Civil No. 06-3715 (ADM/AJB)
United States District Court, D. Minnesota
August 09, 2007
Filed August 10, 2007
Dennis T. D’Antonio, Joshua Lee Mallin, Weg and Myers, New York, NY, George E. Warner, Jr., Warner Law, LLC, Scott A. Lifson, Bernick, Lifson, Greenstein, Greene & Liszt, PA, Minneapolis, MN, for Plaintiff.
David E. Bland, Stacey P. Slaughter, Robins Kaplan Miller & Ciresi LLP, Minneapolis, MN, for Defendant
*1 This matter is before the Court, United States Magistrate Judge Arthur J. Boylan, on Defendant Federal Insurance Company’s (“Federal”) Motions to Compel Rule 30(b)(6) Deposition and an Award of Sanctions [Docket No. 53] and Compel Deposition of Salvatore Giandinoto and an Award of Sanctions [Docket No. 59], as well as Plaintiff Advanced Duplication Services, LLC’s (“ADS”) Motion to Compel Discovery. A hearing was held on August 1, 2007, in the United States District Courthouse, 180 East Fifth Street, Saint Paul, MN 55101. Dennis T. D’Antonio from Weg & Meyers, P.C., and George E. Warner, Jr. from Bernick & Lifson, P.A., represented ADS. David E. Bland from Robins, Kaplan, Miller & Ciresi, L.L.P., represented Federal.
Based upon the record, memoranda, and oral arguments of counsel,
IT IS HEREBY ORDERED that:
1. Defendant’s Motion to Compel Rule 30(b)(6) Deposition and an Award of Sanctions is granted in part and denied in part as follows:
A. Defendant’s Motion to Compel Rule 30(b)(6) Deposition is granted. ADS shall adequately prepare a designated 30(b)(6) person or persons to fully answer Federal’s notice as amended below.
B. The topics for Federal’s four requests in the original deposition notice shall be amended to:
(1) the procedures ADS used to search, locate, and produce electronic and non-electronic documents responsive to Federal’s document requests;
(2) the procedures ADS used to search back-up tapes or other archives of electronically stored information to locate emails and other electronic documents responsive to Federal’s document requests;
(3) identity of the person or persons at ADS responsible in locating, searching, and producing electronic and non-electronic documents responsive to Federal’s document requests; and
(4) the identity of the person or persons at ADS responsible for searching back-up tapes or other archives of electronically store information to locate emails and other electronic documents responsive to Federal’s document requests.
C. Defendant’s Motion for an Award of Sanctions is denied.
2. Defendant’s Motion to Compel Deposition of Salvatore Giandinoto and an Award of Sanctions is moot in part and denied in part as follows:
A. Defendant’s Motion to Compel Deposition of Salvatore Giandinoto is moot pursuant to the agreement of the parties at the August 1, 2007, hearing. Mr. Giandinoto’s fact witness deposition shall be limited to factual background information within his knowledge excluding any opinions Mr. Giandinoto formed from the facts concerning this litigation.
B. Defendant’s Motion for an Award of Sanctions is denied.
3. Plaintiff’s Motion to Compel [Docket No. 59] is granted in part and denied in part as follows:
A. Plaintiff’s Motion to Compel Claim Investigation Documents Concerning a Prior Loss at ADS in 2002 is denied.
B. Plaintiff’s Motion to Compel Defendant’s File Maintained by its Loss Control Department Concerning the ADS Facilities is granted.
C. Plaintiff’s Motion to Compel Reserve Information is denied.
D. Plaintiff’s Motion to Compel Defendant’s Privilege Log Withheld on the Basis of Attorney-Client Privilege/Attorney Work Product is denied in part. Defendant shall produce to Plaintiff Log #3. Defendant’s have also agreed to produce to Plaintiff: Log #12, #19, #21, #23, #24, one page of #25, and #26.
