Hegarty v. Transamerica Life Insurance Company

— 1 — — 2 — — 3 — 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 EUREKA DIVISION — 7 — 8 ROBERT F. HEGARTY, Case No. 19-cv-06006-MMC (RMI) 9 Plaintiff, ORDER RE: DISCOVERY DISPUTE 10 v. Re: Dkt. Nos. 99, 101 11 TRANSAMERICA LIFE INSURANCE COMPANY, — 12 — Defendant. — 13 — 14 Now pending before the court is a jointly-filed letter brief (dkt. 101) presenting a discovery 15 dispute through which Plaintiff seeks to compel the production of certain documents and 16 information. This dispute, and any further discovery disputes, have been referred (see dkt. 100) to 17 the undersigned. Further, until a ruling is rendered on Defendant’s initial motion for summary 18 judgment, Judge Chesney has limited the scope of discovery to the issue of whether Plaintiff’s 19 claims are barred by the settlement in Oakes v. Bankers United Life Assurance Co., Case No. 9620 06849 (192nd Dist. Ct., Dallas County, Texas) (“Oakes”). For the reasons stated below, Plaintiff’s 21 request to compel the discovery in question is denied.1 22 BACKGROUND 23 In 1989, when he was 48 years old, Plaintiff purchased a direct recognition life vanishing 24 premium insurance contract from the General Services Life Insurance Company – the predecessor 25 in interest to Defendant Transamerica Life Insurance Company. See Compl. (dkt. 1) at 2. Plaintiff 26 contends that he was guaranteed certain increases to the cash value of this policy, generally known — 27 — 1 as “persistency bonuses,” on the twentieth, thirtieth, and fortieth anniversaries of the inception 2 date of his insurance contract. Id. Plaintiff’s lawsuit is premised on the assertion that Defendant 3 breached the contract by repudiating the 30th and 40th anniversary bonuses in 2016 – which 4 Plaintiff contends amounted to a breach of contract, unfair and deceptive business practices, and 5 elder abuse. See Ltr. Br. (dkt. 101) at 2. Defendant denies these allegations and contends that 6 Plaintiff’s claims were released by the August 2000 class action settlement in Oakes. Id. 7 In the preface to the Parties’ letter brief, they jointly set forth the following: (1) that the 8 currently applicable scope of discovery is limited to the question of whether Plaintiff’s claims are 9 barred by Oakes; (2) that following the resolution of this discovery dispute and the production of 10 any resulting discovery, Defendant will file its summary judgment motion on the limited issue of 11 whether Plaintiff’s claims are barred by the terms of the settlement in Oakes; (3) that Plaintiff’s 12 assertions of estoppel and waiver will not be considered in connection with that motion; (4) if it is 13 later determined that Oakes covers any of Plaintiff’s claims, he would then be permitted discovery 14 related to his waiver and estoppel assertions and, if appropriate, Plaintiff would then be able to 15 move for summary judgment on those grounds; and, (5) if, on the other hand, the court concludes 16 that none of Plaintiff’s claims are barred by Oakes, then discovery concerning estoppel and waiver 17 would be unnecessary, but discovery related to any remaining claims or defenses could be 18 conducted. Id. 19 As for the settlement agreement in Oakes, the undersigned has carefully reviewed the copy 20 which Plaintiff has filed on the docket of this case (see Hegarty Decl., Exh. J (dkt. 21-4) at 12721 98), albeit, with the exception of the one missing page (see id. at 158). The Oakes Settlement’s 22 release and waiver provisions define the term “Releasees” as including, inter alia, the defendant in 23 that case and any of its successors and assigns. Id. at 175. Through the release provision of the 24 Oakes Settlement, each class member individually agreed to “forever release and discharge the 25 Releasees from any and all causes of action . . . on the basis of, connected with, arising out of, or 26 related to, in whole or in part, the Policies, the Released Transactions . . . which include without 27 limitation . . . the nature, design, characteristics, actuarial and pricing assumptions, terms, bonuses 1 interest and other policy crediting . . . [and] persistency, or other policy bonuses . . .” Id. at 176-77 2 (emphases added). 