HDI GLOBAL SPECIALTY SE v. PF HOLDINGS LLC et al, No. 4:2020cv00103 - Document 63 (M.D. Ga. 2021)
Court Description: ORDER granting in part and denying in part 36 Motion to Compel; granting in part and denying in part 42 Motion to Quash. Ordered by US DISTRICT JUDGE CLAY D LAND on 05/13/2021 (CCL)
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IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF GEORGIA COLUMBUS DIVISION HDI GLOBAL SPECIALTY SE, * Plaintiff/Counter-Defendant, * vs. * PF HOLDINGS, LLC, SCHOOLHOUSE ROAD ESTATES, INC., RALSTON GA, LLC, PF RALSTON, LLC, PHILIP HADLEY, and JENNIFER GLAUBIUS, * * * Defendants/Counter-Plaintiffs, CASE NO. 4:20-CV-103 (CDL) * vs. * HDI GLOBAL SPECIALTY SE and NATIONAL UNION FIRE INSRANCE COMPANY OF PITTSBURGH, PA, * * Counter-Defendants/Third-Party Defendants. * O R D E R Presently pending before the Court are Plaintiff HDI Global Specialty SE’s motion to quash subpoena and the motion to compel brought by PF Holdings, LLC, Schoolhouse Road Estates, Inc., Ralston GA, LLC, PF Ralston, LLC, Philip Hadley, and Jennifer Glaubius (“Defendants”). For the reasons set forth below, Defendants’ motion to compel (ECF No. 36) is granted in part and denied in part, and HDI’s motion to quash subpoena (ECF No. 42) is granted in part and denied in part. FACTUAL BACKGROUND Jennifer Glaubius and Philip Hadley were residents at the Ralston Apartments in Columbus, Georgia. suffered injuries caused by poor They claim that they living conditions at the Ralston, which was owned, leased, and/or managed by PF Holdings, LLC, Schoolhouse Road Estates, Inc., Ralston GA, LLC, and PF Ralston, LLC (“Ralston Entities”). Glaubius and Hadley made settlement demands on the Ralston Entities for claims arising out of their living conditions. HDI Global Specialty SE, which had issued a commercial general liability insurance policy with Ralston GA, LLC and PF Ralston, LLC as the named insureds, hired Brad Wolff with the law firm of Swift Currie to represent Ralston GA and PF Ralston; HDI later hired the law firm of Huff, Powell and Bailey to represent Ralston GA and PF Ralston. responded to the information. settlement demands with a request for HDI more Glaubius and Hadley then filed lawsuits against all four Ralston Entities in the State Court of Muscogee County, Georgia. Union They also sent HDI and its excess carrier, National Fire Insurance Company, additional settlement demands, which HDI rejected via its attorney, Paul Fields of the firm Fields Howell. PF Holdings, LLC and Schoolhouse Road Estates, Inc. assert that HDI denied them a defense even though HDI was obligated to provide one, and they retained 2 attorney Jason Crawford to represent them in the action. HDI contends that it offered to assume the defense of PF Holdings and Schoolhouse Road under a reservation of rights and hired attorney David Mize of Huff Powell to represent them, but PF Holdings and Schoolhouse Road rejected the insurer’s conditions. HDI further asserts that Glaubius and Hadley agreed to arbitrate their claims against PF Holdings and Schoolhouse Road and dismissed their claims against Ralston GA and PF Ralston without prejudice. According to HDI, Mr. Crawford represented PF Holdings and Schoolhouse Road at the arbitration, and Mr. Mize was not permitted to participate. The arbitrator found in favor of Glaubius and Hadley on most of their claims. damages amount in of The the amount $3,500,000, $21,000,000. arbitrator of and awarded $7,000,000, punitive Glaubius attorneys’ damages in compensatory fees the in amount the of The arbitrator awarded Hadley compensatory damages in the amount of $5,000,000, attorneys’ fees in the amount of $2,500,000, and punitive damages in the amount of $15,000,000. A state court judge confirmed the arbitrator’s awards and entered judgments in favor of Glaubius and Hadley. HDI filed this action seeking a declaration that it does not owe an obligation to Schoolhouse Road or PF Holdings in connection with the claims asserted by Glaubius and Hadley. PF Holdings and Schoolhouse Road assigned to Glaubius and Hadley any claims they may have against HDI and National Union for 3 negligent or bad faith failure to settle. The Defendants filed a counterclaim against HDI for bad faith failure to settle and breach of the duty to defend, and they filed a third-party claim against National Union. DISCUSSION The parties’ present discovery dispute centers on three categories of documents: (1) HDI’s claim file, (2) Huff Powell’s entire file and communications between HDI and