text:
    In the Matter of Mark C. PAUTLER, Attorney-Respondent.
    No. 01SA129.
    Supreme Court of Colorado, En Banc.
    May 13, 2002.

      John Gleason, Attorney Regulation Counsel, Naney L. Cohen, Chief Deputy Regulation Counsel, Denver, Colorado, Attorneys for Petitioner.
    William A. Tuthill, III, Acting Jefferson County Attorney, Ellen G. Wakeman, Assistant County Attorney, Jennifer 0. Pielsticker, Assistant County Attorney, Golden, Colorado, Attorneys for Attorney-Respondent.
    Ken Salazar, Attorney General, Cheryl Hone, Assistant Attorney General, Appellate Division, Denver, Colorado, Attorneys for Amicus Curiae, for Attorney-Respondent.
    Linda R. Johnson, Denver, Colorado, Attorney for Amicus Curiae Colorado Organization for Victim Assistance.
    H. Patrick Furman, Boulder, Colorado, Attorney for Amicus Curiae Colorado Criminal Defense Bar.
    Colorado District Attorneys Council, Peter A. Weir, Executive Director, Denver, Colorado.
    M. Katherine Howard, Deputy District Attorney, Pueblo, Colorado, Attorneys for Ami-cus Curiae for Attorney-Respondent.
   Justice KOURLIS

delivered the Opinion of the Court.

I will employ such means as are consistent with Truth and Honor; I will treat all persons whom I encounter through my practice of law with fairness, courtesy, respect, and honesty.

Oath of Admission-Colorado State Bar, 2002

In this proceeding we reaffirm that members of our profession must adhere to the highest moral and ethical standards. Those standards apply regardless of motive. Purposeful deception by an attorney licensed in our state is intolerable, even when it is undertaken as a part of attempting to secure the surrender of a murder suspect. A prosecutor may not deceive an unrepresented person by impersonating a public defender. We affirm the hearing board's finding that the district attorney in this case violated the Colorado Rules of Professional Conduct, and on somewhat different grounds, including the attorney's failure to disclose his deception immediately after the event, we also affirm the discipline imposed by the hearing board.

L.

The hearing board found the following facts by clear and convincing evidence: On June 8th, 1998, Chief Deputy District Attorney Mark Pautler arrived at a gruesome crime seene where three women lay murdered. All died from blows to the head with a wood splitting maul, While at the scene ("Chenango apartment"), Pautler learned that three other individuals had contacted the sheriffs department with information about the murders. Pautler drove to the location where those witnesses waited ("Belleview apartment"). Upon arrival, he learned that the killer was William Neal Neal had apparently abducted the three murder victims one at a time, killing the first two at the Chenango apartment over a three-day period. One of the witnesses at the Belle-view apartment, J.D.Y., was the third woman abducted. Neal also took her to the Chenan-go apartment where he tied her to a bed using eyebolts he had serewed into the floor specifically for that purpose. While J.D.Y. lay spread-eagled on the bed, Neal brought a fourth woman to the Chenango apartment. He taped her mouth shut and tied her to a chair within J.D.Y.'s view. Then, as J.D.Y. watched in horror, Neal split the fourth vie-tim's skull with the maul. That night he raped J.D.Y. at gunpoint.

The following morning, Neal returned with J.D.Y. to the Belleview apartment. First one friend, a female, and then a second friend, a male, arrived at the apartment. Neal held J.D.Y. and her two friends in the Belleview apartment over thirty hours. He dictated the details of his crimes into a recorder. Finally, he abandoned the apartment, leaving instructions with J.D.Y. and her friends to contact police, and to page him when the police arrived.

When Pautler reached the Belleview apartment, Deputy Sheriff Cheryl Moore had already paged Neal according to the instructions Neal had left. Neal answered the page by phoning the apartment on a cell-phone. The ensuing conversation lasted three-and-2half hours, during which Moore listened to Neal describe his crimes in detail. She took notes of the conversation and occasionally passed messages to Pautler and other officers at the scene. Sheriff Moore developed a rapport with Neal and continuously encouraged his peaceful surrender. Meanwhile, other law enforcement officers taped the conversation with a hand-held recorder set next to a second phone in the apartment. Efforts to ascertain the location of Neal's cell-phone were unsuccessful.

At one point, Neal made it clear he would not surrender without legal representation; Moore passed a message to that effect to Pautler. Neal first requested an attorney who had represented him previously, Daniel Plattner, but then also requested a public defender (PD). Pautler managed to find Plattner's office number in the apartment telephone book. When he called the number, however, Pautler received a recorded message indicating the telephone was no longer in service. Pautler believed that Plattner had left the practice of law, and he therefore made no additional attempt to contact Platt-ner. Upon learning that Plattner was unavailable, Sheriff Moore agreed with Neal to secure a public defender. However, no one in the apartment made any attempt to contact a PD or the PD's office.

Pautler later testified that he believed any defense lawyer would advise Neal not to talk with law enforcement. Pautler also testified that he did not trust anyone at the PD's office, although on cross-examination he admitted there was at least one PD he did trust. Law enforcement officials present at the Belleview apartment, testifying in Paut-ler's defense, said they would not have allowed a defense attorney to speak with Neal because they needed the conversation to continue until they could apprehend Neal. Instead of contacting the PD's office, or otherwise contacting defense counsel, Pautler offered to impersonate a PD, and those law enforcement agents at the seene agreed.

When Neal again requested to speak to an attorney, Sheriff Moore told him that "the PD has just walked in," and that the PD's name was "Mark Palmer," a pseudonym Pautler had chosen for himself. Moore proceeded to brief "Palmer" on the events thus far, with Neal listening over the telephone. Moore then introduced Pautler to Neal as a PD. Pautler took the telephone and engaged Neal in conversation. Neal communicated to Pautler that he sought three guarantees from the sheriffs office before he would surrender: 1) that he would be isolated from other detainees, 2) that he could smoke cigarettes, and 3) that "his lawyer" would be present. To the latter request, Pautler answered, "Right, I'll be present."

b Neal also asked, "Now, um, at this point, I want to know, um, what my rights are-you feel my rights are right now." Pautler did not answer the question directly, but asked for clarification. Neal then indicated he sought assurance that the sheriffs office would honor the promises made. Pautler communicated to Neal that he believed the sheriff's department would keep him isolated as requested. Pautler did not explain to Neal any additional rights, nor did Neal request more information on the topic. In later conversations, it was clear that Neal believed "Mark Palmer" from the PD's office represented him.

Neal eventually surrendered to law enforcement without incident. An officer involved in the arrest approached Pautler with the news that Neal had asked whether his attorney was present. Pautler was at the scene but did not speak with Neal, although he asked the officer to tell Neal that the attorney was indeed present. Evidence at the hearing indicated that Neal was put into a holding cell by himself and received his requested cigarettes as well as a telephone call.

Pautler made no effort to correct his misrepresentations to Neal that evening, nor in the days following. James Aber, head of the Jefferson County Public Defender's office, eventually undertook Neal's defense,. Aber only learned of the deception two weeks later when listening to the tapes of the conversation whereupon he recognized Pautler's voice. Aber testified at Pautler's trial that he was confused when Neal initially said that a Mark Palmer already represented him. Aber told the board that he had difficulty establishing a trusting relationship with the defendant after he told Neal that no Mark Palmer existed within the PD's office. Several months later Neal dismissed the PD's office and continued his case pro se, with advisory counsel appointed by the court. Ultimately, Neal was convicted of the murders and received the death penalty. The parties dispute whether Neal dismissed Aber out of the mistrust precipitated by Pautler's earlier deception.

