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Leonard A. Wychocki v. Franciscan Sisters of Chicago

June 15, 2011

LEONARD A. WYCHOCKI, PLAINTIFF,
v.
FRANCISCAN SISTERS OF CHICAGO, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Magistrate Judge Nan R. Nolan

MEMORANDUM OPINION AND ORDER

Defendants Franciscan Sisters of Chicago and Franciscan Sisters of Chicago Service Corporation (collectively, "Franciscan Sisters") move to quash or modify the document subpoenas issued by Plaintiff Leonard A. Wychocki to McDermott Will & Emery LLP ("McDermott") and Sullivan, Cotter & Associates, Inc. ("Sullivan Cotter"). Wychocki moves to compel the production of documents containing communications with Sullivan Cotter and requests sanctions.*fn1 For the reasons stated below, the motions are granted in part and denied in part.

I. BACKGROUND

Wychocki filed suit against Franciscan Sisters for recovery of deferred compensation and benefits allegedly due under a deferred compensation plan. (Compl. ¶ 3.) Franciscan Sisters operates long term care, senior housing facilities and community based services in five states. (Id. ¶ 4; Countercl. ¶ 2; Doc. 101 Ex. A.) Wychocki was Franciscan Sisters' President and Chief Executive Officer from 1994 through 2006. (Compl. ¶ 4; Countercl. ¶¶ 4, 9.) Third Party Defendant and Counter Plaintiff Julie Secviar was hired in 1998 as the Vice President of Human Resources for Franciscan Sisters. (Countercl. ¶¶ 5, 11.) She was later promoted by Wychocki to the position of Vice President of Strategic Resources. (Id. ¶ 11.) Her responsibilities included managing compensation and benefits for all of Franciscan Sisters' employees and executives. (Id.) Secviar left Franciscan Sisters in 2008. (Id. ¶ 23.)

In late 2000 or early 2001, Wychocki approached Franciscan Sisters' Board of Directors ("Board") and requested additional retirement benefits in the form of a Supplemental Executive Retirement Plan ("SERP"). (Compl. ¶ 6; Countercl. ¶ 12.) The Board instructed Secviar to retain an executive compensation consulting firm with expertise on SERPs to obtain an independent proposal regarding an appropriate SERP benefit for Wychocki. (Countercl. ¶ 14.) While the Board authorized Secviar to obtain Wychocki's input, she was instructed to obtain the consulting firm's independent recommendations regarding the appropriate level of a SERP benefit for an officer in Wychocki's position. (Id. ¶ 15.)

Secviar engaged Clark/Bardes Consulting ("Clark/Bardes") to provide the independent proposal. (Compl. ¶ 6; Countercl. ¶ 16.) Clark/Bardes was "experienced in determining the types and levels of compensation and benefits being provided to executives in the marketplace and familiar with types and levels of compensation and benefits being provided to executives of not-for-profit organizations." (Countercl. ¶ 16.) Although the SERP was made retroactive to July 2001, it was not finalized until shortly before Wychocki took early retirement in December 2006. (Compl. ¶¶ 6-- 8.) Subsequent to his retirement, Wychocki acknowledges that Franciscan Sisters paid him "substantial monetary benefits" but contends that they withheld approximately $800,000 that was due him pursuant to the SERP and withheld payment of other benefits which have an approximate value of $300,000. (Id. ¶ 10.)

Franciscan Sisters filed a counterclaim and third-party complaint against Wychocki and Secviar, respectively, alleging fraud, fraud in the inducement, conspiracy to commit fraud, breach of fiduciary duty, unjust enrichment and breach of contract. (Countercl. ¶¶ 1, 83--144.) Franciscan Sisters contend that Wychocki and Secviar schemed to obtain a SERP for Wychocki that was significantly in excess of what Clark/Bardes had recommended. (Id. ¶¶ 17--18, 21--23.) In furtherance of their scheme, Wychocki and Secviar withheld from the Board information about the $1 million SERP actually recommended by Clark/Bardes and instead directed Clark/Bardes to design a plan that would yield a $3.5 million benefit. (Id. ¶¶ 21--23, 29--31.) Despite the fact that the $3.5 million plan was based on Wychocki and Secviar's parameters, Wychocki and Secviar "intentionally misled" the Board to believe that the plan was based on Clark/Bardes's recommendations. (Id. ¶ 33.)

