The Humane Society of the United States et al v. National Union Fire Insurance Company of Pittsburgh, PA

Filing 98

MEMORANDUM OPINION. Signed by Judge Deborah K. Chasanow on 7/11/2016. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
THE HUMANE SOCIETY OF THE
UNITED STATES, et al.

:

v.

:

Civil Action No. DKC 13-1822

:
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA.

:

MEMORANDUM OPINION
In this multi-faceted insurance coverage dispute, several
matters are ready for resolution.1

First, Plaintiffs The Humane

Society of the United States (“HSUS”), Jonathon Lovvorn, and
Kimberly Ockene (collectively, the “Plaintiffs”) seek leave to
amend

their

complaint.

(ECF

No.

90).

Second,

the

parties

dispute whether Plaintiffs have satisfied – or can satisfy their discovery obligations concerning legal defense costs being
sought.

(ECF Nos. 89; 92; 93).

For the following reasons,

Plaintiffs’ motion for leave to amend will be denied, and the
court will grant the parties 60 days of additional discovery
regarding defense costs in the underlying Feld Litigation.

1

Overlapping related litigation is also pending in Maryland
state courts. The parties have been notifying this court of the
progress of that litigation, but it is unclear how those results
affect this suit.

I.

Plaintiffs’ Motion for Leave to Amend
A. Background
A more complete recitation of the factual background can be

found

in

the

judgment.

court’s

prior

memorandum

(See ECF No. 84, at 1-7).

opinion

on

summary

The initial complaint in

this case was filed in the Circuit Court for Montgomery County,
and

Defendant

Pittsburgh,

PA

National
(“National

action to this court.
Plaintiffs

assert

a

Union

Fire

Union”

or

Insurance
“Defendant”)

(ECF No. 1).
claim

for

Company

of

removed

the

As currently applicable,

insurance

coverage

against

Defendant in connection with a lawsuit filed against them by
Feld

Entertainment,

Inc.

HSUS

is

a

national

nonprofit

organization dedicated to protecting animals, and Mr. Lovvorn
and Ms. Ockene are employed as attorneys with HSUS.

According

to Plaintiffs, Defendant:
breached
the
terms
of
the
[Management
Liability,
Professional
Liability,
Crime
Coverage and Kidnap and Ransom/Extortion
Coverage
for
Non
Profit
Organizations,
Policy No. 01-932-56-98, for the policy
period June 1, 2009, to June 1, 2010 (the
“2009-2010 D&O Policy”)] by refusing to pay
the losses that Plaintiffs may, are, or will
be obligated to pay because of the Feld
Litigation.
(ECF No. 2 ¶ 36).

Plaintiffs also seek a declaratory judgment

that Defendant is obligated to pay all losses that Plaintiffs

2

may become legally obligated to pay in the Feld Litigation.
(Id. ¶ 46).
The original scheduling order set August 15, 2013, as the
deadline for the amendment of pleadings.

(ECF No. 11, at 2).

Although the discovery deadlines were extended, the deadline to
amend pleadings and add parties was not modified.
scheduling

order

established

that

the

parties

A subsequent

would

complete

discovery on or before October 10, 2014, and file dispositive
motions by November 20.
After
judgment.

discovery

(ECF No. 62).
concluded,

(ECF No. 68).

Defendant

moved

for

summary

On July 30, 2015, the court issued a

memorandum opinion and order granting in part and denying in
part Defendant’s motion for summary judgment.
85).

(ECF Nos. 84;

The court entered judgment in favor of Defendant on a

portion of Plaintiffs’ breach of contract claim, concluding that
“no coverage is available for HSUS under [Coverage C of] the
2009-2010 [D&O] Policy.”
summary

judgment

motion

(ECF No. 84, at 25).
was

denied

plaintiffs, Mr. Lovvorn and Ms. Ockene.

as

to

the

Defendant’s
individual

(See id. at 25-39).2

The parties participated in telephonic conferences on August 26
2

The court determined that a genuine dispute exists
regarding whether Mr. Lovvorn and Ms. Ockene are entitled to
coverage under Coverage A of the 2009-2010 D&O Policy.
Defendant did not move for summary judgment under Coverage B of
the 2009-2010 D&O Policy, and the court’s prior memorandum
opinion did not address Plaintiffs’ claim for coverage under
Coverage B.
3

and September 9.
expressed

On September 8, Plaintiffs for the first time

their

complaint.

intent

to

seek

leave

to

file

an

amended

(See ECF No. 86).

In response to the court’s letter order confirming matters
discussed

during

the

conference

call,

pending motion for leave to amend.

