LAWRENCE HANDORF BOAGF HOLDCO LP PHT HOLDING II LP v. MILLIMAN INC (2024)

ORDER

Before the Court is a Motion to Compel Non-Party Milliman, Inc. filed by Plaintiffs Lawrence Handorf, BOAGF Holdco LP and PHT Holding II LP (“Plaintiffs”) on February 29, 2024. (Doc. 1.) On March 1, 2024, Plaintiffs filed a Memorandum of Law in Support of Motion to Compel Non-Party Milliman, Inc. (Doc. 5.) Non-Party Milliman, Inc. filed a timely resistance on March 24, 2024. (Doc. 27.) On April 8, 2024, Plaintiffs filed a Reply. (Doc. 35.) Neither party has requested oral argument or a hearing and I conclude that a hearing is unnecessary.

I. BACKGROUND

A. The nature of the dispute

In the underlying lawsuit, BOAGF Holdco LP, et al. v. Transamerica Life Insurance Company, 23-CV-32-CJW, Plaintiffs claim Transamerica Life Insurance Company (“Transamerica”) breached universal insurance policy contracts when it raised the policies' monthly deduction rates or MDRs.¹ Plaintiffs in the underlying action seek damages based on breach of the policy terms that govern how the MDR is to be calculated. Plaintiffs allege,

Transamerica retained Milliman to develop the MDR increase, to create actuarial assumptions on which the MDR increase was modelled, and ultimately to calculate the actual percentage increase applied to each policy in the putative class. Over a 1.5-year period, Milliman dedicated a team of more than 12 actuaries and consultants across seven offices to work on the MDR increase. While Transamerica made the ultimate decision to impose the MDR increase on Class Members, “Milliman made decisions” about “certain actuarial issues” for the MDR increase.

(Doc. 5 at 2.)

Plaintiffs served a subpoena upon Milliman. Milliman served written objections, but seems to have largely complied with the subpoena producing, as Milliman frequently notes, more than 220,000 pages of records. At issue is the following request:

REQUEST FOR PRODUCTION NO 1: ALL DOCUMENTS CONCERING the 2021 MDR INCREASE, including without limitation:

․

(c) All internal COMMUNICATIONS CONCERNING the 2021 MDR INCREASE[.] ․

(Doc. 6-6 at 13-14.)

The parties have narrowed the issue now before the Court to certain documents that Milliman has declined to produce in response to this request, i.e., (1) Milliman's internal communications to or from three of its employees regarding the MDR increase and (2) internal emails or notes summarizing Milliman's high-level communications with Transamerica representatives. Other facts will be discussed as necessary.

II. DISCUSSION

A. The parties' arguments

Plaintiffs emphasize Milliman's key role in the MDR increase. Milliman was engaged by Transamerica to perform an analysis and recommendations regarding potential MDR increases. Plaintiffs describe “Project Incline” as an approximately two-year project wherein Transamerica hired Milliman to assess “whether adjustments to [MDRs] would bring the policies back to originally expected financial performance on a going forward basis.” (Doc. 5 at 6 (citation omitted.)) This work culminated in Milliman's report and recommendations for MDR increases on various life insurance products.

Plaintiffs allege that more than a dozen actuaries and other staff communicated internally about the project to coordinate the work and make decisions about the report and recommendations. (Id. at 7.) Three Milliman employees were identified by Transamerica as having discoverable information, Kristen Koon, Novian Junus, and David Cook, as well as four Transamerica employees who had “high-level” meetings with Milliman. Plaintiffs argue that contrary to Milliman's objection the internal communications by these Milliman employees and documentation of communications with Transamerica employees are relevant.

