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Aerojet Rocketdyne, Inc. v. Global Aerospace, Inc.

United States District Court, E.D. California

September 23, 2019

GLOBAL AEROSPACE, INC., et al., Defendants.


         On March 13, 2019, the assigned magistrate judge denied defendants and counterclaimants’[1] (“Global” or “Global defendants”) motion to compel the production of multiple documents redacted as privileged and declined its request for in camera review of those documents. Order, ECF No. 189. In that same order, the magistrate judge granted plaintiff Aerojet Rocketdyne, Inc.’s motion to compel production of several categories of documents Global contends are privileged. Id. On March 27, 2019, Global moved for reconsideration of the magistrate judge’s rulings. Mot., ECF No. 197. Aerojet opposes. Opp’n, ECF No. 200. As explained below, the court DENIES in part Global’s motion and, as to certain portions of the magistrate judge’s order, REFERS this matter back to the magistrate judge for further explanation.

         I. BACKGROUND

         As reviewed in numerous prior orders, this liability insurance coverage case follows two 2014 incidents in which engines for use in space launches, supplied by Aerojet to non-party Orbital, failed; their failure ultimately led to a $50 million settlement between Aerojet and Orbital for which Aerojet sought coverage from its insurers, Global. Global denied coverage. See Jt. St. re Global Mot., ECF No. 177, at 11-15[2] (parties’ respective statements of case). Rather than provide an exhaustive review of the underlying facts here, the court addresses those facts as necessary to resolve the pending motion.


         Federal Rule of Civil Procedure 72(a) requires that district judges consider timely objections to nondispositive pretrial orders issued by magistrate judges and “modify or set aside any part of the order that is clearly erroneous or is contrary to law.” Fed.R.Civ.P. 72(a); see also 28 U.S.C. § 636(b)(1)(A); E.D. Cal. R. 303(f). “A Magistrate Judge’s decision is ‘contrary to law’ if it applies an incorrect legal standard, fails to consider an element of [an] applicable standard, or fails to apply or misapplies relevant statutes, case law, or rules of procedure.” Martin v. Loadholt, No. 1:10-cv-00156-LJO-MJS, 2014 WL 3563312, at *1 (E.D. Cal. July 18, 2014); 12 Fed. Prac. & Proc. Civ. § 3069 (3d ed.) (noting “‘contrary to law’ appears to invite plenary review, ” though “many matters such as discovery scheduling or disputes might better be characterized as suitable for an abuse-of-discretion analysis”). “A finding is ‘clearly erroneous’ when although there is evidence to support it, the reviewing [body] on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” Concrete Pipe and Prods. v. Constr. Laborers Pension Trust, 508 U.S. 602, 622 (1993) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948)) (alteration in original). “[R]eview under the ‘clearly erroneous’ standard is significantly deferential . . . .” Id. at 623.


         Global contends the magistrate judge’s rulings on the parties’ respective motions to compel were clearly erroneous and contrary to law. The court addresses Global’s arguments as to the two underlying orders separately.

         A. Order Denying Global’s Motion to Compel

         1. The Parties’ Briefing Before the Magistrate Judge

         On January 30, 2019, Global moved to compel production of several documents, seeking in camera review to determine whether Aerojet properly invoked the attorney client privilege and work product doctrine. Global Mot. to Compel, ECF No. 141.

         Specifically, Global sought the unredacted minutes of Aerojet’s Board of Directors and Authorization Committee meetings and documents provided to those committees for their meetings, which Aerojet produced with redactions asserting the attorney-client privilege. Acknowledging that portions of these documents may be subject to a valid claim of privilege, Global requested the magistrate judge conduct an in camera review of the documents, arguing such review “is plainly available to federal courts sitting in diversity and applying the substantive privilege law of California.” Jt. St. re Global Mot. at 7-8 (footnote omitted), 18.

         Aerojet defended its redactions, arguing it was plain from the documents and Aerojet’s privilege log that Aerojet had properly asserted the privilege. See, e.g., id. at 27 (“The Agenda indicates this was not an ordinary board of directors meeting, but a special one called to specifically discuss, seek legal advice, and develop a legal strategy related to settlement.”), 28 (arguing “[l]ess than one full paragraph in a 73 page package of board minutes” was redacted in Exhibit L; two paragraphs redacted in Exhibits M and N; one paragraph redacted in Exhibit S; with redactions applied only where Aerojet’s counsel “provided legal advice to the Board”); but see Jt. St. re Global Mot. Ex. L (redacting one paragraph of 7 page, not 73 page, document). Aerojet also argued the magistrate judge, sitting in diversity, was prohibited from conducting in camera review. Id. at 23 (arguing “cases in this District treats [sic] [California Evidence Code] § 915 as substantive law on privilege, applicable in federal court”).

