Fidelity National Title Ins. Co. v. Harlow, Adams & Friedman, P.C. et al. (2013)

MEMORANDUM OF DECISION RE MOTION TO COMPEL (# 120)

FACTS

The plaintiff, Fidelity National Title Insurance Company (Fidelity) commenced a nine-count complaint against the defendants Harlow, Adams & Friedman, P.C.'s (Harlow Adams), Stephen P. Wright Esq., Michael P.A. Williams, Esq., George W. Adams, III, Esq., James M. Nugent, Esq. and Michael Calise.   The defendants Wright, Williams, Adams and Nugent were at all relevant times employed by the defendant Harlow Adams.   The plaintiff's complaint alleges the following.   On or around October 2006, Calise obtained a $2.5 million dollar loan from Fairfield County Bank f/k/a Fairfield County Bank Corp. (FCB) pursuant to a refinance application and a commitment letter.   In connection with the $2.5 million dollar loan, Calise provided a mortgage to FCB on both properties he owned in Westport, located at 8 Sylvan Road South (Sylvan Road Premises) and at 215 Post Road West (Post Road Premises), and at all relevant times was a client of Harlow Adams.   In connection with the loan, the plaintiff issued title insurance and Harlow Adams issued the policy pursuant to the Issuing Agency Agreement (Agreement) entered into between the plaintiff and Harlow Adams on September 23, 2007.   The Agreement obligated Harlow to, inter alia, keep safely and segregated all monies that may be entrusted to it by the plaintiff or others, exercise a fiduciary with respect to the owners of the funds so deposited, and be solely liable for any and all losses arising by reason of its improper, unauthorized, reckless or premature disbursement of any escrowed funds.

FCB recorded a mortgage relating to the $2.5 million loan on the Sylvan Road Premises and on the Post Road Premises on October 4, 2006.   In connection with the loan, a commitment letter was issued by FCB and required, as a condition to the loan to Calise, that an existing mortgage on the Post Road Premises, held by B & M Investments, LLC (B & M) in the principal amount of $1.6 million dollars, be paid out of the proceeds of the $2.5 million dollar loan thereby giving FCB's Post Road Mortgage first lien position on the property.   Harlow Adams, as agent for Calise in closing his loan to FCB was obligated under the commitment letter to disburse that portion of the $2.5 million loan, which it held in escrow, to B & M thereby ensuring FCB was in first lien position on the Post Road Premises.

By Assignment dated October 4, 2006, and recorded on October 6, 2006, in the Westport land records, FCB assigned its interest in both the Post Road Mortgage and the Sylvan Road Mortgage to Ridgefield Bank Mortgage Corporation (Ridgefield Bank).   As FCB's successor-in-interest, Ridgefield Bank became the plaintiff's insured party in regard to the $2.5 million loan.   By order dated August 18, 2006, the Bankruptcy Court (Schiff, J.), in the Calise Bankruptcy, ordered that the B & M Mortgage on the Post Road Premises be treated as a secured claim and be paid and satisfied in full and discharged and released as a matter of law.   Pursuant to the commitment letter and the August 18, 2006 order, the B & M mortgage was to be paid and satisfied in full and discharged and released upon receipt by B & M of $1,651,000.   The plaintiff further alleges that upon information and belief, Attorney Williams sent a Trustee Check in the amount of $1,631,000 (B & M payoff) to B & M on or about October 4, 2006, in full satisfaction of the debt since installment payments had been made decreasing the final sum due from $1,651,000 to $1,631,000.   B & M rejected tender of the $1,631,000 and appealed Judge Schiff's order which was ultimately affirmed by the Second Circuit on November 30, 2009.   On December 9, 2009, and pursuant to the November 30, 2009 order, B & M demanded payment of the $1,631,000, but Calise objected and claimed that B & M waived its right by refusing payment in October 2006.   On January 27, 2010, B & M filed a motion to compel payment, which was granted by the Court (Schiff, J.) on June 18, 2010.   Notwithstanding that the Harlow Adams defendants were holding the B & M payoff in trust and in their capacity as escrow agents, the $1,631,000 was released by Harlow Adams to Calise personally.   Instead of maintaining the money in escrow while any dispute was resolved in the Calise Bankruptcy, the Harlow Adams defendants released the funds absent further, effective instruction or court order.   Because Harlow Adams did not use the funds it held in escrow to pay off the B & M mortgage, it remained in first lien position on the Post Road Property ahead of FCB's successor-in-interest and plaintiff's insured, Ridgefield Bank.

