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Peter v. The Progressive Corporation (8/27/99) sp-5168
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Notice: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
SAMUEL PETER, SR., )
individually and as father ) Supreme Court No. S-8608
and next friend of SAMUEL )
PETER, JR., ) Superior Court No.
) 3KN-97-964 CI
Petitioners, )
) O P I N I O N
v. )
) [No. 5168 - August 27, 1999]
THE PROGRESSIVE CORPORATION )
and PROGRESSIVE NORTHWESTERN )
INSURANCE COMPANY, )
)
Respondents. )
______________________________)
Petition for Review from the Superior Court of
the State of Alaska, Third Judicial District, Kenai,
Harold M. Brown, Judge.
Appearances: David Karl Gross, Law Offices of
Murphy L. Clark, Anchorage, for Petitioners. Gary A. Zipkin and
Susan M. West, Guess & Rudd, P.C., Anchorage, for Respondents.
Before: Matthews, Chief Justice, Eastaugh,
Fabe, Bryner, and Carpeneti, Justices.
FABE, Justice.
CARPENETI, Justice, dissenting.
I. INTRODUCTION
After receiving a total of twelve interrogatories from
the plaintiffs in a lawsuit alleging bad faith in the delay of
underinsured motorist payments, the defendant insurer asked the
superior court to appoint a discovery master to handle all future
discovery disputes. The court granted the request and ordered that
the master's fees be paid by the losing party in each discovery
dispute. The plaintiffs appeal, claiming that use of discovery
masters is unfair to financially disadvantaged parties. We vacate
the superior court's order and remand for determination of whether
a master is appropriate in this case in light of various factors
that we outline below.
II. FACTS AND PROCEEDINGS
In March 1995 an automobile driven by Cynthia Pack struck
eight-year-old Samuel Peter, Jr. while he was crossing the street.
In June 1996 Samuel Jr. and his parents, Donita and Samuel Sr.,
sued Pack for Samuel Jr.'s injuries. Pack, in turn, filed a
counterclaim against Donita, alleging that she negligently failed
to supervise her son.
The Peters have an automobile insurance policy with
Progressive Northwestern Insurance Company. In December 1997
Samuel Sr., on his own behalf and on behalf of Samuel Jr., sued
Progressive, Progressive's agent Dan Woodruff, and Last Frontier
Insurance, their insurance broker, alleging that Progressive
committed bad faith and breach of fiduciary duty by denying
knowledge that Donita was insured in the hopes that the Peters
would not make a claim. Progressive denied all allegations.
One day after filing their complaint, the Peters served
Progressive and its agents with three discovery requests consisting
of a total of twelve interrogatories. One month later, in February
1998, Progressive moved for a protective order precluding the
Peters from disclosing "any confidential or proprietary information
produced by Progressive"to third parties. The Peters filed a
forty-one-page opposition with over one hundred pages of exhibits.
The next day, Progressive moved for appointment of a discovery
master to resolve disputes. Progressive requested that the losing
party pay the master's fees within ten days of the resolution of
each individual discovery dispute. The Peters opposed the motion,
arguing that appointment of a master would give Progressive a
strategic advantage and would deprive the Peters of meaningful
access to the justice system.
In April 1998 Superior Court Judge Harold M. Brown issued
an order granting Progressive's motion and asked the parties to
submit the name of a mutually acceptable discovery master. We
granted the Peters' petition for review from this order.
III. STANDARD OF REVIEW
We review the appointment of special masters pursuant to
Alaska Civil Rule 53 for an abuse of discretion. [Fn. 1] "We will
find an abuse of discretion only when we are left with a definite
and firm conviction after reviewing the whole record that the trial
court erred in its ruling."[Fn. 2] Although we also review
discovery orders and sanctions for an abuse of discretion, [Fn. 3]
we review de novo the question of whether a trial court weighed the
appropriate factors when issuing a discovery order. [Fn. 4]
When interpreting the Civil Rules we exercise our
independent judgment, [Fn. 5] adopting the rule of law that is most
persuasive in light of reason, precedent, and policy. [Fn. 6]
Similarly, we review constitutional questions de novo. [Fn. 7]
IV. DISCUSSION
The Peters' central argument in this appeal is that
imposition of masters' fees unfairly infringes on nonwealthy
litigants' access to civil justice. As the Peters point out, the
text of Civil Rule 53 provides no guidance on when appointment of
a discovery master is appropriate. To address the Peters'
argument, then, we must determine the scope of trial courts'
authority under Civil Rule 53 to appoint discovery masters and must
consider whether the constitutional right of meaningful access to
the court system [Fn. 8] requires certain limitations on that
authority.
Not only will our inquiry allow us to articulate basic
principles to guide judges, attorneys, and litigants in the
appropriate use of discovery masters, but it will also assist our
Standing Advisory Committee on the Rules of Civil Procedure to
address the use of discovery masters and propose changes to Civil
Rule 53. In any case, our judicial duty to determine whether
appointment of a master was appropriate in this case, and by
implication whether certain limitations on the trial court's
discretion in appointing a master may be justified, exists
independent of the activities of the Civil Rules Committee. [Fn. 9]
A. Overview of Authority to Appoint Discovery Masters
1. Alaska law
Alaska Civil Rule 53(a) governs the use of special
masters in civil trials. It provides in part:
(a) Appointment and Compensation. The
presiding judge of the superior court for each judicial district .
