Holmgren v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 09 November 1992
• Docket Number: Nos. 91-35350,91-35841,s. 91-35350
• Citation: 976 F.2d 573
• Parties: , 23 Fed.R.Serv.3d 778 Julie HOLMGREN, Plaintiff-Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant. Julie HOLMGREN, Plaintiff-Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 573

976 F.2d 573

61 USLW 2207, 23 Fed.R.Serv.3d 778

Julie HOLMGREN, Plaintiff-Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant.

Julie HOLMGREN, Plaintiff-Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant.

Nos. 91-35350, 91-35841.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 2, 1992.

Decided Oct. 2, 1992.

As Amended on Denial of Rehearing Nov. 9, 1992.

William Conklin and Allen P. Lanning, Conklin, Nybo, LeVeque & Murphy, Great Falls, Mont., for defendant-appellant.

Alexander Blewett, III, and Michael J. George, Hoyt & Blewett, Great Falls, Mont., for plaintiff-appellee.

Appeals from the United States District Court for the District of Montana.

Before FARRIS, NORRIS, and KOZINSKI, Circuit Judges.

FARRIS, Circuit Judge:

In these consolidated appeals, State Farm Mutual Automobile Insurance Company appeals the district court's judgment entered on a jury verdict for Julie Holmgren in her action for unfair claim settlement practices under Mont.Code Ann. § 33-18-201. State Farm also appeals the district court's award of attorney expenses under Fed.R.Civ.P. 37(c). We affirm in all respects except the size of the Rule 37(c) award.

I

Julie Holmgren was injured on July 16, 1986, in Helena, Montana, when State Farm's insured, Sharon Cannon, ran a stop sign and collided with the car in which Holmgren was riding. Cannon was intoxicated at the time. She left the scene of the Holmgren accident and collided with three other cars in the vicinity. Cannon pled guilty to several charges, including driving while under the influence of alcohol.

Immediately after the accident, Holmgren was treated at a local emergency room for headache and neck and back pain. She thereafter saw Dr. Bishop, who prescribed physical therapy and recommended that she cease working until January 1987. Holmgren followed his recommendation. Her employer discharged her from her part-time job some time before October 22, 1986. Holmgren received further treatment through 1988.

Within a week of the accident, Holmgren hired an attorney, who promptly contacted State Farm. A State Farm representative, Ron Ashbraner, conducted an initial investigation and concluded that Cannon's liability was clear. At his direction, State Farm reimbursed the Holmgren family for the damage to their automobile, for car rental expenses, and made advance payments for Holmgren's medical expenses and lost wages totaling just over $5,000.

Holmgren's husband had been disabled in 1984 and was unemployed. The Holmgrens lost their home through foreclosure in December 1987. The family's fiscal pressures were regularly communicated to State Farm by Holmgren's counsel.

In December 1987, State Farm's offer to settle for $12,500 was rejected. Unsuccessful settlement attempts led to the July 1988 filing of suit in state court. Cannon's attorney, who had been retained by State Farm, filed an answer admitting injury but denying liability. The suit was settled for $40,000 in October 1989, on the second day of trial. The settlement expressly reserved Holmgren's rights against State Farm for bad faith in the process of adjusting and settling the claim.

Holmgren filed this suit in state court, under Mont.Code Ann. §§ 33-18-201(2), (4), (6) and (13), on November 9, 1989. Invoking diversity jurisdiction, State Farm removed the suit to federal district court. The district court entered judgment of $149,115.40 on a jury verdict for Holmgren, after crediting State Farm for advance payments and the amount paid to settle the Cannon suit. Motion for judgment notwithstanding the verdict was denied on January 24, 1991. State Farm filed timely a notice of appeal from the judgment and the order denying the motion for judgment notwithstanding the verdict.

Holmgren's motion for attorneys' fees under Fed.R.Civ.P. 37(c) for State Farm's denial during discovery of certain requests for admission was granted. Following supplemental briefing, the district court awarded attorneys' fees of $11,639.35. State Farm timely appealed.

II

(1) Opinion Work Product--State Farm contends that the district court erred in compelling it to produce and admitting as evidence plaintiff's exhibits 92 and 93. These items are handwritten memoranda drafted during the litigation of the Cannon suit by a State Farm adjuster. They contain a range of values for Holmgren's claims, including aggravation, medical expenses, lost earnings, pain and suffering, loss of course of life and loss of home, fixing the range of potential liability as from $78,000 to $145,000. State Farm argues that these items are opinion work product and protected under Fed.R.Civ.P. 26(b)(3).

Holmgren contends that State Farm failed to object to the admission of the exhibits. We reject the argument. Counsel objected by affidavit to the production of both items as "opinion work product."

