U.S. Bank National Association v. PHL Variable Insurance Company et al
Filing
81
MEMORANDUM AND ORDER denying 58 Motion to Preclude; denying 61 Motion to Compel: For the foregoing reasons, PHL's motion to preclude (Docket no. 253 in 12 Civ. 6811, Docket no. 58 in 13 Civ. 1580) is denied. PHL's motion to compel (Dock et no. 256 in 12 Civ. 6811, Docket no. 61 in 13 Civ. 1580) is denied without prejudice to PHL submitting a letter demonstrating the relevance of the non-privileged information it seeks within three days of the date of this Order. (Signed by Magistrate Judge James C. Francis on 10/3/2013) Copies Mailed By Chambers. (tn)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - -:
US BANK NATIONAL ASSOCIATION,
: 12 Civ. 6811 (CM) (JCF)
a national association as
:
securities intermediary for LIMA
:
ACQUISITION LP,
:
:
Plaintiff,
:
:
- against :
:
PHL VARIABLE INSURANCE COMPANY,
:
a Connecticut Corporation,
:
:
Defendant.
:
- - - - - - - - - - - - - - - - - -:
U.S. BANK, as securities
: 13 Civ. 1580 (CM) (JCF)
intermediary,
:
:
MEMORANDUM
Plaintiff,
:
AND ORDER
:
- against :
:
PHL VARIABLE INSURANCE COMPANY,
:
:
Defendant.
:
- - - - - - - - - - - - - - - - - -:
JAMES C. FRANCIS IV
UNITED STATES MAGISTRATE JUDGE
As laid out in numerous prior orders resolving discovery
disputes between these parties, this case concerns purportedly
improper increases in cost of insurance (“COI”) rates imposed by
defendant
PHL
Variable
Insurance
Company
(“PHL”)
on
certain
universal life insurance policies acquired by Lima Acquisition, LP,
an entity for which plaintiff U.S. Bank National Association (“U.S.
Bank”) acts as securities intermediary.
1
PHL has now filed two
identical motions in each of these related cases.
The first seeks
to preclude evidence of the damages claimed by U.S. Bank because it
has not provided “a computation of any category of damages []
claim[ed], as required under Rule 26 [of the Federal Rules of Civil
Procedure] and demanded by PHL in additional discovery requests.”
(Defendant PHL Variable Insurance Company’s Memorandum of Law in
Support of its Motion to Preclude Evidence of Plaintiff’s Claimed
Damages (“Def. Preclusion Memo.”) at 1).
The second seeks to
compel U.S. Bank to produce a witness pursuant to Rule 30(b)(6) of
the Federal Rules of Civil Procedure to “testify as to the facts
surrounding [U.S. Bank’s] investigations of PHL or PHL’s cost of
insurance rate adjustments . . . conducted at [U.S. Bank’s]
direction or for [its] benefit.”1
(Def. MTC Memo. at 1).
For the reasons that follow, both PHL’s motion to preclude
and its motion to compel are denied.
1
PHL’s motion originally also sought production of “previous
statements obtained from former PHL employees in the course of
th[e] investigations.” (Defendant PHL Variable Insurance Company’s
Memorandum of Law in Support of its Motion to Compel Answers to
Deposition Questions and the Production of Documents Concerning
Investigations Conducted by or for Plaintiff (“Def. MTC Memo.”) at
1). It has now withdrawn that request, and seeks only to depose a
30(b)(6) designee who can testify as to the facts of the
investigations. (Reply Memorandum of Law in Support of Defendant
PHL Variable Insurance Company’s Motion to Compel Answers to
Deposition Questions and the Production of Documents Concerning
Investigations Conducted by or for Plaintiff (“MTC Reply”) at 1
n.1, 2).
2
Motion to Preclude
A.
Background
The plaintiff alleges that it suffered damages from two
excessive COI rate increases, the first in 2010 and the second in
2011.
(Plaintiff U.S. Bank’s Memorandum of Law in Opposition to
Defendant’s Motion to Preclude Evidence of Plaintiff’s Claimed
Damages (“Pl. Preclusion Memo.”) at 4).
In its initial disclosures in the action that became Case No.
12 Civ. 6811 after it was transferred to this district from the
Central District of California, U.S. Bank stated that the “amount
and basis for the calculation of Plaintiff’s damages” were to be
the subject of expert opinions, but revealed that the damages
“consist of the increased cost of insurance that [the] [p]laintiff
has paid and continues to pay, the diminution in value of the
[p]olicies as a result of . . . [the] increase . . ., and []
attorneys’ fees and costs.”
Plaintiff
U.S.
Bank
(Rule 26(A)(1) Initial Disclosures by
National
Association,
as
Securities
Intermediary for Lima Acquisition LP dated Feb. 8, 2012 (“Initial
Disclosures”), attached as Exh. A to Declaration of Brian P.
Perryman dated Aug. 20, 2013 (“Perryman Preclusion Decl.”), § III).
