2016-00202505-CU-IC

Manuel Medina vs. Balboa Insurance Company

Nature of Proceeding: Motion to Compel Responses to Subpoena for Bus. Records (Bob Sims

Filed By: Bossio, Cheryl D.

Plaintiff Manuel Medina’s (“Plaintiff”) motion to compel further responses from non-party Bob Sims and the Law Offices of Sims, Lawrence & Arruti (collectively, “Sims”) to Plaintiff’s deposition subpoena for production of business records is ruled upon as follows.

This case arises from an underlying action filed on August 8, 2011, by Plaintiff and others against Lillian Penton (“Penton”) and Leanne Morris (“Morris”), Sacramento County Superior Court case no. 34-2011-00110427 (the “Underlying Action”). In the Underlying Action, plaintiffs alleged the real property they had rented from Penton and Morris suffered from various defects that left the property uninhabitable and caused personal injuries to the occupants.

Penton and Morris had a homeowner’s insurance policy with Balboa Insurance Company (“Balboa”). Balboa agreed to defend Penton and Morris in the Underlying Action and retained Sims as Cumis counsel for their insureds, Penton and Morris. To that end, Balboa also retained the law firms of Borton Petrini LLP (“Borton Petrini”); Wood, Smith, Henning & Berman LLP (“Wood Smith”), appellate counsel Gurnee, Mason & Forestiere, LLP (“Gurnee Mason”); and Prata Daley LLP (“Prata Daley”) as counsel to communicate on Balboa’s behalf with these defense firms.

At trial of the Underlying Action, the Court entered judgment against Penton and Morris in favor of the plaintiffs in the sum of $1,434,782.50. On February 2, 2015, Penton and Morris entered into a Full Claim and Policy Holder Release (the “Release”) with Balboa, generally releasing their right to seek coverage benefits from Balboa under the terms of the insurance policy. It appears Penton and Morris then filed for bankruptcy.

In this action, Plaintiff alleges defendants wrongfully aided, abetted, and conspired with judgment debtors Penton and Morris to hinder and delay recovery of the judgment.

In this instant action, on August 22, 2018, Plaintiff served non-parties Sims with a deposition subpoena for production of business records. (Panday Decl. Exhs. A-B.) The subpoena contains 37 requests, which seek documents referring or relating in any way to the Underlying Action between Sims and other entities and persons, including between Sims and the following:

(1) Borton Petrini

(2) Wood Smith
(3) Penton

(4) Morris

(5) Balboa

(6) QBE First
(7) QBE Americas

(8) QBE North America
(9) QBE Insurance
(10) QBE Insurance Corporation

(11) NGLS Insurance Services, Inc.
(12) QBE Holdings, Inc.

(13) Prata & Daley
(14) Selvin Wraith Halman LLP

(15) The Law Office of Sasha Ganji
(16) The Chapter 7 bankruptcy trustee, Alan Fukushima,

(17) Bossiolaw
(18) The Law Offices of Rosenberg & Link
(19) Gurnee Mason

The subpoena also requests documents concerning post-judgment motions filed in the Underlying Action, documents concerning the Release, and documents concerning the bankruptcy action filed by Penton and Morris.

On September 6, 2018, Sims served objections to the subpoena stating, among other things, that the items requested were protected under the attorney-client privilege and attorney work product doctrine. (Panday Decl. Exh. D.)

Prior to serving the subpoenas on Sims, on August 7, 2018, Plaintiff served Penton and Morris with a Notice to Consumer with a copy of the subpoenas. (Panday Decl. Exh. C.) Penton and Morris did not object.

Plaintiff and Sims met and conferred, but were unable to resolve their disagreement and this instant motion followed.

Plaintiff seeks to compel Sims to provide further responses on the grounds Sims’ clients, Penton and Morris, allegedly waived their attorney client privilege by failing to object to the subpoena and by statements made in prior depositions of Penton and Morris, where Sims was not present and objections were raised by Penton and Morris’ bankruptcy counsel regarding attorney-client privilege.

