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

United States District Court, N.D. Indiana, Fort Wayne Division

April 14, 2017

VALLEY FORGE INSURANCE COMPANY, Plaintiff and Counter-Defendant,
v.
HARTFORD IRON & METAL, INC., et al., Defendants and Counter-Claimants. Keramida Doc. No. Protected Under the Work-Product Doctrine? CH2M Doc. No. Protected Under the Work-Product Doctrine?

          OPINION AND ORDER

          Susan Collins, United States Magistrate Judge

         Before the Court for an in camera review are 185 emails or email threads which Defendants and Counter-Claimants Hartford Iron & Metal, Inc., and Alan B. Goldberg, doing business as Hartford Iron & M (together, “Hartford Iron”), withheld as privileged in response to discovery requests by Plaintiff and Counter-Defendant Valley Forge Insurance Company (“Valley Forge”).[1] The emails, which consist of Hartford Iron's communications with environmental contractors Keramida, Inc. (“Keramida”), and CH2M Hill, Inc. (“CH2M”), were the subject of a motion to compel filed by Valley Forge (DE 458), which the Court addressed and ruled on at a hearing in November 2016 (DE 563; DE 568). When ruling, the Court left the door open for an in camera review of the emails should the parties not be able to resolve what remained of their discovery dispute after the ruling. (DE 568 at 8).

         The parties ultimately could not resolve their dispute, and on January 10, 2017, the Court granted Valley Forge's motion for an in camera review of the emails. (DE 606; DE 614). The issue has been fully briefed, and oral argument has been heard on the motion. (DE 458; DE 459; DE 473; DE 479; DE 563; DE 568; DE 606; DE 614; DE 633; DE 635; DE 636).

         Having now completed an in camera review of the emails, [2] the Court concludes for the following reasons that the emails are not protected by the attorney-client privilege, but that some of the emails are protected by the work-product doctrine.[3]

         I. FACTUAL AND PROCEDURAL BACKGROUND[4]

         Hartford Iron owns and operates a scrap m recycling operation in Hartford City, Indiana. (DE 6-1 at 1). Valley Forge, Hartford Iron's insurer, filed this suit against Hartford Iron in January 2014, claiming that Hartford Iron had breached a second settlement agreement entered into by the parties in December 2012 that purported to settle the parties' respective rights and duties under certain insurance contracts relating to an environmental clean-up site on Hartford Iron's property. (DE 1).

         The following events precipitated the parties entering into the second settlement agreement:

• In April 2009, Hartford Iron and Valley Forge entered into a settlement allocating responsibilities between them with respect to an agreed order between Hartford Iron and Indiana Department of Environmental Management (“IDEM”) that was then adopted by IDEM in May 2009.

• In August 2011, the Environmental Protection Agency (“EPA”) sent Hartford Iron a notice of intent to file a civil administrative claim.
• In October 2011, Hartford Iron sued Valley Forge in state court.
• From March 2012 to August 2012, Hartford Iron received correspondence from the EPA regarding civil penalties and environmental remediation to be conducted at the Hartford Iron site.
• In April 2012, IDEM issued a remediation request, directing Hartford Iron to submit a remediation work plan for the site. Hartford Iron did so in July 2012.

(DE 6-1 at 1).

         A. The Relevant Terms of the Second Settlement Agreement

         Under the terms of the second settlement agreement, Valley Forge was authorized to appoint new defense counsel, subject to Hartford Iron's approval, to represent Hartford Iron with respect to the EPA and IDEM claims and the remediation work plan for the site. (DE 6-1 at 2-3).

         The defense counsel's duties were described in the agreement as follows:

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 the costs and obtaining agency approval of the most cost effective remediation alternative that protects Hartford Iron's interests at the site.

