Riddell, Inc. v. Superior Court

Filed 8/23/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
RIDDELL, INC. et al., B275482
Petitioners, (Los Angeles County
Super. Ct. No. BC482698)
v.
THE SUPERIOR COURT OF
LOS ANGELES COUNTY,
Respondent;
ACE AMERICAN INSURANCE
COMPANY et al.,
Real Parties in Interest.
ORIGINAL PROCEEDINGS in mandate. John Shepard
Wiley Jr., Judge. Petition granted.
Covington & Burling, David B. Goodwin, Gretchen A. Hoff
Varner, Reynold L. Siemens and Jeffrey A. Kiburtz for
Petitioners.
No appearance for Respondent.
Duane Morris, Ray L. Wong, Amanda Graham; Nicolaides
Fink Thorpe Michaelides Sullivan, Sara M. Thorpe, Jeffrey N.
Labovitch; Duplicki Keller, George J. Keller and Jeffrey E.
Duplicki for Real Parties in Interest.
__________________________
Riddell, Inc. and other football helmet manufacturers and
affiliates (collectively Riddell) are defendants in lawsuits filed by
numerous former professional football players alleging personal
injuries resulting from their use of Riddell football helmets (the
third party actions). Riddell filed suit against numerous insurers
(collectively the Insurers) alleging that they owe Riddell a
defense and indemnity in the third party actions.1
1 The plaintiffs in the superior court and petitioners in this
writ proceeding are Riddell, Inc.; All American Sports
Corporation; Riddell Sports Group, Inc.; Easton-Bell Sports, Inc.;
Easton-Bell Sports, LLC; EB Sports Corp.; and RBG Holdings
Corp.
The Insurers are Ace American Insurance Company,
Allianz Underwriters Insurance Co., American Home Assurance
Co., Arrowood Indemnity Company, Aspen Specialty Insurance
Co., Associated International Insurance Co., Century Indemnity
Company, Certain Underwriters at Lloyd’s, London and Certain
London Market Insurance Companies, Chartis Specialty
Insurance Co., Columbia Casualty Company, Continental
Insurance Co., Employers’ Fire Insurance Company, First
Specialty Insurance Corporation, First State Insurance
Company, Illinois National Insurance Co., Insurance Company of
North America, Mt. McKinley Insurance Co., National Union Fire
Insurance Company of Pittsburgh, Pa., New England
Reinsurance Co., OneBeacon Insurance Co., Pacific Employers
2
In Riddell’s action against the Insurers (the coverage
action), the Insurers propounded discovery seeking information
relating to prior claims against Riddell, which model of Riddell
helmet each of the plaintiffs in the third party actions wore, and
the dates of use. Unsatisfied with Riddell’s responses to some of
the discovery requests, the Insurers moved to compel further
responses, including privilege logs of documents Riddell had
withheld in discovery responses that had already been provided.
Riddell moved for a protective order staying the discovery at
issue. The trial court granted the motions to compel and denied
the motion for a protective order. Riddell filed the instant
petition for a writ of mandate challenging those rulings with
respect to some of the discovery requests.
We agree with Riddell that the discovery at issue is
logically related to factual issues in the third party actions and
that a stay of that discovery is therefore appropriate. We agree
with the Insurers, however, that Riddell must provide privilege
logs of documents withheld in document productions that have
already occurred. We accordingly grant the petition and direct
the trial court to vacate its order on the Insurers’ motions to
compel and enter a new order granting the motions as to the
privilege logs only. We also direct the trial court to grant
Riddell’s request for a stay of the discovery at issue.
Insurance Co., Transcontinental Insurance Co., Transport
Indemnity Company, Twin City Fire Insurance Co., Westchester
Fire Insurance Co., and Westport Insurance Corp.
3
FACTUAL AND PROCEDURAL BACKGROUND
A. The Third Party Actions
Former professional football players and their
representatives and spouses filed numerous lawsuits against
Riddell alleging that the former players suffered long-term
neurological damage from repeated head injuries as a result of
wearing Riddell helmets while playing football. The plaintiffs
allege causes of action for negligence and strict products liability
based on defective design and failure to warn.
