United Specialty Insurance Company v. LIC Contracting, Inc. et al
Filing
128
ORDER granting in part and denying in part 123 , 124 United Specialty's Motion to Seal and granting in part and denying in part 125 , 126 the LIC Defendants' Motion to Seal. See attached document. Ordered by Magistrate Judge Vera M. Scanlon on 1/6/2022. (Scully, Nicole)
Case 1:17-cv-05736-EK-VMS Document 128 Filed 01/06/22 Page 1 of 12 PageID #: 5469
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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UNITED SPECIALTY INSURANCE
:
COMPANY,
:
:
Plaintiff,
:
:
-against:
:
LIC CONTRACTING, INC., SEUNGHO KIM, :
JEEWHA KIM, 211-12 NORTHERN
:
BOULEVARD CORP., and SAI GROCERY,
:
INC.,
:
: :
Defendants.
:
---------------------------------------------------------- x
ORDER
17 Civ. 5736 (EK) (VMS)
Vera M. Scanlon, United States Magistrate Judge:
Before the Court are Plaintiff United Specialty Insurance Company’s (“Plaintiff” or
“United Specialty”) and Defendants LIC Contracting, Inc., Seungho Kim and Jeewha Kim’s
(collectively, the “LIC Defendants”) motions to seal certain documents to be filed with the
briefing related to the LIC Defendants’ proposed motion for summary judgment. See ECF Nos.
123, 124, 125, 126. Defendants 211-12 Northern Boulevard Corp. and SAI Grocery, Inc.
(collectively, the “211 Defendants”) oppose the motions to seal. ECF No. 127. For the
following reasons, United Specialty’s motion to seal and the LIC Defendants’ motion to seal are
granted in part and denied in part.
I.
Background
Plaintiff’s action is for declaratory judgment pursuant to 28 U.S.C. § 2201 against the
LIC Defendants in connection with the LIC Defendants’ insurance coverage claims under a
Plaintiff-issued policy relating to an incident that gave rise to state court litigation (the
“Underlying Action”). See ECF No. 1 at 1-2. The LIC Defendants demanded that their
nonparty primary insurance carrier defend and indemnify them in the Underlying Action. See id.
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at 2. In the Underlying Action, summary judgment was entered against the LIC Defendants in
connection with an excavation project they conducted that allegedly caused damage to a building
adjacent to the excavation site. See id. Plaintiff alleges that it is entitled to a declaration that it
has no obligation to defend or indemnify the LIC Defendants with respect to the Underlying
Action under the terms of the Plaintiff-issued policy which provide for Plaintiff to defend and
indemnify the LIC Defendants when the applicable limits of controlling underlying insurance
have been exhausted. See id. at 2-3. Plaintiff’s policy includes an exclusion related to injury or
damage caused by subsidence, which Plaintiff alleges excludes coverage for the excavation
damage in the Underlying Action. See id. at 6-8.
Discovery was certified as complete based on the representation of the parties in ECF No.
113. See Order dated 3/9/2021. United Specialty and the LIC Defendants subsequently
submitted motions for pre-motion conferences for proposed summary judgment motion practice.
See ECF Nos. 115, 116. The LIC Defendants’ proposed motion practice includes equitable
arguments of waiver and estoppel against Plaintiff’s disclaimer of coverage, on the theory that
Plaintiff allegedly “sabotaged” any chance of a reasonable settlement during mediation in the
Underlying Action. See ECF No. 116 at 2. Plaintiff intends to oppose these equitable
arguments, claiming they are “devoid of merit.” See ECF No. 117 at 2. The requests for a premotion conference were granted, and a pre-motion conference was held. See Dkt. Entry
6/17/2021; ECF No. 121.
In connection with the LIC Defendants’ proposed motion for summary judgment and
Plaintiff’s proposed opposition, the parties seek to file under seal (1) documents in Plaintiff’s
claims file generated before January 4, 2018; and (2) those portions of the deposition transcripts
of Plaintiff’s agents Keri Yaeger and Virginia Balogh pertaining to Plaintiff’s claims-handling
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activities with the Underlying Action prior to January 4, 2018. See ECF No. 123 at 2; ECF No.
