Bio-Behavioral Care Solutions, LLC v. Doctors Behavioral Hospital, LLC
Filing
43
MEMORANDUM AND ORDER GRANTING PLAINTIFF/COUNTER-DEFENDANT'S MOTION TO COMPEL [Doc. 39]. Signed by District Judge Avern Cohn. (MVer)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
BIO-BEHAVIORAL CARE SOLUTIONS, INC.,
A Michigan limited liability company,
Plaintiff/Counter-Defendant,
v.
Case No. 14-14123
DOCTORS BEHAVIORAL HOSPITAL, LLC.,
d/b/a Doctors Neuropsychiatric Hospital,
an Indiana limited liability company,
HON. AVERN COHN
Defendant/Counter-Plaintiff.
________________________________/
MEMORANDUM AND ORDER GRANTING PLAINTIFF/COUNTER-DEFENDANT’S
MOTION TO COMPEL (Doc. 39)1
I.
This is a contract case. Plaintiff Bio-Behavioral Care Solutions, LLC is suing
defendant Doctors Behavioral Hospital, LLC claiming that defendant breached a
contract (Marketing Agreement) between the parties, it seeks $195,000 in damages.2 In
broad terms, plaintiff performs marketing services for hospitals which it says results in
hospitals obtaining business relationships with long term care facilities that use the
services offered by the hospitals. Defendant, a hospital in Indiana, was interested in
building relationships with nursing homes and assisted care facilities in Western
Michigan. In 2012, defendant and plaintiff entered into a Marketing Agreement in which
1
Upon review of the parties’ papers, the Court deems this matter appropriate for
decision without oral argument. See Fed. R. Civ. P. 78(b); E.D. Mich. LR 7.1(f)(2).
2
Plaintiff subsequently filed an offer of judgment in the amount of $130,000.
plaintiff agreed to provide management and consulting services to defendant.
Plaintiff says that it provided services under the Marketing Agreement and
defendant has refused to pay. The complaint (Doc. 1) is in four counts:
Count I - Account Stated
Count II - Breach of Contract
Count III - Unjust Enrichment/Quantum Meruit
Count IV - Promissory Estoppel
Defendant filed a one count counterclaim, stating that plaintiff breached the Marketing
Agreement by failing to fulfill its obligations. (Doc. 3). Both sides seek money
damages.
Before the Court is plaintiff’s motion to compel. For the reasons that follow, the
motion will be granted and plaintiff will be awarded its attorney fees and expenses
associated with the motion.
II.
A.
Shortly after the complaint was filed, plaintiff filed a motion for summary judgment
(Doc. 12) claiming that there is no genuine issue of material fact that defendant has
breached the Marketing Agreement.
Thereafter, defendant filed a motion to strike portions of the affidavit testimony of
two individuals or to compel answers to deposition questions (Doc. 32).
After briefing on the motion, plaintiff filed the instant motion to compel,
contending that discovery requests sent to defendant after it filed its motion for
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summary judgment are relevant to its claims for liability and damages. (Doc. 39).3
In light of the fact that discovery was not complete, the Court denied plaintiff’s
motion for summary judgment and defendant’s motion to strike without prejudice. The
Court also observed that based on the summary judgment papers, there appeared to be
factual disputes. (Doc. 40).
B.
Plaintiff’s case is supported in part on a document obtained during discovery
from defendant entitled “Doctors Behavioral Hospital, LLC A/P Aging Detail.” A/P is
presumed to mean “account payable.” This document appears to show that as of
December 17, 2012, defendant owed plaintiff $105,000.
III.
The scope of discovery under the Federal Rules of Civil Procedure is traditionally
quite broad. Lewis v. ACB Bus. Servs., 135 F.3d 389, 402 (6th Cir.1998). Parties may
obtain discovery on any matter that is not privileged and is relevant to any party's claim
or defense if it is reasonably calculated to lead to the discovery of admissible evidence.
Fed. R. Civ. P. 26(b)(1). “Relevant evidence” is “evidence having any tendency to make
the existence of any fact that is of consequence to the determination of the action more
probable or less probable than it would be without the evidence.” Fed. R. Evid. 401.
Rule 33 allows a party to serve requests for production of documents on an opposing
party. Fed. R. Civ. P. 33. A party receiving these types of discovery requests has 30
3
The Court held a telephone conference with the parties prior to plaintiff filing the
motion. At the conference, the Court stated that if the parties could not resolve the
matter themselves, plaintiff could file a motion to compel.
3
days to respond with answers or objections. If the receiving party fails to respond, Rule
37 provides the party who sent the discovery the means to file a motion to compel. Fed.
