Allstate Insurance Company et al vs. Nassiri, et al.,, No. 2:2008cv00369 - Document 259 (D. Nev. 2010)

Court Description: ORDER Denying without prejudice 211 Motion to Strike Plaintiffs Claim for Damages and DENYING without prejudice 212 Joinder to 211 Motion to Strike. Signed by Magistrate Judge George Foley, Jr on 12/16/2010. (Copies have been distributed pursuant to the NEF - DXS)
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Allstate Insurance Company et al vs. Nassiri, et al., Doc. 259 1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 7 8 9 10 11 ALLSTATE INSURANCE COMPANY, et al., ) ) Plaintiffs, ) ) vs. ) ) OBTEEN N. NASSIRI, D.C, et al., ) ) Defendants. ) __________________________________________) Case No. 2:08-cv-00369-JCM-GWF ORDER 12 13 This matter is before the Court on Defendants Obteen Nassiri, D.C., Jennifer Nassiri, 14 Advanced Accident Chiropractic Care and Digital Imaging Services’ (hereinafter collectively 15 referred to as the “Nassiri Defendants”) Motion to Strike Plaintiff’s Claim for Damages, Enter 16 Default and Strike Plaintiff’s Complaint (#211), filed on August 15, 2010; Co-Defendants Albert 17 Noorda, M.D. and Marland Medical Center, LLC’s Joinder in the Nassiri Defendants’ Motion 18 (#212), filed on August 18, 2010; Plaintiffs’ Opposition to the Nassiri Defendant’s Motion to 19 Strike Plaintiff’s Claim for Damages, Enter Default and Strike Plaintiff’s Complaint (#228), filed 20 on September 1, 2010; and the Nassiri Defendants’ Reply to Response to Motion to Strike 21 Plaintiff’s Claim for Damages, Enter Default and Strike Plaintiff’s Complaint (#236), filed on 22 September 13, 2010. The Court conducted a hearing in this matter on November 30, 2010. 23 BACKGROUND 24 On March 20, 2008, Plaintiffs Allstate Insurance Company, Allstate Property & Casualty 25 Company and Allstate Indemnity Company (hereinafter collectively referred to as “Allstate”) filed 26 a 42 page “Complaint for Damages and Demand for Jury Trial” (#1) against the Defendants 27 alleging federal and state statutory and common law causes of action. In summary, Plaintiffs allege 28 that Defendants provided unnecessary chiropractic or medical treatment to numerous patients who 1 were allegedly injured in automobile accidents. Many of those patients were either referred to 2 Defendants by the same attorney or were referred by Defendants to that attorney. Complaint (#1), ¶ 3 25. The patients subsequently made claims for bodily injury damages against Plaintiffs’ insureds. 4 Plaintiffs allege that they made inflated settlement payments because of Defendants’ unnecessary, 5 unreasonable and fraudulent diagnoses and treatments. 6 The complaint provided significant factual detail about the chiropractic or medical 7 treatments that Plaintiffs allege were unnecessary, unreasonable and/or fraudulent. Complaint (#1), 8 ¶¶ 19-114. It provided specific descriptions of the diagnosis and treatment of numerous individual 9 claimants who were identified by their initials. It is evident from the complaint and subsequently 10 disclosed information that Plaintiffs conducted a detailed review of the medical records of the 11 claimants and obtained a preliminary expert opinion regarding the allegedly unnecessary or 12 fraudulent treatment provided to those claimants. The complaint, however, was vague as to the 13 total number of claimants involved in the case and the amount of damages sought by Plaintiffs. In 14 this regard, paragraph 63 alleged that there were approximately 300 claimants. Plaintiffs simply 15 alleged damages in excess of $75,000.00. See e.g. ¶168. Plaintiffs served their initial Rule 26(a) disclosures on or about July 21, 2008. Motion 16 17 (#211), Exhibit “1,” Plaintiffs’ Initial Disclosures Pursuant to FRCP 26(a)(1). The disclosure also 18 stated that there were approximately 300 underlying claimants, but provided no information as to 19 the amount of overpayment damages sought by Plaintiffs. The action was thereafter stayed until 20 November 2008 pending the decision on Defendants’ motions to dismiss. The action was again 21 partially stayed until July-August 2009 because the Nassiri Defendants filed for bankruptcy. 22 During those stay periods, the parties engaged in unsuccessful settlement negotiations. 