1260 BB Property LLC v. Certain Underwriters at Lloyd’s

Case Number

23CV00285

Case Type

Hearing Date / Time

Wed, 10/30/2024 - 10:00

Nature of Proceedings

Insurers’ Motion to Reopen Discovery to Take a Third-Party Deposition

Tentative Ruling

Plaintiffs [“1260 BB”]: Jared Katz, Gregory J. Scandaglia, William J. Ryan, Eric J. Muñoz, Samuel C. Halter, Joseph R. Swee, Therese L. Tully.

Defendants other than Liberty Mutual [“Insurers”]: Tyler M. Costanzo, Charles Deutsch, Sava Vojcanin.

Defendant Liberty Mutual [“Liberty”]: Nicholas J. Boos.

To the Lawyers: As a Courtesy to the Bench please pass this Tentative along to anyone missed in the email string that needs to know.

Issue

Insurers’ Motion to reopen discovery to take a third-party deposition. Trial is set for March 26, 2025. The early date for close of fact discovery is past and was set pursuant to a schedule stipulated by the parties.

RULING

For the reasons set out below the motion is GRANTED if Insurers commit to a date when it will have taken the deposition. The deposition must occur promptly. That commitment will be given at the 10/30/24 Hearing on the record. That date is __________________.

The Motion

Filed 9/20/24; 21 pages; read and considered it all; summarized: the limited discovery requested is to permit Insurers to issue a subpoena for and depose third party witness Diane Balasa regarding her personal knowledge of and involvement in the acts and events which form the basis for the instant litigation. This Motion is made pursuant to (A) the doctrine of equitable estoppel, and (B) the Code of Civil Procedure section 2024.050, and (C) on the grounds of (1) necessity; (2) diligence; (3) ability to proceed to trial on the scheduled date; and (4) the time between the prior trial date and the current trial date. The Motion is based on the Memorandum of Points and Authorities, the Declaration of Charles W. Deutsch and exhibits, a Reply Brief, the files and records of this matter, any oral argument, and such other matters as the Court may consider.

Memorandum of Points and Authorities; summarized: 1260 BB has engaged in a pattern of gamesmanship and harassment designed to inconvenience Insurers and frustrate the discovery process; has now culminated in a transparent effort to deny Insurers the opportunity to conduct the deposition of a relevant witness with substantial personal involvement in and knowledge of the issues which go to the heart of this litigation; the Court should not permit 1260 BB to abuse the discovery process and should enter an Order re-opening discovery for the limited purpose of permitting Insurers to subpoena and depose third party witness Diane Balasa.

