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McKenzie Law Firm, P.A. v. Ruby Receptionists, Inc.

United States District Court, D. Oregon

December 16, 2019

MCKENZIE LAW FIRM, P.A., and OLIVER LAW OFFICES, INC., on behalf of themselves and all others similarly situated, Plaintiffs,

          Keith S. Dubanevich and Cody Berne, Stoll Stoll Berne Lokting & Schlachter PC, Laurence D. King, Matthew B. George, and Mario M. Choi, Kaplan Fox & Kilsheimer LLP, Robert I Lax, Lax LLP, Jon M. Herskowitz, Baron & Herskowitz, Miami FL; Gregory J. Brod, Brod Law Firm, PC, Of Attorneys for Plaintiffs.

          Andrew R. Escobar and Austin Rainwater, DLA Piper LLP, Of Attorneys for Defendant.



         The named plaintiffs in this putative class action are McKenzie Law Firm, PA (“McKenzie”) and Oliver Law Offices, Inc. (“Oliver”) (collectively, “Plaintiffs”). McKenzie and Oliver are two relatively small law firms. The defendant is Ruby Receptionists, Inc. (“Ruby” or “Defendant”). Ruby provides virtual receptionist services to small businesses, including law firms. McKenzie and Oliver are former clients of Ruby and assert claims of breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and money had and received. Pending before the Court is a discovery dispute between the parties concerning the application of the work-product doctrine.

         In connection with both this lawsuit and a related state court action, counsel for Ruby sent emails and several drafts of a declaration to a former employee of Ruby after Ruby's counsel learned that the former employee had been speaking with an investigator working for Plaintiffs' counsel. As part of this email exchange, the former employee requested that Ruby's counsel make certain changes to the draft declaration. Ruby's counsel revised the draft declaration, the former employee signed the declaration, and Ruby's counsel filed the declaration in the related state court action. The former employee, without the need for a subpoena from Plaintiffs' counsel and without anyone telling Ruby's counsel, voluntarily sent to Plaintiffs' counsel copies of the emails exchanged with Ruby's counsel, including the drafts of the declaration. Ruby contends that these emails and the drafts of the declaration are protected under the work-product doctrine and may not be used by Plaintiffs in litigation with Ruby. Plaintiffs offer essentially two responses. First, Plaintiffs argue that the emails and declaration drafts are not work-product. Second, Plaintiffs contend that even if these documents are work product, Ruby waived the protections of the work-product doctrine by disclosing them to its former employee under circumstances in which there was a reasonable probability that the opposing party (Plaintiffs) would see these documents. As explained more fully below, the Court concludes that the documents are presumptively work product but that Ruby waived its right to preclude Plaintiffs' use of those documents in this lawsuit.


         In federal court, the work-product doctrine is governed by federal law, even in diversity cases. See Kandel v. Brother Int'l Corp., 683 F.Supp.2d 1076, 1083 (C.D. Cal. 2010) (citing Frontier Refining, Inc. v. Gorman-Rupp, Inc., 136 F.3d 695, 702 n.10 (10th Cir. 1998) (“Unlike the attorney-client privilege, the application of the work-product doctrine in diversity of citizenship cases is determined under federal law.”). The work-product doctrine “is not a privilege but a qualified immunity protecting from discovery documents and tangible things prepared by a party or his representative in anticipation of litigation.” Admiral Ins. Co. v. United States Dist. Court for the Dist. of Arizona, 881 F.2d 1486, 1494 (9th Cir. 1989) (citing Fed.R.Civ.P. 26(b)(3)). Documents or the compilation of materials created by an attorney or agents of the attorney in preparation for litigation or trial may be covered by the work-product doctrine. United States v. Richey, 632 F.3d 559, 567 (9th Cir. 2011). To qualify for work-product protection, materials must: “(1) be prepared in anticipation of litigation or for trial and (2) be prepared by or for another party or by or for that other party's representative.” Id. (quotation marks omitted). The primary purpose of the work-product doctrine is to “prevent exploitation of a party's efforts in preparing for litigation.” Admiral Ins. Co., 881 F.2d at 1494. Work-product protection, however, like the attorney-client privilege, is waivable. Richey, 632 F.3d at 567.