23 Prior to June 28, 2010, Defendants did not raise the issue of Plaintiffs’ failure to provide a 24 computation of damages. On that date, however, the Nassiri Defendants’ counsel sent a letter to 25 Plaintiffs’ counsel demanding that they provide a computation of damages in accordance with their 26 obligations under Fed.R.Civ.Pro. 26(a). Motion (#211), Exhibit “2.” Plaintiffs’ attorney responded 27 to Defendants’ counsel on July 6, 2010 as follows: 28 ... 2 1 Under Rule 26, as discovery proceeds, Allstate is required to supplement its initial damages computation to reflect the information obtained through discovery. CCR/AG Showcase Phase I Owner, L.L.C. v. United Artists Theatre Circuit, Inc., 2010 U.S. Dist. LEXIS 56137 (D. Nev. May 13, 2010). “A computation of damages may not need to be detailed early in the case before all relevant documents or evidence has been obtained by the plaintiff.” Id. Here, as you know, we have not yet deposed all of the parties, nor have we received the medical records of the underlying claimants. 2 3 4 5 6 However, we will try to get you a more detailed computation of Allstate’s damages, including the names of the underlying claimants within the next two weeks. 7 8 Motion (#211), Exhibit “3.” 9 Plaintiffs’ counsel did not provide a damages computation within the next two weeks as he 10 indicated he would try to do. There was no further direct communication between counsel about 11 Plaintiffs’ computation of damages before the Nassiri Defendants filed their instant motion on 12 August 15, 2010. The Nassiri Defendants, however, raised the Plaintiffs’ failure to provide a 13 damages computation in their August 5, 2010 response to Plaintiffs’ motion for production of 14 HIPAA protected records. See Response (#204), pages 3-4. In their Reply (#206), page 6, filed on 15 August 9, 2010, Plaintiffs stated that “Allstate has already agreed to supplement their Rule 26 16 disclosures despite the limited discovery which has taken place in this matter. Should Defendants 17 believe that this supplement is incomplete, then they should file an appropriate motion.” 18 On or about August 16, 2010, Plaintiffs disclosed the August 13, 2010 report of their expert 19 witness Craig S. Little, D.C. See Plaintiffs’ Reply (#217), Attachment “1”. Dr. Little’s report 20 states that he originally reviewed the medical records of 27 claimants who were treated by 21 Defendant Advanced Accident Chiropractic (“AAC”) and prepared an October 31, 2007 report of 22 his findings. Dr. Little’s August 13th report stated that he has reviewed the medical records of 157 23 claimants. His report contains a chart which lists the total chiropractic expenses for each claimant 24 and the much lower amount of chiropractic expenses that Dr. Little believes were reasonable. 25 According to Dr. Little’s chart, the total chiropractic expenses billed by AAC for the 157 claimants 26 was $791,330.00. The total amount of reasonable chiropractic expenses was $119,065.00, leaving 27 a balance of $672,265.00 in allegedly unjustified chiropractic expenses. 28 ... 3 1 Plaintiffs served their Second Supplement to Plaintiffs Initial Disclosures Pursuant to FRCP 2 26(a)(1) (hereinafter “Second Supplemental Disclosure”) on August 17, 2010. Plaintiff’s 3 Opposition (#228), Exhibit “D.” Plaintiffs’ Second Supplemental Disclosure states that the 4 number of underlying claims for which Plaintiffs seek recovery of damages is 158. It further 5 identifies each claim by the claimant’s name and claim number and states the estimated amount of 6 overpayment on the claim. The total estimated overpayment for all claims is $559,000.00. Exhibit 7 “D.” Plaintiffs state that the estimate of overpayment damages is based “upon the discovery 8 completed to date, and without consideration of Plaintiff’s expert’s opinions.” It also states that 9 Plaintiffs arrived at the damage-estimate by relying upon the advice of counsel and that the 10 estimated damages are based on the settlement amounts Plaintiffs would likely have paid if they 11 had known of Defendants’ malfeasance at the time the claims were settled. Plaintiffs cite 12 numerous factors that were or may be considered in evaluating and calculating the amount of 13 overpayment on each claim. Plaintiffs’ Opposition (#228), Exhibit “E”.1 14 Plaintiffs’ counsel, Bruce Kelly, stated at the November 30, 2010 hearing that he spent 15 approximately 60 hours in preparing the damages computation. He also stated, however, that 16 Aaron Patterson, an employee of Allstate, is the person who will testify at trial regarding Plaintiffs’ 17 damages and indicated that Mr. Patterson’s testimony will be independent of counsel’s computation 18 of damages. Mr. Kelly further advised that Plaintiffs will revise their damages computation once 19 they have the opportunity to review the complete patient files for the subject claimants that were 20 recently produced by the Nassiri Defendants. 