Court Opinion

ID: 6329772
Source: CourtListenerOpinion
Date Created: 2022-04-12 22:11:02.956401+00
Date Added: 2024-06-11T09:22:56.642627
License: Public Domain

NOT DESIGNATED FOR PUBLICATION

                            STATE OF LOUISIANA

                              COURT OF APPEAL

                                FIRST CIRCUIT

                                  2021 CA 0703

JAMES J. DONELON, COMMISSIONER OF INSURANCE FOR THE
 STATE OF LOUISIANA, IN HIS CAPACITY AS REHABILITATOR
            OF LOUISIANA HEALTH COOPERATIVE, INC.

                                     VERSUS

      TERRY S. SHILLING, GEORGE G CROMER, WARNER L.
      THOMAS, IV, WILLIAM A. OLIVER, CHARLES D. CALVI,
 PATRICK C. POWERS, CGI TECHNOLOGIES AND SOLUTIONS,
INC., GROUP RESOURCES INCORPORATED, BEAM PARTNERS,
      LLC, MILLIMAN, INC., BUCK CONSULTANTS, LLC, AND
      VELERS CASUALTY AND SURETY COMPANY OF AMERICA

                                              Judgment Rendered:     APR 12 2022

                   On Appeal from the 19th Judicial District Court
                      In and for the Parish of East Baton Rouge
                                 State of Louisiana
                              Trial Court No. 651, 069

                   Honorable Timothy E. Kelley, Judge Presiding

Keith C. Armstrong                           Attorneys for Defendant/Appellant,
Zachary S. Miller                            Milliman, Inc.
Baton Rouge, Louisiana
and

Reid L. Ashinoff
Justin N. Kattan
Justine N. Margolis
Catharine Luo
New York, New York
John Ashley Moore                    Attorneys for Third -Party Appellee,
Vincent V. Tumminello, III           Louisiana   Department   of Insurance
Michael A. Grace
William H. Patrick, IV
Baton Rouge, Louisiana

         BEFORE: WHIPPLE, CJ., PENZATO, AND HESTER, JJ.

                               Fj,
PENZATO, J.

       This is an appeal from a February 25, 2021 judgment denying a motion to

compel discovery filed by Milliman, Inc. ("            Milliman")   against a non-party, the

Louisiana Department of Insurance (" LDI"). ' The LDI filed a motion for leave to

file a sur -reply brief, as well as a motion to supplement the record on appeal with

an order signed by the trial court on July 21, 2021. We hereby grant both motions.

We affirm in part and reverse in part the February 25, 2021 judgment, and remand

the matter for further proceedings.

                      FACTS AND PROCEDURAL HISTORY

       Louisiana Health Cooperative, Inc. (" LAHC")                 was   a non-profit health

insurance company incorporated in 2011 pursuant to Louisiana' s implementation

of the Affordable Care Act (" ACA").          By July 2015, LAHC was out of business,

and in September of 2015, LAHC was placed into rehabilitation and under the

direction and control of the Commissioner of Insurance for the State of Louisiana

as   Rehabilitator,   through    his   duly   appointed     Receiver,     Billy   Bostick ( the

 Receiver").

       On August 31,       2016, the Receiver filed suit against various defendants

asserting claims of breach of fiduciary duty, breach of contract, negligence, and

gross negligence that purportedly caused or contributed to LAHC' s insolvency.                In

a supplemental and amending petition filed on November 29, 2016, Milliman was

added as a defendant. The Receiver asserted claims of professional negligence and

breach of contract against Milliman, which provided professional actuarial services

to LAHC from August 2011 to March 2014.                   The Receiver contended that a

feasibility study dated March 30, 2012, prepared by Milliman for LAHC, and a

report dated August 15, 2013, prepared by Milliman and relied upon by LAHC to

I A co- defendant, Buck Global, LLC ("   Buck"),    also appealed the February 25, 2021 judgment.
Buck filed an unopposed motion to dismiss its appeal, which was granted by this court. Donelon
v. Shilling, 2021 CA 0703 ( La. App. 1 Cir. 11/ 5/ 21).

