August 6, the due date under the July 22 order, came and went with no semblance of compliance with Judge Purcell's order. Nothing was produced either as to pending or previous litigation. On Monday, August 11, plaintiffs' counsel pointed out to defendant's counsel the absurdity of this state of affairs:
With regard to other lawsuits, it is difficult to conceive that this company does not know what lawsuits are presently pending against the company and these lawsuits should be immediately identified. There is no excuse for not having produced, at least, those lawsuits by the date designated in the Court's Order of August 6, 2003. Additionally, there are a number of ways for the Defendant to identify past cases. It is required to address its cases in connection with annual accounting and annual statements. It would have specific ledger accounts that identified where it had hired outside counsel to represent Defendant in cases. Defendant cannot comply with its regulatory requirements and still be completely unable to identify the cases that had been filed against it. To the extent that it is not in compliance with such regulations, there are a number of different ways that Defendant can identify lawsuits. Defendant should immediately provide those cases that can be easily identified today, and begin work to identify the others and explain its actions in order to comply.
August 11, 2003 letter from Engel to Jacobson (exhibit 5 to motion for sanctions).
Three days after the August 11 letter from plaintiffs' counsel to defendant's counsel, Mr. Scott was deposed. In considering the testimony of Mr. Scott and his colleagues at National States on this subject, it should be borne in mind that, as has been noted (see
p. 7, above), defendant's president was also the head of the law firm which served as defendant's general counsel. The law firm's offices were located in the same building as defendant's headquarters. Mr. Scott testified that it never occurred to him to contact general counsel to get lawsuit-related materials with which to comply with request no. 6. Scott depo. at 66. He admitted that he had had no conversation at all with general counsel “with regard to the company's complying with producing a list of lawsuits.” Id.
at 66–67. Professing to believe that it was simply not possible to comply with request no. 6, Mr. Scott took no action at all to comply with that request. Id.
*8 In contrast to the impression Mr. Scott sought to convey with his testimony, Mr. Morrison's testimony left little doubt that he understood that general counsel would have files on lawsuits against National States. Morrison September 9 depo. at 44–45. He quite sensibly testified that if requested to produce a list of other lawsuits, “I wouldn't know how else to go about it other than to ask general counsel.” Id.
at 48–49. Nevertheless, on the morning the trial started, the only thing that had been provided was a list of pending
The other thing from the plaintiff, Your Honor, was the information regarding other lawsuits. And frankly, at this point in the litigation, that's so that we can see and try to establish if they've been aware of their wrongdoing in this rescission practice in the past and if they've been called on it before. And obviously that information at this late date is not very usable, but the evidence before the Court obviously was that they made no effort whatsoever to even go—their testimony was he didn't even go ask the general counsel if they had files where they could try to generate the list. And it's just ridiculous.
Now, this morning they show—on their arrival here at the conference, they have a list of pending lawsuits that they've produced. And, of course, there's no reason why now they are just now able to comply with the Court's order as opposed to before. But again there is no legitimate basis for why they haven't complied with the court's order.
THE COURT: So you have provided a list of pending
MR. ENGEL: About ten minutes ago.
Tr., p. 32 (emphasis added). After being informed of the status of defendant's compliance with respect to request no. 6, plaintiff's counsel had the following colloquy with the court:
And I said it's inconceivable that a company can't figure out what lawsuits are at least pending against it now, much less what has pended against them in the past. They have to report it to their accountant, they have to do it for all kinds of financial statements.
THE COURT: That would certainly be inconsistent with my experience in 29 years in the practice of law.
MR. ENGEL: Can't figure out your lawsuits?
THE COURT: If for no other reasons, an annual list of pending litigation has to be prepared for any number of audit and other reporting-related reasons.
Tr., p. 35. It was obviously too late, on the first day of trial, to direct that defendant bring itself into compliance with request no. 6, but, anticipating post-trial consideration of the consequences of defendant's failure to comply with the July 22 order, the court directed as follows:
Lest there be any doubt, the defendant is directed to produce to the plaintiff within ten days from this date, either as requested by Request Number 6, either a list of all lawsuits filed against defendant during the five years preceding the date of service of that request or as indicated by Request Number 6 as an acceptable alternative, copies of all complaints and petitions filed against the defendant during that five-year period.
