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Valley Forge Insurance Co. v. Hartford Iron & Metal Inc.

United States District Court, Northern District of Indiana, Fort Wayne Division

May 11, 2015

VALLEY FORGE INSURANCE COMPANY, Plaintiff,
v.
HARTFORD IRON & METAL, INC. and ALAN B. GOLDBERG DBA HARTFORD M & IRON, Defendants.

OPINION AND ORDER

ROBERT L. MILLER, JR. JUDGE UNITED STATES DISTRICT COURT

Plaintiff Valley Forge Insurance Company moved to seal certain documents that defendants Hartford Iron & Metal, Inc. and Alan Goldberg attached as exhibits to their response to Valley Forge’s motion for preliminary injunction as well as portions of Hartford Iron’s response brief and amended response brief. In its reply, Valley Forge also asks the court to seal the transcript of the preliminary injunction motion hearing and the exhibits from that hearing. Hartford Iron opposes the motion and points out that Valley Forge filed two sealed exhibits, related to its preliminary injunction motion reply, without the court’s permission. Valley Forge replied; the motion to seal is ripe for review.[1]

Under the 2012 Settlement Agreement between the parties, Valley Forge agreed to defend and indemnify Hartford Iron against claims brought by the Indiana Department of Environmental Management and the United States Environmental Protection Agency. In Part II, Section A, this agreement appointed an attorney, “defense counsel, ” whose anticipated tasks include “legal work to defend Hartford Iron against the EPA and IDEM claims, to handle negotiations with the agencies, to supervise the environmental consultant, and to represent Valley Forge’s recognized interests in controlling costs and obtaining agency approval of the most cost effective remediation alternative that protects Hartford Iron’s interests at the site.” Valley Forge argues that Hartford Iron disclosed to defense counsel privileged attorney-client communications that shouldn’t have been disclosed without Valley Forge’s consent.[2] Most of the communications at issue discuss the remediation of the site and are between current defense counsel Jamie Dameron and employees of Valley Forge or employees of August Mack Environmental, Inc., Valley Forge’s environmental contractor performing the remediation.

This dispute causes two well established principles to collide – open court records and attorney-client confidences. The court has jurisdiction over this suit based on diversity jurisdiction, so the court applies state law to substantive issues and federal law to procedural issues. Stutzman v. CRST, Inc., 997 F.2d 291, 294 (7th Cir. 1993). Under Federal Rule of Evidence 501, in a diversity case in which state law supplies the rule of decision, the state’s substantive law of privilege governs as well. Armour Int’l Co. v. Worldwide Cosmetics, Inc., 689 F.2d 134, 135 (7th Cir. 1982); Netherlands Ins. Co. v. Nat’l Cas., 283 F.R.D. 412, 416 (C.D. Ill. 2012); Lauth Grp., Inc. v. Grasso, No. 1:07-CV-0972-SEB-TAB, 2008 WL 926631, at *2 (S.D. Ind. Apr. 4, 2008). Accordingly, federal law controls the request to seal, and Indiana law determines the attorney-client privilege.

In general, court records, and especially the documents that influence a judicial decision, are open to the public. Baxter Int’l, Inc. v. Abbott Labs., 297 F.3d 544, 545 (7th Cir. 2002). A court won’t seal a document unless it contains information that “legitimately may be kept from public inspection.” Id. at 546; see Hicklin Eng’g, L.C. v. Bartell, 439 F.3d 346, 348 (7th Cir. 2006) (“The political branches of government claim legitimacy by election, judges by reason. Any step that withdraws an element of the judicial process from public view makes the ensuing decision look more like fiat and requires rigorous justification.”). Conversely, the attorney-client privilege promotes secrecy. An attorney must maintain the confidences related to the representation of a client unless the client gives informed consent of the disclosure. Ind. Prof’l Cond. R. 1.6. The attorney-client privilege encourages clients to “communicate fully and frankly with the lawyer even as to embarrassing or legally damaging subject matter.” Canfield v. Sandock, 563 N.E.2d 526, 528-529 (Ind. 1990) (quoting Ind. Prof’l. Cond. R. 1.6 cmt. 2). “To invoke attorney-client privilege, the invoking party must ‘establish by a preponderance of the evidence (i) the existence of an attorney-client relationship and (ii) that a confidential communication was involved.’” TP Orthodontics, Inc. v. Kesling, 15 N.E.3d 985, 995 (Ind. 2014) (quoting Mayberry v. State, 670 N.E.2d 1262, 1266 (Ind. 1996)). More precisely, the attorney-client privilege only protects communications between an attorney and a client “in the course of an effort to obtain legal advice or aid, on the subject of the client’s rights or liabilities, from a professional legal advisor acting in his or her capacity as such.” Id. at 995-996. The scope of the privilege is narrow because it “may prevent the disclosure of relevant information, ” and the party “asserting the privilege has the burden of establishing its applicability.” Lauth Grp., Inc. v. Grasso, No. 1:07-CV-0972-SEB-TAB, 2008 WL 926631, at *2 (S.D. Ind. Apr. 4, 2008) (quoting Howard v. Dravet, 813 N.E.2d 1217, 1222 (Ind.Ct.App. 2004)). The court may seal documents or portions of the record that fall within “categories of bona fide long-term confidentiality, ” Baxter Int’l, Inc. v. Abbott Labs., 297 F.3d 544, 545 (7th Cir. 2002), and the attorney-client privilege is one such category. Drics v. Duffy, No. 1:14-CV-01192-SEB-MJD, 2014 WL 5324285, at *1 (S.D. Ind. Oct. 16, 2014). “The claim of privilege cannot be a blanket claim; it ‘must be made and sustained on a question-by-question or document-by-document basis.’” United States v. White, 950 F.2d 426, 430 (7th Cir. 1991); TP Orthodontics, Inc. v. Kesling, 15 N.E.3d 985, 994 (Ind. 2014).

