Knisely v. National Better Living Association, Inc et al
Filing
167
MEMORANDUM OPINION AND ORDER SUSTAINING OBJECTIONS AND REVERSING IN PART MAGISTRATE COURT'S FEBRUARY 11, 2015 ORDER. Signed by District Judge Gina M. Groh on 3/11/2015. (tlg)
IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF WEST VIRGINIA
MARTINSBURG
DAVID KNISELY,
Plaintiff,
v.
CIVIL ACTION NO.: 3:14-CV-15
(JUDGE GROH)
NATIONAL BETTER LIVING
ASSOCIATION, INC., AMERICAN MEDICAL
AND LIFE INSURANCE COMPANY, and
JOHN/JANE DOES,
Defendants.
MEMORANDUM OPINION AND ORDER SUSTAINING OBJECTIONS AND
REVERSING IN PART MAGISTRATE COURT’S FEBRUARY 11, 2015 ORDER
Pending before the Court are Defendant National Better Living Association, Inc.’s
(“NBLA”) Objections [ECF 159] to the magistrate court’s February 11, 2015 Order Granting
in Part and Denying in Part Plaintiff’s Motion to Compel Discovery Responses from NBLA
[ECF 239]. For the following reasons, the Court SUSTAINS NBLA’s Objections and
REVERSES IN PART the magistrate court’s February 11, 2015 Order.
I. Background1
This case concerns an alleged scheme to sell members of NBLA a junk health
insurance policy offered by American Medical and Life Insurance Company (“AMLI”).
Plaintiff David Knisely purchased one such policy. Based on that transaction, Knisely filed
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The factual allegations of Knisely’s live complaint are detailed in this Court’s August 19, 2014
Memorandum Opinion and Order Granting in Part NBLA’s Motion to Dismiss, Granting in Part American
Medical and Life Insurance Company’s Motion for Judgment on the Pleadings, and Denying Plaintiff’s
Motion to Amend.
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suit against NBLA, AMLI and John/Jane Does in West Virginia state court on December
12, 2013. His complaint raised the following claims: (1) violations of the Racketeer
Influenced and Corrupt Organizations Act (“RICO”) against all defendants; (2) violations of
the West Virginia Unfair Trade Practices Act (“UTPA”) against all defendants; (3) violations
of the West Virginia Discount Medical Plan Organizations and Discount Prescription Drug
Plan Act Organization Act (the “Plan Act”) against NBLA; (4) bad faith and breach of
contract against AMLI; (5) fraud against all defendants; and (6) unconscionability against
all defendants.
On January 29, 2014, NBLA removed this case to this Court with AMLI’s consent.
NBLA later moved to dismiss the complaint for lack of personal jurisdiction and failure to
state a claim upon which relief can be granted while AMLI moved for judgment on the
pleadings. In responding to these motions, Knisely stated that, if the Court was inclined to
dismiss any part of his complaint, he would request leave to amend it.
While those motions were pending, Knisely moved to compel production of NBLA’s
financial statements from 2005 to the present, which the Court referred to the magistrate
court. Knisely argued these documents were relevant to his RICO claim. NBLA contested
that position and raised other grounds for denying the motion.
On July 18, 2014, the magistrate court granted the motion, stating:
Although the Court agrees that the production of the financial statements
may be premature as it relates to Plaintiff’s punitive damage claim or
Defendant’s ability to satisfy a judgment, the Court finds that the Plaintiff’s
complaint does contain allegations of violations of the federal Racketeer
Influenced and Corrupt Organizations Act and that these financial statements
may lead to the discovery of admissible evidence with regard to those issues.
