Hansen v. Combined Transport, Inc. et al

Filing 71

ORDER: Denying Motion for Sanctions 32 ; Granting in Part Denying in Part Motion to Compel 36 ; Denying Motion for Leave 49 ; Granting Motion to Compel 52 ; Denying Motion for Sanctions 53 ; Denying Motion for Disqualification of Counsel 57 . Please access entire text by document number hyperlink. Signed on 05/08/2014 by Magistrate Judge Mark D. Clarke. (rsm)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
MEDFORD DIVISION

CHRIS HANSEN,

Case No. 1: 13-cv-01993-CL
Plaintiff,

v.

ORDER

COMBINED TRANSPORT, INC.,
Defendant.
CLARKE, Magistrate Judge
Plaintiff Chris Hansen brings various employment and contract related claims against the
defendant Combined Transport, Inc., ("Combined Transport") based on Oregon and Washington
state law. This Court has jurisdiction under 28 U.S.C. § 1332. The case comes before the Court
on the defendant's motions for relief, imposition of sanctions, and disqualification of counsel
(#32, #53, #57), discovery motions (#36), and motion for leave to file an amended answer (#49).
Also at issue is Plaintiffs motion to compel (#52). The motions are granted and denied as
discussed below.

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BACKGROUND
Plaintiff Chris Hansen began his employment with the defendant, Combined Transport,
in June, 2011. At that time, the parties entered into a Letter of Agreement, stating the terms of
Plaintiffs employment, as well as a Non-Solicitation Agreement. The Letter of Agreement
provided, in part, that Combined Transport would pay Plaintiff "a salary of $5,800 per month
with a bonus of no less than 1% on loads hauled by Combined [Transport]' s equipment and 2%
on loads that are brokered." The Non-Solicitation Agreement provided, in part, that for two
years after his employment terminated, Plaintiff would not solicit or do business with any
customers that were "exclusive" customers of Combined Transport as of June, 2011.
Nearly two years later, in April, 2013, Plaintiff's employment with Combined Transport
was terminated. The facts surrounding Plaintif:f s termination are disputed by the parties. For
instance, Plaintiff claims that Combined Transport's General Manager, Tony Keller, asked him
what he felt he was owed for his bonuses, and what it would take to "get out of the Letter of
Agreement." Plaintiff claims that he then asked Pam Hurley, another Combined Transport
employee, to prepare reports for him, which he intended to use to calculate the bonuses owed.
Ms. Hurley, currently still an employee at Combined Transport, submitted a declaration denying
that such a conversation took place. Regardless, it is undisputed that certain documents
belonging to Combined Transport were in Plaintiffs possession after he was terminated. It is
also undisputed that Keller sent letters to Plaintiff and Plaintif:f s attorneys requesting the return
of all Combined Transport's equipment, records, notes,.documents, and other proprietary items
and information, as provided in the Letter of Agreement.
On April12, 2013, Plaintiff met with his attorney, John Kreutzer, and turned overthe
various documents he had in his possession relating to Combined Transport. These documents

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were place into a binder labelled "client documents." On April 18, Mr. Kreutzer receiv~d from
Plaintiff a series of PDF's via email, which contained a 582-page report. The report contained a
customer list, labelled by Combined Transport, "New Customer Report." Mr. Kreutzer states
that due to his own error, and possibly that of his staff, this report was not placed into the client
documents binder; instead a separate binder was created. The next day, April 19, 2013,
Plaintiffs attorney sent Mr. Keller a letter, which stated, "Attached are Combined documents
that were in Mr. Hansen's possession that are now being returned to you." The letter also
indicated that Mr. Hansen himself did not retain copies or electronic files of those documents.
However, it now appears that the 582-page New Customer Report was not included in the
attachment to that letter. Mr. Kreutzer states that this was an unintentional omission by his
office, probably due to the fact that the report was placed in a separate binder from the other
client documents. There was no pending litigation at that time.
Besides the letters regarding the Combined Transport documents in Plaintiffs
possession, the parties also exchanged correspondence regarding the bonuses due Plaintiff under
the terms of the Letter of Agreement. After it became clear that the parties could not resolve
their dispute over the bonuses, Plaintiff filed his Complaint in King County Superior Court in the
state of Washington. The Complaint was served on the defendant on June 26, 2013, and the
defendant then removed to federal court in the Western District of Washington (Dkt. # 1). The
case was transferred to this Court on a motion to change venue on November 8, 2013 (Dkt. #23).
In September, 2013, the defendant received Plaintiffs Rule 26 Initial Disclosures, which
identified "Customer Lists" under Rule 26(a)(l )(A)(ii). The actual 582-page New Customer
Report, however, was not produced to the defendant until January, 2014, although Plaintiff

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counsel believed at the time that it had been produced back in April, 2013. Plaintiff claims he
does not retain any copies of this report, and his attorneys retain one computer disk copy.

