Freelife International, Inc. v. American Educational Music Publications Incorporated, et al, No. 2:2007cv02210 - Document 173 (D. Ariz. 2010)
Court Description: ORDER granting in part and denying in part 169 Motion to Privately Disclose Attorneys Fees to Settlement Conference Judge and Motion for Expedited Consideration, as follows: a) granted as to Plaintiffs Motion for Expedited Consideration; b) denied in all other aspects. FURTHER ORDERED, pursuant to Rule 26(c), Fed.R.Civ.P., that all parties are hereby prohibited from disclosing or otherwise publicizing the other partys attorneys and experts fees in this case until authorized to do so by Judge Campbell. Counsel shall return all settlement conference memoranda to the settlement conference Judge at the conclusion of the settlement conference for destruction. Signed by Magistrate Judge Lawrence O Anderson on 1/29/10.(MAP)
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Freelife International, Inc. v. American Educational Music Publications Incorporated, et al 1 Doc. 173 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 Freelife International, Inc., 9 10 11 12 13 14 ) ) ) Plaintiff, ) ) v. ) American Educational Music Publications,) Inc., a Delaware company; David Lucas) ) Burge, ) ) Defendants. _________________________________) No. CV-07-2210-PHX-DGC ORDER 15 This case arises on Plaintiff’s Motion to Privately Disclose Attorneys’ Fees 16 17 to Settlement Conference Judge and Motion for Expedited Consideration,1 filed on 18 January 25, 2010. (docket # 169) Plaintiff Freelife International, Inc. (“Freelife” or 19 “Plaintiff”) requests “that the parties not be required to disclose an estimate of the costs 20 and time to be expended for trial, including the parties’ past and future attorneys’ and 21 experts’ fees, in their Settlement Conference Memoranda.” (Id. at 1) “Defendants have no 22 objection to the mutual disclosure of attorney fee information. . . .” (docket # at 172 at 1) 23 The Court will deny Plaintiff’s Motion but will enter a sua sponte protective order that all 24 parties are prohibited from disclosing or otherwise publicizing the other party’s attorneys’ 25 26 27 28 1 Fortuitously, the undersigned Magistrate Judge was provided the only notice of Plaintiff’s Motion by Judge Campbell’s Judicial Assistant. Plaintiff’s counsel did not provide a copy to the undersigned’s ECF mailbox, contrary to LRCiv 40.2(d), despite the undersigned’s issuance of the order about which Plaintiff objects. Dockets.Justia.com 1 and experts’ fees in this case in any extrajudicial fashion without prior authorization to do 2 so by the assigned District Judge, the Honorable David G. Campbell. 3 4 BACKGROUND The docket reflects the Complaint was filed on October 15, 2007 in the 5 Maricopa County Superior Court and removed to this District Court nearly two and a half 6 years ago. This dispute arises out of a website – www.breathe.org (“Breathe website”) – 7 that Plaintiff claims Defendants created to publish numerous false and defamatory 8 statements about FreeLife’s business and its products. (docket # 21 at 2) Claims of 9 defamation (Count I), tortious interference with business relationships (Count II), and 10 breach of contract (Count III) were initially alleged in the Complaint. (Id. at 2-3) The 11 parties have vigorously prosecuted and defended the claims, defenses and counter-claim 12 by filing numerous dispositive motions and engaging in extensive discovery. On October 13 1, 2009, Judge Campbell granted in part and denied in part Plaintiff’s motion for partial 14 summary judgment on the breach of contract claim, granted Plaintiff’s motion for 15 summary judgment on Defendant Burge’s defamation counterclaim, and denied 16 Defendants’ motion for summary judgment on Plaintiff’s claims. (docket # 120) There 17 are numerous motions in limine pending for ruling. A jury trial is scheduled for April 6, 18 2010 before Judge Campbell. (docket # 158) 19 After two unsuccessful attempts at private mediation in 2008 and 2009 20 before a well-respected, retired Maricopa County Superior Court Judge, one or more of 21 the parties requested a settlement conference with a United States Magistrate Judge. On 22 December 22, 2009, the Judge Campbell referred this case by random assignment to the 23 undersigned Magistrate Judge for purposes of conducting a settlement conference. 