Evanston Ins. Co. v. Frederick
Evanston Ins. Co. v. Frederick
2024 WL 4783836 (C.D. Cal. 2024)
September 30, 2024
Scott, Karen E., United States Magistrate Judge
Summary
The court ruled that the attorney-client privilege did not apply to communications between Evanston's attorneys and the Kennedys Firm, as the tripartite relationship between Evanston, HRC, and Littler had ended. However, the work product privilege could be asserted for documents created after April 15, 2021. The parties were ordered to meet and confer about the motion to compel and Littler was given a deadline to respond to the subpoena. The order was filed under seal and the parties were instructed to submit a redacted version for public filing.
EVANSTON INS. CO.
v.
JANE L. FREDERICK, et al
v.
JANE L. FREDERICK, et al
Case No. 8:23-cv-00882-FWS-KES
United States District Court, C.D. California
Filed September 30, 2024
Scott, Karen E., United States Magistrate Judge
PROCEEDINGS (IN CHAMBERS): Order Ruling on Attorney-Client Privilege Issues Related to HRC's Subpoena to Littler and Requiring Parties to Meet and Confer about HRC's Motion to Compel (Dkt. 84)
I. INTRODUCTION
*1 Before the Court is a discovery dispute between Plaintiff Evanston Insurance Company (“Evanston”) and its insured, HRC Fertility Management, LLC (“HRC” or “HRC Fertility”).
HRC and certain doctors working at HRC were sued in an employment dispute: Ghazal v. Huntington Reproductive Center Medical Group, et al., No. 2OSTCV46587 (L.A. Superior Court) (the “Underlying Lawsuit”). HRC tendered a claim to Evanston, which agreed to defend HRC subject to a reservation of rights. Evanston initially chose attorney Jamie Y. Lee at Littler Mendelson, PC (“Littler”) to serve as defense counsel for HRC. As discussed in more detail below, HRC eventually asserted that conflicts of interest gave it the right to independent Cumis[1] counsel and chose Callahan & Blaine, APLC (“Callahan & Blaine”) to serve that role. The Underlying Lawsuit settled in 2023.
Evanston filed this federal action seeking a declaratory judgment as to coverage, and HRC filed counterclaims for bad faith. (See Dkt. 25 (First Amended Complaint); Dkt. 40 (joint Rule 26(f) report).)
HRC served a subpoena on Littler seeking documents that Evanston contends are protected by the attorney-client communication and work product privileges. Because Ms. Lee continued to actively participate in the Underlying Lawsuit, and Littler sent HRC invoices based on that participation, HRC argues that the tripartite attorney-client relationship between Littler, Evanston, and HRC did not end until the Underlying Lawsuit did. Accordingly, HRC is entitled to review all communications between Evanston and Littler, up to and concerning the June 2023 settlement negotiations related to the Underlying Lawsuit.
Contemporaneous communications show that, as of April 15, 2021, both Evanston and HRC agreed that a conflict of interest prevented Littler from representing both Evanston and HRC and that appointment of independent Cumis counsel was necessary. Accordingly, Evanston can claim the attorney-client privilege over communications with Littler, as against HRC, on and after that date. Littler's continued participation in the Underlying Lawsuit was consistent with California Civil Code section 2860(f), and Evanston has submitted evidence showing that continued billing of HRC was an administrative error that did not amount to a knowing waiver of the privilege.
II. PROCEDURAL HISTORY
A. HRC's Subpoena to Littler and Denial of Motion to Quash.
In December 2023, HRC served the subpoena, which directed Littler to produce documents in response to twenty-two requests. (Dkt. 54 at 15-17.) Generally, the requests seek documents about HRC, the Underlying Lawsuit, the claim, and the policy (nos. 1-4); Littler's communications with Evanston (nos. 5-8, 13-16); Littler's communications with the Kennedys Firm, Evanston's coverage and litigation counsel (nos. 9-12, 17-20); and Littler's attorney work product related to both the Underlying Lawsuit (no. 21) and HRC's insurance claim (no. 22).
HRC filed supporting declarations from its counsel at Callahan & Blaine, Edward Susolik, and an accounts payable supervisor in HRC's accounting department, Lisa Wylie. (Dkt. 50 (First Susolik Decl.); Dkt. 49 (Wylie Decl.).) Evanston filed a declaration from Daniel Evans, a senior counsel/manager for management liability claims at Markel Service, Incorporated (“Markel”); Markel is Evanston's claim service manager. (Dkt. 52 (Evans Decl.).) Additionally, at the Court's invitation (Dkt. 56), Ms. Lee filed a declaration (Dkt. 58 (Lee Decl.)).[4]
After hearing oral argument on April 9, 2024 (Dkt. 68 (transcript)), the Court denied the motion to quash on April 25, 2024. (Dkt. 70.)[5] The Court found that at least some of the documents sought by the subpoena were not privileged, because documents from the time when Littler was serving as tripartite counsel were discoverable, and—contrary to Evanston's assertion that this relationship only existed for a few weeks between September and October 2022—documents appeared to show that tripartite relationship may have begun as early as March 2019. (Dkt. 70 at 3-4.)
The Court directed Littler to respond to the subpoena by May 28, 2024 and stated, “Any privilege log produced by Littler/Evanston should clearly state the dates when Littler contends it had an attorney-client relationship with HRC versus when it did not and explain the factual basis for the end date (if any).” (Id. at 6.) The Court also “provide[d] guidance to the parties about what privileges can (or cannot) be claimed on any yet-to-be-drafted privilege logs.” (Id. at 4-6.) The Court noted:
Any privilege log produced by Littler/Evanston should clearly state the dates when Littler contends it had an attorney-client relationship with HRC versus when it did not and explain the factual basis for the end date (if any). To the extent Littler may claim it did not have an attorney-client relationship with HRC before or during months when it billed HRC for legal services as the “client,” Littler will need to explain that. The Court finds the “administrative oversight” argument hard to swallow given the number of bills, the amount of money paid and not refunded, Ms. Lee's numerous 2022 and 2023 appearances identifying herself as counsel for HRC, and the apparent failure of anyone to advise HRC of the change in Littler's status.
*3 (Id. at 6.)
B. Supplemental Briefing.
On May 13, 2024, Littler asked the Court to stay its compliance with the subpoena until the Court decided precisely when Littler had an attorney-client relationship with HRC and when it did not. (Dkt. 73.) Littler itself took no position on this issue. (Id. at 3 n.1.)
The Court allowed HRC and Evanston to file supplemental briefing on this issue. (Dkt. 78 (order setting briefing schedule); Dkt. 79 (HRC Fertility's initial statement); Dkt. 83 (Evanston's initial statement); Dkt. 88 (Evanston opposition); Dkt. 89 (HRC's response); Dkt. 90 (HRC Fertility's reply); Dkt. 91 (Evanston's Reply).)
The parties also submitted additional declarations with exhibits. (Dkt. 80 (Second Susolik Decl. filed by HRC); Dkt. 91-1 (Second Evans Decl. filed by Evanston); Dkt. 92-1 (Kowalski Decl. filed by Evanston).)
III. LEGAL STANDARDS
A. Governing Law.
The Court must quash or modify a subpoena if it “requires disclosure of privileged or other protected matter, if no exception or waiver applies....” Fed. R. Civ. P. 45(d)(3)(A)(iii). A party has standing to object to a non-party subpoena on the basis that it seeks privileged materials and the objecting party is the holder of that privilege. Crispin v. Christian Audigier, Inc., 717 F. Supp. 2d 965, 973-74 (C.D. Cal. 2010).
