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Peerless Indemnity Insurance Co. v. Sushi Avenue, Inc.

United States District Court, D. Minnesota

February 15, 2017

Peerless Indemnity Insurance Company, Plaintiff,
v.
Sushi Avenue, Inc., Defendant.

          Daniel W. Berglund, Esq., and Meghan M. Rodda, Esq., Grotefeld Hoffman Schleiter Gordon Ochoa & Evinger LLP, Minneapolis, MN, on behalf of Plaintiff.

          Blair A. Harrington, Esq., Jon R. Steckler, Esq., and Thomas P. Harlan, Esq., Madigan Dahl & Harlon, PA, Minneapolis, MN, on behalf of Defendant.

          MEMORANDUM OPINION AND ORDER

          ANN D. MONTGOMERY U.S. DISTRICT JUDGE

         I. INTRODUCTION

         This matter is before the undersigned United States District Judge for a ruling on Plaintiff Peerless Indemnity Insurance Company's (“Peerless”) Objection [Docket No. 53] to Magistrate Judge Leo I. Brisbois' January 4, 2017 Order [Docket No. 52] (“Order”). Peerless objects to the portion of Judge Brisbois' Order that concluded Peerless' attorney-client privilege was not maintained and that its Amended Redaction Log was insufficient. For the reasons stated below, Peerless' Objection is sustained in part and overruled in part.

         II. BACKGROUND

         A. The Underlying Dispute

         Peerless was Sushi Avenue, Inc.'s (“Sushi”) workers compensation insurance carrier for two policy periods. Order at 2. For the first policy period, March 19, 2013 through March 19, 2014, Peerless estimated the premium would be $39, 630. Id. For the second period, March 19, 2014 through February 15, 2015, the premium was estimated to be $46, 864. Id. The contract provided that Peerless would determine the final premium at the end of each policy term, “using the actual, not the estimated, premium basis and the proper classifications and rates that lawfully apply to the business and work covered by the policy.” Id. Sushi was to pay Peerless the difference between the estimated and final premium. Id.

         Sushi is in the business of selling sushi and related products in kiosks located in supermarkets in Minnesota and other states. Sushi contracts with individuals who operate the kiosks. Id. at 1-2. That contract obligates the kiosk operators to carry workers compensation insurance that is sufficient to protect both the kiosk operators and Sushi from potential claims. Id. at 2. Sushi claims that the kiosk operators are independent contractors rather than employees of Sushi.

         On April 2, 2014, Dawn Mathison (“Mathison”), a Senior Premium Auditor with Liberty Mutual Insurance (“Liberty”), the parent company of Peerless, conducted an audit of the first policy period. Id. After reviewing payroll, tax filings, and the contract between Peerless and Sushi, Mathison concluded the kiosk operators were Sushi employees, not independent contractors. As a result, the first policy premium was increased by $389, 354. Id. at 2-3.

         Peerless and Sushi could not resolve the additional audit premium for the first policy period. Workers compensation coverage for the second policy period was cancelled effective March 18, 2015. Id. at 4. In April 2015, Mathison began a cancellation audit for the second policy period, eventually concluding that Sushi owed an additional premium of $357, 640. Id. The parties continue to disagree whether the kiosk operators are employees of Sushi or independent contractors.

         On November 13, 2015, Peerless filed this breach of contract suit based on Sushi's failure to pay the additional premiums. Id. at 5. Peerless seeks a declaratory judgment that the kiosk operators are employees of Sushi and should be included when calculating Sushi's workers compensation insurance premiums. Id.

         During discovery, Sushi requested Peerless produce documents relating to Peerless' assertion that the kiosk operators are Sushi employees rather than independent contractors. Id. at 6. In response to this request, Peerless produced documents in both redacted and unredacted form, but also declined production of certain documents, citing attorney-client privilege or the work product doctrine. Id. Peerless' redaction log dated June 7, 2016, identified 37 documents protected by privilege or work product doctrine. Id. On September 8, 2016, Sushi told Peerless that its claims of privilege were improper because the documents referenced in the redaction log did not identify an attorney as either a creator or recipient of the communication. Id. Sushi requested that Peerless produce unredacted versions of documents identified on the redaction log. Peerless declined and instead offered to provide an Amended Redaction Log to better explain its assertions of privilege. Id. at 7.

         Through depositions conducted on September 14 and 15, 2016, Sushi learned of other unproduced communications it believed were responsive to its document requests. Id. After receiving a September 16, 2016 deficiency letter, Peerless produced nearly 6, 000 pages of documents between September 16 and October 7, 2016. Id. One of the documents produced is a September 3, 2014 email that Peerless now claims is privileged. Id. at 8.

         On October 18, 2016, Peerless produced an Amended Redaction Log adding 258 additional documents Peerless claimed were protected by attorney-client privilege or the work product doctrine. Id. The log, however, did not further explain why the documents did not need to be produced. Id.

         Sushi sent another deficiency letter on October 24, 2016. Id. In that letter, Sushi again complained about the substance of Peerless' Amended Redaction Log and additionally demanded further document production. Id. In response, Peerless claimed the redacted documents were properly withheld. Id. Peerless also stated that the September 3, 2014 email was inadvertently produced and requested it be ...


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