Opinion
11 Civ. 1299 (HB) (FM)
11-10-2011
GENON MID-ATLANTIC, LLC, et ano, Plaintiffs, v. STONE & WEBSTER, INC., Defendant.
DISCOVERY ORDER FRANK MAAS, United States Magistrate Judge.
In this declaratory judgment action, each side objects to its adversary's withholding of certain documents based on attorney-client privilege, the work product doctrine, or both. I have reviewed the parties' submissions and have conducted an in camera review of the contested documents. For the reasons set forth below, both sides will be required to produce additional documents or portions of documents.
I. Factual Background and Procedural History
On July 30, 2007, plaintiffs GenOn Mid-Atlantic, LLC, and GenOn Chalk Point, LLC (together, "GenOn"), and defendant Stone & Webster, Inc. ("Shaw"), entered into an agreement ("Turnkey Agreement"), pursuant to which Shaw committed to design and build air quality control systems, known as "wet scrubbers," at three of GenOn's Maryland power plants ("Project"). See GenOn Mid-Atlantic, LLC v. Stone & Webster, Inc., 11 Civ. 1299 (HB) (FM), 2011 WL 2207513, at *1 (S.D.N.Y. June 6, 2011) ("GenOn I"). This work was necessary for GenOn's power plants to be in compliance with Maryland's Healthy Air Act, which took effect on January 1, 2010. Id. In GenOn I, Judge Baer, to whom this case is assigned, summarized the payment provisions of the Turnkey Agreement as follows:
Defendant Stone & Webster, Inc., is a wholly-owned subsidiary of the Shaw Group, Inc. (ECF No. 66 ("Am. Compl.") ¶ 3).
The amount payable to [Shaw] was not fixed, but was to be determined by applying a formula containing two variables: (1) the target cost set out in the contract; and (2) the total amount of reimbursable costs incurred by the contractor to complete the work (the "Actual Costs"). The formula is intended to reward [Shaw] if its Actual Costs are less than the target, and discourage it from incurring Actual Costs greater than the target.Id. Judge Baer further summarized GenOn's audit rights and the effect of change orders on the amount that Shaw eventually would be paid. As he explained:
The target cost was subject to modification by "change order" on grounds set forth in the Turnkey Agreement. Thus, the amount payable to [Shaw] under the Turnkey Agreement cannot be determined until the amount of all change orders are known, and [Shaw] has submitted to GenOn a final accounting of its Actual Costs. [Shaw] is contractually bound to provide this final accounting on an "Open Book" basis, which means essentially that it must make available all relevant "books, records, schedules, logs and electronic communications and data" in order to substantiate the costs and expenses incurred.
Id.
The Turnkey Agreement further provided that New York law shall govern any disputes among the parties. (Am. Compl. ¶ 10).
On February 24, 2011, GenOn commenced this action to determine its rights and obligations under the Turnkey Agreement. In its complaint, as amended, GenOn alleges that it need not reimburse Shaw for the excessive costs that Shaw incurred while building and installing the scrubbers. (See Am. Compl. ¶ 38; ECF No. 78 ("GenOn Mem.") at 1). Perhaps not surprisingly, Shaw has asserted a counterclaim, in which it contends that GenOn breached the Turnkey Agreement by failing to pay Shaw more than $200 million to which it is entitled. (See ECF No. 79); GenOn I at *2.
Earlier this year, GenOn moved to (a) enforce Judge Baer's order dated April 8, 2011, regarding Shaw's production of certain accounting documents; and (b) quash a subpoena Shaw had served on FTI Consulting, Inc., a third-party consultant that GenOn's counsel retained in 2009 to provide a "confidential analysis of [Shaw's] accounting data" after GenOn became aware of Project cost overruns. (See ECF Nos. 22, 36); GenOn I at *2-4. Shaw cross-moved to "compel production of the subpoenaed [FTI] documents and to disqualify GenOn's counsel and a potential expert witness." (ECF No. 28); GenOn I at *1.
On June 6, 2011, Judge Baer found, insofar as relevant, that the FTI documents - for which GenOn claimed work product protection - were created "in the ordinary course of business," pursuant to GenOn's audit rights under the Turnkey Agreement, and "to assess the availability and strength of potential legal claims." GenOn I at *3. Judge Baer concluded that those documents were not protected work product because FTI "acted under the authority of [the] contractually mandated audit procedure" when it approached Shaw to obtain data for the audit, and because "there was no representation that any portion of the audit went above and beyond what was contemplated by the Turnkey Agreement." Id. Thus, GenOn failed to show that the FTI documents "would [not] have been created in 'essentially similar form' irrespective of GenOn's declaratory judgment action." Id. (citing United States v. Adlman ("Adlman II"), 134 F.3d 1194, 1202 (2d Cir. 1998)). In his decision, Judge Baer also concluded that the Turnkey Agreement entitled GenOn to the source documents underlying Shaw's final accounting documents and change order documents. Id. at *2. Shaw therefore was directed to produce those documents "forthwith." Id.
Since GenOn I, the parties have had further disputes regarding document discovery and, in particular, privilege claims. (See ECF No. 71 (June 28, 2011 Tr.)). These disputes were referred to me for resolution on August 4, 2011. (ECF No. 91). I subsequently have reviewed the parties' papers, (see ECF Nos. 77-78), and also have reviewed the contested documents in camera. For the reasons set forth below, each side will be required to produce additional documents.
