United States District Court, D. Nebraska
CENTRAL VALLEY AG COOPERATIVE, for itself and as Fiduciary of the Central Valley Ag Cooperative Health Care Plan; and CENTRAL VALLEY AG COOPERATIVE HEALTH CARE PLAN, Plaintiffs,
DANIEL K. LEONARD, SUSAN LEONARD, THE BENEFIT GROUP, INC., ANASAZI MEDICAL PAYMENT SOLUTIONS, INC., CLAIMS DELEGATE SERVICES, LLC, LINUS G. HUMPAL, and GMS BENEFITS, INC., Defendants.
MEMORANDUM AND ORDER
R. ZWART UNITED STATES MAGISTRATE JUDGE
before me is Plaintiff's motion to continue the
court-ordered case progression deadlines; specifically, the
expert witness disclosure deadline and trial setting. (Filing
No. 133). For the reasons stated below, the motion will be
granted in part.
to Rule 16(b)(4), a case management order “may be
modified only for good cause and with the judge's
consent.” Fed.R.Civ.P. 16(b)(4). The movant's level
of diligence and the degree of prejudice to the parties are
both factors to consider when assessing if good cause
warrants extending a case management deadline, with the
movant's diligence being the first consideration and the
extent of prejudice to either party considered only after the
movant makes a showing of due diligence. Sherman v. Winco
Fireworks, Inc., 532 F.3d 709, 716-17 (8th Cir. 2008);
Marmo v. Tyson Fresh Meats, Inc., 457 F.3d 748, 759
(8th Cir. 2006).
Plan at issue has spawned multiple lawsuits, only one of
which is pending in this forum. Others include “the
Methodist Hospital litigation, ” a malpractice case,
and a defamation lawsuit filed against Central Valley Ag
Cooperative (“CVA”) by some or all the defendants
in this litigation. In addition, CVA's attorney has
questioned the ethics of one of the opposing attorneys, and
The Benefit Group, Inc. (“TBG”) has sent several
Rule 11 letters to CVA. The resulting undercurrent of acrimony
has frequently threatened to drown the orderly case
progression of this federal lawsuit. So far, at the parties'
request, the undersigned magistrate judge has held six case
conferences-totaling over five hours-attempting to
understand and rule on the parties' ongoing discovery and
case progression disputes. From that background, and after
reviewing the case filings and evidence of record, the
undersigned magistrate judge provides the following summary
of facts relevant to the pending motion.
counsel has represented CVA regarding alleged improprieties
in the Central Valley Ag Cooperative Health Care Plan
(“the Plan”) and its claims handling since at
least 2016. On October 10, 2017, CVA retained an accounting
firm, BKD, to: 1) “audit the financial
statements” of the Plan for 2014 through 2016; and 2)
“express an opinion on whether supplemental schedule(s)
required [under ERISA] were fairly stated, in all material
respects, in relation to the financial statements as a whole,
” as required under ERISA reporting requirements.
(Filing No. 142-3).
following day, October 11, 2017, CVA filed its verified
complaint and a motion for temporary restraining order. These
initial filings were signed by CVA's current attorney of
record. The TRO motion alleged “the ongoing harm caused
by Defendants' multiple breaches of fiduciary duties will
result in immediate and irreparable injury, loss, and
continued harm to CVA and the Plan if injunctive relief is
not granted . . . .” (Filing No. 3, at CM/ECF p. 2).
Among other things, CVA asked the court to order expedited
discovery and an immediate forensic audit of the Plan by Bill
Kenedy and Taylor Pugh of the Lutz accounting firm at
Defendants' cost and with their full cooperation. (Filing
No. 3, at CM/ECF pp. 2-3). As to discovery, CVA argued:
Plan assets, participant claims files, and other records of
the Plan are needed in order to pay participant claims,
ascertain the amount of stop loss insurance proceeds to which
the Plan is entitled, and to assure protection of Plan
assets. Expedited discovery will facilitate the ability of
CVA and its auditors and attorneys to put the affairs of the
Plan in order for the protection of the participants.
(Filing No. 3-1, at CM/ECF p. 18). CVA argued that the court
must act immediately because the Defendants' actions were
causing harm to the Plan, with health claims left unpaid and
Plan participants facing creditor collection and being denied
access to health care. (Filing No. 3-1, at CM/ECF p. 10-11;
Filing No. 101, at CM/ECF p. 12).
hearing was held before Judge Smith Camp on October 17, 2017.
(Filing No. 101). During that hearing, CVA counsel stated CVA
had retained experts, Kenedy and Pugh from the Lutz
accounting firm, to perform a forensic audit and to evaluate
claims against the Plan and make sure the proper amounts were
being paid. (Filing No. 101, at CM/ECF pp. 9, 12). CVA's
[I]f money is being diverted from this plan, if claims are
being paid in a way that they shouldn't, if health care
providers are being strong-armed, then this is an urgent
And the forensic audit and the expedited forensic audit is
necessary for the client and the plan to know where the money
is, who has been paid the money, in what amount, and for what
(Filing No. 101, at CM/ECF pp. 51-52).
motion for a TRO was denied on October 26, 2017. (Filing No.
