Myrtle Beach, The City of v. United National Insurance Company

Filing 91

ORDER granting in part and denying in part 43 Motion for Attorney Fees; granting in part and denying in part 45 Motion to Compel; denying 83 Motion for Protective Order. Defendant is ordered to produce unredacted copies of documents identified herein as Section 1 of 2 by September 8, 2010. The parties are ordered to conduct the deposition of United's expert by the end of September 2010. Signed by Magistrate Judge Shiva V Hodges on 08/27/2010.(vhor, )

-SVH Myrtle Beach, The City of v. United National Insurance Company

Doc. 91

IN THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF SOUTH CAROLINA F L O R E N C E DIVISION T h e City of Myrtle Beach, P la in tif f , vs. U n ite d National Insurance Company, D e f e n d a n t. ) ) ) ) ) ) ) ) ) ) C /A No.: 4:08-1183-TLW-SVH

ORDER

I.

F a c tu a l and Procedural Background T h is is a breach of contract/bad faith refusal to pay first party insurance benefits

a c tio n originally brought in state court and removed to this court based on diversity of c itiz e n s h ip , 28 U.S.C. § 1332. Plaintiff City of Myrtle Beach (the City) was a defendant in an underlying lawsuit alleging, among other things, discrimination and civil rights v io la tio n s regarding its use of different traffic patterns and law enforcement presence d u rin g what has been referred to as "Harley Week" and "Atlantic Beach Bikefest" (the U n d e rlyin g Suit). According to its complaint, here the City incurred approximately $ 6 7 5 ,0 0 0 in attorney's fees and costs defending the Underlying Suit from 2003 to 2006. Pursuant to a reimbursement insurance policy or policies that defendant United National I n s u ra n c e Company (United) issued to the City, the City sought reimbursement of its fees a n d costs during the course of the Underlying Suit. After United failed to reimburse it, th e City filed this action in February 2008, asserting causes of action for breach of

Dockets.Justia.com

contract and first party bad faith refusal to pay, seeking actual and punitive damages, a tto rn e ys ' fees, and prejudgment interest. T h is matter was referred to United States Magistrate Judge Thomas E. Rogers III f o r full pretrial and non-dispositive motions handling by order dated April 7, 2008 [Entry # 5 ] . Judge Rogers handled many scheduling and discovery matters prior to the case b e in g assigned to the undersigned on April 12, 2010 [Entry #64]. Pending on the docket a re the following three motions: (1) the City's Third Motion [Entry #45]; (2) United's M o tio n for Attorneys' Fees [Entry #43]; and (3) United's Motion for Protective Order f ile d August 13, 2010 [Entry #83]. The court held a hearing on the first two motions on J u ly 14, 2010, and took the matters under advisement. This order serves to memorialize th e court's rulings on the motions. For the reasons set forth herein, (1) the motion to compel is granted in part and d e n ie d in part, (2) the motion for attorneys' fees is granted in part and denied in part, and (3 ) the motion for protective order is denied. II. D is c u s s io n A. T h e City's Motion to Compel 1. F a c tu a l and Procedural Background

T h e City served its interrogatories and request for production of documents on U n it e d on August 19, 2008, including a request for United's complete claims file. By e m a il dated October 24, 2008, counsel for the City alerted counsel for United that its d is c o v e ry responses were past due. After not receiving responses, the City filed a motion
P a g e 2 of 28

to compel on October 30, 2008 [Entry #22]. United subsequently provided responses in w h ic h it claimed, inter alia, that the documents sought were either not relevant or p ro te c te d from discovery by the attorney-client privilege and/or work product doctrine. On June 17, 2009, United provided a 53-page privilege log that identified documents in its files for which it asserted a privilege. In response to the 53-page privilege log, the City filed its Second Motion to C o m p e l on July 24, 2009 [Entry #32], on which Judge Rogers held a hearing on S e p te m b e r 14, 2009. By order dated September 28, 2009 [Entry #41], Judge Rogers d ire c te d the parties to meet and confer regarding the privilege log, which he found failed to comply with Fed. R. Civ. P. 26 and which "clearly provides less than sufficient i n f o r m a t io n from which a determination can be made as to the applicability of a p riv ile g e ." The order provided that if the parties were unable to resolve the dispute, that U n ite d was to amend its privilege log to be in compliance with Fed. R. Civ. P. 26(b)(5)(ii) to allow the City and the court to properly evaluate the privilege asserted. After the parties were unable to resolve the dispute, United provided an amended 1 2 -p a g e privilege log that the City received on October 14, 2009. Deeming the amended p riv ile g e log to be substantially the same as the original 53-page privilege log the court f o u n d to be inadequate, the City filed its Third Motion to Compel on October 21, 2009 [ E n try #45], which is presently before the court. A c c o rd in g to the City, it requested reimbursement for its ongoing ultimate net lo s s e s from United in 2003, but United did not reimburse those losses, claiming various
P a g e 3 of 28

reasons including the City's alleged failure to have adequate documentation of hours b ille d and alleged overcharges by the City's attorneys. Early in the litigation between the C ity and the NAACP, United retained outside attorneys to review bills from the City's a tto rn e ys and to communicate with the City on why United was not reimbursing the City f o r its expenses in a timely manner. Those same attorneys sent correspondence to the C ity's third party administrator and to the City in connection with United's position on its v a rio u s reasons for not reimbursing the City and communicated to the City that the matter w a s primarily an equitable matter and that the City should receive only a portion of the a m o u n t of expenses it claimed. Those same attorneys communicated with United and its r e i n s u r e r in connection with the nature and merits of the Underlying Suit against the City, th e amount of the expenses for which the City was seeking reimbursement, and their o p i n io n s on coverage issues. As a result of those communications, United and its

