COMMON CARRIER DUTY OF CARE: Amtrak liable for damages to passenger raped by sleeper car attendant under Montana duty of care to passengers. . . Amtrak’s reliance on general course & scope rule rejected. . . Johnston/Morris.

Magistrate Johnston’s findings & recommendations.

Patsy Shepherd of North Carolina, then 68, was a passenger on Amtrak’s Empire Builder as it passed through Montana. Charles Pinner of Michigan, then 59, a sleeper car attendant, raped her 4/19/15 as the train passed by Wolf Point. He was convicted in Roosevelt Co. of kidnap and rape and sentenced to 60 years in prison. Amtrak has terminated him. Shepherd filed a complaint 4/14/17 alleging that Pinner is liable for damages stemming from the intentional torts of assault, sexual assault, battery, and false imprisonment, and that Amtrak is liable for the damages that he caused her to suffer and also for the damages she suffered because it was negligent in his hiring, supervision, and retention. Both parties request summary judgment.

Shepherd argues that regardless of whether Pinner’s actions were foreseeable or within course & scope of his employment, Amtrak is strictly liable because it is a common carrier, which is an exception to the “course and scope” rule, citing Taillon (Mont. 1903) for the proposition that “courts will not allow the carrier to shield himself behind the objection that such act was beyond the scope of the servant’s employment.” See also Ellinghouse (Mont. 1915). Amtrak argues that she is relying on antiquated dicta and that it is not strictly liable under Montana statutory or common law. It argues that Montana has not explicitly adopted the common carrier exception to the general course & scope rule. It cites Maguire (Mont. 1992) for its argument that the Montana Supreme Court has declined to extend employer liability to an employee’s intentional criminal acts outside course & scope of employment.

Montana has long recognized that common carriers owe a higher duty of care to those who have entrusted their safety to them. Cash (Mont. 1984). However, this does not equate to strict liability for holding Amtrak liable for any harm regardless of fault. Strict liability — also called liability without fault — is “liability that does not depend on proof of negligence or intent to do harm but that is based instead on a duty to compensate the harms proximately caused by the activity or behavior subject to the liability rule.” Black’s. Montana law does not hold a common carrier “strictly liable” for the harm caused to its passengers regardless of negligence or fault. Rather, the issue is — based on the undisputed facts — whether Amtrak — as a common carrier — is liable for the torts of its employee that were committed outside the course & scope of employment.

Taillon rejected a common carrier’s argument that it was not liable for a passenger’s damages caused by a servant’s intentional and wrongful acts committed outside the course & scope of employment. It analyzed a statute identical to the current statutory duty of care — MCA 69-11-107(1) — and held that the common carrier was liable to its passenger for the damages its employee’s intentional torts outside the course & scope of the employee’s employment caused the passenger to suffer:

Our statute charges upon the carrier of passengers for hire certain duties, among which are the following (section 2790, Civ.Code): “A carrier of persons for reward must use the utmost care and diligence for their safe carriage, and must provide everything necessary for that purpose, and must exercise to that end a reasonable degree of skill.” This statute is merely declaratory of the common law as it has existed for many years. From the nature of the business, the actual transportation of passengers is usually intrusted to servants. These servants, therefore, must be charged with the exercise of the same care toward the passenger as is charged upon the master under the statutes and the contract of carriage; and it necessarily follows that any negligence or wrong committed to the passenger by the servant is a violation of such statute and contract, and if injury results therefrom the master is liable. The carrier is bound to do certain acts, and cannot excuse himself from liability upon the ground that he has committed their performance to others. The proper doing of the acts by another, appointed by him alone, is just as obligatory and binding upon him as though he undertook to perform them himself. He is bound to discharge his statutory and contractual obligation to the letter, and, if he commits the performance of these obligations to another, he does so at his own peril. There is no way in which he can shirk or evade their performance. If the servant in such cases does what the master could not do without violating the duties resting upon him, then the master must be held responsible for the acts of the servant, no matter how wrongful, willful, or even malicious they may be. Therefore, whenever the misconduct of the servant causes a breach of the obligation or the violation of the duty of the master, the master is liable for such acts, if injury follow.(Emphasis added).

Thus, under Montana law, if a common carrier commits the performance of its statutory duty of care to its agent, it is responsible for the agent’s actions “no matter how wrongful, willful, or even malicious they may be.” As the Supreme Court stated, there is no way in which a common carrier can shirk or evade its performance of its statutory duty, which would necessarily include arguing that the employee was outside the course & scope of his employment.

It is undisputed that Amtrak confided the duty to “use the utmost care and diligence for [Shepherd’s] safe carriage” to Pinner and that he breached this duty. Because it is a common carrier under Montana law, Amtrak is liable for the damages he caused her to suffer when he breached this duty and she is entitled to partial summary judgment on this issue. Amtrak’s argument that it is not liable because he was outside the course & scope of his employment is contrary to Taillon and must be rejected.

Further, Montana adopted Restatement of Agency §214 in Paull (Mont. 2009), which defines a “non-delegable duty”:

A master or other principal who is under a duty to provide protection for or to have care used to protect others or their property and who confides the performance of such duty to a servant or other person is subject to liability to such others from harm caused to them by the failure of such agent to perform the duty.

Amtrak argues that Paull adopted §214 only with respect to “inherently dangerous activities” because it did not address Maguire or other cases where the non-delegable duty exception was interpreted beyond inherently dangerous activities. However, Paull did not limit §214 to situations involving inherently dangerous activities, but stated: “We adopt Restatement (Second) Agency, § 214, as an appropriate statement of the law in Montana.” Cmt (e) contains a pointed example: “P, a railroad, employs A, a qualified conductor, to take charge of a train. A assaults T, a passenger. P is subject to liability to T.” Given that §214 is an accurate statement of Montana law, Amtrak is not excused from discharging the duty to provide for Shepherd’s protection and safety because the agent it chose to discharge this duty acted outside course & scope of his employment. To the contrary, §214 imposes liability on Amtrak for Shepherd’s damages because the very agent to whom it delegated the performance of this duty breached it, causing her to suffer damage.

