Opinion ID: 654186
Heading Depth: 2
Heading Rank: 1

Heading: Insured-Insurer Communications

Text: 10 We assume at the outset that the Missouri law of attorney-client privilege would insulate some of Linde Thomson's insurance communications from production. 3 The issue for this court in evaluating Linde Thomson's claim that the state privilege applies to this subpoena enforcement proceeding is one of characterization. Federal Rule of Evidence 501 4 mandates the application of state privileges in civil actions or proceedings for which state law supplies the rules of decision and federal privileges for issues or proceedings arising under federal law. See FED.R.EVID. 501. Federal Rule of Evidence 1101(c) states that [t]he rule with respect to privileges applies at all stages of all actions, cases, and proceedings. FED.R.EVID. 1101(c). 11 Linde Thomson argues, pursuant to Rule 1101(c), that an administrative investigation is merely a stage of subsequent litigation. According to this view, Missouri law of privilege controls in this particular subpoena enforcement proceeding, because the ultimate claims pursued by the RTC, as evidenced by its suit filed in the Missouri District Court, sound in state law violations. This argument rests on several assumptions. First, it presumes that a complaint will follow, inevitably, from the issuance of an administrative subpoena. Second, it assumes that the RTC directed its investigation only to the identification of possible state law violations, and that this intent was either manifest or somehow ascertainable. Finally, it equates the administrative investigation with a civil discovery mechanism. We disagree with Linde Thomson's underlying premises, and thus reject its conclusion. 12 Linde Thomson's claim suggests that the sole permissible purpose of RTC investigations is the determination of the existence of legal claims under state law. However, the RTC faces no such limitation. An investigation conducted by the RTC may conceivably neither culminate in litigation, nor be initially designed to inspire it. See FTC v. Texaco, Inc., 555 F.2d 862, 874 (D.C.Cir.) (en banc), cert. denied, 431 U.S. 974, 97 S.Ct. 2939, 53 L.Ed.2d 1072 (1977). We cannot abide by an interpretation of Rule 1101(c) that requires an ex ante determination of what claims, if any, may eventually be pursued by an agency undertaking a broad investigation pursuant to its clear statutory mandate. See 12 U.S.C. Sec. 1821(d)(2)(I) (1989). Although the RTC has now filed a complaint against Linde Thomson that focuses primarily on violations of state law, this complaint followed, rather than anticipated, the subpoena enforcement proceeding below. We look at the inquiry from the perspective of the district court, which proceeded without knowledge of any subsequently issued complaints. As we reasoned in Texaco, in the pre-complaint stage, an investigating agency is under no obligation to propound a narrowly focused theory of a possible future case.... The court [303 U.S.App.D.C. 321] must not lose sight of the fact that the agency is merely exercising its legitimate right to determine the facts, and that a complaint may not, and need not, ever issue. 555 F.2d at 874 (emphasis in original). 13 Unlike a discovery procedure, an administrative investigation is a proceeding distinct from any litigation that may eventually flow from it. See EEOC v. Deer Valley Unified School Dist., 968 F.2d 904, 906 (9th Cir.1992); EEOC v. University of Notre Dame du Lac, 551 F.Supp. 737, 742 (N.D.Ind.1982), rev'd on other grounds, 715 F.2d 331 (7th Cir.1983). In enforcing a subpoena, our role is limited to evaluating whether the subpoena is for a lawful purpose, whether the documents requested are relevant to that purpose, and whether the demand is reasonable. See FTC v. Texaco, 555 F.2d 862, 872 (D.C.Cir.) (en banc) (citing Endicott Johnson v. Perkins, 317 U.S. 501, 509, 63 S.Ct. 339, 343, 87 L.Ed. 424 (1943), and Oklahoma Press Pub. Co. v. Walling, 327 U.S. 186, 209, 66 S.Ct. 494, 505, 90 L.Ed. 614 (1946)), cert. denied, 431 U.S. 974, 97 S.Ct. 2939, 53 L.Ed.2d 1072 (1977). Resolution of these issues requires interpretation of the scope of subpoena authority under the enabling federal law. The nature of a subpoena enforcement proceeding, under common sense and precedents in this circuit and elsewhere, thus rests soundly in federal law, and federal law of privilege governs any restrictions on the subpoena's scope. 5 See FTC v. TRW, Inc., 628 F.2d 207, 210-11 (D.C.Cir.1980) (applying federal law to evaluate a claimed self-evaluative privilege against compliance with an FTC subpoena); Dole v. Milonas, 889 F.2d 885, 889 n. 6 (9th Cir.1989) (applying federal law to determine scope of attorney-client privilege in proceeding to enforce administrative subpoena under ERISA); United States v. Schoenheinz, 548 F.2d 1389, 1390 (9th Cir.1977) (applying federal law to reject employer-stenographer privilege asserted against IRS subpoena); Colton v. United States, 306 F.2d 633, 636 (2d Cir.1962) (applying federal law to determine scope of attorney-client privilege in IRS investigatory proceeding), cert. denied, 371 U.S. 951, 83 S.Ct. 505, 9 L.Ed.2d 499 (1963). We therefore reject Linde Thomson's contention that state law applies to the privileged status of the documents at issue and proceed to the inquiry under federal law.
