No. 85SA437Supreme Court of Colorado.
Decided May 19, 1986.
Original Proceeding
Page 1045
Moye, Giles, O’Keefe, Vermeire Gorrell, Teryl R. Gorrell, Paul F. Lewis, for Petitioner.
Pryor, Carney and Johnson, P.C., W. Randolph Barnhart, John L. Wheeler, for Respondents.
James S. Miller, for Amicus Curiae, Colorado Trial Lawyers Association.
Lavinder, Ayd Cairns, P.C., Patricia M. Ayd, for Amicus Curiae, Colorado Defense Lawyers Association.
EN BANC
JUSTICE VOLLACK delivered the Opinion of the Court.
[1] Petitioner National Farmers Union Property and Casualty Co. (NFU or petitioner) instituted this original proceeding to prohibit enforcement of an order issued by the respondent court compelling discovery of a memorandum regarding a lease guaranty insurance policy. The memorandum was prepared by outside counsel to inform petitioner’s general counsel of the results of anPage 1046
investigation as to the facts regarding issuance of the policy and conclusions regarding whether a claim under the policy should be paid. We issued a rule to show cause and now discharge the rule.
I.
[2] Petitioner is a defendant in the trial court proceedings. This case involves a claim for insurance benefits alleged to be payable from a lease guaranty insurance policy which purportedly insured the payment of sublease installments due from Union Square Development Company to Houston International Minerals Co. (HIMCO). Under the policy NFU guaranteed payment of rents which came due under the sublease during the policy period in the event of a default. HIMCO was subsequently acquired through merger by Tenneco Minerals Company (Tenneco), the plaintiff in the trial court proceedings. Following default on the sublease payments, NFU denied Tenneco’s claim under the policy.
II.
[4] Initially we note that orders pertaining to discovery are interlocutory in character and generally are not reviewable in an original proceeding. However, we will exercise our original jurisdiction when an order will place a party at a significant disadvantage in litigating the merits of the case. Caldwell v. District Court, 644 P.2d 26 (Colo. 1982); Hawkins v. District Court, 638 P.2d 1372 (Colo. 1982). Should the information ordered compelled be used as evidence in this case, withdrawal of petitioner’s counsel may be mandated if they are called to testify as witnesses. The circumstances involved in this case justify our exercise of original jurisdiction.
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Observance of the obligation to hold inviolate the confidences developed in the attorney-client relationship not only facilitates the full development of facts essential to proper representation of the client but also encourages the general public to seek early legal assistance. Therefore, privileged information is excepted from the normal rules of discovery.
[7] Limitations also exist as to discovery of information falling within the work product doctrine. Documents prepared in anticipation of litigation or for trial are discoverable “only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of his case and that he is unable without undue hardship to obtain the substantial equivalent of the materials by other means.” C.R.C.P. 26(b)(3).[2] Work product materials enjoy a qualified immunity from discovery because “the general policy against invading the privacy of an attorney’s course of preparation is so well recognized and so essential to the orderly working of our system of legal procedure that a burden rests on the one who would invade that privacy to establish adequate reasons to justify production. . . .” Hickman v. Taylor, 329 U.S. 495 (1947). As a result, the party seeking discovery must overcome the burden imposed by C.R.C.P. 26(b)(3) regardless of whether the materials are prepared for trial by an attorney or by some other agent of a party. Hawkins v. District Court, 638 P.2d 1372 at 1376-77 (Colo. 1982). However, Rule 26(b)(3) is not intended to protect materials prepared in the ordinary course of business from general discovery. Id., 638 P.2d at 1377. See alsoNotes of Advisory Committee on 1970 Amendments to Federal Rules of Civil Procedure, 48 F.R.D. 487, 501 (1970).
III.
[8] In Hawkins, we examined the issue of whether investigative reports and witnesses’ statements compiled by an insurance adjuster in the course of investigating a fire loss with an insured are discoverable in an action by the insured against an insurance company for failing to pay the fire loss claim. The trial court held such information was privileged pursuant to the work product doctrine. After setting forth guidelines for determination of whether such information is protected by the work product doctrine from discovery requests, we remanded the matter for reconsideration by the trial court.
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was prepared in contemplation of specific litigation. Id., at 1379. Thus, under Hawkins, “a showing that a claims adjuster, or even a lawyer not acting as a legal counselor for the insurer, conducted an investigation of a claim, during which he compiled various reports and statements, would not be sufficient by itself to overcome the presumption of an ordinary business activity.” Id. (emphasis added). In the matter at hand, the burden on NFU is to show the memorandum was prepared when a substantial probability of imminent litigation existed.
