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Class Action Defense Cases-Grider v. Keystone Health: Pennsylvania Federal Court Sanctions Class Action Defense Counsel And Defendants For Bad Faith Conduct

Class Action Defense Counsel Engaged in Bad Faith Conduct in Connection with Discovery Warranting Sanctions Pennsylvania Federal Court Holds

In a blistering 77-page opinion, a Pennsylvania federal court provided a stern warning to class action lawyers, sanctioning not only defendants but their counsel for discovery abuse. Grider v. Keystone Health Plan Central, Inc., ___ F.Supp.2d ___ [Slip Opn., at 2-6] (E.D. Pa. September 28, 2007). While this opinion faulted class action defense counsel, we will discuss tomorrow Slesinger v. The Walt Disney Co., a mirror-image case that sanctions plaintiff and plaintiff’s counsel for abusive discovery tactics, though not in a class action context. Because of the length of the Grider opinion, we summarize it with broad brushstrokes; the slip opinion is well worth reading and may be downloaded at the end of this article. Briefly, in 2001, plaintiffs – a family doctor, and a medical corporation that services 4,000 patients – filed a putative class action in Pennsylvania state court against HMO Keystone Health Plan Central, Highmark (formerly Pennsylvania Blue Shield), Capital Blue Cross and others alleging that they conspired to defraud, delay payment and reduce payment on insurance claims; defense attorneys removed the class action to federal court. Grider v. Keystone Health Plan Central, Inc., ___ F.Supp.2d ___ [Slip Opn., at 7-9] (E.D. Pa. September 28, 2007). The court granted plaintiffs’ motion to certify the litigation as a class action, id., at 14-15. The class action turned on information in the defendants’ possession “that will either prove or disprove plaintiffs’ claims in this matter.” Id., at 38-39. Following years of discovery battles, plaintiffs filed two motions for sanctions against defendants and their counsel. The district court in substantial part granted the motions.

The hearing on sanctions resembled a trial – the parties called 16 witnesses and introduced 306 exhibits over the course of 9 court days, Grider, at 3-4, resulting in the court making 93 findings of fact, id., at 22-35, and 10 conclusions of law, id., at 35-36. At bottom, the discovery process was deeply affected by the animosity between the parties and their counsel. The district court described the discovery phase as “severely troubling” and summarized at page 37, “This case is nearly six-years old, and discovery is not complete. At times the discovery process has completely broken down. It was necessary to appoint a Special Discovery Master to regulate and control discovery.” The district court described “incessant motion practice” that “threatened to paralyze the operations” of the magistrate and the court, id. In part, the court found that defense counsel “attempt[ed] to subvert discovery by the use of general objections,” id., at 46, which they “raised…in every response to plaintiffs’ discovery” and “steadfastly maintained…were all completely proper,” id., at 47.

The bottom line was that defendants withheld “the most important information in this case: the claims information and data generated in processing the request for payment for services rendered submitted by the doctors who make up this class.” Grider, at 39. The district court found this unacceptable: “If defendants have truly done nothing wrong in this matter, it will not disadvantage them if plaintiffs receive and review all of the claims and audit information in defendants’ possession.” Id., at 39-40. Instead, they denied having access to the information, “misrepresented the nature of their roles in the claims submission process,” and “feigned misunderstanding of words, terms and phrases clearly understood by them and their clients.” Id., at 40. Further, the court held that defendants “did not conduct a reasonable investigation” to locate documents in response to discovery requests, id., at 48, and affirmatively denied having information even though they “had the ability to generate reports of the kind requested by plaintiffs” and in fact did generate such reports to assist defense counsel in preparing declarations for the court, id., at 50.

At the end of the day, the court held that defendants and their counsel violated Rule 26(g), Grider, at 51, as well as Rule 37(c), id., at 59, 61, and 64-65. Moreover, the court held that defense counsel engaged in bad faith conduct that warranted sanctions under 28 U.S.C. § 1927 and Local Rule 83.6.1, id., at 71. This included “[seeking] reconsideration of nearly every discovery Order entered by Judge Rapoport, a jurist of over 25 years experience,” advancing several arguments “simply to make work for plaintiffs’ counsel and to delay these proceedings.” Id., at 74. The court ordered sanctioned defendants and their counsel as follows: Keystone – 25%; Capital Blue Cross – 25%; defense counsel John S. Summers and the law firm of Hangley Aronchick, Segal & Pudlin, jointly and severally – 25%; Highmark – 10%; defense counsel Sandra A. Girifalco and the law firm of Stradley, Ronon, Stevens & Young, jointly and severally – 10%; and defense counsel Daniel B. Huyett, Jeffrey D. Bukowski and the law firm of Stevens & Lee, P.C., jointly and severally – 5%. Id., at 5-6.

NOTE: The federal court rejected the notion that defendants should not be sanctioned for using general objections because of plaintiffs’ use of general objections, explaining at page 48: “Plaintiffs’ conduct is not at issue in these sanctions motions. Thus, even if plaintiffs may have included improper general objections in their discovery responses…, it does not relieve defendants of their discovery violations.”

Download PDF file of Grider v. Keystone Health