Discovery

The Eleventh Circuit affirmed a district court’s order compelling discovery and awarding contempt sanctions after a man refused to answer discovery requests and defied orders requiring production of documents in a divorce proceeding. After filing for divorce in Russia, the plaintiff sought discovery in countless courts across Europe and the Caribbean searching for documents she believed would reveal her husband’s secret ownership of assets in a Bahamian corporation. Plaintiff ultimately sought relief in federal district court in Georgia seeking discovery against an associated Atlanta corporation. A magistrate judge ordered the company to respond to the requests for production, but after an initial round of non-compliance and accompanying sanctions, it only produced twenty-three pages of documents.

The courts dealt extensively with the interpretation of 28 U.S.C. § 1782, which authorizes district courts to order discovery for use in a proceeding in a foreign tribunal upon satisfaction of certain requirements. The Eleventh Circuit addressed the first issue, defendant’s extraterritoriality argument that § 1782 does not reach documents located in foreign countries, and rejected it as a matter of first impression. It read the statute in conjunction with the Federal Rules of Civil Procedure to allow discovery of materials outside the United States so long as they are in the possession or control of the responding party. The Eleventh Circuit affirmed the district court’s broad interpretation of the “control requirement” to include situations where a company has the legal right to obtain documents requested and where the affiliated corporate entities have actually shared responsive information and documents in their normal course of business dealings. Finding sufficient circumstantial evidence that the Atlanta company had “control” over its Bahamian counterpart, the court affirmed and paved the way for the disclosure of documents the plaintiff had been searching for all over the world.

Sergeeva v. Tripleton Int’l Ltd., No. 15-13008 (11th Cir. Aug. 23, 2016).

This post written by Thaddeus Ewald, a law clerk at Carlton Fields in Washington, DC .

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Plaintiffs sought coverage from the insurer Defendants for a $212.5 million dollar settlement of a claim of violation of the False Claims Act relating to errors and omissions in underwriting and origination of HUD mortgage loans. Defendants disclaimed coverage in part, stating the claim is “interrelated” to an earlier “claim” and thus barred under a later policy, and that Plaintiffs failed to timely notify Defendants of the claim. Plaintiffs sought discovery, and Defendants objected The Court largely agreed with Defendants, denying Plaintiffs’ requests for:

• Other Similar Claims Files: although the parties should not be allowed to withhold extrinsic evidence during discovery while they wait for the Court to make a determination of ambiguity in the insurance contract, each claim is fact specific – involving different policy language and facts – and would not aid the Court in interpreting the policy language or Plaintiffs’ bad faith claims. Additionally, affidavits from each insurer reflected production would be unduly burdensome and disproportionate.
• Claims-Handling & Underwriting Manuals of Excess Insurers: the interpretation of the excess policies depends upon interpretation of the primary policy, thus, any definition of “claim” or “interrelated” in the claims-handling manuals of the excess insurers are irrelevant. Further, what the excess insurers’ underwriting departments knew regarding the earlier “claim” is neither notice under the policies, nor relevant to interpretation of the terms “claim” and “interrelated claims.”
• Reinsurance Communications: although the law on the discoverability of reinsurance communications is unclear, such communications are irrelevant to determining the intent of the parties to the primary insurance contract, or to Plaintiffs’ claim of bad faith.
• Reserves: although courts are divided on the discoverability of reserves, the Court’s prior precedent held such information was a business decision and thus irrelevant to Plaintiffs’ claims.

The only discovery Defendants were compelled to produce were reinsurance agreements pursuant to Fed.R.Civ.P. 26 (a)(1)(A)(iv).

First Horizon Nat’l. Corp., et al. v. Houston Casualty Co., et al., 2:15-cv-02235 (USDC W.D. Tenn. Oct. 5, 2016).

This post written by Nora A. Valenza-Frost.
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A South Carolina federal court found that Companion Property and Casualty Insurance Company’s expert’s testimony did not satisfy its obligation to provide a damages calculation. Companion argued that its failure to disclose the precise method by which it calculated its alleged damages was immaterial because the method of damages calculation is the subject of expert evidence. But the Court held that mere reliance on expert evidence did not satisfy the disclosure requirement under Fed.R.Civ.P. 26(a)(1)(A)(iii).

Defendants specifically requested Companion provide a computation of damages, including those under the reinsurance trust agreement it allegedly had to pay from its own funds due to a shortfall of collateral in the trust accounts. Companion referred instead to its expert testimony on the issue, and the Defendants moved to compel disclosure.

The Court agreed with the Defendants that an expert report does not stand in the shoes of the required disclosure under the Fed.R.Civ.P., and ordered Companion to provide an initial estimate as to each damage category (except punitive damages) and a general analysis as to how that figure was computed.

Companion Property and Casualty Insurance Company v. U.S. Bank National Association, 3:15-cv-01300 (USDC D.S.C. June 24, 2016)

This post written by Nora A. Valenza-Frost.

See our disclaimer.