Opinion
CIVIL ACTION No. 01-2058-KHV
April 18, 2002
MEMORANDUM AND ORDER
Employers Reinsurance Corporation ("ERC") brings suit against Mid-Continent Casualty Company ("MCCC") to determine whether the parties' reinsurance agreement requires ERC to reimburse MCCC for certain expenses which MCCC incurred in declaratory judgment actions with its insureds. This matter comes before the Court on Plaintiff Employers Reinsurance Corporation's Objections To The Magistrate's Memorandum And Order Dated February 4, 2002 ("ERC Objections") (Doc. # 77) filed February 19, 2002. Specifically, ERC challenges the magistrate judge finding that ERC failed to meet its burden to establish attorney-client privilege and/or work product protection with respect to four documents. For reasons set forth below, the Court overrules ERC's objection.
Factual Background
On October 1, 2001, ERC objected to MCCC's requests for production of documents based on attorney-client privilege and work product. Over a month later, on November 5, 2001, ERC provided a ten-page privilege log which listed 47 documents. See Exhibit B to ERC Objections. For each document, ERC provided the date, description and a short explanation of the nature of the privilege claimed. See id.
On November 8, 2001, MCCC filed a motion to compel, asserting that the documents (which ERC withheld) were not privileged and that ERC had waived any privilege by "the untimely and improper assertion under Rule 25(b)(5) and case law." Defendant Mid-Continent Casualty Company's Motion To Compel Discovery ("MCCC Motion To Compel") (Doc. # 39) at 2. MCCC argued that ERC had waived its privilege with respect to all documents because ERC (1) delayed providing the privilege log and (2) did not meet its burden of showing that the documents were protected and instead made "mere assertions" of privilege. Defendant Mid-Continent Casualty Company's Memorandum In Support of Defendant Mid-Continent Casualty Company's Motion To Compel Discovery ("MCCC Memorandum") (Doc. #40) filed November 8, 2001 at 3-4. MCCC did not elaborate on specific insufficiencies in the privilege log. Regarding specific documents, MCCC challenged whether attorney-client privilege protected (1) certain claims audit reports and (2) an email dated January 31, 2001. See id. at 5-7. MCCC argued that the privilege did not apply to such documents because ERC claims attorneys had produced or received the documents for business purposes and not for the purpose of rendering legal advise. See id.
On November 15, 2001, ERC provided an amended privilege log. See Exhibit C to ERC Objections. The amended log contained three new entries but was otherwise identical to the original
On November 21, 2001, ERC responded to the motion to compel, claiming that MCCC had orally agreed to an indefinite extension of time for ERC to provide a privilege log. See Plaintiff Employers Reinsurance Corporation's Memorandum In Opposition To Defendant Mid-Continent Casualty Company's Motion To Compel Discovery ("ERC Memorandum") (Doc. #48) at 2-8. ERC also asserted that its privilege log sufficiently complied with Rule 26(b)(5) and that MCCC had not shown circumstances which justified waiver. See id. at 5-11. Finally, ERC argued that the attorney-client privilege protected the claims audit reports and the e-mail because its claims attorneys were acting as legal counsel and not as claims adjusters. See id. at 11-16.
On November 28, 2001, MCCC filed its reply. See Defendant's Reply Memorandum In Support of Its Motion To Compel Discovery ("MCCC Reply") (Doc. #52). MCCC denied that it had agreed to an extension of time. See id. at 2. Also, in addition to the claims audit reports and e-mail, MCCC identified five documents for which it disputed ERC's claim of privilege. See id. at 6-7. For each document, MCCC articulated deficiencies in ERC's assertion of privilege. See id. At the pretrial conference on January 24, 2002, MCCC "clarified" its position that ERC had failed to establish privilege as to only these five documents.Memorandum And Order (Doc. #68) filed February 4, 2002 at 8 n. 5.
Three of the documents were new listings on the amended privilege log.
Magistrate Judge Order
On February 4, 2002, Magistrate Judge Waxse ruled on MCCC's motion to compel. See Memorandum And Order (Doc. #68). Judge Waxse found that the parties had misinterpreted their communications regarding an extension of time and that he could not find a "severe discovery violation" which warranted waiver based on untimeliness. Id. at 5. With regard to the claims audit reports and e-mail, Judge Waxse noted that ERC had provided sufficient information to support the attorney-client privilege. See id. at 7. He further decided to review the documents in camera to determine whether they were in fact privileged. See id. at 7-8. With respect to the five documents identified in MCCC's reply, Judge Waxse found that ERC had not met its burden of showing that the documents were protected and ordered ERC to produce them. See id. at 10-14.
