Opinion
No. M8-85 (HB)
February 24, 2003
OPINION ORDER
Defendant Federal Insurance Co. ("Federal Insurance") moves to compel Sullivan Cromwell to produce certain documents pursuant to a subpoena. The documents are sought in connection with a litigation where Federal Insurance disputes the reasonableness and thus its liability for certain legal fees paid by plaintiff. For the following reasons, defendant's motion to compel is granted-in-part and denied-in-part.
I. BACKGROUND
Microsoft Corporation ("Microsoft") brought suit in the Western District of Washington against Federal Insurance for its failure to pay settlement costs and nearly $3 million in legal fees plaintiff paid to its local counsel, Preston Gates Ellis ("Preston") and co-counsel, Sullivan Cromwell. The fees sought are for work performed to defend Microsoft against several class action lawsuits. Federal Insurance's obligations under the insurance policy remains an open issue to be decided by Judge Coughenour in the Western District of Washington.
Near the end of October 2002, Federal Insurance served subpoenas on Sullivan Cromwell and Preston, to compel production of documents allegedly needed to determine what work these law firms performed, how it related to the Washington lawsuits, whether this work was reasonable and necessary to the defense, how the fees were determined, and whether the fees were reasonable. Fed. Ins. Mem. at 1-2; Sullivan Cromwell ("SC") Opp. at 7. Federal Insurance seeks an order that requires Preston and Sullivan Cromwell to produce: (1) underlying time sheets, time records, work-in-progress, summaries, etc. that form the basis of their invoices to Microsoft; (2) documents reflecting the work performed by Preston and Sullivan Cromwell for which Microsoft seeks to have Federal Insurance pay; (3) nonprivileged documents sufficient to determine the "value" or "rates" of the services rendered for Microsoft and other clients, and (4) documents reflecting each firm's policies, practices, or procedures regarding setting or calculating fees charged to clients other than Microsoft. See Federal Ins. Reply at 2-3, 11-12; Microsoft Corp. v. Federal Ins. Co., No. C01-1815C, slip op. at 3 (W.D. Wash. Feb. 14, 2003). In a February 14, 2003 opinion, Judge Coughenour granted-in-part and denied-in-part Federal Insurance's motion to compel production of documents from Preston. Id. at 5. He ordered Preston to produce within 10 days of entry of the order the underlying time sheets, time records, work-in-progress summaries, etc. that were used to create the invoices," but ruled, on the basis of attorney-client or attorney work product privilege, that Preston was not obligated to produce privileged documents evidencing the work or services it performed. Id. In addition, Judge Coughenour ruled that Preston need not produce documentation regarding fees charged to clients other than Microsoft and its policy and procedures for calculating those fees. Id.
II. DISCUSSION
Sullivan Cromwell's arguments before me mirror those raised by Preston before Judge Coughenour. Sullivan Cromwell first argues that Federal Insurance's motion to compel is untimely under the Western District of Washington's scheduling order and inconsistent with Judge Coughenour's November 14, 2002 order denying Federal Insurance more time to take discovery. Sullivan Cromwell notes that Federal Insurance filed its motion to compel after the discovery deadline, set at November 15, 2002. SC Opp. Exh. 7 at 2. The local rules of the Western District of Washington provides that "[a]ny motion to compel discovery shall be filed and served on or before" the discovery deadline. W.D. Wash. Local R. 16(f). While Sullivan Cromwell is correct in observing that the parties by stipulation cannot amend Judge Coughenour's scheduling order, SC Opp. at 9, Judge Coughenour undoubtedly has authority to amend his scheduling order to treat the motion to compel as timely, and he apparently did. See Microsoft, No. C01-1815C, slip op. at 5. A judge has broad discretion to control case management and scheduling, which should not be disturbed unless there is an abuse of discretion. Grochowski v. Phoenix Const., 318 F.3d 80, 86 (2d Cir. 2003); Nicholas v. Wallenstein, 266 F.3d 1083, 1089 (9th Cir. 2001) (Tashima, J., concurring). I find no reason to disturb Judge Coughenour's implicit ruling allowing Federal Insurance time to serve and file its motion to compel documents from Microsoft's counsel, including Sullivan Cromwell. See Microsoft, No. C01-1815, slip op. at 3 n. 2 (summarily rejecting Preston's argument that Federal Insurance's motion to compel is untimely).
Second, Sullivan Cromwell contends that the documents sought by Federal Insurance is protected by the attorney-client or attorney work product privilege. Federal Insurance asserts that Microsoft placed "at issue" the work of its attorneys, and therefore it waived any applicable privileges. I disagree. With respect to privileged documents relating to Sullivan Cromwell's billing practices with its other clients, Microsoft plainly has no authority to waive the privilege on behalf of the law firm for other clients. Dietz v. Doe, 131 Wn.2d 835, 850 (1997). This Court may find an implied waiver of the attorney-client privilege if: "(1) the assertion of the privilege was the result of some affirmative act, such as by filing suit, by the asserting party; (2) through this affirmative act, the asserting party put the protected information at issue by making it relevant to the case; and (3) application of the privilege would have denied the opposing party access to information vital to his defense." Pappas v. Holloway, 114 Wn.2d 198, 207 (1990). Federal Insurance argues that Microsoft has placed "at issue" all of Sullivan Cromwell's privileged documents with respect to representation of Microsoft, and therefore it has waived any right to the privilege. I concur with Judge Coughenour's conclusion that the waiver by Microsoft is not as broad as Federal Insurance suggests. Microsoft, No. C01-1815C, slip op. at 4.
