Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_07-cv-00101/USCOURTS-caed-2_07-cv-00101-3/pdf.json

Parties Involved:
Lawrence Caso
Plaintiff
Caso Trust
Plaintiff
Hartford Casualty Insurance Company
Defendant

Document Text:

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 1 Because oral argument will not be of material

assistance, the court orders the matter submitted on the briefs. 

E.D. Cal. L.R. 78-230(h).

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

LAWRENCE CASO, CASO TRUST,

NO. 2:07-cr-0101 FCD/DAD

Plaintiffs,

v. MEMORANDUM AND ORDER

HARTFORD CASUALTY INSURANCE

COMPANY, 

Defendant.

----oo0oo----

This matter is before the court on defendant Hartford

Casualty Insurance Company’s (“defendant”) motion for imposition

of sanctions against plaintiffs’ counsel, Andrew Woll, as a

result of statements counsel made about this case in a newspaper

article.1

 The article ran in the Mountain Democrat, the local

newspaper for Placerville, California. Defendant contends

plaintiffs’ counsel made false and deceptive statements in the

article which he knew or reasonably should have known would

Case 2:07-cv-00101-FCD-DAD Document 40 Filed 12/12/07 Page 1 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2 Defendant requests that the court impose sanctions in

the amount of $6,000.00, $3,000.00 payable to defendant and

$3,000.00 payable to the court. Said amount represents

defendant’s approximate costs in bringing the instant motion. 

(See Johnston Decl., filed Nov. 13, 2007.)

3 While defendant does not prevail on its motion, the

court does not find any basis to impose sanctions against

defendant for bringing the instant motion, as requested by

plaintiffs. Accordingly, the court DENIES plaintiffs’ crossmotion for imposition of sanctions against defendant. As set

forth below, although the court finds that plaintiffs’ counsel’s

statements did not rise to a level sanctionable under the Rules

of Professional Conduct, his statements did transcend appropriate

attorney conduct, and thus, defendant had reasonable grounds to

bring this motion. Sanctions against defendant are therefore not

merited.

2

materially prejudice the adjudicative process in this case. Such

conduct defendant maintains violates California Rule of

Professional Conduct, Rule 5-120, and merits both imposition of

sanctions against counsel2

 as well as an order directing counsel

to refrain, until the conclusion of the trial, from making any

further communications to the media that violate Rule 5-120.

For the following reasons, the court DENIES defendant’s

motion. While plaintiff’s counsel overstepped the bounds of

professional conduct in some of his remarks, the court cannot

find that his comments are substantially likely to materially

prejudice these proceedings. As such, imposition of sanctions is

not warranted.3

BACKGROUND

 This case involves an insurance claim for water intrusion

at the foundation of a two-story commercial building located at

550 Main Street, Placerville, California, owned by plaintiff Caso

Trust (the “Property”). The water intrusion was discovered the

morning of December 31, 2005, after a period of record rainfall. 

Case 2:07-cv-00101-FCD-DAD Document 40 Filed 12/12/07 Page 2 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4 Yount took photos, made a diagram, and later made log

notes of what he observed during the inspection. (Exs. 13, 14,

15, 16 to Evid. in Supp. of Mot.)

3

Around the time of the loss, it rained in a quantity that

resulted in the United States President declaring a major

disaster in several counties, including El Dorado County where

the Property is located. Plaintiff Lawrence Caso discovered the

water damage on December 31. He observed water pooling and

bubbling at a level of almost four inches, along the rear of the

building, starting from the southeast corner almost to the

southwest corner. (Caso Dep., Ex. 7 to Evid. in Supp. of Mot.,

filed Nov. 13, 2007, 60:8-12, 15-61:1, 89:5-7.) He entered the

suites adjacent to the back wall and found that water seeped into

the carpet. (Id. at 60:15-61:1.)

The water damage to the building was reported to defendant

on January 3, 2006. On January 6, 2006, defendant’s adjuster,

Ivan Yount, inspected the Property4 with Mr. Caso and interviewed

Mr. Caso about the loss. (See id. at Ex. 13.) On January 16,

2006, Yount sent plaintiffs a letter denying the claim because

the cause of the loss was surface water. (Id. at Ex. 17.) 

Plaintiffs sought reconsideration of their claim on or about

January 26, 2006, but again, after review by a claims supervisor,

defendant denied the claim based on a disclaimer of coverage in

the policy. (Id. at Exs. 16, 18.)

On December 14, 2006, plaintiffs filed the instant action

against defendant, alleging claims for breach of contract and

breach of the covenant of good faith and fair dealing. 

Thereafter, on October 15, 2007, plaintiffs’ attorney, Mr. Woll,

Case 2:07-cv-00101-FCD-DAD Document 40 Filed 12/12/07 Page 3 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

made statements about the case quoted in a newspaper article

which ran on the front page of the Mountain Democrat,

Placerville’s local newspaper. (Id. at Ex. 1.) The heading to

the article reads: “Building Owner Says He’s Forced to Sue.” The

article discusses the present litigation between plaintiffs and

defendant and includes on the second page of the article a color

photo of plaintiff’s counsel, indicating how high the water

allegedly rose in the back of the building.

