Certain Underwriters at Lloyd's v. Taylor, Bean & Whitaker Mortgage Corp. (In re Taylor, Bean & Whitaker Mortgage Corp.)

493 B.R. 872, 24 Fla. L. Weekly Fed. B 149, 2013 WL 3550651, 2013 Bankr. LEXIS 2801
CourtUnited States Bankruptcy Court, M.D. Florida
DecidedJuly 12, 2013
DocketCase No.: 3:09-bk-7047-JAF; Adv. Pro. No. 3:10-ap-243-JAF
StatusPublished

This text of 493 B.R. 872 (Certain Underwriters at Lloyd's v. Taylor, Bean & Whitaker Mortgage Corp. (In re Taylor, Bean & Whitaker Mortgage Corp.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, M.D. Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Certain Underwriters at Lloyd's v. Taylor, Bean & Whitaker Mortgage Corp. (In re Taylor, Bean & Whitaker Mortgage Corp.), 493 B.R. 872, 24 Fla. L. Weekly Fed. B 149, 2013 WL 3550651, 2013 Bankr. LEXIS 2801 (Fla. 2013).

Opinion

ORDER DIRECTING THAT DISCOVERY RELATED DOCUMENTS REDACTED AND WITHHELD BY UNDERWRITERS BE FILED UNDER SEAL FOR IN CAMERA INSPECTION

JERRY A. FUNK, United States Bankruptcy Judge

This proceeding is before the Court on Taylor, Bean & Whitaker Mortgage Cor[874]*874poration’s (“TBW”) Motion to Compel Underwriters1 to Produce Documents (Doc. 465, the “Motion”). Defendants Federal Loan Mortgage Corporation (“Freddie Mac”) and Sovereign Bank (“Sovereign”) have each filed joinders to the Motion (Docs. 469, 471, and 489). Underwriters filed a response in opposition to the Motion (Doc. 485, the “Response”), to which TBW filed a reply brief (Doc. 490, the “Reply”). Also before the Court is Underwriters’ sur-reply brief (Doc. 499-1, the “Sur-Re-piy”).2

For the reasons stated below, the Court requires an in camera inspection of the documents redacted and withheld by Underwriters during discovery. In addition, the Court will direct that Underwriters file an accompanying memorandum setting forth a detailed explanation as to the basis for each assertion of privilege. The moving parties will be given an opportunity to file a response to Underwriters’ memorandum in this regard.

I. Background

On August 24, 2009, TBW filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code, thereby commencing the underlying case (3:09-bk-7047-JAF). Included in the assets of TBW’s bankruptcy estate are certain fidelity bonds and insurance policies (collectively, the “Bonds”), which cover various types of losses attributable to, inter alia, errors and omissions by TBW’s employees. Underwriters provide coverage under the Bonds.3 The Bonds specify that they are governed by Florida law (Doc. 184-6 at 54).

On November 3, 2010, Defendant Government National Mortgage Association (“GNMA”) served Underwriters with its First Request for Production of Documents (Doc. 465-1). On January 14, 2011, TBW served its First Request for Production of Documents upon Underwriters (Doc. 465-2). On August 19, 2011, Freddie Mac served Underwriters with its First Request for Production of Documents (Doc. 465-3). On February 15, 2012, Underwriters voluntarily produced Miller Insurance Services Limited’s (“Miller”) file for the 2007 and 2008 policy years, with an attendant privilege log (Doc. 465-4). On August 10, 2012, Sovereign issued a subpoena for the production of documents to Stateside Underwriting Agency (“Stateside”), the company which apparently provided banker’s bonds to TBW in 2004, 2005, 2006 and 2007 (Doc. 373; Doc. 465 at 2).

TBW states that Underwriters’ counsel, on behalf of all Underwriters, Miller, and Stateside, produced documents on a rolling basis, some of which were redacted — purportedly on bases set forth in certain privilege logs (Doc. 465 at 3; see also Docs. [875]*875465-4, 465-7). TBW asserts that, at the depositions of the corporate representatives of Miller and Underwriters in London, England, on February 12 through 15, 201S, it came to the conclusion that “some of the assertions of privilege made by counsel for Underwriters were baseless.” (Doc. 465 at 3). By way of example, TBW asserts that “Stateside and Miller are independent and unrelated corporate entities, such that Stateside’s disclosure of communications from its counsel to Miller would destroy Stateside’s attorney-client privilege and subject the disclosed documents to production.” (Id.).