Most of the lawsuits have been consolidated in a federal
multidistrict proceeding entitled NFL Players’ Concussion Injury
Litigation, MDL No. 2323 (the MDL), which is pending in the
United States District Court for the Eastern District of
Pennsylvania. The federal district court in the MDL has stayed
all discovery pending the resolution of certain issues, so no
discovery on the merits has taken place in the MDL.
B. Riddell’s Complaint and the Insurers’ Responses
On April 12, 2012, Riddell filed the coverage action against
the Insurers. The operative first amended complaint alleges
claims for declaratory relief, breach of contract, and breach of the
implied covenant of good faith and fair dealing. Riddell alleges
that the Insurers issued primary and excess liability insurance
policies to Riddell, including coverage for commercial general
liability and products liability. Riddell further alleges that the
Insurers have a duty to defend the third party actions and
indemnify Riddell for any losses suffered. According to Riddell,
some of the Insurers have agreed to provide a defense but others
4
have not, and none of the Insurers has agreed to indemnify
Riddell.
The Insurers filed answers alleging numerous affirmative
defenses, including that Riddell expected or intended the injuries
alleged in the third party actions, that Riddell had prior
knowledge of the alleged injuries but failed to disclose that
knowledge when purchasing liability insurance, and that the
injuries did not occur during the policy periods. Some Insurers
also cross-complained for declaratory relief concerning the duties
to defend and indemnify and for reimbursement of defense costs.
C. The Discovery Stay, Protective Order, and Lifting of the
Stay
The trial court initially stayed all discovery in the coverage
action. On August 10, 2012, the court partially lifted the stay,
allowing discovery to proceed only on the existence and terms of
insurance, self-insurance, captive insurance, exhaustion of
insurance policy limits and self-insured retentions, formation and
dissolution of insured entities, and foundational matters
pertaining to the duty to defend.
On December 13, 2012, the trial court entered a stipulated
protective order providing that the parties may designate
documents, information, or other material as “Protected
Material” and must maintain the confidentiality of such material.
The stipulated protective order defined the term “Protected
Material” as “[i]nformation or materials that constitute or
contain trade secret or other personal or confidential commercial
information” or “‘protected health information’” as defined by
federal regulations for purposes of the Health Insurance
Portability and Accountability Act of 1996.
5
On June 19, 2015, the trial court lifted the discovery stay in
its entirety but cautioned counsel for the Insurers to avoid any
discovery that would prejudice Riddell in the third party actions.
D. Discovery, Motions to Compel, and Motion for Protective
Order
On September 11, 2015, Certain Underwriters at Lloyd’s,
London and Certain London Market Insurance Companies
(collectively LMI) propounded a set of four document requests on
Riddell. Request number 1 sought “all documents relating to the
defense of prior bodily injury claims, including but not limited to,
correspondence with or from insurers, defense counsel and
counsel for the claimant(s).” (Block capitals omitted.) Request
number 2 sought “all documents relating to the settlement or
resolution of prior bodily injury claims, including but not limited
to, correspondence with or from insurers, defense counsel and
counsel for the claimant(s).” (Block capitals omitted.) Request
number 3 sought all documents relating to the defense of 15
claims identified in a spreadsheet previously produced by Riddell
in the coverage action. And request number 4 sought all
documents relating to the settlement of the same 15 claims. All
four requests are at issue in this writ proceeding.
Riddell responded to LMI’s requests by asserting various
objections and also identifying 450 responsive documents that
had been produced in response to previous requests. Riddell also
conducted an additional review, produced some previously
withheld documents, and produced again but in less-redacted
form some documents that had previously been produced. On
April 14, 2016, LMI moved to compel further responses to its
document requests. LMI contended that Riddell’s responses were
6
untimely and that Riddell had consequently waived all objections
and should be compelled to produce all responsive documents
“regardless of Riddell’s objections.” In the alternative, LMI
sought an order compelling Riddell to provide a privilege log.
