Dobish v. Rain and Hail, LLC

Filing 39

ORDER granting 34 motion to amend and granting 31 motion for leave to depose the arbitrator by written interrogatory as set forth herein. The plaintiff shall have until November 10, 2011, to file the Amended Complaint. The court will hold a te lephone conference on November 28, 2011, at 10:00 a.m. C.S.T., for the purpose of reviewing the preparation of the case to date and scheduling the case to trial. Plaintiff's counsel shall initiate the conference with the undersigned magistrate judge and participating counsel. Ordered by Magistrate Judge Thomas D. Thalken. (TRL)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
LEE DOBISH,

)
)
)
)
)
)
)
)
)

Plaintiff,
vs.
RAIN AND HAIL, LLC,
Defendant.

8:11CV41
ORDER

This matter is before the court on the plaintiff’s motion for leave to depose an
arbitrator (Filing No. 31) and motion to amend the complaint (Filing No. 34). The plaintiff
filed a brief (Filing No. 32) and an index of evidence (Filing No. 33) in support of the motion
to depose an arbitrator. The plaintiff also filed a draft of the proposed amended complaint
(Filing No. 35). The defendant filed briefs (Filing Nos. 37 and 38) in opposition to the
motions. The plaintiff did not file any reply.

BACKGROUND
This case arises as an appeal of an arbitration decision regarding the defendant’s
denial of the plaintiff’s insurance claim. See Filing No. 1 - Complaint. The plaintiff
purchased farm crop insurance for the crop year 2007 from the defendant. Id. ¶ 4. The
plaintiff alleges he raised corn grain crops on several farms insured by the defendant,
however several of the crops sustained losses due to wind damage in the fall of 2007. Id.
¶ 5. The plaintiff submitted a loss claim, which the defendant investigated and denied. Id.
¶¶ 6-7. The defendant’s denial, dated January 21, 2008, is based upon the defendant’s
determination that the plaintiff did not have an insurable interest in the subject damaged
crop. Id. ¶ 7; see Filing No. 20-3 Jan. 21, 2008, Letter. Upon review, the defendant again
denied the plaintiff’s insurance claim stating, the plaintiff “did not prove the production loss
to the satisfaction of Defendant ‘through records that are acceptable to us and,
consequently, the claim must be denied on that basis as well.’” See Filing No. 1 Complaint ¶ 8 (quoting Filing No. 20-4 May 6, 2008, Letter). On January 21, 2009, the

plaintiff filed a demand for arbitration of the claim dispute under the terms of the insurance
contract. See Filing No. 1 - Complaint ¶ 9. On June 4, 2010, an arbitrator, Richard A.
Schwartzbeck, Ph.D., with the American Arbitration Association (AAA), issued an award
determining the plaintiff was not entitled to any insurance indemnity on the crop claim. Id.
¶ 11; see Filing No. 20-5 Award of Arbitrator.
In the complaint, the plaintiff alleges that during the arbitration proceeding:
Counsel for the Defendant withdrew its denial of Plaintiff’s
claim based on its previously asserted premise that the
amount of crop loss suffered by the Plaintiff could not be
determined and stated to the Arbitrator and Plaintiff that the
Defendant accepted the amount of loss reported by Plaintiff
and contained in the Claim Information and Deferral Form as
to each of Plaintiff’s farm parcels and would not be contesting
that matter in the Arbitration. Said Counsel for the Defendant
reiterated the stipulation that the amount of Plaintiff’s loss was
not in dispute during the arbitration when said counsel was
cross-examining Plaintiff’s witness Mark Dobish stating that the
insurer was not contesting the amount of crop loss.
See Filing No. 1 - Complaint ¶ 12.
Despite the alleged stipulation, the plaintiff alleges that the arbitration award:
was premised in part on the Arbitrator finding that the amount
of loss could not be determined, notwithstanding that such
amounts were stipulated to by both parties and found in a
complete and uncontested documentary report, the Claim
Information and Deferral Form, filed with Defendant and
entered into evidence at the arbitration.
See Filing No. 1 - Complaint ¶ 16.
Accordingly, the plaintiff argues the arbitrator’s decision is contrary to law because
the award was premised on a finding inconsistent with the parties’ stipulation about the
amount of loss. Id. On this basis, the plaintiff contends he was denied a fair and lawful
hearing on his claim in violation of the Federal Arbitration Act. Id. Generally, the plaintiff
argues he is entitled to have the arbitrator’s award vacated under 9 U.S.C. § 10(a)(3) or
(4) for the reasons that the “award was procured by . . . undue means”, “there was evident
partiality or corruption in the arbitrator[ ]”, and/or the “arbitrator[ ] [was] guilty of . . .
misbehavior by which the rights of [the plaintiff] have been prejudiced.” Id. ¶ 19. More
2

