HENRIQUEZ-DISLA v. ALLSTATE PROPERTY & CASUALTY INSURANCE COMPANY
MEMORANDUM AND ORDER THAT DEFENDANT'S MOTION FOR RECONSIDERATIN IS GRANTED IN PART AND DENIED IN PART. DEFENDANT'S REQUEST FOR CERTIFICATION FOR INTERLOCUTORY APPEAL IS GRANTED; ETC.. SIGNED BY MAGISTRATE JUDGE ELIZABETH T. HEY ON 8/7/14. 8/7/14 ENTERED AND E-MAILED.(jl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
FRANCIS HENRIQUEZ-DISLA and
ALLSTATE PROPERTY AND
CASUALTY INSURANCE CO.
MEMORANDUM AND ORDER
ELIZABETH T. HEY, U.S.M.J.
August 7, 2014
Allstate has sought reconsideration of this court’s decision requiring it to produce
partially unredacted claim logs to Plaintiffs in this bad faith/insurance fraud case. For the
reasons that follow, I will grant the motion for reconsideration with respect to specific log
entries identified in this memorandum, grant the request to certify the issue for an
interlocutory appeal with respect to the log entries that I have ordered unredacted, and
will stay further proceedings pending the Third Circuit’s consideration.
The applicability and scope of the attorney-client privilege is at the heart of this
discovery dispute.1 Although Defendant provided redacted copies of the logs relevant to
Plaintiffs’ insurance claims, Plaintiffs sought unredacted versions of the logs as well as
policy and procedural manuals used in Allstate’s decision-making process. After
reviewing the logs in camera, I ordered Allstate to produce partially unredacted versions
of the logs, requiring production of those portions that reflected that counsel performed
In the privilege logs, Defendant identifies certain entries as “Attorney Client
Privilege or Work Product Doctrine.” However, throughout the response to the motion to
compel and in seeking reconsideration, Allstate relies solely on the attorney client
the ordinary business of claims investigation and not as counsel.2 I also ordered the
production of the policy and procedural manuals governing Allstate’s coverage decisions
and the course of the investigation, subject to a confidentiality agreement.3 Allstate has
filed a motion for reconsideration to correct what it considers to be a manifest error of
law and to protect privileged material from production.
Motions to reconsider may be brought pursuant to Federal Rule of Civil Procedure
59(e) and Local Rule 7.1(i). The purpose of a motion to reconsider is to correct manifest
errors of law or fact, or to present newly discovered evidence. Harsco v. Zlotnicki, 779
F.2d 906, 909 (3d Cir. 1985), cert. denied, 476 U.S. 1171 (1986). A court should grant a
motion to reconsider Aonly if the moving party establishes one of three grounds: (1) there
is newly available evidence; (2) there is an intervening change in the controlling law; or
(3) there is a need to correct a clear error of law or prevent manifest injustice.@ Drake v.
Steamfitters Local Union No. 420, No. 97-585, 1998 WL 564486, at *3 (E.D. Pa. Sept. 3,
Throughout its motion for reconsideration, Allstate frames the question at issue as
“whether the attorney-client privilege applies to legal services provided by a law firm to a
client and also relates to subrogation issues.” Doc. 34-2 at 11. If the log entries revealed
that the attorney retained in this case was acting as legal counsel and not as a claims
investigator, I would agree.
Allstate’s motion for reconsideration is dedicated to the log entries, focusing on
the relationship between Allstate and its counsel. Despite this fact, it appears that
Defendant has failed to comply with the remainder of my May 29 ruling, requiring the
production of the portions of claims manuals and policies which informed Allstate’s
coverage decision and the course of the investigation. See Docs. 36 & 38. In Allstate’s
most recent filing, Doc. 41, it explains that it is working to obtain the manuals ordered
produced in my earlier ruling. Although I entered an order staying discovery on July 30,
2014, see Doc. 44, I direct that the manuals be produced without respect to the stay, in
light of my earlier ruling.
1998), aff=d, 242 F.3d 370 (3d Cir. 2000). Moreover, A[b]ecause federal courts have a
strong interest in finality of judgments, motions for reconsideration should be granted
sparingly.@ Continental Cas. Co. v. Diversified Indus., Inc., 884 F.Supp. 937, 943 (E.D.
