KEOLIS TRANSIT SERVS., LLC v. DIST. CT. (TOTH)

138 Nev., Advance Opinion g
IN THE COURT OF APPEALS OF THE STATE OF NEVADA
KEOLIS TRANSIT SERVICES, LLC, No. 81637-COA
Petitioner,
vs.
THE EIGHTH JUDICIAL DISTRICT
COURT OF THE STATE OF NEVADA,
IN AND FOR THE COUNTY OF
CLARK; AND THE HONORABLE FEB 2 4 2022
RICHARD SCOTTI, DISTRICT JUDGE,
ELI
Respondents,
and BYLERK UHPA'
C EF EPUTY CLERK
SHAY TOTH,
Real Party in Interest.
Original petition for a writ of prohibition challenging a district
court order compelling disclosure of an insurer's surveillance videos and
related reports in a tort action.
Petition granted in part and denied in part.
Muehlbauer Law Office, Ltd., and Andrew R. Muehlbauer and Sean P.
Connell, Las Vegas,
for Petitioner.
Cliff W. Marcek, P.C., and Cliff W. Marcek, Las Vegas; Moss Berg Injury
Lawyers and Boyd B. Moss, Las Vegas,
for Real Party in Interest.
Claggett & Sykes Law Firm and Micah S. Echols, Las Vegas; Sharp Law
Center and A.J. Sharp, Las Vegas,
for Amicus Curiae Nevada Justice Association.
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,
BEFORE THE COURT OF APPEALS, GIBBONS, C.J., TAO and BULLA,
JJ.
OPINION
By the Court, TAO, J.:
This interlocutory writ petition arises from a personal injury
action in which the petitioner asserts that the district court improperly
ordered that three surveillance videos and two related reports created by
its insurance company's investigators were subject to discovery and not
protected from disclosure as "work produce under NRCP 26(b)(3). Based
on the record, we can only reach a decision as to the first two videos and the
report related to those videos. We conclude that the first two videos and
related report are not protected work product because their production was
not directed by Keolis's counsel. We cannot, however, reach a conclusion as
to the ultimate discoverability of the third video and accompanying report
because, while they were created at the direction of Keolis's counsel after
the suit was commenced and thus constitute work product, the district court
did not analyze whether they may nonetheless be discoverable upon a
showing of substantial need and undue hardship. Because the district court
ordered the disclosure of all the videos and reports at issue without
conducting the required analysis, we take this opportunity to clarify the
appropriate framework as it pertains to an insurer's surveillance materials.
Accordingly, we grant the petition in part and direct further proceedings.
FACTUAL BACKGROUND
While driving a vehicle on behalf of petitioner Keolis Transit
Services, LLC (Keolis), employee Andre Petway rear-ended a vehicle driven
by real party in interest Shay Toth, allegedly causing serious injuries to
Toth, who subsequently retained counsel. A few days after the collision, in
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July 2017, Toth's counsel sent a letter notifying Keolis's third-party insurer
of Toth's representation and that she was claiming damages for personal
injuries in connection with the collision.
Days after receiving this letter, the insurer obtained an
Insurance Services Office (ISO) report to ascertain whether Toth had filed
other insurance claims. A little over a year later, in August 2018, the
insurer initiated an investigation to assess Toth's injuries and the
truthfulness of her claims. As part of this investigation, an investigator
recorded video surveillance of Toth publicly engaged in daily activities.
Outside of representations Keolis's counsel made to the discovery
commissioner below that a claims adjuster directed this surveillance, the
record does not reveal who participated in the decision to conduct this
additional investigation or what specifically prompted it. The investigator
generated two surveillance videos of Toth, both dated August 2018 in
Keolis's privilege log. The investigator also produced a written report
associated with these two videos, likewise dated August 2018.
In June 2019, Toth filed the instant suit for negligence against
both Petway and Keolis. Thereafter, Keolis's counsel directed further
investigation, culminating in a third surveillance video of Toth engaged in
public activities and an accompanying written report. During discovery, in
response to requests for production of documents, Keolis disclosed the
existence of these videos and reports without disclosing their contents. Toth
then specifically requested copies of, or access to, the videos and reports, but
1Because this matter reached this court in connection with an
interlocutory writ petition, neither Toth nor this court has seen the contents
of any of the three surveillance videos or the two accompanying reports, nor
does it appear that the district court reviewed any of these materials.
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Keolis refused, asserting that the surveillance videos and reports are
protected work product.