This matter arises from an insurance dispute between Insurers and 1260 BB under a property insurance policy held and procured by 1260 BB’s property manager, Four Seasons. The Four Seasons Resort the Biltmore Santa Barbara (“Hotel”), property owned by 1260 BB, managed by Four Seasons, and insured under policies issued by Insurers to Four Seasons, was damaged by the 2017 Thomas wildfire and 2018 Montecito mudslides. Insurers indemnified 1260 BB more than $5.9 million and $46.6 million for covered losses resulting from the wildfire and mudslides, respectively. Ms. Balasa, an employee of policyholder Four Seasons, was directly involved in the investigation and adjustment of the claims on behalf of both Four Seasons and 1260 BB, including assisting in the preparation of 1260 BB’s claim and communicating directly with 1260 BB’s claims advocate Josh Collier and independent adjuster Stuart Whiteside of Sedgwick. Insurers made good faith attempts to obtain Ms. Balasa’s deposition. First, Insurers asked if 1260 BB would accept service given the relationship between 1260 BB and Four Seasons. After 1260 BB delayed providing a clear response, Insurers approached Four Seasons’ counsel, Anthony Fiotto directly. Delays ensued. Eventually, when Four Seasons’ counsel advised that he could not accept service, Insurers retained Canadian counsel to begin service upon a Canadian citizen with a subpoena for a deposition in California litigation. 1260 BB, now aware of Insurers’ efforts to depose Ms. Balasa, served their own notice of deposition and subpoena, not on Ms. Balasa directly, but on Mr. Fiotto, her attorney. Apparently, Mr. Fiotto was authorized to accept notice and subpoena for Ms. Balasa’s deposition, but only from 1260 BB. The parties then agreed to depose Ms. Balasa on September 25, 2024. The issue of Ms. Balasa’s deposition having been resolved – and believing that 1260 BB was acting in good faith – Insurers determined that it was no longer necessary to undergo the time and expense of independently serving Ms. Balasa. Insurers reasonably relied upon 1260 BB’s notice. On Wednesday, September 11, 2024, only two days before the close of fact discovery, 1260 BB’s counsel sent an email stating that, “The deposition of Diane Balasa will not be going forward September 25 (or any day the week September 23).  We will get back to you shortly with additional information.” There was no indication in this email that 1260 BB would not proceed with Ms. Balasa’s deposition, which would have allowed Insurers to at least attempt to resume efforts to serve Ms. Balasa. Two days later, on the fact discovery deadline, 1260 BB sent an email withdrawing its subpoena and notice of deposition of Ms. Balasa without explanation. Insurers immediately contacted 1260 BB’s counsel, who deliberately wasted the last few hours of fact discovery and delayed any response until the following morning, a Saturday, to refuse Insurers’ request. 1260 BB’s actions fit within a larger pattern of delay, misrepresentation, gamesmanship, and harassment throughout litigation. As a result, it is clear that 1260 BB deliberately acted to mislead Insurers and to frustrate efforts to depose Ms. Balasa. There is no good faith explanation for 1260 BB’ actions. In light of 1260 BB’s actions, and in the interest of conducting full and fair discovery, Insurers ask this Court to reopen discovery for the limited purpose of serving and deposing Ms. Balasa.

The requested discovery is necessary because: (1) the insurance Policies procured by Four Seasons under which 1260 BB asserts its claims form the basis for this action; and (2) Ms. Balasa, as an employee of Four Seasons, was a direct and active participant in the adjustment of 1260 BB’s insurance claims, including the alleged acts and omissions which form the basis for this litigation. There is no genuine dispute that Ms. Balasa is a relevant witness with necessary information. After all, all parties, including 1260 BB, have sought her deposition. All parties have also disclosed Ms. Balasa as a relevant witness with information directly pertinent to the underlying issues, including both the facts that form the basis for 2160 BB’s claim and 1260 BB’s calculation of damages.

As set forth in the Background Section of the Points and Authorities and the accompanying Deutsch Declaration, Insurers have been diligent in attempting to obtain Ms. Balasa’s deposition. Insurers’ efforts included multiple unanswered requests and communications with 1260 BB’s counsel and weeks of ignored requests to Four Seasons’ counsel in efforts to avoid the cost and burden of international discovery. When Insurers finally received a denial, they promptly sought to retain Canadian counsel to assist serving a subpoena on a Canadian citizen. In fact, it was only once 1260 BB served its own subpoena on Ms. Balasa that Insurers ceased their efforts, based on their reasonable reliance thereon and the fact that serving multiple deposition subpoenas on a single fact witness is unnecessarily duplicative. Additionally, “the reasons that the discovery was not completed or that the discovery motion was not heard earlier” C.C.P. 2024.050(b)(2) is there was no reason for Insurers to believe that 1260 BB would abuse the Notice and Subpoena process.

The requested discovery will not cause delay of the trial scheduled for March 26, 2024. The deposition will be short and will not interfere with trial preparations; the only reason that the fact discovery cutoff expired on September 13, 2024, was based on a discovery stipulation. The standard fact discovery cutoff under Code of Civil Procedure section 2024.020(a) is 30 days before trial. As such, any deposition of Ms. Balasa would still occur well within the typical timeframe for completion of fact discovery.

This matter was originally scheduled to proceed to trial on September 25, 2024, before it was reset to March 26, 2025. This grants the parties six months of additional time in which to complete further discovery and means that 1260 BB will not be prejudiced by a limited reopening of discovery. To the extent it is relevant here, the time between trials will allow the requested discovery without need for a further continuance.

