10 Fla. L. Weekly Supp. 379a
Insurance — Personal injury protection — Discovery — Production of documents — Appeals — Certiorari — Order compelling production of documents causes irreparable harm sufficient to permit certiorari review and departs from essential requirements of law by allowing medical provider to obtain premature discovery in support of unripe bad faith claim entirely unrelated to provider’s underlying PIP claims as assignee of insured and requiring production of document that may be protected by trade secret privilege without first conducting in camera review — Discovery sought to show insurer’s reasons for paying bills at preferred provider rates is not relevant to claim for insurance benefits — Privilege — Trade secrets — Argument that insurer failed to provide evidence to support assertion that document contains trade secrets lacks merit where, by failing to conduct in camera inspection, trial court refused to even reach stage where insurer could submit evidence on trade secrets — Insurer did not waive trade secrets privilege regarding agreement between insurer and software company by asserting affirmative defense based on agreements between insurer and PPO network and between medical provider and PPO network — Claim of trade secrets privilege was also not waived by insurer’s failure to file privilege log where, because insurer raised trade secrets objection to only one discovery request, it was clear which privilege insurer was invoking for which document — Trial court’s offer to seal document after insurer produced it is inadequate substitute for in camera inspection prior to production — Order compelling production quashed
NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Petitioner, v. AUGUSTINE V. JOSEPH, M.D., P.A., Respondent. Circuit Court, 9th Judicial Circuit (Appellate) in and for Orange County. Case No. 02-CA-9257. Writ No. 02-60. March 3, 2003. Petition for Writ of Certiorari. Counsel: Charles Tyler Cone and Shannon H. Campbell, Fowler, White, Boggs, Banker, P.A., Tampa, for Petitioner. Glenn Klausman, Jacobs & Goodman, P.A., Altamonte Springs; and Paolo Longo, Maitland, for Respondent.
(Before COHEN, SMITH, M., and GRINCEWICZ, JJ.)
FINAL ORDER GRANTING PETITIONFOR WRIT OF CERTIORARI
(PER CURIAM.) Petitioner, Nationwide Mutual Fire Insurance Company (“Nationwide”), seeks certiorari review of a nonfinal order of the trial court compelling Nationwide to produce certain documents in response to Respondent’s, Dr. Augustine V. Joseph’s, (“Joseph”) discovery request. Nationwide claims that the irreparable harm suffered by production of these documents is sufficient to permit the review. This Court has jurisdiction pursuant to Florida Rule of Appellate Procedure 9.030(c)(1)(B).Factual and Procedural Background
Joseph filed two suits against Nationwide as the assignee of two Nationwide insureds, Harbiyeh and Odeh Mouala, injured in an automobile accident. The only claims in the suits were claims for personal injury protection (PIP) benefits due to the Moualas as a result of their treatment with Joseph. Joseph alleged that Nationwide refused to pay for certain medical care provided by himself, which was reasonable, necessary and related to the accident.
Nationwide denied this allegation and raised affirmative defenses. In one of those affirmative defenses, Nationwide alleged that both Joseph and Nationwide subscribe to the Beech Street and/or CCN Provider Organization Network. By operation of these subscriptions, Nationwide’s insured was entitled to medical services at a pre-arranged, contractual rate.
Based on the issues framed by the pleadings, Nationwide produced to Joseph:
— A copy of the Moualas’ auto policy with Nationwide and a copy of the declarations page for that policy;
— Copies of the claim forms submitted to Nationwide for the Moualas’ treatment;
— Copies of the explanation-of-benefits forms for the Moualas’ treatment;
— A copy of the PIP payout log for the Moualas’ treatment;
— A copy of a contract between Joseph and CCN, the preferred-provider organization referred to in Nationwide’s affirmative defense;
— A copy of the CCN’s fee schedule;
— A copy of an agreement between Nationwide and CCN;
— Affidavits from Nationwide and CCN testifying that the agreement between Nationwide and CCN provided access to CCN’s PPO network to insureds of Nationwide.
Nationwide objected to the remainder of Joseph’s requests for production on various grounds. Of particular relevance to the present proceedings, Nationwide objected to production of documents containing information that was irrelevant to Joseph’s claims for PIP benefits on the ground that the information sought was aimed at a “bad-faith” claim that could not be brought until Nationwide’s liability for, and the amount of, Joseph’s underlying claims for PIP benefits had been established. Nationwide also raised an objection that part of the information requested is a trade secret and therefore is proprietary in nature.
