IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

MedChoice Financial, LLC,

Plaintiff

 v.

ADS Alliance Data Systems, Inc., et al.,

Defendants

and

Phillip W. Hall, et al.,

Additional Counterclaim

Defendants

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Civil Action 2:11-cv-00212

Judge Frost

Magistrate Judge Abel

Order

Plaintiff MedChoice Financial, LLC brought this action against defendants ADS

Alliance Data Systems, Inc. and World Financial Network Bank alleging that they

breached a contract under which they underwrote private label credit cards MedChoice

issued to patients of the healthcare providers that comprised MedChoice’s exclusive

provider network.1

 ADS and the Bank have filed a counterclaim that alleges MedChoice

1

The amended complaint also pleads claims for tortious interference with

contracts, unjust enrichment, breach of fiduciary duty, and violations of Ohio Revised

Code §§ 1333.61, et seq., 1301.01, et seq., and 4165.01, et seq.

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and counterclaim defendant Philip Hall breached the contract and committed fraud.2

On October 26, 2012, I issued an order granting, in part, the June 27, 2012 motion

of ADS and the Bank to compel MedChoice and Hall to provide them discovery. (Doc.

61.) This matter is now before the Magistrate Judge on the February 1, 2013 motion of

ADS and the Bank for sanctions for the failure of MedChoice and Hall to provide the

discovery ordered and to compel them, once again, to provide it. (Doc. 63.)

Facts pleaded regarding the claims and defenses of the parties. My October 26

Order summarized the facts underling the dispute as follows: 

. . . Under the contract, MedChoice and the Bank were to share the

profits generated. MedChoice collected fees from the extension of credit to

the providers’ patients. In 2009, the last full year the contract was in place,

the MedChoice private label credit cards generated more than $10 million

per month in revenues. In May 2009, the Bank and its parent company,

ADS, expressed their interest in buying MedChoice. When the parties

were unable to agree on terms of a sale, ADS and the Bank implemented a

scheme to limit MedChoice’s business opportunities with its providers, to

restrict and subsequently cut off MedChoice’s cash flow, and ultimately to

terminate the parties’ contract for pretextual reasons that were ADS’s and

the Bank’s own creation. Within days of the wrongful termination, ADS

and/or the Bank signed MedChoice’s largest and most profitable provider

as a direct customer. The Bank also breached the contract by failing to pay

certain contractual “yield share” and “hold back” amounts to MedChoice.

The Bank has filed counterclaims against MedChoice and against

additional counterclaim defendants Philip Hall and Michelo A. Naturile.

The counterclaims plead that the Program Agreement authorized

MedChoice to submit credit card charges to the Bank only for “Goods

and/or Services” rendered by “Providers” to “Clients” of those

“Providers.” The definitions of "Client" and "Providers" limited credit card

charges to charges for goods or services listed in the definition of “Elective

2

The counterclaim also seeks to pierce MedChoice’s corporate veil to make Hall

liable for MedChoice’s actionable conduct. It further pleads claims for aiding and

abetting fraud and defamation.

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Cosmetic Surgery” contained in Exhibit 1 to the Program Agreement.

MedChoice, without the Bank’s knowledge, repeatedly submitted charges

for goods or services that were not permitted under the Program

Agreement, including, among others, charges for fertility services and

vitamins.

In August 2009, the Bank learned that MedChoice had been

submitting charges for fertility services. On August 31, 2009, the Bank

advised MedChoice and Hall that “fertility is not an approved procedure”

under the Program Agreement. In October 2009, the Bank directed Hall to

remove the following industries and store numbers from MedChoice’s

data base: any fertility and women’s centers, any drug rehabilitation

centers, “complementary healthcare,” and “mobile anesthesiologists.” On

January 12, 2010, the Bank reiterated its demand that all fertility and

rehabilitation services providers need to be terminated because they do

not qualify under the Program Agreement. 

In or about January 2010, the Bank learned that MedChoice was

also submitting charges for the sale of vitamins. The bank notified

MedChoice that charges for vitamins were also not permitted under the

Program Agreement and demanded that MedChoice process charges only

for approved procedures. The Bank then charged back to MedChoice all

outstanding Cardholder balances for the unauthorized vitamin charges, as

it was entitled to do under the Program Agreement.

