Court Opinion

ID: 9604008
Source: CourtListenerOpinion
Date Created: 2023-08-22 02:12:58.008587+00
Date Added: 2024-06-11T18:02:17.576371
License: Public Domain

ANDREWS, Presiding Judge,
dissenting.
Because I believe the trial court abused its discretion in striking State Farm’s answer and entering default judgment against it, I must respectfully dissent.
Health Horizons’ complaint against State Farm specifically alleged as follows: State Farm was an automobile insurance company which issued policies containing provisions for payment of medical expenses of its insureds incurred as a result of automobile accidents. Health Horizons accepted assignment by the insureds of the right to payment under these policies as a result of Dr. Knott’s providing medical services to State Farm’s insureds. When medical bills were submitted by Health Horizons to State Farm, they were frequently denied on the basis that State Farm contended that the treatments given were not necessary. In order to support its refusal to pay these claims, State Farm “entered into a fraudulent scheme with various medical professionals whereby said medical professionals furnish unfounded opinions that the treatment. . . was not necessary.” As a result, Health Horizons claimed damages “in an amount equal to the sum of the claims for medical bills wrongfully denied,” as well as for punitive damages under OCGA § 51-12-5.1.
State Farm answered, including as its first defense that the complaint failed to state a claim upon which relief could be granted. Discovery ensued, including Health Horizons’ first interrogatories filed in October 1997. State Farm filed objections to these and sought a protective order. Health Horizons’ subsequent motion to compel answers to these interrogatories was granted on April 24, 1998. Although a certificate of immediate review was granted by the trial court, no appeal was sought by State Farm. The interrogatories were then answered.
Thereafter, State Farm2 filed its motion to dismiss contending that Health Horizons was a foreign company and had not registered in Georgia as required by OCGA §§ 14-2-1501 (a) and 14-2-1502 (a).3 Health Horizons then obtained a certificate of immediate review and the issue of the relation back of the registration to the original com*449plaint was decided in Health Horizons v. State Farm &c. Ins. Co., 239 Ga. App. 440 (521 SE2d 383) (1999). The remittitur was received by the trial court and this action was reinstated on March 6, 2000.4
Shortly thereafter, due to a serious illness in the family of Health Horizons’ counsel, the case was continued at his request until early 2001. Upon resumption of the case, the case was again stayed by order of April 6, 2001, pending an agreed-upon mediation by the parties in an effort to resolve the matter.
That mediation having failed, discovery resumed. Health Horizons’ request for production, served on May 23, 2001, contained Paragraph 18, which is at the heart of this appeal. That paragraph requested production of
[t]hose documents produced in Robinson v. State Farm, [Case No. OC 94-98099D, Fourth Judicial District of the State of Idaho, and] Foltz v. State Farm &c. Ins. Co., [331 F3d 1122 (9th Cir. 2003)],5. . . regarding handling of medical claims, protocols for medical reviews of State Farm policyholders, incentives in claims’ reductions, and reductions in claims.
On July 2, 2001, State Farm filed its motion for protective order regarding the request to produce these documents and the depositions to which these documents related. State Farm objected to Paragraph 18 on the grounds that it was overly broad, burdensome, and oppressive, and that the material requested was not relevant nor material to the issues between State Farm and Health Horizons, nor reasonably calculated to lead to discovery of admissible evidence. Further, State Farm objected that “most all the documents sought from the Foltz case are under seal and cannot be voluntarily produced by State Farm. Additionally, most all of the documents sought from the Robinson . . . cases are either subject to the protective order or are under seal.”
