Grigson et al v. Farmers Group, Inc.

Filing 164

ORDER GRANTING IN PART AND DENYING IN PART 105 Third Motion to Compel; DENYING 140 Fourth Motion to Compel. Signed by Judge Andrew W. Austin. (td)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
CHARLES GRIGSON, et al.
v.
FARMERS GROUP, INC.

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1:17-CV-00088-LY

ORDER
Before the Court are Plaintiff’s Third Motion to Compel Discovery (Dkt. No. 105),
Defendant’s Response (Dkt. No. 107), and Plaintiff’s Reply (Dkt. No. 109); and Plaintiff’s Fourth
Motion to Compel Discovery (Dkt. No. 140), Defendant’s Response (Dkt. No. 151), and Plaintiff’s
Reply (Dkt. No. 154). The motions have been referred to the undersigned for resolution.
A.

Third Motion to Compel (Dkt. No. 105)
The case at hand is a putative class action in which Plaintiffs and other putative class

members challenge the insurance premium rate setting practices of Farmers Group, Inc. (“FGI”). At
issue is the alleged discrepancy between premiums charged under the Farmers Auto 2.0 and 2.5
policy regimes (“FA2") and the recently adopted Farmers Smart Plan Auto (“FSPA”) regime.
Plaintiffs allege that coverage under FA2 and FSPA is identical or virtually identical and that, despite
this, premiums under FSPA are significantly lower. Plaintiffs further allege that when FGI rolled
out FSPA in early 2016, it instructed its agents to only offer FSPA to new clients and to restrict
access to existing clients who were covered under the FA2 regime, thereby requiring those customers
to pay significantly more for the same or nearly identical coverage. Plaintiffs allege this is a
discriminatory practice and illegal under Texas law.
In discovery, Plaintiffs have sought production of a number of rate change models FGI has
produced internally. These tools, known as Auto Off Balance tools (“AOBs”), are models that take

into consideration a wide range of variables to help insurers set an adequate premium rate. FGI
initially objected to producing certain AOB tools on the ground that they were created in anticipation
of litigation and were covered by the work product doctrine. Plaintiffs challenged this assertion.
Eventually, Plaintiff and FGI agreed that FGI would provide access to some of these AOBs. Dkt.
105, Ex. 1 at 9. FGI provided access to two AOBs, and Plaintiff served a 30(b)(6) deposition notice
on FGI for a witness to testify regarding the tools. Prior to the deposition, FGI produced three more
AOBs it had created for litigation purposes (“the produced AOBs”). Dkt. 105, Ex. 3; Ex. 4. At the
deposition, Plaintiffs discovered the existence of an additional two AOBs (“the unproduced AOBs”)
also created by FGI at the direction of counsel. Dkt. 105, Ex. 4. Plaintiffs now seek production of
these two unproduced AOBs, as well as the instructions from counsel and any other communications
regarding the five total AOBs created for litigation (“the litigation AOBs”).
Plaintiffs contend that by disclosing the produced AOBs, FGI waived its ability to assert
work-product protection as to the unproduced AOBs, as all five AOBs relate to the same subject
matter. Plaintiffs further argue that FGI’s disclosure of the produced AOB tools also waived its
attorney-client privilege as to any communications between defense counsel and FGI concerning the
AOBs. Plaintiffs contend that FGI is attempting to use its privilege as both a sword and a shield,
which itself is a ground to assert waiver. FGI, on the other hand, contends that Plaintiffs’ argument
conflates the attorney-client privilege and the work-product doctrine. FGI denies it has waived its
attorney-client privilege, and argues that the production of the AOBs prior to the deposition did not
constitute a subject matter waiver as to all AOBs, because subject matter waiver is only warranted
when the quality or substance of the attorney’s work is called into question by the party asserting the
privilege. FGI denies that it has called into question the quality or substance of the work product

