Georgia-Pacific Consumer Products LP et al v. Zurich American Insurance Co. et al
ORDER denying 126 & 129 Motion to Bifurcate and to Stay. Signed by Chief Judge William H. Steele on 4/26/2016. (tgw)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
PRODUCTS LP, etc., et al.,
) CIVIL ACTION 15-0342-WS-B
ZURICH AMERICAN INSURANCE
COMPANY, etc., et al.,
This matter is before the Court on the motions of two defendants (“Aspen”
and “National”) to bifurcate and to stay. (Docs. 126,129). The parties have filed
briefs in support of their respective positions, (Docs. 126, 129, 147, 151, 153), and
the motions are ripe for resolution. After careful consideration, the Court
concludes the motions are due to be denied.
According to the third amended complaint, (Doc. 182) (“the complaint”),
the entity plaintiff (“GP”) operates a paper mill facility in Choctaw County. One
defendant (“S&S”) contracted with GP to perform work at the facility, in the
course of which an employee of S&S was killed. S&S had agreed to obtain
insurance in favor of GP and its officers and agents (including the individual
plaintiff). Aspen and National issued excess/umbrella policies but refused to
investigate the matter or provide coverage and refused to participate in the
ultimate settlement of the underlying lawsuit. The complaint asserts claims
against Aspen and National for: breach of contract (Count One); negligence
(Count Two); bad faith (Count Three); abnormal bad faith (Count Four); and
declaratory relief (Count Nine). Aspen and National would like the Court to
bifurcate the bad faith claims from the other claims and to stay discovery on the
bad faith claims pending resolution, by trial or otherwise, of the other claims.
“For convenience, to avoid prejudice, or to expedite and economize, the
court may order a separate trial of one or more separate issues [or] claims ….”
Fed. R. Civ. P. 42(b). The rule invests trial courts with “broad discretion” whether
to order bifurcation. Harrington v. Cleburne County Board of Education, 251
F.3d 935, 938 (11th Cir. 2001).
The parties agree that a breach of the insurance contract is an element of
any bad faith claim, normal or abnormal. It is thus correct that a ruling against the
plaintiffs on their contract claim necessarily dooms their bad faith claims. In light
of this relationship, the movants argue that bifurcation of discovery and trial will
both further judicial economy and avoid undue prejudice. They cite opinions from
a number of jurisdictions that have engaged in such bifurcation in bad faith cases,
sometimes with explanation, sometimes without, and sometimes by resort to a
formal rule specifically addressing the issue.1 The plaintiffs for their part cite a
number of cases ruling that such bifurcation is inappropriate, in general or under
the particular circumstances.
The Court has experimented with bifurcation of bad faith claims and has
found no improvement in judicial economy. As National concedes, (Doc. 126 at
12), such improvement in economy is possible only if the movants ultimately
prevail on the contract claim; otherwise, two rounds of discovery, dispositive
motions and trial are required, rather than one – a result opposed to judicial
economy. While the movants assure the Court they will prevail on the contract
No such rule governs this case.
claim, their arguments, as raised in the instant motions and in their previously
denied motions to dismiss, leave ample room for skepticism on that score.
The movants say bifurcation promotes efficiency because there is no
appreciable overlap in the discovery and evidence needed to resolve the contract
and bad faith claims. The Court is not so sure. Both Aspen and National rely on
provisions of their respective policies to make the case there is no coverage, but
they have failed to show that these provisions unambiguously negate coverage. If
the policies are ambiguous, the movants concede that extrinsic evidence may be
appropriate to resolve the ambiguity, and the Court has been provided no
assurance that such extrinsic evidence could not include evidence also relevant to
the bad faith claims.2
Furthermore, the movants overlook that the plaintiffs also bring a claim for
negligent failure to settle the underlying lawsuit. Under the movants’ proposal,
discovery and resolution of that claim would proceed alongside the contract claim,
and the movants have not even asserted, much less shown, that none of the
discovery and evidence relevant to the bad faith claim is relevant to the negligence
claim as well. The Court’s brief research suggests there would be extensive
Finally, the movants seek to further entangle the contract and bad faith
claims by proposing that the Court resolve, in the first phase of the bifurcated
Aspen seems to suggest that the policies cannot be ambiguous because the
plaintiffs allege the policies are unambiguous in a manner that supports them while the
movants maintain the policies are unambiguous in a manner that supports them. The
Court, however, not the parties, will determine whether the policies are ambiguous.
