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Ingenco Holdings, LLC v. Ace American Insurance Co.

United States District Court, W.D. Washington, Seattle

December 8, 2014

INGENCO HOLDINGS, LLC, et al., Plaintiffs,
v.
ACE AMERICAN INSURANCE COMPANY, Defendant.

ORDER

RICHARD A. JONES, District Judge.

I. INTRODUCTION

This matter comes before the court on Plaintiffs' motion to compel discovery. For the reasons stated below, the court neither grants nor denies the motion to compel, but instead directs the parties to comply with the instructions concluding Part III as to the disputes that the motion raises. The clerk shall TERMINATE the motion to compel. Dkt. #42.

This order has been hastily revised so that it does not address Defendant's motion to continue the deadline for expert witness disclosures. Dkt. #47. Just this morning, after the motion had already been pending for two weeks, the parties withdrew it after reaching an agreement. The court will accept the parties' compromise, but warns them that it will consider sanctions if they take the same approach in a future motion. The court has too many motions in too many civil cases to use its limited resources addressing disputes that the parties belatedly resolve.

II. BACKGROUND

Plaintiff Ingenco Holdings, LLC is the parent company of Plaintiff Bio Energy (Washington), LLC. Ingenco (who the court will treat as the sole Plaintiff for the sake of simplicity) is the insured on a commercial property insurance policy from Defendant ACE American Insurance Company. In addition to more than a dozen other properties that Ingenco or its subsidiaries operate in Virginia, Maryland, Pennsylvania, and North Carolina, the policy covers a landfill gas processing facility that Bio Energy operates in western Washington. Ingenco has sued ACE for breach of the policy, bad faith, as well as violations of the Washington Consumer Protection Act and its Insurance Fair Conduct Act, all arising from ACE's refusal to indemnify Ingenco for losses resulting from the failure of a methane purification apparatus at the landfill facility. The court suggests no opinion on the merits of the parties' insurance dispute, because the court has never considered them.

The motion before the court concerns discovery, not the merits of this dispute. Ingenco seeks either to compel the production of ACE's entire claim file or to compel the court to agree to an in camera review of the portion of the claim file that ACE has withheld. The latter would be an unenviable chore for the court, because according to ACE's most recent version of its privilege log, it has withheld (by the court's conservative estimate) more than 800 pages of documents. ACE justified withholding most of the documents by asserting that they are privileged communications between ACE (or its agents) and the attorney ACE hired shortly after Ingenco filed the claim at issue in this dispute.

III. ANALYSIS

A. The Parties Do Not Address the Law Relevant to the Attorney-Client Privilege Dispute at the Core of Their Motion to Compel.

What state's attorney-client privilege law applies when a client located in Pennsylvania communicates, either directly or via an agent located in New York or New Jersey, or via an agent of that agent located in British Columbia, with an attorney in Illinois? Ingenco would have the court apply Washington law; ACE would have the court apply Virginia law. Both answers seem an affront to intuition. The attorney-client privilege is, after all, a privilege protecting a client's communications with her attorney. If none of the communications took place in Washington or Virginia, why would either state's privilege law apply?

The parties' attempts to answer these questions begin in the right place by noting that in a diversity case like this one, the court applies the choice-of-law rules of the forum state. Patton v. Cox, 276 F.3d 493, 495 (9th Cir. 2002). The threshold question in a Washington choice-of-law analysis is whether there is an actual conflict with another state's law. Burnside v. Simpson Paper Co., 864 P.2d 937, 942 (Wash. 1994) ("[T]he party seeking to apply foreign law must show that an actual conflict exists between the presumptive Washington law and the law of the foreign state."). ACE asserts that Virginia law ought to apply, and that Virginia law conflicts with Washington law as to the attorney-client privilege question that Ingenco's motion raises. The court will not consider whether Virginia and Washington law conflict in this respect (Ingenco asserts that they do not), because the court is certain that whichever state's law applies to the attorney client privilege issue in this case, it is not Virginia's law.

ACE arrived at its choice of Virginia law by invoking a choice-of-law analysis relevant to disputes over insurance coverage. In that context, the choice of Virginia law is at least defensible, because the coverage dispute involves a Virginia insured (Ingenco) and a policy negotiated and delivered in Virginia covering many properties located in Virginia in addition to the Washington property at issue in this case. The court suggests no opinion on ACE's contention that Virginia law rather than Washington law ought to apply to the parties' coverage dispute, because there is no coverage dispute before the court.

Instead of a coverage dispute, Ingenco's motion raises a dispute about the application of attorney-client privilege. Washington courts apply Section 139 of the Restatement (Second) of Conflict of Laws to decide choice-of-law questions as to whether a privilege protects a communication. State v. Donahue, 18 P.3d 608, 611 (Wash.Ct.App. 2001). Section 139, which neither Ingenco nor ACE cited, provides as follows:

(1) Evidence that is not privileged under the local law of the state which has the most significant relationship with the communication will be admitted, even though it would be privileged under the local law of the forum, unless the admission of such ...

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