Crandall v. Hartford Casualty Insurance Company et al

Filing 72

MEMORANDUM DECISION AND ORDER granting 55 Motion for Discovery; denying 67 Motion for Summary Judgment. The Court will set for hearing Plaintiffs § 6-1604 Motion for Hearing on Punitive Damages 44 after the entry of this Memorandum Decision and Order. Signed by Judge Ronald E Bush. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by krb)

UNITED STATES DISTRICT COURT
DISTRICT OF IDAHO

Case No.: CV 10-00127-REB

DANIEL W. CRANDALL,
Plaintiff,

MEMORANDUM DECISION AND
ORDER RE:

vs.
HARTFORD CASUALTY INSURANCE
COMPANY, and HARTFORD STEAM BOILER
INSPECTION & INSURANCE COMPANY,
Defendants.

DEFENDANTS’ MOTION FOR
SUMMARY JUDGMENT
(Docket No. 67)
DEFENDANTS’ MOTION TO
ALLOW ADDITIONAL WRITTEN
DISCOVERY
(Docket No. 55)

Currently pending before the Court are Defendants’ (1) Motion for Summary Judgment
(Docket No. 67) and (2) Motion to Allow Additional Written Discovery (Docket No. 55).
Having carefully reviewed the record and otherwise being fully advised, the Court enters the
following Memorandum Decision and Order:
I. BACKGROUND
On February 25, 2011, Defendants moved for summary judgment. See Defs.’ Mot. for
Summ. J. (Docket No. 36). Following oral argument, on August 22, 2011, the Court granted in
part, and denied in part, Defendants’ Motion for Summary Judgment. See 8/22/11 MDO
(Docket No. 59). Relevant to both the procedural and substantive posture of the case now, the

MEMORANDUM DECISION AND ORDER - 1

Court granted Defendants’ Motion for Summary Judgment on Plaintiff’s claim for (1) “lost
compensation” damages, (2) damages for “loss on investment in CatRisk,” (3) damages for “loss
on investment in Physicians Billing and Support Services, Inc.,” (4) damages for “loss on
investment in Moore Support Services, Inc.,” and (5) damages for “loss on accounting services.”
See id. at pp. 10-17; 20-21.
From the Court’s perspective, by granting Defendants’ Motion for Summary Judgment as
to the damages sought by Plaintiff’s damages expert, Thomas J. South, a question arose as to
Plaintiff’s ability to recover any damages relating to Plaintiff’s remaining causes of action. If no
damages could be obtained, the action logically ought to be dismissed in its entirety; on the other
hand, if damages were available, the action would proceed forward. To help answer this
question, the Court’s August 22, 2011 Memorandum Decision and Order requested the parties to
comment on the status of the action:
In light of this Memorandum Decision and Order, on or before August 30, 2011, the
parties are to notify the Court concerning the status of the action – specifically,
whether Defendants’ Motion for Summary Judgment resolves the claims raised in
the underlying Complaint. Unless otherwise notified, the Court will vacate any
pending deadlines and enter a corresponding judgment, consistent with this
Memorandum Decision and Order.
See id. at pp. 21-22.
What followed was disagreement between the parties about the resulting posture of the
case and, further, their respective submissions to the Court were equivocal in addressing the
Court’s concerns. Specifically:
•

On August 30, 2011, Plaintiff submitted his “Post-Summary Judgment Notice of Status
of Matter.” See Pl.’s Notice (Docket No. 60). There, Plaintiff argued that, following the

MEMORANDUM DECISION AND ORDER - 2

Court’s Memorandum Decision and Order, Plaintiff’s claims for breach of contract and
breach of implied covenant of good faith and fair dealing remain to be resolved at trial.
See id. at p. 2. Additionally, Plaintiff asserted that Defendants’ “Motion for Summary
Judgment did not dispose of those claims, but only of certain claims for damages relating
thereto . . . .” See id.1
•

