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Eli Lilly and Co. v. Arch Insurance Co.

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

September 19, 2016

ELI LILLY AND COMPANY, et al. Plaintiffs,
v.
ARCH INSURANCE COMPANY, et al. Defendants.

          ORDER ON PLAINTIFFS' MOTION FOR SANCTIONS

          LARRY J. McKINNEY, JUDGE United States District Court

         Plaintiffs Eli Lilly and Company (“Lilly”) and Eli Lilly do Brasil LTDA (“Lilly do Brasil”) (collectively, “Plaintiffs”) have moved for sanctions against Defendants Arch Insurance Company and Arch Specialty Insurance Company (collectively, “Arch”) pursuant to Rule 37 of the Federal Rules of Civil Procedure (“Rule 37”). Dkt. No. 375. Plaintiffs asserts that Arch's unilateral decision to cancel the Rule 30(b)(6) deposition of John Touchstone (“Touchstone”), which was scheduled to commence on February 10, 2016, violated this Court's Orders dated January 29, 2016, and February 2, 2016. Further, Plaintiffs contend that Arch's subsequent evasive tactics to reschedule a Rule 30(b)(6) deposition and the personal fact deposition of Touchstone amount to an abuse of the discovery process. Both of these failures, Plaintiffs assert warrant sanctions, including attorneys' fees and expenses incurred by Plaintiffs for the cancelled deposition and the filing of this motion as well as the establishment of two contested facts that were at issue in the depositions: (1) Lilly do Brasil is a named insured; and (2) Brazil is included in the Arch policies' “coverage territory.”[1] Arch denies that its cancellation violated any of the Court's orders or that its conduct amounts to an abuse of the discovery process such that an award of sanctions is proper.

         For the reasons stated herein, the Court GRANTS in part and DENIES in part Plaintiff's Motion for Sanctions.

         I. FACTUAL BACKGROUND

         Plaintiffs in this case seek coverage under its general liability insurance policies for claims arising in Brazil against Lilly do Brasil and Lilly. Specifically, Plaintiffs seek coverage for (1) defense and, if necessary, indemnification against suits brought by the Brazilian government and individuals who worked or lived at or near the facility that alleged injury from contamination at Lilly do Brasil's former facility in Brazil; and (2) the costs of investigating and remediating the contamination. Arch denies any defense, indemnity, or remediation cost obligation.

         On November 20, 2015, Arch filed a Motion for Judgment on the Pleadings in which it alleges, in part, that Plaintiffs cannot support their claim that the Arch policies should be reformed because the parties intended for them to cover Lilly's subsidiaries, including Lilly do Brasil. Dkt. No. 362. Arch also asserts a foreign law defense. Id.

         On December 9, 2015, Arch moved to stay discovery between it and Plaintiffs based on its arguments in the Motion for Judgment on the Pleadings. Dkt. No. 318. On January 28, 2016, the Court granted in part and denied in part Arch's motion to stay discovery (“Jan. 28 Order”). Dkt. No. 342. Specifically, the Court stated, “[T]he discovery between Lilly and Arch shall be limited to the foreign law defense and arguments raised by Arch in its Motion for Judgment on the Pleadings.” Dkt. No. 342 at 4.

         On February 2, 2016, Plaintiffs' counsel informed the Court that a dispute had arising regarding the scope of the discovery contemplated by the Jan. 28 Order, namely, whether or not a deposition of Arch's Rule 30(b)(6) witness should proceed; therefore, the Court scheduled a Telephonic Status Conference to resolve the dispute. Dkt. No. 345. During the teleconference, the Court heard arguments from the parties on the issue and concluded “that the deposition may take place as limited to the issues raised by Arch in its Motion for Judgment on the Pleadings and its application of foreign law argument and notice.” Dkt. No. 346 (“Feb. 2 Order”). The Court offered to make itself available on the day of the deposition to help the parties narrow the deposition requests or to resolve any disputes that arose. Id.

         At the time of the February 2, 2016, teleconference, Arch had identified John Touchstone (“Touchstone”) as its Rule 30(b)(6) witness. However, given Touchstone's key role in writing/acquiring the Arch policies at issue, Plaintiffs had also noticed Touchstone's personal deposition for the same time in or to save resources; it served both subpoena's on Arch's counsel. Dkt. No. 377 at 4. The depositions were set to occur on February 10, 2016. Id. at 4-5.

         However, on February 8, 2016, at approximately 10:10 p.m., Arch's counsel contacted Plaintiffs and cancelled the Rule 30(b)(6) deposition offering no explanation but stating, “We will reset the deposition as promptly as we can consistent with your schedule. I know this is very unfortunate and will work with you to get it reset as promptly as possible. I apologize.” Dkt. No. 376-14.

         At Arch's counsel's request, counsel for both parties conferred by telephone the next morning. Dkt. No. 376-16. Plaintiffs' counsel summarizes the conversation as follows:

[Mr. Shadley] stated that he was in California and had been preparing Mr. Touchstone for his depositions, and that during his preparation he had come to the conclusion that there “was something wrong with Mr. Touchstone.” He stated that Mr. Touchstone “might have a condition, ” that is “answers would not be reliable, ” and the he didn't “want everyone to waste their time flying out to California.” Mr. Shadley said that Arch would be designating a different 30(b)(6) witness. He also said that Arch would work around my schedule in resetting the 30(b)(6) deposition so as to minimize the inconvenience of the last minute cancellation. I informed Mr. Shadley that Lilly would be seeking costs, which Mr. Shadley acknowledged as being reasonable under the circumstances.

Dkt. No. 376-1, ¶ 16.

         On or around February 23, ...


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