Lukee Enterprises, Inc. v. New York Life Insurance

MEMORANDUM OPINION

Plaintiffs bring this action against three defendant insurance companies to collect on certain insurance policies. Federal jurisdiction is based solely on grounds of diversity of citizenship.

Presently at issue is plaintiffs’ Motion for an order striking notice of deposition of William B. Bonds, C.P.A.; for an order quashing the subpoena served upon him which would compel his attendance at deposition proceedings; and for a protective order prohibiting further attempts to obtain his deposition.

Plaintiffs seek this order because Bonds is a certified public accountant and it is claimed that any knowledge or information which he has relating to Charles M. Preston or Lukee Enterprises, Inc., was supplied to him by privileged communications from them. It is contended these communications are privileged by operation of N.M.S.A. § 20-1-121 and N.M.S.A. § 67-23-262, New Mexico’s accountant-client privilege statutes.

Plaintiffs contend that Bonds will not be called as a witness, and that their claim does not put the “financial aspects and dealing of plaintiffs” into issue. Defendants, however, claim full discovery is necessary to their defense. They also maintain the Plaintiffs have waived any privilege they may have by bringing the action.

The specific question presented is whether a federal court, in a diversity case, should accord an accountant-client privilege granted by state statute.

Federal courts in such matters of privilege in diversity cases generally follow state statutes and decisional law. Although some courts and the proposed Rules of Evidence for the United States District Courts and Magistrates disregard state law in diversity cases3, the weight of authority favors application of state law in such cases4. In so applying state privilege statutes some courts have based their decision on the premise that under the Erie doctrine a privilege confers a substantive right which is beyond regulation by the Federal Rules of Civil Procedure5. Many *23other courts, while giving effect to the state-created privileges, both in terms of admission of evidence under Rule 43(a) and in terms of discovery under Rule 26(b), have not placed the result on the compulsion of Erie.6 They have relied either upon the reference to state law in Rule 43 (a) and the practice in the federal courts prior to the adoption of the federal rules, or on the principle of accommodating the policy of the state.

It is not necessary to select among the various grounds cited for application of state statutory privileges in a diversity case to conclude that the privilege claimed by plaintiffs in this case should be recognized and accorded.

The doctrine of waiver and numerous cited cases 7 supporting this doctrine advanced by defendants is not at the present time applicable in this action. In those cases, the plaintiffs were seeking to protect from discovery by claim of privilege evidence which they intended to use or which was needed to support their ease. A different situation is present here. The plaintiffs have not by the mere filing of this action waived the privilege. The matters as to which defense seeks to inquire of the accountant are not in areas necessary to maintain plaintiffs’ claim, but relate solely to matters which defendants have put in issue and as to which they have the burden of proof.

No ruling is indicated or required at this time on whether the plaintiffs may have waived their privilege by virtue of testimony to date.

Plaintiffs’ Motion for an order striking notice of deposition of William B. Bonds and for an order quashing the subpoena served on Bonds will be granted.