[10] The record reflects that Tenneco made demand for payment of benefits under the policy by letter dated March 2, 1984. NFU referred the matter to its general corporate counsel, who in turn contacted outside corporate counsel to investigate whether the claim was covered under the policy. The resulting memorandum, which was dated April 24, 1984, was then submitted to general corporate counsel. By letter of June 15, 1984, NFU informed Tenneco that it decided to deny the claim, and on July 24, 1984, Tenneco filed suit. NFU maintains litigation was anticipated immediately after an initial demand was made under the policy. Because the lease guaranty policy was the only such policy of its type ever issued by NFU and the amount of the claim approached $1.8 million, among other factors, NFU contends the probability of litigation was imminent. The information contained in the memorandum is based almost entirely on statements taken from NFU employees concerning circumstances surrounding the issuance of the policy. [11] Here, the record adequately supports the trial court’s determination that NFU has not met its burden of showing that the first twenty-seven and one-third pages of the memorandum were prepared in anticipation of litigation. At the time the investigation was conducted and the memorandum prepared, no lawsuit had been filed nor was there any indication that litigation was imminent. Indeed, until the investigation was completed and the reports submitted, NFU was itself uncertain whether or not it would deny the claim. It was only after NFU denied the claim that litigation arose. NFU may not avail itself of the protection afforded by the work product doctrine simply because it hired attorneys to perform the factual investigation into whether the claim should be paid. The attorneys were performing the same function a claims adjuster would perform, and the resulting report is an ordinary business record of the insurance company. Given these circumstances, we believe that the respondent court was fully justified in granting the motion to compel discovery of the twenty-seven and one-third pages of the memorandum. [12] Next, we must determine whether discovery of the memorandum is barred by the attorney-client privilege.IV.
[13] In addition to the work product doctrine, NFU asserts the attorney-client privilege protects the memorandum from discovery. NFU argues the memorandum was prepared by outside counsel in response to a request for legal advice relating to an investigation of the origination of the policy and the validity of the claim. As authority for the proposition that the document is privileged, NFU relies upon Upjohn Co. v. United States, 449 U.S. 383 (1981).
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issued a summons requesting the results of the questionnaires. Upjohn refused to produce this information asserting the attorney-client privilege and the work product doctrine. The Supreme Court held the work product doctrine applied and the attorney-client privilege protected the information at issue.
[15] The Supreme Court noted the attorney-client privilege exists to protect not only the giving of professional advice to those who can act on it, but also the giving of information to the lawyer to enable him to give sound and informed advice. Upjohn Co. v. United States, 449 U.S. at 390-91.[3]Moreover, forcing an attorney to disclose notes and memoranda of witnesses’ oral statements is particularly disfavored because it tends to reveal the attorney’s mental processes. Id., 449 U.S. at 399. [16] The Court, in determining that the attorney-client privilege applied to bar discovery of the information, relied on the following factors. First, the information was provided by corporate employees to counsel acting as counsel for the corporation at the direction of corporate supervisors. Second, the purpose of the communications was to allow counsel to provide legal advice to the corporation. Third, the employees were made aware that they were being questioned by attorneys so that the corporation could secure legal advice. Last, the employees were informed that the communications were highly confidential. Id., 449 U.S. at 394-95. [17] None of the four factors relied on in Upjohn has been demonstrated here. The attorneys’ activities, as detailed in the first twenty-seven and one-third pages of the memorandum, consisted of conducting interviews with various officers and employees for the purpose of determining the factual circumstances underlying the issuance of the policy. In this respect, the attorneys were acting more in the role of claims investigators than legal counsel for NFU. Second, the dominant purpose of the interviews, as strongly implied by the memorandum itself, was to provide the company with the factual circumstances underlying the issuance of the policy. Third, there is an absence of any showing by NFU that those persons questioned were ever informed that the attorneys were acting as company counsel or that the purpose of the investigation was to allow the company to obtain legal advice. Finally, there is no indication that the employees were ever told that the investigation was confidential. In the absence of these factors, the extension of the attorney-client privilege to the circumstances of this case results in cloaking with confidentiality communications that, so far as the record shows, would have been forthcoming even without the attorney-client privilege. [18] We conclude the attorney-client privilege does not protect the first twenty-seven and one-third pages of the memorandum because the information contained therein was not legal advice but the results of a factual investigation relating to the issuance of the policy. The portion of the memorandum which contains legal conclusions and a subsequent memorandum of a legal nature were not disclosed to Tenneco. The trial court judge reviewed the documents in camera following the procedure set forth i Martinelli v. District Court, 612 P.2d 1083 (Colo. 1980), and correctly determined which document or portions thereof needed to be disclosed. Petitioner’s contention that the attorney-client privilege
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protects the first twenty-seven and one-third pages of the memorandum from discovery is not tenable under these circumstances. We also find petitioner’s other objections to disclosing this information to be without merit.
[19] We hold that the portion of the memorandum ordered disclosed by the trial court judge is properly discoverable. It is protected by neither the work product doctrine nor the attorney-client privilege. The respondent judge was correct in determining the information contained therein could be discovered, and accordingly, we discharge the rule to show cause and remand the matter for further proceedings. [20] Rule discharged. [21] JUSTICE ROVIRA dissents.(1975). The privilege is available to corporations. United States v. Louisville Nashville R. Co., 236 U.S. 318 (1915); A v. District Court, 191 Colo. 10, 550 P.2d 315 (1976), cert. denied, 429 U.S. 1040 (1977).