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Church Mutual Insurance Co. v. Coutu

United States District Court, D. Colorado

May 25, 2018

CHURCH MUTUAL INSURANCE COMPANY, a Wisconsin corporation, Plaintiff,
PHILLIP MARSHALL COUTU, an individual, POWER ADJUSTERS, INC., a Colorado corporation, JUDAH LEON BENSUSAN, an individual, and ATLANTIS CLAIMS SERVICES, LLC, a Florida limited liability company, Defendants.



         Magistrate Judge Nina Y. Wang This matter is before the court on Defendants' Motion to Compel Discovery Filed Pursuant to Minute Order Dated April 9, 2018 (“Motion to Compel” or “Motion”). [#189]. The undersigned considers the Motion to Compel pursuant to 28 U.S.C. § 636(b), Rule 72 of the Federal Rules of Civil Procedure, and the Memorandum dated April 18, 2018 [#190]. Upon review of the Parties' briefing [#157; #159; #171], the applicable case law, the entire docket, the documents submitted for in camera review, and the Parties' comments offered at the January 30, 2018 Discovery Conference, this court GRANTS IN PART and DENIES IN PART the Motion to Compel.


         This court has discussed the background of this case in its prior Recommendation and Orders, see e.g., [#103; #120], and does so here only as it pertains to the discovery issue before the court. This case arises from an appraisal award issued to Plaintiff Church Mutual Insurance Company's (“Plaintiff” or “Church Mutual”) policyholder Montview Boulevard Presbyterian Church (“Montview”), which Church Mutual contends was artificially inflated for Defendants Phillip Marshall Coutu, Power Adjusters, Inc. (“Power Adjusters”), Judah Leon Bensusan, and Atlantis Claims Services, LLC's (“Atlantis Claims”) (collectively, “Defendants”) own economic gains. In its original Complaint Plaintiff alleged two claims against Defendants: (1) civil conspiracy and (2) fraudulent concealment. [Id.]. Plaintiff filed its First Amended Complaint (“FAC”) on April 25, 2017. In issuing a Recommendation on Defendants' Joint Motion to Dismiss the FAC [#65], the undersigned recommended dismissing only Plaintiff's claims under the federal Racketeering Influenced and Corrupt Organizations Act (“RICO”) and Colorado Organized Crime Control Act (“COCCA”). [#120]. The undersigned also limited discovery to the “Montview matter and the relationships between the four Defendants.” See [#103 at 7].

         Plaintiff then filed its Motion for Leave to File Second Amended Complaint (“Motion to Amend”) on October 6, 2017. [#128]. This court recommended granting Plaintiff leave to file a Second Amended Complaint (“SAC”), which the presiding judge, the Honorable Raymond P. Moore, adopted in part.[1] See [#166; #183]. The SAC is now the operative complaint in this matter and asserts claims against all Defendants for: (1) civil conspiracy (“Claim I”); (2) fraudulent concealment (“Claim II”); (3) federal civil RICO violations (“Claim III”); (4) federal civil RICO conspiracy (“Claim IV”); and (5) state civil COCCA violations (“Claim V”). The SAC also includes a prayer for exemplary damages under Colo. Rev. Stat. § 13-21-102. [#184].

         On January 11, 2018, the Parties submitted a “Joint Statement of the Parties to Magistrate Nina Wang Framing Discovery Dispute - Scope of Deposition of Nicholas Cassidy” (the “Joint Statement”). [#143]. The main issue identified by the Joint Statement was “the applicability of the attorney-client privilege and work product privilege during the deposition of former Senter Goldfarb attorney Mr. Nicholas Cassidy.” [Id. at 1]. Church Mutual invoked the attorney-client privilege to preclude discovery or disclosure of documents prepared by the law firm of Senter Goldfarb & Rice, LLC (“Senter Goldfarb”) relating to the appraisal of the Montview insurance claim. As the Joint Statement made clear, Mr. Cassidy was a former Senter Goldfarb attorney at the time of the Montview appraisal process, who had several communications with Church Mutual's designated appraiser Mr. William McConnell. [Id.]. Defendants sought to depose Mr. Cassidy about his communications with Mr. McConnell and Church Mutual during the Montview appraisal process. [Id.]. Church Mutual argues that these communications are protected from discovery or disclosure under both the attorney-client privilege and the work product doctrine, because the appraisal process is an adversarial process and Senter Goldfarb was retained in anticipation of litigation. See [#143-1; #143-2; #157]. Defendants counter that neither privilege protects Mr. Cassidy's communications with Mr. McConnell or Church Mutual because, although Mr. Cassidy is an attorney, he acted in the capacity of a “file handler” or claims investigator regarding the Montview appraisal. See [#143-1; #143-2; #159; #171].

