255 F. Supp. 3d 700
E.D. Mich.2017Background
- State Farm sued multiple defendants for common-law fraud, RICO, and unjust enrichment, alleging a scheme to submit medically unnecessary treatment claims (e.g., PT, MRIs) and inflate transportation fees via Get Well and Transport Us.
- State Farm served bank subpoenas on defendants and non-parties (Get Well, Affiliated Diagnostic) to obtain financial records to trace ownership, control, profit flows, and relationships central to the alleged RICO enterprise.
- Defendants moved for a protective order limiting or quashing bank subpoenas; non-parties moved to quash subpoenas served on their banks arguing lack of relevance and burden.
- Magistrate Judge Davis conducted proportionality analysis under Fed. R. Civ. P. 26(b)(1), considering amount in controversy, importance of issues, parties’ access to information, burden, and benefit.
- Court found State Farm demonstrated relevance and necessity of bank records to prove scope of fraud, ownership/control, connections among defendants, motive, potential additional parties, and damages, and that defendants/non-parties failed to show specific undue burden.
- Result: motions for protective orders and motions to quash as to the bank subpoenas were denied; parties may object under Rule 72.
Issues
| Issue | Plaintiff's Argument | Defendant / Non-Party Argument | Held |
|---|---|---|---|
| Whether bank subpoenas are proportional and discoverable under Rule 26 | Bank records are critical to proving RICO enterprise, ownership/control, profit flow, and damages; defendants have not produced equivalent documents | Subpoenas are burdensome, duplicative of Phase I discovery, and seek irrelevant/overbroad information | Denied protective order; subpoenas permissible (proportionality favors State Farm) |
| Whether non-party bank records (Get Well, Affiliated) are relevant | Non-party records likely show ownership/control links to defendants, excessive transportation/MRI billing, and concealment schemes | Non-parties assert no nexus to litigation and invoke privacy/overbreadth precedents | Denied motions to quash; records sufficiently tied to scheme and relevant |
| Whether defendants met burden to show undue burden/cost of complying | State Farm: defendants failed to produce specific evidence of cost; subpoenas necessary | Defendants: asserted general storage/processing costs and promised but did not submit vendor estimates | Court: defendants failed to substantiate burden; factor weighs for discovery |
| Whether prior case law (MedCity) mandates quashing similar subpoenas | State Farm: MedCity quashed personal account subpoenas but allowed corporate bank records; distinguishes factual posture here | Defendants/non-parties rely on MedCity to show subpoenas are overbroad and irrelevant | Court: MedCity limited to personal accounts; corporate/non-party commercial records are discoverable; motion to quash denied |
Key Cases Cited
- Trepel v. Roadway Express, Inc., 194 F.3d 708 (6th Cir.) (district court has broad discretion over discovery)
- Doe v. United States, 253 F.3d 256 (6th Cir. 2001) (noting public importance of combating health-care fraud)
- First Tech. Safety Sys., Inc. v. Depinet, 11 F.3d 641 (6th Cir. 1993) (abuse of discretion standard for reviewing magistrate discovery orders)