U.S. Bank further asserted that while it was “unable to ascertain
the exact amount of the cost of insurance rate increases” because
PHL had not provided that information, it believed that PHL has
3
documents, “such as policy illustrations and documents that state
the actual cost of insurance rates and formula, [that] will reflect
the amount of the cost of insurance rate increases from which the
improper cost of insurance amounts can be determined.”
Disclosures, § III).
(Initial
As for the diminution in value of the
policies, U.S. Bank stated that “actuarial analyses or other policy
valuations” could be used to make that determination.2
(Initial
Disclosures, § III).
In
response
to
a
request
for
production
of
documents
concerning its damages computation, U.S. Bank objected on a number
of grounds, including attorney-client privilege and work product
immunity,
but
agreed
to
produce
non-privileged
responsive
documents.
(Plaintiff U.S. Bank National Association’s Objections
and Responses to Defendant PHL Variable Insurance Company’s First
Set of Requests for Production of Documents, attached as Exh. C to
Perryman Preclusion Decl., at 48).
produced.
The
plaintiff’s
Rule
No such documents have been
30(b)(6)
designee,
Mats
Ola
Eriksson, testified at his deposition that U.S. Bank had computed
damages at the instruction of its counsel, both at the time of the
2
U.S. Bank’s initial disclosures regarding damages in Case
No. 13 Civ. 1580 are similar, except that they do not discuss the
manner in which the damages can be ascertained. (Rule 26(A)(1)
Initial Disclosures by Plaintiff U.S. Bank National Association, as
Securities Intermediary dated May 31, 2013, attached as Exh. B to
Perryman Preclusion Decl., § III).
4
filing of the complaint (presumably in Case No. 12 Civ. 6811) and
since that time, but Mr. Eriksson declined to provide the amount of
damages computed, the methodology employed, or the documents relied
on.
(Excerpts from Transcript of Deposition of Mats Ola Eriksson
dated Aug. 7, 2013 (“Eriksson Dep.”), attached as Exh. D to
Perryman Preclusion Decl., at 310-13).
Mr. Eriksson also stated
that U.S. Bank had retained an expert to assist computing damages,
but was not certain whether that expert would be the expert who
would testify at trial. (Eriksson Dep. at 312-13).
PHL now seeks to preclude U.S. Bank from presenting any
evidence of its damages at trial.
B.
Discussion
1.
Legal Standards
Rule 26(a)(1)(A) requires parties to exchange as part of their
initial disclosures, among other material, “a computation of each
category of damages claimed by the disclosing party.” Fed. R. Civ.
P. 26(a)(1)(A)(iii).
In addition, the disclosing party must make
available for inspection and copying “the documents or other
evidentiary
material,
unless
privileged
or
disclosure, on which each computation is based.”
26(a)(1)(A)(iii).
This
disclosure
(like
all
protected
from
Fed. R. Civ. P.
other
initial
disclosures) must be made “based on the information then reasonably
available to [the disclosing party],” and is not excused because
5
the disclosing party has not fully investigated the case.
Civ. P. 26(a)(1)(E).
Fed. R.
Moreover, disclosures are to be timely
supplemented by the disclosing party if it learns that they are
incorrect or incomplete.
To
guard
against
Fed. R. Civ. P. 26(e)(1)(A).
“‘sandbagging’
an
adversary
with
new
evidence,” Ritchie Risk-Linked Trading Strategies (Ireland), Ltd.
v. Coventry First LLC, 280 F.R.D. 147, 156 (S.D.N.Y. 2012), Rule
37(c) of the Federal Rules of Civil Procedure states that a party
that fails to provide information required by Rule 26(a) or (e) “is
not allowed to use that information . . . unless the failure was
substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1).
Preclusion is, of course, a harsh sanction, to be imposed rarely.
Ritchie Risk-Related Trading, 280 F.R.D. at 156.
Although the
sanction of preclusion has been characterized as “automatic,” the
Second Circuit has recognized that the rule, itself, allows less
severe penalties to be imposed as an alternative and that the
district court has wide discretion in levying sanctions.
Design
Strategy, Inc. v. Davis, 469 F.3d 284, 294 (2d Cir. 2006); see Fed.
R. Civ. P. 37(c)(1) (listing sanctions that court may order “in
addition to or instead of” preclusion).
Moreover, “[t]he sweep of
this exclusion is softened by the proviso that it should not apply
if the offending party’s failure to disclose was ‘substantially
justified,’ and that even if the failure was not substantially
6
justified the exclusion should not apply if the failure was
‘harmless.’”
8B Charles Alan Wright, et al., Federal Practice &
Procedure § 2289.1 (3d ed. 2010).
“Substantial justification may be demonstrated where there is
justification to a degree that could satisfy a reasonable person
that parties could differ as to whether the party was required to
comply with the disclosure request, or if there exists a genuine
dispute concerning compliance.”
