Progressive Casualty Insurance Company v. Federal Deposit Insurance Corporation et al
Filing
102
ORDER granting in part and denying in part 72 Motion to Compel and granting in part and denying in part 77 Motion to Compel. See text of Order for details. All documents that Progressive and/or Everest are directed to produce in accordance with this order shall be produced no later than 9/12/14. Signed by Magistrate Judge Leonard T Strand on 8/22/14. (djs)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
WESTERN DIVISION
PROGRESSIVE CASUALTY
INSURANCE COMPANY,
Plaintiff,
No. C12-4041-MWB
vs.
ORDER
FEDERAL DEPOSIT INSURANCE
CORPORATION, as Receiver of Vantus
Bank, et al.,
Defendants.
____________________
INTRODUCTION
This case is before me on two motions filed by defendant Federal Deposit
Insurance Corporation, as Receiver of Vantus Bank (FDIC-R): (1) a motion (Doc. No.
72) to compel plaintiff Progressive Casualty Insurance Company (Progressive) to comply
with the court's March 10, 2014, order and (2) a motion (Doc. No. 77) to compel Everest
Reinsurance Company (Everest) to comply with subpoena. Both motions are resisted. I
conducted a telephonic hearing on August 19, 2014. All parties were represented by
counsel, as was Everest. The motions are fully submitted.
Because time is of the essence (discovery is scheduled to close on August 29,
2014), this order will depart from my usual format in that it will contain no background
discussion and an abbreviated written analysis. The parties need prompt answers, not a
lengthy ruling. Nonetheless, I have carefully considered the parties’ respective briefs
and supporting exhibits.
DISCUSSION OF SPECIFIC ISSUES
I.
Scope of the March 10, 2014, Order
The parties disagree as to the scope of my order (Doc. No. 59) filed March 10,
2014, which compelled Progressive to produce certain information. The dispute is
centered on the “Reinsurance Information” portion of the order. The operative language
is:
Progressive will be ordered to supplement its response to document request
numbers 12 and 23 to produce the following documents: (1) its
communications with its reinsurers regarding the Disputed Provisions, (2)
its communications with its reinsurers regarding the FDIC-R’s claims
against the Bank’s former officers and directors, (3) its communications
with its reinsurers regarding coverage under its standard policy form for
claims by the FDIC acting as receiver, and (4) any reinsurance policies that
are implicated by FDIC-R’s lawsuit against the Bank’s officers and
directors. If Progressive contends that any of the documents addressed by
this order are protected by a privilege, it may withhold those documents
and describe them in a privilege log.
Doc. No. 59 at 14.
FDIC-R contends that this obligated Progressive to produce
communications with reinsurers regarding any and all policies that used the same standard
form as the policy issued to Vantus. Progressive disagrees and claims that it was required
only to produce communications with reinsurers relating to (a) the Vantus Policy itself
and (b) to the claims asserted by FDIC-R against Vantus’s former directors and officers.
Progressive is correct. The order specifically required Progressive to “supplement
its response to document request numbers 12 and 23.” Id. The scope of the order did
not exceed the scope of those requests. In other words, I did not order Progressive to
produce even more that what FDIC-R requested.
Request 12 sought “[a]ll documents relating to the purchase, placement or ceding
of any reinsurance by you that relate to the Policy, including all status reports provided
by you to such reinsurance companies and memoranda relating to meetings with
reinsurers.” Doc. No. 43-1 at 7. Request 23 sought “[a]ll documents relating to any
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communications with any reinsurer about the Claims.” Id. FDIC-R defined “Policy” as
“the Progressive Directors & Officers/Company Liability Insurance Policy for Financial
Institutions, Policy No. 10032780-01, attached as Exhibit 1 to the Complaint, together
with all endorsements and including the discovery period referenced in paragraph 19 of
the Complaint.” Doc. No. 72-4 at 2. Similarly, FDIC-R defined “Claims” as “any and
all demands for insurance coverage and/or payment made by the FDIC and/or any
officers or directors of Vantus Bank.” Id. at 4. Thus, request number 12 was expressly
limited to the Policy at issue in this case, while request number 23 was expressly limited
to the claims made against Vantus’s directors and officers.
