Gov't Emps. Ins. Co. v. Nealey, CIVIL ACTION NO. 17–807

• Decision Date: 13 June 2017
• Docket Number: CIVIL ACTION NO. 17–807
• Citation: 262 F.Supp.3d 153
• Parties: GOVERNMENT EMPLOYEES INSURANCE CO., et al., Plaintiffs, v. Scott P. NEALEY, et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

262 F.Supp.3d 153

GOVERNMENT EMPLOYEES INSURANCE CO., et al., Plaintiffs,

v.Scott P. NEALEY, et al., Defendants.

CIVIL ACTION NO. 17–807

United States District Court, E.D. Pennsylvania.

Signed June 13, 2017

Bruce E. Samuels, Dan W. Goldfine, Jared Sutton, Lewis Roca Rothgerber Christie LLP, Phoenix, AZ, Nicholas M. Centrella, Andrew Kabnick Garden, Conrad O'Brien, Philadelphia, PA, for Plaintiffs.

Robert E. Kelly, Allman Kelly & Willner LLC, Michael J. Fortunato, Wendy R. Hughes, Rubin Fortunato & Harbison PC, Paoli, PA, for Defendants.

MEMORANDUM

STENGEL, District Judge

I. INTRODUCTION

This is a case about litigation abuse—namely, the misuse of lawsuits for the improper purpose of harassment, delay, and obstruction.

A few years ago, two class actions were filed against GEICO General Insurance Company in Washington state court. Not surprisingly, as in any litigation, a dispute arose about the use of documents in these Washington class actions. Rather than meet and confer with the plaintiffs' lawyers (or file a motion in Washington court) about this dispute, GEICO sued them here in Philadelphia. That, however, was not enough to quench GEICO's thirst for aggression. GEICO also sued the plaintiffs' lawyers' expert witness and his company.

GEICO weaves some clever arguments in an attempt to justify its acts of obstruction. However, practicality, legal analysis, and common sense all make clear GEICO is attempting to stalemate the Washington class actions by suing the plaintiffs' lawyers thousands of miles away from where those class actions are currently being litigated. The red herrings in this case are GEICO's alleged "claims" for trade secret misappropriation and unjust enrichment. Even if these "claims" were anything more than red herrings—which they are not—they fail as a matter of law.

The defendants filed a motion to dismiss. In the alternative, defendants move to transfer this action to the U.S. District Court for the Western District of Washington. While transfer might be appropriate in this case, there is no need. I will not tolerate the attempted manipulation of our judicial process in this case. The case is dismissed.

II. BACKGROUND

The facts giving rise to this case began two years ago when Stephen M. Hansen, a Washington lawyer, filed a putative class action against GEICO. Mr. Hansen filed the action, on behalf of Washington residents who are insured by GEICO, in Washington state court. The complaint alleged GEICO fails to fully reimburse its customers when they are involved in car accidents. More specifically, it alleges GEICO fails to honor its duty to provide Underinsured Motorist ("UIM") coverage for property damage to customers' cars.¹

After being sued in state court, GEICO attempted to remove the case to federal court under the Class Action Fairness Act, 28 U.S.C. § 1332(d) (CAFA). Attorney Hansen, on behalf of the plaintiffs, then filed a motion to remand. The district court granted the motion to remand. McGraw v. GEICO Gen. Ins. Co., No. C15-5336, 2015 WL 5228027 (W.D. Wash. Sept. 8, 2015).

Back in state court, deadlines for briefing on the motion for class certification were set. Days before GEICO was ordered to file their brief, GEICO again attempted to remove the case to federal court. The plaintiffs again filed a motion to remand. The court granted the second motion to remand, finding that GEICO's removal was "improper." McGraw v. GEICO Gen. Ins. Co., Case No. C16-5876, 2017 WL 744594, at *4 (W.D. Wash. Feb. 27, 2017). This improper removal, the court found, had "increased [plaintiffs'] costs of litigation" and "wasted judicial resources." Id. GEICO filed a motion for reconsideration of this remand order, which the court denied on May 16, 2017.

Around the same time attorney Hansen filed suit in McGraw (the above case), he filed a separate class action, also against GEICO, in Washington state court. Scott P. Nealey, a California lawyer, also represents the plaintiffs in this case, which is captioned Stone v. Government Employees Insurance Company, Case No. C16–5383 (W.D. Wash.) (Settle, J.). The Stone complaint alleges GEICO systematically fails to properly reimburse its customers for the loss of use of their vehicle after car accidents.

