American Automobile Insurance Company, et al v. Hawaii Nut & Bolt, Inc.

Filing 200

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS/COUNTERCLAIM PLAINTIFF SAFEWAY INC.'S MOTION TO COMPEL DOCUMENTS FROM PLAINTIFFS/COUNTERCLAIM DEFENDANTS AMERICAN AUTOMOBILE INSURANCE COMPANY AND NATIONAL SURETY CORPORATION re 146 - Signed by MAGISTRATE JUDGE KEVIN S.C. CHANG on 1/9/2017. "In accordance with the foregoing, Safeway's Motion to Compel, filed October 20, 2016, is HEREBY GRANTED IN PART AND DENIED IN PART. Any supplemental responses d irected by the Court shall be provided to Safeway by January 27, 2017. FF is to provide the Court with an unredacted version of Safeway's Exhibit L by January 16, 2017." (emt, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
AMERICAN AUTOMOBILE
INSURANCE COMPANY;
NATIONAL SURETY
CORPORATION,

)
)
)
)
)
Plaintiffs/
)
Counterclaim
)
Defendants,
)
)
vs.
)
)
HAWAII NUT & BOLT, INC.; )
SAFEWAY, INC.,
)
)
Defendants/
)
Counterclaim
)
Plaintiffs,
)
)
and
)
)
DOUGLAS MOORE; MONARCH
)
INSURANCE SERVICES, INC.; )
INSURANCE ASSOCIATES,
)
INC.,
)
)
Additional
)
Counterclaim
)
Defendants.
)
_________________________ )

CIVIL NO. 15-00245 ACK-KSC
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS/
COUNTERCLAIM PLAINTIFF
SAFEWAY INC.’S MOTION TO
COMPEL DOCUMENTS FROM
PLAINTIFFS/COUNTERCLAIM
DEFENDANTS AMERICAN
AUTOMOBILE INSURANCE
COMPANY AND NATIONAL SURETY
CORPORATION

ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS/COUNTERCLAIM PLAINTIFF SAFEWAY INC.’S
MOTION TO COMPEL DOCUMENTS FROM PLAINTIFFS/COUNTERCLAIM
DEFENDANTS AMERICAN AUTOMOBILE INSURANCE COMPANY
AND NATIONAL SURETY CORPORATION
Before the Court is Defendants/Counterclaim
Plaintiff Safeway Inc.’s (“Safeway”) Motion to Compel

Production of Documents From Plaintiffs/Counterclaim
Defendants American Automobile Insurance Company and
National Surety Corporation, filed October 20, 2016.
On December 12, 2016, Counterclaim Defendants Douglas
Moore, Monarch Insurance Services, Inc., and Insurance
Associates, Inc. filed statements of no position.
Plaintiffs/Counterclaim Defendants American Automobile
Insurance Company and National Surety Corporation
(collectively “Fireman’s Fund” or “FF”) filed their
Opposition on December 13, 2016.

On December 20, 2016,

Safeway filed its Reply.
This matter came on for hearing on January 3,
2017.

Steven Allison, Esq., and Stuart Fujioka, Esq.,

appeared on behalf of Fireman’s Fund.

Judith Pavey,

Esq., and Maile Miller, Esq., appeared, and Terence
O’Toole, Esq., appeared by phone, on behalf of Safeway.
Corlis Chang, Esq., appeared on behalf of Insurance
Associates, Inc., and Donna Marron, Esq., and Sasha
Hamada, Esq., appeared on behalf of Douglas Moore and
Monarch Insurance Services, Inc.

After careful

consideration of the parties’ submissions, the
2

applicable law, and the arguments presented at the
hearing, the Court HEREBY GRANTS IN PART AND DENIES IN
PART the Motion for the reasons set forth below.
BACKGROUND
As the Court and the parties are wellacquainted with the facts and procedural history of
this case, the Court includes only those facts
pertinent to the disposition of the instant Motion.
On May 27, 2016, Safeway served FF with its
First Request for Production of Documents (“RPOD”).
Due to an anticipated substitution of counsel, Safeway
granted FF an extension of time to respond to the RPOD.
On July 14, 2016, FF’s former counsel Tom
Petrus & Miller LLC withdrew and Crowell & Moring LLP,
along with local counsel Stuart Fujioka, appeared.
On September 15, 2016, FF began producing
documents on a rolling basis.

