United States District Court, S.D. Ohio, Western Division
L. Litkovitz, United States Magistrate Judge
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).
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).
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
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#:
Chronology of discovery issues
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.
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-
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).
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.
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.).
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
1. A Powell desk file kept by Gaines (Doc. 98, Exh. E, Gaines
Depo., pp. 19-20).
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#:
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
OneBeacon argues that Powell's demands for additional
discovery are not proportional to the needs of the case.
(Id. at PAGEID#: 2140, 2153-56).
The parties' motions
Powell's motion to compel and for sanctions;
OneBeacon's motion for protective order and to certify
issue to the Ohio Supreme Court
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).
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).
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).
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.
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).
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
(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
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).
The balance of considerations weighs in favor of production
of the information in dispute.
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).
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). The Court therefore accepts
OneBeacon's representations to the Court on this matter.
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.
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.
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.
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). 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.
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. (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.
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.
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.
The importance of the issues at stake in the
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).
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. 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.
The amount in controversy
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
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).
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).
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. 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.
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.
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). 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
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.
The parties' relative access to relevant
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.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 ...