Ritchie Risk-Related Trading, 280
F.R.D. at 159 (internal quotation marks omitted).
A violation is
harmless if it does not prejudice the opposing party.
Id.
In
evaluating whether a failure to disclose should be excused, courts
look to factors such as (1) whether the failure has an explanation
or was willful or in bad faith; (2) the surprise or prejudice to
the party against whom the evidence would be offered; (3) the
ability to cure the surprise; (4) the importance of the evidence;
and (5) the extent to which allowing the evidence would disrupt the
trial. See, e.g., Rodrick v. Wal-Mart Stores East, L.P., 666 F.3d
1093, 1096-97 (8th Cir. 2012); MicroStrategy Inc. v. Business
Objects, S.A., 429 F.3d 1344, 1357 (Fed. Cir. 2005); David v.
Caterpillar, Inc., 324 F.3d 851, 857 (7th Cir. 2003); Woodworker’s
Supply, Inc. v. Principal Mutual Life Insurance Co., 170 F.3d 985,
993 (10th Cir. 1999); Softel, Inc. v. Dragon Medical and Scientific
Communications, Inc., 118 F.3d 955, 961 (2d Cir. 1997); Accenture
7
Global Services GmbH v. Guidewire Software Inc., 691 F. Supp. 2d
577, 587 n.16 (D. Del. 2010); Ebbert v. Nassau County, No. 05 CV
5445, 2008 WL 4443238, at *14 (E.D.N.Y. Sept. 26, 2008).
2.
Violation of Rule 26(a) or (e)
It is clear that U.S. Bank failed, both in its initial
disclosures and subsequently, to provide PHL with a “computation of
each category of damages claimed” or to allow PHL to inspect or
copy any documentary evidence on which such a computation was
based.
Fed. R. Civ. P. 26(a)(1)(A)(iii).
Relying on Kingsway
Financial Services, Inc. v. Pricewaterhouse-Coopers LLP, No. 03
Civ. 5560, 2006 WL 1520227 (S.D.N.Y. June 1, 2006), U.S. Bank seems
to claim that, because its damages calculation will require expert
testimony, it is relieved of the obligation to present such
information until it makes its expert disclosures pursuant to Rule
26(a)(2).
In
(Pl. Preclusion Memo. at 2).
Kingsway,
disclosures
that
certain
reported
defendants
total
argued
damages
that
figures
initial
without
a
supporting calculation were inadequate. Kingsway, 2006 WL 1520227,
at *1.
The court held that, “[w]here . . . damages are not the
product of a simple mathematical calculation and require expert
testimony, the damages calculations need not be produced with the
plaintiff’s Rule 26(a)(1) disclosures and may be produced as part
of the party’s Rule 26(a)(2) disclosures.”
8
Id.
The court further
noted that the party claiming damages still has “‘the obligation,
when it makes its initial disclosures, to disclose to the other
parties the best information then available to it concerning that
claim, however limited and potentially changing it may be.’” Id.
(quoting
6
James
W.
Moore,
Moore’s
Federal
Practice
§
26.22[4][c][ii] (3rd ed. 1997)). Thus, Kingsway does not create an
exception to Rule 26(a)(1) in cases in which damages will be proved
by experts: the disclosing party still has the responsibility to
provide
each
category
of
required
disclosures
based
on
the
information it has at the time, and to supplement those disclosures
as more information is gained.
See, e.g., Stemrich v. Zabiyaka,
No. 1:12-CV-1409, 2013 WL 4080310, at *3 (M.D. Pa. Aug. 13, 2013)
(stating that Rule 26 “explicitly contemplates a procedure” by
which initial damages information is supplemented following an
expert’s review); Allstate Insurance Co. v. Nassiri, No. 2:08-cv369, 2010 WL 5248111, at *4 (D. Nev. Dec. 16, 2010) (“While the
precise method of calculation need not be disclosed if it is
properly the subject of
future expert testimony, this does not
relieve
from
the
plaintiff
providing
reasonably
available
information concerning its damages computation.”); Hesco Parts, LLC
v. Ford Motor Co., No. 3:02-CV-736-S, 2007 WL 2407255, at *2 (W.D.
Ky. Aug. 20, 2007) (“[A]lthough the defendants are not entitled to
early disclosure of the plaintiff’s expert report, the plaintiff’s
9
initial disclosures should provide its executives’ assessment of
damages in light of the information available to them in sufficient
detail so as to inform the defendants of the contours of their
potential exposure.”).
Here, U.S. Bank has admitted to preparing damages computations
and to amending them; however, it has not produced any computation
or any documentation to PHL.
Therefore, it has violated Rules
26(a) and (e).
3.
Justification and Harmlessness
a.
Explanation for Failure to Disclose
U.S. Bank makes two interrelated arguments to explain its
failure to provide a damages computation to PHL.
First, it claims
that it is impossible to produce an accurate computation without
certain information that is in PHL’s possession but which PHL has
not provided.