II. Discussion
A. Applicable Law
1. Attorney-Client Privilege
Because this case arises under the Court's diversity jurisdiction, questions regarding the applicability of the attorney-client privilege must be decided under New York law. See Fed. R. Evid. 501. In New York, the attorney-client privilege is statutory. Thus, absent a waiver, a client cannot be compelled to disclose any "confidential communication made between the attorney . . . and the client in the course of professional employment." N.Y. C.P.L.R. § 4503(a)(1). This state law privilege extends only to "confidential communications made between a client and his attorney for the purpose of facilitating the rendition of legal advice or services, in the course of a professional relationship and that are primarily or predominantly of a legal character." Gruss v. Zwirn, ___ F.R.D. ___, 2011 WL 2946376, at *3 (S.D.N.Y. July 14, 2011) (internal quotation marks omitted). Moreover, although the privilege analysis under New York law is "substantially similar" to that which would be undertaken in a federal question case, see HSH Nordbank AG N.Y. Branch v. Swerdlow, 259 F.R.D. 64, 70 n.6 (S.D.N.Y. 2009), the New York privilege is "not absolute and thus may be set aside 'where strong public policy requires disclosure.'" Bowne of N.Y.C., Inc. v. AmBase Corp., 150 F.R.D. 465, 471 (S.D.N.Y. 1993) (quoting Priest v. Hennessy, 51 N.Y.2d 62, 69 (1980)).
Corporations, like other clients, may avail themselves of the attorney-client privilege to protect confidential communications "relating to their legal matters." Rossi v. Blue Cross & Blue Shield of Greater N.Y., 73 N.Y.2d 588, 592 (1989). However, communications that relate primarily to business matters, rather than legal advice, are not protected. Id. at 592-93.
Whether a particular communication is protected by the privilege "is necessarily a fact-specific determination." Spectrum Sys. Int'l Corp. v. Chem. Bank, 78 N.Y.2d 371, 378 (1991). As in federal question cases, the proponent bears the burden of establishing each element of the privilege. See id. at 377; Bowne, 150 F.R.D. at 470. Furthermore, this burden cannot be met through "mere conclusory or ipse dixit assertions." von Bulow by Auersperg v. von Bulow, 811 F.2d 136, 146 (2d Cir. 1987) (quoting In re Bonanno, 344 F.2d 830, 833 (2d Cir. 1965)).
2. Work Product Doctrine
Unlike the attorney-client privilege, which is governed by state law in a diversity action, federal law governs the applicability of the work product doctrine in all federal suits. Allied Irish Banks, P.L.C. v. Bank of Am., Inc., 252 F.R.D. 163, 173 (S.D.N.Y. 2008). Originally promulgated in Hickman v. Taylor, 329 U.S. 495, 514 (1947), and subsequently codified in Fed. R. Civ. P. 26(b)(3), the work product rule "shields from disclosure materials 'prepared in anticipation of litigation' by a party or the party's representative, absent a showing of substantial need." United States v. Adlman ("Adlman I"), 68 F.3d 1495, 1501 (2d Cir. 1995) (quoting Fed. R. Civ. P. 26(b)(3)). The purpose of the rule is to afford a litigant "a zone of privacy in which [his] lawyer can prepare and develop legal theories and strategy 'with an eye toward litigation,' free from unnecessary intrusion by his adversaries." Adlman II, 134 F.3d at 1196 (quoting Hickman, 329 U.S. at 511).
Although both opinion and factual work product fall within the scope of the doctrine, an attorney's mental impressions, conclusions, opinions, or legal theories concerning litigation typically are afforded greater protection. Id. at 1199, 1204. This special protection is justified because the "core" of the work product doctrine is to shelter the mental processes of an attorney in analyzing and preparing his client's case. Id. at 1197 (quoting United States v. Nobles, 422 U.S. 225, 238 (1975)). Moreover, because "attorneys often must rely on the assistance of investigators and other agents in the compilation of materials in preparation for trial," the work product rule extends to "material prepared by agents for the attorney as well as those prepared by the attorney for himself." Nobles, 422 U.S. at 238-39.
A party claiming work product protection faces a "heavy" burden. In re Grand Jury Subpoenas Dated March 19, 2002 and August 2, 2002, 318 F.3d 379, 384 (2d Cir. 2003). That party must show that the material is "[a] . . . a document or tangible thing, [b] that was prepared in anticipation of litigation, and [c] was prepared by or for a party, or by his representative." Allied Irish Banks, 252 F.R.D. at 173; accord Gucci Am., Inc. v. Guess?, Inc., 271 F.R.D. 58, 73-74 (S.D.N.Y. 2010). The work product doctrine thus "does not shield from disclosure everything that a lawyer does." Rattner v. Netburn, No. 88 Civ. 2080 (GLG) (MHD), 1989 WL 223059, at *6 (S.D.N.Y. June 20, 1989). The Second Circuit nevertheless "has interpreted the 'in anticipation of litigation' requirement broadly." Strougo v. BEA Assocs., 199 F.R.D. 515, 520 (S.D.N.Y. 2001). A document therefore "will be found to have been prepared 'in anticipation of litigation' if, 'in light of the nature of the document and the factual situation in the particular case, the document can fairly be said to have been prepared or obtained because of the prospect of litigation.'" Clarke v. J.P. Morgan Chase & Co., No. 08 Civ. 2400 (CM) (DF), 2009 WL 970940, at *7 (S.D.N.Y. Apr. 10, 2009) (quoting Adlman II, 134 F.3d at 1202).
On the other hand, a mere "possibility" of litigation is insufficient to obtain work product protection. Kingsway Fin. Servs., Inc. v. Pricewaterhouse-Coopers LLP, No. 03 Civ. 5560 (RMB) (HBP), 2007 WL 473726, at *5 (S.D.N.Y. Feb. 14, 2007); Gould Inc. v. Mitsui Mining & Smelting Co., Ltd., 825 F.2d 676, 680 (2d Cir. 1987) (work product doctrine requires the "existence of a real, rather than speculative, concern"). To prevail, the non-producing party must show that the document was "prepared because of the prospect of litigation when the preparer face[d] an actual claim or potential claim following an actual event or series of events that reasonably could result in litigation." Bank Brussels Lambert v. Credit Lyonnais (Suisse), S.A., 160 F.R.D. 437, 448-49 (S.D.N.Y. 1995).
