Moon Mountain Farms, LLC v. Rural Community Insurance Company

Filing 34

ORDER by Judge Samuel Conti transferring 13 Motion to Disqualify Counsel, and transferring 1 Motion to Compel to the District of Arizona, Case No. 2:13-cv-00349-DJH. (sclc1, COURT STAFF) (Filed on 7/10/2014)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

United States District Court

For the Northern District of California

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MOON MOUNTAIN FARMS, LLC,

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Plaintiff,

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v.

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RURAL COMMUNITY INSURANCE
COMPANY,

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Defendant.

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) Case No. 14-mc-80099-SC
)
) ORDER GRANTING MOTION TO
) TRANSFER
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I. INTRODUCTION

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Now pending before the Court are three motions: (1) Plaintiff

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Moon Mountain Farms, LLC's ("MMF") motion to compel; (2) MMF's

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motion to transfer; and (3) nonparty Wells Fargo & Company's

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("Wells Fargo") motion to disqualify counsel.

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relate to a subpoena issued from this District in October 2013 for

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an action pending before the District of Arizona (Case No. 2:13-cv-

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00349-DJH).

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These motions all

All three motions are fully briefed 1 and suitable for

ECF Nos. 1 ("MMF Mots."), 21 ("Wells Fargo Opp'n"), 30 ("MMF
Reply"), 13 ("DQ Mot."), 23 ("DQ Opp'n"), 29 ("DQ Reply").

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decision without oral argument per Civil Local Rule 7-1(b).

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the reasons set forth below, the Court GRANTS MMF's motion to

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transfer and TRANSFERS all pending motions to the District of

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For

Arizona.

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II. BACKGROUND

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These motions arise out of an insurance dispute between MMF

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United States District Court

For the Northern District of California

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and Defendant Rural Community Insurance Company (RCIC).

MMF

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alleges that RCIC erroneously denied an insurance claim that MMF

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made in 2007.

The claim was arbitrated, and the arbitrator found

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that RCIC was required to indemnify MMF.

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Arizona, alleging that RCIC acted with bad faith in handling the

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insurance claim and subsequent arbitration.

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that lawsuit, currently being heard before the United States

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District Court for the District of Arizona, to which the subpoena

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at issue in these motions relates.

MMF brought suit in

MMF Mots. at 3.

It is

In January 2014, Judge Bolton, who was then presiding over the

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Arizona case, 2 granted MMF's motion to compel discovery of (1)

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RCIC's post-denial claims file, (2) RCIC's counsel's coverage

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opinion, and (3) communications between RCIC and its consulting

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experts.

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Order"), at 2, 7.

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premised on a finding that RCIC had impliedly waived attorney-

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client privilege.

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fifteen pages of discovery.

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38, Ex. 12.

Case No. 2:13-cv-00349-DJH ECF No. 73 ("Production
The order to compel RCIC's counsel's opinion was

Id. at 5.

RCIC has disclosed approximately
MMF Mots. Ex. A ("Axel Decl.") ¶¶ 33,

The parties disagree as to whether RCIC has complied

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The case has since been reassigned to Judge Humetewa.

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with the order, and MMF argues that Wells Fargo, which is RCIC's

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parent company, possesses discoverable documents.

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issued a subpoena from this District in October 2013.

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objected, and MMF now brings this motion to compel.

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As a result, MMF
Wells Fargo

Wells Fargo has also brought a motion to disqualify counsel

represent certain Wells Fargo subsidiaries, which creates an

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United States District Court

for MMF.

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For the Northern District of California

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Wells Fargo argues that lawyers for MMF currently

impermissible conflict of interest.

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requested that the Court transfer the motion to compel, along with

DQ Mot. at 1-2.

MMF has

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the related motion to disqualify counsel, to the District of

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Arizona for resolution.

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Fargo has also requested judicial notice of a transcript of

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proceedings before Judge Bolton in the underlying Arizona action.

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ECF No. 29.

MMF Mots. at 8; DQ Opp'n at 4.

MMF has opposed the request.

Wells

ECF No. 31.

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III. LEGAL STANDARD
Federal Rule of Civil Procedure 45, which governs the use of

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subpoenas, was significantly amended last year.

The amendments

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were adopted in April 2013 but did not take effect until December

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1, 2013.

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to the effective date of the amendments.

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version of the Rules applies to proceedings after the effective

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date in pending cases unless the Supreme Court specifies otherwise,

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or applying them would be infeasible or work an injustice.

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Civ. P. 86(a)(2).

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subpoenas be issued from the court where the action is pending.

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Fed. R. Civ. P. 45(a)(2).

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amended rule permits the compliance court to "transfer a motion

The subpoena at issue here was issued in October, prior
However, the amended

Fed. R.

