Please release me, let me go Protection in Branch qui tam in the context of Judge Vance’s post-trial Order in Weiss v Allstate

Branch is rockin’ and rollin’ over Protective Orders!  Chain of fools was the opening act for please release me, let me go Elvis-impersonating Allstate’s attempt to place trial exhibits under seal in Weiss v Allstate.  Judge Vance’s post-trial Order in Weiss provides context for an examination of the protective motions and orders in Branch:

To counter the presumption in favor of the public’s common law right of access to court records, Allstate argues that the Court should seal the documents designated Exhibits 7, 31, and 31A because other courts have found similar insurance materials to be confidential in nature, and thus subject to a protective order. Allstate also asserts that it would be prejudiced in litigating other claims arising from Hurricane Katrina if plaintiffs in those other cases had access to the exhibits outside of the normal course and scope of discovery. The Court finds that neither interest is sufficient to overcome the right of public access in this instance.

Allstate does not point to a single document or excerpt of a document within the approximately 185 pages that comprise Exhibits 7, 31, and 31A that might be harmful to its competitive position. Its failure to do so is particularly telling given the facially benign nature of these exhibits. Exhibit 7 includes a press release, a list of publicly available phone numbers, tips to policyholders affected by Hurricane Katrina, and suggested answers for its personnel to use when responding to questions from policyholders with hurricane claims. Exhibit 31 and 31A contain customer service guidelines to be followed by Allstate personnel, including information that was intended to be passed along to customers. It is not apparent that these documents contain sensitive material of any kind.

Judge Vance’s use of the word benign provides an interesting contrast to “our documents are malignant” espoused by insurer defendants in Katrina policyholder litigation.  As a result, there has been an epidemic of protection orders in federal courts in both Mississippi and Louisiana. However, as the Order indicates, insurers cry “malignant” but submit the “benign”.

Why our courts have been quick to issue protective orders will be one of the legacy questions of Katrina litigation.  Some have suggested the Magistrate Judges were convinced protective orders were the only way to assure plaintiff’s access to needed documents – a suggestion that begs another why.  Rather than speculate at the answers, let’s look at evidence of alternatives.

Many a Katrina policyholder case, for example, has “gone to dead” and subjected the policyholder to the purgatory of settlement when the related claim files of other policyholders were protected at the request of the litigating policyholder’s insurance company.  The authors of In Search of Consistency in Insurance Claims Handling: Discovery of Insurance Companies’ Filed on Reserves and Other Policyholders’ Claims explain that “when the shoe is on the other foot…[insurance companies]…themselves take the position that “other” claims files are discoverable:

…. For example, in a recent reinsurance case in New York, Zurich Insurance Company moved the court to compel its reinsurance company to produce comparable “other” claims files. In Zurich American Ins. Co. v. Ace American Reinsurance Co., Zurich alleged that its reinsurer did not pay its share of a settlement reached with Zurich’s policyholder…

…the court found that the reinsurer’s handling of similar claims could provide evidence of how it had interpreted its obligation to follow the settlements of its reinsureds in similar circumstances by shedding light “on the meaning that the parties ascribed to the terms that they incorporated into the policies at issue.”  Consequently, the court found that the requested information was relevant and discoverable…

The reinsurer also opposed the production of “other” claims files on grounds of burdensomeness. The reinsurer argued that its computer system was incapable of segregating claims, the type of claim, or the reason the claim was denied. While the court recognized that the “volume of data accumulated” by the defendant made a “search of its entire database infeasible,” it nevertheless found that “a sophisticated reinsurer that operates a multimillion dollar business is entitled to little sympathy for utilizing an opaque data storage system, particularly when, by the nature of its business, it can reasonably anticipate frequent litigation.” Ultimately, the court ordered the parties to “propose a protocol for sampling” the reinsurer’s claim files in order to obtain examples of claims files in which issues of the allocation of policy limits had been addressed.

