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Sierrapine, A California Limited Partnership v. Refiner Products Manufacturing

August 1, 2011


The opinion of the court was delivered by: Kendall J. Newman United States Magistrate Judge


Presently before the court is plaintiff's motion to compel further responses to plaintiff's third set of interrogatories, numbered 16 through 18, and fourth set of requests for the production of documents, numbered 14 through 20.*fn1 (See generally Pl.'s Mot. to Compel, Dkt. No. 90.) Although discovery closed over one year ago, plaintiff was granted leave to conduct additional, limited discovery by the district judge assigned to this matter, United States District Judge Morrison C. England, Jr., with any substantive disagreements regarding the discovery to be resolved by the undersigned. (See Order, May 11, 2011, Dkt. No. 87.) Plaintiff's motion to compel concerns whether-and, if so, to what extent-plaintiff may permissibly conduct discovery into a "policyholder's release" agreement executed by defendant and its insurer, Travelers, relative to an underlying breach of contract and breach of warranty action. Travelers is a not a named defendant, and the operative Second Amended Complaint (Dkt. No. 34) includes no allegations of, or claims for relief premised on, some fraudulent conveyance or transfer in regards to the "policyholder's release" agreement.

The undersigned heard this matter on its law and motion calendar on July 28, 2011. (Minutes, Dkt. No. 94.) Attorney Michael J. Thomas appeared on behalf of plaintiff. Attorney Duncan MacDonald appeared on behalf of defendant. The parties previously filed a Joint Statement Re Discovery Disagreement ("Joint Statement"). (Joint Statement, Dkt. No. 93; see also MacDonald Decl., Dkt. No. 92.)

The undersigned has considered the Joint Statement and related materials, oral arguments, and appropriate portions of the record in this case and, for the reasons stated below, denies plaintiff's motion to compel.*fn2 At bottom, plaintiff's discovery requests-which in most respects far exceed the leave granted by Judge England-seek information about defendant's assets and ability to satisfy a potential judgment in the context of a breach of contract and breach of warranty action. This discovery does not seek information and materials that are relevant to any of the claims or defenses at issue in the litigation, nor is it reasonably calculated to lead to the discovery of admissible evidence. See Fed. R. Civ. P. 26(b)(1). Although the undersigned is not unsympathetic to plaintiff's concern regarding the apparent uncertainty it faces in regards to a pending settlement offer made by defendant and going forward in the litigation, plaintiff's discovery, even if narrowed, does not seek relevant information and materials.*fn3 Plaintiff's interrogatories and document requests amount to premature, post-judgment discovery of a judgment debtor, which should be sought consistent with Federal Rule of Civil Procedure 69(a)(2).

However, the undersigned orders defendant to supplement its Rule 26(a)(1)(A)(iv) disclosures to plaintiff on or before August 19, 2011, to provide "for inspection and copying as under Rule 34, any insurance agreement under which an insurance business may be liable to satisfy all or part of a possible judgment in the action or to indemnify or reimburse for payments made to satisfy the judgment." Fed. R. Civ. P. 26(a)(1)(A)(iv); see also Fed. R. Civ. P. 26(e)(1). Defendant shall make a diligent and complete inquiry in regards to the supplementation of its disclosures-it is not sufficient for defendant's counsel to make ambiguous representations based on materials that they and defendant have "identified" or have "knowledge of." The undersigned expects a more forthcoming disclosure from defendant and its counsel.


The underlying lawsuit, commenced in state court in August 2008 and removed to this court in September 2008, involves plaintiff's claims that defendant breached several express and implied commercial warranties in relation to work performed by defendant pursuant to a contract with plaintiff. (See generally Second Am. Compl.) In short, plaintiff contends that defendant defectively rebuilt components of two "refiners" that plaintiff intended to use to manufacture medium density fiberboard.

As noted above, defendant's insurer is or was the Travelers insurance company. On December 29, 2010, defendant and Travelers entered into a "Confidential Settlement Agreement" through which defendant completely released its claims for defense and indemnity submitted to Travelers in connection with plaintiff's lawsuit in exchange for monetary consideration in an amount that both defendant and Travelers have withheld from plaintiff. (See Addison Decl., Ex. 4, Dkt. No. 93, Dkt. No. 93-4.)

