Target Corporation v. ACE American Insurance Company

Background

ACE issued Target a privacy and network liability policy covering claims related to Target’s media and advertising operations. Universal Standard, Inc. sued Target for trademark infringement involving Target’s Universal Thread clothing line. Target settled that case and sought coverage from ACE for its defense and settlement costs. ACE denied coverage, and Target brought claims for declaratory judgment and breach of contract.

The order concerned ACE’s Motion to Compel Discovery and Target’s Motion to Compel Discovery. The court did not decide the underlying insurance-coverage dispute.

ACE’s Motion to Compel

ACE sought supplemental responses to Requests for Production 1 through 14. The requests sought materials from the trademark case, including deposition materials, expert reports, written discovery, damages evaluations, settlement demands, settlement communications, and communications concerning coverage. ACE argued that the materials were relevant to determining whether the settlement included covered losses rather than only disgorged profits or a reasonable royalty.

The court agreed that the withheld documents were relevant to allocating the settlement between covered and uncovered losses. Under the discovery rules, however, relevant information must also be nonprivileged and proportional to the case.

The court explained that documents consisting of confidential communications between Target and its attorneys for obtaining legal advice were protected by attorney-client privilege. Documents prepared in anticipation of litigation could also be protected work product. Because the parties had not addressed the protection of each document individually and had not submitted the documents for the court’s review, the court’s analysis of those protections was general.

The court also held that the mediation communications at issue were protected by the Mediation Agreement, which stated that the entire mediation process was confidential and that offers, promises, conduct, and statements made during mediation were privileged and inadmissible. The court did not need to decide whether Minnesota General Rule of Practice 114.08 independently applied because the Mediation Agreement protected Target’s communications with the mediator.

The court rejected ACE’s waiver arguments. The Common Interest Agreement did not require Target to disclose the mediation communications it had withheld. Target’s disclosure of some confidential information did not waive all undisclosed information concerning the same subject matter because of the Mediation Agreement. The court also found that Target had not placed the contents of privileged communications at issue. Finally, ACE had not shown a substantial need for factual work product.

The court therefore denied ACE’s Motion to Compel Discovery.

Target’s Motion to Compel

Target challenged ACE’s redactions, sought discovery about ACE’s communications with reinsurers, and sought testimony from an ACE corporate witness about ACE’s document-collection efforts.

Redactions and privilege log. ACE had redacted information as “non-responsive,” including information about reserves, reinsurance, and other insurance policies. The court held that redaction was not an appropriate way to exclude information from otherwise responsive documents merely because ACE considered it irrelevant or nonresponsive. ACE had to produce reserve or reinsurance information that it had redacted on those grounds.

If ACE claimed that the redacted information was protected by attorney-client privilege or the work-product doctrine, it could withhold the information only if it properly supported that claim. The court found ACE’s privilege log inadequate and ordered ACE to provide an amended privilege log to Target within fourteen days. The parties had to meet and confer seven days after the amended log was produced; they could pursue further motion practice if disputes remained.

Reinsurance discovery. The court did not compel written reinsurance discovery because Target’s existing requests did not describe that discovery with reasonable particularity. The court denied without prejudice this part of Target’s motion, allowing Target to serve a proper request for production and allowing the parties to meet and confer before returning to court if necessary.

Target also sought testimony about all communications concerning reinsurance. The court found that deposition topic overly broad because it did not describe the matters for examination with reasonable particularity. The court did not compel ACE to produce a witness on that topic, although Target could serve a request for production seeking the communications.

ACE’s document-collection efforts. The court granted Target’s request for Rule 30(b)(6) testimony about ACE’s document-collection efforts. ACE had not shown that this discovery was disproportionate to the needs of the case. The court noted that ACE could instruct its witness not to answer questions seeking privileged communications or protected work product.

Order

The order denied ACE American Insurance Company’s Motion to Compel Discovery. It granted in part, denied in part, and denied without prejudice in part Target Corporation’s Motion to Compel Discovery, as described above. The order was signed by John F. Docherty, United States Magistrate Judge.