1 2
3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON 8 AT SEATTLE
9 10 WATER’S EDGE, A CASE NO. C19-1553JLR CONDOMINIUM OWNERS 11 ASSOCIATION, ORDER 12 Plaintiff, v. 13
AFFILIATED FM INSURANCE 14 COMPANY, et al., 15 Defendants. 16
I. INTRODUCTION 17 Before the court is Plaintiff Water’s Edge, a Condominium Owners Association’s 18 (“Water’s Edge”) renewed motion to compel the deposition of Daniel Syhre. (2d Mot. 19 (Dkt. # 69).) Defendant MiddleOak Specialty (“MiddleOak”) opposes the motion. (2d 20 Resp. (Dkt. # 71).) The court held oral argument on Water’s Edge’s renewed motion on 21 August 2, 2022. (See 8/2/22 Min. Entry (Dkt. # 72).) The court has considered the 22 1 parties’ submissions, the arguments of counsel, the relevant portions of the record, and 2 the applicable law. Being fully advised, the court GRANTS Water’s Edge’s renewed
3 motion to compel the deposition of Mr. Syhre. 4 II. ANALYSIS 5 On October 1, 2020, Water’s Edge brought a motion to compel the deposition of 6 MiddleOak’s attorney, Mr. Syhre, under Cedell v. Farmers Ins. Co., 295 P.3d 239 (Wash. 7 2013) based on his involvement in quasi-fiduciary tasks associated with the adjustment of 8 Water’s Edge’s claim. (1st Mot. (Dkt. # 45).) The court denied its motion without
9 prejudice and informed Water’s Edge that it could renew the motion “after it takes 10 additional discovery on MiddleOak’s claims handling process if Water’s Edge obtains 11 information in discovery showing that Mr. Syhre’s deposition is necessary to Water’s 12 Edge’s preparation of this case.” (11/10/20 Order (Dkt. # 49) at 7; see also 10/27/20 Hrg. 13 Tr. (Dkt. # 51) at 21.) Following the court’s ruling, Water’s Edge took the deposition of
14 MiddleOak’s designated representative pursuant to Federal Rule of Civil Procedure 15 30(b)(6) in an effort to determine whether the information sought from Mr. Syhre was 16 available by other means. (See 2d Mot. at 1.) As a result of that deposition testimony, 17 Water’s Edge now renews its motion to compel the deposition of Mr. Syhre. (Id.) 18 Below, the court sets forth the relevant legal standard before turning to Water’s Edge’s
19 renewed motion. 20 A. Legal Standard 21 “Parties may obtain discovery regarding any nonprivileged matter that is relevant 22 to any party’s claim or defense and proportional to the needs of the case.” Fed. R. Civ. P. 1 26(b)(1). The Ninth Circuit defines privileged information as “confidential disclosures 2 made by a client to an attorney in order to obtain legal advice, as well as an attorney's
3 advice in response to such disclosures.” United States v. Chen, 99 F.3d 1495, 1501 (9th 4 Cir. 1996). The attorney-client privilege “applies to communications between lawyers 5 and their clients when the lawyers act in a counseling and planning role, as well as when 6 lawyers represent their clients in litigation.” Id. 7 However, under Washington State law, the attorney-client privilege applies 8 differently in certain insurance cases. “[I]n first party insurance claims by insured[s]
9 claiming bad faith in the handling and processing of claims,” the attorney-client privilege 10 is presumptively inapplicable. Cedell, 295 P.3d at 246. In such cases, Cedell creates a 11 “presumption that there is no attorney-client privilege relevant between the insured and 12 the insurer in the claims adjusting process, and that the attorney-client . . . privilege[ is] 13 generally not relevant.” MKB Constructors v. American Zurich Insurance Co., No.