re in s u re r set reserves for their anticipated loss exposure for damages, but refused to re im b u rs e the City for its expenses. The Underlying Suit continued until February of 2006. From May 2003, through 2 0 0 6 , the City claims it spent a total of $637,503.15 defending itself in the Underlying S u it. The City argues its sought to be reimbursed for its ultimate net losses, but that d u rin g these years, United did not pay any money to the City, including losses that it did n o t dispute. According to the City, in December 2006, United made an offer to pay $ 3 0 9 ,1 1 0 .5 3 to settle all the City's claims for ultimate net losses, which offer the City re je c te d . The City filed this action in February 2008 for breach of contract and bad faith
P a g e 4 of 28

against United. A year later, in February 2009, United made an offer of judgment to the C ity in the amount of $425,148.77, which offer the City rejected. On May 1, 2009, United p a id the City $346,734.41 with the explanation that the amount of approximately $ 2 1 5 ,0 0 0 claimed by the City from United was the only amount in dispute. During the approximate six year period in which United refused to reimburse the C it y for any of its ultimate net losses, United retained two law firms to adjust the City's c l a im s . United claims that all communications between it and those law firms are p ro te c te d by the attorney-client privilege. United likewise has refused to produce any c o m m u n ic a tio n s addressed either directly or through copies to its reinsurer. A f te r the hearing on the City's Motion to Compel, the court directed United to p ro v id e a complete set of the documents for which it claims a privilege for the court's in c a m e ra review. The court has reviewed the documents and has determined that some of th e documents are properly discoverable. 2. A n a l ys i s

G e n e r a l l y, parties in civil litigation enjoy broad discovery, as detailed in Fed. R. C iv . P. 26(b)(1): P a rtie s may obtain discovery regarding any nonprivileged matter that is re le v a n t to any party's claim or defense-including the existence, d e s c rip tio n , nature, custody, condition, and location of any documents or o th e r tangible things and the identity and location of persons who knows of a n y discoverable matter.... Relevant information need not be admissible at th e trial if the discovery appears reasonably calculated to lead to the d is c o v e ry of admissible evidence.

P a g e 5 of 28

Fed. R. Civ. P. 26(b)(1).

"[T]he discovery rules are given `a broad and liberal

tre a tm e n t.'" Nat'l Union Fire Ins. Co. of Pittsburgh, P.A. v. Murray Sheet Metal Co. Inc., 9 6 7 F.2d 980, 983 (4th Cir.1992) (quoting Hickman v. Taylor, 329 U.S. 495, 507 (1947)). T h e discovery sought must be relevant, which means that the information sought must be " `a n y matter that bears on, or that reasonably could lead to other matter that could bear o n , any issue that is or may be in the case.'" Hickman, 329 U.S. at 501. It is against the backdrop of broad discovery that claims are privilege are e v a lu a te d . United claims the information withheld is protected by the attorney-client p riv ile g e by virtue of its communications with two law firms concerning the re im b u rs e m e n t of fees and costs to the City. United claims that it was retained as

c o v e ra g e counsel and was not involved in the defense and settlement of the Underlying L a w s u it, but instead: "sought to obtain the defense invoices supporting the City's claim f o r reimbursement; sought information about the experts whose fees were submitted for re im b u rs e m e n t; sought information about the settlement; and, attempted to negotiate a re s o lu tio n of this coverage dispute with the City." It claims the work it performed has b e e n in connection with the coverage dispute and in anticipation of the present coverage litig a tio n . The City argues that the attorney-client privilege is not applicable in first-party b a d faith claims because the insurer's thoughts and knowledge are central to the case. Some courts have held that, in essence, the attorney-client privilege is not a p p lic a b le in a case of bad faith. The Supreme Court of Ohio held that evidence of bad f a ith is not worthy of protection in a first party bad faith claim. Boone v. Vanliner
P a g e 6 of 28

Insurance Company, 744 N.E.2d 154 (Ohio 2001)("in an action alleging bad faith denial o f insurance coverage, the insured is entitled to discover claims file materials containing a t t o rn e y-c lie n t communications related to the issue of coverage that were created prior to th e denial of coverage").1 See also In re Bergeson, 112 F.R.D. 692, 697 (D. Mont.

1 9 8 6 )(a p p l yi n g Montana law); Silva v. Fire Ins. Exch., 112 F.R.D. 699 (D. Mont. 1 9 8 6 )(a p p lyin g Montana Law). These opinions, in essence, find a per se waiver of p riv ile g e in a first-party bad faith action. H o w e v e r, other courts have found no per se waiver of the attorney-client privilege o n mere allegations of bad faith. Tackett v. State Farm Fire and Casualty Ins. Co., 653 A 2 d 254,260 (Del. 1995)(first requiring in camera inspection and recognizing a waiver of th e privilege if the insurer relies on the advice of counsel defense); Squealer Feeds and L ib e rty Mutual Ins. Co., 530 N.W.2d 678 (Iowa 1995)(looking at the nature of the re la tio n s h ip of the parties ­ adversarial ­ rather than the nature of the claim); Clausen v. N a tio n a l Grange Mut. Ins. Co., 730 A.2d 133 (Del. Super. 1997)(must present factual b a s is adequate to support good faith belief materials establishing claim may be revealed t h r o u g h discovery); Palmer v. Farmers Ins. Exchange, 861 P.2d 895, 906 (Mont. 1993); B a rry v. USAA, 989 P.2d 1172, 1176 (Wash. App. 1999)(underinsured motorist claim in v o lv e d adversarial relationship); Ring v. Commercial Union Ins. Co., 159 F.R.D. 653 ( M .D . N.C. 1995)(appears to reject blanket exception to the attorney-client privilege and re q u ire a prima facie case of bad faith before allowing discovery). The only exception to
1

