STATE EX REL. ALLSTATE INS. v. Gaughan

• Decision Date: 14 July 1998
• Docket Number: No. 24510.,24510.
• Court: West Virginia Supreme Court
• Parties: STATE of West Virginia ex rel. ALLSTATE INSURANCE COMPANY, a Foreign Corporation, Defendant Below, Petitioner, v. The Honorable Martin J. GAUGHAN, Judge of the Circuit Court of Ohio County, West Virginia and Carol J. Thoburn, Defendant Below, Respondents.

508 S.E.2d 75

203 W.Va. 358

STATE of West Virginia ex rel. ALLSTATE INSURANCE COMPANY, a Foreign Corporation, Defendant Below, Petitioner, v. The Honorable Martin J. GAUGHAN, Judge of the Circuit Court of Ohio County, West Virginia and Carol J. Thoburn, Defendant Below, Respondents.

No. 24510.

Supreme Court of Appeals of West Virginia.

Submitted January 13, 1998.

Decided July 14, 1998.

Walter M. Jones, III, E. Kay Fuller, Dale Buck, Martin & Seibert, L.C., Martinsburg, West Virginia, Attorneys for Petitioner.

Robert P. Fitzsimmons, Jacob M. Robinson, Michael W. McGuane, Thomas C. Schultz, Wheeling, West Virginia, Attorneys for Respondents. DAVIS, Chief Justice:

This writ of prohibition was filed by petitioner/defendant below, Allstate Insurance Company (hereinafter "Allstate"), seeking to restrain the enforcement of two discovery orders entered by the respondent, Honorable Martin J. Gaughan, Judge of the Circuit Court of Ohio County. Allstate contends that the circuit court exceeded its authority by requiring Allstate to produce and disclose to respondent/plaintiff below, Carol J. Thoburn (hereinafter "Ms. Thoburn"), (1) all written complaints made against Allstate nationwide from 1986 to the present and all nationwide advertising files and advertising materials shown or disseminated by Allstate from 1986 to the present, (2) all documents evidencing sanctions filed against Allstate by any regulatory agency nationwide from 1990 to present, and (3) specific claim files that Allstate asserts are protected by the attorney-client privilege. Additionally, Allstate seeks to prevent further disclosure of an alleged attorney-client document inadvertently disclosed to Ms. Thoburn. For the reasons discussed below, the writ of prohibition is granted as moulded.

I. FACTUAL AND PROCEDURAL HISTORY

This case originates from a personal injury suit filed by Ms. Thoburn against one of Allstate's insureds, Timothy Mirandy. In 1991, Ms. Thoburn was a passenger in a car that was hit by a vehicle driven by Mr. Mirandy. Ms. Thoburn sustained injuries from the accident. She subsequently filed a personal injury action against Mr. Mirandy.

Allstate evaluated the claim against its insured, Mr. Mirandy. Allstate offered to settle the matter for $20,000. Ms. Thoburn rejected the offer and proposed settling the claim for the policy limit of $100,000. Allstate rejected Ms. Thoburn's offer to settle the personal injury claim. On June 24, 1995, a jury returned a verdict in favor of Ms. Thoburn, awarding her $229,500.¹ In August, 1995, Allstate paid the judgment on behalf of its insured, Mr. Mirandy.

On May 1, 1996, Ms. Thoburn filed the instant underlying bad faith action against Allstate. Ms. Thoburn's bad faith claims² were based upon Allstate's refusal to settle the personal injury case against Mr. Mirandy for the policy limit of $100,000, before the jury returned its verdict.³ The bad faith causes of action were based upon Allstate's alleged violations of W.Va.Code § 33-11-4(9).⁴ The record presently before the Court does not identify the specific subsections of W.Va.Code § 33-11-4(9) which Ms. Thoburn asserts were violated by Allstate.

During discovery in the bad faith case against Allstate, Ms. Thoburn served Allstate with a request to produce: (1) all written complaints made in West Virginia against Allstate from 1986 to the present, (2) all advertising files and advertising materials shown or disseminated in West Virginia by Allstate from 1986 to the present, (3) all documents evidencing all sanctions filed against Allstate in West Virginia by any regulatory agency from 1990 to present, and (4) the complete investigative claim file maintained by Allstate relating to the action Ms. Thoburn instituted against Mr. Mirandy.

Allstate produced some of the requested documents maintained in Mr. Mirandy's claim file. In producing those documents, Allstate inadvertently supplied a document it claimed to be protected by the attorney-client privilege. Ms. Thoburn then filed a motion to compel the production of all documents requested by her pleadings. After a hearing on the motion to compel, the circuit court entered two orders which required Allstate to produce (1) all written complaints made nationwide against Allstate from 1986 to the present,⁵ (2) all nationwide advertising files and advertising materials shown or disseminated by Allstate from 1986 to the present,⁶ (3) all documents evidencing all sanctions filed against Allstate on a nationwide basis by any regulatory agency from 1990 to present,⁷ and (4) specific claim file documents involving the personal injury action instituted by Ms. Thoburn against Mr. Mirandy.⁸ The circuit court also denied a request by Allstate for a protective order preventing further disclosure of and preventing the use of the alleged attorney-client document inadvertently provided to Ms. Thoburn. From the orders, Allstate now seeks a writ of prohibition.

