Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_04-cv-00870/USCOURTS-azd-2_04-cv-00870-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

EaglePicher Incorporated, 

Plaintiff, 

vs.

Federal Insurance Company, et al.,

Defendant. 

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No. CV-04-870-PHX-MHM

REPORT AND RECOMMENDATION

TO THE HONORABLE MARY H. MURGUIA, UNITED STATES DISTRICT JUDGE:

Two motions have been referred to this court for a report and recommendation.

Five areas of dispute are identified and briefed in the two motions and will be dealt

with in turn.

A. Expert Interrogatory No. 9

Zurich American Insurance Company (“Zurich”) complains that EaglePicher

Management Corporation (“EPMC”) will not answer a straightforward question regarding

the field of expertise of EPMC’s expert Michael A. Rodman (“Rodman”). Zurich contends

it should know Rodman’s area of expertise so it can adequately prepare for his deposition.

Knowing the area of expertise, Zurich contends, will allow it to look into whether it is a

generally recognized area of expertise, and if so, what qualifications are needed to be

considered an expert in the field. It will also allow Zurich to determine whether there are

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professional organizations for this expertise, and if so, is Rodman a member. Zurich cites

several more examples of why it is important to know, rather than infer, the area of expertise

professed by Rodman for a proper and thorough deposition preparation. EPMC responds that

it has disclosed Rodman’s field of expertise and refers the court to Rodman’s written report

(attached as Ex. A to Doc. #119) and rather flippantly advises Zurich’s counsel to “ask him

yourself” at his deposition.

In the first place, EPMC has not disclosed Rodman’s field of expertise. That was the

purpose of expert interrogatory #9 which EPMC has refused to answer. Second, Rodman’s

written report does not specifically state his field of expertise. It may be inferred, but Zurich

is not required to suppose such information in preparation for a deposition or cross

examination in trial. Finally, specification of an expert’s field of expertise is necessary for

a court to properly perform its role in areas such as a Daubert hearing. Daubert v. Merrell

Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993).

Counsel’s refusal to answer this elementary and important interrogatory, and the

subsequent defense of its actions, has been a waste of this court’s time and EPMC’s money.

This type of nonsense should be sanctioned.

B. Communications Between EaglePicher, Inc. And Federal Insurance Company

Zurich claims EPMC should produce all the written communications between

EaglePicher, Inc. (“EPI”) (EPMC’s assignor) and Federal Insurance Company (“Federal”).

John Franklin Brock (“Brock”) allegedly embezzled in excess of $8,000,000 from

EPI. After discovering the loss, EPI filed claims against Zurich whose policy was in effect

when Brock was arrested, and Federal, whose policy was in effect during some of the years

in which Brock allegedly embezzled from EPI. Federal settled with EPI. Federal paid a total

of $400,000 to resolve its part of the case and the Settlement Agreement and Release

memorializing the agreement has been provided to Zurich.

Zurich contends it is entitled to the correspondence leading up to the settlement as

there is an overlap in EPMC’s claims. Zurich claims that much of the damages sought

against it have been paid to EMPC’s predecessor EPI, through the settlement with Federal.

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1

. . . “[s]tatements of fact made during settlement negotiations . . . are admissible. . .”

Fed.R.Evid. 408 advisory committee’s note (1974 Enactment). If the Court wanted to make

“facts” conveyed in settlement negotiations inadmissible, it would have done so. Id.

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To avoid an unjust “double recovery” Zurich contends it should be able to scrutinize how the

settlement was calculated and on what basis. EPMC cites Rule 408, Fed. R. Evid. in

response.

Rule 408 makes evidence of settlement of a disputed claim inadmissible when offered

as an admission of liability or the amount of liability. Rule 408 is an evidentiary rule, not a

discovery rule. The tension, of course, is between the need to facilitate settlement and the

search for the truth through disclosure of facts related to that goal. As this is a discovery

dispute, not a request for a ruling on admission of evidence, this court prefers to look at the

applicable discovery rule.