Pa. 1995). A motion to reconsider may not raise new arguments that could have (or
should have) been made in the context of the original motion. See Helfrich v. Lehigh
Valley Hosp., No. 03-5793, 2005 WL 1715689 at *3 (E.D. Pa. July 21, 2005) (citing
Balogun v. Alden Park Mgmt. Corp., No. 98-0612, 1998 WL 692956 at *1 (E.D. Pa. Oct.
Initially, it bears noting that Defendant does not appear to have examined the
specific entries affected by my prior order. Rather, both now and in its initial redactions,
Defendant appears to have taken an all-or-nothing approach to its redactions. Review of
the logs in their entirety reveals that any entry mentioning counsel has been redacted
without regard to the content of the entry. For example, Defendant redacted the entries
stating that they hired Curtin and Heefner. See February 6, 2012 at 12:07 p.m., and 12:20
p.m. (Fire Claim Bates 29). Such information is clearly not privileged and this
information was disclosed in counsel’s discussions with Plaintiffs and in Defendant’s
own motion. The result of Allstate’s redactions is that Defendant slashed with a sword
that which should have been excised with a pen knife.
Additionally, Defendant has not drawn any distinction with respect to the different
bases for ordering the unredactions. For example, the original redactions on the two
claim files contained an inconsistency with respect to two nearly identical entries, and I
concluded that Defendant’s failure to claim privilege as to one claim file required
unredaction for the entry in the other claim file. See Doc. 31 at 7 n.3. Defendant fails to
address this or any other specific unredaction. Defendant’s failure to analyze the specific
entries at issue undermines its claim of privilege – wherein it has the burden to show that
each entry meets the elements of the attorney-client privilege.
Nature of the Work Performed
In my earlier opinion, I relied on a decision from the district court in Minnesota
discussing the attorney-client privilege which drew a distinction between legal work done
by attorneys and claims investigation performed by attorneys. See Mission Nat’l Ins. Co.
v. Lilly, 112 F.R.D. 160 (D. Minn. 1986) (privilege not applicable to fact investigation
performed by attorney on behalf of carrier). The former was covered by the attorneyclient privilege, while the latter was not. Although I have not found any case in
Pennsylvania drawing this distinction, the district court in New Jersey has done the same.
See Cellco P’ship v. Certain Underwriters at Lloyd’s London, No. 05-3158, 2006 WL
1320067, at *4 (D.N.J. May 12, 2006) (review of the documents revealed counsel
provided legal advice not claims investigation).
Recognizing that Pennsylvania courts would likely draw the same distinction,
Allstate argues that it never hired Curtin and Heefner for anything other than legal
services. Counsel has attached an affidavit from Holly Kelly, a claims adjuster assigned
to Plaintiffs’ claims, in which Ms. Kelly states that Allstate retained Curtin and Heefner
“to render legal services including the taking of Plaintiffs’ Examinations Under Oath
[“EUO”] to ultimately render legal/coverage opinions,” and also states that “[a]t no time,
did Defendant retain Curtin & Heefner LLP as a ‘Claims Investigator’ or to perform any
non-legal claim related functions.” Doc. 35-1 ¶¶ 4-5.4 However, the log entries belie the
affidavit.5 Without disclosing their contents, review of the redacted log entries reveals
that they contain direction to conduct routine investigation, whether to be done by
counsel or by a claims representative, see e.g., February 8, 2012, at 5:41 p.m. (Fire Claim
Bates 200);6 contain notations on the efforts to schedule the EUO’s, see e.g., March 7,
2012 at 12:52 p.m. (Fire Claim Bates 192); March 20, 2012 at 1:27 p.m. and 3:54 p.m.
(Fire Claim Bates 191), April 5, 2012 at 8:14 a.m. (Fire Claim Bates 189), and
memorialize efforts to pursue subrogation and direction to counsel to retain a cause and
origin specialist to determine the cause of the fire. See e.g., February 3, 2012 at 9:08 a.m.
