WOODLAND HILLS, Calif. — Patient files and financial records used during the business operations of AIM Medical Associates were "willfully destroyed," a bankruptcy trustee says.
The trustee assigned to oversee the AIM bankruptcy said that all of the testing clinic's records, stored at a Public Storage locker in Sherman Oaks, Calif., were destroyed in March.
AIM, the primary performer-testing facility for years led by former porn star Sharon Mitchell, filed for Chapter 7 bankruptcy in May 2011, listing $3,500 in assets and $371,000 in liabilities, primarily owed to laboratories it worked with and legal counsel.
AIM's patient files and financial records were being stored at the locker in preparation for litigation targeting adult entertainment producers who used the clinic and signed indemnity agreements with the clinic, the trustee says.
The pending legal action against adult producers centers around an unnamed performer who filed a class-action claim in 2011 against AIM for violating the California Medical Information Act, unfair and deceptive trade practices and the public disclosure of private facts.
"The complaint alleged that [AIM], in connection with the online portal ... violated numerous federal and state laws by disclosing the test results to the producers without the necessary consent/release/waiver of the performers," the trustee says.
The trustee, in a motion to the bankruptcy court, said that he was to employ special counsel to sue adult producers using AIM's database based upon the indemnity agreements.
Identities of an untold number of targeted producers were not revealed in the trustee's statements to the court, but the trustee is considering an XBIZ request to acquire that information.
The funds anticipated from settlements or judgments would be substantial to pay off performer claims because the trustee anticipated that punitive damages would be available based upon the "willful violation of state and federal laws."
AIM several years ago created an online database to provide producers performer-test results, but the clinic did not have consent from the adult actors, the trustee said.
To go online and see performer-test results, "producers paid a fee and entered into an indemnity agreement whereby the producers agreed to indemnify [AIM] for any claims resulting from the unlawful/unintended disclosure of confidential test results," the trustee said.
"These documents, including the indemnity agreements, were maintained by AIM as part of its books and records and were placed in storage at the facility owned, maintained and operated by [Public Storage]."
With the patient files and financial records now destroyed, the trustee anticipates that a substantial cost will be incurred in re-creating the destroyed records.
The trustee has asked for a $1 million bond be put up by Public Storage because employees, specifically the district manager, at the facility were aware of the trustee's earlier order that the contents of the locker were not to be removed or destroyed.
The trustee has asked the bankruptcy court to hold Public Storage in civil contempt and order the storage giant to compensate for re-creation of the evidence.
Public Storage counsel did not return XBIZ calls for comment.
A hearing over the bond issue will be held at U.S. Bankruptcy Court in Woodland Hills, Calif., on Oct. 23.
