Aerojet Rocketdyne, Inc. v. Global Aerospace, Inc. ( 2022 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 | Aerojet Rocketdyne, Inc., No. 2:17-cv-01515-KJM-AC 12 Plaintiff, ORDER 13 v. 14 Global Aerospace, Inc., et al., 1S Defendants. 16 17 Plaintiff Aerojet Rocketdyne, Inc. (“Aerojet”) moves, under Federal Rule of Civil 18 | Procedure 16, to amend the scheduling order to reopen limited discovery on its bad faith 19 | insurance claim against defendant Global Aerospace, Inc. (“Global”). Having considered the 20 | parties’ positions, relevant legal authority, and the record in this case, the court grants Aerojet’s 21 | motion. 22 | I. BACKGROUND 23 Because prior orders have thoroughly explained the history of this insurance dispute, see, 24 | e.g., Mot. Strike Order, ECF No. 231, the court only summarizes relevant details here. Plaintiff 25 | Aerojet supplied rocket engines to non-party Orbital Sciences Corporation (“Orbital”). See 26 | Second Am. Compl. (“SAC”) § 36, ECF No. 149. Two malfunctions followed. First, on May 22, 27 | 2014, Aerojet’s engine failed during testing, ultimately causing “substantial damage to the engine, 28 | the test facility, and ground equipment.” /d. Second, on October 28, 2014, Orbital attempted to 1 launch a vehicle with cargo destined for the International Space Station. Id. The launch was 2 powered by two engines supplied by Aerojet. Id. Fifteen seconds into the launch, the vehicle 3 exploded and impacted near the launch pad, causing destruction of the launch vehicle and its 4 cargo, and “significant damage to the launch pad and associated facilities and buildings.” Id. 5 Orbital threatened to sue, id. ¶¶ 42–43, but Aerojet and Orbital resolved their dispute 6 before a lawsuit was filed, id. ¶ 48. Prior to finalizing settlement, however, Aerojet sought 7 insurance coverage for Orbital’s threatened claims. Id. ¶ 44. Aerojet is insured by defendant 8 Global. Before the Aerojet-Orbital settlement was finalized, Global was aware of the nature of 9 Orbital’s claims. Id. ¶¶ 44–47. Global was also aware that Aerojet would seek indemnification 10 from Global for the property damage included in the Orbital settlement. Id. Aerojet finalized its 11 settlement with Orbital, “tendered the settlement to Global, and requested Global reimburse 12 Aerojet for amounts . . . paid to Orbital under the settlement.” Id. ¶ 50. 13 Global retained Condon & Forsyth to lead its investigation into Aerojet’s reimbursement 14 request. See First Mot. to Recons. Order at 10,1 ECF No. 239. Importantly, the Condon & 15 Forsyth personnel who led the claims investigation were Katherine Posner and Wendy Grossman, 16 who are Global’s trial counsel in this case. See Mot. Reopen Sched. at 11–12, ECF No. 286-1. 17 After investigation, Global denied Aerojet’s reimbursement request, asserting the policy does not 18 provide indemnification for “amounts . . . paid to Orbital under the settlement . . . .” SAC ¶ 51. 19 Based on Global’s denial of its reimbursement request, Aerojet filed suit against Global in 20 Los Angeles County Superior Court, and Global timely removed to this court. See generally Not. 21 of Removal, ECF No. 1. The operative second amended complaint makes three claims: 22 (1)breach of written insurance contract; (2) breach of implied covenant of good faith and fair 23 dealing (“bad faith”), and (3) unfair competition in violation of California Business and 24 Professions Code section 17200 et seq. SAC ¶¶ 54–79. 25 Since this case’s inception, Global has responded to Aerojet’s discovery requests 26 regarding its bad faith claim by asserting privilege and work-product protection; this response has 1 To avoid confusion, pages cited here are those printed on the top right page of the document by the CM/ECF system. 1 resulted in a protracted discovery dispute. Aerojet filed a motion to compel production on 2 February 1, 2019, see ECF No. 151, which the court granted a month later, see Mot. Compel 3 Order, ECF No. 189. Global then moved for reconsideration, see ECF No. 197, which Aerojet 4 opposed, see ECF No. 200, and the court denied on October 7, 2019, see First Mot. to Recons. 5 Order, ECF No. 239. Global then moved for reconsideration a second time. See ECF No. 248. 