Galaria v. Nationwide Mutual Insurance Company

Filing 77

OPINION AND ORDER denying 74 Motion for Reconsideration. Nationwide shall arrange for a meet-and-confer conference, as outlined in Order, within 21 days. Signed by Magistrate Judge Terence P. Kemp on 5/8/2017. (agm) Modified text on 5/8/2017 (agm).

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
Mohammad S. Galaria,,
Plaintiff,
v.

Case No. 2:13–cv–118
JUDGE MICHAEL H. WATSON
Magistrate Judge Kemp

Nationwide Mutual Insurance
Company,
Defendant.
Anthony Hancox,
Plaintiff,
v.

Case No. 2:13–cv–257
JUDGE MICHAEL H. WATSON
Magistrate Judge Kemp

Nationwide Mutual Insurance
Company,

OPINION AND ORDER
As reflected in Magistrate Judge Abel’s order filed in these
consolidated cases on December 16, 2013, these cases arise out of
the 2012 theft of Plaintiffs’ personal identifiable information
from Nationwide’s computer network.

After the cases were filed,

Nationwide sought a stay of discovery because it moved to dismiss
based on lack of Article III standing and for failure to state a
claim.

Nationwide also argued that the discovery requests at

issue were unduly burdensome.

Judge Abel concluded that

Nationwide had not met its burden to show that a protective order
was warranted.

He denied the motion while noting that Nationwide

could always seek a protective order if it deemed any future
discovery requests to be improper.
Shortly after that order was issued, the Court granted
Nationwide’s motion to dismiss.

After a motion to alter or amend

judgment was also denied, Plaintiffs appealed.

In an order dated

September 12, 2016, the Court of Appeals reversed and remanded,
concluding that Plaintiffs had standing to assert claims under
the Fair Credit Reporting Act, but leaving it to this Court to
determine if they had stated a claim under that statute.
Following the issuance of the mandate, Nationwide filed a second
motion to dismiss, arguing that the complaint failed to state a
claim under the FCRA (and that, in fact, this Court had already
so held) and that Plaintiffs also failed to plead a viable claim
under either negligence or bailment theories.

Plaintiffs

responded by moving to amend their complaint and asked the Court
to stay briefing on the motion to dismiss pending a ruling on
that request, which the Court has done.

The motion for leave to

amend is now fully briefed.
As part of the proceedings on remand, the parties asked for
a discovery conference, which was held on February 16, 2017.

It

was agreed that Nationwide could move for reconsideration of
Magistrate Judge Abel’s motion declining to grant a stay of
discovery and that the motion would be decided by the undersigned
Magistrate Judge.
briefed.

That motion has been filed and is fully

For the following reasons, the motion will be denied.

Nationwide argues, in its motion, that there are two primary
reasons why the order should be reconsidered.

First, it points

to what it characterizes as a change in the law, by which it
means the amendments to Fed.R.Civ.P. 26(b) which became effective
on December 1, 2015, and which place an added emphasis on
proportionality as a factor to be considered in determining the
proper scope of discovery.

Second, it contends that the

procedural posture of the case has changed because the Court of
Appeals did not disturb this Court’s conclusion that Plaintiffs
failed to state a claim under the FCRA.

Given these changes, and

in light of the broad nature of Plaintiffs’ discovery requests,
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which seek information about Nationwide’s computer system and
security measures dating back to 2008, it argues that the Court
should now exercise its discretion to stay discovery pending
resolution of the competing motions to dismiss and for leave to
amend.
In their response, Plaintiffs contend that there is no sound
legal basis for reconsidering Judge Abel’s order.

They argue

that neither the change in the posture of the case nor the change
in Rule 26(b) are the types of circumstances which justify
altering a prior, and not clearly erroneous, decision.

They also

deny that their claims are likely to be found without merit and
assert that the question of whether Nationwide “furnished” the
stolen information in a way that creates liability under the FCRA
is a factual one and cannot be decided on the basis of motions
directed to the pleadings.

In reply, Nationwide argues that it

has met the standard applicable to the Court’s reconsideration of
interlocutory orders governing discovery, and that nothing in
Plaintiffs’ brief alters the fact that both the change in Rule
26(b) and the fact that Judge Watson has already rejected
Plaintiff’s FCRA claim on its merits favor a stay of discovery.
The short summary of the posture of the case provided above
accurately conveys the essence of the Court of Appeals’ ruling,
but some additional explanation of Judge Watson’s two orders (the
order dismissing the case, and the order denying the motion to
alter judgment) is necessary.

It is also important to note that

when Judge Abel issued his order denying a stay of discovery,
neither of those rulings had been made.
When the Court granted the motion to dismiss, it made
several rulings, one of which was the ruling on standing which
was reversed by the Court of Appeals.

The Court also held,

however, that the allegation made by Plaintiffs that Nationwide
failed to adopt policies or procedures that would safeguard their
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personally identifying information from theft did not violate any
of the provisions of the FCRA.

The Court declined to reconsider

that ruling in the order denying the motion to alter judgment,
and the Court of Appeals’ decision did not directly address this
Court’s conclusion on that issue, noting only that the
conceptualization of the issue as one of “statutory standing” was
incorrect, and that the real issue under the FCRA was whether the
Plaintiffs had stated a claim on which relief could be granted.
The Court of Appeals expressed no opinion on that matter,
confining its ruling to jurisdictional issues.

In its renewed

motion to dismiss, Nationwide argues, among other things, that
the complaint (as well as the amended complaint tendered with the
motion to alter judgment) does not state a claim under the FCRA
both because it does not identify any statutory violations and
because Nationwide did not “furnish” the information in question
to anyone else simply because it was stolen from the Nationwide
computer system.