         Further, the work-product doctrine affords special or heightened protection to materials that reveal an attorney's mental impressions or opinions. Admiral Ins. Co., 881 F.2d at 1494; Fed.R.Civ.P. 26(b)(3)(B). Such materials are generally referred to as “opinion” or “core” work product and are distinguished from “fact” work product. Fact work-product may be ordered produced upon a showing of substantial need for the information and that the information cannot be otherwise obtained without undue hardship. Admiral Ins. Co., 881 F.2d at 1494; Fed R. Civ. P. 26(b)(3)(A)(ii). Opinion or core work product, however, is discoverable only “when mental impressions are at issue in a case and the need for the material is compelling.” Holmgren v. State Farm Mutual Ass'n. Ins. Co., 976 F.2d 573, 577 (9th Cir. 1992).

         Finally, the party asserting protection under the work-product doctrine generally has the burden to show that the elements of the doctrine have been established. United States v. City of Torrance, 163 F.R.D. 590, 593 (C.D. Cal. 1995) (“The party claiming work product immunity has the burden of proving the applicability of the doctrine.”); Murphy v. Kmart Corp., 259 F.R.D. 421, 428 (D. S. Dakota 2009) (“The party asserting the work product privilege to resist disclosure bears the burden of providing a factual basis for asserting the privilege.”); see also United States v. Ruehle, 583 F.3d 600, 608 (9th Cir. 2009) (holding that the party asserting an attorney-client privilege has the burden of proving “each essential element” of that privilege).

         When a party opposing the assertion of the work-product doctrine, however, contends that the opposing side has waived the benefits of that doctrine, the question of which side bears the burden of proving waiver or non-waiver arises. The Court has not located any decision from the Ninth Circuit addressing this question or even any decision from a district court within the Ninth Circuit.[1] The Fifth Circuit, however, has addressed this issue and held that the party asserting waiver “bears the burden of demonstrating that a waiver of work product protection occurred.” Ecuadorian Plaintiffs v. Chevron Corp., 619 F.3d 373, 379 (5th Cir. 2010). As the Fifth Circuit explained:

Chevron argues that the plaintiffs, as the party claiming work product protection, bear the burden of demonstrating non-waiver. It cites to United States v. MIT, a decision of the First Circuit that adopts this view. 129 F.3d 681, 686 (1st Cir. 1997). However, to support this proposition, the First Circuit only cites authority concerning the attorney-client privilege. Id. (citing United States v. Wilson, 798 F.2d 509, 512-13 (1st Cir. 1986)). The work product doctrine differs from the attorney-client privilege in that nonwaiver need not be proven to invoke work product immunity. Johnson [v. Gmeinder], 191 F.R.D. [638, ] 643 [(D.Kan. 2000)].

Id. at 379 n.10. Similarly, other out-of-circuit district courts have placed the burden on the party asserting waiver of work-product protection. See, e.g., Pipeline Productions, Inc. v. The Madison Companies, LLC, 2019 WL 3973955, *4 (D. Kan. Aug. 22, 2019) (“Once the party objecting to discovery establishes that the materials are protected work product, the burden shifts to the party asserting waiver to establish that a waiver has occurred.”); Towne Place Condo. Ass'n v. Philadelphia Indem. Ins. Co., 284 F.Supp.3d 889, 899 (N.D. Ill. 2018) (“Where work product is claimed, the party asserting waiver has the burden to show that a waiver occurred.”); United States Sec. & Exch. Comm'n v. Herrera, 324 F.R.D. 258, 262 (S.D. Fla. 2017) (stating that after the party asserting work-product protection meets its initial burden, “the burden shifts to the party asserting waiver”); Mir v. L-3 Commc'ns Integrated Sys., L.P., 315 F.R.D. 460, 467 (N.D. Tex. 2016) (“Unlike the attorney-client privilege, the burden of proving waiver of work product immunity falls on the party asserting waiver.”). Accordingly, this Court holds that the party asserting waiver of work-product protection bears the burden of demonstrating that a waiver of that protection has occurred.


