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National Union Fire Insurance Company of Pittsburgh, PA v. Becton, Dickinson And Co.

United States District Court, D. New Jersey

January 30, 2018

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Plaintiff,
v.
BECTON, DICKINSON AND COMPANY, Defendant.

          OPINION AND ORDER

          JAMES B. CLARK, III United States Magistrate Judge

         THIS MATTER comes before the Court on two motions: (1) a motion by Plaintiff National Union Fire Insurance Company of Pittsburgh, PA. (“National Union” or “Plaintiff”) seeking the entry of a protective order prohibiting Defendant Becton, Dickinson and Company (“Becton” or “Defendant”) from inquiring into certain subjects during Defendant's Federal Rule of Civil Procedure 30(b)(6) deposition of Plaintiff's corporate representative [Dkt. No. 122]; and (2) a motion by Defendant seeking to quash the deposition subpoena served upon Robert Atkins, Esq. of Paul, Weiss, Rifkind, Wharton & Garrison LLP, or, in the alternative, for the entry of a protective order barring Plaintiff from inquiring into privileged topics should Mr. Atkins' deposition be permitted to proceed [Dkt. No. 123]. Both motions are opposed [Dkt. Nos. 124, 125]. For the reasons set forth below, Plaintiff's motion for a protective order [Dkt. No. 122] is DENIED, and Defendant's motion [Dkt. No. 123] is GRANTED in part and DENIED in part.[1]Additionally, as set forth below, the Order entered by the Court on July 28, 2015 granting Plaintiff's request to bifurcate and stay discovery related to Defendant's bad faith counterclaim [Dkt. No. 55] is hereby VACATED sua sponte.

         I. BACKGROUND

         Plaintiff filed its Complaint in this matter on July 9, 2014, seeking a declaratory judgment of its rights and obligations under certain umbrella liability insurance policies issued to Defendant. See Dkt. No. 1. Specifically, Plaintiff seeks a declaration that it is not obligated to defend or indemnify Defendant in connection with two antitrust lawsuits filed against Defendant (the “Underlying Actions”) which were settled by Defendant prior to being tendered to Plaintiff. The Underlying Actions were instituted by Retractable Technologies, Inc. (“RTI”) in state court in 1998 and then in federal court in 2001. The Underlying Actions were settled by Defendant in 2004 for $100, 000, 000.

         Although the Underlying Actions were settled by Defendant in 2004, Plaintiff was not formally notified of the Underlying Actions until it received a letter from Defendant, dated June 13, 2014, demanding defense and indemnity costs arising therefrom. On August 11, 2014, subsequent to the filing of this action, Plaintiff notified Defendant of its denial of coverage for the Underlying Actions.

         In response to Plaintiff's Complaint, Defendant filed its Answer and Counterclaim on August 19, 2014. See Dkt. No. 7. Defendant filed an Amended Answer and Counterclaim on June 23, 2016. See Dkt. No. 87. Defendant's Counterclaim asserts three causes of action for: (1) a declaratory judgment that it is entitled to coverage; (2) breach of contract; and (3) breach of the duty of good faith and fair dealing. See Id. Defendant's bad faith claim asserts that Plaintiff breached its good faith duties to Defendant through its alleged failure to conduct a reasonable investigation of the Underlying Actions and Defendant's claim for coverage prior to filing this action and prior to concluding that Defendant was not entitled to coverage.

         On March 13, 2015, Plaintiff filed a motion for judgment on the pleadings. See Dkt. No. 28. The arguments set forth by the parties in connection with Plaintiff's motion for judgment on the pleadings are relied upon by the parties in their present motions. In its motion for judgment on the pleadings, Plaintiff argued that it owed no coverage for the Underlying Actions because Defendant breached various policy conditions when it settled the underlying action without first notifying Plaintiff. Specifically, as relevant to the present motions, Plaintiff asserted that Defendant's failure to notify Plaintiff of the Underlying Actions until sixteen years after the commencement of the Underlying Actions and ten years after their settlement “constitutes late notice as a matter of law because it represents a fundamental breach of [Defendant's] obligations to [Plaintiff].” Dkt. No. 28 at p. 2. In opposition to Plaintiff's motion, Defendant claimed that Plaintiff could only be excused from its duties to provide coverage by proving it suffered “appreciable prejudice” stemming from Defendant's late notice, which requires a showing that Plaintiff: (1) irretrievably lost substantial rights; and (2) likely would have defended successfully against the Underlying Actions. Dkt. No. 34 at p. 15.

