Volkswagen of America, Inc. v. Superior Court

Inc. (Volkswagen), for injuries he allegedly suffered as a result of asbestos exposure. In April 2005 Volkswagen requested the production of “all documents^[^[1] ] *3 [Rusk] submitted to a bankruptcy trust administering assets of’ any of 72 designated companies. Rusk objected on multiple grounds including that the requests invaded protected privacy interests. He produced no responsive documents. Volkswagen learned, however, that Rusk’s attorneys had submitted documents in the chapter 11 bankruptcy proceedings of Kaiser Aluminum & Chemical Company (Kaiser) and to a bankruptcy trust established to handle asbestos claims against Johns-Manville Corporation. Rusk subsequently acknowledged that he had filed a claim with a bankruptcy trust established to handle asbestos claims against Western MacArthur Co., but refused to produce any of those documents.

Petitioner brought a motion to compel the production of the Kaiser, Johns-Manville Corporation and Western MacArthur Co. documents, “and to produce any and all documents related to plaintiff’s submissions to bankruptcy trusts for his alleged asbestos-related disease.” Reasoning in part that the standard for discovery is affected by the ultimate admissibility of the information requested, the court ordered the disclosure of amounts Rusk had received in settlement from any of the trusts and the production of declarations submitted to the trusts signed by Rusk, but not of any documents signed by Rusk’s attorneys. The trial court order, dated December 9, 2005, states in pertinent part: “1. Documents submitted by or on behalf of plaintiff Buddy Rusk, Sr. to asbestos bankruptcy trusts are not privileged. However, other than documents signed by plaintiff under penalty of perjury, the court finds that these documents are confidential settlement documents which are not relevant, not admissible, and therefore not discoverable, except as follows: [f] 2. Plaintiff is ordered to produce all documents which he signed under penalty of perjury that are responsive to [Volkswagen’s] request for production of documents. ...[][] 3. Plaintiff is ordered to supplement his responses to [Volkswagen’s] request for production of documents to plaintiff [Set One], request Nos. 42, 44, and 72 in accordance with Code of Civil Procedure § 2031. Plaintiff is ordered to identify any documents which he has signed under penalty of perjury. Plaintiff is further ordered to identify any documents he has previously produced in this matter that are responsive to [Volkswagen’s] request for production of documents. Plaintiff is not required to produce a privilege log [or] to identify documents which he has not signed under penalty of perjury.”

Volkswagen’s production request or in its motion to compel production. Moreover, to illustrate the type of information it is seeking, Volkswagen submitted a copy of the proof of claim form that Rusk filed in the Kaiser bankruptcy proceedings.^[2] Rusk correctly points out that there is a difference between the bankruptcy court and a bankruptcy trust, and that the proof of claim form that a claimant must file with the bankruptcy court (Form BIO) is not necessarily the same as the claim form that is submitted to a bankruptcy trust, nor is the supporting documentation necessarily the same.

The record contains limited information concerning the operations of so-called “bankruptcy trusts.” The Manville Personal Injury Settlement Trust and the Western Asbestos Settlement Trust were each established by a bankruptcy court pursuant to plans of reorganization under chapter 11 of the Bankruptcy Code ( 11 U.S.C. § 101 et seq.), with limited funds to be used to settle asbestos exposure claims against the bankrupt company.^[3] Rusk’s attorneys assert that “[ejach bankruptcy trust establishes unique guidelines, procedures and forms for negotiating a claim with the trust.” So far as the record discloses, there is no such bankruptcy trust for Kaiser, and there is no indication as to the number of other companies included in the document request for which bankruptcy trusts have been established.

