AmTrust North America, Inc, et al v. Safebuilt Insurance Services, Inc. et al
Combined Cases Transfer ORDER re 1 Motion to Enforce Subpoena and 1 Motion to Compel. The Clerk of Court shall TRANSFER the Motion to Enforce Subpoena and Compel Discovery to United States District Court for the Southern District of New York, as the issuing court under the caption AmTrust North America, Inc., et al. v. Safebuilt Insurance Services, Inc., et al., Civil Action No. 14-cv-9494 (CM) and shall then close the file in this District. Signed by Magistrate Judge Carolyn S Ostby on 4/12/2016. (Also docketed in MC-16-02-BLG-CSO) (JDR, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
AMTRUST NORTH AMERICA, INC., a
Delaware corporation; and
COMPANY, INC., a New Hampshire
-vsSAFEBUILT INSURANCE SERVICES,
INC., a California corporation a/k/a
INSURANCE SERVICES, INC., et al.,
SAFEBUILT INSURANCE SERVICES,
INC., a California corporation a/k/a
INSURANCE SERVICES, INC., et al.,
-vsAMTRUST NORTH AMERICA, INC., a
Delaware corporation; and
COMPANY, INC., a New Hampshire
Amtrust North America, Inc., and Technology Insurance
Company, Inc. (“AmTrust Parties”), acting through counsel in a case
venued in the United States District Court for the Southern District of
New York, Civil Action No. 14-cv-9494 (“SDNY Litigation”), served a
subpoena on Moulton Bellingham, PC (“Moulton Bellingham”), on
October 9, 2015. ECF No. 7-1 (MC 16-1).1 Moulton Bellingham, Pacific
Re’s counsel in Montana, initially responded to the subpoena on
November 23, 2015. ECF No. 10 (MC 16-1).
The subpoena sought, inter alia:
All non-privileged documents, records and communications
with the Office of the Montana State Auditor, Commissioner
of Insurance and Securities concerning Pacific Re, Inc.’s
protected cell Pac Re 5-AT and specifically as it relates to
cell formation, cell funding, cell merger, policy fees, reported
premium, business plan approvals, business plan
amendments, policy language approvals, and policy language
ECF No. 7-1 at 9 (MC 16-1). Moulton Bellingham responded to this
“ECF No.” refers to the document as numbered in the Court’s
Electronic Case Files. See The Bluebook, A Uniform System of Citation,
§ 10.8.3. References to page numbers are to those assigned by ECF.
request with documents numbered as MB 54-145. These documents
included a Report of Examination of Pacific Re, Inc., dated December
31, 2012, as well as other documents concerning the Montana
Commissioner of Securities and Insurance office (“CSI”). ECF No. 10 at
4 (MC 16-1).
But on January 8, 2016, Moulton Bellingham sent Plaintiffs a
letter requesting that the documents produced identified as MB 54-73
and MB 74-121 (the “Documents”) be returned and all copies destroyed.
ECF No. 4-5 (MC 16-1). Moulton Bellingham argues that this attempt
to claw back the Documents is based on their confidential nature, as
provided in MCA § 33-28-108(3).
Now pending in this action is Plaintiffs’ motion to enforce the
subpoena and compel discovery of the Documents. ECF No. 1 (MC 161). The named Defendants are SafeBuilt Insurance Services, Inc., The
Taft Companies, LLC, Preferred Global Holdings, Inc., David E. Pike,
David E. Pike, Inc., Philip Salvagio, Salmen Insurances Services, Inc.,
Carl M. Savoia, and John Does (hereafter referred to, with Pacific Re,
Inc., as “Safebuilt Parties”). This motion essentially asks whether the
Documents may be clawed back based on the confidentiality portion of
MCA § 33-28-108(3).
The Court heard oral argument on the motion on April 8, 2016.
The AmTrust Parties, as Plaintiffs in MC 16-2, served another
subpoena in Montana in case number 14-9494, the SDNY Litigation.
This subpoena was issued on March 2, 2016, to CSI. ECF No. 2-1 at 3
(MC 16-2). This subpoena requested witness testimony regarding:
1. Creation, formation and approval of Pac Re Cell 5-AT of
Pacific Re, Inc.
