Opinion
Civil Action No. 04-3408, Section "A" (2).
May 18, 2005
ORDER AND OPINION ON MOTIONS
This is an action to recover damages and attorney's fees incurred by plaintiffs as a result of defendants' alleged failure to provide them with an insurance defense in, and defendants' alleged unauthorized settlement of, certain state court toxic mold lawsuits ("the Plaza tower litigation"). Four motions for protective order filed by defendants, American Equity Insurance Company, Great Lakes Reinsurance (UK) PLC, Clarendon America Insurance Company and Monticello Insurance Company, Record Doc. Nos. 33, 38, 53 and 61, are currently pending before me. Oral argument was conducted on May 11, 2005.
In the motions, defendant American Equity specifically requests that it be relieved from providing responses to plaintiffs' Requests for Production No. 3, 4, 5, 8 through 16, and 19 through 23 and Interrogatories No. 10, 13, 14 and 15. All of the defendants have joined in American Equity's motion. In addition, defendant Great Lakes specifically seeks relief as to Interrogatory No. 16 (total fees and expenses paid to lawyers for defense in the Plaza Tower litigation) and Request for Production No. 18 ("entirety of its claim file"). The motions assert several objections to plaintiffs' discovery, including various privileges, irrelevance, over breadth and undue burden.
Having considered the record, the submissions of the parties and the applicable law, IT IS ORDERED that the motions are GRANTED IN PART, DENIED IN PART and DEFERRED IN PART as follows:
I. ANALYSIS
(A) The Applicable Legal Standard
The legal standard applicable to these motions as a threshold matter is the familiar dichotomy of Fed.R.Civ.P. 26(b)(1) and (2). After the substantial amendment to the discovery rules that became effective December 1, 2000, Fed.R.Civ.P. 26(b)(1) provides that parties may obtain discovery regarding any matter,not privileged, that is relevant to the claim or defense of any party. Fed.R.Civ.P. 26(b)(1). In addition, the court may order discovery of any matter relevant to the subject matter involved in the action only if the party seeking such discovery makes a showing of good cause. Id. The new standard concerning the scope of discovery is narrower than the old, pre-2000, broader standard. Seaga Mfg., Inc. v. Fortune Resources Enters., Inc., No. 99C50332, 2002 WL 31399408, at *3 (N.D. Ill. Oct. 24, 2002) (Mahoney, M.J.); Thompson v. Department of Housing Urban Dev., 199 F.R.D. 168, 171 (D. Md. 2001) (Grimm, M.J.).
Thus, the tone of entitlement to unlimited, unrestricted "subject matter" discovery struck in plaintiffs' memorandum in opposition to the motions for protective order is off-base. Instead, under the applicable rule, "it is hoped that reasonable lawyers can cooperate to manage discovery without the need for judicial intervention. When judicial intervention is invoked, the actual scope of discovery should be determined according to the reasonable needs of the action." Advisory Committee Notes to the 2000 Amendments to the Federal Rules of Civil Procedure,reported in Federal Civil Judicial Procedure and Rules at 166 (Thomson West Pamph. 2005 ed.) (emphasis added).
In this case, neither party has shown good cause to expand the scope of discovery to broad "subject matter" discovery. It appears that plaintiffs have made the subject discovery overly broad and unduly complicated, beyond information relevant to the claims and defenses of the parties. Accordingly, the court applies the narrower, threshold standard of Rule 26(b)(1) to the scope of discovery in this case; that is, "any matter, not privileged, that is relevant to the claim or defense of any party."
The claims asserted in the complaint, originally filed as a state court petition, against the insurers who have moved for protective orders are all Louisiana state law claims. They include breach of the subject insurance contracts, abuse of rights, and breach of the Louisiana statutory obligations of good faith and fair dealing. Record Doc. No. 1 (Exhibit B to Removal Petition at ¶¶ 42, 43 and 45). In addition, plaintiffs have asserted state law claims of negligence, breach of fiduciary duty and negligent misrepresentation, but only against defendant Frank Associates, Inc., which has not moved for a protective order.Id. at ¶ 44. The damages sought by plaintiffs are $291,701.69 spent by plaintiffs on attorneys' fees to defend themselves in the Plaza Tower litigation while defendants were denying coverage, $13 million in loss of value to the Plaza Tower building, and attorney's fees and costs incurred in connection with this action. Id. at ¶¶ 46-49.
