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Schultz v. Sentinel Insurance Co., Ltd.

United States District Court, D. South Dakota, Southern Division

June 3, 2016





         This matter is before the court on plaintiff Lucille Schultz’s complaint pursuant to the court’s diversity jurisdiction, 28 U.S.C. § 1332. See Docket No. 1. Ms. Schultz has filed a motion seeking an order from the court compelling defendant Sentinel Insurance Company, Ltd. (“Sentinel") to provide certain discovery. See Docket No. 18. Sentinel resists the motion. See Docket No. 25. The presiding district court, the Honorable Lawrence L. Piersol, referred Ms. Schultz’s motion to this magistrate judge for decision.


         The following facts are largely taken from Ms. Schultz’s complaint and the parties’ briefs on the instant motion to compel. No indication by the court is given as to the veracity of these allegations. They are described merely to provide context in setting forth the claims asserted.

         A damaging hail storm hit Sioux Falls, South Dakota, in June, 2014. Ms. Schultz submitted a claim to Sentinel under her homeowner’s insurance policy for damage to her roof from that storm. Sentinel initially approved the claim, paying Ms. Schultz around $213 for spot repairs after an inspection by its adjustor, Tom Seversen, verified damage to the roof. Later, Ms. Schultz provided Sentinel with a report from her own inspector asserting spot repairs were ineffective and her entire roof needed to be repaired at a cost of $17, 726. Thereafter, Sentinel denied her claim.

         After receiving Ms. Schultz’s inspector’s report, Sentinel hired Stanley Johnson to conduct another inspection of Ms. Schultz’s roof on Sentinel’s behalf. Mr. Johnson’s report did not address the issue raised by Ms. Schultz’s inspector that spot repairs would not be effective in fixing her roof. In its initial disclosures required by Federal Rule of Civil Procedure 26, Sentinel identified Mike Martin and Jerry Vander Plaats, in addition to Severson and Johnson, as estimators or adjusters having relevant knowledge of the parties’ claims or defenses in this case. See Docket No. 20-6 at p. 3.

         Ms. Schultz filed a complaint in this court against Sentinel alleging breach of contract, bad faith, punitive damages, and vexatious refusal to pay. See Docket No. 1. The parties in this action stipulated to the entry of a protective order early on. See Docket No. 17. The order applies to “confidential documents or information" and defines that phrase to include proprietary business information including financial information, training materials, contracts and agreements, non-public sensitive material, testimony given at a deposition, and personal financial, health, medical, psychological, psychiatric, rehabilitation or counseling records of parties and non-parties. Id. at pp. 1-2, 4, ¶¶ 1, 7. The order provides that a party may designate documents, testimony or information as confidential. Id. at p. 2, 4, ¶¶ 2, 7.

         Once information is designated as “confidential, " the receiving person may not copy or reproduce it in any form and may not disclose the content or substance of the information except to counsel for plaintiff or defendant and their regular employees in the preparation of the case for trial, parties to the action (including corporate representatives), expert and fact witnesses who may be called to give depositions or testimony, and the court and court staff. Id. at pp. 2-3, ¶ 4. Persons to whom “confidential" information is disclosed are forbidden to further disclose the information or to make any other use of the information except as provided in paragraph 4. Id. at p. 3, ¶ 5. If “confidential" documents are filed with the court, they must be filed under seal. Id. at p. 4, ¶ 8.

         When permitted disclosure of “confidential" information is being made to parties to the litigation, regular employees or agents of counsel for the parties, or to fact or expert witnesses, counsel must inform the person to whom the disclosure is being made that they are prohibited from disclosing the information to any other person. Id. at pp. 3-4, ¶ 6. Further, counsel making the disclosure must provide the person to whom the disclosure is made with a copy of the protective order and tell the person that violation of the order will subject the person to court sanctions. Id. at p. 4. The protective order does not affect admissibility of a “confidential" document at trial. Id. at pp. 5-6, ¶ 12.

         Information subject to the attorney-client privilege or the work-product doctrine is subject to special retraction provisions. Id. at pp. 4-5, ¶ 9. If a privileged document is inadvertently produced, the party may, if they act quickly enough, retract the document. Id. If this occurs, the parties essentially agree to act as if the information was never produced. Id.

         “Confidential" documents must be destroyed at the conclusion of the litigation or returned to the party from whom they emanated. Id. at p. 5, ¶ 10. The court retains jurisdiction post-termination of the action to resolve disputes regarding the provisions of the protective order. Id. at p. 5, ¶ 11.

         If someone disagrees with a “confidential" designation, that person may notify the designator of the objection. Id. at p. 2, ¶ 3. The parties then agree to make a good-faith effort to resolve their disagreement about the confidentiality of the information. Id. If the disagreement is not resolved, the matter is submitted to the court via motion. Id. The person who designated the information as “confidential" need not disclose the information until the court rules on whether it is “confidential." Id.