124 at 2; ECF No. 125 at 2; ECF No. 126 at 2. They argue that these claims-file documents are
subject to the attorney-client privilege; that this privilege was not waived although documents
were shared between United Specialty and the LIC Defendants; and that prior to United
Specialty’s disclaimer of coverage on January 4, 2018, United Specialty and the LIC Defendants
shared a common legal interest and were permitted to share files while maintaining the privilege
under a joint-defense theory. See ECF No. 123 at 2-3; ECF No. 124 at 2-3; ECF No. 125 at 2-3;
ECF No. 126 at 2-3. They also argue that the 211 Defendants should not be allowed access to
these documents because the 211 Defendants are the plaintiffs in the Underlying Action whose
interests are adverse to those of the LIC Defendants such that the production of these documents
would be extremely prejudicial to the LIC Defendants in the Underlying Action. See ECF No.
123 at 3; ECF No. 124 at 3; ECF No. 125 at 3; ECF No. 126 at 3. The 211 Defendants opposed
the motions to seal, arguing that United Specialty and the LIC Defendants have failed to
establish that these documents are privileged or protected by the common-interest doctrine, and
that the 211 Defendants should have access to the documents and be allowed to fully participate
in discovery. See ECF No. 127 at 2-3.
II.
Legal Standards
The Second Circuit utilizes a three-step process for determining whether documents
should be sealed in light of the common law right of access. “Before any such common law
right can attach . . . a court must first conclude that the documents at issue are indeed judicial
documents.” Lugosch v. Pyramid Co. of Onondaga, 435 F.3d 110, 119 (2d Cir. 2006) (internal
quotations omitted). To constitute a judicial document, “the item filed must be relevant to the
performance of the judicial function and useful in the judicial process.” United States v.
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Amodeo (“Amodeo I”), 44 F.3d 141, 145 (2d Cir. 1995).
Second, after determining that the documents are judicial documents and that the
“common law presumption of access attaches,” the court must “determine the weight of that
presumption.” Lugosch, 435 F.3d at 119. According to the Second Circuit, “the weight to be
given the presumption of access must be governed by the role of the material at issue in the
exercise of Article III judicial power and the resultant value of such information to those
monitoring the federal courts. Generally, the information will fall somewhere on a continuum
from matters that directly affect an adjudication to matters that come within a court’s purview
solely to insure their irrelevance.” United States v. Amodeo (“Amodeo II”), 71 F.3d 1044, 1049
(2d Cir. 1995). When a document plays a role in a court’s adjudication of litigants’ substantive
rights—a function that is “at the heart of Article III”—the presumption is strong, but “[a]s one
moves along the continuum, the weight of the presumption declines.” Id. When “documents are
usually filed with the court and are generally available, the weight of the presumption is stronger
than where filing with the court is unusual or is generally under seal.” Id. at 1050.
Third, the court must balance any “competing considerations” against the weight of the
presumption of access. Lugosch, 435 F.3d at 120 (internal quotations & citation omitted).
“Such countervailing factors include but are not limited to ‘the danger of impairing law
enforcement or judicial efficiency’ and ‘the privacy interests of those resisting disclosure.’” Id.
(quoting Amodeo II, 71 F.3d at 1050); accord Bernstein v. Bernstein Litowitz Berger &
Grossmann LLP, 814 F.3d 132, 143 (2d Cir. 2016). When weighing privacy interests, courts
should consider “the degree to which the subject matter is traditionally considered private rather
than public.” Amodeo II, 71 F.3d at 1051. Courts should also assess the “nature and degree of
injury,” paying heed to “the sensitivity of the information and the subject” but also to “how the
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person seeking access intends to use the information.” Id. (explaining that “[c]ommercial
competitors seeking an advantage over rivals need not be indulged in the name of monitoring the
courts”).
The First Amendment right of access stems from the qualified right of the public and the
press “to attend judicial proceedings and to access certain judicial documents.” Lugosch, 435
F.3d at 120 (quoting Hartford Courant Co. v. Pellegrino, 380 F.3d 83, 91 (2d Cir. 2004)). Once a
court concludes that there is a qualified First Amendment right of access to the judicial
documents at issue, it may only seal the documents “if specific, on the record findings are made
demonstrating the closure is essential to preserve higher values and is narrowly tailored to serve
that interest.” Id. (quoting In re N.Y. Times Co., 828 F.2d 110, 116 (2d Cir. 1987)). “Broad and
general findings by the trial court . . . are not sufficient to justify closure.” Id. (quoting In re
N.Y. Times Co., 828 F.2d at 116). Examples of “higher values” may include law-enforcement
interests, the privacy of innocent third parties, Amodeo II, 71 F.3d at 1050, and the attorneyclient privilege, Lugosch, 435 F.3d at 125.
