BROTHERS PETROLEUM, LLC v. UNDERWRITERS AT LLOYD’S LONDON CIVIL ACTION NO: 06-02836 United States District Court, E.D. Louisiana Filed December 12, 2008 Counsel Joseph Vincent DiRosa, Jr., Joseph Vincent DiRosa, Jr., Attorney at Law, Metairie, LA, for Brothers Petroleum, L.L.C. Patrick J. McShane, Danica Colleen Benbow, J. Dwight LeBlanc, III, Thomas Jackson Bethune, IV, Frilot L.L.C., New Orleans, LA, Michael B. North, Hamlin, Griffin & Kohnke, LLC, Abita Springs, LA, for London Certain Underwriters at Lloyd's Roby, Karen W., United States Magistrate Judge SECTION: “S” (4) *1 Before the Court is a Motion to Compel (R. Doc. 43), filed by the Plaintiff, Brothers Petroleum, LLC (“Brothers”) seeking an order from the Court compelling the Defendant, Underwriters at Lloyd’s London (“Underwriters”) to produce documents responsive to its subpoena duces tecum. Underwriters responded in its Opposition to Motion to Compel (R. Doc. 60), contending that the requested documents are protected work product and subject to attorney-client privilege. Shortly thereafter, the Underwriters sought to file the documents with the Court for the its review. (R. Doc. 64.) The Court granted Underwriters’ request to file the documents for in camera review. (R. Doc. 65.) Brothers then filed a Reply Memorandum in Response to Opposition to Motion to Compel (R. Doc. 68.) The subject motion was heard with oral argument on October 3, 2007. I. Background Brothers filed this action against Underwriters to recover insurance proceeds that Brothers alleges should have been paid for extensive wind and looting damage caused by Hurricane Katrina to its various gas stations and convenience stores in the greater New Orleans area. (R. Doc. 1.) Underwriters’ local agent and independent contractor, Integrity Brokers and Underwriters, Inc. (“Integrity Brokers”), assigned the ASU Group (“ASU”), a second independent contractor, to investigate the insurance claims made by Brothers after Hurricane Katrina. (R. Doc. 60-3, Ex. B, p. 1.) According to Brothers, ASU assigned Jerry Edler (“Edler”) and Audie Friloux (“Friloux”), two independent contractors, to investigate and evaluate Brothers’ insurance claims. Brothers alleges that Edler and Friloux estimated the damage claim to exceed $3,500.000.00. (R. Doc. 43-2, p. 3.) On December 8, 2005, ASU assigned its employee Bruce E. Spitler (“Spitler”), a general adjuster, to adjust Brothers’ insurance claim. (R. Doc. 60-3, Ex. B, p. 1.) Brothers contends that Underwriters found Edler and Friloux’s reports to be faulty, and therefore sought Spitler to readjust the claim. From Spitler’s work with Brothers’ insurance claim, Spitler became familiar with the provisions, exclusions, and claims made under the subject policy. (R. Doc. 60-3, Ex. B, p. 1.) On January 5, 2006, Spitler met with (1) Imad Hamdan (“Hamdan”), the president of Brothers; (2) Abdal Manihim; and (3) Darrell LeJeune, Brothers’ insurance agent. (R. Doc. 60-3, Ex. B, p. 1.) During the meeting, Spitler requested that Brothers produce documentary evidence to support its significant insurance claim. (R. Doc. 60-3, Ex. B, p. 1.) However, Hamdan claimed that the requested documentation did not exist. (R. Doc. 60-3, Ex. B, p. 1.) Based on the purportedly recalcitrant behavior by Hamdan at the meeting, Spitler believed that the “claim would undoubtedly result in litigation.” (R. Doc. 60-3, Ex. B, p. 2.) He asserted that all documentation prepared by him from that point onward “was prepared in anticipation that this claim would result in litigation.” (R. Doc. 60-3, Ex. B, p. 2.) Furthermore, he opined that the claimed inventory and equipment loss at Brothers’ locations and the total value of the claim is unique from other insurance claims. (R. Doc. 60-3, Ex. B, p. 2.) Spitler provided a sworn statement to this effect. *2 On February 20, 2006, counsel for Brothers contacted Spitler and ASU, informing them that Brothers had retained legal representation to pursue damages sustained to its business properties from Hurricane Katrina and Rita. (R. Doc. 60-4, Ex. C.) Underwriters ultimately retained counsel on April 18, 2006. (R. Doc. 60, p. 9.) Brothers thereafter filed suit on May 26, 