The amended version of Rule 45 requires that

If compliance is required elsewhere, the

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under this rule to the issuing court if the person subject to the

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subpoena consents or if the court finds exceptional circumstances."

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Fed. R. Civ. P. 45(f).

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The Advisory Committee notes provide some guidance as to when
exceptional circumstances may be found:

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United States District Court

For the Northern District of California

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The prime concern should be avoiding burdens on local
nonparties subject to subpoenas, and it should not be
assumed that the issuing court is in a superior position
to
resolve
subpoena-related
motions.
In
some
circumstances, however, transfer may be warranted in
order to avoid disrupting the issuing court's management
of the underlying litigation, as when that court has
already ruled on issues presented by the motion or the
same issues are likely to arise in discovery in many
districts. Transfer is appropriate only if such interests
outweigh the interests of the nonparty served with the
subpoena in obtaining local resolution of the motion.

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Fed. R. Civ. P. 45 advisory committee's note.

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IV. DISCUSSION
Wells Fargo opposes transfer of the motion to compel to the

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District of Arizona.

Consequently, the Court may only transfer the

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motions related to this subpoena to the District of Arizona upon a

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finding of exceptional circumstances.

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A.

Application of Rule 45(f)

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As an initial matter, it is not obvious that Rule 45(f)

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applies at all in this case.

The rule permits a transfer "[w]hen

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the court where compliance is required did not issue the subpoena."

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This Court issued the subpoena, and this Court is also where

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compliance is sought.

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apply at all in this case, and that the Court therefore may not

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transfer the case.

Wells Fargo argues that Rule 45(f) does not

Wells Fargo Opp'n at 7.

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However, application

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of Rule 45 is complicated by the fact that the subpoena was issued

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in October, prior to the effective date of the 2013 amendments.

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The subpoena was only issued from this Court because the

issue from the court for the district where the deposition is to be

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taken.

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subpoena issued from this Court.

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United States District Court

previous version of the Federal Rules required the subpoena to

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For the Northern District of California

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the subpoena should have issued from the District of Arizona;

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indeed, Rule 45(a)(2) in its current form would prohibit this Court

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Because Wells Fargo is headquartered in San Francisco, the
Under the current rule, however,

from issuing the subpoena to which these motions relate.
In a recent case, the United States District Court for the

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District of Columbia faced precisely this issue.

In Wultz v. Bank

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of China, Ltd., the plaintiffs in a lawsuit pending in the Southern

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District of New York sought to enforce a subpoena in the District

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of Columbia.

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effective date of the 2013 amendments to the Federal Rules of Civil

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Procedure.

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motion to quash the subpoena.

As here, the subpoena was issued prior to the

In May 2014, the District of Columbia court ruled on a
That court determined that:

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[S]ince the text of Rule 45(a)(2) now explicitly requires
that "[a] subpoena must [be] issue[d] from the court
where the action is pending," and because the underlying
litigation is not pending in this Court, this Court could
not now have issued the subpoena at issue in accordance
with Rule 45(a)(2). Thus, since the subpoena explicitly
identifies the Southern District of New York as the court
where the underlying action is pending, pursuant to
amended Rule 45 the Southern District of New York must be
considered the issuing court.

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Wultz v. Bank of China, Ltd., MC 13-1282 (RBW), 2014 WL 2257296

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(D.D.C. May 30, 2014) (citations omitted).

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subpoena at issue here specifies the District of Arizona as the

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As in Wultz, the

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court where the underlying action is pending.

Axel Decl. Ex. 1.

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The Court finds the reasoning in Wultz compelling and determines

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that faithful application of the current version of Rule 45

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requires the Court to consider the District of Arizona the issuing

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court.

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to the District of Arizona is warranted upon the existence of

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exceptional circumstances.

The Court finds that Rule 45(f) applies, and that transfer

United States District Court

For the Northern District of California

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B.

Exceptional Circumstances

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The court where compliance with a subpoena is sought has

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discretion to transfer related motions to the issuing court only

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upon a finding of exceptional circumstances.

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45(f).

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transfer is "warranted in order to avoid disrupting the issuing

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court's management of the underlying litigation, as when that court

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has already ruled on issues presented by the motion . . . ."

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R. Civ. P. 45 advisory committee's note.

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has already ruled on issues presented by a subpoena-related motion,

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exceptional circumstances exist and the court of compliance may

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transfer the motion to the issuing court.

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Fed. R. Civ. P.

Such exceptional circumstances include situations in which

Fed.

When the issuing court

The issues raised in the motion to compel relate to orders and

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discovery from the underlying Arizona case.

