JACQUELYN “JACKIE” LACEY, et al., Plaintiffs, v. STATE FARM GENERAL INSURANCE CO., Defendant Case No. CV 24-5205 FMO (MAAx); JAMS Case Reference No. 1210040394 United States District Court, C.D. California April 15, 2025 Wilner, Michael R., Special Master ORDER TO SHOW CAUSE RE: SANCTIONS 1. The district court appointed me as Special Master in this action in January 2025. (Docket # 70, 71.) The Court's appointment order specifically authorized me to “impose on a party any noncontempt sanction provided by Rule 37 or 45, and may recommend [to the district court] a contempt sanction against a party and sanctions against a nonparty.” (Docket # 70 at ¶ 3 (quoting Fed. R. Civ. P. 53(c)(2)).) 2. Plaintiff's lawyers are ordered to show cause why the Special Master should not impose sanctions based on the following: 3. Version 1 of Plaintiff's supplemental brief. I conducted a hearing on a discovery issue on April 7, 2025. During that hearing, I directed the parties to submit supplemental briefing on a disputed privilege issue. 4. I received Plaintiff's supplemental brief (Version 1) at approximately noon on Monday, April 14.[1] During my review of Version 1 of Plaintiff's brief, I went onto Westlaw to read several of the judicial decisions cited or quoted in the pleading. 5. The problem: I couldn't verify aspects of what Plaintiff's lawyers put into the brief. Specifically, Plaintiff's lawyers included what they presented as a lengthy quotation from a decision (National Steel Products) that appeared to strongly support their position on the privilege issue. The passage from Version 1 is reproduced in full: Rather, these internal notes reference the adjusters' recommendations, pending activities, and discussion with other State Farm claims representatives regarding the Lacey's insurance claim. National Steel Products Co. v. Superior Court, 164 Cal.App.3d 476, 489 (1985) (“Internal memoranda or claims file materials, although they may discuss legal theories, litigation tactics or potential liability, are not privileged unless they are written by or at the direction of counsel and prepared for the purpose of transmitting information to counsel for legal advice.”) Version 1 at 7. 6. I reviewed the online version of the appellate decision in National Steel Products. The text quoted in Plaintiff's brief does not exist in that opinion. 7. Additionally, Plaintiff's lawyers cited to another judicial decision that, again, appeared to strongly support their litigation position: California courts are especially skeptical of overbroad privilege assertions in bad faith insurance litigation, where the insurer's claims conduct is directly at issue. See, Booth v. Allstate Ins. Co., 198 Cal.App.3d 1357, 1366 (1989) (“An insurer cannot assert privilege to shield evidence of bad faith.”) Version 1 at 10. 8. I was unable to locate this judicial decision online. I tried inputting the citation that Plaintiff provided. I also searched for it using the case caption in the brief.[2] The decision does not appear to exist. *7 9. I sent an e-mail to the lawyers via JAMS Access later that day. My e-mail (sent at around 4 pm PT on April 14) was primarily intended to set up another hearing on the discovery issue. Additionally, I asked Plaintiff's lawyers to check the accuracy of the National Steel Products and Booth citations. I expressly told the lawyers that I was unable to locate the items as stated in their brief. 10. Version 2. At roughly the same time, Plaintiff's lawyers filed an amended version of their supplemental brief (Version 2). An e-mail from an administrative assistant at the Ellis George firm informed me that the only change to Version 2 of the brief was “cosmetic to correct the placement of the screenshots” of certain disputed documents that were copied in the filing. 11. Despite that statement, there was a curious change to the National Steel Products parenthetical quotation. The purported text from the decision was fundamentally the same. However, the end of the quotation had garbled typing added to it: “[ ] prepared for the purpose of transmitting information Page dfsadf for legal advice.” Version 2 at 7 (emphasis added). The Booth citation was unmodified. 12. Version 3. Plaintiff's lawyers filed a third version of the supplemental brief with JAMS at approximately 6 pm PT that same day (Version 3). Version 3 did not contain the quoted language from the National Steel Products decision as quoted above. Instead, it contained a parenthetical summation with the same internal pin cite. The parenthetical read: “(Privilege is strictly construed because it suppresses relevant facts which may be necessary for a just decision.)” Version 3 at 7. 13. My review of the National Steel Products opinion showed that this language actually was a direct quotation from the text of the appellate decision. However, it appears in a different portion of the decision (Cal. App. edition page 483, not page 489) than as cited in the brief. 14. The reference to the Booth decision was omitted from Version 3 of the brief. Instead, the same sentence of the brief (“California courts are especially skeptical...”) is supported by a different citation.[3] Version 3 at 10. 15. I also received an e-mail from Mr. Vahedy, an associate at the K&L Gates firm. That e-mail stated that the Version 3 brief: addresses the issues raised in [my] 4:06 pm e-mail. Specifically, references to National and Booth were inadvertently included prior to filing. These cites have since been addressed and updated within our respective papers. 16. OSC. I'm not satisfied by that explanation. Based on the materials I reviewed on Monday, Plaintiff's lawyers may have presented falsified research on an issue of such significance (the dispute over privilege assertions) that it led to my appointment as Special Master. I'm also concerned that a brief (Version 2) that allegedly was amended for “cosmetic” reasons contained a bizarre modification in one of the problematic sections. 17. Therefore, Plaintiff's lawyers are ordered to show cause why I should not impose sanctions (or recommend that the district judge impose sanctions) on them for this conduct. Plaintiff's lawyers may discharge this OSC by filing a sworn declaration attesting in adequate detail about the circumstances by which the erroneous National Steel Products and Booth materials made their way into Versions 1 and 2 of the brief. I specifically want to know which lawyers / staff members at the firms representing Plaintiff were responsible for this conduct. I also want a statement from a competent lawyer explaining whether or not any AI product was utilized in the preparation of the brief. *8 18. I also will require Mr. Copeland or Mr. Keech to personally review every citation and quotation in Version 1 of the brief. One of these lawyers will attest to the accuracy of those materials or inform me of any other problems in the supplemental brief that I didn't catch. 19. Plaintiff's lawyers will file these declarations with me via JAMS Access by or before noon on Friday, April 18. Note that, until I resolve this issue, neither this order nor the declarations of counsel should be filed on the federal court docket. Consistent with paragraph 7 of the appointment order, the parties are informed that I may consider cost-shifting of my fees regarding this situation. Footnotes [1] I also received a supplemental brief from Defendant. That submission is not relevant to this OSC. [2] I used a Boolean search (ti(booth and allstate))in the California and 9th Circuit jurisdictional databases on Westlaw. No result found. [3] That decision – State Farm Mutual Auto Ins. Co. v. Lee, 13 P.3d 1169, 1183 (Ariz. 2000) – is a ruling of the Arizona Supreme Court that may (in part) have relied on California law.