Century Aluminum Company et al v. AGCS Marine Insurance Co.

Filing 209

ORDER GRANTING 129 , 181 Century's Motion to Compel Production of Robb Documents re Weather Conditions. Signed by Judge Nathanael M. Cousins on 08/28/2012. (nclc2, COURT STAFF) (Filed on 8/28/2012)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN FRANCISCO DIVISION

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CENTURY ALUMINUM COMPANY, et al.,

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Case No. 11-cv-02514 YGR (NC)

Plaintiffs,

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ORDER GRANTING
CENTURY’S MOTION TO
COMPEL PRODUCTION OF
ROBB DOCUMENTS RE:
WEATHER CONDITIONS

v.

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AGCS MARINE INSURANCE CO.,
Re: Dkt. Nos. 129, 181
Defendant.

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The issue presented is whether defendant AGCS waived the attorney-client and

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work product privileges by selectively providing discovery about some of coverage

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counsel Geoff Robb’s communications but shielding other communications with Robb

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about defendants’ weather investigation. Century seeks to compel AGCS to produce the

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shielded Robb documents, arguing that AGCS waived any applicable privileges by its

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selective disclosure. AGCS counters that documents at issue were not selectively

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produced and that AGCS has therefore not waived any privileges.

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The Court held a hearing on the motion to compel on August 22, 2012. Dkt. No.

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207. The Court finds that AGCS, by its selective disclosures, waived any privileges

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attached to Robb’s communications about the weather investigation. The Court

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therefore grants Century’s motion to compel as to this category of Robb’s documents.
Case No. 11-cv-02514 YGR (NC)
ORDER RE MOTION TO COMPEL

I. BACKGROUND

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This bad faith insurance action arises from a business interruption loss and repair

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claim made by plaintiff Century and its wholly-owned subsidiary, Nordural, under a

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commercial insurance policy issued by defendant AGCS Marine Insurance. See

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Joint Case Management Statement at 2, Dkt. No. 21. Plaintiffs allege that the insurance

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policy should cover multi-million dollar losses they suffered when a Nordural

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transformer was severely damaged while in transit from Norway to Iceland on July 11,

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2010. Id. AGCS denied the claim. Id. Century contends that the denial was a breach of

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contract and that AGCS’s handling of the claim also breached the implied covenant of

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good faith and fair dealing. Id. AGCS contends that there is no coverage under the

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policy for Century’s claims for repairs to the transformer and for consequential business

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interruption, and AGCS therefore properly denied Century’s claims. Id.

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A. Discovery Dispute regarding AGCS Privilege Assertions.
On July 27, 2012, the parties filed a joint letter brief outlining a dispute as to

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AGCS’ privilege claims. Joint Letter Brief, Dkt. No. 129. There, Century asserted that

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AGCS failed to produce hundreds of documents and portions of documents based on

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improper claims of attorney-client privilege or other protections. Id. at 1. In a

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supplemental brief regarding waiver of privilege, Century asserts that AGCS selectively

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produced privileged material that it found favorable, while withholding information less

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favorable to AGCS. Pl.’s Mot. Compel at 5-6, Dkt. No. 181. The bulk of these

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documents include communications involving and testimony about attorney Geoff Robb.

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Id. at 5.
In opposition, AGCS contends that Century can only point to three documents as

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having been selectively produced: (1) Inouye Ex. 41; (2) Oppermann Ex. 22/Zachariades

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Ex. 41; and (3) Oppermann ex. 31/Zachariades Ex. 46. Def.’s Opp’n Mot. Compel at 3,

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Dkt. No. 198. AGCS asserts that these documents are either not subject to privilege or

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were inadvertently disclosed. Id.

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//
Case No. 11-cv-02514 YGR (NC)
ORDER RE MOTION TO COMPEL

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1. Coverage Counsel Robb

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AGCS hired Robb as coverage counsel soon after Century reported the

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transformer claim to AGCS. Id. at 2. Century alleges that Robb was “intimately

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involved in each stage of the claim, Robb was copied on routine claim communications,

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contacted dozens of potential experts (especially regarding weather/sea conditions), and

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ultimately was the sole drafter of Allianz’s denial letter, signed by Zachariades without

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edits.” Id. In addition, Century asserts that AGCS, through Robb, engaged weather

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expert Bob Cohen. Id. at 3. The Cohen reports and communications have not been

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produced to Century but instead withheld as privileged. Id. Century asserts that AGCS

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has intentionally revealed Robb documents concerning the weather/sea conditions

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investigation that AGCS believes supports its position. Id.

