Kohl's Dep't Stores, Inc. v. Liberty Mut. Ins. Co.

STATE OF MAINE BUSINESS AND CONSUMER COURT

CUMBERLAND, ss Location: Portland

DocketNo.: BCD-CV-12-JJ ·

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)

KOHL'S DEPARTMENT STORES, )

INC., )

)

Plaintiff, ) ORDER ON KOHL'S MOTION TO

) COMPEL PRODUCTION OF

v. ) DOCUMENTS AND LIBERTY'S

) MOTION TO QUASH

LIBERTY MUTUAL INSURANCE CO., )

)

Defendant )

)

In this reach and apply action, see 24-A M.R.S. § 2904 (2011), Kohl's Department Stores

Inc. (Kohl's) moves to compel production of two sets of documents from Liberty Mutual

Insurance Company (Liberty): 1) documents prepared by the attorney of Liberty's insured, W/S

Alfred Road Properties LLC (Alfred Road), in Kohl's Department Stores, Inc. v. WS. Alfred

Road Properties LLC, CUMSC-CV-08-391, which is the litigation underlying this reach and

apply action; and 2) internal documents of Liberty, i.e., the insurance adjuster's claims file.

Liberty objects that both sets of documents are protected by work-product privilege and the

attorney-client privilege. Relatedly, Liberty moves to quash a subpoena served by Kohl's on

Alfred Road's counsel requesting documents related to the underling litigation.

FACTUAL AND PROCEDURAL BACKGROUND

I. Underlying Litigation

Kohl's filed suit against Alfred Road and another party on July 3, 2008, asserting breach

of contract (Count I), breach of duty of good faith and fair dealing (Count II), negligent

misrepresentation (Count III), intentional misrepresentation (Count IV), and punitive damages

1

(Count V), because of deficient subsoil conditions on a commercial site developed by Alfred

Road, upon which a Kohl's department store was situated. (Compl. ~~ 6-13.) Liberty defended

Alfred Road, subject to a reservation of rights, and hired David L. Herzer, Jr, of Norman,

Hanson & DeTroy, LLC, to defend Alfred Road. (Compl. ~ 17; Compl. Exhs. A, B.) In

addition, Alfred Road had separate, personal counsel, Christian Habersaat of Goulston Storrs in

Boston, (Exh. B. at 1), as did Liberty during the litigation (Def.'s Opp'n M. Compel3).

Kohl's asserted damages in excess of$12,800,000, which exceeded Alfred Road's policy

limits of $10,800,000. (Compl. ~~ 15, 19-20.) Liberty was aware of the amount of damages

sought by Kohl's. (Compl. ~~ 20, 24.) On July 8, 2011, Alfred Road put Liberty on notice that

if Liberty did not provide reasonably sufficient monies under the policy toward settlement,

Alfred Road would explore settlement on Count III of the complaint. (Compl. ~ 25; Answer

~ 25; see Pl.'s M. Compel 6 n.5; Def.'s Opp'n M. Compel 5, 8 n.2.) As a result of

court-mandated mediation on July 11 and 12, 2011, at which a representative of Liberty was

present, Kohl's and Alfred Road entered into a settlement agreement for a consent judgment to

be entered on Count III in the amount of $10,800,000. (Compl. ~~ 26-27, 29.) The consent

judgment was entered by the court on October 21, 2011. (Compl. ~ 30; Compl. Exh. B.)

II. Reach and Apply Action

Kohl's filed this reach and apply action against Liberty on December 5, 2011, in

Cumberland County Superior Court, seeking to apply the coverage amounts of the policy to the

settlement with Alfred Road. (Compl. ~~ 33-41.) Liberty answered on February 6, 2012,

asserting, in relevant part, the affirmative defense of collusion. (Answer at 9.)

In the course of discovery, Kohl's requested the following documents, which are the

subject of its motion to compel:

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1. Liberty's complete file in Kohl's Department Stores, Inc. v. WIS Alfred Road

Properties Limited Liability Company, et al., CV-2008-391 (hereinafter "the

Underlying Litigation"). This includes but is not limited to all correspondence in

either print or electronic form between Liberty Mutual and its insured and

attorneys representing Liberty Mutual's insured.

2. All documents generated or created by Alfred Road or its attorneys relating to

the Litigation. This request includes but is not limited to all valuations and/or

assessments of Kohl's Department Stores, Inc.'s ([]hereinafter "Kohl's") claim in

the Underlying Litigation.

