Opinion
Civil No. 03-2092 (JRT/JSM)
March 5, 2004
Paul Dahlberg, MESHBESHER SPENCE, LTD., Rochester, MN, for plaintiff Patricia Ille
Phillip A. Kohl, CHRISTIAN PETERSON, P.A., Albert Lea, MN, for plaintiff Leo Osbeck
David K. Furness, WALBRAN, FURNESS LEUNING, Owatonna, MN, for plaintiff Laureen Hohansee
Patrick J. Sauter, Daniel Q. Poretti, and Kimberly Ross, RIDER, BENNETT, Minneapolis, MN, for defendant
ORDER
In this lawsuit, plaintiffs, as trustees for the next-of-kin of three individuals killed in an automobile accident, have sued defendant American Family Mutual Insurance Company ("American Family"), alleging that American Family's refusal to settle plaintiffs' claims amounted to negligence, recklessness, bad faith, breach of fiduciary duty, and breach of contract. United States Magistrate Judge Janie S. Mayeron, in an Order dated September 26, 2003 (the "September 26 Order"), granted the plaintiffs' motions for protective orders, and also granted plaintiffs' motions to quash subpoenas duces tecum. Defendant appeals the September 26 Order, arguing that it is clearly erroneous or contrary to law, and prevents defendant from engaging in discovery relevant to its defense. For the reasons discussed below, the Court denies defendant's appeal, and affirms the September 26 Order.
BACKGROUND
On February 22, 1997, six people including Lyle Wallace, Robert Wallace, Kathleen Wallace, and Rebecca Wallace, were killed in an automobile accident. Timothy Donaldson, Lyle Wallace, and Sean Young were drivers of the three cars involved in the fatal accident. Plaintiffs are the trustees for the next-of-kin of those victims in the Wallace vehicle who brought a wrongful death suit in Minnesota state court against Timothy Donaldson. At the time of the accident, Donaldson was insured by defendant American Family, and all three plaintiffs offered to settle claims with American Family for $60,000, the limit of Donaldson's policy. American Family refused, and the wrongful death action proceeded to a jury trial. In early 2001, the jury found Donaldson thirty-three percent negligent, and $4,632,000 was awarded to the plaintiffs.
No lawsuit was brought on behalf of the driver of the Wallace car, Lyle Wallace.
Donaldson then assigned all his claims against American Family to the plaintiffs. The Assignment also waived Donaldson's "right to any claim of privilege that he may have with respect to any reports, statements, documents or any other material arising out of the litigation that was brought by the Trustees against Timothy Donaldson." After the Assignment, plaintiffs sued American Family in Minnesota state court, and American Family properly removed to this Court on the basis of diversity of citizenship.
American Family served subpoena duces tecum on each of plaintiffs' attorneys and Attorney Mahler seeking to depose plaintiffs' attorneys (each plaintiff continues to be represented by the counsel who represented him or her in the wrongful death action). American Family also requested documents including, among other requests, all documents relating to the attorneys' representation of the individual plaintiffs, all documents relating or referring to Donaldson's liability; and documents relating to communications between and among counsel for plaintiffs.
A complete list of the document request can be found at pages 5 to 9 of the September 26, 2003 Order.
Plaintiffs, after receiving the subpoenas and document requests, sought the protective orders and sought to quash the subpoenas. The Magistrate Judge, in a careful and well-reasoned Opinion and Order, granted all plaintiffs' motions. The Magistrate Judge concluded that the information sought by the subpoenas duces tecum was not relevant or crucial to the litigation. The Magistrate Judge further found that the information sought in the subpoenas was available elsewhere (including in defendant's own files). Finally, the Magistrate Judge addressed whether the information was privileged, and if so, had the privilege been waived. The Magistrate Judge concluded that, due to the broad wording of the discovery request, defendant did seek privileged information and the relevant privilege had not been waived. Defendant filed a timely appeal.
