Summary
In Palazzetti, the court found that defendants had produced to plaintiff's counsel two memoranda from one of the defendants to his attorney.
Summary of this case from In re Papst Licensing GmbH Patent LitigationOpinion
98 Civ. 0722 (LBS)(FM)
July 21, 2000
MEMORANDUM OPINION AND ORDER
This contract action arises out of a licensing agreement between plaintiff Palazetti Import/Export, Inc. ("Palazetti" or "Plaintiff"), on the one hand, and defendants Gregory P. Morson ("Morson") and the Morson Group, Inc. ("Morson Group")(collectively, "Defendants"), on the other. Palazetti has now moved, pursuant to Rule 37 of the Federal Rules of Civil Procedure, for an order compelling the Defendants to produce from the files of Defendants' former counsel, Davis Davis, P.C., certain documents which have been withheld, in whole or in part, on privilege grounds. Palazetti also seeks to compel the deposition of Eric Davis, Esq. ("Davis"), a member of that firm. Davis Davis, in turn, has filed a cross-motion seeking the attorney's fees it allegedly has incurred in responding to multiple requests by the Defendants' present counsel, Dan L. Johnston, Esq. ("Johnston"), for the production of documents.
Following an in camera review of the contested documents, Palazetti's motion is granted, in part, because the Defendants previously waived the protections of the attorney-client privilege and work product doctrine with respect to certain documents. The Davis Davis cross-motion for fees is denied.
I. BACKGROUND
Both Palazetti and the Morson Group are corporations engaged in the business of selling furniture. Morson is the President of the Morson Group. Pursuant to the licensing agreement, the Morson Group acquired the right to use the Palazetti name for a retail furniture store in Boston, Massachusetts. In this lawsuit, Palazetti claims that the Defendants breached the terms of the licensing agreement and engaged in unfair competition in violation of the Lanham Act, 14 U.S.C. § 1051, et seq.
A. Discovery Dispute
On August 3, 1998, Johnston was substituted for Davis Davis as counsel for the Defendants. Prior to that date, Davis served as primary defense counsel.
On September 24, 1999, Palazetti noticed the deposition of Davis and subpoenaed certain documents from his firm regarding its involvement in the drafting of the licensing agreement. At an earlier point, Johnston had turned over to Palazetti's counsel two memoranda from Morson to Davis ("Waiver Documents") which, but for that action, would unquestionably have been shielded from disclosure based upon the attorney-client privilege. Johnston contended that the disclosure was inadvertent, but he nevertheless permitted Morson to answer numerous questions about the Waiver Documents at a September 15, 1999, deposition. Many of these questions were answered without Johnston even interposing an objection. Indeed, at one point, after he had initially directed Morson not to respond to a question concerning the Waiver Documents, Johnston reversed course, instructing him, "Just go ahead and answer, what the hell." (Morson Dep. Tr. at 27).
On October 27, 1999, Magistrate Judge Grubin, to whom this case had been referred for general pretrial supervision, held a conference at which Johnston contended that the privilege was not waived because his initial production of the Waiver Documents was inadvertent. Judge Grubin disagreed, however, ruling from the bench that the privilege had, in fact, been waived as a consequence of Johnston's failure to object to all of the deposition questions concerning the Waiver Documents and to instruct Morson not to answer them. (See Guzov Decl. Ex. D at 6-12). Judge Grubin thereafter issued an Order, dated December 2, 1999, directing, among other things, that Johnston "shall produce to plaintiff all documents . . . that may have been privileged but for which privilege has now been waived as set forth in my ruling during the conference held on October 27, 1999." (Id. Ex. A at 1).
This case was reassigned to me on February 16, 2000, following Judge Grubin's departure from the bench. On March 6, 2000, I held a conference in order to familiarize myself with the case and set a schedule for the completion of discovery. At that conference, Palazetti complained that, despite Judge Grubin's ruling, the Defendants had continued to withhold documents on privilege grounds. Since the precise scope of the Defendants' waiver was unclear, I directed the Defendants to produce for in camera inspection any privileged documents responsive to Palazetti's September 24th subpoena which they were withholding on the theory that the protections of the attorney-client privilege or work product doctrine remained intact.
