2018 WL 5078376

United States District Court, E.D. Michigan, Southern Division.
WAUSAU UNDERWRITERS INSURANCE COMPANY, Plaintiff,
v.
RELIABLE TRANSPORTATION SPECIALISTS, INC., AMARILD USHE and BURT HOLT, Defendants.
CASE NO. 15-12954
|
10/18/2018

GEORGE CARAM STEEH, UNITED STATES DISTRICT JUDGE

ORDER DENYING PLAINTIFF’S OBJECTIONS TO MAGISTRATE JUDGE’S SEPTEMBER 6, 2018 OPINION AND ORDER DENYING PLAINTIFF’S MOTION TO COMPEL PRODUCTION OF JOINT DEFENSE AGREEMENT [DOC. 169]
*1 This case stems from an underlying lawsuit (the “Holt Litigation”) filed by Burt Holt against Reliable Transportation Specialists (“Reliable”), Amarild Ushe, and Containerport Group Inc., related to injuries sustained by Holt when he was struck by a tractor trailer operated by Ushe. The Holt Litigation proceeded to trial and Holt obtained a verdict against defendants Reliable and Ushe in the amount of $8,735,142.35. The present litigation arises out of Reliable’s and Ushe’s breach of contract / duty of good faith and fair dealing claim alleging that Wausau acted in bad faith against its insured by refusing to negotiate a settlement within the policy limits in the Holt Litigation.

On July 27, 2018, Wausau filed a motion to compel production of a joint defense agreement entered between Holt and Reliable. Magistrate Judge Stafford held a hearing on the motion on September 6, 2018, having previously ordered that the Common Interest Confidentiality Agreement (“Agreement”) be produced for in camera review by the court. Magistrate Judge Stafford denied the motion to compel, finding that the Agreement is not relevant and therefore not discoverable.

A. Standard of Review
Fed. R. Civ. P. 26(b)(1) allows the discovery of information “that is relevant to any party’s claim or defense and proportional to the needs of the case.” Fed. R. Civ. P. 72(a) provides that “[t]he district judge in the case must consider timely objections and modify or set aside any part of the [Magistrate’s] order that is clearly erroneous or is contrary to law.” The clearly erroneous standard applies to a magistrate’s factual findings, whereas legal conclusions are reviewed under the “contrary to law” standard. Sedgwick Ins. v. F.A.B.E. Custom Downstream Sys., Inc., 47 F.

Supp. 3d 536, 538 (E.D. Mich. 2014).

B. Analysis
Judge Stafford described the Agreement as “merely a mechanism for safely sharing information,” and noted that the Agreement “does not define the scope of the common interest” between Holt and Reliable. She further described the Agreement as containing only generic, boilerplate terms. In response to Wausau’s argument that this case is unique because there are adverse interests among the parties to the Agreement that may lead to future litigation between them, Judge Stafford concluded that “adverse interests among parties to a common interest agreement are not unique…and the alleged uniqueness of this case does not distinguish this case from others finding that boilerplate joint defense agreements are not relevant or discoverable.” (Order, p. 2, citing JP Morgan Chase Bank, N.A. v. Winget, No. 08-13845, 2010 WL 11545362, at *3 (E.D. Mich. Dec. 10, 2010).

Wausau argues that the scope of discovery is traditionally quite broad, Lewis v. ACB Bus. Servs., 135 F.3d 389, 402 (6th Cir. 1998), and therefore the Agreement’s provisions are relevant to the claims and defenses in this case. Wausau again points out that Reliable and Holt are adversaries in that Holt has an outstanding judgment against Reliable. While the parties believe they have a common interest in pursuing Reliable’s claim for bad faith against Wausau, the scope and nature of such common interest is not obvious to Wausau. Wausau wants to discover the entire Agreement which may be useful to impeach witnesses at trial, including fact witnesses such as Holt’s and Reliable’s attorneys. Wausau believes that understanding the common interest between the two parties and the terms of their agreement to maintain confidentiality is relevant to impeach the credibility or explain the motivation behind the testimony of such fact witnesses.

*2 Magistrate Judge Stafford considered each of the arguments made by Wausau and concluded that under applicable law, the terms of the Agreement are not relevant and therefore not discoverable. The Magistrate Judge’s decision is not contrary to law. While Wausau is correct that the scope of discovery is generally quite broad, when it comes to joint defense agreements, courts are clear that boilerplate agreements are neither relevant nor discoverable as they do not pertain to the claims or defenses at issue in the cases. Wausau’s objections are therefore overruled.