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2. Disclosed Exhibits

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The first allegedly privileged exhibit that Century points to as selectively

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produced is Inouye Ex. 41, which contains handwritten notes of an AGCS underwriter in

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which she notes “Al Warrington1 reviewing ‘sufficient packaging.’” Def.’s Opp’n Mot.

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Compel at 4. AGCS asserts that the document is not privileged. Id.
The second exhibit Century references is Oppermann Ex. 22/Zachariades Ex. 41,

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which includes notes of a telephone conference that Robb attended. Id. AGCS again

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asserts that the notes do not indicate any confidential attorney-client communications

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were revealed. Id.
Century asserts that in recent depositions AGCS’ counsel permitted examination

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and testimony about the third exhibit, Oppermann Ex. 31/Zachariades Ex. 46, a

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privileged communication from Robb to the “Nordural Team.” Pl.’s Mot. Compel at 4;

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see also Myers Decl. ¶ 4, Ex. 3 (Zachariades Depo. 309:4-9). AGCS contends that the

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document is privileged and work product protected and “that [it] was neither voluntarily

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nor intentionally disclosed by AMIC.” Def.’s Opp’n Mot. Compel at 5. Instead, AGCS

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Al Warrington was the first coverage counsel AGCS engaged after Century reported the
transformer claim. Pl.’s Mot. Compel at 2.
Case No. 11-cv-02514 YGR (NC)
ORDER RE MOTION TO COMPEL

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asserts that Oppermann brought the un-Bates stamped original document to his

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deposition. Def.’s Opp’n at 5. The document was then provided to Century’s counsel

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because AGCS’ counsel mistakenly believed that it had been previously produced. Id.

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The privileged communication was then marked as Ex. 31 to the Oppermann deposition

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and subsequently as Ex. 46 to the Zachariades deposition. Id. AGCS claims that this

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was all in error and now requests that the document be returned under the terms of the

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parties’ protective order. Id.

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II. STANDARD OF REVIEW

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Subject matter waiver is governed by Federal Rule of Evidence 502, which

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applies to disclosures of information covered by attorney-client privilege and work

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product protection. Fed. R. Evid. 502.2 Under Rule 502(a), a waiver of the attorney-

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client privilege or work product protection “extends to an undisclosed communication or

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information in a federal . . . proceeding only if: (1) the waiver is intentional; (2) the

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disclosed and undisclosed communications or information concern the same subject

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matter; and (3) they ought in fairness to be considered together.” Fed. R. Evid. 502(a).
III. DISCUSSION

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A. Selective Disclosure of Robb Document Amounts to Waiver.
Century contends that it has been “prevented from exploring the critical weather

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element of the claims ‘investigation’ and denial by [AGCS’] selective invocation of

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privilege over Robb documents.” Pl.’s Reply at 2. AGCS maintains that the individual

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documents identified by Century reveal that the documents are either “not subject to

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privilege or work-product protection or were inadvertently produced by AGCS.” Joint

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Letter Brief at 4.

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The doctrine of waiver of the attorney-client privilege is rooted in notions of

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fundamental fairness: “to protect against the unfairness that would result from a privilege

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holder selectively disclosing privileged communications to an adversary, revealing those

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The Federal Rules of Evidence govern the scope of waiver even if state law provides the
rule of decision. See Fed. R. Evid. 502(f).
Case No. 11-cv-02514 YGR (NC)
ORDER RE MOTION TO COMPEL

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that support the cause while claiming the shelter of the privilege to avoid disclosing

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those that are less favorable.” Phoenix Solutions, Inc. v. Wells Fargo Bank, N.A., 254

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F.R.D. 568, 576 (N.D. Cal. 2008) (citing Tennenbaum v. Deloitte & Touche, 77 F.3d

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337, 340-41 (9th Cir. 1996)). The Court first considers whether AGCS’ use of the three

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disclosed documents constitutes an intentional waiver.