In addition to the narrower scope of discovery applicable to this case through amended Rule 26(b)(1), the court must also consider and apply the limitations imposed on discovery by Rule 26(b)(2). The precursor to current Rule 26(b)(2) was adopted in 1983
to deal with the problem of over-discovery. The objective is to guard against redundant or disproportionate discovery by giving the court authority to reduce the amount of discovery that may be directed to matters that are otherwise proper subjects of inquiry. The new sentence is intended to encourage judges to be more aggressive in identifying and discouraging discovery overuse. . . . The court must apply the standards in an even-handed manner that will prevent use of discovery to wage a war of attrition or as a device to coerce a party, whether financially weak or affluent. . . . But the court must be careful not to deprive a party of discovery that is reasonably necessary to afford a fair opportunity to develop and prepare the case.
Advisory Committee Notes, in Federal Civil Judicial Procedure and Rules at 157 (emphasis added).
In 1993, the rule was amended further
to enable the court to keep tighter rein on the extent of discovery. The information explosion of recent decades has greatly increased both the potential cost of wide-ranging discovery and the potential for discovery to be used as an instrument for delay or oppression. . . . The revisions in Rule 26(b)(2) are intended to provide the court with broader discretion to impose additional restrictions on the scope and extent of discovery. . . .Id. at 162 (emphasis added).
Thus, Rule 26(b) is not a discovery blank check. It requires balancing and imposes on the court the obligation to rein in overly broad, potentially abusive discovery like some of plaintiffs' requests in this case. Applying and balancing the standards set out in the rule, I find that the resources of the parties are approximately equal and the amount in controversy, while substantial, is not so great that some of the overly broad discovery submitted by plaintiffs is justified under Rule 26(b)(1) or (2)(iii), particularly when the legal needs of the case are evaluated in light of the nature of the claims and defenses asserted. This should be a relatively straightforward case of discerning the parties' obligations under their written insurance agreements, applying the well-established law of Louisiana concerning such contracts, and comparing the parties' conduct to their contractual and legal obligations.
As to most of the discovery requests at issue, defendants argue that a protective order is appropriate because responsive materials or information are privileged. Unfortunately, defendants' privilege objections are wholly unsubstantiated at this time and not yet properly asserted. The law does not establish that the requested materials are privileged as a matter of law. When defendant asserts in its reply memorandum that "plaintiffs have not overcome American Equity's privilege claims," Record Doc. No. 64 at p. 3, it has the parties' proof obligations in this regard exactly backwards. Contrary to defendant's argument, the party resisting discovery by asserting any privilege bears the burden of proof sufficient to substantiate its privilege claims and cannot rely merely on a blanket assertion of privilege. United States v. Newell, 315 F.3d 510, 525 (5th Cir. 2002); In re Santa Fe Int'l Corp., 272 F.3d 705, 710 (5th Cir. 2001); High Tech Communications, Inc. v. Panasonic Co., 1995 WL 45847, at *1 (E.D. La. Feb. 2, 1995) (Vance, J.) (citing Hodges, Grant Kaufman v. United States, 768 F.2d 719, 721 (5th Cir. 1985)). As one leading commentator has succinctly explained the procedure,
Once the proponent has properly asserted the privilege claim and the requisite information about the allegedly privileged document provided to the opponent, the proponent must substantiate all actual assertions about the claim. This is usually done through supporting affidavits from individuals with personal knowledge of the relevant facts, exhibits attached to the motion and briefs, discovery responses, pleadings and other undisputed facts. . . . To the extent that evidentiary support for the factual basis of the privilege is not forthcoming, the claim is little more than a bald, conclusory, or ipse dixit assertion. The court will deny such an assertion because it forecloses meaningful independent inquiry by the finder of facts (the judge) into the validity of the claim. . . . Although an attorney's word may be "taken on its face," a privilege claim is not self-executing. It requires more proof than a conclusion by the party asserting the claim (or his attorney) that it is justified.