After these notices, the counterclaim defendants devised a

fraudulent scheme to continue to submit unauthorized charges, by

submitting those charges to the Bank for unauthorized procedures under

a false Provider name -- “Surgery Loans Direct." At least $844,000 worth of

MedChoice’s charge transactions for fertility treatments occurred after the

Bank reiterated to MedChoice that such charges were not authorized

under the Program Agreement. By the time the Bank discovered the fraud,

MedChoice had only approximately $15,000 in cash and was unable to

pay the chargebacks that the Bank was entitled to make under the

Program Agreement, resulting in hundreds of thousands of dollars in

damages to the Bank.

In late 2008, MedChoice had a large number of chargebacks

associated with one of MedChoice’s providers, Body Solutions, which the

Bank offset from Net Proceeds otherwise payable to MedChoice. 

Unbeknownst to the Bank, MedChoice did not have sufficient financial

reserves to cover these chargebacks. MedChoice thereafter began to have

financial difficulties, which it failed to disclose to the Bank, in breach of

section 5.1 of the Program Agreement. Hall instructed others at 

MedChoice not to disclose these financial difficulties to the bank.

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Under the Program Agreement, MedChoice was responsible for all

settlements with Providers. However, unbeknownst to the Bank,

MedChoice began to fail to settle with Providers. The counterclaim

defendants told those Providers that the reason MedChoice had not paid

them was that the Bank had not paid Med-Choice and had “cut off” the

providers, when in fact the Bank had already paid MedChoice the

amounts that MedChoice owed those Providers.

(Doc. 61, PageID 883-86.)

Alleged violations of the October 26 Order/Discovery sought. ADS and the

Bank assert that MedChoice and Hall failed to (1) identify bank accounts held in the

name of MedChoice’s affiliated entities (Interrogatory No. 1); (2) produce bank

statements and related documentation from financial accounts held in the name of

Phillip Hall (Requests for Production Nos. 72, 76 and 80); (3) produce documents

relating to credit card charges incurred by MedChoice (Request for Production No. 82);

and (4) produce documents relating to MedChoice’s payment to providers and brokers

(Request for Production No. 49). ADS and the Bank seek an immediate response to

Interrogatory No. 1 and immediate production of the documents sought by Requests for

Production Nos. 71, 75 and 81. They also request sanctions under Rule 37(a)(5)(A), Rule

37(b)(2)(A), and Rule 37 (b)(2)(C), Fed. R. Civ. P. 

Discussion. I will now consider MedChoice’s and Hall’s responses to each of the

four categories of documents identified above.

(1) Bank accounts held in the name of MedChoice’s affiliated entities (Interrogatory No. 1). The October 26 Order found that this interrogatory was relevant to

defendants’ defense that MedChoice and Hall directed money needed for MedChoice to

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meet its obligations under the contract to the affiliated entities. MedChoice and Hall

were ordered to answer the interrogatory. They did so, identifying two bank accounts. 

That, however, was not an accurate answer to the interrogatory. After October 26

MedChoice and Hall produced 12 gigabytes of ESI records, consisting of 195,308

documents with an unknown number of pages, as well as more than 8,700 Bates-labeled

pages. (March 1, 2013 Declaration of Lindsey Stinchcomb, ¶ 3, Doc. 66-1, PageID 998.)

But the ESI included many irrelevant, nonresponsive documents and was not organized

in a way that the responsive documents could be easily located. Defendants’ counsel

spent considerable time and money separating the relevant from the irrelevant. (March

18, 2013 Declaration of Loriann E. Fuhrer, ¶ 3, Doc. 71-2, PageID 1080)(“Fuhrer 3d Decl.,

¶ __.” During that process, defendants’ counsel discovered two additional bank

accounts held in the name of the MedChoice affiliated entity MedLease, LLC at a

previously undisclosed bank, Bank Atlantic. (Fuhrer 3d Decl., ¶ 4, PageID 1081.)

