NEW JERSEY PHYSICIANS UNITED RECIPROCAL EXCHANGE v. THE MEDICAL PROTECTIVE COMPANY, INC. et al
Filing
137
MEMORANDUM OPINION filed. Signed by Magistrate Judge Tonianne J. Bongiovanni on 8/23/2017. (mmh)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
NEW JERSEY PHYSICIANS UNITED
RECIPROCAL EXCHANGE
Civil Action No. 13-2286 (PGS)
Plaintiff,
v.
MEMORANDUM OPINION
THE MEDICAL PROTECTIVE
COMPANY, INC., et al.
Defendants.
BONGIOVANNI, Magistrate Judge
This matter comes before the Court upon The Medical Protective Company, Inc. d/b/a
Princeton Insurance Company’s (“Princeton”) motion to strike New Jersey Physicians United
Reciprocal Exchange’s (“NJPURE”) economic expert reports. [Docket Entry No. 134].
NJPURE opposes Princeton’s motion. The Court has reviewed all arguments raised in support
of and in opposition to Princeton’s motion and considers same without oral argument pursuant to
L.Civ.R. 78.1(b). For the reasons set forth more fully below, Princeton’s motion to strike is
GRANTED in part.
I.
Background and Procedural History
NJPURE is a not-for-profit reciprocal interinsurance exchange which provides medical
malpractice insurance to physicians and other potential policyholders. (Compl. ¶1). Princeton is
a for-profit entity organized for the purpose of engaging in the insurance business, including
medical malpractice insurance. (Id. ¶¶ 2, 17; Princeton Answer ¶¶ 2, 17).
On April 10, 2013, NJPURE filed suit against Princeton. Through its Complaint, it claims
that Princeton has and continues to make false or misleading written and oral statements to the
public about NJPURE’s business operations and insurance services. 1 The only false or
misleading statements referenced in the Complaint are Princeton’s annual “Marketplace
Updates,” which NJPURE refers to as the “False Comparative Advertisements.” (Id. ¶ 28).
NJPURE alleges that the “Marketplace Updates” offer misleading or false comparisons between
its financials and those of its for-profit competitors, such as Princeton. (Id. ¶ 30). Based on
Princeton’s distribution of the “Marketplace Updates,” NJPURE has asserted a claim against
Princeton for violations of the Lanham Act, Section 43, 15 U.S.C. § 1125(a) (Unfair
Competition) as well as New Jersey common law claims for libel, libel per se, trade libel and
tortious interference with prospective contractual relationships. (Id. ¶¶ 4-6; 72-108).
2
Prior to filing suit against Princeton, NJPURE filed a Complaint, since twice amended,
against Boynton & Boynton, Inc. (“Boynton”) and Kevin Byrne (“Byrne”) (collectively, the
“Boynton Defendants”). (See Civil Action No. 12-5610). Boynton is an insurance agency in the
business of selling medical malpractice insurance. (See Second Am. Compl. ¶2 in Civil Action
No. 12-5610; Answer to Am. Compl. ¶ 2 in Civil Action No. 12-5610). 3 Byrne is a licensed
agent of Boynton. (See Id. ¶ 3; Answer to Am. Compl. ¶3 in Civil Action No. 12-5610).
Through its Second Amended Complaint, NJPURE claims that Boynton and Byrne have and
continue to make false or misleading written and oral statements to the public about NJPURE’s
business operations and insurance services. As examples of the Boynton Defendants’ false or
1
While NJPURE’s Complaint references both written and oral statements (see, e.g. Compl. ¶
68), the only false or misleading statements referenced in the Complaint are Princeton’s annual,
written “Marketplace Updates” and NJPURE has only asserted various libel claims, no claims
for slander, against Princeton.
2
NJPURE also asserted a claim against Princeton under the Insurance Trade Practices Act;
however, NJPURE later stipulated to the dismissal of this claim. (See Stipulation and Order of
Dismissal of 5/8/2014; Docket Entry No. 56).
3
Unless otherwise indicated, all Docket Entry No. references come from Civil Action No. 132286).
2
misleading statements, NJPURE relies on email exchanges between Byrne and two specifically
identified prospective clients of NJPURE, as well as on “Marketplace Updates” issued by the
Boynton Defendants to NJPURE’s prospective clients. NJPURE alleges that the “Marketplace
Updates” offer misleading or false comparisons between its financials and those of its for-profit
competitors served by the Boynton Defendants. (Second Am. Compl. ¶ 24 in Civil Action No.
12-5610). Given the Boynton Defendants’ alleged scheme to disseminate libelous and
slanderous information about NJPURE to the public via email and other media, NJPURE has
asserted claims against Boynton and Byrne for violations of the Lanham Act, Section 43, 15
U.S.C. § 1125(a) (Unfair Competition), as well as New Jersey common law claims for libel, libel
per se, slander, slander per se, trade libel and tortious interference with prospective contractual
relationships. (Id. ¶¶ 5-7; 92-139). 4
While NJPURE sought to consolidate the matters it separately filed against Princeton and
the Boynton Defendants, the District Court determined that it would not be appropriate, at least
at that juncture, to consolidate both cases for trial purposes. In reaching this conclusion, the
District Court found:
[W]hile both cases involve allegations of the “Market Updates,”
the Boynton Action clearly contains unrelated claims and
allegations based on false written and oral statements made by the
Boynton Defendants to customers in an effort to s[ell] malpractice
insurance policies that are not present in the Princeton Action.
