STEVEN J. KRUEGER and CORALEE A. KRUEGER, Plaintiffs and Appellees, v. GRINNELL MUTUAL REINSURANCE COMPANY, Defendant and Appellant.
#28555-r-DG
IN THE SUPREME COURT OF THE STATE OF SOUTH DAKOTA
12/19/18
2018 S.D. 87
THE HONORABLE JON S. FLEMMER Judge
APPEAL FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT DAY COUNTY, SOUTH DAKOTA. CONSIDERED ON BRIEFS ON NOVEMBER 12, 2018.
LEE SCHOENBECK JOE ERICKSON of Schoenbeck Law, P.C. Watertown, South Dakota Attorneys for plaintiffs and appellees.
MELANIE L. CARPENTER of Woods, Fuller, Shultz & Smith, P.C. Sioux Falls, South Dakota Attorneys for defendant and appellant.
[¶1.] Steven and Coralee Krueger filed a complaint against Grinnell Mutual Reinsurance Co. (Grinnell) alleging failure to pay underinsured motorist benefits. The Kruegers served written discovery requests on Grinnell. Grinnell responded but raised several objections. The Kruegers wrote a letter demanding answers to certain discovery requests within a week. Grinnell did not respond, and the Kruegers filed a motion to compel. The circuit court granted the Kruegers’ motion in its entirety, finding that Grinnell had sufficient notice of the Kruegers’ bad faith claim and thus had intentionally not responded to requests rеlated to a bad faith cause of action. The circuit court also granted the Kruegers’ request for attorney fees. We granted Grinnell‘s request for discretionary appeal. We reverse.
Facts and Procedural History
[¶2.] This case arises from an accident on March 14, 2015. The Kruegers were rear-ended by a vehicle driven by William Akron. Akron‘s insurance had limits of
[¶3.] On January 17, 2017, Lee Schoenbeck informed Grinnell he would be representing the Kruegers. On March 31, the Kruegers told Grinnell they reached a settlement agreement against Akron to his policy‘s limits. They also noted, “We now intend to pursue an underinsured motorist claim against your company.” Grinnell continued to pay the Kruegers’ medical bills until Steven‘s med-pay limits were exhausted in May 2017. Coralee‘s limits were еxhausted after the filing of this lawsuit.
[¶4.] On July 12, 2017, the Kruegers demanded payment of underinsured motorist benefits, asking Grinnell, “[W]ould it be reasonable to expect that you complete your investigation by August 1, 2017?” The adjuster who had been working on the Kruegers’ med-pay file, Pat McCumber, replied on July 13. She informed the Kruegers that Grinnell had opened an underinsured motorist benefits file and that Sheryl Stepanek was the assigned adjustеr to that file.
[¶5.] On July 27, Stepanek wrote the Kruegers a letter advising them that she had received their demand for underinsured motorist coverage and that she was assigned to the underinsured motorist file to avoid a conflict of interest while the med-pay file was still open. She requested authorization from the Kruegers for McCumber to release documents from the med-pay file to the underinsured motоrist file so that she could consider their claim. On August 3, the Kruegers replied, providing the requested authorization. The same day, the Kruegers’ counsel signed a summons and complaint against Grinnell.
[¶6.] The Kruegers’ complaint alleged in pertinent part:
- Grinnell Mutual has refused to pay the underinsurance benefits owing under the contract, and has not been reasonable in dealing with the Plaintiffs.
- Grinnell Mutual has breached its contract and duties with respect to Plaintiffs.
- As a result of Grinnell Mutual‘s actions, Plaintiffs have been damaged.
- Grinnell Mutual‘s refusal to indemnify, particularly because it was done without proper investigation, was without reasonable cause.
- Grinnell Mutual should be required to pay a sum to Plaintiffs as reasonable attorney‘s fees for the cost of Plaintiffs pursuing and recovering the amounts owed to them under the Auto Policy.
The prayer for relief requested “a reasonable amount to be determined by a jury, including attorney‘s fees.”
[¶7.] The Kruegers served Grinnell discovery requests on September 22, 2017. Grinnell answered on November 22, following an extension. Grinnell objected to many of the Kruegers’ requests on the basis that the information sought was “beyond the permissible scope of discovery as provided by
[¶8.] On January 17, 2018, the Kruegers sent a letter to Grinnell‘s counsel demanding
[¶9.] There was no further contact between the parties until the Kruegers filed a motion to compel on January 25, 2018. The following day, Grinnell sent a letter to the Kruegers and explained it had objected because the discovery requests wеre relevant “only in situations where bad faith has been alleged.” Additionally, Grinnell pointed out that it did not believe the Kruegers had satisfied the statutory requirement to meet and confer in good faith to resolve a discovery dispute without court action. Counsel for the Kruegers responded, claiming that bad faith had been sufficiently pleaded.
