First Coast Energy, L.L.P. v. Mid-Continent Casualty Company
Filing
18
ORDER granting in part and denying in part 16 Motion to compel. Signed by Magistrate Judge Monte C. Richardson on 11/20/2012. (MOH)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
JACKSONVILLE DIVISION
FIRST COAST ENERGY, L.L.P.,
Plaintiff,
vs.
Case No. 3:12-cv-281-J-32MCR
MID-CONTINENT CASUALTY COMPANY,
Defendant.
_____________________________________/
ORDER
THIS CAUSE is before the Court on Plaintiff’s Motion to Compel Discovery (Doc.
16) filed October 22, 2012. Defendant filed a response in opposition to this Motion on
November 8, 2012. (Doc. 17). Accordingly, the matter is now ripe for judicial review.
I. BACKGROUND
The instant litigation involves Plaintiff’s claims against Defendant for insurer bad
faith. On August 28, 2012, Plaintiff served discovery requests on Defendant. On
October 11, 2012, Defendant responded to the discovery requests and objected to
several of the requests on the basis that Plaintiff failed to post a cost bond in
accordance with Florida Statute §624.155. Accordingly, Plaintiff brought the instant
motion seeking an order compelling Defendant to respond to Interrogatories 6 and 7
and Requests to Produce numbers 3, 5 through 9, and 12 through 18. Additionally,
Plaintiff seeks an award of $905.00 as sanctions against Defendant.
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II. DISCUSSION
Motions to compel discovery under Rule 37(a) are committed to the sound
discretion of the trial court. See Commercial Union Ins. Co. v. Westrope, 730 F.2d 729,
731 (11th Cir. 1984). The trial court's exercise of discretion regarding discovery orders
will be sustained absent a finding of abuse of that discretion to the prejudice of a party.
See Westrope, 730 F.2d at 731.
The overall purpose of discovery under the Federal Rules is to require the
disclosure of all relevant information so that the ultimate resolution of disputed issues in
any civil action may be based on a full and accurate understanding of the true facts, and
therefore embody a fair and just result. See United States v. Proctor & Gamble Co.,
356 U.S. 677, 682, 78 S.Ct. 983 (1958). Discovery is intended to operate with minimal
judicial supervision unless a dispute arises and one of the parties files a motion
requiring judicial intervention. Furthermore, “[d]iscovery in this district should be
practiced with a spirit of cooperation and civility.” Middle District Discovery (2001) at 1.
In the instant case, Defendant objected to several of Plaintiff’s discovery requests
on the grounds that before Plaintiff may obtain discovery relating to its claim for punitive
damages, it must first pay the costs of such discovery in advance or post a cost bond as
required by Florida Statutes §624.155(5). This statute provides a party may only
recover punitive damages if “the acts giving rise to the violation occur with such
frequency as to indicate a general business practice” and the acts are either “[w]illful,
wanton, and malicious; [i]n reckless disregard for the rights of any insured; or [i]n
reckless disregard for the rights of a beneficiary under a life insurance contract.” Fla.
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Stat. §624.155(5). Additionally, the statute provides: “any person who pursues a claim
[for punitive damages] shall post in advance the costs of discovery. Such costs shall be
awarded to the authorized insurer if no punitive damages are awarded to the plaintiff.”
Id. Accordingly, Defendant takes the position that Plaintiff cannot obtain discovery
pertaining to its punitive damages claims until it posts a cost bond for the discovery.
Plaintiff responds by citing two decisions by this Court holding that no such bond
is necessary, including Precisionaire, Inc. v. Liberty Mutual Ins. Co., No. 8:04-cv-1939,
2006 WL 2508090 (M.D. Fla. Aug. 29, 2006). Defendant acknowledges the
Precisionaire decision, but argues the undersigned should not follow it. Defendant
notes that in Precisionaire, the court observed that the Eleventh Circuit had not
addressed the issue of whether Florida Statute §624.155(5) should apply in federal
court, but that other federal courts had declined to require a district court to follow a
state’s practice regarding cost bonds. Precisionaire, 2006 WL 2508090, at *1. Indeed,
the court cited a Colorado decision in which the court found a statute requiring a party to
post a bond was procedural in nature and therefore, “the policies underlying Erie R.R.