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1. Inouye Ex. 41

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Exhibit 41 to the Inouye deposition contains handwritten notes of an AGCS

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underwriter stating “Al Warrington3 reviewing ‘sufficient packaging.’” Def.’s Opp’n

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Mot. Compel at 4. Century asserts that this document is privileged but was voluntarily

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disclosed by AGCS. Pl.’s Reply at 3. AGCS asserts that the documents is not privileged

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and that AGCS has never asserted that the document is privileged. Def.’s Opp’n Mot.

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Compel at 3.

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The Court agrees with AGCS that Inouye Ex. 41 is not obviously privileged as the

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notes themselves are not confidential communications, and the notes do not memorialize

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or relay any confidential communications. See Cal. Evid. Code § 952 (defining

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confidential communication between client and lawyer as “information transmitted

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between a client and his or her lawyer in the course of that relationship. . . [that] includes

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the legal opinion formed and the advice given by the lawyer in the course of that

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relationship.”).

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2. Oppermann Ex. 22/Zachariades Ex. 41

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The second exhibit, Oppermann Ex. 22/Zachariades Ex. 41, includes notes of a

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telephone conference in which Robb participated. Id. Century asserts that Zachariades

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testified that she asked Robb to join in that telephone conference in his capacity as

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coverage counsel because she was “seeking his legal service and advice in connection

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with the claim.” Pl.’s Reply at 3. AGCS again asserts that the notes do not indicate any

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Al Warrington was the first coverage counsel AGCS engaged after Century reported the
transformer claim. Pl.’s Mot. Compel at 2.
Case No. 11-cv-02514 YGR (NC)
ORDER RE MOTION TO COMPEL

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confidential attorney-client communications were revealed and that no waiver can occur

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where privilege did not attach in the first place. Def.’s Opp’n Mot. Compel at 3. AGCS

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asserts that this situation is akin to an attorney being “cc” on an email, which does not,

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by itself, make the email a privileged communication. Id. (citing Dawe v. Corrections

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USA, 263 F.R.D. 613, 621 (E.D. Cal. 2009)).

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Upon review of the exhibit, the Court finds that Oppermann Ex. 22/Zachariades

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Ex. 41 contains factual information and does not obviously reveal confidential attorney-

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client communications.

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3. Oppermann Ex. 31/Zachariades Ex. 46
The final document, Oppermann Ex. 31/Zachariades Ex. 46, is a communication

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from Robb to the “Nordural Team” in which Robb forwards a report from Bob Cohen

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which Robb claims “greatly strengthen the improper packing defense.” Pl.’s Mot.

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Compel at 6. Century asserts that AGCS’ counsel permitted examination and testimony

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about this privileged communication at the Oppermann and Zachariades depositions,

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admitting that it was doing so selectively. Id. at 4; see also Myers Decl. ¶ 4, Ex. 3

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(Zachariades Depo. 309:4-9) (testimony from AGCS’ counsel during the Zachariades

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deposition regarding Oppermann Ex. 31/Zachariades Ex. 46 where counsel states “this

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document was sent out by the Long Levitt firm, and it probably was governed by the

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attorney-client privilege. In hindsight, we did not request its clawback because it

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basically has factual information in it.”). AGCS’ counsel then permitted Oppermann and

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later Zachariades to testify fully regarding the Robb communication. See id.

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AGCS states that the exhibit is not bates stamped, indicating that AGCS did not

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intend to disclose the document. Def.’s Opp’n Mot. Compel at 3. AGCS asserts that

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Oppermann brought the un-Bates stamped original document to his deposition and that

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the document was provided to Century’s counsel because AGCS’ counsel mistakenly

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believed that it had been previously produced. Id. at 5. The document was subsequently

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used as an exhibit to the Zachariades deposition. Id. In support of its position, AGCS

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points to the fact that at the Zachariades deposition AGCS’ counsel noted that
Case No. 11-cv-02514 YGR (NC)
ORDER RE MOTION TO COMPEL

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“production of this document does not waive any other privilege connected with any

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other conversation referenced or about the document.” Id. AGCS now claims that

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Oppermann Ex. 31/Zachariades Ex. 46 was produced in error and requests that the

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document be returned under the terms of the parties’ protective order. Id.

