QBE Insurance Corporation v. Jorda Enterprises Inc.,
ORDER denying 190 Plaintiff's Motion in Limine. Signed by Magistrate Judge Jonathan Goodman on 9/17/2012. (oim)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. lO-21107-CIV-GOLD/GOODMAN
QBE INSURANCE CORPORATION,
JORDA ENTERPRISES, INC.,
ORDER DENYING PLAINTIFF'S MOTION IN LIMINE REGARDING
EVIDENTIARY HEARING ON DEFENDANT'S SANCTIONS MOTION
In this Hurricane Katrina-related subrogation lawsuit United States District
Judge Alan S. Gold granted Defendant Jorda Enterprises, Inc.'s summary judgment
motion against Plaintiff QBE Insurance Corporation [ECF No. 159] and referred Jorda's
sanctions motion [ECF No. 124] against QBE to the Undersigned. Judge Gold noted that
he would enter judgment after resolution of the sanctions motion. In its motion, Jorda
seeks sanctions (under Fed. R. Civ. P. 11 and 28 U.s.C. § 1927) against QBE, its law firm
and the individual attorneys who worked on the case or made decisions about the case,
including former attorneys of the law firm.
I scheduled the sanctions motion for an evidentiary hearing [ECF No. 177] after
hearing the parties' positions about the nature of the hearing. Jorda did not want an
evidentiary hearing, but QBE did.
QBE then filed the instant in limine motion concerning the evidentiary hearing
[ECF No. 190] and Judge Gold referred [ECF No. 191] the motion to me, as well.
In its in limine motion outlining a proposed procedure for the evidentiary
hearing, QBE seeks leave to submit privileged documents
camera for the
Undersigned's ex parte review. It also requests similar permission to submit testimony
implicating privileged matter on an ex parte basis. QBE's motion does not specify
exactly how it expects the Undersigned to review such purportedly protected testimony
at the evidentiary hearing. Presumably, however, the Undersigned would either need to
exclude Jorda and its counsel from the courtroom or arrange for such testimony at
QBE does not explain whether: (1) it expects the Undersigned to assume that all
testimony it provides in camera is, in fact, privileged and subject to protection or
whether I am supposed to critically evaluate the testimony to see whether all of it, some
of it, or none of it is privileged; (2) the Undersigned is supposed to passively receive the
testimony in camera or if it would be appropriate for the Undersigned to ask questions
of the witnesses presenting ex parte testimony; (3) the Undersigned (if questioning is
permitted under QBE's proposal) is supposed to ask questions privately, so that Jorda
does not hear the questions; (4) (if questioning from the Undersigned is implicitly
included in QBE's suggested hearing procedure) the Undersigned should ask the
questions which Jorda might be expected to ask (and perhaps other questions as well);
and (5) the Undersigned is then expected to provide a privilege log-type of summary of
the ex parte testimony to Jorda.
The Undersigned denies the motion for the reasons outlined below.
However, as explained later in this Order, QBE is the master of its own privilege
protection. If it decides to not introduce privileged documents and not elicit testimony
on privileged matters, then the issue never arises and Jorda will not be entitled to obtain
privileged information from QBE or its counsel. On the other hand, if QBE places the
privileged matters in issue by seeking to substantively rely on them by introducing
privileged documents and privileged testimony, then it may very well waive the
applicable privilege. QBE cannot use the privilege as a sword and a shield. It cannot try
to persuade me to deny the sanctions motion by submitting privileged documents and
privileged testimony and simultaneously foreclose Jorda from challenging the very
evidence it is relying upon for substantive purposes. That is fundamentally unfair and
runs counter to basic privilege law.
But as noted, QBE (and its law firm and the firm's attorneys - the so-called
Sanctions Defendants) can prevent the disclosure of privileged information by not
relying on it (and therefore not placing it at issue). Of course, QBE may prefer to rely on
privileged information because it might provide a more-persuasive defense to the
sanctions motion, but this is a voluntary strategy calt not a Court-imposed requirement.
If QBE wanted to preserve the privilege, then its position urging an evidentiary hearing
is inconsistent. A request to conduct a substantial portion of a hearing in camera is, to a
large extent, fundamentally and philosophically at odds with a request for an
APPLICABLE LEGAL PRINCIPLES
When a party affirmatively relies on privileged information, then the information
is automatically placed into issue and any privilege that would otherwise attach is
impliedly waived. As succinctly explained in one of the leading treatises on the
attorney-client privilege and the work-product doctrine:
We are told that we cannot have our cake and eat it too.
What this means in the privilege context is that a litigant
cannot at one and the same time place privileged matters
into issue and also assert that what has been placed into
issue nonetheless remains privileged and not subject to full
discovery and exploration.
Edna Selan Epstein, The Attorney-Client Privilege and the Work-Product Doctrine 343
4th ed. 2001).
