Wellin ex rel. Estate of Wellin v. Farace
Wellin ex rel. Estate of Wellin v. Farace
2018 WL 11474066 (D.S.C. 2018)
November 27, 2018
Howard, William L., Special Master
Summary
The Plaintiff sought attorney fees from the underlying litigation as a part of the damages caused by the alleged malpractice. The Court determined that the Plaintiff had waived the attorney-client privilege and work product protection with regard to attorney invoices and expenses. The Court also had the option of granting the Plaintiff's motion or delaying production of the unredacted invoices pending resolution of the underlying litigation, and of ensuring that any privileged information contained in the legal invoices was not inadvertently disclosed to the Plaintiff's opponents in the underlying litigation.
Additional Decisions
Wendy C. H. WELLIN, ON BEHALF OF the ESTATE OF Keith S. WELLIN, as its duly Appointed Special Administrator, Plaintiff,
v.
Thomas M. FARACE, Esq., individually and as agent for Nixon Peabody, LLP and Nixon Peabody Financial Advisors, LLC; Nixon Peabody, LLP; and Nixon Peabody Financial Advisors, LLC, Defendants
v.
Thomas M. FARACE, Esq., individually and as agent for Nixon Peabody, LLP and Nixon Peabody Financial Advisors, LLC; Nixon Peabody, LLP; and Nixon Peabody Financial Advisors, LLC, Defendants
C/A 2:16-cv-00414-DCN
United States District Court, D. South Carolina, Charleston Division
Signed November 27, 2018
Counsel
Arthur Camden Lewis, Lewis Babcock LLP, Columbia, SC, James M. Griffin, Griffin Humphries LLC, Columbia, SC, Badge Humphries, Griffin Humphries LLC, Sullivan's Island, SC, for Plaintiff.Benjamin Rogers Gooding, Robert Erving Stepp, Robinson Gray Stepp and Laffitte LLC, Columbia, SC, for Defendants Thomas M. Farace, Esq., Nixon Peabody LLP.
Howard, William L., Special Master
SPECIAL MASTER'S REPORT AND RECOMMENDATION RE: DEFENDANTS’ MOTION TO COMPEL PRODUCTION OF LEGAL INVOICES, ECF NO. 97
*1 In this legal malpractice case, Defendants move to compel Plaintiff to produce unredacted copies of all invoices evidencing legal fees incurred by Keith Wellin or the Estate of Keith Wellin that Plaintiff seeks to recover in this litigation. This would include the legal fees incurred in connection with the ongoing representation of Plaintiff in the underlying litigation out of which this malpractice action arises. The motion is made pursuant to Rule 34, and Rule 37, Fed. R. Civ. P. The motion was filed on June 14, 2018, and was heard by the undersigned on September 20, 2018, sitting as Special Master, pursuant to the May 30, 2017 Order of the United States District Court for the District of South Carolina, Charleston Division, Hon. David C. Norton presiding.
HISTORY OF THE CASE
This legal malpractice action arises out of the alleged actions of the Defendants in the management of the estate plan for Plaintiff's decedent, Keith S. Wellin, spanning a twelve year period, from 2001 through 2013. Plaintiff alleges that Defendant attorney, Thomas M. Farace (“Farace”), individually and as a partner in and agent for Defendant Nixon Peabody, LLP and its subsidiary, Nixon Peabody Financial Advisors, LLC, began representing Keith Wellin with respect to his estate planning, both individually and as Trustee of the Keith S. Wellin Revocable Living Trust dated December 11, 2001 (“Revocable Trust”), which Trust was drafted by Defendants on Keith Wellin's behalf.
Plaintiff alleges that Keith Wellin and his three children formed a partnership, Friendship Partners, LP (“Friendship Partners”), in 2003 upon the advice and direction of Defendants, and Keith Wellin funded it with Berkshire Hathaway Class A stock (“BRKa”) having a value at that time of approximately Seventy-five Million Dollars ($75,000,000.00). At the time it was formed, Keith Wellin was a limited partner, owning 98.9% of the partnership units. According to the allegations, the general partner was a Limited Liability Corporation, Friendship Management, LLC, which owned the remaining 1.1% interest, and was controlled by Keith Wellin's three children. In 2007, Keith Wellin assigned his partnership interest in Friendship Partners to the Keith S. Wellin Revocable Trust, though the Plaintiff maintains Friendship Partners was never admitted as a Substitute Limited Partner as required by the Partnership Agreement.