In granting FDIC-R’s motion to compel concerning those two requests, I did not
dramatically expand their respective scopes, as FDIC-R seems to think. I simply directed
Progressive to produce certain types of documents, to the extent they were otherwise
responsive to the requests. FDIC-R is stuck with the scope and language of the requests
it drafted. So long as Progressive produced the requested reinsurance documents with
regard to the Vantus Policy, and with regard to the claims against Vantus’s former
officers and directors, it has complied with my order. This does not mean that all other
reinsurance information is automatically beyond the scope of permissible discovery. It
simply means that they are beyond the scope of FDIC-R’s request numbers 12 and 23.
2.
Attorney Client Privilege and the Work Product Doctrine
a.
Overview and Applicable Standards
Progressive has redacted portions of certain reinsurance communications on
grounds of attorney-client privilege and/or the work product doctrine. FDIC-R argues
the reinsurance information communicated to Progressive’s reinsurers was created in the
ordinary course of business and therefore, is not covered by the work product doctrine.
FDIC-R also contends Progressive waived any privilege, work product or attorney-client,
it may have for the reinsurance information when it voluntarily disclosed documents
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containing that information to reinsurers and its reinsurance broker, Guy Carpenter.
FDIC-R argues that the common interest doctrine cannot apply to communications with
reinsurers or reinsurance brokers because the nature of the relationship and interest is
purely commercial. According to FDIC-R, if the common interest doctrine does not
apply, then any communications by Progressive with its reinsurers or brokers that
included privileged information was a voluntary waiver of protection, thus entitling
FDIC-R to discover those communications.
Progressive contends that the work product and attorney-client privileges cover
legal advice and analysis contained in its reinsurance materials and that its voluntary
disclosure of those materials to the reinsurance broker and reinsurers does not constitute
a waiver. Progressive argues that it is entitled to redact that legal advice and analysis
because the common interest doctrine applies in this situation, as the reinsurance
companies and Progressive’s interests are aligned and they are not adversaries.
In this diversity case, the court must “apply federal law to resolve work product
claims and state law to resolve attorney-client privilege claims.” Progressive Cas. Ins.
Co. v. F.D.I.C., 298 F.R.D. 417, 426 n.2 (N.D. Iowa 2014) (citing St. Paul Reins. Co.
v. Commercial Fin. Corp., 197 F.R.D. 620, 636 (N.D. Iowa 2000), in turn quoting
Baker v. General Motors Corp., 209 F.3d 1051, 1053 (8th Cir. 2000)). The work
product doctrine, as recognized under federal law, protects materials prepared by an
attorney in anticipation of litigation from discovery. Hickman v. Taylor, 329 U.S. 495,
511 (1947). “There are two kinds of work product - ordinary work product and opinion
work product.” Baker, 209 F.3d at 1054 (citing Gundacker v. Unisys Corp., 151 F.3d
842, 848 n.4 (8th Cir. 1998)). Ordinary work product includes raw factual information
and is not discoverable unless the party seeking discovery has a substantial need for those
materials and cannot obtain the materials by other means. Id. Opinion work product
consists of counsel’s mental impressions, conclusions, opinions or legal theories and
enjoy almost absolute immunity, making them discoverable in only very rare and
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extraordinary circumstances. Id.; see also In re Murphy, 560 F.2d 326, 336 (8th Cir.
1977).
The work product doctrine will protect documents from discovery only when they
are prepared in the anticipation of litigation. Simon v. G.D. Searle & Co., 816 F.2d 397,
401 (8th Cir. 1987). The test is, in light of the particular circumstances of the case,
whether the documents can fairly be said to have been prepared or obtained because of
the prospect of litigation. Id. There is no protection for documents prepared in the
regular course of business. Id. The party asserting the work product privilege bears the
burden of providing a factual basis for establishing the applicability of the privilege. St.