6 Again, Aerojet opposed. See ECF No. 249. The court denied the Motion for Reconsideration and 7 granted the Motion to Compel in its entirety, again, on January 14, 2021. See generally Second 8 Mot. to Recons. Order, ECF No. 277. All in all, it took roughly two years to resolve Aerojet’s 9 Motion to Compel. Thus, while the deadline for fact discovery was June 15, 2019, see Amend 10 Sched. Order at 5, ECF No. 185, this court entered the order requiring Global to turn over the 11 claims investigation file on January 14, 2021, see Second Mot. to Recons. Order. As a result, 12 Aerojet only started receiving the contested documents in February 2021, and it soon began to 13 meet and confer regarding what it perceived as deficiencies in the production. Global sent its last 14 batch of production to Aerojet on May 12, 2021. See Mot. Amend Sched. at 17 n.6, ECF No. 15 286-1. At this point, Aerojet maintains Global’s production is inadequate. 16 While Global’s second Motion for Reconsideration2 was pending, the parties jointly 17 requested that the court defer hearing Global’s Motion for Summary Judgment on bad-faith 18 claims until the court ruled on Global’s second Motion for Reconsideration. See generally Joint 19 Stip., ECF No. 241. The court granted this request on October 15, 2019. See Min. Order, ECF 20 No. 245. On February 27, 2020, the court noted that it “will not amend the scheduling order 21 until” it resolved two pending motions: Global’s second Motion for Reconsideration, and an 22 unrelated Motion in Limine. See Min. Order, ECF No. 261. The court resolved Global’s Motion 23 for Reconsideration on January 14, 2021, see Second Mot. to Recons. Order, and its Motion in 24 Limine on May 7, 2021, see Mot. Limine Order, ECF No. 280. Once the court decided both 25 motions, Aerojet requested, on May 27, 2021, that the court reopen discovery on a limited basis 26 and that briefing on Global’s bad faith Motion for Summary Judgment be delayed until discovery 2 This is Global’s Second Reconsideration request vis-à-vis Aerojet’s Motion to Compel. Global has filed other Motions for Reconsideration in this matter as well. 1 was complete. See generally Joint Status Report, ECF No. 284. The court’s October 7, 2021 2 minute order was silent on these requests. See Minute Order, ECF No. 285. 3 Aerojet now moves to amend the scheduling order to reopen limited discovery on its bad 4 faith claim. See generally Mot. Amend Sched., ECF No. 286. Specifically, Aerojet seeks “to 5 amend the Scheduling Order to permit Aerojet to conduct up to five depositions, and similarly 6 limited written discovery, focused on the reasonableness and adequacy of the claims investigation 7 by Condon & Forsyth and documents Aerojet recently received regarding that investigation.” Id. 8 at 5. Global opposes, see ECF No. 287, and Aerojet has replied, see ECF No. 290. The court 9 submitted the matter without a hearing and resolves it here. 10 II. LEGAL STANDARD 11 A moving party must show good cause to modify a scheduling order. Fed. R. Civ. P. 12 16(b); Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 608 (9th Cir. 1992). The “good 13 cause” standard also applies to requests to reopen discovery. See, e.g., Sheridan v. Reinke, 14 611 F. App'x 381, 384 (9th Cir. 2015) (applying Johnson “good cause” requirement to motions to 15 reopen discovery); Yeager v. Yeager, No. 06-001196, 2009 WL 1159175, at *2 (E.D. Cal. 16 Apr. 29, 2009) (a party must show “good cause” to reopen discovery). 17 Specific factors courts consider when analyzing a motion to reopen discovery include: 18 (1) whether trial is imminent, (2) whether the request is opposed, (3) whether the 19 non-moving party would be prejudiced, (4) whether the moving party was diligent 20 in obtaining discovery within the guidelines established by the court, (5) the 21 foreseeability of the need for additional discovery in light of the time allowed for 22 discovery by the district court, and (6) the likelihood that the discovery will lead to 23 relevant evidence. 