Case Name:   Aetna Life Insurance Company, Inc. v. Bay Area Surgical Management, LLC, et al.

 

Case No.:       1-12-CV-217943

 

There are several motions currently before the Court.  Defendants Bay Area Surgical Management, LLC, Bay Area Surgical Group, Inc., Forest Ambulatory Surgical Associates, L.P., SOAR Surgery Center, LLC, Knowles Surgery Center, LLC, National Ambulatory Surgery Center, LLC, Los Altos Surgery Center, LP, Julie Hashemieh, Bobby Sarnevesht, and Javad Zolfaghari (collectively, “BASM”) bring a Motion to Set Aside or Modify Discovery Referee’s Recommended Report RE Plaintiff’s Motion to Compel Document Discovery From BASM and BASM ASC’s.  BASM and 26 subpoenaed non-party physicians bring a Motion to Set Aside or Modify Discovery Referee’s Recommended Order RE Plaintiff’s Motion to Compel Compliance with Physician Subpoenas and an Application to File Under Seal a Compendium of Underlying Pleadings and Records in Support of Motions to Set Aside or Modify the Discovery Referee’s Reports on Plaintiff’s Motions to Compel.

 

The motion to seal is GRANTED.

 

1. Motion to Set Aside or Modify Discovery Referee’s Recommended Report

 

BASM seeks to set aside the order of the discovery referee concerning certain discovery requests by plaintiff Aetna Life Insurance Company (“Aetna”).  BASM argues that the discovery referee’s (Hon. James Trembath) report is procedurally and substantively defective.  BASM asserts that the report makes clear that the referee applied a basic “relevance” standard to the RPDs rather than the “good cause” standard.  BASM contends that this explains the absence of any proper assessment of the credibility, competency, or admissibility of the evidence submitted by Aetna in support of the underlying motion.

 

A party propounding a request for production may move for an order compelling a further response if it deems that an objection in the response is without merit or too general.  (Code Civ. Proc., § 2031.310, subd. (a)(3).)  The motion must set forth “specific facts showing good cause justifying the discovery sought by the demand.”  (Code Civ. Proc., § 2031.310, subd. (b)(1); Kirkland v. Super. Ct. (Guess? Inc.) (2002) 95 Cal.App.4th 92, 98.)  Generally, the party who seeks to compel production has met his burden of showing good cause simply by a fact-specific showing of relevance.  (Ibid.)  If good cause is shown, the burden shifts to the responding party to justify any objections.  (Ibid.)

 

BASM’s motion relies in large part on the proposition that a showing of good cause requires more of an evidentiary showing than that made by Aetna.  BASM is mistaken regarding the standard for good cause.  A showing of good cause does not require expert testimony (and it is not apparent why live expert testimony was needed at the hearing on the discovery); rather, as stated above good cause is shown simply by a fact-specific showing of relevance.  (Kirkland v. Super. Ct., supra, 95 Cal.App.4th at p. 98.)  Consequently, Aetna only needed to show that the financial documents requested are relevant to the facts of this case.  Aetna did this in its moving papers, in which it discussed the need for financial records to value ownership interests and potential hidden compensation to physician-investors.  (See Volume II of Supplemental Compendium of Underlying Pleadings and Records RE (1) Plaintiff’s Motion to Compel Document Discovery From BASM Defendants, and (2) Plaintiff’s Motion to Compel Compliance with Physician Subpoenas Pursuant to CRC 2.551(b)(3), Exhibit 55.)  At that point, the burden shifted to BASM to justify its objections.

 

Concerning the objections, the referee found that BASM had not sufficiently established that the RPDs were “irrelevant, overly burdensome, oppressive, vague, violates [sic] any privilege, is [sic] confidential (private, proprietary, or reasonably available by lesser intrusive means.”  (Compendium of Underlying Pleadings and Records in Support of Motions to Set Aside or Modify Discovery Referee’s Recommended Orders RE (1) Plaintiff’s Motion to Compel Document Discovery from BASM Defendants, and (3) Plaintiff’s Motion to Compel Compliance with Physician Subpoenas (part 2 of 2), Exhibit 36.)  BASM focused on two main objections in its opposition papers; it argued that the RPDs were overbroad and invaded the right to privacy of BASM as well as non-parties.

 

With regard to the first argument, it is true that the RPDs are quite broad.  However, the referee appropriately limited the documents to be produced to documents that are related to the issues in this action.  For example, in response to RPD No. 20, the defendants were ordered “to produce financial reports and documents relating to preparation of the financial reports that pertain to the appraisal or valuation of each such Defendant.”  (Compendium of Underlying Pleadings and Records in Support of Motions to Set Aside or Modify Discovery Referee’s Recommended Orders RE (1) Plaintiff’s Motion to Compel Document Discovery from BASM Defendants, and (3) Plaintiff’s Motion to Compel Compliance with Physician Subpoenas (part 2 of 2), Exhibit 36, p. 3:16-17, emphasis added.)  In response to RPD No. 28, the defendants were ordered to produce ledgers reflecting income and ledgers reflecting any and all sums paid in any context to the investors.”  (Compendium of Underlying Pleadings and Records in Support of Motions to Set Aside or Modify Discovery Referee’s Recommended Orders RE (1) Plaintiff’s Motion to Compel Document Discovery from BASM Defendants, and (3) Plaintiff’s Motion to Compel Compliance with Physician Subpoenas (part 2 of 2), Exhibit 36, p. 3:21-23, emphasis added.)