2. Taft’s request for and the approval and merger of Cell 5AT into the core.
3. Reversal of Cell 5-AT merger into the core.
4. Pacific Re, Inc. and Preferred Contractors Insurance
Company, RRG Inc. (“PCIC”) policy wording changes and
approvals from July 1, 2011 through May 31, 2012.
5. The Examination of Pacific Re, Inc. as of December 31,
2012 and subsequent Orders of Supervision.
ECF No. 2-1 at 6 (MC 16-2).
The CSI deposition was completed on March 16, 2016, over the
objections of the Safebuilt Parties.
Now pending is the Safebuilt Parties’ motion for a protective
order, to quash subpoena to CSI, for a discovery stay, and for the motion
to be transferred to the SDNY Litigation. ECF No. 1 (MC 16-2).
The AmTrust Parties argue that Moulton Bellingham cannot
claw-back the CSI examination report or the Orders of Supervision.
They argue that: (1) all materials related to CSI’s examination of Pacific
Re are discoverable based on a court order in the SDNY Litigation, ECF
No. 9 at 14–15 (MC 16-1); (2) Pacific Re has consented to the disclosure
of the documents under the Captive Reinsurance Agreement, id. at 15;
(3) this Court should order the production of the documents, id. at 15–
17; (4) the Examination Report is public as a matter of law because the
statute requires an examination report to remain confidential for only
thirty days before becoming open for public inspection, id. at 17; and (5)
public policy considerations demonstrate the Examination Report
should be public, id. at 18.
The Safebuilt Parties argue that the motion to compel should not
be granted. They argue that: (1) Pacific Re’s examination is privileged
because it was a non-public examination, ECF No. 18 at 12–13 (MC 161); (2) there are no relevant rulings in the SDNY Litigation, id. at 14–
16; (3) they have not consented to the disclosure of the privileged
documents, id. at 17–18; (4) the underlying facts are obtainable from an
alternate, non-privileged source, id. at 19; (5) the examination report
was created years after the end of the program at issue in the SDNY
Litigation and the request is overly broad, id. at 20; (6) there is no basis
to show the privilege was breached, id. at 21–27; (7) they should be
seeking relief in the SDNY, id. at 18; and (7) public policy mandates
communications between insurers and regulators be protected, id. at
27–29. They also argue that the AmTrust Parties’ motion lacks a nexus
to this jurisdiction, and includes improperly named parties that are not
the target of the subpoena. Id. at 5, 18.
The Amtrust Parties respond that: (1) there is not an insurance
examination privilege in Montana, because the statue only makes
examinations confidential, ECF No. 23 at 11–16 (MC 16-1); (2) this
jurisdiction is the correct place for this request because it is the district
in which compliance would occur and the issues are based on Montana
law, id. at 16–17; (3) the parties named in this action are the same as in
the SDNY Litigation, and were named to provide notice, id. at 17; and
(4) Plaintiffs have not conceded that Moulton Bellingham’s
interpretation of “privilege” in this context was appropriate, id. at 18.
The Safebuilt Parties argue here that: (1) the subpoena seeks
overbroad, privileged, and confidential information, ECF No. 1 at 14–19
(MC 16-2); (2) the subpoena would subject Plaintiffs to unnecessary
annoyance and embarrassment, id. at 19–21; (3) enforcement of the
subpoena would be disproportionate to the underlying litigation, id. at
21–23; (4) Rule 452 prohibits enforcement of the subpoena, id. at 24–25;
(5) this motion should be adjudicated in the SDNY Litigation, id. at 25;
(6) enforcement of the subpoena should be stayed immediately, pending
adjudication of the subpoena’s propriety and the related motion to
compel, id. at 25–34.
The AmTrust Parties respond that: (1) only Pacific Re has
standing to file the motion to quash and only on the ground of
“privilege”, ECF No. 3 at 14–17 (MC 16-2); (2) the Montana statute does
not create a “privilege”, id. at 17–22; (3) interpreting a Montana statute
does not warrant and transfer to New York because there is no consent
References to the Rules are to the Federal Rules of Civil
Procedure, unless otherwise noted.
nor extraordinary circumstances, id. at 22–24; and (4) Pacific Re’s
gamesmanship mandates denial of the stay and triggers 28 U.S.C. §
1927, because the deposition notice was served on March 2, 2016, CSI
did not object, and the AmTrust parties did not act with any urgency
prior to belatedly filing this action, id. at 24–27.
