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Nationwide Mutual Insurance Co. v. Cg Stony Point Townhomes, LLC

United States District Court, E.D. Virginia, Newport News Division

January 15, 2015

NATIONWIDE MUTUAL INSURANCE COMPANY, et al., Plaintiffs,
v.
CG STONY POINT TOWNHOMES, LLC, et al., Defendants.

OPINION AND ORDER

MARK S. DAVIS, District Judge.

This matter is before the Court on Plaintiffs' motion for summary judgment, ECF No. 112, and associated motion to strike an affidavit submitted by Defendants in opposition to summary judgment, ECF No. 121. For the reasons set forth below, the motion to strike is DENIED without prejudice, and the motion for summary judgment is GRANTED.

A. Background

The instant "Chinese Drywall" civil action has a lengthy and complex procedural history, the majority of which is not directly relevant to the resolution of the instant motions. In short, it is no longer disputed in this declaratory judgment action that Defendants' claimed damages are not covered under the primary property coverage provisions of several relevant insurance policies issued by Plaintiffs because the polices contain a "pollution exclusion" and Defendants' claimed damages result from "pollution" emitted from "Chinese Drywall" that was installed during the construction of the covered properties. ECF No. 113 ΒΆ 26.

Notwithstanding Defendants' concession of such point, which was based on rulings by the United States Court of Appeals for the Fourth Circuit and the Supreme Court of Virginia, ECF No. 115-16, at 46-47, Defendants asserted at a February 28, 2014 status hearing before this Court that factual and legal disputes remained as to the applicability of several secondary coverage provisions contained within the relevant insurance policies, further arguing that such matters were not previously briefed because the prior summary judgment practice was limited to resolving the applicability of the "pollution exclusion, "[1] see generally ECF No. 115-16 (hearing transcript). Because counsel disagreed as to whether previously exchanged discovery materials precluded Defendants from pursuing coverage under the secondary coverage provisions, the Court ordered the parties to submit status updates after reviewing their discovery materials. Upon receipt of the parties' status updates, the Court determined that Defendants had not waived their right to seek recovery under the secondary coverage provisions, noting that Plaintiffs had never propounded any discovery requests requiring Defendants to identify the specific policy provisions under which coverage was asserted. ECF No. 108, at 2 n.1. Moreover, Plaintiffs rightly conceded at the February hearing that the prior summary judgment practice was directed only at the applicability of the "pollution exclusion."[2] Id. at 2.

Based on the above, the Court decided that the most prudent course was to permit the limited additional discovery sought by the parties to develop the facts pertinent to the potential applicability of the secondary coverage provisions, followed by the submission of supplemental summary judgment briefs. In granting the parties' request for additional discovery, the Court required the parties to "exchange lists identifying any witnesses from whom affidavits will be submitted in support of additional summary judgment briefing." ECF No. 108, at 4. Moreover, the Court ordered that for "each witness identified, the parties should also provide a short summary of the subject matter of the planned affidavits." Id . (emphasis added). Such requirement was imposed in order to allow opposing counsel to determine which individuals he may want to depose and to permit counsel to identify potential rebuttal witnesses. The Court thereafter granted the parties' joint request for an extension of the briefing schedule. Plaintiffs' supplemental summary judgment motion and associated motion to strike are now fully briefed and are therefore ripe for review.

B. Motion to Strike

Plaintiffs' motion to strike seeks to exclude an affidavit submitted by named defendant "Steven Middleton, " based on Defendants' alleged failure to comply with this Court's prior Order instructing Defendants to provide a "short summary of the subject matter of the planned affidavits." ECF No. 108, at 4. Notably, one of the key, if not the most important, remaining factual questions in this case was whether there had been an "Equipment Breakdown" at any of the insured properties. Defendants therefore identified four individuals (later reduced to three) as potential witnesses who may submit an affidavit on the topic of alleged HVAC system breakdowns at the covered properties, including one individual that would purportedly state under oath that "the HVAC systems in the affected property broke down and that he repaired it." ECF No. 123-1. Additionally, Defendants identified Mr. Middleton as potentially submitting an affidavit on five topics, none of which mentioned HVAC systems or "equipment breakdowns." Id . Plaintiffs deposed all three of Defendants' HVAC witnesses, but did not depose Mr. Middleton.