On November 13, 2015, the Insurers propounded a second
set of document requests and a second set of special
interrogatories on Riddell. Of the document requests, only
numbers 73, 74, and 79 to 86 are at issue in this proceeding.2
Those requests sought all documents relating to: the dates when
each plaintiff in the MDL played football in the National Football
League (NFL) or certain other professional football leagues
(number 73); the dates when each of those plaintiffs wore a
Riddell helmet and the model worn (number 74); and every claim
against Riddell in which Santana Insurance Company (Santana)
or certain other insurers provided a defense (numbers 79 and 86),
the insurance provided by Santana or certain other insurers was
impaired or exhausted (numbers 80 and 84), Riddell funded its
own defense (number 81), or Santana or Riddell or certain other
insurers paid part of the settlement or judgment (numbers 82, 83,
and 85).
Of the interrogatories, only numbers 86 and 87 are at issue
in this proceeding. They ask Riddell to state all facts relating to:
the dates when each plaintiff in the MDL played football in the
NFL or certain other professional football leagues (number 86)
and the dates when each of those plaintiffs wore a Riddell helmet
and the model worn (number 87).
2 Riddell’s writ petition also identifies document request
numbers 75 to 78 as being at issue, but Riddell clarifies in its
reply that it is not challenging the trial court’s order with respect
to those requests.
7
Riddell responded to those document requests and
interrogatories by asserting various objections and contending
that insofar as the document requests sought documents relevant
to the existence and terms of insurance, self-insurance, captive
insurance, exhaustion of insurance policy limits and self-insured
retentions, formation and dissolution of insured entities, and
foundational matters pertaining to the duty to defend, such
documents had previously been produced. On April 14, 2016, the
Insurers moved to compel further responses, including production
of a privilege log.
Also on April 14, 2016, Riddell moved for a protective order.
Riddell argued that the discovery requests described above3
sought information that was logically related to factual issues
affecting Riddell’s liability in the third party actions, as well as
information protected by the attorney-client privilege and work
product doctrine. Riddell sought “an order relieving [Riddell]
from responding to” the discovery at issue, and Riddell requested
an award of sanctions against the Insurers for discovery abuse.
E. The Trial Court’s Ruling
On May 20, 2016, the trial court rejected LMI’s argument
that Riddell had waived its objections to LMI’s document
requests, but the court otherwise granted the motions to compel
and denied Riddell’s motion for a protective order and sanctions.
The court reasoned that the Insurers “contend that they are only
obligated to defend and indemnify Riddell for the actions within
3 Namely, LMI’s first set of document requests, numbers 1 to
4; the Insurers’ second set of document requests, numbers 73, 74,
and 79 to 86; and the Insurers’ second set of special
interrogatories, numbers 86 and 87.
8
the multidistrict litigation in which the former football players
contend their injuries stem from a period for which the insurers
issued policies. The coverage issue in this case thus depends
primarily on when the underlying claims arose. The question of
when the underlying claims arose ‘is logically unrelated to the
issues of consequence in the underlying case.’” (Quoting
Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287,
302 (Montrose I).)
The trial court acknowledged that the Insurers’ discovery
sought evidence concerning whether and when the former players
wore Riddell helmets and the model worn when the players were
injured, and the MDL plaintiffs bear the burden of proof on all of
those facts. But the court accepted the Insurers’ arguments that
(1) Riddell can respond to the discovery without confirming or
admitting the truth of any allegations or information provided,
and (2) the existing protective order “is sufficient to prevent
prejudice to Riddell in its defense of the underlying action.”
The court also ordered Riddell to produce privilege logs,
excluding only “communications with its counsel in this action
after the date it filed this action, or any work product its counsel
created in anticipation of this action or in the course of this
action. Riddell must list all other documents it withholds.”
F. Riddell’s Ex Parte Application and Writ Petition
On June 1, 2016, Riddell filed an ex parte application
seeking a stay of the order granting the motions to compel
further responses to the discovery at issue in Riddell’s motion for
a protective order, so that Riddell could file a writ petition in this
court. Riddell also asked the trial court to certify the issues for
9
appellate resolution under section 166.1 of the Code of Civil
Procedure.
On June 2, 2016, the trial court granted Riddell’s request
for a stay through June 13. The court declined to certify any
issues for appellate review under Code of Civil Procedure section
166.1.
Riddell filed the instant petition for writ of mandate,
asking that we direct the trial court to vacate its order of May 20,
2016. We issued a stay of that order and requested opposition to
the petition. We subsequently issued an alternative writ,
directing the trial court to vacate its order or show cause why the
petition should not be granted. The trial court did not vacate its
order.