Attorney Regulation Counsel charged Pautler with violating both Colo. RPC 8.4(c) and 4.3 of the Colorado Rules of Professional Conduct ("Rules"). The presiding disciplinary judge granted summary judgment against Pautler on Rule 84(c) the 4.3 charge went to a hearing board because the judge ruled that (1) whether Neal was represented, and (2) whether Pautler gave advice, were disputed questions of fact. The board subsequently found that Pautler violated Rule 4.3. With one dissent, the board set the sanction for both violations at three months suspension, with a stay granted during twelve months of probation. During that period, Pautler was to retake the MPRE, take twenty hours of CLE credits in ethics, have a supervisor present whenever he engaged in any activity implicating Colo. RPC 4.3, and pay the costs of the proceedings.

We take note of additional facts pertinent to our decision here. First, Neal was an unrepresented person at the time Pautler spoke with him; the parties stipulated to this fact after the PDJ's ruling but before Paut-ler's trial. Second, Pautler is a peace officer, level Ia, as defined in section 18-1-)(IID)(A), 6 C.R.S. (2001), by virtue of his position in the DA's office. As such, Pautler carries a badge and is authorized to carry a weapon. He was armed during these events. He is further authorized to use lethal force, when necessary, to apprehend a dangerous felon. § 18-1-707(2)(a)(I), 6 C.R.S. (2001). Also, all parties acknowledged Paut-ler's reputation for honesty and high ethical standards. Finally, Pautler testified that given the same cireumstance, he would not act differently, apart from informing Neal's defense counsel of the ruse earlier.

IL.

Lawyers, as guardians of the law, play a vital role in the preservation of society. The fulfillment of this role requires an understanding by lawyers of their relationship with and function in our legal system. A consequent obligation of lawyers is to maintain the highest standards of ethical conduct.

Colo. R.P.C. pmbl.

The jokes, cynicism, and falling public confidence related to lawyers and the legal system may signal that we are not living up to our obligation; but, they certainly do not signal that the obligation itself has eroded. For example, the profession itself is engaging in a nation-wide project designed to emphasize that "truthfulness, honesty and candor are the core of the core values of the legal profession." Lawyers themselves are recognizing that the public perception that lawyers twist words to meet their own goals and pay little attention to the truth, strikes at the very heart of the profession-as well as at the heart of the system of justice. Lawyers serve our system of justice, and if lawyers are dishonest, then there is a perception that the system, too, must be dishonest. Certainly, the reality of such behavior must be abjured so that the perception of it may diminish. With due regard, then, for the gravity of the issues we confront, we turn to the facts of this case. |

III.

For purposes of our decision, "the board's factual findings are binding on this court unless, after considering the record as a whole, the findings are unsupported by substantial evidence." People v. Benneft, 810 P.2d 661, 665 (Colo.1991); see also C.R.C.P 251.27(b) (mandating a "clearly erroneous" standard of review for findings of fact). Questions of law in attorney disciplinary proceedings receive de novo review as with any appeal, CR.C.P 251.27(b); see also People v. Reynolds, 933 P.2d 1295, 1303 (Colo.1997).

The complaint charged Pautler with violating Colo. RPC 8.4: "It is professional misconduct for a lawyer to: ... (c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation." This rule and its commentary are devoid of any exception. Nor do the Rules distinguish lawyers working in law enforcement from other lawyers, apart from additional responsibilities imposed upon prosecutors. See Colo. RPC 3.8; see also Berger v. United States, 295 U.S. 78, 88, 55 S.Ct. 629, 79 L.Ed. 1314 (1985). The two jurisdictions that have created exceptions to this blanket prohibition limited them to circumstances inapposite here.

A. Pautler's Defense

We are unpersuaded by Pautler's assertion that his deception of Neal was "justified" under the cireumstances, and we underscore the rationale set forth in People v. Reichman, 819 P.2d 1035 (Colo.1991). There, a district attorney sought to bolster a police agent's undercover identity by faking the agent's arrest and then filing false charges against him. Id. at 1036. The DA failed to notify the court of the scheme. Id. We upheld a hearing board's imposition of public censure for the DA's participation in the ploy. Id. at 1039.

To support our holding in Reichman, we cited In re Friedman, 76 Ill.2d 392, 30 Ill.Dec. 288, 392 N.E.2d 1333 (1979). There, a prosecutor instructed two police officers to testify falsely in court in an attempt to collar attorneys involved in bribery. Friedman, 30 Ill.Dec. 288, 392 N.E.2d at 1334. A divided Illinois Supreme Court found such advice violated the ethics code despite the undeniably wholesome motive. Id. 30 Ill.Dec. 288, 392 N.E.2d at 1336. Similarly, in In re Malone, 105 A.D.2d 455, 480 N.Y.S.2d 608 (N.Y.App.Div.1984), a state attorney instructed a corrections officer, who was an informant in allegations against correctional officers abusing inmates, to lie to an investigative panel. Id. at 604-05. The instruction was purportedly to save the testifying officer from retribution by the other corrections officers. Id. Again, despite the laudable motive, the New York court upheld Malone's censure for breaking the code. Id. at 607-08.

Thus, in Reichman, we rejected the same defense to Rule 84(c) that Pautler asserts here. We ruled that even a noble motive does not warrant departure from the Rules of Professional Conduct. Moreover, we applied the prohibition against deception a for-tiori to prosecutors:

District attorneys in Colorado owe a very high duty to the public because they are governmental officials holding constitutionally created offices. This court has spoken out strongly against misconduct by public officials who are lawyers. The respondent's responsibility to enforce the laws in his judicial district grants him no license to ignore those laws or the Code of Professional Responsibility.

Reichman, 819 P.2d at 1038-89 (citations omitted).

We stress, however, that the reasons behind Pautler's conduct are not inconsequential. In Reichman, we also stated, "While the respondent's motives and the erroneous belief of other public prosecutors that the respondent's conduct was ethical do not excuse these violations of the Code of Professional Responsibility, they are mitigating factors to be taken into account in assessing the appropriate discipline." Id. at 1039. Hence, Reichman unambiguously directs that prosecutors cannot involve themselves in deception, even with selfless motives, lest they run afoul of Rule 8.4(c).

B. Imminent Public Harm Exception

Pautler requests this court to craft an exception to the Rules for situations constituting a threat of "imminent public harm." In his defense, Pautler elicited the testimony of an elected district attorney from a metropolitan jurisdiction. The attorney testified that during one particularly difficult cireum-stance, a kidnapper had a gun to the head of a hostage. The DA allowed the kidnapper to hear over the telephone that the DA would not prosecute if the kidnapper released the hostage. The DA, along with everyone else involved, knew the DA's representation was false and that the DA fully intended to prosecute the kidnapper. Pautler analogizes his deceptive conduct to that of the DA in the hostage case and suggests that both cases give cause for an exception to Rule 8. 4(c).