5. All documents relating to Liberty Mutual's assessment and/or determination

ofthe value of Kohl's claim in the Underlying Litigation.

12. The complete file of the adjuster assigned to the Underlying Litigation by

Liberty Mutual including but not limited to all notes made in electronic form and

kept on servers or computers of Liberty Mutual.

(M. Compel Exh. A, Pl.'s Doc. Request 4-5.) Liberty objected on various grounds to the

production of these documents. (M. Compel Exh. A, Def.'s Response to Doc. Request 1-4, 8.),

and Kohl's moved to compel production of them.

Seeking similar information as the motion to compel, Kohl's also subpoenaed numerous

documents from Alfred Road for inspection in Alfred Road's deposition:

1. All portions of Alfred Road's file in the Underlying Litigation that have been

provided or will be provided to Liberty Mutual or Liberty Mutual's counsel in

connection with the [present litigation]. This includes but is not limited to all

correspondence in either print or electronic form between Liberty Mutual and its

insured and attorneys representing Liberty Mutual's insured.

2. All documents generated or created by Alfred Road or its attorneys relating to

the Underlying Litigation which have been provided or will be provided to

Liberty Mutual or Liberty Mutual's attorneys. This request includes but is not

limited to all valuations and/or assessments of Kohl's claim in the Underlying

Litigation.

3. All documents generated or relating to work performed in the Underlying

Litigation by Ron Carr and/or Gerry D'Huy or D'Huy Engineering, Inc., or any

individual or company associated with Ron Carr and/or Gerry D'Huy or D'Huy

Engineering, Inc.

3

4. All documents generated or relating to work performed by Gerald Marion

and/or Marino Engineering Associates, Inc. in the Underlying Litigation.

5. All documents relating to Liberty Mutual's assessment and/or determination

of the value of Kohl's claim in the Underlying Litigation.

6. All correspondence in either print or electronic form between W/S Alfred

Road's attorneys and Liberty Mutual relating in any way to the mediation in the

Underlying Litigation which took place on July 11 and July 12, 2011.

7. All documents relating to Liberty Mutual's settlement position for the

mediation which took place in the Underlying Litigation on July 11 and July 12,

2011.

8. All documents related to coverage opinions in the Underlying Litigation.

9. All documents relating to Liberty Mutual's settlement position for the

mediation in the Underlying Litigation which took place on April 27 and April 28,

2010.

10. All report or analyses in either print or electronic form by attorneys for W/S

Alfred Road attorneys or representatives to Liberty Mutual relating to the

Underlying Litigation.

(De f.'s M. Quash Exh. A.) Liberty objected to the subpoena requests and moved to quash them.

Attached to Liberty's motion to quash is a letter from Alfred Road's counsel, Attorney

Habersaat, stating that Alfred Road "will not invoke a privilege as to those materials in its

possession that its defense counsel provided to Liberty [or Liberty's representatives] during the

course of defense counsel's representation" of Alfred Road in the Underlying Litigation. (Def.'s

M. Quash Exh. C.)

DISCUSSION

The key issues in both the motion to compel and the motion to quash are essentially the

same. The parties dispute the scope of the attorney-client privilege and work product privilege

when an insurer provides a defense to its insured, and the insured and insurer cooperate in

4

preparation of litigation. Central to the parties' arguments are the identities of the attorneys and

the clients in "common interest" arrangements and the effect of one client's waiver of privilege.

There are some points not in issue, however. First, Liberty does not assert a privilege

with respect to documents dated after July 8, 2011, when Alfred Road informed Liberty it

intended to settle without Liberty's consent and cooperation. Liberty asserts that it will produce

those documents that is has in its possession, if it has not done so already. Similarly, Kohl's

withdraws the motion to compel documents in Liberty's claims file to the extent those

documents are not included in the file of the insured's defense counsel up to the date of July 8,

2011. Second, Liberty has stipulated that the Kohl's store in question must be tom down and

rebuilt in order to repair it. Finally, the parties agreed at oral argument upon certain discovery

requests relevant to the scope of discovery on Liberty's collusion defense. The parties agreed

that Kohl's will provide the documents that were in effect in July 2011 enumerated in items 1, 3,

6, and 7 of Liberty's revised request for production. 1

I. Attorney-Client Privilege

"The purpose of the attorney-client privilege is to encourage clients to make full

disclosure to their attorneys and to protect not only the giving of professional advice to those

who can act on it but also the giving of information to the lawyer to enable him to give sound

and informed advice." Corey v. Norman, Hanson & DeTroy, 1999 ME 196, ,-r 18, 742 A.2d 933

(quotation marks and citation omitted). 2

1

The revised list is Exhibit A to the reply memo Liberty submitted on the scope of discovery related to

the defense of collusion.

