1260 BB Property, LLC v. Certain Underwriters at Lloyd’s and London Market Companies, et al.

Case Number

23CV00285

Case Type

Hearing Date / Time

Wed, 05/01/2024 - 10:00

Nature of Proceedings

Motions to Compel (2)

Tentative Ruling

ATTORNEYS:          For Plaintiff 1260 BB Property, LLC: Jared M. Katz, Eric J. Munoz, William J. Ryan, and Gregory J. Scandaglia

                                    For Defendants Lexington Insurance Company, Ace American Insurance Company, American International Group UK Limited, Assicurazioni Generali SPA UK Branch, Certain Underwriters at Lloyd’s and London Market Companies, Great Lakes Reinsurance (UK), Lloyd’s Underwriter Syndicate, Sompo Canopius dba Canopius Underwriting Agency Inc., Westport Insurance Corporation, Zurich Insurance PLC UK Branch, and Chubb Insurance Company of Canada: Ron H. Burnovski, Charles W. Deutsch, Sava Alexander Vojcanin

                                    For Defendant Liberty Mutual Fire Insurance Company: Nicholas J. Boos

                                   

TENTATIVE RULING:

For the reasons set forth below:

1. Plaintiff’s motion to compel further written responses to subpoena for production of business records and production of documents by Third-Party Sedgwick Claims Management Services, Inc. is denied.
2. Plaintiff’s Motion to compel further responses to requests for production of documents from all defendants other than Liberty Mutual and Lexington Insurance Company and request for monetary sanctions is granted in part and denied in part as follows:
   1. Plaintiff’s motion is granted as to requests for production of documents Nos. 3 and 4. The amended responses and production of documents shall be limited to documents pertaining to 1260 BB Property and the subject property. The documents will be subject to the protective order previously entered in this matter.
   2. To the extent that the amended responses, and production of documents, affect the privilege logs, the privilege logs shall be amended accordingly.
   3. Defendants shall provide the amended written responses, and produce all responsive documents, no later than May 22, 2024.
3. No monetary sanctions shall be awarded in favor of any party.

Background:

On January 23, 2023, plaintiff 1260 BB Property, LLC filed its complaint against multiple entity defendants. The complaint contains four causes of action for: (1) Breach of Contract; (2) Declaratory Judgment against primary insurers; (3) Declaratory Judgment against excess insurers; and (4) Breach of the Implied Covenant of Good Faith and Fair Dealing.

As alleged in the complaint: Plaintiff is the owner of the Four Seasons Resort the Biltmore Santa Barbara (“hotel” or “FSSB”). (Complaint, ¶ 2.) The hotel was insured under insurance policies procured by Four Seasons Hotel Ltd. for a policy period of April 1, 2017, to April 1, 2018. (Ibid.) During the policy period, the hotel suffered substantial property damage and economic loss from the Thomas Fire and the ensuing debris flow and mudslide totaling in excess of $64,000,000.00. (Ibid.) On the claims related to the fire, plaintiff suffered in excess of $6,700,000.00 in insured losses, of which certain defendant insurers have paid $5,953,000.00 but have refused to pay in excess of $793,000.00. (Id., at ¶ 3.) On the claims related to the mudslide, plaintiff suffered in excess of $58,000,000.00 in insured losses, of which certain defendants responsible for the first layer of primary insurance of $50,000,000.00 have paid $46,670,264.00. (Id. at ¶ 4.) The excess insurers have refused to pay any amount of the losses above the $50,000,000.00 primary policy limits. (Ibid.) Attached to the complaint as Exhibits B through M are copies of relevant insurance policies related to the claimed losses.

[Note: For purposes of these motions, “Defendants” shall mean all defendants other than Liberty Mutual and Lexington Insurance Company.]

On May 8, 2023, plaintiff served requests for production of documents, requesting 35 categories of documents, on numerous defendants. The requests are, with minor exceptions, identical. Defendants provided responses to most of the requests with objections based on privilege and that the requests were overbroad, unduly burdensome, not proportional to the needs of the litigation, irrelevant, and not reasonably calculated to lead to the discovery of admissible evidence.

Plaintiff moved to compel further responses to requests Nos. 3, 4, 5, 6, 7, and 14. Plaintiffs also sought to compel production of all documents listed on defendants’ privilege logs which have been withheld or redacted, or to which defendants have shared with third-party AON.

Defendants opposed the motion on the grounds that they have provided proper responses to all written discovery and that they did not waive attorney-client or work product privilege with respect to documents withheld on those grounds.

