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William Powell Co. v. National Indemnity Co.

United States District Court, S.D. Ohio, Western Division

April 11, 2017

THE WILLIAM POWELL CO., Plaintiff,
v.
NATIONAL INDEMNITY CO., et al., Defendants.

          Dlott, J.

          ORDER

          Karen L. Litkovitz, United States Magistrate Judge

         This matter is before the Court on the following motions filed by the parties: (1) defendant The William Powell Company's Motion to Compel and for Sanctions (Doc. 98), defendant OneBeacon Insurance Company's opposing memorandum (Doc. 104), and plaintiff's reply in support of the motion (Doc. 108); (2) defendant's Cross-Motion for Protective Order and Sanctions (Doc. 106), plaintiff's opposing memorandum (Doc. 109), and defendant's reply (Doc. 111); and (3) defendant's motion to certify question to the Ohio Supreme Court (Doc. 112), plaintiff's response (Doc. 113), and defendant's reply (Doc. 118).

         I. Background

         Plaintiff The William Powell Company (Powell) is a privately-held Ohio corporation that was formed in 1846. (Doc. 1, Complaint, ¶ 9). Powell manufactures industrial valves used in a variety of industries. (Id.). Powell purchased numerous primary and excess level product liability insurance policies from 1955 to 1977 from General Accident Fire & Life Assurance Corporation (General Accident) that required the insurer to defend and indemnify Powell against damages resulting from accidents leading to bodily injury. (Doc. 45 at PAGEID#: 961, citing Doc. 1 at PAGEID#: 4-5). Through a series of corporate mergers and asset sales, defendant OneBeacon Insurance Company (OneBeacon) assumed the insurance policies that provided coverage to Powell. (Doc. 44 at PAGEID#: 942, citing Complaint, ¶ 19). According to the complaint, OneBeacon entered into a reinsurance agreement with National Indemnity Company (NICO), pursuant to which OneBeacon sold its then-existing claim reserves to NICO. (Complaint, ¶¶ 20, 21). The complaint alleges that NICO agreed to provide a maximum of $2.5 billion to cover OneBeacon's historic and undetermined liabilities attributable to risks such as the long-tail asbestos exposure claims covered by Powell's General Accident policies. (Complaint, ¶ 21). In addition to acquiring responsibility for reimbursing OneBeacon for claims and defense costs up to a total amount of $2.5 billion, NICO also acquired responsibility for handling and adjusting all of OneBeacon's claims; however, it delegated claims handling to Resolute Management, Inc. (Resolute) in 2006. (Complaint, ¶¶ 21 22).

         Beginning in 2001, individuals nationwide and in Canada began to sue for asbestos-related injuries that were allegedly caused by asbestos in Powell valves. (Doc. 44 at PAGEID#: 942, citing Complaint, ¶ 16). Powell tendered claims to OneBeacon pursuant to the insurance policies, which led to litigation in state court (Powell v. OneBeacon, No. A1109350 (Ham. Cty, Ohio C.P. Nov. 23, 2011)) and the instant lawsuit which Powell subsequently filed on October 14, 2014. (Doc. 45 at PAGEID#: 962, 963; see Doc. 17-3). Powell initially brought claims for violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) and a claim for tortious interference with contractual relations against NICO and Resolute; a claim for breach of the duty of good faith and fair dealing against all defendants; and a claim for breach of contract against OneBeacon. (See Doc. 45 at PAGEID#: 962, citing Doc. 1 at PAGEID#: 19-22). The Court dismissed the claims against NICO and Resolute (Doc. 44), leaving only the breach of contract and bad faith claims against OneBeacon pending. (Doc. 45 at PAGEID#: 962, citing Doc. 44). On reconsideration, the Court stated it would abstain from proceeding on the breach of contract claim until the state courts had made a final determination on which of the insurance policies were triggered by the underlying bodily injury claims. (Doc. 70 at PAGEID#: 1290-92). Thus, the only claim currently at issue in this litigation is Powell's claim against OneBeacon for bad faith under Ohio law, which imposes a duty on an insurer to act in good faith in the handling and payment of the claims of its insured. See Hoskins v. Aetna Life Ins. Co., 452 N.E.2d 1315 (Ohio 1983).

         In the course of its rulings, the Court in this litigation rejected a statute of limitations argument raised by OneBeacon in light of Powell's representation to the Court that its bad faith claim was based “solely upon acts which occurred on and after October 10, 2010.” (Doc. 45 at PAGEID#: 968, citing Doc. 43 at PAGEID#: 916). The bad faith claim includes allegations that OneBeacon denied coverage for claims after stating coverage was available, instructed counsel to withhold information from Powell, delayed communication of coverage decisions to Powell, excluded Powell from settlement discussions, unilaterally authorized settlements, failed to pay defense costs of local defense counsel and failed to fund settlements, and limited investigations into the exposure dates which determine whether the policies are triggered. (Id. at PAGEID#: 962, 967).

