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Trigon Insurance v. United States
Citations: 204 F.R.D. 277; 57 Fed. R. Serv. 664; 51 Fed. R. Serv. 3d 378; 88 A.F.T.R.2d (RIA) 6883; 2001 U.S. Dist. LEXIS 18824; 2001 WL 1456388Docket: Civ. No. 3:00CV365
Court: District Court, E.D. Virginia; November 8, 2001; Federal District Court
Trigon Insurance Company, formerly Blue Cross and Blue Shield of Virginia, has filed a motion seeking sanctions against the United States for allegedly destroying evidence and improperly influencing expert testimony. The case involves Trigon’s effort to recover federal income taxes and interest collected from 1989 to 1995, stemming from legislation that imposed federal income tax on Blue Cross and Blue Shield organizations beginning after December 31, 1986. This included the Fresh Start Basis Rule, which allowed Trigon to base its asset valuation on fair market value as of January 1, 1987, and permitted deductions for losses not covered by insurance. Trigon filed claims for refunds for losses related to various health insurance contracts, which were denied by the IRS, prompting the current litigation. The United States engaged Analysis Group/Economics (AGE) as a litigation consultant, which became contentious when they sought to challenge Trigon's expert testimony through a Daubert motion. Trigon raised concerns over AGE's dual role as both consultant and expert witness. In response to the Daubert motion, Trigon requested depositions of AGE's representatives and sought a broad range of documents related to AGE's work on the case, including communications and reports. Trigon raised concerns regarding AGE's involvement in the litigation after discovering that AGE was funding the fees and expenses of the United States' testifying experts. On January 4, 2001, Trigon requested additional documents related to AGE’s role, including communications among the United States, Deal, and AGE employees. Subsequently, Trigon subpoenaed AGE for the same documents. The United States and AGE contended that AGE was a non-testifying consultant and claimed that Deal, despite being an owner of AGE, was separately retained as a testifying expert. During a January 15, 2001 telephone hearing, the Court warned the United States about the implications of AGE’s dual role and emphasized the importance of disclosing all relevant documents to avoid barring experts from testifying. The Court also disapproved of any ghostwriting by AGE for the testifying experts. Trigon's motion to depose Deal was granted, but after scheduling, the United States retracted the Deal Declaration and withdrew its Daubert motion. On February 12, 2001, Trigon filed a Motion to Compel production of documents and Deal’s deposition, which became moot when the United States withdrew its objections at a March 27, 2001 hearing. The reports from the United States' testifying experts were produced on March 13, 2001, revealing that some experts had reviewed the Deal Declaration and each other's reports. Trigon then requested drafts of the testifying experts’ reports, asserting that they were included in prior requests and necessary under Rule 26(a)(2). Counsel for the United States instructed AGE and its testifying experts to preserve all draft reports and communications. However, due to AGE's document retention policy and individual practices, many documents had already been deleted. Depositions revealed that AGE significantly contributed to the drafting and editing of the experts' reports, with some experts being publicly labeled as AGE affiliates. In response to concerns about evidence destruction, Trigon filed a Motion for Appropriate Relief on July 30, 2001. Subsequent hearings on August 16 and 21, 2001, highlighted the destruction of evidence, prompting the Court to order the United States to engage an independent computer forensics expert to investigate the deletions, as well as to depose the testifying experts and AGE members about the lost documents. This led to the recovery of numerous communications and draft reports through the efforts of AGE and Deloitte & Touche, the forensics expert. Following the submission of reports and additional papers, the Court requested further briefing on spoliation issues and scheduled a final hearing for October 22, 2001. The heart of Trigon’s complaint centers on the United States' failure to produce significant communications and draft reports related to the testifying experts and AGE. To address this, it is essential to evaluate the materials that should have been disclosed based on Trigon’s document requests, which included communications and drafts. The United States contended that the absence of the term "draft reports" in Trigon's requests exempted them from production. However, the Court found that Trigon's requests were sufficiently broad to encompass draft reports, and the United States' decision to limit the interpretation of these requests was deemed risky. Importantly, Federal Rules of Civil Procedure require the retention and production of draft reports and related correspondence, affirming that the testifying expert must provide a complete report detailing opinions and the data considered in forming those opinions. Rule 26(a)(2) of the Federal Rules of Civil Procedure was amended in 1993 to expand the scope of discoverable information from material “known by experts” to material “considered by” experts, indicating a broader approach to disclosure. The term "considered" encompasses a wider range of information than "relied upon," which was deliberately excluded from the revised rule. This change aims to ensure that all documents reviewed by an expert, including drafts and materials not ultimately relied upon, are subject to disclosure to assess the validity of the expert's opinion. Case law, including *Karn v. Ingersoll-Rand* and *Haworth, Inc. v. Herman Miller, Inc.