The work product doctrine was first articulated by the Supreme Court in Hickman v. Taylor, 329 U.S. 495, 67 S.Ct. 385, 91 L.Ed. 451 (1947). Fed.R.Civ.P.Rule 26(b)(3), which substantially codifies the Hickman decision, provides:

[A] party may obtain discovery of documents and tangible things otherwise discoverable under subdivision (b)(1) of this rule and prepared in anticipation of litigation or for trial by or for another party or by or for that other party's representative (including the other party's attorney, consultant, surety, indemnitor, insurer, or agent) only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of the party's case and that the party is unable without undue hardship to obtain the substantial equivalent of the materials by other means. In ordering discovery of such materials when the required showing has been made, the court shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the litigation.

The primary purpose of the work product rule is to "prevent exploitation of a party's efforts in preparing for litigation." Admiral Ins. Co. v. United States District Court, 881 F.2d 1486, 1494 (9th Cir.1989). Like the discovery process that it limits, the work product doctrine encourages efficient development of facts and issues.

Exhibits 92 and 93 meet the threshold requirements for qualification as work product: both are (a) documents sought by Holmgren that were (b) prepared for trial (c) by a representative of State Farm. They reflect the opinion of a State Farm adjuster on the range of potential liability. See Reavis v. Metropolitan Property & Liability Ins. Co., 117 F.R.D. 160, 164 (S.D.Cal.1987) (recognizing opinion work product of adjusters handling claim).

We need not decide whether Rule 26(b)(3) provides any protection for material prepared for litigation that has terminated. For even if it does, the rule permits discovery when mental impressions are the pivotal issue in the current litigation and the need for the material is compelling.

A party seeking opinion work product must make a showing beyond the substantial need/undue hardship test required under Rule 26(b)(3) for non-opinion work product. Upjohn Co. v. United States, 449 U.S. 383, 401-02, 101 S.Ct. 677, 688-89, 66 L.Ed.2d 584 (1981). The Supreme Court, however, has so far declined to decide whether opinion work product is absolutely protected from discovery. Id. at 401, 101 S.Ct. at 688.

The leading case denying all discovery of opinion work product is Duplan Corp. v. Moulinage et Retorderie de Chavanoz, 509 F.2d 730, 734 (4th Cir.1974) (Duplan II ). The Duplan II court reasoned, "[i]n our view, no showing of relevance, substantial need or undue hardship should justify compelled disclosure of an attorney's mental impressions, conclusions, opinions or legal theories. This is made clear by the Rule's use of the term 'shall' as opposed to 'may.' " Id. at 734. This argument ignores the Advisory Committee notes to the 1970 amendment to Rule 26(b)(3) which state that the Rule "conform[s] to the holdings of the cases, when viewed in light of their facts." In Hickman, the Court stated that "[i]f there should be a rare situation justifying production of [work product], petitioner's case is not of that type." 329 U.S. at 513, 67 S.Ct. at 395.

The Supreme Court, in 1946, rejected a proposed amendment to Rule 30(b) that would have given opinion work product absolute protection. See Report of Proposed Amendments to Rules of Civil Procedure, 5 F.R.D. 433, 456-57 (1946); Order dated December 27, 1946, 329 U.S. 843 (1946) (omitting reference to Rule 30(b) amendment in enumeration of amendments to rules adopted). That rejection, followed closely by the Hickman decision, which ordained a case-by-case approach to work product questions, suggests that the Court did not view the mandatory language of Rule 26(b)(3) as demanding absolute protection of opinion work product.

We agree with the several courts and commentators that have concluded that opinion work product may be discovered and admitted when mental impressions are at issue in a case and the need for the material is compelling. See, e.g., Bio-Rad Labs., Inc. v. Pharmacia, Inc., 130 F.R.D. 116, 122 (N.D.Cal.1990); Reavis, 117 F.R.D. at 164; Handgards, Inc. v. Johnson & Johnson, 413 F.Supp. 926, 932-33 (N.D.Cal.1976); Bird v. Penn Cent. Co., 61 F.R.D. 43, 47 (E.D.Pa.1973); 4 J. Moore, Federal Practice p 26.64[3.-2], at 26-385 & n. 8 (2d ed. 1991); J. Anderson et al., The Work Product Doctrine, 68 Cornell L.Rev. 760, 831-37 (1983). But see 8 C. Wright & A. Miller, Federal Practice and Procedure: Civil § 2022, at 188 n. 97, 193, § 2026, at 229-32 (1970).

Both elements are met here. In a bad faith insurance claim settlement case, the "strategy, mental impressions and opinion of [the insurer's] agents concerning the handling of the claim are directly at issue." Reavis, 117 F.R.D. at 164. Further,...