Specifically, U.S. Bank claims that it cannot
compute the amount of damages due to the increased COI rates
without knowing, from PHL, the “COI rate actually charged on each
policy” (the “Actual Rate”) and the “COI rate that U.S. Bank would
have been charged but for PHL’s [] COI rate increases” (the “ButFor Rate”).
(Pl. Preclusion Memo. at 5, 9).
The Actual Rate
“varies every month for every policy depending on the level of
funding in each policy that month,” and is determined using “a
complicated set of seven formulas that ultimately depend on the
10
difference between the actual ‘Funding Ratio’ in each policy (that
is, the policy value divided by the face amount for that policy for
that month) and the ‘Target Funding Ratio’ that PHL now requires
that particular policy to maintain,” which is not fixed but varies
depending on a number of variables.
7).
(Pl. Preclusion Memo. at 5,
The Actual Rate “is not provided to policy owners by PHL in
the ordinary course of business.”
(Pl. Preclusion Memo. at 6).
The But-For Rate would normally be determined by “rely[ing] on
policy
illustrations
provided
by
[PHL]”;
however,
the
policy
illustrations that PHL has produced are “seriously inaccurate.”
(Pl. Preclusion Memo. at 9-10).
even
with
complete
sufficiently
experts.
Second, U.S. Bank claims that,
information,
complicated
that
the
they
damages
require
calculations
the
assistance
are
of
(Pl. Preclusion Memo. at 11; Letter of Gregory P. Joseph
dated Sept. 4, 2013).
PHL counters that, for certain categories of damages, it is
inaccurate for U.S. Bank to assert that PHL is in sole possession
of necessary information. PHL contends that the calculation of the
diminution of value for the policies depends on “how [U.S Bank]
appraises the policies’ fair market value,” a factor that PHL would
not know.
Variable
(Reply Memorandum of Law in Support of Defendant PHL
Insurance
Plaintiff’s
Claimed
Company’s
Damages
Motion
to
(“Preclusion
11
Preclude
Reply”)
Evidence
of
at
In
2).
addition,
PHL
information
claims
that
necessary
to
it
does
permit
a
not
“possess
computation
of
all
of
the
plaintiff’s
claimed overcharge damages” traceable to “expected future cost of
insurance overcharges,” because this component of damages requires
knowledge of “(1) the policies’ expected remaining durations, as
[U.S. Bank] views them; and (2) [U.S. Bank’s] intended net present
value calculation.”
(Preclusion Reply at 2 (internal quotation
marks omitted)).
Notably, PHL asserts only that some information required to
calculate
these
future
overcharge
damages
is
in
U.S.
Bank’s
possession, not that all necessary information is in U.S. Bank’s
possession.
PHL thus seems to concede that certain damages
computations -- overcharge, as opposed to diminution damages, for
example -- require information that it would have to provide to
U.S. Bank in order for the computation to be accurate.
Moreover,
and more importantly, PHL does not challenge U.S. Bank’s assertion
that an accurate calculation of these damages will require the
assistance of experts.
However, PHL repeatedly asserts that U.S. Bank has retained an
expert to compute its damages and seems to insist that the damages
computation that U.S. Bank has admitted to creating was made with
the assistance of these experts. (Preclusion Reply at 4; Letter of
Waldemar J. Pflepsen, Jr. dated Sept. 6, 2013).
12
That is not borne
out by the record.
Mr.
Eriksson testified that he and four other
employees of Fortress Investment Group LLC (“Fortress”) computed
damages.3
(Eriksson Dep. at 310-11).
He later admits that outside
experts have been retained to compute damages.
312).
(Eriksson Dep. at
That is, contrary to the defendant’s interpretation (Letter
of Waldemar P. Pflepsen dated Sept. 18, 2013 (“Pflepsen Ltr.”) at
1),
Mr.
Eriksson
does
not
assert
that
the
existing
damages
calculations were accomplished by or with the assistance of the
retained experts or that the plaintiff’s damages estimate was
“vetted” by an expert.
U.S. Bank even acknowledges that these
computations are inaccurate and will not be relied on at trial.
(Pl. Preclusion Memo. at 16).
Moreover, Rule 26(a)(1) does not mandate that the initial
damages computation, even if complicated, be performed by an
expert.
Indeed, this points to a foundational flaw in PHL’s
motion. The defendant seems to assume that the damages computation
required in initial disclosures would be akin to a fully-reasoned
expert
report.
That
is
not
required;
rather
Rule
26(a)(1)
contemplates an estimate of damages and “some analysis,” e.g.,
3
Plaintiff U.S. Bank acts as securities intermediary for
Lima. (Def. MTC Memo. at 2). “Lima, a limited purpose entity that
holds ownership interests in the subject policies, is an indirect
subsidiary of Fortress . . . , the employees and subsidiaries of
which act as Lima’s portfolio advisor.” (Def. MTC Memo. at 2).