         While Plaintiff's motion for judgment on the pleadings was still pending, Plaintiff filed a request to bifurcate Defendant's bad faith claim and related discovery pending a determination on Defendant's entitlement to coverage. See Dkt. No. 40. In support of its request, Plaintiff asserted that Defendant could not maintain a bad faith claim until it first established an entitlement to coverage, and because the Court would soon examine Defendant's bad faith claim in connection with Plaintiff's motion for judgment on the pleadings, a stay of all bad faith discovery was warranted. Id. In opposition, Defendant disagreed with Plaintiff's contention that its bad faith claim would not be viable absent a determination of entitlement to coverage and argued that a bifurcation of discovery would waste the parties' and the Court's time and resources and would result in prejudice to Defendant. See Dkt. No. 44.

         On July 28, 2015, the Court granted Plaintiff's request and bifurcated and stayed discovery related to Defendant's bad faith claim. See Dkt. No. 55. In its Order, the Court noted that although a large portion of the briefing submitted by the parties in connection with Plaintiff's request to bifurcate addressed the bifurcation of Defendant's bad faith claim in its entirety, such a request was dispositive and must be made before the District Judge. Id. at n. 1. Accordingly, the Court granted Plaintiff's request only insofar as all discovery regarding Defendant's bad faith claim would be “held in abeyance pending the District Court's decision on the issue of bifurcation of the trial of this matter.” Id. at n. 2. To date, Plaintiff has not submitted a request to the District Judge to bifurcate this matter in its entirety.

         Thereafter, on September 30, 2015, Defendant filed a motion for leave to amend its Answer. See Dkt. No. 58. On October 22, 2015, the Court entered an Order administratively terminating Plaintiff's motion for judgment on the pleadings pending disposition of Defendant's motion to amend. See Dkt. No. 64. Defendant's motion to amend was granted and Defendant filed its Amended Answer and counterclaims on June 23, 2016. Plaintiff has not renewed its motion for judgment on the pleadings.

         The present motions arise from the parties' seemingly endless conflicts over the scope of proper discovery in connection with this matter. After numerous attempts to resolve the current disputes informally, the Court permitted the filing of the instant motions.

         Plaintiff's motion seeks relief related to the 30(b)(6) deposition notice served by Defendant based upon the Order entered by the Court on July 28, 2015 granting Plaintiff's request to bifurcate discovery related to Defendant's bad faith counterclaim. On January 26, 2015, Defendant served Plaintiff with the 30(b)(6) notice at issue seeking deposition testimony on twenty-one (21) topics and the production of all documents related to those topics (the “National Union Notice”). See Dkt. No. 122, Sheridan Decl. at Ex. 1. According to Plaintiff, six of the twenty-one topics included in the National Union Notice relate to Defendant's bad faith counterclaim. Plaintiff objected to the National Union Notice and advised Defendant that it would not provide a witness to testify on Topics 3, 4, 17 and 18.

         After discovery related to Defendant's bad faith claim was bifurcated and stayed, Plaintiff reiterated its position that six of the topics in the National Union Notice, specifically Topics 3, 4, 12, 16, 17 and 18, seek information related to Defendant's bad faith claim and are therefore improper at the present stage of this litigation.[2] The Court ordered the parties to meet and confer and attempt to narrow and/or resolve their disputes regarding the scope of the National Union Notice. Following their meet and confer, Plaintiff agreed to designate a witness to testify as to Topics 16, 17 and 18 and Defendant agreed to withdraw Topic 12. The parties were unable to reach any sort of understanding or agreement as to Topics 3 and 4, which are now the subject of Plaintiff's motion.[3]

         Plaintiff presently seeks to bar Defendant from inquiring into Plaintiff's claims handling procedures during Defendant's 30(b)(6) deposition of Plaintiff's corporate representative claiming that such information relates to bad faith and is therefore improper based upon the Court's stay of bad faith discovery. In opposition to Plaintiff's motion, Defendant argues that the discovery into Plaintiff's claims handling procedures sought in the 30(b)(6) topics at issue relates to Plaintiff's claim of appreciable prejudice which requires Plaintiff to demonstrate that Defendant's late notice resulted in Plaintiff's loss of the opportunity to follow its claims handling procedures.

