Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_08-cv-01386/USCOURTS-azd-2_08-cv-01386-1/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 42:1981 Civil Rights

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

 

Saguaro Medical Associates, P.C., an

Arizona professional corporation; and

Rakesh Malhotra, M.D., 

Plaintiffs, 

vs.

Banner Health, an Arizona corporation,

d/b/a Banner Thunderbird Medical

Center,

Defendant.

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No. CV-08-1386 PHX-DGC

ORDER

The Court held a discovery conference with the parties on April 16, 2009. Several

issues were addressed. This order will reflect the Court’s rulings on those issues.

1. Defendants shall supplement their privilege log by adding the names of

attorneys for whom attorney-client privileged documents have been withheld, and by

including all documents (paper and electronic) for which redactions have been made on the

basis of peer review. This supplementation shall be made by May 1, 2009.

2. Defendants shall produce all score cards from all Banner facilities, up to the

present date. Defendants shall also produce all minutes of the medical executive committee

at Banner Thunderbird Hospital, concerning hospitalists, up to the present date. This

production shall be made by May 1, 2009.

3. Plaintiffs may take the deposition of Dr. Perkins, for up to one-half day, by

May 8, 2009.

Case 2:08-cv-01386-DGC Document 86 Filed 04/21/09 Page 1 of 5
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4. Defendants have asked the Court to strike a damages theory disclosed for the

first time by Plaintiffs on March 26, 2009, the day before the close of fact discovery. This

theory sets forth a claim for $7.5 million in lost profits based on a June 2007 email received

by Plaintiff Rakesh Malhotra and disclosed for the first time by Plaintiffs with the new

damages theory. After reviewing the email and the new theory, the Court concludes that the

new theory would require Defendants to engage in substantial additional discovery. This

discovery likely would include depositions of the participants in the email, the consultant to

whom Plaintiff Malhotra forwarded the email, and members of the medical groups that were

to be merged under the proposal. Substantial document production could also be required.

Defendants reasonably could request discovery concerning not only the details of the

proposed merger, but also the financial viability of the two entities to be merged, the

contracts those entities had with various hospitals, the number of doctors who would join the

merged entity, and the likely success of their respective practices. Because the new damages

theory is based on ten years of earnings Dr. Malhotra allegedly would have received from

the new entity, and those earnings would be based in part on the number of physicians who

joined the entity and the future success of the venture, discovery from participating hospitals

might also be required, as well as expert testimony on the likelihood of the merger being

completed, its expected financial success, and other issues that could affect its viability. 

The Court’s Case Management Order established a fact discovery deadline of

March 27, 2009. Dkt. #24. This date was proposed by the parties. See Dkt. #14. The Case

Management Order stated that “[t]he parties are advised that the Court intends to enforce the

deadlines set forth in this Order and should plan their activities accordingly.” Dkt. #24, ¶ 10.

The Court also advised the parties of the firmness of the deadlines at the case management

conference held on October 29, 2008. See Dkt. #22.

Rules 26(a)(1)(A)(iii) required Plaintiffs to make an initial disclosure of the

computation of each category of damages they are asserting in this case, as well as the

documents or other evidentiary material upon which the computation is based. The Case

Management Order required Plaintiffs to make this disclosure by October 31, 2008.

Case 2:08-cv-01386-DGC Document 86 Filed 04/21/09 Page 2 of 5
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Dkt. #24, ¶ 1. The intent of the initial disclosure, in part, is to inform Defendants of damages

claims that might require investigation during the discovery period or expert analysis. Rule

26(a)(1)(E) provides that “[a] party must make its initial disclosure based on the information

then reasonably available to it. A party is not excused from making its disclosures because

it has not fully investigated the case[.]” 