On October 1, 2015, the Washington state court in Stone entered a stipulated Protective Order to protect confidential information anticipated to be produced through litigation. (Protective Order, Doc. No. 22–1 at 7–18) [hereinafter "the Protective Order"]. In order to subject material to the protections of the Protective Order, two conditions are required. First, the material must be "confidential" within the meaning of the Protective Order. (Protective Order ¶ 2.1). Second, the party seeking confidentiality must designate the material "Confidential or Highly Confidential pursuant to Section III" of the Protective Order. (Id. ). In order to designate something as confidential, the Protective Order had very specific requirements:

A party may designate Material or information as Confidential by placing or affixing on the Material in a manner that will not interfere with its legibility the words "CONFIDENTIAL—SUBJECT TO A PROTECTIVE ORDER."

... A party may designate Material or information as Highly Confidential by placing or affixing on the Material in a manner that will not interfere with its legibility the words "HIGHLY CONFIDENTIAL—SUBJECT TO A PROTECTIVE ORDER."

(Id. ¶¶ 3.1.1 & 3.1.2) (emphasis in original).

As it did in McGraw, GEICO attempted to remove the Stone case to the U.S. District Court for the Western District of Washington under CAFA. On behalf of the Stone plaintiffs, attorneys Nealey and Hansen filed a motion to remand. The issue on remand was whether the amount in controversy was sufficient under CAFA to confer federal subject-matter jurisdiction.² In support of its response to the Stone plaintiffs' motion to remand, GEICO filed an affidavit prepared by David Antonacci, a technical supervisor in GEICO's claims department. The purpose of the affidavit was to try to prove to the court in Stone how many—of a certain type—of insurance claims GEICO receives and how much they, on average, pay out on this type of claim. GEICO used this aggregate amount to argue that CAFA's $5 million amount in controversy requirement was met.

GEICO filed the Antonacci affidavit on the Stone docket in two different ways. First, it filed a redacted version. This redacted version did not include any of the specific "CONFIDENTIAL" language required to bring it under the protections of the Protective Order. See Stone v. Gov't Employees Ins. Co., Civ. No. 16–5383 (W.D. Wash.) (Doc. No. 24).

Second, GEICO tried to file a version of the Antonacci affidavit "under seal." (Compl. ¶¶ 45–46). It was stamped as being "Filed Under Seal." (Id. ¶¶ 2, 45–46). GEICO, however, did not file a motion to seal this document as is required by the U.S. District Court for the Western District of Washington's Local Rules of Civil Procedure. This version also did not include any "CONFIDENTIAL" language required to bring it under the protections of the Protective Order. (Id. ¶ 45–46).

Nowhere on any of the two versions of the filed Antonacci affidavit did GEICO place the language "CONFIDENTIAL—SUBJECT TO A PROTECTIVE ORDER" or "HIGHLY CONFIDENTIAL—SUBJECT TO A PROTECTIVE ORDER. " (Id. ¶¶ 2–3, 6, 45–46, 64). In addition to filing the affidavit, GEICO provided attorneys Nealey and Hansen with an unredacted copy of the affidavit. This copy had the words "Filed Under Seal" on the upper left-hand corner of the first page of the affidavit. (Id. ¶ 46).

Two days after GEICO filed the Antonacci affidavit on the Stone docket, attorney Nealey was in Philadelphia for a deposition in a different case to which GEICO is not a party.³ The deponent was Dr. Bernard Siskin, an expert statistician who is employed by BLDS, a consulting firm with offices in Philadelphia. Dr. Siskin was retained as an expert for the plaintiffs in Stone. (Id. ¶ 53). The opposing party in the Siskin deposition was USAA—an automobile insurance company. (Id. ¶ 56).

GEICO alleges that, at this deposition, Mr. Nealey provided Dr. Siskin with a copy of the Antonacci affidavit to use to support his opinions. (Id. ¶ 58). The "Filed Under Seal" brand was not on the first page of the Antonacci affidavit used at Dr. Siskin's deposition. (Id. ). GEICO alleges that "[u]pon information and belief, either the Attorney Defendants [Nealey and Hansen] or Defendant Siskin, or both, tampered with the copy of Mr. Antonacci's Declaration that GEICO disclosed in the Stone Lawsuit by (i) removing the ‘Filed Under Seal’ brand from the first page; or (ii) substituting the first page of the redacted version for the first page of the unredacted and sealed version." (Id. ¶ 59). Mr. Hansen was not present at Siskin's deposition. (Id. ¶ 62).

After this deposition, the district court in Stone ordered GEICO to show cause why the Antonacci affidavit should be under seal. In that order, the district court noted that GEICO had not properly followed the Local Rules for filing the affidavit under seal. It also noted that the Protective Order did not confer judicial decision-making authority on GEICO; GEICO was still required to follow the Local Rules for filing a document under seal even though there was a state-court protective order. After argument, that court ultimately granted GEICO's motion to seal. However, this was not until months after Dr. Siskin was deposed.

III. LEGAL STANDARD

A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted examines the legal sufficiency of the complaint. Conley v. Gibson, 355 U.S. 41, 45–46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). The factual allegations must be sufficient to make the claim for relief more than just speculative. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). In determining whether to grant a motion to dismiss, a ...