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Lighthouse Property Insurance Corp. v. BMW of North America, LLC

United States District Court, E.D. Louisiana

January 12, 2018


         SECTION: “F” (4)



         Before the Court is a Motion for Contempt and Sanctions (R. Doc. 100) seeking an order finding BMW North America (“BMW NA”) in contempt of court, for sanctions in the form of costs and attorney's fees, and such other relief as justice requires. Rec. Doc. 100. The motion is opposed. Rec. Doc. 138.

         I. Background

         A. Factual Summary

         This is a subrogation claim filed by Lighthouse Insurance Corporation (“Lighthouse”) as a result of its payment to its insureds, the Scotts, for damages to their home. The Scotts' garage was damaged when their BMW caught fire while inside. Rec. Doc. 100-1. Lighthouse contends that the fire was caused by a design defect in the BMW. Id.

         On August 4, 2017, Lighthouse took the Federal Rule of Civil Procedure (“Rule”) 30(b)(6) deposition of BMW NA and requested documents pursuant to Rule 34. Lighthouse forwarded a list of twenty-one (21) proposed topics to which BMW objected, and which was reviewed by the court as a result of an earlier filed Motion to Compel. Rec. Doc. 50. The undersigned overruled BMW NA's objections on all but one topic and ordered the deposition to go forward as noticed on the twenty (20) remaining items of inquiry. Rec. Doc. 68.

         B. The Current Dispute

         Lighthouse contends that BMW NA's representative had no substantive knowledge, was unable to answer basic questions, and made no attempts to gain knowledge before the deposition on several issues. Lighthouse also contends that BMW NA did not produce any documents during the deposition despite receiving the Rule 34 Request for Production of Documents. Lighthouse, therefore, seeks an order of contempt for BMW's failure to comply with this court's order to produce a knowledgeable corporate deponent and produce the requested documents. Lighthouse also seeks costs and attorney's fees.

         BMW NA contends that it is not in violation of the Court's order because during the hearing it expressed a desire to produce the most knowledgeable employee regarding the case, Mark Yeldham but that he was unexpectedly unavailable due to a family emergency. Rec. Doc. 71, p. 4. BMW NA contends that Lighthouse knew that if it went forward with the deposition as scheduled, despite the unavailability of the most knowledgeable witness, then there would be topics that the witness was not familiar with.

         BMW NA also contends that Peter Baur, the alternate designated corporate representative, did prepare to testify on behalf of the company. BMW NA contends that Bauer investigated the noticed topics and reached out to several BMW NA employees to educate himself based on the corporation's knowledge, information, and records in its control. BMW NA contends that Lighthouse has not tried to resolve the issues that are the subject of this motion, yet it seeks to hold them in contempt. Further, BMW NA contends that Baur consulted with Yeldham and Sophia Roughgarden, both BMW NA employees. Rec. Doc. 121. BMW NA also argues its corporate representative investigated information known and reasonably available to the organization and had no obligation to investigate facts or information outside of the corporation's knowledge to prepare for the Rule 30(b)(6) deposition. Fed. R. Civ. Proc. 30(b)(6).

         Oral argument regarding the motion was heard on October 4, 2017. Prior to the issue being submitted, the undersigned issued an order (Rec. Doc. 145) requiring BMW NA to reproduce Mr. Baur and required him to provide testimony regarding the following topics:

1. Notice Topic 17 regarding the corporate structure of BMW NA and its relationship to BMW AG. The Court limited the testimony to the steps Baur took in order to prepare for the topic prior to his August 4, 2017 corporate deposition. Baur was also required to testify about whether he took the time to figure out the “layers” between BMW NA and BMW AG, other than BMW Holding, and whether there is a corporate structure overlap between the two entities.
2. Notice Topic 21 regarding BMW NA's investigation and/or inspection of the fire incident at issue in this litigation. The Court limited the testimony to the steps taken by Baur, such as who he spoke to and what he spoke to them about regarding the investigation, in order to prepare for his August 4, 2017 deposition.
3. Notice Topic 15, which sought documents shared between BMW NA and Peake Motor Co., Inc. d/b/a Peake BMW regarding the subject vehicle.

         The Court further required BMW NA to submit a supplemental memorandum addressing which of its responses to written discovery overlapped with Notice Request 15, such that the witness was not required to reproduce documents already produced. Further, the Court required Lighthouse to file a supplemental memorandum regarding Notice Topics 12, 13 and 18, addressing why BMW NA's involvement in the sale of the vehicle is relevant to the issues in the case.

         II. Standard of Review

         Federal Rule of Civil Procedure 26(b)(1) provides that parties may obtain discovery regarding relevant information to any claim or defense as long as it is non-privileged. Rule 26(b)(1) specifies that “[i]nformation within the scope of discovery need not be admissible in evidence to be discovered.” Rule 26(b)(1) also specifies that discovery must be “proportional to the needs of the case, considering the important of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” Fed.R.Civ.P. 26(b)(1).

         Rule 37(b)(2)(A)(vii) provides for sanctions if under Rule 30(b)(6) a witness fails to obey an order to provide or permit discovery. A party seeking an order of civil contempt must establish by clear and convincing evidence that: (1) a court order was in effect; (2) the order required certain conduct by the respondent; and (3) the respondent failed to comply with the court's order. Piggly Wiggly Clarksville, Inc. v. Mrs. Baird's Bakeries, 177 F.3d 380, 382 (5th Cir. 1999).

         Self-reporting is, in fact, a central concept of the discovery process. The duty of disclosure finds expression in the rules of discovery, and in this Court's Rules of Professional Conduct, which prohibit an attorney from suppressing any evidence that he or his client has a legal obligation to reveal or produce.

         Sanctions may be imposed on a party that, without substantial justification, fails to disclose information required by Rule 26(a) or 26(e)(2). In re Sept. 11th Liab. Ins., 243 F.R.D. 114, 125 (S.D.N.Y. 2007) (citing Fed.R.Civ.P. 37(c)(1)). A failure to disclose under Rule 37 includes not only spoliation of evidence, but also a party's untimely production of documents and information required to be produced.

         III. Analysis

         Lighthouse contends that BMW NA violated the Court's order of October 11, 2017, requiring Peter Baur to be produced as the alternate corporate representative. Lighthouse also argues that BMW NA failed to produce the required documents according to Rule 34.

         BMW NA contends that:

1. It did not violate an order of the court;
2. Lighthouse knew that its preferred witness had a family emergency, but insisted on requiring them to produce a corporate witness who, while prepared, may not have all of the answers as required;
3. That its representative's testimony on the only five topics at issue was sufficient, and the plaintiff only complains about five of the twenty topics listed in the notice which its corporate representative provided testimony on;
4. That plaintiff failed to assert or preserve any objection regarding the sufficiency of Baur's testimony during the deposition and therefore plaintiff waived the right to assert any objection regarding Baur's testimony;
5. That plaintiff also waived its objection to the witness' testimony regarding the board members because he acquiesced in the response ...

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