Recommended, summary judgment for Shepherd.

– – –Judge Morris’s order.

Judge Johnston’s findings & recommendations are adopted in full. Shepherd’s motion for summary judgment

is granted; Amtrak’s cross-motion is denied.

Shepherd v. Amtrak and Pinner, 44 MFR 192, 4/9/18, 44 MFR 193, 8/15/18.

Michael George (George Law Firm), Great Falls, for Shepherd; Michelle Friend & Jared Frickle (Hedger Friend), Billings, Mark Landman (Landman Corsi Ballaine & Ford), NYC, and John Bonventre (Landman Corsi Ballaine & Ford), Newark, for Amtrak.

INSURANCE BAD FAITH: Discovery compelled in part, denied in part. . . document “dump” prohibited, must be searchable and indexed, no “confusing and evasive” responses to broader requests. . . Plaintiff awarded 1/2 fees/costs incurred on motion. . . Molloy.

Shirley MacDonald ran a stop sign in front of a Ford Taurus occupied by Steven Nei and his daughter 1/6/15 on Hwy 93 near Florence. He has been diagnosed with injuries to his brain, spine, arm, hand, and extremities. MacDonald’s insurer USAA paid its $300,000 liability limit. Nei’s insurer Travelers Home & Marine Ins. took the position that the claim was not worth more than the USAA limits. Nei had paid for $5,000 med-pay and $500,000 UIM for each of his 3 vehicles from 2009, and argues that they should stack. He sued Travelers in State Court alleging bad faith and unfair claims practices and seeking a declaration of coverage and punitives. The case was removed to this Court. Nei sought discovery of Travelers’ claims file, manuals, and procedures, its pattern & practice, and its incentives for bonuses. Travelers objected to most of its requests. Nei moves to compel. He objects to Travelers’ boilerplate objections, seeks an unredacted claims file, and requests that Travelers be ordered to produce the requested historical & claim information. Both Nei’s requests and Travelers’ objections suffer from infirmities: Nei’s request lacks “reasonable particularity,” Rule 34(b)(1)(A); Travelers’ objections also lack particularity, Rule 34(b)(2)(B), and fail to state “whether any responsive materials are being withheld,” Rule 34(b)(2)(C).

“Boilerplate objections or blanket refusals” are not consistent with the discovery rules. BNSF (9th Cir. 2005). The Local Rules also require specific reasons for objections. “The burden lies on the objecting party to show that a discovery request is improper. Where a party’s objections are themselves vague and impermissibly overbroad, and no specifics are given, the objecting party fails to carry its burden.” Russell (D.Mont. 2012). Nonetheless, the Court has an obligation to review discovery requests to ensure that they are not frivolous. Moreno (DPR 2011). Travelers’ “boilerplate” objections state either:

Travelers objects to this Interrogatory as irrelevant, overly broad, burdensome, oppressive, not proportional to the needs of the case, seeking non-discoverable expert information beyond that allowed by Rule 26(b)(4);

or

Travelers objects to this Request for Production as irrelevant, overly broad, not limited in duration, burdensome, oppressive, not proportional to the needs of the case, and seeking information that is confidential and/or proprietary business information.

Irrespective of their individual application, none of Travelers’ objections state whether responsive material was withheld as required by Rule 34(b)(2)(C). At the 7/18 hearing, counsel argued that this is immaterial because an objection implies existence of responsive materials. However, Rule 34 was specifically amended in 2015 to make such a statement mandatory. Comm. Notes. Failure to clarify existence of responsive materials also hamstrings the Court’s ability to assess relevancy & proportionality. Travelers’ objections fail to comply with Rule 34 and can be overruled on those grounds alone. They also lack specificity in their individual application. Its argument that while they may be broad and overlap, “the objections apply,” is a truism. Almost any discovery request could be objected to by generally stating the limitations of discovery. However, that does not mean that those objections are sufficiently specific. On the other hand, as Travelers argued, many of Nei’s requests are overbroad. As a result, neither his requests nor Travelers’ objections are helpful in determining the amount of discovery that is proportional under these circumstances. Rule 26(b)(1). However, at minimum, proportional discovery lies somewhere in the middle. Accordingly, Travelers’ objections are overruled in part and it is required to provide responsive materials as outlined below.

Nei seeks a complete, unredacted copy of his claims file. Travelers insists that it has produced the file, excepting only the parts outlined in the privilege logs, which have been supplemented pursuant to Rule 26(e). It further insists that the privileged information was appropriately withheld. Nei argues that Travelers is attempting to use privilege as both a sword and a shield and that it has sent him on “a never-ending wild goose chase,” releasing different parts of the file at different times and with over 1,500 pages of shuffled, duplicate pages. It is not clear what parts of the file have been produced and which redacted. It seems that the Third Supplemental Privilege log outlines all that has been withheld. Because this case is in the unique procedural posture where both bad faith litigation and claim investigation are pending, in camera review of most of the withheld documents is necessary.

A federal court sitting in diversity applies the privilege of the forum state, Theme Promotions (9th Cir. 200), and federal law in determining application of the work product doctrine, Moe (D.Mont. 2010).

Privilege is construed narrowly under Montana law, American Zurich (Mont. 2012), and “to the extent an attorney acts as a claims adjuster, claims process supervisor, or claims investigation monitor, and not as a legal advisor, the attorney-client privilege does not apply, “Barnard Pipeline (D.Mont. 2014). “An insurer in a bad faith case waives the attorney-client privilege by relying on advice of counsel as a defense to a bad faith charge.” Id. “To deserve protection, documents must contain confidential communications for the purpose of seeking legal advice.” Id.

