Dobson Brothers Construction v. Ratliff et al

Filing 151

ORDER denying 137 Plaintiff's Motion to Compel. Ordered by Magistrate Judge Cheryl R. Zwart. (BHC)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
DOBSON BROTHERS
CONSTRUCTION, Company, a
Nebraska corporation,
Plaintiff,
v.
RATLIFF, Inc., an Oklahoma
corporation, and AMERICAN
CONTRACTORS INDEMNITY
COMPANY, a California corporat,
Defendants.

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4:08CV3103

MEMORANDUM AND ORDER

This matter is before the court on Dobson Brothers Construction’s (“DBC”) motion
to compel, (filing no. 137). For the reasons set forth below, the motion is denied.

FACTUAL BACKGROUND

DBC filed suit against American Contractors Insurance Company (“ACIC”) and codefendant Ratliff, Inc. (“Ratliff”) on May 14, 2008, (filing no. 1). DBC’s claims against
Ratliff were subject to mandatory arbitration, and pending that arbitration, the court stayed
the litigation of claims filed against ACIC. The stay was lifted on February 20, 2011 after
the arbitration award as to the claims between DBC and Ratliff became final. Discovery
commenced and was initially due to be completed by July 21, 2011, (filing no. 121).

The parties served and responded to various forms of discovery and conducted
depositions. On or about May 20, 2011 the parties began communicating regarding the
scheduling of depositions for ACIC’s representatives Frank Lanak and Gregory Chin. Filing
No. 138-1 ¶ 7(b). The parties had difficulty scheduling the depositions in a timely manner

and the parties filed a joint motion to extend the discovery and deposition deadline until
August 31, 2011. The depositions were scheduled for July 19-20, 2011. Filing No. 138-1,
¶7(f). The court entered an order granting the motion to continue and also ordered that all
dispositive motions to be filed by September 30, 2011. Filing No. 125. The order also made
clear that if the parties filed any dispositive motions after August 31, 2011, the trial would
have to be continued. Id.

Due to the illness of one of ACIC’s attorneys, the depositions of Lanak and Chin were
eventually rescheduled for August 24, 2011 in Los Angeles, California. Filing No. 138-1,
¶7(i). The parties did not move to extend the discovery deadline. On August 26, 2011, DBC
served American Counsel with a Second Request for Production of Documents and a Third
Set of Interrogatories via email. Filing No. 138-1, ¶7(l). On August 31, 2011, ACIC filed
a motion for summary judgment. On September 6, 2011 ACIC informed BDC that it
objected to the discovery requests on the basis of timeliness and relevancy. Filing Nos. 1381, ¶7(n), 143-2 & 143-3. Subsequently, ACIC also objected on the grounds that the requests
were unduly burdensome. Filing No. 138-1, ¶7(p). Despite the parties’ good faith effort,
they could not resolve the dispute over the outstanding requests. DBC filed the pending
motion to compel.

The following discovery requests are in dispute:
1.

Interrogatories

INTERROGATORY NO. 1. Please state whether the performance bond identified as
Exhibit A to these interrogatories is based on one or more standardized documents utilized
by ACIC to issue performance bonds. To the extent that the answer is in the affirmative,
please identify the documents that form the basis of Exhibit A.

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INTERROGATORY NO.3. Please identify the number of performance bonds issued
by ACIC in each of the following years: 2010, 2009, 2008, 2007, 2006, and 2005.

INTERROGATORY NO.5. To the extent that ACIC has ever paid a claim on a
performance bond during the years 2005 through and including 2010, please state when such
claims were paid or settled and to whom any such payments were made.

INTERROGATORY NO.6. Please identify all notices upon which a performance
bond claim payment was made during the years 2005 through and including 2010 and the
performance bond under which each such notice was submitted.

2.

Requests for Production

1.

To the extent that either Exhibit A (identified in interrogatories) is based off

of one of more documents utilized by ACIC to issue performance bonds or the alphanumeric
code at the bottom right of Exhibit A identifies such a document utilized by ACIC, please
produce a copy of each such document and any modifications or subsequent revisions or
editions of the same since the time that any such document went into usage.

2.

Please provide a copy of the form referenced by ACIC's designed

representative on August 24, 2011, that served as a basis of Exhibit A and other bonds issued
by ACIC.

3.

Please produce all other forms or documents utilized by ACIC for the issuance

of a performance bond.

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4.

Please produce copies of all performance bonds issued during the years 2005

through and including 2010 on which ACIC paid or settled a claim.

5.

Please produce copies of all notifications received by ACIC in connection with

performance bonds on which ACIC paid or settled a claim during the years 2005 through and
including 2010.