2007. Brothers brings this subject motion seeking to compel the production of all documents relating to the adjusting work performed by Spitler, including his claims investigation notes, coverage analyses, recommendations, time sheets, evaluations, notes, and other materials made in connection with the claim. Brothers contends that none of Spitler’s documents were prepared by or directly transmitted to the Underwriters, and therefore, the requested materials are not protected work product. Many of Spitler’s documents were directed to John Dupuy (“Dupuy”), an agent of Underwriters employed by Integrity Brokers. In opposition to Brothers’ motion to compel, Underwriters contends that the requested documents involving Spitler are protected work product because the materials were prepared in anticipation of litigation. Additionally, Underwriters maintains those documents that were prepared by or directly sent to Underwriters’ counsel are protected by attorney-client privilege. In its reply memorandum, Brothers counterargues that the investigations conducted by Spitler are factually relevant and of crucial importance to the presentation and defense of Brothers’ property damage claims. Therefore, Brothers maintains that it has a substantial need for Spitler’s documents and cannot obtain the substantial equivalent of those documents without undue hardship. Brothers thus argues that even if the Court determines that the contested documents are work product, Brothers is entitled to discover the materials. The Court considers the parties’ contentions below. II. Standard of Review Federal Rule of Civil Procedure (“Rule”) 26(b)(1) provides that “[p]arties may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defense.” The Rules specify that “[r]elevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.” Fed. R. Civ. P. 26(b)(1). The discovery rules are accorded a broad and liberal treatment to achieve their purpose of adequately informing litigants in civil trials. Hebert v. Lando, 441 U.S. 153, 176 (1979). Nevertheless, discovery does have “ultimate and necessary boundaries.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978) (quoting Hickman v. Taylor, 329 U.S. 495, 507 (1947)). Furthermore, “it is well established that the scope of discovery is within the sound discretion of the trial court.” Coleman v. American Red Cross, 23 F.3d 1091, 1096 (6th Cir.1994). A. Work Product Doctrine While state law applies to considerations of attorney-client privilege in this diversity case, considerations of the work product doctrine are governed by federal law. Dunn v. State Farm Fire & Casualty Co., 927 F.2d 869, 875 (5th Cir. 1991). The work-product doctrine is “distinct from and broader than the attorney-client privilege.” U.S. v. Nobles, 422 U.S. 225, 238 n. 11 (1975). The work product doctrine provides that parties ordinarily may not discover “work product,” or documents and tangible materials prepared in anticipation of litigation by or for another party or its “representative (including the other party’s attorney, consultant, surety, indemnitor, insurer, or agent).” Fed. R. Civ. P. 26(b)(3). *3 Nevertheless, Rule 26(b)(3) permits the discovery of work product if the materials sought (1) are otherwise discoverable under Rule 26(b)(1) and (2) the requesting party shows that “it has substantial need for the materials to prepare its case and cannot, without undue hardship, obtain their substantial equivalent by other means.” Id. Similar to attorney-client privilege, the burden of demonstrating applicability of work product protections rests on the party invoking it. Hodges, Grant & Kaufmann v. U.S. Government, Dept. of the Treasury, I.R.S., 768 F.2d 719, 721 (5th Cir. 1985). The mere fact that litigation eventually ensues does not, alone, protect all documents related to the subject matter of the litigation. Binks Mfg. Co. v. National Presto Indus. Inc., 709 F.2d 1109 (7th Cir.1983). A document is only considered work product if it is primarily concerned with legal assistance. Loctite Corp. v. Fel-Pro, Inc., 667 F.2d 577, 582 (7th Cir. 1981). For a document to be prepared in “anticipation of litigation,” litigation does not necessarily