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Coneal v. American Commerce Insurance Co.

United States District Court, W.D. Kentucky, Paducah Division

September 20, 2019

RENITA CONEAL PLAINTIFF
v.
AMERICAN COMMERCE INSURANCE COMPANY DEFENDANT

          OPINION AND ORDER

          LANNY KING, MAGISTRATE JUDGE UNITED STATES DISTRICT COURT

         Senior Judge Thomas B. Russell referred this matter to Magistrate Judge Lanny King for ruling on all discovery motions. (Docket # 7).

         This matter is before the Court on Defendant, American Commerce Insurance Company’s (hereinafter, “ACIC”) Motion to Compel, or, in the Alternative, Motion for In Camera Review. (Docket # 16). Plaintiff Renita Coneal has filed a Response (Docket #17), and Defendant has filed a Reply (Docket # 18). Fully briefed, this matter is now ripe for adjudication.

         For the reasons detailed below, Defendant’s Motion (Docket # 16) is GRANTED in part and DENIED in part. The Court finds that all of the information requested is broadly relevant, but the information is privileged except for those documents pertaining to the Plaintiff’s choice of law firm.

         Factual Background

         This matter arises from a civil action brought by Plaintiff Coneal against Defendant ACIC for violations of Kentucky’s Unfair Claims Settlement Practices Act, The Kentucky Consumer Protection Act, and Kentucky common law regarding bad faith, as well as injuries suffered in an automobile accident. (Docket # 1). Coneal’s claims derive from ACIC’s handling of Plaintiff’s insurance claim against ACIC’s insured, Mary Payne, for damages suffered in an automobile accident. (Id.). Plaintiff brought claims against both Payne and ACIC. (Docket # 17 at 1). Coneal made a settlement demand to ACIC in May or June of 2016.[1] Coneal alleges that ACIC acted in bad faith by neglecting to respond to this demand until January 17, 2018, well over 20 months afterward. (Id.). Defendant argues that Plaintiff’s former attorney, David Oakes, was the reason for much of the delay. “[I]t is apparent from discovery that a great deal of delay in reaching a settlement was caused by David Oakes, the attorney whom Plaintiff engaged to represent her in presenting her pre-suit claim for compensation of alleged injuries to ACIC.” (Docket # 16 at 3). Defendant attributes further delay to questions regarding the possible pre-existence of Coneal’s medical conditions. (Id. at 4). Plaintiff believes that ACIC had the necessary information to attempt to settle the claim well before January 2018. (Docket # 17 at 2).

         The case was originally filed in McCracken Circuit Court, and Defendant subsequently removed it following Ms. Payne’s dismissal. (Docket # 1 at 2). Plaintiff provided, along with her responses to Defendant’s Second Set of Requests for Production of Documents and Interrogatories, two privilege logs. (Docket # 16 at 4). The first pertained to documents provided by Oakes, the second related to documents provided by Saladino & Schaaf, Oakes’ former law firm. (Id).[2] Plaintiff claimed 34 documents were protected by the attorney-client privilege. (Docket # 16 at 4). Defendant disagrees with 20 of those claims, but states that some of those documents may be duplicates. (Id.).

         Defendant argues that the information requested is relevant and discoverable and is not covered by the protections of attorney-client privilege, as it is underlying factual information to which the protections are not extended. (Id. at 7). Specifically, Defendant seeks information from six sources: (1) documents reflecting injuries suffered and medical treatment received by Plaintiff (lines 8, 9, and 10 of the Oakes privilege log and lines 11, 1215, 16, and 17 of the Saladino & Schaaf privilege log); (2) the Attorney Screening Form used by David Oakes (line 20 of the Oakes privilege log); (3) the engagement letter signed by Coneal with regards to her representation by Saladino & Schaaf for her claim for compensation from ACIC (line 9 of the Saladino & Schaaf privilege log); (4) Coneal’s contingency fee agreement regarding her compensation claims (lines 18 and 21 of the Oakes Privilege Log); and (5) Coneal’s contingency fee agreement regarding her bad faith claims (line 14 of the Oakes privilege log); and (6) documents pertaining to Coneal’s choice between law firms (line 17 of the Oakes privilege log and lines 5, 6, 7, and 18 of the Saladino & Schaaf privilege log). (Id. at 10-14). Plaintiff responds that the documents are covered by the attorney-client privilege and are not discoverable, regardless of any showing of need, or nature of underlying facts. (Docket # 17 at 4-7). Additionally, Plaintiff alleges that Defendant already has the information it seeks in these documents from other, non-privileged sources. (Id. at 7-8).