         The Parties appeared before the undersigned for a Discovery Conference on January 30, 2018, to discuss the attorney-client privilege and work product doctrine issues, among other discovery disputes. See [#152]. Ahead of the Discovery Conference Church Mutual submitted several documents for in camera review to support its invocation of both privileges. [#156 (subject to Level 3 Restriction)]. At the conclusion of the Discovery Conference this court ordered the Parties to submit supplemental briefing on the privileges issue, and directed Church Mutual to provide to the court for in camera review a copy of the engagement letter between Church Mutual and Senter Goldfarb. [#152]. No such engagement letter exists, but Church Mutual provided the court with two additional documents it believes supports its position. The Parties have since submitted their supplemental briefing on the issue, including Defendants' response brief addressing Church Mutual's exhibits attached to its supplement brief and the instant Motion to Compel. See [#157; #159; #171; #189]. The Motion is ripe for resolution.


         I.Rule 26(b)(1)

         Rule 26(b)(1) of the Federal Rules of Civil Procedure defines the scope of permissible discovery in this action. Fed.R.Civ.P. 26(b)(1). The Rule permits discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case. Id. This scope for discovery does not include all information “reasonably calculated to lead to admissible evidence.” The amendments to Rule 26 effective December 1, 2015, purposefully removed that phrase. See Advisory Committee Notes to 2015 Amendments to Rule 26(b)(1) (“The former provision for discovery of relevant but inadmissible information that appears “reasonably calculated to lead to the discovery of admissible evidence” is also deleted. The phrase has been used by some, incorrectly, to define the scope of discovery”; In re Bard Filters Products Liability Litig., 317 F.R.D. 562, 563 (D. Ariz. 2016). As explained by the Bard court, the Advisory Committee on the Federal Rules of Civil Procedure was concerned that the phrase had been used incorrectly by parties and courts to define the scope of discovery, which “might swallow any other limitation on the scope of discovery.” Id. (citing Fed.R.Civ.P. 26 advisory committee's notes to 2015 amendment).

         The applicable test is whether the evidence sought is relevant to any party's claim or defense, and proportional to the needs of the case. Id. Rule 401 of the Federal Rules of Evidence defines relevant evidence as “evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more or less probable than it would be without the evidence.” Fed.R.Evid. 401. In defining the scope of appropriate discovery, the Parties and the court are directed to consider the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Fed.R.Civ.P. 26(b)(1).

         II. Rule 37(a)(1)

         Pursuant to Rule 37(a)(1), a party may move for a court order compelling disclosure or discovery, and must certify that she “has in good faith conferred or attempted to confer with the person or party failing to make disclosure or discovery in an effort to obtain it without court action.” Fed.R.Civ.P. 37(a)(1). A motion to compel may include a party's failure to produce documents requested pursuant to Rule 34. See Fed. R. Civ. P 37(a)(3)(B)(iv). “The party moving to compel discovery must prove that the opposing party's answers are incomplete[, ]” and the “party objecting to discovery must establish that the requested discovery does not fall under the scope of relevance as defined in Rule 26(b)(1).” Tara Woods Ltd. P'ship v. Fannie Mae, 265 F.R.D 561, 566 (D. Colo. 2010). Ultimately, “[t]he administration of the rule[] lies necessarily within the province of the trial court with power to fashion such orders [as] may be deemed proper to vouchsafe full discovery for the just, speedy and inexpensive determination of the lawsuit.” Robison v. Transamerica Ins. Co., 368 F.2d 37, 39 (10th Cir. 1966).


         I. Attorney-Client Privilege & Work Product Doctrine

         Though not specifically addressed by the Parties, the issue of the attorney-client privilege appears to relate to elements of Plaintiff's state law claims, e.g., what Church Mutual and its representatives knew, and what they relied upon in making their payment determinations. Thus, Colorado substantive law governs the scope and application of the attorney-client privilege. See 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.”). By contrast, “the work product privilege is governed 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) (citation and quotation omitted).

Colorado has codified the attorney-client privilege in pertinent part as follows:
“An attorney shall not be examined without the consent of his client as to any communication made by the client to him or his advice given thereon in the course of professional employment...”

Colo.Rev.Stat. § 13-90-107(b). The law is clear that the attorney-client privilege inures to the benefit and protection of the client to allow a client to gain counsel, advice, or direction with respect to the client's rights and obligations confidentially. See Mountain States Tel. & Tel. ...

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