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State Farm Auto v. Stephens
IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA September 1992 Term _________ NO. 21368 _________ STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Petitioner V. HONORABLE BOOKER T. STEPHENS, JUDGE OF THE CIRCUIT COURT OF MCDOWELL COUNTY, DONALD RAY PERKINS AND SHEILA D. PERKINS, Respondents __________________________________________________________ Petition for Writ of Prohibition WRIT GRANTED AS MOULDED ____________________________________________________________ Submitted: December 1, 1992 Filed: December 16, 1992 R. Carter Elkins Laura L. Gray Campbell, Woods, Bagley, Emerson, McNeer & Herndon Huntington, West Virginia Attorney for the Petitioner G. David Brumfield Welch, West Virginia Attorney for Respondents Donald Ray Perkins and Sheila D. Perkins John M. Hedges Charleston, West Virginia Attorney for Respondent Booker T. Stephens

JUSTICE MILLER delivered the Opinion of the Court. SYLLABUS BY THE COURT 1. A writ of prohibition is available to correct a clear legal error resulting from a trial court's substantial abuse of its discretion in regard to discovery orders. 2. Under Rule 26(B)(1)(iii) of the West Virginia Rules of Civil Procedure, a trial court may limit discovery if it finds that the discovery is unduly burdensome or expensive, taking into account the needs of the case, the amount in controversy, limitations on the parties' resources, and the importance of the issues at stake in the litigation. 3. Where a claim is made that a discovery request is unduly burdensome under Rule 26(b)(1)(iii) of the West Virginia Rules of Civil Procedure, the trial court should consider several factors. First, a court should weigh the requesting party's need to obtain the information against the burden that producing the information places on the opposing party. This requires an analysis of the issues in the case, the amount in controversy, and the resources of the

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parties. Secondly, the opposing party has the obligation to show why the discovery is burdensome unless, in light of the issues, the discovery request is oppressive on its face. Finally, the court must consider the relevancy and materiality of the information sought. 4. The question of the relevancy of the information sought through discovery essentially involves a determination of how substantively the information requested bears on the issues to be tried. However, under Rule 26(b)(1) of the West Virginia Rules of Civil Procedure, discovery is not limited only to admissible evidence, but applies to information reasonably calculated to lead to the discovery of admissible evidence. 5. Under Rule 37(b)(2)(D) of the West Virginia Rules of Civil Procedure, a court has the power to find a party in contempt for failure to obey a discovery order, except an order to submit to a physical or mental examination. 6. A civil contempt sanction that sets monetary penalties retroactively before the hearing on contempt for failure to comply with a discovery order cannot be enforced. A monetary per diem penalty is permissible where it is set prospectively from the date of the contempt order as a means of ensuring compliance with the underlying discovery order. 7. Under Rule 37(b)(2)(E) of the West Virginia Rules of Civil Procedure, a court may require a party failing to obey the order or the attorney advising him or both to pay the reasonable expenses, including attorney's fees, caused by the failure. This provision allows attorney's fees to be excused unless the failure was substantially justified or such an award would be unjust. The rule clearly states that such sanctions may be imposed in lieu of or in addition to any other sanctions. Miller, Justice: In this original proceeding in prohibition, State Farm Mutual Automobile Insurance Company (State Farm) asks us to prevent the Circuit Court of McDowell County from enforcing an order entered July 10, 1992, which held State Farm in contempt for failing to comply with court-ordered discovery and assessed a penalty against State Farm of $5,000 for each day of continued noncompliance. State Farm contends that the trial court's discovery order was oppressive and unduly burdensome and that the contempt citation was, therefore, unwarranted. We agree, and we grant the writ of prohibition prayed for, as moulded. I. The history of this case is long and tortuous. Respondent Donald Ray Perkins, a resident of McDowell County, was rendered a quadriplegic as the result of an automobile accident which occurred in Virginia in February 1982 and was caused by another driver whose identity is unknown. In order to recover under the uninsured motorist provisions of his automobile insurance policy, issued by State Farm, Mr. Perkins and his wife, Sheila D. Perkins (the plaintiffs), instituted a "John Doe" tort action in the Circuit Court of McDowell County. State Farm removed the tort action to federal court and filed a declaratory judgment action, seeking a judgment of noncoverage. These actions were consolidated, and the case proceeded to the summary judgment stage in federal court. The federal district court then certified to this Court questions concerning the appropriate choice of law and application of the "physical contact" requirement. We answered these questions in Perkins v. Doe, 177 W. Va. 84, 350 S.E.2d 711 (1986). As a result, the federal district court entered a summary judgment in favor of the plaintiffs on the issue of coverage and remanded the tort action to the Circuit Court of McDowell County. The tort action was tried on September 26, 1989, and the jury rendered a verdict of $3.5 million for the plaintiffs. On February 27, 1990, the plaintiffs instituted an action against State Farm in the Circuit Court of McDowell County, alleging that State Farm unreasonably and in bad faith refused to settle the "John Doe" action for the policy limits of the uninsured motorist coverage. The plaintiffs also alleged that State Farm violated the Unfair Trade Practices Act, W. Va. Code, 33-11-1, et seq. Along with the complaint, the plaintiffs filed a set of interrogatories, which, among other things, asked State Farm to provide information on every claim filed against it, nationwide, since 1980 which involved allegations of bad faith, unfair trade practice violations, excess verdict liability, or inquiries from insurance industry regulators concerning State Farm's handling of claims.See footnote 1

