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Darmer v. State Farm Fire and Casualty Co.

United States District Court, D. Minnesota

October 28, 2019

Steven Darmer, Plaintiff,
v.
State Farm Fire and Casualty Company, Defendant.

          ORDER AND REPORT AND RECOMMENDATION

          Katherine Menendez United States Magistrate Judge

         This matter is before the Court on State Farm Fire and Casualty Company's Motion for Sanctions Under Fed.R.Civ.P. 37(b) and the Court's Inherent Power. [Def.'s Mot., ECF No. 233.] In support of its motion, State Farm asserts that during discovery Mr. Darmer failed to produce highly relevant documents that undermine his claims. State Farm seeks a variety of sanctions. [Defs.' Mem. at 44-48, ECF No. 235; Defs.' Proposed Order, ECF No. 238.] The Court held a hearing on State Farm's motion on June 11, 2019. As explained below, State Farm's motion is granted in part, and the Court recommends that the District Court permit cross examination concerning Mr. Darmer's discovery misconduct.

         I. Background

         Mr. Darmer's St. Paul home was damaged in a fire on November 15, 2016. State Farm insured the home. Mr. Darmer submitted a claim to State Farm and hired a public adjuster, Troy Brown, to assist him in resolving the claim with the insurer. Mr. Darmer asserted that he was entitled to substantial benefits from State Farm under the relevant policies. He asked State Farm to pay the policy limits in replacement costs for the dwelling, and to reimburse for the contents of the home that were lost in the fire and alternative living expenses while his home was being rebuilt. Mr. Darmer alleges that State Farm breached its obligations by failing to pay the full amount of benefits to which he was entitled.

         A. Original and Amended Repair Contracts

         Approximately nine months after the fire, on August 23, 2017, Mr. Darmer entered a “Work Authorization & Contractual Agreement” (the “Original Repair Contract”) to have his home rebuilt by Ultimate Restoration, Inc. (“URI”). [Sixth Williams Aff., Ex. 3, ECF No. 237.] The Original Repair Contract with URI estimated the cost of rebuilding the home at $954, 385.05. [Id.] The Original Repair Contract was accompanied by an Original Repair Estimate reflecting the same rebuilding costs. [ECF No. 92-1.] However, on the same day that the Original Repair Contract and Estimate were fully executed, Mr. Darmer signed an “Amendment to Contract, ” which established a “[n]ew contract amount … for new rebuild building for $519, 135.09.” [Sixth Williams Aff., Ex. 5.] Chris Kosek executed both versions of the contract on behalf of URI. [Id.; id., Ex. 3.] An “Amended Repair Estimate” corresponds to the Amendment to Contract and reflects the lower contract amount of approximately $520, 000. [Sixth Williams Aff., Ex. 7.] On August 26, 2017, Darmer's public adjuster, Mr. Brown, submitted the Original Repair Contract to State Farm in connection with his claim, representing that it governed the repair work being done. [Id., Ex. 3.] Mr. Brown did not send State Farm the Amendment to Contract or Amended Repair Estimate.[1] State Farm was unaware of the amended contract documents until the discovery process in this litigation.

         Early Document Production

         Mr. Darmer filed this case in September of 2017. In December 2017, State Farm served Mr. Darmer with requests for production of documents under Fed.R.Civ.P. 34. [Sixth Williams Aff., Ex. 51.] One of those requests asked for production of “[a]ll documents … relating to … any construction, renovation, improvement alteration, repair, restoration, destruction, replacement, … or other services … performed or provided at any time (before or after the fire) for the dwelling….” [Id. (Request No. 7).] In his written responses, Mr. Darmer never referenced the amended contract documents. [Sixth Williams Aff., Ex. 52 (response to Request No. 7).]

         On February 1, 2018, Mr. Darmer produced a flash drive including thousands of pages of documents with no Bates labeling. [Aff. of Scott Williams (“First Williams Aff.”) ¶¶ 3-4, ECF No. 198.] There is no evidence that this flash drive contained a copy of the Amendment to Contract or the Amended Repair Estimate, which reflect the lower contract price between Mr. Darmer and URI.

         In early 2018, the Court ordered Mr. Darmer to submit to an examination under oath (“EUO”) in connection with his insurance claim. [ECF No. 42 (establishing a two-part EUO to take place on 4/20/2018 and 4/28/2018).] Just before the EUO was set to take place, State Farm advised the Court that Mr. Darmer had produced a large amount of electronically stored information (“ESI”) on a second flash drive (the “April flash drive”) containing “over 20, 000 files with no Bates labels or any other apparent organization.” [See Order (Apr. 19, 2018), ECF No. 45.] The April flash drive also included irrelevant information, supporting State Farm's position that no attempt had been made by Mr. Darmer or his counsel, Edward Beckmann, to provide State Farm with responsive information. [First Williams Aff. ¶¶ 10-11.]

