In Re PFA Ins. Mktg. Litig.
In Re PFA Ins. Mktg. Litig.
2021 WL 2653740 (N.D. Cal. 2021)
June 8, 2021

Kim, Sallie,  United States Magistrate Judge

Failure to Produce
In Camera Review
Attorney-Client Privilege
Proportionality
Third Party Subpoena
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Summary
Steven G. Early, the former Chief Financial Officer and Chief Operating Officer for PFA and a PFA founder, has asserted that the attorney-client privilege protects all the requested documents and has refused to produce them. The Court has ordered Early to provide a privilege log and for in camera review some randomly selected documents that the Court will select. If the Court finds that the documents are not privileged, the Court may order Early to produce all documents withheld on the basis of privilege for in camera review.
IN RE PFA INSURANCE MARKETING LITIGATION, Plaintiff,
v.
PREMIER FINANCIAL ALLIANCE, et al., Defendants
Case No. 21-mc-80087-YGR (SK)
United States District Court, N.D. California
Filed June 08, 2021

Counsel

Adam E. Polk, Pro Hac Vice, Daniel C. Girard, Girard Sharp LLP, San Francisco, CA, Justin Tharpe Holcombe, Skaar & Feagle, LLP, Woodstock, GA, for Plaintiff.
Michael John Hassen, Reallaw, APC, Walnut Creek, CA, for Defendant Premier Financial Alliance.
Rachel A. Naor, Robert D. Phillips, Jr., Thomas A. Evans, Alston & Bird LLP, San Francisco, CA, for Defendant Life Insurance Company of the Southwest.
Steven Gregory Early, The Early Firm LLC, Cumming, GA, Pro Se.
Kim, Sallie, United States Magistrate Judge

ORDER ON MOTION TO COMPEL SUBPOENA

Now before the Court is the motion by Plaintiffs to compel compliance with subpoenas it issued for documents from non-party Steven G. Early, whom Plaintiffs identify as the former Chief Financial Officer and Chief Operating Officer for Defendant Premier Financial Alliance (“PFA”) and a PFA founder and whom Defendants identify as PFA's lawyer.
 
BACKGROUND
Plaintiffs have sued PFA and Life Insurance Company of the Southwest for unfair and deceptive practices in marketing and selling indexed universal life insurance policies and essentially allege that Defendants operated a pyramid scheme. (In re PFA Insurance Marketing Litigation, Case No. 18-cv-03771-YGR, Dkt. No. 131.) PFA has alleged “PFA Associates” are independent contractors and not employees of PFA (In re PFA Insurance Marketing Litigation, Dkt. No. 95 at page 13) and that PFA is not responsible for their actions. Plaintiffs deposed Early, who confirmed in his deposition that he was PFA's Chief Compliance Officer. Plaintiffs seek 13 categories of documents from Early: (1) contracts between PFA and Life Insurance Company of the Southwest; (2) communications between and among Early, David Carroll, and Louis Puglisi; (3) documents relating to PFA's business plan; (4) documents relating to the Living Life Policy; (5) documents regarding sales and marketing of the policies at issue; (6) documents regarding a certain promotion; (7) documents regarding recruitment, enrollment and training of the Premier Members[1]; (8) documents and communications with certain individuals associated with or employed by Defendants and their success in a certain program; (9) documents regarding the same individuals and their success in the financial services and insurance industries; (10) documents regarding meetings and events; (11) documents regarding the requirements for becoming a Premier Member; (12) documents regarding incentives to Premier Members; and (13) documents regarding compliance and approval of marketing materials created by Premier Members. (Dkt. No. 5.)
 
Early, asserting that the attorney-client privilege protected all the requested documents, refused to produce them. (Dkt. 5.) He submitted a declaration in which he claimed that he was outside counsel hired by PFA to provide legal advice to “PFA sales associates” regarding compliance. (Dkt. 5) Early specifically stated that he advised “PFA members who shared” that “they may have violated state or federal laws or regulations” and sought Early's advice in a private and confidential manner. (Id.) Early also declared: “I and my law firms were retained by PFA as an outside lawyer for all services that I provided to PFA until I retired in March of 2020.” (Id.) Thus, Early provided joint representation to both PFA and the PFA sales associates.
 
DISCUSSION
Federal Rule of Civil Procedure 45 governs discovery of nonparties by subpoena. The scope of the discovery that can be requested through a subpoena under Rule 45 is the same as the scope under Rule 26(b). Fed. R. Civ. P. 45 Advisory Comm.'s Note (1970) (“[T]he scope of discovery through a subpoena is the same as that applicable to Rule 34 and other discovery rules.”); Fed. R. Civ. P. 34(a) (“A party may serve on any other party a request within the scope of Rule 26(b).”).
 