Although Allstate argued in response to Plaintiffs’ motion to compel that Curtin
and Heefner had been retained in a legal capacity with no involvement in claims
investigation, see Doc. 29 ¶ 20, Allstate did not include the affidavit in its original
response; instead attaching it to the motion for reconsideration in the first instance. No
affidavit has been submitted with respect to communications with attorneys of White and
Williams, who were hired to pursue subrogation.
In Allstate’s motion for reconsideration, they focus on this court’s notation that
counsel was hired early in the claims process. Although the timing of counsel’s entry
onto the claims scene was one factor I considered in determining whether counsel was
providing legal advice or acting as a claims investigator (counsel retained to conduct
EUO on February 6, 2012, and denial letter prepared October 15, 2012), the log entries
were the primary reason I determined that counsel’s activities were related to claims
This entry poses a problem. This entry contains the notes made by a claims
manager to a claims representative. To the extent it contains a directive to counsel to
obtain specific information during the EUO, that directive may be subject to the attorneyclient privilege. The remainder of the entry involves direction regarding other avenues of
investigation. It appears that this additional investigation is directed to the claims
representative and the claims manager is requesting basic investigation be done.
Therefore, I will vacate the prior order unredacting the first line of this entry to the
comma. See February 8, 2012 at 5:41 p.m. (Fire Claim Bates 199- 200).
(Fire Claim Bates 30); January 25, 2012 at 3:06 p.m. (Fire Claim Bates 39).7 As
explained in my earlier opinion, such activities (investigating subrogation possibilities,
determining the cause of the fire, gathering background information on the claimants, and
arranging for EUO’s) are ordinary business functions in claims investigation. The fact
that they were performed by an attorney at the behest of a claims adjuster does not
change the character of the activity – basic claims investigation.8
In support of its argument that all of the redacted information is protected by the
attorney-client privilege, Allstate relies on a 1996 opinion from the Honorable R. Stanton
Wettick, Jr., of the Court of Common Pleas of Allegheny County. See Doc. 34-2 at 1
(quoting Mueller v. Nationwide Mut. Ins. Co., 31 Pa. D. & C.4th 23, 41-42 (Allegheny
Com. Pl. 1996)). In the excerpt of the opinion quoted by Allstate, Judge Wettick extolls
the benefits of insurance companies hiring counsel in the decision-making process and
cautions that open and honest exchanges between company and counsel are less likely if
such communications are discoverable. See Mueller, 31 Pa. D. & C.4th at 41-42. What
Allstate fails to acknowledge is that earlier in the opinion Judge Wettick noted that the
privilege applies only when, in connection with the communication in question, the
Despite the fact that Allstate considers direction to counsel to hire a cause and
origin specialist to be privileged, the cause and origin specialist’s conclusions were not
redacted. See February 28, 2012 at 1:25 p.m. (Fire Claim Bates 194) (reciting cause and
origin specialist’s conclusions).
Similarly, to the extent Allstate attempts to distinguish the cases upon which I
relied by arguing that the lawyers in those cases were retained to conduct investigation, I
reject the argument. I will not be guided by the label attached by Defendant. Rather, I
am guided by the character of the work -- sustaining the redaction of entries relating to
legal work, while ordering the disclosure of the entries related to basic claims
lawyer is acting as a lawyer. Id. at 31. “The sine qua non of any claim of privilege is
that the information sought to be shielded is legal advice.” United States v. Rockwell
Intern., 897 F.2d 1255, 1264 (3d Cir. 1990).