3 LEGAL STANDARDS 4 When moving to compel discovery, the moving party has the burden of demonstrating 5 relevance. See e.g., Amy v. Curtis, No. 19-cv-02184-PJH (RMI), 2021 U.S. Dist. LEXIS 27543 , at 6 *5 (N.D. Cal. Feb. 12, 2021); see also Soto v. City of Concord, 162 F.R.D. 603, 610 (N.D. Cal. 7 1995). Within the framework of the narrowed scope of discovery that is currently applicable in 8 this case, it should be noted that “[w]hile it is true that the standard for relevance is not very 9 demanding (see Fed. R. Evid. 401 – evidence is relevant if (a) it has any tendency to make a fact 10 more or less probable than it would be without the evidence; and (b) the fact is of consequence in 11 determining the action), the rule still requires that any evidence that is to be offered must 12 ‘logically advance a material aspect of the party’s case.’” In re Glumetza Antitrust Litig., No. 1913 cv-05822-WHA (RMI), 2020 U.S. Dist. LEXIS 113361 , at *31-32 (N.D. Cal. June 29, 2020) 14 (quoting Estate of Barabin v. AstenJohnson, Inc., 740 F.3d 457, 463 (9th Cir. 2014)). 15 Additionally, in order to succeed on a motion to compel, a moving party bears the burden 16 of not only demonstrating the above-described entitlement to the requested discovery, but also that 17 it has satisfied proportionality and other requirements of Rule 26. See Rodriguez v. Barrita, Inc., 18 No. 09-04057 RS-PSG, 2011 U.S. Dist. LEXIS 134079 , at *4 (N.D. Cal. Nov. 21, 2011). In light 19 of this, courts are required to limit discovery if its burden or expense outweighs its likely benefit; 20 this is “the essence of proportionality,” a frequently ignored or overlooked discovery principle. In 21 re Glumetza Antitrust Litig., 2020 U.S. Dist. LEXIS 113361 , at *31-32 (citing Apple Inc. v. 22 Samsung Elecs. Co., No. 12-cv-0630-LHK (PSG), 2013 U.S. Dist. LEXIS 116493 , at *34-36 23 (N.D. Cal. Aug. 14, 2013)). 24 DISCUSSION 25 One thing that is clear from reviewing the Parties’ letter brief is the fact that Plaintiff is 26 displeased with the narrowed scope of discovery – accordingly, it appears that Plaintiff is striving 27 to expand that scope by asserting that the Oakes Settlement was attended with “potential latent 1 Insurance Contract.” Id. at 3. As such, Plaintiff’s requests to compel are largely, if not entirely, 2 focused on fishing for extrinsic evidence relating to his insurance contract and the Oakes 3 Settlement in what appears to be an effort at making an end-run around the narrowed discovery 4 scope. To this end, Plaintiff’s portion of the letter brief opens with a series of generalized 5 statements that do not do much to advance Plaintiff’s apparent objective. In this regard, Plaintiff 6 asserts: (1) that federal courts treat discovery relevancy liberally; (2) that a court’s primary task 7 when interpreting a written contract is to determine the parties’ intent during contract formation; 8 (3) that contract language is often construed in its lexical environment, which may include 9 objectively determinable facts and circumstances that contextualize the parties’ transaction; (4) 10 that context can be used to reveal a latent ambiguity even though extrinsic evidence of intent alone 11 cannot be used to create it; (5) that a judicial determination of ambiguity is not a prerequisite to 12 discovering extrinsic evidence of party intent; and, (6) without any explanation, Plaintiff contends 13 that “intent is relevant to Hegarty’s fraud/elder abuse claims and no ambiguities are needed for 14 those claims. Id. at 3.2 15 Plaintiff then provides four examples of supposed ambiguities that might justify his 16 sweeping requests for extrinsic evidence. First, Plaintiff rhetorically asks whether persistency 17 bonuses are an express written term of a policy form issued by Defendants such that they are 18 expressly excepted from release under settlement Section H.1.b.2. Id. at 3-4. The undersigned 19 finds no merit to this suggestion because the terms, “persistency, or other bonuses,” are expressly 20 accounted for in Section H.1.b.1(15), and also because Section H.1.b.2 unambiguously provides — 21 — — 22 — 2 The Parties agree that Texas law governs the interpretation of the Oakes Settlement. See Ltr. Br. (dkt. 101) at 3, 5. That said, the undersigned is unpersuaded by Plaintiff’s suggestion that broad-based discovery 23 of extrinsic evidence might reveal some “latent ambiguity,” because “[w]hen the contract is not ambiguous