AMA Discount, Inc. et al v. Seneca Specialty Insurance Company
Filing
55
ORDER AND REASONS GRANTING IN PART AND DENYING IN PART 52 Motion to Compel as set forth in document. Signed by Magistrate Judge Joseph C. Wilkinson, Jr on 6/8/2016. (my)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
AMA DISCOUNT, INC. d/b/a
CHEF DISCOUNT MARKET ET AL.
CIVIL ACTION
VERSUS
NO. 15-2845
SENECA SPECIALTY INSURANCE CO.
SECTION “N” (2)
ORDER AND REASONS ON MOTION
This is an insurance coverage dispute. Plaintiffs’ Motion to Compel, Record Doc.
No. 52, is pending before me. Having considered the written opposition, Record Doc.
No. 53; the record; and the applicable law; the motion is GRANTED IN PART AND
DENIED IN PART as follows.
Defendant Seneca Specialty Insurance Co. asserts the attorney-client privilege and
lack of proportionality as objections to plaintiffs’ Request for Production No. 1, which
seeks defendant’s entire claim file. The file is from the underlying litigation brought by
Krispy Krunchy Foods, LLC, against Seneca’s insured, AMA Discount, Inc. and its
principals (collectively “AMA Discount”), who are the plaintiffs in the instant breach of
contract case against Seneca. Defendant’s proportionality objection is overruled.
Discovery of Seneca’s claim file from the underlying litigation is proportional to the
needs of the instant case. The file is relevant and important to resolution of AMA
Discount’s claims that Seneca breached the contract by refusing to provide AMA Discount
with a defense and indemnity and failed to comply with its duty of good faith and fair
dealing towards AMA Discount in connection with the defense and settlement of the
underlying litigation. Defendant’s state of mind in denying coverage to AMA Discount
and settling the underlying litigation with Krispy Krunchy are at issue in the instant action.
Swoboda v. Manders, No. 14-19-EWD, 2016 WL 2930962, at *9 (M.D. La. May 19,
2016); Biggers v. State Farm Ins. Co., No. 92-2004, 1993 WL 408375, at *3 (E.D. La. Oct.
5, 1993). Seneca has sole access to the relevant information in its file, and has not shown
that producing the materials will subject it to any undue burden or expense. Fed. R. Civ.
P. 26(b)(1). Seneca’s mere denial that the policy provided coverage for AMA Discount in
the underlying litigation does not defeat the relevance, importance or discoverability of the
materials sought to plaintiff’s claims in this matter.
Although some materials in the claim file may be privileged, defendant has failed
to comply with its obligation under Fed. R. Civ. P. 26(b)(5) to produce a privilege log that
identifies the materials withheld on the basis of attorney-client privilege or work product.
“An insurance ‘claims file’ is not by definition privileged in its entirety and may contain
much that is not subject to any privilege. Conversely, a privileged document does not
necessarily lose its privileged status simply by being housed in a claims file.” BG Real
Estate Servs. v. Am. Equity Ins. Co., No. 04-3408, 2005 WL 1309048, at *8 (E.D. La. May
18, 2005); accord Shaw Grp., Inc. v. Zurich Am. Ins. Co., No. 12-257-JJB, 2014 WL
1784051, at *13 (M.D. La. May 5, 2014) (citing BG Real Estate Servs., 2005 WL 1309048,
at *8; Dixie Mill Supply Co. v. Cont’l Cas. Co., 168 F.R.D. 554, 559 (E.D. La. 1996));
Douga v. D & Boat Rentals, Inc., No. 04-1642, 2007 WL 1428678, at *4 (W.D. La. May
10, 2007) (citing St. Paul Reinsurance Co., v. Commercial Fin. Corp., 197 F.R.D. 620, 630
(N.D. Iowa 2000); Goodyear Tire & Rubber Co. v. Chiles Power Supply, Inc., 190 F.R.D.
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532, 535 (S.D. Ind. 1999); Piatkowski v. Abdon Callais Offshore, L.L.C., No. 99-3759,
2000 WL 1145825, at *2 (E.D. La. Aug. 11, 2000)). Accordingly, the motion is granted
to the extent that defendant must supplement its written response to Request for Production
No. 1 and produce to plaintiff all non-privileged materials in its claim file. The motion is
denied at this time as to any privileged materials in the claim file, but Seneca must provide
plaintiffs with a proper privilege log as to all materials withheld on privilege grounds.