Also on August 30, 2011, Defendants submitted their “Notification to Court of Status of
Case.” See Defs.’ Notification (Docket No. 61). There, Defendants maintained that the
Court’s Memorandum Decision and Order “fully resolves the case and the Judgment
should be entered in favor of the two defendants.” See id. at p. 2.2 As to available
damages, Defendants argued that there can be none because (1) Plaintiff repeatedly
deferred to his “damages expert” for any detail surrounding his damage claims;3 and (2)
1

Plaintiff also (1) pointed out that his Motion for Leave to Amend Re: Punitive
Damages (Docket No. 44) and Motion for Leave to Conduct Additional Discovery (Docket No.
55) are still pending, and (2) requested that the action be ordered to mediation. See Pl.’s Notice,
p. 2 (Docket No. 60). Neither of these points assists the Court in understanding whether Plaintiff
still maintains recoverable claims against Defendants.
2

Defendants claimed that entry of Judgment in favor of Defendant Hartford Steam
Boiler Inspection and Insurance Company (“Hartford Steam Boiler”) is straightforward as “the
Court entered summary judgment in its favor on all issues.” See Defs.’ Notification, p. 2
(Docket No. 61). This appears to be undisputed. Therefore, the focus now is on whether entry
of Judgment in favor of Hartford Casualty Insurance Company (“Hartford Casualty”) is
appropriate.
3

In this respect, Defendants cited to two different instances in Plaintiff’s deposition. See
Defs.’ Notification, pp. 2-3 (Docket No. 61) (citing to Plaintiff’s deposition at 62:11-13, 17-18
and 212:2-6). The Court noted that these references were not included in the original record,
submitted in support of Defendants’ Motion for Summary Judgment. Having said this, the Court
did point out at least one instance in the provided record where Plaintiff seemed to acknowledge
(at least in the context provided during the deposition) that he may not be testifying as to
his/CatRisk’s alleged damages. See Pl.’s Depo. at 78:21-79:8, attached as Ex. A to McGee Aff.
at ¶ 2 (Docket No. 36, Att. 2) (“Again, I’m not the damages person. I don’t think that’s been
fully settled as to what the damages may or may not be . . . . I’m going to be relying upon the
damages expert to tell me what is legitimate and what can or cannot be done.”).
MEMORANDUM DECISION AND ORDER - 3

the damages outlined by Plaintiff’s damages expert, Mr. South, are unrecoverable by
virtue of the Court’s Memorandum Decision and Order. See id. at pp. 2-3 (“In October,
some two months after his deposition, plaintiff designated Mr. South and Mr. South’s
exposition of the plaintiff’s damages are all that the defendants and the Court have to go
on in evaluating the damage claims of the plaintiff. All of the claims for damages
outlined by Mr. South have been dismissed.”).
•

On September 13, 2011, Plaintiff submitted his “Supplement to Notice of Status of
Matter.” See Pl.’s Supp. to Notice (Docket No. 62). In it, Plaintiff took issue with
Defendants’ August 30, 2011 submission, stating that Defendants “incorrectly allege[ ]
that the Plaintiff’s claims against it are incapable of proof because there are allegedly no
damages remaining for the Plaintiff to recover.” See id. at p. 2. Plaintiff further argued
that Defendants’ Motion for Summary Judgment did not address Plaintiff’s other claims,
namely breach of contract and bad faith. See id. at p. 3 (“Instead, the Plaintiff’s claims
for breach of contract and for bad faith, as well as damages relating thereto, are
conspicuously absent from the Defendants’ Motion for Summary Judgment, and the
Defendant may not rely on summary adjudication-by-implication in order to attempt to
dispose of the Plaintiff’s claims.”). In other words, it appeared as though Plaintiff was
arguing that damages – separate from those identified by Mr. South and already
addressed by this Court – are available to Plaintiff as to Plaintiff’s breach of contract and
bad faith claims. See id. (“Far from having no damages claims at all, the damages to
which the plaintiff is entitled are, as a matter of law, contract damages in the amount of
all unpaid benefits due under the policy . . . . Second, the Plaintiff’s ‘bad faith’ claim . . .

