LaBrier v. State Farm Fire and Casualty Company

Filing 176

ORDER entered by Judge Nanette Laughrey, denying Defendant State Farm's motion to vacate, Doc. 135 . (Barragan-Scott, Alana)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF MISSOURI
CENTRAL DIVISION
AMANDA M. LABRIER, individually,
and on behalf of all others similarly
situated,
Plaintiff,
vs.
STATE FARM FIRE AND CASUALTY
COMPANY,
Defendant.

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No. 2:15-cv-04093-NKL

ORDER
On April 6, 2016, Special Master Leland Shurin 1 ordered Defendant State Farm Fire and
Casualty Company to answer Plaintiff Amanda LaBrier’s second set of interrogatories by
5/6/2016. [Docs. 117 and 125.] On April 14, 2016, State Farm objected to the Special Master’s
order, arguing the interrogatories are unduly burdensome and the order penalizes State Farm for
its record keeping. State Farm asks the Court to vacate or suspend the order. [Doc. 135.]
For the reasons discussed below, the Court concludes the Special Master did not abuse
his discretion in entering the order. State Farm’s motion is therefore denied.
I.

Background
In May 2015, State Farm removed this case from state court, filing the supporting

declaration of its employee Juan Guevara, in which he explained he used State Farm’s and
Xactware Solutions, Inc.’s data to generate calculations of class size and alleged damages.
Since July 2015, LaBrier has been serving State Farm with discovery concerning State

1

Mr. Shurin was agreed to by the parties and appointed in February 2016.

Farm’s data related to putative class members and damages. 2 In October 2015, as a means to
streamline discovery, LaBrier proposed that State Farm provide a list of data fields that were
available in State Farm’s and Xactware’s databases, including a list of fields for State Farm’s
internal claims payment data. State Farm would not do so. LaBrier then deposed Naresh
Jangda, a State Farm software engineer who writes computer code to retrieve data from State
Farm’s internal claim system and who has done so to retrieve class-wide data in other labor
depreciation class actions. Jangda testified that State Farm maintained a list of data fields and
that he could put almost any such data field into an Excel spreadsheet. LaBrier also deposed
Jamie Stoddart, an Xactware developer who writes code to retrieve data from Xactware
databases. Similar to Jangda, Stoddart testified he has done so to retrieve class-wide data on
behalf of State Farm in other labor depreciation class actions, that Xactware maintained a list of
data fields, and that he could put almost any such data field into an Excel spreadsheet.
In March 2016, LaBrier told the Special Master that she sought a list of all data fields for
both systems, and wanted to obtain remote access to State Farm’s electronic claims system.
State Farm objected, arguing that the identity of data fields and operation of its complex
proprietary electronic claim system were highly confidential and constituted trade secrets, and
doing so would not yield the information LaBrier sought. The Special Master preliminarily ruled
that in lieu of providing data fields or remote access, State Farm should answer interrogatories
asking for labor depreciation withheld and the dates relevant to calculation of prejudgment
interest, and State Farm’s affirmative defenses.

2

LaBrier served her first requests for production in July 2015; first set of
interrogatories in October 2015; second requests for production, a notice of deposition of State
Farm’s employee, and a subpoena duces tecum on Xactware Solutions, Inc.’s employee in
December 2015; a notice of deposition on Xactware’s employee in January 2016; five notices of
deposition in February and March 2016; and a second set of interrogatories in March 2016.
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In total, the Special master held six in-person and telephone hearings from 3/4/2016 to
4/1/2016 before issuing Order No. 4, and reviewed extensive written argument, and numerous
depositions and other evidence submitted by the parties. The Special Master concluded the
interrogatories sought information that is within the scope of Rule 26, in that they sought
information relevant to the case, and were proportional to the needs of the case, considering the
factors expressly provided under Rule 26(b).

