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U.S. Bank National Association, A National Association As Securities Intermediary For Lima Acquisition Lp v. Phl Variable Insurance Company

April 22, 2013


The opinion of the court was delivered by: James C. Francis IV United States Magistrate Judge


In this, the sixth of seven discovery disputes that have been presented in this case so far, defendant PHL Variable Insurance Company ("PHL") moves to compel plaintiff U.S. Bank National Association ("US Bank") to produce documents in response to eight of PHL's requests for production of documents ("RFPs") and to supplement its responses to fifteen of PHL's requests for admission ("RFAs"). PHL's motion is granted in part and denied in part.*fn1


A. Facts

The factual background of this dispute is laid out in my November 5, 2012 Memorandum and Order. At issue are 12 policies (the "Policies") that US Bank acquired in December 2010 in connection with the acquisition by Lima LS plc (the general partner of Lima Acquisition LP) of five limited liability companies -- which, together, owned 982 policies -- from Pacifica Group LLC ("Pacifica"). (Memorandum and Order dated Dec. 10, 2012 ("December 10 Order"), at 5; List of Policies, attached as Exh. 1 to First Amended Complaint ("FAC"); Plaintiff's Memorandum of Law in Opposition to PHL's Motion to Compel Production and Responses to Requests for Admission ("Pl. Memo.") at 3-4 & n.1). The relevant policies are universal life insurance policies which allow policyholders to pay as much money as they want into their policy accounts each month as long as the account balance is sufficient to cover policy charges, including a "cost of insurance charge." (FAC, ¶ 2). If the balance is not met, the policies will ultimately lapse. (FAC, ¶ 2). The policies at issue permit the insurer to adjust cost of insurance rates, but only based on certain specified factors, the most significant of which is mortality. (FAC, ¶ 4). US Bank alleges that, although life expectancy has increased, which should lead to a reduction in the cost of insurance, PHL has increased its cost of insurance rates. (FAC, ¶ 4). According to the plaintiff, PHL has done so both to increase its fees and to prompt policyholders to allow their policies to lapse rather than pay higher fees, thereby relieving PHL of the risk of ever having to pay out on the policies. (FAC, ¶ 7).

B. December 10 Order My December 10 Order is also relevant here, as part of the dispute centers on its interpretation. In the defendant's motion to compel filed in October 2012 (the parties' fifth discovery dispute), PHL argued that its defenses of waiver, estoppel, or acquiescence required discovery into whether the plaintiff had "foreknowledge at the time it acquired the Policies that PHL had already increased, and might again increase, its cost of insurance rates." (Defendant's Memorandum of Law in Support of Its Motion to Compel Production of Documents and Responses to Interrogatories dated Oct. 19, 2012 ("Def. Oct. 19 Memo.") at 8 (emphasis omitted); Defendant PHL Variable Insurance Company's Reply in Support of Its Motion to Compel Production of Documents and Responses to Interrogatories dated Nov. 1, 2012, at 6). US Bank countered by agreeing to produce documents about the acquisition of the policies "to the extent that they also concern PHL's cost of insurance rate increases, this lawsuit, or the [P]olicies." (December 10 Order at 6). I granted this branch of PHL's motion, holding that discovery into "[t]he circumstances surrounding the plaintiff's acquisition of the [P]olicies" was appropriate because it was relevant to "establishing that US Bank had foreknowledge of th[e] alleged breach [of the terms of the Policies] at the time it acquired the [P]olicies," but nonetheless acquired them and accepted their benefits. (December 10 Order at 7).

It is clear from the context of the order, as well as a fair reading of its language, that documents relating to "circumstances surrounding the [] acquisition of the [P]olicies" are relevant only insofar as they might lead to admissible evidence regarding US Bank's foreknowledge of cost of insurance increases. (December 10 Order at 7). Indeed, this is precisely what PHL argued in the motion to compel that resulted in the December 10 Order. To the extent that the December 10 Order was ambiguous on that point, it is now clarified.

In addition, the December 10 Order held that discovery regarding the origination of the policies is not relevant unless and until PHL asserts a so-called "STOLI" defense.*fn2 Such a defense, the order notes, requires that PHL seek a declaratory judgment, cease collecting premiums, and tender the premiums paid to the court. (December 10 Order at 8-10). As of the filing of this motion to compel, PHL has not done advanced such a defense.


A. Production Generally, "[p]arties may obtain discovery regarding any non-privileged matter that is relevant to any party's claim or defense." Fed. R. Civ. P. 26(b)(1). "Although not unlimited, relevance, for the purpose of discovery, is an extremely broad concept." Condit v. Dunne, 225 F.R.D. 100, 105 (S.D.N.Y. 2004); see also Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978). It "'encompass[es] any matter that bears on, or that reasonably could lead to other matters that could bear on, any issue that is or may be in the case." Schoolcraft v. City of New York, No. 10 Civ. 6005, 2012 WL 2161596, at *12 (S.D.N.Y. June 14, 2012) (quoting Oppenheimer Fund Inc., 437 U.S. at 351). "Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence." Fed. R. Civ. P. 26(b)(1). The burden of demonstrating relevance is on the party seeking discovery. See, e.g., King County, Washington v. IKB Deutsche Industriebank AG, No. 09 Civ. 8387, 2012 WL 3553775, at *1 (S.D.N.Y. Aug. 17, 2012). Once relevance has been shown, it is up to the responding party to justify curtailing discovery. Condit, 225 F.R.D. at 106. "[T]he court must limit the frequency or extent of discovery" where:

(i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive;

(ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; or

(iii) the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues.

Fed. R. Civ. P. 26(b)(2)(C). "General and conclusory objections as to relevance, overbreadth, or burden are insufficient to exclude discovery of requested information." Melendez v. Greiner, No. 01 Civ. 7888, 2003 WL 22434101, at *1 (S.D.N.Y. Oct. 23, 2003). "Instead, the objecting party must show specifically how, despite the broad and liberal construction afforded the federal discovery rules, each request is not relevant or how each question is overly broad, burdensome or oppressive." Tourtelotte v. Anvil Place Master Tenant, LLC, No. 3:11CV1454, ...

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