13
Maharaj v. California Bank & Trust, 288 F.R.D. 458, 463 (E.D. Cal.
2013), and Rule 26(e) requires supplementation as additional or
corrective information becomes available.
Expert disclosures, on
the other hand, are governed by Rule 26(a)(2), which provides that
such information be provided “in the sequence that the court
orders.”4
See Fed. R. Civ. P. 26(a)(2)(D).
That is, neither Rule
26(a)(1) nor Rule 26(e) requires disclosure of an expert report
prior to the date ordered by the court for such disclosure.
See
Hesco Parts, 2007 WL 2407255, at *2.
The mere fact that assessing the amount of damages will
require expert testimony does not absolve U.S. Bank of providing in
its initial disclosures a computation of damages using the best
information it has available, but it has provided a plausible
explanation as to why such disclosure was not forthcoming.
b.
Surprise or Prejudice
PHL claims that it has been severely and incurably prejudiced
by U.S. Bank’s failure to provide damages computations, contending
that (1) discovery will have to be reopened to allow PHL to respond
to
any
newly-disclosed
calculations
4
and
(2)
PHL
is
“greatly
The parties exchanged initial expert reports on September
16, 2013, as required by the scheduling orders in these cases.
(Civil Case Management Plan in Case No. 13 Civ. 1580 dated May 14,
2013 (“13 Civ. 1580 Sched.”) at 2; Civil Case Management Plan in
Case No. 12 Civ. 6811 dated May 17, 2013 (“12 Civ. 6811 Sched.”) at
1; Letter of Gregory P. Joseph dated Sept. 17, 2013).
14
disadvantaged in preparing an opening report challenging [U.S.
Bank’s] claimed damages and methodology.”
(Def. Preclusion Memo.
at 10-11).
As
noted
above,
the
damages
calculation
U.S.
Bank
performed is inaccurate and will not be relied on at trial.
Preclusion Memo. at 16).
has
(Pl.
And PHL can hardly claim surprise, given
that it has known that damages would be proven through expert
testimony since U.S. Bank made its initial disclosures at the
beginning of 2012.
PHL argues that fact discovery will have to be reopened in
order for it to “redepose multiple witnesses on damages topics” and
“propound additional document requests and interrogatories refined
to address [U.S. Bank’s] specific damages amount and its underlying
methodology.”
(Def. Preclusion Memo. at 10-11).
However, it is
not clear why this should be necessary: experts will be opining on
damages, and the underpinnings of any expert testimony can be
tested
during
expert
discovery,
which
has
not
yet
closed.
Moreover, PHL will, of course, be afforded the opportunity to
depose U.S. Bank’s expert and to respond to his expert report with
a rebuttal report.
why
the
disclosure
Meanwhile, PHL provides no explanation as to
of
an
inaccurate
and
preliminary
damages
computation would provide it with sufficient fodder to engage in
further fact discovery, or how such a computation would facilitate
15
production of its opening expert report, especially in light of the
fact that the damages computation required by Rule 26(a) need not
be particularly detailed.
See, e.g., Maharaj, 288 F.R.D. at 463.
Having received U.S. Bank’s expert report, PHL asserts that,
had it received an earlier disclosure, it “would have been in a
position
to
compare
[U.S.
Bank’s]
day-to-day
projections
and
valuations of its policies with [U.S. Bank’s] ongoing damages
computations,” and could have asked during fact discovery, as
asserted in the expert report, “whether [U.S. Bank] actually
intended never to take loans or withdrawals” against the value of
the policies.
(Pflepsen Ltr. at 2).
These and other assertions
of prejudice depend on the notion that U.S. Bank’s initial (or
supplemental) damages calculations would contain the detailed
analysis of an expert report -- indeed, they seem to depend on an
early disclosure of U.S. Bank’s actual expert report.
But, as
discussed above, neither Rule 26(a)(1) nor Rule 26(e) requires such
early disclosure.
iii. Cure
U.S. Bank’s opening expert report on damages was submitted on
September 16, 2013. Therefore, PHL now has an accurate computation
of damages upon which U.S. Bank will be relying.
iv.
The
evidence
of
Importance of Evidence
U.S.
Bank’s
16
damages
is
unquestionably
important, as PHL concedes.
v.
(Def. Preclusion Memo. at 12).
Disruption
Expert discovery is still open, with rebuttal reports due on
October 16, 2013.
at 1).
(13 Civ. 1580 Sched. at 2; 12 Civ. 6811 Sched.
No trial date has been set, although the joint pre-trial
orders are due on February 11, 2014.
Civ. 6811 at 2).
(13 Civ. 1580 Sched. at 2; 12
It is unlikely that allowing the evidence will
disrupt the trial or the court’s schedule.
I therefore find that U.S. Bank’s failure to disclose its
damages computation was both substantially justified and harmless
and, in any case, has been cured.
Thus, I will neither preclude
U.S. Bank’s damages evidence nor impose any other sanction.
