Grove Way Investments, LLC v. Centene Management Company, LLC ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 GROVE WAY INVESTMENTS, LLC, a No. 2:19-cv-0696-JAM-EFB California limited liability company, 12 Plaintiff, 13 ORDER AFTER HEARING v. 14 CENTENE MANAGEMENT COMPANY, 15 LLC, a Wisconsin limited liability company, and DOES 1 through 20, 16 inclusive, 17 Defendants. 18 AND RELATED COUNTERCLAIMS. 19 20 21 This case was before the court on May 27, 2020, for hearing on plaintiff Grove Way 22 Investments, LLC’s (“Grove Way”) motion to compel defendant Centene Management Company, 23 LLC (“Centene”) to produce documents withheld based on an assertion of the attorney-client 24 privilege (ECF No. 15) and Centene’s motion to exclude plaintiff’s expert witness (ECF No. 20). 25 ///// 26 ///// 27 ///// 28 1 Attorney Katherine Wegner appeared on behalf of Grove Way; attorneys Erinn Contreras and 2 Daniel Maroon appeared on behalf of Centene.1 At the hearing, Centene was ordered to submit a 3 declaration in support of its contention that the six documents it withheld were protected by the 4 attorney-client privilege. That declaration has been submitted. ECF No. 36. For the reasons 5 stated on the record, Centene’s motion to exclude Grove Way’s expert witness (ECF No. 20) is 6 denied. Further, for the reasons stated on the record, and as briefly described below, Grove 7 Way’s motion to compel defendant to produce documents is denied. 8 I. Background 9 The complaint alleges that Grove Way is the successor-in-interest to RF3 International 10 Drive, LLC (“RF3”). Compl. (ECF No. 1 at 9-75) ¶ 1. In January 2017, RF3 and Centene 11 entered into a single-tenant lease agreement for an office building (the “property”) located in 12 Rancho Cordova, California. Id. ¶ 10. The lease agreement included a Construction Rider, which 13 requires Centene to bear the cost of all “Tenant Improvements” to the property. ECF No. 1 at 48. 14 However, the Construction Rider also provided that Centene was entitled to a one-time payment 15 for completing certain tenant improvements. The Construction Rider refers to the approved 16 payment for specific tenant improvements as “Allowances.” To obtain a disbursement, Centene 17 was required to a request for “disbursement of the Allowances.” Id. Alternatively, Centene could 18 elect to apply “a unused portion of the Allowances of up to [$5.00] per rentable square foot of the 19 building . . . against [its] Rent obligations under the Lease.” Id. Under the Construction Rider, 20 Centene was required to make the election or request disbursement by December 31, 2017. Id. If 21 it failed to do so, any unused portion of the Allowances was forfeited to the Landlord. Id. 22 In June 2017, Grove Way purchased the property, and RF3 assigned to Grove Way all its 23 rights under defendant’s lease. Id. ¶ 11. In October 2017, Grove Way and Centene executed an 24 amendment to the lease that extended the December 31, 2017 deadlines to June 30, 2018. Id. 25 ¶ 13. Grove Way alleges that Centene did not complete the Tenant Improvements by that date, 26 nor did it submit a request for disbursement. Id. ¶ 14. Instead, Centene allegedly submitted an 27 28 1 Counsel for both parties appeared telephonically. 1 untimely request for disbursement in February 2019. Id. ¶ 17. Grove Way also claims that 2 Centene made numerous tenant improvements that were not permitted under the terms of the 3 lease. It further alleges that Centene failed to timely pay its rent. Id. 16. The complaint alleges a 4 claim for breach of contract and seeks declaratory judgment finding Grove Way is not obligated 5 to make a disbursement under the lease. Id. at 12-14. 6 In February 2020, Grove Way served its first set of Requests for Production of Documents 7 on Centene. ECF No. 30 at 4. Centene served objections and responses to the request for 8 production. Id. The parties subsequently met and conferred regarding Centene’s objections, but 9 they continue to disagree as to whether Centene has improperly withheld six documents it 10 contends are protected by the attorney-client privilege. Accordingly, Grove Way now moves to 11 compel the production of those documents.2 12 II. Discussion 13 In a diversity action, such as this case, the attorney-client privilege is governed by state 14 law. Fed. R. Evid. 201. Under California law, the attorney-client privilege, set forth at California 15 Evidence Code section 954, confers a privilege on the client “to refuse to disclose, and to prevent 16 another from disclosing, a confidential communication between client and lawyer . . . .” Cal. 17 Evid. Code. § 954. A confidential communication between client and lawyer is defined as 18 “information transmitted between a client and his or her lawyer in the course of that relationship 19 and in confidence by a means which, so far as the client is aware, discloses the information to no 20 third persons other than those who are present to further the interest of the client in the 21 consultation or those to whom disclosure is reasonably necessary for the transmission of the 22 information or the accomplishment of the purpose for which the lawyer is consulted, and includes 23 a legal opinion formed and the advice given by the lawyer in the course of that relationship.” Cal. 24 Evid. Code § 952; see Ins. Co. of N. Am. v. Super. Ct., 108 Cal. App. 3d 758, 765 (1980) (“While 25 involvement of an unnecessary third person in attorney-client communication destroys 26 27 2 Grove Way’s motion also sought to compel the production of documents other responsive documents that Centene has since produced. Thus, the parties’ dispute is limited to 28 the six documents Grove Way contends are privileged. 