S.T. Specialty Foods, Inc. v. Copesan Services, Inc.

Background

S.T. Specialty Foods, Inc. arranged for Copesan Services Inc. to fumigate its food-processing facility beginning September 30, 2016. S.T. Specialty alleged that the pesticide used during the fumigation caused mechanical equipment at the facility to fail. After investigating possible causes, S.T. Specialty contacted Wil-Kil Pest Control Company, Inc., a wholly owned subsidiary of Copesan, on October 10, 2016, asking whether the fumigant could have caused fine electrical damage.

On November 17, 2016, S.T. Specialty sent Copesan a formal letter stating that it believed the fumigant had caused widespread damage and loss and demanding $515,955.42. Copesan notified Sedgwick Claims Management Services, its insurer’s third-party claims manager, and Sedgwick later retained Stephen Kessler and engineering consultant Ryan Haase. Copesan formally retained outside counsel in April 2017. S.T. Specialty filed suit in September 2018.

Discovery dispute

S.T. Specialty moved to compel three categories of materials: documents on Copesan’s privilege log created during the investigation; documents sought from Sedgwick and Kessler; and documents concerning Haase’s inspection, testing, and analysis. S.T. Specialty argued that materials created before Copesan’s outside counsel first contacted it on April 27, 2017, were not prepared for litigation and that Copesan could not assert objections on behalf of the subpoena recipients.

The court applied Federal Rule of Civil Procedure 26(b)(3), which generally protects documents and tangible things prepared because of anticipated litigation, and Rule 26(b)(4)(D), which protects the facts known and opinions held by a consulting expert retained for anticipated litigation who is not expected to testify at trial. The court explained that the protection can begin before a lawsuit is filed, but the party asserting it must show more than a remote possibility of litigation. The inquiry is based on objective circumstances, including the nature of the documents and the factual situation, and documents prepared in the ordinary course of business remain unprotected.

When litigation became foreseeable

The court rejected October 10, 2016, as the starting date. The notes from S.T. Specialty’s call with Copesan reflected an inquisitive and concerned conversation rather than an adversarial one, and Copesan did not notify its insurer until November 2. The court also found that the record did not show that S.T. Specialty communicated anything between October 10 and mid-November that made litigation sufficiently foreseeable.

The court held that November 17, 2016, was the relevant trigger date. S.T. Specialty’s letter identified a specific theory of liability, described the alleged damage and loss, and made a specific monetary demand. The court concluded that, as of that date, the prospect of litigation had arisen sufficiently to invoke work-product protection. It ordered production by January 10, 2020, of otherwise responsive documents created before November 17, 2016, that Copesan, Kessler, or Sedgwick had withheld on work-product grounds.

Copesan’s documents

For more than 150 documents on Copesan’s privilege log created between November 17, 2016, and April 27, 2017, the court found that the available information was inadequate to determine whether each document had been prepared because of anticipated litigation or for an ordinary business purpose. The court ordered an in camera review, meaning a private review by the judge, of a representative sample.

S.T. Specialty could identify no more than 35 entries from Copesan’s privilege log by January 17, 2020. Copesan had to deliver those documents to chambers by January 24, 2020. After reviewing the sample, the court stated that it would issue a final order deciding whether the sampled and other documents in that date range had to be produced or whether Copesan’s work-product objections would be upheld. The court also noted that it could revisit the November 17 trigger date if the document review clearly pointed to a different conclusion.

The court did not decide Copesan’s attorney-client privilege claims except as to the requested additional details in the privilege log. It noted that S.T. Specialty had not challenged those claims more broadly.

Sedgwick and Kessler documents

The court likewise ordered production by January 10, 2020, of responsive and otherwise discoverable documents, or redacted portions of documents, in Kessler’s and Sedgwick’s files that were created before November 17, 2016, and withheld on attorney work-product grounds.

For documents created on or after November 17, 2016, the court rejected Copesan’s argument that the subpoenas were unenforceable because S.T. Specialty allegedly failed to provide advance notice to Copesan’s counsel. Copesan had not shown specific prejudice, and the record was unclear about the Sedgwick subpoena’s service date. The court also rejected S.T. Specialty’s argument that Copesan could not assert work-product and attorney-client protections for documents held by Sedgwick and Kessler. The court found that Copesan had an interest in asserting those protections and that the recipients were working on Copesan’s behalf.

Although the court was concerned that privilege logs for Kessler’s and Sedgwick’s withheld documents were produced late, it found that the protections had not been waived. The court allowed S.T. Specialty to select up to 15 additional entries from the Kessler and Sedgwick logs, dated between November 17, 2016, and April 26, 2017, for in camera review under the same schedule.

Haase’s consulting-expert materials

The court denied the motion to compel documents from Ryan Haase. Because Haase was retained after November 17, 2016, to investigate S.T. Specialty’s claims, and had not been identified as an expert expected to testify at trial, the court treated his work as protected under Rule 26(b)(4)(D). Disclosure would have required exceptional circumstances showing that S.T. Specialty could not obtain the same facts or opinions by other means. The court found no such circumstances, noting that S.T. Specialty had first and continuing access to the damaged equipment. The court therefore also declined to require Haase or Copesan to produce a log of Haase’s files.

Disposition

The court ordered that S.T. Specialty’s motion to compel was GRANTED IN PART AND DENIED IN PART. It required production of certain pre-November 17, 2016, documents, established in camera review procedures for selected later documents, and denied the request to compel Haase’s materials.