Sacred Heart Health Services et al v. MMIC Insurance, Inc. et al

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
SACRED HEART HEALTH SERVICES
and AVERA HEALTH & LEWIS &
CLARK SPECIALTY HOSPITAL, LLC,
Plaintiffs,
vs.
MIDWEST MEDICAL INSURANCE
COMPANY,
Defendant.
4:20-CV-04149-LLP
ORDER GRANTING PLAINTIFFS’
MOTION TO COMPEL
DOCKET NO. 23
INTRODUCTION
This matter is pending before the court on plaintiffs’ complaint alleging
two counts of breach of contract and two counts of bad faith against defendant
arising out of defendant’s alleged failure to participate in settlement of various
claims arising under plaintiffs’ insurance policies issued by defendant. See
Docket No. 1. Jurisdiction is premised on the diverse citizenship of the parties
and an amount in controversy in excess of $75,000. Id. Now pending is
plaintiffs’ motion to compel a third party to comply with a subpoena duces
tecum served on that party. See Docket No. 23. This motion was referred to
this magistrate judge for determination pursuant to 28 U.S.C. § 636(b)(1)(A).
See Docket No. 27.
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FACTS
A physician named Dr. Allen Sossan became the object of multiple
lawsuits against him alleging he had performed unnecessary surgeries. The
limits of Dr. Sossan’s medical malpractice policy were quickly exceeded.
Injured parties also sued the various hospitals and other entities under whose
auspices Dr. Sossan practiced medicine. Those entities included lawsuits
against the plaintiffs herein.
Plaintiffs are insured by defendant Midwest Medical Insurance Company
(“MMIC”). All the Sossan cases were pending before the same circuit court
judge in South Dakota state court. Plaintiffs attempted to extricate themselves
from the lawsuits by filing summary judgment motions. After the circuit court
denied their motions, an omnibus mediation session was scheduled to address
all of the Sossan cases.
Plaintiffs allege in their complaint that MMIC refused to participate in
settlement negotiations on behalf of plaintiffs in the Sossan cases unless
plaintiffs agreed to forfeit any claims they may have had against MMIC for bad
faith failure to pay insurance benefits. Plaintiffs refused to accept this
condition. MMIC apparently initially attended the Sossan mediation, but left
before the process concluded. Plaintiffs allege they were forced to settle the
Sossan claims out of their own pockets. They now seek recovery of the
contract benefits they believe they were entitled to under their insurance
policies with MMIC as well as damages for bad faith refusal by MMIC to pay
those benefits.
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When the injured parties brought their myriad suits against Dr. Sossan,
at least thirteen claims were also asserted against Dr. Donald Swift for
allegedly negligently referring patients to Dr. Sossan. Dr. Swift, who was also
insured by MMIC, was represented by the Sioux Falls law firm of Evans, Haigh
& Hinton, LLP (“Evans law firm”). Acting on behalf of Dr. Swift, the Evans law
firm settled the claims brought against Dr. Swift. Dr. Swift alleges MMIC
refused to participate in the settlement of these claims and he was forced to
settle the claims with his own money. See Docket No. 25-1. After settling the
claims, Dr. Swift assigned any rights he may have to plaintiffs, including all his
files from his trial counsel regarding the Sossan medical malpractice cases. Id.
Plaintiffs served the Evans law firm with a subpoena duces tecum seeking
complete copies of each of their 13 files associated with their representation of
Dr. Swift. See Docket No. 25-2. The Evans law firm responded by lodging
three objections to this subpoena. See Docket No. 25-3. Thereafter, plaintiffs
filed this instant motion to compel.
DISCUSSION
Rule 45 of the Federal Rules of Civil Procedure allows a party to serve a
subpoena for the production of documents on a nonparty, with notice to the
other parties in the litigation. See FED. R. CIV. P. 45(a). The nonparty on whom
the subpoena is served must be protected from undue burden or expense. Id.
at subsection (d)(1).
A subpoena must be quashed or modified if it requires the disclosure of
privileged or other protected matter if there is no exception or waiver
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applicable, or if the subpoena subjects a person to undue burden. Id. at
subsection (d)(3)(A). A subpoena may be quashed or modified to protect a
person affected by a subpoena if the subpoena requires disclosure of a trade
secret or other confidential research, development, or commercial information.
Id. at subsection (d)(3)(B).
