The Missouri Court of Appeals Eastern District ruled Aug. 31 that a Sandberg Phoenix & von Gontard partner’s files could be disclosed during discovery in litigation that lingers after the collapse of a party tent in 2012.
The court found that Keith Phoenix had played a mixed role in the underlying lawsuit, acting both as counsel to an insurance company but also at times as an attorney for the insurer’s policyholder, which was embroiled in a lawsuit that led to a $5.2 million verdict in 2016.
Kilroy Was Here LLC, which operates Kilroy’s Sports Bar, had erected a 40-by-60-foot tent near Busch Stadium for an event after a St. Louis Cardinals game. The tent fell down during a severe storm on April 28, 2012, killing one person and injuring several others.
In the wake of the multimillion dollar verdict against the bar, the plaintiffs agreed that they would seek to recover the judgment from Kilroy’s insurers, rather from the bar’s assets. In exchange, Kilroy assigned to the plaintiffs its claim that its insurer, Starr Indemnity and Liability Company, had acted in bad faith by refusing the settle the case prior to trial.
According to the opinion, in April 2015 the plaintiffs had made a demand to settle the wrongful death claim and the seven personal injury claims for $720,100, informing the insurer that a failure to accept the demand would constitute bad-faith refusal to settle. Although the figure was well within the bar’s $1 million policy limit, the insurer instead countered with an offer of about $250,000. No settlement was reached.
The plaintiff’s suit against Starr is now pending in St. Louis Circuit Court. During discovery, the plaintiffs sought files and testimony from Phoenix, whom Star hired specifically to advise it about the potential for bad-faith litigation. The subpoena asks the firm to provide materials “including correspondence, billing records, and any other documents, either received or generated” in the Kilroy litigation.
Judge Joan L. Moriarty refused the request, finding that the information was protected by attorney-client privilege. But the Eastern District disagreed.
The court said the potential for a bad-faith claim put Starr and Kilroy in a potentially adversarial role — the insurer still owed a zealous defense to its policyholder, even as that policyholder was threatening it with litigation. Judge James M. Dowd wrote that Phoenix’s role in the case should have allowed Starr to “proceed on two separate tracks,” with Phoenix advising on bad-faith matters while a separate attorney defended Kilroy’s interests. “The record shows, however, that these two tracks converged.”
Dowd said Phoenix at times acted as “Kilroy’s de facto co-counsel” by aiding the other lawyer in the bar’s defense, handling tasks ranging from providing legal research to reviewing motions and jury instructions and trying to negotiate a settlement.
Dowd added that the convergence was “troubling but not surprising” given the overlapping interests of the insurer and its insured to resolve the case and limit their exposures. But, Dowd said, to the extent Phoenix acted as Kilroy’s lawyer, the defendant was entitled to see the files concerning its case.
“Moreover, Kilroy should be entitled to know what Phoenix did on Kilroy’s behalf and why,” Dowd wrote. The court remanded the case for Moriarty or a special master to determine what materials were discoverable and which remain subject to privilege.
Judges Angela T. Quigless and Robin Ransom concurred. Ransom heard the case shortly before her appointment to the Missouri Supreme Court earlier this year and was assigned as a special judge to complete the case.
Todd Muchnick of Muchnick Haber Margolis, an attorney for the plaintiffs, said he thinks the opinion clarifies the case law regarding attorney-client privilege, especially in the context of bad-faith claims.
“We never really thought that the attorney-client privilege applied to all of his file,” he said. “We always thought he had this dual role, that he was either acting as a claims adjuster or as co-counsel.”
Gerry Greiman of Spencer Fane, an attorney for Sandberg Phoenix, didn’t return a call seeking comment.
The case is State ex rel. Kilroy Was Here LLC v. Moriarty, ED109351.