Because this Court is exercising diversity jurisdiction over this action, the claim of privilege is governed by California law. (Dkt. 25 ¶ 8 (operative First Amended Complaint, asserting jurisdiction under the diversity statute, 28 U.S.C. § 1332)); Fed. R. Evid. 501; Star Editorial, Inc. v. U.S. Dist. Ct. for Cent. Dist. of Cal., 7 F.3d 856, 859 (9th Cir. 1993).[6]
B. Establishment of Attorney-Client Relationship and Privilege Under California Law.
“In California, evidentiary privileges are statutorily created and must be strictly construed.” Cont'l Cas. Co. v. St. Paul Surplus Lines Ins. Co., 265 F.R.D. 510, 518 (E.D. Cal. 2010). California's attorney-client privilege confers a privilege on the client “to refuse to disclose, and to prevent another from disclosing, a confidential communication between client and lawyer in the course of that relationship...” Cal. Evid. Code § 954. “The fundamental purpose of the attorney-client privilege is, of course, to encourage full and open communication between client and attorney.” Zimmerman v. Superior Court, 220 Cal. App. 4th 389, 396 (2013) (citation omitted).
*4 “[A] communication is not privileged, even though it may involve a legal matter, if it has no relation to any professional relationship of the attorney with the client.” People v. Gionis, 9 Cal. 4th 1196, 1210 (1995). “[A] privileged communication must be ‘transmitted between a client and his or her lawyer in the course of that relationship....’ ” Wood v. Superior Ct. of San Diego Cnty., 46 Cal. App. 5th 562, 581-82 (2020) (emphasis in original). In other words, “an actual attorney-client relationship is required to sustain claims of the privilege.” Id. at 583 (citation omitted).
“When the evidence is undisputed, the question of whether an attorney-client relationship exists is one of law.” Streit v. Covington & Crowe, 82 Cal. App. 4th 441, 444 (2000); see also Wood, 46 Cal. App. 5th 562 at 580. “The party claiming the privilege has the burden of establishing the preliminary facts necessary to support its exercise, i.e., a communication made in the course of an attorney-client relationship.” Costco Wholesale Corp. v. Superior Ct., 47 Cal. 4th 725, 733 (2009). “Once that party establishes facts necessary to support a prima facie claim of privilege, 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 the communication was not confidential or that the privilege does not for other reasons apply.” Id.
“No formal agreement or compensation is necessary to create an attorney-client relationship for purposes of the privilege.” Edwards Wildman Palmer LLP v. Superior Ct., 231 Cal. App. 4th 1214, 1226 (2014). Some case law suggests that courts should focus on the reasonable expectations of the client. See Gionis, 9 Cal. 4th at 1211 (finding that communications made “after an attorney's refusal of representation” were not privileged because “a person could have no reasonable expectation of being represented by an attorney after the attorney's explicit refusal to undertake representation”). However, most of the case law discussing the attorney-client relationship in the privilege context focuses on whether an attorney-client relationship was ever formed. This case law is not very helpful in deciding the present dispute, in which the parties agree that such a relationship was formed but disagree when it ended.
One situation where California courts have addressed the end of attorney-client relationships is in considering the statute of limitations for legal malpractice claims.[7] In that context, California courts use an “objective” test to determine when the relationship ended, “focus[ing] on the client's reasonable expectations in light of the particular facts of the attorney-client relationship.” Wang v. Nesse, 81 Cal. App. 5th 428, 440 (2022). Those expectations may be based “upon the attorney's express notification to the client that the attorney will perform no further services, or, if the attorney remains silent, may be inferred from the circumstances.” Laclette v. Galindo, 184 Cal. App. 4th 919, 928 (2010). Courts “do not focus on the client's subjective beliefs; instead, [courts] objectively examine evidence of an ongoing mutual relationship and of activities in furtherance of the relationship.” Flake v. Neumiller & Beardslee, 9 Cal. App. 5th 223, 231 (2017) (citation and quotation marks omitted).
C. Waiver of the Privilege.
*5 “The attorney-client privilege may be waived, but only by the holder of the privilege.” McDermott Will & Emery LLP v. Superior Ct., 10 Cal. App. 5th 1083, 1101 (2017). “In light of the important public policies underlying privileges, ... the scope of the waiver of a privilege is generally construed narrowly.” Manela v. Superior Ct., 177 Cal. App. 4th 1139, 1147 (2009).
“A waiver results when the holder, without coercion, (1) has disclosed a significant part of the communication, or (2) has consented to the disclosure made by anyone else.” McDermott Will & Emery, 10 Cal. App. 5th at 1101 (citing Cal. Evid. Code § 912(a)). “[I]nadvertent disclosures” do not constitute a waiver; there must be “some measure of choice and deliberation on the part of the privilege holder” that demonstrates an “intention to voluntarily relinquish a known right.” Id. (citations omitted). “The privilege holder's characterization of his or her intent in disclosing a privileged communication is an important consideration in determining whether the holder waived the privilege, but is not necessarily dispositive.” Id.
Where joint clients are co-holders of the privilege (as discussed further below), “one joint client cannot waive the attorney-client privilege for another joint client.” Anten v. Superior Ct., 233 Cal. App. 4th 1254, 1256 (2015).
D. Attorney-Client Relationships in the Insurance Context.
1. Tripartite Relationship.
“Special rules apply to the application of the attorney-client privilege in the insurance context.” L.A. Terminals, Inc. v. United Nat'l Ins. Co., No. 19-cv-0286-ODW-PVCx, 2021 U.S. Dist. LEXIS 246135, at *10, 2021 WL 6103181, at *4 (C.D. Cal. Nov. 17, 2021).
“When an insurer retains counsel to defend its insured, a tripartite attorney-client relationship arises among the insurer, insured, and counsel.” Bank of Am., N.A. v. Superior Ct., 212 Cal. App. 4th 1076, 1083 (2013). “The relationship is based on a shared interest in defending against third-party liability and begins when the insurer acknowledges a duty to defend the insured and provides a defense to the action.” Cont'l Cas., 265 F.R.D. at 520 (citing Lectrolarm v. Pelco, 212 F.R.D. 567, 517 (E.D. Cal. 2002)). “[B]oth the insurer and the insured are considered to be clients of defense counsel.” Id. at 518.
California Evidence Code section 962 provides, “Where two or more clients have retained or consulted a lawyer upon a matter of common interest, none of them ... may claim a privilege under this article as to a communication made in the course of that relationship when such communication is offered in a civil proceeding between one of such clients ... and another of such clients....” In other words, “if multiple clients retain or consult with an attorney on a matter of common interest and the joint clients later sue each other, then the communications between either client and the attorney made in the course of that relationship are not privileged in the suit between the clients.” Anten, 233 Cal. App. 4th at 1256; see also Glacier Gen. Assurance Co. v. Superior Ct., 95 Cal. App. 3d 836, 840 (1979) (rejecting argument that Cal. Evid. Code section 962 “vitiat[es] the privilege only as to those communications made ... by joint clients in the presence of each other”).
