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William R. Friedrich (State Bar No. 044731) Deborah S. Ballati (State Bar No. 067424) Pamela Hammond Davis (State Bar No. 168068) Farella Braun & Martel LLP Russ Building, 30th Floor 235 Montgomery Street San Francisco, CA 94104 Telephone: (415) 954-4400 Facsimile: (415) 954-4480 Attorneys for Plaintiffs VISA INTERNATIONAL SERVICE ASSOCIATION, VISA U.S.A., INC., and VISA CANADA UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION VISA INTERNATIONAL SERVICE ASSOCIATION, VISA U.S.A., INC., and VISA CANADA, Plaintiff, vs. AMERICAN GUARANTEE & LIABILITY INSURANCE COMPANY, and DOES 1 through 100, Defendants. Case No. C 01-2306 CRB VISA’S RESPONSE TO AMERICAN GUARANTEE’S OBJECTIONS TO INITIAL DISCLOSURE REQUIREMENTS CMC Date: Nov. 2, 2001 Judge: Hon. Charles R. Breyer Plaintiffs Visa International Service Association, Visa U.S.A., Inc., and Visa Canada (collectively, “Visa”) respectfully submit this response to American Guarantee and Liability Insurance Company’s (“American Guarantee”) Memorandum of Law In Support of Its Objections to the Initial Disclosure Requirements of Rule 26(a)(1). [FOOTNOTE 1] I. INTRODUCTION In this action, Visa seeks a declaration that American Guarantee is obligated to reimburse it for the expenses it incurred to remediate and prevent imminent loss or damage to Visa’s computer systems and electronic data associated with the Year 2000 computer “bug.” At present, American Guarantee continues to investigate Visa’s claim while maintaining that no coverage exists. Visa filed the instant action to preserve its rights after American Guarantee refused to enter into a tolling agreement with respect to this claim. American Guarantee’s objections to making initial disclosures in this action are misplaced for several reasons. First, its Memorandum of Law seeks to litigate its defenses to the suit as a whole on the merits. Second, American Guarantee confuses the function and purpose of initial disclosures by suggesting that it does not have enough information to respond to Visa’s claim when such a response is not required under Rule 26(a)(1). Finally, the terms of American Guarantee’s proposed order would prejudice Visa and needlessly delay this action for five months while American Guarantee unilaterally conducts discovery. Contrary to its objections, American Guarantee has all the information it needs to disclose the information reasonably available to it at this time. II. DISCUSSION A. American Guarantee improperly seeks to litigate its defenses on the merits at the initial disclosure stage American Guarantee asserts that it cannot make initial disclosures because Visa allegedly breached various policy conditions, including those concerning notice of loss, proof of loss, and cooperation by the insured. These assertions are defenses to Visa’s lawsuit, not an excuse to avoid making mandatory disclosures. An insurer may assert defenses based upon breach by the insured of a condition of the policy such as a cooperation clause. See Campbell v. Allstate Ins. Co ., 60 Cal. 2d 303, 305, 32 Cal. Rptr. 827, 828 (1963). The insurer has the burden of proving that it has been prejudiced by the insured’s breach of the cooperation clause. Id. at 306; See also Pruyn v. Agricultural Ins. Co., 36 Cal. App. 4th 500, 516, 42 Cal. Rptr. 2d 295, 303 (1995). The evidence cited by American Guarantee in support of its arguments that Visa has failed to comply with various policy provisions thus relates to American Guarantee’s defenses on the merits to the suit as a whole, which are properly addressed by summary judgment or at trial, not at the initial disclosure stage. Indeed, all of the cases cited in Section I of American Guarantee’s Memorandum of Law relate to the substantive merits of its defenses, and have nothing to do with its procedural obligation to make initial disclosures at this early stage in the action. [FOOTNOTE 2]American Guarantee is required to make its initial disclosures. B. American Guarantee Improperly Equates Its Purported Inability To Respond To Visa’s Claim With Its Ability To Make Initial Disclosures American Guarantee fundamentally misconceives the function and purpose of initial disclosures when it states on page 2 of its Memorandum of Law that “American Guarantee cannot possibly respond to Visa’s elusive claim until it has been reasonably documented.” SeeMemorandum at 2:6-7. At the initial disclosure stage, Visa is not asking American Guarantee to respond to its claim. Visa is also not “seeking to avail itself” of anything, as American Guarantee contends; rather, Visa is simply complying with the Federal Rules of Civil Procedure, which evenhandedly mandate that both parties exchange basic information about their claims and defenses. Visa has complied, and American Guarantee should also comply. 1. Rule 26 imposes an obligation to disclose reasonably available information. A party’s initial disclosure obligations are limited to information then reasonably available to it. SeeFed. R. Civ. P. 26(a)(1). “Reasonably available” information is that which is known to a party, its agents and counsel, as well as information obtainable through reasonable investigation. SeeFed. R. Civ. P. 26(a)(1) advisory committee’s notes (1993). A party is not excused from making initial disclosures because it has not fully completed its investigation of the case. It must disclose whatever information is “reasonably available” to it at the time of the disclosures. SeeFed. R. Civ. P. 26(a)(1). After making its initial disclosures, a party is under an ongoing obligation to supplement its initial disclosures at “appropriate intervals.” SeeFed. R. Civ. P. 26(e)(1). Thus, the parties have the ability to modify and add to their disclosures as the case develops. 