                                                   3
set its premium rates for 2014, were unreliable, inaccurate, and not the result of

careful, professional       analysis.   The Receiver alleged that Milliman breached its

duty to LAHC by failing to discharge its duties with reasonable care, failing to act

in accordance with the professional standards applicable to actuaries,                  failing to

produce an accurate and reliable feasibility study, failing to set premium rates for

LAHC that were accurate and reliable,                 and failing to exercise the reasonable

judgment expected of professional actuaries under like circumstances.                         The

Receiver further alleged that Milliman' s failure to exercise reasonable care, failure

to act in accordance with the professional standards applicable to actuaries, and its

breach of contract were the legal causes of all or substantially all of LAHC' s

damages.

        In its answer, Milliman denied the Receiver' s allegations.                   In addition,

Milliman asserted several affirmative defenses,                including allegations that the

Receiver' s damages were not solely caused by Milliman, but by other persons or

entities, including the LDI, the Commissioner of Insurance, the Receiver, LAHC,

the federal government, third parties, and other defendants.                  On September 18,

2020,   the Receiver filed a motion seeking to dismiss or strike Milliman' s

 regulator fault"    or "   receiver fault" defenses pursuant to La. R.S. 22: 2043. 1( B). 2

By judgment dated January 12,             2021,    the trial court granted the motion and

excluded the acts of the LDI and the Commissioner of Insurance from Milliman' s

defenses. After this appeal was taken, on a similar motion by the Receiver, the trial

court struck Milliman' s affirmative defenses predicated upon prior wrongful or

negligent actions of any officer, manager, director, trustee, employee, or agent of

LAHC pursuant to La. R. S. 22: 2043. 1( A).3

2 Louisiana Revised Statutes 22: 2043. 1( B) provides that " No action or inaction by the insurance
regulatory authorities may be asserted as a defense to a claim by the receiver."

3 Louisiana Revised Statutes 22: 2043. 1( A) provides in pertinent part as follows:

                                                  0
        On or about November 19, 2020, Milliman served an amended subpoena

duces       tecum    on   the    LDI,   which    contained    38   requests   for   production   of

documents.'         The LDI responded to the subpoena, objecting to each of the requests

for production of documents therein.'                   Milliman thereafter filed a motion to

compel.

        In its motion to compel, Milliman alleged that the documents requested from

the LDI were directly relevant to the Receiver' s claims and/ or Milliman' s defenses

and were reasonably calculated to lead to the discovery of admissible evidence.                  In

opposition,      the LDI argued that all of the documents sought by Milliman' s

subpoena related to regulatory action or inaction taken by the LDI or on its behalf,

and were not legally relevant as a matter of law in light of La. R.S. 22: 2043. 1 and

the trial court' s January 12, 2021 judgment.                The LDI further argued that the

requested documents "           were not reasonably calculated to lead to the discovery of

admissible evidence."           La. C. C. P. art. 1422.

        The trial court heard Milliman' s motion to compel on February 12, 2021.

Following the argument of counsel, the trial court denied the motion to compel,

and signed a judgment conforming to its oral reasons on February 25, 2021.                   It is

from this judgment that Milliman appeals.

        No prior wrongful or negligent actions of any present or former officer, manager,
        director, trustee, owner, employee, or agent of the insurer may be asserted as a
        defense to a claim by the receiver under a theory of estoppel, comparative fault,
        intervening cause, proximate cause, reliance, mitigation of damages, or otherwise.

4 Milliman previously sought to obtain these documents from the Receiver through discovery
requests.    The Receiver objected to the production of any LDI documents, contending it was not
a representative of the LDI in the litigation. Milliman filed a motion to compel the Receiver to
produce responsive records of the LDI, contending that the Commissioner was in possession,
custody, and control of the responsive documents of the LDI, regardless of the " capacity" in
which he appeared in the litigation. Following a hearing, the trial court signed an order dated
October 7, 2020, denying Milliman' s motion to compel. The order indicated the trial court' s
finding that the Receiver in this litigation was not the custodian and did not possess or control
the records of the LDI.  Milliman applied for writ of certiorari which was denied by this court.
Donelon v. Shilling, 2020 CW 1111 ( La. App. 1 Cir. 12/ 30/20), 2020 WL 7869454 ( unpublished
writ action).

5 LDI' s responses to the amended subpoena duces tecum included references to its previous
responses to the original subpoena, which was added to/ modified.