The waiver-by-affirmative-reliance doctrine arises in both the attorney-client
privilege and work-product doctrine scenarios, and both federal and state courts
recognize the waiver-by-voluntary-disclosure rule. See, e.g., In re EchoStar Commc'ns
Corp., 448 F.3d 1294, 1301 (Fed. Cir. 2006) (waiver when party asserts advice of counsel
defense to a charge of willful patent infringement); Chavis v. North Carolina, 637 F.2d
213, 223-24 (4th Cir. 1980) (waiver of work-product when witness, in defending his
credibility, referred to and relied upon alleged work-product material); Sedco Int'l, S.A.
v. Cory, 683 F.2d 1201, 1206 (8th Cir. 1982) (explaining that a client may impliedly waive
attorney-client privilege when a client testifies about portions of the communication,
when a client places the attorney-client relationship directly at issue and when a client
asserts reliance on an attorney's advice as an element of a claim or defense); Chiron
Corp. v. Genentech, Inc. 179 F. Supp. 2d 1182, 1186 (E.D. Cal. 2001) (waiver applied to
both attorney-client and work-product material); Abbott Labs. v. Alpha Therapeutic Corp.,
200 F.RD. 401, 411 (N.D. Ill. 2001) (waiver of work-product by injecting issue of its own
negligence into the case); Hoyas v. State, 456 So. 2d 1225 (Fla. 3d DCA 1984) (waiver of
attorney-client privilege by criminal defendant's voluntary disclosure, during trial
testimony, about a Significant part of his conversation with counsel).l
See also Cont'l Ins . Co. v. Roberts, No. 8:05-CV-1658-T-17MSS, 2008 WL 2700055 at
*1 (M.D. Fla. July 9, 2008); McLaughlin v. Lunde Truck Sales, Inc., 714 F. Supp. 916 (N.D.
Ill. 1989) (waiver of attorney-client privilege by offering former attorney's affidavit to
support good faith defense); Brownell v. Roadway Package Sys., Inc. 185 F.RD. 19
(N.D.N.Y. 1999) (employer waived its right to invoke both attorney-client privilege and
work-product doctrine by asserting the adequacy of its investigation as an affirmative
defense); Harding v. Dana Transp., Inc., 914 F. Supp. 1084 (D.N.J. 1996) (employer waived
attorney-client privilege concerning attorney's investigation of plaintiff's allegations by
using the results of the investigation as a defense to alleged respondeat superior
liability); Handgards, Inc. v. Johnson & Johnson, 413 F. Supp. 926, 931-33 (N.D. Cal. 1976)
(waiver by relying on attorney's advice and calling the attorneys as witnesses); Hearn v.
Rhay, 68 F.RD. 574, 581 (E.D. Wash. 1975) (waiver by prison officials in civil rights
lawsuit because they raised affirmative defense of immunity and the legal advice they
received is germane to the defense they raised). Cf Tibado v. Brees, 212 So. 2d 61 (Fla. 2d
DCA 1968) (spousal privilege waived when husband voluntarily gave deposition
testimony about privileged communications with his wife).
The waiver-by-affirmative-use doctrine flows from a notion of fundamental
fairness: "to protect against the unfairness that would result from a privilege holder
selectively disclosing privileged communications to an adversary, revealing those that
support the cause while claiming the shelter of the privilege to avoid disclosing those
that are less favorable." Century Aluminum Co. v. AGCS Marine Ins . Co., No. ll-CV-02514
YGR NC, 2012 WL 3731561, at *3 (N.D. Cal. Aug. 28, 2012) (granting motion to compel
because defendant, through its selective disclosures, waived any privileges attached to
its coverage counsel's communications about defendant's weather investigation)
(quoting Phoenix Solutions, Inc. v. Wells Fargo Bank, N.A., 254 F.R.D. 568, 576 (N.D. Cal.
If a party could use the privilege as both a sword and a shield, then the party
"could selectively disclose fragments helpful to its cause, entomb other (unhelpful)
fragments, and in that way kidnap the truth-seeking process." In re Keeper of Records
(Grand Jury Subpoena Addressed to XYZ Corp.), 348 F.3d 16, 24 (1st Cir. 2003).
In addition, both federal and state rules of evidence recognize the waiver theory
and provide for the scope of the waiver. Federal Rule of Evidence 502(a) provides that
the waiver of attorney-client privileged information extends "to an undisclosed
communication or information in a federal or state proceeding only if: (1) the waiver is
intentional; (2) the disclosed and undisclosed communications or information concern
the same subject matter; and (3) they ought in fairness to be considered together./I
Likewise, although the Florida evidence rules do not control here, it is worth noting that
§ 90.507, Fla. Stat. similarly provides for waiver when the privilege-holder "voluntarily
discloses or makes the communication when he or she does not have a reasonable
expectation of privacy, or consents to disclosure of, any significant part of the matter or
comm uni ca tion." 2
In its motion, QBE references the Advisory Committee Notes to Fed. R. Civ. P.