Shaw presses a narrower interpretation of the phrase "in anticipation of litigation" which would include only documents "prepared principally or exclusively" to assist in litigation. (ECF No. 77 ("Shaw Mem.") at 5 (citing United States v. Constr. Prods. Research, Inc., 73 F.3d 464, 473 (2d Cir. 1996); Bowne, 150 F.R.D. at 471). That formulation, however, has been rejected by the Second Circuit in favor of a broader test that protects documents that "can fairly be said to have been prepared or obtained because of the prospect of litigation." Adlman II, 134 F.3d at 1202 (emphasis in original). As the Adlman II court explained, requiring that the documents have been prepared principally or exclusively to assist in litigation "would potentially exclude documents containing analysis of expected litigation, if their primary, ultimate, or exclusive purpose is to assist in making a business decision." Id. at 1198. Based on its conclusion that "the protection of documents of this type is more consistent with both the literal terms and the purposes of Rule 26(b)(3), the Second Circuit rejected the Construction Products standard. Id.
"Accordingly, documents prepared in the ordinary course of business, or that otherwise would have been prepared absent the prospect of litigation, do not receive work product protection." Gucci Am., Inc., 271 F.R.D. at 74. By the same token, however, a document prepared because of the prospect of litigation will not lose its protection under the work product doctrine simply because it may assist in business decisions. Adlman II, 134 F.3d at 1202; see also id. at 1199 (document prepared by in-house attorneys to assist in deciding whether to undertake a business transaction that will likely result in litigation is protected work product).
B. Application of Law to Facts
1. GenOn Documents
Shaw objects to thirty-eight documents withheld or redacted by GenOn on the basis of attorney-client privilege or the work product doctrine. (Shaw Mem. at 8).
In support of its assertions of privilege and work product protection, GenOn has proffered the declarations of Robert Patrick and Bruce Warren Wells, respectively the Vice President of Plant Services and Major Projects and the Director of Project Controls at GenOn Energy Services. (See GenOn Mem. Exs. F ("Patrick Decl."), G ("Wells Decl."). In those declarations, Patrick and Wells both state that they have "personal knowledge" of the contested documents. (Patrick Decl. ¶ 2; Wells Decl. ¶ 2). The names of these declarants do, indeed, appear on certain of the contested documents. Their declarations nevertheless lack the level of detail necessary to meet GenOn's burden. Instead, their declarations merely repeat in mantra-like fashion that the documents were "created in anticipation of litigation," "created with input from in-house counsel" or " to obtain the advice of in-house counsel," or that they "convey legal advice." (See Patrick Decl. ¶¶ 3-16; Wells Decl. ¶¶ 3-19). Often, in both the declarations and the privilege log, GenOn has failed to identify the specific authors or recipients of the contested documents. Accordingly, because the declarations lack any factual context, they are virtually useless.
GenOn Energy Services is an affiliate of GenOn. (Patrick Decl. ¶ 1; Wells Decl. ¶ 1).
In these circumstances, the Court necessarily must decide the applicability of the attorney-client privilege and work product doctrine based upon an in camera review of the GenOn contested documents, the "general context in which they were prepared[,] and the information disclosed on the privilege and redaction logs." AIU Ins. Co. v. TIG Ins. Co., No. 07 Civ. 7052 (SHS) (HBP), 2008 WL 4067437, at *10 (S.D.N.Y. Aug. 28, 2008); see also Grinnell Corp v. ITT Corp., 222 F.R.D. 74, 78 (S.D.N.Y. 2003) (burden of establishing work product protection "must be satisfied for each document individually on the basis of its privilege log entries, affidavits, and/or the documents themselves").
a. GenOn Work Product Claims
GenOn has withheld three types of documents based on its claim that they constitute attorney work product: (i) PowerPoint presentations to GenOn's Executive Committee, (ii) charts and spreadsheets concerning Project cost overruns, and (iii) notes and memoranda regarding disputed costs. (See GenOn Mem. at 30-36). Shaw contends generally that work product protection for these documents is not justified because they were created before GenOn reasonably anticipated litigation and were "prepared in the ordinary course of business." (Shaw Mem. at 9).
Shaw also objects that certain documents related to FTI's audit must be produced pursuant to Judge Baer's Opinion and Order dated June 6, 2011, and a related order subsequently issued. (Shaw Mem. at 2, 9). My in camera review of these documents establishes, however, that they are not fairly encompassed in Judge Baer's prior rulings.
In support of its argument that GenOn did not reasonably anticipate litigation when the contested documents were created, Shaw notes that GenOn failed to put a litigation hold in place until some time in April 2011. (See Shaw Mem. at 6-7). It is, of course, settled law that, "[o]nce a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a litigation hold." Zubulake v. UBS Warburg LLC, 229 F.R.D. 422, 431 (S.D.N.Y. 2004). In this instance, however, the fact that GenOn may have failed to do so before April 2011 suggests merely that it may have been negligent or grossly negligent, not that this was the earliest date that GenOn could reasonably have anticipated litigation. See Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, 685 F. Supp. 2d 456, 465 (S.D.N.Y. 2010). Indeed, GenOn commenced this suit on February 24, 2011, and Shaw filed its answer less than two weeks later. (See ECF Nos. 1, 4). GenOn consequently must have anticipated litigation at some point prior to April 2011.
GenOn has not specified in its papers the precise date that it instituted a litigation hold.
As these facts also suggest, determining when a party anticipates litigation is necessarily a fact-intensive exercise. Courts addressing the issue have shied away from adopting categorical rules for discerning when a party's written output crosses the line from ordinary work to that which is performed in anticipation of litigation. See AIU Ins. Co., 2008 WL 4067437, at *14. Accordingly, while factors such as a party's decision to hire an attorney or to file suit can aid a court in divining when the party anticipated litigation, no one factor is dispositive. See Gucci Am., Inc., 271 F.R.D. at 75 (filing suit); AIU Ins. Co., 2008 WL 4067437, at *13 (hiring attorney).