It appears uncontroverted that plaintiff learned of the Confidential Settlement Agreement, also referred to by the parties and the court as the "Travelers Agreement" or the "policyholder's release," on or about January 11, 2011.*fn4 (See Order, May 11, 2011, at 2 and 4.) Plaintiff represents in its portion of the Joint Statement that on December 3, 2010, it had transmitted a settlement demand to Travelers's counsel, David Worthington, which included plaintiff's analysis of Travelers's insurance obligations for covered damages. (See Joint Statement at 2-3.) Worthington responded by way of a letter dated January 10, 2011, and conveyed to plaintiff that defendant and Travelers had reached and memorialized an agreement regarding the litigation. (Id. at 3; see also Letter, Jan. 10, 2011, Ex. 1 to Pl.'s Interrogatories, Set Three, attached as Exhibit 1 to Addison Decl.) Worthington informed plaintiff's counsel that plaintiff should direct all future communications, including settlement communications, to defendant's counsel because Worthington would be withdrawing from the action.*fn5 On or about January 25, 2011, defendant's counsel, John Heller, allegedly confirmed the existence of the executed policyholder's release agreement. (See Joint Statement at 3.)

The discovery completion deadline passed on May 14, 2010. (See Stip. & Order, Mar. 11, 2010, Dkt. No. 38.) However, as a result of plaintiff's January 11, 2011 discovery of the policyholder's release agreement, plaintiff moved, on April 7, 2011, to modify the pretrial scheduling order in order to: (1) re-designate additional expert witnesses who had been previously stricken; and, relevant here, (2) seek additional discovery regarding the policyholder's release agreement executed by defendant and Travelers. (See Pl.'s Mot. to Amend the Sched. Order, Dkt. No. 82.) As acknowledged in Judge England's May 11, 2011 order, plaintiff's motion to reopen discovery sought "'written discovery tailored to require production of the [policyholder's release] and related information and documents.'" (Order, May 11, 2011, at 5 (modification in original).)

Judge England granted plaintiff's request to reopen discovery "for the limited purpose of the alleged policyholder's release, only." (Order, May 11, 2011, at 5.) In granting plaintiff limited leave to conduct additional discovery, Judge England stated:

Since no authority has been cited which plainly forecloses the requested discovery, the Court finds it appropriate to reopen discovery, for the limited purpose of the alleged policyholder's release, only. All such discovery, along with any disputes relative to the discovery, must be completed not later than September 2, 2011. (Id. (emphasis added).) His order further stated:

The PTSO is also modified to permit limited additional discovery pertaining to the so-called policyholder's release alleged by Plaintiff. All discovery pertaining to that limited additional discovery, along with any disputes related thereto, shall be completed and/or resolved by September 2, 2011.

(Id. at 6 (first emphasis added).)*fn6 In reaching this conclusion, Judge England reviewed some of the seemingly conflicting, out-of-district authorities cited by the parties in regards to discovery of insurance settlement agreements, but did not resolve the apparent conflict or expressly conclude that plaintiff is actually entitled to discover the policyholder's release and related materials and information. Judge England understandably left any "substantive disagreement about whether discovery is ultimately indicated" to be resolved through a discovery motion, as opposed to a motion to modify the pretrial scheduling order. (Id.)

On May 16, 2011, plaintiff served its third set of interrogatories and fourth set of requests for production of documents. (Addison Decl., Ex. 1.) Plaintiff's interrogatories and document requests contain the following definition of the term "Insurance Agreements":

"Insurance Agreements" shall mean and include all documents that are release [sic] or any other type of agreements (including but not limited to all drafts and unexecuted documents) between RPM and Traveler's [sic] Insurance or any other insurance company, and that relate to the facts SierraPine alleges in its Second Amended Complaint in the Lawsuit; including the agreement(s) mentioned in the January 10, 2011 letter David Worthington sent to Shelley Addison attached hereto as Exhibit 1.

Plaintiff's interrogatories 16 through 18 state:


Name every person who participated in the negotiation or execution of, or correspondence about, any of the Insurance Agreements. INTERROGATORY NO. 17:

Name every person who prepared any report that RPM provided to any potential or actual reinsurer during the time period of January ...

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