(DE 6-1 at 2). The second settlement agreement also provided that Valley Forge could replace its current environmental consultant, HydroTech Corporation, with another environmental consultant, August Mack Environmental, Inc. (“August Mack”). (DE 6-1 at 2). August Mack's duties were described in the agreement as follows:

August Mack will carry out, at [Valley Forge's] expense, the Remediation Work Plan (July 31, 2012) for the Property, as approved or modified by IDEM and/or EPA. August Mack may initiate requests for amendment or modification. Prior to Remediation Work Plan approval, August Mack's work will include: (i) effective immediately, prevention of illegal stormwater discharges; (ii) installation and operation of a temporary stormwater treatment system pursuant to the Industrial Wastewater Treatment Construction Permit; and (iii) treatment and/or off-site disposal of contaminated stormwater currently in storage tanks on site and disposal of drummed wastes currently in storage. August Mack will also modify the Remediation Work Plan to incorporate agency comments, and will prepare and implement future work plans as required by IDEM or EPA for subsequent steps in the site remediation.

(DE 6-1 at 3).

         B. Relevant Facts as to Keramida

         In December 2013, Valley Forge appointed Attorney Jamie Dameron as Hartford Iron's defense counsel pursuant to the terms of the second settlement agreement. (DE 455-6 at 1 ¶ 2). Dameron had approximately nine years experience in private practice largely focusing on environmental law and about 20 years experience “as a professional with clients performing environmental cleanups”; Dameron was an “environmental consulting geologist” prior to practicing law. (DE 45-55 at 1 ¶ 3).

         Dameron soon concluded that there were serious problems in the stormwater collection system constructed by August Mack. (DE 373-6 at 1-2 ¶ 4). By March 2014, Dameron conveyed her concerns to Hartford Iron and Valley Forge and advised that they “obtain other perspectives on the maintenance and operation of [the stormwater] system” (DE 45-25) from “other storm water consultants” (DE 45-24), such as Keramida (DE 45-25). More particularly, Dameron wrote:

August Mack sent an email yesterday indicating that it would like to send the certified operator out to the site to do a system inspection. . . . This has me thinking specifically about the approach of getting different perspectives and useful information in the short term and then using that information to build on longer term solutions.
I suggest that the outside storm water consultant also do a system inspection identifying issues, improvements and any other recommendations. I will initiate this with a phone call and brief RFP for those interested. We will move forward with a scope/retention letter from this office with a follow up providing system information on the pending sump/pump installs, flow diagram, other system details including past regulatory/collection challenges. If we see value, then the next part of this effort is to solicit proposals for certain improvements/alternatives and the operation and maintenance. This second proposal would be based on the information learned during the inspection scope. These tasks may evolve slightly as I discuss the initial inspection scope with the consultants, but I wanted to provide an idea for the framework.
We will soon be discussing the noncompliance events and how to achieve effective and efficient storm water treatment with IDEM, and possibly EPA. I am recommending this storm water treatment assessment effort because it will likely offer value now on a number of defense-related regulatory issues as well as promote efficiency in treating the industrial storm water.

(DE 45-24).

         Near that same time, Dameron sent an email to Keramida, stating:

The requested proposal and work for inspection of storm water collection and treatment system are for the purpose of facilitating legal advice to Hartford Iron; therefore, the work must be done such that legal privileges are preserved, unless otherwise directed by me. The facility is also under agency enforcement so the work is being performed in the midst of litigation and in anticipation of additional litigation. Please do not disclose any communications or work, including this email, to any third parties. Take reasonable steps necessary to ensure confidentiality. I recommend marking all communications - Confidential: Privileged Attorney-Client Communication/Work Product. I am requesting a proposal with an SOQ for system inspection services and an inspection report. . . . A goal of this effort is to evaluate and improve system operation in the short term and ensure that it is adaptable for changes to the storm water expected during and after IDEM directed soil remediation. If selected for these services, invoices will be sent to my firm . . . . Direct billing to the insurers may be more practical in the future, should Keramida be selected to provide additional storm water consulting and system operation services. (DE 473-10). In April 2014, Dameron's law firm, with Valley Forge's approval, hired Keramida.

(DE 455-6 at 2 ¶ 5).

         In June 2014, Keramida summarized its findings from its evaluation and inspection of the Hartford Iron site and identified necessary changes to the stormwater system. (DE 45-26; DE 455-6 at 2 ¶ 5). That same month, Dameron followed up with Valley Forge on her recommendation “to develop a planned storm water treatment system to replace the current ad hoc arrangement, ” stating that ...


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