Lead Opinion
¶1 American Zurich Insurance Company (Zurich) seeks a writ of supervisory control, arguing that the Thirteenth Judicial District Court is proceeding based on a mistake of law in controlling discovery with respect to matters protected by the attorney-client privilege and the work product doctrine. We accept review of the petition in this instance because the case presents a purely legal issue for which, if the District Court erred, there would be no adequate remedy on appeal. For the reasons that follow, we conclude the District Court correctly applied the law of attorney-client privilege, but incorrectly analyzed the work product doctrine. However, since the court reached the proper conclusion, supervisory control is unnecessary and we dismiss the petition.
FACTUAL AND PROCEDURAL BACKGROUND
¶2 Phillip Peters suffered a serious injury on January 18,1999, while working at Roscoe Steel & Culvert Co. (Roscoe). He later filed a workers’ compensation claim. Zurich, which insured Roscoe under Plan II of the Montana Workers’ Compensation Act, accepted liability for Peters’s claim. Zurich contracted with Employee Benefit Management Solutions (EBMS), a third-party adjuster, to provide services for Peters’s claim. EBMS employee Jim Kimmel was responsible for adjusting Peters’s claim. Kimmel stated in his deposition that he had
¶3 Over the course of several years, Peters and Zurich disagreed over elements of Peters’s claim, including the level of his impairment and other issues. During this time, attorney Joe Maynard of the Crowley Law Firm advised Zurich on various legal matters. Maynard prepared an opinion and evaluation letter regarding Peters’s case, dated October 7,2003 (Maynard Letter). The letter was prepared in advance of a mediation held October 10, 2003. Maynard sent the letter to Kimmel, who then wrote notes on the letter reflecting his conversation with Maynard. Without Zurich’s or Maynard’s knowledge or permission, Kimmel provided a copy of his annotated letter to Roscoe.
¶4 Although the case did not settle as a result of the 2003 mediation, the parties eventually resolved Peters’s underlying disability benefits claim. Peters filed the present action in May 2008 for unfair claims settlement practices, naming Zurich and Kimmel as defendants. On May 6, 2011, Peters served Roscoe with a Subpoena Duces Tecum requesting Roscoe’s “entire file and all documentation relating to Mr. Peters’s employment, his injury of January 18, 1999, his workers’ compensation claim regarding this injury, and any and all correspondence either written or electronic or in whatever form, with Zurich, EBMS, and the Crowley Law Firm regarding Mr. Peters.” Roscoe, represented by separate counsel, objected to the subpoena and filed an action to quash it, citing attorney-client privilege and the work product doctrine. In its July 7th order, the court denied Roscoe’s motion and ordered Roscoe to produce the Maynard Letter. The court held that the letter was not protected by attorney-client privilege because Roscoe was neither a party to the action nor had a shared legal interest with Zurich. The court similarly found the letter was not protected by the work product doctrine since Roscoe had no legal interest in the claim and was not acting as Zurich’s agent, attorney, or consultant. Zurich then filed a motion for relief from the court’s order to produce. The court denied Zurich’s motion, and Zurich petitioned this Court for a writ of supervisory control.
DISCUSSION
¶5 1. Propriety of Supervisory Control.
¶6 Pursuant to Article VII, Section 2(2) of the Montana Constitution, this Court may exercise supervisory control over other courts. The Court is justified in doing so when “urgency or emergency factors exist, making the normal appeals process inadequate, when the case involves
¶7 We find it appropriate to review Zurich’s contentions. We requested supplemental briefing and oral argument in this case because the question presented is one of first impression and raises an issue of law: whether, in a claim for workers’ compensation benefits, an attorney’s communication to its client insurer is privileged when the client voluntarily discloses the communication to the non-client employer. Normal channels of appeal would prove inadequate. We have recognized that compelled discovery of potentially-privileged material presents unique issues that, under certain circumstances, are “sufficient to invoke original jurisdiction.” Inter-Fluve v. Mont. Eighteenth Jud. Dist. Ct., 2005 MT 103, ¶ 1, 327 Mont. 14, 112 P.3d 258 (quoting Winslow v. Mont. Rail Link, Inc., 2001 MT 269, ¶ 2, 307 Mont. 269, 38 P.3d 148). If the District Court did err in ordering production of the Maynard Letter, later appeal would provide no relief for Zurich because the purportedly confidential contents of the letter would be exposed. However, while we accept review of the petition, we decline to exercise supervisory control in this case. As explained below, though the District Court erred in its analysis of the work product doctrine, its analytical error does not affect the correctness of its decision to require production of the letter. We take the opportunity to explain our reasoning in order to promote judicial efficiency and to avoid a later appeal of the issue in this case.