         II. Chronology of discovery issues

         Powell served it First Set of Requests for Production on OneBeacon on February 18, 2016. (Doc. 98, Exh. A). OneBeacon subsequently filed an interlocutory appeal from the Court's Order denying its motions to dismiss/motion to stay in the Sixth Circuit Court of Appeals on March 1, 2016. (Doc. 49). The Court ordered the parties to proceed with Rule 26 initial disclosures (see Doc. 107 at PAGEID#: 2601-02), and the appeal was ultimately dismissed for lack of jurisdiction on August 5, 2016. (Doc. 69). In the meantime, OneBeacon served its written responses to Powell's Requests for Production and produced 34, 479 pages of documents to Powell on June 2, 2016. (Doc. 98, Exh. B, Joseph M. Brunner Decl., ¶ 6; Id., Exh. C). To Powell's knowledge, the production did not include any emails. (Id., Exh. B, Brunner Decl., ¶ 6). OneBeacon subsequently represented to Powell that OneBeacon would produce all relevant documents, including all emails, by July 8, 2016. (Id., ¶ 9). On that date, OneBeacon produced emails from one custodian, Darilyn Michaud, for the period January 18, 2016 to May 31, 2016, and one email from October 2015. (Id., ¶ 10). Powell objected on the ground that OneBeacon had identified four other individuals with knowledge in its interrogatory responses: Bonnie McClements, Gregory Gaines, Clayton Budlong, and Graham Loxley (Doc. 85-1, Exhs. B, D-PAGEID#: 1346-47, 1362). (Doc. 98, Exh. D, David Hine Decl., ¶ 6, Exh. 4, p. 2- PAGEID#: 1729). OneBeacon responded that it was performing a “privilege review” of an additional 50, 000 Michaud emails that were responsive to Powell's First Request for Production. (Id., Exh. 4, p. 1- PAGEID#: 1728; see Doc. 105, Exh. 1, Sunny Horacek Decl., ¶ 20; Exh. 2, Michaud Decl., ¶¶ 16-23). OneBeacon informed Powell that it needed until August 19, 2016, to complete review and production of Michaud's emails, and that communications from other Resolute employees would be duplicative of her emails because Michaud was the “information hub” for the Powell account and Powell information “goes through” her. (Doc. 105, Exh. 1, Horacek Decl., ¶ 20; Doc. 98, Exh. D, Hine Decl., Exh. 4, p. 1- PAGEID#: 1728). OneBeacon maintains that this approach proved to be sound because only a “small percentage of documents” were later produced to supplement the initial productions. (Doc. 104 at PAGEID#: 2152, citing Doc. 105, Exh. 1, Horacek Decl., ¶ 35, Exh. R- PAGEID#: 2470-2508). Powell disagrees and argues the number of emails generated by individuals other than Michaud and subsequently produced demonstrates that OneBeacon's approach of focusing solely on her emails was not valid.

         The Court conducted a discovery conference on August 2, 2016. (Docket Sheet, 8/02/16 Minute Entry). The Court ordered OneBeacon to produce all outstanding documents by August 19, 2016, and a privilege log by September 2, 2016. (Doc. 97 at PAGEID#: 1576). Over the next several weeks, OneBeacon produced three batches of emails: (1) Michaud emails for the period January 2, 2012 to May 31, 2016, which OneBeacon produced on August 19, 2016; (2) an additional 95, 986 pages which it produced on August 24, 2016; and (3) 23, 951 pages which it produced on September 15, 2016. (Doc. 98, Exh. B, Brunner Decl., ¶¶ 11, 12). Powell alleges that OneBeacon did not search for and produce emails from custodians other than Michaud. (Id., Exh. D, Hine Decl., ¶ 7, Exh. 5- PAGEID#: 1732). Nor did OneBeacon produce documents concerning Powell's account generally; instead, it limited production to documents concerning the handling of individual claims. (Id., Exh. 5- PAGEID#: 1733-36).

         The undersigned conducted an informal discovery conference to resolve the parties' outstanding discovery issues on September 22, 2016. (Doc. 71). The Court issued a post-conference Order that established a limited discovery method by which Powell could ascertain whether custodians other than Michaud had emails relevant to Powell's claims that were not duplicative of Michaud's. (Doc. 74). The process disclosed that three individuals in addition to Michaud -- Graham Loxley, Tom Ryan, and Brooke Green -- had emails and other documents that were responsive to Powell's Requests for Production. (Doc. 85-1, Exhs. H, I, M- PAGEID#: 1373-78, 1385-87). The undersigned held a follow-up conference on October 13, 2016, after which OneBeacon was ordered to provide supplemental affidavits; produce documents from the three individuals by November 3, 2016; and provide a complete privilege log to Powell by November 10, 2016. (Doc. 78). OneBeacon provided a revised privilege log on November 10, 2016. (Doc. 98, Exh. K).

         The Court held another informal telephone discovery conference on November 18, 2016 (Doc. 88), after which it issued an Order directing the parties to proceed with telephone depositions of six individuals who had previously given affidavits and scheduling the matter for another informal discovery conference. (Doc. 90). Pursuant to the Court's Order, Powell deposed Gregory Gaines, Graham Loxley, David Gold, John Matosky, Peter Dinunzio, and Clayton Budlong. (Doc. 98, Exhs. E-J). Their testimony disclosed that there were communications and documents that OneBeacon had not produced.

         The Court held a follow-up telephone discovery conference on December 9, 2016 (Doc. 91), after which Powell sent letters to OneBeacon on December 22 and 29, 2016 to try to resolve the outstanding issues. (Doc. 98, Exh. D, Hine Decl., § 12, Exh. 10- PAGEID#: 1772-82; Exh. B, Brunner Decl., § 13, Exh. 6- PAGEID#: 1663-66). Powell requested a response from OneBeacon on the issues it identified in the letters. (Exh. B, Brunner Decl., ¶ 14, Exh. 7-PAGEID#: 1668-69). OneBeacon responded shortly before the next scheduled conference with the Court on January 9, 2017. (Id., Exh. 7- PAGEID#: 1667-68). After the conference, and at Powell's request, the Court issued an order setting a briefing schedule on the outstanding discovery issues. (Doc. 96). The Court granted Powell until January 13, 2017 to file a motion to compel. (Id.).