We first note that no complaint reached this court alleging that the DA in the kidnapper scenario violated Rule 8.4(c), and therefore, this court made no decision condoning that DA's behavior. But assuming arguendo that the DA acted in conformity with the Rules, one essential fact distinguishes the hostage scenario from Pautler's case: the DA there had no immediately feasible alternative. If the DA did not immediately state that he would not prosecute, the hostage might die. In contrast, here Neal was in the midst of negotiating his surrender to authorities. Neal did make references to his continued ability to kill, which Pautler described as threats, but nothing indicated that any specific person's safety was in imminent danger. More importantly, without see-ond guessing crime seene tactics, we do not believe Pautler's choices were so limited. Pautler had several choices. He had telephone numbers and a telephone and could have called a PD. Indeed, he attempted to contact attorney Plattner, an indication that communicating with a defense attorney was not precluded by the cireumstances. Pautler also had the option of exploring with Neal the possibility that no attorney would be called until after he surrendered. While we do not opine, in hindsight, as to which option was best, we are adamant that when presented with choices, at least one of which conforms to the Rules, an attorney must not select an option that involves deceit or mis-

representation. The level of ethical standards to which our profession holds all attorneys, especially prosecutors, leaves no room for deceiving Neal in this manner. Pautler cannot compromise his integrity, and that of our profession, irrespective of the cause.

C. Duress and Choice of Evils

Pautler further argues that the traditional defenses of duress and "choice of evils provide examples of appropriate defenses to allegations of ethical misconduct. He also refers the court to the comment after Rule 4.1 where attorneys permissibly "misrepresent" their client's position as part of "generally accepted conventions in negotiations." Colo. RPC 4.1 emt. Pautler does not assert that any of these exceptions apply in his case, but that their existence demonstrates that exeeptions are, at times, available to the otherwise strictly interpreted ethics rules.

This court has never examined whether duress or choice of evils can serve as defenses to attorney misconduct. We note that the facts here do not approach those necessary for either defense: Pautler was not acting at the direction of another person who threatened harm (duress), nor did he engage in criminal conduct to avoid imminent public injury (choice of evils).

A review board in Illinois examined a similar scenario and decided against such an exception. In re Chancey, No. 91CH348, 1994 WL 929289, at *7 (Ill. Att'y Reg. Disp. Comm'n Apr. 21, 1994). In Chancey, a prosecutor with an impeccable reputation drafted a false appellate court order for the sole purpose of deceiving a dangerous felon who had abducted his own child and taken her abroad. Id. at **2-4. Chancey signed a retired judge's name to the order. Id. at *3. He never intended to file the order and did not file the order, nor was the order ultimately used to deceive the felon. Id. Despite its non-use, and despite Chancey's undeniably worthy motive, the Illinois board reprimanded Chanceey for his deceit. Id. at *7. Rather than consider an exception in light of valid concerns over the safety of an abducted child, the board insisted on holding attorneys, especially prosecutors, to the letter of the Rules. Further, the board observed, and we agree, that motive evidence was only relevant in the punishment phase, as either a mitigating or aggravating factor. Id.

Nor does the commentary to Colo. RPC 4.1 persuade us that an exception to Colo. RPC 8.4(c) is appropriate. If anything, the fact that the commentary to Rule 4.1 made explicit an already acknowledged exception demonstrates that, where applicable, the Rules and commentary set forth their own exceptions. Neither Colo. RPC 8.4(c), nor its comment, contain any such exception. On a related point, the hearing board noted, "Both of the rules under which Pautler was charged are imperative, not permissive in application. Compliance with their mandatory provisions is required and is not subject to the exercise of discretion by the lawyer."

D. Role of Peace Officer

Finally, Pautler contends that this court has never addressed whether district attorneys, "while functioning as peace officers," may employ deception to apprehend suspects. He suggests that because peace officers may employ lethal force when pursuing a fleeing, dangerous felon, it would be absurd to sanction an officer who instead uses artifice, simply because that officer is also a licensed attorney. We disagree.

The Rules of Professional Conduct apply to anyone licensed to practice law in Colorado. See In re C de Baca, 11 P.3d 426, 429-30 (Colo.2000) (ruling that lawyers must adhere to the Rules of Professional Conduct even when suspended from the practice of law). The Rules speak to the "role" of attorneys in society; however, we do not understand such language as permitting attorneys to move in and out of ethical obligations according to their daily activities. Pautler cites Higgs v. District Court, 713 P.2d 840 (Colo.1985), for the proposition that this court has provided a test for distinguishing when prosecutors act as "advocates" and when they act as "investigators," for purposes of governmental immunity. Id. at 858. Such test exists, but we hold here that in either role, the Rules of Professional Conduct apply. The obligations concomitant with a license to practice law trump obligations concomitant with a lawyer's other duties, even apprehending criminals. Moreover, this case does not confront us with the propriety of an attorney using deceit instead of lethal foree to halt a fleeing felon. We limit our holding to the facts before us. Until a sufficiently compelling scenario presents itself and convinces us our interpretation of Colo. RPC 8.4(c) is too rigid, we stand resolute against any suggestion that licensed attorneys in our state may deceive or lie or misrepresent, regardless of their reasons for doing so.

IV.

The complaint also charges Pautler with violating Rule 4.3:

In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall state that the lawyer is representing a client and shall not state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer's role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding. The lawyer shall not give advice to the unrepresented person other than to secure counsel.

Colo. RPC 4.3. This rule targets precisely the conduct in which Pautler engaged. At all times relevant, Pautler represented the People of the State of Colorado. The parties stipulated that Neal was an unrepresented person. Pautler deceived Neal and then took no steps to correct the misunderstanding either at the time of arrest or in the days following. Pautler's failure in this respect was an opportunity lost. Where he could have tempered the negative consequences re-suiting from the deception, he instead allowed them to linger.

While it is unclear whether Pautler actually gave advice to Neal, he certainly did not inform Neal to retain counsel. In addition, Pautler went further than implying he was disinterested; he purported to represent Neal. Without doubt, Pautler's conduct violated the letter of Colo. RPC 4.8.

For reasons substantially similar to those above, we refuse to graft an exception to this rule that would justify or excuse Pautler's actions. Instead, we affirm the ruling of the hearing board finding a violation of Colo. RPC 4.3 and turn now to consider the sanction imposed.

v.

The hearing board suspended Pautler for three months and then stayed that suspension during twelve months of probation. During the probationary period, Pautler was to fulfill various conditions including retaking the MPRE. We review this sanction under a reasonableness standard. C.R.C.P 251.27(b).

The board rendered its decision after reviewing the ABA Standards for Imposing Lawyer Sanctions (1991 & Supp.1992) (ABA Standards). Those standards require examination of the duty violated; the lawyer's mental state; the potential or actual injury caused by the lawyer's misconduct; and the existence of aggravating or mitigating factors. ABA Standards 3.0.

The board found that Pautler violated duties to the legal system, the profession, and the public. It also ruled that his mental state was "not only knowing, it was intentional." Further, the board found actual injury to the administration of justice in that Paut-ler's conduct "contributed to a perceived lack of trust between Neal and his lawyers, adversely impacted subsequent judicial proceedings and resulted in additional hearings to explore factual and legal issues created by the deceptive conduct." The board ruled the harm was perhaps unquantifiable, but certainly present. The board also found substantial "potential injury" because, had Neal discovered Pautler's deception, the "negotiating gains made by Sheriff Moore might be lost, Neal could terminate communication and resume or escalate his murderous crime spree." The board also considered the implications of whether Pautler actually became Neal's lawyer.