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State Farm filed no responses or objections to the plaintiffs' interrogatories. On July 16, 1990, the plaintiffs filed with the circuit court a motion to compel State Farm to respond to the interrogatories. On August 1, 1990, State Farm filed a motion for a protective order, asking the trial court to limit the scope of the plaintiffs' discovery. Apparently, there was no hearing on either of these motions. On May 31, 1991, the plaintiffs filed a second motion to compel discovery. A hearing was conducted before the circuit court on July 1, 1991. Although no transcript of this hearing has been provided to this Court, it appears that State Farm challenged at least some of the plaintiffs' interrogatories as being unduly burdensome.See footnote 2 The court granted the plaintiffs' motion to compel discovery and ordered State Farm to respond fully to all of the plaintiffs' interrogatories by September 15, 1991. State Farm's counsel was apparently directed to prepare an order reflecting the court's ruling at the July 1, 1991 hearing. For some reason, however, this order was not prepared until November of 1991. On November 19, 1991, the order compelling discovery was entered by the circuit court, nunc pro tunc to July 1, 1991. Shortly thereafter, State Farm's local counsel withdrew from representation and present counsel took over its defense. On February 20, 1992, the plaintiffs filed with the court a motion for partial summary judgment or, in the alternative, for sanctions against State Farm under Rule 37 of the West Virginia Rules of Civil Procedure. The plaintiffs alleged that State Farm had still not responded to any of their interrogatories and was in contempt of the November 19, 1991 discovery order. On February 27, 1992, State Farm filed partial responses to the plaintiffs' interrogatories, apparently providing information regarding bad faith and excess verdict claims filed against State Farm in West Virginia and the log of complaints filed against it with the West Virginia Insurance Commissioner. That same day, State Farm filed a motion for reconsideration of the November 19, 1991 order on the ground that the plaintiffs' interrogatories seeking disclosure of data on claims filed throughout the country were oppressive and unduly burdensome. Attached to the motion was the affidavit of Gary Driscoll, a State Farm employee, which indicated that State Farm had no index or computer program which would enable it to locate the information requested by the plaintiffs. Mr. Driscoll stated that producing a list of all bad faith claims filed against State Farm since 1980 would require manual inspection of all State Farm claim files, active and retired, throughout the country for the period in question and would cost over $40 million.See footnote 3 A hearing, which was styled by the circuit court as a show cause hearing to determine whether State Farm should be held in contempt of court, was conducted on May 14, 1992. Mr. Driscoll testified as to the matters contained in his affidavit and was cross-examined by the plaintiffs' attorney. By order dated July 10, 1992, the trial court found State Farm in contempt of the November 19, 1991 discovery order and assessed a fine of $5,000 for every day after entry of the contempt order that State Farm failed to provide the required responses to the plaintiffs' interrogatories. A hearing on State Farm's motion for reconsideration of the November 19, 1991 discovery order was held on August 7, 1992, and, by order dated September 3, 1992, the trial court denied the motion. On September 18, 1992, State Farm instituted this proceeding in prohibition. State Farm contends that the November 19, 1991 discovery order is oppressive and unduly burdensome and asks us to prevent the circuit court from enforcing that order and the contempt order. II. Initially, we note that in the past we have permitted the use of a writ of prohibition to correct a clear legal error resulting from a trial court's substantial abuse of its discretion in regard to discovery orders. See, e.g., Nutter v. Maynard, 183 W. Va. 247, 395 S.E.2d 491 (1990); Michael v. Henry, 177 W. Va. 494, 354 S.E.2d 590 (1987). This rule is based on Syllabus Point 1 of Hinkle v. Black, 164 W. Va. 112, 262 S.E.2d 744 (1979).See footnote 4 Turning to the question of the validity of the trial court's discovery order, Rule 26 of the West Virginia Rules of Civil Procedure governs discovery generally. The scope of discovery is set out in Rule 26(b)(1), which provides, in part: "Parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action[.]"See footnote 5 The rule also specifies, however, that the trial court may limit

