Babcock & Wilcox Power Generation Group, Inc. v. Cormetech, Inc.

81 F. Supp. 3d 632, 2015 U.S. Dist. LEXIS 8067, 2015 WL 350392
CourtDistrict Court, N.D. Ohio
DecidedJanuary 23, 2015
DocketCase No. 5:14cv514
StatusPublished

This text of 81 F. Supp. 3d 632 (Babcock & Wilcox Power Generation Group, Inc. v. Cormetech, Inc.) is published on Counsel Stack Legal Research, covering District Court, N.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Babcock & Wilcox Power Generation Group, Inc. v. Cormetech, Inc., 81 F. Supp. 3d 632, 2015 U.S. Dist. LEXIS 8067, 2015 WL 350392 (N.D. Ohio 2015).

Opinion

MEMORANDUM OPINION & ORDER

. KATHLEEN B. BURKE, United States Magistrate Judge.

In this diversity action, Plaintiff Bab-cock & Wilcox Power Generation Group, Inc. (“B & W” or “Babcock”) seeks indemnity from Defendant Cormetech, Inc. (“Cormetech”) for amounts B & W paid to a third party, Kansas City Power & Light Company (“KCP & L”) pursuant to a settlement agreement. The matter is before the Court on a discovery dispute. B & W has refused to produce communications pertaining to its settlement negotiations and mediation with KCP & L, asserting that the federal settlement privilege recognized by the Sixth Circuit in Goodyear Tire & Rubber Co. v. Chiles Power Supply, Inc., 332 F.3d 976 (6th Cir.2003) (“Goodyear”), applies to those communications. In its most recent brief, B & W has also asserted that most of the communications are subject to an additional privilege, Ohio’s mediation privilege.1 For the reasons explained below, the Court finds that the federal settlement privilege does not [634]*634apply to this case but that Ohio’s mediation privilege does.

I. Background2

A. Factual Background

B & W designs, manufactures and sells emissions control equipment and services to power plants. Doc. 1, ¶ 6. Cormetech manufactures catalysts for Selective Catalyst Reduction (“SCR”) systems used by power plant operators. Doc. 1, ¶ 7. A catalyst is used to reduce nitrogen oxide, an undesirable by-product created when power plants burn coal. Doc. 1, ¶ 7; Doc. 12-1, p. 2.

In December 2005, Babcock entered into a contract with KCP & L, agreeing to build an SCR system for a power station in LaCygne, Kansas (“LaCygne Power Plant”). Doc. 1, ¶ 8. Babcock issued a technical specification for catalyst modules to Cormetech. Doc. 1, ¶ 9. On May 5, 2006, Babcock issued to Cormetech a Purchase Order for catalysts, referencing B & W/Cormetech Standard Terms and Conditions. Doc. 1, ¶¶ 10, 12. The B & W/Cor-metech Standard Terms & Conditions provided,

Seller [Cormetech] shall defend and indemnify Buyer [B & W] against all damages, liabilities, claims, losses and expenses (including attorney’s fees) arising out of, or resulting in any way from any defect in the goods or services purchased hereunder....

Doc. 1-1, p. 4, § 4. The Terms and Conditions also specified that the parties’ agreement was to be governed “by the laws of the state in which Buyer is located.” Doc. 1-1, p. 6, § 14. Since B & W’s principal place of business is in Ohio (Doc. 1, p. 1, ¶ 1), Ohio law governs the agreement between B & W and Cormetech.