Plaintiffs

(ECF No. 90).

filed

the

Defendant

responded in opposition (ECF No. 91), and Plaintiffs replied
(ECF No. 94).
seek

to

add

In the proposed amended complaint, Plaintiffs
claims

for

breach

of

contract

and

declaratory

judgment under two additional insurance policies that Defendant
sold to HSUS: Policy No. 965-95-51, for the period January 1,
2007,

to

January

1,

2008

(the

“2007-2008

D&O

Policy”);

and

Professional Liability Insurance for Corporate Counsel, Policy
No. 01-950-29-84, for the period June 1, 2009, to June 1, 2010
(See ECF No. 90-2).3

(the “Employed Lawyers Policy”).
B. Standard of Review

The deadline established by the scheduling order for the
amendment of pleadings was August 15, 2013, and that deadline
has long since passed.

(ECF No. 11).

Consequently, Plaintiffs

must do more than satisfy the liberal standard of Fed.R.Civ.P.

3

According to Plaintiffs, Defendant denied coverage under
the Employed Lawyers Policy on April 13, 2015. (ECF Nos. 94, at
8; 94-2). Plaintiffs gave notice under the 2007-2008 D&O Policy
on August 24, and Defendant denied coverage on October 28. (ECF
Nos. 94, at 8; 94-1).
4

15(a);

they

must

first

meet

the

mandates

of

Fed.R.Civ.P.

16(b)(4), which calls for “good cause” to modify a scheduling
order.

See Nourison Rug Corp. v. Parvizian, 535 F.3d 295, 298-

99 (4th Cir. 2008); Elat v. Ngoubene, 993 F.Supp.2d 497, 519-20
(D.Md. 2014) (applying a two-prong test under Rules 16(b)(4) and
15(a) in analyzing an untimely motion for leave to amend).
“A schedule may be modified only for good cause and with
the judge’s consent.”
F.3d

at

298

Fed.R.Civ.P. 16(b)(4); see Nourison, 535

(“[D]istrict

courts

require

management tools provided by Rule 16.

the

effective

case

Therefore, after the

deadlines provided by a scheduling order have passed, the good
cause standard must be satisfied to justify leave to amend the
pleadings.”).
by

showing

The movant satisfies the good cause requirement

that,

despite

due

diligence,

it

could

not

have

brought the proposed claims in a reasonably timely manner.

See

Montgomery v. Anne Arundel County, Md., 182 F.App’x 156, 162 (4th
Cir.

2006);

Rassoull

v.

Maximus,

Inc.,

209

F.R.D.

372,

374

(D.Md. 2002); Potomac Elec. Power Co. v. Elec. Motor Supply,
Inc., 190 F.R.D. 372, 375 (D.Md. 1999) (“Properly construed,
‘good

cause’

despite

a

quotation

means

party’s
marks

that

scheduling

diligent

omitted)).

deadlines

efforts.”
The

cannot

(citation

factors

courts

and

be

met

internal

consider

in

determining good cause are the “danger of prejudice to the nonmoving party, the length of delay and its potential impact on
5

judicial proceedings, the reason for the delay, and whether the
movant acted in good faith.”

Tawwaab v. Va. Linen Serv., Inc.,

729 F.Supp.2d 757, 768–69 (D.Md. 2010) (citation and internal
quotation marks omitted).

As Judge Williams explained:

Courts in the [United States Court of
Appeals for the] Fourth Circuit deny leave
to amend a complaint past the deadline
established by a scheduling order where the
moving party has been careless in developing
his claims or where he has failed to
satisfactorily account for his failure to do
so.
Compare
Whichard
v.
Specialty
Restaurants Corp., 220 F.R.D. 439, 441
(D.Md. 2004) (denying plaintiff’s motion to
join an additional defendant five months
after the court imposed deadline because
plaintiff
had
ample
notice
before
the
deadline that the original defendant might
not be the right party) with Long v. Blair,
No.
2:09–CV–00349,
2010
WL
1930220
(S.D.W.Va. May 12, 2010) (holding that good
cause existed where the plaintiff did not
establish a sufficient evidentiary basis to
support new claims until after the deadline
for amending his complaint and moved to
amend immediately after the new evidence
came to light).
Id. at 769.

The dictates of Rule 16(b) are not to be taken

lightly, as “a judge’s scheduling order is not a frivolous piece
of paper, idly entered, which can be cavalierly disregarded by
counsel

without

peril.”

Potomac

Elec.,

190

(citation and internal quotation marks omitted).

6

F.R.D.

at

375

If

Rule

16(b)

is

consider Rule 15(a).

not

satisfied,

there

is

no

need

to

See Nourison, 535 F.3d at 299; Marcum v.

Zimmer, 163 F.R.D. 250, 254 (S.D.W.Va. 1995) (“[T]he focus of
the

inquiry

is

modification.
should end.”).

upon
If

the

that

moving
party

party’s

was

not

reasons

for

seeking

diligent,

the

inquiry

Once the movant has met the burden of showing

good cause, however, the inquiry shifts to Rule 15(a), which
provides that “court[s] should freely give leave [to amend a
pleading]

when

justice

so

requires.”

Fed.R.Civ.P.

15(a)(2).

Denial of leave to amend is appropriate “only when the amendment
would be prejudicial to the opposing party, there has been bad
faith on the part of the moving party, or the amendment would be
futile.”

