The Shaw Group Inc et al v. Zurich American Insurance Company et al

Filing 159

RULING denying 150 Motion to Stay; denying 150 Motion to Bifurcate. Signed by Judge James J. Brady on 7/12/2013. (LLH)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
THE SHAW GROUP, INC., ET AL
CIVIL ACTION
VERSUS
NO. 12-257-JJB
ZURICH AMERICAN INSURANCE
COMPANY, ET AL
RULING ON DEFENDANT’S MOTION TO STAY DISCOVERY AND BIFURCATE
THE TRIAL

This matter is before the Court on a motion by Defendant North American Specialty
Insurance Company (“NAS”) to stay discovery and bifurcate the trial on the issue of the extracontractual bad faith claims against it. (Doc. 150). Defendant Zurich American Insurance
Company (“Zurich”) has filed a response to NAS’ motion. (Doc. 154). Plaintiff The Shaw
Group, Inc. and Shaw Process Fabricators, Inc. (collectively “Shaw”) has filed an opposition
(Doc. 155), to which NAS has filed a reply. (Doc. 157). Oral argument is not necessary. For the
reasons stated herein, the Court DENIES NAS’ motion. (Doc. 150).
Shaw was sued in the Eastern District of Washington by REC Solar Grade Silicon LLC
(“REC”) for property damages resulting from pipe spools manufactured by Shaw and used in
REC’s facility in Washington. At the time of the suit, Shaw was insured by Zurich, its primary
insurance carrier, and NAS, its excess insurance carrier. (Doc. 11). Shaw alleges that the insurers
informed Shaw that coverage did not exist under either the primary or excess policies. Shaw
ultimately settled with REC and brought this action, alleging that NAS breached its contract by
failing to indemnify Shaw for the settlement and that NAS is extra-contractually liable for
allegedly denying coverage in bad faith and mishandling the claims in bad faith.

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Under the current scheduling order, all discovery, with the exception of experts, is due by
December 31, 2013. (Doc. 149). Dispositive motions are due by May 30, 2014. (Doc. 149).
However, NAS now seeks to stay discovery with respect to the extra-contractual claims, and
requests that this Court enter an order setting the deadline for discovery for the breach of contract
claim to August 30, 2013, and the deadline for dispositive motions for this claim to September
30, 2013. NAS argues that if this Court stays discovery, NAS would be able to file a motion for
partial summary judgment with respect to the breach of contract claim, which could potentially
dispose of the entire case as to NAS. NAS alleges that there was no coverage for this claim under
the insurance policy and if there was no coverage, NAS could not have breached the contract.
NAS argues that if this Court finds that NAS did not breach the contract, Shaw’s extracontractual claims against it will be rendered moot. Alternatively, if this Court finds that a trial is
necessary of the breach of contract claim, NAS argues that this Court should bifurcate the trial,
trying the breach of contract claim first, and then if necessary, trying the extra-contractual claims
second.
As a preliminary matter, this Court finds that it is premature to request a bifurcation of
the trial at this relatively early stage, and the Court hereby denies NAS’ motion as to this.
Turning to NAS’ motion to stay discovery on the extra-contractual claim, NAS argues that
because extra-contractual claims are conditioned on finding that this Court determines that NAS
breached its contract, this Court should stay discovery as to the extra-contractual claims until the
threshold legal question is resolved. In Federal Insurance Co. v. New Hampshire Insurance Co.,
this Court stayed discovery where a summary judgment motion presented a “pure question of
law relating to contractual interpretation, which could potentially dispose of the entire case.”
Federal Insurance Co. v. New Hampshire Insurance Co., 2010 WL 1757932, *3 (M.D. La.

