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Cosgrove v. National Fire & Marine Insurance Co.

United States District Court, D. Arizona

November 8, 2016

KAREN COSGROVE, a single person, Plaintiff,
v.
NATIONAL FIRE & MARINE INSURANCE COMPANY, a foreign insurer, Defendant.

          ORDER

          H. Russel Holland United States District Judge

         Motion for Reasonable Expenses

         Plaintiff moves[1] for an award of attorneys' fees incurred in connection with her motion to compel. This motion is opposed.[2] Oral argument was not requested and is not deemed necessary.

         Background

         This case arises out of remodeling work plaintiff Karen Cosgrove had done on her home by WTM Construction, which was insured by defendant National Fire & Marine Insurance Company. Plaintiff alleged that the work done by WTM Construction was defective and sued WTM Construction and its owners (the Mitzels) in state court. Plaintiff settled her claims against WTM Construction and the Mitzels, and they assigned their claims against defendant to plaintiff pursuant to a Morris Agreement. In this action, plaintiff asserts a breach of contract claim and a bad faith claim against defendant.

         Plaintiff brought a motion to compel production of defendant's communications with the Graif law firm, which served as defendant's "coverage counsel" in the state court action. Defendant asserted an attorney-client privilege as to these communications. The court found that defendant had impliedly waived the attorney-client privilege as to the Graif communications and thus granted plaintiff s motion to compel.[3] The court's implied waiver finding was based on State Farm Mutual Automobile Insurance Co. v. Lee, 13 P.3d 1169 (Ariz. 2000), which held that an implied waiver occurs if the party asserting the waiver makes an affirmative claim that its conduct is based on information it received from counsel. Defendant claimed that its conduct had been subjectively reasonable and based this claim "on a determination that there was an 80 percent chance of defeating the insured's claims based on policy exclusions in the WTM policy."[4] The court found that in making that determina- tion it was "more probable than not" that defendant's claims handler had relied on information she received from the Graif firm.[5]

         Pursuant to Rule 37(a)(5)(A), Federal Rules of Civil Procedure, plaintiff now moves for an award of her attorneys' fees incurred in connection with her motion to compel.

         Discussion

         Rule 37(a)(5)(A) provides that if a motion to compel is granted, "the court must, after giving an opportunity to be heard, require the party... whose conduct necessitated the motion ... to pay the movant's reasonable expenses incurred in making the motion, including attorney's fees" unless one of three exceptions applies. The three exceptions are if:

(i) the movant filed the motion before attempting in good faith to obtain the disclosure or discovery without court action;
(ii) the opposing party's nondisclosure, response, or objection was substantially justified; or
(iii) other circumstances make an award of expenses unjust.

Fed. R Civ. P. 37(a)(5)(A).

         Defendant argues that an award of fees would not be appropriate because its position as to the Graif communications was substantially justified.[6] "Substantial justification exists where the losing party shows that it raised an issue about which reasonable minds could genuinely differ on whether that party was bound to comply with the discovery rule." Lopez v. Mauisun Computer Systems, Inc., Case No. CV-12-00414-TUC-BPV, 2016 WL 524659, at *1 (D. Ariz. Feb. 10, 2016). Defendant argues that reasonable minds could have differed as to whether it had waived its attorney-client privilege as to its communications with the Graif firm. Defendant argues that, contrary to plaintiff's contention, the motion to compel did not involve a straightforward application of Lee as evidenced by the fact that plaintiffs motion was 8 pages long and had 12 exhibits attached, defendant's opposition brief was also 8 pages long, and the court's order was 13 pages long. Moreover, defendant argues that the application of Lee is never straightforward but rather involves the application of ...


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