United States District Court, S.D. Indiana, Indianapolis Division
PAIN CENTER OF SE INDIANA, LLC; INDIANA PAIN MEDICINE AND REHABILITATION CENTER, P.C., and ANTHONY ALEXANDER, M.D. Plaintiffs,
ORIGIN HEALTHCARE SOLUTIONS LLC; SSIMED (d/b/a SSIMED Holding, LLC); ORIGIN HOLDINGS, INC., a Delaware Corporation; JOHN DOES (1-50 inclusive; and JOHN DOES (1-100 inclusive Defendants.
ENTRY ON PLAINTIFFS' OBJECTION TO MAGISTRATE JUDGE LARUE'S JANUARY 28, 2014 ENTRY
RICHARD L. YOUNG, District Judge.
Plaintiffs, the Pain Center of SE Indiana, LLC, The Pain Medicine and Rehabilitation Center, P.C. and Anthony Alexander, M.D., object to the Magistrate Judge's January 28, 2014 Entry denying Plaintiffs' Motion to Compel Defendants, Origin Healthcare Solutions, LLC, SSIMED, d/b/a SSIMED Holding, LLC, and Origin Holdings, Inc., to answer requests numbered 84 through 101 of Plaintiffs' First Set of Production of Documents. For the reasons set forth below, the court SUSTAINS the Plaintiffs' Objection and REMANDS the motion to the Magistrate Judge for proceedings consistent with this Entry.
According to the First Amended Complaint ("Complaint"), SSIMED was established in 1991 as an electronic health record vendor and provider of physical software and services. (Filing No. 16, at ECF p. 4). The software was directed at medical claim coding, patient appointment tracking, and medical insurance billing. (Filing No. 16, at ECF p. 4). Plaintiffs entered into contracts to purchase this software in 2003 and in 2006 from SSIMED but at some later point, Origin Healthcare Solutions assumed the contracts as successor-in-interest to SSIMED. (Filing No. 16, at ECF p. 4, Filing No. 16, at ECF p. 10, Filing No. 16, at ECF p. 16). Origin Holdings is the parent corporation of Origin Healthcare Solutions. (Filing No. 16, at ECF p. 5).
Plaintiffs' Complaint generally alleges that the software they purchased from Defendants (collectively referred to in the Complaint as "Origin" or the "Origin entities"), entitled "Practice Manager" and "EMRge", was defective, support services were deficient, and, as a result, Plaintiffs suffered multimillion-dollar losses. ( See generally, Filing No. 16). The 48-page Complaint consists of thirteen Counts, including a count for fraud (Count I), fraud in the inducement (Count II), breach of contract (Count III), unjust enrichment (Count V), breach of warranties (Count VI), and fraudulent misrepresentation (Count VII).
As regards the three Origin entities who are named defendants in this action, the Complaint alleges that:
The Origin entities, and each of them, were an owner, a co-owner, an agent, representative, partner, and/or alter ego of its co-defendants, or otherwise acting on behalf of each and every remaining Origin entity and, in doing things hereinafter alleged, were acting within the course and scope of their authorities as an owner, a co-owner, an agent, representative, partner, and/or alter ego of its co-defendants, with full knowledge, permission and consent of each and every remaining defendant, each co-defendant having ratified the acts of the other co-defendants.
In support of this allegation, the Complaint alleges that: (1) all operated and were headquartered during the relevant time period at the same corporate address; (2) in correspondence to investors, the public, and consumers, the Origin entities utilized the names of all the various Origin entities interchangeably; (3) the Origin entities shared common directors and other personnel; (4) the Origin entities made decisions in a uniform voice; (5) the directors and personnel were aware of many of the allegations giving rise to the Complaint, including knowingly creating, developing, and propagating false information to consumers and investors; (6) the Origin entities commingled assets; (7) the Origin entities' objectives were common; (8) Origin Holding utilizes Origin Healthcare Solutions as a shell and sham and, to the extent SSIMED exists, Origin Healthcare Solutions utilizes SSIMED as a shell and sham to avoid individual liability; and (9) shareholders invited the public (and the Plaintiffs) to deal with the Origin entities as one entity. (Filing No. 16, at ECF pp. 5-7). As a result, Plaintiffs allege the Origin entities are jointly and severally liable for all relief sought by the Plaintiffs. (Filing No. 16, at ECF p. 7).
Plaintiffs' First Request for Production of Documents includes 103 document requests; only requests numbered 84-101, described by the parties as the alter ego requests, are at issue. (Filing No. 52-1, at ECF pp. 15-19). Those specific requests seek records on various topics from the Origin entities, defined in the First Request for Production of Documents as including not only the three named defendant entities, but also SSIMED Holdings, and Origin Parent, LLC. (Filing No. 52-1, at ECF p. 4). Defendants objected, and the Plaintiffs filed the present Motion to Compel.
Before the Magistrate Judge, the Plaintiffs argued that: (1) the alter-ego discovery is relevant to its claims and defenses, and is not limited solely to the alter-ego issue, but is also germane to other issues; (2) the decision to stay discovery will add time and expense to this case; (3) the decision to stay discovery will prejudice the Plaintiffs by, inter alia, preventing them from filing a dispositive motion on that issue; and (4) Defendants have asked for similar discovery; for example, asking for all financial records relating to the operation or administration of Plaintiffs' enterprises. Defendants responded that the alter ego requests for production were: (1) overly broad because they included entities that were not named in the Complaint; (2) not drafted with "reasonable particularity" as required by Federal Rule of Civil Procedure 34(b)(1)(A); and (3) overly burdensome given the time and cost of producing the discovery to date. Of notable import to the present objection, Defendants also argued that alter ego discovery is relevant only if a finding of liability against the Defendants on the underlying claims is established - presumably during post-judgment proceedings supplemental. Thus, the court should stay discovery on the alter ego issue, which is an issue for the court and not the jury, until a finding of liability is established to minimize jury confusion and promote judicial economy.
In denying Plaintiffs' Motion to Compel the production of materials related to requests numbered 84-101, the Magistrate Judge ruled:
The Court agrees with Defendants that, considering the burden that responding to Plaintiffs' alter-ego requests would impose on them and considering the conditional relevance of those requests (only if the jury returns a verdict in Plaintiffs' favor), Defendants need not comply with Plaintiffs' requests nos. 84-101 at this time.... [I]f Defendants move before trial for summary judgment on the alter-ego issue, then Plaintiffs will be entitled to conduct relevant discovery in order to permit them to meaningfully respond to such a motion. Because the issue will be determined by the Court, it might still decide to take such a motion under advisement until after jury trial; however, Defendants' filing of such a motion before trial would tend to indicate that they have changed their minds about whether the burden of production before trial is undue, leaving judicial efficiency as the primary factor determining whether the motion is held in abeyance.
(Filing No. 64, at ECF pp. 7-8).
II. Standard of ...