Crown Life Ins. Co. v. Craig
| Decision Date | 30 June 1993 |
| Docket Number | No. 92-3180,92-3180 |
| Citation | 995 F.2d 1376 |
| Parties | CROWN LIFE INSURANCE COMPANY, a Canadian Corporation, Plaintiff-Appellant, v. Kerry P. CRAIG and Craig/Associates, Inc., an Illinois Corporation, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
David J. Novotny (argued), J. Robert Geiman, and Donald A. Murday, Peterson & Ross, Chicago, IL, and Kevin R. Hayes, Alexandria, VA, for plaintiff-appellant.
Joseph M. Condron, Sanders, Smith & Cross; Lawrence C. Casano, Pittman & Associates; and William J. Stonikas, William Cook (argued), and Steven M. Ritter, Cook & Ritter, Chicago, IL, for defendants-appellees.
Before CUMMINGS and COFFEY, Circuit Judges, and ESCHBACH, Senior Circuit Judge.
Crown Life Insurance Company ("Crown Life") appeals the district court's imposition of sanctions, findings of fact and refusal to allow a witness to testify in this diversity case. After a bench trial, the district court entered judgment in favor of Crown Life on a check that Kerry P. Craig and Craig/Associates, Inc. (collectively "Craig") had written to Mr. Craig, but the district court found in favor of Craig on three other checks. The district court also granted Crown Life judgment on its claim for payment of loan indebtedness, although not in the full amount that Crown Life claimed. After finding that Crown Life had violated discovery orders, the district court sanctioned Crown Life by entering a default judgment in favor of Craig on its counterclaim. We have jurisdiction to decide this appeal pursuant to 28 U.S.C. § 1291. We affirm the judgment and the sanction.
Crown Life filed this action against Craig, its former Chicago general agency. In its complaint Crown Life alleged that Craig wrongfully drew eleven checks on Crown Life's funds in a bank account known as the "branch account". Crown Life also sought recovery of an additional amount over $500,000, which Crown Life alleged it had loaned to Craig under certain financing agreements during the term of Craig's general agency. Craig filed a counterclaim alleging that it was owed renewal commissions by Crown Life.
Prior to trial on the claim and counterclaim, the district court granted summary judgment in favor of Crown Life on seven of the eleven branch account checks Craig wrote. Of the four remaining checks, three were written to brokers and one was payable to Mr. Craig. The three broker checks were drawn to pay producer bonuses and commissions to brokers who had placed business with Crown Life through Craig. The district court found that Crown Life had implicitly authorized Craig to use the account for these purposes by allowing such use in the past. Thus, the district court found in favor of Craig on these three checks. The district court found that the remaining check written to Mr. Craig was unauthorized and granted judgment in favor of Crown Life on it.
With regard to Craig's alleged loan indebtedness, the main issue at trial was whether Crown Life had agreed to forgive or write-off certain loans made to Craig. Most of the controversy on this issue centered specifically on a loan relating to arbitration in an unrelated dispute between Craig and Clarke Lloyd, a former senior vice president for Crown Life. Ultimately, the district court found that Crown Life had forgiven the arbitration loan, and awarded Crown Life judgment on only a part of its claim for loan repayments.
The counterclaim concerned the amount of renewal commissions due Craig. Other than Summaries of Renewal Commissions Payable and other Crown Life internal documents, the only evidence offered on this issue was the testimony of Clarke Lloyd. Lloyd testified regarding a rule-of-thumb in the insurance industry for evaluating future renewal commissions. Crown Life also submitted into evidence the general agency agreement it had signed with Craig. (Crown Life Ex. 3). This agreement provided that renewal commissions were payable only as they were "earned", i.e., when the premium was paid by the policyholder. According to the agreement, renewal commissions would be paid over a ten-year period following a general agent's termination.
A Crown Life employee, Robert Currie, testified at trial about a database containing data for each policy sold by Crown Life's general agents, including Craig. The parties and the district court referred to this data as the "raw data". During the pendency of the trial, Craig's expert witness informed counsel for Craig that the documentation given to him (i.e., the documents produced by Crown Life) was insufficient for him to formulate an opinion on the amount of commissions due Craig. Counsel for Craig then moved to dismiss Crown Life's complaint because it had not produced the raw data.