The Boone court limited its holding to pre-coverage denial. 744 N.E.2d at 158.
P a g e 7 of 28

the attorney-client privilege recognized by the South Carolina Supreme Court includes c o m m u n ic a tio n s in furtherance of tortious or fraudulent conduct. See Doster, infra. T h e South Carolina Supreme Court recognized a cause of action for bad faith in an in s u r e r ' s handling of a first party claim in Nichols v. State Farm Mutual Automobile Ins. C o ., 306 S.E.2d 616, 619 (S.C. 1983). The court adopted the line of cases following G ru e n b e rg v. Aetna Ins. Co., 510 P.2d 1032 (Cal. 1973) recognizing an "implied c o v e n a n t of good faith and fair dealing that neither party will do anything to impair the o th e r's rights to receive benefits under the contract." Nichols, 306 S.E.2d at 618. The bad f a ith claim is an action sounding in contract. See Diane Carter v. American Mut. Fire Ins. C o ., 307 S.E.2d 227 (S.C. 1983); Brown v. South Carolina Ins. Co., 324 S.E.2d 641, n.4 (S .C . App. 1984). Therefore, a bad faith claim is available to an insured so long as there is a binding contract. See Cock-N-Bull Steak House, Inc. v. Generali Ins. Co., 466 S.E.2d 7 2 7 , 730 (S.C. 1996); Brown, 324 S.E.2d at 646. S o u th Carolina clearly recognizes a "special" relationship between an insurer and its insured. While it does not appear that South Carolina courts have qualified the re la tio n s h ip between an insurer and its insured as a fiduciary relationship,2 see Pitts v. J a c k s o n Nat. Life Ins. Co., 574 S.E.2d 502,507 (S.C. App. 2002), they clearly have c h a ra c te riz e d the relationship as "special."

"A confidential or fiduciary relationship exists when one imposes a special confidence in another, so that the latter, in equity and good conscience, is bound to act in good faith and with due regard to the interests of the one imposing the confidence. Pitts v. Jackson Nat. Life Ins. Co., 574 S.E.2d 502 (S.C. App. 2002).
2

P a g e 8 of 28

Also, South Carolina recognizes the public policy of promoting confidence in the s e c re c y of confidential disclosures made by the client within the attorney-client re la tio n s h ip .3 State v. Doster, 284 S.E.2d 218 (S.C. 1981). As stated in Doster, however, th e privilege is to be strictly construed. Id. at 219. Also, as set forth in Doster, "[n]ot e v e ry communication within the attorney and client relationship is privileged. The public p o lic y protecting confidential communications must be balanced against the public in te re s t in the proper administration of justice." Id. at 220. See also Ross v. Medical Univ. o f South Carolina, 453 S.E.2d 880, 884 (S.C. 1994) (stating "privilege is not absolute" a n d citing language in Doster). The privilege does not extend to communications in f u rth e ra n c e of criminal tortious or fraudulent conduct. Doster, 284 S.E.2d at 220. A c c o rd in g ly conflicting policies exist in a bad faith claim: The time-honored attorneyc lie n t privilege and the duty of good faith and fair dealing an insurer owes to its insured in v o lv in g this "special" relationship. An insurer's thoughts and knowledge are at the c e n te r of a claim for bad faith. An insurance company sued for bad faith shall be judged b y evidence before it at the time it denied the claim or if the insurance company did not s p e c if ic a lly deny the claim by the evidence it had before it at the time the suit was filed. H o w a rd v. State Farm Mut. Auto Ins. Co., 450 S.E.2d 582,584 (S.C. 1994).

The essential elements giving rise to the attorney-client privilege include (1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal adviser, (8) except the protection be waived." Doster, 284 S.E.2d at 219-220 (citing 8 Wigmore, Evidence § 2292 (McNaughton rev. 1961).
3

P a g e 9 of 28

Under South Carolina law, lack of waiver is a necessary element to establish the a tto rn e y-c lie n t privilege. Under South Carolina law, the waiver may be explicit or a w a iv e r may be implied by making communications with counsel an issue. See Floyd v. F lo yd , 615 S.E.2d 465,484 (S.C. App. 2005) (implied waiver of privilege by making c o m m u n ic a tio n s with counsel an issue). However, a waiver must be "distinct and u n e q u iv o c a l." See State v. Thompson, 495 S.E.2d 437, 439 (S.C. 1998) (citing State v. H ito p o u lu s , 309 S.E.2d 747, 749 (S.C. 1983)). T h e approach first espoused in Hearn v. Rhay, 68 F.R.D. 574 (E.D. Wash. 1975) s e ts forth a frame work that provides a balance between the two competing policies of a tto rn e y-c lie n t privilege and the administration of justice and is consistent with e s ta b lis h e d South Carolina law. Additionally, the Hearn approach is the most widely a c c e p te d approach. See Lorenz v. Valley Forge Ins. Co., 815 F.2d 1095 (7th Cir. 1987); L e e , 347 P.3d at 406 (extensive discussion of the differing approaches). The privilege is " in te n d e d as a shield, not a sword." GAB Business Services, Inc. v. Syndicate, 627, 809 F .2 d 755, 762 (11th Cir. 1987). The undersigned finds there is no per se waiver of the a tto rn e y client privilege simply by a plaintiff making allegations of bad faith. However, if a defendant voluntarily injects an issue in the case, whether legal or factual, the insurer v o lu n ta ry waives, explicitly or impliedly, the attorney-client privilege. Lorenze, 815 F.2d a t 1098. Thus, "voluntarily injecting" the issue is not limited to asserting the advice of c o u n s e l as an affirmative defense. A party's assertion of a new position of law or fact m a y be the basis of waiver.
P a g e 10 of 28