DISCUSSION
Riddell argues that the trial court erred by denying
Riddell’s request to be relieved from responding to the disputed
discovery, because the discovery is logically related to unresolved
factual issues affecting liability in the third party actions and a
confidentiality order would not realistically protect Riddell from
potential prejudice. We agree. We also agree with LMI, however,
that Riddell must produce privilege logs for document
productions that have already occurred.
A. Governing Legal Principles
“It is by now a familiar principle that a liability insurer
owes a broad duty to defend its insured against claims that create
a potential for indemnity. [Citation.] . . . ‘[T]he carrier must
defend a suit which potentially seeks damages within the
10
coverage of the policy.’ [Citation.] Implicit in this rule is the
principle that the duty to defend is broader than the duty to
indemnify; an insurer may owe a duty to defend its insured in an
action in which no damages ultimately are awarded. [Citations.]”
(Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076,
1081.)
“The determination whether the insurer owes a duty to
defend usually is made in the first instance by comparing the
allegations of the complaint with the terms of the policy.”
(Horace Mann Ins. v. Barbara B., supra, 4 Cal.4th at p. 1081.) In
addition, “facts known to the insurer and extrinsic to the third
party complaint can generate a duty to defend, even though the
face of the complaint does not reflect a potential for liability
under the policy.” (Montrose I, supra, 6 Cal.4th at p. 296.)
Extrinsic facts can also negate the duty to defend, but only if the
facts are undisputed and conclusively eliminate the potential for
coverage. (Id. at pp. 298-299.)
“Normally, the insurer must defend until the underlying
action is resolved by settlement or judgment. However,
circumstances may change such that there is no longer a
potential for coverage by, for example, (1) the discovery of new or
additional evidence, (2) a narrowing or partial resolution of
claims in the underlying action, or (3) the exhaustion of the
policy. [Citations.] When any such circumstances exist, an
insurer may bring a declaratory relief action, in order to
conclusively establish that there is no longer a duty to defend.
[Citation.]” (Great American Ins. Co. v. Superior Court (2009)
178 Cal.App.4th 221, 234-235 (Great American).) Alternatively, if
the insurer has refused to defend, then the insured may bring a
declaratory relief action in order to resolve the issue and secure a
11
defense. (See, e.g., Haskel, Inc. v. Superior Court (1995) 33
Cal.App.4th 963, 971 (Haskel).)
Litigation of the declaratory relief action when the
underlying action is pending may, however, create a risk of
prejudice to the insured. For example, “[i]f the declaratory relief
action is tried before the underlying litigation is concluded, the
insured may be collaterally estopped from relitigating any
adverse factual findings in the third party action,
notwithstanding that any fact found in the insured’s favor could
not be used to its advantage.” (Montrose Chemical Corp. v.
Superior Court (Canadian Universal Ins. Co.) (1994) 25
Cal.App.4th 902, 910 (Montrose II).)
Consequently, “[i]f the factual issues to be resolved in the
declaratory relief action overlap with issues to be resolved in the
underlying litigation, the trial court must stay the declaratory
relief action.” (Great American, supra, 178 Cal.App.4th at p. 235;
see Montrose I, supra, 6 Cal.4th at p. 301; United Enterprises,
Inc. v. Superior Court (2010) 183 Cal.App.4th 1004, 1012.) “If
there is no such factual overlap and the declaratory relief action
can be resolved on legal issues or factual issues unrelated to the
issues in the underlying action, the question as to whether to
stay the declaratory relief action is a matter entrusted to the trial
court’s discretion.” (Great American, supra, 178 Cal.App.4th at
pp. 235-236; see Montrose I, 6 Cal.4th at p. 302; United
Enterprises, at p. 1012.)
In Haskel, the Court of Appeal held that the foregoing
principles apply not only to a request for a stay of the declaratory
relief action but also to a request for “a stay of all discovery in the
declaratory relief action which is logically related to issues
affecting [the insured’s] liability in the underlying action.”
