Prosight-- Syndicate 1110 At Lloyd's v. American Builders and Developers LLC

Filing 218

ORDER denying Claimants' 193 Motion to Compel Production of Attorney-Client Communications. Signed by Judge Steven P Logan on 10/29/19. (CLB)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Prosight-- Syndicate 1110 At Lloyd’s, )
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Plaintiff,
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vs.
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American Builders and Developers
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LLC,
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Defendant.
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No. CV-17-04662-PHX-SPL
ORDER

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Plaintiff Prosight-- Syndicate 1110 At Lloyd’s (the “Plaintiff”) filed suit against

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American Builders and Developers LLC (“ABD”) seeking a declaratory judgment that it

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is not liable to indemnify ABD for any damages awarded pursuant to Maria Virginia

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Huizache and Florenciano Axinicuilteco’s (the “Claimants”) lawsuit.1 The Claimants filed

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this Motion to Compel Production of Attorney-Client Communications (the “Motion”),

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arguing that the Plaintiff’s deposition testimony has opened the door to discovery of the

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Plaintiff’s attorney-client communications. (Doc. 193) The Motion was fully briefed on

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August 15, 2019, and oral argument was requested. (Docs. 194, 196) Because it would not

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assist in resolution of the instant issues, the Court finds the pending motion is suitable for

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decision without oral argument. See LRCiv. 7.2(f); Fed. R. Civ. P. 78(b); Partridge v.

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Reich, 141 F.3d 920, 926 (9th Cir. 1998). The Court’s ruling is as follows.

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In January 2016, an employee of a subcontractor was killed while working at the
location of ABD’s construction project. The Claimants, as the decedent’s parents, brought
a wrongful death action against ABD, among others, in Arizona state court. The Claimants
stepped into the shoes of ABD to defend this case.

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In the Motion, the Claimants seek an order from the Court compelling the Plaintiff

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to produce discovery materials that qualify as attorney-client communications between the

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Plaintiff and Plaintiff’s counsel. The Claimants argue that a representative of the Plaintiff

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stated in a deposition that the Plaintiff relied on the advice of counsel when denying ABD’s

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claim for coverage. (Doc. 193 at 5) The Claimants primarily rely on the holding of State

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Farm v. Lee to argue that this admission waived the Plaintiff’s attorney-client privilege for

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communications related to the advice of counsel on the topic of the Plaintiff’s denial of

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ABD’s claim. (Doc. 193 at 5–8) State Farm Mut. Auto. Ins. Co. v. Lee, 199 Ariz. 52 (2000).

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In Lee, the Supreme Court of Arizona crafted the legal standard for deciding when

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a party waives its attorney-client privilege for communications between client and counsel.

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The Lee plaintiff was an insurance company who stated that it relied on the advice of

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counsel and evaluated the law in defending its good faith decision to deny the defending

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parties’ claims. Lee, 199 Ariz. at 57–58. The Supreme Court of Arizona held that attorney-

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client privilege is waived when a party “has asserted some claim or defense, such as the

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reasonableness of its evaluation of the law, which necessarily includes the information

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received from counsel.” Id. at 62. Privilege is waived because “the party claiming the

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privilege has interjected the issue of advice of counsel into the litigation to the extent that

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recognition of the privilege would deny the opposing party access to proof without which

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it would be impossible for the factfinder to fairly determine the very issue raised by that

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party.” Id. The Supreme Court of Arizona stated that a party waives its attorney-client

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privilege in this instance when “the party asserting the privilege claims its conduct was

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proper and permitted by law and based in whole or in part on its evaluation of the state of

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the law.” Id. However, simply conferring with counsel or “trading information for advice”

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is not enough to waive attorney-client privilege. Id. at 66.

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The Court finds that the Plaintiff’s statements regarding reliance on the advice of

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counsel do not rise to the level of waiving its attorney-client privilege. The statements

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highlighted by the Claimants in the Deposition of Paul Kush reflect that the Plaintiff

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“reviewed the facts that had been provided to [it] thus far, . . . reviewed the complaint, and
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[it] sought the advice of counsel as well,” and “[it relied] on all of the facts that had been

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provided to [it], and further, on advice of [its] counsel.” (Doc. 193 at 4) The Court finds

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that the Plaintiff’s statements clearly demonstrate the type of conferral between client and

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counsel that is explicitly excluded from Lee’s holding. The Plaintiff is not arguing that it

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denied ABD’s claim because counsel advised it to, nor does the Plaintiff advance any

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arguments regarding its interpretation of the law as a defense. Furthermore, the Lee court

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stated that simply asserting a good faith defense is not enough to waive attorney-client

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privilege. Id. at 57 (stating “a mere denial of a cause of action is not the kind of act that

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waives the privilege” and “[a]n insurer’s denial of an insured’s allegations of bad faith, and

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its assertion that it acted in good faith . . ., without more, do not . . . give rise to an implied

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waiver.”). Thus, the Court finds that the Claimants have failed to demonstrate that the

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Plaintiff has waived its attorney-client privilege. Accordingly,

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IT IS ORDERED that Claimants’ Motion to Compel Production of Attorney-Client
Communications (Doc. 193) is denied.
Dated this 29th day of October, 2019.

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Honorable Steven P. Logan
United States District Judge

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