Williams & Cochrane, LLP v. Quechan Tribe of the Fort Yuma Indian Reservation ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 WILLIAMS & COCHRANE, LLP, Case No.: 17cv1436-GPC-DEB 12 Plaintiff, ORDER DENYING MOTION FOR 13 v. RECONSIDERATION 14 ROBERT ROSETTE; ROSETTE & [ECF No. 292] ASSOCIATES, PC; ROSETTE, LLP; 15 QUECHAN TRIBE OF THE FORT 16 YUMA INDIAN RESERVATION, a federally-recognized Indian tribe; and 17 DOES 1 THROUGH 100, 18 Defendants. 19 20 Before the Court is Plaintiff Williams & Cochrane’s (“W&C”) motion asking this 21 Court to reconsider the Honorable Magistrate Judge Michael S. Berg’s Order (ECF No. 22 23 284) on April 17, 2020 (“April 17 Order”). ECF No. 292.1 Quechan Tribe (“Quechan”) 24 25 26 1 The case has since been reassigned to Magistrate Judge Daniel E. Butcher for all further Magistrate Judge 27 proceedings. 1 and Rosette LLP (“Rosette”) (collectively, “Defendants”) filed an opposition. ECF No. 2 311. For the reasons stated below, the Court DENIES Plaintiff’s motion for 3 reconsideration. 4 5 I. PROCEDURAL BACKGROUND 6 On March 2, 2018, W&C filed their First Amended Complaint (“FAC”) against 7 Quechan and Rosette. ECF No. 39. In their FAC, W&C alleged breach of contract and 8 9 breach of the implied covenant of good faith and fair dealing claims against Quechan; a 10 RICO claim against Rosette and RICO conspiracy claim against all Defendants; and a 11 negligence/breach of fiduciary duty claim against Rosette. Id. 12 13 On June 21, 2018, Quechan filed an Answer to the FAC and Counterclaims. ECF 14 No. 94. This Court held that the following six counterclaims would survive W&C’s 15 subsequent motions to strike and dismiss: (1) breach of fiduciary duty; (2) breach of the 16 17 implied covenant of good faith and fair dealing; (3) negligence; (4) breach of contract; (5) 18 unfair competition under Cal. Bus. & Prof. Code § 17200 et seq.; and (6) an entitlement 19 to offset any damages that W&C may be entitled to from its affirmative claims against 20 21 Quechan. ECF No. 173. 22 On December 6, 2018, W&C filed their Third Amended Complaint (“TAC”) in 23 which they reasserted claims for breach of contract, breach of the covenant of good faith 24 25 and fair dealing, a Lanham Act violation, and two RICO conspiracy claims. ECF No. 26 174. In response to Defendants’ answer and counterclaims to the TAC (ECF No. 182), 27 1 W&C filed a “reply claim” for tortious breach of contract against Quechan. ECF No. 2 179. On December 31, 2018, Quechan filed a motion to strike and dismiss W&C’s 3 “reply claim” pursuant to Rule 12(f) and 12(b)(6). ECF No. 184. In their motion, 4 5 Quechan relied on California Civil Code Section 47(b) to assert the litigation privilege 6 applies to termination letters sent by Quechan to W&C. ECF No. 184-1 at 17. 7 On September 10, 2019, this Court granted (1) Rosette’s motion to dismiss the 8 9 TAC’s RICO conspiracy claims and (2) Quechan’s motion to dismiss W&C’s “reply 10 claim” for tortious breach of contract against Quechan. ECF Nos. 216, 217. On 11 September 24, 2019, W&C filed a motion for reconsideration of the September 10, 2019 12 13 Order. ECF No. 219. In their motion, Plaintiff relied on case law regarding the scope of 14 California state privilege law. Id at 5. On December 12, 2019, this Court denied W&C’s 15 motion for reconsideration of the foregoing order as the termination letters were related 16 17 to Quechan’s request for their case file and falls within the scope of the litigation 18 privilege. ECF No. 247. 19 On September 25, 2019, W&C filed a fourth amended complaint. ECF No. 220. 20 21 On October 8, 2019, Quechan filed an answer to the fourth amended complaint. ECF No. 22 231. On October 22, 2019, W&C filed a pleading captioned as “[Amended]” Motion for 23 Judgment on the Pleadings. ECF No. 235 at 1. On April 22, 2020, this Court issued an 24 25 order granting Plaintiff’s motion with respect to Quechan’s fifth and sixth counterclaims 26 27 1 for unfair competition under Cal. Bus. & Prof. Code § 17200 et seq. and recoupment 2 and/or setoff. ECF No. 285. 