Opinion
CASE NO. 20-50133 ADV. NO. 20-5031
05-28-2021
IN RE: OGGUSA, INC., et al DEBTORS OGGUSA, INC. PLAINTIFF v. W.I.S.E. UNDERWRITING AGENCY LIMITED, et al. DEFENDANTS
MEMORANDUM OPINION AND ORDER
This matter is before the court on Plaintiff's Renewed and Amended Motion to Strike Defendants' Improper Objections to GenCanna's Discovery Requests and Compel Defendants to Promptly Produce Requested Information and for Sanctions Pursuant to Fed. R. Civ. P. 37 ("Motion to Compel"). [ECF No. 117.] The Plaintiff raises several issues with the Defendants' discovery responses, or the lack thereof. The threshold issue is whether the Plaintiff is entitled to information from third-parties hired to assist with the Defendants' investigation of the Plaintiff's insurance claim.
The Plaintiff seeks communications with, and documents created by, CSL Global, LTD ("CSL Global"), BakerTilly US, LLP ("BakerTilly"); and Enderle & Romans, PLLC ("Enderle") (collectively, the "Third-Party Advisors"). The Defendants claim the communications and work product of their Third-Party Advisors are protected from discovery because the advisors are consulting experts hired in anticipation of litigation. FED. R. CIV. P. 26(b)(4)(D) (incorporated by FED. R. BANKR. P. 7026). The Defendants also assert the attorney-client privilege applies to at least some of the information. The Plaintiff contends the Third-Party Advisors were hired in the ordinary course of business to investigate and evaluate its insurance claim and the information is relevant and discoverable.
The Defendants were ordered to supplement the record with evidence to show the Third-Party Advisors were retained as consulting experts. [ECF No. 126.] The Defendants timely supplemented the record, and the matter was submitted. [ECF No. 127.]
The evidence confirms the Third-Party Advisors were retained to evaluate the property damage claim in the ordinary course of business. Their work product is not protected from discovery. This decision does not address any other alleged deficiencies or privileges asserted in the discovery responses because the Defendants should first supplement their discovery responses and revise their privilege logs based on this decision.
I. Procedural History.
A. The Bankruptcy Proceeding.
On January 24, 2020, three petitioning creditors filed an involuntary chapter 11 petition against the Plaintiff Debtor OGGUSA, Inc., then known as GenCanna Global USA, Inc. [Case No. 20-50133, ECF No. 1.] The Plaintiff consented to the involuntary petition on February 6, 2020. [Id., ECF No. 37.] An order for relief was entered the same day. [Id., ECF No. 94.]
On February 5, 2020, the Plaintiff's parent company and one of its wholly owned subsidiaries filed voluntary chapter 11 petitions. The Debtors' cases were jointly administered. [Id., ECF No. 89.] The Debtors sold substantially all their assets in May 2020 and confirmed a plan of reorganization in November 2020. [Id., ECF Nos. 850, 1517.]
B. The Property Loss and Insurance.
The Plaintiff's business was "the development of hemp genetics and the production and distribution of wholesale and white-label hemp-derived cannabinoid products, including CBD, to customers throughout the United States and internationally." [Id., ECF No. 1414-1 at § 2.01.] The Plaintiff owned a hemp processing facility in Winchester, Kentucky. On November 7, 2019, the Winchester facility and any product housed therein were destroyed by an explosion and fire. [Id. at § 2.04.2.]
The Plaintiff was insured under a Market Reform Contract issued by the Defendant Talisman Casualty Insurance Company, LLC. [ECF No. 75-1 at ¶ 9, Exh. A; ECF No. 109 at ¶ 9; ECF No. 110 at ¶ 9.] The Plaintiff made a claim under the Market Reform Contract. [ECF No. 75-1 at ¶¶ 24-25; ECF No. 109 at ¶¶ 24-25; ECF No. 110 at ¶¶ 24-25.] The Defendant W.I.S.E Underwriting Agency Limited ("W.I.S.E.") was responsible for administering the insurance and the claim. [ECF No. 75-1 at ¶ 13; ECF No. 109 at ¶ 13; ECF No. 110 at ¶ 13.] The Defendants did not issue a coverage decision before the Plaintiff initiated litigation.
