Global Investors Agent Corp. & Others v. Nat'l Fire Ins. Co. Of Hartford & Others

• Decision Date: 28 May 2010
• Docket Number: No. 09-P-762.,09-P-762.
• Citation: 76 Mass.App.Ct. 812,927 N.E.2d 480
• Parties: GLOBAL INVESTORS AGENT CORPORATION & others v.NATIONAL FIRE INSURANCE COMPANY OF HARTFORD & others.
• Court: Appeals Court of Massachusetts

76 Mass.App.Ct. 812

927 N.E.2d 480

GLOBAL INVESTORS AGENT CORPORATION & others ¹v.NATIONAL FIRE INSURANCE COMPANY OF HARTFORD & others.²

No. 09-P-762.

Appeals Court of Massachusetts Middlesex.

Argued Feb. 8, 2010.

Decided May 28, 2010.

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Ira H. Zaleznik, Boston, for the plaintiffs.

Mark W. Shaughnessy, for the defendants.

Present: KANTROWITZ, GREEN, & MEADE, JJ.

KANTROWITZ, J.

This case stems from a dispute concerning the defendant insurers' duty to defend the plaintiffs against counterclaims resulting from an underlying action initiated by the plaintiffs in the U.S. District Court for the District of Maine (Maine litigation). The Maine litigation settled in mediation prior to the defendants' providing coverage,³ and the plaintiffs brought suit against the defendants in Massachusetts, alleging breach of contract and breach of the covenant of good faith and fair dealing for failing to defend them in the Maine litigation.

Specifically, the plaintiffs claimed $96,850.01 in damages related to legal fees and costs stemming from the defendants' failure to defend them in the Maine litigation, as well as consequential damages related to their loss of valuable claims and rights. They also alleged that the defendants committed unfair and deceptive practices in violation of G.L. c. 93A and G.L. c. 176D.

Prior to trial, on September 7, 2004, a Superior Court judge granted the plaintiffs partial summary judgment, establishing the defendants' breach of their duty to defend the plaintiffs in the Maine litigation, and leaving only the issue of damages to be determined. The judge denied the plaintiffs' motion to bifurcate the trial, and all claims were presented to the jury, which awarded the plaintiffs $38,000 (of the requested $96,850.01). The jury declined to award either consequential or, in an advisory opinion, c. 93A and c. 176D damages. The judge also allowed the motions for a directed verdict, filed by codefendants Transportation Insurance Company (Transportation Insurance) and CNA Financial Corporation (CNA Financial), collectively doing business as CNA, finding that no evidence supported any of the claims against them.

Posttrial, pursuant to Mass.R.Civ.P. 59(e), 365 Mass. 828 (1974), the plaintiffs filed a motion to alter or amend the judgment, arguing that, under Preferred Mut. Ins. Co. v. Gamache, 426 Mass. 93, 686 N.E.2d 989 (1997), and its progeny, they were “entitled to the reasonable attorney's fees and expenses incurred in successfully establishing the insurer's duty to defend under the policy.” Id. at 98, 686 N.E.2d 989. The judge agreed and awarded the plaintiffs additional attorney's fees in the amount of $22,420, and costs in the amount of $313.18, for successfully establishing the defendants' duty to defend. In all, the plaintiffs were awarded $84,783.33.

Finding the damages insufficient, the plaintiffs appeal, arguing that the judge made several erroneous determinations, to wit, impermissibly (1) allowing evidence covered by the attorney-client privilege; (2) refusing to bifurcate the trial; (3) admitting settlement offers; (4) admitting inadmissible deposition testimony; (5) excluding expert testimony; (6) providing improper jury instructions; (7) directing a verdict for Transportation Insurance and CNA Financial; and (8) calculating their award of attorney's fees for establishing the defendants' duty to defend. We affirm.

Background. In 2000, plaintiffs Richard L. Gold and Thomas R. Gold (the Golds) formed the companies Global Investors Agent Corporation and Gold Management, LLC, and entered into an investment agreement and a management services agreement with a Maine company, Global Protein Products (GPP). Contemporaneously, the Golds entered into a commercial general liability coverage policy issued by the defendants covering themselves individually as well as Global Investors Agent Corporation and Gold Management, LLC.⁴

On November 26, 2001, the GPP board of directors voted to terminate the management services agreement with the plaintiffs “for cause” due to “gross negligence in performing [their] duties under this agreement.” On January 10, 2002, the plaintiffs brought suit in the United States District Court for the District of Maine against GPP, and GPP filed counterclaims against the plaintiffs in April of 2002. On May 2, 2002, the plaintiffs timely notified the defendant insurers about the counterclaims and sought defense coverage under their insurance policy. Prior to the defendants' determination whether the defense was covered under the plaintiffs' policy, on July 30, 2002, the plaintiffs settled the Maine litigation.

