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United States ex rel. Robinson v. Indiana University Health Inc.

United States District Court, S.D. Indiana, Indianapolis Division

June 30, 2015

UNITED STATES ex rel. Judith Robinson, STATE OF INDIANA, Plaintiffs,
INDIANA UNIVERSITY HEALTH INC., HEALTHNET, INC., MDWISE, INC., Defendants. JUDITH ROBINSON bringing this action on behalf of the United States of America and the State of Indiana, Relator.


MARK J. DINSMORE, Magistrate Judge.

This matter comes before the Court on Defendants' Motion to Stay Discovery. [Dkt. 101.] For the reasons stated below, the Court DENIES Defendants' motion.

I. Background

On December 19, 2013, Dr. Judith Robinson ("Relator") filed her "Complaint for Violations of the False Claims Act & the Indiana False Claims and Whistleblower Protection Act." [Dkt. 1.] She alleged that Indiana University Health, Inc. ("IU Health") and HealthNet, Inc. ("HealthNet") had violated the False Claims Act ("FCA") by misrepresenting the manner in which they provided medical care to women with high-risk pregnancies. [ See id. ] The Court sealed the case pursuant to 31 U.S.C. ยง 3730(b)(2), [Dkt. 5], and Relator later amended her complaint to add claims against MDwise, Inc. ("MDwise"). [Dkt. 38.]

On March 10, 2015, the Court lifted the seal and ordered Relator to serve the amended complaint on Defendants. [Dkt. 54.] Relator did so, [Dkts. 57, 59 & 60], and each of the Defendants responded with a motion to dismiss. [Dkts. 94, 96 & 98.] Defendants contend that Relator's amended complaint fails to satisfy the heightened pleading standards of Federal Rule of Civil Procedure 9(b), [ see Dkts. 95, 97 & 99], and Defendants now ask the Court to stay all discovery in this case until the Court resolves their motions to dismiss. [Dkt. 101.]

II. Discussion

A court may stay discovery through an exercise of its inherent authority to manage litigation or through its authority under Federal Rule of Civil Procedure 26(c). See, e.g., E.E.O.C. v. Fair Oaks Dairy Farms, LLC, No. 2:11 CV 265, 2012 WL 3138108, at *2 (N.D. Ind. Aug. 1, 2012) (citing Landis v. North American Co., 299 U.S. 248, 254-55 (1936)); see also Fed.R.Civ.P. 26(c)(1) ("The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense[.]"). The party seeking a stay has no absolute right to a stay; rather, that party "bears the burden of proof to show that the Court should exercise its discretion in staying the case[.]" Cloverleaf Golf Course, Inc. v. FMC Corp., No. 11-CV-190-DRH, 2011 WL 2838178, at *2 (S.D. Ill. July 15, 2011) (citing Indiana State Police Pension Trust v. Chrysler LLC, 556 U.S. 960, 961 (2009)).

To carry its burden, the movant must show that good cause exists for the stay: the good cause determination encompasses factors such as whether the stay will prejudice the nonmovant; whether the stay will simplify the issues in the case; and whether the stay will reduce the burden of litigation for the parties or the court. Fair Oaks Dairy Farms, 2012 WL 3138108, at *2 (citing Abbott Laboratories v. Matrix Laboratories, Inc., 2009 WL 3719214, *2 (N. D. Ill. 2009)); see also id. (emphasis added) (quotation marks and citations omitted) ("[The Court should] balance interests favoring a stay against interests frustrated by the action in light of the court's paramount obligation to exercise jurisdiction timely in cases properly before it."). District courts have " extremely broad discretion " in weighing these factors and in deciding whether a stay should issue. Cloverleaf, 2011 WL 2838178, at *2 (emphasis original) (citing Crawford-El v. Britton, 523 U.S. 574, 598 (1998)).