Addressing mitigating factors, the board acknowledged Pautler's praiseworthy motive, but also found a "secondary" motive: to keep Neal "talking about his crimes without the benefit of requested legal representation and thereby gain an advantage in subsequent legal proceedings." Other mitigating factors included Pautler's full cooperation with the Office of Attorney Regulation, see ABA Standards 9.832(e), and his lack of prior discipline, see id. at 9.32(a). Among the aggravators, the board found Pautler's substantial experience with the law, see id. at 9.22(1), and, most importantly, his lack of remorse, see id. at 9.22(g). While the board ultimately ruled that the mitigating factors outweighed the aggravating factors, they declined to depart from the presumptive sanction of suspension.

We conclude that the hearing board's discipline was reasonable. Pautler violated a duty he owed the public, the legal system, and the profession. His role of prosecutor makes him an instrument of the legal system, a representative of the system of justice. The fact that he lied for what he thought was a good reason does not obscure the fact that he lied-in an important cireumstance and about important facts. To the extent Paut-ler's misconduct perpetuates the public's mis-perception of our profession, he breached public and professional trust. See generally ABA Standards 5.0-7.0.

Second, the record supports the board's finding that Pautler acted intentionally. He intended to deceive Neal into believing not only that the attorney on the telephone was a PD, but that the attorney represented him. Because Pautler's conscious objective was to accomplish the result, his mental state was intentional. See ABA Standards definitions.

Third, we agree that the evidence before the hearing board supported the finding of actual, unquantifiable harm. We do not agree, however, that the evidence also supported a finding of potential harm.

As to the aggravating factors, we do not find adequate support in the record for the board's finding that Pautler harbored a see-ondary, ulterior motive. While it is undoubtedly true that Pautler sought to keep Neal on the telephone until he surrendered, no evidence suggested he did so in an effort to gain a tactical advantage in subsequent criminal proceedings. Pautler never attempted to elicit incriminating statements from Neal. Indeed, Neal had already confessed to the crimes in substantial detail, both over the telephone and in the taped confession he left at the Belleview apartment; there was little need for additional evidence. For purposes of aggravation and mitigation, we conclude that Pautler's only motive was Neal's surrender to law enforcement.

However, we do find an additional aggravating cireumstance: Pautler's post-incident conduct. An attorney's post-incident conduct also bears upon aggravation and mitigation. See ABA Standards 9.22(J) (indifference in making restitution is an aggravating factor); id. at 9.32(d) (timely good-faith effort to make restitution or to rectify consequences of misconduct is a mitigating factor). After the immediacy of the events waned, Pautler should have taken steps to correct the blatant deception in which he took part. Instead, he dismissed such responsibility believing that the PD's office "would find that out in discovery." Although we do not agree that Pautler's subsequent failure to correct the deception was evidence of a secondary, ulterior motive, as the hearing board found, we do find that such conduct was an independent aggravating factor.

In mitigation, we credit Pautler's commendable reputation in the legal community, his lack of prior misconduct, and his full cooperation in all these proceedings. In addition, we believe Pautler's motivation to deceive Neal was in no way selfish or self-serving. He believed he was protecting the public.

In light of the various factors bearing on Pautler's discipline, we do not find the hearing board's sanction unreasonable. See C.R.C.P. 251.27(b). Other attorneys participating in deceit and misrepresentation have received suspensions. See, eg., In the Matter of Gibson, 991 P.2d 277, 279 (Colo.1999) (ordering thirty-day suspension when attorney deceived client to hide the fact that the attorney had neglected his client's tort claim); People v. Casey, 948 P.2d 1014, 1015 (Colo.1997) (affirming forty-five-day suspension when an attorney "represented" a teenager in criminal charges knowing the teen was using an assumed name).

In sum, we agree with the hearing board that deceitful conduct done knowingly or intentionally typically warrants suspension, or even disbarment. See ABA Standards 7.2 ("Suspension is generally appropriate when a lawyer knowingly engages in conduct that is a violation of a duty owed to the profession l...") 14d. at 5.11(b) ("Disbarment is generally appropriate when ... a lawyer engages in any other intentional conduct involving dishonesty, fraud, deceit, or misrepresentation. ..."). We further agree that the mitigating factors present in Pautler's case outweigh the aggravating factors, and affirm the imposition of a three-month suspension, which shall be stayed during twelve months of probation. This sanction reaffirms for all attorneys, as well as the public, that purposeful deception by lawyers is unethical and will not go unpunished. At the same time, it acknowledges Pautler's character and motive.

VL

Therefore, we affirm the hearing board's ruling that Pautler violated Rules 8.4(c) and 4.3 of the Colorado Rules of Professional Conduct. We also affirm the hearing board's probationary period, with a three-month suspension to be imposed only if Pautler violates the terms of that probation. Finally, Pautler is to pay the costs of this proceeding as ordered by the hearing board.

      . The Oath of Admission that Mark Pautler actually took when he was sworn into the Colorado Bar in 1975 read:
      "I will ... advance no fact prejudicial to the honor or reputation of a party or witness, unless required by the justice of the cause with which I am charged."
      Oath of Admission-Colorado State Bar, 1975
      In the intervening years, this court has changed the Oath in a way that more specifically reflects the commitment to the basic precepts of the profession: fairness, courtesy, respect and honesty.

      . Professional Reform Initiative project of the National Conference of Bar Presidents, 2001.

      . We recall Justice Sutherland's famous rationale behind the heightened ethical standards imposed upon federal prosecutors:
      The United States Attorney is the representative not of an ordinary party to a controversy, but of a sovereignty whose obligation to govern impartially is as compelling as its obligation to govern at all; and whose interest, therefore, in a criminal prosecution is not that it shall win a case, but that justice shall be done. As such, he is in a peculiar and very definite sense the servant of the law, the twofold aim of which is that guilt shall not escape or innocence suffer. He may prosecute with earnestness and vig- or-indeed, he should do so. But, while he may strike hard blows, he is not at liberty to strike foul ones. It is as much his duty to refrain from improper methods calculated to produce a wrongful conviction as it is to use every legitimate means to bring about a just one.
      Berger, 295 U.S. at 88, 55 S.Ct. 629.

      . Only Utah and Oregon have construed or changed their ethics rules to permit government attorney involvement in undercover investigative operations that involve misrepresentation and deceit. See Utah State Bar Ethics Advisory Opinion Comm., No. 02-05, 3/18/02, and Or. DR 1-102(d), respectively. The recently issued advisory opinion of the Utah Bar Ethics Committee holds that attorneys may participate in "otherwise lawful" government investigative operations without violating the state's ethics rules. Id. The Oregon rule is more restrictive. It encompasses similar investigative operations, but limits the attorney's role to "supervising" or "advising," not permitting direct participation by attorneys. See Or. DR 1-102(d).

      . Reichman violated DR 1-102(A)(4), the identically worded predecessor to Colo. RPC 8.4(c).

      . We do not address whether, under some unique circumstances, an "imminent public harm" exception could ever apply to the Colorado Rules of Professional Conduct. We hold only that this is not such case.

      . Duress is available by statute as a complete defense to criminal charges where the defendant engaged in conduct "at the direction of another person because of the use or threatened use of unlawful force upon him or upon another person" to such degree that a "reasonable person ... would have been unable to resist." § 18-1-708, 6 C.R.S. (2001).

