Plaza Ins. Co. v. Lester

• Decision Date: 04 June 2015
• Docket Number: Civil Action No. 14-cv-01162-LTB-CBS
• Parties: PLAZA INSURANCE COMPANY, a Missouri corporation, Plaintiff, v. CAROLYN LESTER, JAMES BRADEN, and BONNIE BRADEN, Defendants.
• Court: U.S. District Court — District of Colorado

PLAZA INSURANCE COMPANY, a Missouri corporation, Plaintiff, v. CAROLYN LESTER, JAMES BRADEN,and BONNIE BRADEN, Defendants.

Civil Action No. 14-cv-01162-LTB-CBS

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

June 4, 2015

ORDER REGARDING DEFENDANTS' MOTION TO COMPEL THE PRODUCTION OF DOCUMENTS

Magistrate Judge Shaffer

This matter comes before the court on Defendants Carolyn Lester, James Braden, and Bonnie Braden's (collectively the "Defendants") Motion to Compel the Production of Documents (doc. #27), filed on September 15, 2014. As of that date, Plaintiff Plaza Insurance Company (hereinafter "Plaza" or the "Plaintiff") had produced approximately 530 pages from its claim file and withheld 143 pages and additional redactions based upon the attorney-client privilege and/or the work product doctrine. The motion to compel was referred to this magistrate judge by memorandum (doc. #28) on September 16, 2014. Plaintiff filed its Response in Opposition to Defendants' Motion to Compel (doc. #29) on October 9, 2014, which was followed by Defendants' Reply (doc. #36) on October 16, 2014.

I held a hearing on the pending motion on October 20, 2014. At that time, I directedPlaza's counsel to submit an updated privilege log and copies of those documents that Plaintiff was withholding on the basis of privilege for the court's in camera review. The court held another hearing on February 17, 2015. At the conclusion of that hearing, the parties were directed to submit supplemental briefs addressing the issue of whether or to what extent an uninsured motorist (UIM) claim might be barred by the "one civil action" rule set forth in Colorado's Wrongful Death Act, C.R.S. §13-21-203(1)(a).¹ Defendants and Plaza filed supplemental briefs on February 24, 2015 (doc. ## 53 and 54, respectively).²

The court has completed its in camera review of the materials submitted by Plaza. I also have carefully viewed the parties' briefs and exhibits, the entire case file, and the applicable case law. For the following reasons, I will grant Defendants' motion and require production of some documents previously withheld by Plaza.

PROCEDURAL BACKGROUND

Plaza Insurance Company commenced this case on April 24, 2014 by filing a Complaint for Declaratory Relief (doc. #1). That Complaint acknowledged that on August 24, 2013, while working in the course and scope of his employment as a tow truck driver for C&J Auto Service("C&J"), Martin Braden was fatally struck by a vehicle operated by Dana Beales. Plaza's Complaint also noted that James Braden and Bonnie Braden, as parents of Martin Braden, filed a wrongful death action in the District Court for the County of Weld, Colorado on September 20, 2013 based upon the death of their son. In their complaint, the Bradens stated that their son was unmarried at the time of his death. Unbeknownst to the Bradens, Carolyn Lester considered herself Martin Braden's common law wife.³ Plaza's Complaint for Declaratory Relief states that "Carolyn Lester, James Braden, and Bonnie Braden participated in mediation on December 10, 2013 to reach an agreement, as between them, regarding how any judgment or settlement proceeds from any wrongful death action would be shared." Ms. Lester and the Bradens also were aware that Martin Braden had been covered under C&J's insurance policy at the time of his death. Plaza does not dispute the existence of that coverage. The Bradens' counsel made a demand on Plaza for UIM coverage, up to the policy limits of $1,000,000.00, on February 26, 2014.

Plaza alleges, and it is not disputed, that the Bradens settled their wrongful death action against Mr. Beales for $100,000.00, the limits of his insurance policy. Thereafter, the wrongful death action in Weld County District Court was dismissed on April 10, 2014, without Ms. Lester ever intervening or formally joining that litigation as a named party. Plaza commenced this declaratory judgment action two weeks later, on April 24, 2014.

Defendants filed their Answer and Counterclaim (doc. #9) on June 6, 2014. Defendantscollectively asserted claims for breach of contract for insurance benefits (first claim), bad faith breach of an insurance contract (second claim), unreasonable delay and/or denial in violation of C.R.S. §§ 10-3-1115 and 10-3-1116 (third claim), and fraud (fourth claim). The fraud claim specifically alleged that Plaza and its attorneys "fraudulently induced Defendants into believing that their request for UIM benefits would be honored and paid" in the wake of their mediated settlement of the wrongful death claims, that Defendants settled those claims "acting . . . in detrimental reliance upon Plaza's misrepresentations and false statements," and that Plaza "intended to fraudulently induce Defendants to take steps that Plaza could later attempt to use to its benefit in refusing to pay the UIM benefits to which Defendants have been and are entitled."

