The trial court ordered Grange Mutual Insurance Company ("Grange") to comply with sixteen discovery requests. Grange petitioned the Court of Appeals for a writ of prohibition, claiming that compliance with the trial court's order required burdensome production of irrelevant information and disclosure of privileged trade secrets.
Dale Wilder ("Wilder") was involved in a car accident with Sid Gabbard, who was insured by Grange. Wilder submitted a personal injury claim, and Grange assigned Erica Barnes ("Barnes") to serve as the adjuster on the claim. After negotiating with Grange for six months, Wilder was dissatisfied with the way the claim was being handled and he filed suit in the Owsley Circuit Court. Wilder's lawsuit included a personal injury claim against Sid Gabbard and a bad faith claim against Grange.
The trial court bifurcated the claims, holding the bad faith claim in abeyance until after the trial on the personal injury claim. At the conclusion of the trial of the personal injury claim, the jury returned a verdict for Wilder and awarded him approximately $26,000.00.
The bad faith claim alleges that Barnes undervalued Wilder's claim during negotiations and that she had repeatedly delayed communicating with Wilder's attorney. During pretrial preparations, Wilder submitted forty-two discovery requests to Grange. Grange objected to sixteen of those requests, citing concerns about relevancy, privacy, improper motive, trade secret privileges, and the burdensome nature of the requests. The trial court overruled Grange's objections and granted Wilder's motion to compel the discovery. Grange then requested a protective order to limit the discovery allowed, or in the alternative, to prohibit public disclosure of the discovery. The trial court denied the motion without making any findings of fact. Grange again requested a protective order, specifically asking the trial court to conduct an in camera review of the materials to be produced to determine the extent of relevancy and privilege, and again in the alternative, to seal the file to prohibit disclosure of the discovery outside of the litigation. The trial court also denied this request.
Grange then filed a petition with the Court of Appeals for a "writ of prohibition barring the Owsley Circuit Court ... from compelling ... production ... of confidential business and trade secrets, burdensome and expensive historic data of limited relevance, and irrelevant information unrelated to the issues in the case, or limiting production to relevant information subject to appropriate Protective Orders." Grange also described the relief it was seeking as a request that the Court of Appeals "craft[ ] a discovery order which gives [Wilder] all discovery which is relevant to his claims, balanced against the legitimate needs of the Petitioner to be protected against unwarranted public disclosure, undue burden and expense, and profiteering," or at the very least, "[s]eal this file," prohibit Wilder from copying the discovery, and require that Wilder return the discovery at the conclusion of the case. Grange claimed that the production of the documents would cause irreparable harm and could not be adequately remedied on appeal. The Court of Appeals denied the petition because it found that while Grange would not have an adequate remedy on
A. Writ of Prohibition Standard
A writ of prohibition is an "extraordinary remedy and we have always been cautious and conservative both in entertaining petitions for and in granting such relief."
Instead, Grange's claim falls under the second class. In that type of case, writs of prohibition "ordinarily ha[ve] not been granted unless the petitioner established, as conditions precedent, that he (a) had no adequate remedy by appeal or otherwise, and (b) would suffer great and irreparable injury (if error has been committed and relief denied)."
We have also held, however, that a showing of great and irreparable harm in this second class of cases is not "an absolute prerequisite"
B. Appellate Review Standard
Grange claims that a denial of a writ of prohibition is examined on appeal under the de novo standard of review "where the factual underpinning for application of an articulated legal rule is so wanting as to equal, in reality, a distortion of the legal rule." Grange cites Lexington Public Library v. Clark
The cited language supports an abuse of discretion standard rather than de novo review. And the cited language actually relates the standard to be applied by the court hearing the initial petition when it reaches the merits of the case, i.e., after applying the "practical and convenient formula"
But we must review this matter under an appellate standard. The petition for this writ was filed in the Court of Appeals, which acted as a trial court because it heard the matter as an original action. And this case is now before us as a matter of right appeal, not an original action. Since the passage of the Judicial Article in 1976, the Court of Appeals has been the appropriate forum for the original action in a petition for a writ of prohibition applicable to a circuit court, and the Supreme Court is limited to appellate review.
