A district judge in the Eastern District of California has ordered a third-party insurance broker to comply with a subpoena from defendants seeking documents related to that broker's sale of defendant's insurance policies to plaintiffs.

The order was entered in two lawsuits against Applied Underwriters, Inc. that have been consolidated for pre-trial purposes. In these lawsuits, Shasta Linen Supply Inc. and Pet Food Express Ltd. allege that Applied Underwriters used "an unfiled, void and illegal collateral agreement in the collection of excessive fees and expenses" in connection with workers' compensation insurance. Applied Underwriters issued a subpoena to Relation Insurance Services, Inc., which was the insurance broker that sold the policies at issue. Relation objected to the subpoena on the basis that (1) it sought irrelevant information, (2) this information was available from plaintiffs, (3) the requested documents contained confidential, proprietary information, and (4) Applied Underwriters should be required to pay the costs of the production. The court rejected all four objections.

First, the court agreed with Applied Underwriters that information regarding the insurance brokerage work that Relation did for the plaintiffs was relevant to the question of plaintiffs' reliance on Applied Underwriters' allegedly fraudulent statements, as it could show what plaintiffs already knew about the market for insurance and competitive products. Second, the court found that Applied Discovery had already sought discovery from plaintiffs, and that the subpoena was meant to fill in gaps in plaintiffs' productions. The court also emphasized that no rule required that party discovery be final before third-party discovery is issued. Third, the court found that a protective order entered in the matter would address Relation's concerns regarding its confidential, proprietary information. Finally, the court found that $15,000—the amount that Relation estimated compliance with the subpoena would cost—was not a "significant expense" as is required for the cost shifting provision of Fed. R. Civ. P. 45(d)(2)(B)(ii) to apply, as Relation was a large company that had received approximately $400,000 in commissions from sales to the plaintiffs. Thus, the court ordered Relation to produce the requested documents and information at its own expense.

Shasta Linen Supply Inc. v. Applied Underwriters, Inc., No. 2:16-cv-00158 WBS AC, and Pet Food Express Ltd. v. Applied Underwriters, Inc., No. 2:16-cv-01211 WBS AC (June 14, 2018)

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