                                                    5
                               ASSIGNMENT OF ERRORS

         Milliman contends that the trial court' s decision to preclude discovery of all

information in the possession of the LDI, based on its conclusion that none of this

information could possibly be admissible at trial, is erroneous because it:

         1.    Contravenes La. C. C. P. art.
                                          1422 and this court' s controlling precedent
         holding that evidence is discoverable, regardless of its ultimate admissibility,
         if it reasonably may lead to admissible evidence;

         2.    Ignores that Milliman' s subpoena does not seek evidence concerning the
         LDI' s " action or inaction";   and

         3.    Misapplies La. R.S. 22: 2045, which does not bar production of non -
         confidential, non -privileged,     and/ or pre -receivership documents sought by
         the subpoena.

                                 LAW AND DISCUSSION

         It is well settled under Louisiana law that the discovery statutes are to be

liberally and broadly construed to achieve their intended objectives.             Bridges u

Hertz Equipment Rental Corp.,            2008- 0400 ( La. 6/ 20/ 08), 983 So. 2d 1256, 1258

per curiam).
                    The basic objectives of the Louisiana discovery process are (       1)   to

afford all parties a fair opportunity to obtain facts pertinent to the litigation; ( 2)      to

discover the true facts and compel disclosure of these facts wherever they may be

found; ( 3)     to assist litigants in preparing their cases for trial; ( 4)   to narrow and

clarify the basic issues between the parties; and ( 5)       to facilitate and expedite the

legal process by encouraging settlement or abandonment of less than meritorious

claims.       Hodges a Southern Farm Bureau Cas. Ins. Co., 433 So. 2d 125, 129 ( La.

1983).

         A party generally may obtain discovery of any information, not privileged,

which is relevant to the subject matter involved in the pending action.           La. C. C. P.

art.   1422.     The test of discoverability is not the admissibility of the particular

information sought, but whether the information appears reasonably calculated to

lead to the discovery of admissible evidence.             Lehmann a American Southern

                                                 ON
Home Ins. Co.,      615 So. 2d 923, 925 ( La. App. 1 Cir.), writ        denied, 617 So. 2d 913

La. 1993).       Generally, a showing of relevancy and good cause for production has

been required in cases where a party seeks production of records from a non-party.

Stolzle a Safety &        Systems Assur: Consultants, Inc., 2002- 1197 ( La. 5/ 24/ 02), 819

So. 2d 2879 289 ( per curiam).

        A trial court has broad discretion in discovery matters, and such discretion

will not be disturbed on appeal absent a clear showing of abuse of that discretion.

Bell a Treasure Chest Casino, L.L. C., 2006- 1538 ( La. 2/ 22/ 07), 950 So. 2d 654,

656.

        The initial inquiry in most discovery problems is whether the matter sought

to be discovered is relevant. Hodges, 433 So. 2d at 129.                Milliman contends that

its subpoena sought four categories of documents that relate directly to the

Receiver' s claims         against Milliman, and to Milliman' s           defenses.     The LDI

contends that all of the documents requested by Milliman relate to regulatory

action or inaction taken by the LDI or on its behalf and are therefore statutorily

irrelevant pursuant to the absolute immunity protection set forth in La.                      R.S.

22: 2043. 1. 6

        The four categories of documents sought by Milliman in its subpoena are

discussed below. 7

1.     Communications concerning Milliman' s reports in support of LAHC' s

2012 feasibility study and 2014 rate filings (Requests 1, 69 99 12913915) 8

6 We note, however, that with regard to Requests 6, 16, and 37, the LDI did not raise any claims
of statutory privilege in its objections to Milliman' s subpoena.

 Milliman does not address the relevancy of Requests 2- 5, 7, 8, 10, 11, 14, 18, 21- 28, and 34- 36.
We may consider as abandoned any assignment of error or issue for review which has not been
briefed.    See Uniform Rules—Courts of Appeal, Rule 2- 12. 4( B)( 4).         See also Louisiana
Commerce &    Trade Ass' n, SIF v. Williams, 2014- 1680 ( La. App. 1 Cir. 6/ 5/ 15), 174 So. 3d 696,
699.   Accordingly, we affirm the denial of the motion to compel Requests 2- 5, 7, 8, 10, 11, 14,
18, 21- 28, and 34- 36.

