United Heritage Property and Casualty Company v. Farmers Alliance Mutual Insurance

Filing 58

MEMORANDUM AND ORDER re: Motions to Compel and to Quash. Breck Bartons motion to quash subpoena 20 is GRANTED; The Beddes defendants' motion to quash subpoena 23 is DENIED without prejudice; and FAMI's motion to compel 40 isGRANTED. Signed by Judge William B. Shubb. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by jm)

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UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF IDAHO

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UNITED HERITAGE PROPERTY AND
CASUALTY COMPANY, an Idaho
corporation,

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MEMORANDUM AND ORDER RE:
MOTIONS TO COMPEL AND TO
QUASH

Plaintiff,

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NO. CIV. 1:10-456 WBS

v.
FARMERS ALLIANCE MUTUAL
INSURANCE COMPANY, a foreign
corporation,

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Defendant.
/

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----oo0oo----

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Plaintiff United Heritage Property and Casualty Company

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(“United Heritage”) brought this action against defendant Farmers

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Alliance Mutual Insurance Company (“FAMI”), arising out of FAMI’s

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refusal to accept United Heritage’s tender of an insurance-

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related suit.

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third parties to quash subpoenas and FAMI’s motion to compel

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production.

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///

Presently before the court are two motions by

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I.

Factual and Procedural Background
On April 10, 2003, the minor daughter of Connie and

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Fabricio Zarate fell into a stairwell and suffered injuries at an

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apartment leased to the Zarates by the owners, the Beddes family

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and their partnership (“Beddes defendants”).

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(Docket No. 1).)

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(Id. ¶ 12.)

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managed by Rentmaster under a Property Management Agreement with

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the Beddes defendants.

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(Compl. ¶¶ 8, 10

The Beddes defendants were insured by FAMI.

At the time of the accident, the apartment was

(Id. ¶ 9.)

The Zarates filed a claim with FAMI for damages against

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the Beddes defendants, who settled the claim for $300,000.00.

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(Id. ¶¶ 11-12.)

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FAMI released FAMI and the Beddes defendants but expressly

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reserved all claims the Zarates may have had against Rentmaster:

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This release is not intended to release any other
tortfeasor . . . and is specifically intended to exclude
and does hereby exclude Rentmaster of Rexburg, any of its
owners, or assigns as possible tortfeasor in this matter
of Releasors. Such claims are specifically reserved and
are not compromised or released by his [sic] document.

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The Release and Settlement Agreement drafted by

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(Id. ¶ 13 (emphasis omitted).)
On April 4, 2006, Connie Zarate filed a lawsuit against
(Id. ¶ 15.)

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Rentmaster for negligence (“Zarate litigation”).

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Rentmaster then filed a third-party complaint against the Beddes

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defendants.

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(Id. ¶ 16.)

Rentmaster, which had an insurance policy with United

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Heritage, tendered the defense and indemnity of the Zarate

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litigation to United Heritage, and United Heritage accepted.

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(Id. ¶¶ 20-21.)

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requests of FAMI for a copy of the Beddes defendants’ insurance

United Heritage alleges that it made numerous

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policy.

(Id. ¶¶ 17-19.)

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copy of the FAMI policy and discovered a provision stating that

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an “insured” includes “any organization while acting as your real

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estate manager.”

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United Heritage eventually received a

(Id. ¶ 22.)

This provision, United Heritage asserts, means that

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FAMI was the primary insurer not only for the Beddes defendants

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but also for Rentmaster.

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Heritage and Rentmaster attempted to tender the defense of the

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Zarate litigation to FAMI and demanded a refund of attorney’s

(Id. ¶ 19.)

Accordingly, United

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fees and costs incurred and payment of any indemnity required to

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be paid by United Heritage in order to protect Rentmaster, but

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FAMI declined.

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these motions that the Zarate litigation has settled for the

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policy limit of $500,000.00.

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(Id. ¶ 24.)

The parties stated at the hearing on

United Heritage then filed this lawsuit against FAMI,

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alleging claims for subrogation, breach of duty to defend, breach

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of duty to indemnify, bad faith, intentional infliction of

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emotional distress, fraud, unjust enrichment, and declaratory

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judgment.

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II.

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Discussion
A.

Breck Barton’s Motion to Quash
Breck Barton, attorney for the Zarates, moves to quash

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United Heritage’s subpoena to produce documents relating to

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Barton’s representation of the Zarates.