To be protected under the work product doctrine, the document must be “prepared in anticipation of litigation.” Rule 26(b)(3)(A). This does not include documents prepared in the ordinary course of business, Barnard, and the party withholding the documents has the burden to show that each documentwithheld “was prepared or obtained because of the prospect of litigation,” Moe. “Often, in insurance bad faith litigation, the work product doctrine does not apply to materials that are generated before the insurer has formally denied the insured’s claim because such materials are prepared as part of the ordinary course of business.” Barnard. But once an insured has filed a bad faith action, “all documents generated by the insurer are generated ‘in anticipation of litigation’ and are not part of the ordinary course of business.” Id.

The Third Supplemental Privilege Log outlines 43 pages withheld as either privilege or work product. Only 1 entry pre-dates Travelers’ knowledge of Nei’s suit (8/28/17), and is described as emails between attorney Adrienne Harris and Anthony Schwisow about “a separate claim that was inadvertently added to claim notes.” All the other documents relate to communication with Travelers’ current counsel Jon Wilson. It appears that all the other information withheld under the previous privilege logs — including communications with previous counsel Spoon Gordon Ballew — has been provided.

Whether the documents identified in the Third Supplemental Privilege Log have been properly withheld is complicated by the fact that Travelers has never formally denied Nei’s claim, admitting at the 7/18 hearing that it continues to investigate with the aid of present counsel. Thus there is a question about invoking the attorney-client privilege based on the extent to which present counsel acted as a “claims adjuster, claims process supervisor, or claims investigator, and not as a legal advisor.” Barnard.

There is also a work product question because “the work product doctrine applies to documents generated by an insurer after the insured files a bad faith claim against the insurer, even when the insurer has not yet formally denied the insured’s claim.” Id. But work product protection is not absolute, and “a party may discover work product materials if it can establish the relevance of the materials, the requisite need for the materials, and the requisite hardship in obtaining the materials by other means.” Id.; Rule 26(b)(3)(A)(i)-(iii). “To obtain ordinary work product materials, the requesting party must show a ‘substantial need’ for the materials.” Id. And “to obtain opinion or mental impression work product as defined in [Rule] 26(b)(3)(A)(ii), the requesting party must show a ‘compelling or overwhelming need’ for the materials.” Id.; Moe.

Because an insurer’s “claims file reflects a unique, contemporaneous record of the handling of the claim” that cannot be obtained elsewhere, because the “strategy, mental impressions and opinion of the insurer’s agents concerning the handling of the claim are directly at issue” in an insurance bad faith claim, the need for such materials is compelling, and both ordinary and opinion work product protection is generally overcome in bad faith litigation when asserted by the insurer’s agents. Barnard.

But an “insured cannot establish a compelling need for the opinion work product of an insurer’s attorneys” “unless the insurer relies on the advice of counsel defense.” Id.

Accordingly, in camera review of most of the documents identified in the Third Supplemental Privilege Log is appropriate. Moe (opting for in camera review over the more serious sanction of deeming deficient log entries “as a waiver of the attorney-client privilege”). Only by reviewing these documents can the Court determine if they contain claims handling, justifying Nei’s “compelling need” for them, or if they contain legal advice and/or counsel’s mental impressions & opinions limited to the present litigation. Travelers need not produce or provide for in camera review the “Draft of Civil Cover Sheet,” “Draft of Preliminary Pretrial Statement,” “Draft(s) of Exhibit Designation for Notice of Removal to U.S. District Court,” “Draft of Corporate Disclosure Statement,” or “Draft of Attachment to Civil Cover Sheet.” These documents undisputedly contain the opinions & mental impressions of current counsel in relation to the current litigation and Nei cannot establish compelling need for them.

Nei has also requested Travelers’ historic information and information for other claims and suits, arguing that other cases show that it has the information and that similar discovery has been ordered. Moe. He is entitled to certain historical and claims handling information, but he is required to show a nexus with the issues in this case or that “the defendant’s conduct in other cases” is sufficiently similar to the conduct in the instant case. Id. To the extent that he makes general requests for information unrelated to Travelers’ activities in Montana around the time of his claim, they are denied as irrelevant and disproportionate. Rule 26(a)(1).

Consistent with the analysis above, each interrogatory and request for production is addressed individually:

Int. 10. Identify the number of claims in which Defendant or its attorneys have hired any physicians to provide medical records reviews or medical examinations in any Montana cases in the last 10 years. Nei alleges numerous facts associated with his treatment & diagnosis by Dr. Rosen and claims that Travelers has been obstinate in “seeking to hire forensic medical examiners to justify its own predetermination about [Nei’s] claim” and that it “refused to accept statements from Steven Nei’s medical providers and delayed things further by stating that it needed more information before it could send Steve Nei to its hand-picked doctors for forensic medical evaluations in order to support its position.” He has made a sufficient threshold showing that the interrogatory is relevant. However, he has made no allegation that any physicians hired by Travelers were incompetent or not qualified to perform medical records review or an IME, while Travelers’ counsel indicated at the hearing that the policy required that he see one of its physicians and that the physician in this case had not worked for Travelers before. But even if that is not the whole story, the mere fact that Travelers contracts with certain physicians is not sufficient to show a “track record” of “biased medical opinions.” McCall (D.Nev. 2017) (“If the requirement for proportionality in discovery means anything, it must mean that burdensome, tangential discovery should not be permitted based on the mere possibility that something may turn up to support what is otherwise only speculation.” Weighing these concerns, Travelers is required to respond to a narrower interrogatory: Identify the number of claims in which Defendant or its attorneys hired the physician(s) that worked on this case to provide medical records reviews or medical examinations at the time of Nei’s claim and 5 years prior to the filing of his claim.