In the pending motions, the documents that the parties seek to file wholly under seal are
documents “submitted to the court as supporting material in connection with [the LIC
Defendants’] motion for summary judgment.” Lugosch, 435 F.3d at 123. “[D]ocuments
submitted to a court for its consideration in a summary judgment motion are—as a matter of
law—judicial documents to which a strong presumption of access attaches, under both the
common law and the First Amendment.” Id. at 121. The Second Circuit has instructed that the
weight of the presumption of public access given to summary judgment filings “is of the highest:
‘documents used by parties moving for, or opposing, summary judgment should not remain
under seal absent the most compelling reasons.’” Id. at 123 (quoting Joy v. North, 692 F.2d 880,
5
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893 (2d Cir. 1982)).
“It is undeniable that the public has a significant interest in preserving the confidentiality
of attorney-client communications.” Diversified Grp., Inc. v. Daugerdas, 217 F.R.D. 152, 160
(S.D.N.Y. 2003). “Indeed, this is precisely the kind of countervailing concern that is capable of
overriding the general preference for public access to judicial records.” Siedle v. Putnam Invs.,
147 F.3d 7, 11 (1st Cir. 1998) (reversing a district court’s decision to unseal privileged
documents at the request of a newspaper); see Crystal Grower’s Corp. v. Dobbins, 616 F.2d 458,
462 (10th Cir. 1980) (concluding that the public’s interest in preserving the attorney-client
privilege outweighs the public’s more general interest in access to court documents);
Dombrowski v. Bell Atl. Corp., 128 F. Supp. 2d 216, 219 (E.D. Pa. 2000) (finding that the
failure to maintain privileged materials under seal would cause “a clearly defined and serious
injury not only to the parties seeking closure but also to the public interest which the attorneyclient privilege is designed to serve”) (internal quotations & citation omitted)).
Under New York law, the common-interest doctrine allows attorney-client and other
privileged communications to be shared with a third party to further a common legal interest
without waiving privilege. See Ambac Assur. Corp. v. Countrywide Home Loans, Inc., 27
N.Y.3d 616, 628 (2016). Courts within the Second Circuit recognize the common-interest rule.
See Kingsway Fin. Servs., Inc. v. Pricewaterhouse-Coopers LLP, No. 03 Civ. 5560 (RMB)
(HBP), 2008 WL 4452134, at *7 (S.D.N.Y. Oct. 2, 2008) (collecting cases). Where a common
interest is found between an insurer and an insured, but the insurer ultimately disclaims
coverage, courts have applied the common-interest doctrine to protect communications shared
prior to the time the insurer denied coverage to the insured. See Bovis Lend Lease, LMB, Inc. v.
Seasons Contracting Corp., No. 00 Civ. 9212 (DF), 2002 WL 31729693, at *15 (S.D.N.Y. Dec.
6
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5, 2002); see also Kingsway, 2008 WL 4452134, at *8 (“The fact that the parties are currently
adverse in a related action does not alter the fact that Dore and Great American shared a common
interest at the time the communications were made . . . . The fact that the parties’ interests have
diverged . . . does not necessarily negate the applicability of the common interest rule.”) (internal
citations & quotations omitted)).
Courts have also found that insurers do not have to produce their communications with
the insured’s defense counsel and claims-file documents to the underlying plaintiff; this is
because the interests of the insured and the underlying plaintiff are adverse to each other in the
underlying actions. See Tudor Ins. Co. v. McKenna Assocs., No. 01 Civ. 115 (DAB) (JCF),
2003 WL 21488058, at *3 (S.D.N.Y. June 25, 2003); U.S. Underwriters Ins. Co. v. Ziering, No.
06 Civ. 1130 (JFB) (WDW), 2008 WL 2230688, at *4 (E.D.N.Y. May 28, 2008); Tudor Ins. Co.
v. Golovunin, No. 07 Civ. 4792 (KAM) (ALC), 2010 WL 11627209, at *2 (E.D.N.Y. Apr. 15,
2010).
III.