. . may appoint one or more standing masters for such
district . . . . [T]he word "master"includes a referee, an auditor
and an examiner, and a magistrate or a deputy magistrate. The
compensation, if any, to be allowed to a master shall be fixed by
the court, and shall be charged upon such of the parties or paid
out of any fund or subject matter of the action which is in the
custody and control of the court, as the court may direct. . . .
(b) Powers. The order of reference to the
master may specify or limit the master's powers and may direct the
master to report only upon particular issues or to do or perform
particular acts . . . . Subject to the specifications and
limitations stated in the order, the master has and shall exercise
the power to regulate all proceedings in every hearing before the
master and to . . . take all measures necessary or proper for the
efficient performance of the master's duties under the order.
Although we have not previously set forth guidelines for
the use and appointment of special masters to supervise the
discovery process, we have addressed generally the use of referees
in lieu of judges for various purposes in civil trials. In Dean v.
Firor, [Fn. 10] the seminal Alaska case regarding the use of
masters, we noted that the language in Federal Civil Rule 53(b),
including the requirement that an "exceptional condition"justify
the use of a master, [Fn. 11] was "purposefully omitted from Alaska
Civil Rule 53."[Fn. 12] We acknowledged that the drafters of the
Alaska rule may have "intended to allow the trial judges a more
liberal use of masters than that allowed under the federal system"
and that therefore "application of the extensive federal case law
on this subject [is] inappropriate."[Fn. 13]
Nevertheless, we decided that "[w]hile some jurisdictions
may give trial judges a great deal of liberty in referring cases,
we find a more restrictive view to be more appropriate."[Fn. 14]
We reasoned that the judiciary should be solely responsible for
resolving questions of law, such as the claim for fraudulent
conveyance at issue in Dean, and that a trial court should not
reduce itself to the role of a "quasi-appellate court by simply
reviewing the findings of the master."[Fn. 15]
We declined to address the propriety of appointing a
discovery master in a more recent case involving the same attorney
appearing for the plaintiffs in the present case, Gonzales v.
Safeway Stores, Inc. [Fn. 16] In Gonzales, the trial court had
appointed a master due to "ongoing discovery disputes."[Fn. 17]
After the master had made several rulings, the plaintiff moved to
discharge the master on the grounds that the fees "infringe[d] upon
his access to the court and violate[d] his due process and equal
protection rights."[Fn. 18] But because the plaintiff did not
object at the time of appointment, we concluded that he had waived
the issue. [Fn. 19] We also noted that trial courts generally have
authority under Civil Rule 53 to appoint masters and fix their
compensation. [Fn. 20]
This case law, albeit limited, provides Alaska state
courts with authority under Civil Rule 53 to use discovery masters
in at least some circumstances. The harder task, and one that this
case requires us to perform, is to define those circumstances in
order to determine whether appointment of a discovery master was
appropriate in this case.
2. Sources other than Alaska law
Some jurisdictions set forth criteria for determining the
propriety of referring a discovery dispute to a master. For
example, California's rule gives courts discretion to appoint a
master over one party's objection only when "it is necessary for
the court to appoint a referee to hear and determine any and all
discovery motions and disputes."[Fn. 21] California courts have
interpreted this rule "to permit reference over the parties'
objection where that procedure is necessary, not merely
convenient."[Fn. 22] A recently proposed Michigan rule would
allow courts to appoint discovery masters only if "there are
complex or numerous discovery issues and a master's assistance
would facilitate a more speedy and economical determination of
those issues."[Fn. 23]
Federal Rule of Civil Procedure 53 similarly requires
that an "exceptional condition"exist before a master can be
appointed. [Fn. 24] Although this restriction does not exist in
Alaska Civil Rule 53, we believe a discussion of the use of
discovery masters in federal courts is still an important source of
guidance given our endorsement of a restricted view of the use of
masters in Dean. Alaska District Court Local Rule 53.1(a) allows
courts to appoint discovery masters in order to
assist the parties in the speedy and
economical conduct of discovery and resolution of discovery
disputes. As a condition of such appointment, and especially in
complex cases involving numerous, significant disputes, the court
may require the parties to pay the fees of the discovery master.
(Emphases added.) This provision discourages courts from forcing
parties to pay for a referee unless the case is complex or time
consuming, although the decision remains within the court's
discretion. The Manual for Complex Litigation counsels that judges
should reserve the use of masters for cases "where the financial
stakes justify imposing the expense on the parties and where the
amount of activity required would impose undue burdens on a judge.