on its face, extrinsic evidence may not be used to create an ambiguity.” Transcon. Gas Pipeline Corp. v. 24 Texaco, Inc., 35 S.W.3d 658, 665 (Tex. App. 2000). If a written instrument is so worded that a court may properly give it a certain or definite legal meaning or interpretation, it is not ambiguous, and extrinsic 25 evidence is not admissible. R & P Enterprises v. LaGuarta, Gavrel and Kirk, 596 S.W.2d 517, 519 (Tex. 1980). On the other hand, “a contract is ambiguous if the application of pertinent rules of interpretation to 26 the face of the instrument leaves it genuinely uncertain as to which one of two or more meanings is proper.” Maxwell v. Lake, 674 S.W.2d 795, 801 (Tex. App. 1984) (citing Universal C.I.T. Credit Corp. v. 27 Daniel, 150 Tex. 513 , 243 S.W.2d 154 (1951)). Only in such a situation is extraneous evidence admissible to determine the true meaning of the instrument. LaGuarta, 596 S.W.2d at 519 . Simply because Plaintiff 1 that “[u]nder no circumstance shall this Section H.1.b.2 entitle a Class Member to assert claims 2 that relate to the allegations contained in the Action or to matters described in Section H.1. See 3 Hegarty Decl., Exh. J (dkt. 21-4) at 176-78 (emphasis added). There is no ambiguity here and 4 Plaintiff’s effort to create one is unpersuasive. Plaintiff’s second example of an ambiguity is to 5 suggest that an illustration that was attached to his insurance contract constitutes a “policy form” 6 as the term is used in Section H.1.b.2 of the Settlement Agreement, such that it might constitute an 7 exception from the claims released by class members. See Ltr. Br. (dkt. 101) at 4. However, in 8 Section H.1.b, “illustrations” are expressly included among “sales presentations” and “oral or 9 written statements or representations allegedly made in connection with, or directly or indirectly 10 relating to, the Released Transactions”; and, furthermore, illustrations are again provided for in 11 Section H.1.b(15) (“illustrations of dividend, interest and other policy crediting rates, interest, 12 persistency, or other policy bonuses, account equity rates, account value calculations, policy loans, 13 policy charges, premium charges, monthly deductions, market value adjustments, cost of 14 insurance and administrative charges, cash values, ultimate cash values or death benefits . . .”). See 15 Hegarty Decl., Exh. J (dkt. 21-4) at 176-77 (emphasis added). As mentioned, there is no ambiguity 16 here, and Plaintiff’s attempt to identify one is ineffectual. Plaintiff’s third “example” of an 17 ambiguity suggests that Section H.1’s “limited reference” to persistency bonuses might not 18 include and contemplate “guaranteed persistency bonuses” rather than “non-guaranteed 19 persistency bonuses.” See Ltr. Br. (dkt. 101) at 4. Likewise, this argument is meritless due to the 20 repetitive appearance of the prominently-underlined phrase, “without limitation,” which appears 21 twice in Section H.b.1 and once in Section H.1.b.1.b – it therefore becomes clear that Plaintiff is 22 simply grasping at straws because “without limitation” means “without limitation,” and when one 23 refers to “persistency bonuses,” “without limitation,” the objectively clear understanding is that 24 the reference includes every type of “persistency bonuses.” See See Hegarty Decl., Exh. J (dkt. 2125 4) at 176. Plaintiff’s fourth and final example of a purported ambiguity that might justify extrinsic 26 evidence is to suggest that a release of persistency bonuses under Section H might impermissibly 27 “alter” the insurance contracts covered by the Settlement Agreement in violation of Section M.21. 1 Matters and Reservations,” and subsection 21 specifically provides that “[n]either this Agreement 2 nor any of the relief to be offered under the Stipulation of Settlement shall be interpreted to alter in 3 any way the contractual terms of any Policy or to constitute a novation of any Policy.” See 4 Hegarty Decl., Exh. J (dkt. 21-4) at 189, 195. Again, Plaintiff’s effort to drum up an ambiguity 5 where none exists is based on a shifting use of terminology and an unfair reading of Section M.21 6 of the Settlement Agreement. The objectively manifest meaning of subsection 21, when read in 7 context of the entirety of Section M, unambiguously provides that the Agreement and “the relief to 8 be offered” thereunder shall not be construed to otherwise alter the contractual terms of the 9 underlying policies or to constitute a novation thereof. This reading of Section M.21 is one which 10 is harmonious with the entirety of the Agreement, whereas Plaintiff’s reading of Section M.21 11 would effectively nullify the entirety of the Settlement Agreement’s release provisions – leading 12 to an absurd conclusion that the Oakes parties’ Agreement boils down to nothing.3 In short, the 13 undersigned is unpersuaded by any of Plaintiff’s suggestions of ambiguities that might justify his 14 requests for the production of extrinsic evidence. 