*6 Thus, for as long as the tripartite relationship exists between the insurer, insured, and tripartite counsel, “the attorney-client privilege is shared among the insurer, insured, and attorney.” Lincoln Gen. Ins. Co. v. Ryan Mercaldo LLP, No. 13-cv-2192, 2015 U.S. Dist. LEXIS 182529, at *5, 2015 WL 12672142, at *2 (S.D. Cal. July 15, 2015); see also Bank of Am., 212 Cal. App. 4th at 1083 (“[C]onfidential communications between either the insurer or the insured and counsel are protected by the attorney-client privilege, and both the insurer and insured are holders of the privilege”).
2. Independent Cumis Counsel.
“However, when a conflict arises between the insurer and insured, such as a dispute over coverage, California law requires the insurance company to hire separate counsel for the insured.” Cont'l Cas., 265 F.R.D. at 520. This separate, independent counsel is often referred to as “Cumis counsel,” after the decision in San Diego Navy Fed. Credit Union v. Cumis Ins. Society, 162 Cal. App. 3d. 358 (1984). The Cumis decision was later “substantially codifie[d]” in California Civil Code section 2860. Cont'l Cas., 265 F.R.D. at 520.
“At that point, the ‘joint client’ structure underlying the tripartite relationship clearly evaporates.” Cont'l Cas., 265 F.R.D. at 524. Cumis counsel's “only ‘client’ (i.e., the only person to whom the standard lawyer-client obligations run) is the insured.” First Pac. Networks, Inc. v. Atl. Mut. Ins. Co., 163 F.R.D. 574, 579 (N.D. Cal. 1995).[8]
“In the Cumis context, unlike the ‘usual tripartite relationship,’ the attorney-client privilege insulates from the defending insurer privileged communications between the insured and its counsel,” because “Cumis counsel represents the insured, not the insurance company.” Cont'l Cas., 265 F.R.D. at 520 (citing Kroll & Tract v. Paris & Paris, 72 Cal. App 4th 1527, 1543 (1999) and Assurance Co. of Am. v. Haven, 32 Cal. App. 4th 78, 90 (1995)).
3. Duty of Cooperation and Right to Participate.
After appointment of independent Cumis counsel, California law nevertheless requires Cumis counsel, the insured, and the insurer to communicate and cooperate with each other as follows:
(d) When independent counsel has been selected by the insured, it shall be the duty of that counsel and the insured to disclose to the insurer all information concerning the action except privileged materials relevant to coverage disputes, and timely to inform and consult with the insurer on all matters relating to the action. Any claim of privilege asserted is subject to in camera review in the appropriate law and motion department of the superior court. Any information disclosed by the insured or by independent counsel is not a waiver of the privilege as to any other party.*7 ...(f) Where the insured selects independent counsel pursuant to the provisions of this section, both the counsel provided by the insurer and independent counsel selected by the insured shall be allowed to participate in all aspects of the litigation. Counsel shall cooperate fully in the exchange of information that is consistent with each counsel's ethical and legal obligation to the insured. Nothing in this section shall relieve the insured of his or her duty to cooperate with the insurer under the terms of the insurance contract.
Cal. Civ. Code § 2860(d), (f) (emphasis added).
Thus, “[w]hile counsel for both the insurer and insured are required to ‘cooperate fully in the exchange of information that is consistent with each counsel's ethical and legal obligation to the insured,’ and with the insured's ‘duty to cooperate with the insurer under the terms of the insurance contract,’ Cal. Civ. Code § 2860(f), these disclosure and cooperation requirements do not require the disclosure of privileged material.” Cont'l Cas. Co., 265 F.R.D. at 520. As one district court has explained:
While ... Cumis counsel has some obligations to the carrier, those obligations are limited and are set forth in section 2860.... These obligations are strictly of an informational character, and arise only because of the unique three-cornered arrangement that carriers create when they agree to defend only under a reservation of rights.... Most significantly, these clearly are not the obligations of a lawyer to a client.... They could not be—because one lawyer cannot simultaneously represent two parties between whose interests there is such an obvious and significant on-going tension.
First Pac. Networks, 163 F.R.D. at 579 (emphasis added).
IV. TIMELINE OF EVENTS
A. March 2019-March 2020
Although Dr. Ghazal did not file the Underlying Lawsuit until December 2020, she (through her counsel) made claims on HRC and other parties well before that, in about early 2019. (First Susolik Decl. ¶ 5 / Dkt. 50 at 2.) In March 2019, HRC notified Evanston of the impending lawsuit and tendered a claim under its policy with Evanston. (First Susolik Decl. ¶ 6 / Dkt. 50 at 3.) On March 14, 2019, Evanston sent the matter to Littler to perform a conflicts check. (First Susolik Decl. Ex. A / Dkt. 50 at 15 (Evanston claim activity log).)
On January 22, 2020, Callahan & Blaine sent a letter to Evanston officially asking Evanston to defend and indemnify HRC under the policy. (First Susolik Decl. Ex B / Dkt. 50 at 17.) Callahan & Blaine stated that it was counsel for HRC in the Underlying Lawsuit. (Id.) Callahan & Blaine also represented four individual physicians employed by an HRC affiliate who were also named as defendants in the Underlying Lawsuit. (First Susolik Decl. ¶ 4 / Dkt. 50 at 2.)
According to Ms. Lee, Littler was appointed by Evanston to represent HRC on or about February 7, 2020. (Lee Decl. ¶ 2 / Dkt. 58 at 2.) On March 24, 2020, Callahan & Blaine sent a letter to Evanston stating, “We were advised by Ms. Jaime Lee of Littler ... that Evanston has agreed to the Insured with regard to the [Underlying Lawsuit].” (First Susolik Decl. Ex. C / Dkt. 50 at 19.)[9] Beginning on or around March 20, 2020, Ms. Lee began to be copied on email exchanges between Callahan & Blaine and opposing counsel related to the Underlying Lawsuit. (First Susolik Decl. ¶ 8 / Dkt. 50 at 3.) Between May and August 2020, counsel for all the parties in the Underlying Lawsuit, including Ms. Lee of Littler and counsel from Callahan & Blaine, discussed “a tolling agreement” and selected a mediator. (First Susolik Decl. ¶ 10 / Dkt. 50 at 3.)
*8 [redacted]
Littler continued to send invoices to HRC through December 2023. (Wylie Decl. ¶ 9 / Dkt. 49 at 3-4.)
B. September 2020: Evanston's Reservation of Rights.
[redacted]
[redacted]
[redacted]
C. October 2020: Callahan & Blaine's Letter Declaring a Conflict of Interest Requiring Independent Cumis Counsel.
On October 16, 2020, Callahan & Blaine responded to Evanston's reservation of rights letter by stating that it created a conflict of interest requiring the appointment of independent Cumis counsel.[10] (First Susolik Decl. Ex. E / Dkt. 59 at 32.) The letter stated, “HRC does not give its informed consent to representation by Evanston's retained counsel, given the extent of the conflicts of interest outlined above. As such, the Littler firm may not represent both Evanston and HRC, and independent counsel should be appointed immediately.” (Id. at 38 (emphasis added).) The letter further stated, “HRC hereby informs Evanston that it has have [sic] designated Callahan & Blaine to act as its independent Cumis counsel....” (Id. at 39.) Callahan & Blaine represented that it was qualified to act as counsel under section 2860(c)[11]; stated that it would “endeavor to follow Evanston's litigation guidelines once they [had] been provided”[12]; and asked to be paid “a blended [redacted] per hour” for its three attorneys working on the Underlying Litigation. (Id.)
