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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

STATE FARM MUTUAL Case No. 08-13939

INSURANCE COMPANY

Nancy G. Edmunds

Plaintiff United States District Judge

vs. Michael Hluchaniuk

United States Magistrate Judge

HARANATH POLICHERLA, M.D.,

HARANATH POLICHERLA, M.D., P.C., 

and ADVANCED NEURO REHAB

SERVICES, P.C.,

Defendants.

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ORDER DENYING DEFENDANTS’ MOTION TO QUASH (Dkt.44)

 AND GRANTING PLAINTIFF’S MOTION TO COMPEL 

DEFENDANTS’ PRODUCTION OF DOCUMENTS (Dkt. 50).

I. PROCEDURAL HISTORY

The complaint in the present case was filed September 11, 2008. (Dkt. 1). 

A motion to strike the complaint was filed by defendants on December 1, 2008. 

(Dkt. 8). On January 15, 2009, an order consolidating this case with a similar case

filed by Allstate Insurance Company (Allstate) was entered by the District Judge. 

Defendants’ motion to strike plaintiff’s complaint was denied on February 26,

2009. (Dkt. 24).

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Defendants filed a motion to dismiss against both State Farm Insurance

Company (plaintiff) and Allstate on March 17, 2009. (Dkt. 32, 33). On March 27,

2009, defendants filed an answer to plaintiff’s complaint and a counterclaim

against plaintiff. (Dkt. 36, 37). Plaintiff filed a motion for a protective order on

April 1, 2009, which was granted April 6, 2009. (Dkt. 41, 42). 

On April 8, 2009, defendants filed a motion to quash a subpoena served on a

third party by plaintiff. (Dkt. 44). That motion was referred to the undersigned on

April 9, 2009. (Dkt. 45). Plaintiff responded to the motion to quash on April 22,

2009. (Dkt. 48). On April 30, 2009, plaintiff filed a motion to compel defendants’

production of documents. (Dkt. 50). That motion was also referred to the

undersigned on May 1, 2009. (Dkt. 51). On May 7, 2009, the parties conferred

and stipulated that the two pending motions - defendants’ motion to quash and

plaintiff’s motion to compel - be consolidated. (Dkt. 53). A notice of hearing

regarding the motion to quash and motion to compel, setting the hearing date for

May 26, 2009, was entered on May 7, 2009. (Dkt. 53). Defendants filed a

response to plaintiff’s motion to compel on May 14, 2009. (Dkt. 59).

An order of stipulation and dismissal regarding Allstate’s complaint was

entered on May 26, 2009, leaving State Farm as the only named plaintiff. (Dkt.

65). The hearing on the motion to quash and motion to compel was held on May

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26, 2009. The hearing on defendants’ motion to dismiss is currently scheduled for

July 29, 2009. (Dkt. 66). On June 4, 2009, plaintiff filed a supplemental brief in

support of its motion to compel. (Dkt. 69). Defendants responded to plaintiff’s

supplemental brief on June 16, 2009. (Dkt. 71).

II. RELEVANT FACTS

Plaintiff brought the present action seeking damages from defendants based

on allegations of fraudulent testing procedures and false diagnoses of plaintiff’s

insureds amounting to violations of the violations of the Racketeer Influenced and

Corrupt Organization Act (RICO). Plaintiff submits that it served defendants with

a set of document production requests on March 3, 2009. (Dkt. 50, p. 11). 

Defendants produced the relevant documents for a number of plaintiff’s document

requests, but objected to several others. (Dkt. 50, p. 12). More specifically,

defendants objected on the grounds that the various document requests were vague,

overly broad, ambiguous, overly burdensome, protected by physician-patient

privilege, or not reasonably calculated to lead to the discovery of any admissible

evidence. (Dkt. 50, p. 12-14). Plaintiff’s document requests 2, 6-7, and 10-11

remain at issue. Id. According to plaintiff, counsel sent a letter to defendants on

April 24, 2009 in an effort to resolve the issues raised in defendants’ objections. 

(Dkt. 50, p. 14). On April 29, 2009, defendants responded, agreeing to a narrowed

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definition incorporated in the document requests, but otherwise maintaining its

previous objections. (Dkt. 50, p. 15).

On March 25, 2009, Plaintiff served a subpoena on Comerica Bank

requesting various financial records of defendants. (Dkt. 44, p. 9). Defendant

moved to quash the subpoena on the grounds that defendant maintained a privacy

interest in the information, that the information sought was not relevant, and that

plaintiff’s request was for the purpose of harassing defendants. (Dkt. 44, p. 9).