Not having access to the documents that Rusk submitted to the trusts, Volkswagen’s request for production was understandably broad: “all documents” submitted to the respective trusts. Rusk’s initial response consisted solely of objections and provided no disclosure that he had provided any materials to any of the trusts. Subsequently Rusk filed a supplemental

response in which, purportedly in compliance with Code of Civil Procedure section 2031.240, subdivision (b),^[4] he “identifie[d] plaintiff’s confidential settlement information packetfs] provided to” the Johns-Manville Corporation and Western Asbestos trusts, without any information as to the contents of these “packets.” In opposing the motion to produce, Rusk represented the following: “All documents relating to plaintiff’s claims filed with these Trusts contain both plaintiff’s and the Trust’s efforts to negotiate a settlement. These documents include plaintiff’s proof of claim form, the Trusts’ categorization and valuation of plaintiff’s claim, the Trusts’ offer and release form, if any, plaintiff’s acceptance or dispute of the Trusts’ categorization or evaluation, and any miscellaneous correspondence in furtherance of settlement.” Rusk also submitted with his opposition pages from the Western Asbestos Settlement Trust Web site entitled “Claim Packet Information—Critical Claim Documents” which indicate that much more is included in the packet. The documents “necessary to complete the claim process” include, among other things, a claim form with sections entitled “Diagnosis,” “Chest X-Ray,” “CT Scan,” “Pulmonary Function Test,” “Pathology Report,” “Land Exposure,” “Shipboard Exposure,” and “Secondary Exposure,” a “Traditional Occupation List,” a “Site List” and a “Ships List.” It is thus reasonable to assume that the submission to the bankruptcy trust includes information and possibly supporting documentation describing a claimant’s history of asbestos exposure and medical condition. The packet likely includes materials such as those described generally in Rusk’s attachment to the Kaiser proof of claim. (See fn. 2, ante.)

Thus, for present purposes we construe Volkswagen’s request to include all documentation submitted by Rusk to bankruptcy trusts, if they exist, for the specified companies. The request is not for proofs of claim or other documents filed with the bankruptcy court.^[5] Nor, contrary to the implication in Rusk’s opposition, does the request seek the production of documents prepared or submitted to him by the bankruptcy trust, which would include the trust’s evaluation of his claim and settlement offers.^[6] However, Volkswagen’s request is broad enough to encompass all materials submitted on Rusk’s behalf to the trust, including the amount of his claim, information

concerning his work history and medical condition, and supporting documentation. The request is also broad enough to include settlement proposals and statements that may have been made in connection with settlement negotiations.

Although both parties have taken unacceptably extreme positions concerning the documents that are or are not discoverable, their briefs address the relevant issues. In the interest of minimizing further disputation, we shall attempt to define the proper scope of production in response to Volkswagen’s request. In issuing a writ of mandate, the court is not limited by the wording of the prayer in the petition, but may grant relief as it deems appropriate. (Lockyer v. City and County of San Francisco (2004) 33 Cal.4th 1055 , 1113 [ 17 Cal.Rptr.3d 225 , 95 P.3d 459 ]; Sacramento City Police Dept. v. Superior Court (1984) 156 Cal.App.3d 1193 , 1197, fn. 5 [ 203 Cal.Rptr. 169 ], disapproved on other grounds in People v. Memro (1985) 38 Cal.3d 658 , 683, fn. 26 [ 214 Cal.Rptr. 832 , 700 P.2d 446 ].)

III. Discoverability Does Not Turn on the Admissibility of the Evidence or on Whether Documents Were Signed by Rusk

Code of Civil Procedure section 2017.010 authorizes the production of any nonprivileged document that “is itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence.” At the hearing on the motion to compel, the trial court correctly recited this standard, but also made a comment suggesting that the inadmissibility of a document might justify the denial of discovery.^[7] Paragraph 1 of its order, which made a finding of inadmissibility, seems to confirm that this factor was significant in determining the scope of the production ordered.

The admissibility of a document bears on its discoverability in the sense that if the document is admissible, it necessarily is discoverable. (Norton v. Superior Court (1994) 24 Cal.App.4th 1750 , 1760-1761 [ 30 Cal.Rptr.2d 217 ].) But the inverse is not necessarily true: the fact that evidence is not admissible does not mean that it is also not discoverable. A “claim that discovery is not warranted because the evidence disclosed would not itself be admissible is untenable. It is settled that admissibility is not prerequisite to

discovery.” (Davies v. Superior Court (1984) 36 Cal.3d 291 , 301 [ 204 Cal.Rptr. 154 , 682 P.2d 349 ]; see also Glenfed Development Corp. v. Superior Court (1997) 53 Cal.App.4th 1113 , 1117 [ 62 Cal.Rptr.2d 195 ] [“Admissibility is not the test, and it is sufficient if the information sought might reasonably lead to other, admissible evidence”]; Norton v. Superior Court, supra, 24 Cal.App.4th at pp. 1760-1761.)