Int. 11: For all claims in which Defendant has hired any Montana physicians to provide medical records reviews or medical examinations in the last 10 years, identify the nature of the case and the name, address, and phone number of the Montana physicians Defendant or its attorneys have hired.Travelers is required to respond to a narrower interrogatory similar to Int. 10.

Int. 12: State the amount of money which Defendant or its attorneys have paid to the Montana physicians identified above in the last 10 years. Travelers is required to respond to a narrower interrogatory similar to Ints. 10 & 11.

Int. 13: Provide a list of all claims that have been made against Defendant for UIM, UM, med-pay, and bad faith at the time of Nei’s claim and 5 years prior to filing of his claim. Travelers’ objection is sustained. This request is overbroad and goes beyond the scope of matters relevant to the bad faith litigation. It is also disproportionate considering the issues and the bearing such discovery would have on them. Rule 26(b)(1).

RFP 6: Produce the entire claims file(s) pertaining to Nei’s claims in this case from the date they were opened. Withheld documents are subject to in camera review.

RFP 7: Produce a copy of all electronic documents including adjuster’s notes, diary entries, and emails dealing in any manner with Nei’s med-pay and UIM claims. Withheld documents are subject to in camera review.

RFP 13: Please produce all policy manuals, claim manuals, general manuals, rules, instructions, guidelines, internal operating procedures, or other similar written evidence of the policies, procedures, or protocols required or recommended by Defendant or Defendant’s adjusters in connection with the processing, adjustment, settlement, or handling of bodily injury and UIM claims in Montana. Travelers’ claims manual and policies are relevant to Nei’s bad faith claims. However, the request is overly broad and must be temporally limited. See First Horizon (WD Tenn. 2016) (“The Defendant’s conduct and positions they took in other insurance claims is of no consequence to the instance case.”). The request is limited to 5 years prior to filing of Nei’s claim.

RFP 15: Please produce all manuals, guidelines, newsletters, or directives made available to claim supervisors or managers from 2005. Travelers’ manuals and policies are relevant to Nei’s bad faith claims, but the request is overly broad and is limited to documents made available in connection with bodily injury and UIM claims in Montana around the time of Nei’s claim. Unlike RFP 13, it does not make sense to limit the request to those associated specifically with Nei’s claims as these types of policy documents and broader operations manuals would not necessarily be connected to a specific case. And while Travelers “cannot unilaterally narrow the geographic scope of plaintiffs’ requests to the region of Montana,” Simonsen (31 MFR 154), Nei fails to make the requisite relevancy showing for his expansive request.

RFP 16: Please produce all asset & balance sheets showing the net worth of Defendant. Production not required. As discussed at the 7/18 hearing, Nei may rely on publicly available information as to the net worth of Travelers and its related entities. Any objection that such information exaggerates or inaccurately reflects its net worth will be considered in conjunction with its refusal to provide more specific information as requested above.

RFP 17: Please produce organizational charts regarding the claims department from 2005. If you contend that your company did not maintain organizational charts during any portion of the time covered by this request, then please produce documents and writings containing information regarding the departmental structure, lines of supervision or authority, and personnel employed during such period. While Travelers’ internal structures & incentives are relevant to Nei’s bad faith claim, this request is overly broad and must be limited to employees working on bodily injury and UIM claims in Montana around the time of his claim.

RFP 18: Please produce written job descriptions for all positions held by Anthony Schwisow and his supervisors from 2005. Travelers’ objection overruled as to Schwisow, sustained as to his supervisors. Schwisow appears to have been involved in the handling of Nei’s claim. His job descriptions are relevant to Nei’s bad faith claim. McCall (“Information regarding the job qualifications and training of the claims employees who actually handled the plaintiff’s insurance claim is relevant and generally discoverable in a bad faith action.”). However, it is disproportionate to also require the job descriptions for his supervisors, without specifically naming them.

RFP 19: Please produce all directions for your claims adjusters handling cases in Montana. Travelers’ objection is sustained. This request is overbroad and it is not clear what Nei means by “directions.”

RFP 20: Please produce complete copies of all information Travelers produced in discovery in Grossi (Pa. 2013), with the exception of any of the plaintiff’s medical records or private information regarding the plaintiff. Travelers’ objection is sustained. This request is overbroad, seeks irrelevant information, and asks for discovery disproportionate to the needs of the case. “Bad faith claims are fact specific and depend on the conduct of the insurer vis a vis the insured.” Grossi (quoting Condio (Pa. 2006). The facts in Grossi — which involved Travelers holding only a $1 million reserve despite facts & value of claim — are distinguishable from those here. Moe (while “evidence of a defendant’s conduct in other cases may be relevant and admissible,” it must be “sufficiently similar to the conduct in the instant case”).

RFP 24: Please produce a computerized list of and copies of complaints filed in all civil actions against Defendant during the past 10 years alleging insurance bad faith, unfair claim settlement practices, fraud, or similar tort theories, stating the court in which the case was filed, the case number, and the name, address, and telephone number of counsel for plaintiff(s). This is overbroad, disproportionate, and includes information not relevant to this case. However, Montana cases involving similar issues during a similar period are relevant to Nei’s claims. Travelers is required to provide only the complaints, court, and case number. Further information is available in the public record.

RFP 28: Please provide copies of all complaints by policyholders received by Defendant from individuals in Montana from 2005. Travelers’ objection is sustained. This is vague and overbroad. There is no limitation on the type of complaints, making it unclear how this information is relevant to the current suit or proportionate to its needs.

RFP 29: Please produce complete copies of Defendant’s claims manuals pertaining to evaluating and reserving UM and UIM claims, including Travelers Liability Best Practices Manual(s). Travelers is required to produce. It is fair to assume that reserves may be recommended by Montana adjusters, but they may be set elsewhere in Travelers’ organization related to UIM claims in Montana at the time of Nei’s claim.