 

As for the right to privacy, generally the right to privacy does not apply to corporations, but only to people.  (Roberts v. Gulf Oil Corp. (1983) 147 Cal. App. 3d 770, 791.)  With regard to individuals, such as the doctor investors in this action, a right of privacy exists as to a party’s confidential financial affairs.  (See Cobb v. Superior Court (1979) 99 Cal. App. 3d 543, 549-550.)  Even when financial records are protected by the right of privacy, however, discovery of the records is permitted if the discovery sought is directly relevant.  (Britt v. Sup. Ct. (San Diego Unified Port Dist.) (1978) 20 Cal.3d 844, 859-862.)  In the instant matter, the financial information requested is directly relevant to Aetna’s claims.  Aetna’s need for the information requested outweighs BASM’s and the doctors’ privacy concerns, especially since there is a protective order in place.

 

In sum, the discovery referee’s order was appropriate and there is no basis to set it aside.  The Motion to Set Aside or Modify Discovery Referee’s Recommended Report RE Plaintiff’s Motion to Compel Document Discovery from BASM and BASM ASC’s is DENIED.

 

1. Motion to Set Aside or Modify Discovery Referee’s Recommended Order RE Plaintiff’s Motion to Compel Compliance with Physician Subpoenas

 

BASM and the 26 non-party physicians seeks to set aside the recommended report of the discovery referee concerning Aetna’s motion to compel compliance with physician subpoenas.  Most of BASM’s and the physicians’ arguments regarding the requests at issue are the same as those made in connection with the other motion to compel – such as the application of the good cause standard, and whether the documents are protected by the right to privacy (i.e. whether the documents sought are directly relevant).  For the reasons already discussed in connection with the other motion, these arguments are without merit.

 

The remaining arguments are that Aetna is seeking the same documents from the non-party physicians as already sought directly from BASM and, because these documents are subject to the right to privacy, Aetna must show that the documents are not available from less intrusive sources.  Aetna points out that BASM has a three-year document destruction policy.  Therefore, it is likely that Aetna would not have all of the requested documents going back more than three years.

 

Further, in Calcor Space Facility v. Superior Court (1997) 53 Cal. App. 4th 216, 225, cited by Aetna, the court stated:

 

As between parties to litigation and nonparties, the burden of discovery should be placed on the latter only if the former do not possess the material sought to be discovered. An exception to this may exist where a showing is made the material obtained from the party is unreliable and may be subject to impeachment by material in possession of the nonparty.

 

The referee found that “due to the omissions and inconsistencies with regard to the BASM-related Defendants’ production of documents and lack of production of documents that the redundancy argument fails.”  (Compendium of Underlying Pleadings and Records in Support of Motions to Set Aside or Modify Discovery Referee’s Recommended Orders RE (1) Plaintiff’s Motion to Compel Document Discovery from BASM Defendants, and (3) Plaintiff’s Motion to Compel Compliance with Physician Subpoenas (part 2 of 2), Exhibit 49, p. 3:21-25.)  Aetna asserts that there have been several inaccuracies in the documents produced and that Aetna is entitled to receive discovery from the physicians to test the veracity of BASM’s documents.  This argument is well-taken.  This case involves allegations of hidden payments and Aetna therefore has a reason to want to compare documents received from BASM with those received from the physicians and to make sure that no documents are missing from the production.  Moreover, the doctors did not establish any undue burden in producing the documents so there is no reason to prevent them from responding to the subpoenas.  As stated by the referee, “[a]lthough the [physicians] are non-party deponents, they should not be accorded [the] same level of ‘protection’ as non-involved ‘innocent bystanders’.  The [physicians] are directly involved in the transactions at issue and enjoyed the financial benefits thereof.”  (Compendium of Underlying Pleadings and Records in Support of Motions to Set Aside or Modify Discovery Referee’s Recommended Orders RE (1) Plaintiff’s Motion to Compel Document Discovery from BASM Defendants, and (3) Plaintiff’s Motion to Compel Compliance with Physician Subpoenas (part 2 of 2), Exhibit 49, p. 3:17-19.)

 

In sum, the discovery referee’s order was appropriate.  The Motion to Set Aside or Modify Discovery Referee’s Recommended Order RE Plaintiff’s Motion to Compel Compliance with Physician Subpoenas is DENIED.