AgriVest Partnership v. Central Iowa Production Credit Ass'n

• Decision Date: 21 August 1985
• Docket Number: No. 84-1020,84-1020
• Citation: 373 N.W.2d 479
• Parties: AgriVEST PARTNERSHIP, Appellee, v. CENTRAL IOWA PRODUCTION CREDIT ASSOCIATION, Appellant.
• Court: Iowa Supreme Court

Page 479

373 N.W.2d 479

AgriVEST PARTNERSHIP, Appellee, v. CENTRAL IOWA PRODUCTION CREDIT ASSOCIATION, Appellant.

No. 84-1020.

Supreme Court of Iowa.

Aug. 21, 1985.

Robert J. Baudino, Jr., and Barbara A. Buhr of Neiman, Neiman, Stone & Spellman, P.C., Des Moines, for appellant.

Curt N. Daniels, Mingo, for appellee.

Considered by REYNOLDSON, C.J., and HARRIS, LARSON, SCHULTZ, and CARTER, JJ.

REYNOLDSON, Chief Justice.

In this appeal from an interlocutory order, defendant Central Iowa Production Credit Association (CIPCA) challenges the district court's ruling requiring it to comply with plaintiff AgriVest Partnership's request for production of documents. We affirm.

AgriVest, a partnership comprised of Indian Creek Corporation and AgriShare Limited, has a hog-raising operation in Jasper County. CIPCA, a corporation organized under 12 U.S.C. section 2091 and following, provides credit to farmers.

September 16, 1983, AgriVest filed an amended and substituted petition in the Iowa District Court for Jasper County seeking damages from CIPCA under several theories. AgriVest generally alleged CIPCA wrongfully informed meat packing plants to which AgriVest sold hogs that CIPCA had a security interest in AgriVest's livestock. At CIPCA's request, the packing plants allegedly issued checks for AgriVest's hogs payable to AgriVest and CIPCA jointly. AgriVest alleged CIPCA's refusal to endorse and deliver these checks denied AgriVest the money required to continue its business. As a result, AgriVest filed a voluntary bankruptcy petition in the United States Bankruptcy Court for the Southern District of Iowa. ¹ In the petition before us, AgriVest seeks $100,000 in actual damages and $300,000 in punitive damages.

January 18, 1984, AgriVest filed its first request for production of documents. At issue here is that portion requesting "[a]ll Board Meeting minutes whether formal or informal for the period of July 1, 1979 to January 1, 1984 as well as any supporting documentation regarding the minutes discussing the status of any and all loans made to AgriVest Partnership, Indian Creek Corporation, or AgriShare Limited and all discussions concerning AgriVest Partnership, AgriShare Limited, Indian Creek Corporation." Obviously, the object of AgriVest's request was to uncover facts to support its allegation that CIPCA sought to "harass" and "torment" AgriVest.

CIPCA did not comply with AgriVest's request. February 17, AgriVest filed a motion to compel discovery. CIPCA resisted and moved for a protective order. In support of its motion CIPCA asserted:

The 4 1/2 years of minutes of the meetings of the Board of Directors concern many other borrowers of the Defendant, along with discussion of financial details and classification of loans. The materials sought would have little or no relevance to the pending action, and no confidential information concerning any party other than the Plaintiff should be disclosed. Any disclosure concerning other parties would be a violation of the regulations of the Farm Credit System and would jeopardize the Defendant's eligibility to refinance its loans through the Federal Intermediate Credit Bank of Omaha.

March 29, district court found AgriVest's request for production appeared reasonably calculated to lead to discovery of admissible evidence. ² The court then ruled that

[t]he discovery of the requested information should take place at the office of the Defendant or office of the Defendant's counsel. Plaintiff's counsel shall be allowed to make copies of requested documents at Plaintiff's expense subject to objections of defense counsel as to the work product and attorney-client privilege.

If at the time of this discovery the Defendant makes objections to the scope of the discovery requested by the Plaintiff based upon work product or attorney-client privilege then the Court shall hold an in camera hearing to determine the objections.

(Emphasis added.) CIPCA was given thirty days to comply with AgriVest's request.

April 30, CIPCA filed a "Response to the Motion to Produce," which stated it had complied with AgriVest's discovery request with three exceptions. In lieu of disclosing its board meeting minutes, CIPCA supplied AgriVest with an excerpt from its September 2, 1983, board meeting that contained no mention of AgriVest or its partners.

May 11, AgriVest filed another motion, renewing its January 18 request to inspect and copy board minutes.

May 29, a second hearing was held in district court with a different judge presiding. When the parties were unable to resolve their disputes, the court suggested two alternative procedures. The hearing was continued until June 4.