Wausau contends that even if the terms of the Agreement are not discoverable, the fact that Holt and Reliable entered into the Agreement is relevant. “The parties to a joint defense agreement…are relevant because the existence of the agreement may demonstrate bias.” Biovail Laboratories International SRL v. Watson Pharmaceuticals, Inc., No. 10-20526, 2010 WL 344187, *1 (S.D. Fla. August 10, 2010) (emphasis in original). In Biovail, the Florida District Court held that the joint defense agreement at issue was not relevant because it contained only boilerplate terms, but that the parties to the agreement and the date of the agreement were relevant. Id. at *2. Wausau seeks clarification from this court as to whether it can refer to the existence of the Agreement and the parties thereto. This is an issue that is more appropriately addressed in the context of a motion in limine. Now, therefore,

IT IS HEREBY ORDERED that Wausau’s Objections to Magistrate Judge’s September 6, 2018 Opinion and Order Denying Plaintiff’s Motion to Compel Production of the Joint Defense Agreement are DENIED.

IT IS SO ORDERED.

Dated: October 18, 2018
s/George Caram Steeh

GEORGE CARAM STEEH

UNITED STATES DISTRICT JUDGE

CERTIFICATE OF SERVICE Copies of this Order were served upon attorneys of record on
October 18, 2018, by electronic and/or ordinary mail.

s/Marcia Beauchemin

Deputy Clerk
All Citations
Slip Copy, 2018 WL 5078376

2018 WL 5279122

United States District Court, E.D. Louisiana.
KIERRA THOMAS, ET AL.
v.
RANDALL CHAMBERS, ET AL.
CIVIL ACTION NO. 18-4373
|
10/24/2018

SECTION “R” (4)

ORDER AND REASONS
*1 Before the Court are plaintiffs’ motion to dismiss defendants’ counterclaim and plaintiffs’ motion for sanctions under Federal Rule of Civil Procedure 11.1 Because defendants’ counterclaim fails to state a claim for fraud under Louisiana law and the Federal Rules of Civil Procedure, the Court grants plaintiffs’ motion to dismiss. The Court denies plaintiffs’ motion for Rule 11 sanctions because plaintiffs have failed to comply with the rule’s procedural requirements.

I. BACKGROUND
This case arises out of a motor vehicle accident in Orleans Parish.2 On April 24, 2017, plaintiff Kierra Thomas was driving an automobile westbound on Interstate 10 in the right-hand lane with plaintiffs Antoine Clark and Shirley Harris as passengers.3 Defendant Randall Chambers was allegedly driving a tractor-trailer next to plaintiffs in the middle lane.4Chambers was allegedly driving the tractor-trailer in the course of his employment with defendant God’s Way Trucking, LLC.5 Plaintiffs allege that Thomas was driving “straight in a cautious fashion” when Chambers negligently attempted to move into the right-hand lane without “keep[ing] a proper lookout.”6 Chambers’ vehicle allegedly struck plaintiffs’ vehicle, causing all three plaintiffs to be “violently jolted.”7 All three plaintiffs allege that the accident caused serious injuries to their necks and backs, and that their injuries require continuing medical care and treatment.8

On April 6, 2018, plaintiffs filed suit against Chambers, God’s Way Trucking, and defendant Canal Insurance Company.9 Canal Insurance allegedly insured the vehicle Chambers drove on the day of the collision.10Plaintiffs allege that Chambers’ negligence caused their injuries, and that God’s Way Trucking is liable for their damages as Chambers’ employer under the doctrine of respondent superior.11 Plaintiffs also allege causes of action for negligent entrustment and negligent hiring against God’s Way Trucking.12 Defendants removed the action to federal court on April 27, 2018, asserting diversity jurisdiction pursuant to 28 U.S.C. § 1332.13

On July 3, 2018, defendants filed a counterclaim against plaintiffs.14 In the counterclaim defendants allege that plaintiffs intentionally caused the collision and that plaintiffs suffered no injuries as a result of the accident.15Defendants assert that plaintiffs’ petition for damages constitutes a fraudulent misrepresentation under Louisiana law.16 Defendants further assert that as a result of plaintiffs’ alleged misrepresentations, they have suffered damages to be shown at trial, including attorneys’ fees and litigation expenses.17 On July 11, 2018, plaintiffs filed a motion to dismiss defendants’ counterclaim and a motion for sanctions under Federal Rule of Civil Procedure 11.18 Plaintiffs allege that Rule 11 sanctions are warranted because defendants’ counterclaim is frivolous.19 Defendants oppose both motions.20

II. LEGAL STANDARD
*2 Plaintiffs’ motion to dismiss defendants’ counterclaim is brought under Federal Rule of Civil Procedure 12(b)(6). To survive a Rule 12(b)(6) motion, a party must plead “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when the party pleads facts that allow the court to “draw the reasonable inference that the [opposing party] is liable for the misconduct alleged.” Id. at 678. A court must accept all well-pleaded facts as true and must draw all reasonable inferences in favor of the nonmoving party. See Lormand v. US Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009).