As SLABBED readers know, the Branch plaintiffs proposal of just such a “protocol for sampling” has been vigorously opposed by the defendant insurance companies.  Their vigor, however, got out of hand and this past Thursday, Branch filed a related Motion and Memorandum in Support of Motion for Protective Order seeking the Court’s protection from what could be called slap depositions.  (Thanks for the word, Sop.) The Memorandum in Support of the Branch motion provides background and detail on the slapping:

Branch Consultants, LLC (“Branch”) respectfully moves this Court to issue a protective order that precludes Defendants from seeking discovery that is wholly irrelevant to the claims and defenses at issue in this case and would serve only to annoy, embarrass, or oppress Branch. The Court should grant Branch’s Motion and enter the attached proposed protective order.

In a False Claim Act (“FCA”) qui tam action, the credibility, integrity, and personal background of the relator are not relevant to whether the defendant submitted a false claim…Even if the United States does not intervene, the government nevertheless remains the real party in interest.  Whether the United States is entitled to Instead, the claim stands or falls based on the proof necessary to establish a false claim: whether there “was a false statement or fraudulent course of conduct, that the statement was provided knowingly, that the statement was material, and that the government paid money as a result.”

Defendants have served dozens of discovery requests on both Branch and third parties seeking information and documents that could serve no purpose other than to attempt to intimidate, embarrass, or attack the integrity of Branch and its principals… As Judge Vance recently held, “This case is about an alleged fraud committed by a group of insurance companies and adjusters against the government of the United States”…The integrity and past conduct of the relator are simply not relevant to whether a defendant submitted a false claim. There is no mini-trial to be had on the integrity of the relator. Indeed, even a person who “planned and initiated the violation” of the FCA can serve as the relator.

Naturally, a reader begins to wonder Who done it? and it is not until page eight that an insurance company is mentioned by name – Fidelity, represented by the interest-conflicted and, obviously, integrity-challenged Gerald Nielsen. Branch provides five examples of “document requests” that “have no conceivable purpose other than to harass, embarrass, or oppress Branch”.  One is Fidelity’s request for production of “Every retainer agreement or contract with any of the owners of the properties put at issue at paragraph 23 of the FAC.”

Branch’s retainer agreements with homeowners are entirely irrelevant to the question of whether Defendants intentionally submitted fraudulent flood claims to the United States. “Any and all documents or materials of any type (marketing or otherwise) that Branch showed or provided to the persons who ‘retained’ Branch (FAC, ¶19) to solicit or induce those persons to retain Branch after Katrina.”

Fidelity’s stated purpose for this document request is to inquire as to whether Branch told the homeowners that it was working for the government to gain access to the property. There is absolutely no merit to Fidelity’s allegations. But even if Branch told the homeowners that they were government employees, how is that relevant to whether Fidelity defrauded the government? Whether the United States may recover fraudulent overpayments is in no way dependent on Branch’s conduct.

Branch also describes circumstances related to non-party certain non-party subpoena “that Defendants served”.  Defendant Branch Protection Ex1 ANPAC subpoena Baker 406-2 issued a subpoena to non-party Richard Barker, an attorney seeking:

Any and all contracts, agreements, retention agreements, letters of engagement, or similar documents between you and/or your clients and Max Johnson, Branch Consultants, L.L.C, Melanie Mayer, Mayer & Associates, P.A., Mayer Group, L.L.C., and/or any other individual, public adjusting company, firm or other business known to be associated with Max Johnson and/or Melanie Mayer, for service or work performed regarding the following properties…

The “properties” listed in the subpoena just happened to be all of the “exemplary properties” in the Branch complaint and the Melanie Mayer mentioned  “is an attorney and is the daughter of Max Johnson, who is the president and founder of Branch”.

Ms. Mayer has served as Branch’s attorney. She also is currently a defendant in an action filed by the Securities and Exchange Commission for securities fraud relating to offshore investments. That SEC action is completely unrelated to Branch, Hurricane Katrina, or this case.  It is inconceivable how Ms. Mayer could have provided services for Branch that are relevant to whether Defendants knowingly submitted a false claim to the government.

It is transparent that Defendants hope to make the SEC action against Ms. Mayer the subject of this lawsuit even though it has absolutely no bearing on whether Defendants submitted false claims to the United States.  The only imaginable purpose of seeking discovery from her is to smear Branch’s reputation by association, which is entirely inappropriate.