Production continued

through the end of October 2016.

During this time

period, counsel for the parties exchanged
communications regarding the sufficiency of FF’s
responses and production.
3

On October 20, 2016, Safeway filed the instant
Motion.
On December 16, 2016, Senior U.S. District
Judge Alan C. Kay issued an Order Granting Plaintiffs
American Automobile Insurance Company’s and National
Surety Corporation’s Motion to Dismiss Breach of
Contract and Reformation Counterclaims in Second
Amended Counterclaim (“Dismissal Order”), which
dismissed Safeway’s breach of contract and reformation
claims with leave to amend by January 15, 2017.
LEGAL STANDARD
Federal Rule of Civil Procedure (“FRCP”) 26
provides:
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 this scope of discovery
need not be admissible in evidence to be
discoverable.
4

Fed. R. Civ. P. 26(b)(1).

Relevance “has been

construed broadly to encompass any matter that bears
on, or that reasonably could lead to other matter that
could bear on, any issue that is or may be in the
case.”

Oppenheimer Fund, Inc. v. Sanders, 437 U.S.

340, 351 (1978).

At the same time, it has its

“ultimate and necessary boundaries.”

Id.

“District

courts have broad discretion in determining relevancy
for discovery purposes.”

Surfvivor Media, Inc. v.

Survivor Prods., 406 F.3d 625, 635 (9th Cir. 2005)
(citing Hallett v. Morgan, 296 F.3d 732, 751 (9th Cir.
2002)).
The 2015 amendment to FRCP 26 added
proportionality as a requirement for obtaining
discovery.

Thus, “relevancy alone is no longer

sufficient to obtain discovery, the discovery requested
must also be proportional to the needs of the case.”
Centeno v. City of Fresno, Case No. 1:16-cv-00653-DADSAB, 2016 WL 7491634, at *4 (E.D. Cal. Dec. 29, 2016)
(citing In re Bard IVC Filters Prod. Liab. Litig., 317
F.R.D. 562, 564 (D. Ariz. 2016)).
5

Addressing all

proportionality considerations does not rest solely
with the party seeking discovery.

Fed. R. Civ. P.

26(b)(1) advisory committee’s note to 2015 amendment.
Instead, “[t]he parties and the court have a collective
responsibility to consider the proportionality of all
discovery and consider it in resolving discovery
disputes.”

Id.

District courts have broad discretion to limit
discovery where the discovery sought is “unreasonably
cumulative or duplicative, or can be obtained from some
other source that is more convenient, less burdensome,
or less expensive.”

Fed. R. Civ. P. 26(b)(2)(C).

Limits also should be imposed where the requesting
party has had ample opportunity to obtain the
information through discovery in the action or the
discovery is outside the scope of permissible discovery
under FRCP 26(b)(1).

Id.

In the event a party fails to respond to a
discovery request, the party who served the discovery
request may file a motion to compel.
37(a)(3)(B)(iii)-(iv).

Fed. R. Civ. P.

An incomplete or evasive answer
6

or response is deemed a failure to answer or respond.
Fed. R. Civ. P. 37(a)(4).

The motion to compel 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); see also Local Rule 37.1(a), (b).
ANALYSIS
By way of this Motion, Safeway requests an
order:

1) compelling FF to provide appropriate

responses and/or objections to all of the requests;
2) compelling FF to produce the documents and ESI in
the form requested by Safeway; 3) compelling FF to
respond to and produce the documents and ESI responsive
to those requests they refuse to respond to (RPOD nos.
7, 17, 20, 24, 25, 25, 27, 29, 30, 31, 32, 33, 35, 36,
38, 39, 47, 49, 50, 51, 53, 54, 55, 56, 57, and 58);
4) compelling FF to produce responsive documents and
ESI to the requests for which they have unreasonably
limited or withheld production (RPOD nos. 8, 9, 13, 26,
34, 42, 45, and 48); and 5) awarding Safeway its
7

reasonable attorneys’ fees and costs incurred in
connection with this Motion.
As an initial matter, the Court addresses FF’s
contention that Safeway did not engage in a meaningful
meet and confer.