Plaintiffs also deny that any undue burden would be caused by the requested production. Plaintiffs assert the burden would consist of searching ESI for about 12 custodians for “negotiated” terms. (Doc. 5 at 16.) At this stage it is not clear if terms have already been agreed to (perhaps in the context of other searches) or those terms remain to be agreed to. Plaintiffs contend that the additional work associated with this search is de minimis (they call it a “drop in the bucket”) when compared with the work performed to date. Plaintiffs also assert that there is no undue burden based on the additional cost because Transamerica will pay Milliman to perform the work. Finally, Plaintiffs assert that, based on what they claim are significant increases in the MDR caused by Milliman's work, the burden is proportional.

Milliman notes it has largely complied with the subpoena by supplying over 220,000 pages of documents, devoting many hours to the response, and incurring attorney fees. Milliman argues that even if Transamerica has paid for its employees' time in responding to the subpoena, its employees have lost the opportunity to work on other matters and it has still incurred attorney fees (and in-house attorney time) in responding.

Milliman contends its internal communications and notes of communications with Transamerica cannot be relevant because they were never sent to Transamerica. Also, irrelevant, according to Milliman, are its “proprietary information, techniques, software, and commercially sensitive documents.” (Doc. 27 at 3.) Milliman argues that even though its work is admittedly relevant to Plaintiffs' claims, the Court should not permit discovery of its “internal, private and sensitive communications.” (Id.) Milliman is concerned that granting the motion would “have a chilling effect on employees' future abilities to communicate freely and honestly with one another on work projects, and on companies' efforts to retain and withhold from production to litigants and adverse actors the confidential and proprietary inner-workings of how they conduct business.” (Id. at 4.)

Milliman stresses the fact that it is a third party for whom the Court should accord special concern in balancing competing needs. Milliman contends Plaintiffs failed to avoid imposing an undue burden on it as a third party who does not welcome disclosure of the “internal communications and commercially sensitive and proprietary information now sought by Plaintiffs.” (Id. at 15.) Finally, Milliman asserts that requiring it to produce its internal communications would have “chilling effect on its business, innovation and freedom of thought.” (Id.)

In their reply, Plaintiffs argue that Milliman's internal communications are relevant because they may reflect Milliman employees' frank and unguarded statements about the MDR analysis and be used for impeachment. They argue that the materials are relevant because they may contain notes about communications with Transamerica regarding “high-level meetings and status updates.” Plaintiffs contend that the fact that all these documents were not shared with Transamerica is immaterial because scienter is not an element of the breach of contract claims against Transamerica and the documents may reflect the reasoning behind the MDR increase. Plaintiffs point out that Transamerica outsourced actuarial analysis to Milliman and, therefore, its internal discussions may show the reasons for the methodology it employed.

Plaintiffs also argue that while Milliman has explained its efforts to comply with the subpoena to date, it has not provided any support for its contention that the remaining response would prove burdensome. Plaintiffs assert that Milliman's status as a third party does not protect its internal communications from discovery and that, as a consultant hired by Transamerica to perform actuarial analysis for the MDR review, Milliman's interest in “freedom of thought” is qualitatively different from entities who have been afforded protection from production of internal communications.

B. Applicable Standards

Federal Rule of Civil Procedure 45(d) requires attorneys responsible for issuing subpoenas to avoid undue burden and expense on a person subject to the subpoena. A subpoena must be quashed or modified under certain circumstances:

On timely motion, the court for the district where compliance is required must quash or modify a subpoena that:

(i) fails to allow a reasonable time to comply;

(ii) requires a person to comply beyond the geographical limits specified in Rule 45(c);

(iii) requires disclosure of privileged or other protected matter, if no exception or waiver applies; or

(iv) subjects a person to undue burden.

Fed. R. Civ. P. 45(d)(3)(A).

Rule 45(e)(1)(D) provides:

The person responding need not provide discovery of electronically stored information from sources that the person identifies as not reasonably accessible because of undue burden or cost. On motion to compel discovery or for a protective order, the person responding must show that the information is not reasonably accessible because of undue burden or cost. If that showing is made, the court may nonetheless order discovery from such sources if the requesting party shows good cause, considering the limitations of Rule 26(b)(2)(C). The court may specify conditions for the discovery.