Between 2003 and 2009, Keith's Will and Revocable Trust provided that Keith's full interest in Friendship Partners, as well as a majority of the rest of his estate, would pass to his three children, Peter J. Wellin, Cynthia W. Plum and Marjorie W. King, at his death.
Plaintiff alleges Keith modified his estate plan in 2009, again based upon the advice and help of Thomas Farace as his estate planning attorney, by creating the Wellin Family 2009 Irrevocable Trust, which is at the center of ongoing litigation between the Plaintiff in this case, as well as Wendy C. H. Wellin, individually, and the purported Trust Protector and Trustee of the 2009 Irrevocable Trust, against the Wellin children and at least one Wellin grandchild. The genesis of that ongoing litigation, involving multiple lawsuits (“the underlying litigation”), is as follows.
*2 In the 2009 Revocable Trust, the situs of which was designated as South Dakota, Keith named his three children, Peter S. Wellin, Cynthia W. Plum and Marjorie W. King, as the only named beneficiaries, and designated them as the only individual trustees. Keith named the South Dakota Trust Company, LLC as the sole corporate Trustee, and Thomas Farace was designated as the Trust Protector. The Trust provided that the three Wellin children could not be removed as trustees by the Trust Protector, and also designated them as members of the Trust's distribution committee. To fund the Trust, Keith sold his 98.9% interest in Friendship Partners, LP to the Trust in return for a promissory note having a face value of Forty Nine Million, Eight Hundred Thousand Dollars ($49,800,000.00).[1] The Trust was drawn to be an “intentionally defective grantor trust,” as a result of which any income generated by the Trust would be taxable to Keith, as the grantor, rather than to the Trust.
THE “UNDERLYING LITIGATION”
Keith Wellin filed suit against his children on July 3rd, 2013 (Civil Action No. 2:13-cv-01831-DCN)(“Wellin I”), seeking, inter alia, a return of all assets in the Trust and Friendship Partners. He asserted that the Defendant Wellin Children had defrauded him into entering into the 2009 transactions.[2] Keith subsequently executed various documents, including those which purported to remove Thomas Farace as the designated Trust Protector and substitute Lester Schwartz in his stead.
In addition, Keith executed documents intended to reacquire some of the Trust assets by substituting the Note owed to him by the Trust, having a value of $50,211,466.55, for a 58% interest in Friendship Partners, pursuant to Article IX(A) of the Trust. The newly executed documents made further changes designed to end the “grantor status” of the Trust, including releasing the power of trust asset substitution, the effect of which would be to shift the tax burden for payment of the Note to the Trust. In that litigation, the Defendant Wellin Children assert the changes made regarding the Trust by Keith and Lester Schwartz on November 20, 2013 were ineffective, invalid and/or incomplete.
On or about December 1, 2013, the Defendant Wellin Children took the steps they claim were necessary to sell the BRKa stock and ultimately distribute approximately $32 million to each of their individual investment accounts, leaving approximately $52 million in the Trust to satisfy the Note to Keith. They maintain that this was necessary to protect the trust and its assets, and that no money has been spent other than for the attorney fees and expenses incurred in the litigation.
The Wellin I litigation spawned multiple lawsuits, including (1) four cases in the United States District Court for the District of South Carolina; (2) two separate cases in South Carolina state court; (3) one case in Charleston County, South Carolina Probate Court; (4) litigation in Delaware; and (5) litigation in South Dakota. This litigation includes tangential claims for defamation.
*3 Plaintiff asserts that the attorney fees and expenses incurred to date and to be incurred in the above described litigation, most of which is still ongoing, are being paid out of Keith Wellin's assets, either directly, or by the Wellin Children's depletion of the funds taken from the 2009 Trust in November of 2014. Therefore, Plaintiff claims they are a part of the damages in this malpractice case.