In reply, the Safebuilt Parties argue that: (1) the Plaintiffs all
have standing because the subpoena seeks financial information
directly related and vital to Plaintiffs’ business and would lead to
disclosure of their business practices, giving competitors an advantage;
(2) the subpoena seeks impermissible discovery because it is seeks
overbroad, privileged, and confidential information pursuant to, among
other things, MCA § 33-28-108-(3); (3) the subpoena would subject them
to unnecessary annoyance and embarrassment; and (4) the request is
disproportionate to the underlying SDNY action. ECF No. 8 at 4–12
The Safebuilt Parties argue that Rule 45 prohibits CSI from
testifying as to privileged or private documents and communications,
and the subpoena seeks testimony related to the Safebuilt Parties’
sensitive commercial and/or financial information, and sensitive
business information of non-parties. Id. at 12–13. They argue that the
information cannot be obtained from CSI because Pacific Re did not
consent to the disclosure of the privileged documents. Id. at 14.
Finally, the Safebuilt Parties argue this motion should be
transferred to SDNY to ensure consistent rulings, preserve judicial
economy, and permit the court with the most experience and knowledge
of the facts rule on it. Id. at 16–17. They argue that sanctions would
also be improper because there was no delay, nor any excess cost or
expense associated with the motion. Id. at 17–18.
III. LEGAL STANDARD
The Federal Rules of Civil Procedure require that a subpoena
must issue from the court where the action is pending. Fed. R. Civ. P.
45(a)(2). If timely objection is made to the subpoena, “the serving party
may move the court for the district where compliance is required for an
order compelling production or inspection.” Fed. R. Civ. P.
45(d)(2)(B)(i). Additionally, on a timely motion, “the court for the
district where compliance is required must quash or modify a subpoena
that . . . requires disclosure of privileged or other protected matter, if no
exception or waiver applies[.]” Fed. R. Civ. P. 45(d)(3)(A). When a
motion is made regarding a subpoena to a compliance court, and the
compliance court did not issue the subpoena, it may transfer the motion
to the issuing court “if the person subject to the subpoena consents or if
the court finds exceptional circumstances.” Fed. R. Civ. P. 45(f).
The Advisory Committee’s Note to Rule 45(f) provides guidance in
determining whether exceptional circumstances exist, warranting
transfer to the issuing court. The note provides that:
In the absence of consent, the court may transfer in
exceptional circumstances, and the proponent of transfer
bears the burden of showing that such circumstances are
present. The prime concern should be avoiding burdens on
local nonparties subject to subpoenas, and it should not be
assumed that the issuing court is in a superior position to
resolve subpoena-related motions. In some circumstances,
however, transfer may be warranted in order to avoid
disrupting the issuing court's management of the underlying
litigation, as when that court has already ruled on issues
presented by the motion or the same issues are likely to
arise in discovery in many districts. Transfer is appropriate
only if such interests outweigh the interests of the nonparty
served with the subpoena in obtaining local resolution of the
Fed. R. Civ. P. 45(f) Advisory Committee Note (2013).
This Advisory Committee Note makes clear that a prime factor in
deciding whether to transfer an action under Rule 45(f) is consideration
of burdens on local nonparties subject to the subpoena. But these
burdens “must be balanced with the interests in ensuring the efficient,
fair and orderly progress of ongoing litigation before the issuing court.”
Obesity Research Institute, LLC v. Fiber Research International, LLC,
3016 WL 593546, *3 (D. Nev. 2016) (quoting Judicial Watch, Inc. v.
Valle Del Sol, Inc., 307 F.R.D. 30, 34 (D.D.C. 2014)). “Ultimately, the
Court must balance the interest of local resolution against factors such
as judicial economy and risk of inconsistent rulings.” Venus Med. Inc. v.
Skin Cancer & Cosmetic Dermatology Ctr. PC, 2016 WL 159952, at *2
(D. Ariz. Jan. 14, 2016) (citing Moon Mountain Farms, LLC v. Rural
Cmty. Ins. Co., 301 F.R.D. 426, 429–430 (N.D. Cal. 2014)).