Other rules regarding discovery are worth bearing in mind. Rule 26(b) governs the scope of discovery in general. Unless otherwise limited by court order, the scope of discovery is as follows:

Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.

Subsection 26(b)(2)(C) provides that the court “must limit” the extent of discovery if it determines:

(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 proposed discovery is outside the scope permitted by Rule 26(b)(1).

Rule 26(b)(2)(C) “should be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding.” Fed. R. Civ. P. 1. Rule 34(a) provides for discovery by production requests “within the scope of Rule 26(b).” A party may obtain, as of right, discovery “relevant to any party's claim or defense.” 8 Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 2008 (3d ed. 2010).

C. Analysis

The documents Plaintiffs seek are relevant.

The MDR increase and how it was arrived at is at the heart of this case. Milliman was intimately involved in the analysis that supported Transamerica's decision to impose an increase. Had Transamerica performed the analysis in-house, its internal communications would unquestionably be a relevant target for discovery regarding the reliability of that analysis. The fact that Transamerica chose to have the analysis performed by a third party does not change the relevance of the communications among the actuaries who performed it. Not having seen the documents Milliman has declined to produce, I cannot predict their content. The documents being sought might be wholly inconsequential and contain nothing that impeaches the people performing the analysis. Then again, they could contain anything from statements showing a bias in favor of their client to technical discussions of the analysis that only actuaries or others well versed in the subject matter would identify as material to the reliability of the analysis.

The fact that the internal communications were not shared with Transamerica does not change their relevance to the analysis performed for the MDR decision. By way of analogy, a physician might not communicate all the reasoning supporting a course of treatment to a patient. That does not mean that the physician's consultation with others about the diagnosis or the treatment is irrelevant to a subsequent inquiry into the basis for the treatment recommendation. The same rationale applies here. The discussion among the people who performed the analysis about that analysis is sufficiently relevant to their recommendation regarding the MDR to permit the requested discovery. The notes of “high-level” meetings between Transamerica and Milliman employees are, if anything, more relevant. While the internal communications may show frank communications among Milliman employees, these notes may show frank communications with Transamerica about the MDR analysis that were not included in the project deliverables or written communications.

2. Milliman has not established the existence of an undue burden on it to produce the requested records.

“[F]ederal courts are particularly mindful of Rule 45's undue burden and expense limitations.” Progressive Cas. Ins. Co. v. F.D.I.C., 302 F.R.D. 497, 504-05 (N.D. Iowa 2014) (citing Miscellaneous Docket Matter No. 1 v. Miscellaneous Docket Matter No. 2, 197 F.3d 922, 927 (8th Cir. 1999); American Broadcasting Cos. v. Aereo, Inc., No. 13-MC-0059, 2013 WL 5276124, at *7 (N.D. Iowa Sept. 17, 2013); Precourt v. Fairbank Reconstruction Corp., 280 F.R.D. 462, 467 (D.S.D. 2011)).

This Court has noted:

If a subpoena subjects a person to undue burden, then it must be quashed by the Court. Fed.R.Civ.P. 45(c)(3)(A)(iv). That is, “[e]ven if relevant, discovery is not permitted where no need is shown, or compliance would be unduly burdensome, or where harm to the person from whom discovery is sought outweighs the need of the person seeking discovery of the information.” Micro Motion, Inc. v. Kane Steel Co., Inc., 894 F.2d 1318, 1323 (Fed.Cir.1990) (emphasis in original).

Factors which may be considered by the Court in determining whether an undue burden exists include: (1) relevance of the information requested; (2) the need of the party for the documents; (3) the breadth of the discovery request; (4) the time period covered by the request; (5) the particularity with which the party describes the requested documents; and (6) the burden imposed. Precourt, 280 F.R.D. at 467. Syncbak has the burden of proving that compliance with the subpoena creates an undue burden. Id. When a non-party is subpoenaed, however, the Court is “particularly mindful” of Rule 45's undue burden and expense cautions. Id. See also Miscellaneous Docket Matter No. 1, 197 F.3d at 927 (“concern for the unwanted burden thrust upon non-parties is a factor entitled to special weight in evaluating the balance of competing needs”).

