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Lamar Advertising of South Dakota, Inc. v. Kay

March 1, 2010

LAMAR ADVERTISING OF SOUTH DAKOTA, INC., A SOUTH DAKOTA CORPORATION, AND CODY P. BURTON, PLAINTIFFS,
v.
RICHARD W. KAY, DEFENDANT.



The opinion of the court was delivered by: Veronica L. Duffy United States Magistrate Judge

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO COMPEL

INTRODUCTION

The original plaintiffs in this action, Richard and Deana Kay, brought the original lawsuit in December, 2007, alleging negligence against original defendants Lamar Advertising of South Dakota, Inc. ("Lamar") and Cody Burton, and seeking damages for injuries arising from a motor vehicle collision. Docket No. 1. Jurisdiction was founded on diversity of citizenship among the parties and an amount in controversy of at least $75,000. See 28 U.S.C. § 1332. The Kays settled their claim against Lamar and Mr. Burton in October, 2009. Throughout the proceedings and settlement, Lamar indicated its belief that Mr. Kay was contributorily negligent, as well as its intent to seek contribution from Mr. Kay as to the settlement paid to Mrs. Kay.

On December 15, 2009, Mr. Kay filed a motion requesting a determination by the district court that the settlement allocation paid by Lamar to Mrs. Kay was unreasonable. Docket No. 143. On or about December 10, 2009, Mr. Kay served plaintiffs with various discovery requests regarding the settlement and allocation. Docket No. 181. In January, 2010, plaintiffs served responses to Kay's requests. Id. Plaintiffs' responses denied knowing what "settlement negotiations" meant, asserted that the information sought was available through Kay's former counsel, and objected based on the attorney-client and work product privileges. Thereafter defendant Kay filed this motion to compel production, pursuant to Federal Rule of Civil Procedure 37 and Local Rule 37.1. The district court, the Honorable Karen E. Schreier, Chief Judge, referred the motion to this magistrate judge for resolution pursuant to 28 U.S.C. § 636(b)(1)(A).

FACTS

The facts, insofar as they are pertinent to the present motion, are as follows. Mr. and Mrs. Kay were injured on July 19, 2006, when a boom truck driven by Cody Burton, an employee acting within the scope of his employment with Lamar, collided with the Kays' motorcycle. The Kays filed suit against Lamar and Mr. Burton in December, 2007. Docket No. 1. Lamar and Burton filed a counterclaim against Mr. Kay in March, 2008. Docket No. 29. The Kays settled their claim against Lamar and Burton in October, 2009, but Lamar and Burton advised their intent to seek contribution from Mr. Kay for payment made to Mrs. Kay for her injuries. The Kays did not inform counsel representing Mr. Kay on Lamar's counterclaim against him, Attorney Heather Lammers Bogard, as to the details of the settlement allocation between Mr. and Mrs. Kay. Attorney Eric Neiman, who represented the Kays through the date of settlement, withdrew from representation on December 2, 2009. Docket No. 142. The district court realigned the parties when Lamar and Mr. Burton sought contribution from Mr. Kay for payment made to Mrs. Kay in settlement for her injuries. Accordingly, the original plaintiff Mr. Kay is now the defendant in the action, and the original defendants are now the named plaintiffs. See Docket No. 146.

Following the settlement, Mr. Kay's counsel on the contribution claim filed a motion for a determination that the settlement allocation was unreasonable. Docket No. 143. In support of that motion, Mr. Kay asserted that the total settlement among the original parties was $1.5 million, and that Mrs. Kay received an allocation of $525,000, despite evidence showing that her actual medical bills totaled approximately $126,500.*fn1 Id. Mr. Kay's medical bills, however, totaled $512,000, and his claimed loss of income and lost stock options were in excess of $6 million. Id. Mrs. Kay asserted no claim for lost earning capacity. Id. The plaintiffs resisted Mr. Kay's motion for a determination that the settlement allocation was unreasonable. Docket No. 148.

Mr. Kay served various discovery requests on the plaintiffs in December, 2009. The plaintiffs objected to the requests and supplied only limited responses on January 19, 2010. Docket No. 198. Mr. Kay thereafter requested that plaintiffs' counsel revisit the discovery requests to see whether any of plaintiffs' answers could be supplemented. Plaintiffs continued to object on grounds that the information sought was privileged and otherwise readily discoverable through former counsel, but nonetheless provided supplemental discovery responses on or near February 1, 2010. Docket No. 196. Despite admitting that they have provided additional discovery beyond the district court's discovery deadline of December 5, 2008, plaintiffs now assert an objection to Mr. Kay's motion to compel on grounds that the district court's deadline for discovery has passed. Id.

Mr. Kay asserts that plaintiffs' initial answers to his requests, as well as their supplemental responses, are inadequate. Mr. Kay also notes that although the plaintiffs objected on grounds of privilege, they failed to provide an appropriate privilege log pursuant to Vaughn v. Rosen*fn2 , and did not describe the nature of any of the withheld information pursuant to Federal Rule 26(b)(5)(A)(ii) so that he could assess the plaintiffs' claims. Mr. Kay argues that discovery as to the approximation of the Kays' total recovery, Lamar's proportionate liability, and other factors as to the reasonableness of the settlement goes to the heart of plaintiffs' claim that they are entitled to contribution from Mr. Kay, and that any information relating to the settlement allocation and settlement negotiations is discoverable. Docket No. 180, at 5.