Plaintiff also moved to compel further written responses and production of documents regarding a subpoena for production of business records by third-party Sedgwick Claims Management Services, Inc. arguing that attorney client privilege was waived as to certain documents.

Defendants opposed the motion on the grounds that the attorney client privilege was not waived.

On March 27, 2024, the court made orders to continue the hearing to May 1, 2024. Defendants were ordered to file a revised declaration of Stuart Whiteside, which they did on March 28, 2024. The parties were ordered to give notice to Four Seasons Hotels Limited (“FSHL” or “Four Seasons”) advising Four Seasons of certain documents that were being requested and giving Four Seasons the opportunity to object. Four Seasons filed their objections on April 17, 2024.

Pursuant to Four Seasons’ objections, Four Seasons claims that the disclosure of the requested information, as it pertains to hotels other than The Four Seasons Resort the Biltmore Santa Barbara (FSSB), is confidential information the disclosure of which would cause competitive harm to Four Seasons. (Obj., ¶ 3.) Four Seasons provides sound reasoning for their claims of confidentiality.

However, Four Seasons “does not object to the disclosure of (a) FSHL Hotel Information concerning FSSB; (b) FSHL Hotel Information concerning hotels other than FSSB provided the identity of those hotels (including all identifying information such as the address, city, state, and country where the hotel is located) is redacted; and (c) the FSHL Premium Information, provided that, with respect to (a), (b), and (c), the FSHL Information is marked as and treated as “Highly Confidential” pursuant to Stipulated Confidentiality Agreement and Protective Order entered by the Court on October 26, 2023.” (Obj., ¶ 7.)

On April 26, 2024, the parties submitted a stipulation narrowing the issues in the motion to compel further written responses to RFP’s and production of documents. Pursuant to the stipulation, the issues that remain to be resolved are: (1) RFP Nos. 3 and 4; (2) Privilege log for Group A-1 entries; (3) Privilege log for Group C entries; (4) Request for fees and costs; and (5) Objections and response to objections raised by the amended Stuart Whiteside declaration.

Analysis:

Privilege Logs

“[I]f a party responding to an inspection demand timely serves a response asserting an objection based on the attorney-client privilege or work product doctrine, the trial court lacks authority to order the objection waived even if the responding party fails to serve a privilege log, serves an untimely privilege log, or serves a privilege log that fails either to adequately identify the documents to which the objection purportedly applies or provide sufficient factual information for the propounding party to evaluate the objection.” (Catalina Island Yacht Club v. Superior Court (2015) 242 Cal.App.4th 1116, 1126.)

As reflected in their privilege logs, defendants rely on the attorney client privilege for withholding, or redacting, multiple documents.

Plaintiff argues, with respect to both motions, that defendants’ privilege logs are deficient, and that attorney client privilege was waived with respect to multiple categories of documents because they contain communications with Aon representative Melanie Fenlon. With respect to the motion to compel further written responses to the subpoena served on Sedgwick, that is the plaintiff’s only argument.

“As used in this article, “ ‘confidential communication between client and lawyer’ ” means information transmitted between a client and his or her lawyer in the course of that relationship and in confidence by a means which, so far as the client is aware, discloses the information to no third persons other than those who are present to further the interest of the client in the consultation or those to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted, and includes a legal opinion formed and the advice given by the lawyer in the course of that relationship.” (Evid. Code § 952; Italics added.)

“The privilege is given on grounds of public policy in the belief that the benefits derived therefrom justify the risk that unjust decisions may sometimes result from the suppression of relevant evidence.” [Citations.]’ [Citation.] ‘[T]he privilege is absolute and disclosure may not be ordered, without regard to relevance, necessity or any particular circumstances peculiar to the case.’ [Citation.]” (Costco Wholesale Corp. v. Superior Court (2009) 47 Cal.4th 725, 732, 101 Cal.Rptr.3d 758, 219 P.3d 736 (Costco ).) “ ‘[The privilege] is not to be whittled away by means of specious argument that it has been waived. Least of all should the courts seize upon slight and equivocal circumstances as a technical reason for destroying the privilege.’ [Citation.]” (Blue Ridge Ins. Co. v. Superior Court (1988) 202 Cal.App.3d 339, 345.)