11, which state, in the part quoted by QBE, "the rule does not require a party or an
attorney to disclose privileged communications or work product in order to show that
the signing of the pleading, motion or other paper is substantially justified." But this
comment merely echoes a truism: a party is not obligated to disclose privileged
information in a Rule 11 proceeding. Instead, it has the opportunity to decide whether to
make such a disclosure. ICU Med., Inc. v. Alaris Med. Sys., Inc., No. SACV 0400689MRP
VBKX, 2007 WL 6137003, at *12 (CD. Cal. Apr. 16, 2007) (noting that party "was not
required to reveal privileged material to Alaris in opposing the Rule 11 Motion" and
also explaining that in camera declarations produced a "selective waiver" of the
Federal Rule of Evidence 502, entitled "Attorney-Client Privilege and Work
Product; Limitations on Waiver," provides, in relevant part in subsection (£), "[a]nd
notwithstanding Rule SOl, this rule applies even if state law provides the rule of
decision." Thus, in this diversity action subrogation lawsuit, the federal rule controls
the scope of the waiver. Century Aluminum Co. v. AGCS Marine Ins. Co., No. 11-CV-02514
YCR NC, 2012 WL 3731561, at *2-3, n. 2 (N.D. Cal. Aug. 28, 2012).
attorney-client privilege" and explaining that "a party cannot use the attorney-client
privilege as a sword and a shield.").
To be sure, QBE and its counsel have not yet disclosed privileged information.
Instead, they have merely announced (in a hearing to discuss the procedures for the
evidentiary hearing) an intent to do so at the evidentiary hearing. Thus, no waiver has
yet occurred, as the actual voluntary disclosure (not a prediction or promise that
disclosure will be made in the future) is the waiver-triggering event. Tennenbaum v.
Deloitte & Touche, 77 F.3d 337, 341-342 (9th Cir. 1996). QBE may stop the waiver doctrine
from applying by not voluntarily disclosing privileged information at the evidentiary
QBE cites limited authority to support its proposal that the Undersigned accept
documents for in camera review and permit witnesses to provide testimony on a
confidential basis, outside of Jorda's presence. But these limited citations, do not
provide sufficient support for QBE's procedural recommendation.
QBE cites In Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 732 F. Supp. 2d 653,
660 (N.D. Tex. 2010) for the proposition that, in a Rule 11 motion context, "(f]ederal
courts are accommodating regarding privilege issues and allow ex-parte and in-camera
filing where appropriate." But this is an out-of-context description of the relevant
discussion in Highmark. The issue in that case was whether sanctions should be imposed
upon defense counsel. The Highmark Court explained that the defendant was "not
required to disclose privileged information in defense of its pre-filing efforts." Id. It also
noted that, "privilege issues notwithstanding, [defendant] and its counsel must comply
with the law, including Rule 11." Id. That Court then emphasized that the defendant
"was not entitled to at once rely on the opinion of counsel to justify its filing of
counterclaims but withhold the details of counsel's pre-filing efforts -
the sort of
details that would allow the Court to verify the adequacy of counsel's efforts - based
on privilege. rd. Then, after making the "accommodating-regarding-privilege-issues
pointed out that, "[n]evertheless, Allcare [the defendant] essentially chose to rely on
Shelton's investigation and analysis" in responding to the motion seeking fees. rd.
Therefore, Highmark actually provides support for Jorda's position and, under
the specific facts, undermines QBE's position if it decides to rely on privileged
information to defend the sanctions motion. Abbott Point of Care, Inc. v. Epocal, Inc., No.
CV-08-S-S43-NE, 2012 WL 1339982, at *11 (N.D. Ala. Apr. 18, 2012) (rejecting effort to
rely on Highmark, explaining that a party "is free to decide how it wants to defend"
unclean hands allegations, noting that a choice to rely on the advice of counsel defense
would open the door to otherwise protected communications and concluding that "if
Abbott prefers for attorney communications to remain protected by the privilege, it
should rely upon some other defense.") (emphasis supplied).
QBE's reliance on Int'l Bus. Counselors, Inc. v. Bank of Jkeda, Ltd., No. 89 CIV. 8373
(CSH), 1991 WL 51173 (S.D.N.Y. 1991) is unpersuasive because the issue there arose in a
significantly different scenario. Specifically, the privilege-holder there was not the party
seeking to introduce privileged information - and specifically opposed the disclosure.
Here, QBE, the privilege-holder, sought an evidentiary and announced an intent to
itself use privileged information at the evidentiary hearing.