*, supports the interpretation that any information considered by an expert must be disclosed, barring only counsel’s mental impressions. Courts have ruled that even materials protected by work-product privilege must be disclosed if they were considered by an expert, as established in *Lamonds v. General Motors Corporation*. The 1993 amendments effectively removed the necessity for the party requesting discovery to prove reliance by the expert, reinforcing the principle that all documents reviewed are discoverable to ensure the integrity of the expert's opinion and facilitate cross-examination. Courts have affirmed that drafts of expert reports are discoverable under Federal Rule of Civil Procedure 26(a)(2)(B) and are not considered protected work product. This ruling extends to disclosures of drafts and communications between testifying experts and other parties, as drafts may be relevant for cross-examination and are not shielded by privilege. The court emphasized the necessity for disclosure, referencing a January 15, 2001, conference where it clarified that materials reviewed by testifying experts must be produced, including communications and drafts shared among experts. In this context, the United States was obligated to retain and disclose these documents, particularly in response to Trigon's requests, which, despite being informal, did not lessen the United States' responsibility. The failure to produce these materials has led to allegations of spoliation of evidence, defined as the willful destruction or failure to preserve evidence relevant to litigation, which could hinder Trigon's ability to challenge the opinions of the United States' testifying experts. Spoliation, the act of destroying evidence, is universally condemned in legal practice, based on the principle that wrongdoers should not gain from their misconduct, encapsulated in the maxim omnia presumuntur contra spoliatorem. Courts recognize that destroyed evidence often represents the best insight into the truth of a matter, and allowing a party to benefit from such destruction is inherently unfair. The spoliation inference suggests that a party who destroys relevant evidence is more likely to be adversely affected by that evidence than one who does not. While the court criticized the United States for resisting document production, it did not issue a specific order for compliance, thus the United States is not in contempt. However, courts possess inherent authority to sanction spoliation even without a prior order, a power essential for the administration of justice. This authority allows courts to maintain order and ensure the efficient resolution of cases. Legal precedents affirm that courts can impose sanctions for spoliation without requiring proof of a court order violation. For instance, in Dillon v. Nissan Motor Co., the Eighth Circuit upheld a district court's exclusion of expert testimony due to evidence destruction, highlighting that parties are responsible for preserving pertinent evidence. Additionally, in W.R. Grace, it was stated that while a spoliation sanction can follow a violation of a court order, the lack of such an order does not preclude the application of sanctions based on the court's inherent authority. The Second Circuit recognizes that district courts can impose sanctions for spoliation even without a formal discovery order, utilizing their inherent power to manage litigation, as established in West and Chambers. The Fourth Circuit similarly acknowledges substantial discretion for district courts in spoliation cases, allowing measures such as dismissal, summary judgment, or adverse inference against the offending party. In Vodusek, the court addressed spoliation when evidence was intentionally destroyed during an investigation related to a fatal boat explosion. The district court held that the plaintiff had a duty to preserve evidence, and the destruction hindered the defendants' ability to investigate. Consequently, the court instructed the jury to draw an adverse inference, which the Fourth Circuit upheld on appeal. The appellate court clarified that while bad faith is a sufficient basis for such an inference, it is not a necessary condition; the mere lack of evidence that would aid the opposing party can imply that the party fears the evidence may be unfavorable. To prove spoliation, the moving party must establish that the opposing party had a duty to preserve documents that were intentionally destroyed, resulting in