Does Counsel’s Coverage Denial Letter to Insured Waive Privilege for Underlying Coverage Opinion? Reply

The West Virginia Supreme Court of Appeals confronted an interesting issue—whether an insurer’s lawyer waives the attorney–client privilege for his coverage opinion by sending a coverage denial letter directly to the insured.  The Court answered with an emphatic “No.”  Montpelier U.S. Ins. Co. v. Bloom, 757 S.E.2d 788 (W. Va. 2014).  You may read the decision here.

A property owner sued B&B Transit alleging that it caused a landslide that damaged their property.  B&B notified its insurer of the claim, and the insurer retained coverage counsel to determine whether the policy provided coverage for the landslide allegations.

Coverage counsel then prepared a coverage opinion letter to the insurer.  Counsel later explained, in writing, the coverage decision to the insured without enclosing the coverage opinion.  Counsel stated—using coverage lingo—that the policy had a subsidence exclusion that did not cover property damage “arising out of or aggravated by the subsidence of land as a result of a landslide.”

In a subsequent bad-faith claim, B&B sought disclosure of counsel’s coverage opinion, arguing that counsel’s letter explaining the coverage decision resulted in waiver of the attorney–clieWVA Courtnt privilege for the coverage opinion.

The W. Va. Supreme Court found this argument “novel,” noting that B&B did not cite to, “nor have we found, any case in the country that has held that the attorney–client privilege does not apply to a coverage opinion letter when an insurer communicates the gist of the recommendation contained in the letter to the insured.”

The Court analogized this novel issue to cases where insureds sought coverage opinion letters as part of the insurer’s claims file.  And it distinguished cases where an attorney acted as a claims adjustor on the initial claim determination.

The Court concluded that the attorney–client privilege protects from disclosure coverage counsel’s coverage opinion letter and that counsel’s communication of the coverage decision to the insured does not constitute privilege waiver.  Insurance coverage counsel facing this type of discovery dispute now have support from the West Virginia Supreme Court.

Engineer’s Investigative Report—Sent to Outside Counsel—Not Privileged Reply

The Nevada Supreme Court ruled that the attorney–client privilege did not protect from disclosure a post-accident investigative report by a manufacturer’s engineer.  The Court issued the ruling even though the investigator sent the report to the manufactureconfidential document flush awayr’s outside counsel.  Mega Manufacturing, Inc. v. Eighth Judicial District Court, 2014 WL 2527226 (Nev. May 30, 2014).  You may read the decision here.


Accident Investigation

Following an injury involving a press brake machine, the press brake manufacturer’s chief engineer conducted an investigation and sent his investigation report to the manufacturer’s outside counsel.  The engineer discussed the investigation with outside counsel before conducting the investigation.

The injured plaintiff sued and sought production of the investigation report.  The manufacturer objected, asserting the work-product doctrine and the attorney–client privilege.  The trial court rejected both objections.

Attorney–Client Privilege

One may question the court’s rejection of the attorney–client privilege.  The court applied Nevada’s privilege, which protects confidential communications between the “client’s representative and the client’s lawyer.”  While there was a factual issue whether the manufacturer or an affiliate company actually employed the engineer, there was no dispute that the engineer was the manufacturer’s representative while conducting the investigation.

Yet, the court relied upon federal common law in making its decision and noted that the Supreme Court’s Upjohn decision “largely turns on the issue of employment.”  The Nevada court therefore held the privilege inapplicable because there was some dispute whether the press brake manufacturer employed the engineer.

The court did not address several decisions finding that the privilege applied to consultants and others considered functional equivalent of employees.  See my post regarding a Google case applying the functional equivalent of employee test.

Work-Product Doctrine

The court similarly rejected the work-product doctrine because there was a factual issue whether the engineer prepared the report in anticipation of litigation.  The engineer testified that he spoke with the manufacturer’s outside counsel before conducting the investigation and sent the final report to him. But the court found this factual evidence insufficient to prove the anticipation-of-litigation element.

Other Privileges

The manufacturer also asserted the self-critical analysis privilege, but the court gave this privilege virtually no attention, stating simply that it “considered [the manufacturer’s] other arguments and conclude they lack merit.”

PoP Analysis

The court’s decision lacks a thorough analysis, but, fortunately, the court decided not to publish the opinion, meaning it has no precedential value.  Yet, the case is constructive for lawyers and corporations conducting post-accident investigations.  The evidence in this case appeared equivocal—but what if the manufacturer’s counsel had directed, in writing, that the engineer conduct the investigation because the company anticipated litigation?  And what if the engineer began his investigative report with a statement that he prepared it at the direction of counsel, on behalf of the manufacturer, and for purposes of the manufacturer’s counsel providing legal advice.  I suspect the court would have reached a different outcome.