Paul Reinsurance Co., Ltd. v. Commercial Fin. Corp., 197 F.R.D. 620, 628 (N.D. Iowa
2000). If the asserting party meets its burden, the burden shifts to the opposing party to
prove “substantial need” and “undue hardship” in order to obtain the materials. Id.
The attorney-client privilege is a separate source of protection from the work
product doctrine. Baker, 209 F.3d at 1055. Under Iowa law, the privilege is created by
statute:
A practicing attorney . . . shall not be allowed, in giving testimony, to
disclose any confidential communication properly entrusted to the person
in the person's professional capacity, and necessary and proper to enable
the person to discharge the functions of the person's office according to the
usual course of practice or discipline.
Iowa Code § 622.10(1). “Any confidential communication between an attorney and the
attorney's client is absolutely privileged from disclosure against the will of the client.”
Keefe v. Bernard, 774 N.W.2d 663, 669 (Iowa 2009) (quoting Shook v. City of
Davenport, 497 N.W.2d 883, 885 (Iowa 1993), overruled on other grounds by Wells
Dairy, Inc. v. Am. Indus. Refrigeration, Inc., 690 N.W.2d 38, 43 (Iowa 2004)).
However, the Iowa Supreme Court has cautioned that “[b]ecause it impedes the full and
free discovery of the truth, the attorney-client privilege is strictly construed.” Miller v.
Cont'l Ins. Co., 392 N.W.2d 500, 504 (Iowa 1986) (citing Chidester v. Needles, 353
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N.W.2d 849, 852 (Iowa 1984)).
Thus, “voluntary disclosure of the content of a
privileged communication constitutes waiver as to all other communications on the same
subject.” Id. at 504-05.
Some courts have applied the common interest doctrine as an exception to the
general rule that voluntary disclosure of privileged material to a third party waives any
applicable privilege. See, e.g., Fireman’s Fund Ins. Co. v. Great Am. Ins. Co. of N.Y.,
284 F.R.D. 132, 139 (S.D.N.Y. 2012). “At its core, the common interest doctrine
applies when multiple persons are represented by the same attorney. Communications
made to the shared attorney to establish a defense strategy remain privileged.” North
River Insurance Co. v. Columbia Casualty Co., 1995 WL 5792, *2 (S.D.N.Y 1995).
The doctrine applies where parties are represented by separate counsel that engage in a
common legal enterprise. Id. at *3. “The key consideration is that the nature of the
interest be identical, not similar, and a legal interest, not solely commercial.”
Id.
Additionally, the parties must establish that any exchange of privileged information was
made in the course of formulating that common legal interest and strategy. Fireman’s
Fund, 284 F.R.D. at 140. Neither the Iowa Supreme Court nor the Eighth Circuit Court
of Appeals appears to have adopted the common interest doctrine.1
1
The Iowa Supreme Court does recognize the “joint-client exception.” Brandon v. West Bend
Mut. Ins. Co., 681 N.W.2d 633, 644 (Iowa 2004). This exception applies when two or more
persons jointly consult the same attorney to act for them in a matter of common interest. Id.
The exception is based largely on the concept that joint clients have no intention or expectation
to keep their communications confidential as between themselves. Id. The rational for this
exception is “simply that if it appears the secret or imparted communication is such that the
attorney is under a duty to divulge it for the protection of the others he has undertaken to
represent in the involved transaction, the communication is not privileged.” Henke v. Iowa
Home Mut. Cas. Co., 87 N.W.2d 920, 924 (Iowa 1958). This exception does not apply to
Progressive and its reinsurers as they did not jointly consult one attorney to represent them or
act on their behalf.
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b.
Analysis
Work Product Doctrine.