MEMORANDUM DECISION AND ORDER - 4

also remains to be adjudicated, as the Defendants and their counsel again opted not to
address this issue in their Motion for Summary Judgment.”).
•

On September 23, 2011, Defendants submitted their “Memorandum in Support of
Defendants’ Notification to Court of Status of Case” and, again, argued that the action
should be dismissed in its entirety. See Mem. in Supp. of Defs.’ Notification (Docket
No. 65). While admitting that Hartford Casualty has not paid any benefits to
CatRisk.com (the assignor), Defendants claimed that Plaintiff simply has not offered any
proof of any damages other than those calculated by Mr. South in his expert report. See
id. at p. 2 (“However, CatRisk.com had not, and has not, proven any recoverable benefits
that would be due under the policy and therefore, there was, and is, nothing to pay. The
Court has dismissed all of the claims for damages that Plaintiff’s expert, Mr. South,
postulated. Plaintiff admitted that Mr. South was his sole damage expert. The Plaintiff
cannot at this point, having failed to provide any evidence of recoverable damages, claim
that there are other damages which have not been disclosed.” (Emphasis in original)).
According to Defendants, absent damage, there can be no cause of action. See id. at p. 4
(citing Jones v. Talbut, 394 P.2d 316 (Idaho 1964)).
The sum of such submissions from the parties illustrated the quandary left before the

Court following the Court’s ruling on the original Motion for Summary Judgment, as to the
issues that had been presented and argued to the Court. The parties’ submissions did not
persuade the Court that there had been resolution of the question of whether other damages
(beyond those already identified by Mr. South) were available to Plaintiff on any claims that
were not specifically dismissed by the Court’s August 22, 2011 Memorandum Decision and

MEMORANDUM DECISION AND ORDER - 5

Order. With all this in mind, the Court invited Defendants to, once again, move for summary
judgment, based upon a discrete, updated record, detailing their arguments in favor of a complete
resolution of the action in their favor. See 11/16/11 Notice, p. 5 (Docket No. 66) (“Therefore,
while it may be viewed as inefficient given all that has transpired thus far, the Court requests
that, if Defendants contend that Plaintiff is wholly incapable of recovering any amount of
damages on any remaining causes of action, it so move for summary judgment in this limited
respect. Only after such arguments are squarely before the Court can Plaintiff respond
accordingly and, as such, position this Court to “settle the pond” on this issue and, perhaps, this
action entirely.”).
On December 2, 2011, Defendants filed a second Motion for Summary Judgment,
arguing that “Plaintiff cannot show the existence of evidence to support damages, which is an
essential element of his claims for breach of contract and breach of the covenant of good faith
and fair dealing against Hartford Casualty Insurance Company.”). See Defs.’ Mot. for Summ. J.
(Docket No. 67). Plaintiff naturally opposes Defendants’ latest attempt to dismiss any and all
remaining claims.
II. DISCUSSION
A.

Defendants’ Motion for Summary Judgment (Docket No. 67)
1.

Motion for Summary Judgment: Standard of Review

Summary judgment is used “to isolate and dispose of factually unsupported claims . . . .”
Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). It is “not a disfavored procedural
shortcut,” but rather is “the principal tool[ ] by which factually insufficient claims or defenses
[can] be isolated and prevented from going to trial with the attendant unwarranted consumption
MEMORANDUM DECISION AND ORDER - 6