This is perhaps a result of the fact that many of the seminal opinions on the subject of writs are from original writ actions in our predecessor Court — i.e., when there was no intermediate appellate court that would hear the original writ action and from which an appeal could be taken. Those opinions did not need to consider the standard on appeal because there was no higher court that could entertain an appeal. But it could also be that no party has framed the issue so as to require careful attention on our part as to the standard of review that we ought to apply.
By claiming that de novo is the proper standard of review, however, Grange has placed this issue squarely before us. Though our previous decisions have not dealt with this question extensively,
Thus, it is apparent that the proper standard actually depends on the class, or category, of writ case. De novo review will occur most often under the first class of writ cases, i.e., where the lower court is alleged to be acting outside its jurisdiction, because jurisdiction is generally only a question of law. De novo review would also be applicable under the few second class of cases where the alleged error invokes the "certain special cases" exception
But the requirement that the court must make a factual finding of great and irreparable harm before exercising discretion as to whether to grant the writ then requires a third standard of review, i.e., clear error, in some cases. This is supported by the fact that the petition for a writ is an original action
C. Adequate Remedy on Appeal
There is no dispute that Grange would not have an adequate remedy on appeal. As the Court of Appeals noted, Wilder has conceded this point. But for the sake of completeness we point out that there will rarely be an adequate remedy on appeal if the alleged error is an order that allows discovery. Our predecessor court noted the following:
As such, we agree with the Court of Appeals that Grange would have no adequate remedy on appeal.
D. Great and Irreparable Harm
The Court of Appeals based its decision on a finding that Grange failed to prove great and irreparable harm. Grange argues that it did show great and irreparable harm because the requested discovery is irrelevant and would require disclosure of trade secrets.
1. Irrelevant Discovery
Grange complains that almost all of the discovery requests at issue in this case aim to discover irrelevant information. But showing irrelevancy is not a method of proving great and irreparable injury. Mere possession of irrelevant information by an opposing party is not "something of a ruinous nature."
Our predecessor court, however, held that discovery of irrelevant material could fall under the certain special cases exception,
To frame the issue, we note that CR 26.02 allows that "[p]arties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action.... It is not grounds for objection that the information sought will be inadmissible at the trial if the discovery sought appears to be reasonably calculated to lead to the discovery of admissible evidence." We also note that under CR 26.02, "[t]he question of relevancy is more loosely construed upon pre-trial examination than at the trial, and the Rule requires only relevancy to the subject matter involved in the action."
a. Interrogatories No. 9 and 10(b) and Request for Production No. 10
These discovery requests
It is enough for us to note that discovery of information and documents related to similar claims involving other adjusters could reveal a pattern of bad faith conduct on the part of Grange. This would certainly be relevant to Wilder's bad faith claim, regardless of whether such information was admissible at trial. As such, Interrogatories Nos. 9 and 10(b) and Request for Production No. 10 were proper.
b. Requests for Production No. 8, 9, 20, and 29
These discovery requests
In support of its relevance argument, Grange cites to only one case: Garvey v. National Grange Mutual Insurance Company.
The bad faith claim here is not based on whether the insurance adjuster may have strayed from internal procedures. The question is whether Grange's own policies, as described in the manuals, embody or encourage bad faith practices. And use of such manuals is not without precedent in our courts.
c. Requests for Production No. 13, 14, 23, and 26
These discovery requests
The relevance of procedures for setting reserves to a bad faith claim seems obvious. Reserve setting procedures are controlled in part by statute.
Grange's argument that Wilder is seeking this discovery for other improper purposes,
But evidence that is relevant to the proceeding at hand, as is the case here, is discoverable despite the fact that the evidence may be useful in other contexts. That discovery might be useful in other litigation or other proceedings is actually a good thing because it furthers one of the driving forces behind the Civil Rules by allowing the cost of repeating the discovery process to be avoided and thereby encouraging the efficient administration of justice.
