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Lamar Advertising of South Dakota, Inc. v. Kay

April 12, 2010


The opinion of the court was delivered by: Veronica L. Duffy United States Magistrate Judge



The original plaintiffs in this action, Richard and Deana Kay, brought the original lawsuit in December, 2007, alleging negligence against original defendants Lamar Advertising of South Dakota, Inc. ("Lamar") and Cody Burton, and seeking damages for injuries arising from a motor vehicle collision. Docket No. 1. Jurisdiction was founded on diversity of citizenship among the parties and an amount in controversy of at least $75,000. See 28 U.S.C. § 1332. The Kays settled their claim against Lamar and Mr. Burton in October, 2009, but throughout the proceedings and settlement, Lamar indicated its belief that Mr. Kay was contributorily negligent, as well as its intent to seek contribution from Mr. Kay as to the settlement paid to Mrs. Kay.

On December 15, 2009, Mr. Kay filed a motion requesting a determination by the district court that the allocation of the settlement between Mr. and Mrs. Kay was unreasonable. Docket No. 143. On February 11, 2010, Mr. Kay served on Mr. Chet Andrews, an employee of Zurich North America, plaintiff Lamar's insurer, a subpoena and a subpoena duces tecum directing him to testify and produce documents at a deposition to be taken on February 24, 2010. Docket No. 217. Plaintiffs resisted the subpoena and filed an unopposed motion to extend the district court's discovery deadline so the parties might resolve the dispute as to the subpoena issued by Mr. Kay to Mr. Andrews. Docket No. 219.

Thereafter, plaintiffs filed a motion requesting that the district court quash the subpoena and issue a protective order, pursuant to Federal Rules of Civil Procedure 26(c), 45(c)(3)(a), 37 and Local Rule 37.1. The district court granted the plaintiffs' motion to extend its discovery deadline, and set the new deadline for discovery at seven days after the court's ruling on plaintiffs' motion to quash and motion for protective order. See Docket No. 220. The district court, the Honorable Karen E. Schreier, Chief Judge, then referred the motion to quash the subpoena to this magistrate judge for resolution pursuant to 28 U.S.C. § 636(b)(1)(A).


The facts, insofar as they are pertinent to the present motion, are as follows. Mr. and Mrs. Kay were injured on July 19, 2006, when a boom truck driven by Cody Burton, an employee acting within the scope of his employment with Lamar, collided with a motorcycle on which the Kays were riding. The Kays filed suit against Lamar and Mr. Burton in December, 2007. Docket No. 1. Lamar and Burton filed a counterclaim against Mr. Kay in March, 2008. Docket No. 29. The Kays settled their claim against Lamar and Mr. Burton in October, 2009, and the district court thereafter realigned the parties. Accordingly, the original plaintiff, Mr. Kay, is now the defendant in the action, and the original defendants, Lamar and Mr. Burton, are now the named plaintiffs. See Docket No. 146.

On or about February 11, 2010, Mr. Kay served a subpoena duces tecum on Mr. Chet Andrews of Zurich North America ("Zurich").*fn1 See Docket No. 217. The subpoena directs Mr. Andrews to attend a deposition and to produce the following documents at that deposition: (1) Zurich's complete file on the motorcycle accident; (2) any communications between Zurich and Lamar with regard to the motorcycle accident claim, settlement negotiations, and the settlement allocation; (3) any communications between Zurich and Lamar's counsel with regard to the motorcycle accident claim, settlement negotiations, and the settlement allocation; and (4) any documents or notes of conversations between Zurich and the Kays' former counsel relating to the motorcycle accident claim, settlement negotiations, and the settlement allocation. See Docket No. 217. Lamar and Mr. Burton resist the subpoena and argue that because Zurich is a "representative" of Lamar under South Dakota statutory law, Zurich may invoke the attorney-client privilege as to the documents and information requested in the subpoena. Docket No. 223.