These additional factual and legal issues predominate the Boynton
Action, and significantly, they are irrelevant to the Princeton
Action; as such, it would not be appropriate to try these cases at the
same time.
4
NJPURE also asserted claims against Boynton and Byrne under the Insurance Trade Practices
Act; however, these claims were dismissed. (See Op. and Order of 1/28/2014; Docket Entry
Nos. 39 & 40 in Civil Action No. 12-5610).
3
(Letter Order of 3/23/2015 at 2; Docket Entry No. 72). Nevertheless, given the overlap between
the two cases, “both actions concern allegations of Princeton’s false advertisement campaign and
how those false publications affected NJPURE[,]” the District Court consolidated the matters for
discovery purposes.
(Id.) Since that time, discovery in the two cases has proceeded along the
same schedule and the Court’s discovery orders have been simultaneously entered in both cases.
Two such orders are primarily relevant to Princeton’s pending motion to strike. 5
First, on October 19, 2015, the Court entered a Letter Order addressing the damages
related discovery NJPURE was to produce:
With respect to Princeton’s request for discovery concerning
NJPURE’s damages, the Court agrees that the time has come for
NJPURE to identify, with some specificity, what its damages are.
Rule 26(a)(1)(A)(iii) requires a party to provide “a computation of
each category of damages claimed by the disclosing party – who
must also make available for inspection and copying as under Rule
34 the documents or other evidentiary material, unless privileged or
protected from disclosure, on which each computation is based,
including materials bearing on the nature and extent of injuries
suffered[.]” While the precise amount of damages allegedly
suffered by NJPURE may be determined at trial, NJPURE is
obligated to produce damages related discovery. As a result, to the
extent it has not done so, NJPURE is directed to supplement its
Initial Disclosures regarding damages as well as its responses to
Princeton’s damages related discovery requests, such as RPDs # 31
& 44, and Interrogatory # 13. NJPURE must complete this
supplementation no later than October 30, 2015.
(Letter Order of 10/19/2015 at 2; Docket Entry No. 93).
5
Given that the two cases have not been consolidated for trial purposes coupled with the fact that
Princeton and the Boynton Defendants raised different issues regarding the Soudry Reports, the
Court directed that Princeton and the Boynton Defendants’ file separate motions to strike.
(Letter Order of 7/11/2016 at 10; Docket Entry No. 133). The Court addresses the two motions
to strike separately, with only Princeton’s motion being discussed herein.
4
Second on December 10, 2015, in response to a dispute raised by Princeton regarding the
sufficiency of the damages related discovery produced by NJPURE, the Court entered a Letter
Order finding:
The Court is underwhelmed by NJPURE’s response /
production regarding damages. It is clear that at this juncture that
its claim of damages is speculative. While the Court appreciates that
precision with respect to damages may come via expert discovery
and that a damages calculation may evolve over time and become
fine-tuned by the time of trial, at this instant, to speak colloquially,
NJ Pure appears to have nothing.
Indeed, NJPURE’s
supplementation of its Initial Disclosures with respect to damages
stated in total:
Plaintiff has asserted in Counts Four and six of the
Second Amended Complaint claims of Libel per se
and Slander per se for which damages are presumed
as a matter of law. See d.g, MacKay v. CSK Publ.
Co., Inc., 300 N.J. Super. 599 (App. Div. 1997).
Plaintiff seeks all such presumed damages against
defendants in this matter.
In addition to the foregoing, plaintiff seeks all
damages pursuant to the Lanham Act, 15 U.S.C. §
1051, et seq., including but not limited to plaintiff’s
lost profits, the profits of defendants attributable to
the actionable conduct, and corrective advertising
expenses. Plaintiff’s investigation into the full scope
of damages is ongoing and continuing. To date,
plaintiff
has
identified
the
following
insureds/potential insureds whose business was lost
in substantial part due to defendants’ wrongful
conduct as described in the complaint and discovery
exchanged: Dr. Mary Anne Fury; Dr. Babak Behin;
Dr. Ghassan Khani; Dr. Marc Levine; Dr. Joshua
Wolpert; Dr. Mark Ditmar; Dr. Pavlinka DundevaBaleva; Dr. Aravinda Reddy; Dr. Sandra Ann Mead;
Dr. Babatunji Omotoso; Dr. Mansoora Chaudry; Dr.
Mainish Saini; Dr. Julie Lorber; Dr. Fauzia Hameed;
Dr. Patricia Graham; Dr. James Schlesinger; Dr.
Eugene Jerome Lind; Dr. Phillip Paparone; Dr. Lisa
Simone Vernon, Pulmonary & Allergy Associates,
P.A. and University Radiology Group.
5
Plaintiff believes that the amount of monetary
damages caused by the defendants’ wrongful
conduct as described in the complaint and discovery
to be in excess of $2,000,000. Plaintiff has not yet
retained expert witnesses with regard to the exact
quantum of damages.
Plaintiff reserves the right to amend and/or
supplement the foregoing responses as discovery
continues in this matter.
(Letter from Manuel J. Almeida, Jr. to James M. Nardelli of
10/30/2015).
NJPURE’s cases have been collectively pending for over 2½
years. They need to move. Any information NJPURE seeks to rely
upon either directly or through an expert for the purposes of
establishing damages that is in NJPURE’s possession, custody or
control needs to be produced NOW. If it is not, and the Court
determines that it should have been, then NJPURE shall be
precluded from later relying on it to establish its damages claim. In
other words, if nothing else is produced/identified, the Court shall
presume
that
NJPURE’s
current
production
of
facts/documents/information is complete and NJPURE shall be
limited to same. While the Court appreciates that depositions can
be used to elucidate the parties’ positions, they are not a substitute
for adequate paper discovery.
