LIBERTY INTERNATIONAL UNDERWRITERS CANADA v. SCOTTSDALE INSURANCE COMPANY et al

Filing 237

AMENDED MEMORANDUM OPINION & ORDER, Re: 226 Order on Motion for Leave to Appeal. Signed by Judge Noel L. Hillman on 10/6/17. (js)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

LIBERTY INTERNATIONAL
UNDERWRITERS CANADA,
Plaintiff,
v.

Civil No. 12-4934 (NLH/JS)

AMENDED MEMORANDUM
OPINION & ORDER

SCOTTSDALE INSURANCE COMPANY
and INFINITY ACCESS LLC,
Defendants.

APPEARANCES:
STEPHEN ALLEN LONEY, JR.
HOGAN LOVELLS US LLP
1835 MARKET STREET, 29th FLOOR
PHILADELPHIA, PA 19103
MARK C. GOODMAN (pro hac vice)
HOGAN LOVELLS US LLP
3 EMBARCADERO CENTER, 15TH FLOOR
SAN FRANCISCO, CA 94111
On behalf of plaintiff Liberty International
Underwriters Canada
GARY S. KULL
APRIL T. VILLAVERDE
CARROLL, McNULTY & KULL LLC
120 MOUNTAIN VIEW BLVD.
P.O. BOX 650
BASKING RIDGE, NJ 07920
LISA MARTIN LAMPKIN (pro hac vice)
SELMAN BREITMAN LLP
11766 WILSHIRE BOULEVARD, 6TH FL.
LOS ANGELES, CA 90025
On behalf of defendants Scottsdale Insurance
Company and Infinity Access LLC

HILLMAN, District Judge
WHEREAS, pending before the Court is the motion of
Defendants, Scottsdale Insurance Company and Infinity Access
LLC, seeking leave to appeal the Magistrate Judge’s resolution
of a discovery dispute involving Defendants’ request for
documents that Plaintiff, Liberty International Underwriters
Canada (“Liberty”), claims are protected by the attorney-client
privilege and work-product doctrine 1; and
WHEREAS, the dispute over these documents has been before
this Court twice before:
First, on the cross-motions by Liberty and Defendants
Scottsdale Insurance Company and Infinity Access LLC appealing
the Magistrate Judge’s decision that some of Liberty’s
privileged documents should be produced to Defendants, where in
a summary Order this Court determined that the Magistrate
Judge’s decision was not “clearly erroneous or contrary to law”
(Docket No. 128); and
Second, on Liberty’s motion asking the Court to reconsider
its denial of the parties’ cross-motions, where the Court held

1

This action concerns claims by Liberty against Defendants,
Scottsdale Insurance Company and Infinity Access LLC, to recover
$1 million plus attorneys’ fees that Liberty paid in November
2011 to settle a lawsuit where it was alleged that Infinity, a
subcontractor to Liberty’s insured Tractel, LTD., started a fire
at the Borgata Hotel, Casino and Spa in Atlantic City, New
Jersey. Defendants contend, among other defenses, that
Liberty’s lawsuit is barred by the terms of the settlement
agreement Tractel entered into with Borgata.
2

oral argument and subsequently determined that the issue
warranted remand, explaining that even though the Court remained
unconvinced that the decision by the Magistrate Judge was
“clearly erroneous or contrary to law,” there was sufficient
ambiguity regarding the application of In re Kozlov, 398 A.2d
882, 887 (N.J. 1979), and its progeny, to warrant remand in
order to allow the Magistrate Judge to more fully explain his
findings and the application of the Koslov test, as modified by
subsequent decisions, to the unique facts of the case, and so
that he may more explicitly articulate whether the predicate
circumstances necessary to pierce the attorney-client privilege
exist in this matter (Docket No. 137); and
WHEREAS, the Magistrate Judge followed this Court’s
direction, having determined that Kozlov did not require that
Liberty’s privilege be pierced because it did not explicitly or
implicitly waive its privilege and because Liberty did not place
advice of counsel “at issue,” and the Magistrate Judge reversed
his prior order directing that the privileged documents be
produced to Defendants (Docket No. 142); and
WHEREAS, Defendants filed a motion before the Magistrate
Judge seeking reconsideration of his decision deeming Liberty’s
documents as privileged, and on January 25, 2017, the Magistrate
Judge denied Defendants’ motion, reiterating that Liberty did
not affirmatively place the settlement agreement “at issue” but
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was merely seeking to defend Defendants’ affirmative defense,
which is that the settlement agreement is valid and bars
Liberty’s claims against them (Docket No. 159); and
WHEREAS, Defendants have brought the issue before this
Court for a third time in their instant motion for leave to
appeal the Magistrate Judge’s January 25, 2017 decision; and
WHEREAS, Defendants argue that the Magistrate Judge erred
when he determined that Liberty did not place the settlement
agreement “at issue,” and that Liberty did not rely upon
communications with counsel; and
WHEREAS, in their motion, Defendants disagree with the
Magistrate Judge’s reversal of his decision that had originally
directed Liberty to produce some of its privileged documents;
and
WHEREAS, the Magistrate Judge having recognized Defendants’
disappointment of his changed decision:
The Court is not oblivious to defendants’ frustration.
In fact, as early as December 10, 2014, the Court wrote
that fairness dictates that some of plaintiff’s privileged
documents be produced and defendants have a substantial
need for the documents. However, based on recent cases
interpreting Kozlov, fairness and need is not enough to
justify the production of privileged information.
Essentially the same ruling applies to the “at issue”
waiver doctrine because the Third Circuit has held that
even if facts are “vital, highly probative, and directly
relevant or go to the heart of an issue,” this does not
justify a privilege waiver. Instead, only if plaintiff
affirmatively interjects privileged communications into the
case does an implied waiver occur. This has not occurred
here for two main reasons. One, defendants and not
plaintiff raised the assignment issue as an affirmative
4

