In re Premera Blue Cross Customer Data Sec. Breach Litig.
In re Premera Blue Cross Customer Data Sec. Breach Litig.
Opinion of the Court
Michael H. Simon, United States District Judge *1237Plaintiffs bring this putative class action against Defendant Premera Blue Cross ("Premera"), a healthcare benefits servicer and provider. On March 17, 2015, Premera publicly disclosed that its computer network had been breached. Plaintiffs allege that this breach compromised the confidential information of approximately 11 million current and former members, affiliated members, and employees of Premera. The compromised confidential information includes names, dates of birth, Social Security Numbers, member identification numbers, mailing addresses, telephone numbers, email addresses, medical claims information, financial information, and other protected health information (collectively, "Sensitive Information"). According to Plaintiffs, the breach began in May 2014 and went undetected for nearly a year. Plaintiffs allege that after discovering the breach, Premera unreasonably delayed in notifying all affected individuals. Based on these allegations, among others, Plaintiffs bring various state common law claims and state statutory claims.
Before the Court is Plaintiffs' motion to compel. Plaintiffs request an order requiring Premera to produce certain documents, described by category, that Premera has withheld based on assertions of attorney-client privilege or protection under the attorney work-product doctrine. For the reasons discussed below, Plaintiffs' motion is granted in part and denied in part.
STANDARDS
A. Applicable Law
Plaintiffs originally argued that Oregon law, as the law of the forum state, applies to the parties' dispute regarding the scope of the attorney-client privilege. Premera responds that Washington law applies. In supplemental briefing, Plaintiffs concede that there is no material conflict between Oregon and Washington law on the specific issues of attorney-client privilege relevant to the pending motion. Thus, Plaintiffs do not oppose the application of Washington law. The parties also agree that federal law governs the work-product doctrine in federal court.
B. Attorney-Client Privilege
Washington law recognizes that "in our open civil justice system, parties may obtain discovery regarding any unprivileged matter that is relevant to the subject matter of the pending action" and that the attorney-client privilege is "an *1238exception to the general duty to disclose." Newman v. Highland Sch. Dist. No. 203 ,
Washington's attorney-client privilege provides that "[a]n attorney or counselor shall not, without the consent of his or her client, be examined as to any communication made by the client to him or her, or his or her advice given thereon in the course of professional employment." RCW 5.60.060(2)(a). But the attorney-client privilege does not automatically shield any conversation with any attorney. To qualify for the privilege, communications must have been made in confidence and in the context of an attorney-client relationship. It is a narrow privilege and protects only communications and advice between attorney and client. The privilege extends to corporate clients and may encompass some communications with lower level employees, as both the United States Supreme Court and this court have recognized.
The attorney-client privilege does not shield facts from discovery, even if transmitted in communications between attorney and client. Rather, only privileged communications themselves are protected in order to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice. The attorney-client privilege recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyer being fully informed by the client. However, because the privilege sometimes results in the exclusion of evidence which is otherwise relevant and material, contrary to the philosophy that justice can be achieved only with the fullest disclosure of the facts, the privilege cannot be treated as absolute; rather, it must be strictly limited to the purpose for which it exists.
Id. at 777-78,
It is well accepted that "[t]he attorney client privilege is limited to information related to obtaining [legal] advice." Mechling v. City of Monroe ,
In evaluating assertions of the attorney-client privilege in a corporate setting, the Washington Supreme Court has adopted the U.S. Supreme Court's "flexible" approach set forth in *1239Upjohn Co. v. United States ,
whether the communications at issue (1) were made at the direction of corporate superiors, (2) were made by corporate employees, (3) were made to corporate counsel acting as such, (4) concerned matters within the scope of the employee's duties, (5) revealed factual information not available from upper-echelon management, (6) revealed factual information necessary to supply a basis for legal advice, and whether the communicating employee was sufficiently aware that (7) he was being interviewed for legal purposes, and (8) the information would be kept confidential.
Id. at 778-779,
C. Work-Product Doctrine
The work-product doctrine "is not a privilege but a qualified immunity protecting from discovery documents and tangible things prepared by a party or his representative in anticipation of litigation." Admiral Ins. Co. v. U.S. Dist. Court for the Dist. of Ariz. ,
When materials are prepared for a "dual purpose," meaning they are not prepared exclusively for litigation, then the "because of" test applies.