Insurers request that this Court enter an Order re-opening discovery for the limited purpose of serving notice of deposition and a subpoena on Ms. Balasa and for leave to file an Application for Commission to Take Deposition Outside of California, and for any further relief that this Court deems just and appropriate.

Supported by the Declaration of Charles Deutsch; 186 pages [includes Exhibits A and B; read and considered.

The Opposition

Filed 10/17/24; 19 pages; read and considered; summarized: Defendants’ motion should be denied because their own lack of diligence is the sole reason they could not take Diane Balasa’s deposition before the September 13, 2024 close of fact discovery. Defendants waited for over a year and a half after Plaintiff filed the instant action and just prior to the close of fact discovery on September 13 before they took any steps to depose Diane Balasa, a non-party employee of non-party Four Season and a resident of Canada.  Based upon Defendants’ own submission to this Court, Defendants have known that Ms. Balasa was knowledgeable of the wildfire and mudslide events at issue in this litigation since before the litigation was filed.  Ms. Balasa was also specifically disclosed by Plaintiff to Defendants on August 11, 2023 as a person with knowledge of the facts of this case in written discovery responses. 

Defendants then waited over one year until the close of fact discovery was fast approaching before even beginning the process of trying to obtain an international subpoena over this Canadian resident.  From the commencement of this litigation in January 2023, Defendants have had every opportunity to take the necessary steps to obtain a proper international subpoena over Ms. Balasa. 

Yet, even as of the date of this filing, Defendants have not obtained or served a proper subpoena on Ms. Balasa or demonstrated any concrete steps sufficient to obtain service of process over Ms. Balasa as a Canadian citizen.  Most importantly, before Plaintiff did or said anything about Ms. Balasa’s deposition at the end of August 2024, it was already too late for Defendants to obtain a valid international subpoena before the close of discovery because it would require a lengthy international legal process.  Thus, all Defendants’ reliance arguments should be rejected as after-the-fact excuses for their own lack of diligence.

Defendants’ motion fails to give proper weight and context to the fact that Ms. Balasa resides in Canada.  As such, Ms. Balasa is outside the subpoena power of this Court absent extraordinary legal proceedings necessary for an international subpoena.  Defendants fail even to inform the Court of what would be necessary to obtain a Canadian subpoena, what specific steps they have taken to secure one, and for how long the case (and perhaps the trial) would be delayed while the Defendants belatedly pursue the international legal proceedings required for a Canadian subpoena.  Indeed, despite their silence on the issue, it is very likely the case would be substantially delayed should the Court allow Defendants to proceed.

After failing timely to secure service of a subpoena, or even to take concrete steps to obtain an international subpoena, Defendants fall back on blaming Plaintiff’s counsel, as well as Four Seasons’ counsel, for Defendants’ own failure to obtain proper service of process over this Canadian resident.  By their own admission, Defendants failed to act diligently because they were unreasonably relying on the mere “possibility” that service of a subpoena and notice of the deposition would happen with little effort on their part.  Defendants’ lack of diligence is therefore the source of their failure. Defendants now ask the Court to excuse their dilatory conduct and reward them with a reopening of discovery and a potential delay of the trial setting to take the deposition of this witness.  Defendants have not satisfied the law for reopening discovery.  Defendants’ request to estop Plaintiff from relying on the close of discovery deadline is without merit and represents an attempt to shift the blame from their own demonstrable lack of diligence. Defendants failed for over 18 months during the Court-defined discovery period to take Ms. Balasa’s deposition and nothing Plaintiff did or said contributed to that failure.  Defendants’ motion to reopen should be denied.