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The Court finds that disclosure of Oppermann Ex. 31/Zachariades Ex. 46 was not

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inadvertent. AGCS’ counsel, acknowledging that the document is “probably privileged,”

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chose to then produce the privileged document and report from Bob Cohen which Robb

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claimed “greatly strengthens the improper packing defense.” This occurred for the first

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time at the Oppermann deposition and a second time at the Zachariades deposition. The

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Court finds that AGCS’ counsel made the knowing decision to produce the subject

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document. Accordingly, the Court finds that AGCS has waived privilege as to

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Oppermann Ex. 31/Zachariades Ex. 46.

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B. Scope of Waiver

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Under Rule 502, a waiver “generally results in a waiver only of the

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communication or information disclosed.” Fed. R. Evid. 502 (Advisory Committee

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Notes). “The idea is to limit subject matter waiver to situations in which the privilege

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holder seeks to use the disclosed material for advantage in the litigation but to invoke the

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privilege to deny its adversary access to additional materials that could provide an

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important context for proper understanding of the privileged materials.” 8 Charles Alan

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Wright, et al., Federal Practice and Procedure § 2016.2 (3d ed., 2010 update).

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Accordingly, “subject matter waiver (of either privilege or work product) is reserved for

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those unusual situations in which fairness requires a further disclosure of related,

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protected information, in order to prevent a selective and misleading presentation of

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evidence to the disadvantage of the adversary.” Fed. R. Evid. 502 (Advisory Committee

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Notes).

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Here, AGCS has attempted to use the disclosed document as both a shield and a

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sword, that is, to reveal a limited aspect of privileged communications in order to gain a

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tactical advantage in litigation. The Court finds that by voluntarily producing a
Case No. 11-cv-02514 YGR (NC)
ORDER RE MOTION TO COMPEL

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privileged document concerning “significant development in the weather investigation”

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drafted by Robb, AGCS has waived the attorney-client privilege and work product

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protection as to all Robb communications concerning defendants’ weather investigation.

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On the other hand, the Court disagrees with plaintiffs that the scope of the waiver should

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extend to all communications with Robb, with no limitation on topic. The Court finds

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that a waiver of that breadth is not supported by Federal Rule of Evidence 502 and

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would not be proportionate to the purposeful disclosures made by AGCS.
III. CONCLUSION

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For the reasons discussed above, Century’s motion to compel AGCS to produce

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communications with Robb concerning defendants’ weather investigation is GRANTED.

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AGCS’ production must include, but is not limited to, the following documents:

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AGCS GR 00120-00129; AGCS GR 00132-00134; AGCS GR 00137-00139; AGCS GR

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00141-00143; AGCS GR 00161; AGCS GR 01503-01504; AGCS GR 01602-01603;

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AGCS GR 01611-01621; AGCS GR 01647-01649; AGCS GR 02251; AGCS GR

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02890-02892; AGCS GR 02898-02903; AGCS GR02908-02912; AGCS GR 02954-

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02961; AGCS GR 02964-02965; AGCS GR 02968-02969; AGCS GR 02972-02977;

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AGCS GR 03012-03014; AGCS GR 03019-03031; AGCS GR 03191-03193; AGCS GR

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03207-03209; AGCS GR 03218; AGCS GR 03224; AGCS GR 03237-03242; AGCS GR

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03249-03252; AGCS GR 03282-03284; AGCS GR 06977-06978.

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AGCS must produce the responsive documents to Century in accordance with this

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order, and file and serve a supplemental log of documents being produced, on or before

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September 14, 2012. Any party may object to this nondispositive order within 14 days.

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Fed. R. Civ. P. 72(a).

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IT IS SO ORDERED.

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DATED: August 28, 2012
____________________________
NATHANAEL M. COUSINS
United States Magistrate Judge

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Case No. 11-cv-02514 YGR (NC)
ORDER RE MOTION TO COMPEL

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