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LABMD, Inc. v. Tiversa Holding Corp.

United States District Court, W.D. Pennsylvania

August 16, 2019

LABMD, INC., Plaintiff,
v.
TIVERSA HOLDING CORP. formerly known as TIVERSA, INC.; ROBERT J. BOBACK; M. ERIC JOHNSON; DOES 1-10, Defendants.

         Re: ECF Nos. 393 and 402

          MEMORANDUM OPINION

          MAUREEN P. KELLY MAGISTRATE JUDGE.

         Presently before the Court is the Motion for Sanctions Pursuant to Federal Rule of Civil Procedure 37(b)(2) (the "Motion for Sanctions") filed by Defendant Tiversa Holding Corp. ("Tiversa"). ECF No. 393. In the Motion for Sanctions, Tiversa requests that Plaintiff LabMD, Inc. ("LabMD") be sanctioned for failure to abide by the Order of this Court dated June 21, 2019 (the "Deposition Protective Order") expressly directing the limited scope of depositions. Defendant Robert J. Boback ("Boback") joins in the Motion for Sanctions. ECF No. 402. LabMD filed a Brief in Opposition. ECF No. 409. Tiversa filed a Reply in Support of its Motion for Sanctions. ECF No. 411.

         I. RELEVANT PROCEDURAL HISTORY

         In order to consider the Motion for Sanctions, it is essential to review it in the context of the relevant procedural history of this case, including the conduct of LabMD and its counsel.

         LabMD commenced this litigation on January 21, 2015. ECF No. 1. Following the disposition of two Motions to Dismiss that were granted in part and denied in part, ECF No. 115, on February 12, 2016, LabMD filed a First Amended Complaint. ECF No. 125. Another Motion to Dismiss was filed. ECF No. 137. On October 7, 2016, this Court issued a Report and Recommendation recommending that the Motion to Dismiss be granted as to Count II (as to Defamatory Statements Nos. 1-12, 14-15 and 17-20), Count III, Count IV, Count V and Count VI. ECF No. 166. It was further recommended that the Motion to Dismiss be denied as to Count II (as to Defamatory Statements Nos. 13 and 16). Id. The Report and Recommendation was adopted by District Judge Mark Hornak. ECF No. 185.

         Following disposition of the Motions to Dismiss, only a portion of LabMD's defamation per se claim remains as to two statements.

133. The following statements published by Tiversa and Boback in their February 10, 2015 statement to "The Pathology Blawg" are false and defamatory, were known by Boback and Tiversa to be false and defamatory, were understood by recipients of the statements to apply to LabMD, were intended to harm LabMD and did, in fact, cause special harm [to] LabMD:...
• LabMD lawsuit - The claims are baseless and completely unsubstantiated .... even in the complaint itself. This appears to be another attempt by Daugherty to distract people from the INDISPUTABLE FACT that LabMD and Michael Daugherty leaked customer information on nearly 10, 000 patients. (Defamatory Statement No. 13).

ECF No. 125 ¶ 133 (internal citations omitted).

135. The following statements made by Boback and Tiversa in a letter to the editor of the Wall Street Journal, published in the December 9, 2015 edition of the Journal, are false and defamatory, were known by Boback and Tiversa to be false and defamatory, were understood by recipients of the statements to apply to LabMD, were intended to harm LabMD and did, in fact, cause special harm [to] LabMD:...
• LabMD's CEO Michael Daugherty admits that a LabMD employee improperly installed LimeWire file-sharing software on a company computer. Doing so made confidential patient information publicly available over the Internet. (Defamatory Statement No. 16).

Id. ¶ 135.

         On August 29, 2017, the Court conducted the initial case management conference in this case. During the conference, the Court gave the parties 5 months to conduct discovery in light of the fact that all that remained of the 205 paragraph 10 count First Amended Complaint was a portion of the defamation per se claim as to the two statements, identified above. The Court set a fact discovery period of August 29, 2017 to January 29, 2018. ECF Nos. 246 and 247.[1]

         On October 12, 2017, the Court conducted a telephone status conference with counsel and addressed discovery, ESI custodians/search terms and an upcoming mediation. ECF No. 285.