Joseph filed a motion to compel asking the lower court to overrule Nationwide’s objections. Joseph argued that the discovery at issue was relevant “to show a scheme” to pay Joseph’s bills at PPO rates, to show “the exorbitant profits” that Nationwide could make by paying those rates, to show that Nationwide “has knowledge” that the PPO rates were lower than non-PPO rates, to show “the exorbitant financial profiteering” by Nationwide, and, in general, to show Nationwide’s “reason” for paying Joseph’s bills at PPO rate.
The lower court heard Joseph’s motion to compel on September 9, 2002, along with Nationwide’s motion for protective order that raised, in part, the same issues. The lower court overruled Nationwide’s objections to Joseph’s requests for production.
As to Nationwide’s trade-secret objection, the lower court ruled, “The fact that third parties may be involved in this sort of thing is of no significant concern to the Court.” The lower court then ruled, “If your client believes that any of those things are proprietary or trade secret or otherwise so confidential as to keep them from public view, I have no problem whatsoever with you identifying such in some appropriate motion and asking for that to be sealed.”
The lower court then ruled that the documents would have to be produced “twenty days from today [September 9].” The lower court directed Joseph’s counsel to prepare a written order and deliver it to Nationwide’s counsel to be signed before it was submitted. Joseph’s counsel did not actually submit a proposed order to Nationwide’s counsel until September 18, 2002. The lower court did not sign the order until September 24, 2002. Because this timing left Nationwide only four working days to prepare and file a petition for writ of certiorari seeking review of the order, Nationwide moved the lower court to stay the order.
The lower court denied Nationwide’s motion for stay. In its discovery order, the lower court found “the documents requested in the Plaintiff’s Motion to Compel Production of Documents are relevant and discoverable, based upon this Defendant’s claim to entitlement to the Plaintiff’s CCN managed care network discount rate.”
Based on this finding, the lower court granted Joseph’s motion to compel with one exception, the request for copies of invoices, cancelled checks, and evidence of payment. The sole basis for the exception was that “it is anticipated the production of the other documents . . . will obviate the need” for the documents excepted.
As to Nationwide’s objection based on the trade-secret privilege, the lower court ruled:
If the Defendant claims a document is “proprietary” or “trade secret,” that document is to be produced to plaintiff’s counsel and plaintiff’s counsel is ordered to not disseminate the document until a court determination whether the document shall remain subject to this confidentiality order. The Defendant shall identify for Plaintiff’s counsel each document asserted to be “proprietary” or “trade secret.” If plaintiff’s counsel chooses to challenge the claims of “proprietary” or “trade secret,” the challenged documents may be filed under seal for an in camera review by the Court, upon motion and proper Notice to the Defendant.
At no time did the lower court undertake an in camera inspection of the documents prior to requiring their production to Joseph’s counsel.
On September 27, 2002, Nationwide concomitantly filed a Petition for Writ of Certiorari seeking to quash the lower court’s “Order Compelling Defendant to Produce Documents” dated September 24, 2002, and an “Emergency Motion to Stay Lower Tribunal’s ‘Order Compelling Defendant to Produce Documents’ Pending Review.”
On October 3, 2002, an “Order Granting in Part and Denying in Part ‘Emergency Motion to Stay Lower Tribunal’s ‘Order Compelling Defendant to Produce Documents’ Pending Review’ ” was issued. This Court determined that Nationwide had raised the trade secrets privilege only in response to Request Number Five, attached to the Petition for Writ of Certiorari as Appendix 8. Petitioner’s responses to request numbers six through twenty raise the objection that the requested documents are irrelevant. This Court found that Nationwide will suffer irreparable harm if compelled to disclose the documents responsive to Request Number Five. In addition, Nationwide did demonstrate a likelihood of success on the merits as to those documents, as it appeared that the lower tribunal ordered Nationwide to produce those documents without first determining whether they do contain trade secrets. Scientific Games, Inc. v. Dittler Brothers, Inc., 586 So. 2d 1128, 1131 (Fla. 1st DCA 1991) (when confronted with claim of trade secrets privilege, trial court must first determine if documents contain trade secrets).