2

The privilege is stated in M.R. Evid. 502:

(b) General rule of privilege. 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 (I) between the client or

5

The "burden of establishing the existence of privilege is on [the] party objecting to [its]

discovery." Pierce v. Grove Mfg. Co., 576 A.2d 196, 199 (Me. 1990). Nevertheless, the

privilege belongs to the client and "[o]nce it is waived, it cannot be later revived." Field &

Murray, Maine Evidence§ 502.5 at 220 (6th ed. 2007).

A. Identification of the Correct Client

With respect to documents created by Alfred Road's counsel either in the possession of

Alfred Road or Liberty, Kohl's argues that Alfred Road was the client and Liberty, as a

non-client, cannot claim attorney client-privilege. Kohl's cites four separate opinions of the

Maine Professional Ethics Commission in support of the proposition that when counsel paid for

by the insurer represents an insured, the insured is the attorney's client, not the insurer. See, e.g.,

Me. Prof. Ethics Comm'n, Op. No. 63 at 1-2 (Nov. 5, 1985) ("In our opinion, the attorney

represents the insured, notwithstanding that he is hired and paid by the insurance company.")

Acknowledging that the Law Court has not addressed this issue directly, Kohl's points to

Patrons Oxford Insurance Co. v. Harris, 2006 ME 72, ~~ 16-21, 905 A.2d 819, in which the Law

Court recognized the competing interests when an insurance carrier provides a defense to the

insured under a reservation of rights.

the client's representative and the client's lawyer or the lawyer's representative, or (2)

between the lawyer and the lawyer's representative, or (3) by the client or the client's

representative or the lawyer or a representative of the lawyer to a lawyer or a representative

of a lawyer representing another party in a pending action and concerning a matter of

common interest therein, or (4) between representatives ofthe client or between the client and

a representative of the client, or ( 5) among lawyers and their representatives representing the

same client.

(c) Who may claim the privilege. The privilege may be claimed by the client, the client's

guardian or conservator, the personal representative of a deceased client, or the successor,

trustee, or similar representative of a corporation, association or other organization, whether

or not in existence. The person who was the lawyer or the lawyer's representative at the time

of the communication is presumed to have authority to claim the privilege but only on behalf

ofthe client.

(Emphasis added.)

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Liberty, on the other hand, points out that no Maine court has addressed the issue of

whether the counsel hired by an insurance company represents only the insured, or the insured

and the insurer in the underlying litigation, and asserts that the Professional Ethics Commission

opinions are not binding. Cf Vicor Corp. v. Vigilant Ins. Co., 674 F.3d 1, 19 (1st Cir. 2012)

(explaining that "Massachusetts law . . . considers an attorney retained by an insurer to represent

the insured as the attorney for both" insured and insurer). Liberty argues that regardless of

whether Liberty was a client or not, the "common interest" privilege protects those documents.

Although Liberty asserts that the Court need not reach the issue of whether an attorney

hired by an insurer represents both an insured and the insurer, the court views the identity of the

client and the common interest privilege as inescapably linked. "The common interest privilege

is not an independent basis for privilege but an exception to the general rule that no

attorney-client privilege attaches when confidential communications are communicated in the

presence of or to third parties." 1 EDNA SELAN EPSTEIN, THE ATTORNEY-CLIENT PRIVILEGE AND

THE WORK-PRODUCT DOCTRINE, pt. 1, element 3, § H (LEXIS 5th ed. 2007) [hereinafter

EPSTEIN, ATTORNEY-CLIENT PRIVILEGE]. Cases refer to this exception as the "common interest

privilege," "common interest doctrine," "allied lawyer doctrine," and ''joint defense privilege,"

sometimes interchangeably. Critics have suggested that the interchangeable use of the terms

"common interest privilege" or "joint defense privilege" is imprecise, and there is a conceptual

distinction between when parties with separate lawyers consult (the "allied lawyer doctrine"),

and when two clients share the same lawyer (the "joint client doctrine"). See Sec. Investor Prot.

Corp. v. Stratton Oakmont, Inc., 213 B.R. 433, 435 n.1 (Bankr. S.D.N.Y. 1997) (distinguishing

between the various doctrines); 1 EPSTEIN, ATTORNEY-CLIENT PRIVILEGE, pt. 1, element 3, §H.