      . "Choice of evils" is a statutory defense applicable when the alleged criminal conduct was "necessary as an emergency measure to avoid an imminent public or private injury which [was] about to occur ... and which [was] of sufficient gravity" that it outweighed the criminal conduct. § 18-1-702, 6 C.R.S. (2001).

      . Pautler cites Montag v. State Bar, 32 Cal.3d 721, 186 Cal.Rptr. 894, 652 P.2d 1370 (1982), and Trammell v. Disciplinary Board, 431 So.2d 1168 (Ala.1983), as examples where other jurisdictions have indicated that duress may be a defense to ethics violations. We note that in neither case did the court find facts sufficient to sustain the defense. While they did not reject the defense outright, the courts ruled that the facts did not warrant its application.

      . The Colorado Attorney General writing as friend of the court asserted that, during these events, Pautler acted on behalf of the police department "which is not the district attorney's client." This rationale does not comport with sections 20-1-101 to -102, 6 C.R.S. (2001), and we therefore decline to adopt it.

      . The board weighed the ramifications of Neal's discovering Pautler's deceit and "resuming or escalating his murderous crime spree." We do not view this as "potential harm" under the ABA Standards. The record does not suggest that Neal "probably" would have resumed his crime spree due to Pautler's deception, but for some intervening factor. Neal might have continued killing regardless, or he might not have continued even if he discovered Pautler's deception. Hypothetical, worst-case scenarios are not the proper foundation for imposing discipline.


source: Caselaw Access Project

author: Justice MARTINEZ

license: Public Domain

text:
    In re Kevin SILVA and Molly Silva, Plaintiffs, v. BASIN WESTERN, INC.; Richard Stewart Transportation and Sinclair Oil Corporation; And Bradley Petroleum, Inc., Defendants.
    No. 01SA303.
    Supreme Court of Colorado, En Banc.
    June 3, 2002.

      Barry I. Tillis, Littleton, Colorado, Attorney for Plaintiffs.
    Senter Goldfarb & Rice, L.L.C., William L. Senter, Tiffaney A. Norton, Denver, Colorado, Attorneys for Defendants.
    Roberts Levin & Patterson, P.C., Daniel W. Patterson, Denver, Colorado, Attorneys for Amicus Curiae, Colorado Trial Lawyers Association.
    Johnson & Ayd, P.C., James D. Johnson, Denver, Colorado, Attorneys for Amicus Cu-riage, Colorado Defense Lawyers Association.
   Justice MARTINEZ

delivered the Opinion of the Court.

In this original proceeding, brought pursuant to C.A.R. 21, Petitioners Basin Western, Inc. and Richard Stewart Transportation (collectively "Basin Western") seek relief from a trial court order compelling the production of information regarding insurance reserves and settlement authority in the personal injury claim of Respondents Kevin and Molly Silva ("the Silvas"). The trial court ordered disclosure and awarded attorney fees to the Silvas as a sanction for Basin Western's failure to disclose the information. Basin Western petitioned this court for a writ prohibiting the trial court from enfore-ing its discovery order and awarding attorney fees to the Silvas. We issued a rule to show cause and now make the rule absolute.

Whether insurance reserves and settlement authority fall within the seope of discovery is a question of first impression in Colorado. Therefore, we explore the nature of insurance reserves and settlement authority to determine whether such information is reasonably calculated to lead to admissible evidence in a personal injury action against an insured party and is discoverable. After addressing our jurisdiction in this case, we next look at the rules of discovery generally. We then discuss the nature of reserves and settlement authority, and how other jurisdictions have viewed the discoverability of such information. We conclude that reserves and settlement authority are not relevant to the Silvas' personal injury action against Basin Western and are therefore not discoverable. We further hold that the trial court erred in awarding attorney fees to the Silvas as a sanction for Basin Western's alleged discovery violation.

I. Facts and Procedure

The underlying case arises from an incident that occurred on July 23, 1999, when Kevin Silva's car caught fire while he was driving past a gas station. Kevin Silva fled his burning car, while it was still moving, but before it exploded. At the time of the accident, an employee of Basin Western, Inc. was delivering gasoline to the gas station in a tanker leased from Richard Stewart Transportation. The Silvas allege this Basin Western employee had negligently caused a stream of gasoline to flow from the station out onto the street. They argue that the stream of gasoline caused Kevin Silva's car to catch fire as he drove past the station. The Silvas do not claim that Kevin Silva suffered any physical injuries in the accident, but they claim the accident caused him emotional suffering, including Post-Traumatic Stress Disorder (PTSD).

After hiring an attorney who initially attempted to negotiate a settlement with Basin Western's insurer, AIG Claim Services, Inc. (AIG), the Silvas filed a complaint. During discovery, the Silvas requested that Basin Western produce the entire contents of the AIG insurance file compiled prior to the filing of the complaint. Basin Western produced approximately one thousand pages of investigatory materials from the file but redacted information regarding reserves and settlement authority. Basin Western also refused to disclose eleven letters, correspondence between Basin Western employees and insurance adjusters for AIG. Basin Western provided a privilege log to the Silvas, claiming the redacted information and letters were either irrelevant, unlikely to lead to the discovery of admissible evidence, or prepared in anticipation of litigation.

The Silvas responded with a motion to compel discovery. The trial court accepted the Silvas' argument that the contested information was prepared by insurance adjusters for Basin Western in the ordinary course of business, not under the direction of counsel, and was therefore discoverable. The trial court ordered Basin Western to produce the letters, reserves, settlement authority, and the estimated value of the case. The court further awarded attorney fees to the Silvas as a sanction against Basin Western pursuant to Colorado Rule of Civil Procedure 37. Basin Western petitioned this court for relief from the trial court's order.

II. Rule 21 Jurisdiction

This court has original jurisdiction under C.A.R. 21 to review whether a trial court abused its discretion in cireumstances where a remedy on appeal would prove inadequate. In re Leaffer v. Zarlengo, 44 P.3d 1072, 1077-78 (Colo.2002); Todd v. Bear Valley Vill. Apartments, 980 P.2d 973, 975 (Colo.1999). As a general rule, orders pertaining to discovery are interlocutory in nature and not reviewable in an original proceeding. Bond v. Dist. Court, 682 P.2d 33, 36 (Colo.1984). However, this court has not hesitated to review discovery rulings where a pretrial discovery order would cause unwarranted damage to a litigant that could not be cured on appeal. See In re Leaffer, 44 P.3d at 1077; Hawkins v. Dist. Court, 638 P.2d 1372 (Colo.1982); Phillips v. Dist. Court, 194 Colo. 455, 573 P.2d 553 (1978). If Basin Western is improperly compelled to produce the contested information from AIG's insurance files the damage will not be curable on appeal. See Bond, 682 P.2d at 36. Accordingly, we exercise original jurisdiction to determine whether the trial court erred in ordering the disclosure of reserves and settlement authority in the Silvas personal injury action against Basin Western.

III. Reserves

A. Purpose & Scope of Discovery

The seope of discovery under the Colorado Rules of Civil Procedure is very broad. The purposes of pretrial discovery include the elimination of surprise at trial, the discovery of relevant evidence, the simplification of the issues, and the promotion of expeditious settlement of cases. Id. at 40; Hawkins, 638 P.2d at 1375. The test for determining whether information is discoverable is stated in Rule 26(b)(1) of the Colorado Rules of Civil Procedure:

parties may "obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether it relates to the claim or defense of the party seeking discovery or to the claim or defense of any other party, including the existence, de-seription, nature, custody, condition and location of any books, documents, or other tangible things, and the identity and location of persons having knowledge of any discoverable matter. The information sought need not be admissible at trial if the information sought appears reasonably calculated to lead to admissible evidence.

