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Accountable Health Solutions, LLC v. Wellness Corporate Solutions, LLC

United States District Court, D. Kansas

July 31, 2017

ACCOUNTABLE HEALTH SOLUTIONS, LLC, and HOOPER HOLMES, INC., Plaintiffs,
v.
WELLNESS CORPORATE SOLUTIONS, LLC, Defendant.

          MEMORANDUM AND ORDER

          Teresa J. James U.S. Magistrate Judge

         This matter is before the Court on Plaintiffs' Motion to Compel Disclosure of Defendant's Financial Information (ECF No. 102). Plaintiffs request an order compelling Defendant to produce its financial documents responsive to Plaintiffs' Second Request for Production of Documents Nos. 5-9, all of which Plaintiffs argue seek information about Defendant's financial condition and are relevant to Plaintiffs' claim for punitive damages. Defendant opposes the motion, arguing that Plaintiffs' claim for punitive damages is spurious, the confidential financial documents requested are not relevant, and production of its financial information at this point in the litigation would be premature. For the reasons discussed below, the motion is granted in part and denied in part.

         I. Relevant Background

         In 2014, Defendant Wellness Corporate Solutions, LLC and Accountable Health Solutions, Inc. (“AHS”) entered into a Master Services Agreement (“Agreement”)[1] whereby Defendant would provide preventive health wellness screening and immunization services to AHS's customers and employees. In 2015, Hooper Holmes, Inc. acquired the assets of AHS and transferred the assets to its subsidiary, Accountable Health Solutions, LLC. Hooper Holmes, Inc. and Accountable Health Solutions, LLC are the Plaintiffs in this case.[2]

         Plaintiffs allege that Defendant breached the competition provisions of the Agreement by soliciting and marketing its services to one of Plaintiffs' longtime customers, Building Materials Corporation of America d/b/a GAF (“GAF”). Plaintiffs also allege Defendant tortiously interfered with Plaintiffs' contract with GAF, as well as their prospective business expectancies or relationships with GAF. In their First Amended Complaint, Plaintiffs assert claims for breach of contract (Count I), breach of implied covenant of good faith and fair dealing (Count II), tortious interference with a contract (Count III), and tortious interference with prospective business expectancies or relationships (Count IV). Plaintiffs seek punitive damages in Counts III and IV. Defendant has asserted a breach of contract counterclaim for unpaid services allegedly provided and due under the Agreement.

         II. Requested Discovery

         Plaintiffs served their Second Request for Production of Documents on Defendant on May 2, 2017. These requests sought the following financial documents relating to Defendant:

Request No. 5: all monthly, quarterly, annual and year-end financial statements of WCS for 2015, 2016 and 2017 to date, including but not limited to, balance sheets, statements of profits and loss, general ledgers, accounts receivable and accounts payable.
Request No. 6: all monthly, quarterly, or annual statements or reports from financial institutions pertaining to WCS's financial assets of any type whatsoever (including bank accounts, savings accounts, checking accounts, investment accounts) for the years 2015, 2016, and 2017 to date.
Request No. 7: all tax returns including all schedules, attachments, and worksheets filed by WCS in years 2015, 2016, and 2017 to date.
Request No. 8: all documents relating to any debts of WCS for the past three years, including but not limited to all notes, loan agreements, lease agreements, deeds of trust, mortgages, loan guarantees, bond agreements and trust indentures.
Request No. 9: all documents prepared or submitted by WCS to obtain a loan, lease or mortgage from a financial institution in the years 2015, 2016, and 2017 to date.
Defendant asserted the following objection to each of the above-referenced requests:
[Defendant] WCS objects to this request as seeking confidential and proprietary competitive information that would only be discoverable - if ever - in the event of an award of punitive damages in this case. The mere allegation of punitive damages does not entitle Plaintiffs to this information. WCS intends to move for the dismissal of the punitive damages claim in this case as having no basis in law or fact.[3]

         After conferring with Defendant, as required by Fed.R.Civ.P. 37(a)(1) and D. Kan. 37.2, Plaintiffs filed the instant motion to compel on June 30, 2017.

         III. Objections to the Requested Discovery

         In response to Plaintiffs' motion to compel, Defendant argues that it should not be required to produce the requested financial information because Plaintiffs' claim for punitive damages is spurious. It also argues the Requests seek information that is not relevant to a punitive damages award. According to Defendant, Plaintiffs' mere allegation of punitive damages does not warrant the broad discovery requests seeking its confidential and proprietary financial documents and information. Finally, Defendant argues it would be premature to produce the requested financial information at this point in the case.

         A. Plaintiffs' Claim for Punitive Damages is Not Spurious

         Generally, information about a party's current net worth or financial condition is relevant to the issue of punitive damages.[4] “When a punitive damages claim has been asserted by the plaintiff, a majority of federal courts permit pretrial discovery of financial information of the defendant without requiring plaintiff to establish a prima facie case on the issue of punitive damages.”[5] But a plaintiff seeking discovery of the defendant's financial condition in support of a claim for punitive damages must show the claim is ...


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