Yessenow v. Hudson

270 F.R.D. 422, 2010 U.S. Dist. LEXIS 70859, 2010 WL 2802371
CourtDistrict Court, N.D. Indiana
DecidedJuly 14, 2010
DocketCause No. 2:08-CV-353
StatusPublished
Cited by5 cases

This text of 270 F.R.D. 422 (Yessenow v. Hudson) is published on Counsel Stack Legal Research, covering District Court, N.D. Indiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Yessenow v. Hudson, 270 F.R.D. 422, 2010 U.S. Dist. LEXIS 70859, 2010 WL 2802371 (N.D. Ind. 2010).

Opinion

OPINION AND ORDER

ANDREW P. RODOVICH, United States Magistrate Judge.

This matter is before the court on the Verified Motion to Compel Discovery [DE 73] filed by the plaintiff, Dr. Jeffrey Yessenow, on December 28, 2009, and on the Motion for Hearing Oral Argument [DE 77] filed by the defendant, Dr. Hilton Hudson, on January 11, 2010. For the following reasons, the Verified Motion to Compel Discovery is GRANTED, and the Motion for Hearing Oral Argument is DENIED.

Background

This motion arises out of a dispute about an indemnity agreement. The plaintiff, Jeffrey Yessenow, and the defendant, Hilton Hudson, both practiced medicine at and were investors in what is now known as Heartland Memorial Hospital. Leroy Wright, a banker, also was a major investor in the Hospital. In March of 2006, TWG Illiana Surgery and Medical Center, Inc., merged with iHealthcare, Inc., to create Heartland Memorial Holdings, Inc., whose main asset was Heartland Memorial Hospital, LLC. Hudson was the Chairman of TWG, and Wright was the Chairman of iHealthcare. After the merger, Yessenow became the CEO of Heartland Memorial Hospital, Hudson was chairman of the hospital and a substantial minority shareholder of Heartland Memorial Holdings, Inc., and Wright was the majority shareholder of Heartland Memorial Holdings, Inc.

[425]*425This merger was financed in large part by a venture capital company, AIC Ventures, and resulted in an agreement between AIC Ventures and Heartland Memorial Hospital to purchase five of the Hospital’s ancillary medical facilities through a sale/leaseback transaction. However, AIC Ventures required an initial security deposit of one-year’s rent, roughly $1.5 million, in case the Hospital defaulted on any payments. According to Yessenow, Hudson and Wright asked him to post the initial security deposit. So, on March 17, 2006, Yessenow obtained a six month letter of credit, backed by a $1.5 million promissory note and secured by a mortgage on his lakefront condo in downtown Chicago.

On March 23, 2006, the sale/leaseback transaction was consummated. Worried about his exposure under the letter of credit, Yessenow insisted on indemnification from his business partners. On March 31, 2006, the parties entered into an Indemnification Agreement whereby the Hospital would indemnify Yessenow from any losses or expenses incurred as a result of the bank loan. The Hospital’s indemnification obligations to Yessenow were guaranteed jointly and severally by Hudson and Wright individually, and their business entities, Hudson Publishing, Wright Capital Partners, and Wright Group Holdings.

On March 6, 2008, the bank that purchased Yessenow’s promissory note made a demand for a draw on the full amount of the letter of credit. Yessenow looked to the defendants for indemnification, they balked, and this lawsuit followed. Yessenow filed Plaintiffs First Amended Complaint on April 24, 2009, seeking declaratory judgment on the indemnity agreement and asserting claims of constructive fraud, unjust enrichment, and breach of contract.

The defendants filed their Answer to Plaintiffs First Amended Complaint and Restated Amended Counterclaim on May 8, 2009. In their counterclaims for breach of fiduciary duty and unjust enrichment, the defendants assert that Yessenow’s mismanagement of the hospital and his acts of self-dealing during his tenure as CEO caused nearly half of the hospital’s physicians to quit and destroyed the value of Heartland/Illiana, rendering its shareholders’ ownership interests worthless. Yessenow filed his Answer to Defendants’ Restated Amended Counterclaim on June 17, 2009, raising the affirmative defenses of unjust enrichment, fraud, and unclean hands.

