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Plaza Insurance Co. v. Lester

United States District Court, D. Colorado

June 4, 2015

PLAZA INSURANCE COMPANY, a Missouri corporation, Plaintiff,
v.
CAROLYN LESTER, JAMES BRADEN, and BONNIE BRADEN, Defendants.

ORDER REGARDING DEFENDANTS’ MOTION TO COMPEL THE PRODUCTION OF DOCUMENTS

Craig B. Shaffer United States Magistrate Judge

This matter comes before the court on Defendants Carolyn Lester, James Braden, and Bonnie Braden’s (collectively the “Defendants”) Motion to Compel the Production of Documents (doc. #27), filed on September 15, 2014. As of that date, Plaintiff Plaza Insurance Company (hereinafter “Plaza” or the “Plaintiff”) had produced approximately 530 pages from its claim file and withheld 143 pages and additional redactions based upon the attorney-client privilege and/or the work product doctrine. The motion to compel was referred to this magistrate judge by memorandum (doc. #28) on September 16, 2014. Plaintiff filed its Response in Opposition to Defendants’ Motion to Compel (doc. #29) on October 9, 2014, which was followed by Defendants’ Reply (doc. #36) on October 16, 2014.

I held a hearing on the pending motion on October 20, 2014. At that time, I directed Plaza’s counsel to submit an updated privilege log and copies of those documents that Plaintiff was withholding on the basis of privilege for the court’s in camera review. The court held another hearing on February 17, 2015. At the conclusion of that hearing, the parties were directed to submit supplemental briefs addressing the issue of whether or to what extent an uninsured motorist (UIM) claim might be barred by the “one civil action” rule set forth in Colorado’s Wrongful Death Act, C.R.S. §13-21-203(1)(a).[1] Defendants and Plaza filed supplemental briefs on February 24, 2015 (doc. ## 53 and 54, respectively).[2]

The court has completed its in camera review of the materials submitted by Plaza. I also have carefully viewed the parties’ briefs and exhibits, the entire case file, and the applicable case law. For the following reasons, I will grant Defendants’ motion and require production of some documents previously withheld by Plaza.

PROCEDURAL BACKGROUND

Plaza Insurance Company commenced this case on April 24, 2014 by filing a Complaint for Declaratory Relief (doc. #1). That Complaint acknowledged that on August 24, 2013, while working in the course and scope of his employment as a tow truck driver for C&J Auto Service (“C&J”), Martin Braden was fatally struck by a vehicle operated by Dana Beales. Plaza’s Complaint also noted that James Braden and Bonnie Braden, as parents of Martin Braden, filed a wrongful death action in the District Court for the County of Weld, Colorado on September 20, 2013 based upon the death of their son. In their complaint, the Bradens stated that their son was unmarried at the time of his death. Unbeknownst to the Bradens, Carolyn Lester considered herself Martin Braden’s common law wife.[3] Plaza’s Complaint for Declaratory Relief states that “Carolyn Lester, James Braden, and Bonnie Braden participated in mediation on December 10, 2013 to reach an agreement, as between them, regarding how any judgment or settlement proceeds from any wrongful death action would be shared.” Ms. Lester and the Bradens also were aware that Martin Braden had been covered under C&J’s insurance policy at the time of his death. Plaza does not dispute the existence of that coverage. The Bradens’ counsel made a demand on Plaza for UIM coverage, up to the policy limits of $1, 000, 000.00, on February 26, 2014.

Plaza alleges, and it is not disputed, that the Bradens settled their wrongful death action against Mr. Beales for $100, 000.00, the limits of his insurance policy. Thereafter, the wrongful death action in Weld County District Court was dismissed on April 10, 2014, without Ms. Lester ever intervening or formally joining that litigation as a named party. Plaza commenced this declaratory judgment action two weeks later, on April 24, 2014.

Defendants filed their Answer and Counterclaim (doc. #9) on June 6, 2014. Defendants collectively asserted claims for breach of contract for insurance benefits (first claim), bad faith breach of an insurance contract (second claim), unreasonable delay and/or denial in violation of C.R.S. §§ 10-3-1115 and 10-3-1116 (third claim), and fraud (fourth claim). The fraud claim specifically alleged that Plaza and its attorneys “fraudulently induced Defendants into believing that their request for UIM benefits would be honored and paid” in the wake of their mediated settlement of the wrongful death claims, that Defendants settled those claims “acting . . . in detrimental reliance upon Plaza’s misrepresentations and false statements, ” and that Plaza “intended to fraudulently induce Defendants to take steps that Plaza could later attempt to use to its benefit in refusing to pay the UIM benefits to which Defendants have been and are entitled.”