Rule 37.1 of the Local Rules of

Practice for the U.S. District Court for the District
of Hawaii (“Local Rules”) provides:
The court will not entertain any motion
pursuant to Fed. R. Civ. P. 26 through 37,
including any request for expedited
discovery assistance pursuant to
LR37.1(c), unless counsel have previously
conferred, either in person or by
telephone, concerning all disputed issues
(including the requirement that discovery
be proportional to the needs of the
case), in a good faith effort to limit the
disputed issues and, if possible,
eliminate the necessity for a motion or
expedited discovery assistance.
Local Rule 37.1(a).

Although it would have been

preferable for the parties to have resolved or more
effectively limited the subject disputes without
involving the Court, the Court finds that the meet and
confer requirement was satisfied.

Therefore, the Court

now turns to the merits of the disputes.

8

A.

Claims and Underwriting Files in the Underlying
Lawsuit
Safeway seeks all of HNB’s claims and

underwriting files in the underlying lawsuit and does
not accept FF’s claims of attorney client privilege and
work product doctrine with respect to the portions of
the files that have been withheld.

FF represents that

all claims and underwriting files for HNB have been
produced, with the exception of privileged
communications and documents with separate coverage
counsel and information on reserves.

FF claims that it

is unaware of any additional non-privileged responsive
documents and that it has produced all non-privileged
documents responsive to RPOD nos. 8, 9, 13, 17, 29, 30,
31, 32, 33, 34, and 36.

Safeway believes the Court

should conduct an in camera review to determine whether
the withheld documents have been appropriately
designated as privileged/protected.1

1

Neither party could provide a concrete estimate
of the number of documents or pages that are
implicated.
9

The Court accepts counsel’s representations
concerning the content of the withheld documents, as
well as the representation that all non-privileged
documents have been produced.

The Court declines to

order further production or conduct an in camera review
of all withheld documents in this category based solely
on Safeway’s speculation that FF has improperly
designated the documents as privileged or protected.
Accordingly, the Court DENIES the Motion to the extent
it seeks further production and/or an in camera review
of all documents from the claims and underwriting files
from the underlying lawsuit for which FF asserts
privilege/protection.2
Notwithstanding the foregoing, the Court shall
make a limited exception with respect to Safeway’s
Exhibit L, which is a document entitled Corporate

2

Likewise, the Court finds that based on FF’s
representations, FF need not produce additional
documents created during the underlying case and
adjustment of HNB’s claim. FF asserts that it produced
all documents in its possession from the defense of HNB
in the underlying action including communications with
and work product of underlying defense counsel.
10

Position Statement, Coverage Issues and Declaratory
Relief Actions.

Safeway identifies this document as a

policy manual that should be produced, but FF’s counsel
explained at the hearing that this is a unique
document.

Per FF’s counsel, FF asked coverage counsel

to make determinations about positions.

Exhibit L was

prepared by coverage counsel and advises FF about how
claims are to be handled.3

The Court will review this

document in camera to determine whether the redactions
are warranted.

FF is directed to provide the Court

with an unredacted copy of this document by January 16,
2017.
B.

Reserves Information
Safeway requests an order compelling the

production of documents relating to the setting of
reserves.

It asserts that information concerning the

setting of reserves is probative of FF’s assessment of
HNB’s exposure, as well as FF’s exposure.

FF has

objected to the production of reserves information,
3

FF’s counsel additionally argued that the
document is irrelevant.
11

characterizing the same as nothing more than educated
guesses about what an insurer may be required to pay if
coverage exists and the costs of defending a case.
“In an insurance context, the term ‘reserve’
refers to ‘a fund of money set aside by a bank or an
insurance company to cover future liabilities.’”
Metropolitan Life Ins. Co. v. Ogandzhanova, No. CV-12372–PHX-GMS, 2013 WL 1442581, at *1 (D. Ariz. Apr. 9,
2013) (quoting BLACK’S LAW DICTIONARY (9th ed. 2009)).

The

method of calculating reserves is central to the
relevance of the reserve information.

If calculations

rely on automatic factors rather than an analysis of
the factual or legal merits of the insured’s specific
claim, the relevance diminishes significantly.
*2.

Id. at

By contrast, “when calculation of the reserve

amount ‘entail[s] an evaluation . . . based upon a
thorough factual consideration’, the information will
be relevant.”