Analysis
a. United Specialty’s Motion To Seal
As to United Specialty’s request to file under seal “any documents in its claims file
generated before January 4, 2018,” see ECF No. 123 at 2; ECF No. 124 at 2, the date on which
United Specialty denied coverage to the LIC Defendants, the Court denies this broad request.
Other than three pages, United Specialty has not attached the specific documents it seeks to file
under seal for the Court’s review, so this Court cannot evaluate any claim of privilege. This
Court previously observed that not all of the documents that are part of the claims file are
privileged. See ECF No. 122, June 19, 2019 Tr. at 35:10-18. Upon review of the three pages
attached to United Specialty’s motion to seal, United-001353-1354, United-001410, the Court
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finds that United-001353-54 are privileged and contain attorney-work product; they may be filed
under seal. United-001410, however, is a document generated after January 4, 2018, and without
any further elaboration as to why this document is privileged, the request to file it under seal is
denied.
b. The LIC Defendants’ Motion To Seal
i. Waiver
As to the LIC Defendants’ request to file under seal certain pages of the claims file that
are attached to their motion to seal, the Court denies the motion with respect to United-00002451, United-000055, United-000058-63, United-000067-72, United-000075-85, United-000090,
United-000093, United-000096, United-000099-101, United-000104, United-000108, United000112, United-000117, United-000122-123, United-000675, and United-000728-729 as these
documents have already been produced to the 211 Defendants. See ECF No. 83 at 2. The LIC
Defendants do not dispute that the disclosure occurred. To the extent the LIC Defendants now
purport to claim privilege over such documents, any privilege has been waived.
As to the remainder of the documents attached to the LIC Defendants’ motion to seal,
United-000016-23, United-000052-54, United-000056-57, United-000064-66, United-00007374, United-000086-89, United-000091-92, United-000094-95, United-000097-98, United0000102-103, United-000105-107, United-000109-111, United-000113-116, United-000118121, United-000308-329, United-000587-590, United-000595-601, United-000617-661, United000663-674, United-000676-727, United-000730-755, United-000777-782, United-000804-812,
and United-000820-821, the Court finds that United Specialty and the LIC Defendants shared
these communications pursuant to a common legal interest in litigating and mediating the
Underlying Action prior to the time that Plaintiff disclaimed coverage. See Bovis Lend Lease,
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LMB, 2002 WL 31729693, at *15; see also Kingsway, 2008 WL 4452134, at *8. As such, any
applicable privilege over these documents has not been waived.
At the outset, the Court notes that United Specialty’s claims file was not produced to the
211 Defendants during discovery, and despite multiple opportunities to raise the issue with the
Court, the 211 Defendants never moved to compel the production of these documents. In fact,
the 211 Defendants represented to the Court in joint status letters that discovery was complete
and that all outstanding issues were resolved. See, e.g., ECF No. 80 at 1 (“At this juncture there
are no discovery disputes among the parties other than the priority of depositions discussed more
fully below. The parties have completed their exchange of voluminous written discovery and
documents.”); ECF No. 113 at 1 (“Expert discovery has been completed in this action and any
issues between the parties have been resolved.”); Order dated 3/9/2021 (certifying discovery is
complete); see also ECF No. 83 at 1 (“At the October 17, 2018 conference before Your Honor,
counsel for the 211 Defendants, Chris Vatter, raised concerns about the sealed documents, and
indicated that it would be making specific objections and demands, requesting further
information as to why the documents contained under entry # 51 were privileged. 211
Defendants’ request however never transpired.”). The request for these documents to now be
produced to the 211 Defendants and the 211 Defendants’ challenge to their privilege designation
as part of discovery, are untimely and waived.
