Wells Fargo Bank, N.A. v. Fidelity National Title Company et al
Filing
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MEMORANDUM OPINION AND ORDER re 12 Motion to Bifurcate and to Stay Discovery: It is ORDERED that Wells Fargo's claims will be bifurcated to separate bad faith allegations for resolution after the outcome of the underlying claims. It is FURTHER ORDERED that all discovery relating solely to Wells Fargo's bad faith claims will be stayed until the resolution of its underlying claims. Signed by Judge Jennifer B Coffman on August 11, 2011. (AWD) cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION
LEXINGTON
CIVIL ACTION NO. 11-37-JBC
WELLS FARGO BANK, N.A.,
V.
PLAINTIFF,
MEMORANDUM OPINION AND ORDER
FIDELITY NATIONAL TITLE
COMPANY, ET AL.,
DEFENDANTS.
***********
This matter is before the court upon Fidelity National Title Company and
ServiceLink Title Company’s motion to bifurcate Wells Fargo Bank’s contract and
bad faith claims and to stay discovery on Wells Fargo’s bad faith claims until after
resolution of its contract claims (R. 12). The court will grant the motion.
This dispute arises out of a homeowners’ refinancing of their mortgage
pursuant to which a mortgage/security agreement was neither signed nor recorded.
The homeowners have since defaulted on the loan and filed bankruptcy, and the
Trustee has successfully avoided Wells Fargo’s security interest in the property.
Wells Fargo’s complaint alleges that Fidelity National and its subsidiary ServiceLink
Title Company breached their contracts with Wells Fargo by failing to properly
execute and record the mortgage and failing to issue a title insurance policy. Wells
Fargo also claims bad faith on the part of the defendants.
Whether Wells Fargo may pursue its bad faith tort claim is entirely dependent
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upon the outcome of its contract claims, because it first must prove that the
defendants were liable on the underlying contracts in order to pursue its tort claims.
See Wittmer v. Jones, 864 S.W.2d 885, 890 (Ky. 1993). The questions of
whether a contract existed, whether it was breached, and to what extent each
defendant might be liable are primarily issues of law that will be supported by
objective proof of each party’s obligations and actions. On the other hand,
questions of whether the defendants acted in bad faith will require subjective proof
of defendants’ intent, and the discovery involved in such inquiries will likely be
much more extensive and contentious.
Because the proof required for the bad faith claim is not “inextricably
intertwined” with the proof required for the underlying contract claim, see Tharpe
v. Il. Nat. Ins. Co., 199 F.R.D. 213, 215 (W.D. Ky. 2001), it is both logical and
reasonable to delay consideration and discovery regarding Wells Fargo’s bad faith
claims until it is determined that such effort is necessary. See 2H&V Constr. Serv.,
LLC, v. Sergent Systems, Inc., No. 08-388, 2009 U.S. Dist. LEXIS 111465, at *3
(E.D. Ky. 2009); Smith v. Allstate Ins. Co., 403 F.3d 401, 407 (6th Cir. 2005).
Under such circumstances, bifurcation of issues will further the interests of judicial
economy and convenience and will avoid prejudice. See FED . R. CIV . P. 42(b);
Bridgeport Music, Inc. v. Justin Combs Pub., 507 F.3d 470 (6th Cir. 2007); Am.
Trim. LLC v. Oracle Corp., 383 F.3d 462 (6th Cir. 2004).
Accordingly,
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IT IS ORDERED that Wells Fargo’s claims will be bifurcated to separate bad
faith allegations for resolution after the outcome of its underlying claims.
IT IS FURTHER ORDERED that all discovery relating solely to Wells Fargo’s
bad faith claims will be stayed until the resolution of its underlying claims.
Signed on August 11, 2011
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