"Ordinarily a party has no standing to seek to quash a subpoena issued
to someone who is not a party to the action, unless the objecting party claims
some personal right or privilege with regard to the documents sought." Charles
A. Wright, Arthur R. Miller, Mary K. Kane, Richard L. Marcus, A. Benjamin
Spencer, and Adam Steinman, 9A Fed. Prac. & Proc. Civ. § 2459 (3d ed. Oct.
2020 update) (hereinafter "Fed. Prac. & Proc. Civ."). As with other discovery,
the relevancy issue at the time a subpoena is served is broad—the court does
not evaluate whether the evidence sought is admissible, but rather whether the
information is relevant to a claim or defense and is nonprivileged. Id. The
court also considers whether the information is likely to lead to the discovery of
admissible evidence. Id. The party seeking to quash or modify a subpoena
bears the burden of demonstrating grounds for quashing it. Id.
As indicated above, the requesting party must establish the relevance of
the discovery sought as an initial threshold matter. Plaintiffs argue that one of
the issues they will bear the burden of proving in this litigation against MMIC
is that the settlements they reached with persons injured by Dr. Sossan were
reasonable. See Docket No. 26 at p. 6. Plaintiffs seek the information in the
Evans law firm’s files for Dr. Swift so as to compare how the Evans law firm
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valued some of the claims of some patients injured by Dr. Sossan and the
amount paid in settlement of those claims. Id. Plaintiffs claim they need to
know the names of the injured parties in order to make the comparison
between claims plaintiffs settled and claims Dr. Swift settled. Id.
In its response to plaintiffs’ motion to compel, the Evans law firm
explains that the subpoena served on it will require production of documents
which summarize the medical records of the persons who were injured by
Dr. Swift and, by extension, Dr. Sossan. See Docket No. 29. Although these
documents are not themselves medical records, they summarize and set forth
some details from the injured parties’ medical records. Id. Accordingly, the
Evans law firm is willing to produce those documents upon this court’s order,
but did not want to produce them without a court order for fear that it would
be accused of violating privacy laws related to patients’ medical records. Id.
In addition, the Evans law firm seeks an order from the court that it need
only produce the paper file in Dr. Swift’s cases as, at the time the Evans law
firm represented Dr. Swift, the law firm kept all its files in paper form. Id. If
an email was sent or received, the law firm printed it out and placed it in the
paper file. Counsel for the Evans law firm represents it believes an electronic
search of the law firm’s records will not reveal any additional documents. Id.
Also, counsel represents he has already spent 8 hours searching through and
preparing the Dr. Swift files for production to plaintiffs. Id. If the court is
going to require the Evans law firm to conduct electronic searches for
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additional records, counsel requests that plaintiffs be required to pay counsel
for his time in making such searches. Id.
Regarding the Evans law firm’s concern about patient privacy, it cites to
only two specific statutes: SDCL §§ 19-2-13 and 19-19-503. Id. at p. 2. It also
states it is concerned about violating “other healthcare privacy laws,” but does
not specifically mention any other statutes of concern. Id. The Health
Insurance Portability and Accountability Act (“HIPAA”) comes to mind as an
obvious other source of privacy protection for healthcare laws. See Pub. L.
No. 104-191, §§ 261-64, 110 Stat. 1936 (1996).
Plaintiffs assert that HIPAA specifically allows the disclosure of private
healthcare data in a judicial proceeding in response to an order of the court.
See 45 C.F.R. § 164.512(e). Thus, if this court were to order the Evans law firm
to disclose the documents called for by plaintiffs’ subpoena, such disclosure
would not subject the law firm to potential HIPAA liability.
Turning to the two state statutes cited by the Evans law firm, the first,
SDCL § 19-2-13 states the following:
The production of a record of a healthcare provider, whether in
litigation or in contemplation of litigation, does not waive any
privilege which exists with respect to the record, other than for the
use in which it is produced. Any person or entity receiving such a
record may not reproduce, distribute, or use it for any purpose
other than for which it is produced. This rule does not bar any
person or entity from complying with any court order, or state or
federal law or regulation authorizing disclosure of information that
otherwise would be protected by this rule.
Thus, the South Dakota statue, like HIPAA, allows an exception for disclosure
of records pursuant to court order.
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The second state statute cited by the Evans law firm is SDCL § 19-19-
503, which sets the general rule of patient-physician privilege. See SDCL
§ 19-19-503(b). That privilege is subject to waiver if the patient files a lawsuit
which places his or her medical condition into issue. SDCL § 19-19-503(d)(3).
