Frank W. Schaefer, Inc. v. C. Garfield Mitchell Agency, Inc.

• Decision Date: 18 August 1992
• Docket Number: No. 12744,12744
• Citation: 612 N.E.2d 442,82 Ohio App.3d 322
• Parties: FRANK W. SCHAEFER, INC., Appellee, v. C. GARFIELD MITCHELL AGENCY, INC. et al., Appellants.
• Court: Ohio Court of Appeals

Page 322

82 Ohio App.3d 322

612 N.E.2d 442

FRANK W. SCHAEFER, INC., Appellee, v. C. GARFIELD MITCHELL AGENCY, INC. et al., Appellants.

No. 12744.

Court of Appeals of Ohio, Second District, Montgomery County.

Decided Aug. 18, 1992.

Robert Huffman and Christopher M. Gee, West Milton, for appellee.

Arthur A. Ames, Dayton, for appellants.

WOLFF, Judge.

Richard Noggle, d.b.a. C. Garfield Mitchell Agency, Inc., appeals from a judgment against him and in favor of Frank W. Schaefer, Inc. in the amount of $221,700, together with interest and costs.

The facts of the case are essentially as follows.

Frank W. Schaefer, Inc. is a manufacturer of industrial furnaces. Since approximately 1962, Schaefer had purchased all of its insurance through the C. Garfield Mitchell Agency, a proprietorship owned and operated by Richard Noggle. In his capacity as insurance agent to Schaefer, Noggle was in contact with the company several times a year, in addition to conducting an annual insurance review.

In April 1985, an accident occurred at Schaefer's shop in which Dean Bourelle, an employee of Schaefer, was seriously injured while using a radial arm saw. As a result, Bourelle's hand was almost completely severed. Bourelle's hand was later reattached after extensive surgery.

On April 4, 1986, Bourelle filed a complaint against Schaefer, alleging that the removal of the saw's anti-kickback safety device constituted an intentional tort for which he was entitled to recover damages outside the workers' compensation system. Schaefer forwarded this complaint to Noggle, and Schaefer's insurance company initially provided the necessary legal representation to defend the lawsuit.

On November 12, 1986, however, the insurance company filed a declaratory judgment action to determine whether it was required, under the general liability policy purchased by Schaefer, to provide representation for the intentional tort claim, and whether it was further required to pay any resulting settlement or judgment rendered in favor of Bourelle. On September 2, 1987, the trial court determined that neither of these undertakings was covered by the general liability policy and that the insurance company was not responsible for them.

Although Schaefer then assumed responsibility for the costs of its legal representation, it continued to utilize the services of Thomas E. Jenks, the attorney originally hired by the insurance company. In evaluating Schaefer's liability, Jenks considered the facts of the case and the standards enunciated by the Ohio Supreme Court at that time. Based on this evaluation, Jenks determined that it was likely that Schaefer would lose at trial and that the jury verdict, including punitive damages, could be in excess of $500,000. Jenks recommended that Schaefer settle the case and suggested that Schaefer obtain a second opinion. Schaefer did consult a second attorney, recommended by Jenks, who reviewed the applicable case law and the facts of the case and also determined that settlement would be prudent.

Settlement negotiations commenced and, on December 14, 1987, Schaefer settled with Bourelle for $215,000.

On July 6, 1988, Schaefer filed a complaint against Noggle, alleging that Noggle had negligently, and in breach of contract, failed to recommend that Schaefer purchase a stopgap endorsement to its general liability insurance policy, that this policy endorsement would have provided coverage for Bourelle's injury, and that Noggle's failure to recommend this endorsement resulted in Schaefer's settlement payment to Bourelle.

Trial commenced on January 14, 1991, and on January 24, 1991, the jury found in favor of Schaefer and awarded the company $221,700.

Noggle appeals, asserting four assignments of error.

"I. The trial court erroneously prevented defendants from obtaining critical and germane information, claimed to be privileged, from the files of counsel for Bourelle and Schaefer, in the underlying Bourelle case."

In this assignment of error, Noggle contends that the trial court erroneously determined that certain materials contained in the files of the attorneys who represented Schaefer and Bourelle in the underlying intentional tort claim were subject to the attorney-client privilege and exempt under the work-product provisions of Civ.R. 26. In support, Noggle argues that these materials were subject to discovery because the attorney-client privilege of both parties had been waived and because the work-product doctrine was inapplicable to this case.

