Guessford v. Pa. Nat'l Mut. Cas. Ins. Co.

• Decision Date: 21 May 2013
• Docket Number: 1:12CV260
• Court: U.S. District Court — Middle District of North Carolina
• Parties: LAWRENCE D. GUESSFORD, JR., Plaintiff, v. PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY, Defendant.

LAWRENCE D. GUESSFORD, JR., Plaintiff,

v. PENNSYLVANIA NATIONAL MUTUALCASUALTY INSURANCE COMPANY, Defendant.

1:12CV260

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

May 21, 2013

MEMORANDUM OPINION, ORDER, AND RECOMMENDATION

OF UNITED STATES MAGISTRATE JUDGE

This case comes before the undersigned United States Magistrate Judge for disposition of Defendant's Motion for Protective Order (Docket Entry 25) and Defendant's First Motion to Compel Discovery Responses from Plaintiff (Docket Entry 59), as well as for recommended rulings on Plaintiff's Motion for Sanctions (Docket Entry 63) and Plaintiff's Renewed Motion for Sanctions (Docket Entry 90).¹ For the reasons that follow, Defendant'sinstant Motions will be denied (except as to protection of certain personal information of a third-party) and Plaintiff's instant Motions should be denied (except as to certain cost-shifting).

I. BACKGROUND

This case arises from Plaintiff's First Amended Complaint, which alleges, in pertinent part, that Defendant violated North Carolina's Unfair and Deceptive Trade Practices Act ("UDTPA"), N.C. Gen. Stat. § 75-1.1, and committed the North Carolina tort of bad faith refusal to settle, in connection with an under-insured motorist claim Plaintiff made upon Defendant, an insurer. (See Docket Entry 18, ¶¶ 53-69; see also Docket Entry 51 at 7-22, 28 (granting Defendant judgment on the pleadings as to Plaintiff's breach of contract claim, but permitting UDTPA and bad faith claims to proceed).) Shortly after discovery began, Plaintiff filed his First Motion to Compel (Docket Entry 22), whereupon Defendant filed its instant Motion for Protective Order (Docket Entry 25), along with a certification (pursuant to this Court's Local Rule 37.1(b)) that the Parties agreed to present that matter at a one-hour hearing without briefing (id. at 1). Subsequently, in responding to Plaintiff's First Motion to Compel, Defendant stated that it "has been willing to provide (and now has provided) almost all of the documents in [its] claim file [regarding Plaintiff] and in the [related] file of [the outside attorneys upon whom it relied for an advice of counsel defense], subject to an appropriate [p]rotective[o]rder for those documents that are confidential or are proprietary in nature." (Docket Entry 30 at 3.) Defendant further reported that it "produced to Plaintiff responsive claims manuals in confidence until this Court enters its [o]rder with respect to [Defendant's instant] Motion for Protective Order." (Id. at 16.)

As to the protective order issue, Defendant asserted that it "has a proprietary interest in the contested documents [from its claim file regarding Plaintiff, the related file of its attorneys, and its claims manual-type materials]." (Id. at 8.) To support that assertion, Defendant cited an affidavit of an attorney in its employ. (Id. (citing Docket Entry 30-17).) Plaintiff responded with a filing asserting that "the subject documents do not qualify for protection under Rule 26" (Docket Entry 32 at 1) and confirming that the Parties had agreed to submit the matter via a one-hour hearing without briefing (id. at 2). In addition, with the Court's permission (see Text Order dated Aug. 27, 2012), Plaintiff filed under seal examples of the documents for which Defendant sought protection (see Docket Entries 36-1, 36-2, 36-3).

The undersigned Magistrate Judge subsequently held a hearing on Defendant's instant Motion for Protective Order at which counsel for the Parties made argument, submitted for inspection under seal a copy of all the documents which Defendant sought to protect, and agreed to provide under seal deposition materials cited at the hearing. (See Docket Entry dated Nov. 16, 2012.) Defendantthereafter filed under seal transcript pages from the deposition of a former employee and a related exhibit. (Docket Entries 42, 42-1, 42-2, 42-3.)² The Court (per the undersigned Magistrate Judge) also deemed moot Plaintiff's First Motion to Compel because, "at th[e] hearing, the parties agreed that Defendant had produced documents under a temporary agreement contingent on the resolution by the Court of [the instant] Motion for Protective Order by Defendant . . . ." (Text Order dated Nov. 18, 2012.)