In response to this claim, Defendants requested that Plaintiff produce unredacted copies of all invoices for legal services rendered to Keith Wellin and to Wendy Wellin, as Special Administrator of the Estate of Keith Wellin, by each of the attorneys and firms representing them in the underlying litigation. Plaintiff did not provide the requested documentation, and this Motion to Compel followed.
Plaintiff objects to Defendants’ Requests for Production on the grounds that the requests seek information that is protected by the attorney-client privilege and the attorney work-product doctrine. Plaintiff further argues that disclosure of the privileged information contained in the legal invoices “undoubtedly would disadvantage Plaintiff” in the related litigation because that litigation is ongoing and counsel from all sides of the related litigation have been privy to discovery and depositions from this case. Consequently, Plaintiff's counsel argues the summaries of expenditures they prepared and produced to Defendants should be sufficient for Defendants to defend this claim and this component of damages.[4]
DISCUSSION
1) Standard of Review
Rule 26(b)(1) of the Federal Rules of Civil Procedure states:
Unless otherwise limited by court order, the scope of discovery is as follows: 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, considering the importance of the issues at stake in the action, the amounts 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. Information within the scope of discovery need not be admissible in evidence to be discoverable.
Rule 26(b)(2)(C) of the Federal Rules of Civil Procedure addresses limitations on frequency and extent of discovery, and provides:
(C) When Required. On motion or on its own, the court must limit the frequency or extent of discovery otherwise allowed by these rules or by local rule if it determines that:
*4 (i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive;
(ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action, or
(iii) the proposed discovery is outside the scope permitted by Rule 26(b)(1).
“District courts have ‘wide latitude in controlling discovery and their rulings will not be overturned absent a showing of a clear abuse of discretion.’ ” State Farm Fire and Casualty Company v. Admiral Insurance Company, 225 F. Supp.3d 474, 478-479 (D.S.C. 2016)(citing Ardrey v. United Parcel Serv., 798 F.2d 679, 683 (4th Cir. 1986)); Middleton v. Nissan Motor Co., No. 10-2529, 2012 WL 3612572, at *2 (D.S.C. Aug. 21, 2012). The Fourth Circuit has instructed that “[d]iscovery under the Federal Rules of Civil Procedure is broad in scope and freely permitted.” Carefree of Md., Inc. v. Carefree Pregnancy Ctrs., Inc., 334 F.3d 390, 402 (4th Cir. 2003). “Under Rules 26(b)(2)(C) and 26(c), ‘the court has broad authority to limit discovery and prescribe alternative discovery mechanisms. Minter v. Wells Fargo Bank, N.A., 258 F.R.D. 118, 124 (D. Md. 2009); in other words, to determine ‘when a protective order is appropriate and what degree of protection is required. Furlow v. United States, 55 F.Supp.2d 360, 366 (D. Md. 1999)(quoting Seattle Times Co. v. Rhinehart, 467 U.S. 20, 36, 104 S.Ct. 2199, 81 L.Ed.2d 17 (1984)).’ ” In re C. R. Bard. Inc. Pelvic Repair Systems Product Liability Litigation, 2014 WL 12703776, *2 (S.D.W. Va. June 6, 2014). “Nevertheless, protective orders ‘should be sparingly used and cautiously granted.’ ” Id., citing Baron Fin. Corp. v. Natanzon, 240 F.R.D. 200, 202 (D. Md. 2006) (quoting Medlin v. Andrew, 113 F.R.D. 650, 653 (M.D.N.C. 1987)).
(i) Attorney-Client Privilege
Rule 501 of the Federal Rules of Evidence provides as follows:
Except as otherwise provided by the Constitution of the United States or provided by Act of Congress or in rules prescribed by the Supreme Court pursuant to statutory authority, the privilege of a witness ... shall be governed by the principles of the common law as they may be interpreted by the courts of the United States in the light of reason and experience. However, in civil actions and proceedings, with respect to an element of a claim or defense as to which State law supplies the rule of decision, the privilege of a witness ... shall be determined in accordance with state law.
In accordance with the second sentence of Rule 501, state law supplies the rule of decision to be applied in this diversity matter. Hatfill v. New York Times Co., 459 F. Supp. 2d 462, 465 (E.D. Va. 2006); Mordesovitch v. Westfield Ins. Co., 244 F. Supp.2d 636 (S.D.W. Va. 2003).