of public and private resources.” Id. at 327. “[T]he mere existence of some alleged factual
dispute between the parties will not defeat an otherwise properly supported motion for summary
judgment; the requirement is that there be no genuine issue of material fact.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).
However, the evidence, including all reasonable inferences which may be drawn
therefrom, must be viewed in a light most favorable to the non-moving party (see id. at 255) and
the Court must not make credibility findings. Id. Direct testimony of the non-movant must be
believed, however implausible. Leslie v. Grupo ICA, 198 F.3d 1152, 1159 (9th Cir. 1999). On
the other hand, the Court is not required to adopt unreasonable inferences from circumstantial
evidence. McLaughlin v. Liu, 849 F.2d 1205, 1208 (9th Cir. 1988).
The moving party bears the initial burden of demonstrating the absence of a genuine
issue of material fact. Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001). To carry this
burden, the moving party need not introduce any affirmative evidence (such as affidavits or
deposition excerpts) but may simply point out the absence of evidence to support the nonmoving
party’s case. Fairbank v. Wunderman Cato Johnson, 212 F.3d 528, 532 (9th Cir. 2000).
This shifts the burden to the non-moving party to produce evidence sufficient to support a
jury verdict in its favor. Anderson, 477 U.S. at 256-57. The non-moving party must go beyond
the pleadings and show “by [its] affidavits, or by the depositions, answers to interrogatories, or
admissions on file” that a genuine issue of material fact exists. Celotex, 477 U.S. at 324.
However, the Court is “not required to comb through the record to find some reason to
deny a motion for summary judgment.” Carmen v. San Francisco Unified Sch. Dist., 237 F.3d
1026, 1029 (9th Cir. 2001) (quoting Forsberg v. Pac. Northwest Bell Tel. Co., 840 F.2d 1409,

MEMORANDUM DECISION AND ORDER - 7

1418 (9th Cir. 1988)). Instead, the “party opposing summary judgment must direct [the Court’s]
attention to specific triable facts.” Southern California Gas Co. v. City of Santa Ana, 336 F.3d
885, 889 (9th Cir. 2003). A statement in a brief, unsupported by the record, cannot be used to
create an issue of fact. Barnes v. Independent Auto. Dealers, 64 F.3d 1389 n. 3 (9th Cir. 1995).
2.

Plaintiff’s “Damages”

Plaintiff’s claims for (1) breach of contract, and (2) breach of the covenant of good faith
and fair dealing were not dismissed in the Court’s prior ruling. Rather, Defendants’ original
Motion for Summary Judgment only tested certain claims, as well as the sought-after damages
reflected within Mr. South’s September 30, 2010 expert report. Now, with the damages
identified by Mr. South unavailable to Plaintiff, Defendants argue that Plaintiff “cannot recover
any amount of damages on any remaining cause of action” and, accordingly, move for summary
judgment. See Defs.’ Mem. in Supp. of Mot. for Summ. J., p. 2 (Docket No. 67, Att. 1).
In response, Plaintiff (now represented by counsel) argues that his “equipment
breakdown” and “business interruption” losses, as reflected within the pre-litigation
correspondence between him and Defendants’ representatives (and, later, re-produced during
discovery), are recoverable under one or all of the remaining causes of action. According to
Plaintiff, these losses exceed $100,000. See Pl.’s Resp. to Defs.’ Mot. for Summ. J., pp. 2-3
(Docket No. 68) (“Plaintiff’s disclosures were made both prior to the litigation, when he
exchanged numerous emails and items of correspondence with the Defendants’ claims
representative, forensic accountant, and with other Hartford representatives, as well as in the
course of discovery on this matter. . . . . Specifically, Mr. Crandall’s document production
clearly discloses the sum of $27,500 in Equipment Breakdown coverage and $85,000 in Business

