Federal Insurance Company et al v. Southern Lithoplate Inc. et al

Filing 85

ORDER denying 55 Motion to Stay discovery in this case. Signed by Senior Judge James C. Fox on 8/8/2013. (Edwards, S.)

Federal Insurance Company et al v. Southern Lithoplate Inc. et al

Doc. 85

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:12-CV-793-F

FEDERAL INSURANCE COMPANY, and GREAT
NORTHERN INSURANCE COMPANY,
Plaintiffs,
v.
SOUTHERN LITHOPLATE, INC., SPECTRATECH
INTERNATIONAL, INC., and SAM T. ADAMS,
Defendants.

SOUTHERN LITHOPLATE, INC., SPECTRATECH
INTERNATIONAL, INC., and SAM T. ADAMS,
Counterclaim and Third-Party Plaintiffs,
v.
FEDERAL INSURANCE COMPANY, GREAT
NORTHERN INSURANCE COMPANY, ARROWOOD
INDEMNITY COMPANY, WAUSAU
UNDERWRITERS INSURANCE COMPANY,
WAUSAU BUSINESS INSURANCE COMPANY,
LIBERTY INSURANCE CORPORATION, and
TRAVELERS INSURANCE COMPANY
Counterclaim and Third-Party Defendants.

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ORDER

This matter is before the court on Third-Party Defendants Wausau Underwriters
Insurance Company, Wausau Business Insurance Company, and Liberty Insurance Corporation
(hereinafter, "Liberty Insurance Parties" or "Liberty Parties")'s Motion to Stay Discovery [DE55]. The motion has been fully briefed and is ripe of disposition. The Liberty Insurance Parties

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request that the court stay discovery pending resolution of its Motion to Dismiss all third-party
claims asserted against them. For the reasons that follow, the motion is DENIED.

FACTUALANDPROCEDURALBACKGROUND
This case is an insurance dispute relating to an environmental contamination lawsuit filed
against Defendants Southern Lithoplate, Spectratech, and Sam Adams in West Virginia state
court. Upon receiving notice of the West Virginia lawsuit, Defendants notified their insurance
providers, Plaintiffs Federal Insurance Company and Great Northern Insurance Company, and
requested Plaintiffs assume their legal defense. Plaintiffs did so, but under a reservation of rights
clause in the insurance contract that allows Plaintiffs to reserve the right to deny coverage under
the policy. Plaintiffs now seek a declaratory judgment that the insurance policies provide no
coverage for environmental claims and that Plaintiffs have no duty to defend Defendants in the
West Virginia action.
Defendants have filed their Answer and a Third-Party Complaint [DE-24] against the
Liberty Insurance Parties. In short, Defendants seek a declaratory judgment that the Liberty
Insurance Parties provided insurance to Defendants at the time of the alleged contamination and
therefore owe the Defendants a duty to defend the environmental lawsuit and to indemnify
Defendants in the event they are found liable. Defendants/Third-Party Plaintiffs also assert
claims for breach of contract and unfair and deceptive trade practices against the Liberty
Insurance Parties based on the Liberty Insurance Parties' alleged refusal to provide a defense in
the West Virginia action.

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The Liberty Insurance Parties have filed a Motion to Dismiss [DE-47] the Third-Party
Complaint and a Motion to Stay [DE-55] discovery pending resolution of the motion to dismiss.
Defendants oppose both motions. 1
ANALYSIS
The court has broad discretion to stay discovery pending resolution of a motion to
dismiss. Landis v. North Am. Co., 299 U.S. 248,254 (1936). Motions to stay are generally
disfavored because delaying discovery may cause case management problems as the case
progresses. Simpson v. Speciality Retail Concepts, 121 F.R.D. 261,263 (M.D.N.C. 1988); Kron
Medical Corp v. Groth,119 F.R.D. 636, 638 (M.D.N.C. 1988). The moving party bears the
burden of showing good cause and reasonableness for a stay pending discovery. Simpson, 121
F.R.D. at 263.
Here, the Liberty Insurance Parties argue that a stay is warranted because the relative
burden of completing discovery, in terms of both time and financial cost, weighs heavier on the
Liberty Parties. 2 However, even assuming that discovery would be more burdensome on the
Liberty Parties in this case, countervailing considerations convince the court that discovery
should not be stayed in this case. This is a complex, multi-party insurance declaratory judgment
action, which also involves claims for breach of contract and unfair and deceptive trade practices.
If the court stays discovery as to the Liberty Insurance Parties, and discovery proceeds as to all
1

The court will address the motion to dismiss in a subsequent order.

2

Liberty also argues that a stay is warranted because its motion to dismiss turns on a purely
legal question, and if allowed, it will dispose of all the claims against the Liberty parties. The court is
not persuaded by these arguments. Practically every motion to dismiss the court considers turns on
purely legal questions and seeks dismissal of all claims against a party. If this were a sufficient reason to
stay discovery, the court would have to stay discovery in nearly every case in which a party files a motion
to dismiss pursuant to Rule 12(b)(6).
3

the other parties, the case will be in a posture in which deadlines for dispositive motions and
other matters will be different depending on the claim and/or party involved in the motion. This
could potentially create case management problems for the court as well as problems for the
remaining parties, who would likely prefer to brief and argue all dispositive motions at the same
time.
The court, in its discretion, finds that good cause does not exist to stay discovery in this
case. Accordingly, the Liberty Insurance Parties' motion to stay discovery [DE-55] is DENIED.

SO ORDERED.
This the ff ,}day of August, 2013.

nior United States District Judge

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