Court Opinion

ID: 3048109
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:23:22.07759+00
Date Added: 2024-06-11T07:38:10.340804
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

CONNECTICUT GENERAL LIFE               
INSURANCE COMPANY; EQUITABLE
LIFE ASSURANCE SOCIETY OF THE
UNITED STATES; CIGNA EMPLOYEE
BENEFITS SERVICES INC.; AETNA
U.S. HEALTHCARE, INC.; UNITED
HEALTHCARE CORPORATION, fka
United HealthGroup Incorporated
dba UnitedHealth Group; HUMANA,
INC.; AETNA LIFE INSURANCE                  No. 04-55859

                                       
COMPANY,                                      D.C. No.
               Plaintiffs-Appellees,       CV-99-08197-TJH
                 v.                           OPINION
NEW IMAGES OF BEVERLY HILLS,
                         Defendant,
                and
PROVIDENCE AMBULATORY SURGERY
CENTER, INC., dba Providence
Ambulatory Surgery Center;
HARRELL ROBINSON, M.D.,
            Defendants-Appellants.
                                       
        Appeal from the United States District Court
            for the Central District of California
           Terry J. Hatter, Chief District Judge,
       and J. Spencer Letts, District Judge, Presiding

                  Submitted May 3, 2006
                   Pasadena, California

                   Filed March 30, 2007

                            3683
3684         CONNECTICUT GENERAL LIFE v. PROVIDENCE
Before: Diarmuid F. O’Scannlain,* Andrew J. Kleinfeld, and
            Barry G. Silverman, Circuit Judges.

                   Opinion by Judge Kleinfeld

  *This case was submitted on May 3, 2006, before Judge Lay, Judge
Kleinfeld, and Judge Silverman. Judge Lay became unavailable while the
decision was pending, and Judge O’Scannlain was drawn to replace him
pursuant to General Order 3.2(g). Judge O’Scannlain has read the briefs
and reviewed the record.
          CONNECTICUT GENERAL LIFE v. PROVIDENCE     3685

                       COUNSEL

Roy C. Dickson (briefed), Dickson & Associates, Yorba
Linda, California, for the appellants.

Lawrence C. Fox (briefed), Kornstein, Veisz, Wexler & Pol-
lard, LLP, New York, New York, for the appellees.
3686          CONNECTICUT GENERAL LIFE v. PROVIDENCE
                             OPINION

KLEINFELD, Circuit Judge:

  The only issue raised in this case is the appropriateness of
a discovery sanction that terminated the case and imposed
judgment.

                                Facts

   Harrell Robinson, M.D., and Providence Ambulatory Sur-
gery Center, Inc. were part of a huge, lucrative, fraudulent
scheme to solicit patients, perform surgeries, and submit
fraudulent billings to insurance companies. We described the
scheme in a related appeal:

       The background of this case is long and colorful.
       Plaintiffs — branches of four major medical insur-
       ance companies — filed a complaint in 1999 against
       dozens of individuals involved in an alleged insur-
       ance fraud scheme at ten outpatient surgery clinics in
       Southern California. The alleged scheme involved
       surgeons who would perform elective cosmetic sur-
       geries and then submit fraudulent bills and medical
       records to plaintiffs, assigning bogus diagnoses and
       misrepresenting the surgeries performed. For exam-
       ple, various facial cosmetic surgeries were docu-
       mented and billed as procedures to correct deviated
       septums; breast implants were billed as biopsies;
       tummy tucks became hernia or gynecological sur-
       geries. The fraud was aided by patient recruiters who
       sought patients, primarily Asian-American women,
       from all over the country and were paid a fee per
       patient.1
  1
    Connecticut General Life Insurance Company v. New Images of Bev-
erly Hills, 321 F.3d 878, 879-80 (9th Cir. 2003);. See also Robinson v.
Cigna Employee Benefits Services, No. 01-55868, 36 Fed. Appx. 329 (9th
Cir. June 7, 2002); Connecticut General Life Insurance Company v. Zilka,
No. 03-56237, 108 Fed. Appx. 497 (9th Cir. August 27, 2004).
            CONNECTICUT GENERAL LIFE v. PROVIDENCE              3687
   After the insurance companies sued him, Dr. Robinson
filed for bankruptcy. In another disposition, we affirmed the
district court’s sanctions against Dr. Robinson and his attor-
ney, Roy Dickson, for misconduct and bad faith in connection
with the filing and prosecution of the bankruptcy petition.2 Dr.
Robinson had “failed to disclose his ownership of real prop-
erty, incorrectly reported the value for his residential property,
and failed to include Cigna as a creditor in its schedules,” and
both Robinson and Dickson “knowingly deceived the court
and acted in bad faith” by submitting “perjured declarations,
fabricated evidence and frivolous pleadings.”3 This appeal is
a continuation of that pattern.