Out-of-State Subpoenas: Which State Decides Privilege Objections? Reply

Two privilege-related questions arise when an out-of-state subpoena requests production of putatively Mapprivileged information: (1) which state’s privilege law applies? and (2) which court—the home-state court or the foreign-state court—decides the issue? In a split decision, with a well reasoned dissent, on a matter of first impression, the Arizona Court of Appeals ruled that the foreign-state court decides the privilege issue under foreign-state law. Johnson v. O’Connor, 2014 WL 2557700 (Ariz. Ct. App. June 6, 2014). You may access the opinion here.

Background

A Wisconsin criminal court issued a certification pursuant to the Uniform Act to Secure Attendance of Witnesses From Without a State in Criminal Proceedings (Uniform Act) asking an Arizona state court to subpoena psychological records from Arizona-based Psychological Counseling Services, Ltd for use in the Wisconsin criminal trial. PSC claimed that the Arizona psychologist–patient privilege protected the records from disclosure, but the Arizona trial court refused to decide the objection, ruling that the requesting state should resolve “matters of professional privileges.”

Majority Decision

The issue on appeal was whether the trial court should have considered PCS’s privilege objections under Arizona law before requiring PCS to produce the records. In a 2 to 1 decision, the majority interpreted the Uniform Act as requiring the Wisconsin state court—where the criminal proceeding was pending—to decide the privilege issue under Wisconsin law.

The appellate court held that the Arizona Supreme Court case of Tracy v. Superior Court, 810 P.2d 1030 (Ariz. 1991), controlled, but offered other reasons for its decision: (1) the decision furthers the Uniform Act’s purposes because allowing the foreign state to rule on privilege issues reduces procedural hurdles and increases cooperation among the states; and (2) the decision is consistent with the Restatement (Second) of Conflict of Laws § 139(2), which provides that the foreign state’s privilege law decides the issue rather than the state with the most significant relationship.

Dissent

The dissent took issue with the majority’s reasoning, stating that “communications that take place in Arizona are subject to Arizona law, and Arizona courts should apply that law before ordering the release of privileged or confidential documents for use in a prosecution in another jurisdiction.” The dissent distinguished the Tracy decision, which did not address the production of privileged records.

The dissent viewed the question as: “does the law of the state in which the communications took place govern whether the communications are privileged or confidential, and if so, which state should determine how to apply that law?” The dissent answered that the “site of the communication is dispositive” and requires that the law of the jurisdiction in which the communication occurred controls the privilege issue. It therefore flows that, “because the law of the jurisdiction where the communications took place governs, courts from that jurisdiction are best situated to address whether the communications are privileged.”

The dissent argued that leaving the privilege analysis to another jurisdiction would lead to inconsistent interpretations and applications of the home-state’s privilege law. And allowing a foreign jurisdiction to decide Arizona privilege law places Arizona patients and treating professionals in an untenable position in which there is uncertainty as to what types of communications the psychologist–patient privilege protects from disclosure.

PoP Analysis

This case highlights the split of authority on conflict-of-privilege-law issues for out-of-state subpoenas. Some states reserve the issue to the home state while others defer to the foreign state. The Johnson dissent, though, has the better reasoned argument, particularly with the majority’s questionable reliance on the Restatement provision. Many commentators are critical of this provision, as you can see in this article and my post highlighting an in-depth review of the provision. In short, this case adds to the uncertainty, and the issue needs further development.

Privilege-Log Designations: Categorical or Document-by-Document? Reply

Courts are increasingly ruling on the adequacy of parties’ privilege-log designations. As discussed in a prior post, Roger Clemens learned the hard way that failure to submit a privilege log results in privilege waiver. My article, Ignoring Privilege Log Obligations May Prove Costly, also details issues arising from inadequate privilege-log designations.

But does an adequate privilege log necessarily require a party to list each document? Or, may parties identify privileged documents by categories or topics? And does a party have to identifypointing_at_chalkboard_text_10562 documents where the identification will itself disclose privileged information? The Court’s decision in Manufacturers Collection Co. v. Precision Airmotive, LLC, 2014 WL 2558888 (N.D. Tex. June 6, 2014), provides helpful guidance on these topics. You may access the opinion here.

