Allied World Specialty Ins. Co. v. Siu Physicians & Surgeons, Inc.

ALLIED WORLD SPECIALTY INSURANCE COMPANYf/k/a DARWIN NATIONAL ASSURANCE COMPANY,a Delaware Corporation, Plaintiff, v. SIU PHYSICIANS & SURGEONS,INC., an Illinois Corporation,SAJIDA AHAD, JAN RAKINIC,CHRISTINA VASSILEVA, and ERICA ROTONDO, Defendants.

Case No. 17-cv-03139

UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF ILLINOIS SPRINGFIELD DIVISION

FILED: March 31, 2021

March 30, 2021

OPINION

SUE E. MYERSCOUGH, U.S. District Judge:

Now before the Court are Plaintiff Allied World Specialty Insurance Company's ("Allied") Motion for Summary Judgment, d/e 39, and Allied's Motion to Strike Improper Argument and Evidence from Defendant SIU Physician & Surgeons, Inc.'s Memorandum in Opposition to Plaintiff's Motion for Summary Judgment ("Motion to Strike"), d/e 51. For the reasons discussed below, both motions are granted.

I. PROCEDURAL HISTORY

This insurance dispute arises from an underlying lawsuit filed by Sajida Ahad, M.D., ("Ahad") against the Board of Trustees of Southern Illinois University ("SIU") and SIU Physicians & Surgeons, Inc. ("SIU P&S"). See Ahad v. Bd. of Trs. of S. Ill. Univ., 15-cv-3308 (C.D. Ill. filed October 27, 2015) (hereinafter "the Ahad lawsuit"). The Ahad lawsuit, alleging gender-based pay discrimination, sought certification of a collective action under the Fair Labor Standards Act (FLSA) and certification of a Federal Rule of Civil Procedure 23 class on claims under the Illinois Equal Pay Act, the Illinois Civil Rights Act, and Title VII of the Civil Rights Act of 1964, as amended.

On June 9, 2017, Allied filed its complaint in this case, d/e 1, against defendant SIU P&S seeking a declaratory judgment that Allied has no duty to indemnify SIU P&S in connection with the Ahad lawsuit. After this Court conditionally certified an FLSA collective action in the Ahad lawsuit, Allied has twice amended its complaint in this case to add as defendants in this action Ahad and three physicians who opted in to the conditionally certified collective action by filing consent forms—doctors Jan Rakinic, ChristinaVassileva, and Erica Rotondo. See Am. Compl., d/e 22; Second Am. Compl., d/e 33.

In proceedings before the assigned United States Magistrate Judge following the close of discovery, the parties reported that they would be filing motions for summary judgment. See Minute Entry April 23, 2018. Shortly thereafter, Allied filed the motion for summary judgment now pending before the Court. In the motion for summary judgment, Allied seeks a declaration that Allied has no duty to defend or indemnify SIU P&S on the EEOC Charge and the Ahad lawsuit, including the consent forms, under any of the insurance policies issued by Allied to SIU P&S.

SIU P&S did not file its own motion for summary judgment, but rather in SIU P&S' response to Allied's motion for summary judgment, SIU P&S urges the Court to sua sponte grant summary judgment in favor of SIU P&S. After SIU P&S filed its response to Allied's motion for summary judgment, Allied filed the motion to strike that is also pending before the Court and which the Court addresses first.

II. MOTION TO STRIKE

In conjunction with its reply, d/e 53, in support of its motion for summary judgment, Allied filed a motion to strike, d/e 51, which the Court now considers before turning to the motion for summary judgment. In the motion to strike, Allied asks the Court to strike, pursuant to Federal Rule of Civil Procedure 37(c)(1), certain exhibits filed in support of SIU P&S' Motion to Decertify Collective Action in the Ahad lawsuit and relied on in SIU P&S' Memorandum in Opposition to Allied World's Motion for Summary Judgment, d/e 45, and any argument in the memorandum based on those exhibits. The exhibits at issue are the transcripts of the depositions of Ahad, Rakinic, and Vassileva, along with the exhibits attached to each of the deposition transcripts, as well as the declaration of Wendy Cox-Largent.

In most cases, including this one, Federal Rule of Civil Procedure 26(a)(1) requires parties to make certain initial disclosures "without awaiting a discovery request." Fed. R. Civ. P. 26(a)(1) (allowing court to order otherwise); but see id. R. 26(a)(1)(B) (exempting certain types of cases). Under Rule 26(a)(2)(e), a party must supplement its disclosures "when required under Rule 26(e)."That rule, in turn, requires supplementation "in a timely manner if the party learns that in some material respect the disclosure or response is incomplete or incorrect, and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process." Id. R. 26(e)(1)(A).