*9 Tr., p. 36. Near the conclusion of the discussion of this topic on the first day of the trial, defendant's counsel relayed to the court the state of facts, as represented by the defendant, which the defendant apparently wanted the court to believe:
MR. JACOBSON: Your Honor, my understanding is that National States does not have a list of lawsuits and it certainly does not keep copies of the pleadings filed in the cases from my understanding.
THE COURT: Not even the complaint or petition?
MR. JACOBSON: No, your Honor.
THE COURT: Going back five years, that would make this company totally unique in my 31 years of experience.
Tr., p. 37.
The task of preparing a list of past lawsuits post-trial, as directed by the court, was not complicated. It is equally clear from Mr. Moffitt's post-trial deposition that compliance with request no. 6 prior to trial, as ordered, would have been equally uncomplicated:
Q.... And I just want to ask, when was the first time that the general counsel's office became involved in this case in any respect with regard to discovery requests?
A. After the verdict was in.
Q. After the verdict that was rendered in the jury trial?
Q. Okay. And tell me what occurred at that time.
A. Mr. Scott came up and told me that we needed to produce a list.
Moffitt September 9 depo. at 12–13. Of course, the list was promptly produced. Within a week of Mr. Scott's request, Mr. Moffitt was able to compile the list by retrieving his own files and referring to his annual litigation summaries. Id.
at 19–21. Significantly, Mr. Moffitt also confirmed that Mr. Scott was well aware that the law firm had a file for “each of the lawsuits.” Id.
at 18. Only if a file was, for some reason, out of the office would Mr. Scott ever be unable to come to the general counsel's office and get a litigation file. Id.
Thus, on July 22, defendant was ordered to comply with request no. 6, which it could do either by producing a list of lawsuits or by producing the complaints and petitions. Nothing was produced by August 6. Nothing other than a list of pending lawsuits was produced before the end of the trial. The list of pending lawsuits (as opposed to the pleadings themselves) was, of course, worthless by virtue of not having been produced until the first day of the trial, thus precluding meaningful investigation for evidentiary significance in this case (a result which the court cannot but conclude was the result intended by defendant). All the while, the complaints and petitions which National States had been ordered to produce reposed in the files of the law firm headed by the president of National States, the offices of which were located in National States' headquarters building. Those files were, by any measure, within the “possession, custody or control” of National States. Rule 34(a), F.R.Civ.P. There was no practical impediment of any kind to full and timely compliance with the July 22 order as to request no. 6. This was an instance of disobedience in its simplest form.
*10 We now know that defendant had been sued 39 times in cases involving life insurance policies. Motion for sanctions, ex. 16. In his post-trial deposition, Mr. Moffitt acknowledged that most of the actions on life insurance policies involved rescissions, and every one of those cases probably included a claim of bad faith. Moffitt September 9 depo. at 52–53.
During the punitive damage phase of the trial, defendant's counsel elicited the following testimony from Mr. Morrison:
Q. Were you ever aware of any lawsuits or jury verdicts against—let me back up. Are you aware of any jury verdicts against National States with respect to their rescission practices?
MR. O'DONNELL: That's all I have, thank you.
Tr. p. 552. Of course, in asking the question (and even in abortively referring to “lawsuits”), counsel was well aware that plaintiffs had been hobbled in their ability to counter the implication of Mr. Morrison's answer to the question. This question clearly opened the door not only to any adverse verdicts but to other potentially telling matters which might be gleaned from litigation files, including settlements of rescission cases under circumstances which might suggest, in the words of the Vining
court, “a deliberate, willful pattern of abusive conduct by [National States] in handling claims under its life insurance policies.” Vining
As plaintiffs aptly put it, National States “simply decided that it was worth whatever the court might do for non-compliance in order to avoid this evidence at trial, and only this court's order on plaintiffs' motion for sanctions will determine whether or not its decision was a good one.” Motion for sanctions, at 11.