As expounded by the Arizona Supreme Court in State Farm Mut. Auto. Ins. Co. v. L e e , 13 P.3d 1169 (Ariz. 2000), "if State Farm were merely asking its expert witness to e v a lu a te the reasonableness of its conduct under the statutes, the case law, and the policy la n g u a g e , State Farm would not have put counsel's advice to the claims managers at is su e ; nor would Plaintiffs need to know what the claims managers actually believed . . . to prove that State Farm's position was not objectively reasonable." But "when a litigant s e e k s to establish its mental state by asserting that it acted after investigating the law and re a c h in g a well-founded belief that the law permitted the action it took, then the extent of its investigation and the basis for its subjective evaluation are called into question." Turning to the matter at hand, the City asserts that it has presented a prima facie c a s e of bad faith. It claims evidence of bad faith can be shown from United's violations of S o u th Carolina's Improper Claim Practices Act. See S.C. Code Ann. § 38-59-20;

G a s k in s v. Southern Farm Bureau Cas. Ins. Co., 581 S.E.2d 169 (S.C. 2003). At the very le a s t, the City claims it can present prima facie evidence that United engaged in unlawful c la i m s practices of (1) knowingly misrepresenting to the City pertinent facts or policy p r o v is io n s relating to coverages at issue or providing deceptive or misleading information w ith respect to coverages, and (2) offering to settle claims for an amount less than the a m o u n t otherwise reasonably due or payable based upon the possibility or probability that th e City would be required to incur attorneys' fees to recover the amount reasonably due o r payable and unreasonable delay in reimbursement of amounts due. See S.C. Code A n n . § 38-59-20.
P a g e 11 of 28

The City cites to the record for support that United and its counsel have given in c o n s is te n t facts and positions on which policy provisions applied to the City's claim. In J u ly 2003, United employee Janet Brittingham wrote a reservation of rights letter stating U n ite d would cover the loss for the Underlying Suit under its comprehensive general lia b ility policy. However, Ms. Brittingham changed her position a year later in August 2 0 0 4 and stated the loss was covered under the public officials policy. The difference b e tw e e n the comprehensive general liability policy and the public officials policy is that th e former does not include an express exclusion for equitable relief while the latter does. T h e only significant event that occurred between the reservation of rights letter and the e -m a il was the South Carolina Supreme Court's decision of Helena Chemical Co. v. A llia n z Underwriters Ins. Co., 594 S.E.2d 455 (S.C. 2004), in which the court found that th e re was no distinction between equitable relief and compensatory damages in an in s u ra n c e policy absent an express exclusion in the policy. Thereafter, United's attorneys c l a i m e d that it did not owe the City for equitable defense costs because equitable relief w a s expressly excluded from the policy in the public officials policy. That position was re p e a te d in United's counterclaim and its answers to the Local Rule 26.03 Interrogatories f ile d in this lawsuit. When questioned about the change in policy coverage, Ms. B rittin g h a m testified in her deposition that the communication stating the change to the p u b lic officials policy was "a mistake" and that the Underlying Suit had always been c o v e re d under the comprehensive general liability policy. She could not recall whether a n yo n e else told her to notify the City of the change in policy coverage. The City
P a g e 12 of 28

contends that such evidence shows United has engaged in misleading conduct designed to c a u s e it to believe that equitable relief was expressly excluded from United's coverage. Further, the City argues that United has not dealt with it in good faith as a first p a rty insured in responding toits request for reimbursement of its ultimate net losses. The C it y claims that throughout the six years that United did not pay any money to it and c o n tin u e d to offer significantly less than what the City believes was due in an effort to f o rc e the City to settle the case. For example, in December 2006, United made an offer to p a y $309,110.53 to settle all the City's claims for ultimate net losses. The City rejected th a t offer. In February 2009, United made an offer of judgment for $425,148.77 in full a n d complete settlement of all the City's claims. The City rejected that offer. In May 2009, United actually paid what it considered to be the City's undisputed u ltim a te net losses by tendering a check in the amount of $346,734.41. Since that time, U n ite d has tried to narrow the scope of the City's claims in this action by repeatedly c h a ra c te riz in g them to involve only the remaining $215,795.74 "disputed amount" the C ity incurred in defending the NAACP's motion for preliminary injunction/appeal and a tte n d a n t settlement negotiations. However, the undersigned's review of the City's

c o m p la in t, the briefing and the records in this case reveals the case is more properly v ie w e d from the City's perspective as one for United's alleged breach of contract and bad f a it h in refusing and delaying payment and refusal to negotiate in good faith. When

v ie w e d through that lens, the documents sought in the City's first, second and th ird /in s ta n t motion to compel relating to the timing, delay, and reasoning behind
P a g e 13 of 28

