Opinion ID: 1577251
Heading Depth: 2
Heading Rank: 4

Heading: Great and Irreparable Harm

Text: The Court of Appeals based its decision on a finding that Grange failed to prove great and irreparable harm. Grange argues that it did show great and irreparable harm because the requested discovery is irrelevant and would require disclosure of trade secrets.
Grange complains that almost all of the discovery requests at issue in this case aim to discover irrelevant information. But showing irrelevancy is not a method of proving great and irreparable injury. Mere possession of irrelevant information by an opposing party is not something of a ruinous nature. [22] Our predecessor court, however, held that discovery of irrelevant material could fall under the certain special cases exception, [23] allowing a court to forego the great and irreparable harm requirement in the interests of justice. Thus, we must evaluate the relevance of the requested discovery to see if its production would be a substantial miscarriage of justice ... and correction of the error is necessary and appropriate in the interest of orderly judicial administration. [24] To frame the issue, we note that CR 26.02 allows that [p]arties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action.... It is not grounds for objection that the information sought will be inadmissible at the trial if the discovery sought appears to be reasonably calculated to lead to the discovery of admissible evidence. We also note that under CR 26.02, [t]he question of relevancy is more loosely construed upon pre-trial examination than at the trial, and the Rule requires only relevancy to the subject matter involved in the action. [25]
These discovery requests [26] focus on other bad faith claims brought against Grange by private plaintiffs or the Kentucky Insurance Commission. Grange argues that information and documents related to such claims is irrelevant because they cover claims against adjusters other than those involved in this case. Citing Kentucky Farm Bureau Mutual Insurance Co. v. Troxell , [27] Grange argues that discovery of other claims is limited only to claims involving the same adjusters. But Troxell addresses only the admissibility at trial of other claims, not their discoverability, and it states that evidence of other claims involving the same adjuster is admissible, which would imply that they are discoverable. The opinion does not contain the sort of limiting language that Grange implies. In fact, it does not even address in any way the admissibility or discoverability of claims involving other adjusters. It is enough for us to note that discovery of information and documents related to similar claims involving other adjusters could reveal a pattern of bad faith conduct on the part of Grange. This would certainly be relevant to Wilder's bad faith claim, regardless of whether such information was admissible at trial. As such, Interrogatories Nos. 9 and 10(b) and Request for Production No. 10 were proper.
These discovery requests [28] focus on manuals that contain Grange's internal policies and procedures for evaluating and adjusting claims. Grange's primary complaint with discovery of these items concerns their trade secret status, which is addressed separately below. But Grange also claims that these items are irrelevant. In support of its relevance argument, Grange cites to only one case: Garvey v. National Grange Mutual Insurance Company. [29] The plaintiff in Garvey had filed suit in which he claimed breach of contract, bad faith claim, and deceit based on the insurance company's refusal to provide coverage for fire damage to his business. The trial court granted a protective order that prohibited discovery of the insurance company's manuals, noting the following: The contents of these manuals do not pertain to whether the plaintiff's present claim for loss is covered under the insurance contract issued by the defendant. Moreover, the fact that the defendant may have strayed from its internal procedures does not establish bad faith on the part of the defendant in handling the plaintiff's loss. [30] The bad faith claim here is not based on whether the insurance adjuster may have strayed from internal procedures. The question is whether Grange's own policies, as described in the manuals, embody or encourage bad faith practices. And use of such manuals is not without precedent in our courts. [31] As such, we disagree with the applicability of Garvey to this case. Grange's training and policy manuals are relevant to Wilder's bad faith claim, and absent some sort of privilege or other showing of irreparable harm, they are discoverable.
