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Physicians Healthsource, Inc. v. Allscripts Health Solutions Inc.

United States District Court, N.D. Illinois, Eastern Division

December 2, 2016

PHYSICIANS HEALTHSOURCE, INC., an Ohio corporation, individually and as the representative of a class of similarly-situated persons, Plaintiffs,


          Jeffrey Cole Magistrate Judge.


         The plaintiff has filed two separate motions: the first is a motion to strike evidence that the defendants have relied on in their motion for summary judgment and in their response to the plaintiff's motion for class certification. [Dkt. #241, #243]. The second came a month and a half after the defendants had filed their response. In it, the plaintiff targeted fourteen of the Declarations the defendants attached to and relied upon in their response brief. [Dkt. #243, at 1-2].[1] Five of those fourteen Declarations are apparently also a part of another “junk fax” case the plaintiff has filed, Physicians Healthsource, Inc. v. A-S Medications, 12-CV-5105, which is pending before Judge Gottschall.[2] The Declarations are relevant to the issue of predominance as it relates to individualized issues of consent to receive faxes. [Dkt. #215, at 20]. Then there is a fifteenth Declaration, that of Judi Desorcie, which the plaintiff mentioned in a footnote in its first motion to strike. There, plaintiff indicated it would be addressing that Declaration with another motion to strike, but not until it responded to the defendants' motion for summary judgment. [Dkt. #243, at 2 n.1].

         The plaintiff filed its second motion to strike - the one targeting the Desorcie Declaration - on July 21, 2016. [Dkt. #250, #251]. The effect was to give the plaintiff an extra week to complete its reply to the defendants' response to plaintiff's class certification motion, which had been due July 14th. In any event, it is unclear why the plaintiff needed 52 or even 45 days to file a motion to strike. It would seem that one would respond or move promptly in regard to evidence - which allegedly surprised the plaintiff - and seek redress in a more determined manner than was done. But now, untimely or not, see Brandt v. Vulcan, Inc., 30 F.3d 752, 756 (7th Cir. 1994), the plaintiff claims surprise and argues that none of these 15 Declarants was properly disclosed by the defendants during discovery, that they should be barred from testifying and their Declarations stricken pursuant to Fed.R.Civ.P. 37(c)(1).[3] If all of this seems moderately complicated, it is, and it could have been avoided with essentially no effort by either side.

         Despite the advent of the Federal Rules of Civil Procedure and the hope that gamesmanship could be eliminated from federal practice (or at least vastly curtailed), there continues to be a good deal of adherence to stealth or omission as the path to be followed.[4] And so, judges and lawyers are often left to perform tasks whose outcome will never please everyone, and which, with slight effort from either or both sides, would have been unnecessary. But Learned Hand was probably right when, in his now famous address to the Bar Association of the City of New York, he cautioned that: “the atmosphere of contention over trifles, the unwillingness to concede what ought to be conceded, and to proceed to the things which matter... I must say that as a litigant I should dread a lawsuit beyond almost anything else short of sickness and death...” The anodyne was not to be found in judges, for “without a bar which is willing to co-operate, a bench more virtuous and wise than any we are ever to get would do very little.” L. Hand, The Deficiencies of Trials to Reach the Heart of the Matter, 104-106 (1921).


         Consistent with the overarching intent that litigants receive a fair and unbiased trial and that what Wigmore called “trial by ambush” should be a thing of the past, the Federal Rules of Civil Procedure require a party to provide “the name and, if known, the address and telephone number of each individual likely to have discoverable information that the disclosing party may use to support its claims or defenses . . ., identifying the subjects of the information.” Fed.R.Civ.P. 26(a)(1)(A). Rule 26 also requires a party to supplement or amend its initial Rule 26(a)(1) disclosures (and discovery responses) if it learns that the disclosure or response is “incomplete or incorrect and if the additional corrective information has not otherwise been made known to the other parties during the discovery process or in writing....” Fed.R.Civ.P 26(e)(1)(A). To ensure compliance with these basic requirements, Rule 37 provides that “[i]f a party fails to provide information or identify a witness as required by Rule 26(a) or 26(e), the party is not allowed to use that information or witness to supply evidence . . . unless such failure was substantially justified or harmless.” Fed.R.Civ.P. 37(c)(1). See, generally, Saathoff v. Davis, 826 F.3d 925, 931 (7th Cir. 2016).