Compare RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 76 (LEXIS 2000) (titled

7

"The Privilege in Common-Interest Arrangements"), with RESTATEMENT (THIRD) OF THE LAW

GOVERNING LA WYERS § 75 (LEXIS 2000) (titled "The Privilege of Co-Clients"). An attorney

representing two co-clients is a far different situation than clients with a common interest that are

separately represented. See, e.g., M.R. Evid. 502(d)(5).

On the issue of which client Attorney Herzer represented, the court concludes that Alfred

Road was Herzer's client, and not Liberty. The court bases this conclusion on the long-standing

position of the Maine Professional Ethics Commission and the Law Court's language in Patrons

Oxford Insurance Co. v. Harris. 3 Over the course of the last 25 years, the Commission has

maintained the position that an "attorney represents the insured, notwithstanding that he is hired

and paid by the insurance company." Me. Prof. Ethics Comm'n, Op. No. 63 at 1-2 (Nov. 5,

1985); accord Me. Prof. Ethics Comm'n, Op. No. 164 at 1 (Dec. 2, 1998); Me. Prof. Ethics

Comm'n, Op. No. 122 at 1 (Mar. 5, 1992); Me. Prof. Ethics Comm'n, Op. No. 72 at 1 (Aug. 6,

1986). Further, the Law Court stated in Patrons Oxford that "an insurer who reserves the right to

deny coverage cannot control the defense of a lawsuit brought against its insured by an injured

party." 2006 ME 72, ,-r 15, 905 A.2d 819. Exclusive representation of the insured by the

attorney hired by an insurer naturally flows from the concept that the insured must be able to

control the litigation, particularly when as here, the insurer has elected to defend under a

reservation of rights. In such a situation, the interests of the insured and the insurer are not

identical because the insurer may still refuse to pay for damages awarded to a plaintiff or pay the

amount of a settlement. See United Servs. Auto. Ass'n v. Morris, 741 P.2d 246, 250-51 (Ariz.

1987) (cited in Patrons Oxford Ins. Co. v. Harris, 2006 ME 72, ,-r 15, 905 A.2d 819). Because

Liberty reserved the right to deny coverage, and absent an express arrangement to the contrary,

3

The Law Court, in at least one instance, has relied upon the reasoning of Maine Professional Ethics

Commission opinions. See Bd. ofOverseers ofthe Bar v. Warren, 2011 ME 124, ~ 26,34 A.3d 1103.

8

the court concludes that Attorney Herzer represented Alfred Road exclusively, and did not

represent Liberty. This conclusion is reinforced by the fact that Liberty had its own counsel

during the course of the Underlying Litigation. The identity of Alfred Road as the client,

however, is not the end of the inquiry.

B. The Common Interest Doctrine

The common interest doctrine, as stated in the Restatement (Third) of the Law Governing

Lawyers, is:

If two or more clients with a common interest in a litigated or nonlitigated matter

are represented by separate lawyers and they agree to exchange information

concerning the matter, a communication of any such client that otherwise

qualifies as privileged ... that relates to the matter is privileged as against third

persons. Any such client may invoke the privilege, unless it has been waived by

the client who made the communication.

RESTATEMENT (THIRD) OF THE LAW GOVERNING LA WYERS § 76 (LEXIS 2000). "[T]he common

interest privilege assumes the existence of a valid underlying privilege," such as the

attorney-client privilege or the work-product privilege. See 1 EPSTEIN, ATTORNEY-CLIENT

PRIVILEGE, pt. 1, element 3, §H. Relevant official comments to the Restatement section explain

the scope of the privilege:

d The permissible extent of common-interest disclosures. Under the

privilege, any member of a client set--a client, the client's agent for

communication, the client's lawyer, and the lawyer's agent ... can exchange

communications with members of a similar client set.

e. Extent of common interests. The communication must relate to the

common interest, which may be either legal, factual, or strategic in character. The

interests of the separately represented clients need not be entirely congruent.

g. Standing to assert the privilege; waiver. Any member of a common-

interest arrangement may invoke the privilege against third persons, even if the

communication in question was not originally made by or addressed to the

objecting member.

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In the absence of an agreement to the contrary, any member may waive

the privilege with respect to that person's own communications. Correlatively, a

member is not authorized to waive the privilege for another member's

communication. If a document or other recording embodies communications

from two or more members, a waiver is effective only if concurred in by all

members whose communications are involved, unless an objecting member's

communication can be redacted.

