Opinion
OP 24-0302
06-04-2024
ACCIDENT FUND GENERAL INS. CO., and NICOLE PALAGI, Petitioners, v. MONTANA EIGHTH JUDICIAL DISTRICT COURT, CASCADE COUNTY, HONORABLE ELIZABETH A. BEST, PRESIDING JUDGE, Respondent.
ORDER
Petitioners Accident Fund General Ins. Co. and Nicole Palagi (collectively "Accident Fund") seek a writ of supervisory control to vacate the December 3, 2023 Order on Plaintiff's Motion to Compel ("First Order") and portions of the April 30, 2024 Order Granting Plaintiffs' Second Motion to Compel ("Second Order") of the Eighth Judicial District Court, Cascade County, in its Cause No. BDV-23-0092. Accident Fund asserts the rulings are abuses of discretion and errors of law and this Court should accept supervisory control to overturn them.
Accident Fund and Palagi are the defendants in an insurance bad faith claim initiated by Contessa Bryer, Personal Representative of the Estate of Johnny Lee Sheldon, and Taylor Sheldon (collectively "Bryer"), concerning Accident Fund's adjustment of the workers' compensation claim of Johnny Lee Sheldon (Sheldon). Bryer also filed a workers' compensation claim in the Workers' Compensation Court (WCC), which determined Sheldon suffered a compensable claim that Accident Fund unreasonably adjusted. Bryer v. Accident Fund Gen. Ins. Co., 2022 MTWCC 8 (affd Bryer v. Accident Fund Gen. Ins. Co., 2023 MT 104, 412 Mont. 347, 530 P.3d 801). Pertinent to the present petition, Accident Fund provided Sheldon's employer with workers' compensation insurance at the time of Sheldon's industrial injury and it hired a third-party adjuster, Gallagher Bassett Services, Inc. (Gallagher Bassett), to adjust the claim, who in turn assigned the claim to Palagi, a Montana-based claims examiner. Bryer, 2023 MT 104, ¶ 8.
In the bad faith claim underlying the present dispute, Bryer first moved the District Court to compel Accident Fund to provide discovery responses after she found its response to her requests for production inadequate. The District Court examined Accident Fund's responses and found them "woefully inadequate, obstructive, and facially abusive of the discovery process." It ruled that Accident Fund had obstructed discovery and waived claims of privilege, because it interposed "facially and blatantly improper objections" and neither filed a privilege log nor moved for a protective order. The court found that Accident Fund refused to respond to sixteen of Bryer's requests for production when the information and documents Bryer sought were clearly within the scope of discovery. The court concluded that Accident Fund had no justification for its failure to respond to discovery. Granting Bryer's motion, the court ordered Accident Fund to fully respond to Bryer's requests for production and pay Bryer's associated expenses, including attorney fees.
Bryer moved to compel for a second time and further requested sanctions for Accident Fund's alleged failure to provide adequate supplementation following the First Order. Bryer alleged that Accident Fund had failed to produce six items that the District Court had ordered Accident Fund to produce. One item Accident Fund failed to produce was the contract in place between Accident Fund and Gallagher Bassett at the time of Sheldon's injury. Accident Fund responded, in part, that it had produced the only responsive contract it possessed. Based on Accident Fund's representation that it did not have the remaining contracts and documents incorporated by reference into the existing contract, Bryer then argued spoliation. Bryer requested various remedies and sanctions for Accident Fund's alleged failure to comply with the First Order.