24 (docket # 158) 25 After conferring with counsel about mutually agreeable dates and times and 26 considering that an out-of-district party will appear telephonically from India, this Court 27 entered a Settlement Conference Order on January 19, 2010, setting the settlement 28 conference for Thursday, February 4, 2010 at 10:00 a.m. (docket # 167) The Court -2- 1 ordered, inter alia, that each party “provide the Court with the original of that party’s 2 Settlement Conference Memoranda, at least, three (3) business days before the 3 Settlement Conference[]”; the Settlement Conference Memoranda shall not be filed with 4 the Clerk but shall be exchanged between the parties; and the Settlement Conference 5 Memoranda shall include “[a]n estimate of the costs and time to be expended for further 6 discovery, pretrial and trial, including past and future attorneys’ and experts’ fees.” (Id. at 7 5) (emphasis in original). 8 Plaintiff FreeLife objects to the disclosure of its past and estimated future 9 attorneys’ and experts’ fees to the adverse parties because Plaintiff is “very sensitive to 10 the opposing party gaining access to confidential attorneys’ fees information” as 11 Defendants might publicize “this information . . . on the Breathe website in a further 12 effort to embarrass FreeLife.” (Id. at 2) For authority, Plaintiff cites a non-controlling 13 district court opinion “that requiring the production of attorneys’ fees information prior to 14 a fee application may be unwarranted[, citing] Abels v. JBC Legal Group, P.C., 233 15 F.R.D. 645, 646 (N.D. Cal. 2006) (refusing to compel production of attorneys’ fees 16 records where case had not progressed to point where attorneys’ fees were at issue).” 17 (Id.) Instead of requesting a Rule 26(c) protective order that Defendants and their counsel 18 not disclose or publicize this confidential information to anyone outside the parties and 19 their counsel, Plaintiff “requests that the Court permit the parties to disclose their 20 estimates for past and future attorneys’ and experts’ fees directly and privately to the 21 Magistrate Judge during the Settlement Conference, rather than in the Settlement Con- 22 ference Memoranda [unless Plaintiff chooses to] disclose this information to Defendants 23 at the Settlement Conference if the circumstances warrant the disclosure.” (Id.) Although 24 Plaintiff does not raise the attorney-client privilege as a bar to attorneys’ fees disclosure, 25 the Court concludes that some discussion is relevant to the Motion. 26 Defendants’ Response points out that Plaintiff “has previously asserted that 27 [Defendant] Burge has an ‘obligation to indemnify FreeLife for the costs and fees 28 (including attorney’s fees) of this litigation,’ and has made demand ‘that FreeLife be -3- 1 indemnified for all costs and fees incurred in this lawsuit[,]’” citing Plaintiff’s counsel’s 2 March 31, 2008 letter to defense counsel. (docket # at 172 at 1) This letter asserts that 3 Defendant Burge “entered a contract with FreeLife” and “remind[s] [Defendant Burge] of 4 his obligation to indemnify FreeLife for the costs and fees (including attorney’s fees) of 5 this litigation and . . . serve[s] as a demand that FreeLife be indemnified for all costs and 6 fees incurred in this lawsuit.” (Id., Exhibit 1 at 1) Defendants’ Response concludes that 7 “[a]ttorney fee information should be exchanged.” (Id. at 2) The Court agrees. 8 ATTORNEYS’ FEES 9 This case is based on diversity jurisdiction. (docket # 1, at ¶ 8) A federal court 10 sitting in diversity jurisdiction must apply the substantive law of the forum state. KL Group 11 v. Case, Kay & Lynch, 829 F.2d 909, 918 (9th Cir. 1987) (“The availability of 12 the attorney-client privilege in a diversity case is governed by state law.”) (citing Fed.R.Evid. 13 501). Of course, Arizona recognizes that the attorney-client privilege may be invoked to 14 prevent the disclosure of confidential communications made for the purpose of facilitating 15 the rendition of professional legal services to the client. Ulibarri v. Superior Court, 184 Ariz. 16 382, 387, 909 P.2d 449, 454 (Az. Ct. App. 1995); Arizona Revised Statute (“A.R.S.”) § 17 12-2234. 18 “The attorney-client privilege is the oldest of the privileges for confidential 19 communications known to the common law.” Upjohn Co. v. United States, 449 U.S. 383, 389 20 (1981); Valenti v. Allstate Ins. Co., 243 F.Supp.2d 200, 217 (M.D. Pa. 2003) (citing, among 21 others, Swidler & Berlin v. United States, 524 U.S. 399 (1998)). The privilege is intended “to 22 encourage full and frank communications between attorneys and their clients and therefore 23 promote broader public interests in the observance of law and the administration of justice.” 24 Upjohn, 449 U.S. at 389; Arizona Independent Redistricting Commission v. Fields, 206 Ariz. 25 130, 142, 75 P.3d 1088, 1100 (Az.Ct.App. 2003) (“[T]he attorney-client privilege only 26 applies to confidential communications made for the purpose of obtaining or providing legal 27 assistance for the client.”) (citing A.R.S. § 12-2234(B)). “The attorney-client privilege 28 provides that an attorney cannot be required to disclose any communication between the -4- 1 attorney and the client unless the client so consents.” In re Conservatorship of Westover, 2 2009 WL 1530814, * 9 (Az.Ct.App. 2009) (citing Samaritan Foundation v. Goodfarb, 176 3 Ariz. 497, 501, 862 P.2d 870, 874 (Ariz. 1993)). 