Fidelity & Deposit Co. v. McCulloch

168 F.R.D. 516, 1996 U.S. Dist. LEXIS 13397, 1996 WL 520506
CourtDistrict Court, E.D. Pennsylvania
DecidedSeptember 10, 1996
DocketCivil Action No. 96-338
StatusPublished
Cited by43 cases

This text of 168 F.R.D. 516 (Fidelity & Deposit Co. v. McCulloch) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fidelity & Deposit Co. v. McCulloch, 168 F.R.D. 516, 1996 U.S. Dist. LEXIS 13397, 1996 WL 520506 (E.D. Pa. 1996).

Opinion

MEMORANDUM

JOYNER, District Judge.

Today we address the complex and contentious discovery dispute that has arisen among certain parties to this action. Three motions are presented for decision: (1) the Motion to Compel of Defendants A. Donald McCulloch, Jr. (“McCulloch”), William R. Lewis (“Lewis”), and Reef C. Ivey, II (“Ivey”) (hereinafter “Defendants’ Motion”), (2) Ivey’s Supplemental Motion to Compel (hereinafter “Ivey’s Motion”), and (3) the Cross-Motion for a Protective Order of Plaintiff Fidelity and Deposit Company of Maryland (“Fidelity”). Defendants’ Motion concerns the interrogatories and requests for document production of Defendant McCulloch, and Plaintiffs Cross-Motion involves documents produced in response. Ivey’s Motion seeks to compel responses to his own discovery requests.

For the reasons that follow, we hold that Fidelity has waived the attorney-client and work product privileges with respect to some, but not all, of the documents it has disclosed, but deny the remainder of Defendants’ Motion. In addition, we grant Plaintiffs Motion for a Protective Order as to the remaining privileged disclosures, and grant in part and deny in part Ivey’s Motion. Lastly, we extend the discovery deadline in this case by an additional 30 days.

[519]*519BACKGROUND

Plaintiff Fidelity is a stock insurance company that issued to Nutri/System, Inc. (“Nutri/System”) a Pension and Welfare Fund Fiduciary Responsibility Policy (“Policy”) for successive annual periods from July 31, 1991 through July 31, 1993. Defendants McCulloch, Lewis, and Ivey are former officers and directors of Nutri/System.1

During 1993 and 1994, McCulloch, Lewis and Ivey were named as defendants in some or all of six related lawsuits, five filed in the Court of Common Pleas of Montgomery County, Pennsylvania, and one filed in this Court (hereinafter the “underlying actions”). Former Nutri/System employees brought the underlying actions to recover pension and medical benefits due pursuant to Nutri/System’s Pension and Profit Sharing Plan (hereinafter the “PPSP”). Plaintiffs in the underlying actions allege that McCulloch, Lewis, Ivey, and others are liable for said benefits under the Pennsylvania Wage Payment and Collection Law, Pennsylvania common law, and the Federal Employee Retirement Income Security Act of 1974 (“ERISA”).

Under the Policy at issue in this case, Fidelity provides Defendants coverage for

all sums which the Insured shall become legally obligated to pay as damages due to any claim made during the policy period against the Insured because of: (a) any Breach of Fiduciary Duty (as herein defined) by an Insured, or (b) any Breach of Fiduciary Duty by any other person for whom the Insured is legally responsible.

Defs.’ Mot. to Compel at Ex. A. A “Breach of Fiduciary Duty” is defined under the Policy as

the violation of any of the responsibilities, obligations, or duties imposed upon Fiduciaries by the Employee Retirement Income Security Act of 1974 ... or the common law or statutory law of any jurisdiction governing any of the Plan(s); the term includes any other negligent act, error or omission of the Insured in the Administration of any of the Plan(s).

Id. The Plan also contains certain relevant exclusions that may release Fidelity from any obligation to Defendants.

Fidelity accepted the duty to defend the underlying actions subject to a reservation of rights as to the PPSP claims that are not “ERISA type breaches of fiduciary duty.” See Defs.’ Mot. to Compel at Ex. C. As the number of claims grew and legal fees mounted,2 Fidelity continued to provide for a defense subject to this reservation of rights, all the while advising Defendants that it had “not yet made a determination regarding coverage of the claims asserted in the various litigations.” Id During this period, Fidelity consistently maintained that, while it was “continuing [its] review of the coverage issue,” it was “of the opinion that it may have no responsibility for the defense or indemnification of any claims for any losses attributed to any violations other than ERISA violations.” Id

On January 17, 1996, Fidelity instituted this declaratory judgment action to determine its rights and obligations to Defendants under the Policy. In response, Defendants McCulloch, Lewis, and Ivey asserted counterclaims alleging, inter alia, breach of contract, breach of fiduciary duty, and bad faith under the Pennsylvania Unfair Insurance Practices Act. Defendants contend generally that Fidelity’s attempts to disclaim coverage are motivated solely by a desire to avoid paying escalating defense costs.

Inevitably, this document intensive litigation produced discovery disputes necessitating judicial intervention. The various motions and memoranda of law submitted by both sides raise numerous issues apparently mooted by subsequent document production. We address only those questions that the parties identified in the August 27,1996 conference call as remaining in dispute and re[520]*520gard all other issues as having been resolved among the parties themselves. Throughout our analysis, we remain mindful that, under Federal Rule of Civil Procedure 26, Defendants “may obtain discovery regarding any matter, not privileged, which is relevant to subject matter involved in the pending action ... [so long as] the information sought appears reasonably calculated to lead to the discovery of admissible evidence.” Fed. R.Civ.P. 26(b)(1). We note also that Plaintiff, as the party resisting discovery, bears the burden of persuasion on its objections. Bayges v. SEPTA, 144 F.R.D. 269, 271 (E.D.Pa.1992); Roesberg v. Johns-Manville Corp., 85 F.R.D. 292, 297 (E.D.Pa.1980).

DISCUSSION

I. THE MOTION TO COMPEL OF DEFENDANTS MCCULLOCH, LEWIS, AND IVEY

A. Waiver of the Attorney-Client and Work Product Privileges

Plaintiff objects to many of Defendants’ interrogatories and requests for document production on the grounds that they call for privileged information. Defendants contend that Plaintiff waived any applicable privileges with respect to communications with counsel regarding the coverage decision, and allege two distinct bases on which we might find such a waiver. We find the first argument meritless, but agree that certain of Fidelity’s disclosures constitute a limited waiver.

1. Waiver by Placing the Advice of Counsel in Issue

Defendants contend first that Fidelity waived the protections of the attorney-client privilege by placing the advice of counsel at issue in this case. Defendants assert that Plaintiff “indirectly raised the issue of advice of counsel as part of its defense in both its Answer and the counterclaims against it” and “directly asserted such defense in answers and objections to discovery.” Defs.’ Mem. in Supp. of Mot. to Compel at 20. Defendants point obliquely to their attached Exhibit “H” (which simply includes Plaintiffs Responses to Counterclaims and Answers to Discovery) to substantiate these allegations.

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Bluebook (online)
168 F.R.D. 516, 1996 U.S. Dist. LEXIS 13397, 1996 WL 520506, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fidelity-deposit-co-v-mcculloch-paed-1996.