Guided by Judge Wettick’s reasoning encouraging open and honest exchanges
between counsel and the insurance company, I have again reviewed the log entries that I
previously ordered unredacted and will grant Defendant’s motion for reconsideration
with respect to eight of them. I believe an argument can be made that Allstate and
counsel were participating in the type of information exchange Judge Wettick discussed
with respect to these eight entries. Each entry pertains to an actual or contemplated
communication with counsel and can be read to touch on strategy or thought process,
rather than solely directing an item of basic claims investigation. Therefore, I vacate my
prior decision with respect to the following log entries:
January 26, 2012 at 12:06 p.m. (Fire Claim Bates 37),
Email dated February 10, 2012 at 10:26 a.m. (Fire Claim Bates 48),
May 2, 2012 at 9:03 a.m. (Fire Claim Bates 187),
March 19, 2012 at 9:55 a.m. (Fire Claim Bates 191),
February 10, 2012 at 12:41 p.m. (Fire Claim Bates 198),
February 8, 2012 at 5:41 p.m. (Fire Claim Bates 200) (In the fifth paragraph of the
entry, the first line to the comma in the second line remains redacted. The remainder of
that paragraph should be unredacted.),
March 12, 2012 at 1:23 p.m. (Theft Claim Bates 63), and
May 2, 2012 at 9:02 a.m. (Theft Claim Bates 65).
The redacted portions of these log entries shall remain redacted unless specified
Waiver of Privilege
In the response to the motion for reconsideration, Plaintiffs argue that Defendant
has waived the privilege by placing the advice of counsel at issue. Doc. 39. In defending
Plaintiffs’ bad faith claim, Allstate pled as a defense that “Allstate’s alleged withholding
of any benefits at issue was made in good faith and was reasonable.” Doc. 17 ¶ 62.
Because the decision-maker identified by Allstate (Ms. Kelly) has stated in her affidavit
that counsel was hired to render legal and coverage decisions, see Doc. 35-1, Plaintiffs
argue that Allstate placed counsel’s advice in issue and cannot now shield that advice by
the attorney-client privilege. Doc. 39 at 2-3. Allstate argues that it has not waived the
privilege and has not placed the advice of counsel at issue in the case. Doc. 34-2 at 4.
A party to a lawsuit may waive the attorney-client privilege by asserting claims or
defenses that put the attorney’s advice in issue in the litigation. Rhone-Poulenc Rorer
Inc. v. Home Indem. Co., 32 F.3d 851, 863 (3d Cir. 1994).
However, advice is not placed in issue merely because
it is relevant. . . . A waiver can be found only where a client
has made the decision and taken an affirmative step in the
litigation to place the advice of attorney in issue. . . . This
occurs where the client attempts to prove a claim or defense
by disclosing or describing an attorney client communication.
Saltern v. Nor-Car Fed. Credit Union, Civ. No. 02-7175, 2003 WL 21250578, at *1 (E.D.
Pa. Apr. 17, 2003) (citing Rhone-Poulenc, 32 F.3d at 863). Rhone-Poulenc teaches that
the advice of counsel “does not necessarily become in issue merely because the
attorney’s advice might affect the client’s state of mind in a relevant manner.” 32 F.3d at
863. Only when the client “asserts a claim or defense, and attempts to prove that claim or
defense by disclosing or describing an attorney client communication,” does the client
waive the attorney-client privilege. Id.
In Saltern, the Honorable Jacob Hart of this court found that the defendant’s
production of a document referring to the company’s president having consulted with an
attorney was insufficient to waive the attorney-client privilege. Similarly in Fidelity and
Deposit Co. v. McCulloch, 168 F.R.D. 516 (E.D. Pa. 1996), upon which Judge Hart
relied, the Honorable J. Curtis Joyner found that the plaintiff had not waived the privilege
even when documents produced in discovery established that the plaintiff’s “state of
mind (to the extent that a corporation can have one) was affected in a relevant manner by
the advice of its outside counsel.” Relying on Rhone-Poulenc, Judge Joyner concluded
“this simply does not amount to a waiver.” Id. at 519.
In this case, Plaintiff pieces together two allegations to tailor the waiver of
privilege. First, answering the allegations of bad faith in the complaint, Allstate stated
that it had acted in good faith. See Doc. 17 ¶ 62. Second, in Ms. Kelly’s affidavit
regarding the attorney-client privilege, she stated that Allstate retained counsel to render
legal services including coverage opinions. Doc. 35-1 ¶ 4. At no point has Allstate
asserted the advice of counsel as a defense. Although Ms. Kelly’s affidavit suggests that
counsel may have affected Allstate’s state of mind, as Judge Joyner so aptly put it, “this
simply does not amount to a waiver” of the privilege. McCulloch, 168 F.R.D. at 519.
