Passport 420 LLC et al vs Starr Indemnity & Liability Company

Case Number

19CV03596

Case Type

Hearing Date / Time

Mon, 09/30/2024 - 10:00

Nature of Proceedings

1) Motion for Brandt Attorney Fees; 2) Motion for Prejudgment Interest; and, 3) Motion to File Exhibits Under Seal

Tentative Ruling

Passport 420, LLC, et al. v. Starr Indemnity & Liability Company, et al.

Case No. 19CV03596

           

Hearing Date: September 30, 2024                                                   

HEARING:              (1) Plaintiff’s Motion For Brandt Attorney Fees And Costs

                                    (2) Plaintiff’s Motion For Prejudgment Interest On The Award Of Policy Benefits And Brandt Attorney Fees And Costs

                                    (3) Plaintiff’s Motion To File Exhibits Under Seal

                                   

ATTORNEYS:        For Plaintiffs Passport 420, LLC; Spring Creek Research, LLC; and William Parrish: A. Barry Cappello, Lawrence J. Conlan, Richard Lloyd, Cappello & Noel LLP

                        For Defendant Starr Indemnity & Liability Co.: Michael J. Terhar, Carl J. Basile, Cunningham Swaim, LLP, Ralph S. LaMontagne, Jr., Eric A. Amador, LaMontagne & Amador LLP

TENTATIVE RULING:

(1) The motion of plaintiff to file exhibits under seal is denied. On or before October 10, 2024, plaintiff shall publicly file the declaration of Lawrence J. Conlan submitted in support of plaintiff’s motion for Brandt attorney’s fees and costs, with exhibits and without redactions, in accordance with this ruling.

(2) The Court continues the hearing on plaintiff’s motion for Brandt attorney fees and costs and motion for prejudgment interest to October 28, 2024.

Background:

This action arises out of losses sustained as a result of a government seizure of aircraft owned by plaintiffs Passport 420, LLC (Passport), Spring Creek Research, LLC (Spring Creek) and William Parrish (Parrish) (collectively, plaintiffs.) On July 11, 2019, plaintiffs filed a complaint against defendants Starr Indemnity & Liability Company (Starr Indemnity), Avenatti & Associates, APC (Avenatti Associates), and Michael J. Avenatti (Avenatti) (collectively, defendants), alleging three causes of action: (1) breach of contract (against Starr Indemnity); (2) breach of the covenant of good faith and fair dealing (against Starr Indemnity); and (3) declaratory relief (against all defendants). Briefly, as alleged in the complaint:

On July 11, 2016, Parrish and Avenatti, who at the time was Parrish’s attorney, formed Passport for the purpose of purchasing an aircraft. Parrish owns his interest in Passport through Spring Creek. Avenatti purchased his interest in Passport through Avenatti Associates. The aircraft was purchased on January 18, 2017, for a net price of $4,383,605. Parrish held a 52.7 percent ownership interest in the aircraft. Avenatti was removed as the manager of Passport on August 29, 2018.

Starr Indemnity sold to plaintiffs an Elite Comprehensive Corporate Aircraft Policy No. 1000320046-03 (the policy), which provides coverage during the period from January 26, 2019, through January 26, 2020. The policy provided for insurance of up to $10 million for covered perils which include “seizure” of the aircraft by a government authority. During the policy period, the federal government seized the aircraft as part of a criminal investigation of Avenatti. Plaintiffs submitted a sworn proof of loss to Starr Indemnity, but Starr Indemnity refused to acknowledge coverage.

On February 2, 2024, Starr Indemnity filed its answer to the complaint responding to its allegations and asserting nineteen affirmative defenses.

The matter proceeded to a thirteen day jury trial which commenced on April 24, 2024. (See Apr. 24, 2024, Minute Order.) On May 16, 2024, the jury returned a verdict in favor of Passport, and on May 17, 2024, the jury awarded punitive damages in favor of Passport in the amount of $15 million. (See May 16 & 17, 2024, Minute Orders; May 17, 2024, Verdict Form [Punitive Damages].)

On June 6, 2024, plaintiffs filed a request for dismissal of Avenatti and Avenatti Associates from the action, without prejudice.

On June 18, 2024, the Court entered a Judgment After Trial By Jury (the judgment). In response to Starr Indemnity’s May 23, 2024, the Court issued a statement of decision with respect to Starr Indemnity’s defense of recission on June 20, 2024.

On July 31, 2024, Passport filed three motions: (1) a motion for attorney’s fees and costs (the fee motion) made pursuant to Brandt v. Superior Court (1985) 37 Cal.3d 813; (2) a motion for prejudgment interest (the prejudgment interest motion); and (3) a motion to file exhibits M and N of the declaration of Lawrence J. Conlan (Conlan), submitted in support of the fee motion, under seal (the motion to seal).  The fee motion and prejudgment interest motion are each opposed by Starr Indemnity.

