Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_06-cv-00903/USCOURTS-casd-3_06-cv-00903-2/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Breach of Contract

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06cv0903

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

J&M ASSOCIATES, INC.,

Plaintiff,

v.

NATIONAL UNION FIRE INSURANCE

COMPANY OF PITTSBURGH, PA, et

al.,

Defendants. 

 

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Case No. 06-CV-0903-W (JMA)

ORDER GRANTING PLAINTIFF’S

MOTION TO COMPEL DEPOSITION OF

DEFENDANT’S FED. R. CIV. P.

30(b)(6) WITNESS AND AWARDING

SANCTIONS

[Doc. 93] 

Plaintiff J&M Associates, Inc. (“J&M”) has filed a letter

brief in support of its motion to compel the deposition of

Defendant National Union Fire Insurance Company of Pittsburgh,

PA’s (“National Union’s”) Fed. R. Civ. P. 30(b)(6) witness

regarding loss allocation. National Union opposes. For the

reasons set forth below, the Court GRANTS J&M’s motion. 

I. BACKGROUND

On March 24, 2008, J&M served a deposition notice upon

National Union, seeking to take the deposition of the person(s)

most knowledgeable on three topics, including the following:

National Union’s practice and procedure with regard to

allocating and/or reserving for defense expenses on

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liability claims, including defense expenses incurred

by National Union in coverage actions, as reflected on

the attached J&M “AIG RMIS Risk Detail Report” (Exhibit

“A” hereto).

Holtz Decl., Ex. B-2. J&M sought to take the above deposition,

among others, on May 1, 2008 in New York City. Id., Ex. B-1 & B2. National Union served objections to the deposition notice on

April 17, 2008, which included the following “specific

objections” to the above topic (referred to by the parties as

“topic number 3"):

[T]he terms “practice and procedure” and “allocating

and/or reserving” are vague, overbroad and unduly

burdensome, thus inhibiting National Union in its

ability to prepare sufficiently for the deposition. 

Given the vague and improper description of the scope

of [the] Topic, National Union reserves the right to

object to specific areas of questioning where the

witness did not have sufficient notice and/or time to

be able to prepare. 

[B]y seeking information pertaining to “defense

expenses incurred by National Union in coverage

actions,” the topic is unduly burdensome.

[I]t exceeds the permissible scope of discovery and

seeks information neither relevant to any claims or

defenses in this action, nor reasonably calculated to

lead to the discovery of admissible evidence. J&M’s

“allocation bad faith” theory is not viable under

California law. (Citations omitted.) Moreover, “an

insured cannot base a cause of action for bad faith on

nonrenewal, even if there is a coverage dispute between

the insurer and insured over a prior claim.” {Citation

omitted.)

Id., Ex. C.

Counsel for the parties corresponded both before and after

National Union served its objections regarding, inter alia, the

scope and parameters of the deposition sought by J&M. See id.,

Exs. D-I (consisting of letters and e-mails exchanged between

J&M’s counsel, James Holtz, Esq., and National Union’s counsel,

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R. Gaylord Smith, Esq. of Lewis Brisbois Bisgaard & Smith LLP

substituted in this matter in place of Ms. Bernard and the Gordon &

Rees LLP law firm on June 24, 2008. See Doc. 102.

3 06cv0903

Michelle Bernard, Esq., dated between April 17, 2008 and April

23, 2008).1 In particular, Ms. Bernard advised on April 17, 2008

that National Union intended to designate a representative from

World Wide Facilities, Inc. (“World Wide”) to testify as to topic

number 3. Id., Ex. D-3. She explained that National Union

“outsourced” the underwriting and marketing of Staffing Services

Liability policies, such as J&M’s, to World Wide, its managing

general agent, and that World Wide had made the decision to nonrenew J&M’s policy. Id. As such, she proposed that “a

representative from World Wide would be in the best position to

address what role, if any, the amount of loss expense allocated

to J&M . . . played in the decision to non-renew this account

with National Union.” Id. 

Mr. Holtz responded to Ms. Bernard’s proposal later that

same day. Id., Ex. E-1. He advised of his position that “the

bottom line is that you are producing no persons from National

Union for depositions as noticed for May 1.” He observed that

the deposition notice did not mention “non-renewal” at all, and

stated that “NATIONAL UNION must produce an employee to testify

on this topic.” Id. (emphasis in original). He further

contended that J&M was entitled to know why National Union had

allocated its coverage defense costs to J&M’s loss experience,

and whether it was a company practice to do so. Id. 