24 United States, ex rel. William Schumer v. Hughes Aircraft Co., 63 F.3d 1512, 1526 (1995) (citing 25 Smith v. United States, 834 F.2d 166, 169 (10th Cir. 1987)). Of these six factors, the primary 26 factor is the fourth: whether the moving party was diligent in its attempts to complete discovery 27 in a timely manner. See Johnson, 975 F.2d at 609. If the moving party was not diligent, the 28 inquiry should end, and the request should be denied. Id. 29 ///// 1 A decision to reopen discovery involves an exercise of discretion. Hughes Aircraft Co. v. 2 United States, ex rel. William Schumer, 520 U.S. 939, 952 (1997). “Motions are more often 3 granted when the opposing party's actions caused delay or when the need to amend arises from 4 some unexpected or outside source.” Fed. Deposit Ins. Corp. as Receiver for Butte Cmty. Bank v. 5 Ching, No. 13-01710, 2016 WL 1756913, at *2 (E.D. Cal. May 3, 2016) (citing Hood v. Hartford 6 Life and Acc. Ins. Co., 567 F. Supp. 2d 1221, 1225–26 (E.D. Cal. 2008)). 7 III. ANALYSIS 8 Because the moving party’s diligence is the most important consideration in the court’s 9 good cause inquiry, the court starts there. Finding that Aerojet was diligent in its attempts to 10 complete discovery in a timely manner, the court then assesses the remaining factors. 11 A. Aerojet was Diligent 12 Courts use a three-pronged test to assess diligence in the context of a motion to amend the 13 scheduling order under Rule 16: 14 [T]o demonstrate diligence under Rule 16's “good cause” standard, the movant may 15 be required to show the following: (1) that she was diligent in assisting the Court in 16 creating a workable Rule 16 order; (2) that her noncompliance with a Rule 16 17 deadline occurred or will occur, notwithstanding her diligent efforts to comply, 18 because of the development of matters which could not have been reasonably 19 foreseen or anticipated at the time of the Rule 16 scheduling conference; and (3) that 20 she was diligent in seeking amendment of the Rule 16 order, once it became 21 apparent that she could not comply with the order. 22 Grant v. United States, No. 11-00360, 2011 WL 5554878, at *4 (E.D. Cal. Nov. 15, 2011) 23 (quoting Jackson v. Laureate, Inc., 186 F.R.D. 605, 608 (E.D. Cal. 1999)). 24 A fair analysis under all three prongs suggests Aerojet was diligent in its attempts to 25 complete discovery in a timely manner. As to the first prong, Aerojet has diligently assisted the 26 court in creating a workable Rule 16 order. When Global’s Motions for Reconsideration on 27 Aerojet’s Motion to Compel prevented Aerojet from timely obtaining the discovery it now seeks, 28 Aerojet repeatedly brought scheduling concerns to the court’s attention. See, e.g., Minutes, ECF 29 No. 257 (“[Aerojet’s counsel] raised concerns related to scheduling” when the discovery deadline 30 lapsed with Global’s second Motion for Reconsideration pending.); see also Joint Status Report at 1 7, ECF No. 259 (“[Aerojet proposes that] the parties . . . adopt a schedule that will allow them to 2 move forward with those pieces of the litigation process that they can, as soon as they can, rather 3 than planning to come back to this Court for further deadlines and scheduling orders at each step 4 of the process.”). When the court decided it would not address the scheduling order until after it 5 decided two of Global’s pending motions, Aerojet remained proactive with regard to scheduling: 6 Aerojet proposed short and specific discovery deadlines to take effect if the pending Motion for 7 Reconsideration was denied. See Joint Status Report at 8, ECF No. 259. And after Global’s 8 motions were decided, Aerojet again raised the scheduling issue in its separate statement to the 9 May 27, 2021 Joint Status Report. See ECF No. 284. Less than a month after the court issued a 10 minute order that was unresponsive to this concern, Aerojet brought the motion at issue here. See 11 generally Mot. Amend Sched. In short, Aerojet has been consistently diligent in assisting the 12 court in creating a workable Rule 16 order. The first prong is satisfied. 13 These same facts, particularly Aerojet’s filing its Motion to Amend the Scheduling Order 14 less than a month after the court’s October 7, 2021 minute order, also demonstrate that Aerojet 15 was diligent in seeking amendment of the Rule 16 order once it became apparent it could not 16 comply with that order; thus, Aerojet also satisfies the third prong. 17 Finally, as to the second prong, Aerojet could not have foreseen, in late 2017, that it 18 would still be waiting to receive documents essential to its bad faith claim in mid-2021. 19 Resolution of Aerojet’s Motion to Compel was delayed by two Motions for Reconsideration. 