Applied Underwriters, Inc. v. Top's Personnel, Inc.

Filing 201

MEMORANDUM AND ORDER that Applied's motion to compel (Filing No. 197 ) is granted in part and denied in part as outlined in this order. The deadline for completing class certification discovery is September 7, 2018. Applied's deadline for filing its response to the motion for class certification is October 9, 2018. Ordered by Magistrate Judge Cheryl R. Zwart. (LAC)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
APPLIED UNDERWRITERS, INC., a
Nebraska Corporation;
8:15CV90
Plaintiff,
MEMORANDUM AND ORDER

vs.
TOP'S PERSONNEL, INC., A New Jersey
Corporation;
Defendant.

This matter is currently before the court on Plaintiff Applied Underwriter’s, Inc.’s
motion to compel. (Filing No. 197).
On January 16, 2018, Defendant Top's Personnel, Inc. (“Top’s”) filed a motion for
leave to 1) amend its answer to assert class action counterclaims; and 2) reopen
discovery limited to class certification. (Filing No. 116). Applied Underwriter’s (“Applied”)
opposed the motion. (Filing No. 121). A hearing was held on January 26, 2018, and the
court granted Top’s’ motion to amend and gave Top’s leave to file an amended answer
asserting the class claims. (Filing Nos. 124 & 127). In its ruling on the motion to amend,
the court reopened discovery specifically related to the class certification, to commence
when Top’s’ amended answer was filed of record. (Filing No. 127).

After class certification discovery commenced, Applied served a Rule 30(b)(6)
Notice of Deposition on Top’s and subpoenaed documents and testimony from Top’s’
worker’s compensation broker, Global Indemnity Insurance Agency, Inc. (“Global”). Top’s
and Global contested the relevancy of some of the deposition topics and document
production requests. The court held a discovery dispute conference with the parties (Filing
No. 192), after which the discovery issues remained unresolved.

Applied then filed the instant motion to compel, (Filing No. 197), and the court
stayed Applied’s response to the class certification motion pending resolution of these
discovery issues, (Filing No. 196). For the following reasons, the motion will be granted
in part and denied in part, as follows.

ANALYSIS
Applied’s motion to compel requests the following relief:
Defendant/Counterclaim Plaintiff Top’s Personnel, Inc. (“Top’s”) shall
produce a witness to provide deposition testimony on all topics listed in the
Notice of Rule 30(b)(6) Deposition of Top’s dated March 21, 2018 (the
“Notice”), including but not limited to topics Nos. 4-7 listed in the Notice that
Top’s has objected to as irrelevant and for which Top’s refuses to produce
a testifying witness;
Nonparty Global Indemnity Insurance Agency, Inc. “(Global,” which is the
workers’ compensation insurance broker for Top’s), shall produce a witness
to provide deposition testimony on all topics listed in the Subpoena to testify
at a deposition in a civil action and to produce documents, dated March 20,
2018, that was served on Global (the “Subpoena”), including but not limited
to topics listed in the Subpoena as Nos. 3-4 that Global and Top’s object to
as irrelevant and for which Global refuses to produce a testifying witness;
and

Global shall produce all documents sought by the Subpoena, including but
not limited to the documents sought in Request Nos. 3-4 listed in the
Subpoena that Global objects to producing and has not produced.

(Filing No. 197 at CM/ECF p. 1-2).

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I.

30(b)(6) Deposition Notice Directed at Defendant Top’s Personnel.
As indicated above, Top’s has not produced a deponent in response to Applied’s

March 2018 Notice of Rule 30(b)(6) Deposition. Specifically, Top’s contests the relevancy
of four requested deposition topics:

4. The Company's [Top’s’] history, process, procedure, and practice of
considering and selecting workers' compensation insurance coverage
before, during, and after participating in the Applied Program.
5. The Company's [Top’s’] workers' compensation insurance experience
before, during, and after participating in the Applied Program.
6. The Company's [Top’s’] management structure, ownership and control,
business, and affiliates.
7. The Company's [Top’s’] affirmative defenses asserted in its amended
answer in this Action.
(Filing No. 199 at CM/ECF p. 12).
The Federal Rules of Civil Procedure allow for discovery of “any nonprivileged
matter that is relevant to any party's claim or defense and proportional to the needs of the
case.” Fed. R. Civ. P. 26(b)(1) (emphasis added). Relevancy, for the purposes of
discovery, includes “any matter that bears on, or that reasonably could lead to other
matters 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). The proportionality analysis then requires the
court to weigh “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.” Fed. R. Civ. P. 26(b)(1).
The broad scope of Fed. R. Civ. P. 26 generally allows discovery “unless it is clear the
information sought can have no possible bearing on the case.” Ingram v. Covenant Care
Midwest, Inc., 2010 WL 1994866, at *3 (D. Neb. 2010).