         Powell filed its motion to compel and for sanctions on January 13, 2017. (Doc. 98). Powell identified the following documents disclosed by the supplemental depositions which OneBeacon had not produced:

1. A Powell desk file kept by Gaines (Doc. 98, Exh. E, Gaines Depo., pp. 19-20).[1]
2. Emails with attachments containing financial data on Powell's account which Loxley receives monthly (Doc. 98, Exh. F, Loxley Depo., pp. 11-18, 20).
3. Emails containing meeting agendas and discussing topics for meetings that Gold sent and received related to quarterly meetings Resolute employees and Loxley conduct at which Gold but not Michaud is present and at which the status of OneBeacon accounts, including the Powell account, are discussed. (Doc. 98, citing Exh. G, Gold Depo., pp. 18-27).
4. Email conversations Matosky (Assistant Vice-President and Associate General Counsel for Resolute) had with Loxley and previously with Stuart McKay at OneBeacon for which OneBeacon has asserted a privilege claim, which Powell disputes. (Doc. 98, Exh. H, Matosky Depo., pp. 29-32; Exh. B, Brunner Decl., ¶ 14, Exh. 7- PAGEID#: 1667).
5. Relevant documents that likely exist on Resolute's shared network spaces -- the RAPID system and the V drive -- such as communications from local defense counsel and settlement calculators, which have never been searched for responsive nonduplicative documents. (Doc. 98, Exh. G, Gold Depo., pp. 15-17; Exh. H, Matosky Depo., pp. 23-24; Exh. I, Dinunzio Depo., pp. 18-19).

(Doc. 98 at PAGEID#: 1594-95). Powell maintains it “is likely that other relevant documents reside” with custodians other than Michaud. (Id. at PAGEID#: 1595).

         OneBeacon filed a response to Powell's motion to compel (Doc. 104) together with supporting affidavits and exhibits (Doc. 105) and a motion for a protective order and sanctions (Doc. 106). OneBeacon alleges that with the Court's oversight, it has adopted an electronic document production strategy designed to provide Powell with the discovery to which it is entitled by “focusing on the production sources most likely to have responsive documents.” (Doc. 104 at PAGEID#: 2139). OneBeacon contends that “for more than a decade” it has managed Powell's insurance coverage for Powell's asbestos liability through Michaud and “[a]ll communications and decisions about defense and indemnity” of Powell's asbestos liability go through her so that she can implement such decisions. (Id.). OneBeacon alleges that insofar as other individuals are included in these communications, these individuals' communications are “manifestly duplicative” of Michaud's. (Id.). OneBeacon asserts that any relevant communications that do not involve Michaud have been identified and either produced or withheld as privileged. (Id. at PAGEID#: 2139-40). OneBeacon denies Powell's allegation that it has failed to search the Resolute V drive or the RAPID claims system. (Doc. 104 at PAGEID#: 2153, n. 6). OneBeacon claims that the documents from the Resolute V drive have been searched and either produced or included in the privilege log between DocID range H13251-0004-001001 and H13251-0004-002763 or in bates range OBFed0028051-OBFed0330405. (Id.). OneBeacon alleges that the documents from Resolute's RAPID system are listed in OneBeacon's privilege log between DocID range H13251-0001-001001 to H13251-0001-001012 and the produced portions are in bates range OBFed0034294-OBFed0034327. (Id.).

         Finally, OneBeacon argues that Powell's demands for additional discovery are not proportional to the needs of the case. (Id. at PAGEID#: 2140, 2153-56).

         III. The parties' motions

         1. Powell's motion to compel and for sanctions; OneBeacon's motion for protective order and to certify issue to the Ohio Supreme Court

         Powell moves the Court under Fed.R.Civ.P. 37(a) to compel OneBeacon to produce documents it has allegedly refused to produce or has improperly withheld on privilege grounds. (Doc. 98). Powell alleges that OneBeacon has provided evasive or incomplete responses in violation of Fed.R.Civ.P. 37(a)(4) and has improperly limited production to (1) one custodian, Resolute employee Michaud, and (2) specific indemnification claims that Powell identified in the complaint as only representative samples in support of its bad faith claim against OneBeacon. Powell alleges that as of the date of its motion - January 13, 2017 - OneBeacon was still collecting and producing documents from Ryan and Green and had not produced any emails from Loxley despite being ordered to do so by the Court. (Doc. 98 at PAGEID#: 1593; see Doc. 78). Powell seeks an order compelling the production of emails and specified documents from custodians other than Michaud whom it has identified and documents and communications concerning the general administration and handling of Powell's account that OneBeacon allegedly “has refused to search, collect and produce.” (Doc. 98 at PAGEID#: 1586-87). In addition, Powell moves the Court to order the production of documents that OneBeacon has purportedly inappropriately withheld from production based on “incomplete and specious privilege claims.” (Id. at PAGEID#: 1587). Powell alleges that the privilege log OneBeacon originally provided on September 2, 2016 and revised on November 10, 2016 was deficient because it provided “useless descriptions” of the withheld documents, such as “concerning WPC v. One Beacon”; it indicated OneBeacon had withheld documents pertaining to underlying asbestos claims that pre-date OneBeacon's denial of coverage in those cases; it included entries that did not identify the authors or recipients in some cases, or failed to identify the privilege OneBeacon was asserting; and it indicated OneBeacon had withheld communications between itself and third parties without any proof of a common interest or joint defense agreement. (Id. at PAGEID#: 1596, citing Exh. K). Powell also asks the Court to require OneBeacon to pay the expenses Powell incurred in obtaining relevant and improperly withheld documents. (Id. at PAGEID#: 1611-13).

