First American Title Insurance Co. v. Bowles Rice, L.L.P.

FOR THE NORTHERN DISTRICT OF WEST VIRGINIA

FIRST AMERICAN TITLE INSURANCE CO.,

Plaintiff,

v. CIVIL ACTION NO. 1:16cv219

(Judge Keeley)

BOWLES RICE, LLP,

Defendant.

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

Now pending are objections filed by the defendant, Bowles

Rice, LLP (“Bowles Rice”), to the denial of two motions to compel

by the Honorable Michael J. Aloi, United States Magistrate Judge.

For the reasons stated on the record during the November 20, 2017,

status conference, as well as those that follow, the Court

OVERRULES Bowles Rice’s objections (Dkt. No. 103).

I. BACKGROUND

A. Factual Background1

This case is the most recent in a litany of litigation flowing

from the ill-fated construction of a $2 billion, 695-megawatt

supercritical coal-fired power plant by Longview Power, LLC

(“Longview”), in Maidsville, West Virginia. Longview financed

construction of the plant, in part, by borrowing approximately $1.1

billion. The financing was secured by a Fee and Leasehold Credit

1 Because the basic underpinning of this case is not in

dispute, unless otherwise noted, the Court takes its recitation of

the foundational facts from the parties’ pleadings and briefing.

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

Line Deed of Trust, Security Agreement, and Assignment of Leases

and Rents and Fixture Filing (“Deed of Trust”), in favor of Union

Bank of California, N.A. (“Union Bank”), which was executed and

recorded in Monongalia County, West Virginia, on February 28, 2007.

To cover the Deed of Trust’s priority, Union Bank obtained a

$775 million lender’s policy of title insurance from the plaintiff,

First American Title Insurance Company (“First American”). The

policy has an effective date of March 9, 2007, and includes a

mechanic’s lien endorsement. Pursuant to its agency agreement with

First American, Bowles Rice actually underwrote, performed title

searches, and issued the title insurance policy on First American’s

behalf.2 First American reinsured portions of its liability under

the policy through agreements with Old Republic Title Insurance

Company (“Old Republic”) and Stewart Title Insurance Company

(“Stewart”).

As subsequent events make clear, few parties involved with

construction of the power plant escaped the project unscathed.

First, Longview became entangled in various disputes with its

contractors during the course of construction, and the contractors

2 At this time, the parties dispute whether Bowles Rice was

acting pursuant to a 1994 agency agreement regarding policies

issued out of its office in Charleston, West Virginia, or a 2006

agency agreement regarding policies issued out of its office in

Morgantown, West Virginia.

2

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

filed mechanic’s lien claims in excess of $335 million in February

2012. Because the mechanic’s liens claimed priority over its Deed

of Trust, Union Bank filed a claim with First American in April

2013. Longview subsequently filed for bankruptcy protection in the

District of Delaware in August 2013.

First American proceeded to litigate the issue of liability

under its insurance policy on several fronts. In May 2014, it

sought declaratory relief in California state court regarding its

obligations to Union Bank. Thereafter, Longview filed an adversary

proceeding against First American in the bankruptcy proceeding in

the District of Delaware, seeking a determination regarding

coverage under the insurance policy. In June 2014, the Delaware

bankruptcy court approved the assignment of proceeds under the

policy from Union Bank to Longview, and it stayed First American’s

case in California. In September 2014, First American commenced its

own adversary proceeding in the District of Delaware, challenging

the priority of the mechanic’s liens over the Deed of Trust.

Ultimately, in December 2014, First American resolved its

liability in these matters by contributing $41 million as part of

a global settlement in the Delaware bankruptcy court. First

American recovered a portion of this loss through its reinsurance

policies, but only after Old Republic and Stewart contested their

3

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

liability and forced First American to litigate the claims. In

turn, First American filed this lawsuit for breach of contract

against Bowles Rice on November 16, 2016.

More particularly, First American seeks to recover its loss

based on Bowles Rice's alleged breaches of their agency agreements.

First, First American contends that Bowles Rice knew construction

had commenced on the power plant prior to issuing the title

insurance policy - thus giving rise to the possibility of the

filing of mechanic’s liens that would hold priority over the Deed

of Trust - but breached its duty to inform First American of such

a critical fact. Second, First American claims that Bowles Rice

breached its duty to indemnify it for losses associated with Union

Bank’s claim under the title insurance policy.

