United States District Court, D. Nebraska
MEMORANDUM AND ORDER
R. Zwart, United States Magistrate Judge
matter is before the court on the Motion to Compel and Motion
for Sanctions filed by Defendant Top's Personnel Inc.
(“Top's Personnel”). (Filing No.
89). For the following reasons, the motion will be
granted as set forth below.
December of 2011, Applied Underwriters Captive Risk Assurance
Company, Inc. (“AUCRA”) entered into a
Reinsurance Participation Agreement (“Reinsurance
Agreement”) with Top's Personnel. (Filing No.
17 at CM/ECF p. 3). Plaintiff Applied Underwriters Inc.
(“Applied Underwriters”) was not a party to the
Reinsurance Agreement. On May 15, 2014, Top's Personnel
executed a promissory note (“the Note”) in favor
of Applied Underwriters. In the Note, Top's Personnel
“acknowledge[d] its indebtedness (including
workers' compensation premiums) to [Applied Underwriters]
and its affiliates and subsidiaries” and promised to
pay the principal sum of $119, 645.13 together with interest.
(Filing No. 1-1 at CM/ECF p. 7). AUCRA was not a
party on the Note.
February of 2015, Applied Underwriters and Applied Risk
Services (“ARS”) filed a Complaint against
Top's Personnel. (Filing No. 1-1). The initial
Complaint alleged two claims. The first alleged Top's
Personnel breached its obligations to Applied Underwriters
under the Note. The second alleged Top's Personnel
breached its obligations to ARS under the Reinsurance
court determined ARS was not a party to the Reinsurance
Agreement. (Filing No. 22). Thereafter, Plaintiff
Applied Underwriters filed an amended complaint removing ARS
and the second cause of action from the original complaint.
The amended complaint alleges that Top's Personnel and
Applied Underwriters entered into the Note “for good
and valuable consideration” and Top's Personnel
failed to make the required payments under the Note.
(Filing No. 23). Applied Underwriters alleges that
with accrued interest added, Top's Personnel owes $126,
488.45 under the Note. (Id.).
April of 2016, Top's Personnel moved to dismiss or
otherwise stay Plaintiff's claim and compel arbitration,
citing an arbitration clause within the Reinsurance
Agreement. (Filing No. 27). The court determined
Applied Underwriters was not a party to the Reinsurance
Agreement nor did it appear to be legally bound by the
Reinsurance Agreement or the specific arbitration provision
within it. (Filing No. 34). The court explained that
if the corporate relationship between Applied Underwriters
and AUCRA was sufficiently close or the formalities between
the two corporations were disregarded, there may be a valid
argument that Applied Underwriters could be bound by the
Repurchase Agreement and its arbitration clause. (See
Filing No. 34 at CM/ECF p. 6). But based on the evidence
before the court at that time, the court denied Top's
August 8, 2016, this Court entered its order for the final
progression of this case in accordance with the parties'
Rule 26(f) report. (Filing Nos. 38 &
39). The Court ordered that the deadline for
completing written discovery was November 30, 2016.
(Filing No. 39 at CM/ECF p. 2). Top's Personnel
served its First Set of Interrogatories and Document Requests
upon Plaintiff on September 22, 2016. Among other requests,
the defendant's Interrogatories and Document Requests
sought specific information and documents concerning the
Reinsurance Agreement, the relationship between the Note and
the Reinsurance Agreement, and the corporate relationship
between AUCRA and Applied Underwriters. Defendant received
Plaintiff's responses on December 12, 2016.
Personnel believed Applied Underwriters' responses to its
discovery were incomplete, and in accordance with Fed. R.
Civ. P. 37(a)(2)(A) and NECivR 7.0.1(i), the parties
conferred in an effort to resolve their disputes. On December
29, 2016, the defendant sent a meet-and-confer letter to
Plaintiff's counsel. (Filing No. 48-1 at CM/ECF p.
66). Plaintiff responded by letter on January 6, 2017,
supplementing some of the discovery in dispute, (Id. at
p. 72), but ultimately the parties were unable to fully
resolve their dispute. Defendant filed a motion to compel on
January 17, 2017. (Filing No. 46).
motion, Top's Personnel sought to compel Applied
Underwriters to fully answer Interrogatory Nos. 2, 3, 4, 5,
6, 7, 11, & 15 and sought supplements to its document
production. Regarding document production, Top's
Personnel claimed Applied Underwriters failed to produce any
correspondence regarding the Promissory Note, Reinsurance
Agreement, and any negotiations between the parties.
(Filing No. 47 at CM/ECF pp. 11-12). Finally, the
defendant sought to take the deposition of Plaintiff's
Counsel, Jeffrey Silver based upon his position as Vice
President of Applied Underwriters and the answers he
personally supplied for the interrogatories.
court entered its order on Defendant's Motion to Compel
on March 31, 2017 (the “March 31 Order”).
(Filing No. 77). The court granted the motion in
part and denied the motion in part. Specifically, the court
granted Defendant's motion as to each interrogatory and
on Defendant's request for production. However the court
denied the defendant's request to depose Plaintiff's
counsel. (Filing No. 77 at CM/ECF pp. 15-16). The
discovery compelled under the March 31, 2017 order was not
produced until after a telephone conference and order entered
on April 25, 2017 which required Plaintiff to produce its
discovery in accordance with the March 31 Order by April 28,
2017. (See Filing No. 84). On April 28,
2017 Plaintiff produced its supplemental responses pursuant
to the March 31 Order. (See Filing No. 91-1).
again, Top's Personnel believed many of Applied
Underwriters' responses to the discovery were
insufficient and incomplete. Top's Personnel raised the
issue on a telephonic conference with the undersigned on May
12, 2017 and on May 19, 2017 sent a meet-and-confer letter to
Plaintiff's counsel. (Filing No. 91-1 at CM/ECF pp.
