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Senior Lifestyle Corp. v. Key Benefits Administrators, Inc.

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

June 28, 2019




         This matter is before the Court on Defendant's Renewed Motion to Enforce the July 6, 2018 Discovery Order and for Sanctions and Other Relief [Dkt. 133]. Pursuant to 28 U.S.C. § 636(b)(1)(B), Magistrate Judge Dinsmore, was “designated . . . to conduct any necessary hearings and issue a report and recommendation regarding the proper disposition of Defendant's Motion[.]” [Dkt. 211.] For the reasons set forth below, the Magistrate Judge recommends Defendant's motion be GRANTED.

         I. Background

         Plaintiff Senior Life Style Corporation (“SLC”) entered into a contract with Defendant Key Benefit Administrators, Inc. (“KBA”), which was in effect beginning January 1, 2015 and terminating December 31, 2015. [Dkt. 1 at 3.] This Administrative Services Agreement (“ASA”) between the parties named Defendant KBA as “the Plan Supervisor, for the purpose of establishing the terms and conditions under which KBA agrees to provide administrative services with respect to the Employer's Employee Welfare Benefit Plan [of SLC] . . . .” [Dkt. 1-1 at 1.] Pursuant to the contract, KBA agreed to provide the following services: “administering claims for benefits, paying claims for benefits from SLC assets, and coordinating the purchase of stop-loss insurance.” [Dkt. 1 at 2.] SLC claimed that on November 6, 2015, it discovered its “stop-loss coverage had been cancelled due to KBA's failure to pay owed premiums to the stop-loss insurance carrier” and that KBA contended the reason it discontinued stop-loss payments on behalf of SLC was due to SLC's failure to adequately “make sufficient payments to KBA.” [Dkt. 1 at 1.] SLC filed its lawsuit against KBA on May 8, 2017 and asserted that KBA had: 1) breached its fiduciary duty under ERISA Sections 502(a)(3); 2) breached the ASA; and 3)[1]committed gross negligence for failure to submit payments to the stop-loss carrier and failure to notify the stop-loss carrier “that SLC had reached the reimbursement threshold . . . .” [Dkt. 1.]

         KBA served its requests for production in October 2017 and April 2018; these requests sought information “related to SLC's financial condition and use of plan assets during the time relevant to the parties' dispute[, ]” to which SLC raised relevancy objections. [Dkt. 121 at 1.] KBA attempted to resolve the discovery dispute by meeting and conferring with SLC. [Dkt. 121 at 1.] On May 10, 2018, the parties appeared in-person for a discovery conference with the Court. [Dkt. 79.] At the conclusion of the discovery conference, the Court authorized the Defendant to file a motion to compel Plaintiff's responses to its First and Second Requests for Production. [Dkt. 79 at 1.] On May 25, 2018, KBA filed its Motion to Compel Plaintiff's Responses to Requests for Production [Dkt. 82]; the Court granted this motion in part, [2] in its July 6, 2018 Order [Dkt. 93]. On August 23, 2018, KBA filed its Motion to Enforce the July 6, 2018 Discovery Order and for Relief Under FRCP 37(b)(2)(A) [Dkt. 107]; the Magistrate Judge held a hearing on this motion on September 6, 2018. [Dkt. 108.] At this time, KBA's motion was denied as premature:

based upon Defendant's counsel's admissions that Defendant [had] no specific evidence regarding any documents or other information that [were] being withheld. However, Defendant was authorized to conduct discovery regarding Plaintiff's efforts in responding to Defendants discovery requests and the Court's order on the motion to compel, and this order [was] without prejudice to Defendant's resubmission of the motion in the event evidence of improper conduct is discovered.

[Dkt. 123 at 2.] SLC filed its Renewed Motion to Enforce the July 6, 2018 Discovery Order and for Sanctions and Other Relief on October 19, 2018. [Dkt. 133; Dkt. 134.] The Magistrate Judge held a hearing on Plaintiff's renewed motion on November 15, 2018 and issued the following preliminary orders: 1) SLC “shall complete its production of documents in compliance with the Court's July 6, 2018 Order on Motion to Compel . . . a[s] quickly as possible”; 2) KBA “shall cooperate in that production as needed”; and 3) “SLC shall report to the Court when that production is complete.” [Dkt. 172.] The Court authorized the filing of the parties' supplemental briefs regarding KBA's renewed motion, once this additional production of SLC documentation was completed and reviewed by KBA. [Dkt. 217.]

         On May 31, 2019, KBA filed its Supplemental Brief in Support of Defendant's Renewed Motion to Enforce Discovery Order and Request for Sanctions and Other Relief[3] [Dkt. 219]. SLC filed its supplemental Response in Opposition on June 10, 2019. [Dkt. 229-1.] Thus, KBA's renewed motion is now ripe for the Court's consideration.

         II. Legal Standard

         A court's authority to sanction parties under Federal Rule of Civil Procedure 37 applies in those instances where a party has failed to comply with a court order, though this order need not be “a formal order”; rather, “[a]n agreement or promise between the parties to conduct discovery in a particular fashion may constitute an order.” Blasius v. Angel Auto., No. 3:13-CV-46-JVB-CAN, 2014 WL 12783287, at *3 (N.D. Ind. Apr. 3, 2014). Further, the Court has “an inherent power to sanction a range of litigation abuses-including discovery abuses-to ensure the orderly and expeditious disposition of cases.” Armstrong v. Amstead Indus., Inc., No. 01 C 2963, 2004 WL 1497779, at *2 (N.D. Ill. July 2, 2004). The Court has “broad discretion” when considering imposition of sanctions “but any sanction imposed must be ‘proportionate to the circumstances surrounding a party's failure to comply with discovery rules.'” Deere v. Am. Water Works Co., Inc., 306 F.R.D. 208, 224 (S.D. Ind. Mar. 26, 2015) (quoting Melendez v. Ill. Bell Tel. Co., 79 F.3d 661, 672 (7th Cir. 1996)).

         III. Discussion

         The Court begins its analysis by discussing SLC's violation of the Court's July 6, 2018 discovery Order. The Court notes that this dispute centers on the existence and content of SLC's financial documentation that reflects its financial performance between January 1, 2015 and June 30, 2016. Among other discovery requests, KBA's First Request for Production No. 23 is integral to KBA's defense of the case. KBA's RFP No. 23 sought the following discovery from SLC:

REQUEST NO. 23 - Any and all documents related to SLC's financial performance during the relevant time period, including documents that reflect or relate to concerns about the occurrence of declining financial performance, less than projected financial performance, liquidity problems and/or shortfalls in available operating capital.

[Dkt. 93 at 11.] The Court expressly rejected SLC's boilerplate objections as to relevance, proportionality, the large breadth of the request, and undue burden. [Dkt. 93 at 12.] The Court's July 6, 2018 Order found that the financial information requested was “[a] central theme of KBA's defense . . . that SLC failed to make required payments to KBA due to cash flow issues that required SLC to use employee payments related to the Plan for other purposes.” [Dkt. 93 at12.] Though it expressly acknowledged the request was broad in nature, the Court found the relevance of this information to “greatly outweigh[ ] the burden of its production” and ordered SLC to fully respond to KBA's RFP No. 23 by July 20, 2018. [Dkt. 93 at 12, 16.] By the Court's deadline, SLC produced a minimal eight documents “including its 2016 financial audit report” leaving KBA suspicious that ...

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