ANALYSIS
I. Standard of Review
"The standard of review applicable to an appeal of a magistrate judge's order on a nondispositive issue is extremely deferential." Reko v. Creative Promotions, Inc., 70 F. Supp.2d 1005, 1007 (D. Minn. 1999). This Court will reverse such an order only if it is clearly erroneous or contrary to law. 28 U.S.C. § 636(b)(1)(A); Fed.R.Civ.P. 72(a); D. Minn. LR 72.1(b)(2).
II. Plaintiffs' Motion to Quash
Defendant first argues that the Magistrate Judge erred in her application of Pamida, Inc. v. E.S. Originals, Inc., 281 F.3d 726 (8th Cir. 2002). In Pamida, the Eighth Circuit determined that when a request for documents or depositions involves an attorney of one of the parties in the action, and the information relates to the attorney's representation in concluded litigation, a three-prong test must be met before the discovery is allowed. Id. at 730. Specifically, under Pamida, to obtain such discovery the information sought must be peculiarly within the attorney's knowledge; the information sought must be centrally relevant to the issues in the ongoing litigation, and the attorney-client privilege must not apply, or, if it does apply, it must have been waived. All three prongs must be met before the discovery is allowed.
Due to the broadly worded discovery request, the Magistrate Judge analyzed the request under both Pamida and Shelton v. American Motors Corp., 805 F.2d 1323, 1327 (8th Cir. 1986). Shelton applies to requests seeking information about the representation in the ongoing litigation. Defendant suggests that the requests seek only information relating to the concluded wrongful death action. Although the Court agrees with the Magistrate Judge's characterization of the wording of the requests, for the purposes of this appeal, the Court assumes defendant seeks only information relating to the concluded litigation.
The Magistrate Judge determined that none of the three prongs were met in this case. The discovery is appropriate only if all three of the Pamida prongs are met; defendant argues that is the case, and each prong is met. Defendant describes the information sought as "regarding [attorneys for plaintiffs and William Mahler's] first-hand knowledge of the failed settlement negotiations and the facts bearing on liability in the underlying action." (Def.'s Appeal Mem. at 4.) Defendant argues that it does not seek any privileged information, or attorney work product as it relates to the ongoing litigation.
This dispute is a "bad-faith" failure to settle case and Minnesota law regarding this issue is well established. The Minnesota Supreme Court, as cited by the Magistrate Judge, sets out the following standard:
The insurer's duty of good faith is breached in situations in which the insured is clearly liable and the insurer refuses to settle within the policy limits and the decision not to settle within the policy limits is not made in good faith and is not based upon reasonable grounds to believe that the amount demanded is excessive. See Peterson v. American Family Mut. Ins. Co., 160 N.W.2d 541, 543-44 (1968); Boerger v. American Gen. Ins. Co., 100 N.W.2d 133, 135(1959). In Boerger v. American General Insurance Company, 100 N.W.2d 133 (1959), the Minnesota Supreme Court addressed . . . whether the insurer acted in good faith and upon reasonable grounds in rejecting a proposed settlement offer. . . .[T]he court stated: "We are of the opinion that the insurance company could have validly declined the offer of settlement if good faith existed on either of two grounds. First, if it in good faith believed that its insured was not liable. Second, even if liability of its insured was certain, if it believed in good faith that a settlement at the proposed figure which it was required to contribute was greater than the amount the jury would award as damages."Short v. Dairyland Ins. Co., 334 N.W.2d 384, 387 (Minn. 1983). See also Miller v. ACE USA, d/b/a American Ins. Co., 261 F. Supp.2d 1130, 1140-41 (D. Minn. 2003) (discussing holding of Short).
Given this well-established standard, as the Magistrate Judge found, the relevant conduct here involved American Family's actions, and not the actions of plaintiffs' counsel. There is no dispute that plaintiffs' counsel demanded that American Family pay the policy limit, and there is no dispute that American Family refused. The opinions of plaintiffs' counsel are arguably relevant, but only to the extent that anyone familiar with the underlying facts would have an opinion about the reasonableness of the settlement demand. However, the Magistrate Judge did not clearly err when she found that the opinions are not centrally relevant, and are certainly not crucial, to the instant litigation. Because this conclusion is dispositive of the appeal, the Court will not discuss the additional prongs of the Pamida test.