The parties dispute whether W.I.S.E. is also an insurer under the Market Reform Contract.
C. The Adversary Proceeding.
The Plaintiff filed this adversary proceeding on August 28, 2020. [ECF No. 1.] The Defendants failure to assume or deny the claim precipitated the filing. The Plaintiff alleges the Defendants failed to properly investigate and pay the insurance claim. [ECF Nos. 1, 4, 35, 75.] The Plaintiff seeks to recover the insurance proceeds and additional damages based on breach of contract, bad faith, negligence, and other equitable remedies. [Id.]
The Bankruptcy Court has jurisdiction pursuant to 28 U.S.C. § 1334. The proceeding is a non-core proceeding under 28 U.S.C. § 157. [ECF No. 70.] The District Court denied the Defendants' motion to withdraw the reference pending trial, so discovery and dispositive motions are decided by the Bankruptcy Court subject to the District Court's review. [ECF No. 116.]
D. The Discovery Dispute.
Discovery is ongoing and contentious. The disputes derive, in part, from the parties' differing views of how discovery in this action should proceed.
In September 2020, the Plaintiff served written discovery on the Defendants. [ECF Nos. 12, 13.] Before the discovery was due in October, the Defendants moved to bifurcate the Plaintiff's bad faith and other extra-contractual claims from its breach of contract claim and only allow discovery on the breach of contract issue. [ECF No. 26.] The request was denied. [ECF No. 65.]
In November and early December 2020, the Defendants subpoenaed documents from the Third-Party Advisors. [ECF Nos. 46, 48, 69.] The Defendants assumed control of the document production, asserting that the Third-Party Advisors were hired as consulting experts and their work product and communications are privileged. [See, e.g., ECF No. 105-4.]
On February 8, 2021, the Plaintiff filed a Motion to Strike Defendants' Improper Objections to GenCanna's Discovery Requests and Compel Defendants to Promptly Produce Requested Information and For Sanctions Pursuant to Fed. R. Civ. P. 37. [ECF No. 105.] The Plaintiff complained of multiple deficiencies in the responses, but the primary issue is the Defendants' refusal to provide information from the Third-Party Advisors. [Id.] The Plaintiff's initial Motion to Compel was denied and the Defendants were told to reconsider their positions based on the recent rulings on the Defendants' motions to dismiss. [ECF Nos. 102, 107, 108.]
The Defendants supplemented their discovery and a renewed Motion to Compel was filed on April 8, 2021. [ECF No. 117.] The Defendants still refuse to produce information from the Third-Party Advisors on the extra-contractual claims and argue the Third-Party Advisors are protected from discovery as consulting experts.
Immediately after the Plaintiff renewed its Motion to Compel, the Defendants filed another request to bifurcate and stay discovery on the bad faith claims. [ECF Nos. 118, 121.] The Defendants argued that simultaneous discovery on the breach of contract and extra-contractual claims is fueling the discovery disputes and the information requested is either irrelevant or protected from production by privilege. [ECF No. 121.]
A hearing was held on April 22, 2021. [ECF No. 122.] The Defendants' renewed request to bifurcate and stay discovery was denied. [ECF No. 125.] The Defendants were ordered to supplement the record with evidence showing the Third-Party Advisors were hired as consulting experts. [ECF No. 126 ("Order to Supplement").] The Order to Supplement required the following:
1. The date each individual or organization was retained.
2. The terms of engagement, which should at least include:
a. The scope of work; and
b. The method of compensation for the anticipated work.
[Id.]
3. Identification of any documents recording or evidencing the retention.
4. The date the Defendants contend that they first anticipated litigation of the claim and any circumstances or documentation supporting that belief.
The Defendants timely supplemented the record with the Declaration of David Earl, a Director at W.I.S.E. [ECF No. 127-1.] The Defendants also submitted various exhibits attached to Earl's Declaration and its supplemental response. [ECF No. 127.] The exhibits are primarily correspondence between the parties' representatives offered to support Earl's statement that W.I.S.E. believed litigation was likely by November 22, 2019, the day it hired its first advisor. [Id.]
The Defendants' proof does not show the Third-Party Advisors were hired as consulting experts.
