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Gratiot Center, LLC v. Lexington Insurance Co.

United States District Court, E.D. Michigan, Northern Division

December 11, 2017

GRATIOT CENTER, LLC, Plaintiff,
v.
LEXINGTON INSURANCE COMPANY, et al, Defendants.

          ORDER GRANTING MOTION TO COMPEL

          THOMAS L. LUDINGTON, UNITED STATES DISTRICT JUDGE.

         After a heavy snowfall, the roof of a Saginaw, Michigan, shopping center owned by Gratiot Center, LLC, partially collapsed. Gratiot Center then contracted with Star Construction and Restoration, LLC, to perform repairs. On June 27, 2016, Star Construction filed a Complaint against Gratiot Center and a party later identified as Mountain Asset Management Group, LLC, which allegedly entered into the repair contracts with Star Construction. Compl, ECF No. 1, Case No. 1: 16-cv-12413. On November 23, 2016, Gratiot Center filed a Complaint against Lexington Insurance Company, Chubb Insurance, Liberty Mutual Fire Insurance Company, QBE Insurance, and Ace American Insurance. Compl.. ECF No. 1, Case No. 1:16-cv-14144. In the present suit, Gratiot Center is asserting a breach of contract claim against Defendants for refusing to pay $636, 139.27 in losses arising out of the roof collapse. Am. Compl. at 5, ECF No. 21. Gratiot Center explains that it “has suffered damages in the amount of $636.139.27, which is the amount claimed by Star Construction [in the related case].” Id. at 6. Gratiot Center also asserts $70, 038.52 in expenses related to Defendants' denial of coverage and $75, 975.45 in legal fees across the two actions. Id. at 7.[1] On February 1, 2017, Gratiot Center filed a motion to consolidate the two cases, which was denied. ECF No. 32. Subsequently, the Court issued a scheduling order in Gratiot Center v. Lexington Insurance Company, et al. ECF No. 29.

         Star Construction v. Gratiot Center, LLC, et al, has been dismissed pursuant to a stipulated order of dismissal. Case No. 1: 16-cv-12413, ECF No. 40. As part of the agreement leading to dismissal, Star Construction's counsel agreed to represent Gratiot Center in the related litigation. That substitution of counsel has occurred.

         Now, Defendants have moved for an order compelling Gratiot Center to produce the settlement agreement and joint prosecution agreement it entered into with Star Construction. ECF No. 38. Gratiot Center is refusing to produce the agreements, contending that they are irrelevant. Defendants argue that “the documents are relevant because this suit must be prosecuted by the Real Party in Interest.” Mot. Compel at 4. Defendants further contend that “Gratiot Center is no longer the Real Party in Interest to this suit if it has assigned its rights under the insurance policies to Star Construction.” Id. Additionally, “each of the policies issued to Gratiot Center contain clauses barring the insured from transferring its rights under the policies and The Insurers cannot evaluate whether the terms of the policies have been breached without reviewing all the settlement documents.” Id. at 4.

         Gratiot Center disputes the relevance of the settlement agreements, but offers to provide the documents at issue to the Court for in camera review. Specifically, Gratiot Center contends that, even if it entered into an agreement to pay policy proceeds to Star Construction, it remains the real party in interest. Second, Gratiot Center alleges that even if an assignment has occurred, the anti-assignment provisions in the policies are unenforceable in this instance: “assignments of post-loss claims cannot be prohibited by such clauses.” Pl. Resp. Br. at 8, ECF No. 39.[2]

         I.

         Pursuant to Federal Rule of Civil Procedure 26(b),

Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.

Id.

         That standard “has been construed broadly to encompass any matter that bears on, or that reasonably could lead to other matter that could bear on, any issue that is or may be in the case.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978). Thus, “[t]he Federal Rules of Civil Procedure authorize extremely broad discovery.” Guinn v. Mount Carmel Health Sys., No. 2:09-CV-0226, 2010 WL 2927254, at *3 (S.D. Ohio July 23, 2010) (citing United States v. Leggett & Platt, Inc., 542 F.2d 655 (6th Cir.1976)). The information sought “need not be admissible in evidence to be discoverable.” Rule 26(b).

         II.

         Gratiot Center argues that the agreements between it and Star Construction are “not relevant to any issue in this action.” Resp. Mot. Compel at 3, ECF No. 39. In their motion to compel, Defendants argue that the documents are relevant for two reasons: because the agreements might reveal that Gratiot Center is not the real party in interest and because the insurance policies issued by Defendants contain an anti-transfer provision. Gratiot Center argues that neither argument is even facially cognizable in this suit.

         Generally speaking, the underlying merits of claims and affirmative defenses should not be litigated via a motion to compel. See State Farm Mut. Auto. Ins. Co. v. Universal Rehab Servs., Inc., No. 15-10993, 2016 WL 5369610, at *2 (E.D. Mich. Sept. 26, 2016) (“Universal's arguments that State Farm cannot meet its burden of proof are better left for a motion on the merits, not a motion to compel.”); Strategic Mktg. & Research Team, Inc. v. Auto Data Sols., Inc., No. 2:15-CV-12695, 2017 WL 1196361, at *4 (E.D. Mich. Mar. 31, 2017) (“The factual basis of ADS's claims is properly addressed at summary judgment, and ‘has no bearing on whether the discovery Plaintiffs seek is relevant, particularly viewed in light of a party's broad rights to discovery under Rule 26.'”) (quoting Scooter Store, Inc. v. Spinlife.com, LLC, No. 2:10-CV-18, 2011 WL 2160462, at *2 (S.D. Ohio June 1, 2011) (similar)). After all, the scope of discovery is not limited to “admissible” evidence or evidence supporting meritorious arguments. Rather, Defendants are entitled to discovery of “any matter that bears on, or that reasonably could lead to other matter[s] that could bear on, any issue that is or may be in the case.” Oppenheimer Fund, Inc. v, 437 U.S. at 351. Nevertheless, if the discovery which Defendants seek is only potentially relevant to a claim that could not be reasonably advanced given the procedural and factual setting of ...


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