specifically, the plaintiff alleges the “Arbitrator initially erred when he failed to rely on the
crop loss data submitted by Plaintiff, and admitted by Defendant, and received in
evidence by the Arbitrator finding that he could not determine the amount of loss suffered
by Plaintiff.” Id. ¶ 20 (emphasis added). The defendant denies it entered into the
stipulation suggested by the plaintiff and argues it “continued to maintain that production
verification remained an issue in the arbitration.” See Filing No. 7 - Answer ¶ 12.
On June 22, 2011, the plaintiff filed a motion requesting leave to subpoena the
arbitrator’s records to determine if the records contained evidence supporting his
contention that the defendant waived one of its defenses. See Filing No. 21 - Brief p. 1.
On August 2, 2011, the court granted the plaintiff’s motion, in part, to the extent the plaintiff
was authorized to serve a subpoena on the arbitrator for documents limited to the issues
of whether the defendant withdrew its denial of the plaintiff’s insurance claim based on the
premise that the amount of crop loss suffered could not be determined and the defendant
accepted the amount of loss reported by the plaintiff as contained in the Claim Information
and Deferral Form as to each of the plaintiff’s farm parcels and would not be contesting
that matter in the Arbitration. See Filing No. 27.
On August 9, 2011, the plaintiff issued a subpoena to Richard “Schwartsbeck”
seeking: “The entirety of your notes made or created during the course of the referenced
Arbitration, specifically including and not limited to the opening statements and remarks
of counsel regarding stipulations relating to the issues subject to the arbitration.” See Filing
No. 28.

On September 12, 2011, the court received production of the responsive

documents, which were filed with the court under seal. See Filing No. 29. The court
reviewed the documents and determined the documents produced shall remain a sealed
part of the record, without production to the parties in this case. See Filing No. 30. The
documents were comprised of the parties’ submissions to the arbitrator with notes
periodically handwritten directly on the documents and exhibits. There were no separate
notes independent of those handwritten on the documents submitted by the parties. None
of the documents referenced the issues for arbitration other than the documents, in the
nature of opening briefs, provided by the parties. The arbitrator made no reference in any
of his personal notations about a stipulation by the parties narrowing the issues or any
3

concession by the defendant with regard to the amount of loss. The court found the
arbitrator’s documents were not relevant to “evinc[e] a record of Defendant’s waiver of one
of two defenses.”
On October 7, 2011, the plaintiff filed the instant motion for leave to depose the
arbitrator. See Filing No. 31. The plaintiff argues, that because the arbitrator had no notes
regarding a stipulation between the parties about the issues for arbitration, the plaintiff is
entitled to depose the arbitrator to determine if he “has any recollection of the issues that
were submitted on such stipulation of the parties, and whether said Arbitrator’s decision
was made without consideration of the issues the parties actually agreed to submit.” Id.
The plaintiff contends the deposition is necessary to discover “what issues and evidence
[the arbitrator] considered in reaching an award” and “whether such Arbitrator acted within
the scope of his authority, committed an error of law or gross negligence or error, or
misbehavior.” See Filing No. 32 - Brief p. 1. The plaintiff states he does not intend to
challenge the manner in which the arbitrator weighed the evidence, merely whether he
knew of, understood, and applied the parties’ stipulation. Id. at 2.
The defendant opposes the plaintiff’s motion to depose the arbitrator. See Filing
No. 37 - Response. The defendant argues the plaintiff’s stated reasons for the deposition
are only a thinly veiled attempt to challenge the arbitrator’s decision on the merits, which
is legally impermissible. Id. at 5-6. Moreover, the defendant argues the plaintiff should not
be allowed to depose the arbitrator based on bald, unsubstantiated allegations because
the defendant asserts the parties did not enter into the stipulation alleged by the plaintiff.
Id. at 10. As evidence the stipulation did not exist, the defendant quotes the defendant’s
written closing argument from the arbitration proceeding, which suggests the plaintiff’s crop
production was still at issue before the arbitrator. Id. at 10-11. The plaintiff did not
challenge the defendant’s statements about whether the crop production was at issue prior
to the arbitrator’s decision. Id. at 11, 13. The defendant contends the plaintiff’s request
to depose the arbitrator is unfair under the circumstances where the plaintiff did not timely
bring the alleged misunderstanding to the arbitrator’s attention, the plaintiff did not request
a stenographic recording of the arbitration, and the arbitrator’s notes contain no mention
of the stipulation. Id. at 13. Finally, the defendant argues that because of the time which
4

