United States District Court, D. Maryland
CX REINSURANCE COMPANY LIMITED, f/k/a CNA REINSURANCE COMPANY LIMITED, Plaintiff,
CITY HOMES, INC., et al., Defendants.
MEMORANDUM OPINION AND ORDER
STEPHANIE A. GALLAGHER UNITED STATES MAGISTRATE JUDGE.
to Judge Bredar's May 22, 2018 Order, this matter has
been referred to me for discovery disputes and related
scheduling matters. [ECF No. 55]. Presently pending is
Plaintiff CX Reinsurance Company Limited's (“CX
Re”) Motion for Protective Order [ECF No. 61],
Defendant City Homes, Inc., et al's Opposition [ECF No.
69], and CX Re's Reply [ECF No. 75]. Also pending are CX
Re's Motion to Seal Plaintiff's Motion for Protective
Order [ECF No. 62], City Homes's Motion to Seal
Opposition to Plaintiff's Motion for Protective Order
[ECF No. 71], and CX Re's Motion to Seal Reply in Support
of Plaintiff's Motion for Protective Order [ECF No. 76].
I find that no hearing is necessary. See Loc. R.
105.6 (D. Md. 2016). For the following reasons, CX Re's
Motion for Protective Order is DENIED and CX Re's Motion
to Seal Plaintiff's Motion for Protective Order, City
Homes's Motion to Seal Opposition, and CX Re's Motion
to Seal Reply are all DENIED, though the parties are granted
leave to file redacted versions of the documents in question,
along with a new motion to seal the redacted portions.
action, CX Re seeks to rescind commercial general liability
insurance policies (“Policies”) issued to City
Homes, Inc. (“City Homes”), its principal Barry
Mankowitz (“Mankowitz”), and other named insureds
in 1997, 1998, 1999, and 2000. Compl. ¶¶ 1, 11-19,
63. The Policies provide insurance coverage for certain
risks, including lead exposure, relating to specified
residential rental properties in Baltimore, Maryland.
See Policies, [ECF Nos. 1-1, 1-2, 1-3, 1-4].
particular, CX Re alleges that City Homes made
misrepresentations of material fact in the Application upon
which the Policies were issued. Compl. ¶ 1. CX Re avers
that City Homes falsely answered “No” to
Questions 12 and 14 of the Application, which ask,
respectively, whether there is “lead paint on any
interior or exterior surface of the building, ” and
whether there is “any paint chipping or flaking, or
otherwise peeling off any interior or exterior surface of the
building[.]” Id. ¶¶ 20-27, 57-58. CX
Re argues that, if Defendants had answered the question
truthfully, CX Re either would not have issued the Policies,
or would have issued the Policies subject to substantially
different terms. Id. ¶¶ 59-60. CX Re
asserts that it first learned of the alleged
misrepresentations regarding Questions 12 and 14 of the
Application in May, 2017, and filed this action shortly
thereafter on May 30, 2017. Id. ¶¶ 61, 62.
September 10, 2013, well before CX Re filed this action, City
Homes filed for bankruptcy relief. In re City Homes III,
LLC, No. 13-25370-RAG (Bankr. D. Md. 2013). CX Re was an
active participant in the Chapter 11 proceedings, as one of
City Homes's lead paint insurers. On April 13, 2017, the
Bankruptcy Court entered an order confirming the Third
Amended Chapter 11 Plan, and on April 17, 2017, the
Bankruptcy Court appointed Zvi Guttman (“Mr.
Guttman”) as the Plan Trustee. In re City
Homes, ECF Nos. 849, 853. When CX Re filed this lawsuit
against City Homes, Mr. Guttman sought clarification from the
Bankruptcy Court regarding his obligation to defend against
CX Re's action. In re City Homes, ECF No. 899.
On September 28, 2017, over CX Re's objections,
Bankruptcy Judge Gordon issued an order approving City
Homes's Term Sheet and authorizing City Homes to engage
the law firm of Gallagher Evelius & Jones LLP (“the
Gallagher firm”) as defense counsel in this action.