In addition, a November 14, 2008 letter from William Doniger, a MedChoice employee,

to Hall talk about moving funds from Bank Atlantic to new National City bank

accounts. (Fuhrer 3d Decl., ¶ , Ex. B, PageID 1086.) Yet MedChoice and Hall have so far

only identified accounts at Bank of America and PNC.

Defendants’ counsel found references to these accounts by carefully searching

the 12 gigabyte document dump MedChoice and Hall made in response to their

requests for production of documents. Rule 34(b)(E)(i), Fed. R. Civ. P. provides:

A party must produce documents as they are kept in the ordinary course

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of business or must organize and label them to correspond with the

categories of the request . . . .

Plaintiffs’ counsel did neither. They “reviewed MedChoice and Mr. Hall's ESI only for

privilege and not for substance prior to production.” (December 13, 2012 Email from

Andrea Perry Block to Lori Fuhrer and Tom Hill, Fuhrer 2d Decl., Ex. D, PageID 936.)

Had plaintiffs’ production complied with the Rule, they would likely have found the

Bank Atlantic and National City accounts. In any event, it is clear that neither Hall nor

MedChoice made a thorough search before answering Interrogatory No. 1. Their

conduct is sanctionable. They had the obligation to make a thorough search to identify

and produce all bank accounts and bank statements in their possession or under their

control.3

 They must institute a thorough search that not only includes talking with the

person’s most knowledgeable about MedChoice’s and Hall’s accounts but also asking

the persons in the affiliated entities most likely to know the bank accounts held by those

entities to provide them with all available information about their accounts.4

 Then Hall

3

Hall searched only for bank accounts and bank statements in his possession.

February 28, 2013 Declaration of Phillip Hall, ¶ 10, PageID 1003.) 

4

MedChoice’s and Hall’s attempt to distance themselves from the affiliated

entities is unconvincing. They assert that the affiliated entities are not parent companies

or subsidiaries of MedChoice, that they are not interrelated businesses, and that Hall

did not manage the finances and day-to-day operations of the entities.(March 1, 2013

Memorandum in Opposition, Doc. 66, p. 4, PageID 986; February 28, 2013 Declaration of

Phillip Hall, ¶ 6.) But defendants’ counsel have uncovered documents that demonstrate

those assertions are not entirely accurate. For example, In December 2006, MedChoice

had a 45% ownership interest in MedLease. (Fuhrer 3d Decl., Ex. D, PageID 1088.) In

connection with an application for enrollment in Bank Atlantic’s Business Online

Banking Cash Management services, Hall represented himself to be a managing

member of MedLease. (Fuhrer 3d Decl., Ex. F, PageID 1090.) Hall was the president of

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and MedChoice are ORDERED to further supplement their response to Interrogatory

No. 1 within fourteen (14) days of the date of this Order.

(2) Bank statements and related documentation from financial accounts held in

the name of Phillip Hall (Requests for Production Nos. 72, 76 and 80). As discussed

above, Hall searched only for bank statements in his possession.5

 That is a violation of

the October 26, 2012 Order. (Doc. 61, p. 10, PageID 892.) He produced only two bank

statements. He states that defendants have issued subpoenas to his banks seeking those

records and that he did not oppose the subpoenas. He further asserts that to the extent

the banks do not produce the records, he will.

The fact that Hall’s noncompliance with the October 26 Order forced defendants

to issue subpoenas to the banks where they know Hall has accounts is not a defense to

the motion for sanctions. Defendants have the right to have Hall identify each bank

account and to produce the bank records in his possession, custody or control. While

they could have entered an agreement for Hall to request that the banks send the

statements to defendants’ counsel, that time has passed. Hall chose to disregard his

obligations as a party to this lawsuit to provide the requested discovery. As ordered

above, Hall is ORDERED to supplement his production of documents responsive to

Requests for Production Nos. 72, 76 and 80 within fourteen (14) days of the date of this

MedChoice Credit Services Corp. (Fuhrer 3d Decl., Ex. H, PageID 1092.) MedChoice

Settlement LLC was a subsidiary of MedChoice. (Fuhrer 3d Decl., Ex. J, PageID 1095.) 