II. Analysis.
A. The Information Sought is Relevant.
A party may obtain discovery regarding "any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case." FED. R. CIV. P. 26(b)(1) (incorporated by FED. R. BANKR. P. 7026). The Plaintiff has the initial burden to show the information sought is relevant. Burton v. Swicker & Assoc., PCS, Civil Action No. 10-227-WOB-JGW, 2012 WL 12925675, at *1 (E.D. Ky. Jan. 9, 2012). Relevancy is construed broadly. Id.
The Plaintiff seeks an order compelling the Defendants to produce their claims file, including investigative documents, reports, coverage opinions, and any other analysis and discussions by the Third-Party Advisors about the Plaintiff's claim. [ECF No. 117 at ¶ 53.] The Plaintiff alleges the Defendants breached the insurance contract and acted in bad faith or negligently because they failed to properly investigate the claim and make a timely coverage decision. [See generally ECF No. 75.] The evaluation of these allegations must consider how the Defendants and their advisors processed the Plaintiff's claim and why they did not assume or deny the claim prior to the litigation. The Third-Party Advisors were retained by the Defendants to help them investigate the claim and decide whether coverage applies. [ECF No. 127-1 at ¶¶ 9, 17, 23.] Information generated by the Third-Party Advisors during this investigation and evaluation of the Plaintiff's claim is relevant.
B. Relevant Information is Not Discoverable from a Consulting Expert Absent Exceptional Circumstances.
The Defendants claim the information sought is protected from discovery because the Third-Party Advisors were hired as consulting experts. A party may not discover facts known or opinions held by a consulting expert or a third-party retained "in anticipation of litigation or to prepare for trial and who is not expected to be called as a witness at trial". FED. R. CIV. P. 26(b)(4)(D). Discovery from a non-testifying or consulting expert is permitted in only two instances: (1) as provided in Civil Rule 35(b) (physical and mental examinations not applicable here); or (2) on a showing of exceptional circumstances under which it is impracticable for the party to obtain facts or opinions on the same subject by other means. Id.
Civil Rule 26(b)(4)(D) is an extension of the work product doctrine. Appleton Papers, Inc. v. E.P.A., 702 F.3d 1018, 1024 (7th Cir. 2012); Lindon v. Kakavand, Case No. 5:13-CV-26-DCR-REW, 2014 WL 12648464, at *1 (E.D. Ky. April 29, 2014). The work product doctrine prevents discovery of documents prepared in anticipation of litigation or for trial by or for another party or its representative unless the materials are (1) otherwise discoverable under Civil Rule 26(b)(1) and (2) a party shows it has a substantial need and cannot obtain it otherwise without undue hardship. FED. R. CIV. P. 26(b)(3)(A).
The Defendants have the burden to show that Civil Rule 26(b)(4)(D) applies. Lammert v. Auto-Owners (Mut.) Ins. Co., Case No. 3:17-0819, 2019 WL 6896916, at *3 (M.D. Tenn. Aug. 13, 2019); Foster v. Am. Fire and Cas. Co., Case No. 5:13-CV-426-GFVT-REW, 2016 WL 8135350, *2 (E.D. Ky. April 1, 2016). The application of Civil Rule 26(b)(4)(D) is construed narrowly. Foster, 2016 WL 8135350 at *2.
To meet their burden, the Defendants must prove they consulted with the Third-Party Advisors: (1) "because of" a subjective belief there was a prospect of litigation; and (2) their belief was objectively reasonable. United States v. Roxworthy, 457 F.3d 590, 594 (6th Cir. 2006); see also Vaught v. Seaver Prop., LLC v. Philadelphia Indemn. Ins. Co., Case No. 5:16-CV-40-TBR, 2016 WL 10952825, at *2 (W.D. Ky. Sept. 9, 2016) (adopting the "because of" test to determine whether documents created by third-party advisors in the claims process are discoverable). Relevant information prepared in the ordinary course of business, pursuant to public requirements unrelated to litigation, or for nonlitigation purposes, are not protected from disclosure. Roxworthy, 457 F.3d at 593.
