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LLC v. Certain Underwriters at Lloyd's

Court of Appeals of Louisiana, Fifth Circuit

February 19, 2019

ZYDECO'S II, LLC, ZYDECO'S CORP, DUSTIN GAINEY and ROSEMARIE GAINEY
v.
CERTAIN UNDERWRITERS AT LLOYD'S, LONDON SUBSCRIBING TO CERTIFICATE/POLICY NO. B1180D150152-59633, IN RE CERTAIN UNDERWRITERS AT LLOYD'S, LONDON SUBSCRIBING TO CERTIFICATE/POLICY NO. B1180D150152-59633

          APPLYING FOR SUPERVISORY WRIT FROM THE TWENTY-NINTH JUDICIAL DISTRICT COURT, PARISH OF ST CHARLES, STATE OF LOUISIANA, DIRECTED TO THE HONORABLE EMILE R. ST. PIERRE, DIVISION ''C'', NUMBER 82.255

          Panel composed of Judges Jude G. Gravois, Hans J. Liljeberg, and John J. Molaison, Jr.

         Relator/defendant, Certain Underwriters at Lloyd's, London, Subscribing to Certificate/Policy No. B1180D150152-59633, seeks this Court's supervisory review of the trial court's October 25, 2018 written judgment which denied its motion to quash a subpoena duces tecum filed by plaintiffs, Zydeco's II, LLC, Zydeco's Corp., and Dustin and Rosemarie Gainey. For the following reasons, we vacate the trial court's judgment which denied Underwriters' motion to quash, grant the writ application, and remand the matter for the limited purpose of directing the trial court to conduct an in camera inspection of the documents requested in the subject subpoena duces tecum to determine whether such documents are subject to the attorney-client privilege, and if so, to determine whether Underwriters has waived the attorney-client privilege by placing such documents "at issue" in this case, as per the anticipatory waiver principle, as 18-C-604 discussed below. We further lift the stay of the return date for the subpoena duces tecum issued by this Court on October 24, 2018.

         Plaintiffs owned and operated a restaurant in Boutte, Louisiana. On May 30, 2016, the restaurant caught fire, and as a result, the property was a total loss. At the time of the fire, Underwriters had in full force and effect a commercial property policy issued to plaintiffs. On August 26, 2016, the insurance policy in question was rescinded by Underwriters after it was revealed that plaintiffs did not have a centrally monitored fire alarm as required by the policy. On November 14, 2016, plaintiffs filed a petition for damages against Underwriters and a number of other defendants, including Underwriters' agent, Braishfield Associates, Inc., arguing a breach of duty of good faith and fair dealing.[1]

         In May 2018, plaintiffs filed a motion to compel seeking the production of unredacted copies of all emails, correspondence, and claims notes in the possession of Underwriters and Braishfield. On June 26, 2018, the trial court ordered the limited production of communications from May 31, 2016 through September 30, 2016 as the communications were prepared in the ordinary course of business of adjusting the claim and determining coverage. In its written judgment, the trial court noted that plaintiffs were seeking the entirety of the insurer's claim file including communications between Underwriters, its claim administrator, its field adjusters, its investigator, and its counsel. Because the issues in this case involve whether Underwriters acted in bad faith and called into question the actions of Underwriters in dealing with its own insured, the court ordered the production of the pre-representation portions of the claim file which pertain to the decision-making process and to the investigation of the claim, including unredacted communications, documents, emails, and correspondence between Underwriters, its adjusters, and its underwriting agents. The order of production did not include communications with counsel for Underwriters, its third-party claims administrator, its field adjusters, and its underwriting agents, as they are protected by the attorney-client privilege.