Three days before the conclusion of the trial, counsel for Crown Life informed the district court that one of its witnesses, Daniel Martineau, would not be available to testify as scheduled. The district court refused to continue the trial to allow this testimony. The district court also sanctioned Crown Life for not producing the raw data.
The district court held that Crown Life was entitled to judgment on the check payable to Craig on the branch account and that Crown Life was entitled to judgment for a portion of the loan indebtedness it sought to recover against Craig. The district court also granted judgment in favor of Craig on the counterclaim for renewal commissions. As a sanction, the district court did not allow Crown Life to rely on its own figures for renewal commissions, did not allow it to rebut Lloyd's rule of thumb, and did not allow it to rely on the contract provision providing payment as it is earned. Therefore, the amount of the counterclaim judgment was established based on the rule-of-thumb estimate described by Lloyd.
On appeal, Crown Life argues that the district court's sanction was based on a clearly erroneous factual finding that Crown Life violated the discovery order, or in the alternative, that the sanction was too harsh and an abuse of discretion. Crown Life also challenges the district court's refusal to continue the trial to hear testimony from Martineau. Finally, Crown Life argues on appeal that the district court's finding that the three broker checks were authorized and its finding that the arbitration loan was forgiven were clearly erroneous.
To resolve the challenge to the discovery sanction, we must consider in some detail the history of discovery. Craig propounded its Request for Production of Documents on April 13, 1990. . 1 In response to requests numbered 3 and 12, Crown Life produced some copies of documents entitled Agency Management Status Reports ("AMSRs"), which reflected summaries of renewal commissions earned by Craig. Crown Life also produced documents entitled Agent's Statement of Earnings and Account ("ASEAs"). (Crown Life, Ex. B).
Crown Life propounded interrogatories to Craig, including question 14, which asked Craig to identify those persons it expected to call as expert witnesses at trial. In response to question 14, Craig stated that it had not yet retained an expert witness, but that once it did, Craig would provide the requested information.
On July 19, 1990, Craig filed a motion to compel, alleging that Crown Life had failed to produce documents, including documents responsive to request number 12. (R. 29). On August 14, 1990, the motion was argued before Magistrate Judge Weisberg, to whom the district judge had referred all matters concerning discovery. At that time, Magistrate Judge Weisberg ordered Crown Life to produce ASEAs and AMSRs for the remaining dates requested, and he also ruled that Craig was entitled to an affidavit signed by a responsible Crown Life representative stating that there were no underlying documents to support these summaries. (Transcript of Proceedings before Magistrate Judge Weisberg, September 5, 1990). Craig received an affidavit signed by Kevin R. Hayes, Associate General Counsel for Crown Life, stating that all documents responsive to the request had been produced. (Appellee's Supplemental Appendix 5).
On September 24 and 25, 1990, Craig deposed Robert Currie, Crown Life's Manager of U.S. Individual Agency Services. In his deposition testimony, Currie referred to a year-end computer printout of total renewals attributable to each general agency and a "Summary of Renewal Commissions Payable" produced every year in December. Thereafter, Craig filed another motion to compel, seeking production of the documents to which Currie referred in his testimony. (R. 55). In response, Crown Life argued that the summaries were not relevant because these statements were internal memoranda that reflected mere estimates of renewal commissions and not actual earnings. Magistrate Judge Weisberg ordered Crown Life to produce any and all documents that reflected the calculation of the renewal commissions by December 4, 1990. (Transcript of Proceedings before Magistrate Judge Weisberg, November 13, 1990, at 6-9).
After the deadline had passed, Craig filed another motion to compel. (R. 66). Two days before the hearing on the motion, counsel for Crown Life produced some responsive documents. At the hearing, Magistrate Judge Weisberg granted Craig's motion to compel and allowed Crown Life until January 24, 1991 to comply with its order to produce the documents. Magistrate Judge Weisberg also awarded Craig attorneys' fees in the amount of $250 pursuant to Rule 37(a)(4) of the Federal Rules of Civil Procedure. (Transcript of Proceedings before Magistrate Judge Weisberg, January 10, 1991, at 5-6).
Craig took the deposition of Daniel Martineau, Crown Life's Director of Actuarial Services. Martineau's department is responsible for producing the Summary of Renewal Commissions Payable and...
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