Ex parte Horton

• Decision Date: 13 February 1998
• Citation: 711 So.2d 979
• Parties: Ex parte Cecil Larry HORTON and Sue Horton. (In re Cecil Larry HORTON and Sue Horton v. ALFA LIFE INSURANCE CORPORATION). 1961054.
• Court: Alabama Supreme Court

Page 979

711 So.2d 979

Ex parte Cecil Larry HORTON and Sue Horton (In re Cecil Larry HORTON and Sue Horton v. ALFA LIFE INSURANCE CORPORATION).

1961054.

Supreme Court of Alabama.

Feb. 13, 1998.

Rehearing Denied March 20, 1998.

Jere L. Beasley, W. Daniel "Dee" Miles III, and Joseph H. "Jay" Aughtman of Beasley, Wilson, Allen, Main & Crow, P.C., Montgomery; and Mickey L. Johnson, Pelham, for petitioners.

Robert W. Bradford, Jr., and Jeff J. Bradwell of Hill, Hill, Carter, Franco, Cole & Black, P.C., Montgomery; and James W. Fuhrmeister of Griffin, Allison, May, Alvis & Fuhrmeister, Birmingham, for respondent Alfa Life Insurance Corporation.

Albert L. Jordan, Cecil H. Macoy, Jr., and Michael L. Jackson of Wallace, Jordan, Ratliff & Brandt, L.L.C., Birmingham, for intervenor Linda Denson.

BUTTS, Justice.

Cecil Larry Horton and Sue Horton, plaintiffs in an action pending in the Shelby Circuit Court, have petitioned for a writ of mandamus directing Judge J. Michael Joiner to grant their motion to compel additional discovery from a client list provided to them by the defendant Alfa Life Insurance Corporation ("Alfa") relating to one of its insurance agents. We grant the writ.

I.

Linda Denson is an agent for Alfa. In June 1982, she sold Alfa whole life insurance policies to the Hortons--a $100,000 policy to Larry Horton and a $75,000 policy to his wife Sue Horton. The Hortons allege that Denson told them that the policies would be "paid up" after they had paid premiums for 10 years and that after 15 years the policies would have a combined cash value of $28,000 that the Hortons could withdraw while still maintaining the policies' death benefits.

In June 1986, four years after the Hortons had bought their first Alfa policies, Denson sold each of the Hortons an additional $50,000 whole life insurance policy. They allege that Denson told them that the policies would add to their existing life insurance coverage, that their total premiums would be lowered, and that they would get more insurance coverage for less money. In July 1990, Denson sold the Hortons two more life insurance policies--a $150,000 twenty-year term policy to Larry Horton and a $150,000 twenty-year decreasing term policy to Sue Horton. However, the Hortons allege that they did not know at the time (July 1990) that they were buying insurance; the Hortons allege that Denson told them that the forms they were signing at that time were merely to update their 1986 whole life insurance policies. These two 1990 term policies replaced the Hortons' whole life policies and were paid for by the cash values of the 1982 and 1986 whole life policies. The Hortons allege that they did not know they were buying these term life insurance policies and, thus, did not know these new policies were replacing the whole life insurance policies they had bought in 1982 and 1986 or that the new term policies would be paid for by the cash values of the whole life policies.

In September 1991, the Hortons questioned Denson regarding bills they were receiving from Alfa. They say they asked why they were receiving bills from Alfa asking for payments in addition to the premiums they were already paying monthly. They say Denson responded by telling them to ignore the additional bills and that she would clear up the matter. Denson had the Hortons sign several more forms; the Hortons say she told them these forms were necessary to clear up the billing problem. However, the Hortons say they continued to receive the billing notices from Alfa and they say Denson told them to continue ignoring them.

The Hortons eventually notified the Alabama Department of Insurance of their concerns. After a review by the Insurance Department, the Hortons learned that Denson had used the cash value of their whole life insurance policies to pay premiums on the term life insurance policies even though, the Hortons say, they had never authorized Alfa to transfer funds from their whole life policies. In March 1994, the Insurance Department informed the Hortons that in its opinion neither Denson nor Alfa had violated Alabama insurance law.

In April 1995, the Hortons filed a complaint against Alfa, alleging that through its agent, Denson, Alfa had made fraudulent misrepresentations to them that had induced them to purchase additional Alfa life insurance policies that were unnecessary, and alleging that they had suffered damage as a result. The Hortons further alleged that Alfa's conduct toward them was the result of a pattern and practice of fraud and other intentional wrongful conduct.