DISCUSSION
I.

Motions for relief, sanctions, disqualification of counsel (#32, 53, 57) are denied.
The Plaintiff has submitted a declaration denying that he obtained the documents at issue

in any improper way, and his attorneys have provided evidence that the New Customer Report
was not immediately provided to defense counsel due to an unintentional error. Plaintiff counsel
did disclose the report, the attorneys eventually produced it in its entirety, and they are willing to
tum over the computer disk containing the only copy to defense counsel. Plaintiff counsel stated
that the report was not examined, and it was not used in drafting Plaintiffs First Request for
Production: Considering that portions of the report are likely discoverable in this litigation, and
there is no evidence of bad faith or improper motive for not disclosing the document sooner, the
defendant's motions regarding this report are denied: However, Plaintiff counsel shall return all
copies to defense counsel, including the computer disk, immediately.

II.

Defendant's motion to compel (#36) is granted in part and denied in part.
"Parties may obtain discovery regarding any nonprivileged matter that is relevant to any

party's claim or defense . . .. Relevant information need not be admissible at trial if the discovery
appears reasonably calculated to lead to the discovery of admissible evidence." Fed. R. Civ. P.
26(b )(1 ). Under Rule 26, all such discovery is subject to restrictions imposed by the court to
limit the frequency or extent of discovery if the court determines that "the discovery sought is
unreasonably cumulative or duplicative, or can be obtained from some other source that is more
convenient, less burdensome, or less expensive." Fed. R. Civ. P. 26(b)(2)(C)(i).

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a. Medical Records

The defendants claim that they are entitled to Plaintiff's medical records because Plaintiff
asserts damages for emotional distress based on his claims for wrongful discharge. Defendants
argue that the damages claim puts Plaintiffs medical condition at issue, and therefore defendants
are entitled to all medical records "of each and every physician, psychiatrist, psychologist,
counselor, plastic surgeon, chiropractor, naturopath, and other practitioner of the healing arts
who examined or treated plaintiff from January 1, 2003 to present."
Plaintiff claims these records are privileged and not subject to discovery. The cases
relied upon by Plaintiff, however, apply federal law regarding physician- and psychologistpatient privilege. See, e.g., Thomas v. UPS Ground Freight. Inc .. et al., Civ. No. 06-1281, slip
op. at 3-6 (D.Or. Feb. 15, 2007); Kinnee v. Shack. Inc., Civ. No. 07-1463-AC, 2008 WL
1995458 (D. Or. May 6, 2008). In a civil case, "state law governs privilege" when state law
supplies the rule of decision on a claim or defense. Fed. R. Evid. 501. Therefore, in this case,
Washington and Oregon state law govern the privilege at issue.
Washington protects confidential physician-patient (RCW 5.60.060(4)) and psychologistpatient (RCW 18.83.110) communications. See Petersen v. State, 100 Wash.2d 421,429, 671
P.2d 230 (1983). These statutory privileges were both enacted in derogation of the common law
and are strictly construed. Id. The purpose behind the physician-patient privilege is to promote
proper treatment by encouraging full disclosure and to protect the patient from embarrassment.
Smith v. Orthopedics Int'L Ltd., 170 Wash.2d 659, 667, 244 P.3d 939 (2010). However, "when a
plaintiff puts his mental health at issue by alleging emotional distress, he waives his
psychologist-patient privilege for relevant mental health records. The defendant is entitled to
discover any records relevant to the plaintiff's emotional distress." Lodis v. Corbis Holdings.