B. Procedural Background

The parties have been engaged in discovery since the Court

conducted a scheduling conference in February 2017. In August 2017,

Bowles Rice filed two motions to compel, which the Court referred

to Magistrate Judge Aloi (Dkt. Nos. 51; 52). On October 23, 2017,

Magistrate Judge Aloi entered a written order denying portions of

Bowles Rice’s motions (Dkt. No. 89).3

3 Many issues that were the subject of Bowles Rice’s motions

actually were resolved during proceedings before the magistrate

judge. His written order dealt exclusively with remaining matters

4

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

1. Bowles Rice’s Motions

In its first set of interrogatories, particularly

Interrogatory No. 4, Bowles Rice sought the following:

Identify by name, residence and business address and

residence and business telephone number, each and every

agent, representative and/or employee of Plaintiff who

participated in the decision regarding the level at which

any reserve should be established as to any claim herein

described and state specifically the reasons and rational

relied on in support of the decision to set a reserve at

the level where it was first established and describe in

detail any and all documents which might exist which

would indicate the amount of the reserve established;

when it was established; who established the reserve; the

reasons and rationale relied on in support of the

establishment of the reserve, whether such reserve was

ever changed, and if so, how and why it was changed.

(Dkt. No. 51-1 at 7). First American responded as follows:

First American objects to this interrogatory on grounds

it seeks information that is not relevant, the request is

not reasonably calculated to lead to the discovery of

admissible evidence, and the request is not proportional

to the needs of the case. Further objecting, First

American states that the request seeks information

protected by the attorney client privilege and the

attorney work product doctrine.

Id.

Bowles Rice moved to compel this information, arguing that

1) reserve information "is relevant to determining the

reasonableness of any settlements that [First American] now seeks

to recover from Bowles Rice"; 2) without a privilege log, Bowles

that are now the subject of Bowles Rice’s objections.

5

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

Rice cannot not adequately assess First American's work-product

claims; and 3) the identity of individuals involved with reserves

"is clearly discoverable" (Dkt. No. 51 at 8-10).

At the same time, in Requests for Production Nos. 4, 6, 8, 10,

12, 14, and 16, Bowles Rice sought "litigation related documents

which would not have been publicly filed" (Dkt. No. 52 at 10). It

specifically sought "all documents reflecting all communications,

emails, letters, etc., between Plaintiff and any attorney or

representative retained by it or acting on its behalf related to"

the following actions, many of which are discussed above:

• Jarrett F. Jamison, III, et al. v. Longview Power,

LLC, et al., Civil Action No. 07-CV-20 (N.D.W.Va.);

• Jarrett F. Jamison, III, et al. v. Longview Power,

LLC, et al., Civil Action No. 07-CV-41 (N.D.W.Va.);

• Old Republic National Title Insurance Company v.

First American Insurance Company, Civil Action No.

8:15-cv-126-T-30EAJ (M.D. Fla.);

• In re Longview Power, LLC, et al., Adversary

Proceeding No. 14-AP-50369 (BLS) (Bankr. D. Del.);

• First American Title Insurance Company v. Union

Bank, N.A. fka Union Bank of California, N.A., et

al., Civil Action No. 8:14-CV-00953 (Super. Ct.);

and

• Kvaerner North American Construction Inc.'s action

against Longview Power, LLC, Civil Action No.

12-C-521, in the Circuit Court of Monongalia

County, West Virginia.

6

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

In response, First American "object[ed] that [each] request

seeks documents and information that are protected from production

by the attorney client privilege and attorney work product

doctrine." According to Bowles Rice, although this information is

relevant to whether the settlements were in good faith, First

American did not provide a privilege log. Bowles Rice moved to

compel First American to provide a privilege log so that Bowles

Rice could evaluate the claims of privilege (Dkt. No. 52 at 13-14).

At Magistrate Judge Aloi's direction, Bowles Rice filed a

supplemental brief on October 6, 2017, to address its argument that

First American had impliedly waived the attorney-client privilege

covering the enumerated litigation by filing this lawsuit (Dkt. No.

