Free Letter - District Court of Delaware - Delaware

Case 1:05-cv-00699-SLR-IVIPT Document 110 Filed O2/05/2007 Page 1 of 4
tenner Hamilton LLP
ArLo:tieys at Law
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February 5, 2007
Via CM f RCF and Hand Belivery
Honorable Mary Pat Thynge
United States District Court
District of Delaware
Evlé North King Street,
Wilniington, BE l980i
Re: EJ. DuPont de Neniours and Company v.
Lum`be·rniens Mutual Casualty Company,
Civii Action No. 054399
Dear Judge Thynge:
This ietter serves as Lunioerrnens Mutual Casualty Conipany’s ("Keinper’”)
response to DuPont°s February 2, 2007 letter concerning discovery disputes. lsi.eniper’s
production to date cornprises over 43,000 pages of documents, which include documents
responsive to the very discovery issues which DuPont has sought to raise with the Court.
DuPont’s claimed discovery dispute is not weEl—t`ou·nded and the relief` it seeks should be denied.
l}uPont’s Second Rule 30(b)(6) Notice of Deposition. DuPont’s Second Rule
30(b)(6) Notice is objectionable for a number or reasons, inciuding that the topics are over broad,
vague, unduly burdensome. not relevant and largely dupticative of DuPont’s First Rule 30{b)(6)
Notice. A copy ot` i<.eniper’s objections set tbrth in its ietter dated January 8, 2007 is attached as
Exhibit A and a copy of Dul’ont’s First Ruie 30(b`)(6) Notice is attached as Exhibit B. Despite
these objections. Kemper has agreed to produce Jack McGregor for a second 30(b)(6) deposition
to testify to the extent it is possible concerning the topics addressed in DuPont’s Second Rule
3»0(b)(6) Notice. See l Mr. i\/lcGregor is expected to testify concerning why Kemper developed and used
a Large Risk Contributory Dividend Plan (‘*LRCDP") with its policyhoiders {ttenis l, 2, 3). To
the extent that DuPont seeics more specitic intorination as to preciseiy when and who at Keinper
amiizi ii;
Philadelphia Boston Washington, D.C. Detroir l\Ecw York ljittsburgh
Berwyn Harrisburg Orange County Princeton ‘$v'ilinington
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Case 1:05-cv-00699-SLR-IVIPT Document 110 Filed O2/05/2007 Page 2 of 4
at
Honorable Mary Pat Thynge
February 5, 2007
Page 2
developed the LRCDP, which Kemper policyholders a LRCDP was first offered and specific
facts and circumstances relating to policyholders other than DuPont, such inquiries are
overbroad. unduly burdensonie and irrelevant and Kemper seeks to preserve its objections.
Further, Mr. McGregor is further expected to testify concerning the meaning of
various policy and plan provisions as requested to the extent such questioning is not duplicative
ot` his original 3~0(p)(6) deposition wherein DuPont asked for Kemper’s understanding of the
meaning ofmost ofthe very same terms. Compare DuPont’s iiirst and Second 30(b)(6`) Notices.
DuPont seeks to burden the Court because Kemper has not yet confirmed a date
for Mr. l\/lcCrregor’s deposition. DuPont, however, tails to advise the Court that DuPont has not
provided Kemper with a date as to when it will produce its own 30(_b')(6`) witness in response to
Kemper’s Second 30(b)(6) Notice (D‘u?ont has not even confirmed that a witness will even be
produced at all). See DuPoni’s letter dated February 2, 2007 objecting to Ke1nper`s Second Rule
30(b)(6) Notice attached as Exhibit D. lt should be noted that Kemper has preserved its
objections to DuPont’s Second Rule 30(b)(6) notice, in essentially the same manner as DuPont
has done with respect to Kemper’s Second Rule 30(b)(6) Notice. Compare Exhibits A and D.
Financial/Accounting Documents. DuPont does not dispute that Kemper has
produced accounting records for the 2002 policy yearethe only policy year in disputeewhich
evidence that [Kemper booked the full estimated subject premium as revenue at the beginning of
the policy year. Kemper has made this production despite the absence of any formal request by
DuPont to do so. Kemper has also ot`t’ered to provide a Rule 30(b)(6) witness to explain the
accounting records Kemper produced showing how Kemper booked subiect premium.;
DuPont’s attempts to seek Kemper”s accounting records showing how Kemper
booked DuPont’s preruiunis for years prior to 2002 is overbroad, unduly burdensome and simply
not relevant to the 2002 year in dispute. To the extent that i)ui’ont believes that Kemper
changed the nianner in which it booked estimated subject premium for 2002 (which it did not),
such an inquiry can be made by asking this of a 30(b)(6) witness or propounding a simple
interrogatory to this effect. There is no reason to burden Kemper with extensive production of
detailed accounting records for policy years not at issue. Such a production would involve an
enormous burden upon Kemper to trace how it booked the estimated subject premiums for
approximately 35 separate DuPont insurance policies for each year during the period .1997-200l.
Moreover, such a request is disingenuous given DuPont’s failure to produce to Kemper copies of
I DuPont incorrectly states that it "was never billed for the fuil subject premium? The documentary record
as welt testimony of various witnesses confirm that Keniper`s invoices for years prior to 2002 reflect billing for
the entire audited subicct premium with a reduction of such preniiuin from the dividends declared.