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involved in the produced AOBs. FGI objects to production of the remaining AOBs and any
communications between attorneys and FGI regarding the same.
Federal Rule of Civil Procedure 26(b) permits “discovery regarding any nonprivileged matter
that is relevant to any party’s claim or defense. . . .” FED. R. CIV. P. 26(b). Discoverable information
is not limited to admissible evidence, but includes anything “reasonably calculated to lead to the
discovery of admissible evidence.” Id.; see also Coughlin v. Lee, 946 F.2d 1152, 1159 (5th Cir.
1991). Courts traditionally construed “relevance” broadly: information was considered relevant if
it encompassed any matter that bore on, or that reasonably could lead to other matter that could bear
on, any issue in the case. Coughlin, 946 F.2d at 1159. The amendment to Rule 26(b) to allow
discovery only of matter relevant to a party’s “claim or defense” was intended to narrow the scope
of discovery. And it is well established that “matters relating to discovery are committed to the
discretion of the trial court.” Freudensprung v. Offshore Technical Servs., Inc., 379 F.3d 327, 347
(5th Cir. 2004).
There is no question that FGI waived its right to assert work product protection as to the three
AOBs produced prior to the corporate representative deposition. The issue is whether by its
purposeful disclosure of these AOBs produced for litigation purposes, FGI also waived work product
or attorney-client protection as to other matters that are related to the produced AOBs. Unlike the
attorney client privilege, the work product doctrine is governed, even in diversity cases, by the
uniform federal standard embodied in Federal Rule of Civil Procedure 26(b)(3). Dunn v. State
Farm, 927 F.2d 869, 875 (5th Cir. 1991) (applying state law to claims of attorney-client privilege
but federal common law to work-product); Davis v. United States, 2006 WL 2883042 at n.1 (W.D.
La. Oct. 4, 2006) (noting that federal law of work product doctrine applies in a diversity case).

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Work-product and attorney-client privileges are also distinct with respect to waiver, and waiver of
one does not necessarily mean waiver of the other. United States v. Nobles, 422 U.S. 225, 239
(1975); Shields v. Sturm, Ruger & Co., 864 F.2d 379, 382 (5th Cir. 1989) (“The work product
privilege is very different from the attorney-client privilege.”); Doe 1 v. Baylor Univ., 320 F.R.D.
430, 435 (W.D. Tex. 2017). The attorney-client privilege promotes full and frank discussion
between counsel and client. Upjohn v. United States, 449 U.S. 383, 389 (1981). Generally,
“disclosure of any significant portion of a confidential communication waives the privilege as to the
whole.” Nguyen v. Excel Corp., 197 F.3d 200, 208 (5th Cir. 1999). Work-product privilege, on the
other hand, protects the attorney’s research, analysis, thought processes, and trial strategy from
discovery prior to trial, thus supporting the adversarial judicial system. Dunn, 927 F.2d at 875. Work
product typically constitutes “documents and tangible things that are prepared in anticipation of
litigation or for trial by or for another party or its representative . . . including the other party’s
attorney.” FED. R. CIV. P. 26(b)(3).
Waiver in the work product context typically only applies to the document actually disclosed.
S.E.C. v. Brady, 238 F.R.D. 429, 444 (N.D. Tex. 2006). A more general subject matter waiver is
usually reserved for instances in which the quality or substance of the attorney’s work product has
been directly placed at issue in the litigation. Baylor, 320 F.R.D at 442; Feld v. Fireman’s Fund Ins.
Co., 991 F.Supp.2d 242, 255 (D.D.C. 2013). In order to constitute subject matter waiver, work
product must directly place at issue in litigation the quality or substance of an attorney’s work.
Baylor, 320 F.R.D. at 442. It is only when work product is the direct subject of litigation that
disclosure of the product may constitute a subject matter waiver. Id.; Feld, 991 F.Supp.2d at 253.