   The insurance companies who are plaintiffs and appellees
brought this case as a RICO action against numerous South-
ern California surgeons and surgery clinics. The complaint
alleged that the surgeons and surgery clinics operated a fraud-
ulent billing scheme.4 The case never got to trial, because
after years of evasion of discovery obligations by Robinson
and his clinic, Providence Ambulatory Surgery Center, the
district court entered a default judgment for $2,034,954.51.
Robinson and Providence appeal the case dispositive sanction.

                             Analysis

   The appellants’ brief argues that the order requiring discov-
ery did not apply to Robinson, because he was in bankruptcy
proceedings (and protected by the automatic stay) when it was
issued. And it argues the order did not apply to Providence,
because Providence was in default at that time, and the order
excluded parties in default. It also argues that the sanction
  2
     Robinson v. Cigna Emple. Benefits Serv. (In re Robinson), 36 Fed.
Appx. 329 (9th Cir. 2002).
   3
     Robinson v. Cigna Emple. Benefits Serv. (In re Robinson), 36 Fed.
Appx. 329, 330 (9th Cir. 2002).
   4
     Connecticut General Life Insurance Company v. New Images of Bev-
erly Hills, 321 F.3d 878, 879-80 (9th Cir. 2003).
3688         CONNECTICUT GENERAL LIFE v. PROVIDENCE
was excessive, because Robinson and Providence’s noncom-
pliance was inadvertent.

   The core of the appellants’ argument is yet another fraud on
the court. The appellants’ brief states that “Dr. Robinson was
in Bankruptcy until July of 2000.” This is important because
a bankruptcy stay would prevent the April 2000 order com-
pelling discovery from applying to Dr. Robinson when it was
issued. The appellants’s brief states as a fact that the order
granting relief from the stay and permitting litigation against
Dr. Robinson to proceed, “was not operative until July 10,
2000.”

   To support this critical factual assertion, appellants cite to
their excerpts of record, where the docket sheet is reproduced.
The docket sheet as reproduced in the appellants’ excerpts of
record shows the date for the order granting relief from the
bankruptcy stay as “7/00.” That looks as though it means July
2000, supporting the brief.

   But that is false. In fact, the order was entered March 17,
2000. Appellants made March look like July by photocopying
the docket sheet so that part of the left side did not copy.
Thus, “03/17/00” became “7/00.”

   Appellees pointed this out in their brief. Yet when it was
called to appellants’ attention in the opposition brief in this
appeal, they did not confess error. They did not file a reply
brief. Instead, a year and a half later, after the case was sub-
mitted for decision without oral argument, appellants sent the
court a “notice of errata” stating that the correct date was
April, rather than July as they had claimed, and making a new
argument.5
  5
   We struck the letter because leave to rebrief the case on a new theory
was neither requested nor given. The new theory appears meritless on its
face.
             CONNECTICUT GENERAL LIFE v. PROVIDENCE               3689
   When Robinson and Providence finally responded to the
order compelling discovery, their response approached contu-
maciousness. Defendants’ discovery responses appear calcu-
lated to prevent plaintiffs from learning and proving the truth.
Robinson refused to answer some questions and provide some
documents, such as those asking whether he paid people to
recruit patients (a crime in California6), on the ground that his
answers might tend to incriminate him. Robinson and Provi-
dence claimed that patient charts and records had been “mis-
placed or lost” and that they were “unable to locate said
charts.”