Therefore, I reject Plaintiffs’ theory of wholesale waiver.
Certification for Interlocutory Appeal
Finally, Defendant asks this court to certify the memorandum and order for
interlocutory appeal. Doc. 34-2 at 9. Section 1292(b) of Title 28 of the United States
Code provides in relevant part:
When a district judge, in making in a civil action an order not
otherwise appealable under this section, shall be of the
opinion that such order involves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation,
he shall so state in writing in such order.
28 U.S.C. § 1292(b). The statute requires that three elements be present to grant the
certification for interlocutory appeal: (1) the order at issue involves a controlling issue of
law; (2) substantial ground for difference of opinion exists regarding the resolution of the
issue; and (3) an immediate appeal will materially advance the ultimate termination of the
litigation. Katz v. Carte Blanche Corp. 496 F.2d 747, 754-55 (3d Cir. 1974). The burden
is on the party seeking certification to establish that “exceptional circumstances justify a
departure from the basic policy against piecemeal litigation and of postponing appellate
review until after the entry of final judgment.” Hall v. Wyeth, Inc., No. 10-738, 2010
WL 4925258, at *1 (E.D. Pa. Dec. 2, 2010) (quoting L.R. v. Manheim Twp. Sch. Dist.,
540 F. Supp.2d 603, 608 (E.D. Pa. 2008)).
A controlling issue of law is one in which either, if decided erroneously, would
lead to reversal on appeal, or is “serious to the conduct of the litigation either practically
or legally.” Hall, 2010 WL 4925258, at *1 (quoting Katz, 496 F.2d at 755). Here, at the
discovery phase, disclosure of allegedly privileged information is serious to the conduct
of the litigation. If the case proceeded in the ordinary course and post-trial Allstate
succeeded in challenging this court’s pretrial ruling, a second trial could be required and
privileged information would have been improperly revealed. Saving judicial time and
the resources of the litigants have been recognized as relevant factors in the analysis. Id.
“Substantial grounds for difference of opinion exist where there is genuine doubt
or conflicting precedent as to the correct legal standard.” Hall, 2010 WL 4925258, at *1
(quoting Bradburn Parent Teacher Store, Inc. v. 3M, Civ. No. 02-7676, 2005 WL
1819969, at *4 (E.D. Pa. Aug. 2, 2005)). Although I am of the opinion, like the courts in
Mission National and Cellco, that log entries regarding basic claims investigation
performed by counsel are not protected, I have found no Pennsylvania case drawing this
distinction and Judge Wettick’s opinion did not specifically address this issue, other than
to acknowledge the basic tenet that, for the communication to be protected, the attorney
must be acting as a lawyer. Mueller, 31 Pa. D. & C.4th at 31. Under the circumstances,
direction from the Court of Appeals is appropriate.
Although the Supreme Court has concluded that postjudgment appeals “generally
suffice to protect the rights of litigants and ensure the vitality of the attorney-client
privilege,” the Court has noted that interlocutory appeal pursuant to section 1292(b) is
available for “a particularly injurious or novel privilege ruling.” Mohawk Indus., Inc. v.
Carpenter, 558 U.S. 100, 109-10 (2009). Considering the dearth of caselaw regarding the
applicability of the attorney-client privilege to basic claims investigatory work and the
lack of a suitable definition for that work, I believe this case presents a novel privilege
ruling in this district and circuit, qualifying for interlocutory appeal.
Finally, the court must consider whether an interlocutory appeal would materially
advance the termination of this litigation. Although the need for a trial will not be
affected by an interlocutory appeal, the course of discovery and the ensuing trial would
be affected. Once this issue is resolved, discovery will likely proceed more
expeditiously. Although I recognize the hazard of permitting piecemeal litigation,
considering the early stage at which the case is, I will grant certification as all three
factors have been met. I will also grant Allstate’s request for a stay of proceedings
pending the appeal, with the exception of Allstate’s production of manuals previously
ordered. The issue certified for interlocutory appeal impacts the discovery in the matter
and it would be counterproductive to proceed without resolution of this underlying issue.
An appropriate order follows.
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