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State Farm Mutual Automobile Insurance Co. v. Eastern Medical

August 5, 2008

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY AND STATE FARM FIRE & CASUALTY COMPANY, PLAINTIFFS,
v.
EASTERN MEDICAL, P.C., MEDICAL ACUPUNCTURE SERVICES, P.C., ROBERT HARD, M.D., ELVIN RUIZ, M.D., JOSEPH MORRIS A/K/A JOSEPH CAROLLO, BAYSIDE MANAGEMENT, INC., MANAGEMENT SERVICE ORGANIZATION, INC., LAI FAN XUE, CHENG HE SU, LI LI ZHANG, QUN LIU, RUN SHENG XIE, AND YAN YAN YU, DEFENDANTS.



The opinion of the court was delivered by: Levy, United States Magistrate Judge

MEMORANDUM AND ORDER

Defendants Eastern Medical, P.C. ("Eastern"), Medical Acupuncture Services, P.C. ("MAS"), Dr. Robert Hard, Dr. Elvin Ruiz, Lai Fan Xue, Cheng He Su, Li Li Zhang, Qun Liu, Run Sheng Xie, and Yan Yan Yu (collectively, "defendants") move pursuant to Federal Rule of Civil Procedure 37 to compel plaintiffs State Farm Mutual Automobile Insurance Company and State Farm Fire & Casualty Company ("plaintiffs") to provide the special investigation unit ("SIU") file compiled by plaintiffs on each defendant.*fn1 For the reasons given below, defendants' motion is granted in part and denied in part.

BACKGROUND

On August 10, 2005, plaintiffs filed suit in this Court, alleging civil Racketeering Influenced and Corrupt Organizations Act ("RICO") violations under 18 U.S.C. § 1962 and common law fraud claims. (See Complaint, dated Aug. 10, 2005, ¶¶ 50-53, 57-59, 61-65, 67-71, 73-76, 80-82, 84-88, 90-94.) Plaintiffs seek to recover money that defendants allegedly acquired "by submitting, and causing to be submitted, thousands of fraudulent bills relating to medically unnecessary acupuncture services that were purportedly rendered to victims of automobile accidents in . . . New York." (Amended Complaint, dated Sept. 10, 2007 ("Compl."), ¶ 1.) Furthermore, they seek a declaratory judgment holding that they have no legal obligation to pay any claims submitted by Eastern or MAS because:

(i) [Eastern and MAS] were fraudulently incorporated, and therefore, ineligible to seek or recover no-fault benefits;

(ii) Eastern . . . was not authorized by the State of New York to provide and charge for acupuncture services;

(iii) Robert Hard, M.D., and Elvin Ruiz, M.D., the purported owners of Eastern . . . were not certified to practice acupuncture prior to December 13, 2001 and November 28, 2001, respectively, and therefore could not lawfully own, control or practice through an acupuncture professional corporation; and

(iv) [Eastern and MAS] engaged in unlawful fee splitting with non-medical professionals.

(Compl. ¶ 2.)

After a series of lengthy discovery battles, the parties have resolved the bulk of their disputes, save one: whether plaintiffs must produce "the SIU file compiled by [plaintiffs] on each party to the lawsuit." (Eastern Medical, Medical Acupuncture Services and Affiliated Defendants' Memorandum of Law in Support of Motion to Compel Discovery, dated Oct. 31, 2007 ("Defs. Mem."), 8. See generally Order, dated May 16, 2008; Order, dated Feb. 29, 2008; Defs. Mem. 4-7, 15-19.) Plaintiffs argue that the SIU files are privileged and not relevant. (See Response in Opposition to Defendants' [sic] Eastern Medical, PC, Medical Acupuncture Services, PC, Robert Hard, Elven Ruiz, Lai Fan Xue, Cheng He Su, Li Li Zhang, Qun Liu, Run Sheng Xie and Yan Yan Yu Motion to Compel Discovery, dated Dec. 21, 2007 ("Pls. Opp'n"), 14, 16.)

STANDARD OF REVIEW

Under the Federal Rules of Civil Procedure, "[p]arties may obtain discovery regarding any non-privileged matter that is relevant to any party's claim or defense." Fed. R. Civ. P. 26(b)(1). Courts should construe the scope of discovery "broadly," see Spina v. Our Lady of Mercy Med. Ctr., No. 97 Civ. 4661, 2001 WL 630481, at *2 (S.D.N.Y. June 7, 2001) (citing Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978)), but not to an extent that permits parties to "roam in the shadow zones of relevancy and to explore matter which does not presently appear germane on the theory that it might conceivably become so." Id. (quotation marks & citation omitted).

With respect to the discovery of privileged information, the Second Circuit has held that claims of privilege "must be strictly construed and accepted 'only to the very limited extent that . . . excluding relevant evidence has a public good transcending the normally predominant principle of utilizing all rational means for ascertaining truth.'" Cox v. Miller, 296 F.3d 89, 107 (2d Cir. 2002) (quoting Trammel v. United States, 445 U.S. 40, 50 (1980)) (quotation marks & citation omitted). "The party asserting the privilege and resisting discovery, [sic] has the burden of establishing the existence of the privilege in all respects." Allen v. W. Point-Pepperell, Inc., 848 F. Supp. 423, 426-27 (S.D.N.Y. 1994); accord Onebeacon Ins. Co. v. Forman Int'l, Ltd., No. 04 Civ. 2271, 2006 WL 3771010, at *4 (S.D.N.Y. Dec. 15, 2006). The Federal Rules of Evidence state that the privilege of a . . . person . . . shall be governed by the principles of the common law as they may be interpreted by the courts of the United States in the light of reason and experience. However, in civil actions and proceedings, with respect to an element of a claim or defense as to which State law supplies the rule of decision, the privilege of a . . . person . . . shall be determined in accordance with State law.

Fed. R. Evid. 501; see Myers v. Phillips, No. 04 CV 4365, 2007 WL 2276388, at *1 (E.D.N.Y. Aug. 7, 2007); Komlosi v N.Y. State Office of Mental Retardation & Dev. Disabilities, No. 88 Civ. 1792, 1992 WL 77544, at *2 (S.D.N.Y. Apr. 3, 1992); cf. King v. Conde, 121 F.R.D. 180, 187 (E.D.N.Y. 1988). More simply, federal courts generally will apply federal privilege rules in ...


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