3 The following claims remain in this lawsuit: W&C’s claims for (1) breach of 4 5 contract against Quechan, (2) breach of the implied covenant of good faith and fair 6 dealing against Quechan, and (3) violation of the Lanham Act (15 U.S.C. § 1051 et seq.) 7 against Rosette. ECF No. 220. Also remaining in this lawsuit are Quechan’s claims 8 9 against W&C for (1) breach of fiduciary duty; (2) breach of the implied covenant of good 10 faith and fair dealing; (3) negligence; and (4) breach of contract. ECF No. 285. All of the 11 foregoing claims are state law claims with the exception of W&C’s federal Lanham Act 12 13 claim against Rosette. ECF No. 220. W&C’s Lanham Act claim is premised on Robert 14 Rosette’s representation on his firm’s website that he “successfully litigated a case saving 15 the Pauma Band of Luiseno Mission Indians over $100 Million in Compact payments 16 17 allegedly owed to the State of California against then Governor Schwarzenegger.” ECF 18 No. 220 ¶ 220. 19 On March 5, 2020 and March 18, 2020, the parties filed Joint Motions for 20 21 Determination of Discovery Dispute regarding Quechan’s and Rosette’s privilege claims 22 over communications listed in their privilege logs. ECF Nos. 271, 272, 274. On April 23 16, 2020, Magistrate Judge Michael S. Berg held a discovery hearing with the parties to 24 25 address their joint motions. ECF No. 284. During the hearing, Plaintiff raised the issue 26 that federal privilege law, rather than California state privilege law, should govern 27 1 Defendants’ privilege claims in this federal question case. ECF Nos. 287, 292-2, Ex. A. 2 In relevant part, Magistrate Judge Berg overruled Plaintiff’s objections. Id. Magistrate 3 Judge Berg applied California state privilege law to analyze Defendants’ attorney-client 4 5 privilege claims because (1) Federal Rule of Evidence 501 provides that “state law 6 governs privilege regarding a claim or defense for which state law supplies the rule of 7 decision;” (2) the only federal claim in this case is the Lanham Act claim while state 8 9 claims outweigh the federal claim; and (3) Plaintiff had failed to address the issue when 10 the parties submitted their briefs. ECF No. 287 at 4-7. 11 On April 17, 2020, Magistrate Judge Berg issued an order finding, in relevant part, 12 13 (1) Quechan and Rosette had not waived any attorney-client privilege asserted in their 14 privilege logs through their counterclaims, affirmative defenses, or damages requests, and 15 (2) portions of the challenged communications in Quechan’s and Rosette’s privilege logs 16 17 are protected by the attorney-client privilege. ECF No. 284 at 2, 4. 18 On April 28, 2020, Plaintiff filed the instant motion for reconsideration of 19 Magistrate Judge Berg's April 17 Order. ECF No. 292. Plaintiff challenges portions of 20 21 the April 17 Order that address two discovery motions W&C filed to compel the 22 production of communications between Quechan and Rosette over which Quechan had 23 asserted the attorney-client privilege. ECF Nos. 271, 272, 311. On June 5, 2020, 24 25 Quechan and Rosette filed a joint opposition to W&C’s motion for reconsideration. ECF 26 311. 27 1 II. FACTUAL BACKGROUND 2 The parties are familiar with the factual background, which is described at length 3 in the Court’s prior orders. ECF Nos. 216, 247. 