Id. (citation and internal quotations

omitted).
Here, FF’s counsel conceded at the hearing that
although the setting of reserves is in part an
12

accounting exercise to comply with statutory/regulatory
schemes, some analysis is conducted.

The Court

therefore finds that the reserves information with
respect to HNB’s claim is relevant and proportional to
the needs of the case.

FF is ordered to produce all

non-privileged documents responsive to the requests
related to reserves information.

Bernstein v.

Travelers Ins. Co., 447 F. Supp. 2d 1100, 1107-08, 1116
(N.D. Cal. 2006) (finding that reserves were
discoverable in a bad faith action to shed light on the
defendant insurance company’s internal assessments of
the insurance claim).
To address concerns about confidential,
propriety, and/or trade secret information that may be
implicated, the parties are directed to submit a
stipulated protective order for the Court’s review and
approval,4 and any production regarding reserves shall

4

At minimum, the protective order should prohibit
the parties or their counsel from using information
obtained in this litigation for any purpose other than
this litigation and from disclosing the same to anyone
who is not an officer or agent of the Court or a party
to the action.
13

be subject to that protective order.

Id. at 1116

(ordering production of reserve information subject to
a protective order “prohibiting plaintiffs or their
counsel from using the information for any purpose
other than this litigation and from disclosing it to
anyone who is not an officer or agent of this court or
a party to this action (or such party’s agent)”).
C.

Personnel Files
Safeway seeks the personnel files and

information for individuals who played a role in the
handling of HNB’s insurance claim.

FF has concerns

about the privacy rights of its employees as well as
third parties.

FF also objects to the production of

personnel files because Safeway’s claims are against
FF, not the individual adjusters.

Finally, FF

challenges Safeway’s contention that personnel files
typically reveal a scheme for incentivizing employees
to delay or deny claims, noting that it has provided
interrogatory responses that no such incentive programs
exist; that Safeway has deposed several adjusters who
handled HNB’s claim; and that its personnel files do
14

not contain information regarding training experience.
“[P]ersonnel files in bad faith actions have
routinely been found to be relevant and discoverable.”
Gowan v. Mid Century Ins. Co., 309 F.R.D. 503, 512
(D.S.D. 2015) (citation omitted).

This is because

“[p]ersonnel files may reveal an inappropriate reason
or reasons for defendant’s action with respect to
plaintiff’s claim or an ‘improper corporate culture.’”
Id. (citation omitted); White Mountain Cmtys. Hosp.
Inc. v. Hartford Cas. Ins. Co., No. 3:13-CV-8194 JWS,
2014 WL 6885828, at *4 (D. Ariz. Dec. 8, 2014) (“The
contents of the personnel files of the three
individuals may disclose information showing that the
adjustors had reasons to ‘low-ball’ their evaluations,
were not actually competent to adjust the type of claim
made by White Mountain, or did not process the claim in
a reasonable manner.

Any such information would be

highly relevant to White Mountain’s claims in this
lawsuit (and contrary information would serve to defeat
White Mountain’s claims).”).

15

The Court acknowledges that privacy concerns
are implicated in the production of personnel files.
However, under the circumstances, and given the claims
asserted by Safeway, the personnel files for those
individuals involved in the handling of HNB’s insurance
claim are relevant and proportional to the needs of the
case, and are thus discoverable.
Safeway alleged breach of contract, bad faith,
negligent misrepresentation and omission, and
reformation claims against FF in its Second Amended
Counterclaim.5

Doc. No. 64.

The personnel files of the

individuals who handled HNB’s claim may contain
information relevant to these claims, as well as FF’s
defenses.

Moreover, although Safeway may have deposed

some of these individuals, depositions are not a
substitute for the contemporaneous information that may
be included in personnel files.

Liberty Mut. Ins. Co.

V. Cal. Auto. Assigned Risk Plan, No. 3:11-CV-01419-

5

Although the breach of contract and reformation
claims were dismissed in Judge Kay’s Dismissal Order,
he granted Safeway leave to file an amended pleading,
the deadline for which has yet to expire.
16

MMC(JSC), 2012 WL 892188, at *7 (N.D. Cal. Mar. 14,
2012) (“[E]x post facto deposition testimony of Mr.
Hartman or other Liberty Mutual employees regarding his
job performance will not prove as relevant or reliable
as objective evaluations conducted outside this
lawsuit.

