Ex parte Stephens

• Decision Date: 08 March 1996
• Citation: 676 So.2d 1307
• Parties: Ex parte Margaret A. STEPHENS and Paul E. Stephens. (Re Margaret A. STEPHENS and Paul E. Stephens v. LIFE INSURANCE COMPANY OF GEORGIA, et al.). 1941630.
• Court: Alabama Supreme Court

Page 1307

676 So.2d 1307

Ex parte Margaret A. STEPHENS and Paul E. Stephens (Re Margaret A. STEPHENS and Paul E. Stephens v. LIFE INSURANCE COMPANY OF GEORGIA, et al.).

1941630.

Supreme Court of Alabama.

March 8, 1996.

John F. Whitaker, Ted L. Mann and Daniel J. Sullivan of Sadler, Sullivan, Sharp, Fishburne & Van Tassell, P.C., Birmingham, for Petitioners.

J. Mark Hart of Olschner & Hart, P.C., Birmingham; J. Fred Wood, Jr., of Dominick, Fletcher, Yielding, Wood & Lloyd, P.A., Birmingham, for Respondents.

Jack W. Torbert of Torbert & Torbert, Gadsden, President of Alabama Defense Lawyers Association; Bert S. Nettles, Mark D. Hess and A. David Fawal of London & Yancy, Birmingham, for Amicus Curiae Alabama Defense Lawyers Association.

J. Mason Davis, Jr., of Sirote & Permutt, P.C., Birmingham, President of Alabama Association of Life Insurance Companies; and Charles D. Stewart and Howard K. Glick of Spain & Gillon, Birmingham, for American Council of Life Insurance, Amici Curiae Alabama Association of Life Insurance Companies and American Council of Life Insurance.

PER CURIAM.

Margaret A. Stephens and Paul E. Stephens petition this Court for a writ of mandamus directing Judge Thomas R. Jones, of the Circuit Court of Bibb County, to vacate a protective order that imposed certain restrictions on discovery. The restrictions were placed upon informal interviews that the Stephenses intend to conduct with certain former holders of insurance policies issued by the defendant Associated Doctors Health and Life Insurance Company. The issue presented by this petition is whether the circuit court abused its discretion in placing the restrictions on the contacts with the former policyholders.

On August 1, 1995, the Stephenses filed an action against Life Insurance Company of Georgia ("Life of Georgia"), Associated Doctors Health and Life Insurance Company ("Associated Doctors"), and insurance agent Fred Smith, seeking money damages for fraud, misrepresentation, negligent hiring, and negligent supervision and/or training. ¹ The Stephenses contend that agent Fred Smith sold them several health insurance policies that Smith represented would pay as much as, or more than, the policy Margaret Stephens had in force through her employer at that time. The Stephenses further contend that the defendants defrauded them by misrepresenting the facts concerning these policies so as to induce them to buy the policies. To obtain evidence to prove these allegations and evidence of a scheme or plan to defraud, the Stephenses propounded interrogatories to the defendants in which they sought the names of former holders of policies issued by Associated Doctors. The Stephenses limited their request to former policyholders who had purchased their policies from Fred Smith from 1990 through the date of the interrogatories.

The defendants objected to the interrogatories on the grounds that they sought information the defendants said was "irrelevant, immaterial, not reasonably calculated to lead to the discovery of admissible evidence, overbroad, burdensome, and unduly prejudicial to defendant[s] and [their] customers and business relations." In response, the Stephenses filed a motion to compel the defendants to answer the interrogatories, basing their motion on the grounds that "evidence of a pattern or practice of fraud is discoverable" and that they had purposely limited the request to former policyholders so as not to jeopardize the defendants' business or proprietary interests.

The circuit court issued a protective order in which it ordered the defendants to answer the interrogatories regarding former policyholders; however, the court placed restrictions on the contacts that could be made with the former policyholders. The circuit court imposed the following restrictions that are challenged in this petition:

"(B) The parties (including their attorneys or persons acting on their behalf) shall not contact, either in person or by telephone, any person on the list without a representative of the other party being present for the duration of the contact;

"(C) The parties shall not communicate to such person the allegations of the plaintiffs in this case."

The Stephenses contend that the circuit court abused its discretion when it placed these two restrictions on the contacts with the former policyholders. More specifically, they argue that requiring that opposing counsel or some other representative ² be present during any and all contacts with the former policyholders infringes upon their right to prepare their case and violates the work-product privilege. Furthermore, they argue that restriction "(B)" will cause "unnecessary logistical obstacles." As to restriction "(C)," the Stephenses claim that it prevents them from conducting any meaningful interviews with the former policyholders regarding Smith's alleged fraudulent conduct in regard to the sale of the policies.