In response, Ms. Bernard, in an e-mail dated April 18, 2008,

disagreed with Mr. Holtz’s statement that National Union was not

producing any witnesses in response to the deposition notice. 

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Ms. Vitucci served as the claims analyst for the underlying

Melendez claim, and Audrey Samit served as the claims director

overseeing both the Melendez and Varis Brown claims. Def.’s Br. at 2;

see also March 4, 2008 Order [Doc. 89], Section III.A (containing

discussion of the Varis Brown claim). The depositions of Ms. Vitucci

and Ms. Samit took place during three days of depositions (April 30,

2008 to May 2, 2008) which took place in New York City in this matter. 

4 06cv0903

Id., Ex. G-1. She explained that notwithstanding its objections

to the notice, which were “interposed to preserve all of National

Union’s rights regarding the relevance and admissibility of your

Rule 30(b)(6) topics, National Union intends to produce Rule

30(b)(6) designees on May 1, 2008, in New York City.” Id. She

further advised that it was “entirely appropriate for National

Union to designate a witness from its managing general agent

World Wide to provide deposition testimony to the extent that

National Union deems World Wide to be most knowledgeable

regarding any of the requested topics.” Id. She also stated

that National Union “has no stated ‘policy’ or ‘procedure’ of

allocating coverage counsel/coverage litigation expenses to the

insured’s loss experience,” and suggested that Christine Vitucci

or Audrey Samit2 could provide testimony regarding the claim

payment process, including the “mechanics” of how claims payments

are made and how they are characterized or coded. Id.

Additionally, she advised that Peter Kalin, the Manager of

Underwriting Operations for World Wide, would testify regarding

the decision to non-renew J&M’s policy. Id. 

Mr. Holtz sent a responsive e-mail the following day, on

April 19, 2008, in which he explained:

[T]he 30(b)(6) notice asks essentially for someone to

explain the loss allocation on the . . . AIG RMS loss

run. I do not understand why you and [Matthew Elstein,

Esq.] repeatedly talk about non-renewal because I am

not asking for a witness on that topic, nor does the

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AIG was responsible for adjusting insurance claims on behalf of

National Union during the time period relevant to this case.

5 06cv0903

amended complaint allege a cause of action for

“wrongful non-renewal.” The complaint alleges that the

allocation of [National Union’s] coverage expenses to

the insured’s loss experience increased the total

numbers on the loss run, which had an effect on the

ability generally to market the J&M risk, was

unreasonable (bad faith) and perhaps was done in

retaliation for J&M fighting AIG3 on the coverage

denial. This has nothing to do with non-renewal by

[National Union] of the expiring policy as [National

Union] had freedom of choice to non-renew. Someone

somewhere can explain what the AIG RMS form is and why

the AIG coverage expenses incurred in fighting the

action brought by J&M against National Union were

allocated to the insured’s loss experience, and whether

that was just a one-time thing for J&M or is company

policy. . . . [¶] [S]omeone knows what that form means

and how it is generated and where the info on it comes

from, generally even if not specifically for J&M, so I

asked for someone familiar with the methodology or

practice of filling out the form. . . . Please produce

someone who can explain what this document is, and how

and why it was filled out in the way it was. 

Id., Ex. H-1. 

Subsequently, on April 22, 2008, the undersigned’s law clerk

held a telephone conference with counsel, at which time Mr. Holtz

advised of his concern that the person designated by National

Union would not be able to adequately testify as to the subject

topic. Ms. Bernard stated that National Union would provide 

witnesses to testify as to each of the three topics set forth in

the Rule 30(b)(6) deposition notice, without qualification, and

that it was premature for J&M to raise the issue of the adequacy

of the witness as to topic number 3. Ms. Bernard did not provide

the name of the witness, but confirmed that the witness would be

able to adequately testify. Mr. Holtz conceded that the proper

course was to go forward with the depositions, and to raise the

issue with the Court afterwards if any of the witnesses produced

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6 06cv0903

were not able to adequately testify as to any of the designated

topics. He sent a confirming letter to this effect on April 23,

2008. Id., Ex. I. 

Mr. Holtz deposed Mr. Kalin of World Wide on May 1, 2008. 

