# Thompson v. Dennis Widmer Construction, Inc.

> District Court, D. Oregon · November 10, 2021

URL: https://www.frixlaw.com/law-library/cases/10393982

## Case

- **Court:** District Court, D. Oregon
- **Decided:** November 10, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

REESE THOMPSON and MARGARET Case No. 3:20-cv-01145-IM
THOMPSON,
OPINION AND ORDER
Plaintiffs,
v.
DENNIS WIDMER CONSTRUCTION,
INC., an Oregon Corporation,
Defendant.

DENNIS WIDMER CONSTRUCTION,
INC.,
Third-Party Plaintiff,
v.
EDGEWOOD CONSTRUCTION, LLC, an
Oregon Limited Liability Company,
Third-Party Defendant.
and

CONTRACTORS BONDING AND
INSURANCE COMPANY, an Illinois
Corporation,
Garnishee.
Jason E. Hirshon, Slinde Nelson Stanford, 111 SW 5th Avenue, Suite 1940, Portland, OR 97204.
Attorney for Plaintiffs.

Paul A. Mockford, Parsons Farnell & Grein LLP, 1030 SW Morrison Street, Portland, OR
97205. Attorney for Defendant and Third-Party Plaintiff.

David P. Rossmiller and Elissa M. Boyd, Betts, Patterson & Mines, P.S., 111 SW Fifth Avenue,
Suite 3650, Portland, OR 97204. Attorneys for Garnishee.

IMMERGUT, District Judge.

This matter comes before the Court on Garnishee Contractors Bonding and Insurance
Company’s (“CBIC”) Motion to Compel production by Defendant/Third-Party Plaintiff Dennis
Widmer Construction, Inc. (“DWC”) and Plaintiffs Reese and Margaret Thompson
(“Thompsons”). ECF 28. CBIC moves the Court for an order compelling DWC and the
Thompsons to produce “unredacted copies of the documents highlighted [i]n Exhibits 3-5 of the
Declaration of David P. Rossmiller.” Id. at 2. In all, CBIC is requesting the production of thirty-
four documents identified in the Thompsons’ privilege log, 484 documents identified in DWC’s
privilege log, and the unredacted version of Kenneth Walhood’s file notes for the underlying
lawsuit. See ECF 29-3 (DWC Privilege Log), 29-4 (File Notes), 29-5 (Thompson Privilege Log).
Because the Court has decided that oral argument would not help resolve this matter, the
parties’ requests for argument are DENIED. For the following reasons, CBIC’s Motion to
Compel, ECF 28 is GRANTED IN PART and DENIED IN PART.
BACKGROUND
This case began as a construction lawsuit. Plaintiffs Reese and Margaret Thompson sued
DWC, their general contractor, in Oregon state court (“Thompson litigation”) for property
damage to their home. ECF 6 at ¶¶ 6, 11, 14. DWC had an insurance policy with CBIC,
Commercial General Liability Policy number D12HA1537 (“Policy”), under which CBIC
defended DWC in this lawsuit. ECF 3 at 6; ECF 6 at ¶¶ 5, 12. CBIC defended DWC under a
reservation of rights. ECF 6 at ¶ 12.
DWC alleges that in the Thompson litigation, CBIC repeatedly refused to settle, was not
responsive to the Thompsons’ offers or DWC’s communications, and only offered to pay
settlement amounts that were too low. See ECF 6 at ¶¶ 15–35, 37. The Thompsons offered to

settle their claims against DWC first for $250,851 and then for $198,000. Id. at ¶¶ 15, 18.
DWC’s defense counsel opined to CBIC that DWC faced liability for between $190,000 and
$280,000 at trial. Id. at ¶ 19. CBIC offered between $40,000 and $60,000 to settle. Id. at ¶¶ 17,
24, 28.
After CBIC notified DWC’s defense counsel that CBIC would not pay more than
$60,000 to settle the Thompson litigation, DWC agreed with the Thompsons to proceed with a
stipulated judgment of $225,000 liability for DWC. Id. at ¶¶ 24–29. On May 20, 2020the state
court entered a judgment against DWC and in favor of the Thompsons for $225,000. Id. at ¶ 30.
On June 15, 2020, the Thompsons, now judgment creditors, served a Writ of Garnishment on