[redacted] of Markel states that it was his understanding that, “Concurrently with the Callahan & Blaine firm's self-declaring appointment as HRC Fertility's defense and independent Cumis counsel, the scope of Ms. Lee's retention shifted to only representing Evanston's interests as its monitoring counsel....” (First Evans Decl. ¶ 5 / Dkt. 52 at 3.)
*9 After this shift in role, Markel's “billing system continued to run in the same fashion but with the invoices being handled under the Evanston policy as supervisory rather than defense expenses.” (Second Evans Decl. ¶ 3 / Dkt. 91-1 at 3.) In other words, HRC continued to receive invoices from Littler for work on the Underlying Lawsuit. (Wylie Decl. ¶ 9 / Dkt. 49 at 3-4.)
D. January-February 2021: Communications between Callahan & Blaine, the Kennedys Firm, and Littler.
On January 25, 2021, Evanston wrote a letter to Callahan & Blaine. (See Evanston Initial Stmt. Ex. 4 / Dkt. 83-4 at 2 (later correspondence referring to this letter).) The parties have not submitted a copy of this letter. In later correspondence, Evanston characterized the letter's contents as follows:
Evanston, in its January 25, 2021 letter, advised it will defend HRC Fertility in the [Underlying Lawsuit] under the Policy to the extent required under applicable law, and subject to the Policy's terms and limitations outlined in that letter, including a complete reservation of all of Evanston's rights under the Policy and at law. Evanston, in that letter, also advised of various independent counsel rights (commonly called “Cumis” counsel) as to HRC Fertility's defense....
(First Susolik Decl. Ex. F / Dkt. 50 at 43.)
Ms. Lee declares that, on February 9, 2021, she “was informed by Callahan & Blaine ... that it was retained by Evanston as the independent Cumis defense counsel for HRC Fertility.” (Lee Decl. ¶ 3 / Dkt. 58 at 2.) It is unclear how Callahan & Blaine communicated this; she does not point to any specific letter, email, phone call, or in-person conversation. Billing records from Littler indicate that, on that same date, Ms. Lee stated that she had “[e]xchanges with client's coverage counsel regarding appointment of cumis counsel and further litigation plan based on same.” (Wylie Decl. Ex. 5 / Dkt. 49 at 47-48.)
On February 17, 2021, Callahan & Blaine wrote a letter to the Kennedys Firm. (Evanston Initial Stmt. Ex. 4 / Dkt. 83-4 at 2-11.) As it had in its October 2020 letter, Callahan & Blaine asserted, “Evanston's reservation of rights has created a conflict of interest in its retained panel counsel, Jamie Lee, Esq. of the firm Littler Mendelson and HRC.... HRC does not give its informed consent to representation by Evanston's retained counsel .... As such, the Littler firm may not represent both Evanston and HRC....” (Id. at 2, 9 (emphasis added).)
The letter characterized Evanston's letter of January 25, 2021 as “reiterat[ing] [Evanston's] agreement to defend HRC in the [Underlying Lawsuit] under a reservation of rights and impl[ying] its consent to HRC's appointment of Cumis counsel.” (Id. (emphasis added).) Callahan & Blaine “formally request[ed] that, pursuant to California Civil Code section 2860, Evanston appoint independent counsel to protect the interests of HRC in the” Underlying Lawsuit. (Id. at 2.) Callahan & Blaine demanded it be reimbursed “at a blended rate of [redacted] per hour for all attorneys working on the” Underlying Lawsuit—the same rate it had demanded in its October 2020 letter—and stated, “[i]f Evanston refuses to pay [redacted] per hour, Callahan & Blaine will seek its full rates at a fee arbitration.” (Id. at 11.)[13]
E. April 2021: Evanston's Response re Appointment of Cumis Counsel.
*10 On April 15, 2021, the Kennedys Firm wrote to Callahan & Blaine on behalf of Evanston. (First Susolik Decl. Ex. F / Dkt. 50 at 42.) The letter noted that HRC Fertility had “advised Evanston that HRC Fertility designates the Callahan & Blaine firm to act as its independent Cumis counsel for the defense of the [Underlying Lawsuit], and has requested Evanston agree to pay a blended rate of [redacted] per hour for that defense.” (Id. at 43.)
Evanston stated that it would “only consent to HRC Fertility's proposed defense arrangement and retention of Callahan & Blaine” if they agreed to a lower hourly rate and fewer attorneys being assigned to the case. (Id. at 43-44.) Evanston stated, “If Callahan & Blaine [was] unwilling to defend” the Underlying Lawsuit on these terms, HRC Fertility could “pay the difference between Evanston's approved hourly rates and the actual rates charged,” or Evanston could “proposed a different firm to defend HRC Fertility” under the policy, which stated that Evanston would “provide a list of attorneys or law firms from which the Insured may designate defense counsel....” (Id. at 44.) Evanston also stated that its “consent to HRC Fertility's proposed defense arrangement with Callahan & Blaine” was “subject to ... Evanston's guidelines for defense counsel ... and satisfaction of the $250,000 retention.” (Id. at 44.)
Evanston noted, “Upon agreement of the terms set forth in this letter, HRC Fertility has a continuing duty to Evanston to timely ‘inform and consult with [Evanston] on all matters relating to the [Underlying Lawsuit],’ and to disclose ‘all information concerning the action except privileged materials relating to coverage disputes.’ ” (Id. (quoting Cal. Civ. Code § 2860(d)).)
The record does not contain any response to this letter from Callahan & Blaine. It appears that, as of March 2022, Callahan & Blaine still had not responded. (See Dkt. 83-2 at 7 (email from the Kennedys Firm complaining, “I advised you that Evanston cannot set-up you[r] firm on the e-billing system until there is an agreement on the outstanding issues in Evanston's April 15, 2021 letter, including on hourly rates. My email to you was also Evanston's fifth follow up request for a response to its April 15 letter. Evanston has clearly attempted, repeatedly, to address billing and defense handling issues, only to be met with resistance or silence from your firm.”).) Callahan & Blaine and Evanston continued to disagree about fee issues through 2023. (See Evanston Initial Stmt., Ex. 2 / Dkt. 83-2 at 7-8 (March 2022 emails between the Kennedys Firm and Callahan & Blaine); Evanston Initial Stmt., Ex. 4 / Dkt. 83-4 at 13 (June 2023 email from the Kennedys Firm to Callahan & Blaine).)
F.March 2022: Emails Between the Kennedys Firm and Callahan & Blaine About Littler's Role.[14]
In March 2022, the Kennedys Firm sent Callahan & Blaine emails complaining that they had not provided Evanston with a “Litigation Plan” or regular status reports for the Underlying Lawsuit, in breach of “Evanston's policy terms and defense handling guidelines” and California Civil Code section 2860(d). (Dkt. 83-2 at 4, 9-10.) In the exchange of emails that followed, Callahan & Blaine responded:
*11 Evanston's claims that the “failure to provide necessary status reports and respond to basic defense handling inquiries has impeded upon Evanston's ability to properly investigate and evaluate this claim” is simply not accurate. Evanston has appointed the firm of Littler Mendelson as monitoring counsel for this matter. To the extent Evanston has any questions regarding the status of the case, you can simply ask Jamie Lee of the Littler firm, with whom I have an excellent relationship. In fact, I am certain that Ms. Lee has been providing Evanston periodic status reports. Thus, Evanston has not had any limitation whatsoever in its ability to “properly investigate and evaluate this claim.”
