Evraz Oregon Steel Mills, Inc. v. Continental Insurance Company
Filing
360
OPINION and ORDER - Continental's Motion 334 to Compel is GRANTED. IT IS SO ORDERED. DATED this 28th day of July, 2014, by United States Magistrate Judge John V. Acosta. (peg)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
EVRAZ INC., N.A., a Delaware
Corporation,
Civ. No. 3:08-cv-00447-AC
OPINION AND ORDER
Plaintiff,
v.
RIDDELL WILLIAMS P.S.
v.
THE CONTINENTAL INSURANCE
COMPANY, a Pennsylvania Corporation;
CENTRAL NATIONAL INSURANCE
COMPANY OF OMAHA, a Nebraska
Corporation; CENTURY INDEMNITY
COMPANY, a Pennsylvania Corporation;
GRANITE STATE INSURANCE
COMPANY, a Pennsylvania Corporation;
AMERICAN HOME ASSURANCE
COMPANY, a New York Corporation;
HARTFORD FIRE INSURANCE
COMPANY, a Connecticut corporation;
INSURANCE COMPANY OF THE
STATE OF PENNSYLVANIA, a
Pennsylvania corporation; NATIONAL
OPINION AND ORDER - 1
[RMD]
UNION FIRE INSURANCE COMPANY
OF PITTSBURGH PA, a Pennsylvania
company; RLI INSURANCE COMPANY,
an Illinois corporation; STONEWALL
INSURANCE COMPANY, a Nebraska
corporation; WESTCHESTER FIRE
INSURANCE COMPANY, a New York
corporation; WESTPORT INSURANCE
CORPORATION, a Missouri corporation;
ZURICH-AMERICAN INSURANCE
COMPANY, a New York corporation;
Defendants,
THE CONTINENTAL INSURANCE
COMPANY, a Pennsylvania corporation,
Third-Party Plaintiff,
v.
INSURANCE COMPANY FOR THE
STATE OF PENNSYLVANIA, a
Pennsylvania corporation; and AMERICAN
HOME ASSURANCE COMPANY, a
foreign insurance company,
Third Party Defendants,
CONTINENTAL INSURANCE
COMPANY, a Pennsylvania corporation,
Counterclaimant,
v.
EVRAZ OREGON STEEL MILLS, INC., a
Delaware corporation
Counter Defendant,
INSURANCE COMPANY OF THE
STATE OF PENNSYLVANIA, a
OPINION AND ORDER - 2
[RMD]
Pennsylvania corporation; and AMERICAN
HOME ASSURANCE COMPANY, a
foreign insurance company,
Third-Party Plaintiffs,
v.
TIG INSURANCE COMPANY;
Third-Party Defendant,
TIG INSURANCE COMPANY;
Counterclaimant,
v.
CONTINENTAL INSURANCE
COMPANY, a Pennsylvania corporation,
Counterdefendant.
___________________________________
ACOSTA, Magistrate Judge:
Introduction
Defendant and Third-Party Plaintiff Continental Insurance Company (“Continental”) filed
suit against Third-Party Defendant Fireman’s Fund Insurance Company (“Fireman’s Fund”)
claiming Fireman’s Fund entered into a bad-faith settlement agreement with Evraz, Inc. (“Evraz”).
Continental now seeks discovery from Fireman’s Fund, and requests that the court compel Fireman’s
Fund to produce documents relevant to Continental’s third-party claims. For the reasons discussed
herein, the court grants Continental’s motion to compel.
Factual Background
Plaintiff Evraz, Inc., (“Evraz”) a Delaware corporation that operates steel mills, owns several
parcels of property in the Portland metropolitan area. In 1999 and 2000, the Oregon Department of
Environmental Quality (“DEQ”) and the United States Environmental Protection Agency (“EPA”)
OPINION AND ORDER - 3
[RMD]
notified Evraz that it was potentially liable for investigating and cleaning up environmental
contamination at the Portland Harbor Superfund Site.
Evraz has cooperated significantly with
DEQ and the EPA, but has nonetheless incurred significant legal defense costs since the case began.
Evraz tendered its defense to its insurers, and demanded reimbursement for previously-paid defense
costs. In 2006, Evraz came to an agreement with Third-Party Defendant Fireman’s Fund which
extinguished its liability to Evraz. However, Evraz did not reach a settlement with Continental, and
in 2008 Evraz filed suit against Continental for breach of contract.
In December 2011, Continental filed a third-party complaint against Fireman’s Fund seeking
contribution to Continental’s potential liability to Evraz. (Dkt. No. 166.) Continental served
Fireman’s Fund with Requests for Production of Documents (“Request for Production”) in
December 2013. (Declaration of Kathryn Boling (“Boling Decl.”) Ex. A.) Notably, Continental
sought production of Fireman’s Fund’s case file relating to its insurance coverage of, and settlement
with, Evraz (the “case file”). (Boling Decl. Ex. A.) Fireman’s Fund refused to produce the case file
and contended that the file, which is large enough to fill twenty-four boxes, “includes attorney-client
and work product documents.” (Boling Decl. Ex. B at 3.) Further, Fireman’s Fund contended that
it would face undue burden and expense in reviewing and redacting privileged material from the file
because the request “is not reasonably calculated to lead to the discovery of admissible evidence.”