In response, Health Horizons filed its second motion to compel discovery on August 1, 2001. The trial court then continued the hear*450ing on both motions until December 2001, to give the parties an opportunity to resolve their discovery issues. As reflected in the hearing conducted on these motions on December 20, 2001, the parties were able to resolve a number of these matters. Among the matters agreed to was the entry of a consent protective order applicable to documents State Farm deemed confidential. As to those documents sought by Request 18, supra, however, the parties were unable to resolve their disputes. During the hearing, the trial court announced that
I’m not doing anything to break the seals in those courts. What I am saying to State Farm is that you have to get your duplicate copies of whatever is under seal in these two cases. I will allow the State Farm attorneys to go through them and to determine what you think is relevant and releasable. If you have a portion, or however large the group’s going to be, of documents that you claim are not relevant to be released to them pursuant to these categories and pursuant to this litigation, then you’re going to have to . . . give me . . . the equivalent of a privileged log of what you claim, or I guess a relevancy log —. . .of what you claim . . . you don’t need to release, and why, or, well, what you claim the non-relevancy is, and then I guess that means I have to do an in-camera inspection.
Following that hearing, State Farm began reviewing those documents produced in the Foltz/Robinson cases, a total of over 41,000 documents. On January 30, 2002, after counsel for State Farm and Health Horizons agreed regarding its wording, the trial court entered its written order on Health Horizons’ second motion to compel. Regarding Health Horizons’ Request for Production of Documents No. 18, Paragraph 5 of that order directed 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 claims reductions, and reductions in claims, which it also produced in the cases of Robinson v. State Farm and Foltz v. State Farm. [State Farm’s] attorneys shall review all documents State Farm produced in the aforesaid cases and prepare a privilege log identifying those documents which [State Farm] contends are not relevant to the categories set out above, so as to enable counsel for [Health Horizons] to challenge or dispute [State Farm’s] contentions. Any such dispute will be *451resolved by the Court, following an in camera inspection of the disputed documents.
No time limit within which this was required to be done was stated in the order. Health Horizons does not dispute that, following this order, State Farm produced 13,000 pages of documents, although counsel for Health Horizons was apparently unaware that some of these documents were in his office when he drafted and filed, on April 22, 2002, the motion for sanctions against State Farm pursuant to OCGA § 9-11-37 (b) (2) (C). Although not addressed by the majority, that motion was premised solely upon Health Horizons’ contention that State Farm had refused to produce any of the Foltz/Robinson documents in response to the trial court’s January 30, 2002 order and its claim that such refusal was “unreasonable and obviously due to an intention to delay and frustrate this Court’s Order that State Farm has not produced these documents during the months that have elapsed since December 20, 2001 and since January 30, 2002.” In fact, the first box of documents resulting from the review of Foltz/ Robinson documents had been forwarded to Health Horizons’ counsel on March 25, 2002, and three more boxes were sent on April 8, 2002. State Farm was also, at that time, preparing the privilege/relevancy logs referenced by the January 30, 2002 order. The log for the Foltz case is fifty-five pages and the one for the Robinson case is seven pages.
In addition to the 13,000 documents received before the filing of the motion to strike, an additional 1,000 documents were sent to Health Horizons’ attorney on May 13, 2002.6 On May 16, the Foltz! Robinson logs were provided to Health Horizons’ counsel and submitted to the court for in camera review.
The hearing on Health Horizons’ motion for sanctions was held on June 18, 2002, and taken under advisement by the trial court. The order granting this motion was entered on October 10, 2002, and this appeal ensued.
The October 10 order states, inter alia, that State Farm’s failure to “provide complete responses to” Health Horizons’ September 8, 1998 second interrogatories “is the subject of the present Order.” These interrogatories sought information from State Farm regarding its eighth and ninth defenses that some of Health Horizons’ claims were barred by the statute of limitation and some by accord and satisfaction. The only request for production included with these interrogatories was for those documents related to accord and satisfaction. As stated above, the sole premise for Health Horizons’ motion *452for sanctions was the failure of State Farm to produce any documents pursuant to Request for Production No. 18 as required by the January 30, 2002 order.
While acknowledging that, between March 26, 2002, and May 16, 2002, State Farm produced over 14,000 documents as well as the privilege/relevancy logs, the trial court nonetheless found that “State Farm continues to disregard the Court’s Order [of January 30, 2002,] requiring all documents requested in Health Horizons’ Interrogatory 18 relevant to the four categories enumerated in the Court’s Order.”