The work-product doctrine also affords special or heightened protection to materials that reveal an attorney's mental impressions and opinions, i.e. , "opinion" or "core" work product. Admiral Ins. Co. ,
The primary purpose of the work-product doctrine is to "prevent exploitation of a party's efforts in preparing *1240for litigation." Admiral Ins. Co. ,
D. Common Interest Doctrine
"The 'common interest' doctrine provides that when multiple parties share confidential communications pertaining to their common claim or defense, the communications remain privileged as to those outside their group." Sanders v. State ,
DISCUSSION
Plaintiffs move to compel production of four categories of documents. Plaintiffs seek: (1) documents that Premera asserts incorporate the advice of counsel, but were not prepared by or sent to counsel; (2) documents that Premera asserts were prepared at the request of counsel, but were not prepared by or sent to counsel and appear to be business documents not prepared because of litigation; (3) documents that relate to third-party vendor work on the data breach investigation and remediation, including Mandiant's work for Premera and other third-party vendors working on technical and public relations aspects of the investigation and analysis; and (4) documents that Premera is withholding, despite being sent to third-parties, based on what Plaintiffs contend is an improper assertion of the joint defense or common interest exception to waiver of privilege. Premera responds that the first three categories involve documents prepared by either Premera employees or third party vendors hired by outside counsel at the request of counsel or under the supervision of counsel. Thus, argues Premera, they are properly withheld as privileged or as protected under the work-product doctrine. Premera further responds that it properly entered into common interest agreements with other Blue Cross-related entities, and thus there was no waiver of privilege for documents sent to those entities.
Plaintiffs also argue that Premera is required to produce certain documents based on the fiduciary exception to the attorney-client privilege because Premera admits that some of the plans involved are governed by the Employee Retirement Income Security Act of 1974 ("ERISA"). Premera responds that the Court's earlier decisions on Premera's motions to dismiss render this argument without merit, that Washington has not yet adopted the fiduciary exception, and that even if the exception applies in Washington it would not apply to the specific documents being withheld in this case.
A. Application of Attorney-Client Privilege and Work-Product Doctrine
1. Documents that Premera asserts incorporate advice of counsel, but were not prepared by or sent to counsel (Category 1)
The documents in Category 1 were drafted by persons who are not attorneys and were sent to and from persons who are not attorneys. Although these documents contain or reference business, *1241technical, or public relations information, Premera argues that they are properly withheld as privileged because they are "drafts" that incorporate the advice of counsel. Some of these documents include edits or "redlines" from counsel. Others are drafts prepared by counsel that include edits or redlines by Premera personnel who are not attorneys. For some of these drafts, Premera has produced to Plaintiffs the final version, e.g. , certain press releases and notices.
Premera argues that Washington's law on attorney-client privileged communications is broader than the law governing other jurisdictions. Premera asserts that under Washington law any communication made during the course of an attorney-client relationship, regardless of whether the communication pertains to business or legal advice, is protected. In support of this broad proposition, Premera primarily relies on a state trial court's opinion in Sanders v. State ,
The Washington Supreme Court recently reiterated, after quoting Washington's privilege statute, that the attorney-client privilege is a "narrow privilege," that it "does not shield facts from discovery, even if transmitted in communications between attorney and client," and that it "must be strictly limited to the purpose for which it exists." Newman ,
Considering the attorney-client privilege as explained by Washington's appellate courts, it appears that many of the documents in Category 1 being withheld by Premera are not protected under the attorney-client privilege. Premera has withheld entire drafts of documents that it was required as a business to prepare in response to the data breach. Premera prepared press releases and notices to be sent to its customers. The fact that Premera planned eventually to have an attorney review those documents or that attorneys may have provided initial guidance as to how Premera should draft internal business documents does not make every internal draft and every internal communication relating to those documents privileged and immune from discovery.
All of the withheld documents are not internal factual or investigatory reports prepared at the request of counsel to inform counsel of the underlying facts so that counsel can provide adequate legal advice or representation, such as was the case in Doehne , relied on by Premera. Instead, the Category 1 documents include business documents that the company would have prepared regardless of any concern about litigation. Placing them under the supervision of outside counsel and then labelling all communications relating to them as privileged does not properly *1242establish an attorney-client privilege. The focus of the privilege must be the purpose for which a document was created. See Doehne ,
There may be some documents, however, that contain protected attorney-client communications, such as drafts that include edits or redlines by an attorney communicating legal advice. If underlying edited or redlined documents contain legal advice from counsel, those documents (or at least the edits or redlines) are entitled to protection. Although an attorney may wear "two hats" when reviewing a document for both a business and a legal purpose, some of the documents described in Category 1 appear to have been created with anticipated litigation in mind. Therefore, when an edit or redline was not done solely for a business purpose and the edit or redline communication appears to constitute legal advice under Washington's law of attorney-client privilege, that edit or redline need not be disclosed. Additionally, if there are documents for which the primary purpose was to prepare for litigation, to advise counsel of underlying facts to help with counsel's legal representation, or otherwise to communicate with counsel for the purpose of receiving legal advice or representation, those documents would be protected under the attorney-client privilege.