4 5 In most relevant part, Quechan hired W&C to represent them in negotiations with 6 the State of California regarding a new gaming compact and signed an Attorney-Client 7 Fee Agreement on September 29, 2016. ECF No. 231 ¶ 1. Quechan alleges that W&C 8 9 misrepresented what it could achieve and sought to prolong negotiations. ECF No. 94 ¶¶ 10 2, 11. On June 26, 2017, Quechan sent a letter to W&C terminating the firm and asking 11 them to transmit their entire case file to its new counsel, Rosette, LLP. Id. ¶ 5. W&C 12 13 filed the instant lawsuit alleging Quechan had breached the Attorney-Client Fee 14 Agreement by refusing to pay W&C’s contingency fee as well as alleging fraud and 15 intentional interference claims. ECF No. 231 ¶ 53. W&C also alleged a false advertising 16 17 claim under the federal Lanham Act against Rosette for representations Robert Rosette 18 made on his law firm’s website. ECF No. 220 ¶ 220. 19 III. DISCUSSION 20 21 A. Legal Standard 22 The district court may reconsider a magistrate judge’s decision on pretrial matters 23 where the order is “clearly erroneous or is contrary to law.” 28 U.S.C. § 636(b)(1)(A); 24 25 see Fed. R. Civ. P. 72(a) (“The district judge in the case must consider timely objections 26 and modify or set aside any part of the order that is clearly erroneous or is contrary to 27 1 law.”). Under the “clearly erroneous” standard, the district court should overturn a 2 magistrate judge’s decision when the court “on the entire evidence is left with the definite 3 and firm conviction that a mistake has been committed.” United States v. U.S. Gypsum 4 5 Co., 333 U.S. 364, 395 (1948). However, the “contrary to law” standard “permits 6 independent review of purely legal determinations by the magistrate judge.” F.D.I.C. v. 7 Fid. & Deposit Co. of Maryland, 196 F.R.D. 375, 378 (S.D. Cal. 2000). 8 9 B. Analysis 10 First, W&C asserts that federal privilege law should apply to Defendants’ privilege 11 claims because this case falls in the category of a federal question action with pendant 12 13 state claims. ECF No. 292-1 at 7. W&C argues that applying federal law to federal 14 claims and state law to the state claims in this case would create an “unworkable result.” 15 Id. Moreover, W&C asserts that California state privilege law should not be applied “to 16 17 documents that also concern Arizona work by an Arizona firm for an Arizona tribe.” Id. 18 at 7. Defendants counter that Magistrate Judge Berg correctly applied California state 19 privilege law. ECF No. 311 at 3. 20 21 Here, W&C asserts only one claim for relief against Rosette under the federal law 22 (i.e., the Lanham Act claim); all remaining claims for relief are brought under California 23 state law against Quechan. ECF No. 311 at 4. In the instant discovery dispute, W&C 24 25 seeks to compel the production of communications between Quechan and Rosette over 26 which Quechan has asserted the attorney-client privilege. Id. Defendants argue that the 27 1 challenged communications relate to W&C’s state-law contract claims against Quechan 2 rather than W&C’s federal Lanham Act claim against Rosette. Id. On this basis, the 3 Magistrate Judge’s applied California state privilege law to Defendants’ privilege claims 4 5 since the challenged communications relate only to claims for which state law provides 6 the rule of decision, i.e. W&C’s state-law contract claims. Id. Defendants also note that 7 any error in applying California state privilege law was “harmless” because the outcome 8 9 would have been the same under federal privilege law. Id. 10 Second, W&C assert they first had notice the Magistrate Judge may apply 11 California state privilege law to Defendants’ privilege logs was on April 16, 2020 during 12 13 the Discovery Hearing. Id. In a footnote, W&C also objects to the Magistrate Judge’s 14 finding that neither Quechan nor Rosette waived their privilege claims. Id. at 8. 