I. Attorney-Client Relationship

To begin with, the parties disagree about whether the attorney-client privilege applies to the relationship between Valley Forge and defense counsel. Both parties point to the language of the 2012 Settlement Agreement to support their view of the relationship. Valley Forge claims defense counsel jointly represents Valley Forge and Hartford Iron because the agreement identifies defense counsel’s duties to include defending Hartford Iron and representing the interests of Valley Forge and delegates the control of the defense to Valley Forge. Hartford Iron claims defense counsel hasn’t ever represented Valley Forge, and defense counsel Jamie Dameron informed Valley Forge that she hadn’t been hired to represent Valley Forge or “on the basis of a joint representation.” The contract’s language doesn’t explicitly address the issue.

Valley Forge cites Cincinnati Insurance Co. v. Wills, 717 N.E.2d 151 (Ind. 1999), and argues that under Indiana law, when an insurance company employs and pays for its insured’s defense counsel, such counsel has an attorney-client relationship with both the insured and the insurance company. The court agrees, although the Cincinnati Insurance Co. v. Wills holding isn’t that simple.[3] In the typical case in which an insurance company employs and pays for its insured’s defense counsel, be it an insurance company employee or an outside attorney, the Cincinnati Insurance Co. v. Wills court found “it unrealistic to ignore the client relationship with both” the insured and the insurer, and held that nothing prevents the joint representation as long as the clients’ interests align. Id. at 161. Valley Forge and Hartford Iron disagree about whether their interests align. Valley Forge says they share the common interest of minimizing Hartford Iron’s liability; Hartford Iron says their interests don’t align. At the preliminary injunction hearing, the court expressed skepticism, in light of this case, that the parties’ interests are aligned. So, ethically, joint representation by defense counsel at this time isn’t a good idea, but that doesn’t answer several related questions, such as whether defense counsel original represented both parties and their interests diverged at some point (and if so, the remedy) or if defense counsel at no point represented both parties. As the Cincinnati Insurance Co. v. Wills court observed, “If a conflict arises, it will have to be handled, and there are a variety of means to do that.” Id. If a conflict has arisen or always existed, the parties should address it in an appropriate motion that proposes the means by which they would like to address the issue. The court needn’t decide whether an attorney-client relationship existed to determine whether the privilege applied to the communications at issue because Valley Forge didn’t establish that the communications were confidential.[4]

II. Confidential Communications

Valley Forge contends that of the fifty-six documents Hartford Iron attached as exhibits to its response brief, twenty-eight contain attorney-client and work-product privileged communications and Hartford Iron’s response brief and amended response brief extensively discuss and divulge the contents of confidential and privileged communications. As the party asserting the privilege, Valley Forge bears the burden of establishing that the attorney-client privilege applies to the documents. Lauth Grp., Inc. v. Grasso, No. 1:07-CV-0972-SEB-TAB, 2008 WL 926631, at *2 (S.D. Ind. Apr. 4, 2008). The attorney-client privilege protects confidential communications between an attorney and a client, which are communications made “in the course of an effort to obtain legal advice or aid, on the subject of the client’s rights or liabilities, from a professional legal advisor acting in his or her capacity as such.” TP Orthodontics, Inc. v. Kesling, 15 N.E.3d 985, 995-996 (Ind. 2014). For each document, Valley Forge identifies the exhibit number, date, author, recipient, and type of communication. Valley Forge refers to the brief and amended brief in general.

The vast majority of the documents are correspondence that involved current defense counsel:

Exhibits 11-25, 27, 33-37, 40, and 56

communications to or from defense counsel Jamie Dameron

Exhibit 39

letter from Valley Forge’s counsel to an attorney that Valley Forge would like to hire to succeed Ms. Dameron as defense counsel

Exhibit 42

letter from former defense counsel to a representative of Hartford Iron

The list reveals correspondence that, on its face, involves an attorney and a client, but to be protected by the attorney-client privilege, a communication between an attorney and a client must also involve the provision of legal services. TP Orthodontics, Inc. v. Kesling, 15 N.E.3d 985, 995-996 (Ind. 2014). Valley Forge doesn’t specify how the correspondence to and from defense counsel involved his or her role as defense counsel. The ...


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