Court Certifies Interlocutory Appeal in Microcaptive Class Action

Benyamin Avrahami, et al.,
Plaintiffs,
v.
Celia Clark, et al.,
Defendants.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA

ORDER

Before the Court is Defendants Celia Clark and Clark & Gentry PLLC (collectively, “the Clark Defendants”)'s Motion to Amend Order to Certify for Interlocutory Appeal Under 28 U.S.C. § 1292(b) and to Stay Discovery Order. (Doc. 137) The Motion has been fully briefed and is ready for review. (Docs. 144, 146)

As a threshold matter, the Clark Defendants state in their Reply brief they are also seeking an appeal as a matter of right under 28 U.S.C. § 1291. (Doc. 146 at 1) It is their belief that the case they initially cited as the basis for a § 1292(b) appeal does not preclude a § 1291 appeal on the same issue. See Mohawk Indus. Inc. v. Carpenter, 558 U.S. 100, 110–11 (2009). That is not this Court's reading of the case. Therefore, the Court will not wait for a ruling on the § 1291 appeal and will address the motion pending before it without delay.

This motion to certify comes after the Court's January 26, 2021 Order (Doc. 135), which settled the parties' discovery dispute and directed the Clark Defendants to respond to the Plaintiffs' First Set of Interrogatories and Requests for Production without disclosing attorney-client communications and attorney work product. Plaintiffs requested disclosures about Defendants' other clients' identities, communications between Defendants, and information about their agreements and fee sharing. (Doc. 132-1) Defendants now seek certification for interlocutory appeal on the following question: “Whether the attorney-client privilege and [Ethics Rule] 1.6 protect Clark's clients' identities from disclosure and, if so, then the extent to which that limits Clark's obligation to respond to Plaintiffs' discovery requests.” (Doc. 137 at 1) Plaintiffs oppose the Motion. (Doc. 144) Defendants do not want to disclose the names of their other clients that were allegedly penalized because of their involvement in captive insurance. (Doc. 132 at 4) Defendants had argued that the identities of the clients are protected by attorney-client privilege, because revealing them could subject them to adverse action. (Doc. 132-2 at 3) The Court previously found attorney-client privilege did not apply to the disclosure of the client identities. (Doc. 135)

A district court may certify an order for interlocutory appeal when there is a (1) “controlling question of law” (2) as to which there is “substantial ground for difference of opinion,” and (3) an immediate appeal would “materially advance the ultimate termination of the litigation.” 28 U.S.C. § 1292(b). The application for an appeal under this section will not stay proceedings in the lower court unless the district judge or Court of Appeals so orders. Id.

A “controlling question of law” is one that will “materially affect the outcome of litigation in the district court.” Villarreal v. Caremark LLC, 85 F. Supp. 3d 1063, 1068 (D. Ariz. 2015) (citing Kight v. Eskanos & Adler, P.C., 2007 WL 173825, at *2 (S.D. Cal. Jan. 8, 2007). “Examples of controlling questions of law include fundamental issues such as the determination of who are necessary and proper parties, whether a court to which a case has been transferred has jurisdiction, or whether state or federal law should be applied.” Villareal, 85 F. Supp 3d at 1068 (internal quotations omitted).

The question here is whether attorney-client privilege and Ethics Rule 1.6 apply to the identities of clients that have already been released. On its face it does not appear to be a controlling question of law, as it does not fall into any of the above examples. However, whether the identities of these clients are disclosed could impact Plaintiffs' ability to meet the class certification requirements. (Doc. 137 at 2) The answer to this question may change the course of the case. This fact also goes to the third factor, because if the identities are found privileged, less discovery may result and the termination of the case will be advanced.

As to the second § 1292(b) factor, it is settled law that client identities are not usually protected unless the identity and fee arrangements “are so intertwined with attorney-client communications that they are therefore privileged.” Ralls v. United States, 52 F.3d 223, 227 (9th Cir. 1995). See also Tornay v. United States, 840 F.2d 1424, 1428 (9th Cir. 1988). Client identities are definitely not protected against IRS investigations. See United States v. Blackman, 72 F.3d 1418, 1422 (9th Cir. 1995). The Ninth Circuit explicitly held that client identities are not protected even when their disclosure might lead to the client's becoming IRS targets because “disclosure in itself is not incriminating.” Reiserer v. United States, 479 F.3d 1160, 1166 (9th Cir. 2007). However, in Reiserer, the party seeking the disclosures was the IRS. Id. The application of this rule in private civil suits is murkier. Courts within the Ninth Circuit have held that fee or retainer agreements are not privileged, but the cases concerned agreements with clients whose identities were previously known. Gusman v. Comcast Corp., 298 F.R.D. 592, 599–600 (S.D. Cal. 2014); Hoot Winc, LLC v. RSM McGladrey Fin. Process Outsourcing, LLC, 2009 WL 3857425, at *1–2 (S.D. Cal. Nov. 4, 2009); see also Carrizosa v. Stassinos, No. C 05-2280 RMW RS, 2006 WL 2529503, at *1 (N.D.Cal. Aug. 31, 2006). Here, where Plaintiff may or may not know the client identities, the answer is unclear. Thus, the Court finds the second factor fulfilled.

Finally, the Court has read the case law Defendants cite to show issues of privilege and confidentiality have been certified for interlocutory appeal in the past. (Doc. 137 at 3–4) The Supreme Court in Mohawk suggested using § 1292(b) as an alternative to the collateral order doctrine when the lower court's ruling on a privilege issue “involves a new legal question or is of special consequence.” 558 U.S. 100, 110–11 (2009).

Furthermore, the Ninth Circuit has accepted interlocutory review on attorney-client privilege issues in the past; Defendants provide the Court with three such examples. See Tennenbaum v. Deloitte & Touche, 77 F.3d 337, 338–39 (9th Cir. 1996) (deciding whether an agreement to waive privilege prevents the ability to claim it in the future, specifically at a deposition); In re Boileau, 736 F.2d 503, 504 (9th Cir. 1984) (deciding whether a bankruptcy court could compel production of certain documents); Transamerica Computer Co. v. Int'l Bus. Machines Corp., 573 F.2d 646, 647 (9^th Cir. 1978) (deciding whether inadvertent disclosure in a prior proceeding constituted a waiver of privilege in the instant proceeding). (Doc. 137 at 4)

The Court finds the question “Whether the attorney-client privilege and [Ethics Rule] 1.6 protect Clark's clients' identities from disclosure and, if so, then the extent to which that limits Clark's obligation to respond to Plaintiffs' discovery requests,” appropriate for interlocutory appeal under 28 U.S.C. § 1292(b).

Therefore,

IT IS ORDERED that Defendants' Motion to Amend Order to Certify for Interlocutory Appeal Under 28 U.S.C. § 1292(b) and to Stay Discovery Order (Doc. 137) is granted.

IT IS FURTHER ORDERED that the Court's January 26, 2021 Order (Doc. 135) is stayed pending disposition of the interlocutory appeal.

IT IS FURTHER ORDERED if the United States Court of Appeals for the Ninth Circuit does not accept the interlocutory appeal, the parties are ordered to notify the court within ten (10) days to lift the stay.

Dated this 11th day of February, 2021.

Honorable Steven P. Logan
United States District Judge