prejudice. The court considers the culpability and prejudice when determining appropriate sanctions. A duty to preserve evidence exists under Fourth Circuit law, which is essential for establishing wrongdoing in cases of evidence destruction. Parties, their counsel, and expert witnesses are obligated not to destroy or lose relevant evidence, particularly when they are aware it may be necessary for a claim. This obligation arises from discovery requests or rules requiring disclosure. Spoliation is recognized when a party with control over evidence fails to preserve it while knowing its relevance to litigation. When determining spoliation, courts assess whether evidence was intentionally destroyed and what its likely contents were. Intentional destruction does not require bad faith for sanctions to apply; however, an adverse inference regarding a party's case weakness can only be drawn if the party knew the evidence was relevant and willfully acted to destroy it. A degree of blameworthiness is necessary before sanctions for spoliation can be imposed. If spoliation is confirmed, sanctions must aim to deter future misconduct, shift the risk of an erroneous determination to the offending party, and restore the prejudiced party to the evidentiary position they would have held without the spoliation. A district court has discretion in assessing the severity of sanctions for spoliation, influenced by both prophylactic and punitive considerations. No standardized test exists for determining spoliation, as each case requires a fact-specific analysis. Key factors for sanction severity include the fault of the party responsible for evidence alteration or destruction, the prejudice suffered by the opposing party, and whether a lesser sanction could sufficiently address the situation without causing substantial unfairness. The assessment of sanctions hinges on the blameworthiness of the offending party and the harm inflicted on the opposing party. Courts maintain flexibility in sanctioning to avoid rigid rules. In this specific case, the duty to preserve certain evidence was established under Federal Rule of Civil Procedure 26(a)(2), with the United States and its agents required to preserve communications and draft reports from the time they were created. Trigon's spoliation claim and sanction request will be evaluated based on these guiding principles. The United States was required to produce documents requested by Trigon from December 2000 to March 2001, despite most requests being informal, which provided sufficient notice regarding the allegedly spoiled evidence. The Court cautioned the United States about the risks of not producing the documents. The United States had a duty to preserve these documents, as it was aware they needed to be disclosed. Evidence was indeed destroyed, with some documents recovered through efforts by AGE and Deloitte, while others remained unrecoverable. The United States argued that Trigon did not specifically request “draft reports” until March 19, 2001, and claimed AGE’s document retention policy absolved it of responsibility. However, these arguments do not negate the finding of intentional destruction. Trigon’s requests were clear enough to encompass the evidence in question starting December 26, 2000, and the Court indicated that expert materials were discoverable in January 2001. The United States failed to take necessary steps to preserve evidence, fulfilling the criteria for intentional destruction. AGE, serving as the United States’ agent for expert testimony, was also responsible for ensuring that materials considered by testifying experts were preserved and disclosed, regardless of its document retention policy. The destruction of documents by both testifying and non-testifying experts was willful, and these documents were critical for cross-examination and Daubert challenges. The spoliation of drafts and communications undermines the ability to assess the credibility and independence of the testifying experts' opinions. Experts involved in litigation often receive guidance from consultants, which raises concerns about the integrity and independence of their testimony. Effective cross-examination is crucial to ensure the reliability of expert opinions, particularly as the number of self-identified "expert consultants" has surged. While these experts may meet the qualifications set forth by the Supreme Court in Daubert and the Federal Rules of Evidence, many provide limited assistance and can mislead the trier of fact. Cross-examination is essential for uncovering potential biases, particularly regarding the sources of information the experts relied upon—whether they conducted an independent review or relied on selective facts provided by attorneys or consultants. The integrity of expert testimony hinges on the need for experts to form their opinions based on reliable analysis rather than advocacy for a party. The destruction of documents by AGE and the testifying experts significantly impairs the ability to assess the validity of their opinions and the credibility of their expertise. These documents, which detail the evolution of the experts’ opinions and influences upon