Premier Harvest et al v. AXIS Surplus Insurance Company et al

Filing 58

ORDER DENYING Defendant's 52 Motion to Quash and GRANTING Plaintiff's request for attorney fees (Dkt. No. 54 at 12). Signed by U.S. District Judge John C Coughenour.(TH)

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THE HONORABLE JOHN C. COUGHENOUR 1 2 3 4 5 6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 7 8 9 PREMIER HARVEST LLC, et al., 10 Plaintiffs, 11 CASE NO. C17-0784-JCC ORDER v. AXIS SURPLUS INSURANCE COMPANY, et al., 12 13 Defendants. 14 This matter comes before the Court on Defendant Axis Surplus Insurance Company’s 15 16 motion to quash three discovery subpoenas issued by Plaintiffs to non-parties (Dkt. No. 52); 17 Plaintiffs’ response, which includes a request for attorney fees in responding to Defendant’s 18 motion (Dkt. No. 54); and Defendant’s reply (Dkt. No. 57). Having thoroughly considered the 19 parties’ briefing and the relevant record, the Court DENIES the motion to quash (Dkt. No. 52) 20 and GRANTS Plaintiffs’ request for attorney fees (Dkt. No. 54 at 12) for the reasons explained 21 herein. 22 I. BACKGROUND 23 The Court has described the underlying facts of this case in previous orders and will not 24 repeat them here. (See Dkt. Nos. 43, 50). Following the Court’s order denying Defendant’s 25 motion to dismiss, Defendant made its Federal Rule of Civil Procedure 26(a)(1) initial 26 disclosures, which included a list of persons with discoverable information. (Dkt. No. 55-1 at 2– ORDER C17-0784-JCC PAGE - 1 1 8.) Consultants GT Engineering, Wiss Janey Elstner Associates, and NPC Energy Services 2 (collectively the “consultants”) were on that list. (Id.) Shortly thereafter, Plaintiffs issued 3 discovery subpoenas to the consultants seeking “[a]ll documents . . . referring or relating in any 4 way to [Plaintiffs].” (Dkt No. 53-1 at 2, 5, 8.) Defendant moves to quash the subpoenas on the 5 basis that the consultants are “experts that [Defendant] specifically retained in anticipation of 6 litigation.” (Dkt. No. 52 at 1) (citing Fed. R. of Civ. P. 26(b)(4)(D)); (see Dkt. No. 55-1 at 7) 7 (similar assertion in Defendant’s initial disclosures). In the alternative, Defendant moves to 8 quash the subpoenas on the basis that the consultants possess protected work product or 9 privileged attorney-client communications. (Id.) (citing Fed. R. of Civ. P. 26(b)(3)). Plaintiffs 10 seek attorney fees in responding to Defendant’s motion. (Dkt. No. 54.) 11 II. DISCUSSION 12 A. 13 Federal Rule of Civil Procedure 26(b)(4)(D) provides that absent a showing of Defendant’s Motion to Quash 14 exceptional circumstances, “a party may not . . . discover facts known or opinions held by an 15 expert who has been retained or specially employed by another party in anticipation of litigation 16 or to prepare for trial and who is not expected to be called as a witness at trial.” Similarly, 17 Federal Rule of Civil Procedure 26(b)(3)(A) provides that absent a showing of substantial need, 18 “a party may not discover documents . . . that are prepared in anticipation of litigation or for trial 19 by or for another party or its representative.” Correspondingly, the Court must grant a timely 20 motion to quash a subpoena that requires disclosure of protected matter. Fed. R. Civ. P. 21 45(d)(3)(A)(iii). The party moving to quash bears the burden of persuasion. See, e.g., Jones v. 22 Hirschfeld, 219 F.R.D. 71, 74–75 (S.D.N.Y 2003). 23 Defendant claims that it received anonymous information that Plaintiffs were attempting 24 to intentionally inflate their insurance losses. (Dkt. No. 52 at 2.) Defendant asserts that based on 25 this information it anticipated Plaintiffs’ insurance claim would result in litigation and retained 26 counsel to advise it as to “potential fraud defenses and/or claims and to prepare for anticipated ORDER C17-0784-JCC PAGE - 2 1 litigation regarding these issues.” (Id.) Defendant further asserts that it then retained the 2 consultants to “evaluate the claimed damage in order to assist [counsel] in analyzing the possible 3 fraud and prepar[e] for litigation.” (Id.) On this basis, Defendant claims the consultants’ files are 4 protected from discovery. 5 In order to determine whether an expert was retained “in anticipation of litigation” the 6 Court applies the “because of” standard. U.S. Inspection Services, Inc. v. NL Engineered Sols., 7 LLC, 268 F.R.D. 614, 618 (N.D. Cal. 2010) (citing In re Grand Jury Subp. (Mark Torf/Torf 8 Envtl. Mgt.), 357 F.3d 900, 907 (9th Cir. 2004)). A similar standard applies to dual purpose 9 documents prepared on behalf of a party. U.S. v. Richey, 632 F.3d 559, 568 (9th Cir. 2011). An 10 expert must be retained and/or a document must be prepared because litigation was reasonably 11 anticipated. In making this assessment, the Court must consider the totality of the circumstances. 