United States District Court, M.D. Alabama, Southern Division
ROBERT C. McDONALD, et al., Plaintiff,
COTTON STATES MUTUAL INSURANCE COMPANY, Defendant.
TERRY F. MOORER, Magistrate Judge.
Pending before the Court are Plaintiffs' Motion to Compel (Doc. 30, filed August 20, 2014), and Motion to Continue Deadlines (Doc. 45, filed September 17, 2014), and Defendants' Motion to Compel (Doc. 34, filed September 3, 2014), and Motion to Quash (Doc. 40, filed September 8, 2014). The Court held oral argument on the motions on September 9, 2014 and September 25, 2014. The Complaint alleges that Defendant Cotton States Mutual Insurance Company ("Cotton States" or "Defendant") breached their contract with the Plaintiffs Robert and Lucy McDonald ("the McDonalds" or "Plaintiffs") as well as a class of current and former policyholders ("The Class") by knowingly using a dwelling coverage calculation which exceeds the actual amount necessary to replace the covered homes. See Doc. 1-3 at 36-48. The Complaint further alleges that Cotton States used the Residential Component Technology ("RCT") program to calculate the replacement cost of insured homes. See Doc. 1-3 at 37. It is alleged that Cotton States added inflation adjustment into the RCT's calculation for the sole purpose of collecting higher premiums even though they knew or should have known that the actual replacement cost amount was substantially less than the cost output by the RCT. See Doc. 1-3 at 44-45.
A. Plaintiffs' Motion to Compel
On August 20, 2014, the McDonalds filed a Motion to Compel (Docs. 30-31) requesting this Court to compel a series of discovery requests. Specifically, Plaintiffs propounded interrogatories, request for production, and requests for admission requesting detailed information on "every Alabama insured whose replacement coverage value for a residential dwelling was set using RCT, " the methodology employed to determine the building costs in Alabama, detailed information on every Alabama insured whose policy included Coverage CC Inflation and Coverage EE inflation, as well as several other various requests for admissions and requests for production. See Doc. 31.
Discovery is not limited to that information which is admissible in court, but rather discoverable information is "relevant information" which "appears reasonably calculated to lead to the discovery of admissible evidence." FED. R. CIV. P. 26(b)(1). The Court recognizes its duty to balance production of "relevant information" which is "reasonably calculated to lead to the discovery of admissible evidence" with concerns that the discovery sought is "unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive." FED. R. CIV. P. 26(b)(1) and 26(b)(2)(C)(i).
It is important to note that the case is currently in the class certification stage with three separate proposed classes, and the main discovery requests before this Court are purported to further the formation of a class for the case to proceed against Cotton States. For the McDonalds to certify a class in a class action lawsuit, they must prove that as a class representative, they are "part of the class and possess the same interest and suffer the same injury' as the class members." Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2550, 180 L.Ed.2d 374 (2011) (citations omitted). Rule 23(a) of the Federal Rules of Civil Procedure provides four requirements that Plaintiffs must meet to ensure that they "are appropriate representatives of the class whose claims they wish to litigate." Id. Pursuant to Rule 23(a) the Plaintiffs must effectively "limit the class claims to those fairly encompassed by the named plaintiff's claims'" by proving "numerosity, commonality, typicality, and adequate representation." Id. (citations omitted).
Here, the McDonalds request the "name, last known address, and policy number of each and every Alabama insured:" 1) "whose replacement coverage value for a residential dwelling was set using the RCT during the applicable class period;" 2) "whose policy included COVERAGE CC INFLATION during the applicable class period;" and 3) "whose policy included COVERAGE EE INFLATION during the applicable class period." See Doc. 31 at 3-6. The McDonalds allege that Cotton States knowingly used a dwelling coverage calculation which exceeds the actual amount necessary to replace the covered homes, and that the RCT, Coverage CC Inflation and Coverage EE Inflation were used to determine the excessive premiums. The McDonalds believe that as a result of Cotton States' intentional actions, they and many other Alabama insureds paid excessive premiums.
Cotton States raises multiple objections to the requests. First, Cotton States objects on the grounds that the interrogatories and requests for production are not tailored to the class membership because the requests would include all clients who had the relevant RCT calculation or coverage inflation calculation included or ran during the relevant period whether or not it was used in calculating the clients' finalized insurance premiums.
Next, Cotton States objects to the requests on the grounds that the classes cannot "be reasonably identified and/or contacted, a fact that will be central to the opposition to the class, " and it would be unduly burdensome. See Doc. 31. The parties have submitted dueling expert reports for in camera review related to this issue. Plaintiffs' expert states that he was given a small sample of the image files similar to those in Cotton States' database, and was able extrapolate the information he sought. While Defendant's expert does not disagree that the information requested is available and can be retrieved, he does contend that it cannot be retrieved with any certainty as to its accuracy, and the undertaking will be time and labor intensive resulting in exorbitant expenses for this early stage of the case.
Defendant's expert states that, in essence, the results of any searches run on the stored files will result in over-inclusive and/or under-inclusive results. Searches related directly to narrowing results to those which included an RCT or coverage inflation will return results which include policies which simply had it run, and not necessarily those policies which actually had the premium set using these methods. Similarly, the search cannot be narrowed down to those accounts with a total loss claim, making the results over-inclusive. In order to narrow the requests in this manner it would require a manual review of each policy. Additionally, due to the fact that many files were manually scanned or faxed and manually assigned a "value" that would be used in the searches, image quality and human error could make the results under-inclusive. These are but a few examples as to why the expert believes the results will not be accurate, and the expert report contains a more detailed analysis than the examples presented here.
Similarly, the expert states that the costs of this undertaking would be high. Basing his calculations on an average page count of two pages per document through five pages per document, the expert estimates the cost to be between $90, 000 and $225, 000. This is simply the cost of running the optical character recognition system, and does not account for the hourly technician fees, or other costs the parties may occur throughout the process.
Finally, Cotton States objects and states that "these inquiries are irrelevant and beyond the scope of discovery allowed by the Scheduling Order at this pre-certification stage of the case." See Doc. 36 at 11. Specifically, Cotton States asserts that "[t]he identification and location of individual class members is only relevant if and when a class has been certified to enable Plaintiffs to send a class notice, and is not necessarily to address the class certification requirements of Rule 23." Id. (citing Dubin & Dubin LLP v. Mayorga, No. 13-MC-21S, 2013 WL 3989550, at *4 (W.D.N.Y. Aug. 2, 2013); Walker v. Alta Colleges, Inc., No. A-09-CV-894-LY, 2010 WL 2710769, at *8-9 (W.D. Tex. July 6, 2010)).
The Court will first address the issue of whether the information is discoverable prior to discussing issues of expense or accuracy of the results. Discoverable information is "relevant information" which "appears reasonably calculated to lead to the discovery of admissible evidence." FED. R. CIV. P. 26(b)(1). To successfully certify a class at the class certification stage the plaintiff must prove numerosity, commonality, typicality, and adequate representation. The McDonalds argue that their ability to identify and locate potential class members will be a central factor in proving numerosity in their motion for class certification. Cotton States explicitly stated that class members cannot "be reasonably identified and/or contacted, a fact that will be central to the opposition to the class." See Doc. 31. The Court is inclined to agree with Cotton States insofar as the names, contact information, and policy numbers are requested for the purpose of notification, this information would not be discoverable prior to class certification. See Dubin & ...