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Fay Avenue Properties, LLC v. Travelers Property Casualty Company of America

United States District Court, S.D. California

June 17, 2014

FAY AVENUE PROPERTIES, LLC., LA JOLLA SPA MD, INC., Plaintiffs,
v.
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA; AND DOES 1 through 100, inclusive, Defendants.

ORDER OVERRULING OBJECTIONS TO MAGISTRATE JUDGE'S ORDER PURSUANT TO FEDERAL RULE OF CIVIL ROCEDURE 72 [Dkt. No. 99.]

GONZALO P. CURIEL, District Judge.

Before the Court is Plaintiff La Jolla Spa MD, Inc.'s ("La Jolla Spa") motion to modify/set aside Magistrate Judge's Order on Joint Motion for Determination of Discovery Dispute pursuant to Federal Rule of Civil Procedure ("Rule") 72 filed on April 2, 2014. (Dkt. Nos. 98, 99.) As part of the order, Magistrate Judge William V. Gallo denied Plaintiff's motion to compel production of documents pertaining to documents withheld by Defendant based on the attorney-client privilege. Based on the reasoning below, the Court OVERRULES Plaintiff's objections to the Magistrate Judge's Order filed on April 2, 2014.

Factual Background[1]

Plaintiff La Jolla Spa operated a high-end medical spa and boutique in downtown La Jolla and Plaintiff Fay Avenue Properties, LLC ("Fay Ave Property") owned the two story building where La Jolla Spa was located. Both Plaintiffs were named insured under an insurance policy issued by Travelers Property Casual Company of America ("Travelers"). Dianne York is the President of La Jolla Spa and sole member of Fay Avenue Properties. La Jolla Spa brings the instant objection to the Magistrate Judge's order pursuant to Rule 72.

Plaintiff occupied the first floor of 7630 Fay Avenue, La Jolla, California ("Fay Ave Property"), where it operated a spa and retail shop. The second floor of the Fay Ave Property was partially occupied by the medical practice of York's former husband, Dr. Mitchell Goldman ("Goldman"). On or about September 18, 2009, Goldman vacated the Fay Ave Property, and moved his medical practice and equipment to another location, in accordance with the terms of York's and Goldman's divorce judgment. Plaintiff contends that Goldman, and/or persons acting on his behalf, stole medical and office equipment from the Fay Ave Property.

On or about January 26, 2010, Defendant received notice of the alleged September 18, 2009 theft. (Dkt. No. 93-3, Farley Decl. ¶ 2, Ex. B.) On February 19, 2010, Travelers assigned the insurance claim to claims adjuster, Erin Farley ("Farley"). (Id. ¶ 4.) On February 22, 2010, Farley sent York a letter that requested documents and information to substantiate Plaintiff's claim. (Id. ¶ 5.) By March 29, 2010, Plaintiff produced documentation to Defendant, including the York-Goldman divorce judgment and a claim spreadsheet of Plaintiff's claimed inventory that allegedly had been stolen. (Id., Farley Decl. ¶¶ 7-10.) The Farley declaration also states in pertinent part:

(1) In late March 2010, Defendant retained the law firm of Jones Turner, LLP ("Jones Turner") to assist it by taking the Examinations Under Oath ("EUO") of Plaintiff and to provide coverage advice. (Id. ¶ 12.)

(2) Farley intended that all communications between Defendant and Jones Turner would be privileged and confidential. (Id. ¶ 13.)

(3) The attorneys at Jones Turner, Alan Jones and Steven Turner ("Turner") were not, and are not, employees of Defendant. Throughout the course of the administration of Plaintiff's claim, Farley sought coverage advice from Turner. (Id. ¶ 14.)

(4) On August 25, 2010 and January 25, 2011, Farley attended York's examination under oath ("EUO"). At the August 25, 2010 and January 25, 2011 EUOs, York testified that she would provide many of the documents requested by Turner and Defendant, but that had not yet been provided, to support Plaintiff's claim. At the conclusion of the January 25, 2011, York requested an advance payment from Defendant. (Id. ¶ 16.)

(5) On January 31, 2011, Defendant made an advance payment of $250, 000 to Plaintiff Fay Ave Properties. The payment was conditioned upon York's representations, which Defendant assumed to be true for the purposes of the payment. On January 31, 2011, Farley sent York a letter that detailed the reasoning and conditions on which Defendant's advance payment was made. (Id. ¶ 18, Ex. 6.)

(6) Jones Turner did not have the authority to grant or deny advance payment requests made to Defendant, and did not make the decision to make the $250, 000 advance payment. (Id. ¶ 19.)

(7) On February 7, 2011, Plaintiff's attorney sent an email to Turner that requested an additional advance payment from Defendant. On February 9, 2011, Farley responded to the February 7, 2011 email by highlighting that Plaintiff had failed to provide to Defendant many documents to substantiate its claim that Plaintiff had previously agreed to provide to Defendant. The request for the additional advance payment was denied. (Id. ¶¶ 20-21, Ex. 7.)

(8) On April 22, 2011, Farley attended another session of York's EUO. At the EUO, York produced a box of documents that purportedly substantiated Plaintiff's claim. The EUO was suspended to allow York to produce additional documents to Defendant. (Id. ¶ 23.)

(9) After the April 22, 2011 EUO, Farley learned from Turner that Plaintiff's attorney requested an advance payment from Defendant. On April 27, 2011, Farley sent a letter to Plaintiff's attorney which states, inter alia, that Plaintiff had failed to provide to Defendant many documents to substantiate its claim that Plaintiff had previously agreed to provide, that Plaintiff had added new items to its claim that had not been previously identified, that during the April 22, 2011 EUO, York was unable to provide basic information regarding Plaintiff's claim, and that it was Plaintiff's duty and responsibility to provide correct information in support of the claim. The request for an advance payment was denied. (Id. ¶ 24, Ex. 8.)

(10) On April 29, 2011, Plaintiff's attorney sent Turner a revised inventory of allegedly stolen items. The revised inventory increased the number of stolen items from approximately 200 to over 1, 000 items, and had increased the claim by millions of dollars. (Id. ¶ 25.)

(11) On May 23, 2011, York sent Farley and Turner an email that requested another advance payment. On May 27, 2011, Farley sent a letter to York which provided a detailed account of Plaintiff's claim history, and noted that Plaintiff's failure to provide to Defendant requested information about its claim had prevented Defendant from completing its investigation. The request for advance payment was denied. (Id.¶¶ 28-29, Ex. 10.)

(12) On June 2, 2011, Plaintiff's attorney sent Turner another updated claim inventory. Turner sent the updated claim inventory to Farley. The updated claim inventory had over 1000 line items and was valued at over $13 million. (Id. ¶ 32.)

(13) On July 19, 2011, Farley received an email from Plaintiff's attorney which asked for a $1 million advance payment. On July 20, 2011, Farley responded that Defendant could not fully respond t Plaintiff's claim, and that it would not pay ...


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