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Rsui Indemnity Company v. American States Insurance Co.

United States District Court, E.D. Louisiana

June 9, 2015

RSUI INDEMNITY COMPANY
v.
AMERICAN STATES INSURANCE COMPANY, Section:

ORDER

KAREN WELLS ROBY, Magistrate Judge.

Before the Court is a Motion for Sanctions Against American Insurance Company (R. Doc. 120) filed by the Plaintiff, RSUI Indemnity Company ("RSUI"), seeking a court order sanctioning American States Insurance Company ("ASIC") for failing to respond to RSUI's discovery request for file handling guidelines. The motion is opposed. See R. Doc. 125. RSUI filed a reply to ASIC's opposition. See R. Doc. 133. The motion was heard on the briefs.

I. Background

This action is a dispute between the excess and primary liability insurance carriers of a common insured. The excess insurer, RSUI, seeks to recover from the primary liability insurer, ASIC, the $2 million it paid as a result of ASIC's alleged breach of the duty to defend the common insured. The full recitation of the factual summary is located in this Court's previous order addressing RSUI's motion for leave to amend, see R. Doc. 110.

In the instant motion, RSUI seeks to impose sanctions for ASIC's alleged failure to act in good faith by failing to produce its file handling guidelines in response to RSUI's Request for Production ("RFP") No. 2 of its Second Set of Interrogatories and Requests for Production. See R. Doc. 120-1, at 1. RFP No. 2 sought: "[a]ny file handling guidelines issued to defense counsel applicable to the defense of the referenced litigation." See R. Doc. 78-3, at 4. In response to the request, ASIC objected on the grounds that the request seeks confidential/proprietary trade secrets and that it is not reasonably calculated to lead to the discovery of admissible evidence. Id. at 5. ASIC further stated: "[s]ubject to all objections, ASIC responds that it has not identified any documents responsive to this request." Id.

RSUI represents that shortly after receiving ASIC's discovery responses it took the deposition of Brad Brumfield who was ASIC's staff counsel assigned to the underlying case. See R. Doc. 120-1, at 2. RSUI contends that it asked Brumfield about the existence of written guidelines and he responded, "[w]e have guidelines on what functions were claims functions and what functions were attorney functions." Id. After the deposition, the case was dismissed on summary judgment and appealed to the Fifth Circuit. After the case was remanded in October 2014, RSUI sent another request for the file handling guidelines. See R. Doc. 78-2. In response, ASIC stated that it "has no file handling guidelines' per se, but will produce... PAL Litigation Management Protocols." Id. at 8-9.

RSUI now seeks sanctions for ASIC's failure to produce the file handling guidelines when it was initially requested before the Brumfield deposition. RSUI contends that it had to redepose Brumfield after it received the guidelines and that ASIC should be responsible for the cost of Brumfield's second deposition. RSUI also seeks reasonable attorney fees associated with filing the instant motion.

II. Standard of Review

A federal court has the power to sanction a party who has abused the judicial process. The Court's power to sanction derives from two primary sources: (1) the Court's inherent authority and (2) Federal Rule of Civil Procedure ("Rule") 37. Chambers v. NASCO, Inc., 501 U.S. 32, 44, 46, 50-51 (1991); Natural Gas Pipeline Co. of Am. v. Energy Gathering, Inc., 86 F.3d 464, 467 (5th Cir. 1996).

Rule 37 permits the trial court to issue any "just" orders when a party fails to comply with a prior discovery order. Such Orders can include:

(i) directing that the matters embraced in the order or other designated facts be taken as established for purposes of the action, as the prevailing party claims;
(ii) prohibiting the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence;
(iii) striking pleadings in whole or in part;
(iv) staying further proceedings until the ...

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