         Just 8 days later, on October 20, 2017, LabMD and its CEO, Michael Daugherty ("Daugherty"), filed a new lawsuit with this Court against Tiversa and Boback, and the individual attorneys and law firms representing them in the instant case in LabMD, Inc. and Michael J. Daugherty v. Tiversa Holding Corp., et al., No. 17-1365. In the new lawsuit, LabMD and Daugherty alleged that Defendants engaged in abuse of process, conspiracy to abuse process, and violations of Pennsylvania's Dragonetti Act. These claims arose out of purported misconduct by Tiversa and Boback in pursuing defamation claims against several parties, including LabMD and Daugherty, in two Pennsylvania state and federal court actions.[2] LabMD and Daugherty alleged that these defamation actions were procured, initiated, and continued in a grossly negligent manner and without probable cause, and that defendants had filed certain motions for purposes of concealing their own misconduct and harming LabMD.

         On October 24, 2017, Defendants filed a joint Motion to Stay the instant case so that they could have the opportunity to review the new lawsuit and decide the impact that it had on the ability of defense counsel and their law firms to continue to represent Tiversa and Boback. ECF No. 292. The stay was granted until a status conference with the Court on December 4, 2017. ECF No. 295.

         On December 4, 2017, the Court conducted a status conference. ECF No. 296. Discovery conducted to date was discussed. Attorney James Hawkins for LabMD acknowledged during the status conference his understanding that discovery in the instant case was limited to Statement Nos. 13 and 16. ECF No. 311-2 at 10:9-16. Following the conference, the Court stayed this case pending rulings on the Motions to Dismiss in No. 17-1365. ECF No. 300.

         The Motions to Dismiss were granted in No. 17-1365 and the case was dismissed on November 6, 2018.[3]

         On February 7, 2019, this Court conducted a status conference to address the completion of discovery, including: search terms and custodians, the names of the individuals to be deposed, setting deposition dates as soon as possible, and nonparty subpoena issues. ECF No. 324.

         During this conference, Tiversa's counsel expressed concern that LabMD's discovery requests were not directly related to the two defamation claims but were attempts to use discovery in this case for other cases or in other forums. ECF No. 370 at 20.

         Of particular note to the instant Motion for Sanctions, throughout the February 7, 2019 status conference, the Court addressed the requirements of proportionality and that discovery is to be limited to the remaining portions of the defamation per se claim as to Statement Nos. 13 and 16. Id. at 8, 13 and 17. The Court also stated:

And again, I want to be clear, as you think about that after the ESI and the depositions, is I am going to be enforcing the amendments to the Federal Rules of Civil Procedure in terms of proportionality. This case has now been dramatically narrowed to just the two claims as to the two statements, and those are the only things that I'm going to allow discovery on, that which is related to it for purposes of preparing this case for trial.

Id. at 24.

         At the conclusion of the February 7, 2019 status conference, this Court reiterated:

But let's all communicate with each other and keep it constructive so that we keep it focused on the narrow issues in this case. This case is not about what's going on in all the other different forums. We have a limited issue that's left here, and let's deal with it accordingly.

Id. at 29.

         At the conclusion of the February 7, 2019 status conference, the Court scheduled fact discovery to close on June 1, 2019. ECF Nos. 324, 325 and 370 at 28.[4]

         On May 21, 2019, LabMD filed a Motion to Modify Case Management Order seeking an extension of time to complete fact discovery. ECF No. 337. In the motion and accompanying brief, LabMD sought to extend discovery by another 10 months until March 30, 2020. LabMD also attached 1, 549 pages of exhibits in support of its motion. ECF No. 338-1 to 338-32. Tiversa opposed the motion on the grounds that: the case was 4 years old and limited to one defamation claim related to the two alleged defamatory statements made in 2015. Tiversa argued that it was apparent that the request for an additional 10 months of discovery sought by LabMD was an attempt by LabMD to conduct discovery that would be heavily focused on LabMD's claims and defenses in the state court defamation action and the qui tarn action.[5] ECF No. 345 at 2. However, as a practical matter, Tiversa was agreeable to a 30 day extension to facilitate the completion of certain depositions. Id. at 1. Given the myriad of irrelevant matters raised in LabMD's brief and exhibits, this Court issued an Order granting in part and denying in part the motion for extension of time to complete discovery. The Court ruled, in pertinent part:

In the instant motion, Plaintiff seeks to extend discovery by ten months. Defendants oppose this request. Defendant Tiversa is agreeable to a thirty day extension of discovery in order to complete the limited number of necessary depositions. As the parties are well aware, and as this Court has repeatedly addressed, this case is now four years old and the remaining claims relate solely to remaining portion of one defamation claim as to two alleged defamatory statements. The Court has also repeatedly addressed the requirements of the applicable Federal Rules of Civil Procedure that discovery must be proportionate to the limited remaining claims as to the two alleged defamatory statements. As such, Plaintiffs request for a ten month extension of discovery is DENIED. The Court will allow a brief thirty day extension of discovery until July 1, 2019. NO FURTHER EXTENSIONS OF DISCOVERY WILL BE GRANTED.

