Opinion
No. CIV 01-427 JP/LFG
December 5, 2002
ORDER GRANTING DEFENDANT'S MOTION TO COMPEL
THIS MATTER comes before the Court on the motion [Doc. 28] of Defendant Virginia Surety Company, Inc. ("Virginia Surety") to compel the production of documents. For the reasons given below, the motion is granted under the conditions set forth below.
Factual and Procedural Background
This case involves a dispute over insurance coverage. Plaintiffs are an individual, Alexis Girard ("Girard"), and corporate entity Greer Enterprises, Inc. ("Greer"). Girard is the president and CEO of Greer. On March 11, 1999, Defendant Virginia Surety issued a "directors and officers" indemnity insurance policy for a one-year period, covering certain liabilities of Greer's officers and directors. During the coverage period, Girard and Greer were named as defendants in a lawsuit entitled Wallace, et al. v, Greer Enterprises, et al., Civ. No. 00-952 BB/LCS-ACE, brought in U.S. District Court by three individual Greer shareholders, Greta Wallace, Tanya Raedisch, and Ryan Raedisch. The Wallace/Raedisch plaintiffs alleged in the underlying suit that Girard committed errors and breaches of duty and made misleading statements, in the course of her duties as a director and officer of Greer.
That lawsuit will be referred to variously hereinafter as "Civ. No. 00-952," "the Wallace action," or "the underlying suit."
In their complaint in the present action, Girard and Greer allege that they sent notices of claim to Virginia Surety, along with demands for defense of the underlying Wallace action, on three occasions in February and July 2000. Virginia Surety notified Girard and Greer in November 2000 that it was denying coverage for the underlying action, which was concluded by settlement in January 2002. Girard and Greer allege herein that Virginia Surety is guilty of bad faith refusal to provide coverage and a defense, that it committed unfair insurance claims practices and unfair trade practices under New Mexico law, and that it breached the insurance contract. Plaintiffs seek a declaratory judgment against Virginia Surety, as well as compensatory and punitive damages, including triple damages under the New Mexico Unfair Trade Practices Act. [Complaint, Doc. 1].
The parties in the underlying action entered into a number of confidentiality agreements. The first two were executed in June 2000 and applied to the documents produced to the Wallace plaintiffs by Greer in the underlying suit. On June 28, 2002, U.S. Magistrate Judge Smith entered a Supplemental Confidentiality Order [Doc. 167 in Civ. No. 00-952], which confirmed the earlier confidentiality agreements and contained numerous restrictions on dissemination of documents produced in the Wallace litigation. One of the provisions of this order allowed for exceptions to the confidentiality restrictions for certain individuals and entities, provided they sign an Acknowledgment of Supplemental Confidentiality Order, attached to the Order as Ex. C. In addition, the parties entered into a Confidentiality Agreement in connection with their settlement of the underlying action [Doc. 28, Ex. D]; this Confidentiality Agreement was entered as an Order in that case [Doc. 311 in Civ. No. 00-952].
In its Requests for Production served on Girard and Greer in the present action, Virginia Surety sought discovery of a number of documents which are subject to the above described confidentiality agreements. Plaintiffs refused to produce these documents on confidentiality grounds. Virginia Surety thereupon filed this motion to compel, and in response, Girard and Greer also argue that the requests are overbroad, vague and burdensome, and that the documents sought are protected by attorney-client privilege. The Court overrules these objections, although reserving the privilege issue for a later ruling, and will order Girard and Greer to respond fully to Virginia Surety's requests for production, under certain conditions as discussed below.
Discussion A. General Objections.
In their amended response to Virginia Surety's first request for production, Girard and Greer opened with a section headed "General Objection." In it, Plaintiffs argue that Virginia Surety's "entire Request for Production is overbroad and repetitive of discovery already performed by the parties." In addition, Girard and Greer also raise the confidentiality argument with respect to "all information related to the settlement of the underlying action." Although Plaintiffs do not raise this general argument again in their response to the motion to compel, the Court reminds the parties that general objections of this nature are legally ineffective and do not fulfill Plaintiffs' duty to respond to discovery requests.
