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Burroughs Diesel, Inc. v. The Travelers Indemnity Company of America

United States District Court, S.D. Mississippi, Eastern Division

February 14, 2019




         THIS MATTER is before the Court on Plaintiff's Motion [52] to Compel Discovery. Having carefully considered the parties' submissions and the applicable law, the Court finds that the Motion should be granted in part and denied in part.

         This lawsuit arises out of an alleged hydrochloric acid tank failure owned by Baker Petrolite, not a party to this litigation, on October 14, 2016. The alleged failure resulted in acid travelling through the air and damaging Burroughs' real and personal property. Travelers Indemnity Company of America (TIA) had previously issued a commercial property insurance policy to Burroughs. After Burroughs' property was allegedly damaged by hydrochloric acid, it filed a claim with TIA. On October 18, 2016, TIA retained Albert Nalibotsky to represent TIA in its anticipated subrogation claim against Baker. On October 20, 2016 Mr. Nalibotsky was retained by Travelers Property Casualty Company of America (TPPCA) to represent it in a separate subrogation lawsuit arising out of the same hydrochloric acid tank failure.

         On November 2, 2016, TIA informed Burroughs that it would likely deny the claim. On February 22, 2017, TIA issued a denial letter. On March 28, 2018, Burroughs filed suit against TIA bringing several claims stemming from the denial of coverage.

         On January 4, 2019, Burroughs filed the instant motion to compel discovery. Burroughs disputes a wide array of redactions and in some cases a failure to produce documents on the part of TIA. TIA responded to the motion stating that several of the disputed issues had been resolved but maintained that the Court should not compel production of several of the documents at issue, citing attorney-client privilege and the work-product doctrine. On February 1, 2019, Burroughs filed its reply and the matter is ripe for consideration. Additionally, the Court ordered TIA to submit the withheld or redacted documents for in camera review. The Court has now had the opportunity to review the records at issue.

         The Court applies the standard set forth in Federal Rule of Civil 26(b)(1) which allows for discovery of material that is proportional to the needs of the case and non-privileged. “The party seeking discovery bears the burden of showing its necessity.” Freeman v. United States, 556 F.3d 326, 341 (5th Cir. 2009). The party, however, that resists discovery by claiming a privilege has the burden of establishing the privilege. Enron Corp. Sav. Plan v. Hewitt Assocs., L.L.C., 258 F.R.D. 149, 160 (S.D. Tex. 2009). Discovery is “to be accorded a broad and liberal treatment to effect [its] purposes of adequately informing litigants in civil trials.” Herbert v. Lando, 441 U.S. 153, 176 (1979). “At some point, however, discovery yields diminishing returns, needlessly increases expenses, and delays the resolution of the parties' dispute.” Willis v. City of Hattiesburg, 2016 WL 918038, at *2 (S.D.Miss. Mar. 10, 2016). Discovery disputes are left to the discretion of the trial court. Freeman, 556 F.3d at 341. Having carefully considered the Motion, the Court rules as follows:

         Disputed Interrogatory Interrogatory No. 4: As to your employees who were involved in the claim handling of the subject commercial property claim by Plaintiff, describe all training and training materials of each employee who worked on the subject claim, and describe any and all claims manuals or protocol which your employees were required to follow or reference in handling the subject claim, including, but not limited to, manuals or procedures to be followed before denying a claim or issuing a reservation of rights.

         Burroughs moves to compel the production of the Knowledge Guide and any other manuals, procedures, or protocols required to be followed in handling the subject claim or denying a claim. TIA produced a Knowledge Guide in response to this interrogatory on December 13, 2018, but according to Burroughs 419 of the 440 pages produced had redactions. TIA argues that this particular discovery dispute is not ripe for consideration because Burroughs failed to comply with Local Uniform Civil Rule 37(a), which requires the parties to consult in good faith before seeking a conference with the court or filing discovery motions. TIA represents that any issue Burroughs had with the Knowledge Guide was not communicated until January 3, 2019 during a telephonic conference with the Court, and Burroughs filed this instant Motion to Compel the next day. In its response and supplemental response, TIA raises several objections to producing the full Knowledge Guide, generally relating to relevance and proportionality.

         The Court is unpersuaded by TIA's ripeness argument. The issue here has been addressed in conference with the Court and the Court needs no further conference before considering the issue. Nothing in TIA's Response suggests that yet another conference would be fruiful.

         Federal Rule of Civil Procedure 26(b)(1) states “Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case….” Material is considered relevant if there is “any possibility” that it can relate to a claim or defense of a party. S.E.C. v. Brady, 238 F.R.D. 429, 436-437 (N.D. Tex. 2006). The discovery requested need not be admissible at trial, it must only be presumed that it will lead to discovery of admissible evidence. Id.

         The Court finds that the Knowledge Guide, [1] which TIA's claims adjusters use as a reference, is relevant to the claims in this case. Additionally, the Court finds that its production, in unredacted form, would not be burdensome. Producing the unredacted document should be far less burdensome than the amount of time previously spent redacting hundreds of pages.

