Case Name: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. HEALTH HORIZONS, INC.
Court: Court of Appeals of Georgia
Jurisdiction: Georgia
Decision Date: 2003-12-01
Citations: 264 Ga. App. 443
Docket Number: A03A1387
Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. HEALTH HORIZONS, INC.
Judges: Blackburn, P. J., Ruffin, P. J., Eldridge, Mikell and Adams, JJ, concur. Andrews, P. J., dissents. Johnson, P. J., not participating.
Reporter: Georgia Appeals Reports
Volume: 264
Pages: 443–456

Head Matter:
A03A1387.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. HEALTH HORIZONS, INC.
(590 SE2d 798)

Opinion:
Barnes, Judge.
This court granted State Farm Mutual Automobile Insurance Company's application for an interlocutory appeal of the trial court's order granting Health Horizons, Inc.'s motion for sanctions, dismissing its answer, and granting a judgment to Health Horizons on liability. The insurance company argues on appeal that the trial court abused its discretion, and further contends that the trial court erred in granting a judgment on liability because Health Horizons' complaint failed to allege fraud properly. We conclude that the trial court did not abuse its discretion in dismissing State Farm's answer and issuing a judgment against it as to liability, and therefore affirm the trial court's order.
The history of this case is long and complicated, having already made one trip to this court on an unrelated matter. The only issue before us, however, is whether the trial court erred in concluding that State Farm wilfully failed to comply with its previous order granting Health Horizons' motion to compel, and thus striking the defendant's answer and granting a default judgment to the plaintiff on the issue of liability.
In August 1997, Health Horizons filed a complaint against State Farm asserting that the insurer had fraudulently denied Health Horizons' claims for reimbursement of medical services provided to State Farm's policyholders. State Farm answered and denied liability. The parties conducted extensive discovery, and the trial court eventually granted Health Horizons' second motion to compel discovery after a hearing conducted on December 20, 2001. The written order was entered on January 30, 2002, after the parties agreed to the wording. On October 10, 2002, the trial court granted Health Horizons' motion to strike State Farm's answer, finding that State Farm wilfully disregarded that portion of the January 30 order requiring it to respond to Health Horizons' "Request for Production of Documents No. 18." Specifically, the trial court had ordered State Farm to "produce copies of its documents regarding the handling of medical claims, protocols for medical reviews of State Farm policyholders, incentatives [sic] in claim reductions, and reductions in claims, which it also produced in the cases of Robinson v. State Farm and Foltz v. State Farm." Robinson was a similar action filed in an Idaho state court, and Foltz was a similar action filed in federal district court in Oregon. The order further provided that State Farm's attorneys should review these documents and prepare a "privilege log" identifying the documents State Farm contends do not fall into these four categories, to enable the plaintiff to challenge the omissions and the court to resolve the dispute.
While the order did not specify a time period for compliance, at the hearing a month earlier counsel for State Farm stated that 30 days should be more than enough time, although he also stated that he did not know how many documents were involved. After the plaintiff moved for sanctions on April 22, 2002, State Farm filed a brief in response arguing to the court for the first time that it had been delayed in responding because it could not find duplicate copies of all the documents from these other two cases that were not stamped "sealed."
As Health Horizons made clear during the hearing on its motion for sanctions, it was not complaining about the length of time it took for State Farm to deliver the voluminous records it produced in response to the court's order to compel production. Rather, it was complaining about the fact that State Farm declined to produce some of the documents. One of the reasons it gave for declining to produce some of these documents was that a federal court in Oregon had placed them under seal. The issue of these documents being under seal was exactly the issue that the parties argued about in their hearing on Health Horizons' motion to compel. The trial court considered this issue, and gave State Farm very specific directions about how to handle it, which was to produce copies of these documents from their own files that related to four specific issues, and if it thought that the documents did not relate to these four issues, list them in a log and the court would decide whether they were relevant or not. The parties agreed at the hearing to a protective order covering all discovery produced in this case, and then worked together for a month to draft an order that reflected the trial court's direction at the hearing.
State Farm decided not to seek an interlocutory appeal challenging the trial court's order, as it explained later at the sanctions hearing, because "a discovery order doesn't. . . get much attention in the appellate courts." Instead, State Farm employees at the corporate headquarters produced a log identifying some of these documents as not being produced because they were under seal, "Not related to Health Horizons' litigation in time," contained personal information, or related to a different case. Health Horizons moved for sanctions, and at that hearing, State Farm told the court that, at the previous hearing on the motion to compel, it had no idea what had been produced in the Oregon federal court case Health Horizons was seeking information about, although it had received the plaintiff's request to produce seven months before that hearing. At the sanctions hearing, State Farm said it would consider the trial court's suggestion that it could have sought instruction from the other court if it were concerned about being in contempt of that court's order.
In its first post-hearing letter to the trial court, State Farm then suggested that Health Horizons could attempt to intervene in the other case, which was on appeal to the Court of Appeals for the Ninth Circuit. Two months later, in its second post-hearing letter to the trial court, State Farm's attorney told the trial court that he had been advised that the company had corresponded with the judge in the other case, asking it to reassume jurisdiction for the purposes of unsealing the record for another reason, even though it was still on appeal. If that court agreed to unseal the records, then State Farm offered to ask that the records also be unsealed for production in this case.
The trial court found that State Farm's refusal to comply with the mandates of its order to compel production was "wilful and in conscious disregard" of the court's order. It further found that
State Farm's behavior throughout the discovery process, from its untimely production to its conscious, intentional refusal to comply with the Court's Order to Compel Production has been adverse to constitutional and statutory mandates for a speedy and efficient discovery process and undermines the power and authority of the Court.