Toth filed a motion to compel pursuant to NRCP
16.1(a)(1)(A)(ii), arguing that Keolis was required to disclose the videos and
reports with its initial disclosures. The discovery commissioner determined
that the ISO report should be disclosed, as it was prepared in the ordinary
course of business. However, the discovery commissioner concluded that
the videos and related reports are protected from discovery as work product,
but that Keolis would need to disclose the materials within 30 days of Toth's
deposition if Keolis intended to use them at trial.
After Toth filed an objection, the district court partly modified
the discovery commissioner's report and recommendation and, in a one-
sentence footnote containing no analysis or findings, ordered Keolis to
immediately produce all three videos and both related reports. Keolis filed
this petition seeking a writ of prohibition challenging the district court's
discovery order with respect to the surveillance materials, but not the ISO
report.
ANALYSIS
Standard for writ relief
"Generally, extraordinary relief is unavailable to review
discovery orders." Diaz v. Eighth Judicial Dist. Court, 116 Nev. 88, 93, 993
P.2d 50, 54 (2000). A court may nevertheless consider a writ petition raising
a discovery issue if "an important issue of law needs clarification and public
policy is served by the court's invocation of its original jurisdiction." Id.(quoting Bus. Comput. Rentals v. State Treasurer, 114 Nev. 63, 67, 953 P.2d
13, 15 (1998)). A writ of prohibition is appropriate to prevent improper
discovery. Wynn Resorts, Ltd. v. Eighth Judicial Dist. Court, 133 Nev. 369,
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373-74, 399 P.3d 334, 341 (2017); Venetian Casino Resort, LLC v. Eighth
Judicial Dist. Court, 136 Nev. 221, 223 n.3, 467 P.3d 1, 4 n.3 (Ct. App. 2020).
Here, we elect to entertain the petition to clarify the legal
analysis a district court must apply when determining whether an insurer's
surveillance materials are protected as work product and, if surveillance
videos qualify for work-product protection, whether they are nevertheless
subject to discovery, which is an important issue that may arise in
numerous similarly situated cases. Moreover, without our intervention, the
district court's order compelling disclosure of the videos and related reports
may result in the unjust compromise of potentially protected work product
that an appeal could not fully rectify after a final judgment. Accordingly,
we deem our intervention appropriate.
Standard of review
This court will not disturb the district court's ruling on
discovery matters absent a clear abuse of discretion. Canarelli v. Eighth
Judicial Dist. Court, 136 Nev. 247, 251, 464 P.3d 114, 119 (2020). To receive
this deference, however, "the district court must apply the correct legal
standard in reaching its decision, and we owe no deference to legal error."
See In re Guardianship of B.A.A.R., 136 Nev. 494, 496, 474 P.3d 838, 841
(Ct. App. 2020).
Surveillance videos and the work-product doctrine
The work-product doctrine originated at common law but
currently stands codified in NRCP 26(b)(3), which states the following:
(A) Documents and Tangible Things.
Ordinarily, a party may not discover documents
and tangible things that are prepared in
anticipation of litigation or for trial by or for
another party or its representative (including the
other party's attorney, consultant, surety,
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indemnitor, insurer, or agent). But, subject to Rule
26(b)(4), those materials may be discovered if:
(i) they are otherwise discoverable
under Rule 26(b)(1); and
(ii) the party shows that it has
substantial need for the materials to prepare its
case and cannot, without undue hardship, obtain
their substantial equivalent by other means.
Thus, the preliminary inquiry when considering a work-product question is
whether the material was created in anticipation of litigation or for trial.
As the Nevada Supreme Court explained in Wynn Resorts, Ltd.
v. Eighth Judicial District Court, a party prepares a document in
anticipation of litigation when, "in light of the nature of the document and
the factual situation in the particular case, the document can fairly be said
to have been prepared or obtained because of the prospect of litigation." 133
Nev. at 384, 399 P.3d at 348 (quoting Restatement (Third) of the Law
•Governing Lawyers § 87 cmt. i (Am. Law Inst. 2000)). This test, commonly
referred to as the "because of test, asks whether a party prepared or
obtained a document because of the prospect of litigation and whether the
anticipation of litigation was essential for the creation of the document.2 Id.