In South Carolina, the fee agreement between attorney and client is generally not protected by the attorney-client privilege. Strickland v. Capital City Mills, 74 S.C. 16, 7 L.R.A.N.S. 426 (1906). As the Strickland court explained:
The general rule excludes from evidence all confidential communications of a professional nature between attorney and client, unless the client, for whose benefit the rule is established, waives the privilege. This is based upon a wise public policy which considers that the interests of society are best promoted by inviting the utmost confidence on the part of the client in disclosing his secrets to his professional adviser, under the pledge of the law that such confidence shall not be abused by permitting a disclosure of such communications. This rule, however, is subject to limitations, and should not be extended beyond its legitimate scope and purposes. We see no reason why the contract between the client and attorney as to the fee to be paid for professional services, and the assignment of an interest in a judgment recovered in payment of services rendered, should fall within the rule of privileged communications. This is knowledge which is not communicated by the client to the attorney, but is knowledge of the attorney derived from his own act in creating the fact sought to be disclosed, and not from a revelation of any secret of the client. The fee contract, whether regarded as made preliminary to the relation of attorney and client, or at the close of such relation in compensation for services rendered, or whether made during the existence of such relation, is really collateral to the professional relation, is not strictly a part of it, and has no bearing upon the merits of the latter, upon which the professional aid was invoked. As to such a contract the parties ordinarily stand in adversary relation.
*5 Strickland, 54 S.E. at 221-222.
In State v. Poster, 276 S.C. 647, 652, 284 S.E.2d 218, 219 (1981), the South Carolina Supreme Court explained that “the privilege must be tailored to protect only confidences disclosed within the [attorney-client] relationship.” The Court recognized the essential elements giving rise to the privilege, as stated by Wigmore, to be:
“(1) Where legal advice of any kind is sought (2) from a professional legal advisor in his capacity as such, (3) the communications relating to that purpose (4) made in confidence (5) by the client (6) are at his instance permanently protected (7) from disclosure by himself or by the legal advisor, (8) except the protection be waived.” 8 Wigmore, Evidence § 2292 (McNaughton rev. 1961).
In considering this issue, the Fourth Circuit Court of Appeals noted in N.L.R.B. v. Harvey, 349 F.2d 900, 904 (C.A. 4th Cir. 1965) that “[g]enerally, the identity of the attorney's client is not considered privileged matter.” In so holding, the Court quoted from the case of United States v. Pape, 144 F.2d 778, 782 (2nd Cir. 1944), cert. denied 323 U.S. 752, 65 S.Ct. 86, 89 L.Ed. 602 (1944) as follows:
The authorities are substantially uniform against any privilege as applied to the fact of retainer or identity of the client. The privilege is limited to confidential communications, and a retainer is not a confidential communication, although it cannot come into existence without some communication between the attorney and the – at that stage prospective – client.
Thus, as the Fourth Circuit has observed, “ ‘[t]he identity of the client, the amount of the fee, the identification of payment by case file name, and the general purpose of the work performed are usually not protected from disclosure by the attorney-client privilege’ ”. In re Grand Jury subpoena, 204 F.3d 516 (4th Cir. 2000)(citing Chaudhry v. Gallerizzo, 174 F.3d 394, 402 (4th Cir. 1999))(quoting Clarke v. American Commerce National Bank, 974 F.2d 127, 129 (9th Cir. 1992)(“However, correspondence, bills, ledgers, statements and time records which also reveal the motive of the client in seeking representation, litigation strategy, or the specific nature of the services provided, such as researching particular areas of the law, fall within the privilege.”)).
