Firstsource Sols. USA, LLC v. Tulare Reg’l Med. Ctr.
In this breach of contract case, the court ordered summary judgment for the plaintiff, refusing the defendant additional time for discovery.
The court noted that “virtually all of the salient facts” were undisputed. Namely, the plaintiff, Firstsource Solutions, contracted with Tulare Regional Medical Center for fee-collection services. At the end of the contract, Tulare refused to pay Firstsource nearly $725,000 for its services. Firstsource filed suit seeking payment in full. Tulare counterclaimed, arguing that Firstsource breached the contract by “fail[ing] to collect between $6.5 and $7 million” in patient bills.
During discovery, Tulare twice sought, and twice obtained, extensions for its discovery deadlines. Despite those continuances, it failed to provide evidence supporting its defense or its counterclaim.
Firstsource moved for both summary judgment and terminating sanctions. It argued that Tulare admitted to the material facts and “had provided no admissible evidence” to support its defense and counterclaim. Further, it said, Tulare had not “participated in discovery in good faith.”
Tulare filed a request under Federal Rule of Civil Procedure 56(d), seeking a deferral of the court’s ruling on summary judgment. Tulare claimed that it needed additional time to disclose records that were relevant to the court’s summary judgment ruling.
Rule 56(d) requires that “the court…deny or continue a motion for summary judgment” when a party “cannot present facts essential” to its defense. However, the party seeking the delay “must also establish that [it has] been diligent in pursuing” discovery.
The court concluded that Tulare “crafted the bind in which it now finds itself” by failing to diligently engage in discovery. Tulare sought to disclose “the billing records for nearly 400,000 patient accounts” it had not provided in discovery. Those records “were arguably part of the initial disclosures” Tulare should have provided to Firstsource. Both Tulare’s defense and its counterclaim relied on those records. Firstsource requested the records “early on” in discovery, but Tulare never provided them. Inexplicably, Tulare did not dispute that the records were, and had been, in its possession.
However, Tulare “only began the process of seeking to disclose” those records a month before the already-extended discovery deadline. Tulare offered “no satisfactory explanation” for its delay. It stated only that its staff were “over-burdened” and unfamiliar with the billing system.
Finding that Tulare’s failures were “no one’s fault but its own,” the court declined to defer its ruling on summary judgment.
The court then turned to the motion for summary judgment. There, Tulare argued that a genuine dispute of material fact remained regarding Firstsource’s breach of contract. As proof, it provided records from four patient accounts.
Firstsource sought to exclude that evidence, noting that it too was never disclosed during discovery. The court “interpret[ed] this objection as a motion for evidentiary sanctions under Rule 37(c).”
While the court acknowledged that precluding Tulare’s evidence was a “harsh sanction,” it found it appropriate. Here, Tulare did not substantially justify its failure. Despite two extensions on its own motion, Tulare “still failed to…timely produce the discovery it now seeks” to introduce. Nor was Tulare’s conduct “a case of mistake, inadvertence, or even negligence.” Rather, the court found the failure to disclose “both willful and in bad faith,” to Firstsource’s prejudice.
The court declined lesser sanctions, finding that they would necessarily produce a delay. This, rather than a sanction, would be “precisely the relief” that Tulare sought. The court thus excluded Tulare’s evidence from its consideration of Firstsource’s motion for summary judgment.
As to summary judgment, the court again ruled in Firstsource’s favor. It ordered Tulare to pay the “undisputed amount of $724,385.08 invoiced and not paid” under the contract. Firstsource also sought its costs and attorneys’ fees; the court directed it to file its specific request.
The court denied Firstsource’s motion for terminating sanctions as moot, given its grant of summary judgment.
Takeaways on Cooperating in Discovery
We’ve said it before: if you have relevant and potentially dispositive information, it’s incumbent on you to timely produce it in discovery. Failure to cooperate with the discovery process will not curry you any favor with opponents or the courts. Nor are courts sympathetic to organizational failures to understand or manage discoverable data. Here, Tulare’s failure to take discovery seriously was fatal to its case.
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