Arkansas judge orders another insurance company to produce documents for class action

Michelle Massey, East Texas Bureau Jul. 23, 2009, 4:32am


TEXARKANA, Ark. – In spite of potentially costing the company millions of dollars, Arkansas Circuit Court Judge Kirk Johnson has ordered Farmers to produce all of its claim files in an ongoing class action regarding payments to general contractors.

In a July 1 order, Judge Johnson denied the plaintiffs' motion for contempt but granted the plaintiffs' motion to compel. The parties entered an agreement that 2,000 case files would be produced instead of all claim files as the plaintiffs first requested.

The original lawsuit filed Sept. 8, 2004, in the Circuit Court of Miller County, Ark., accuses insurance companies of not paying the general contractors' overhead and profit. Although the insurance companies paid previous damage claims, the lawsuit argues that plaintiffs are entitled to the additional payment.

The class action alleges claims of civil conspiracy, unjust enrichment, fraud and constructive fraud.

In the recent order, Judge Johnson acknowledged that the parties had an agreement to produce a statistical sampling of 2000 case files to help reduce litigation costs.

The court wrote that the premise for this agreement was that this sampling would be used to establish damages as it was used to calculate damages in a similar litigation in Oklahoma.

While Farmers held up to the agreement and provided the requested information, the plaintiffs claimed there was a lack of data that they needed to select the files and thus failed to comply with terms of the agreement.

The plaintiffs argue that Farmers destroyed 35 file boxes of claim files in 2005 that related to possible class members in Oklahoma, Missouri, Arkansas, Kansas and Iowa.

Based on this information, Judge Johnson denied the plaintiffs' motion for contempt stating that the agreement did not require the defendant to provide the details the plaintiff requested.

However, Judge Johnson wrote that while Farmers acknowledged that the plaintiffs had the impression that the sampling would be used to calculate damages, it failed to advise that it would object to this method.

"The Defendant chose to 'lie behind the log' and keep silent about its intentions to object to the use of the statistical sampling method and reduce their costs of discovery," Judge Johnson wrote.

Further, Judge Johnson stated that, "The Court does not believe that the gamesmanship portrayed by the Defendant towards the Court is acceptable conduct of established principals of fair play and plain dealing."

The court order rejected the previous agreement between Farmers and the plaintiffs allowing the statistical sampling of claim files and ordered Farmers to produce all claims files within six months.

Judge Johnson also denied Farmers' motion for a protective order and ordered that Farmers is responsible for the costs of production of these documents.

Foremost Insurance Co. is also facing a similar court order to produce extensive amounts of discovery.

After the plaintiffs made allegations of destruction of file documents, Judge Johnson ordered the company to produce hard copies and files in electronic format to determine what data was lost or destroyed.

Foremost argues that the plaintiffs have refused to work toward developing a reasonable discovery plan and the costs of the requested production are overly burdensome.

Foremost stated that just to produce the requested e-mail from Foremost employees, it will cost the insurance company between $7 million and $20 million.

The hearing on sanctions against Foremost is scheduled for July 29.

After Nationwide was faced with the same court order, it chose to settle to avoid the expense and burden of the expansive production of documents.

While denying any wrongdoing, Nationwide wrote that it had agreed to settlement to "avoid further burden and expense of protracted litigation and to be completely free of any further controversy with respect to the claims which have been asserted."

The settlement provides eligible class members with a payment equal to 20 percent of the amount previously paid to complete repairs, minus any previously paid general contractor's overhead and profit.

The final settlement approval hearing is scheduled for July 27 in the Miller County Courthouse in Texarkana, Ark.

Chubb Insurance companies are also in a discovery dispute with the plaintiffs and facing possible court sanctions. Defendant Chubb states that it offered several times to "discuss and meet and confer with plaintiffs regarding discovery issues," but the plaintiffs have refused.

Although most of the related court documents are filed under court seal, part of Chubb's discovery battle involves the deposition of its corporate representative. Chubb filed motions with the court asking for a postponement from the deposition as the representative had previous work obligations but the court did not respond.

Currently, motions are stayed pending mediation. Mediation was ordered on July 1 and ordered to be completed by Aug. 8.

The plaintiffs are represented by Texarkana attorneys John Goodson and Matt Keil of the law firm Keil and Goodson, attorneys Michael B. Angelovich, Cary Patterson, Brady Paddock and Christopher Johnson of the Texarkana law firm Nix, Patterson and Roach LLP.

Chivers v State Farm, Case No 2004-294-3

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