FDIC-R argues the reinsurance information is not
protected by the work product doctrine because the information was created in the
ordinary course of Progressive’s business. I agree. The documents were prepared and
distributed to the reinsurance companies and broker for business purposes. Progressive
itself admits that the documents were provided for case updates pursuant to the
reinsurance agreements, or in response to specific requests, and included the matter’s
history, its present posture, current activity, assessments of coverage and liability issues,
amounts paid and reserve, and plans for future handling. Doc No. 75 at 10. Those are
all typical business purposes for the reinsurance industry. Progressive has not met its
burden of showing that these documents were “prepared or obtained because of the
prospect of litigation.” Simon, 816 F.2d at 401. Therefore, they are not subject to
protection under the under the work product doctrine.
Attorney-Client Privilege. FDIC-R argues that even if Progressive’s reinsurance
documents contain attorney-client communications, any privilege was waived when
Progressive voluntarily disclosed the documents to the reinsurers and broker. Again, I
agree. Progressive waived any applicable attorney-client privilege when it distributed
the communications to its reinsurers and broker.
While Progressive admits that it voluntarily disclosed privileged communications
to third parties, it relies on the common interest doctrine to argue that the attorney-client
privilege was nonetheless preserved.
Even assuming Iowa recognizes the common
interest doctrine, I find that Progressive has failed to establish that it applies here. As
noted above, the doctrine applies only when the parties share a common legal interest.
The relationship between Progressive and its reinsurers and broker is commercial and
financial in nature, not legal. The information Progressive disclosed was in furtherance
of its business relationship with the reinsurers and broker. The sole purpose of disclosure
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was to obtain or maintain reinsurance policies to cover Progressive’s insurance risks.
That is, of course, the commercial nature of the reinsurance industry.
Progressive has not shown that the privileged information contained in the
documents at issue was disclosed in order to build a legal defense or strategy for litigation.
While Progressive contends that the reinsurers’ interests are aligned with its own because
the reinsurers and Progressive would face liability for loss if Progressive is ultimately
ordered to pay proceeds under the Vantus Policy, that fact is the basis of the reinsurance
industry and, indeed, the sole purpose of reinsurance. The unique circumstances of the
reinsurance business do not automatically give rise to a common legal interest.
In this case, Progressive has not shown that its reinsurers are actively participating
in Progressive’s litigation and legal defense, or that they have any obligation to do so.
There is no evidence establishing a joint strategy or legal enterprise, which is central to
the common interest doctrine.
The argument that “if Progressive loses, so do its
reinsurers” does not come close to establishing that the common interest doctrine applies
(assuming, again, that Iowa law even recognizes that doctrine).
Any disclosure by Progressive of attorney-client privileged communications to its
reinsurers and/or broker operated as a waiver of the privilege under Iowa law.
Progressive cannot now claim privilege over those communications.
3.
The ESI Order
On June 19, 2013, I approved and entered the parties’ joint proposed order (Doc.
No. 36) concerning the production of electronically stored information (the ESI Order).
With regard to Progressive, the ESI Order includes the following provision:
Progressive contends that Backup Documents2 are not readily available and
that the production of Backup Documents by Progressive would be unduly
burdensome and would require the expenditure of significant time and
resources. For that reason, Progressive does not intend to produce Backup
2
“Backup Documents” are defined as “ESI stored on backup tapes.” Doc. No. 36 at ¶ 10.
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Documents. In the event that FDIC-R or the Ds & Os believe that
Progressive should produce such documents, they may file a motion with
the Court seeking an order compelling such production. Nothing contained
herein shall be deemed to constitute a waiver of their right to do so or a
waiver of Progressive’s right to contest any such motion.
Doc. No. 36 at ¶ 17. FDIC-R now complains that Progressive’s production is missing
certain, requested ESI, noting that Progressive has produced only about 10 email
messages that pre-date 2010.
