Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_06-cv-00921/USCOURTS-casd-3_06-cv-00921-3/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1132 E.R.I.S.A.-Employee Benefits

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06cv0921

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

OMNI HOME FINANCING, INC., et

al.,

Plaintiffs,

v.

HARTFORD LIFE AND ANNUITY

INSURANCE COMPANY, et al.,

Defendants. 

 

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Case No. 06-CV-0921-IEG (JMA)

ORDER DENYING DEFENDANTS’

MOTION FOR AN ORDER COMPELLING

THE DEPOSITIONS OF ATTORNEYS

KENNETH BONUS AND ROBERT

BUTTERFIELD

[Doc. No. 121]

Defendants Hartford Life and Annuity Insurance Company

(“Hartford”) and Paul Bannock (“Bannock”) (hereinafter

collectively “Defendants”) have filed a letter brief in support

of their motion for an order compelling the depositions of

attorneys Kenneth Bonus and Robert Butterfield. Plaintiffs Omni

Home Financing, Inc. (“Omni”), Omni Home Financing, Inc. 412(i)

Defined Benefit Plan (“Plan”), Keith Murphy (“Murphy”), Anthony

A. Gaglione and David A. Bancroft (hereinafter collectively

“Plaintiffs”) oppose. For the reasons set forth below, the Court

DENIES Defendants’ motion.

// 

Case 3:06-cv-00921-IEG-JMA Document 125 Filed 01/07/08 Page 1 of 10
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Mr. Butterfield, of Butterfield Schechter LLP, is the law

partner of Marc Schechter, Esq., lead counsel for Plaintiffs in this

case. According to Plaintiffs, Mr. Bonus previously held the

designation of “of counsel” to the Butterfield Schechter firm, but is

now employed with Pillsbury Winthrop Shaw Pittman LLP. 

2 06cv0921

I. BACKGROUND

On November 7, 2007, counsel for Defendants, Jessica Taylor,

Esq., deposed Plaintiff Murphy as an individual and as the

corporate representative for Omni. Defs.’ Letter Br. at 1. 

During his deposition, Mr. Murphy testified about legal advice

obtained by Plaintiffs from Kenneth Bonus (“Bonus”), an attorney,

in connection with the subject Plan. Id. at 1-2; Murphy Dep.,

attached as Ex. 1 to Taylor Decl. (“Murphy Dep.”), 65:6-66:24. 

Mr. Murphy testified that Mr. Bonus had advised Plaintiffs to

terminate the Plan and had helped Plaintiffs with the termination

process. Murphy Dep., 65:16-66:24. Mr. Murphy also testified

that attorney Robert Butterfield (“Butterfield”) had provided

advice to Plaintiffs regarding an audit conducted by the Internal

Revenue Service (“IRS”), without discussing the nature of any

such advice. Id., 191:6-15.1 Mr. Murphy further testified that

Mr. Bonus and/or Mr. Butterfield had not discussed the

possibility of Plaintiffs working with Defendant Hartford to

convert the whole life policies at issue in this case to

different types of policies, instead of allowing the whole life

policies to lapse. Id., 202:14-24.

On or about November 9, 2007, Defendants issued deposition

notices and subpoenas for the depositions of Bonus and

Butterfield, which were scheduled to be held on November 27,

2007. Taylor Decl., Ex. 4. After various communications between

Plaintiffs’ and Defendants’ counsel, the depositions were

Case 3:06-cv-00921-IEG-JMA Document 125 Filed 01/07/08 Page 2 of 10
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rescheduled for November 28 and 29, 2007. Defs.’ Letter Br. at

5; Taylor Decl., Exs. 5-9. On November 27, 2007, counsel for Mr.

Butterfield, Daniel Levinson, Esq., sent a letter to Defendants’

counsel advising that Mr. Butterfield would not appear for his

deposition absent a court order. Taylor Decl., Ex. 10. Robert

Plumb, Esq., counsel for Mr. Bonus, orally indicated the same. 

Taylor Decl., ¶ 19.

Plaintiffs currently object to the taking of the depositions

of Bonus and Butterfield on relevance and attorney-client

privilege grounds. With regard to relevance, Defendants contend

that the legal advice obtained by Plaintiffs from Bonus and

Butterfield in connection with the subject Plan is relevant to

Plaintiffs’ damages claims, and is thus discoverable. 

Specifically, Defendants argue that they are entitled to know (1)

if Plaintiffs considered mitigating their damages by, for

example, “converting to other policies to preserve the cash value

of their policies rather than letting them lapse and losing all

of their contributions”, (2) whether Plaintiffs are seeking to

minimize the amount of money they will owe the IRS, and (3)

whether Plaintiffs have made any argument to the IRS about the

legitimacy of the Plan that is inconsistent with the claims of

alleged defects in the Plan made in this lawsuit. Defs.’ Br. at

2. Defendants further argue, with regard to Plaintiffs’

assertion of the attorney-client privilege, that Plaintiffs have

waived the privilege in various ways. Id. at 2-6. 