Fed.R.Civ.P. 34 provides that responses to Requests for Production must state, with respect to each item or category, either that inspection will be allowed or else an objection must be given with grounds stated therefor. Peat, Marwick, Mitchell Co. v. West, 748 F.2d 540, 541 (10th Cir. 1984). A general objection which does not identify the documents to be withheld but states merely that the responding party objects to the production of any privileged documents is "entirely inadequate." Id.; W.R. Grace Co. v. Pullman, Inc., 446 F. Supp. 771, 774-75 (W.D.Okla. 1976).
A response to requests for production "must clearly set forth the specifics of the objection and how that objection relates to the documents being demanded . . . The burden is on the party resisting discovery to clarify and explain precisely why its objections are proper given the broad and liberal construction of the discovery rules found in the Federal Rules of Civil Procedure." Obiajulu v. City of Rochester, 166 F.R.D. 293, 295 (W.D.N.Y. 1996).
[D]efendant's assertions of harassment, burden, prejudice, and expense are generalized, non-specific objections, which are insufficient to prevent the requested discovery. The party claiming that a discovery request is unduly burdensome must allege specific facts that indicate the nature and extent of the burden, usually by affidavits or other reliable evidence . . . A conclusory assertion of burden and expense is not enough.
Tucker v. Ohtsu Tire Rubber Co., 191 F.R.D. 495, 498 (D.Md. 2000).
The Court thus rejects any generalized objections and turns to the specific Requests for Production currently in controversy.
B. Document Requests 1 and 2
In Document Request No. 1, Virginia Surety asked Girard and Greer to turn over "All documents produced by any party in the Underlying Action, whether produced voluntarily or pursuant to a document request or subpoena." In Request No. 2, Virginia Surety asked for "All 4 documents produced by a non-party in the Underl[y]ing Action." Virginia Surety argues that these documents are clearly relevant to the issues in the present action, which involves Girard and Greer's claim for coverage related to the underlying action, and the coverage issues will "overlap to some extent" with the discovery undertaken in the Wallace case.
Girard and Greer objected to both requests, and now resist the motion to compel, on two grounds: (1) the documents sought are subject to prior Confidentiality Agreements and Orders; and (2) the requests are overly broad, vague and burdensome.
Effect of Confidentiality Orders in Prior Litigation
Before addressing the merits of the confidentiality issue, the Court must first consider whether this is the proper forum in which to raise this issue. As in Jepson, Inc. v. Makita Elec. Works, Ltd., 30 F.3d 854, 860 (7th Cir. 1994), the motion to compel in this case is, "in effect, a motion for modification of [a protective order entered in prior litigation]." When modification is sought of a protective order issued in prior litigation, the question usually is seen as properly addressed to the court which entered the original order. Wilk v. Am. Med. Ass'n, 635 F.2d 1295, 1299 n. 8 (7th Cir. 1980).
The typical procedure is for the party seeking modification to intervene in the earlier case for the limited purpose of seeking the modification, even if that case has long been concluded. See, e.g., United Nuclear Corp. v. Cranford Ins. Co., 905 F.2d 1424 (10th Cir. 1990); Wilk, supra; Kerasotes Mich. Theaters, Inc. v. Nat'l Amusements, Inc., 139 F.R.D. 102 (E.D.Mich. 1991). However, this is not a hard-and-fast rule:
Courts which have been called upon to decide discovery motions that involve requests to modify or terminate a protective order previously issued by another court, whether state or federal, have frequently felt 5 constrained by principles of comity, courtesy, and, where a federal court is asked to take such action with regard to a previously issued state court protective order, federalism . . . These principles, while unquestionable important, are not absolute, and courts asked to issue discovery orders in litigation pending before them also have not shied away from doing so, even when it would modify or circumvent a discovery order by another court, if under the circumstances, such a result was considered justified.
Tucker, at 499-500.
