Lantheus Med. Imaging, Inc. v. Zurich Am. Ins. Co.

• Decision Date: 11 January 2012
• Docket Number: No. 10 Civ. 9371(JPO)(JLC).,10 Civ. 9371(JPO)(JLC).
• Citation: 841 F.Supp.2d 769
• Parties: LANTHEUS MEDICAL IMAGING, INC., Plaintiff, v. ZURICH AMERICAN INSURANCE CO., Defendant.
• Court: U.S. District Court — Southern District of New York

841 F.Supp.2d 769

LANTHEUS MEDICAL IMAGING, INC., Plaintiff,

v.ZURICH AMERICAN INSURANCE CO., Defendant.

No. 10 Civ. 9371(JPO)(JLC).

United States District Court,

S.D. New York.

Jan. 11, 2012.

Andrew Arthur Ruffino, Danielle M. Estrada, Covington & Burling LLP, New York, NY, Jennifer Reid Whitfield, Joanne B. Grossman, Rukesh A. Korde, William F. Greaney, Covington & Burling, L.L.P., Washington, DC, for Plaintiff.

Bernadette Kelly Kirwin, Philip C. Silverberg, William D. Wilson, Mound Cotton Wollan & Greengrass, Daniel Mark Krainin, Edward Maxwell Grauman, Beveridge & Diamond, P.C., New York, NY, for Defendants.

OPINION AND ORDER

JAMES L. COTT, United States Magistrate Judge.

In this action, Plaintiff Lantheus Medical Imaging, Inc. (“Lantheus”) seeks declaratory relief and money damages arising from Defendant Zurich American Insurance Company's (“Zurich”) alleged breach of its contractual obligation to indemnify Lantheus for financial loss arising from the extended shutdown of a Canadian nuclear reactor that supplied a raw material used by Lantheus in manufacturing radiopharmaceutical products. Currently before the Court is Lantheus' Motion for Issuance of Amended Letters Rogatory that would permit Lantheus to obtain evidence from non-party Atomic Energy of Canada Limited (“AECL”), a Canadian Crown corporation, which operates the nuclear reactor. Lantheus contends that AECL possesses information—in the form of documents and deposition testimony—that will demonstrate that certain exclusions contained in Lantheus' insurance coverage policy issued by Zurich are inapplicable. In response, AECL, as amicus curiae, contends that the Foreign Sovereign Immunities Act and principles of international comity prohibit this Court from issuing the amended letters rogatory. For the reasons set forth below, Lantheus' motion is granted.

I. Background

The central issue in this litigation is whether the contingent business interruption losses Lantheus sustained as a result of the shutdown of the nuclear reactor at Chalk River Laboratories in Ontario, Canada (the “NRU Reactor”)—and for which it seeks coverage from Zurich—were caused by either “covered” or “excluded” perils. (Memorandum of Law in Support of Plaintiff's Motion for Issuance of Amended Letters Rogatory, dated August 29, 2011 (“Pl.'s Mem.”) (Dkt. No. 36), at 2). The NRU Reactor, which is owned and operated by AECL, was shut down for 15 months in 2009 and 2010 because of damage to the reactor's vessel. ( Id. at 2). During the shutdown, the NRU Reactor ceased production of molybdenum–99 (“Moly–99”), causing the shortage of a “critical raw ingredient” that Lantheus relies on to manufacture radiopharmaceutical products. ( Id.). To establish that its losses resulted from “covered” perils in its suit against Zurich, Lantheus seeks evidence from AECL that will clarify both the “sequence of events leading to the NRU Reactor shutdown and the causes of the damage to its aluminum alloy reactor vessel[,]” such as operator error, corrosion, or improper maintenance. (Pl.'s Mem. at 3–4; Declaration of Rukesh A. Korde in Support of Plaintiff's Motion, dated August 29, 2011 (“Korde Decl.”) (Dkt. No. 37), ¶¶ 4–11 and the exhibits cited therein).¹

Lantheus' application is the most recent of several attempts to obtain information from AECL. Beginning in as early as May, 2010, Lantheus contacted AECL in an effort to obtain discovery material from AECL informally. (Declaration of Anna St. John in Support of Plaintiff's Motion, dated August 29, 2011 (“St. John Decl.”) (Dkt. No. 39), ¶ 3). However, according to Lantheus, despite AECL's initial willingness to provide information voluntarily, Lantheus' repeated efforts to meet with AECL technical personnel or executives were futile; its requests for voluntary production ignored, or answered with mostly irrelevant or heavily redacted material; and its requests for information pursuant to Canada's Access to Information Act resisted.² (Pl.'s Mem. at 4–5 & n. 2). As a result on May 10, 2011, Lantheus filed an Unopposed Motion for Issuance of Letters Rogatory with this Court. (Dkt. No. 24). The Honorable Laura Taylor Swain granted the motion on May 12, 2011, resulting in the issuance of letters rogatory requesting the assistance of Canadian courts in obtaining documents and deposition testimony from AECL. (Korde Decl. ¶ 31; Orders dated May 12, 2011 (Dkt. No. 29–30)). On May 26, 2011, Lantheus served AECL with a Notice of Application for a July 21, 2011 hearing in the Ontario Superior Court of Justice (“Ontario Court”) to enforce the letters rogatory. (Korde Decl. ¶ 32). On June 16, 2011, AECL first asserted its position that it was immune to process within Canada and that the discovery material Lantheus sought implicated export and other “public policy” issues. (Pl.'s Mem. at 6; Korde Decl. ¶¶ 33–36).