¶8 2. Whether Kimmel’s actions waived Zurich’s attorney-client privilege.
¶9 The attorney-client privilege protects communications between attorney and client during the course of the professional relationship.
The fundamental purpose of the attorney-client privilege is to enable the attorney to provide the best possible legal advice and encourage clients to act within the law. The privilege furthers this purpose by freeing clients from the consequences or the*303 apprehension of disclosing confidential information, thus encouraging them to be open and forthright with their attorneys.
Inter-Fluve, ¶ 22. The privilege serves to ensure attorneys freely give accurate and candid advice to their clients without the fear it later will be used against the client. Inter-Fluve, ¶ 22 (citing Palmer by Diacon v. Farmers Ins. Exch., 261 Mont. 91, 107, 861 P.2d 895, 904-05 (1993)). ¶10 While serving these underlying policy goals, the privilege must be construed narrowly because it obstructs the truth-finding process. Westinghouse Elec. Corp. v. Republic of Philippines, 951 F.2d 1414, 1423 (3rd Cir. 1991). The privilege “protects only those disclosuresmecessary to obtain informed legal advicewvhich might not have been made absent the privilege.” Fisher v. U.S., 425 U.S. 391, 403, 96 S. Ct. 1569, 1577 (1976). The purpose is to encourage full and frank communication, not as an end in itself, but as a means to promote ‘broader public interests in the observance of law and administration of justice.” Upjohn Co. v. U.S., 449 U.S. 383, 389, 101 S. Ct. 677, 682 (1981).
¶11 As a general rule, the privilege extends only to communications between an attorney and a client. There are specific exceptions, however, which permit communications involving third parties to receive the same protection. Westinghouse, 951 F.2d at 1424. Attorney-client communications may be protected if disclosed to another party “where the parties undertake a joint effort with respect to a common legal interest.” U.S. v. BDO Seidman, LLP, 492 F.3d 806, 816 (7th Cir. 2007). Such disclosures may be privileged if communicating with the third party is “necessary for the client to obtain informed legal advice.” Westinghouse, 951 F.2d at 1424 (emphasis added). These third parties may be co-litigants, or other professionals assisting the attorney in representing the client. Westinghouse, 951 F.2d at 1424; In re Rules of Prof'l Conduct, 2000 MT 110, ¶ 60, 299 Mont. 321,2 P.3d 806 (citing U.S. v. Mass. Inst. of Tech., 129 F.3d 681, 684 (1st Cir. 1997)). The lawyer’s need to communicate with these third parties must be “appropriate, even if not vital, to the consultation.” In re Rules, ¶ 60 (citing Mass. Inst. of Tech., 129 F.3d at 684). Known variously as ‘joint defense agreements,” the ‘joint prosecution privilege,” or the “common interest doctrine,” the shared privilege generally is limited to parties involved in litigation or impending litigation, or where the third party has “a common legal interest for the purpose of rendering legal advice to the client.” Hanover Ins. Co. v. Rapo & Jensen Ins. Servs., Inc., 870 N.E.2d 1105, 1109-10 (Mass. 2007).
