Woods v. Standard Fire Ins. Co.

MEMORANDUM OPINION AND ORDER

MATTHEW A. STINNETT, UNITED STATES MAGISTRATE JUDGE

This matter is before the Court on Plaintiff Laura N. Woods' Motion to Compel and for In Camera Review. [DE 101]. For the Motion to Compel, Woods seeks to compel the deposition of three in-house lawyers for Defendant Standard Fire Insurance Company's (“Standard Fire”) parent company. Standard Fire contends that the depositions would invade the province of the attorneyclient privilege and is not proportional to the needs of the case. As to the in camera request, Woods requests the Court review of twenty-one pages of documents redacted or withheld based on claims of work product protection. Standard Fire does not object to an in camera review. The Court previously held a telephone conference on this dispute, at which time the Court ordered the parties to brief these issues. [DE 98]. Woods filed the instant Motion to Compel and for In Camera Review [DE 101]. Standard Fire responded [DE 102], Woods replied [DE 104] and this matter is ripe for a decision.

I. FACTUAL & PROCEDURAL BACKGROUND

The parties largely agree on the factual and procedural posture of the case, which the Court will not reiterate in detail here. Woods was involved in an automobile accident and asserted an underinsured motorist (“UIM”) claim against Standard Fire. The claim presented a choice-of-law question not addressed in the insurance contract. Standard Fire, based upon a coverage opinion from Darout, applied Connecticut law and, pursuant to that law, applied off-sets to the UIM coverage. Woods filed suit for breach of contract (Counts I and II), violation of the Kentucky Motor Vehicle Reparations Act (Count III), common law bad faith (Count IV), and violation of the Unfair Claims Settlement Practices Act (Count V). Judge Hood granted partial summary judgment in this case in favor of Woods, resolving Counts I and II (the so-called “contractual claims”), and lifted the stay permitting discovery on Counts III through V (the “bad faith claims” or “extracontractual claims”).

After a long-litigated fight, the undersigned ruled (and Judge Hood affirmed) that Woods could depose Enante Darout regarding the coverage opinion she issued to Standard Fire's claims adjuster Matthew Parsons. [DE 63 and 89]. The Court previously held that Standard Fire had to produce Darout's coverage opinion. [DE 40]. Woods deposed Darout about her coverage opinion on October 18, 2021. That deposition ultimately revealed new information and the existence of documents that are the subject of this dispute. Specifically, Darout testified that she was supervised by three other in-house lawyers, Patricia Allen, Katie Roh, and Dawn Midkiff for Standard Fire as part of a secondment program, during which time she drafted the coverage opinion at issue in this case. Woods now seeks to take the deposition of all three attorneys.

Prior to Darout's deposition, the Court ruled Woods was not permitted to take the deposition of Allen. [DE 76]. Based on the information available at that time, the Court found Woods had not satisfied the Shelton test to justify taking the deposition of Allen. [DE 76]. In light

of the new information in the record, the Court revisits the Shelton analysis as to Allen, and applies the analysis to the requested depositions of Roh and Midkiff.

Additionally, the Court addresses Woods' request for in camera review of twenty-one withheld or redacted documents.

II. ANALYSIS

A. Application of the Shelton Test

For the reasons cited in its Memorandum Opinion and Order dated October 22, 2021, the Court will apply the test for deposing in-house counsel set forth in Shelton v. American Motors Corp., 805 F.2d 1323 (8th Cir. 1986) and adopted by the Sixth Circuit in Nationwide Mut. Ins. Co. v. Home Ins. Co., 278 F.3d 621, 628 (6th Cir. 2002) to determine whether Woods will be permitted to take the depositions of Allen, Roh, and Midkiff. Pursuant to Shelton and its progeny, Woods must show that “(1) no other means exist to obtain the information; (2) the information sought is relevant and nonprivileged; and (3) the information is crucial to the preparation of the case.” Nationwide Mut. Ins. Co. v. Home Ins. Co., 278 F.3d 621, 628 (6th Cir. 2002) (citing Shelton v. American Motors Corp., 805 F.2d 1323 (8th Cir. 1986)); See also Smith-Bunge v. Wisconsin Central, Ltd., 2017 WL 11463829, at *4 (D. Minn. May 1, 2017) (citing several cases applying Shelton to depositions of in-house counsel); Upjohn Co. v. United States, 449 U.S. 383 (1981) (discussing that in-house counsel is afforded the same attorney-client privilege as litigation counsel). The Court finds the Woods has made such a showing as to Allen, but not as to Roh or Midkiff.

1. There are no other means to obtain the information.

As cited above, the first prong of the Shelton test is that a deposition of a party's attorney is permissible only if “no other means exist to obtain the information.” Nationwide, 278 F.3d at 628.

The issue at hand is how and why Darout crafted the coverage opinion in the first place. As the Court previously noted, the purpose of the inquiry into Darout-and consequently Roh, Midkiff, and Allen-is to uncover “why she wrote what she wrote.” [DE 63 at Page ID 653 (citing DE 52 at 592)]. Darout's testimony shows that Allen may have knowledge about why Darout wrote what she wrote-in fact, she appears to have been intimately involved with drafting the coverage opinion-and there is no alternative means to obtain the information Allen has other than by deposing her.

The same is not true of Roh or Midkiff. The information in the record is that Roh and Midkiff do not have any information about the substance of the coverage opinion. Roh and Midkiff were merely involved in assigning the matter to Allen, who then assigned it to Darout. It appears Roh and Midkiff possess little, if any, knowledge about the coverage opinion, and that there are alternative means to obtain the relevant information: the testimony of Darout and Allen.

2. The information is relevant and not privileged.

The Court previously found that Darout's coverage opinion was not privileged. [DE 40 at Page ID # 525-26]. Standard Fire concedes that the coverage opinion is relevant to Woods' bad faith claim. [DE 48-1 at Page ID # 557-58]. The Court does not see any reason to distinguish Roh, Midkiff, or Allen's testimony from Darout's on this factor. As the Court held in its Memorandum Opinion and Order, any questions of in-house counsel must be limited to Counts I and II of the Complaint, i.e., the “contractual claims” that are no longer “live.” Standard Fire has asserted that Allen has remained active in this matter post-Complaint, including as related to the extracontractual claims asserted in Counts III through V of the Complaint; to the extent Allen has

information on those claims, it is protected by the work-product doctrine and attorney-client privilege.^[1]

3. The information is crucial to the case.

To prevail on her extracontractual claims, Woods must prove that Standard Fire (1) was obligated to pay the claim; (2) lacked a reasonable basis in law or fact for denying the claim; and (3) knew there was no reasonable basis for denying the claim or acted with malice, reckless disregard for her rights, and/or gross negligence to prove her bad faith claim. See Wittmer v. Jones, 864 S.W.2d 885, 890 (Ky. 1993). Judge Hood already ruled that Standard Fire was obligated to pay the claim, satisfying the first element. The Court previously found that critical information to prove the second and third elements of Woods' bad faith claim rests, at least in part, with Darout. And upon the deposition of Darout, similar critical information to prove the second and third elements of Woods' bad faith claim likely rests with Allen. Darout testified that she did not know why Allen did not select outside or in-house counsel licensed in Kentucky rather than Darout. [DE 101-15, at Page ID # 921 (Ex. O, Darout Depo. Excerpt)]. Darout...