         OneBeacon disputes that it has improperly withheld documents that Powell is entitled to discover, that it has provided a deficient privilege log, and that Powell is entitled to an award of sanctions. (Doc. 104). OneBeacon also alleges that Powell's approach is not proportional to the needs of the case. OneBeacon contends that only communications regarding specific underlying claims are relevant and that the communications regarding the Powell account generally are privileged. (Id.). OneBeacon argues that its communications with its agents and partners are privileged. OneBeacon moves for a protective order and for sanctions against Powell for seeking the additional discovery and withheld documents. (Doc. 106). OneBeacon also moves to certify an issue pertaining to one specific category of withheld documents to the Ohio Supreme Court. (Doc. 112).

         2. Governing standards

         Rule 26 provides that “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case[.]” Fed.R.Civ.P. 26(b)(1). If a party objects to the relevance of information sought in discovery, “the party seeking discovery must demonstrate that the requests are relevant to the claims or defenses in the pending action.” Anderson v. Dillard's, Inc., 251 F.R.D. 307, 309-10 (W.D. Tenn. 2008) (citing Allen v. Howmedica Leibinger, 190 F.R.D. 518, 522 (W.D. Tenn. 1999)). “If that party demonstrates relevancy, the party resisting discovery bears the burden of demonstrating why the request is unduly burdensome or otherwise not discoverable under the Federal Rules.” Id. at 310 (citing cases).

         If a party fails to produce documents, the opposing party may move for an order compelling production. Fed.R.Civ.P. 37(a)(3)(B)(iv). For purposes of subdivision (a) of Rule 37, “an evasive or incomplete disclosure . . . must be treated as a failure to disclose. . . .” Fed.R.Civ.P. 37(a)(4).

         Several decisions issued by district courts in the Sixth Circuit have found that the burden is on the resisting party to demonstrate with specificity that a discovery request is unduly burdensome or that the discovery sought is not discoverable under the Federal Rules. Kafele v. Javitch, Block, Eisen & Rathbone, No. 2:03-cv-638, 2005 WL 5095186, at *2 (S.D. Ohio Apr. 20, 2005) (“As a general rule, ‘[a]ll grounds for an objection . . . shall be stated with specificity. . . . The mere statement by a party that an interrogatory or request for production is overly broad, burdensome, oppressive and irrelevant is not adequate to voice a successful objection.”). See also Kline v. Mortgage Elec. Sec. Sys., No. 3:08-cv-408, 2014 WL 4928984, at *13 (S.D. Ohio Oct. 1, 2014), on reconsideration in part, 2014 WL 5460575 (S.D. Ohio Oct. 27, 2014) (same) (citing In re Heparin Prods. Liab. Litig., 273 F.R.D. 399 (N.D. Ohio 2011)); Groupwell Int'l (HK) Ltd. v. Gourmet Exp., LLC, 277 F.R.D. 348, 360 (W.D. Ky. 2011) (same).

         Although the decisions summarized above pre-date the December 1, 2015 amendment of Rule 26(b)(1), nothing in the amended Rule indicates that the allocation of burdens under the Rule has been altered. Courts continue to hold that the party who files a motion to compel discovery “bears the burden of demonstrating relevance.” Albritton v. CVS Caremark Corp., No. 5:13-cv-00218, 2016 WL 3580790, at *3 (W.D. Ky. June 28, 2016) (citing United States ex rel. Gruenbaum v. Werner Enters., Inc., 270 F.R.D. 298, 302 (S.D. Ohio 2010); Anderson, 251 F.R.D. at 309-10)). See also Gazvoda v. Sec. of Homeland Sec., 15-cv-14099, 2017 WL 168159, at *4 (E.D. Mich. Jan. 17, 2017); First Horizon Natl. Corp. v. Houston Cas. Co., No. 2:15-cv-2235, 2016 WL 5869580, at *4 (W.D. Tenn. Oct. 5, 2016). If the movant demonstrates relevancy, the burden shifts to the party resisting discovery to demonstrate “why the request is unduly burdensome or otherwise not discoverable.” First Horizon Natl. Corp., 2016 WL 5869580, at *4 (quoting Anderson, 251 F.R.D. at 310); Gazvoda, 2017 WL 168159, at *4. Commentary from the rulemaking process bolsters the position that the amended rule did not shift the burden of proving proportionality to the party seeking discovery. See Committee on Rules of Practice and Procedure to the Judicial Conference of the United States, Report to the Standing Committee, Rules Appendix B-8 (June 14, 2014), available online at www.uscourts.gov/file/14140/download?token=McTrl8L0 (explaining that the proposed Committee Note had been revised to address concerns about shifting the burden of proof to the party seeking discovery and to clarify that the Rule as amended does not authorize “boilerplate refusals to provide discovery on the ground that it is not proportional”). The advisory committee's note to Rule 26(b)(1) addresses the parties' burdens under the amended Rule as follows:

Restoring the proportionality calculation to Rule 26(b)(1) does not . . . place on the party seeking discovery the burden of addressing all proportionality considerations.
….
Nor is the change intended to permit the opposing party to refuse discovery simply by making a boilerplate objection that it is not proportional. . . . [I]f the parties continue to disagree, the discovery dispute could be brought before the court and the parties' responsibilities would remain as they have been since 1983. A party claiming undue burden or expense ordinarily has far better information --perhaps the only information -- with respect to that part of the determination. A party claiming that a request is important to resolve the issues should be able to explain the ways in which the underlying information bears on the issues as that party understands them. . . .