33). The following day, CVA served a Notice of Request to
Audit on Defendant TBG. (Filing No. 142-4).
the last quarter of 2017, Defendant TBG responded to requests
for documentation made by CVA's retained accountants.
(Filing Nos. 142-5, 142-6). As explained by TBG's
On November 27, 2017, The Benefit Group provided CVA's
auditors with searchable Excel spreadsheets in native format
bates labeled TBGAudit905, 906, 907 and 908. These
spreadsheets were The Benefit Group's claims detail
history from January 1, 2013 through December 31, 2017. These
reports contain hundreds of thousands of lines of data
regarding claims. For example, TBGAudit907 consisted of
approximately 78, 000 rows of data with each row having
dozens of columns identifying the name of the claimant, the
claim number, the date the claim was received, the date the
claim was processed, the date the claim was paid, the name of
the service provider, a description of the service, total
charges, allowable charges, not covered amount, PPO savings,
amount paid by other insurance, coinsurance, deductible,
amount paid, and check number for the payment among other
(Filing No. 142-1, at CM/ECF p. 2, ¶ 11).
demand doubled from $3, 000, 000 to $6, 000, 000 on November
15, 2017. (Filing No. 142-10). In addition to accounting
firms BKD and Lutz, CVA retained Beau Reid, Division Leader
for Holmes Murphy and Associates, as a consulting expert in
December 2017, (Filing No. 104). So, by the end of 2017,
Plaintiffs had retained three experts for assistance with
auditing the Plan and/or deciphering the claims, payments
made to medical providers, and the amounts received by
Defendants. During November or December of 2017, CVA became
aware of previously undisclosed documents possessed by TBG
and Anasazi Medical Payment Solutions, Inc.
(“AMPS”). These documents, referred to hereafter
as AMPS invoices, included information CVA and its experts
believed was crucial in understanding how claims were handled
and money was spent by the Plan. (Filing No. 150). CVA claims
it demanded this documentation in late 2017 and again in
February 2018, but TBG and AMPS did not provide it. (Filing
filed an amended complaint on October 31, 2017, (Filing No.
34), and a second amended complaint (without leave of the
court) on November 15, 2017. (Filing No. 35). On December 18,
2017, Defendants filed motions to dismiss. (Filing Nos. 36,
38, 40). CVA did not respond to the motions to dismiss.
Instead, it used the arguments raised in Defendants'
briefs to add allegations to a proposed third amended
complaint and it moved for leave to file that version
complaint on January 4, 2018. (Filing No. 43).
flurry of motion practice was fully submitted on January 25,
2018. The undersigned magistrate judge dissected CVA's
proposed 79-page third amended complaint and issued findings
and recommendations on the pending motions on March 29, 2018.
No. objections were filed to those findings and
recommendations, and they were wholly adopted by Judge Smith
Camp on May 1, 2018. (Filing Nos. 58 and 59). On May 7, 2018,
CVA filed its third amended complaint, modified consistent
with the court's order to remove, among other claims,
CVA's claim for recovery under RICO. (Filing No. 60) The
Defendants' answers were filed on or before May 22, 2018.
(Filing Nos. 61, 62, 63, 64).
the motions to dismiss and CVA's motion to amend were
pending, CVA pursued a complaint before the Nebraska
Department of Insurance, (Filing No. 142-11); met with the
Lutz accounting firm to review the case, (Filing No. 142-12);
and secured Kenedy's affidavit regarding his
investigation and verifications of the financial aspects of
the administrative services provided to the Plan by TBG and
other service providers from 2014 through 2017 (Filing No.
142-13). CVA requested and TBG provided additional documents
and information for the audit being conducted by Lutz.
(Filing No. 142-7, 142-8; 142-23), and TBG provided to BKD
the check register information and documents for a sampling
of 152 claims. (Filing No. 142-1, at CM/ECF p. 2-3, ¶
12, 18; 142-9).
states it again requested the AMPS invoices in February of
2018. It also asserts that it requested bank records during
the audit and was led to believe only one bank account
existed, the records for which were provided to CVA by TBG.
However, in April of 2018, CVA realized through its experts
that additional bank accounts existed and the documentation
from those accounts was missing. (Filing No. 150). TBG states
it told CVA in late 2017 that the bank accounts contain
information for several clients, and those records cannot be
released absent a protective order. (Filing No. 150, at
4, 2018, the court entered a scheduling order which required
the parties to meet, confer, and jointly complete a Rule
26(f) Report. (Filing No. 65). The parties convened a Rule
26(f) conference, and they attempted to draft the joint
report, (Filing No. 135, at CM/ECF p. 4), but they could not
agree on case scheduling deadlines. Defendants asked that
CVA's expert reports be served on or before November 30,
2018; CVA requested a May 15, 2019 expert report deadline.