On December 11, 2002, following the docketing of State Farm’s notice of appeal here on December 4, 2002, the trial court entered its order regarding the documents withheld from Health Horizons by State Farm during discovery, but provided on June 18, 2002, to the trial court along with the Foltz/Robinson privilege/relevancy logs for in camera review. That order states only that “[t]he Court considered the contents of these documents in reaching its decision of October 10, 2002, which is currently under review by the Court of Appeals.” The order also directed those documents be forwarded to this Court under seal for consideration with the appeal.
1. State Farm contends, in its first enumeration, that the trial court erred in finding that State Farm had wilfully disobeyed its order compelling the production of Foltz/Robinson documents and that, even if correct in concluding that State Farm had not fully complied with that order, the trial court entered an unduly harsh sanction and abused its discretion by striking State Farm’s answer and affirmative defenses and entering default judgment in favor of Health Horizons as to liability, leaving only the issue of damages for trial. I agree.
I recognize that trial judges have broad discretion in controlling discovery, including imposition of sanctions, and that appellate courts will not reverse a trial court’s decision on such matters absent a clear abuse of discretion. Fidelity Enterprises v. Heyman & Sizemore, 206 Ga. App. 602, 603 (426 SE2d 177) (1992); Addington v. Anneewakee, Inc., 204 Ga. App. 521, 522 (420 SE2d 60) (1992). While the Civil Practice Act authorizes a trial court to dismiss a party’s pleadings as a sanction for a complete failure to attend his own deposition, to respond to interrogatories, or to respond to requests for production, without the opponent’s filing of a motion to compel and entry of a court order (OCGA § 9-11-37 (d) (1); Mayer v. Interstate Fire Ins. Co., 243 Ga. 436 (254 SE2d 825) (1979); Barron v. Spanier, 198 Ga. App. 801 (403 SE2d 88) (1991)), there was no such complete failure here, even with regard to Request for Production No. 18.
The sole premise contained in Health Horizons’ motion for the striking of State Farm’s answer and entering of default judgment on liability was State Farm’s claimed disobedience of the trial court’s *453January 30, 2002 order, which Health Horizons alleged was a total failure to comply with regard to Request for Production No. 18. OCGA § 9-11-37 (b) (2). Many of the cases dealing with entry of default as a result of disobedience of a court order regarding discovery involve a total failure to comply, not a partial failure. Compare Amaechi v. Somsino, 259 Ga. App. 346 (577 SE2d 48) (2003), and City of Griffin v. Jackson, 239 Ga. App. 374, 376-377 (1) (520 SE2d 510) (1999) (striking of pleadings and entries of default affirmed, no response to court order), with Gen. Motors Corp. v. Conkle, 226 Ga. App. 34, 38-46 (1) (486 SE2d 180) (1997) (physical precedent only); Harwood v. Great American Mgmt. &c., 171 Ga. App. 488 (320 SE2d 269) (1984); and Thornton v. Burson, 151 Ga. App. 456, 457-461 (2) (260 SE2d 388) (1979) (entry of default judgments reversed, partial discovery provided).
As the trial court recognized, the harshest sanction available under OCGA § 9-11-37 (b), that of dismissal and default, is reserved for the most extreme cases and the trial court must find wilfulness as a predicate for imposing this sanction. Schrembs v. Atlanta Classic Cars, 261 Ga. 182 (402 SE2d 723) (1991); see Tenet Healthcare Corp. v. Louisiana Forum Corp., 273 Ga. 206, 210 (3) (538 SE2d 441) (2000) .
For a number of reasons, I believe that the trial court erred in imposing the ultimate sanction in this case. First and foremost, having provided in the January 30, 2002 order that State Farm could produce the privilege/relevancy logs regarding the FoltzIRobinson cases, the trial court’s only action regarding these logs was its December 11, 2002 order, merely stating that the trial “Court considered the contents of these documents. . . .”