¶13 Moreover, the insurer’s duty to compensate the employee cannot be delegated to the employer, nor can the employer veto or influence any settlement between the insurer and the employee. Hernandez v. Nat’l Union Fire Ins. Co. of Pittsburgh, 2003 MTWCC 5, ¶ 1, 2003 MT Wrk. Comp. LEXIS 4. The rules of the Workers’ Compensation Court, promulgated after extensive participation by attorneys for claimants, insurers and employers, make clear that the employer is not to be named as a party to an action for benefits, except in cases involving the uninsured employers’ fund or involving a request for relief against an employer. Admin. R. M. 24.5.301(4). With those limited exceptions, the employer is not at risk in the action, though it retains a “duty to cooperate and assist its insurer, including any duty to assist in responding to discovery.” Admin. R. M. 24.5.301(4). It is thus improper for an insurer and an employer to collaborate on settlement of a worker’s claim for benefits. Consistent with the Workers’ Compensation Court rules, Roscoe was not named as a party in Peters’s compensation claim before that Court.
¶14 To be sure, an employer and an insurer share legal interests in the workers’ compensation arena. The employer and insurer must work together to promote safety on the job, to assist employees in prompt return to work after an injury, and to prevent fraudulent claims. Sections 39-71-107(1), 39-71-316, 39-71-613(4), 45-6-301(5), MCA. Even outside the workers’ compensation system, though, “the relationship between an insurer and insured is permeated with potential conflicts.” In re Rules, ¶ 37. As we have previously stated, the common interest in keeping litigation and premium costs down, by itself, is not sufficient to extend the privilege beyond the attorney-client relationship. In re Rules, ¶ 70.
¶16 In addition, Kimmel’s disclosure of the Maynard Letter to Roscoe was not necessary for Zurich to obtain legal advice. Roscoe had a duty to provide Zurich with information to facilitate Zurich’s evaluation of the claim, but the necessity for information only flows in one direction in this context. In light of the law barring an employer in Plan II cases from participating in the adjustment of the claim, it was not necessary or appropriate for Zurich to communicate its settlement strategy with Roscoe. Peters’s expression of interest in suing Roscoe (Dissent, ¶ 43) did not bring Roscoe’s legal interests into the adjustment of the benefits claim. To the contrary, an employer’s legal interests most likely would be at odds with those of its insurer were the employee to seek exemption from workers’ compensation exclusivity by alleging intentional acts. See §39-71-414, MCA. In any event, ‘It]he litigation looming on the horizon” was only that pending in the Workers’ Compensation Court, involving solely Zurich and Peters. FEC v. Christian Coalition, 178 F.R.D. 61, 73 (E.D. Va. 1998). As the District Court correctly concluded, Roscoe was neither a party to the action nor shared a common interest with Zurich in the adjustment of Peters’s claim.
¶18 In FSP Stallion 1, the common interest doctrine was invoked by a number of defendants sued for violation of federal and state securities laws. The plaintiffs claimed the defendants-a group of individuals and their business entities-had conspired to develop a scheme to fraudulently induce investors to purchase tenant-in-common interests at an inflated price. They sought production of documents relating to the drafting and preparation of the Private Placement Memorandum (PPM) used to solicit investors, which the defendants claimed were protected by a shared privilege since all had participated together in preparing the PPM. FSP Stallion 1, at **14-15. The court refused to apply the privilege to the documents in question, ruling that Tt]he common interest doctrine does not extend to communications about a joint business or financial transaction, merely because the parties share an interest in seeing the transaction is legally appropriate.” Additionally, the court noted, “[a] desire to comply with applicable laws and to avoid litigation does not transform their common interest and enterprise into a legal, as opposed to a commercial, matter.” FSP Stallion 1, at *67.
¶19 Like the defendants in FSP Stallion 1, although Roscoe and Zurich may have shared a desire to avoid litigation and to comply with the workers’ compensation laws, Roscoe did not share a common legal interest in the adjustment of Peters’s claim and thus was not protected by Zurich’s privilege with its counsel.
