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UPMC v. Cbiz, Inc.

United States District Court, W.D. Pennsylvania

March 29, 2018




         I. Introduction

         Pending before the Court is the Motion to Compel (ECF No. 75) filed by Defendants CBIZ, Inc., CBIZ Benefits & Insurance Services, Inc., and Jon S. Ketzner (collectively "CBIZ"). CBIZ's Motion has been fully briefed (see ECF Nos. 75-1, 83, 86, 89, 92, 93, 100) and is ripe for disposition.

         This case arises from Plaintiff UPMC's acquisition of Plaintiff Altoona Regional Health System ("Altoona")-an acquisition which allegedly came with a multimillion dollar negligent understatement of Altoona's pension plan liabilities. In the instant Motion to Compel, CBIZ asks this Court to order Plaintiffs to produce certain documents relating to Plaintiffs' communications with the Internal Revenue Service ("IRS") and other agencies. Plaintiffs respond by arguing that they have produced all relevant, responsive, and non-privileged communications requested by CBIZ. However, CBIZ disagrees that the communications in question are protected by either the attorney-client privilege or the work-product doctrine.

         For the reasons that follow, CBIZ's Motion to Compel (ECF No. 75) will be GRANTED.

         II. Jurisdiction and Venue

         UPMC is a Pennsylvania nonprofit corporation with its principal place of business in Pittsburgh, Pennsylvania. (ECF No. 81 ¶ 1.) Altoona is likewise a Pennsylvania nonprofit corporation, with its principal place of business in Altoona, Pennsylvania. (Id. ¶ 2.) Plaintiffs allege that CBIZ, Inc. is a Delaware corporation with its principal place of business in Cleveland, Ohio, that CBIZ B&I is a Missouri corporation, and that Ketzner resides in Maryland. (Id. ¶¶ 4-7.) Plaintiffs seek damages "well over" $100 million. (Id. at 10.) Thus, this case is between citizens of different states and the amount in controversy exceeds $75, 000. This Court, therefore, has subject-matter jurisdiction over plaintiffs' claims under 28 U.S.C. § 1332(a)(1).

         Because a substantial part of the alleged events giving rise to Plaintiffs' claims occurred within the Western District of Pennsylvania, venue is proper in this district under 28 U.S.C. § 1391(b)(2).

         III. Relevant Background

         The Court previously detailed the procedural and factual background of the instant case in its Memorandum Opinion denying Defendants' Motion to Dismiss. See UPMC v. CBIZ, No. 3:16-cv-204, 2017 WL 4357984, at *l-*3 (W.D. Pa. Sept. 29, 2017) (Gibson, J.). Thus, the Court primarily relies on this prior coverage of this case's background and will not repeat those details herein. However, the Court will provide some additional background particularly pertinent to the present Motion to Compel.

         In their original Complaint, Plaintiffs alleged that the IRS and the Pension Benefit Guaranty Corporation ("PBGC") "may" impose significant penalties on Plaintiffs due to CBIZ's alleged negligence. (ECF No. 1 ¶¶ 57-59.) In deciding CBIZ's Motion to Dismiss, the Court was persuaded that, under the federal standard applicable to motions to dismiss, Plaintiffs' allegations of penalty damages were sufficiently definite to state a claim upon which relief could be granted because only the amount-not the existence -of the penalties remained unliquidated. See UPMC, 2017 WL 4357984, at *8. However, Plaintiffs now concede that no such penalty damages exist and have, accordingly, filed an Amended Complaint that omits a request for these penalty damages. (See ECF Nos. 81, 89.)

         The crux of the instant Motion to Compel-filed on January 1, 2018-has evolved throughout the briefing of this issue and centers around documents and communications regarding these previously alleged IRS and PBGC penalties. Specifically, CBIZ seeks to compel responses to document request numbers 106, 107, and 109-112. (See ECF Nos. 75-1 at 2-4, 75-3 at 1-)

         Initially, the resolution of this Motion to Compel revolved around whether these communications remained relevant subsequent to Plaintiffs' filing of their Amended Complaint without penalty-specific damages. (See ECF Nos. 75, 76, 86, 89.) However, in an only two-page response filed on February 1, 2018, Plaintiffs contended that CBIZ's Motion to Compel is now moot because "[o]n January 31, 2018, UPMC produced to CBIZ the sole responsive, non-privileged communication with the IRS that UPMC had yet to produce in response to CBIZ's requests" and that "UPMC does not possess any communications with the PBGC." (ECF No. 83 at 1.)