Rule 37(c)(1) supplies a remedy for initial-disclosure and supplementation violations. That Rule provides, in part, that "[i]f a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless." Fed. R. Civ. P. 37(c)(1). The Seventh Circuit has held that "[t]he exclusion of non-disclosed evidence is 'mandatory under Rule 37(c)(1) unless non-disclosure was justified or harmless.'" Rossi v. City of Chicago, 790 F.3d 729, 737-38 (7th Cir. 2015) (quoting Musser v. Gentiva Health Servs., 356 F.3d 751, 758 (7th Cir. 2004)); accord Cripe v. Henkel Corp., 858 F.3d 1110, 1112 (7th Cir. 2017) (citing Hassebrock v. Bernhoft, 815 F.3d 334, 341 (7th Cir. 2016) and Novak v. Board of Trs. of S. Ill. Univ., 777 F.3d 966, 972 (7th Cir. 2015)). Rule 37(c)(1) allows the court to impose lessersanctions "[i]n addition to or instead of this sanction." See Malik v. Falcon Holdings, LLC, 675 F.3d 646, 649-50 (7th Cir. 2012) (citing Ball v. City of Chicago, 2 F.3d 752 (7th Cir. 1993)) ("[Rule 37] gives the judge discretion to match a remedy to the wrong."); Dynegy Mktg. & Trade v. Multiut Corp., 648 F.3d 506, 514 (7th Cir. 2011) ("Whether a failure to comply with Rule 26(a) or (e) is substantially justified, harmless, or warrants sanctions is left to the broad discretion of the district court." (citing David v. Caterpillar, Inc., 324 F.3d 851, 857 (7th Cir. 2003)).

In Allied's motion to strike, Allied urges the Court to strike the exhibits and argument based on the exhibits because the documents relied on by SIU P&S in its response to Allied's motion for summary judgment were not listed in SIU P&S' initial disclosures or any supplement to those disclosures. Mem. Supp. Mot. to Strike 2, d/e 52. Allied further argues that the documents are not material to the motion for summary judgment and should not be considered for that reason as well. Id.

In support of its Rule 37(c)(1) argument, Allied recounts the timeline discovery has followed in this case. SIU P&S provided Allied with SIU P&S' initial disclosures on December 15, 2017. Id.In its initial disclosures, SIU P&S identified the following as documents SIU P&S may use to support its claims or defenses:

(a) Allied World's Healthcare Organizations Management Liability Package Policies issued to SIU P&S for the periods November 4, 2013 to November 3, 2014 (the "2013 Policy"); November 4, 2014 to November 1, 2015 (the "2014 Policy"); November 1, 2015 to November 1, 2016 (the "2015 Policy"); and November 1, 2015 to November 1, 2017 (the "2016 Policy") (collectively, the "Policies").

(b) All pleadings relating to the Ahad EEOC Charge, to the extent not privileged or otherwise protected for discovery or disclosure.

(c) All pleadings relating to the Ahad Lawsuit, to the extent not privileged or otherwise protected from discovery or disclosure.

(d) All pleadings relating to class action or collective action aspects of the Ahad Lawsuit, including the Rakinic and Vassileva Consent Forms.

(e) Communications involving SIU P&S, its insurance broker and/or Allied World, relating to the Ahad EEOC Charge, the Ahad Lawsuit, and/or the Rakinic and Vassileva Consent Forms, including communications providing SIU P&S insurance broker and/or Allied World with notice of claims.

Id. at 2-3. SIU P&S never supplemented these initial disclosures. Id. at 3. Discovery closed on March 31, 2018, and Allied filed its motion for summary judgment shortly thereafter. Id. SIU P&S subsequently sought and was granted two extensions of time to respond to Allied's motion for summary judgment. See Motions forExtension of Time, d/e 41, 42; Minute Entries dated May 1, 2018 and June 11, 2018 (granting motions for extension of time). In the interim covered by these extensions of time, SIU P&S filed a motion to decertify the conditionally certified collective action in the Ahad lawsuit on June 15, 2018. Mem. Supp. Mot. to Strike 3. Soon after, SIU P&S filed its response to Allied's motion for summary judgment in this case, relying on the exhibits filed in connection with the motion to decertify which are the subject of the motion to strike.

Allied contends that exclusion of these documents and the argument based on them is mandatory under Rule 37 because SIU P&S did not identify the documents in SIU P&S' initial disclosures or any supplement thereto. Id. at 4-5. In support, Allied adopts a narrow reading of the definition of 'pleading' in Federal Rule of Civil Procedure 7 which includes only complaints, answers to complaints, and replies to answers among others. Id. at 5. Allied argues that the failure to disclose is not substantially justified or harmless because Allied suffered surprise and prejudice as a result, Allied will not have an opportunity to cure the prejudice, and the circumstances under which SIU P&S was able to rely on thedisputed documents is "suspicious" although perhaps not rising to the level of bad faith or willfulness. Id. at 6-7.

In response to the motion to strike, SIU P&S contends that the disputed documents fall within the scope of Allied's own initial disclosures which included "documents generated in connection with the Ahad claim, as defined by Allied World...