RFP 30: Please produce any documentation that explains with specificity & particularity the manner in which you compensate your employees who adjust, handle, settle, litigate, or otherwise process UM or UIM claims. Travelers’ payment, incentive, and bonus information is relevant to Nei’s bad faith claim. However, the request is overbroad and must be limited to compensation for employees that did adjust, handle, litigate, or otherwise process such claims in Montana around the time of Nei’s claim (5 years prior to filing).

RFP 32: Please produce copies of any Montana-specific claims manuals or directives you have generated or used for Montana claims from 2005.Travelers is required to produce the documents for the 5 years before Nei’s claim was submitted.

RFP 33: Please produce your UIM claims manuals and indexes from 2005. Travelers is required to produce them for the 5 years before Nei’s claim.

RFP 34: Please produce any manuals or directives regarding Montana cases which address med-pay and stacking. Travelers is required to produce them for the 5 years prior to Nei’s claim.

Travelers must produce the information to Nei within 10 days. It may not simply “dump” documents, but must provide them searchable and indexed. It is cautioned to avoid “confusing and evasive” responses to the broader disclosure requests ordered above. Simonsen.

Travelers shall bear its own fees & costs on the present motion, as well as half of Nei’s. Rule 37(a)(5)(C), (c)(1)(A). While both parties failed to adhere to the discovery rules, a partial award of fees & costs is justified based on Travelers’ complete failure to comply with Rule 34(b)(2)(C). Holmgren (9th Cir. 1992) (upholding a 37(c) award where the insurer “acted as if the rule simply didn’t exist”).

Nei v. The Travelers Home & Marine Ins., 44 MFR 191, 7/26/18.

James Towe (Towe & Fitzpatrick), Missoula, for Nei; Guy Rogers & Jon Wilson (Brown Law Firm), Billings, for Travelers.

ENDANGERED SPECIES: Challenges to irrigation dam bypass (as opposed to dam removal and installation of large pumps) to accommodate pallid sturgeon rejected on summary judgment on remand from 9th Circuit reversal of preliminary injunction. . . Morris.

FWS listed pallid sturgeon as endangered in 1990. The largest population in the world exists on the Missouri River between Fort Peck Dam and Lake Sakakawea. Fewer than 125 remain, due in large part to Fort Peck Dam on the Missouri and the Intake Dam on the Yellowstone River. The Intake Dam is 70 miles from the confluence of the rivers. The dams prevent the sturgeon from swimming far enough upriver to spawn successfully. Larvae drift 152-329 miles while developing. Larvae hatched below the Intake Dam lack sufficient “drift distance” to develop before they reach the lower oxygen levels in Lake Sakakawea. If the sturgeon could spawn above Intake Dam, larvae would have the opportunity to develop sufficiently before they reached the lake. In consultations with FWS, the Corps of Engineers issued a biological opinion in 2000 which determined that its operation at Fort Peck Dam likely would preclude the sturgeon from reproducing in the wild. The BiOp provided reasonable & prudent alternatives which would have allowed the Corps to comply with the Endangered Species Act. The Corps failed to implement these RPAs. An amended BiOp in 2003 concluded again that Fort Peck Dam operations jeopardize the sturgeon and prescribed a series of RPAs. The Corps again failed to implement essential elements of these RPAs.

The Bureau of Reclamation operates Intake Dam and the Lower Yellowstone Irrigation Project consisting of 4 districts. Intake Dam consists of a wood structure topped with rocks. It requires annual replacement of rocks via buckets transported on cables to hold back water for irrigation. The Bureau and Corps adopted a plan in 2010 to construct a permanent concrete diversion dam, a rock-lined ramp for sturgeon passage, and a new headworks with fish screens to reduce entrainment of fish in the irrigation canal. They constructed the headworks in 2012 but abandoned the plan to build a concrete dam with a rock ramp, primarily due to cost. They ultimately identified a new dam and bypass channel (“the Project”) for which they intend to spend $57 million to replace the wood & rock weir with a concrete weir to ensure continued irrigation water to the 56,800 acres currently serviced. 5 sturgeons successfully used a natural side channel around the existing weir in 2014 during unusually high water. The agencies decided that a new bypass channel — which would have sufficient flow at the time — was the best option to allow sturgeon to navigate around the proposed concrete weir. Defenders of Wildlife, concerned that they will not use the bypass, propose making the river free-flowing and installing pumps for irrigation. Intervenor Irrigators contend that pumps would not be economically feasible.

The Court granted Defenders of Wildlife a preliminary injunction in 9/15 to enjoin construction on the Project and ordered the agencies to complete an EIS, emphasizing the need to analyze sturgeon recovery and whether the Project would provide passage past Intake Dam. Their 2016 EIS and ROD sufficiently corrected their NEPA violations at the heart of the original preliminary injunction. Plaintiff amended its complaint, and the Court granted a preliminary injunction in 7/17 to halt construction related to the Project, reasoning that Plaintiff likely would succeed on the merits of their ESA, NEPA, and CWA claims in their amended complaint. The 9th Circuit vacated this preliminary injunction 4/4/18, determining that this Court improperly considered the harm caused by “continued operation of the existing weir” in its assessment of irreparable harm attributable to the Project, wrongly flipped the burden to require the Corps to prove that the Project would allow sturgeon passage, and lacked any basis to conclude that Plaintiff had established a likelihood of success on the merits. Plaintiff moves for summary judgment on Claims 1 & 2 challenging the decade-long operations of Fort Peck Dam in violation of ESA, Claims 4 & 5 challenging the decade-long operations of the Intake Dam by the Bureau in violation of ESA, Claim 11 challenging the Corps’s and Bureau’s 2016 EIS and ROD for violations of NEPA, Claim 12 challenging FWS’s 2016 BiOp for violations of ESA, Claim 13 challenging the Corps’s and Bureau’s reliance on the 2016 BiOp for violations of ESA, and Claim 14 challenging the Corps’s 2016 CWA approval of the Project.