Fed.
R. Civ. P. 37(c)(1) (sanctions may be imposed when failure to make
initial
disclosures
is
neither
substantially
justified
nor
harmless).
B.
Motion to Compel
1.
U.S.
deponent.
“Has
Bank
Background
designated
Fortress
Ola
Eriksson
as
its
Rule
30(b)(6)
At the deposition, counsel for PHL asked Mr. Eriksson,
retained
employees of [PHL]?”
Mats
Mr.
Eriksson
any
investigators
to
contact
former
(Excerpts from Transcript of Deposition of
(“Eriksson
Dep.”),
attached
as
Exh.
A
to
Declaration of Brian P. Perryman dated Aug. 20, 2013 (“Perryman MTC
17
Decl.”), at 280).
On advice of counsel, Mr. Eriksson refused to
answer the question, asserting that everything he knew about such
investigations he had learned from Fortress’ in-house counsel.
(Eriksson Dep. at 280-81).
Later in the deposition, Mr. Eriksson
testified that either Fortress or Lima engaged a law firm to
conduct investigations with former PHL employees into conduct
relevant to this litigation. (Eriksson Dep. at 335). On advice of
counsel, he again refused to testify as to how many former PHL
employees were contacted or the mechanics of the interviews.
(Eriksson Dep. at 336, 339-40).
He also asserted that Doug
Cardoni,
director
a
non-attorney
managing
information about the investigations.
MTC Memo. at 3).
of
Fortress,
had
(Eriksson Dep. at 337; Def.
When Mr. Cardoni was deposed, he too refused to
answer questions about the investigations because his knowledge
came from counsel.
(Excerpt from Transcript of Deposition of
Douglas Joseph Cardoni dated Aug. 1, 2013, attached as Exh. B to
Perryman MTC Decl., at 223-24).
PHL now seeks an order compelling the plaintiff “to produce a
Rule 30(b)(6) designee able to testify as to the facts surrounding
investigations of PHL or PHL’s cost of insurance rate adjustments
that were conducted at [the] plaintiff’s direction or for [its]
benefit.” (Def. MTC Memo. at 7). U.S. Bank claims the information
sought is protected as attorney work product.
18
(Plaintiff U.S.
Bank’s Memorandum of Law in Opposition to Defendant PHL’s Motion to
Compel Answers to Deposition Questions and the Production of
Documents Concerning Investigations Conducted By or For Plaintiff
(“Pl. MTC Memo.”) at 1).
2.
The
Discussion
burden
of
establishing
any
right
protection is on the party asserting it.
to
work
product
In re Grand Jury
Subpoenas Dated March 19, 2002 & August 2, 2002, 318 F.3d 379, 384
(2d Cir. 2003) (party asserting work product protection faces
“heavy” burden). The protection claimed must be narrowly construed
and its application must be consistent with the purposes underlying
the asserted immunity.
Id.
The work product doctrine “shields from disclosure materials
prepared ‘in anticipation of litigation’ by a party, or the party’s
representative, absent a showing of substantial need.”
United
States v. Adlman, 68 F.3d 1495, 1501 (2d Cir. 1995) (quoting Fed R.
Civ. P. 26(b)(3)).
It is designed to protect “mental impressions,
conclusions, opinions or theories concerning the litigation.”
United States v. Adlman, 134 F.3d 1194, 1195 (2d Cir. 1998).
A
document is prepared “in anticipation of litigation” if, “in light
of the nature of the document and the factual situation in the
particular case, [it] can fairly be said to have been prepared or
obtained because of the prospect of litigation.”
19
Id. at 1202
(internal
quotation
marks
omitted).
Although
work
product
protection typically accrues to documents and tangible things, the
doctrine also protects a witness from answering questions that
“reveal [his] attorneys’ legal opinions, thought processes, [or]
strategy.” Securities and Exchange Commission v. Gupta, 281 F.R.D.
169, 171 (S.D.N.Y. 2012) (citing United States v. District Council
of
New
York
City
and
Vicinity
of
the
United
Brotherhood
of
Carpenters and Joiners of America, No. 90 Civ. 5722, 1992 WL
208284, at *6-7 (S.D.N.Y. Aug. 18, 1992)); see also Banks v. Office
of the Senate Sergeant–at–Arms, 222 F.R.D. 1, 4 (D.D.C. 2004) (“The
federal courts also protect work product even if it has not been
memorialized in a document.
Questions of a witness that would
disclose counsel’s mental impressions, conclusions, opinions or
legal theories may be interdicted to protect ‘intangible work
product.’”).
Though it is often asserted that the work product doctrine
does not prevent disclosure of facts, see, e.g., 8 Charles A.
