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ITT Corp. v. Travelers Casualty and Surety Co.

United States District Court, D. Connecticut

January 27, 2017

ITT CORPORATION ET AL.
v.
TRAVELERS CASUALTY & SURETY CO.

          RULING ON PENDING DISCOVERY ISSUES

          Joan Glazer Margolis United States Magistrate Judge

         I. PROCEDURAL HISTORY

         On January 6, 2012, plaintiffs ITT Corporation [“plaintiff ITT”] and Goulds Pumps Inc. [“plaintiff Goulds”] commenced this lawsuit against defendant Travelers Casualty and Surety Company, formerly known as Aetna Casualty and Surety Company, with respect to nineteen Excess Overlayer Indemnity policies [“XN policies”] issued to plaintiff ITT with more than $245 million in coverage and two XN excess insurance policies issued to plaintiff Goulds with more than $50 million in coverage; plaintiffs allege that defendant has changed its interpretation of the XN policies to constructively eliminate the coverage afforded to plaintiffs under their XN policies. (Dkt. #1). The complaint contains three counts: Count One requests declaratory and injunctive relief regarding coverage; Count Two alleges a violation of the Connecticut Unfair Trade Practices Act [“CUTPA”], Conn. Gen. Stat. §42-110a et seq.; and Count Three alleges procedural bad faith in the handling of plaintiffs' asbestos claims in violation of the common law of Connecticut. On June 12, 2014, defendant filed its answer and affirmative defenses. (Dkt. #103).

         On March 24, 2014, the case was transferred from U.S. District Judge Robert C. Chatigny to U.S. District Judge Jeffrey A. Meyer (Dkt. #93); Judge Chatigny had referred the case to U.S. Magistrate Judge Donna F. Martinez for discovery. (Dkt. #26). Suffice it to say, there have been multiple discovery disputes throughout the duration of this lawsuit. (See, e.g., Dkts. ##17, 19, 25, 29-30, 33, 50-51, 61, 62, 67-68, 82-83, 85-87, 89-90, 94-95, 97-99, 100-02, 105-07, 111-12, 114-19, 121-29, 134, 145, 147-49, 151-52, 154-57, 160-74, 176-78). On February 21, 2013, Judge Chatigny stayed this lawsuit under the Colorado River abstention doctrine (Dkt. #78), pending a decision by the California Superior Court regarding the proper interpretation of defendant's excess insurance policies in Cannon Electric, Inc. et al. v. Affiliated FM Insurance Co. et al., Case No. BC 290354 [“Cannon”]. On March 17, 2014, Judge Chatigny lifted the stay to the extent that plaintiffs could engage in “time sensitive” discovery, after the California Superior Court filed a thirty-eight page Statement of Decision in favor of the plaintiffs there. (Dkt. #92; see also Dkt. #83). On June 22, 2016, the California Courts of Appeal affirmed this decision. (Dkts. ##138-39, 142). One month later, on July 20, 2016, Judge Meyer further lifted the stay to permit third party discovery. (Dkt. #145).

         Under the latest Scheduling Order, filed July 26, 2016 (Dkt. #149), all discovery is to be completed by May 31, 2017. On October 4, 2016, the parties filed status reports regarding their pending discovery disputes. (Dkts. ##177-78). Twenty-three days later, on October 27, 2016, Judge Meyer referred this file to this Magistrate Judge for discovery. (Dkt. #181). Four days thereafter, this Magistrate Judge filed an order (Dkt. #182), requiring the parties to forward copies of the Requests for Admission, Interrogatories and Document Requests, and objections thereto, in dispute, as well as letters detailing any other outstanding discovery disputes. Consistent with this order, defendant filed its supplemental letter on November 14, 2016, along with eighteen exhibits. (Dkts. ##183-84).[1] Plaintiffs also forwarded a letter, dated November 14, 2016, along with twenty-nine exhibits.[2]

         On December 22, 2016, plaintiffs and defendant forwarded additional letters summarizing the parties' discovery disputes (Dkts. ##185, 187-88); after the discovery conference was held on January 4, 2016, defendant forwarded a supplemental letter one week later, [3] as to which plaintiffs responded two days later. (Dkts. ##186, 189-90).