Defendants assert that Plaintiff was aware that it “intended to abuse the discovery process” when it took steps to secure a voluntary subpoena on Ms. Balasa on August 28, 2024, and then withdraw that request on September 13, 2024.  This is nothing in the record to support this characterization of the facts, and Plaintiffs deny it.  The record facts show that Plaintiff said nothing at all to Defendants about Ms. Basala’s personal deposition prior to August 28.  Then, beginning August 28, Plaintiff for a time contemplated taking Ms. Balasa’s deposition and took steps to secure her voluntary attendance.  However, at that time, it was clear to everyone that it was too late for any party to secure Ms. Balasa’s deposition through a valid international subpoena.  Plaintiff did not and could not have intended to frustrate Defendants’ efforts to obtain such a subpoena because Defendants’ prior lack of diligence had already made obtaining a valid subpoena infeasible.

There is no support for any assertion that Plaintiff intended to “directly prevent” Defendants from timely serving a subpoena on Ms. Balasa. Defendants’ counsel is sophisticated and well-resourced.  They could have, at any time, carried through with any desire to undertake the necessary steps of serving an international subpoena on Ms. Balasa, a Canadian resident.  By the time Plaintiff addressed the issue of Ms. Balasa’s personal deposition it was already too late for Defendants to obtain a subpoena.

Defendants’ equitable estoppel argument fails because they knew by August 2024 that it was too late to obtain an international subpoena over Ms. Balasa.  Defendants knew Ms. Balasa was a Canadian resident outside the subpoena power of this Court.  Defendants knew discovery closed on September 13.  It was Defendants’ lack of diligence for over twenty months of litigation and discovery that prevented them from obtaining a subpoena over Ms. Balasa, not anything said or done by Plaintiff.

Defendants accuse Plaintiff of “gamesmanship” and discovery “abuse” as means of hiding or excusing their own lack of diligence.  But there is nothing Plaintiff did that was improper.  Plaintiff merely evaluated its litigation options over a two-week period and ultimately chose not to take a single deposition at a time when discovery was closing and there were numerous other depositions that still needed to be completed.  Defendants well knew discovery was closing on September 13.  Defendants had over 18 months of litigation and discovery to seek a subpoena of Ms. Balasa. Defendants did nothing until it was too late and only have their own lack of diligence to blame.

Defendants argue that when they received Plaintiff’s notice of deposition on August 28, they “reasonably ceased their efforts to serve Ms. Balasa because further efforts would have been duplicative and unnecessary.” But that was a mere two weeks before the close of discovery.  It was already too late for Defendants to obtain a subpoena of Ms. Balasa using the formal international legal channels. Based on this undisputed fact, there was and can be no reliance on anything Plaintiff said or did. None of Defendants’ estoppel cases support their position.

Plaintiff requests that this Court deny Defendants’ motion to reopen limited discovery in its entirety.  Defendants are not entitled to the discovery.  Defendants’ argument for equitable estoppel likewise fails.

Supported by the declaration of Gregory Scandaglia; 47 pages; read and considered; includes Exhibits A, B, C, D, and E.

The Reply

Filed 10/23/24; 13 pages; read and considered; summarized: the entirety of the 1260 BB Response is designed to do one thing: obfuscate and blame Insurers for 1260 BB’s gamesmanship and intent to abuse the discovery process. Every point raised in opposition to Insurers’ Motion is either a deliberate mischaracterization or pure conclusion proffered without any support. 1260 BB fails to refute the points raised in Insurers’ Motion and fails to demonstrate that it did anything other than interfere with Insurers’ efforts to complete discovery.

The relevant factual background is set forth in Insurers’ Motion; but Insurers correct omissions in 1260 BB’s Response. The first, and most notable omission, is that 1260 BB does not deny the facts set forth in the Declaration of Charles W. Deutsch.  The Declaration states that Attorney Deutsch spoke with, among others, Attorney Ryan on multiple occasions through the course of discovery, and that on multiple occasions Attorney Deutsch asked Attorney Ryan whether 1260 BB would accept service of subpoena and notice of deposition on behalf of Four Seasons.  1260 BB does not deny this.  The Deutsch Declaration states that Attorney Ryan repeatedly stated that he would confer with his partner, Attorney Scandaglia, and provide a response.  1260 BB does not deny this.  The Deutsch Declaration states that, after indicating that it would provide an answer regarding acceptance of service on behalf of Four Seasons, 1260 failed to provide any clarity until were forced to take direct steps to contact Four Seasons. 1260 BB does not deny this.

