McDonnel Grp., LLC v. Starr Surplus Lines Ins. Co.
McDonnel Grp., LLC v. Starr Surplus Lines Ins. Co.
2020 WL 3001904 (E.D. La. 2020)
February 7, 2020
van Meerveld, Janis, United States Magistrate Judge
Summary
The court ruled that the Insurers and/or MKA must produce a privilege log listing all communications with Hrach that are responsive to the subpoena but which are being withheld on the basis of a privilege. The court also denied the motion to compel production of the subrogation related MKA documents. This ruling ensures that all relevant ESI is accounted for and that any privileged information is properly protected.
MCDONNEL GROUP, LLC, Plaintiff
v.
STARR SURPLUS LINES INSURANCE COMPANY, LEXINGTON INSURANCE COMPANY, Defendants
v.
STARR SURPLUS LINES INSURANCE COMPANY, LEXINGTON INSURANCE COMPANY, Defendants
NO. 18-CV-01380, C/W 19-2227; 19-2230; 19-10462
United States District Court, E.D. Louisiana
Filed February 07, 2020
Counsel
Randall A. Smith, Dylan T. Leach, J. Geoffrey Ormsby, Smith & Fawer, LLC, New Orleans, LA, for Plaintiff.Lee Ann Thigpen, Clifton Michael Decker, Pro Hac Vice, James Wallace Gunn, III, Pro Hac Vice, James L. Warren, III, Pro Hac Vice, Carroll, Warren & Parker, PLLC, Jackson, MS, Michael G. Bagneris, Bagneris, Pieksen & Associates, LLC, New Orleans, LA, for Defendants
van Meerveld, Janis, United States Magistrate Judge
ORDER AND REASONS
**Applies to all cases**
*1 Before the Court is the Motion to Compel Compliance with Subpoena Duces Tecum filed by Jung, L.L.C. (“Jung”). (Rec. Doc. 437). Oral argument was held on February 5, 2020, and two issues were taken under submission: (1) whether the subpoenaed party will be required to produce its communications between Defendants’ counsel and 2) whether the subpoenaed party will be required to produce documents related to the subrogation investigation. For the following reasons, the court will require a privilege log as to the first question and will deny the Motion to Compel as to the second.
Background
This lawsuit arises out of a series of water intrusion events at The Jung Hotel (the “Hotel”) in 2017. At the time, the Hotel was being renovated by The McDonnel Group (“McDonnel”) pursuant to an agreement with Jung, the owner of the Hotel. McDonnel was insured by the defendant Insurers through Completed Value Construction All Risks Policies (“Policies”), which covered property damage. McDonnel claims property damage and repair costs as well as costs for delays to the renovation project and/or to expedite work on the project. McDonnel filed this lawsuit for declaratory relief and monetary damages. The Insurers say they have paid undisputed portions of certain claims, found that certain claims fall below applicable deductibles, and have requested more information regarding the remaining claims. But, they claim, such requests for additional information have been largely ignored. Plaintiffs Mechanical Construction Company LLC as agent of Bernhard MCC, LLC (“BMCC”), All Star Electric Inc. (“All Star”),[1] and Jung have also filed lawsuits against the Insurers, each claiming that it is an additional insured under the Policies. Those lawsuits have been consolidated with the present one. In addition to its separate lawsuit, Jung, LLC has intervened in the lead action.
Trial in this matter is set to begin on March 9, 2020. The deadline to complete discovery was December 31, 2019.
The present motion concerns a subpoena issued by Jung to Madsen, Kneppers & Associates, Inc. (“MKA”), a scheduling expert retained by the Insurers prior to this litigation to assist with loss adjustment. Jung seeks eight categories of documents:
1. All documents evidencing any work performed by MKA for or on behalf of Aaron Prefontaine, York Risk Services Group (“York”), Integra Technical Services North America, Inc. (“Integra”), or the Insurers in connection with or the Hotel and any related insurance claims.
2. All Documents received by MKA in connection with work performed by MKA concerning the Hotel and any related insurance claims.
3. All reports prepared by MKA for or on behalf of Prefontaine, York, Integra, or the Insurers related to work performed by MKA concerning the Hotel and/or any related insurance claims.
4. All retention agreements between MKA, Prefontaine, York, Integra, and/or the Insurers related to work performed by MKA concerning the Hotel and/or any related insurance claims.
*2 5. All invoices, billings, or statements issued or sent by MKA to Prefontaine, York, Integra, and/or the Insurers related to work performed by MKA concerning the Hotel and/or any related insurance claims.
6. All communications between MKA and Prefontaine, York, Integra, and/or the Insurers related to work performed by MKA concerning the Hotel and/or any related insurance claims.