[¶10.] On February 14, 2018, the circuit court held a hearing on the Kruegers’ motion to compel. In its oral argument to the court, Grinnell argued that “Grinnell just really needed to know what it‘s responding to. . . . [T]he objections as they were stated and as they were made were substantially justified at the time. The questions [weren‘t] relevant to a breach of contract case[.]” Grinnell also submitted that the single letter sent by Kruegers’ counsel did not fulfill the meet and confer requirеment. The Kruegers argued that Grinnell was on sufficient notice of the bad faith claim because pleadings only require factual allegations and “we alleged that [Grinnell] refused to pay without proper investigation. That‘s not an element of breach of contract.”
[¶11.] The circuit court granted the Kruegers’ motion and signed its order on February 28, 2018. It based its ruling on finding “[t]hat the Complaint put the Defendant on notice that the Plaintiffs are alleging what is commonly referred to as a ‘bad faith’ cause of action, particularly in Paragraphs 14 and 17 of the Complaint.” The court determined “[t]hat with notice of the bad faith claim, Defendant Grinnell Mutual intentionally refused to answer the discovery requests related to that claim.” The court ordered that Grinnell respond to all of the requests cited in the Kruegers’ demand letter, with the caveat that “personnel files . . . shall be produced pursuant to this protection order that the materials shall be maintained as confidential in this litigation[.]” The court further ordered that Grinnell pay the Kruegers’ counsel $2,200.00 in attorney fees. Grinnell filed a petition for permission to take discretionary appeal that we granted on April 3, 2018 and stayed further proceedings. Grinnell raises two issues in this appeal, which we have rephrased and address in the following order:
- What level of specificity is a party required to plead to allow the proper scope of discovery to be determined by the litigants and the court?
- Whether one letter from plaintiff stating that defendant must answer written discovery requests satisfies the requirements of
SDCL 15-6-37(a)(2) thаt a party must confer in good faith before filing a motion to compel.
Standard of Review
[¶12.] “A circuit court discovery sanction under
Analysis and Decision
1. What level of specificity is a party required to plead to allow the proper scope of discovery to be determined by the litigants and the court?
[¶13.] We assume without deciding for purposes of this appeal that the allegation of bad faith was adequately raised and decline to address Issue 1 further, finding Issue 2 to be dispositive of the outcome of this case.
2. Whether one letter from plaintiff stating that defendant must answer written discovery requests satisfies the requirements of SDCL 15-6-37(a)(2) that a party must confer in good faith before filing a motion to compel.
[¶14.] Under
[¶15.] Grinnell argues that by merely sending one letter, “[t]he Kruegers’ counsel failed to meet and confer in good faith as required by the rule, which is justification for both outright denial of the motion to compel as well as a denial of attorney‘s fees.” In response, the Kruegers cite the circuit court‘s discretion in such matters. The Kruegers argue that the circuit court properly considered the facts before it, including their letter asking Grinnell to respond to discovery requests. They cite the circuit court‘s finding that Grinnell “intentionally refused to answer discovery requests” as evidence that it “appreciate[еd] that all good faith attempts to confer with Grinnell had been and would be futile.”
[¶16.] We have not yet addressed what communication is required to satisfy the meet and confer requirement of
[¶17.] Courts addressing this issue have found that in instances where there is a genuine dispute about the discoverability of the information sought or the adequacy of the answers, one letter does not fulfill the meet and confer requirement. “A single letter between counsel which addresses the discovery dispute . . . does not satisfy the duty to confer.” Williams v. Bd. of Cty. Comm‘rs of Unified Gov‘t of Wyandotte Cty., 192 F.R.D. 698, 700 (D. Kan. 2000). This is because mailing a letter to opposing counsel does not meet the requirement that counsel converse and deliberate. Id. See also Hays v. Adam, 512 F. Supp. 2d 1330, 1334 (N.D. Ga. 2007) (“This single letter does not constitute a sufficient effort to resolve the issue outside of court pursuant to Rule 37(a)[.]“).
[¶18.] Even if more than one letter is sent, courts still examine the quality of the efforts to confer put forth by the moving party. Wilson v. Aargon Agency, Inc., 262 F.R.D. 561, 564 (D. Nev. 2010). In Wilson, the court observed:
Two back to back letters stating merely that Wilson‘s responses were ‘wholly inadequate’ do not stand in as a ‘personal consultation and sincere effort . . . to resolve the matter without court action’ . . . . The meet and confer requirement is not merely a formalistic prerequisite to discovery disputes and cannot be met by simply showing that the discovery in question was requested more than once.
Id. (internal citations omitted). The court emphasized that parties at an informal conference “must present to each other the merits of their respective positions with the same specificity with which they would brief the discovery disputе.” Id.