1 confidentiality, involvement of third persons to whom disclosure is reasonably necessary to 2 further the purpose of the legal consultation preserves confidentiality of communication.”). 3 “Thus, for example, the [attorney-client] privilege extends to communications which are intended 4 to be confidential, if they are made to attorneys, to family members, business associates, or agents 5 of the party or his attorneys on matters of joint concern, when disclosure of the communication is 6 reasonably necessary to further the interest of the litigant.” OXY Res. Cal. LLC v. Super. Ct., 115 7 Cal. App. 4th 874, 890 (2004) (internal quotation marks omitted). 8 “The party claiming the privilege has the burden of establishing the preliminary facts 9 necessary to support its exercise, i.e., a communication made in the course of an attorney-client 10 relationship.” Costco Wholesale Corp. v. Super. Ct., 47 Cal. 4th 725, 733 (2009) (citations 11 omitted). “[T]o determine whether a communication is privileged, the focus of the inquiry is the 12 dominant purpose of the relationship between the parties to the communication. Under that 13 approach, when the party claiming the privilege shows the dominant purpose of the relationship 14 between the parties to the communication was one of attorney-client, the communication is 15 protected by the privilege.” Clark v. Superior Court, 196 Cal. App. 4th 37, 51 (2011) (citing 16 Costco, 47 Cal. 4th 725). “Once that party establishes facts necessary to support a prima facie 17 claim of privilege, the communication is presumed to have been made in confidence and the 18 opponent of the claim of privilege has the burden of proof to establish the communication was not 19 confidential or that the privilege does not for other reasons apply.” Id. 20 Centene argues that the disputed documents contain communication between its in-house 21 counsel, Katharine Jones; two of its Directors who act and make decisions on behalf of Centene; 22 Barbara Ottolina and Michael Bohm; and Centene’s real estate brock, Scott Bozoian, who is the 23 Executive Managing Director of Cushman. ECF No. 30-3 at 4. Centene explains that it has a 24 written contract with Cushman whereby Cushman acts as Centene’s real estate broker for all of its 25 real estate transactions, including leases. It further claims that Cushman acted as Centene’s real 26 estate broker with respect to negotiating the lease underlying this case, and consulted with 27 Centene’s in-house counsel order to facilitate the provision of legal advice to Centene with 28 respect to the negotiation of the Lease. Id. It further claims that Ottolina and Bohm were also wOAOe 2 LUV YY YAN MUO So PUR Oe PAY VI 1 | included in those confidential communications because that they were the business people who 2 || would ultimately have to approve the Lease and/or any exhibits involving construction of tenant 3 || improvements. Centene also contends that Cushman’s main role as Centene’s real estate broker 4 | is to serve as the liaison between Centene, as a tenant, and Centene’s landlords or potential 5 | landlords in negotiating and revising lease agreements. Significantly, the declaration Centene 6 || submitted states that the withheld emails contain “comments and suggested revisions to a draft 7 | lease as well as revised draft of the lease containing Centene’s in-house counsel’s redlines 8 || revisions and comments.” Decl. of Erinn M. Contreras § 2. 9 Centene’s representations show that the dominate purpose of the emails was to obtain and 10 || share legal advice from counsel concerning the terms of the lease. Furthermore, Cushman would 11 || not be able to serve as an effect liaison for the negotiations if it was shielded from counsel’s legal 12 || advice concerning the lease and its terms. See Amtel Corp. v. St. Paul Fire & Marine Ins. Co., 13 | 409 F. Supp. 2d 1180, 1182 (N.D. Cal. 2005) (holding that disclosure of privileged 14 | communication to client’s insurance broker did not waive the privilege because broker □□□□□□□ as 15 || aconduit of information between [corporate client] and the insurers.”). Accordingly, Centene has 16 | satisfied its burden of establishing the preliminary facts necessary to support its assertion of the 17 | privilege. 18 | IU. Conclusion 19 Accordingly, it is hereby ORDERED that: 20 1. Plaintiffs motion to compel defendant to produce documents (ECF No. 15) is denied; 21 || and 22 2. Defendant’s motion to exclude plaintiff’s expert witness (ECF No. 20) is denied. 23 | DATED: August 6, 2020. 24 Eg Vout 4 Lp 4H AL 25 EDMUND F. BRENNAN UNITED STATES MAGISTRATE JUDGE 26 27 28