Schlumberger Technology Corporation v. First Mercury Insurance Co.

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
SCHLUMBERGER TECHNOLOGY
CORPORATION, as assignee of
CHESAPEAKE OPERATING, INC.,
Plaintiff,
v.
FIRST MERCURY INSURANCE
CO.,
Defendant.
No. 4:22-CV-01465
(Chief Judge Brann)
MEMORANDUM OPINION
DECEMBER 3, 2025
I. 	BACKGROUND
Plaintiff Schlumberger Technology Corporation (“Plaintiff”) sues Defendant
First Mercury Insurance Co. (“Defendant”) for denying coverage of a personal injury
lawsuit filed against Schlumberger.1 Plaintiff’s connection to Defendant involves a
series of contracts between Plaintiff, Chesapeake Appalachia LLC (“CALLC”),
Chesapeake Operating Inc. (“COI”), and SweetH20.2 Plaintiff and SweetH20 were
both performing services for CALLC and/or COI during November 2010. 3
1 	See Doc. 15 (Amend. Compl.).
2 	Doc. 57 (Br. in Supp.) at 1-3; Doc. 61 (Br. in Opp.) at 8.
3 	Id.
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A SweetH20 employee was injured while performing work on COI and
CALLC’s 	wellsite. 4 He 	sued 	Plaintiff. 	Plaintiff, 	through 	a 	series 	of 	mutual
indemnification agreements between it, COI, CALLC, and SweetH20, tendered the
employee’s claim to SweetH20’s insurer, Defendant.5 Defendant denied coverage.
Plaintiff subsequently sued Defendant, alleging that that Defendant acted in bad faith
when it denied coverage because the terms of SweetH20’s insurance policy covered
Plaintiff’s losses.6
The claims adjuster who signed and sent the denial of Plaintiff’s claim was
one Todd Jeffrey Miernicki (“Miernicki”).7 Plaintiff deposed Miernicki, inquiring
about the claim denial process and the rationale behind it.8 During that deposition,
Miernicki explained that he did not make the ultimate decision over whether to grant
or deny coverage, that instead his job was only to investigate and provide a “pros
and cons” type recommendation to the higher placed executives with First Mercury.9
Above Miernicki in the chain of command was his supervisor Mary Coffey
(“Coffey”), in-house counsel Stan Greenspan (“Greenspan”), and outside counsel
4 	Id.
5 	Id.
6 	Doc. 15.
7 	Doc. 61-12 (Exhibit 11); Doc. 54-5 (Miernicki Tr.) 5:6.
8 	Doc. 54-5.
9 	Id. at 27:19-20; 35:12-14.
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Kristin Gallagher (“Gallagher”).10 It was Gallagher who drafted the denial letter
itself; Miernicki’s signature was merely an addition.11
Now, 	Plaintiff 	seeks 	to 	compel 	Defendant 	to 	produce 	documents 	and
communication involving Greenspan and Gallagher’s work in the claims denial
process.12 Plaintiff believes these documents and communications to be integral to
Plaintiff’s bad faith claim. 13 Defendant asserts that the communications are barred
by attorney-client privilege and the documents by work product doctrine. 14
Plaintiff seeks specifically to 1) compel production of documents involving
Greenspan and Gallagher’s work related to claim denial that Defendant has withheld
or redacted; 2) compel the deposition of Greenspan and Gallagher about their roles
in the claim denial process; and 3) bar Gallagher and her firm Kennedys CMK LLP
(“Kennedys CMK”) from representing Defendant.
II. 	LAW
A. 	Standard of Review
“Federal courts have broad discretion to determine the scope of discovery and
to manage the discovery process.”15 “Federal Rule of Civil Procedure 37 governs
motions to compel discovery, and “[t]he scope of what type of discovery may be
10 	Id. at 19:17-14; 21:14-19; 89:19-25.
11 	Id. at 85:16-21; 86:11-13.
12 	Doc. 57 at 6-8.
13 	Id. at 8.
14 	Doc. 61 at 6.
15 	Schiavone v. Luzerne Cty., 343 F.R.D. 34, 37 (M.D. Pa. 2023) (Mehalchick, C.M.J.) (citing
Wisniewski v. Johns-Manville Corp., 812 F.2d 81, 90 (3d Cir. 1987)).
