Cardinal Aluminum Company v. Continental Casualty Company et al

Filing 26

OPINION & ORDER granting in part and denying in part 23 Motion for Protective Order. Signed by Magistrate Judge Lanny King on 7/1/2015. cc: Counsel(KJA)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
LOUISVILLE DIVISION
CASE NO. 3:14-CV-857-TBR-LLK
CARDINAL ALUMINUM COMPANY

PLAINTIFF

v.

CONTINENTAL CASUALTY COMPANY

DEFENDANT

OPINION AND ORDER
Defendant, Continental Casualty Company, moved the Court, pursuant to Rule 26(c) of
the Federal Rules of Civil Procedures, for a protective order related to a Rule 36(b)(6) deposition
noticed by Plaintiff, Cardinal Aluminum Company. (Docket # 23). Defendant designated a
representative to respond to the topics. Nonetheless, Defendant challenges two aspects of the
deposition notice—namely, the propriety of six of the thirteen noticed areas of inquiry and the
location of the deposition. For the reasons described in this opinion and order, the Court grants
Defendant’s motion, in part, and denies it, in part. Plaintiff may inquire as to topics 2 and 10
through 13 as contained in its Rule 30(b)(6) deposition notice, subject to the Court’s reservation
of ruling on objections based on attorney-client privilege and work-product doctrine. The Court
stays discovery as to topic nine. The deposition will take place in Louisville, Kentucky.
Background
Plaintiff filed its complaint in Jefferson Circuit Court alleging claims for breach of
contract, violation of Kentucky’s Unfair Claims Settlement Practices Act, and common-law bad
faith as well as seeking declaratory relief. (Docket # 1-5). The claims assert insurance coverage

for a crack that formed in a large piece of industrial equipment. Id. Defendant1 removed the case
to federal court on diversity of jurisdiction grounds. (Docket # 1). Plaintiff amended its
complaint and Defendant answered shortly after the removal. (Docket ## 6, 7).
District Judge Russell issued a Scheduling Order that bifurcated the bad-faith claims and
set a fact-discovery deadline of July 1, 2015, which was later extended to July 15, 2015. (Docket
## 12, 21). On June 8, 2015, Plaintiff sent a proposed notice for a Rule 30(b)(6) deposition of a
representative of Defendant. (Docket ## 23-2, 23-3). Defendant disputed the propriety of some
of the areas of inquiry listed as well as the location of the deposition. After a telephonic status
conference with the Magistrate Judge, the parties agreed to an accelerated briefing schedule.
(Docket # 20). Defendant moved for a protective order, Plaintiff responded, and Defendant filed
a reply. (Docket ## 23, 24, 25). The matter is now ripe.
Challenged Deposition Topics
In its Cardinal Aluminum Company’s Notice of Fed. R. Civ. P. 30(b)(6) Deposition of
Continental Casualty Company, Plaintiff listed thirteen areas of inquiry, as matters for
examination required by rule. (Docket # 23-3). Defendant objects to six of the listed areas.
Generally, the objected-to areas concern payment of insurance premiums, other claims for
similar losses, and pleadings and discovery responses previously made by Defendant.
“Parties may obtain discovery regarding any nonprivileged matter that is relevant to any
party’s claim or defense . . . .” Fed. R. Civ. P. 26(b)(1). The burden of establishing good cause
sufficient for the issuance of a protective order rests on the moving party, i.e., Defendant. Nix v.
Sword, 11 Fed. App’x 498, 500 (6th Cir. 2001) (per curiam). Defendant must “articulate specific
facts showing ‘clearly defined and serious injury’ resulting from the discovery sought and cannot
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Initially, CNA Insurance Company was a co-defendant in this case. Plaintiff voluntarily
dismissed its claims against the co-defendant three days after the removal. (Docket # 5).
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rely on mere conclusory statements.” Id. (quoting Avirgan v. Hull, 118 F.R.D. 252, 254 (D.D.C.
1987)).
At this juncture, the Court can only rule on the propriety of the matters included in
Plaintiff’s Rule 30(b)(6) notice. Particularized objections and related motions cannot come
before the Court until Plaintiff poses specific questions to the party representative.
I. Plaintiff’s payment of premiums
Defendant objects to topic two regarding the payment of premiums. Plaintiff agreed to
limit the topic to the amount of premiums paid. (Docket # 24, p. 2).
In a breach of contract case, like the instant matter, consideration provides an element of
the cause of action. Ky. Emps. Ret. Sys. v. Seven Cntys. Servs., Inc. (In re Seven Cntys. Servs.,
Inc.), 511 B.R. 431, 475 (Bankr. W.D. Ky. 2014). Plaintiff alleged that policy premiums serve as
consideration for the insurance contract. (Docket # 6, para. 15). The amount of premiums paid is
reasonably calculated to lead to the discovery of admissible evidence and therefore within the
scope of discovery.
Moreover, Defendant failed to demonstrate a clearly defined and serious injury that will
result if Plaintiff asks questions related to the amount of premiums paid. Plaintiff may inquire as
to the amount of premiums paid during the deposition.
II. Other claims submitted to Defendant
Topic 9 notices Defendant of Plaintiff’s intention to ask about “[o]ther claims submitted
by [Defendant’s] insureds seeking coverage for damage to similar industrial extrusion presses.”
(Docket # 23-3). Defendant objects to allowing deposition questions regarding this topic based
on a lack of relevance. (Docket # 23-1, pp. 7-8). Defendant concedes that the topic may become
relevant if the litigation reaches the bad-faith claims, currently bifurcated. Id.; (Docket #12, para.

