Miller et al v. York Risk Services Group

Filing 413

ORDER AND OPINION denying 388 Motion to Stay, but nevertheless the court hereby STAYS further proceedings in this court for 10 days from the date of this order. Signed by Judge John W Sedwick on 9/24/14.(LSP)

UNITED STATES DISTRICT COURT
DISTRICT OF ARIZONA

LAURIE MILLER, BRIAN DIMAS,
KIM MILLS, ANTHONY SOZA,
BRUCE CAMPBELL, KELLIE
BOWERS, TIM HUNTER, BRIAN
SAYLOR, MICHAEL SCHAMADAN,
INDIVIDUALLY AND AS
REPRESENTATIVE OF THE ESTATE
OF HIS WIFE, BRANDI SCHAMADAN,
and JOI KLAGES,

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Plaintiffs,
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vs.
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YORK RISK SERVICES GROUP and )
FRANK GATES SERVICE COMPANY, )
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Defendants.
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2:13-cv-1419 JWS
ORDER AND OPINION

[Re: Motion at Docket 388]

I. MOTIONS PRESENTED
At docket 388, defendants York Risk Services Group and Frank Gates Service
Company (collectively “York”) move to stay proceedings in this matter and request that
the court certify a question concerning their assertion of attorney-client privilege for
interlocutory appeal to the Court of Appeals. Plaintiffs’ opposition is at docket 391.
York’s reply is at docket 397. Oral argument was not requested, and it would not assist
the court.
II. BACKGROUND
Nine of the ten plaintiffs are or were employed as firefighters by the City of
Phoenix (“City”); the tenth is a City of Phoenix police officer. York is a third-party
insurance administrator who adjusted City employees workers’ compensation claims
under contract to the City. Plaintiffs contend that York, with the assistance and

knowledge of City employees, wrongfully denied or delayed payment of workers’
compensation benefits to which they are entitled.
In the course of adjusting the claims, York’s adjusters had contact with lawyers
retained by York. The adjusters considered and relied upon those com munications in
adjusting the claims. Furthermore, the communications between the individual
adjusters and the lawyers were memorialized in the adjusters’ notes. W hen it produced
the claims files during discovery, York redacted entire documents, as well as portions of
the adjusters’ notes memorializing communications between the adjusters and the
lawyers. In a motion at docket 307, plaintiffs asked the court to order defendants to
produce “the improperly withheld claims notes prepared throughout the claims process
as protected by privilege.”1 The principal issue in dispute was whether defendants had
waived the attorney-client privilege as to the communications between the adjusters
and the lawyers.
Relying on the decision by the Arizona Supreme Court in State Farm Mut. Auto
Ins. v. Lee,2 this court held that where the good faith of the party is at issue–as York’s is
here–and the communications at issue are taken into account by York’s adjusters in
making their claims decisions, the adjuster/claims attorney communications are
discoverable. This court explained: “It is impossible to test the accuracy of York’s
assertion that the adjusters acted reasonably . . . if a significant factor forming a basis
for their decisions–the communications with the claims lawyers–is cloaked in secrecy.”3
Based on the principles recognized in State Farm v. Lee, this court held that “York has
waived its right to rely on the attorney client privilege . . . .”4

1

Doc. 307 at 1.

2

100 Ariz. 52 (Ariz. 2000)

3

Order, doc. 383 at 5.

4

Id.

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III. STANDARD OF REVIEW
York asks this court to certify its ruling directing discovery of the adjuster/claims
attorney communications for interlocutory review by the Court of Appeals. Federal law
affords district courts discretion to recommend interlocutory review only if the non-final
order in question decides a (1) controlling question of law, (2) as to which there are
substantial grounds for a difference of opinion as to that question’s answer, and
(3) immediate review of the order will materially advance the ultimate resolution of the
lawsuit.5 Generally speaking, use of §1292(b) should be limited to “exceptional
situations in which allowing an interlocutory appeal would avoid protracted and
expensive litigation.”6
III. DISCUSSION
The question which York wants the Court of Appeals to consider is whether York
waived the attorney-client privilege as to the adjuster/claims lawyers communications it
redacted from the ten claims files.7 The court first considers whether its decision on the
waiver question involves a “controlling” question of law by virtue of being a question
whose resolution would avoid protracted and expensive litigation. It is not. Whether or
not the redactions from the ten files are produced as this court has ordered or retained
by York without disclosure to plaintiffs will not avoid protracted and expensive litigation.
This lawsuit is already protracted and doubtless very expensive. The protraction and
expense will continue regardless of whether the redactions are produced.
Turning to whether there are substantial grounds for a difference of opinion as to
the resolution of the question whether York waived the attorney-client privilege, the