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compelled under Rule 37 is defined, in turn, by” 16 by Federal Rule of Civil Procedure
26, which provides:
Unless otherwise limited by court order, the scope of discovery is as
follows: Parties may obtain discovery regarding any nonprivileged
matter that is relevant to any party’s claim or defense and proportional
to the needs of the case, considering the importance of the issues at
stake in the action, the amount in controversy, the parties’ relative
access to relevant information, the parties’ resources, the importance of
the discovery in resolving the issues, and whether the burden or expense
of the proposed discovery outweighs its likely benefit. Information
within this scope of discovery need not be admissible in evidence to be
discoverable. 17
“The party seeking the discovery has the burden of clearly showing the
relevancy of the information sought.”18 “If the moving party meets this initial
burden, the burden then shifts to the opposing party to demonstrate that the requested
discovery (i) does not fall within the scope of discovery contemplated by Rule
26(b)(1) or (ii) is not sufficiently relevant to justify the burden of producing the
information.” 19
In Pennsylvania, the attorney-client privilege is “a statutory right afforded to
clients in civil cases.” 20 “Its purpose is to protect communications between a client
and the client’s legal counsel so that information can be conveyed freely during the
16 	Schiavone, 343 F.R.D. at 37 (quoting Brewer v. Berks Cty. Sheriff, No. 13-5763, 2015 U.S.
Dist. LEXIS 193191, 2015 WL 13620425, at *2 (E.D. Pa. Oct. 5, 2015)).
17 	FED. R. CIV. P. 26.
18 	Caver v. City of Trenton, 192 F.R.D. 154, 159 (D.N.J. 2000).
19 	Atkinson v. Luitpold Pharms., Inc., 414 F. Supp. 3d 742, 744 (E.D. Pa. 2019).
20 	King v. Kappa Sigma Fraternity, 331 A.3d 695, 701 (Pa. Super. Ct. 2025).
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preparation of a legal matter.”21 When the client is a corporate entity, “the privilege
extends 	to 	‘communications 	between 	[the 	entity’s] 	attorneys 	and 	agents 	or
employees authorized to act’ on the entity’s behalf.” 22 The Pennsylvania Superior
Court has identified the following elements for the privilege to apply: (1) “The
asserted holder of the privilege is or sought to become a client; (2) [t]he person to
whom the communication was made is a member of the bar of a court or his
subordinate; 	(3) [t]he communication relates to a fact of which the attorney was
informed by his client, without the presence of strangers, for the purpose of securing
either an opinion of law, legal services or assistance in a legal matter, and not for the
purpose of committing a crime or tort; and (4) [t]he privilege has been claimed and
is not waived by the client.” 23
“[T]he party asserting the attorney-client privilege has the initial burden of
showing that the privilege has been properly invoked.” 24 “If the trial court finds that
the proponent of the privilege has set forth facts which make it applicable, then the
burden shifts to the party seeking disclosure of the communication to produce facts
which would make it discoverable.” 25
21 	Id.
22 	Id. (quoting BouSamra v. Excela Health, 210 A.3d 967, 983 (Pa. 2019)).
23 	Id. at 701-702 (citing Ford-Bey v. Pro. Anesthesia Servs. of N. Am., LLC, 229 A.3d 984, 990-
91 (Pa. Super. 2020)).
24 	Id.
25 	Id.
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The work product doctrine similarly provides that materials “prepared in
anticipation of litigation or for trial by or for another party or its representative” are
not “[o]rdinarily” discoverable. 26 “The purpose of the work-product doctrine differs
from that of the attorney-client privilege.”27 “Protecting attorneys’ work product
promotes the adversary system by enabling attorneys to prepare cases without fear
that their work product will be used against their clients.” 28 “Under either Rule 26
or [Hickman v. Taylor], the party invoking the work product doctrine has the burden
of proving it applies.” 29 “Once that burden has been met, protected work prepared in
anticipation of litigation must be produced only under very limited circumstances
and opinion work product is ‘afforded near absolute protection from discovery.’” 30
But “[t]he question [of] whether a document was prepared in anticipation of
litigation is often a difficult factual matter.” 31 The United States Court of Appeals
for the “Third Circuit has stated that a document is created in anticipation of
litigation when, ‘in light of the nature of the document and the factual situation in
the particular case, the document can be fairly said to have been prepared or obtained
26 	FED. R. CIV. P. 26(b)(3)(A).
27 	Westinghouse Elec. Corp. v. Republic of Philippines, 951 F.2d 1414, 1427-28 (3d Cir. 1991).
28 	Id. (citing Hickman v. Taylor, 329 U.S. 495, 510-11, 67 S. Ct. 385, 393-94, 91 L.Ed. 451 (1947)
and United States v. AT&T, 642 F.2d 1285, 1299 (D.C. Cir. 1980)).