21 22 23 DISCUSSION Defendants argue that Plaintiffs should be sanctioned because of their failure to timely provide a computation of damages pursuant to Rule 26(a)(1)(A)(iii) of the Federal Rules of Civil 24 25 1 26 27 28 Plaintiffs’ counsel states in his affidavit that he spoke with the Nassiri Defendants’ counsel on August 18, 2010 and asked him whether in light of Plaintiffs’ Second Supplemental Disclosure, he was willing to withdraw Defendants’ motion. Defendants’ counsel allegedly responded that he would have filed the motion for sanctions even if Plaintiffs had served their Second Supplemental Disclosure two weeks earlier. 4 1 Procedure. In addition to requesting that Plaintiffs be precluded from presenting evidence of 2 damages, Defendants argue that Plaintiffs’ default should be entered and their complaint stricken. 3 Motion (#211). Although inartfully stated, Defendants ask the Court to dismiss Plaintiffs’ 4 complaint as a sanction for its violation of Rule 26(a)(1)(A)(iii). 5 The Court first addresses Plaintiffs’ argument that Defendants’ motion should be denied 6 because Defendants failed to meet and confer with them prior to filing the motion. Defendants’ 7 motion is one for sanctions. They do not seek an order compelling Plaintiffs to provide a damages 8 computation. Rule 37 does not require the moving party to meet and confer with the opposing 9 party prior to filing a motion for sanctions under Rule 37(b) or (c). See Hoffman v. Construction 10 Protective Services, Inc., 541 F.3d 1175, 1179 (9th Cir. 2008); Sille v. Parball Corporation, 2010 11 WL 2505625 (D. Nev. 2010) at *2 and Dayton Valley Investors, LLC v. Union Pacific Railroad 12 Co., 2010 WL 3829219 (D.Nev. 2010) at *2 (same). Accordingly, Defendants were not required to 13 meet and confer with Plaintiffs before filing their motion. The Court may, however, consider the 14 parties’ efforts to resolve the dispute in determining whether and to what extent sanctions should be 15 imposed. 16 Fed.R.Civ.Pro. 26(a)(1)(A) requires a plaintiff to disclose potential witnesses, documentary 17 evidence, and a computation of its alleged damages. Rule 26(a)(1)(C) requires that the disclosures 18 be made early in the case. A party is required to make its initial disclosures based on the 19 information then reasonably available to it and is not excused from making disclosures because it 20 has not fully investigated the case or because it challenges the sufficiency of another party’s 21 disclosures or because another party has not made its disclosures. Rule 26(a)(1)(E). A party is also 22 required to supplement or correct its initial disclosures, as necessary and in a timely manner, as the 23 case proceeds. Rule 26(e)(1)(A). 24 In City and County of San Francisco v. Tutor-Saliba Corporation, 218 F.R.D. 219, 221-222 25 (N.D.Cal. 2003), the court noted that Rule 26 does not elaborate on the level of specificity required 26 in the initial damages computation. Tutor-Saliba states that a plaintiff should provide its 27 computation of damages in light of the information currently available to it in sufficient detail so as 28 to enable the defendants to understand the contours of their potential exposure and make informed 5 1 decisions regarding settlement and discovery. The court further stated that the word “computation” 2 contemplates some analysis beyond merely setting forth a lump sum amount for a claimed element 3 of damages. The party must also timely disclose its theory of damages. 