Thereafter, on July 30, 2003, the plaintiffs sued the defendants in Massachusetts for failing to defend them in the Maine litigation. In addition to their claim for attorney's fees expended to defend themselves, the plaintiffs also sought to recover consequential damages on the theory that they were forced to settle the case on unfavorable terms and abandon valuable claims and rights, and sought c. 93A and c. 176D damages on the basis that the defendants used unfair and deceptive practices in failing promptly to defend them. After summary judgment established the defendants' duty to defend, the plaintiffs were unsuccessful at trial in establishing consequential and c. 93 and c. 176D damages.

The main issue on appeal is whether the attorney-client privilege was held to be appropriately waived. We address the other issues in turn.

Waiver of attorney-client privilege. The trial judge allowed limited discovery on the plaintiffs' attorney-client communications because she determined that the plaintiffs waived their privilege when they placed advice they received from their attorney “at issue” in the present litigation. Specifically, the judge permitted the defendants to depose the plaintiffs' attorney in the Maine litigation, Harold Friedman, concerning his perceptions, recollection, and analysis of the plaintiffs' defenses and strategies before, during, and after the mediation of the Maine litigation.

“The classic formulation of the attorney-client privilege, which we indorse, is found in 8 J. Wigmore, Evidence § 2292 (McNaughton rev. ed. 1961): ‘(1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal adviser, (8) except the protection be waived.’ ” Commissioner of Rev. v. Comcast Corp., 453 Mass. 293, 303, 901 N.E.2d 1185 (2009). See Mass. G. Evid. § 502 (2010). “[W]e construe the privilege narrowly, in part to protect the competing societal interest of the full disclosure of relevant evidence.” Commissioner of Rev. v. Comcast Corp., supra at 304, 901 N.E.2d 1185. “[A] party may resist discovery on the basis of privilege, but may not at the same time rely on the privileged communications or information as evidence at trial.” G.S. Enterprises, Inc. v. Falmouth Marine, Inc., 410 Mass. 262, 270-271, 571 N.E.2d 1363 (1991).

“There are, under Massachusetts law, certain exceptions to the attorney-client privilege and some circumstances in which the privilege may be deemed waived other than by express waiver.” Darius v. Boston, 433 Mass. 274, 277, 741 N.E.2d 52 (2001). “We accept the premise underlying the concept of ‘at issue’ waiver of the attorney-client privilege: there are circumstances in which a litigant may implicitly waive the privilege, at least in part, by injecting certain types of claims or defenses into a case.” Id. at 284, 741 N.E.2d 52. See Mass. G. Evid. § 523(b)(2). See also Zabin v. Picciotto, 73 Mass.App.Ct. 141, 158, 896 N.E.2d 937 (2008) (“The nature of the defendants' allegations placed the work [the attorney] performed in the underlying litigation directly at issue, and [the attorney] was the only source available to testify regarding the work she performed”).

In Darius, the Supreme Judicial Court held that while it was not formulating “an exact definition of the ‘at issue’ waiver doctrine under Massachusetts law,” the discovery sought by the defendants in the case fell “well beyond whatever definition we might adopt.” Darius v. Boston, supra at 279, 741 N.E.2d 52. In doing so, the court noted that, since the case involved a statute of limitations issue related to the timing of certain attorney-client communications, “[t]his is not a case ... where a party relies on ‘advice of counsel’ in its claim or defense. It is thus distinguishable from cases ... in which the advice of counsel, at the time a party took certain action, is directly or indirectly implicated in the party's claim or defense.” Id. at 280 n. 7, 741 N.E.2d 52, citing, among other cases, Hearn v. Rhay, 68 F.R.D. 574 (E.D.Wash.1975), as illustrative of a case where an “advice of counsel” claim or defense existed.⁵

In further resolving the applicability of a potential “at issue” waiver in Darius, the court placed two additional limitations on the doctrine. First, “[a]n ‘at issue’ waiver, in circumstances where it is recognized, should not be tantamount to a blanket waiver of the entire attorney-client privilege in the case. By definition, it is a limited waiver of the privilege with respect to what has been put ‘at issue.’ ” Darius v. Boston, supra at 283, 741 N.E.2d 52. Second, “there can be no ‘at issue’ waiver unless it is shown that the privileged information sought to be discovered is not available from any other source.” Id. at 284, 741 N.E.2d 52.

With these limitations in mind, we address whether an “at issue” waiver occurred in the case at bar. Where our review concerns the attorney-client privilege, “[m]ixed questions of law and fact, such as whether there has been a waiver, generally receive de novo review.” Commissioner of Rev. v. Comcast Corp., ...