FRCP 26(b)(5) requires a privilege-invoking party to expressly make the privilege claim, and “describe the nature of the documents, communications, or tangible things not produced or disclosed—and do so in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the claim.” In Manufacturers Collection, the third-party plaintiff argued that the third-party defendant violated this rule by simply identifying a category of documents as privileged.

The Court, however, rejected the argument that FRCP 26(b)(5) always requires a document-by-document privilege designation. Citing SEC v. Thrasher, 1996 WL 125661 (SDNY Mar. 20, 1996) and heeding the Advisory Committee’s qualification that “courts retain some discretion to permit less detailed disclosure in appropriate cases,” the Court described two circumstances where a document-by-document approach was inappropriate:

  1. Where a detailed disclosure would, in effect, reveal the putatively privileged information; and

  2. Where a document-by-document listing would be unduly burdensome and the additional information to be gleaned from a more detailed log would be of no material benefit to the discovering party in assessing the privilege claim.

Under these standards, the Court permitted the third-party defendant to identify withheld documents by category. But this approach did not relieve the party of identifying all of the senders and recipients of communications (even if not by a particular document reference) so that the objecting party could determine whether privilege waiver existed.

Nor did the categorical approach permit the party to identify general categories, as the Court required it to breakdown the categories into subcategories, such as date range and type of authors and recipients, and break out each type of claimed protection, such as the attorney–client privilege and the work-product doctrine.

Even with the subcategories admonition, the Manufacturers Collection decision serves as good authority for those parties faced with crafting a privilege log for voluminous information and where providing a document-by-document listing would itself reveal privileged information. Practitioners should keep this decision handy.

ABA Journal Blawg 100 Nominations 1

Dear Readers:

Thank you for subscribing to or simply reading my posts on Presnell on Privileges. I am grateful that thousands of readers visit my blog each month, and that several of you have provided favorable feedback and shared mPoP Logoy posts via LinkedIn, Twitter, and Facebook.

The ABA is soliciting nominations of legal blogs for inclusion in its 8th Annual ABA Journal Blawg 100. I respectfully ask that you consider nominating Presnell on Privileges for this distinction.

You may complete the short nomination form here. The nomination process ends at 5:00 p.m. EDT on Friday, August 8, 2014.

The ABA seeks not only the blog’s name, but a short (500 characters max) commentary on what you appreciate about the blog. Does the blog provide complete coverage in an area (evidentiary privileges) that few others discuss in detail? Identify and describe timely case law updates on significant privilege decisions? Provide independent analysis on court decisions and offer practical tips on privilege-related issues? If so, please let the ABA know.

And of course feel free to nominate other blogs as I am doing. I am prohibited from nominating my own blog—and would not do so even if permissible—so I will appreciate your nomination.

Thank you for your consideration and for following my blog.

Todd Presnell

Significant D.C. Circuit Decision for Attorney–Client Privilege and Internal Investigations Reply

The D.C. Circuit Court of Appeals issued a significant decision upholding the attorney–client privilege for internal investigations conducted at in-house counsel’s direction.  The Court ruled that the privilege applied even where governmentConfidential Report Blue Tone Brochure regulations required the investigation and non-attorneys conducted the employee interviews. And in a move that will please in-house counsel, the Court rejected a narrow view of the primary purpose test for dual-purpose communications. In re Kellogg, Brown & Root, Inc., 2014 WL 2895939 (D.C. Cir. June 27, 2014).  You may read the opinion here.

An employee of Kellogg, Brown & Root, Inc., a Department of Defense contractor, filed a qui tam action asserting that KBR defrauded the government by inflating its DoD invoices and receiving improper kickbacks.  DoD regulations require defense contractors to maintain policies triggering internal investigations when misconduct claims arise.

When apprised of the potential wrongdoing, KBR’s in-house counsel directed an internal investigation pursuant to KBR’s Code of Business Conduct.  Non-attorneys working under the in-house lawyer’s direction conducted the employee interviews, and KBR required its employees to sign confidentiality agreements—but these agreements did not mention the attorney–client privilege.

The employee later sought production of the internal investigation report.  The district court rejected KBR’s privilege argument after finding that KBR conducted the internal investigation because of its corporate policy and DoD regulatory requirements, and not for the “primary purpose” of providing legal advice.  The district court held that the primary purpose test shielded internal investigation reports only where the company would not have conducted the investigation “but for” the purpose of seeking legal advice.

The D.C. Circuit reversed.  And in ruling that the attorney–client privilege protected KBR’s internal investigation, the Court made three critical holdings.

