Wells Dairy v. AMERICAN INDUS. REF.

• Decision Date: 10 December 2004
• Docket Number: No. 03-1199.,03-1199.
• Parties: WELLS DAIRY, INC., Appellant, v. AMERICAN INDUSTRIAL REFRIGERATION, INC., Refrigeration Valves and Systems Corporation, and O.H. Livermore Construction, Inc., Appellees. The Pillsbury Company, Appellee, v. Wells Dairy, Inc., Appellant.
• Court: Iowa Supreme Court

690 N.W.2d 38

WELLS DAIRY, INC., Appellant, v. AMERICAN INDUSTRIAL REFRIGERATION, INC., Refrigeration Valves and Systems Corporation, and O.H. Livermore Construction, Inc., Appellees.

The Pillsbury Company, Appellee, v. Wells Dairy, Inc., Appellant.

No. 03-1199.

Supreme Court of Iowa.

December 10, 2004.

Paul T. Falk, Steven R. Johnson and David C. Lechner of Falk Johnson LLC, Chicago, Illinois, and Daniel B. Shuck, Jeff W. Wright and Jeana L. Goosman of Heidman, Redmond, Fredregill, Patterson, Plaza, Dykstra & Prahl, L.L.P., Sioux City, and Juli Wilson Marshall, Julie D. Bailey, Mary Rose Alexander and Leslie N. Rosen, of Latham & Watkins LLP, Chicago, Illinois, for appellant.

John D. Mayne and Missy J. Denton of Mayne, Marks & Madsen, L.L.P., Sioux City, and Lindsay G. Arthur, Jr., of Arthur, Chapman, Kettering, Smetak & Pikala, P.A., Minneapolis, Minnesota, for appellee Refrigeration Valves and Systems Corporation.

Matthew T.E. Early of Rawlings, Nieland, Probasco, Killinger, Ellwanger, Jacobs & Mohrhauser, Sioux City, and Michael D. Hutchens of Meagher & Geer, PLLP, Minneapolis, Minnesota, for appellee American Industrial Refrigeration, Inc.

Marci I. Iseminger of Crary, Huff, Inkster, Sheehan, Ringgenberg, Hartnett, Storm & Jensen, P.C., Sioux City, and William J. Cremer, Edmund J. Siegert and Bradley M. Burd of Cremer, Kopon, Shaughnessy & Spina, LLC, Chicago, Illinois, for appellee Pillsbury Co.

CADY, Justice.

This is an interlocutory appeal from a district court order granting appellees' (American Industrial Refrigeration, Inc. (AIR) and Refrigeration Valves and Systems Corp. (RVS)) motion to compel production by appellant (Wells Dairy) of a report by two investigators from the University of Wisconsin. Wells Dairy had refused to produce the report, claiming it was privileged under the work-product doctrine and self-critical-analysis privilege. After the appeal was fully briefed, appellant's counsel inadvertently disclosed the report to appellees AIR and RVS along with 30,000 pages of other documents in response to RVS's discovery requests. After Wells Dairy's disclosure, RVS moved to dismiss the appeal, claiming the issue in the appeal was moot. On our review, we affirm the district court order.

I. Background Facts and Proceedings.

This case arose out of an explosion that occurred at Wells Dairy's South Ice Cream Plant (SICP) in LeMars. Appellee O.H. Livermore, Inc. was the general contractor when the SCIP was built in 1991. Appellees RVS and AIR designed the SICP's ammonia refrigeration system. On March 29, 1999, the SICP's refrigeration system sprung an ammonia leak, which caused an explosion and fire.

Sometime after the explosion, Douglas Wells, chief operating officer and senior vice president of marketing for Wells Dairy, retained Drs. Douglas T. Reindl and Frederick T. Elder of the University of Wisconsin "to investigate operations of the SICP's refrigeration system." Mr. Wells stated in an affidavit that he

sought a consultant who could do an evaluation of Wells Dairy's SICP's refrigeration system, which was the subject of the claims, to assist [him] as the person responsible for addressing these issues at Wells Dairy in evaluating and responding to the legal claims and the status of the refrigeration at issue.

He further stated that "[a]t the time he retained Drs. Reindl and Elder, it was [his] expectation that any report would be kept confidential and not used in any litigation." Drs. Reindl and Elder conducted "[a] critical review of refrigeration staffing at Wells' Dairy Inc." and prepared a 107-page report (the Wisconsin report), the stated goal of which was to answer three questions: (1) "Is refrigeration a core competency for Wells' Dairy?"; (2) "How competent is Wells' Dairy, Inc. in the area of refrigeration?"; and (3) "Looking toward the future, what refrigeration capabilities should Wells' possess?".