2. Documents that Premera asserts were prepared at the request of counsel, but were not prepared by or sent to counsel and appear to be business documents not prepared because of litigation (Category 2)
The documents in Category 2 include those prepared by Premera employees and third-party vendors who are not attorneys. According to Premera, these documents contain information requested by counsel, including information relating to technical aspects of the breach and its mitigation, company policies, public relations and media matters, and remediation activities. The third-party vendors were retained by Premera's outside counsel. Premera argues that the documents are properly withheld as both privileged and protected under the work-product doctrine. Premera asserts that these are documents that were prepared primarily in anticipation of litigation and for the purpose of facilitating legal advice.
a. Attorney-client privilege
As with the Category 1 documents, the Court finds that the primary purpose of many of the documents in Category 2 was not to communicate with counsel or obtain legal advice, Morgan ,
*1243Lumber v. PPG Indus., Inc. ,
Premera relies primarily on In re Copper Market Antitrust Litig. ,
The same is true of the other business functions that Premera delegated to its outside counsel for supervision. Premera has not met its burden of demonstrating that all of these documents are privileged. Accordingly, drafts of documents prepared by Premera employees and third-party vendors relating to the business functions that Premera had to perform regardless of litigation, including preparing press releases, media interactions, and notices, are not privileged. Communications relating to those drafts similarly are not automatically privileged. If, however, communications were sent to or from counsel seeking or providing actual legal advice, such as about possible legal consequences of proposed text or an action being contemplated by Premera, then such communications would be privileged. See Dawson v. New York Life Ins. Co. ,
b. Work-product protection
Assuming without deciding that the Category 2 draft documents and communications had a dual purpose-both business and legal, the Court must consider whether the communications and documents were prepared "because of" the prospect of litigation. Richey ,
3. Documents that relate to Mandiant's work for Premera, including the Mandiant Remediation Report, and other third-party vendors' technical and public relations aspects of the investigation and analysis (Category 3)
a. Mandiant
The facts surrounding the Mandiant report(s) are not particularly clear to the Court. Plaintiffs move to have Premera produce the Mandiant "Remediation Report." Premera states that it already has produced the Mandiant "Intrusion Report," subject to an agreement that such production does not constitute a waiver of privilege, but adds that drafts and other *1245documents relating to that report are privileged and protected by the work-product doctrine. It is not clear to the Court whether the "Intrusion Report" and "Remediation Report" are two different documents.
Mandiant was hired by Premera in October 2014 to review Premera's data management system. On January 29, 2015, Mandiant discovered the existence of malware in Premera's system. On February 20, 2015, Premera hired outside counsel in anticipation of litigation as a result of the recently discovered data breach. On February 21, 2015, Premera and Mandiant entered into an amended statement of work that shifted supervision of Mandiant's work to outside counsel. The amended statement of work, however, did not otherwise change the scope of Mandiant's work from what was described in the Master Services Agreement between Mandiant and Premera entered into on October 10, 2014. Several weeks after the February 21st agreement, Mandiant issued a report.
Premera argues that Mandiant is the equivalent of a private investigator or other investigative resource hired by an attorney to conduct an investigation on behalf of an attorney, and thus that Mandiant's work is privileged and protected as work-product. The flaw in Premera's argument, however, is that Mandiant was hired in 2014 to perform a scope of work for Premera, not outside counsel. That scope of work did not change after outside counsel was retained. The only thing that changed was that Mandiant was now directed to report directly to outside counsel and to label all of Mandiant's communications as "privileged," "work-product," or "at the request of counsel." Premera argues that, with respect to Mandiant, after the breach was discovered and outside counsel was hired it became an entirely different situation. The amended statement of work, however, does not support that assertion. The only thing that appears to have changed involving Mandiant was the identity of its direct supervisor, from Premera to outside counsel. The amended statement of work confirms that the scope of the work remained the same. Thus, Premera's argument that Mandiant's focus shifted in February 25, 2015, and that Mandiant then became more like an investigator working on behalf of outside counsel instead of performing its original role on behalf of Premera, is not supported by the amended statement of work.
This situation is unlike the Target data breach case relied upon by Premera. In Target , the company performed its own independent data breach investigation that was produced in discovery and the attorneys performed a separate investigation through a retained expert company that was privileged and protected from discovery. In re Target Corp. Customer Data Sec. Breach Litig. ,
This situation also is unlike the Experian case relied on by Premera. In re Experian Data Breach Litig. , Case No. 8:15-cv-01592-AG-DFM (C.D. Cal.). In that case, outside counsel was hired by the company and outside counsel then hired Mandiant.
