United States District Court, D. Arizona
ORDER
G.
Murray Snow Chief United States District Judge.
Pending
before the Court is the Motion to Bifurcate and Stay
Discovery on Bad Faith and Punitive Damages Claims of
Defendant RLI Corp. (Doc. 22). For the following reasons the
motion is granted in part and denied in part.
BACKGROUND
Plaintiffs
Sandrine and Gustav Mounier filed this action against
Defendants RLI Corp., Four Season Travel, and GEO Tours. The
Court dismissed Four Season Travel as a party upon its
motion. (See Doc. 24.) In the Case Management Order,
the Court granted leave for RLI to file two separate motions
for summary judgment: one motion on choice of law and the
issue of coverage, and a second regarding all other issues in
the case. (Doc. 25 at 4.) The first motion is due no later
than September 27, 2019. The deadline for discovery regarding
choice of law and coverage issues is August 30, 2019, and
discovery for other issues is to be completed by February 14,
2020. (Id. at 2.) In the current motion, RLI
requests that the Court bifurcate trial and discovery.
DISCUSSION
I.
Legal Standard
The
Federal Rules of Civil Procedure permit a court to order a
separate trial of separate issues for convenience, to avoid
prejudice, or to expedite and economize. Fed.R.Civ.P. 42(b).
District courts have broad discretion as to whether
bifurcation is appropriate. Zivokic v. S. Cal. Edison
Co., 302 F.3d 1080, 1088 (9th Cir. 2002) (citing
Exxon Co. v. Sofec, Inc., 54 F.3d 570, 575 (9th Cir.
1995)). “The piecemeal trial of separate issues in a
single lawsuit . . . is not to be the usual course, however,
and will be ordered only where the party seeking separate
trials meets his or her burden of proving that bifurcation is
necessary.” Lassley v. Secura Supreme Inc.
Co., No. 14-cv-1766, 2015 WL 5634307 at *2 (D. Ariz.
Sept. 15, 2015) (internal citations and quotation marks
omitted).
II.
Analysis
Because
the Court previously granted leave for RLI to file a
preliminary summary judgment motion on the issues of choice
of law and coverage, the sole issue remaining for decision in
this motion is whether discovery and trial should be
bifurcated along the same lines. RLI contends that
bifurcation of discovery and trial is justified here because
a trial on the choice of law and coverage issues could
prevent the necessity of a second, longer, costlier trial on
the issues of insurance bad faith and punitive damages Under
Arizona law, an insurance bad faith claim can be brought
regardless of whether the insurer actually denied coverage.
See Deese v. State Farm Mut. Auto. Ins. Co., 172
Ariz. 504, 510, 838 P.2d 1265, 1271 (1992) (“We hold
that a plaintiff may simultaneously bring an action both for
breach of contract and for bad faith, and need not prevail on
the contract claim in order to prevail on the bad faith
claim.”). In California, however, a bad faith claim
cannot be brought if a putative insured was not owed
coverage. See Love v. Fire Ins. Exch., 221
Cal.App.3d 1136, 1151 (1990) (“[T]here are at least two
separate requirements to establish breach of the implied
covenant [of good faith]: (1) benefits due under the policy
must have been withheld; and (2) the reason for withholding
benefits must have been unreasonable or without proper
cause.”).
Thus,
if California law applies, a determination that no coverage
was due would have the effect of rendering the remainder of
trial unnecessary. For that reason, the Court allowed RLI to
file an initial motion on the choice of law and coverage
issues. But the Court is not persuaded that the possibility
of a ruling favorable to RLI on both of those issues
outweighs the potential inefficiencies that would result from
two separate trials. If the case was bifurcated, and RLI did
not prevail on the choice of law issue, the bad faith and
punitive damage claims would have to be tried regardless of
the outcome of the breach of contract action. For those
reasons, the Court declines to order bifurcation of the case.
However,
as the Court has previously determined to allow two rounds of
briefing, it would be appropriate to allow only discovery
related to the limited issues of choice of law and coverage
under the policy until those issues are decided. This course
will have the benefit of preventing extensive and expensive
discovery regarding the bad faith and punitive damages claims
until it becomes clear that those claims can be brought. And
this approach will also avoid the potential inefficiencies of
have two separate trials should the resolution of the choice
of law issue go against RLI. Discovery on the issues of
choice of law and coverage under the policy may proceed as
outlined in the Case Management Order (Doc. 25). Until the
Court's resolution of those two preliminary issues,
discovery on the bad faith and punitive damage claims is
stayed.
IT
IS THEREFORE ORDERED that the Motion to Bifurcate
and Stay Discovery on Bad Faith and Punitive Damages Claims
of Defendant RLI Corp. (Doc. 22) is GRANTED IN PART
AND DENIED IN PART. RLI shall file its preliminary
motion regarding choice of law and coverage issues according
to the schedule set forth in the Court's Case Management
Order (Doc. 25). Until the ...