Then, on August 19, 2014, the Court issued a memorandum opinion and order
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granting in part NBLA’s motion to dismiss and AMLI’s motion for judgment on the pleadings
and denying Knisely’s motion to amend his complaint.2 In granting NBLA’s motion to
dismiss in part, the Court dismissed the RICO claims and granted NBLA leave to file a
motion to dismiss concerning whether this Court can exercise personal jurisdiction over it
without the RICO claims. Given the pending personal jurisdiction issue, the Court denied
the remainder of NBLA’s motion to dismiss without prejudice and granted NBLA leave to
refile it should the Court find personal jurisdiction over NBLA. In granting AMLI’s motion
for judgment on the pleadings in part, the Court dismissed the RICO, bad faith and breach
of contract, and § 33-11-4(1)(a), (1)(e) and (2) UTPA claims. The Court denied the motion
to dismiss the UTPA claims brought under § 33-11-4(9) and Rule § 114-14-4. Finally, the
Court denied the motion as moot concerning the fraud and unconscionability claims
because Knisely withdrew them as to AMLI.
On September 11, 2014, Knisely filed a second motion to compel, which contended
that NBLA had not produced all of its financial statements per the magistrate court’s order.
The magistrate court denied the motion because Knisely had only offered speculation that
additional financial statements existed. Then, on October 21, 2014, Knisely filed his third
motion to compel discovery responses from NBLA.
With a stay imposed on October 21, 2014 lifted, the magistrate court held an
evidentiary hearing concerning Knisely’s third motion to compel and, on February 11, 2015,
entered an Order granting the motion in part. NBLA now objects to the portion of that
Order that granted the motion to compel as to requests for production of documents 4 and
5. Knisely contests these objections.
2
Although Knisely did not file a separate motion to amend, the Court construed his request to amend
as a motion since he sought such relief.
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II. Standard of Review
A party may object to a magistrate judge’s order on a motion to compel. Fed. R. Civ.
P. 72(a); see also 28 U.S.C. § 636(b)(1)(A). The “clearly erroneous” or “contrary to law”
standard of review governs review of such orders. Fed. R. Civ. P. 72(a). If a magistrate
judge’s decision is “clearly erroneous or is contrary to law,” a district court may modify or
set aside any portion of the decision. Id. A court’s “finding is ‘clearly erroneous’ when
although there is evidence to support it, the reviewing court on the entire evidence is left
with the definite and firm conviction that a mistake has been committed.” United States v.
United States Gypsum Co., 333 U.S. 364, 395 (1948); see also Harman v. Levin, 772 F.2d
1150, 1152 (4th Cir. 1985). Because a magistrate judge has broad discretion afforded to
resolve “nondispositive discovery disputes, the court should only overrule a magistrate
judge’s determination if this discretion is abused.”
Shoop v. Hott, Civil Action No.
5:08CV188, 2010 WL 5067567, at *2 (N.D.W. Va. Dec. 6, 2010) (citing Detection Sys., Inc.
v. Pittway Corp., 96 F.R.D. 152, 154 (W.D.N.Y. 1982)).
III. Discussion
NBLA objects to the magistrate court compelling responses to requests for
production of documents 4 and 5 on several grounds, including that it was clearly
erroneous to find the discovery sought relevant. Because the Court agrees that reversal
is warranted on that basis, it does not reach NBLA’s other arguments.
Like Knisely’s initial motion to compel, these requests seek NBLA’s financial
information, this time concerning NBLA’s communication with its accountants or auditors.
Specifically, request for production 4 provides:
From 2006 to the present, please produce each and every communication,
correspondence, document, or other tangible item that was exchanged
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between any executive officer or director of NBLA and WT Uniack & Co.,
12600 Dearfield Parkway, Ste. 100, Alpharetta, GA 30004, or any other
accountant or auditor.
Request for production 5 provides:
In the event that other persons or entities other than officers or directors of
NBLA provided information concerning NBLA to WT Uniack & Co., 12600
Dearfield Parkway, Ste. 100, Alpharetta, GA 30004, this information is within
NBLA’s control; for the years 2006 to the present, please produce each
communication and correspondence, all documentation, and any and all
other tangible items provided to WT Uniack & Co., 12600 Dearfield Parkway,
Ste. 100, Alpharetta, GA 30004, or any other accountant or auditor, along
with the identity of the person or entity who provided the information and the
reason therefore.
