LIBERTY INTERNATIONAL UNDERWRITERS CANADA v. SCOTTSDALE INSURANCE COMPANY et al

Filing 238

MEMORANDUM OPINION & ORDER, Denying 180 Motion for Sanctions. Signed by Judge Noel L. Hillman on 10/6/17. (js)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

LIBERTY INTERNATIONAL
UNDERWRITERS CANADA,
Plaintiff,
v.

Civil No. 12-4934 (NLH/JS)

MEMORANDUM
OPINION & ORDER

SCOTTSDALE INSURANCE COMPANY
and INFINITY ACCESS LLC,
Defendants.

APPEARANCES:
STEPHEN ALLEN LONEY, JR.
HOGAN LOVELLS US LLP
1835 MARKET STREET, 29th FLOOR
PHILADELPHIA, PA 19103
MARK C. GOODMAN (pro hac vice)
HOGAN LOVELLS US LLP
3 EMBARCADERO CENTER, 15TH FLOOR
SAN FRANCISCO, CA 94111
On behalf of Plaintiff Liberty International
Underwriters Canada
GARY S. KULL
APRIL T. VILLAVERDE
CARROLL, McNULTY & KULL LLC
120 MOUNTAIN VIEW BLVD.
P.O. BOX 650
BASKING RIDGE, NJ 07920
LISA MARTIN LAMPKIN (pro hac vice)
SELMAN BREITMAN LLP
11766 WILSHIRE BOULEVARD, 6TH FL.
LOS ANGELES, CA 90025
On behalf of Defendants Scottsdale Insurance
Company and Infinity Access LLC

HILLMAN, District Judge
WHEREAS, pending before the Court is the motion [180] of
plaintiff, Liberty International Underwriters Canada
(“Liberty”), for sanctions arising out of the motions and
discovery requests filed by Defendants, Scottsdale Insurance
Company and Infinity Access LLC, regarding the Magistrate
Judge’s handling of a discovery dispute involving Defendants’
request for documents Liberty claims are protected by the
attorney-client privilege and work-product doctrine 1; and
WHEREAS, Liberty, moving pursuant to 28 U.S.C. § 1927 2,
“seeks the legal expenses it incurred in (a) responding to the
defendants’ groundless appeal of the Magistrate Judge’s
privilege rulings, (b) moving to quash and/or preclude issuance
of subpoenas for attorney discovery that the defendants
unreasonably pursued while also continuing to litigate party

1

This action concerns claims by Liberty against Defendants to
recover $1 million plus attorneys’ fees that Liberty paid in
November 2011 to settle a lawsuit where it was alleged that
Infinity, a subcontractor to Liberty’s insured Tractel, LTD.,
started a fire at the Borgata Hotel, Casino and Spa in Atlantic
City, New Jersey. Defendants contend, among other defenses,
that Liberty’s lawsuit is barred by the terms of the settlement
agreement Tractel entered into with Borgata.
2

28 U.S.C. § 1927 provides, “Any attorney or other person
admitted to conduct cases in any court of the United States or
any Territory thereof who so multiplies the proceedings in any
case unreasonably and vexatiously may be required by the court
to satisfy personally the excess costs, expenses, and attorneys’
fees reasonably incurred because of such conduct.”
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discovery issues that the defendants had already conceded should
be resolved first; and (c) litigating this motion for sanctions”
(Docket No. 180-1 at 6); and
WHEREAS, as the Court noted in its denial of Defendants’
most recent motion seeking leave to appeal the Magistrate
Judge’s ruling (Docket No. 226 at 2-3), the dispute over these
documents had been raised to this Court twice before: (1) on the
cross-motions by Liberty and Defendants appealing the Magistrate
Judge’s decision that some of Liberty’s privileged documents
should be produced to Defendants, and (2) on Liberty’s motion
asking the Court to reconsider its denial of the parties’ crossmotions; and
WHEREAS, the Court denied Defendants’ motion for leave to
appeal, finding that the Magistrate Judge’s final decision was
not clearly erroneous or contrary to law (Docket No. 226 at 6);
and
WHEREAS, Liberty alleges in its instant motion that by
Defendants filing their motion for leave to appeal, they have
vexatiously multiplied the proceedings, which is a pattern that
they have followed throughout the litigation; and
WHEREAS, Defendants reject Liberty’s position, arguing that
that “[t]he record is clear that Defendants and their counsel
have pursued discovery and motion practice [in] good faith and
pursuant to supportable law,” and “[e]qually clear is the fact
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that Defendants’ counsels’ conduct certainly does not in any way
rise to a willful abuse of the judicial process that is
tantamount to bad faith – which is the standard that must be
satisfied before sanctions are awarded” (Docket No. 185 at 1);
and
WHEREAS, the Court has considered the parties’ arguments,
and notes that (1) Liberty and Defendants have now each raised
the privileged documents issue before this Court twice, (2)
Liberty initially appealed the Magistrate Judge’s decision
because he decided in Defendants’ favor, and Defendants crossappealed because they requested the disclosure of even more
documents than ordered by the Magistrate Judge, (3) Liberty
sought reconsideration of the Court’s affirmance of the
Magistrate Judge’s initial decision, (4) Liberty effectively
prevailed on its motion for reconsideration, with this Court
remanding the issue to the Magistrate Judge for a renewed
analysis of the privilege-piercing issue, (5) Liberty prevailed
on the Magistrate Judge’s reconsideration, where he changed
course and found that all of Liberty’s documents were protected
from disclosure, and (6) Defendants sought this Court’s review
of the issue, since they had previously prevailed in their
efforts to obtain Liberty’s documents; and

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WHEREAS, the Court finds that the litigation efforts by
both sides relating to Liberty’s privileged documents stand in
equipoise; and
WHEREAS, the Court further notes that the Magistrate Judge
has recently issued several lengthy Text Orders chastising the
parties (see Docket No. 202, 203, 206), including stating,
“Having received the parties' July 20, 2017 letters, the Court
regrets now knowing that plaintiff's candor to the Court is less
than forthcoming.

The Court now knows that plaintiff did not

make itself available for defendant's expert depositions the
first two weeks of July and on July 18.

Nevertheless, the Court

is tired of addressing the unnecessary bickering that has
regularly occurred in the case and will not waste any more time
on an issue that never should have been brought to its
attention. . . .

Further, the Court will not sanction defendant

when its submission [Doc. No. 204] evidences that it attempted
to address plaintiff's concerns in an appropriate and
professional manner.
defendant is VACATED.

The Order to Show Cause directed to
The Court regrets defendant had to waste

valuable time on this matter as did the Court.” (Docket No.
206); and
WHEREAS, the Court finds that Liberty has not demonstrated
that Defendants have multiplied the proceedings unreasonably and

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vexatiously in violation of 28 U.S.C. § 1927 such that Liberty
is entitled to the fees and costs it seeks;
Accordingly,
IT IS on this

6th

day of

October

, 2017

ORDERED that the MOTION for Sanctions for Payment of Costs,
Fees and Expenses by LIBERTY INTERNATIONAL UNDERWRITERS CANADA
[180] be, and the same hereby is, DENIED.

s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.

At Camden, New Jersey

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