73). First American argues, on the other hand, that it must only

prove the "objective reasonableness" of its settlement to succeed

on its indemnification claim, making the privileged documents

irrelevant (Dkt. No. 81 at 6).

2. The Magistrate Judge’s Decision

In rejecting Bowles Rice’s arguments and denying its motions

to compel, Magistrate Judge Aloi reasoned that First American had

not waived the attorney-client privilege regarding underlying

settlements because it had not placed attorney-client

communications in issue by relying on them (Dkt. No. 89 at 9-11).

7

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

Second, Magistrate Judge Aloi denied Bowles Rice’s request to

compel production of the mental impressions behind First American’s

reserves, given that reserves themselves are irrelevant to the

reasonableness of the settlement. Id. at 12. Finally, he did not

require First American to produce a privilege log for

communications taking place after July 2014. Id.

II. STANDARD OF REVIEW

Pursuant to 28 U.S.C. § 636(b)(1)(A), the Court may designate

a magistrate judge to determine non-dispositive pretrial matters,

but the Court “may reconsider any pretrial matter . . . where it

has been shown that the magistrate judge’s order is clearly

erroneous or contrary to law.” Fed. R. Civ. P. 72(a) provides the

framework for such reconsideration. When the Court refers a non-

dispositive motion, “the magistrate judge must . . . , when

appropriate, issue a written order stating the decision.” The

parties have an opportunity to object within 14 days of being

served with the order, and “[t]he district judge in the case must

consider timely objections and modify or set aside any part of the

order that is clearly erroneous or is contrary to law.”

In this case, Bowles Rice identifies three specific objections

to Magistrate Judge Aloi’s rulings on its motions to compel. The

questions presented for the Court are as follows:

8

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

• Whether the decision is contrary to law because it did not

require First American to provide privilege logs for allegedly

privileged documents produced after July 29, 2014;

• Whether the decision that reserve information is irrelevant is

clearly erroneous or contrary to law given the particularized

facts of this case; and

• Whether the decision that First American did not waive its

attorney-client privilege regarding the underlying lawsuits is

clearly erroneous or contrary to law.

III. LEGAL FRAMEWORK

Although they rely on the same authority, First American and

Bowles Rice dispute a foundational issue: whether, under the burden

of proof applicable to First American’s request for

indemnification, First American must prove that it acted in

subjective “good faith,” or must only demonstrate that the

underlying settlements were objectively reasonable. After reviewing

relevant West Virginia precedent, the Court is persuaded that First

American has the better argument.

West Virginia recognizes both express and implied

indemnification. Express indemnity is based on a written agreement

and "can provide the person having the benefit of the agreement,

the indemnitee, indemnification even though the indemnitee is at

9

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

fault." Syl. Pt. 1, Valloric v. Dravo Corp., 357 S.E.2d 207 (W. Va.

1987). Implied indemnity, on the other hand, arises out of a

relationship between the parties. Id.

“Where a party having a duty to indemnify has been notified or

been made a party to the underlying proceedings and given an

opportunity to participate in its settlement negotiations . . . the

indemnitee should not be required to prove" that it was actually

liable "to recover the amount paid in the settlement." Rather,

"[u]nder a potential liability standard, the indemnitee must in his

indemnity suit show that the original claim is covered by the

indemnity agreement. Then he must demonstrate that he was exposed

to liability which could reasonably be expected to lead to an

adverse judgment. Finally, he must prove that the amount of the

settlement was reasonable." Id., 357 S.E.2d 207, Syl. Pt. 4.

This test obtains regardless of whether the duty is express or

implied. Moreover, the standard does not involve inquiry into the

subjective belief of a settling indemnitee. Rather, the Supreme

Court of Appeals has identified two objective factors for assessing

reasonableness: "the amount paid in settlement of the claim in

light of the risk of exposure." Id. at 214.

Bowles Rice argues that First American must show that it acted

in "good faith" in order to recover, claiming that the Supreme

10

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

Court of Appeals "implicitly recognized that good faith is required

to support an indemnity claim for an underlying settled claim”

(Dkt. No. 82 at 4-5). This simply is not correct. In Valloric, West

Virginia’s highest court merely noted that requiring an indemnitee

to prove that it was "actually liable," rather than "potentially

liable," would discourage settlements "on a good faith basis."