It is generally preferable to appoint special masters with the
parties' consent."[Fn. 25] Special masters are "sometimes
appointed"during discovery in "complex [federal] cases to limit
massive discovery requests, to rule on claims of privilege and to
make factual determinations necessary to rule on the admissibility
of evidence."[Fn. 26] A referee may be appropriate "where
disclosure is complicated by an intractable opponent, discourteous
and uncooperative attorneys, [or] constant rulings on disclosure
disputes."[Fn. 27]
Both federal and state courts have justified appointing
discovery masters based on the contentious or unwieldy nature of
discovery disputes. In one federal case in which the parties filed
twenty-seven motions to compel or for protective orders, the court
appointed a discovery master but acknowledged that "[t]he use of a
special master in this district for the purpose of discovery
management is an extraordinary event, occurring perhaps once a
decade."[Fn. 28] The court lamented that the "case is a mess
because the lawyers are out of control."[Fn. 29] Another federal
court similarly appointed a discovery master because of what it
described as the "acrimony"between counsel; the court believed
this hostility "necessitate[d] the provision of day care for
counsel who, like small children, cannot get along and require
adult supervision."[Fn. 30] The California Court of Appeal has
approved use of discovery masters "to reduce [] the tension between
contentious discovery disputants."[Fn. 31]
Our research uncovers no universally applied list of
factors for determining when a court's appointment of a discovery
master is appropriate. Still, certain principles repeatedly
surface in those authorities that have considered the issue. Based
on a review of our own case law, the law of other jurisdictions,
academic literature, and policy considerations, we believe that
appointment of a discovery master should generally be reserved for
cases (1) where the issues are unusually complex or specialized;
(2) where discovery is particularly document intensive; (3) where
resolving discovery disputes will be especially time consuming; (4)
where the parties are particularly contentious or obstructionist;
or (5) where a master will facilitate a more speedy and economical
determination of the case. We believe that these factors reflect
a respect for the immense and often unreasonable burdens placed on
trial courts' time and resources, while avoiding an undesirable
shift in the role of trial courts to that of "quasi-appellate"
courts. [Fn. 32] Perhaps more importantly, the guidelines attempt
to ensure nonwealthy litigants' access to the courts.
B. Appointment of a Master as a Discovery Sanction
The factors we have just set forth are remedial and
managerial in nature: Their goals are to assist parties having
difficulty resolving discovery conflicts absent court intervention
and to ensure a prompt resolution of a complicated or contentious
discovery process by using masters to ease the burden on trial
judges with hectic daily court schedules. Although courts may
reasonably take into account parties' contentiousness when deciding
to appoint a discovery master, the purpose for such an appointment
should not be punitive. We agree with the Peters that the use of
masters as a sanctioning tool potentially runs afoul of the
procedural requirements of Civil Rule 37.
Civil Rule 37(g) allows courts to impose sanctions only
after certain requirements are met:
Failure to Cooperate in Discovery or to
Participate in the Framing of a Discovery Plan. If a party or a
party's attorney engages in unreasonable, groundless, abusive, or
obstructionist conduct during the course of discovery . . . the
court may, after opportunity for hearing, require such party or
attorney to pay to any other party the reasonable expenses,
including attorney's fees, caused by the conduct.
(Emphasis added.) Similarly, a court may not force a losing party
to pay for fees and costs with respect to a Rule 37(a) motion to
compel unless the prevailing party has first made a good faith
effort to obtain compliance without court action. [Fn. 33] When a
court appoints a master as a means of deterring future unreasonable
discovery requests, it imposes a "sanction"while circumventing the
requirements of Rule 37.
The Peters argue that any appointment of a discovery
master is a back-door sanction without the attendant safeguards of
Civil Rule 37, because parties are forced to pay the master's fees
even for losing a reasonable, good-faith dispute. But unless the
purpose of the master's appointment is punitive, payment of
master's fees is no different than any other cost of litigation
thrust upon parties. [Fn. 34] Such inevitable costs generally
implicate due process concerns only when they affect a litigant's
meaningful access to justice.
Progressive contends that appointment of a master does
not work as a sanction at all because both parties are subject to
paying a master's fees if they lose a dispute. Progressive also
notes that one could make a similar argument against forcing
parties to pay fees upon losing a good-faith motion to compel. But
paying fees upon losing a single motion to compel is qualitatively
different from paying a master to oversee the rest of the discovery
process. Whereas the former is subject to Civil Rule 37
requirements and serves to compensate the other party for costs
incurred, the latter has no proportionality requirement or
procedural safeguard attached. And although Progressive's argument
may be persuasive in the abstract, in a case like this, in which
one party has substantially more financial resources than another,
appointment of a master could disproportionately burden the party
being sanctioned.
Some courts appear cautiously willing to use the
discovery master as a sanctioning tool in certain circumstances.
One federal court required an attorney, in response to his "Rambo
Litigation"technique during a deposition, to pay for a new
deposition as well as for a discovery master to supervise the
deposition. [Fn. 35] One commentator has suggested, albeit in a
tongue-in-cheek article, that discovery masters should be used more
often as a threat to quell discovery abuse. [Fn. 36] Even so,
given the language and spirit of Civil Rule 37, we agree with those
courts that have discouraged the use of masters as a discovery
sanction. [Fn. 37]
C. Circumstances in Which Courts May Require Parties to Pay
a Discovery Master's Fees
In addition to identifying general principles that should
guide a trial court's decision to appoint a master, this case also
requires us to decide when imposition of master's fees on one or
both parties is appropriate. Most courts and commentators that
have discussed the issue have concluded that courts should consider
the parties' financial means when determining the method of
compensating a master. A recently proposed Michigan rule would
allow the court to appoint a discovery referee only if it is fair
to the litigants based on their conduct and financial means:
The court may appoint a discovery master if
the court finds . . . it is fair to impose the cost of a discovery
master on the parties, taking into account the nature of the case,
the means of the parties, the conduct of the parties that
contributes to the need for a master, and the degree to which
appointing a discovery master would facilitate a more speedy and
economical determination of the case.[ [Fn. 38]]
Similarly, the California Court of Appeal recently held that trial
courts must consider a party's financial condition in determining
whether to refer discovery disputes to a master if referral would
require imposition of master's fees. [Fn. 39] One commentator
expressed concern that
[t]he risk of imposing unfair costs on a party
is a particular concern in determining whether to appoint a
pretrial master. . . . Parties are not required to defray the costs
of providing public judicial officers, and should not lightly be
charged with the costs of providing private judicial officers.[[Fn. 40]]
We agree with these jurisdictions; courts should logically consider
the possibility of economic hardship on one or more parties when
fashioning a plan to compensate a discovery master.