Huff Powell, and (3) invoices from Swift Currie and Huff Powell. disputes raise product. issues of attorney-client privilege and work In this federal diversity action, state law governs the application of attorney-client 501. Most of the Under Georgia communications law, the between privilege. Fed. R. Evid. privilege protects confidential attorney and client. “[P]rivilege attaches where (1) there is an attorney-client relationship; (2) the communications in question relate to the matters on which legal advice was sought; (3) the communications have been maintained in confidence; and (4) no exceptions to privilege are applicable.” S.E.2d 404, McCalla Raymer, LLC v. Foxfire Acres, Inc., 846 414 (Ga. Waterfront, LLC v. S.E.2d 104 (Ga. 98, governed by Federal Ct. Hunter, App. Maclean, 2013)). Rule 2020) of Work Civil (quoting Exley & product Procedure Dunn, St. Simons P.C., 746 protections are 26(b)(3), which protects from discovery documents prepared in anticipation of 4 litigation unless substantial need substantial equivalent principles party’s party the without protect attorney seeking documents or demonstrates cannot obtain hardship. disclosure opinions, other them and undue “against conclusions, litigation.” I. for also impressions, the or Work of legal their product the mental theories representative a of concerning a the Fed. R. Civ. P. 26(b)(3)(B). HDI’s Claim File Defendants seek most of HDI’s claims file. Specifically, they contend that they are entitled to “everything that HDI and coverage counsel relied on in deciding to deny coverage reject the offers to settle,” plus reserves information. Status Rep. 2, ECF No. 54. HDI responds that and Joint Defendants’ request seeks attorney work product and communications that are otherwise subject to the attorney client privilege. It has therefore produced a redacted claim file to Defendants, which redacts communications with coverage counsel (Mr. Fields and his firm) because it is not asserting advice of counsel as an affirmative defense and does not intend to rely on advice of counsel to prove a claim or defense. HDI waived any claim of privilege between HDI and coverage counsel. file, including relevant to the correspondence issues in as to all communications Although HDI’s entire claim with this 5 Defendants maintain that its attorney, litigation, may be attorney-client privilege trumps relevance, unless that privilege has been waived. Counsel for Defendants has pointed the Court to no binding authority establishing a “bad faith failure to settle exception” to this well-established principle. Court reviewed contention Defendants’ that HDI submission waived its in Furthermore, the support privilege of as communications between HDI and coverage counsel their to all regarding all coverage issues, and the Court finds that there was no such waiver. Defendants overcoming the did not cite attorney-client another privilege or valid well basis for established work product protections with respect to the mental impressions, conclusions, opinions, or legal theories of HDI’s attorneys and other representatives. HDI thus shall not be required to produce these documents. In addition to redacting communications with coverage counsel, HDI also redacted insurance reserves information from its claim file. The Court finds that evidence regarding the amount of reserves set by HDI is potentially relevant in this action where the purported insured alleges that the insurer refused to provide a defense and acted in bad faith in rejecting a settlement demand. HDI did not point the Court to any binding authority establishing that this evidence is not discoverable. Accordingly, HDI shall be required to produce the reserves information but may redact any portions of the claim file that 6 would reveal privileged information. Based on the Court’s review of the disputed documents HDI submitted for in camera inspection, document discoverable nos. reserves HDI_0001096 information to is contained HDI_0001101, in HDI_0001114, HDI_0001124 (entry #73), HDI_0001125 (entry #74), HDI_0001166, HDI_0001181 (entry #208), PRIV-HDI 1287 to 1300 (HDI may redact any privileged communications with coverage counsel).1 II. Huff Powell Documents HDI also refused to employees and the lawyers client privilege and produce communications at Huff Powell, claiming attorney- work product. Defendants between contend its that these documents comprise the Huff Powell file for the Ralston Entities and that they are entitled to the documents they were clients of Huff Powell and they can because