The Court finds that it is appropriate in this case to modify the Confidentiality Orders entered in the underlying action, to the extent that materials protected by those orders may be used in this case, for the following reasons. First, there is no federalism issue, as the earlier orders were entered in a federal, not a state case. Second, the prior orders contemplate that other courts might issue subpoenas or order production of material otherwise subject to the confidentiality orders. See, Supplemental Confidentiality Order, Doc. 167 in Civ. No. 00-952 BB/LCS, at ¶ 8 ("If another court or an administrative agency subpoenas or orders production . . ."); Confidentiality Agreements, attached as Exs. A and B to Supplemental Confidentiality Order, at ¶ 2 ("Unless required by applicable law or court order"); and Confidentiality Order, Dock. 311 in Civ. No. 00-952 BB/LCS, at ¶¶ 2 a, b, c ("except as required by law").
Third, both parties in the present case have specifically requested that this Court provide guidance in this confidentiality dispute. See, Virginia Surety's Motion to Compel [Doc. 28], at 4: "Counsel for the parties have conferred prior to the filing of this motion. An order from this Court is necessary so as to allow the plaintiffs to produce the requested documents, so this motion is necessary"; and see, Girard and Greer's Response [Doc. 29], at 1: "Plaintiffs therefore request that this Court examine the Confidentiality Order and Agreement and instruct the parties how to proceed."
Finally, the district court in Tucker noted that the 1993 revisions to the Federal Rules of Civil Procedure emphasize that "courts need to consider the potential expense and burden of discovery on the litigants, as well as their resources" and:
Consistent with this approach, it is appropriate for a court to consider the time and expense related to requiring a party in a pending case to initiate an action in another court for the sole purpose of requesting modification of a discovery order issued by that court.
Id., at 500. This Court likewise declines to require the parties to return to the previous, now-terminated litigation to seek modification of the Confidentiality Orders but will decide the issue in the context of discovery practice in the present litigation.
Confidentiality orders of the sort entered in the Wallace litigation are not disfavored in the federal courts. As the Tenth Circuit notes,
[Such orders] allow the parties to make full disclosure in discovery without fear of public access to sensitive information and without the expense and delay of protracted disputes over every item of sensitive information, thereby promoting the overriding goal of the Federal Rules of Civil Procedure, 'to secure the just, speedy, and inexpensive determination of every action' . . . No doubt such an order makes the discovery process in a particular case operate more efficiently; the assurance of confidentiality may encourage disclosures that otherwise would be resisted.
United Nuclear, at 1427.
The court goes on to state that, although allowing modification of a protective order for the benefit of collateral litigants "tends to undermine the [confidentiality] order's potential for more efficient discovery," nevertheless, there is a countervailing efficiency consideration: "saving time and effort in the collateral case by avoiding duplicative discovery." Id., at 1427-28. The Tenth Circuit therefore follows the standard set out by the Seventh Circuit in the Wilk case:
[W]here an appropriate modification of a protective order can place private litigants in a position they would otherwise reach only after repetition of another's discovery, such modification can be denied only where it would tangibly prejudice substantial rights of the party opposing modification.
United Nuclear, at 1428, quoting Wilk, at 1299. And even if the party opposing modification can demonstrate prejudice, the court still has broad discretion in balancing that injury against the benefits of modifying the protective order.
The parties' desire to make it more burdensome for their opponents to pursue their defense is not a legitimate consideration and does not constitute the requisite "tangible prejudice." United Nuclear, at 1428. "[T]here is something unsettling about the notion that Ohtsu might forever be insulated from producing discovery in this, or other actions, by virtue of having once produced it in a protected fashion in the [earlier case]." Tucker, at 501. Girard and Greer have not shown that they would be prejudiced by modification of the confidentiality orders entered in the Wallace action, especially if the parties in this litigation are subjected to the same confidentiality restrictions as were the parties in Wallace. Indeed, they do not really argue that they would be prejudiced but rather contend that they are simply prevented from disclosing the material by virtue of the earlier orders.