June 4, CIPCA reported that neither of the court's alternatives was acceptable. As an alternative, CIPCA suggested the court examine the board meeting minutes in camera and allow AgriVest to copy those found relevant. The court declined the suggestion. Instead, it ruled that CIPCA's "board meeting minutes [shall be examined by AgriVest's attorney, who was ordered not to disclose] any information gained during discovery without prior court order, with the exception that any copies ... could be disclosed to 'co-parties' or partners." Further objections to production were to be determined by the court after hearing.

July 2, CIPCA applied for grant of appeal in advance of final judgment. It alleged regulations promulgated by the Farm Credit System required it to withhold the highly confidential information concerning borrowers and personnel contained in its board meeting minutes. Such a violation of the regulations, CIPCA asserted, could disqualify it from refinancing its loans through the Federal Intermediate Credit Bank. CIPCA raised the probability of suits by member-borrowers and employees should it be forced to breach the alleged confidentiality of the minutes. We granted the application.

I. A threshold issue is whether Iowa or federal law controls the determination whether CIPCA has a privilege that insulates its board meeting minutes from the reach of AgriVest's discovery request. The underlying suit is indisputably a state law action in which Iowa law will rule the decision. CIPCA, however, is a federally chartered corporation. While it is privately owned and a legal entity "separate and apart from the federal government in the usual sense," it is nonetheless a federal instrumentality vested with a public interest. Brake, A Perspective on Federal Involvement in Agricultural Credit Programs, 19 S.D.L.Rev. 567, 577 (1974). See also Merced Production Credit Association v. Sparkman, 703 F.2d 1097, 1100 (9th Cir.1983); Southwest Washington Production Credit Association v. Fender, 21 Wash.2d 349, 353, 150 P.2d 983, 985 (1944). CIPCA's assertion of privilege is based in part on federal regulations. To the extent these regulations are relevant, we shall consider them as a federal court would. The remainder of our decision, however, is controlled by Iowa law.

In the end, application of federal or Iowa law to this issue will make little difference. Iowa Rule of Evidence 501 is similar to its federal counterpart. ³ See Iowa R.Evid. 501 committee comment. The principles we have enunciated in Iowa cases on privilege often derive from federal cases. See, e.g., Farnum v. G.D. Searle & Co., 339 N.W.2d 384, 389 (Iowa 1983); Lamberto v. Bown, 326 N.W.2d 305, 307 (Iowa 1982).

II. This appeal presents a single question: Does regulation or common law provide CIPCA a privilege to withhold minutes of its board of directors meeting from discovery by AgriVest? Our scope of review is limited. Because discovery rules are to be liberally construed to effectuate the disclosure of relevant information to the parties, "[t]he trial court has wide discretion in its rulings on discovery issues and will be reversed only when an abuse of discretion is found." Farnum, 339 N.W.2d at 389.

III. Undergirding our discovery rules is the principle that litigants are entitled to every person's evidence. Lamberto, 326 N.W.2d at 306-07. The law favors full access to relevant information. Association for Women in Science v. Califano, 566 F.2d 339, 346 (D.C.Cir.1977). "[D]iscovery rules apply to the United States ... as fully as they apply to any other person." 8 C. Wright and A. Miller, Federal Practice and Procedure: Civil § 2019, at 153 (1970).

Iowa Rule of Civil Procedure 122(a) provides:

Parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action....

Thus, a party may defeat discovery by establishing that the material sought is privileged or irrelevant. Hickman v. Taylor, 329 U.S. 495, 507-08, 67 S.Ct. 385, 392, 91 L.Ed. 451, 460-61 (1947). In this appeal, CIPCA relies on privilege.

One resisting discovery through assertion of a privilege has the burden to show the privilege exists and applies. Robbins v. Iowa-Illinois Gas & Electric Co. 160 N.W.2d 847, 855 (Iowa 1968); see Heathman v. United States District Court, 503 F.2d 1032, 1033 (9th Cir.1974). Privilege is an exception to the discovery rules and, consequently, is to be construed narrowly. See, e.g., St. Regis Paper Co. v. United States, 368 U.S. 208, 218, 82 S.Ct. 289, 295, 7 L.Ed.2d 240, 248 (1961) ("Ours is the duty to avoid a construction that would suppress otherwise competent evidence unless the statute, strictly construed, requires such a result."); Coastal Corp. v. Duncan, 86 F.R.D. 514, 518 (D.Del.1980) (The executive privilege is "an exception to the usually broad scope of discovery" and requires "consistency and [care] in ... assertion."); Lamberto, 326 N.W.2d at 307 (The duty of every person to give testimony is so compelling "even those privileges rooted in the federal constitution must give way in some circumstances."); 4 J. Moore, Moore's Federal Practice p 26.60(1) (2d ed. 1984). When the asserted privilege is based on a statute, the terms of the statute define the reach of the privilege. 8...