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has already produced some of the documents, but moves to quash

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the subpoena as to those documents he believes are privileged.

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See Fed. R. Civ. P. 45(c)(3)(A).

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the motion.

(Docket No. 20.)

Barton

United Heritage does not oppose

Accordingly, the court will grant Barton’s motion to
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quash.
B.

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Beddes Defendants’ Motion to Quash
Plaintiff’s attorney, who so zealously opposes

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discovery of his own client’s billing records on the ground that

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they are protected by the attorney-client and work product

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privileges, seeks with equal zeal to discover the entire file of

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the Beddes defendants’ attorney, Jeffrey Thomson, in the Zarate

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litigation.

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court.

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The incongruity has not escaped the notice of the

Presently before the court is the Beddes defendants

motion to quash that subpoena.

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It appears that some or all of the requested documents

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were the subject of a previous Order of the court, (see Mar. 23,

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2011, Order (Docket No. 39)), but because those documents were

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reviewed in camera by another judge, the court cannot be certain.

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Nor can this court discern which documents may have been found

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discoverable and which were not.

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court that the documents were different and that the motion to

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quash is not moot.

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appear at the hearing.

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motion on its merits.

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Mr. Thomson represented to the

Counsel for the Beddes defendants did not
Accordingly, the court must consider the

The Beddes defendants have made no showing regarding

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the documents they believe to be privileged, such as by providing

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a privilege log.

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under a claim that it is privileged . . . must . . . describe the

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nature of the withheld documents, communications, or tangible

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things in a manner that, without revealing information itself

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privileged or protected, will enable the parties to assess the

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claim.”

“A person withholding subpoenaed information

Fed. R. Civ. P. 45(d)(2)(A).
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Accordingly, the motion

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will be denied without prejudice.

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reassert the motion if, for example, they wish to specify the

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documents protected by privilege.

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C.

The Beddes defendants may

FAMI’s Motion to Compel

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FAMI moves to compel production of attorney invoices

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showing fees incurred by attorneys for United Heritage in the

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Zarate litigation.

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its Complaint to recover those fees from FAMI.

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previously produced by United Heritage do not reveal which

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attorney provided the service or what service was provided.

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(See Mot. to Compel Ex. C (Docket No. 40-2).)

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production of the redacted portions of those invoice could

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possibly prejudice plaintiff in any way.

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steadfastly takes the position that they are protected by the

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attorney-client and work product privileges.

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(Docket No. 40.)

United Heritage seeks in
Redacted invoices

It is unclear how

Nevertheless, plaintiff

Because this case arises under the court’s diversity

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jurisdiction, attorney-client privilege is governed by Idaho law.

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See Fed. R. Evid. 501.

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addressed an issue, the court “look[s] to other state-court

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decisions, well-reasoned decisions from other jurisdictions, and

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any other available authority to determine the applicable state

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law.”

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1991); see Truckstop.Net, L.L.C. v. Sprint Commc’ns Co., Nos. CV-

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04-561, CV-05-138, 2007 WL 2480001, at *5 (D. Idaho Aug. 29,

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2007) (“The Court finds no Idaho precedent as to [subject matter

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waiver].

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cases.

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making its determination as to the subject matter waiver

When the state supreme court has not

Burns v. Int’l Ins. Co., 929 F.2d 1422, 1424 (9th Cir.

The Ninth Circuit has addressed this issue in two

The Court adopts Ninth Circuit precedent as Idaho law in

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issue.”).
Idaho courts have not addressed whether communications

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regarding fees are protected by the attorney-client privilege.

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Under Ninth Circuit law, communications between attorney and

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client that concern “the identity of the client, the amount of

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the fee, the identification of payment by case file name, and the

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general purpose of the work performed are usually not protected

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from disclosure by the attorney-client privilege.”

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Commerce Nat’l Bank, 974 F.2d 127, 129 (9th Cir. 1992).

Clarke v. Am.
However,

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“correspondence, bills, ledgers, statements, and time records

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which also reveal the motive of the client in seeking

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representation, litigation strategy, or the specific nature of

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the services provided, such as researching particular areas of

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law, fall within the privilege.”

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Id.

United Heritage represents that the requested invoices

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fall within the privilege because they reveal the specific nature

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of the services provided.