ECF No. 349.[6]

         On June 18, 2019, Tiversa filed a Motion for Protective Order Limiting the Scope of Depositions. ECF No. 372. In the Motion, Tiversa sought a protective order limiting the scope of upcoming depositions in this case to the remaining defamation per se claims as to Statement Nos. 13 and 16 and referenced the Court's prior and recent admonishments of counsel for LabMD regarding the requirement of proportionality for discovery. Id.

         In the Motion for Protective Order, Tiversa cited the Court to counsel for LabMD's deposition questioning of non-party Joel Adams ("Adams") on Monday, June 17, 2019 (the day before the Motion for Protective Order was filed). Tiversa advised the Court that LabMD's counsel did not ask one question about the two defamatory statements remaining at issue -Statements Nos. 13 and 16. Tiversa pointed out many questions that were asked of Adams had nothing to do with the remaining claims in this case. Id. at 3-5. These irrelevant questions included, but were not limited to: if there was something secretive about his children, strengths and weaknesses of a certain employee, the workplace culture at Tiversa, leadership styles, guns in the workplace, an AIDS clinic in Chicago, Edward Snowden, an Iranian IP address and whether the witness had "ever met Judge Maureen P. Kelly." Id. Tiversa correctly argued that these questions had nothing to do with the remaining claim in the instant case.

         In the Motion for Protective Order, Tiversa argued that these deposition questions by LabMD's counsel clearly demonstrated the type of "fishing expedition" that this Court expressly forbid during the status conference on June 11, 2019. Tiversa cited to this Court's clear statement on the record at the then most recent status conference:

As I've said, we had a status conference in this case on February 7, 2019. And this Court, as I have been throughout, was crystal clear that the only remaining claim in this case is the two statements that remained as to the defamation per se claim. It was clear that discovery to be completed was to relate to these remaining claims only. This was not to be used as a fishing expedition for the qui tarn action or the state court action. It was to be limited to the remaining claims in this case.

ECF No. 367 at 25 (emphasis added).

         LabMD opposed the Motion for Protective Order and pointed to ten broad topic areas that were covered in the Adams deposition which it claimed "related to the two defamatory statements and the intimidation of witnesses by Tiversa and Mr. Boback." ECF No. 376.

         This Court granted the Motion for Protective Order Limiting the Scope of Depositions and issued the Deposition Protective Order on June 21, 2019. The Court held as follows:

Having considered the arguments of the parties relative to the instant Motion, the Court finds that Tiversa has demonstrated good cause under Rule 26(c) to warrant the issuance of the requested protective order. In the context of the applicable provisions of Rule 26, this Court, as addressed during the June 11, 2019, Status Conference, referenced herein, has repeatedly advised counsel that discovery in this case must be limited to the portion of the sole remaining in this case - the defamation per se claim as to Statement #13 and #16. This Court has also repeatedly discussed with counsel the corresponding requirements of proportionality. Nonetheless, LabMD has repeatedly attempted to push or has gone beyond the boundaries of the requirements of Rule 26 and disregarded the orders of this Court: by consistently attempting to engage in "fishing expeditions"; by seeking information that is not relevant to the remaining claim in this case; by seeking information to be used in the qui tam action, state court action or other litigation in other forums; and by attempting to relitigate previously disposed of legal matters. Clearly, such discovery conduct by LabMD seeks information that is not for the requisite legitimate and proper purpose.
Due to LabMD's ongoing discovery tactics, disregard of this Court's prior admonishments and orders and the limited nature of the remaining defamation per se claim in this case, this Court is compelled to grant Tiversa's Motion for Protective Order. An appropriate order follows.
AND NOW, this 21st day of June, 2019, it is hereby ORDERED that Defendant Tiversa Holding Corp.'s Motion for Protective Order Limiting the Scope of Depositions is GRANTED. The scope of the depositions in this action must be limited to the remaining portion of the defamation per se claim, specifically Statements #13 and #16, LabMD's alleged damages and defenses thereto.
NOTICE is hereby given to LabMD and its counsel that if this Order is disregarded that this Court may impose sanctions, up to and including the dismissal of this action, as provided for by Federal Rule of Civil Procedure 37(b).