The exception in this group is Request for Production No. 13. The average amounts paid on other claims would only be relevant if the degree of damages or injury were comparable to Wilder's. This request, however, is so blanket as to seek primarily irrelevant records and information. As such, it falls into the certain special cases exception.
d. Requests for Production No. 11, 16, and 21
These discovery requests
Other information to be found in personnel files (e.g., related to job performance, bonuses, wage and salary data, disciplinary matters) is relevant to Wilder's claim. Job performance and disciplinary information could help show that the adjusters and their superiors had engaged in bad faith practices in adjusting Wilder's initial claim or that they had engaged in bad faith practices at other times. This information could also show Grange's knowledge or even approval of such practices. This makes those portions of the personnel records related to job performance and disciplinary matters discoverable.
Wilder claims that the compensation of Grange's employees could be keyed to obtaining low settlements, which in turn might encourage bad faith practices by adjusters and other employees. Wage, salary, and bonus data as to the employees described in the discovery requests shed light on this subject, as would the discovery requests as to how Grange's overall compensation system works. Thus, insofar as the requested personnel records relate to compensation of the employees involved and the other records relate to how Grange's overall compensation system works, they are discoverable.
e. Request for Production No. 3
This discovery request
f. Request for Production No. 22
This discovery request
2. Trade Secrets
In addition to claims of irrelevance, Grange attacks Requests for Production Nos. 8, 9, 13, 14, 20, 23, 26, and 29 on the grounds that the documents requested have trade secrets status. Trade secrets enjoy substantial protection in Kentucky as embodied by the Uniform Trade Secrets Act.
We have previously addressed, at least in part, the issue of trade secrets in the context of a petition for writ of prohibition. In Wal-Mart Stores, Inc. v. Dickinson,
We have already discussed the applicability of the certain special cases exception, by way of irrelevance of the proposed discovery, above, finding that the exception does not apply to Requests for Production Nos. 8, 9, 13, 14, 20, 23, 26, and 29. The remaining question then is whether Grange has proven great and irreparable harm. The Court of Appeals has already given us a negative answer to this question of fact. So we are left to evaluate whether the Court of Appeals, which acted as a trial court in the original petition for a writ of prohibition, committed clear error. In holding that Grange "failed to also demonstrate that ... production will cause it irreparable harm," the Court of Appeals also noted the following:
After reviewing the record submitted to the Court of Appeals, we must agree.
Grange's petition for a writ of prohibition contains only broad descriptions of documents, e.g., "Grange's training and or other internally created manuals, reserve setting data, policy and procedure manuals, claims payment averages, personnel and management guidelines, wage and benefits data, and other claims programs and software,"
Grange attempts to evade the inevitable result of this failure to prove that the documents contain trade secrets by alleging a conflict between CR 76.36(5) and the fact that the Court of Appeals found no irreparable injury because Grange "neither submitted, nor sufficiently described" the records in question. CR 76.36(5) states that "[e]vidence in support of or against the petition, other than that which may be attached to the petition and response
While we understand that Grange did not want to simply attach the records as exhibits to their petition, it is unclear that the Court of Appeals actually needed to see the records themselves. A thorough description of the records, perhaps in the form of a privilege log, would have been enough to show irreparable harm, but as we have already noted, the descriptions that Grange did provide were not enough to require that the Court of Appeals find great and irreparable harm.
But more importantly, "the burden of proving that a privilege applies rests on the party claiming its benefit."
E. Trial Court's Failure to Conduct an In Camera Review
As a final matter, we address Grange's initial substantive claim that the trial court "erred as a matter of law" by not conducting an in camera review of the requested discovery. This is simply an incorrect statement of the law in Kentucky. "[T]he decision whether to engage in in camera review rests within the sound discretion of the trial court."
The majority of the disputed discovery requests are sufficiently relevant so as not to require a writ of prohibition. But some of the discovery that Wilder seeks — the advertising information under Request for Production No. 3; certain personal aspects of the personnel records under Request for Production No. 11 including original job applications, marital information, tax and dependant data, medical information, health insurance data, worker's compensations claims, and retirement account data; and records showing average amounts paid on other claims under Request for Production No. 13 — is not relevant to the litigation underlying this case. As such, a writ of prohibition under Bender's certain special cases exception should issue as to those discovery requests.
We affirm in part and reverse in part, and thus remand this matter to the Court of Appeals for entry of a writ of prohibition in conformity with this opinion.