Aereo, 2013 WL 5276124, at *7.

Milliman is obviously a third party for this analysis. However, not all third parties are equally above the fray in disputes over subpoenas. Milliman relies on Aereo where the American Broadcast Company (“ABC”) sued Aereo for copyright infringement over Aereo's recording and retransmitting ABC broadcasts. This Court found Aereo was not entitled to certain records from a third-party that was developing competitive technology in which ABC had invested. Milliman also relies on Virginia Dept. of Corrections v. Jordan, 921 F.3d 180, 183 (4th Cir. 2019), a dispute over a third-party subpoena where death-row inmates were challenging Mississippi's lethal-injection procedures. While the Virginia Department of Corrections had experience with lethal injection and provided significant discovery, it was not essentially involved in the underlying Mississippi dispute.

In contrast, Milliman is far from being a stranger to the underlying dispute. Milliman has been asked to provide records that were created solely while performing the MDR analysis that it was paid to perform and regarding the policies at issue in the case at bar. Milliman has not been asked to provide records about other MDR analyses it has performed for Transamerica or other clients.² Unlike the third parties in Aereo or Jordan whose involvement was tangential or merely coincidental, Milliman was directly involved in the issues before the Court. Hence, any concern about imposition on a third party is diminished.

Moreover, Milliman has not established that the burden of producing the requested records is undue. The Court must determine if the information is not reasonably accessible because of undue burden or cost. See Fed. R. Civ. P. 45(e)(1)(D). Whether data is “not reasonably accessible because of undue burden or cost” turns on “factors such as the complexity of the ESI and the nature of the media on which the ESI is stored.” KAIST IP US LLC v. Samsung Elecs. Co., No. 2:16-CV-01314-JRG-RSP, 2017 WL 9937760, at *2 (E.D. Tex. Dec. 21, 2017) (citing Zubulake v. UBS Warburg LLC, 217 F.R.D. 309, 318–19 (S.D.N.Y. 2003) (“[W]hether production of documents is unduly burdensome or expensive turns primarily on whether it is kept in an accessible or inaccessible format (a distinction that corresponds closely to the expense of production).”))).³

Milliman repeats that it has produced more than 200,000 documents to date.⁴ This number is not meaningful by itself. With electronically stored information, a page count does little to explain the difficulty of locating and producing the documents. However, Milliman asserts that its employees have spent approximately 120 hours responding to the subpoena, with 65 of those hours from principal and consulting actuary Kristen Koon. (Doc. 27 at 6.) This is certainly a significant time commitment. It might be too much to ask a stranger to the litigation to comb through records to that extent. As stated above, however, Milliman was intimately involved in the MDR analysis, and the time commitment is not undue. In reaching this conclusion I have considered the factors listed in Aereo: “(1) relevance of the information requested; (2) the need of the party for the documents; (3) the breadth of the discovery request; (4) the time period covered by the request; (5) the particularity with which the party describes the requested documents and (6) the burden imposed.” 2013 WL 5276124, at *7. The relevance of and the need for the records is discussed above. There is no issue respecting the breadth of the request, the time period, or the description of the records. The “burden imposed” is the subject of this portion of my ruling.

Transamerica's payment for Milliman's time in responding to the subpoena presents an interesting issue that is not the focus of the parties' briefing. Milliman notes,

While Transamerica, pursuant to terms agreed upon when Milliman was initially retained in August 2020, has paid Milliman for the time that Milliman employees have spent in responding to Plaintiffs' third-party subpoena, Transamerica has not paid—and will not be paying—Milliman for the time spent by either its in-house counsel or outside counsel in responding to Plaintiffs' subpoena, preparing for and appearing at Ms. Koon's deposition, or responding to this motion.