Clearly, for purposes of the Sossan/Swift litigation, the patients injured
by Dr. Sossan waived their patient-doctor privilege as to their medical
conditions for purposes of that litigation. However, that does not mean they
have waived their privilege for all time and for all purposes.
The District of Minnesota grappled with the extent of a waiver of patient-
physician privilege in Cerro Gordo Charity v. Fireman’s Fund Ins. Co., 623 F.
Supp. 877 (D. Minn. 1985). In that case, Leonard Richards had sued his
insurance companies in the 1970s to obtain insurance benefits for some
psychiatric care Richards received. Id. at 878. In order to prove that the
treatment he had received was covered by the insurance policies, at trial
Richards called his psychiatrist who testified in open court about his treatment
of Richards. Id. at 879-80.
Later, litigation was filed in federal district court over the proceeds of
some life insurance policies which Richards purchased on the life of May
Wilson, whom Richards then murdered or had someone else murder. Id. at
878. In the life insurance litigation, a transcript of Richards’ psychiatrist’s
testimony from the earlier proceeding was read into evidence, a fact Richards
argued was error in his post-trial motion. Id. at 879-80.
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The court noted that a prior waiver of the patient-physician privilege in
one proceeding does not entail a wholesale waiver of the privilege for all
subsequent purposes and proceedings. Id. at 880. “Nonetheless, where a
selective disclosure of confidential information occurs, a finding of limited
waiver as to the same evidence is warranted.” Id. The purpose of the privilege
was to encourage the patient to be fully forthcoming and honest in his
statements made in expectation of medical care. Id. Where a limited
disclosure is made, and that same evidence is used again later, the goal of the
patient-physician privilege is not undermined. Id.
The court concludes the same herein. Those who were injured by
Dr. Sossan via Dr. Swift waived their privilege as to their medical information
for purposes of their lawsuits. This lawsuit is closely related, concerning the
determination of where responsibility lies for the settlement monies paid by
plaintiffs to Dr. Sossan’s victims. Furthermore, the information being disclosed
is the same as was revealed in the Dr. Swift lawsuits.
Nonetheless, to limit the extent of the usage of the medical information of
these patients, the court requires plaintiffs, defendant, and the Evans law firm
to fashion a protective order regarding these records. At a minimum, the
protective order should provide for filing under seal of any document
identifying a patient and for filing of redacted documents from which
identifying information has been removed. The protective order should also
prohibit further dissemination or disclosure of the documents beyond this
lawsuit and the attorneys, clients, and experts involved in this lawsuit. If the
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parties cannot agree upon terms of a protective order within 15 days of the
date of this order, they should notify the court and the court will impose one of
its own.
CONCLUSION
Based on the foregoing facts, law, and analysis, it is hereby
ORDERED that plaintiffs’ motion to compel [Docket No. 23] is granted in
full. The Evans law firm shall comply fully with the subpoena duces tecum
served upon it. The law firm is required to produce only the paper file as it
appears in their own records without the necessity of conducting any further
search for electronic records. No attorney’s fees or costs will be awarded for
the filing of this motion. It is further
ORDERED that plaintiffs, defendant and the Evans law firm shall, within
15 days of today’s date, agree upon and submit to the court a protective order
regarding private patient information in the subpoenaed documents in accord
with the court’s suggestions above. Alternatively, if an agreement cannot be
mutually reached within 15 days, the parties shall so notify the court and the
court will issue a protective order of its own making.
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NOTICE OF RIGHT TO APPEAL
Pursuant to 28 U.S.C. § 636(b)(1)(A), any party may seek reconsideration
of this order before the district court upon a showing that the order is clearly
erroneous or contrary to law. The parties have fourteen (14) days after service
of this order to file written objections pursuant to 28 U.S.C. § 636(b)(1)(A),
unless an extension of time for good cause is obtained. See FED. R. CIV. P.
72(a); 28 U.S.C. § 636(b)(1)(A). Failure to file timely objections will result in the
waiver of the right to appeal questions of fact. Id. Objections must be timely
and specific in order to require review by the district court. Thompson v. Nix,
897 F.2d 356 (8th Cir. 1990); Nash v. Black, 781 F.2d 665 (8th Cir. 1986).
DATED this 23rd day of February, 2021.
BY THE COURT:
VERONICA L. DUFFY
United States Magistrate Judge
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