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United States ex rel. Scott v. Humana, Inc.

United States District Court, W.D. Kentucky, Louisville Division

October 16, 2019

UNITED STATES OF AMERICA ex rel. STEVEN SCOTT, Plaintiff,
v.
HUMANA, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          Colin H. Lindsay, Judge

         Before the Court is Relator's motion to compel Defendant Humana Inc. to fully comply with Relator's 30(b)(6) deposition notice as briefed in DNs 201, 208, and 211. Also before the Court are the corresponding motions to seal the motion, response and reply to Relator's motion to compel Humana to fully comply with Relator's 30(b)(6) deposition notice. (DNs 200, 207, 210.)

         For the reasons set forth below, Relator's motion to compel Defendant Humana Inc. to fully comply with Relator's 30(b)(6) deposition notice (DN 201) is GRANTED IN PART AND DENIED IN PART.

         DNs 200, 207 and 210 are DENIED WITHOUT PREJUDICE. DNs 201, 208, and 211 shall remain PROVISIONALLY UNDER SEAL pending further orders from the Court.

         I. MOTION TO COMPEL

         A. Legal Standard

         Trial courts have wide discretion in dealing with discovery matters. See S.S. v. E. Ky. Univ., 532 F.3d 445, 451 (6th Cir. 2008) (quoting Chrysler Corp. v. Fedders Corp., 643 F.2d 1229, 1240 (6th Cir. 1981)). Fed.R.Civ.P. 26(b)(1) provides that "[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case...." Fed.R.Civ.P. 26(b)(1). This language is broadly construed by the federal courts to include "any matter that bears on, or that reasonably could lead to other matter[s] that could bear on, any issue that is or may be in the case." Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978) (citing Hickman v. Taylor, 329 U.S. 495, 501 (1947)). The scope of discovery is not without limits, however. In assessing whether information is within the scope of discovery, the Court is directed to consider "the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit." Fed.R.Civ.P. 26(b)(1).

         Fed. R. Civ. P 37(a)(3)(B)(ii) permits a party to compel discovery when "a corporation or other entity fails to make a designation under Rule 30(b)(6)." Under Rule 30(b)(6), when a corporation is served with notice of a deposition, it is obligated "to produce a witness or witnesses knowledgeable about the subject or subjects described in the notice and to prepare the witness or witnesses to testify not simply to their own knowledge, but the knowledge of the corporation." Schall v. Suzuki Motor of Am. Inc., 2017 WL 4050319, at *5 (W.D. Ky. Sept. 13, 2017). "A 30(b)(6) witness testifies as a representative of the entity, his answers bind the entity and he is responsible for providing all the relevant information known or reasonably available to the entity." Smith v. General Mills, Inc., 2006 Wl 7276959, at *5 (S.D. Ohio April 13, 2006.)

         A corporation has a duty to prepare its witnesses to testify "fully, completely, and unevasively to the questions...as to the relevant subject matters." Weber Mfg. Techs., Inv. v. Plasan Carbon Composites, Inc., 2016 Wl 8114507, at *5 (E.D. Mich. July 26, 2016.) The inability of a designee to answer every question on a particular topic does not necessarily mean that the corporation or agency has failed to comply with its obligations under the Rule. Consumer Fin. Prot. Bureau v. Border & Border, 2016 WL 9460471, at *3 (W.D. Ky. June 29, 2016.) Should it become apparent during the course of the deposition that the designee is unable to adequately respond to relevant questions on the listed subjects contained in the deposition notice, then the responding entity has a duty to timely designate additional or supplemental witnesses as substitute deponents. Only if the corporation is unable to provide an appropriate designee because "it does not have the requested information; cannot reasonably obtain it; and, lacks sufficient knowledge after a good faith, thorough review of all available information, will its obligations under Rule 30(b)(6) cease." Id.

         "If a party fails to educate its 30(b)(6) witness with respect to the corporation's full knowledge of the topics noticed for deposition, this failure is effectively a failure to appear for purposes of Rule 37." Brooks v. Caterpillar Glob. Mining Am., LLC, 2016 WL 5213936, at *2 (W.D. Ky. Sept. 20, 2016). The designative party "must substitute an appropriate deponent when it becomes apparent that the previous deponent is unable to respond to certain relevant areas of inquiry." Wicker v. lawless, 278 F.Supp.3d 989, 1000 (S.D. Ohio 2017).

         "If a deponent has already been deposed in a case, then a party must obtain leave of court in order to take the deposition. The court must grant leave to resume the deposition to the extent consistent with Rule 26(b)(1) and (2)." Smith v. Old Dominion Freight line, Inc., 2017 WL 2371825, at *3 (W.D. Ky. May 31, 2017), citing Fed.R.Civ.P. 30(a)(2)(A)(ii).