Progressive claims that the Peters must make a showing of
indigency before the court can consider financial hardship in
appointing a master. But in cases involving parties of "modest
means,"California courts must still determine a "fair and
reasonable apportionment of reference costs before issuing [their]
order."[Fn. 41] Indeed, given the fees normally charged by many
private referees, [Fn. 42] even a relatively small number of good-
faith disputes could be financially devastating to even a non-
indigent party. [Fn. 43]
More fundamentally, all potential litigants -- not just
those who are indigent -- have a constitutional right in Alaska of
meaningful access to the justice system. [Fn. 44] Prohibitively
high master's fees could potentially jeopardize such access. In
Malvo v. J.C. Penney Co., [Fn. 45] we invalidated an attorney's
fees award that compensated the defendant for the full amount of
his attorney's fees, noting that when a plaintiff risks such a high
potential liability, "the size of a party's bank account will have
a major impact on his access to the courts."[Fn. 46] Even if an
imposition of costs or fees is valid on its face, it "may offend
due process because it operates to foreclose a particular party's
opportunity to be heard."[Fn. 47] We believe the ultimate test,
as Justice Matthews expressed it in his dissent in Bozarth v.
Atlantic Richfield Oil Co., [Fn. 48] is "whether the [cost] is so
great that it imposes an intolerable burden on a losing litigant
which, in effect, denies the litigant's right of access to the
courts."[Fn. 49]
The Peters argue that any imposition of master's costs on
a financially disadvantaged party violates Civil Rule 26, which
allows discovery of all relevant nonprivileged material. [Fn. 50]
They argue that discovery requests by indigent parties are chilled
when those parties know they must pay extra fees for discovery
requests. But such a result is not a per se violation of the
rules; the same argument could be made with equal force against the
Rule 37 provision forcing parties to pay fees and costs upon losing
a good-faith motion to compel. And if a discovery master is
otherwise appropriate, appointment should not be deemed a
procedural violation merely because it discourages lengthy
discovery requests. If the chill is so severe as to effectively
end the litigation or destroy a party's meaningful access to the
courts, however, then appointment of a master in such circumstances
would most likely be inappropriate. [Fn. 51]
Of course, any added cost to the litigants for paying
master's fees may be offset by the time and money saved "in the
long run by the more efficient progress of discovery and the
elimination of time spent in motions to compel."[Fn. 52] The
implications of these long-term savings extend beyond a particular
case:
The cost of a private referee . . . must also
be weighed against the . . . cost of having to seek repeated
judicial intervention through motions and Court appearances to
resolve disputes and compel compliance with discovery, and the
potential prejudice due to delay of the case . . . . In addition,
there is the hidden cost to all users of the judicial system from
the waste of scarce judicial resources and increased calendar
congestion.[ [Fn. 53]]
Thus, to determine whether master's fees in any given case infringe
upon the guaranteed right of access to the justice system in
Alaska, courts may take into account the possibility that the costs
to the litigants are offset by the efficiency of master-assisted
litigation.
Although trial courts should not be burdened with
performing an elaborate analysis of the total amount of master's
fees as a percentage of each party's annual income, courts should
not choose a means of compensation without considering whether the
parties can reasonably afford the fees and whether potentially
viable alternatives exist to the appointment of a private referee.
Such alternatives include appointment of masters for a limited
purpose or duration or placing a cap, proportionate to a litigant's
annual income, on the amount of master's fees imposed on them. [Fn.
54] To determine whether a party can afford a private referee,
trial courts could rely upon financial affidavits similar to those
used to determine waiver of filing fees and bonds. In the end, the
burden on trial courts from having to consider parties' financial
means is minimal compared to the burden on indigent or "modest
means"litigants of having to pay prohibitively high masters' fees
in order to have their claims adjudicated.
From the point of view of low-income litigants, a "loser
pays"system, in which the loser of each discovery dispute pays the
master's fees for that dispute, may be preferable to equal
distribution of costs. As the dissent points out, the trial court
in this case most likely chose the "loser pays"system in an
attempt to minimize the financial hardship on the Peters. [Fn. 55]
But the fact that such a system is preferable to equal distribution
does not make it fair and reasonable in every case. Depending on
the number of likely disputes, the master's hourly rate, the
party's annual income, and the available alternatives, a "loser
pays"provision may still preclude a financially disadvantaged
party from gaining meaningful access to justice.
In short, trial courts have an implied obligation under
both the Civil Rules and the Alaska Constitution to consider the
parties' financial status before issuing an order of reference and
to choose a method of compensation that does not restrict
litigants' meaningful access to discovery or, more generally, to
the justice system.