DBC’s motion to compel was originally filed on September 29, 2011. Each party
submitted briefs in support of their respective positions on the matter. However, I did not
feel the parties adequately addressed the issue of relevance and instructed them to submit
supplemental briefs addressing the following issues:

•

how ACIC's course of dealing or performance with other parties would affect
the outcome of this litigation in any way.

•

how the verbage of "default" notices served on ACIC in other cases, and
ACIC's response to those notices, is relevant to deciding whether ACIC
violated the terms of the performance bond in this case; particularly if the
notice provisions of other performance bonds differ from the language used in
the Dobson/Ratliff bond, or the performance bonds in other cases are governed
by differing state laws;

•

how the content of any default notices, and ACIC's determination of bond
coverage, made after December 12, 2007 (when Dobson notified ACIC in this
case, filing no. 1, ¶¶ 14, 16), could be relevant to determining how ACIC
should have responded to Dobson's notice, or Dobson's understanding of the
notice requirements.

Having received the parties’ supplemental briefing, the matter is fully submitted.

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LEGAL ANALYSIS

Generally speaking, the scope of permissible discovery is extremely broad and parties
may obtain “discovery regarding any nonprivileged matter that is relevant to any party’s claim
or defense including the existence, description, nature, custody, condition, and location of any
documents . . .” Fed. R. Civ. P. 26(b)(1). However, the scope of discovery is not unlimited.

Rule 26(b) of the Federal Rules of Civil Procedure is widely recognized as a
discovery rule which is liberal in scope and interpretation, extending to those
matters which are relevant and reasonably calculated to lead to the discovery of
admissible evidence. Kramer v. Boeing Co., 126 F.R.D. 690, 692
(D.Minn.1989) (and cases cited therein). While the standard of relevance in the
context of discovery is broader than in the context of admissibility (Rule 26(b)
clearly states that inadmissibility is no grounds for objection to discovery),
Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 98 S.Ct. 2380, 57 L.Ed.2d
253 (1978), Culligan v. Yamaha Motor Corp., USA, 110 F.R.D. 122
(S.D.N.Y.1986), this often intoned legal tenet should not be misapplied so as to
allow fishing expeditions in discovery. Some threshold showing of relevance
must be made before parties are required to open wide the doors of discovery
and to produce a variety of information which does not reasonably bear upon the
issues in the case.
Hofer v. Mack Trucks, Inc., 981 F.2d 377, 380 (8th Cir. 1992).

Once the requesting party meets the threshold relevance burden, “[a]ll discovery
requests are a burden on the party who must respond thereto. Unless the task of producing or
answering is unusual, undue or extraordinary, the general rule requires the entity answering or
producing to bear that burden.” Continental Ill. Nat’l Bank & Trust Co. Of Chicago v. Caton,
136 F.R.D. 682, 684-85 (D. Kan. 1991). Further, the party opposing the motion to compel
must provide specific explanations or factual support as to how each request is improper. St.
Paul Reinsurance Co., Ltd. v. Commercial Fin. Corp., 198 F.R.D. 508, 511-12 (N.D. Iowa
2000).
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“The fact that production of documents would be burdensome and expensive and would
hamper a party’s business operation is not a reason for refusing to order production of relevant
documents.” Wagner v. Dryvit Systems, Inc., 208 F.R.D. 606, 610 (D. Neb. 2001) (internal
citations omitted). The standard is whether the burden or expense is “undue” and whether the
“hardship is unreasonable in the light of the benefits to be secured from the discovery.” Id.
(quoting Wright, Miller & Marcus, Federal Practice and Procedure § 2214, p. 435 (1994)). A
party claiming requests are unduly burdensome cannot make conclusory allegations, but must
provide some evidence regarding the time or expense required. See Horizon Holdings, L.L.C.
v. Genmar Holdings, Inc., 209 F.R.D. 208, 213 (D. Kan. 2002).

The defendant has asserted that none of the contested requests for production or
interrogatories seek relevant material. That is, to the extent the discovery requests seek
historical information or other examples in which ACIC was informed of a default under the
terms of a performance bond, that information is not relevant to the current dispute between
ACIC and DBC.

The defendant also asserts that the discovery requests place an undue

burden on it and that DBC’s requests were not timely filed.

In this case, I fail to see how the requested information regarding ACIC’s course of
dealings or course of performance with unrelated third parties has any relevance to this
dispute. DBC has had two chances to provide this court with citation to any law holding the
type of information requested is reasonably calculated to lead to the discovery of admissible
evidence.