Under these circumstances, the Court finds that the March
1, 2016 end date for fact discovery remains sufficient. The parties
should be able to take the 7 depositions they previously anticipated
and had scheduled as well as any additional depositions in that
time period. NJPURE shall produce its expert report(s) by April
15, 2015. NJPURE is reminded that all facts or data considered by
its expert in forming his opinions must be disclosed with its expert
report(s). See FED.R.CIV.P. 26(a)(2)(B)(ii). If, after reviewing
NJPURE’s expert report(s), Princeton believes that information
considered by the expert was not timely produced, Princeton may
seek to preclude the District Court’s consideration of all or a
portion of the report(s).
(Letter order of 12/10/2015 at 2-4; Docket Entry No. 104).
6
On April 29, 2015, NJPURE served Princeton with Mr. Michael Soudry’s preliminary
analysis report, which addressed NJPURE’s alleged damages. On May 20, 2016, NJPURE
served Princeton with a supplemental report on damages. Upon receipt and review of same,
Princeton wrote the Court asking that both Mr. Soudry’s preliminary analysis report and
supplemental report (collectively, the “Soudry Reports”) be stricken because in same, in
contravention of the Court’s Orders, Mr. Soundry relied on documents and information never
produced by NJPURE during discovery. (Letter from Walter J. Fleisher Jr. to Hon. Tonianne J.
Bongiovanni of 6/7/2016 at 1-3). After receiving additional informal letter briefing on
Princeton’s request to strike the Soudry Reports, the Court determined that in light of the
significance of the issues raised, “not only in terms of the numbers of issues raised, but also
based on the impact a decision regarding those issues could have on NJPURE[,]” the question of
whether the Soudry Reports should be stricken “should be the subject of formal motion
practice.” (Letter Order of 7/11/2016 at 9; Docket Entry No. 133). As a result, Princeton filed
the instant motion to strike in accordance with the briefing scheduled outlined in the Court’s July
11, 2016 Letter Order. (Id. at 10).
II.
The Parties’ Arguments
A. Princeton’s Arguments
Princeton argues that the Soudry Reports should be stricken under FED.R.CIV.P. (“Rule”)
37(b)(2) and 37(c) because they rely on documents and information never produced in discovery.
Princeton also notes that the Court has the power to enforce its own Orders and, consequently,
could strike the Soudry Reports based on the October 19 and December 10, 2015 Letter Orders.
With respect to the documents and information NJPURE failed to produce, Princeton
identifies the following four pieces of information: (1) an email from NJPURE to a physician
7
group known as University Radiology Group (“URG”) that disclosed a May 18, 2012 rate
indication; (2) a December 2010 rate indication NJPURE provided to Dr. Shen as well as a
“View Activity History” for Dr. Chen; (3) NJPURE’s policy retention rates and group retention
rates for 2004-2014; and (4) NJPURE’s Annual Statements for 2013-2015. Princeton argues that
NJPURE’s failure to produce the aforementioned information during discovery warrants the
Court striking the Soudry Reports based on the factors outlined in Wachtel v. Health Net, Inc.,
239 F.R.D. 81 (D.N.J. 2006); Ford Motor Co. v. Edgewood properties, Inc., No. 06-1278, 2011
WL 5828661 (D.N.J. Nov. 18, 2011); and Ware v. Rodale Press, Inc., 322 F.3d 218 (3d Cir.
2003).
In this regard, Princeton argues that it has been prejudiced by NJPURE’s failure to
produce the aforementioned discovery, which is clearly material to NJPURE’s damages
calculation. Specifically, Princeton argues that NJPURE’s failure to produce the relevant
discovery caused Princeton to waste time and resources determining whether the information
had, in fact, been produced, and then, after determining it had not, waste additional time and
resources bringing NJPURE’s failure to the Court’s attention, first informally and then through
the instant formal motion to strike. Importantly, Princeton contends that had it timely been given
access to the withheld information, it would have sought additional discovery. For example,
Princeton claims it would have sought additional discovery regarding the retention rates the
Soudry Reports rely upon in determining NJPURE’s damages. Princeton argues that it would
have sought both paper and Rule 30(b)(6) testimony on the retention rates to determine what the
retention rates were, how they factored into NJPURE’s business, whether the retention rates used
in the Soudry Reports are appropriate to use in analyzing whether NJPURE would have retained
the at-issue accounts, etc. Further, Princeton maintains that it could not have sought said
8
information from the witnesses it deposed after the Soudry Reports were served both because, as
this Court recognized, depositions “‘are not a substitute for adequate paper discovery’”
(Princeton Reply Br. at 8 (quoting Letter Order of 12/10/2015 at 3)), and because when it
attempted to do so, NJPURE’s Chief Marketing and Business Development Officer and
designated Rule 30(b)(6) witness, Eric Poe, testified he was “uncertain how such rates are
measured, did not know what these rates were for NJ PURE in any particular year, and did not
know if NJ PURE’s retention rates had been produced in discovery.” (Id.)