D. Necessity of a Remand
The record does not reveal whether the Peters are of
sufficiently modest means or whether the discovery master's fees
will be sufficiently high as to call into question the Peters'
meaningful access to the justice system. For example, it is
unclear from the record to what extent any benefit or settlement
payments already made by Progressive to the Peters have affected
the Peters' ability to pay master's fees. [Fn. 56] Although the
Peters did include financial hardship as an issue in their
opposition to Progressive's motion for appointment of a master, it
is unclear whether the superior court considered the parties'
financial status before issuing the order. Accordingly, we remand
to give the court an opportunity to evaluate the Peters' claim of
economic hardship and to determine a fair and reasonable means of
compensating the discovery master should the court determine that
a master is appropriate in this case. [Fn. 57]
Judge Brown arguably could have viewed the debate
regarding Progressive's motion for a protective order, during which
the Peters filed an opposition with over one hundred pages of
exhibits, as a harbinger of future contentiousness between the
parties. Indeed, such a prediction is borne out by the vast number
of post-appointment discovery requests submitted by the Peters.
[Fn. 58] Thus, we cannot say that the trial judge abused his
discretion in appointing a master given the circumstances of this
case. But because we have not previously articulated factors for
trial courts to consider when appointing a discovery master, and
because a remand is necessary in any event to resolve the Peters'
claim of financial hardship, we believe the superior court should
have an opportunity on remand to review its referral order in light
of the basic principles we have articulated to determine whether a
master is appropriate in this case. In doing so, the superior
court may find it necessary to review the entire course of
discovery, including post-appointment requests.
V. CONCLUSION
By articulating guidelines for courts to consider when
appointing discovery masters, we do not wish to discourage use of
such masters. Rather, we hope to ensure both that trial courts
have the time and resources they need to adjudicate disputes while
still protecting the ability of persons of modest means to gain
access to the judicial system. Because we have not previously set
forth these factors, we VACATE the superior court's order of
reference and REMAND to give the court an opportunity to consider
the factors we have suggested. On remand, the superior court
should also determine a fair and reasonable compensation method
after considering the impact of master's fees on the parties'
meaningful access to the courts.
CARPENETI, Justice, dissenting.
This court has previously held, [Fn. 1] and repeats
today, [Fn. 2] that the appointment of a discovery master is left
to the sound discretion of the trial court. The trial court in
this case, accurately anticipating that the discovery disputes
would quickly degenerate into near-chaos, [Fn. 3] appointed a
discovery master. In a clear attempt to meet any concern that an
individual litigant suing a large company might be disadvantaged by
the order of appointment, the trial court provided that the
master's fees for any particular dispute would be borne by the
party losing the dispute. I would leave undisturbed the trial
court's management of this case.
The court justifies its interlocutory intrusion into this
case by referring to "our judicial duty to determine whether
appointment of a master was appropriate in this case."[Fn. 4]
With respect, I disagree: our inquiry is limited to whether the
trial court abused its discretion in appointing a master. And the
court's justification for acting now -- the need for "timely"
resolution of this issue given that the trial court stayed all
discovery pending the outcome of this petition [Fn. 5] -- must seem
ironic indeed to litigants whose case has been stayed because
review was granted. [Fn. 6] There is no need for action by this
court now except that need occasioned by the improvident grant of
the petition for review.
That is not to say that Rule 53 might not appropriately
be amended, nor that such amendment might not include several of
the provisions the court adopts today. But it strikes me that
these issues are particularly apt for prior consideration by this
court's Civil Rules Advisory Committee, input from the bar, and
final determination by this court in its rulemaking function.
Such an approach would have the advantage of informing
more fully this court's analysis in an area of today's opinion
which I regard as potentially problematic. That is, in determining
"whether master's fees in any given case infringe upon the
guaranteed right of access to the justice system,"trial courts are
told only that they "may take into account the possibility that the
costs to the litigants are offset by the efficiency of master-
assisted litigation."[Fn. 7] This is problematic for several
reasons.
First, the "costs to the litigants"-- that is, the
master's fees -- will be entirely unknown at the beginning of the
case. That amount will be a function of several factors truly
unknowable to the trial court from its pre-litigation perspective:
the amount of contentiousness to come, the future willingness of
opposing counsel to try to work within the spirit of the rules, the
complexity of legal issues which arise in the course of discovery,
and the like.
Second, whether those costs will be "offset by the
efficiency of master-assisted litigation"is likewise extremely
difficult to assess. If by "the efficiency of master-assisted
litigation"the court means, for example, savings to the parties in
lower attorney's fees resulting from quicker discovery decisions,
how can the trial judge even remotely quantify those calculations?
Third, the court refers to "potentially viable
alternatives"to the appointment of a master, [Fn. 8] but they are
not true alternatives. Instead, in suggesting that the trial court
might limit the purpose or duration of the appointment or the
amount of money to be spent on it, the court merely posits limiting
the appointment in various ways. Trial courts presently have that
authority and presumably exercise it.
