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Munchener Ruckversicherungs-Gesellschaft Aktiengesellschaft in Munchen v. Northrop Grumman Risk Management Inc.

United States District Court, D. Columbia

December 9, 2015



         For NORTHROP GRUMMAN RISK MANAGEMENT INC., a Vermont Corporation, NORTHROP GRUMMAN CORPORATION, A Delaware Corporation, NORTHROP GRUMMAN SHIPBUILDING, A Delaware Corporation, Defendants: Barry Jay Fleishman, LEAD ATTORNEY, KILPATRICK TOWNSEND & STOCKTON, LLP, Washington, DC; Adam Howard Charnes, KILPATRICK TOWNSEND & STOCKTON LLP, Winston-Salem, NC.

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         JAMES E. BOASBERG, United States District Judge.

         Donald C. Holmes, counsel for reinsurance company Munich Re, is on a mission to hold Northrop Grumman Corporation and Huntington Ingalls (formerly Northrop Grumman Shipbuilding) accountable for purportedly defrauding the Navy. He hopes to make hundreds of millions of dollars for doing so by bringing a False Claims Act suit in Mississippi. While attempting to establish the alleged fraud, however, Holmes improperly used sensitive documents provided by the Navy under a protective order issued five years ago by this Court in a separate proceeding that has long since been terminated.

         Earlier this year, the district court presiding over the FCA action in the Southern District of Mississippi dismissed Holmes's case, in part because he had violated this Court's protective order. See United States ex rel. Holmes v. Northrop Grumman Corp., No. 13-85, 2015 WL 3504525 (S.D.Miss. June 3, 2015). With that decision pending on appeal, Holmes now moves this Court to reopen the case here to " correct" his " inadvertent noncompliance" with the protective order. In particular, he asks for a modification of the order to allow him to use the protected documents in his FCA suit. As his Motion is both unconvincing and misleading, the Court finds no reason to alter the order's terms.

         I. Background

         This litigation involves the intersection of two different cases in other forums: a foreign arbitration of a reinsurance dispute in London and a False Claims Act suit in Mississippi. The instant Motion seeks to modify a protective order issued by this Court in relation to the former in order to assist Holmes in the latter. In setting forth the facts, the Court draws from both the decision in the FCA suit and other pleadings in this case.

         Northrop Grumman Risk Management, Inc. (NGRMI) is the " captive" insurer of Northrop Grumman Corporation (Northrop), a large U.S. defense contractor. See Am. Compl., ¶ 4. NGRMI insured its parent company for certain losses over $1 million. See id. Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in Munchen Koniginstr (Munich Re) is a German company that reinsured Northrop's covered losses. See id., ¶ ¶ 2, 4. In 2008, Munich Re initiated arbitration proceedings against NGRMI in London to dispute a claim for losses caused by Hurricane Katrina and to seek reimbursement under the companies' reinsurance contract. See id., ¶ 11.

         While the arbitration was pending, Munich Re filed a request with the U.S. Navy for documents the Navy had received from Northrop Grumman Shipbuilding, Inc., a former subsidiary of Northrop that has since been spun off as an independent company named Huntington Ingalls, Inc. See id., ¶ 19; Opp. at 3 n.2. According to Munich Re, the Navy

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agreed to release the requested documents provided that an enforceable protective order was put in place to ensure that they would be used only for the arbitration proceedings. See Compl., ¶ 3 & Exh. 1 (Proposed Protective Order), ¶ 7.

         Munich Re then filed a Complaint in this Court on April 6, 2010, against NGRMI, Northrop, and Huntington Ingalls (collectively " Northrop Grumman" ), asking, inter alia, for the Court to issue a protective order. See Compl., ¶ 13. (Curiously, although Munich Re admits this was a miscellaneous action, the company filed the Complaint as a civil case. See id., ¶ 1.) Counsel for Munich Re, Donald C. Holmes and Gerald Fisher, explicitly stated in the Complaint here that they sought these documents " in aid of private foreign arbitration only" and that they were " in no way . . . attempt[ing] to usurp the power of the . . . arbitration tribunal" for another purpose. See Am. Compl., ¶ 22 (emphasis added). Although discovery had not yet begun in the arbitration proceedings, see Def.'s First Mot. for Extension of Time to Respond, ¶ ¶ 2, 10, Munich Re was apparently eager to obtain the requested documents. In the following weeks, the company filed multiple motions to expedite and oppositions to Defendants' motions for extension of time. See, e.g., Pl.'s First Mot. to Expedite (Apr. 26, 2010) at 6 (" The entry of the protective order should take place in an expedited fashion so Plaintiff can proceed with gathering and marshaling proof from U.S. Navy documents . . . ." ); Pl.'s Opp. to First Mot. for Extension (May 7, 2010) at 5 (" There is no reason for further delay." ); Pl.'s Second Mot. to Expedite (May 12, 2010) at 3 (" Plaintiff urgently needs . . . the entry of the protective order . . . ." ); Pl.'s Opp. to Second Mot. for Extension (May 17, 2010) at 4 (" Plaintiff needs the documents it seeks at the earliest possible date." ).

         On June 2, 2010, while the litigation in this Court was still pending, Holmes and Fisher filed a qui tam lawsuit against Northrop and Huntington Ingalls under the False Claims Act, which was later transferred to the Southern District of Mississippi, seeking over $2.5 billion in damages. See Holmes, 2015 WL 3504525, at *2, 6. Pursuant to the provisions of the Act, the lawsuit was filed under seal and not made known to this Court. See 31 U.S.C. § 3730(b)(2); Holmes, 2015 WL 3504525, at *1. The qui tam complaint alleged that Northrop and Huntington Ingalls had defrauded the Navy in the amount of no less than $835 million by using government funds earmarked for Hurricane Katrina-related expenses to cover cost overruns incurred before the hurricane. See Id. at *2. Holmes and Fisher further averred that they expected the documents they had requested from the Navy would prove these allegations. See Id. at *5 n.5.

         A few weeks later, Munich Re and Northrop Grumman stipulated to a protective order here, see Joint Mot. for Protective Order, and on June 24, 2010, the Court approved it. See ECF No. 20 (Order Granting Joint Mot. for Protective Order). The protective order entered was substantially similar to the one Munich Re had initially proposed. Compare Protective Order with Proposed Protective Order. The final version included a " Good Cause Statement" section in which each party explained why the order was necessary. Northrop Grumman noted that because the company is a major defense contractor for the United States, the material disclosed by the Navy would include both its " sensitive business material" and information " vital to the national defense." See id. at 2 (explaining that, if disclosed without an enforceable protective order, these documents would " jeopardize Northrop's competitive edge in the marketplace" and pose a risk to national security). Munich Re, in turn, stated that it needed the requested documents for the arbitration and, recognizing the documents' sensitive nature, agreed they should be protected. See id. at 3. Finally, Northrop Grumman and Munich Re further stipulated that the Navy's Touhy Regulations, which govern the agency's responses to information requests, prohibited the Navy from disclosing the requested information absent a ...

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