7. All communications between MKA and McDonnel related to work performed by MKA concerning the Hotel and/or any related insurance claims.
8. All communications between MKA and Jung related to work performed by MKA concerning the Hotel and/or any related insurance claims.
Jung argues the documents they seek concern MKA’s involvement in the Hotel insurance claims and are relevant. It submits that MKA was involved in adjustment of the insurance claim concerning the Hotel long before litigation was initiated. MKA’s employee Christopher Hrach provided a Schedule Delay Analysis Report that was sent to the Insurers’ insurance adjuster, Prefontaine. Jung submits that delays to the schedule caused by the various covered loss events in this case and the Insurers’ alleged bath faith in adjusting the claim are critical issues to be tried in this case. Jung adds that Hrach has been listed as a witness who may testify at trial.
The Insurers have filed a memorandum in opposition. They note that on January 13, 2020 (2 days before the motion was filed), MKA produced 226 documents from its files including Hrach’s “work file,” documents from a consultant assisting Hrach, all communications between Hrach and McDonnel and/or Jung related to the project, and all non-privileged communications between MKA and Defendants or their adjuster, Prefontaine. The Insurers also describe these documents as all documents that Hrach relied on or considered in performing his work related to this matter. On that same date, the Insurers produced a list of all documents provided to Hrach by their counsel for his use in performing his analysis with bates number references to previously produced documents. The Insurers insist Jung is not entitled to any other documents in Hrach’s file because all documents relied on by Hrach have been produced or identified. The Insurers point out that MKA employs other people besides Hrach that were involved in other aspects of the underlying insurance claims besides the delay analysis that Hrach worked on. This includes a subrogation investigation and litigation involving BMCC. The Insurers insist that any materials reviewed or prepared by those employees is irrelevant to this litigation and is also privileged. The Insurers insist that the subpoena as written is overbroad because it would extend to such documents. The Insurers also point out that Hrach was not retained to provide expert testimony. Instead, he is a hybrid witness whose involvement pre-dates the litigation, while he also has specialized knowledge that he utilized in performing his work and arriving at his opinions regarding these claims, including his Schedule Delay Analysis. The Insurers also note that Jung deposed Hrach on January 15, 2020, and had the opportunity to inquire into any relevant and non-privileged information Hrach possesses. The Insurers argue that MKA has discharged their duty to respond.
*3 Of relevance to the remaining issues, at oral argument, the Insurers represented that all documents provided to Hrach (regardless of whether they were provided by Insurers’ counsel, McDonnel, or Prefontaine) have been produced, except for transmittal correspondence. Jung highlighted that no privilege log has been produced and argued that it is entitled to communications between the Insurers’ counsel and Hrach. At oral argument, the court ruled that the production by the Insurers and MKA is sufficient, however, the court took under submission the issue of whether the communications between Hrach and Insurers’ counsel are subject to production.
Additionally in reply, Jung argues that the Insurers’ subrogation documents are relevant to this litigation because the subrogation investigation involved the cause and resulting damages from the March 10 event, just as this case does. Jung argues that there is no privilege that applies to subrogation investigations. “The relevant inquiry is ‘when the insurance company shifted its focus from collecting information and evaluating a claim to preparation for a lawsuit.’ ” Selective Ins. Co. of Am. v. Swarey, No. 07-CV-6324, 2011 WL 240750, at *2 (W.D.N.Y. Jan. 24, 2011) (quoting Taroli v. Gen. Elec. Co., 114 F.R.D. 97, 99 (N.D. Ind. 1987), aff’d, 840 F.2d 920 (7th Cir. 1988)). Jung submits that here, MKA was retained early in the adjustment process, before litigation. Jung insists the documents in MKA’s possession related to subrogation were created during the ordinary course of business in adjusting the Hotel’s builder’s risk claims. At oral argument, Jung added that the subrogation documents are relevant because the Insurers have taken the position that they had not received proof of loss at a time when they were already asserting a subrogation claim against BMCC.
Law and Analysis
1. Scope of Discovery
The Federal Rules of Civil Procedure provide that “parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case.” Fed. R. Civ. Proc. 26(b)(1). In determining proportionality, the parties (and the Court if called to weigh in) should consider:
the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.
Fed. R. Civ. Proc. 26(b)(1). “Information within this scope of discovery need not be admissible in evidence to be discoverable.” Id.
2. Discovery Subpoenas
Federal Rule of Civil Procedure 45 governs the issuance of subpoenas and compliance with them. “A person commanded to produce documents ... may serve on the party or attorney designated in the subpoena a written objection to inspecting, copying, testing, or sampling any or all of the materials ... or to producing electronically stored information in the form or forms requested.” Id. at R. 45(d)(2)(B). If objection is made, the serving party, on notice to the commanded party “may move the court for the district where compliance is required for an order compelling production or inspection.” Id. R. 45(d)(2)(B)(i). “These acts may be required only as directed in the order, and the order must protect a person who is neither a party nor a party’s officer from significant expense resulting from compliance.” Id. R. 45(d)(2)(B)(ii).