         On February 8, 2018, CBIZ responded by stating that Plaintiffs had, up until its February 1, 2018 response, never offered any basis for its non-production other than lack of relevancy. (ECF No. 86 at 2.) CBIZ further argued that the only documents that Plaintiffs have produced are the initial request to the IRS and the IRS's final ruling. (Id.) CBIZ also suggested that Plaintiffs' cursory and vague allusions to attorney-client privilege and the work-product doctrine are insufficient to meet Plaintiffs' burden to establish the applicability of those protections. (Id.) Shortly thereafter, on February 9, 2018, the Court ordered Plaintiffs to "file a brief and/or any other appropriate support for their assertion of privilege on or before February 23, 2018" and granted CBIZ leave to respond to any such filings on or before March 9, 2018. (ECF No. 87.)

         On February 23, 2018, Plaintiffs filed what amounts to a less than three-page brief, providing perfunctory argument as to the applicability of attorney-client privilege and the work-product doctrine to the IRS communications in question. (ECF No. 89.) Disputing Plaintiffs' arguments, CBIZ filed a thirteen-page Supplemental Brief and 145 pages of exhibits on March 9, 2018. (ECF No. 92.) Lastly, after seeking leave of Court, Plaintiffs filed a five-page Supplemental Brief responding to CBIZ's Supplemental Brief on March 26, 2018. (ECF No. 100.)

         IV. Discussion

         As stated supra, CBIZ asks this Court to order Plaintiffs to produce documents in response to discovery request numbers 106, 107, and 109-112. (See ECF Nos. 75-1 at 2-4, 75-3 at 1.) The primary content of the discovery sought by CBIZ is communications involving UPMC, Plaintiffs' attorneys, Ernst & Young, and the IRS in connection with the resolution of potential fines, penalties, and taxes resulting from CBIZ's allegedly misstated actuarial valuations of Altoona's pension liabilities. (See ECF No. 89.) The Court notes that, hereinafter, the discovery sought by CBIZ in the instant Motion to Compel -i.e., that discovery sought by discovery request numbers 106, 107, and 109-112-will be referred to as "the penalty information." The Court will first address the preliminary issue of the continuing relevancy of this discovery after Plaintiffs amended their Complaint to exclude damages claims in relation to these fines, penalties, and taxes. The Court will then analyze the applicability of the attorney-client privilege and the work-product doctrine to the discovery sought by CBIZ.

         A. Plaintiff's Relevancy Arguments Appear to Have Been Withdrawn and, Regardless, are Ineffectual

         1. Legal Standard

         Federal Rule of Civil Procedure 26 provides the general framework for discovery in federal civil litigation. See Fed. R. Civ. P. 26. Rule 26(b)(1) defines the scope of discovery as "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). A matter is relevant if "it has any tendency to make a fact more or less probable than it would be without the evidence; and ... the fact is of consequence in determining the action." See Fed. R. Evid. 401. In determining whether discovery is proportional to the needs of the case, courts must 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).

         Rule 37 provides the mechanism to compel discovery from a person or party who refuses to provide discovery. See Fed. R. Civ. P. 37. The party moving to compel discovery under Rule 37 bears the initial burden of proving the relevance of the material requested. See UPMC v. CBIZ, Inc., No. 3:16-cv-204, 2017 WL 4129654, at *2 (W.D. Pa. Sept. 15, 2017) (Gibson, J.) (citing Morrison v. Phila. Hous. Auth., 203 F.R.D. 195, 196 (E.D. Pa. 2001)). If the movant meets this initial burden, then the burden shifts to the person resisting discovery to establish that discovery of the material requested is inappropriate. Id. (citing Momah v. Albert Einstein Med. Ctr., 164 F.R.D. 412, 417 (E.D. Pa. 1996)). The person resisting discovery must explain with specificity why discovery is inappropriate; the boilerplate litany that the discovery sought is overly broad, burdensome, oppressive, vague, or irrelevant is insufficient. See id (citing Josephs v. Harris Corp., 677 F.2d 985, 991-92 (3d Cir. 1982)).

         2. ...

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