   Besides obtaining patient records, plaintiffs needed to find
former staff, who could be compelled to testify under oath
about what went on. The interrogatories asked for the names,
last known addresses, and phone numbers of former employ-
ees, and answers were required by court order. But defendants
did not provide them. Dr. Robinson and Providence hid the
identities and locations of former employees by providing no
addresses or phone numbers, and listing some only by first
name or nickname. For example, they “identified” former
employees as “Jenny - Surgical Consultant,” “ ‘Duke’ - Office
Admistrator [sic],” “ ‘Lisa’ - Biller / Collection / Surgery /
Scheduling,” “ ‘Chalon’ - Billing / Collections,” “Patty -
Office Manager,” “Maritza - Office Manager,” “Bob - Office
Administrator,” and “ ‘Bud’ Altman - Surgical Techinician
[sic].” The practical effect, as any lawyer would anticipate,
was to frustrate effective discovery that would expose fraudu-
lent billing by preventing the insurance companies from find-
ing employees who could testify to it. These responses and
others amounted to avoidance, not compliance, with discov-
ery obligations.

  The district court warned defendants in July that it would
“entertain a motion for terminating sanctions by plaintiffs
  6
   See Cal. Bus. & Prof. Code § 650; Cal. Ins. Code §§ 750, 1871.7; Cal.
Penal Code §§ 549, 550.
3690         CONNECTICUT GENERAL LIFE v. PROVIDENCE
against any defendant who does not fully comply” with the
order compelling discovery. After another year and a half of
evasion and noncompliance, Connecticut General filed a
motion for terminating sanctions against Dr. Robinson and
Providence. Dr. Robinson and Providence filed no opposition.
The district court examined the motion, found it meritorious
on its face, and ordered “terminating sanctions” against Dr.
Robinson and Providence, by which it meant default judg-
ment under Rule 37.7

   After the order was issued, Dr. Robinson and Providence
filed an opposition to the motion, claiming they had mailed it
earlier (but on the date it was supposed to have been filed, so
it would still have been late). Despite the untimeliness of the
opposition, the district court reconsidered its order in light of
the opposition, and ordered a response. After considering
these filings, the district court again imposed a terminating
sanction, judgment by default. Judgment was entered against
Robinson and Providence on the complaint for $2,034,954.51.

   Because it was predicated on a lie, Dr. Robinson’s argu-
ment that the bankruptcy stay protected him from the order to
compel fails. The stay had been dissolved. Likewise, Robin-
son and Providence’s argument that they were not warned
relies on a false premise. They were warned, in the language
quoted above. Their argument that the order compelling
responses was not timely served is also false in fact, and
depends on the tricky photocopying of the docket sheet that
hid the first few characters. Providence argues that the order
to compel did not apply to it, because it was in default and the
order did not apply to parties in default. But Providence suc-
ceeded in getting the default set aside. And after it did, the
district court expressly stated that, “All defendants are cau-
tioned that the court will entertain a motion for terminating
sanctions by plaintiffs against any defendant who does not
fully comply” with all discovery obligations, including but
  7
   Fed. R. Civ. P. 37.
             CONNECTICUT GENERAL LIFE v. PROVIDENCE              3691
not limited to the order entered before Providence got its
default set aside.

  A terminating sanction, whether default judgment against a
defendant or dismissal of a plaintiff’s action, is very severe.
We review discovery sanctions for abuse of discretion.8 Only
“willfulness, bad faith, and fault” justify terminating sanctions.9

   [1] We have constructed a five-part test, with three sub-
parts to the fifth part, to determine whether a case-dispositive
sanction under Rule 37(b)(2) is just: “(1) the public’s interest
in expeditious resolution of litigation; (2) the court’s need to
manage its dockets; (3) the risk of prejudice to the party seek-
ing sanctions; (4) the public policy favoring disposition of
cases on their merits; and (5) the availability of less drastic sanc-
tions.”10 The sub-parts of the fifth factor are whether the court
has considered lesser sanctions, whether it tried them, and
whether it warned the recalcitrant party about the possibility
of case-dispositive sanctions.11 This “test” is not mechanical.
It provides the district court with a way to think about what
to do, not a set of conditions precedent for sanctions or a
script that the district court must follow:

      Like most elaborate multifactor tests, our test has not
      been what it appears to be, a mechanical means of
      determining what discovery sanction is just. The list
      of factors amounts to a way for a district judge to
      think about what to do, not a series of conditions
      precedent before the judge can do anything, and not
  8
   Jorgensen v. Cassiday, 320 F.3d 906, 912 (9th Cir. 2003).
  9
   Jorgensen v. Cassiday, 320 F.3d 906, 912 (9th Cir. 2003).
  10
     Jorgensen v. Cassiday, 320 F.3d 906, 912 (9th Cir. 2003) (quoting
Malone v. U.S. Postal Serv., 833 F.2d 128, 130 (9th Cir. 1987).
  11
     Valley Eng’rs v. Electric Eng’g Co., 158 F.3d 1051, 1057 (9th Cir.
1998).
3692         CONNECTICUT GENERAL LIFE v. PROVIDENCE
       a script for making what the district judge does
       appeal-proof.12

   [2] In this case, the district court issued a terse order and
did not engage in extended discussion. But the record makes
application of all the factors so clear that no extended discus-
sion was needed. “Although it is preferred, it is not required
that the district court make explicit findings in order to show
that it has considered these factors and we may review the
record independently to determine if the district court has
abused its discretion.”13

   The record in this case, as we have discussed, amply sup-
ports sanctions. In deciding whether to impose case-
dispositive sanctions, the most critical factor is not merely
delay or docket management concerns, but truth. “What is
most critical for case-dispositive sanctions, regarding risk of
prejudice and of less drastic sanctions, is whether the discov-
ery violations ‘threaten to interfere with the rightful decision
of the case.’ ”14

   [3] Sometimes courts respond to contumacious refusal to
produce required discovery or comply with orders compelling
discovery with suggestions that lawyers “quit squabbling like
children” and work things out for themselves. That can oper-
ate to the advantage of a dishonest, noncompliant party, and
  12
      Valley Eng’rs v. Electric Eng’g Co., 158 F.3d 1051, 1057 (9th Cir.
1998).
   13
Allen v. Bayer Corp. (In re: Phenylpropanolamine (PPA) Prods. Liab.
Litig.), 460 F.3d 1217, 1226 (9th Cir. 2006) (quoting Ferdik v. Bonzelet,
963 F.2d 1258, 1261 (9th Cir. 1992)). See also Adriana Intl. Corp. v.
Lewis & Co., 913 F.2d 1406, 1412 (9th Cir. 1990) (“If the district court
fails to make explicit findings regarding each of these factors, the appel-
late court must review the record independently to determine whether the
dismissal was an abuse of discretion.”).
   14
      Valley Eng’rs v. Electric Eng’g Co., 158 F.3d 1051, 1057 (9th Cir.
1998) (quoting Adriana Intl. Corp. v. Lewis & Co., 913 F.2d 1406, 1412
(9th Cir. 1990)).
             CONNECTICUT GENERAL LIFE v. PROVIDENCE                  3693
can prevent the truth from coming out. Federal Rule of Civil
Procedure 1 requires that the rules be construed to secure the
“just” resolution of disputes. “There is no point to a lawsuit,
if it merely applies law to lies.”15 The most critical factor to
be considered in case-dispositive sanctions is whether “a
party’s discovery violations make it impossible for a court to
be confident that the parties will ever have access to the true
facts.”16 Dickson’s “pattern of deception and discovery abuse
made it impossible for the district court to conduct another
trial with any reasonable assurance that the truth would be
available. It is appropriate to reject lesser sanctions where the
court anticipates continued deceptive misconduct.”17

   [4] “Where a party so damages the integrity of the discov-
ery process that there can never be assurance of proceeding on
the true facts, a case dispositive sanction may be appropriate.”18
This was just such a case. The district court did its duty, and
fairly exercised its discretion in order to secure a just resolu-
tion of the dispute.19

   AFFIRM.

   15
      Valley Eng’rs v. Electric Eng’g Co., 158 F.3d 1051, 1058 (9th Cir.
1998).
   16
      Valley Eng’rs v. Electric Eng’g Co., 158 F.3d 1051, 1058 (9th Cir.
1998).
   17
      Anheuser-Busch, Inc. v. Natural Beverage Distribs., 69 F.3d 337, 352
(9th Cir. 1995).
   18
      Valley Eng’rs v. Electric Eng’g Co., 158 F.3d 1051, 1058 (9th Cir.
1998).
   19
      We are sending a copy of this decision to the California Bar for such
action as it may deem appropriate regarding Mr. Dickson.