Standards For Review of Magistrate Judge Order Regarding Discovery
Upon objection to a magistrate judge order pertaining to a non-dispositive matter, the district court may modify or set aside any portion of the order which it finds to be "clearly erroneous or contrary to law." Rule 72(a), Fed.R.Civ.P.; 28 U.S.C. § 636 (b)(1)(A). The Court does not conduct a de novo review; rather, the Court applies a more deferential standard under which the moving party must show that the magistrate judge order is "clearly erroneous or contrary to law." Id.;see Burton v. R.J. Reynolds Tobacco Co., 177 F.R.D. 491, 494 (D. Kan. 1997). The Court is required to affirm the magistrate's order unless the entire evidence leaves it "with the definite and firm conviction that a mistake has been committed." Ocelot Oil Corp. v. Sparrow Indus., 847 F.2d 1458, 1464 (10th Cir. 1988) (quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)); see Smith v. MCI Telecomm. Corp., 137 F.R.D. 25, 27 (D. Kan. 1991) (magistrate judge afforded broad discretion in resolving non-dispositive discovery disputes; district court will generally grant great deference and overrule only if discretion clearly abused).
Analysis
ERC urges the Court to reverse Judge Waxse's ruling, arguing that it has sufficiently demonstrated a work product or attorney-client privilege. As the party seeking to withhold documents, ERC bears the burden to show that they are clearly protected. See Peat, Marwick. Mitchell Co. v. West, 748 F.2d 540, 542 (10th Cir. 1984). In doing so, ERC must establish all elements of privilege by an evidentiary showing based on competent evidence. See Audiotext Comm. Network, Inc. v. US Telecomm, Inc., No. 94-2395-GTV, 1995 WL 625962, at *7 (D. Kan. Oct. 5, 1995). To establish attorney-client privilege, ERC must show that the documents reflect "confidential communications . . . between an attorney and client in the course of giving or requesting legal advice and to which other persons have not become privy." Id. (quotations and citations omitted). In order to show work product, ERC must demonstrate that it prepared the documents "in anticipation of litigation or for trial." Rule 26(b)(3), Fed.R.Civ.P. To qualify as work product, the threat of litigation must be "real and imminent." Audiotext, 1995 WL 625962 at *9 (quotations and citation omitted). Documents prepared in the ordinary course of business are not protected as work product. See Simon v. G.D. Searle Co., 816 F.2d 397, 401 (8th Cir. 1987). "The inchoate possibility, or even the likely chance of litigation, does not give rise to the privilege." Audiotext, 1995 WL 625962 at *9 (quoting Mission Nat'l Ins. Co. v. Lilly, 112 F.R.D. 160, 163 (D. Minn. 1986)).
ERC does not object to producing one of the five documents which Judge Waxse ordered it to produce. See ERC Objections (Doc. #77) at 4. Thus, ERC objects to Judge Waxse's order with respect to four documents.
ERC asserts that its privilege log sufficiently establishes that the documents are protected. Rule 26(b)(5), Fed.R.Civ.P, provides:
To the extent ERC argues that its privilege log is sufficient because it provides more information than MCCC's privilege log, the Court rejects this argument. ERC did not challenge the sufficiency of MCCC's privilege log, and that matter is not before the Court. The relevant issue is whether ERC has met its burden to show that the documents listed on its privilege log are protected.
When a party withholds information otherwise discoverable . . . by claiming that it is privileged or subject to protection as trial preparation material, the party shall make the claim expressly and shall describe the nature of the documents, communications, or things not produced or disclosed in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the applicability of the privilege or protection.
A. Document No. 1
With respect to the first document (Item 4, p. 1), ERC provides the following information on its amended privilege log:
Date Document Description Nature of Privileged Communication _______ ___________________________________ __________________________________ Undated Notes of Attorney Marty L. Rosemann document withheld under work concerning mental thoughts and product and attorney/client privilege impressions and work product grounds concerning claims made by [MCCC], including communications from Attorney Clay Crawford. _________________________________________________________________________________________ Exhibit C to ERC Objections at 1. Judge Waxse found that attorney-client privilege does not protect this document because ERC has not shown that it involves communication with a client or that the attorneys were acting as legal advisors. See Memorandum And Order (Doc. #68) at 12. He further found that ERC had not shown that the notes were prepared in anticipation of litigation.ERC argues that the document constitutes work product because it contains (1) mental thoughts and impressions of Mr. Rosemann, an in-house claims attorney, regarding the claims made by MCCC, and (2) detailed notes of conversations between Mr. Rosemann and Clay Crawford, another in-house claims attorney. ERC provides no information, however, to support its claim that the attorneys made the notes and communications in anticipation of litigation. The Court therefore finds no error in Judge Waxse's conclusion that the document is not protected.