Progressive states that any email messages sent prior to April 2010 are likely
stored on backup tapes and thus fall within the ESI Order’s description of “Backup
Documents.” According to Progressive, this means it is not required to retrieve and
produce those messages unless FDIC-R seeks, and obtains, the court order described in
Paragraph 17 of the ESI Order. FDIC-R submits that its pending motion (Doc. No. 72)
to compel can be treated as such a motion. During the hearing, FDIC-R’s counsel
presented a list of seven Progressive employees and asked that Progressive be compelled
to search its backup tapes to retrieve and produce responsive email messages to or from
those employees.
FDIC-R’s counsel acknowledged that Progressive had not been
presented with that specific request at any time prior to the hearing.
Under these circumstances, I agree with Progressive. To the extent that responsive
email messages (or other ESI) are stored exclusively on backup tapes, Progressive was
not required to retrieve that information absent a court order pursuant to Paragraph 17 of
the stipulated ESI Order. Progressive advised FDIC-R on June 17, 2014, of the fact that
it did not intend to search backup tapes to locate additional ESI. Doc. No. 75 at 5.
Progressive did not file a motion pursuant to Paragraph 17 of the ESI order. Instead, it
filed its pending motion to compel compliance with a different order (the March 10,
2014, order). It then waited nearly two months, until the hearing on its motion was in
progress, to request that Progressive be ordered to search its backup tapes concerning
seven specific employees.
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FDIC-R could have, but did not, follow the procedure set forth in the ESI Order.
That would have required, at the outset, efforts to resolve the issue informally. See, e.g.,
Local Rule 37(a). Those efforts naturally would have included discussions concerning
the specific individuals about whom the backup tapes should be searched. Neither FDICR’s present motion, nor its itemization of specific individuals during the hearing on that
motion, complies with Paragraph 17 of the ESI order. FDIC-R is not entitled to an order
that would require Progressive to retrieve ESI from its backup tapes.
4.
Other Alleged Deficiencies
FDIC-R complains of other alleged deficiencies in Progressive’s production, such
as (a) the lack of documents generated during the placement of reinsurance and (b)
documents setting forth the reinsurers’ coverage positions. My discussion of the scope
of the March 10, 2014, order, supra, presumably resolves this issue to a large extent.
Moreover, Progressive has expressly represented that it has no additional responsive
documents in its possession or control concerning these topics. Doc. No. 75 at 7-9. If
that representation is incorrect, Progressive has a duty to supplement its production. Fed.
R. Civ. P. 26(e)(1). However, FDIC-R has not shown that Progressive is withholding
responsive, discoverable materials concerning requests 12 or 23. As such, FDIC-R is
not entitled to an order compelling discovery.
5.
The Subpoena to Everest
Everest complains about both the relevance of the information sought by FDIC-
R’s subpoena and the alleged burden that compliance would impose. It also invokes the
same arguments, discussed and rejected above, that Progressive has raised as to the
preservation of attorney-client privilege and work product protection when documents
are shared between an insurer and reinsurer.
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Everest’s arguments as to relevance are not well-founded.
Everest adopts
Progressive’s arguments concerning the scope of the March 10, 2014, order. That order
has nothing to do with Everest. Instead, as discussed above, the order simply compelled
Progressive to respond to FDIC-R’s document requests 12 and 23. The fact that those
requests were of a limited scope does not somehow control the scope of all other
discovery. While FDIC-R is not entitled to demand responses to those requests that
exceed the scope of their express terms, FDIC-R is free to make other requests that go
beyond that scope.
Nor does the fact that Everest was not a reinsurer of the Vantus Policy
automatically place Everest off-limits for discovery in this case. Generally, a party may
obtain discovery regarding any nonprivileged matter that is relevant to any claim or
defense. See Fed. R. Civ. P. 26(b)(1). The scope of permissible discovery is broader
than the scope of admissibility. See, e.g., Hofer v. Mack Trucks, Inc., 981 F.2d 377,
380 (8th Cir. 1992). FDIC-R has offered a plausible explanation as to how Progressive’s
communications with reinsurers concerning its standard form policy might be relevant to
the interpretation and construction of the policy provisions at issue in this case. Because
it is undisputed that Everest has reinsured Progressive with regard to other policies using
the same form, it is not obvious that Everest cannot possibly possess relevant information.