ECF No. 379 at 5-6 (emphasis added).

         During an emergency telephone conference with counsel on June 27, 2019, relative to another matter of LabMD's conduct, Tiversa's counsel notified the Court that LabMD had violated the Deposition Protective Order. ECF No. 403 at 11-12. The Court responded:

[T]his court has been very clear with all of you since you were before the court for the lengthy status conference on February 7th of this year and on June 11th, and in multiple rulings on discovery motions, again . . . repeatedly advising counsel that the remaining discovery in this case, because all that is left is what remains of the defamation per se claim is to statements 13 and 16 only. And I have repeatedly, and I think I've used the phrase crystal clear in some of my orders, indicated that that is the scope of discovery. This is not a fishing expedition, and I have repeatedly indicated that.

Id. at 12.

         In the pending Motion for Sanctions, Tiversa and Boback assert that LabMD and its counsel have willfully violated the express ruling set forth in the Order of Court dated June 21, 2019. ECF Nos. 393 and 402.

         Since the status conference on April 23, 2019, the Court has been required to deal with numerous discovery motions and discovery issues, including this Motion for Sanctions. ECF Nos. 329, 331, 332, 336, 337, 339, 341, 347, 349, 350, 351, 352, 353, 356, 361, 363, 364, 366, 371, 372, 374, 375, 377, 379, 381, 382, 388, 391, and 393. Almost all of the discovery motions and issues in the final two-and-one-half months of discovery resulted from the conduct of LabMD and its counsel.

         II. TIVERSA'S MOTION FOR SANCTIONS

         In the instant Motion for Sanctions, ECF No. 393, Tiversa argues that LabMD and its counsel willfully violated the express ruling of this Court in the Deposition Protective Order limiting the scope of deposition questions in the remaining depositions in this case.

         Tiversa argues that LabMD and its counsel repeatedly violated the Deposition Protective Order dated June 21, 2019 through continued improper questioning of six deponents. Tiversa correctly recognizes that this Court clearly limited the scope of depositions to "the remaining portion of the defamation per se claim, specifically Statements #13 and #16, LabMD's alleged damages and defenses thereto." Id. at 6. Tiversa also recognizes that this Court provided clear notice "to LabMD and its counsel that if this Order is disregarded that this Court may impose sanctions, up to and including the dismissal of this action, as provided for by Federal Rule of Civil Procedure 37(b)." Id. Tiversa argues that, notwithstanding the clear language of the Deposition Protective Order, LabMD and its counsel continued to proceed with discovery without regard for the Federal Rules of Civil Procedure or the Orders of this Court. Tiversa cites as "one of the most glaring examples" of this utter disregard the continued questioning by LabMD's counsel of witnesses about the "gun culture" at Tiversa. Id. at 2. Tiversa notes that this Court directly addressed the improper nature of this type of questioning (among others); yet LabMD's counsel proceeded unabated and without regard for the Deposition Protective Order. Tiversa also argues that, despite repeated admonitions and warnings by the Court and the Deposition Protective Order, LabMD has continued with its fishing expedition, seeking to obtain discovery in this case for other pending litigation, not for the "requisite legitimate and proper purpose." ECF No. 379 at 5. As such, Tiversa asserts that the imposition of sanctions against LabMD and its counsel is warranted.

         In support of this Motion for Sanctions, Tiversa has provided to the Court excerpts, as examples, from each of the six depositions conducted by counsel for LabMD in the days immediately after the issuance of the Deposition Protective Order dated June 21, 2019, during which LabMD's counsel spent a substantial portion of each deposition asking a multitude of questions not related to the remaining defamation per se claim as to Statement Nos. 13 and 16 and that were violative of the Deposition Protective Order.[7]

         1. Deposition of Robert Boback-6/24/19

         Boback is a named defendant in this case.