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Here, discovery has been reopened for the limited purpose of class certification
and the underlying merits of Top’s’ class counterclaims. Thus, Rule 26’s broad discovery
mandate must be confined to the narrow purposes for which the court allowed additional
discovery. Put differently, relevant discovery must “bear[ ] on” an issue related specifically
Top’s’ counterclaims. Oppenheimer, 437 U.S. at 351.
Top’s argues that the above topics are irrelevant to the issue of class certification
and constitute an improper attempt by Applied to obtain general discovery that should
have been requested months, if not years, earlier. (Filing No. 200 at CM/ECF p. 1-2).
However, even if the court agrees with Top’s that this information could—and should—
have been obtained earlier, that does not end the inquiry. Regardless of the parties’ past
conduct and alleged failure to previously make these requests, they are nevertheless
proper if relevant to the class claims.

Two of the contested deposition topics deal with Top’s’ history in and experience
with worker’s compensation insurance policies. (see Filing No. 199 at CM/ECF p. 12)
(Deposition Topics 4-5). Applied seeks deposition testimony regarding Top’s’ “history,
process, procedure, and practice of considering and selecting workers' compensation
insurance” and “workers' compensation insurance experience before, during, and after
participating in the Applied Program.” (Id). Top’s, however, argues that its history and
sophistication regarding worker’s compensation is irrelevant to the merits of its
counterclaims and is therefore outside the scope of the current, limited discovery
parameters. Specifically, Top’s states that neither consumer fraud statute implicated by
its class counterclaims requires that they prove “reliance,” rendering irrelevant its
sophistication regarding worker’s compensation insurance. (Filing No. 200 at CM/ECF p.
6) (“[i]f reliance is not required to establish a claim under the CFA, then obviously Top’s
sophistication, or lack thereof, is entirely irrelevant to that claim”). In its briefing, Top’s
does not address the relevancy of these inquiries to its counterclaim requests for unjust
enrichment or rescission.

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But, to recover under either consumer fraud law, Top’s must prove a causal
relationship between its purchase of the allegedly illegal insurance policies and the harm
it has allegedly suffered. (Filing No. 129 at CM/ECF pp. 26-35). The same is true for its
rescission and unjust enrichment remedies. (Id). And Top’s admits that limited inquiry into
its worker’s compensation experience is relevant to those causal requirements. (Filing
No. 200 at CM/ECF pp. 7-8) (“Top’s has made clear to Applied that it may inquire into
Top’s experience purchasing insurance from Applied and any other proposals that it may
have solicited in 2011 when Top’s made the decision to sign the RPA”). Thus, Top’s
appears to concede that these topics are partially relevant, but argues they are overbroad
insofar as they seek information prior to and after 2011.

The court notes that, as drafted, Applied does not set any bounds of time for which
it is seeking Top’s worker’s compensation experience. In that regard, Top’s is correct:
The inquiry is overbroad as drafted. However, in its brief, Applied states that it seeks this
data from the period five years prior to Top’s participation in the Applied Program through
the date the deposition was noticed. (Filing No. 198 at CM/ECF p. 14). The court agrees
with Applied that that time-period is reasonable. Providing a deponent who can testify
regarding these topics, for that period of years, is not an unduly burdensome request. The
court thus determines that these inquiries are both relevant and proportional, and will
grant the motion to compel deposition testimony on those topics, provided that the
inquiries are confined to the period of time beginning five years before Top’s began
participating in the Applied Program and ending at the time of the deposition.
Next, Applied requests deposition testimony regarding Top’s’ “management
structure, ownership and control, business, and affiliates.” (see Filing No. 199 at CM/ECF
p. 12) (Deposition Topic 6).