Edwards v. City of Goldsboro, 178 F.3d 231, 242 (4th

Cir. 1999) (emphasis in original) (quoting Johnson v. Oroweat
Foods Co., 785 F.2d 503, 509 (4th Cir. 1986)).

Leave to amend

may be denied as futile “if the proposed amended complaint fails
to satisfy the requirements of the federal rules,” including
federal pleading standards.

Katyle v. Perm Nat. Gaming, Inc.,

637 F.3d 462, 471 (4th Cir. 2011) (quoting United States ex rel.
Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 376 (4th Cir.
2008)).
C. Analysis
Plaintiffs’ proposed amendments add claims for breach of
contract and declaratory judgment under two additional insurance
7

policies that Defendant sold to HSUS, the 2007-2008 D&O Policy
and the Employed Lawyers Policy.

In their motion, Plaintiffs

addressed only the liberal standards of Rule 15(a) regarding
amendments to pleadings.

According to Plaintiffs:

The [c]ourt should grant Plaintiffs’
motion for leave to amend because: (1)
Plaintiffs have a good-faith basis to add
claims under the 2007-2008 D&O Policy and
the
Employed
Lawyer[s]
Policy
because
[Defendant] has breached . . . its coverage
(2)
obligations under these policies;[4]
[Defendant]
will
not
be
prejudiced
by
amendment; and (3) amendment is not futile.
. . . [I]n granting [Defendant] summary
judgment [on Plaintiffs’] claim for coverage
under Coverage C . . . in the 2009-2010 D&O
Policy, the [c]ourt opened the prospect for
coverage under the 2007-2008 D&O Policy,
causing Plaintiffs to give notice under [the
2007-2008 D&O Policy].
(ECF

No.

90-1,

at

4-5).

Plaintiffs

further

assert

that

“granting Plaintiffs’ motion to amend will promote interests of
judicial economy by allowing disputes over coverage under all
three

[p]olicies

to

be

resolved

in

one

litigation,

thereby

avoiding costly and unnecessarily duplicative litigation and the
possibility
pending

of

motion,

inconsistent
however,

results.”

Plaintiffs

4

(Id.

neglect

at
to

5).

In

consider

the
Rule

Plaintiffs argue that they have a good-faith basis for
asserting additional claims under the 2007-2008 D&O Policy and
the Employed Lawyers Policy.
Plaintiffs misapprehend the
federal standards established by Rule 15(a), as courts should
deny leave to amend a pleading when there has been bad faith on
the part of the movant. See Edwards, 178 F.3d at 242.
8

16(b) and their burden to show good cause to modify the existing
scheduling order.
According to Defendant, Plaintiffs’ failure to address good
cause

under

Rule

16(b)

in

sufficient to warrant denial.

their

pending

motion

is

alone

Defendant argues that:

Plaintiffs would not have been able to meet
their burden . . . because they cannot show
that they were diligent in seeking leave to
amend in light of their admission that they
believed, as far back as 2010, that the
2007-2008 D&O Policy and the . . . Employed
Lawyers Policy covered the Feld Litigation.
Despite this belief, Plaintiffs waited more
than
two
years
after
the
[s]cheduling
[o]rder deadline for amendments, close to a
year after the 15-month discovery period
ended, and nearly two months after this
[c]ourt decided [Defendant’s] dispositive
motion, to file a [m]otion for [l]eave to
[a]mend their complaint.
(ECF

No.

91,

at

1).

Assuming

arguendo

that

Plaintiff

can

satisfy Rule 16(b), Defendant contends that Rule 15(a) mandates
denial of Plaintiffs’ motion because Plaintiffs acted in bad
faith and, furthermore, because the proposed amended complaint
would unfairly prejudice Defendant.
The
movant’s

Rule

16(b)

diligence.

“good

cause”

Here,

it

(Id. at 2).
inquiry
was

is

only

focused
after

on

the

Defendant

identified Plaintiffs’ failure even to address Rule 16(b) that
Plaintiffs presented arguments regarding good cause.

Because

Plaintiffs’ contentions appear for the first time in their reply
9

brief, the court is inclined not to consider them.
v.

FedEx

Ground

Package

Sys.,

Inc.,

451

See Clawson

F.Supp.2d

731,

734

(D.Md. 2006) (“The ordinary rule in federal courts is that an
argument
memorandum
careless

raised

for

the

will

not

be

lawyering

by

first

time

in

considered.”).
Plaintiffs’

a

reply

Not

only

counsel

brief
does

warrant

or
the
this

treatment, it is also a sign of a lack of diligence — without
which the court is hard-pressed to conclude that good cause
exists to modify the scheduling order.

See Rassoull, 209 F.R.D.

at 374.
Even considering the arguments advanced in the reply brief,
Plaintiffs

nonetheless

fail

to

establish

good

modifying the scheduling order under Rule 16(b).

cause

for

As noted, the

factors courts consider in evaluating good cause are the “danger
of prejudice to the non-moving party, the length of delay and
its potential impact on judicial proceedings, the reason for the
delay, and whether the movant acted in good faith.”

