United States District Court, W.D. Virginia, Abingdon Division
HARLEYSVILLE INSURANCE COMPANY, Plaintiff/Counterclaim Defendant
HOLDING FUNERAL HOME, INC., et al., Defendants/Counterclaim Plaintiffs.
MEADE SARGENT UNITED STATES MAGISTRATE JUDGE
matter was heard before the undersigned on the Plaintiffs
Motion Requesting The Disqualification of Defendants'
Counsel, (Docket Item No. 52) ("Motion"), on
January 17, 2017. Based on the reasoning set forth below, the
Motion will be denied insofar as it seeks the
disqualifications of defense counsel. Nonetheless, the
undersigned finds that some sanction is appropriate and will
award plaintiff its fees and costs incurred in pursuing the
material facts are not in dispute. Plaintiff, Harleysville
Insurance Company, ("Harleysville"), has sued the
defendants seeking a declaratory judgment that it does not
owe the defendants' fire loss claim for an October 22,
2014, loss of a funeral home in Castlewood, Virginia, based
on the fire being intentionally set, material
misrepresentations and failure to cooperate. The defendants
have filed counterclaims alleging breach of insurance
contract and bad faith against Harleysville. At issue before
the court is defense counsel's access to
Harleysville's entire claims file, and whether the facts
and circumstances surrounding this access require the
disqualification of defense counsel.
effort to share information electronically, Thomas Cesario, a
Senior Investigator for Nationwide Insurance Company,
("Nationwide"), which owns Harleysville, uploaded
video surveillance footage of the fire loss scene,
("Video"), onto an internet-based electronic file
sharing service operated by Box, Inc. Cesario then sent an
email containing a hyperlink to the Box, Inc., internet site,
("Box Site"), by which Wes Rowe of the National
Insurance Crime Bureau, ("NICB"), could access the
file containing the Video using the internet and download the
Video. The Video was placed on the Box Site, and the
hyperlink to the Box Site sent by email to Rowe on September
22, 2015. The email to Rowe stated: "Here is the link to
access the video" and provided the hyperlink. The email
also contained the following statement:
CONFIDENTIALITY NOTICE: This e-mail contains information that
is privileged and confidential, and subject to legal
restrictions and penalties regarding its unauthorized
disclosure or other use. You are prohibited from copying,
distributing or otherwise using this information if you are
not the intended recipient. If you received this e-mail in
error, please notify me immediately by return e-mail, and
delete this e-mail and all attachments from your system.
(Docket Item No. 55-5 at 2.) Harleysville concedes that any
person who used the hyperlink to access the Box Site had
access to the electronic information stored there. The
information was not password protected. Harleysville also
concedes that any person who had access to the internet could
have accessed the Box Site by simply typing in the url
address in a web browser.
receiving the September 22, 2015, email, Rowe used the
hyperlink included to access the Box Site on two occasions,
once on September 22, 2015, and, again, subsequently, to
download the Video. On the occasions that Rowe used the
hyperlink to access the Box Site, the only information
contained there was the Video.
April 28, 2016, Cesario placed files containing
Harleysville's entire claims file and Nationwide's
entire investigation file for the defendants' fire loss,
("Claims File"), on the Box Site to be accessed by
Harleysville's counsel. Cesario then sent an email to
Harleysville's counsel with the same hyperlink he sent to
Rowe to be used by counsel to access the Box Site and
retrieve a copy of the Claims File.
counsel issued a Subpoena Duces Tecum, dated May 24, 2016, to
NICB requesting NICB's entire file related to the fire.
On or about June 23, 2016, NICB sent defense counsel
electronic copies of all documents and information it had
received from Harleysville, including a copy of the September
22, 2015, email from Cesario to Rowe containing the hyperlink
to the Box Site. That same day, defense counsel, without the
knowledge or permission of Harleysville or its counsel, used
the hyperlink to gain access to the Box Site, which now
contained the Claims File. Defense counsel downloaded the
Claims File and reviewed it without ever notifying
Harleysville's counsel that they had accessed and
reviewed potentially privileged information.