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1). Plaintiff responds that it should have the discovery because the Court may find the policy
language ambiguous, in which case the treatment of similar claims will speak to the meaning of
the insurance contract. (Docket # 24, pp. 3-4). Importantly, Plaintiff argues that it seeks the
other-claims discovery not to demonstrate that an ambiguity exists but in case an ambiguity
exists.
Pursuant to Kentucky law, courts interpret contracts as a matter of law, including
determining if ambiguity exists. 3D Enters. Contracting Corp. v. Louisville & Jefferson Cnty.
Metro. Sewer Dist., 174 S.W.3d 440, 448 (Ky. 2005) (quoting Cantrell Supply, Inc. v. Liberty
Mut. Ins. Co., 94 S.W.3d 381, 385 (Ky. 2002)). “A contract is ambiguous if a reasonable person
would find it susceptible to different or inconsistent interpretations.” Cantrell Supply Inc., 94
S.W.3d at 385. As Plaintiff admits, at this stage in the instant litigation, the Court has not
determined if an ambiguity exists in the contract. (Docket # 24, p. 3-4).
“Trial courts have broad discretion and inherent power to stay discovery until preliminary
questions that may dispose of the case are determined.” Hahn v. Star Bank, 190 F.3d 708, 719
(6th Cir. 1999) (citing Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936)). Broad discovery has
its limits and this Court must exercise discretion to balance the needs and rights of both parties.
Scales v. J.C. Bradford & Co., 925 F.2d 901, 906 (6th Cir. 1991) (citing Trevino v. Celanese
Corp., 701 F.2d 397, 406 (5th Cir. 1983)). Moreover, the Court must work to “secure the just,
speedy, and inexpensive determination of every action.” Fed. R. Civ. P. 1.
Determination of the legal question of the insurance contract’s potential ambiguity
provides a threshold issue. Parol evidence has no immediate relevance until the Court determines
an ambiguity exists. Cantrell Supply Inc., 94 S.W.3d at 385. Therefore, the Court finds that,
under the current procedural posture, staying any discovery related to other claims provides the

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more efficient and just result. If the Court later determines an ambiguity exists, Plaintiff may
move the Court for additional discovery. The Court expresses no opinion as to the ultimate
validity of any such discovery request, only that Plaintiff should not have the discovery at this
time.
III. Defendant’s Answer, Affirmative Defenses, and responses to written discovery
With topics 10 to 13, Plaintiff seeks to depose Defendant’s representative regarding its
pleadings and discovery responses, including searches for responsive information. Defendant
objects to these topics stating that Plaintiff should utilize contention interrogatories, instead of a
deposition, because the topics would require the corporate representative to “undertake on-thespot legal analysis.” (Docket # 23-1, pp. 9-10). Defendant further objects that the attorney-client
and work-product privileges protect some of the information. (Docket # 23-1, pp. 10-11).
Plaintiff responds that it does not seek legal conclusions regarding the pleadings and discovery
responses. (Docket # 24, p. 5).
The Eastern District of Kentucky held that “[a] party which intends to assert claims and
defenses in litigation must adequately prepare an individual to testify as to those claims and
defenses.” In re Classicstar Mare Lease Lit., No. 5:07-CV-353-JMH et al., 2009 WL 1313311,
at * 2 (E.D. Ky. May 12, 2009); accord Miller v. Experian Info. Solutions, Inc., No. 3:13-cv-90,
2014 WL 7176620, at *2 (S.D. Ohio Sept. 18, 2014). This Court agrees that Defendant’s
corporate representative must attend the deposition prepared to discuss the facts related to
Defendant’s case, including the discovery previously provided to Plaintiff. Moreover, facts
related to the search for documents or responsive information is reasonably calculated to lead to
the discovery of admissible evidence and therefore a proper subject for the deposition. Fed. R.
Civ. P. 26(b)(1).