Underwriters’ privilege logs (Docs. 465-4, 465-7) provide a description of the documents) that were either redacted or withheld. In addition, the privilege logs provide the name of the author(s) and the recipient(s) of the documents (id.). Many of the documents are described as email chains, which have as many as five authors (see, e.g., Doc. 465-7 at 6). In addition, some documents have as many as sixteen recipients (id.). Attached to Underwriters’ Response are the affidavits of Richard Nowell, Scott Schmookler, and Clare Constable (Docs. 485-1, 485-2, 485-3).

Richard Nowell is an employee of Stateside (Doc. 485-1 at 1). In his affidavit he states that, between 2004 and 2009, Stateside acted as an underwriting agent for Underwriters, which granted Stateside the authority to underwrite certain banker’s bonds and professional liability policies on behalf of Underwriters (id.). Mr. Nowell further states, however, that Stateside did not act as Underwriters’ agent with respect to the issuance of the 2008 Bonds to TBW (id.). In addition, Mr. Nowell testifies that, at no point in time, was Stateside given the authority to waive the attorney-client privilege on behalf of Underwriters (id.).

Scott Schmookler is an attorney who was formally a partner at the law firm of Clausen Miller (Doc. 485-2 at 1). Mr. Schmookler states that Clausen Miller was retained by Underwriters to act as their legal counsel with respect to the insurance claim submitted by TBW and the attendant litigation that ensued (id.). In his affidavit, Mr. Schmookler explains that certain documents contained within the subject privilege logs were either redacted or withheld because they contain legal advice provided to Underwriters (id.). Mr. Schmookler additionally states that certain documents were withheld based on the attorney work product doctrine (id. at 2). Further, Mr. Schmookler testifies that other documents were withheld or redacted because they contain information regarding: (1) other insurance policies; (2) other insureds; (3) reinsurance; or (4) reserves (id. at 2-3). The remaining documents were purportedly withheld as being irrelevant (id. at 2).

Clare Constable is employed by Canopi-us Managing Agents Limited (“Canopius”) as a divisional head of claims (Doc. 485-3). Ms. Constable states that “Canopius manages Syndicate 4444 at Lloyd’s and is the lead underwriter” (id. at l).4 Ms. Constable states that, after receiving notice of TBW’s claim, Underwriters retained Clau-sen Miller to act as their legal counsel. Ms. Constable testifies that Clausen Miller did not act as a claim adjuster or investigator and that communications from Clausen Miller that were sent to Underwriters “were not shared with third parties.” (id. at 2).

[876]*876II. Discussion

Rule 26(b)(1) of the Federal Rules of Civil Procedure (made applicable by Rule 7026 of the Federal Rules of Bankruptcy Procedure) provides, in pertinent part, that a party may obtain discovery regarding any non-privileged matter that is relevant. Moreover, the information need not be admissible at trial so long as the discovery appears reasonably calculated to lead to the discovery of admissible evidence. Fed. R. Civ. P. 26(b)(1). A party withholding discovery by asserting a privilege has the burden of proving the existence of the privilege. Tyne v. Time Warner Entm’t Co., L.P., 212 F.R.D. 596, 599 (M.D.Fla.2002).

Related

Smith v. Armour Pharmaceutical Co.
838 F. Supp. 1573 (S.D. Florida, 1993)
Heartland Express, Inc. v. Torres
90 So. 3d 365 (District Court of Appeal of Florida, 2012)
Tyne v. Time Warner Entertainment Co.
212 F.R.D. 596 (M.D. Florida, 2002)

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493 B.R. 872, 24 Fla. L. Weekly Fed. B 149, 2013 WL 3550651, 2013 Bankr. LEXIS 2801, Counsel Stack Legal Research, https://law.counselstack.com/opinion/certain-underwriters-at-lloyds-v-taylor-bean-whitaker-mortgage-corp-flmb-2013.