The opinion of the court was delivered by: Terrence F. McVerry United States District Court Judge
Pending before the Court are: PLAINTIFF'S SECOND MOTION TO COMPEL DISCOVERY PURSUANT TO FED. R. CIV. P. 37 (Document No. 235); and PLAINTIFF'S MOTION TO COMPEL PRODUCTION OF DOCUMENTS LISTED IN DEFENDANT'S PRIVILEGE LOG (Document No. 239). Defendant Life Investors has filed responses in opposition to the motions (Document Nos. 249, 253), Plaintiff has filed reply briefs (Document Nos. 262, 263), and the motions are ripe for disposition.*fn1
This purported class action case has had a protracted and complicated procedural history, which will not be repeated in full. The case primarily involves interpretation of the term "actual charges" in a supplemental cancer insurance policy but Plaintiff has also asserted a "bad faith" claim. On July 9, 2009, the Court issued a Memorandum Order to resolve previous discovery disputes.
A. Second Motion to Compel
In this motion, Plaintiff seeks an order which compels Life Investors to: (1) provide complete responses to Interrogatories 3, 4, 8 and Document Requests 10, 38-63, 66-68 and 69-72; (2) produce in-house counsel Mark Edwards for deposition; and (3) to perform an additional search for documents. Plaintiff also seeks an extension of discovery. Defendant contends that Plaintiff has had its responses for many months and improperly waited until the eve of the discovery deadline to file this motion. The Court declines to deny Plaintiff's motions as untimely in light of the circumstances surrounding the rolling discovery in this case and its complex and protracted procedural history. The motion was filed prior to the discovery deadline and relates to the "bad faith" claim which is not a subject of the pending motion for partial summary judgment.
The specific issues will be addressed seriatim in the order presented by Plaintiff. At this stage of the case, the requested information need not be admissible at trial so long as the discovery appears to be reasonably calculated to lead to the discovery of admissible evidence. Fed. R. Civ. P. 26(b)(1).
1. Interrogatories 3 and 4
Plaintiff seeks the names and addresses of all insureds covered by Life Investors LPC01PA and BPC01PA policies on or after April 2006 (Interrogatory #3), and of all persons who had submitted "actual charges" claims to Defendant (Interrogatory #4). Plaintiff contends that they are fact witnesses with respect to Life Investors' past practice of paying claims, its revised interpretation of "actual charges" in 2006, and damages. Defendant agreed to provide redacted claim files in response to Interrogatory 4 without revealing the insureds' identities and stated that it had identified eleven policies on which such claims had been made.
Defendant contends that the discovery of names and addresses of other insureds would invade their privacy and would diminish the company's goodwill with its customers. Plaintiff argues that the identities have become relevant because Life Investors has emphasized in court filings that the Smiths are the only Pennsylvania policyholders to have complained. Plaintiff further notes that Defendant's privacy objections are mitigated because a Protective Order is in place.
The Court places little weight on Defendant's argument that the Smiths are the only policyholders to have complained. Nevertheless, the Court concludes that persons who have made "actual charges" claims to Life Investors are potential fact witnesses with discoverable knowledge of how Life Investors treated their claims. Defendant has already produced the redacted claim files and the other claimants' privacy interests are adequately addressed by the Protective Order. As to the broader category of policyholders who have not submitted claims, the Court concludes that Plaintiff has failed to articulate a sufficient basis for such discovery. The burden of such discovery is greater and the likelihood that such policyholders would have relevant knowledge of Defendant's treatment of "actual charges" claims is lower. Defendant shall provide the names and addresses of persons who filed claims in response to Interrogatory 4. Accordingly, this aspect of the motion is GRANTED IN PART AND DENIED IN PART.
Plaintiff seeks the identity of agents who sold the insurance policies in question within Pennsylvania. Plaintiff contends that the agents have highly relevant information, particularly as to the bad faith claim. Defendant objects on the basis of relevance and because Plaintiff is attempting to evade the limit on interrogatories. Defendant points out that Plaintiff's daughter, Mary Pennington, was the insurance agent who sold her the policy and that it has produced all materials related to that specific transaction. Defendant also requests that any contact with the agents of its successor company, Transamerica, be limited to the bounds of a subpoena.