The exhibits attached to Defendants' Answer and Counterclaim expand upon the facts set out in Plaza's Complaint. Those exhibits include a letter from Plaza's outside law firm, Treece Alfrey Musat P.C. (the "Treece Firm"), dated March 7, 2014, to John Astuno, Jr., the attorney representing the Bradens and Ms. Lester, stating "[p]ursuant to your request of February 20, 2014, this letter will confirm that . . . Plaza Insurance Company, through its third party claims administrator, North American Risk Services [NARS], consent to your proposed settlement with . . . the insurance carrier for Dana Rex Beales." See Exhibit 1 (doc. #9-1) attached to Defendants' Answer and Counterclaim. On March 18, 2014, before the wrongful death action in Weld County District Court was dismissed, Mr. Astuno advised Katherine Jensen, an attorney at the Treece Firm, that Ms. Lester would be asserting a claim under the UIM policy as "[s]he is the common law wife of the deceased" and that the Bradens would sign a release "assuming we can conclude this matter." See Exhibit 2 (doc. #9-2) attached to Defendants' Answer and Counterclaim. On April 1, 2014, Mr. Astuno again wrote to Ms. Jensen, forwarding a copy ofthe proposed Settlement Agreement with Mr. Beales' insurance carrier and asking her to "give us the benefit of your thoughts on the matter." Mr. Astuno explicitly asked for Plaza's "blessing" of the proposed Settlement Agreement. See Exhibit 4 (doc. #9-4) attached to Defendants' Answer and Counterclaim. On April 11, 2014, Mr. Astuno wrote to Ms. Jensen expressing his belief that "you have been provided with everything you need to evaluate this claim" and hinting at some frustration that "[w]e have jumped through numerous hoops and have yet to receive from you an offer in response to our policy limit demand." See Exhibit 6 (doc. #9-6) attached to Defendants' Answer and Counterclaim.

This court held a Fed. R. Civ. P. 16 scheduling conference on August 21, 2014. During that conference, counsel for Defendants and Plaza's new counsel from the firm of Sweetbaum Sands Anderson, P.C. discussed anticipated disputes involving Plaintiff's assertion of the attorney-client privilege and the work product doctrine in the context of Plaza's initial disclosures under Fed. R. Civ. P. 26(a)(1). I advised defense counsel that Rule 26(a)(1)(A)(ii) only requires a party to identify those documents in its possession, custody or control that it "may use to support its claims or defenses, unless the use would be solely for impeachment" and, more importantly, did not require the disclosing party to physically produce any documents as part of their initial disclosures. Cf. Kern River Gas Transmission Co. v. 6.17 Acres of Land, 156 Fed. Appx. 96, 101 (10th Cir. 2005); Kleiner v. Burns, No. 00-2160-JWL, 2000 WL 1909470, at *4 n.5 (D. Kan. Dec. 22, 2000). The court expressed the view that any privilege disputes were better framed in the context of actual requests for production under Fed. R. Civ. P. 34. See Fed. R. Civ. P. 37(a)(3)(A) (permitting a party to move to compel "if a party fails to make a disclosure required by Rule 26(a)") (emphasis added). I directed Defendants to serve requestsfor production by August 25, 2014, and then contact Plaza's counsel by September 5, 2014 to determine if Plaintiff would continue to withhold materials as privileged or protected under Fed. R. Civ. P. 26(b)(3). Defendants filed their motion to compel on September 15, 2014.

In moving to compel, Defendants raise alternative arguments. First, Ms. Lester and the Bradens contend that all communications between Plaza, NARS and the Treece Firm are not shielded by the attorney-client privilege because, for much of the relevant time period, outside counsel were working in an extra-legal or investigative capacity and acting more as claims adjuster than legal advisors. See Defendants' Motion to Compel, at 11. Second, Defendants maintain that work product protection cannot extend to most of the withheld documents because "there is no evidence to suggest that between September 26, 2013 and April 24, 2014, Plaza had reason to believe there was a substantial probability that Carolyn Lester or James or Bonnie Braden would file imminent litigation against it on the UIM claim." Id. at 13. Even if the contested documents fall within the work product doctrine, Ms. Lester and the Bradens insist that the Treece Firm's materials are critical to the preparation of their claims and substantially equivalent information cannot be obtained through other means. See Fed. R. Civ. P. 26(b)(3). Finally, Defendants argue that the crime fraud exception allows for disclosure of otherwise-privileged documents "[t]o the extent Defendants can make a 'prima facie showing that the[ir] allegations of attorney participation in [Plaza's] . . . fraud has some foundation in fact." Id. at 14. Plaintiff's brief in opposition insists that "[w]ith the exception of documents showing direct communication with its attorneys or internal communication discussing specific conversations with its attorneys,...