Last, and most importantly, I do not know that the
court's assumption that the expense of the discovery master would
or should be borne by the parties -- as opposed to counsel -- is
necessarily correct. In the great majority of instances, the
client does not participate actively in the formulation and
execution of discovery strategy. Because counsel make the
decisions which lead to increased expenses, it appears neither
unfair nor punitive to require counsel to bear those expenses. The
assumption that the master's costs would be borne by the parties
rather than counsel -- an assumption almost completely unexamined
by the court today [Fn. 9] -- should be referred to the Civil Rules
Advisory Committee. Reference would allow a full airing of the
relevant facts and an examination of the assumptions underlying the
various positions which have been presented to the court. [Fn. 10]
The court acknowledges, at the end of a long and
scholarly opinion, that "we cannot say that the trial judge abused
his discretion in appointing a master given the circumstances of
this case."[Fn. 11] I agree. That is why the petition should be
dismissed as improvidently granted. [Fn. 12] Because I believe the
standards for appointment of masters under Civil Rule 53 and the
conditions of appointment can more properly be developed through
amendment of the rule, I would refer these issues to the court's
standing Civil Rules Advisory Committee for action.
FOOTNOTES
Footnote 1:
See Dean v. Firor, 681 P.2d 321, 327 n.8 (Alaska 1984).
Progressive sought appointment of a discovery master pursuant to
Alaska Civil Rule 53. Although Civil Rule 53 does not by its terms
cover the use of discovery masters, we have referenced it when
discussing discovery masters. See Gonzales v. Safeway Stores,
Inc., 882 P.2d 389, 398 (Alaska 1994).
Footnote 2:
Christensen v. NCH Corp., 956 P.2d 468, 473 (Alaska 1998)
(citing Stone v. International Marine Carriers, Inc., 918 P.2d 551,
554 (Alaska 1996)).
Footnote 3:
See id. (citing Stone, 918 P.2d at 554).
Footnote 4:
See In re Mendel, 897 P.2d 68, 72-73 n.7 (Alaska 1995).
Footnote 5:
See Breck v. Moore, 910 P.2d 599, 608 (Alaska 1996).
Footnote 6:
See Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979).
Footnote 7:
See State, CSED v. Beans, 965 P.2d 725, 727 (Alaska 1998).
Footnote 8:
See Bush v. Reid, 516 P.2d 1215, 1218-21 (Alaska 1973). See
generally discussion supra at IV.C.
Footnote 9:
Moreover, the rulemaking process is a highly structured one
and involves circulating proposals for public comment and study by
the committee. See Alaska R. Admin. P. 44(a)-(j). Given that the
trial court in this case has stayed all discovery pending the
outcome of this appeal, it is especially important that we timely
resolve the discovery master issue.
Footnote 10:
681 P.2d 321 (Alaska 1984).
Footnote 11:
Federal Civil Rule 53(b) states in relevant part:
(b) Reference. A reference to a master shall
be the exception and not the rule. In actions to be tried by a
jury, a reference shall be made only when the issues are
complicated; in actions to be tried without a jury, save in matters
of account and of difficult computation of damages, a reference
shall be made only upon a showing that some exceptional condition
requires it.
Footnote 12:
Dean, 681 P.2d at 327.
Footnote 13:
Id.
Footnote 14:
Id. at 328.
Footnote 15:
Id.
Footnote 16:
882 P.2d 389 (Alaska 1994).
Footnote 17:
Id. at 398.
Footnote 18:
Id.
Footnote 19:
See id. at 399.
Footnote 20:
See id. at 398.
Footnote 21:
Cal. Civ. Proc. Code sec. 639(e) (West Supp. 1999).
Footnote 22:
Taggares v. Superior Court, 72 Cal. Rptr. 2d 387, 393 (App.
1998) (second emphasis added).
Footnote 23:
David M. Lawson, Annual Survey of Michigan Law: Evidence, 44
Wayne L. Rev. 849, 900 n.254 (1998).
Footnote 24:
Fed. R. Civ. P. 53(a); see also Margaret G. Farrell, The Role
of Special Masters in Federal Litigation, C842 A.L.I.-A.B.A. Course
of Study 931, 947 (1993) ("Where information sought in discovery is
. . . complex in nature, there is an even greater ground upon which
to find exceptional conditions required for the appointment of a
master under Rule 53.").
Footnote 25:
Manual for Complex Litigation, Third sec. 21.52 (3d ed. 1995).
Footnote 26:
Farrell, supra note 25, at 947.
Footnote 27:
Raymond Powers, Court-Appointed Referees: An (Underutilized)
Adjunct to the Court, A Way Toward Better Management of Discovery,
23 Westchester B.J. 97, 98 (1996).
Footnote 28:
Mercer v. Gerry Baby Prods. Co., 160 F.R.D. 576, 579 (S.D.
Iowa 1995).
Footnote 29:
Id. at 577.
Footnote 30:
Van Pilsum v. Iowa State Univ. of Science and Tech., 152
F.R.D. 179, 181 (S.D. Iowa 1993).
Footnote 31:
Taggares v. Superior Court, 72 Cal. Rptr. 2d 387, 388 (App.
1998).
Footnote 32:
Dean v. Firor, 681 P.2d 321, 328 (Alaska 1984). The Civil
Rules Committee should consider these factors, as well as any
others it deems relevant after studying the issue, when drafting
its recommendations for changes to Rule 53.
Footnote 33:
See Alaska R. Civ. P. 37(a)(4)(A).
Footnote 34:
Cf. Alaska R. Civ. P. 37(a) (forcing the losing party to pay
fees with respect to a motion to compel, even if filed in good
faith).