The Court agrees with Plaintiff. Both sides recognize that Ms. Pennington has a unique relationship to this case and therefore her testimony may not be representative of that of an "independent" insurance agent. The knowledge of the Life Investors agents as to the "actual charges" policies and practices may be highly relevant. At this time, Plaintiff seeks the production of documents. The Court will not impose any limitations upon Plaintiff's ability to contact the agents beyond the Federal Rules of Civil Procedure and Rules of Professional Conduct, but suggests that the parties cooperate to facilitate any such discovery. Accordingly, this aspect of the motion is GRANTED.
3. Interrogatory 8/ Whitlock's Green Folder
Plaintiff seeks the identity of the persons who made or approved the 2006 change regarding "actual charges" and the documents relied upon by those decision-makers. Defendant filed a supplemental response which essentially referred Plaintiff to the deposition testimony of Connie Whitlock. Plaintiff continues to seek a response which identifies the documents, including Bates-ranges and privilege log numbers, in Whitlock's "green folder" and the documents relied upon by two other individuals who participated in the decision, Brenda Clancy and Chris Garrett.
Defendant suggests that these requests be denied as moot because it has already produced all the responsive documents and/or listed them on a privilege log. Defendant offers to provide a complete copy of the contents of the "green folder" to the Court for in camera review. Defendant notes that Plaintiff has already deposed Clancy and chose not to depose Garrett and contends that the reference to "any documents relied upon" by them is overbroad, such that its response and supplemental response were sufficient. Indeed, Defendant represents that there is nothing left to compel.
The Court will accept Defendant's representation. If Plaintiff develops evidence that the representation was false, misleading or incomplete, the Court will entertain an appropriate motion for sanctions at that time. However, the Court cannot condone Defendant's apparent game-playing in the manner in which it produced the documents in the "green folder." See Fed. R. Civ. P. 34(b)(2)(E)(I) (documents must be produced as they are kept in the usual course of business). Defendant shall provide Plaintiff with a copy of all the non-privileged documents contained in the "green folder" and a listing of all the privileged documents which were contained in that folder. The Court will also accept Defendant's offer to provide a complete copy of the "green folder" for in camera review. In accordance with the foregoing, this aspect of the motion is GRANTED IN PART AND DENIED IN PART.
4. Document Requests 38-63
Plaintiff seeks information about the personal financial incentives which may have motivated Defendant's decision-makers to revise the company's interpretation of "actual charges." In Saldi v. Paul Revere Life Ins. Co., 224 F.R.D. 169, 177-78 (E.D. Pa. 2004), the Court authorized discovery to determine whether claims handlers had a financial incentive structure that led to bad faith actions. Plaintiff contends that its burden to prove bad faith by clear and convincing evidence provides a substantial need to show knowledge or recklessness that outweighs the burdens associated with these requests. Plaintiff further notes the existence of the Protective Order.
Defendant contends that the production of sensitive personnel file information such as performance evaluations, compensation records and annual reviews is improper. Defendant further observes that the six employees who were deposed by Plaintiff uniformly responded that their personal compensation was not affected by the revised "actual charges" interpretation. In Kaufman v. Nationwide Mut. Ins. Co., 1997 WL 703175 (E.D. Pa. 1997), the Court recognized that a heightened standard of relevance was needed to justify disclosure of personnel files, particularly where the information could be obtained in less obtrusive ways such as depositions. Indeed, Saldi cited Kaufman with approval for this proposition.
Plaintiff, in reply, states that several of the decision-makers admitted during their depositions that their bonuses were linked, at least indirectly, to the financial performance of the cancer policies at issue. Plaintiff further notes that Whitlock, Clancy, Adams and Gwin testified that they could not recall the specifics of their compensation arrangements and performance goals. Upon review of the relevant deposition transcript excerpts, the Court agrees with Plaintiff. The less obtrusive alternative was explored by Plaintiff and did not yield sufficiently complete answers. Accordingly, the Court concludes that Plaintiff has appropriately demonstrated a justifiable need for the sensitive employee compensation information as to Whitlock, Clancy, Adams and Gwin to explore whether Defendant had a motive of financial self-interest. Greene v. United Servs. Auto. Ass'n, 936 A.2d 1178, 1190-91 (Pa. Super. 2007). Plaintiff has not met its heightened burden to undertake similar discovery as to other employees. Accordingly, this aspect of the motion is GRANTED IN PART AND DENIED IN PART.
5. Document Requests 69 and 71
Plaintiff seeks production of the annual reports of Life Investors and its parent companies for 2003-2008 on the basis that they will provide substantial background information. Plaintiff contends that the parent company reports are relevant because the "actual charges" change was a concerted cross-company effort. Defendant represents that the annual reports do not have any bearing on Plaintiff's claims ...