Plaintiff contends that pursuant to Evidence Code § 912(a), Penton and Morris expressly waived the attorney-client privilege. Section 912(a) provides: “Except as otherwise provided in this section, the right of any person to claim a privilege … is waived with respect to a communication protected by the privilege if any holder of the privilege, without coercion, has disclosed a significant part of the communication or has consented to disclosure made by anyone. Consent to disclosure is manifested by any statement or other conduct of the holder of the privilege indicating consent to the disclosure, including failure to claim the privilege in any proceeding in which the holder has legal standing and the opportunity to claim the privilege.”

At the outset, it bears noting that the Court may determine the issue of waiver of the privilege as a matter of law, as “that inquiry requires a critical consideration, in a factual context, of legal principles and their underlying values…[and] [t]herefore, the question is predominately legal…” (McKesson HBOC, Inc. v. Superior Court (2004)

115 Cal.App.4th 1229, 1236.)

The attorney-client privilege confers a privilege “to refuse to disclose, and to prevent another from disclosing, a confidential communication between client and

lawyer.” (Evid. Code § 954.) The privilege protects “information transmitted between a client and his or her lawyer in the course of [the attorney-client] relationship and in confidence by a means which, so far as the client is aware, discloses the information to no third persons other than those to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted…” (Evid. Code § 952.) Simply, the privilege protects confidential communications between the attorney and client. (Evid. Code, § 952.) “The party claiming the privilege has the burden of establishing the preliminary facts necessary to support its exercise, i.e., a communication made in the course of an attorney-client relationship.” (Costco Wholesale Corp. v. Superior Court (2009) 47 Cal.4th 725, 733.) The party opposing the privilege has the burden to establish that the communication was not confidential or that the privilege does not apply for other reasons. (Id.)

The definition of a waiver under Evidence Code section 912, subdivision (a) differs from the ordinary definition of a waiver as the intentional relinquishment of a known right. (See Pickering & Story, Limitations On California Professional Privileges: Waiver Principles And The Policies They Promote (1976) 9 U.C. Davis L. Rev. 477, 496 & fn. 98; see also 8 Wigmore, Evidence (McNaughton ed. 1961) § 2327, pp. 635-636 [stating that a waiver of the attorney-client privilege by implication should be determined by reference to not only the holder’s implied intention but also fairness and consistency]; 1 McCormick, Evidence (6th ed. 2006) § 93, p. 418.)

In support of his argument of waiver, Plaintiff cites to a statement made by Penton and Morris’ bankruptcy counsel (Mr. Rahimzadeh) during deposition, wherein Mr. Rahimzadeh objected that a question sought attorney-client privileged information, but then stated “but we have through discovery already waived that privilege to a certain extent; so I’ll go ahead and let her answer the question.”

In opposition, Sims contends Mr. Rahimzadeh’s statement that the privilege has been waived [to a “certain extent”] does not constitute waiver by Penton, and Penton could not have then provided a voluntary and intentional waiver through her answers during the deposition because she believed (erroneously) this right had already been waived.

After review of the cited deposition testimony from Penton and Morris, the Court is not persuaded that Penton and Morris, through their testimony, intentionally relinquished a known right. There is no evidence that either Penton or Morris contemplated or understood that through their responses they were waiving their attorney-client privilege as to all communications with counsel made in the Underlying Action. Further, although neither Penton nor Morris objected to the subpoena, Plaintiff has not provided any legal authority that such a failure to object to a business records subpoena issued to a non-party can be construed as a waiver of the attorney-client privilege.

Plaintiff then contends the attorney-client privilege does not attach to any communications Sims had with defendants Balboa, QBE, and their attorneys because Sims’ was appointed as Cumis counsel to Balboa’s insureds, Penton and Morris. Therefore, Plaintiff reasons the attorney-client relationship existed only as between Sims and Penton and Morris.

