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Eli Lilly and co. v. Arch Insurance Co.

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

July 10, 2017

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

          ORDER

          LARRY MCKINNEY, UNITED STATES DISTRICT JUDGE.

         This matter comes before the Court on Defendants', Arch Insurance Company and Arch Specialty Insurance Company's (collectively, “Arch's”), Motion to Compel the Depositions of Ian S. Pettman and Mike Brown or, in the Alternative, to Strike the Affidavits of Ian S. Pettman and Mike Brown, and Motion for Sanctions (the “Motion”). Dkt. No. 631. In the Motion, Arch seeks to compel the depositions of two British citizens that submitted affidavits on behalf of Plaintiffs, Eli Lilly and Company and Eli Lilly do Brasil, Ltda. (collectively, “Lilly”), or alternatively, to strike their affidavits in connection with Lilly's Second Amended Complaint and Cross Motion for Summary Judgment. Dkt. No. 632 at 35. Arch also requests that the Court order Lilly “to pay Arch's costs incurred in conjunction with this motion and [Arch's] prior attempts to obtain” the desired depositions. Id. For the reasons stated herein, the Court GRANTS in part and DENIES in part Arch's Motion.

         I. BACKGROUND

         Generally, this case involves an insurance dispute that arises from claims against Eli Lilly do Brasil (“Lilly Brasil”) for alleged environmental contamination and products liability injuries related to a plant in Brazil. Dkt. No. 289, ¶¶ 10-55. In its Second Amended Complaint, Lilly asserts that the liabilities of Lilly Brasil, a wholly-owned subsidiary of Eli Lilly and Company (“Lilly U.S.”), are covered by certain primary and excess insurance policies purchased by Lilly U.S. Id. at ¶¶ 56-98. Lilly also asserts that if Lilly Brasil is not expressly covered, certain excess insurance policies should be reformed to allow for such coverage based on the doctrine of mutual mistake. Id. at ¶¶ 99-175. In support of its allegation regarding mutual mistake, Lilly attached affidavits (the “Affidavits”) of British citizens, Ian S. Pettman and Mike Brown (collectively, the “JLT Witnesses”), to its First Amended Complaint, Dkt. No. 211, Exs. I (“Pettman Aff.”) & J (“Brown Aff.”), and relied on the Affidavits in its Cross Motion for Partial Summary Judgment. Dkt. No. 460 at 9-10. While both of the JLT Witnesses are employees of the British company, JLT Specialty Limited (“JLT”), the Affidavits were executed by the JLT Witnesses in their individual capacities, rather than their official capacities for JLT. See generally, Pettman Aff; Brown Aff.

         In the Affidavits, the JLT Witnesses explained that they have worked closely with Lilly U.S. to provide and manage worldwide excess commercial general liability, employee liability, and auto insurance coverage to Lilly U.S. and its subsidiaries. Pettman Aff., ¶¶ 4-6; Brown Aff., ¶ 5. Because JLT is not licensed in the United States, JLT had to work directly with insurance brokers in the United States (the “U.S. Brokers”), who had direct contact with the insurers that provided such coverage to Lilly U.S. Pettman Aff., ¶ 7. Although JLT could not directly obtain this worldwide coverage for Lilly U.S., it remained heavily involved with the procurement of coverage by reviewing quotes from insurers and communicating with the U.S. Brokers regarding the desired coverage. Id. at ¶ 9. In light of their experiences working with Lilly U.S., the JLT Witnesses stated that they believe that the insurers providing coverage to Lilly U.S., including Arch, “were aware, and intended, that those policies [at issue] should cover Lilly [U.S.]'s world-wide operations, including those at, or arising from the activities of Lilly [U.S.]'s wholly-owned subsidiary, [Lilly Brasil].” Pettman Aff., ¶ 10; Brown Aff., ¶ 9. The JLT Witnesses further “affirm[ed] under the penalties of perjury that [their] affidavit[s are] true and accurate, to the best of [their] knowledge and belief[s].” Pettman Aff. at 4; Brown Aff. at 3.

         On December 2, 2016, Arch filed a Motion to Strike the Affidavits, pursuant to Federal Rules of Civil Procedure 37(c)(1)(C) and 12(f). Dkt. No. 554. On February 8, 2017, the Court denied Arch's Motion to Strike. Dkt. No. 603. The Court found that, even though certain aspects of Lilly U.S.'s relationship with JLT were “troubling, ” Arch undoubtedly knew about the JLT Witnesses since the filing of Lilly's First Amended Complaint and could have approached the JLT Witnesses directly for discovery even though they are British citizens. Id. at 4. The latter was suggested, in part, by Lilly in response to Arch's Motion to Strike. Dkt. No. 568 at 3, 7.

         Following the Court's ruling on Arch's Motion to Strike, Arch proceeded to seek depositions of the JLT Witnesses through the United Kingdom's court system (the “UK Court”), in accordance with the Hague Convention. Dkt. No. 632 at 8. On February 28, 2017, Master McCloud of the UK Court initially ordered that Arch may take the oral evidence of the JLT Witnesses for up to seven hours each, including time for cross-examination and re-direct examination of the JLT Witnesses. Dkt. No. 632, Ex. 5.

