Free Response to Motion - District Court of Arizona - Arizona

1 T. Michael Daggett (#002784) Christian C.M. Beams (019672) 2 STINSON MORRISON HECKER LLP 3 1850 North Central Avenue, Suite 2100 Phoenix, Arizona 85004-4584 4 Tel: (602) 279-1600 5 Fax: (602) 240-6925 E-mail: [email protected] 6 7 Attorneys for Plaintiff Alanco Technologies, Inc. 8 9 10 11 12 13 14 15 16 17 18 19 v. ALANCO TECHNOLOGIES, INC., an Arizona corporation; TECHNOLOGY SYSTEMS INTERNATIONAL, INC., f/k/a TSI ACQUISITION CORPORATION, an Arizona corporation; ROBERT R. KAUFFMAN and ELIZABETH KAUFFMAN, husband and wife; GREG M. OESTER and LINDA OESTER; husband and wife, Plaintiffs, ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) No. CV-04-0789-PHX-DGC PLAINTIFFS' RESPONSE TO DEFENDANT'S MOTION TO STAY THE DISCOVERY SCHEDULE UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA

[Oral Argument Requested]

CAROLINA CASUALTY 20 INSURANCE COMPANY, a Florida 21 corporation, Defendant. 22 23 24

Plaintiffs Alanco Technologies, Inc., Technology Systems International, Inc., an Arizona corporation, f/k/a TSI Acquisition Corporation, Robert R. Kauffman and Elizabeth

25 Kauffman, and Greg M. Oester and Linda Oester (collectively, "Plaintiffs") respond to 26 Defendant Carolina Casualty Insurance Company's ("Carolina") Motion to Stay the Discovery 27 Schedule and requests that the Court to deny this Motion on the ground that the resolution of a 28
DB02/776261 0003/6770202.1

Case 2:04-cv-00789-DGC

Document 73

Filed 08/12/2005

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1 separate litigation has no bearing on the issues currently being litigated in this action. For this 2 reason, discovery should not be delayed in this case. 3 This Motion comes about after Carolina noticed depositions under Rule 30(b)(6) to

4 Alanco and Technology Systems International, Inc. ("TSIA"), seeking very detailed 5 information about a separate litigation, Technology Systems International, Inc. ("TSIN") v. 6 Alanco, et al. (the "TSIN litigation"). This information included all discovery, pleadings, 7 correspondence, memoranda, research, etc., that make up the litigation file in that case. 8 Plaintiffs objected on the ground that such a request would not lead to the discovery of 9 admissible evidence in this case ­ the contents of the litigation file in the TSIN litigation has 10 no bearing on whether Defendant has a duty to pay for the defense of that action under the 11 terms of its policy. Defendant then suggested a stipulated stay in discovery to the conclusion 12 of that case, to which Plaintiffs could not agree for the same reason. Defendant then filed this 13 Motion. 14 Carolina's Motion argues that discovery in this case should be stayed because it has

15 certain affirmative defenses of which the application will "turn sharply" based upon the court's 16 findings in the Technology Systems International, Inc. ("TSIN") v. Alanco, et al. litigation (the 17 "TSIN litigation"). This Motion should be denied for two reasons. 18 First, Carolina is attempting to create an additional issue about which discovery is

19 proper when no such issue exists. Under the insurance policy at issue in this case, Carolina has 20 two obligations: 1) pay the defense costs of the TSIN litigation from its inception; and 2) pay 21 any judgment that might result. One duty arises at the inception of litigation, and the other 22 arises at its conclusion. This action arose out of Carolina's refusal to meet the former

23 obligation. There is no claim related to the latter obligation because the TSIN litigation has not 24 been resolved; there is simply no existing judgment on which to properly make such a claim. 25 Therefore, the issues to be explored in discovery in this case revolve around factual

26 circumstances surrounding this denial of coverage at the inception of the TSIN litigation. How 27 Alanco chose to defend TSIN's claims has no bearing on this determination. For this reason, 28 the outcome of the TSIN litigation makes no difference to the determination of whether 2
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1 Carolina's denial of coverage at its inception is appropriate. In the face of this, there is no 2 articulable interest that might be served by staying discovery in this case (and thus the decision 3 on whether Carolina must honor Alanco's claim for defense costs). 4 Indeed, both affirmative defenses that Carolina notes in its Motion ­ exemptions for

5 fraud or personal profit ­ pertain to the second duty it has under the insurance contract: paying 6 any potential judgment. While there are fraud claims in the TSIN litigation, liability under 7 those claims is a black and white issue: one is either found liable under that cause of action (at 8 the end of the day) or one is not. In either event, this litigation is based on Carolina's refusal to 9 pay the defense costs of the TSIN litigation from its inception. 10 Second, even if the Court decides that the substance of the TSIN litigation is indeed

11 relevant to this matter, which it is not, there still is no interest served in staying discovery in the 12 way suggested by Carolina. Discovery in that action has closed, and has been closed for many 13 months. Thus, no new information will come to light after the resolution of the TSIN litigation 14 that does not already exist. As such, even if the substance of the case prior to judgment is 15 found to bear on Carolina's duty to pay for the defense (which it does not), there remains no 16 justifiable reason to stay discovery pending its outcome. 17 This case has revolved around the application of the "Insured vs. Insured" exclusion,

18 Carolina's stated basis for denying coverage. If Carolina has additional defenses, it is free to 19 make them and conduct discovery thereon. No matter what the defense, though, the issue in 20 this case is coverage of the defense of a litigation from its inception; policy exclusions such as 21 fraud and personal profit have no bearing on this issue. 22 For these reasons, the Court must deny Carolina's Motion to Stay the Discovery

23 Deadline. 24 25 26 27 28 /// /// /// /// /// 3
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DATED this _____ day of August, 2005. STINSON MORRISON HECKER LLP

By: T. Michael Daggett Christian C.M. Beams 1850 N. Central Avenue, Suite 2100 Phoenix, Arizona 85004-4584 Attorneys for Alanco Technologies, Inc. I hereby certify that on the 12th day of August, 2005, I caused the foregoing document to be filed electronically with the Clerk of Court through ECF; and that ECF will send an e-notice of the electronic filing to the following participants: Mark G. Worischeck [email protected] Attorneys for Defendant James K. Thursdon ThurstonJ@@wemed.com Attorneys for Defendant To be delivered as a courtesy hard copy to: Hon. David G. Campbell /s/ Christian C.M. Beams

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