As for Everest’s complaints about the effort and expense that would be required
in order to respond to the subpoena, the Federal Rules of Civil Procedure protect
nonparties from being subjected to “undue burden or expense” in responding to a
subpoena.
See Federal Rule of Civil Procedure 45(d).
Indeed, federal courts are
particularly mindful of Rule 45's undue burden and expense limitations. Miscellaneous
Docket Matter No. 1 v. Miscellaneous Docket Matter No. 2, 197 F.3d 922, 927 (8th Cir.
1999); accord American Broadcasting Co. v. Aereo, Inc., No. 13-MC-0059, 2013 WL
5276124, at *7 (N.D. Iowa Sept. 17, 2013); Precourt v. Fairbank Reconstruction Corp.,
280 F.R.D. 462, 467 (D.S.D. 2011). Here, while the original scope of the subpoena
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was quite broad, I find that FDIC-R later took reasonable steps to narrow that scope and
eliminate any undue burden. Everest, by contrast, repeatedly took the position that it
would conduct no search, and would produce no documents, in response to the subpoena.
This was a mistake. Everest has had the subpoena for six months. During that time, it
could have taken steps to retrieve and produce at least some of the requested information.
Instead, it simply rejected each attempt by FDIC-R to negotiate a resolution. Now,
Everest will have to comply on an expedited basis.
I find that FDIC-R is entitled to obtain the documents described in the subpoena,
as narrowed by FDIC-R in communications between counsel. See Doc. No. 77-5 at 2-4
(Exhibit C to FDIC-R’s motion). While this will no doubt impose some burden on
Everest, I find Everest has failed to demonstrate that the burden will be undue under the
circumstances.3
CONCLUSION
For the reasons set forth herein:
1.
FDIC-R’s motion (Doc. No. 72) to compel Progressive to comply with the
Court's March 10, 2014, order is granted in part and denied in part. It is granted in
that Progressive has failed to show that it is entitled to redact any information shared with
its broker or reinsurers on the basis of work product and/or attorney-client privilege. As
such, Progressive is hereby ordered to produce unredacted versions of materials that are
responsive to FDIC-R’s document request numbers 12 and 23. The motion is denied in
all other respects.
3
During the hearing, FDIC-R’s counsel did not address the subpoena’s request for testimony
pursuant to Federal Rule of Civil Procedure 30(b)(6). Due to the upcoming deadlines in this
case, and the fact that FDIC-R waited until July 18, 2014, to file its motion concerning Everest,
I find that it is not appropriate to require that Everest produce witnesses to appear pursuant to
Rule 30(b)(6).
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2.
FDIC-R’s motion (Doc. No. 77) to compel Everest to comply with
subpoena is granted in part and denied in part. It is granted in that Everest is hereby
compelled to produce documents pursuant to the subpoena, but the subpoena is hereby
modified to reflect the limitations to which FDIC-R has already agreed (Doc. No. 77-5
at 2-4). The motion is denied in all other respects.
3.
All documents that Progressive and/or Everest are directed to produce in
accordance with this order shall be produced no later than September 12, 2014.4
IT IS SO ORDERED.
DATED this 22nd day of August, 2014.
________________________________
LEONARD T. STRAND
UNITED STATES MAGISTRATE JUDGE
4
I recognize that this date is not only beyond the discovery deadline, but also the dispositive
motions deadline. I find, however, that an earlier compliance deadline is not likely to be feasible.
Any party filing a dispositive motion on or before the September 5, 2014, deadline for such
motions may file a motion to supplement its supporting appendix to include documents
subsequently produced in response to this order. Of course, any such motion should be filed as
soon as practicable upon receipt of those documents.
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