"The anticipation of litigation must be the sine qua non for the creation of
the document—``but for the prospect of that litigation,' the document would
2We take this opportunity to note that the narrow issue here is Toth's
ability to access the contents of the videos and reports. The mere existence
of videos and reports like those at issue here generally must be disclosed in
discovery. See NRCP 16.1(a)(1)(A)(ii) (providing that a party must disclose
"a description by category and location" of materials that it "may use to
support its claims or defenses, including for impeachment or rebuttal");
NRCP 26(b)(1) ("Parties may obtain discovery regarding any nonprivileged
matter that is relevant to any party's claims or defenses and proportional
to the needs of the case . . . ."); Ex parte Doster Constr. Co., 772 So. 2d 447,
451 (Ala. 2000); Cabral v. Arruda, 556 A.2d 47, 50 (R.I. 1989).
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not exist." Id. (quoting In re Grand Jury Subpoena (Mark Torfl Torf Envtl.
Mgmt.), 357 F.3d 900, 907 (9th Cir. 2004)). Thus, the "because of test does
not protect "documents that are prepared in the ordinary course of business
or that would have been created in essentially similar form irrespective of
the litigation." Id. (quoting United States v. Adlman, 134 F.3d 1194, 1202
(2d Cir. 1998)). In general, to determine whether a document satisfies the
"because or test, the district court must consider the totality of the
circumstances. Id.Here, the third video and related report were created at the
express direction of Keolis's counsel after Toth filed suit. However, the first
two videos and related report were created earlier by the insurance carrier,
before Toth's suit was filed, for reasons not fully clear from the record.
Under the general work-product analysis, the question would be whether
Keolis, through its insurer, created these materials in the ordinary course
of business, in which case they are not protected under the work-product
doctrine, or rather created the videos "because or looming litigation, in
which case they are protected work product. This case, however, is not
governed by the typical work-product analysis.
• As the parties note, the complexity in this case lies in the fact
that insurance companies exist, in at least some sense, for the purpose of
recommending and implementing policies and procedures to mitigate the
possibility of conduct that may lead to future litigation that necessarily
requires them to anticipate, plan for, avoid, and defend actual or threatened
litigation. Indeed, insurance carriers charge their clients premiums based
upon actuarial calculations that expressly consider the likelihood of future
litigation and the potential damages that a jury might award. But this cuts
two ways. On the one hand, Keolis argues that, because much of what
insurance carriers do is anticipate and respond to possible litigation threats,
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every investigation they conduct in response to the receipt of a lawyer's
letter of representation must be considered protected work product. On the
other hand, Toth argues that, because insurance carriers are in the business
•of routinely conducting such investigations whenever they receive a letter
of representation from an attorney, whether they ever lead to lawsuits or
not, such investigations are merely part of their regular and ordinary
business activities.3
The Nevada Supreme Court has addressed this issue. In
Ballard v. Eighth Judicial District Court, the supreme court articulated a
special rule for insurer& investigations: investigative materials generated
in the context of an insurance investigation are considered to have been
created in the ordinary course of business of the insurance company, rather
than in anticipation of litigation, unless the investigation was performed at
the request or under the direction of an attorney. See 106 Nev. 83, 85, 787
P.2d 406, 407 (1990). In Ballard, within days of an automobile/pedestrian
accident but after learning that the plaintiff was represented by counsel,
the defendant's automobile liability insurance company began its own
investigation into the facts and circumstances of the accident. Id. at 84, 787
P.2d at 407. When the plaintiff later sought to discover a statement that
3 Toth argues that NRS 686A.310 mandates insurance investigations
and therefore makes an insurance investigation an ordinary business
activity. See Wynn Resorts, 133 Nev. at 384, 399 P.3d at 348 (noting that
the "because of rule "withholds protection from documents that are
prepared in the ordinary course of business or that would have been created
in essentially similar form irrespective of the litigation" (quoting United
States v. Adlman, 134 F.3d 1194, 1202 (2d Cir. 1998))). That statute,
however, only describes the failure to investigate a claim as an "unfair
.practice" and therefore cannot be read to categorically make video
surveillance an ordinary business activity such that surveillance videos are
automatically excluded from work-product protection.
