United States v. Dobco Inc.

Background

The parties reported four related discovery issues: (1) whether communications between M. Frank Higgins & Co., Inc. and Merchants National Bonding, Inc. were protected by the common-interest doctrine; (2) whether communications involving Higgins, Merchants, and five consulting professionals or organizations were protected by the consulting-expert privilege; (3) whether materials from Merchants’ investigation of Dobco’s claim under a performance bond were protected by the work-product doctrine; and (4) how the parties should search and produce electronically stored information (ESI).

Common-Interest Doctrine

The court explained that the common-interest doctrine can preserve attorney-client or work-product protection when parties and their lawyers share a legal interest and have undertaken a joint defense effort. But the doctrine does not automatically protect every communication between a construction principal and its surety. Higgins and Merchants had to establish first that the attorney-client privilege or work-product doctrine applied to the specific materials.

The court did not make a blanket privilege ruling. It required information about Dobco’s default notices; when Higgins or Merchants retained outside counsel; when Merchants denied performance on the bond or agreed to support Higgins in denying Dobco’s claim; and the participants, dates, confidentiality, legal purpose, and litigation-related purpose of the communications and documents being withheld.

Merchants’ Investigation

The court considered whether documents created during Merchants’ investigation of Dobco’s bond claim could qualify as work product. Work-product protection generally covers materials prepared because of expected litigation, rather than materials created in the ordinary course of business. The court said that an insurer’s claim investigation and a surety’s investigation may present similar timing problems because investigations can be routine while litigation remains possible.

The court declined to apply an automatic presumption that Merchants’ investigation materials were protected. Instead, it required a fact-specific assessment. The parties had to provide information about any duty Merchants had to investigate; when Merchants learned of the default notices; when and why it investigated; whether it hired outside counsel; when it denied performance or supported Higgins; how the investigation differed from ordinary business investigations; and whether any meaningful distinction existed between insurers and sureties for work-product purposes.

Consulting-Expert Privilege

The consulting-expert privilege ordinarily protects facts known and opinions held by an expert retained or specially employed in anticipation of litigation who is not expected to testify at trial. The court rejected the idea that Higgins and Merchants could obtain blanket protection for all communications with Partner Engineering, J.S. Held, North S. Tarr, Niagara Research Associates, and the International Masonry Institute.

The court required the parties to identify when and by whom each consultant was retained and for what purpose. They also had to state whether reports were provided to Dobco and whether any reports became discoverable because Higgins relied on them in its complaint. The court specifically noted that ordinary-business communications could not be shielded merely by labeling the professionals non-testifying experts.

ESI Protocol

Higgins and Merchants proposed producing all nonprivileged documents identified by agreed search terms. Dobco argued that producing every electronic communication containing a search term, without considering relevance or proportionality, would be an improper fishing expedition.

The court stated that parties may agree to produce all documents generated by an ESI search, but it would not require an unwilling party to do so. ESI remains subject to the Federal Rules of Civil Procedure, which require production of relevant, responsive, nonprivileged information within the scope of discovery. Because search terms may identify nonresponsive documents, Dobco was entitled to review its documents for responsiveness even when they matched a search term. The court expected Dobco to promptly produce nonprivileged documents that were responsive to the parties’ requests, except documents properly withheld based on an objection.

The court directed the parties to meet and confer about search terms, custodians, and date ranges. Those searches were to be narrowly tailored, proportional to the needs of the case, and not unduly burdensome, costly, or voluminous. The parties had to submit a joint letter updating the court by September 7, 2023.

Disposition

The court ordered the parties to provide additional facts addressing the three privilege issues and to negotiate the ESI protocol. It did not finally decide whether the disputed communications, investigation materials, or expert materials were privileged.