Valloric, 357 S.E.2d at 212. Nowhere does the court require

indemnitees to prove subjective good faith in addition to or as a

component of reasonableness. Rather, it appears to treat acts that

are "reasonable and undertaken in good faith" as one and the same.

See id.; accord Grace Village Health Care Facilities, Inc. v.

Lancaster Pollard & Co., No. 3:11cv295, 2013 WL 4012662 (N.D. Ind.

Aug. 6, 2013); Interspan Distribution Corp. v. Liberty Ins.

Underwriters, Inc., 2009 WL 2605314 (S.D. Tex. Aug. 21, 2009)

(recognizing an objective standard).

IV. DISCUSSION

Because West Virginia law imposes an objective standard on

parties seeking indemnification, the Court concludes that reserve

information regarding Union Bank’s claim is irrelevant, and that

First American did not impliedly waive its attorney-client

privilege by filing this lawsuit. Moreover, First American need not

11

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

provide a privilege log regarding those attorney-client

communications.

A. Reserves Information Is Irrelevant.

Bowles Rice argues that reserve information is relevant to the

reasonableness of First American’s decision to settle its liability

in the underlying litigation for $41 million. More particularly,

Bowles Rice contends that information related to First American’s

quickly changing reserve for the underlying claim may help

establish the unreasonableness of its settlement (Dkt. No. 103 at

9-11). Although not binding on this Court’s application of the

Rules of Evidence, there is persuasive West Virginia authority to

the contrary regarding the relevance of reserve information.

“[R]eserves are value approximations made by an insurance

company regarding what will be sufficient ‘to pay all obligations

for which the insurer may be responsible under the policy with

respect to a certain claim.” State ex rel. Erie Ins. Prop. & Cas.

Co. v. Mazzone, 625 S.E.2d 355, 358-59 (W. Va. 2005). When deciding

whether reserve information is relevant in any particular case, it

is critical to consider the method by which an insurance company

sets reserves (i.e. individual vs. aggregate), the nature of the

underlying litigation, and the purpose for which the information is

sought. “In other words, it is widely recognized that relevancy of

12

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

reserve information turns on the unique factors presented in each

case.” Id. at 360. For instance, in a third-party bad faith case,

information related to an individual reserve may be relevant to

whether an insurance company intentionally undervalued the

plaintiff’s claim with regard to its settlement offers. See

Nicholas v. Bituminous Cas. Corp., 235 F.R.D. 325, 330 (N.D.W.Va.

2006) (noting that, “[a]lthough reserve information generally has

been held to be irrelevant in cases involving coverage issues, Erie

recognized that a few courts had determined that such information

is relevant in bad faith cases”).

Here, even assuming that First American set its reserve for

the underlying claim such that its “reasons and rationale” are

probative of good or bad faith, those subjective beliefs are not

relevant given “the unique factors presented” in this case. Erie,

625 S.E.2d at 360. As already discussed, under the potential

liability standard upon which First American relies, an indemnitee

need only prove that it reasonably settled a claim for which it may

have been liable. Valloric, 357 S.E.2d 207, Syl. Pt. 4. Whether

First American’s settlement was reasonable will be determined based

on the amount First American paid in light of the possible exposure

it faced. Id. at 214. Because this standard is objective,

Magistrate Judge Aloi’s conclusion that subjective information

13

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

regarding First American’s reserve is irrelevant - and thus not

discoverable - was neither clearly erroneous nor contrary to law.

B. First American Did Not Impliedly Waive the Attorney-Client

Privilege.

Bowles Rice also contends Magistrate Judge Aloi incorrectly

concluded that First American did not impliedly waive its attorney-

client privilege regarding underlying litigation (Dkt. No. 103 at

11-13).

In this diversity action, attorney-client privilege is

governed by West Virginia law, Fed. R. Evid. 501, which requires

that “(1) both parties must contemplate that the attorney-client

relationship does or will exist; (2) the advice must be sought by

the client from the attorney in his capacity as legal advisor;

[and] (3) the communication between the attorney and client must be

intended to be confidential.” Smith v. Scottsdale Ins. Co., 621 F.