First, the Court rejected the notion that the privilege did not apply because non-attorneys conducted the employee interviews.  The Court held that the privilege applies so long as the company’s legal department directed the investigation, stating that “communications made by and to non-attorneys serving as agents of attorneys in internal investigations are routinely protected by the attorney–client privilege.”

Second, the Court held that the privilege applied even though KBR did not inform its employees of the interview’s purpose and that the confidentiality agreement signed by the employee did not mention that the discussions were privileged.  The Court refused to require companies to “use magic words to its employees in order to gain the benefit of the privilege for an internal investigation,” and held that KBR satisfied its burden by telling the employees that the interviews were highly confidential and not to discuss the matter without authorization from KBR’s General Counsel.

Third, the Court rejected a narrow interpretation of the primary purpose test for dual-purpose communications and adopted a new, broader standard. Noting “evident confusion” about this test and stating that the district court’s “but for” test was “not appropriate for attorney–client privilege analysis,” the Court followed the Restatement (Third) of the LawDC Circuit Governing Lawyers § 72, and articulated this test: “Was obtaining or providing legal advice a primary purpose of the communication, meaning one of the significant purposes of the communication?”

In other words, the Court rejected the sole causation test in favor of a broader test that, “sensibly and properly applied, … boils down to whether obtaining or providing legal advice was one of the significant purposes of the attorney-client communication.”

PoP Analysis

The KBR decision represents a significant victory for in-house lawyers overseeing internal investigations.  With more governmental regulations mandating corporate investigations and more corporations implementing mandatory investigation policies, it seems short-sighted that these events would vitiate, rather than strengthen, the attorney–client privilege.

And the Court’s rejection of the narrow “but for” primary purpose test runs contrary to several recent decisions concerning dual purpose communications.  In one decision, a state court adopted a heightened burden for in-house counsel—for a dual-purpose communication containing an equal amount of legal and business advice, the in-house lawyer has to “clearly show” that the legal purpose outweighs the business purpose for the privilege to apply.  See my blog post, GC’s “Talking Points” Memo to CEO Not Privileged—Leads to a Punitive Damages Verdict, for further discussion of this case. And for a discussion of how other courts apply the “because-of” and “primary purpose” standards in these situations, see my prior post titled Dual-Purpose Emails to In-House Counsel: Are They Privileged?

SAR Privilege Protects U.S. Bank’s Internal Investigation Policies and Procedures Reply

In a broad interpretation of the Suspicious Activity Report (SAR) privilege, a Washington state appellate court ruled that the privilege precludes disclosures of a bank’s policies and procedures for investigating suspicious activity and its specific internal investigations into wrongful conduct. Norton v. U.S. Bank Nat’l Ass’n, 324 P.3d 693 (WaSAR Reportsh. Ct. App. 2014). You may read the opinion here.

A U.S. Bank employee left to start an investment company, which later turned out to be a Ponzi scheme using several accounts at U.S. Bank. The plaintiffs invested in the Ponzi scheme, lost $11 million, and later sued U.S. Bank for breaches of fiduciary duty, fraud, and several other causes of action.

In discovery, the plaintiffs sought all documents related to U.S. Bank’s internal investigation and documents, including policies, generally related to U.S. Bank’s internal monitoring and investigations to detect money laundering. U.S. Bank resisted the discovery on grounds that the SAR privilege protects general and specific internal investigation documents from civil discovery. The Washington appellate court agreed and reversed the trial court’s denial of the privilege.

The SAR privilege arises from the Bank Secrecy Act, 31 U.S.C. § 5318, and its implementing regulations. The confidentiality provisions of 12 CFR § 21.11(k) constitute an “unqualified discovery and evidentiary privilege.” The SAR privilege covers not only the Suspicious Activity Report, but also any information that would reveal whether such a report exists.

In Norton, the state appellate court held that simply redacting explicit references to the existence of a SAR is insufficient to enforce the privilege. The court interpreted the SAR privilege broadly, finding that federal statutes require banks to establish internal policies, procedures, and controls to detect and report money laundering, and that these policies are intertwined with banks’ obligation to report suspicious activity. As such, the court ruled that “discovery into these matters will produce documents suggesting” that the bank either filed or considered filing a Suspicious Activity Report.

The court held that U.S. Bank was not required to produce its internal investigation policies and procedures generally or with specific reference to the Ponzi scheme perpetrated by its former employee. According to the court, “internal reports and methods used to investigate suspicious activity are precisely the type” of supporting documentation that the SAR privilege covers.