On or about January 14, 2011, the Bankruptcy Court entered a Stipulation and Oder which directed Calise to make certain payments to B & M in connection with the debt owed to B & M. The Stipulation and Order required Calise to make the final payment of $1,081,211.20 on or before April 30, 2011.   Failure to make such payment would result in the stay in the Superior Court foreclosure action to be lifted and B & M, at its option, could file a motion seeking to enter judgment in the amount of $4,362,774.11 plus interest at 10% per annum after October 31, 2010, plus attorneys fees.   On or about April 21, 2011, the plaintiff learned that Calise would not be making the final payment which could have resulted in potential liability to the plaintiff as insurer in the amount of $2.5 million.   In order to mitigate its damages, on May 2, 2011, the plaintiff paid $781,211.20 to B & M, which together with a payment on behalf of Harlow Adams, constituted full tender of the final payment that was accepted by B & M as full payment of all amounts due and owing.   The May 2, 2011 payment by the plaintiff to B & M restored Ridgefield Bank to its first lien position on the Post Road Premises per the commitment letter and agreement between Calise and the Bank, and as insured by the plaintiff.   In paying B & M, the plaintiff alleges that it performed the obligation owed by Calise pursuant to the commitment letter and pursuant to the January 14, 2011 Stipulation and Order.   The plaintiff claims that as a result of the defendants' actions it has been damaged and continues to be damaged and the defendants are liable for such damages.   Count one of the complaint sounds in breach of contract against Harlow Adams;  count two sounds in negligent performance of contract against Harlow Adams;  count three sounds in negligence against Harlow Adams;  count four sounds in common-law indemnification against Harlow Adams;  count five sounds in statutory indemnification against Harlow Adams;  count six is a claim of subrogation of Ridgefield Bank's rights as third-party beneficiary as to Harlow Adams;  count seven is a claim of subrogation of Ridgefield Bank's rights under the escrow agreement as against Harlow Adams;  count eight is a subrogation claim of Ridgefield Bank's escrow negligence claim as against Harlow Adams;  and count nine is a claim of unjust enrichment against Michael Calise.

On July 18, 2012, the defendant Harlow Adams filed and served its objections to the plaintiff's interrogatories and requests for production which were served on the defendants on June 4, 2012.   On February 22, 2013, the plaintiff filed a motion to compel the defendants to provide substantive responses to its interrogatories and request for production.   The motion to compel was originally scheduled on this court's non-arguable short calendar on March 11, 2013.   This court scheduled this matter for oral argument at short calendar on March 25, 2013.

DISCUSSION

The defendant Harlow Adams has objected to a number of the plaintiff's interrogatories and requests for production on grounds that some of the information sought was already transmitted to and in the possession of the plaintiff, the interrogatories seek disclosure of personal and confidential banking information and also seek disclosure of confidential information protected by rule 1.6 of the Connecticut Rules of Professional Conduct.

“Our Supreme Court has noted:  ‘[The] rules of discovery are designed to make a trial less a game of blindman's bluff and more a fair contest with the basic issues and facts disclosed to the fullest practicable extent ․’ (Internal quotation marks omitted.)  Wexler v. DeMaio, 280 Conn. 168, 188–89, 905 A.2d 1196 (2006), quoting United States v. Procter & Gamble Co., 356 U.S. 677, 682, 78 S.Ct. 983, 2 L.Ed.2d 1077 (1958).”  Travelers Property & Casualty Co. v. Christie, 99 Conn.App. 747, 759, 916 A.2d 114 (2007).