         A. Overview of Federal and State Lawsuits

         Ruby Receptionists is a business based in Portland, Oregon that provides receptionist services to small businesses throughout North America. The putative class in this federal action consists of all of Ruby's clients in the United States for telephone call answering and messaging services. Many of Ruby's clients are small law firms and solo practitioners. Ruby's clients enter into written contracts with Ruby to purchase receptionist services. Ruby bills its clients based on the quantity of “receptionist minutes” used or contracted for per month. Plaintiffs' claims in this case stem from two of Ruby's billing practices. First, Plaintiffs allege that Ruby failed to disclose to its clients Ruby's practice of “rounding up” to the nearest 30-second increment when calculating a “receptionist minute.” Second, Plaintiffs allege that Ruby failed to disclose to its clients that Ruby includes in its charges the time that callers have been placed “on hold” or “parked” by Ruby's receptionists.

         Ruby's clients enter into written contracts with Ruby for a set number of “receptionist minutes” per month for a fixed monthly fee. There also is an agreed-upon fee “per receptionist minute” for any additional minutes used beyond the set monthly number. Plaintiff Oliver contracted with Ruby from October 2012 through May 2013. Oliver agreed to purchase 100 receptionist minutes per month for $229 and further agreed to pay $2.29 for each additional receptionist minute used after 100 minutes per month. Plaintiff McKenzie contracted with Ruby from April 2016 through November 2018. McKenzie agreed to purchase 200 receptionist minutes per month for $413.08 and further agreed to pay $2.07 for each additional receptionist minute used after 200 minutes per month.

         As alleged by Plaintiffs, when calculating billing Ruby rounds up telephone calls to the next 30-second increment. Thus, a telephone call that lasts ten seconds, for example, would be billed for thirty seconds (or one-half of a receptionist minute). A telephone call that lasts one minute and thirty-one seconds would be billed for two minutes, as would a telephone call that lasts one minute and fifty-nine seconds. The time billed also includes any “hold” or “parked” time incurred after a Ruby receptionist first answers the call until the call is transferred. Ruby charges for the entire duration of the telephone call, including “hold” or “parked” time, from the moment the call is first answered until: (a) the call is connected to the client; (b) the call is transferred to voicemail; (c) the receptionist finishes taking a message or answering a question and the call terminates or disconnects; or (d) the call otherwise terminates or disconnects.

         Ruby's written contracts do not define the term “receptionist minute” or otherwise explain how Ruby calculates time for billing purposes. Ruby has a document entitled “Terms and Conditions, ” which includes an integration clause. That clause states: “These Terms and Conditions and the Ruby Receptionist Service Agreement set forth the entire Agreement between the parties. This Agreement shall be binding upon all successors and assigns of the parties hereto.” The Terms and Conditions and the separate document titled “Service Agreement, ” thus, together comprise the written contract between Ruby and its client. The contract has a 30-day term and automatically renews unless one party gives written notice 30 days in advance. Ruby's clients can access and view their billing records and call history on Ruby's website and app.

         In late 2017, the same attorneys who represent McKenzie and Oliver in this federal putative class action filed a putative class action against Ruby in Oregon state court on behalf of a different named plaintiff. That action is currently titled Maiden Insurance LLC v. Ruby Receptionists, Inc., Multnomah County Circuit Court, Case No. 17CV48545 (“Maiden”). In Maiden, the plaintiffs allege facts and claims against Ruby that are very similar to the facts and claims presented in this federal lawsuit.

         B. Pending Discovery Dispute

         For several months between late 2014 and early 2015, Mr. Justin Enger worked for Ruby as a sales associate. ECF 96-9, ¶ 2. As previously noted, the Maiden lawsuit was filed in state court in 2017. In late 2018, an investigator working for Plaintiffs' counsel spoke with Mr. Enger. ECF 96, ¶ 3. Plaintiffs commenced this federal action in November 2018.

         On July 3, 2019, Plaintiffs' counsel filed in Maiden Plaintiff's Second Motion to Compel. ECF 96-1. In that motion, Plaintiffs' counsel asked the state court to order Ruby to search the electronic files of certain current and former Ruby employees, including Mr. Enger. Also in that motion, Plaintiffs' counsel stated:

Justin Enger, former Sales Associate: Enger told an investigator that his former supervisor, Ashley Fisher-Nelson, instructed him “not to advertise” the round-up charges to clients. Enger also thought that Ruby did not charge customers when a receptionist was not involved in the call, which he referred to as “parking.” This contradicts Ruby's practice of charging for the time a caller is on hold. Enger ...

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