Anticipation of litigation must be the "driving force" behind any document created in consultation with an advisor to protect them from discovery. In re Prof'l Direct Ins. Co., 578 F.3d 432, 439 (6th Cir. 2009) (citation omitted). Any ambiguity is resolved in favor of the party seeking discovery. Fru-Con Const. Corp. v. Sacramental Mun. Util. Dist., Case. No. S-05-0583 LKK GGH, 2006 WL 2050999, at *4 n.3 (E.D. Cal. July 20, 2006); B.C.F. Oil Ref., Inc. v Consol. Edison Co. of New York, Inc., 171 F.R.D. 57, 62 (S.D. N.Y. 1997).
C. The Information Sought from the Third-Party Advisors is Discoverable.
The Defendants' argument that the Third-Party Advisors are consulting experts is overshadowed by the fact that they never denied the claim; this indecision is the genesis of the lawsuit. Generally, the date coverage is denied is the "pivotal point" when "an insurance company shifts its activity from the ordinary course of business to anticipation of litigation." Schwarz & Schwarz of Virginia, L.L.C. v. Certain Underwriters at Lloyd's London Who Subscribed to Pol'y No . NC959 , Case No. 6:07CV00042, 2009 WL 1043929, at *3 (W.D. Va. Apr. 17, 2009) (citations omitted). The fact that there was no coverage decision when the Third-Party Advisors were retained indicates W.I.S.E. was acting in the ordinary course when it hired them.
The date coverage is denied is not, however, a bright-line rule; all facts are considered to decide when a party reasonably anticipated litigation. Id. The facts in this case support a conclusion that the Third-Party Advisors were retained in the ordinary course of W.I.S.E.'s business to investigate the Plaintiff's claim, regardless of any fear of litigation. A third-party advisor is not entitled to blanket protection from discovery under Civil Rule 26(b)(4)(D) just because there is a fear of litigation. The facts must support the role; here, they do not.
The Defendants have not shown the information sought from the Third-Party Advisors was created in anticipation of litigation. Therefore, relevant investigative documents, reports, coverage opinions, and any other written analysis by the Third-Party Advisors as part of their investigation into the Plaintiff's claim are discoverable.
1. CSL Global Was Initially Retained in the Ordinary Course of Business.
The Defendants maintain they anticipated litigation by November 22, 2019, the day they hired CSL Global. [ECF No. 127-1 at ¶¶ 8-9.] There is no written agreement with CSL Global that might shed light on the basis for retention. Instead, Earl submits that two events prior to November 22 support his stated desire to protect W.I.S.E.'s "interests in anticipation of litigation". [Id. at ¶ 8.]
The day after the fire, the Plaintiff's broker told W.I.S.E that most of the inventory had been moved before the fire. [ECF No. 127-1 at ¶ 4.] A preliminary investigation by the Plaintiff's investigator a week later concluded that the loss was likely in the millions. [Id. at ¶¶ 5-6, Exh. C.] Earl also suggested the lack of information, the size of the claim, and the "claim's complexities" supported a conclusion that there was a reasonable prospect of litigation. [Id. at ¶ 8.]
These reasons do not create a reasonable prospect of litigation. Conflicting information within two weeks of the complete destruction of a large production facility by an explosion and fire should not surprise anyone, particularly a company that insures such facilities. Also, the additional factors Earl cites will exist in almost all property damage claims and do not create a reasonable fear of litigation before the insurer has even started its own claims analysis. Otherwise, the claims analysis performed by an insurance company would always escape discovery.
At this juncture, W.I.S.E. acted as any insurer or its agent would in a similar situation: it began investigating and evaluating the claim. And, in fact, that is the reason W.I.S.E. gives for retaining CSL Global: "W.I.S.E. retained CSL Global to further investigate the loss, including the damages GenCanna allegedly incurred, and to advise what additional information was needed to further evaluate GenCanna's claim." [Id. at ¶ 9.] This kind of investigation and evaluation of a claim is a basic, ordinary function in the insurance business. See, e.g., Mazer v. Frederick Mut. Ins. Co., Case No. 1:19-CV-01838, 2021 WL 311229, at *3 (M.D. Pa. Jan. 29, 2021) (citations omitted); Westfield Ins. Co. v. Carpenter Reclamation, Inc., 301 F.R.D. 235, 250 (S.D. W.V. 2014).