Further, Princeton argues that discovery cannot be reopened to cure the prejudice caused
by NJPURE’s failure to produce the damages related discovery relied upon in the Soudry
Reports because doing so would substantially disrupt the completion of this litigation. Princeton
notes that at the time it filed its motion to strike, this matter had already been pending for 39
months and the Boynton matter for 46 months. Princeton argues that the cases have languished
for so long in large part due to NJPURE’s discovery deficiencies. Princeton claims that given
how this matter has proceeded to date, reopening discovery would likely cause significant further
delay and cost significant additional resources. Moreover, Princeton argues that based on the
case history it would be inconsistent for the Court to reopen fact discovery now. In this regard,
Princeton notes that twice before the Court refused to extend the March 1, 2016 fact discovery
deadline. (See Letter Orders of 12/10/2015 and 5/4/2016; Docket Entry Nos. 104; 111).
In addition, Princeton claims that the prejudice caused by NJPURE’s failure to timely
produce damages related discovery as ordered by this Court cannot be cured by a sanction other
than striking the Soudry Reports. For example, Princeton claims that a monetary fine is
insufficient because such a fine is incapable of replacing its lost opportunity to gain relevant
discovery. Further, Princeton argues that based on NJPURE’s past history of dilatoriness, there
9
is no reason to believe that NJPURE would fully comply without delay with future court orders
providing for additional damages related discovery.
Princeton also argues that NJPURE’s reliance on unproduced information in the Soudry
Reports can in no way be characterized as an innocent mistake. In this regard, Princeton argues
that NJPURE was certainly on notice that it was obliged to produce damages related information
as Rule 26 makes this obligation clear as did the Court’s two Letter Orders. In light of same,
Princeton contends that the Court should find that NJPURE acted in bad faith.
Moreover, Princeton maintains that NJPURE’s history of noncompliance is only its own
fault. Indeed, Princeton claims that throughout this entire case, but especially within the past
year, NJPURE has acted unreasonably in resisting all efforts by Princeton to move discovery
forward. Princeton notes that all of the unproduced documents/information relied upon in the
Soudry Reports was in NJPURE’s possession before the Court entered the two Orders
compelling NJPURE to produce damages related discovery. Princeton further claims that
NJPURE still has not amended its discovery responses to include the information disclosed in the
Soudry Reports.
Based on the foregoing and the applicable case law, Princeton argues that the Soudry
Reports should be stricken. Further, Princeton asks that the Court require NJPURE to pay its
attorney’s fees and costs incurred pursuing this motion to strike under Rule 37(b).
B. NJPURE’s Arguments
NJPURE opposes Princeton’s motion to strike. In doing so, it raises a few main
arguments. First, NJPURE argues that Princeton’s motion to strike must be denied because the
information Princeton claims was not produced does not affect the entirety of the Soudry
Reports. Second, NJPURE argues that Princeton has not be prejudiced or surprised by the
10
inclusion of the allegedly unproduced information. Third, NJPURE argues that monetary
sanctions must be denied because NJPURE did not willfully violate the Court’s Orders or fail to
comply with them in bad faith.
As to the specific documents/information Princeton claims NJPURE failed to produce,
NJPURE contends that it produced information regarding URG’s rate indication and that
Princeton possessed NJPURE’s Annual Statements from 2013-2015. Therefore, NJPURE
maintains only two areas of discovery are at issue: (1) the policy retention rates and group
retention rates for 2004-2014 disclosed in the charts utilized by Mr. Soudry in his expert reports;
and (2) the exact premiums for Dr. Shen or the physician group, Pulmonary and Allergy
Associates (“PAA”). NJPURE concedes it did not produce these documents during discovery.
Nevertheless, NJPURE maintains that Princeton has not been prejudiced by the
nondisclosure. In this regard, NJPURE argues that all of the physicians and medical practices
included in the Soudry Reports were identified within the Court’s deadline for the production of
damages related discovery. In addition, NJPURE claims that these physicians / medial practices
are the insureds and/or customers of Defendants, and therefore Defendants know what premiums
they pay. 6
With respect to URG’s rate indication, NJPURE argues that while the specific email
highlighted by Princeton was not produced, on December 21, 2015, when it supplemented its
damages related discovery, it produced emails demonstrating that “a rate indication was provided
with respect to URG for a premium between ‘$1,687,500-$1,820,000[,]” and on January 20,
2016, Franca Hobbs, the representative of URG named in NJPURE’s Complaint, produced an
6
Princeton contends that NJPURE knows that this is not true as neither PAA nor Dr. Shen were
insureds of Princeton during the time period applicable to this litigation.
11
email establishing that URG was given a rate indication by Plaintiff of $1,560,000 and testified
that “her group was paying . . . $1.6 million” (NJPURE Opp. at 7; Docket Entry No. 135).
NJPURE notes that in his expert report, Mr. Soudry used the lowest known premium number to
calculate damages related to URG.
Similarly with respect to the undisclosed policy retention rate and group retention rate
information disclosed in the charts included in the Soudry reports, NJPURE argues that it did not
produce this information because it never expected retention rates to be used in relation to
damages. NJPURE argues that Mr. Soudry used this information to generate a conservative
damages calculation, which actually benefits (not prejudices) Princeton as the retention rate
information was used to reduce NJPURE’s damages. Moreover, NJPURE claims that if
Princeton believed the retention rate information was significant, it could have questioned three
different witnesses, all of whom were deposed after said information was produced in the Soudry
Reports - Dr. Lena Chang, Eric Poe or Joana Quaintance – regarding same.
NJPURE also maintains that there is no incurable prejudice to Princeton because
Princeton has not yet served its expert reports. As a result, NJPURE maintains that Princeton
can confer with its experts regarding the information set forth in the Soudry Reports and its
experts can address any issues raised.
