United States District Court, S.D. Ohio, Western Division
MEMORANDUM OPINION AND ORDER
STEPHANIE K. BOWMAN UNITED STATES MAGISTRATE JUDGE.
above two cases initially were consolidated solely for
purposes of discovery and pretrial proceedings. On January 9,
2017, the case was reassigned to U.S. District Judge Timothy
S. Black for all further proceedings. Although the cases were
previously set for trial on different dates, (see
Docs. 27, 70 in Case No. 14-802, Docs. 33, 77 in Case No.
14-869), Judge Black's most recent order sets the both
cases for trial on October 23, 2017.
before the undersigned are three extensively briefed
motions. Two of the motions have been filed by
Fifth Third to amend its pleadings in both Case No.
1:14-cv-869, and in Case No. 1:14-cv-802. For the convenience
of this Court, those two motions will be addressed by
separate Order. This Order will discuss the third pending
motion - a Motion for a Protective Order filed by a group of
insurers in Case No. 1:14-cv-869.
background of the two related cases has been summarized in
prior orders, but is repeated herein for the convenience of
No. 1:14-cv-802 was first filed by RLI Insurance Company
(“RLI”), one of several insurers participating in
a financial bond policy issued to Fifth Third Bancorp
(“Fifth Third”). RLI's complaint seeks a
declaratory judgment that it owes nothing under its bond due
to the fact that Fifth Third was aware of the loss prior to
the purchase of the bond, and failed to timely present its
claim. Fifth Third filed a counterclaim for breach of
contract, seeking coverage under the bond. A month after RLI
initiated its declaratory judgment action, Fifth Third filed
Case No. 14-cv-869 against a number of other insurers that
also issued and/or participated in additional financial bonds
purchased by Fifth Third, and under which Fifth Third also
seeks to recover.
cases arise from the actions of a Fifth Third loan officer,
Matthew Ross, who was formerly employed in the bank's
structured finance group. Fifth Third alleges that it has
suffered losses in excess of $100 million due to Mr.
Ross's misconduct, exceeding the policy limits of all of
the financial bonds issued by the various entities. As Senior
District Judge Beckwith previously noted in consolidating the
two cases for pretrial proceedings, the Defendants in Case
No. 14-cv-869 “raise many defenses similar to those
raised by RLI, such as lack of timely notice of loss, and
Fifth Third's discovery of the fraudulent conduct prior
to the inception of the policy period.” (Case No.
1:14-cv-802, Doc. 27 at 3). In both suits, Fifth Third seeks
no damages other than those recoverable under the alleged
breach of contract claims, the “insured losses”
up to the policy limits. However, Fifth Third has suggested
that it is likely to seek an award of attorney's fees
under Ohio law, assuming that it can demonstrate that the
Insurers acted in bad faith in denying coverage.
March 12, 2015, the Court entered an initial joint Calendar
Order for both cases, providing a September 30, 2015 deadline
for motions to amend the pleadings. While that deadline was
not amended, other pretrial deadlines, including deadlines
relating to discovery and the filing of dispositive motions,
have been repeatedly extended since entry of that initial
order. In the Court's most recent Calendar Order of
February 10, 2017, the last day on which either party may
serve written discovery is April 14, 2017, with any
discovery-related motions to be filed by May 15, 2017, which
also marks the close of discovery. The dispositive motion
deadline, for motions that pertain to the underlying breach
of contract claim, is June 3, 2017.
27, 2016, the undersigned granted the motion of a group of
insurers (hereinafter “Insurers”) that sought
bifurcation of discovery on Fifth Third's bad faith
allegations. Judge Beckwith overruled Fifth Third's
objections to that Order, and the stay of discovery related
to “bad faith” allegations remains in effect
through at least June 3, 2017.