The Court finds, further, that other countervailing considerations do not outweigh Virginia Surety's right to obtain full discovery in this case. For example, "[a] collateral litigant should not be permitted to exploit another's discovery in the sense of instituting the collateral litigation simply as a device to obtain access to the sealed information," Wilk, at 1300; however, this is not a concern in the case of a "bona fide litigant who needs access for bona fide litigation purposes." Id. Virginia Surety is the defendant in the present litigation, and there is no indication, and no one argues, that Virginia Surety is anything but a bona fide litigant attempting to protect its corporate interests, or that 8 the material is sought for anything other than bona fide litigation purposes. As was true of the defendant in Kerasotes (at 106 n. 4), "there is no persuasive evidence of improper motive. Quite to the contrary, the information sought is likely to lead to discoverable material and save time and expense in furtherance of Fed.R.Civ.P. 1."
It is also true that a party disclosing information under the shield of a protective order might have thereby been persuaded to waive objections and "provid[e] a fuller disclosure than might otherwise have been required of them," and it would now be unfair to whip away the shield they were relying upon. Olympic Refining Co. v. Carter, 332 F.2d 260, 264 (9th Cir. 1964). However:
None of these circumstances, in our opinion, support the view that these orders are not subject to modification to meet the reasonable needs of other parties in other litigation. In the federal judicial system trial and pretrial proceedings are ordinarily to be conducted in public . . . The purpose of the federal discovery rules, as pointed out in Hickman v. Taylor, 329 U.S. 495, 501, 67 S.Ct. 385, 91 L.Ed. 451, is to force a full disclosure.
Id.
In addition, the Court must balance the legitimate privacy and secrecy interests of the party resisting modification of the confidentiality order against the moving party's need for full discovery. However, there is no "legitimate secrecy interest" in using a protective order as a shield to prevent relevant information from reaching litigants with a valid need for it, and the court should not assist the resisting party in this effort. Jepson, at 860. Furthermore, if access to the protected material can be granted without harm to truly legitimate interests, then access should be granted:
As illustrated in United Nuclear Corp., the interest in keeping the protected material secret is expediency in the discovery process with regard to future actions where the deposed witnesses will not be eager to respond freely without the guarantee that their testimony will be used solely for the trial at hand. But the goal of the federal rules to seek a 'just, speedy and inexpensive determination of every action' is, ironically, also furthered by sharing discovery with collateral litigants. . . . Furthermore, any secrecy interest will be preserved as AMC will only have access to the deposition transcripts subject to the continuing provisions of the original protective order. [Emphasis in original].
Kerasotes, at 106.
Other courts have also determined that legitimate secrecy interests can be protected upon modification of a protective order entered in prior litigation, by granting discovery in the later case, subject to the same restrictions set forth in the original order. See, e.g., United Nuclear, at 1428 ("any legitimate interest the defendants have in continued secrecy as against the public at large can be accommodated by placing Intervenors under the restrictions on use and disclosure contained in the original protective order"); Wilk, at 1297 (noting that the moving party "did not seek to dissolve the protective order entirely; rather, it sought access to the protected materials on the same terms as the [parties in the earlier litigation]"; and Tucker, at 501-02:
Finally, the court should consider whether it is possible to incorporate terms in its own order which will further the protections originally ordered by the Texas court. This is easily done by imposing on the plaintiffs in this action the same obligations and restrictions that were originally imposed on the Hernandezes. Accordingly, production of the documents in this case which fall within the scope of the Order originally issued by the Texas court will be subject to its same restrictions . . . After this case has concluded, if there are efforts to obtain the documents ordered produced by this order in connection with litigation pending in other courts, they are free to decide for themselves whether the discovery sought should be granted, and, if so, what protective measures should accompany it.
The Court finds that the interests of both parties, and the interest of the Court in expeditious procedure, can best be accommodated by directing that any material ordered produced pursuant to this ruling, and which is also subject to the two Confidentiality Orders [Docs. 167 and 311] in Civ. No. 00-952, be produced herein under the same confidentiality provisions as set forth in the two earlier Orders. To that extent the Court will order modification of the earlier Confidentiality Orders.