In opposition, Sims contends a tripartite attorney-client relationship existed between Sims, the insureds, and the defendant insurance companies. Sims cites to Bank of America v. Superior Court (2013) 212 Cal.App.4th 1076, 1083, which stated “When an insurer retains counsel to defend its insured, a tripartite attorney-client relationship arises among the insurer, insured, and counsel. As a consequence, confidential communications between either the insurer or the insured and counsel are protected by the attorney-client privilege, and both the insurer and insured are holders of the privilege. In addition, counsel’s work product does not lose its protection when it is transmitted to the insurer.”

The Court agrees a tripartite attorney-client relationship existed between Sims, the insureds, the defendant insurance companies, and counsel retained by the defendant insurance companies. As explained in Bank of America, “In the insured-insurer relationship, the attorney characteristically is engaged and paid by the carrier to defend the insured. The insured and the insurer have certain obligations each to the other … arising from the insurance contract. Both the insured and the carrier have a common interest in defeating or settling the third party’s claim. . . . Conceptually, each member of the trio, attorney, client-insured, and client-insurer has corresponding rights and obligations founded largely on contract, and as to the attorney, by the Rules of Professional Conduct as well. . . . This entity may be conceived as comprising a unitary whole with intramural relationships and reciprocal obligations and duties each to the other quite separate and apart from the extramural relations with third parties or with the world at large. Together, the team occupies one side of the litigating arena.” ( Bank of America, supra, at 1090-1091.) Further, in Bank of America, the Court found a tripartite attorney-client relationship existed among the insurer, the insured, and counsel notwithstanding the insurer’s reservation of rights and that retaining an attorney to represent the insured is enough in itself to establish the tripartite attorney-client relationship. Thus, the attorney represents two clients, the insured and the insurer. (Bank of America, supra, at 1091.)

“The issue of whether an attorney-client relationship is formed between an insurance company and the counsel it hires to defend an insured has arisen in several contexts. In analyzing these situations, the courts have described counsel’s representation as “triangular.” [citation omitted.] In other words, the attorney represents two clients, the insured and the insurer. [citation omitted.] This trio has been portrayed as a “loose partnership, coalition or alliance directed toward a common goal, sharing a common purpose which lasts during the pendency of the claim or litigation against the insured. [citation omitted.]” (State Farm Mut. Auto. Ins. Co. v. Fed. Ins. Co. (1999) 72 Cal.App.4 th 1422, 1428-1429.)

Further, as noted in Hartford Casualty Ins. Co. v. J.R. Marketing, LLC (2015) 61 Cal.4th 988, “In the ordinary situation that requires appointment of Cumis counsel, the insurer acknowledges that some or all of the third party claims are at least potentially covered under the policy and on that basis agrees to defend its insured. If the “insurer reserves its rights on a given issue and the outcome of that coverage issue can be controlled by counsel first retained by the insurer for the defense of the claim, a conflict of interest may exist” that gives rise to the need for Cumis counsel. (§ 2860, subd. (b).) But the existence of that conflict does not mean the insurer and insured are entirely at odds. Their interests remain aligned as to third party claims unaffected by the coverage dispute. And even as to the claims implicating that dispute, “[b]oth the insured and the insurer, of course, share a common interest in defeating the claims.” [citation] The

conflict exists only to the extent that “if liability is found, their interests diverge in establishing the basis for that liability.” (Ibid.) ¶ Having accepted that this conflict of interest requires appointment of Cumis counsel, the insurer then plays an integral role in establishing and managing the tripartite relationship.” (Hartford, supra, at 1012. [emphasis added]) Hartford further notes that “Once Cumis counsel begins representing the insured, “it shall be the duty of [Cumis] counsel and the insured to disclose to the insurer all information concerning the [third party] action except privileged materials relevant to coverage disputes, and timely to inform and consult with the insurer on all matters relating to the action.” (§ 2860, subd. (d).) In addition, “both the counsel provided by the insurer and independent counsel selected by the insured shall be allowed to participate in all aspects of the litigation,” and “[c]ounsel shall cooperate fully in the exchange of information that is consistent with each counsel’s ethical and legal obligation to the insured.” (§ 2860, subd. (f).) This statutory scheme, like its counterparts in other jurisdictions, contemplates that “an insurer can reasonably insist that independent counsel fully inform it of factual and legal developments related to the defense, consult with it on defense strategy and tactics, and consult with it before incurring major expenses in the course of the