Tawwaab,

729 F.Supp.2d at 768–69 (citation and internal quotation marks
omitted).

In their motion, Plaintiffs must demonstrate that the

reasons for their delay justify a departure from the rules set
by the court in the scheduling order.

According to Plaintiffs,

“[t]he facts underpinning the claims that Plaintiffs now seek to
add to their complaint – claims for coverage under [Defendant’s]
2007-2008 D&O Policy and Employed Lawyers Policy – did not come
10

to ripen . . . until long after the August 15, 2013 deadline for
amendment had passed.”

(ECF No. 94, at 6).

Because Defendant

denied coverage under both the Employed Lawyers Policy on April
13, 2015, and the 2007-2008 D&O Policy on October 28, 2015,
Plaintiffs
complaint

contend
before

that
the

they

could

scheduling

not

order

have

amended

deadline.

their

(See

id.

(citing Tawwaab, 729 F.Supp.2d at 768 (“The Fourth Circuit has
noted that a finding of ‘good cause’ is justified under Rule
16(b) where at least some of the evidence needed for a plaintiff
to prove his or her claim did not come to light until after the
amendment deadline.” (citation omitted)))).
Here, Plaintiffs were aware of the two additional policies
before

the

concluded,

scheduling

and

before

order

the

deadline,

court

memorandum opinion and order.

issued

before

its

discovery

summary

judgment

Plaintiffs filed the complaint on

May 23, 2013, demanding coverage under only the 2009-2010 D&O
Policy; they deliberately elected not to include any claim under
either the 2007-2008 D&O Policy or the Employed Lawyers Policy
in the complaint.
deadline
discovery
coverage

for

The court’s August 15, 2013 scheduling order

amending

concluded
to

on

Plaintiffs

the

pleading

October
under

10,

the

was
2014.

Employed

not

extended,

Defendant
Lawyers

and

denied

Policy

on

April 13, 2015, while the summary judgment motion was pending;
Plaintiffs only gave notice under the 2007-2008 D&O Policy on
11

August 24, and Defendant denied coverage on October 28.5
September

8,

Plaintiffs

for

the

first

time

expressed

intent to seek leave to file an amended complaint.
86).

On
their

(See ECF No.

The underlying facts were long known to Plaintiffs, and

Plaintiffs could have included some claims under the 2007-2008
D&O Policy and the Employed Lawyers Policy when they commenced
this

action,

and

certainly

scheduling order deadline.6

before

the

expiration

of

the

Instead, they waited until more than

two months following the summary judgment opinion to seek leave
to amend the complaint.

See Howard v. Inova Health Care Servs.,

302 F.App’x. 166, 181 (4th
should

be

made

as

soon

as

Cir. 2008) (“[A] motion to amend
the

necessity

for

altering

the

5

There is some discrepancy as to the date on which
Plaintiffs
gave
notice
under
the
2007-2008
D&O
Policy.
Plaintiffs’ reply brief includes a “Timeline of Key Dates” that
identifies August 24 as the date on which Plaintiffs gave
notice.
(ECF No. 94, at 8).
According to Defendant’s denial
letter attached by Plaintiffs, however, Defendant wrote: “While
it appears that the Feld Litigation was a Claim first made
against [the Fund for Animals (“FFA”)], and thus against the
Organization, during the policy period of the [2007-2008 D&O
Policy], it was not reported to [Defendant] . . . until August
25, 2015, more than seven years after the policy period ended.”
(ECF No. 94-1, at 5).
6

Here, for instance, Plaintiffs’ motion for leave to file
an amended complaint was filed on September 28, 2015,
approximately one month after they gave notice under the 20072008 D&O Policy and one month before Defendant formally denied
coverage.
Plaintiffs add claims for breach of contract and
declaratory relief under the 2007-2008 D&O Policy in their
proposed amended complaint.
(See ECF No. 90-2, at 20).
In
their motion, Plaintiffs explain that they “anticipate that
[Defendant] will deny coverage under [the 2007-2008 D&O
Policy].” (ECF No. 90-1, at 3).
12

pleading becomes apparent.” (quoting Deasy v. Hill, 833 F.2d 38,
41 (4th Cir. 1987))).

Lack of diligence and carelessness are the

“hallmarks of failure to meet the good cause standard.”
Virginia
F.R.D.

Hous.
564,

Dev.

567

Fund

v.

(S.D.W.Va.

Ocwen

Tech.

W.

Inc.,

200

Plaintiffs

2001).

Xchange,

offer

no

justification for their substantial delay in seeking to include
claims under the 2007-2008 D&O Policy and the Employed Lawyers
Policy,

and

the

potential

surprise to Plaintiffs.

to

pursue

such

claims

came

as

no

They had ample time during the course

of this litigation to have pursued coverage under the additional
policies.