Colo. R. Civ. P. 26(b)(1) (emphasis added). Relevancy for purposes of discovery is not the same as relevancy for admissibility of evidence at trial. Williams v. Dist. Court, 866 P.2d 908, 911 (Colo.1993); Kerwin v. Dist. Court, 649 P.2d 1086, 1088 (Colo.1982). Thus, Colo. R. Civ. P. 26(b)(1) permits parties to obtain "discovery regarding any unprivileged, relevant matter that 'relates to the claim or defense of the party seeking discovery or to the claim or defense of any other party' if it is 'reasonably calculated to lead to the discovery of admissible evidence." " In re Leaffer, 44 P.3d at 1083.

We liberally construe discovery rules to eliminate surprise at trial, discover relevant evidence, simplify issues, and promote the expeditious settlement of cases. Bond, 682 P.2d at 40; Jenkins v. Dist. Court, 676 P.2d 1201, 1205 (Colo.1984). In close cases, the balance must be struck in favor of allowing discovery. Wiliams, 866 P.2d at 911; Jenkins, 676 P.2d at 1205. For this reason, a motion to compel discovery is committed to the discretion of the trial court and the court's determination must be upheld on appeal absent a clear abuse of discretion. Williams, 866 P.2d at 911.

Although the law generally favors discovery, the seope of discovery is not limitless. Leidholt v. Dist. Court, 619 P.2d 768, T70 (Colo.1980). The need for discovery must be balanced by weighing a party's right to privacy and protection from harassment against the other party's right to discover information that is relevant. Id. at 770-71. Thus, the information sought through discovery must be relevant to the subject matter of the action and reasonably calculated to lead to the discovery of admissible evidence.

B. Nature of Reserves & Settlement Authority

The dispute between Basin Western and the Silvas involves the discoverability of insurance reserves and settlement authority. The term "reserve" or "reserves" has a special meaning in the law of insurance. Maryland Cas. Co. v. United States, 251 U.S. 342, 350, 40 S.Ct. 155, 64 L.Ed. 297 (1920); In re Couch, 80 B.R. 512, 516 (S.D.Cal.1987). "While its seope varies under different laws, in general it means a sum of money, variously computed or estimated, which with acere-tions from interest, is set aside, 'reserved,' as a fund with which to mature or liquidate, either by payment or reinsurance with other companies, future unacerued and contingent claims, and claims acerued, but contingent and indefinite as to amount or time of payment." Maryland Cas. Co., 251 U.S. at 350, 40 S.Ct. 155; In re Couch, 80 B.R. at 516. More simply, reserves are the funds insurance companies set aside to cover future expenses, losses, claims, or liabilities. Black's Low Dictionary 1807 (6th Ed.1990). There are several different subcategories of reserves. However, any differences in the various types of reserves do not affect our analysis; we therefore find it unnecessary to differentiate between them.

Reserves are subject to the same relevancy standard for discovery as other information. Reserves cannot automatically be deemed irrelevant to an insured's bad-faith claim against an insurer. Lipton v. Superior Court, 48 Cal.App.4th 1599, 56 Cal.Rptr.2d 341, 343 (1996). Reserves may nevertheless be irrelevant for discovery purposes. Id. As one court explained, "An insured is entitled to discovery of loss reserve information unless the trial court can, as a matter of law, conclude that it is not relevant to the subject matter or is not calculated to lead to the discovery of admissible evidence." Id. at 8350. In essence, information regarding reserves was neither automatically protected from, nor subject to, discovery merely because an insurer prepared the information. Rather, reserve information is subject to the same test for discoverability as any other matter.

Furthermore, reserves should not be equated with an admission or valuation by the insurer;

A common misconception is that an insurer's loss reserves are the same as settlement authority. They are not. The main purpose of a loss reserve is to comply with statutory requirements and to reflect, as accurately as possible, the insured's potential liability. It does not automatically authorize a settlement at that figure.

Id. at 348-49. Reserve amounts are only partially within the insurer's control. In re Couch, 80 B.R. at 516. Modern statutes, including Colorado statutes, require insurers to maintain reserves to assure the insurer's ability to satisfy its potential obligations under its policies. § 10-3-208, 8 C.R.S. (2001); 3 C.C.R. 702-3; see also In re Couch, 80 B.R. at 516; 48 Am.Jur.2d Insurance § 28 (1982 & Supp.2002). The insurer must reasonably estimate the amount necessary to provide for the payment of all losses and claims for which the insurer may be Hable. Lipton, 56 Cal.Rptr.2d at 350. The reserves must also reflect all potential claim expenses and any claim the insurer undertakes to defend since the insurer will have claim handling expenses, including attorney fees and court costs. In re Couch, 80 B.R. at 516. The reserve requirement therefore reflects a desire on the part of the states and the insurance companies themselves to ensure that resources are available to cover the insurer's future liabilities, Thus, a particular reserve amount does not necessarily reflect the insurer's valuation of a particular claim.

Settlement authority or recommendations similarly cannot be equated with the insurer's valuation of a particular claim. Settlement authority generally refers to an agent's ability to accept an offer of settlement that binds the principal up to and including a certain amount of money. See Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d § 203:7 (1995); John Doe v. Nebraska, 971 F.Supp. 1305, 1306 (D.Neb.1997) (Lolding that full settlement authority requires a representative for a company with a defense or indemnity obligation to have final settlement authority to commit the company, at his or her discretion, to settle, authorize dismissal of a case with prefudiee, or accept a settlement amount). Compromises and offers to compromise are not admissions of liability. CRE 408; Scott Co. of Cal. v. MK-Ferguson Co., 882 P.2d 1000, 1005 (Colo.Ct.App.1991); see also Signature Dev. Co., Inc. v. Royal Ins. Co. of America, 230 F.3d 1215 (10th Cir.2000). Courts are unwilling to "infer that settlement authority invariably constitutes a final, objective assessment of a claims worth to which an insurer may be held." Signature Dev. Co., Inc., 230 F.3d at 1215 (citing Kosierowski v. Allstate Ins. Co., 51 F.Supp.2d 583, 592 n. 8 (E.D.Pa.1999) and Voland v. Farmers Ins. Co., 189 Ariz. 448, 943 P.2d 808, 812 (Ct.App.1997) (stating that "that the carriers considered [plaintiffs] claim's 'fair value' to be $30,000 and therefore offered to settle for that amount does not mean they acknowledged that was 'the minimal amount the insurer's own adjuster had evaluated as being owed to the insured."). |

Neither reserves nor settlement authority reflect an admission by the insurance company that a claim is worth a particular amount of money. Statutory requirements, limitations in the evaluation, and bargaining tactics limit the usefulness of reserves and settlement authority as valuations of a claim.