*2 E. Plaintiff’s Motion to Compel the Documents Steve Mortenson Reviewed in Preparation for his May 1, 2007, deposition is granted.Mr. Mortenson shall be redeposed by Plaintiff and the deposition shall not count towards Plaintiff’s limit pursuant to the Pretrial Scheduling Order [Docket No. 32]. Defendant shall also produce the documents Mr. Mortenson reviewed in preparation for his deposition pursuant to Fed. R. Evid. 612 to Plaintiff in detail by Bates Number.
F. Plaintiff’s Motion to Compel the Deposition of Robert Boesel is granted. Mr. Boesel’s fact witness deposition shall be limited to factual information within his knowledge including, but not limited to any opinions Mr. Boesel formed from the facts up until the date of litigation.
I. Defendant’s Motion to Compel Rule 30(b)(6) Deposition and an Award of Sanctions
Fed. R. Civ. P. 30(b)(6) specifies the requirements of a person designated to testify on behalf of an organization: first, the designee must be an officer, director, managing agent, or other person who consents to testify on its behalf; second, the person (or persons) so designated “shall testify as to matters known or reasonably available to the organization. Under Rule 30(b)(6), the party requesting a 30(b)(6) deposition, must articulate in its deposition notice the particular subject areas that the party anticipates will be discussed and are relevant to the party’s claims. Fed. R. Civ. P. 30. “[T]he responding party [to a 30(b)(6) deposition] must make a conscientious good-faith endeavor to designate the persons having knowledge of the matters sought by [the opposing party] and to prepare those persons in order that they can answer fully, completely, and unevasively, the questions posed by [the opposing party] as to the relevant matters.” 3M Innovative Properties Co. v. Tomar Elecs., 2006 WL 2670038, at *10 (D. Minn. Sept. 18, 2006)(citing Prokosch v. Catalina Lighting, Inc., 193 F.R.D. 633, 638 (D. Minn. 2000)). However, a corporation should not be confronted with a seemingly endless sequence of depositions to answer the questions of a party requesting a 30(b)(6) deposition which necessarily interfere with the capacity of its officers and employees to properly discharge their employment duties, and which impose substantial financial costs. Fed. R. Civ. P. 30(b)(6), 1970 advisory committee notes.
On June 21, 2006, Federal served a Rule 30(b)(6) deposition notice on ADS, seeking testimony about the searches done for documents responsive to four of Federal’s Requests for Production. See Ex. A [Docket No. 57]. ADS produced Jean A. Lagotte, Jr., ADS’ Chairman of the Board, as the Rule 30(b)(6) designee. The 30(b)(6) deposition of Mr. Lagotte took place on July 10, 2007, but was aborted after approximately one hour when Mr. Bland (counsel for Federal) determined that Mr. Lagotte was not sufficiently prepared to answer the questions to their 30(b)(6) notice. Mr. Lagotte testified that he spent two hours in preparation with his counsel, Mr. Mallin (counsel for ADS), and an additional forty-five minutes or so with Brent Carlson, ADS’ IT Director, in preparation for his 30(b)(6) deposition. See Ex. B, pp. 11:4-14, 13:3-17 [Docket No. 57]. ADS and ADS’ counsel had a duty to adequately prepare Mr. Lagotte for the 30(b)(6) deposition so that he could answer fully, completely, and unevasively to the questions posed by Federal. However, many of the answers given by Mr. Lagotte evidenced his lack of preparation and uncertainty with the persons and procedures involved in searching for the non-electronic and electronic documents requested by Federal.
Thus, Federal is entitled to a properly prepared Rule 30(b)(6) deponent from ADS.
*3 At the same time, the requesting party’s obligation is to designate “with painstaking specificity” the particular subject areas that are intended to be questioned and that are relevant to the issues in dispute. Prokosch, 193 F.R.D. at 638. In light of this requirement, several topics in Federal’s deposition notice lack specificity. For example, with respect to Federal’s First Requests for Production, Federal asks ADS to “identify each person who searched for non-electronic documents responsive to said request” or “identify each person who was asked to provide non-electronic documents responsive to said requests.” See Ex. A [Docket No. 57](emphasis added). Such a broad and burdensome request would trigger, as stated earlier, a seemingly endless sequence of depositions that would interfere with the capacity of officers to properly discharge their employment duties. See Dwelly v. Yamaha Motor Corp. USA, 214 F.R.D. 537, 540 (D. Minn. 2003). It would be impossible for ADS to produce and unreasonable for Federal to request a witness who would have audited every document response given as well as interview every person who participated in the production of each of the 103 document requests made by Federal.
