United States District Court, W.D. Virginia, Abingdon Division
OPINION AND ORDER
P. Jones United States District Judge.
T. Ross, David P. Abel, and Robert S. Reverski, Jr., Midkiff,
Muncie & Ross, P.C., Richmond, Virginia, and John L.
Cooley, CooleySublettPearson PLC, Roanoke, Virginia, for
Plaintiff and Counter-Defendant Harleysville Insurance
Company; Glenn H. Silver, C. Thomas Brown, Erik B. Lawson,
and Caitlin M. Brown, Silver & Brown, Fairfax, Virginia,
for Defendants and Counter-Claimants Holding Funeral Home,
Inc., Golden Rule Family Management, LLC, and L.J. Horton
a diversity action arising out of a claim for fire insurance
coverage. Harleysville Insurance Company
(“Harleysville”) seeks a declaration that it has
no duty to pay insurance benefits to Holding Funeral Home,
Inc., Golden Rule Family Management, LLC, and L.J. Horton
Florist, Inc. (“Defendants”). The defendants
counterclaim for breach of contract.
on the merits of this case have been stayed pending the
disposition of a related criminal prosecution. However, as a
separate matter, counsel for Harleysville (hereinafter
“Plaintiff's Counsel”) have filed a motion to
disqualify counsel for the defendants (hereinafter
“Defendants' Counsel”). For the reasons that
follow, I believe it is necessary to hold an additional
evidentiary hearing in this matter, and I so order.
December 21, 2016, Plaintiff's Counsel filed a motion to
disqualify Defendants' Counsel. ECF No. 52. The motion
was referred to United States Magistrate Judge Pamela Meade
Sargent. In their motion, Plaintiff's Counsel asserted
that Defendants' Counsel improperly accessed and reviewed
certain privileged documents (hereinafter “Claims
File”), that they concealed this access from
Plaintiff's Counsel, and that they refused to destroy the
Claims File when asked to do so. As relief, Plaintiff's
Counsel sought the disqualification of Defendants'
Counsel. Plaintiff's Counsel also sought court orders
directing Defendants' Counsel to destroy their copies of
the Claims File, directing Defendants' Counsel not to
disclose the Claims File, and barring the use of the Claims
File in this action. See generally Pl.'s Mem. Supp. Mot.
to Disqualify, ECF No. 53. Defendants' Counsel contended
in response that disqualification was inappropriate, first on
the ground that Plaintiff's Counsel had failed to prove
the Claims File was privileged, and second on the ground that
any privilege was waived when Harleysville posted the Claims
File to a publicly-accessible folder on the Internet. See
generally Defs.' Opp'n to Mot. to Disqualify, ECF No.
full briefing by both parties, Magistrate Judge Sargent held
an evidentiary hearing on this matter on January 17, 2017. At
the hearing, she invited counsel to submit supplemental
evidence and case law following the hearing. Both
Plaintiff's Counsel and Defendants' Counsel did so.
Defendants' Counsel subsequently objected to
Plaintiff's Counsel's submission, arguing that the
evidence contained therein should properly have been
presented via testimony at the hearing, where the witnesses
would have been subject to cross-examination and evidentiary
objections. Defs.' Obj. to Pl.'s Supplementation 5,
ECF No. 66. Magistrate Judge Sargent agreed and sustained
Defendants' Counsel's objections, a decision to which
Plaintiff's Counsel timely objected. Order, ECF No. 67;
Pl.'s Obj., ECF No. 73.
Judge Sargent subsequently denied Plaintiff's
Counsel's motion to disqualify. Assuming without deciding
that at least some portion of the Claims File was privileged,
she found that any privilege had been waived when
Harleysville uploaded the files to a publically-accessible,
non-password-protected website. Mem. Op. 9, 13, ECF No. 68.
Because any privilege was waived, she concluded,
disqualification of Defendants' Counsel was unwarranted,
since replacement counsel would be entitled to access the
same information. Id. at 17. However, she also held
that because Defendants' Counsel knew or should have
known they had accessed potentially-privileged information,
they should have revealed this access to Plaintiff's
Counsel and should have asked the court to decide the
question of waiver before making use of the information.
Id. at 16. Because they did not do so, she said,
their conduct “require[d] some sanction.”
Id. She accordingly imposed sanctions on
Defendants' Counsel in the form of payment of
Plaintiff's and Defendants' Counsel filed timely
objections. Plaintiff's Counsel objected to Magistrate
Judge Sargent's finding that Harleysville had waived any
privilege and to her denial of their Motion to Disqualify.
See generally Pl.'s Obj., ECF No. 73. Defendants'
Counsel objected to Magistrate Judge Sargent's sua
sponte imposition of sanctions, arguing that such
sanctions were both unwarranted and unjust. See generally
Defs.' Obj., ECF No. 70. These objections are now before
me for review.
Standard of Review.
issues raised by both parties - namely, questions of
privilege and waiver along with sanctions - are “not
dispositive of a party's claim or defense.”
Fed.R.Civ.P. 72(a). I therefore must consider the
parties' objections and “modify or set aside any
part of the order that is clearly erroneous or is contrary to
of fact are reviewed under the Rule's “clearly
erroneous” standard. Gairola v. Va. Dep't of
Gen. Servs., 753 F.2d 1281, 1288 (4th Cir. 1985);
see also Bruce v. Hartford, 21 F.Supp.3d 590, 594
(E.D. Va. 2014); HSBC Bank USA, Nat'l Ass'n v.
Resh, No. 3:12-CV-00668, 2014 WL 317820, at *7 (S.D.
W.Va. Jan. 28, 2014). A court's “finding is
‘clearly erroneous' when although there is evidence
to support it, the reviewing court on the entire evidence is
left with the definite and firm conviction that a mistake has
been committed.” United States v. U.S. Gypsum
Co., 333 U.S. 364, 395 (1948); see also Harman v.
Levin (In re Robertson), 772 F.2d 1150, 1153 (4th Cir.
magistrate judge's decisions on questions of law,
however, I review under the Rule's “contrary to
law” standard. PowerShare, Inc. v. Syntel,
Inc., 597 F.3d 10, 15 (1st Cir. 2010). In the context of
Rule 72(a), this “contrary to law” standard is
equivalent to de novo review. Id. (holding
that review of a question of law “is plenary under the
‘contrary to law' branch of the Rule 72(a)
standard” and that therefore, “[f]or questions of
law, there is no practical difference between review under
Rule 72(a)'s ‘contrary to law' standard and . .
. [a] de novo standard” (citations omitted));
Haines v. Liggett Grp. Inc., 975 F.2d 81, 91 (3d
Cir. 1992) (holding that while “[t]he district court is
bound by the clearly erroneous rule in findings of facts[, ]
the phrase ‘contrary to law' indicates plenary
review as to matters of law”); Bruce, 21
F.Supp.3d at 594; HSBC Bank USA, ...