Wright, et al., Federal Practice and Procedure § 2023 (3d ed. 2010)
(“The courts [have] consistently held that the work product concept
[furnishes] no shield against discovery, by interrogatories or by
deposition, of the facts that the adverse party’s lawyer has
learned, or the persons from whom he or she had learned such facts,
or the existence or nonexistence of documents, even though the
20
documents themselves may not be subject to discovery.”), the Second
Circuit has noted that this is an overstatement:
While it may well be that work product is more deeply
concerned with the revelation of an attorney’s opinions
and strategies, and that the burden of showing
substantial need to overcome the privilege may be greater
as to opinions and strategies than as to facts, we see no
reason why work product cannot encompass facts as well.
It is helpful to remember that the work product privilege
applies to preparation not only by lawyers but also by
other types of party representatives including, for
example, investigators seeking factual information. If
an attorney for a suspect, or an investigator hired for
the suspect, undertakes a factual investigation,
examining inter alia, the scene of the crime and
instruments used in the commission of the crime, we see
no reason why a work product objection would not properly
lie if the Government called the attorney or the
investigator . . . and asked “What facts have you
discovered in your investigation?”
In re Grand Jury Subpoena dated October 22, 2001, 282 F.3d 156, 161
(2d Cir. 2002) (internal citations omitted).
U.S. Bank asserts that its former counsel in this case, Orrick
Herrington & Sutcliffe LLP (“Orrick”), retained investigators to
assist them in preparing for this and other litigation against PHL.
(Pl. MTC Memo. at 2; Declaration of Khai LeQuang dated Aug. 27,
2013 (“LeQuang Decl.”), attached as Exh. 1 to Declaration of
Courtney A. Solomon dated Aug. 28, 2013 (“Solomon Decl.”), ¶ 3).
Orrick identified certain individuals to be contacted and “provided
the investigators with information and directions as to the types
of people” to contact “based on, among other things, information
21
. . . about [PHL] and specific individuals and groups at [PHL].”
(Pl. MTC Memo. at 2; LeQuang Decl., ¶ 4).
PHL seeks disclosure of the facts surrounding U.S. Bank’s
investigations.
(MTC Reply at 3-4).
More specifically, PHL seeks
the following types of information: (1) the identities of those who
ordered or directed the investigations; (2) the identities of those
who conducted the investigations; (3) the identities of those who
were contacted in connection with the investigations; (4) the
identities of those who were present during any contacts or
meeting; (5) the dates on which the interviews occurred; and (6)
confirmation of whether documents were collected from third parties
in connection with the investigations.
(MTC Reply at 3). The
parties focus in particular on one category of information: the
identities of those contacted in connection with the interviews.
It is an unsettled question whether the work product immunity
protects the identities of those persons interviewed by an attorney
or his agent in anticipation of litigation.
Compare, e.g., Oregon
Health & Science University v. Vertex Pharmaceuticals, Inc., No.
Civ. 01-1272, 2002 WL 31968995, at *2 (D. Or. Oct. 24, 2002) (“The
names
of
the
ex-employees
[interviewed],
the
dates
of
these
conversations, and the names of those who were present are not
protected by the work product doctrine.”) and Alexander v. Federal
Bureau of Investigation, 192 F.R.D. 12, 19 (D.D.C. 2000) (requiring
22
disclosure
of
names
of
those
interviewed)
with
Plumbers
&
Pipefitters Local 572 Pension Fund v. Cisco Systems, No. C01-20418,
2005 WL 1459555, at *4 (N.D. Cal. June 21, 2005) (identifying names
of investigatory interviewees “would allow Defendants to infer the
importance of these witnesses, revealing Plaintiff’s legal theories
and conclusion[s]”) and In re MTI Technology Corp. Securities
Litigation II, No. SACV 00-745, 2002 WL 32344347, at *3 (C.D. Cal.
June 13, 2002) (stating, “Although the identity and location of
witnesses that may have knowledge of any discoverable matter is not
protected,
the
identity
of
witnesses
interviewed
by
opposing
counsel is protected,” and collecting cases (footnote omitted)).
However, courts in this district have noted that the identities of
people interviewed as part of counsel’s investigation into the
facts of the case have the potential to reveal counsel’s opinions,
thought processes, or strategies, and are therefore protected. See
Plumbers and Pipefitters Local Union No. 630 Pension-Annuity Trust
Fund v. Arbitron, Inc., 278 F.R.D. 335, 343 n.8 (S.D.N.Y. 2011)
(stating that, in “the circumstance in which a party demands a list
of persons whom opposing counsel has interviewed,” one party “is
essentially seeking, and potentially piggybacking on, a roadmap of
an adversary’s pretrial investigation[,] [which] implicates core
policies behind the work product doctrine,” and collecting cases);
In re Initial Public Offering Securities Litigation, 220 F.R.D. 30,
23
35-36 (S.D.N.Y. 2003) (citing with approval “the proposition that
a party may not specifically demand the identities of witnesses
interviewed or relied upon by counsel”).
Here, U.S. Bank asserts that its former counsel’s decisions
regarding whom to interview had a strategic component based on
information counsel had about PHL and about individuals at PHL.