12
(Haskel, supra, 33 Cal.App.4th at p. 980.) Justice Croskey
explained that although narrower than a request for a stay of the
declaratory relief action itself, the request for a discovery stay in
that action presents “essentially . . . the same basic question.”
(Ibid.) Accordingly, discovery in the declaratory relief action that
is logically related to issues affecting the insured’s liability in the
underlying action “should be stayed pending resolution of the . . .
underlying action unless . . . a confidentiality order will be
sufficient to protect [the insured’s] interests.” (Ibid.)
The same year that Haskel was decided, a plurality of the
Supreme Court, in discussing a related issue, cited with apparent
approval Haskel’s holding that discovery that is logically related
to liability in the underlying action should be stayed. (See
Adams v. Paul (1995) 11 Cal.4th 583, 593 (plur. opn. of Arabian,
J.).) The following year, Republic Indemnity Co. v. Schofield
(1996) 47 Cal.App.4th 220 likewise agreed with Haskel on that
point. (Republic Indemnity Co., at p. 228.) But in the ensuing 21
years, no published California case has addressed the issue.
We agree with Justice Croskey’s reasoning in Haskel that a
request for a stay of discovery in the declaratory relief action
presents “essentially . . . the same basic question” as a request for
a stay of the action itself. (Haskel, supra, 33 Cal.App.4th at
p. 980.) Under the Montrose I line of cases, if the factual issues to
be resolved in the declaratory relief action overlap with
unresolved issues in the underlying action, then the declaratory
relief action must be stayed because of the risk of prejudice to the
insured, including the risk of collateral estoppel. Discovery in the
declaratory relief action that is logically related to issues
affecting liability in the underlying action poses a similar risk of
prejudice. Moreover, the insured will inevitably be prejudiced by
13
having to pay the costs of discovery in the declaratory relief
action that would, if it had taken place in the underlying action,
have been paid for by any insurers with a duty to defend.
The upshot of these legal principles is that an insurer
cannot, over the insured’s objection, use a declaratory relief
action as a forum to litigate factual issues affecting the insured’s
liability in the underlying action. Rather, such issues must be
litigated in the underlying action. If the allegations in that
action, together with the facts known to the insurer, show a
potential for coverage, then the insurer must provide a defense in
that action. If, in the course of defending that action, the insurer
learns of additional, undisputed facts that conclusively eliminate
the potential for coverage and thus negate the duty to defend,
then the insurer may seek declaratory relief on that basis. But
the insurer cannot use the discovery process in the declaratory
relief action to investigate or develop those facts if they are
logically related to issues affecting the insured’s liability. Rather,
that factual investigation and development must take place in
the underlying litigation, where any insurer with a duty to
defend should be paying for the insured’s defense, including
discovery costs. (See generally Haskel, supra, 33 Cal.App.4th at
pp. 975-980.)
B. Riddell’s Request for a Partial Stay of Discovery
Riddell argues that the discovery at issue in the coverage
action is logically related to issues affecting Riddell’s liability in
the third party actions. We agree.
The document requests seek all documents relating to
various prior claims against Riddell, the defense or settlement of
certain claims, or the dates when the MDL plaintiffs played
14
professional football and wore Riddell helmets, and the models
worn. The interrogatories similarly concern the dates when the
MDL plaintiffs played professional football and wore Riddell
helmets, and the models worn. All of that discovery is
straightforwardly related to issues affecting Riddell’s liability in
the third party actions. As the trial court acknowledged, the
MDL plaintiffs bear the burden of proving that they played, when
they played, that they wore Riddell helmets, and which models
they wore. In addition, the discovery concerning prior claims
against Riddell will yield evidence of what Riddell knew about
the risks of playing football wearing Riddell helmets, and when
Riddell knew it. The extent and timing of Riddell’s knowledge of
those risks are, of course, facts at issue in the third party
actions—the MDL plaintiffs allege that Riddell “‘knew or should
have known of the substantial dangers involved in the reasonably
foreseeable use of the helmets.’” Consequently, all of the
discovery at issue is logically related to issues affecting Riddell’s
liability in the third party actions.
Riddell’s request for a stay of that discovery should
therefore have been granted unless a confidentiality order would
have been sufficient to protect Riddell’s interests. Riddell argues
that the existing confidentiality order does not provide adequate
protection and no revision of the order would remedy that defect.4
Again, we agree.