In the Second Order, the District Court stated, "Starting in the underlying workers' compensation case, Accident Fund has, at best, slow-walked production of documents in its claim file to Plaintiffs, which the WCC Court did not tolerate. . . . Accident Fund's dilatory death-by-a-thousand-cuts approach to discovery has continued in this Court." The court explained that for Bryer's first Request for Production, a complete copy of the claims file, Accident Fund provided an initial response and four supplemental responses over nine months, in several instances asserting, incorrectly, that it had produced the complete claims file, only to "drip [more] claim file documents . . . when pressure was applied," and even though § 39-71-107(3), MCA, requires workers' compensation insurers to maintain claims files at the Montana office of the claims adjuster in a manner that allows the documents to be retrieved and copied at the claimant's request. The court'noted that in the fourth supplemental response, Accident Fund provided more than two years' worth of claims notes that it had not previously produced. The court found Accident Fund's explanations for its serial failures to produce the entire claims file unpersuasive. It specifically rejected Accident Fund's insistence that it did not handle Sheldon's claim, pointing out that workers' compensation insurers are vicariously liable for the acts or omissions of their administrators under Montana workers' compensation case law.
The court next rejected Accident Fund's argument that it need not produce Gallagher Bassett's unredacted claim notes, even though Accident Fund had waived attorney-client privilege, because Palagi had not done so. The court reasoned that Accident Fund, not Palagi, was the client and it was thus Accident Fund's privilege to waive.
The court further granted Bryer's request to allow her expert to inspect Accident Fund's databases and claims handling portals to verify that Accident Fund had produced all information and documentation regarding Sheldon's workers' compensation claim in Accident Fund's possession. The court determined it could not rely on Accident Fund's assertion that it had fiilly produced all information because of Accident Fund's approach to discovery and persistence "in hedging its discovery responses on its objection that it did not adjust John Sheldon's workers' compensation claim." The court found the declaration of Accident Fund's corporate representative to be "replete with conditional representations" that caused the court to lack faith in the completeness of Accident Fund's responses. It determined Bryer could inspect Accident Fund's database under M. R. Civ. P. 26(a) and 34(a)(1)(A). The court limited the scope of the inspection, permitted an Accident Fund representative to be present for the inspection, and ruled Bryer could only use or disclose any information obtained for the purpose of this litigation and could not publicly disclose any of the information obtained.
The court further determined sanctions were warranted due to Accident Fund's dilatory discovery actions and Bryer was entitled to relief for Accident Fund's spoliation of evidence. The District Court ordered Accident Fund to pay Bryer's reasonable expenses, including attorney fees, associated with the second motion to compel and motion for sanctions, pay the cost of Bryer's expert to inspect Accident Fund's database and:
Because of Accident Fund's spoliation, the following facts are established as true: Accident Fund retained the right, at any time arid in its sole discretion, to direct or assume control of the administration, investigation, and performance of all claims services related to John Sheldon's workers' compensation claim including final authority over all decisions related to John Sheldon's claim. Accident Fund shall not claim Accident Fund was not responsible for the handling of John Sheldon's workers' compensation claim.
Following the Second Order, Accident Fund petitioned this Court for writ of supervisory control.
Supervisory control is an extraordinary remedy that is sometimes justified when urgency or emergency factors exist making the normal appeal process inadequate, when the case involves purely legal questions, and when the other court is proceeding under a mistake of law and is causing a gross injustice, constitutional issues of state-wide importance are involved, or, in a criminal case, the other court has granted or denied a motion to substitute a judge. M. R. App. P. 14(3). Supervisory control is appropriate when the district court is proceeding based on a riiistake of law which, if uncorrected, would cause significant injustice for which an appeal is an inadequate remedy. Truman v. Mont. Eleventh Judicial Dist. Court, 2003 MT 91, ¶ 13, 315 Mont. 165, 68 P.3d 654 (citing Park v. Sixth Judicial Dist. Court, 1998 MT 164, ¶ 13,289 Mont. 367, 961 P.2d 1267). Whether it is appropriate for this Court to assume supervisory control is a "case-by-case decision that depends on the presence of extraordinary circumstances and a particular need to prevent an injustice from occurring." Truman, ¶ 13 (citing Par A:, ¶ 13).