         JLT objected and sought to set aside Master McCloud's order. Dkt. No. 652 at 10. Prior to the hearing that was to take place on JLT's motion to set aside, Arch and JLT negotiated several terms regarding the process by which the JLT Witnesses would be deposed, including limiting the scope of questioning, providing the JLT Witnesses with a summary of the lines of questioning seven days in advance, and treating the depositions as trial depositions, as opposed to discovery depositions. Id. However, on the morning of the hearing, Arch indicated that it did not wish to proceed with the depositions without the ability to cross-examine the JLT Witnesses and admitted that such cross-examination is not permitted under English law. Id. at 11. On March 16, 2017, Senior Master Fontaine set aside Master McCloud's order in its entirety, finding that Arch is not entitled to cross-examine the JLT Witnesses under English law. Dkt. No. 652, Ex. A-1 at 11. Senior Master Fountaine further ordered Arch to pay fees to JLT. Id. at 12.

         In light of the orders issued in the UK Court, Arch now seeks to either compel the JLT Witnesses' depositions in the United States, or alternatively, to strike the Affidavits altogether. See generally, Dkt. No. 632. Arch asserts that Lilly has sufficient control over the JLT Witnesses to compel them to appear for depositions under the Federal Rules of Civil Procedure (the “Rules”). Id. at 9-13. Arch further argues that, if the Court were to find that the JLT Witnesses could not be compelled to testify in depositions, the Affidavits should be stricken because the JLT Witnesses do not have personal knowledge of the information contained within the affidavits and because, without the ability to subject the JLT Witnesses to cross-examination or to otherwise test the Affidavits' veracity, the Affidavits amount to inadmissible hearsay. Id. at 15-22. Arch also requests that the Court require Lilly to pay Arch's costs associated with this Motion and Arch's prior attempts to obtain the depositions of the JLT Witnesses. Id. at 23-30.

         Lilly opposes the Motion because it lacks control over the JLT Witnesses. Dkt. No. 652 at 11-14. Lilly further argues that, while the Court cannot compel cross-examination of the JLT Witnesses, Arch can still obtain its desired testimony through direct examination under English law, and that the Affidavits should not be rendered inadmissible simply because the JLT Witnesses cannot be cross-examined. Id. at 14-20.

         II. CONTROL AND PERSONAL JURISDICTION OVER THE JLT WITNESSES

         Although there is a clear relationship between Lilly and JLT, there is no evidence that Lilly has sufficient control over JLT for this Court to compel Lilly to produce the JLT Witnesses for depositions. Arch correctly points out that Lilly U.S. had several agreements with JLT, through which JLT agreed to provide insurance brokering services to Lilly U.S. and agreed to encourage the JLT Witnesses to assist Lilly U.S. throughout this litigation. See Dkt. No. 632 at 10-13, Ex. 8. However, none of these agreements forfeit JLT's status as an independent, British company, completely distinct from Lilly U.S. Because JLT remains an independent entity and because none of its agreements with Lilly U.S. allow Lilly to demand that the JLT Witnesses appear for depositions, Lilly lacks control over JLT and the JLT Witnesses and the Court cannot compel Lilly to produce the JLT Witnesses for depositions in either the United States or the United Kingdom.

         Furthermore, the Court may only compel the JLT Witnesses' depositions if it has personal jurisdiction over them. A district court must have personal jurisdiction over a non-party in order to compel its compliance with a discovery request. See Leibovitch v. Islamic Republic of Iran, 188 F.Supp.3d 734, 745 (N.D. Ill. 2016) (citing Reinsurance Co. of Am. v. Administratia Asigurarilor de Stat, 902 F.2d 1275, 1281 (7th Cir. 1990); Gucci Am., Inc. v. Weixing Li, 768 F.3d 122, 141 (2nd Cir. 2014); In re Uranium Antitrust Litig., 480 F.Supp. 1138, 1145 (N.D. Ill. 1979); 16 MOORE'S FEDERAL PRACTICE § 108.125 (3d ed. 2003)). A determination of personal jurisdiction involves two steps. The Court must first determine whether the state's “long-arm jurisdiction” statute allows jurisdiction and, second, decide whether the exercise of jurisdiction comports with due process. See NUCOR Corp. v. Aceros Y Maquilas de Occidente, S.A., 28 F.3d 572, 580 (7th Cir. 1994). Indiana's jurisdiction statute is Indiana Trial Rule 4.4(A), which states that “a court of this state may exercise jurisdiction on any basis not inconsistent with the Constitutions of this state or the United States.” Accordingly, this Court has personal jurisdiction to the extent allowed by the Due Process Clause of the Fourteenth Amendment.

         For a forum to have personal jurisdiction, the Due Process Clause requires that a non-resident entity have “certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.'” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). Personal jurisdiction under Indiana Trial Rule 4.4(A) may be either general or specific. See Alpha Tau Omega v. Pure Country, Inc., 185 F.Supp.2d 951, 956 (S.D. Ind. 2002). General jurisdiction makes a non-resident entity amenable to suit within a particular forum regardless of the subject matter of the suit, based on an entity's continuous and systematic contacts with the forum. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-16 (1984). Specific jurisdiction makes a non-resident entity amenable only to suits arising out of or related to its contacts with the particular forum. Id. at 414. Specific jurisdiction may be based on relatively modest contacts with the forum if such contacts have a substantial connection to the litigation at issue. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-76 (1985). For specific jurisdiction, due process requires that a non-resident entity have established contacts with the forum state by purposefully availing itself of the privilege of conducting business there. See Asahi Metal Indus. Co. v. Superior Ct. of Cal., 480 U.S. 102, 112 (1987). To “purposefully avail” itself in a forum state, a non-resident entity's conduct and connection with the forum state should be such that it should reasonably anticipate being hauled into court in that state. Burger King, 471 U.S. at 474. When determining whether personal jurisdiction may be exercised, the Court engages in a ...


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