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Nicholes v. Combined Insurance Company of America

United States District Court, S.D. West Virginia, Beckley Division

February 28, 2018

LUCENDA NICHOLES, Plaintiff,
v.
COMBINED INSURANCE COMPANY OF AMERICA, Defendant.

          MEMORANDUM OPINION AND ORDER

          OMAR J. ABOULHOSN UNITED STATES MAGISTRATE JUDGE

         On February 23, 2018 came the parties, by counsel, all for hearing on Plaintiff's Motion to Compel Regarding Defendant's Supplemental Responses to the Fourth and Fifth Requests For Production of Documents.[1] (ECF No. 98) Appearing for Plaintiff were Christa Collins, Esq., pro hac vice, and Damon Ellis, Esq., and for Defendant, Sheryl Bey, Esq., pro hac vice, and John Meadows, Esq. After hearing the arguments of counsel, reviewing the pleadings filed in support of same, and having reviewed the pertinent legal authorities, the Court FINDS as follows:

         Background

         Plaintiff has instituted a class action complaint against Defendant alleging that the insurance company has engaged in “routine, systematic and deceptive practices” selling supplemental insurance policies that under law, provides no benefit its Medicaid customers. Plaintiff asserts claims under the West Virginia Unfair Trade Practices Act and the common law of rescission based on mutual mistake. Plaintiff has alleged that these sales practices have been an ingrained part of Defendant's “culture” for decades, which is evidenced by similar lawsuits that were filed in Alabama and Mississippi, resulting in Defendant's withdrawal from those states' insurance markets. Plaintiff has also alleged that Defendant has continued its deceptive sales practices overseas, specifically in Australia, which eventually garnered the attention of the Australian Securities and Investments Commission. Plaintiff alleges that after the conclusion of the investigation conducted by Australian authorities, Defendant turned over its Australian operations to an affiliate.

         In the matter immediately before the Court, Plaintiff seeks information related not only to Defendant's electronically stored information (“ESI”) that presumably contains discovery pertaining to insurance sales to Medicaid recipients in West Virginia, but also information regarding substantially similar or identical insurance business practices in Alabama, Mississippi, other states, as well as in Australia. One aspect of the recent breakdown in cooperation between the parties with regard to the discovery issues at hand concern which statute of limitations applies, and therefore, which applicable statute of limitation narrows the scope of Plaintiff's Requests.

         During the informal conference held on February 6, 2018, the undersigned attempted to explore some resolution between the parties of the issues raised in Plaintiff's Motion. Plaintiff represented that until recently, the parties' discovery customarily included documentation and information that predated the filing of Plaintiff's lawsuit by four years. Further, Plaintiff asserted that previously produced discovery revealed that Defendant changed its own policies over the years with regard to insurance sales to Medicaid recipients, an issue that goes to the heart of her case. Additionally, Plaintiff argued that since her claims arise in contract, the statute of limitations would be ten years, pursuant to West Virginian law. Defendant countered that Plaintiff's claims are based on violations of the West Virginia Unfair Trade Practices Act, for which the statute of limitations is one year, and Plaintiff's other claims are based on violations of West Virginia common law, rescission of a contract based on fraud or mutual mistake, for which the statute of limitations is two years. Regardless of which statute of limitations applies, Defendant argued that Plaintiff's Requests go well beyond the statute of limitations addressed by the parties, and are therefore temporally and geographically overbroad and disproportionate to the needs of this case.

         Relevant Law

         Pursuant to Rule 26(b)(2)(C) of the Federal Rules of Civil Procedure, a court is required, on motion or on its own, to limit the frequency and extent of discovery, when:

(1) the discovery sought is unreasonably cumulative or duplicative;
(2) the discovery can be obtained from some other source that is more convenient, less burdensome, or less expensive;
(3) the party seeking the discovery has already had ample opportunity to collect the requested information by discovery in the action; or
(4) the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues.

         Under Rule 26, “[p]arties 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 . . . .” Fed.R.Civ.P. 26(b)(1). Thus, “[r]elevance is . . . the foundation for any request for production, regardless of the individual to whom a request is made.” Cook v. Howard, 484 Fed.Appx. 802, 812 (4th Cir. 2012).

         This Rule “cautions that all permissible discovery must be measured against the yardstick of proportionality.” Lynn v. Monarch Recovery Management, Inc., 285 F.R.D. 350, 355 (D. Md. 2012) (quoting Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497, 523 (D. Md. 2010)).