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documents, and notes that what is missing from the documents is

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that which is most essential to a bill: a short description of

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the work performed.

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precisely the type of document that attorneys expect to turn

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over, and routinely do turn over without objection, whenever they

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expect to recover attorney’s fees.

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why United Heritage believes this case to be any different.

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However, the court need not decide whether the documents are in

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fact privileged under Clarke because, unlike the documents United

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Heritage’s counsel seeks to subpoena from the Beddes defendants,

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the privileges have clearly been waived with respect to the

The court has reviewed the redacted

Such a bill, without redactions, is

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The court does not understand

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information sought here.

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Under Idaho law, a privilege is waived when the holder

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of the privilege “voluntarily discloses or consents to disclosure

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of any significant part of the matter or communication.”

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R. Evid. 510.

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attorney-client privilege is a defensive shield and not an

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offensive sword.”

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see Bittaker v. Woodford, 331 F.3d 715, 719 (9th Cir. 2003).

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Under Idaho law, “as at common law, the ‘consent’ of the client

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to the disclosure of confidential communications may be either

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express or implied from the conduct of the client.

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‘consent’ of the client is found, the privilege is said to have

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been ‘waived.’”

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Idaho courts have not squarely addressed whether putting

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information at issue in a case amounts to a waiver.

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at 421 (“By testifying to privileged communications, and by

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making an issue of her defense the privileged matter of her

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relation with her former attorneys, appellant Louise Spencer

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waived the attorney-client privilege for all communications

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relevant to the settlement process and the conduct of her former

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attorneys.”).

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jurisdictions to determine whether United Heritage has waived the

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privilege.

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Idaho

Waiver is based on the principle that “the

Skelton v. Spencer, 98 Idaho 417, 420 (1977);

When the

Skelton, 98 Idaho at 419 (citations omitted).

But see id.

Accordingly, the court looks to other

The Ninth Circuit has held that “parties in litigation

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may not abuse the [attorney-client] privilege by asserting claims

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the opposing party cannot adequately dispute unless it has access

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to the privileged materials.”

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“[t]he party asserting the claim is said to have implicitly

Bittaker, 331 F.3d at 719.

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Thus,

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waived the privilege.”

Id.

Under both state and federal law, an

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implied waiver of the attorney-client privilege occurs when “(1)

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the party asserts the privilege as a result of some affirmative

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act, such as filing suit; (2) through this affirmative act, the

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asserting party puts the privileged information at issue; and (3)

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allowing the privilege would deny the opposing party access to

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information vital to its defense.”

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Powell Moss & Miller, 43 F.3d 1322, 1326 (9th Cir. 1995) (citing

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Hearn v. Rhay, 68 F.R.D. 574, 581 (E.D. Wash. 1975));

Home Indem. Co. v. Lane

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see Terrebonne, Ltd. of Cal. v. Murray, 1 F. Supp. 2d 1050, 1059

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(E.D. Cal. 1998) (Wanger, J.) (“Under California law, the

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attorney-client privilege is waived when the client . . . places

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‘in issue’ the contents of the communication with its

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attorney.”).

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The Hearn factors are met here.

United Heritage

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asserts the privilege after having filed suit against FAMI, which

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put the attorney’s fees, in the form of damages, at issue.

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needs access to the billing records to be able to defend itself

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against double billing, inaccurate calculations, wrongly

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allocated hours, unreasonable rates, or any other

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inconsistencies.

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waived its attorney-client privilege relating to the records.

FAMI

Accordingly, United Heritage has implicitly

The work-product doctrine’s protections are also

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waivable.

United States v. Richey, 632 F.3d 559, 567 (9th Cir.

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2011); see Truckstop.Net, 2007 WL 2480001, at *5 (the work-

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product doctrine is governed by federal law).

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“applies equally to the work product privilege, a complementary

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rule that protects many of the same interests [as the attorney8

The Bittaker rule

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client privilege].”

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the court will grant FAMI’s motion to compel production.

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Bittaker, 331 F.3d at 722 n.6.

Accordingly,

IT IS THEREFORE ORDERED that:
(1) Breck Barton’s motion to quash subpoena be, and the same
hereby is, GRANTED;
(2) The Beddes defendants’ motion to quash subpoena be, and
the same hereby is, DENIED without prejudice; and
(3) FAMI’s motion to compel be, and the same hereby is,
GRANTED.
DATED:

July 26, 2011

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