Plaintiffs resist Mr. Kay's motion to compel on various grounds, including that the information sought is either subject to privilege, is readily obtainable through former counsel, or does not exist. Docket No. 201.

DISCUSSION

A. Whether the Information Sought is Discoverable

1. Scope of Discovery Under Rule 26 Federal Rule of Civil Procedure 26(b)(1) sets forth the standard governing the scope of discovery in civil cases:

(1) Scope in General. Unless otherwise limited by court order, the scope of discovery is as follows: Parties may obtain discovery regarding any non-privileged matter that is relevant to any party's claim or defense--including the existence, description, nature, custody, condition, and location of any documents or other tangible things and the identity and location of persons who know of any discoverable matter. For good cause, the court may order discovery of any matter relevant to the subject matter involved in the action. Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence. All discovery is subject to the limitations imposed by Rule 26(b)(2)(C).

See Fed. R. Civ. P. 26(b)(1).

The advisory committee's note to the 2000 amendments to Rule 26(b)(1) provide guidance on how courts should define the scope of discovery in a particular case:

Under the amended provisions, if there is an objection that discovery goes beyond material relevant to the parties' claims or defenses, the court would become involved to determine whether the discovery is relevant to the claims or defenses and, if not, whether good cause exists for authorizing it so long as it is relevant to the subject matter of the action. The good-cause standard warranting broader discovery is meant to be flexible.

The Committee intends that the parties and the court focus on the actual claims and defenses involved in the action. The dividing line between information relevant to the claims and defenses and that relevant only to the subject matter of the action cannot be defined with precision. A variety of types of information not directly pertinent to the incident in suit could be relevant to the claims or defenses raised in a given action. For example, other incidents of the same type, or involving the same product, could be properly discoverable under the revised standard. ... In each case, the determination whether such information is discoverable because it is relevant to the claims or defenses depends on the circumstances of the pending action.

The rule change signals to the court that it has the authority to confine discovery to the claims and defenses asserted in the pleadings, and signals to the parties that they have no entitlement to discovery to develop new claims or defenses that are not already identified in the pleadings. ... When judicial intervention is invoked, the actual scope of discovery should be determined according to the reasonable needs of the action. The court may permit broader discovery in a particular case depending on the circumstances of the case, the nature of the claims and defenses, and the scope of the discovery requested.

See Fed. R. Civ. P. 26(b)(1) advisory committee's note.

The same advisory committee's note further clarifies that information is discoverable only if it is relevant to the claims or defenses of the case or, upon a showing of good cause, to the subject matter of the case. Id. "Relevancy is to be broadly construed for discovery issues and is not limited to the precise issues set out in the pleadings. Relevancy . . . encompass[es] 'any matter that could bear on, or that reasonably could lead to other matter that could bear on, any issue that is or may be in the case.' " E.E.O.C. v. Woodmen of the World Life Ins. Society, 2007 WL 1217919 at *1 (D. Neb. March 15, 2007) (quoting Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978)). The party seeking discovery must make a "threshold showing of relevance before production of information, which does not reasonably bear on the issues in the case, is required." Id. (citing Hofer v. Mack Trucks, Inc., 981 F.2d 377, 380 (8th Cir. 1993)). "Mere speculation that information might be useful will not suffice; litigants seeking to compel discovery must describe with a reasonable degree of specificity, the information they hope to obtain and its importance to their case." Id. (citing Cervantes v. Time, Inc., 464 F.2d 986, 994 (8th Cir. 1972)).

Discoverable information itself need not be admissible at trial; rather, "discovery of such material is permitted if reasonably calculated to lead to the discovery of admissible evidence." See Fed. R. Civ. P. 26(b)(1) advisory committee's note. Additionally, Rule 26(b)(2) requires the court to limit discovery if it determines, for example, that the discovery sought is unreasonably cumulative or duplicative or that "the burden or expense of the proposed discovery outweighs its likely benefit..." See Fed. R. Civ. P. 26(b)(2)(C); see also Roberts v. Shawnee Mission Ford, Inc., 352 F.3d 358, 361 (8th Cir. 2003) ("The rule vests the district court with discretion to limit discovery if it determines, inter alia, the burden or expense of the proposed discovery outweighs its likely benefit."); Continental Illinois Nat'l Bank & Trust Co. of Chicago v. Caton, 136 F.R.D. 682, 684-85 (D.Kan. 1991) ("All discovery requests are a burden on the party who must respond thereto. Unless the task of producing or answering is unusual, undue or extraordinary, the general rule requires the entity answering or producing the documents to bear that burden.").

2. The Right of Contribution and Reasonableness of Settlement

In this case, plaintiffs seek contribution from the defendant, Mr. Kay, following settlement with him and his wife. South Dakota state substantive law governs the underlying diversity action. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). Under South Dakota law, contribution is available to a settling tortfeasor. SDCL ยง 15-8-12. South Dakota statutory law does not specifically provide that in order to recover contribution from a joint tortfeasor with whom the defendant has settled, a defendant must prove that the settlement reached was reasonable, but the South Dakota Supreme Court has acknowledged that "[i]n contribution actions, 'a compromiser must sustain the burden of proof, not only as to the compromiser's own liability to the original plaintiff, but also as tot he amount of damages and the reasonableness of ...


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