P. Rice, Attorney-Client Privilege in the United States § 11:10 at 977-80 (Lawyers Coop. 1993) (emphasis added). Only after the party resisting discovery has borne its evidentiary burden of establishing privilege does the burden shift back to the party seeking discovery to establish that the materials are nevertheless discoverable, for example, by making the showing set out in Fed.R.Civ.P. 26(b)(3), proving waiver or otherwise.
Thus, defendants' objections in the instant case that the requested information is shielded from discovery by the attorney-client communication privilege, the joint defense privilege, Fed.R.Civ.P.26(b)(3) and/or the work product doctrine can be sustained only if they are both properly asserted and the facts supporting any privileges are established byevidence, not merely declared by lawyer argument. Despite defendants' burden of proof on their privilege claims, they have submitted no evidence of any kind, by affidavit, deposition testimony or otherwise, which might establish that the requested information is privileged in any way. The mere assertion of a lawyer in defendants' memoranda that responsive materials or information were attorney-client communications, work product, part of a joint defense or prepared in anticipation of litigationis not evidence sufficient to bear the burden.
In addition, Fed.R.Civ.P.26(b)(5) provides:
When a party withholds information otherwise discoverable under these rules by claiming that it is privileged or subject to protection as trial preparation material, the party shall make the claim expressly and shall describe the nature of the documents, communications, or things not produced or disclosed in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the applicability of the privilege or protection.
The rule employs the mandatory "shall," yet defendants have submitted no privilege logs. Under somewhat similar circumstances in other cases, all assertions of privilege or other protections against the requested discovery have been deemed waived. See, e.g., Nagele v. Electronic Data Sys. Corp., 193 F.R.D. 94, 108 (W.D.N.Y. 2000); Bordonaro v. Union Carbide Corp., No. 93-3355, 1995 WL 234545, at *2 (E.D. La. April 20, 1995) (Duval, J.); Burns v. Imagine Films Entertainment, Inc., 164 F.R.D. 589, 594 (W.D.N.Y. 1996); Massachusetts School of Law at Andover, Inc. v. American Bar Ass'n, 914 F. Supp. 1172, 1178 (E.D.Pa. 1996).
In this case, however, because of the importance of the privileges asserted and the substantial burden on defendants of compiling the requisite logs, I have not deemed the privileges waived, either by defendants' failure to comply with Rule 26(b)(5) or by their failure thus far to sustain their burden of proof. Instead, I have ordered defendants to submit the necessary materials by dates certain, Record Doc. No. 65, and I will defer ruling for now and address the privilege objections after defendants make their supplemental submissions.
In the meantime, some of the subject discovery objections do not involve privilege assertions of any kind and can be addressed now. Some of the discovery undertaken by plaintiffs is not relevant to claims or defenses asserted in this matter. Some must be prohibited under Rule 26(b)(2). On the other hand, some of defendants' objections are not well-founded. Accordingly, the motions are ruled on in part as follows, in the order that particular discovery requests are addressed in American Equity's motion.
(B) Evaluation of the Specific Discovery Requests
The motions are granted as to Request Nos. 12 and 14. Plaintiffs concede in their opposition memorandum that these requests seek materials that are subject to the attorney-client privilege. Therefore, defendants' objections are sustained, their motions are in part granted and no responses to these two requests are required.
The motions are also granted as to Request No. 23. Although plaintiffs did not concede the privileged nature of materials responsive to this request in their opposition memorandum or at oral argument, they should have. Like Requests No. 12 and 14, it is clear and obvious on the face of this request that it calls strictly for materials subject to the attorney-client communication privilege and/or the attorney work product doctrine. No further response to this request is required.
Because materials responsive to these three requests are clearly protected, defendants are relieved of the obligation to include materials that are responsive exclusively to the foregoing three requests in their Rule 26(b)(5) privilege logs.
