United States District Court

For the Northern District of California

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 Simultaneously e-filed with an administrative request to the district court to file the

document under seal (Docket # 173).

C-09-1611 ORDER Page 1 of 4

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

Richard Doble, et al.,

Plaintiffs,

v.

The Mega Life and Health Insurance

Company,

Defendants.

________________________________/

No. C 09-1611 CRB (JL)

ORDER

Introduction

All discovery in this case has been referred by the district court (Hon. Charles R.

Breyer), under 28 U.S.C. §636(b) and Civil Local Rule 72.

Procedural Background

The Court received Plaintiffs’ letter1

 of July 12, 2010 regarding their allegations that

MEGA has not complied with this Court’s order issued March 31, 2010, ordering production

of documents “forthwith.” MEGA responded with its letter brief on July 13, e-filed at Docket

# 174. 

Case 3:09-cv-01611-CRB Document 76 Filed 07/14/10 Page 1 of 4
United States District Court

For the Northern District of California

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C-09-1611 ORDER Page 2 of 4

Some time after issuing its March 31 order, the Court, in response to a request from

Plaintiffs, set a date for MEGA’s compliance of June 4, 2010, with the proviso “[t]hat there

will be no further extensions.” The discovery cut-off in this case is August 13, 2010, the

Pretrial Conference is September 16, and jury trial is September 20.

Argument

Plaintiffs contend that MEGA has to date failed to comply with this Court’s orders. As

a result, Plaintiffs have been unable to develop discovery in the subject area of the

documents at issue, specifically the Multi-State Examination and Regulatory Settlement

Agreement, for instance by taking 30(b)(6) depositions on topics relating to the missing

documents. These include: MEGA’s response to regulatory investigations of its claims

handling practices, its internal findings concerning those investigations, and its subsequent

compliance with agreements with regulators made in connection with those investigations. 

Plaintiffs argue that MEGA’s willful and repeated disobedience of the Court’s orders

may and in this case should be treated as contempt, punishable by a range of sanctions up

to and including issue preclusion as provided by Rule 37, Federal Rules of Civil Procedure. 

Plaintiffs ask that the Court order MEGA yet again to fully and immediately comply with the

Court’s March 31 discovery order, and in addition order MEGA to pay Plaintiffs’ attorney

fees and expenses incurred in pursuing this discovery, as a sanction under FRCP Rule

37(b).

MEGA responds that it has conscientiously attempted to comply with this Court’s

orders. MEGA contends that Plaintiffs seek a further order compelling compliance because

MEGA has not produced the so-called "2007 Report" or, more specifically, the consultant's

report referenced in the Multi-State Market Conduct Examination ("Examination"). MEGA

argues that this report is a non-issue because a final report does not exist. As set forth in

the Declaration of Susan Luna, attached to its letter brief, MEGA has confirmed that its

consultant, PricewaterhouseCoopers (“PwC”), did not issue a final and comprehensive

2007 report to MEGA, as Plaintiffs insist. (Luna Decl. ¶¶ 7-9.) Instead, it provided MEGA

with two draft reports relating to claims handling during its general audit in or about August,

Case 3:09-cv-01611-CRB Document 76 Filed 07/14/10 Page 2 of 4
United States District Court

For the Northern District of California

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C-09-1611 ORDER Page 3 of 4

2005, through January, 2007. MEGA asserts it has produced both of those reports to

Plaintiffs.

MEGA argues that Plaintiffs are mistaken about the existence of a final and

comprehensive 2007 Report, just as they are in claiming that the Examiners "ordered"

MEGA to produce it to them. In fact, the Examiners accepted MEGA's contention that any

reports by its consultants are privileged and confidential. (Luna Decl. ¶ 9.) Thus, the

Examiners decided that an overview of the report would suffice. MEGA has produced the

overview to Plaintiffs. The Court finds this contention by MEGA to be ambiguous, in that it

implies that a full report was prepared for MEGA but that MEGA did not produce it to the

Examiners on the grounds of privilege, and therefore withholds it from production to

Plaintiffs.

MEGA, in the course of the parties’ discussions regarding this discovery, offered to

produce a 2009 report or the index to the report so Plaintiffs could request portions of it

related to claims handling. This was a 182 page report entitled “A Report Card on

Compliance with the Performance Standards Set Forth in the Regulatory Settlement

Agreement” dated November 9, 2009, prepared by the Schacht Group and SMART

Business Advisory and Consulting LLC. (Luna Decl at 2)

MEGA asserts that its counsel explained to Plaintiffs’ counsel that it had not located

the final and comprehensive 2007 Report that Plaintiffs believed existed, and offered to

provide Plaintiffs with a declaration once MEGA concluded its search or confirmed that the

2007 Report does not exist. MEGA explained that the only 2007 consultant's report it had

located regarding claims handling was a draft report that appeared to be incomplete. At no

time did MEGA's counsel say that MEGA had located the 2007 Report, as Plaintiffs now

claim. (Pls' letter at ¶. 2-3.) MEGA agreed to produce the draft report to allow Plaintiffs to

see for themselves that it was not the report they were seeking. MEGA then emailed the

report and other documents to Plaintiffs.

Case 3:09-cv-01611-CRB Document 76 Filed 07/14/10 Page 3 of 4
United States District Court

For the Northern District of California

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C-09-1611 ORDER Page 4 of 4

MEGA has repeatedly advised Plaintiffs that it cannot locate the final,

comprehensive 2007 Report that Plaintiffs have repeatedly argued must exist, and it has

now confirmed that PwC did not prepare such a report. (See Luna Decl. ¶ 9.)

MEGA argues that it cannot be compelled to produce a report that does not exist,

nor should it be sanctioned for its inability to do so. MEGA requests the Court deny

Plaintiffs' request for an order for further compliance, another 30(b)(60 deposition, or

sanctions.

Conclusion and Order

In the interests of justice, this Court will provide MEGA with an opportunity to file a

sworn declaration that no document responsive to Plaintiffs’ requests and subject to this

Court’s March 31 order exists which has not been produced to Plaintiffs. Such a declaration

will preclude MEGA from relying on any such document or its content in motions or at trial.

The Court will also give MEGA an opportunity to be heard on the issue of whether it has

failed to comply with the Court’s previous orders and, if so, if its failure merits sanctions as

requested by Plaintiffs. The matter will be heard on the Court’s calendar on August 4, 2010

at 9:30 a.m.

IT IS SO ORDERED.

DATED: July 14, 2010

__________________________________

 JAMES LARSON

 United States Magistrate Judge

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