Here, GenOn evidently first anticipated litigation with Shaw in January 2009, based on the loss of sixty days of "float time" that had been built into the Project schedule and the resulting threat that the state of Maryland might impose fines. (GenOn Mem. at 26). In fact, the following month, GenOn retained Alston & Bird to represent it in connection with "potential litigation" against Shaw. (Id. at 26 & Ex. H (retainer letter dated Feb. 9, 2009)). According to GenOn, rather than relying on the contractual change order process to resolve the dispute, the parties instead engaged in settlement negotiations that culminated in the signing of a settlement agreement, denominated a "Second Amendment" to the Turnkey Agreement, on June 12, 2009. (Id. at 26). The Second Amendment, however, did not signal the end of any litigation concern. Indeed, only one week later, GenOn's in-house counsel requested Alston & Bird's services regarding another issue that remains the subject of dispute in this lawsuit. (Id. at 26-27 & Ex. J). Shaw admits that GenOn also withheld payments and refused to negotiate with Shaw beginning in or around December 2009. (Shaw Mem. at 28).
From these facts, it appears that GenOn may have anticipated litigation with Shaw as early as the beginning of 2009. Moreover, GenOn apparently anticipated litigation regarding at least one of the issues raised by the parties' present pleadings by mid-2009. Rather than making a categorical ruling as to when GenOn reasonably anticipated litigation, however, the Court will base its determinations upon its review of the contested documents and any additional context provided by GenOn's other submissions.
Consistent with this view, GenOn claims in its papers that it began anticipating this litigation in "mid-2009." (GenOn Mem. at 27-29)
i. PowerPoint Presentations
In 2009, GenOn created a series of PowerPoint presentations discussing Shaw's cost overruns for presentation to its Executive Committee. The presentations evidently were assembled by personnel directly involved in the Project with input from in-house counsel. (See GenOn Mem. at 27). GenOn maintains that the presentations were prepared in anticipation of litigation because, at the time of their creation, the company "anticipated elements" of the current litigation. (Id.). The presentations appear to fall into two broad categories: documents created as part of a special cost recovery project and others created as part of GenOn's routine management reporting.
These are identified as Documents 74-77, 83, 84, 87, 324, R21, R95, and R103 on GenOn's privilege log. (See GenOn Mem. at 30-32).
Based on my in camera review, I conclude that the PowerPoints or portions thereof withheld as Documents 87, 324, R21, R95, and R103 constitute work product. Although these presentations were not created by attorneys, (see, e.g., GenOn Privilege Log at 2), the work product privilege extends beyond documents prepared by counsel and includes those prepared by a client in the course of preparation for possible litigation. See Nobles, 422 U.S. at 238-39; Gucci Am., Inc., 271 F.R.D. at 74; see also Sec. & Exch. Comm'n v. Strauss, No. 09 Civ. 4150 (RMB) (HBP), 2009 WL 3459204, at *6 (S.D.N.Y. Oct. 28, 2009) (interview notes prepared by non-attorney SEC employees constitute work product). Moreover, by the time these presentations were created, GenOn had retained outside counsel and had decided to pursue a detailed cost recovery strategy separate and apart from its routine contract and change order negotiations with Shaw. Although litigation was not certain to be a result of that strategy, it certainly was reasonable for GenOn to assume that it might be the outcome. Nothing further need be shown for GenOn's work product claim concerning these documents to be sustained.
Documents preceded by an "R" were produced to Shaw with redactions. (See GenOn Privilege Log at 6-8).
On the other hand, GenOn cannot legitimately claim work product protection for the PowerPoints in Documents 74-77, 83, and 84. Even if GenOn anticipated litigation by mid-2009, GenOn personnel still would have briefed the GenOn Executive Committee about its progress on the Project and the steps it was taking to reduce costs. Indeed, GenOn does not dispute that it generated similar reports in earlier months. These additional periodic reports reflect the same sort of routine reporting, not information that was generated in furtherance of the strategy that outside counsel had been retained to assist. Accordingly, these documents generated in the ordinary course of business must be produced.
ii. Charts and Spreadsheets
GenOn also has withheld or redacted several spreadsheets and charts pertaining to the disputed cost overruns on the grounds that they constitute work product. Shaw contends, among other things, that these documents were routinely prepared as "part of the normal briefing process" before GenOn reasonably could have anticipated litigation with Shaw. (See, e.g., Shaw Mem. at 14-15).
These are Documents 104, 105, 114, 119, 141, 301, 302, 311, 314, 327, R77, R86, R89, R96, R97, and R98. (GenOn Mem. at 32-35).
The analysis that an owner or contractor might undertake as part of the normal give-and-take in a large construction project is similar to that in which it might engage if discussions break down and litigation ensues. Thus, in negotiating or disputing a change order, both sides typically are required to assess the factual - and often the legal - strength of their respective positions. For this reason, deciding whether an internal corporate document that addresses such issues was prepared in the ordinary course or, instead, constitutes litigation-oriented work product can be a difficult task.
Here, however, having reviewed the contested charts and spreadsheets, I conclude that they are entitled to work product protection. For example, Document 114, dated March 1, 2010, itemizes certain disputed costs, maps out GenOn's valuation of each, and includes a column captioned "contractual basis for dispute," in which GenOn sets forth the legal bases for disputing the cost overruns identified. (See GenOn Mem. at 33). Even more tellingly, the redacted portions of Documents R97 and R98 analyze the strength of GenOn's data and its argument with respect to each disputed cost. (Id. at 33). Because these documents reflect the mental impressions of counsel regarding the strength of GenOn's claims, their resulting value, and a strategy for reaching a successful resolution, they properly are withheld as work product.
Noting that several of the charts and spreadsheets are undated, Shaw argues that GenOn cannot establish that they were created at a time when GenOn anticipated litigation. (See, e.g., Shaw Mem. at 17). The documents themselves, however, establish that they are litigation-oriented. Document 327, for example, is an undated copy of a "Recovery Playbook" that lists the contractual basis of each dispute, possible counter-arguments, GenOn's "confidence factor" with respect to its claim, and a predicted recovery value. The document also leaves blank spaces for an attorney to fill in GenOn's "legal position" concerning each dispute. (See GenOn Mem. at 33). Documents 301 and 302 similarly are copies of a spreadsheet that contains an evaluation of "where the case may settle." (See id. at 34). In yet another example, Document R96 includes a spreadsheet of "damages" and requests advice regarding the strength of GenOn's claims based on the numbers set forth and the Turnkey Agreement timeline. (See id. at 35). In sum, GenOn has properly asserted the work product doctrine as a basis for withholding or redacting these disputed charts and spreadsheets even though they are undated.