14 C13-0611JLR, 2014 WL 2526901, at *4 (W.D. Wash. May 27, 2014) (citing Cedell, 295 15 P.3d at 246). Nonetheless, an insurer may overcome Cedell’s “presumption of 16 discoverability by showing its attorney was not engaged in the quasi-fiduciary tasks of 17 investigation and evaluating or processing the claim, but instead in providing the insurer 18 with counsel as to its own liability: for example, whether or not coverage exists under
19 the law.” Cedell, 295 P.3d at 246. 20 B. Water’s Edge’s Renewed Motion to Compel 21 Water’s Edge argues that the record currently before the court demonstrates that 22 “information critical to the development and prosecution of its case can only be obtained 1 through the deposition of Mr. Syhre.” (See 2d Mot. at 1.) Specifically, Water’s Edge 2 contends that “Mr. Syhre had complete control” over three areas of the claim adjusting
3 process—(1) the review of Water’s Edge’s claim supporting documents; (2) the 4 investigation into the nature and extent of the property damages; and (3) the contents of 5 the denial letter—and that those three areas are relevant to Water’s Edge’s bad faith, 6 Insurance Fair Conduct Act (“IFCA”), and breach of contract claims. (See id. at 1-5 7 (citing McIsaac Decl. (Dkt. # 70) ¶ 3, Ex. A (portions of MiddleOak’s Rule 30(b)(6) 8 representative’s deposition transcript)); see also SAC (Dkt. # 36) at 4-6.)
9 In response, MiddleOak does not argue that Mr. Syhre was engaged in privileged, 10 rather than quasi-fiduciary tasks, with respect to the three areas of the claim adjusting 11 process identified in the renewed motion. (See generally 2d Resp. at 1-3.) Instead, it 12 argues that the test announced in Shelton v. Am. Motors Corp., 805 F.2d 1323 (8th Cir. 13 1986),1 rather than Cedell, applies to this discovery dispute and that “Water’s Edge
14 cannot meet its burden on the third [element of the Shelton test] by showing that 15 counsel’s deposition is crucial to the preparation of its case by relying on the general 16 notion that that deposition would cover topics that might be relevant to non-specific 17 issues.” (Id. at 3; see also id. at 2 (alleging that Water’s Edge could depose other 18
19 20 1 The Shelton test requires that parties seeking to depose opposing counsel demonstrate that they have no other means to obtain the information at issue, that the information is relevant 21 and nonprivileged, and that the information is crucial. See Lloyd Lifestyle Ltd. v. Soaring Helmet Corp., No. C06-0349JCC, 2006 WL 753243, at *2 (W.D. Wash. Mar. 23, 2006) (citing Shelton, 22 805 F.2d at 1327). 1 individuals regarding the destructive investigation and that “it is unclear why it would be 2 necessary for [Water’s Edge] to depose defense counsel [regarding] its own records”).)