         Whether a failure to comply with Rule 26(a) or (e) is substantially justified or harmless is left to the broad discretion of the district court. Dynegy Mktg. & Trade v. Multiut Corp., 648 F.3d 506, 514 (7th Cir. 2011); David v. Caterpillar, Inc., 324 F.3d 851, 857 (7th Cir. 2003).[5] But a district court has no discretion to ignore the plain language of the Rules. Id.[6] Thus, if the court concludes that the failure was not substantially justified or harmless, exclusion is mandatory and automatic. Novak v. Bd. of Trustees of S. Illinois Univ., 777 F.3d 966, 972 (7th Cir. 2015).

         The parties' current submissions on the issue of the Declarations cover 450 pages. A review reveals that there is no dispute that the defendants did not name any of the 15 Declarants in their Rule 26 disclosures; nor did the plaintiff ask the obvious and proper question, namely who, if any, from the vast list provided by the defendants, had given their assent to receive faxes. And so the issue comes down to whether the Declarants were “otherwise made known” to the plaintiff in the discovery process under Rule 26(e)(1)(A) - a fact that plaintiff denies. Alternatively, the defendants insist that their failure to disclose the 14 names was substantially justified or was harmless under Rule 37(c)(1).

         The Fourteen Declarants

         The defendants first argue that the identities of the 14 Declarants “were otherwise made known” to the plaintiff in 2013 when the defendants produced “BFX Reports.” [Dkt. #266, at 2].[7]It is not clear what “BFX Reports” are, but they apparently were taken from the plaintiff's Salesforce database and comprise a list of persons and entities who provided the defendants with their contact information - in other words, fax targets. [Dkt. #266, at 3]. In responses to interrogatories, the defendants have indicated that they “culled the list of persons and entities who received [faxes]” from this list. [Dkt. # 266, at 3]. They further submit that this fact has also been underscored in deposition testimony from various witnesses from July 2014 on. [Dkt. # 266, at 3]. The plaintiff points out that this list contained 17, 781 names or fax targets [Dkt. #267, at 2; #204-1, at 9], and that there has been no elaboration by the defendants either at the time of production or by way of subsequent disclosure under Rule 26(1)(a). The plaintiff submits that it is asking far too much for the production of this extensive list to constitute making the fourteen Declarants “otherwise known” through the “discovery process or in writing” as required by Rule 26(e)(1)(A).

         Well over 17, 000 entries is a huge list to pour over, especially given the fact we are talking about just fourteen individuals from the list that the defendants selected to provide Declarations. It's quite a leap to say, as defendants do, that while the defendants failed to disclose the 14 Declarants as witnesses, they were made known to plaintiff by the 17, 000-person list. That's simply too far to stretch the “otherwise-made-known” provision of the Federal Rules of Civil Procedure. (Rule 26(e)(1)(A)). As we have said, the Rule is designed to ensure fairness by not allowing a party to claim ignorance when it has or should have become aware of disputed information through the “discovery process.” Rules of practice and procedure are not ends in themselves. They were devised to promote the ends of justice, not to defeat them. Orderly rules of procedure do not require sacrifice of the rules of fundamental justice. Hormel v. Helvering, 312 U.S. 552, 556-557 (1941). The Rule was never intended to allow material to be smuggled into a case inside a Trojan horse.

         Still, the plaintiff is the master of its law suit and thus is the arbiter of the parameters of this litigation. Crosby v. Cooper, 725 F.3d 395 (7th Cir. 1973). Seventeen thousand is the size of the class action plaintiff wants to maintain. While discovery in such a case is bound to be rather daunting, that is one of the burdens of properly maintaining a large class action. Plaintiff was free to control the scope and manageability of discovery and its counsel's workload and challenges. The position the plaintiff finds itself in is really the inevitable result of its own decisions. See Swanson v. Citibank, N.A., 614 F.3d 400, 411 (7th Cir. 2010)(discussing concerns with asymmetric discovery and genesis of Fed.R.Civ.P. 23(f)); Culver v. City of Milwaukee, 277 F.3d 908, 913 (7th Cir. 2002)(class counsel responsible for directing and managing class actions).

