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Camico Mutual Insurance Company v. Heffler

January 28, 2013

CAMICO MUTUAL INSURANCE COMPANY, PLAINTIFF,
v.
HEFFLER, RADETICH & SAITTA, LLP, DEFENDANT.



The opinion of the court was delivered by: DuBois, J.

MEMORANDUM

I.BACKGROUND

This case arises out of a dispute over insurance coverage. Defendant Heffler, Radetich & Saitta, L.L.P. ("Heffler") administers class action settlement funds, and was insured by plaintiff CAMICO Mutual Insurance Company ("CAMICO"). Heffler was sued by a class member who alleged that one of the firm's employees misappropriated class action settlement proceeds. Heffler independently retained Conrad O'Brien P.C. ("O'Brien firm") to defend in that action, captioned Oetting v. Heffler, Radetich & Saitta, LLP ("Oetting action").

CAMICO has thus far paid for the O'Brien firm's defense in the Oetting action. In the present action CAMICO seeks, inter alia, a declaratory judgment stating that its coverage obligation arising from the misappropriation is limited to $100,000.

CAMICO now moves to compel production by Heffler of numerous documents related to the Oetting action. Heffler has refused to turn over these documents in discovery on the grounds that they are subject to attorney-client privilege. Specifically, Heffler claims that these documents were created in communication with the O'Brien firm in regard to the defense in the Oetting action.

CAMICO does not contest Heffler's claim that the documents at issue are subject to attorney-client privilege. Rather, CAMICO asserts that an exception to the privilege applies because it shared a common interest with Heffler regarding the defense of the Oetting action. (Mot. at 3.)

II. LEGAL STANDARD

"As the claims and defenses in issue in this action arise under state law, Federal Rules of Evidence 501 and 1101(c) provide that [the Court] should apply state law in determining the extent and scope of the attorney-client privilege." Rhone-Poulenc Rorer Inc. v. Home Indem. Co., 32 F.3d 851, 861-62 (3d Cir. 1994). The parties do not dispute that the privilege rules of the Commonwealth of Pennsylvania apply to this case. Unfortunately, the Pennsylvania Supreme Court has not addressed the issue before the Court, namely when the "common interest" or "co-client" exceptions to attorney-client privilege apply.

The Court is therefore charged with predicting how the state Supreme Court would rule regarding the claimed exception from attorney-client privilege. "When predicting how the state's highest court would resolve the issue, we must take into consideration: (1) what that court has said in related areas; (2) the decisional law of the state intermediate courts; (3) federal cases interpreting state law; and (4) decisions from other jurisdictions that have discussed the issue." Colliers Lanard & Axilbund v. Lloyds of London, 458 F.3d 231, 236 (3d Cir. 2006).

The Third Circuit has described certain relevant exceptions to attorney-client privilege in In re Teleglobe Communications Corp, 493 F.3d 345 (3d Cir. 2007). Although the opinion applied Delaware law on some issues, in addressing exceptions to attorney-client privilege the court looked to case law from numerous jurisdictions, the Restatement (Third) of the Law Governing Lawyers, and general principles animating the doctrines at issue. Id. at 362-66.

Indeed, "[w]hile Teleglobe was a case applying Delaware law, its discussion of the common-interest doctrine was not so limited. The Third Circuit engaged in a contemplative analysis of the purpose, history, and requirements of the common-interest doctrine, without much reference to Delaware law at all . . . In fact, Teleglobe has been cited by courts around the country as a leading opinion on the common-interest doctrine." Hoffmann-La Roche, Inc. v. Roxane Laboratories, Inc., Civ. No. 09-6335, 2011 WL 1792791, at *6 n.6 (D.N.J. May 11, 2011). Accordingly, the Court cites Teleglobe as persuasive authority in this case.

The Teleglobe court described two distinct exceptions to attorney-client privilege, the "common interest" exception and the "co-client" exception. The Court will address each exception in turn.

First, the "'common interest' (also known as 'community of interest')" exception to attorney-client privilege which "applies when clients are represented by separate counsel." Teleglobe, 493 F.3d at 365. That is, where separate clients retain different attorneys who share information with each other pursuant to a common legal interest, such information is not privileged as between those clients. Id. at 365-66.

Pennsylvania state courts have held that under the "common interest" exception, separate counsel for different clients is required. See In re Condemnation by City of Philadelphia in 16.2626 Acre Area, 981 A.2d 391, 397-98 (Pa. Commw. Ct. 2009) (noting that the common interest exception arises where, "co-defendants with essentially the same interests must retain separate counsel to avoid potential conflicts over contingent or subsidiary issues in the case. To avoid duplication of efforts, such defendants should be able to pool their ...


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