He noted that State Farm’s primary issue

concerned whether the burden or expense of the proposed discovery outweighs its likely benefit.
He observed that the authorized scope of discovery in this case concerns both merits and
certifiability, so LaBrier was entitled to conduct discovery on both. He concluded that State
Farm had identified a universe of 150,000 Missouri claims at issue, and State Farm’s
own briefing confirms that the computerized information available
to it for each of the…claims as to which the Interrogatories could
potentially seek information[] includes the following:
(a)
(b)
(c)
(d)

The incremental amounts paid on the claim;
The total amounts paid on the claim;
The amount of the relevant deductible;
The amount of the relevant policy limits, under
Coverage A;
(e) The amount of the calculated “Actual Cash Value”; and
(f) The amount of labor depreciation deducted, in the
course of calculating “Actual Cash Value.”
[Doc. 117, pp. 2-3.] Furthermore, the Special Master concluded, it appeared that the amounts of
withheld depreciation called for in the interrogatories could be determined from State Farm’s
computerized records with respect to at least a subset of the 150,000 claims: “(a) the total
claims payments made were equal to the calculated "Actual Cash Value" amount (less the
relevant deductible), and (b) these total payments were still less than the total maximum
amount that might be payable (in light of the relevant policy limits), if the claim was resolved
on the basis of actual repair or replacement cost.” [Id., p. 3.] “Consequently,” the Special
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Master concluded, “it would appear that individualized claim-file review would not be required
in order to” answer the interrogatories, “at least with respect to a significant portion of” the
claims. [Id.]
T he Special Master concluded that even if the above rationale was incorrect, State Farm
should be required to answer the interrogatories for additional reasons. State Farm was being
ordered to answer interrogatories in lieu of producing documents, which State Farm had
described as a substantial burden. To the extent State Farm’s computerized data was not readily
accessible, it is because of State Farm’s purported inability to access the data, notwithstanding
that State Farm itself uses the same categories of information pertinent to the calculation of
amounts owed its insureds. “At the very least, [State Farm’s] failure to keep such records should
not constitute justification to withhold relevant discovery from [LaBrier].” [Id. at p. 4.]
The Special Master set out the approved interrogatories in the Order. State Farm was
ordered to answer the following interrogatories by May 6, 2016:
INTERROGATORY NO. 1: Separately for each structural damage
claim upon which you made one or more actual cash value ("ACV") payments to
Missouri policyholders, and for which some amount of depreciation of labor
was withheld from at least one of those ACV payments, please state the total,
principal amount of labor depreciation that was actually withheld by you for
each claim, subject to the applicable deductibles and policy limits. The criteria
for this interrogatory are as follows:
a.

b.
c.
d.

The temporal scope of this interrogatory includes claims for which
the first ACV payment was between March 30, 2005 and the
present and
Excluded from this interrogatory is any structural damage claim
that is or was subject to appraisal and
Excluded from this interrogatory is any structural damage claim
that is or was the subject of an individual lawsuit and
By the terms of this interrogatory, excluded from this interrogatory
is any claim for which State Farm paid its full limits of available
coverage, without regard to the withholding of labor depreciation.

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INTERROGATORY NO. 2: Separately state, for each structural
damage claim within the scope of Interrogatory No. 1 (including its criteria) and
for which you withheld labor depreciation of any amount from a Missouri
policyholder, state the date that labor depreciation was first withheld. If multiple
labor depreciation withholdings took place for a particular claim, state both the
date(s) and amount(s) of the withheld labor depreciation.
INTERROGATORY NO. 3: Separately state, for each structural
damage claim within the scope of Interrogatory No. 1 (including its criteria) and
for which you withheld labor depreciation of any amount from a Missouri
policyholder, whether you contend you subsequently paid a portion or all of the
withheld labor depreciation for such claim, and, if so, set forth the date and
amount of the withheld labor depreciation that was later paid. If you contend that
payment of withheld labor depreciation took place on multiple dates for a
particular claim, state both the date(s) and amount(s) of payment(s) of the
withheld labor depreciation.
INTERROGATORY NO. 4: Separately state, for each structural
damage claim within the scope of Interrogatory No. 1 (including its criteria) and
for which you withheld labor depreciation of any amount from a Missouri
policyholder, which of your affirmative defenses apply to such claim and the facts
supporting your affirmative defense(s) for such claim.
[Doc. 125, pp. 3-4.]
II.