Co. v. Tompkins, 304 U.S. 64 (1938) did not militate toward applying the state statute in
federal court.” Id. (citing Hartnett v. Catholic Health Initiatives Mt. Region, 47 F.Supp.2d
1255, 1256 (D. Colo. 1999)).
Defendant takes the position that Florida’s statute is different than the Colorado
statute and, unlike the Colorado statute, is substantive in nature. Therefore, Defendant
argues this Court should apply the requirement of posting a bond prior to obtaining
discovery regarding punitive damages. Specifically, Defendant points out that the
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Colorado statute simply requires a non-resident plaintiff to post a cost bond if ordered
by the Court and failure to do so, will result in dismissal of the suit. On the other hand,
the Florida statute provides that a plaintiff seeking punitive damages in a bad faith
action against an insurer must post a cost bond prior to engaging in discovery and if the
plaintiff does not obtain an award of punitive damages, the cost bond is forfeited to the
defendant. Because of this second provision, Defendant believes the statute is
substantive rather than merely procedural in nature.
As Defendant correctly notes, the Erie doctrine requires federal courts sitting in
diversity to apply the law of the forum state to substantive issues, and federal law to
procedural issues. See Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427, 116
S.Ct. 2211, 2219 (1996) (citing Erie, 304 U.S. 64, 58 S.Ct. 817). Distinguishing
between substantive and procedural law, however, is often challenging. Gasperini, 518
U.S. at 427, 116 S.Ct. at 2219 (“classification of a law as ‘substantive’ or ‘procedural’ for
Erie purposes is sometimes a challenging endeavor”); Lundgren v. McDaniel, 814 F.2d
600, 605-06 (11th Cir. 1987) (observing that “[t]he distinction between substance and
procedure has proved highly elusive”).
In order to distinguish substantive from procedural statutes, the Supreme Court
has established a two-step test. See Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136
(1965). First, a court must determine whether the state statute in question is in “direct
collision” with any Federal Rule of Civil Procedure. Hanna, 380 U.S. at 472, 85 S.Ct. at
1144. If so, the Federal Rule controls, unless it modifies, enlarges, or abridges a
substantive right. See Rules Enabling Act, 28 U.S.C. 2072(b). If there is no direct
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collision with any Federal Rule of Civil Procedure, then the state statute would control if
failure to apply it would thwart the aims of Erie. See Hanna, 380 U.S. at 468, 85 S.Ct.
at 1142.
In the instant matter, there is no requirement in the Federal Rules of Civil
Procedure for a cost bond when a plaintiff seeks punitive damages, so the statute and
the rule cannot be said to be in direct collision. See Tiara Condo. Ass’n, Inc. v. Marsh
USA, Inc., 697 F. Supp. 2d 1349, 1357-58 (S.D. Fla. 2010) (holding “[i]t is well settled
that when there is no federal rule controlling on an issue, courts should use the
‘outcome determinative test’ to determine whether a state’s rule is actually substantive,
or merely procedural . . .”).
Once it has been determined that the state law does not conflict with a Federal
Rule of Civil Procedure, the court must determine whether the principles underlying the
Erie doctrine require enforcement of the state rule in federal court. “[F]ederal courts
sitting in diversity must enforce state rules that are clearly substantive, ‘intended to be
bound up with the definition of the rights and obligations of the parties.’” Computer
Economics, Inc. v. Gartner Group, Inc., 50 F. Supp. 2d 980, 990-91 (S.D. Cal. 1999)
(quoting Byrd v. Blue Ridge Rural Electrical Co-op., Inc., 356 U.S. 525, 536, 78 S.Ct.
893, 900 (1958)). “State rules that define the elements of a cause of action, affirmative
defenses, presumptions, burdens of proof, and rules that create or preclude liability are
so obviously substantive that their application in diversity actions is required.”
Computer Economics, Inc., 50 F. Supp. 2d at 990.