has elapsed since the arbitration, the arbitrator’s current memory about the alleged
stipulation does not necessarily bear on how the arbitrator determined the award. Id. In
the alternative, the defendant asks the court to delay ruling on whether the arbitrator should
be deposed until after the court resolves the defendant’s yet-to-be-filed motion for
summary judgment, which may render the discovery request moot. Id. at 12-13.
In a related motion, the plaintiff seeks to amend the complaint to add a claim based
on the arbitrator’s alleged failure to apply the party’s stipulation such that the arbitrator was
incompetent for failing to apprise himself of the actual issues before him or he decided
issues that had been removed from his jurisdiction. See Filing No. 34 - Motion. The
defendant opposes the amendment arguing the plaintiff failed to follow procedural
requirements when filing the motion. See Filing No. 38 - Brief p. 3-4. Additionally, the
defendant argues the plaintiff failed to show good cause for filing the untimely motion for
amendment and the proposed amendment is futile. Id. at 4.

ANALYSIS
A.

Deposition
“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). “Broad discovery
is an important tool for the litigant, and so ‘[r]elevant information need not be admissible
at the trial if the discovery appears reasonably calculated to lead to the discovery of
admissible evidence.’” WWP, Inc. v. Wounded Warriors Family Support, Inc., 628 F.3d
1032, 1039 (8th Cir. 2011) (quoting Fed. R. Civ. P. 26(b)(1)). However, “[t]he District
Court does have discretion to limit the scope of discovery.” Credit Lyonnais v. SGC Int’l,
Inc., 160 F.3d 428, 431 (8th Cir. 1998). To determine if a matter is discoverable, the
analysis requires the court to first determine whether the sought discovery is relevant to a
claim. If a matter is relevant, the court must determine if the matter is subject to a privilege
precluding discovery, or if the court should otherwise use its discretion to limit discovery
on the matter.

5

The court previously determined the plaintiff met his burden of showing documents
“evincing a record of Defendant’s waiver of one of two defenses” are relevant to this case
and, more specifically to the plaintiff’s claims stated in the complaint and the defendant’s
current defenses. The information sought may support (or contradict) the plaintiff’s claim
alleging the defendant abandoned or waived a particular defense during the arbitration
proceeding. Similarly, the court already determined the relevance of the documents sought
combined with the objective and limited nature of the facts sought to prove outweighed the
public interest in protecting the arbitrator’s documents from disclosure. Due to the potential
for production of irrelevant, sensitive, and private materials, the court required production
of the documents for review in camera. The documents did not yield the discovery sought
by the plaintiff, prompting the plaintiff to seek the information by another means. The court
is leery of allowing the plaintiff to conduct a standard deposition of the arbitrator due to the
potential for exceeding the very limited grounds upon which the discovery inquiry may be
granted. Accordingly, the court will grant the plaintiff leave to depose the arbitrator by
written interrogatory. Such limitation will adequately protect the interests of the parties, the
arbitrator, and the arbitration process.

B.

Motion to Amend
Under Federal Rule of Civil Procedure 15, a court should grant leave to amend

freely “when justice so requires.” However, “denial of leave to amend may be justified by
undue delay, bad faith on the part of the moving party, futility of the amendment or unfair
prejudice to the opposing party.” Amrine v. Brooks, 522 F.3d 823, 833 (8th Cir. 2008)
(internal quotation and citation omitted). The party opposing the amendment has the
burden of demonstrating the amendment would be unfairly prejudicial. Roberson v. Hayti
Police Dep’t, 241 F.3d 992, 995 (8th Cir. 2001); see Hanks v. Prachar, 457 F.3d 774,
775 (8th Cir. 2006). There is no absolute right to amend. Sherman v. Winco Fireworks,
Inc., 532 F.3d 709, 715 (8th Cir. 2008). Whether to grant a motion for leave to amend is
within the sound discretion of the district court. Popoalii v. Correctional Med. Servs., 512
F.3d 488, 497 (8th Cir. 2008). However, a motion to amend should be denied on the
merits “only if it asserts clearly frivolous claims or defenses.” Gamma-10 Plastics, Inc.
6