(ii) Work Product Doctrine
Federal law applies to determine whether or not information is protected by the work-product privilege. This is so because the privilege is a creature of Federal Rule of Civil Procedure 26(b)(3), which codified the privilege as first recognized by the Supreme Court in Hickman v. Taylor, 329 U.S. 496 (1947). See, Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Murray Sheet Metal Co., Inc., 967 F.2d 980, 983-984 (4th Cir. 1992); Doe v. United States (In re Doe), 662 F.2d 1073, 1078 (4th Cir. 1981) cert. denied, 455 U.S. 1000, 102 S. Ct. 1632, 71 L.Ed.2d 867 (1982); First S. Bank v. Fifth Third Bank, N.A., Civ. No. 10-2097, 2013 WL 1840089 at 4 (D.S.C. May 1, 2013); United Coal Cos. V. Powell Constr. Co., 839 F.2d 958, 966 (3d Cir. 1988); PepsiCo, Inc. v. Baird, Kurtz & Dobson LLP, 305 F.3d 813, 817 (8th Cir. 2002). The party asserting the privilege bears the burden of establishing the documents the party seeks to protect were prepared in anticipation of litigation. In re Grand Jury Proceedings, Thursday Special Grand Jury, Sept. Term, 1991, 33 F.3d 342, 352 (4th Cir. 1994); see also, Carnes v. Crete Carrier Corp., 244 F.R.D. 694, 697 (N.D. Ga. 2007); United States v. Roxworthy, 457 F.3d 590, 593 (6th Cir. 2006). “Thus, in resolving the question of whether matters are immune from discovery because of a work product rule, attention must be turned first to whether the documents or tangible things were prepared in anticipation of litigation or for trial ....” National Union Fire Ins, Co., 967 F.2d at 984.
*6 In Chaudhry, supra, the Fourth Circuit Court of Appeals analyzed whether or not the Defendant's legal billing statements were protected by privilege. Chaudhry, 174 F.3d at 402-403. The Court noted the legal bills revealed the identity of federal statutes researched by Defendant's attorney. Id., 174 F.3d at 403. Since the records would divulge confidential information, the Court concluded they were protected from disclosure by the attorney-client privilege. Id. In reaching its conclusion, the Court further noted that the work product doctrine prohibited the disclosure of the Defendant's Research Memorandum. See Rule 26(b)(3), Fed. R. Civ. P. (“an attorney is not required to divulge, by discovery or otherwise, facts developed by his efforts in preparation of the case or opinions he has formed about any phase of the litigation.”). As the Court explained, “[f]act work product is discoverable only ‘upon a showing of both a substantial need and an inability to secure the substantial equivalent of the materials by alternate means without undue hardship.’ ” Id., (quoting In re Grand Jury Proceedings, 33 F.3d 342, 348 (4th Cir. 1994)). “Opinion work product is even more carefully protected, since it represents the thoughts and impressions of the attorney.” Id., (citing In re Grand Jury Proceedings, 33 F.3d at 348.).
ANALYSIS
Preliminarily, the Defendants argue the Plaintiff did not timely object to the Defendants’ request to produce the unredacted legal invoices. Request number 13 of Defendants’ First Request For Production To Plaintiff sought the following:
13. All documents evidencing any damages claimed in this matter.
Plaintiff responded to this request as follows:
Responsive documents will be provided pending the resolution of Wellin v. Wellin, et al., 2:13-cv-01831-DCN.
Request number 16 sought the following documentation:
16) All documents that support your contention in paragraph 42 of the Amended Complaint that “more than $10,000,000 has been expended by Wellin, the Plaintiff, and the Wellin Children in furtherance of” the related litigation.
Plaintiff responded to this request as follows:
Plaintiff is searching for these documents and will supplement this request as necessary.
Fed. R. Civ. P. 34 states:
[a] party upon whom ... [a request for production of documents] is served shall serve a written response within 30 days after the service of the request.... The response shall state, with respect to each item or category, that inspection and related activities will be permitted as requested unless the request is objected to, in which event the reasons for the objection shall be stated.
When a party fails to respond, the propounding party “may move for an order compelling disclosure or discovery.” Fed. R. Civ. P. 37(a)(1). If a party fails to respond to requests for production within the applicable thirty-day time limit as specified under Fed. R. Civ. P. 34, he waives any objections he may have to the production of documents. See Hall v. Sullivan, 231 F.R.D. 468, 474 (D. Md. 2005) (“[I]mplicit within Rule 34 is the requirement that objections to document production requests must be stated with particularity in a timely answer, and that a failure to do so may constitute a waiver ...”); accord Holcombe v. Helena Chem. Co., No. 2:15-CV-2852-PMD, 2017 WL 713920, at *3 (D.S.C. Feb. 23, 2017).