The exhibits attached to Defendants’ Answer and Counterclaim expand upon the facts set out in Plaza’s Complaint. Those exhibits include a letter from Plaza’s outside law firm, Treece Alfrey Musat P.C. (the “Treece Firm”), dated March 7, 2014, to John Astuno, Jr., the attorney representing the Bradens and Ms. Lester, stating “[p]ursuant to your request of February 20, 2014, this letter will confirm that . . . Plaza Insurance Company, through its third party claims administrator, North American Risk Services [NARS], consent to your proposed settlement with . . . the insurance carrier for Dana Rex Beales.” See Exhibit 1 (doc. #9-1) attached to Defendants’ Answer and Counterclaim. On March 18, 2014, before the wrongful death action in Weld County District Court was dismissed, Mr. Astuno advised Katherine Jensen, an attorney at the Treece Firm, that Ms. Lester would be asserting a claim under the UIM policy as “[s]he is the common law wife of the deceased” and that the Bradens would sign a release “assuming we can conclude this matter.” See Exhibit 2 (doc. #9-2) attached to Defendants’ Answer and Counterclaim. On April 1, 2014, Mr. Astuno again wrote to Ms. Jensen, forwarding a copy of the proposed Settlement Agreement with Mr. Beales’ insurance carrier and asking her to “give us the benefit of your thoughts on the matter.” Mr. Astuno explicitly asked for Plaza’s “blessing” of the proposed Settlement Agreement. See Exhibit 4 (doc. #9-4) attached to Defendants’ Answer and Counterclaim. On April 11, 2014, Mr. Astuno wrote to Ms. Jensen expressing his belief that “you have been provided with everything you need to evaluate this claim” and hinting at some frustration that “[w]e have jumped through numerous hoops and have yet to receive from you an offer in response to our policy limit demand.” See Exhibit 6 (doc. #9-6) attached to Defendants’ Answer and Counterclaim.

This court held a Fed.R.Civ.P. 16 scheduling conference on August 21, 2014. During that conference, counsel for Defendants and Plaza’s new counsel from the firm of Sweetbaum Sands Anderson, P.C. discussed anticipated disputes involving Plaintiff’s assertion of the attorney-client privilege and the work product doctrine in the context of Plaza’s initial disclosures under Fed.R.Civ.P. 26(a)(1). I advised defense counsel that Rule 26(a)(1)(A)(ii) only requires a party to identify those documents in its possession, custody or control that it “may use to support its claims or defenses, unless the use would be solely for impeachment” and, more importantly, did not require the disclosing party to physically produce any documents as part of their initial disclosures. Cf. Kern River Gas Transmission Co. v. 6.17 Acres of Land, 156 Fed.Appx. 96, 101 (10th Cir. 2005); Kleiner v. Burns, No. 00-2160-JWL, 2000 WL 1909470, at *4 n.5 (D. Kan. Dec. 22, 2000). The court expressed the view that any privilege disputes were better framed in the context of actual requests for production under Fed.R.Civ.P. 34. See Fed. R. Civ. P. 37(a)(3)(A) (permitting a party to move to compel “if a party fails to make a disclosure required by Rule 26(a)”) (emphasis added). I directed Defendants to serve requests for production by August 25, 2014, and then contact Plaza’s counsel by September 5, 2014 to determine if Plaintiff would continue to withhold materials as privileged or protected under Fed.R.Civ.P. 26(b)(3). Defendants filed their motion to compel on September 15, 2014.