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If a state rule is not clearly substantive, the court must determine whether failure
to apply it would thwart the aims of Erie. The two aims of Erie are the discouragement
of forum shopping and the avoidance of inequitable administration of the laws, i.e., the
likelihood that the applicability of particular substantive rights and duties would turn on
the forum in which the action is brought. Hanna, 380 U.S. at 468, 85 S.Ct. at 1142.
Thus, the state rule should apply when the failure to do so would significantly affect the
outcome of the litigation, encourage forum shopping, or result in “inequitable
administration of the laws.” Gasperini, 518 U.S. at 428, 116 S.Ct. at 2220 (quoting
Hanna, 380 U.S. at 468, 85 S.Ct. at 1142). “Under this analysis, courts may apply
ostensibly procedural rules when their non-application would create an incentive for
plaintiffs to file actions in federal court.” Computer Economics, Inc., 50 F. Supp. 2d at
991 (citing Woods v. Holy Cross Hospital, 591 F.2d 1164, 1168 (5th Cir. 1979) (federal
court must apply state statute requiring malpractice plaintiffs to submit claims to
screening panel because statute serves state's substantive policies and failure to apply
it would encourage forum shopping); Stoner v. Presbyterian University Hospital, 609
F.2d 109, 110 (3rd Cir. 1979) (federal court must apply state statute requiring plaintiffs to
first submit claims to non-binding arbitration: although statute was more procedural than
substantive, failure to apply it would relieve diversity litigants of legal burdens imposed
on litigants in state court); RTC Mortg. Trust 1994 N-1 v. Fidelity Nat. Title Ins. Co., 981
F.Supp. 334, 346-47 (D.N.J. 1997) (federal court must apply state statute requiring
malpractice plaintiffs to furnish defendant with affidavit from a licensed professional
attesting to the merit of plaintiff's claims within 60 days after filing of answer)).
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Finally, the court must determine if the state’s interest in uniform enforcement of
its laws is outweighed by any “countervailing federal interests.” Gasperini, 518 U.S. at
432, 116 S.Ct. at 2222; Byrd, 356 U.S. 525, 537, 78 S.Ct. 893. For example, in Byrd,
the Supreme Court held that the strong federal interest in the function of the jury “an
interest embodied in the Seventh Amendment,” required a federal court to submit
disputed factual questions to a jury, even in light of a contrary state practice. Id. at 53738, 78 S.Ct. at 900-01.
Utilizing these considerations in the instant case, the undersigned finds
application of Florida Statute §624.155(5) in this Court is appropriate. First, while the
statute appears primarily procedural in nature, it does have a substantive element. If
the state statute only required Plaintiff to post a cost bond, the Court would agree that it
is simply procedural and like the Colorado statute in Hartnett, not applicable in federal
court. However, Florida Statute §624.155(5) provides that if the plaintiff does not
recover punitive damages, he forfeits the amount of the cost bond to the defendant.
This provision certainly appears to be more substantive in nature and is analogous to
the statute at issue in Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 69 S.Ct.
1221 (1949). In Cohen, the Supreme Court addressed the following question:
whether a federal court, having jurisdiction of a stockholder’s
derivative action only because the parties are of diverse
citizenship, must apply a statute of the forum state which
makes the plaintiff, if unsuccessful, liable for the reasonable
expenses, including attorney’s fees, of the defense and
entitles the corporation to require security for their payment.
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Cohen, 337 U.S. at 543, 69 S.Ct. at 1224. The Court rejected the plaintiff’s argument
that the statute at issue was “procedural,” and therefore, not required to be applied in
the federal court. Indeed, the Court stated:
[T]his statute is not merely a regulation of procedure. With it
or without it the main action takes the same course.
However, it creates a new liability where none existed
before, for it makes a stockholder who institutes a derivative
action liable for the expense to which he puts the corporation
and other defendants, if he does not make good his claims.
Such liability is not usual and it goes beyond payment of
what we know as “costs.” . . . We do not think a statute
which so conditions the stockholder’s action can be
disregarded by the federal court as a mere procedural
device.