C. Discovery of Reserves & Settlement Authority Generally Precluded

A few courts have simply found that the purposes of discovery are not served by compelling disclosure of reserves and settlement authority. For example, in addressing this issue, the Union Carbide court expressed its view that the discovery rules were directed to opinions as to factual issues in controversy and did not render the internal opinions and conclusions 'of the insurer setting the reserves discoverable. Union Carbide v. Travelers Indemn. Co., 61 F.R.D. 411, 412 (W.D.Pa.1978). "[Wle do not believe that the proper end of discovery-expedition of the litigation either by narrowing the area of controversy or by avoiding unnecessary testimony or by providing a lead to evidence-will be served by allowing discovery of the reserves in question." Id.; see also Leksi, Inc. v. Fed. Ins. Co., 129 F.R.D. 99, 106 (D.N.J.1989). The Union Carbide court declined to compel discovery, reasoning that the contingent and uncertain nature of reserves rendered questions about reserve tantamount to hypothetical questions. Umion Carbide, 61 F.R.D. at 412; see also Fed. Realty Inv. Trust v. Pac. Ins. Co., 760 F.Supp. 533, 540 (D.Md.1991); Nat'l Union Fire Ins. Co. v. Stouffer Chem. Co., 558 A.2d 1091, 1097 (Del.Super.Ct.1989).

Other courts have explicitly relied upon the tenuous relationship between reserve amounts or settlement authority and an insurer's evaluation of a claim to find that the nature of reserves makes them irrelevant for discovery purposes. See, e.g., Signature Dev. Co., Inc., 230 F.3d at 1223 (holding that reserves and settlement authority do not necessarily constitute a final objective assessment of a claims' worth); In re Couch, 80 B.R. at 512 (stating that reserves cannot accurately or fairly be equated with an admission of liability or the value of a particular claim); Indep. Petrochemical Corp. v. Aetna Cas. & Sur. Co., 117 F.R.D. 283, 287 (D.D.C.1986) (holding that reserves of very tenuous, if any relevance); Leksi, Inc., 129 F.R.D. at 99 (same); Fid. & Deposit Co. of Md. v. McCulloch, 168 F.R.D. 516, 525 (E.D.Pa.1996) (same); Union Carbide, 61 F.R.D. at 412 (same); Hoechst Celanese Corp. v. Nat'l Union Fire Ins. Co., 623 A.2d 1099, 1109 (Del.Super.Ct.1991) (holding reserve information to be irrelevant); Nat'l Union Fire Ins. Co., 558 A.2d at 1091 (same); Schierenberg v. Howell-Baldwin, 571 N.E.2d 335, 387 (Ind.Ct.App.1991) (holding the amount of reserves, settlement authority, and lability opinions were properly redacted and protected from discovery because they were not reasonably calculated to lead to the discovery of admissible evidence). Fidelity & Deposit Co. of Maryland v. McCulloch, 168 F.R.D. 516, 525 (E.D.Pa.1996), held that requests for production of reserve information are not "reasonably calculated to lead to the discovery of admissible evidence."

Courts finding reserves and settlement authority unlikely to lead to admissible evidence reason that reserves and settlement authority reflect an insurer's basic assessment of the value of a claim taking into consideration the likelihood of an adverse judgment, but do not normally entail a thorough factual and legal evaluation when routinely made as a claim analysis. Signature Dev. Co., Inc., 230 F.3d at 1223; Indep. Petrochemical Corp., 117 F.R.D. at 288; Nat'l Union Fire Ins. Co., 558 A.2d at 1097. These courts characterize reserves as accounting entries that an insurance company regularly uses to set aside sufficient funds in the event of policyholder lability. Hoechst Celanese Corp., 623 A.2d at 1109. As such, the reserves do not evidence an acknowledgment by the insurers of lability. Id. Instead, these courts see reserves as an appro-. priate business decision justified by the need to preserve financial stability given the unpredictability of future liabilities. Id. The McCullough court acknowledged that the relevancy of reserve data to a bad faith counterclaim presents a slightly closer . question. McCulloch, 168 F.R.D. at 525. However, it concluded the reserve data would merely suggest that the cost of defending the third-party claim increased over time. Id. These courts ruled that reserves do not reflect the value of the case, have limited relevance and little probability of leading to admissible evidence, and held reserves undiscoverable. In re Couch, 80 B.R. at 512; Indep. Petrochemical Corp., 117 F.R.D. at 287; Leksi, Inc., 129 F.R.D. at 99; McCulloch, 168 F.R.D. at 525; Union Carbide, 61 F.R.D. at 412; Hoechst Celanese Corp., 623 A.2d at 1109; Nat'l Union Fire Ins. Co., 558 A.2d at 1097-98. Similarly, Signature Development Compamies, Inc. v. Royal Insurance Company of America, 230 F.3d at 1223-24, held that authorization to settle for a particular amount did not mean that the amount reflected the insurance company's final assessment of the claim. Thus, as a general rule, reserves and settlement authority are not reasonably calculated to lead to discoverable evidence and are therefore not subject to discovery.

D. Reasons for Finding Reserves Discoverable Do Not Apply to the Silvas' Personal Injury Tort Action Against Basin Western

Most cases addressing the discoverability of insurance reserves have done so in the context of disputes between an insured party and his or her insurer, such as declaratory judgment or bad faith claims. See Russ & Segalla, supra, § 251:29. Such first-party claims between an insured and his insurer differ from the Silvas third-party personal injury tort claim. However, we have looked to these cases for guidance in determining whether the trial court properly ordered disclosure of reserves and settlement authority in the present case. We now consider these differences to determine whether, and to what extent, they effect our analysis.

The relationship between a plaintiff and the defendant's insurer in third-party personal injury tort claims such as this one differs significantly from the relationship between an insured party and his insurer in a first-party dispute between them. See Weitzman v. Blazing Pedals, Inc., 151 F.R.D. 125, 126 (D.Colo.1998). Third-party personal injury tort claims involve lability investigations. Id. When a liability insurer investigates a third-party personal injury claim, the investigation is made in anticipation of claims which, if denied, will likely lead to litigation. Id. Although a claim may be settled short of legal action, there is always the possibility that a claim will end in litigation. Id. In contrast, when a first-party claim between an insured and his or her insurer is at issue, the insured "is asking for payment under the terms of the insurance contract between him and the insurance company." Tayler v. Travelers Ins. Co., 183 F.R.D. 67, 71 (N.D.N.Y.1998)(underinsured motorist claim by insured against his own insurer) (citing Weitzman, 151 FRD. at 126). The insurance company owes the insured a duty to adjust his claim in good faith. Id. The scope of discovery of insurance information should therefore be broader in a first-party claim between an insured party and his insurer than in a third-party personal injury claim. Consequently, courts have been more likely to find reserves and settlement authority discoverable in claims between an insured and his or her insurer, such as a bad faith claim or declaratory judgment action, than in third-party claims.

We found only two cases in which a court extended the discovery of reserves beyond a first-party dispute between an insured and his or her insurer. See, e.g., Simon v. G.D. Searle & Co., 816 F.2d 397 (8th Cir.1987); Gen. Elec. Capital Corp. v. Directv, Inc., 184 F.R.D. 32 (D.Conn.1998). Both cases are distinguishable from the present case and neither persuades us that the trial court in this case correctly compelled discovery of reserves and settlement authority.

General Electric Capital Corp. v. Directv, Inc., 184 F.R.D. 32 (D.Conn.1998), rejected the notion that reserve information is relevant only in cases in which an insured has sued his or her insurer regarding coverage. See Gen. Elec. Capital Corp., 184 F.R.D. at 38. Instead, the court found that reserve information could be relevant to cases involving notice issues. Id. After an in camera review of eighty-four contested documents, the court found four of the documents to be relevant, but. protected by the work-product doctrine and/or the attorney client privilege and five other documents both relevant and nonprivileged.