         In September 2018, the Court informed the parties that certain discovery issues they flagged needed to be addressed through formal motion practice, rather than the Court's informal dispute resolution process. [Mins. (Sept. 10, 2018), ECF No. 112.] State Farm filed a motion to compel, arguing in relevant part that much of the ESI Mr. Darmer produced in the February and April flash drives was unusable because it lacked all organization. [Def. Mem. in Supp. of Mot. to Compel (“MTC Mem.”), ECF No. 197.] The Court found that Mr. Darmer's production of documents was “a massive dump of data with little or no effort to ensure that the information provided to State Farm was responsive to State Farm's requests.” [Order (Oct. 5, 2018) at 3, ECF No. 218.] The Court ordered Mr. Darmer to “make reasonable efforts to improve the state of his document production”; required him to review the documents produced for relevance and responsiveness; directed him to determine which documents could properly be designated as confidential; and instructed him to provide documents with some organization. [Id. at 3.] Essentially, this Order alleviated State Farm of having to engage in the laborious task of sifting through the haphazard data dump on both flash drvies and required Mr. Darmer and Mr. Beckmann to take on the ordinary responsibility of making a reasonable document production.

         November 2018

         On November 1, 2018, State Farm took Mr. Kosek's deposition. [Sixth Williams Aff., Ex. 4.] Mr. Kosek testified about an “addendum” to the Original Repair Contract, but he had not yet produced any documents at the time he was deposed. [Id.; see also id., Ex. 1 (summary describing Exhibit 32).] State Farm received URI's document production on November 20, 2018, for the first time revealing a copy of the Amendment to Contract with the $520, 000 amount. That same day, Mr. Darmer supplemented his document production as ordered by the Court on October 5th. [Sixth Williams Aff. ¶ 3.] There is no indication that the November 2018 production included the Amendment to Contract or the Amended Repair Estimate.

         Subsequent Developments

         State Farm took Mr. Darmer's deposition on March 1, 2019. Mr. Darmer admitted that he signed the Amendment to Contract on August 23, 2017. [Sixth Williams Aff., Ex. 10 (Dep. at p. 17-18).] Mr. Darmer claimed that he could not remember whether the Amendment to Contract or Amended Repair Estimate had ever been provided to State Farm. [Id., Ex. 10 (Dep. at p. 18- 19).]

         Because State Farm had already taken the depositions of Mr. Kosek and Mr. Brown prior to receiving a copy of the Amendment to Contract and the Amended Repair Estimate, State Farm reasonably insisted that it be permitted to take those depositions again. [Sixth Williams Aff., Ex. 11; see also id., Ex. 1 (Executive Summary of Ex. 11).] Mr. Brown's second deposition was taken on May 16, 2019. Mr. Kosek's second deposition was rescheduled several times, and eventually took place on May 31, 2019.

         B. Undisclosed Emails

         State Farm's motion for sanctions also addresses Mr. Darmer's failure to produce copies of certain email communications he exchanged with Mr. Brown. In its initial discovery requests in December 2017, State Farm asked Mr. Darmer to produce “[a]ll … communications relating to services performed at any time by public adjuster(s) with regard to Plaintiff's property and/or Plaintiff's claims arising out of the November 2016 fire….” [Sixth Williams Aff., Ex. 51 (Request No. 8).] In response, Mr. Darmer generally referenced documents which had been separately produced by Mr. Brown's company, DTL Global. [Id. (response to Request No. 8).] However, as noted above, the February and April flash drives amounted to an unusable ESI data dump, and Mr. Darmer was later explicitly ordered to improve the state of his production.

         State Farm also served a subpoena on DTL Global, Mr. Brown's company, in December of 2017. In response to that subpoena, Mr. Brown produced an array of documents, including several emails between Mr. Brown and Mr. Darmer. [First Williams Aff. ¶¶ 6-8 & Exs. C, D.] The following list describes the twelve emails received from Mr. Brown that are at issue:

1. Answers to JJJ Letter;
2. Appraiser Ben Johnson Retainer Agreement;
3. Change in Blue;
4. JJJ Response to Letter 4-10-17;
5. Letter;
6. Letters from State Farm;
7. Letters to Ryan and ...

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