Footnote 35:
Van Pilsum v. Iowa State Univ. of Science and Tech., 152
F.R.D. 179, 181 (S.D. Iowa 1993) (internal quotation marks
omitted). See also Jean M. Cary, Rambo Depositions: Controlling an
Ethical Cancer in Civil Litigation, 25 Hofstra L. Rev. 561, 588-90
(1996) (discussing Van Pilsum and the use of Civil Rule 37).
Footnote 36:
See Charles Yablon, Stupid Lawyer Tricks: An Essay on
Discovery Abuse, 96 Colum. L. Rev. 1618, 1642 (1996) (suggesting
that courts "[a]ppoint special discovery masters to attend every
deposition and glare at the litigators whenever it looks like they
are going to get out of line").
Footnote 37:
See, e.g., AIU Ins. Co. v. Mehaffy, 942 S.W.2d 796, 799-803
(Tex. App. 1997) (holding that trial courts can neither appoint
special masters as "auditors"to investigate discovery violations
nor force a party to pay for the audit as part of a sanction).
Footnote 38:
Lawson, supra note 24, at 900 n.254.
Footnote 39:
See Taggares v. Superior Court, 72 Cal. Rptr. 2d 387, 393-94
(App. 1998); McDonald v. Superior Court, 27 Cal. Rptr. 2d 310, 314-
15 (App. 1994).
Footnote 40:
Edward H. Cooper, Civil Rule 53: An Enabling Act Challenge, 76
Tex. L. Rev. 1607, 1623 (1998). See also Manual for Complex
Litigation, Third sec. 21.52 (3d ed. 1995) (noting that courts
should
consider the "imposition on parties of extra expense").
Footnote 41:
McDonald, 27 Cal. Rptr. 2d at 314-15 (internal quotation marks
omitted).
Footnote 42:
The proposed master in this case would have been compensated
at $190 per hour.
Footnote 43:
A trial court has limited discretion in discovery matters to
impose a sanction that has the effect of ending the litigation
entirely. See Sykes v. Melba Creek Mining, Inc., 952 P.2d 1164,
1169 (Alaska 1998); see also Alaska R. Civ. P. 37(b)(3). If the
master's fees are high enough, and if good-faith disputes are
inevitable, such fees could conceivably be so large as to force
plaintiffs like the Peters to abandon the litigation or to withhold
otherwise legitimate discovery requests on salient issues.
Footnote 44:
See Bush v. Reid, 516 P.2d 1215, 1218-21 (Alaska 1973). We
clarified this right in In re K.A.H., 967 P.2d 91 (Alaska 1998), in
which we held that Alaska Rule of Professional Conduct 1.8(e) does
not violate the general right of access to civil court merely
because it prohibits lawyers from providing clients with financial
assistance other than court and litigation costs. See id. at 94-
95. We found significant that, unlike the law in Bush prohibiting
parolees from filing suit, Rule 1.8(e) did not "require[]
plaintiffs to pay for court access." Id. at 95.
Footnote 45:
512 P.2d 575 (Alaska 1973).
Footnote 46:
Id. at 587.
Footnote 47:
Id. (quoting Boddie v. Connecticut, 401 U.S. 371, 380 (1971)).
Footnote 48:
833 P.2d 2 (Alaska 1992).
Footnote 49:
Id. at 6 (Matthews, J., dissenting). The Bozarth majority
recognized that an attorney's fees award of $76,000 was
"disturbing"and that such fees might "deter[] a broad spectrum of
our populace from the voluntary use of our courts." Id. at 4 n.3.
But we also decided that, based on the language of Rule 82, we
lacked authority to reduce or vacate the award. See id.
Footnote 50:
See Alaska R. Civ. P. 26(b)(1).
Footnote 51:
Progressive argues that high masters' fees are not prohibitive
because "the vast majority of contingent fee agreements allow (or
even require) the attorney to advance costs on behalf of a client
of limited means. Upon closure of the case, costs are recouped.
Most attorneys are more than happy to advance costs on behalf of
their client." But in Malvo v. J.C. Penney Co., 512 P.2d 575
(Alaska 1973), we invalidated an attorney's fee award of $10,500
because such a large fee might discourage suits by low-income
plaintiffs who cannot afford to risk such liability in order to
litigate their case. See id. at 586-87. Given that the proposed
master in this case charges an hourly rate of $190, the fees in
this case could be similarly prohibitive.
We do agree with the dissent that reference of the cost
advancement issue to an advisory committee would be appropriate.
See Dissent at 28 n.10. We therefore request that the Rules of
Professional Conduct Committee of the Alaska Bar Association make
a recommendation to the Board of Governors as to whether attorneys
may ethically advance masters' fees to their clients as "costs and
expenses"under the recently amended Rule of Professional Conduct
1.8(e)(1). We also request that our Standing Advisory Committee on
the Civil Rules of Procedure address whether such fees are
recoverable as costs under Civil Rule 79(f).
Footnote 52:
Van Pilsum v. Iowa State Univ. of Science & Tech., 152 F.R.D.