These discovery requests [32] focus on Grange's methodologies for setting reserves on claims that its adjusters handle. Again, Grange claims these are protected as trade secrets, which we address below. But Grange also makes the unique argument that this information is irrelevant to the case because Wilder already has discovery that lists the reserve amount set for his claim and because Wilder is only seeking this information for use in future litigation or to sell to other plaintiffs' attorneys. The relevance of procedures for setting reserves to a bad faith claim seems obvious. Reserve setting procedures are controlled in part by statute. [33] Evidence of Grange's reserve setting procedures would help show whether Grange is following the statutory and regulatory requirements and whether the specific system for setting reserves is aimed at achieving unfairly low values. We find that this evidence is relevant to the bad faith claim. Grange's argument that Wilder is seeking this discovery for other improper purposes, i.e., use in other litigation or for sale to other attorneys, is even more difficult to swallow. Grange cites Oppenheimer Fund, Inc. v. Sanders [34] for the proposition that seeking discovery for use in other proceedings is an improper motive. But Grange's reading of Oppenheimer is far too restrictive because the evidence sought in that case was useful only in other proceedings and was not relevant to the case at hand. [35] We agree that when this is the case, then discovery of the evidence is improper. But evidence that is relevant to the proceeding at hand, as is the case here, is discoverable despite the fact that the evidence may be useful in other contexts. That discovery might be useful in other litigation or other proceedings is actually a good thing because it furthers one of the driving forces behind the Civil Rules by allowing the cost of repeating the discovery process to be avoided and thereby encouraging the efficient administration of justice. [36] And [e]ven though CR 1 no longer requires it ... the rules of procedure should be construed to secure the just, speedy, and inexpensive determination of every action. [37] The exception in this group is Request for Production No. 13. The average amounts paid on other claims would only be relevant if the degree of damages or injury were comparable to Wilder's. This request, however, is so blanket as to seek primarily irrelevant records and information. As such, it falls into the certain special cases exception.
These discovery requests [38] focus on the personnel files and the records and policies concerning the compensation of various Grange employees. We agree that many of the items likely to be found in personnel records (e.g., original job application, marital information, tax and dependant data, medical information, health insurance data, worker's compensations claims, and retirement account data) are irrelevant to a bad faith claim and thus are not discoverable. Thus, Wilder's discovery requests, to the extent that such truly personal items are covered, are overly broad. Other information to be found in personnel files (e.g., related to job performance, bonuses, wage and salary data, disciplinary matters) is relevant to Wilder's claim. Job performance and disciplinary information could help show that the adjusters and their superiors had engaged in bad faith practices in adjusting Wilder's initial claim or that they had engaged in bad faith practices at other times. This information could also show Grange's knowledge or even approval of such practices. This makes those portions of the personnel records related to job performance and disciplinary matters discoverable. Wilder claims that the compensation of Grange's employees could be keyed to obtaining low settlements, which in turn might encourage bad faith practices by adjusters and other employees. Wage, salary, and bonus data as to the employees described in the discovery requests shed light on this subject, as would the discovery requests as to how Grange's overall compensation system works. Thus, insofar as the requested personnel records relate to compensation of the employees involved and the other records relate to how Grange's overall compensation system works, they are discoverable.
This discovery request [39] focuses on advertising that Grange used from 1993 to 1997. Wilder failed to address this discovery request in his brief, which we read as a waiver of this issue.
This discovery request [40] is for Grange newsletters that deal in any way with claims handling. Grange's brief mentions this discovery request only in a section title. The text following the section title focuses solely on the discovery request dealing with advertisements, without addressing the issue of newsletters. Because Grange at least mentions this request, we will not read it as having been waived. Wilder also fails to address this discovery request directly, but we read his overall argument in favor of allowing discovery related to Grange's claims handling documents as applying to this request also. On this point, we would simply note that internal company newsletters that relate to claims handling could contain evidence that shows that Grange encouraged or knew about bad faith claims handling by its adjusters, which makes those documents relevant and discoverable. Though Grange does not expressly claim these documents are covered as trade secrets, any claim that they might be is addressed below.