waive any privilege as to the files that were produced as part of that attorney-client relationship. Based on the Court’s review of the present record, HDI hired Huff Powell in early March 2020 to counsel HDI and to represent the Ralston Entities in the state court actions. Later that month, HDI informed Schoolhouse Road The Court notes that the demands of Glaubius and Hadley were rejected on February 24, 2020, so the reserve information after that date, which is included in HDI_0001186, HDI_0001187, HDI_0001190 (entry nos. 225, 226, 227), and PRIV-HDI 1301 to 1309 (HDI may redact any privileged communications with coverage counsel), will likely be inadmissible at trial. Nevertheless, the Court finds it appropriate to order the production of this reserve information given the possibility that the post demand rejection reserves could be tied back to the company’s rejection of the demand. 1 7 and PF Holdings that HDI agreed to subject to a reservation of rights. defense Then, Glaubius and Hadley actions. After Ralston GA and PF Ralston were dismissed from rejected court HDI’s action, conditions PF a Ralston state and them dismissed the GA provide PF Ralston from Holdings for the and the state court Schoolhouse defense. HDI filed Road this declaratory judgment action on May 14, 2020; shortly after that, PF Holdings and Schoolhouse Road proceeded to arbitration with their own privately hired counsel. Huff Powell continued to provide counsel to HDI after May 14, 2020. It is clear that after May 14, 2020 Huff Powell represented only HDI. evidence And that Defendants HDI waived did not point any privilege the Court to any for communications between HDI and Huff Powell after May 14, 2020. Therefore, any communications between HDI and its lawyer, Huff Powell, after May 14, 2020 are protected by attorney-client privilege. As to communications between HDI and Huff Powell prior to May 14, 2020, the Court finds that Defendants are entitled to communications that relate to the claims against Defendants that HDI had hired Huff Powell to defend. Huff Powell represented reservation of rights. the Defendants. the During that timeframe, Defendants, albeit under a It had an undivided duty of loyalty to See, e.g., Paul v. Smith, Gambrell & Russell, 599 S.E.2d 206, 209 (Ga. Ct. App. 2004) (“It is a proud hallmark 8 of the legal profession that an attorney owes undivided loyalty to his client—undiluted obligations, others.”). and by undiminished conflicting by interests or of contrariant himself or of And Defendants, as Huff Powell’s clients, have the right to see the correspondence related to the claims against them that Huff Powell was defending. correspondence shield it may from have Huff been The fact that some of that shared Powell’s only other with client, HDI the does not Defendants. Accordingly, those communications shall be produced. Based on the Court’s review of the disputed documents HDI submitted for in camera inspection, those documents are: PRIV-HDI 0805 to PRIV-HDI 812, PRIV-HDI0897 to PRIV-HDI0899. III. Defense Counsel Invoices In addition to the previously discussed Huff Powell documents, Defendants seek the invoices from defense counsel at Swift Currie and Huff Powell. HDI contends that these invoices are not discoverable but did not provide any authority for this position. attorney’s In fees general, is not information privileged, concerning although an payment invoice would reveal privileged information may be redacted. of that See, e.g., In re Grand Jury Proc. 88-9 (MIA), 899 F.2d 1039, 1044 (11th Cir. 1990). Accordingly, HDI shall produce the Swift Currie and Huff Powell invoices, though it may redact any portions that would reveal privileged information. 9 Based on the Court’s review of the disputed documents HDI submitted for in camera inspection, those are document nos. PRIV-HDI 1543 to PRIV-HDI 1564, PRIV-HDI 1574 to PRIV-HDI 1578, PRIV-HDI 1598. CONCLUSION Defendants’ motion to compel (ECF No. 36) is granted in part and denied in part to the extent set forth above, and HDI’s motion to quash subpoena (ECF No. 42) is granted in part and denied contend produce in part that to any should the of be extent the set documents produced protective order, it should forth the subject work with above. Court to a Should ordered it to confidentiality Defendants’ counsel to propose an appropriate order. IT IS SO ORDERED, this 13th day of May, 2021. S/Clay D. Land CLAY D. LAND U.S. DISTRICT COURT JUDGE MIDDLE DISTRICT OF GEORGIA 10 HDI
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