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primary arguments in opposition to the motion to compel are that

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(1) the subpoena requires Wells Fargo to produce documents that

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RCIC has already produced in the Arizona case, Wells Fargo Opp'n at

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13-15; and (2) that documents sought in the subpoena are already

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under in camera review in the District of Arizona or are not

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subject to Judge Bolton's production order, id. at 15-16.

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second argument clearly presents an issue upon which the District

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Wells Fargo's two

The

subject to Judge Bolton's order involves an existing ruling in the

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underlying action.

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fact.

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MMF's first subpoena request was "an improper attempt to circumvent

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the authority of the presiding judge over the discoverability of

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the requested documents, since Request No. 1 is currently the

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United States District Court

of Arizona has already ruled: determining which documents are

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For the Northern District of California

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subject of a pending motion to compel in the primary action, in the

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United States District Court for the District of Arizona . . . ."

Indeed, Wells Fargo seems to acknowledge this

In its objection to the subpoena, Wells Fargo stated that

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Axel Decl. Ex. 2.

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authority of the presiding judge in the underlying action is surely

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an exceptional circumstance contemplated by Rule 45.

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the District of Arizona is in a much better position to determine

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which documents have already been produced, which documents are

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under in camera review, and which documents are subject to the

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production order.

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Avoiding such an attempt to circumvent the

Additionally,

This result is indicated by the text of the Advisory

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Committee's notes to Rule 45.

Additionally, the few courts to

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consider this issue since the amendments took effect have found

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exceptional circumstances in analogous situations.

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Financial Center, a judge in the Southern District of Ohio granted

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a motion to transfer a motion to compel to the Southern District of

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Florida, where the underlying litigation was pending.

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found exceptional circumstances because a similar motion to compel

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was pending before the Florida court.

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compel dealt with a subpoena directed at a different party but that

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sought similar items.

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2013 WL 6388539, at *1-3 (S.D. Ohio Dec. 6, 2013).

In FTC v. A±

The court

That similar motion to

F.T.C. v. A± Fin. Ctr., LLC, 1:13-MC-50,

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That is also

been unable to obtain from RCIC under an existing production order

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issued in the District of Arizona.

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courts facing similar situations have also found exceptional

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circumstances.

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Elec., Inc., 14 C 3731, 2014 WL 2808984, at *2 (N.D. Ill. June 20,

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2014) (transferring motion because ruling on it risked inconsistent

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United States District Court

the issue here: MMF seeks documents from Wells Fargo that it has

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For the Northern District of California

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rulings that might disrupt management of the underlying

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litigation); Chem-Aqua, Inc. v. Nalco Co., 3:14-MC-71-D-BN, 2014 WL

See MMF Mots. at 4-5.

Other

See Cont'l Auto. Sys., U.S., Inc. v. Omron Auto.

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2645999, at *3 (N.D. Tex. June 13, 2014) (finding exceptional

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circumstances because the court presiding over the underlying

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litigation had already ruled on issues in motion to compel); Wultz,

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2014 WL 2257296, at *7 (finding exceptional circumstances where the

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judge presiding over the underlying litigation was "in a better

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position to rule on the . . . motion . . . due to her familiarity

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with the full scope of the issues involved").

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Ruling on the motion to compel would require the Court to

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duplicate review already conducted by the District of Arizona.

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would also risk disrupting the District of Arizona's management of

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the underlying litigation, because the District of Arizona has

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already ruled on some of the issues presented in the motion.

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Moreover, the District of Arizona is in a better position to rule

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on these motions due its familiarity with the issues involved.

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Court finds that exceptional circumstances exist and that transfer

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is permitted under Rule 45.

It

The

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C.

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The Advisory Committee's notes to Rule 45 make clear that the

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Burden on Wells Fargo

primary focus in determining whether transfer is appropriate should

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be the burden on local nonparties.

Thus the Court proceeds to

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analyze the burden of a transfer on Wells Fargo, the local nonparty

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involved in these motions.

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"unjustifiably burdened" by transfer to the District of Arizona

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because (1) it would be expensive, and (2) it would deny Wells

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Fargo the protection of local laws on attorney-client privilege.

Wells Fargo argues that it would be

The expense argument is unconvincing.

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"Almost any subpoenaed

United States District Court

For the Northern District of California

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party could make the same undue burden arguments that [Wells Fargo]

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makes here."

Chem-Aqua, 2014 WL 2645999, at *3.

Thus, in

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situations like this, "the cost of litigation alone does not amount

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to an unfair prejudice."

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it clear that litigating this motion in the District of Arizona

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will cost very much at all.

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jurisdiction where the underlying litigation is pending that will

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require few, if any, modifications of the written submissions, [and

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therefore] does not rise to the level of unfair prejudice."

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Additionally, the Advisory Committee encourages judges to "permit

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telecommunications" to minimize travel costs after a Rule 45(f)

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transfer.