The motions are also granted as to Request No. 19, but only as provided herein. The request for the entire "computer hard drive" referenced in this request is overly broad and seeks much that is irrelevant and not likely to lead to the discovery of admissible evidence. The entire "computer hard drive" need not be produced and no further response to this particular request is required. However, a computer hard drive is one of the "other data compilations" referenced in Fed.R.Civ.P. 34(a). If particular non-privileged items on the referenced computer hard drive are responsive to other requests for production as to which defendants' objections have not been sustained, those items must be "translated, if necessary, by the respondent through detection devices into reasonably usable form," Fed.R.Civ.P. 34(a) (for example, by printing out the items on paper), and then produced, not in response to the overly broad Request No. 19, but in response to any other request that has called for such information. If defendants assert privilege objections to such materials, if there are any, the materials may be withheld and listed on defendants' privilege logs for possible later determination of their discoverability.
The motions are deferred as to Requests No. 13, 15, 21 and 22 (evaluation and analysis materials) and 5, 9, 10 and 11, together with Interrogatory No. 13 (joint defense and settlement materials), pending my resolution of the privilege issues according to the schedule and based on the future submissions referenced above. Materials responsive to these requests may or may not be protected by the attorney-client privilege, work product doctrine, state law joint defense privilege or Rule 26(b)(3). However, defendants' relevance, over-breadth, burdensomeness and all other objections (except privilege) are specifically overruled. Materials responsive to these requests are directly and substantially relevant to plaintiffs' claims in this case. Defendants have presented affidavit evidence that the burden of gathering these materials may be significant. However, the direct and substantial relevance of these materials to plaintiffs' claims eliminates any possible finding that this discovery, if the materials are not privileged, should be prohibited for any of the reasons set out in Fed.R.Civ.P. 26(b)(2), particularly since I cannot conclude that the burden or expense of requiring responses to these particular requests outweigh their likely benefit to the case, considering all the factors set out in Rule 26(b)(2)(iii). After receiving and reviewing defendants' submissions pursuant to my previous order, if I find that these materials are not privileged, I will order their production.
The motions are denied as to Interrogatory No. 10, but only as provided herein. All objections to this interrogatory, except privilege, are overruled. The privileges asserted by defendants do not protect facts, only communications of a certain sort, work product and Rule 26(b)(3) tangible items. Certainly, the part of the interrogatory that merely seeks the identity of the person within movants' companies who made the decision to settle the Plaza Tower litigation cannot conceivably be privileged in any way. This is a straightforward fact request seeking the identity of a potentially key witness in connection with the precise claims asserted by plaintiffs. It does not seek the content of any privileged communications (whether attorney-client or joint defense), work product or Rule 26(b)(3) tangible items.
In addition, I am familiar with the settlement process, having conducted hundreds of settlement conferences during my ten years as a magistrate judge and having negotiated several settlement agreements during my eleven years as a lawyer in private practice. I suspect that the answer to the part of this interrogatory which seeks reasons why movants elected to settle the state court litigation might be all or some combination of factors, including the risks of losing, the amount of potential exposure to damages, the cost of defense, and any terms and conditions of the relevant insurance policies concerning settlement, among other possible reasons. All of the foregoing reasons would be facts that do not reveal privileged communications, attorney work product or protected Rule 26(b)(3) materials. For the same reasons discussed above, specifically, that the privileges asserted by defendants do not protect facts from discovery, but only certain kinds of communications, work product and tangible items under Rule 26(b)(3), this part of the interrogatory must also be answered, but only with facts, without revealing privileged information. If privileged information responsive to this part of the interrogatory is being withheld, it must be identified in the Rule 26(b)(5) logs that are the subject of my previous order, and that part of the motions relating to this interrogatory will be deferred.
Answers to Interrogatory No. 10 must be provided within twenty (20) days of entry of this order.
The motions are denied as to Request for Production No. 8 and Interrogatories No. 15 and 16, subject to the redaction condition contained herein. All objections, except privilege of any kind, are overruled. The good faith reasons, if any, why defendants settled the Plaza Tower litigation are directly and significantly relevant to plaintiffs' claims. As noted briefly above, cost of defense is a frequently relied upon and good faith reason why litigants of all kinds settle lawsuits. Even if there is burden and expense associated with requiring defendants to respond to these requests, the importance of this information to plaintiffs' claims (and perhaps even to the defense that the Plaza Tower litigation was settled in good faith) outweighs the burden.