III. STANDARD OF REVIEW

It is well-established that “the scope of discovery is within the sound

discretion of the trial court.” Lavado v. Keohane, 992 F.2d 601, 604 (6th Cir.

1993); Chrysler Corp. v. Fedders Corp., 643 F.2d 1229, 1240 (6th Cir. 1981). All

parties agree that in order for information to be relevant at the discovery stage, and

thus discoverable, it must be relevant to “any party’s claim or defense” and, while

the information itself need not be admissible in an evidentiary sense, it must still be

“reasonably calculated to lead to the discovery of admissible evidence.” 

Fed.R.Civ.P. 26(b)(1); see also Lewis v. ACB Business Services, Inc., 135 F.3d

389, 402 (6th Cir. 1998), quoting, Mellon v. Cooper-Jarrett, Inc., 424 F.2d 499,

501 (6th Cir. 1970) (“The scope of examination permitted under Rule 26(b) is

broader than that permitted at trial. The test is whether the line of interrogation is

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reasonably calculated to lead to the discovery of admissible evidence.”).

The resolutions of the present motions hinge on several principles of

discovery. While the permitted scope of discovery is broad, a Court may limit the

extent of discovery if it determines that the discovery sought is unreasonably

duplicative, or can be obtained from some other source that is more convenient,

less burdensome, or less expensive; the party seeking discovery has had ample

opportunity to obtain the information by discovery in the action; or, the burden or

expense of the proposed discovery outweighs its likely benefit. Fed.R.Civ.P. 26

(b)(2)(C)(i)-(iii). When dealing with electronically stored information, the party

from whom discovery is sought must show that the information sought in the

discovery request is not reasonably accessible because of undue burden or cost. 

Fed.R.Civ.P. 26(b)(2)(B). The Court may nevertheless condition or order

discovery if good cause is shown by the requesting party.

Rule 34(a)(1)(A) permits a party to serve on another party, a request to

produce any designated documents – including writings, drawings, graphs, charts,

photographs, sound recordings, images, and other data or data compilations –

stored in any medium from which information can be obtained from. The request

must describe with reasonable particularity each item or category of items. 

Fed.R.Civ.P. 34(b)(1)(A). 

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A party may issue a subpoena that, among other things, commands the

person to whom the subpoena is directed at to produce designated documents or

electronically-stored information. Fed.R.Civ.P. 45(a)(1)(A). A court must, upon a

timely motion, quash a subpoena when the subpoena “requires disclosure of

privileged or other protected matter.” Fed.R.Civ.P. 45(c)(3)(A)(iii). Additionally,

a court may quash a subpoena when the subpoena requires disclosure of

confidential commercial information. Fed.R.Civ.P. 45(c)(3)(B)(i).

IV. ANALYSIS AND CONCLUSIONS

A. Defendant’s Motion to Quash

Defendants filed the motion to quash in response to a subpoena served on

Comerica Bank, a nonparty to this litigation, seeking various financial information

and records of defendants. Defendants argue that the motion to quash should be

granted because the subpoena requests personal and confidential financial

information, seeks information that is neither relevant nor reasonably calculated to

lead to the discovery of admissible evidence, and is meant to harass defendants.

(Dkt. 44, p. 9). Additionally, defendants argue that plaintiff is seeking the same or

similar information by means of document production requests, and plaintiff

should be forbidden from serving subpoenas on third parties until it “avails itself of

the normal discovery process.” (Dkt. 44, p. 12). Defendant cites no authority for

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this position, however. 

In response, plaintiff argues that defendant lacks standing to challenge a

subpoena served on a third party. (Dkt. 48, p. 8). According to plaintiff, the

records sought in the subpoena are business records of the bank, and are not private

papers of the defendants. Additionally, plaintiff maintains that the information is

relevant to prove, among other things, the structure of the enterprise, the scope of

the fraud, and motive. (Dkt. 48, p. 9-11). Finally, plaintiff argues that the request

is neither harassing nor burdensome to defendants, and that plaintiff is not required

to wait for defendants’ production before seeking information from third parties. 

(Dkt. 48, p. 13, 14).