5

Hall Decl., ¶ 10, PageID 1003.

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Order.

(3) Documents relating to credit card charges incurred by MedChoice (Request

for Production No. 82). On December 4, 2012, defendants’ counsel asked plaintiffs to

produce these records for the period December 1, 2009 through May 31, 2010. (Fuhrer

2d Decl., Ex. A, PageID 927.) On December 7, 2012, MedChoice’s counsel told

defendants’ counsel they would provide descriptions of the documents and how they

could be accessed by December 14. (February 1, 2013 Declaration of Loriann Fuhrer, Ex.

B, PageID 929.) On January 8, defendants’ counsel again asked for the credit card

charges. MedChoice’s counsel did not respond, and defendants filed their motion for

sanctions. On February 22, 2013, defendants’ counsel wrote MedChoice’s counsel

seeking access to the documents. (Fuhrer 3d Decl., ¶ 6 and Ex. V, PageID 1115.) On

March 14, 2013, MedChoice’s counsel for the first time said that the records were in a

web-based system called XRMS. (Fuhrer 3d Decl., ¶ 6 and Ex. V, PageID 1083 and 1115-

16.) But plaintiffs did not produce the documents.

MedChoice counters that on January 23, 2013 it did produce paper copies of the

requested documents for the six-month period selected by defendants. They were Batesstamped H-278655 through 278693. (Stinchcomb Decl., ¶ 5, Doc. 66-1, PageID 999.)

Defendants respond that the documents produced were not credit card but debit card

statements. If MedChoice has no credit cards and is using debit cards as credit cards,

then it has at least one other debit card. (Fuhrer 3d Decl., Ex. EE, PageID 1167-70.)

If the debit card documents were meant to be responsive to Request for

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Production No. 82, MedChoice should have so stated when the documents were

produced. Rule 34(b)(E)(i), Fed. R. Civ. P. Defendants have the right to a formal

response to the document request. If the production is complete, that formal response

should so state. If not, it is ORDERED that the remaining documents be produced 

within fourteen (14) days of the date of this Order.

(4) Documents relating to MedChoice’s payment to providers and brokers

(Request for Production No. 49). The request seeks all documents that evidence, reflect,

refer to, or relate to any payments made by MedChoice to its providers and/or brokers.

The October 26 Order provided:

Defendants’ motion to compel with respect to RPD 49 is

GRANTED. These documents are relevant to defendants’ allegations that

MedChoice failed to settle with Providers and told them that the reason

MedChoice had not paid them was that the Bank had not paid MedChoice

and had “cut off”the providers. Defendants maintain that the Bank had

already paid MedChoice the amounts that MedChoice owed those

Providers. While relevant, I recognize that the request for “every

document” relating to MedChoice’s payments to providers or brokers

might be burdensome. If MedChoice claims burdensomeness as to

documents reflecting routine accounting for those payments, it must

describe the documents, how they are kept, and how they are accessed to

defendants’ counsel and provide defendants’ counsel with a representative sampling of those documents for a timeframe designated by defendant’s counsel Any document giving reasons why MedChoice had not paid

providers or brokers must be produced. All summary documents must be

produced.

(Doc. 61, pp. 12-13, PageID 895-96.)

On December 7, 2012, plaintiffs’ counsel informed defendants’ counsel that

MedChoice asserted the production would be burdensome without further explanation

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and said they would provide defendants with a description of all the documents and a

description of how they could be accessed by December 14. (Fuhrer 2d Decl., Ex. B,

PageID 929.) When the promised information was not forthcoming, defendants’ counsel

emailed plaintiffs’ counsel on January 8 asking for it. Plaintiffs’ counsel did not

respond. (Fuhrer 2d Decl., ¶ 6 and Ex. E, PageID 924 and 940.) As of the February 1,

2013, when the motions for sanctions was filed, plaintiffs had not provided any

information demonstrating that production of the documents would be burdensome

and had not produced the documents.