Overbreadth and Vagueness
The Court does not agree with Plaintiffs that these requests are overly broad and burdensome. Girard and Greer argue that Virginia Surety "has made no effort to discover documents related to a particular topic or issue." They claim that Virginia Surety has an obligation to demonstrate the relevance of every document produced by any party or non-party in the underlying litigation.
Virginia Surety counters that Girard and Greer are seeking coverage for the cost of all claims made in the underlying action, and therefore Virginia Surety needs a broad range of documents produced in that case. Virginia Surety states that it could narrow its request for documents if Plaintiffs would agree to narrow their claims in the present case, noting the existence of several coverage disputes, including whether the insurance policy covers Greer's corporate liability, and whether the prior litigation, insofar as it related to Greta Wallace, was subject to a policy exception for shareholders with a greater-than-5% interest in the company. Virginia Surety also claims that the entire policy is void, because Girard and Greer knew but did not disclose that litigation was brewing against them at the time they purchased the policy.
The Court does not resolve these disputes at this time but finds that the documents sought are reasonably calculated to lead to discovery of relevant information in this case. Documents produced during discovery in the underlying litigation are relevant to this case, involving as it does the question whether the Virginia Surety policy covered litigation of the sort pursued in the Wallace matter. In addition, if Plaintiffs are successful in establishing coverage, they will have to prove the amount of damages to which they are entitled, including their costs in defending the action and the amount of attorney fees which should have been paid by Virginia Surety under the policy. Virginia Surety has a right to discovery of all documents produced in the underlying litigation, in order to ferret out admissible evidence to counter Plaintiffs' proof regarding the time and activity of their attorneys in that case.
It is possible that, as Girard and Greer argue, some of this material may turn out to be irrelevant to issues of coverage. However, eventual admissibility of material sought on discovery is not the proper test. The Federal Rules generally provide a broad and liberal scope for discovery. United States v. Procter Gamble Co., 356 U.S. 677, 682, 78 S.Ct. 983, 986-87 (1958). Under Fed.R.Civ.P. 26, a party may obtain discovery regarding any matter, "not privileged, that is relevant to the claim or defense of any party. . . ." The material sought need not be admissible; rather, if it is calculated to lead to the discovery of admissible evidence, then it is discoverable in the absence of some other privilege or policy ban. Olympic Refining Co., at 266.
The documents produced in the underlying litigation are clearly calculated to lead to admissible or relevant evidence. Although these documents may well be voluminous, they have already been produced during discovery in the underlying suit, and it would be no great burden on Plaintiffs to produce them here. Indeed, the very fact that extensive discovery has already been produced is one factor weighing in favor of modification of a protective order, in the interests of avoiding duplication of time and effort. Wilk, at 1299 ("Particularly in litigation of this magnitude, we, like the Multidistrict Panel, are impressed with the wastefulness of requiring the State of New York to duplicate discovery already made").
However, since Rule 26 vests the Court with broad discretion to tailor discovery as needed, Crawford-El v. Britton, 523 U.S. 574, 598, 118 S.Ct. 1584, 1597 (1998), and to restrict discovery 12 where the burden or expense of the proposed discovery outweighs its likely benefits, Bosaw v. Nat'l Treasury Employees' Union, 887 F. Supp. 1199, 1213 (S.D.Ind. 1995), the Court will therefore relieve Girard and Greer of the burden of producing any documents described in Request Nos. 1 and 2 which are already part of the public record in Civ. No. 00-952. Those items are as easily obtainable by Virginia Surety as by Girard and Greer.
C. Document Request No. 9
The parties have resolved the dispute over Request 9, and the Court will enforce their agreement. That Request asks Plaintiffs to produce "All correspondence from Greta Wallace, Tanya Raedisch, Ryan Raedisch, and their attorneys regarding the claims in the Underlying Action." Girard and Greer initially objected to this request on grounds it is overly broad, vague and burdensome, and is subject to the Confidentiality Agreement/Order.