2. CSL Global Investigated the Plaintiff's Claim in the Ordinary Course of Business.
Earl's testimony and the supplemental documents reference events well after November 22 to try to justify W.I.S.E.'s fear of litigation on that date, which makes it harder to credit the alleged subjective belief. Regardless, the information does not prove CSL Global ever became a consulting witness.
CSL Global continued working into early 2020, communicating with the Plaintiff's employees to gather information that would help W.I.S.E. determine the cause and origin of the fire and the extent of the loss. [See, e.g., ECF Nos. 117-16, 117-17, 117-18 (correspondence to Plaintiff requesting information for investigation).] Earl testified that CSL Global was told employees were on break prior to the explosion and the Plaintiff was facing foreclosure actions, which fueled W.I.S.E.'s suspicions. [ECF No. 127-1 at ¶ 13.] But this communication did not occur until January 15, 2021, and the communication was qualified by the need for a written report. [Id.]
CSL Global also told the Plaintiff's adjuster shortly thereafter that the claim was "questionable", but again conceded more information was needed. [ECF No. 127-3.] These communications might show a need for vigilance, but the record confirms W.I.S.E.'s concern at this point was the need for more information before it could assume or deny the claim. Reasons for denying a claim do not automatically translate to potential litigation, particularly where the investigation is still early and ongoing.
Earl also suggests the bankruptcy filing in late January increased the potential for litigation. [ECF No. 127-1 at ¶ 15.] It is possible to believe a bankruptcy filing will create an adversarial relationship with creditors over the proceeds of an insurance policy, but those fights would not directly involve the insurer. The bankruptcy should not have contributed to a concern over litigation between the insured and insurer over a claim that was not even assumed or denied.
The allusions to foreclosures, bankruptcy, and an inconclusive report from the state fire marshal are likely intended to suggest a crime occurred. These factors do not, alone or together, prove an intentional act. For example, the inconclusive report by the fire marshal probably suggests the opposite, although this finding might also support continued diligence. Regardless, there is no evidence that a crime was committed so it is not inferred.
The Defendants also included in their supplement an email from CSL Global dated February 13, 2020, relaying a phone call from the Plaintiff's adjuster threatening a lawsuit if someone does not contact him. [ECF No. 127-4.] The context of the email only suggests frustration that a party is not receiving the attention desired, not actual litigation over denial of a claim that has not even occurred.
The Defendants also include an alleged threat of litigation in a February 21, 2020, email. [ECF No. 127-5.] But that email was from the Plaintiff's adjuster to the Plaintiff's financial advisor copying another person employed by the Plaintiff's adjuster. [Id.] The evidence does not show this alleged threat ever found its way to the Defendants except as part of discovery for this adversary proceeding. The loose application of the facts to support the alleged fear on November 22 suggests an after-the-fact attempt to justify a position that did not exist in real time.
Even if a reasonable fear of litigation arose at some point, such belief does not automatically transform CSL Global into a consulting expert; there must be a formal intent to hire CSL Global as such at some point in the representation. Bartram, LLC v. Landmark American Ins. Co., Case No. 1:10-CV-00028-SPM-GRJ, 2011 WL 284448, at *3 (N.D. Fla. Jan. 24, 2011). The record created by the Defendants does not show CSL Global was ever retained in anticipation of litigation or shifted to that role at any point during its investigation.
3. BakerTilly and Enderle Were Hired to Investigate the Plaintiff's Claim in the Ordinary Course of Business.
The information presented prior to retention of BakerTilly and Enderle in March and June 2020, respectively, does not create a reasonably objective fear of litigation to suggest they were hired as consulting experts. The Defendants continued to focus on the need for more information to assume or deny the claim. Even if the Defendants' alleged concerns were reasonable, the evidence shows BakerTilly and Enderle were hired to progress the claims analysis, not in anticipation of litigation.
Earl testified that W.I.S.E. hired BakerTilly on March 10, 2020, to "analyze Gencanna's claim from a forensic accounting perspective." [ECF No. 127-1 at ¶¶ 17-18.] Forensic accountants are sometimes hired to aid in litigation defense, although there is no retention agreement or engagement letter to show BakerTilly was hired for a litigation purpose. It is possible, however, to infer the ordinary course basis for hiring BakerTilly from information regarding retention of Enderle.