Analysis:

As further discussed below, the Court will deny the motion to seal of Passport. As the fee motion is supported by records which are the subject of the motion to seal, the Court will continue the hearing on the fee motion and the prejudgment interest motion for all reasons further discussed below.

Attached as exhibit M and N to the Conlan declaration submitted in support of the fee motion are, respectively, invoices for services ostensibly rendered to Parrish by the law firms of Cappello & Noel and Blank Rome (collectively, the fee invoices). (Conlan Decl., Exhs. M [Cappello & Noel invoices] & N [Blank Rome invoices attached to Milunas declaration as Exh. A].) Passport has filed a public redacted version of the Conlan declaration and lodged the Conlan declaration conditionally under seal. In the motion to seal, Passport seeks an order authorizing the filing of exhibits M and N to the Conlan declaration under seal on the grounds that the fee invoices were marked as “confidential” pursuant to a stipulated protective order (the protective order), and are privileged, confidential, and in some instances, constitute protected trade secrets.

There exist procedural problems with the motion to seal. The Conlan declaration lodged conditionally under seal includes redactions to exhibit L, which is not addressed in the motion to seal, and exhibit M. A record lodged conditionally under seal must not contain redactions. (Cal. Rules of Court, rule 2.551 (b)(4) & (5).) (Note: Undesignated rule references shall be to the California Rules of Court unless otherwise indicated.) Without the unredacted records, the Court cannot make the express factual findings required by rule 2.550(e).

With respect to the substantive arguments offered by Passport, California has “long recognized a common law right” of public access to documents filed in court as a basis for adjudication. (Overstock.com, Inc. v. Goldman Sachs Group, Inc. (2014) 231 Cal.App.4th 471, 483 (Overstock).) Court records are presumed to be open to the public “unless they are specifically exempted from disclosure by statute or are protected by the court itself due to the necessity of confidentiality.” (McGuire v. Superior Court (1993) 12 Cal.App.4th 1685, 1687; Cal. Rules of Court, rule 2.550(c).) A court may order a record be filed under seal only upon express factual findings that “there exists an overriding interest that overcomes the right of public access to the record”, that “the overriding interest supports sealing the records”, that “a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed”, that “the proposed sealing is narrowly tailored”, and that “no less restrictive means exist to achieve the overriding interest.” (Cal. Rules of Court, rule 2.550(d)(1)-(5); Sander v. State Bar of California (2013) 58 Cal.4th 300, 319, fn. 7.)

To make the required “reasoned decision about sealing or unsealing records”, a court must “identify[] and weigh[] competing interests and concerns” by “identifying the specific information claimed to be entitled to such treatment; [] identifying the nature of the harm threatened by disclosure; and [] identifying and accounting for countervailing considerations.” (H.B. Fuller Co. v. Doe (2007) 151 Cal.App.4th 879, 894 (H.B. Fuller).) “The burden of presenting information sufficient to accomplish the first two steps is logically placed upon the party seeking the sealing of the documents, who is presumptively in the best position to know what disclosures will harm him and how. This means at a minimum that the party seeking to seal documents, or maintain them under seal, must come forward with a specific enumeration of the facts sought to be withheld and specific reasons for withholding them.” (Ibid.)  

Records which are the subject of a motion to seal must be publicly filed in a manner that redacts only the matters or information that the moving party proposes to be sealed. As noted above, though the motion to seal is directed only to exhibits M and N of the Conlan declaration, the publicly filed and redacted declaration includes redactions to exhibit L. Passport has not identified, with specific references to the record, the information or matters that it proposes to seal with respect to exhibit L, and offers no reasoned argument tailored to any request to seal matters appearing in exhibit L. Passport’s failure to do so is sufficient grounds on which the Court may deny the motion. (H.B. Fuller, supra, 151 Cal.App.4th at p. 894; Cal. Rules of Court, rule 3.1113(a) & (b).)

Furthermore, to the extent Passport contends that its designation of the fee invoices as “confidential” pursuant to the protective order is sufficient grounds for a sealing order, the Court may “not permit a record to be filed under seal based solely on the agreement or stipulation of the parties.” (Cal. Rules of Court, rule 2.551(a).) The Court also notes that the express provisions of the protective order further discussed above, which the Court approved on June 30, 2024, contemplate that the parties will comply with California Rules of Court, rules 2.550 and 2.551 under circumstances where confidential material is included in any motion governed by those rules. (June 30, 2020, Stipulated Protective Order at p. 12, ll. 2-3.) As the records which are the subject of the motion to seal are submitted as a basis for adjudication of the fee motion, rules 2.550 and 2.551 apply here. (In re Marriage of Tamir (2021) 72 Cal.App.5th 1068, 1085.)

Regarding Passport’s contention that the fee invoices reveal counsel’s litigation strategies which, according to Passport, constitute trade secrets, the general and conclusory arguments offered by Passport are wholly insufficient to show that the fee invoices include trade secrets, or to overcome the presumption in favor of public access to the fee invoices. (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 301; see also and generally Whyte v. Schlage Lock Co. (2002) 101 Cal.App.4th 1443, 1455-1456 [general discussion].)