As to Request for Production No. 3, defendant objects to producing its settlement
agreement with Krispy Krunchy in the underlying litigation. Seneca argues that the terms
of its settlement with Krispy Krunchy are not relevant in the instant case and that the
settlement agreement is subject to a confidentiality agreement. Both objections are
overruled. Again, defendant’s denial that its policy provided coverage to AMA Discount
as a defendant in the underlying litigation does not render Seneca’s settlement with Krispy
Krunchy Foods irrelevant to AMA Discount’s claim of bad faith denial of insurance
coverage in this case. Although settlement agreements are not admissible at trial to prove
liability, they are discoverable to the extent that they are relevant. Jackson v. Strategic
Restaurants Acquisition Co., No. 11-268-JJB, 2012 WL 1455213, at *3 (M.D. La. Apr. 26,
2012); In re Enron Corp. Sec., Derivative & ERISA Litig., 623 F. Supp. 2d 798, 838 (S.D.
Tex. 2009).
Defendant’s confidentiality objection is unfounded. Confidentiality clauses in
private settlement agreements cannot preclude a court-ordered disclosure pursuant to a
valid discovery request. Brown & Williamson Tobacco Corp. v. F.T.C., 710 F.2d 1165,
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1180 (6th Cir. 1983); In re Enron Corp., 623 F. Supp. 2d at 838; McGuire v. Warner, No.
05-40185, 2009 WL 4403383, at *6 n.10 (E.D. Mich. Nov. 25, 2009). The confidentiality
of defendant’s settlement agreement with Krispy Krunchy can be preserved in this action
by an appropriate protective order. Accordingly, the motion is granted and defendant must
supplement its written response and produce all materials responsive to plaintiff’s Request
for Production No. 3, subject to the protective order below.
Plaintiff’s Request for Production No. 7 is a broad-ranging request that seeks all
documents concerning Seneca’s efforts to settle the claims in the underlying litigation.
According to Seneca’s supplemental response to this request, plaintiff’s counsel
specifically asked during the parties’ discovery conference for emails between counsel for
Seneca and counsel for Krispy Krunchy concerning the settlement. Seneca objects that the
request is overly broad, seeks materials protected by the attorney-client privilege and/or
Seneca’s confidentiality agreement with Krispy Krunchy, and is not proportional to the
needs of the case. Defendant’s relevance and confidentiality objections are overruled as
to any responsive materials, including emails regarding the settlement, for the same reasons
stated above with respect to Request for Production No. 3. Accordingly, the motion is
granted in that defendant must supplement its written response and produce all nonprivileged materials responsive to plaintiff’s Request for Production No. 7. The motion is
denied at this time to the extent that defendant claims privilege for any withheld responsive
materials, but defendant must produce a proper privilege log as to any such materials.
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Defendant must produce its supplemental written responses, responsive nonprivileged documents and privilege log to plaintiff no later than June 22, 2016. All
information produced in accordance with this order must be marked and kept confidential
and used only for purposes of this litigation and must not be disclosed to any one except
parties to this litigation, the parties’ counsel of record and experts retained in connection
with this litigation. All persons to whom such information is disclosed must sign an
affidavit that must be filed into the record, agreeing to the terms of the protective order and
submitting to the jurisdiction of this court for enforcement of those terms. If, after
receiving defendant’s privilege log, plaintiff contests any of the privilege designations, it
may file a new motion to compel as to particularly identified materials.
Although the motion has been granted in part and denied in part, I find that some
portion of plaintiff’s fees and costs incurred in connection with it should be apportioned to
defendant. Fed. R. Civ. P. 37(a)(5)(C). Defendant’s objections were largely unfounded. Its
failure to provide the privilege log required by Rule 26(b)(5) is inexplicable. In these
circumstances, I find that a just apportionment is that defendant must pay plaintiff $750.00
(three hours at $250 per hour) in reasonable attorney’s fees incurred by reason of
defendant’s actions.
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8th
New Orleans, Louisiana, this _________ day of June, 2016.
JOSEPH C. WILKINSON, JR.
UNITED STATES MAGISTRATE JUDGE
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