3. Analysis
a. Hrach Communications
At oral argument it became clear that the only potentially relevant documents that were provided to Hrach but may not have been produced were “transmittal” correspondence. The only reference to privilege in the briefing as it concerns the Hrach documents[2] are Jung’s request for a privilege log for any documents being withheld as privileged (Rec. Doc. 437-1, at 3), the Insurers’ representation that “all non-privileged communications between MKA and Defendants or their adjuster” had been produced (Rec. Doc. 448, at 5), and Jung’s argument in reply that any Prefontaine reports produced to Hrach in unredacted form are discoverable by Jung in unredacted form because there is no privilege covering communications with a non-retained expert (Rec. Doc. 454-1, at 6). As to the Prefontaine reports, the Court has ordered them produced in unredacted form subject to a Motion to Compel, so the issue is moot. As to communications between Insurers and/or their counsel on the one hand and Hrach on the other, the court has insufficient information before it to determine whether such communications are protected by the work-product doctrine or attorney-client privilege.
*4 Some or all of Hrach’s communications may be discoverable depending on his role at the time, whether he and counsel were acting in anticipation of litigation, and as a result of his status as a non-retained expert. See Gables Condo. & Club Ass’n, Inc. v. Empire Indem. Ins. Co., No. 18-23659-CIV, 2019 WL 1317824, at *7 (S.D. Fla. Mar. 22, 2019) (concluding that experts that are at first ordinary fact witnesses but later become experts assisting in anticipation of litigation are “entitled to work product protection for only the period after litigation was reasonably anticipated”); United States v. Sierra Pac. Indus., No. CIV S-09-2445 KJM EF, 2011 WL 2119078, at *9–10 (E.D. Cal. May 26, 2011) (concluding that as to discoverability of an expert’s communications with counsel, some non-reporting witnesses should be treated as reporting expert witnesses, and some should be treated differently). When documents are withheld as privileged or protected as trial-preparation materials, Federal Rule of Civil Procedure 26(b)(4)(A) requires that the party invoking the privilege “(i) expressly make the claim; and (ii) describe the nature of the documents, communications, or tangible things not produced or disclosed--and do so in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the claim.” Thus, Courts typically require a privilege log that identifies “each document and provide[s] basic information, including the author, recipient, date and general nature of the document.” Benson v. Rosenthal, No. CV 15-782, 2016 WL 1046126, at *9 (E.D. La. Mar. 16, 2016) (quoting In re Papst Licensing, GmbH Patent Litig., No. Civ. A. MDL 1298, 2001 WL 1135268, at *2 (E.D. La. Sept. 19, 2001). Without a privilege log indicating the date of the communications at issue and asserting the basis on which the Insurers are withholding the documents, the court cannot assess whether they have been properly withheld.
Accordingly, the Insurers and/or MKA shall produce a privilege log listing all communications with Hrach that are responsive to the subpoena but which are being withheld on the basis of a privilege. They shall do so within seven days. Thereafter, the parties shall meet and confer to determine whether they can resolve any dispute regarding the privilege designations. If the dispute cannot be resolved, an appropriate motion may be filed.
b. Subrogation Documents
As to the subrogation documents, the court finds that they are of minimal, if any, relevance to the issues at hand. Jung’s request for these documents is on the order of a fishing expedition. Jung hopes that something in the subrogation investigation may assist it in proving that the Insurers had proof of loss earlier than the Insurers claim. Primarily, though, the subrogation investigation file will contain materials relevant to the Insurers’ claims for subrogation. Evidence in the possession of MKA and/or Insurers that might show proof of loss had been satisfied or communications regarding their assessment of that issue would be in the investigation file related to the Hotel’s claims under the Policies. As to MKA, such investigation was conducted by Hrach, and as discussed above, those documents have been produced or identified. Moreover, while the Insurers represented the total production of the other, subrogation related MKA documents would amount to less than 1,000 pages, the burden of reviewing and producing those documents at this late stage in the litigation with trial about one month away, outweighs the minimal relevance of the documents. Accordingly, MKA and the Insurers will not be required to produce the subrogation documents.
Conclusion
For the foregoing reasons, within seven days, the Insurers and/or MKA shall produce a privilege log listing all communications with Hrach that are responsive to the subpoena but which are being withheld on the basis of a privilege. As to the subrogation documents, the Motion to Compel is DENIED.
New Orleans, Louisiana, this 6th day of February, 2020.