         Legal Standard

         “Rule 26(b)(1) is the touchstone for the scope of civil discovery.” Pogue v. NorthWestern Mut. Life Ins. Co., No. 3:14-CV-598-CRS, 2017 WL 3044763, at *4 (W.D. Ky. July 18, 2017). Rule 26(b)(1) provides that “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case.” Fed.R.Civ.P. 26(b)(1). Relevance is to be “construed broadly to encompass any matter that bears on, or that reasonably could lead to other matter[s] that could bear on any party’s claim or defense. The Court has wide discretion when dealing with discovery matters, including whether information might be relevant.” Alvey v. State Farm Fire & Casualty Co., No. 5:17-CV-00023-TBR-LLK, 2018 WL 826379, at *2 (W.D. Ky. Feb. 9, 2018) (citing Pogue, 2017 WL 3044763, at *5) (citations omitted).

         Rule 26(b)(2) addresses limitations on the frequency and extent of discovery. See Schall v. Suzuki Motor of Am., Inc., No. 4:14CV-00074-JHM, 2017 WL 4050319, at *4 (W.D. Ky. Sept. 13, 2017); Pogue, 2017 WL 3044763, at *5. Subpart (b)(2)(C) 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:
(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).

Fed. R. Civ. P. 26(b)(2)(C).

         Privileged documents fall outside of the scope of discovery. Fed. R. Civ. P.26(b)(1). The burden of establishing that a privilege exists to shield a document from discovery rests on the party asserting the privilege. Cardinal Aluminum Co. v. Continental Casualty Co., No. 3:14-CV-857-TBR-LLK, 2015 WL 4483991, at *2 (W.D. Ky. July 22, 2015). Here, Plaintiff must bear that burden. In re Grand Jury Investigation No. 83-2-35, 723 F.2d 447, 450 (6th Cir. 1983).

         Plaintiff pled claims under the Kentucky Unfair Claims Settlement Practices Act, the Kentucky Consumer Protection Act, and Kentucky common law regarding bad faith. (Docket # 1). The source of federal jurisdiction in this removal action rests in diversity. Thus, for questions of attorney-client privilege, this Court must apply state law if “state law supplies the rule of decision for the claim.” Fed.R.Evid. 501; see In re Powerhouse Licensing, LLC, 441 F.3d 467, 472 (6th Cir. 2006); see also Pinnacle Surety Services, Inc. v. Manion Stigger, LLP, 370 F.Supp.3d 745, 750 (W.D. Ky. 2019). State law supplies the rules of decision for all the claims in this case, therefore, this Court must apply the Kentucky law regarding attorney client privilege. Jewell v. Holezer Hosp. Found., Inc., 899 F.2d 1507, 1513 (6th Cir. 1990) (“In a civil case involving claims based on state law, the existence of a privilege is to be determined in accordance with state, not federal, law.”) see also Brown v. Tax Ease Lien Servicing, LLC, No. 3:15-CV-208-CRS, 2017 WL 6939338, at *11 (W.D. Ky. Feb. 16, 2017).

         Analysis

         I. Relevance

         Relevance serves as the threshold requirement for all discovery. Evidence need not be admissible to be discoverable, it needs only to meet the threshold of relevance. Information is within the scope of discovery if it is “relevant to any party’s claim or defense and proportional to the needs of the case.” Fed.R.Civ.P. 26(b)(1). Coneal claims that the information sought by ACIC lacks relevance. ACIC argues that these documents shed light on the reasons for the delay in attempting to resolve Coneal’s claims. As an initial matter, the Court finds all of the information requested by ACIC meets the requirements of relevance under Rule 26.