CBIC, an insurer of DWC. ECF 1 at ¶ 2; ECF 6 at ¶ 36.
On July 15, 2020, Garnishee CBIC removed the Writ of Garnishment proceeding to this
Court based on diversity. ECF 1. On July 16, 2020, CBIC responded, denying that it owes any
debt “to the Thompsons as Garnishors or to DWC pursuant to the applicable Policy provisions,
exclusions and limitations.” ECF 3 at 6.
On September 16, 2020, DWC filed crossclaims against CBIC. ECF 6. DWC alleges that
in the Thompson litigation, CBIC breached its contractual and fiduciary duties to DWC by,
among other things, failing to settle the Thompson litigation against DWC and refusing to pay
the resulting judgment against DWC. ECF 6 at ¶ 1; see also id. at ¶¶ 15–35, 37–55. On October
7, 2020, CBIC answered DWC’s crossclaims, asserting affirmative defenses of failure to state a
claim, unclean hands, no coverage, waiver, and estoppel. ECF 11 at ¶¶ 58–63. CBIC also brings
counterclaims for a declaratory judgment that it does not owe a duty to indemnify DWC and for
breach of contract. Id. at 10, 14; id. at ¶¶ 16–25.
On February 5, 2021, DWC filed a Motion to Compel and supporting materials seeking

unredacted copies of a limited number of documents. ECF 14; ECF 15. Following a hearing and
in camera review, ECF 21, this Court granted in part and denied in part DWC’s motion, ECF 22.
On September 8, 2021, CBIC filed this Motion to Compel and supporting materials. ECF
28; ECF 29. CBIC seeks unredacted copies of a bevy of documents from DWC’s and the
Thompsons’ privilege logs—totaling 518 documents—as well as the unredacted version of
defense counsel’s file notes for the Thompson litigation. ECF 29-3; ECF 29-4; ECF 29-5. CBIC
argues that: (1) Oregon’s “tripartite” rule created an attorney-client relationship between defense
counsel, DWC, and CBIC such that no privilege can exclude CBIC, ECF 28 at 5–8; (2) that there
can be no common interest or attorney-client privilege over communications not kept

confidential between DWC and their counsel (or between the Thompsons and their counsel), id.
at 8–9; and (3) that the mediation privilege does not apply to communications made after a
settlement agreement was signed, id. at 10, or to communications involving defense counsel or
CBIC’s agents and employees, id. at 10–11.
LEGAL STANDARDS
Under Federal Rule of Civil Procedure 26(b)(1), parties may discover any unprivileged
information that is relevant to any party’s claim or defense and proportional to the needs of the
case. Fed. R. Civ. P. 26(b)(1). Pre-trial discovery is “accorded a broad and liberal treatment.”
Shoen v. Shoen, 5 F.3d 1289, 1292 (9th Cir. 1993) (internal quotation marks omitted) (quoting
Hickman v. Taylor, 329 U.S. 495, 507 (1947)).
The parties agree that Oregon law governs the attorney-client privilege analysis and
federal law, specifically the Federal Rules of Civil Procedure, governs the work product
protection analysis. See ECF 14 at 6; ECF 16 at 5; ECF 28 at 4; ECF 30 at 4–5 (citing Oregon
law for attorney-client arguments and the Federal Rules for work product arguments); see also
Triangle Park, LLC v. Indian Harbor Ins. Co., No. 08-CV-1256-BR, 2010 WL 11579377, at *5