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Defendant cites to Byrd and Exxon to support its argument that the Court should order the
questions posed by interrogatory. (Docket # 23-1, p. 9-10). One can distinguish these cases. The
Byrd court acknowledged that “‘contention questions’ are not per se impermissible during a Rule
30(b)(6) deposition.” Byrd v. Wal-Mart Transp., LLC, No. CV609-014, 2009 WL 3055303, at *4
n.7 (S.D. Ga. Sept. 23, 2009). The Court recognizes a line between factual and legal answers. Id.
The former—what Plaintiff asserts it seeks in the instant matter—remain proper during a
deposition according to the Byrd court’s sources. Id. (quoting First Internet Bank of Ind., No.
1:07-cv-0869-DFH-DML, 2009 WL 2092782, at *4 n.5 (S.D. Ind. July 13, 2009)). The Byrd
court states that the latter do not provide admissible evidence and cannot “fairly be said to lead to
the discovery of admissible evidence.” Id. at *2 n.3 (calling questions about legal conclusions a
“waste [of] trial time”) (citing R&B Appliance Parts, Inc. v. Amana Co., 258 F.3d 783, 786-87
(8th Cir. 2001)).
The Exxon court ordered the use of contention interrogatories in a case that concerned
patent construction and infringement. Exxon Research & Eng’g Co. v. United States, 44 Fed. Cl.
597, 602 (Fed. Cl. 1999). The Court relied on caselaw from the District of Nebraska that
addressed the deposition-or-interrogatory problem and found depositions

potentially

inappropriate “when the topic is very complex.” Id. (citing Protective Nat’l Ins. Co. v.
Commonwealth Ins., 137 F.R.D. 267, 281 (D. Neb. 1989)). The caselaw undergirding Exxon
goes on to use trademark validity as an example of a topic the courts should not require a
30(b)(6) deponent to answer, while questions regarding insurance claims remained appropriate
for a deposition. Id. The Court does not find the subject matter of the instant litigation very
complex, especially in light of the facts that this is an insurance-coverage dispute and
Defendant’s designee works as a professional insurance adjuster. (Docket # 23-1, p. 4).

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A lay witness cannot generally testify as to legal conclusions. See Fed. R. Evid. 701(c);
Torres v. Cnty. of Oakland, 758 F.2d 147, 150-51 (6th Cir. 1985). When testimony addresses
issues with “a separate, distinct and specialized meaning in the law different from that present in
the vernacular,” it calls for an impermissible legal conclusion. 758 F.2d at 151. This Court agrees
with the Byrd court that, being generally inadmissible, deposition questions eliciting a legal
conclusion from a lay witness lack a reasonable calculation to lead to the discovery of admissible
evidence. Byrd, WL 3055303, at *2 n.3. Therefore, questions as to legal conclusions exceed the
scope of permissible discovery and are not appropriate for a 30(b)(6) deposition. Fed. R. Civ. P.
26(b)(1). Plaintiff may inquire as to the facts that topics 10 through 13 encompass but must
refrain from asking Defendant’s representative, a lay witness, to draw legal conclusions.
As to attorney-client privilege and work-product doctrine, the rules permit Defendant’s
counsel to instruct the corporate representative not to answer. Fed. R. Civ. P. 30(c)(2).
Suggesting that Plaintiffs utilize alternative discovery devices will not alter the privileged nature,
or at least the objection on that ground, of the information. The Court finds that Defendant can
adequately protect its evidentiary privileges during a deposition.
The Court concludes that Defendant failed to meet its burden to demonstrate that any
inquiry into its answer, affirmative defenses, and written discovery responses will work a clearly
defined and serious injury. Therefore, Plaintiff may inquire into these topics, subject to
objections and motions to terminate or limit the deposition made in response to specific
questions or lines of inquiry in accordance with Rule 30 and this opinion and order.
The Location of the Deposition
Plaintiff filed a notice to depose Defendant pursuant to Rule 30(b)(6) in counsel’s offices
in Louisville. (Docket # 23-3). Defendant chose Ronald Smith as its Rule 30 corporate

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representative. Mr. Smith works and resides in Indianapolis, Indiana. (Docket # 23-1, p. 4). The
distance between Indianapolis and Louisville is approximately 115 miles.
Plaintiff is a privately-owned corporation with approximately 450 employees. Defendant
is a publicly-traded corporation, which, according to Plaintiff, has about 8,000 employees and
assets of $46 billion. (Docket # 24, p. 9). Plaintiff’s principal place of business is Kentucky.
Defendant’s principal place of business is Chicago, Illinois. Plaintiff is represented by attorneys
with offices in Louisville, Kentucky.