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discovery if it finds that "[t]he discovery is unduly burdensome or expensive, taking into account the needs of the case, the amount in controversy, limitations on the parties' resources, and the importance of the issues at stake in the litigation."See footnote 6 W.Va.Civ.P. 26(b)(1)(iii). Rule 33(b) of the West Virginia Rules of Civil Procedure, relating to the use of interrogatories, states that "[i]nterrogatories may relate to any matters which can be inquired into under Rule 26(b)[.]" We discussed burdensome discovery requests in Truman v. Farmers & Merchants Bank, 180 W. Va. 133, 375 S.E.2d 765 (1988). In Truman, a wrongful discharge case, the plaintiff, after answering the defendant bank's interrogatories, had submitted her own interrogatories and a request for production of documents. The bank took discovery depositions, but failed to answer the plaintiff's discovery requests. The plaintiff filed a motion to compel discovery. The bank then moved for summary judgment and made a motion to block the plaintiff's discovery as being oppressive. The trial court granted summary judgment for the bank. In Syllabus Points 3 and 4 of Truman, we stated: "3. In assessing whether discovery is burdensome or oppressive, the question is not the number of interrogatories or the fact that the interrogating party is using successive methods of discovery, or even that the interrogating party already possessed the information, but whether or not, they are unduly burdensome or oppressive when viewed with relation to the case itself; are the interrogatories unreasonable under the facts and circumstances of the particular case. "4. Where objections are made to discovery requests, most courts require specific showing as to how each discovery request is burdensome, oppressive, or embarrassing unless such can be determined from the sheer volume of the requests in light of the case issues." We held that the plaintiff's discovery requests were relevant to disputed factual issues and that the trial court should have ruled on the motion to compel discovery and on the bank's motion for a protective order before addressing the summary judgment motion. We found the plaintiff's discovery requests not to be unduly burdensome, and we reversed the judgment of the circuit court. Rule 26 and Truman, supra, indicate that where a claim is made that a discovery request is oppressive and unduly burdensome, the trial court should consider several factors. First, a court should weigh the requesting party's need to obtain the information against the burden that producing such information places on the opposing party. This requires an analysis of the issues in the case, the amount in controversy, and the resources of the parties. Secondly, the opposing party has the obligation to show why discovery is burdensome unless, in light of the issues, the discovery request is oppressive on its face. Finally, the court must consider the relevancy and materiality of the information sought. In this case, the trial court heard State Farm's objections to the plaintiffs' interrogatories on July 1, 1991. No transcript of that hearing has been filed with this Court. We have only the court's November 19, 1991 order to reflect what occurred at the hearing. It appears that the court only considered State Farm's argument that the interrogatories objected to were unduly burdensome.See footnote 7 There is no mention made in the order of the relevancy of the material sought in the questioned interrogatories. The question of the relevancy of the information sought through discovery, which essentially involves a determination of how substantively the information requested bears on the issues to be tried, is a factor that has been stressed by a number of courts. See, e.g., Rich v. Martin Marietta Corp., 522 F.2d 333 (10th Cir. 1975); State Farm Mut. Auto. Ins. Co. v. Superior Court, 167 Ariz. 135, 804 P.2d 1323 (App. 1991); Mead Reinsurance Co. v. Superior Court, 188 Cal. App. 3d 313, 232 Cal. Rptr. 752 (1986); Leeson v. State Farm Mut. Auto. Ins. Co., 190 Ill. App. 3d 359, 137 Ill. Dec. 837, 546 N.E.2d 782 (1989); State ex rel. Bankers Life & Casualty Co. v. Miller, 160 Mont. 256, 502 P.2d 27 (1972); Wyda v. Makita Elec. Works, Ltd., 162 A.D.2d 133, 556 N.Y.S.2d 78 (1990). See generally 4A Moore's Federal Practice

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