Documents and tangible things prepared in the ordinary course of business are clearly discoverable under Practice Book § 13–2.  Practice Book § 13–2 provides in relevant part:  “In any civil action ․ where the judicial authority finds it reasonably probable that evidence outside the record will be required, a party may obtain in accordance with the provisions of this chapter discovery of information or disclosure, production and inspection of papers, books, documents and electronically stored information material to the subject matter involved in the pending action, which are not privileged, whether the discovery or disclosure relates to the claim or defense of the party seeking discovery or to the claim or defense of any other party, and which are within the knowledge, possession or power of the party or person to whom the discovery is addressed.   Discovery shall be permitted if the disclosure sought would be of assistance in the prosecution or defense of the action and if it can be provided by the disclosing party or person with substantially greater facility than it could otherwise be obtained by the party seeking disclosure.   It shall not be ground for objection that the information sought will be inadmissible at trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence.”   See West Hartford v. Murtha Cullina, LLP, 85 Conn.App. 15, 27, 857 A.2d 354 (2003), cert. denied, 272 Conn. 907, 863 A.2d 700 (2004).

Our Supreme Court has also “long recognized that the granting or denial of a discovery request rests in the sound discretion of the [trial] court ․” (Internal quotation marks omitted.)  Barry v. Quality Steel Products, Inc., 280 Conn. 1, 16–17, 905 A.2d 55 (2006).  “That discretion is limited, however, by the provisions of the rules pertaining to discovery ․ especially the mandatory provision that discovery ‘shall be permitted if the disclosure sought would be of assistance in the prosecution or defense of the action ․’ The court's discretion applies to decisions concerning whether the information is material, privileged, substantially more available to the disclosing party, or within the disclosing party's knowledge, possession or power ․” (Citations omitted;  internal quotation marks omitted.)  Standard Tallow Corp. v. Jowdy, 190 Conn. 48, 57–60, 459 A.2d 503 (1983).   The plaintiff's cited discovery requests fall into two categories:  1) requests for information and documentation regarding the receipt and disbursement of proceeds for the FCB loan transaction by Harlow Adams, as escrow or title agent;  and 2) requests for information and documentation regarding any notices Harlow Adams provided to FCB regarding certain key facts and circumstances at issue in this action.   More specifically, the plaintiff's discovery requests seek information regarding “(i) the receipt and disbursement of FCB loan proceeds by Harlow Adams;  (ii) communications between Harlow Adams and FCB concerning Harlow Adams' administration of the FCB loan proceeds;  (iii) communications with B & M concerning remittance of payment on account of the B & M claim;  and (iv) communications between Harlow Adams and Fidelity concerning Harlow Adams' administration of the FCB loan proceeds.”   The documents and information concerning Harlow Adams' receipt and subsequent disbursement of the proceeds of the FCB loan transaction that the plaintiff has requested are discoverable under Practice Book § 13–2 because such information requested relates to the plaintiff's claims in this case and “would be of assistance in the prosecution ․ of the action ․” Connecticut Practice Book § 13–2.   As the plaintiff correctly points out in its brief, the central issue in this case is the transfer and handling of funds received by Calise pursuant to the FCB loan in which he agreed to deliver $1,631,000 of the proceeds of the FCB loan to B & M in satisfaction of the B & M Mortgage.   In addition, Harlow Adams, pursuant to the Agency Agreement, agreed to the plaintiff's oversight of its escrowed moneys and accepted fiduciary duties when it acted as escrow agent.   Accordingly, in accordance with the rules of discovery as stated above, the court finds that the information and documentation requested by the plaintiff is discoverable.