These are Documents 301, 302, 311, 314, 327, R77, and R96 on GenOn's privilege log. (See GenOn Mem. at 33-35).
iii. Notes and Memoranda
GenOn also has withheld on work product grounds (in whole or in part) six documents consisting of GenOn's internal notes and memoranda.
These are Documents 89, 106, 118, 299, R36, and R80 on GenOn's privilege log. (See GenOn Mem. at 35-36).
GenOn has failed to establish that Documents 89, 106, 118, and R36 were created in anticipation of litigation. The first three documents (Documents 89, 106, and 118), created in early 2010, are handwritten notes by GenOn employees that list "action items" or identify types of data needed to investigate Shaw's cost overruns. (See GenOn Mem. 35-36; GenOn Privilege Log at 3). Document R36, dated July 14, 2010, appears to be a PowerPoint presentation from which GenOn has redacted handwritten notes "describ[ing] areas of Shaw's cost overruns and strategies." (GenOn Privilege Log at 7). Nothing on the face of these documents, however, suggests that they were prepared to assist counsel or with litigation in mind. It follows that GenOn has not sustained its burden with respect to these documents.
On the other hand, GenOn has properly asserted work product protection as to Documents 299 and R80. Document 299 is an undated memorandum with handwritten notes that GenOn withheld in full on the grounds that it "contain[s] strategy for [the] resolution of [a] global scheduling dispute [and was] prepared due to anticipated litigation and settlement discussions." (GenOn Privilege Log at 4). According to GenOn, the redacted text refers to "potential settlement values and [GenOn's] overall negotiating strategy." (GenOn Mem. at 36). Although the document fails to indicate on its face any involvement of counsel, it appears to concern the dispute that led to the signing of the Second Amendment to the Turnkey Agreement in which counsel unquestionably was involved. Moreover, the document focuses on the terms of the contract and how these can be appropriately negotiated in upcoming dispute resolution discussions. On its face, therefore, the document seems clearly to qualify as work product.
Document R80 is a "Review of Shaw Company Owned Equipment" dated April 15, 2010. The document includes a memorandum setting forth GenOn's analysis of Shaw's equipment charges and charts summarizing the raw data used to complete the review. GenOn redacted the memorandum as work product, but produced the charts. The memorandum indicates on its face that it was "Prepared at the Request of Council [sic]." Moreover, it appears to have been prepared to provide counsel with a detailed summary of the disputed charges so that GenOn's legal position could be assessed. As such, the memorandum is appropriately redacted.
Shaw is not deprived of any information needed to draw its own conclusions since GenOn has already produced the underlying factual data in the appended charts.
b. GenOn Attorney-Client Privilege Claims
Relying on a claim of attorney-client privilege, GenOn has redacted four PowerPoints, designated as Documents R10, R12, R14, and R16, and a series of handwritten notes compiled in Document R55. GenOn also seeks to withhold, on the theory that they constitute privileged attorney-client communications, several PowerPoints that I already have concluded do not qualify as work product. (See Documents 74-77, 83, and 84).
i. PowerPoint Presentations
Documents R10, R12, R14, and R16: GenOn created these PowerPoint presentations for its Executive Committee between July and October 2008. (GenOn Privilege Log at 6). GenOn has redacted two pages of each of these presentations pursuant to the attorney-client privilege, contending that their contents reflect the "opinions, recommendations, and conclusions of outside counsel and legal advice regarding contract status and administration." (Id.). GenOn represents with respect to Documents R10 and R12 that the redacted pages "were created to convey legal advice from outside counsel and to obtain the advice of in-house counsel" after outside counsel had performed an audit "to analyze the current status of the project in the context of the requirements of the Turnkey Agreement." (GenOn Mem. at 31). GenOn further contends that the redacted portions of Documents R14 and R16 "were created with input from in-house counsel and contain legal advice regarding provisions of the Turnkey Agreement." (Id.).
GenOn asserts that this audit was performed before, and consequently is completely unrelated to, the FTI audit. (GenOn Mem. at 31).
Despite GenOn's efforts to characterize the redacted portions of these documents as privileged, my in camera review confirms that they either reflect business advice or state the obvious. It is not enough that a document was created by attorneys if the information that it contains was not "made for the purpose of facilitating the rendition of legal advice or services." Spectrum Sys. Int'l Corp., 78 NY.2d at 378 (quoting Rossi, 73 N.Y.2d at 593) (internal quotation marks omitted). Here, the redacted portions evaluate the status of the scrubber project, comment on costs, cash flows, contingency reserves, and schedule, and provide insights on project management. Even if an outside law firm was the source of this information, it is not the sort of "advice that can be rendered only by consulting the legal authorities." See In re County of Erie, 473 F.3d 413, 421 (2d Cir. 2007). The attorney-client privilege accordingly does not attach to the redacted portions of these documents.
Documents 74-77, 83, and 84: GenOn contends that these PowerPoint presentations are properly withheld pursuant to the attorney-client privilege because they were drafted with input from GenOn's in-house attorneys and presented to GenOn's Executive Committee (which includes in-house attorneys) "to convey information needed regarding Shaw cost overruns in order to obtain advice of in-house counsel," and reveal strategies for reducing Shaw's cost overruns. (GenOn Privilege Log at 2). As noted previously, there has been no showing that in-house counsel's input concerning these documents consisted of legal, as opposed to business, advice. Nor is there any indication that the in-house attorneys on the Executive Committee were being asked to undertake any legal analysis or to provide any legal advice by virtue of receiving these documents. The attorney-client privilege therefore does not apply to these documents.
ii. Handwritten Notes
Document R55 consists of a series of handwritten notes made by Bruce Wells, the Director of Project Controls at GenOn Energy Services, between April 2008 and December 2010. (See GenOn Privilege Log at 7; Wells Decl. ¶ 1). GenOn has made nine redactions to these notes based on the attorney-client privilege. (GenOn Privilege Log at 7).