Lamar and Mr. Burton also assert that any testimony by Mr. Andrews as a representative deponent of Zurich must be excluded, pursuant to the district court's previous ruling granting plaintiffs' motion in limine to exclude any reference to insurance coverage or lack thereof. See Docket No. 206. Lamar and Mr. Burton argue that there is no way to introduce any testimony of Mr. Andrews without referencing insurance coverage and thereby prejudicing Lamar's case. Docket No. 223.

In response, Mr. Kay asserts that Lamar and Mr. Burton have not met their burden of establishing that the documents listed in the subpoena duces tecum are subject to the attorney-client privilege, but also that the attorney-client privilege does not apply to the documents. Docket No. 230. Mr. Kay also asserts that even if the documents were protected by privilege at some point, Lamar and Mr. Burton have since waived any such privilege. Id. Finally, Mr. Kay argues that Mr. Andrews is subject to the subpoena because the deposition testimony he is expected to give is relevant and discoverable. At a minimum, Mr. Kay argues, the prospective testimony is "reasonably calculated to lead to the discovery of admissible evidence." Id. (quoting EEOC v. Woodmen of the World Life Ins. Soc., 2007 WL 1217919, at *1 (D. Neb. Mar. 15, 2007)). The court now addresses each of the parties' arguments in turn.


A. Whether Mr. Andrews is Subject to the Subpoena

At the outset, the court considers the plaintiffs' assertion that any and all testimony of Mr. Andrews must be excluded because his testimony necessarily includes reference to insurance, all references to which have been prohibited by the district court in this case. See Docket No. 206. Lamar and Mr. Burton assert there is "simply no way that Kay may introduce any portion" of Mr. Andrews' prospective testimony without violating Federal Rules of Evidence 411 and 402.*fn2

Federal Rule 411 provides that evidence of insurance coverage is not admissible upon the issue of liability. However, the rule "does not require the exclusion of evidence of insurance against liability when offered for another purpose, such as proof of agency, ownership, or control, or bias or prejudice of a witness." Fed. R. Evid. 411.

The issue presently in dispute among the parties is whether the settlement and the allocation of payment to the Kays was or was not reasonable. Resolution of that issue does not hinge in any way upon whether liability insurance was or was not in place. Mr. Andrews was apparently integral in shaping the settlement and the allocation between Mr. and Mrs. Kay, so his testimony regarding that settlement is most certainly relevant to the issue of whether the settlement was or was not reasonable. As a layperson, Mr. Andrews' opinions, mental impressions, and thought processes regarding the settlement are not subject to work product privilege, as those of plaintiffs' counsel might be. In this case, the court agrees with Mr. Kay that quashing the subpoena as a prophylactic measure simply because some of his prospective testimony might be inadmissible is not appropriate.

Instead, the court believes a balance can be struck without prohibiting Mr. Andrews' testimony altogether. For example, the parties might stipulate to any foundational requirements prior to Mr. Andrews' testimony, so reference to insurance or Mr. Andrews' employment with Lamar's insurance carrier would be unnecessary. The parties might alternatively agree that Mr. Andrews characterize his employment simply as that of a representative of Lamar, which plaintiffs agree he is for purposes of invoking privilege, and which fact Mr. Kay does not dispute. Mr. Andrews' testimony should be limited to the parties' settlement negotiations and the settlement allocation rather than proof of liability or wrongdoing on the part of Lamar or Cody Burton. Mr. Andrews' testimony can be elicited in such a way that reference to insurance is not made, and the district court's prohibition on any mention of insurance still be satisfied. For these reasons, the court finds that Mr. Andrews is subject to the subpoena and subpoena duces tecum, and must appear and provide the documentation in accordance with the court's opinion below.