¶20 Finally, we examine whether Zurich waived its attorney-client privilege in transmitting the letter to Roscoe. The attorney-client privilege is held by the client and may be waived by voluntary disclosure. M. R. Evid. 503; State v. Tadewalt, 2010 MT 177, ¶ 17, 357 Mont. 208, 237 P.3d 1273. ‘Voluntary disclosure to a third party of
¶21 Zurich cites Inter-Fluve for the principle that a corporate attorney-client privilege is normally only exercised and waived by its officers and directors. ¶ 33. Since Kimmel was merely a claims adjuster, Zurich contends he had no such authority. We disagree. Section 39-71-107(2), MCA, details the extensive authority a Montana claims adjuster must have when examining and managing workers’ compensation claims. Consistent with the requirements of state law, Kimmel acknowledged he had “absolute authority” over management of Peters’s claim. In Inter-Fluve, we quoted the United States Supreme Court’s analysis of the attorney-client privilege in a corporate context, stating all corporate action “must necessarily be undertaken by individuals empowered to act on behalf of the corporation.” ¶ 33 (quoting Commodity Futures Trading Comm’n v. Weintraub, 471 U.S. 343, 348, 105 S. Ct. 1986, 1991 (1985)). Not only was Kimmel empowered to act on behalf of the corporation in this instance, Montana law requires his authority in the adjustment process. Thus, Kimmel was authorized to waive Zurich’s privilege.
¶22 In sum, we conclude the District Court properly applied the law in determining the attorney-client privilege does not authorize Roscoe to withhold the Maynard Letter. Roscoe was not a party to the action, nor did it share a common legal interest in Zurich’s adjustment of the workers’ compensation claim. Zurich’s disclosure of the letter via Kimmel to Roscoe constitutes a waiver of its attorney-client privilege.
¶23 3. Whether the Maynard Letter is protected by the work product doctrine.
¶24 While the District Court properly concluded the attorney-client privilege did not apply, it failed to conduct a separate analysis of the work product doctrine, stating only that because Roscoe had no legal interest in the matter, waiver of the work-product privilege necessarily followed. Zurich argues this approach was flawed, because Roscoe was not its “adversary” in the workers’ compensation proceeding. Zurich is correct that waiver of the attorney-client privilege by voluntary disclosure does not necessarily waive confidentiality of attorney work
¶25 We discussed in Palmer the great protections to be afforded to opinion work product, setting a high bar against compelled production. Our discussion concluded with the observation that “materials that contain the mental impressions and opinions of [counsel] are immune from discovery under the work-product doctrine, unless a waiver occurred.” Palmer, 261 Mont. at 118, 861 P.2d at 912. We partially analyzed disclosure in the insurer-insured context in In re Rules. There, we analyzed client confidentiality obligations under Rule 1.6, M. R. Prof. Conduct, which is broader in both scope and protection than the attorney-client privilege and the work product doctrine. In re Rules, ¶ 77. The case dealt with unauthorized disclosures by insured’s counsel to third-party auditors, whom the Court found were not ‘heeded in the representation” or “appropriate ... to a consultation.” In re Rules, ¶ 71. In fact, third-party auditors stood in potential conflict with the interests of the insured, as their mission is partially to find fault with legal charges. In re Rules, ¶ 75. The Court made clear it was not holding “that the disclosure of detailed descriptions of professional services to a third-party auditor necessarily violates any privilege that may attach to them. Resolution of that issue would clearly entail findings of fact that we have not made in the present case.” In re Rules, ¶ 73. This case requires more exacting analysis of when disclosure to a third party nullifies work product protection.
¶26 The purpose underlying the work product doctrine requires us to distinguish between disclosures to adversaries and disclosures to non-
¶27 If the disclosure is to a non-adversary, but the recipient is a “conduit” to an adversary, the court examines whether the disclosing party had a reasonable basis for believing the recipient would keep the disclosed material confidential. Deloitte, 610 F.3d at 141. A reasonable expectation of confidentiality may derive from “common litigation interests between the disclosing party and the recipient” or “may be rooted in a confidentiality agreement or similar arrangement between the disclosing party and the recipient.” Deloitte, 610 F.3d at 141. Absent common interests, we inquire as to whether a confidentiality agreement or other assurance gave the disclosing party a reasonable expectation that the recipient would keep its work product confidential. Deloitte, 610 F.3d at 142. In Deloitte, the court concluded the disclosing party had a reasonable expectation the recipient would keep the information confidential because the recipient was bound by rules of professional conduct governing accountants, which include confidentiality requirements. 610 F.3d at 142.