First, GenOn has withheld several notes prepared in 2008 pertaining to the engagement of outside counsel. (Id.). The redacted portion of the notes dated June 11, 2008, memorializes a preliminary discussion about the scope of outside counsel's engagement. A second redaction on the notes of June 25, 2008 reflects the discussion at a "kick-off" meeting with outside counsel concerning GenOn's expectations; it also includes certain background regarding GenOn's relationship with Shaw. Another redaction, on notes dated August 27, 2008, reflects further discussion about outside counsel's initial assessment. Even if these discussions were preliminary, they plainly are protected by the attorney-client privilege since they were undertaken for the purpose of seeking legal advice. GenOn therefore need not produce these materials.
Two additional redactions, on notes dated on August 13 and October 22, 2008, shield comments by GenOn personnel concerning an assessment prepared by outside counsel. Since a corporation can only act through its officers and employees, these notes appear to be part of the process of reacting and responding to counsel's assessment. As such, they are properly withheld.
Turning to the remainder of the redacted notes, the materials withheld with respect to February 24 and August 11, 2009 reflect GenOn's requests for, and receipt of, legal advice on particular issues and, therefore, are appropriately withheld as attorney-client communications. In contrast, the redactions on the notes dated August 1, 2008, and July 6, 2009 cannot be justified on the basis of the attorney-client privilege because the materials withheld simply reflect business strategy and advice. These materials consequently must be disclosed.
GenOn contends that the July 6, 2009 notes also constitute work product because they were prepared in anticipation of litigation. (GenOn Privilege Log at 2). Suffice it to say, there is nothing on the face of this document that suggests that it reflects anything other than an in-house session to prepare for a business meeting with Shaw.
2. Shaw Documents
Shaw relies primarily on the attorney-client privilege to justify its partial or total withholding of fifty-five documents contested by GenOn. (See Shaw Privilege Log; Shaw Mem. at 28). To support these privilege claims, Shaw has submitted a privilege log and a memorandum of law. Shaw has failed, however, to submit any declarations or affidavits to substantiate its factual contentions. Shaw also has not furnished any detailed information about the dramatis personae who generated or received the contested documents.
Shaw also asserts a claim of work product protection with respect to a small number of the documents listed in its privilege log (Documents 228, 229, 635, and 636) and supporting memorandum (Documents 323-25 and 236). Because I find that all of these documents reflect privileged attorney-client communications, there is no need to consider whether they also constitute work product.
GenOn attacks Shaw's privilege assertions in two ways. First, GenOn objects to each entry in Shaw's privilege log on the ground that the documents allegedly do not seek or convey legal advice, or have been withheld simply because they purport to have been transmitted to an attorney. (GenOn Mem. at 2). Second, GenOn maintains that Shaw's privilege log is inadequate because Shaw improperly used single log entries for dissimilar documents, failed to log certain documents that were withheld or redacted, and failed to indicate its redactions clearly on the documents that were produced. (Id. at 20-21). I will address GenOn's general objections before turning to the validity of Shaw's specific privilege assertions.
a. Shaw Privilege Log
First, GenOn objects to Shaw's use of single entries on its privilege log to represent what GenOn views as "multiple, dissimilar documents." (Id. at 22-24). Entries 114-18 of Shaw's privilege log, for instance, are said to consist of "representative examples" of five spreadsheets that were part of each Shaw internal monthly Project review. (Id. at 22-23; Shaw Mem. at 32). Shaw maintains that it has "dozens, if not hundreds" of copies of such spreadsheets that either were part of other documents produced to GenOn or that were maintained as "loose paper copies." (See GenOn Mem. Ex. B). For such documents, Shaw has logged only one example of each spreadsheet even if it has made corresponding redactions to other documents. (See Shaw Mem. at 32-33). GenO n contends, however, that it is entitled to separate privilege log entries for each occurrence of a redacted or withheld spreadsheet so that it can evaluate Shaw's privilege claims in context. (GenOn Mem. at 23-24).
Under Rule 26(b)(5) of the Federal Rules of Civil Procedure, a party withholding documents on the basis of privilege must describe the nature of the documents with enough detail to "enable other parties to assess the applicability of the privilege." Fed R. Civ. P. 26(b)(5)(A); see also Constr. Prods. Research, Inc., 73 F.3d at 473 (court may require submission of "an adequately detailed privilege log in conjunction with evidentiary submissions to fill in any factual gaps") (quoting Bowne, 150 F.R.D. at 474). This Court's Local Rules lend color to the federal rule by specifying that the withholding party must identify the privilege asserted, as well as describe the type of document, and the general subject matter, date, authors, and recipients of the document. S.D.N.Y. Civ. R. 26.2(a)(1), (a)(2). Typically, a party complies with these requirements by producing "an itemized privilege log, with supplementary submissions filling in any gaps in the factual bases for the privileges asserted." In re Rivastigmine Patent Litig., 237 F.R.D. 69, 87 (S.D.N.Y. 2006). Documents may be listed categorically in a log when "[i] a document-by-document listing would be unduly burdensome and [ii] the additional information to be gleaned from a more detailed log would be of no material benefit to the discovering party in assessing whether the privilege claim is well-grounded." Id. (quoting Sec. and Exch. Comm'n v. Thrasher, No. 92 Civ. 6987 (JFK) (MHD), 1996 WL 125661, at *1 (S.D.N.Y. Mar. 20, 1996)).
Shaw's privilege log entries and memorandum generally indicate the type of document, and the subject matter, date, authors, and recipients of the document, as required by Local Rule 26.2. Furthermore, it is not apparent what material benefit GenOn would derive if Shaw were required to identify each document containing the same spreadsheet. Indeed, Shaw has represented that the documents were redacted "in the same way in each instance" and "were all created for the same purpose and distributed only within Shaw or to Shaw's outside auditors." (Shaw Mem. at 33). Although these representations are in an unsworn memorandum, absent any suggestion that Shaw may have waived the privilege by sending a spreadsheet to a third party, it would be a useless - and potentially very expensive - exercise to require Shaw to include specific entries in its privilege log each time the same redacted document appears in another document.