At the sanctions hearing, the plaintiff argued that State Farm was in contempt of the trial court's order granting its motion to compel because, in its 63-page privilege list, it indicated that it need not produce a number of documents because they were under court seal, rather than because they were not relevant or otherwise did not fall within the four categories the trial court specified in its previous order. The plaintiff further argued that some of State Farm's other reasons for withholding documents were because they contained personal information, they were related to a different case, and they involved a different time frame, in defiance of the court's order granting its motion to compel.
In its order, the trial court responded to these assertions as follows:
At the hearing, State Farm had asserted privacy concerns because many of the documents had been sealed by the court in Oregon. The Court found this argument unpersuasive. The only concern of the Plaintiffs in the Oregon cases which required the sealing of the documents was the confidentiality of the medical records. Clearly, this Court allowed State Farm to redact the names of the patients involved before submitting copies of its documents to this Court.
The trial court further found that State Farm knew the type of documents requested since May 2001 and the specific documents requested since December 2001, almost five months before, and that its failure to produce these documents was wilful and in conscious disregard of the court's order. The trial court specifically addressed State Farm's failure to produce certain documents because they contained private information, and rejected the company's proposals for "time-consuming and uncertain resolutions to a 'problem' of its own making which was resolved by this Court in its order to compel production."
1. At some point, showing diligence without actually producing anything is an empty gesture. The trial court's job is to control its litigation, and it has broad discretion in ascertaining whether a party has made a good faith effort to comply with its orders or has wilfully failed to comply. Riches to Rags v. McAlexander & Assoc., 249 Ga. App. 649, 652 (549 SE2d 474) (2001). State Farm has been represented by three of the best law firms in this state, yet presents itself as caught between the orders of two courts with no way to satisfy both. The company made no attempt to appeal this issue or protect itself in any way. Instead, at each juncture, it offered another excuse, or another avenue down which the company or the plaintiff could travel toward the end result of possibly producing the documents in the future.
Historically it has been the policy of the Georgia appellate courts to refuse to interfere with a trial court's exercise of its discretion in absence of abuse. This policy is applicable to a trial judge's exercise of the broad discretionary powers authorized under the discovery provisions of the Civil Practice Act.
(Citations and punctuation omitted.) Rubin v. Cindyreal, N.V., 171 Ga. App. 45, 46 (318 SE2d 520) (1984). See also Cannon Air Transport Svcs. v. Stevens Aviation, 249 Ga. App. 514, 517 (4) (548 SE2d 485) (2001); Deep South Constr. v. Slack, 248 Ga. App. 183, 185 (1) (546 SE2d 302) (2001); Butler v. Biven Software, 238 Ga. App. 525, 527 (2) (522 SE2d 1) (1999). We will affirm a trial court's finding of a wilful refusal to comply with discovery if any evidence supports it. Potter v. American Medcare Corp., 225 Ga. App. 343, 346 (484 SE2d 43) (1997).
Further, while we cannot consider the trial court's order confirming that it reviewed the privilege logs at issue, because the order was filed after we granted State Farm's application for interlocutory appeal, the record otherwise establishes that the trial court did so. The logs themselves are included in the record. In its order granting sanctions, the trial court found as a fact that State Farm produced the logs, and further found that the logs included documents that fell within the four categories that the court had ordered the company to produce. Therefore, we need not remand the case for the trial court to consider the logs it has already considered.
State Farm argues that a trial court can only dismiss an answer if a defendant completely fails to respond to an order to compel, and in this case, because State Farm produced thousands of pages of documents, the trial court should be constrained to grant a lesser sanction. If that were the law, then a defendant could endlessly respond to a motion to compel by partially complying while asserting various forms of privilege or unavailability or difficulty of production in order to "stay in the game," as State Farm has done here. In wilfully defying the trial court's order, State Farm has opened itself up to the ultimate sanction of having its answer dismissed, despite the fact that it complied with the order to compel in some respects.
Neither Mayer v. Interstate Fire Ins. Co., 243 Ga. 436, 439 (2) (254 SE2d 825) (1979), nor Barron v. Spanier, 198 Ga. App. 801 (403 SE2d 88) (1991), requires a different conclusion. The cases hold that, if a defendant completely fails to respond to discovery, the plaintiff need not obtain an order compelling a response before filing a motion for sanctions, but do not otherwise limit the trial court's authority to impose sanctions when a discovery order is violated. In this case, however, the plaintiff obtained an order in response to its motion to compel, and the defendant then defied the order, subjecting it to the sanction of dismissing its answer.
2. Finally, State Farm argues that the trial court erred in granting a default judgment to Health Horizons, because its complaint does not state a fraud claim. We disagree. The elements of a fraud action are an intentional false representation by the defendant designed to induce the plaintiff to act or refrain from acting, upon which the plaintiff justifiably relies, resulting in damage to the plaintiff. City Dodge v. Gardner, 232 Ga. 766, 769-770, n. 1 (208 SE2d 794) (1974). The plaintiff contends that it relied on State Farm's promise to pay proper medical claims, which it never intended to do and in fact did not do, to the plaintiff's detriment. "A promise made without a present intent to perform is a misrepresentation of a material fact and is sufficient to support a cause of action for fraud." (Citations and punctuation omitted.) Howard v. Hammond, 216 Ga. App. 703, 706 (1) (455 SE2d 390) (1995). Accordingly, Health Horizons' claims are sufficient to state a fraud claim.
Judgment affirmed.
Blackburn, P. J., Ruffin, P. J., Eldridge, Mikell and Adams, JJ, concur. Andrews, P. J., dissents. Johnson, P. J., not participating.
In Health Horizons v. State Farm &c. Ins. Co., 239 Ga. App. 440 (521 SE2d 383) (1999) (physical precedent only), we held that the registration of a foreign corporation filed with the Secretary of State related back to a previously filed complaint by that corporation in this state.