them, are critical for effective cross-examination. AGE's document retention policy appeared designed to obstruct this essential process. Judicial intervention mitigated the potential harm to Trigon by mandating a forensic search for the missing documents, emphasizing their significance in the litigation. Touche identified a significant number of documents that were attempted to be destroyed, allowing Trigon to effectively cross-examine most of the United States’ experts. However, Trigon still faces prejudice concerning Dr. Feldstein, despite AGE admitting to assisting in drafting his report. Deloitte Touche could not recover drafts or many emails related to Dr. Feldstein's report, though some fragments indicate AGE's involvement in its creation. For example, an email from Dr. Feldstein suggested a willingness for AGE to modify his report significantly, while another message from AGE directed him not to work on the report's conclusion, raising doubts about the originality of his opinions. This situation has severely limited Trigon's ability to cross-examine Dr. Feldstein regarding his report's substance and the independence of his expert testimony. Trigon has acknowledged some reduction in prejudice regarding other experts, as it chose not to seek their preclusion from testifying. Instead, Trigon requested that adverse inferences be drawn against the experts' credibility and that AGE be prohibited from further interaction with them. Additionally, Trigon seeks reimbursement for attorney fees due to spoliation. Although preclusion could have been a fitting sanction, it is deemed inappropriate given the recovery of significant evidence and the necessity of expert testimony in this first-impression case under a new statute. Trigon argues that allowing the United States to start anew with different experts would lead to greater prejudice due to delays and additional expenses. Preclusion of testimony is deemed inappropriate as a sanction in this case. Instead, adverse inferences regarding the substantive testimony and credibility of the experts will be drawn based on trial evidence. To prevent AGE from complicating the evaluation of expert evidence by the United States, it will be excluded from participating in any aspect of developing or presenting this testimony due to its actions causing spoliation and uncooperative behavior during remediation efforts by Trigon. Trigon is entitled to recover attorneys’ fees and costs resulting from the spoliation, although this recovery will wait until the trial concludes. The decision on sanctions considers AGE's culpability and the extent of prejudice, leading to the conclusion that the selected sanctions are appropriate. Trigon also alleges that AGE ghostwrote the testifying experts' reports, warranting significant discounting. Ghostwriting refers to the preparation of a report's substance by someone other than the expert. Rule 26 mandates that expert witnesses prepare their own reports, although it allows for counsel assistance. However, the report must reflect the expert's testimony and be signed by the expert. Despite guidance from the Advisory Committee Notes on Rule 26, ambiguity exists regarding acceptable levels of counsel involvement. Recent case law, such as Marek v. Moore, illustrates that even if an expert's report has been revised by counsel, it may not necessarily be struck if the expert acknowledges their limited role in its preparation. Counsel should supervise the preparation of an expert witness report to ensure complete disclosure, with the report reflecting the expert's intended testimony and being signed by the expert. The court in Marek found no evidence of undue influence by counsel over the expert, determining that both the original and revised reports were substantially authored by the witness. It stressed that attorneys cannot alter the expert's opinions, distinguishing between opinions genuinely adopted by the expert and those influenced by counsel. In Indiana Ins. Co. v. Hussey Seating Co., the expert confirmed he prepared his own Rule 26 report, which satisfied the requirements of Rule 26, as his opinions and supporting materials were his own. The court noted that while counsel prepared certain sections, such as qualifications, these did not pertain directly to the expert’s opinions. In Manning v. Crockett, an expert’s report closely mirrored the plaintiffs' complaint, with both the expert and counsel signing it, prompting the court to reiterate that while attorney involvement is permissible, the expert must have substantial participation in report preparation. The cases collectively highlight the balance between necessary attorney assistance and the expert's independent contribution. An attorney's role in preparing expert witness reports under Rule 26 is to assist with document preparation, such as compiling a list of cases where the expert has testified, and refining disclosures to ensure compliance with the rules. However, the court distinguished permissible assistance from "ghost-writing," where an attorney writes a report entirely and asks the expert to sign it. The court emphasized that under Rule 26(a)(2)(B), the expert must "prepare" the