Considering work-product protection, the Court looks at the "dual-purpose" test. Looking at the totality of the circumstances, particularly the fact that the amended statement of work did not change the scope of work and there is no evidence that Mandiant changed its scope or purpose at the direction of outside counsel, the Court concludes that Premera has not shown that all of the underlying documents relating to the Mandiant reports were created because of anticipated litigation and "would not have been created in substantially similar form but for the prospect of litigation." Richey ,
b. Third-party vendors
The analysis for these Category 3 documents is the same as for the documents in Categories 1 and 2. These are the documents created by the third-party vendors hired by outside counsel. Many of these documents appear to be related to business functions delegated to counsel. There appear to be some documents, however, that are or may be related to legal functions and are thus properly protected by the attorney-client privilege or work-product doctrine. The documents relating to Epiq appear to be legal in nature and thus not a business function; they may be withheld. There also appear to be several electronic discovery vendors for whom it is unclear whether the work performed is of a legal or business nature. Premera provided the Court with the written agreement between Altep, Inc. and Premera, which references a statement of work, but Premera did not provide a copy of the statement of work. Without reviewing the statement of work, it is not clear whether Altep was performing litigation discovery services for counsel or computer technical assistance services for Premera. If it was the former, then Altep would not be performing a business function and the information would be privileged or protected by the work-product doctrine. Similarly, e-Discovery, iDiscover, LLC, and Navigant are vendors that appear to be providing services relating to electronic discovery or discovery-related computer forensic assistance. If those services are being performed for counsel as litigation-support for discovery, they would not constitute non-legal business functions and would be privileged or protected by the work-product doctrine. If, however, they are services being performed for the benefit of Premera as part of the investigation or remediation *1247of the breach, they likely would be a business function and thus discoverable. The other third-party vendors appear to be performing business functions and thus their documents and communications would not be protected by privilege or work-product.
Premera argues that under Upjohn and Washington law attorneys are entitled to obtain factual information from third parties in order to be able to provide legal advice. First, the Court notes that the Washington Supreme Court, although noting that Washington has adopted Upjohn , also expressly noted that "[t]he attorney-client privilege does not shield facts from discovery, even if transmitted in communications between attorney and client." Newman ,
4. Documents that Premera is withholding, despite being sent to third-parties, based on what Plaintiffs contend is an improper assertion of the joint defense (or common interest) exception (Category 4)
The documents described in Category 4 involve Premera's assertion of a common interest or joint defense exception to waiver of privilege for other entities, such as Blue Cross Blue Shield, CareFirst,
Generally, joint defense or common interest parties are parties within the same litigation. Cf. C.J.C. ,
Broyles involved a situation where a group of four employees visited two attorneys to discuss a situation at work and decide whether to bring claims of sexual harassment and hostile work environment. Id. at 417, 441,
Broyles , however, does not support Premera's contention that defendants in separate lawsuits based on separate data breaches occurring on separate occasions nevertheless can invoke the common interest doctrine when they discuss related legal issues and concepts. Broyles supports the traditional interpretation of "common" interest-that the parties share either a claim or potential liability in "common," which depends on a common nucleus of operative facts. Generally, this means that the common interest parties are in the same lawsuit, or at the minimum may share a common or related liability or claim. See also Mockovak v. King Cty. ,
Premera stretches the definition of "common interest" beyond reasonable bounds. Under Premera's interpretation, different people or entities around the country that have a similar alleged product defect, or allegedly engaged in similar fraudulent schemes, or have been accused of similar forms of misconduct generally can claim a common interest and enter into common interest agreements. Under Premera's argument, as long as the claims asserted against those parties are the same or reflect the same the theory of liability, then they would have a "common" defense. That is not, however, how the common interest or joint defense doctrine works.
The common interest agreement between Premera and the Anthem entities fails under the proper definition of a "common"
*1249interest because that agreement involves different underlying data breaches. The common interest agreement between Premera and the Blue Cross and Blue Shield Association, however, states that its underlying matters "involve claimed liability for and as a result of a recent criminal intrusion into Premera's computer systems" (emphasis added). This appears to indicate that the potential shared liability is specific to the intrusion that is the subject matter of this pending litigation. To the extent that there are other matters arising out of the very same intrusion at issue in this case, and thus involving the same nucleus of operative facts that are part of this case, they would be part of the common liability and subject to the protections of the common interest doctrine. The agreement continues, however, to state that it includes litigation and investigations "involving other conduct alleged to be similar to or connected with" the intrusion (emphasis added). Data breaches that merely are "similar to" the underlying data breach or otherwise somehow "connected with" it are not a common liability, properly understood, with this case and thus are not properly subject to the common interest doctrine. From the Court's review of the matters identified or described in Schedule A that was attached to the purported common interest agreement, they are all cases that are included in the multi-district litigation before this Court concerning the data breach at Premera. Thus, those parties are properly part of a common interest agreement. To the extent, however, that any documents were shared with any third party whose purported common interest is not based on the same underlying data breach as is the subject matter in this case, there is no common interest doctrine protection for those disclosures.