United's failure to reimburse the City are clearly discoverable under Fed. R. Civ. P. 26 a n d 34. F o r the purposes of the motion to compel, the court finds that the City has p re s e n t e d a prima facie case of bad faith. United asserts that it does not rely on the advice o f counsel as an affirmative defense and, therefore, there has been no waiver of its a tto rn e y-c lie n t privilege. As the proponent of the privilege, United has the burden of e s ta b lis h in g the applicability of the privilege. In re Grand Jury Proceedings, 33 F.3d 342, 3 5 2 (4th Cir. 1994). Included within this task is the burden of establishing no waiver of th e privilege. As discussed above, injecting issues of law or fact into the case can c o n s titu te an explicit or implied waiver. A review of the Answer to the Complaint filed by U n ite d reveals a number of defenses asserted in addition to the denial of the various f a c tu a l allegations contained in the City's Complaint. Defenses asserted include, but are n o t limited to, that "United National and its representatives have acted reasonably and in g o o d faith at all times herein and therefore Plaintiffs are barred from any recovery in this a c tio n " ; preclusion of coverage for loss and expenses incurred in connection with claims f o r declaratory and injunctive relief; preclusion of coverage to the extent that the City f a ile d to allocate loss payments and/or associated defense expenses between uncovered a n d covered claims; preclusion of coverage for lack of an "occurrence" or "intended and e x p e c te d " injury; preclusion of coverage for reimbursement of defense expenses that are u n n e c e s s a ry or unreasonable; preclusion of coverage to the extent that the City failed to c o o p e ra te with United; and others. United argues that its role was not as a "claims
P a g e 14 of 28

adjuster," but as coverage counsel. The City retorts that United's claims are contradicted b y its claims adjuster Ms. Brittingham who testified the attorneys were acting in her p la c e . Further, Ms. Brittingham testified that United retained the attorneys because of e s c a la tin g expenses and because they wanted the attorneys to take out whatever might a p p ly to declaratory injunctive relief. The attorneys also communicated with the third p a rty administrator and directly with the City in connection with bills and adjustments. The undersigned has reviewed each document submitted by United for in camera re v ie w . Many of the documents do not contain information ordinarily protected by the a tto rn e y-c lie n t privilege. To the extent that a document does contain information n o rm a lly protected by the attorney-client privilege, United fails to meet its burden of e s ta b lis h in g protection by failing to establish a lack of waiver. By asserting the defenses in its Answer, it has injected into this case the issues of law and fact contained in the d o c u m e n ts for which it seeks protection. While this ruling amounts to a virtual per se w a iv e r of the privilege in this case, this result is based on the facts and issues presented b y United in its Answer and its failure to meet its burden as to the applicability of the p riv ile g e with this in mind. Therefore, the court grants the City's motion to compel as to th e documents in Section 1 of 2 United provided for in camera review, specifically d o c u m e n ts Bates-numbered 578­590, 624 (and subparts) ­ 626, 629­631, 635­658, 663, 6 6 9 ­ 6 7 1 , 676, 678,­679, 682­683, 686­705, 708­714, 717­723, 732­749, 752­760, 763­765, 767­776. After the City reviews the documents United produces pursuant to th is order, the court will entertain the City's request to conduct depositions or further
P a g e 15 of 28

discovery out-of-time with respect to the information gleaned, if necessary.

Such a

re q u e s t should be made by motion and filed by September 30, 2010, absent a request for a n extension for good cause. With respect to the documents in Section 2 of 2 United provided for in camera re v ie w relating to reinsurance and reserve information, the court finds that a showing of re le v a n c e for this information has not been made at this time. Therefore, the City's m o tio n to compel is denied as to these documents Bates-numbered 598­628, 632­634, 6 5 9 ­ 6 6 8 , 675, 677, 680­681, 715­716, 724­731, 766, 958-961, 982­983, 998, 1014­1039. By consent of the parties, all communications identified on United's privilege log th a t post-dated the City's filing of this lawsuit on February 27, 2008, need not be p ro d u c e d . F o r the foregoing reasons, the City's motion to compel [Entry #45] is granted in p a rt and denied in part. Accordingly, United is directed to produce to the City unredacted c o p ie s of the Section 1 of 2 documents no later than September 8, 2010. B. U n ite d 's Motion for Attorneys' Fees 1. B a c k g ro u n d

A s noted above, prior to the undersigned's involvement in this case, the parties f ile d several motions to compel discovery. Specifically, United filed motions to compel o n October 29, 2008 [Entry #21] and on July 8, 2009 [Entry #31], and the City filed a m o tio n to compel on October 30, 2008 [Entry #22] and on July 24, 2009 [Entry #32].
Page 16 of 28

After briefing, Judge Rogers noticed a hearing for and heard argument on the four m o tio n s on September 14, 2009. On September 28, 2009 [Entry #41], he issued an order f in d in g as moot United's motion to compel [Entry #21] and the City's motion to compel [ E n try #22], and granted in part United's motion to compel [Entry #31] and the City's m o tio n to compel [Entry #32]. Judge Rogers determined the City should pay United's c o s ts and fees attributable to the City's motion to compel [Entry #32], noting that "[i]f U n ite d chooses to pursue these costs and fees, it shall submit its request and affidavit w ith in fifteen (15) days of the date of this order." [Entry #41] By motion dated October 1 3 , 2009 [Entry #43], United sought reimbursement of $8,731.34 for its attorneys fees a n d costs allegedly attributable to the City's motion to compel. T h e City filed an opposition to the motion for attorneys' fees, and the matter was re f e rre d to the undersigned by order dated April 12, 2010. After reviewing the record and th e briefs and considering the arguments of counsel, the court grants in part and denies in p a rt the motion for attorneys' fees. United's request for fees and costs may be categorized as follows: A tto r n e y C a ta lin a J. Sugayan D a v id M. Dolendi J u lie L. Simpson E d w a rd K. Pritchard H o u r ly Rate $395.00 $275.00 $260.00 $ 2 0 0 .0 0 # of Hours Billed 7 8.5 1.1 15 Total Cost $2,765.00 $2,337.50 $286.00 $3,000.00