         Having reviewed the Knowledge Guide, it is plain that much of the information in it does not apply to this case. It is equally plain, however, that TIA redacted information that is relevant to the claims and issues. Perhaps more importantly, the redactions are so frequent and indiscriminate that the context of much of the unredacted information is unclear or useless. The entire Knowledge Guide should be produced.

         To the extent TIA is concerned about producing trade secrets or information that it deems sensitive, a protective order was entered in this case to address that issue. See Order [50]. The parties may designate material as confidential and to seek leave to file documents under seal pursuant to Local Uniform Civil Rule 79.[2] The Knowledge Guide should be produced in unredacted form.

         As to any other manuals, procedures, and protocols regarding the handling of this claim or the denying of any claim, TIA asserts that no such materials exist. TIA states that the parties agreed to limit any training material to those used to respond to claims regarding chemical spills. Burroughs counters that the narrowing of such materials is not appropriate, and it continues to seek all training materials related to the handling of this claim. After reviewing the Knowledge Guide, the Court agrees that the restrictions put in place by TIA are too narrow. TIA should produce all training manuals, procedures, and protocols utilized by claims handlers in this case. The Court, therefore, finds that the Motion to Compel as to Interrogatory No. 4 should be GRANTED.

         Disputed Requests for Production

         Request No. 1: Please produce all documents, emails, and electronically stored data which in any way relate to the allegations of the Complaint and the Plaintiff's claim for damages to its real and personal property.

         TIA objected to producing some portions of this requested material asserting attorney-client privilege and work-product doctrine. The Court will first address whether the attorney-client privilege applies to the communications involving Ms. Grenier, TIA's in-house counsel, and Mr. Nalibotsky, TIA's and TPCCA's subrogation counsel. TIA asserts that communications with Ms. Grenier were withheld because she rendered legal advice to claims personnel and was acting as an attorney when these communications were made. Burroughs counters that attorney-client privilege cannot be asserted as to communications with Ms. Grenier because TIA responded to a separate interrogatory stating that “no in-house or other attorney participated in the claim handling or denial of claim.” See [52-1] at 13.

         TIA also asserts attorney-client privilege as to communications with Mr. Nalibotsky in his capacity as TIA's subrogation counsel and as TPCCA's subrogation counsel. An affidavit was submitted from Mr. Nalibotsky stating that he was retained on October 16, 2016 to represent TIA in regard to any subrogation claim it might have, but at an unspecified date his representation of TIA ceased after TIA denied Burroughs' claim. Aff. [75-3]. Mr. Nalibotsky currently represents TPCCA in a separate subrogation lawsuit arising from the same hydrochloric acid tank failure. Id. Burroughs argues that Mr. Nalibotsky could not have been counsel for TIA in a subrogation matter because TIA so promptly denied Burroughs' claim that there was never a subrogation claim to investigate.

         Mississippi state law governs the application of the attorney client privilege in this matter. See Fed. R. Evid. 501. “A client has a privilege to refuse to disclose- and to prevent others from disclosing- any confidential communication made to facilitate professional legal services to the client.” Miss. R. Evid. 502(b). “[The] privilege protection attaches to those communications that would facilitate the rendition of legal services or advice.” United Investors Life Ins. Co. v. Nationwide Life Ins. Co., 233 F.R.D. 483, 487 (N.D. Miss. 2006) (emphasis in original). It is important to bear in mind, however, that the attorney-client privilege only extends to communications and not to facts. Upjohn Co. v. United States, 449 U.S. 383, 395 (1981).

         After reviewing the documents in camera as well as the parties' submissions, the Court finds that Ms. Grenier was acting in her capacity as counsel to TIA and that communications between Ms. Grenier and TIA representatives are protected to the extent that they were made to facilitate professional legal services or advice. TIA's interrogatory response representing that no attorneys “participated” in the claims handling and the denial of the claim is disingenuous and misleading, as numerous communications with attorneys are in the claims file now at issue. Moreover, the interrogatory itself plainly asks for the identity of any attorneys who were called upon to give legal advice. While TIA may object to identifying the advice given on privilege grounds, the name of an attorney is not privileged. The answer was pure gamesmanship. As the attorney is clearly listed on the privilege log, it is perplexing that TIA saw fit to avoid disclosing the attorney's name in this discovery response.

         Discovery responses should be straight-forward. Dollar v. Long Mfg., N.C., Inc., 561 F.2d 613, 614 (5th Cir. 1977) (holding that “discovery by interrogatory requires candor in responding.”). This response was neither straightforward nor candid. The Court, however, will not compel TIA to disclose communications between itself and its counsel solely based on this evasive response since the communications between claims handlers and Ms. Grenier were properly disclosed on the privilege log. The communications were properly withheld.