During the discovery process, the Hortons requested from Alfa the names, addresses, and telephone numbers of all Alabama residents who had purchased Alfa life insurance policies over the previous five years. After Alfa objected to this request, the Hortons amended it to seek production of the names and addresses of all persons to whom Denson had sold Alfa life insurance policies during the previous 10 years ("the Denson client list"). Alfa again objected to the request. The trial court issued an order allowing the Hortons only limited discovery--the court ordered Alfa to produce the Denson client list, but it allowed the Hortons to contact only every fourth person on the list. The trial court stated that it believed such discovery would provide the Hortons a representative sample of Alfa policyholders and said that if the Hortons believed they needed additional discovery, the court would entertain a further request later.

Using a letter approved by the trial court, the Hortons' counsel attempted to contact 97 Alfa life insurance policyholders from the Denson client list. The Hortons say that 17 of those letters were returned to their counsel because the addresses Alfa had provided for those persons were not current. Only 12 persons responded to the letter from the Hortons' counsel. The Hortons, contending this response was inadequate to provide them with sufficient discovery, moved to compel additional discovery from the Denson client list. Alfa objected to the motion, and the court denied it. The Hortons made a second motion to compel additional discovery; the court denied that motion also. The Hortons then filed this petition for a writ of mandamus.

II.

The Hortons argue that this Court should order Judge Joiner to grant their motion for additional discovery from the Denson client list, because, they say, Judge Joiner abused his discretion in limiting their discovery in what they say was an arbitrary and restrictive manner. They argue that the Alabama Rules of Civil Procedure are to be construed broadly to allow parties the discovery they need to prepare their case. The Hortons contend that in their fraud case, in which they seek punitive damages and therefore have the burden of proving a high degree of culpability on the part of Alfa, it is well within the scope of discovery allowed under Rule 26, Ala. R. Civ. P., to discover information indicating whether Denson made the same or similar misrepresentations to other Alfa policyholders. In sum, they argue that they have a right to gather all the information necessary to determine whether Denson's alleged misconduct toward them as an Alfa agent was part of a pattern and practice of misconduct.

The Hortons argue that the limited response they received from persons on the Denson client list was the result of two factors: the trial court's restriction limiting them to contacting only every fourth person, and a letter Alfa mailed to the persons on the list telling them that their names and addresses had been given to a law firm in relation to a lawsuit brought by a discontented policyholder and telling them that "[t]he decision as to whether or not you wish to discuss your personal business or insurance coverage with this law firm is entirely up to you and you are under no legal obligation to do so." The Hortons note that this letter was not preapproved by the trial court, and they say Alfa wrote the letter with the intent to discourage response to the letter from the Hortons' counsel.

The list supplied by Alfa contained the names of 414 persons. The Hortons say that the 12 responses, from roughly 100 persons they were allowed to contact, did not provide them a representative sample of policyholders; that the response is insufficient to supply "pattern and practice" witnesses; and that the trial court abused its discretion in not granting their motion for further discovery from the list. In support of their contention, the Hortons cite this Court's opinions in Ex parte Howell, 704 So.2d 479 (Ala.1997), Ex parte Rowland, 669 So.2d 125 (Ala.1995) and Ex parte Asher, Inc., 569 So.2d 733 (Ala.1990), in which we expounded on a plaintiff's broad right to discovery in fraud cases. In Ex parte Howell, in which the client lists of two insurance company agents were at issue, this Court held that a trial court had abused its discretion in limiting to only 25 the number of persons that could be contacted from each list and in further limiting to 15 the number of clients that could be interviewed from each list. We concluded in Ex parte Howell that the limitations would prevent the plaintiffs from obtaining meaningful discovery, and that the restrictions were arbitrary and amounted to an abuse of discretion by the trial court. The Hortons argue that the limitation imposed on their discovery is similar to the restrictions placed on the plaintiffs in Ex parte Howell and that this Court should rule that Judge Joiner abused his discretion and grant their petition for a writ of mandamus.

In response, Alfa contends that this Court should defer to the broad discretion and authority that is granted to trial courts over the discovery process and, thus, deny the Hortons' petition. Alfa says that the Hortons have already been accorded the broad discovery applicable to cases alleging fraud. Citing Ex parte Mobile Fixture & Equipment Co., 630 So.2d 358 (Ala.1993), Alfa says that if...