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Leichtnam v. American Zurich Ins. Co.

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

September 30, 2018





         This is a bad faith diversity action brought by Plaintiff, Joseph Leichtnam, against Defendants, American Zurich Ins. Co., Zurich American Ins. Co., and Zurich North American (hereinafter collectively referred to as “Zurich”). (Doc. 1). Pending before the court is a motion filed by Leichtnam to compel Zurich to provide certain discovery. (Doc. 38). The presiding district judge, the Honorable Jeffrey L. Viken, Chief Judge, referred this motion to this magistrate judge for a decision. (Doc. 37).


         The facts as pertinent to the pending motion are as follows. Leichtnam sustained a work related injury to his back when he fell off a forklift on August 29, 2007. Leichtnam incurred medical expenses as a result of his work related injuries. In May of 2009, Zurich arranged for Leichtnam to see Dr. Farnham who opined that the Plaintiff's fall from the forklift did not cause anything other than some “post concussion headaches early on.” (Doc. 1 at p. 2). Thereafter, Zurich ceased payments for Leichtnam's medical treatment. Leichtnam filed a petition with the Department of Labor. Leichtnam and Zurich negotiated a settlement of his worker's compensation claim.

         Leichtnam thereafter initialed this civil diversity action against Zurich alleging bad faith. Leichtnam has included a request for punitive damages. Zurich denies that it acted in bad faith.


         I. Whether Plaintiff Met and Conferred With Defendant

          “On notice to other parties and all affected persons, a party may move for an order compelling disclosure or discovery. The motion must include a certification that the movant has in good faith conferred or attempted to confer with the person or party failing to make disclosure or discovery in an effort to obtain it without court action.” FED. R. CIV. P. 37(a)(1).

         The moving party's motion may contain the equivalent of this certification in which the attorney “confirms that it has attempted in good faith to resolve this discovery dispute [with opposing counsel]” prior to filing the motion. See Highmark, Inc. v. Northwest Pipe Co., No. CIV 10-5089-JLV, 2012 WL 997007, *4 (D.S.D. Mar. 23, 2012). Leichtnam's motion contains a statement that it has met and conferred with opposing counsel. (Doc. 31).

         “The purpose of the meet and confer requirement is to force litigants to attempt to resolve, or at least narrow, the disputed issues to prevent the unnecessary waste of time and effort on any given motion.” Robinson v. Napolitano, No. CIV. 08-4084, 2009 WL 1586959, *3 (D.S.D. June 4 2009) (internal quotations omitted) (citing Alexander v. Federal Bureau of Investigation, 186 F.R.D. 197, 199 (D.D.C. 1999)).

         The parties' briefing and exhibits set forth the actions taken by the parties satisfies met the meet and confer requirements. The court will accept this description as equivalent to the required certification and finds that Leichtnam has satisfied its duty to confer in good faith with counsel for Zurich to try to work out these differences before filing the instant motion. Therefore, the court will consider the motion on its merits.

         II. Scope of discovery

          The scope of discovery for civil cases is set forth in Federal Rule of Civil Procedure 26(b)(1) which provides as follows:

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.

         FED. R. CIV. P. 26(b)(1).

         “A party seeking discovery is merely required to make a threshold showing of relevance, which is more relaxed than the showing required for relevance in the context of admissibility.” Klynsma v. Hydradyne, LLC, No. CIV. 13-5016-JLV, 2015 WL 5773703, *16 (D.S.D. Sept. 30, 2015) (citing Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 350-51 (1978)). The party resisting discovery must show specifically how each request is irrelevant or unduly burdensome. Klynsma, 2015 WL 5773703 at *16 (citing St Paul Reinsurance Co., 198 F.R.D. at 512).

         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, 67 S.Ct. 385, 392, 91 L.Ed.2d 451 (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.”).