Fed. R. Civ. P. 26(b)(1) advisory committee's note (2015).

         The factors to be considered under amended Rule 26(b) in determining whether a party is entitled to discovery are: “[(1)] the importance of the issues at stake in the action, [(2)] the amount in controversy, [(3)] the parties' relative access to relevant information, [(4)] the parties' resources, [(5)] the importance of the discovery in resolving the issues, and [(6)] whether the burden or expense of the proposed discovery outweighs its likely benefit.” Fed.R.Civ.P. 26(b)(1).

         3. The balance of considerations weighs in favor of production of the information in dispute.

         Powell seeks production of the following documents:

1. Monthly emails with attachments Loxley receives that contain financial data concerning Powell's accounts (Doc. 98, Exh. F, Loxley Depo., pp. 11-18);
2. Emails and agendas associated with quarterly meetings between Resolute employees and Loxley (Doc. 98, Exh. F, Loxley Depo., pp. 31-35; Exh. G, Gold Depo., pp. 18-27);
3. Emails between Resolute in-house counsel Matosky and Loxley or McKay discussing Powell's account (Doc. 98, Exh. H, Matosky Depo., pp. 12, 29-33);
4. Documents on Resolute's shared network spaces that have not been searched (Doc. 98, Exh. G., Gold Depo., pp. 15-17; Exh. H, Matosky Depo., pp. 23-24; Exh. I, Dinunzio Depo., pp. 18-19);
5. Responsive, nonduplicative documents from custodians whose documents have not been searched (Budlong, Gaines, Gold, Dinunzio, David Warren, Kevin Hannemann, and Adrian Vann);
6. Communications and other documents that relate to Powell's account generally that have not been produced, including documents from Michaud, Ryan, and Green; and
7. Documents that have been withheld based on allegedly incomplete or invalid privilege claims.

(Doc. 98 at PAGEID#: 1586-87).

         Initially, the Court finds that two categories of information have been produced to the extent there is evidence such communications and documents exist: Category #2 agendas related to quarterly meetings involving Loxley, and Category # 4 documents on Resolute's shared network spaces. Powell acknowledges the Loxley meeting agendas were produced the same date it filed the motion to compel, and it reserves the right to challenge redactions to the documents. (Doc. 108 at PAGEID#: 2615). OneBeacon represents that it has searched and produced documents from shared network spaces consisting of the Resolute V-Drive and RAPID claims system. (See Doc. 104 at PAGEID#: 2153, n. 6). Powell questions OneBeacon's representations but has not presented any specific evidence that refutes those representations. (Doc. 108 at PAGEID#: 2614-15).[2] The Court therefore accepts OneBeacon's representations to the Court on this matter.

         As to the remaining categories, the parties continue to debate whether OneBeacon's cause of action for bad faith handling of the asbestos claims against Powell is limited to the specific asbestos claims identified in the complaint. The Court has found that the specific asbestos claims identified in the complaint are not an exclusive list of the bad faith acts at issue in this litigation; instead, the underlying cases identified in the complaint are only “a representative sample of a larger set of bad faith incidents[.]” (Doc. 45 at PAGEID#: 967). Further, the undersigned has previously determined that communications regarding information that is not reflected in the policy manuals related to investigating, defending and processing claims are “fair game” for discovery purposes given the bad faith claim. (Sept. 22, 2016 Inf. Disc. Conf. Audio Recording at 1:38:38, 3:32:34-3:33:02). Thus, Powell's discovery requests are relevant insofar as they relate to alleged bad faith acts in the handling of Powell's account, and relevancy is not restricted to specific asbestos claims identified in the complaint. To the extent Powell has pointed to evidence that indicates the custodians it has named are in possession of those communications or related information, Powell is entitled to discover such information.

         OneBeacon disputes that the information sought in Category Nos. 1, 2 (relating to emails), 3, 5, and 6 is relevant to this lawsuit and is discoverable by Powell. First, One Beacon alleges that the Loxley emails described in Category Nos. 1 and 2 are not relevant because with the exception of one underlying case that purportedly is not at issue here - the Edward Walton case - Loxley “was clear that he is not involved in decisions regarding defense, indemnity or the handling of the [Powell] account as a whole and [he] does not receive information regarding the types of damages sought by [Powell].” (Doc. 111 at PAGEID#: 2677). The Court disagrees that emails sent to Loxley containing financial data on the Powell account are not relevant to Powell's bad faith claim. Loxley provided testimony that indicated he received monthly email communications and financial data pertaining to the Powell account and that he had a responsibility to protect against Resolute eroding coverage too quickly for the Powell claims. (Doc. 98, Exh. F, Loxley Depo. at 13-18). Loxley testified that as the head of claims for Armour Risk Management, Ltd. (the entity that purchased OneBeacon's asbestos liabilities), he oversees a team of claims personnel who are responsible for adjusting claims on the portfolios his company manages or owns, including OneBeacon. (Id. at 10-11, 14). Loxley testified that as the head of claims he has received monthly emails from Resolute since January 2015 containing financial data in a spreadsheet form pertaining to the Powell account. (Id. at 12-14). Loxley testified that his primary responsibility with regard to the OneBeacon portfolio is to “work with Resolute to monitor the erosion of the NICO reinsurance coverage which is in place protecting” the OneBeacon portfolio. (Id. at 14-15). Loxley testified that after receiving the data, he will speak with Resolute to be updated on any significant areas of activity or concern that may be driving the erosion. (Id. at 15). Loxley also testified that his company monitored developments in underlying claims in litigation and provided some oversight to make sure Resolute is “not seeking to erode [the] coverage any quicker than they should.” (Id. at 18). Loxley testified that by monitoring the claims, his company can be prepared to deal with a situation where the cover might “erode more quickly” than anticipated, and they can “understand what their strategy is in dealing” with claims filed against Powell. (Id. at 17-18). This testimony is sufficient to show that the monthly emails Loxley receives are relevant to Powell's bad faith claim and are discoverable. In addition, Powell has presented evidence that Loxley communicated by email with Resolute employees concerning the quarterly meetings and those emails “would not have included the account managers.” (Doc. 98, Exh. G, Gold Depo. at 28-29). Thus, these emails would not be duplicative of those produced for Michaud and are relevant.