“The attorney-client privilege “ ‘deserves a particularly high degree of protection in this regard since it is a legislatively created privilege protecting important public policy interests, particularly the confidential relationship of attorney and client and their freedom to discuss matters in confidence.’ ” [Citations.]” ( Korea Data Systems Co. v. Superior Court (1997) 51 Cal.App.4th 1513, 1516.)

Defendants have provided a declaration of Stuart Whiteside with respect to Aon and Melanie Fenlon. Whiteside declares as follows:

“I am aware that Aon UK Limited made use of a complex underwriting facility(ies) at its disposal, which is identified as an “ ‘Aon Client Treaty’ ” (“ ‘ACT’ ”) to place and provide fractional portions of the property insurance coverage for Four Seasons Hotels Ltd.” (Whiteside Dec., ¶ 6.)

“At all relevant times I understood Melanie Fenlon to be an employee of an Aon-related entity acting on behalf of the ACT interests with respect to the claims that form the basis of this litigation. Melanie Fenlon was designated as the conduit to receive and provide information reasonable and necessary for subscribing ACT entities to participate in the Insuring Market’s investigation and adjustment of the Claims. Specifically, it is my understanding that Melanie Fenlon would receive Sedgwick reports and upload them through the Electronic Claims File (“ECF”) platform for ACT subscribing insurers and syndicates to review. The ECF is the system used to notify and update Lloyd’s Insurers of claims.” (Whiteside Dec., ¶ 7.)

“I understood that Melanie Fenlon was not involved in any manner in the placement services undertaken by any Aon-related entity regarding the property insurance coverage afforded by the Insuring Market to Four Seasons Hotels Ltd.” (Whiteside Dec., ¶ 8.)

“At all relevant times I understood Melanie Fenlon to be acting on behalf of the ACT for purposes of my communication with the ACT subscribing syndicates.” (Whiteside Dec., ¶ 9.)

Plaintiff has objected to each of the above statements contained in the Whiteside declaration on the grounds that the statements lack foundation, that Whiteside does not have personal knowledge of the declared facts, and that the statements are irrelevant. The court does not find the objections have merit and the objections are overruled.

The evidence presented by defendants demonstrates that the communications made to Fenlon, who was acting in the capacity of “the conduit to receive and provide information reasonable and necessary for subscribing ACT entities to participate in the Insuring Market’s investigation and adjustment of the Claims” rather than as a broker for plaintiff, were to further the interests of defense counsels’ clients and that the transmission of the information was to accomplish the purpose for which the lawyers were consulted. Defendants have met their initial burden and plaintiff has not presented evidence sufficient to overcome the claim of attorney client privilege. As such, attorney client privilege has not been waived.

Because the motion to compel further written responses to subpoena to Sedgwick is based entirely upon the assertion that the attorney client privilege was waived, that motion will be denied in its entirety. Plaintiff’s request for monetary sanctions relative to the motion will also be denied. Defendants did not request sanctions for opposing the motion.

However, with respect to the motion to compel further responses to the requests for production from defendants, in addition to the claim that attorney client privilege has been waived, plaintiff argues: (1) For many of the log entries defendants do not assert attorney client privilege or work product doctrine but rather reference that the documents are confidential or irrelevant; (2) Defendants assert trade secret privilege as a basis for withholding documents and information relating to plaintiff’s request for insurance premium calculations and, even if a trade secret were established, the Joint Stipulated Confidentiality Agreement and Protective Order provides protection for those documents; and (3) Defendants’ assertions of attorney client privilege and work product fail to identify any attorney, law firm, or attorney work product material that would justify withholding or redacting responsive documents.

“(b) If the responding party objects to the demand for inspection, copying, testing, or sampling of an item or category of item, the response shall do both of the following:

“(1) Identify with particularity any document, tangible thing, land, or electronically stored information falling within any category of item in the demand to which an objection is being made.

“(2) Set forth clearly the extent of, and the specific ground for, the objection. If an objection is based on a claim of privilege, the particular privilege invoked shall be stated. If an objection is based on a claim that the information sought is protected work product under Chapter 4 (commencing with Section 2018.010), that claim shall be expressly asserted.” (Code Civ. Proc. § 2031.240, subd. (b).)

To the extent that plaintiff makes an implied argument that a privilege log is only meant to assert attorney client privilege or work product doctrine, such argument is without merit. There are many objections based on privilege that may be asserted which would justify the withholding of documents including things such as a right to privacy (Cal. Const. Art. 1, § 1) and trade secret (Evid. Code § 1060). “Confidentiality,” in the context of defendants’ objections, obviously encompasses claims of privacy and trade secret. The court notes that at some places in their moving papers plaintiff acknowledges that these are allowable objections while at other places in the papers they appear to argue that they are not allowable objections.