         “When a litigant seeks personal and/or personnel information concerning nonlitigant employees or former employees from the litigant's former employer, production of the requested information may invade the nonlitigant employees' or former employees' right to privacy.” State ex rel. Westbrook Health Servs. v. Hill, 209 W.Va. 668, 647, 550 S.E.2d 646, 652 (2001). To insure that discovery is sufficient, yet reasonable, district courts have “substantial latitude to fashion protective orders.” Seattle Times Co. v. Rhinehart, 467 U.S. 20, 36, 104 S.Ct. 2199, 81 L.Ed.2d 17 (1984).

         In Paull Associates Realty, LLC v. Lexington Insurance Company, 2014 WL 12596397, at *4 (N.D. W.Va. Jan. 9, 2014), the court endorsed situations where a plaintiff “has a ‘colorable basis' for suspecting that Defendant is withholding responsive materials.” The court ordered the defendant therein to re-answer certain requests for production, because the defendant previously classified certain responses as confidential, yet produced discovery that was “non-objectionable” notwithstanding the objection.

         “[I]t remains true that ‘relevancy in discovery is broader than relevancy for purposes of admissibility at trial.' ” In re: American Medical Systems, Inc. Pelvic Repair Systems Product Liability Litigation, Nos. 2:14-cv-11870, 2:14-cv-28142, 2016 WL 4411506, at *2 (S.D. W.Va. Aug. 17, 2016) (M. J. Eifert) (quoting Amick v. Ohio Power Co., No. 2:13-cv-6593, 2013 WL 6670238, at *1 (S.D. W.Va. Dec. 18, 2013)).

         Plaintiff's Motion to Compel Regarding Defendant's Supplemental Responses to the Fourth Set of Requests for Production of Documents [2]

         Request No. 1:

Documents and information sufficient to show the identity of Combined's in-field agent trainers in the four years preceding this lawsuit to the present.

         Plaintiff contends that this information relates to Defendant's training and business practices concerning sales to Medicaid recipients and is relevant with respect to her claim of Defendant's deceptive and inequitable conduct, as well as to Defendant's knowledge of its training and business practices being harmful to Medicaid recipients. Plaintiff further contends that this information should not be limited to two years, and avers that prior to the new year, Defendant had customarily disclosed discovery that predated this lawsuit by four years. Simply stated, Plaintiff wants the identities of Defendant's in-field agent trainers to confirm (or not) Defendant's practices of selling insurance products to Medicaid recipients.

         Defendant argues that not only is this request invasive to the privacy interests of its non-litigant employees, but also it is too broad temporally and geographically, as it concerns at minimum nationwide information. Moreover, Defendant asserts that it already disclosed the name of the only West Virginia in-field agent trainer: Rex Metrick; he has been the in-field agent trainer in West Virginia since 2012. Additionally, Defendant asserts that this Request is vague, and should be limited to two years because Plaintiff's claims do not satisfy the applicable statute of limitations.

         The undersigned would agree with Defendant that on its face, this Request is overly broad insofar as it seeks information as to the identities of in-field agent trainers nationwide, and the civil action herein pertains to violations of West Virginia law. However, the undersigned disagrees with Defendant that the Request should be limited to two years, especially given the parties' previous custom of exchanging information that predated Plaintiff's filing of her lawsuit by four years. Moreover, neither party can agree on what would be an appropriate narrowing of this Request: Plaintiff proffered “east of the Mississippi” and Defendant countered, West Virginia only. It is not lost on the undersigned that Defendant has already disclosed the West Virginia-only response to this Request, which predates the filing date of Plaintiff's lawsuit by four years. Nevertheless, even a cursory review of a map of the United States shows that there are twenty-six states “east of the Mississippi”, including West Virginia, which is too broad of the Request, and disproportionate to the needs of this case.

         Nevertheless, Plaintiff's lawsuit concerns Defendant's insurance practices that she has consistently alleged is nationwide, even global in nature, and that it is Defendant's sales “culture” that has driven the challenged conduct subject to this civil action. As more thoroughly discussed infra, Plaintiff has demonstrated that through discovery, Defendant's alleged misconduct was substantially similar to its conduct that became subject to lawsuits in Alabama and Mississippi. The Court FINDS that nationwide discovery of in-field agents is disproportional to the needs of the case and further FINDS that all states east of the Mississippi River is also disproportional. However, the Court FINDS that narrowing the scope of inquiry to only West Virginia is also disproportionally too narrow for the needs of the case. Therefore, the Court FINDS that it would be relevant and proportional to require Defendant to disclose all in-field agent trainers as follows: 1) as it relates to all states that comprise the 4th Circuit Court of Appeals; 2) additional states that border West Virginia that are outside of the 4th Circuit Court of Appeals, namely, Kentucky, Ohio and Pennsylvania; and 3) the states of Mississippi and Alabama.