For these reasons, based on the relevant precedent, NJPURE argues that the Soudry
Reports should not be stricken. NJPURE likewise argues that monetary sanctions are not
warranted. In this regard, as already explained, NJPURE claims there has been no prejudice to
Princeton. NJPURE also contends that there is no evidence of willfulness or bad faith as it
complied with the Court’s Orders and produced damages related discovery in accordance with
same. In this regard, NJPURE argues that the few documents Princeton did not receive until
12
NJPURE produced the Soudry Reports were withheld unintentionally either because NJPURE
inadvertently failed to produce the document (e.g., the email regarding URG’s rate indication) or
because they did not exist until requested by Mr. Soudry, himself (i.e., the retention rate charts).
Under these circumstances, NJPURE argues that the imposition of attorney’s fees and costs is
not warranted and the Court should not in its discretion impose same.
III.
Analysis
Without awaiting a discovery request, Rule 26(a)(1)(A)(iii) requires each party to provide
to the other parties “a computation of each category of damages claimed by the disclosing party
– who must also make available for inspection and copying as under Rule 34 the documents or
other evidentiary material, unless privileged or protected from disclosure, on which each
computation is based, including materials bearing on the nature and extent of injuries suffered[.]”
Given NJPURE’s alleged failure to produce sufficient information regarding its damages, the
Court twice entered Letter Orders addressing NJPURE’s obligation to produce damages related
discovery. First, on October 19, 2015, the Court ruled:
With respect to Princeton’s request for discovery concerning
NJPURE’s damages, the Court agrees that the time has come for
NJPURE to identify, with some specificity, what its damages are.
Rule 26(a)(1)(A)(iii) requires a party to provide “a computation of
each category of damages claimed by the disclosing party – who
must also make available for inspection and copying as under Rule
34 the documents or other evidentiary material, unless privileged or
protected from disclosure, on which each computation is based,
including materials bearing on the nature and extent of injuries
suffered[.]” While the precise amount of damages allegedly
suffered by NJPURE may be determined at trial, NJPURE is
obligated to produce damages related discovery. As a result, to the
extent it has not done so, NJPURE is directed to supplement its
Initial Disclosures regarding damages as well as its responses to
Princeton’s damages related discovery requests, such as RPDs # 31
& 44, and Interrogatory # 13. NJPURE must complete this
supplementation no later than October 30, 2015.
13
(Letter Order of 10/19/2015 at 2). Second, on December 10, 2015, the Court held:
The Court is underwhelmed by NJPURE’s response / production
regarding damages. It is clear that at this juncture that its claim of
damages is speculative. While the Court appreciates that precision
with respect to damages may come via expert discovery and that a
damages calculation may evolve over time and become fine-tuned
by the time of trial, at this instant, to speak colloquially, NJ Pure
appears to have nothing. Indeed, NJPURE’s supplementation of its
Initial Disclosures with respect to damages stated in total:
Plaintiff has asserted in Counts Four and six of the
Second Amended Complaint claims of Libel per se
and Slander per se for which damages are presumed
as a matter of law. See d.g, MacKay v. CSK Publ.
Co., Inc., 300 N.J. Super. 599 (App. Div. 1997).
Plaintiff seeks all such presumed damages against
defendants in this matter.
In addition to the foregoing, plaintiff seeks all
damages pursuant to the Lanham Act, 15 U.S.C. §
1051, et seq., including but not limited to plaintiff’s
lost profits, the profits of defendants attributable to
the actionable conduct, and corrective advertising
expenses. Plaintiff’s investigation into the full scope
of damages is ongoing and continuing. To date,
plaintiff
has
identified
the
following
insureds/potential insureds whose business was lost
in substantial part due to defendants’ wrongful
conduct as described in the complaint and discovery
exchanged: Dr. Mary Anne Fury; Dr. Babak Behin;
Dr. Ghassan Khani; Dr. Marc Levine; Dr. Joshua
Wolpert; Dr. Mark Ditmar; Dr. Pavlinka DundevaBaleva; Dr. Aravinda Reddy; Dr. Sandra Ann Mead;
Dr. Babatunji Omotoso; Dr. Mansoora Chaudry; Dr.
Mainish Saini; Dr. Julie Lorber; Dr. Fauzia Hameed;
Dr. Patricia Graham; Dr. James Schlesinger; Dr.
Eugene Jerome Lind; Dr. Phillip Paparone; Dr. Lisa
Simone Vernon, Pulmonary & Allergy Associates,
P.A. and University Radiology Group.
Plaintiff believes that the amount of monetary
damages caused by the defendants’ wrongful
conduct as described in the complaint and discovery
to be in excess of $2,000,000. Plaintiff has not yet
14
retained expert witnesses with regard to the exact
quantum of damages.
Plaintiff reserves the right to amend and/or
supplement the foregoing responses as discovery
continues in this matter.
(Letter from Manuel J. Almeida, Jr. to James M. Nardelli of
10/30/2015).
NJPURE’s cases have been collectively pending for over 2½ years.
They need to move. Any information NJPURE seeks to rely upon
either directly or through an expert for the purposes of establishing
damages that is in NJPURE’s possession, custody or control needs
to be produced NOW. If it is not, and the Court determines that it
should have been, then NJPURE shall be precluded from later
relying on it to establish its damages claim. In other words, if
nothing else is produced/identified, the Court shall presume that
NJPURE’s current production of facts/documents/information is
complete and NJPURE shall be limited to same. While the Court
appreciates that depositions can be used to elucidate the parties’
positions, they are not a substitute for adequate paper discovery.