15 The Court addresses each argument in turn. 16 17 1. Choice of Law 18 Federal Rule of Evidence (“Rule”) 501, in relevant part, provides that “in a civil 19 case, state law governs privilege regarding a claim or defense for which state law 20 21 supplies the rule of decision.” Fed. R. Evid. 501. Thus, state law claims brought into 22 federal court pursuant to the court’s diversity jurisdiction are governed by state privilege 23 law. See Fed. R. Evid. 501; Gulf Islands Leasing, Inc. v. Bombardier Capital, Inc., 215 24 25 F.R.D. 466, 470 (S.D.N.Y. 2003) (finding state law governs attorney-client privilege 26 claim in diversity action). In federal question civil cases and criminal cases, however, 27 1 federal privilege law, rather than state privilege law, generally governs claims of 2 privilege. E.g., United States v. Ruehle, 583 F.3d 600, 608 (9th Cir. 2009); Clarke v. Am. 3 Commerce Nat. Bank, 974 F.2d 127, 129 (9th Cir. 1992) ("Issues concerning application 4 5 of the attorney-client privilege in the adjudication of federal law are governed by federal 6 common law.”); Weil v. Inv./Indicators, Research & Mgmt., Inc., 647 F.2d 18, 24 (9th 7 Cir. 1981) (applying federal common law to attorney-client privilege claim in federal 8 9 question civil case). The legislative history of Rule 501 shows that Congress was 10 concerned with the question of whether the jurisdictional basis for a given action should 11 determine whether state or federal law should apply: 12 13 The Justice Department objected to the House formulation of Rule 501 on the ground that it would defeat procedural uniformity in cases in which the 14 government was a party by requiring the application of state privilege law in 15 federal question cases where state substantive law was applied; the Department cited the example of the Federal Tort Claims Act which requires 16 application of state substantive law. The Senate Judiciary Committee 17 thought that the intent of the House was to make state privilege rules applicable only in diversity cases, but that the language chosen was ill-suited 18 for this purpose because it could be construed to require the use of state 19 privilege where state substantive law was being employed in a federal question case. Accordingly, it proposed and the Senate adopted an 20 amendment that would have made the privilege question turn on the 21 jurisdictional basis for the suit. 22 Crowe v. Cty. of San Diego, 242 F. Supp. 2d 740, 747 (S.D. Cal. 2003) (citing 23 23 WRIGHT & GRAHAM § 5433, at 854–55). The proposed amendment ultimately failed, 24 25 and Congress ultimately explained that "in nondiversity jurisdiction civil cases, federal 26 privilege law will generally apply." Id. 27 1 a. Federal Question Actions with Pendent State Claims 2 In the absence of textual guidance in Rule 501, federal courts have split in their 3 approach. A majority of federal courts have applied federal privilege law to claims of 4 5 privilege in federal question actions with pendent state law claims. See, e.g., Meoli v. 6 Am. Med. Serv. of San Diego, 287 B.R. 808, 813 (S.D. Cal. 2003); Perrignon v. Bergen 7 Brunswig Corp., 77 F.R.D. 455, 459 (N.D. Cal. 1978); J. P. Foley & Co. v. Vanderbilt, 8 9 65 F.R.D. 523, 526 (S.D.N.Y. 1974). Other courts, however, have held that both federal 10 and state privilege law should apply in a federal question action with pendent state claims 11 and have applied federal privilege law to federal claims and state privilege law to state 12 13 claims. Los Angeles Mem'l Coliseum Comm'n v. Nat'l Football League, 89 F.R.D. 489, 14 492 (C.D. Cal. 1981). Still others have applied state privilege law in federal question 15 actions with pendent state claims where the predominant nature of all the claims are 16 17 based on state law. See Platypus Wear, Inc. v. K.D. Co., 905 F. Supp. 808, 812 (S.D. Cal. 18 1995) (finding “where the evidence sought can be relevant only to state law claims, the 19 state law privilege should be applied consistent with the express language of Rule 501.”). 