(Doc. 27 at 8.) The fact that Milliman is being paid for its time (if not its attorney fees) seems to lower the burden on Milliman. In reality, however, the expense does not disappear but is merely shifted to Transamerica. The Court has an obligation to ensure “the just, speedy, and inexpensive determination of every action and proceeding.” Fed. R. Civ. P. 1 (emphasis added). Thus, I cannot ignore the expense merely because it has been shifted to one of the parties. On the other hand, the fact that Milliman and Transamerica apparently foresaw the possibility of compensating Milliman for these services and included it in their contract, supports my conclusion above that Milliman, though a third party, is intimately involved in the dispute.

Finally, while Milliman describes the overall burden associated with its response to the subpoena, it does not show what marginal increase in the burden, if any, might arise from providing the remaining records in dispute. The requests in the subpoena seem to comprehensively cover documents in Milliman's possession regarding the MDR analysis. It would be somewhat surprising to find that Milliman has not already identified and segregated the disputed internal correspondence and notes of meetings with Transamerica while preparing its responses to the undisputed requests. Or it may be, as Plaintiffs suggest, that the marginal burden is to collect internal communications from approximately 12 custodians and search them for agreed ESI terms (Doc. 5 at 16.) In any event, Milliman has not shown the remaining documents at issue are not reasonably accessible because of undue burden or cost.

3. Whether there is good cause to require the production

If Milliman had established the data sought is not reasonably accessible, I would need to establish if there was good cause to order the production under Rule 45(e)(1)(D) “considering the limitations of Rule 26(b)(2)(C).” I will address this issue for the sake of completeness. Neither party references the limitations of Rule 26(b)(2)(C) which states:

On motion or on its own, the court must limit the frequency or extent of discovery otherwise allowed by these rules or by local rule if it determines that:

(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 proposed discovery is outside the scope permitted by Rule 26(b)(1).

I find no basis to conclude that any of these limitations applies. Indeed, there seems to be no source for the subpoenaed information, other than from Milliman. Moreover, as stated above, the information sought is within the scope of Rule 26(b)(1).

4.Alleged proprietary information and privilege issues

Although Milliman makes passing references to “commercially sensitive and proprietary information” (see e.g., Doc. 27 at 11), it has not explained what makes the information commercially sensitive or proprietary, except for the chilling effect discussed below. Merriam–Webster Online Dictionary defines the adjective “proprietary” to mean:

1: of, relating to, or characteristic of a proprietor: proprietary rights

2: used, made or marketed by one having the exclusive legal right: a proprietary process; proprietary software

3: privately owned and managed and run as a profit-making organization: proprietary clinic

(Merriam–Webster Online, www.merriam-webster.com/dictionary/proprietary following proprietary (adjective)). Milliman has not, for example, explained how any trade secrets, formulas, customer lists, or other sensitive business information is at risk of disclosure if its internal communications or notes of meetings with Transamerica are produced. Nor has it explained why the protective order entered in the underlying litigation would not suffice to keep such information from being divulged beyond this litigation. July 27, 2023 Amended Stipulated Protective Order filed in underlying Case No. 23-cv-32-CJW at Doc. 92.

Rather, Milliman has expressed a concern about the

chilling effect on employees' future abilities to communicate freely and honestly with one another on work projects, and on companies' efforts to retain and withhold from production to litigants and adverse actors the confidential and proprietary inner-workings of how they conduct business, lest a simple third-party subpoena is served and a motion to compel is threatened.

(Doc. 27 at 4.)

No doubt Milliman's employees (perhaps like many people) would feel freer to communicate frankly in their internal communications if they were confident those communications were protected from disclosure. Milliman has not expressly claimed that any privilege protects its internal communications or its notes of communications with Transamerica from disclosure. Plaintiffs note that the engagement letter in which Transamerica retained Milliman stated the intent to protect communications between Milliman and Transamerica as work-product or attorney-client protected. (Doc. 5 at 8.) Plaintiffs also cite cases where efforts to invoke these privileges were rejected. (Id. at n. 6.) Milliman is not, however, resisting production of the documents based on a formal privilege. Rather, Milliman resists production based on its status as a third party and based on certain policy considerations, such as the need to encourage frank internal communications among its employees.

