Ploen v. AIG Specialty Insurance Company

Background

In 2016, Mark Ploen, Richard Enrico, and Tony Jacobson each invested or loaned $3 million to AOM Holdings, LLC and received membership units. AOM allegedly did not pay the promised dividends or interest. In 2020, Ploen, Enrico, and Jacobson separately sued AOM in state court. Ploen and Enrico later entered into settlement agreements with AOM under which each received $250,000 and AOM agreed to stipulated judgments of $3 million.

The agreements were Miller-Shugart agreements, meaning AOM settled while limiting the plaintiffs’ recovery to AOM’s insurer. Ploen and Enrico are attempting to enforce those agreements against AIG, which insured AOM. AIG denied coverage under a policy exclusion for claims brought by a security holder, creditor, or interest holder when a company executive actively solicited, assisted, participated in, or intervened in the claim. AIG also contended that the settlements were unreasonable and resulted from collusion.

AIG served discovery requests on Ploen and Enrico and subpoenas on Jacobson and the law firms Kutak Rock, Fredrikson & Byron, Messerli & Kramer, and Faegre Drinker Biddle & Reath. By the hearing, the remaining disputes involved communications between Ploen’s and Enrico’s attorneys, attorney billing-invoice entries describing communications, and mediation materials.

Legal standards

Federal Rule of Civil Procedure 26(b)(1) permits discovery of nonprivileged information relevant to a claim or defense and proportional to the needs of the case. Rule 45 governs subpoenas to nonparties and requires reasonable steps to avoid imposing undue burden or expense. The same relevance and proportionality standards generally apply to party discovery and nonparty subpoenas.

The work-product doctrine protects documents and tangible things prepared in anticipation of litigation. Ordinary work product, including factual information, may be discoverable if the requesting party shows substantial need and an inability to obtain the equivalent without undue hardship. Opinion work product, such as an attorney’s mental impressions, conclusions, opinions, and legal theories, receives stronger protection. The common-interest doctrine can protect work product shared by parties with a common legal interest when the information is exchanged while developing a common legal strategy.

Rulings on the discovery disputes

Communications between Ploen’s and Enrico’s attorneys. The Court found that communications mentioning Jacobson could be relevant to whether the policy exclusion applied. It also found that communications discussing settlement with AOM could be relevant to whether the settlements resulted from collusion. However, the communications were protected work product. Ploen and Enrico had common legal interests in their similar claims arising from the same transaction, and their attorneys exchanged information while developing common legal strategies. AIG did not adequately show that it had a substantial need for the protected material or could not obtain its equivalent by other means. The Court therefore did not require production of those protected communications.

The Court found that Ploen’s privilege-log entries sufficiently described the communications and the asserted protection. If Enrico had not already provided a privilege log, he was required to do so within fourteen days, unless AIG and Enrico agreed that Ploen’s log was sufficient.

Attorney billing invoices. The Court declined to require production of the requested billing-invoice narratives. The number of references to Jacobson or his counsel in the invoices was, at most, only tangentially relevant to Jacobson’s involvement. Requiring review and line-by-line redaction of extensive invoices would also be unnecessarily burdensome, especially because many of the underlying communications had already been produced or would be produced. The Court further noted that invoice narratives could contain confidential communications, legal advice, or work product, and that summaries would be duplicative when the underlying communications had already been disclosed. The ruling did not prevent Jacobson and Kutak from voluntarily producing redacted invoices.

Mediation materials. AOM had agreed to produce mediation-related communications between its counsel and Ploen’s and Enrico’s counsel, so AIG’s request concerning AOM was moot. The Court held that the mediation statement did not need to be disclosed because it was created to share confidential information with the mediator and was protected under the cited Minnesota mediation statute. Mediation-related communications between Ploen’s and Enrico’s attorneys were also protected under the common-interest doctrine. The Court denied this part of AIG’s motion to compel, subject to Enrico’s obligation to provide a privilege log if necessary.

Other matters and disposition

The Court stated that it had denied at the hearing Ploen’s and Enrico’s motion to compel discovery from Fredrikson. Fredrikson, Jacobson, and Kutak sought attorney’s fees under the rule governing nonparty subpoenas. The Court deferred those fee requests for a separate order after reviewing the submitted cost declaration and AIG’s response.

The final order states that AIG’s motions to compel in both cases were granted in part and denied in part as explained above. This was a discovery ruling and did not decide whether AIG owed coverage or whether the Miller-Shugart settlements were enforceable.