Thus, Rusk’s argument that the documents Volkswagen seeks are protected from discovery by Evidence Code section 1152 provides no justification for the trial court’s ruling. Section 1152 provides, in pertinent part, that “[ejvidence that a person has, in compromise . . . furnished ... or promised to furnish money or any other thing ... to another who has sustained . . . loss or damage, as well as any conduct or statements made in negotiation thereof, is inadmissible to prove his or her liability for the loss or damage or any part of it.” Volkswagen maintains that, although neither statute precludes discovery here, Evidence Code section 1154 comes closer to providing the protection Rusk seeks. Section 1154 provides protection for offers to discount a claim.^[8] Volkswagen argues correctly that neither Evidence Code section 1152 nor section 1154 is dispositive because each is directed at the admissibility of evidence, not its discovery. This is clear from the language of both sections, which speak of the inadmissibility of evidence. This contrasts sharply, for example, with the language of Evidence Code section 1119 (protecting the confidentiality of mediations), which provides that no evidence of mediation proceedings “is admissible or subject to discovery.” (Evid. Code, § 1119, subd. (b).)

Furthermore, Evidence Code sections 1152 and 1154 are not absolute bars to admissibility, since a settlement document may be admissible for a purpose other than proving liability. (See, e.g., White v. Western Title Ins. Co. (1985) 40 Cal.3d 870 , 887 [ 221 Cal.Rptr. 509 , 710 P.2d 309 ], superseded by statute on other grounds in Ins. Code, § 12340.11 [admitting settlement offer not to prove liability for loss, but to prove breach of covenant of good faith and fair dealing]; Carney v. Santa Cruz Women Against Rape (1990) 221 Cal.App.3d 1009 , 1023-1024 [ 271 Cal.Rptr. 30 ] [admitting apology written pursuant to a settlement agreement to show the truth or falsity of statements in a newsletter]; Truestone, Inc. v. Simi West Industrial Park II (1984) 163 Cal.App.3d 715 , 725 [ 209 Cal.Rptr. 757 ] [statement in settlement letter admitting debt, admissible as an admission against interest].)

Although admissibility is not a prerequisite to discoverability, a heightened standard of discovery may be justified when dealing with information which, though not privileged, is sensitive or confidential. (See, e.g., Britt v. Superior Court (1978) 20 Cal.3d 844 , 855-856 [ 143 Cal.Rptr. 695 , 574 P.2d 766 ] [establishing a balancing test to protect private information such as associational privacy and medical histories that do not relate to conditions at issue in litigation]; Valley Bank of Nevada v. Superior Court (1975) 15 Cal.3d 652 [ 125 Cal.Rptr. 553 , 542 P.2d 977 ] [requiring special procedures to protect third parties’ bank records]; Boler v. Superior Court (1987) 201 Cal.App.3d 467 , 472 [ 247 Cal.Rptr. 185 ] [requiring a showing of “direct relevance” to prevent searching for marginally pertinent sensitive information].) Nonetheless, the cases that have approved a heightened standard are concerned primarily with protecting particularly sensitive matters, such as sexual or psychiatric histories, or the privacy interests of third parties. (See, e.g., Hinshaw, Winkler, Draa, Marsh & Still v. Superior Court (1996) 51 Cal.App.4th 233 , 237-239 [ 58 Cal.Rptr.2d 791 ] [settlement agreement of third parties].) In contrast, what is at issue here is information bearing on the very injury for which Rusk himself is suing Volkswagen. No third party interests are at stake.^[9] There is no reason to provide heightened protection for information concerning Rusk’s work history, which plainly is relevant and not confidential, or concerning his medical condition which is directly at issue and undoubtedly substantially disclosed in materials that have already been produced during the course of discovery.