(D. Or. July 23, 2010); Union Pac. R.R. Co. v. Mower, 219 F.3d 1069, 1076 n.8 (9th Cir. 2000).
Oregon’s attorney-client privilege is codified by statute and provides that “[a] client has a
privilege to refuse to disclose and to prevent any other person from disclosing confidential
communications made for the purpose of facilitating the rendition of professional legal services
to the client . . . .” O.R.S. 40.225(2) (alternatively cited as Oregon Rule of Evidence 503). The
attorney-client privilege applies when: (1) the communication was “confidential,” (2) the
communication was made for the purpose of facilitating the rendition of professional legal
services to the client; and (3) the communication was between the lawyer and the client. State ex
rel. Or. Health Scis. Univ. v. Haas, 325 Or. 492, 501 (1997). The party asserting the privilege

bears the burden of establishing that the privilege applies. See State v. Serrano, 346 Or. 311, 325
(2009).
Federal Rule of Civil Procedure 26 protects attorney work product from discovery if it
was prepared in anticipation of litigation by a party or its representative. Admiral Ins. Co. v. U.S.
Dist. Court, 881 F.2d 1486, 1494 (9th Cir. 1989); Triangle Park, 2010 WL 11579377, at *6.
“The party asserting the work product doctrine bears the burden of establishing, for each
document, the rule’s application.” Triangle Park, 2010 WL 11579377, at *6 (internal quotation
marks and citation omitted).
The parties also agree that the mediation privilege is created by O.R.S. 36.100 et seq. See
ECF 28 at 10–11; ECF 30 at 9–10. Except as otherwise provided by statute, “[m]ediation
communications are confidential and may not be disclosed to any other person.” O.R.S.
36.220(1)(a). Even so, a “party to a mediation may disclose confidential mediation
communications to a person if the party’s communication with that person is privileged under

[the Oregon Rules of Evidence].” O.R.S. 36.220(7). Confidential mediation communications
“are not admissible as evidence in any subsequent adjudicatory proceeding, and may not be
disclosed by the parties or the mediator in any subsequent adjudicatory proceeding.” O.R.S.
36.222(1). “The limitations on admissibility and disclosure in subsequent adjudicatory
proceedings . . . apply to any subsequent judicial proceeding . . . includ[ing] disclosure during
and discovery conducted.” O.R.S. 36.222(7).
DISCUSSION
CBIC seeks a motion to compel production of four broad categories of documents. First,
CBIC seeks correspondence between DWC and assigned defense counsel, Kenneth Walhood.
ECF 28 at 3. Second, and relatedly, CBIC seeks from DWC “a plethora of documents redacted

based on the purported attorney-client and work product privileges” that relate to the Thompson
litigation and are either to, from, or by defense counsel. Id. Third, CBIC seeks from both DWC
and the Thompsons documents that included counsel for underlying defendant Edgewood
Construction, LLC. Id. at 3–4. Fourth, CBIC seeks from DWC and the Thompsons documents
that were withheld under the mediation privilege that either (i) include DWC’s defense counsel
or CBIC’s employees or agents or (ii) are dated after the mediation concluded. Id. at 4.
A. Correspondence between DWC and Defense Counsel
DWC withheld correspondence between it and defense counsel Kenneth Walhood, whom
CBIC hired, based on attorney-client privilege. CBIC argues that the attorney-client privilege
does not exist between co-clients and their shared counsel. See id. at 5–6.
The attorney-client privilege does not apply “[a]s to a communication relevant to a matter
of common interest between two or more clients if the communication was made by any of them

to a lawyer retained or consulted in common, when offered in an action between any of the
clients.” O.R.S. 40.225(4)(e). It is true, as CBIC states, that Oregon law recognizes “a tripartite
representation relationship in which an insurer retains legal counsel to represent both an insured
and the insurer.” Hertz Corp. v. Katzung, No. 3:20-cv-269-SI, 2021 WL 1187039, at *5 (D. Or.
2021). But “[t]o minimize th[e] risk” of a conflict of interest “and to permit joint representation
in such cases, both the ethical rules and insurance law require that a lawyer hired by the insurer
to defend an insured must treat the insured as ‘the primary client’ whose protection must be the
lawyer’s ‘dominant’ concern.” Or. State Bar, Formal Op. No. 2005-121 (2016).
When it comes to the interplay between attorney-client privilege, the tripartite