As set out above, this order was entered after State Farm had filed its notice of appeal and this case had been docketed here. The filing of the notice of appeal serves to supersede a judgment, and while it is on appeal, the trial court is without authority to modify it. OCGA § 5-6-46 (a); Dalton American Truck Stop v. ADBE Distrib. Co., 146 Ga. App. 8, 11 (4) (245 SE2d 346) (1978); see also Isaac v. State, 237 Ga. App. 723, 726 (3) (516 SE2d 575) (1999). Therefore, the December 11, 2002 order is a nullity. Dalton American Truck Stop, supra.
Health Horizons argues that because the documents were watermarked with the FoltzIRobinson sealing/confidentiality stamp was not alone a reason for not producing them after entry of the January 30, 2002 order. A review to the FoltzIRobinson privilege/relevancy logs, however, shows that this sole reason is listed for withholding relatively few of the documents. Other reasons given are lack of relevance to Health Horizons’ claim; the information sought is not related to the four categories in the January 30, 2002 order; the *454information sought contains personal and medical information of State Farm’s insureds not involved in this litigation; and other reasons.
It cannot be said, in the present context of this case, that there has been a total failure by State Farm to comply with the trial court’s order, as urged in Health Horizons’ motion for sanctions. Gen. Motors Corp. v. Conkle, supra; Harwood v. Great American Mgmt. &c., supra; Thornton v. Burson, supra; see Mayer v. Interstate Fire Ins. Co., supra at 437-438 (2); Brunswick Mfg. Co. v. Sizemore, 176 Ga. App. 838, 839-842 (1) (338 SE2d 288) (1985); Danger v. Strother, 171 Ga. App. 607, 608-609 (1), (3) (320 SE2d 613) (1984).
In considering this matter, it is important to keep in mind that, in order to be discoverable, the items or testimony sought must be “relevant to the subject matter involved in the pending action, whether it relates to the claim or defense of the party seeking discovery or to the claim or defense of any other party. . . .” (Emphasis supplied.) OCGA § 9-11-26 (b) (1). Here, the pending action is not one between an insured of State Farm and State Farm, but of a third-party service provider which claims to have been directly defrauded by State Farm.
At a minimum, I believe that the trial court’s order should be reversed and this matter remanded for consideration of the logs, in light of any objections thereto by Health Horizons, which have not yet been made, and resolution of these disputes by the trial court.
2. I also believe that, as argued by State Farm, even if it had wilfully failed to comply with the trial court’s order of January 30, 2002, the entry of default judgment against it as to its liability to Health Horizons was error.
As previously noted, when a party fails to comply with an order to provide discovery, the trial court has several options, including dismissal and default in the most flagrant cases where the failure to comply is wilful, in bad faith, and in conscious disregard of an order. E.g., Motani v. Wallace Enterprises, 251 Ga. App. 384-386 (1) (554 SE2d 539) (2001); Harwood v. Great American Mgmt. &c., supra; see Gen. Motors Corp. v. Conkle, supra at 44 (1) (c).
On the present record, I do not believe that this showing has been made, and even if the trial court properly determined that striking of State Farm’s answer was appropriate, this alone did not mandate entry of default judgment in Health Horizons’ favor as to liability.
Here, throughout this litigation, Health Horizons has steadfastly disavowed any intention to pursue any claim for State Farm’s bad faith failure to settle claims of its insureds, see Southern Gen. *455Ins. Co. v. Ross, 227 Ga. App. 191, 195-196 (7) (489 SE2d 53) (1997),7 instead asserting a direct claim of fraud against State Farm, as set out above on page 448.
In relevant part, OCGA § 9-11-55 (a) provides that when a case is in default, the plaintiff is entitled to judgment “as if every item and paragraph of the complaint or other original pleading were supported by proper evidence.” As the Supreme Court of Georgia and this Court have consistently held, a default operates as an admission of the well-pled facts alleged in the complaint, but not the conclusions of law contained therein:
A judgment by default properly entered against parties sui juris operates as an admission by the defendant of the . . . definite and certain allegations and the fair inferences and conclusions of fact to be drawn from the allegations of the declaration. Conclusions of law [ ] and facts not well pleaded and forced inferences are not admitted by [the] default judgment.