Rule 26(b)(1), Fed.R.Civ.P. provides that “[p]arties may obtain discovery regarding

any nonprivileged matter that is relevant to any party’s claim or defense. . . . Relevant

information need not be admissible at the trial if the discovery appears reasonably calculated

to lead to the discovery of admissible evidence.” Herbert v. Lamke, 441 U.S. 153 (1979).

(The question of admissibility at trial is not determinative of whether communications must

be produced.)

What the trier of fact hears and is provided at trial is left for another day. Today,

Zurich is entitled to review the correspondence leading up to the settlement agreement with

co-defendant Federal. The relevance derives from a potential overlapping of recovery

regarding the Federal and Zurich policies; the potentially admissible evidence would be facts

asserted by EPI in support of its effort to settle with Federal.1

C. Communications with Aon Risk Services of Ohio

EPMC contends that all communications with Aon Risk Services of Ohio, Inc.

(“Aon”) need not be produced as the material was generated by a non-testifying expert or,

alternatively, was protected by the “work product” doctrine. Zurich dismisses the effort as

a “bad document privilege” gambit.

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Rule 26(b)(4)(B), Fed.R.Civ.P., states that “ordinarily” facts and opinions of an expert

retained or specially employed by a party in anticipation of litigation or to prepare for trial

are not discoverable. To be protected, Aon’s communications have to be generated after

being specially retained or employed to provide an opinion or to prepare for trial.

Aon’s role is described by David Krall (“Krall”), who at all pertinent times was

General Counsel, Corporate Secretary, and Vice President of EPI. In his deposition, Krall

described EPI’s relationship with Aon as that of an insurance broker. He described a longterm relationship in which Aon researched EPI’s insurance needs and then went out in the

market to obtain the best coverage at the best possible price. When asked what Aon’s role

was with respect to the Brock claim, Krall answered that Aon prepared and submitted the

claim. When asked if EPI “specially” hired Aon to provide any litigation services in

connection with the claim, he answered, “I don’t believe so. I don’t recall that happening.”

Krall did not know if Aon gave EPI advice on how to maximize claims and described his

interaction with Aon in the Brock matter as “very small.”

EPMC refers to Krall’s affidavit for support. Krall’s affidavit (¶ 6) indeed states

that EPI began consulting with Aon to secure its expert assistance. Krall’s inconsistent

deposition testimony aside, the communication referred to in the Krall Affidavit,

however, does not support his broad conclusory statement.

The communication relied upon by Krall is a March 31, 2003 e-mail (Ex. D

attached to Krall Affidavit). The subject e-mail simply provides an informational time

line regarding securing the insurance and a description of the information requested by

Zurich.

Succinctly, none of the material provided lends support to EPMC’s contention that

Aon was hired “specially” to help EPMC prepare for litigation or provide an independent,

non-testifying expert opinion. This was a long term broker-business relationship. There

was a claim and the broker was simply helping its client to develop the facts, answer

Zurich’s questions, and assist with the claim.

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EPMC’s alternative argument, that the material not produced is protected as work

product under Rule 26(b)(3), Fed.R.Civ.P., also lacks merit. Assuming arguendo that the

protection applies, the material sought is arguably relevant, and Zurich has a substantial

need for the materials to prepare its case (double recovery potential) and the material is

not available otherwise. As such, the material is not protected.

D. Privilege Log

Zurich contends that EPMC’s privilege log lists documents that should not be

protected. More specifically, Zurich argues that some documents appear to involve

ordinary business activities, some involve communications where attorneys are merely

copied, some do not involve lawyers at all, and finally, some have been disclosed to third

parties. Zurich provides a list of “examples” for each category through Exhibits A, B, C

and D attached to Zurich’s supplemental memorandum (Doc. #108)

The court requested, and has been provided copies of all the documents listed in

the referenced exhibits and has reviewed them in camera.

It is the proponent’s burden to establish a privilege. U.S. v. Martin, 278 F.3d 988

(9th Cir. 2002). Privileges are not favored, and should be construed narrowly because

their application may impede the fact-finder’s search for the truth. Trammel v. United

States, 445 U.S. 40, 46 (1980).