The defendant further argues that the information and documentation is protected by the attorney-client privilege as enunciated in Rule 1.6 of the Connecticut Rules of Professional Conduct.  Rule 1.6 of the Rules of Professional Conduct provides in relevant part that “[a] lawyer shall not reveal information relating to representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation, or the disclosure is permitted by subsection (b), (c), or (d).”  “In Connecticut, the attorney-client privilege protects both the confidential giving of professional advice by an attorney acting in the capacity of a legal advisor to those who can act on it, as well as the giving of information to the lawyer to enable counsel to give sound and informed advice.”  (Internal quotation marks omitted.)  Harp v. King, 266 Conn. 747, 769 n.27, 835 A.2d 953 (2003).  “The basic principles of the attorney-client privilege are undisputed.   Communications between client and attorney are privileged when made in confidence for the purpose of seeking legal advice ․ Connecticut has a long-standing, strong public policy of protecting attorney-client communications.”  (Citations omitted;  internal quotation marks omitted.)  Gould, Larson, Bennet, Wells & McDonnell, P.C. v. Panico, 273 Conn. 315, 321, 869 A.2d 653 (2005).   The attorney-client privilege “was designed, in large part, to encourage full disclosure by a client to his or her attorney so as to facilitate effective legal representation ․ Rule 1.6(a) 1 of the Rules of Professional Conduct effectuates that goal by providing in relevant part that [a] lawyer shall not reveal information relating to representation of a client unless the client consents after consultation ․ The attorney-client privilege seeks to protect a relationship that is a mainstay of our system of justice ․ Indeed, this court has stated:  It is obvious that professional assistance would be of little or no avail to the client, unless his legal adviser were put in possession of all the facts relating to the subject matter of inquiry or litigation, which, in the indulgence of the fullest confidence, the client could communicate.   And it is equally obvious that there would be an end to all confidence between the client and attorney, if the latter was at liberty or compellable to disclose the facts of which he had thus obtained possession;  and hence it has become a settled rule of evidence, that the confidential attorney, solicitor or counselor can never be called as a witness to disclose papers committed or communications made to him in that capacity, unless the client himself consents to such disclosure.”  (Internal quotation marks omitted.)  Woodbury Knoll, LLC v. Shipman & Goodwin, LLP, 305 Conn. 750, 768, 48 A.3d 16 (2012).

There is a distinction between the confidentiality requirement contained in Rule 1.6 and the common-law principle of attorney-client privilege.   “[W]hile Rule 1.6 may be applicable to conversations with plaintiff's counsel ․ Rule 1.6 is inapplicable to discovery requests and deposition questions ․ Defendants do not specify what subsection of Rule 1.6 applies when the law firm is hired to collect a debt, and not in the context of providing legal advice ․ [T]he privilege does not apply where, as here, an attorney or law firm is acting as a business advisor or collection agent.”   (Emphasis added.)   Avoletta v. Danforth, Tolisano & Danforth, LLC, United States District Court, Civ. No. 3:11CV1126 (D.Conn., July 31, 2012).   The common-law doctrine of attorney-client privilege, not Rule 1.6s confidentiality requirement, is the appropriate means of challenging a discovery request.  “The attorney-client privilege ․ doctrine [applies] in judicial and other proceedings in which a lawyer may be called as a witness or otherwise required to produce evidence concerning a client.   The Rule [1.6] of client-lawyer confidentiality applies in situations other than those where evidence is sought from the lawyer through compulsion of law.”  (Emphasis added;  internal quotation marks omitted.)  Id. Therefore, so far as the defendant's objection is based on Rule 1.6, that rule would not warrant sustaining the objection.²

Regarding the evidentiary doctrine of attorney-client privilege, “[t]he party asserting privilege has the burden of establishing its applicability ․ [W]here the attorney acts as a ․ collection agent ․ the communications between him and his client are not protected by the privilege ․ The privilege does not protect incidental legal advice given during the course of correspondence pertaining to business and not made in response to a request made primarily for the purpose of securing legal advice.   Finally, the privilege does not immunize from disclosure the facts communicated where those facts can be learned from some source other than the privileged communication;  put another way, a non-confidential document does not become privileged merely by its transmittal by a client to his or her attorney.”  (Citations omitted;  emphasis added;  internal quotation marks omitted.)  Id. In the present case, the allegedly offensive interrogatories all relate to the transfer of funds by the defendant on behalf of its client.   They do not relate to legal counseling of the client or the defendant's client seeking legal advice.