The defendants answer that they have shown good cause to support the restrictions imposed by the circuit court. They argue that requiring that opposing counsel be present when contact is made will protect the former policyholders from "multiple or annoying contacts" since there will need to be only one interview with the former policyholders. The defendants also argue that the restrictions will protect the business interest and reputation of Fred Smith. They claim that even though Smith is no longer an agent with Associated Doctors he could still attempt to sell insurance to one of the former policyholders and that unlimited contact with the former policyholders could create a "cloud" over Smith's relationship with those people. Last, the defendants argue that the restrictions do not prevent the meaningful questioning of the former policyholders, and they insinuate that the true intentions of the Stephenses in seeking unrestricted contact is to improperly solicit the former policyholders as clients against the defendants. Similarly, the amicus curiae brief submitted by the Alabama Defense Lawyers Association (ADLA) argues that the restrictions may be imposed to prevent the Stephenses' attorneys from improper solicitation of the former policyholders. The ADLA asserts that these restrictions may be seen as unreasonable "only if the intentions of petitioner's counsel [are] to solicit additional litigants."

The Alabama Rules of Civil Procedure, adopted in 1973, were intended to permit very broad and liberal discovery so as to allow parties to obtain information needed in preparation of their case. See Rule 26(b)(1), Ala.R.Civ.P. Furthermore, it is well established that the rules regarding discovery are to be broadly and liberally construed, to ensure that the spirit of the rules is carried out. Assured Investors Life Ins. Co. v. National Union Assocs., Inc., 362 So.2d 228 (Ala.1978). However, while the rules are to be so construed, the right to discovery is not unlimited and the circuit court does have broad power to control the discovery process to prevent its abuse by any party. Id., 362 So.2d 228, 231. Rule 26(c) authorizes the circuit court, upon a showing of good cause, to enter a protective order to prevent the abuse of discovery.

Rule 26(c), however, does not authorize the circuit court to set arbitrary limits on discovery, "but instead vests the circuit court with discretion to control the discovery process." Campbell v. Regal Typewriter Co., 341 So.2d 120, 123 (Ala.1976), modified on other grounds, Sharp Electronics Corp. v. Shaw, 524 So.2d 586 (Ala.1987). Therefore, decisions affecting discovery are within the sound discretion of the circuit court, and on review the question becomes whether, under all the circumstances, the circuit court has abused that discretion. Id. When one challenges a circuit court's protective order, "mandamus is the proper means of review to determine whether a trial judge abused his discretion in ordering discovery." Ex parte Allstate Insurance Co., 401 So.2d 749, 751 (Ala.1981).

We conclude that the circuit court did abuse its discretion in placing the restrictions on contacting and interviewing the former policyholders. A review of the petition, the exhibits, and the briefs in opposition reveals that the restrictions were "overly restrictive and unduly limited the discovery of needed information." Ex parte Clarke, 582 So.2d 1064, 1067 (Ala.1991).

The first step in determining whether a court has abused its discretion is to determine the particularized need for discovery, in light of the nature of the claim. The Stephenses allege fraud. This Court has held that a party alleging fraud is entitled to a broader range of discovery than is usually allowed, because of the greater difficulty in proving fraud. Id. See also Ex parte Rowland, 669 So.2d 125 (Ala.1995). With this in mind, we will review the contested restrictions.

The first restriction requires that opposing counsel be present each time a former policyholder is contacted in any manner, by either party. The Stephenses argue that the presence of opposing counsel will be an intrusion into their right to freely and strategically plan their case. They contend that to obtain the information they need to develop their case they will have to ask the former policyholders questions that will reveal to defense counsel the plaintiffs' strategy and mental impressions for the case. Thus, the Stephenses are claiming that the presence of opposing counsel will violate the work-product privilege.

Rule 26(b)(3), Ala.R.Civ.P., addresses the discovery of counsel's work product made in preparation for trial:

"(3) Trial Preparation: Materials. Subject to the provisions of subdivision (b)(4) of this rule, a party may obtain discovery of documents and tangible things otherwise discoverable under subdivision (b)(1) of this rule and prepared in anticipation of litigation or for trial by or for another party or by or for that other party's representative (including the other party's attorney,...