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the defendant made to the insurer during that investigation, the supreme
court held that "materials resulting from an insurance company's
investigation are not made 'in anticipation of litigation unless the insurer's
investigation has been performed at the request of an attorney." Id. at 85,
787 P.2d at 407 (citing Langdon v. Champion, 752 P.2d 999 (Alaska 1988)).
Therefore, the court concluded, because the statement "was not taken at the
request of an attorney, it is not privileged under NRCP 26(b)(3)." Id.After Ballard, the supreme court clarified this rule in
Columbia I HCA Healthcare Corp_ v. Eighth Judicial District Court, holding
that the simple involvement of an attorney does not automatically insulate
all materials, such as a hospital's occurrence reports, from discovery as
work product. 113 Nev. 521, 526-27, 936 P.2d 844, 848 (1997) (discussing
Ballard and rejecting the notion "that documents become [protected work
product] by injecting an attorney into the investigative process .
especially when the investigation occurs in the ordinary course of
business"). While Columbia is not an insurance investigation case, we read
it and Ballard together to require, at least, an attorney's involvement before
insurance investigation materials become work product, but also to
acknowledge that an attorney's involvement is not itself sufficient to confer
work-product protection to materials that otherwise would have been
prepared in the ordinary course of business, irrespective of the attorney's
involvement.
Ballard controls the initial inquiry of this discovery dispute
regarding materials created through an insurer's investigation. With
respect to the first two videos, Ballard's requirement of attorney
involvement proves dispositive. This illustrates the special outcome under
Ballard as opposed to the general analysis under Wynn Resorts, as the
record suggests that the first two videos were created in response to the
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letter of representation from Toth's counsel. Specifically, although not
prompted by Keolis's counsel, a colorable argument can still be made that
these videos were created "because or litigation, rather than in the ordinary
course of business, because the attorney letter itself might have triggered
the expectation of potential future litigation. Under Ballard's insurer
exception, however, any such subjective anticipation of litigation, no matter
how real it may have been, is immaterial so long as the insurer's attorney
did not direct the surveillance.
This outcome may seem counterintuitive under the general
"because or test. However, when viewed in light of the uniquity of
insurance company practices explained above, the reason for this initial and
potentially dispositive inquiry becomes clear. Accordingly, we take this
opportunity to clarify that the "because or test generally applied in work-
product cases gives way to Ballard's counsel requirement when insurance
investigation materials are at issue. Yet, while involvement of counsel is
necessary, it is not sufficient. Columbia, 113 Nev. at 526-27, 936 P.2d at
848. Instead, we read Ballard and Columbia together to establish that
insurance investigation materials are created in anticipation of litigation,
and are therefore protected work product, only when they are created at the
direction of counsel under circumstances demonstrating that counsel's
involvement was reasonable and not for the mere strategic purpose of
obtaining work-product protection for routinely created materials.
Thus, we conclude that Nevada Supreme Court precedent
resolves this case with respect to the first two videos and the accompanying
report because Keolis did not argue for, and the record does not support, a
conclusion that the initial investigation came at the direction of Keolis's
counsel. Thus, the first two videos and report should be produced. We turn
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next to the third video and accompanying report, drawing two crucial
distinctions.
The most obvious distinction between the materials, given the
preceding discussion, is that the final video and report were created at the
direction of Keolis's counsel. However, the other distinction is perhaps more
important. The third video was created after Toth filed her lawsuit. This
is important because work-product protections attach to materials prepared
both "in anticipation of litigation or for trial." NRCP 26(b)(3)(A) (emphasis
added).
While the third video and related report were generated at the
direction of counsel, we need not wrestle with the question of whether
counsel's involvement was reasonable or merely strategic because, when the
third video was made, litigation had already commenced. There was
nothing left to anticipate. The third video and related report were created
after Toth filed suit; therefore, the materials were prepared for trial.
Accordingly, the third video and its related report are protected by the work-
product doctrine under NRCP 26(b).
Nonetheless, we must stop short of reaching a conclusion as to
the ultimate discoverability of the third video and related report. Keolis
argues that the district court failed to perform the complete and necessary
analysis, and its argument is correct, as far as it goes; the district court's
order consists of only a single sentence and virtually no analysis of any
facts. Because that single sentence ordered the materials disclosed, it had
no reason to analyze the main exception to the work-product doctrine.
However, our foregoing analysis shows that such an analysis must be
performed. When materials meet the requirements for protection under the
work-product doctrine, they may still be subject to discovery upon a showing
by the requesting party of substantial need and undue hardship under
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NRCP 26(b)(3)(A). Thus, if the record demonstrates that this exception is
met, then the third video and related report are discoverable regardless of
whether the work-product doctrine applies to them.