29 	EFG BNK AG v. Lincoln National Life Ins. Co., 593 F. Supp. 3d 225, 229 (E.D. Pa. 2022)
(citing Serrano v. Chesapeake Appalachia, LLC, 298 F.R.D. 271, 277 (W.D. Pa. 2014)).
30 	Serrano, 298 F.R.D. at 277 (quoting In re Cendant Corp. Sec. Litig., 343 F.3d 658, 663 (3d
Cir. 2003)).
31 	United States v. Rockwell Int’l, 897 F.2d 1255, 1266 (3d Cir. 1990).
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because of the prospect of litigation.’”32 “In applying this test, courts must look to
‘the state of mind of the party preparing the document or . . . the party ordering
preparation of the document.’” 33 “This inquiry is limited by the requirement that the
party’s anticipation of litigation be objectively reasonable.”34
The attorney-client privilege doctrine does not cover business advice, nor
legal advice only incidental to business advice. 35 “The privilege does not exist just
because one party to the communication has the title of ‘attorney.’”36 Instead, to be
privileged, the individual must be acting as “an advisor, i.e., presenting opinions and
setting forth defense tactics as to the procedures to be utilized for an effective
defense.” 37 “The privilege simply does not attach to a discussion of the facts, no
matter how extensive or involved the discussion may become.”38 Similarly, the work
product doctrine does not apply to documents created by a licensed attorney when
those documents are created in the routine course of business. 39
32 	Sullivan v. Warminister Tp., 274 F.R.D. 147, 152 (E.D. Pa. 2011) (quoting Rockwell Int’l, 897
F.2d at 1266).
33 	Id. (quoting Martin v. Bally’s Park Place Hotel & Casino, 983 F.2d 1252, 1260 (3d Cir. 1993)).
34 	Id.
35 	Gillard v. AIG Ins. Co., 609 Pa. 65, 78 n.8 (2011) (“[T]he privilege does not extend to business
advice or protect clients from factual investigations.”); Pace-O-Matic, Inc. v. Eckert, No. 20-
CV-292, 2024 U.S. Dist. LEXIS 77113, at *17 (M.D. Pa. Apr. 29, 2024).
36 	United States Fidelity & Guar. Co. v. Barron Indus., 809 F. Supp. 355, 364 (M.D. Pa. 1992).
37 	Id.
38 	Id.
39 	See Atiyeh v. Liberty Mut. Ins. Co., No. 00-2661, 2000 U.S. Dist. LEXIS 17607, at *1-2 (E.D.
Pa. Nov. 15, 2000).
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B. 	Analysis
Preliminarily, the Court sees the relevance of the information sought; for a
bad faith claim, evidence of Defendant’s rationale for denying Plaintiff’s claim is
important for determining liability.40 Accordingly, the burden shifts to Defendant to
prove that the information requested is covered by the attorney-client privilege or
work product doctrine. Defendant has not met this burden.
In the insurance context, where the lines between what is legal and what is
factual can blur, courts have repeatedly emphasized that “[a]n insurance company
cannot reasonably argue that the entirety of its claims files are accumulated in
anticipation of litigation when it has a duty to investigate, evaluate, and make a
decision with respect to claims made . . . by its insureds.”41 However, there is a point
where “an insurance company’s activity shifts from mere claims evaluation to an
anticipation of litigation.”42
40 	See also Keefer v. Erie Ins. Exchange, 2014 U.S. Dist. LEXIS 29282, No. 1:13–CV–1938, at
*5 (M.D. Pa. Mar. 7, 2014) (“Given the liberal scope of federal discovery and the fact that the
reason for non-payment may be probative of whether Defendant acted in bad faith in the
investigation of Plaintiff's UIM claim, Defendant's objection to this area of inquiry will be
overruled.”).
41 	See, e.g., Shaffer v. State Farm Mut. Auto. Ins. Co., No. 1:13-CV-01837, 2014 U.S. Dist.
LEXIS 30436, at *2 (M.D. Pa. Mar. 10, 2024) (internal quotation omitted); Barnard v. Liberty
Mut. Ins. Corp., No. 3:18-CV-01218, 2019 U.S. Dist. LEXIS 18660, at * (M.D. Pa. Feb 6,
2019); see also Solo-Sanchez v. State Farm Mut. Auto Ins. Co., No. 19-4016, 2021 U.S. Dist.
LEXIS 11738, at *18 (E.D. Pa. Jan 22, 2021) (stating that an insurer “is not permitted to shield
the discovery of its entire claims handling and investigation under the attorney-client privilege
and work-product doctrine by hiring an attorney to perform its services.”).