         Plaintiff tells us that this suit is a spin-off from a previous junk fax class action case it filed against the defendants that was settled before Magistrate Judge Kim in February 2012. According to the plaintiff, the defendants perpetrated a fraud on Judge Kim by selecting 36 faxes to withhold from discovery. [Dkt. #78, ¶ 1]. If that were the case, the plaintiff could have filed a motion under Fed.R.Civ.P. 60(b)(2) or (b)(3), which allow relief from a judgment when there is newly discovered evidence or fraud. Plaintiff chose, instead, to file a new case. Strategic decisions have consequences, which bind the elector. McKune v. Lile, 536 U.S. 24, 41 (2002); Crowe ex rel. Crowe v. Zeigler Coal Co., 646 F.3d 435, 444 (7th Cir. 2011); Abbott Laboratories v. Takeda Pharmaceutical Co. Ltd, 476 F.3d 421 (7th Cir.2007); Silc v. Crossetti, 2013 WL 3872196, 3 (N.D.Ill. 2013)(and cases cited).

         The new case - this case - is based, originally, on those 36 faxes purportedly withheld by the defendants from discovery in the previous case. Plaintiff could have pursued its claim for redress under the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. §227, for as much as $54, 000 in damages if it could prove punitive damages were appropriate. Indeed, the defendants advanced a settlement offer to plaintiff for just that amount at the outset of this case. [Dkt. ##34, 43]. The plaintiff decided to forego the settlement offer and to pursue this matter as another class action case. All these decisions were the plaintiff's right, of course. But all decisions, as the courts have repeatedly noted, have binding consequences. Obviously, bringing a massive class action against a business necessitates obtaining and sifting through far more discovery than would have been imposed upon plaintiff and counsel had they limited their pursuit to plaintiff's individual claim. That ignores a foreseeable consequence in every class action case, and it's a consequence plaintiff and counsel chose here, although this case has become more complex and unwieldy than just a case about 36 junk faxes would be.

         As a result of plaintiff's discovery requests in this case, the plaintiff has determined from the BFX reports produced by the defendants that defendants sent faxes to 17, 781 fax numbers. [Dkt. #204-1, at 9]. It's not clear what plaintiff did once it had this information, but the issue of consent, or whether faxes were unsolicited or uninvited, has been an issue in this case from day one, as plaintiff made clear in its Complaint. [Dkt. #1, ¶¶ 2, 12-13, 17(a), 27; see also Dkt. #58, at 2-3]. The defendants either denied the allegation of no permission or claimed to have insufficient knowledge to answer. See, e.g. Dkt. #59, ¶12.[8] The plaintiff does not call our attention to any point in discovery where it requested information from the defendants as to who from these BFX lists might have solicited faxes or consented to receive them from the defendants. Yet, the plaintiff knew either that it was its burden under the Act or that, at the very least, this was a defense that would be advanced by the defendants. Some follow up from plaintiff would have seemed to have been as simple as it was appropriate.[9] But plaintiff does not inform us of any. [Dkt. #267, at 2]. It seems that, once it had the massive list, plaintiff chose not to initiate any further or pointed inquiry.[10]

         The only case the plaintiff relies upon to support its position that it could not have been expected to do anything further once it received the large BFX list and that the Declarants do not fall within the “otherwise made known” safe harbor is Wallace v. U.S.A.A. Life Gen. Agency, Inc., 862 F.Supp.2d 1062, 1065 (D. Nev. 2012). Wallace is not binding here, and is not a class action case. It is an insurance case in which the insurer sought to call as witnesses the two underwriters who investigated the insured's claim. The insurer conceded it never disclosed the underwriters as potential witnesses, but claimed that the underwriters were “otherwise made known” to the insured during discovery. The court found that while the underwriters' names appeared in the bodies of documents the insurer produced in discovery, they were not identified as underwriters or even as individuals who had anything to do with the claim. Id. at 1065.

         Under those circumstances, the court's discretionary decision that the insured never was provided in a meaningful way - and one required by both the letter and the spirit of the Federal Rules of Civil Procedure - with the identities of those who conducted an investigation and were to serve as witnesses in support of the position taken by the carrier seems correct. In that context, the duplicity of the carrier and the lack of good faith of the insurance carrier seems as obvious as the “innocence” of the insured. That is not comparable to the situation here where plaintiff asked only for a list of people to whom faxes were sent and under the Complaint undertook the obligation to prove who had not given prior permission and yet did nothing to learn the identity of such people.