FWS’s 2016 BiOp and Incidental Take Statement for the Project do not violate ESA. FWS analyzed whether a take of 59% of adult sturgeon approaching the Project would jeopardize the species and ultimately determined that the Project on balance “substantially improves the survival and recovery of the species.” This Court previously found “unavailing” the agencies’ citations to a BiOp that purportedly analyzed the impact of the authorized take limit. The first BiOp described FWS’s reasoning for choosing the 59% figure and explained that FWS anticipated more successful passage. The 2nd BiOp referred to the jeopardy finding without any reference to the 59% take authorization. This Court determined that softening the requirements of the jeopardy analysis on the basis that the Incidental Take Statement included an overestimate of the take did not make for sound policy in that it would encourage agencies to always overestimate take. The 9th Circuit disagreed. It determined that FWS had articulated a “reasoned basis for the no-jeopardy finding in its Biological opinion” and that its “approved incidental take represents a substantial reduction in the impairment of breeding caused in the project’s absence.” It recognized that analysis of the ITS and identification of a recovery goal sometimes may be needed to explain the reasoned basis for an agency’s no-jeopardy finding, but determined that this Court erred in treating absence of a specific ITS analysis and the failure to identify a quantifiable recovery goal as technical deficiencies that precluded a no-jeopardy finding in the BiOp. FWS recognized that migrating sturgeon would face both beneficial and adverse effects from the Project but concluded that the bypass channel would provide more reliable passage than the current channel as the existing channel often lacks sufficient flows to fill for passage during spawning season.

This Court determined in its preliminary injunction order that the agencies failed to provide sufficient information to demonstrate that the project would improve a situation that they concede to be dire, and instructed them to analyze whether it would improve the sturgeon’s “plight to give it a chance at survival and recovery.” The 9th Circuit reversed, recognizing that identification of a “recovery goal may sometimes be needed to explain the reasoned basis for an agency’s no-jeopardy finding,” but concluding that such analyses were not required here. It stressed that even though the BiOp did not identify a quantifiable recovery goal, it adequately addressed the Project’s overall positive impact on species recovery. It apparently interpreted §7(a)(2) as remaining concerned with whether the action would cause too much harm rather than whether it would improve a species’ status. Plaintiff’s view conflicts with the regulatory definition of “jeopardize” under this interpretation. The 9th Circuit determined that nothing in a 7(1)(2) consultation requires agencies to recover a species — that ESA requires “some attention to recovery issues” to provide “reasonable assurance that the agency action in question will not appreciably reduce the odds of success for future recovery planning, by tipping a listed species too far into danger.” FWS’s analysis in the BiOp leads to the conclusion that the proposed action provides a net positive for the sturgeon. It does not jeopardize its “continued existence” in this context.

FWS properly used the shovelnose sturgeon population to compare with the pallid sturgeon population in concluding that the Project would represent an improvement in the likelihood of survival and recovery of the pallid sturgeon. It acknowledged the differences between them. It remains reasonable to evaluate the specific interaction between the existing weir and shovelnose larvae to provide some idea as to how a new weir might affect pallid larvae as these present similar interactions. The Court must defer to FWS’s scientific judgment in choosing to use the shovelnose as a surrogate.

FWS evaluated the short-term impacts of the Project in the context of a rapidly declining pallid sturgeon population. It conceded that no upstream passage would occur during construction, but considered the short-term adverse effects of continued maintenance of the existing weir, possible interactions with the fish screens, and adverse effects caused by construction of the bypass channel. It recognized that the existing high flow channel would need to be filled during construction. This channel provides only occasional access for pallid sturgeon during the highest water years; only a handful of pallid sturgeon used it in the past during perfect water conditions. FWS estimated that the existing channel would contain enough water for the sturgeon — statistically — during 1 year of construction of the new bypass. It further estimated that 32 adult wild pallid sturgeon would be blocked from spawning by the Project. It considered this blockage to constitute a “temporary, but significant impairment of breeding and is considered an ‘injury’ to the sturgeon.” However, the impairment represents the status quo, as it does not change the current reproduction, numbers, or distribution of pallid sturgeon in the action area. ESA further contemplates artificial propagation to conserve or recover listed species. The 9th Circuit has recognized that hatchery fish may be considered under ESA.

FWS issued a lawful ITS. FWS’s regulations expressly provide for another species as a surrogate. Its ITS recognizes that if the Project were constructed and pallid sturgeon spawn upstream, larvae may be killed or injured at the site during the drift downstream. It relies on the shovelnose to measure the allowable take and provide a trigger for re-initiation of consultation.

The Bureau’s and Corps’s reliance on the BiOp to authorize the Project did not violate their ESA §7 duty to ensure that their actions likely would not jeopardize the sturgeon. Plaintiff has failed to carry the burden contemplated in Pyramid Lake (9th Cir. 1990). It cannot rely on the current weir to demonstrate that the agencies’ actions would jeopardize sturgeon. They are attempting to implement a high priority action that furthers recovery. Plaintiff has failed to demonstrate how this would jeopardize the listed species beyond its current dire circumstance. Id.

The CWA prohibits the Corps from issuing a §404(b) permit for projects that involve discharge of dredged or fill material into waters of the US if a less damaging practicable alternative exists. Plaintiff contends that the Corps must disapprove the Project absent a determination that the less invasive Multiple Pumps Alternative would be impracticable. The Corps determined that the bypass channel would be more practicable than the MPA in light of the extra costs of construction and maintenance. Plaintiff contends that the CWA does not contemplate inquiry into relative practicalities. The agencies counter that the Corps must consider the Project’s overall objectives, which include the continued viable & effective operation of the Lower Yellowstone Irrigation Project. The Multiple Pumps Alternative would provide passage for the pallid sturgeon, but it remains in doubt whether it would satisfy the Project’s purpose of “continuing the viable and effective operation of the LYP” in light of its inherently complicated design of gravity combined with pumps that require “highly precise timing on the startup and shutdown of each pump.” The Corps and Bureau concluded that multiple pumps would result in volumes that “will be highly variable from year to year” and that the risk of canal bank failures would increase due to the multiple locations of pumped inflows and the need for additional monitoring and coordination. The MPA involved an estimated $132 million for construction and $4.9 million per year for maintenance.

