United Services Auto. Ass'n v. Werley

• Decision Date: 09 September 1974
• Docket Number: No. 2082,2082
• Citation: 526 P.2d 28
• Parties: UNITED SERVICES AUTOMOBILE ASSOCIATION, Petitioner, v. Harley D. WERLEY et al., Respondents.
• Court: Alaska Supreme Court

Page 28

526 P.2d 28

UNITED SERVICES AUTOMOBILE ASSOCIATION, Petitioner, v.Harley D. WERLEY et al., Respondents.

No. 2082.

Supreme Court of Alaska.

Sept. 9, 1974.

Hugh B. White, John H. Bradbury, Anchorage, for petitioner.

Joseph L. Young, Atkinson, Conway, Young, Bill & Gagnon, Anchorage, for respondentHarley D. Werley.

Before RABINOWITZ, C. J., and CONNOR, BOOCHEVER, and FITZGERALD, JJ.

RABINOWITZ, Chief Justice.

This petition seeks review of a superior court discovery order directing the production of various documents.The basis for review urged by petitionerUnited States Automobile Association(hereinafter USAA) is that the order violates the attorney-client privilege.

On July 20, 1968, a car driven by Mrs. Joan Pope, owned by respondentHarley Werley, and in which Mr. Werley and Mrs. Townsend were passengers, was involved in a collision with a vehicle driven by Jimmie Joe Carlisle.Townsend died in the accident, and Carlisle was convicted of negligent homicide on July 7, 1969, with the judgment of conviction being entered on September 4, 1969.Carlisle was uninsured, but all three occupants of the vehicle owned by Werley were insured under policies issued by petitioner USAA.USAA paid Werley the $15,000 limit due him under the uninsured motorist clause in his policy, but denied Werley's contention that he should be allowed to recover an additional $30,000 under the same clause in two policies issued by USAA to Tom and Joan Pope.

In April of 1970, Werley filed suit against USAA, seeking a declaratory judgment on his right to recover for his injuries up to the full limits of both Pope policies as well as his own policy.This court, in an opinion handed down in June of 1972, followed the Lamb-Weston doctrine and approved the practice of 'stacking policies.'¹

Following this court's interpretation of the 'other insurance' clause in Werley's policy, in August, 1972, Werley filed an amended complaint seeking an additional $30,000 from USAA for personal injuries resulting from the collision with Carlisle.In response to Werley's amended complaint, USAA contested its liability under the uninsured motorist clauses.USAA contended that there was an issue of fact concerning Carlisle's negligence in that there was no showing that the time for Carlisle's appeal of his conviction of negligent homicide had elapsed.USAA also argued that there was the possibility that someone other than Carlisle might have carried insurance on Carlisle's vehicle, and that this possibility was a defense to any payment under the uninsured motorist clause.

There months later, on November 27, 1972, USAA filed an interpleader action, positing the possibility of a claim by Joan Pope for damages resulting from the 1968 accident after the limits of the two Pope policies had been exhausted by Werley's claim and Townsend's husband's claim for damages based on his wife's wrongful death.In this interpleader action, which was subsequently consolidated with the Werley and Townsend actions, USAA explicitly denied that Werley was entitled to recover under the uninsured motorist clauses in the Pope policies.USAA simply argued that, in the event it was held liable to Werley, all the possibly interested claimants should be present to shield the insurer from double liability.

In response to the interpleader action brought by USAA, Werley filed a counterclaim which alleged that USAA had breached its duty to deal with its insured fairly and in good faith by refusing, without proper cause, to compensate him for a loss covered by his policy of insurance.Werely went on to allege that this breach of good faith was intended to coerce him into accepting less than the full amount to which he was entitled under his policy.

Subsequently, the interpleader action was rendered moot by the submission of affidavits signed by the Popes which released USAA from any obligation to compensate them as a result of the 1968 accident if the policy amounts were paid to Werley and Townsend.The Townsend claim was then settled, and shortly thereafter Werley's motion for a summary judgment was granted by the superior court, ² leaving unresolved only Werley's counterclaim against USAA for its alleged bad faith failure to pay a valid claim of its insured.

During discovery regarding his counterclaim against USAA, Werley sought the production of the following documents:

(1) Any letters, correspondence, reports, communications and copies of the same, including notes of oral and telephone convesations, concerning the case of Werley v. United Services Automobile Association, Superior CourtNo. 70-1203, ³ sent or exchanged between and among USAA and any of its agents and legal counsel.

