The Charter Oak Fire Insurance Company v. American Capital, Ltd., 8:09-cv-00100

Background

Travelers (Charter Oak Fire Ins. Co. & Travelers Prop. Cas. Co.) sued for declaratory relief about coverage for heparin-related litigation involving American Capital and affiliates; Travelers asserted rescission/reformation and denied coverage.
During discovery Travelers withheld ~596 claims-handling documents as attorney-client privileged and work product; produced a limited set and a privilege log.
Magistrate Judge Schulze ordered broad production, finding many claims materials were ordinary-course claims handling (not privileged) and that privilege protection shifted to a later date (initially Sept. 18, 2008; later, based on new evidence, Dec. 8, 2008); she also found waiver in part due to Travelers’ rescission claim.
Plaintiffs sought to submit an in camera declaration from outside counsel (Paul Janaskie) to support privilege claims; Magistrate deferred consideration of that submission and granted Defendants’ motion to compel pre-December 8, 2008 documents.
District Judge Chasanow reviewed Plaintiffs’ objection that the magistrate improperly ruled without considering the proffered in camera declaration, and also considered Defendants’ unopposed motion to seal.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Applicability of attorney-client/work-product protection to pre-Dec. 8, 2008 claims materials	Travelers: communications with coverage counsel were legal advice and thus privileged earlier (by Sept. 18, 2008 or before)	Defendants: depositions and evidence show counsel performed ordinary claims-handling functions until Dec. 8, 2008, so materials are discoverable	Magistrate's factual finding that Plaintiffs did not anticipate litigation until Dec. 8, 2008 is reasonable; materials pre-Dec. 8 are not protected (district court affirmed)
Whether magistrate erred by declining to consider Plaintiffs’ proffered in camera declaration before ruling	Travelers: proffered Janaskie declaration would have provided admissible privileged evidence and should have been considered	Defendants: prior record and depositions provided sufficient evidence; Plaintiffs already said privilege logs suffice and declined earlier need for the declaration	District court held magistrate acted within discretion; declining immediate in camera review was not clearly erroneous or contrary to law
Waiver by assertion of rescission claim	Travelers: rescission claim does not necessarily waive privilege beyond what is relevant; sought limits on waiver	Defendants: rescission claim places Plaintiffs’ knowledge and timing at issue, supporting broader disclosure	Magistrate’s earlier waiver ruling (limited to certain post-September documents) was refined; district court sustained magistrate’s discretionary treatment and limited relief per prior order
Motion to seal filings and exhibits designated confidential	Defendants sought sealing to enforce protective order; Plaintiffs did not oppose	N/A	Motion to seal granted; court accepted redacted public filings and sealed unredacted exhibits pending agreed redactions

Key Cases Cited

United States v. Abu Ali, 528 F.3d 210 (4th Cir. 2008) (in camera proceedings may be used to test privilege assertions)
Victor Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251 (D.Md. 2008) (privilege claims require particularized privilege logs and sufficient evidentiary support)
Nat'l Union Fire Ins. Co. v. Murray Sheet Metal Co., Inc., 967 F.2d 980 (4th Cir. 1992) (work-product/anticipation of litigation requires documents prepared because of prospect of litigation, not ordinary business)
Zolin v. United States, 491 U.S. 554 (U.S. 1989) (in camera review appropriate only with sufficient factual basis to justify privilege inquiry)
In re Allen, 106 F.3d 582 (4th Cir. 1997) (attorney-client privilege determinations rest on factual findings)
United States v. Jones, 696 F.2d 1069 (4th Cir. 1982) (burden is on proponent of privilege to show both attorney-client relationship and that communications are privileged)