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Britz Fertilizers, Inc. v. Bayer Corp.

May 4, 2009

BRITZ FERTILIZERS, INC., PLAINTIFF,
v.
BAYER CORPORATION, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Dennis L. Beck United States Magistrate Judge

ORDER DENYING BRITZ'S MOTION TO COMPEL PRODUCTION OF DOCUMENTS AND FURTHER DEPOSITION TESTIMONY (Document 56)

Plaintiff Britz Fertilizers, Inc., ("Britz") filed the instant motion to compel production of documents and further testimony from James Rushford, or alternatively, a motion for in camera review, on August 29, 2008.*fn1 The matter was heard on January 30, 2009, before the Honorable Dennis L. Beck, United States Magistrate Judge. Roger Schrimp appeared on behalf of Britz. Stephen Clifford and T. Mark Smith appeared on behalf of Bayer Corporation and Bayer Cropscience, Inc. ("Bayer"). Jerome Lerch appeared on behalf of non-party James Rushford.

RELEVANT BACKGROUND

History of Proceeding

In December 2002, Ahmad Skouti and Walter Johnson filed an action in the Fresno County Superior Court against Britz. The complaint alleged that a "tank mix" containing several agricultural chemicals, including Bayer's product Ethrel, caused damage when applied to plaintiffs' vineyard .

In January 2003, Britz's insurance carrier, Farmland Insurance ("Farmland"), retained Theodore W. Hoppe ("Hoppe") to represent Britz in the action. On January 16, 2003, Hoppe tendered defense of the Skouti action to Bayer and requested that Bayer indemnify Britz. After receiving no response from Bayer, Hoppe filed a cross-complaint in the Skouti action against Bayer on March 7, 2003, requesting declaratory relief and indemnity.

On May 14, 2003, Bayer, through its outside counsel, James L. Moore ("Moore"), wrote a letter to Hoppe regarding Britz's defense of the Skouti action. The letter explained that while Bayer would retain James Rushford ("Rushford") to defend the action "with [Hoppe]" based on the longstanding relationship between Britz and Bayer, rather than out of legal obilgation. The letter further stated that Bayer may withdraw from the defense of the Skouti action and that if it does, "Britz agrees to waive any conflict and allow attorneys retained by Bayer in this matter to continue to represent Bayer if Bayer is included as a party." Hoppe agreed, and based on the agreement to defend contained therein, Britz dismissed the cross-complaint on June 3, 2003.

On June 18, 2003, Rushford associated in as co-counsel for Britz. In an October 25, 2004, letter, Moore advised Hoppe that Bayer would continue to pay Hoppe's fees and other litigation expenses provided that Hoppe sign an agreement that Britz would not assert liability against Bayer based on its payment of defense costs. The letter also advised that Rushford would withdraw as counsel, stating that he "has not been actively involved in defending this case, which has been defended by [Hoppe]." Hoppe signed the letter and returned it to Moore.

On October 25, 2004, Rushford sent a withdrawal of counsel pleading to Hoppe for his signature. Rushford also stated that as a condition to Bayer's continued payment of Britz's defense, Hoppe needed to provide him with courtesy copies of all pleadings and discovery.

Rushford further indicated that he would represent any Bayer witnesses if they were deposed or called to testify at trial. The withdrawal was filed with the court on November 22, 2004. After his withdrawal, Rushford continued to advise Bayer on the courtroom proceedings and other events, including subpoenas directed to Bayer personnel.

Britz's CFO Robert Glassman ("Glassman") associated in as co-counsel for Britz and attended the trial with Hoppe. Trial commended on February 28, 2005, and at the beginning of Britz's case-in-chief, Glassman admitted liability on behalf of Britz. On April 14, 2005, the court entered judgment against Britz in the amount of $7,596,247. Bayer continued to pay Hoppe's fees and other litigation expenses through the appeal.

On March 14, 2006, Britz filed this action against Bayer seeking indemnity, declaratory relief and damages for fraud, misrepresentation and false promise. Britz filed a separate action on June 8, 2007, alleging that Bayer breached an agreement to adequately defend Britz and that Bayer was negligent in its defense of the Skouti action. By order dated February 5, 2008, Judge Wanger dismissed the negligence claim.

On February 28, 2008, Britz filed an amended complaint, restating the surviving claims for both actions. The amended complaint includes a claim for breach of contract to defend, alleging that Bayer failed "to take adequate measures to ensure that Britz received an adequate defense." The amended complaint also alleges that Bayer agreed to furnish, select and pay for Rushford's legal services. The amended complaint further alleges that Bayer breached the agreement to defend, in part, by (1) failing to inform Britz of facts suggesting that it was not being adequately defended, as communicated by Rushford to Moore and Ferguson; (2) failing to replace Rushford as co-counsel when he withdrew; and (3) failing to ensure that Britz had adequate trial counsel.

The Rushford Documents

On May 23, 2007, in response to subpoenas issued by Britz to Rushford and his law firm, Rushford produced four banker's boxes of documents, consisting primarily of trial and deposition transcripts, pleadings, correspondence and some discovery from the Skouti action. A letter from Rushford's counsel, Brett Broge, accompanied the production and explained that Rushford was asserting the attorney-client privilege "as to all documents depicting communications between Mr. Rushford and Bayer representatives, which took place either before Mr. Rushford's association of Britz began on or about June 18, 2003, or after the representation ended on October 25, 2004."

Rushford's Deposition

Britz served Rushford with a deposition notice and subpoena on August 10, 2007, indicating that the deposition would continue day-to-day until completed. Exhibit C. Rushford was deposed on October 3, 2007. In response to questions regarding the conversations he had with Bayer regarding the Skouti action, Bayer's counsel asserted the attorney-client privilege and Rushford's counsel, Jerome Lerch ("Lerch"), instructed him not to answer. That afternoon, Lerch informed Britz's counsel that he would not permit Rushford's deposition to continue the next day based on Federal Rule of Civil Procedure 30(d). According to Britz, counsel informed Lerch of the parties' "stipulation" regarding a longer deposition, but Lerch continued to refuse.*fn2

After the parties met and conferred, Lerch agreed to produce Rushford for an additional four hours, but conditioned the additional time on the resolution of the issues in this motion.

Hearings on Motions

At the January 30, 2009, hearing on Britz's motion to compel, the Court explained that Britz was entitled to explore the nature of Bayer's initial retention of Rushford, so that its argument against the attorney-client privilege and crime-fraud exception could be fully briefed. The Court therefore determined that more information relating to Rushford's initial engagement was necessary and ordered (1) Bayer to examine the documents on its privilege log with a view towards what constitutes engagement information, and obtain information from Moore and Ferguson, if any, as to any ...


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