¶28 We conclude that Roscoe was neither an adversary of Zurich nor necessarily a conduit to Peters. As recognized by the District Court, Roscoe had no legal interest in the adjustment of Peters’s claim. While Roscoe was not adversarial to Zurich, its overlapping relationship with both Peters and Zurich makes Zurich’s expectations of confidentiality in Roscoe during the claims adjustment process unreasonable. Given the law expressly excluding Roscoe from participation in and liability for the claim, there could be no basis for either a confidentiality agreement or assurances of confidentiality. ‘Common sense suggests that there can be no joint defense agreement when there is no joint defense to pursue.” In re Grand Jury Subpoena, 274 F.3d 563, 575 (1st Cir. 2001).
¶29 The District Court did not apply the correct legal standard to the work product analysis, but it reached the proper conclusion.
¶30 IT IS THEREFORE ORDERED that Zurich’s petition for a writ of supervisory control is dismissed.
DATED this 13th day of March, 2012.
Concurrence Opinion
concurring.
¶31 I join the Court’s Opinion. Aside from the Court’s finely-tuned legal analysis, with which I agree, I suggest there is another fundamental point in this case that needs to be emphasized.
¶32 It needs no citation to authority that in the typical workers’ compensation case, the employer enjoys immunity from suit by the injured worker.
¶33 It makes obvious sense that the employer is required to cooperate with its WCA insurer to the limited extent of providing some basic background information regarding the injured worker and the claim. However, whether we presume-er not-that the WCA insurer’s approach will be to try to avoid entirely or to limit the payment of benefits to the injured worker, it is patently unfair for the WCA insurer to involve the employer in adjusting, mediating, and settling the injured worker’s claim.
¶34 When that happens, the employer gets the best of both worlds. Not only does the employer enjoy immunity from suit, the employer also gets to shoot down (or help shoot down) the injured worker’s claimJhereby preserving its (the employer’s) claims record for
¶35 Concomitantly, the injured worker gets the worst of both worlds. The injured worker cannot sue the employer
¶36 The rule in Hernandez v. Natl. Union Fire Ins. Co., 2003 MTWCC 5, ¶ 1,2003 MT Wrk. Comp. LEXIS 4 (see Opinion, ¶ 13) is correct and ensures basic fairness and the viability of the quid pro quo. The employer must not be involved in adjusting, mediating, or settling the injured worker’s claim. The employer must not be involved in the sorts of decisions that would militate in favor of the employer’s being privy to materials, documents, and information protected by the attorney-client privilege between the employer’s WCA insurer and its counsel. In short, if the quid pro quo is to remain a viable concept, the employer cannot be part of the “magic circle,” the “community of interest,” or whatever one wants to call it.
¶37 I concur in the Court’s well-reasoned Opinion.
One could say that in every workers’ compensation case, the employer is immune from suit given that the “exclusivity” statutes, §§39-71-411 and -413, MCA, effectively make it impossible for the employee to ever sue the employer for injury in the workplace. See Wise v. CNH Am., LLC, 2006 MT 194, ¶¶ 14-18, 333 Mont. 181, 142 P.3d 774 (Nelson, J., concurring).
Of course, as here, the injured worker can sue the employer’s WCA insurer for bad faith and UTPA violations.
Dissenting Opinion
dissenting.
¶38 We recognized in In re Rules that “information may be shared without loss of the privilege’” to parties who were outside the attorney-client relationship but nonetheless “within the ‘magic circle’ or community of interest” by virtue of shared legal interests. In re Rules of Prof'l Conduct, 2000 MT 110, ¶¶ 60, 70, 299 Mont. 321, 2 P.3d 806 (citation omitted). I believe the Court has understated the interests shared by American Zurich and Roscoe. I would hold that these parties have the necessary “community of interest” which permitted information to be shared in this matter without loss of the privilege. In re Rules, ¶ 70.