Thus, this Court held Nationwide did not demonstrate that it will be irreparably harmed by disclosure of the documents responsive to requests numbered six through twenty. The lower tribunal’s “Order Compelling Defendant to Produce Documents,” was stayed as it related to the production of documents responsive to Joseph’s “Supplemental Request for Production” of Request Number Five pending certiorari review by this Court. The lower tribunal’s “Order Compelling Defendant to Produce Documents,” was not stayed as it related to the production of documents responsive to Joseph’s “Supplemental Request for Production” of requests numbered six through twenty.
On November 26, 2002, Joseph filed a “Response to Petition for Writ of Certiorari.” On December 26, 2002, Nationwide filed its “Reply to Response to Petition for Writ of Certiorari.”Standard of Review
In reviewing a nonfinal order, for which no appeal is provided by statute, this Court’s review by certiorari is limited only to whether the order departs from the essential requirements of law and whether it causes material injury to petitioner throughout the remainder of the proceedings below, effectively leaving no adequate remedy on appeal. Martin-Johnson, Inc. v. Savage, 509 So. 2d 1097 (Fla. 1987). This principle remains the appropriate standard in considering the grant of certiorari relief in pretrial discovery. Allstate Insurance Co. v. Boecher, 733 So. 2d 993 (Fla. 1999).Discussion
“Discovery in civil cases must be relevant to the subject matter of the case and must be admissible or reasonably calculated to lead to admissible evidence.” Residence Inn by Marriott v. Cecile Resort Ltd., 822 So. 2d 548, 549, citing to, Brooks v. Owens, 97 So. 2d 693, 699 (Fla. 1957). Furthermore, it is axiomatic that information sought in discovery must relate to the issues involved in the litigation, as framed in all pleadings. Krypton v. MGM-Pathe Communications Co., 629 So. 2d 852, 854 (Fla. 1st DCA 1993).
The threshold for certiorari review when a claim of privilege is not asserted is that a petitioner must affirmatively establish from the record that the disclosure of those alleged irrelevant documents would “cause material injury of an irreparable nature.” Allstate v. Langston, 655 So. 2d 91, 94 (Fla. 1995); Allstate v. Boecher, 733 So. 2d 993 (Fla. 1999). Joseph argues Nationwide has failed to meet this burden and thus the order compelling production should stand. Joseph further cites to Coyne v. Schwartz, Gold, Cohen, Zakarin and Kotler, P.A., 715 So. 2d 1021, 1023 (Fla. 4th DCA 1998) for the proposition that “to the extent that the matters are simply irrelevant, we dismiss the petition . . . . Production of irrelevant material does not rise to the level of irreparable harm for certiorari to lie.”
While it is accurate that case law certainly supports the position that discovery of irrelevant materials does not necessarily cause irreparable harm, it also provides that a litigant is not entitled to carte blanche irrelevant discovery. Allstate Insurance Company v. Langston, 655 So. 2d 91 (Fla. 1995). However, Nationwide argues that the materials sought are not simply irrelevant, but are premature discovery in support of an unripe “bad-faith” claim. Nationwide contends that this objection simply required the trial court to compare Joseph’s discovery requests with the issues framed by the pleadings and does not depend on any question of fact. The pleadings and discovery requests are all part of the record before this Court.
Joseph argues that Nationwide was required to submit the documents to the trial court to support its position that the discovery requested was in support of a premature “bad-faith” claim.
Joseph cites no authority for this proposition. Instead, Joseph cites Leon Shaffer Golnick Advertising, Inc. v. Cedar, 423 So. 2d 1015 (Fla. 4th DCA 1982) for the idea that Nationwide “presented no evidence in support of its claim” and that “mere allegations by Petitioner’s counsel” are insufficient. This case stands only for the proposition that argument of counsel cannot establish facts. Once again, this Court needs only to compare the discovery requests with the issues framed by the pleadings to determine that these requests are premature bad-faith discovery.
An order compelling discovery of certain types of information “may reasonably cause material injury of an irreparable nature.” Allstate Insurance Company v. Langston, 655 So. 2d 91, 94 (Fla. 1995). The Langston court went on to give two examples: (1) “ ‘cat out of the bag’ material that could be used to injure another person or party outside the context of the litigation,” and (2) “material protected by privilege, trade secret, work product, or involving a confidential informant.” Id.