App’x 743, 745 (4th Cir. 2015) (unpublished decision) (alteration

in original) (quoting State ex rel. Med. Assurance of W. Va., Inc.

v. Recht, 583 S.E.2d 80, 84 (W. Va. 2003)). Even if privileged

matters are relevant and helpful to a litigant’s case, they are not

discoverable. Id.

Nonetheless, “[a] party may waive the attorney-client

privilege by asserting claims or defenses that put his or her

attorney’s advice in issue.” Syl. Pt. 6, State ex rel. Brison v.

14

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

Kaufman, 584 S.E.2d 480 (W. Va. 2003) (quoting Syl. Pt. 8, State ex

rel. United States Fid. & Guaranty Co. v. Canady, 460 S.E.2d 677

(1995)). “[A]n attorney’s legal advice only ‘becomes an issue where

a client takes affirmative action to assert a [claim or] defense

and attempts to prove that [claim or] defense by disclosing or

describing an attorney’s communication.’” State ex rel. Marshall

Cty. Comm’n v. Carter, 689 S.E.2d 796, 805 (W. Va. 2010) (quoting

Canady, 460 S.E.2d at 688 n.16). Critically, “advice is not in

issue merely because it is relevant, and does not come in issue

merely because it may have some affect [sic] on a client’s state of

mind.” Smith, 621 F. App’x at 746 (quoting Canady, 460 S.E.2d at

688 n.16).

Bowles Rice relies primarily on two cases to argue that First

American placed its attorneys’ advice “in issue” by filing this

indemnification lawsuit: Hearn v. Rhay, 68 F.R.D. 574 (E.D. Wash.

1975), and In re County of Erie, 546 F.3d 222 (2d Cir. 2008). The

approaches outlined in these cases are valuable as persuasive

authority regarding how West Virginia would determine whether First

American placed its attorney advice “in issue” in this case.

In Hearn, the defendants confined the plaintiff in a mental

health unit without a hearing or other review. When the plaintiff

sued them for violations of his constitutional rights, the

15

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

defendants asserted that they had acted in good faith and were

entitled to immunity. 68 F.R.D. at 578. To counter this defense,

the plaintiff sought discovery of legal advice rendered to the

defendants. In analyzing whether the defendants had impliedly

waived the attorney-client privilege, the district court noted that

privilege exceptions usually involve “the party asserting privilege

plac[ing] information protected by it in issue through some

affirmative act for his own benefit.” In order to avoid manifest

unfairness, the court concluded that privilege is impliedly waived

when “(1) assertion of the privilege was a result of some

affirmative act, such as filing suit, by the asserting party; (2)

through this affirmative act, the asserting party put the protected

information at issue by making it relevant to the case; and (3)

application of the privilege would have denied the opposing party

access to information vital to his defense.” Id. at 581.

Application of the test articulated in Hearn has varied in the

context of indemnification actions. Compare 1st Sec. Bank of

Washington v. Eriksen, 2007 WL 188881, at *3 (W.D. Wash. 2007)

(finding that attorney-client privilege is not waived under Hearn

even though objective reasonableness of a settlement may be at

issue), with GAB Bus. Servs., Inc. v. Syndicate 627, 809 F.2d 755,

762 & n.11 (11th Cir. 1987) (reasoning that an indemnitee waived

16

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

its attorney-client privilege by placing the reasonableness of its

settlement at the “very heart” of the litigation, thus “requir[ing]

testimony from its attorneys or testimony concerning the

reasonableness of its attorneys’ conduct”), criticized in PETCO

Animal Supplies Stores, Inc. v. Ins. Co. of North America, 2011 WL

2490298, at *18 (D. Minn. June 10, 2011).

But to the extent that Hearn suggests privileged information

is at issue merely because it is relevant to a claim, this aspect

of the test is difficult to square with West Virginia law.4 As

discussed, although privilege can be waived in West Virginia when

a party’s claim or defense puts its attorney’s advice at issue,

advice does not become “in issue” unless a client takes affirmative

action to rely on his or her attorney’s advice in subsequent

litigation. Indeed, the Supreme Court of Appeals has noted that

advice does not become “in issue” merely because it is relevant or

affected the client’s state of mind. Smith, 621 F. App’x at 746

4 As Bowles Rice points out, a magistrate judge in this

district recently cited Hearn with regard to implied waiver. See

Smith v. Scottsdale Ins. Co., 40 F. Supp. 3d 704, 724 (N.D.W.Va.