Accordingly, all non-privileged materials responsive to Request for Production No. 8 must be produced and Interrogatories No. 15 and 16 must be answered within twenty (20) days of entry of this order. The amounts paid, the numbers of hours billed, the dates on which lawyers worked and the billing rates applied are in no way privileged or otherwise protected from discovery. On the other hand, descriptive entries on lawyers' bills may conceivably reveal privileged communications or lawyer work product. For example, the notation "legal research" on a lawyer's bill is a fact, not a privileged communication or work product, but a lengthy description of that research which reveals the content of a confidential attorney-client or joint defense communication or the work product mental impressions, strategies, opinions or legal theories of the billing attorney may be privileged. Thus, defendants are hereby permitted to redact from the materials they produce and exclude from these interrogatory answers all privileged matters.
The motions are granted as to Request for Production No. 16 and Interrogatory No. 14. All objections are sustained. In particular, these discovery requests seek information about claims similar to those asserted in this case, but they do not directly seek information relevant to the claims made in this case. At best, they are relevant to the "subject matter" of the pending action, and "good cause," as required by Fed.R.Civ.P. 26(b)(1) for this discovery, has not been shown. Other litigation or claims made by others who are not parties to this lawsuit hinge upon the wording of those separate contracts of insurance and the facts and circumstances peculiar to any such other cases that may or may not be similar to those in this case. In this regard, particularly considering the unrebutted affidavit of Thomas W. O'Brien, defendants have borne their burden of establishing the tremendous burden and expense faced by defendants if they were required to respond to these requests. Under these circumstances, I find that the burden and expense of requiring responses to this discovery outweighs its likely benefit to the case, considering all of the factors set out in Fed.R.Civ.P. 26(b)(2)(iii) and the tangentially relevant nature of the requested information.
The motions are also granted as to Requests for Production No. 3 and 4. This discovery must be prohibited pursuant to Fed.R.Civ.P. 26(b)(2)(i). In essence, these requests seek production from defendants of voluminous materials that defendants previously sent to plaintiffs or received from them. In short, on the face of these requests, it appears that plaintiffs should already be in possession of these materials or the documents should be available to plaintiffs from the public records of the state court Plaza Tower litigation or the document depository created in connection with that litigation. Thus, while the materials may be relevant to plaintiffs' claims under Fed.R.Civ.P. 26(b)(1), "the discovery sought [in these two requests] . . . is obtainable from some other source that is more convenient, less burdensome, or less expensive," Fed.R.Civ.P. 26(b)(2)(i), namely plaintiffs' own files, the public record and the document depository to which they have had access.
The motions are also granted as to Request for Production No. 20. All relevant, non-privileged materials responsive to this request will be produced pursuant to other requests, including particularly but not limited to Request No. 18. Thus, requiring a further response to this request would be unduly cumulative or duplicative in violation of Fed.R.Civ.P.26(b)(2)(i), and the burden or expense of requiring the broad-ranging search of materials described in O'Brien's affidavit establishes that the burden and expense of requiring a response to this request outweighs its likely benefit under Fed.R.Civ.P.26(b)(2)(iii).
As to Request for Production No. 18, which was raised in the motion of defendant Great Lakes, the motion is denied in part and deferred in part as follows. Specifically, "Great Lakes requests that it not have to produce the `entirety of its claims file' regarding the Plaza Tower Litigation as there are documents within the file that are privileged." Record Doc. No. 38 (Memorandum in Support at p. 3). An insurance "claims file" is not by definition privileged in its entirety and may contain much that is not subject to any privilege. Conversely, a privileged document does not necessarily lose its privileged status simply by being housed in a claims file. Thus, the motion is denied in part as to Request No. 18 in that all non-privileged materials in the relevant claims file must be produced. The motion is deferred, however, concerning any materials contained in the claims file as to which a privilege objection has been asserted. In this regard, Great Lakes, like the other movants, must comply with my previous order concerning the submission of Rule 26(b)(5) privilege logs and proof sufficient to sustain its burden of establishing any privilege as to all such materials stored in the claims file.