Plaintiffs thereafter submitted their supplemental summary judgment motion relying on the deposition testimony of the HVAC witnesses designated by Defendants, who testified that they had no knowledge of an HVAC "breakdown" at any of the insured properties and/or that their company invoices failed to disclose any "breakdowns." ECF Nos. 115-14, 115-15, and 123-4. Defendants subsequently filed a motion in opposition to summary judgment supported not by an affidavit from any of the HVAC witnesses, but instead by Mr. Middleton's affidavit, which focused almost exclusively on the HVAC systems at the subject properties.[3] ECF No. 117. Such affidavit, in a manner largely devoid of factual details, asserts that an HVAC "breakdown" occurred at each of the five subject properties in or around June of 2008. Moreover, such affidavit challenges the knowledge base of Defendants' own HVAC witnesses, and their businesses, appearing to assert, without disclosing any details, that some other unidentified person or business performed HVAC repairs on all five covered properties at some point during 2008.

The pending motion to strike Mr. Middleton's affidavit based on Defendants' alleged failure to comply with this Court's Order appears to be premised on this Court's "inherent power'" to control litigation through regulating "conduct that abuses the judicial process.'" Rutledge v. City of Danville, Va., No. 4:13cv66, 2013 WL 6804697, at *6 (W.D. Va. Dec. 20, 2013) (quoting Silvestri v. General Motors Corp., 271 F.3d 583, 590 (4th Cir. 2001)); see Ready Transp., Inc. v. AAR Mfg., Inc., 627 F.3d 402, 404-05 (9th Cir. 2010) (recognizing that a federal district court's "inherent power" to control its docket "includes the power to strike items from the docket as a sanction for litigation conduct"). Relief could also be warranted pursuant to Rule 37 of the Federal Rules of Civil Procedure, as such Rule discusses sanctions that apply when a party fails to comply with a court's discovery order or fails to disclose or supplement certain information. Fed.R.Civ.P. 37 (b) (2), (c). Pursuant to Rule 37, the Court may, as a sanction for noncompliance, "prohibit the disobedient party from... introducing designated matters into evidence." Fed.R.Civ.P. 37 (b) (2) (A) (ii).

Regardless of the legal basis for Plaintiffs' motion, which seeks to strike what Plaintiffs characterize as a "self-serving" affidavit submitted without proper notice, this Court is not inclined to impose sanctions without first conducting a hearing to allow the Court to determine if the sanction requested is warranted based on the facts specific to this case. However, the Court declines to hold a hearing at this time to further inquire into such matter because summary judgment is appropriate regardless of whether the disputed affidavit is considered. Plaintiffs' motion to strike is therefore DENIED, without prejudice to Plaintiffs' right to refile such motion should any future rulings on summary judgment become necessary in this case.[4]

C. Summary Judgment

The Federal Rules of Civil Procedure provide that a district court shall grant summary judgment in favor of a movant if such party "shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby Inc., 477 U.S. 242, 247-48 (1986). A fact is "material" if it "might affect the outcome of the suit, " and a dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. at 248.

In resolving a summary judgment motion, "the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Id. at 249. In doing so, the judge must construe the facts and all "justifiable inferences" in the light most favorable to the non-moving party, and the judge may not make credibility determinations. Id. at 255; see McAirlaids, Inc. v. Kimberly-Clark Corp., 756 F.3d 307, 310 (4th Cir. 2014) ("It is an axiom that in ruling on a motion for summary judgment, the evidence ...


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