Plaintiffs’ new theory is based on a merger proposed to Plaintiff Malhotra

approximately one year before this lawsuit was filed. Plaintiff Malhotra was a party to the

merger talks, and those talks concerned a possible merger of Plaintiff Saguaro Medical

Associates, P.C. and another medical group. Information concerning the merger clearly was

reasonably available to Plaintiffs when this case commenced. As a result, Plaintiffs had an

obligation to include the damages theory in their initial disclosure statement. Because the

theory was not disclosed until the day before the discovery deadline – too late for Defendants

to conduct any discovery – and because Plaintiffs were fully aware of the firmness of the

deadlines set by the Court (and proposed by the parties themselves), the damages theory was

not timely disclosed. The Court further concludes that the failure to make the disclosure is

neither substantially justified nor harmless, and Plaintiffs therefore will not be permitted to

assert the new damages theory at trial. Fed. R. Civ. P. 37(c).

Plaintiffs did not request an extension of the discovery schedule when they disclosed

this substantial new damages theory at the last minute. They suggested at the April 16, 2009

hearing that several additional months of discovery be allowed for Defendants to investigate

the new theory. Federal Rule of Civil Procedure 16 provides that the district judge shall

enter a scheduling order governing the case and that the “schedule shall not be modified

except upon a showing of good cause[.]” Fed. R. Civ. P. 16(b); see Johnson v. Mammoth

Recreations, Inc., 975 F.2d 604, 608 (9th Cir. 1992) (“The scheduling order ‘controls the

subsequent course of the action’ unless modified by the court.”) (quoting Fed. R. Civ. P.

16(e)); Wong v. Regents of the Univ. of Cal., 410 F.3d 1052, 1062 (9th Cir. 2005) (“Courts

set [pretrial] schedules to permit the court and the parties to deal with cases in a thorough and

orderly manner, and they must be allowed to enforce them, unless there are good reasons

Case 2:08-cv-01386-DGC Document 86 Filed 04/21/09 Page 3 of 5
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not to.”). Good cause exists when a deadline “cannot reasonably be met despite the diligence

of the party seeking the extension.” Fed. R. Civ. P. 16 Advisory Comm.’s Notes (1983 Am.);

see Johnson., 975 F.2d at 609 (“Rule 16(b)’s ‘good cause’ standard primarily considers the

diligence of the party seeking the amendment.”). The Court concludes that Plaintiffs could

have disclosed the new damages theory in their initial disclosure statement through the

exercise of reasonable diligence. Plaintiffs therefore cannot make the showing of good cause

required to extend the discovery period.

“In these days of heavy caseloads, trial courts . . . set schedules and establish

deadlines to foster the efficient treatment and resolution of cases.” Wong v. Regents of the

Univ. of Cal., 410 F.3d 1052, 1060 (9th Cir. 2005). “Parties must understand that they will

pay a price for failure to comply strictly with scheduling and other orders, and that failure

to do so may properly support severe sanctions[.]” Id. “As the torrent of civil and criminal

cases unleashed in recent years has threatened to inundate the federal courts, deliverance has

been sought in the use of calendar management techniques. Rule 16 is an important

component of those techniques.” Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 611

(9th Cir. 1992). Plaintiffs may not assert their new damages theory at trial.

5. Defendants will not be permitted to image Plaintiffs’ computers in order to

verify that Plaintiffs have produced all emails within their possession. Defendants have

known of the existence of such emails for some time, and should have sought to image the

computers before the close of discovery.

6. Defendants will be permitted to review the spreadsheets in the offices of

Plaintiffs’ counsel. The review should be completed by May 1, 2009.

7. Plaintiffs must disclose to Defendants’ expert the line items reflecting the

dollar amount of fees paid to attorneys. Plaintiffs need not disclose the details of the legal

services; such details are protected as attorney work product.

8. Defendants will not be permitted to subpoena insurance contracts between

various insurance companies and Plaintiffs. Such subpoenas should have been served during

the discovery period.

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9. Plaintiffs shall return to Plaintiffs all documents inadvertently produced from

the in-house attorneys’ file, with the exception of those marked as deposition exhibits and

the document bearing bates number 1325.

DATED this 20th day of April, 2009.

Case 2:08-cv-01386-DGC Document 86 Filed 04/21/09 Page 5 of 5