(LeQuang Decl., ¶ 4).
In light of this assertion, and the
persuasive
reasoning
cases
identities
of
the
of
cited
individuals
U.S.
above,
Bank
I
find
that
interviewed
investigation are protected as work product.
in
the
its
See Plumbers and
Pipefitters Local Union No. 630, 278 F.R.D. at 343 n.8; Plumbers &
Pipefitters Local 572 Pension Fund, 2005 WL 1459555, at *4; In re
MTI Technology Corp. Securities Litigation II, 2002 WL 32344347, at
*3; see also Cason-Merenda v. Detroit Medical Center, No. 06-15601,
2008 WL 659647, at *2 (E.D. Mich. March 7, 2008) (holding “a
discovery request [seeking a list of individuals selected by
counsel for interviews] would implicate the work product doctrine,
as it would threaten to disclose the thought processes and
strategic assessments of plaintiffs’ counsel”); Tracy v. NVR, Inc.,
250 F.R.D. 130, 132 (W.D.N.Y. 2008) (“The better reasoned decisions
. . . are those that draw a distinction between discovery requests
that seek the identification of persons with knowledge about the
claims or defenses (or other relevant issues) -- requests that are
24
plainly permissible -- and those that seek the identification of
persons who who have been contacted or interviewed by counsel
concerning the case.”).
Other categories of information sought -- information about
those who ordered and conducted the interviews, those who were
present but not interviewed, and the dates of the interviews -- are
not protected from disclosure because they are not likely to
provide insight into counsel’s opinions, thought processes, or
strategy.
See, e.g., Cason-Merenda, 2008 WL 659647, at *2-3
(allowing
discovery
investigation).
of
identities
of
those
conducting
Similarly, the question of whether documents were
collected from third parties is not likely to impinge on attorney
work product protection, as it does not implicate the “selection
and compilation theory of work product,” which protects from
disclosure
“counsel’s
sifting,
selection
otherwise unprotected documents.5
5
and
compilation”
of
District Council of New York
In its opening brief, PHL states that Mr. Eriksson and Mr.
Cardoni also improperly refused to supply answers regarding the
manner in which the investigations were conducted, the scope of the
investigations, and the reasons the investigations were ordered.
(Def. MTC Memo. at 5-6).
However, in its reply brief, PHL no
longer lists these as subjects of inquiry and I therefore assume
that it no longer seeks such information. In any case, information
about the scope of and reasons for the investigations would be
protected from disclosure as work product. Cf. In re Grand Jury
Subpoena dated October 22, 2001, 282 F.3d at 161; Oregon Health &
Science University, 2002 WL 31968995, at *2 (substance of
conversations with interviewees “may reveal attorney work product[]
25
City,
1992
WL
208284,
at
*7 9.
However,
it
is
unclear
how
information relating to these questions could be relevant given
that the identities of the interviewees will not be disclosed.
motion to compel
is
therefore denied without prejudice to PHL
demonstrating the relevance of such information.
Bank National Association v.
See, e.g.,
PHL Variable Insurance Co.,
No.
Civ. 6811, 2013 WL 1728933, at *2 (S.D.N.Y. April 22,2013)
burden
of
The
demonstrating
relevance
is
on
the
party
12
("The
seeking
discovery.") .
Conclusion
For the foregoing reasons,
PHL's motion to preclude (Docket
no. 253 in 12 Civ. 6811, Docket no. 58 in 13 Civ. 1580) is denied.
PHL's motion to compel (Docket no. 256 in 12 Civ. 6811, Docket no.
61 in 13 Civ. 1580) is denied without prejudice to PHL submitting
a
letter
demonstrating
the
relevance
of
the
non-privileged
information it seeks within three days of the date of this Order.
SO ORDERED.
~
~.~~~1i-
JAMES C. FRANCIS IV
UNITED STATES MAGISTRATE JUDGE
by providing to defendant those facts that the attorney believed to
be relevant and what line of questioning he or she pursued").
26
Dated: New York, New York
October 3, 2013
Copies mailed this date to:
Gregory P. Joseph, Esq.
Peter R. Jerdee, Esq.
Rachel M. Cherington, Esq.
Courtney A. Solomon, Esq.
Samuel N. Fraidin, Esq.
Joseph Hage Aaronson LLC
485 Lexington Avenue, 30th Floor
New York, NY 10017
Brian P. Perryman, Esq.
Jason H. Gould, Esq.
Waldemar J. Pflepsen, Jr., Esq.
Jorden Burt LLP
1025 Thomas Jefferson St., N.W.
Suite 400 East
Washington, D.C. 20007
Raul A. Cuervo, Esq.
Jordan Burt LLP
777 Brickell Ave., Suite 500
Miami, FL 33131-2803
Stephen J. Jorden, Esq.
Ben V. Seessel, Esq.
Jorden Burt LLP
175 Powder Forest Drive
Simsbury, CT 06089
27
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