Further, the ‘personnel documents in Mr.

Hartman’s file prior to the Harlan/Ten Berge matter are
the best illustration of what Liberty Mutual knew or
believed – at the time of the [Underlying Action] about Mr. Hartman’s competence,’ and therefore provide
the best evidence of the reasonableness of the
company’s choice to rely on his advice.”) (second
alteration in original).
Consequently, the Court directs FF to produce
the personnel files of those individuals who played a
role in handling HNB’s insurance claim.6

6

To address the

Even under a heightened standard that requires a
balancing of the need for discovery with the right of
privacy, the Court would conclude that production is
appropriate. All Star Seed v. Nationwide Agribusiness
Ins. Co., No. 12CV146-L BLM, 2013 WL 1882260, at *3
(S.D. Cal. May 3, 2013) (citation and quotations
omitted) (“In the context of discovery of confidential
information in personnel files, even when such
17

privacy concerns cited by FF, protected privacy
information should be redacted.

White Mountain, 2014

WL 6885828, at *4 (‘Certainly, the employees have a
reasonable expectation that no information will be
disclosed which would identify family members, social
security numbers, place of residence, phone numbers,
private email addresses, anything relating to a medical
condition, or similar essentially private matters.

The

material produced should be redacted by Hartford so
that none of these matters are disclosed.”).
information should be produced unredacted.

Other
Such

information is directly relevant to litigation,
discovery will not be permitted until a balancing of
the compelling need for discovery against the
fundamental right of privacy determines that disclosure
is appropriate.”). Not only are the subject personnel
files clearly relevant, the information sought cannot
be readily obtained by other means, as discussed above.
Id. (quoting Matter of Haw. Corp., 88 F.R.D. 518, 524
(D. Haw. 1980)) (alteration in original) (citations and
quotations omitted) (“[E]ven where strong public policy
against disclosure exists, as in the case of personnel
files, discovery is nonetheless allowed if (1) the
material sought is ‘clearly relevant,’ and (2) the need
for discovery is compelling because the information
sought is not otherwise readily obtainable.”).

18

information shall be produced subject to the protective
order to be submitted by the parties to alleviate
concerns about confidentiality or dissemination to
third parties.

Id. (“What is produced will be subject

to the protective order, so anything negative about an
employee’s work, anything relating to an employee’s
compensation, and anything else reflected in the
material produced will not be disseminated to any third
party.”); Goran, 309 F.R.D. at 512 (“For the remaining
contents of the personnel files at issue, the district
court’s protective order assures the confidentiality of
these documents.”).
D.

Other Policies, Claims, and Complaints
Safeway requests reports, analysis, documents,

and ESI relating to claims, complaints, or lawsuits
involving FF that are similar to the instant insurance
claim, i.e. CGL policies issued to business in the
State of Hawaii for the past 15 years and claims made
under those policies.

FF opposes the request as

overbroad, irrelevant, and unduly burdensome.
estimates that in the past 15 years, there were
19

It

approximately 340,000 claims under CGL policies for FF
companies and its systems are incapable of conducting
electronic searches to locate similar claims.
Inasmuch as FF’s handling of other similar
insurance claims and lawsuits in Hawaii is relevant to
the claims in this action, it is discoverable.

Mauna

Kea Beach Hotel Corp. v. Affiliated FM Ins. Co., No.
07-00605 DAE-KSC, 2009 WL 1227850, at *1, *5 (D. Haw.
May 1, 2009) (concluding that the defendant insurance
company’s handling of other claims and lawsuits in
Hawaii is relevant to a bad faith claim).

The Court

also finds that the discovery of this information is
proportional to the needs of the case, with the
limitations to be imposed by the Court.
To minimize the burden to FF, production shall
be limited to paid claims/settlements and lawsuits in
Hawaii for a 10-year period (2005-2015) involving CGL
policies that included the same provisions/exclusions
that formed the basis of the denial of coverage.

The

production should also be limited to products liability
claims involving property damage that resulted from an
20

occurrence.

Id. at *5 (finding that limiting the

production to claims in Hawaii, along with a narrowing
of the years of production, substantially reduced the
burden to the insurance company).
E.