Therefore, the topics for Federal’s four requests in the original deposition notice shall be amended to: (1) the procedures ADS used to search, locate, and produce electronic and non-electronic documents responsive to Federal’s document requests; (2) the procedures ADS used to search back-up tapes or other archives of electronically store information to locate emails and other electronic documents responsive to Federal’s document requests; (3) identity of the person or persons at ADS responsible in locating, searching, and producing electronic and non-electronic documents responsive to Federal’s document requests; and (4) the identity of the person or persons at ADS responsible for searching back-up tapes or other archives of electronically store information to locate emails and other electronic documents responsive to Federal’s document requests. ADS shall thereafter adequately prepare the designated 30(b)(6) person or persons to fully answer Federal’s notice as amended by the Court.
Federal asserts that ADS’ conduct regarding the Rule 30(b)(6) deposition warrants sanctions in the amount of $3,032.00. Rule 37(d) of the Federal Rules of Civil Procedure provides:
If a party or an officer, director, managing agent of a party or a person designated under Rule 30(b)(6) or 31(a) to testify on behalf of a party fails (1) to appear before the officer who is to take the deposition, after being served with proper notice, or...the court in which the action is pending on motion may make such orders in regard to the failure as are just, and among others it may take action authorized under subparagraphs (A), (B), and (C) of subdivision (b)(2) of this rule. ...In lieu of any order or addition thereto, the court shall require the party failing to act or the attorney advising that party or both to pay the reasonable expenses, including attorney’s fees, caused by the failure unless the court finds that the failure was substantially justified or that other circumstances make an award of expenses unjust.
Nevertheless, sanctions under Rule 37 are not mandatory. See Davis v. U.S. Bancorp., 383 F.3d 761, 765 (8th Cir. 2004). In this case, any sanctions against ADS for failing to adequate prepare Mr. Lagotte for the 30(b)(6) deposition are offset by Federal’s failure to designate “with painstaking specificity” the particular subject areas that were intended to be questioned and that were relevant to the issues in dispute. The Court thereby concludes that such circumstances make an award of expenses to Federal unjust and no sanctions will be awarded.
II. Defendant’s Motion for an Award of Sanctions Regarding the Deposition of Salvatore Giandinoto
On January 17, 2007, ADS designated two experts as testifying experts in this litigation, one of whom was Salvatore Giandinoto. On April 2, 2007, Dr. Giandinoto was re-designated as a non-testifying expert pursuant to Fed. R. Civ. P. 26(b)(4) after he left Chemir Analytical Services.
Even in light of Dr. Giandinoto’s re-designation, Federal believed it was entitled to depose him. Federal attempted to reschedule Dr. Giandinoto’s deposition, but ADS refused.
*4 The parties thereafter agreed at the August 1, 2007, hearing that the deposition of Mr. Giandinoto would be allowed so long as his deposition was limited to factual background information within his knowledge excluding any opinions he formed from the facts concerning this litigation.