179, 181 (S.D. Iowa 1993); see also Mercer v. Gerry Baby Products
Co., 160 F.R.D. 576, 577 (S.D. Iowa 1995) ("Although the use of the
special master increases transactional costs in the short run, this
increase will be minimal compared with the expenses (time, money,
and energy) incurred to-date, and should result in savings to each
party in the long run."); Jonathan S. Liebowitz, Special Masters:
An Alternative Within the Court System, 48 Disp. Resol. J., 64, 67
(1993) ("When measured against the prospect of trying the case for
years . . . the costs of using the services of a special master
fade into insignificance.").
Footnote 53:
Powers, supra note 28, at 101.
Footnote 54:
See, e.g., Bozarth v. Atlantic Richfield Oil Co., 833 P.2d 2,
6 (Alaska 1992) (Matthews, J., dissenting) (suggesting a cap on
attorney's fee awards proportionate to plaintiff's annual income).
Courts generally may not force the non-indigent party to pay the
full cost of the referee's fees merely because of the other party's
indigence. See, e.g., Taggares v. Superior Court, 72 Cal. Rptr. 2d
387, 394 (App. 1998).
Footnote 55:
See Dissent at 25.
Footnote 56:
Progressive claims to have paid more than $70,000 in medical
payments and third-party liability payments to the Peters thus far.
Footnote 57:
The Peters also advance equal protection and due process
claims. But these claims stand or fall on whether appointment of
a master precludes the Peters' meaningful access to the courts or
works as a de facto sanction. To the extent that the Peters make
a generic argument that the "appointment creates an advantage of
the rich over the poor,"the same argument could be made against
nearly every pre- or post-trial imposition of costs on parties.
The crucial inquiry is whether such costs affect other substantive
rights or are otherwise violative of the Civil Rules.
Footnote 58:
The Peters submitted more lengthy discovery requests after the
court's appointment of a master in April 1998. In May and June
1998 the Peters filed 125 requests for admission and 238 requests
for production with Progressive. And in August 1998, in responding
to one of Progressive's motions for a protective order, the Peters
filed an opposition that was 71 pages long and contained over 1,500
pages of exhibits.
FOOTNOTES (Dissent)
Footnote 1:
See Dean v. Firor, 681 P.2d 321, 327 n.8 (Alaska 1984).
Footnote 2:
See Slip Op. at 3-4.
Footnote 3:
Progressive, alleging that the Peters' initial twelve
interrogatories (which Progressive has termed "extremely broad,
unduly burdensome, and, as a practical matter, virtually impossible
to respond to") called for proprietary documents, moved for a
protective order precluding the Peters from "disclosing to third
parties any confidential or proprietary information produced"in
discovery. In response to this motion, the Peters filed a 41-page
brief and 138 pages of exhibits. The trial court appointed a
discovery master soon afterwards.
Shortly after appointment of the discovery master,
plaintiffs within a ten-day period filed a total of 125 requests
for admission and 238 requests for production.
Footnote 4:
Slip Op. at 5.
Footnote 5:
See Slip Op. at 5 n.9.
Footnote 6:
This court granted the petition for review on May 22, 1998.
The trial court stayed all discovery on September 11, 1998.
Footnote 7:
Slip Op. at 20.
Footnote 8:
Id. at 20.
Footnote 9:
The court acknowledges Progressive's argument concerning
master's fees being paid by counsel, see Slip Op. at 18-19 n.51,
citing Malvo v. J.C. Penney Co., 512 P.2d 575 (Alaska 1973), but
then assumes that master's fees would be treated the same as
attorney's fees. I believe that the assumption is unwarranted.
The court cites Malvo to support the argument that a high award
might discourage lawsuits by low income plaintiffs. But Malvo
concerned attorney's fee awards. Progressive's argument was that
master's fees have come to be treated generally as an item of
expense advanced by counsel for plaintiff and only recovered by
counsel from plaintiff if plaintiff prevails. An opponent's
attorney's fees are not treated in this fashion. Accordingly, an
attorney's fee award could well have a chilling effect, but a
master's fee award, if it is in fact treated as an item which is
advanced by counsel (and is not recovered by the opponent as a
cost), would not have a chilling effect.
Footnote 10:
The Rules of Professional Conduct were amended in 1993 to
provide that counsel may advance court costs and expenses of
litigation, "the repayment of which may be contingent upon the
outcome of the matter." Alaska R. Prof. Conduct 1.8(e)(1) (as
amended by Alaska Supreme Court Order No. 1123 (July 15, 1993)).
Reference of this issue to the appropriate advisory committee would
allow consideration of whether discovery master expenses should be
considered as "costs and expenses"subject to this rule. Reference
would also allow exploration of whether the rules on cost recovery
should be amended to allow inclusion of discovery master costs.
See Alaska R. Civ. P. 79.
Footnote 11:
Slip Op. at 23.
Footnote 12:
The argument that "a remand is necessary in any event to
resolve the Peters' claim of financial hardship,"Slip Op. at 23,
gives more credit to the claim than it is due: Both before the
superior court and before this court the claim was nothing more
than unsupported assertions in briefs. This court has consistently
found unsupported assertions of counsel to be insufficient to raise
factual issues. See, e.g., French v. Jadon, Inc., 911 P.2d 20, 26
(Alaska 1996)("Mere assertions of fact in pleadings and memoranda
are insufficient for denial of a motion for summary judgment.")
(quoting State, Dep't of Highways v. Green, 586 P.2d 595, 606 n.32
(Alaska 1978)).
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