F e e s /D is b u r s e m e n ts G a s to Florence, hearing transcript and access to online court records: T ota l
P a g e 17 of 28

$ 3 4 2 .8 4 $8,731.34

31.6

Mr. Pritchard serves as local counsel. Ms. Sugayan has been admitted pro hac vice. M r. Dolendi and ms. Simpson work in Ms. Sugayan's firm, but are not admitted pro hac v ic e . In determining what constitutes a reasonable number of hours and the appropriate h o u rly rates (i.e., in calculating the lodestar fee), the court considers the following twelve f a c to rs : (1) the time and labor expended; (2) the novelty and difficulty of the questions ra ise d ; (3) the skill required to properly perform the legal services rendered; (4) the a tto rn e y's opportunity costs in pressing the instant litigation; (5) the customary fee for l i k e work; (6) the attorney's expectations at the outset of the litigation; (7) the time lim ita tio n s imposed by the client or circumstances; (8) the amount in controversy and the re s u lts obtained; (9) the experience, reputation and ability of the attorney; (10) the u n d e s ira b ility of the case within the legal community in which the suit arose; (11) the n a tu re and length of the professional relationship between attorney and client; and (12) a tto rn e ys ' fees awards in similar cases. Barber v. Kimbrell's, Inc., 577 F.2d 216, 226 (4th C ir. 1978); Jackson v. Estelle's Place, LLC, 2010 WL 3190697. While the court must c o n s id e r all twelve of the factors, the court is not required to rigidly apply these factors, a s not all may affect the fee in a given case. "[T]hese factors should be considered in d e te rm in in g the reasonable rate and the reasonable hours, which are then multiplied to d e te rm in e the lodestar figure which will normally reflect a reasonable fee." E.E.O.C. v. S e r v i c e News Co., 898 F.2d 958, 965 (4th Cir. 1990). Further, Local Rule 54.02(A)

P a g e 18 of 28

provides that attorneys' fee petitions must comply with Barber "and shall state any e x c e p tio n a l circumstances and the ability of the party to pay the fee." The court evaluates United's request for attorneys' fees in light of the foregoing a u t h o r i t y. 2. Arguments of Counsel a) The time and labor expended

T h e starting point for establishing the proper amount of an award is the number of h o u r s reasonably expended, multiplied by a reasonable hourly rate. Blum v. Stenson, 465 U .S . 886, 888 (1984). When a party prevails on only some of the claims made, the n u m b e r of hours may be adjusted downward. The number of hours must obviously be a d ju s te d to delete duplicative or unrelated hours. The number of hours must be reasonable a n d must represent the product of "billing judgment." 461 U.S. at 437. I n Edward K. Pritchard's affidavit, which accompanied United's Request for A tto rn e ys ' Fees & Costs, he candidly states his invoices "are true and accurate reflections o f all fees and expenses incurred in bringing United National's motion to compel and in d e f e n d in g the motion to compel of [the City]...hearings for both of which motions were h e ld before The Honorable Thomas E. Rogers on September 14, 2009." See Pritchard A f f ., ¶ 15. T h e City contends that Mr. Pritchard's hours should be reduced to the actual a m o u n t of time attributable to the City's Motion to Compel. According to Mr. Pritchard, h e is claiming a total time of 15 hours billed on all outstanding motions. Of the 15 hours,
P a g e 19 of 28

Mr. Pritchard claimed 6.40 hours for attending a hearing he would have attended in any e v e n t because of United's then-pending Motion to Compel. He also claimed $155.65 for m ile a g e and $186.15 for the cost of the transcript for the hearing. The remaining 8.6 h o u rs claimed are for preparation for both the City's motions and United's motions. The C ity contends the 8.6 hours should be divided equally among the motions. U n ite d ' s Chicago counsel also submitted fees for reimbursement, some of which in c lu d e d time for work on United's motion to compel. For example, the City highlights b illin g entries describing the services as: "Call with local counsel regarding mediation a n d City's Motion to Compel;" "Review City's Motion to Compel and Response to U n ite d 's Motion to Compel and assess issues;" and "Study court order on Motions to C o m p e l." T h e City argues that the fees of Mr. Pritchard should be reduced to the amount of tim e attributable to the City's motion to compel. The City argues that the 6.40 hours c la im e d by Mr. Pritchard for attending a hearing in Florence, South Carolina should not b e paid by the City because Mr. Pritchard would have been required to attend the hearing re g a rd le s s of the City's motion to compel because of United's outstanding motion to c o m p e l . In the motion for attorneys' fees and costs, Mr. Pritchard claims he accurately s ta te d his travel time, in addition to the time that he spent in Judge Rogers' courtroom. M r. Pritchard does not agree that any of his time spent traveling or in the courtroom s h o u ld be reduced.