See Crouch v. City of Hyattsville, Md., No. DKC-09-

2544, 2012 WL 718849, at *4 n.7 (D.Md. Mar. 5, 2012) (“[T]o
amend his complaint, Plaintiff need not have waited until he had
all the evidence he needed to prove his claims.”).
because

Plaintiffs

failed

to

establish

that

Accordingly,

they

exercised

diligence in seeking leave to amend the complaint, they have not
satisfied Rule 16, and their motion will be denied.
Moreover,
prejudice
juncture.

to

the

court

Defendant

may

also

stemming

consider

from

an

the

danger

amendment

at

of
this

“When considering a motion for leave to amend, ‘the

court may take into account the stage of the proceedings,’ such
as whether the parties have completed discovery.”

Elat, 993

F.Supp.2d at 520 (quoting Skinner v. First Am. Bank of Virginia,
64 F.3d 659, 1995 WL 507264, at *2 (4th Cir. 1995) (unpublished
13

table opinion)).

By failing to move for leave to amend until

after the court ruled on Defendant’s summary judgment motion,
Plaintiffs

have

deprived

Defendant

of

the

opportunity

“conduct any necessary follow-up discovery . . . .

to

If leave

were granted, [Defendant] would also be prejudiced because of
the obvious delay and because of the time and expense already
incurred
motion,

in
and

discovery

and

preparation

the

for

further

need

of

a

summary

discovery.”

judgment

Hemphill

v.

ARAMARK Corp., No. 1:12-CV-01584-ELH, 2014 WL 1248296, at *26
(D.Md. Mar. 25, 2014), aff’d, 582 F.App’x 151 (4th Cir. 2014);
see Hammer v. Peninsula Poultry Equip. Co., No. RDB-12-1139,
2013 WL 97398, at *4 (D.Md. Jan. 8, 2013) (“Undue prejudice to
the

opposing

substantially

party
change

may
the

result

from

an

of

the

nature

amendment
case

or

that

would

require

the

opposing party to invest more time and expense in new litigation
preparation.” (citation omitted)).

Here, Plaintiffs filed the

pending motion nearly one year after discovery concluded and
approximately

two

months

summary judgment motion.

after

the

court

decided

Defendant’s

Such a delay prejudices Defendant,

which rightly argues that “Plaintiffs’ proposed new claims would
involve development of . . . different defenses, potentially
including the designation of additional experts by [Defendant].”
(ECF No. 91, at 13 n.8).

14

The remaining arguments Plaintiffs advance in support of
their motion do not address Rule 16(b)’s standard of good cause.
First, Plaintiffs contend that the court’s September 9, 2015
letter order extended the deadline for pleading amendments by
establishing a briefing schedule for the pending motion.
ECF No. 94, at 2-5).
misinterprets

the

(See

Plaintiffs’ argument is unavailing, as it

establishment

of

a

modification of the scheduling order.

briefing

schedule

as

a

In permitting Plaintiffs

to file the pending motion, the court did not relieve Plaintiffs
of their burden to satisfy the dictates of Rule 16(b) and show
good cause for modifying the existing scheduling order.

See

Reyazuddin v. Montgomery Cty., Md., No. DKC-11-0951, 2012 WL
27241, at *6 (D.Md. Jan. 4, 2012).

Nowhere in the September 9

letter order did the court purport to adjust the scheduling
order or waive Plaintiffs’ obligation to comply with the federal
rules

governing

argument

that

pleading
granting

amendments.
leave

would

Plaintiffs’
serve

the

additional

interests

of

judicial economy similarly fails to address the proper standard
under

Rule

16(b).

Plaintiffs

assert

that

“granting

[their]

motion to amend will promote interests of judicial economy by
allowing disputes over coverage under all three [p]olicies to be
resolved

in

unnecessarily

one

litigation,

duplicative

inconsistent results.”

thereby

litigation

and

avoiding
the

costly

possibility

and
of

(ECF No. 90-1, at 5; see ECF No. 94, at
15

10-11).

The interests of judicial economy do not demonstrate

diligence and good cause under Rule 16(b).

See Reyazuddin, 2012

WL 27241, at *6.
Because

Plaintiffs

lack

good

cause

for

modifying

the

scheduling order under Rule 16(b), their remaining arguments in
support of leave to amend under Rule 15 need not be considered.7
Plaintiffs’ motion will be denied, and the complaint will remain
the

operative

pleading,

subject

to

the

court’s

opinions

and

orders previously issued in this case.
II.

Discovery Regarding Legal Defense Costs
A. Background
The court also requested that the parties submit memoranda

“regarding

whether

Plaintiffs

should

be

permitted

to

produce

remaining discovery disclosures and which party bears the burden
of demonstrating the reasonableness of expenses.”
see ECF Nos. 89; 92; 93).