III. Discovery Regarding Attorney Mahler
Defendant separately argues that discovery should be allowed regarding Attorney Mahler. Defendant argues first that equity demands that the waiver in the Assignment be read as a waiver of communications between Donaldson and Attorney Mahler. Defendant additionally argues that communications between Mahler and Attorney Dahlberg (counsel for Ille) cannot be construed as privileged under any circumstance. Defendant seems to suggest that communications between Dahlberg and Mahler are relevant to an "apparent alliance between Mr. Mahler and plaintiffs' counsel and the inexplicable pinning of liability on Mr. Mahler's own client." September 26 Order at 31 (quoting defendant's opposition brief).
Attorney Mahler does not represent any party in this litigation. He initially represented Timothy Donaldson and his siblings, Terry Donaldson and Tanya Gottlieb, in connection with their claims against Sean Young and Lyle Wallace for the wrongful death of their mother, Patricia Donaldson. Mahler also represented Terry Donaldson and Tanya Gottlieb in an action against their brother, Timothy Donaldson. Mahler withdrew from this conflict in May of 2000. Mahler was not Donaldson's attorney in the wrongful death action; in that case, Donaldson was represented by Attorney Sandberg.
Mahler objected to the subpoena directed at him on the ground that defendant sought information protected by the attorney-client privilege or the work product doctrine. He also argues that the material is irrelevant to the claims of breach of fiduciary duty and bad faith brought against defendant.
The Magistrate Judge, applying the ordinary standards governing depositions, determined that the information defendant sought from Mahler was not relevant, and that defendant sought information protected by the attorney-client privilege and the work product doctrine. Therefore the Magistrate Judge determined that the subpoena would be quashed, and a protective order issued.
Defendant has not shown that the decision of the Magistrate Judge on this issue was clearly erroneous or contrary to law. Specifically, defendant has not shown how the purported "alliance" is relevant to this bad faith action. As noted by the Magistrate Judge, the relevant conduct is that of defendant in refusing to settle the wrongful death case. The impressions and discussions among and between counsel for plaintiff might be relevant if those discussions and/or impressions somehow influenced American Family's decision to refuse settlement offers. Defendant has made no such showing, and the Magistrate Judge's determination on this issue is therefore affirmed.
IV. Plaintiff Osbeck's Motion to Strike
On December 3, 2003, defendant submitted a two-page letter to the Court regarding this appeal. Defendant indicated that depositions taken by plaintiffs of American Family employees highlight the error of the Magistrate Judge's Order. Plaintiff Osbeck moved to strike the letter as not permitted under the Local Rules. Plaintiff argues that the letter provided no information or argument that was not available at the time of defendant's initial briefing. Plaintiff Osbeck alternately requests an opportunity to respond to the December 2, 2003 letter.
Local Rule 72.1 provides that a party may appeal a nondispositive pretrial order, and sets out a briefing schedule. Reply briefs are not authorized by Local Rule 72.1, and unsolicited memoranda of law are disallowed by Local Rule 7.1. To the extent the December 2, 2003 letter is merely a status update provided as a courtesy to the Court, it is proper. The letter borders on an unsolicited, and improper, memorandum of law, however, given the Court's decision to affirm the Order of the Magistrate Judge, it is not necessary to strike the December 2, 2003 letter.
ORDER
Based on the foregoing, all the records, files, and proceedings herein, IT IS HEREBY ORDERED that:
1. The Magistrate Judge's Order dated September 26, 2003 granting protective orders and quashing subpoenas duces tecum [Docket No. 49] is AFFIRMED.
2. Plaintiff Osbeck's Motion to Strike Defendant's Letter Brief Dated December 03, 2003 or, in the alternative, for Leave to Respond to Said Letter Brief [Docket No. 62] is DENIED.