20 These motions caused the Motion to Compel to remain pending for roughly two years. Aerojet 21 could not have reasonably foreseen or anticipated this at the time of the Rule 16 scheduling 22 conference. Nor could Aerojet have foreseen that the court would not revisit the scheduling 23 order, as it had contemplated, after it resolved Global’s motions. The second prong is met. 24 Global’s contrary suggestions are unpersuasive. Global, for instance, notes that Aerojet 25 “failed to make timely efforts to discover arguably relevant evidence pertaining to its bad faith 26 claim that was not subject to its claims of privilege.” Opp’n Amend Sched. at 13. But a finding 27 of diligence does not require a movant to seek discovery the way Global would have done it, or to 28 ///// 1 request all “arguably relevant” evidence. Aerojet’s diligence, which is given primary 2 consideration in the court’s good cause analysis, is evident from the record. 3 B. Other Good Cause Factors Weigh in Favor of Reopening Discovery 4 Having determined that factor four—Aerojet’s diligence—is met, the court turns to the 5 remaining factors to determine whether Aerojet has shown good cause for amending the 6 scheduling order.3 Factors one, two, three and five do not require extensive discussion. As to the 7 first factor, trial has not been scheduled, so it is not “imminent.” This weighs in favor of 8 reopening discovery. As to the second factor, Aerojet’s request is opposed. This weighs against 9 reopening discovery, at least on its face. As to the third factor, Global provides its entire 10 argument in one sentence: “the advocate-witness rule could result in disqualification of the 11 Global Defendants’ counsel.” Opp’n Amend Sched. at 21. Without more, the court will not 12 speculate on this point; the court declines to make Global’s arguments for it. This factor weighs 13 in favor of reopening discovery; even if it did not, it would not shift the balance among the six 14 factors or alter the court’s ultimate conclusion. As to the fifth factor, as the court has explained 15 above in its diligence analysis, Aerojet could not have foreseen, in 2017, that it would still be 16 waiting for discovery in 2021. To the extent the need for additional discovery became 17 foreseeable, Aerojet was still barred from moving to amend the scheduling order until the court 18 decided Global’s pending motions. See Min. Order, ECF No. 261. Those motions were not 19 resolved until May 2021, the same month Aerojet once against raised the need for additional 20 discovery in the motion at issue here. The fifth factor is satisfied. 21 ///// 3 For ease of reference, as discussed above, the six factors are: (1) whether trial is imminent, (2) whether the request is opposed, (3) whether the non-moving party would be prejudiced, (4) whether the moving party was diligent in obtaining discovery within the guidelines established by the court, (5) the foreseeability of the need for additional discovery in light of the time allowed for discovery by the district court, and (6) the likelihood that the discovery will lead to relevant evidence. Hughes Aircraft Co., 63 F.3d at 1526 (citing Smith, 834 F.2d at 169). 1 The sixth factor, the likelihood that the requested discovery will lead to relevant evidence, 2 also favors reopening discovery. Aerojet seeks to conduct up to five depositions of Condon & 3 Forsyth personnel involved in the claims investigation, starting with Ms. Posner and Ms. 4 Grossman, the “key parties responsible for investigating Aerojet’s claims.” Mot. Amend Sched. 5 at 13. Aerojet also seeks leave to propound five requests for production, five requests for 6 admission and five interrogatories focused on Condon & Forsyth’s claims investigation and 7 relevant documents recently received by Aerojet. Id. at 5. 8 The parties dispute whether the requested discovery is likely to lead to new evidence. 