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Here, FGI has used the three produced AOBs to suggest that certain percentages of the
proposed Class are undamaged. Dkt. No. 127-28. By doing so, FGI has waived the work product
protection as to the subject matter of the Litigation AOBs as a whole. FGI has directly placed at
issue in this current suit the quality and substance of the Litigation AOBs. By only producing some
of the AOBs it has created in connection with this litigation, it appears to that FGI has “cherry
picked” its claim of privilege as to the remaining AOBs, something courts do not permit.. U.S. ex
rel. Figueroa v. Covan World-Wide Moving, Inc., 2014 WL 5461995, at *3 (D.S.C. Oct. 27, 2014).
For example, as Plaintiffs rightly note, in its briefing on the class action certification question FGI
on more than one occasion underscores the results of the January 2016 Litigation AOB to argue that
it is “undisputed” that one third of the putative class would have had higher premiums upon
rewriting to FSPA and that this high number of undamaged class members should doom the
Plaintiffs’ request for class certification. Dkt. 127 at 2, 31; Dkt. 127-30 at ¶¶ 31-37. FGI has also
used the results of the specific AOB iterations to argue that the AOB tools are not reliable enough
to measure damages. Dkt. No. 127-28, at ¶ 72, Dkt. 127-30, at ¶ 34. Given this use of the Litigation
AOBs, the Court finds that FGI has waived work product protection as to the other two AOBs, and
therefore GRANTS Plaintiffs’ Motion as it relates to the previously unproduced Litigation AOBs.
Plaintiffs also seek to compel FGI to produce instructions from counsel and internal
correspondence regarding all five of the Litigation AOBs. Plaintiffs argue in part that they have not
been able to learn the assumptions and/or directions that came from FGI’s outside counsel relating
to the Litigation AOBs that have already been produced and that they have no idea what assumptions
are in the two unproduced Litigation AOBs. In addition, they argue that they are “entitled to
understand the instructions that FGI received from its outside counsel in building these tools,

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because they are critical to understanding the tools themselves and to analyzing and comparing the
different tools.” Dkt. No. 105, at 9. FGI, on the other hand, argues Plaintiffs are not entitled to
attorney-client communications regarding the Litigation AOBs. The Court agrees with FGI.
Generally, a party waives attorney-client privilege when it voluntarily discloses privileged
communications to a third party, including an adversary in litigation. Reedhycalog UK, Ltd. v. Baker
Hughes Oilfield Operations, Inc., 251 F.R.D. 238, 244 (E.D. Tex. 2008); Aspex Eyewear, Inc. v.
E'Lite Optik, Inc., 2002 WL 1592606, at *3 (N.D. Tex. July 17, 2002); United States v. El Paso Co.,
682 F.2d 530, 539 (5th Cir. 1982) (“To retain the attorney-client privilege, the confidentiality
surrounding the communications made in that relationship must be preserved.”). The Fifth Circuit
has held that “[a] client waives the attorney-client privilege . . . by failing to assert it when
confidential information is sought in legal proceedings.” Nguyen, 197 F.3d at 206. Subject matter
waiver generally occurs only where the party holding the privilege seeks to gain some strategic
advantage by disclosing favorable, privileged information, while holding back that which is
unfavorable. In re Sealed Case, 676 F.2d 793, 809 & n.54 (D.C. Cir. 1982); Graco Children's
Products, Inc. v. Dressler, Goldsmith, Shore & Milnamow, Ltd., No. 95 C 1303, 1995 WL 360590,
at *8 (N. D. Ill. 1995).
Here, there is no evidence to suggest that FGI waived the attorney-client privilege. While
it is certainly true that FGI allowed its employee to be deposed about the nature of the AOB tool,
there is nothing in the parties’ briefs to suggest that FGI did not assert its privilege. In fact, FGI’s
outside counsel during Ms. Tai’s deposition stated:
So I’m going to object. Let me tell you the line we’re drawing here. As far as our
communications about what scenarios are possible, what could be done, those
discussions we’re claiming privilege over of course. But as far as what does the tool
do, what are the changes, how is it different, what scenario is it looking at, you can
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ask all those questions without saying, “Is that—well, is that something that Adam
told you to do, or is that something someone else told you to do?” As far as what
does the tool do, how it works, how it runs, any assumption, you’re free to ask how
the tool works. But as far as our discussions about the tool, we’re claiming privilege
over that.
Dkt. 105, Ex. 4 at 11, 20. FGI’s counsel preserved the confidentiality surrounding the
communications between counsel and employees at FGI, and hence, the attorney-client privilege has
not been waived by FGI as to any communications related to the Litigation AOBs. Despite
Plaintiffs’ contention, they are not “entitled” to have access to any instructions FGI received from
outside counsel. Nevertheless, while Plaintiffs may not have access to instructions FGI received
from outside counsel regarding the AOB tools, there is nothing inhibiting Plaintiffs from accessing
purely internal, non-counsel related communications related to all the Litigation AOBs. Plaintiffs
argue that the universe of purely internal communications related to the Litigation AOBs should be
relatively small and there is nothing in the briefs to suggest otherwise. The Court will therefore
GRANT the Plaintiffs’ Third Motion to Compel as to internal, non-counsel related communications
concerning all of the Litigation AOBs, but DENY the motion as to any attorney-client
communications
B.