Claims Manuals and Guidelines, Training and
Marketing Materials
Safeway seeks claims manuals and guidelines,

training materials, and marketing materials.

It

concedes that FF produced claims manuals, but no
training materials, no resource materials for policy
language interpretation, and no marketing materials.
FF claims to have produced all non-privilege documents
consisting of claims manuals and guidelines, training
materials, and marketing materials that it has been
able to locate.

FF represents that it additionally

provided interrogatory responses listing resources
available to FF’s adjusters for claims handling.
the hearing, FF’s counsel explained that training
occurs in an informal manner and that there is no

21

At

central repository for training materials.7
Based on FF’s representations that it is not
withholding anything and has produced all responsive
documents it has been able to locate, as well as
interrogatory responses listing resources available to
its adjusters in handling claims, the Motion is DENIED
without prejudice.

The Court declines to compel

further production of documents regarding this category
of requests.
F.

Miscellaneous Categories
FF identifies several requests that were not

specifically addressed in the Motion and were
improperly grouped with the categories already
addressed:
1.

RPOD nos. 7, 25, 47, 54, and 55.

RPOD no. 7 - Compensation
RPOD no. 7 requests “[a]ll Documents reflecting

your compensation resulting from the issuance of each

7

For example, according to FF’s counsel, training
occurs via webinars, the access links for which are
temporary. Trainers are brought into offices, but
there are no materials that are generated from those
training sessions to produce.
22

of the Policies insuring HNB, and that show the
distribution of the premiums including amounts
distributed to and/or received by third parties.”
Mot., Decl. of Judith Pavey, Ex. A.

Safeway submits

that this request falls under the personnel files
category because courts frequently group compensation
into the same category as personnel.

That is true with

respect to compensation of the individual whose
personnel file is sought.

However, RPOD no. 7 appears

to seek FF’s compensation.

Given this discrepancy, FF

need not respond at this time.

Safeway should amend

this request to clarify the information it seeks to
obtain and provide the amended request to FF.
2.

RPOD no. 25 - Third Party Information
RPOD no. 25 requests information about “anyone

involved in any decision by you concerning HNB who was
not your employee, all documents concerning the scope
of their involvement, their employer, their credentials
and what they said or did.”

Id.

FF challenges this

request on the grounds that it is overbroad and
irrelevant.

In its Reply, Safeway clarified that it is
23

requesting relevant personnel information related to
any third parties hired/retained by FF to aid in
evaluating HNB’s claims.

Reply at 12-13 n.9.

The

Court finds that this request, as clarified and limited
in the Reply, seeks relevant information that is
proportional to the needs of the case.

Therefore, FF

should provide all non-privileged documents responsive
to the amended RPOD no. 25.
3.

RPOD no. 47 - Handbooks and Manuals Regarding
Employment Terms and Goals
RPOD no. 47 requests “[a]ll employee handbooks,

human resources manuals and personnel manuals relevant
to the employment terms and goals of CGL claims
adjusters/handlers during the time of the Claims.”

Id.

For the reasoning articulated with respect to personnel
files, FF is directed to produce documents responsive
to this request.
4.

RPOD no. 54 - Criteria for Promotion/Demotion,
Award/Bonus Programs/Payments
RPOD no. 54 requests “[a]ll documents that

describe your criteria for promotion, demotion and
commendation, including bonus programs/payments, and
24

employee recognition programs relevant to CGL claims
adjusters/handlers during the time of the Claims.”

Id.

For the reasoning articulated with respect to personnel
files, FF is directed to produce documents responsive
to this request.
5.

RPOD no. 55 - Net Worth
RPOD no. 55 requests FF’s net worth and FF

argues that information concerning its net worth is
non-discoverable unless there is “prima facie” evidence
that punitive damages are warranted.

The Court

disagrees.
Discovery of a defendant’s financial
information is in fact permissible when punitive
damages are sought.

Vollert v. Summa Corp., 389 F.