On February 22, 2013, plaintiffs’ counsel emailed defendants’ counsel that

“MedChoice tracked its acct. for payments to providers and brokers using a web-based

system called XRMS.” Plaintiffs’ counsel offered a detailed explanation about how data

was entered into XRMS, giving a detailed example. MedChoice agreed to providing

defendants with a representative sampling of the documents. (March 1, 2013

Declaration of Ronald T. Coleman, Jr., ¶ 5 and Ex. A, PageID 1008 and 1010-11.)

Although MedChoice blames the failure to provide this information earlier on a

miscommunication between Mr. Coleman and an associate (Coleman Decl., ¶¶ 4-5,

PageID 1008), defendants were forced to file this motion for sanctions to obtain a

response to their counsel’s January 8 email. Moreover, as discussed below, plaintiffs still

refuse to produce the documents in an electronic form.

On March 6, 2013, defendants’ counsel emailed plaintiffs’ counsel requesting

production of documents from the XRMS database in an electronic form. Further, if

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MedChoice was claiming that an electronic production was burdensome, it should

“specifically explain the burden in quantifiable terms.” (Fuhrer 3d Decl., ¶ 7 and Ex. W,

PageID 1083 and 1118.) On March 14, 2013, MedChoice’s counsel’s responded:

MedChoice is not in a position to provide the data from the XRMS

database in electronic form. There is no one affiliated with MedChoice

who could process the data or perform the required work, and MedChoice

does not have the financial resources to hire someone to do so. MedChoice

estimates that it would cost somewhere between $3,000 and $10,000.

(Fuhrer 3d Decl., Ex. X, PageID 1124.) After further inquiry by defendants’ counsel,

MedChoice’s counsel stated in a March 15 email that their client did not have a cost

estimate by a vendor. The $3,000 - $10,000 estimate was made by defendant Hall. His

qualifications to make the estimate were not provided. Further, without explaining why

a database that at least at the time of the events at issue in the lawsuit was active

business data, could not now be accessed electronically6

, MedChoice asserted that the

individual files were encrypted and would have to be decrypted. MedChoice has not

produced any documents from the database in either an electronic or a paper format.

None of the proffered explanations support denying defendants access to the

XRMS database in an electronic format. This database, which was not revealed to

defendants until after I issued the October 26 order compelling discovery, is at the heart

of this lawsuit. The data represents the nuts and bolts of how MedChoice used Program

6

Once it decided to file this lawsuit, MedChoice had the legally binding obligation to preserve all evidence relevant to those claims and defendants’ defenses to them.

Since this was active data at the heart of its business, its hard to understand why it is

now inaccessible and/or burdensome to produce.

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Agreement monies. Defendant World Financial Network Bank maintains that MedChoice was not paying providers with the funds WFNB transmitted to MedChoice.

MedChoice maintains that it performed the contract, but WFNB’s breach caused it to be

unable to pay providers.

MedChoice’s unsupported assertion that it does not have the ability to produce

the XRMS database in electronic form and that it cannot pay an outside vendor to do so

fails to meet its obligation to prove that the production would be burdensome. Accordingly, it is ORDERED that within 14 days of the date of this Order MedChoice produce

the sampling of the XRMS database previously agreed to in an electronic form or, alternatively, provide defendants with an exact duplicate of the database.

Motion to compel responses to Interrogatory No. 1 and Requests for

Production of Documents Nos. 71, 75 and 81. Interrogatory No. 1 seeks all bank

accounts held by MedChoice. Request No. 75 seeks all documents relating to those bank

accounts. The interrogatory and request were originally a part of the motion to compel

but were withdrawn when MedChoice represented it would produce its financial

statements and related draft and work papers; account numbers and bank names for all

its bank accounts; all documents relating to its bank accounts, funding accounts,

depository accounts, automatic clearing house accounts, and brokerage accounts; and

all documents responsive to Request No. 75. But as of February 1, 2013, MedChoice had

identified eleven bank accounts and produced only seven bank statements.

MedChoice asserts that it produced financial statements a year ago in response to

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a subpoena from WFNB in a related case and that it produced additional financial

statements in its more recent ESI production. (Stinchcomb Decl. ¶¶6-9,Doc. 66-1,

PageID 999.) MedChoice states that it has answered Interrogatory No. 1, produced all

bank statements and other documentation in its possession, and has not opposed

subpoenas to the banks. If defendants cannot obtain particular bank statements,

MedChoice will cooperate in an attempt to obtain them.