         Regarding Mr. Nalibotsky, the Court finds that he was acting as counsel for TIA concerning any subrogation claim TIA may have possessed. Mr. Nalibotsky's affidavit specifically states that he was counsel for TIA. Aff. [75-3]. This is further verified by the Court's in camera review of certain documents. Any communications between Mr. Nalibotsky and TIA representatives for the purpose of seeking legal advice is protected by attorney-client privilege, as long as Mr. Nalibotksy was employed or retained by TIA. That a subrogation claim did not materialize does not mean that one was not considered or that TIA did not seek advice about pursuing a claim or did not evaluate one.

         As to other withheld materials, TIA argues that the work-product doctrine applies to all materials created before January 17, 2017. Burroughs argues that work-product doctrine cannot be claimed for the redacted or withheld material because it was communicated that the claim would be denied on November 2, 2016, only a few weeks after the claim was submitted, and TIA could not have prepared for a subrogation claim when it so promptly denied coverage.

         The work-product doctrine protects material prepared in anticipation of litigation created by an attorney. See generally Hickman v. Taylor, 329 U.S. 495 (1947). “[T]he doctrine protect[s] material prepared by agents for the attorney as well as those prepared by the attorney himself.” U.S. v. Nobles, 422 U.S. 225, 238-239 (1975). Yet, “when relevant and non-privileged facts remain hidden in an attorney's file and where production of those facts is essential to the preparation of one's case, discovery may properly be had.” Hickman, 329 U.S. at 511.

         “The party asserting the privilege bears the burden of proving that the information requested is privileged.” Barker v. Kinder Morgan Se. Terminals, LLC, 2007 WL 4333843, at *1 (S.D.Miss. Dec. 6, 2007) (referencing In re Santa Fe Int'l Corp., 272 F.3d 705, 710 (5th Cir. 2001)). The Court must consider for what purpose the document or documents at issue were created. If the “primary motivating purpose” in creating the documents was to aid possible future litigation, then the work-product doctrine applies. United States v. Davis, 636 F.2d 1028, 1040 (5th Cir. 1981).

         The Court is of the opinion that materials produced by TIA subrogation specialists prior to January 17, 2017 were in anticipation of litigation and protected by the work-product doctrine. Albert Nalibotsky sent a letter on October 19, 2016 to Baker Hughes on behalf of Travelers[3]putting Baker Hughes on notice of potential litigation and evidenced TIA's intent to potentially pursue a subrogation claim. See Resp. [75-3].

         TIA further submits that work done after January 17, 2017 and the work-product of TPCCA is protected by the work-product doctrine. TIA discontinued its subrogation efforts on January 17, 2017, according to its file records. See TIA 636. Specifically, TIA points to work done by Mr. Edwards, an expert consultant, who performed work in 2017 for both TIA and TPCCA concerning the underlying tank failure. Burroughs disputes this assertion and argues that TIA and TPCCA are entirely separate entities. Burroughs argues that TPCCA's subrogation case “involves a separate and distinct insurer with its own counsel (Albert Nalibotski, TPC subrogation counsel), over an unrelated subrogation claim under a separate insurance policy, all of which are not at issue or involved in this case.” Memo. [53] at 10.

         TIA argues that “TIA and TPCCA are related entities with a common legal interest in litigating their cases, the work-product privilege applies to protect these materials.” The Court has not found a case considering Mississippi law on common-interest privilege in the realm of work product, but it has been addressed in the context of attorney-client privilege. The common-interest privilege “extends to statements made in multiple party cases in which different lawyers represent clients who have common interests.” Miss. R. Evid. 502 cmt. “Rule 502 does not broadly construe the common interest privilege.” United Inv's Life Ins. Co v. Nationwide Life Ins. Co, 233 F.R.D. 483, 487 (N.D. Miss. 2006). “[T]he party asserting the privilege must have been, at the time of the communication, a co-party to pending litigation with the party to whom it bears a relationship of common interest.” Id. at 487-488.

         TIA has not demonstrated that TPCCA and itself meet the common interest standard under Mississippi Rule of Evidence 502 and have not provided any binding authority to support its position. TIA and TPCCA are not co-parties in this lawsuit. No matter how expansive or overlapping TIA and TPCCA's business interests are, they cannot shelter their communications or shared documents with the common interest privilege. TIA may not claim the work-product doctrine for materials produced by TPCCA after TIA denied Burroughs' claim.

         The Court finds that the Motion to Compel as to Request No. 1 should be GRANTED IN PART as to all materials withheld based on work product after January 17, 2017 and DENIED as to all other relief requested.

         Request No. 3: Please produce all training materials and documentation which was used in the training of employees who participated in any way in the handling of the subject claim.

         As discussed previously, TIA shall produce the unredacted Knowledge Guide and all training materials and protocols utilized in the claim at issue. The Motion to Compel as to Request No. 3 is GRANTED.

         Request No. 4: Please produce the claims handling manual of Travelers' protocol for handling commercial property claims which would be applicable to the claims handling of the subject claim, issuing a reservation of rights or the denial of the subject claims.

         As discussed previously, TIA shall produce the unredacted Knowledge Guide and all training materials and protocols utilized in the claim at issue. The ...

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