Yet it is clear from reading the documents themselves that Browne was instructed by Baker to create the memorandum.
The communications were not in complete confidence in that they were released to two non-lawyers, with the intention that they be relayed to insurance companies. Browne understood them to be used in this fashion, Browne Deposition, at 324-25, and the documents themselves confirm this. Browne did not recall that his communications were meant to be confidential. Id. at 386. The memorandum was disseminated, however, only to a select group of individuals with a need to know about the Bliss incident.
Plaintiffs repeatedly argue, incorrectly, that a communication to legal counsel is prima facie made to obtain legal advice. Diversified, at 610. The more complete, accurate statement made in Diversified is that a matter committed by a corporation to a legal adviser is prima facie so committed for the sake of legal advice to that corporation. It is far too expansive an interpretation to say that any communication made by any employee to a corporation's counsel is prima facie done so for legal advice and therefore is privileged absent some other showing.
The tension underlying discovery issues such as this lies between the need for outsiders to know what a corporation has done and the need for the corporation to secure effective legal advice. In this situation, plaintiffs suggest that all matters an employee thinks require the assistance of counsel should be privileged. From the documents, it is clear that there were no actual or threatened lawsuits at hand, just the possibility of lawsuits somewhere down the road. Browne volunteered the information to Baker without any expectation that it be kept secret. Unlike Upjohn and Diversified this was not a situation where counsel was conducting interviews of employees at the direction of the corporate control group. Therefore, it does not seem that the communication was made for the purpose of securing legal advice, nor that the employee was directed to make the communication except in a very general way. The communication was made with the expectation that it would be disseminated outside the corporate structure to the type of entities (insurance companies) which now seek to discover it. The communication is more in the nature of a routine report to the corporate counsel rather than an interview by the counsel of the employee at the specific direction of a corporate superior. Such reports will be made for independent business reasons whether privileged or not. Therefore, there is no need for a privilege to prevent an employee such as this from being inhibited in talking to counsel. The motion for reconsideration is denied.
III. Defendant Mission Insurance Company's Motion to Stay
On May 28, 1986, defendant Mission moved this court for an order staying all proceedings and trial in this action against Mission pending the outcome of rehabilitation proceedings begun in the Superior Court of the State of California. On October 31, 1985, the California Superior Court entered an order appointing the Insurance Commissioner of California as Conservator of Mission due to Mission's insolvency within the meaning of the California Insurance Code. Insurance Commissioner of California v. Mission Ins. Co., No. C 572724 (Cal.Super.Ct. Oct. 31, 1985). Pursuant to that order, all persons were enjoined by the court from instituting or maintaining any action at law or suit in equity against Mission or its Conservator.
Plaintiffs argue that the October 31 order has been superseded by a March 6, 1986 order by the same court which approved an application for authority to reinsure the business of Mission. Insurance Commissioner of California v. Mission Ins. Co., No. C 572724 (Cal.Super.Ct. Oct. 31, 1986). Basically, that order approved a rehabilitation plan worked out in a Letter Agreement between Mission and the California Insurance Commissioner. As plaintiffs see it, this effectively terminated the rehabilitation process and no stay is warranted.
This court reads the March 6, 1986 order as authorization by the Superior Court for the Conservator to proceed with a tentative plan for rehabilitation. A definitive agreement has not yet been reached; rather the court said that:
Upon the execution of the Definitive Agreement and other documents to carry out the provisions and intent of the Letter Agreement, the Insurance Commissioner shall file the appropriate application for approval of said Agreement or Agreements.
Id. at 4. The court did not vacate its October 31, 1986 order. Instead, it views the rehabilitation process as ongoing. This is not surprising since the Letter Agreement, to become effective, requires approval of three different state insurance commissions and of 70 percent of the reinsurers defined as having an interest. See Letter Agreement, Exhibit B to Plaintiffs' Opposition to Motion to Stay, filed June 11, 1986, at 10-11.