15 In light of the findings and conclusions described above, the undersigned will now turn to 16 Plaintiff’s individual discovery requests. Through RFP No. 67, Plaintiff seeks “all documents 17 relating to the settlement of Oakes.” See Ltr. Br. (dkt) 101 at 11. Compounding the problematic 18 nature of the overwhelming breadth of this request, and the passage of 20 years since the 19 settlement in Oakes, Plaintiff’s portion of the letter brief falls woefully short of satisfying his 20 burden to explain the relevance and proportionality of this request in light of the currently 21 narrowed scope of discovery and the unambiguous nature of the Oakes Settlement Agreement. See 22 id. at 4. In summary fashion, Plaintiff submits that he seeks “[e]xchanges between opposing 23 counsel,” as well as “‘[s]cripts for the Claims administrator, agents and customer service — 24 — — 25 — 3 “When the provisions of a contract appear to conflict, we will attempt to harmonize the two provisions and assume the parties intended every provision to have some effect.” United Protective Servs. v. W. Vill. 26 Ltd. P’ship, 180 S.W.3d 430, 432 (Tex. App. 2005) (citing Edlund v. Bounds, 842 S.W.2d 719, 726 (Tex. App. Dallas 1992, writ denied) (when provisions of contract appear to conflict, they should be harmonized 27 if possible to reflect intentions of parties, so that the entire agreement can be given effect)). Therefore, because “the application of pertinent rules of interpretation to the face of the instrument [does not] leave[] it 1 representatives to help them explain the settlement to potential class members, and [how] the other 2 circumstances of the settlement bear on the settlement’s latent and actual ambiguities. They 3 provide objective information. They are relevant . . . [and] Hegarty cannot get this material from 4 the Oakes class’ attorney [because] [h]e died and his files were destroyed.” Id. For the reasons 5 described above, Plaintiff’s request to compel this extrinsic material is DENIED because Plaintiff 6 has failed to meet his burden to establish relevancy or proportionality. 7 Through RFP No. 28, Plaintiff seeks all documents relating to the reduction in amount or 8 elimination of the payment of persistency bonuses to increase the profitability of direct recognition 9 life insurance policies, while noting that this request is not limited to the relevant period. See Ltr. 10 Br. (dkt. 101) at 9-10. In justifying this request, Plaintiff only states that “discovery relating to 11 Transamerica’s analyses of whether to eliminate or reduce persistency bonuses is relevant to its 12 intent with respect to entering and its subsequent understanding of the settlement, as well as what 13 was discussed in the negotiations.” Id. at 4. Given that the scope of discovery has been limited to 14 whether or not Plaintiff’s claims are barred by the Settlement Agreement in Oakes, the 15 undersigned finds that Plaintiff has failed to meet his burden in establishing either relevance or 16 proportionality for the information encompassed in RFP No. 28; accordingly, Plaintiff’s request to 17 compel this material DENIED. 18 Plaintiff then lumps several discovery requests together: RFP No. 1 (all documents relating 19 to the amount of reserves Defendant established each year for all direct recognition life insurance 20 policies in force during the year); RFP No. 21 (all documents relating to any statement of 21 operations that Defendant filed or otherwise delivered to any state insurance commissioner 22 regarding any direct recognition life insurance policies – not limited to the relevant period); RFP 23 No. 38 (all documents referring to the total amount of surrender charges Defendant received each 24 year for direct recognition life insurance policies surrendered during the year); RFP Nos. 84 & 85 25 (all documents relating to illustrations issued on or after September 1, 2000, or procedures that 26 Defendant followed after September 1, 2000, for direct recognition life insurance policies 27 containing either guaranteed or non-guaranteed persistency bonuses). See id. at 8-9, 10-11, 12-13. 