August 22, 2016, in response to a request for production of
documents, defense counsel produced a thumb drive to
Harleysville's counsel. When Harleysville's counsel
reviewed the information contained on the thumb drive,
counsel discovered that it contained potentially privileged
material inadvertently produced by the defendants.
Harleysville's counsel alerted defense counsel. Defense
counsel requested that the disclosed privileged documents be
destroyed, and Harleyville's counsel complied. Upon
further review of the information contained on the thumb
drive, Harleysville's counsel discovered on October 27,
2016, that its Claims File was contained on the thumb drive
and had been produced by defense counsel. The Claims File was
located in a computer file entitled "NICB Video."
On November 1, 2016, Harleysville's counsel contacted
defense counsel and requested that defense counsel destroy
their copy of the Claims File. Defense counsel have conceded
that all defense counsel of record have reviewed the
materials accessed on the Box Site and that the materials
have been shared with the defendants. Nationwide,
subsequently, disabled the Box Site so it was no longer
accessible to anyone, and Harleysville filed the Motion with
counsel argues that defense counsel's access to
Harleysville's Claims File was an improper, unauthorized
access to privileged information requiring the
disqualification of all defense counsel of record. Defense
counsel argue that the Motion should be denied because
Harleysville waived any claim of privilege or confidentiality
by placing the information on the Box, Inc., site where it
could be accessed by anyone.
asserts that the Claims File reviewed by defense counsel
contained information protected from disclosure by the
attorney-client privilege and the work-product doctrine.
Jurisdiction in this declaratory judgment action is based on
diversity of citizenship, and the claims raised by the
parties are governed by Virginia state law. Therefore, under
Federal Rule of Evidence 501, Virginia state law governs the
applicability and waiver of any evidentiary privilege.
See Fed. R. Evid. 501. The work-product doctrine,
however, it not a privilege, but rather a qualified immunity
from discovery. See Continental Cas. Co. v. Under Armour,
Inc., 537 F.Supp.2d 761, 769-70 (D. Md. 2008) (citing 8
Charles Alan Wright, Et Al., Federal Practice and Procedure:
Civil 2d § 2023 at 335 (2d ed. 1994)). Thus, Rule 501
does not apply, and federal law, not Virginia law, governs
the applicability and waiver of the protection available
under the work-product doctrine. See Continental Cas.
Co., 537 F.Supp.2d at 769-70.
Virginia law, confidential attorney-client communications are
privileged from disclosure. See Walton v. Mid-Atl. Spine
Specialists, 694 S.E.2d 545, 549 (Va. 2010).
"Nevertheless, the privilege is an exception to the
general duty to disclose, is an obstacle to investigation of
the truth, and should be strictly construed."
Commonwealth v. Edwards, 370 S.E.2d 296, 301 (Va.
1988). Also, the attorney-client privilege may be expressly
or impliedly waived by the client's conduct. See
Edwards, 370 S.E.2d at 301. The proponent of the
privilege has the burden to establish that the
attorney-client privilege applies to a communication and that
the privilege was not waived. See Edwards, 370
S.E.2d at 301; United States v. Jones, 696 F.2d
1069, 1072 (4th Cir.1982).
it is hard to imagine that the entire Claims File would be
protected by the Virginia attorney-client privilege, the
court will assume that at least a portion of the file
contains privileged information for the purpose of addressing
the parties' arguments at issue here. See Westchester
Surplus Lines Ins. Co. v. Clancy & Theys Const. Co.,
2013 WL 6058203, at *6 (E.D. N.C. Nov. 15, 2013)
("Similar to work product, application of the
attorney-client privilege can be i- complicated in the
context of insurance claims). Harleysville argues that the
court should treat defense counsel's access to its claims
file as an unauthorized involuntary disclosure or, in the
alternative, as an ...