“The general rule is that a litigant has standing to challenge a subpoena

issued to a third party only where the litigant can claim some privilege or other

privacy interest in the subject matter of the subpoena.” Thomas v. Marina Assocs.,

202 F.R.D. 433 (E.D. Pa. 2001); Chirco v. Rosewood Vill. L.L.C., 2005 U.S. Dist.

LEXIS 43746 *2 ( E.D. Mich. 2005). In the present case, the subject matter of the

subpoena at issue relates to defendants’ financial information and records, and the

outcome, therefore, hinges on whether defendant can claim a viable privacy

interest in the information sought to be discovered by the subpoena.

As the Sixth Circuit has consistently recognized, there is no privacy interest

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in the financial affairs of an individual. Jenkins v. Rock Hill Local Sch. Dist., 513

F.3d 580, 591 (6th Cir. 2008); Overstreet v. Lexington-Fayette Urban County

Gov’t, 305 F.3d 566, 575 (6th Cir. 2002). Therefore, the undersigned concludes

that defendants can claim no viable privacy interest and, therefore, lack standing to

challenge the subpoena issued to a third-party.

With respect to the corporate financial records, Rule 45 provides that a court

may quash a subpoena seeking confidential business information. A common

practice in federal courts regarding a claim of confidential financial information is

to place the burden on the party claiming the privilege. Insulate America v. Masco

Corp., 227 F.R.D. 427, 432 (W.D. N.C. 2005). Upon a showing that the

information falls into a protected category and that disclosure may be harmful, the

burden shifts to the requesting party to establish both relevance and need for the

information. Id. The court then weighs the respective interests involved. Id. 

In the present case, defendants have claimed a privacy interest in the

financial records of the two corporate defendants. Although defendants have not

satisfactorily demonstrated how they would be harmed by the disclosure of

financial records, the undersigned nevertheless concludes that plaintiff has

sufficiently established the relevance of the financial information and the

information should therefore be disclosed.

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 “Tests” are defined as “needle electromyography tests or EMGs, nerve

conduction velocity tests or NCVs, evoked potential tests, and

electronystagmography tests or ENGs.” (Dkt. 50).

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Based on the foregoing analysis, defendants’ motion to quash is DENIED.

B. Plaintiff’s Motion to Compel

1. Document Request 2

Plaintiff asserts that defendants’ objections to Document Request 2, which

seeks documents related to claims submitted to other insurers seeking payment for

the Tests1

 or the Epley Maneuver, are unfounded because the request is narrowly

tailored to seek documents relating to a fraudulent billing enterprise employed by

defendants, who submitted hundreds of fraudulent bills to plaintiff and other

insurers for unnecessary medical procedures. (Dkt. 50, p. 15). Moreover, plaintiff

asserts that defendants provided no evidence of any undue burden imposed by

responding to the request; nevertheless, plaintiff maintains that the benefit of the

request outweighs any burden imposed on defendants. Finally, plaintiff asserts that

under federal law, there is no physician-patient privilege. Because plaintiff alleges

violations of federal law, plaintiff maintains that the state law physician-patient

privilege is inapplicable. Additionally, plaintiff points out that a HIPPA-qualified

protective order has already been entered by Judge Edmunds, which addresses any

confidentiality issues. (Dkt. 42).

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In response, defendants maintain their objection to Document Request 2 on

the grounds that it is overly broad and unduly burdensome. (Dkt. 59, p. 5-8). 

More specifically, defendants assert that the request does not limit claims to

automobile insurers or to patients injured in automobile-related accidents and that

compliance with the request will require extensive review of every patient file

dating back to 2001 to determine whether the file contains relevant documents. 

Additionally, defendants note that they spent over 1100 hours at a cost of over

$22,000 to produce 284 files relating to State Farm insurance claims, which pales

in comparison to the more than 10,000 patient files in defendants’ possession that

potentially fall within the scope of the discovery request. (Dkt. 59, Ex. 3).

Next, defendants assert that they have filed a motion to dismiss on plaintiff’s

federal question (RICO claim), and, if granted, this Court’s subject matter

jurisdiction will be based on diversity of citizenship. Therefore, state law,

including the Michigan physician-patient privilege, will apply. As such,

defendants assert that in the interim, any document production should be

suspended until defendants’ motion to dismiss is ruled on, because if production is

ordered and the motion to dismiss is granted, defendants will be irreparably

harmed. Finally, defendants assert that plaintiff’s Document Request 2 amounts to

a mere “fishing expedition” and that plaintiff is seeking the documents based on

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 CPT codes (Current Procedural Terminology), as the Court understands

them, are a set of numbers assigned to every task and service a medical practitioner

may provide to a patient. The codes are uniformly recognized, and updated

annually to ensure accurate billing and reimbursement information.