         Plaintiffs' letter, dated December 22, 2016 (Dkt. #188), lists the specific discovery items at issue and outlined the four topics upon which they seek discovery: (1) evidence that in 2009 Travelers advanced a coverage position that contradicted Aetna's intent on what the XN policies cover; (2) evidence that Travelers knew that it had no reasonable factual basis to assert that Aetna's underwriters did not intend to cover plaintiffs' product liability loss for losses that exceeded the aggregate limits of the policies beneath the XN policies; (3) evidence that Travelers advanced this position as a general business practice, i.e., not just with plaintiffs, but with other policyholders; and (4) evidence of Travelers' financial motivation to engage in bad faith conduct. (Id. at 2-3). Plaintiffs dispute defendant's arguments that these discovery requests are irrelevant, disproportional, vague, speculative and unduly burdensome, and that the discovery is prohibited by Conn. Gen. Stat. § 38a-988 and principles of confidentiality. (Id. at 4). Plaintiffs have suggested as a compromise that disclosure be limited as follows: (1) to discovery related to claims made under XN policies to insured A.H. Robins Company for Dalkon Shield product liability loss;[4] and (2) discovery related to asbestos-related products liability claims made under XN policies such that, of the twenty-seven XN policyholders with asbestos-product liability claims for which it has made payments under XN policies, defendant need only respond to twelve of them, namely, the first six and the last six policyholders for which Travelers paid asbestos products claims, as an initial disclosure, without prejudice to seeking the remaining fifteen claims. (Id. at 4-5).[5]

         In addition, plaintiffs seek discovery related to certain documents for which they moved to compel production prior to the case having been stayed due to the pendency of the California lawsuit in 2014. (Id. at 5, citing Dkt. #126, at 71-72, 74). Plaintiffs seek production of the “Wigmore Memo, ” upon which Judge Meyer has not ruled. (Id., citing Dkts. ##127-28). Lastly, plaintiffs contended that they were in the process of amending their Rule 26(a) disclosures regarding damages, and would provide non-privileged supporting documentation. (Id.).

         In its letter, dated December 22, 2016 (Dkt. #187), defendant argues that plaintiffs have misused the discovery process in having served 520 Requests for Admission, Judge Meyer already has denied many of plaintiffs' Requests for Production at issue here and already found that the discovery sought is overly broad, intrusive, and burdensome, and defendant is willing to abide by the decision in the California litigation so this lawsuit is “needless.” (Id. at 1-2, citing Dkts. ##125, 184 (Exh. C, at 21-26; Exh. D, at 15-19; Exh. E, at 71-75)). Defendant further objects to plaintiffs' proposed compromise as even the limited request is “extraordinar[ily] burdensome and intrusive[, ]” and would still leave the discovery dispute unresolved in that it preserves the opportunity for plaintiffs to seek additional files. (Id. at 2). Defendant also contends that Judge Meyer already denied production of the Wigmore Memo. (Id., citing Dkts. ##125, 127-28, 184 (Exh. E, at 74)). Lastly, defendant argues that plaintiffs' promise to provide copies of invoices for costs incurred in the Cannon litigation in California still does not satisfy their burden to provide computations of their damages under Fed.R.Civ.P. 26(a)(1)(A)(iii). (Id. at 1).

         In its letter, dated January 11, 2017 (Dkt. #189), [6] defendant referred to other lawsuits in which plaintiffs' counsel has been criticized for “playing the dual role of coverage counsel and defense counsel for a different policyholder[, ]” and argued that defendant's other policyholders have legitimate expectations of privacy and confidentiality (id. at 2-4 & Exhs. C-F), and that plaintiffs have failed to demonstrate any “legally cognizable ‘ascertainable loss'” required to maintain a CUTPA claim. (Id. at 1-2 & Exhs. A-B).

