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WH Holdings, LLC v. ACE American Insurance Co.

September 17, 2010

WH HOLDINGS, LLC, PLAINTIFF,
v.
ACE AMERICAN INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

Defendant Ace American Insurance Company ("ACE") moves to compel third-party respondent GAB Robins of North America ("GAB") to fully respond to the Subpoena Duces Tecum served upon GAB by ACE. For the reasons set forth below, ACE's Motion to Compel is denied. ACE also moves for contempt sanctions relating to a subpoena for a deposition that it served in this matter; that Motion is also denied as discussed below.

BACKGROUND

ACE is currently a defendant in an insurance-coverage action brought in the United States District Court for the Eastern District of Louisiana by WH Holdings, LLC ("WH Holdings"). In that suit ("the Louisiana litigation"), WH Holdings alleges that ACE is liable for insurance coverage of damage caused by Hurricane Katrina to the facade of the Ritz Hotel in New Orleans, Louisiana. GAB was the claims adjuster for the property at issue, and is alleged to have documents "evidencing what property was damaged, what payments were received by WH Holdings for what damaged property and WH Holdings' status as an insured under" the ACE policy. (R. 8 at 2.) ACE served a subpoena on GAB that issued from this jurisdiction, on June 25, 2009, and after a breakdown in communication filed this suit seeking to compel compliance with the subpoena.

ACE'S MOTION TO COMPEL

ACE argues that it is entitled to an order mandating full compliance with the subpoena because the documents sought are relevant to the underlying litigation and the subpoena is not unduly burdensome, and because GAB failed to timely object or provide a privilege log regarding non-produced documents. GAB responds that it has already produced, in response to the subpoena, all of the documents in its possession relating to the damage at issue; and that ACE's broader request for all documents relating to claims for damage to the Ritz has already been heard, and denied, by the magistrate judge who is charged with the adjudication of discovery disputes in the Louisiana litigation.

I. Magistrate Judge Chasez's Ruling in the Eastern District of Louisiana

ACE filed a broad motion to compel discovery in the Eastern District of Louisiana seeking documents that supposedly will help them ensure that no other insurer has paid for any portion of the claimed damage to the facade. Magistrate Judge Alma Chasez denied the broad request and issued a narrow order for WH Holdings to produce discovery related to the damages it claims, and specifically to produce any documents related to any payments from other sources for the facade. ACE then filed this third-party subpoena and motion to compel against the insurance claims adjuster for the other policies that insured the Ritz Properties, GAB Robins. The motion to compel is substantially the same as the motion brought in Louisiana and requests many of the same documents. Thus, the Court must first consider where Judge Chasez's order is binding here, or whether ACE should be allow to circumvent Judge Chasez's ruling by seeking the same discovery that she would not allow them to obtain from WH Holdings directly from a third party in this jurisdiction.

A. Res Judicata and Collateral Estoppel Do Not Apply

Judge Chasez's ruling was not a final judgment on the merits of the case, and so is not binding upon this Court's adjudication of the present motion to compel under the doctrine of res judicata. Magistrate judges do not have the authority to decide dispositive motions that would qualify as "final judgments on the merits" under the Federal Rules, see Fed. R. Civ. P. 72(a), but can only issue recommended dispositions with findings of fact for review by the district judge. The very form of the magistrate judge's ruling here reflects that it is a nondispositive magistrate decision pursuant to Fed. R. Civ. P. 72(b), which cannot constitute a final judgment on the merits.

For the same reason, the magistrate judge's ruling is not binding under the doctrine of collateral estoppel or issue preclusion, which requires that the previously litigated issue "have been essential to the final judgment." Washington Group Intern., Inc. v. Bell, Boyd & Lloyd LLC, 383 F.3d 633, 636 (7th Cir. 2004). This discovery order is not one which is essential to a final judgment, as one has not yet been entered in the Louisiana litigation.

B. "Law of the Case" Does Not Apply

The doctrine of "law of the case" also does not require this Court to reach the same conclusion in deciding the present Motion as Judge Chasez reached in the Louisiana proceedings. "Law of the case" does not apply in third party subpoena proceedings because they are not continuations of the same case, but rather "new proceeding[s] in a different court." In re Subpoena Duces Tecum Issued to Commodity Futures Trading Comm., 439 F.3d 740, 742 (D.C. Cir. 2006). Since "law of the case" only applies to ...


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