24/7 Records, Inc. v. Sony 4 Music Entertainment, Inc., 566 F.Supp.2d 305, 318 (S.D.N.Y. 2008). The courts also recognize, 5 however, that a plaintiff may not be able to provide a detailed computation of damages early in the 6 case before all relevant documents or evidence has been obtained. A plaintiff cannot, however, 7 simply produce documents relating to its alleged damages without explanation. Design Strategy, 8 Inc. v. Davis, 469 F.3d 284 295-96 (2n d Cir. 2006); Frontline Medical Associates, Inc. v. Coventry 9 Health Care, 263 F.R.D. 567, 569 (C.D.Cal. 2009). While the precise method of calculation need 10 not be disclosed if it is properly the subject of future expert testimony, this does not relieve the 11 plaintiff from providing reasonably available information concerning its damages computation. 12 Rule 37(c)(1) states that if a party fails to provide information or identify a witness as 13 required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply 14 evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is 15 harmless. In addition to or instead of this sanction, the court may order payment of reasonable 16 expenses, including attorney’s fees, caused by the failure to make disclosures, may inform the jury 17 of the party’s failure and may impose other appropriate sanctions, including any of the orders listed 18 in Rule 37(b)(2)(A)(i)-(v). The burden is upon the disclosing party to show that the failure to 19 disclose was substantially justified or harmless. The court need not find bad faith before imposing 20 the evidence preclusion sanction. Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 21 1106-7 (9th Cir. 2001); Hoffman v. Construction Protection Services, 541 F.3d at 1180; and Oracle 22 USA, Inc. v. SAP AG, 264 F.R.D. 541, 545 (N.D. Cal. 2009). 23 Rule 37(c)(1) does not, however, require the district court in all instances to exclude 24 evidence as a sanction for late disclosure that is neither justified or harmless. In Design Strategy, 25 Inc. v. Davis, 469 F.3d 284 295-96 (2n d Cir. 2006), the Second Circuit noted that “Rule 37(c) itself 26 recognizes that ‘[i]n addition to or in lieu of this [preclusion] sanction, the court, on motion and 27 after affording an opportunity to be heard, may impose other appropriate sanctions.’” Design 28 Strategy, 469 F.3d at 298. In exercising its discretion as to what sanction, if any, is appropriate, the 6 1 court should consider the following factors: (1) the party’s explanation for the failure to comply 2 with the disclosure requirement, (2) the importance of the excluded evidence or testimony, (3) the 3 prejudice suffered by the opposing party as a result of having to meet new evidence and (4) the 4 possibility of a continuance. Id. at 296. The Ninth Circuit has identified similar factors that the 5 district court should consider in deciding whether to impose Rule 37(c)(1)’s evidence preclusion 6 sanction. Wendt v. Host International, Inc., 125 F.3d 806, 814 (9th Cir. 1997). See also AZ 7 Holding, L.L.C. v. Frederick, 2009 WL 2432745 (D.Ariz. 2009) *5; Galentine v. Holland America 8 Line--Westours, Inc., 333 F.Supp.2d 991, 995 (W.D.Wash. 2004); F.D.S. Marine, LLC v. Brix 9 Maritime Co., 211 F.R.D. 396, (D.Or. 2001); and Lindner v. Meadow Gold Dairies, Inc., 249 10 11 F.R.D. 625, 642 (D.Haw. 2008). As the court in Tutor-Saliba noted, the cases in which courts have excluded evidence based 12 on the failure to provide a damages computation have involved “extreme situations” in which the 13 plaintiff did not provide a damages computation until shortly before trial or until well after the 14 close of discovery. Cases decided since Tutor-Saliba in which the evidence preclusion sanction has 15 been imposed have also involved similar extreme circumstances. See Hoffman v. Construction 16 Protective Services, Inc., 541 F.3d 1175 (9th Cir. 2008); CQ Inc. v. TXU Mining Company, 565 17 F.3d 268 (5th Cir. 2009); 24/7 Records v. Sony Music Entertainment, 566 F.Supp.2d 305, 318 18 (S.D.N.Y. 2008); and Green Edge Enterprises, LLC v. Rubber Mulch Etc. LLC, 2009 WL 1383275 19 (E.D.Mo. 2009). In Oracle USA, Inc. v. SAP AG, 264 F.R.D. 541, 545 (N.D. Cal. 2009), the court 20 precluded the plaintiff from materially expanding the scope of its claimed damages even though 21 discovery had not closed. That case, however, involved somewhat unique circumstances in which 22 the parties had engaged in massive electronic discovery based on plaintiff’s limited damages 23 theories. The court refused to permit plaintiff to materially expand the scope of its damages claims 24 later in the discovery process because it would have required a new round of burdensome and 25 expensive electronic discovery and resulted in further delay. 