         Even if the 14 Declarants were not otherwise made known in discovery to the plaintiff under Rule 26(e)(1)(A) - and I think they were not - the question becomes whether the defendants' failure to formally disclose their names was substantially “justified or harmless” under Rule 37(c)(1). A district court need not make explicit findings concerning the existence of a substantial justification or the harmlessness of a failure to disclose. David v. Caterpillar, Inc., 324 F.3d 857, 857 (7th Cir. 2003); Woodworker's Supply, Inc. v. Principal Mutual Life Ins. Co., 170 F.3d 985, 993 (10th Cir. 1999). Still, the Seventh Circuit has indicated that the following factors should guide the district court's discretion: (1) the prejudice or surprise to the party against whom the evidence is offered; (2) the ability of the party to cure the prejudice; (3) the likelihood of disruption to the trial; and (4) the bad faith or willfulness involved in not disclosing the evidence at an earlier date. David, 324 F.3d at 857.

         As discussed earlier and as plaintiff, itself, submits [Dkt. #243 at 1-2], the plaintiff knew that consent would be a critical issue. Indeed, its own Complaint said so and seemed to relegate proof on that score to the plaintiff. And yet, the plaintiff, who was in the perfect position to make the next logical move - and, it bears repeating, needed the information to sustain the allegations in the Complaint - did not ask for the names of those who had given their consent to receive faxes. It was content with the massive list provided by defendants and not to ask the decisive question. Our courts have refused to follow and have been critical of the “ostrich-like” approach to legal issues, cf. Microsoft Corp. v. Rechanik, 249 Fed.Appx. 476, 478-479 (7th Cir. 2007); Hill v. Norfolk & Western Ry. Co., 814 F.2d 1192, 1198 (7th Cir. 1987), and have refused to allow litigants essentially to blame their adversaries.

         It must not be forgotten that the adversary system is alive and well. Perdue v. Kenny A. Ex rel. Winn, 559 U.S. 542, 560 (2010)(Kennedy, J. concurring); Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 595-96 (1993); Alioto v. Town Of Lisbon, 2011 WL 2642369, 5 (7th Cir. 2011); Kay v. Board of Educ. of City of Chicago, 547 F.3d 736, 738 (7th Cir.2008); Kirksey v. R.J. Reynolds Tobacco Co., 168 F.3d 1039, 1041 (7th Cir. 1999); Burdett v. Miller, 957 F.2d 1375, 1380 (7th Cir. 1992). Compare Brandeis, The Living Law, 10 Ill.L.Rev. 461, 470 (1916)(a “judge rarely performs his functions adequately unless the case before him is adequately presented.”) Thus, common sense and ordinary prudence cannot be abandoned with impunity. Metaphorical ostriches, no less than chickens, come home to roost. And thus, generally, a lawyer need not make a case for his adversary.[11]

         In the current situation, there was ample opportunity for the plaintiff to cure any prejudice it might have felt stemmed from the production from so large a list. There was a month and a half during which plaintiff could have addressed this issue with a motion to strike or, in the case of the motion for summary judgment, with a motion under Fed.R.Civ.P. 56(d) for some additional discovery. The plaintiff seems to scoff at anything like a limited reopening of discovery for such a purpose [Dkt. #10-12], but that's quite a sharp turn from the route plaintiff has been on all along in this case. Suddenly, for the plaintiff, the discovery and briefing schedules are sacrosanct. But the plaintiff's “overarching” concern for deadlines and rules seems to be confined to its motion to strike. [See Dkt. ##97, 112, 125, 153, 173, 185, 188, 189, 191, 193, 203, 221, 224, 231, 234, 235, 240, 244, 252, 260, 268].

         Even so, there would seem to be little if any prejudice to be cured, according to plaintiff. As noted earlier, and as plaintiff, itself, submits [Dkt. #243, at 1-2], the 14 Declarations matter only with respect to the question of individualized consent in the predominance analysis. The defendants mention them on a single page of their twenty-seven-page response to the plaintiff's motion for class certification. [Dkt. #215, at 20; #227-1, at 20].[12] According to the plaintiff's reply in support of its motion for class certification, the Declarations are “of no evidentiary value whatsoever” because, while the Declarants claim they gave permission for faxes, they cannot even remember receiving any or when they gave permission [Dkt. #238, at 18] - (there will be a bit more discussion on that point later). Moreover, in the motion for class certification, plaintiff argues that individualized issues of prior express permission or ...

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