3 To begin, the court rejects MiddleOak’s contention that the court should apply the 4 test for deposing opposing counsel established in Shelton to this dispute. “Although the 5 [c]ourt [has] previously employed the Shelton test, the [c]ourt has never done so in the 6 context of insurance bad faith litigation, and Shelton itself has never been adopted by the 7 Ninth Circuit.” Bagley v. Travelers Home & Marine Ins. Co., No. C16-0706JCC, 2016 8 WL 8738672, at *2 (W.D. Wash. July 5, 2016) (citation omitted) (declining to impose the
9 Shelton test because “Shelton is inapposite in a case such as this, where an insured alleges 10 insurance bad faith and seeks to depose opposing counsel regarding quasi-fiduciary 11 tasks”). Rather, this court has applied the Cedell presumption in cases where the insured 12 claims bad faith in the handling and processing of claims and seeks to depose opposing 13 counsel regarding quasi-fiduciary tasks.2 See, e.g., id. (ordering the deposition of defense
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1 2
3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON 8 AT SEATTLE
9 10 WATER’S EDGE, A CASE NO. C19-1553JLR CONDOMINIUM OWNERS 11 ASSOCIATION, ORDER 12 Plaintiff, v. 13
AFFILIATED FM INSURANCE 14 COMPANY, et al., 15 Defendants. 16
I. INTRODUCTION 17 Before the court is Plaintiff Water’s Edge, a Condominium Owners Association’s 18 (“Water’s Edge”) renewed motion to compel the deposition of Daniel Syhre. (2d Mot. 19 (Dkt. # 69).) Defendant MiddleOak Specialty (“MiddleOak”) opposes the motion. (2d 20 Resp. (Dkt. # 71).) The court held oral argument on Water’s Edge’s renewed motion on 21 August 2, 2022. (See 8/2/22 Min. Entry (Dkt. # 72).) The court has considered the 22 1 parties’ submissions, the arguments of counsel, the relevant portions of the record, and 2 the applicable law. Being fully advised, the court GRANTS Water’s Edge’s renewed
3 motion to compel the deposition of Mr. Syhre. 4 II. ANALYSIS 5 On October 1, 2020, Water’s Edge brought a motion to compel the deposition of 6 MiddleOak’s attorney, Mr. Syhre, under Cedell v. Farmers Ins. Co., 295 P.3d 239 (Wash. 7 2013) based on his involvement in quasi-fiduciary tasks associated with the adjustment of 8 Water’s Edge’s claim. (1st Mot. (Dkt. # 45).) The court denied its motion without
9 prejudice and informed Water’s Edge that it could renew the motion “after it takes 10 additional discovery on MiddleOak’s claims handling process if Water’s Edge obtains 11 information in discovery showing that Mr. Syhre’s deposition is necessary to Water’s 12 Edge’s preparation of this case.” (11/10/20 Order (Dkt. # 49) at 7; see also 10/27/20 Hrg. 13 Tr. (Dkt. # 51) at 21.) Following the court’s ruling, Water’s Edge took the deposition of
14 MiddleOak’s designated representative pursuant to Federal Rule of Civil Procedure 15 30(b)(6) in an effort to determine whether the information sought from Mr. Syhre was 16 available by other means. (See 2d Mot. at 1.) As a result of that deposition testimony, 17 Water’s Edge now renews its motion to compel the deposition of Mr. Syhre. (Id.) 18 Below, the court sets forth the relevant legal standard before turning to Water’s Edge’s
19 renewed motion. 20 A. Legal Standard 21 “Parties may obtain discovery regarding any nonprivileged matter that is relevant 22 to any party’s claim or defense and proportional to the needs of the case.” Fed. R. Civ. P. 1 26(b)(1). The Ninth Circuit defines privileged information as “confidential disclosures 2 made by a client to an attorney in order to obtain legal advice, as well as an attorney's
3 advice in response to such disclosures.” United States v. Chen, 99 F.3d 1495, 1501 (9th 4 Cir. 1996). The attorney-client privilege “applies to communications between lawyers 5 and their clients when the lawyers act in a counseling and planning role, as well as when 6 lawyers represent their clients in litigation.” Id. 7 However, under Washington State law, the attorney-client privilege applies 8 differently in certain insurance cases. “[I]n first party insurance claims by insured[s]
9 claiming bad faith in the handling and processing of claims,” the attorney-client privilege 10 is presumptively inapplicable. Cedell, 295 P.3d at 246. In such cases, Cedell creates a 11 “presumption that there is no attorney-client privilege relevant between the insured and 12 the insurer in the claims adjusting process, and that the attorney-client . . . privilege[ is] 13 generally not relevant.” MKB Constructors v. American Zurich Insurance Co., No.