As a result of the explosion, two lawsuits arose. Wells Dairy filed suit against the appellees on March 26, 2001 for breach of contract, negligence, and strict products liability. On August 8, 2002, the Pillsbury Company sued Wells Dairy for breach of their production contract and negligence. The district court consolidated the two cases for purposes of discovery.

On May 30, 2001, AIR served a request for production of documents upon Wells Dairy, requesting production of, inter alia:

All reports, analyses, inspections, or other documents in regard to complaints or other defects in the work, materials, or project performance;

....

Any written reports prepared as a result of any investigation relating to the facts and allegations related to this lawsuit.

....

All written notes, memoranda, reports or other documents which in any way relate to the project and which were prepared by or with the assistance or input of a retained consultant or expert witness.

....

All documents not specifically requested by these document requests but which nonetheless refer or relate to the project or incident.

On December 27, 2001, Wells Dairy objected to the request in part on the grounds that it asked for information prepared in anticipation of litigation.

During the deposition of Wells Dairy's refrigeration engineer, Donald Palmer, on April 23, 2003, AIR learned of the existence of the Wisconsin report. Counsel for Wells Dairy objected to AIR's questioning of Mr. Palmer regarding the substance of the report "on the basis of the self-critical-analysis privilege." Accordingly, AIR, joined by RVS, moved to compel production of the Wisconsin report. Wells Dairy resisted the motion, asserting that the Wisconsin report was work product protected under Iowa Rule of Civil Procedure 1.503(3) and that the report was also protected under the self-critical-analysis privilege. On July 2, 2003, the district court granted the motion to compel and ordered production of the report within twenty days of its order. Wells Dairy applied for interlocutory appeal. This court granted the application and stayed the district court's order compelling production of the report. After the appeal was fully briefed, Wells Dairy inadvertently disclosed the Wisconsin report. RVS moved to dismiss the appeal on mootness grounds.

II. Motion to Dismiss Appeal.

RVS asserts Wells Dairy waived its work-product privilege when it produced the disputed report during the course of the appeal. Consequently, it claims that the interlocutory appeal no longer presents a justiciable controversy and that it must be dismissed as moot. Wells Dairy claims the appeal is not moot because inadvertent disclosure of a document cannot constitute a waiver of the work-product privilege.

We have not previously considered how the work-product doctrine is affected by the inadvertent disclosure of documents or materials. Our consideration of waiver of the work-product privilege has been limited to subject-matter waiver. See Exotica Botanicals, Inc. v. Terra Int'l, Inc., 612 N.W.2d 801 (Iowa 2000)

(concerning whether disclosure of the general subject matter of documents constitutes waiver of the work-product privilege).

We understand the nature and scope of the problems of inadvertent disclosure of discovery materials for trial lawyers.¹ We also recognize that courts from other jurisdictions have taken divergent paths in their efforts to address the issue.² Moreover, some of these efforts are complicated because the ultimate resolution can often rest with the formulation of protective relief, considering the contents of the documents have been disclosed.

Notwithstanding, it is only necessary to address the issue of inadvertent disclosure in this case if the underlying disputed documents or materials are protected by the privilege. A document must first be privileged to support any claim for protective relief due to inadvertent disclosure. Thus, the substantive issue raised on appeal in this case also relates to the mootness issue and would be dispositive of the inadvertent-disclosure issue if resolved adversely to Wells Dairy. Because we ultimately conclude that the district court correctly decided that the disputed document in this case was not privileged, we find it unnecessary to address the inadvertent-disclosure claim further. Additionally, we observe that the parties have fully briefed the privilege issue, and judicial resources would be conserved by deciding the case on the question of the existence of a privilege.

III. Standard of Review.

As we have previously explained,

On review of a district court's ruling on a discovery matter, we afford the district court wide latitude. We will reverse a ruling on a discovery matter only for an abuse of discretion. "A reversal of a discovery ruling is warranted when the grounds underlying a district court order are clearly unreasonable or untenable." "A ruling based on an erroneous interpretation of a discovery rule can constitute an abuse of discretion."

Exotica Botanicals, Inc., 612 N.W.2d at 804 (citations omitted).

IV. Work-Product Doctrine.

Iowa Rule of Civil Procedure 1.503(3) creates a qualified privilege for trial preparation materials:

[A] party may obtain discovery of documents and tangible things otherwise discoverable under rule 1.503(1) 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 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 case and that the party seeking discovery is unable without undue hardship to obtain the substantial equivalent of the materials by other means.

The pivotal issue in this appeal is whether the Wisconsin report was "prepared in anticipation of litigation" so as to constitute work product protected by rule 1.503(3).

The district court held the Wisconsin report "was prepared for business purposes and not in anticipation of...