 562. No such situation
is alleged in this case.
Similarly, the plan administrator has a fiduciary duty to act
prudently and in the best interest of the participants which requires
disclosure of pension options to a participant with terminal cancer.
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Anderson v. Board of Trustees of Northwest Ohio United Food and
Commercial Workers Union and Employer, 567 F.Supp.2d 991 (N.D. Ohio
2008).
The Court focused on whether the plan’s actions were in the
best interest of the participant, and the duty of the plan to inform
the participant so he may act in his best interest.
Id. at 1004.
There are a number of cases that consider whether undisclosed
material is pertinent to the plan.
In Ames v. American National Can
Co., 170 F.3d 751 (7th Cir. 1999), the Court concluded that plaintiff
had no right to learn the names of the individual fiduciaries because
that list was not a document under which the plan was managed.
Because the information requested was not pertinent to the operation
of the plan, the plan was not required to disclose it.
Id. at 759.
In another case, the Court noted that Congress used intentional
language limiting disclosure to “formal or legal documents under which
a plan is set up or managed.” Faircloth v. Lundy Packing Co., 91 F.3d
648, 654 (4th Cir. 1996).
The Court relied on 28 U.S.C. § 1024:
The administrator shall, upon written request of any
participant or beneficiary, furnish a copy of the latest
updated summary, plan description, and the latest annual
report, any terminal report, the bargaining agreement,
trust agreement, contract, or other instruments under
which the plan is established or operated.
The
administrator may make a reasonable charge to cover the
cost of furnishing such complete copies. The Secretary
may by regulation prescribe the maximum amount which will
constitute a reasonable charge under the preceding
sentence.
28 U.S.C. § 1024(b)(4).
The Court ruled § 1024 should not be read
broadly, and that Congress intended § 1024 to limit the required
disclosures.
Faircloth
at
654.
The
Court
also
discussed
§
404(a)(1)(A), and found that it did not require plan fiduciaries to
furnish documents to participants and beneficiaries beyond what §
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104(b)(4) required of plan administrators.
Id. at 657.
Finally, in Anweiler v. American Elec. Power Service Corp., 3
F.3d 986 (7th Cir. 1993), the Court found the fiduciary breached a duty
by not giving full and complete material information concerning a
reimbursement
agreement.
The
Court
recognized
that
although
reimbursement agreements are typically upheld, the deceased was not
told
that
the
reimbursement
material information.
agreement
Id. at 991.
was
revocable,
which
was
The Court ruled that Aetna “may
have manipulated its position as insurer of the disability plan and
life insurance policy to its own benefit rather than Mr. Anweiler’s
when it provided for reimbursement of one policy by way of another.”
Id. at 992.
However, the Court found that plaintiff was not entitled
to equitable relief because the plaintiff did not come with clean
hands.
These cases are helpful in evaluating Plaintiff’s claim that
Defendant and CIGNA breached a fiduciary duty by not disclosing
material information.
Plaintiff does not allege that he requested
information on Defendant’s fee agreement with CIGNA, even though he
was
told
in
a
February
Defendant’s fees.
15,
2007
letter
that
CIGNA
would
pay
Nor did Plaintiff request potential conflict of
interest documentation, or the legal status of the social security
back award, even though this information, at least in part, was
provided to Plaintiff initially by Defendant. Plaintiff has not shown
that this information was needed to prevent him from making a harmful
decision.
information
On the contrary, Plaintiff has failed to show that the
is
essential
participant’s interest.
to
protect
Plaintiff’s
or
any
other
Plaintiff received the benefit of the plan -13-
long term disability benefits and payments. There was no manipulation
by either CIGNA or Defendant for their own benefit and the silence was
not misleading.
Finally, Plaintiff has not shown that the information was
pertinent to the plan.
The plan did not operate under the payment
agreement, nor was the relationship between CIGNA and Defendant
pertinent to the plan, the administration of the plan, or the
operation of the plan.
Plaintiff has not alleged that CIGNA or
Defendant manipulated their respective positions by not disclosing the
agreement.
Even if Plaintiff had requested the information, without
a showing that the plan operated or was administered under the
documents or information requested, Plaintiff would not have a right
to them.
Plaintiff has not pointed to one piece of evidence in the record
that failure to disclose the fee arrangement, the status of the award,
or the alleged conflict of interest misled Plaintiff into making an
uninformed decision about his plan benefits.
Indeed, Plaintiff’s
benefits were not affected and Plaintiff received the full benefit of
long term disability insurance. CIGNA and Defendant complied with the
plan’s lawful terms and provided Plaintiff the benefits due under the
plan.1
1
Plaintiff’s counsel has initiated an ethics complaint in
Missouri against an attorney hired by Defendant (or perhaps an inhouse attorney employed by Defendant, the Court cannot tell which) to
assist Plaintiff in making his Social Security disability claim. The
ethics complaint is supported by the opinion of a Kansas lawyer who
handles Social Security cases.
Essentially, the claim is that
Defendant’s attorney who helped Plaintiff committed ethical violations
by not disclosing the contingent fee agreement, etc.
Plaintiff’s
counsel asserts that the “investigation” of the complaint has been
“deferred until the disposition of this case.” The Court assumes that
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IV.
Conclusion
For the reasons stated herein, Defendant’s Motion for Summary
Judgment (Doc. 67) is granted.
The clerk will enter judgment for the
Defendant.
Plaintiff filed the Third Amended Complaint as a Class Action.
Because Plaintiff has failed to show that he is entitled to relief,
Plaintiff’s request for class action status is denied.
The Court
seriously doubts that there are few, if any, persons insured by CIGNA
LTD policies who would want to be part of a class action which
involves the claims made by Plaintiff.
A motion for reconsideration of this order pursuant to this
court’s Rule 7.3 is not encouraged.
The standards governing motions
to reconsider are well established.
A motion to reconsider is
appropriate where the court has obviously misapprehended a party’s
position or the facts or applicable law, or where the party produces
new evidence that could not have been obtained through the exercise
of reasonable diligence.
Revisiting the issues already addressed is
not the purpose of a motion to reconsider and advancing new arguments
or supporting facts which were otherwise available for presentation
when the original motion was briefed or argued is inappropriate.
Comeau v. Rupp, 810 F.Supp. 1172 (D.Kan. 1992). Any such motion shall
not exceed three pages and shall strictly comply with the standards
enunciated by this court in Comeau.
The response to any motion for
this Memorandum and Order will receive appropriate consideration by
those responsible for evaluating ethics complaints in Missouri.
Although not conclusive on the outcome of the ethics complaint, the
Court views Plaintiff’s counsel’s decision to file the complaint to
be most unfortunate.
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reconsideration shall not exceed three pages.
No reply shall be
filed.
IT IS SO ORDERED.
Dated this 6th day of July 2012, at Wichita, Kansas.
s/ Monti Belot
Monti L. Belot
UNITED STATES DISTRICT JUDGE
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