Id. at 555-56, 69 S.Ct. at 1229-1230.
Like the statute at issue in Cohen, Florida Statute §624.155(5) creates a new
liability in the amount of the bond for discovery costs incurred by a defendant in a case
in which the plaintiff fails to obtain an award of punitive damages. Like in the Cohen
case, this liability for a plaintiff is unusual and beyond what is normally awarded as
costs. As such, the statute is both procedural and substantive and as such, is
applicable in federal court.
Additionally, it appears that failure to apply Florida Statute §624.155(5) in
diversity cases would influence a plaintiff’s choice of forum. A plaintiff with a potentially
weak claim for punitive damages would certainly prefer to bring his claim in federal court
and avoid the requirement of advancing the costs of discovery and the potential of
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having to forfeit those costs to the defendant if his claim for punitive damages is
unsuccessful.1
Finally, the Court sees no countervailing federal interest which would outweigh
Florida’s interest in enforcement of Florida Statute §624.155(5). The statute protects
Defendants from potentially expensive discovery and encourages plaintiffs to propound
thoughtful and narrowly tailored discovery requests. These considerations are in line
with the federal rules of civil procedure.
While there is a dearth of cases interpreting this statute, at least one other district
court has stated in dicta that the requirement in Florida Statute §624.155(5) of posting a
cost bond prior to engaging in discovery on punitive damages would be applicable in
federal court. See Harrington v. Twin City Fire Ins. Co., Case No. 01-8442-CIV (S.D.
Fla. June 7, 2002) (the court granted a plaintiff’s motion to compel despite defendant’s
argument that plaintiff failed to post the discovery cost bond prior to seeking discovery
on punitive damages). The Harrington court found that the requirement of posting a
cost bond in the Florida statute would be applicable in federal court, however, it was not
necessary in that case because the defendant had failed to show that the discovery
sought was either difficult or costly to produce. The court cited Dunn v. National
Security Fire and Casualty Co., 631 So.2d 1103, 1110 (Fla. 5th DCA 1993) for the
proposition that the purpose of the provision allowing for advance costs of discovery
was to account for the fact that “discovery far beyond a single claim file or litigation may
1
The Court does note, however, that Plaintiff in the instant case chose to bring its claims
in state court and Defendant removed it to this Court.
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be necessary and discovery of more than one claim file or litigation file could be
‘exceedingly costly.’” The Harrington court further noted that “[a]ccording to Dunn, ‘the
advance posting of costs provision of [] §624.155(4) is not applicable’ unless the
discovering party ‘seeks discovery of a general business practice through requesting
access to multiple files . . .’”
To that end, the majority of Plaintiff’s discovery requests seek access to multiple
files, however, certain requests do not. Therefore, to the extent a request does not
seek access to multiple files, Plaintiff is not required to post the costs of discovery.
Accordingly, Defendant is directed to produce responses to Plaintiff’s Requests to
Produce Numbers 5, 6, 9, 12, 14, and 15. Defendant shall provide these responses no
later than Monday, December 3, 2012.
As for the remaining discovery requests, they appear to seek access to multiple
files and therefore, would be covered by section 624.155(5)’s requirement of posting in
advance the costs of the discovery. The parties shall confer in an attempt to reach an
agreement as to the reasonable costs to produce the requested documents. The Court
is hopeful the parties can reach agreement without further Court intervention, however,
if they are unable to do so, Defendant shall file a motion for the Court to determine the
amount of the costs. This motion shall be filed no later than Monday, December 10,
2012. Along with the motion, Defendant should include affidavits and other evidence
supporting its proposed amount of costs.
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Accordingly, after due consideration, it is
ORDERED:
Plaintiff’s Motion to Compel Discovery (Doc. 16) is GRANTED in part and
DENIED in part as provided in the body of this Order. The Court finds Defendant’s
non-disclosure was substantially justified and therefore, will not award Plaintiff’s
expenses in filing this Motion.
DONE AND ORDERED in Chambers in Jacksonville, Florida this
November, 2012.
Copies to:
Counsel of Record
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