In moving to compel, Defendants raise alternative arguments. First, Ms. Lester and the Bradens contend that all communications between Plaza, NARS and the Treece Firm are not shielded by the attorney-client privilege because, for much of the relevant time period, outside counsel were working in an extra-legal or investigative capacity and acting more as claims adjuster than legal advisors. See Defendants’ Motion to Compel, at 11. Second, Defendants maintain that work product protection cannot extend to most of the withheld documents because “there is no evidence to suggest that between September 26, 2013 and April 24, 2014, Plaza had reason to believe there was a substantial probability that Carolyn Lester or James or Bonnie Braden would file imminent litigation against it on the UIM claim.” Id. at 13. Even if the contested documents fall within the work product doctrine, Ms. Lester and the Bradens insist that the Treece Firm’s materials are critical to the preparation of their claims and substantially equivalent information cannot be obtained through other means. See Fed. R. Civ. P. 26(b)(3). Finally, Defendants argue that the crime fraud exception allows for disclosure of otherwise-privileged documents “[t]o the extent Defendants can make a ‘prima facie showing that the[ir] allegations of attorney participation in [Plaza’s] . . . fraud has some foundation in fact.” Id. at 14. Plaintiff’s brief in opposition insists that “[w]ith the exception of documents showing direct communication with its attorneys or internal communication discussing specific conversations with its attorneys, Plaza has produced the entire claim file in this action.” See Response in Opposition, at 4. Plaintiff contends that the Treece Firm was retained not to conduct a factual investigation, but rather to provide legal advise and opinion regarding the UIM claim. As for the applicability of the crime-fraud exception, Plaintiff insists that

Not one document referenced by Defendants tends to show that Plaza sought the advise of the Treece Firm . . . to commit a crime or fraud, let alone attempt to deprive anyone of the benefit of UIM benefits under the Policy. In fact, all correspondence referred to by Defendants tends to show that Plaza was working with Defendants up until it received notice that Defendants failed to properly handle the underlying action pursuant to Colorado’s Wrongful Death Act and Colo. Rev. Stat. § 13-21-203. Until Plaza received a copy of the Notice of Dismissal of the action, it was under the mistaken belief that Lester would be substituting into the Wrongful Death Action and pursuing the underlying claim in that lawsuit.

See Plaintiff’s Response in Opposition, at 15.

ANALYSIS

Rule 26(b)(1) of the Federal Rules of Civil Procedure requires production of nonprivileged materials relevant to a party’s claims or defenses. Privileges further the administration of justice and “should not be set aside lightly.” See Horton v. United States, 204 F.R.D. 670, 672 (D. Colo. 2002). However, privileges also serve to withhold relevant information from the finder of fact and for that reason should be narrowly construed. See Montgomery v. Leftwich, Moore & Douglas, 161 F.R.D. 224, 225 (D.D.C. 1995). Where, as in this case, subject matter jurisdiction is premised on diversity, the court must apply Colorado’s law governing attorney-client privilege. White v. Am. Airlines, Inc., 915 F.2d 1414, 1424 (10th Cir. 1990) (“In a civil action based upon a state cause of action, state law controls the determination of privileges.”). “Unlike the attorney client privilege, the work product privilege is governed, even in diversity cases, by a uniform federal standard embodied in Fed.R.Civ.P. 26(b)(3).” Frontier Refining, Inc. v. Gorman-Rupp Co., Inc., 136 F.3d 695, 702 n.10 (10th Cir. 1998)) (quoting United Coal Cos. v. Powell Constr. Co., 839 F.2d 958, 966 (3rd Cir. 1988)).

A. The Attorney-Client Privilege and Work Product Doctrine

The attorney-client privilege extends only to confidential matters communicated between the attorney and his or her client in the course of receiving counsel, advice, or direction with respect to the client’s rights or obligations. See, e.g., A. v. Dist. Court of Second Judicial Dist., 550 P.2d 315, 327 (Colo. 1976), cert denied, 429 U.S. 1040 (1977); Losavio v. District Court, 533 P.2d 32, 35 (Colo. 1975). Under the common law, “a critical component of the privilege ‘is whether the communication between the client and the attorney is made in confidence of the relationship and under circumstances from which it may reasonably be assumed that the communication will remain in confidence.’” In re Qwest Commc’ns Int’l, Inc., 450 F.3d 1179, 1185 (10th Cir. 2006) (quoting United States v. Lopez, 777 F.2d 543, 552 (10th Cir. 1985)).