Federal also seeks sanctions by way of reimbursement for expenses to prepare for Dr. Giandinoto’s deposition, as well as the time associated with making this motion pursuant to Fed. R. Civ. P. 37(d). As stated earlier, however, Rule 37 sanctions are not mandatory and the Court may find the decision not to permit the deposition of Dr. Giandinoto was substantially justified. See Davis, 383 F.3d at 765. A position is considered “substantially justified” if it has a clearly reasonable basis in law and fact. Goad v. Barnhart, 398 F.3d 1021, 1025 (8th Cir. 2005). Under Fed. R. Civ. P. 26(b)(4), a party may, through interrogatories or by deposition, discover facts and opinions of a non-testifying experts only upon a showing of exceptional circumstances. In light of the fact that Dr. Giandinoto left Chemir, ADS decided to re-designate him as a non-testifying expert. Mr. Mallin invited Mr. Bland to identify such circumstances that would provide Federal with the right to take Dr. Giandinoto’s deposition. See Mem. 4 [Docket No. 82]. However, Federal failed to identify any “exceptional circumstance” that would justify the taking of Dr. Giandinoto’s deposition. The Court holds that ADS had a reasonable basis in refusing to allow Federal to depose Dr. Giandinoto once he was re-designated as a non-testifying witness. Therefore, ADS’ actions were substantially justified and no sanctions will be awarded.
III. Plaintiff’s Motion to Compel
Pursuant to Fed. R. Civ. P. 26(b)(1), parties to an action are entitled to liberal discovery regarding “any matter, not privileged, which is relevant to the subject matter involved in the pending action...Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.” A discovery request is relevant unless it is clear that the information sought can have no possible bearing on the subject matter of the action. See Mead Corp. v. Riverwood Natural Res. Corp., 145 F.R.D. 512, 522 (D. Minn. 1992). When the discovery sought appears relevant on its face, the party resisting discovery has the burden to establish that the discovery is not relevant, or is “of such marginal relevance that the potential harm occasioned by the discovery would outweigh the ordinary presumption in favor of broad disclosure.” Turner v. Moen Steel Erection, Inc., 2006 WL 3392206, at *3 (D. Neb. Oct. 5, 2006).
Federal correctly asserts that the 2002 loss by ADS is irrelevant to the 2005 loss involving the Sony SLIM-HD that is the subject matter of this litigation. The 2002 loss did not involve the Sony machine. In fact, the 2002 loss predated the installation of the Sony machine. ADS claims that the 2002 loss documents are relevant since they concern a loss that was investigated by at least one of the same individuals who investigated the loss that is the subject of this litigation.
Furthermore, ADS claims those same documents might provide information showing methods, procedures, and protocols utilized in assessing the 2002 loss, which may offer guidance in how Federal proceeded in assessing the 2005 loss. Information pertaining to the procedures and protocols Federal uses to assess loss claims for purposes of insurance coverage is relevant or may lead to the discovery of admissible evidence for purposes of this litigation. However, documents relating to the 2002 loss claim are remote and have no bearing on the existence or non-existence of damage to the Sony SLIM-HD or whether Federal breached its contractual duty to cover ADS’ 2005 loss.
*5 As previously stated, a discovery request is relevant unless it is clear that the information sought can have no possible bearing on the subject matter of the action. See Mead Corp., 145 F.R.D. at 522. Any documents concerning inspections Federal performed of the ADS facility and its equipment after the installation of the Sony SLIM-HD is relevant to whether Federal had knowledge of the various conditions and risks prior to the loss. More specifically, Federal’s knowledge of ADS’ facility and equipment is relevant to the presence of hyrdrochloric acid in the Sony machine subsequent to the power outages and corrosion. Federal claims that any inspections it may have performed are irrelevant to the issue of whether ADS sustained physical loss or damage in 2005. The Court disagrees. If Federal knew of any damages or defects in the ADS facility or the Sony machine prior to the 2005 loss, such information is relevant to the issue of direct physical damage, which is a necessary component for coverage by Federal and a disputed issue by the parties in this case. Therefore, the Court holds that ADS is entitled to all files, notes, and reports maintained by Federal’s Loss Control Department with respect to the ADS premises.
At the August 1, 2007, hearing the Court ordered Defendant’s to produce the documents Federal had withheld or redacted based on the attorney-client privilege for in camera
review. As Federal correctly points out, Federal Rule of Evidence 501, claims of privilege are to be determined by state law when the case turns on state law issues. Minnesota has codified the scope of privilege in Minn. Stat. § 595.02.