Discussion
Focusing on the burden of compliance, State Farm argues that the discovery is not

proportional to the needs of the case.
A.

Standard for review of the Special Master’s order

Because the Order appointing the Special Master in this case was silent as to the standard
of review, his discovery orders are reviewed by this Court for abuse of discretion. See Fed. R.
Civ. P. 3(f)(5) (a “court may set aside a master’s ruling on a procedural matter only for an abuse
of discretion” unless the order of appointment “establishes a different standard”); and, see, e.g.,
In re. Hardieplank Fiber Cement Siding Litig., 2014 WL 5654318, at *1 (D. Minn. Jan. 28,
2014) (special master’s discovery orders are procedural and subject to review for abuse of
discretion).
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State Farm argues the standard is de novo, but the cases it cites are unpersuasive. They
involve review of orders concerning disputes referred to special masters for report and
recommendation. E.g., Koninklijke Philips Electronics N.V. v. Zoll Lifecor Corp., 2014 WL
4660539 (W.D. Pa. Sept. 17, 2014) (motion to compel referred to special master for report and
recommendation, which court adopted in part). Here, the Special Master is authorized to make
discovery orders. State Farm also suggests that LaBrier’s cited authority, Advanced Microtherm,
Inc. v. Norman Wright Mech. Equip. Corp., 2007 WL 878566, *1 (N.D. Cal. Mar. 20, 2007),
establishes a more rigorous review standard when discovery disputes are not “standard” ones.
The court in Advanced simply observed that the dispute before it was a standard discovery
dispute, and not functionally similar to a dispositive order, and proceeded to apply the abuse of
discretion standard in reviewing the special master’s discovery order. The Special Master’s
order here is not the functional equivalent of a dispositive order.
Accordingly, the abuse of discretion standard will be applied here.
B.

Does the burden or expense of the proposed discovery outweigh its likely
benefit?

The federal rules contemplate liberal discovery. Rule 26(b)(1) authorizes parties to
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.
Under the rules, district courts possess considerable discretion in determining the need
for, and form of, discovery. See Admiral Theatre Corp. v. Douglas Theatre Co., 585 F.2d 877,
898–99 (8th Cir. 1978).

District courts are similarly granted considerable discretion in
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determining the necessity for and scope of discovery on issues related to class certification. See
Villar v. Crowley Maritime Corp., 990 F.2d 1489, 1495 (5th Cir.1993); Kamm v. California City
Dev. Co., 509 F.2d 205, 209 (9th Cir. 1975). The Eighth Circuit Court of Appeals has generally
endorsed broad discovery prior to class certification. See Johnson v. Nekoosa–Edwards Paper
Co., 558 F.2d 841, 845 n. 5 (8th Cir. 1977) (“[W]e note that broad discovery should usually be
permitted prior to class certification.”). Because the rules “allow for broad discovery, the burden
is typically on the party resisting discovery to explain why discovery should be limited.”
Cincinnati Ins. Co. v. Fine Home Managers, 2010 WL 2990118, *1 (E.D. Mo. July 27, 2010)
(citing Rubin v. Islamic Republic of Iran, 349 F.Supp.2d 1108, 1111 (N.D.Ill.2004)). The bare
assertion that requested discovery is unduly burdensome is “ordinarily insufficient to bar
production.” Id. (citing St. Paid Reinsurance Co., Ltd. v. Commercial Fin. Corp., 198 F.R.D.
508, 511–12 (N.D. Iowa 2000)). In Cincinnati, for example, the court was “not persuaded” that
the amount of time or money required to comply with discovery represented an undue burden,
where the objecting party failed to provide an estimate of hours or monetary cost of compliance.
Id. at *2.
In this case, Special Master Shurin effectively ordered State Farm to identify the amount
of labor depreciation withheld and the dates when it was withheld. For each claim, State Farm
was to state whether some or all of the depreciation was later paid by State Farm. Excluded from
the calculations were any claims for which State Farm paid its full limit of coverage. Finally,
State Farm was to identify which affirmative defenses it was asserting as to each claim where
labor was depreciated. State Farm does not dispute that the discovery sought is relevant. Indeed,
the discovery goes directly to central issues in the case and is needed to identify class members
and damages, discovery that is routinely provided in class action cases.