Simon v. G.D. Searle & Co., 816 F.2d 397 (8th Cir.1987), addressed whether corporate risk management documents prepared by nonlawyer employees of a self-insured company, which contained aggregate reserve information compiled by the risk management employees from individual reserve estimates made by the company's attorneys, were precluded from discovery by Fed.R.Civ.P. 26(b)(2). The Eighth Circuit held "the discovery of matters pertaining to insurance depend[s] on whether such information [is] relevant to the subject matter or reasonably calculated to lead to admissible evidence." Id. at 404. The court upheld the trial court's disclosure of the documents, finding them relevant to the issues of notice, defect, and punitive damages. Id. Statements made elsewhere in the opinion indicate that the court based its decision, at least in part, on the fact that the documents involved aggregate reserve figures. The court noted:

Individual case reserve figures reveal the mental impressions, thoughts, and conclusions of an attorney in evaluating a legal claim and are by "their very nature prepared in anticipation of litigation, and consequently, they are protected from discovery as opinion work product.

Id. at 401. This language suggests that the court would not have permitted discovery if the risk management documents had contained individual reserve figures rather than aggregate ones.

Both General Electric Capital Corp., 184 F.R.D. at 32, and Simon, 816 F.2d at 397, are distinguishable from the present case. The cases involved issues of notice that are not present in the current case. Simon involved aggregate reserve numbers found in corporate risk management documents, rather than individual reserves established by the insurer and discussed in the insurance file.

E. Application

In this case, the Silvas sought to compel digclogsure of letters containing references to reserves and settlement authority sent between Basin Western Employees and AIG insurance adjusters. The Silvas argue that AIG's reserves and settlement authority are discoverable. Specifically, they note the discrepancy that often occurs between the amount that an insurance company is willing to offer a plaintiff to settle a case and the reserves the company sets aside in the case. The Silvas presumably equate AIG's reserves and settlement authority with the insurance company's valuation of their case.

We are convinced that the purposes of discovery are not served by allowing discovery of reserves and settlement authority in a third-party personal injury claim such as the Silvas'. The present action is not a first-party action between the Silvas and their insurer, or even a case between Basin Western (the insured) and AIG (its insurer). Nor is it a dispute between two or more insurance companies over coverage. Rather, it is a third-party personal injury tort claim against Basin Western (the insured) by the Silvas (the allegedly injured third party). Because the relationship between the insured party and the insurer differs from the relationship between an insurance company and a party who may have been injured by the insured, the seope of discovery also differs.

In a first-party claim, the insurance company owes a duty to its insured to adjust a claim in good faith that the insurance company does not owe to the plaintiff in the present third-party personal injury claim. Weitzman, 151 F.R.D. at 126. This difference in the duty of an insurance company in a first-party claim versus a third-party claim affects our analysis of the discoverability of reserves. In a first-party claim, the establishment of reserves and settlement authority could be relevant and reasonably calculated to lead to admissible evidence regarding whether the insurance company adjusted a claim in good faith or made a prompt investigation, assessment, or settlement of a claim. See Weitzman, 151 F.R.D. at 126; Savoy, 176 F.R.D. at 12; Lipton, 48 Cal.App.4th at 1614, 56 Cal.Rptr.2d 341. The scope of discovery has thus been traditionally broader in first-party disputes between an insured party and his or her insurer. Weitzman, 151 F.R.D. at 126. Reserves have been correspondingly more likely to be found discoverable in such actions. However, AIG owes no such duty to the Silvas in the present third-party personal injury action. Consequently, reserves and settlement authority should be less subject to discovery than in bad faith or declaratory judgment actions.

The Silvas' general allegations of relevancy are insufficient to convince us that the insurance reserves and settlement authority at issue are discoverable in a personal injury tort action. See Home Ins. Co. v. Ballenger Corp., 74 F.R.D. 93, 101-02 (N.D.Ga.1977) (holding that general allegations of relevancy are insufficient to overcome specific objections of an adverse party to the disclosure of reserve information).

We hold that the Silvas' requests for production of reserves and settlement authority are not reasonably calculated to lead to the discovery of admissible evidence in this third-party personal injury tort claim between the Silvas and Basin Western. Consequently, the trial court erred in compelling disclosure of the reserves and settlement authority.

IV. Attorney Fees

Basin Western also contests the trial court's award of attorney fees to the Silvas as a sanction for a discovery violation pursuant to Colo. R. Civ. P. 37. Basin Western claims the trial court abused its discretion in imposing the sanction for Basin Western's failure to produce reserve information and settlement authority. We agree. Because we find no discovery violation occurred in this case, we hold that the trial court erred in awarding attorney fees to the Silvas. We therefore make the rule absolute as to the award of attorney fees.

V. Conclusion

We hold that the trial court erred in compelling Basin Western to produce information regarding insurance reserves and settlement authority. Such information is not reasonably calculated to lead to admissible evidence in a personal injury tort action against an insured party and is therefore not discoverable in this case. Under these circumstances, we further find the trial court abused its discretion in awarding attorney fees as a discovery sanction against Basin Western. Accordingly, the rule is made absolute, and the trial court is directed to vacate its order compelling discovery and awarding attorney fees.

      . The term reserve includes "unearned premium reserve" to meet future liabilities on policies; "Hability reserve" to satisfy claims, indefinite in amount and as to time of payment but accrued on liability and workers' compensation policies; and "reserve for loss claims" accrued on policies other than those provided for in the "liability reserve." Maryland Cas. Co., 251 U.S. at 350, 40 S.Ct. 155. Loss reserves represent the amount anticipated to be sufficient to pay all obligations for which the insurer may be responsible under the policy with respect to a particular claim. Lipton, 56 Cal.Rptr.2d at 348-49. That amount necessarily includes expenses that are likely to be incurred in connection with the settlement or adjustment of the claim, as well as the legal fees and other costs required to defend the insured. Id.

      . While the trial court's order refers to "settlement authority," the briefs in this case refer to "settlement recommendations." The terms have related but distinct meanings. "Settlement authority" generally means the amount that an agent of a party is authorized to offer in settlement of a claim. See John Doe, 971 F.Supp. at 1306. "Settlement recommendation" is the amount a party or agent recommends be offered to settle a claim. For simplicity, we discuss these terms together using the term "settlement authority."

      . Basin Western challenges the trial court's order compelling it to disclose settlement authority and settlement recommendations on the ground that Colorado Rule of Evidence (CRE) 408 makes compromises and offers to compromise inadmissible at trial. However, CRE 408 does not apply to communications between an insured party and its insurer regarding the merits of a claim. Scott Co. of Cal., 832 P.2d at 1006; see also Raybestos Prods. Co. v. Younger, 54 F.3d 1234 (7th Cir.1995) (holding that because a letter did not relate to any proposal for settlement Fed. R.Evid. 408 did not bar its admission). Nor does CRE 408 apply to "situations in which someone acknowledges that a certain claim is valid or valid to a certain extent", or statements to the effect: "I think your claim is worth 'X'." Scott Co. of Cal., 832 P.2d at 1006. Accordingly, Basin Western cannot rely on CRE 408 to protect against the disclosure of the documents at issue in this case.