The court’s conclusions and recommendations regarding the material produced are

attached as Exhibit A.

From its review, the court also concludes that the privilege log is credible. 

Overall, there does not seem to be over-reaching, and therefore the court will not require

the production of any additional material absent changed circumstances that are at once

substantial and newly discovered.

///

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2

“Captain Morgan” alleges that the legal department of EPI started investigating

Brock as early as 1997 and condoned Mr. Brock’s ownership in entities doing business with

EPI. If this was established as fact, Zurich contends, it would defeat EPMC’s theft insurance

claims against Zurich.

“. . . Naturally I do not want to get officially in the middle of a fight between your

client and EaglePicher.” (Doc. #107-4 @ p.2, e-mail from “Captain Morgan” to Mattessich).

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E. Request to Amend Case Management Order

The last issue involves Zurich’s Motion to Amend Case Management Order (Doc.

#107). The discovery deadline previously set was October 30, 2007. It is that deadline

that Zurich is most interested in extending.

This litigation was transferred to this court in April of 2004. It was originally filed

in state court in 2003. Through the course of discovery, Zurich has been provided for

review over 30 packing boxes of documents from EPMC and voluminous other

documents from third parties. There have been multiple trips to cities in four states and

eleven depositions have been taken. Virtually everyone who has any direct knowledge of

Brock’s employment and the alleged fraud has been deposed. Nothing that has been

produced contradicts EPI’s contention that it was not until the latter part of 2001 that EPI

became aware of circumstances requiring an investigation of Brock’s alleged activities. 

Apparently, Mr. Mattessich, one of several attorneys for Zurich, received an

anonymous e-mail in December 2007, over four years after this litigation was originally

filed in state court, from an individual who identified himself only as “Captain Morgan.”

“Captain Morgan,” it appears, is good at telling tales, but woefully short on substance and

commitment.2

 “Captain Morgan” refuses to come forward and be subject to examination

on the particulars of his allegations. He has produced nothing tangible. Indeed, “Captain

Morgan” arguably does not have any personal knowledge of these allegations at all as he

told Mr. Mattessich that “I am a close associate of Mr. Brock and what I do not already

know from discussions with him, I am sure I can find out.” (Doc. #107-4 @ p.7, e-mail

from “Captain Morgan” to Mattessich) (Emphasis added). Zurich has made no effort to

depose Mr. Brock, apparently declining to indulge a futile act as counsel for Brock has

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indicated Brock would not cooperate and if deposed would invoke his right to remain

silent.

A discovery deadline can be extended for good cause. Fed.R.Civ.P. 16(b);

Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 608 (9th Cir. 1992). This litigation

has pended for over four years. Discovery is closed. “Captain Morgan’s” untimely email campaign adds nothing. The argument, and evidence against extension overwhelm:

1) “Captain Morgan” names names and refers to reports. EPMC

acknowledges that the information described by “Captain Morgan” is the

type sought by Zurich’s various discovery requests. EPMC, as a result of

being advised of “Captain Morgan’s” allegations, launched a new

investigation and again reviewed its records to determine if additional

material exists that should be produced. Each and every person, save one,

named by “Captain Morgan” was re-interviewed and provided affidavits. 

No person - no document - has been found to support “Captain Morgan.”

2) Mr. Brock, the one who would be most interested in this type of vindicating

material, and the one who would have direct knowledge of the facts and

circumstances supporting the claim, never raised it in his civil or criminal

cases. It is recalled that Mr. Brock has a civil judgment against him and

was sentenced to prison for his actions.

3) Nothing can be developed from Mr. Brock as he will refuse to testify (and

as previously noted, it does not appear he has anything to provide). If

“Captain Morgan” exists independent of Mr. Brock and decided to surface

and cooperate, his testimony does not appear to be based on personal

information and therefore would be excluded as hearsay.