9 Global argues it has already complied with this court’s order to produce Condon & Forsyth’s 10 entire file from the date Global engaged it to investigate Aerojet’s claim through the date Global 11 issued its denial letter; reopening discovery will therefore reveal nothing new. See Opp’n Amend 12 Sched. at 20. Aerojet in turn questions whether Condon & Forsyth could perform the “mighty 13 tasks” associated with “multi-million-dollar insurance claims” with “fewer than 30 internal 14 emails,” many of which were non-substantive, and “fewer than five partial pages of typewritten 15 notes and no hand-written notes.” Mot. Amend Sched. at 13–14. Aerojet further notes apparent 16 incongruities between Condon & Forsyth’s billing entries and Global’s document production to 17 date, asserting that these incongruities “raise[] questions that can only be answered by Ms. Posner 18 and Ms. Grossman.” Id. at 14. Aerojet’s request to probe the incongruities is a fair one. The 19 court expressly rejects Global’s assertion that the heightened standard articulated in Shelton v. 20 Am. Motors Corp., 805 F.2d 1323 (8th Cir. 1986) applies to the proposed depositions of Ms. 21 Posner and Ms. Grossman. See Opp’n Amend Sched. at 19. This is an echo of arguments made 22 across two years of briefing on Aerojet’s Motion to Compel and Global’s two Motions for 23 Reconsideration. Aerojet intends to depose Ms. Posner and Ms. Grossman in their capacity as 24 claims handlers, not trial counsel, see Mot. Amend Sched. at 12, and will be bound by that 25 representation. Ultimately, the court agrees with Aerojet’s assertion that it “should not be 26 foreclosed from deposing the individuals at the heart of Global's investigation solely because they 27 happen presently to serve as the Global Defendants' trial counsel. Such a rule would permit 28 insurers to circumvent the limitations on attorney-client privilege and shield critical evidence 1 relating to their investigations from discovery by hiring lawyers when they receive a notice of 2 claim.” Id. at 13. 3 Given that the requested discovery is likely to uncover new evidence, the court next 4 considers whether the new evidence is likely to be relevant. Aerojet alleges Global “had the duty 5 to act fairly and in good faith to Aerojet in carrying out its responsibilities under the Policies, 6 including reasonably investigating claims . . . .” SAC ¶ 68. Aerojet’s requested discovery is 7 directed at the reasonableness of Condon & Forsyth’s investigation of Aerojet’s claim for 8 coverage; it is relevant. The court thus finds the requested discovery is likely to lead to relevant 9 evidence, and the sixth factor is met. 10 Global’s primary argument to the contrary is circular and unpersuasive. Specifically, 11 Global argues that its decision to disclaim coverage was reasonable, and that the information 12 Aerojet seeks about Condon & Forsyth’s claims investigation is therefore irrelevant because the 13 mechanics of a claims investigation are irrelevant if the investigation’s conclusion was 14 reasonable. This argument assumes its conclusion: Global attempts to deny Aerojet access to 15 evidence that could prove the disclaimer was unreasonable by simply asserting the disclaimer was 16 reasonable. Global’s pre-trial proclamation that its denial of coverage was reasonable does not 17 render the facts related to Aerojet’s bad faith claim irrelevant for purposes of conducting 18 discovery. See Shade Foods, Inc. v. Innovative Prods. Sales &Mktg., Inc., 93 Cal. Rptr. 2d 364, 19 386 (Cal. Ct. App. 2000) (“Among the most critical factors bearing on the insurer’s good faith is 20 the adequacy of its investigation of the claim.”). Aerojet is entitled to the requested discovery. 21 See Landes v. Skil Power Tools, No. 12-01252, 2013 WL 6859837, at *3 (E.D. Cal. Dec. 30, 22 2013) (quoting Moore's Federal Practice § 16.14[b] (2003): “[G]ood cause is likely to be found 23 when the moving party has been generally diligent, the need for more time was neither 24 foreseeable nor its fault, and refusing to grant the continuance would create a substantial risk of 25 unfairness to that party.”); see also Ching, 2016 WL 1756913, at *2 (“Motions are more often 26 granted when the opposing party's actions caused delay or when the need to amend arises from 27 some unexpected or outside source.” (citing Hood, 567 F. Supp. 2d at 1225–26)). 1 IV. CONCLUSION 2 For the foregoing reasons, the court grants Aerojet’s Motion to Amend the Scheduling 3 Order. The parties shall complete the limited discovery ordered here by March 4, 2022. The 4 court’s October 7, 2021 minute order, ECF No. 285, setting a hearing date and briefing schedule 5 for Global’s bad faith Motion for Summary Judgment is vacated. The parties shall submit a Joint 6 Status Report with a proposed schedule for Global’s bad faith Motion for Summary Judgment no 7 later than March 18, 2022. 8 This order resolves ECF No. 286. 9 IT IS SO ORDERED. 10 DATED: January 4, 2022.