Babcock used the catalysts it bought from Cormetech to fulfill its contract with KCP & L. Doc. 1, ¶ 13. The SCR process at the LaCygne Power Plant began operation in April 2007. Doc. 1, ¶ 13. On August 5, 2008, the catalysts were tested and deemed to be at the end of their useful life, well in advance of their guaranteed life of 24,000 hours of operation. Doc. 1, ¶ 14. In April 2009, KCP & L spent approximately $8.5 million replacing the catalysts with new catalysts that it obtained directly from Cormetech. Doc. 1, ¶ 14. KCP & L made a claim against Babcock, alleging that KCP & L incurred more than $15 million in costs because of the faulty catalysts. Doc. 1, ¶ 16. On or about July 18, 2013, Babcock reached a settlement with KCP & L pursuant to mediation, in which it agreed to pay KCP & L $3.5 million. Doc. 1, ¶ 16.3

Babcock initially brought suit against Cormetech on August 3, 2012. Doc. 1, ¶ 5. The parties voluntarily dismissed the case without prejudice pursuant to a tolling agreement between them. Doc. 1, ¶ 5. On March 6, 2014, Babcock refiled its Complaint in this Court against Cormetech for breach of warranty and indemnity. Doc. 1, pp. 4-6. It seeks judgment against Cormetech for $3.5 million, the amount it settled for with KCP & L, plus its costs and expenses incurred in addressing and settling KCP & L’s claim. Doc. 1, pp. 5-6.

B. Procedural Background

On September 26, 2014, the parties filed a Proposed Stipulated Protective Order (Doc. 22) and a Proposed Agreed Order for Non-Waiver of Privileged Electronically Stored Documents of Information (“Proposed Privilege Order”) (Doc. 23). In their Proposed Privilege Order, the parties defined “privilege” to include “the federal settlement privilege being asserted by [] [635]*635Babcock[], should the Court deem that said privilege is applicable to the within matter.” Doc. 28, p. 2.

On September 30, 2014, the Court issued an Order directing the parties to jointly file a supplemental brief explaining what they meant by the term “federal settlement privilege” as used in the Proposed Privilege Order. Doc. 26. The parties responded, explaining that they were in dispute as to whether the federal settlement privilege is applicable to the within matter. Doc. 27, p. 1. Babcock asserted that it raised the settlement privilege “as it believes was established by the Sixth Circuit” in Goodyear and Allen County, Ohio v. Reilly Industries, Inc., 197 F.R.D. 352 (N.D.Ohio 2000), “as it pertains to all discovery relating to settlement, mediation, and negotiation communications that occurred between it and [] KCP & L.” Doc. 27, p. 1. Cormetech contended that the federal settlement privilege “did not apply to the circumstances of this case” and that, even if it did, “any privilege surrounding settlement negotiations between KCP & L and Plaintiff is inapplicable because Plaintiff is asserting a claim for indemnification and must demonstrate that the settlement between it and KCP & L was fair and reasonable.” Doc. 27, p. 2. The parties stated,

[We] have now exhausted good-faith efforts to resolve this difference and reached an impasse. The parties respectfully request that this Court permit them to independently brief this issue in further detail, so that the case law and arguments of each party can be considered by this Court in making its determination of whether the settlement privilege is applicable to the within matter.

Doc. 27, p. 2.

Accordingly, the Court construed the , parties’ request as a notice of a discovery dispute pursuant to Local Rule 37.1 and instructed the parties to file briefs supporting their respective positions. Doc. 30. After reviewing the briefing (Docs. 31, 32), the Court conducted a telephone conference with counsel. Doc. 38. The Court discussed the issues raised by the parties in their briefs, attempted to facilitate an agreement amenable to all, and directed the parties to confer and then file a joint status report informing the Court as to whether the parties had reached an agreement regarding discovery of the documents sought. Doc. 38. Specifically, the Court encouraged the parties to review the holding in Scheurer Hospital v. Lancaster Pollard & Co., 2012 WL 5471135 (E.D.Mich. Nov. 9, 2012).

The parties filed a joint status report wherein Babcock proposed the following, consistent with its reading of Scheurer Hospital:

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Cite This Page — Counsel Stack

Bluebook (online)
81 F. Supp. 3d 632, 2015 U.S. Dist. LEXIS 8067, 2015 WL 350392, Counsel Stack Legal Research, https://law.counselstack.com/opinion/babcock-wilcox-power-generation-group-inc-v-cormetech-inc-ohnd-2015.