The Bureau ensured that its existing operation of the Intake Dam did not jeopardize the pallid sturgeon. Plaintiff has failed to demonstrate how the yearly rocking of the weir reduces “reproduction, numbers, or distribution” of the species when it maintains the status quo over the last 100-plus years. FWS determined that the rock debris field would still block passage for decades even if the District failed to perform the yearly rocking.

Plaintiff’s ESA challenge to the Corps’s operation & maintenance of Fort Peck Dam has been rendered moot by its re-initiation of consultation in 7/15. However, the Corps and Bureau cannot continue to stall implementation of RPAs described in each succeeding BiOp and avoid complying with ESA mandates simply by engaging in serial re-litigation of consultation to develop RPAs that they have shown little appetite to implement. The day of reckoning will come when they must actually complete the consultation process with incorporation of RPAs, as no one — including the Corps and Bureau — stands above the law.

Plaintiff’s motion for summary judgment on Claims 11-14 is denied and Federal/Intervenor Defendants’ cross-motions for summary judgment are granted. Plaintiff’s request that the Court order the Bureau to finalize a plan to bring its operation at Intake Dam into compliance with ESA (Claims 4 & 5) is dismissed without prejudice. Plaintiff’s request that the Court order the Corps to finalize a plan to bring its operation of Fort Peck Dam into compliance with ESA (Claims 1 & 2) has been rendered moot and is dismissed without prejudice.

Defenders of Wildlife and Natural Resources Defense Council v. Army Corps of Engineers and Intervenors Lower Yellowstone Irrigation Project Board of Control, Savage Irrigation Dist., and Intake Irrigation Dist, 44 MFR 190, 7/20/18.

McCrystie Adams (DOW), Denver, and William Eubanks (Meyer Glitzenstein & Crystal), DC, and Neil Levine, Denver, for Plaintiffs; Brian Collins (DOJ), DC, AUSA Coby Howell, Portland, Daniel Pinkston (DOJ), Denver, AUSA Mark Steger, Billings, Jeffrey Beelaert (DOJ), DC; Mark Stermitz (Crowley Fleck), Missoula, for Irrigators; Patrick Byorth, Bozeman, for Amici Montana Chapter of American Fisheries Society and Montana Trout Unlimited.

BENCH JUDGMENT: $28,850,936 plus prejudgment interest and attorney fees as share of East Helena lead smelter Superfund Site response costs on remand from 9th Circuit’s finding of timeliness. . . Christensen.

Asarco brought this civil action for contribution against Arco pursuant to CERCLA for costs & damages incurred by Asarco at the East Helena lead smelter “Superfund” site following the Asarco (9th Cir. 2017) conclusion that Asarco’s claim was timely. Trial was held 5/29-6/7/18 with 160 exhibits and 12 witnesses including 3 experts. (Testimony of Antonio Toccafondo was presented by perpetuation deposition. The parties hi-lited his transcript and the Court read the excerpts after-hours outside the presence of counsel.) A 96-page findings, conclusions, and judgment ensued.

Asarco is awarded $27,850,936, representing Arco’s equitable share of the response costs Asarco paid under the $99,294,000 6/09 CERCLA Consent Decree, $1 million representing an uncertainty premium or error factor under the 6th Gore Factor, prejudgment interest to be determined in subsequent proceedings, and Asarco’s costs of suit and reasonable attorney fees to be determined in subsequent proceedings.

ASARCO v. Atlantic Richfield Co., 44 MFR 189, 6/26/18.

Kris McLean, Gregory Evans, and Rachel Parkin (Milodragovich Dale Steinbrenner), Missoula, for Asarco; Randy Cox, Kenzo Kawanabe, and Benjamin Strawn for Arco.

INSURANCE BAD FAITH: Insurers given deadline to affirm whether they intend to irrevocably assert attorney-client privilege v. advice-of-counsel defense. . . Johnston.

Park Plaza Condo Association on 4/13/17 submitted a property damage claim to its insurers (collectively “Travelers”) for $748,517 to $2,5468,262. Travelers examined witnesses as part of its investigation. On 8/29/17 Park Plaza submitted another estimate of $4,317,181. It sued 9/8/17 alleging, inter alia, insurance bad faith. Travelers states that additional expert investigation — regarding core samples of the concrete exterior — was scheduled for 5/18 but has been delayed. On 1/8/18 Park Plaza filed a Motion for Order re Insurers’ Assertion of Attorney-Client Privilege, asserting that they must clarify whether they are asserting the privilege irrevocably. Travelers objected that forcing them to irrevocably assert the privilege is premature because discovery has not closed and the investigation is pending, and the FRCivP already provide remedies in the event that Travelers committed any sort of prejudice against Park Plaza. The Court held a hearing 6/12/18.

MCA 26-1-803 states:

(1) An attorney cannot, without the consent of the client, be examined as to any communication made by the client to the attorney or the advice given to the client in the course of professional employment.

(2) A client cannot, except voluntarily, be examined as to any communication made by the client to the client’s attorney or the advice given to the client by the attorney in the course of the attorney’s professional employment.

While the privilege serves valid policy goals, it “must be construed narrowly because it obstructs the truth-finding process.” American Zurich (Mont. 2012); Westinghouse (3rd Cir. 1991). With respect to waiver, “an insurer in a bad faith case waives the attorney-client privilege by relying on advice of counsel as a defense to a bad faith charge.” Barnard Pipeline (D.Mont. 2014); Palmer (Mont. 1993).