4 We grant the Insurers’ motion to take additional evidence,
namely, the exhibits to the declaration of attorney George J.
Keller. According to the declaration, the exhibits are alternative
versions of the confidentiality order that were proposed in
negotiations between the parties.
15
For the reasons already explained, all of the discovery at
issue is intimately related to factual issues affecting Riddell’s
liability in the third party actions. If the Insurers use evidence
obtained through this discovery to litigate those factual issues in
the coverage action, then Riddell will suffer prejudice by being
collaterally estopped from relitigating any adverse findings in the
third party actions while being unable to use any favorable
findings to its advantage. (Montrose II, supra, 25 Cal.App.4th at
p. 910.) Moreover, if Riddell is compelled to respond to this
discovery in the coverage action rather than in the third party
actions, then Riddell rather than any insurers with a duty to
defend will be forced to bear the costs of collecting and producing
all of this evidence. No confidentiality order can solve either of
these problems. Moreover, the federal district court hearing the
MDL is not bound by a state court confidentiality order in the
coverage action. (See Baker v. General Motors Corp. (1998) 522
U.S. 222, 225, 238 [118 S.Ct. 657, 139 L.Ed.2d 580].) It might
show deference to such an order, but it might not. Riddell’s reply
brief summarizes the situation well: “[N]o confidentiality order,
no matter how broad, can protect Riddell from the prejudice
caused by having to build the underlying plaintiffs’ case for them,
bear investigation and discovery costs that should be borne by
the Insurers . . . , and risk collateral estoppel.”
Because the discovery at issue is logically related to issues
affecting Riddell’s liability in the third party actions and no
confidentiality order would adequately protect Riddell’s interests,
the trial court should have granted Riddell’s request for a stay.
The Insurers’ arguments for a contrary conclusion lack
merit. First, the Insurers assert that the disputed discovery does
not “seek any information logically related to” the third party
16
actions, but they present no intelligible argument in support of
that claim. In particular, they do not attempt to explain how
their requests for all documents relating to various categories of
prior claims against Riddell, or to the defense or settlement of
those claims, or to the dates when the MDL plaintiffs played
football using Riddell helmets, could possibly be logically
unrelated to issues affecting Riddell’s liability in the third party
actions.
Both in their briefs and at oral argument, the Insurers
contended that, for many of the discovery requests at issue, their
intention was merely to obtain information related to erosion or
exhaustion of policy limits, self-insurance, captive insurance, and
other coverage issues that are unrelated to liability in the third
party actions. Some of the discovery requests, for example,
concern prior claims in which the insurance provided by Santana
(Riddell’s captive insurer) was impaired or exhausted, or in which
Santana paid all or part of a settlement or judgment. Assuming
for the sake of argument that the Insurers’ description of their
intentions is accurate, the discovery is still logically related to
issues affecting liability in the third party actions, because the
discovery requests sweep much more broadly than the Insurers
purportedly intended. The requests involving Santana, for
example, do not merely ask for information or documents
concerning erosion or exhaustion of policy limits. Rather, they
identify various prior claims in which Santana was involved and
request all documents relating to those claims. When questioned
on this point at oral argument, counsel for the Insurers failed to
present any argument for the conclusion that such broad requests
17
are logically unrelated to issues affecting liability in the third
party actions.5
Second, the Insurers argue that under Haskel, a stay of
discovery that is logically related to issues affecting liability in
the third party actions is not required unless “the insured will
suffer prejudice if forced to respond to that discovery.” That is,
the Insurers interpret Haskel as holding that before granting a
request for a discovery stay the court must determine both that
the discovery is logically related to liability in the underlying
litigation and that responding to the discovery would be
prejudicial. Haskel does not so hold. Rather, it holds that if
discovery in the declaratory relief action is logically related to
5 We also note that some of the correspondence from the
meet-and-confer process concerning the discovery requests at
issue suggests that the Insurers did not intend the discovery to
be as narrowly targeted as the Insurers now contend.
