SCOPE OF ATTORNEY-CLIENT PRIVILEGE: OVERCOMING INSURER OBJECTIONS
By Mike Abourezk and Marialee Neighbours
Elements of Privilege
In order for attorney-client privilege to apply, these elements must be met: (1.) a client; (2.) a confidential communication; (3.) a communication made for purpose of facilitating rendition of professional legal services to the client; and (4.) a communication made in one of the five relationships enumerated in S.D.C.L. § 19-13-3. State v. Catch the Bear, 352 N.W.2d 640, 645 (S.D. 1984).
Privilege Strictly Construed
Courts frequently state that attorney-client privilege is to be strictly construed. This is because the privilege is viewed as an exception to the general evidentiary rule of Anglo-American law that any witness with knowledge of the facts may be called to testify about what he or she knows. This general principle of full disclosure leads to a reluctance to suppress the truth even under a claim of attorney-client privilege. See United States v. Nixon, 418 U.S. 693, 710, 94 S.Ct. 3090, 3108 (1974)("exceptions to the demand for every man's evidence are not lightly created nor expansively construed, for they are in derogation of the search for truth."); Diversified Industries, Inc. v. Meredith, 572 F.2d 596, 602 (8th Cir. 1977) (Eighth Circuit observed: "While the privilege, where it exists, is absolute, the adverse effect of its application on the disclosure of truth may be such that the privilege is strictly construed."); N.L.R.B. v. Harvey, 349 F.2d 900, 907 (4th Cir. 1965) (court quoted the following with approval: "the privilege remains an exception to the general duty to disclose. Its benefits are all indirect and speculative; its obstruction is plain and concrete . . . it is worth preserving for the sake of a general policy, but it is nonetheless an obstacle to the investigation of the truth. It ought to be strictly confined within the narrowest possible limits consistent with the logic of its principle."); 8 Wigmore, Evidence, § 2292 at 554 (McNaughton rev. 1961).
Accordingly, the rule is no different in South Dakota. Statutory privileges are not favored in this state and will be construed strictly in order " to avoid suppressing otherwise competent evidence." State v. Catch the Bear, 352 N.W.2d at 645.
Burden of Proof on Party Asserting Privilege
Insurance companies often make blanket objections based on attorney-client privilege in pre-trial discovery. They allege conclusory statements of privilege, not focusing on any single document, in an attempt not to have to substantiate their objections.
However, in order for attorney-client privilege to apply, the party asserting the privilege has the burden of first proving, as to each individual document, each of the specific required elements. See, e.g., International Paper Company v. Fibreboard Corp., 63 F.R.D. 88, 94 (D. Del.1974)(an improperly asserted claim of privilege is no claim of privilege at all a party resisting disclosure on the grounds of attorney-client privilege must by affidavit show sufficient facts as to bring the identified and described documents within the narrow confines of the privilege); F.T.C. v. Lukens Steel Co., 444 F.Supp. 803, 806 (D.C.D.C. 1977)(party seeking privilege has burden of demonstrating its applicability). The manner in which this is done is usually with a privilege log, which allows the plaintiff and the court to carefully assess each of the privilege objections and the basis for each objection. Unless an insurance company has done this, it has not offered any proof at all.
In their treatise on Federal Practice and Procedure, Wright and Miller state that "As a starting point, it is clear that ultimately a party asserting privilege must make a showing to justify withholding materials if that is challenged." See 8 Federal Practice and Procedure Civ. 2d § 2016.1 (updated 2005). The determination of whether the privilege has been properly invoked is for the court... the claimant of the privilege is not the final arbiter of the validity of the assertion. Davis v. Fendler, 650 F.2d 1154, 1160 (9th. Cir. 1981).
As with any other privileges, the party raising the privilege bears the burden of demonstrating its applicability. One treatise, The Attorney Client Privilege and the Work Product Doctrine, issued by the American Bar Association Section of Litigation (2d ed. 1982) notes: "...the work product qualified immunity must be specifically raised and demonstrated rather than asserted in a blanket fashion... Requests are routinely granted to identify the documents as to which immunity from discovery is sought by the author's name, all recipients of the document, and the purposes of its production so that opposing counsel can assess the validity of the request.... The detailed index may, in some cases, be sufficient for the court to rule on a claim of protection without reviewing the documents themselves. Nevertheless, it must be adequate to permit the court to determine whether all elements of the privilege are present in each document."
Quoting the federal district court in Eureka Financial Corp. v. Hartford Accident and Indemnity Co., Wright and Miller point out the clear rule: "Whether a responding party states a general objection to an entire discovery document on the basis of privilege, or generally asserts a privilege objection within an individual discovery response, the resulting 'blanket objection' is decidedly improper. This fact should no longer be 'news' to a responding party." 8 Federal Practice and Procedure Civ. 2d § 2016.1 (updated 2005), citing Eureka Financial Corp., 136 F.R.D. at 182. "Such a blanket claim of privilege is improper." In Re Shopping Carts Antitrust Litigation, 95 F.R.D. 299, 305 (D.C.N.Y. 1982).