As noted, both subpoenas at issue here were issued in the SDNY
Litigation. The subpoena in MC 16-1-BLG-CSO was issued on a local
nonparty, Moulton Bellingham. The subpoena in MC 16-2-BLG-CSO
was issued to another local nonparty, CSI. The record does not clearly
reflect that either entity consents to transfer these actions to the SDNY,
although Moulton Bellingham, in its capacity as counsel for the
Safebuilt Parties, does request such a transfer. Accordingly, the Court
will consider whether the actions should be transferred to the SDNY
based on the “exceptional circumstances” test.
In considering possible burdens on the local nonparties subject to
the subpoenas, the Court here notes that neither nonparty recipient
initially objected to the subpoena nor is either recipient a party to these
actions. Neither has appeared in this Court seeking to be heard. The
factor weighs in favor of transfer.
The Court is cognizant that resolution of these disputes might
require interpretation of unresolved issues of Montana law. But any
Montana interest this might create is outweighed by other factors at
issue that are better resolved in the SDNY Litigation. These factors
include: (1) judicial economy; (2) risk of inconsistent rulings; and (3)
discovery management in the underlying action. The Court discusses
below each factor in turn.
First, principles of judicial economy support transferring these
actions to the issuing court. The underlying action has been pending for
more than a year and a half, and discovery appears to have been
extensive and to have raised many disputes that have been resolved by
a magistrate judge in that district court. Some of the issues briefed by
the parties here overlap with those already decided in the SDNY
Litigation. That Court is much more familiar with the history of the
litigation among these parties, and with the claims and defenses
currently outstanding. The legal issues arising under Montana law are
intertwined with other discovery issues, making it difficult to rule on
the Montana law issues without entering into ground already plowed in
the SDNY. Thus, the SDNY is in the best position to rule on the
Second, the risk of issuing an inconsistent ruling is high, and
weighs strongly in favor of transferring the actions to the issuing court.
The parties here disagree on the scope of prior orders issued in the
SDNY Litigation. For example, in briefing the parties disagree on the
meaning of an order from the presiding judge, Judge McMahon,
regarding discovery, as well as an order from Judge Cott, who has
presided over various discovery disputes in the SDNY Litigation. The
parties argue that this Court needs to interpret or apply these prior
orders to resolve these actions, but attempting to do so could lead to
Third, issues regarding the scope of discovery are more properly
resolved by the issuing court which is responsible for case management
of the underlying litigation. Although this issue in MC 16-2 is framed
as a Rule 45 issue, it concerns an attempt to claw back documents,
which is more appropriately considered in a Rule 26 context.
Additionally, many of the arguments in both actions involve
interpreting the proper scope of discovery and deciding whether the
materials are relevant, overly burdensome, or disproportionate to the
underlying litigation. These are determinations that should be made in
the SDNY Litigation.
At least one other discovery dispute, that was initially litigated by
these parties in a compliance district, was subsequently transferred to
the SDNY. See Amtrust North America, Inc., et al., Civil Action No. 15mc-00190-RM (D. Colo. Jan. 4, 2016).
For all these reasons, the Court concludes that there are
exceptional circumstances that warrant transfer to the issuing court.
Based on the foregoing, IT IS ORDERED that:
(1) In MC 16-1-BLG-CSO, the Clerk of Court shall TRANSFER
the Motion to Enforce Subpoena and Compel Discovery to
United States District Court for the Southern District of New
York, as the issuing court under the caption AmTrust North
America, Inc., et al. v. Safebuilt Insurance Services, Inc., et al.,
Civil Action No. 14-cv-9494 (CM) and shall then close the file in
(2) In MC 16-2-BLG-CSO, the Motion to Transfer the pending
motions is GRANTED. The Clerk of Court shall TRANSFER
the pending motions to United States District Court for the
Southern District of New York, as the issuing court under the
caption AmTrust North America, Inc., et al. v. Safebuilt
Insurance Services, Inc., et al., Civil Action No. 14-cv-9494 (CM)
and shall then close the file in this District.
DATED this 12th day of April, 2016.
/s/ Carolyn S. Ostby
United States Magistrate Judge
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