Id., Ex. J-1. Mr. Kalin testified that he was not the person

most knowledgeable as to the subject topic, and Ms. Bernard

interjected that he was not being designated for that topic. 

Id., Ex. J-3. The following exchange then took place:

MR. HOLTZ: Okay. Ms. Bernard who are you producing

for topic number 3, today?

MS. BERNARD: National Union is going to stand on its

written objections as to topic number 3, and pursuant

to our discussions yesterday, we will not be producing

a witness. 

Id. J&M subsequently filed the instant motion.

II. DISCUSSION

A. National Union’s Counsel Should Have Continued to Meet

and Confer on This Issue

According to the record before the Court, National Union

changed its mind about producing a 30(b)(6) witness on topic

number 3 sometime between April 22, 2008, when Ms. Bernard

represented to the Court’s law clerk that it would produce a

witness, and May 1, 2008, when Ms. Bernard stated, apparently to

Mr. Holtz’s surprise, that it would not produce a witness. It is

unclear to the Court why National Union changed its position. 

National Union’s argument that it changed its position after J&M

rejected Dorothy Taylor, the President of World Wide, as a

witness is not supported by the record before the Court. First,

Ms. Taylor is not mentioned by name in any of the correspondence

provided to the Court. Second, although J&M initially questioned

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the adequacy of a World Wide representative to serve as a Rule

30(b)(6) witness on behalf of National Union (see Holtz Decl.,

Ex. E-1), it eventually determined that it would take the

deposition of such a witness and would reserve its rights to

challenge the witness’s qualifications as a managing agent as

well as the adequacy of the witness to testify on the subject

topic. See id., Ex. I-3 (referring to Peter Kalin of World

Wide).

The parties’ meet and confer efforts regarding this topic

seemingly ended on or around April 23, 2008. Indeed, based on

the record provided to the Court, Ms. Bernard did not respond to

correspondence dated April 19, 2008 from Mr. Holtz setting forth

the matters on which he intended to seek deposition testimony. 

The Court has communicated to counsel, throughout the myriad

discovery disputes in this case, the extreme importance this

Court places on parties’ efforts to meet and confer extensively

regarding all discovery matters. The Court’s local rules also

contain a meet and confer requirement. See Civ. L.R. 26.1 a. In

the Court’s view, Mr. Holtz’s April 19, 2008 correspondence (see

Holtz Decl., Ex. H-1) clearly and concisely sets forth the

information J&M wished to obtain by way of the 30(b)(6)

deposition. The Court does not understand why National Union did

not respond to this correspondence, and finds that it should have

done so before electing to take the position it eventually did,

i.e., to stand on its written objections to the deposition

notice, after representing to the Court and to opposing counsel

that it would produce a witness to testify on the subject topic. 

// 

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B. J&M’s Counsel’s Correspondence of April 19, 2008

Adequately Set Forth the Scope of the Rule 30(b)(6)

Deposition Sought by J&M

As indicated above, the Court finds that Mr. Holtz’s

correspondence of April 19, 2008 adequately set forth, with

reasonable particularity, the scope of the Rule 30(b)(6)

deposition sought by J&M. Thus, it clarified any questions

National Union may have had about the intended matters for

examination, and resolved any issues as to “vagueness” that

National Union contends existed. The Court also finds that the

information sought, as clarified in Mr. Holtz’s correspondence,

would not place a burden upon National Union. The Court

accordingly overrules National Union’s first and second

objections to the deposition notice, which are premised upon

vagueness and burdensomeness.

C. The Court Has Previously Ruled that Discovery Relating

to J&M’s “Loss Allocation” Theory is Permissible 

As discussed in this Court’s March 4, 2008 Order, the Second

Amended Complaint sets forth the following in pertinent part:

[National Union] breached the implied covenant of good

faith and fair dealing by [its] conduct as alleged

herein, including:

(m) Engaging in retaliatory behavior

contrary to the insured’s interest, by

allocating to the insured’s “loss experience”

the cost of NATIONAL UNION’s defense of the

instant coverage action, causing the insured

to seek replacement general liability

coverage and creating increased difficulties

for the insured in obtaining replacement

coverage, and resulting in higher premiums

for the insured.