As the article’s contents are critical to resolution of the

motion, the court quotes the entirety of the article here:

A Main Street, Placerville, building owner said 

he has been forced to sue his Connecticut-based insurer

after it refused to pay for water damages the building

sustained in a series of 2005 storms. 

Placerville attorney Andrew Woll is not only serving

as legal counsel for building owner Larry Caso, he is also 

a tenant of the building.

Woll alleges the insurance carrier, Hartford Casualty,

acted in bad faith when it refused to cover the $50,000

worth of damage to the rear of the building.

“The law requires all insurers to reasonably

investigate all claims,” Woll said. “Hartford’s immediate

denial came after no investigation and the company made

repeated requests to ignore their own agent, which is

despicable.”

Woll said the conduct could lead to a jury’s imposition

of punitive damages that exceed Caso’s expenses.

The case was transferred from El Dorado County to the 

U.S. District Court in Sacramento because the plaintiff and

defendant are from different states. 

Woll said Hartford is now claiming that the flooding

resulted from water rushing down a steep hillside behind the

building, but Woll said he has plenty of evidence to suggest

the water level rose due to roots clogging up the building’s

8-inch drainage pipe. 

Woll showed the Mountain Democrat the large branch

of roots, which he is currently keeping in his office.

“As soon as we removed the roots, the water problems

were gone,” Woll said, “And what’s ridiculous is that (Caso)

actually bought extra protection for drain back-ups, which

Hartford continues to intentionally ignore.”

Woll said Hartford did eventually decide to make a

settlement offer that would cover attorney fees and actual

damages, but that the offer was contingent upon Caso

entering into a confidentiality agreement.

Case 2:07-cv-00101-FCD-DAD Document 40 Filed 12/12/07 Page 4 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5 Pursuant to Eastern District Local Rule 83-180(e), this

court has adopted the California Rules of Professional Conduct,

including Rule 5-120, as the “standards of professional conduct

in this Court.”

5

“(Caso) refused to sell his First Amendment rights and

refused the offer,” Woll said. “This is a common tactic

for large corporations. With confidentiality, insurers are

able to keep their bad faith suits secret and the public

remains susceptible to the millions of dollars spent yearly

by insurers to polish their image.”

The case is set to go to trial next June. Among those

due to testify on behalf of Caso are witnesses who were 

present when the roots were discovered and removed, and a

plant expert. 

STANDARD

California Rules of Professional Conduct, Rule 5-120,

addressing “Trial Publicity,” provides that an attorney who is

participating in the litigation of a matter “shall not make an

extrajudicial statement that a reasonable person would expect to

be disseminated by means of public communication if [the

attorney] knows or reasonably should know that it will have a

substantial likelihood of materially prejudicing an adjudicative

proceeding in the matter.”5 Notwithstanding this provision, the

Rule provides that an attorney involved in litigation may state,

among other things: “(1) the claim, offense or defense involved

and, except when prohibited by law, the identity of the person

involved; (2) the information contained in a public record; (3)

that an investigation of the matter is in progress; (4) the

scheduling or result of any step in litigation; (5) a request for

assistance in obtaining evidence and information necessary

thereto . . . .”

Rule 5-120's strictures are consistent with the United

States Supreme Court’s decision in Gentile v. State Bar of

Case 2:07-cv-00101-FCD-DAD Document 40 Filed 12/12/07 Page 5 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

Nevada, 501 U.S. 1030 (1991). There, in reviewing a Nevada state

bar rule on extrajudicial statements to the press, the Court held

that a state may constitutionally restrict attorney speech upon a

showing of “substantial likelihood of material prejudice” to a

fair trial. Id. at 1075. The Court emphasized that restricting

speech of lawyers while they are involved in pending cases does

not prohibit speech altogether but “merely postpones the

attorneys’ comments until after trial.” Id. at 1076. 

Ultimately, the Court determined that states may impose “ethical

restrictions on [attorneys’] speech [during pending cases] to

which an ordinary citizen” could not be imposed. Id. at 1071. 

In 1995, California enacted Rule 5-120, which is

incorporated by reference to these proceedings via Eastern

District Local Rule 83-180(e). The court has discretion to

sanction an attorney for violation of the court’s rules pursuant

to Eastern District Local Rule 11-110, providing:

Failure of counsel or of a party to comply with these

Rules or with any order of the Court may be grounds

for imposition by the Court of any and all sanctions

authorized by statute or Rule or within the inherent

power of the Court.

See also Dahl v. City of Huntington Beach, 84 F.3d 363 (9th Cir.

1996). 