Since Insurers filed their Motion to Reopen Limited Discovery, 1260 BB has doubled down on its abuse of discovery.  [The Court must and does ignore the new evidence in the Reply. It is impermissible.]

The second omission arises from 1260 BB’s efforts to again sidestep its own role in delaying discovery.  1260 BB unilaterally put a halt to oral discovery for approximately five months in 2023. Insurers presented their first PMQ designee witnesses in December 2023 and January 2024. Insurers also agreed to a schedule to present their respective European-based corporate representatives for depositions during the weeks of February 5 and 19, 2024 and independent adjuster Stuart Whiteside for deposition on February 27, 2024.  After completing two depositions, 1260 BB unilaterally cancelled all scheduled depositions and filed a Motion to Compel additional productions that delayed all oral discovery until after May 2024.  Most of the documents in the Motion were already in 1260 BB’s possession.  The sole documents that this Court ordered Insurers to produce – materials related to calculation of insurance premiums – were not used by 1260 BB in a single deposition.  Insurers promptly resumed efforts to schedule and present their remaining twelve party representative witness (two of whom sat for depositions on multiple days) and the various noticed consultants who aided Property Insurers in the underlying adjustment.  1260 BB’s effort to ignore its own delays and the extensive efforts that Insurers made to complete discovery is disingenuous and intended to shift the focus from its own duplicity.

As set forth in Insurers’ Motion, there are four considerations in reopening discovery: necessity; diligence of the party seeking the discovery; likelihood that permitting the discovery will delay or interfere with trial or prejudice any other party; the length of time that has elapsed between any date previously set, and the date presently set, for the trial of the action. 

1260 BB’s Opposition fails to meaningfully engage with or refute any of the relevant considerations. 1260 BB’s attempt to argue that Ms. Balasa’s deposition is not necessary is baffling. 1260 BB spends only three sentences of its Opposition on this point and argues that Ms. Balasa’s deposition is not necessary because she has not been deposed.  It is pure tautology.  If the fact that a witness was not deposed rendered them unnecessary, then there would be no reason to ever reopen discovery because every single motion would inherently fail to satisfy the first element.

Sections A.2 through A.4 of the Opposition are equally duplicative and conclusory.  In sum, 1260 BB asserts and reasserts that Insurers did nothing to obtain Ms. Balasa’s deposition.  This argument asks the Court to ignore the facts set forth in the Motion and Declaration, the same facts that 1260 BB does not deny.  The fact of the matter is that Insurers spent months seeking 1260 BB’s cooperation in conversations with Attorney Ryan, and Attorney Ryan repeatedly said that he would provide an answer at some undisclosed later date. Again, 1260 BB does not deny any of this. 1260 BB attempts to muddy the waters by arguing that its gamesmanship does not count because it served its subpoena and notice for Ms. Balasa in her personal capacity, rather than as a corporate designee.  1260 BB does not explain why this distinction is relevant, but its intent is plain.  Focusing on this distinction – one without meaningful difference – allows 1260 BB to ignore everything before August 28, 2024, and pretend that its efforts to delay are entirely irrelevant. 

1260 BB repeatedly makes the conclusory statement that “it was already impossible for Defendants to obtain a valid subpoena over Ms. Balasa personally prior to the September 13 discovery cutoff using the required international legal proceedings for a subpoena of a Canadian resident.”  But 1260 BB admits, in the very same document, that it has no basis for this assertion: “neither the parties nor the Court really has any idea how long it will take to obtain a valid subpoena on Ms. Balasa.” 