         Second, One Beacon alleges that the information in Category No. 3 -- emails between Resolute's in-house counsel Matosky and either Loxley or McKay discussing Powell's account -- relate to on-going coverage litigation between Powell and OneBeacon and that Powell concedes Matosky's communications with Loxley “have been identified and withheld as privileged.” (Doc. 111 at PAGEID#: 2677-78, citing Doc. 98, Exh. H, PAGEID#: 1841, 1846 and Doc. 98 at PAGEID#: 1595). Matosky testified that he communicated with Loxley about the Powell account by email about once a quarter, as he typically communicated with Loxley only to report developments in litigation where OneBeacon was involved as a party, and prior to 2014 he had communications of the same nature with McKay at OneBeacon. (Doc. 98, Exh. H, Matosky Depo., pp. 31-33). Matosky's description of the nature of his communications with Loxley and McKay demonstrates the relevance of those communications to this litigation. Whether OneBeacon is entitled to withhold those documents on the basis of an attorney-client privilege is a separate issue that will be addressed infra.

         Third, OneBeacon alleges it has produced relevant, unprivileged portions of information in Category #5 (“Responsive, nonduplicative documents from custodians whose documents have not been searched (Clayton Budlong, Greg Gaines, David Gold, Peter Dinunzio, David Warren, Kevin Hannemann, and Adrian Vann)).” (See Doc. 111 at PAGEID#: 2678, citing Doc. 104 at PAGEID#: 2153 and Doc. 105 at PAGEID#: 2178-2180).[3] OneBeacon contends that Powell has not explained why it believes documents outside the scope of OneBeacon's search may exist, why they would be relevant, why they would not be privileged, and why they would not be accessible from other sources. (Doc. 111 at PAGEID#: 2678). One Beacon alleges that “hoping” to find additional documents does not justify conducting discovery. (Id.). However, as to email communications related to the Powell account sent or received by Gold, Budlong and Dinunzio, Powell has done more than simply express a “hope” that it can find additional relevant emails from the individuals identified in Category #5. Powell relies on deposition testimony that Gold participated in quarterly meetings between Resolute employees at which the status of Powell's account was discussed, and Gold sent and received emails related to the meetings containing meeting agendas and discussing meeting topics. (Doc. 98 at PAGEID#: 1594-95, citing Exh. G, Gold Depo., pp. 18-27). Budlong gave deposition testimony that although he was not positive, he likely viewed email correspondence on exposure modeling for the Powell account. (Doc. 98, Exh. J, Budlong Depo., pp. 17-18). Dinunzio testified that as a member of Resolute's Asbestos Strategic Unit (ASU) responsible for approving individual asbestos claim settlements, he discussed the merits of individual Powell cases with his supervisors and other members of the ASU (Doc. 98 at PAGEID#: 1595, citing Exh. I, Dinunzio Depo., pp. 14-16; see also pp. 11-13). Thus, Powell has shown that information identified in Category No. 5 in the custody of these three individuals is relevant.

         Powell has not shown that communications of Warren, Hanneman and Vann are relevant. Dinunzio testified that he did not recall whether he had any communications related to Powell with Warren, who worked with him in the ASU; he did not have communications with Hanneman, who was not in the ASU while Dinunzio worked at Resolute; and Dinunzio did not testify that he had any communications with Vann, who did not have settlement authority with regard to the Powell claims. (Id. at 21-23). Gold testified he had no recollection of ever receiving an email from the ASU on the Powell account.[4] (Doc. 98, Exh. B, Gold Depo., pp. 22-25). Powell is therefore not entitled to discover email communications or documents in the possession of these individuals at this juncture.

         The sixth category of information Powell requests is communications and other documents that relate to Powell's account generally and which have not been produced, including documents from Michaud, Ryan, and Green. To the extent OneBeacon has limited its production to communications, documents, and information related to specific asbestos claims against Powell, its production is incomplete. The Court has determined that the scope of Powell's claim is not limited at this stage to the underlying asbestos claims identified in its complaint, but that its bad faith claim relates to the handling of Powell's account generally.