Correspondence from Riddell’s counsel sought to clarify whether
the Insurers sought only “payment/impairment/exhaustion
information,” and counsel expressed Riddell’s willingness to
comply if that were all the Insurers sought. In response, counsel
for LMI asserted “there should not be any dispute that the [c]ourt
lifted any limitations on the scope of discovery in June 2015.
Therefore, LMI is entitled to seek discovery regarding all
potential issues in this matter, including the payment of defense
and indemnity of prior claims.” Thus, despite Riddell’s expressed
willingness to comply if the discovery were appropriately confined
to coverage issues, and despite the trial court’s admonition, upon
lifting the discovery stay, that the Insurers should be careful to
avoid discovery that could prejudice Riddell in the third party
actions, LMI defended its requests on the ground that it could
seek discovery on “all potential issues in this matter” because
there were no longer “any limitations on the scope of discovery.”
18
issues affecting liability in the underlying action, then “such
discovery should be stayed pending resolution of the liability
claims asserted against [the insured] in the underlying action
unless the court finds that a confidentiality order will be
sufficient to protect [the insured’s] interests.” (Haskel, supra, 33
Cal.App.4th at p. 980.)
Third, the Insurers argue that compelling Riddell to
respond to the disputed discovery would not prejudice Riddell.
The argument fails both because Haskel does not require a
separate finding of prejudice and because compelling Riddell to
respond to the disputed discovery would severely prejudice
Riddell, for the reasons we have already described. The Insurers’
arguments concerning prejudice never mention the collateral
estoppel problem or the shifting of discovery costs from insurers
who have a duty to defend (in the third party actions) to Riddell
(in the coverage action).6
6 An example illustrates the frivolous nature of the Insurers’
arguments concerning prejudice. One of the disputed document
requests seeks “[a]ll documents relating to each and every claim
against Riddell where Riddell paid any amount to fund a
settlement or judgment.” (Block capitals omitted.) The Insurers’
entire argument concerning the potential prejudice from that
request consists of the following two sentences: “The underlying
actions have nothing to do with whether [Riddell] has paid any
prior claim. Thus, the disclosure of such information would not
prejudice [Riddell’s] defenses in the underlying actions.” The
request is not, however, limited to “information” concerning
whether Riddell paid a prior claim. Rather, the request identifies
a particular category of claims against Riddell (i.e., those for
which Riddell paid part of a settlement or judgment) and asks for
all documents relating to those claims. Those documents are
likely to include evidence showing what Riddell knew about the
19
Fourth, the Insurers argue that the disputed discovery
requests are unproblematic because they “call for objective facts
(which do not depend on conflicting legal theories), or, at a
minimum, alleged facts, that any insurer would need when
considering a claim for coverage (similar to seeking the date of
the accident or the model of the car in an automobile liability
claim).” The argument lacks merit. The rule requiring a stay of
discovery that is logically related to liability in the underlying
action (unless a confidentiality order would provide adequate
protection) does not contain an exception for “objective or alleged
facts that any insurer would need when considering a claim for
coverage.” Such an exception would swallow the rule, because
discovery that is logically related to liability in the underlying
action will usually be related to objective or alleged facts that an
insurer would need when evaluating coverage. Moreover, the
Insurers’ argument reflects a misunderstanding of the general
legal principles reviewed ante. Either the allegations in the third
party actions, together with extrinsic facts presently known to
the Insurers, show a potential for coverage and thereby trigger a
duty to defend, or they do not. If they do, then the Insurers
cannot use discovery in the coverage action to investigate and
develop additional facts to defeat that duty if those facts are
logically related to liability in the third party actions.
risks of playing football wearing Riddell helmets, and when
Riddell knew it. If the Insurers use that evidence in support of
their affirmative defense that Riddell “expected or intended” the
injuries suffered by the MDL plaintiffs, then Riddell will suffer
prejudice by being collaterally estopped from relitigating any
adverse findings in the third party actions.
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Fifth and finally, the Insurers argue that before imposing a
stay, the court must consider not only the potential prejudice to
the insured if the stay is denied but also the potential prejudice
to the insurer if the stay is granted, and the Insurers argue that
the trial court did not abuse its discretion in conducting this
“balancing of interests.” The argument fails because the case law
does not call for any such balancing under the circumstances of
this case. If the factual issues to be resolved in the declaratory
relief action and in the underlying liability action do not overlap,
then a stay is discretionary and “the trial court should consider
the possibility of prejudice to both parties.” (Great American,
supra, 178 Cal.App.4th at p. 236.) But if there are overlapping
factual disputes, then a stay is mandatory. (Id. at p. 235.)