(ECF No. 88;

Although not styled as a motion, in

effect, Plaintiffs seek an extension of discovery in order to
supplement

responses,

and

Defendant

seeks

sanctions

for

Plaintiffs’ discovery failings.

7

Although the court need not analyze Plaintiffs’ motion
under Rule 15(a), it should be noted that denial of leave to
amend is appropriate when the amendment would prejudice the nonmoving party.
Edwards, 178 F.3d at 242.
Here, the court
determines that Defendant would be prejudiced by Plaintiffs’
proposed amendments.
16

The dispute stems from the legal fees and expenses incurred
by Plaintiffs in the underlying Feld Litigation.

The complaint

only requests damages in excess of $75,000.00, but does not
particularize further.
during

discovery,

(ECF No. 2, at 9-11).

Plaintiffs

produced

At some point

documents

showing

approximately $178,000.00 of defense costs were paid.
Nos. 89, at 7; 92, at 6).

that

(See ECF

More recently, Plaintiffs seek to

supplement their responses to include $938,102.61 in additional
fees and expenses.

(See ECF No. 89, at 6-10).

Subsumed within

this issue is a dispute over which party bears the burden of
proof - either production or persuasion - on the reasonableness
of the costs.
Plaintiffs somewhat blithely contend that they satisfied
their discovery obligation because the legal billing documents
were provided to Defendant via Donna Roberts, a claims-handling
agent, in reference to a different insurance policy.
at

20-21).

assessment
acknowledge

That
of

any

that

assertion

is

prejudice
fact.

to

easily

rejected,

Defendant

Moreover,

(See id.

although

necessarily

Plaintiffs

stretch

an

must
the

relevant case law too far when they state that Defendant bears
the burden to challenge those bills for reasonableness in the
first instance.

On the other hand, given the procedural posture

of this case, Plaintiffs’ failure to provide discovery in a
timely

fashion

will

not

preclude
17

their

claim

altogether.

Rather, a brief period of follow-up discovery will remedy any
deficit.
B. Standard of Review
Defendant
production

of

propounded
documents

interrogatories
supporting

and

requested

Plaintiffs’

claim

the
for

damages, and specified attorney invoices, and proof of payments
related to the Feld Litigation.
6-9).

Under

Fed.R.Civ.P.

(See id. at 7; ECF No. 92, at

26(e),

a

party

is

required

to

supplement disclosures in a timely fashion:
(1) In General.
A party who has made a
disclosure under Rule 26(a) - or who has
responded to an interrogatory, request for
production, or request for admission - must
supplement or correct its disclosure or
response:
(A) in a timely manner if the party
learns that in some material respect
the
disclosure
or
response
is
incomplete or incorrect, and if the
additional or corrective information
has not otherwise been made known to
the other parties during the discovery
process or in writing; or
(B) as ordered by the court.
Failure to supplement with newly-obtained relevant information
subjects a party to sanctions under Rule 37(c):
(1) Failure to Disclose or Supplement. If a
party
fails
to
provide
information
or
identify a witness as required by Rule 26(a)
or (e), the party is not allowed to use that
information or witness to supply evidence on
a motion, at a hearing, or at a trial,
unless
the
failure
was
substantially
18

justified or is harmless. In addition to or
instead of this sanction, the court, on
motion and after giving an opportunity to be
heard:
(A) may order payment of the reasonable
expenses, including attorney’s fees,
caused by the failure;
(B) may inform the jury of the party’s
failure; and
(C)
may
impose
other
appropriate
sanctions, including any of the orders
listed in Rule 37(b)(2)(A)(i)-(vi).
The

broad

discretion

afforded

to

district

courts

under

Rule

37(c) is to be guided by several factors: (1) the surprise to
the party against whom the evidence would be offered; (2) the
ability of that party to cure the surprise; (3) the extent to
which allowing the evidence would disrupt the trial; (4) the
importance of the evidence; and (5) the nondisclosing party’s
explanation for its failure to disclose the evidence.

S. States

Rack And Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d 592,
597 (4th Cir. 2003).
C. Analysis
1. Supplemental Discovery
On

December

23,

2013,

Plaintiffs

produced

invoices

from

Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) for
work through August 2013 in excess of $178,000.00.
formal supplementation has been made.

No further

Defendant asserts that it

inquired in e-mails and voicemail messages whether Plaintiffs
19

intended to supplement those responses.

(ECF No. 92, at 9).

Plaintiffs state, however, that Defendant knew that there would
be

ongoing

lawyers

costs

to

Plaintiffs

and

obtain
also

it

such

should

have

deposed

information.

contend

that

the

(ECF
invoices

No.

the

WilmerHale

89,

at

provided

6-8).

to

Ms.

Roberts, a claims handler for a different policy, on March 10,
2014, and April 2, 2014, for an additional $781,030.77, provided
notice.

(Id. at 8-10).

In Maryland, “[t]he party seeking an award of fees must
prove

the

amount

of

attorneys’

fees

under

the

standards

ordinarily applicable for proof of contractual damages.”