         Tiversa argues that during the deposition of Boback, counsel for LabMD asked countless questions relating to issues that were not related in any way to the remaining portion of the defamation claims, limited to Statements Nos. 13 and 16. Tiversa further argues that the questions were blatant attempts to get discovery to support LabMD's claims against Boback in other lawsuits and/or other forums, including state and federal court in Pennsylvania, state and federal court in New York, and federal court in Virginia. Tiversa provides the following examples of LabMD's questioning in violation of the Deposition Protective Order and prior rulings of this Court.[8]

• LabMD's counsel spent a significant portion of the deposition asking questions about the alleged spread of the 1718 file, which is not at issue in either Statement No. 13 or 16, but is at issue in many of the other cases LabMD has filed against Tiversa and Mr. Boback. (ECF No. 393-2 at 38:16) ("What does file spread mean to you?"); (id. at 53:20-24) ("Do you have any recollection of testifying that the file was found by Tiversa at locations in Costa Rica, London, England, San Diego, California, and Apache Junction, Arizona?").
• LabMD's counsel asked questions regarding the FTC investigation which, as this Court has previously ruled, ECF No. 408, is not relevant to this case. (Id. at 42:5-7) ("Do you have a recollection of Tiversa preparing a list of 84 companies to turn over to the FTC?"); (id. at 126:11-12) ("Did Tiversa make misrepresentations to the FTC?"); (id at 126:14-15) ("Did Tiversa make misrepresentations to Congress?"); (id. at 129:22-25) ("Do you believe that Tiversa benefitted commercially from the fact that the FTC was investigating companies that Tiversa had referred to the FTC?"); (id at 33:9-11) ("When you read your June 2014 deposition, did anything strike you as being false?"); (id at 115:8-10) ("You did not admit to Congress or the FTC that there was a mistake in your earlier testimony?").
• LabMD's counsel asked Boback if he believed anything Daugherty said in his book The Devil Inside the Beltway was not true. (Id. at 83:1 -2).
• LabMD's counsel blatantly ignored the Court's prior ruling denying LabMD's Motion for Witness Protection with respect to its allegations that Boback engaged in witness intimidation of non-party Richard Wallace. ECF No. 371. Such questions included:
o "[I]n January or February of 2014, did you visit Mr. Wallace in the hospital at the treatment facility where he was?" (ECF No. 393-2 at 187:11-14);
o "Did you have any conversations with anybody at the treatment facility?" (Id. at 187:19-20);
o "Did you get a release of medical records?" (Id. at 188:22-23);
o "Was Mr. Wallace, in fact, fired on February the 28th?" (Id. at 140:22-23); and
o Why was [Mr. Wallace] fired?" (Id. at 141:4).

         2. Deposition of Keith Tagliaferri - 6/25/19

         Keith Tagliaferri ("Tagliaferri") is a former employee of Tiversa and not a party to this case. Tagliaferri is a defendant in another federal case, Daugherty v. Adams, 17-368 (W.D. Pa.).

         In support of its Motion for Sanctions, Tiversa points out that most, if not all, the deposition questions asked of Tagliaferri by LabMD's counsel sought discovery related to the allegations against Tagliaferri in the other federal action, not the claims in the instant case. Tiversa argues that at no point during Tagliaferri's nearly three-hour deposition did counsel for LabMD ask any questions about Statement Nos. 13 and 16; nor did counsel ask any questions regarding "publicly available" or the word "leak." Tiversa provides the following examples of LabMD's questioning in violation of the Deposition Protective Order and prior rulings of this Court.

• LabMD's counsel spent the majority of the deposition questioning Tagliaferri about reports he had prepared while employed at Tiversa that are totally unrelated to the defamatory statements. (ECF No. 393-1 at 11:20-23).
• Questions by LabMD's counsel focused entirely on the "Fourth Forensic Report" as it is defined in the Complaint in the other federal action, and referring to said report as "evidence fabricated by Tagliaferri."
• Counsel for LabMD made over thirty references to the "Fourth Forensic Report" during Tagliaferri's deposition, which is not relevant to this limited defamation case.
• Counsel for LabMD also asked about another report that was prepared for a former Tiversa client, Cigna, which appears in the Complaint in the other federal action. (Id. at 38:13-17). That report was prepared years prior to the defamatory statements at issue in this case.
• None of the questions asked of Tagliaferri had any relation to or bearing on the two allegedly defamatory statements in this case.

         3. Deposition of Richard Wallace - 6/26/19

         Richard Wallace ("Wallace") was formerly employed by Tiversa as a director of operations. LabMD has repeatedly tried to align ...


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