In Kobluk v. University of Minnesota, 574 N.W.2d 436, 440 (Minn. 1998), the Court followed Wigmore’s definition of privilege as constituting the full scope of the privilege in Minnesota:
This court has described the attorney-client privilege by reference to is statutory formulation [Minn. Stat. § 595.02], as well as Wigmore’s classic explanation:
(1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instances permanently protected (7) from disclosure by himself or by the legal adviser, (8) except the protection be waived.
8 John Henry Wigmore, Evidence § 2292, at 554 (McNaughton rev. 1961).
The majority of cases that ADS’ cites stand for the proposition that Federal is required to produce the privileged documents based on work product doctrine. However, Federal never asserted work product as a basis for withholding documents and the Court agrees that none of the documents withheld by Federal would fall under the work product privilege. In any event, the attorney-client privilege does not extend to fee information including “the identity of the client, the amount of the fee, the identification of payment by case file name, and the general purpose of the work performed.” See Brennan v. Western Nat’l Mut. Ins. Co., 199 F.R.D. 660, 662 (D.S.D. 2001). On the other hand, billing statements “which also reveal the motive of the client in seeking representation, litigation strategy, or the specific nature of the services performed, such as researching particular areas of law, fall within the privilege.” Id. Upon in camera
review of the documents withheld and redacted by Federal, the Court holds that Log #3 would fall under the former fee information category thereby constituting non-privileged information subject to disclosure. The information in the fee letter does nothing more than show client identity, the acceptance of representation, the type of fee arrangement between Chubb & Sons (a division of Federal) and Cozen O’Connor should ADS have a valid loss claim, and Chubb’s general responsibility for all “reasonable and authorized expenses incurred”. The Court also concludes that Federal’s claims of attorney-client privilege for all other documents
meets the standards of Minn. Stat. § 595.02. Furthermore, there is no evidence of waiver of that privilege by Federal. Therefore, Plaintiff’s motion is denied in part.
*6 ADS also seeks production of information about reserves withheld by Federal as irrelevant.
ADS claims the reserve information may identify the merits Federal has associated with this case, as well as provide ADS with insight into the value Federal places on each of those merits. Nevertheless, this case is a first-party insurance claim where coverage is at issue, not a third-party claim where a duty to defend is at issue.
In Am. Prot. Ins. Co. v. Helm Concentrates, Inc., 140 F.R.D. 448, 450 (E.D. Cal. 1991), the court distinguished third-party liability actions from first-party property actions and held that reserve information was irrelevant in a first-party case because the issue is whether the loss is covered. Id. (stating that “[in first-party insurance cases], the policy either provides coverage or does not...[p]otential liability or insured estimates [i.e. reserves] as to its potential liability is marginally relevant at best.”). The Court agrees with Federal when it states, “Although the existence of reserves may show a subjective belief or intention as to the ultimate outcome, it is not relevant to the underlying issue of the case, that being whether coverage existed.” See Mem. 8 [Docket No. 75]. Also, because insurance reserves are merely estimates of possible liability with “tenuous relevance”,
the Court finds that ADS’ request for reserve information is not reasonably calculated to lead to the discovery of admissible evidence and ADS’ request is thereby denied.
During the May 1, 2007, deposition of Steve Mortenson, Federal’s claim adjuster, Federal’s counsel directed Mr. Mortenson not to answer questions posed to him concerning the documents he reviewed in preparation for his deposition. See Ex. E [Docket No. 70]. Defendant’s counsel objected on the ground that there was Eighth Circuit case law justifying their instruction and further required the person asking questions to ask about specific documents and whether a specific document was shown or reviewed by the deponent. Id.
In any event, Fed. R. Evid. 612 states in pertinent part that if, before testifying, “a witness uses a writing to refresh memory for the purpose of testifying..., [and] if the court in its discretion determines it is necessary in the interests of justice, [then] an adverse party is entitled to have the writing produced...to inspect it, to cross-examine the witness thereon, and to introduce in evidence those portions which relate to the testimony of the witness.”