Second Am. Compl. ¶ 25(m). The Court previously stated the

following in response to National Union’s argument that the above

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allegations set forth an “untenable” theory that is not viable

under California law: 

As National Union should be aware, it is not within

this Court’s purview to determine whether the above

allegation should be stricken -- the district judge

must do so. Until and unless the allegation is

stricken, it remains a component of J&M’s bad faith

claim and, as such, J&M is entitled to obtain discovery

regarding any nonprivileged matter relevant to the

allegation. Moreover, National Union’s

characterization of this allegation as simply a

“wrongful non-renewal theory” (id.) is too narrow. It

is clear that J&M’s allegation, and the discovery it

seeks in relation thereto, go beyond the non-renewal of

J&M’s policy by National Union. Rather, J&M seeks this

discovery as evidence of National Union’s alleged bad

faith. 

Mar. 4, 2008 Order at 13-14.

Although, as National Union observes, the March 4 Order

pertained to the written discovery then before the Court, the

Court finds that the above language still should have been

instructive to National Union with respect to the instant

dispute. The Court has already stated, in no uncertain terms,

that J&M is entitled to discovery in relation to the “loss

allocation” issue, and it is entitled to take a deposition on

this topic as well as conduct written discovery. The Court is

thus dismayed and bewildered that National Union continues to

deny discovery to J&M on the basis that this theory cannot give

rise to bad faith liability. See Def.’s Objections to Deposition

Notice, attached as Ex. C to Holtz Decl., at ¶ 9; Def.’s Br. at

4-6. Based on its previous and current finding that the

information sought is relevant to J&M’s claims in this case, the

Court overrules National Union’s third objection to topic number

3 set forth in the 30(b)(6) deposition notice. 

In conclusion, the Court finds that J&M has properly set

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forth, with reasonable particularity, the information it seeks by

way of the 30(b)(6) deposition, that the information sought is

relevant to J&M’s claims in this case, as the pleadings presently

stand, and that National Union’s objections to the deposition

notice are properly overruled. Accordingly, the Court ORDERS

that National Union shall produce a witness pursuant to Rule

30(b)(6) to testify regarding the “loss allocation” issue, as

described in further detail in Mr. Holtz’s April 19, 2008

correspondence (see Holtz Decl., Ex. H-1) and as summarized in

Section I., supra pp. 4-5.

D. J&M’s Request for Sanctions

J&M contends that sanctions are warranted against National

Union pursuant to Rule 37 of the Federal Rules of Civil

Procedure. J&M’s Mem. at 6-9. The Court agrees. 

Rule 37 provides in relevant part:

The court where the action is pending may, on motion,

order sanctions if:

a party or a party’s officer, director, or

managing agent—or a person designated under

Rule 30(b)(6) or 31(a)(4)—fails, after being

served with proper notice, to appear for that

person’s deposition[.]

Fed. R. Civ. P. 37(d)(1)(A)(i). Further, “[t]he court must

require the party failing to act, the attorney advising that

party, or both to pay the reasonable expenses, including

attorney’s fees, caused by the failure, unless the failure was

substantially justified or other circumstances make an award of

expenses unjust.” Fed. R. Civ. P. 37(d)(3). 

Here, the Court finds that National Union’s failure to

produce a Rule 30(b)(6) witness on the topic of loss allocation

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was not substantially justified. The Court finds that National

Union shall thus be required to pay J&M’s attorney’s fees of

$1,200.00 (four hours at $300 per hour) for wasted deposition

time and $1,800.00 (eight hours at $225 per hour) for preparation

of the instant motion, totaling $3,000.00. The remainder of the

attorneys’ fees sought by J&M were not incurred as a result of

National Union’s failure to produce a 30(b)(6) witness on the

subject issue. See Fed. R. Civ. P. 37(d)(3). 

IV. CONCLUSION

Based on the foregoing, the Court GRANTS J&M’s motion to

compel the deposition of National Union’s Fed. R. Civ. P.

30(b)(6) witness regarding loss allocation, as set forth in

further detail above. The 30(b)(6) witness shall be made

available for deposition in San Diego within fifteen days of the

date of this Order. 

Additionally, the Court AWARDS J&M’s counsel the sum of

$3,000.00 as sanctions for National Union’s failure to produce a

witness for deposition pursuant to Rule 30(b)(6). National Union

shall pay this amount directly to J&M’s counsel within fifteen

days of the date of this Order. 

IT IS SO ORDERED.

DATED: June 27, 2008

Jan M. Adler

U.S. Magistrate Judge

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