RESTATEMENT (THIRD) OF THE LAW GOVERNING LA WYERS § 76 cmts. d, e, g.

The common interest privilege has been recognized by the Law Court in Citizens

Communications Co. v. Attorney General: "the common interest component of the privilege

prevents clients from waiving the attorney-client privilege when attorney-client communications

are shared with a third person who has a common legal interest with respect to the

communications, such as a co-defendant." 2007 ME 114, ,-r 16, 931 A.2d 503. The Law Court

pointed to M.R. Evid 502(b)(3), which protects confidential communications "by the client or the

client's representative or the lawyer or a representative of the lawyer to a lawyer or a

representative of a lawyer representing another party in a pending action and concerning a matter

of common interest therein." (Emphasis added). But see Waste Mgmt, Inc. v. Int'l Surplus Lines

Ins. Co., 144 Ill. 2d 178, 194 (Ill. 1991) (applying the common interest doctrine "where the

attorney, though neither retained by nor in direct communication with the insurer, acts for the

mutual benefit of both the insured and the insurer"). This Court notes, however, that the

language in Citizens Communication and in M.R. Evid. 502(b)(3) indicates the scope of the

common interest only applies to parties in the same or another pending action. Liberty was not a

party to the Underlying Litigation. Thus, although the Law Court and the rule clearly indicate

the common interest doctrine applies to co-defendants or parties with a common interest in the

same litigation, the Law Court has not addressed whether an insurer and insured have a common

interest in litigation notwithstanding that the insurer is not a party to the litigation.

10

Nevertheless, the court concludes that the common interest doctrine should apply to

protect the communications between Liberty and Alfred Road, insurer and insured, as against

third parties. By all accounts, Liberty and Alfred Road fully cooperated in the defense of the

Underlying Litigation, freely exchanging information for three years until the divergence of

interest on July 8, 2011. Although the interest of insurer and insured is not identical when there

has been a reservation of rights, the insurer and the insured should be able to communicate freely

with respect to the litigation to the extent of their common interest without fear that the plaintiff

in a subsequent reach and apply litigation could seek discovery of those communications. To

hold otherwise would hamstring an insured in defense of claims against it and significantly

jeopardize the opportunity for settlement of the litigation. See Alit (No. 1) Ltd v. Brooks Ins.

Agency, No. 10-2403 (FLW), 2012 U.S. Dist. LEXIS 38144, at *30-*31 (D.N.J. Mar. 21, 2012)

("it would be contrary to the very purpose of the common interest doctrine ... to hold that the

sharing of information [by insured and insurer] in order to defeat a common adversary would

then require disclosure of those shared communications to that common adversary").

Kohl's argues that documents sent to Liberty's insurance adjuster by Alfred Road's

attorney do not qualify as privileged communications because the communications are from a

lawyer to a representative of a client, rather than a representative of the client to a lawyer as

expressly stated in the rule. See M.R. Evid 502(b)(3). Notwithstanding Kohl's technical

argument, the court concludes that the better view of the scope of the common interest doctrine

(or allied lawyer doctrine) is in the Restatement: "Under the privilege, any member of a client

set- a client, the client's agent for communication, the client's lawyer, and the lawyer's agent

. . . can exchange communications with members of a similar client set." RESTATEMENT

(THIRD) OF THE LAW GOVERNING LAWYERS § 76 cmt. d. Thus, communications between

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Attorney Herzer and Liberty's insurance adjuster are still within the scope of the attorney-client

privilege.

Accordingly, to the extent documents in Liberty's file in the Underlying Litigation

(document request item 1) or documents related to Liberty's assessment of the Underlying

Litigation (document request item 5) contain confidential communications between Liberty's

counsel and Liberty, or Liberty's counsel to Alfred Road or Alfred Road's counsel, those

documents are protected by the attorney-client privilege. The Court addresses the attorney-client

privilege with respect to the documents requested of Alfred Road and item 2 of documents

requested of Liberty in the next section, and item 12 in the discussion of work product.

C. Effect of One Party's Waiver of Attorney-Client Privilege in a Common Interest

Arrangement

As noted, Alfred Road has decided it "will not invoke a privilege as to those materials in

its possession that its defense counsel provided to Liberty [or Liberty's representatives] during

the course of defense counsel's representation" of Alfred Road in the underlying litigation.

