Transportation Alliance Bank, Inc. v. Arrow Trucking Co. et al
Filing
178
OPINION AND ORDER by Magistrate Judge Frank H McCarthy ; granting in part and denying in part 153 Motion to Compel; denying 154 Motion for Sanctions (jcm, Dpty Clk)
UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF OKLAHOMA
TRANSPORTATION ALLIANCE
BANK, INC.,
PLAINTIFF,
vs.
ARROW TRUCKING CO., et al.,
DEFENDANTS.
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CASE NO . 10-CV-016-GKF-FHM
OPINION AND ORDER
Defendant Carol Pielsticker Bump’s Motions to Compel [Dkt. 153] and for
Sanctions [Dkt. 154] have been fully briefed and are ripe for decision. The motions
seek production of the following: a settlement agreement between Plaintiff and
Defendant Mowry; a declaration by Defendant Mowry which was required by the terms
of the settlement agreement; all settlement-related drafts and communications;
Plaintiff’s attorney’s internal notes related to the settlement; similar documents
pertaining to Mr. Moore and Mr. Pielsticker; and sanctions.
At the time of the deposition of Defendant Mowry Defendant Bump had an
outstanding discovery request to Plaintiff requesting that Plaintiff produce all
communications with Defendant Mowry.
However, Plaintiff did not disclose the
existence of the settlement agreement and declaration to Defendant Bump. Instead,
the existence of the settlement agreement and declaration was disclosed during
Defendant Bump’s questioning of Defendant Mowry at his deposition. Defendant
Mowry refused to disclose the terms of the settlement agreement or to produce the
agreement or declaration because the settlement agreement contained a confidentiality
clause. Relying on the confidentiality clause, Plaintiff also refused to produce the
agreement or declaration without Defendant Mowry’s consent.
In response to the instant motion to compel, Defendant Mowry continues to rely
on the confidentiality clause of the settlement agreement and also argues that
Fed.R.Evid. 408 protects the settlement agreement from disclosure. Despite the
confidentiality clause, Plaintiff does not object to the production of the settlement
agreement and declaration if the Court finds them to be relevant under Fed.R.Civ.P. 26
and orders production. Plaintiff does object to the other requests in the motion to
compel.
Rule 26(b)(1) permits discovery of any nonprivileged matter that is relevant to
any party’s claim or defense. The Court must, therefore, decide whether the discovery
requested is privileged and if not privileged, whether the information is relevant.
Privilege
The Court rejects the argument that the confidentiality clause prevents
Defendant Bump’s discovery of the settlement agreement and declaration.
Confidentiality is not a bar to discovery, although a confidentiality clause may justify
seeking Court direction before disclosing the settlement agreement. High Point SAIL
v. Sprint Nextel Corp., 2011 WL 3241432 (D.Kan., July 29, 2011); Cook v. Medical Sav.
Ins. Co., 2006 WL 687126 (W.D. Okla., March 17, 2006).
The Court finds that Fed.R.Evid. 408 is not a basis to deny Defendant Bump’s
discovery of the settlement agreement and declaration. The terms of Rule 408 do not
create a privilege from discovery. Rule 408 limits the admissibility of compromise offers
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and negotiations when offered for particular purposes but allows their admission for
other purposes.
In Goodyear Tire & Rubber Co. v. Chiles Power Supply, Inc., 332 F.3d 976 (6th Cir.
2003) the Sixth Circuit Court of Appeals recognized what it called a “settlement
privilege” which was based in part on Fed.R.Evid. 408. However, the Goodyear Court
applied that privilege to communications made in furtherance of settlement. 322 F.3d
at 983. The Court acknowledged cases holding that the fact of settlement or the
settlement agreement itself may be admissible for some purposes under Rule 408. Id.
at 982. The present case is distinguishable from the Goodyear case insofar as the
Goodyear case involved settlement discussions presided over by the Court under an
admonishment that all talks were to remain confidential. The settlement between
Plaintiff and Defendant Mowry was not reached in a court-ordered proceeding. Further,
the Tenth Circuit has not issued an opinion following the Sixth Circuit in finding a
“settlement privilege.” See High Point, 2011 WL 3241432, *7 (refusing to acknowledge
a “settlement privilege” in the absence of Tenth Circuit authority); Heartland Surgical
Specialty Hosp., LLC v. Midwest Div., Inc., 2007 WL 1246216 (D.Kan. 2007) (same).