(Id. at 4 (emphasis added).) The Kennedys Firm responded:
The presence of monitoring counsel is immaterial, and does not negate your separate obligations to Evanston as the insured's direct counsel.... The statute [section 2860] imposes duties on you, Cumis counsel, notwithstanding the appointment of any monitoring counsel selected by Evanston. Indeed, the statute provides that both Cumis counsel and the insurer's independent counsel “shall be allowed to participate in all aspects of the litigation” and “shall cooperate fully in the exchange of information.” The insured and its counsel's duty – meaning you and/or your firm – to cooperate with Evanston, per the policy and law, are not relieved in such a case.Your reporting obligation to Evanston remains, regardless of Ms. Lee's involvement in this matter.
(Id. at 4-5 (emphasis in original).)
G. November 2022-May 2023: Discovery in the Underlying Lawsuit.
Ms. Lee of Littler continued to participate in the Underlying Lawsuit. On November 30, 2022, she signed a stipulation to continue a post-arbitration status conference filed in the Underlying Lawsuit; her signature block read, “Attorneys for Respondent [HRC].” (First Susolik Decl. Ex. J / Dkt. 50 at 70.) Between March 2023 and May of 2023, she attended multiple depositions in the Underlying Lawsuit and stated on the record that she was appearing “for” or “on behalf of” HRC. (First Susolik Decl. ¶¶ 21, 31 / Dkt. 50 at 6-8.) Mr. Susolik of Callahan & Blaine states that he “allowed Ms. Lee to join in private discussions” with HRC's “agents and affiliates regarding the case, before, during breaks, and after depositions....” (First Susolik Decl. ¶ 21 / Dkt. 50 at 6.)
HRC continued to receive invoices from Littler for legal work on the Underlying Lawsuit. (Wylie Decl. ¶ 9 / Dkt. 50 at 3-4 (describing and attaching invoices dated June 21, 2021; September 23, 2021; December 22, 2021; March 17, 2022; June 17, 2022; September 20, 2022; December 22, 2022; March 23, 2023; and May 17, 2023).) HRC paid these invoices through December 2022; it stopped paid them in March 2023. (Id.)
H. June 2023: Arbitration Trial for the Underlying Lawsuit.
Between June 12 and 16, 2023, the parties attended an arbitration trial and so did Ms. Lee. (First Susolik Decl. ¶ 21 / Dkt. 50 at 6.)
[redacted]
[redacted]
[redacted]
[redacted]
[redacted]
In an email dated June 27, 2023, in response to accusations from the Kennedys Firm that Callahan & Blaine had not been providing sufficient updates about the Underlying Lawsuit, Mr. Susolik wrote:
I do note again that Evanston's appointed counsel Jamie Lee of Littler also attended the entire arbitration. I am certain that she has been providing detailed and substantive reporting to Evanston. In fact, since she and her firm are not substantively participating in the arbitration, reporting to Evanston is actually her primary function at the arbitration, to be monitoring counsel under Civil Code section 2860.
*12 (Evanston Initial Stmt. Ex. 3 / Dkt. 83-3 at 2 (emphasis added).)
I. October-November 2023: Settlement of the Underlying Lawsuit.
[redacted] On November 22, 2023, Dr. Ghazal filed a request for dismissal of the Underlying Lawsuit. (Second Susolik Decl. Ex. FF / Dkt. 80 at 17.)
V. DISCUSSION
A. Effect of the Court's Prior Order.
HRC argues that Evanston is improperly “seek[ing] to relitigate” findings from the Court's April 25th order. (Dkt. 89 at 6; see also Dkt. 90 at 2-3.) However, that order stated it was merely providing “guidance” on the privilege issues, which were not essential to denying the motion to quash the entire subpoena. (Dkt. 70 at 4.) On May 23rd, the parties submitted a joint stipulation asserting that “additional briefing or evidence” was “required to resolve these [privilege] issues.” (Dkt. 77 at 2 ¶ 6.) To the extent any findings in this order are inconsistent with the Court's April 25th order, that is due to the additional briefing and evidence submitted by the parties. See generally Amarel v. Connell, 102 F.3d 1494, 1515 (9th Cir. 1996) (“[T]he interlocutory orders and rulings made pre-trial by a district judge are subject to modification by the district judge at any time prior to final judgment,” and a “district court is vested with ‘broad discretion to make discovery and evidentiary rulings conducive to the conduct of a fair and orderly trial.’ ”) (citations omitted).
B. The Tripartite Attorney-Client Privilege Ended on April 15, 2021.
The parties agree that, when Littler was first assigned to the case, it was acting as tripartite counsel for Evanston and HRC. While Littler served as tripartite counsel, its communications with Evanston were not privileged from disclosure to HRC. See Bank of Am., 212 Cal. App. 4th at 1083 (noting that “both the insurer and insured are holders of the privilege” under the tripartite relationship). The Court does not need to decide the date on which this tripartite relationship began because, as noted in its prior order, Littler is unlikely to have any relevant, responsive documents prior to its involvement in HRC's claim and the Underlying Lawsuit.
The parties disagree as to when that tripartite relationship ended. Evanston contends that it ended on October 16, 2020, when HRC declared there was a conflict of interest requiring the appointment of independent Cumis counsel. HRC contends that it lasted through the end of the Underlying Lawsuit in November 2023. Neither parties' position squares neatly with the facts described above.
October 2020 is too early because, as discussed in the Court's prior order, at that point, Evanston could have disagreed that a conflict of interest existed, possibly necessitating court intervention. See, e.g., James 3 Corp. v. Truck Ins. Exch., 91 Cal. App. 4th 1093, 1097 (2001) (“The insureds objected to being represented by retained defense counsel and, citing an alleged conflict of interest, demanded that Truck allow them to choose their own counsel. Truck refused, and the insureds filed the instant declaratory relief action in the superior court.”). Alternatively, Evanston could have withdrawn its reservation of rights to avoid the conflict of interest. See Swanson v. State Farm Gen. Ins. Co., 219 Cal. App. 4th 1153, 1160 (2013) (“[W]hen State Farm withdrew its Cumis-triggering reservation of rights, it no longer had an obligation to allow [the insured] to control the litigation or an obligation to pay the attorneys' fees of [the insured's] Cumis counsel.”).
*13 The most appropriate date, in the Court's view, is when Evanston expressed its agreement that there was a conflict of interest necessitating the appointment of independent Cumis counsel. At that point, it was reasonable for Evanston to believe that the tripartite attorney-client relationship with HRC had been severed, and that its communications with Ms. Lee were protected from disclosure to HRC by the attorney-client privilege. See Flake, 9 Cal. App. 5th at 231 (“the representation ends when the client actually has or reasonably should have no expectation that the attorney will provide further legal services”); Laclette, 184 Cal. App. 4th at 928 (whether the attorney continues to represent the client “should be viewed objectively from the client's perspective”). Although Flake and Laclette arise in a different context than the present case—i.e., they were deciding whether the statute of limitations for malpractice claims was tolled while the client reasonably believed that the lawyer continued to represent them—it makes sense to apply the same test in the privilege context. Protecting communications that the client reasonably believed were confidential serves the “fundamental purpose of the attorney-client privilege,” i.e., “to encourage full and open communication between client and attorney.” Zimmerman, 220 Cal. App. 4th at 396.