B. Procedural Requirements for Asserting Privilege

Before embarking on a discussion of the applicability of either the attorney-client privilege or the work product doctrine, the court notes the procedural requirements of Rule 26 of the Federal Rules of Civil Procedure. Rule 26 outlines what must be done to assert a privilege during pretrial discovery:

When a party withholds information otherwise discoverable by claiming that the information is privileged or subject to protection as trial-preparation material, the party must:

(i) expressly make the claim; and

(ii) describe the nature of the documents, communications, or tangible things not produced or disclosed--and do so in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the claim.

See Fed. R. Civ. P. 26(b)(5)(A). The burden is on the party claiming the privilege to state specifically and establish the facts supporting each of the requisite elements of the privilege. "A blanket claim of privilege which does not specify what information is protected will not suffice." United States v. White, 970 F.2d 328, 334 (7th Cir. 1992).

To the extent that a party fails to comply with the procedural requirements of asserting privilege, the court may order the documents to be produced to the opposing party or may order the documents produced to the court for in camera review. See Fed. R. Civ. P. 26(b)(5). With the Federal Rules and procedural guidelines in mind, the court now turns to applicability of privilege to the specific items directed to be produced pursuant to the subpoena duces tecum served on Mr. Chet Andrews in this case.

C. Subpoena Item No. 1

The rider attached to the subpoena duces tecum served on Mr. Andrews commanded him to produce

A complete copy of Zurich's entire file relating to the motorcycle accident including but not limited to all settlement negotiations, and documents related to the allocation of the $1.5 million settlement with Kay and his wife, Deana Kay.

See Docket No. 224-2. Plaintiffs argue that both the attorney-client privilege and the work product doctrine protect this information from discovery in this case. Docket No. 223.

1. The Attorney-Client Privilege

The party asserting a privilege with regard to items sought in discovery has the burden of demonstrating a factual basis for the privilege. DeNeui v. Wellman, 2008 WL 2787947, at *2, (D.S.D. July 16, 2008); Cottier v. City of Martin, 2007 WL 4568989, at *2-3 (D.S.D. Dec. 19, 2007); Rabushka ex rel. United States v. Crane Co., 122 F.3d 559, 565 (8th Cir.1997); Fed. R. Civ. P. 26(b)(5)(A). Rule 26(b)(5)(A) sets forth what is required in order for a party to assert a privilege. See supra Part B.

In a diversity action, state law determines both the existence and scope of the attorney-client privilege. Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938)("Except in matters governed by the Federal Constitution or by acts of Congress, the law to be applied in any case is the law of the state."); Fed. R. Evid. 501; Gray v. Bicknell, 86 F.3d 1472, 1482 (8th Cir. 1996). Since this court has jurisdiction over the parties by reason of the diversity of citizenship among them, 28 U.S.C. § 1332, the state law of privilege applies to the issue of whether the statements or communications were privileged and whether the privilege has been waived. Id.

Under South Dakota law, no person may refuse to be a witness, to disclose any matter, or to object to the production of any writing unless specifically provided by statute or Constitutional provision. SDCL § 19-13-1. The attorney-client privilege is one of these exceptions.

A "client" is defined as "a person, public officer, or corporation, limited liability company, association, or other organization or entity, either public or private, who is rendered professional legal services by a lawyer, or who consults a lawyer with a view to obtaining professional legal services from him [or her]; . . ." SDCL § 19-13-2(1). A "representative" of the client is defined as "one having authority to obtain professional legal services, or to act on advice rendered pursuant thereto, on behalf of the client; . . ." Id. at (2). A "lawyer" is defined as "a person authorized, or reasonably believed by the client to be authorized, to engage in the practice of law in any state or nation; . . . " Id. at (3). A "representative of the lawyer" is defined as "one employed by the lawyer to assist the lawyer in the rendition of legal services; . . ." Id. at (4). Finally, a "confidential communication" is defined as a communication "not intended to be disclosed to third persons other than those to whom disclosure is made in furtherance of the rendition of professional legal services to the client or those reasonably necessary for the transmission of the communication." Id. at (5).

Given these definitions, South Dakota law provides that: 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 ...

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