Earl testified that Enderle was retained in June 2020 to "investigate and provide analysis of the value of GenCanna's claimed loss and to identify additional documentation needed to value GenCanna's claim." [Id. at ¶¶ 24-25.] W.I.S.E. hired Enderle because BakerTilly representatives could not perform a site visit due to the COVID-19 pandemic travel restrictions. [Id. at ¶ 23.] So Enderle was hired to perform the work that BakerTilly would have accomplished, which Earl admits was related to the ongoing claims decision and not litigation defense.
Like CSL Global and BakerTilly, there is no written agreement in the record that might shed light on the arrangement and justify a different conclusion. Apparently, however, there is a written agreement with Enderle that the Defendants chose not to put into evidence. [Id. at ¶ 23.] The failure to submit the retention letter is odd, particularly because the Defendants filed other evidence for this decision under seal. Bad intention is not inferred by the omission, but the Defendants will also not receive any benefit of the doubt. The evidence was due by the specific, prior date to allow the litigation to proceed in a timely manner.
Earl testified that W.I.S.E.'s legal counsel suggested it hire BakerTilly and Enderle. [Id. at ¶¶ 17, 23.] It appears that Enderle was retained by legal counsel. [Id. at ¶ 24.] These factors go the farthest to suggest the retention was in anticipation of litigation. But they are not enough to overcome the conflicting testimony that shows the Third-Party Advisors were retained to help evaluate the property damage claim.
W.I.S.E. and its Third-Party Advisors still needed additional documentation to make a coverage decision when BakerTilly and Enderle were retained and that is the admitted basis for their work. Regardless of any fear of litigation, BakerTilly and Enderle were retained for an ordinary course action that is not related to litigation.
D. The Information is Discoverable Even If the Defendants Hired the Third-Party Advisors as Consulting Experts.
Even if the evidence supported a conclusion that the Third-Party Advisors were hired as consulting experts, the Plaintiff is still entitled to discovery of the requested information. A document prepared by a consulting expert in anticipation of litigation is discoverable if there are "exceptional circumstances under which it is impracticable for the party to obtain facts or opinions on the same subject by other means." FED. R. CIV. P. 26(b)(4)(D). Information related to the claims process is integral to the Plaintiff's claims.
This is a first-party bad faith case. Shaheen v. Progressive Cas. Ins. Co., Case No. 5:08-CV-00034-R, 2012 WL 3644817, at *3 (W.D. Ky. Aug 24, 2012) (defining a first-party bad faith case as a case between the insurer and the insured based on the insurer's failure to act in good faith to resolve a claim). A first-party bad faith case turns on the insurance company's investigation and coverage decision. Woods v. Standard Fire Ins. Co., Case No. 5:18-CV-658-JMH-MAS, 2020 WL 2420527, at *2 (E.D. Ky. May 12, 2020) (citing Madison v. Nationwide Mut. Ins. Co., Case No. 1:11-CV-157-R, 2012 WL 4592135, at *2 (W.D. Ky. Oct. 1, 2012)); Shaheen, 2012 WL 3644817, at *3; Minter v. Liberty Mut. Fire Ins. Co., Case No. 3:11CV-249-S, 2012 WL 2430471, at *2 (W.D. Ky. June 26, 2012). The claims file contains information about the investigation and the basis for the coverage decision that is essential for resolution of the bad faith claim. 6 MOORE'S FEDERAL PRACTICE - CIVIL § 26.80[2] (a probative fact is crucial to the analysis).
The Plaintiff also alleges that the Defendants breached the Market Reform Contract in failing to fully investigate the claim, promptly communicate with the Plaintiff, and make a coverage decision in a timely manner. [See generally ECF No 75.] Resolution of the breach of contract claim also requires information related to the claims process.
There is no other way to discover facts necessary to resolve whether the Defendants breached the insurance contract or acted in bad faith by failing to properly and timely investigate the claim and determine coverage than through the claims file and information collected by the Third-Party Advisors hired to perform the investigation. There are exceptional circumstances under which it is impracticable for the Plaintiff to obtain this information anywhere other than through the Defendants.