         A. Meet and Confer Requirement

         Before a party may make a motion to compel another party to make discovery or disclosure, the movant must certify that they have in good faith conferred or attempted to confer with the opposing party from whom the discovery or disclosure is sought in an attempt to resolve the disagreement without court intervention. See Fed.R.Civ.P. 37(a)(1). Ms. Schultz alleges that she has complied with this requirement. Sentinel does not dispute that assertion, though it insinuates that Ms. Schultz was unreasonable in the dispute resolution meetings. The court considers Ms. Schultz’s motion on its merits.

         B. Standards Applicable to Discovery

         Federal Rule of Civil Procedure 26(b)(1) sets forth the scope of discovery in civil cases pending in federal court:

Unless otherwise limited by court order, the scope of discovery is as follows: Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within the scope of discovery need not be admissible in evidence to be discoverable.

See Fed.R.Civ.P. 26(b)(1). Rule 26 contains specific limitations relative to electronic discovery and other objections to providing discovery:

(B) Specific Limitations on Electronically Stored Information. A party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost. On motion to compel discovery or for a protective order, the party from whom discovery is sought must show that the information is not reasonably accessible because of undue burden or cost. If that showing is made, the court may nonetheless order discovery from such sources if the requesting party shows good cause, considering the limitations of Rule 26(b)(2)(C). The court may specify the conditions for the discovery.
(C) When Required. On motion or on its own, the court must limit the frequency or extent of discovery otherwise allowed by these rules or by local rule if it determines that:
(i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive;
(ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; or
(iii) the proposed discovery is outside the scope permitted by Rule 26(b)(1).

See Fed.R.Civ.P. 26(b)(2)(B) and (C).

         A party claiming a privilege as to requested discovery has the burden of proving the basis for the application of the privilege:

When a party withholds information otherwise discoverable by claiming that the information is privileged or subject to protection as trial-preparation material, the party must:
(i) expressly make the claim; and
(ii) describe the nature of the documents, communications, or tangible things not produced or disclosedBand do so in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the claim.

See Fed.R.Civ.P. 26(b)(5)(A).

         If a party fails to respond to a proper request for discovery, or if an evasive or incomplete response is made, the party requesting the discovery is entitled to move for a motion compelling disclosure after having made a good faith effort to resolve the dispute by conferring first with the other party. See Fed. R. Civ. P. 37(a).

         The scope of discovery under Rule 26(b) is extremely broad. See 8 Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure § 2007, 36-37 (1970) (hereinafter "Wright & Miller"). The reason for the broad scope of discovery is that "[m]utual knowledge of all the relevant facts gathered by both parties is essential to proper litigation. To that end, either party may compel the other to disgorge whatever facts he has in his possession." 8 Wright & Miller, § 2007, 39 (quoting Hickman v. Taylor, 329 U.S. 495, 507-08 (1947)). The Federal Rules distinguish between discoverability and admissibility of evidence. Fed.R.Civ.P. 26(b)(1), 32, and 33(a)(2) & (c). Therefore, the rules of evidence assume the task of keeping out incompetent, unreliable, or prejudicial evidence at trial. These considerations are not inherent barriers to discovery, however.

         “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, the defining question is whether it is within the scope of discovery. See Fed.R.Civ.P. 26(b)(1). Additionally, the court may limit the frequency and extent of discovery. See Fed.R.Civ.P. 26(b)(2); 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.).

         Rule 34 of the Federal Rules of Civil Procedure governs requests for the production of documents and provides that a party may ask another party to permit copying of documents “in the responding party's possession, custody, or control." See Fed.R.Civ.P. 34(a)(1). The concept of documents in a party's “possession" or “custody" is clear enough, but the concept of documents in a party's “control" is not obvious upon a reading of the rule.

         The rule that has developed is that if a party “has the legal right to obtain the document, " then the document is within that party's “control" and, thus, subject to production under Rule 34. See 8A Charles A. Wright, Arthur R. Miller, & Richard L. Marcus, Fed. Practice & Procedure, §2210, at 397 (2d ed. 1994) (hereinafter “Fed. Practice & Procedure"). “Because a client has the right, and the ready ability, to obtain copies of documents gathered or created by its attorneys pursuant to their representation of that client, such documents are clearly within the client's control." American Soc. for the Prevention of Cruelty to Animals v. Ringling Bros. & Barnum & Bailey Circus, 233 F.R.D. 209, 212 (D.D.C. 2006) (citing Poole ex rel. Elliott v. Textron, Inc., 192 F.R.D. 494, 501 (D. Md. 2000); and Poppino v. Jones Store Co., 1 F.R.D. 215, 219 (W.D. Mo. 1940)).

         Merely because documents gathered by an attorney are subject to the client's control does not, however, automatically mean they are discoverable. The work product doctrine and the attorney-client privilege still apply and may be asserted in opposition to discovery, along with the appropriate privilege log. Ringling Bros., 233 F.R.D. at 211-213.

         C. Substantive Law Applicable to Ms. ...

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