In re California Bail Bond Antitrust Litigation

Background

Lexington National Insurance Corporation and American Surety Company moved for relief from a magistrate judge’s non-dispositive pretrial order. They asked the district court to reverse Judge Ryu’s order denying their request to claw back documents produced in discovery. The documents were communications concerning a 2016 California Department of Insurance inquiry into excessive rates. They primarily involved advice from Robert W. Hogeboom, a regulatory lawyer jointly retained by Lexington as outside counsel to Mark Holtschneider, who was then Lexington’s Executive Vice President and General Counsel.

Plaintiffs Shonetta Crain and Kira Monterrey challenged the defendants’ claim that the documents were protected by the attorney-client privilege, which generally protects confidential communications made to obtain or provide legal advice. After reviewing the documents privately, Judge Ryu denied the clawback motion.

The Parties’ Arguments

The moving defendants argued that the communications involved legal advice about responding to an extraordinary, date-specific information request from the California Department of Insurance. They also argued that the common-interest doctrine protected communications shared with other sureties. That doctrine can preserve privilege when parties share a legal interest and communicate for a common legal purpose.

The Court’s Analysis

The district court explained that a magistrate judge’s non-dispositive order ordinarily remains in place unless it is clearly erroneous or contrary to law. A factual finding is clearly erroneous when the reviewing court is left with a firm conviction that a mistake was made; a legal conclusion is reviewed anew.

The court found no basis to disturb Judge Ryu’s ruling. It agreed that Hogeboom’s advice was primarily and explicitly directed at rallying the bail bond industry and coordinating an industry-wide response to the Department of Insurance inquiry. The advice recommended non-legal methods, including informational letters and personal meetings with department heads, to influence the agency. The court concluded that this was lobbying advice, not legal advice about satisfying statutory or regulatory requirements or challenging the agency in a regulatory proceeding. Because the communications were not primarily for legal advice, the attorney-client privilege did not protect almost all of them.

The court also agreed that the common-interest doctrine did not protect the few communications that might otherwise have been privileged. The primary purpose of the three sureties’ retention of Hogeboom was to coordinate an industry advocacy campaign, which more closely resembled commercial lobbying than a legal defense strategy. The defendants did not show that the sureties shared a common legal interest in a legal proceeding by the Department of Insurance. The inquiry letters were sent to each surety separately, and the record did not indicate that the agency could bring legal proceedings against the sureties as co-defendants or that one surety would have a legal interest in another surety’s separate rate inquiry.

Disposition

The court denied Lexington and American Surety Company’s motion for relief from the magistrate judge’s non-dispositive pretrial order. The order therefore left in place Judge Ryu’s denial of the clawback motion.