         The relevance of these documents derives from the common-sense linkage between Plaintiff’s claims and the information contained within the documents. Plaintiff has brought claims for physical injuries incurred in an accident with ACIC’s insured. (Docket # 1-1). In so doing, she has placed her medical condition into issue. This means that information pertaining to her medical condition is relevant to this case. Therefore, documentation reflecting injuries suffered and medical treatment received by the Plaintiff[3] (lines 8, 9, and 10 of the Oakes privilege log and lines 11, 12, 15, 16, and 17 of the Saladino & Schaaf privilege log) and the Attorney Screening Form (line 20 of the Oakes privilege log) are relevant. Both contain information regarding the underlying motor vehicle accident, as well as injuries suffered by the Plaintiff. The information contained in these documents is relevant to this case.

         Additionally, all of the broad categories of information requested likely contain information relevant to Plaintiff’s claims under the Kentucky Unfair Claims Settlement Practices Act, as well as Kentucky law regarding bad faith insurance claims. (Docket #1-1). Plaintiff asserts that ACIC delayed in attempting to settle her claim, much to her detriment. (Id.). ACIC counters that Plaintiff’s own actions were the cause of the delay.

         The accident at the center of this case occurred on February 12, 2015. (Id.). Plaintiff’s state court suit was filed on November 27, 2017. (Id.). The Attorney Screening Form[4], Engagement Letter[5], Contingency Agreements[6] for both her underlying tort claims and bad faith claims, and documents concerning Plaintiff’s choice of law firms[7] all are relevant to the delay in filing suit. Each may contain information that sheds light on Plaintiff’s reasons for waiting to file suit, the reasons for relevant gaps in time, and the like. All of these would be important to determining the presence of bad faith on the part of ACIC in its handling of Plaintiff’s claims.

         Additionally, the reasons for the delay could be relevant to development of evidence for trial. “The Sixth Circuit has held that one may admit ‘facts tending to show interest, bias or motive’ at trial, and therefore one may discover such evidence or information reasonably calculated to lead to the discovery of such evidence.” In re Complaint of Foss Maritime Co., No. 5:12-CV-21-TBR-LLK, 2015 WL 1249571, at *1 (W.D. Ky. Mar. 18, 2015) (citing Majestic v. Louiville & Nashville R.R. Co., 147 F.2d 621, 627 (6th Cir. 1945)). To establish a bad faith claim under Kentucky law, information surrounding Plaintiff’s delay would be relevant to a showing of “interest, bias, or motive” at trial.

         Finally, Plaintiff has failed to carry the burden of refuting relevance. In filing a claim for bad faith that seeks damages and attorney’s fees, Plaintiff has placed the fees incurred in the underlying claim at issue. Further, Plaintiff does no more to dispute the relevance of this information than to state that it is not relevant. Again, the bar of relevancy is a low one. The party resisting discovery has the burden to “show that the material sought either falls beyond the scope of relevance, or is so marginally relevant that he potential harms of production outweigh the presumption in favor of broad disclosure.” Bentley v. Highlands Hosp. Corp., No. 7:15-CV-97-ART-EBA, 2016 WL 762686, at *1 (E.D. Ky. Feb. 23, 2016). Defendant has established that the information requested is relevant, and Plaintiff does not present evidence to successfully refute it.

         The Court finds that all subsets of information sought by Defendant ACIC is relevant and within the bounds of discovery. The Court will now address Plaintiff Coneal’s objections based upon the attorney-client privilege.

         II. Attorney-Client Privilege[8]

         The Defendant has produced Plaintiff’s privilege logs from both Oakes Law Firm and Oakes’ previous employer, Saladino & Schaaf. (Docket # 16-2). In its Motion to Compel, Defendant argues that Plaintiff’s privilege logs withhold information that is not privileged. (Docket # 16 at 5). The logs invoke the attorney-client privilege as the basis for exclusion.

         Plaintiff asserts that the information sought by Defendant is protected from disclosure by the attorney-client privilege. The attorney-client privilege is bedrock principle of American jurisprudence. 8 J. Wigmore, Evidence § 2290 (McNaughton rev. 1961); see also Hunt v. Blackburn, 128 U.S. 464, 470, 9 S.Ct. 125, 127 (1888)[9]. It exists for the purposes of excluding communications, made in confidence between client and counsel, for the purposes of procuring legal services, from use in legal proceedings. Hickman v. Taylor, 329 U.S. 495, 508 (1947).

         Kentucky’s “lawyer-client privilege” functions as the state’s equivalent of the federal attorney-client privilege. As discussed above, a federal court, sitting in diversity, analyzing claims brought under state law, applies the state law of ...


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