Supp. 1348, 1350-51 (D. Haw. 1975); Bakersfield Pipe &
Supply, Inc. v. Cornerstone Valve, LLC, Case No.: 1:14CV-01445, 2016 WL 3538251, at *4 (E.D. Cal. Jun. 29,
2016) (alterations in original) (citation omitted)
(“Because ‘[t]he discovery of financial information
[is] relevant to a putative [sic] damages claim,’ it is
permissible under the Federal Rules of Civil Procedure
25

without a prima facie showing by Plaintiff.”); Phillips
v. Clark Cty. Sch. Dist., No. 2:10-CV-02068-GMN-GWF,
2012 WL 135705, at 13 (D. Nev. Jan. 18, 2012) (citation
and quotations omitted) (“Although the Ninth Circuit
has not defined the parameters of the dissemination of
financial information during discovery when punitive
damages are alleged, EEOC v. Cal. Psychiatric
Transitions, 258 F.R.D. 391 (E.D. Cal. 2009), most
courts do not require the plaintiff to make a prima
facie showing of merit on its punitive damage claim
before permitting discovery of a defendant’s net
worth.”).
FF relies on Dunlea v. Dappen, 83 Hawai‘i 28,
924 P.2d 196 (1996), overruled on other grounds by Hac
v. Univ. of Haw., 102 Hawai‘i 92, 73 P.3d 49 (2003), to
support its position.

However, Dunlea did not prohibit

discovery of a defendant’s financial information.
Rather, it accorded the trial court the discretion to
allow such discovery subject to protections designed to
avoid prejudice to a defendant.

26

We generally agree with the trial court
that discovery of a defendant’s assets is
not appropriate “until there’s a prima
facie showing in discovery that you are
going to get to a jury on punitives.”
Although a prima facie showing necessarily
precedes a judgment on liability for
punitive damages, the trial court has
discretion to fashion appropriate orders
and procedures to avoid prejudice to the
defendant. For example, the court may
allow discovery of Dappen’s assets,
subject to a protective order (e.g.,
allowing discovery of the information, but
subject to specific instructions that the
information is to be provided to the
attorney only and shall not be divulged to
anyone, including the attorney’s client,
until such time as the trial court lifts
the protective order), and/or the court
may bifurcate the issues of liability and
damages so that evidence of Dappen’s
financial condition is not admissible
until the jury has determined whether
Dunlea’s claim was timely brought and
whether Dappen is liable.
Id. at 39 n.12, 924 P.2d at 207 n.12 (emphasis added).
Accordingly, FF is directed to respond to RPOD no. 55,
but any such production is subject to the protective
order to be submitted by the parties.
G.

ESI
Safeway takes issue with FF’s failure to

produce ESI in the manner it designated and/or in the
27

manner in which it is maintained in the ordinary course
of business.
the ESI.

Safeway seeks to obtain the metadata for

FF contends that it produced the documents in

the formats in which they are maintained and that the
federal rules do not require the conversion of
documents to formats other than those in which they
were maintained.
FRCP 34(b)(2)(E) provides:
(E) Producing the Documents or
Electronically Stored Information. Unless
otherwise stipulated or ordered by the
court, these procedures apply to producing
documents or electronically stored
information:
(i) A party must produce documents as they
are kept in the usual course of business
or must organize and label them to
correspond to the categories in the
request;
(ii) If a request does not specify a form
for producing electronically stored
information, a party must produce it in a
form or forms in which it is ordinarily
maintained or in a reasonably usable form
or forms; and
(iii) A party need not produce the same
electronically stored information in more
than one form.
Fed. R. Civ. P. 34(b)(2)(E).
28

“[T]he primary source of

ESI to be produced during discovery’s progression
should be active ESI, typically defined as ESI
currently or habitually in use by the requested
entity.”

U.S. ex rel. Carter v. Bridgepoint Educ.,

Inc., 305 F.R.D. 225, 238 (S.D. Cal. 2015) (citing 26
The Sedona Principles:

Best Practices Recommendations

& Principles for Addressing Electronic Document
Production 139 (2d ed. 2007)).

The responding party

cannot argue that expenditure of time and effort
relieves it of its obligation to produce accessible
data.

Id. (citations omitted).
“With its potential relevance under Rule

26(b)(2) unquestioned, the metadata of both archival
and active ESI has been found to be discoverable.

Id.

(citing Aguilar v. Immigration & Customs Enforcement
Div., U.S. Dep’t of Homeland Sec., 255 F.R.D. 350,
355-56 (S.D.N.Y. 2008)).