         Thereafter, Braishfield was dismissed from the case. On September 20, 2018, plaintiffs filed and requested service of a subpoena duces tecum upon Braishfield seeking the following:

A certified copy of the full unredacted documents which have been previously produced and any other documents not yet produced that pertain to the claims, underwriting and/or any other files, documents, emails, correspondence or other evidence regarding the named insureds: Zydeco's II LLC and Zydeco's Corp, property location: 13228 Highway 90, Boutte, Louisiana, policy No. B1180D150152-59633 including, but not limited to the adjustment, investigation, and handling of any and all claims and/or decisions or determinations to rescind the insurance policy No.: B1180D150152-59633.

         In response, Underwriters filed a motion to quash the subpoena on grounds that it sought documents that are protected by the attorney-client privilege, or alternatively, for an in camera inspection of the subject documents. Underwriters further argued that plaintiffs were trying to get around the previous discovery limitations by demanding that Braishfield provide its full, unredacted claim file, which includes documents specifically excluded from production by the trial court's previous ruling. Following a hearing, the trial court orally and subsequently in writing denied the motion to quash.[2]

         In this writ application, Underwriters argues that the trial court committed legal error in finding that Underwriters did not have standing to bring the motion to quash on behalf of Braishfield, and that the trial court erred in denying the motion to quash when the records requested are privileged and plaintiffs have not met the requirement for disclosure of the same. Underwriters again contends that the documents sought are subject to the attorney-client privilege and argues that the information sought was information previously sought by plaintiffs but aimed at Underwriters. The court previously found that communications between Underwriters' counsel and Underwriters or its agents remained privileged and could not be produced.

         In opposition to the writ application, plaintiffs rely on the testimony of Tony Hayter, who gave the La. C.C.P. art. 1442 corporate deposition for Underwriters. Plaintiffs argue that Mr. Hayter testified that the basis for Underwriters' decision to rescind the insurance policy was due to the advice of counsel. Specifically, plaintiffs point out that in his deposition, Mr. Hayter was asked: "And that rescission was based upon the communications with your lawyers, right?" Underwriters' counsel then lodged an objection to this question. Mr. Hayter subsequently responded "Yes." to this question. Thus, plaintiffs argue that Underwriters has placed the communications, including privileged communications, between Underwriters and Braishfield "at issue" and therefore will have to disclose those communications to be successful at trial to show that it was not arbitrary and capricious.[3]

         As a general rule, parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action. La. C.C.P. art. 1422. The attorney-client privilege is the oldest of the privileges for confidential communications known to the common law. Upjohn Co. v. United States, 449 U.S. 383, 389, 101 S.Ct. 677, 682, 66 L.Ed.2d 584 (1981). Its purpose is to encourage full and frank communications between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice. Id. The privilege recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyer's being fully informed by the client. Id.

         La. C.E. art. 506(B) provides that a client has a privilege to refuse to disclose or prevent another from disclosing confidential communication made for the purpose of facilitating the rendition of professional legal services to the client. The party seeking to assert the attorney-client privilege has the burden of proving that the privilege is applicable. Keith v. Keith, 48919 (La.App. 2 Cir. 5/15/14), 140 So.3d 1202, 1209.

         In ruling on discovery matters, the trial court is vested with broad discretion, and, upon review, an appellate court should not disturb such rulings absent a clear abuse of discretion. Khoobehi Props., LLC v. Baronne Dev. No. 2, L.L.C., 16-506 (La.App. 5 Cir. 3/29/17), 216 So.3d 287, 303, writ denied, 17-0893 (La. 9/29/17), 227 So.3d 288.

         The Louisiana Supreme Court has recognized the waiver of the attorney-client privilege may occur when a party places privileged communications "at issue." Smith v. Kavanaugh, Pierson & Talley, 513 So.2d 1138, 1145 (La. 1987). The placing-at-issue waiver occurs when the waiving party pleads a claim or defense in such a way that he will be forced inevitably to draw upon a privileged communication at trial in order to prevail. Id. The placing-at-issue waiver is an application of the anticipatory waiver principle, and under this principle, the court must concern itself with whether the ...


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