Under these circumstances, the Court finds that the March 1, 2016
end date for fact discovery remains sufficient. The parties should
be able to take the 7 depositions they previously anticipated and
had scheduled as well as any additional depositions in that time
period. NJPURE shall produce its expert report(s) by April 15,
2015. NJPURE is reminded that all facts or data considered by its
expert in forming his opinions must be disclosed with its expert
report(s). See FED.R.CIV.P. 26(a)(2)(B)(ii). If, after reviewing
NJPURE’s expert report(s), Princeton believes that information
considered by the expert was not timely produced, Princeton may
seek to preclude the District Court’s consideration of all or a
portion of the report(s).
(Letter Order of 12/10/2015 at 2-4).
Despite these very explicit Letter Orders, NJPURE failed to produce in discovery all of
the information its damages expert relied upon in crafting the Soudry Reports. Instead, as
Princeton notes, four pieces of information were included and relied upon in the Soudry Reports
that NJPURE did not produce in discovery: (1) an email from NJPURE to URG that disclosed a
15
May 18, 2012 rate indication; (2) a December 2010 rate indication NJPURE provided to Dr.
Shen as well as a “View Activity History” for Dr. Chen; (3) NJPURE’s policy retention rates and
group retention rates for 2004-2014; and (4) NJPURE’s Annual Statements for 2013-2015. 7 The
Court, therefore, must determine what, if any, sanction(s) is warranted.
Rule 37 authorizes the Court to impose a wide range of sanctions on a party who has
failed to comply with its discovery obligations. In this regard, Rule 37(b)(2)(A) provides:
If a party or a party’s officer, director, or managing agent . . . fails
to obey an order to provide or permit discovery, including an order
under Rule 26(f), 35, or 37(a), the court where the action is
pending may issue further just orders. They may include the
following: . . . (ii) prohibiting the disobedient party from
supporting or opposing designated claims or defenses, or from
introducing designated matters in evidence[.]
Further, Rule 37(c)(1) provides:
If a party fails to provide information or identify a witness as
required by Rule 26(a) or (e), the party is not allowed to use that
information or witness to supply evidence on a motion, at a
hearing, or at a trial, unless the failure was substantially justified or
is harmless. In addition to or instead of this sanction, the court, on
motion and after giving an opportunity to be heard: (A) may order
payment of the reasonable expenses, including attorney’s fees,
caused by the failure; (B) may inform the jury of the party’s
failure; and (C) may impose other appropriate sanctions, including
any of the orders listed in Rule 37(b)(2)(A)(i)-(vi).
In deciding whether to impose sanctions under Rule 37(c)(1), the Court considers four
factors:
(1) prejudice or surprise to the Plaintiffs; (2) the ability of
Plaintiffs to cure the prejudice; (3) the likelihood of disruption; and
(4) the Defendants’ bad faith or unwillingness to comply. These
7
While NJPURE argues that its Annual Statements are public documents and that Princeton had
copies of same, that alone is insufficient. If NJPURE intended to rely on them, they should have
been produced or at least identified in discovery. There is no indication that they were. Indeed,
the Court previously ordered Princeton to produce publicly available documents. (See Letter
Order of 5/18/2016; Docket Entry No. 119).
16
factors are nearly identical to the factors this Court considers when
deciding to exclude evidence under Rule 37(b)(2): (1) the
prejudice or surprise to Plaintiffs; (2) the ability of Plaintiffs to
cure that prejudice; (3) the extent to which the evidence would
disrupt the orderly and efficient trial of the case or other cases in
the court; and (4) bad faith or willfulness of Defendants in failing
to comply with the court’s order.
Wachtel., 239 F.R.D. at 104-05 (D.N.J. 2006) (citations omitted). Further, where the exclusion
sought under Rule 37(b)(2) “is tantamount to dismissing the claim,” such as precluding any
evidence of damages at trial where damages are a necessary element of the claim at issue, the
Court also considers the factors outlined in Poulis:
“(1) the extent of the party’s personal responsibility; (2) the
prejudice to the adversary caused by the failure to meet scheduling
orders and respond to discovery; (3) a history of dilatoriness; (4)
whether the conduct of the party or the attorney was willful or in
bad faith; (5) the effectiveness of sanctions other than dismissal,
which entails an analysis of alternative sanctions; and (6) the
meritoriousness of the claim or defense.”
Ware, 322 F.3d at 221 (quoting Poulis v. State Farm Fire and Cas. Co., 747 F.2d 863, 868 (3d
Cir. 1984)).
1. Prejudice or Surprise to Princeton
The Court finds that Princeton has been prejudiced by NJPURE’s reliance on the
unproduced damages related information in the Soudry Reports. In the first instance, Princeton
has been prejudiced by being forced, in fairly short order, to (1) comb the record after the Soudry
Reports were served to determine whether the information relied upon therein was produced by
NJPURE during fact discovery and, after determining that certain information had not been
produced in contravention of two Court Orders, (2) bring this issue to the Court’s attention.
There is simply no reason Princeton should have had to have expended the resources to do so
and the Court finds this burden is sufficient to establish prejudice. See Ware, 322 F.3d at 222-23
17
(upholding District Court’s determination that party had been prejudiced in part by adversary’s
failure to timely produce specific information regarding damages, which resulted in party having
to file two motions regarding same because prejudice “include[s] the burden that a party must
bear when forced to file motions in response to the strategic discovery tactics of an adversary.”)
