State Farm Fire & Cas. Co. v. Admiral Ins. Co.

• Decision Date: 04 February 2016
• Docket Number: Civil Action No. 4:15–2745–RMG
• Citation: 225 F.Supp.3d 474
• Court: U.S. District Court — District of South Carolina
• Parties: STATE FARM FIRE AND CASUALTY COMPANY and Maurice Lavon Robinson, Plaintiffs, v. ADMIRAL INSURANCE COMPANY, Defendant.

225 F.Supp.3d 474

STATE FARM FIRE AND CASUALTY COMPANY and Maurice Lavon Robinson, Plaintiffs,

v.ADMIRAL INSURANCE COMPANY, Defendant.

Civil Action No. 4:15–2745–RMG

United States District Court, D. South Carolina, Charleston Division.

Signed February 4, 2016

Kevin Mitchell Barth, Ballenger Barth and Hoefer, Florence, SC, Linda Weeks Gangi, Thompson and Henry, Conway, SC, W. James Hoffmeyer, Law Office of W. James Hoffmeyer, Florence, SC, for Plaintiffs.

John Robert Murphy, Timothy J. Newton, Wesley Brian Sawyer, Murphy and Grantland, Columbia, SC, for Defendant.

ORDER

Richard Mark Gergel, United States District Court Judge

The matter is before the Court on Plaintiff Maurice Robinson's motion to compel Defendant Admiral Insurance Company ("Admiral") to answer certain interrogatories and to produce certain documents. For the reasons given below the motion is granted in part and denied in part.

I. Background¹

Mr. Robinson alleges that that Admiral's failure to defend and to indemnify him in an underlying lawsuit was a bad-faith breach of contract. In the underlying lawsuit, James McElveen sought redress for significant physical injuries that he suffered at a fraternity hazing event hosted in Mr. Robinson's home. Admiral provided liability coverage for the fraternity, Phi Beta Sigma, and the fraternity's national president, Jimmy Hammock. State Farm provided homeowner's coverage for Mr. Robinson. Admiral retained J.R. Murphy as coverage counsel, and it retained the Hood Law Firm ("Hood") to defend Phi Beta Sigma and Mr. Hammock. State Farm retained the Hoffmeyer Law Firm to defend Mr. Robinson.

Admiral agreed to settle Mr. McEleevn's claims against Phi Beta Sigma and Mr. Hammock for $500,000 (half of its $1,000,000 "Each Occurrence" policy limit). Mr. Robinson was not included in that settlement. The insurance company defending Mr. Robinson, State Farm, rejected a settlement offer of $300,000 (its policy limit) and instead chose to go to trial. Mr. McEleeven won a $1,584,000 judgment. State Farm ultimately paid $975,000 to settle that judgment. Mr. Robinson filed this bad-faith action within the Court's diversity jurisdiction, claiming that he was an insured under the Admiral policy and therefore should have been included in the Admiral settlement. State Farm later joined his action to seek recovery for the amounts it paid.

On October 1, 2015, Mr. Robinson served Admiral with interrogatories and requests for production ("RFPs"). Admiral refuses to answer certain interrogatories (numbered 9 and 11) or to produce certain documents responsive to RFPs numbered 2, 3, and 4. Admiral asserts that the withheld documents are protected from discovery by the attorney-client privilege and/or the work product doctrine, and that interrogatory 11 calls for the production of information protected from discovery by the South Carolina Rules of Alternative Dispute Resolution. Admiral also asserts that interrogatory 9 is too vague to answer, while Mr. Robinson asserts that Admiral's answer to interrogatory number 7 is deficient. Mr. Robinson has now brought the present motion to compel answer of the disputed interrogatories and production of the disputed documents.

II. Standard of Review

Rule 26(b)(1) of the Federal Rules of Civil Procedure states:

Unless otherwise limited by court order, the scope of discovery is as follows: Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.

District courts have "wide latitude in controlling discovery and [their] rulings will not be overturned absent a showing of clear abuse of discretion." Ardrey v. United Parcel Serv., 798 F.2d 679, 683 (4th Cir. 1986) ; Middleton v. Nissan Motor Co., No. 10–2529, 2012 WL 3612572, at *2 (D.S.C. Aug. 21, 2012).

III. Analysis

Mr. Robinson asserts that Admiral's responses to RFPs 1–4 and to Interrogatories 7, 9, and 11 are deficient. Regarding RFPs 2, 3, and 4, he claims that Admiral's assertions of attorney-client privilege and work product doctrine protection are improper as a matter of law. The Court will first address those attorney-client privilege and work product issues. For the reasons given below, the motion to compel as to RFPs 2, 3, and 4 will be denied as to requests for privileged communications between Admiral and Mr. Murphy but otherwise denied without prejudice so that the parties may resolve or at least narrow their disagreement with this Order's guidance on attorney-client privilege and work product doctrine. The Court will then address the other issues raised in the disputes concerning the interrogatories and RFP 1.