Discovery was reopened not only to address the merits of the counterclaims, but
also to determine whether a class should be certified at all. And to certify a class under
Fed. R. Civ. P. 23, the moving party must establish each of the four requirements of Rule
23(a)—numerosity, commonality, typicality, and adequacy—and must further establish

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that the action qualifies under at least one of the three subsections of Rule 23(b).
Evaluation of the Rule 23 criteria must be “rigorous,” Wal-Mart Stores, Inc. v. Dukes, 564
U.S. 338, 350-51 (2011), and requires the court to, among other considerations,
determine whether Top’s will “fairly and adequately protect the interests of the class.” Fed.
R. Civ. P. 23(a)(4).
Top’s argues that discovery regarding its business structure is irrelevant to the
court’s assessment of the Rule 23 factors. The court disagrees. The court is tasked with
deciding whether Top’s can adequately represent its proffered classes, but Top’s is
simultaneously resisting a basic inquiry into its corporate structure.
Top’s correctly notes that “a class representative’s character deficiencies may
serve as a viable challenge to a finding of adequacy, [but] ‘courts look to personal
characteristics only insofar as they touch upon the lawsuit.’” (Filing No. 200 at CM/ECF
p. 8) (quoting Chime v. Peak Sec. Plus, Inc., 137 F. Supp. 3d 183, 211 (E.D.N.Y. 2015)).
Top’s argues that an inquiry into its business structure is an attempt by Applied to dredge
up “character deficiencies” surrounding Top’s alleged financial difficulties that in no way
touch or relate to this lawsuit. That argument is entirely speculative. It is for the court to
determine whether any uncovered deficiencies are properly considered under Rule 23’s
adequacy prong. And Top’s’ argument that any such information would be inadmissible
under Fed. R. Evid. 403 is similarly unavailing. Discovery need not be admissible to be
relevant under the discovery rules. Fed. R. Civ. P. 26(b)(1). (“[i]nformation within [the]
scope of discovery need not be admissible in evidence to be discoverable”).

Based on the foregoing, the court will grant the motion to compel testimony
regarding Top’s’ “management structure, ownership and control, business, and affiliates”
as reasonably calculated to lead to evidence relevant to its adequacy as class
representative. Fed. R. Civ. P. 23.
Finally, even under the broad scope of Rule 26, Applied’s request for deposition
testimony regarding “affirmative defenses asserted in its amended answer in this Action”

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clearly seeks, at least in part, information completely irrelevant to the class counterclaims.
(see Filing No. 199 at CM/ECF p. 12) (Deposition Topic 7). This proposed topic purports
to request information as to all affirmative defenses in Top’s’ amended answer, many of
which bear no relation to the class issues. As indicated above, discovery has not been
reopened as to all claims: Any discovery not related specifically to the class claims is
improper. The court will deny the motion to compel this testimony but notes that Applied
may inquiry into an affirmative defense so long as it touches or relates to one of the class
claims.
In sum, the court will grant in part and deny in part Applied’s motion to compel the
testimony requested in its 30(b)(6) Notice. The requests for worker’s compensation
information and corporate structure are relevant and proportional to the present needs of
the case. But the request for information regarding affirmative defenses is overly broad
and requests information wholly unrelated to purposes for which discovery was reopened.

II.

Rule 45 Subpoena Directed at Non-Party Global.
Global, Top’s’ worker’s compensation broker, has resisted discovery related to two

document production requests and two deposition topics requested in a nonparty
subpoena for documents and testimony. All four topics relate specifically to Top’s’
purchase of and experience with worker’s compensation insurance. (Filing No. 199 at
CM/ECF pp. 20-21) (Deposition Topics 3-4, Document Request Nos. 3-4). As discussed
at length above, the court has determined that inquiry into Top’s worker’s compensation
insurance experience is reasonably calculated to lead to information regarding the
counterclaims’ causation requirements. The same is true here. The court will grant the
motion to compel testimony and production from Global regarding the contested topics
for the reasons outlined above.

The court notes that the requests targeted at Global are bounded in time to a fiveyear period before Top’s began participating in the Applied Program, through the date of

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the deposition. As noted in the discussion above, the court determines that time period is
reasonable.

Accordingly,

IT IS ORDERED:

1)

Applied’s motion to compel (Filing No. 197) is granted in part and denied in

part as outlined in this order.

2)

The deadline for completing class certification discovery is September 7,

3)

Applied’s deadline for filing its response to the motion for class certification

2018.

is October 9, 2018.

Dated this 24th day of July, 2018.
BY THE COURT:
s/ Cheryl R. Zwart
United States Magistrate Judge

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