Defendants in this case contend that good cause exists for a stay of discovery for two reasons. They first argue that a stay will effectuate the purpose of Federal Rule of Civil Procedure 9(b). [Dkt. 101 at 5-6.] They then argue that a stay will relieve them of the undue burden of responding to Relator's expansive discovery requests. [ Id. at 6-7.]

A. Purpose of Rule 9(b)

Federal Rule of Civil Procedure 9(b) requires a plaintiff asserting fraud to "state with particularity the circumstances constituting" the fraud. The rule applies to FCA allegations such as those in this case, see, e.g., U.S. ex rel. Gross v. AIDS Research Alliance-Chicago, 415 F.3d 601, 604 (7th Cir. 2005), and Relator must accordingly plead the "the who, what, when, where, and how" of Defendants' allegedly false statements. See id. at 605. The purpose of this heightened pleading standard is to protect a defendant's reputation from harm; to minimize "strike suits" and "fishing expeditions;" and to provide notice of the claim to the adverse party. Jepson, Inc. v. Makita Corp., 34 F.3d 1321, 1327 (7th Cir. 1994) (quoting Vicom, Inc. v. Harbridge Merch. Servs., Inc., 20 F.3d 771, 777 (7th Cir. 1994)).

Defendants seize on this purpose as a basis to stay discovery pending resolution of their motions to dismiss. Rule 9(b), the argument goes, is intended to require pre-suit investigation- not a post-suit fishing expedition-and Defendants accordingly note that some courts have described Rule 9(b) as a "gatekeeper" or prerequisite to discovery. [Dkt. 101 at 4 (citing U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 185 (5th Cir. 2009) ("In cases of fraud, Rule 9(b) has long played that screening function, standing as a gatekeeper to discovery, a tool to weed out meritless fraud claims sooner than later."); U.S. ex rel. Atkins v. McInteer, 470 F.3d 1350, 1359 (11th Cir. 2006) (quotation omitted) ("The particularity requirement of Rule 9 is a nullity if Plaintiff gets a ticket to the discovery process without identifying a single claim.")).] Defendants thus argue that no discovery should occur in this case until after Relator has affirmatively demonstrated that she has satisfied the requirements of Rule 9(b) by surviving Defendants' motions to dismiss.

As an initial matter, two of the cases on which Defendants rely, Grubbs and Atkins, come from outside this circuit, and this Court is accordingly not obligated to follow them. Thus, even assuming that those cases establish a rule that generally forbids discovery pending resolution of a Rule 9(b) motion, [1] this Court may still exercise its discretion to determine that, in this case, no stay is warranted. Moreover, neither Grubbs nor Atkins specifically addressed whether a stay of discovery was appropriate pending a Rule 9(b) motion to dismiss; instead, their comments about discovery were made only in addressing the merits of the defendants' motions to dismiss. See Grubbs, 565 F.3d at 183; Atkins, 470 F.3d at 1353. Those remarks thus appear to be dicta, and they are accordingly entitled to less weight than this court might otherwise give them.

Next, Defendants cite Jepson, Inc. v. Makita Corp., 34 F.3d 1321, 1327 (7th Cir. 1994), for the proposition that an FCA "relator must be able to sufficiently plead a cause of action under Rule 9(b) without resorting to discovery." [Dkt. 101 at 3 (emphasis original).] This statement reads Jepson too broadly. As noted above, the Seventh Circuit in that case did acknowledge that one purpose of Rule 9(b) is to prevent "fishing expeditions, " but the court said nothing about the FCA or the propriety of granting a stay pending a motion to dismiss pursuant to Rule 9(b). Moreover, there exists an obvious distinction between 1) allowing a "fishing expedition" and 2) allowing the parties to engage in the usual course of discovery. See, e.g., Ribble v. Kimberly-Clark Corp., 717 F.Supp.2d 820, 824 (E.D. Wis. 2010) ("[A]llowance of broad discovery is not a fishing license."); Piacenti v. Gen. Motors Corp., 173 F.R.D. 221, 224 (N.D. Ill. 1997) ("The legal tenet that relevancy in the discovery context is broader than in the ...

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