Selective Waiver Doctrine Rejected in FCA Case: K–Mart Must Disclose Work Product Data to Relator Reply

In a case that should teach us all a lesson, the USDC for the S.D. of Illinois ruled that K–Mart waived its work product protections over attorney-created data when it disclosed the data to HHS investigators. The Court rejected K–Mart’s selective waiver argument and compelled it to produce the data in a False Claim Act civil action. United States v. Kmart Corp., 2014 WL 2218758 (S.D. Ill. May 29, 2014).Cooperation and privilege You may read the opinion here.

Risky Decision?

In 2009, the OIG for the Dep’t of Health and Human Services conducted an investigation into K–Mart’s alleged improper Medicare claims. In response to an OIG subpoena, K–Mart produced a substantial amount of documents culled from 25 custodians, and its legal team also created and produced a subset of transaction data in a simpler format.  K-Mart and HHS entered into a confidentiality agreement prior to the production, but the agreement did not specifically address attorney–client privilege or work-product concerns.

In the False Claim Act action, K–Mart produced the custodial documents, but refused to produce the subset of data on grounds that the work-product doctrine protected this attorney-created subset from production.

Selective Waiver?                                                 

K–Mart urged the Court to apply the selective waiver doctrine, arguing that it encourages corporations to cooperate with government investigators. While finding cooperation laudable, the Court “most pointedly” reminded K–Mart that “the attorney client privilege and work product doctrines do not exist to foster full and frank conversation with the government.”

The Court noted that the majority of federal circuits reject the selective waiver doctrine, and found that K–Mart should have known that producing the attorney-created data to the government waived any work-product protections. In fairly strong language, the Court said that “it is incumbent upon attorneys anticipating or involved in litigation to take appropriate steps to closely guard confidential information” and that “K–Mart should not be permitted to ‘pick and choose’ to which adversary it waives work product protection and which adversary does not.”

The Court commented that “disclosure of protected attorney work product is a strategic litigation decision” and found that K–Mart made a strategic calculation that the benefit of appearing cooperative with a government investigation outweighed the risk of waiver.

Would a Confidentiality Agreement Work?

The Court noted one federal-court decision, Lawrence E. Jaffee Pension Plan v. Household Int’l, Inc., 244 FRD 412 (N.D. Ill. 2006), held that the defendant did not waive work-product protections upon disclosure to the SEC because it had a confidentiality agreement with the SEC stating that disclosure did not waive the privilege and work-product protections.

But the K–mart case is different. While K–Mart secured a confidentiality agreement with HHS, it did not mention privilege or work-product protections. And the Court indicated that, even if the agreement mentioned those protections, the agreement would not affect its decision.

PoP Analysis

This case illustrates the peril companies under investigation face when responding to government subpoenas or document requests. While some federal statutes provide selective waiver protections in financial services investigations, the majority view under federal common law is that there is no selective waiver doctrine—disclosure of documents to an investigative body waives the privilege in existing or subsequent civil actions. And while it is certainly better to have a confidentiality agreement with the government agency, those agreements may not withstand the waiver tide.

Outside Counsel Forwards Privileged Email to Adversary—Court Finds No Waiver Reply

The USDC SDNY issued an instructive roadmap in ruling that an outside lawyer’s forwarding a privileged email to adversary counsel did not constitute privilege waiver. Andmistake concepts, with oops message on keyboard. the ruling avoided a potentially larger disaster—disclosure of other privileged documents under the subject-matter waiver doctrine. Rank Group Ltd. v. Alcoa, Inc., 2014 WL 1883505 (SDNY May 9, 2014). You may read the opinion here.

Background

Rank Group purchased Alcoa’s Chilean-based consumer packaging business, and later sued Alcoa seeking indemnification for a $10M tax liability from the Chilean government. During the transaction process, one of Rank’s outside lawyers forwarded a privileged email to Alcoa’s outside lawyer regarding the Chilean tax authority’s treatment of a loan repayment.

In the post-transaction litigation, Alcoa claimed that, by voluntarily sending the email to Alcoa counsel, Rank’s lawyer waived the privilege, and it sought production of all communications between Rank and its lawyers regarding the loan repayment and associated tax consequences.

No Authority to Waive

Rank sprang to damage-control action, and argued that its outside lawyer had no authority to unilaterally waive the company’s privilege. In support, Rank submitted affidavits from the outside lawyer’s partner and the company’s regional financial controller. Both Rank representatives stated that Rank never authorized its outside counsel to share the privileged email with Alcoa and that it considered confidential all communications between Rank and its outside lawyer.