[¶19.] The amount of effort a moving party must expend to meet and confer “is different in different circumstances, and may vary with the prospects for success.” Clement, 99 Cal. Rptr. 3d at 804. A court, through its broad discretion regarding discovery matters, is entitled to consider all the relevant circumstances in ruling on whether the meet and confer requirement was met. Id. “An appropriate circumstance for excusing non-compliance with rules is when compliance would have been an exercise in otiosity.” In re Sulfuric Acid Antitrust Litig., 231 F.R.D. 351, 356 (N.D. Ill. 2005). In determining whether the meet and confer requirement would have been futile, a court should look to specific events in the record demonstrating futility. See id. (pointing to events in the record revealing “the polarity and intractability of the parties’ positions“).
[¶20.] A failure to fulfill the meet and confer requirement in good faith often serves as a basis for denying the motion to compel. See, e.g., Layne Christensen Co. v. Purolite Co., 271 F.R.D. 240, 245 (D. Kan. 2010); Regions Bank v. Legal Outsource PA, No. 2:14-cv-476-FtM-29MRM, 2016 WL 7228738, at *2 (M.D. Fla. Mar. 10, 2016); Brown v. Bridges, No. 12-CV-4947-P, 2015 WL 11121361, at *3 (N.D. Tex. Jan. 30, 2015). Courts may also decline to award sanctions or attorney fees when the requirement has not been met, yet grant the motion to compel. See, e.g., Scottsdale Ins. Co. v. Physicians Grp., LLC, No. 8:15-cv-1129-T-23AAS, 2016 WL 3425675, at *1 (M.D. Fla. June 22, 2016); Forest River, Inc. v. Heartland Recreational Vehicles, LLC, No. 3:09-CV-302 JVB, 2010 WL 11579072, at *2 (N.D. Ind. Dec. 1, 2010). Here,
[¶21.] We hold that the circuit court abused its discretion in granting the Kruegers’ motion to compel. The record shows that this is not a situation where a party wholly failed to answer any of the requested discovery. Instead, there was a genuine dispute between counsel for the parties concerning the breadth of the claims alleged by the Kruegers’ and the appropriate scope of discovery for those claims. In such circumstances, the Kruegers, by sending one letter stating, “Please make a good faith effort to answer each of these questions by January 24, 2018[]” did not meet the requirements of
[¶22.] In granting the motion to compel, the circuit court merely relied on the Kruegers’ assertion that Grinnell was on sufficient notice of the bad faith claims and “the discovery requests Defendant Grinnell Mutual refused to answer [were] reasоnable and appropriate for the claims in this litigation.” It failed to consider Grinnell‘s arguments that the Kruegers had not attempted to meet and confer in good faith regarding the scope of discovery, as required by statute. There is no indication that the court examined the quality of the communication between the parties or the extent of their efforts to resolve their disputе without judicial intervention.
[¶23.] The Kruegers argue that the circuit court appropriately considered the futility of requiring the parties to meet and confer in good faith when it stated that Grinnell “intentionally refused to answer the discovery requests.” While Grinnell did not answer certain questions and did not respond to the Kruegers’ demand letter, there is no evidence suggesting that Grinnell was intractable to the point of rendering the meet and confer requirement futile. See In re Sulfuric Acid, 231 F.R.D. at 359 (pointing to a series of letters between the parties that “reveal not a meeting of the minds . . . but an expression of irreconcilable positions and a clash of wills“). Rather, it appears that Grinnell‘s objections were substantially justified due to concerns about the proper scope of discovery. “A party‘s discovery conduct is found to be ‘substantially justified’ under Rule 37 if it is a response to a ‘genuine dispute, or if reasonable people could differ as to the appropriateness of the contested action.‘” Samsung Elecs. Am., Inc., v. Yang Kun Chung, 321 F.R.D. 250, 278 (N.D. Tex. 2017) (quoting S.E.C. v. Kiselak Capital Grp., LLC, No. 4:09-cv-256-A, 2012 WL 369450, at *5 (N.D. Tex. Feb. 3, 2012)).
[¶24.]
[¶25.] Furthermore, in determining whether the efforts were undertaken in good faith, the court should consider whether the moving party has attempted to confer with “freedom from intention to defraud or abuse the discovery process, and faithfulness to one‘s obligation to secure information without court action.” See Shuffle Master, Inc. 170 F.R.D. at 171. When a moving party argues that an attempt to meet and confer would have been futile, the party should still demonstrate facts indicating good faith efforts at communication were met with uncooperative and intractable resistance. Ultimately, it is not the quantity, but the quality, of the communication a court should consider when addressing a motion to compel.
[¶26.] We also note that the award of attorney fees in this matter was unsupported by the record and the requirements of
[¶27.] Wе clarify that a court retains its broad discretion to grant or deny discovery sanctions. See Pearson, 2007 S.D. 92, ¶ 10, 738 N.W.2d at 917. But that decision is not unlimited given the text of
Conclusion
[¶28.] We reverse because the circuit court abused its discretion when it granted the Kruegers’ motion to compel and awarded the Kruegers’ attorney fees.
[¶29.] KERN, JENSEN and SALTER, Justices, concur.