Defendant is represented by attorneys in Lexington,

Kentucky.
Although Rule 30 does not set any particular location for depositions, the deposing party
may unilaterally select the place for the deposition, subject to the opposing party’s right to
challenge the location via a motion for a protective order. See Steven S. Gensler, Federal Rules
of Civil Procedure, Rules and Commentary, Rule 30 (2015).
Rule 26(c) provides, in pertinent part, that “[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, including one or more of the following: . . . (B) specifying terms, including time and
place, for the disclosure or discovery . . . .” Fed. R. Civ. P. 26(c).
“The burden of establishing good cause for a protective order rests with the movant.”
Nix, 11 Fed. App’x at 500. “To show good cause, a movant for a protective order must articulate
specific facts showing ‘clearly defined and serious injury’ resulting from the discovery sought
and cannot rely on mere conclusory statements.” Id.
Defendant relies primarily on Culver v. Wilson, in which this Court recognized that
“[d]istrict courts of the Sixth Circuit have held that a rule has ‘evolved’ such that ‘in federal
litigation, in the absence of special circumstances, a party seeking discovery must go where the

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desired witnesses are normally located.’” Culver v. Wilson, No. 3:14-CV-660-CRS-CHL, 2015
WL 1737779, at *3 (W.D.Ky. Apr. 16, 2015) (quoting Farquhar v. Shelden, 116 F.R.D. 70, 72
(S.D. Mich. 1987)). In Culver, this Court granted the defendant’s unopposed motion for a
protective order, finding that requiring the defendant’s 30(b)(6) designee to travel from its
principal place of business in Omaha, Nebraska, to Louisville, Kentucky, would impose an
undue burden on the defendant. While this Court in Culver made a reference in passing to cases
that mentioned that a party may “insist” on the deposition taking place at its principal place of
business, its analysis focused on whether the location posed an undue burden. This Court did not
recognize that a corporate defendant had a right to insist on a deposition location absent a
showing of undue hardship.
Defendant relies on Meyer v. Photofax, Inc., which is an example of an exception to the
rule where the equities in support of the general rule do not apply. Meyer v. Photofax Inc., No.
08-143-HRW, 2009 WL 1850609, at *3 (E.D. Ky. June 26, 2009). Meyers held that the
defendant corporation had failed to meet its onus of establishing good cause for changing the
noticed location from the forum state, Kentucky, to the location of its principal place of business
near Chicago. “[A] number of factors serve[d] to dissipate the presumption in favor of Illinois
and have persuaded the [Court] that the depositions should be conducted in Kentucky.” Id. at *2.
Neither party cites, nor can this Court find, a case similar to this one where the defendant
insists that its representative be deposed at the witness’s home location, not the defendant’s
principal place of business, or where the distance of travel is so short.
Defendant has failed to satisfy its burden to show that requiring its chosen corporate
representative to drive approximately 115 miles to Louisville is unduly burdensome and

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expensive. Therefore, the motion for a protective order regarding the location of the deposition
should be denied.
THEREFORE, IT IS HEREBY ORDERED that Defendant’s Motion for Protective Order
(Docket # 23) is granted in part and denied in part. The Court stays discovery related to topic
nine of Plaintiff’s Cardinal Aluminum Company’s Notice of Fed. R. Civ. P. 30(b)(6) Deposition
of Continental Casualty Company (i.e., “Other claims submitted by [Defendant’s] insureds
seeking coverage for damage to similar industrial extrusion presses.”). (Docket # 23-3). If, at a
later date, the Court determines an ambiguity exists in the contract, Plaintiff may move the Court
for discovery related to other claims submitted to Defendant. Otherwise, the stay remains in
place until the parties proceed to the bad-faith stage of this bifurcated litigation. Plaintiff may
depose Defendant’s designated representative or representatives as to all other areas of inquiry
listed in the deposition notice. The deposition will take place at the offices of Fultz Maddox
Dickens PLC, 2700 National City Tower, 101 South Fifth Street, Louisville, Kentucky, 40202.

July 1, 2015

c:

Counsel

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