Our supreme court has defined the terms "substantial need"
and "undue hardship" for purposes of this exception. See generally
Canarelli v. Eighth Judicial Dist. Court, 136 Nev. 247, 257-58, 464 P.3d
114, 122-23 (2020). In particular, the party seeking to overcome work-
product protection must demonstrate an actual need for the evidence in the
preparation of its case; "[a] mere assertion of the need will not suffice."
Wardleigh v. Second Judicial Dist. Court, 111 Nev. 345, 358, 891 P.2d 1180,
1188 (1995). The requesting party must also demonstrate that he or she
would face undue hardship to discover the same evidence "or the substantial
equivalent thereof." Id. Generally, no undue hardship exists if the same
evidence is discoverable by any other reasonable means. See id. at 359, 891
P.2d at 1188-89 (finding no undue hardship where the requesting party
could have deposed any of 74 individuals who could possess the desired
evidence). Importantly, under NRCP 26(b)(3)(B), li]f the court orders
discovery of [work-product] materials, it must protect against disclosure of
4 We note that the extent to which Keolis plans to use the materials at
trial is relevant to the question of whether Toth can show substantial need
under NRCP 26(b)(3)(A). See Fletcher v. Union Pac. R.R. Co. , 194 F.R.D.
666, 670 (S.D. Cal. 2000) ("Whether [surveillance] films will be used at trial
is a significant factor in determining whether the party seeking to discover
them has a 'substantial need for the material."). Moreover, although it is
not necessary to our disposition, we note that multiple courts, like the
discovery commissioner here, have determined that defendants need only
produce work-product surveillance materials to be used, after they have had
the opportunity to depose the plaintiff, reasoning that such timing
preserves a defendanes ability to use the materials for impeachment. See,
e.g., Marchello v. Chase Manhattan Auto Fin. Corp., 219 F.R.D. 217, 219 (D.
Conn. 2004); Cabral, 556 A.2d at 50.
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the mental impressions, conclusions, opinions, or legal theories of a party's
attorney or other representative concerning the litigation."
In the case at bar, the district court disposed of the
discoverability of all the surveillance videos in a single-sentence footnote,
ordering all the roaterials disclosed. As a result, the district court made no
findings and provided no analysis of the exception under NRCP 26(b)(3)(A),
let alone the appropriate conditions of the production to protect against the
disclosure of counsel's mental impressions, conclusions, opinions, or legal
theories as required under NRCP 26(b)(3)(B). Based upon the record before
us, we are unable to determine whether Toth demonstrated, or could have
demonstrated, substantial need and undue hardship and, if so, when the
production should be made. Nor can we sit as factfmders and determine
these questions in the first instance.5 Consequently, we grant Keolis's
petition in part and direct the district court to reconsider Toth's motion to
compel under the standards set forth herein.
5As noted above, it appears that the content of the videos has not been
disclosed to the district court. The nature of the video is important to a
determination of whether the evidence or the substantial equivalent thereof
is obtainable via other means. When a party alleges that surveillance
videos or other similar materials contain potentially sensitive information,
district courts may inspect the materials in camera in order to answer these
inquiries. See Chiasson v. Zapata Gulf Marine Corp., 988 F.2d 513, 515-16
(5th Cir. 1993) (addressing the district court's analysis of video evidence
after an in camera review of the evidence); Mitchell v. Eighth Judicial Dist.
Court, 131 Nev. 163, 176, 359 P.3d 1096, 1104 (2015) (directing the district
court to conduct an in camera review of allegedly sensitive documents to
determine "the conditions appropriate to their production"); Las Vegas
Sands v. Eighth Judicial Dist. Court, 130 Nev. 643, 656, 331 P.3d 905, 914
(2014) (directing the district court to resolve disputes regarding a privilege
log by conducting an in camera review to determine if the records were in
fact privileged).
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CONCLUSION
For the reasons set forth herein, we conclude that the first two
videos and related report, created before the suit was filed, fail Ballard's
explicit requirement for counsel involvement in insurance cases. As such,
those materials are not protected work product. The third video and
accompanying report, however, were created at the direction of counsel after
Toth filed suit against Keolis. Accordingly, these materials are work
product. The third video and related report may nonetheless be
discoverable upon a showing of substantial need and undue hardship.
Because the district court failed to apply this framework, however, we grant
Keolis's petition in part and direct the clerk of this court to issue a writ of
prohibition instructing the district court to vacate its order granting Toth's
motion to compel insofar as it required production of the third video and
related report and to conduct further proceedings consistent with this
opinion.
Tao
We concur:
, C.J.
Gibbons
J.
Bulla
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