A short time later, Plaintiff filed his Second Motion to Compel (Docket Entry 47), "seek[ing] responses to [eight] requests for production . . . which seek information about whether Defendant's management instructed or motivated its claims department employees to mishandle its insureds' first-party claims for underinsured motorist benefits, especially through delay, undervaluation, or failure to communicate" (id. at 2), as well as "a response to [an] interrogatory [] which seeks the revenue and net worth information necessary to present a claim for punitive damages" (id. at 5). Plaintiff further stated that "[t]he [P]arties agree that this matter can be ruled upon in an in-court hearing of no more than one hour, without briefing." (Id. at 12.)³

After a stay of discovery (granted at the Parties' request to allow them to focus on a mediation that ultimately failed to resolve the case) (see Docket Entry 49; Text Order dated Jan. 29, 2013), the undersigned Magistrate Judge held a hearing, granted in part and denied in part Plaintiff's Second Motion to Compel, and directed the Parties to attempt to reach a resolution as to one of the disputed document requests (see Docket Entry dated Mar. 15, 2013).⁴ Defendant thereafter filed its instant First Motion to Compel (Docket Entry 59) and supporting brief (Docket Entry 60). Plaintiff responded in opposition (Docket Entry 67) and Defendant replied (Docket Entry 71). Additionally, Plaintiff filed his instant Motion for Sanctions (Docket Entry 63) and related brief (Docket Entry 64). Defendant responded in opposition (Docket Entry 68) and Plaintiff replied (Docket Entry 72).

The undersigned Magistrate Judge then held a hearing, orally denied Defendant's request for compelled production of further written discovery from Plaintiff and an unrestricted deposition of Plaintiff's attorney, directed the Parties to attempt to agree on the scope of a deposition of that attorney, reiterated that Plaintiff must not disclose, other than for purposes of this case,material produced by Defendant from personnel files and regarding compensation plans, and deferred action on Plaintiff's request for sanctions to afford Defendant an opportunity to assess whether it should make a further production. (See Docket Entry dated May 3, 2013.) Ultimately, Defendant made a further production (see Docket Entry 76) and the Parties agreed on terms for the disputed deposition (see Docket Entry 77). After receiving Defendant's further production, Plaintiff filed his instant Renewed Motion for Sanctions. (Docket Entry 90.)

II. DISCUSSION

A. Defendant's Motion for Protective Order

Defendant "moves for entry of [a] [p]rotective [o]rder . . . pursuant to Rule 26(c) of the Federal Rules of Civil Procedure." (Docket Entry 25 at 1.) Specifically, it seeks an order mandating that documents produced from its claim file regarding Plaintiff, the related file of the attorneys upon whom it relies for an advice-of-counsel defense, and its claims manual-type materials "be restricted to this litigation, and returned or destroyed [at the end of the case] . . . ." (Docket Entry 30 at 6.) Defendant seeks such a protective order on the ground that it "has a proprietary interest in the contested documents." (Id. at 8.)

i. Outline of Governing Standard and Record Evidence

Under the Rule cited by Defendant, "[t]he court may, for good cause, issue an order to protect a party or person from annoyance,embarrassment, oppression, or undue burden or expense, including . . . (G) requiring that a trade secret or other confidential research, development, or commercial information not be revealed or be revealed only in a specified way . . . ." Fed. R. Civ. P. 26(c)(1) (emphasis added). "To obtain a protective order under Rule 26(c), the party resisting discovery must establish that the information sought is covered by the rule and that it will be harmed by disclosure." In re Wilson, 149 F.3d 249, 252 (4th Cir. 1998). Accordingly, in this context, Defendant must show that the documents in question constitute trade secrets or other confidential commercial information and that any public disclosure of them will harm it. Moreover, "Rule 26(c)'s requirement of a showing of 'good cause' to support the issuance of a protective order . . . contemplates a particular and specific demonstration of fact as distinguished from stereotyped and conclusory statements." Jones v. Circle K Stores, 185 F.R.D. 223, 224 (M.D.N.C. 1999) (Sharp, M.J.) (italics in original) (second set of internal quotation marks omitted); accord, e.g., Baron Fin. Corp. v. Natanzon, 240 F.R.D. 200, 202 (D. Md. 2006); Brittain v. Stroh Brewery Co., 136 F.R.D. 408, 412 (M.D.N.C. 1991) (Eliason, M.J.).

To meet that burden, Defendant submitted an affidavit from one of its attorneys stating, in pertinent part, as follows:

1) he is "privy to and participate[s] in [Defendant's] development of its proprietary business documents, forms, andprocesses . . . for evaluating and processing insurance claims" (Docket Entry 30-17 at 2);⁵

2) he reviewed the documents "requested by [Plaintiff] in discovery" (id.) and produced by Defendant to that point (as documented on attached logs) (id. at 3);⁶

3) "[t]he insurance industry is a highly competitive business" (id.);

4) the documents in question "are not documents that are disclosed to the public" (id.);

5) Defendant "has invested significant time and resources into the development of its proprietary [d]ocuments and processes for which it seeks the requested [p]rotective [o]rder" (id.);

6) "these [d]ocuments and processes are proprietary to [Defendant] and reflect significant business expenditures and investments" (id.);

7) the documents in question "contain information...