Defendants respond that another party, CosmetiCredit subpoenaed the financial

statements in the related litigation. The protective order in that case prohibits there use

in any other litigation. (Fuhrer 3d Declaratory., Ex. DD, December 12, 2010 Protective

Order, p. 2, ¶ 3, PageID 1158.) Defendants ask that MedChoice be deemed to have

waived its confidentiality right under the CosmetiCredit case protective order precluding

use of the bank statements in other litigation. It is SO ORDERED. Defendants may,

subject to the protective order in this lawsuit, use the bank statements MedChoice

produced in the CosmetiCredit case for any purpose in this lawsuit.

As to financial statements, there are only fourteen documents MedChoice

identifies as financial statements in the ESI it has produced. Eight of these are for the

period ending December 31, 2008. The fact that others have produced financial

statements is irrelevant. MedChoice must make a search asking all persons

knowledgeable about the likely location of financial statements, whether employees,

former employees, or third parties, for the years in question. MedChoice is ORDERED

to search again, thoroughly, and produce within fourteen (14) days of the date of this

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Order all financial statements for the 5 years requested.

Documents relating to Hall’s personal finances. Request for Production No. 71

seeks Hall’s financial statements and all supporting documents. Request for Production

No. 81 seeks Hall’s income tax returns and related documents. Defendants withdrew

their motion to compel answers to these request after Hall promised to produce

documents related to his finances for the period September 20, 2005 through September

10, 2010. Before the motion to compel was filed, Hall produced no personal financial

statements and two individual income tax returns (for 2009 and 2010). 

Hall responds that there was a copy of his individual income tax return for 2008

in MedChoice’s ESI production. But as noted earlier, that production was not of the

records as kept in the ordinary course of business and defendants did not identify

which requests for production the documents were responsive to. Rule 34(b)(E)(i), Fed.

R. Civ. P. After the motion to compel was filed, Hall produced his 2007 individual

income tax return. Hall states that he does not have his 2005 or 2006 individual income

tax return in his possession and that he has no personal financial statements in his

“possession, custody, or control.” (Hall Decl., ¶¶ 15 and 16, PageID 1004.) That

statement cannot be literally true, since Hall can obtain his income tax returns from the

IRS. If defendants’ counsel provides him with a form requesting his individual income

tax returns fo the years 2005 and 2006, defendant Hall is ORDERED to execute it within

fourteen (14) days of receiving it and either return it to defendants’ counsel or deliver it

by certified mail to the IRS. See, Grant v. Target Corp., 281 F.R.D. 299, 307-08 (S.D. Ohio

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2012). 

If defendants do not credit Hall’s assertion that he has no personal financial

statements for 2005 - 2010 within his possession, custody or control, they are free to

depose him about how he conducted the search for financial statements, whether he

sought them from his personal assistants, accountants, attorneys, banks or other third

parties to whom he gave or entrusted them, and the like. If his sworn statement is not

accurate, he may be subject to sanctions. Bratka v. Anheuser-Busch Company, Inc., 164

F.R.D. 448, 461-64 (S.D. Ohio 1995).

ESI from custodians Anthony Girardi and Joann McLaughlin. Plaintiffs

represented they had possession of computer hard drives belonging to Anthony Girardi

and Joann McLaughlin. (Fuhrer 2d Decl., ¶ 9 and Ex. G, PageID 925 and 950-51.)

Plaintiffs’ counsel identified Giardi’s hard drive as likely containing discoverable

information. (Fuhrer 2d Decl., ¶ 10 and Ex. H, PageID 925 and 952.) When plaintiffs

produced ESI, the production did not include any documents from Giardi. On

December 13, 2012, defendants’ counsel asked plaintiffs’ counsel to confirm whether

there was searchable data for Giardi and asked defendants’ counsel to run the search

terms against the data of Joann McLaughlin. (Fuhrer 2d Decl., ¶ 11 and Ex. I, PageID

925 and 961.) Defendants’ counsel sent followup emails to plaintiffs’ counsel on January

8 and 21, but got no response. (Fuhrer 2d Decl., ¶ 12 and 13 and Exs. J and K, PageID

925, 964 and 968.) 