II. LEGAL STANDARDS

A. Relevance

Rule 26 of the Federal Rules of Civil Procedure permits

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discovery regarding “any nonprivileged matter that is relevant to

any party’s claim or defense.” Fed. R. Civ. P. 26(b)(1). 

Relevant information need not be admissible at trial so long as

the discovery appears reasonably calculated to lead to the

discovery of admissible evidence. Id. All discovery is subject

to the limitations imposed by Rule 26(b)(2)(C), which provides in

relevant part:

On motion or on its own, the court must limit the

frequency or extent of discovery otherwise allowed by

these rules or by local rule if it determines that: 

(i) the discovery sought is unreasonably

cumulative or duplicative, or can be obtained

from some other source that is more

convenient, less burdensome, or less

expensive; 

(ii) the party seeking discovery has had

ample opportunity to obtain the information

by discovery in the action; or 

(iii) the burden or expense of the proposed

discovery outweighs its likely benefit,

considering the needs of the case, the amount

in controversy, the parties’ resources, the

importance of the issues at stake in the

action, and the importance of the discovery

in resolving the issues. 

Fed. R. Civ. P. 26(b)(2)(C). It is within the authority of the

court to define the actual scope of discovery to the reasonable

needs of the action. Fed. R. Civ. P. 26 Advisory Committee

Notes, 2000 Amendment. 

B. Attorney-Client Privilege

The elements of the attorney-client privilege provide that

(1) when legal advice of any kind is sought (2) from a

professional legal advisor in his or her capacity as such, (3)

the communications relating to that purpose, (4) made in

confidence (5) by the client, (6) are, at the client’s instance,

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permanently protected (7) from disclosure by the client or by the

legal advisor (8) unless the protection be waived. United States

v. Martin, 278 F.3d 988, 999 (9th Cir. 2002). Because the

attorney-client privilege “impedes full and free discovery of the

truth,” the privilege is strictly construed. Id. 

III. DISCUSSION

A. Relevance

In response to Defendants’ assertion that the testimony of

Bonus and Butterfield is relevant to the issue of whether

Plaintiffs have mitigated their damages, Plaintiffs state:

[A]dvice of counsel regarding whether to convert is

wholly irrelevant to determining mitigation of damages. 

If conversion of the policies would have mitigated

damages, Defendants can establish that there was an

option to convert and Plaintiffs did not convert. 

Whether counsel looked into any such alleged option and

whether counsel advised on an alleged conversion option

is irrelevant to whether Plaintiffs mitigated damages. 

To further clarify, even if counsel investigated this

option and advised Plaintiffs of the option and

Plaintiffs did not exercise the conversion option, it

would not defeat a claim of mitigation if Defendant can

establish that such a legal option was available and

would have mitigated damages. The advice of counsel

has no bearing on whether such an option would mitigate

damages.

Pls.’ Br. at 4-5. The Court agrees. Irrespective of any legal

advice Bonus or Butterfield may have rendered to Plaintiffs, the

fact remains that Plaintiffs did not convert their policies. 

Instead, they terminated them. If Defendants want to argue that

Plaintiffs failed to mitigate their damages by not converting the

policies, they can do so. The testimony of Bonus and Butterfield

is neither relevant to nor necessary on this point. 

Moreover, any testimony that Bonus or Butterfield would

provide on the topics of termination or conversion of the

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policies would be cumulative of testimony already given by

Plaintiff Murphy directly on these points. See Fed. R. Civ. P.

26(b)(2)(C)(i). In particular, Murphy has already testified that

Plaintiffs terminated the Plan and stopped paying the premiums on

the policies based on the advice of counsel. Murphy Dep., 65:8-

66:2. Murphy also testified that counsel did not advise

Plaintiffs of any conversion option. Id., 202:17-203:3. Any

advice that Bonus or Butterfield may have rendered, or did not

render, on the topics of termination or conversion has no bearing

on Defendants’ ability to argue that Plaintiffs did not mitigate

their damages. 

Additionally, the Court finds that allowing the depositions

would impose an undue burden on Bonus and Butterfield in

contravention of Rule 45(c)(1), which aims to protect persons

subject to subpoenas. See Fed. R. Civ. P. 45(c)(1) (“A party or

attorney responsible for issuing and serving a subpoena must take

reasonable steps to avoid imposing undue burden or expense on a

person subject to the subpoena.”); see also Fed. R. Civ. P.

26(b)(2)(C)(iii) (requiring the court to limit discovery if “the

burden or expense of the proposed discovery outweighs its likely

benefit”). For these reasons, the Court will not permit the

depositions of Bonus and Butterfield to go forward with respect

to the topic of mitigation of damages. 

Defendants also seek to depose Bonus and Butterfield to

determine whether Plaintiffs are trying to minimize the amount of

money they will owe the IRS, and whether Plaintiffs have made any

arguments to the IRS about the legitimacy of the Plan which are

inconsistent with the positions taken by Plaintiffs in this case. 

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2

On December 19, 2007, counsel for Defendants, Jessica Taylor,

Esq., advised the undersigned’s law clerk that footnote 2 of

Plaintiffs’ letter brief contains statements inconsistent with

information previously provided to Defendants. Footnote 2 states:

Hartford’s brief makes the claim that no other documents

from Mr. Butterfield’s files have [been] produced. The

majority of Mr. Butterfield’s files are related to the audit

and have been produced. Susan Meter explained to counsel

for Hartford that there are internal emails between Mr.