A legally sufficient complaint or counterclaim must establish more than a “sheer possibility” that the party’s claim is true. Iqbal, 556 U.S. at 678. It need not contain detailed factual allegations, but it must go beyond labels, legal conclusions, or formulaic recitations of the elements of a cause of action. Id. In other words, the face of the complaint or counterclaim must contain enough factual matter to raise a reasonable expectation that discovery will reveal relevant evidence of each element of the party’s claim. Lormand, 565 F.3d at 257. The claim must be dismissed if there are insufficient factual allegations to raise a right to relief above the speculative level, Twombly, 550 U.S. at 555, or if it is apparent from the face of the complaint or counterclaim that there is an insuperable bar to relief, Jones v. Bock, 549 U.S. 199, 215 (2007).

III. DISCUSSION

A. Motion to Dismiss
Defendants’ counterclaim asserts a claim for fraud, which Louisiana law defines as “a misrepresentation or a suppression of the truth made with the intention either to obtain an unjust advantage for one party or to cause a loss or inconvenience to the other.” La. Civ. Code art. 1953. The elements of a Louisiana fraud and intentional misrepresentation claim are: 1) a misrepresentation of a material fact; 2) made with intent to deceive; and 3) causing justifiable reliance with resultant injury. Kadlec Med. Ctr. v. Lakeview Anesthesia Assoc., 527 F.3d 412, 418 (5th Cir. 2008).

Defendants’ fraud claim is subject to the heightened pleading requirement in Federal Rule of Civil Procedure 9(b). Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 339 (5th Cir. 2008). Under Rule 9(b), a party “must state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). The Fifth Circuit “interprets Rule 9(b) strictly, requiring the [complaining party] to specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent.” Flaherty & Crumrine Preferred Income Fund, Inc. v. TXU Corp., 565 F.3d 200, 207 (5th Cir. 2009). In other words, “Rule 9(b) requires ‘the who, what, when, where, and how’ to be laid out.” Benchmark Elecs., Inc. v. J.M. Huber Corp., 343 F.3d 719, 723 (5th Cir. 2003) (quoting Tel-Phonic Servs., Inc. v. TBS Int’l, Inc., 975 F.2d 1134, 1139 (5th Cir. 1992)). Finally, “although scienter may be ‘averred generally,’ . . . pleading scienter requires more than a simple allegation that a [party] had fraudulent intent. To plead scienter adequately, a [complaining party] must set forth specific facts that support an inference of fraud.” Tuchman v. DSC Commc’ns Corp., 14 F.3d 1061, 1068 (5th Cir. 1994) (quoting Fed. R. Civ. P. 9(b)).

*3 Here, defendants have failed to satisfy even the less stringent Rule 12(b)(6) pleading standard because they do not allege that they justifiably relied on plaintiffs’ alleged misrepresentations. See Iqbal, 556 U.S. at 678. Defendants do not allege any facts in their counterclaim addressing this element. Defendants contend in their opposition that plaintiffs’ alleged misrepresentations were “used to deceive” them into “defend[ing] a meritless claim…in justifiable reliance.”21 But the Court cannot consider this allegation in defendants’ opposition when adjudicating plaintiffs’ motion to dismiss. See Estes v. JP Morgan Chase Bank, Nat’l Ass’n, 613 F. App’x 277, 280 (5th Cir. 2015) (district court did not err when refusing to consider new factual allegations in party’s opposition, because “when deciding a Rule 12(b)(6) motion, a district court generally must limit itself to the contents of the pleadings”); Goodwin v. Hous. Auth. of New Orleans, No. 11-1397, 2013 WL 3874907, at *9 n.37 (E.D. La. July 25, 2013) (noting that it is “inappropriate to raise new facts and assert new claims in an opposition to a motion to dismiss”).

Even if the Court were to consider defendants’ belated allegation, dismissal would still be required because it does not satisfy the Rule 12(b)(6) requirement that a claim for relief must be “plausible on its face.” Iqbal, 556 U.S. at 678. Defendants appear to assert that being forced to defend against what they see as a fraudulent claim for damages is equivalent to “justifiable reliance” on that claim. This contention misconstrues the definition of “reliance,” which Black’s Law Dictionary defines as “dependence or trust by a person.” Black’s Law Dictionary (10th ed. 2014). Any assertion that defendants depended upon or trusted plaintiffs’ alleged misrepresentations is facially absurd, because defendants are contesting them in this litigation. It therefore defies comprehension how defendants have justifiably relied on plaintiffs’ representations and been injured as a result.

Lastly, defendants fail to allege any facts in support of their conclusory allegation that plaintiffs intentionally caused the automobile collision. Defendants thus fall well short of their obligation to “set forth specific facts that support an inference of fraud.” Tuchman v. DSC Commc’ns Corp., 14 F.3d at 1068; see also Fed. R. Civ. P. 9(b) (complaining party “must state with particularity the circumstances constituting fraud”).