42 	Solo-Sanchez, 2021 U.S. Dist. LEXIS 11738, at *20.
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The challenging question here is determining at what point Greenspan and
Gallagher’s work crossed the threshold from routine insurance adjustment, a
business transaction not protected by the privileges, to legal analysis and preparation
of litigation, i.e. protected activity. 43 Defendant has not met its burden to show that,
at all relevant times, Greenspan and Gallagher were acting in an advisory, legal
capacity rather than in the course of claims adjusting business. On the contrary, after
a detailed review of Miernicki’s testimony, it is clear that Greenspan and Gallagher
were integral to Plaintiff’s claim denial. 44 To the extent that these attorneys served
“a dual role in representing Defendant, the attorney-client privilege would extend to
communications prepared while they acted as legal counsel,” but not to their work
in processing and denying Plaintiff’s claim. 45
43 	This difficulty is compounded by the Court not having access to any documents or evidence
from Defendant to determine what type of work Greenspan and Gallagher were doing if not
routine claims adjustment.
44 	See Doc. 54-5 (Tr. Miernicki). Miernicki described the denial as being a group decision made
by himself, his supervisor Coffey, Greenspan, and Gallagher. Id. at 34:2-13. Gallagher and
Greenspan provided Miernicki the “substance of the reasons for denial of coverage.” Id. at
35:12-14. Miernicki made it clear that he was not the one with final decision-making power:
he testified that there was never a time that the coverage determination was his responsibility.
Id. at 78:7-11. Indeed, Gallagher drafted the coverage opinion itself; Miernicki’s signature was
but an addition. Id. at 85:16-21; 86:11-13. See also id. at 88:22-89:1 (“[Q:] If I wanted to know
the rationale behind the denial based on the additional insured endorsement, who would I need
to ask that question to? A: Stan Greenspan. Q: Anyone else that could answer that question?
[A:] I guess [Gallagher].”).
Defendant claims that Miernicki misremembered the events in question, but provides no
factual support for this claim. Doc. 61 at 15. Defendant’s word, without more, does not prevail
over the clear testimony provided in Miernicki’s deposition to the contrary.
45 	Pengate Handling Sys. v. Westchester Surplus Lines Ins. Co., No. 1:06-CV-0993, 2007 U.S.
Dist. LEXIS 13303, at *13 (M.D. Pa. Feb. 27, 2007).
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Similarly, Defendant has not met its burden to show that the documents were
prepared in anticipation of litigation rather than as part of the routine claim denial
process. That Plaintiff had raised the possibility of litigation, and perhaps even
initiated it, before or while the documents at issue were created, does not alone
render them protected work product.46 Instead, the documents must be prepared for,
or in anticipation of, the litigation.47 The only evidence before the Court now,
Miernicki’s testimony, indicates that the documents sought were created during and
to assist with the denial of Plaintiff’s claim, not for legal advice related to Plaintiff’s
threatened litigation.48
In Pengate, a case quite factually similar to this one, the court drew the line of privilege by
referencing the date of Plaintiff’s claim denial; documents or communications prepared after
the claim was decided would be reviewed in camera. Id. at *13-14. Given that Plaintiff did
raise the possibility of litigation before his claim was decided, it is likely that some purely legal
statements or communications were made before the date of claim denial. Doc. 61 at 4.
Additionally, it is likely that some statements about the denial from a purely business lens were
made after Plaintiff was notified. Therefore, while the date of Plaintiff’s denial should guide
parties, it is not dispositive.
46 	See Highland Tank & Mfg. Co. v. PS Intern., 246 F.R.D. 239, 246 (W.D. Pa. 2007) (“[T]he
work product doctrine only protects documents prepared in anticipation of litigation, not in the
regular course of business.”); Am. Home Assur. Co. v. United States, No. 09-CV-258, 2009
U.S. Dist. LEXIS 93597, at *6 (D.N.J. Oct. 7, 2009).
47 	Id.; Sullivan, 274 F.R.D. at 152.
48 	See supra note 44, Doc. 54-5. However, the Court is limited by not having access to the actual
documents withheld by Defendant as privileged, and leaves room for the possibility that there
are documents or communications with counsel that were made about Plaintiff’s litigation
rather than in the course of insurance adjustment. Any such documents or communications
would be covered by the work product doctrine.
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Plaintiff is entitled to discover First Mercury’s underlying rationale for
denying the claim. 49 Accordingly, Plaintiff may discover facts, documents, and
communications relevant to Greenspan and Gallagher’s roles in denying the claim.
