Stryker Corporation et al v. National Union Fire Insurance Company of Pittsburgh, PA et al

Filing 393

OPINION; signed by Magistrate Judge Joseph G. Scoville (Magistrate Judge Joseph G. Scoville, mmh)

UNITED STATES OF AMERICA
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

STRYKER CORPORATION, et al.,

)
)
Plaintiffs,
)
)
v.
)
)
TIG INSURANCE COMPANY,
)
)
Defendant.
)
____________________________________)

Case No. 1:05-cv-51
Honorable Robert Holmes Bell

OPINION

In this diversity action, Stryker Corporation seeks to recover on an excess liability
insurance policy issued by defendant, TIG. In this and related litigation, the court has found that the
underlying insurance coverage provided by the primary carrier, XLIA, has been exhausted, leaving
a claim against TIG for over $7.6 million, which Stryker contends falls within the excess liability
coverage provided by TIG.
Presently pending before the court is TIG’s motion for protective order under Fed.
R. Civ. P. 26(c), in which TIG seeks to limit the scope of discovery. The basis for TIG’s motion is
Judge Bell’s opinion and order, entered June 27, 2013, in which the court denied a motion for
summary judgment by Stryker. TIG contends that the court’s opinion and order made significant
factual findings and legal determinations that are “now binding law of the case.” (Mem. at 1, docket
# 381). In essence, TIG contends that the court has already determined that the “net ultimate loss”
language of the TIG policy unambiguously covers only underlying settlements entered into with
TIG’s written consent, that claims for which Stryker seeks compensation were settled without TIG’s