As to the date when both Evanston and HRC agreed that a conflict of interest existed, Mr. Susolik of Callahan & Blaine admits that Evanston's April 15, 2021 letter “agreed to appoint independent Cumis counsel pursuant to Cal. Civ. Code § 2860, and the retention of Callahan & Blaine ... as HRC Fertility's independent Cumis counsel....” (First Susolik Decl. ¶ 15 / Dkt. 50 at 4.) Although disputes continued (and it appears are still continuing) regarding issues like the amount of attorney's fees Callahan & Blaine should be paid and whether Callahan & Blaine was required to follow Evanston's litigation guidelines, at that point the parties agreed that retention of independent Cumis counsel was necessary.
Evanston has met its burden of demonstrating that, as of April 15, 2021, it had an attorney-client relationship with Littler that excluded HRC. HRC's arguments as to why the relationship continued through November 2023 are unpersuasive for the reasons discussed below.
1. Littler's failure to inform HRC that the tripartite relationship had ended.
HRC argues that the tripartite relationship nevertheless continued because “at no time did Littler inform HRC Fertility ... that it was no longer representing HRC Fertility....” (Dkt. 89 at 3 (emphasis in original).) But Ms. Lee's failure to formally notify HRC that the tripartite attorney-client relationship had ended is not determinative. The California Court of Appeal has discussed former tripartite counsel's duties after appointment of independent Cumis counsel as follows:
[In] the classic tripartite relationship between insurer, insured and the attorney hired by the insurer to defend a claim[,] ... [“]the attorney represents two clients, the insured and the insurer, and he owes to both a high duty of care....” [Lysick v. Walcom, 258 Cal. App. 2d 136, 146-48 (1968).] And, when the two clients have divergent or conflicting interests in the same subject matter, the attorney has a duty to disclose “all facts and circumstances” which, in the reasonable attorney's judgment “are necessary to enable his client to make free and intelligent decisions regarding the subject matter of the representation.” [Id. at 147.] ... Consequently, if the attorney “attempts dual relationship without making the full disclosure required of him, he is civilly liable to the client who suffers loss caused by lack of disclosure.” [Id. at 148.]...Generally speaking, when the parties are operating under section 2860 [i.e., after Cumis counsel is necessary,] the various disclosures recommended in Lysick—including the disclosure that counsel is representing only the insurance company in the matter of settlement—would be unnecessary because the insured is protected by independent counsel every step of the way....[G]iven that we are in the section 2860 mode, with Cumis counsel appointed to independently protect the rights and interests of the insured, the duty of insurer-provided counsel becomes that of sharing information and affording independent counsel the opportunity to participate in all aspects of the litigation.*14 ...There is no way out of the subdivision (f) duty to cooperate and allow participation in all aspects of the litigation once independent counsel has been selected. It matters not if counsel provided by the insurer characterizes himself or herself as representing only the insurer or as assuming some sort of quasi-dual representation role. Subdivision (f) prescribes the protocol for operating when independent counsel has been selected. That protocol mandates that both counsel be allowed to participate in all aspects of the litigation and that counsel cooperate fully in the exchange of information consistent with his or her obligation to the insured.
Novak v. Low, Ball & Lynch, 77 Cal. App. 4th 278, 283-85, & n.4 (1999) (bolded emphasis added) (holding that insurer's counsel “did not ‘properly’ represent only [the insurer] during the settlement conference because the covert settlement was negotiated without the knowledge or participation of independent counsel, as required by section 2860, subdivision (f)”).
Consistent with this understanding, after Callahan & Blaine asserted that conflicts of interest prevented Littler from ethically representing both Evanston and HRC, it was Callahan & Blaine's responsibility to protect the insured's rights regarding confidential information. HRC has cited no authority for its claim that Littler was required to formally notify HRC of the change in representation. After independent Cumis counsel became necessary, the attorney-client relationships were governed by section 2860.
Moreover, Mr. Susolik's assertion that he nevertheless believed Littler continued to represent both HRC and Evanston is inconsistent with his multiple letters, beginning in October 2020, asserting that conflicts of interest prevented Littler from doing so.
He asserts that Ms. Lee never expressed “the notion that she was participating in these proceedings only as ‘monitoring counsel’ for the sole benefit of insurer Evanston....” (First Susolik Decl. ¶ 20 / Dkt. 50 at 5.) Yet this is inconsistent with his contemporaneous emails to the Kennedys Firm in March 2022 and June 2023, in which he acknowledged that Ms. Lee's role was as “monitoring counsel.” (Dkt. 83-2 at 4 (March 2022 email from Mr. Susolik stating, “Evanston has appointed the firm of Littler Mendelson as monitoring counsel for this matter.”).)[15] “Monitoring counsel” for the insurer appears to be a recognized, if perhaps uncommon, role in the Cumis context. See generally Hon. H. Walter Croskey (Ret.), et al., California Practice Guide: Insurance Litigation, Ch. 7B-K, ¶ 7:824 (2023) (“It may be risky for an insurer to reject a request for independent counsel on the grounds other than those set forth in the statute (5 years experience and E&O [errors and omissions] coverage) ... If the insurer believes it ultimately might owe a duty to indemnify the insured against the underlying lawsuit, it may want to insist on Cumis counsel qualified to handle the particular type of case, or engage its own lawyer with the requisite expertise to monitor the underlying litigation.”) (emphasis added); Novak, 77 Cal. App. 4th at 280 (noting that the insurer retained “respondent law firm ... to monitor [Cumis counsel's] billings and represent its interests in the” underlying action) (emphasis added).
*15 Mr. Susolik of Callahan & Blaine declares that he “would not have included Ms. Lee in ... private discussions with HRC's agents and affiliates if [he] knew at the time that Evanston would later claim that the Littler Firm was exclusively monitoring counsel for its sole benefit....” (First Susolik Decl. ¶ 21 / Dkt. 50 at 6.) At the hearing he complained, “For almost 3 1//2 years, I allowed Ms. Lee into all of our client meetings. We relied on her status as our defense counsel.” (Dkt. 68 at 18.) This reliance argument might have more force if the present subpoena were attempting to discover HRC's communications with Ms. Lee at those client meetings. But HRC is not attempting to use the attorney-client privilege to shield such communications; rather, HRC is seeking to use the privilege as a sword to obtain Evanston's communications. The more important consideration is whether Evanston reasonably believed those communications were privileged as against HRC.
2. Littler's continued participation in the Underlying Lawsuit.
HRC argues that Littler continued to represent both it and Evanston because Ms. Lee continued to appear in the Underlying Lawsuit on behalf of HRC. However, these actions were consistent with the insurer's right under section 2860(f) to have its own counsel participate in the underlying action even after the appointment of Cumis counsel.
As noted above, section 2860(f) provides that, after the appointment of independent Cumis counsel, “both the counsel provided by the insurer and independent counsel selected by the insured shall be allowed to participate in all aspects of the litigation.” Cal. Civ. Code § 2860(f) (emphasis added). At least one secondary source indicates that, where section 2860(f) applies, “both Cumis counsel and the insurer's selected counsel may appear as ‘attorneys of record’ for the insured.” Hon. H. Walter Croskey (Ret.), et al., California Practice Guide: Insurance Litigation, Ch. 7B-K, ¶ 7:824 (2023). This makes some sense, given that the insurer usually is not a party to the underlying litigation, but its counsel retains a statutory right to participate in that litigation. Ms. Lee's appearances at the depositions and signing of court filings related to arbitration are consistent with this right to participate.