have to be imminent, but “the primary motivating purpose behind the creation of the document [must be] to aid in possible future litigation.” In re Kaiser Aluminum & Chem. Co., 214 F.3d 586, 593 (5th Cir. 2000). The work product doctrine affords no protection to materials prepared in the ordinary course of business. U.S. v. El Paso Co., 682 F.2d 530, 542 (5th Cir. 1982). Factors that reveal the primary motivation for the creation of a document include: (1) the retention of counsel, (2) counsel’s involvement in generating the document, (3) whether it was routine practice to prepare that type of document or whether the document was prepared in response to a particular circumstance. Southern Scrap Material Co. v. Fleming, No. 01-02554, 2003 WL 21474516, at *6 (E.D. La Jun. 18, 2003). If the document would have been created regardless of whether litigation was inspected to ensue, then the document will be deemed as created in the ordinary course of business and not in anticipation of litigation. Id. For litigation arising from insurance claims, the analysis of whether documents were prepared in anticipation of litigation is complicated “because insurance companies are in the business of conducting, investigation[,] and evaluating claims against its policies. Kansas City Southern Ry. Co. v. Nichols Constr. Co., LLC, et al., No. 05-01182, 2007 WL 2127820, at *3 (E.D. La. Jul. 25, 2007). To determine whether insurance documents, such as adjusting documents, are worthy of work product protection, a court must undertake a fact-specific analysis. Id. The insurer must first point the court towards the critical factor that made it anticipate litigation and secondly, offer specific facts demonstrating that the critical factor caused the insurer to deal with the insured differently. Id. B. Attorney-Client Privilege In a diversity action, federal courts must apply the state law of attorney-client privilege. Fed. R. Evid. 501. The law of Louisiana provides that: A client has a privilege to refuse to disclose, and to prevent another person from disclosing, a confidential communication, whether oral, written, or otherwise, made for the purpose of facilitating the rendition of professional legal services to the client. La. Evid. Code 506(B). A “confidential communication” is not intended to be disclosed to anyone other than “[t]hose whom disclosure is made in furtherance of obtaining or rendering professional legal services for the client.” La. Evid. Code 506(A)(5)(a). However, a client or an attorney acting with authority may waive the privilege with words or conduct expressing an intention to relinquish the known right, or conduct that would make it unfair if the privilege holder later insisted upon the privilege. Smith v. Kavanaugh, Pierson & Talley, 513 So.2d 1138, 1143 (La. App. Cir. 1987). Thus, disclosure of the confidential communication is deemed a waiver of the privilege as to that communication and any information relating to that subject matter. Robinson v. Abraham, 582 So.2d 1341, 1344 (La. App. 4 Cir.1991). III. Analysis *4 Underwriters claims work product protection over adjusting documents and correspondence prepared or transmitted by ASU and Spitler after January 5, 2006. It also asserts attorney-client privilege over those documents exchanged with Underwriters’ counsel. As to its work product arguments, Underwriters asserts that the meeting on January 5, 2006 between Spitler and representatives of Brothers constitutes the “critical factor” that made it anticipate litigation. During the meeting, Brothers allegedly refused to provide corroborating documentation of the claims, despite the significant amount at stake and the “massive inventory losses at almost every location.” (R. Doc. 60, p. 8.) Underwriters submits an affidavit where Spitler declares under penalty of perjury that he came to the impression that the claim would result in litigation during the January 5, 2006 meeting. (R. Doc. 60-3, Ex. B, p. 1.) In Spitler’s sworn statement, he declared that “[a]ll documentation prepared by him” after the meeting was prepared in anticipation of litigation. (R. Doc. 60-3, Ex. B, p. 1.) In opposition, Brothers argues that the