As noted, both that motion and Plaintiffs’

motion to amend - a motion which would allow Plaintiffs to add
allegations about an attempted identity theft relating to Mr.
Galaria as well as claims under Ohio and Minnesota statutory law
- are pending, with the latter being fully briefed.
This Court has written extensively about the principles
governing motions to stay or limit discovery during the pendency
of a case-dispositive motion, and it would serve no purpose to
repeat those statements here in any depth.

The short version of

that story is that the Court does not routinely stay discovery
when the moving party has filed a “garden-variety” motion to
dismiss which faces an uncertain reception by the District Judge.
See, e.g., Peters v. Credit Protection Ass’n LP, 2014 WL 6687146,
*3 (S.D. Ohio Nov. 26, 2014).

Even when the proposal is to

stage, rather than stay, discovery, similar principles are
involved.

See Heartland Jockey Club Ltd. v. Penn National
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Gaming, Inc., 2009 WL 5171829 (S.D. Ohio Dec. 21, 2009).

That

case is also instructive on another point: although Nationwide
makes much of the fact that Rule 26(b)(1) was amended during the
pendency of this action, that amendment adds little of substance
to the cost-benefit analysis which was already mandated by Rule
26.

As this Court said in Heartland, supra, at *4, the pre-2015

version of the Rules “mandate[d] the performance of a
cost-benefit analysis when one party objects to discovery as
being unduly burdensome or disproportionate to the matters at
stake in the litigation.

See, e.g., Fed.R.Civ.P. 26(b)(2)(C)

(listing as factors to be considered in such an analysis whether
‘the discovery sought is unreasonably cumulative or duplicative’
and whether ‘the burden or expense of the proposed discovery
outweighs its likely benefit, considering the needs of the case,
the amount in controversy, the parties' resources, the importance
of the issues at stake in the action, and the importance of the
discovery in resolving the issues’”).
With these principles in mind, the Court turns to its
analysis of Judge Abel’s decision.

He considered many, if not

all, of the same arguments which the parties make in the
memoranda filed in connection with the motion to reconsider.
After doing so, he concluded that Nationwide had failed to meet
its burden to show that the discovery at issue was unduly
burdensome.

He noted that Nationwide did not support its motion

with any evidence as to how costly or time-consuming responding
to the outstanding discovery would be; that it did not respond to
Plaintiffs’ argument that it may already have gathered much of
this information as part of its response to the breach of
security which occurred; and that Nationwide still had to incur
the cost of preserving the information at issue once litigation
was threatened or filed, and that it had not shown that producing
the same information would add an unreasonable burden to its
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litigation costs.

He did not attach much, if any, importance to

the pendency of a motion to dismiss, but he did leave open the
possibility that once discovery began, if concrete disputes about
the legitimate scope of discovery arose, the Court would be open
to resolving them.

See Doc. 34.

Nothing in Judge Abel’s approach to the issue strikes the
Court as unreasonable, either given the circumstances which
existed when he issued the order or the current circumstances.
Nationwide’s motion to reconsider still does not provide the
Court with any particularized showing of how much it would cost,
or how much time it would take, to respond to the discovery
requests at issue.

Nationwide has taken the position, at this

time, that it will not provide any discovery at all until the
Court orders it to do so, but that does not mean that some amount
of discovery, consisting of less than everything which Plaintiffs
have asked for, might not be reasonably related and proportional
to the issues and amount at stake in the case, or that Nationwide
should not be directed to attempt to work out an agreement to
provide information and produce documents in a way that keeps the
case moving while still acknowledging the possibility that it may
not progress beyond the pleading stage.
The Court does not totally discount Nationwide’s argument
that its motion to dismiss may be more likely to be granted in
this case than in the routine case because Judge Watson has
already expressed an opinion about the merits of the FCRA claim.
That does not change the fact that the Court of Appeals declined
to use that ruling as alternate grounds to affirm, or that the
Court of Appeals’ standing analysis (and its critique of this
Court’s ruling on the statutory standing issue) might not have
some impact on the ultimate disposition of the motion to dismiss.
Further, it does not account for any arguments made in support of
the motion for leave to amend, which will require fresh
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consideration.

Consequently, Judge Abel’s decision not to give

much weight to the pendency of a dispositive motion was also
reasonable, and the Court adopts it as well.
For all of these reasons, the motion for reconsideration
(Doc.

74) is denied.

Nationwide shall, within 21 days of the

date of this order, arrange for a meet-and-confer conference at
which it shall make a good faith proposal about how much of the
requested information most relevant to the Plaintiffs’ claims can
be produced promptly and without unreasonable expenditures of
time or money.

If the parties cannot agree on the scope and

timetable for such production, they shall request an in-person
conference with the Court to discuss the matter further.
MOTION FOR RECONSIDERATION
Any party may, within fourteen days after this Order is
filed, file and serve on the opposing party a motion for
reconsideration by a District Judge.

28 U.S.C. §636(b)(1)(A),

Rule 72(a), Fed. R. Civ. P.; Eastern Division Order No. 14-01,
pt. IV(C)(3)(a).

The motion must specifically designate the

order or part in question and the basis for any objection.
Responses to objections are due fourteen days after objections
are filed and replies by the objecting party are due seven days
thereafter.

The District Judge, upon consideration of the

motion, shall set aside any part of this Order found to be
clearly erroneous or contrary to law.
This order is in full force and effect even if a motion for
reconsideration has been filed unless it is stayed by either the
Magistrate Judge or District Judge.

S.D. Ohio L.R. 72.3.
/s/ Terence P. Kemp
United States Magistrate Judge

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