5

28 U.S.C. § 1292(b).

6

In re Cement Antitrust Litigation, 673 F.2d 1020, 1026 (9th Cir. 1982).

7

“York believes that it will be successful in demonstrating to the Ninth Circuit that the
privilege was not waived.” Doc. 388 at 6.

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court looks to the Ninth Circuit’s decision in Couch v. Telescope, Inc.,8 which explains
that the court should “examine to what extent the controlling law is unclear.”9 Here,
despite York’s protestations to the contrary, it is this court’s opinion that there is no lack
of clarity respecting the controlling law. It was established by the Arizona Supreme
Court in State Farm v. Lee.10 If anything may fairly be debated it would be this court’s
finding of fact based on the deposition testimony from various adjusters that the
adjusters relied on the claims lawyers’ communications when deciding the merits of
plaintiffs’ benefit claims, not this court’s interpretation of Lee.
Immediate review of this court’s order to produce the redacted portions of the ten
claims files will not materially advance the ultimate resolution of the lawsuit. That will
remain for a jury to determine after hearing such evidence as may be admitted at trial.
It should be added that the court has not ruled that the redacted m aterials are
admissible in evidence. All the court has thus far ruled with respect to the redactions is
that they must be produced for plaintiffs’ review.
York also argues that it is being denied due process. 11 The decision made by
this court was based on a fully briefed motion to compel discovery. There is no process
beyond the opportunity to be heard already accorded York which remains “due” in this
court. As to proceedings in the Court of Appeals, this court cannot recommend that
such proceedings go forward unless it can do so consistent with § 1292(b).
York also makes an argument for interlocutory review which falls outside
conventional § 1292 analysis. York contends that, as a result of disclosure of the
redactions, “York will be severely prejudiced and irreparably harmed in a manner that is

8

611 F.3d 629 (9th Cir. 2010).

9

Id., 611 F.3d at 633.

10

100 Ariz. 52.

11

Doc. 388 at 7. The argument appears to be primarily linked to its request for a stay,
but also seems to relate to its argument that interlocutory review is appropriate.

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not correctable on appeal from a final judgment.”12 York cites Agster v. Maricopa
County13l which held that the Court of Appeals had jurisdiction to consider a district
court order to produce a document as to which a peer review privilege had been
asserted. This argument should be presented to the Court of Appeals itself, for the
argument does not fall within the ambit of the discretion afforded to this court by
§ 1292(b).
York states that if this court declines to certify the order to produce the redacted
materials, it will seek a writ of mandamus from the Court of Appeals.14 Of course, it
may pursue that remedy. Plaintiffs contend that appellate review at this stage will only
serve to delay resolution of the litigation. This court agrees, but whether to issue a writ
of mandamus is a matter for the Court of Appeals.
Given that York will file a petition for a writ of mandamus, this court must
consider whether to issue a stay sufficient for York to seek relief in the Court of
Appeals. In order to afford York an opportunity to obtain relief in the appellate court,
this case is STAYED for a period of 10 days from the date of this order.
V. CONCLUSION
For the reasons above, the motion at docket 388 is DENIED, but nevertheless
the court hereby STAYS further proceedings in this court for 10 days from the date of
this order.
DATED this 24th day of September 2014.

/s/ JOHN W. SEDWICK
SENIOR UNITED STATES DISTRICT JUDGE

12

Id. at 9.

13

422 F.3d 836 (9th Cir. 2005).

14

Doc. 388 at 10.

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