3. Littler's sending invoices to HRC.
HRC argues that the fact that HRC continued to receive bills for Littler's legal work in the Underlying Lawsuit shows that either (a) the tripartite attorney-client relationship continued, or (b) Evanston waived the privilege.[16]
In Lincoln General Insurance Co. v. Ryan Mercaldo, LLP, No. 13-cv-2192, 2015 WL 12672142, 2015 U.S. Dist. LEXIS 182529 (S.D. Cal. July 15, 2015), an insurer filed a legal malpractice action against its coverage counsel for advising the insurer to deny coverage and withdraw its defense of its insured (which resulted in a successful bad faith action by the insured). In the malpractice action, coverage counsel sought communications between the insurer and Mr. Dawson, who had initially been hired as tripartite counsel for both insurer and insured.
*16 The insurer argued “that the attorney-client privilege continued until Mr. Dawson actually withdrew from the defense,” but the court found the insurer “severed the tripartite relationship on July 6, 2009, when it disclaimed its duty to defend [the insured] against the third party claims and stated its intention to withdraw its defense.” 2015 WL 12672142, at *2, 2015 U.S. Dist. LEXIS 182529, at *6. The court reasoned, “As of that date, ... there was no longer a common interest between the insurer and insured with regard to the ... third party claim.” Id. The court rejected the insurer's argument that “because it continued to pay for Mr. Dawson's services for several months after disclaiming coverage, [the insurer] was still Mr. Dawson's client with respect to the third party claims against [the insured],” finding, “payment alone does not establish an attorney-client relationship.” 2015 WL 12672142, at *2, 2015 U.S. Dist. LEXIS 182529, at *7 (citing Wells Fargo Bank v. Superior Court, 22 Cal. 4th 201, 213 (2000)). This case supports the idea that, notwithstanding billing arrangements, an acknowledged conflict of interest between the insurer and insured, which is sufficient to invoke section 2860 and Cumis, destroys the tripartite attorney-client relationship.
[redacted] In light of the other evidence discussed above, this is insufficient to show that Evanston reasonably believed the tripartite relationship continued to exist or that it intended to waive any applicable privilege. See McDermott, 10 Cal. App. 5th at 1101 (“inadvertent disclosures” do not constitute a waiver); Manela, 177 Cal. App 4th at 147 (“In light of the important public policies underlying privileges, ... the scope of the waiver of a privilege is generally construed narrowly.”).[17]
C. As Applied to the Specific Requests in the Subpoena to Littler.
1. Request Nos. 9-12, 17-20: Littler's Communications with the Kennedys Firm.
These requests seek all communications between Littler and the Kennedys Firm (and documents and ESI referring or relating thereto) regarding HRC (nos. 9 and 17), the Underlying Action (nos. 10 and 18), the claim (nos. 11 and 19), and the policy (nos. 12 and 20). (Dkt. 54 at 17-18.)
Evanston cannot claim an attorney-client privilege over these communications as against HRC while the tripartite relationship between Evanston, HRC, and Littler existed. However, Evanston can claim the privilege once the tripartite relationship ended, i.e., after April 15, 2021, because at that point both Littler and the Kennedys Firm represented only Evanston.
2. Request Nos. 5-8 and 13-16: Littler's Communications with Evanston.
These requests seek all communications between Littler and Evanston (and documents and ESI referring or relating thereto) regarding HRC (nos. 15 and 13), the Underlying Action (nos. 6 and 14), the claim (nos. 7 and 15), and the policy (nos. 8 and 16). (Dkt. 54 at 14-15.)
Based on the above analysis, Evanston may assert the attorney-client privilege over qualifying[18] communications made after April 15, 2021. Evanston may not assert the privilege over communications made on or before April 15, 2021.
3. Request Nos. 1-4: Documents
These requests seek all documents and ESI referring or relating to HRC (no. 1), the Underlying Action (no. 2), the claim (no. 3), and the policy (no. 4). (Dkt. 54 at 15.)
“Where the [attorney-client] privilege applies, it may not be used to shield facts, as opposed to communications, from discovery.” Edwards, 231 Cal. App. 4th at 1226. “Relevant facts may not be withheld merely because they were incorporated into a communication involving an attorney, and knowledge that is not otherwise privileged does not become so by being communicated to an attorney.” Id.
Parties responding to the subpoena will need to apply this rule and the Court's ruling about when the tripartite relationship existed in determining what to produce or describe on a privilege log.
4. Request Nos. 21 and 22: Littler's Work Product
*17 This request seeks “all documents and ESI referring or relating to attorney work product” produced by Littler regarding the Underlying Action (no. 21) and the claim (no. 22). (Dkt. 54 at 15.)
Evanston may not claim the work product privilege over documents that were created on or before April 15, 2021, i.e., while the tripartite relationship existed. Because Littler was acting as HRC's counsel during that time period, HRC is entitled to view Littler's work product from that time period.
For work product that was created after April 15, 2021, the responding parties will need to decide whether to assert the work product privilege and log any work product accordingly. As the Court noted previously:
The attorney work-product privilege is a qualified privilege. It can be waived in insurance bad faith disputes (such as this one) by an insurance company that asserts reliance on advice of counsel as a defense.In its counterclaim Answer, Evanston asserts that HRC's counterclaims are barred because “Evanston acted reasonably and in good faith at all times material herein, based on the relevant facts known to Evanston at the time it acted.” (Dkt. 39 at 14.) Evanston also reserved the right to add additional affirmative defenses. (Id. at 15.)Given the conditional nature of the attorney work-product privilege and Evanston's assertion of an affirmative defense that may depend, factually, on what Evanston's attorneys advised it to do (and thus what was a “reasonable” or “good faith” response), the attorney work-product privilege does not provide a basis to quash the entire subpoena. Any instances when relevant, responsive documents are withheld based on the attorney work-product privilege would need to be logged, and Littler would need to provide sufficient information to allow the parties and the Court to assess the applicability of that privilege.
(Dkt. 70 at 3.)
VI. HRC'S MOTION TO COMPEL (DKT. 84)
While the parties were briefing the privilege issues regarding HRC's subpoena to Littler, HRC filed a new motion to compel Evanston to produce documents responsive to HRC's first set of requests for production of documents. (Dkt. 84 (notice of motion), Dkt. 85 (joint stipulation).) Evanston withheld responsive documents based on the attorney-client privilege. (Id. at 10.) HRC initially noticed a hearing on the motion for July 9, 2024. The Court later ordered the hearing off calendar, noting:
HRC's motion to compel is based, in large part, on the same privilege dispute that the parties already briefed in connection with the Littler subpoena.... Once the Court rules on the privilege issue in connection with the Littler subpoena, the parties can meet and confer to determine if HRC's motion to compel (Dkt. 84) continues to present any issues requiring judicial determination. If so, then the parties should alert the Court if they wish to address those remaining issues by way of a telephonic informal discovery conference with short letter briefs or by some other way.
Dkt. 99 at 2.)
VII. CONCLUSION
Based on the foregoing, IT IS HEREBY ORDERED that:
- On or before October 11, 2024, the parties shall meet and confer about the motion to compel (Dkt. 84) and either: (a) they shall jointly contact the Court's CRD to request an informal telephonic discovery conference,[19] or (b) HRC shall file a notice withdrawing the motion to compel.
- Littler shall respond to the subpoena on or before October 18, 2024. If Littler plans to withhold any documents based on the attorney-client communication or work product privileges, it should do so consistent with the above analysis and should produce a privilege log by that date.
