Shaw Grp., Inc. v. Zurich Am. Ins. Co.

THE SHAW GROUP, INC., et al. v. ZURICH AMERICAN INSURANCE COMPANY, et al.

CIVIL ACTION NO. 12-257-JJB-RLB

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF LOUISIANA

Signed: May 7, 2014

RULING AND ORDER

Before the Court is defendant Zurich American Insurance Company's ("Zurich") Motion to Compel Responses to Interrogatories. (R. Doc. 259). This Motion is opposed by plaintiffs The Shaw Group, Inc. and Shaw Process Fabricators, Inc. (collectively, "Shaw"). (R. Doc. 271). Zurich has filed a Reply. (R. Doc. 279).

Also before the Court is Zurich's Motion for Leave to Serve Excess Requests for Admission and Excess Interrogatory. (R. Doc. 280). The motion is opposed by Shaw. (R. Doc. 281).

I. Background

This is an insurance dispute. In the underlying action, REC Solar Grade Silicon, LLC ("REC") sued Shaw for damages regarding defective pipe spools sold by Shaw to REC for use in a gas manufacturing plant. Shaw filed an action in the Eastern District of Washington in July of 2011 seeking a declaratory judgment providing that, among other things, Zurich American Insurance Company ("Zurich"), Shaw's primary insurer, breached its duty to defend Shaw in the underlying litigation and did so in bad faith.

According to the Second Amended Complaint, after Shaw tendered Zurich with the complaint in the underlying action, Zurich responded that "there was no insurance coverage" for the damages in the Underlying Litigation, but also provided that "it would accept and undertake the defense of the Underlying Litigation under a full reservation of rights." (R. Doc. 156, "SAC," ¶ 15). Shaw alleges that since undertaking its duty to defend, Zurich has "disputed the extent to which it was obligated to pay for defense costs" and has "unreasonably breached its duty to defend by failing to pay for the defense in a timely manner." (SAC, ¶ 16). Shaw alleges that Zurich "controlled the defense of Plaintiffs in the Underlying Litigation in the Eastern District of Washington," but breached its duty to exercise the degree of reasonable care applicable to the defense, which proximately caused it harm. (SAC, ¶ 23). Shaw also alleges that Zurich violated its "duties to engage in good faith settlement negotiations of the Underlying Litigation by refusing indemnity to Plaintiffs herein prior to the July mediation between the Plaintiffs and REC." (SAC, ¶ 23). This court has ruled that Shaw's extra-contractual claims against Zurich shall be governed under Washington law. (R. Doc. 132 at 11).

Discovery in this action has been extended multiple times in light of various discovery disputes between the parties. The current deadline for filing all discovery motions and completing fact discovery is February 28, 2014. (R. Doc. 236 at 4). The parties have submitted a joint request to extend fact discovery to May 15, 2014, because of "weather, witness availability, and the need to continue depositions due to pending discovery motions before the Court that will impact their scope." (R. Doc. 260-1 at 3). On April 11, 2014, the court held a telephone status conference and provided that after rulings were issued on the pending discovery motions, new discovery deadlines would be set accordingly. (R. Doc. 277).

On March 12, 2014, Zurich filed the instant motion to compel responses to its interrogatories. (R. Doc. 259). Zurich served its Initial Interrogatories on Shaw on December 6, 2013 and its Supplemental Interrogatories on January 2, 2014. Zurich argues that Shaw's responses to its initial and supplemental interrogatories are "evasive, incomplete, and unresponsive." (R. Doc. 259-1 at 1). More specifically, Zurich argues that Shaw has not provided sufficient responses to Interrogatories Nos. 4 and 5, and Supplemental Interrogatories Nos. 2, 3, 4, and 7. Zurich also argues that the court implicitly granted Zurich leave to propound upon Shaw more than 25 interrogatories by extending the deadline for Shaw to respond to those interrogatories. (R. Doc. 277). (R. Doc. 259-1 at 12). Shaw counters that its responses are sufficient and do not rely upon its objection that the interrogatories request legal conclusions. Shaw also asserts that it properly refused to answer interrogatories in excess of those allowed by Rule 33 in the absence of leave of court.