(Def.'s M. Quash Exh. C.) Alfred Road is within its rights to do so. As explained by the First

Circuit,

a party always remains free to disclose his own communications. Thus, the

existence of a [common interest] does not increase the number of parties whose

consent is needed to waive the attorney-client privilege; it merely prevents

disclosure of a communication made in the course of preparing a joint defense by

the third party to whom it was made.

In re Grand Jury Subpoena, 274 F.3d 563, 572-73 (1st Cir. 2001); see also RESTATEMENT

(THIRD)OFTHELAWGOVERNINGLAWYERS § 76 cmt. g ("In the absence of an agreement to the

contrary, any member [of a common interest arrangement] may waive the privilege with respect

to that person's own communications." (emphasis added)). Because Alfred Road is not asserting

any privilege as to materials provided to Liberty during the course of Herzer's representation of

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Alfred Road in the Underlying Litigation, Alfred Road has waived its attorney-client privilege to

documents only to the extent they represent Alfred Road's own communications to Liberty. The

partial waiver by Alfred Road does not apply to communications between Attorney Herzer and

Alfred Road or to communications by Liberty to Attorney Herzer or Alfred Road.

Ostensibly, Alfred Road's waiver only applies to the following disputed discovery

requests made by Kohl's: items 1 and 2, in whole or in part, of the requests made to Liberty; and

items 1, 2, 6, and 10, in whole or in part, of the requests made to Alfred Road. Any

communications within these categories, however, between Attorney Herzer and Alfred Road or

any communications by Liberty to Attorney Herzer or Alfred Road are protected by the

attorney-client privilege based on the common interest or allied lawyer doctrine.

Because Liberty has not filed a privilege log, the Court cannot rule definitively on the

attorney-client privilege for document requests 5 and 12 submitted to Liberty or requests 3, 4, 5,

7, 8, and 9 submitted to Alfred Road. Nevertheless, the Court notes that it is unlikely that the

attorney-client privilege would apply in full to requests 3 and 4 of Alfred Road. The Court thus

moves on to the second privilege asserted.

II. Work Product Privilege

The purpose of the work-product privilege and associated rule is to "promote the

adversary system by protecting the confidentiality of papers prepared by or on behalf of

attorneys in anticipation of litigation." Springfield Terminal Ry. Co. v. Dep 't of Transp., 2000

ME 126, ~ 19, 754 A.2d 353. Pursuant to M.R. Civ. P. 26(b)(3),

a party may obtain discovery of documents and tangible things . . . prepared in

anticipation of litigation or for trial by or for another party or by or for that other

party's representative (including the other party's attorney, consultant, surety,

indemnitor, insurer, or agent) only upon a showing that the party seeking

discovery has substantial need of the materials in the preparation of the party's

case and that the party is unable without undue hardship to obtain the substantial

13

equivalent of the materials by other means. In ordering discovery of such

materials when the required showing has been made, the court shall protect

against disclosure of the mental impressions, conclusions, opinions, or legal

theories of an attorney or other representative of a party concerning the litigation.

(Emphasis added). Because the work-product privilege applies only to documents and tangible

things, "discovery of work product will be denied if the party seeking discovery can obtain the

desired information by taking the deposition of witnesses." 8 CHARLES ALAN WRIGHT, ARTHUR

R. MILLER, & RICHARD L. MARCUS, FEDERAL PRACTICE AND PROCEDURE § 2025 at 538 (3d ed.

2010); accord Eoppolo v. Nat'! R. Passenger Corp., 108 F.R.D. 292, 294 (E.D. Pa. 1985) ("The

work product doctrine furnishes no shield against discovery by interrogatories or by depositions

of the facts that the adverse party has learned or the persons from whom such facts were

learned.); 2 Harvey, Maine Civil Practice § 26.6 at 641-42 (3d ed. 2011) (explaining relevant

facts known to a party or its attorney are discoverable through interrogatory).

"A document is protected as work product only if it was created because of the party's

subjective anticipation of future litigation," and only if the "preparer's anticipation of litigation

[was] 'objectively reasonable."' Springfield Terminal Ry. Co., 2000 ME 126, ,-r 16, 754 A.2d

353. "[W]ork product protection is provided against 'adversaries,' so ... disclosing material in a

way inconsistent with keeping it from an adversary waives work product protection." United

States v. Mass. Inst. ofTech., 129 F.3d 681, 687 (1st Cir. 1997). The party seeking to protect

material from disclosure has the burden of establishing that it is work product. Springfield

Terminal Ry. Co., 2000 ME 126, ,-r 15, 754 A.2d 353.