defense. Two, plaintiff has affirmatively represented it
will not rely on privileged communications. Further, the
Court agrees with plaintiff that “[p]roducing witnesses to
testify – in response to Infinity’s arguments – that
Plaintiff did not authorize assignment of its rights is
simply not the same as affirmatively relying on privileged
communications that might ‘memorialize’ the underlying
facts.” Thus, [Liberty’s corporate representative’s]
minimal deposition testimony that defendants rely upon does
not waive plaintiff’s privilege. Further, to repeat,
plaintiff has affirmatively stated in its brief and at oral
argument that it will not rely on privileged communications
to defend defendants’ assignment defense. This further
buttresses the holding that plaintiff is not placing its
privileged communications at issue.
(Docket No. 159 at 13-14 (internal citations omitted).) 2; and
2

The Magistrate Judge also noted:
The Court expects that substantial trial evidence disputes
will occur when plaintiff supports its defense at trial by
stating it did not authorize Tractel’s assignment.
However, those issues are not presently before the Court.
The Court accepts plaintiff’s representation that it will
not rely on privileged communications and bases its
decision in large part on plaintiff’s admission. Plaintiff
will have to live with the consequences of its strategic
position. On the one hand plaintiff cannot represent it
will not rely on privileged communications for discovery
purposes, but then rely on the same communications at
trial. Plaintiff also cannot refuse to reveal privileged
communications on direct examination but reveal them on
cross-examination. At trial, plaintiff will have to accept
whatever consequences flow from its steadfast resistance to
producing discovery regarding the communications between
and amongst its counsel regarding the assignment.
Plaintiff cannot pick and choose which privileged
communications it will reveal.

(Docket No. 159 at 16.)
Summary judgment motions filed by Liberty and Scottsdale
are currently being briefed. (See Docket No. 214, 219.) Should
the concerns expressed by the Magistrate Judge arise during the
resolution of the parties’ summary judgment motions or potential
trial, the Court may revisit the privileged documents issue if
5

WHEREAS, the Court notes, as before, that a district court
judge will only reverse a magistrate judge’s opinion on pretrial
matters if it is “clearly erroneous or contrary to law,” 28
U.S.C. § 636(b)(1)(A); Fed. R. Civ. P. 72(a); L. Civ. R.
72.1(c)(1)(A); and
WHEREAS, this Court has reviewed the Magistrate Judge’s two
decisions issued after this Court remanded the matter to him for
further consideration; and
WHEREAS, the Court finds that the Magistrate Judge’s
decision was not “clearly erroneous or contrary to law” because
in the context the Magistrate Judge issued his January 25, 2017
decision – during the discovery process – he applied the correct
legal standard to the unique facts of this case in accord with
In re Kozlov, 398 A.2d 882, 887 (N.J. 1979);
Accordingly,
IT IS on this

6th

day of

October

, 2017

ORDERED that the MOTION for Leave to Appeal by INFINITY
ACCESS LLC, SCOTTSDALE INSURANCE COMPANY [171] be, and the same
hereby is, DENIED.

s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.

At Camden, New Jersey

necessary. For now, the parties shall proceed in accord with
the Magistrate Judge’s most recent decision on the issue.
6