documents requested in the subpoena duces tecum to Spitler are not protected under the work product doctrine. Brothers asserts that the documents did not involve opposing counsel. Furthermore, Brothers contends that even if the documents are protected work product, it has a substantial need for the documents to prepare for its case of bad faith against Underwriters and cannot obtain the substantial equivalent of Spitler’s documents through other means. A. Work Product Doctrine First, the Court notes that according to Rule 26(b)(3), work product protections extend to materials prepared by the client’s representatives, and therefore would extend to materials generated by Spitler. The Court next proceeds with its analysis. Here, Spitler swore under oath that (1) the meeting with Brothers’ representatives as the critical moment at which he anticipated litigation and (2) facts regarding the contentious nature of the claim. The claim involves 13 different Brothers’ locations of gas stations and convenience stores and damages are alleged to exceed three million dollars ($3,000,000.00). Furthermore, Brothers allegedly claimed a total inventory loss for all 13 business locations, but claimed at the meeting to have no substantiating documentation to prove the losses. Given the appreciable amount of money involved and the lack of cooperation from Brothers, the Court finds Spitler’s assertion that he believed that the claim would most likely result in litigation to be reasonable. However, Underwriters did not appoint counsel until April 18, 2006. (R. Doc. 60, p. 9.) If Spitler indeed believed that litigation was imminent and prepared every document subsequent to January 5, 2006 in anticipation of litigation, it is counterintuitive that the Underwriters would delay more than three months after the “critical” meeting and nearly two months after Brothers retained counsel before appointing counsel itself. Many of the documents at issue were created before counsel was retained and counsel was not involved in the creation of the documents. Furthermore, the disputed documents are insurance documents, and thus would be routinely prepared for insurance claims and also concurrently relevant to this litigation. Nevertheless, the Court reasons that Underwriters’ delay in retaining counsel for two to three months does not alone indicate that it did not anticipate litigation. In fact, Underwriters’ actions in (1) hiring Spitler to provide a second opinion and (2) not distributing any insurance funds to Brothers despite the amount of losses at issue suggests that there was deep discord regarding this insurance claim. Therefore, in cumulatively weighing the above evidence, the Court concludes that the documents created by Spitler after January 5, 2006 were prepared in anticipation of litigation. Next, the Court addresses Brothers’ assertions that is entitled to discover the work product. Here, the discovery requested in the subpoena duces tecum to Spitler is otherwise discoverable under Rule 26(b)(1) and reasonably calculated to lead to the discovery of admissible evidence. However, Brothers has failed to show a specific substantial need for Spitler’s materials to advance its case. *5 Brothers argues that in bad faith insurance cases, the nature of the litigation automatically establishes substantial need for the discovery of parts of the claims file. However, opposing case law in this district suggests that insured plaintiffs do not have free reign in discovering insurance claims files in bad faith cases. See Dixie Mill Supply Co. v. Continental Casualty Co., 168 F.R.D. 554, 559 (E.D. La. 1996) (“A simple assertion that an insured cannot otherwise prove her case of bad faith does not automatically permit an insured ‘to rummage through [the insurers’] claims file.’ ” (citation omitted)). Merely because a plaintiff asserts a bad faith insurance claim does not open an insurer’s claims file open for discovery, for otherwise, a plaintiff could force an insurer to “abrogate its privileges simply by asserting in the complaint that the defendant acted in bad faith.” Id. at 556. The Court acknowledges that the requested information may reveal why Underwriters refused to pay the insurance claim, the focal issue in the case. Specifically, Underwriters hired several different adjusters to assess Brothers’ insurance claim and the requested information may illuminate how Spitler’s adjustment of the claim differed from the previous adjusters and what corrective action Spitler took to remedy any prior adjusting deficiencies. However, other than these generalized assertions about the need to prove its claim of bad faith, Brothers has not contended why it has a substantial need to discover Spitler’s documents in particular and why it is foreclosed from obtaining similar information from other sources or avenues of discovery. Additionally, Brothers fails to show that it cannot obtain their substantial equivalent of Spitler’s documents by other means. In its brief, Brothers asserts that without the requested discovery, it cannot adequately prepare for its later deposition of Spitler. However, Spitler’s prospective deposition provides Brothers with an alternative means of discovering the same information as the discovery requested in its subpoena duces tecum. See EPCO Carbondioxide Products, Inc. v. St. Paul Travelers Ins. Co., No. 06-1800, 2007 WL 4560363 at *2 (“[D]iscovery of work product will be denied when the requesting party can obtain the desired information via deposition.”). Therefore, the Court concludes that while the contested documents may constitute work product, Brothers has not made a sufficient showing that there are no other means by which to obtain the substantial equivalent of the evidence. Although Underwriters has established that materials generated or possessed by Spitler may be work product, after review of the documents, the Court determines that not all of the materials claimed as work product are indeed protected. Specifically, Underwriters attempts to classify as work product (1) diagrams and floor plans of the Brothers gas stations and convenience stores, (2) administrative emails regarding scheduling, (3) transmission sheets of electronic attachments, and (4) documents containing publicly available information. The Court finds that the above documents are not protected work product because they merely contain facts or procedural information, and no substantive information or legal strategy. After in camera review of the materials, the Court concludes that the following documents constitute work product: (1) documents bate-stamped 0104-0105, 0121, 0138-0140, 0149, 0152-0156, and 0192-0193 in “ASU Correspondence File,” (2) documents bate-stamped 0145-0146, 0180-0186, 0191-0194, 0241, and 0255-0263 in “ASU Location 1,” (3) documents bate-stamped 0095-0098 and 0161-0165 in “ASU Location 2,” (4) documents bate-stamped 104-108 in “ASU Location 3,” (5) documents bate-stamped 0067-0070 and 0107 in “ASU Location 4,” (6) documents bate-stamped 0080-0083, 0138-0142in “ASU Location 5,” (7) documents bate-stamped 0111-0114 and 0121-0126 in “ASU Location 6,” (8) documents bate-stamped 0080-0083 and 0119-0123 in “ASU Location 7,” (9) documents 0095, 0097-0100, 0135-0139 bate-stamped in “ASU Location 8,” (10) documents bate-stamped 0075-0078 and 0113-0117 in “ASU Location 9,” (11) documents bate-stamped 0103-0106 and 0130-0133 in “ASU Location 10,” (12) documents bate-stamped 0080-0083 and 0117-0120 in “ASU Location 11,” (13) documents bate-stamped 0058-0061 and 0116-0120 in “ASU Location 12,” and finally, (14) documents bate-stamped 0102-0107, 0111-0114, 0170-0172, and 0204-0206 in “ASU Location 13.” *6 However, the following documents do not constitute work product: (1) documents bate-stamped 0106-0107, 0117-0118, and 0151 in “ASU Correspondence File,” (2) documents bate-stamped 0187-0190, 0195, 0199, 0208-0211, 0212, 0244, 0247, 0249-0250, and 0252 in “ASU Location 1,” (3) documents bate-stamped 0092, 0094, 0099, and 0166 in “ASU Location 2,” (4) documents bate-stamped 0060-0061 and 109 in “ASU Location 3,” (5) documents bate-stamped 0064-0066 and 0071-0073 in “ASU Location 4,” (6) documents bate-stamped 0078-0079, 0084, 0092, 0143 in “ASU Location 5,” (7) documents bate-stamped 0110, 0115, and 0128 in “ASU Location 6,” (8) documents bate-stamped 0079, 0084, and 0124 in “ASU Location 7,” (9) documents bate-stamped 0096, 0101, 0140-0145 in “ASU Location 8,” (10) documents 0073-0074 and 0118 bate-stamped in “ASU Location 9,” (11) documents bate-stamped 0099, 0102 and 0134 in “ASU Location 10,” (12) documents bate-stamped 0079, 0084, and 0121 in “ASU Location 11,” (13) documents bate-stamped 0057, 0062, and 0121 in “ASU Location 12,” and finally (14) documents bate-stamped 0108-0110, 0115, 0119, 0138-0142, 0165-0169, and 0207 in “ASU Location 13.” B. Attorney-Client Privilege The Plaintiffs also seek documentation created by ASU and Spitler, and sent to the Defendant’s counsel after the retention of Defendant’s counsel. Underwriters asserts that claims file material that Spitler generated before litigation ensued included documents generated by or directed to Underwriters’ counsel and therefore are subject to the attorney-client privilege. However, after review, the Court concludes that the contested documents do not seek the legal opinion of counsel. In fact, one of the documents classified as “correspondence from Underwriters’ counsel” is actually a letter to the Underwriters by the adjuster and not to Underwriters’ counsel. Therefore, the Court finds that the documents to which Underwriters asserted attorney-client privilege are in fact not privileged. IV. Conclusion Accordingly, IT IS ORDERED that the Plaintiff’s Motion to Compel (R. Doc. 43) is DENIED IN PART and GRANTED IN PART. IT IS GRANTED in that the following documents are not protected by the work product doctrine, and therefore must be produced in unredacted form no later than 14 days from the date of this Order: (1) documents bate-stamped 0106-0107, 0117-0118, and 0151 in “ASU Correspondence File,” (2) documents bate-stamped 0187-0190, 0195, 0199, 0208-0211, 0212, 0244, 0247, 0249-0250, and 0252 in “ASU Location 1,” (3) documents bate-stamped 0092, 0094, 0099, and 0166 in “ASU Location 2,” (4) documents bate-stamped 0060-0061 and 109 in “ASU Location 3,” (5) documents bate-stamped 0064-0066 and 0071-0073 in “ASU Location 4,” (6) documents bate-stamped 0078-0079, 0084, 0092, 0143 in “ASU Location 5,” (7) documents bate-stamped 0110, 0115, and 0128 in “ASU Location 6,” (8) documents bate-stamped 0079, 0084, and 0124 in “ASU Location 7,” (9) documents bate-stamped 0096, 0101, 0140-0145 in “ASU Location 8,” (10) documents 0073-0074 and 0118 bate-stamped in “ASU Location 9,” (11) documents bate-stamped 0099, 0102 and 0134 in “ASU Location 10,” (12) documents bate-stamped 0079, 0084, and 0121 in “ASU Location 11,” (13) documents bate-stamped 0057, 0062, and 0121 in “ASU Location 12,” and finally (14) documents bate-stamped 0108-0110, 0115, 0119, 0138-0142, 0165-0169, and 0207 in “ASU Location 13.” IT IS DENIED in that the following documents are protected by the work product doctrine: (1) documents bate-stamped 0104-0105, 0121, 0138-0140, 0149, 0152-0156, and 0192-0193 in “ASU Correspondence File,” (2) documents bate-stamped 0145-0146, 0180-0186, 0191-0194, 0241, and 0255-0263 in “ASU Location 1,” (3) documents bate-stamped 0095-0098 and 0161-0165 in “ASU Location 2,” (4) documents bate-stamped 104-108 in “ASU Location 3,” (5) documents bate-stamped 0067-0070 and 0107 in “ASU Location 4,” (6) documents bate-stamped 0080-0083, 0138-0142in “ASU Location 5,” (7) documents bate-stamped 0111-0114 and 0121-0126 in “ASU Location 6,” (8) documents bate-stamped 0080-0083 and 0119-0123 in “ASU Location 7,” (9) documents 0095, 0097-0100, 0135-0139 bate-stamped in “ASU Location 8,” (10) documents bate-stamped 0075-0078 and 0113-0117 in “ASU Location 9,” (11) documents bate-stamped 0103-0106 and 0130-0133 in “ASU Location 10,” (12) documents bate-stamped 0080-0083 and 0117-0120 in “ASU Location 11,” (13) documents bate-stamped 0058-0061 and 0116-0120 in “ASU Location 12,” and finally, (14) documents bate-stamped 0102-0107, 0111-0114, 0170-0172, and 0204-0206 in “ASU Location 13.” *7 IT IS FURTHER GRANTED in that none of the documents in which Underwriters asserted that the attorney-client privilege are protected. IT IS FURTHER ORDERED that Underwriters retrieve their documents from the Court, no later than 7 days from the signing of this Order.