Premier Harvest et al v. AXIS Surplus Insurance Company et al
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)
THE HONORABLE JOHN C. COUGHENOUR
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
PREMIER HARVEST LLC, et al.,
CASE NO. C17-0784-JCC
AXIS SURPLUS INSURANCE
COMPANY, et al.,
This matter comes before the Court on Defendant Axis Surplus Insurance Company’s
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
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–
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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.)
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).
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
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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.
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.”
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
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
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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.
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.
The Court DENIES Defendant’s motion to quash (Dkt. No. 52).
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
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
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).
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.
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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.
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.
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.
DATED this 5th day of December 2017.
John C. Coughenour
UNITED STATES DISTRICT JUDGE
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