B. Document Nos. 2 and 4
With respect to the second and fourth documents (Items 48 and 50, p. 9), the amended privilege log states:
Date Document Description Nature of Privileged Communication _______ __________________________________ __________________________________ Last Notes of Attorney Clay Crawford and Contains mental thoughts and updated Attorney Marty L. Rosemann concerning impressions of Attorneys Clay 2/13/01 ERC's potential coverage and duties Crawford and Marty Rosemann, as with respect to claim no. 0481398. well as coverage and exposure to liability which were redacted. _______ ___________________________________ __________________________________ Last Notes of Attorney Clay Crawford and Contains mental thoughts and updated Attorney Marty L. Rosemann concerning impressions of Attorneys Clay 5/21/01 ERC's potential contractual obligations, Crawford and Marty Rosemann duties and liability with respect to which were redacted from this claim no. 0462909. document. __________________________________________________________________________________________ Exhibit C to ERC Objections at 9. Judge Waxse noted that the ERC log does not identify the specific type of protection which it claims for these documents. He further found that ERC had not satisfied either attorney-client or work product privilege because it had not shown the purpose for which the notes were created or that the notes reflected communications between attorney and client. See Memorandum And Order (Doc. # 68) at 13-14.ERC asserts that the privilege log clearly shows that ERC was attempting to invoke work product immunity. Even so, ERC has not shown that the documents were prepared in anticipation of litigation. ERC asserts that the fact that the notes were last updated on February 13, 2001, after this lawsuit was commenced, demonstrates that the notes were prepared in furtherance of this litigation. Perhaps the Court would accept this argument if the notes were first prepared after the lawsuit had commenced. ERC provides no information, however, regarding when the notes were first prepared, their length or the extent of updates between the time they were first prepared through the time of litigation. The fact that they were last updated after litigation commenced does not demonstrate that the notes, in whole or in part, were prepared in anticipation of litigation. The Court finds no error in Judge Waxse's conclusion that ERC has not shown that the documents are protected.
B. Document No. 3
With respect to the third document (Item 49 p. 9), the amended privilege log provides:
Date Document Description Nature of Privileged Communication _______ ________________________________________ __________________________________ Last Notes of Attorney Clay Crawford, Contains mental impressions and updated Attorney Marty L. Rosemann and strategies concerning possible 2/13/01 Attorney Emily Lacy regarding ERC's litigation exposure and coverage potential contractual obligations and liability, which were redacted. duties with respect to claim no. 0458046, Attorney-client privileged as well as attorney client communications were redacted. communications made between the attorneys and ERC's general in-house counsel Kathy Baker regarding coverage liability and exposure. (Various date [stet]). _______ ________________________________________ __________________________________ Exhibit C to ERC Objections at 9. Judge Waxse concluded that ERC had not shown the purpose for which the notes were prepared or that they involved client communications. See Memorandum And Order (Doc. # 68) at 13. In objection to the magistrate judge order, ERC submits deposition testimony of Kathy Baker to show that she is a representative of ERC and therefore constitutes the client. See ERC Objections at 9. The Court will not consider this evidence, however, because it was not before the magistrate judge. See Haines v. Liggett Group Inc., 975 F.2d 81, 91 (3d Cir. 1992) (district court not permitted to receive further evidence when reviewing non-dispositive magistrate judge order). ERC repeats the same arguments regarding the date the document was last updated, and the Court reaches the conclusion stated above. The Court finds no error in Judge Waxse's determination that ERC has not shown that the document is protected.ERC argues that Judge Waxse wrongfully required it to come forward with additional information when MCCC made new arguments in its reply brief. The Court generally will not consider issues raised for the first time in a reply brief because the opposing party has not had an opportunity to respond. See Eaton v. Meneley, 180 F. Supp.2d 1247, 1255 (D. Kan. 2002). Here, however, MCCC did not raise an entirely new issue in its reply. Its original motion argued generally that the privilege log descriptions were inadequate. In reply, MCCC made more specific arguments regarding particular document descriptions. While there may be some circumstances in which it would be unfair to consider arguments which are raised more specifically in the reply brief, that is not the case here. MCCC raised the sufficiency of ERC's privilege log descriptions in its original motion. See MCCC Memorandum at 3-4. In response, ERC recognized its burden to show that the documents were protected and argued that its privilege log sufficiently met that burden. See ERC Response at 3, 9-11. In addition, at the pretrial conference ERC learned that MCCC had limited its arguments regarding the sufficiency of the document descriptions to the five documents listed in its reply brief. Despite this notice, ERC did not ask to submit additional information to the Court. Even now, ERC does not argue that it would have submitted additional information if MCCC had directed its original motion to the five specific documents. Indeed, ERC's principal argument here is that the descriptions alone are sufficient. See ERC Objections at 4-10. In these circumstances, the Court finds no error in the magistrate judge decision.
In sustaining the motion to compel, Judge Waxse noted that ERC had not come forward with additional facts or evidence to support its claims of attorney-client privilege and work product. See Memorandum And Order (Doc. # 68) at 11-12.
Finally, ERC asserts that requiring it to produce the documents is a disproportionate sanction. The Court disagrees. To date, ERC has not shown that the documents are protected.
A party seeking to assert the privilege must make a clear showing that it applies. Failure to do so is not excused because the document is later shown to be one which would have been privileged if a timely showing had been made. . . . [T]hat such a showing had not been made when the [magistrate] was called upon to make its ruling defeats the privilege. It is not enough that a document would have been privileged if an adequate and timely showing had been made. The applicability of privilege turns on the adequacy and timeliness of the showing as well as on the nature of the document.Peat, Marwick, 748 F.2d at 542. The magistrate judge did not err in requiring ERC to produce the documents. See Burton, 177 F.R.D. at 496-499.
IT IS THEREFORE ORDERED that Plaintiff Employers Reinsurance Corporation's Objections To The Magistrate's Memorandum And Order Dated February 4, 2002 (Doc. # 77) filed February 19, 2002 be and hereby is OVERRULED.