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State Farm argues, however, that it cannot answer the interrogatories without complex
inquiries in multiple databases. For example, it claims it cannot search for “actual cash value”
payments using data inquiries because its payment data is in a “picture format” which can only
be accessed through “ECS.”

In addition, it claims calculating labor depreciation for any

particular claim based on Xactware estimates would require downloading estimates “one at a
time and recalculating each estimate manually.” Yet Guevara explained that he used Xactware
software at the beginning of the lawsuit to identify the number of putative class members, which
necessarily required identification of who had depreciated labor deducted from their ACV
calculation. He also used the data to estimate the amount of damages being alleged. While the
Court understands the actual payment data is in the ECS system, it finds incredible the
suggestion that there is no cost-effective way to match up information in one database with the
information in another. Even if this data sorting would need to be done for each claim, data
sorting is what computers do in much higher levels in very short amounts of time. Therefore,
even if the matching must be done claim by claim, the time and cost involved does not justify
preventing LaBrier’s access to critical information. 3
The Court recognizes this might require computer programming that State Farm does not
have or does not normally use for this purpose. Nonetheless, State Farm has refused access to its
computer system. Therefore, neither the Court nor LaBrier can determine whether such a
calculation can be made with existing software. In light of State Farm’s interest in keeping its
computer system secret, it should bear the cost of doing any additional programming to pull out
the information required by the interrogatories, which is information clearly within the control of
3

Even if Guevara testified that Xactware estimates had to be downloaded one at a
time, and individually calculated, such testimony does not address how Guevara was able to
provide information in support of State Farm’s removal of the case to federal court within 30
days of its filing, nor what information is available in State Farm’s own claims payment system.
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State Farm.
While it may be more difficult to determine when a later payment effectively reimburses
a previously withheld labor depreciation, State Farm has not identified with any specificity why
the databases it has access to would not show subsequent payments being made to an insured for
replacement cost. While theoretically such subsequent payments could be for something else,
the Court agrees with the Special Master that this will be the exception and not the rule. Indeed,
Guevara could identify putative class members by claim and could calculate estimated damages
within 30 days for each putative class member. State Farm has not identified with specificity
and coherence why it cannot now, after many months of discovery, use a similar method to
provide highly relevant discovery contemplated by the Federal Rules of Civil Procedure.
Further, retroactive reimbursement of labor depreciation is arguably an affirmative
defense that State Farm would need to gather information on anyway, which is further reason for
State Farm being required to incur this expense. Asberry v. Cate, No. 11-2462, 2014 WL
1286191, at *3 (E.D. Cal. Mar. 31, 2014) (“Moreover, if the responding party would necessarily
have to gather the requested information to prepare its own case, objections that it is too difficult
to obtain the information for the requesting party are no honored.”); Flour Mills of Am., Inc. v.
Pace, 75 F.R.D. 676, 680-81 (E.D. Okla. 1977) (“An interrogatory will not be held objectionable
as calling for research ... if the interrogated party would gather the information in preparation of
its own case.”); Am. Oil Co. v. Penn. Petrol. Prods. Co., 23 F.R.D. 680, 683 (D.R.I. 1959)
(“Since the information sought here will undoubtedly be assembled by the defendant prior to trial
in preparation for its defenses, it cannot be said that these interrogatories are objectionable as
being burdensome.”).
Indeed, this is true as to all State Farm’s affirmative defenses and placing the burden on

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State Farm to provide information in support of its affirmative defenses ensures State Farm will
be judicious in identifying those affirmative defenses that are sufficiently viable to justify the
cost of discovery. For example, State Farm suggests it might need to do an in-person viewing of
the property in question, before it can answer the interrogatories.