DBC asserts in its supplemental brief that “a key issue is going to be whether [DBC]
complied with the notice requirements required by [the] bond.” Filing No. 148, p. 7.
However, DBC does not provide anything other than conclusory statements that ACIC’s
conduct with other parties is even minimally relevant to the litigation in this case. Contract
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disputes are governed by the four corners of the agreement unless ambiguities exist. Strunk
v. Chromy-Strunk, 270 Neb. 917, 939, 708 N.W.2d 821, 840 (2003). DBC does not assert
the written agreement in this case is ambiguous, or that it must be interpreted consistent with
some industry standard applicable to performance bond notice provisions. Twice given the
opportunity to address the legal significance of ACIC’s prior course of dealings or
performance with unrelated third parties, DBC has failed to direct this court to any case or
other binding authority that holds such conduct is in any way relevant to a dispute between
DBC and ACIC.1 See generally, Rosen-Novak Auto Co. v. Honz, 783 F.2d 739, 742 (8th
Cir. 1986)(discussing the course of dealing between an insurer and specific insured to
establish a course of dealing to support a claim of waiver or estoppel); Peterson v.
Cornhusker Cas. Co., 238 Neb. 173, 175, 469 N.W.2d 553, 555 (1991)(finding an insurer
has no particular duty to inform an insured of the expiration of a policy unless “the insurer
has by custom or course of dealing with the particular insured” created such a duty);
Restatement (Second) of Contracts § 202(4)(prior course of performance between the parties
is given great weight in interpretation of a contract). In short, DBC has not met its threshold
relevance requirement for the discovery at issue in this motion.

Even if the court found the disputed requests seek relevant information, any such
relevance would be far too minimal to overcome the undue burden of production placed on

1

DBC does cite to the case of Factory Mutual Ins. Co. v. Nebraska Beef, Inc., No.

8:09cv159, 2010 WL 1553458 (D. Neb. April 15, 2010) a case involving an insurance dispute in
which the Hon. Thomas D. Thalken allowed broad discovery. Simply put, the opinion in Factory
Mutual Ins. does not address the specific questions I posed in the first Memorandum and Order
issued on this motion. The Factory Mutual Ins. opinion makes no mention of the “course of
performance” or “course of dealing” issues. Moreover, this court is not bound by Judge Thalken’s
opinion.
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ACIC. Frank Lanak, the Senior Vice President of Claims for American Contractors,
provided an affidavit stating the following:

•

To produce the information that DBC seeks in its latest discovery to American
Contractors would require American Contractor's employees to review
hundreds (perhaps thousands) of claims files to determine what bond form
was used, if the language of the form used on the unrelated claim was the
same or substantially similar to the form of the performance bond tendered to
DBC, and what correspondence and other information was tendered to and
evaluated by American Contractors in resolving the claim and the similarity
of the information to the information received from DBC on its claim on the
performance bond in this case. Filing No. 146-4, ¶13.

•

If American Contractors is forced to produce the information sought by DBC
in its last discovery requests, it will have to reassign one or more employees
to cull through the hundreds of claims files, which could take weeks or more
than a month. Filing No. 146-4, ¶ 14.

•

Assuming that American Contractors employees are able to review the
hundreds of claims on which DBC seeks information and collect responsive
documents and information, this Affiant, with assistance from American
Contractor's counsel in this case, would then have to purge all responsive
information of privileged materials to protect the privacy of other claimants
and create an extensive privilege log, which would be both time consuming
and expensive. Filing No. 146-4, ¶15.

ACIC has provided sufficient evidence of the substantial burden on ACIC if it is
required to respond to the discovery requests. Even if the information of ACIC’s dealing
with others--in this and other states, on different contracts, and during different time
periods– is minimally relevant to the claims now before the court, the burden of responding
to such requests substantially outweighs the relevancy of the information to be obtained.
See St. Paul Reinsurance Co., Ltd., 198 F.R.D. at 511-12 (finding the party opposing discovery
must offer evidence “ ‘revealing the nature of the burden’ ”(internal quotations omitted)).

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Finally, the court questions why the discovery requests were not made long ago.
From the outset, ACIC has claimed the notice of claim was insufficient. If DBC believed
ACIC’s dealings with others was relevant to the notice issue, it could have served the
discovery, quite literally, years ago. The case will not further be delayed by requiring ACIC
to conduct weeks of document searches and redaction, followed by possibly months of
further discovery on the information gleaned from those documents.

Accordingly,

IT IS ORDERED, plaintiff’s motion to compel, (filing no. 137), is denied.

DATED this 8th day of December, 2011.

BY THE COURT:

s/ Cheryl R. Zwart
United States Magistrate Judge

*This opinion may contain hyperlinks to other documents or Web sites. The U.S. District
Court for the District of Nebraska does not endorse, recommend, approve, or guarantee any third
parties or the services or products they provide on their Web sites. Likewise, the court has no
agreements with any of these third parties or their Web sites. The court accepts no responsibility for
the availability or functionality of any hyperlink. Thus, the fact that a hyperlink ceases to work or
directs the user to some other site does not affect the opinion of the court.
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