Finally, unlike the attorney-client privilege, the work-product privilege can be overcome

by making the following showing: "(1) the party must show 'substantial need,' seemingly

something more than relevancy sufficient to satisfy [M.R. Civ. P.] 26(b)(l), (2) the party would

suffer 'undue' hardship, and not merely some expense or inconvenience, to obtain (3) the

14

'substantial equivalent."' 8 FEDERALPRACTICEANDPROCEDURE § 2025 at 538 (quoting Fed. R.

Civ. P. 26(b)(3)). Nevertheless, "the mental impressions, conclusions, opinions, or legal theories

of an attorney or other representative of a party concerning the litigation" must be protected.

M.R. Civ. P. 26(b)(3).

4

A. Liberty's adjuster's file and other documents in Liberty's possession not covered

by the attorney-client privilege

Kohl's concedes that the adjuster's file is work product, but asserts it has substantial need

of the documents because of Liberty's collusion defense. See Harriman v. Maddocks, 518 A.2d

1027, 1034 (Me. 1985) (deciding that an insurance adjuster's case file and investigation is

conducted in preparation of litigation, but is subject to discovery based on a Rule 26(b)(3)

substantial need showing). Kohl's anticipates the file will contain evidence regarding Liberty's

notice of Alfred Road seeking settlement without Liberty's consent, the valuation of Kohl's

claim by Liberty, and the reasonableness of the settlement. Without these documents, Kohl's

argues that "there may be no other method of determining the basis of Liberty's settlement

position in the underlying litigation" and that Liberty should not be allowed to use work-product

as a shield after putting collusion and fraud into issue. Kohl's also notes that it will be difficult

to take the adjuster's deposition without the claims file.

Liberty asserts that because Kohl's can and will take a deposition of its adjuster, it cannot

obtain the desired documents because it has ability to obtain the "substantial equivalent."

Liberty also argues that valuation of the claim would be protected as a mental impression,

conclusion, opinion, or legal theory of the case.

Although Kohl's desire for the adjuster's file is plain, the Court concludes that Kohl's has

not shown it cannot achieve its objective through other methods of discovery and has not met its

4

No party is asserting or has argued that the attorney-client privilege protects the adjuster's file.

15

burden to overcome work-product protection based on substantial need. Accordingly, the Court

concludes that the adjuster's file is protected as work product.

With respect to document requested in items 1, 2, and 5, to the extent the documents were

not created by Alfred Road, there is no question that the documents sought were prepared in

anticipation of litigation and the Court views these as requests as for Liberty's protected work

product.

B. Documents in the possession of Alfred Road

With respect to the documents requested from Alfred Road, similar to its arguments with

respect to attorney-client privilege, Kohl's argues that the documents prepared by Alfred Road's

counsel are not protected work product because Alfred Road was the client and the documents

were not created for the benefit of Liberty Mutual. Liberty reasserts its arguments regarding the

common interest privilege in its work product arguments. Case law indicates that the common

interest doctrine applies equally, and perhaps with greater effect, to work product as it does to

confidential communications when there is a common interest. See In re Lindsey, 158 F.3d

1263, 1282 (D.C. Cir. 1998); In re Grand Jury Subpoenas, 902 F.2d 244, 249 (2d Cir. 1990);

Griffith v. Davis, 161 F.R.D. 687, 692-94 (C.D. Cal. 1995); see also 2 EPSTEIN,

ATTORNEY-CLIENT PRIVILEGE, pt. 2, § VII(C)(2) ("disclosure between parties that have common

financial interests are sufficient to protect the work-product privilege, even if such would not be

sufficient to protect the attorney-client privilege"). Similar to the attorney-client analysis, the

Court concludes that documents exchanged between Alfred Road and Liberty during the period

of common interest are protected by work product to the extent the privilege applies.

Here, there is no question that the documents sought from Alfred Road's counsel were

prepared in anticipation of litigation. Even the requests themselves frame the documents sought

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as those related to the "Underlying Litigation." Nevertheless, Kohl's argues that even if the

privilege applies, it has substantial need of the documents. In the words of Kohl's, because

Liberty has asserted collusion, the documents in question "would provide direct evidence of the

lack of collusion between Kohl's and Alfred Road" and "may well provide the best evidence

available to counter Liberty's collusion defense." Kohl's anticipates the documents will contain

evidence regarding Liberty's notice of Alfred Road seeking settlement without Liberty's consent,

the valuation of Kohl's claim, and the need for meaningful participation by Liberty in the

settlement process. Last, Kohl's asserts that it will suffer undue hardship without the documents

because it cannot get them anywhere else.