As noted in Hall, Rule 33(b)(4), pertaining to interrogatories, requires that all grounds for objection to interrogatories must be stated with specificity and that any ground not so stated in a timely objection is waived unless excused by the court for good cause. Hall, 221 F.R.D. at 473. Although there is no similar provision contained in Rule 34 regarding requests for production of documents and things, the commentary to Rule 34 makes it clear that the procedures under Rule 34 were intended to be governed by the same procedures applied under Rule 33.[5] Id.
*7 It is incumbent upon the party which failed to particularize its objections to demonstrate good cause why waiver should not occur. Hall, 221 F.R.D. at 474. The court in Hall identified six factors to be considered in assessing good cause: (1) the length of the delay or failure to particularize; (2) the reason for the delay or failure to particularize; (3) whether there was any dilatory or bad faith action on the part of the party that failed to raise the objection properly; (4) whether the party seeking discovery has been prejudiced by the failure; (5) whether the document request was properly framed and not excessively burdensome; and (6) whether waiver would impose an excessively harsh result on the defaulting party. Id.
The parties arguments and submissions in their memoranda regarding the issue of waiver are very short and do not provide enough information to allow for a proper analysis of the above factors. However, I conclude it is not necessary to resolve this issue because I conclude the unredacted invoices for legal fees and costs are subject to production by virtue of having been placed at issue by the Plaintiff.
As this Court explained in Berchtold v. Faegre Baker Daniels, LLP, 2014 WL 12609704, at *2 (D.S.C. December 3, 2014), where a party is seeking legal fees, the opposing party is entitled to invoices itemizing the fees and expenses incurred. Id., citing XL Specialty Ins. Co. v. Bollinger Shipyards, Inc., No. 12-2071, 2014 WL 295053 at *8 (E.D. La. Jan. 27, 2014); Feld v. Fireman's Fund Ins. Co., 292 F.R.D. 129, 138 (D.D.C. 2013); see also Equitable Prod. Co. v. Elk Run Coal Co., No. 2:08-cv-00076, 2008 WL 5263735, at *6 (S.W.D. Va. Oct. 3, 2008) (“Simply put, a party may not attempt to recover damages for a particular type of loss and then refuse to produce the evidence of that alleged loss for thorough examination and testing by the opposing party”); Selee Corporation v. McDaniel Advanced Ceramic Technologies, LLC, 2016 WL 9686076 (where Plaintiff sought to seal and provide unredacted attorney fee billing records ex parte to court for review, court granted motion to seal but, as a matter of fundamental fairness, required Plaintiff to permit its opponent to review the unredacted version and be heard on the reasonableness of the fee request); Nationwide Payment Solutions, LLC v. Plunket, 831 F.Supp.2d 337, (D. Maine 2011) (“[A] claimant who seeks attorney fees and submits attorney fee invoices in support of that request can be said to have impliedly waived any applicable privilege or protection, at least as to its opponent and as to the invoices themselves.”); Travelers Casualty and Surety Company of America v. Grace & Naeem Uddin, Inc., (concluding that if all three conditions of the Hearn test are met, a court should find that the party asserting a privilege has impliedly waived it through his own affirmative conduct, and this applies even if the privilege holder does not attempt to make use of a privileged communication. An implied waiver will be found if the privilege holder asserts a position, “the truth of which can only be assessed by examination of the privileged communication.”) (citing Union County Iowa v. Piper Jaffray & Co., Inc., 248 F.R.D. 217,220 (S.D. Iowa 2008)) (quoting In re Kidderv Peabody Secs. Litig., 168 F.R.D. 459, 470 (S.D.N.Y. 1996)).
As in this case, in Berchtold, the court concluded the Plaintiff not only put at issue the amount and reasonableness of the attorney fees in the three underlying litigation matters, but also put at issue whether the fees incurred were proximately caused by the Defendant's opinion letter. “Thus, to the extent that the amount of the fees, the reasonableness of the fees, or whether the fees were proximately caused by the [ ] opinion letter ‘necessarily involves an examination of the attorney's advice or communication to the client,’ the privilege has been waived.” Berchtold, 2014 WL 12609704, at *3 (quoting United States v. White, 944 F.Supp2d 454,459).