The work product doctrine exempts from discovery “documents and tangible things . . . prepared in anticipation of litigation or for trial, ” see Fed. R. Civ. P. 26(b)(3)(A), and is intended to provide a lawyer “with a certain degree of privacy, free from unnecessary intrusion by opposing parties and their counsel.” Hickman v. Taylor, 329 U.S. 495, 510 (1947). In that respect, the work product doctrine is not a privilege within the scope of Fed.R.Evid. 501, but rather “a tool of judicial administration” that furthers the goals of fairness and convenience. Pete Rinaldi’s Fast Foods, Inc. v. Great Am. Ins. Cos., 123 F.R.D. 198, 201 (M.D. N.C. 1988). The doctrine does not protect materials prepared in the “ordinary course of business.” W. Nat’l Bank v. Emp’rs Ins. of Wausau, 109 F.R.D. 55, 57 (D. Colo. 1985). “A document is protected by the work product privilege if it was prepared in anticipation of litigation by another party or that party’s representative, and was intended to remain confidential.” Aull v. Cavalcade Pension Plan, 185 F.R.D. 618, 624 (D. Colo. 1998).

Documents prepared in anticipation of litigation are those that, “in light of the nature of the document and the factual situation in the particular case . . . can fairly be said to have been prepared or obtained because of the prospect of litigation.” Thus, documents that were prepared in the ordinary course of business or that “would have been created in essentially similar form irrespective of the litigation” are not protected by the work product doctrine.

Weber v. Paduano, No. 02 Civ. 3392(GEL), 2003 WL 161340, at *3 (S.D.N.Y. Jan. 22, 2003) (internal citations omitted). Cf. Sandra T.E. v. S. Berwyn Sch. Dist. 100, 600 F.3d 612, 622 (7th Cir. 2009) (“Work product protection applies to attorney-led investigations when the documents at issue ‘can fairly be said to have been prepared or obtained because of the prospect of litigation.’”) (quoting Logan v. Commercial Union Ins. Co., 96 F.3d 971, 976-77 (7th Cir. 1996)).

The party asserting the attorney-client privilege and/or work product protection bears the burden of persuasion, and cannot sustain that burden simply by asserting that withheld materials contain privileged or protected information. See FDIC v. United Pac. Ins. Co., 152 F.3d 1266, 1276 n.6 (10th Cir. 1998). Rather, the party must make a “clear showing” and provide “precise reasons” for withholding each otherwise relevant document. See Black & Veatch Corp. v. Aspen Ins. (UK) Ltd., 297 F.R.D. 611, 615 (D. Kan. 2014) (the party withholding documents must “provide sufficient information to enable the court to determine whether each element” of the privilege or work product doctrine is satisfied). See also Testwuide v. United States, No. 01-201L, 2006 WL 5625760, at *4 (Fed. Cl. Aug. 7, 2006) (“Document descriptions in a privilege log must contain more than boilerplate assertions that the documents in question contain attorney-client communications;” “the description of each document and its contents must be sufficiently detailed to allow the court to determine whether the elements of attorney-client privilege . . . have been established.”); Illiana Surgery and Med. Ctr. LLC v. Hartford Fire Ins. Co., No. 2:07 cv 3, 2008 WL 2622803, at *3 (N.D. Ind. Jun. 30, 2008) (finding that defendant had not met its burden of showing why each document withheld on the basis of privilege was entitled to protection; “[i]nstead, the privilege log contain[ed] virtually the same boilerplate language with respect to each assertion of the privilege”).[4]

I find that most, but not all of the documents submitted for my in camera review fall within the attorney-client privilege.[5] The court is satisfied that the Treece Firm provided “legal advice and opinion as to the UIM claim made in conjunction with Mr. Braden’s death and concerning its exposure and legal obligations pursuant to Colorado law regarding the Policy.” See Exhibit 2 (doc. #29-1) attached to Plaintiff’s Response in Opposition. However, it is also clear that the Treece Firm’s initial efforts were often investigative and non-legal in nature.[6]Some of the documents included on Plaza’s privilege log simply direct the Treece Firm to collect police files or court records.[7]See Fiechtner v. Am. Family Mut. Ins. Co., No. 09-cv-02681-WJM-MEH, 2011 WL 4087296, at *2 (D. Colo. Sept. 13, 2011) (holding that where counsel for the insurance company was acting as a claims adjuster, rather than an attorney, his actions in that capacity were not protected by the attorney-client privilege or work product doctrine). Cf. Colorado Mills, LLC v. Phila. Indem. Ins. Co., No. 12-cv-01830-CMA-MEH, 2013 WL 1340649, at *4 (D. Colo. Apr. 2, 2013) (“the mere retention of an attorney to investigate a claim does not automatically render ...


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