Professional Documents
Culture Documents
Case No 2:11-cv-3695-RDP
OPPOSED1
Confidential Pursuant to Protective
Order
This case has only now entered the heart of the discovery phase, and Defendants
will incur substantial fees and expenses in completing this phase and proceeding
through the summary judgment and trial phases.
Similarly, Defendants will incur substantial fees and expenses in the RICO case,
which is in the very early phases.
C&S is a modestly-sized law firm that cannot afford to pay what may amount to
millions of dollars in outside counsel fees in the coming months in this and the
RICO case.
On November 17, undersigned counsel for defendants contacted counsel for Drummond to inform
Drummond of defendants intention to file this motion and to inquire whether Drummond would oppose the motion.
Counsel for Drummond later indicated that Drummond would oppose this motion.
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Defendants have filed on this date a nearly identical motion in the RICO case, No. 2:15-cv-0506-RDP.
C&S had insurance defense coverage in this case until March 2015, after which
time it incurred more than
in legal fees and expenses. It expects to
incur millions more that it will have to pay out-of-pocket if additional insurance
coverage is not available.
C&S is involved in a declaratory judgment case in the U.S. District Court for the
Southern District of Florida involving its insurers obligation to provide defense
coverage in the RICO case.
Resolution of the declaratory judgment case will not only provide clarity as to
Defendants ability to defend themselves in the RICO case, it will also provide
clarity about the resources available for Defendants to devote to the defense of
this case.
Summary judgment on the coverage question is fully briefed, and the parties
expect the U.S. District Court for the Southern District of Florida to render a
decision quickly.
Defendants, therefore, request a very short stay of this case and the RICO case until the
district court in Florida renders a decision on the summary judgment motions concerning
insurance defense coverage.
INTRODUCTION AND FACTUAL BACKGROUND
On October 21, 2011, Drummond Company, Inc. filed this libel action against C&S and
Mr. Collingsworth. Due to an appeal to the Eleventh Circuit over personal jurisdiction, the
parties did not begin litigating the merits of the case until 2013.
Defendants were initially represented in this matter by the law firm of Clark, Hair &
Smith P.C. In late 2014, Defendants retained the law firms of Susman Godfrey L.L.P.
(Susman), Steptoe & Johnson L.L.P. (Steptoe), and Spotswood Sansom & Sansbury L.L.C.
(Spotswood) when they realized significantly more resources were going to be required to
adequately respond to and address the ever-expanding scope of legal and factual issues in the
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case. Two of the most prominent issues were the massive document review Defendants
undertook following entry of the Courts October 15, 2014 Order, and the intense effort required
to respond to, and participate in hearings on, Drummonds renewed motion for sanctions.
Between October 15, 2014when the Court entered its order on privilege logsand
January 9, 2015the date Defendants served their supplemental interrogatory responses and
revised privilege logC&S incurred approximately
Declaration of Eldon Hills (Hills Decl.) 3. A significant portion of those expenses were
attributable to the document review and privilege logging necessary to comply with the Courts
October 15, 2014 Order.
C&S then incurred approximately
2015the date that the evidentiary hearing on Drummonds renewed motion for sanctions was
originally scheduledand September 3, 2015the last day of the three-day evidentiary hearing.
Ex. 1, Hills Decl. 4. Much of those expenses were incurred in preparation for the three-day
evidentiary hearing.
In the middle of these massive projects, Drummond filed the RICO lawsuit in March
2015. That lawsuit is in the very early stages, as the parties are briefing Defendants motions to
dismiss.
In all, Defendants have incurred about
more in the RICO action. Ex. 1, Hills Decl. 6-7. The combined
and approximately
total, over
, is sure to balloontrial in this action is still far off and the RICO action
Defendants have requested that all of their outside counsel firms except for Spotswood and
Badham & Buck withdraw from representing C&S and Mr. Collingsworth, respectively, due the
extraordinarily expensive nature of this action and to reduc[e] the size of [their] trial team.
Doc. 366 at 1 (Susmans motion to withdraw); see also Doc. 381 at 1 (In light of the
extraordinary expense of the case, Steptoe has been requested to withdraw in this matter.).3
C&S is a modestly-sized law firm based in Fort Lauderdale, Florida, that cannot afford to
pay what may amount to millions more in fees in the coming months. C&S only has 21 lawyers,
including two part-time lawyers, one semi-retired lawyer, and a lawyer who is not actively
practicing. The firm is simply not big enough to be able to absorb such fees on its own.
But, Defendants were not simply unprepared for the contingency of litigation. C&S was
insured in this case, and it relied on one of its insurers, Firemans Fund Insurance Company
(Firemans), to cover its legal costs in this action for a period of time. That coverage, however,
was quickly exhausted after the new team came on board given the scope of document review
and privilege logging required, and Drummonds efforts to seek potentially case-terminating
sanctions.
Defendants then sought defense coverage for the RICO action from another of their
insurers, Hartford Casualty Insurance Company (Hartford). But, Hartford refused to provide
any coverage. Since the time the Firemans coverage was exhausted in March 2015, Defendants
have incurred approximately
Decl. 5.
Susman and Steptoe have remained, for the time being, Defendants counsel in the RICO action but most
of the work in that matter is now being handled in-house by C&S.
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Continuing to incur such fees could very well financially ruin C&S. Staying these actions until
the district court in Florida rules would allow C&S to avoid potentially ruinous legal fees while
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the party ultimately responsible for the fees in the RICO action is still unknown. Indeed,
Defendants can only determine the type of legal representation they can afford in the RICO
action once they know if they have insurance coverage. And knowing whether there is coverage
in the RICO action will also provide clarity about the resources available for Defendants to
devote to the defense of this action. The coverage decision in the RICO action will have a great
impact on how Defendants litigate both cases.