Further, the Court finds that the unproduced information relied upon in the Soudry
Reports is significant. For example, NJPURE’s damages, most of which are associated with the
URG account, are based on unproduced premium and surplus contribution information, which,
despite NJPURE’s suggestion to the contrary, Princeton was not aware of. Similarly, the
unproduced retention rate information relied upon in the Soudry Reports is used to justify
NJPURE’s claim for damages over multiple years. Princeton should have had the opportunity to
take discovery on these pieces of information and it has been prejudiced by the inability to do so
in a timely matter. Moreover, the fact that Princeton’s experts may be able to address the
undisclosed information in their yet unserved expert reports does not cure the prejudice.
Because of NJPURE’s untimely disclosure, Princeton has been denied the opportunity to arm its
own experts with additional information regarding the previously unproduced information,
thereby impairing its experts’ ability to challenge the assertions contained in the Soudry Reports.
2. Ability of Princeton to Cure the Prejudice
Here, the Court finds that Princeton would be unable to cure the prejudice caused by
NJPURE’s reliance on information not properly disclosed during fact discovery. On multiple
occasions, the Court explicitly refused to extend the fact discovery deadline. (See Letter Order
of 5/4/2016 at 2-4 (determining that good cause did not exist to adjust the fact discovery
deadline, noting that “for the past six months, the Court has been vigorously pushing the parties
to complete fact discovery” and that “the tenor of [its past] Orders made it clear that the time had
18
come for all fact discovery, including damages discovery, to be completed”); Letter Order of
12/10/2015 (holding that under the circumstances of the case “the March 1, 2016 end date for
fact discovery remains sufficient” and refusing to extend same.)) It would, therefore, be entirely
inconsistent to reopen discovery now.
Moreover, not only would it be inconsistent to do so, but it would also be unfitting. The
Court could not have been any clearer regarding NJPURE’s obligations. As already noted, on
October 19, 2015, NJPURE was unambiguously informed that:
[T]he time has come for NJPURE to identify, with some specificity,
what its damages are. Rule 26(a)(1)(A)(iii) requires a party to
provide “a computation of each category of damages claimed by the
disclosing party – who must also make available for inspection and
copying as under Rule 34 the documents or other evidentiary
material, unless privileged or protected from disclosure, on which
each computation is based, including materials bearing on the nature
and extent of injuries suffered[.]” While the precise amount of
damages allegedly suffered by NJPURE may be determined at trial,
NJPURE is obligated to produce damages related discovery. As a
result, to the extent it has not done so, NJPURE is directed to
supplement its Initial Disclosures regarding damages as well as its
responses to Princeton’s damages related discovery requests, such
as RPDs # 31 & 44, and Interrogatory # 13.
(Letter Order of 10/19/2015 at 2). Similarly, on December 10, 2015, the Court unequivocally
stated that NJPURE’s damages related discovery was deficient and directed NJPURE to
immediately produce said discovery or run the risk of having the information barred later on:
The Court is underwhelmed by NJPURE’s response / production
regarding damages. It is clear that at this juncture that its claim of
damages is speculative. While the Court appreciates that precision
with respect to damages may come via expert discovery and that a
damages calculation may evolve over time and become fine-tuned
by the time of trial, at this instant, to speak colloquially, NJ Pure
appears to have nothing.
***
19
NJPURE’s cases have been collectively pending for over 2½ years.
They need to move. Any information NJPURE seeks to rely upon
either directly or through an expert for the purposes of establishing
damages that is in NJPURE’s possession, custody or control needs
to be produced NOW. If it is not, and the Court determines that it
should have been, then NJPURE shall be precluded from later
relying on it to establish its damages claim. In other words, if
nothing else is produced/identified, the Court shall presume that
NJPURE’s current production of facts/documents/information is
complete and NJPURE shall be limited to same. While the Court
appreciates that depositions can be used to elucidate the parties’
positions, they are not a substitute for adequate paper discovery.
***
NJPURE shall produce its expert report(s) by April 15, 2015.
NJPURE is reminded that all facts or data considered by its expert
in forming his opinions must be disclosed with its expert report(s).
See FED.R.CIV.P. 26(a)(2)(B)(ii). If, after reviewing NJPURE’s
expert report(s), Princeton believes that information considered by
the expert was not timely produced, Princeton may seek to
preclude the District Court’s consideration of all or a portion of the
report(s).
(Letter Order of 12/10/2015 at 2-4). Thus, NJPURE knew it was obliged to produce all
information it intended to rely upon to prove damages and was warned that if it attempted to rely
on any unproduced information, including through its expert, it would be precluded from doing
so. Under these circumstances, the Court finds that it would be inappropriate to reopen fact
discovery. 8
Furthermore, the Court finds that the prejudice is not cured by the fact that Princeton has
yet to serve its own expert reports. While Princeton’s experts would be able to address Mr.
8
The Court finds that doing so would also be unfair to Princeton. At the time Princeton’s motion
to strike was filed, this case had already been pending for well over three years. Reopening
discovery at this juncture would certainly delay the resolution of this already protracted
litigation, and, given how discovery has proceeded to date, the Court suspects that the delay
would not be insubstantial.
20
Soudry’s opinions using the information included in his reports, that does not change the fact that
Princeton was denied timely access to this information and the ability to obtain discovery on it.