         A corporation may not "circumvent its obligations to prepare its Rule 30(b)(6) witness to answer fully and without evasion all questions about the designated subject matter simply by producing a witness without knowledge of the subject believed to be irrelevant." Brooks at *2, (quoting Champion Foodservices, LLC v. Vista FoodExch., Inc., 2016 WL 44680000, at *14n.35 (N.D. Ohio Aug. 23, 2016.) Thus, "arguments as to the relevance of the topics do not weigh on the question of whether [an entity] fully complied with the Rule 30(b)(6) deposition notice. The inquiry must focus solely on whether the 30(b)(6) witnesses were prepared to testify regarding information known or reasonably available to [the entity]." Id.

         Fed. R Civ. P 27 permits Courts to issue a protective order if justice requires and to protect individuals from annoyance, embarrassment, oppression, or undue burden or expense. "The burden of establishing good cause for a protective order rests with the movant." Nix v. Sword, 11 Fed.Appx. 498, 500 (6th Cir.2001) (citing General Dynamics Corp. v. Selb Mfg. Co., 481 F.2d 1204, 1212 (8th Cir.1973)). "To show good cause, a movant for a protective order must articulate specific facts showing a 'clearly defined and serious injury' resulting from the discovery sought and cannot rely on mere conclusory statements." Id. (citing Avirgan v. Hull, 118 F.R.D. 252, 254 (D.D.C.1987)).

         B. Discussion

         On November 30 and December 1, 2018, Relator served his initial and first amended Rule 30(b)(6) deposition notices. (DN 208-2 ¶3.) On December 26, 2018, Humana served its objections and responses to Relator's First Amended Notice. (DN 208-2 ¶6.) Relator served a Second Amended Notice on January 9, 2019. (DN 208, at PageID # 12268.) Counsel for both parties exchanged meet and confer correspondence from January 3, 2019 to January 17, 2019. (DN 208-2 ¶7.) Humana served its objections and responses to the Second Amended Notice on February 10, 2019. (DN 208 at PageID #12268.) The deposition notice included a list of 28 documents that contain the relevant bid assumptions and 20 documents containing the relevant budget-at-bid assumptions. (DN 201-1.) Relator argues Humana has failed to designate a deponent for some topics, and failed to adequate prepare its deponents as to other topics.

         In opposition, Humana contends that deposition notice was far-reaching, overbroad, unintelligible and so expansive that no corporation could have reasonably provided responsive testimony. (DN 208, at PageID #12264.) Humana contends that Relator moves to compel testimony that he never sought in his notice, or was never expressly subject to the parties' agreement on the scope of testimony. (DN 208, at Page #12265.) In its response Humana moves for a protective order under Rule 26(c)(1). (DN 208, at PageID # 12266.)

         During the meet and confer process, Relator contends he agreed to narrow his list of budget-at-bid documents to four specific documents for Contract Years 2011-2013. (DN 201, at PageID # 11701.) For Contract Years 2014-2018, the parties agreed that the relevant "Budgets-at-Bid" for each year were identified in Humana's previous interrogatory responses. (DN 201, at PageID # 11702.) Relator states the parties agreed Milliman would provide the preferred pharmacy utilization assumptions reflected in Humana's bids, and that Humana would "designate one or more corporate representatives to testify on relevant topics based on the values that Milliman identifies in its response to these three specific requests from Relator." (DN 201, at Page ID # 11702.) Relator argues that in advance of the Rule 30(b)(6) depositions, Relator and Humana had agreed that Humana's corporate witnesses would at a minimum provide testimony regarding the preferred utilization, membership, and member cost share assumptions in a limited set of budgets-at-bid documents and a set of preferred use assumptions provided by Milliman. (DN 201, at PageID #11702.)

         Humana argues it never agreed to provide Rule 30(b)(6) testimony about the specific preferred use assumptions that Milliman supplied. (DN 201-1 ¶13.) However, Humana concedes it stipulated to the preferred utilization assumptions that Milliman identified. (Id.)