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mere speculation.

At the May 26, 2009 hearing, the parties debated the capability of

defendants’ billing software as it relates to filtering billing records by CPT2

 codes. 

In their supplemental brief, defendants admit that their billing software is capable

of filtering billing records by CPT code, but submit that such filtering is

inadequate. (Dkt. 71, p. 3). That is, even with a filtered list of patients who

received specific tests performed by Dr. Policherla, defendants would have to

manually inspect the files of each identified patient and copy any documents

relating to the document request. Plaintiff maintains that, given the capabilities of

the billing software, defendants should be able to produce the list of patients whose

documents would be responsive to this request without significant burden. (Dkt.

69, p. 1).

Recognizing the time and expense defendants have already invested in

producing documents relating to State Farm claims, the undersigned acknowledges

that producing relevant documents relating to more than 10,000 patients would be

an onerous task. Nevertheless, the undersigned is convinced that plaintiff has

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satisfied the relevancy threshold with respect to the documents sought in this

request. 

Additionally, the undersigned is not persuaded by defendants’ assertion that

discovery should be suspended until the resolution of the motion to dismiss and the

subsequent applicability of the Michigan physician-patient privilege is determined. 

Federal Courts are vested with an obligation to exercise the jurisdiction given to

them. Colorado River Water Conservation Dist. v. United States, 424 U.S. 800,

817-818 (1976). In the instant case, this Court’s jurisdiction was based on the

presence of a federal question. In federal question cases where pendent state

claims are raised, the federal common law governs all claims of privilege raised in

the litigation. Hancock v. Dodson, 958 F.2d 1367, 1373 (6th Cir. 1992), citing,

Perrignon v. Bergen Brunswig Corp., 77 F.R.D. 455, 458 (N.D. Cal. 1978). The

physician-patient privilege is not recognized under the federal common law. 

General Motors Corp. v. Director of Nat. Institute for OSHA, 636 F.2d 163, 165

(6th Cir. 1980). Therefore, defendant’s records are not protected by any privilege.

As such, the undersigned orders: (1) plaintiff to provide defendants with a

list of relevant CPT codes by Monday, July 27, 2009 to be used in the patient

filtration search; (2) defendants to produce the list of patients, filtered by the

identified CPT codes, by Monday, August 10, 2009; (3) plaintiff to select 250

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 It is assumed that these 250 patient files would not include any of the 284

files already produced by defendants, which would give plaintiff approximately

534 patient files to review.

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 The request seeks financial information from defendant Dr. Policherla in

both his personal capacity and corporate capacity as owner of Haranath Policherla,

M.D., P.C. and Advanced Neuro Rehab Services, P.C, both of which are named

defendants.

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patients from the filtered list by Monday, August 24, 20093

; (4) defendants to

either (a) produce all documents responsive to Document Request 2 for all 250

patients identified by plaintiff by Monday, September 14, 2009, or, in an effort to

ease defendants’ financial burden, (b) permit plaintiff’s counsel to review all 250

files and identify the relevant documents, and provide plaintiff with copies of the

identified documents by Monday, September 14, 2009. Further discovery in this

area may be permitted if plaintiff can make a showing, based on the results of the

ordered discovery, that additional disclosures would be productive.

2. Plaintiff’s Document Requests 6 and 7

Plaintiff’s Document Requests 6 and 7 seek various financial records from

defendants4

 including tax returns, general ledgers, balance sheets, income

statements, and bank accounts. At the hearing held May 26, 2009, plaintiff limited

its request to tax returns, IRS W2 forms, IRS 1099 forms, and bank account

information from defendant Dr. Policherla, in addition to above-mentioned forms

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and the general ledgers of the named corporate defendants. In its motion to

compel, plaintiff asserts that the financial information is necessary to (1) assess the

financial relationship and structure of the enterprise, (2) measure the extent and

scope of defendants fraud, (3) determine the financial relationship between

members of the alleged fraudulent enterprise and third parties, (4) prove defendants

motive, (5) identify other witnesses who may have participated in the fraudulent

scheme, and (6) prove plaintiff’s damages. (Dkt. 50, p. 19-23).

