Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_06-cv-00921/USCOURTS-casd-3_06-cv-00921-4/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1132 E.R.I.S.A.-Employee Benefits

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

OMNI HOME FINANCING, INC., KEITH

W. MURPHY, ANTHONY A. GAGLIONE,

DAVID A. BANCROFT, and OMNI HOME

FINANCING, INC. 412(i) DEFINED

BENEFIT PLAN,

Plaintiffs,

CASE NO. 06cv0921 IEG (JMA)

ORDER OVERRULING

DEFENDANTS’ OBJECTIONS TO

MAGISTRATE JUDGE ADLER’S

ORDER DENYING

DEFENDANTS’ MOTION TO

COMPEL DEPOSITIONS

[Doc. No. 132.]

vs.

HARTFORD LIFE AND ANNUITY

INSURANCE COMPANY, PAUL

BANNOCK, and DOES 1 through 100,

inclusive,

Defendants.

Defendants Hartford Life and Annuity Insurance Company and Paul Bannock (collectively

“defendants”) have filed objections to Magistrate Judge Jan M. Adler’s order of January 7, 2008,

denying defendants’ motion for order compelling the depositions of attorneys Kenneth Bonus and

Robert Butterfield. (Doc. Nos. 125 & 121.) Plaintiffs filed an opposition on February 8, 2008 (Doc.

No. 135) and defendants filed a reply on February 15, 2008 (Doc. No. 136).

BACKGROUND

In the instant case, plaintiffs seek to recover damages for alleged violations of ERISA and

for state law claims in connection with a 412(i) defined benefit plan. Defendants have raised the

affirmative defense that plaintiffs failed to mitigate their damages, because they terminated the life

Case 3:06-cv-00921-IEG-JMA Document 137 Filed 02/29/08 Page 1 of 4
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insurance policies which were the subject of the plan. 

On or about November 9, 2007, Defendants issued deposition notices and subpoenas for

the depositions of Kenneth Bonus (“Bonus”) and Robert Butterfield (“Butterfield”). According to

the testimony of Plaintiff Keith Murphy at his deposition, he received advice from Bonus and

Butterfield regarding terminating the 412(i) plan. Counsel for Butterfield and Bonus advised

defense counsel no depositions would be taken absent a court order. Defendants filed a motion for

an order compelling the attorneys’ depositions. (Doc. No. 121.) Magistrate Judge Adler denied

the motion on January 7, 2008. (Doc. No. 125.) 

Defendants seek to depose the attorneys in order to:

(1) determine whether Plaintiffs (through their counsel) considered mitigating their

damages, such as converting to other policies to preserve the cash value of their

whole life policies rather than letting them lapse and losing all of their

contributions; (2) whether they are seeking to minimize the amount of money they

owe the IRS; or (3) whether they made any argument to the IRS about the

legitimacy of the plan that is inconsistent with the claims of alleged defects in the

Plan in this case.

(Objections at 5.) Plaintiffs opposed the depositions on the grounds of relevance and attorneyclient privilege. Plaintiffs argued the advice of counsel regarding mitigation was not relevant to

whether or not plaintiffs failed to mitigate. Magistrate Judge Adler agreed. He also found the

testimony would be cumulative to the deposition testimony of Murphy regarding the advice of

counsel, and that the depositions would impose an undue burden on the attorneys. (1/7/08 Order at

5-7.) Magistrate Judge Adler also made findings regarding attorney-client privilege as an

alternative basis for his decision.

DISCUSSION

Legal Standard

Under Rule 72 of the Federal Rules of Civil Procedure, the district judge on a case must

consider timely objections to nondispositive decisions by the magistrate judge. The magistrate

judge’s order should be modified or set aside if it is “clearly erroneous or is contrary to law.” Fed.

R. Civ. P. 72(a); see also 28 U.S.C. §636(b)(1)(A).

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In reply, defendants argue Judge Adler improperly found the depositions should not go forward because the

burden of proof fell on defendants to establish failure to mitigate. Defendants seriously misinterpret Judge Adler’s order,

which did not mention burden of proof and clearly articulated Judge Adler’s reasons for finding the evidence irrelevant.

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Analysis

As correctly noted by Magistrate Judge Adler, Rule 26 of the Federal Rules of Civil

Procedure permits discovery regarding “any nonprivileged matter that is relevant to any party’s

claim or defense.” Fed. R. Civ. P. 26(b)(1). Under Rule 26(b)(2)(C), the Court “must limit”

discovery if it is “unreasonably cumulative or duplicative.” Because the testimony is not relevant,

and is unnecessary, duplicative, and burdensome to the third party attorneys, Judge Adler denied

plaintiffs’ motion to order the depositions under Rule 26.

Defendants argue Judge Adler erred by failing to consider that Bonus and Butterfield could

reveal why plaintiffs chose to terminate the plan and let their policies lapse. Defendants fail,

however, to explain how this is relevant to the instant action. As Judge Adler correctly decided,

even if plaintiffs’ termination of the plan did constitute failure to mitigate, their motives in failing

to mitigate are not relevant. Plaintiffs claim that if counsel knew of an available mitigation option

but failed to inform plaintiffs of the option, “then that is evidence Hartford and Bannock is entitled

to present to the jury to show a portion of Plaintiffs’ damages are not recoverable from them.” 

(Objections at 7.) Like Judge Adler, the Court does not see why counsel’s knowledge of a

mitigation option is relevant to whether the option was available and whether it should have been

taken.1

Defendants also argue Judge Adler erred by failing to consider the need for Bonus and

Butterfield to testify regarding their dealings with the IRS in connection with the audit. However,

as represented by Butterfield in his declaration, plaintiffs have already produced the documents

reflecting communications with the IRS, and no substantive oral communications were made. 

Moreover, defendants also seek this information in order to establish why plaintiffs failed to

mitigate. Judge Adler’s decision that counsel’s beliefs regarding the benefits of terminating the

plan for tax purposes are not relevant to whether plaintiffs failed to mitigate is not clearly

erroneous nor contrary to law. 

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CONCLUSION

For the foregoing reasons, the Court agrees with Magistrate Judge Adler’s well-reasoned

decision. The Court thus declines to modify the decision or set it aside, and OVERRULES

plaintiffs’ objections to Judge Adler’s order. 

IT IS SO ORDERED.

DATED: February 29, 2008

IRMA E. GONZALEZ, Chief Judge

United States District Court

Case 3:06-cv-00921-IEG-JMA Document 137 Filed 02/29/08 Page 4 of 4