P a g e 20 of 28

The City further argues that the remaining hours claimed for the preparation of b o th the City's motions and United's motions should be divided equally among the m o tio n s . United disagrees and argues the attorney fees requested by Mr. Pritchard for d e f e n d in g the City's motion to compel are reasonable because he would have had to s p e n d the same amount of time preparing to respond to the City's motion to compel re g a rd le s s of the time spent in preparation for United's motion to compel. United further a s s e rts that a close reading of the parties' motions and responses reveals that the material a t issue was so intertwined as to be impossible to separate the time allocated to each m o tio n . Therefore, United contends Mr. Pritchard should be awarded for the entire time h e spent defending this matter, in addition to his costs. b) The results obtained

T h e City concedes the court allowed United to request attorneys' fees attributable to the City's motion filed July 29, 2009. However, the City asserts that in the same order th e court found that United's privilege log was inadequate and permitted the City an o p p o rtu n ity to make a second Motion to Compel if necessary. The City contends some f e e adjustment downward should be considered for the results actually obtained by U n ite d . United argues that the court should not consider fee adjustment downward, b e c a u s e United obtained a favorable result and the court allowed it to request the a tto rn e ys ' fees attributable to the City's motion filed on July 29, 2009. United disputes th e City's argument that the fee should be adjusted downward because of the court's
P a g e 21 of 28

ruling. United argues the court's order, which allows the City to file a motion to compel if th e privilege log is not sufficient, does not negate the favorable result obtained by United. M o re o v e r, initially the City requested costs and fees relating to its motion to compel, w h i c h was denied by the court and, instead, costs and fees were awarded to United. T h e re f o re , United argues this factor weighs heavily in favor of awarding attorneys' fees a n d costs to counsel for United. c) The experience, reputation, and ability of the attorney

T h e City has no dispute in connection with the $200 hourly rate charged by Mr. P ritc h a rd . The affidavits support his hourly rate. However, the City argues there is no s u p p o rt for the hourly rates charged by United's other counsel except a statement that the a m o u n t is customary for attorneys in Chicago, Illinois. The party seeking recovery of attorneys' fees bears the burden of "[d]ocumenting th e appropriate hours expended and hourly rates." Hensley v. Eckerhart, 461 U.S. 424, 4 3 7 (1983). The first step in setting a reasonable fee is determining the appropriate hourly r a t e ." Plyler v. Evatt, 902 F.2d 273, 277 (4th Cir. 1990). The reasonableness of the a t t o r n e y's hourly rate is determined by the "prevailing market rates in the relevant c o m m u n ity." Rum Creek Coal Sales, Inc. v. Caperton, 31 F.3d 169, 175 (4th Cir. 1994) (q u o t in g Blum v. Stenson, 465 U.S. 886, 895 (1984)). "The court must assess the e x p e rie n c e and skill of the prevailing parties' attorneys and compare their rates to the ra te s prevailing in the community for similar services by lawyers of reasonably c o m p a ra b le skill, experience and reputation." Alexander S. v. Boyd, 929 F.Supp. 925,
P a g e 22 of 28

935 (D.S.C. 1995). The relevant market for determining the prevailing rate is ordinarily th e community in which the court where the action is prosecuted sits. See National W ild lif e Federation v. Hanson, 859 F.2d 313 (4th Cir. 1988). Here, the applicable market ra te is the prevailing rate for lawyers of comparable skill, experience, and reputation in S o u th Carolina. M s . Sugayan appears to have comparable experience and skill to local attorney Mr. P ritc h a rd . The City contends that her hourly rate should be adjusted to $200 per hour to m e e t the rates prevailing in the community for similar services by lawyers of reasonably c o m p a ra b le skill, experience, and reputation. That rate equals the hourly rate United is p a yin g Mr. Pritchard for his services in South Carolina. United argues that although the starting point for selecting the proper rate is often th e community in which the court sits, "[t]he complexity and specialized nature of a case m a y mean that no attorney, with required skills, is available locally." National Wildlife F e d e ra l v. Hanson, 859 F.2d 313, 317 (4th Cir. 1988) ((quoting Chrapliwy v. Uniroyal, In c ., 670 F.2d 760, 768 (7th Cir. 1982) (internal citations omitted)). In Chrapliwy, the c o u rt set forth the following two questions to be asked in determining whether an e x c e p tio n to the general rule should be granted: (1) whether the services of like quality tru ly available in the locality where the services are rendered, and (2) whether the party c h o o s in g the attorney from elsewhere act reasonably in making that choice. Id. at 769. W h ile United does not directly address the factors set out in Chrapliwy, it argues Ms.

P a g e 23 of 28

Sugayan's law firm, Sedgwick, Detert, Moran & Arnold LLP is a specialized firm, which is extremely familiar with United, and thus, is very efficient with its time. d) Attorneys' fees awards in similar cases.

W ith regard to awards in similar cases, the City directs the court's attention to In re M b a k p u o , 52 F.3d 321 (Table), 1995 WL 224050 (4th Cir. 1995) (unpublished), which h e ld the amount of $1,439.50 was a reasonable amount for attorneys' fees and costs for a m o tio n to compel. United points to no authority or attorneys' fees awards in similar cases. 3) A n a l ys i s

T h e parties do not address the remaining Barber factors. The court notes that the is su e s addressed in defending this particular motion to compel were not of such a novel a n d difficult variety to require an attorney with a highly specialized practice. Similarly, re s p o n d in g to motions to compel is a typical task for a litigation attorney, and generally d o e s not require the type of specialized skill that justifies higher rates. It also does not a p p e a r that any unusual time limits were imposed on United in defending the motion to c o m p e l. On the other hand, the court notes that United and its Chicago counsel have s h a re d an ongoing professional relationship and that the Chicago counsel are intimately f a m ilia r with the facts in the underlying action. However, it is not clear this knowledge w a s necessary in defending the motion to compel at issue. A f te r considering all applicable Barber factors, the undersigned finds that an h o u rly rate of $200 is appropriate for Mr. Pritchard and United's Chicago counsel. This ra te is representative of the local market rate for defending a motion to compel and for
P a g e 24 of 28

lawyers with a similar level of skill, experience, and reputation.

