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Continental Western Insurance Co. v. Colony Insurance Co.

United States District Court, D. Colorado

June 5, 2014

COLONY INSURANCE COMPANY, a Virginia corporation, Defendant.


MICHAEL J. WATANABE, Magistrate Judge.

This case is before this court pursuant to an Order Referring Case (Docket No. 4) issued by Senior Judge Wiley Y. Daniel on June 4, 2013.

Now before the court is Plaintiff's Motion to Compel Production of Claim File Documents on Colony Insurance Company's Privilege Log (Docket No. 25) filed on March 11, 2014. The court has carefully considered the subject motion (Docket No. 25), defendant's response (Docket No. 31), and plaintiff's reply (Docket No. 33). The court has also considered the disputed documents (Docket Nos. 37, 37-1, 37-2) which were submitted for in camera review. In addition, the court has taken judicial notice of the court's file, and has considered the applicable Federal Rules of Civil Procedure and case law. The court now being fully informed makes the following findings of fact, conclusions of law, and order.

I. Background

Plaintiff Continental Western Insurance Company (hereinafter "CWIC") brought this matter against defendant Colony Insurance Company (hereinafter "Colony") for reimbursement of defense and indemnity payments on behalf of their common insured, Pepper Equipment Corp., in connection with certain claims and lawsuits arising from a listeria epidemic traced to Jensen Farms cantaloupe. Pepper sold equipment to Jensen used to process the cantaloupe. CWIC and Colony both provided liability coverage to Pepper during a certain time period, but their coverage did not overlap in time.

As part of Jensen's bankruptcy claim resolution process, parties allegedly responsible for the listeria outbreak were permitted to participate in order to also obtain settlements with listeria claimants. CWIC negotiated an agreement allowing Pepper to participate in this process in exchange for agreed to contributions by CWIC. Colony did not participate in the process. CWIC contends it resolved claims and suits that should have been defended and indemnified by Colony, based on the date when "bodily injury" occurred for a given claimant. There are currently cross motions for summary judgment (Docket Nos. 21 & 23) in this matter pending before Senior Judge Daniel.

Among its requests for production of documents, CWIC sought Colony's "complete claims file(s) for listeria-based claims, demands or suits against [Pepper], and all documents regarding same to the extent not contained in said claims file(s)." Colony produced its claims file subject to its claims of attorney-client and work product privilege. CWIC also requested "[a]ny documents evidencing communications between Colony, its attorneys or representatives, or any other person or entity, on the other hand, concerning the application of the Colony Policy... to any listeria-based claim, suit or demand against Pepper." Colony produced some documents in response to this request, but withheld others on privilege grounds. In the subject motion (Docket No. 25), CWIC seeks an order from the court compelling Colony to produce some number of the withheld documents.

II. The Sur-Reply and Response to the Sur-Reply

On April 24, 2014, Colony filed a Motion for Leave to Submit a Sur-Reply (Docket No. 40). On May 12, 2014, CWIC filed a Motion for Leave to File Response to Colony's Sur-Reply (Docket No. 45).

Colony argues it should be permitted to file a sur-reply because CWIC made several arguments "that are completely new or substantially expanded" in its reply (Docket No. 33). These allegedly new or expanded arguments, which related to the attorney-client privilege, are as follows: (1) Colony has placed "at issue" attorney-client privileged materials, thereby waiving any protections; (2) Colony has not met its burden to establish the applicability of the attorney-client privilege; and (3) the common interest exception negates the applicability of the attorney-client privilege. CWIC contends that these arguments were properly raised in the subject motion (Docket No. 25).

This court's local rules contemplate only the filing of responses and replies to motions; they do not contemplate sur-replies (or responses to sur-replies). See D.C.COLO.LCivR 7.1(d). Regardless, courts in this district will occasionally permit sur-replies. However, they are generally disfavored and will only be permitted in exceptional circumstances. See Locke v. Grady Cnty., 437 F.App'x 626, 633 (10th Cir. 2011). One such circumstance is when new arguments are inserted into a reply, under which the court may: "(1) choos[e] not to rely on the new arguments in determining the outcome of the motion; or (2) permit[ ] the nonmoving party to file a surreply." EEOC v. Outback Steak House , 520 F.Supp.2d 1250, 1260 (D. Colo. 2006) (citing Pippin v. Burlington Res. Oil & Gas Co. , 440 F.3d 1186, 1992 (10th Cir. 2006)).

The "Law and Argument" section of the subject motion contains two subheadings: (1) "The Work Product Doctrine Does Not Protect Colony's Underlying Claim File From Discovery In A Subsequent Coverage Dispute;" and (2) "The Subject Documents are Relevant to CWIC's Equitable Claims and the Issue Of Colony's Unclean Hands.'" Docket No. 25, at 6, 11. On the surface, then, it does not appear that CWIC raised its attorney-client privilege arguments in its motion. The court, however, will look past the subheadings to the text of the motion

CWIC does not discuss the attorney-client privilege in any detail in its motion. Rather, it is mentioned briefly in the section describing the discovery at issue: "Likewise, as it relates to the attorney-client privilege, Colony improperly withheld and/or redacted certain non-privileged documents based on an overly expansive application of that privilege." Docket No. 25, at 5. The court finds that this conclusory statement alone cannot be considered an "actual argument" put forth by CWIC. This is true regardless of the fact that Colony chose to treat it as one in its response. In addition, while the "common interest" exception is mentioned in the motion, there is no meaningful discussion as to how the exception applies to Colony's attorney-client privileged materials. See Docket No. 25, at 9. Accordingly, the court finds that attorney-client privilege arguments in CWIC's reply must be considered "new arguments."

The court will not rely on the new attorney-client privilege arguments in making its determination on the subject motion. There is no apparent reason as to why these arguments were not included in the subject motion; Colony plainly asserted both the work product doctrine and the attorney-client privilege as justification for withholding certain documents. CWIC could have addressed the attorney-client privilege in detail in the subject motion like it did the work product doctrine. Instead, the attorney-client privilege was only mentioned in passing. For these reasons, the court finds that the ...

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