See Mutual Assurance, Inc. v. Schulte, 970 So. 2d 292, 296 (Ala. 2007) (as
between negligent failure to settle and bad faith failure to settle, “the facts necessary to
establish these separate claims are usually closely related”); State Farm Mutual
Automobile Insurance Co. v. Hollis, 554 So. 2d 387, 389-90 (Ala. 1989) (in a negligentfailure-to-settle case, the insurer must make a diligent investigation of the facts necessary
to make an informed decision about whether to settle); Nationwide Mutual Insurance Co.
v. Smith, 194 So. 2d 505, 506-07, 513 (Ala. 1966) (evidence, inter alia, that the insurer’s
counsel advised the insurer of a reasonable possibility of a verdict in excess of policy
limits supported a verdict in favor of the insured for negligent failure to settle).
proceedings, whether they had an arguable reason for denying coverage (the third
element of a bad faith claim).
The movants identify the relevant prejudice as the plaintiffs’ discovery of
information and documents that were prepared in anticipation of litigation,
constitute work product, or are subject to attorney-client or other privilege. They
do not suggest they would lose otherwise applicable objections to discovery
simply because the action is not bifurcated; instead, all they appear to be saying is
that the plaintiffs would gain earlier access to certain information and documents
that they would receive only later (or not at all, if the movants prevail on the
contract claim) were the case bifurcated. This may be inconvenient or even
embarrassing, but it hardly seems to amount to meaningful prejudice. The
movants remain free to seek entry of an appropriate protective order governing the
use, sharing, return or destruction, etc., of any sensitive information and
documents that may be produced.
The movants argue that S&S would also be prejudiced by early discovery,
in that materials the plaintiff could not obtain on the basis of their indemnity claim
against S&S may be obtainable on the basis of their bad faith claims. Since Aspen
insists that all such material is irrelevant to the indemnity claim, it is unclear what
real danger to S&S actually exists. At any rate, S&S is perfectly capable of
protecting its own interests, and it has not seen fit to join in or to support the
instant motions to bifurcate.
The movants do not appear to argue they would be prejudiced by a trial of
the contract and bad faith claims together. As they repeatedly insist the contract
claim will be resolved by the Court prior to trial, it seems clear that such prejudice
is a remote possibility. Certainly the movants have not demonstrated that any
prejudice from such a joint trial would be so severe as to warrant bifurcation.
The plaintiffs assert that the movants bear the burden of persuading the
Court that bifurcation is appropriate. (Doc. 147 at 2). The movants voice no
disagreement with this proposition, which is supported by authority within this
Circuit.4 The movants have failed to persuade the Court to invoke its “broad
discretion” in favor of bifurcation. Nor is the Court persuaded to stay bad faith
discovery pending resolution of the plaintiffs’ contract claims. For the reasons set
forth above, the motions to bifurcate and to stay are denied.
DONE and ORDERED this 26th day of April, 2016.
s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE
E.g., Bitpay, Inc. v. Massachusetts Bay Insurance Co., ___ F.R.D. ___, 2016
WL 1105263 at *1 (N.D. Ga. 2016) (“The burden to show that bifurcation is warranted is
on the party requesting bifurcation.”); accord Brown v. Toscano, 630 F. Supp. 2d 1342,
1345 (S.D. Fla. 2008); Lankhorst v. Independent Savings Plan Co., 2013 WL 5671303 at
*2 (M.D. Fla. 2013); Cole v. Morgan, 2010 WL 4038607 at *2 (N.D. Fla. 2010).
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?