On April 15, 2014, Zurich filed its motion to exceed the 25 allowed requests for admission allowed under L.R. 36.2. (R. Doc. 280). The motion was filed four days after the court stated it would extend the discovery deadlines after resolving already pending motions. (R. Doc. 277). Zurich requests leave to serve an additional 35 requests for admissions, as well as an additional interrogatory related to those requests for admissions. (R. Doc. 280-1). Zurich has already served 18 requests for admissions and has reached its limit of available interrogatories. Zurich has not yet served this additional discovery on Shaw. Shaw opposes the motion on the grounds that Zurich has failed to establish good cause to serve excess requests for admissions because the majority of proposed discovery seeks either impermissible legal conclusions or attempts to establish immaterial facts. (R. Doc. 281 at 2-9). Furthermore, Shaw opposes the additional interrogatory on the ground that it actually amounts to thirty-five additionalinterrogatories because it relates to each of the thirty-five additional requests for admissions, and Zurich has made no particularized showing of why this additional discovery is warranted.

II. LAW AND ANALYSIS

A. Sufficiency of Shaw's Interrogatory Responses

Zurich claims that Shaw has not provided sufficient responses to Interrogatories Nos. 4 and 5, and Supplemental Interrogatories Nos. 2, 3, 4, and 7. Zurich argues that Shaw's answers are "evasive or incomplete" disclosures that "must be treated as a failure to disclose, answer, or respond" to discovery under Rule 37 of the Federal Rules of Civil Procedure. Zurich argues that Shaw's answers are insufficient because they do not specifically identify how Shaw was allegedly harmed by Zurich's actions. (R. Doc. 259-1 at 8). Zurich also argues that Shaw improperly objected, and refused to respond, on the basis that Zurich's interrogatories sought legal conclusions.

The interrogatories and answers at issue in Zurich's motion to compel are as follows:

Interrogatory No. 4:

Please identify each and every act or omission you claim Zurich committed or omitted which prejudiced you or caused you damage, and the basis for any and all claims for damages and/or penalties identified in your Complaint (including all amendments thereto).

Answer:

Shaw objects to this Interrogatory as vague, ambiguous, overly broad and unduly burdensome. Shaw further objects to this Interrogatory as seeking a legal conclusion, and as improper under the Federal Rules of Civil Procedure. Subject to these objections and its General Objections, Shaw answers as follows:

While it is impossible for Shaw to identify each and every act or omission Zurich committed or omitted that prejudiced Shaw or caused it damage at this time since discovery is continuing, Shaw offers the following as a non-exhaustive description of Zurich's conduct that Shaw is aware of that supports Shaw's claims and damages sought in the Second Amended Complaint.

After Zurich received a copy of the complaint in REC Solar Grade Silicon LLC v. The Shaw Group, Inc., et al, No. 2:09-CV-188-LRS (the "Underlying Lawsuit") in June 2009, Zurich breached its duty to defend to [sic] Shaw by failing to retain defense counsel, by failing to pay defense costs, and by failing to agree to defend Shaw until approximately 15 months later on September 9, 2010. As a result of this breach of the duty to defend, Shaw had to retain counsel and pay its own defense costs and was uncertain whether Zurich would defend its insured against a lawsuit that exposed Shaw to tens of millions of dollars in damages. During this time, Shaw and its counsel asked Zurich and its third-party administrator on several occasions whether Zurich was accepting the defense. Zurich and its third-party administrator FARA failed to adequately respond to Shaw's inquiries. After Zurich finally accepted the defense in September 2010, Zurich and its third-party administrator FARA failed to timely pay defense costs, which constituted further breaches of the duty to defend. As a result of Zurich's failure to timely pay defense counsel, Shaw's main defense counsel at the time, Griffith Nixon Davidson, PC, complained about the late payments and threatened to withdraw as counsel in the Underlying Lawsuit. Because of Shaw's uncertainty in the defense to a damage claim made by REC that by July 2011 had ballooned to over $100 million, Shaw hired another firm, Baker Donelson, to take over as lead counsel. Shaw then had to pay Baker Donelson with its own funds for a period of time until Zurich eventually agreed the retention of Baker Donelson was appropriate and agreed to pay those defense costs. In addition, Shaw lost the time value of the money that Shaw was forced to pay to Baker Donelson and Zurich eventually reimbursed.

In addition, Zurich also breached its duties to Shaw by failing to thoroughly or timely investigate the claim for insurance benefits arising out of the Underlying Lawsuit (the "REC Claim"). After receiving the REC Claim in June 2009, neither Zurich nor its third-party administrator FARA performed a timely or thorough investigation. Moreover, despite determining at some point that coverage existed for the REC Claim and that Shaw would be found liable, Zurich then never attempted to negotiate a settlement with the plaintiff, offer the limits of Zurich's policy to Shaw, or otherwise offer settlement authority to Shaw. Instead, Zurich continued to act in furtherance of its own financial interest instead of those of the insured, Shaw. Because Zurich would not acknowledge to Shaw that coverage existed for the REC Claim, Shaw's excess carriers failed to acknowledge that it owed any duty to Shaw

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