If the witness did not rely on the writing to refresh his or her memory, Rule 612 confers no rights on the adverse party. See United States v. Sheffield, 55 F.3d 341, 343 (8th Cir. 1995). Therefore, the Court hereby orders that Mr. Mortenson be redeposed in accordance with Rule 612. If Mr. Mortenson relies on any writing to refresh his memory for the deposition, Federal shall produce to ADS the writings Mr. Mortenson relied upon detailed by Bates Number. Moreover, Mr. Mortenson’s second deposition shall not count towards ADS’ limit of 10 depositions pursuant to the Pretrial Scheduling Order [Docket No. 32].
When asked the identity of the person responsible for locating non-electronic documents, Mr. Lagotte could not identify a person. Id. at p. 27:20-25. When asked if he could describe the procedure used to locate non-electronic documents responsive to document request number 1, Mr. Lagotte responded that he had asked three other ADS employees-Hardwick, Bartsch, and Schoener-to-obtain the documents for that request, but he did not know what procedures they used or whether they actually searched for the documents. Id. at p. 28:10-29:7.
After Mr. Giandinoto left Chemir, ADS designated Dr. Alan Sapia as its new chemical expert. See Mem. 4 [Docket No. 82].
According to Federal, the employee to whom ADS refers as having handled both the 2002 and 2005 loss only handled the 2005 loss for a little over a month, after which the claim was transferred to a more senior adjuster who continues to handle the claim today. See Mem. 3 [Docket No. 75].
“An attorney cannot, without the consent of the attorney’s client, be examined as to any communication made by the client to the attorney or the attorney’s advice given thereon in the course of professional duty..., without the client’s consent.” Minn. Stat. § 595.02, subdiv. 1(b).
In this case, Federal hired two law firms: (1) Cozen & O’Conner to provide legal advice to Federal as to possible subrogation against Xcel Energy in the event Federal paid ADS’ claimed loss, and (2) Robins, Kaplan, Miller & Ciresi to provide legal advice to Federal as to the claim made by ADS.
The attorney-client privileged documents are: Log #1-2, 4, 6-11, 13-18, 25, and 27-35.
The Court, however, orders that Federal make several changes to the Amended Privilege Log to correctly reflect the withheld or redacted documents. With respect to Log #7, Kenneth Feit shall be added as a “Recipient”. With respect to Log #9, Scott Johnson shall be added as a “Recipient”. With respect to Log #13, Steve Mortenson shall be the “Author”, David Bland shall be the “Recipient”, and the “Subject Matter” shall include “Communication with attorneys re: coverage issues”. With respect to Log #30, Steven Mortenson shall be added as a “Author” and the “Subject Matter” shall include “Communication with attorneys re: information provided to counsel”. Finally, with respect to Log #34, Steve Mortenson shall be the “Author” and Joel Lyons shall be the “Receipient”.
A reserve essentially reflects an assessment of the value of a claim taking into consideration the likelihood of an average judgment. See Indep. PetroChemical Corp. v. Aetna Cas. & Sur. Co., 117 F.R.D. 283, 288 (D.D.C. 1986). In essence, reserves are general estimates of potential liability which may not involve a detailed factual and legal basis. Id.
“First-party insurance” or “indemnity insurance” identifies a policy which provides indemnity against loss for insurance “to the insured’s own property or person.” BLACK’S LAW DICTIONARY 804 (7th ed. 1999). “Third-party insurance” or “liability insurance” refers to “insurance that covers suits against the insured for such damages as injury or death to other drivers or passengers, property damages, and the like.” Id. at 806.
Indep. PetroChemical Corp., 117 F.R.D. at 288.
Federal never supplied ADS with the Eighth Circuit precedent supporting their position- even after ADS requested the citation on several occasions. See Exs. F, H, I [Docket No. 70].
Rule 612 is applicable to depositions. See Sauer v. Burlington Northern Railroad Co., 169 F.R.D. 120, 122 n. 2 (D. Minn. 1996).
End of Document.