Whether or not a responding

“party must supply metadata depends on the form in
which the ESI whose metadata is sought is kept in the
ordinary course of business.”

Id. (citation omitted).

“Assuming a precise and detailed demand has been
29

tendered by the propounding party-and a claim for any
and all ‘documents’ will rarely suffice-active ESI and
its metadata is discoverable and producible at the
requested party’s expense.”

Id. at 238-39.

ESI must be produced in the form in which it is
maintained in the ordinary course of business, and if
this includes metadata, the metadata must also be
provided to Safeway.

As discussed at the hearing, the

parties should put their respective IT representatives
in contact to see if an understanding can be reached
about the format in which the ESI can be produced, as
well as the related metadata (if any such metadata
exists).
H.

Amended Responses
Safeway asks the Court to order FF to indicate

whether documents are being withheld on the basis of
their asserted objections.

Having reviewed FF’s

responses, the Court finds that they sufficiently
identified the relevant objections and indicated
whether or not FF intended to produce responsive
documents.

As such, the Court denies the request to
30

order FF to provide amended responses to all of the
requests asserting objections.
I.

Attorneys’ Fees and Costs
Finally, Safeway requests the fees and costs it

incurred in connection with this Motion pursuant to
FRCP 37.

FRCP 37(a)(5)(C) provides:
(C) If the Motion Is Granted in Part and
Denied in Part. If the motion is granted
in part and denied in part, the court may
issue any protective order authorized
under Rule 26(c) and may, after giving an
opportunity to be heard, apportion the
reasonable expenses for the motion.

Fed. R. Civ. P. 37(a)(5)(C).

Insofar as this Motion is

granted in part and denied in part, the Court,
exercising its discretion, declines to award fees and
costs to Safeway.
In sum, the Court rules as follows:
•

The Motion is GRANTED as to:
1) reserves information;
2) personnel files for those individuals who played
a role in the handling of HNB’s insurance claim;
3) paid claims/settlements and lawsuits in Hawaii
for a 10-year period (2005-2015) involving
a) CGL policies that included the same
31

provisions/exclusions that formed the basis of
the denial of coverage and
b) products liability claims involving property
damage that resulted from an occurrence;
4) personnel information related to any third
parties hired/retained by FF to aid in evaluating
HNB’s claims (amended RPOD no. 25);
5) RPOD nos. 47 (handbooks/manuals regarding
employment terms and goals), 54 (promotion/demotion
criteria, awards/bonus programs/payments), and 55
(net worth); and
6) in camera review of Exhibit L, which shall be
produced to the Court by January 16, 2017.
•

The Motion is DENIED as to:
1) claims and underwriting files from the
underlying case;
2) documents created in the underlying case and
adjustment of HNB’s claims;
3) claims manuals and guidelines, training and
marketing materials;
4) RPOD no. 7 (compensation);
5) Safeway’s request to order FF to submit amended
responses; and
6) Safeway’s request for attorneys’ fees and costs.

•

The Court reserves ruling on Safeway’s request for
ESI to be re-produced pending the consultation
between the parties’ IT representatives.
All supplemental production directed in this
32

Order should be completed by 1/27/17.
CONCLUSION
In accordance with the foregoing, Safeway’s
Motion to Compel, filed October 20, 2016, is HEREBY
GRANTED IN PART AND DENIED IN PART.

Any supplemental

responses directed by the Court shall be provided to
Safeway by January 27, 2017.

FF is to provide the

Court with an unredacted version of Safeway’s Exhibit L
by January 16, 2017.
IT IS SO ORDERED.
DATED:

Honolulu, Hawaii, January 9, 2017.

_____________________________
Kevin S.C. Chang
United States Magistrate Judge

CIVIL NO. 15-00245 ACK-KSC; AMERICAN AUTOMOBILE INSURANCE CO., ET AL. V.
HAWAII NUT & BOLT, INC., ET AL.; ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS/ COUNTERCLAIM PLAINTIFF SAFEWAY INC.’S MOTION TO COMPEL DOCUMENTS
FROM PLAINTIFFS/COUNTERCLAIM DEFENDANTS AMERICAN AUTOMOBILE INSURANCE COMPANY
AND NATIONAL SURETY CORPORATION

33