Rule 26(b) allows a party to obtain discovery concerning any nonprivileged matter that is relevant to any party's claim or defense and that is “proportional to the needs of the case, considering 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. P. 26(b)(1).
 
A court must protect a nonparty subject to a subpoena if the subpoena “requires disclosure of privileged or other protected matter” or the subpoena “subjects a person to undue burden.” Fed. R. Civ. P. 45(d)(3). A court must also limit discovery if it is unreasonably duplicative, if it can be obtained from a source that is more convenient or less burdensome, or if the burden of producing it outweighs its likely benefit. Fed. R. Civ. P. 26(b)(2)(C).
 
In a federal action based on diversity jurisdiction, state law governs privilege claims. KL Grp. v. Case, Kay & Lynch, 829 F.2d 909, 918 (9th Cir. 1987). Under California law, the attorney-client privilege attaches to confidential communications between a client and his attorney during the course of the attorney-client relationship. See Cal. Evid. Code § 952; Roberts v. City of Palmdale, 5 Cal.4th 363, 371 (1993). The party asserting the privilege bears the initial burden of demonstrating that the communication falls within the privilege. State Farm Fire & Casualty Co. v. Superior Court, 54 Cal. App. 4th 625, 639 (1997).
 
California law defines the “client” as “a person who, directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer or securing the legal service or advice from him in his professional capacity ....” Cal. Evid. Code § 951. “Once the foundational facts have been presented, i.e., that a communication has been made ‘in confidence in the course of the lawyer-client ... relationship, the communication is presumed to have been made in confidence and the opponent of the claim of privilege has the burden of proof to establish that the communication was not confidential,’ or that an exception exists.” State Farm Fire & Casualty, 54 Cal. App. 4th at 639 (citing Cal. Evid. Code § 917; BP Alaska Exploration, Inc. v. Superior Court, 199 Cal.App.3d 1240, 1262(1988)).
 
Plaintiffs argue that Early, as corporate counsel to PFA, could not provide attorney-client privileged advice unless the PFA Associates were “functional employees” of PFA. See, e.g., United States v. Graf, 610 F.3d 1148, (9th Cir. 2010). If an outside consultant such as a PFA associate is a functional employee of PFA and seeks to assert privilege over communications with PFA's counsel, then the privilege might apply if the outside consultant/functional employee meets an five-part test. Id. at 1160-1161. Here, though, there is no evidence that the PFA Associates acted as “functional employees” of PFA. Instead, PFA and Plaintiffs both accept, for purposes of this motion, that the PFA Associates were not “functional employees” of PFA.
 
Thus, the analysis then turns on whether Early had an attorney-client relationship with each PFA associate who contacted him to seek advice. Early has submitted evidence to show the existence of an attorney-client relationship with the PFA Associates whom he advised, and Plaintiffs have not rebutted it. Thus, the Court finds, on the facts currently presented, that the attorney-client relationship protects communications between Early and his clients in which his clients sought legal advice. However, without review of the documents, it is not clear if the documents actually contain legal advice. Therefore, the Court ORDERS that Early must provide a privilege log for any document that he withheld on the basis of attorney-client privilege.[2] The log must comply with this Court's Standing Order. (See https://cand.uscourts.gov/wp-content/uploads/judges/kim-sk/SK-Standing-Order-General.pdf.) Early must provide that to both the Court for in camera review (via email to skpo@cand.uscourts.gov) and to Plaintiffs by June 29, 2021. The Court will then require Early to provide the Court for in camera review some randomly selected documents that the Court will select.
 
If the Court finds that the documents are not privileged, the Court may order Early to produce all documents withheld on the basis of privilege for in camera review.
 
IT IS SO ORDERED.
 
Footnotes
The Consolidated Complaint does not define this term, but it appears that a Premier Member is a PFA Associate who both buys and then sells Defendants' policies. (In re Insurance Marketing Litigation, Dkt. No. 131.) The Court will refer to them as PFA Associates in this motion.
The focus of this lawsuit appears to target categories 5-13, which address communications between Early and PFA Associates, and it is not clear if Early produced documents on other subjects (categories 1-4) or if he continues to assert the attorney-client privilege with regard to those other categories. However, to the extent that Early continues to assert privilege over those documents in categories 1-4, he must also provide a log for any documents withheld on the basis of privilege.