         2. The Magistrate Judge’s Rulings

         The magistrate judge held that under Erie, “[t]he use of in camera review to determine whether attorney-client privilege is properly claimed is a procedural matter” governed by federal law.[3] Order at 4 (citation omitted); see generally Laub v. Horbaczewski, No. LACV1706210JAKKS, 2019 WL 1744846, at *4-6 (C.D. Cal. Feb. 8, 2019) (reviewing split among district courts as to whether California law on in camera review applies to federal courts sitting in diversity). After reviewing the applicable federal law governing the use of in camera review, which involves a two-step process and, ultimately, an exercise of discretion, the magistrate judge found without conducting in camera review that Aerojet sufficiently established the privileged nature of the documents and Global failed to call the privilege into question and thus failed to establish the need for in camera review. Order at 4-5; see also United States v. Zolin, 491 U.S. 554, 572 (1989) (establishing two-step analysis for in camera review); In re Grand Jury Investigation, 974 F.2d 1068, 1074-75 (9th Cir. 1992) (holding Zolin two-step process governs in camera review in challenges to privilege designations). The magistrate judge denied Global’s motion in full.

         3. Global’s Motion for Reconsideration & Analysis

         Global moves for reconsideration of the magistrate judge’s order denying Global’s motion to compel, first arguing the magistrate judge’s assessment of a single proffered instance of Aerojet’s inconsistent redactions, where a sentence was redacted in one version of a document but not in the other, was clearly erroneous. Mot. at 22-23; compare Jt. St. re Global Mot, Ex. H, ECF No. 177-8, at 3 (Nov. 7, 2014 Board minutes, unredacted), with Ex. I, ECF No. 177-9, at 3 (same minutes, with redaction of text reading’s “Mr. Boley discussed the status of the investigation and indicated that a privileged legal review of the Antares contract and insurance coverage was underway. A lengthy discussion ensued”). Unpersuaded by Global’s argument that this “example of the heavy-handed nature of Aerojet’s redactions” supported the court’s conducting an in camera review of all redacted board documents, see Jt. St. re Global Mot. at 13, the magistrate judge found, “[t]he sentence at issue states factually that a privileged legal review of a contract was underway; while this sentence is not itself privileged, it is not so clearly outside the scope of privilege as to call into question all of Aerojet’s redactions, ” Order at 6. Global contends the magistrate judge’s ruling erroneously “creates degrees of privilege” and leaves Global “at a loss to understand what threshold showing must be made to persuade the Court to conduct an in camera review of a handful of documents.” Mot. at 23. The court agrees with the former point, but not the latter conclusion. Because the privilege is either properly asserted or it is not, an erroneous redaction does not fall closer to or further from “the scope of privilege” depending on the circumstances. See Order at 6. But it does not follow that the magistrate judge erred in concluding that Aerojet’s “single inconsistency” failed to demonstrate “broad based over-reach in the assertion of the privilege” across multiple documents, and this court finds no basis for reversing the magistrate judge’s determination that Global did not meet its burden in showing in camera inspection may reveal evidence of unprivileged information. See Order at 6.

         Global next argues it became aware of “[a] more compelling example of the heavy-handed nature of Aerojet’s redactions” on February 28, 2019 when Global re-deposed Aerojet’s witness Peter Cova.[4] Mot. at 23. Global provides no authority that allows, much less requires, this court to consider evidence not submitted to the magistrate judge in resolving a motion for reconsideration. See McAdam v. State Nat. Ins. Co., 15 F.Supp. 3d 1009, 1013 (S.D. Cal. 2014) (disregarding declarations not presented to magistrate judge and finding “[a]n objection filed pursuant to 28 U.S.C. § 636(b)(1)(A) or Rule 72(a) may not be wielded as a shoehorn to add material to the record”). Global indicates Cova’s testimony had not yet taken place when the parties filed their joint statement. Mot. at 23. But Cova’s February 28, 2019 deposition took place before the magistrate judge issued her March 13, 2019 order, and Global apparently made no attempt to supplement the record before the magistrate judge or request she delay her ruling until such supplementation was possible upon the finalization of Cova’s deposition transcript. Moreover, the document at issue in Cova’s testimony was not a document covered by the underlying motion. Rather, Global indicated in a footnote that it would separately move to compel production of this document, though it appears from a review of the docket Global has not moved to compel the production of any document since filing this motion for reconsideration and thus never filed a motion to compel production of the document at issue in Cova’s deposition. See Mot. at 24 n.12.

         The court cannot deem the magistrate judge’s findings clearly erroneous or contrary to law on the basis of documents and arguments not presented to her. Because Global argues that Cova’s testimony bears on other documents that were at issue in the underlying motion, see Id . at 24, the court REFERS this matter to the magistrate judge to consider whether these new arguments and evidence establish the necessary factual basis “to support a reasonable, good faith belief that in camera inspection may reveal evidence that information in the materials is not privileged.” See In re Grand Jury Investigation, 974 F.2d at 1075; Lopez v. United States, No. 15CV00180 JAH-WVG, 2017 WL 875594, at *3 (S.D. Cal. Mar. 6, 2017) (declining to exercise discretion to consider new argument but remanding to magistrate judge to consider in the first instance). To the extent Global’s motion is unaffected by this new evidence, it is DENIED.

         B. Order Granting Aerojet’s Motion to Compel

         On February 1, 2019, Aerojet moved to compel Global’s production of several documents, arguing Global had “improperly invoked attorney-client privilege and work product, relevance, and confidentiality objections.” Aerojet MTC, ECF No. 151, at 2; Jt. St. re Aerojet Mot., ECF No. 178, at 8, 11. As follows, the court addresses the specific categories of documents Aerojet requested, the magistrate judge’s ruling and this court’s resolution of the motion for reconsideration.

         1. Global’s Investigation of ...

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