A. Attorney–Client Privilege

In diversity cases, the application of the attorney-client privilege is governed by state law—in this case, the law of South Carolina. Fed. R. Evid. 501 ; Hottle v. Beech Aircraft Corp., 47 F.3d 106, 107 n.5 (4th Cir. 1995). "The attorney-client privilege protects against disclosure of confidential communications by a client to his attorney." State v. Owens, 309 S.C. 402, 424 S.E.2d 473, 476 (1992). "[T]he burden of establishing the [attorney-client] privilege rests upon the party asserting it." Wilson v. Preston, 378 S.C. 348, 662 S.E.2d 580, 585 (2008).

Admiral has not asserted any good-faith affirmative defense that would place its communications with coverage counsel J.R. Murphy at issue. See City of Myrtle Beach v. United Nat'l Ins. Co., Civ. No. 4:08–1183, 2010 WL 3420044, at *5 (D.S.C. Aug. 27, 2010) ; (see also Answer, Dkt. No. 8, Aug. 26, 2015). Those communications therefore remain privileged. City of Myrtle Beach , 2010 WL 3420044, at *5 ("[T]here is no per se waiver of the attorney client privilege simply by a plaintiff making allegations of bad faith."). Indeed, Mr. Robinson's memorandum in support of his motion to compel fails even to articulate a reason why those communications would not be privileged. The Court therefore denies the motion to compel to the extent that it seeks discovery of privileged communications between Admiral and Mr. Murphy.

1. Admiral's Assertion of an Attorney–Client Relationship with Hood

Admiral also asserts that it had an attorney-client relationship with Hood. The burden of demonstrating such a relationship rests with Admiral.

Wilson , 662 S.E.2d at 585. Admiral, however, fails to cite any relevant authority supporting its assertion that it had an attorney-client relationship with Hood.² Instead, Admiral claims that Admiral, Phi Beta Sigma, and Hood shared a "tripartite relationship with respect to the defense of the underlying claim." Admiral cites this Court's decision in Twin City Fire Insurance to support of its contention that a "tripartite relationship" is an attorney-client relationship. See Twin City Fire Ins. Co. v. Ben Arnold–Sunbelt Beverage Co. of S.C., LP, 336 F.Supp.2d 610 (D.S.C. 2004). The issue in that case was whether "an insured [has] the right to retain independent counsel of its own choosing at the insurer's expense where only a potential for a conflict of interest exists." Id. at 621. This Court held that the insured did not have such a right, reasoning that a rule recognizing such a right "would favor insureds who purchase less than full coverage by allowing them to remove the insurance carriers from the case entirely, obtain lawyers of their choosing, and then send the bill to the insurance company." Id. That reasoning clearly implies that the insurance company is not a joint client together with the insured. Admiral also cites Finley v. Home Insurance Company, a Hawaii Supreme Court case quoted in Twin City and the source of the word "tripartite," as "discussing the tripartite relationship." (Def.'s Resp. to Mot. to Compel 4, Jan. 25, 2016, Dkt. No. 23 (citing 975 P.2d 1145, 1153 (Haw. 1998) ).) Finley does indeed discuss that relationship: "Our holding that the sole client of the attorney is the insured reflects the modern view." 975 P.2d at 1153. Admiral simply fails to meet its burden to demonstrate an attorney-client relationship with Hood.

2. The Common Interest Doctrine

Admiral alternatively argues that even if there is no attorney-client relationship between itself and Hood, the communications for which Admiral asserts privilege are nonetheless privileged from production under the common interest doctrine. Before addressing the substance of that doctrine, the Court must determine the threshold question of whether it is available under South Carolina law.

a. Availability of the Common Interest Doctrine Under South Carolina Law

Admiral asserts that "South Carolina applies the common interest doctrine," citing Tobaccoville USA, Inc. v. McMaster, 387 S.C. 287, 692 S.E.2d 526 (2010). (Def.'s Resp. to Mot. to Compel 6.) But Tocbaccoville adopted the common interest doctrine only for a narrow factual scenario:

We now adopt the common interest doctrine for the narrow factual scenario where several states are parties to a settlement agreement, the state laws that regulate and enforce that settlement all have the same provisions, the attorneys general of those settling states are involved in coordinating regulation and enforcement, and the settling states have executed a common interest agreement.

692 S.E.2d at 531. No subsequent South Carolina case addresses this issue. Because the South Carolina Supreme "Court limited its decision to the particular facts of the case ... recognition of the common interest doctrine in criminal or civil cases in South Carolina remains unresolved." Nathan M. Crystal, Confidentiality, Privilege, and Work Product: Some...