“ ‘The purpose of a ‘privilege log’ is to provide a specific factual description of documents in aid of substantiating a claim of privilege in connection with a request for document production. [Citation.] The purpose of providing a specific factual description of documents is to permit a judicial evaluation of the claim of privilege. [Citations.]’ [Citation.]” (Best Products, Inc. v. Superior Court (2004) 119 Cal.App.4th 1181, 1188-1189.)

“The precise information required for an adequate privilege log will vary from case to case based on the privileges asserted and the underlying circumstances. In general, however, a privilege log typically should provide the identity and capacity of all individuals who authored, sent, or received each allegedly privileged document, the document's date, a brief description of the document and its contents or subject matter sufficient to determine whether the privilege applies, and the precise privilege or protection asserted.” (Catalina Island Yacht Club v. Superior Court (2015) 242 Cal.App.4th 1116, 1130.)

Counsel for defendants declares the following:

“I personally participated in multiple “ ‘meet and confer’ ” discussions with counsel for 1260 BB Property with respect to certain matters set forth in 1260 BB’s Motion and this Opposition, including, but not limited to, the “ ‘Group B’ ” documents.” (Burnovski Dec., ¶ 7.)

“In the “ ‘meet and confer’ ” discussions with counsel for 1260 BB Property, I advised counsel on several occasions that all communications and documents reflecting or memorializing communications with subrogation counsel have been so designated in each Insurer’s respective privilege log.” (Burnovski Dec., ¶ 8.)

“During the “ ‘meet and confer’ ” discussions, I also advised counsel for 1260 BB Property that all privilege log entries reflecting communications and documents that have been redacted or withheld pursuant to a claim of attorney-client privilege and/or work product protection, other than those referenced in Paragraph 8 of this Declaration, reference communications and documents containing or memorializing communications with or about discussions by the market representatives with attorney Sava Alexander Vojcanin of Clausen Miller P.C., who had been retained to represent their interests and act as their counsel in November 2020.” (Burnovski Dec., ¶ 9.)

The court has reviewed the many pages of privilege logs, which are set forth in columns listing bates numbers, dates, a brief description of each document, the author of the documents, who received the document, and the claimed privilege. Most of the documents consist of correspondence regarding the claim that is the subject of this action, loss reports, invoices for services, documents related to risk modeling and premium calculations, legal fees, and a subrogation claim. The privilege logs comply with the Code of Civil Procedure and relevant case law. They are not deficient.

Motion to Compel Further Responses to Specific Requests for Production of Documents

“A trial court must be mindful of the Legislature’s preference for discovery over trial by surprise, must construe the facts before it liberally in favor of discovery, may not use its discretion to extend the limits on discovery beyond those authorized by the Legislature, and should prefer partial to outright denials of discovery.” (Williams v. Superior Court (2017) 3 Cal.5th 531, 540.)

“Unless otherwise limited by order of the court in accordance with this title, any party may obtain discovery regarding any matter, not privileged, that is relevant to the subject matter involved in the pending action or to the determination of any motion made in that action, if the matter either is itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence. Discovery may relate to the claim or defense of the party seeking discovery or of any other party to the action. Discovery may be obtained of the identity and location of persons having knowledge of any discoverable matter, as well as of the existence, description, nature, custody, condition, and location of any document, electronically stored information, tangible thing, or land or other property.” (Code Civ. Proc., § 2017.010.)

Code of Civil Procedure, section 2031.010 provides, in pertinent part:

“(a) Any party may obtain discovery . . . by inspecting, copying, testing, or sampling documents, tangible things, land or other property, and electronically stored information in the possession, custody, or control of the party on whom the demand is made.

“(b) A party may demand that any other party produce and permit the party making the demand, or someone acting on the demanding party’s behalf, to inspect and to copy a document that is in the possession, custody, or control of the party on whom the demand is made.”

“The party to whom a demand for inspection, copying, testing, or sampling has been directed shall respond separately to each item or category of item by any of the following:

“(1) A statement that the party will comply with the particular demand for inspection, copying, testing, or sampling by the date set for the inspection, copying, testing, or sampling . . .

“(2) A representation that the party lacks the ability to comply with the demand for inspection, copying, testing, or sampling of a particular item or category of item, or

“(3) An objection to the particular demand for inspection, copying, testing, or sampling.” (Code Civ. Proc. § 2031.210, subd. (a).)