Finally, QBE's citation to Icon Health & Fitness, Inc. v. Park City Entm't, Inc., No.
1:10CV195DAK, 2011 WL 2636829 (D. Utah July 6, 2011) is unhelpful to QBE. The Court
there simply and merely mentioned, in passing, that two declarations were filed in
camera in connection with a Rule 11 motion. It is unclear whether the opposing party
objected to the procedure. Indeed, it appears from the background materials submitted
by Jorda that the parties in Icon Health agreed to the in camera procedure. But regardless
of whether the procedure was the result of a stipulation, the opinion contains no
analysis of the issue and does not discuss in any way the concept of waiver or the
unfairness inherent in allowing a party to defend a motion by asking a judge to
consider private information kept secret from the moving party.
If QBE decides to rely on attorney-client privileged information at the
evidentiary hearing, then it will have generated a waiver applicable to all other
attorney-client communications relating to the same subject matter. Fort James Corp. v.
Solo Cup Co., 412 F.3d 1340, 1349-50 (Fed. Cir. 2005). There is no bright line test for
determining what constitutes the subject matter of a waiver, and courts weigh the
circumstances of the disclosure, the nature of the advice and whether permitting or
prohibiting further disclosures would
prejudice the parties. ld.
Undersigned does not know whether QBE will finally decide to waive the privilege by
affirmatively relying on privileged information and also does not know which
documents and testimony will be placed at issue, I cannot now determine with
specificity the scope of the waiver.
As a general rule, the smaller the amount of privileged information disclosed, the
narrower the scope of the waiver. Thus, if QBE opts to elicit privileged information
from many of its attorneys and to introduce into evidence reports and comprehensive
memoranda, then it is likely that the waiver will be substantial. On the other hand, if it
discloses only one, two-sentence email and no further privileged documents or
testimony, then the subject matter may well be narrow and discrete. The Undersigned
cannot pinpoint the scope of the waiver until events unfold at the evidentiary hearing.
See In Re Keeper of Records (Grand Jury Subpoena Addressed to XYZ Corp.), 348 F.3d 16,23
24 (1st Cir. 2003) (noting that the case law is of limited assistance in determining the
scope of a waiver because of the act-intensive nature of the issues presented).
Unlike waiver of attorney-client materiat work-product waiver, however, is not
a broad waiver of all work-product related to the same subject matter. Instead, it
extends only to "factual" or "non-opinion" work-product concerning the same subject
matter as the disclosed work-product. In re EchoStar Comm'ns Corp., 448 F.3d 1294, 1301
1303 (Fed. Cir. 2006).
Because the primary issue
the sanctions motion is whether QBE and its
counsel had a substantial basis to file the lawsuit and to proceed with it, the
communications QBE and its trial counsel recently had (and continue to have) with new
counsel (at the White and Case LLP firm) will remain privileged and will not be
encompassed by a waiver (unless communications with White and Case are voluntarily
QBE has not yet disclosed privileged documents or provided testimony
implicating privilege. Thus, no implied waiver has been generated yet. As of now, QBE
has only announced an intent to introduce privileged documents and testimony at the
hearing. But now that QBE knows, through this Order, the consequences of deciding to
rely on such privileged information, it may decide to forego the voluntary disclosure
and defend the sanctions motion with non-privileged evidence and arguments. If it opts
to not disclose privileged information, then it may assert privilege objections to the
responsive, privileged documents called for by Jorda's duces tecum subpoena for the
evidentiary hearing and provide responsive documents in redacted form.
On the other hand, if QBE places into issue the privileged matters by introducing
privileged documents or eliciting testimony concerning privileged communications,
then QBE will have generated an implied waiver - and will be required to further
disclose additional privileged information. The scope of the waiver will be based on the
specific nature of the voluntarily disclosed privileged information. Thus, depending on
its hearing strategy decisions, QBE may well be required to completely disclose to Jorda
privileged documents, without any redactions.
QBE says that it might seek to disqualify Jorda's counsel in any future
proceedings if he "gains an unfair informational advantage based on disclosure of
protected information." But QBE has not filed such a motion and the Undersigned is
not in the habit of issuing advisory opinions. If QBE were to file such a disqualification
motion and if that motion were to be referred to the Undersigned, then I would issue an
appropriate ruling. Until then, however, it is inappropriate for me to decide a
disqualification issue which may never arise and which might not be referred to me in
QBE now has the guidance it needs to determine whether to voluntarily disclose
privileged information at the evidentiary hearing and, if so, the nature and extent of the
Accordingly, for the reasons set out above, QBE's motion in limine [ECF No. 190]
DONE and ORDERED,
Chambers, in Miami, Florida, this 17th day of
fjA- - - - -
J na an Goodman
UNITED STATES MAGISTRATE JUDGE
Copies furnished to:
The Honorable Alan S. Gold
All counsel of record
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