ii. Documents
Nonetheless, the Court reviews the documents to determine whether they are privileged
so as to justify sealing from the general public. The Court has reviewed the documents
submitted by the LIC Defendants from United Specialty’s claims file that have not been
previously produced to the 211 Defendants and finds the majority of the previously unproduced
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claims file documents include privileged and attorney-work product regarding the litigation and
mediation of the Underlying Action. See ECF No. 126-1. The following documents may be
filed under seal because they contain attorney-client communications or references thereto,
communications and notes regarding litigation strategy, and attorney work product, such as
confidential mediation statements and calculations relating to settlement value:
United-000016-23
United-000052-54
United-000056-57
United-000064-66
United-000086-88
United-000091-92
United-000094-95
United-000097-98
United-000102-103
United-000105-106
United-000109-111
United-000113-115
United-000118-120
United-000308-311
United-000313
United-000318-321
United-000324-329
United-000587
United-000595
United-000619
United-000621-622
United-000624
United-000629
United-000639-640
United-000642
United-000644
United-000647-648
United-000651-652
United-000657
United-000661
United-000663
United-000665-666
United-000669-670
United-000676-679
United-000681-686
United-000689-706
United-000709
United-000711-712
United-000714
United-000716
United-000718-722
United-000724
United-000730-731
United-000733
United-000739-740
United-000742
United-000744-751.
The Court denies the motion to seal with respect to the following documents for the
following reasons:
Documents
Reason for Denying Request to Seal
United-000073-74
All privileged information is already redacted
on the documents.
Not privileged because these documents do
not contain any substantive content.
United-000089, -107, -116, -121, -314, -322323, -588, -596, -598, -600-601, -618, -620, 623, -625, -641, -643, -649, -653, -664, -667,
10
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-671, -680, -710, -715, -723, -726-727, -732, 735-738, -741
United-000312, -315-317, -645-646, -672, Not privileged because documents are cover
674, -752-755, -777-782, -804-812, -820-821 or non-substantive transmission emails, or the
attachments are already in possession of the
211 Defendants or are public court
documents.
United-000589-590, -597, -599, -617, -626Not privileged because documents are non628, -630-638, -650, -654-656, -658-660, substantive emails regarding logistics or
668, -673, -687-688, -707-708, -713, -717, requesting status updates or copies of
725, -734, -743
documents.
iii. Deposition Transcripts
As to the portions of the deposition transcripts attached to LIC Defendants’ motion to
seal, the Court finds that significant portions of these transcripts may be filed under seal. This
Court previously ordered that the 211 Defendants could not be present for the portions of the
deposition that relate to issues of alleged bad faith between United Specialty and the LIC
Defendants. See ECF No. 122, June 19, 2019 Tr. at 50:3-51:3. The Court has reviewed these
portions of the deposition transcripts and finds that most of the deposition questioning relates to
privileged documents and topics such as litigation and mediation strategy, and disclosure of the
contents to the 211 Defendants or the public would unfairly prejudice the LIC Defendants in the
Underlying Action because that action is still ongoing. See McKenna Assocs., 2003 WL
21488058, at *3 (holding that an insurer in a coverage action did not have to disclose its
communications with the insured’s defense counsel to the underlying plaintiff because the
interests of the insured and the underlying plaintiff were adverse to each other in the underlying
tort action); U.S. Underwriters Ins. Co., 2008 WL 2230688, at *4 (in declaratory judgment
action, finding that the underlying plaintiff, as adversary in the underlying action, does not have
a right to discovery of privileged documents between the insurer and the insured’s retained
defense counsel); Golovunin, 2010 WL 11627209, at *2 (same). United Specialty and the LIC
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Defendants should utilize copies of the deposition transcripts with redactions so that the
following non-privileged questioning—which relates to terminology, identifying people, or the
content of documents that were either already produced to the 211 Defendants or documents this
Court found should not be filed under seal, supra—are in the public access. The following
portions of the deposition transcripts may not be redacted: Balogh Dep. Tr. 62:6-68:4, 69:5-17,
84:3-89:3, 93:2-16, 98:19-99:22, 109:11-110:19, 124:8-24, 127:5-132:2; Yaeger Dep. Tr. 89:697:7, 105:7-116:10, 121:4-122:3, 122:17-124:10, 129:8-133:11, 136:23-137:23, 146:12-149:24,
157:15-158:15, 168:7-13, 168:19-24, 169:5-6, 182:23-184:23, 185:18-186:4, and 190:16-197:10.
IV.
Conclusion
In summary, the motions to seal at ECF Nos. 123, 124, 125, and 126 are granted in part
and denied in part. The parties may file under seal certain of the documents and portions of the
deposition transcripts as described above for purposes of the dispositive motion practice. The
Court takes no position at this time as to how the documents might be used at trial should a trial
be held.
Dated: Brooklyn, New York
January 6, 2022
Vera M. Scanlon
VERA M. SCANLON
United States Magistrate Judge
12
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