Plaintiff’s motion to compel is therefore granted. Documents created and/or
used by the Miernicki, Gallagher, and Greenspan cohort in denying Plaintiff’s claims
are relevant and discoverable. Defendant is compelled to produce copies of its
communications with in-house and outside coverage counsel that were created
during the coverage decision-making process, specifically discuss that process, or
are relevant to that process. 50 Moreover, Plaintiff may depose Greenspan and
Gallagher about facts relevant to their role in the coverage decision-making process.
These depositions shall be completed by January 10, 2026. Plaintiff may not, of
course, inquire into purely legal matters, such as Defendant’s response to Plaintiff’s
threatened litigation.51
49 	This is especially so where Plaintiff, as here, brings a bad faith claim that brings into contention
Defendant’s rationale for denying coverage. It is true that “a mere claim of bad faith is not
enough to shatter the work-product privilege,” but, here, Defendant’s submissions to Plaintiff
are insufficient to depict the internal claim denial process. See Solano-Sanchez, 2021 U.S. Dist.
LEXIS 11738, at *19-20 (internal quotation omitted).
50 	The Court trusts the parties to interpret this order and to disclose any such documents falling
within its scope. However, to the extent that there is dispute about communications or parts of
communications, Defendant may provide such documents to the court for in camera review.
However, “in the interest of efficiency and conservation of valuable judicial resources, the
[C]ourt strongly encourages Defendant to conduct a thorough review of its documents before
submitting them to the court, and submit only those documents that it truly believes fall into a
legal or mixed category so as to implicate the attorney-client privilege in light of the court's
reasoning here.” Pengate, 2007 U.S. Dist. LEXIS 13303, at *14.
51 	If an in camera review of documents should prove necessary, the parties are encouraged to
schedule the depositions for after any review to allow the Court to further clarify the scope of
this order.
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C. 	Motion to Disqualify Counsel
Plaintiff additionally seeks to disqualify Gallagher, and her firm Kennedys
CMK, from continuing to represent Defendant under Pennsylvania Rule of
Professional Conduct 3.7.52 Defendant responds that Rule 3.7 only bars
representation at trial, and even then does not bar the entire firm. 53
Defendant has the better argument here: Rule 3.7 only bars representation of
an advocate-witness at trial. 54 Accordingly, the Court declines to disqualify
Gallagher from continuing representation of Defendant at this stage. 55 Similarly,
Kennedys CMK as a firm may continue to represent Defendant. As trial
approaches, and after discovery is fully completed, the Court will be in a better
place to assess any potential prejudice arising from Kennedys CMK representing
Defendant at trial. 56 Accordingly, Plaintiff’s motion to disqualify counsel will be
denied without prejudice to Plaintiff’s right to file another motion to disqualify
closer to the time of trial.
52 	Doc. 57 at 10; PA. R. PROF . COND. 3.7, Lawyer as Witness.
53 	Doc. 61 at 18-19.
54 	See, e.g., Foster v. JLG Indus., 372 F. Supp. 2d 792, 798-99 (M.D. Pa. 2005) (overruled in part
on other grounds); George v. Wausau Ins. Co., No. CIV. A. 99-6130, 2000 WL 276915, at *2
(E.D. Pa. 2000); Heist v. Henny Penny Farms, Inc., 23 Pa. D. & C. 5th 508, 514-15 (Pa. Com.
Pl. 2011). The Court additionally notes that parties have an independent obligation to ensure
there are no conflicts of interest. United States v. Fassett, 185 F. Supp. 3d 507, 512 (M.D. Pa.
2015) (“‘Determining whether or not such a conflict exists is primarily the responsibility of
the lawyer involved.’”) (quoting the comments to Rule 3.7).
55 	Evans v. Chichester Sch. Dist., 533 F. Supp. 2d 523, 539-40 (E.D. Pa. 2008) (delaying the
determination of disqualification until closer to the trial date).
56 	For instance, should Gallagher and the Kennedys prove to be heavily involved in the factual
disputes, the potential for prejudice and conflicts is much higher.
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II. 	CONCLUSION
Plaintiff’s motion to compel is granted. Plaintiff may discover documents
involving Greenspan and Gallagher’s work related to Plaintiff’s claim’s denial and
depose Greenspan and Gallagher about their roles in that process. These
depositions shall be completed by January 10, 2026. Plaintiff’s motion to
disqualify counsel is denied without prejudice. Kristin Gallagher and Kennedys
CMK may continue to represent Defendant at this time.
An appropriate Order follows.
BY THE COURT:
s/ Matthew W. Brann
Matthew W. Brann
Chief United States District Judge
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