CONCLUSION

For the foregoing reasons, the defendants shall respond to plaintiff's interrogatories.   Accordingly, the motion to compel is GRANTED and defendant's objection thereto is OVERRULED.

Compliance ordered on or before 8/19/2013.   If the moving party does not receive compliance by that date, the moving party may file a Motion for Judgment of Default referring to this order.   Absent proof of compliance on file before the motion appears on this short calendar, the motion will be granted by the Court and judgment will enter.

Wilson, J.

6/27/13

FOOTNOTES

FN1. Rule 1.6, concerning confidentiality of information, provides:  “(a) A lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation, and except as stated in subsections (a), (b), (c), and (d). (b) A lawyer shall reveal such information to the extent the lawyer reasonably believes necessary to prevent the client from committing a criminal act that the lawyer believes is likely to result in death or substantial bodily harm. (c) A lawyer may reveal such information to the extent the lawyer reasonably believes necessary to:  (1) Prevent the client from committing a criminal act that the lawyer believes is likely to result in substantial injury to the financial interest or property of another;  (2) Rectify the consequence of a client's criminal or fraudulent act in the commission of which the lawyer's services had been used. (d) A lawyer may reveal such information to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer's representation of the client.”.  FN1. Rule 1.6, concerning confidentiality of information, provides:  “(a) A lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation, and except as stated in subsections (a), (b), (c), and (d). (b) A lawyer shall reveal such information to the extent the lawyer reasonably believes necessary to prevent the client from committing a criminal act that the lawyer believes is likely to result in death or substantial bodily harm. (c) A lawyer may reveal such information to the extent the lawyer reasonably believes necessary to:  (1) Prevent the client from committing a criminal act that the lawyer believes is likely to result in substantial injury to the financial interest or property of another;  (2) Rectify the consequence of a client's criminal or fraudulent act in the commission of which the lawyer's services had been used. (d) A lawyer may reveal such information to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer's representation of the client.”

FN2. See also the Comment to Rules of Professional Conduct 1.6:  “The principle of confidentiality is given effect in two related bodies of law, the attorney-client privilege in the law of evidence and the Rule of confidentiality established in professional ethics.   The attorney-client privilege applies in judicial and other proceedings in which a lawyer may be called as a witness or otherwise required to produce evidence concerning a client.   The Rule of client-lawyer confidentiality applies in situations other than those where evidence is sought from the lawyer through compulsion of law.   The confidentiality Rule applies not merely to matters communicated in confidence by the client but also to all information relating to the representation, whatever its source.   A lawyer may not disclose such information except as authorized or required by the Rules of Professional Conduct or other law.”.  FN2. See also the Comment to Rules of Professional Conduct 1.6:  “The principle of confidentiality is given effect in two related bodies of law, the attorney-client privilege in the law of evidence and the Rule of confidentiality established in professional ethics.   The attorney-client privilege applies in judicial and other proceedings in which a lawyer may be called as a witness or otherwise required to produce evidence concerning a client.   The Rule of client-lawyer confidentiality applies in situations other than those where evidence is sought from the lawyer through compulsion of law.   The confidentiality Rule applies not merely to matters communicated in confidence by the client but also to all information relating to the representation, whatever its source.   A lawyer may not disclose such information except as authorized or required by the Rules of Professional Conduct or other law.”

Wilson, Robin L., J.