Despite its June 2012 statement that it had custody of Giardi’s hard drive and

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that it likely contained discoverable information, MedChoice now asserts it does not

have any identifiable custodial data for Giardi. It offers no evidence and no declaration

under penalty of perjury to support that assertion. Instead, it cites Doc. 63-10. That

references exhibits attached to Loriann E. Fuhrer’s February 1, 2013 declaration offered

in support of defendants’ motion to compel. Within Doc. 63-10 is a February 6, 2013

email from Andrea Perry Block to Lori Fuhrer and LouAnne Conrad. ( Fuhrer 2d Decl.,

PageID 961-63.) In relevant part, the email states that it includes “a list of custodians

whose computer hard drives we have in our possession.” (PageID 962.) That list

includes both Anthony Giardi and Joann McLaughlin. (PageID 963.) There is nothing in

the email suggesting that MedChoice has no identifiable custodial data from Giardi’s

hard drive. 

As to McLaughlin, MedChoice argues that it should not have to access her hard

drive because it was not included among the hard drives plaintiffs and defendants

agreed would be search using their agreed search terms. Plaintiffs do not want to spend

the additional money required to search McLaughlin’s hard drive. They provide no

evidence supporting their burdensomeness argument.

It is ORDERED that plaintiffs search the Giardi and McLaughlin hard drives and

produce all non-privileged relevant documents within fourteen (14) days of the date of

this Order.

Sanctions. When a motion to compel discovery is granted, “the court shall, after

opportunity for hearing, require the party . . . whose conduct necessitated the motion . .

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. to pay the moving party the reasonable expenses incurred in obtaining the order,

including attorney fees, unless the court finds that the opposition to the motion was

substantially justified or that other circumstances make an award of expenses unjust.” 

Rule 37(a)(4), Fed. R. Civ. P. The “great operative principle of Rule 37(a)(4) is that the

loser pays.” Wright & Miller, Federal Practice and Procedure: Civil §2288 at pp. 657-58

(1994). E.g., Merritt v. Int’l. Brotherhood of Boilermakers, 649 F.2d 1013, 1018 (5th Cir.

1981).

Here plaintiffs opposition to the motion to compel was not substantially justified

and there are no other circumstances that would make an award of attorney fees unjust.

Accordingly, within fourteen days of the date of this order, defendants’ counsel are

DIRECTED to provide plaintiffs’ counsel with a statement of their attorney fees

incurred filing and briefing the motion to compel. If plaintiffs contest the

reasonableness of those fees, they must file a motion within twenty-eight (28) days of

the date of this Order explaining why the fees requested are unreasonable and, if they

have evidence to offer to support that position, requesting a hearing.

I believe other sanctions may be mandated by Rule 37(b)(2)(A) and Rule

37(b)(2)(C), Fed. R. Civ. P. However, I do not believe I am in a position to make that

judgment on the present record. Defendants may renew their request for sanctions after

all discovery is completed, either by filing a separate motion or incorporating the

request in their motion for summary judgment. 

If any party objects to this Report and Recommendation, that party may, within

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fourten (14) days, file and serve on all parties a motion for reconsideration by the Court,

specifically designating this Report and Recommendation, and the part thereof in

question, as well as the basis for objection thereto. 28 U.S.C. §636(b)(1)(B); Rule 72(b),

Fed. R. Civ. P.

The parties are specifically advised that failure to object to the Report and

Recommendation will result in a waiver of the right to de novo review by the District

Judge and waiver of the right to appeal the judgment of the District Court. Thomas v.

Arn, 474 U.S. 140, 150-52 (1985); United States v. Walters, 638 F.2d 947 (6th Cir. 1981). See

also, Small v. Secretary of Health and Human Services, 892 F.2d 15, 16 (2d Cir. 1989). 

The Clerk of Court is DIRECTED to mail a copy of the complaint and this Report

and Recommendation to each defendant.

s/Mark R. Abel 

United States Magistrate Judge 

18

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