Ruling

The Court, applying New York law, stated that the party asserting the corporate attorney-client privilege has the burden of demonstrating the privilege’s application, including that the communication (1) was between client and its counsel, (2) was and remained confidential, and (3) was made for purposes of rendering legal advice.

The burden also requires the party to show a lack of privilege waiver. The non-waiver burden means that the party asserting the privilege

 must show that [its] disclosure was unauthorized and therefore did not result in waiver of the attorney-client privilege.

The Court held that Rank met its non-waiver burden. Both its outside counsel and internal controller verified that its lawyer’s forwarding the privilege email was “unauthorized and inadvertent.” The Court found that these self-serving affirmations “are enough to carry the burden of showing that the disclosure was unauthorized.” And because of this non-waiver finding, the Court did not invoke the subject-matter waiver doctrine.

PoP Analysis

Rank and its counsel avoided a potentially serious consequence arising from the subject-matter waiver doctrine. When a party voluntarily discloses a privileged communication, the subject-matter waiver doctrine extends this waiver to all other communications pertaining to the same subject matter. The doctrine’s purpose is to prevent a party from selectively disclosing favorable information while simultaneously withholding unfavorable information under the cloak of privilege.

The Court’s decision provides a roadmap that companies should follow when someone inadvertently discloses its privileged communications to third parties. The corporate attorney-client privilege belongs to the company, not its executives or its outside lawyers, and only those authorized to waive the privilege may do so. Here, Rank proved—through two affidavits—that its outside lawyer had no authority to waive the privilege. Lawyers faced with an inadvertent privilege disclosure should follow Rank’s lead.

Federal Privilege Law Governs Mediation Evidence for Federal & State Claims against “America’s Toughest Sheriff” Reply

Do federal courts apply federal or state privilege law in cases involving federal and supplemental state-law claims? The 9th Circuit ruled that federal privilege law governs even where the privileged matter relates to both federal and state claims. Wilcox v. Arpaio, 2014 WL 2442531 (CTA9 June 2, 2014). You may read the opinion here.

But thearpaio Court sidestepped two important issues. Does the 9th Circuit recognize a federal common law mediation privilege? And does federal privilege law apply in federal-question cases where the privileged evidence relates solely to the state-law claim?

America’s Toughest Sheriff Settles

The plaintiffs, Maricopa County (Arizona) supervisors, brought federal (42 U.S.C. § 1983) and state-law claims against “America’s Toughest Sheriff,” Joe Arpaio, and the County. As the plaintiffs were two of several plaintiffs with similar claims, the County established an alternative dispute resolution program and appointed retired judge Christopher Skelly to help resolve the claims.

Following mediation, Judge Skelly sent an email to plaintiffs’ counsel confirming a $975,000 settlement “subject to any further approvals deemed necessary by the parties.” You may read the confirming email here. When the County argued there was no settlement, the plaintiffs moved to enforce and the district court, following an evidentiary hearing, granted the motion.

9th Circuit Rules

On appeal, the County argued that the district court erred by admitting Judge Skelly’s email, claiming that Arizona’s mediation privilege precluded the email’s admissibility. The 9th Circuit noted that state contract law governs the issue whether the parties reached a settlement, but that, where the privilege question relates both to federal and state claims, federal rather than state privilege law applies.

This decision comports with the almost universal treatment of this conflict-of-privilege-law issue. Federal privilege law applies where a court entertains a case under federal-question jurisdiction, even with the presence of supplemental state-law claims.

Unanswered Questions

The Court expressly refused to answer “whether, in federal question cases, state or federal privilege law governs the admissibility of evidence that relates exclusively to state law claims.” The answer is likely that federal common law applies, and you can read more about this conflict-of-privilege-law issue in my article The Application of Conflict of Laws to Evidentiary Privileges.

The Court also ruled that the County waived the mediation privilege by not asserting it at the lower-court level, and therefore declined to “determine whether a mediation privilege should be recognized under federal common law and, if so, the scope of such a privilege.”  See my posts Court Takes Broad View of Mediation Privilege and Is Mediation Privilege Absolute or Qualified? for a discussion of some of these issues.  The Court’s ruling is unfortunate, as the federal common law mediation privilege, prevalent in some but not nearly all federal district courts, needs circuit-court attention and refinement.

Alas, we must await another day for these answers.

My thanks to Phoenix lawyer Patrick Gorman of the Jones, Skelton & Hochuli firm for alerting me to this opinion.