"The burden is on the party asserting the privilege to do so in a timely and proper manner and to establish the existence and applicability of the privilege." Marx v. Kelly, 929 F.2d 8,12 (1st Cir. 1991). "But the assertion of privilege must be timely and must also be accompanied by sufficient information to allow the court to rule intelligently on the privilege claim." Id. In Peat, Marwick, Mitchell and Co. v. West, the Tenth Circuit Court of Appeals said: "The applicability of the privilege turns on the adequacy and timeliness of the showing as well as on the nature of the document." 784 F.2d 540, 542 (10th Cir. 1984). "A party seeking to assert the privilege must make a clear showing that it applies." Id.
"Although it may be time-consuming to specifically assert the attorney-client or work-product privilege in a document intensive litigation, the courts nevertheless clearly require such specific identification. Because privileges impede full and free discovery of the truth, the assertion of a privilege such as attorney client is strictly construed. If the privilege is worth protecting, a litigant must be prepared to expend some time to justify the assertion of the privilege." Eureka Financial Corp., 136 F.R.D. at 183.
The South Dakota Supreme Court also requires a party who asserts a privilege to carry the burden of proving his entitlement to assert that privilege. See State v. Guthrie, 627 N.W.2d 401, 424 (S.D. 2001); State v. Catch The Bear, 352 N.W.2d 645. In Maynard v. Heeren, a case involving assertion of the physician patient privilege, the South Dakota Supreme Court said: "If there is opposition to disclosure, the party opposing disclosure must make specific objections to specific portions of the file. General objections to the entire file or large portions of it are not appropriate to allow the trial court to perform its required task of analyzing a specific objection to a specific document." 563 N.W. 2d 830, 836 n.8. (S.D. 1997).
Failure to Provide Privilege Log Waives Attorney-Client Privilege and Work-Product Under Federal Rules.
Under the Federal Rules of Civil Procedure, courts have held that an insurer's failure to provide a privilege log waives attorney-client privilege or work-product. See, e.g., TIG Ins. Corp. Of America v. Johnson, 799 So.2d 339, 341-42 (Fla. App. 4 Dist. 2001); Dorf & Stanton Communications, Inc. v. Molson Breweries, 100 F.3d 919, 923-4 (C.A. Fed. N.Y. 1996); Lohrenz v. Donnelly, 187 F.R.D. 1, 6-7 (D.D.C. 1999); Bregman v. District of Columbia, 182 F.R.D. 352, 362 (D.D.C. 1998); Land Ocean Logistics, Inc. v. Aqua Gulf Corp., 181 F.R.D. 229, 237 (W.D.N.Y. 1998).
Attorney-Client Communications Relating To Business Or Technical Data
"Moreover, a number of courts have determined that attorney-client privilege does not protect client communications that relate only business or technical data." Simon v. G.D. Searle&Co., 816 F.2d 397, 403 (8th Cir. 1987), citing First Mortgage Trust v. First Wis. Corp., 86 F.R.D. 160, 174 (E.D Wis.1980); SCM Corp. v. Xerox Corp., 70 F.R.D. 508, 515 (D.Conn. )("[l]egal departments are not citadels in which public, business or technical information may be placed to defeat discovery and thereby ensure confidentiality."), appeal dismissed, 534 F.2d 1031(2d Cir. 1976).
Attorney Can Not Be Used To Conceal Non-Privileged Documents.
An insurance company can not use an attorney to avoid disclosure of documents. See, e.g., Matter of Feldberg, 862 F.2d 622 ( 7th Cir. 1988)(Corporation could not use attorney to shield documents from grand jury subpoenas); Gould, Inc. v. Mitsui Mining & Smelting Co., 825 F.2d 676 (2d Cir. 1987) (Documents given to an attorney that were not prepared for purpose of giving legal advice were not protected by attorney-client privilege); Mr. and Mrs. B v. Board of Educ. Of Syosset Cent. Sch. Dist. , 35 F. Supp. 2d 224 (E.D. N.Y. 1998)(Copying attorney will not protect disclosure between non-attorneys); United States Postal Serv. v Phelps Dodge Refining Corp. , 852 F. Supp. 156, 160 (E.D. N.Y. 1994)(Document is not necessarily privileged simply because document is sent to attorney or attorney is copied; motive for communication is important consideration).
Defense Counsel Billing Statements Not Protected.
Defense billing statements can be highly relevant in a bad faith case. Often, these billing statements show that an insurer adopted a "scorched earth" policy in fighting a legitimate insurance claim. For instance, an insurer unreasonably refuses to pay an injured worker's medical benefits of $1,200.00 under his worker's compensation insurance coverage. The injured worker is forced to hire an attorney who files a petition before the South Dakota Department of Labor. In answering the petition, defense counsel denies compensability and alleges frivolous defenses such as lack of notice. Repeatedly, the insurer refuses to settle the claim. Eventually, the Department of Labor finds in favor of the injured worker. Pre-trial discovery in the bad faith action shows that the insurance company spent $8,000.00 to fight a $1200.00 claim. This kind of evidence is important in establishing not only the bad faith of the insurer, but also wrongful intent and malice.
Insurance companies object to producing the billing statements of defense counsel on the basis of attorney-client privilege. However, these statements are not protected. Judge Piersol decided this same issue in another bad faith case. See Brennan v. Western Mut. Ins. Co., 199 F.R.D. 660, 662 (D.C. S.D. 2001)(In a legal bill, "the identity of the client, the amount of the fee, the identification of payment by case file name, and the general purpose of the work performed are usually not protected from disclosure by the attorney-client privilege.")