II. STANDARD OF REVIEW

This Court has held that "[a] writ of prohibition will lie where the trial court does not have jurisdiction or, having jurisdiction, exceeds its legitimate powers." Syl. pt. 4, Pries v. Watt, 186 W.Va. 49, 410 S.E.2d 285 (1991). See also, Syl. Pt. 3, State ex rel. McCartney v. Nuzum, 161 W.Va. 740, 248 S.E.2d 318 (1978), overruled on other grounds, In re Katie S., 198 W.Va. 79, 479 S.E.2d 589 (1996). We stated in syllabus point 1 of State ex rel. USF & G v. Canady, 194 W.Va. 431, 460 S.E.2d 677 (1995) that:

In determining whether to grant a rule to show cause in prohibition when a court is not acting in excess of its jurisdiction, this Court will look to the adequacy of other available remedies such as appeal and to the over-all economy of effort and money among litigants, lawyers and courts; however, this Court will use prohibition in this discretionary way to correct only substantial, clear-cut, legal errors plainly in contravention of a clear statutory, constitutional, or common law mandate which may be resolved independently of any disputed facts and only in cases where there is a high probability that the trial will be completely reversed if the error is not corrected in advance. Syl. Pt. 1, Hinkle v. Black, 164 W.Va. 112, 262 S.E.2d 744 (1979).⁹

This Court has also declared that "[a] writ of prohibition is available to correct a clear legal error resulting from a trial court's substantial abuse of its discretion in regard to discovery orders." Syl. Pt. 1, State Farm Mutual Automobile Insurance Co. v. Stephens, 188 W.Va. 622, 425 S.E.2d 577 (1992). "When a discovery order involves the probable invasion of confidential materials that are exempted from discovery under Rule 26(b)(1) and (3) of the West Virginia Rules of Civil Procedure, the exercise of this Court's original jurisdiction is appropriate." Syl. pt. 3, State ex rel. USF & G v. Canady, 194 W.Va. 431, 460 S.E.2d 677 (1995).¹⁰

III. DISCUSSION

A. Nationwide Production of Documents

The circuit court compelled the nationwide production by Allstate of all written complaints made against Allstate from 1986 to present. The circuit court also compelled the nationwide production of all regulatory sanctions filed against it from 1990 to present. Allstate contends that the requirement for the nationwide production of written complaint information and all types of regulatory sanction information is too broad, burdensome and cumulative. To support its claim that the circuit court has abused its discretion on the requirements for a nationwide production of documents, Allstate cites our decision in Stephens.

In Stephens the plaintiff requested information on all bad faith, unfair trade or settlement practices, and excess verdict claims filed against State Farm throughout the entire country for a ten year period. The Stephens plaintiffs also requested nationwide data on all complaints filed against State Farm with insurance industry regulators for the same period. The defendants objected to the request on the grounds that the requested information was too broad, burdensome, irrelevant, and cumulative. This Court held in syllabus point 2 of Stephens that "[u]nder Rule 26(b)(1)(iii) of the West Virginia Rules of Civil Procedure, a trial court may limit discovery if it finds that the discovery is unduly burdensome or expensive, taking into account the needs of the case, the amount in controversy, limitations on the parties' resources, and the importance of the issues at stake in the litigation."¹¹

It was stated in syllabus point 3 of Stephens that:

Where a claim is made that a discovery request is unduly burdensome under Rule 26(b)(1)(iii) of the West Virginia Rules of Civil Procedure, the trial court should consider several factors. First, a court should weigh the requesting party's need to obtain the information against the burden that producing the information places on the opposing party. This requires an analysis of the issues in the case, the amount in controversy, and the resources of the parties. Secondly, the opposing party has the obligation to show why the discovery is burdensome unless, in light of the issues, the discovery request is oppressive on its face. Finally, the court must consider the relevancy and materiality of the information sought.

Ultimately, in Stephens this Court found the nationwide discovery ordered by the trial court to be an abuse of its discretion. This Court indicated that on remand the circuit court should consider statewide application of the discovery requests.

Factually and legally, Stephens is controlling on the nationwide discovery requirements in the instant proceeding. Neither the circuit court orders, nor the record in this case, demonstrate any analysis performed by the trial court in applying the Stephens test. There are no findings of fact, nor conclusions of law, set forth in either discovery order, which illustrates that the court weighed the requesting parties need to obtain the information against the burden that...