8 The referenced requests are set forth below:

                                                  7
       Milliman contends that the communications requested in Requests 1, 6, 9,

12, 13,   and 15 are probative because they establish a contemporaneous record,

unaffected by hindsight or after -the -fact attempts to shift blame for LAHC' s losses,

that   cannot    be   obtained     from     other        sources   concerning       the   quality     and

reasonableness of Milliman' s work for LAHC.

2.     Information      concerning other Louisiana                 insurers'      2014    rate    filings
 Requests 16, 17) 9

       Milliman contends that in order to test the Receiver' s allegations concerning

the reasonableness of Milliman' s assumptions as compared to other Louisiana

carriers, Milliman needs the information requested in Requests 16 and 17 from the

LDI concerning, inter alia, state- wide enrollment levels, rates of other carriers, and

whether or to what extent these allegedly "                 unreasonable"        assumptions actually

       Request   1.  All Documents and Communications referencing or related to
       LAHC' s filings with the LDI, including form and rate filings.

       Request 6.     All Documents and Communications reflecting Communications
       between    LAHC     and   LDL      This request       includes   but is    not limited    to
        Communications sent directly to or from LAHC or on LAHC' s behalf.

        Request 9. All Documents and Communications concerning LAHC' s: a) CO- OP
        Program application ( including any feasibility study or business plan), b) pro
        forma submissions, c) startup or solvency loans, d) requests for additional
        funding, or e) any corrective action plan.

        Request 12.   All Documents and Communications concerning LDI' s assessment,
        review, findings, conclusions and/ or approval of LAHC' s 2014 or 2015 rates.

        Request 13.    All Documents and Communications concerning LDI' s review,
        assessments, findings and/or conclusions relating to Milliman' s actuarial analyses,
        reports and other work for LAHC.

        Request 15. All Documents and Communications concerning any attempt by
        LAHC, LDI, and/or any other person or entity to lower or raise LAHC' s 2014 or
        2015 rates.

9 The referenced requests are set forth below:

        Request 16. All 2014 and 2015 rate filings for ACA -compliant plans sold or to be
        sold in Louisiana by any insurer.

        Request 17.    All Documents and Communications comparing, contrasting or
        otherwise discussing the 2014 or 2015 rates,           rate filings or other actuarial

        analyses prepared by or on behalf of LAHC in relation to the 2014 or 2015 rates,
        rate filings or other actuarial analyses for any other ACA -compliant plan sold or
        to be sold in Louisiana by any other insurer.

                                                    n.
impacted LAHC' s            financial   condition.         Milliman argues that only the LDI

possesses this contemporaneous information.

3.    Documents           concerning     LAHC' s          financial
                                                              insolvency,
                                                                      condition   and

including communications with the federal government concerning changes
to, and implementation of, the ACA (Requests 19, 20, 29- 33) 10

       According to Milliman, the LDI closely monitored LAHC' s financial

condition, recommended that LAHC voluntarily wind down its operations, and had

constant contact with the federal government, which oversaw the ACA CO- OP

program.    Milliman contends that the LDI most likely has information, requested

in Requests 19, 20, 29- 33, that bears on Milliman' s contention that its work did not

cause LAHC' s losses, but rather other factors, including the federal government' s

improper withholding of $63 million in " Risk                Corridor" payments in 2015, and/ or

work of other third -party providers of pre -insolvency services to LAHC,                caused

io The referenced requests are set forth below:

       Request 19.       All Documents and Communications concerning the impact of the
       failure to make Risk Corridor Payments upon the operations or financial condition
       of LAHC or health insurers generally.

       Request 20.       All Documents and Communications concerning the role and impact
       of Risk Adjustment Transfer Payments, the Transitional Reinsurance Payment,
       and/ or the Individual Mandate upon the operations and financial condition of
       LAHC or health insurers generally.

       Request 29.    All Documents and Communications reflecting or analyzing LAHC
       financial statements for the 2014, 2015, 2016 and 2017 calendar years, including:
        a) GAAP financial statements; ( b) Financial statements prepared in accordance

       with statutory accounting principles, including convention statements filed with
       LDI; (c)   Actuarial memoranda supporting the calculation of claim reserves, IBNR
        incurred but not reported) liabilities, and any other liabilities used in the
       preparation of the LAHC financial statements.