14 C13-0611JLR, 2014 WL 2526901, at *4 (W.D. Wash. May 27, 2014) (citing Cedell, 295 15 P.3d at 246). Nonetheless, an insurer may overcome Cedell’s “presumption of 16 discoverability by showing its attorney was not engaged in the quasi-fiduciary tasks of 17 investigation and evaluating or processing the claim, but instead in providing the insurer 18 with counsel as to its own liability: for example, whether or not coverage exists under
19 the law.” Cedell, 295 P.3d at 246. 20 B. Water’s Edge’s Renewed Motion to Compel 21 Water’s Edge argues that the record currently before the court demonstrates that 22 “information critical to the development and prosecution of its case can only be obtained 1 through the deposition of Mr. Syhre.” (See 2d Mot. at 1.) Specifically, Water’s Edge 2 contends that “Mr. Syhre had complete control” over three areas of the claim adjusting
3 process—(1) the review of Water’s Edge’s claim supporting documents; (2) the 4 investigation into the nature and extent of the property damages; and (3) the contents of 5 the denial letter—and that those three areas are relevant to Water’s Edge’s bad faith, 6 Insurance Fair Conduct Act (“IFCA”), and breach of contract claims. (See id. at 1-5 7 (citing McIsaac Decl. (Dkt. # 70) ¶ 3, Ex. A (portions of MiddleOak’s Rule 30(b)(6) 8 representative’s deposition transcript)); see also SAC (Dkt. # 36) at 4-6.)
9 In response, MiddleOak does not argue that Mr. Syhre was engaged in privileged, 10 rather than quasi-fiduciary tasks, with respect to the three areas of the claim adjusting 11 process identified in the renewed motion. (See generally 2d Resp. at 1-3.) Instead, it 12 argues that the test announced in Shelton v. Am. Motors Corp., 805 F.2d 1323 (8th Cir. 13 1986),1 rather than Cedell, applies to this discovery dispute and that “Water’s Edge
14 cannot meet its burden on the third [element of the Shelton test] by showing that 15 counsel’s deposition is crucial to the preparation of its case by relying on the general 16 notion that that deposition would cover topics that might be relevant to non-specific 17 issues.” (Id. at 3; see also id. at 2 (alleging that Water’s Edge could depose other 18
19 20 1 The Shelton test requires that parties seeking to depose opposing counsel demonstrate that they have no other means to obtain the information at issue, that the information is relevant 21 and nonprivileged, and that the information is crucial. See Lloyd Lifestyle Ltd. v. Soaring Helmet Corp., No. C06-0349JCC, 2006 WL 753243, at *2 (W.D. Wash. Mar. 23, 2006) (citing Shelton, 22 805 F.2d at 1327). 1 individuals regarding the destructive investigation and that “it is unclear why it would be 2 necessary for [Water’s Edge] to depose defense counsel [regarding] its own records”).)
3 To begin, the court rejects MiddleOak’s contention that the court should apply the 4 test for deposing opposing counsel established in Shelton to this dispute. “Although the 5 [c]ourt [has] previously employed the Shelton test, the [c]ourt has never done so in the 6 context of insurance bad faith litigation, and Shelton itself has never been adopted by the 7 Ninth Circuit.” Bagley v. Travelers Home & Marine Ins. Co., No. C16-0706JCC, 2016 8 WL 8738672, at *2 (W.D. Wash. July 5, 2016) (citation omitted) (declining to impose the
9 Shelton test because “Shelton is inapposite in a case such as this, where an insured alleges 10 insurance bad faith and seeks to depose opposing counsel regarding quasi-fiduciary 11 tasks”). Rather, this court has applied the Cedell presumption in cases where the insured 12 claims bad faith in the handling and processing of claims and seeks to depose opposing 13 counsel regarding quasi-fiduciary tasks.2 See, e.g., id. (ordering the deposition of defense
14 counsel under Cedell because the defendant failed to carry its burden of demonstrating 15 that the plaintiffs sought “privileged information, rather than information related to a 16 quasi-fiduciary task”); Mkt. Place N. Condo. Ass’n v. Affiliated FM Ins. Co., No. 17 C17-0625RSM, 2018 WL 3956130, at *1 (W.D. Wash. Aug. 17, 2018) (concluding that 18