         Accordingly, Plaintiff's Motion to Compel Defendant's supplemental responses to Request No. 1 is GRANTED IN PART and DENIED IN PART, and only to the extent that Defendant is compelled to disclose the identities of its in-field agent trainers as stated above for the four years preceding this lawsuit and with respect to Alabama and Mississippi, in the four years preceding Defendant's withdrawal from the Alabama and Mississippi insurance markets. With regard to Defendant's concerns over non-litigant employees' privacy rights, it is noted that a protective order has already been entered in this matter on April 13, 2017. (ECF No. 22)

         Request No. 2:

Documents and information sufficient to show employee complaints regarding infield trainers and their techniques in the four years preceding this lawsuit to the present including but not limited to information captured in Clarify and any other electronic systems identified in request 20 below as well as emails and employee exit interviews.

         Plaintiff argues that this information concerns Defendant's company-wide training and business practices as they relate to sales to Medicaid recipients and is further relevant to establishing Defendant's deceptive and inequitable conduct as well as its knowledge of the impact of these practices on its insureds.

         Defendant argues this information is too broad as it seeks information nationwide, should be limited to two years, and further, to the extent it calls for production of private information of individuals who are not litigants in this matter. Notwithstanding its objection to this Request, Defendant asserts that it has no responsive documents concerning West Virginia.

         As mentioned supra, Plaintiff's lawsuit concerns Defendant's insurance practices that she has consistently alleged is nationwide, and global in nature, and that it is Defendant's sales “culture” that has driven the challenged conduct subject to this civil action. As more thoroughly discussed infra, Plaintiff has demonstrated that through discovery, Defendant's alleged misconduct challenged herein, was substantially similar to its conduct that became subject to lawsuits in Alabama and Mississippi. The Court FINDS that nationwide discovery of employee complaints concerning in-field agent trainers and their techniques, employee emails and exit interviews is disproportional to the needs of the case and further FINDS that all states east of the Mississippi River is also disproportional. However, the Court FINDS that narrowing the scope of inquiry to only West Virginia is also disproportionally too narrow for the needs of the case, and as noted above, Defendant has already stated that it has no responsive documents concerning West Virginia. Therefore, the Court FINDS that it would be relevant and proportional to require Defendant to disclose all employee complaints concerning in-field agent trainers and their techniques, emails and exit interviews as described in Plaintiff's Request No. 2 as follows: 1) as it relates to all states that comprise the 4th Circuit Court of Appeals; 2) additional states that border West Virginia that are outside of the 4th Circuit Court of Appeals, namely, Kentucky, Ohio and Pennsylvania; and 3) the states of Mississippi and Alabama.

         Accordingly, Plaintiff's Motion to Compel Defendant's supplemental responses to Request No. 2 is GRANTED IN PART and DENIED IN PART, and only to the extent that if such documentation exists, that Defendant is compelled to disclose employee complaints of its in-field agent trainers and their techniques, emails and exit interviews as described in Plaintiff's Request No. 2 as stated above for the four years preceding this lawsuit, and with regard to Alabama and Mississippi, in the four years preceding Defendant's withdrawal from the Alabama and Mississippi insurance markets. As stated before, with regard to Defendant's concerns over non-litigant employees' privacy rights, it is noted that a protective order has already been entered in this matter on April 13, 2017. (ECF No. 22)

         Request No. 4:

All Commissioned Employee Handbooks and drafts of such Handbooks for Combined, and any other subsidiary or affiliate of ACE Insurance or AEON from 2006 to the present, including Ace Insurance Ltd. during the time it sold Supplemental Insurance in Australia. This search should specifically include documents and information in Jeff Frerick's files and those operating under his supervision and direction.