Because defendants have failed to sufficiently allege their fraud claim, the Court must dismiss the counterclaim. The Court finds that dismissal with prejudice is warranted. Defendants’ fraud claim is not legally cognizable because they cannot allege justifiable reliance sufficiently under the set of facts they have presented. See Dumas v. Jefferson Par. Sewerage Dep’t, No. 00-2993, 2001 WL 699045, at *3 (E.D. La. June 21, 2001) (dismissing complaint with prejudice when plaintiff’s state law claims were not cognizable).

B. Motion for Sanctions
Plaintiffs assert that defendants should be sanctioned under Federal Rule of Civil Procedure 11 because their counterclaim lacks any evidentiary support.22 Rule 11(b) provides that when an attorney submits a pleading, motion or other paper to the court, he certifies to the best of his knowledge that (1) the filing is not presented for an improper purpose, such as to harass, cause unnecessary delay, or increase costs of litigation; (2) the filing is warranted by existing law or by a nonfrivolous argument for modifying or reversing existing law; and (3) the factual contentions have evidentiary support, or if so identified, will likely have evidentiary support after a reasonable opportunity for further investigation. Fed. R. Civ. P. 11(b).

If a party believes that an opposing party has violated Rule 11(b), it may move for sanctions under Rule 11(c). Rule 11(c) sets forth strict procedural requirements for how the party must proceed with its motion. Rule 11(c)(2) provides that
*4 [a] motion for sanctions must be made separately from any other motion and must describe the specific conduct that allegedly violates Rule 11(b). The motion must be served under Rule 5, but it must not be filed or be presented to the court if the challenged paper, claim, defense, contention or denial is withdrawn or appropriately corrected within 21 days after service or within another time the court sets.
Fed. R. Civ. P. 11(c)(2). The requirements in Rule 11(c)(2) are strictly enforced. See Elliott v. Tilton, 64 F.3d 213, 216 (5th Cir. 1995) (holding that the district court’s imposition of sanctions under Rule 11 was an abuse of discretion because the party seeking sanctions did not serve its motion for sanctions against the opposing party at least 21 days prior to filing); Johnson ex. rel. Wilson v. Dowd, 345 F. App’x 26, 30 (5th Cir. 2009) (affirming the district court’s imposition of Rule 11 sanctions, in part, because plaintiff was served with the motion for sanctions 21 days before the motion was filed with the court); Richardson v. U.S. Bank Nat’l Ass’n, No. 09-7383, 2010 WL 4553673, at *1 (E.D. La. Oct. 29, 2010) (denying defendant’s motion for sanctions for failure to comply with the requirements in Rule 11(c)).

Here, there is no indication in the record that plaintiffs complied with the requirements of Rule 11(c)(2). First, plaintiffs filed their motion for sanctions alongside their motion to dismiss, in violation of the requirement that motions for sanctions be filed “separately from any other motion.” Fed. R. Civ. P. 11(c)(2). Second, while plaintiffs’ counsel notified defendants’ counsel that plaintiffs planned to move for sanctions,23 plaintiffs do not aver that they served the motion on defendants in compliance with Rule 5 at least 21 days prior to filing. Fed. R. Civ. P. 11(c)(2); Elliott, 64 F.3d at 216. Because plaintiffs have failed to comply with the procedural requirements in Rule 11(c), their motion for sanctions must be denied.

IV. CONCLUSION
For the foregoing reasons, plaintiffs’ motion to dismiss defendants’ counterclaim is GRANTED. Defendants’ counterclaim is DISMISSED WITH PREJUDICE. Plaintiffs’ motion for sanctions is DENIED.
New Orleans, Louisiana, this __24th___ day of October, 2018.

SARAH S. VANCE UNITED STATES DISTRICT JUDGE
All Citations
Slip Copy, 2018 WL 5279122

Footnotes

1
R. Doc. 14.

2
R. Doc. 1-4.

3
Id. at 3 ¶¶ 7-8.

4
Id. ¶ 9.

5
Id. at 2 ¶ 3.

6
Id. at 3 ¶ 10.

7
Id. ¶¶ 10-11.

8
Id. at 5 ¶ 16; 6 ¶¶ 19 & 22.

9
Id. at 2 ¶ 3.

10
Id.

11
Id. at 4 ¶¶ 13-14.

12
Id. ¶ 14.

13
R. Doc. 1.

14
R. Doc. 13.

15
Id. at 2 ¶ 4.

16
Id.

17
Id. ¶ 5.

18
R. Doc. 14.

19
R. Doc. 14-1 at 5-6.

20
R. Doc. 17.

21
R. Doc. 17 at 5.

22
R. Doc. 14-1 at 5-6.

23
See R. Doc. 14-4. This notification occurred nine days before plaintiffs’ filed their motion for sanctions.