- This order is being filed under seal, because it discusses and quotes from other documents that the parties have filed under seal. The parties should review this order to determine what, if any, portions of it they believe should be redacted. On or before October 30, 2024, the parties shall meet and confer about this issue and jointly lodge a redacted version of the order that can be filed publicly.
Footnotes
San Diego Navy Fed. Credit Union v. Cumis Ins. Society, 162 Cal. App. 3d. 358 (1984).
Per Local Rule 37, the motion was filed in the form of a joint stipulation. The redacted version of the joint stipulation is at Dkt. 46; the unredacted, sealed version is at Dkt. 54.
Page cites to documents on the docket refer to the pagination imposed by the Court's e-filing system.
To the extent HRC objects to the Evans and Lee declarations (Dkt. 63) and Evanston objects to the Susolik and Wylie declarations (Dkt. 64), those objections are overruled because they generally concern what weight should be given to the evidence rather than admissibility. (See, e.g., Dkt. 63 at 4-5 (objecting to Evans' and Lee's characterizations of the parties' correspondence and opinions about when Lee's role shifted under the best evidence rule and as improper lay opinion); Dkt. 64 at 3 (objecting to the Susolik and Wylie declarations on similar grounds).) The Court has considered the declarations to the extent they set forth material facts within the personal knowledge of the declarants.
In addition to the privilege issues, Evanston argued that the subpoena subjected Littler to an undue burden. The Court rejected this argument because (a) it was factually unsupported, and (b) Evanston lacked standing to raise burden arguments on behalf of Littler. (Dkt. 70 at 2.)
In the parties' prior joint stipulation, Evanston argued that “federal privilege law applies” because although “the instant coverage action is before this Court under diversity jurisdiction, ... both federal [and] state law claims are joined tougher [sic].” (Dkt. 54 at 27.) The FAC's request for a declaratory judgment does not mean that federal law “supplies the rule of decision.” Fed. R. Evid. 501; see, e.g., Centerline Hous. P'ship I, L.P.-Series 2 v. Palm Communities, No. 21-cv-00107-JVS-JDEx, 2021 WL 4895746, at *10, 2021 U.S. Dist. LEXIS 204226, at *28 (C.D. Cal. Sept. 2, 2021) (finding attorney-client privilege dispute was governed by state law in declaratory judgment action).
See Cal. Civ. Proc. Code § 340.6 (a)(2) (providing malpractice statute of limitations is tolled while the “attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred”).
“[N]ot every reservation of rights [by the insurer] creates a conflict of interest requiring appointment of independent counsel. It depends upon the nature of the coverage issue, as it relates to the issues in the underlying case.” Blanchard v. State Farm Fire & Cas. Co., 2 Cal. App. 4th 345, 350 (1991). A conflict of interest may exist where “an insurer reserves its rights on a given issue and the outcome of that coverage issue can be controlled by counsel first retained by the insurer for the defense of the claim....” Cal. Civ. Code § 2860(b). “Perhaps the most common situation in which a conflict of interest exists and independent or Cumis counsel is required occurs when the insured's allegedly wrongful conduct could be found to be intentional, with coverage thus depending on the ultimate characterization of the insured's actions.” Long v. Century Indem. Co., 163 Cal. App. 4th 1460, 1471 (2008).
“Another law firm appointed by USUI / Mount Vernon Insurance Company, the insurer for HRC Medical [an affiliate of HRC], also co-represented HRC Medical.” (First Susolik Decl. ¶ 4 / Dkt. 50 at 2.)
Callahan & Blaine argued, “Evanston ... reserves its rights to deny coverage based on, among other things, Section 533 of the California Insurance Code ... which provides ‘An insurer is not liable for a loss caused by the wilful act of the insured...’ As made clear by Evanston's reservation of rights, it has a financial interest in proving that HRC engaged in intentional and/or ‘wilful’ conduct to trigger its coverage defenses. HRC on the other hand, has the opposite interest – HRC's interest is to prove that it is not liable for any of the claims or damages alleged in the Claim, much less claims of intentional conduct. In short, HRC's interests in defending itself in the Claim are to prove that none of the intentional conduct exclusions in Evanston's reservations of rights apply.” (Susolik Decl. Ex. E / Dkt. 50 at 33 (citing Long, 163 Cal. App. 4th at 1471).)
See Cal. Civ. Code § 2860(c) (“When the insured has selected independent counsel to represent him or her, the insurer may exercise its right to require that the counsel selected by the insured possess certain minimum qualifications which may include that the selected counsel have (1) at least five years of civil litigation practice which includes substantial defense experience in the subject at issue in the litigation, and (2) errors and omissions coverage.”).
In a later March 2022 email, Callahan & Blaine disputed that it was required to follow Evanston's litigation guidelines. (Dkt. 83-2 at 6.)
See Cal. Civ. Code § 2860(c) (“The insurer's obligation to pay fees to the independent counsel selected by the insured is limited to the rates which are actually paid by the insurer to attorneys retained by it in the ordinary course of business in the defense of similar actions in the community where the claim arose or is being defended. This subdivision does not invalidate other different or additional policy provisions pertaining to attorney's fees or providing for methods of settlement of disputes concerning those fees. Any dispute concerning attorney's fees not resolved by these methods shall be resolved by final and binding arbitration by a single neutral arbitrator selected by the parties to the dispute.”).
Although these emails were simply attached to Evanston's briefing, rather than being authenticated by a declaration, HRC does not dispute their authenticity. (See Dkt. 89 at 3 (HRC's opposition brief, arguing about the “meaning and significance” of the emails).)
HRC argues that the Court should not consider the March 2022 or June 2023 emails because they “existed and were in the hands of Evanston long before Evanston's unsuccessful Motion to Quash,” and considering them now would “give Evanston a second bite at the apple.” (Dkt. 89 at 6.) Yet HRC previously agreed that “additional briefing or evidence [was] required to resolve” the attorney-client privilege issues (Dkt. 77 at 2 (emphasis added)), and HRC itself submitted new evidence with its supplemental briefing (Dkt. 80 (second Susolik declaration, attaching the settlement agreement and request for dismissal from the Underlying Lawsuit)).
The issue of waiver was raised in the prior joint stipulation and at the April 2024 hearing. (See Dkt. 54 at 33 (“[A]s a separate and independent ground for this opposition, Evanston has waived any exclusive attorney-client relationship between itself and the Littler Firm by having the latter send eighteen invoices to HRC Fertility over the course of over three years detailing the Littler Firm's activities, tasks, and determinations in the underlying litigation.”); Dkt. 68 at 8, 30-33, 38-41, 49 (discussion of waiver at the hearing).) It is not clear whether HRC still intends to rely on the waiver argument. (See Dkt. 79 (HRC's initial brief, which does not mention waiver); Dkt. 89 at 3 (HRC's opposition brief, arguing, “whether Evanston specifically consented to Littler waiving its exclusive attorney-client privilege with Evanston is immaterial” because the “issue is, did Littler's actions and communications with HRC Fertility after February-April 2021 show that it was co-representing HRC Fertility?”).) However, the Court addresses it in an abundance of caution.
That said, the fees that Evanston admits were erroneously charged should be repaid to HRC, if Evanston/Littler have not done so already.
The Court uses the word “qualifying” because it recognizes that some communications might not be privileged for other reasons (e.g., if they were not made in confidence).
The procedure for doing so is described on the Court's website: https://www.cacd.uscourts.gov/honorable-karen-e-scott.