consent, and that the only issue is whether TIG, through its previous actions or statements, has
waived its right to enforce the consent requirement of the policy. TIG therefore contends that the
waiver issue is the sole question left to be decided in this case. Stryker opposes the motion,
contending that it is entitled to pursue discovery concerning the drafting history of the policy, TIG’s
interpretation of the same policy provisions with regard to other insureds, and other factual issues
relevant to the meaning of the “net ultimate loss” provision relied on by TIG as a defense in this
action.
At the heart of TIG’s argument is the assertion that the law of the case doctrine
prohibits Stryker’s relitigation of any issue decided by Judge Bell in his summary judgment opinion.
The law of the case doctrine is much misunderstood by both lawyers and courts, and TIG is no
exception. Cases applying the law of the case doctrine arise in two distinct circumstances. The first
arises when a case has been remanded by an appellate court. In such circumstances, the trial court
is bound to proceed in accordance with the mandate and the law of the case as established by the
appellate decision. See, e.g., Goldberg v. Maloney, 692 F.3d 534, 538 (6th Cir. 2012); Hanover Ins.
Co. v. Am. Eng’g Co., 105 F.3d 306, 312 (6th Cir. 1997). Once an appellate court decides upon a
rule of law, “that decision should continue to govern the same issues in subsequent stages of the
same case.” Scott v. Churchill, 377 F.3d 565, 569-70 (6th Cir. 2004) (quotation and citation
omitted). The only case cited by TIG, McMurtry v. Paul Revere Life Ins. Co., 67 F. App’x 290, 295
(6th Cir. 2003), is of this variety, as it involved the preclusive effect of appellate findings after
remand. This branch of the law of the case doctrine, sometimes called the “mandate rule,” has no
application to the present case, as TIG is not relying on any finding of the Sixth Circuit Court of
Appeals.
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The other species of the law of the case doctrine “posits that when a court decides
upon a rule of law, that decision should continue to govern the same issues in subsequent stages in
the same case.” Pepper v. United States, 131 S. Ct. 1229, 1250 (2011) (quoting Arizona v.
California, 460 U.S. 605, 618 (1983)). In contrast to the mandate rule, which is a rule of preclusion,
this aspect of the law of the case doctrine does not limit the court’s power, but merely directs its
discretion. Pepper, 131 S. Ct. at 1250. As applied to proceedings in the district court, the law of
the case doctrine is significantly mitigated by the provisions of Rule 54(b) of the Federal Rules of
Civil Procedure. Rule 54(b) empowers the court to direct the entry of a final judgment that
adjudicates fewer than all of the claims in the case. In the absence of an express direction for the
entry of judgment, however, “any order or other decision, however designated, that adjudicates fewer
than all the claims or rights and liabilities of fewer than all the parties does not end the action as to
any of the claims or parties and may be revised at any time before the entry of a judgment
adjudicating all the claims and all the parties’ rights and liabilities.” FED. R. CIV. P. 54(b). By virtue
of Rule 54(b), partial summary judgments are interlocutory and are not subject to the strict standards
applicable to motions for reconsideration of a final judgment. See American Canoe Ass’n v. Murphy
Farms, Inc., 326 F.3d 505, 514-15 (4th Cir. 2003). Because of Rule 54(b), “every order short of a
final decree is subject to reopening at the discretion of the district judge.” Moses H. Cone Mem.
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 12 (1983). Thus, in contrast to the mandate rule,
pursuant to which the district court is virtually bound to follow a previous appellate holding, this
aspect of the law of the case doctrine is purely discretionary, allowing the district court to revisit
previous decisions on the basis of new evidence, new law, or a determination that the previous
decision was not sustainable. See American Canoe, 326 F.3d at 515. The court should exercise its
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discretion guided by concerns of finality and judicial economy on the one hand, balanced against the
court’s ultimate responsibility to reach a correct judgment, on the other. Id. Indeed, because of the
force of Rule 54(b), some appellate courts hold that the law of the case doctrine applies only when
there has been a final judgment and that a court’s interlocutory rulings are freely reviewable at later
stages of the case. See, e.g., Vintilla v. United States, 931 F.2d 1444, 1447 (11th Cir. 1991); accord
Gander Mountain Co. v. Cabella’s, Inc., 540 F.3d 827, 830 (8th Cir. 2008).
Under any appropriate view of the law of the case doctrine, therefore, the decisions
embodied in the summary judgment opinion of June 27, 2013, as an interlocutory order, will be
subject to possible reconsideration by Judge Bell in subsequent proceedings. One basis for such
reconsideration is the production of substantially different evidence. See Sejman v. Warner-Lambert
Co., 845 F.2d 66, 69 (4th Cir. 1988). Despite the age of this case, Judge Bell’s summary judgment
was entered before the parties had engaged in any meaningful discovery concerning the TIG policy.
The policy provisions that now appear to be unambiguous on their face may be found to be subject
to latent ambiguities, in light of industry standards, the policy’s drafting history or TIG’s application
of the same policy language in other cases. See Shay v. Aldrich, 790 N.W.2d 629, 667-68 (Mich.
2010). If Stryker is not allowed to pursue discovery on these issues, how could it possibly be in a
position to present the court with substantially different evidence in the future?
The court’s summary judgment opinion came in response to a motion by Stryker, the
plaintiff. As the party with the burden of proof in this case, Stryker faced a substantial burden.
Where a party moving for summary judgment has the burden of proof, “his showing must be
sufficient for the court to hold that no reasonable trier of fact could find other than for the moving
party.” Calderon v. United States, 799 F.2d 254, 259 (6th Cir. 1986). A summary judgment in favor
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of the party with the burden of proof “is inappropriate when the evidence is susceptible to different
interpretations or inferences by the trier of fact.” Hunt v. Cromartie, 526 U.S. 541, 553 (1999).
Therefore, when a court denies summary judgment to a plaintiff, the court is essentially saying that
the plaintiff’s case is not so powerful that no reasonable jury would be free to disbelieve it. See
Arnett v. Meyers, 281 F.3d 552, 561 (6th Cir. 2002). In the present case, the core question identified
in Judge Bell’s opinion was whether TIG had any defenses at all to Stryker’s claims under the excess
policy. (Op., 3). The court determined that it could not find, as a matter of law, “that TIG does not
have any defenses that are unique to its policy.” (Id., 10). The court was careful to express its
conclusions in the negative. In such circumstances, the court is not precluding further exploration
and litigation of the issues on which plaintiff bears the burden, but merely decides that the case must
proceed to the next step. In this case, the next step is discovery.
It may well be that Judge Bell will be unpersuaded by any new evidence unearthed
by Stryker in the discovery process. At this stage of the litigation, however, it would be an abuse
of discretion to deny Stryker the opportunity to uncover the very evidence that may persuade the
court to adopt a different reading of the policy. The parol evidence rule and other doctrines of
contract construction are matters of substantive law, not discovery. See Salzman v. Maldaver, 24
N.W.2d 161, 165 (1946). At the appropriate time, the court can determine whether any evidence
produced in discovery is admissible and sufficient to support an alternative reading of ostensibly
clear language. But the issue at this point is not admissibility, but discoverability. The rules allow
discovery into any nonprivileged matter relevant to any party’s claim or defense. FED. R. CIV. P.
26(b)(1). Although the court has discretion to limit the scope of discovery where the burden or
expense of the proposed discovery outweighs its likely benefit, see FED. R. CIV. P. 26(b)(2)(C), in
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a case involving over $7.6 million, it is hard to conclude that the expense of the discovery sought
by Stryker would outweigh its benefit. TIG has not shown good cause, as required by Fed. R. Civ.
P. 26(c)(1), for the entry of a protective order precluding the discovery sought by Stryker.
Defendant’s motion for protective order (docket # 380) will therefore be denied. The
court notes that Stryker has filed a motion to compel discovery, which, at least in part, raises the
same issue decided in this opinion. Apparently, TIG has resisted fact discovery concerning the
excess policy on the basis that the only issue left in the case is waiver. The parties are directed to
meet and confer with regard to Stryker’s motion to compel, in light of the ruling made in this
opinion. If this opinion does not provide sufficient guidance to the parties to allow them to resolve
Stryker’s motion to compel, TIG is directed to file its response to the motion no later than January
21, 2014.

Dated: January 15, 2014

/s/ Joseph G. Scoville
United States Magistrate Judge

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