defense.” (Richmond, Independent Counsel in Insurance (2011) 48 San Diego L.Rev. 857, 890, fns. omitted.) Indeed, “[t]he insurer’s advice, insight, or suggestions may prove valuable to the insured.” (Ibid.) As acknowledged in San Diego Navy Fed. Credit Union v. Cumis Ins. Soc’y, (1984)162 Cal. App. 3d 358, 361,”[i]n the usual tripartite relationship existing between insurer, insured and counsel, there is a single, common interest shared among them.” Understanding that where the interests of insured and insurer may conflict, the same attorney cannot ethically represent both parties, it does not follow that the tripartite relationship wholly ceases to exist. Indeed, as noted both in the case law and the statute, where Cumis counsel is paid by the insurer, the “insurer then plays an integral role in establishing and managing the tripartite relationship,” ( Hartford, supra.) and Cumis counsel has independent obligations of disclosure beneficial to the insured and the insurer. Civil Code § 2860(d).

Based on the foregoing, the Court is persuaded Sims’ attorney-client relationship was not only between Sims and Penton and Morris, as Cumis counsel, but a tripartite relationship also existed with Balboa, QBE, and all counsel retained by Balboa in connection with the Underlying Action.

Accordingly, objections based on the attorney-client privilege or attorney work product doctrine as to communications by Sims with Penton, Morris, Balboa, QBE, and all counsel retained by Balboa in connection with the Underlying Action have merit and further responses need not be provided as to the requests that seek privileged documents between Sims and these persons/entities.

However, neither party has addressed how any privileged relationship exists between Sims and the bankruptcy trustee (Mr. Fukushima), Selvin Wraith Halman LLP, the Law Office of Sasha Ganji, Bossiolaw, or the Law Offices of Rosenberg & Link.

Accordingly, the Court is not persuaded a privileged relationship exists between Sims and these named entities/persons.

Sims also contends the requests are vague and ambiguous, overbroad, and seek irrelevant documents.

Sims’ objection on the grounds of vague and ambiguous are overruled. The requests are not so vague and ambiguous that Sims cannot frame a reasonable response.

However, upon review, request number 2 is overbroad and is seeks “any and all DOCUMENTS (hard copy or electronic) which identify YOU as an author or recipient.” This is impossibly overbroad and would require production of anything and everything Sims has ever drafted or received. Thus, a further response is not necessary to request number 2.

The other requests, however, are limited to documents concerning the Underlying Action and that are between Sims and certain identified entities/persons. Thus, the objection to these requests as being overbroad is overruled.

Sims shall serve further verified responses to the subpoena and produce responsive documents in accordance with the foregoing, together with a privilege log of withheld documents, no later than February 8, 2019. The privilege log must be sufficiently detailed to allow Plaintiff to challenge the assertion(s) of privilege.

Given the mixed results of the motion, the parties’ requests for monetary sanctions are both denied.

This minute order is effective immediately. No formal order pursuant to CRC Rule 3.1312 or further notice is required.

Item 5 2016-00202505-CU-IC

Manuel Medina vs. Balboa Insurance Company

Nature of Proceeding: Motion to Compel Responses to Subpoena for Bus. Records (Prata &

Filed By: Bossio, Cheryl D.

Plaintiff Manuel Medina’s (“Plaintiff”) motion to compel further responses from non-party Prata & Daley LLP (“Prata Daley”) to Plaintiff’s deposition subpoena for production of business records is DENIED.