Park Plaza argues that if Travelers asserts the attorney-client privilege, that assertion will dictate Park Plaza’s expert’s evaluation of the parties’ positions. While it does not necessarily have a problem with proceeding to trial with the privilege being asserted, it is concerned that Travelers would waive it at the 11th hour and produce hundreds of pages of withheld documents, which would require Park Plaza to re-examine witnesses and re-investigate the case, unnecessarily consuming vast amounts of time & money: “There simply is no reason for the insurers to be allowed to waive the attorney-client privilege as a trial tactic at any time they so desire.”

Travelers argues that it is inappropriate for Park Plaza to request an irrevocable election between the attorney-client privilege and the advice of counsel defense, especially before Park Plaza has defined its claim under the UTPA: “This leaves [Travelers] a Hobson’s choice of either (1) irrevocably asserting the privilege only to find out later an attorney is a witness or (2) waiving a valuable privilege only to later find the attorney’s testimony was not important.” It argues that it is at the horns of a dilemma and that the Court should not force it to make its decision at this time. It cites Quantum (Fed. Cir. 1991), a patent-infringement case:

Proper resolution of the dilemma of an accused infringer who must choose between the lawful assertion of the attorney-client privilege and avoidance of a willfulness finding if infringement is found, is of great importance not only to the parties but to the fundamental values sought to be preserved by the attorney-client privilege. An accused infringer, therefore, should not, without the trial court’s careful consideration, be forced to choose between waiving the privilege in order to protect itself from a willfulness finding, in which case it may risk prejudicing itself on the question of liability, and maintaining the privilege, in which case it may risk being found to be a willful infringer if liability is found.

Moreover, Travelers argues that any attempts to “thwart” or “ambush” Park Plaza already have a remedy according to the FRCivP. For example, if Travelers were to attempt to put on an undisclosed witness it would need to show that the late disclosure “was substantially justified or harmless, which it likely would not be able to do. However, it argues that it cannot be forced to irrevocably assert attorney-client privilege because events outside its control may have to identify attorneys as witnesses, and such late disclosures may ultimately be found harmless or substantially justified. It states that such an order would foreclose its ability to make such an argument. “By requesting an order requiring an irrevocable decision, [Park Plaza] is seeking a special, unique procedural advantage that deprives [Travelers] of [its] right to react to unanticipated changes in the case and to identify new witnesses when that late identification is substantially justified or harmless.” Travelers also argues that “advice of counsel” is not an affirmative defense that must be formally pled in the Answer in an insurance bad faith claim. Penn (D.Mont. 2013). It notes that courts have allowed a party to introduce the defense after the close of discovery, provided there was no prejudice to the opposing party. GS Enterprises (Ma. 1991). Finally, it argues that Park Plaza has not cited any binding authority which requires the Court to impose a special order or deadline.

Park Plaza responds that the Court has broad discretion for “the timing and sequence of discovery pursuant to the District Court Rules,” which provide for “a rigid schedule for discovery, pretrial procedures, and trial.” It also argues that Rule 37 is inapplicable because Travelers has not yet failed to produce discovery, noting that it has rightly invoked attorney-client privilege.

GS Enterprises (Mass. 1991) provided this reasoning in ruling on a state rule identical to Rule 26(b)(1):

A party may resist discovery on the basis of privilege, but may not at the same time rely on the privileged communications or information as evidence at trial. Conversely, a party may waive the privilege and then offer the communications or information as evidence. These are mutually exclusive courses of action, and if the latter is chosen, the party waiving the privilege generally should do so before he raises it as a bar to discovery, so as to allow his adversary sufficient time within which to discover the communications and information. A waiver on the virtual eve of trial is insufficient and, depending on the circumstances, may justify an order barring the use of the privileged evidence.

The Massachusetts Court held that while the party asserting privilege may eventually waive its privilege and produce documents, it may not do so in a manner that would be prejudicial.

The Court has broad discretion to limit and tailor discovery to avoid abuse. The Supreme Court since the 70s has urged trial courts “to actively manage discovery to accomplish the goal of Rule 1 of the Federal Rules of Civil Procedure — ‘to secure the just, speedy, and inexpensive determination of every action and proceeding.’” Roberts (D.Nev. 2016). The deadline which concerns the Court is the simultaneous disclosure of experts 8/8/18. Travelers recognizes that “a defendant ‘must clearly elect whether it will raise an advice-of-counsel defense before the close of discovery and in time to allow for such discovery.” Bell Aerosol (ND Ill. 2007). Whatever advice counsel made with respect to the claim has already been given, and Travelers is free to choose that information or assert its privilege. However, such information is relevant to the parties’ expert disclosures, and the Court must tailor discovery to expedite the procedure and limit frustration of the truth-finding process (even a valid assertion of privilege). Accordingly, the Court will order that Travelers make an irrevocable assertion of whether it intends to rely on the attorney-client privilege by 7/6/18 to allow adequate time for preparing expert disclosures.

Fn. Travelers raises concerns that this deadline to invoke or revoke its privilege would prejudice it in the form of some tactic from Park Plaza. It notes that Park Plaza has already suggested that if it does not waive the privilege, that means that Travelers’ counsel told it to pay and it is using the privilege to hide that fact. That issue is not before the Court at this time. However, the Court will note that no negative inferences may be taken against a party asserting a privilege. Knorr-Bremse (Fed. Cir. 2004); Parker (4th Cir. 1990) (“To protect [the right to effective counsel], a client asserting the privilege should not face a negative inference about the substance of the information sought.”).

Park Plaza Condo Association v. The Travelers Indemnity et al, 44 MFR 188, 6/29/18.

Anders Blewett & Zander Blewett (Hoyt & Blewett), Great Falls, for Park Plaza; Jon Wilson & Guy Rogers (Brown Law Firm), Billings, and James Derrig (Derrig Law Firm), Seattle, for Defendants.