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National Union Fire Insurance Co. of Pittsburgh, P.A. v. Mead Johnson & Co.

United States District Court, S.D. Indiana, Evansville Division

March 10, 2014

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Plaintiff,
v.
MEAD JOHNSON & COMPANY, MEAD JOHNSON NUTRITION COMPANY, Defendants. MEAD JOHNSON NUTRITION COMPANY, MEAD JOHNSON & COMPANY, Counter Claimants,
v.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., LEXINGTON INSURANCE COMPANY, Counter Defendants.

ENTRY ON NATIONAL UNION AND LEXINGTON'S RULE 72(a) OBJECTION TO MAGISTRATE JUDGE HUSSMANN'S OCTOBER 21, 2011 ORDER

RICHARD L. YOUNG, Chief District Judge.

This case arises out of prior litigation between PBM Products, LLC ("PBM"), and Mead Johnson Nutrition Company and Mead Johnson & Company ("Mead Johnson"), competitors in the sale of infant formula (the "PBM Action"). The PBM Action involved claims that Mead Johnson engaged in a false advertising campaign against store brand infant formulas manufactured by PBM Products LLC, Mead Johnson's business competitor, by claiming in a direct mailer to consumers that PBM's store brand infant formulas were nutritionally inferior to Mead Johnson's infant formula, Enfamil LIPIL®, in violation of the Lanham Act (15 U.S.C. § 1125(a)(1)). On November 10, 2009, PBM prevailed at trial and obtained a $13.5 million judgment. See PBM Products, LLC v. Mead Johnson Nutrition Co., et al., 678 F.Supp.2d 390 (E.D. Va. 2009), aff'd , 639 F.3d 111 (4th Cir. 2011).

During this general time frame, Mead Johnson was insured by both National Union Fire Insurance Company under Commercial General Liability Policy No. 090-72-27, and by Lexington Insurance Company under Commercial Umbrella Liability Policy No. XXXXXXXXX, both of which provided advertising liability coverage for the policy period February 10, 2009 to February 10, 2010. Following the jury verdict, Mead Johnson sought insurance coverage from National Union and Lexington (collectively "Insurers") for the underlying PBM Claim. This prompted National Union to file the present declaratory judgment action on January 6, 2011, in this court, seeking a declaration that it is not obligated to defend or indemnify Mead Johnson with respect to the underlying PBM Action because, inter alia, Mead Johnson failed to give timely notice of the claim, and the damages imposed by the jury in the underlying PBM Lawsuit are not covered under the Policy. Mead Johnson counterclaimed against both Insurers for breach of contract and a declaration that it is entitled to coverage under the respective Policies.

Since the filing of this lawsuit, Insurers have filed a number of appeals of discovery orders issued by the Magistrate Judge pursuant to Rule 72(a) of the Federal Rules of Civil Procedure. Those appeals were denied as moot following the court's entry of summary judgment on the issue of late notice in favor of the Insurers. (Filing No. 267).

Mead Johnson appealed the court's entry to the Seventh Circuit Court of Appeals. In a published opinion, the Court held that Mead Johnson "failed inexcusably to comply with the notice provisions in its liability insurance policies, " but reversed the entry of summary judgment because "there has been no factual development in the district court concerning the issue of harm." Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Mead Johnson & Co., LLC , 735 F.3d 539, 544-45 (7th Cir. 2013). The case was remanded to this court for further proceedings consistent with its opinion. Id. As a result of the Seventh Circuit's ruling, National Union's Rule 72(a) appeals are now ripe for ruling. This Entry addresses the Insurers' Objection to the Magistrate Judge's October 21, 2011 Order.

I. The Discovery Order

On August 19, 2011, Mead Johnson filed a Motion to Compel the production of the following: (1) the underwriting files for the Policies at issue; (2) the insurers' communications with reinsurers concerning the policies and claims at issue; (3) the portions of the Insurers' manuals or marketing materials applicable to the types of coverage and claims at issue; (4) information sufficient to reflect any relevant reserves concerning the Policies; (5) information sufficient to reflect the Insurers' approval of the Paul Hastings Law Firm; and (6) information sufficient to reflect the Insurers' payment of advertising coverage for claims brought by the Insured's consumers[1]. (Filing No. 103). On October 21, 2011, the Magistrate Judge granted in part, and denied in part, Mead Johnsons' Motion to Compel. Specifically, the Magistrate Judge granted Mead Johnson's request with respect to: (1) the underwriting files; (2) communications between the Insurers' reinsurers; (3) the number of times the Paul Hastings Law Firm was retained by the Insurers to defend claims brought pursuant to "personal and advertising injury" for the period April 27, 2008, through April 27, 2010; and (4) the Insurers' manuals or marketing materials. In addition, he ordered the Insurers to "make available for examination a person from the unit responsible for handling Mead [Johnson]'s claim to testify as to what guidelines or procedures for denying or paying claims was in effect for the period of time from January 1, 2008, through December 31, 2010." (Filing No. 131).

II. Standard of Review

The court's review of the Magistrate Judge's discovery-related decision is governed by Rule 72(a) of the Federal Rules of Civil Procedure. That rule provides that a district court may modify or set aside any part of a non-dispositive order referred to a magistrate judge that is clearly erroneous or contrary to law. FED. R. CIV. P. 72(a) ("The district judge in the case must consider timely objections and modify or set aside any part of [the magistrate judge's nondispositive] order that is clearly erroneous or contrary to law."). The clear error standard is highly differential, permitting reversal only when the district court "is left with the definite and firm conviction that a mistake has been made." Weeks v. Samsung Heavy Indus. Co., Ltd. , 126 F.3d 926, 943 (7th Cir. 1997).

III. Discussion

The posture of this case has changed to a degree since the Magistrate Judge made his rulings. The focus now is on whether the Insurers' were harmed (or prejudiced) by Mead Johnson's untimely notice of the PBM Action, whether there is "personal and advertising injury" coverage under the Policy, whether any exclusions apply ( i.e., whether the first "publication" was made during the policy period, etc.), and whether National Union's, as opposed to Mead Johnson's, copy of the Deductible Endorsement is operative and binding on the parties. With this understanding in mind, the court now turns to the merits of the Insurers' objections.

A. Underwriting Files

The Magistrate Judge found Mead Johnson's request for the entire underwriting file to be overly broad, and limited his ruling to:

only policy-specific materials concerning the placement, underwriting, issuance, scope and application of the particular policies at issue and the identity of the persons involved in the decision to ...

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