The Court thinks such

discovery is highly implausible, so shifting the cost to State Farm is not unfair. As for the bulk
of the information requested, however, State Farm did not provide evidence from its own or
Xactware employees knowledgeable about the databases, describing and estimating the hours
and costs of obtaining class-wide data reports needed to respond to the interrogatories, and
detailing the manner in which they would be required to analyze the data.
State Farm’s reliance on an extrapolation of hours and costs based on materials filed in
another case does not convince the Court that the Special Master abused his discretion. Those
materials were not prepared by State Farm employees, or persons who work in the insurance
industry, who have general technology expertise, or who have expertise in working with State
Farm or Xactware databases. In contrast, the testimony of State Farm employee Jangda and
Xactware employee Stoddart, to which LaBrier points, demonstrated their familiarity with the
systems, and experience in retrieving the data on behalf of State Farm in other labor depreciation
class actions. Neither Jangda nor Stoddart described a burdensome process, let alone an unduly
burdensome one. As previously mentioned, State Farm’s own employee, Guevara, was able to
quickly access at least part of the data when State Farm wished to use it.
Again, State Farm was ordered to answer interrogatories, rather than produce documents
or permit LaBrier to search for the information, after State Farm argued that producing data
fields and providing proprietary system access would divulge highly confidential, trade secret
information. Answering interrogatories has ameliorated State Farm’s concern about keeping its

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system confidential. A litigant cannot keep its own system secret and then refuse to gather the
information itself.
Moreover, it is plain from the procedural development of this case and the course of
proceedings before the Special Master, that State Farm was focused on providing discovery in
the manner it saw fit, whether phased, sampled, or delayed, which the Court has never permitted
in the year since State Farm removed this case from state court. See Admiral Theatre, 585 F.2d
at 898–99 (district courts possess considerable discretion in determining the need for, and form
of, discovery); Buycks-Roberson v. Citibank Fed. Sav. Bank, 162 F.R.D. 338, 343 (N.D. Ill.
1995) (declining to limit class discovery to a sample selected by the defendant, noting that “[t]he
Federal rules and this Court do not countenance self-selecting discovery by either party”).
During the course of discovery, the Special Master offered several options but State Farm
resisted all except its choice of its sampling of 400 cases without any access to all data from
which those 400 cases were selected. Even now, State Farm has offered no effective way for
LaBrier to access the data that should have been shared in discovery long ago.
obstructionist approach cannot be rewarded.

Such an

To the extent State Farm has been burdened by

answering interrogatories rather than permitting direct access by LaBrier to the information she
seeks, State Farm’s intransigent approach has created much of that burden.
The Special Master did not abuse his discretion in concluding that the likely benefit of
the discovery outweighs the burden or expense of compliance on State Farm.
C.

Is the discovery proportional?

State Farm also generally argues that the burden of the discovery is not proportional to
the needs of the case.
In considering proportionality, the Special Master cited the factors under Rule 26(b):

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“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.”
The issues at stake are at the very heart of this litigation. LaBrier does not have access to
the information she seeks, other than through the discovery, as it is in State Farm’s own database
and the database of its vendor, Xactware. In terms of resources, LaBrier is an individual, while
State Farm is a corporation with a national presence, with sophisticated access to data. As
discussed in the preceding section, the burden or expense of the discovery outweighs its likely
benefit, particularly in light of State Farm’s refusal to permit an outsider to access its computer
system or even provide complete lists of its data fields.
The Special Master acted well within the bounds of discretion, particularly in view of the
centrality and importance of the information sought. It is difficult to imagine any fact discovery
more necessary to the prosecution and defense of the case than that covered by the Order No. 4,
as amended.
State Farm argues that the burden is disproportionate because of the individualized
review it claims is necessary, and that the individualized review shows class certification cannot
be granted in any event. As discussed above, State Farm failed to demonstrate the burden of
producing the information is an undue one. Furthermore, State Farm cannot withhold for months
the very information that LaBrier has sought for purposes of class certification and the merits,
then claim LaBrier cannot meet her burden of proof and that State Farm therefore should not
have to produce the missing data.
The Special Master did not abuse his discretion in concluding the burden of discovery is

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proportional to the needs of the case.
III.

Conclusion
State Farm’s motion to vacate or suspend the Special Master’s Discovery Order No. 4, as

amended [Doc. 135], is denied.
/s/ Nanette K. Laughrey
NANETTE K. LAUGHREY
United States District Judge
Dated: May 9, 2016
Jefferson City, Missouri

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