In re City Homes, ECF No. 921. The law firm of
Semmes Bowen & Semmes (“the Semmes firm”) has
represented all of the Defendants in this action since July
3, 2017. [ECF Nos. 7, 8]. On September 25, 2017, the
Gallagher firm entered its appearance as co-counsel on behalf
of Defendant City Homes, but not Mankowitz. [ECF Nos. 28, 29,
February 2, 2018, Judge Bredar issued a Stipulated Protective
Order in this case, allowing the parties to designate as
confidential any documents they believe, in good faith,
contain “information or items that are entitled to
confidential treatment under applicable legal
principles.” [ECF No. 51 ¶ 1]. Pursuant to the
Stipulated Protective Order, documents designated as
confidential may be disclosed only to the limited group of
authorized persons identified in paragraph 5.2 of the Order.
[ECF No. 51 ¶ 5.2]. The Stipulated Protective Order
specifically excludes from the group of authorized persons
“outside counsel in any other litigation (unless those
same attorneys are also counsel of record in this
litigation), including, without limitation, counsel in any
case alleging lead paint liability to which this litigation
may relate.” Id. ¶ 5.2(a).
now seeks a protective order to prevent the Gallagher firm
from accessing, and disseminating to anyone outside of the
Gallagher firm, litigation files from the Semmes firm and
documents produced by CX Re in this case. [ECF No. 61]. CX Re
also seeks to prevent the use of Defendants'
interrogatory answers from this case in any other lead paint
liability lawsuit, and to prevent the Gallagher firm from
providing advice to any lead paint plaintiffs' attorneys
who have sued, or may later sue, any person insured by CX Re.
may obtain discovery “regarding any non-privileged
matter that is relevant to any party's claim or
defense.” Fed.R.Civ.P. 26(b)(1). Under Federal Rule of
Civil Procedure 26(b), relevance, rather than admissibility,
governs whether information is discoverable. See
id.; Herchenroeder v. Johns Hopkins Univ. Applied
Physics Lab, 171 F.R.D. 179, 181 (D. Md. 1997).
Information sought need only “appear [to be]
reasonably calculated to lead to the discovery of admissible
evidence” to pass muster. See Innovative Therapies,
Inc. v. Meents, 302 F.R.D. 364, 377 (D. Md. 2014).
However, even in the case of relevant information, “the
simple fact that requested information is discoverable under
Rule 26(a) does not mean that discovery must be had.”
Nicholas v. Wyndham Int'l Inc., 373 F.3d 537,
543 (4th Cir. 2004). Instead, Rule 26(b) inserts a
proportionality requirement into the amount and content of
the discovery sought, and requires courts to consider
“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.” Fed.R.Civ.P. 26(b)(1).
Significantly, Rule 26(c)(1) permits courts to, “for
good cause, issue an order to protect a party or person from
annoyance, embarrassment, oppression, or undue burden or
expense.” Fed.R.Civ.P. 26(c)(1).
protective order is sought, the moving party bears the burden
of establishing good cause. Webb v. Green Tree Servicing,
LLC, 283 F.R.D. 276, 278 (D. Md. 2012). To determine
whether the movant has met his burden, the court must balance
the “interest of a party in obtaining the information
versus the interest of his opponent in keeping the
information confidential or in not requiring its
production.” UAI Tech, Inc. v. Valutech, Inc.,
122 F.R.D. 188, 181 (M.D. N.C. 1988). In other words,
“the Court must weigh the need for the information
versus the harm in producing it.” A Helping Hand,
LLC v. Baltimore Cnty., Md., 295 F.Supp.2d 585, 592 (D.
Md. 2003) (internal quotation marks omitted). Despite the
broad discretion conferred on trial courts to “decide
when a protective order is appropriate and what degree of
protection is required, ” see Seattle Times Co. v.
Rinehart, 467 U.S. 20, 36 (1984), the standard for
issuance of a protective order is high. Minter v. Wells
Fargo Bank, N.A., 258 F.R.D. 118, 125 (D. Md. 2009);
id. at 121 (“Although the Fourth Circuit . . .
has not explicitly held that a First Amendment right of
access exists with regard to non-dispositive civil motions
and hearings, the precedent strongly favors that view, with
the higher burden for sealing.”).
CX Re's Motion for Protective Order
argues that a protective order is required in this case based
on “the Gallagher Firm's conflict of interest and
the prejudicial impact that the disclosure of sensitive
information to the Lead Paint Plaintiffs' Firms may have
on the underlying lead paint litigation.” [ECF No. ...