¶39 Although acknowledging that the parties share some general interests as employer and insurer, the Court concludes that Roscoe’s role in the matter is “similar to that of a witness” in which Roscoe is “called upon to provide background information to Zurich about the employee’s duties, history and facts about the injury.” Opinion, ¶ 15. The Court’s reasoning is premised upon the statutes which provide that the employer is not to be named as a party in an action for benefits, and that, under Plan II, the insurer is primarily liable to the
¶40 In Householder v. Republic Indem. Co. of Cal., 2001 MTWCC 61, 2001 MT Wrk. Comp. LEXIS 82, the Workers’ Compensation Court addressed a discovery dispute involving a claimant’s attorney who contacted the employer directly to obtain information. While noting the distinctions between a workers’ compensation case and other liability cases, the Workers’ Compensation Court held that significant legal interests were nonetheless shared by the employer and the insurer. Householder, ¶ 9. Although employers are no longer named in workers’ compensation cases, the Workers’ Compensation Court’s discussion of shared interests, even when the insurer is the liable party, is instructive:
[W]hile a workers’ compensation insurer is directly liable to the claimant, the employer’s interests are affected .... At minimum, the employer is required to cooperate with the insurer in the litigation. The employer’s interests will often dovetail with those of the insurer since its premiums may be affected by its loss experience.
Householder, ¶ 9. We noted this “dovetailing” of interests in the context of liability insurers at issue in In re Rules as well. See In re Rules, ¶ 37 (quoting Kent D. Syverud, What Professional Responsibility Scholars Should Know About Insurance, 4 Conn. Ins. L.J. 17, 23-24 (1997)) (“[b]oth insurance companies and insureds have important and meaningful stakes in the outcome [of] a lawsuit against the insureds, stakes that include not just the money that the insurance company must pay in defense and settlement, but also the uninsured liabilities of the insured, which include not just any judgment in excess of liability limits, but also the insured’s reputation and other non-economic stakes’”).
¶41 An employer has no authority to influence the adjustment of a claim, see Hernandez v. Nat’l Union Fire Ins. Co. of Pittsburgh, 2003
¶42 Further, the employer will rightly be concerned about the future, particularly the potential for future liability exposure which may well be dependent upon the outcome of the claim. This concern is inherent within our legal system, which relies upon case precedent to establish liability in future cases. While this concern does not take away the ultimate responsibility for the claim from the insurer, it nonetheless is a legal concern also shared by the insurer, who must consider the precedent that may be created by way of a settlement or judgment, which in turn, may affect the viability of future claims and the underwriting which may be necessary for those claims. Even though the employer may exert no influence on the claim, the insurer’s actions will potentially affect both the insurer and the employer, and that possibility will provide incentive for the employer to assist the insurer to the best of the employer’s ability. The District Court reasoned that ‘Roscoe did not need to understand the legal analysis or legal implications of Peters’ claim,” but I disagree that such ignorance is or should be the order of the day.
¶44 The Court states broadly that “it was not necessary or appropriate for Zurich to communicate its settlement strategy with Roscoe.” Opinion, ¶ 16. However, while Roscoe had no authority to influence Zurich’s litigation strategy, that should not bar Zurich from soliciting Roscoe’s expertise in order to form the strategy. Indeed, it is by that very process of communication-fche insurer discussing with the employer what options may be available to the insurer for adjusting or defending the claim, depending upon the information which is available-whereby the employer can be educated about the legal issues and better understand the nature of the information the insurer is seeking, so that it may fully satisfy its duties to support the insurer. It is unrealistic to think that communication between the insurer and employer can be reduced to a Webb-esque witness interview calling for “Just the facts, ma’am.” As the Court notes, the purpose of the privilege is to promote such ‘full and frank communication.” Opinion,
¶ 10. We should encourage such communication.
¶45 Nothing similar to these duties exists between the employer and the claimant. The Court notes that employers and employees also share common interests, and reasons that such interests align an
¶46 For these reasons, I believe that, under Montana law, Roscoe shared a “community of interest” with Zurich in the resolution of this claim. In re Rules, ¶ 70.1 would grant supervisory control and would reverse the District Court.
The Maynard letter has been filed under seal, but will be disclosed as a result of the Court’s decision.