United States District Court, D. Arizona
Russel Holland United States District Judge
for Reasonable Expenses
moves for an award of attorneys' fees
incurred in connection with her motion to compel. This motion
is opposed. Oral argument was not requested and is not
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
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. 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." 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.
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.
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
(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).
argues that an award of fees would not be appropriate because
its position as to the Graif communications was substantially
justified. "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 ...