Defendant ANPAC, according to the Branch memorandum, “submitted a list identifying the persons that it intends to depose. Included on that list was Beth Johnson, who is the wife of Max Johnson, one of Branch’s principals”.  While “entirely inappropriate” is an apt description of the alleged “purpose of seeking discovery” from Mr. Johnson’s daughter.  However, the Company’s attempt to seek discovery from Johnson’s wife is so appalling in light of the circumstances that, for all practical purposes, the word slimeball becomes synonymous with ANPAC:

ANPAC explained why it needed to depose Mr. Johnson: As a co-owner and/or member of Branch Consultants, L.L.C., Ms. Johnson should have discoverable information regarding the “original source” status of Branch Consultants, L.L.C., the claims against ANPAC, the allegations in the original Complaint and First Amended Complaint, and the properties identified in Paragraph 27 of the First Amended Complaint.12

A footnote to the restatement of ANPAC’s reported need is documentation Branch was able to reach agreement on this issue with all Defendants except ANPAC”…”through the Rule 37.1 Conference”.

Branch explained to ANPAC on February 22, 23, and 25 that Ms. Johnson suffered a debilitating stroke and has not fully recovered…She cannot use the left side of her body, and her speech has not fully recovered…She is under 24-hour care...Ms. Johnson is in no physical condition to sit for a deposition. In addition, Branch also explained to ANPAC that Ms. Johnson was not involved in Branch’s operations or the adjustments of the properties at issue here.  ANPAC intends to depose each of the four Branch principals and Branch itself. There is absolutely no reason to depose Ms. Johnson. Any deposition would impose a significant undue burden on her physically and would serve only to punish her husband, Max Johnson for serving as a relator and exposing ANPACs’ fraud.

Exhibit 4 to the Motion is the related Declaration of Max Johnson , owner of Branch Consultants and husband of Beth Johnson.  Mr. Johnson’s Declaration attests to his wife’s condition, lack of involvement in the Company and states, “Forcing Beth to attend a deposition would impose a substantial burden on Beth’s health and impose needless and severe emotional stress on her”.  No doubt it would as just reading and reporting ANPAC’s callous disregard for Mrs. Johnson’s health is, alone, an emotional stressful experience. To her credit, Magistrate Shushan responded immediately with an Order:

The motion of the relator, Branch Consultants, LLC (“Branch”), for expedited hearing (Rec. doc. 407) is GRANTED. Branch’s motion for a protective order (Rec. doc. 406) is GRANTED in PART and Melanie Mayer; Mayer & Associates, P.A.; Mayer Group, LLC; Max Johnson; Beth Johnson; Halpern and Martin, LLC; Richard J. Fernandez; Law Offices of Richard J. Fernandez; and Richard H. Barker, IV, are relieved from responding to any subpoena issued by the defendants in this action until further order of the court. Branch’s motion for a protective order is set for hearing (no oral argument) on Wednesday, March 24, 2010, on briefs. Any opposition shall be submitted by Tuesday, March 16, 2010. Any reply shall be submitted by Tuesday, March 23, 2010.

Branch’s Motion for a Protective Order and Magistrate Shushan’s subsequent Order are consistent with the provisions of Rule26(C)(1)(d)FRCP:

The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including… forbidding inquiry into certain matters…

We have now come full circle to Judge Vance’s decision in Weiss v Allstate.  Rule 26 states, “Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence”.   However, Magistrate Shushan’s Order on the Production and Exchange of Confidential Information obtained during the course of Discovery can only be called overly broad in light of the previously reported Liberty Mutual admission:

Liberty Mutual’s Motion to Seal stated: “…on February 15, 2010, Liberty Mutual designated the entirety of its current document production…as “HIGHLY CONFIDENTIAL”

When Liberty Mutual’s assumption of total privilege is considered along with the conduct of Fidelity, ANPAC and Standard Fire that required Branch to seek the Court’s protection, it is clear that Shushan’s Order defining Confidential and Highly Confidential (sealed) documents and testimony needs to be narrowed, revised to clarify what is not allowed and strictly enforced.

Decisions to protect or seal any document or testimony should be considered and weighted as admissible evidence and , as Judge Vance stated, with “the presumption in favor of the public’s common law right of access to court records”.