When Can a Virginia Circuit Court Narrow Discovery?

Mattawoman Energy, LLC v. Cove Point LNG, LP (August 6, 2024)

Discovery can be a time-consuming, costly, and laborious process. In many cases, discovery requests seek information that is sensitive, confidential, or difficult to produce. The party on the receiving end of a voluminous set of discovery requests can hardly be blamed for wanting to avoid responding wherever possible. But when is it appropriate for a trial court to narrow the scope of discovery to specific issues in the case?

In August, a three-judge panel of the Court of Appeals of Virginia issued a new memorandum opinion reversing a circuit court’s decision to narrow the scope of discovery. Mattawoman Energy, LLC v. Cove Point LNG, LP, 2024 Va. App. LEXIS 450 (2024). The Court held that the narrowing of discovery to one issue was an abuse of discretion where it impaired the defendant’s “substantial right to pursue legally cognizable defenses.” This decision clarifies that even when a motion for summary judgment is pending, a defendant’s right to discovery extends to all active and relevant defenses.

Facts—The Pipeline Capacity Reservation

Mattawoman Energy, LLC (“Mattawoman”) had plans to build a natural gas-fueled power plant in Maryland. It contracted with Cove Point LNG, LP (“Cove Point”) for natural gas transportation services via Cove Point’s natural gas pipeline. Part of the parties’ agreement involved usage charges for gas delivered to the plant. However, Mattawoman never built the plant, and no gas was ever delivered.

Also part of the agreement—and the focus of this case—was a separate monthly charge to reserve a portion of Cove Point’s pipeline capacity for Mattawoman’s fuel needs. Although no gas was ever actually delivered, Cove Point claimed that it had reserved capacity for Mattawoman, and it invoiced Mattawoman accordingly.  When Mattawoman didn’t pay, Cove Point sued for breach of contract, requesting over $6.3 million in damages.

Procedural History

Cove Point filed suit in the Circuit Court of Henrico County. Mattawoman demurred, arguing that Cove Point had failed to allege the satisfaction of certain conditions precedent to its breach of contract claim, including the construction of the power plant and the establishment of a delivery connection point. After the circuit court overruled the demurrer, Mattawoman answered and raised five affirmative defenses, including frustration of purpose, failure to mitigate damages, and failure to satisfy a condition precedent.

Mattawoman also served discovery requests on Cove Point, including interrogatories and requests for production of documents, and Cove Point responded. Cove Point then moved for summary judgment.

After the summary judgment had been filed, Mattawoman moved to compel responses to a number of its discovery requests, roughly half of which it claimed had gone unanswered. Cove Point moved for entry of a protective order narrowing the scope of discovery to one issue: whether Cove Point had, in fact, reserved transportation capacity on the pipeline for Mattawoman’s anticipated fuel needs. Cove Point also sought to have Mattawoman’s defenses struck as legally meritless.

The Circuit Court’s Decision

The circuit court granted Mattawoman’s motion to compel only as to documents related to Cove Point’s reservation of pipeline capacity. It entered a partial protective order and further ordered that the scope of discovery in the action be limited to the issue of the capacity reservation. However, the circuit court declined to rule on the legal sufficiency of Mattawoman’s affirmative defenses, instead holding the issue in abeyance until after briefing and argument on Cove Point’s motion for summary judgment. As Mattawoman noted in its opposition to the motion, the circuit court’s decision precluded Mattawoman from taking discovery on four of its five defenses. Ultimately, the circuit court granted summary judgment in Cove Point’s favor, which Mattawoman appealed.

The Court of Appeals’ Holding and Analysis

On appeal, a three-judge panel of the Court of Appeals reviewed the circuit court’s limitation of discovery under an abuse of discretion standard—and reversed. The Court noted that decisions to grant or deny discovery are only reversed when they are “improvident” and affect a party’s “substantial rights.” In this case, the circuit court’s interference with Mattawoman’s ability to discover relevant evidence in support of its defenses affected Mattawoman’s substantial rights. The circuit court had “drastically reduced the number of issues in the case and effectively precluded Mattawoman from raising a genuine dispute of material fact” in opposition to summary judgment.

The Court distinguished the case from the Supreme Court of Virginia’s 1992 decision in Dick Kelly Enterprises v. City of Norfolk, where the circuit court’s limitation of discovery was not an abuse of discretion. In that case, the circuit court limited discovery, but simultaneously granted partial summary judgment as to certain affirmative defenses. Because the court’s decision to narrow discovery only excluded those topics that it had judged legally meritless, the defendant’s rights were not impaired. In fact, continued discovery as to those defenses would have been an undue burden on the plaintiff and a waste of judicial resources. This was very different from Mattawoman’s situation, where the circuit court impaired its opportunity to pursue defenses that had not been dismissed.

Key Takeaways

In effect, the Court of Appeals’ decision emphasizes that summary judgment is a post-discovery mechanism. While issues remain live, the parties have the right to pursue them, including by taking discovery. Discovery limitations are the wrong vehicle for narrowing the focus of a case. The desire to “cut to the chase” in litigation is understandable, but the trial court cannot short-circuit the discovery process for issues that remain legally cognizable. If the court is to narrow discovery, it first needs to deal with the claims or defenses to be excluded from that narrowed scope.

Parties should be wary of narrowed discovery that excludes discovery on live issues, such as active defenses. Conversely, issues that are no longer active—affirmative defenses that have been judged meritless as a matter of law, for example—do not give a party the right to take discovery on those topics. Discovery extends only to ongoing claims and defenses; when a claim or defense dies, the associated right to discovery dies with it.