The trial court’s “Order Compelling Defendant to Produce Documents” does cause irreparable harm in both ways described in Langston. First, the order requires disclosure of “cat out of the bag” material. The order allows Joseph to obtain bad-faith discovery that is entirely unrelated to his underlying claims for PIP benefits as assignee of Nationwide insureds. Once obtained, such discovery cannot be undisclosed and therefore constitutes irreparable harm. Allstate Insurance Company v. Baughman, 741 So. 2d 624 (Fla. 2d DCA 1999).
Second, the lower court has ordered Nationwide to produce documents that may be protected by the trade-secret privilege without first conducting an in camera review of the documents. This issue has already been decided in favor of Nationwide by this Court by “Order Granting in Part and Denying in Part ‘Emergency Motion to Stay Lower Tribunal’s “Order Compelling Defendant to Produce Documents” Pending Review,’ ” dated September 30, 2002. This Court found that Nationwide would suffer irreparable harm if compelled to disclose documents responsive to Joseph’s Request Number Five, the “Letter of Agreement” between CCN and Nationwide and all contracts and agreements between Nationwide and HNC Insurance Solutions and granted an emergency stay pending certiorari review.
Once irreparable harm is established, certiorari is appropriate “when a discovery order departs from the essential requirements of law.” Allstate Insurance Company v. Langston, 655 So. 2d 91, 94 (Fla. 1995). The trial court’s “Order Compelling Defendant to Produce Documents” dated September 24, 2002, departs from the essential requirements of law in two ways: (A) by allowing Joseph to engage in improper discovery to support a bad-faith claim without first establishing Nationwide’s liability for, and the amount of, Joseph’s claim for PIP benefits; and (B) by overruling Nationwide’s objection based on the trade-secret privilege without first undertaking an in camera inspection of the documents to be produced. As issue (B) has already been decided in favor of Nationwide by this Court, only issue (A) remains to be addressed.
As the Fifth District Court of Appeal has explained, there are essentially two types of claims an insured can have against an insurer: a claim for the benefits due under the policy, and a claim for bad faith in the handling of the underlying claim for benefits. “[A] claim for bad faith will lie when a carrier fails to properly perform its fiduciary duty to defend, but a claim for bad faith cannot be prosecuted when the parties simply disagree over the coverage issue. In such a case, the insurance company does not commit a separate tort by refusing to pay the claim.” Allstate Insurance Company v. Swanson, 506 So. 2d 497, 498 (Fla. 5th DCA 1987). Simply stated, there is no cause of action for bad faith until the underlying claim for benefits has been resolved.
The appellate courts of Florida have recognized that the issues in a bad-faith claim are radically different from the issues in the underlying claim for benefits. As a result, those courts have held that an order compelling discovery in support of a bad-faith claim when the underlying claim for benefits is still pending, is a departure from the essential requirements of law that causes irreparable harm that cannot be remedied on appeal. Swanson, 506 So. 2d at 498; Allstate Insurance Company v. Baughman, 741 So. 2d 624 (Fla. 2d DCA 1999); American Bankers Insurance Company v. Wheeler, 711 So. 2d 1347 (Fla. 5th DCA 1998); State Farm Fire & Casualty Company v. Martin, 673 So. 2d 518 (Fla. 5th DCA 1996).
Vest v. Travelers Insurance Company, 753 So. 2d 1270, 1271 (Fla. 2000) clearly states that “[b]ringing a cause of action for bad faith failure to settle is premature until there is a determination of liability or extent of damages owed on the first-party insurance contract.” This is further supported by section 624.155(1)(b)1, Florida Statutes. A first-party bad-faith claim against an insurer does not exist at common law, it must be brought under statute. State Farm Mutual Auto Insurance v. Laforet, 658 So. 2d 55 (Fla. 1995). In the instant case, Nationwide demonstrates that Joseph’s complaint confirms his admission that he is currently pursuing only a claim for PIP benefits. The issues in such a claim are simply what benefits were due and whether Nationwide timely paid them. Nationwide correctly argues the discovery requests at issue have nothing to do with those issues.
Joseph sought the discovery at issue to show Nationwide’s reasons for paying his bills at PPO rates. Nationwide contends that such issues may well be relevant to the issue of whether an insurer committed bad faith in the handling of a claim. There currently is no cause of action for bad faith. Joseph’s counsel argued that the discovery sought was relevant to “show a scheme,” to show “the exorbitant profits,” that Nationwide could make, to show that Nationwide “has knowledge” that PPO rates are lower than non-PPO rates, and to show “the exorbitant financial profiteering by” Nationwide. The reasons or motivations, financial or otherwise, for an insurer’s actions are simply not relevant to a claim for insurance benefits, which is what is at issue here.