Code of Civil Procedure, section 2031.240, provides:

“(a) If only part of an item or category of item in a demand for inspection, copying, testing, or sampling is objectionable, the response shall contain a statement of compliance, or a representation of inability to comply with respect to the remainder of that item or category.

“(b) If the responding party objects to the demand for inspection, copying, testing, or sampling of an item or category of item, the response shall do both of the following:

“(1) Identify with particularity any document, tangible thing, land, or electronically stored information falling within any category of item in the demand to which an objection is being made.

“(2) Set forth clearly the extent of, and the specific ground for, the objection. If an objection is based on a claim of privilege, the particular privilege invoked shall be stated. If an objection is based on a claim that the information sought is protected work product under Chapter 4 (commencing with Section 2018.010), that claim shall be expressly asserted.

“(c)(1) If an objection is based on a claim of privilege or a claim that the information sought is protected work product, the response shall provide sufficient factual information for other parties to evaluate the merits of that claim, including, if necessary, a privilege log.

“(2) It is the intent of the Legislature to codify the concept of a privilege log as that term is used in California case law. Nothing in this subdivision shall be construed to constitute a substantive change in case law.”

A motion to compel further responses to a demand for production of documents “shall set forth specific facts showing good cause justifying the discovery sought by the demand.” (Code Civ. Proc., § 2031.310, subd. (b)(1).) To establish good cause, the burden is on the moving party to make a “fact-specific showing of relevance.” (Glenfed Development Corp. v. Superior Court (1997) 53 Cal.App.4th 1113, 1117.)

Plaintiff’s separate statement addresses RFP Nos. 3, 4, 5, 14, and what plaintiff argues are defendants’ deficient privilege logs. Of note is that the separate statement does not include RFP Nos. 6 or 7. As such, to the extent that plaintiff is seeking further responses to Nos. 6 or 7, as included in the notice of motion, the request will be denied for failure to include them in the separate statement. By way of the above-mentioned stipulation, RFP Nos. 5 and 14 also no longer appear to be at issue. The sole remaining requests at issue are Nos. 3 and 4.

            Request Nos. 3 and 4

Request No. 3 seeks: “All DOCUMENTS reflecting payments of premiums for the [DEFENDANT’S] POLICY or any other policy asserted in this LITIGATION from 2017 through and including 2019.”

Defendants’ response to request No. 3 is: “Defendant objects to Request No. 3 on the grounds that it is overly broad, unduly burdensome, not proportional to the needs of this litigation, irrelevant, and not reasonably calculated to lead to the discovery of admissible evidence.”

Request No. 4 seeks: “All DOCUMENTS reflecting calculation of premiums charged to PLAINTIFF or FOUR SEASONS for the ACE AMERICAN POLICY or any other policy asserted in this LITIGATION from 2017 through and including 2019.”

Defendants’ response to request No. 4 is: “Defendant objects to Request No. 4 on the grounds that it is overly broad, unduly burdensome, not proportional to the needs of this litigation, irrelevant, and not reasonably calculated to lead to the discovery of admissible evidence. Defendant further objects on the grounds that Request No. 4 seeks production of materials that are private, confidential, and proprietary trade secret information under Civil Code section 3426.1(d).”

For request Nos. 3 and 4, plaintiff argues: “In its First Amended Complaint, Plaintiff is asserting a claim under the policy that the increase in insurance premiums from the 2017 through 2019 periods occurred as a result of the mudslide events. See Pl.’s First Amended Complaint at ¶ 84(g).  The increased premium expense would be covered under the provisions of the policy.” (Sep. Stmnt., p. 7, ll. 21-24.) “[U]nderstanding how the Defendant insurers set their premium calculations will provide important evidence on the extent to which the mudslide events proximately contributed the increase in premiums. (Id. at p. 9, ll. 17-19.)

Plaintiffs have met their burden of showing a fact specific showing of relevance. Based on Four Seasons’ objections, the documents will be limited to documents pertaining to 1260 BB Property and the Four Seasons Resort the Biltmore Santa Barbara, including those paid by Four Seasons on behalf of defendants. The documents will be subject to the protective order. To the extent that the amended written responses, and production of documents, affects the privilege logs, amended privilege logs shall be provided to plaintiff.

            Sanctions

As plaintiff was only partially successful with respect to the motion to compel, no sanctions will be granted in favor of any party.