After additional efforts to achieve a compromise failed, the Ontario Court dismissed Lantheus' application for enforcement of the letters rogatory without prejudice in an oral decision on July 27, 2011. (Reasons for Judgment, Lantheus Med. Imaging, Inc. v. Atomic Energy of Canada Ltd., (2011), CV–11–00427161 (Can.Ont.Super.Ct. J.) (“Ontario Court Decision”), attached to the Korde Decl. as Exhibit 26, at 10; see also Pl.'s Mem. at 6–7; Korde Decl. ¶¶ 37–55). The Ontario Court's dismissal was premised on a concern that this Court was not a court of “competent jurisdiction,” or one “with the powers to issue Letters Rogatory,” as required by the Ontario Evidence Act § 60(1). (Ontario Court Decision at 8). According to the Ontario Court, that question turns on the larger issue—which the Ontario Court deferred to this Court for resolution—as to whether the U.S. Foreign Sovereign Immunities Act (“FSIA” or the “Act”), 28 U.S.C. §§ 1330, 1602 et seq., applies to letters rogatory. (Ontario Court Decision at 8). The Ontario Court reasoned that if the FSIA did shield a foreign sovereign from discovery—including discovery obtained by letters rogatory—then this Court would not be a court of “competent jurisdiction.” Id. The Ontario Court concluded that this Court had not considered AECL's status as a foreign sovereign—and thus had not considered the applicability of the FSIA—because “[t]here [wa]s nothing in the order [issuing the letters rogatory] which indicate[d] that the court was aware of or that it considered the question of whether it had jurisdiction to make the order that it did by reason of the provisions of the FSIA.” ( Id. at 5). Accordingly, the Ontario Court ruled that, “in deference to the U.S. Court that was not given the opportunity to consider the issue, it [would be] improper for [it] to grant this request [to enforce the letters rogatory] before the U.S. Court ha[d] been given the relevant information” concerning AECL's status as a foreign sovereign. ( Id. at 10). The Ontario Court's dismissal of Lantheus' application was ordered “without prejudice to its rights to make a further application to [that] court which demonstrates that the U.S. Court had the opportunity to consider the issue of the applicability of the FSIA.” ( Id. at 11).

By letter dated August 4, 2011, Lantheus requested leave from this Court to file a motion for the issuance of amended letters rogatory, which Judge Swain granted that day. (Dkt. No. 32).³ By letter dated August 9, 2011, AECL requested leave to make a special appearance or, alternatively, to appear as amicus curiae, for the limited purpose of opposing Lantheus' motion based on what it deemed the “threshold matter” of whether a U.S. court may issue letters rogatory seeking evidence from a foreign sovereign. (Letter from Daniel M. Krainin to Honorable Laura Taylor Swain, dated August 9, 2011 at 2 (“August 9 Letter”); see also Letter from Daniel M. Krainin to Honorable Michael H. Dolinger, dated August 12, 2011). While Lantheus expressed a willingness to have AECL's views considered in opposition to the motion, it opposed AECL's request to make a special appearance or appear as amicus curiae, in part because AECL, in making a submission to this Court, would have the benefit of relying on factual assertions that have not been tested through discovery. (Letter from Rukesh Korde to Honorable Michael H. Dolinger, dated August 10, 2011; Letter from Rukesh Korde to Honorable James L. Cott, dated September 2, 2011 (“September 2 Letter”)). Lantheus argued that the only appropriate procedure by which AECL could make factual arguments to oppose the motion would be a motion for permissive intervention pursuant to Rule 24(b) of the Federal Rules of Civil Procedure, which would thus enable Lantheus to obtain the discovery necessary to test the factual underpinnings of AECL's jurisdictional claims. (September 2 Letter at 2).

On September 7, 2011, the Court granted AECL's application for leave to appear as amicus curiae without prejudice to an application from Lantheus challenging that status if AECL included in its opposition papers factual material beyond the legal arguments concerning the FSIA and the implications of the letters rogatory on Canadian law. (Dkt. No. 42). The Court also reserved the right to disregard any factual material that had not been subject to discovery or, alternatively, to give Lantheus permission to move to take limited discovery and require AECL to move to intervene. (Dkt. No. 42). After the issue was fully submitted to the Court for its consideration, by letters dated November 21 and 29, and December 1, 2011 ( see Dkt. Nos. 59–60, 62), the parties raised additional arguments to reflect recent communications with the Canadian government concerning Lantheus' requests for information under the Access to Information Act, On December 9, 2011, the Court held oral argument on the motion and reserved decision, ( See Transcript of Oral Argument, dated December 9, 2011 (“Tr.”)).

II. Discussion

A. The Parties' Positions Regarding the Application for Amended Letters Rogatory

The threshold question...