The Court finds that the Federal Rules of Evidence do not preclude Defendant Bump’s
discovery under the facts of this case.
Relevance
In considering the relevancy issue, the Court will separately consider the
relevance
of
the
declaration,
settlement
communications.
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agreement,
and
the
drafts
and
The declaration of Defendant Mowry which was required by the settlement
agreement apparently sets forth Defendant Mowry’s statement of the facts of the case.
The declaration is, therefore, relevant to the claims and defenses in the case and
consequently discoverable.
The settlement agreement apparently sets forth the terms and conditions on
which Plaintiff and Defendant Mowry resolved the litigation between themselves and
may not relate directly to the claims and defenses in the case. Defendant Bump
contends, however, that the settlement agreement is relevant to Defendant Mowry’s
bias and credibility as a witness. Defendant Mowry is an important witness concerning
the facts of the case. The Court finds that the settlement agreement is relevant for
discovery purposes to Defendant Mowry’s bias and credibility and is therefore
discoverable.
Defendant Bump contends the drafts and communications which led to the
settlement agreement and declaration are relevant to show the “process” by which the
settlement agreement and declaration came to exist and to establish Plaintiff’s role in
drafting each document. The Court finds that the “process” is not relevant to the claims
or defenses in the case. This is not a case where the settlement process itself is an
issue in the case as it was in Trinity Mortg. Co., Inc. v. Dryer, 2010 WL 2365525 (N.D.
Okla. 2010) where the Court ordered production of the documents related to a
settlement agreement and the negotiations leading to settlement. The “process” is not
relevant to Defendant Mowry’s bias or credibility as a witness. To the extent that
Mowry’s settlement is relevant to those issues, the final settlement agreement will show
how Defendant Mowry benefitted from his settlement with Plaintiff. Further, discovery
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of the “process” would be costly and contentious as it would necessarily involve
discovery directed to the attorneys handling the litigation. Denial of this discovery is
therefore justified under Fed. R. Civ. P. 26(b)(2)(c)(iii). In addition, the Court finds that
discovery into the negotiation process would have a chilling effect on settlement
negotiations in general which would be contrary to the public policy of encouraging
settlement.
Sanctions
Defendant Bump’s motion seeks sanctions based on allegations of serious
misconduct by Plaintiff, Plaintiff’s attorneys, and Defendant Mowry. Defendant Bump
and her attorneys have not established, or even made a serious effort to establish, a
factual basis for these allegations. Defendant Bump has completely failed to prove that
there was anything improper in Plaintiff’s settlement with Defendant Mowry. Defendant
Bump’s inflammatory accusations provide no basis for sanctions and distract the court
from the discovery issue presented by the facts.
However, the settlement agreement and declaration are documents responsive
to Defendant Bump’s Request for Production No. 28 to Plaintiff.
Since Plaintiff
contends that the documents are protected from discovery, it was incumbent on Plaintiff
to seek a protective order. Defendant Bump should not have been placed in the
position of attending Defendant Mowry’s deposition without the knowledge of the
existence of those documents.
Despite Plaintiff’s failure to seek a protective order, there is authority that a party
is substantially justified for purposes of Fed. R. Civ. P. 37(a)(4)(A) in withholding
documents covered by a confidentiality agreement until the court rules on the matter.
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See Cook v. Medical Sav. Ins. Co., 2006 WL 687126, *2 (W.D. Okla., March 17,
2006)(expenses were not awarded because the existence of a confidential settlement
substantially justified nondisclosure of some information). Additionally in this case
Defendant Bump took the position that a confidentiality clause prevented discovery of
a settlement agreement in a similar situation. These factors lead the court to exercise
its discretion to deny the motion for sanctions against Plaintiff. However, in the future
the party withholding documents should either list the documents on a privilege log or
obtain a protective order from the court.
Conclusion
Defendant Bump’s Motion to Compel (Dkt. 153) is GRANTED IN PART and
DENIED IN PART. Plaintiff shall produce the settlement agreement between Plaintiff
and Defendant Mowry and Defendant Mowry’s declaration. Defendant Bump is also
GRANTED permission to re-depose Defendant Mowry concerning the settlement
agreement and declaration. In all other respects, Defendant Bump’s Motion to Compel
[Dkt. 153] is DENIED. Defendant Bump’s Motion for Sanctions [Dkt. 154] is DENIED.
SO ORDERED this 19th day of October, 2011.
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