14 Linde Thomson urges this court to apply the Missouri law of privilege because it can do so at no substantial cost to federal substantive and procedural policy. United States v. King, 73 F.R.D. 103, 105 (E.D.N.Y.1976); see also Memorial Hosp. v. Shadur, 664 F.2d 1058, 1061 (7th Cir.1981); Riley v. City of Chester, 612 F.2d 708, 715 (3d Cir.1979). In substance, Linde Thomson suggests that we give the law of a particular [303 U.S.App.D.C. 322] state persuasive effect as a matter of federal law. See D'Oench, Duhme & Co., v. FDIC, 315 U.S. 447, 471, 62 S.Ct. 676, 685, 86 L.Ed. 956 (1942) (Jackson, J., concurring). We decline the opportunity to adopt a particular state's privilege law where, as here, the documents in question are sought by a governmental agency with a nationwide mandate to redress matters of pressing public concern. We have previously recognized a strong public interest in having administrative investigations proceed expeditiously and without impediment. FTC v. TRW, Inc., 628 F.2d 207, 210 (D.C.Cir.1980). The serious risk that inconsistent state privilege rules might unduly constrict the RTC's discretion in contravention of its congressional mandate makes it abundantly clear that this is a situation in which state privileges may not be adopted costlessly. A uniform rule, rather than ad hoc borrowing, will better promote federal policy objectives. 15 Federal courts have never recognized an insured-insurer privilege as such. See Petersen v. Douglas County Bank & Trust Co., 967 F.2d 1186, 1188 (8th Cir.1992); Gottlieb v. Bresler, 24 F.R.D. 371, 372 (D.D.C.1959); John P. Ludington, Annotation, Insured-Insurer Communications as Privileged, 55 A.L.R.4th 336 (1992). Moreover, as the Supreme Court has recently made clear, federal courts should not create evidentiary privileges lightly, [i]nasmuch as '[t]estimonial exclusionary rules and privileges contravene the fundamental principle that the public ... has a right to every man's evidence.'  University of Pennsylvania v. EEOC, 493 U.S. 182, 189, 110 S.Ct. 577, 582, 107 L.Ed.2d 571 (1990) (quoting Trammel v. United States, 445 U.S. 40, 50, 100 S.Ct. 906, 912, 63 L.Ed.2d 186 (1980) (citation omitted)). In evaluating a claimed peer-review privilege against compliance with an EEOC subpoena, the Supreme Court suggested that considerable reluctance should greet any attempt--as is made here--to fashion a privilege lacking in historical or statutory basis. See University of Pennsylvania, 493 U.S. at 195, 110 S.Ct. at 585. The imperative of caution appears even stronger in the administrative subpoena context, in which strong public interests in efficient investigation contend with the public policy rationale underlying evidentiary privileges. See, e.g., FTC v. TRW, Inc., 628 F.2d 207, 210 (D.C.Cir.1980). 16 Perhaps recognizing the difficulties inherent in proposing a broad new privilege, Linde Thomson attempts to moor the protection for insured-insurer communications within the existing attorney-client privilege framework. Linde Thomson insists that the liability insurer acts as a mere intermediate agent in transmitting a communication pertaining to liability from the insured to attorneys. See State ex rel. Cain v. Barker, 540 S.W.2d 50, 54 (Mo.1976). Because we believe that this contention merits exploration, we turn to the scope of the federal attorney-client privilege. 17 This court adheres to the axiom that the attorney-client privilege must be strictly confined within the narrowest possible limits consistent with the logic of its principle. In re Sealed Case, 676 F.2d 793, 807 n. 44 (D.C.Cir.1982) (citing In re Grand Jury Investigation, 599 F.2d 1224, 1235 (3d Cir.1979)). Because we have never been confronted with a claimed insured-insurer facet to the attorney-client privilege, we must extrapolate from precedent to determine whether protection for insured-insurer communications is coextensive with the logic of the attorney-client privilege principle. The attorney-client privilege undeniably extends to communications with one employed to assist the lawyer in the rendition of professional legal services. Supreme Court Standards 503(a)(3), 503(b), cited in United States v. (Under Seal), 748 F.2d 871, 874 n. 5 (4th Cir.1984). In FTC v. TRW, Inc., 628 F.2d 207, 212 (D.C.Cir.1980), we explored the ambit of this logic. Tracing the line of cases beginning with Judge Friendly's opinion in United States v. Kovel, 296 F.2d 918 (2d Cir.1961), we observed that the privilege logically encompassed reports of third parties made at the request of the attorney or client where the purpose of the report was to put in usable form information obtained from the client. TRW, 628 F.2d at 212. We stressed that the critical factor for purposes of the attorney-client privilege was that the communication be made in confidence for the purpose of obtaining legal advice from the lawyer. Id. (citing Kovel, 296 F.2d at 922)[303 U.S.App.D.C. 323] (emphasis in original). We cited cases consistent with this limitation extending the attorney-client privilege to a psychiatrist hired by a defense lawyer to aid in an insanity defense, United States v. Alvarez, 519 F.2d 1036, 1045-1046 (3d Cir.1975), to an accountant hired by an attorney to assist the attorney in giving the client tax advice, United States v. Cote, 456 F.2d 142, 144 (8th Cir.1972), and to an accountant who prepared a statement of a client's net worth at the attorney's request, United States v. Judson, 322 F.2d 460, 462-63 (9th Cir.1963). We cautioned restraint, however, lest the privilege be construed to engulf all manner of services that should not be summarily excluded from the adversary process. TRW, 628 F.2d at 212. 