E. The Plaintiff's Objections To Other Deficiencies in the Defendants' Discovery Responses Are Denied Without Prejudice.
The Plaintiff complains of other deficiencies in the Defendants' discovery responses that are not addressed in this Opinion. It is not necessary to address these issues at this time because this Opinion and the denial of the second request to bifurcate and stay the proceeding [ECF No. 125] requires the Defendants to make substantive revisions to their discovery responses, produce any information that is relevant, and amend their privilege logs accordingly. If there are still deficiencies after the Defendants' supplementation, the Plaintiff may then renew its motion to compel production and make its arguments.
It is time to "cut through the clutter to discern the core of these disputes" and efficiently resolve them. Foster, 2016 WL 8135350 at *8. Therefore, the Plaintiff and Defendants are cautioned to proceed with future discovery and objections with the following comments in mind.
Litigation places burdens on parties. Relevancy is construed broadly and disclosure is generally required unless the burden of production is overly disproportionate to the need for the information. FED. R. CIV. P. 26(b)(1); Foster, 2016 WL 8135350 at * 8. The information related to the Defendants' investigation and handling of the Plaintiff's claim is relevant to the Plaintiff's breach of contract and extra-contractual claims. The Defendants' objections that the information is irrelevant or not discoverable based on bifurcation or the role of the Third-Party Advisors is no longer valid.
The Third-Party Advisors are not consulting experts and any objection based on this characterization is overruled. But the attorney-client privilege may still apply to any communications between the Third-Party Advisors and legal counsel. The analysis of the basis for the attorney-client privilege protection is similar to the analysis in this Opinion. Foster, 2016 WL 8135350 at *2 (not all communications between an attorney and client or the client's representatives are privileged; the attorney-client privilege only applies to confidential communications made for the purpose of facilitating the rendition of professional legal services to the client).
Privilege logs should contain sufficient information to allow the opposing party, and if necessary, the reviewing court, to determine if the privilege is appropriately claimed. Osborn v. Griffin, Case No. 11-89-WOB-CJS, 13-32-WOB-CJS, 2013 WL 5221663, at *2 (E.D. Ky. Sept. 17, 2013). Identification of a person and their title or role is required. Subject matter descriptions must have sufficient specificity to identify the purpose and subject matter of the document or communication.
Courts are public forums and the public will have access to information in the record unless there is a real need to maintain confidentiality. 11 U.S.C. § 107(a); FED. R. BANKR. P. 9018, 9037. Sealing documents is an exception that is used sparingly. Id.; see also In re Thomas, 583 B.R. 385, 389 (Bankr. E.D. Ky. 2018).
Any future objection to production of information requested must specifically explain why the information is not relevant and the production of the information requested is so burdensome to justify the refusal to disclose. Arguments in response must specifically explain the need for the information sought and how the necessity for disclosure outweighs the burden to the Defendants.
III. Conclusion.
The evidence presented by the Defendants is not sufficient to satisfy their burden to prove that that the relevant information sought by the Plaintiff is protected from discovery. CSL Global, BakerTilly, and Enderle were not hired as consulting experts; they were retained to assist with the decision to assume or deny the property damage claim. Their work product related to the claims analysis, including but not limited to investigative documents, reports, coverage opinions, and any other written analysis, is discoverable unless protected by another privilege. Based on the foregoing, it is ORDERED:
1. The Plaintiff's Renewed and Amended Motion to Strike Defendants' Improper Objections to GenCanna's Discovery Requests and Compel Defendants to Promptly Produce Requested Information and for Sanctions Pursuant to Fed. R. Civ. P. 37 [ECF No. 117] is GRANTED IN PART;
2. Any objections to disclosure of information from CSL Global, LTD, BakerTilly US, LLP, and Enderle & Romans, PLLC, as consulting experts based on Civil Rules 26(b)(4)(D) is OVERRULED.
3. The Defendants shall provide an updated privilege log and produce relevant information consistent with this Order within 21 days.
4. No sanctions are imposed. The record reflects problems, but they have not yet risen to a level that requires action.
The affixing of this Court's electronic seal below is proof this document has been signed by the Judge and electronically entered by the Clerk in the official record of this case.
Signed By:
Gregory R . Schaaf
Bankruptcy Judge
Dated: Friday, May 28, 2021
(grs)