         Plaintiff asserts that Defendant's business practices and policies that fostered the improper sales alleged in this civil action governed Defendant's insurance sales practices overseas as well, specifically, in Australia. Plaintiff seeks this information to demonstrate that Defendant is also aware that its business practices cause harm, but takes no action to correct them until it is forced out of the market. Plaintiff argues that discovery so far has shown that affiliate of Defendant's inherited its Australian business, and the affiliate continued Defendant's deceptive and inequitable business practices with Defendant's knowledge. Plaintiff further contends this information should not be limited to two years prior to the filing of this civil action.

         Defendant objects to this Request as it concerns documents from its current and former corporate parents, affiliates, both domestic and foreign, and these entities are not parties to this suit. Additionally, Defendant argues that no evidence has been shown that any of these non-party corporate entities acted with or on behalf of Defendant. Defendant asserts that it produced West Virginia handbooks for 2014, 2015 and 2017. Plaintiff's request for handbooks since 2006 from foreign corporate entities is disproportionate to this lawsuit, both temporally and geographically, plus, it is irrelevant to West Virginia Medicaid recipients. Defendant further argues that Plaintiff has not shown any evidence that these foreign entities are the corporate alter egos of Defendant or that Defendant has any control over these entities. The discovery alluded to by Plaintiff concerns a single document that Defendant disclosed to Plaintiff that it obtained from an Australian attorney involved with Ace Insurance, Ltd., which took over Defendant's Australian supplemental health insurance business in 2010.

         Though the undersigned agrees with Plaintiff that this Request should not be limited to just two years prior to the filing of this lawsuit, during the hearing held on February 23, 2018, counsel for Defendant produced a 12-page document entitled “Structure of Ace Limited” that outlined the relationship Defendant had with its overseas affiliates. (ECF No. 110-3) This document indicated that there are over ninety (90) affiliates between ACE Limited and Defendant and no evidence has been shown that Defendant has any control over its affiliates in Australia or that Defendant has any control over any documentation related to the insurance business in Australia. Moreover, the nature of Plaintiff's requests as they relate to insurance practices in Australia is irrelevant and disproportionate as they relate to Medicaid recipients in the United States, let alone West Virginia.

         However, as mentioned previously, Plaintiff's lawsuit concerns Defendant's insurance practices that she has consistently alleged is nationwide, and global in nature, and that it is Defendant's sales “culture” that has driven the challenged conduct subject to this civil action. As more thoroughly discussed infra, Plaintiff has demonstrated that through discovery, Defendant's alleged misconduct challenged herein, was substantially similar to its conduct that became subject to lawsuits in Alabama and Mississippi. The Court FINDS that nationwide discovery of Defendant's Commissioned Employee Handbooks and drafts of such Handbooks is disproportional to the needs of the case and further FINDS that all states east of the Mississippi River is also disproportional. However, the Court FINDS that narrowing the scope of inquiry to only West Virginia is also disproportionally too narrow for the needs of the case, and it is noted that Defendant has already produced those Handbooks as they relate to West Virginia. Therefore, the Court FINDS that it would be relevant and proportional to require Defendant to disclose its Commissioned Employee Handbooks and drafts of such Handbooks as follows: 1) as it relates to all states that comprise the 4th Circuit Court of Appeals; 2) additional states that border West Virginia that are outside of the 4th Circuit Court of Appeals, namely, Kentucky, Ohio and Pennsylvania; and 3) the states of Mississippi and Alabama.

         Accordingly, Plaintiff's Motion to Compel Defendant's supplemental responses to Request No. 4 is GRANTED IN PART and DENIED IN PART, and only to the extent that if such documentation exists, that Defendant is compelled to disclose its Commissioned Employee Handbooks and drafts of such Handbooks as described in Plaintiff's Request No. 4 as stated above for the four years preceding this lawsuit, and with regard to Alabama and Mississippi, in the four years preceding Defendant's withdrawal from the Alabama and Mississippi insurance markets.

         Request No. 7:

Documents and information sufficient to show the Officer and Boards of Directors for Combined Insurance Company of America, Ace Insurance Ltd., Chubb Ltd., Combined Life Insurance Company of New York and ACE Insurance Corporation from 2007 to the present.

         Plaintiff again asserts that discovery demonstrated that an affiliate took over Defendant's Australian insurance business just before that affiliate pulled out of that particular market as a result of regulatory pressure. Again, this information is sought to establish Defendant's business culture and practice, and that despite its knowledge and information about the Australian action, Defendant took no action to correct its practices, to the harm of its insureds. Plaintiff argues that through discovery, she learned that Defendant's ...


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