         By its discovery requests, Powell seeks information related to OneBeacon's handling of its account and communications involving individuals who worked on the account that are in OneBeacon's possession. Because these discovery requests are relevant to Powell's bad faith claim, OneBeacon has the burden of demonstrating why Powell's request is “unduly burdensome or otherwise not discoverable under the Federal Rules.” Anderson, 251 F.R.D. at 310. Upon consideration of each of the factors set forth in amended Rule 26(b)(1), the undersigned concludes that OneBeacon has failed to meet its burden to demonstrate with specificity that the production of the requested information is not warranted under the Rule as to those categories of information that have not yet been produced.

         i. The importance of the issues at stake in the action

         Powell alleges that the issues at stake in this matter are of critical importance and cannot be measured in monetary terms. (Doc. 98 at PAGEID#: 1601-02). Powell alleges this is so because it has been defending against asbestos claims for ten years and OneBeacon's good faith in defending the claims is vital to Powell's continued existence. (Id.). Powell cites the advisory committee's note to Rule 26 for the proposition that the significance of the substantive issues here “may be measured in institutional terms apart from the monetary stakes involved.” See Fed. R. Civ. P. 26(b)(2)(C)(iii) advisory committee's note (2015). One Beacon attempts to downplay the significance of the issues at stake by arguing that all that is before the Court is a state law bad faith claim which is limited to the processing of 23 specific asbestos claims identified in the complaint and through discovery and to the time period after October 2010. (Doc. 104 at PAGEID#: 2154-55).

         Neither party has provided valid support for its arguments pertaining to the significance of the substantive issues at stake here. OneBeacon's attempt to minimize the importance of the issues by focusing on the number of claims allegedly involved in this litigation is unavailing. The Court has previously determined that the bad faith acts alleged with regard to the handling of the approximately 20 claims identified in the complaint are representative of a larger set of bad faith incidents (Doc. 45 at PAGEID#: 967), and the Court has never limited the bad faith claim to the processing of those specific claims.[5] At the same time, Powell has failed to demonstrate that it is impossible to measure monetarily the significance of the issues at stake. Powell has not cited any evidence that indicates resolution of this lawsuit in its favor is essential to the company's continued existence. Moreover, Powell's bad faith insurance claim does not seek to vindicate the type of interests that the advisory committee's note recognizes cannot be measured in monetary terms, i.e., “vitally important personal or public values” or “public policy” matters such as “employment practices [or] free speech” that “may have importance beyond the monetary amount involved.” Fed.R.Civ.P. 26(b)(2)(C)(iii) advisory committee's note (2015). The first factor does not weigh in favor of ordering production of the requested information.

         ii. The amount in controversy

         The parties present widely varying positions on the amount in controversy. Powell calculates the amount in controversy arising from OneBeacon's alleged bad faith handling of its claims at over $10 million, and Powell alleges that its monetary damages continue to increase. (Doc. 98 at PAGEID#: 1602, citing Exh. B, Brunner Decl., ¶ 15, Exh. 8- PAGEID#: 1671-74). Powell asserts these damages arise from OneBeacon's alleged bad faith acts of rejecting settlement demands without consulting Powell, preventing Powell's usual trial counsel from participating in trials or in witness preparation, and communicating with local counsel and extending settlement authority without Powell's knowledge. (Id. at PAGEID#: 1602, citing Exh. M, p. 8- PAGEID#: 2042). Powell contends the damages include high settlement amounts to which OneBeacon belatedly agreed; the delayed evaluation of cases and coverage positions; fees Powell was required to pay to outside counsel to monitor OneBeacon's activities; compensation paid to Powell's executives for time devoted to the lawsuit; and a $3 million punitive damages verdict returned against Powell in the matter of George Coulborn, No. 3:13-cv-8141 (D. Ariz.). (Doc. 98 at PAGEID#: 1602; see id., Exh. M, Powell Responses to OneBeacon's First Set of Interrogatories, Requests for Production of Documents, and Requests for Admission, at PAGEID#: 2042).

         In response, OneBeacon alleges that Powell has not placed a value on its bad faith damages, which OneBeacon asserts must be separate and distinct from damages for a breach of contract, and that the information Powell needs to value its damages is exclusively within its possession. (Doc. 104 at PAGEID#: 2154). OneBeacon contends it has provided evidence that the collective indemnity value of the 23 claims Powell has identified as being at issue is no greater than $265, 688. (Id. at PAGEID#: 2155). OneBeacon alleges it has spent almost this full amount, or a total of approximately $250, 000, on document production in the case to date. (Id. at PAGEID#: 2152; see Doc. 105, Exh. 1, Horacek Decl., ¶ 43). OneBeacon also challenges Powell's claim that it acted in bad faith in the Coulbourn litigation and that Powell suffered $3 million in damages as a result. (Doc. 104 at PAGEID#: 2149-50, n. 4).

         In reply, Powell states that the $11 million total in damages at which it values its case was included in its initial disclosures (Doc. 108 at PAGEID#: 2617-18, citing Exh. C-PAGEID#: 2656-57) and reflected in its April 8, 2016 settlement demand for $11 million, consisting of $4.2 million in claimed compensatory damages for lost executive time, settlement costs, and defense counsel invoices; punitive damages of double the amount of compensatory damages; and attorney fees and costs. (Id., Exh. A, Brunner Decl., ¶ 5).

