Bitpay, Inc. v. Massachusetts Bay Insurance

315 F.R.D. 698, 94 Fed. R. Serv. 3d 40, 2016 WL 1105263, 2016 U.S. Dist. LEXIS 39108
CourtDistrict Court, N.D. Georgia
DecidedMarch 17, 2016
DocketCIVIL ACTION NO. 1:15-CV-3238-SCJ
StatusPublished
Cited by1 cases

This text of 315 F.R.D. 698 (Bitpay, Inc. v. Massachusetts Bay Insurance) is published on Counsel Stack Legal Research, covering District Court, N.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bitpay, Inc. v. Massachusetts Bay Insurance, 315 F.R.D. 698, 94 Fed. R. Serv. 3d 40, 2016 WL 1105263, 2016 U.S. Dist. LEXIS 39108 (N.D. Ga. 2016).

Opinion

ORDER

HONORABLE STEVE C. JONES, UNITED STATES DISTRICT JUDGE

This matter appears before the Court due to a discovery dispute between the parties and on a Motion to Bifurcate and to Stay Discovery (Doc. No. [8]), filed by Defendant Massachusetts Bay Insurance Company (“MBIC”). The Court held a conference call on these matters on March 15, 2016.

As preliminary background, this case arises out of MBIC’s refusal to pay an insurance claim made by Plaintiff, Bitpay, Inc. (“Bitpay”). See Doc. No. [1], p. 4, ¶¶ 19-22. Plaintiff alleges that its CFO received an email from someone asking for a comment on a bitcoin industry document. Id. p. 3, ¶ 12. In fact, the email was fraudulently sent from a hacked account. Id. p. 3, ¶ 13. Afer Bit-pay’s CFO entered his credentials on a web[700]*700site controlled by the hacker, the hacker was able to send false authorizations to Bitpay, causing the transfer and loss of $1,850,000 in bitcoin. Id. pp. 3-4, ¶¶ 14-17. Because Defendant refused to insure the loss, Plaintiff filed the present complaint, asserting two counts: (1) that the refusal to pay the claim was a breach of Plaintiffs insurance policy and (2) that the refusal to pay was done in bad faith. Id. pp. 5-6, ¶¶ 27-36.

In conjunction with its answer, Defendant filed the present motion, requesting that the Court try bifurcate the two counts, and that the Court stay discovery on the bad-faith claim pending resolution of the breach-of-contract claim. See Doc. No. [8], Federal Rule of Civil Procedure 42(b) provides the Court with the authority to bifurcate the trial of separate claims in the interest of “convenience, to avoid prejudice, or to expedite and economize.” Fed.R.Civ.P. 42(b). “The decision to bifurcate is committed to the sound discretion of the trial court.” Home Elevators, Inc. v. Millar Elevator Serv. Co., 933 F.Supp. 1090, 1091 (N.D.Ga.1996). Bifurcation is “not the usual course that should be followed.” Id. The burden to show that bifurcation is warranted is on the party requesting bifurcation. Id.

Here, Defendant notes that, under Georgia law, Plaintiff must first prove that its loss was covered by the insurance policy before it can prove that MBIC’s refusal to pay Plaintiffs claim was in bad faith. See Doc. No. [8], p. 3; see also O.C.G.A. § 33-4-6 (providing for attorney’s fees and increased damages where an insurer makes a bad faith refusal to pay “a loss which is covered by a policy of insurance”). Thus, Defendant argues, needless expense may be prevented by staying discovery on the bad-faith count until there has been a determination as to whether Plaintiffs loss was even covered by the insurance policy. See Doc. No. [8], p. 4. Plaintiff responds, in part, that the facts underlying both the bad-faith claim and the breach-of-contract claim “are inextricably intertwined” and that staying discovery on the bad-faith claim would result in a “duplication of efforts,” which would “increase the cost of discovery exponentially” and require the Court to “resolve discovery disputes piecemeal.” Doe. No. [9], pp. 9-10. The Court agrees with Plaintiff that denying the motion to stay and proceeding with discovery on the bad-faith claim is the most efficient way to proceed in this case.

The bulk of Plaintiffs requests for production are for documents directly related to Plaintiffs claim, such as “communications regarding the commercial crime coverage,” evidence relating to “the underwriting and/or actuarial analysis of the Policy,” and MBIC’s claim file or other documents relating to MBICs investigation of the claim. See Doc. No. [18-3], pp. 6-7. In a letter concerning the present discovery dispute, defense counsel asserted that such evidence is “inappropriately directed to claims handling/bad faith and not the coverage determination made by the claims department.” See Exhibit A,1 p. 1. While the requests are surely relevant to the bad-faith claim, some of the requests are also relevant to the breach-of-contract claim. In particular, MBIC’s claim file seems directly relevant to “the coverage determination made by the claims department.”

If the Court were to grant the Motion to Bifurcate and Stay Discovery, the Court would be required to parse each and every request for production, not to mention each question Plaintiff might potentially ask during a deposition, to determine if it “related to” the breach-of-contract claim or the bad-faith claim — or, if the request related to both claims, how to properly limit the request to only reach information related to the breach-of-contract claim. Such an exercise in hairsplitting would waste precious judicial resources, and result in unnecessarily duplica-tive discovery if Plaintiff in fact succeeds in proving that the loss was covered. The increased discovery burden on Defendant is minimal since many, if not most, of the requests and potential deposition questions will relate to both claims. The facts demonstrate ing whether the loss is covered by the policy and the facts underlying MBIC’s decision not [701]*701to pay the claim will clearly overlap substantially. Simply put, Defendant has not met its burden of showing that bifurcation is warranted in this case. See Home Elevators, Inc., 933 F.Supp. at 1091.

Having decided that the most efficient course of conduct in this case is to allow discovery on both of Plaintiffs claims, the Court now turns to the particular discovery dispute at hand. During the conference call, Defendant’s arguments centered largely around its contention that the information requested by Plaintiff is “irrelevant.” However, Plaintiffs requests for “communications regarding the commercial crime coverage”— the provision at issue in this case—as well as for evidence relating to “the underwriting and/or actuarial analysis of the Policy,” and MBIC’s claim file or other documents relating to MBIC’s investigation of the claim, are quite clearly relevant to the issues in this case. See Doc. No. [18-3], pp. 6-7. Defendant may, and in fact did, dispute whether such requests are “directed to” the bad-faith claim or the breach-of-eontract claim, but the requests are relevant. See Exhibit A, p. 1. Defendant’s communications regarding the policy provision at issue, its underwriting analysis, its claim file, and most of the other production requests will tend to either prove or disprove Plaintiffs claim that Defendant refused to pay a claim that it knew was covered by the policy.

Although not discussed during the conference call, Defendant, in its letter to Plaintiff regarding the discovery dispute, also objected to Plaintiffs request for documents related to “Social Engineering Endorsements,” because that product was not offered at the time of Bitpay’s contract with MBIC, and thus is not at issue in this case. Id. p. 2. The Court agrees. Information regarding Defendant’s other products, developed after the contract at issue in this case, is not relevant to the issue of whether Defendant breached its contract with Plaintiff. Nor is it relevant to the issue of whether Defendant’s decision to deny Bitpay’s claim was in bad faith. Thus, Plaintiffs Request for Production number 18 is beyond the scope of permissible discovery in this case. See

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315 F.R.D. 698, 94 Fed. R. Serv. 3d 40, 2016 WL 1105263, 2016 U.S. Dist. LEXIS 39108, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bitpay-inc-v-massachusetts-bay-insurance-gand-2016.