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Allstate Insurance Co. v. Papanek

United States District Court, S.D. Ohio, Western Division

January 5, 2018

ALLSTATE INSURANCE COMPANY, Plaintiff,
v.
MELISSA PAPANEK, et al., Defendants.

         DECISION AND ENTRY: (1) DENYING DEFENDANT MICHAEL PAPANEK'S MOTION TO COMPEL (DOC. 97); (2) GRANTING IN PART AND DENYING IN PART DEFENDANTS MELISSA PAPANEK AND PHOENIX INSURANCE & FINANCIAL GROUP'S MOTION TO COMPEL (DOC. 105); AND (3) DENYING DEFENDANTS' REQUESTS FOR AN AWARD OF EXPENSES

          Michael J. Newman United States Magistrate Judge

         This civil consent case is before the Court on a motion to compel filed by Defendant Michael Papanek, as well as a separate motion to compel filed by Defendants Melissa Papanek and Phoenix Insurance & Financial Group LLC (“Phoenix”). Docs. 97, 115. Plaintiff Allstate Insurance Company (“Allstate”) filed memoranda in opposition to both motions to compel. Docs. 111-12. Thereafter, Defendants filed reply memoranda. Docs. 115, 118. The Court has carefully considered all of the foregoing, and the two motions are ripe for decision.

         I.

         This case arises from a former business relationship between Plaintiff Allstate and a former Allstate Exclusive Insurance Agency operated by Defendant Melissa Papanek. See generally doc. 22. From October 2008 until October 2014, Melissa Papanek operated the Papanek Agency as an Allstate Exclusive Agency under an exclusive agency agreement with Allstate. Id. at PageID 253-54. Defendant Michael Papanek -- Melissa Papanek's father --worked for the Papanek Agency. Id. To work at the Papanek Agency, Michael Papanek was required to -- and did -- sign a confidentiality and non-compete agreement with Allstate. Id.

         Allstate alleges that, on September 1, 2014, it made the business decision to terminate the exclusive agency agreement with Melissa Papanek and her agency effective, ultimately, on October 31, 2014.[1] Id. at PageID 261. Melissa Papanek alleges that the letter from Allstate gave her the option of either accepting a termination payment (what the parties refer to as “TTP”) or selling her book of business to an Allstate approved buyer. Doc. 33 at PageID 410.

         Allstate alleges, inter alia, that upon termination of Melissa Papanek's agency relationship with Allstate on October 31, 2014, the Papaneks began a new business named Phoenix and have used confidential Allstate information to improperly solicit Allstate customers to purchase competing insurance products from Phoenix -- actions that Allstate alleges violate Defendants' agreements with Allstate. Doc. 22 at PageID 261.

         Melissa Papanek and Phoenix assert counterclaims against Allstate alleging, inter alia, that Allstate impeded her efforts to sell her book of business and, in fact, undertook efforts to direct the sale of her book of business to Allstate's preferred buyer -- an individual named Tony Peh. Doc. 33 at PageID 410. When such efforts were unsuccessful, Melissa Papanek alleges that Allstate forced her to take TPP and then subsequently breached a contract between the parties by ceasing those payments based upon the false allegation that she violated her non-solicitation agreement with Allstate. Doc. 34 at PageID 450.

         II.

         Generally, “[p]arties 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 state in the action, the amount in controversy, the parties' relative access to 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.” Fed.R.Civ.P. 26(b)(1). Information may be discoverable even if not ultimately admissible into evidence at trial. Id.

         Rule 37 provides that “[a] party seeking discovery may move for an order compelling an answer, designation, production or inspection” if a party fails to provide discovery responses. Fed.R.Civ.P. 37(a)(3)(B). The “proponent of a motion to compel discovery bears the initial burden of proving that the information sought is relevant.” Hendricks v. Hazzard, No. 2:11-cv-399, 2013 WL 4052873, at *3 (S.D. Ohio Aug. 12, 2013) (internal citation omitted). “When the information sought appears to be relevant, the party resisting production has the burden of establishing that the information either is not relevant or is so marginally relevant that the presumption of broad disclosure is outweighed by the potential for undue burden or harm.” Wagner v. Circle W Mastiffs, No. 2:08-cv-431, 2013 WL 4479070, at *3 (S.D. Ohio Aug. 19, 2013) (citation omitted).

         III.

         In his motion to compel, Michael Papanek requests that the Court order Allstate to produce an investigatory cease-and-desist form authored by an individual in Allstate's Human Resources Department and sent to Allstate's Legal Department. Doc. 97. In their motion to compel, Melissa Papanek and Phoenix request an order compelling the production of: (1) the cease-and-desist form for the reasons advanced by Michael Papanek; (2) electronically stored information (“ESI”) from cell phones used by specific Allstate agents and employees; (3) a Rule 30(b)(6) deposition of an Allstate representative who can testify regarding websites maintained by Allstate and TPP payments to Melissa Papanek; (4) historical information related to the retention of Allstate customers throughout this region; (5) information related to the sale of other Allstate agencies in Ohio between 2011-14; (6) documents related to Allstate's withholding of TPP payments to other Allstate exclusive agents from 2011 forward; (7) information about Allstate approved purchase candidates; (8) information related to the approval of John Karas to purchase an Allstate exclusive agency and information regarding exclusive agencies owned by Allstate exclusive agent Tony Peh; (9) information concerning compensation plans for Allstate Field Sales Leaders (“FSLs”), Territorials Sales Leaders (“TSLs”) and others 2014 and 2015; and (10) documents related to investigations of other agents for certain alleged misconduct.[2]Doc. 105. These issues are addressed in turn.

         1. Cease-and-Desist Form

         Defendants first seek to compel the production of a cease-and-desist form prepared by Karmen Clark -- an HR deployment leader at Allstate. The evidence produced by Allstate in support of its assertion of privilege consists of the deposition testimony of two Allstate Human Resources employees, Ms. Clark and Nick Strong. Clark prepared the subject cease-and-desist form with regard to Melissa Papanek and the Papanek Agency, whereas Strong was the individual who trained Clark on when and how to complete such forms in the ordinary course of business.

         The form is one created by Allstate's Legal Department for completion by Human Resources in any circumstance where there have been numerous complaints that a former agent may be improperly soliciting former Allstate customers, or a number of policyholders from a former agent have cancelled their Allstate policies. The form purportedly consists of drop-down boxes and a place to add information about the particular customer(s) at issue. Upon completion of the form by Human Resources, it is submitted along with supporting documentation --generally the complaints received by customers and other agents -- to the Allstate Legal Department for review, further investigation, and a determination as to whether a cease-and-desist letter is appropriate. Allstate argues that the cease-and-desist investigation form is protected by application of the attorney-client privilege and/or the work product doctrine. Doc. 111, 115.

         “In [a] diversity action, the state law of privilege governs defendant's claim of attorney-client privilege.” Travelers Cas. & Sur. Co. v. Excess Ins. Co., 197 F.R.D. 601, 605 (S.D. Ohio 2000) (citing Fed.R.Evid. 501; Guy v. United Healthcare Corp., 154 F.R.D. 172, 177 (S.D. Ohio 1993)). The parties in this case make no argument as to the appropriate state law applicable to Allstate's claim of attorney-client privilege and, therefore, the Court is hesitant to address this claim of privilege in ...


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