Tuesday, July 30, 2013

District Court hears title insurance case; denies motion to strike deposition testimony

On July 18, 2013, the United States District Court for the Middle District of Pennsylvania denied Defendant title agent’s motion to strike deposition testimony about a privileged mediation memorandum. Stewart Title Guar. Co. v. Owlett & Lewis, P.C., 2013 WL 3784126 (M.D. Pa. July 18, 2013). Stewart Title Guaranty Company, plaintiff, retained Owlett, defendant, as an attorney and limited agent to examine titles and issue title policies in Tioga County in 1993. The retainer included provisions that held Owlett liable for losses incurred from errors in examining title.

In 2005, the Goldians (a third party to the instant action) received title work and assurance from Owlett that included a policy insuring fee simple to the mineral rights on a property. The Goldian’s predecessors, however, had only retained a 25% interest in the mineral rights of the property. The Goldians had entered into a lease with Chesapeake Energy, which had its bonus reduced after it was discovered the Goldians owned only 25% of the mineral rights. The Goldians sued Owlett for malpractice, and the dispute was privately mediated in 2010. The transactions conveying 75% of the property to other purchasers occurred in 1932, prior to 60 year period for which Owlett examined the history of the mineral title. Outside of Tioga County, it is common practice to only trace title back 60 years. According to the plaintiff, In Tioga County, however, due to a history of owners reserving all or a portion of mineral rights in conveyances in starting in the latter half of the 19th Century, it is common that record owners do not own any or all of the mineral rights on their property. Therefore, the plaintiff argued that title agents in Tioga should know that a 60 year search would be inadequate or insufficient to insure title because instruments recording the record of ownership were likely older than 60 years old. It brought action to recover losses from the agent, as per the retainer agreement’s liability provision.

At dispute in the motion are the mediation memorandum and expert deposition from the Goldian mediation. Owlett’s attorney inadvertantly turned over the documents to the plaintiff during discovery, and the documents were used to illicit testimony from another Owlett attorney. The documents contained disclaimers that they were confidential, and counsel for Owlett objected to the use of the mediation report during the deposition. The court held that while the documents were confidential that the defendant waived their confidentiality because it did not take reasonable steps to prevent disclosure of privileged documents or to rectify its errors. The court explained that the plaintiff and its counsel did not make a specific objection to the use of the Lee report at the time of the deposition, and further did not, but could have, instructed the Owlett attorney not to answer the line of questions in order to protect privilege. Therefore, the motion to strike the deposition was denied.

For more information and updates on this case, follow the Penn State Marcellus Shale Law Blog.

Written by: Garrett Lent, Research Assistant
Agricultural Law Resource and Reference Center
July 2013

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