In conclusion, the saying “too little too late” comes to mind. In reality, however,

that would overstate the value of Zurich’s motion. Zurich’s motion serves up nothing to

satisfy the “good cause” requirement and the inquiry stops there.

It is therefore respectfully recommended as follows:

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3

Bates numbered Fed000001 to FED000062.

4

Bates numbered ARSOH0062, ARSOH0095-0096, ARSOH00134, ARSOH00147-

00151, ARSOH00163-00164, ARSOH00186-00190, ARSOH00201-00202, ARSOH00280,

ARSOH00283-00288, ARSOH00314-00319, ARSOH00327, ARSOH346-00350,

ARSOH00365-00368, ARSOH00377, ARSOH00380, ARSOH00383, ARSOH00386-00388,

ARSOH00391, ARSOH00432-00436, ARSOH00440, ARSOH00449, ARSOH00452-00453,

ARSOH00456-00458, ARSOH00461, ARSOH00463, ARSOH00468-00469, ARSOH00471,

ARSOH00473-00474, ARSOH00477-00479, ARSOH00486-00490, ARSNY0019,

ARSNY0022-0023, ARSNY0133-0134, ARSNY0138-0140, ARSNY0142-0143,

ARSNY0147, PRIV004260, PRIV004347, PRIV004357, PRIV004371, PRIV004378,

PRIV004380-004381, PRIV004384-004385, PRIV004387-004392, PRIV004394-004397,

PRIV005073, PRIV005165, PRIV005167-005179, PRIV5212-5213, PRIV5216, PRIV5222-

5226, PRIV5228-5229, PRIV5232-5233, PRIV5260-5261, AND PRIV5275-5277.

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1) EPMC shall answer interrogatory number 9 regarding Rodman’s field of

expertise.

2) EPMC shall produce all communications3

 provided to the court for an incamera inspection between EPI and Federal.

3) EPMC shall produce all communications4

 provided to the court for incamera inspection between EPI and Aon.

4) EPMC is to provide the documents designated “Disclose” on Exhibit A.

5) Zurich’s Motion to Amend Case Management Order is denied without

prejudice. 

This recommendation is not an order that is immediately appealable to the Ninth

Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of

Appellate Procedure, should not be filed until entry of the district court's order. The

parties shall have ten days from the date of service of a copy of this recommendation

within which to file specific written objections with the Court. See, 28 U.S.C. §

636(b)(1); Fed. R. Civ. P. 6(a), 6(b) and 72. Thereafter, the parties have ten days within

which to file a response to the objections. Failure to timely file objections to the

Magistrate Judge's Report and Recommendation may result in the acceptance of the

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Report and Recommendation by the district court without further review. See United

States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003). 

If no appeal is taken from this Report and Recommendation, the material ordered

provided hereby shall be provided within five days from the expiration of the appeal date. 

If appealed, production shall abide further instructions from Judge Murguia.

DATED this 5th day of March, 2008.

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EXHIBIT A

Page 1 of 4

Bates Number Court’s Recommendation

and Conclusion

PRIV000056 Substance of document is

disclosed in privilege log

Disclose

PRIV000065 Index Disclose

PRIV000068 Impressions of witness Privileged

PRIV000069 Witness info re Brock

litigation

Privileged

PRIV000072 Witness summary Privileged

PRIV004002 Handwritten observations Privileged

PRIV004016 Scheduling - nonlegal Disclose

PRIV004019-4021 Discussion, inter alia of

recovery issues

Privileged

PRIV004022-23 Informational only and

involves disclosed

document

Disclose

PRIV004033 Update re Brock appraisal -

no advice

Disclose

PRIV004036 Update re Brock property Disclose

PRIV004042 Timeline workup and

personal notes to file

Privileged

PRIV004082 Coversheet Disclose

PRIV004090 Coversheet Disclose

PRIV004123 “Have a great weekend” Disclose

PRIV004215-16 Preliminary appraisal of

Brock seized property

Disclose

PRIV004223 Aircraft (Brock property)