3. The Likelihood of Disruption
The Court finds that allowing NJPURE, through the Soudry Reports, to rely on the
unproduced documents would disrupt these proceedings. As noted above, Princeton was denied
the opportunity to obtain discovery regarding the unproduced documents. It was not, for
example, able to explore how the retention rates were measured, how they factored into
NJPURE’s business, or whether the retention rates used in the Soudry Reports are appropriate to
use in analyzing whether NJPURE would have retained the at-issue accounts here.
As also noted there is no way to cure this prejudice because based on the history of the
Court’s Orders, reopening discovery at this juncture would be inappropriate. 9 The Court’s
scheduling orders mean something. Indeed, they “‘are at the heart of case management’” and
integral to the Court’s control of its docket. Estate of Harrison v. Trump Plaza Hotel & Casino,
Civil No. 12-6683 (RBK/KMW), 2015 WL 6951691, at *2 (D.N.J. Nov. 11, 2015) (quoting
Koplove v. Ford Motor Co., 795 F.2d 15, 18 (3d Cir. 1986)). Parties should take comfort from
the fact that they can rely upon the deadlines set by the Court. Indeed, it should be the parties’
expectations that the deadlines set by the Court are fixed and intended to govern the matter going
forward. Otherwise, the entire process would be undermined. See GlobespanVirata, Inc. v.
Texas Instruments, Inc., 2015 WL 1638136, at *4 (D.N.J. July 12, 2005) (noting that
“‘scheduling orders are the heart of the case management [and cannot] be flouted’” as they “‘are
9
Moreover, as suggested above, given how this case has been litigated to date, even if the Court
found that an extension of discovery was appropriate, which it does not, the Court would also
find that said extension would be disruptive to this litigation, likely prolonging the pretrial of this
matter (and therefore delaying the trial of this matter) for several months.
21
designed to offer a degree of certainty in pretrial proceedings, ensuring that at some point both
the parties and the pleadings will be fixed and the case will proceed.’”) (Citations omitted).
Furthermore, it would certainly be disruptive to the just resolution of this action to allow
NJPURE to rely on information supporting its damages calculation that Princeton did not have
access to before fact discovery closed. See Rule 1 (stating that “[t]hese rules . . . should be
construed, administered, and employed by the court and the parties to secure the just, speedy,
and inexpensive determination of every action and proceeding.”)
4. NJPURE’s Bad Faith or Unwillingness to Comply
Although NJPURE did not initially adequately comply with its obligation to produce
damages related discovery, as evidenced by the Court’s Letter Orders dated October 19 and
December 10, 2015, it is clear that NJPURE did ultimately produce significant information
related to its purported damages during the fact discovery period. While the Court generally
anticipates a more fulsome production, given the production ultimately made, the Court does not
find that NJPURE acted in bad faith or was unreasonably unwilling to comply with the Court’s
Orders or its obligations under the Federal Rules of Civil Procedure. NJPURE is responsible for
failing to produce (1) the email it sent to URG that disclosed a May 18, 2012 rate indication; (2)
the December 2010 rate indication it provided to Dr. Shen as well as a “View Activity History”
for Dr. Chen; (3) its policy retention rates and group retention rates for 2004-2014; and (4) its
Annual Statements for 2013-2015; however, the Court finds that this failure did not result from
bad faith or willfulness.
Under these circumstances, the Court finds that striking the Soudry Reports in total is too
harsh a sanction to impose. Nevertheless, given the Court’s explicit instructions, the Court finds
that precluding NJPURE from relying on the undisclosed information is appropriate. As a result,
22
by September 15, 2017, NJPURE is directed to serve a revised economic expert report that does
not reference or rely upon (1) the email it sent to URG that disclosed a May 18, 2012 rate
indication; (2) the December 2010 rate indication it provided to Dr. Shen as well as a “View
Activity History” for Dr. Chen; (3) its policy retention rates and group retention rates for 20042014; or (4) its Annual Statements for 2013-2015. Princeton shall serve its expert reports by
October 20, 2017.
With respect to Princeton’s request for a monetary sanction, the Court notes that Rule
37(b)(2)(C) provides, “[i]nstead of or in addition to the orders above, the court must order the
disobedient party, the attorney advising that party, or both to pay the reasonable expenses,
including attorney’s fees, caused by the failure, unless the failure was substantially justified or
other circumstances make an award of expenses unjust.” Similarly, as already noted herein, Rule
37(c)(1) provides that the Court “may order payment of the reasonable expenses, including
attorney’s fees, caused by the failure” of a party to provide information required by Rule 26(a).
While the imposition of attorney’s fees and costs under Rule 37(c)(1) are, therefore
discretionary, the imposition is mandated under Rule 37(b)(2)(C) unless the failure to provide
discovery pursuant to a court order is “substantially justified or other circumstances make an
award of expenses unjust.”
Here, the Court finds that the imposition of attorney’s fees and costs are not warranted.
While the Court finds that NJPURE should have produced the undisclosed information during
fact discovery, the Court also finds that NJPURE has in large part provided understandable, if
not substantially justified, reasons for its failure. More importantly, the Court specifically
requested that the instant motion to strike be filed. Under these circumstances, the Court finds
that the imposition of an award of expenses would be unfair.
23
IV.
Conclusion
For the reasons stated above, Princeton’s motion to strike is GRANTED in part. An
appropriate Order follows.
Dated: August 23, 2017
s/ Tonianne J. Bongiovanni
HONORABLE TONIANNE J. BONGIOVANNI
UNITED STATES MAGISTRATE JUDGE
24
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