4 There are, however, limitations to the attorney-client privilege. For example, 5 “information as the identity of the client, the amount of the fee, the identification of 6 payment by case file name, the general purpose of the work performed, and whether an 7 attorney coached a client on his testimony” are not protected by the attorney-client privilege. 8 United States v. Bauer, 132 F.3d 504, 509 (9th Cir. 1997) (emphasis added); United States 9 v. Hodgson, 492 F.2d 1175, 1177 (10th Cir. 1974); Colton v. United States, 306 F.2d 633, 10 638, (2nd Cir. 1962) (Questions to attorney regarding receipt of fees from a client are not 11 usually privileged). “In general, the facts of legal consultation or employment, client 12 identities, attorney’s fees and the scope and nature of employment are not deemed 13 privileged. Valenti, 243 F.Supp.2d at 218 (emphasis in original); United States v. Blackman, 14 72 F.3d 1418, 1424 (9th Cir. 1995) (“As a general rule, client identity and the nature of the 15 fee arrangement between attorney and client are not protected from disclosure by the 16 attorney-client privilege.”); Tornay v. United States, 840 F.2d 1424, 1431 (9th Cir. 1988)). 17 DISCUSSION 18 If the attorney-client privilege, “the oldest of the privileges,” does not protect 19 disclosure of attorney’s fees and experts’ fees incurred in litigation, Plaintiff’s “sensitivity” 20 that Defendants “might publicize this information . . . to embarrass FreeLife” does not 21 warrant precluding disclosure of this information in the context of a private, court-ordered 22 settlement conference. Moreover, both Plaintiff’s First Amended Complaint and Defendants’ 23 Answer request an award of reasonable attorney’s fees depending upon who is the prevailing 24 party on the contract claim pursuant to A.R.S. 12-§ 341.01. (docket # 1-1, Exhibit A at 24; 25 docket # 17 at 4-5) Of course, Arizona law “allows courts to award attorneys’ fees to 26 successful parties when the action arises out of a contract.” Moore v. Appleton, 2008 WL 27 5057339, * 2 (Az.Ct.App. 2008) (citing. A.R.S. § 12-341.01). “The award is meant ‘to 28 mitigate the burden of the expense of litigation.’ ” Id. There is no presumption, however, that -5- 1 a court should award attorneys’ fees under section 12-341.01 in contract actions. Id. (citing 2 Assoc. Indem. Corp. v. Warner, 143 Ariz. 567, 569, 694 P.2d 1181, 1183 (1985). 3 This settlement conference judge views that each party’s actual knowledge of 4 the amount of money at risk in going to trial is an invaluable component to a successful 5 settlement conference, especially here where the non-prevailing party will be required to pay, 6 not only its or his own attorneys’ fees and court-related expenses, but likely also those of the 7 adverse party. This Court agrees with Defendants that “[d]isclosure of such information will 8 assist the parties in better understanding the scope and nature of the risks and rewards they 9 face in taking this matter to trial, which can only assist the settlement process.” (docket # at 10 172 at 1) Moreover, Plaintiff’s citation to Abels v. JBC Legal Group, P.C., 233 F.R.D. 645, 11 646 (N.D. Cal. 2006) is not persuasive and is distinguishable because this case does not 12 pertain to disclosure of the amount of attorneys’ fees incurred in the context of a settlement 13 conference, but rather, deals with a request to compel production of attorneys’ fees records 14 prior to trial which were not reasonably calculated to lead to the discovery of admissible 15 evidence per Fed.R.Civ.P. 26(b)(1). 16 Accordingly, 17 IT IS ORDERED that Plaintiff’s Motion to Privately Disclose Attorneys’ Fees 18 to Settlement Conference Judge and Motion for Expedited Consideration, docket # 169, is 19 GRANTED in part and DENIED in part as follows: a) granted as to Plaintiff’s Motion for 20 Expedited Consideration; b) denied in all other aspects. 21 IT IS FURTHER ORDERED, pursuant to Rule 26(c), Fed.R.Civ.P., that all 22 parties are hereby prohibited from disclosing or otherwise publicizing the other party’s 23 attorneys’ and experts’ fees in this case until authorized to do so by Judge Campbell. Counsel 24 shall return all settlement conference memoranda to the settlement conference Judge at the 25 conclusion of the settlement conference for destruction. 26 DATED this 29th day of January, 2010. 27 28 -6-
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