Girard and Greer note that, in its motion to compel, Virginia Surety appears to narrow Request No. 9 to "correspondence demanding changes in Greer's management or demands that Greer buy the shares held by the Wallace plaintiff." Indeed, Virginia Surety does make this concession in its motion. Girard and Greer state further that, "If Defendant narrows its request in such a manner, Plaintiff will produce all responsive documents that are not subject to the Confidentiality Order and Agreement or any other privilege."
Girard and Greer have not argued, either in their original objection to this Request or in their response to the motion to compel, that these documents are subject to any privilege other than the Confidentiality Agreement/Order. They specifically do not raise attorney-client privilege, in contrast to their response to Request No. 10. The Court has already ruled on the Confidentiality Order issue and will therefore order Girard and Greer to respond to Request 9 in accord with the narrower 13 formulation to which the parties have agreed (but subject to the Confidentiality restrictions set forth above, in the discussion of Requests 1 and 2).
D. Document Request No. 10
In Request 10, Virginia Surety seeks "All reports, memoranda, notes and correspondence regarding the Underlying Action, including those prepared by the Plaintiffs herein and their attorneys." Girard and Greer argue that this request is overbroad, vague and burdensome, that it is subject to the Confidentiality Agreements/Orders, and that the materials are protected by attorney-client privilege.
The Court does not find the request overly broad or burdensome. Plaintiffs seek damages based on all costs of litigating the underlying action, and "reports, memoranda and correspondence regarding the Underlying Action" are clearly relevant and proportionate to the broad scope of the coverage for which Plaintiffs argue. Furthermore, Virginia Surety states in its reply in support of the motion to compel that it will agree to limit Request 10 to documents that were created after commencement of the underlying Wallace action. This limitation is reasonable.
Girard and Greer also argue that the materials sought in Request 10 are subject to attorney-client privilege. Virginia Surety states in its opening memorandum that Plaintiffs have provided only a partial privilege log, which is not yet complete. Defendant notes that the full privilege log will provide further information concerning the significance of the withheld documents and asks therefore that the Court allow it 20 days from completion of the logs to bring a separate motion to compel, addressing the privilege assertions. The Court will grant this request and will not resolve any attorney-client privilege issues in the present Order. All material responsive to Request 10, which will not be the subject of an assertion of attorney-client or other privilege, must be produced at this 14 time. All material as to which a privilege will be asserted must be included in the privilege log.
Again, all documents produced in response to Request 10 must conform to the confidentiality restrictions imposed above in the discussion regarding Requests 1 and 2.
Order
IT IS HEREBY ORDERED that Defendant Virginia Surety's Motion to Compel Production of Documents [Doc.28] is granted under the following conditions:
1. Neither the Supplemental Confidentiality Order [Doc. 167 in Civ. No. 00-952], nor the Confidentiality Order Pursuant to Parties' Settlement of Case [Doc. 311 in Civ. No. 00-952], prevents discovery and use of any information ordered produced herein, although any material subject to those earlier orders is subject to the same confidentiality restrictions in this case;
2. Plaintiffs must respond fully to Requests 1 and 2, subject to the Confidentiality restrictions set forth above;
3. Plaintiffs must respond to Request 9, but only to the extent that Defendant seeks all "correspondence demanding changes in Greer's management or demands that Greer by the shares held by the Wallace plaintiff," and subject to the Confidentiality restrictions set forth above;
4. Plaintiffs must respond to Request 10 by providing all non-privileged reports, memoranda, notes and correspondence regarding the Wallace litigation, Civ. No. 00-952, which were produced after commencement of that litigation, and subject to the Confidentiality restrictions set forth above;
5. Material which would otherwise be produced in response to Request 10, but as to which Plaintiffs intend to assert attorney-client or other privilege, must be specifically identified in the privilege log.
IT IS FURTHER ORDERED that Defendant's request is granted for a 20-day period following Plaintiffs' completion of the privilege logs within which to file a motion to compel production of any material to which Plaintiffs assert a privilege. Such a motion must be fully briefed within any original or amended deadlines set by the Court for completion of discovery motions. The Court declines to rule on any assertions of privilege until motions dealing with privilege issues are fully briefed.