         Because he is seeking punitive damages, Mr. Leichtnam must show that Zurich acted with malice, actual or implied. See Bertelsen v. Allstate Ins. Co., 2011 S.D. 13, ¶ 39, 796 N.W.2d 685, 698-99 (citing SDCL § 21-3-2). “Actual malice is a positive state of mind, evidenced by a positive desire and intention to injure one another, actuated by hatred or ill-will towards that person.” Id. at ¶ 40, 796 N.W.2d at 699 (quoting Biegler, 2001 S.D. 13, ¶ 45, 621 N.W.2d at 605). Implied malice can be inferred or imputed by law. Id. “Presumed malice may not ‘be motivated by hatred or ill-will but is present when a person acts willfully or wantonly to the injury of others.' “ Id . (quoting Biegler, 2001 S.D. 13, ¶ 45, 621 N.W.2d at 605). When a party seeks punitive damages, the jury must evaluate “(1) the degree of reprehensibility of the defendant's misconduct, (2) the disparity between the harm (or potential harm) suffered by the plaintiff and the punitive damages award, and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.” Roth v. Farner-Bocken Co., 2003 S.D. 80, ¶ 46, 667 N.W.2d 651, 665-66 (citing State Farm v. Campbell, 538 U.S. 408, 418 (2003)). The jury may consider evidence that the harm caused to a plaintiff was a company policy or practice. Id. at ¶ 65, 667 N.W.2d at 669. With these claims in mind, the court turns to the instant discovery dispute.

         III. Requests for Production

         A. Request for Production 2: Personnel files

         Plaintiff requests the entire personnel file for each person that handled or participated in his case in any way, as well as their supervisors and personnel in the chain of command. Plaintiff names fourteen specific individuals, as well as all of those individuals' supervisors and anyone else in the chain of command. Zurich provided personnel files of three of the named individuals- Jason Sattler, Kimberly Duncan, and Amy Mueller-and requests that the court limit the scope of plaintiff's request to only those individuals who had significant contact with his file. Zurich argues that nearly half of the individuals that plaintiff identifies only touched the file one or two times. Further, because those individuals had little to do with plaintiff's case, Zurich argues their files would not have any relevant information. Therefore, Zurich argues plaintiff's request is irrelevant and overbroad, and asks the court to limit the scope of the request to compel information only from individuals who had significant contact with plaintiff's file. In his reply, Leichtnam reiterates that he is entitled to anyone in the chain of command of upper level management.

         Well settled case law in this district establishes that personnel files in bad faith actions have routinely been found to be relevant and discoverable. Lyon v. Bankers Life & Cas. Co., CIV. 09-5070-JLV, 2011 WL 124629 at *8 (D.S.D. Jan.14, 2011)). “Personnel files may reveal an inappropriate reason or reasons for defendant's action with respect to plaintiff's claim or an ‘improper corporate culture.' ” Id. Furthermore, in cases where the insurance company tried to limit discovery to the claims handler and his or her immediate supervisor, that attempt has been rejected. See Nye v. Hartford Acc. & Indem. Co., 2013 WL 3107492 at *11-12, Civ. No. 12-5028 (D.S.D. June 18, 2013); Kirschenman v. Auto-Owners Ins., 280 F.R.D. 474, 482-83 (D.S.D.2012); Hill v. Auto Owners Ins. Co., No. 5:14-CV-05037-KES, 2015 WL 1280016, at *8 (D.S.D. Mar. 20, 2015). As was noted in Fair v. Royal & Sun Alliance, the evidence of institutional pressure that was brought to bear on an insurance company's claims handlers was not in the personnel file of the claims handler herself, nor was it in her immediate supervisor's file; rather, the entirely relevant evidence was found in the personnel file of the regional claims manager. Fair v. Royal & Sun Alliance, 278 F.R.D. 465, 474-76 (D.S.D.2012).

         Leichtnam has made his initial showing of relevance of the discovery request. The burden then shifts to defendant to show specifically how each interrogatory or request for production of document is not relevant or how each request is overly broad, burdensome, or oppressive. Zurich's position as outlined above fails to show irrelevance. Furthermore, the request is limited to the fourteen individual who accessed the file as well as those persons in the chain of command up to the Senior Vice-President of Claims. The court finds the scope to be reasonable in nature and not overly broad, burdensome, oppressive.

         The court grants Leichtnam's motion to compel as it relates to request for production number 2. However, the court authorizes defendant to redact any sensitive information from the documents produced such as ...

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