(2) All daily time sheets filled out by USAA's officers, agents or servants and their attorneys in the above designated action.

(3) All interoffice memoranda exchanged between and among the attorneys representing USAA in the action.

Counsel for USAA initially resisted the motion to produce on the grounds that the documents were irrelevant, that they constituted an attorney's work product, and that they were cofidential by virtue of the attorney-client privilege.USAA subsequently confined its resistance to the ground that any requested information not disclosed was protected by the attorney-client privilege.⁴Werley then moved to compel petitioner USAA to produce all the requested documents, and the superior court granted this motion.USAA received a stay of the production order so that it could petition this court seeking review of superior court's order.We have decided to grant this petition for review of the superior court's production order.⁵

The sole substantive issue requiring determination is whether the documents which are subject to the superior court's production order are protected by the attorney-client privilege.An appropriate point of departure is Alaska's discovery rules.

CivilRule 34(a) provides in part:

Any party may serve on any other party a request (1) to produce . . . any designated documents . . . which constitute or contain matters within the scope of Rule 26(b) and which are in the possession, custody or control of the party upon whom the request is served . . ..(emphasis added).

Turning next to CivilRule 26(b), that rule provides in part:

Parties may obtain discovery regarding any matter, not privileged which is relevant to the subject matter involved in the pending action . . ..(emphasis added).

This court has on numerous occasions expressed the view that Alaska's discovery rules should be given a liberal construction.⁶As expressed in CivilRule 26(b), one of the limitations on discovery concerns matters that are privileged.Among the privileges recognized in Alaska is the attorney-client privilege.CivilRule 43(h)(2)⁷ provides as follows:

An attorney shall not, without the consent of his client, be examined as to any communication made by his client to him, nor as to the attorney's advice given thereon, in the course of the attorney's professional employment.

The purpose of the attorney-client privilege is to promote the freedom of consultation of legal advisors by clients by removing the apprehension of compelled disclosure by the legal advisors.⁸Given our commitment to liberal pre-trial discovery, it follows that the scope of the attorney-client privilege should be strictly construed in accordance with its purpose.⁹

One of the widely recognized exceptions to utilization of the attorney-client privilege is that the privilege cannot be used to protect a client in the perpetration of a crime or other evil enterprise in concert with the attorney.¹⁰Wigmore notes that this exception is for the logically sufficient reason that no such enterprise falls within the just scope of the relation between legal advisor and client.¹¹

Wigmore concludes that the communications between advisor and client must pertain to ongoing or future, rather than prior, wrongdoing before the privilege ceases to operate.In addition, the advice sought must be for a knowingly unlawful end, and there is generally a restriction of the exception to cases involving a crime or civil fraud.¹²

The mere allegation of a crime or civil fraud will generally not suffice to defeat the attorney-client privilege.In Clark v. United States ¹³ Justice Cardozo

A client who consults an attorney for advice that will serve him in the commission of a fraud will have no help from the law. . . .There are early cases apparently to the effect that a mere charge of illegality, not supported by any evidence, will set the confidences free. . . .But this conception of the privilege is without support in later rulings. . . .To drive the privilege away, there must be 'something to give colour to the charge'; there must be 'prima facie evidence that it has some foundation in fact.'¹⁴(citations omitted)

The general rule is that there must be a prima facie showing ¹⁵ of fraud before the attorney-client privilege is deemed defeated.¹⁶We think the requirement of prima facie evidence of fraud as opposed to a mere allegation of fraud seems particularly meritorious in the circumstance where a party is seeking to discover all the attorney-client communications relating to the defense of an insurance claim by an insurer.Once a litigant has presented prima facie evidence of the perpetration of a fraud or crime in the attorney-client relationship, the other party may not then claim the privilege as a bar to the discovery of relevant communications and documents.

Thus the controlling question in the case at bar is whether Werley has brought his claim for relief, as pleaded in his counterclaim, within the 'civil fraud' exception to the attorney-client privilege.In accord with our previous discussion Werley must satisfy two requirements: (1) there must be an allegation of a continuing or future 'civil fraud', and (2)he must produce prima facie evidence in support of this allegation.

The...