Encouraging frank communications is a principal purpose supporting testimonial and disclosure privileges that have been recognized. For example, the purpose of the attorney-client privilege is “to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice.” Upjohn Co. v. United States, 449 U.S. 383, 389 (1981).

I am not aware of any recognized privilege that protects communications with or among the employees of a third-party actuary. Nor, to be fair, has Milliman argued such a privilege exists. Instead, Milliman has identified cases where Courts have been reluctant to permit discovery of such internal communications. I find those cases distinguishable. In Whole Woman's Health v. Smith, the district court compelled document production of the Texas Conference of Catholic Bishops' internal communications about abortion. 896 F.3d 362, 364 (5th Cir. 2018), as revised (July 17, 2018). The Fifth Circuit reversed the order permitting discovery in large part due to concerns about privileges arising under the “the free exercise, freedom of speech, freedom of assembly, and freedom of petition guarantees of the First Amendment, [and] the Religious Freedom Restoration Act.” Id. at 366. These concerns are wholly absent in the case at bar.

Milliman also relies on In re Methyl Tertiary Butyl Ether (MTBE) Products Liab. Litig., 269 F.R.D. 360, 362 (S.D.N.Y. 2010) where the plaintiffs subpoenaed The Hamner Institute for Health Sciences (“Institute”) seeking production of documents relating to an MTBE study it was conducting. The court noted,

It is not uncommon for courts to quash subpoenas seeking discovery from research institutions out of a concern “that permitting discovery in these situations ‘inevitably tend[s] to check the ardor and fearlessness of scholars, qualities at once fragile and so indispensible (sic) for fruitful academic labor.’ ” [Footnote omitted.] Indeed, this concern is at its peak when a party seeks, as CVWD does here, the internal communications or work product [footnote omitted] of the research body—as revealing these discussions may discourage researchers from freely expressing positions that, although controversial, need to be tested.

In re MTBE, 269 F.R.D. at 364–65. Citing the “value of academic freedom,” the Court quashed the subpoena relating to its internal communications. Concerns about academic freedom are not present in the case at bar.

In re MTBE's conclusion in ordering production of the Institute's communication with the party funding its research is particularly helpful:

While it is necessary to ensure that the values of academic freedom are protected, the Hamner Institute, by virtue of its connection to ExxonMobil, is not entitled to the same level of protection ordinarily accorded to non-party research institutions. The Institute commenced its MTBE study with the knowledge that ExxonMobil was a defendant in this MDL and that the study was likely to play a role in this litigation. It cannot therefore claim that it was unaware that its results would be scrutinized by the plaintiffs who are now seeking information relating to the study.

Id. at 365. Thus, I conclude that Milliman has not established any privilege (or any policy concern that falls short of a formal privilege) that would prevent production of the requested records.

III. CONCLUSION

For the reasons set forth herein, Motion to Compel Non-Party Milliman, Inc. filed by Plaintiffs Lawrence Handorf, BOAGF Holdco LP and PHT Holding II LP (Doc. 1) is granted. Milliman shall produce the requested records by May 10, 2024.

IT IS SO ORDERED this 26th day of April, 2024.

FOOTNOTES

1.   I gather from the underlying lawsuit that, at least from the Plaintiffs' perspective, a higher MDR results in larger deductions that redound to Transamerica's benefit. That is, Transamerica earns more money, and the policies accumulate less.

2.   Or, at least, a dispute about the records of other projects is not before the Court.

3.   KAIST involved the identical language (i.e., “not reasonably accessible because of undue burden or cost” contained in Fed. R. Civ. P. 26. 2017 WL 9937760, at *2.

4.   Milliman also points out that it has produced a witness for a seven-hour deposition.

Mark A. Roberts, United States Magistrate Judge Northern District of Iowa