         1. Failure to Provide Testimony

         Relator argues Humana has refused to designate a witness to testify as to Topic No. 1(1), (m), (n), (o), and (p), and refused to provide testimony on certain issues relating to Topic Nos. 1(k), (q), 3, 6, 8, 9, and 10.

         a) Testimony Relating to Profit Margins

         1. For each Contract Year for the Walmart Plan from 2011 through 2017: ...

k. Humana's actual aggregate gain/loss margins for its Part D plans, as measured by percentage of revenue.
1. Humana's actual aggregate gain/loss margins for all non-Medicare health insurance lines of business, as measured by percentage of revenue.
m. Humana's aggregate gain/loss margins for its Part D plans based on its Bids, as measured by percentage of revenue.
n. Humana's aggregate gain/loss margins for all non-Medicare health insurance lines of business based on its Bids, as measured by percentage of revenue.
o. Humana's aggregate gain/loss margins for its Part D plans based on its Budgets, as measured by percentage of revenue.
p. Humana's aggregate gain/loss margins for all non-Medicare health insurance lines of business based on its Budgets, as measured by percentage of revenue.
q. The identity of all Humana employees who were aware and when they became aware of the information in subtopics (k) though (p).

(DN 201-1.) Relator contends Humana flatly refused to provide deposition testimony about Humana's profit margins as stated in Topic No. l(k) through (p). (DN 201-1, at PageID # 11733).

         Relator argues that though Humana agreed to designate a witness to testify only to the actual gain/loss margin for the Walmart Basic Plan, it has refused to provide any financial information relating to Humana's other Part D business and has refused to provide any information relating to the gain/loss margin in its bids or budgets, based solely on its contention these topics are irrelevant and unduly burdensome. (DN 201, at Page ID # 11703.)

         Humana has refused to designate any witness to testify regarding Topic No. l(1)-(p) on the ground that these topics are irrelevant. (DN 201-5, at PageID# 11788-11793.) Humana has agreed to provide only limited testimony for Topic No. l(k) and (q) also on the ground that these topics seek irrelevant information. (DN 201-5, at PageID #11789, #11794; DN 201, at Page ID # 11712.)

         Relator argues the discovery is relevant since the gain/loss margins reported in Humana's bids, budgets, and actual experience for both its Part D business and non-Medicare business are central to the fraud alleged in the Complaint because they show Humana knowingly misrepresented its eligibility for Part D contracts by asserting that its bids complied with core requirements for eligibility, including a profit cap test, when Humana knew that the Walmart Plan did not comply. (DN 201, at PageID # 11714.) Relator argues the information sought is relevant because the profit margin for a Part D sponsor's plans must be within 1.5% of the profit margin for the sponsor's non-Medicare lines of business. (DN 201, at PageID #11703, 11712.) Relator argues that Humana's false statements included assertions to CMS that it was complying with the profit caps at the same time it was budgeting profits exceeding that cap. (DN 201, at PageID # 11713.)

         Humana argues that the fact that these topics are relevant to CMS's profit cap test does not show why that test if relevant to Relator's complaint, since a profit margin test compares the profit margin across all 104 of Humana's Part D bids to other non-Medicare lines of business, while Relator's FC A claims specifically concern only Humana's Walmart Plan bids. (DN208, at PageID #12280.) Humana argues even if Relator could show variances between external- and internal-facing profit targets for all of Humana's Part D plans combined, it would not be probative evidence that the Walmart Plan bids themselves contained these false assumptions. (DN 208, at PageID #12281.)

         Humana states it agreed for topic 1(k) to testify regarding the Walmart Plan's actual underwriting margin for contract years 2011 through 2017, and for Topic 1(q) it would identify the Humana employees who were aware of the actual underwriting margin and when they became aware. (DN 208-2 ¶8(b); DN 208, at PageID #12270.) Humana contends that when Relator failed to seek relief from the Court it believed that Relator had accepted Humana's "offer of compromise." (DN 208, at PageID # 12282.) Humana states the parties continued to discuss Topics l(1)-(p), but reached an impasse and Humana believed that Relator did not intend to pursue testimony on Topics 1(1) through (p) because Relator did not seek relief from the Court. (DN 208, at PageID #12271.) Humana further argues that Relator did not assert a direct violation of the profit cap in his Complaint.

         In reply, Relator also points out that in order to adequately respond to Topic No. 1(k)-(p) Humana would be required to identify a total of six data points for each contract year, each of which is directly relevant to Humana's bids for the Walmart Plan. (DN 211, at PageID #12765.)

         Based on Relator's representation that CMS requires a part D sponsor to pass a profit test requiring "a Part D sponsor's aggregate margin across all bids [to] be within 1.5% of the entity's non-Medicare business," the Court finds the information requested in l(k)-(q) regarding Humana's gain/loss margins for all Part D plans and all non-Medicare health insurance lines of business is relevant as it could lead to the discovery of admissible evidence regarding whether Humana knowingly made false representations to CMS.

         Based on the foregoing, the Court finds Topic Nos. 1 (k)-1 (q) are relevant to the claims asserted by Relator and that the scope of the Topic is neither overbroad nor unduly burdensome. Humana is ordered to designate a person or persons to testify about information known ...


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