19 2 Mr. Syhre conceded during the court’s October 27, 2020 hearing on Water’s Edge’s first motion to compel, and again during the August 2, 2022 hearing on the renewed motion to 20 compel, that he had not found any “cases that apply the Shelton rule in the Cedell context.” (See 10/27/20 Hrg. Tr. at 16-17; 8/2/22 Min. Entry.) And in its response to Water’s Edge’s renewed motion, MiddleOak similarly failed to provide any cases in which this court applied the Shelton 21 test in the Cedell context. (See generally 2d Resp. at 2 (citing a case that did not involve insurance related claims in which the court applied the Shelton test to determine whether the 22 plaintiffs could depose defense counsel).) 1 the depositions of defense counsel were permitted under Cedell because counsel 2 “engaged in at least some claims processing and handling by assisting in the drafting” of
3 coverage determination and IFCA response letters and “have discoverable information[, 4 relevant to the claims in the case,] related to the drafting of those letters”).3 5 Because this case involves “first party insurance claims by insured[s] claiming bad 6 faith in the handling and processing of claims,” the court concludes that the Cedell 7 presumption applies to the instant discovery dispute. Cedell, 295 P.3d at 246. The court 8 further finds that Mr. Syhre engaged in claim processing and handling—i.e.,
9 quasi-fiduciary—tasks by reviewing the documents that Water’s Edge submitted to 10 MiddleOak in support of its claim; participating in the investigation into the nature and 11 extent of the property damage; and drafting the denial letter on behalf of MiddleOak. 12 (See generally 2d Mot. at 1-5; MiddleOak 30(b)(6) Dep. Tr. (Dkt. # 73).) The court is 13 convinced from the record before it that Mr. Syhre has discoverable information related
14 to those quasi-fiduciary tasks, relevant to Water’s Edge’s claims, and that his deposition 15 is permitted under Cedell. Accordingly, the court GRANTS Water’s Edge’s renewed 16 motion to compel the deposition of Mr. Syhre. The deposition shall be limited to the 17 following areas: (1) the review of Water’s Edge’s claim supporting documents; (2) the 18
19 3 See also Everest Indem. Ins. Co. v. QBE Ins. Corp., 980 F. Supp. 2d 1273, 1280 (W.D. 20 Wash. 2013) (finding that “testimony [of insurer’s counsel] is relevant to determining whether QBE/CAU acted reasonably in denying Derus’ tender, and Everest is entitled to take her deposition”); Canyon Estates Condo. Ass’n v. Atain Specialty Ins. Co., No. C18-1761RAJ, 2020 21 WL 363379, at *1-2 (W.D. Wash. Jan. 22, 2020) (“[T]he Court is convinced . . . that [defense counsel] has discoverable information related to the drafting of those letters, relevant to the 22 Association’s claims, and that his deposition is permitted under Cedell.”). 1 investigation into the nature and extent of the property damages; and (3) the denial letter. 2 Should Water’s Edge pose a question to Mr. Syhre that MiddleOak believes, in good
3 faith, seeks to elicit privileged information, it may make the proper objection. And in the 4 event that Water’s Edge believes, in good faith, that the objection is without merit, the 5 parties may then bring that issue before the court. 6 III. CONCLUSION 7 For the foregoing reasons, the court GRANTS Water’s Edge’s renewed motion to 8 compel the deposition of Mr. Syhre (Dkt. # 69). Water’s Edge may depose Mr. Syhre at
9 a mutually convenient date and time. The deposition shall be limited to the following 10 areas: (1) the review of Water’s Edge’s claim supporting documents; (2) the 11 investigation into the nature and extent of the property damages; and (3) the denial letter. 12 Dated this 2nd day of August, 2022. 13 A 14 15 JAMES L. ROBART United States District Judge 16 17 18 19 20 21 22