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2010). NAS asserts that the issue of whether there was coverage under the policy is a pure
question of law that can be resolved on summary judgment and if this Court rules in NAS’ favor,
the suit as to NAS will be terminated.
Additionally, NAS argues that staying discovery will be convenient and economical
because some of the discovery concerning the breach of contract claim has already been
completed. However, NAS asserts that it is not convenient and economical to permit extracontractual discovery to occur at the same time as the breach of contract discovery because it
will involve “extensive interrogatories, requests for production, depositions, and potential
discovery motion practice.” (Doc. 150 at 5).
Shaw opposes NAS’ motion, arguing that (1) NAS has not filed any dispositive motions;
(2) NAS’ motion would not dispose of the case; (3) not all of the defendants, namely Zurich,
have requested such a stay; (4) the stay would not be efficient or economical because the extracontractual discovery with respect to NAS is related to the extra-contractual discovery with
Zurich, and the discovery “not that extensive”; and (5) a stay will restrict the abilities of the
parties to settle.
Shaw argues that because NAS has not filed any dispositive motions, this Court should
not grant a stay based on the speculative notion that NAS might file a summary judgment
motion. Shaw further argues that there is “no guarantee” that the potential motion would involve
a “pure question of law,” and that the motion may involve both legal and factual issues.
However, NAS points out that if discovery is stayed, it is prepared to file a motion for summary
judgment on the breach of contract claim in less than three months. Moreover, while Shaw
asserts that the motion may contain both legal and factual issues, it is well-settled that insurance
coverage is a question of law. See Domingue v. Reliance Insurance Co., 619 So. 2d 1220, 1223

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(La. Ct. App. 1993) (explaining that disputes concerning whether an insurance policy provides
coverage “can properly be resolved within the context of a motion for summary judgment.”).
Shaw further argues that the motion will not dispose of the case and Zurich has not joined
in the request for a stay. However, as both NAS and Shaw acknowledge, as a practical matter, a
stay with respect to Zurich does not make sense. Shaw’s claims against NAS are (1) failure to
indemnify and (2) bad faith, which this Court has already determined are governed by the
language of NAS’ policy and Louisiana law. Conversely, Shaw’s claims against Zurich are (1)
failure to defend and (2) bad faith, which this Court has already determined are governed by
Zurich’s policy and Washington law.
Shaw contends that staying discovery will not be efficient or economical because Shaw
will still have to produce its bad faith evidence to Zurich and vice versa. Shaw explains that
witnesses will be required to “sit for depositions to describe events involving simultaneous
conduct by Shaw, Zurich, and [NAS] personnel.” (Doc. 155 at 5). If NAS does not prevail on its
motion for summary judgment, the same witnesses will need to be produced again, and the
parties would be required to engage in duplicative discovery. Additionally, Shaw asserts that the
discovery concerning extra-contractual issues is not significantly extensive or burdensome. For
instance, Shaw explains that its first discovery request, which addresses the entirety of its claims
against NAS, constitute five interrogatories and seven request for production.
NAS argues that staying discovery will not be duplicative because Shaw’s discovery
concerning NAS’ bad faith claims requires production of NAS-specific documents, which is not
relevant to the claims asserted against Zurich. Additionally, NAS asserts that the extracontractual discovery entails a “factual intensive inquiry” and there may be discovery disputes,
which would prolong the case. However, if this Court should grant the stay, and require NAS

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and Shaw to complete discovery relating to the breach of contract claim by August 30, 2013 and
ordering dispositive motions to be filed by September 30, 2013, the case could be resolved more
expeditiously.
While the Court recognizes the value of resolving, or attempting to resolve, a purely legal
issue early on in the proceedings, the Court finds that much of NAS’ request is speculative. NAS
appears to be assuming that it is very likely that this Court will find that there was no coverage,
and thus, the suit against NAS will be terminated sooner. However, this is not a sufficient reason
to stay discovery and bifurcate the claims. Additionally, although the deadline for dispositive
motions is not until May 30, 2014, there is nothing preventing NAS from filing a dispositive
motion on the breach of contract claim prior to that date. NAS has asserted that much of the
discovery will be completed soon as to this issue, and thus, NAS will be able to bring this matter
before the Court well in advance of the May 14th deadline, which will achieves NAS’ goal –
attempting to resolve the purely legal issue in advance of the extra-contractual claim.
Accordingly, NAS’ Motion is hereby DENIED.

Signed in Baton Rouge, Louisiana on July 12, 2013.





JAMES J. BRADY, DISTRICT JUDGE
MIDDLE DISTRICT OF LOUISIANA

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