## Facts

- Alta Health Strategies, Inc. (Alta), a managed health-care company, employed Carole L. Kennedy and Peter O’Donnell as senior personnel after recruiting them in 1987.
- Kennedy and O’Donnell contended they accepted lower salaries based on representations that they would receive significant stock-based compensation and that Alta’s stock would perform well in connection with a planned public offering.
- The anticipated public offering did not occur on the early schedule discussed during recruitment; Alta’s initial public offering occurred later, in January 1991.
- Litigation followed, including counterclaims by Kennedy and O’Donnell asserting misrepresentations and related theories tied to the promised stock compensation and the value of Alta stock (including federal securities-law theories seeking “out-of-pocket” damages).
- During discovery, Alta served three interrogatories asking Kennedy and O’Donnell to “state every basis” for their contention that specified statements by Alta (or its agents) constituted admissions.
- Kennedy and O’Donnell objected, arguing the interrogatories sought protected attorney work product, especially counsel’s mental impressions and litigation strategy, under Federal Rule of Civil Procedure 26(b)(3).
- Alta moved to compel answers to the interrogatories and also moved for partial summary judgment aimed at narrowing the counterclaims and damages theories.

## Issues

1. Whether Rule 33(a)(2) permits interrogatories requiring Kennedy and O’Donnell to state every basis for their contention that certain statements were admissions, or whether Rule 26(b)(3) bars such discovery as protected attorney work product.
2. Whether, on the securities-related counterclaim theories, Kennedy and O’Donnell were limited to proving actual, out-of-pocket loss (rather than expectancy or benefit-of-the-bargain damages), warranting partial summary judgment to restrict improper damages theories.

## Decision

- The court granted Alta’s motion to compel answers to the challenged contention interrogatories.
- The court rejected Kennedy and O’Donnell’s broad work-product objection and required them to provide the bases for their “admissions” contentions.
- The court granted Alta’s motion for partial summary judgment in part and denied it in part.
- On the damages questions addressed, the court limited recovery on the federal securities theories to actual damages measured by out-of-pocket loss, not speculative or expectancy-based measures.

## Legal Principles

- Rule 33(a)(2) authorizes contention interrogatories that ask a party to state contentions and the application of law to fact; such interrogatories may be used to narrow disputed issues before trial.
- Rule 26(b)(3) protects attorney work product, including an attorney’s mental impressions, conclusions, opinions, and legal theories, but it does not excuse a party from disclosing the factual and legal grounds on which the party’s claims or defenses rest.
- A contention interrogatory does not become improper merely because answering it requires a party to explain why certain facts support a contention; the objection is stronger only when the interrogatory is aimed at counsel’s private reasoning or trial plan rather than the party’s grounds for the claim.
- In federal securities-fraud claims, 15 U.S.C. § 78bb(a) limits recovery to “actual damages,” commonly measured by out-of-pocket loss (the difference between value given and value received), rather than a benefit-of-the-bargain or expectancy measure.
- Summary judgment may be used to eliminate damages theories that exceed legally recoverable “actual damages” or that lack evidence of a concrete economic loss tied to the alleged misrepresentation.

## Conclusion

Alta Health Strategies, Inc. v. Kennedy held that Rule 33(a)(2) permitted Alta to require Kennedy and O’Donnell to state every basis for their contention that specified statements constituted admissions, and the court compelled answers despite a work-product objection because the interrogatories sought the parties’ grounds for their contentions, not protected attorney thought processes; in the same decision, the court also partially granted summary judgment to restrict securities-related damages to actual, out-of-pocket loss rather than speculative expectancy-based recovery.


Alta Health Strategies, Inc. v. Kennedy, 790 F. Supp. 1085 (1992)