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Electric Power Systems International, Inc. v. Zurich American Insurance Co.

United States District Court, E.D. Missouri, Eastern Division

July 26, 2016

ELECTRIC POWER SYSTEMS INTERNATIONAL, INC., Plaintiff,
v.
ZURICH AMERICAN INSURANCE COMPANY, Defendant.

          MEMORANDUM AND ORDER

          CATHERINE D. PERRY, UNITED STATES DISTRICT JUDGE

         In this breach of contract action, plaintiff Electric Power Systems International, Inc. (EPS), claims that its insurer, defendant Zurich American Insurance Company, wrongfully denied coverage on a third-party property damage claim made against EPS. EPS also brings claims of bad faith failure-to-settle and vexatious refusal to pay. Pending before the Court is EPS’s motion to compel in which it claims that Zurich improperly invoked the attorney-client and work product privileges to withhold certain documents from production in discovery. I have reviewed the challenged documents in camera and, based upon my review, the motion to compel will be granted in part and denied in part.

         Background

         In July 2014, EPS was performing labor under a contract it had with Louisville Gas and Electric Company (LGE) when an LGE transformer was damaged. LGE claimed that EPS caused the damage. EPS tendered the LGE claim to Zurich on July 30, 2014. Zurich denied the claim on August 11, 2014.

         On August 22, 2014, Zurich received correspondence from EPS’s legal counsel, advising that EPS was willing to take legal steps and consider all legal avenues available in relation to the denied claim. Brian Lindemann, a Zurich adjuster assigned to the claim, thereafter contacted Zurich’s in-house legal counsel, John Freeman. Zurich eventually retained outside counsel. EPS first received correspondence from Zurich’s outside counsel on January 5, 2015. EPS filed this lawsuit on July 10, 2015.

         During the course of discovery and in response to EPS’s request for production of documents, Zurich asserted the attorney-client and/or work product privilege with respect to information contained in a number of documents from its claim file and claim notes. Zurick produced redacted versions of these documents and a privilege log justifying the redactions. In its motion to compel, EPS challenges the redactions made in 55 pages of these documents, questioning whether the withheld information is truly protected by the asserted privileges. I granted EPS’s request for in camera review, and Zurich produced to me unredacted versions of the documents, identified by Bates numbers, with the originally redacted portions of the documents contained within outlined boxes.

         Discussion

         As the party objecting to discovery on the ground of privilege, Zurich bears the burden of establishing the existence of privilege, whether it be attorney-client or work product. Advanced Pain Ctrs. Poplar Bluff v. Ware, 11 F.Supp.3d 967 (E.D. Mo. 2014). If Zurich meets its burden with respect to attorney-client privilege, the inquiry ends given that the privilege is an absolute bar to production absent waiver. If Zurich shows the information is protected because it is work product, EPS may nevertheless obtain the discovery if it shows a substantial need for the documents and that it cannot otherwise obtain the substantial equivalent of the materials without undue hardship. Fed.R.Civ.P. 26(b)(3)(A)(ii); PepsiCo., Inc. v. Baird, Kurtz & Dobson LLP, 305 F.3d 813, 817 (8th Cir. 2002).

         Attorney-Client Privilege

         State law applies to claims of attorney-client privilege in diversity cases. Baker v. General Motors Corp., 209 F.3d 1051, 1053 (8th Cir. 2000).

         The privilege “protects ‘any professionally-oriented communication between attorney and client regardless of whether it is made in anticipation of litigation or for preparation for trial.’” Lloyd’s Acceptance Corp. v. Affiliated FM Ins. Co., No. 4:05CV1934 DDN, 2012 WL 1389708, at *7 (E.D. Mo. Apr. 23, 2012) (quoting State ex rel. Tillman v. Copeland, 271 S.W.3d 42, 45 (Mo.Ct.App. 2008)).

[W]here legal advice of any kind is sought from a professional legal advisor in his capacity as such, the communications relevant to that purpose, made in confidence by the client, are at his instance permanently protected from disclosure by himself or by the legal advisor except the protection be waived.

Diversified Indus., Inc. v. Meredith, 572 F.2d 596, 602 (8th Cir. 1977) (internal quotation marks and citation omitted). The privilege does not attach unless the communication is between parties bearing the relationship of attorney and client, is made to obtain legal services or advice, and involves the lawyer in his capacity as a lawyer - “not in some other capacity.” Id.; see also United States v. Spencer, 700 F.3d 317, 320 (8th Cir. 2012); Tillman, 271 S.W.3d at 45.

         Communications between a client’s representatives regarding the decision to seek legal advice is not subject to the privilege if it is not a request directed to counsel for the purpose of obtaining such advice. Olga Despotis Trust v. Cincinnati Ins. Co., No. 4:12CV02369 AGF, 2014 WL 3477310, at *3 (E.D. Mo. July 15, 2014). Nor does merely including counsel among the recipients of a document bring the document within the ambit of the attorney-client privilege; the document must be shared in furtherance of the client’s solicitation of legal advice. Lloyd’s, 2012 WL 1389708, at *7 (citing Diversified Indus., 572 F.2d at 609; Monsanto Co. & Monsanto Tech. LLC v. E.I. Du Pont de Nemours & Co., No. 4:09CV686 ERW, 2011 WL 4408184, at *2 (E.D. Mo. Sept. 22, 2011)).

         Communications made by representatives of an insurer for the purpose of facilitating the rendition of legal services to the client are protected by the attorney-client privilege. Navigators Mgt. Co. Inc. v. St. Paul Fire & Marine Ins. Co., No. 4:06CV1722 SNLJ, 2009 WL 465584, at *4 (E.D. Mo. Feb. 24, 2009). These include communications with in-house counsel as well as memorializing such communications. Lloyds, 2012 WL 1389708, at *7-8. Keeping in-house counsel apprised of the business activities of the insurer’s adjuster, however, is not protected. Id. at *7; see also Monsanto Co., 2011 WL 4408184, at *2 (the “attorney-client privilege does not cover client communications that relate only to business or technical data, where the client is not sharing that information in order to solicit legal advice”).

         To the extent Zurich contends that certain redacted portions of the challenged documents are protected by the attorney-client privilege, [1] I have reviewed the documents in camera and find the following portions of the documents not to fall within the attorney-client parameters described above and therefore not to be so protected:

a. Bates 145: the information contained in the Subject line of the email
b. Bates 158: the information contained in the Subject line of the email
c. Bates 168: first redacted box - claim number, but without the accompanying ...

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