I note that two prominent commentators have suggested that requiring scorched earth privilege logs may make the outcome of a lawsuit dependent on who can afford to prepare a comprehensive privilege log. See John M. Facciola & Jonathan M. Redgrave, Asserting and Challenging Privilege Claims in Modern Litigation: The Facciola Redgrave Framework, 4 Fed. Cts. L. Rev. 19 (2009), available at http://www.tcdi.com/resources/Publications/privilege_claims_litigation_facciola_redgrave.pdf. As an alternative, the authors suggest that counsel should "segregate those documents that are likely to be privileged from the rest, allowing for a more nuanced set of alternatives to alleviate the burden of a document-by-document review of all potentially privileged documents." Id. at 45. The authors, of course, contemplate that this narrowing would be accomplished by agreement through a series of meet and confer sessions, not unilaterally as Shaw did here. Id.
GenOn voices two other complaints regarding the manner in which Shaw conducted its privilege review. First, GenOn asserts that upon reviewing Shaw's document production, it discovered that Shaw had redacted twenty documents that were not identified in Shaw's privilege log. (GenOn Mem. at 21). After this was brought to Shaw's attention, Shaw provided a revised privilege log with over thirty new documents that it claimed had been "overlooked." (Id. at 21-22, Ex. D). Second, GenOn details instances in which Shaw failed to indicate its redactions on the face of the documents produced to GenOn. (Id. at 24-25). Due to these prior omissions, GenOn expresses concern that Shaw may have failed to log all documents it has withheld as privileged, (id. at 22), and "bur[ied] redactions within documents," (id. at 25).
A party withholding otherwise discoverable information by claiming privilege is required to "expressly make the claim" and "describe the nature of the documents." Fed R. Civ. P. 26(b)(5)(A). Shaw consequently has a duty to ensure that it has properly logged all documents it claims are privileged, and to produce copies of redacted documents to GenOn that clearly indicate any redactions made.
In the two binders of documents provided to the Court for in camera review, Shaw has marked the redacted material with yellow highlighting and flags. It is unclear how Shaw indicated those same redactions on the set of documents produced to GenOn.
In light of GenOn's concerns, Shaw will be required to submit, within ten business days, sworn statements from persons with knowledge attesting that (i) none of the spreadsheets that were logged only once were distributed to third parties other than Shaw's outside auditors; (ii) except for duplicate spreadsheets, all documents withheld or redacted on privilege or work product grounds have been logged; and (iii) all redactions have been clearly indicated on any documents produced with redactions.
b. Shaw's Assertions of Attorney-Client Privilege
The documents for which Shaw claims privilege fall into three categories: (i) spreadsheets and other cost reporting documents, (ii) emails with attached financial information, and (iii) memoranda and letters.
i. Spreadsheets and Other Cost Reporting Documents
Many of the documents withheld by Shaw are financial reporting and other accounting documents in the form of spreadsheets. These documents generally consist of quarterly financial reporting, periodic project status reports, and cost and revenue calculations. Recognizing that these "cost reporting" records "contain primarily non-privileged information," Shaw has produced large swaths of the material, but has withheld certain "discrete categories of information" beginning in December 2009. (Shaw Mem. at 25, 28).
These documents are listed in Shaw's privilege log as Documents 92, 103, 114-18, 121, 132, 134, 137, 139-46, 150. 158, 184, 193-97, 230-35, 237-39, 339, 344, 346, 347, 444, 652(C), 653(D), 654(E), 655, 656, 658, 659, 660(F), 661(G), 662(H)-673(H), 681, 682(R).
Shaw considers December 2009 significant because it marked the first time that the financial information on its accounting statements allegedly was "required to be supported by legal opinions." (Shaw Mem. at 33). According to Shaw, up to that point, it had "booked revenue for unapproved change orders at the Shaw cost expended to date." (Id. at 28). Since the projects were "substantially completed and went into service" in December 2009, "actual costs were available." (Id.). Shaw asserts that it was also during this time frame that GenOn withheld payments and "refused to negotiate and finalize changes." (Id.). Shaw responded by altering its "process for taking revenue . . . to reflect potential recovery and losses independent of the calculation based on cost to date that was previously used." (Id.).
Shaw states that it has limited its redactions to two types of information: (i) "an assessment of recovery of unapproved change orders, exposure on deductive change orders, or exposure on audit issues based on legal risk," and (ii) "information elsewhere on the document[s] that, if not redacted, allows [the former] to be readily determined by simple mathematical deduction." (Id. at 26). Shaw contends that the documents reveal "internal valuation[s] . . . as a result of legal analysis performed typically by Wayne Killion, Shaw's in-house counsel." (Id.). Although the authors of the spreadsheets usually were not attorneys, Shaw maintains that the spreadsheets "facilitat[ed] the dissemination of counsel's legal assessment of potential recovery . . . based on an assessment of legal risk." (Id. at 27). Shaw further represents that "the reports were given very limited circulation to key employees with budgetary responsibility on the construction projects." (Id. at 28).
With the exception of three documents, Shaw has failed to show that the spreadsheets reflect primarily legal advice such that they fall under the protection of the attorney-client privilege. In general, the spreadsheets appear to consist of financial records that were created as part of a regularly-conducted internal accounting process. (See, e.g., id. at 34). The factual information and numerical calculations that they contain further do not appear to have required any legal training to generate. Shaw's unsworn assertion that the figures reflect counsel's opinions and advice therefore cannot, by itself, provide a basis to sustain the privilege. Moreover, to the extent that the estimated figures are based on legal opinions previously conveyed, that advice is not revealed by disclosure of the figures on the spreadsheets. See United States v. Davis, 132 F.R.D. 12, 15 (S.D.N.Y. 1990) (computations appended to legal memorandum were not privileged attorney-client communications). Similarly, in the absence of any basis to believe that the withheld figures are privileged, any numbers that Shaw has withheld on the grounds that those figures could otherwise be "back-calculated," (see, e.g., Shaw Mem. at 29), also are not privileged.