relationship, and discovery, neither party cites case law directly on point. But DWC directs the
Court to the Restatement of the Law of Liability Insurance § 11(2) (Am. L. Inst. 2019):
An insurer does not have the right to receive any information of the
insured that is protected by attorney-client privilege, work-product
immunity, or a defense lawyer’s duty of confidentiality under rules
of professional conduct, if that information could be used to benefit
the insurer at the expense of the insured (emphasis added).
See ECF 30 at 7. Also cutting against CBIC’s position that it has a right to all correspondence
between DWC and defense counsel is the fact an insurer and insured’s “interests [can] become
antagonistic” such that “some courts have held that the ‘insurer must not be allowed to use
against its insured any information whatsoever gained by reason of the insurer-insured
relationship.” Hosp. Mgmt., Inc. v. Preferred Contractors Ins. Co., No. 3:18-cv-00452-YY, 2021
WL 3700264, at *19 (D. Or. Mar 17, 2021), report and recommendation adopted, No. 3:18-CV-
452-YY, 2021 WL 2813610 (D. Or. Jul 6, 2021) (quoting Lima v. Chambers, 657 P.2d 279, 285
(Utah 1982)).
The Court also notes that the cases relied on by CBIC are distinguishable. Of particular
note is Hertz Corp. v. Katzung, 2021 WL 1187039, which also concerned motions to compel

between an insured and insurer. “The primary question” in Hertz was “whether the attorney had
sufficiently begun representing the insured to entitle the insured to see otherwise privileged
communications between the attorney and the insurer relating to this tripartite representation,
notwithstanding the fact that the attorney never communicated with the insured and the insured
never even became aware of the attorney’s existence or representation of the insured.” Id. at *1.
Ultimately, the court found that no attorney-client relationship had formed between the insured
and the lawyer because the attorney discovered a conflict of interest between the insurer and
insured before either the insurer or the attorney communicated with the insured about the
representation. Id. at *5–6. Here, on the other hand, the communications at issue are between the

attorney and the insured. Moreover, as DWC points out, Hertz involved an insured seeking
information from an insurer that was arguably attorney-client privileged. ECF 30 at 8. None of
the other concerns at play here—the insured being the dominant concern of the attorney and the
risk of the insurer using the information against the insured—were present in Hertz.
Here, defense counsel Kenneth Walhood understood himself to be representing solely
DWC when he communicated with DWC’s coverage counsel. See ECF 32, Walhood Decl., at
¶ 4. All communications between defense counsel Kenneth Walhood and coverage counsel Paul
Mockford are attorney-client privileged and CBIC may not discover them.
As CBIC acknowledges in its brief, its “coverage analysis has always concluded that very
little of the damages claimed in the Thompsons’ construction defect lawsuit against DWC . . .
was covered.” ECF 28 at 2. To the extent that DWC and CBIC had a common interest in the
Thompson litigation, it was clearly circumscribed. Put another way, DWC was solely interested
in defeating the Thompsons’ claims or settling, while CBIC could avoid liability either by

defeating the Thompsons’ claims or by finding that the alleged damages were not covered. CBIC
expressed no interest in settling for an amount that the Thompsons would have accepted. See
ECF 6 at ¶¶ 17, 24, 28. Thus, all communications between DWC and Kenneth Walhood relating
to settlement are attorney-client privileged and not subject to the “common interest” exception of
O.R.S. 40.225(4)(e).
Finally, as to any communications between DWC and Kenneth Walhood relating to the
Thompson litigation but not settlement, the considerations in Oregon State Bar Formal Opinion
No. 2005-12; Hospitality Management, Inc., 2021 WL 3700264, at *19; and Restatement of the
Law of Liability Insurance § 11(2) favor protection. CBIC cannot now use the communications