Similarly, if discovery in the declaratory relief action is logically
related to issues affecting liability in the underlying action, then
the discovery must be stayed unless a confidentiality order would
adequately protect the insured’s interests. (Haskel, supra, 33
Cal.App.4th at p. 980.) The stay in the instant case is
mandatory, not discretionary, so no balancing is necessary or
appropriate.
For all of the foregoing reasons, we conclude that the trial
court erred by granting the motions to compel further responses
to the discovery at issue and denying Riddell’s request for a stay
of that discovery.
C. The Insurers’ Requests for Privilege Logs
In their motions to compel, the Insurers sought an order
requiring Riddell to provide privilege logs identifying documents
withheld from previous productions as well as documents
withheld from the future productions that the Insurers sought to
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compel. The trial court granted the request. Because we
conclude that, putting aside the issue of privilege logs, the
motions to compel should have been denied, the request for
privilege logs with respect to future productions is moot. The
only remaining issue is the request for privilege logs identifying
documents withheld from previous productions.
In its petition, Riddell raises only two arguments
concerning privilege logs: (1) Riddell should not be required to
log privileged documents generated in connection with the third
party actions that post-date the filing of those actions, because a
privilege log of such documents cannot be required in the MDL;
and (2) production of privilege logs would be unduly burdensome.
The Insurers present no arguments on the first point, and
we agree with Riddell. The federal district court in the MDL is
prohibited from requiring Riddell to log its post-filing
communications with its attorneys. (See Grider v. Keystone
Health Plan Central, Inc. (3d Cir. 2009) 580 F.3d 119, 139,
fn. 22.) The case management order in the coverage action
likewise provides that “[n]o party is required to identify on its
respective privilege log any privileged correspondence between it
and its coverage counsel regarding this coverage action if such
correspondence took place after the filing date of this coverage
action.” We see no reason why Riddell should be required in the
coverage action to log attorney-client communications from the
pending third party actions that it cannot be required to log in
those actions. The Insurers have articulated none.
On the second point, however, we agree with the Insurers.
They correctly point out that under Code of Civil Procedure
section 2031.240, subdivision (c)(1), if an objection to a document
request is based on a claim of privilege or work product, then the
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response to the request “shall provide sufficient factual
information for other parties to evaluate the merits of that claim,
including, if necessary, a privilege log.” Again, the only
argument in Riddell’s petition against providing a privilege log of
documents Riddell has withheld from document productions
Riddell has already undertaken is that it would be burdensome.
Riddell cites no authority for such an exception to the statutory
requirement of producing a privilege log, and we are aware of
none. Moreover, given that Riddell has already performed the
document review necessary to produce the documents it has
produced and withhold the documents it has withheld, the
additional burden of producing a log of the withheld documents
should be relatively light.
For all of these reasons, we conclude that the trial court
correctly granted the Insurers’ request to compel Riddell to
produce privilege logs of documents withheld from previous
productions, but the court should have excluded privileged
documents generated in connection with the third party actions
that post-date the filing of those actions.
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DISPOSITION
The petition is granted. Let a peremptory writ of mandate
issue directing respondent to (1) vacate its order of May 20, 2016,
with respect to LMI’s first set of document requests, numbers 1 to
4; the Insurers’ second set of document requests, numbers 73, 74,
and 79 to 86; and the Insurers’ second set of special
interrogatories, numbers 86 and 87; and (2) enter a new order (a)
granting the Insurers’ motions to compel Riddell to produce
privilege logs of documents withheld in previous productions,
excluding documents generated in connection with the third
party actions that post-date the filing of those actions, (b)
otherwise denying the Insurers’ motions to compel, and (c)
staying the discovery at issue. Riddell is entitled to recover its
costs incurred in this writ proceeding.
MENETREZ, J.*
We concur:
PERLUSS, P. J.
SEGAL, J.
* Judge of the Los Angeles Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
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