Shaw also seeks to justify its withholding of certain spreadsheets on the ground that counsel requested the information to assist it in the provision of legal services. Specifically, Shaw contends that Document 184 was prepared to enable in-house counsel "to provide advice as to the potential inclusion [in Shaw's mechanic's liens] of a claim based on" the "estimated time and cost impact caused by [GenOn] on Shaw's engineering personnel." (Id. at 39). Shaw further contends that Documents 193-97 and 339 were created to assist counsel in connection with a February 2011 mediation with GenOn. (Id. at 40, 49). These documents, however, reflect nothing more than factual information and computations that cannot be protected simply because they were conveyed to counsel. See Upjohn Co. v. United States, 449 US 383, 395-96 (1981); U.S. Postal Serv. v. Phelps Dodge Ref. Corp., 852 F. Supp. 156, 160, 163-64 (E.D.N.Y. 1994); Matter of Bekins Storage Co., Inc., 62 N.Y.2d 324, 326-27 (1984). The documents consequently must be disclosed.
While at least some of these documents could conceivably constitute work product, Shaw failed to rely on the work product doctrine with respect to them in its privilege log. Accordingly, any work product protection that Shaw might have been entitled to assert has been waived. See In re Honeywell Int'l, Inc. Sec. Litig., 230 F.R.D. 293, 299 (S.D.N.Y. 2003).
Documents 150, 158, and 659, however, are properly withheld based on the attorney-client privilege. These spreadsheets reflect Shaw's legal analysis concerning the probability that Shaw would be found liable with respect to GenOn's deductive claims, the compensation Shaw would be entitled to under various contract interpretation scenarios, and the possible settlement values of claims.
ii. E-mails and Attachments
Shaw also has withheld, in whole or in part, emails and accompanying attachments that it contends are privileged attorney-client communications. These are identified as Documents 236, 308-09, 323-25, and 340 on Shaw's privilege log.
Shaw claims that Document 236 was created at the request of in-house counsel to prepare for February 2011 settlement negotiations. (Shaw Mem. at 44). The attached spreadsheet contains "Probable Value" columns said to "reflect the opinions and advice of counsel as to the merits of [GenOn's] audit issues." (Id. at 44-45). If so, the information on the spreadsheet is privileged and therefore properly redacted.
Documents 323-25 reflect an email thread that originates with in-house counsel's distribution of a draft legal memorandum to Shaw personnel for review. (Id. at 48). Subsequent emails forward and comment on the draft memorandum. (Id. at 49). The redactions on these emails consequently are proper.
Finally, Documents 308-09 and 340 are emails, the attachments to which are spreadsheets and charts similar to other routine cost accounting documents that I previously have determined are not privileged. Since the attachments are primarily business related, they cannot be withheld on the basis of the attorney-client privilege. Shaw's submissions also fail to demonstrate how the emails themselves are related to the provision of legal advice or how their contents reveal the substance of such legal advice. (See id. at 45-49). These documents therefore must be produced.
iii. Memoranda and Letters
Shaw also has redacted portions of eight memoranda on the basis of the attorney-client privilege. These are Documents 104, 228, 229, 242, 311, 312, 635 and 636 on Shaw's privilege log. The memoranda were written by Shaw personnel either for Shaw's files or for Rick Shimota, Shaw's Senior Vice President and Chief Financial Officer. In general, the redacted material directly quotes or paraphrases the legal opinions of internal or external counsel on such matters as Shaw's chances of recovery and potential liability. Shaw also has redacted portions of memoranda that attach a legal memorandum written by outside counsel. (Id. at 51). Because the redacted portions of the text restate and convey legal advice within the corporation, they are properly designated as privileged attorney-client communications. Shaw also redacts figures in Documents 228, 229, 312, and 635 which, in context, appear to be part of the privileged communications. These redactions, too, are therefore appropriate.
Finally, Document 490 contains a letter, dated January 13, 2011, from consultant Duggan Rhodes to Shaw's counsel pertaining to the possible provision of expert consulting services. (Id. at 50). The letter outlines the expert's experience and qualifications relevant to analyzing a cost reimbursable contract. Shaw has withheld the entire letter based on attorney-client privilege. (See Shaw Privilege Log at 23). There is no need to consider the applicability of the attorney-client privilege to this document because Rule 26(b)(4)(C) of the Federal Rules of Civil Procedure permits a party to withhold communications between an attorney and an expert witness, "except to the extent that the communications [a] relate to compensation for the expert's study or testimony; [b] identify facts or data that the party's attorney provided and that the expert considered in forming the opinions to be expressed; or [c] identify assumptions that the party's attorney provided and that the expert relied on in forming the opinions to be expressed." Fed. R. Civ. P. 26(b)(4)(C). Here, the letter does not relate to these topics. Accordingly, it need not be produced.
V. Conclusion
For the foregoing reasons, GenOn's and Shaw's applications for the disclosure of additional documents or portions of documents, (ECF Nos. 77, 78), are granted in part and denied in part. The parties are further directed to produce forthwith the additional documents required by this Discovery Order.
Additionally, Shaw is directed to submit, within ten business days, sworn statements from persons with knowledge attesting that (i) none of the spreadsheets that were logged only once were distributed to third parties other than Shaw's outside auditors; (ii) except for duplicate spreadsheets, all documents withheld or redacted on privilege or work product grounds have been logged; and (iii) all redactions have been clearly indicated on any documents that were produced with redactions.
SO ORDERED. Dated: New York, New York
November 10, 2011
/s/_________
FRANK MAAS
United States Magistrate Judge Copies to: Hon. Harold Baer, Jr.
United States District Judge Deborah Cazan, Esq.
John I. Spangler, III, Esq.
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, GA 30309 Karl Geercken
Alston & Bird, LLP (NYC)
90 Park Avenue
New York, NY 10016 Paul Gordon Monte, Esq.
Peckar & Abramson, P.C.
41 Madison Avenue
20th Floor
New York, NY 10010 M ichael Andrew B ranca, Esq.
Peckar & Abramson, P.C.
Two Lafayette Centre
1133 21st Street, N.W., Suite 500
Washington, DC 20036