As discussed above, communications between Premera and entities with data breaches other than the data breach that is the subject of this case, even if the data breach is "similar" or "connected to," are not protected by the common interest doctrine. Thus, those communications are not privileged, and otherwise privileged information contained in such communications has had the privilege waived. Regarding the scope of this waiver, "[t]he widely applied standard for determining the scope of a waiver of attorney-client privilege is that the waiver applies to all other communications relating to the same subject matter." Fort James Corp. v. Solo Cup Co. ,
Plaintiffs also move to compel production of the common interest agreements themselves, relying on federal case authority. Although there is no Washington case on point, the Washington Court of Appeals has cited with approval federal cases discussing the common interest doctrine. See Kittitas Cty. ,
*1250(unpub.). Premera does not specifically respond to this argument or legal authority, other than to state that it has described the agreements and that it has produced a "sample" agreement. This response is neither persuasive nor sufficient. Moreover, in light of the fact that the Court finds most of the claim of common interest not to be valid and that the Court has reviewed the agreements and finds them not to contain privileged information, the Court directs that the agreements themselves be produced.
B. Redactions
Plaintiffs argue that Premera may redact documents that contain some privileged and some nonprivileged information and must then produce the nonredacted portions. The Court agrees. When an email chain contains an email that is privileged or contains privileged information and the remaining emails in that chain do not contain privileged information, the privileged material may be redacted but the remaining material must be produced.
The Court notes that Premera represents that some email chains contain no more than "FYI" or the like for the nonprivileged portion and that it would be burdensome to redact the entire privileged portion to only produce a document containing "FYI." The Court agrees. But that was done before this Court issued this Opinion and Order, in which many of Premera's privilege assertions have been rejected. Going forward, if there is an email string and the only nonprivileged portion is something without substance such as "FYI," Premera need only identify it as such on the privilege log and need not redact and produce the meaningless nonprivileged portion.
C. Fiduciary Exception to the Attorney-Client Privilege
Plaintiffs argue that, for purposes of the attorney-client privilege in the ERISA context, the "real client" on matters of plan administration is not the trustee but the plan beneficiaries, citing to United States v. Mett ,
The Court previously ruled that Plaintiffs failed to state a claim under state law for breach of fiduciary duty. In re Premera Blue Cross Customer Data Sec. Breach Litig. ,
Regarding whether the so-called fiduciary exception to attorney-client privilege applies in Washington, Plaintiffs argue that it is not an exception at all. Plaintiffs *1251quote Mett , in which the Ninth Circuit explained that "the fiduciary exception is not an 'exception' to the attorney-client privilege at all. Rather, it merely reflects the fact that, at least as to advice regarding plan administration, a trustee is not 'the real client' and thus never enjoyed the privilege in the first place." Mett ,
The Court need not reach the issue of the scope of Premera's fiduciary obligations under ERISA or whether the so-called fiduciary exception applies in Washington. Even assuming that Premera has fiduciary obligations and that the so-called fiduciary exception applies in Washington, the types of documents that the Court has allowed Premera to maintain as privileged, as more fully described above, are all documents that are "defensive on the trustees' part and aimed at advising the trustees how far they were in peril." Mett ,
CONCLUSION
Plaintiffs' Motion to Compel (ECF 110) is GRANTED IN PART AND DENIED IN PART as described in this Opinion and Order.
IT IS SO ORDERED.
Although Premera referred to "CareFirst" at oral argument, that entity does not appear to be a party to any of the common interest agreements. If the Court's conclusion is incorrect, Premera has leave to provide additional documentary support.
The Court does not imply that there are no circumstances under which the common interest doctrine could apply to separate lawsuits. There may, for example, be circumstances in which parties share a common liability based on the same underlying set of facts but because of diversity issues some defendants are sued in state court and others are sued in federal court. The Court is not making any ruling about such a circumstance.
Reference
- Full Case Name
- IN RE: PREMERA BLUE CROSS CUSTOMER DATA SECURITY BREACH LITIGATION This Document Relates to All Actions.
- Cited By
- 6 cases
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- Published