The trial court did not need to review the documents sought to understand that these issues concern a cause of action for bad faith, not a claim for benefits, and therefore, that the documents sought were premature “bad-faith” discovery. “An insured’s underlying first-party action for insurance benefits against the insurer necessarily must be resolved before the cause of action for bad-faith in settlement negotiations can accrue.” Allstate Insurance Company v. Baughman, 741 So. 2d 624 (Fla. 2d DCA 1999). CCN is a network of providers with whom Nationwide contracts. Nationwide is obligated to use its best efforts to actively encourage eligible persons to use the CCN Network Providers if health care services are medically necessary to obtain those savings. Neither the amount of money Nationwide saves by participating in the PPO network nor the amount it pays to CCN has anything to do with the PIP benefits due to Joseph for his treatment of a Nationwide insured. Each one of Joseph’s counsel’s arguments confirm that the requested discovery has nothing to do with his underlying claim for benefits. None of the propositions Joseph intends to prove with the requested discovery have anything to do with the PIP benefits due to Joseph for his treatment of a Nationwide insured.
Joseph then argues that Nationwide “failed to provide any evidence, testimony, or affidavits to support counsel’s assertion that the document is ‘trade secret’ or ‘proprietary.’ ” However, Nationwide’s argument is that the trial court departed from the essential requirements of law by failing to conduct an in camera inspection of the document before requiring its production. Harley Shipbuilding Corporation v. Fast Cats Ferry Services, LLC, 820 So. 2d 445, 448 (Fla. 2d DCA 2002). The trial court refused even to reach the stage where Nationwide could submit evidence that the document contained trade secrets or other proprietary information.
Joseph then argues that Nationwide waived any privilege by “relying” on the document in its affirmative defense. Joseph sought production of “a copy of all contracts and agreements between Nationwide and HNC Insurance Solutions.” Nationwide’s affirmative defense, by contrast, was based on (1) an agreement between Nationwide and CCN and (2) an agreement between Joseph and CCN. HNC Insurance Solutions, a software company, was simply not part of the “tripartite arrangement” that formed the basis for Nationwide’s affirmative defense. It is undisputed that Nationwide has already produced the documents underlying the Nationwide, CCN, and Joseph arrangement.
Joseph also argues that Nationwide’s failure to file a privilege log, as required by Rule 1.280(b)(5), Florida Rules of Civil Procedure, waived the claimed privilege to the documents at issue. He cites TIG Insurance Corporation of America v. Johnson, 799 So. 2d 339 (Fla. 4th DCA 2001) for support of this argument. However, as the Second District Court of Appeal explained, a privilege log is necessary only to assist a trial court in assessing which privileges have been invoked for which documents, and which privileges have been waived. Harley Shipbuilding Corporation v. Fast Cats Ferry Services, LLC, 820 So. 2d 445, 448 (Fla. 2d DCA 2002). Here, Nationwide raised a trade secret objection to only one of Joseph’s discovery requests, a letter of Agreement between CCN and Nationwide as a licensed client of HNC Insurance Solutions. Therefore is it was clear which privilege Nationwide was invoking for which document. Each case which has been cited for the proposition that failure to provide a privilege log results in a waiver of the claimed privilege, deals with discovery requests in which there are hundreds of documents at issue. No privilege log was necessary.
Finally, Joseph argued that the trial court offered to seal the document after Nationwide had produced it. This is an inadequate substitute for an in camera inspection prior to production. American Express Travel Related Services, Inc. v. Cruz, 761 So. 2d 1206 (Fla. 4th DCA 2000); Rare Coin-It, Inc. v. I.J.E., Inc., 625 So. 2d 1277 (Fla. 3d DCA 1993).
Based on the foregoing, the lower court’s “Order Compelling Defendant to Produce Documents” departs from the essential requirements of the law and causes Nationwide irreparable harm that cannot be remedied on appeal.
Accordingly, it is hereby ORDERED and ADJUDGED that Petitioner Nationwide Mutual Fire Insurance Company’s Petition for Writ of Certiorari is GRANTED and the decision of the trial court’s “Order Compelling Defendant to Produce Documents” dated September 24, 2002 is QUASHED.
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