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United States ex rel. Rigsby v. State Farm Fire and Casualty Co.

United States District Court, S.D. Mississippi, Southern Division

September 18, 2018

UNITED STATES OF AMERICA ex rel. CORI RIGSBY and KERRI RIGSBY RELATORS/COUNTER-DEFENDANTS
v.
STATE FARM FIRE AND CASUALTY COMPANY DEFENDANT/COUNTER-CLAIMANT

          ORDER GRANTING IN PART AND DENYING IN PART MOTION TO COMPEL

          ROBERT H. WALKER UNITED STATES MAGISTRATE JUDGE

         Before the Court is Relators' motion to compel discovery and State Farm Fire and Casualty Company's (State Farm) motion for leave to file a sur-reply. Doc. [1348] & [1375]. Relators' qui tam action, filed pursuant to the False Claims Act, 31 U.S.C. § 3729 et seq., alleges that in the aftermath of Hurricane Katrina, State Farm submitted false claims to the United States government for payment on flood policies. According to Relators, State Farm unlawfully shifted its responsibility to pay wind damage claims on homeowner's insurance policies to the government by classifying damage as flood damage instead of wind damage. The alleged scheme involved State Farm using Xactotal software rather than Xactimate software to adjust flood claims under National Flood Insurance Program (NFIP) policies, in violation of NFIP adjusting requirements. In furtherance of the scheme, State Farm instructed adjusters to manipulate totals in Xactotal to ensure that flood policy limits were reached. Relators further allege that Lecky King, a State Farm employee, appropriated engineering reports coming into the Gulfport office to make sure all the reports conformed to State Farm's scheme to categorize all losses as caused by flooding rather than wind.

         On August 10, 2009, United States District Judge L.T. Senter, who then presided over the case, ordered State Farm to create a list (the List) of insured properties meeting certain enumerated criteria. Doc. [344]. State Farm first produced the List to the Court in camera. On May 17, 2016, at the Court's direction, State Farm produced the List to Relators. Doc. [1276] at 3 & [1278]. By order dated June 22, 2017, the Court directed State Farm to produce copies of claim files, both wind and flood, for properties included on the List. Doc. [1324]. The claim-file production was intended as a first step in the process to determine which other State Farm insured properties fit within the fraudulent scheme outlined in Relators' complaint. See Doc. [1276] at 2 (“The Court's directives were intended as the first step in what could prove to be a lengthy and complex litigation process” “the undersigned addressed the in camera list as the first order of discovery business.”).

         The undersigned conducted three telephone conferences addressing various issues and disputes regarding production of the claim files. See Doc. [1346]. On December 14, 2017, the Court issued an order directing State Farm to complete production of the claim files. Id. The Court further directed Relators to file motions to compel relating to production of these claim files. Id. The Court also instructed Plaintiffs to file any motion to expand the scope of discovery as it relates to other properties not contained on the List. Id. The Court set a deadline of February 1, 2018, to complete these actions.

         As instructed, Relators filed on February 1, 2018, a motion to compel discovery related to the claim file production. Doc. [1348]. In their motion, Relators also seek to expand the geographic scope of the List to include properties in other counties that might meet the criteria established in the order of August 10, 2009. To that end, Relators request an opportunity to conduct discovery into how State Farm compiled the List. On March 12, 2018, the parties completed briefing on the motion to compel. However, on April 2, 2018, State Farm filed a motion for leave to file a sur-reply. Doc. [1375]. As will be discussed below, State Farm's motion is denied.

         Geographic Scope of Discovery

         In their motion to compel, Relators argue that State Farm has produced only a subset of the claim files required by Judge Senter's order of August 10, 2009. Specifically, Relators argue that State Farm's production is limited to the three coastal counties: Hancock, Harrison, and Jackson. Rather than limiting production arbitrarily to these three counties, Relators assert that State Farm should be directed to amend the List to include any claims adjusted through its Gulfport Field Office, regardless of the county where the property was located. Relators also request an opportunity to conduct discovery regarding how State Farm compiled the List.

         In response, State Farm admits that the properties on the List are only from the three coastal counties of Hancock, Harrison, and Jackson. However, State Farm's counsel subsequently analyzed Hurricane Katrina claim files from other counties adjusted through State Farm's Gulfport Field Office. See Doc. [1362-1]. This analysis failed to identify any additional insured properties from other counties that meet the criteria on the List. Id. at 2. The Court's order of June 22, 2017, required State Farm to produce claim files for properties included on the List. There is no indication that State Farm failed to produce claim files for the properties currently on the List. Therefore, it follows that State Farm's failure to include claim files for properties not included on the List does not constitute a deficiency in State Farm's compliance with this Court's order of June 22, 2017. Moreover, counsel for State Farm represents that a search of claim files from other counties adjusted through the Gulfport Field Office did not reveal any additional properties that should have been included on the List. Accordingly, Relators' request to expand the geographic scope is denied.

         Discovery on Compilation of List

         The Court also denies Relators' request to conduct discovery into how State Farm compiled the List. The only specific basis fully developed by Relators in their motion to compel is whether State Farm should have expanded the geographic scope to include properties from other counties. See Doc. [1349] at 6-10. As discussed above, this is a non-issue. Based on counsel's representations, there are no additional properties from other counties that should have been included on the List. Doc. [1362-1] at 2. Relators also suggest that discovery would aid in exploring inherent subjectivity of the List criteria. As its sole example, Relators' point to the question of what constitutes a “cabana”. Doc. [1349] at 10. Relators apparently wish to examine State Farm's state of mind and “application of judgment” when it responded to what was in effect a discovery order. See Doc. [1369] at 3. It is not the general practice of this Court to allow discovery about discovery. Relators have not provided an adequate factual basis to justify such collateral discovery. See Commins v. NES Rentals Holdings, Inc., 2018 WL 3186983, at *9 (W.D.Ky. June 28, 2018); Caitlin v. Wal-Mart Stores, Inc., 2016 WL 7974070, at *1 (D.Minn. Sept. 22, 2016). Relators' generalized concerns and speculations about State Farm's interpretation of the August 10, 2009, order are not sufficient bases for allowing additional discovery with respect to the List.

         Privilege Log

         Relators argue that State Farm withheld discoverable evidence based on improper and unsubstantiated assertions of privilege. State Farm counters that it has been ordered to produce only the claim files for the insured properties on the List. It has not been ordered to produce litigation or mediation files for which the privileges have been asserted.

         Given the nature of the allegations in Relators' complaint, it does not appear that litigation or mediation files would contain discoverable information or fit within the category of “claim files” for purposes of the Court's June 22, 2017, order. Judge Senter's August 10, 2009, order required State Farm to identify insured properties based on the category of damage (i.e. not “slabs, pilings, or empty shells”); whether NFIP limits were paid; and whether Xactimate estimates were used. Doc. [344] at 2. In other words, the List criteria focused on the initial adjustment and payment of claims for insured properties. It did not extend to later litigation or mediation of those claims. The order of June 22, 2017, directed State Farm to produce claim files for the properties on the List. The order did not require production of litigation or mediation files. Nor was it intended to include production of litigation or mediation files. While the content of litigation or mediation files conceivably could become relevant and discoverable at some future time or for some other purpose, presently State Farm is required to produce only the wind and flood claim files for each property on the List. To the extent Relators seek information or documents categorized as privileged by virtue of litigation or mediation, the motion to compel is denied.

         Relators object to State Farm's bulk logging of withheld documents. State Farm's use of categorical logging relates primarily to litigation and mediation files. See Doc. [1363] at 6. Such categorical logging is acceptable because State Farm is under no present obligation to produce litigation or mediation ...


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