The court is not

p e rs u a d e d that the defense of the motion to compel required specialized skill to justify a h ig h e r market rate. From a review of the invoices, it is clear that United's Chicago counsel drafted the re s p o n s e to the City's motion to compel, using three lawyers, who spent time conferring w it h each other as well as editing and proofreading one another's work, for a total of 16.6 h o u rs . The court finds that reimbursement for 10 hours to draft such a response is more th a n reasonable and appropriate considering the nature of the dispute and extent of the b r i e f i n g . In addition, reimbursement for one attorney (Mr. Pritchard) to prepare for and a t t e n d the hearing in this matter is sufficient. Therefore, United is entitled to $2000 for re im b u rs e m e n t of its Chicago counsel, which represents 10 hours at a rate of $200/hour. United is also entitled to reimbursement for the time Mr. Pritchard spent preparing for a n d defending against the City's motion to compel at the hearing. Because Mr.

P ri t c h a r d ' s billing entries include time spent preparing for both United's motion to c o m p e l and the City's motion to compel, United is not entitled to full reimbursement for h is time. The court finds that United is entitled to reimbursement for 2.1 hours Mr. P ritc h a r d spent preparing for the motions hearing on September 13, 2009, and half of the tim e he spent traveling to and attending the motions hearing on multiple motions. Therefore, United is entitled to reimbursement of $1060 for Mr. Pritchard's time, which re p re se n ts 5.3 hours at an hourly rate of $200. Thus, in sum, United is entitled to re im b u rs e m e n t for $3060 for total attorneys fees spent defending the matter.
Page 25 of 28

United is also entitled to half of the costs it spent for Mr. Pritchard's travel to the h e a rin g on the motions, which equals $77.83. United is not entitled to the cost of the h e a rin g transcript, as this was not used to defend against the City's motion to compel. Therefore, the court grants United's motion in part and finds that United is entitled to a tto rn e ys fees' of $3060 and $77.83 in costs for a total of $3137.83. C. P ro te c tiv e Order

S u b s e q u e n t to the July 14, 2010 hearing, United filed a Motion for Protective O rd e r on August 13, 2010 [Entry #83], in which it requests that the court: (1) enter an o rd e r postponing all discovery until there is a ruling on its motion for summary judgment; a n d (2) enter an order preventing the deposition of United's expert until a mutually a g re e a b le time. Considering the representation of United's counsel that the expert d e p o s itio n would be completed by the end of August 2010, the court views unfavorably U n ite d 's untimely motion for protective order which forced the cancellation of its e x p e rt's deposition. On July 14, 2010, the court granted the City's motion to extend the time for d is c o v e ry to allow it to take the deposition of United's expert, over United's objection. D u rin g the course of the hearing, the court inquired when the deposition could be taken. A t that time, the parties agreed to taking the deposition during August 2010, provided U n ite d 's expert could attend. According to the City and undisputed by United, counsel for t h e City requested available August dates for the deposition by email on July 14, but re c e iv e d no response. On July 30, 2010, United's counsel indicated at the summary
P a g e 26 of 28

judgment hearing before The Honorable Terry L. Wooten that United's expert was a v a ila b le in August for his deposition. When the City's counsel later contacted United's c o u n s e l for available August dates, he was told United's counsel was unavailable for the d e p o s itio n until after October 25, 2010. Counsel for the City then noticed the depositions a n d served the subpoena on all counsel of record. United has provided no basis for its request for a protective order, other than a rg u in g that the motion currently before Judge Wooten could potentially dispose of the la w s u it. The potential of a motion to dispose of a lawsuit does not provide a basis for s ta yin g discovery. Furthermore, the court notes that all parties and the court were aware o f the upcoming summary judgment hearing during the July 14, 2010 hearing when the u n d e rs ig n e d granted the motion to extend the scheduling order to allow the expert d is c o v e ry. At that time the parties discussed on the record and agreed, pursuant to the c o u rt's order, to attempt to proceed with the deposition in August. Despite this, United h a s provided no new information or circumstances which would justify staying the case o r granting a protective order. United's motion is therefore denied and it is instructed to c o o p e ra te in scheduling the deposition of its expert as soon as it is feasible. The court d ire c ts the City to provide to United by September 3, 2010 five dates within the month of S e p te m b e r 2010 which suit it to take the deposition of United's expert. United will c h o o s e from those five dates and make its expert available.

P a g e 27 of 28

III.

C o n c lu s io n F o r the foregoing reasons, (1) the City's Third Motion [Entry #45] is granted in

p a r t and denied in part; (2) United's Motion for Attorneys' Fees [Entry #43] is granted in p a rt and denied in part; and (3) United's Motion for Protective Order filed August 13, 2 0 1 0 [Entry #83] is denied. IT IS SO ORDERED.

A u g u s t 27, 2010 F lo re n c e , South Carolina

S h iv a V. Hodges U n ite d States Magistrate Judge

P a g e 28 of 28