NBLA objected to these requests on multiple grounds, including that the information
was irrelevant since this Court had dismissed the RICO claim. The magistrate court
rejected this argument, reasoning:
In the present case, NBLA has failed to demonstrate that the information
sought in Requests Nos. 4 and 5 is not relevant to Plaintiff’s remaining claims
against NBLA. Just as NBLA’s financial statements were relevant for prior
requests for production, the Court finds that additional financial documents
from NBLA may lead to the discovery of admissible evidence related to the
remaining claims. Accordingly, NBLA’s objections to Requests for Production
of Documents Nos. 4 and 5 do not require denial of Plaintiff’s Motion to
Compel.
NBLA argues that this was clearly erroneous because the magistrate court
previously justified discovery of its financial information based on the RICO claim and such
discovery is not relevant to Knisely’s remaining claims. Knisely responds that NBLA’s
financial information is relevant to his remaining claims and asserts that he is seeking to
amend his complaint to add RICO defendants whose involvement in the alleged RICO
enterprise will be illuminated by NBLA’s financial documents.
Absent a court order limiting the scope of discovery, “[p]arties may obtain discovery
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regarding any nonprivileged matter that is relevant to any party’s claim or defense.” Fed.
R. Civ. P. 26(b)(1). But, “[f]or good cause, the court may order discovery of any matter
relevant to the subject matter involved in the action.” Id. In addition, relevant information
“need not be admissible at the trial if the discovery appears reasonably calculated to lead
to the discovery of admissible evidence.” Id. Thus, “the discovery rules are given ‘a broad
and liberal treatment.’” Nat’l Union Fire Ins. Co. of Pittsburgh, P.A. v. Murray Sheet Metal
Co., 967 F.2d 980, 983 (4th Cir. 1992) (quoting Hickman v. Taylor, 329 U.S. 495, 507
(1947)). “[T]he party asserting that the information requested is not relevant . . . bears the
burden of establishing that the information is not relevant.” Kidwiler v. Progressive
Paloverde Ins. Co., 192 F.R.D. 193, 199 (N.D.W. Va. 2000).
Here, when granting Knisely’s first motion to compel, the magistrate court found
NBLA’s financial information relevant to the RICO claim. This Court later dismissed that
claim, leaving the UTPA, fraud, unconscionability and Plan Act claims. Requests for
production 4 and 5 again seek NBLA’s financial information. Upon review of the record,
NBLA has shown that this information is not relevant to Knisely’s remaining claims. The
UTPA claim alleges NBLA mishandled a claim Knisely made under the AMLI policy by, for
example, misrepresenting policy provisions. Similarly, the fraud claim alleges that NBLA
made false statements concerning the AMLI policy, and the unconscionability claim
maintains NBLA fraudulently induced Knisely to purchase the policy. These claims contain
no allegations that reasonably may be related to NBLA’s financial information. The same
is true for the Plan Act claim, which concerns NBLA’s failure to obtain a license to do
business in West Virginia and post a surety bond. The fact that Knisely has consistently
argued that NBLA’s financial information concerns RICO claims he seeks to bring against
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other entities further shows that NBLA’s financial information lacks any connection to
Knisely’s existing claims.
Thus, without any indication as to how NBLA’s financial
information is relevant or would lead to the discovery of admissible evidence following
dismissal of the RICO claim, this Court finds that this portion of the Order was clearly
erroneous and reverses it.
IV. Conclusion
For the foregoing reasons, the Court SUSTAINS NBLA’s Objections and
REVERSES IN PART the magistrate court’s February 11, 2015 Order Granting in Part and
Denying in Part Plaintiff’s Motion to Compel Discovery Responses from NBLA. The Court
reverses the portion of the February 11, 2015 Order that ordered NBLA to produce
documents responsive to Requests for Production of Documents 4 and 5 on or before
March 13, 2015.
Accordingly, the Court DENIES the Plaintiff’s Third Motion to Compel as to his
Requests for Production of Documents 4 and 5.
The Clerk is directed to transmit copies of this Order to all counsel of record herein.
DATED: March 11, 2015
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