Pretrial discovery disputes are typically not appropriate for exercise of supervisory control. USAA Cas. Inc. Co. v Eighth Judicial Dist. Court, No. OP 19-0139, 396 Mont. 547, 449 P.3d 793 (Apr. 23, 2019). In considering, and ultimately denying, USAA's petition for writ of supervisory control, we relied on precedent that emphasized the importance of liberal discovery as well as the inherent discretion of the district courts to control the discovery process:
"The purpose of discovery is to promote the ascertainment of truth and the ultimate disposition of the lawsuit in accordance therewith. Discovery fulfills this purpose by assuring the mutual knowledge of all relevant facts gathered by both parties which are essential to proper litigation." Massaro v. Dunham, 184 Mont. 400, 405, 603 P.2d 249, 252 (1979) (citing Hickman v. Taylor, 329 U.S. 495, 507, 67 S.Ct. 385, 392, 91 L.Ed. 451 (1947)). Discovery rules are to be "liberally construed to make all relevant facts available to parties in advance of trial and to reduce the possibilities of surprise and unfair advantage." Cox v. Magers, 2018 MT 21, ¶ 15, 390 Mont. 224, 411 P.3d 1271 (quoting Richardson v. State, 2006 MT 43, ¶ 24, 331 Mont. 231, 130 P.3d 634) (emphasis in original). A district court has "inherent discretionary power to control discovery based on its authority to control trial administration." Henricksen v. State, 2004 MT 20, ¶ 35, 319 Mont. 307, 84 P.3d 38 (citing Anderson v. Werner Enters., Inc., 1998 MT 333, ¶ 13, 292 Mont. 284, 972 P.2d 806).US A A at 4.
Elaving reviewed the petition and exhibits, we conclude that Accident Fund has not established the criteria for an extraordinary writ. We review a district court's ruling on a discovery matter for abuse of discretion. State of Or. ex rel. Worden v. Drinkwaiter, 216 Mont. 9,12,700 P.2d 150,152 (1985). The District Court has the inherent power to control discovery by denying a motion for protective order and allowing a deposition to proceed. USAA at 6 (citing Henricksen, ¶ 35). Acting within it its inherent power to control discovery, the District Court considered Bryer's motions and examined Accident Fund's discovery responses. Accident Fund's petition for writ does not raise an issue that is purely one of law but involves a matter of discretion. Where a petition does not raise an issue that is purely one of law but involves a matter of discretion, it fails to satisfy the standards for supervisory control. Hill v. Mont. Fifth Judicial Dist. Court, No. OP 21-0352, 405 Mont. 539, 495 P.3d 422 (Aug. 31, 2021).
Several of the arguments raised in Accident Fund's petition are questions of fact that are not susceptible to review on supervisory control. Alford v. Mont. Fifteenth Jud. Dist. Ct., No. OP 22-0204, 409 Mont. 555, 512 P.3d 1173 (May 3, 2022) (supervisory control is proper only in the Court's discretion and upon an affirmative showing that the lower court is proceeding under a manifest mistake of law involving purely legal questions not dependent on disputed material facts). Regarding the inspection of Accident Fund's databases, Accident Fund argues that the District Court erroneously found that additional, unproduced records exist. As to the spoliation issue, Accident Fund argues that the court erroneously found that the contracts, and documents incorporated into the existing contracts by reference, also exist. This Court does not resolve disputed facts via writs of supervisory control. See Barrus v. Mont. First Jud. Dist. Ct., 2020 MT 14, ¶¶ 17-20, 398 Mont. 353, 456 P.3d 577 (supervisory control not available for matter that does not involve purely legal questions).
As the issues Accident Fund seeks to raise are discretionary rulings or involve disputed issues of fact, its petition fails to satisfy the standards for supervisory control.
IT IS THEREFORE ORDERED that the petition for writ of supervisory control is DENIED and DISMISSED.
The Clerk is directed to provide immediate notice of this Order to counsel for Petitioner, all counsel of record in the Eighth Judicial District Court, Cascade County, Cause No. BDV-23-0092, and to the Honorable Elizabeth A. Best, presiding Judge.