1 of Transamerica and its predecessors-in-interest is relevant to their intent in entering, and their 2 understanding of, the Settlement. Id. at 4. Plaintiff also adds that “after Oakes[,] Transamerica sent 3 illustrations to DRL [p]olicy [o]wners that showed the unqualified payment of [p]ersistency 4 [b]onuses, thereby indicating its understanding that these [b]onuses had not been eliminated by 5 Oakes . . . [and further that] the intent discovered through the RFPs at issue bears on whether the 6 post-Oakes illustrations sent Hegarty were fraudulent.” Id. First, there is a great deal of disconnect 7 between the sweeping breadth of Plaintiff’s RFPs, and the narrow justification to the effect that 8 Plaintiff seeks an explanation for one or more illustrations sent to him sometime after the Oakes 9 Settlement – rendering the RFPs wildly disproportionate to the needs of the case. Second, Plaintiff 10 has once again failed convince the undersigned that there exists any logical relevancy, given the 11 narrowed scope of discovery, for these RFPs by his statement that the post-Oakes conduct of 12 Transamerica and its predecessors-in-interest is relevant to their intent in entering, and their 13 understanding of, the Settlement. In other words, Plaintiff’s effort at establishing relevancy is 14 founded on the faulty premise that the Oakes Settlement Agreement is ambiguous such that 15 extrinsic evidence of the Oakes parties’ intent is needed to understand the Agreement. As 16 discussed above, there is no such ambiguity; accordingly, Plaintiff’s request to compel the 17 materials encompassed in RFP Nos. 1, 21, 38, 84, and 85 is DENIED. 18 Lastly, through RFP No. 94, Plaintiff seeks all transcripts of depositions taken to date in 19 the unrelated case of Helmer v. Transamerica, Case No. 4:17-cv-3129-JSW. See Ltr. Br. (dkt. 20 101) at 13. In support of this request, Plaintiff only states that “nothing in Transamerica’s 21 opposition shows [that] the transcript is not relevant . . . [and that] [a]ny legitimate Helmer privacy 22 issues can be handled by redaction.” Id. at 4. Defendant explains that “Helmer involved different 23 insurance policies and policyholders, and the deposition, taken pursuant to a protective order, was 24 a 30(b)(6) deposition that was never completed and remained open when the case was settled 25 [and] Transamerica had no opportunity to elicit testimony from the witness or seek the 26 adjudication of objections . . . [but in any event] [t]he transcript is particularly irrelevant at this 27 stage of limited discovery because the Court cannot consider it when construing the Oakes 1 transcript in Helmer is to seek to intervene in that case and then to persuade Judge White to 2 || modify the protective order in order to obtain that transcript. Jd. at 6. However, Plaintiff has not 3 explained how “all transcripts of depositions taken to date in Helmer” (id. at 13) are relevant to the 4 || issue at hand or proportional to the needs of this case. Instead, Plaintiff appears to shift his burden 5 to Defendant — seeking to impose a burden of demonstrating irrelevancy on Defendant — because 6 || Plaintiff only notes in this regard that: (1) “nothing in Transamerica’s opposition shows the 7 transcript is not relevant” and, (2) that Helmer is a suit for non-payment of persistency bonuses 8 similar to Hegarty’s. Id. at 4. For that reason, as to RFP No. 94, the undersigned finds that 9 Plaintiff has failed to meet his burden in establishing relevance or proportionality; and, in addition 10 || to the other reasons expounded in Defendant’s portion of the jointly-filed letter brief (see id. at 511 6), Plaintiff's request to compel the deposition transcripts in Helmer is DENIED. 12 IT IS SO ORDERED. 13 Dated: October 21, 2021 14 Mt Z - — 15 — RQBERT M. ILLMAN 16 United States Magistrate Judge — 19 — — 20 — — 21 — — 22 — — 23 — — 24 — — 25 — — 26 — — 27 — — 28 —