(Boling Decl. Ex. B at 3-4.) Continental now moves to compel Fireman’s Fund to produce the case
file.
Legal Standard
The limits of discovery in a federal civil suit are articulated in Federal Rule of Civil
Procedure 26 (“Rule 26"). According to Rule 26, “[p]arties may obtain discovery regarding any
OPINION AND ORDER - 4
[RMD]
nonprivileged matter that is relevant to any party’s claim or defense . . . .” For material to be
discoverable, it need not be admissible in court. It must only be “reasonably calculated to lead to
the discovery of admissible evidence.” FED. R. CIV. P. 26. If a party fails to produce discoverable
material requested by a party, the requesting party – after giving notice and an attempt to confer –
may “move for an order compelling disclosure or discovery. FED. R. CIV. P. 37(a)(1)
Although the Federal Rules of Civil Procedure encourage liberal discovery, the court retains
discretion to limit discovery to serve the interests of justice and equity. Herbert v. Lando, 441 U.S.
153, 177 (1979). “On motion or on its own, the court must limit the frequency or extent of discovery
otherwise allowed by these rules” if the burden and expense of producing the requested documents
would outweigh the likely benefit of production. FED. R. CIV. P. 26(b)(2)(C)(iii).
Discussion
Continental argues that the court should compel Fireman’s Fund to produce the case file
because its request is reasonably calculated to lead to discovery of admissible evidence. The case
file, Continental argues, likely contains or would lead to admissible evidence relevant to its claim
that Fireman’s Fund entered into a settlement agreement with Evraz in bad faith. Fireman’s Fund
makes two arguments against production. First, it contends Continental’s request is not reasonably
calculated to lead to admissible evidence. Second, Fireman’s Fund claims that the court should
decline to compel production because requiring Fireman’s Fund to review, redact, and produce its
entire case file would be unduly burdensome and expensive. The court disagrees with Fireman’s
Fund’s first argument, as a request for the case file is likely to lead to admissible evidence whether
Evraz’s settlement with Fireman’s Fund was in good faith. However, the court must determine if
denying Continental’s motion to compel is nonetheless proper under Rule 26.
OPINION AND ORDER - 5
[RMD]
The court should limit discovery and deny a motion to compel if the burden and expense of
producing the documents sought would outweigh the likely benefit. FED. R. CIV. P. 26. In
determining the likely benefit of producing the documents requested, the court must consider: (1)
the needs of the case; (2) the amount in controversy; (3) the parties’ resources; (4) the importance
of the issues at stake in the action; and (5) the importance of the discovery in resolving the issues.
Id. Although the Federal Rules of Civil Procedure generally provide for “broad and liberal”
discovery, the Supreme Court has instructed that liberal discovery must be tempered by the dictate
of Federal Rule of Civil Procedure 1 that the rules “should be construed and administered to secure
the just, speedy, and inexpensive determination of every action and proceeding.” Herbert , 441 U.S.
at 177 (1979), quoting FED. R. CIV. P. 1. To that end, “judges should not hesitate to exercise
appropriate control over the discovery process.” Id.
First, the needs of the case would be furthered by allowing the requested discovery.
Continental bears the evidentiary burden to support its claim that Fireman’s Fund entered into the
Evraz settlement agreement in bad faith. Oregon statutes provide that settlement agreements
between an insurer and the insured are subject to a rebuttable presumption of good faith, which will
require Continental to overcome that presumption. OR. REV. STAT. § 465.480(4)(b). Any evidence
of bad faith, if it exists, would be in the case file. Second, the amount in controversy in this case is
significant. Continental has paid Evraz more than $7.2 million in defense costs, and Evraz seeks
an additional award of roughly $3 million. If Continental succeeds in its third-party claim,
Fireman’s Fund could be held liable for a portion of Evraz’s $10 million defense. Thus, the amount
in controversy in this case is large. Third, Fireman’s Fund has the resources with which to comply
with Continental’s request. Fourth, the issue at stake in this discovery request weighs in favor of
OPINION AND ORDER - 6
[RMD]
production. The only issue relevant to Continental’s third-party claim is whether Fireman’s Fund
entered into the Evraz settlement agreement in bad faith. That issue is central and dispositive to
Continental’s claim.
Finally, and similar to the first factor, the importance of the requested discovery to resolve
the issues weighs in favor of compelling production. As mentioned previously, if evidence of bad
faith exists at all, it will be found in this case file. Compelling production of the file could yield
primary evidence of bad faith to support Continental’s claim.
Because each of the five “likely benefit” factors weigh in favor of compelling production,
the court concludes that the burden and expense of requiring Fireman’s Fund to comply with
Continental’s request does not outweigh the likely benefit of producing those documents. Therefore,
the court will grant Continental’s Motion to Compel.
Conclusion
For the reasons discussed herein, the court GRANTS Continental’s Motion to Compel (Dkt.
No. 334).
IT IS SO ORDERED
DATED this 28th day of July, 2014
/s/ John V. Acosta
JOHN V. ACOSTA
United States Magistrate Judge
OPINION AND ORDER - 7
[RMD]
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?