         Defendant's motion arises out of a deposition subpoena served by Plaintiff on Robert Atkins, Esq. of Paul, Weiss, Rifkind, Wharton & Garrison LLP (“Paul Weiss”) on March 1, 2017 (the “Atkins Subpoena”). Dkt. No. 123, Bartell Cert. at Ex. D. Mr. Atkins represented Defendant in the Underlying Actions, and through the Atkins Subpoena, Plaintiff seeks information regarding Mr. Atkins' recollection and understanding of the events surrounding the litigation and settlement of the Underlying Actions. Plaintiff admittedly seeks privileged information including communications between Mr. Atkins and Defendant, evaluations of strategy, and impressions regarding the merits of the claims. Defendant claims that because the Subpoena seeks privileged information, it must be quashed. Alternatively, should Plaintiff be permitted to depose Mr. Atkins, Defendant seeks the entry of a protective order barring Plaintiff from inquiring into privileged subject matter.

         In opposition to Defendant's motion, Plaintiff claims that it should be permitted to obtain documents and testimony related to privileged matters allegedly placed at issue by Defendant in this matter including: (1) Defendant's analysis regarding the defense and settlement of the underlying actions; (2) the reasons underlying Defendant's belated request for coverage for the Underlying Actions; and (3) the basis for Mr. Atkins' decisions in the Underlying Actions. Additionally, Plaintiff argues that even if it is not permitted to depose Mr. Atkins regarding privileged matters, the Atkins Subpoena should not be quashed in its entirety because it seeks relevant nonprivileged information from Mr. Atkins “regarding the [Underlying Actions], including [Defendant's] contemporaneous understanding of the asserted claims and defenses, rulings by the court, discovery and documents exchanged, settlement discussions, and representations made to RTI regarding insurance coverage.” Dkt. No. 125 at p. 6.

         II. LEGAL STANDARD

         Federal Rule of Civil Procedure 26 governs the scope of discovery in federal litigation and provides that:

Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.

Fed. R. Civ. P. 26(b)(1). Rule 26 is to be construed liberally in favor of disclosure, as relevance is a broader inquiry at the discovery stage than at the trial stage. Tele-Radio Sys. Ltd. v. De Forest Elecs., Inc., 92 F.R.D. 371, 375 (D.N.J. 1981). While relevant information need not be admissible at trial in order to grant disclosure, the burden remains on the party seeking discovery to “show that the information sought is relevant to the subject matter of the action and may lead to admissible evidence.” Caver v. City of Trenton, 192 F.R.D. 154, 159 (D.N.J. 2000). Upon a finding of good cause, a court may order discovery of any matter relevant to a party's claims, defenses or the subject matter involved in the action. “Although the scope of discovery under the Federal Rules is unquestionably broad, this right is not unlimited and may be circumscribed.” Bayer AG v. Betachem, Inc., 173 F.3d 188, 191 (3d Cir. 1999).

         Pursuant to Rule (26)(b)(2)(C), courts are required to limit discovery where:

(i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive;
(ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; or
(iii) the proposed discovery is outside the scope permitted by Rule 26(b)(1).

         Similarly, pursuant to Rule 26(c), “[t]he court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense[.]” In moving for a protective order, the “burden of persuasion [is] on the party seeking the protective order.” Cipollone v. Liggett Group, Inc., 785 F.2d 1108, 1121 (3d Cir. 1986). The party seeking a protective order “must show good cause by demonstrating a particular need for protection.” Id. Establishing “good cause” requires the movant to “specifically demonstrate [ ] that disclosure will cause a clearly defined and serious injury. Broad allegations of harm, unsubstantiated by specific examples, however, will not suffice.” Glenmede Trust Co. v. Thompson, 56 F.3d 476, 483 (3d Cir. 1995) (citing Pansy v. Borough of Stroudsburg, 23 F.3d 772, 786 (3d Cir. 1994)).

         Discovery sought via a subpoena issued pursuant to Rule 45 must fall within the scope of discovery permissible under Rule 26(b). OMS Investments, Inc. v. Lebanon Seaboard Corp., 2008 WL 4952445 (D.N.J. Nov. 18, 2008). In addition, pursuant to Rule 45(d)(1), “[a] party or attorney responsible for issuing and serving a subpoena must take reasonable steps to avoid imposing undue burden or expense on a person subject to the subpoena” and the Court has a responsibility to enforce this duty. However, it is the party claiming undue burden that must establish same. Nye v. Ingersoll Rand Company, Civ. No. 08-3481(DRD), 2011 U.S. Dist. LEXIS 7383, at *6, 2011 WL 253957 (D.N.J. Jan. 25, 2011); OMS Investments, 2008 ...


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