directions re litigation and

fraudulent transfers

Privileged

PRIV004228 Discussion of Brock assets

and action to be taken

Privileged

PRIV004242-43 Cover letter re draft of

communication to Chubb

Disclose

PRIV004249 Forwards Chubb contract Disclose

PRIV004270 Notice of missing

endorsement

Disclose

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Page 2 of 4

PRIV004287 Report on Downey

property. Not clearly

connected w/any litigation

Disclose

PRIV004289 Analysis of investigation

costs re Chubb claim

Privileged

PRIV004348 Description of meeting

agenda and concerns of

carriers

Disclose

PRIV004351-52 Analysis of issues Privileged

PRIV004363 Forwards e-mail Disclose

PRIV004364-65 Request for status re claims Disclose

PRIV004373 Deposit info Disclose

PRIV004759 Wage info for Brock Privileged

PRIV004782-83 Asking for directions re

appraisal

Privileged

PRIV004785-86 More appraisal questions

and discussion re next step

Privileged

PRIV004809 Solicits advice of counsel Privileged

PRIV004830-31 Seeks advice re plane

seizure

Privileged

PRIV004847-48 Discussion re recovery of

personal property

Privileged

PRIV004871-72 Discussion re Chubb proof

of loss

Privileged

PRIV004876-77 Notes from interview Privileged

PRIV004886 Report re investigation Privileged

PRIV004898 Discussion of efficacy of

Brock settlement

Privileged

PRIV004899-900 Discussion re hanger

maintenance

Disclose

PRIV004908 Discussion of efforts to

formulate counter-offer;

discussions w/Krall

Privileged

PRIV004929 Scheduling a meeting Disclose

PRIV004930-32 Updates - personal notes Privileged

PRIV004954 Results re asset/acct. search

for Brock

Privileged

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Page 3 of 4

PRIV004047 Investigative results re

Webster

Privileged

PRIV004089 Timeline re disclosed

communications between

Chubb, Aon and Zurich

Disclose

PRIV004142 Coversheet Disclose

PRIV004150 Request for verification of

payment

Disclose

PRIV004151 Misc “winding up” of

property mgmt/disposition

Disclose

PRIV004304-5 Description of options and

action re hanger

Disclose

PRIV004357 Request for info re Chubb

declination 

Disclose

PRIV004382 Discussion re who will

pursue claim

Disclose

PRIV004878 Discussion re Brock

litigation

Privileged

PRIV004967-68 Discussion of correct sum

to try to recover in criminal

matter

Privileged

PRIV004972 Inquiry re subpoena power Privileged

PRIV004973 Discussion re recovery of

acct. balance and sale of

aircraft

Privileged

PRIV004974 Question re appraisal Disclose

PRIV004099-100 Worksheet re fraudulent

invoices to pension plan

Privileged

PRIV004288 Request for information Disclose

PRIV004327-29 Communication re

legal/factual issue and

approach in Brock

litigation

Privileged

PRIV004801-03 List of Brock accounts and

analysis notes

Privileged

PRIV004836-38 Discussion of how to

proceed with Brock

Privileged

PRIV004847-48 Discussion re expedited

recovery of property

Privileged

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Page 4 of 4

PRIV004850 Forwards lawyer-to-lawyer

communication re Brock

litigation

Privileged

PRIV004871-72 Draft of Chubb proof of

loss w/request for

comments

Privileged

PRIV004906 Communication re possible

cost to recover IT system

Disclose

PRIV004979-5008 PowerPoint outline of

Brock fraud. No evidence

re when or if ever

presented

Privileged

PRIV005010-5025 Revised draft of

PowerPoint 

Privileged

PRIV000035-39 Interview notes and

observations

Privileged

PRIV000069 Info re Brock’s banker Disclose

PRIV000072 Witness summary and

observations

Privileged

PRIV000074-78 Witness summary and

observations

Privileged

PRIV000081-82 Witness summary and

observations

Privileged

PRIV000091-93 Witness summary and

observations

Privileged

 

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