*8 Just as the attorney-client privilege can be waived, so, too, “the work product doctrine is not absolute. Like other privileges, it may be waived.” Feld v. Fireman's Fund Ins. Co., 991 F.Supp.2d 242, 252-53 (D.D.C. 2013) (Finding that Plaintiff had waived the work-product privilege with respect to materials in the underlying litigation by placing attorney work-product at issue, by bringing the indemnification lawsuit seeking reimbursement of attorney's fees). Indeed, the Supreme Court has clearly stated that the privilege derived from the work-product doctrine is not absolute and may be waived. United States v. Nobles, 422 U.S. 225, 238, 239, 95 S.Ct. 2160, 45 L.Ed.2d 141 (1975). In deciding whether there was an implied waiver, the Court instructed:
What constitutes a waiver with respect to work-product materials depends, of course, upon the circumstances. Counsel necessarily makes use throughout trial of the notes, documents, and other internal materials prepared to present adequately his client's case, and often relies on them in examining witnesses. When so used, there normally is no waiver. But where, as here, counsel attempts to make a testimonial use of these materials the normal rules of evidence come into play with respect to cross-examination and production of documents.
Id. (emphasis added).
And the Court went on to hold that:
[the r]espondent can no more advance the work-product doctrine to sustain a unilateral testimonial use of work-product materials than he could elect to testify in his own behalf and thereafter assert his Fifth Amendment privilege to resist cross-examination on matters reasonably related to those brought out in direct examination.
Id. Accord McGautha v. California, 402 U.S. 183, 215, 91 S.Ct. 1454, 28 L.Ed.2d 711 (1971); In re Martin Marietta Corp., 856 F.2d 619, 625–26 (4th Cir. 1988); see also Equitable Production Co., supra, 2008 WL 5263735 at *3 (finding Plaintiff had waived any protection pursuant to the attorney-client privilege or the work product doctrine by asserting a claim for damages that puts purportedly protected information in issue). I conclude the analysis is as fundamental as the above quoted analogy set forth in United States v. Nobles, 422 U.S. at 239. Therefore, I conclude the Plaintiff has waived work product protection for the Plaintiff's legal invoices by placing attorney fees directly at issue as a part of Plaintiff's damages.
Although I conclude the Plaintiff has waived the attorney-client privilege and work product protection with regard to attorney invoices and expenses, this does not end the inquiry.[6] As noted previously, “[u]nder Rules 26(b)(2)(C) and 26(c), the court has broad authority to limit discovery and prescribe alternative discovery mechanisms; in other words, to determine when a protective order is appropriate and what degree of protection is required.” In re C. R. Bard, supra, 2014 WL 12703776 at *2 (internal citations and punctuation omitted).
The underlying litigation described at the beginning of this Report and Recommendation has been fought since 2013. It is complicated and intertwined, involving multiple parties, law firms, and legal issues. Over 100 depositions have been taken to date, with more to come. Several of the cases have been consolidated for pretrial purposes, as a result of which multiple parties have conducted combined depositions and other discovery. Many of the attorneys involved in the underlying litigation have attended depositions in the within malpractice case because of the overlap in subject matter. There is a great deal at stake in the litigation to all participating parties, and protection of the integrity of that process is important.
*9 In this case, Plaintiff seeks attorney fees from the underlying litigation as a part of the damages proximately caused by the alleged malpractice. Unquestionably, the amount at stake is significant, allegedly exceeding Ten Million Dollars ($10,000,000.00) to date. It is fair to state that those attorney fees and costs asserted as damages in this case will continue to mount so long as the underlying litigation continues. It would seem equally fair to conclude that the within case cannot be tried until the alleged damages are ascertainable, which will presumably be at the conclusion of the underlying cases.