18 Armed with caution and an understanding that the privilege protects only those communications made for the purpose of obtaining legal advice from the lawyer, TRW, 628 F.2d at 212 (citing Kovel, 296 F.2d at 922) (emphasis omitted), we now firmly reject any sweeping general notion that there is an attorney-client privilege in insured-insurer communications. 6 An insured may communicate with its insurer for a variety of reasons, many of which have little to do with the pursuit of legal representation or the procurement of legal advice. Certainly, where the insured communicates with the insurer for the express purpose of seeking legal advice with respect to a concrete claim, or for the purpose of aiding an insurer-provided attorney in preparing a specific legal case, the law would exalt form over substance if it were to deny application of the attorney-client privilege. However, a statement betraying neither interest in, nor pursuit of, legal counsel bears only the most attenuated nexus to the attorney-client relationship and thus does not come within the ambit of the privilege. To paraphrase the Kovel case, if what is sought is not legal advice, but insurance, no privilege can or should exist. See Kovel, 296 F.2d at 922. 19
20 Linde Thomson also urges that the insured-insurer communications fall within the ambit of the work-product doctrine. The work-product doctrine was first elaborated by the Supreme Court in Hickman v. Taylor, 329 U.S. 495, 67 S.Ct. 385, 91 L.Ed. 451 (1947), in order to protect against unwarranted intrusion into the files and mental impressions of attorneys and to promote the interests of clients and the cause of justice. Id. at 510-11, 67 S.Ct. at 393-94. The work-product doctrine provides a working attorney with a 'zone of privacy' within which to think, plan, weigh facts and evidence, candidly evaluate a client's case, and prepare legal theories. Coastal States Gas Corp. v. Department of Energy, 617 F.2d 854, 864 (D.C.Cir.1980). As we observed in In re Sealed Case, 676 F.2d 793 (D.C.Cir.1982), the scope of protection under work-product doctrine is broader than that under attorney-client privilege. Id. at 808. Federal Rule of Civil Procedure 26(b)(3), which applies to subpoena enforcement proceedings according to the terms of Rule 81(a)(3), extends protection to documents and tangible things ... prepared in anticipation of litigation or for trial by or for another party or by or for that other party's representative (including the other party's attorney, consultant, surety, indemnitor, insurer, or agent). FED.R.CIV.P. 26(b)(3) (emphasis added). 21 Despite the doctrine's apparent breadth, we have underscored its limitations, noting that there is no privilege at all unless the document was initially prepared in contemplation of litigation, or in the course of preparing for trial. Coastal States, 617 F.2d at 865. A litigant must demonstrate that documents were created with a specific claim supported by concrete facts which would likely lead to litigation in mind, id., not merely assembled in the ordinary course of business or for other nonlitigation purposes. See Petersen v. Douglas County Bank & Trust Co., [303 U.S.App.D.C. 324] 967 F.2d 1186, 1189 (8th Cir.1992). Courts applying these standards have frequently declined to find insured-insurer communications within the penumbra of the work-product doctrine. See, e.g., McDougall v. Dunn, 468 F.2d 468, 473 (4th Cir.1972) (deeming dispositive the two and one-half year time lapse between statements to insurer and ensuing litigation); Fann v. Giant Food, Inc., 115 F.R.D. 593, 596 (D.D.C.1987) (deeming insurance communications ordinary business even though it was apparent that litigation might eventuate). 22 The district court allowed Linde Thomson to create a privilege log for documents falling under the work-product doctrine. Although we reject any notion that insured-insurer communications as such warrant an extension of the federal work-product doctrine beyond its current confines, some insured-insurer communications obviously could surmount the considerable restrictions of the doctrine to merit protection. We believe that Linde Thomson received ample protection through the privilege log established by the district court below.