This court finds that the best interests of litigation are served by staying these proceedings as regards defendant Mission pending completion of the California state proceedings. See Dellinger v. Mitchell, 143 U.S. App. D.C. 60, 442 F.2d 782 (D.C. Cir. 1971). The purpose of rehabilitation is the preservation of the company and the removal of the causes of insolvency. It would be detrimental to plaintiffs and other Mission policy holders to allow suits to proceed against Mission at a time when it is struggling to lift itself from the brink of insolvency. For that reason, Mission's motion to stay is granted until such time as the rehabilitation process is complete and the Superior Court of California explicitly vacates its order of October 31, 1985. Mission shall continue to be served with all pleadings, discovery and correspondence, and shall be allowed to continue to attend hearings, pretrial proceedings, and depositions.
IV. Defendant Midland Insurance Company Motion to Dismiss/Stay
Defendant Midland moves this court to dismiss these proceedings as against it or, in the alternative, for a stay of all proceedings against it pending the outcome of liquidation proceedings before the Supreme Court of the State of New York. On April 3, 1986, an order of liquidation was filed in the Supreme Court authorizing and directing the New York Superintendent of Insurance to take possession of Midland's property and to liquidate the business and affairs of Midland. In Re Midland Insurance Company, No. 41294-1986 (N.Y. Sup.Ct. Apr. 3, 1986). The order provides that all claimants who have claims against Midland are permanently enjoined from bringing any action against Midland or the Superintendent. Instead, all claimants must file those claims in the liquidation proceeding.
Midland believes this court should afford that court's ruling full faith and credit, which would make proceeding before this court on claims against Midland a moot issue. Therefore, the action should be dismissed or, at a minimum, stayed pending the outcome of the liquidation proceeding. Anshutz v. J. Ray McDermott Co., 642 F.2d 94 (5th Cir. 1981); Janak v. Allstate Ins. Co., 319 F. Supp. 215 (W.D. Wis. 1970).
Plaintiffs believe that this matter should not be stayed against Midland because it would impose duplication of effort, delay and prejudice to plaintiffs. Plaintiffs believe abstention should be narrowly construed, especially when a case is fairly advanced. Plaintiffs reject Janak and Anshutz as not fitting the circumstances of this case. Plaintiffs argue that the matter should proceed against Midland since, even if it is bankrupt, liquidation merely vests the corporate charter in the New York Superintendent of Insurance.
This court finds that the matter should be stayed against Midland just as it should against Mission Insurance. The New York proceedings should be given deference to allow an orderly liquidation process. The matter should not be dismissed until the outcome of the proceedings is determined. The nature of this action, which is largely declaratory, is such that plaintiffs will not have to undergo a significant repetition of litigation if Midland survives the liquidation proceedings. Midland shall continue to be served with all pleadings, discovery, and correspondence, and shall be allowed to continue to attend hearings, pretrial proceedings, and depositions.
Today's Memorandum and Order do not address the remaining motions in this case. Still pending are INA's motion for partial summary judgment, plaintiffs' cross-motion against INA for partial summary judgment, Traveler's motion for partial summary judgment, Continental's motion for partial summary judgment, and Hartford's motion for partial summary judgment. Those motions remain under advisement.
After filing the motion, opposition, and reply papers to which they are entitled, plaintiffs and INA now seek to file supplemental papers regarding their cross-motions for partial summary judgment. To ensure an orderly progression of pleadings in this suit, the court declines to allow the parties to do this.
An appropriate Order accompanies this Memorandum.
ORDER-August 8, 1986, Filed
This matter comes before the court on plaintiffs' motion for reconsideration of the court's May 2, 1986 Memorandum and Order, defendant Mission Insurance Company's motion to stay proceedings against it, and Midland Insurance Company's motion to stay proceedings against it. After consideration of the motions, the opposition thereto, and the entire record herein, it is, by the court, this 7th day of August, 1986,
ORDERED that the May 2, 1986, Memorandum and Order and Declaration is modified to delete the requirement that the injury in fact be "diagnosable and compensable" during the policy period in order to trigger coverage; and it is further
ORDERED that in all other respects, plaintiffs' motion for reconsideration is denied; and it is further
ORDERED that defendant Mission Insurance Company's motion to stay is granted; and it is further
ORDERED that defendant Midland Insurance Company's motion to stay is granted; and it is further
ORDERED that INA's motion for leave to file a supplemental memorandum is denied; and it is further
ORDERED that plaintiffs' motion for leave to file a supplemental memorandum is denied.
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