Insurers who sought and obtained the earlier bifurcation
order have now filed a motion seeking a protective order to
prevent Fifth Third from obtaining discovery that they
believe exceeds the scope of the bifurcation order. Fifth
Third insists that the contested discovery is relevant to the
underlying breach of contract claim, independent of any
relevance to its derivative bad faith allegations. For the
reasons discussed below, I conclude that the Insurers are
entitled to most, but not all, of the protection that they
Analysis of the Motion for Protective Order
January 23, 2017, Defendants Certain Underwriters at
Lloyd's subscribing to Policy Numbers B0509QA048710 and
B0509QA051310 (Lloyd's Syndicates 2488
(“ACE”), 2007 (“Novae”), 1182
(“Talbot”), and 1084 (“Chaucer”),
collectively “Lloyds”); AXIS Insurance Company
(“AXIS”); and Federal Insurance Company
(“Federal”) (Lloyd's, AXIS and Federal are
collectively referred to as “Underwriters”),
filed a motion seeking a protective order concerning
identical Rule 30(b)(6) Deposition Notices served by Fifth
Third Bancorp and Fifth Third Bank (collectively “Fifth
Third”) on each of the Lloyd's Syndicates, AXIS and
Federal. In part, the Underwriters seek an order striking
Topic Nos. 1-6, 11-12, and 14-17 from the 30(b)(6) Notices.
(Doc 98). On January 26, 2017, Continental Insurance Company,
Fidelity and Deposit Insurance Company of Maryland, and St.
Paul Mercury Insurance Company (collectively, the
“Second Excess Insurance Carriers”) joined the
Underwriters' motion as to the Rule 30(b)(6) Notices,
based upon the fact that Fifth Third served the Second Excess
Insurance Carriers with virtually identical Notices,
including topics on which the Second Excess Insurance
Carriers believe to be improper expansions of discovery into
bad faith. (Doc. 99).
convenience of this Court, the Underwriters and the Second
Excess Insurance Carriers are collectively referred to as
“the Insurers” where their positions align in
favor of the requested protective order. Because the Second
Excess Insurance Carriers have joined the motion only in
part, however, the Court will separately address the portion
of the Underwriters' motion that the Second Excess
Insurance Carriers have not joined.
The Scope of the Existing Bifurcation Order and Stay
place the current dispute in context, it is necessary to
review this Court's prior Memorandum Order bifurcating
discovery. In that Order, the undersigned wrote:
Based upon the referenced allegation of bad faith, Fifth
Third seeks very broad discovery of many documents that
otherwise would be subject to privilege and/or
potentially irrelevant to the underlying breach of contract
claim. The Insurers' motions seek either a
protective order or a stay and bifurcation of discovery that
would include the production of claims files, including
otherwise privileged material, RLI's attorney-client
communications, privileged communications with other
insurers, and fee bills for services rendered by outside
counsel. In addition, the Insurers seek protection from
disclosure to Fifth Third of their internal reserves related
to the Fifth Third Claim, and object to disclosure of claims
submitted by other insureds over a four-year period.
(Case No. 1:14-cv-802, Doc. 62 at 5-6, emphasis added).
Ultimately, the undersigned agreed with the Insurers that
[A] stay of discovery and bifurcation on any bad faith
issues… is advisable in the above-captioned cases. In
addition to the privilege issue, the undersigned is persuaded
that a bifurcation of discovery on any “bad
faith” issues furthers the interests of judicial
economy. Thus, the undersigned will grant the Insurers'
motions to stay and/or bifurcate discovery on the bad faith
issues until at least following the filing of any dispositive
motions on the underlying breach of contract claims.
Accord Warren v. Federal Ins. Co., 358 Fed.Appx. 670 at
*6 (6th Cir. 2009) (affirming bifurcation with stay of
discovery on bad faith claim); Smith v. Allstate Insur.
Co., 403 F.3d 401 (6th Cir. 2005) (affirming stay of
discovery on bad faith claim while contract claim was
pending); Ferro Corp. v. Continental Cas. Co., 2008
WL 5705575 (N.D. Ohio Jan. 7, 2008) (finding bifurcation of
discovery and trial to be appropriate in case involving
numerous lawsuits and coverage claims against multiple
insurers; Scotts Co. LLC v. Liberty Mut. Ins. Co.,
2007 WL 4365695 (S.D. Ohio, Dec. 12, 2007) (affirming order