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Pegatron Technology Service, Inc. v. Zurich American Ins. Co.

United States District Court, D. Oregon

April 29, 2019

PEGATRON TECHNOLOGY SERVICE, INC., Plaintiff
v.
ZURICH AMERICAN INS. CO. and AMERICAN GUARANTEE & LIABILITY INS. CO., Defendants
v.
JANE DOE, Nonparty Subpoena Recipient.

          Michael L. Rosenbaum, Rosenbaum Law Group, Of Attorneys for NonParty Movant Jane Doe.

          Alexander F. Stuart, Ellyn E. Nesbit, and Scott Stuart, Willoughby, Stuart, Bening & Cook, Of Attorneys for Plaintiff Pegatron Technology Service, Inc.

          Susan K. Sullivan, Clyde & Co. U.S. LLP, Christian Johnson, Clyde & Co. U.S. LLP, Of Attorneys for Defendant American Guarantee & Liability Insurance Company.

          OPINION AND ORDER ON NONPARTY JANE DOE'S MOTION TO QUASH OR MODIFY DEPOSITION SUBPOENA AND FOR PROTECTIVE ORDER [PENDING IN THE U.S. DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA, CASE NO. 5:18-CV-01477-LHK]

          MICHAEL H. SIMON, UNITED STATES DISTRICT JUDGE

         In this matter, the Court is called upon to balance the legitimate discovery needs of a defendant in a civil lawsuit pending in another district with the legitimate privacy needs of a nonparty witness, located in this district, who seeks to avoid or minimize embarrassment, oppression, and undue burden arising from a deposition subpoena issued under Rule 45 of the Federal Rules of Civil Procedure.

         BACKGROUND[1]

         A. Doe Suffers Injury and Asserts Claim Against Customer

         On January 14, 2016, a woman, whom the parties refer to as “Jane Doe” (“Doe”) for reasons of confidentiality, appears to have suffered the publication of extremely personal and private material without her consent. According to Doe, she sent one of her electronic devices to a business for repair. For reasons of confidentiality, the parties refer to that business as “Customer.” Shortly after Doe sent her electronic device to Customer for repair, certain extremely personal and private material contained on that device was uploaded by someone to Doe's Facebook account and other internet locations without her permission. After Doe learned about this from a friend, Doe contacted Customer, who promptly took Doe's personal and private material offline.

         On January 25, 2016, Doe's lawyer sent a letter to Customer, notifying Customer of Doe's claim. On February 4, 2016, Doe's lawyer sent a second letter to Customer, threatening to file a lawsuit for invasion of privacy and negligent infliction of emotional distress. Among other things, Doe's lawyer stated that Doe would be seeking non-economic and punitive damages in the range of nine figures. In that letter, Doe's lawyer offered to settle with Customer for a specific multi-million-dollar sum, if Customer accepted that demand within 30 days. Doe's lawyer added that a prompt settlement would assist Customer in avoiding the negative media publicity that almost certainly would accompany Doe's lawsuit against Customer.

         Customer had several technical service contracts with Pegatron Technology Service, Inc. (“PTSI”). PTSI's parent company is Pegatron Corporation. Shortly after receiving the letters from Doe's lawyer, Customer tendered to PTSI and Pegatron the defense and indemnification of Doe's claim against Customer. According to Customer, under the terms of PTSI's service contracts with Customer, PTSI had a duty to defend and indemnify Customer against Doe's claim because Doe's asserted personal injury arose from technical services that PTSI had contracted to perform for Customer. PTSI and Pegatron promptly tendered Customer's claim to their insurers, Zurich American Insurance Company ("Zurich") and American Guarantee & Liability Insurance Company (“AGLIC”).

         B. Doe Settles with Customer

         In February 2016, Doe and Customer entered into a “Binding Mediation Agreement.” Under this agreement, Doe waived her right to bring a lawsuit against Customer or any other individual or entity arising out of the underlying incident, including waiving any claims that Doe could assert against PTSI or Pegatron. Doe and Customer selected as their mediator a highly respected retired state court trial judge. Doe and Customer researched jury awards and settlements in matters with similar facts. They agreed that Customer was liable to Doe. They also agreed to enter into a mediation within a specific high and low settlement range. Doe and Customer further agreed that if they could not reach a settlement with the assistance of the mediator by March 22, 2016, the mediator would then be authorized to act as a final decisionmaker and select a binding settlement amount within the agreed-upon high and low range. (This feature of the agreement explains why the parties refer to their agreement as a “Binding Mediation Agreement.”) In addition to Doe, PTSI, and their respective counsel, an attorney representing AGLIC and Zurich attended the mediation. In an email dated March 4, 2016, from counsel for AGLIC and Zurich to counsel for PTSI, the insurers requested information that would substantiate Doe's claimed damages as well as a “liability exposure analysis.” Regarding the proposed settlement between Doe and Customer, the insurers agreed not to assert as a defense to coverage the “no voluntary payments” condition contained in the insurance policies, but the insurers expressly reserved their rights to challenge the reasonableness of any settlement that may be reached.

         After Doe and Customer were unable to agree upon a settlement figure, the mediator determined the final settlement amount within the agreed-upon high and low range, pursuant the Binding Mediation Agreement. The specific settlement amount is confidential, but all parties appear to be treating that figure as quite substantial. In late March and early April 2016, Zurich denied defense and indemnity coverage to PTSI under Zurich's several policies. In late April 2016, AGLIC denied defense and indemnity coverage to PTSI under AGLIC's policy.

         On June 13, 2016, Customer entered into a final written settlement agreement with Doe (“Settlement Agreement”). The Settlement Agreement includes a provision titled, “'Non-Assistance with Any Claim or Litigation Against [Customer] or Others.” That provision reads, in relevant part: “Other than what may be required of her by law or a lawful order of a court of competent jurisdiction, [Doe] will not assist any individual or entity in any manner in bringing, maintaining, or advancing any claim or litigation regarding the Released Matters.” The Settlement Agreement also includes a confidentiality provision that addresses only the Settlement Agreement and its terms, a related fee agreement and its terms, and the “communications relating to either agreement's terms, conditions, or negotiation, or the mediation between the parties.” The confidentiality provision expressly states that it does not apply to “other legal proceedings” as may be required by law or to PTSI's insurers.

         C. Customer Settles with PTSI and Pegatron, and Pegatron ...


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