2014). But that same decision also cited Rhone-Poulenc Rorer Inc.

v. Home Indemnity Co., which was extremely critical of the test

articulated in Hearn. 32 F.3d 851, 863 (3d Cir. 1994) (“These

decisions are of dubious validity. While the opinions dress up

their analysis with a checklist of factors, they appear to rest on

a conclusion that the information sought is relevant and should in

fairness be disclosed.”).

17

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

(quoting Canady, 460 S.E.2d at 688 n.16). Therefore, Magistrate

Judge Aloi did not act contrary to the law by declining to apply

the Hearn test in this case.5

Rather, the better test was articulated by the Second Circuit

in Erie. The court there was critical of Hearn and its application

by the district court below. More particularly, it found fault with

the fact that Hearn appears to make a communication “at issue”

simply because it is relevant to the lawsuit. Erie, 546 F.3d at

229. The Second Circuit instead reasoned that, in order to make

privileged information “at issue” and implicitly waived, “a party

must rely on privileged advice from his counsel to make his claim

or defense.” Id. (emphasis in original). This holding is consistent

with West Virginia’s discussion of waiver, and Magistrate Judge

Aloi was correct to apply it. See Carter, 689 S.E.2d at 805

(quoting Canady, 460 S.E.2d at 688 n.16) (“[A]n attorney’s legal

5 Even if the Court were to apply the Hearn test, Bowles

Rice’s argument falters on the third requirement because it cannot

establish that the privileged communications it seeks are “vital”

to its defense. Rather, Bowles Rice has “access to witnesses other

than plaintiff’s attorney’s who can shed light on the reasons for

the settlement, and to experts who could opine on the

reasonableness of the settlement.” Eriksen, 2007 WL 188881, at *3.

Indeed, First American itself intends to rely on its employees, as

well as pleadings and discovery from the underlying cases, not the

advice of its attorneys (Dkt. No. 109 at 7). That the privileged

communications are relevant and may be helpful to Bowles Rice does

not necessarily mean that they are “vital.” See Eriksen, 2007 WL

188881, at *3.

18

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

advice only ‘becomes an issue where a client takes affirmative

action to assert a [claim or] defense and attempts to prove that

[claim or] defense by disclosing or describing an attorney’s

communication.’”).

Here, First American is not relying on the advice of counsel

to establish that its settlement was reasonable, nor does West

Virginia law require that it do so. To the contrary, First American

has expressly stated its intention to rely solely on the objective

factors set forth by the Supreme Court of Appeals in Valloric.

Given that it need not present subjective evidence, First American

did not impliedly waive its attorney-client privilege by the mere

filing of this indemnification lawsuit. Accord AngioDynamics, Inc.

v. Biolitec, Inc., No. 1:08-CV-004, 2010 WL 11541926 (N.D.N.Y. May

25, 2010) (holding that merely filing an indemnification action

does not constitute a waiver of the attorney-client privilege).

Likewise, because First American is not relying on its state of

mind to prove that the underlying settlement was reasonable,

denying access to privileged material is not unfair, as Bowles Rice

argues. See Leviton Mfg. Co., Inc. v. Greenberg Traurig LLP, 2010

WL 4983183, at *3 (S.D.N.Y. Dec. 6, 2010).

In addition, Bowles Rice attempts to establish that it can

satisfy the Erie test, but only by mischaracterizing the test’s

19

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

proper application. This misconception of the Erie test is belied

by Bowles Rice’s reliance on Bacchi v. Massachusetts Mutual Life

Insurance Co., 110 F. Supp. 3d 270, 276 (D. Mass 2015). In Bacchi,

the defendant pleaded affirmative defenses of good faith and

regulatory approval. Id. at 275. As a result, the plaintiff claimed

that the defendant had placed its legal advice at issue and

impliedly waived attorney-client privilege. Id. The district court

reasoned that “it is not necessary for purposes” of proving

reliance under Erie “to show that the defendant has stated an

intent to introduce” attorney communications. “Rather, it is

sufficient if the defendant’s defense relies on certain facts that

can only be tested or rebutted if the adversary is given access to

privileged material.” Id. at 276.