(Filing No. 135, at CM/ECF p. 22). Defendants requested an
August 2019 trial date; CVA requested an April 2020 trial
date. (Filing No. 135, at CM/ECF p. 135).
court convened a scheduling conference. At that conference,
CVA's counsel explained that collectively from all
Defendants, they had received nearly 1300 discovery requests.
See Filing No. 146, at CM/ECF p. 9. Defendants explained that
they needed to use discovery to flush out CVA's
contentions as to each Defendant. The court noted that
several defendants were sued, the operative complaint is
extensive, and CVA engaged in group pleading, with defendants
as a group allegedly responsible for most of the actions or
inactions underlying CVA's claims. After hearing the
parties' arguments,  the court did not strike or limit
Defendants' discovery as CVA requested. Instead it
To promote the goals outlined in Rule 1 of the Federal Rules
of Civil Procedure, the parties shall promptly confer in good
faith to streamline both the allegations within the complaint
and the corresponding discovery requests, thereby avoiding
global allegations which, in turn, prompt global discovery
served on or received from each named defendant.
(Filing No. 77, at CM/ECF p. 1-2, ¶ 3).
the scheduling conference, Defendants expressed concern with
any delayed resolution of this case, and the court was aware
of CVA's arguments in support of its request for a TRO.
As such, trial was set to commence on August 13, 2019, with
counsel ordered to “govern their case preparation
accordingly.” (Filing No. 77, at CM/ECF p. 1, ¶ 1)
(emphasis in original).
a week after this order was entered, CVA's counsel
requested a discovery dispute conference. That conference was
held on July 19, 2018. (Filing No. 80). CVA's counsel
explained that CVA needed 60 days to respond to
Defendants' discovery, with an August 24, 2018 due date-a
request the defendants did not oppose. However, TBG and AMPS
demanded that any objections to their interrogatories still
be made within the 30-day limit set by the Federal Rules. In
addition, TBG asked for guidance on whether the court
interpreted TBG's interrogatories as exceeding the
50-question limit to which the parties agreed. After
discussing the pending discovery, reviewing the
interrogatories at issue, and hearing the parties'
respective positions, the court concluded TBG's
interrogatories did not exceed the limit of 50, and that
objections to interrogatories should be served within the
deadline set by Rule 33(b)(2), or that CVA provide an
explanation, by interrogatory, as to why objections could not
be made within 30 days. (Filing No. 80).
responding to Defendants' discovery in June and July of
2018, CVA realized documents referred to as “Reports of
Recommendations” existed and those documents had not
been fully disclosed in the auditing process. (Filing No.
mandatory disclosures were served on July 23, 2018. Those
disclosures did not include a damage calculation. (Filing No.
142-18). Defendants requested supplementation, (Filing No.
142-19), and received further damage disclosures on August 1,
2018. (Filing No. 142-20). But CVA has not answered Defendant
Claims Delegate Services, LLC's (“CDS”)
interrogatory asking for “all facts supporting your
contention that the compensation you identified was
‘excess compensation, '” (Filing No. 143-3,
at CM/ECF p. 3, Interrogatory 3); AMPS' interrogatory
requesting the method of computing Plaintiff's damage
claims, (Filing No. 143-2, at CM/ECF p. 5, Interrogatory 18);
or TBG's interrogatory requesting “a current and
complete itemization of the special damages claimed,
including but not limited to an explanation of how the Plan
‘suffered damages in excess of $6 million' as a
result of The Benefit Group's alleged actions.”
(Filing No. 142-21, at CM/ECF p. 2, Interrogatory 21). CVA
has not stated the amount of "undisclosed"
compensation allegedly received by Defendant GMS Benefits,
Inc. (“GMS”) or Defendants Daniel K. and Susan
Leonard, nor has it explained with specificity the facts
supporting that damage claim. (Filing No. 144-3, at CM/ECF p.
4, Interrogatories 2-5).
discovery dispute arose in September of 2018, and a
conference on that dispute was held on September 14, 2018.
(Filing No. 103). TBG had served a records subpoena on Holmes
Murphy and Associates (Beau Reid's firm), and CVA
objected to portions of the subpoena as requesting work
product. After discussing the circumstances, the court
concluded Reid was both a fact witness and a CVA consulting
expert. With the parties' consent, the court entered an
order which limited TBG's records subpoena and explained
when and to what extent a privilege log is necessary. (Filing
not begin serving its own written discovery until September
20, 2018. On that date, it served discovery on GMS, followed
by TBG on October 5, 2018, and AMPS on October 29, 2018.
(Filing No. 124, at 21134).
management and discovery dispute conference was held on
October 26, 2018. By the time of this call, CVA had conducted
two audits of the Plan. During that conference, Defendants
expressed concern that although the case is a year old, CVA
had yet to explain with specificity how its $6 million damage
claim was calculated. (Filing No. 150). CVA explained it
cannot disclose its expert reports until all fact discovery
is complete. CVA explained that the AMPS invoices-known by
CVA to be missing from ...