Bd. of

Trustees, Cmty. Coll. of Baltimore Cty. v. Patient First Corp.,
444 Md. 452, 485 (2015) (citing Bankers & Shippers Ins. Co. of
New York v. Electro Enterprises, Inc., 287 Md. 641, 661 (1980)).
Plaintiffs must concede that, in order to meet their burden at
trial,

they

will

have

to

produce

evidence

of

the

costs

themselves.

It is difficult to understand, then, how Plaintiffs

can

that

contend

they

somehow

do

not

records in discovery in this litigation.

have

to

produce

those

In apparent agreement

with that proposition, Plaintiffs propose that they be allowed
to supplement discovery with those invoices already sent to Ms.
Roberts and any additional invoices incurred while Defendant’s
motion for summary judgment was briefed.

20

(ECF No. 89, at 25).

Accordingly, Plaintiffs will be ordered to supplement discovery
concerning defense costs within 7 days.
2. Plaintiffs’ Ultimate Burden of Proof
Plaintiffs bear the burden to offer sufficient evidence of
the

amount,

sought.

In

necessity,

and

the

Plaintiffs

cases

reasonableness
cite

in

of

defense

their

costs

papers,

the

moving parties produced more than the bare records themselves to
demonstrate damages in the form of defense costs.

For instance,

after a bench trial at which the plaintiff called two fact, but
no expert, witnesses, Judge Bennett noted, “Maryland law governs
the reasonableness of the attorney’s fees and expenses in this
case.

The burden under Maryland law to prove the reasonableness

and necessity of attorney’s fees and expenses rests on [the
plaintiff], and [it] must prove its claim for attorney’s fees
with competent evidence.”

Indus. Enterprises, Inc. v. Penn Am.

Ins. Co., No. RDB-07-2239, 2009 WL 9057727, at *7 (D.Md. June
12, 2009) (citations omitted), amended, No. RDB-07-2239, 2009 WL
3647372 (D.Md. Nov. 3, 2009), and rev’d and remanded, 637 F.3d
481 (4th Cir. 2011).

Judge Bennett continued:

The professional relationship between [the
plaintiff] and Patton Boggs also establishes
the reasonableness of the legal expenses.
Because Penn America breached its duty to
defend, it did not provide any billing
guidelines to [the plaintiff] (e.g. limits
on recoverable fees and expenses, format of
billing, etc.) and it did not object to [the
21

plaintiff’s] choice of counsel.
Meanwhile,
during this time period, [the plaintiff] was
paying its legal bills despite its virtual
insolvency.
[The plaintiff’s president]
also testified that he was very pleased with
the legal work performed by Patton Boggs,
and their ten-year professional relationship
clearly supports his testimony. Under these
circumstances, the payment of actual defense
costs by [the plaintiff] is strong evidence
that such costs are reasonable as a matter
of law.
See Imgarten v. Bellboy Corp., 383
F.Supp.2d 825, 836 (D.Md. 2005).
Indus. Enterprises, Inc., 2009 WL 9057727, at *9.
In Imgarten, a former employee sought attorney fees and
costs against his employer after asserting a claim under the
Maryland Wage Payment and Collection Law, Md. Code Ann., Lab. &
Empl. § 3-501 et seq.

Again, after a trial, the court reasoned:

The starting place is a calculation of the
number of hours worked times the hourly
rate.
From the inception of the litigation
to the hearing on, and briefing of, the
post-trial
motions,
Imgarten’s
attorneys
worked a total of 4,917 hours and billed
Imgarten $916,681. While this sum is hefty,
it is reasonable in terms of the litigation
as a whole.
. . . Imgarten paid his legal fees and
expenses as they accrued.
His attorneys’
bills are not, therefore, abstract invoices
that have piled up, unpaid, year after year.
The
invoices
submitted
by
Imgarten’s
attorneys
represent
marketplace
billing
decisions, and Imgarten, by paying them, has
attested to their reasonableness.
Imgarten,

383

F.Supp.2d

at

836

(internal

footnotes

omitted).

Thus, Judge Bennett’s use of the phrase “as a matter of law”
22

should not be interpreted as stating that the fact that bills
are paid is conclusive on the issue.
Also instructive is Patient First Corp., 444 Md. at 486-87
(citations and footnotes omitted), where the absence of detail
in the records was fatal to the claim:
It is likely well within the discretion
of a trial court to award fees based on
detailed billing statements supported by the
judgment of an experienced corporate counsel
who had judged the bills to be reasonable
and necessary to the company’s defense when
he authorized their payment.
But the
complete redaction of all description of the
services rendered in the billing statements
renders the court’s determination here an
act of faith rather than of discretion.
This was not a redaction of a few isolated
items that might be sensitive or privileged,
but
the
wholesale
elimination
of
all
descriptions of the services rendered by the
law firm. In the absence of any description
of the services rendered, all one reviewing
the report is left to do is to check the
arithmetic.
No explanation was offered at
trial for the redaction of this information.
Nor could we find anything in the record
that might explain it.
Undoubtedly, a conscientious general
counsel would have carefully scrutinized the
redacted
information
about
the
work
performed
to
assess
whether
it
was
reasonable for his company to pay the fees
that were billed.
A court charged with
making a fee award must make a similar
judgment as to fees — whether it is
reasonable for an opposing party to be
obligated to pay them.
While it is
certainly not necessary for the court to
fly-speck the bill, without access to the
redacted portion of the bill, it would be
difficult for the court to give conclusive
weight to the opinion of [the plaintiff’s]
23