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finds that any costs to Wells Fargo imposed by a transfer to the

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District of Arizona are outweighed by the importance of consistent

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management of the underlying litigation and judicial economy.

Wultz, 2014 WL 2257296, at *6. 3

Nor is

"Transferring a motion to the

Fed. R. Civ. P. 45 advisory committee's note.

Id.

The Court

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Wells Fargo urges the Court to consider Garden City Employees'
Retirement Systems v. Psychiatric Solutions for the proposition
that the cost of travel "is a sufficient showing to overcome a
transfer." Wells Fargo Opp'n at 9. Wells Fargo misreads that
case. The Garden City court declined to transfer the motions
because exceptional circumstances did not exist. It did not hold
that travel costs are sufficient to overcome exceptional
circumstances where those circumstances exist. No. MISC.A. 13-238,
2014 WL 272088, at *3 (E.D. Pa. Jan. 24, 2014).

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Second, Wells Fargo argues that it will be prejudiced because

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protection of California's attorney-client privilege laws.

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Fargo Opp'n at 10.

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client privilege laws would apply were the motion to be

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transferred.

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question. 4

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United States District Court

hearing the motion in the District of Arizona would deny it the

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For the Northern District of California

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Fargo's briefings is any mention whatsoever of the Arizona

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attorney-client privilege.

Wells

Wells Fargo implies that Arizona attorney-

Whether that is actually the case is a complex

However, it hardly matters.

Notably absent from Wells

Wells Fargo emphasizes that California

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law requires narrow construction of waivers of attorney-client

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privilege.

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argue that Arizona law permits any less narrow construction, likely

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because the states' laws in this area are virtually identical.

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California law directs that an "implied waiver is narrowly defined

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and the information required to be disclosed must fit strictly

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within the confines of the waiver."

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Superior Court, 188 Cal. App. 3d 1047, 1052 (Cal. Ct. App. 1987).

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Similarly, Arizona courts have held that an implied waiver of

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attorney-client privilege permits only "the fewest and most

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Wells Fargo Opp'n at 10.

However, Wells Fargo fails to

Transamerica Title Ins. Co. v.

Federal Rule of Evidence 501 specifies that state law privileges
apply when state law supplies the rule of decision, but "the rule
does not specify which state law should be applied." Wolpin v.
Philip Morris Inc., 189 F.R.D. 418, 423 (C.D. Cal. 1999). Thus the
process of determining which state's privilege law to apply begins
with Arizona's choice of law rules. See id. (applying California
choice of law rules to determine which state's privilege law
applied, where California law supplied the rule of decision).
Arizona follows the Restatement (Second) of Conflict of Laws. See,
e.g., Swanson v. Image Bank, Inc., 206 Ariz. 264, 266 (Ariz. 2003);
Bates v. Superior Court, 156 Ariz. 46, 48 (Ariz. 1988). Whether
communications privileged under California law, but not under
Arizona law, would be inadmissible in the District of Arizona would
then depend upon whether "some special reason" exists not to give
effect to the Arizona law. Restatement (Second) of Conflict of
Laws § 139.

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regarding the specific issue on which waiver has been found."

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Ulibarri v. Superior Court, 184 Ariz. 382, 385 (Ariz. Ct. App.

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1995).

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conflict; if anything, Arizona law appears to be slightly more

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protective of the privilege holder than California law.

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finds that construction of the waiver of attorney-client privilege

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United States District Court

narrowly-drawn questions as will provide necessary information

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For the Northern District of California

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under Arizona law, if warranted, would not prejudice Wells Fargo.

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It is hard to imagine a scenario in which these laws would

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The Court

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V. CONCLUSION
As described above, the Court finds that exceptional

District of Arizona.

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the importance of ensuring consistency in rulings on the issues

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involved, preserving judicial economy, and permitting the court

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with the most experience and knowledge of the facts to rule on

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United States District Court

circumstances exist, permitting transfer of these motions to the

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For the Northern District of California

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these matters.

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the motion to compel and the motion to disqualify to the District

Any burden on Wells Fargo is outweighed by

Plaintiff Moon Mountain Farms's motion to transfer

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of Arizona is GRANTED.

Wells Fargo's request for judicial notice,

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ECF No. 29, is DENIED as moot.

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to transfer this case to the District of Arizona for consideration

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of MMF's motion to compel and Wells Fargo's motion to disqualify in

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the pending matter of Moon Mountain Farms v. Rural Community

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Insurance Company, No. 2:13-cv-00349-DJH.

The Clerk of the Court is DIRECTED

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IT IS SO ORDERED.

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Dated: July 10, 2014
UNITED STATES DISTRICT JUDGE

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