         Two days later, plaintiffs' letter (Dkt. #190) responded by arguing that the Illinois lawsuit, in which four of the named defendants have XN policies issued by Travelers, demonstrates that “Travelers appears to have treated some of those similarly situated XN policyholders differently[, ]” so that discovery on “bad faith . . . is directly relevant.” (Id. at 1). In addition, plaintiffs replied that defendant's challenges to plaintiffs' damages are “best resolved through a substantive motion, rather than this discovery proceeding.” (Id.).

         II. DISCUSSION

         At the outset, the Magistrate Judge rejects defendant's argument that Judge Meyer already denied plaintiffs' requests for this discovery during his prior discovery conferences in May 2014, June 2014, October 2014, November 2014, and August 2016. (Dkts. ## 102, 117, 126, 154, 169; see also Dkt. #169). While defendant is correct that Judge Meyer stated on November 25, 2014 that he was denying plaintiffs' motion “in substantial part[, ]” he immediately added that he “was going to make this denial, however, subject to exceptions or conditions[, ]” which included that if “the California Court of Appeals rules . . . adverse to Travelers[, ]” then he may decide that “it's time to have a fuller range of discovery in this action, and . . . plaintiffs would not be prejudiced in that instance.” (Dkt. #126, at 71-73).

         A. PROPORTIONALITY, RELEVANCE AND BURDENSOMENESS

         Given the enormous sums potentially at issue in this litigation, defendant's proportionality argument rings hollow. Travelers argues that plaintiffs' requests for admissions relating to the XN policies issued to A.H. Robins in connection with the Dalkon Shield product liability cases are irrelevant. While the A.H. Robins XN policies concern a different product, plaintiffs' claims turn not on the product related to the XN policy, but on the intent of the XN policies' underwriters' and on Travelers' interpretations of the scope of coverage for the XN policies. Plaintiffs' requests for admissions about the A.H. Robins policies, under which plaintiffs allege that Travelers first paid an XN claim, are relevant because they reflect Travelers' understanding of how these policies worked at a much earlier time. Accordingly, to the extent that plaintiffs only make requests for admissions and not document demands on this subject, these requests are relevant to plaintiffs' claims that Travelers has changed its interpretation of the coverage position of the XN policies over time. (Dkts. ##186 and 183-2, Requests for Admission, dated August 2, 2016, at 2-3).

         Regarding the compromise proposed by plaintiffs related to the XN policies issued to twenty-seven other policyholders who are facing asbestos-related product liability claims, the Magistrate Judge agrees with defendant that it would be unduly burdened if, after reviewing the first six and last six files, plaintiffs additionally requested production of the remaining fifteen policies. Defendant appropriately argues that it should not be forced to review these files twice. Instead, unless counsel agree otherwise, the Magistrate Judge orders defendant to produce eighteen of these files (which constitute two-thirds of the twenty-seven files) --in chronological order, numbers 1-2, 4-5, 7-8, 10-11, 13-14, 16-17, 19-20, 22-23, 26-27. Any request by plaintiffs for additional production of the remaining nine insurance files will require demonstration of “compelling and substantial need” addressing why production of the eighteen insurance files is insufficient.

         B. CONFIDENTIALITY

         The Magistrate Judge agrees with plaintiffs that Conn. Gen. Stat. § 38a-988 does not bar production of these documents. See Pike v. Anderson, No. X01 CV 10165364S, 2002 WL 31304235 (Conn. Super. Ct. Sept. 18, 2002). However, to the extent that there are protective orders or confidentiality agreements regarding these eighteen insurance files, or sensitive personal matters that deserve protection, production, is of course, subject to the Protective Order in place in this case. (Dkt. #119). In addition, defendant may redact the names of the claimants and its insureds, as appropriate, substituting the parties' actual names or initials.[7]

         C.THE ...


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