report, which involves more than just signing a document drafted by someone else. In the case of In re Jackson National Life Insurance Co. Premium Litigation, the court found that three expert reports were substantially similar because their language was largely authored by the plaintiffs' counsel, leading to the conclusion that the reports were not genuinely prepared by the experts. The Magistrate Judge held that this lack of true authorship warranted striking the reports under Rule 37(c)(1). The district court upheld this decision, agreeing that the expert's report was not prepared by him and that the plaintiffs failed to provide a compliant report, further justifying sanctions for misleading testimony during the deposition regarding the report's authorship. Expert testimony may be disregarded by courts if it merely reflects the opinions of the hiring attorney rather than the expert's independent analysis. In the case of C. Baxter Int’l. Inc. v. McGaw, the court rejected an expert report because the expert did not prepare it independently. Similarly, in Marbled Murrelet v. Pacific Lumber Co., the court found the testimony lacked objectivity and credibility, appearing to be crafted by attorneys. Occulto v. Adamar of N.J. Inc. emphasized that an expert cannot function solely as an extension of the attorney. For expert opinions to meet the requirements of Fed. R. Evid. 702 and Daubert, they must derive from the expert’s own valid reasoning and methodology. A qualified expert may testify if their opinions are based on sufficient facts and reliable methods applied to the case's facts. The trial judge must determine whether the expert's testimony constitutes scientific knowledge that aids in understanding a fact in issue. In U.S. E.E.O.C. v. Rockwell Intern. Corp., an expert admitted to using methods inconsistent with his typical practice and relied on unverified materials provided by counsel, undermining his credibility. Experts must provide more than legal arguments; they should bring their specialized knowledge to assist the jury. The court in Occulto reiterated that experts should base their reports on their own expertise, not serve as proxies for attorneys. Weight given to an expert's opinion is contingent upon their competence and independence from the party they represent. An expert who echoes an attorney's opinion lacks credibility compared to one who conducts thorough independent analysis. Under Rule 702, an expert’s testimony must assist the trier of fact; if the expert is not independent, their testimony may not be credible or admissible. The court finds Dr. Abdul qualified but questions his credibility due to lack of independence from the defendant. The expert's reliance on counsel for report drafting can be challenged during cross-examination. A physician’s lack of independence undermines credibility, as seen in various case references. There is evidence of collaboration among the United States' experts, yet some claimed independence in their depositions. The burden of proof for demonstrating ghostwriting rests with Trigon, which must show that AGE was responsible for the substance of the experts' opinions. Currently, Trigon has not met this burden, particularly regarding Dr. Feldstein, but the court will consider the absence of documents as an adverse inference in evaluating his testimony. If Trigon effectively develops its cross-examination strategy, the court will respond accordingly at trial. The court partially grants Trigon’s Motion in Limine concerning evidence of ghostwriting, allowing for the introduction of such evidence at trial. A copy of the opinion is to be distributed to all counsel. Trigon filed a Motion in Limine seeking relief due to spoliation of evidence caused by the government's litigation consultant and the consultant's role in drafting expert reports. Trigon's counsel noted that AGE initially claimed recovery of evidence was impossible, but later efforts contradicted this, raising doubts about AGE's credibility. Various letters and subpoenas dated from late 2000 to early 2001 were cited as part of the correspondence with the Department of Justice. The court determined that it did not need to rule on whether drafts by testifying experts must be disclosed, as the experts worked collaboratively under AGE's direction. Concerns were raised about the potential impact of AGE's practices on the integrity of all expert evidence presented by the United States, particularly regarding Dr. Feldstein, due to incomplete recovery of spoliated evidence. AGE will provide existing documents to assist the United States' case, and Trigon may seek fees and costs related to the spoliation after the litigation concludes. The court declined to disqualify a witness whose testimony changed after consultation with an attorney, opting instead to allow cross-examination to reveal inconsistencies. While the court acknowledged that improperly obtained opinions could be disqualified, it also noted that ghostwriting does not always involve coercive tactics. The court ultimately upheld the expert report, as defense counsel did not prove that the expert lacked significant involvement in preparing it.