1260 BB asserts, without basis or justification, that a subpoena would take too long. 

1260 BB also ignores that it was its own delay tactics that brought the case to this point.

1260 BB has already demonstrated that this issue is entirely manufactured.  1260 BB testified, through its PMQ designee, Joseph Hicks, that Four Seasons is 1260 BB’s fiduciary and agent. 1260 BB had no trouble in securing its fiduciary and agent’s cooperation in setting Ms. Balasa’s deposition via service on Four Season’s counsel.  This was not, as 1260 BB’s Opposition misleadingly characterizes it, a mere request as to “whether Four Seasons’ counsel could facilitate voluntary acceptance of a subpoena by Ms. Balasa without the need for formal international legal process,” nor was it merely a pending request.  The covering email contains no request, no discussion of whether counsel could facilitate voluntary acceptance. It was a subpoena, plain and simple, served upon and accepted without objection by Four Seasons’ counsel.  The agreed-to date of September 25, 2024 was not an attempt to find “a mutually agreeable date for a potential Balasa deposition” in light of a pending deposition request. The email is clear and unambiguous: 1260 BB, through service on Four Seasons’ counsel, secured its agent and fiduciary’s counsel, demonstrated that it has the power to obtain Ms. Balasa’s deposition, and did, in fact, do so. Its effort to now claim that it would be impossible to secure Four Seasons’ or Ms. Balasa’s cooperation in a timely manner (as a result of its own doing) rings hollow.

1260 BB argues that it never actively prevented Property Insurers from serving a subpoena, but merely “took their own steps to obtain a voluntary deposition of Ms. Balasa and then abandoned those steps …”  First, as detailed above, 1260 BB did actively work to prevent Insurers from serving a subpoena by stringing Property Insurers along with repeated statements that it was looking into whether it would accept service for Four Seasons.  Second, the subpoena itself was a tactic designed to frustrate Property Insurers’ efforts.  1260 BB asks, feigning ignorance, why Insurers didn’t simply serve their own subpoena after Ms. Balasa’s deposition had been subpoenaed, scheduled, set, and agreed to. 

But 1260 BB knows why Insurers did not do so – there is no reason to expend the time, effort, and money required to effectuate an international subpoena on a witness who has already confirmed their deposition.

1260 BB Property declares, in pure conclusion, that it will suffer prejudice and trial will be delayed if discovery is reopened.  To the extent that 1260 BB complains of any delay or prejudice, its wounds are self-inflicted.

As an initial matter, 1260 BB admits that it has no understanding of or basis on which to opine on the length of time that an international subpoena would take to obtain.  Therefore, its complaint that “it may well take several weeks or even months before Ms. Balasa is even served” is simply unfounded.  Moreover, 1260 BB has already demonstrated its own ability to promptly secure Four Seasons’ counsel’s cooperation and, should it choose to do so again, could easily render this concern moot.

1260 BB’s complaints of delay and prejudice are overstated.

Supported by the Declaration of Charles Deutsch; 186 pages; attaches Exhibits K, L, M. Read and considered; will ignore any new evidence presented that was not presented in the original motion.

Supported by the Declaration of May Lynn Genova; 10 pages; attaches Exhibits A, B.

The Court’s Conclusions

This Motion is granted based on (1) necessity; (2) diligence; (3) ability to proceed to trial on the scheduled date; and (4) the time between the prior trial date and the current trial date. It is not based upon the theory of equitable estoppel. 1260 BB’s excuse for why it released Ms. Balasa’s notice and subpoena on the day of the discovery cutoff does not make sense in the context of ongoing discovery. 

It was reasonable for Insurers to attempt to coordinate the deposition through 1260 BB.  It is common for a litigant to accept service on behalf of witnesses with whom it has a special relationship, such as the relationship between 1260 BB and its fiduciary and agent Four Seasons. 

Insurers request that this Court grant its Motion and enter an Order re-opening discovery for the limited purpose of serving notice of deposition and a subpoena on Ms. Balasa and for leave to file an Application for Commission to Take Deposition Outside of California, should be granted if Insurers commit to a date when it will have taken that deposition. Insurers will do this on their own and will not rely upon any attempt to coordinate the deposition through 1260 BB. The Court points out that Insurers previously agreed to the stipulated cut-off date, and they also must assume responsibility for getting this case tried on the date set. The Court does not reopen discovery in general.

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