In July 2001, the Board, unaware of Clark/Bardes's $1 million SERP recommendation, accepted Wychocki and Secviar's recommendations and instructed Secviar to draft the SERP agreement, which she never did. (Countercl. ¶¶ 32--41.) Several months later, despite the fact that there was no SERP document, Wychocki and Secviar directed Franciscan Sisters' chief financial officer to make a $1.5 million deposit into a special trust account dedicated to funding Wychocki's SERP. (Id. ¶ 44.) Several years later, when it was discovered that the SERP had never been drafted, Wychocki and Secviar represented to the Board that it had previously approved the SERP. (Id. ¶¶ 48--50.)

In connection with drafting the SERP and finalizing Wychocki's severance package in 2004 and 2005, Franciscan Sisters retained Sullivan Cotter to issue an opinion regarding the reasonableness of Wychocki's total compensation package. (Countercl. ¶ 51; see Compl. ¶ 7.) Secviar was responsible for providing information to Sullivan Cotter regarding Wychocki's compensation, including the SERP component. (Countercl. ¶ 52.) Franciscan Sisters contend "the only information that Secviar provided to Sullivan Cotter was Clark's flawed October 2001 report[,] the SERP parameters designed by Secviar and Wychocki[,] and their recollection of the terms approved in 2001." (Id. ¶ 53.) "Based on Secviar's representations, Sullivan Cotter was led to believe that all of these SERP parameters had already been approved by the Board and, therefore, required no critical analysis." (Id. ¶ 54.)

In late 2004, Franciscan Sisters contend that Secviar "orchestrated" a Board meeting and persuaded the Board "to confirm SERP design details under the guise they were already discussed and approved in July 2001, when, in fact, such details had never been discussed or approved at any time." (Countercl. ¶ 95.) "In March 2005, the Board approved a SERP document that contained Wychocki's desired parameters, but only because the Board had been told that these parameters had been previously discussed and approved . . . in July of 2001." (Id. ¶ 96.) Franciscan Sisters assert damages of at least $2.7 million. (Id. ¶ 98.)

II. DISCUSSION

"A party has a general right to subpoena any person to . . . produce documents for inspection and copying." Davis v. City of Springfield, 2009 WL 910204, at *2 (C.D. Ill. Apr. 1, 2009) (citing Fed. R. Civ. P. 45). "The scope of material obtainable by a Rule 45 subpoena is as broad as permitted under the discovery rules." Wallace

v. Hounshel, 2008 WL 89933, at *2 (S.D. Ind. Jan. 2, 2008). In other words, "a subpoena will survive a motion to quash when it designates topics that are reasonably calculated to lead to admissible evidence." Stock v. Integrated Health Plan, Inc., 241 F.R.D. 618, 621 (S.D. Ill. 2007). Nevertheless, the court "must quash or modify a subpoena" that "requires the disclosure of privileged or other protected matter, if no exception or waiver applies." Fed. R. Civ. P. 45(c)(3)(A)(iii).

Under Rule 37, a party may move to compel discovery where another party fails to respond to a discovery request or where the response is evasive or incomplete. Fed. R. Civ. P. 37(a)(3)--(4). "In ruling on motions to compel discovery, courts have consistently adopted a liberal interpretation of the discovery rules." Kodish v. Oak-brook Terrace Fire Prot. Dist., 235 F.R.D. 447, 450 (N.D. Ill. 2006) (citation omitted); see Cannon v. Burge, 2010 WL 3714991, at *1 (N.D. Ill. Sept. 14, 2010) ("The federal discovery rules are liberal in order to assist in trial preparation and settlement."); Bond v. Utreras, 585 F.3d 1061, 1075 (7th Cir. 2009). "Courts commonly look unfavorably upon significant restrictions placed upon the discovery process" and the "burden rests upon the objecting party to show why a particular discovery ...


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