Fourth Motion to Compel (Dkt. No. 140)
In this motion—filed after Judge Yeakel instructwed the parties to limit discovery to that

which is necessary to provide meaningful argument and briefing as to class certification—Plaintiffs
challenge FGI’s objection to producing information related the coverage differences FGI claims exist
between FA2 and FSPA policies. In their Sixth Request for Production of Documents, Fourth Set
of Interrogatories, and Fourth Request for Admission, Plaintiffs request information and documents
regarding these claimed coverage differences, arguing that FGI has put these facts in issue in its

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Response in Opposition to Class Certification. Dkt. No. 127 at 28. Plaintiffs maintain that the
requests are therefore relevant and proper discovery requests notwithstanding Judge Yeakel’s limit
on permissible pre-certification discovery. FGI has objected to production on the grounds that the
requests are overly broad and unduly burdensome, contending that they go beyond what is necessary
to meaningfully argue class certification. Furthermore, FGI argues that its certification briefing only
mentions three coverage differences: Auto Rewards, Mexico coverage, and rental car coverage. It
contends that it has and is continuing to produce records responsive to those differences, which are
the only ones necessary to meaningfully argue class certification.
The scope of discovery is limited, in pertinent part, to that which is relevant considering “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). Discovery is a powerful
and wide-ranging tool, but the court retains discretion to narrow its scope. Freudensprung, 379 F.3d
at 347. The Court must, in fact, limit discovery if it determines that the discovery sought is outside
the scope or if the party seeking it has had ample opportunity to obtain the information sought by
other discovery. FED. R. CIV. P. 26(b)(2)(C).
This Court exercised its discretion to narrow the scope of discovery for purposes of class
certification, “to what you-all realistically and honestly need, not what would be nice in a best-of-allworlds situation, to present good briefs to me and meaningful argument on why I should or should
not certify the class.” Dkt. No. 151 at 5. In its Response to Class Certification, FGI has only raised
a “coverage difference” argument as to three items, and has provided discovery on these issues. Dkt.
No. 151 at 6-7; Dkt. No. 127 at 23; Dkt. No. 151, Ex. H.. Plaintiffs’ requests, on the other hand,
span all possible differences in coverage FGI mentioned in its Response to Class Certification. Dkt.

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140, Ex. 2, RFP Nos. 68, 69. Responding to such requests will likely require an extensive review of
numerous personnel and agent files. Dkt. No. 151, Exs. A, B, E. As FGI has been responsive with
regard to the three briefed coverage differences and claims to have spent over $1 million on
discovery already, the Court concludes that the additional requests are overly broad and unduly
burdensome given the current, pre-certification “needs of the case.” FED. R. CIV. P. 26(b)(1).
In reaching this conclusion, the Court has found particularly instructive Plaintiffs’ statement
that it has “already gathered substantial evidence strongly supporting that the coverages are the same
or materially the same.” Dkt No. 118 at 30. As such, the Court, at this point, does not see a reason
to prolong discovery in the way Plaintiffs ask here. Because FGI has been and is continuing to be
responsive to requests pertaining to the three coverage differences still at issue, compelling discovery
as to the 140 issues no longer at issue would have no substantial effect on the arguments to be
presented on class certification and is outside the scope of discovery as it stands now. Plaintiffs may
continue to seek discovery as to the three coverage differences at issue, but because FGI has been
responsive on these issues, there is no need for the Court to compel it to do so. Thus, Plaintiffs’
Fourth Motion to Compel is DENIED.
Based on the preceding discussion, Plaintiffs’ Third Motion to Compel Requests for
Production (Dkt. No. 105) is GRANTED IN PART AND DENIED IN PART as set forth above,
and Plaintiffs’ Fourth Motion to Compel (Dkt No. 140) is DENIED.
SIGNED this 12h day of August, 2019.

_____________________________________
ANDREW W. AUSTIN
UNITED STATES MAGISTRATE JUDGE

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