Similar to the adjuster's file, the Court concludes that Kohl's has not satisfied its burden

of showing it cannot achieve its objective through other methods of discovery and has not met its

burden to overcome work-product protection based on substantial need. The Court also notes

that some of the documents requested by Kohl's appear to be the protected "mental impressions,

opinions, or legal theories of an attorney or other representative of [Liberty] concerning the

[Underlying Litigation]", specifically document request numbers 5, 7, 8, 9, and 6, to the extent

the documents in item 6 may in any way include, incorporate, summarize or refer to materials

prepared by or for Liberty in connection with the mediation in the Underlying Litigation.

See M.R. Civ. P. 26(b)(3). Accordingly, the Court concludes that the bulk of the documents in

these requests are protected work-product, with a small subset subject to the foregoing waiver

analysis and ruling.

C. Waiver

As noted above, Alfred Road has decided it "will not invoke a privilege as to those

materials in its possession that its defense counsel provided to Liberty [or Liberty's

17

representatives] during the course of defense counsel's representation" of Alfred Road in the

underlying litigation. (De f.'s M. Quash Exh. C.) Whereas, the effect of the waiver of one party

to a common interest arrangement is clear as to the attorney-client privilege, the effect of a

waiver is less clear as to work product. Notably, the underpinnings of the two doctrines are

decidedly different. Whereas the attorney-client privilege exists to encourage clients to make

full disclosure to their attorneys, see Corey, 1999 ME 196, ~ 18, 742 A.2d 933, work product

protection exists to promote the integrity of the adversary system so that an attorney's efforts

will not fall into the hands of an adversary. Alfred Road seeks to waive its privilege and disclose

documents it prepared in anticipation of litigation to a former adversary, Kohl's, but Liberty

asserts a common interest privilege as to those work product materials. The Court is not

prepared to rule on the effect of Alfred Road's waiver or the application of the common interest

privilege to work product materials without briefing on this discrete issue by the parties.

Accordingly, should Liberty and Kohl's continue to disagree over whether Alfred Road

can tum over to Kohl's those limited documents to which Alfred Road is not claiming a

privilege, the parties shall notify the Court in writing and, at the same time, submit to the court:

(1) a privilege log or privilege logs of the documents still in dispute, and (2) simultaneous

ten-page memoranda (a) citing and analyzing applicable authorities on the effect of one party's

waiver of work product privilege as to documents it prepared and shared with another member of

a common interest arrangement, and (b) that authority's particular application to the facts of this

case.

CONCLUSION

Based on the foregoing analysis, it is ORDERED, as follows:

A. With the exception of the documents to which Alfred Road is not claiming a

privilege:

18

(1) Kohl's Motion to Compel is DENIED; and

(2) Liberty's Motion to Quash is GRANTED.

B. With respect to the documents to which Alfred Road is not claiming a

privilege, the court concludes these documents are not protected by the attorney

client-privilege.

C. If the parties continue to disagree over whether Alfred Road can turn over to

Kohl's those limited documents to which Alfred Road is not claiming a privilege,

then on or before November 2, 2012, the parties shall notify the Court of such

disagreement in writing and, at the same time, submit to the court:

(1) A privilege log or privilege logs of the documents still in dispute, and

(2) Simultaneous ten-page memoranda (a) citing and analyzing applicable

authorities on the effect of one party's waiver of work product privilege as to

documents it prepared and shared with another member of a common interest

arrangement, and (b) that authority's particular application to the facts of this

case.

Pursuant to M.R. Civ. P. 79(a), the Clerk is instructed to incorporate this order into the docket by

reference.

Date: October 11, 2012

Chief Justice, Maine Superior Court

Entered on the Dock /1 //:_

Cooies sent vie~ M II et:-- • ~li,

<~ -- Eleetronlcttlly:;

19

BCD-CV-12-13

Kohl's Department Stores, Inc.,

Plaintiff

v.

Liberty Mutual Insurance Co.

Defendant

Plaintiffs Attorney:

John Hobson, Esq

Perkins Thompson

One Canal Plaza

PO Box 426

Portland ME 04112

Defendant's Attorney

Daniel Snow, Esq.

Louise Thomas, Esq.

Pierce Atwood

Merrills Wharf

254 Commercial St

Portland ME 04101