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CX Reinsurance Company Ltd. v. B&R Management, Inc.

United States District Court, D. Maryland

April 3, 2018

CX Reinsurance Company Limited, f/k/a CNA Reinsurance Company Limited
v.
B&R Management, Inc., et al.;

          ORDER

         Dear Counsel:

         Presently pending is Defendant Jessica-Carl, Inc.'s (“Jessica-Carl”) request that this Court delineate the scope of CX Reinsurance Company Limited's (“CX Re”) 30(b)(6) deposition. [ECF No. 250]. The issues have been fully briefed [ECF Nos. 250, 251, 252], and no hearing is necessary. See Local Rule 105.6 (D. Md. 2016). The permissible scope of CX Re's 30(b)(6) deposition is outlined below.

         The factual background has been recited in prior orders and will not be repeated here. Relevant to the instant dispute, on January 9, 2018, Jessica-Carl wrote the Court regarding the testimonial scope of its 30(b)(6) designee, Alvin Lapidus. [ECF No. 237 at 1]. Specifically, Topics 6, 7, and 9 in CX Re's 30(b)(6) Notice of Deposition to Jessica-Carl seek information relating to “[c]hipping, flaking, or peeling paint” and “lead paint on the surfaces” of insured properties at the time B&R Management (“B&R”) submitted the Application. See [ECF No. 237-1 ¶¶ 6-7, 9]. As of January 9, 2018, however, CX Re's claim for rescission was based solely upon its allegation that B&R falsely answered “No” to Question 16 of the Application, which asks whether “the insured ever had any lead paint violations in the building(s)[.]” Pl.'s First Am. Compl., [ECF No. 25 ¶¶ 25-26].[1] Pending, though, was CX Re's Motion for Leave to File Second Amended Complaint, [ECF No. 189] together with its proposed Second Amended Complaint, [ECF No. 189-1], which alleged that B&R also falsely answered Questions 12 and 14, denying that there was “any lead paint on any interior or exterior surface of the building[, ]” or “any paint chipping or flaking, or otherwise coming off any interior or exterior surface of the building[, ]” respectively. [ECF No. 189-1 ¶ 44]; Application, [ECF No. 1-4]. Jessica-Carl argued that Topics 6, 7, and 9 “would only be relevant if the Court granted the Motion to Amend.” [ECF No. 237 at 2]. Thus, because Jessica-Carl's objections to Topics 6, 7, and 9 would be mooted if Judge Hollander approved CX Re's Motion to Amend, after a telephone conference on January 11, 2018, the parties agreed to defer the dispute. [ECF No. 239]. On January 17, 2018, Judge Hollander denied CX Re's Motion for Leave to File Second Amended Complaint, to the extent it sought to add additional claims, [ECF No. 240 at 21], thus leaving CX Re's rescission claim based solely upon the allegation that B&R falsely claimed that it had never received a lead paint violation. See Second Am. Compl., [ECF No. 244]. In addition to now determining the relevance of Topics 6, 7, and 9, Jessica-Carl also objects to Topic 10, which seeks information regarding the “factual bases for each of Jessica-Carl's affirmative defenses.” [ECF No. 237-1 ¶ 10].

         I. Topics 6, 7, and 9

         Jessica-Carl objects to Topics 6, 7, and 9 on the grounds that, because CX Re's claim for rescission is based solely upon the allegation that B&R falsely answered Question 16, “evidence of chipping, flaking, and peeling paint [is] not relevant.” [ECF No. 252 at 1]. CX Re argues, however, that the information remains relevant to Jessica-Carl's “innocent co-insured defense, ” because “[e]vidence that one or more of Jessica-Carl's properties had lead paint on, or paint chipping, peeling, or flaking off of, any surfaces at the time of the Application, would prove that Jessica-Carl is not an innocent insured.” [ECF No. 251 at 2].

         Despite CX Re's assertions, Judge Hollander's ruling (denying CX Re's motion to amend its claims for rescission) renders evidence of peeling or chipping paint irrelevant to Jessica-Carl's innocent co-insured defense. As Jessica-Carl explains, it previously moved for a Temporary Restraining Order (“TRO”) and Preliminary Injunction to enjoin CX Re from entering into a settlement agreement with B&R. [ECF No. 88]. At the time of the June 9, 2017 hearing on the motion, CX Re's complaint only alleged that it was entitled to rescission because B&R falsely claimed it had not received any lead paint violations. See [ECF No. 194 at 6-7] Pl.'s First Am. Compl., [ECF No. 25 ¶¶ 25-26]. The complaint's sole allegation then gave rise to Jessica-Carl's innocent co-insured defense. See [ECF No. 194 at 3-4]. In discovery, though, CX Re had produced more than 1, 300 documents pertaining to lead paint cases, demonstrating that CX Re was also seeking rescission of the Policies on the grounds of flaking and chipping paint. Id. at 4-5. In discussing CX Re's allegations of chipping or peeling paint at the TRO hearing, Judge Hollander stated:

but my overarching concern is how is that a claim in this case? It's not part of the amended complaint. The amended complaint is there was a falsification in answer to Question 16.
. . . .
If there's some other allegation, it's not part of this case. It won't be part of the case unless there's an amendment.

Id. at 10. Thereafter, in response to Judge Hollander's reservations as to whether B&R's misrepresentation of Question 16 alone could deprive Jessica-Carl of insurance, [2] CX Re argued that Questions 12 and 14 contained misrepresentations “on th[e] application concerning property Jessica-Carl owned.” Id. at 12-13. Counsel for CX Re argued that, in demonstrating that Jessica-Carl made material misrepresentations, he “was not limited to just the one allegation in the complaint.” Id. at 15-17. Judge Hollander, however, directly rejected CX Re's position, stating:

I don't agree with you, Mr. Ruberry. Either you move to amend your complaint. If it's granted and the allegations are thereby expanded, then this issue of lead paint peeling and chipping may well be admissible. But right now . . . I'm going to confine it to the allegations in the complaint. I have to. That's just the way it has to be. It can't possibly be that you get to open the door to issues that were not alleged.

Id. at 17. Noting that CX Re has presented no new arguments since the TRO hearing, I find that Judge Hollander's rationale controls. CX Re's sole allegation, giving rise to its claim for rescission, is that B&R falsely denied receiving lead paint violations. Any evidence of lead paint conditions at Jessica-Carl's properties is thus irrelevant, because CX Re failed to allege that the answers to Questions 12 and 14 were false. As such, CX Re is foreclosed from inquiring into Topics 6, 7, and 9 when deposing Mr. Lapidus.

         II. Topic 10

         Next, Jessica-Carl objects to Topic 10, on the grounds that the factual bases for affirmative defenses “should be addressed through Answers to Interrogatories” and that “‘areas of examination regarding the factual basis for claims and defenses asserted is not properly within the scope of a 30(b)(6) deposition.'” Def.'s Mem., [ECF No. 250 at 2] (quoting Fish v. Air & Liquid Sys. Corp., No. CV GLR-16-496, 2017 WL 697663, at *20 (D. Md. Feb. 21, 2017). CX Re argues, however, that it “may ask Mr. Lapidus questions in this area, and if Mr. Lapidus were unable to answer such questions, Jessica-Carl's affirmative defenses would fail.” Pl.'s Mem., [ECF No. 251 at 2] (citing Krakauer v. Dish Network L.L.C., 165 F.Supp.3d 432 (M.D. ...


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