In addition to claims of irrelevance, Grange attacks Requests for Production Nos. 8, 9, 13, 14, 20, 23, 26, and 29 on the grounds that the documents requested have trade secrets status. Trade secrets enjoy substantial protection in Kentucky as embodied by the Uniform Trade Secrets Act. [41] And usually a discovery request that would require the disclosure of a trade secret ... clearly justifies the entry of a protective order, [42] though granting such an order would fall within the discretion of the trial court. [43] We have previously addressed, at least in part, the issue of trade secrets in the context of a petition for writ of prohibition. In Wal-Mart Stores , Inc. v. Dickinson, [44] we noted that [m]ost likely, disclosure of a trade secret would likewise rise to the level of irreparable harm as the potential harm could extend far beyond the case in which the disclosure is made. [45] Grange relies heavily on Wal-Mart Stores in the course of its argument that a writ of prohibition is necessary in this case. But Wal-Mart Stores is readily distinguishable from this case. Wal-Mart was seeking a writ or prohibition against the enforcement of the trial court's order allowing an inspection  termed a walk-through  of its loss prevention headquarters. We noted that Wal-Mart makes no specific claims as to irreparable harm arising from the walk through. Rather it argues that the trial court erred in denying the protective order because its `headquarters are not open to the public and contain extremely sensitive, proprietary, confidential information and trade secrets.' [46] We then stated that involuntary disclosure of trade secrets usually amounts to irreparable harm. But we refused to grant the writ under the irreparable-harm rubric, holding that Wal-Mart's general claims are not well taken and cannot serve to establish irreparable harm. [47] While we did subsequently grant the writ in Wal-Mart Stores , the rationale for the writ came from Bender's certain special cases exception  because the trial judge had failed to make findings of fact as required by CR 34.01 in its premises inspection order  not the traditional irreparable harm approach. We have already discussed the applicability of the certain special cases exception, by way of irrelevance of the proposed discovery, above, finding that the exception does not apply to Requests for Production Nos. 8, 9, 13, 14, 20, 23, 26, and 29. The remaining question then is whether Grange has proven great and irreparable harm. The Court of Appeals has already given us a negative answer to this question of fact. So we are left to evaluate whether the Court of Appeals, which acted as a trial court in the original petition for a writ of prohibition, committed clear error. In holding that Grange failed to also demonstrate that ... production will cause it irreparable harm, the Court of Appeals also noted the following: The record that has been provided to us does not suggest that Grange sought to introduce specific evidence for each document, or category of documents for which it makes a claim of lack of relevance, confidentiality, or privilege, and it is not clear whether it submitted all the documents to the trial court for its review in camera. What is clear, however, is that the records were neither submitted, nor sufficiently described, to us. After reviewing the record submitted to the Court of Appeals, we must agree. Grange's petition for a writ of prohibition contains only broad descriptions of documents, e.g., Grange's training and or other internally created manuals, reserve setting data, policy and procedure manuals, claims payment averages, personnel and management guidelines, wage and benefits data, and other claims programs and software, [48] followed by the conclusory statement that these documents contain proprietary trade secrets. But such a blanket, vague claim of privilege is not enough. We have previously refused to grant a writ of prohibition when the petitioner has failed to provide access to the documents, themselves, or to sufficient descriptions of their contents, [49] and we continue to do so now. Grange attempts to evade the inevitable result of this failure to prove that the documents contain trade secrets by alleging a conflict between CR 76.36(5) and the fact that the Court of Appeals found no irreparable injury because Grange neither submitted, nor sufficiently described the records in question. CR 76.36(5) states that [e]vidence in support of or against the petition, other than that which may be attached to the petition and response in the form of exhibits, affidavits, and counter-affidavits, will be permitted only by order of the court. Grange claims that, under this rule, the Court of Appeals should have ordered it to submit the records that would have allowed it to prove its case, and that absent such an order, it could not prove the privilege. While we understand that Grange did not want to simply attach the records as exhibits to their petition, it is unclear that the Court of Appeals actually needed to see the records themselves. A thorough description of the records, perhaps in the form of a privilege log, would have been enough to show irreparable harm, but as we have already noted, the descriptions that Grange did provide were not enough to require that the Court of Appeals find great and irreparable harm. But more importantly, the burden of proving that a privilege applies rests on the party claiming its benefit. [50] If Grange felt that it was necessary for the Court of Appeals to review the documents, then it could have made a motion for a CR 76.36(5) order to allow the presentation of more evidence. Grange could even have moved the Court of Appeals to undertake an in camera review in order to determine whether discovery of the records would have caused great and irreparable harm. But Grange made no such motion. Instead, Grange now complains that the Court of Appeals failed to grant such an order sua sponte. It is not the duty of the Court of Appeals to make Grange's case for it. And its failure to do so is certainly not grounds for us to reverse the denial of the writ.