R. Civ. P. 37(a)(3)(B)(iii) and (iv). If a court grants a Rule 37 motion to compel, then the
court must award reasonable expenses and attorney's fees to the successful party,
unless the successful party did not confer in good faith before the motion, the opposing
party's position was substantially justified, or other circumstances would make an award
unjust. Fed. R. Civ. P. 37(A)(5)(a).
IV.
In its opening brief, plaintiff says that defendant failed to fully respond to plaintiff’s
request for production (RFP) of documents dated June 30, 2016. Specifically, the RFP
asked for:
1.
Ledgers, spreadsheets, or other writings showing accounts payable by
defendant for years 2012-2015, with redaction of names other than
plaintiffs
2.
Copies of tax returns for the same years, and work papers showing
reconciliation between the amounts shown on the Accounts Payable
Ledger and the related deductions and liabilities on the tax returns.
3.
Spreadsheets, charts or other documents showing referral from facilities
located in Michigan from 2012-2015.
4.
Copies of personnel files of Anthony Bunin and Dr. Richard Vaughn. They
were formerly employed by plaintiff and performed marketing services
under the Marketing Agreement. Defendant subsequently hired them
without notifying plaintiff.
4
Since the filing of the motion, defendant has agreed to produce item 3 (spreadsheets)
and item 4 (personnel files). However, it is not clear whether they have in fact been
produced.
Defendant refuses to produce item 1 (ledgers, spreadsheets, documents or other
writings showing accounts payable) and item 2 (tax returns) on the grounds that the
information is irrelevant and not likely to lead to the discovery of admissible evidence.
In other words, defendant says that the information is nothing but a “fishing expedition.”
Plaintiff contends that the information sought is relevant, explaining:
On June 29, 2016, Plaintiff’s counsel took the deposition testimony of
Kimberly Pendzinski, Chief Financial Officer of Defendant Doctors Hospital.
During her deposition Ms. Pendzinski explained that typically amounts shown on
Defendant’s Accounts Payable Ledger are transferred as a deduction on
Defendant’s tax return.
(Doc. 39 at p. 3)
Thus, plaintiff contends that the documents may show that defendant took a
deduction for amounts it owed to plaintiff but is refusing to pay.
Plaintiff’s position is well-taken. Pendzinski testified at deposition generally that
amounts shown on the accounts payable ledger are transferred to the tax returns:
Q. So when I get the ledger, can I tell from the entry on the ledger?
A. There will be nothing on the A/P ledger that will indicate what we think we
actually may owe to something.
Q. Okay. And those entries, whether it be potential or actual, they get
transferred to the tax return; correct?
A. Yeah. By way of the business making money or losing money , it will be on a
tax return. That's just the nature of -- I don't understand the relevance. What is
the relevance to that?
Q. I ask the questions. Do you know if Doctors Hospital is an accrual basis
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taxpayer or a cash basis taxpayer?
A. I do not.
Q. But you're the CFO; correct?
A. Yeah.
Q. And you don't know that?
A. I believe they are accrual.
Q. So on the tax return, would you have deducted all of these expenses on the
tax return?
MR. DELK: It calls for speculation. THE WITNESS :
A. I don't handle the tax returns for the hospital. MR. DAVIS:
Q. Who does?
A. Bernie Hebert.
Q. But you're a CPA?
A. l am.
Q. All right. So if you have accounts payables, they get to be a deduction on
the return; correct?
A. They do. And if you recoup in another year, they become other income.
Q. Correct. So there's every reason to believe that if the accounts payable
showed an amount payable to BCS, it would have been deducted on the tax
returns?
(Doc. 42 at p. 3-4) (emphasis added).
Based on Pendzinski’s testimony, plaintiff’s discovery requests in items 1 and 2
are reasonable and likely to lead to relevant and admissible evidence, i.e. the
documents may show that defendant took deductions for amounts allegedly owed to
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plaintiff.
V.
Accordingly, plaintiff’s motion to compel is GRANTED. Defendant shall produce
the requested discovery within twenty (20) days. As to the tax returns, defendant may
redact portions that are irrelevant to the request.
Plaintiff also asks for attorney fees in expenses associated with brining this
motion. Because defendant’s position in opposing the discovery was not substantially
justified, the request is GRANTED. Plaintiff shall separately submit a breakdown of
attorney fees and expenses associated with this motion. See Fed. R. Civ. P. 37.
SO ORDERED.
S/Avern Cohn
AVERN COHN
UNITED STATES DISTRICT JUDGE
Dated: October 27, 2016
Detroit, Michigan
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