The unique circumstances of these cases counsels for a stay, and the law plainly permits
this Court to enter stays in both actions. [T]he power to stay proceedings is incidental to the
power inherent in every court to control the disposition of the causes on its docket with economy
of time and effort for itself, for counsel, and for litigants. Landis v. N. Am. Co., 299 U.S. 248,
254 (1936). In deciding whether a stay is merited, the Court must weigh competing interests
and maintain an even balance. Id. at 254-55. Defendants precarious financial situation and the
difficulty of allocating resources to the defense of the cases before the RICO coverage ruling is
issued warrant a stay. In comparison, Drummond has no competing interests of comparable
importance that would favor denying the stay.
Moreover, Defendants are not seeking any novel relief, as courts regularly stay
underlying actions while insurance coverage disputes are resolved. See Markel Intl Ins. Co. v.
OQuinn, 566 F. Supp. 2d 1374, 1378 (S.D. Ga. 2008) (finding the scenario presented herein
represents the classic case for staying the underlying litigation to resolve an insurance coverage
issue in a declaratory judgment action); see also Candy Craft Creations, LLC v. Gartner, No.
CV 212-091, 2015 WL 2408185, at *3-4 (S.D. Ga. May 19, 2015) (staying trade secrets action
pending settlement conference in related insurance coverage matter); Admiral Ins. Co. v. Petron
Energy, Inc., No. 3:11-CV-02524-M, 2013 WL 5910880, at *1 (N.D. Tex. Oct. 31, 2013) (The
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remaining claims in the Oklahoma Litigation were stayed pending resolution of this coverage
action.); City of Scranton v. Indian Harbor Ins. Co., No. 3:11-CV-0529, 2012 WL 4509788, at
*1 (M.D. Pa. Sept. 28, 2012) (The Underlying Action has been stayed pending a resolution of
the present insurance coverage dispute.).
A 2012 decision from the District of Maine is directly on point. In Pan Am Systems, Inc.
v. Hardenbergh, No. 2:11-CV-00339-NT, 2012 WL 4855205 (D. Me. Oct. 12, 2012), a
defendant in a defamation action sought a stay until a duty to defend action against his insurer
was resolved. Id. at *1. The defendant argued the discrepancy in the resources of the parties is
such that he can only mount an adequate defense if his insurance company funds the litigation.
Id. The defendant further asserted he will be significantly affected by whether his fees and costs
will be covered by [his insurer] or come out of his own pocket. Id. at *2. In ordering the stay
requested by the defendant, the court found there would be minimal hardship to the Plaintiffs in
staying this proceeding pending resolution of the insurance action. Id.
A stay is merited here for the same reasons. There is an obvious discrepancy in the
resources of the parties; Defendants have demonstrated insurance funds are necessary to mount
an adequate defense in the RICO action; Defendants have underscored the critical importance to
both cases of determining whether their fees and costs will be covered by [their insurer] or
come out of [their] own pocket; and Drummond will suffer only minimal hardship (if any)
from a stay. Id. at *1-*2.
Indeed, staying these actions while Defendants seek to force their insurer to cover their
defense costs is akin to staying an action so that a party may obtain new counsel. See Dove v.
Grantier, No. CV 213-163, 2015 WL 5602458, at *1 (S.D. Ga. Sept. 22, 2015) ([T]he Court
stayed all deadlines in this case for a period of sixty days to permit Plaintiff time to retain new
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insurance coverage action is complete, and a ruling is likely imminent. Defendants will
immediately inform the Court of the summary judgment ruling so the stay may be lifted.
Defendants are not asking for a stay pending any appeal of that ruling.
CONCLUSION
For the foregoing reasons, Defendants respectfully request a stay in this action until the
Florida district court rules on the motions for summary judgment in the insurance coverage
dispute with Hartford.
DATE: November 19, 2015
Respectfully submitted,
/s/ William T. Paulk
Robert K. Spotswood
Michael T. Sansbury
William T. Paulk
SPOTSWOOD SANSOM & SANSBURY LLC
1819 5th Ave. N.
Suite 1050
Birmingham, AL 35203
Phone (205) 986-3620
Fax (205) 986-3639
rks@spotswoodllc.com
msansbury@spotswoodllc.com
wpaulk@spotswoodllc.com
Attorneys for Conrad & Scherer, LLP
/s/ W. Percy Badham
W. Percy Badham
Brett A. Ialacci
BADHAM & BUCK, LLC
2001 Park Place North, Suite 500
Birmingham, Alabama 35203
Phone: (205) 521-0036
Fax: (205) 521-0037
pbadham@badhambuck.com
bialacci@badhambuck.com
Attorneys for Terrence Collingsworth
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that, on November 19, 2015, I electronically filed the foregoing
with the Clerk of Court using the CM/ECF system, which will send notification of such filing to
the following:
T. Michael Brown
Carly Miller
BRADLEY ARANT BOULT CUMMINGS, LLP
One Federal Place
1819 Fifth Avenue North
Birmingham, Alabama 35203
mbrown@babc.com
camiller@babc.com
William Anthony Davis, III
H. Thomas Wells, III
Benjamin T. Presley
STARNES DAVIS FLORIE, LLP
P.O. Box 59812
Birmingham, AL 35259
tdavis@starneslaw.com
twells@starneslaw.com
bpresley@starneslaw.com
Sara E. Kropf
LAW OFFICE OF SARA KROPF PLLC
1001 G Street NW, Suite 800
Washington, D.C. 20001
Sara@kropf-law.com
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