2. American Guarantee can make appropriate initial disclosures. Contrary to its assertion that it cannot identify its claims and defenses at this stage, American Guarantee possesses all the information it needs to comply with its obligations under Rule 26 at this stage of the lawsuit. American Guarantee knows that it issued four policies of insurance to Visa, the contents of those policies, that Visa has a claim against the policies, and that Visa’s claim is concerned with Year 2000-related computer date recognition problems. Indeed, American Guarantee apparently had enough information to assert forty-one affirmative defenses in its answer to the Complaint. American Guarantee can also identify witnesses and documents: the people with knowledge about the policies and Visa’s notice of claim, the policies themselves, American Guarantee’s claim file for Visa, documents and witnesses associated with the drafting history of the policies and with the conditions upon which American Guarantee relies upon to attempt to excuse its obligation to make disclosures, the people and documents associated with its denials of similar claims, and any policies of reinsurance it may itself possess that might cover an eventual judgment in this action. American Guarantee therefore possesses sufficient knowledge and information to disclose information that is reasonably available to it at the time of disclosures. SeeFed. R. Civ. P. 26(a)(1). American Guarantee is free to, and indeed obligated to, supplement its disclosures as more information becomes available during the course of the lawsuit, and hence is not limited or prejudiced by its initial disclosures. Indeed, it is difficult to see how making disclosures (including but not limited to the information described above) would prejudice American Guarantee in any way. Such disclosures are not “unjust,” “ironic,” “impracticable,” or unduly beneficial to Visa, as American Guarantee suggests. Instead, making disclosures would simply bring American Guarantee into compliance with Rule 26(a)(1), a major purpose of which is to “accelerate the exchange of basic information about the case and to eliminate the paper work involved in requesting such information.” SeeFed. R. Civ. P. 26(a)(1) advisory committee’s notes (1993). C. American Guarantee’s proposed order would cause needless delay and prejudice Visa In seeking to avoid its obligations under the Federal Rules of Civil Procedure, American Guarantee seeks an order providing for a 150-day period during which it could unilaterally conduct discovery. This proposal is patently unreasonable. Under American Guarantee’s proposal, Visa would have 30 days to respond to extensive written inquiries and document requests, after which American Guarantee would have a 120-day period during which to unilaterally investigate the claim before making its initial disclosures at the end of the period. [FOOTNOTE 3]This request should be denied because: (1) nothing prevents American Guarantee from conducting formal discovery in this lawsuit at any time; (2) without the benefit of American Guarantee’s initial disclosures, Visa will be handicapped in its efforts to conduct discovery; and (3) the case would be needlessly delayed by over five months while American Guarantee engages in its one-sided discovery process, presumably requiring a stay of the action. There is no reason why the parties cannot mutually exchange the required information and simply proceed with discovery under the Federal Rules of Civil Procedure on the Court’s regular case management schedule. While Visa has already made its disclosures, American Guarantee would apparently like to prohibit Visa from proceeding with discovery for five months. This needless delay would prejudice Visa’s ability to prosecute the case and frustrate the purpose of Rule 26, which is to accelerate the exchange of information and eliminate needless paperwork. III. CONCLUSION For the foregoing reasons, Visa respectfully requests that the Court overrule American Guarantee’s objections and compel the disclosures required by FRCP 26(a). DATED: October 30, 2001. FARELLA BRAUN & MARTEL LLP By: Deborah S. Ballati /S/_____________ Deborah S. Ballati Attorneys for Plaintiffs Visa International Service Association, Visa U.S.A., Inc., and Visa Canada ::::FOOTNOTES:::: FN1American Guarantee’s Memorandum of Law is purportedly submitted pursuant to Civil L.R. 7, although it was filed only one week before the Case Management Conference originally scheduled for October 12. Rule 7 requires motions to be noticed 35 days in advance. American Guarantee did, however, timely object to the initial disclosure requirements at the meet and confer session. Because Rule 26(a)(1) is silent as to a timeline for briefing a party’s objections, Visa assumes that a motion to strike for failure to comply with Rule 7 would be inappropriate. Accordingly, Visa submits this response in advance of the Case Management Conference (now scheduled for November 2). FN2For example, Reid v. Allstate Insurance Co., No. 99-1120 VRW, 2000 WL 502848 (N.D. Cal. Apr. 14, 2000), is an order granting summary judgment (following discovery) for the insurer on the issue of whether it acted in bad faith in orally examining its insured. Reid did not deal in any way with initial disclosures or the insurer’s obligation to make them. Similarly, Globe Indemnity Co. v. Superior Court, 6 Cal. App. 4 th 725, 8 Cal Rptr. 2d 251 (1992), dealt with whether requiring an insured to submit to an examination is unreasonable as a matter of law. Again, this has no bearing on the present circumstances, which involve equal application of the Federal Rules of Civil Procedure to both parties. FN3It is unclear whether the terms of American Guarantee’s proposed order would permit Visa to conduct any discovery during the 150-day “preliminary investigation period,” but presumably Visa would have to do so without the benefit of initial disclosures, thereby defeating the purpose of American Guarantee’s ever making them.

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