20 21 Defendants argue that California state privilege law was correctly applied to 22 Quechan’s claim of attorney-client privilege because the challenged communications 23 relate to W&C’s state law contract claims against Quechan, claims for which state law 24 25 provides the rule of decision, rather than W&C’s federal Lanham Act claims against 26 Rosette. ECF No. 311. As discussed, W&C’s false advertising claim under the federal 27 1 Lanham Act is premised on representations Robert Rosette made on his law firm’s 2 website. ECF No. 220 ¶ 220. 3 As the legislative history of Rule 501 suggests, the jurisdictional basis of an action 4 5 will generally determine whether a district court will apply federal or state privilege law 6 to the parties’ claims of privilege. See 23 WRIGHT & GRAHAM § 5433, at 854–55. 7 While this Court has federal question jurisdiction and courts have applied federal 8 9 privilege law where federal claims are present, the question the Court must consider here 10 is whether the Magistrate Judge’s decision to apply California state privilege law to 11 Defendants’ claims of privilege is clearly erroneous or contrary to law. 12 13 “When the express terms of a statute give us one answer and extratextual 14 considerations suggest another, it’s no contest. Only the written word is the law, and all 15 persons are entitled to its benefit.” Bostock v. Clayton Cty., Georgia, No. 17-1618, 2020 16 17 WL 3146686 at *3 (U.S. June 15, 2020). Here, there is nothing in the statutory text of 18 Rule 501 that states a district court must apply federal privilege law to claims of privilege 19 in a federal question case with pendent state claims. Further, as Defendants observed, the 20 21 Ninth Circuit has not decided “whether, in federal question cases, state or federal 22 privilege law governs the admissibility of evidence that relates exclusively to state law 23 claims.” Wilcox v. Arpaio 753 F.3d 872, 876, n.3 (9th Cir. 2014). Accordingly, the 24 25 Court holds that the Magistrate Judge’s decision is neither clearly erroneous nor contrary 26 to law because, frankly, the law in this context is unclear and courts have adopted a 27 1 multiplicity of approaches. Moreover, given that this litigation is mostly centered on 2 California based contract claims, it is fair, logical and reasonable to apply Californiia 3 privilege law to the disputed raised herein. The Court concludes that the Magistrate 4 5 Judge’s decision finding that California privilege law will apply to Defendants’ claims of 6 privilege was neither clearly erroneous or contrary to law. 7 2. Notice 8 9 W&C asserts they first had notice that Magistrate Judge Berg may apply California 10 state privilege law to Defendants’ claims of privilege on April 16, 2020 during the 11 Discovery Hearing. ECF No. 292-1 at 6. The Court disagrees. Before W&C filed this 12 13 instant motion, both parties had relied on California state privilege law to assert their 14 claims. On December 31, 2018, Quechan had relied on California Civil Code Section 15 47(b) to assert the litigation privilege to termination letters sent by Quechan to W&C in 16 17 their motion to strike Plaintiff’s “reply claim.” ECF No. 184-1 at 17. On January 18, 18 2019, W&C, too, had relied on case law regarding the scope of California state privilege 19 law (e.g. Nguyen v. Proton Tech. Corp., 69 Cal. App. 4th 140, 148 (1st Dist. 1999)). 20 21 ECF No. 190 at 27. The record shows that Plaintiff had sufficient notice the Magistrate 22 Judge may use California state privilege law to assess Defendants’ claims of privilege. 23 / / / 24 25 / / / 26 / / / 27 1 CONCLUSION For the foregoing reasons, the Court DENIES Plaintiffs motion for : reconsideration. ECF No. 292. 5 IT IS SO ORDERED. 6 7 || Dated: June 23, 2020 2 aaho Os 8 Hon. Gonzalo P. Curiel 9 United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 13 28 17cv1436-GPC-DEB