MEMORANDUM DECISION AND ORDER - 8

Interruption coverage which CatRisk sustained in the initial incident and thereafter when it was
unable to perform under its contracts.”).
Defendants do not dispute that Plaintiff disclosed alleged equipment breakdown and
business interruption damages before bringing this action. Indeed, on June 3, 2009, Plaintiff sent
a letter to Mr. Scott Prause with the heading: “Claim for business interruption and extra expense
damages.” See Ex. D to Crandall Decl. (Docket No. 70, Att. 5); see also Crandall Decl., ¶¶ 17
& 19 (Docket No. 70). Therein, Plaintiff identified the alleged (1) $27,500 equipment
breakdown loss associated with data recovery and physical damage diagnoses from Total Access
Data Recovery, and (2) $81,6004 in business interruption losses related to the loss of billing
client, Cherry Lane Family Clinic, P.A. See id. Moreover, Defendants do not dispute that
Plaintiff produced this same (and other, similar) correspondence in the course of the parties’
document production. Instead, Defendants argue that, such documentation notwithstanding,
Plaintiffs did not properly disclose his damages via initial disclosures, interrogatory responses,
and/or expert reports and, as a result, cannot tether any amount of damages to the remaining
causes of action. The Court disagrees – at least within the parameters of Defendants’ pending
Motion for Summary Judgment.
At this juncture, the question posed by Defendants’ Motion for Summary Judgment is
straightforward: Was Plaintiff injured/damaged by Defendants’ alleged breach of contract? If so,
Defendants’ Motion for Summary Judgment is denied; if not, Defendants’ Motion for Summary
Judgment is granted. Given the multiple communications that occurred prior to the filing of the

4

This figure represents a contract period of 24 months at $3,400/month, whereas
Plaintiff’s briefing identifies $85,000 in business interruption damages over a 25-month period.
See Pl.’s Resp. to Defs.’ Mot. for Summ. J., p. 5 (Docket No. 68).
MEMORANDUM DECISION AND ORDER - 9

lawsuit between Plaintiff and Defendants referencing alleged damages, the Court cannot state, as
a matter of law, that Plaintiff was not so damaged. Plaintiff’s June 3, 2009 letter to Hartford
identifies alleged losses that Plaintiff now claims are recoverable under the existing causes of
action – damages that appear to be distinct from those identified in Mr. South’s report. Whether
these damages are, in fact, recoverable, is not before the Court here; rather, that issue serves to
create a question of fact, precluding the dismissal of or any remaining portions of Plaintiff’s
claim against Defendants. Defendants’ Motion for Summary Judgment is therefore denied.
This is not to say that Plaintiff’s damages are insulated from any pre-trial attack on their
admissibility. That is, the Court perceives potential procedural arguments in favor of excluding
evidence of Plaintiff’s alleged damages when Plaintiff’s initial disclosures, discovery responses,
and testimony during deposition as to his expert’s role in calculating damages may have
compromised Plaintiff’s ability to even claim damages in the context of the remaining claims of
the lawsuit. However, Defendants’ Motion for Summary Judgment only speaks obliquely to
such questions, without formally seeking to exclude Plaintiff’s alleged damages for these
reasons.
In sum, Plaintiff has sufficiently set out in his briefing that he has communicated and
alleged details of equipment breakdown and business interruption losses due to Defendants’
conduct.5 This is enough to raise questions of fact that fend off Defendants’ Motion for

5

Defendants separately argue that Plaintiff’s $27,500 in equipment breakdown losses are
not recoverable because it represents DocTech d/b/a Backups Plus’s contractual responsibility to
maintain the physical systems that housed CatRisk’s software applications - allegedly not a
CatRisk obligation. See Defs.’ Mem. in Supp. of Mot. for Summ. J., pp. 4-5 (Docket No. 67,
Att. 1); Defs.’ Reply in Supp. of Mot. for Summ. J., pp. 5-6 (Docket No. 71). Even if that
position ultimately is well taken, at this stage, it is another question of fact disguised as a
coverage issue. Regardless, even assuming such equipment breakdown losses are not
recoverable here, Plaintiff still alleges nearly $90,000 in business interruption losses and
associated expenses.
MEMORANDUM DECISION AND ORDER - 10

Summary Judgment as currently framed. Importantly, however, the Court’s ruling does not rule
that Plaintiff is permitted to present evidence of damages at trial if there is foundational or other
evidentiary objection to the same; nor does the Court rule today that Plaintiff has actually been
damaged to the extent he now claims. The former question will be decided on another day; the
latter question is for the finder-of-fact to determine based upon the evidence presented at trial.
B.