26 The Court finds that the circumstances in this case do not warrant the imposition of 27 evidence preclusion or the more serious sanctions sought by Defendants. Although Plaintiffs did 28 not provide a computation of damages prior to August 17, 2010, Defendants were not in the dark 7 1 regarding the theory or nature of Plaintiffs’ damage claims or that they were substantial in view of 2 the factual allegations and number of claims at issue. The complaint provided substantial factual 3 detail about the chiropractic and medical treatments that Plaintiffs allege were unnecessary and 4 fraudulent and which resulted in the overpayment of claims. It also appears that the parties were 5 able to engage in settlement negotiations in which offers and counter-offers were exchanged, but no 6 settlement was reached. The Court therefore finds that Defendants were not materially harmed or 7 prejudiced by Plaintiffs’ failure to provide a damages computation prior to August 17, 2010. 8 9 The Court, however, also rejects the Plaintiffs’ assertion that they could not provide even a preliminary damages computation until they obtained the claimants’ complete medical records. 10 Rule 26(a) requires a party to provide a damages computation based on the information reasonably 11 available to the plaintiff at the beginning of the case. While the value of a preliminary damages 12 computation is limited, it does provide the defendants with information about their potential 13 exposure and may assist them in making more informed decisions as the case progresses. Tudor- 14 Saliba, supra. Beyond that, the value of an early and preliminary computation of damages is 15 debatable. Plaintiffs’ counsel’s August 17, 2010 damages computation, for example, cites so many 16 variables that could affect the determination of overpayment that it is really nothing more than 17 speculation. Plaintiffs also assert that the actual calculation of the damages will be provided by 18 their person most knowledgeable, Aaron Patterson, who will apparently rely, in part, on the 19 opinions of Dr. Little as to the amount of unnecessary medical treatment and expense in the 20 individual claims. 21 Given the prior discovery disputes between the parties, the Court cannot assign complete 22 blame to Plaintiffs for the delay in obtaining final evaluation of their damages claim. Plaintiffs 23 must, however, act diligently to complete their expert analysis of the subject claims, provide their 24 experts’ reports and a final damages computation. If Plaintiffs fail to do so by the expert disclosure 25 deadline, then a motion to preclude them from introducing damages evidence at trial will likely be 26 granted. Plaintiffs should also be aware that the type of speculative damages computation provided 27 by Plaintiffs’ counsel on August 17, 2010 is not adequate. 28 ... 8 1 Although the Court could impose monetary sanctions on Plaintiffs for failing to timely 2 provide a damages computation in response to Defendants’ counsel’s June 28, 2010 demand, the 3 Court will excise its discretion and decline to do so. This case has degenerated into accusations 4 and cross-accusations of discovery misconduct between Plaintiffs’ counsel and the Nassiri 5 Defendants’ counsel. The Court could award attorneys fees and costs to both sides on their 6 respective motions. Rather than do so at this point, the Court will instead caution the parties’ 7 counsel that it possesses the authority to impose sanctions not only on the parties, but also on their 8 attorneys should they persist in obstructive and unreasonable discovery tactics and other litigation 9 conduct that unnecessarily delays and increases the burden and cost of this litigation. Accordingly, 10 IT IS HEREBY ORDERED that the Nassiri Defendants’ Motion to Strike Plaintiff’s 11 Claim for Damages, Enter Default and Strike Plaintiff’s Complaint (#211) and Co-Defendants 12 Albert Noorda, M.D. and Marland Medical Center, LLC’s Joinder in the Nassiri Defendants’ 13 Motion (#212) are denied, without prejudice. 14 DATED this 16th day of December, 2010. 15 16 17 ______________________________________ GEORGE FOLEY, JR. United States Magistrate Judge 18 19 20 21 22 23 24 25 26 27 28 9