Here, Bowles Rice places itself in the position of the

defendant in Bacchi, arguing that its defense relies on facts that

can only be tested with access to First American’s privileged

communications (Dkt. No. 73 at 9-10). But this argument gets Erie

backwards by contending that one party can impliedly waive its

opponent’s attorney-client privilege by determining that it must

rely on privileged material to establish its own defense. As

discussed, both West Virginia law and Erie are clear that a party

impliedly waives the privilege only through its own reliance on the

20

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

advice of counsel; the straightforward application of that test to

the facts of this case leads to the conclusion that First American

has not done so. Therefore, Magistrate Judge Aloi did not clearly

err or act contrary to law when he ruled that First American’s

attorney-client privilege has not been impliedly waived.

C. First American Need Not Produce a Further Privilege Log.

Finally, Bowles Rice argues that, even if First American did

not impliedly waive the attorney-client privilege, Magistrate Judge

Aloi erred by not requiring First American to submit a privilege

log for events occurring after July 29, 2014, when First American

retained outside counsel in the underlying actions (Dkt. No. 103 at

4). First American, on the other hand, asserts that the documents

are admittedly and unquestionably privileged, making a privilege

log unnecessary and unduly burdensome (Dkt. No. 109 at 8-10).

The proponent of the attorney-client privilege usually bears

the burden of describing “otherwise discoverable” privileged

material such that other parties will be able to assess the claim.

Fed. R. Civ. P. 26(b)(5). The Local Rules also set out requirements

for what a privilege log must include. L.R. Civ. P. 26.04(a)(2).

“The purpose of the privilege log is to provide information about

the nature of the withheld documents sufficient to enable the

receiving party to make an intelligible determination about the

21

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

validity of the assertion of the privilege.” Sheets v. Caliber Home

Loans, Inc., No. 3:15-CV-72, 2015 WL 7756156, at *3 (N.D.W.Va. Dec.

1, 2015) (internal quotation and citation omitted).

Here, however, Bowles Rice has conceded that requests for

production of First American’s communications with attorneys and

representatives in the underlying lawsuits were meant to identify

privileged information (Dkt. No. 109-5 at 7). It intended to argue

that First American had impliedly waived any claim of privilege by

filing this lawsuit. Id. Because the Court has ruled that First

American did not impliedly waive the attorney-client privilege when

it filed this lawsuit, it would be futile to require that First

American provide a privilege log for clearly privileged

communications. Accord Ryan Inv. Corp. v. Pedregal de Cabo San

Lucas, 2009 WL 5114077, at *3 (N.D. Cal. Dec. 18, 2009) (denying

motion to compel “log of post-litigation counsel communications and

work product” because they are “presumptively privileged”); Frye v.

Dan Ryan Builders, Inc., 2011 WL 666326, at *7 (N.D.W.Va. Feb. 11,

2011) (reasoning that party did not have to produce a privilege log

for its litigation file). Therefore, Magsitrate Judge Aloi did not

err when he denied Bowles Rice’s request for such a log.

Nonetheless, as discussed at the status conference on November

20, 2017, to the extent that First American has failed to provide

22

MEMORANDUM OPINION AND ORDER

OVERRULING DEFENDANT’S OBJECTIONS [DKT. NO. 103]

Bowles Rice with a privilege log for withheld internal documents

generated after July 2014 and not related to the Court’s ruling on

attorney-client privilege - such as the claim file or claim log -

First American is ORDERED to do so now.

V. CONCLUSION

For the reasons discussed, the Court OVERRULES Bowles Rice’s

objections to the Magistrate Judge Aloi’s October 23, 2017, ruling

on its motions to compel (Dkt. No. 103).

It is so ORDERED.

The Court directs the Clerk to transmit copies of this Order

to counsel of record.

DATED: December 11, 2017.

/s/ Irene M. Keeley

IRENE M. KEELEY

UNITED STATES DISTRICT JUDGE

23