         OneBeacon's position that Powell's damages are limited to $265, 688 and that Powell has not justified a damages claim in excess of $10 million is not supported by the record. OneBeacon alleges that the Court has previously held in this case that Powell is limited to pursuing a claim of “bad faith handling and processing of insurance claims separate and apart from the denial of insurance coverage.” (Doc. 104 at PAGEID#: 2147-48, citing Doc. 70 at PAGEID#: 1293). OneBeacon alleges that by so holding, the Court recognized that there “must be damages other than breach-of-contract damages” for a bad faith “tort to be actionable independent of a breach-of-contract claim.” (Id. at PAGEID#: 2147-48, citing Shimola v. Nationwide Ins. Co., 495 N.E.2d 391, 393 (Ohio 1986); Strategy Group for Media, Inc. v. Lowden, No. 12 CAE 03 0016, 2013 WL 1343614, at ¶ 30 (Ohio App. 5th Dist. March 21, 2013); Textron Fin. Corp. v. Nationwide Mut. Ins. Co., 684 N.E.2d 1261 (Ohio App. 9th Dist. 1996)). OneBeacon concludes that “[d]efense and indemnity costs are contract damages” and that Powell must therefore demonstrate it has damages other than defense and indemnity costs allegedly owed under the OneBeacon policies in order to proceed on its bad faith claim. (Id. at PAGEID#: 2148). However, OneBeacon has not cited any authority to support its position that defense and indemnity costs can be recovered only for a breach of contract.[6] Further, OneBeacon construes the Court's prior decision limiting Powell to proceeding on its bad faith claim too broadly. The Court found that Ohio recognizes a cause of action against insurers for a breach of the duty of good faith “separate and apart from the denial of insurance coverage”; that Powell could proceed on its bad faith claim; but that Powell could not prove its breach of contract claim because a determination had not yet been made as to “which policies were triggered.” (Doc. 70 at PAGEID#: 1293-94). The Court did not make any findings regarding the damages that Powell must allege or prove to proceed on its bad faith claim.

         Ohio law governs the damages available to Powell on its breach of contract and bad faith claims. Ohio law holds that “an insurer who acts in bad faith is liable for those compensatory damages flowing from the bad faith conduct of the insurer and caused by the insurer's breach of contract.” Zoppo v. Homestead Ins. Co., 644 N.E.2d 397, 402 (Ohio 1994). See also Valley Forge Ins. Co. v. Fisher Klosterman, Inc., No. 1:14-cv-792, 2016 WL 1642961, at *12 (S.D. Ohio Apr. 26, 2016) (“an insurer who acts in bad faith is liable for those compensatory damages, including attorney fees, flowing from the bad faith conduct of the insurer and caused by the insurer's breach of contract.”) (quoting Furr v. State Farm Mut. Auto. Ins. Co., 716 N.E.2d 250, 265 (Ohio App. 6th Dist. 1998)); Asmaro v. Jefferson Insurance Co. of New York, 574 N.E.2d 1118, 1123 (Ohio App. 6th Dist. 1989) (plaintiff who proves a bad faith claim can recover “extra-contractual damages, ” which are “actual damages over and above those covered by the insurance contract sustained by the insured as a consequence of the insurer's bad faith”). Powell has specified the amounts and types of damages it claims have flowed from OneBeacon's alleged bad faith actions. Although OneBeacon challenges the merits of Powell's bad faith allegations and its $3 million damages claim in connection with the Coulbourn case (Doc. 104 at PAGEID#: 1249-50, n. 4), the merits of the parties' dispute cannot be resolved at the discovery stage. At this juncture, the Court has no reasonable basis to reject Powell's representations that its damages may exceed $10 million.

         Conversely, OneBeacon alleges that its costs to complete the document production requested by Powell and update its privilege log “could equal or exceed the $250, 000” it has spent on document production to date. (See Doc. 111-1, Second Horacek Declaration, ¶ 8). However, OneBeacon has provided no factual basis for this estimate. OneBeacon has failed to identify the additional time and costs it anticipates it would expend, including the number of files and/or databases upon which it bases its estimate, the expected man-hours to identify responsive information from and perform its review of these sources, and the anticipated cost basis for the labor. See, e.g., Surles ex rel. Johnson v. Greyhound Lines, Inc., 474 F.3d 288, 306 (6th Cir. 2007) (providing such estimates). See also Kafele, 2005 WL 5095186, *2 n. 8 (responding party “must show specifically how each discovery request is burdensome and oppressive by submitting affidavits or offering evidence revealing the nature of the burden”) (citation omitted).[7] Further, OneBeacon's assertion that it could be required to spend more than twice the amount it has spent to date on additional discovery is questionable given OneBeacon's representation that it has already produced the vast majority of its discovery. (See Doc. 104 at PAGEID#: 2152; see Doc. 105, Exh. 1, Horacek Decl., ¶ 43). Moreover, as the Court has determined that several of the categories of discovery sought by Powell are not relevant, the cost will necessarily be lower than OneBeacon's estimate.

         Thus, although the Court cannot reasonably estimate the additional discovery costs OneBeacon is likely to incur based on the information OneBeacon has provided, those costs are likely to be far lower than the discovery costs OneBeacon has incurred to date. At the same time, Powell has demonstrated that the amount in controversy is substantial. This factor therefore weighs in favor of production of the contested information.

         iii. The parties' relative access to relevant information

         Powell argues that it has no access to the information it requests because the information consists of OneBeacon's internal documents and communications. (Doc. 98 at PAGEID#: 1602). OneBeacon alleges in response that Powell has equal access to documents it needs, which OneBeacon divides into two categories: (1) any unprivileged documents that tend to show OneBeacon's actions were not reasonably justified; and (2) any unprivileged documents that tend to show Powell was damaged. (Doc. 104 at PAGEID#: 2155). OneBeacon alleges that Powell has access to information in the first category related to defense and indemnification, including all information generated and compiled by its defense lawyers, through the parties' Data Exchange Protocol and other shared information.[8]Id. One Beacon also claims that insofar as this information “comes by and through Michaud, ” OneBeacon has already produced it. (Id.). OneBeacon alleges that information in the second category is “exclusively” in Powell's possession. (Id. at PAGEID#: 2155-56). OneBeacon argues that to the extent it has in ...


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