(Punctuation omitted.) Stroud v. Elias, 247 Ga. 191, 193 (1) (275 SE2d 46) (1981). See also ServiceMaster Co. v. Martin, 252 Ga. App. 751, 752 (1) (556 SE2d 517) (2001); Azarat Marketing Group v. Dept. of Admin. Affairs, 245 Ga. App. 256, 257 (1) (b) (537 SE2d 99) (2000).
Under OCGA § 44-12-24, a personal tort action and an action for fraud are nonassignable as are the rights to punitive damages. Couch v. Crane, 142 Ga. 22 (82 SE 459) (1914), citing Morehead v. Ayers, 136 Ga. 488 (71 SE 798) (1911); Hayslip v. Speed Check Co., 214 Ga. 479, 482 (105 SE2d 455) (1958); Barnes v. Collins, 205 Ga. App. 750, 751 (423 SE2d 308) (1992) (all stating action for fraud not assignable); Southern R. Co. v. Malone Freight Lines, 174 Ga. App. 405, 408 (1) (330 SE2d 371) (1985) (punitive damages not assignable).
In order to recover against State Farm for fraud committed against it, as opposed to fraud committed against so far unidentified State Farm insureds, Health Horizons was required to show the five elements of the tort of fraud: (1) a false representation or omission of a material fact; (2) scienter; (3) intention to induce the party claiming fraud to act or refrain from acting; (4) justifiable reliance; and (5) *456damages. Klusack v. Ward, 234 Ga. App. 178, 179 (1) (507 SE2d 1) (1998); OCGA § 51-6-2 (a).
Decided December 1, 2003
Powell, Goldstein, Frazer & Murphy, Elmer A. Simpson, Jr., John C. Patton, Sutherland, Asbill & Brennan, John A. Chandler, William D. Barwick, for appellant.
Gregory, Christy & Maniklal, Hardy Gregory, Jr., John S. Husser, for appellee.
Examining Health Horizons’ complaint alone, I do not believe it shows the definite and certain allegations and fair inferences and conclusions of fact that would support Health Horizons’ assertion of fraud. See Standridge v. Spillers, 263 Ga. App. 401 (587 SE2d 862) (2003); ServiceMaster Co. v. Martin, supra.

 State Farm’s original counsel withdrew from the case on May 13,1998. Present counsel was substituted and filed additional defenses and this motion to dismiss.

 In its complaint, Health Horizons, Inc. had mistakenly alleged that it was a Georgia corporation.

 On August 28,1998, this matter was reassigned to the present judge, who granted the pending motion to dismiss on November 10, 1998, resulting in the appeal in Health Horizons, supra.

 Both of these cases were suits brought by State Farm’s own insureds against it. Foltz claimed that State Farm conspired with its medical review agency, California Institute of Medical Research & Technology, to fraudulently deny her claim. Both companies were named as defendants. Foltz, supra. The opinion in Foltz, supra, is the result of other State Farm insureds seeking discovery from that case in their own claims against State Farm following Foltz’s confidential settlement of her claims. Robinson sued only State Farm, alleging breach of her policy, intentional infliction of emotional distress, and seeking compensatory and punitive damages. Robinson, supra.

 The record contains no response by Health Horizons to the privilege/relevancy logs.

 Statutory penalties for bad faith failure to settle pursuant to OCGA § 33-4-6 can only be sought by the insured. Pursuant to OCGA § 44-12-24, however, “a right of action is assignable if it involves, directly or indirectly, a right of property.” To the extent that a claim for bad faith failure to settle sounds in tort and involves, at least in part, a claim that the insurer’s conduct exposed the insured’s personal property to loss, it may be assigned. Southern Gen. Ins. Co. v. Ross, supra at 196. Health Horizons, however, does not, as far as apparent from the record here, contend that any such fraud claims of its insureds have been assigned to it.