Finally, we see no basis for limiting the production of material information to documents signed by the plaintiff himself rather than by his attorney, as the trial court did. Statements made by agents authorized to act on behalf of a party are admissible against that party. (Evid. Code, § 1222.) An adequate foundation must be laid to substantiate the authorization

(id., subd. (b)), but absent unusual circumstances this burden can ordinarily be met in the case of an attorney acting within the scope of his client’s representation. (See, e.g., Nissel v. Certain Underwriters at Lloyd's of London (1998) 62 Cal.App.4th 1103 , 1108-1109, fn. 7 [ 73 Cal.Rptr.2d 174 ] [letter by counsel to insurer contained an admission within the meaning of Evid. Code § 1222]; see also 32 CJ.S. (2005) Evidence, § 451 [the rule that “an attorney may make admissions of fact which will affect his client provided that the statement is made during the performance of duties of his employment within the actual or ostensible scope of the authority delegated and during the continuance of his agency” is nearly universally supported].) And in all events, a document containing relevant information may lead to the discovery of admissible evidence whether signed by the attorney or by the client.

Thus, the scope of production to which Volkswagen is entitled turns not on the factors relied on by the trial court, but requires careful analysis of the information that Volkswagen is seeking.

IV. The Discoverability of the Requested Materials Requires Consideration of the Types of Documentation Submitted to the Bankruptcy Trusts

Rusk characterizes the documents Volkswagen has requested as “confidential settlement information packets” but, as indicated above, the submissions contain diverse information and documentation. The proper resolution of this discovery dispute requires consideration of the different types of information included within the production request. So far as can be determined from the record now before us, there are at least three categories of information that should be considered.

1. Claim Forms

Whether included on a formal proof of claim form such as Form B10 used to assert a claim in bankruptcy proceedings, or on a similar form required by the bankruptcy trust, an individual seeking compensation from the trust necessarily will advise the trust of the amount of his or her claim.^[10] Rusk implies that the statement of this amount is necessarily a settlement

the claimant or by the claimant’s attorney. Or the information may be contained in documents prepared by others, such as personnel records or medical reports. If the latter, there ordinarily will be no question about discoverability since even the use in settlement negotiations of relevant documents prepared independently of those negotiations does not shield them from discovery. Even under Evidence Code section 1119, which exempts mediation proceedings from being admitted into evidence or discovered, the use of a writing in a mediation does not preclude that document from being admitted or produced in discovery unless it was specifically prepared for use in the mediation. (Evid. Code, § 1120; Rojas v. Superior Court (2004) 33 Cal.4th 407 , 417 [ 15 Cal.Rptr.3d 643 , 92 P.3d 260 , 93 P.3d 260 ].) Whether answers prepared by the claimant or the claimant’s attorney were prepared in the normal course of submitting a claim or as part of ongoing settlement negotiations may in some cases present a closer question, but there is no reason to presume the latter, and certainly not for the purposes of discovery. It will be time enough if and when such answers are offered in evidence at trial.

3. Attempts to Negotiate Compromise

From Rusk’s description of the materials included in the “settlement information packets” it is possible that some documents evidencing true settlement proposals or statements made in the course of negotiating a settlement with the trust may be included. Such materials of course are inadmissible to prove or disprove liability. (C & K Engineering Contractors v. Amber Steel Co. (1978) 23 Cal.3d 1 , 13 [ 151 Cal.Rptr. 323 , 587 P2d 1136 ]; Caira v. Offner, supra, 126 Cal.App.4th at pp. 32-36.) Any such materials are subject to discovery only if Volkswagen can articulate another basis for admissibility or for reasonably believing they may lead to the discovery of evidence that is admissible. (Norton v. Superior Court, supra, 24 Cal.App.4th 1750 .) While Volkswagen has not made such a showing, neither has Rusk identified any documents in the packet, such as correspondence between the attorneys, which there is any reason to believe contain such an exchange.^[11] Were Rusk to itemize such documents and Volkswagen fail to satisfy the court that there is a reasonable likelihood that the documents will lead to admissible evidence, the court would be justified in refusing to order production of such materials. An in camera review of the particular documents might well be necessary for the court to perform a meaningful evaluation. However, absent such an itemization, discovery should be permitted and any questions concerning admissibility left for trial.