Contemporaneously with the hearing on the within motion, Plaintiff filed with the District Court its motion pursuant to Rule 42(b), Fed.R.Civ.P., seeking a separate trial or phase of trial for this component of damages-attorney fees and costs-so as to allow bifurcated discovery confined to the issue of these alleged damages. Plaintiff argues this will allow for discreet document production and single-issue depositions that can be more easily closed to all persons but the attorneys involved in this action. Plaintiff asserts this will greatly reduce the risk of inadvertent disclosure of privileged information contained in the legal invoices to Plaintiff's opponents in the underlying litigation, the disclosure of which the Plaintiff claims would be highly prejudicial to the Estate. In the event the Court grants Plaintiff's motion, the court will undoubtedly set a schedule for the discovery regarding the issue of attorney fees and costs alleged to be damages proximately caused by the alleged malpractice by the Defendants. In the event the Court does not grant Plaintiff's Motion For Separate Trial On Damages Related To Attorney Fees And Costs, it would still seem to make sense to delay production of the unredacted invoices pending resolution of the underlying litigation, both because the alleged damages are ongoing and cannot be ascertained until that time, and because any possible harm to Plaintiff caused by inadvertent disclosure to Plaintiff's opponents in the underlying litigation would be greatly reduced once that litigation is concluded. Furthermore, Defendants can be fully protected in their right to examine and evaluate the unredacted invoices and conduct discovery regarding this issue.
Therefore, for the foregoing reasons, it is
RECOMMENDED that the Defendants’ Motion to Compel Production of Legal Invoices be granted; but that production of the invoices and expenses be deferred pending resolution of the Plaintiff's Motion For Separate Trial On Damages Related to Attorney Fees and Costs; and it is further
RECOMMENDED that, in the event the Court grants Plaintiff's Motion For Separate Trial On Damages Related To Attorneys’ Fees and Costs, that the Court set a date for production of the legal invoices consistent with the Court's ruling; and it is further
RECOMMENDED that, if the Court denies the Plaintiff's Motion For Separate Trial On Damages Related To Attorneys’ Fees and Costs, that the Court delay production of the unredacted legal invoices and costs until the conclusion of the underlying cases, providing Defendants’ sufficient time for discovery regarding the invoices prior to trial of this malpractice case.
RESPECTFULLY SUBMITTED this 27th day of November, 2018.
Footnotes
According to the Plaintiff, at that time, the BRK stock held by Friendship Partners, LP was worth approximately Ninety Million Dollar.
Keith Wellin also gifted Ten Million Dollars to each of his three children and to his wife, Wendy C.H. Wellin, in January, 2013. In the underlying litigation, Keith Wellin sought, and Wendy Wellin, as Special Administrator of the Estate of Keith S. Wellin and as Trustee of the Keith S. Wellin Florida Revocable Living Trust u/a/d December 11, 2013, seeks return of the gifts to the Wellin Children, alleging Keith Wellin was taken advantage of and misguided by his son, Peter Wellin, in breach of Peter's fiduciary duties, during a time when Keith Wellin was temporarily incapacitated due to medication he was taking.
The factual allegations and procedural histories of the above outlined pending lawsuits are further outlined in the Order of Judge Norton issued in Wellin I, ECF No. 158, on June 28, 2014.
In their response to Defendants’ motion, Plaintiff made the additional argument that Plaintiff should be entitled to production of the Wellin Children's and Grandchildren's unredacted legal invoices from the underlying litigation in the event the court granted Defendants’ motion. Plaintiff also served a subpoena duces tecum on the Wellin Children's attorneys, Nelson, Mullins, Riley and Scarborough LLP and the Wellin Grandchildren's attorneys, Duffy and Young, LLC seeking the same unredacted legal invoices, and subsequently filed a motion to compel their production (ECF No. 108). Both law firms responded with a Motion to Quash the subpoena. However, Plaintiff, and both law firms have since withdrawn these motions pending resolution of Plaintiff's Motion for Separate Trial on Damages Related to Attorney Fees and Costs (ECF No. 122). Therefore, no ruling is required regarding Plaintiff's argument for production of said invoices contained in their Response.
The commentary under Rule 34 states: “The procedure provided in Rule 34 is essentially the same as that in Rule 33 and the discussion in the note appended to that rule is relevant to Rule 34 as well. Hall, 221 F.RD. at 473, citing Fed.R.Civ.P. 34 advisory committee note, 1970 Amend.; Amendment to the Fed. Rules of Civil Procedure, 48 F.R.D. 487, 527 (1970).
Of course, Plaintiff has the option of withdrawing its claim for attorneys fees and costs as a part of damages, in which event, no production of the requested legal invoices and costs would be required.