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Case 1:05-cv-00699-SLR-IVIPT Document 110 Filed O2/05/2007 Page 3 of 4
iii;
Hoixcmblc Mary Pat Tlzymge
February 5* 2(K}7
Page 3
sigazcd i.z1sL1rzmcc agreements between the pa1·t.i<2s, including drafis and related correspondences,
i`0r‘yca1‘s prior to 2002 wlziciu provide that dividends are noi; guaranteed.
Furthezr, lDuP0z1t’s ciaims that further clcc-umsmaticm is required to support
Kcmpcfs accounting pmcticcs is also unwarranted given Kcmpcfs production of iss quarterly
iiizaucial statements for 2002. which detail how Kemper accounted lbr and booked such premium
unda; its LRCDPS. §q_c;_Kc1¤1pe;* 39081 (March 3}, 2002 Quarterly Staicmciit noting that
“stz1tut0i·y sccmmtéiug mlszs pmmulgstccl by she: [N`ati•;>izal Association of Insurance
CO§`B§'l}lSSlOl`i€I'SE l\/laiwail wguim {iw Crmzgnzszy 2*0 only accrz-:e_fbr gyciztgyizolder cfividerzds l·l’ll2£?}Z
zhqy are declared by dm Cl{}}?2[JC1iI_]4’ ’s Baum? qj`.Dz'rec1‘02·s (Board), rcztfzer them based upon
e3$£iH·zc2£écf uftirizmzz dis··id@r·id pc{w2;¤e1·2£s.°`)2 (emphasis added}. lf dividcnés am ROE aCCOu¤t€Cl for
umiii cicciarcd; {lien the {Bl? szibdiccs estimated premium is booked Qi tlzc inception of the policy
years
Documents Regarding Kcmpcfs Financial Condition. `K©m_p<:r’s production
ofsccumcnis relating to its financial condition sincrs: January 1, 2001 was uct, as DuPont
suggcsis, limited to "a few press rcleascs" and "iittlc: <:lsc.’° As nosed, Kemper has produced its
detailed qaiastcrly limnciai sizzicmczits for 2002 and has agreed E0 produce such quarterly
fé11.2m<:i:1l stzmamcants for 2001. These financial statements disclose, among oihcr things,
Kcmpcfs cash flow, liquidity and declining statutory surplus throughout 2002. Such documents
respond fully to DuP0nt”s Request N0. 31. T0 the extent Request 31 may be viewed ic include
communicaitions bcmiccii licmpezr and various rating agencies leading {0 dcwngradcs, Kemper is
unaware cf any such written comxmmicstioms other than the documents previously produced.
Kemper notes that the vast majority 0f its workfoscc from 2.092, including must 0f its oflic-css
and directors from that pcriucl, are :10 longer employed by Kemper. Email files for dcparzimg
employees were not a¥<:.i1ivcd pursuant to company policy.
Berkshire Hathaway Transaction. DuP0n€ requests documents relating $0
licmpcfs business dealings with Berkshire Hathaway, wherein a ilii.25 million equity investment
in ai l<¤:mpcz· sicck subsiéiiary was repurchased, pursuant t0 regulatory approval.} While DuPont
2 iicmpicr agrees 10 pmdiicc iés quairtczrly linzmcizil statements for 2001% which similarly state that under
Statutory Accoamtizzgi divideands are nai aaccomzlccl fbr until dazclarcé, thus requiring Kemper t0 §00k ihc csiiixuamzd
subicc; prcmiaim as revenue at inception alibi: policy.
3 licmpcfs decision 10 rcpurcimsc Bc1·l subsédiusy was made utiezr ccrmin rating, dclwngrscics on December 20, 2002 isi au effort to create liquidity and make
available upsircam sppiwximalcly S"Fll{) million in funds. This decision was publicly disclosed cm Bcccmbcr 23,
2002, p2·%0r to the rcilziwzncccl December 24, 2002 AM E:3cstd0w1zg1·scl<:.
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Case 1:05-cv-00699-SLR-IVIPT Document 110 Filed O2/05/2007 Page 4 of 4
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`l~ionoral;=le Mary Fat Thynge
February 5, 2007
Page 4
reterences this transaction in the factual ailegations of its Complaint, such allegations have
notiiing to do with the causes of action DuPont asserts Keinper which relate to Kenipeifs failure
to declare a dividend tor the 2002 policy year. (See Complaint, Counts l—Vil,1§‘l]` 83-l 13).
indeed. in Du[Pont”s equitable tiaud count wherein DuPont alleges specific instances ot` alleged
traud, DuPont makes no mention whatsoever of the Berkshire Hathaway transaction. (See
Complaint, ii 99). Moreover, the Berkshire Hathaway transaction is a complete red-herring
because even after the December 24, 2002 A.M. Best downgrade of Kemper which DuPont
refererices. DuPont proceeded to renew its coverages with Kemper for the 2003 policy year
under essentially the same terins as it did For the 2002 policy year.
Decision Not to Declare Dividends. Kemper has produced all rion—privilegei
documents relating to its decision not to declare dividends. DuPont tails to mention that Kemper
included in its privilege log ntirnerous privileged documents relating to this decision. Kemper
has further produced the `Qoard of Director minutes reflecting the determination that dividends
would not be declared, as well as its communications to its insureds and certain brokers
regarding same.
W e look forward to discussing these matters ori Tuesday, Feeruary 6, 2007.
Respecttiiliy,
fsf M. Duncan Grant
M. Duncan Grant (DE Bar No. 2.994)
MDCr:dw
Enclosures
cc: Clerk. U.S. District Court (vv! enc.) (via CM/ECF)
John James, Est;. {wfenc.) (via Cl\/lr'}E`.Cl*`}
$530 l52} x2