       Request 30.       All Documents and Communications concerning LAHC' s financial
       condition and solvency.

       Request     31.      All   Documents   and     Communications
                                                                concerning LAHC' s
       operations, including but not limited to the performance of LAHC' s officers,
       directors or other management and/ or its agents GRI and/ or CGI.

       Request 32.       All Documents and Communications concerning the onsite market
       conduct and financial examination of LAHC that commenced in or around March
       2015.

       Request 33.        All Documents and Communications concerning the decision to
       place LAHC into rehabilitation or liquidation.

                                                     OJ
those losses.

4.    Post -receivership       communications            concerning   the     Health   Republic
settlement (Requests 37, 38)"

       According to Milliman, LAHC participated in the federal Health Republic

Insurance Company a U.S. class action in the Court of Federal Claims, in which

several ACA CO- OPs and other carriers sued the federal government for its

improper withholding of "Risk Corridor"                payments.   Milliman contends that the

case settled in 2020 and LAHC was the only insurer, out of 148, that did not get

paid 100% of what the federal government owed it. Through Requests 37 and 38,

Milliman seeks information concerning the Receiver' s post -receivership conduct,

including the Health Republic settlement.

       At   the   hearing on the       motion      to    compel,   counsel    for the Receiver

acknowledged the possibility that data in the requested records could lead to

admissible evidence, but argued that a review of all the records requested would be

a major undertaking and would slow down the litigation.                     The trial court also

recognized Milliman' s interest in obtaining contemporaneous records to place

before the trier -of fact information that it did not act unreasonably and its actions

were prudent.     The trial court questioned whether such information was an attack

on an action or inaction by the insurance regulatory authorities so as to create a

defense, as prohibited by La. R.S.         22: 2043. 1.     However, without evaluating the

specific requests, the trial court denied the motion to compel, stating:

        W] hen I look at [ La. R.S. 22:] 2403. 1 and 2045, ...               I know why
        Milliman] would want to use [ the information], but it cannot be used
       that way under our law, and since it cannot be used it will never be

11 The referenced requests are set forth below:

       Request 37. All Documents and Communications concerning Health Republic
       Insurance Company v. United States of America, No. 1: 16- cv- 00259- MMS,
       United States Court of Federal Claims ( " Health Republic").

       Request 38.  All Documents and Communications concerning any settlements or
       other relinquishment of claims or potential claims involving LAHC and the
       United States federal government, including but not limited to settlements in
       Health Republic.

                                                  10
      admissible.     Just legally it could not be asserted....

      La. R.S. 22: 2043. 1 immunizes the LDI from liability based upon regulator

fault affirmative defenses.     The LDI did not raise the immunity protection provided

by La. R.S.     22: 2043. 1 in its objections to Requests 6,        16, and 37.     Moreover,

Requests 1,     9, 12, 13,   and 15- 17 seek relevant information and may lead to the

discovery of admissible evidence relating to Milliman' s defense of the Receiver' s

allegations that Milliman failed to exercise reasonable care in discharging its duties

and was the sole cause of all or substantially all of LAHC' s damages.            Requests 19,

209 29- 33, and 38 are relevant to Milliman' s defense that parties other than the

insurance regulatory authorities, including former defendants in the case,                 the

federal government, or the Receiver, may have caused or contributed to LAHC' s

losses.    Request 31 seeks, in part, documents and communications concerning " the

performance of LAHC' s officers, directors or other management."              We find that

this portion of Request 31 will not lead to the discovery of admissible evidence,

and we affirm the trial court' s denial of the motion to compel as to documents and

communications concerning " the performance of LAHC' s officers, directors or

other management."       With regard to the remainder of Request 31 and Requests 1,

69 99 129 13, 15- 17, 19, 20, 29, 30, 32, 339 37, and 38, we find the trial court abused

its discretion in relying upon the immunity protection set forth in La.                   R.S.

22: 2043. 1 to deny Milliman' s motion to compel because the information sought in

these Requests is relevant and discoverable for purposes other than regulator fault

affirmative defenses.