v. Am. President Lines, 32 F.3d 1244, 1255 (8th Cir. 1994) (quotations and citations
omitted). Further, “likelihood of success on the new claim or defense is not a consideration
for denying leave to amend unless the claim is clearly frivolous” “or legally insufficient on
its face.” Becker v. Univ. of Neb., 191 F.3d 904, 908 (8th Cir. 1999); Sokolski v. Trans
Union Corp., 178 F.R.D. 393, 396 (E.D.N.Y. 1998) (citation omitted). “The party opposing
such amendment ha[s] the burden of establishing that leave to amend would be . . . futile.”
Sokolski, 178 F.R.D. at 396 (citations omitted). “If a party files for leave to amend outside
of the court’s scheduling order, the party must show cause to modify the schedule.” Id.
(citing Fed. R. Civ. P. 16(b)). Additionally, the court may consider whether the “late
tendered amendments involve new theories of recovery and impose additional discovery
requirements.” Id.
The court finds the plaintiff has shown good cause for filing the motion to amend
beyond the deadline imposed by the court. Although the plaintiff’s deadline was July 1,
2011, good cause exists for the timing of the plaintiff’s October 8, 2011, motion to amend.
See Filing No. 12 - Scheduling Order. The plaintiff has diligently sought discovery related
to the current issue. The plaintiff brought the motion to amend shortly after the court
issued a ruling on matters bearing on the proposed amendment. Under the circumstances,
the timing of the plaintiff’s motion does not indicate he engaged in undue delay.
The defendant failed to sustain the burden of showing unfair prejudice. The parties
will have ample time to complete any necessary discovery or file any relevant dispositive
motions as such deadlines have not expired. In any event, the defendant fails to show any
discovery obligations or other deadlines would be materially impacted by adding the
proposed claim. The defendant has not yet filed a motion for summary judgment and any
future motion could easily encompass the plaintiff’s proposed amendment.

This is

particularly true because the facts involving the proposed claim remain intertwined with the
plaintiff’s existing claims against the current defendant such that justice requires that the
issues be resolved together in a single action. In fact, the issue raised in the proposed
claim is arguably already part of the existing claims. The court will not determine the merits
of the plaintiff’s claim at this time, however the defendant failed to show the claim is legally
futile. Upon consideration,
7

IT IS ORDERED:
1.

The plaintiff’s motion for leave to depose an arbitrator (Filing No. 31) is

granted as set forth below.
a.

The plaintiff may depose Arbitrator Richard A. Schwartzbeck, Ph.D.,

by written interrogatories limited to the issues of whether the defendant
(i) withdrew its denial of the plaintiff’s insurance claim based on the premise
that the amount of crop loss suffered could not be determined and
(ii) accepted the amount of loss reported by the plaintiff as contained in the
Claim Information and Deferral Form as to each of the plaintiff’s farm parcels
and would not be contesting that matter in the Arbitration.
b.

The plaintiff may serve no more than five written interrogatories after

agreement by the defendant as to the content and language of the
interrogatories. If the parties are unable to agree to the specific language of
the interrogatories, the plaintiff may file a motion to compel in accordance
with NECivR 7.0.1. The court will resolve the parties’ differences with
respect to the language of the interrogatories after time has elapsed for
briefing under the rule.
2.

The plaintiff’s motion to amend the complaint (Filing No. 34) is granted.

3.

The plaintiff shall have to on or before November 10, 2011, to file the

amended complaint.
4.

The court will hold a telephone conference on November 28, 2011, at 10:00

a.m. C.S.T., for the purpose of reviewing the preparation of the case to date and
scheduling the case to trial. Plaintiff’s counsel shall initiate the conference with the
undersigned magistrate judge and participating counsel.
DATED this 4th day of November, 2011.
BY THE COURT:
s/ Thomas D. Thalken
United States Magistrate Judge

8