On August 25, 2009, Yessenow served the defendants with his First Set of Interrogatories. Interrogatory 1 requests that the defendants “identify all bank accounts of Defendants from January 1, 2005, to the present, including, but not limited to, the bank name, account name, and account number.” (Pl.’s Interrog. No. 1, Ex. 1 to Pl.’s Mot. to Compel Def.’s to Answer Interrog., at 8.) The defendants answered the interrogatories on October 12, 2009, but the defendants did not answer Interrogatory 1 and have objected to it “on the grounds that it is irrelevant, overly broad, unduly burdensome, oppressive, harassing, and not reasonably calculated to lead to the discovery of admissible evidence.” (Defs.’ Answer to Pl.’s Interrog. No. 1, Ex. 2 to Plaintiffs Motion, at 4.)

The parties debated the relevance of Interrogatory 1 through a series of interactions, including a letter dated November 9, 2009, a telephone conference on December 4, 2009, and a series of emails. Counsel for Yessenow states in the November 9, 2009 letter that Interoggatory 1 “may lead to additional admissible evidence on Plaintiff s/Counter-defendant’s first, second, and fifth affirmative defenses to Counter-plaintiffs’ counterclaim.” (DE 73-4) In an email sent December 7, 2009, counsel for Yessenow asks for a “meet and confer” on the objection to the interrogatory, with counsel for the defendants responding the next day, “I don’t believe a separate meet and confer would be necessary ... the parties’ positions on the appropriateness of the requested discovery differ.” (DE 73-6)

Yessenow filed this motion on December 28, 2009, requesting that an order compelling the defendants to answer Interrogatory 1 and reimbursement for all costs and attorney’s fees in bringing this motion. Yessenow contends that Interrogatory 1 is relevant because the information requested is of a limit[426]*426ed time frame that will be admissible in and of itself or lead to information supporting his affirmative defenses of unjust enrichment, unclean hands, and fraud.

To support this motion, Yessenow argues that third-party discovery uncovered irregularities in the defendants’ handling of TWG’s finances, which Yessenow asserts is involved in the underlying transactions associated with the claims and defenses alleged in this case. He claims that Wright Capital Partners was a majority investor in TWG, and Hudson was an officer and investor in TWG during the relevant time period. He served a subpoena for records of one of TWG’s bank accounts which has uncovered some evidence allegedly supporting this defense, including a $800,000.00 check to Hudson from TWG’s account, a withdrawal of $170,000.00 in cash from TWG’s account by Wright, and the payment of defendants Wright and Wright Capital Partners’ legal bills with TWG money. Yessenow contends that the requested financial information will allow him to discover how TWG’s money was moved to the detriment of TWG’s shareholders and to the defendant’s own unjust enrichment, including the misappropriation of at least $900,000.00 in proceeds from the sale/leaseback agreement with the venture capital company. Yessenow contends that the requested information is relevant to his defense.

Defendants Wright and Wright Partners, LLC did not provide a response to Yessenow’s motion. However, defendants Hudson and Hilton Pubhshing filed a response to Plaintiffs motion, as well as a Motion for Hearing Oral Arguments regarding Interrogatory 1, on January 11, 2010. Hudson argues that Yessenow has failed to demonstrate that the requested information is relevant to any claim or defense in this case, and therefore, failed to overcome their objections that Interrogatory 1 is not relevant. Hudson contends there is no connection between the requested information and the parties’ dispute over the indemnity agreement, which he argues is the sole issue in this case.

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270 F.R.D. 422, 2010 U.S. Dist. LEXIS 70859, 2010 WL 2802371, Counsel Stack Legal Research, https://law.counselstack.com/opinion/yessenow-v-hudson-innd-2010.