          La. R.S. 22: 2045 protects documents that are produced or received during a

receivership action and " which are confidential or privileged pursuant to any other

provision of law."      La. R.S. 22: 2045( A)      and (   B).   The LDI did not object to

Requests 6, 16, and 37 as confidential or privileged pursuant to La. R.S. 22: 2045.

As to the remaining requests, the LDI merely copied the text of La. R.S. 22: 2045 in

                                              11
its objections to Milliman' s subpoena. Privileges, which are in derogation of such

broad exchange of facts, are to be strictly interpreted.         Smith a Lincoln General

Hospital, 605 So. 2d 1347, 1348 ( La. 1992) (          per curiam).    Under Louisiana law,

the party asserting the privilege has the burden of proving that the privilege

applies,   must adequately substantiate the claim, and cannot rely on a blanket

assertion of privilege.   Maldonado a Kiewit Louisiana Co.,           2012- 1868 ( La. App. 1

Cir. 5/ 30/ 14), 152 So. 3d 909, 927, writ denied, 2014- 2246 ( La. 1/ 16/ 15), 157 So.

3d 1129.    We find that the trial court abused its discretion in denying Milliman' s

motion to compel Requests 1, 6, 9, 12, 13, 15- 17, 19, 20, 29- 33, 37, and 38, taking

the LDI' s blanket assertion of privilege as satisfactory proof to allow it to withhold

all documents from discovery. See Law Offices of Robert C. Lehman a Rogers,

2021- 0040 ( La. App. 1 Cir. 3/ 2/ 21),    2021 WL 794550 ( unpublished writ action).

       Based upon the above reasons, we reverse the February 25, 2021 judgment

to the extent that it denied Milliman' s motion to compel with regard to Requests 1,

6, 9, 12, 13, 15- 17, 19, 20, 29, 30, 31 in part, 32, 33, 37, and 38. However, the LDI

objected to    these   Requests    as     overbroad.    The   trial   court   recognized   that

Milliman' s discovery requests were overbroad and would need to be refined " as             to

the relevant time constraint[,]    subject matter[,]     and information of entities being

inquired into."   However, no such process was undertaken, as the trial court denied

in full Milliman' s motion to compel.        Accordingly, we remand this matter with an

order for the trial court to address the LDI' s objection that Requests 1, 6, 9, 12, 13,

15- 17, 19, 20, 29- 33, 37, and 38 are overbroad.          We further order that the LDI

produce to the trial court a privilege log describing the nature of the documents

responsive to Requests 1, 9, 12, 13, 15, 17, 19, 20, 29- 33, and 38 over which it has

claimed a privilege without revealing any privileged information, which shall be

produced to the trial court to consider in conjunction with its ruling on Milliman' s

motion to compel as to Requests 1, 6, 9, 12, 13, 15- 17, 19, 20, 29, 30, 31 in part,

                                               12
32, 33, 37, and 38.       In all other respects,   the February 25, 2021 judgment is

affirmed.

                                    CONCLUSION

        We grant the Louisiana Department of Insurance' s motions for leave to file a

sur -reply brief and to supplement the record on appeal.     We reverse that part of the

trial court' s February 25, 2021 judgment that denied Milliman, Inc.' s motion to

compel discovery as to Requests 1,      6, 9, 12, 13, 15- 17, 19, 20, 29, 30, 31 in part,

32,   33,   37,   and 38, and remand to the trial court to address the Louisiana

Department of Insurance' s objection that these requests are overbroad. We further

order that the Louisiana Department of Insurance produce to the trial court a

privilege log describing the nature of the documents responsive to Requests 1,         9,

12, 13, 15, 17, 19, 20, 29- 33, and 38 over which it has claimed a privilege.      In all

other respects, we affirm the February 25, 2021 judgment. Costs in the amount of

 12, 987. 50 are assessed one- half ($ 6, 493. 75) to the Louisiana Department of

Insurance and one- half ($6, 493. 75) to Milliman, Inc.

MOTIONS           FOR LEAVE      TO   FILE A SUR -REPLY BRIEF GRANTED;
MOTION TO SUPPLEMENT THE RECORD ON APPEAL GRANTED;
JUDGMENT            AFFIRMED       IN    PART      AND    REVERSED          IN   PART;
REMANDED WITH INSTRUCTIONS.

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