Defendants’ Motion to Allow Additional Written Discovery (Docket No. 55)
Defendants point out that, in addition to this action, Plaintiff brought a related action in

this Court against, among others, Seagate Technology (“Seagate”) – the manufacturer of the hard
drive that allegedly failed in the at-issue May 21, 2009 incident. See Defs.’ Mot. to Allow Add’l
Written Disc., pp. 1-2 (Docket No. 55). That action has since been dismissed following a
settlement, contributing to Defendants’ request now to propound no more than 15
interrogatories, 15 requests for production, and 15 requests for admission “regarding aspects of
the litigation and settlement that are not available through the Court’s docket.” See id. at p. 2.
Plaintiff opposes Defendant’s request for additional discovery, arguing: (1) the December
31, 2010 discovery deadline has passed; (2) Defendants already had ample opportunity to
conduct discovery into the Seagate litigation; (3) the Seagate litigation is irrelevant to
Defendants’ alleged conduct here; and (4) the terms of the settlement are confidential. See Pl.’s
Resp. to Mot. to Allow Add’l Written Disc., pp. 2-3 (Docket No. 57). These arguments are not
persuasive.
First, the discovery deadline argument rings hollow when the record indicates that
Plaintiff apparently settled with Seagate and dismissed his claims against Seagate around March
of 2011 – approximately three months after the discovery deadline. Therefore, good cause exists
to modify any applicable scheduling order and allow the requested discovery. Second, inquiry

MEMORANDUM DECISION AND ORDER - 11

into the cause of the failed Seagate hard drive is an issue present here. Finally, although the
terms of any settlement between Plaintiff and Seagate may be confidential, this does not prevent
the parties from either entering into a stipulated protective order regarding the use of such
information in this action moving forward (which would seem to be a logical course) or,
alternatively, Plaintiff separately moving for a protective order as to such matters. Regardless,
Defendants are entitled to discover non-privileged information that is relevant to their defenses
on this particular subject.6
Therefore, Defendants’ Motion to Allow Additional Written Discovery is granted.
Consistent with the Affidavit of Larry C. Hunter in Support of Defendants’ Motion to Allow
Additional Written Discovery (Docket No. 55, Att. 1), discovery shall be filed within seven days
of this Memorandum Decision and Order.
///
///
///
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6

Plaintiff argues that, if Defendants’ Motion to Allow Additional Written Discovery is
granted, “in the interests of fairness and reciprocity,” Plaintiff should be permitted to propound
“additional discovery to the Defendants in an equivalent form and number of requests . . . .” See
Pl.’s Resp. to Mot. to Allow Add’l Written Disc., p. 3 (Docket No. 57). This request is denied –
not only is it not presented by way of a separate motion, Plaintiff fails to offer any reason why
good cause exists to allow such open-ended discovery after the December 2011 discovery
deadline. However, to the extent Plaintiff requests that Defendants be required to supplement all
of their responses to discovery to date (see id.), that request is controlled by the Federal Rules of
Civil Procedure. See, e.g., Fed. R. Civ. P. 26(e).
MEMORANDUM DECISION AND ORDER - 12

III. ORDER
For the foregoing reasons, it is HEREBY ORDERED that Defendants’ Motion for
Summary Judgment (Docket No. 67) is DENIED. It is ALSO ORDERED that Defendants’
Motion to Allow Additional Written Discovery (Docket No. 55) is GRANTED. The Court will
set for hearing Plaintiff’s § 6-1604 Motion for Hearing on Punitive Damages (Docket No. 44)
after the entry of this Memorandum Decision and Order.
DATED: February 27, 2012

Honorable Ronald E. Bush
U. S. Magistrate Judge

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