Butterfield and staff that Hartford is not entitled to. 

They are protected by the attorney work product privilege.

Pls.’ Letter Br. at 2 fn. 2. Ms. Meter, counsel for Plaintiffs,

subsequently informed the Court’s law clerk of the nature of the

documents withheld from production from Mr. Butterfield’s files. 

Based on Ms. Meter’s description of the documents, it appears that

they are non-responsive to Defendants’ request for production. In any

event, the Court has instructed Ms. Meter to conduct another review of

all of Mr. Butterfield’s files (any files of Mr. Bonus are now

apparently in the possession of Mr. Butterfield), produce any

responsive, nonprivileged documents which were not previously

produced, and produce a privilege log for any responsive documents

which are being withheld from production due to privilege, all by

January 4, 2008. After this exercise is complete, if Defendants

believe that further action by the Court is necessary, it will be up

to Defendants’ counsel to advise the Court accordingly. 

7 06cv0921

Plaintiffs, however, represent that they have already produced

all documents reflecting communications with the IRS to

Defendants, and have submitted a declaration by Butterfield in

which he attests that there have been no substantive oral

communications with the IRS with regard to the audit of the Plan. 

Pls.’ Br. at 2 fn. 2; Butterfield Decl., ¶ 2. Therefore,

Defendants are already in possession of the information needed to

address these two issues, and the depositions of Bonus and

Butterfield are not needed on these points.2

Accordingly, the Court finds the depositions should not go

forward.

B. Waiver of Attorney-Client Privilege

Although the Court need not reach the issue of whether there

was a waiver of the attorney-client privilege in view of its

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findings as to relevance, the Court has considered whether there

was a waiver and shall now briefly address this issue. First,

the Court does find that there was an express waiver of the

attorney-client privilege with respect to the matters that Mr.

Murphy disclosed during his deposition. Specifically, Murphy

provided testimony on the following privileged attorney

communications: (1) that Mr. Bonus advised Plaintiffs to

terminate the subject Plan and that Plaintiffs followed this

advice (Murphy Dep., 65:6-66:2) and (2) that counsel advised

Plaintiffs to let the whole life policies lapse and did not

discuss a conversion option with Plaintiffs (id., 202:8-24). The

attorney-client privilege was waived as to these matters because

the privileged communications were voluntarily disclosed and

Plaintiffs’ counsel did not take steps to prevent disclosure of

the information by, for example, instructing Mr. Murphy not to

answer. See Weil v. Investment/Indicators, Research and

Management, Inc., 647 F.2d 18, 23-25 (9th Cir. 1981); Perrignon

v. Bergen Brunswig Corp., 77 F.R.D. 455, 460 (N.D. Cal. 1978). 

The waiver of the attorney-client privilege resulting from these

disclosures is limited, however, to only those matters to which

Murphy provided testimony. See Weil, 647 F.2d at 25 (finding a

waiver of privilege only as to communications about matters

actually disclosed). 

Notwithstanding the waiver, Defendants are not entitled to

take the depositions of Messrs. Bonus and Butterfield for the

reasons discussed in Section III. A. As set forth therein, the

Court has found that deposition testimony by Bonus or Butterfield

is neither relevant nor necessary with respect to each of the

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issues raised by Defendants in this motion. 

Defendants’ other arguments on the waiver issue are without

merit. Defendants have provided no authority to support the

proposition that an express waiver of the privilege occurred by

way of Plaintiffs’ untimely responses to Defendants’ written

discovery such that Plaintiffs would be altogether barred from

invoking the attorney-client privilege at future depositions. 

There was also no implied waiver by Plaintiffs by simply putting

their damages at issue in this case, as Defendants have not

satisfied the three-pronged test required to establish such a

waiver. See United States v. Amlani, 169 F.3d 1189, 1195 (9th

Cir. 1999) (in particular, Defendants have not satisfied the

third prong, which requires the court to evaluate whether

“allowing the privilege would deny the opposing party access to

information vital to its defense”). Finally, Plaintiffs’

counsel’s acquiescence to the scheduling of the depositions did

not result in a waiver of the attorney-client privilege. 

Although Plaintiffs were apparently initially willing to allow

the depositions to go forward, there is absolutely nothing in the

record before the Court which reflects any intention on

Plaintiffs’ part to waive the attorney-client privilege as to any

testimony to be provided by Bonus or Butterfield. Rather, it

appears that Plaintiffs planned to allow the depositions to take

place and intended to assert the attorney-client privilege during

the course of the depositions. This is a course which Plaintiffs

were entitled to take. 

//

//

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IV. CONCLUSION

For the reasons set forth above, the Court hereby DENIES

Defendants’ motion for an order compelling the depositions of

attorneys Kenneth Bonus and Robert Butterfield. 

IT IS SO ORDERED.

DATED: January 7, 2008

Jan M. Adler

U.S. Magistrate Judge

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