Plaintiff served an initial deposition subpoena for production of business records on May 8, 2018. (Prata Decl. ¶ 4, Exh. A.) Prata Daley served written objections on Plaintiff on May 31, 2018, and served a number of non-privileged responsive documents. (Prata Decl. ¶ 5, Exh. B.) After serving its objections, Prata Daley did not receive any “meet and confer” communication or motion to compel further responses from Plaintiff concerning the May 2018 subpoena. (Prata Decl. ¶ 6.)

Plaintiff then served a second, identical deposition subpoena for production of business records on October 9, 2018. (Prata Decl. ¶ 7, Exh. C.) Prata Daley served written objections to the September subpoena on October 26, 2018. (Prata Decl. ¶ 8, Exh. D.)

CCP § 2025.480(b) provides that a subpoenaing must file a motion to compel production no later than “60 days after completion of the record of deposition” (CCP 2025.480(b).) With respect to a Deposition Subpoena for Business Records, the objections served in response to business records subpoenas constitutes a record of a deposition. (Unzipped Apparel, LLC v. Bader (2007) 156 Cal. App. 4th 123, 136.) Thus, the subpoenaing party must file the motion to compel no later than 60 days after

the objections are served. (Id.) The deadline is mandatory. (Id.)

Here, Plaintiff did nothing to compel further responses to the May 2018 subpoena. Plaintiff also did not withdraw the subpoena. Instead, Plaintiff issued a second, identical deposition subpoena seeking the exact same documents from the exact same party. Essentially, Plaintiff has propounded the same discovery twice, perhaps in an attempt to overcome the motion to compel deadline.

As explained in Professional Career Colleges, Magna Inst. v. Superior Court (1989)

207 Cal.App.3d 490, 494, the Court explained:

“In the context of this case it would be an absurdity to say that a party who fails to meet the time [motion to compel] limits of section 2030 may avoid the consequences of his delay and lack of diligence by propounding the same question again. Such a construction of the statute would obviously encourage delay and provide no incentive to attempt to resolve any dispute with the opposing party. The Legislature has explicitly stated that unless a party moves to compel further response within 45 days of the unsatisfactory response, he waives any right to compel a further response. We hold that this means what it says; plaintiffs motion was therefore untimely.”

The Court finds Plaintiff’s May 2018 and September 2018 subpoenas are identical and duplicative. In each subpoena, the document requests are repeated verbatim. Based on the foregoing, the Court finds Plaintiff is precluded from avoiding the applicable motion to compel deadlines by simply re-serving duplicative and identical discovery.

For the first time on reply, Plaintiff argues they were notified by other non-parties that the subpoenas they served in May 2018 were defective because a Notice to Consumer was not served on insureds Penton and Morris. Plaintiff argues the May 2018 subpoena was, therefore, defective and it would have been pointless to move to compel a defective subpoena. The Court is not persuaded. As noted above, Plaintiff did not withdraw the May 2018 subpoena served on Prata Daley on the basis of it being defective. Plaintiff did nothing. As noted above, Plaintiff also does not raise this argument in their moving papers and raises it for the first time on reply. It is elementary that points raised for the first time in a reply brief are not considered by the court. (See St. Mary v. Superior Court (2014) 223 Cal.App.4th 762, 783; Campos v. Anderson (1997) 57 Cal.App.4th 784, 794, fn. 3.)

Accordingly, the motion to compel is DENIED as untimely.

Plaintiff’s request for sanctions is denied.

Prata Daley’s request for sanctions is granted in the amount of $2,250 (representing 6 hours of attorney time at the rate of $375/hour). (CCP § 2025.480(j).) Sanctions are to be paid on or before February 25, 2019. If sanctions are not paid by that date, prevailing party may prepare a formal order granting sanctions for the Court’s signature, and the order may be enforced as a separate judgment. (Newland v. Superior Court (1995) 40 Cal.App.4th 608, 615.)

This minute order is effective immediately. No formal order pursuant to CRC Rule 3.1312 or further notice is required.