The attorney-client privilege, as codified in R.C. 2317.02(A), states in pertinent part:

"The following persons shall not testify in certain respects:

"(A) An attorney, concerning a communication made to him by his client in that relation or his advice to his client, except that the attorney may testify by express consent of the client or * * * if the client voluntarily testifies * * * the attorney may be compelled to testify on the same subject."

Although the language of R.C. 2317.02(A) speaks only to the prohibition of testimony of privileged matters, it has nonetheless been stated that wherever a claim of privilege would be proper at the actual trial of the case, it is proper at the discovery stage. 36 Ohio Jurisprudence 3d (1982), Discovery and Depositions, Section 33. Because the same rules of privilege govern the scope of discovery as govern admissibility at trial, a party may obtain pretrial discovery of privileged materials only if such materials fall within some exception to the privilege or if the privilege will be waived at trial. Handgards, Inc. v. Johnson & Johnson (N.D.Cal.1979), 413 F.Supp. 926, 929.

Civ.R. 26(B)(3), which codifies what is commonly referred to as the work-product doctrine, also limits discovery of certain information and states in pertinent part:

" * * * a party may obtain discovery of documents and tangible things prepared in anticipation of litigation or for trial by or for another party or by or for that other party's representative * * * only upon a showing of good cause therefor."

Although the attorney-client privilege and the work-product doctrine are often employed to protect identical materials, it must be noted that these doctrines are quite different in policy and practice. The attorney-client privilege bestows upon a client a privilege to refuse to disclose and to prevent others from disclosing confidential communications made between the attorney and client in the course of seeking or rendering legal advice. See McCormick, Evidence (2 Ed.1972), Section 87; 8 Wigmore, Evidence (McNaughton Rev.1961), Section 2292. Thus, the attorney-client privilege belongs to the client, and the only materials protected are those which involve communications with his attorney. The work-product doctrine, on the other hand, belongs to the attorney and assures him that his private files shall remain free from intrusions of opposing counsel in the absence of special circumstances. Handgards, Inc., supra, 413 F.Supp. at 931. The work-product doctrine generally protects a broader range of materials than does the attorney-client privilege because the work-product doctrine protects all materials prepared in anticipation of trial.

Due to the differences between the attorney-client privilege and the work-product doctrine, most courts have held that these doctrines constitute independent and distinct sources of immunity from discovery. Handgards, Inc., supra, 413 F.Supp. at 929; In re Election of November 6, 1990 for the Office of Attorney General of Ohio (1991), 57 Ohio St.3d 614, 567 N.E.2d 243. See, also, Hickman v. Taylor (1947), 329 U.S. 495, 67 S.Ct. 385, 91 L.Ed. 451. Therefore, waiver of one of these sources of immunity does not necessarily obviate the protection afforded by the other. Handgards, Inc., supra, at 929; In re Election, supra, at 615, 567 N.E.2d at 244.

Although Ohio courts do not appear to have considered the questions of whether the attorney-client privilege is waived or the work-product doctrine exemption is inapplicable in litigation wherein privileged communications pertaining to prior litigation are at issue, these questions have been considered extensively by the federal courts. The federal courts have developed three different approaches to considering the effect of the filing of such a suit on the various privileges asserted by the plaintiff. See Fed. Deposit Ins. Corp. v. Wise (D.Colo.1991), 139 F.R.D. 168; Zenith Radio Corp. v. United States (C.A.Fed.1985), 764 F.2d 1577. The first of these approaches is the "automatic waiver" rule. As is indicated by its name, this approach mandates that any litigant who brings a claim, counterclaim, or affirmative defense which injects a privileged matter into the litigation automatically waives whatever privileges he may have had. The rationale for this approach is that the presentation of the claim or defense inherently prevents the assertion of privilege. See Indep. Prod. Corp. v. Loew's, Inc. (S.D.N.Y.1958), 22 F.R.D. 266; Ghana Supply Comm. v. New England Power Co. (D.Mass.1979), 83 F.R.D. 586.

The second approach is essentially a loose balancing test in which the need for discovery of privileged materials is balanced against the need to protect the confidentiality of the materials. See Black Panther Party v. Smith (C.A.D.C.1981), 661 F.2d 1243.

The third approach, as first espoused in Hearn v. Rhay (E.D.Wash.1975), 68 F.R.D. 574, employs a tripartite test to determine if the privilege has been waived. According to the Hearn approach, if (1) assertion of the privilege is the result of some affirmative act, such as filing suit, by the asserting party, and (2) through the affirmative action, the asserting party has placed the protected information at issue by making it relevant to the case, and (3) application of the privilege would deny the opposing party access to information vital to its defense, the court should find that the asserting party has impliedly waived the...