ANALYSIS

Defendant specifically challenges the following statements

made by plaintiff’s counsel as violative of Rule 5-120: (1)

counsel’s statement that defendant denied plaintiffs’ claim

immediately “after no investigation;” (2) counsel’s statement

that defendant’s conduct could “lead to a jury’s imposition of

punitive damages that exceed [plaintiffs’] expenses;” (3)

Case 2:07-cv-00101-FCD-DAD Document 40 Filed 12/12/07 Page 6 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

counsel’s statement that defendant “did eventually make a

settlement offer that would cover attorney fees and actual

damages, but that offer was contingent upon [plaintiffs] entering

into a confidentiality agreement[,]” which they did not want to

sign and (4) counsel’s statement that plaintiff “refused to sell

his First Amendment rights and refused to accept the [settlement]

offer” as it was a “common tactic for large corporations . . .

[to ask for confidentiality] as insurers are [then] able to keep

their bad faith suits secret and the public remains susceptible

to the millions of dollars spent yearly by insurers to polish

their image.” Defendant argues said statements were patently

false in certain respects because defendant fully investigated

plaintiffs’ claim, and contrary to counsel’s representations,

defendant never made a settlement offer to plaintiffs. Defendant

contends the other comments are, at a minimum, deceptive since

they mislead the public into believing that plaintiffs can easily

meet the high threshold of proving entitlement to punitive

damages and that insurance companies like defendant are

“inherently bad.”

After reviewing counsel’s response to defendant’s arguments,

the court cannot find that counsel lied in his remarks but, at

least with respect to his comments regarding defendant’s

investigation and settlement offers, counsel’s remarks were

exaggerated and imprecise and as a result very unprofessional. 

As to defendant’s investigation, counsel asserts that he was

simply repeating the complaint’s allegation that defendant

conducted “no investigation” of the claim. However, read in

proper context, the complaint’s allegations assert that the

Case 2:07-cv-00101-FCD-DAD Document 40 Filed 12/12/07 Page 7 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6 Apparently, the parties entered into other settlement

negotiations that were subject to a confidentiality agreement;

those prior discussions are not at issue here.

8

investigation by defendant was inadequate. While counsel, and

his clients, may believe that the investigation was so inadequate

as to be non-existent, counsel should not have reported as a

statement of fact that no investigation was performed at all. 

Clearly, an investigation of some sort was performed by adjuster

Yount. Plaintiff’s counsel, having taken Yount’s deposition, was

well aware of this. Counsel should have qualified his comments,

if made at all, to the extent that his clients assert that the

investigation performed by Hartford was wholly inadequate.

Regarding settlement discussions, the parties dispute how

certain offers of settlement were extended, by whom and in what

context. On one hand, at the time in question,6 defendant

concedes only that it extended an offer of settlement

“hypothetically” in response to an offer made by plaintiffs;

plaintiffs, on the other hand, dispute the “hypothetical” nature

of the offer, contending that a firm offer was made by defendant,

in response to their offer, that was contingent on a

confidentiality agreement--an agreement plaintiffs refused to

sign. The court cannot resolve the parties’ dispute on the

papers filed; both parties assert a different version of the same

event which occurred orally between the attorneys for the

parties. Thus, the court cannot make a finding as to the

veracity of plaintiffs’ counsel’s remarks regarding the parties’

settlement discussions. Nevertheless, the court does find that

counsel’s remarks to the press fell outside the bounds of

Case 2:07-cv-00101-FCD-DAD Document 40 Filed 12/12/07 Page 8 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9

professional conduct as they violate at least the spirit of

Federal Rule of Evidence 408, precluding evidence of the parties’

settlement negotiations. Such remarks, detailing alleged terms

of settlement negotiations have no place in media reports,

possibly attainable by prospective jurors. 

As to counsel’s other statements, the court does not find

these remarks deceptive or misleading, as alleged by defendant. 

Plaintiffs’ counsel indicated only that a jury could award

punitive damages, and his remark regarding alleged “bad faith”

tactics of large corporations was directed generically at

“insurers,” and did not call specific attention to Hartford.

Ultimately, the court agrees with defendant that some of

plaintiffs’ counsel’s remarks crossed the line of professional

conduct; however, the court does not agree with defendant that

counsel’s comments rose to a level sanctionable under the Rules

of Professional Conduct. Counsel’s remarks were not extensive,

they were reported in only one news article, the article appeared

one day in a newspaper circulating in a small community outside

of Sacramento (the location of the prospective trial), and the

article appeared some eight months before trial is set to begin

in this case. Under these circumstances, the court cannot find

that there is a substantial likelihood that counsel’s remarks

would materially prejudice these proceedings. See generally

Gentile, 501 U.S. at 1030. As such, imposition of sanctions is

not merited.

/////

/////

/////

Case 2:07-cv-00101-FCD-DAD Document 40 Filed 12/12/07 Page 9 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10

CONCLUSION

For the foregoing reasons, defendant’s motion for sanctions

and injunctive relief is DENIED. Plaintiffs’ cross-motion for

sanctions is DENIED.

IT IS SO ORDERED.

DATED: December 12, 2007 

Case 2:07-cv-00101-FCD-DAD Document 40 Filed 12/12/07 Page 10 of 10