12 Id.; In re Grand Jury, 357 F.3d at 908. “The [mere] fact that a defendant anticipates the 13 contingency of litigation” is not sufficient to invoke discovery protections. Binks Mfg. v. Nat’l 14 Presto Indus., Inc., 709 F.2d 1109, 1119 (7th Cir. 1983). A defendant must put forward 15 “objective facts establishing an identifiable resolve to litigate prior to the investigative efforts.” 16 Id. 17 Defendant supports its assertion with representations from counsel that Defendant 18 engaged the consultants in anticipation of litigation. (Dkt. No. 53 at 2–3.) It offers nothing else. 19 “Insurance companies are in the business of paying an assured’s just claim.” St. James 20 Stevedoring Co., Inc. v. Femco Mach. Co., 173 F.R.D. 431, 433 (E.D. La. 1997) (internal citation 21 and quotation marks omitted). An investigation of the justness of a claim, whether undertaken 22 internally or through outside consultants, is part of Defendant’s business, even if fraud is 23 suspected. Therefore, more than mere assertions from Plaintiff’s counsel is required from 24 Defendant to convince the Court that it engaged the consultants “because of” litigation. 1 In re 25 26 1 Notably, in all of the cases cited by Defendant, the insurer offered more than mere assertions from counsel to support a claim that once fraud was suspected, litigation was ORDER C17-0784-JCC PAGE - 3 1 Grand Jury, 357 F.3d at 907; Richey, 632 F.3d at 568. Further, Defendant’s previous statements 2 to the Court cut against it assertions. (See Dkt. Nos. 23 at 3, 24 at 2) (Defendant states in 3 previous filings that it retained outside consultants to “evaluate the claimed damage” without 4 reference to anticipated litigation). Therefore, Defendant’s arguments supporting the application 5 of the discovery protections afforded by Federal Rules of Civil Procedure 26(b)(3)(A) and 6 26(b)(4)(D) fail. 7 As to Defendant’s assertion of attorney-client privilege, Defendant neither claims that the 8 consultants worked under the direction of Defendant’s attorney, nor provides sufficient facts for 9 the Court to plausibly conclude that the consultants’ files contain privileged communications 10 with Defendant’s counsel. 2 See Upjohn Co. v. U.S., 449 U.S. 383, 394 (1981); U.S. v. Judson, 11 322 F.2d 460, 462 (9th Cir. 1963). Therefore, Defendant’s arguments in support of discovery 12 protections based on attorney-client privilege similarly fail. 13 The Court DENIES Defendant’s motion to quash (Dkt. No. 52). 14 B. 15 Pursuant to Federal Rule of Civil Procedure 37(a)(5)(A), a party that has failed to block Plaintiff’s Request for Attorney Fees 16 discovery must pay his opponent reasonable fees. The Court may decline to order such an award 17 when the losing party’s conduct was “substantially justified,” the successful party filed their 18 motion before making a good faith attempt to obtain discovery without court action, or doing so 19 20 anticipated. See Chambers v. Allstate Ins. Co., 206 F.R.D. 579, 588 (S.D. W. Va. 2002) (insurer provided the court copies of the documents at issue for in camera review); Ring v. Com. Union 21 Ins. Co., 159 F.R.D. 653, 656 (M.D.N.C. 1995) (insurer provided affidavits indicating that two 22 law enforcement agencies and an independent investigator suspected arson); Lett v. State Farm Fire and Cas. Co., 115 F.R.D. 501, 503 (N.D. Ga. 1987) (insurer provided deposition testimony 23 from special investigator). 2 The Court also notes that in Washington “there is a presumption of no attorney-client 24 privilege” when an insured asserts a claim based on an insurer’s “bad faith in the handling and 25 processing of claims.” Cedell v. Farmers Ins. Co. of Wash., 295 P.3d 239, 246 (Wash. 2013). An insurer can only overcome this presumption upon a showing “that the attorney was providing 26 counsel to the insurer and not engaged in a quasi-fiduciary function” such as investigating or evaluating the claim. Id. Defendants make no such showing. ORDER C17-0784-JCC PAGE - 4 1 would be unjust. Fed. R. Civ. P. 37(a)(5)(A). None of these exceptions apply here. Defendant’s 2 conduct was not substantially justified given the merits of its argument, and Plaintiffs properly 3 sought discovery by subpoena before filing their motion before the Court. Based on these 4 considerations, an award of fees would not be unjust. 5 The Court GRANTS Plaintiffs’ request for attorney fees (Dkt. No. 54 at 12) and 6 DIRECTS Plaintiffs to submit a declaration setting out its attorney fees in responding to 7 Defendant’s motion within ten (10) days of this order. The Court will review the amounts for 8 reasonableness before issuing a final fee award to Plaintiffs. 9 III. 10 CONCLUSION For the foregoing reasons, Defendant’s motion to quash (Dkt. No. 52) is DENIED and 11 Plaintiff’s request for attorney fees (Dkt. No. 54 at 12) is GRANTED. 12 DATED this 5th day of December 2017. 13 14 15 A 16 17 18 John C. Coughenour UNITED STATES DISTRICT JUDGE 19 20 21 22 23 24 25 26 ORDER C17-0784-JCC PAGE - 5

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