General Counsel, which itself was likely
based on the missing information.
And it
seems only fair that the opposing party
would have at least the opportunity to point
out
to
the
court
anything
it
deemed
questionable.
Plaintiffs must, then, produce sufficient evidence of the amount
of

defense

costs

sought,

reasonableness thereof.

as

well

as

the

necessity

and

It may not be essential to produce

expert testimony, but something more than bare, sparse records
is required.

To date, Plaintiffs have produced only some of the

billing records in discovery, and it is not even apparent from
those

records

Plaintiffs

that

certainly

they
have

contain
not

the

produced

requisite

the

detail.

records

for

the

remaining amounts sought; once they do, it will be possible to
examine their completeness.
Plaintiffs contend that they “are not required . . . to
show in the first instance that the defense costs they paid and
[]

for

which

‘reasonable’
Litigation.”

they

or

seek

‘necessary’

(ECF

No.

89,

recovery

from

[Defendant]

to

the

defense

at

13).

The

of

the

cases

were
Feld

cited

by

Plaintiffs, however, either concern legal issues distinct from
those presented here or involve factual situations that make
them inapposite.

For example, Port E. Transfer, Inc. v. Liberty

Mut. Ins. Co., 330 Md. 376 (1993), addresses the reasonableness
of a settlement agreement negotiated by the insurer.

24

There,

after the insurer settled underlying claims against the insured,
the insured refused to pay adjusted policy premiums – which had
increased after the settlements – and the insurer brought suit
for breach of contract.

The insured denied liability, arguing

that the insurer’s settlements were unreasonable and not made in
good faith.

Id. at 378-80.

In effect, the insured challenged

the reasonableness of the settlement in order to defend against
the insurer’s breach of contract action.

The Maryland Court of

Appeals held:
[I]n a case such as this, although the
ultimate burden of proof of its [breach of
contract] claim remains at all times with
the insurer, the burden of production of
evidence of violation by the insurer of an
implied condition of good faith is upon the
insured.
We believe this allocation of the
burden of production will provide adequate
protection for the party claiming bad faith,
but
will
not
unnecessarily
burden
the
insurer
or
the
court
with
protracted
proceedings and unnecessary production of
evidence concerning matters not legitimately
at issue.
Id. at 386.
Similarly, Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v.
Porter

Hayden

Co.,

No.

CCB-03-3408,

2014

WL

1320025,

at

*4

(D.Md. Mar. 31, 2014), concerns the reasonableness of settlement
agreements negotiated by the insured after the insurers refused
to defend.

The insured resolved claims against it, and the

25

insurers then challenged the reasonableness of the settlements.
Judge Blake concluded:
[The insurers] have the initial burden of
production, such that they must produce
sufficient evidence to raise a triable issue
with
regard
to
the
reasonableness
of
settlements.
If the Insurers satisfy their
burden of production, then [the insured] has
the ultimate burden of persuasion to show
the
settlements
are
reasonable.
Accordingly,
to
the
extent
that
[the
insurers’] motion for summary judgment seeks
a ruling that they may challenge the
reasonableness of the Trust’s settlements
and that [the insured] bears the ultimate
burden of persuasion on reasonableness, it
will be granted.
Id. at *4 (citations omitted).
Plaintiffs

address

affirmative

Both cases cited heavily by
defenses

challenging

the

reasonableness of settlement agreements – not the recovery of
defense costs.
This case is different.

The issue of reasonableness is not

a true affirmative defense here; rather, it is an assertion by
Defendant that for at least some of the legal defense costs
sought, Plaintiffs will not be able to carry their burden as
outlined above.

See 61A Am.Jur.2d Pleading § 300 (2016) (“[A]

matter that merely negates an element of the plaintiff’s prima
facie case is not an affirmative defense.”).

Discovery will

allow the parties to explore the other side’s factual positions,
and Plaintiffs will have to produce evidence of the amount of
the legal costs, as well as their necessity and reasonableness.
26

Defendant

will

be

free

to

challenge

that

evidence,

and

the

ultimate burden of proof will remain with Plaintiffs.
III. Conclusion
For the foregoing reasons, Plaintiffs’ motion for leave to
amend will be denied.

The parties will have 60 days to conduct

follow-up discovery regarding defense costs.

A separate order

will follow.

/s/
DEBORAH K. CHASANOW
United States District Judge

27