Kaufmann v. Credithrift Financial, Inc.

• Decision Date: 27 June 1984
• Docket Number: No. 1-184A2,1-184A2
• Citation: 465 N.E.2d 207
• Parties: Albert KAUFMANN, Appellant (Plaintiff Below), v. CREDITHRIFT FINANCIAL, INC., American General Corp., Wendell L. Dixon, Webster R. Vause, Ray W. Arensman, Ronald C. Coleman, Ludlow Shonnard, Jr., Wayne A. Davidson, David C. Eades, Owen M. Hamilton, Edwin S. Karges, Jr., Richard F. Meier, H. Morris Robinson, George Ryan, Louis Durfee, Robert G. Tuck and Eldo Taylor, Appellees (Defendants Below).
• Court: Indiana Appellate Court

Page 207

465 N.E.2d 207

Albert KAUFMANN, Appellant (Plaintiff Below), v. CREDITHRIFT FINANCIAL, INC., American General Corp., Wendell L. Dixon, Webster R. Vause, Ray W. Arensman, Ronald C Coleman, Ludlow Shonnard, Jr., Wayne A. Davidson, David C Eades, Owen M. Hamilton, Edwin S. Karges, Jr., Richard F Meier, H. Morris Robinson, George Ryan, Louis Durfee, Robert G. Tuck and Eldo Taylor, Appellees (Defendants Below).

No. 1-184A2.

Court of Appeals of Indiana First District.

June 27, 1984.

Stephen D. Oestreich, Wolf, Popper, Ross, Wolf & Jones, New York City, Rodney H. Grove, Evansville, for appellant.

Theodore R. Boehm, James H. Ham, III, Robert K. Stanley, Baker & Daniels, Indianapolis, Patrick A. Shoulders, Alan N. Shovers, Kahn, Dees, Donovan & Kahn, Frederick R. Folz, Folz, Stone, Keck, LaPlante & Foltz, Evansville, for appellees.

ROBERTSON, Judge.

The plaintiff-appellant, Kaufmann, brings this interlocutory appeal from the trial court's ruling granting extensive discovery to the defendants-appellees (collectively referred to as Credithrift).

Kaufmann brought a shareholders class action lawsuit against the defendants which, broadly stated, alleged a breach of fiduciary and other common law duties in Credithrift being merged with American General. Credithrift moved, pursuant to Indiana Rules of Trial Procedure 30, to depose Kaufmann and also sought the production of documents by Kaufmann. Kaufmann sought to restrict the scope of the discovery with the trial court ruling, in pertinent part:

The Court having this matter under advisement now orders plaintiff to answer question in Dixon's motion to compel in Exhibit # A, except question # 23, and to produce documents listed in Exhibit # B and answer interrogatories listed in Exhibit # B and to respond to issues relating to plaintiff's involvement in other class action finance lawsuit[s] to issues of possible conflict of interest, and to documents, not attorney work product, of the subject matter of this litigation.

The issues are stated by Kaufmann as being:

1. Whether the Court erred in permitting the defendants under the guise of class discovery to conduct a general inquiry into the plaintiff's financial resources and means, including the production of tax returns, financial statements, and loan applications, and whether the question of the plaintiff's income is a legitimate area of inquiry after the plaintiff has testified under oath that his net worth is in excess of $100,000;

2. Whether the Court erred in allowing defendants to make a general inquiry into the plaintiff's prior litigation, including the production without limitation, of all pleadings, motions, briefs, affidavits, depositions, interrogatory answers, other discovery, transcripts, stipulations, orders and judgments pertaining to

(i) any determination that the action was or was not properly maintainable as a class action or derivative suit;

(ii) the adequacy of Kaufmann as a class representative or as a plaintiff in a derivative action;

(iii) any disposition or adjudication of the merits of the action; or

(iv) any settlement of the action, including court approval thereof,

after plaintiff had testified that no court has ever found him to be an inadequate class representative;

3. Whether the Court erred in allowing defendants to ask plaintiff at deposition to interpret the "legal" language of the complaint in a highly complex securities lawsuit by going through the complaint paragraph by paragraph, especially after plaintiff had testified generally as to the allegations contained in the Complaint and expressed a familiarity with the facts supporting said allegations.

The request for production by Credithrift which serves as the basis for the first issue, the general inquiry into Kaufmann's financial resources and means, reads:

All documents evidencing or reflecting Kaufmann's current income, net worth, assets, liabilities or financial condition, including, without limitation, (a) any financial statements prepared for or by Kaufmann at any time during the years 1980 or 1981, (b) any federal income tax returns filed by Kaufmann in 1979, 1980 or 1981 and (c) any applications for a loan or credit made by or for Kaufmann during 1980 or 1981.

Kaufmann objected:

Plaintiff objects to this Request on the ground that it calls for documents not properly subject to discovery and which relate to matters that are wholly collateral to and neither relevant nor material to the issues of this litigation and for documents not calculated to lead to documents that are relevant or material thereto. In addition, this Request is objected to on the grounds that it is made not for the purposes of discovery, but for the purposes of imposing an undue burden upon plaintiff, and for the purposes of harassment and delay. Notwithstanding plaintiff's objection to this Request, plaintiff has testified at his deposition attended by all defendants' counsel that his net worth is in excess of $100,000.

The thrust of Kaufmann's argument is that an inquiry into Kaufmann's financial health has no bearing upon his adequacy as a class representative in the pending litigation.

Initially we should examine Kaufmann's role in the cause of action. Whether a plaintiff will adequately and fairly represent the class is a legitimate matter of concern for the trial court. There should be evidence to demonstrate to the trial court that such duties will be discharged. Ind.Rules of Procedure, Trial Rule 23, Perfect Circle Corporation v. Case, (1983) Ind.App., 444 N.E.2d 1211; Kuespert v. State, (1978) 177 Ind.App. 142, 378 N.E.2d 888. The burden of proof that the class will be fairly and adequately represented rests with the plaintiff. Perfect Circle Corporation, supra. The sufficiency of representation is a question of fact. Bowen v. Sonnenburg, (1980) Ind.App., 411 N.E.2d 390. Because of the similarity between T.R. 23 and the concomitant federal rule, we may utilize federal law in resolving any questions which may arise. Bowen supra; State ex rel Harris v. Scott Circuit Court, (1982) Ind., 437 N.E.2d 952.

A parallel consideration entails an...