70-73). In addition to discussing Applied
Underwriters' discovery responses, Top's Personnel
again discussed the potential of deposing Plaintiff's
counsel based upon certain new answers provided in
Plaintiff's discovery responses. Plaintiff responded to
Defendant's meet-and-confer letter on May 30, 2017 and
Plaintiff provided approximately 240 pages of additional
discovery. (Id. at CM/ECF pp. 74-78). Top's
Personal argues that Applied Underwriters' answers remain
incomplete and requested, and was granted, leave to file the
motion, Top's Personnel again seeks to compel Applied
Underwriters to completely answer, with clarity,
Interrogatories 3, 5, 6, and 7 and to fully supplement its
document production concerning these interrogatories.
Top's Personnel also seeks to compel the deposition of
Mr. Silver arguing that new information provided by Plaintiff
shows he is an essential fact witness in this case.
Additionally, Top's Personnel seeks sanctions against
Applied Underwriters in accordance with Rule 37(b) for
Applied Underwriters' alleged failure to comply with the
court's March 31 Order.
scope of permissible discovery is broad and parties may
discovery regarding any nonprivileged matter that is relevant
to any party's claim or defense and proportional to the
needs of the case, considering the importance 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.
Information within this scope of discovery need not be
admissible in evidence to be discoverable.
Fed. R. Civ. P. 26(b)(1). Courts should examine each
case individually to determine the weight and importance of
the proportionality factors.
majority, if not all, of the discovery which Top's
Personnel seeks was the subject of its prior motion to compel
and the court's March 31, 2017 order. (See Filing No.
46; Filing No. 77). Top's Personnel argues
that Applied Underwriters continues to evade the
Defendant's discovery requests and did not comply with
the March 31 Order. Applied Underwriters argues that it has
fully answered the interrogatories and complied with the
court's order. Plaintiff further argues this case is a
straightforward breach of contract case concerning only the
Promissory Note. That is, Plaintiff contends that
Defendant's discovery requests complicate this matter and
are in essence a “fishing expedition.” For the
reasons, discussed in the March 31, 2017 order, each of the
interrogatories and requests (which are part of this and the
previous motion) are permissible discovery under Federal Rule
26(b)(1) and are relevant. The requests pertain to the
creation of the Note and its connection to the Reinsurance
Agreements as well as the relationship between AUCRA and
Applied Underwriters. That is, the information affects
whether Applied Underwriters may be bound to the Reinsurance
Agreement, which may determine whether this case is subject
to mandatory arbitration. (See Filing No. 77 at CM/ECF
pp. 5-6, 11; Filing No. 34 at CM/ECF pp.
Underwriters argues that Top's Personnel and AUCRA are
already involved in the arbitration of AUCRA's claims
arising from the Repurchase Agreement and thus implies that
Top's Personnel's discovery in this case is untimely
and should be abandoned. The arbitration of AUCRA's
claims under the Repurchase Agreement does not affect whether
the parties to the Note are bound to the Repurchase
Agreement's arbitration clause; whether this court
must compel arbitration of Applied Underwriters'
claims. See Ferry-Morse Seed Co. v. Food Corn, Inc., 729
F.2d 589, 592 n.6 (8th Cir. 1984)(holding the court must
compel arbitration where certain elements are met); see
also Herd Co. v. Ernest-Spencer Inc., Case No.
8:09cv397, 2010 WL 76371 **8-10 (D. Neb. January 5,
2010)(recognizing the split in authority regarding
whether an action should be stayed or dismissed when claims
are subject to arbitration).
court will review each disputed discovery item in turn.
Interrogatories to Plaintiff.
NO. 3. Describe in detail the negotiations that led
to the execution of the Promissory Note. In doing so:
a. Identify the individuals and entities that participated in
the negotiation of the Reinsurance Agreement;
b. Describe in detail the substance of those negotiations;
c. Set forth the time period of negotiation; and
d. Attach all documents that relate, refer, or otherwise
pertain to the negotiations.
a. Plaintiff incorporates herein its General Objections
identified above. Without waiving that objection, the
individuals involved in the negotiation that led to the
execution of the Promissory Note were members of
Plaintiff's customer service department and including
b. The substance of the negotiation was that Defendant owed
$119, 645.13 and requested a payment plan to pay the amount
c. The negotiation occurred prior to the execution of the
d. See documents attached as Exhibit 1.
response to Defendant's first motion to compel, the court
granted defendant's request to compel a complete answer
to Interrogatory No. 3 and required Applied Underwriters to
answer Interrogatory No. 3 with “the specificity
requested by the defendant[.]” (Filing No. 77 at
CM/ECF p. 8). The court found that Plaintiff's
previous responses had failed to provide a fully-responsive
answer, noting Plaintiff named only one employee involved in
the negotiations. (Id.) On April 28, 2017 Plaintiff
supplemented its answer as follows:
Supplemented Response After March 31 Order:
a. The individuals involved in the negotiation that led to
the execution of the Promissory Note [assuming the
interrogatory was directed to the Promissory Note in
questions and not the Reinsurance Participation Agreement]
was Defendant's broker, ...