Federal Insurance asserts that Washington state law should govern whether the attorney client privilege exists. In regard to state privilege law, a federal court must apply the choice of law rules of its forum. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941); Tartaglia v. Paul Revere Life Ins., 948 F. Supp. 325, 326 (S.D.N.Y. 1996); Roberts v. Carrier Corp., 107 F.R.D. 678, 685-86 (D. Ind. 1985). "New York choice of law gives `controlling effect to the law of the jurisdiction which, because of its relationship or contact with the occurrence or the parties, has the greatest concern with the specific issue raised in the litigation.'" Tartaglia, 948 F. Supp. at 326 (quoting Babcock v. Jackson, 12 N.Y.2d 473, 481-81 (1963)). The specific matter at issue here is whether the attorney-client privilege has been waived by Microsoft, a Washington state corporation, in regard to materials created and held by Sullivan Cromwell throughout the United States, including New York, New Jersey, Washington D.C., and Los Angeles. Pfeiffer Decl. at ¶ 8. It would appear that Washington state, where plaintiff is headquartered, has the most contacts with the issue raised here, and accordingly Washington state law should apply.
Federal Insurance cites a handful of cases from jurisdictions outside of Washington state that allowed discovery of attorney work product or communications normally protected by the attorney-client privilege. Fed. Ins. Reply Mem. at 7. Federal Insurance cites no authority, however, from Washington state that holds that merely asserting a claim for indenmification should vitiate the attorney-client privilege with respect to all aspects of a client's legal defense. Such a rule is too broad an application of the "at-issue" waiver. See Microsoft, No. C01-1815, slip op. at 4-5; In re Disciplinary Proceeding Against Boelter, 139 Wn.2d 81, 91 (1999) (noting that exceptions to the attorney-client privilege should not be carelessly invoked); Bovis Lend Lease, LMB, Inc. v. Seasons Contracting Corp., 2002 WL 31729693, at *16 (S.D.N.Y. Dec. 5, 2002) (rejecting insurer's argument "that, by placing insured's defense costs at issue in this case, [the entity bringing the suit] has waived privilege as to all documents relating to those costs.").
Because Sullivan Cromwell does not bill its clients on an hourly rate basis but rather on the "value of the services rendered to the client," S C Mem. at 3, and the invoice billed to Microsoft gives only "a short paragraph describing, very generally, the work performed," Federal Insurance argues that access to Sullivan Cromwell's privileged work product and communications is vital to its defense. Contrary to Federal Insurance's claim, "[t]he reasonableness of the attorneys' fees actually incurred in a case can "in all probability . . . be determined . . . by examination of attorney time records and documents filed in court." Bovis, 2002 WL 31729693, at *16 (quoting 670 Apartments Corp. v. Agric. Ins. Co., 1997 WL 801458, at *2 (S.D.N.Y. Dec. 30, 1997)); see also Prudential Ins. Co. of Am. v. Coca-Cola Enter., Inc., 1993 WL 276065, at *1 (S.D.N.Y. July 21, 1993) (noting that defendant's ability to challenge the reasonableness of the attorney's fees could be fully evaluated by reference to attorney's diary entries as well as to final copies of documents that reflect the attorney's labor). Although Sullivan Cromwell apparently bases its fees on the "value" of the services rendered, unlike most firms, which bill on an hourly rate, Sullivan Cromwell surely must keep track of the amount of work ultimately required," see Fed. Ins. Mem. Exh. B (Sept. 25, 1997 Sullivan Cromwell letter). The (1) underlying time sheets, time records, work-in-progress, summaries, etc. that form the basis of Sullivan Cromwell's invoices to Microsoft and (2) policies, procedures or other documents related to the manner in which the fees charged to Microsoft in the underlying litigations were calculated will provide sufficient information to evaluate the fees for which Microsoft seeks reimbursement, and Sullivan Cromwell is directed to produce these materials to Federal Insurance by March 3, 2003. At this juncture, and on the record before me, Federal Insurance's other request for non-privileged documents that pertain to Sullivan Cromwell's billing practices with respect to other clients is denied. Macmillan, Inc. v. Federal Ins. Co., 141 F.R.D. 241, 243 (S.D.N.Y. 1992).
Sullivan Cromwell further argues that Federal Insurance's subpoena is improper because it should have sought such material from Microsoft. Sullivan Cromwell presents no evidence and I see no reason to conclude that any of the materials I have ordered Sullivan Cromwell to produce is in Microsoft's possession.
III. CONCLUSION
For the foregoing reasons, Federal Insurance's motion to compel is granted-in-part and denied-in-part. The Clerk of the Court is ordered to close this miscellaneous matter and remove it from my docket.