Further, based on information appearing in the motion, it is the Court’s understanding that the fee invoices were provided to Starr Indemnity, without redactions pursuant to the protective order, and that Passport seeks only to prevent disclosure of the fee invoices to the general public and not to Starr Indemnity or its counsel. (See, e.g., Notice at p. 2; Memo. at pp. 3 & 5 [discussing the necessity for Starr Indemnity to access the fee invoices].) Based on the available information, Passport waived the attorney-client privilege by knowingly and voluntarily consenting to the disclosure of the unredacted fee invoices to Starr Indemnity. (Evid. Code, § 912 [the right to claim the attorney-client privilege is waived “if any holder of the privilege, without coercion, has disclosed a significant part of the communication or has consented to disclosure made by anyone”];  see also Ardon v. City of Los Angeles (2016) 62 Cal.4th 1176, 1188-1189 [general discussion of waiver].) To the extent Passport relies upon the fee invoices as a basis for adjudicating the amount of fees it incurred to establish its rights to benefits under the Policy, there also exists an implied waiver of the attorney-client privilege. (Byers v. Superior Court (2024) 101 Cal.App.5th 1003, 1011.) Because Passport has ostensibly disclosed the privileged material appearing in the fee invoices to Starr Indemnity, and as the fee invoices directly affect the determination of the present motion, Passport has failed to show, with factual specificity, the existence of any overriding interest that would overcome the public’s right to access these records. The same analysis applies with respect to any work product appearing in the fee invoices. (McKesson HBOC, Inc. v. Superior Court (2004) 115 Cal.App.4th 1229, 1239.)

In addition, the “attorney-client privilege only protects communications between attorney and client made for the purpose of seeking or delivering the attorney’s legal advice or representation.” (Los Angeles County Bd. of Supervisors v. Superior Court (2016) 2 Cal.5th 282, 293-294 (Board of Supervisors) [also noting that “the privilege does not apply to every single communication transmitted confidentially between lawyer and client”].) For this reason, the fee invoices themselves including amounts charged to Parrish by Blank Rome, which Passport has redacted from the public record, do not categorically fall within the attorney-client privilege. (Id. at pp. 294-295 & 299; see also Conlan Decl., Exh. M at PDF p. 343 [redaction of amounts charged to Parrish by Blank Rome].)

Moreover, the Court’s review of portions of exhibit M which are redacted from the public record show that not all information appearing in the fee invoices relates to communications “made for the purpose of the legal consultation, rather than some unrelated or ancillary purpose.” (Board of Supervisors, supra, 2 Cal.5th at p. 297.) For example, Passport has redacted from the exhibit M of the publicly filed Conlan declaration entries describing counsel’s review of various court filings, conferences and meetings with other firm attorneys and staff regarding ancillary matters, preparation of documents filed with the court, and correspondence to opposing counsel. (Conlan Decl., Exh. M at PDF pp. 344 & 347.) These entries, on their face, do not show that information was conveyed to Passport for the purpose of legal representation and do not reflect counsel’s “impressions, conclusions, opinions, or legal research or theories ….” (Code Civ. Proc., § 2018.030, subd. (a).) In addition, at this stage of the proceedings, the fee invoices do not disclose work performed by counsel in active litigation. (Board of Supervisors, supra, 2 Cal.5th at p. 300.) These examples are intended to be illustrative but not exhaustive.

For all substantive and procedural reasons further discussed above, though Passport may prefer to keep information appearing in the fee invoices confidential, Passport has failed to meet its burden to show, with specific facts, that there exists a competing and overriding interest that overcomes the public’s right to access the fee invoices submitted as a basis for adjudication of the fee motion. Rather, available information and evidence shows that the competing interests weigh in favor of the presumption of public access. (Overstock, supra, 231 Cal.App.4th at p. 483-484.) In addition, with respect to the material appearing in exhibit L, the Court is unable to make the findings required under rule 2.550(e). Therefore, the Court will deny the motion to seal.

As further noted above, the Conlan declaration lodged by Passport conditionally under seal includes redactions. Therefore, the presently exists no appropriate lodged record that may be unsealed and publicly filed under rule 2.551(b)(6). To the extent Passport intends to proceed with the fee motion, the Court requires an appropriate and proper record on which to determine that motion. Therefore, the Court will continue the fee motion to permit Passport to publicly file an unredacted copy of the Conlan declaration, in the same form as the present Conlan declaration and including all exhibits thereto. To the extent Passport fails to either file an unredacted copy of the Conlan declaration or withdraw the fee motion, the Court will order the lodged record, which is in electronic form, permanently deleted and will deny the fee motion as without evidentiary support. The Court will also continue the hearing on the prejudgment interest motion.