between its insured—DWC—and retained defense counsel to deny coverage.
B. Documents about the Thompson litigation to, from, or by Defense Counsel
DWC also withheld documents to, from, or by defense counsel based on attorney-client
and work-product privileges. ECF 28 at 3. Every document labeled as work product in DWC’s
privilege log is also labeled as attorney-client privileged, see generally ECF 29-3, and thus not
discoverable to the extent outlined above. As to the defense file, ECF 29-4, the Court
understands from the parties’ briefing that (1) DWC claimed that defense counsel’s file was
work product and therefore privileged, but (2) that DWC still produced a redacted copy because
CBIC claimed compelling need. ECF 28 at 3; ECF 30 at 9 n.4. Thus, there is no work-product
protection at issue regarding the overall file. The redactions to the defense file asserted attorney-
client and mediation privileges rather than work-product, ECF 29-4, so their discoverability is
governed by the Court’s rulings on those issues. As explained above, the redactions based on
attorney-client privilege are proper if they are communications between DWC and Kenneth
Walhood, whether about settlement or the Thompson litigation. As explained more fully below,

the redactions based on mediation privilege are proper if they reflect communications made
before the Settlement Agreement was signed on May 11, 2020. There is one unexplained
redaction, id. at 3; DWC is ordered either to explain why this portion was redacted or provide a
version of the defense file with that portion unredacted.
Even if the attorney-client privilege did not apply, CBIC would not be able to discover
every document labeled work product. CBIC argues that Federal Rule of Civil Procedure
26(b)(3) “includes in the work-product protection a party’s representative ‘including the other
party’s attorney . . . insurer, or agent.’” ECF 28 at 8 (emphasis added by CBIC). This misreads
Rule 23(b)(3), which categorically precludes, unless otherwise permitted, the discovery of

“documents . . . prepared in anticipation of litigation . . . for . . . the other party’s . . . insured.”
Fed. R. Civ. P. 23(b)(3)(A). This Court has previously found that a failed mediation on January
22, 2020 triggered CBIC’s anticipation of litigation. ECF 22 at 9. That date is also when DWC
admittedly anticipated litigation. ECF 30 at 8. Anything prepared by defense counsel after that
date is entitled to work product protection and is not discoverable on that basis. 1 In contrast,

1 Nor has CBIC shown that it has a compelling need for either the fact work product or
defense counsel’s mental impressions. ECF 28 at 8. CBIC claims that fact work-product is
needed to show “how the settlement agreement came to be and what damages could have been
included in the same.” Id. CBIC also seeks defense counsel’s mental impressions because they
were “a substantial factor in settling around CBIC and are therefore at issue in determining
whether there was a breach of contract.” Id. These general assertions do not satisfy CBIC’s
burden of showing compelling need where CBIC has two settlement demands from the
anything prepared before January 22, 2020, though, could not have been prepared in anticipation
of litigation and is not entitled to work-product protection.
C. Documents Including Counsel for Underlying Defendant Edgewood Construction, LLC
Next, CBIC seeks documents shared with “lawyers for [underlying defendant]
Edgewood[, LLC] or others not employed by DWC’s coverage counsel.” ECF 28 at 8. The

Thompsons have represented that during conferral for this motion, they explained to CBIC that
they did not intend to withhold documents for purposes other than the mediation privilege. ECF
33 at 2. The Thompsons submitted as an attachment an updated privilege log reclassifying six of
the documents CBIC seeks as mediation privileged. ECF 34-1 at 7-8 (Entry Nos. 85, 86, 88, 98,
104, 105). The Court accepts this updated privilege log and will analyze those documents under
the mediation privilege in the next section.
There are two documents, which CBIC seeks as communications with someone whose
inclusion destroys any privilege, that have not been reclassified as mediation privileged. These
documents are PRIV000051 (Entry No. 38) and PRIV000052 (Entry No. 39). ECF 29-5 at 5;

ECF 34-1 at 4. One recipient of these documents—Jason Hirshon—is counsel for the
Thompsons, while the others’2 relationships to the Thompsons are unknown to the Court. The
sender of these documents—Lisa Maguire—appears to be the assistant to a prior mediator and
was also copied on several communications with the later mediator. See ECF 29-7 at 2 (Entry