In response, defendants assert that they retain a privacy interest in the bank

records and maintain their objection that the requests were overly broad, vague and

ambiguous, and not calculated to lead to admissible evidence. (Dkt. 59, p. 13, 14). 

Additionally, defendants argue that plaintiff’s six reasons as to why the

information is necessary have no merit. (Dkt. 59, p. 14). That is, according to

defendants, plaintiff’s purported reasons have either been admitted by defendants

and are undisputed, and, therefore, no discovery is necessary, or they are grounded

in mere speculation, and are, therefore, insufficient grounds for compelling the

documents.

In addition to the analysis in Part IV (A), the undersigned concludes that

defendants’ objection does not overcome plaintiff’s showing of relevancy. 

Plaintiff limited both request 6 and 7 to the specific documents mentioned both

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above and at the May 26, 2009 hearing. As such, the undersigned is convinced that

the requests are not overly broad or vague, and are reasonably calculated to lead to

admissible evidence. Therefore, defendant is ordered to produce the documents

requested in requests 6 and 7, subject to the limitations mentioned, by Monday,

August 3, 2009. 

3. Plaintiff’s Document Requests 10 and 11

Plaintiff’s Document Request 10 seeks a copy of Dr. Policherla’s passport

while Document Request 11 seeks a copy of his schedule or calendar for dates that

services were rendered for claims submitted to State Farm. In its motion to

compel, plaintiff asserts that it received claims for services purportedly performed

by Dr. Policherla on dates on which he was allegedly out of the country. Plaintiff

asserts that both Document Requests 10 and 11 will likely lead to evidence that

supports its allegations of fraudulent medical testing by showing that the same

evaluation reports were prepared, the same tests were administered, and the same

therapies were rendered whether Dr. Policherla was in or out of the country. (Dkt.

50, p. 25).

In response, Dr. Policherla maintains his objection that both requests are not

reasonably calculated to lead to admissible evidence. (Dkt. 59, p. 19).

Additionally, Dr. Policherla asserts that he is permitted to supervise nurse

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practitioners performing medical services that they would not otherwise be able to

perform unsupervised. According to Dr. Policherla, supervision for medical

services has been provided via telecommunications in the past. As such, defendant

asserts that compelling discovery of Document Requests 10 and 11 will not

demonstrate that services rendered and billed to plaintiff were not performed due to

defendants’ absence from the country. Finally, defendant maintains that the

requests amount to an invasion of his privacy by uncovering all of his travel and

scheduling activities dating back to 2001.

Rule 26(b)(1) provides that “parties may obtain discovery regarding any

nonprivileged matter that is relevant to any party's claim or defense.” In the

complaint, plaintiff claims that defendant performed medical tests that were either

unnecessary or were not performed. (Dkt. 1, ¶ 78). Even accepting defendant’s

assertion that he is permitted to supervise nurse practitioners performing the

medical procedures as true for purposes of this motion, the undersigned is

convinced that the documents sought in requests 10 and 11 are both relevant and

reasonably calculated to lead to admissible evidence. Therefore, the motion to

compel is granted with respect to these items, to the extent that the requested

documents exist, and defendants are ordered to produce the documents by Monday,

August 3, 2009.

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The parties to this action may object to and seek review of this Order, but are

required to file any objections within 10 days of service as provided for in 28

U.S.C. § 636(b)(1) and Local Rule 72.1(d)(2). A party may not assign as error any

defect in this Order to which timely objection was not made. Fed.R.Civ.P. 72(a). 

Any objections are required to specify the part of the Order to which the party

objects and state the basis of the objection. Pursuant to Local Rule 72.1(d)(2),

objections must be served on this Magistrate Judge.

Dated: July 20, 2009 s/Michael Hluchaniuk

Michael Hluchaniuk

United States Magistrate Judge

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CERTIFICATE OF SERVICE

I certify that on July 20, 2009, I electronically filed the foregoing paper with

the Clerk of the Court using the ECF system, which will send electronic

notification of such filing to the following: Robert S. Harrison, Jenny Louise

Johnson, Kathy P. Josephson, Matthew D. Klakulak, Jules B. Olsman, Ross O.

Silverman, and Morley Witus, and I certify that I have mailed by United States

Postal Service the paper to the following non-ECF participant(s): not applicable.

s/James P. Peltier 

Pete Peltier

Courtroom Deputy Clerk

U.S. District Court

600 Church Street

Flint, MI 48502

(810) 341-7850

pete_peltier@mied.uscourts.gov

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