United States: District Court Largely Denies Defendants' Requested Protective Order On Variety Of Discovery Requests In Consolidated Class Actions

On November 15, 2017, we reported  on two class actions alleging that the "EquityComp" workers' compensation insurance program marketed and sold by Applied Underwriters ("defendants") violated California insurance law and regulations.  The class actions had been consolidated for pre-trial purposes.  Defendants recently moved for a protective order and sought protection from discovery on a host of interrogatories and requests for production.  The Eastern District of California granted the motion in part and denied it in part on the following grounds, largely rejecting defendants' bid for protection against the discovery.

First, the court held plaintiffs were entitled to pre-certification discovery regarding absent class members, including personal and contact information. It noted that disclosure of putative class members' information is "common practice" in this context and concluded defendants had failed to show any specific prejudice or harm associated with such production.

Second, the court described as "moot" a dispute over whether plaintiffs were entitled to documents regarding the SolutionOne program—different than the EquityComp program which the original plaintiffs participated in—because an amended complaint added a new plaintiff who did participate in the SolutionOne program. Even if it were not moot, the court said, defendants would not be entitled to protective order because they failed to allege more than a general "burden" to justify prevention.

Third, the court granted the protective order regarding plaintiffs' request for defendants' communications with non-California state regulators.  It concluded the requests were disproportionate where there was at most "slight" relevance because of the wide variety in state insurance regulatory regimes and the lack of a "specific factual basis" for believing the non-California communications would be relevant to defendants' compliance with California law.

Fourth, the court ordered production regarding the submission of a Reinsurance Participation Agreement to the California Department of Insurance for approval because such information is relevant and because defendants did not satisfy their burden of showing harm or prejudice.

Fifth, the court rejected defendants' request for a protective order regarding recently requested segregated "cell" accounts because there is a year left before the close of discovery, so defendants would not be harmed by the recent timing of the request.

Finally, the court allowed discovery of defendants' total revenues related to the EquityComp program because it was relevant to plaintiffs' central argument that defendants' unfair and fraudulent business practices allowed them to "make hundreds of millions of dollars." Nor, the court found, did defendants show harm from divulging their revenues.

Shasta Linen Supply, Inc. v. Applied Underwriters Inc., Case No. 16-158 (E.D. Cal. Jan. 12, 2018).

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