Thompsons to establish damages and defense counsel’s settlement evaluations to show his
mental impressions about the settlement. ECF 11 at ¶ 15 (CBIC’s admission to being aware of a
settlement demand for $250,851); ECF 15-6 (Walhood settlement evaluation); ECF 15-7 at 1
(March 4, 2020 letter from DWC’s coverage counsel demanding settlement for $198,000); ECF
15-10 (May 11, 2020 letter from DWC’s coverage counsel explaining the stipulated judgment).
2 Matthew Juhren and Kristen Wiljanen.
No. 104). If these documents are mediation privileged, the Thompsons should update their
privilege log accordingly.
Finally, the Thompsons—without reclassifying which privileges might apply—have
designated as “Downgrade to Produce” three documents: PRIV000494 (Entry No. 11),
PRIV000495 (Entry No. 12), and PRIV 000061 (Entry No. 77). ECF 34-1 at 1, 6. If they have

not done so already, the Thompsons should produce these documents to CBIC.
D. Documents Relating to Mediation
The last category of documents CBIC seeks are those about which DWC and the
Thompsons have invoked mediation privilege under O.R.S. 36.100 et seq. CBIC argues that it is
entitled to (1) documents from after the signing of the Settlement Agreement on May 11, 2020
and (2) documents including defense counsel or CBIC’s agents and employees. ECF 28 at 10–
11.
During the discovery process, DWC informed CBIC that it believed that the mediation
privilege applies until the mediator ceases communication with the parties. ECF 29-7 at 5. The

Oregon Supreme Court, however, has stated that:
[C]ommunications that occur after a settlement agreement is
signed are not ‘mediation communications’ within the meaning of
ORS 36.110(7)(a) and are neither prohibited from disclosure under
ORS 36.220 nor inadmissible under 36.222. A communication is
thus ‘in the course of or in connection with’ a mediation only if it
is made during and at a mediation proceeding or occurs outside of
a proceeding but relates to the substance of the dispute being
mediated and is made before a resolution is reached or the process
is otherwise terminated.
Alfieri v. Solomon, 358 Or. 383, 397 (2015) (footnote omitted). DWC urges that CBIC
“overreads” Alfieri because, unlike the parties in that case, CBIC was not a party to the
mediation. ECF 30 at 10. But DWC does not point to any language in Alfieri or any other case
that persuades this Court that such a distinction is noteworthy. Communications made after “a
resolution is reached” are no longer mediation communications and so no longer fall under the
mediation privilege. Unless they are otherwise privileged, DWC and the Thompsons are ordered
to produce these documents.

As for the mediation communications that included defense counsel or CBIC’s agents or
employees, CBIC’s arguments fail. First, CBIC argues that the communications involving
defense counsel implicate the tripartite relationship and O.R.S. 36.220 provides that “a party to a
mediation may disclose confidential mediation communications to a person if the party’s
communication with that person is privileged under [O.R.S. 40.225].” See ECF 28 at 5. As
DWC points out, the permissive language of O.R.S. 36.220 does not obligate disclosure. ECF 30
at 10. Moreover, O.R.S. 36.222(7) provides that “[t]he limitations on admissibility and disclosure
in subsequent adjudicatory proceedings imposed by this section apply to any subsequent judicial
proceeding . . . [and] include disclosure during any discovery conducted as part of a subsequent

adjudicatory proceeding.” Indeed, the mediation agreement itself provided that “[a]ll mediation
communications . . . are (to the fullest extent permitted by law) non-discoverable and
inadmissible for any purpose in any arbitral, judicial or other proceeding.” ECF 34 at 14. Finally,
if any mediation communications were made with CBIC, its agents, or employees, the need for
discovery is unclear since those documents would already be in CBIC’s possession.
CONCLUSION
For the foregoing reasons, CBIC’s Motion to Compel, ECF 28, is GRANTED IN PART
and DENIED IN PART. DWC and the Thompsons are ordered to produce all communications

marked as mediation-privileged dated after the Settlement Agreement signed on May 11, 2020
unless those documents are otherwise privileged. DWC is also ordered to produce any
documents marked as work-product privileged from before the date DWC anticipated
litigation—that is, January 22, 2020—unless otherwise privileged.

IT IS SO ORDERED.

DATED this 10th day of November, 2021.

/s/ Karin J. Immergut
Karin J. Immergut
United States District Judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10393982. Public record. Not legal advice.