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Inc., 172 Wash. App. 835, 855,292 P.3d 779, 791 (2013). Even ifthe plaintiff stipulates that he
will not introduce any psychologist or expert testimony, the records may still be relevant to show
causation and magnitude. Id.
Oregon also protects confidential physician-patient (ORS 40.235) and psychologistpatient (ORS 40.230) communications. Like in Washington, a plaintiff in Oregon waives his
privilege by putting his psychological condition into question by claiming emotional distress
damages. Baker v. En2:lish, 134 Or. App. 43,46-47, 894 P.2d 505, 507 (1995) aff'd in part, rev'd
in part, 324 Or. 585, 932 P.2d 57 (1997) ("There is no dispute that [plaintiffs] records, as they
pertained to plaintiff himself, were not privileged, because plaintiff put his own psychological
condition into question by claiming emotional distress damages.").
In this case, Plaintiffhas alleged emotional distress damages; therefore he has waived his
privilege under both Oregon and Washington state law. Therefore, any records of treatment, by
any medical professional, for emotional or psychological matters shall be produced to the
defendants under an appropriate protective order to be worked out by the parties. Plaintiff has
not, however, put his physical health at issue in this case. Therefore he is not required to
produce medical records not pertaining to his mental or emotional health.
b. Earnings Statements

The Court finds that the Plaintiffs records ofincome and earnings statements from May,
2011 to present are discoverable and shall be produced to the defendants under an appropriate
protective order to be worked out by the parties.
III.

Defendant's motion for leave to file Second Amended Answer (#49) is denied.

Federal Rule of Civil Procedure 15(a) provides that leave to amend a pleading "shall be
freely given when justice so requires." This rule represents a "strong policy permitting

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amendment." Texaco. Inc. v. Ponsoldt, 939 F.2d 794, 798 (9th Cir.1991). The liberality ofthe
rule is qualified by the requirement that the amendment not cause undue prejudice to the
opposing party, is not sought in bad faith, and is not futile. Green v. Citv of Tucson, 255 F.3d
1086, 1093 (9th Cir.200 1). Thus, whether leave to amend should be granted is generally
determined by considering the following: 1) undue delay; 2) bad faith; 3) futility of amendment;
and 4) prejudice to the opposing party. Lockheed Martin v. Network Solutions Inc., 194 F .3d
980, 986 (9th Cir.1999).
Not all ofthe factors merit equal weight. Eminence Capital. LLC v. Aspeon. Inc., 316
F.3d 1048, 1052 (9th Cir.2003) (per curiam). The consideration of prejudice to the opposing
party carries the greatest weight, and is the "touchstone of the inquiry under Rule 15(a)." Id. at
1052. Absent prejudice, or a strong showing of any of the remaining factors, there exists a
presumption under rule 15(a) in favor of granting leave to amend. Id. Although delay is not a
dispositive factor in the amendment analysis, it is relevant, Morongo Band of Mission Indians v.
Rose, 893 F.2d 1074, 1079 (9th Cir.1990), especially when no reason is given for the delay.
Swanson v. United States Forest Serv., 87 F.3d 339,345 (9th Cir.1996). Where the legal basis
for a cause of action is tenuous, futility supports the refusal to grant leave to amend. Morongo
Band, 893 F.2d at 1079.
In this case, defendants move for leave to amend their answer for a second time based on
the same assertions and arguments defendants made in their motions for sanctions and
disqualification of counsel. That is, defendants contend that Plaintiff deliberately stole the New
Customer Report and his attorneys intentionally did not disclose or produce it to the defendants.
The revised and additional allegations in the Proposed Second Amended Answer assert new
claims against the Plaintiff as well as his attorneys. The Court finds a substantial number of

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these claims to be futile as well as prejudicial, as they would require Plaintiff to obtain new
counsel even though the Court has found no evidence of counsel's bad faith at-improper motive,
as discussed above. Defendant's motion for leave to amend is denied at this time.
IV.

Plaintiff's motion to compel (#52) is granted.
Plaintiff requests production of records of all loads hauled by Combined from June, 2011

to present. The defendants object, protesting that only loads hauled by Combined that were also
brokered by Plaintiff are relevant to his claims; therefore discovery should be limited
accordingly. Plaintiff insists that his contract guaranteed him a 2% bonus on "loads that are
brokered" with no limitation as to the person who brokered the~. While Plaintiffs
interpretation of the contract language as to the 2% bonus may be a stretch, the documents
requested are discoverable and shall be produced to Plaintiff under an appropriate protective
order to be worked out by the parties.

ORDER
1. Defendant's motion for relief (#32) is DENIED.
2. Defendant's motion to compel (#36) is GRANTED in part and DENIED in part.
3. Defendant's motion for leave (#49) is DENIED.
4. Plaintiffs motion to compel (#52) is GRANTED.
5: Defendant's motion for sanctions (#53) is DENIED.
6. Defendant's motion for disqualification of counsel (#57) is DENIED.

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