At least some of the documents required to be produced to the Court were in the possession of Davis Davis, which had by then brought its own action against the Defendants in state court to recover unpaid legal fees. Johnston contends that the Davis firm's animus against the Defendants made it difficult to isolate and secure the production of these additional documents. Davis Davis avers, to the contrary, that poor document control by Johnston caused extraordinary difficulties in connection with the identification and reproduction of the relevant documents, leading to its request for attorney fees.
Despite any difficulties that present and past counsel may have encountered, Johnson eventually produced the relevant documents to the Court — albeit in two installments — for in camera review. Annexed to two declarations by Johnston, dated March 15 and March 18, 2000 ("Johnston Decl. I" and "Johnson Decl. II", respectively), are 43 documents which were withheld by the Defendants in their entirety and five additional documents which were produced in redacted form (collectively, the "Disputed Documents"). The Defendants continue to maintain that the Disputed Documents are protected by the attorney-client privilege and the work product doctrine despite Judge Grubin's prior waiver ruling.
B. Waiver Documents
Both of the Waiver Documents address in detail Morson's concerns regarding potential violations of the licensing agreement by Palazetti. More specifically, his November 13th memorandum addresses (i) the timing of payments made by Palazetti to the Morson Group; (ii) Palazetti's delay in delivering merchandise to Morson's Boston store; (iii) Palazetti's financial difficulties and their effect on Palazetti's ability to deliver furniture; (iv) the possibility of purchasing furniture directly from a third-party manufacturer; (v) problems with defective Palazetti merchandise; (vi) letters written by Morson's wife to Palazetti regarding the parties' disagreements; and (vii) possible remedies available to the Morson Group, including a refusal to pay money to Palazetti under the licensing agreement, initiation of a lawsuit against Palazetti, or efforts to assume Palazetti's business. Morson raised three additional issues in his November 14th memorandum: (i) Palazetti's alleged misrepresentations concerning advertising costs and the level of revenues received by Palazetti during certain sale periods; (ii) Palazetti's advertisements in a Boston-based publication; and (iii) Palazetti's efforts to limit the Morson Group's ability to advertise.
At the Morson deposition, Palazetti's counsel asked questions concerning several of these topics after the Waiver Documents were marked as exhibits without objection.
III. DISCUSSION A. Work Product
The Defendants claim that, notwithstanding their prior waiver, several of the Disputed Documents remain protected from disclosure pursuant to the work product doctrine. Rule 26(b)(3) of the Federal Rules of Civil Procedure affords 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." United States v. Adlman, 134 F.3d 1194, 1196 (2d Cir. 1998). Under Rule 26(b)(3), documents "`prepared in anticipation of litigation or for trial' are discoverable only upon a showing of substantial need of the materials and inability, without undue hardship, to obtain their substantial equivalent elsewhere." Id. at 1197. Although both factual and opinion work product fall within the scope of the doctrine, an attorney's mental impressions, conclusions, opinions, or legal theories typically are afforded greater protection. Id.
B. Attorney-Client Privilege
The Defendants also claim that, notwithstanding any waiver, the attorney-client privilege continues to shield several of the Disputed Documents from disclosure. Since the issues in this case arise, at least in part, under the federal Lanham Act, the scope and applicability of the privilege are questions governed by federal law. See Fed.R.Evid. 501; Sequa Corp. v. Gelmin, No. 91 Civ. 8675, 1993 WL 276081, at *1 (S.D.N.Y. July 16, 1993) (Dolinger, M.J.)("Under Fed.R.Evid. 501, the applicable standard for the attorney-client privilege in this case is found in federal law since the assertedly privileged evidence is relevant to federal as well as state law claims.").
Under federal law, to invoke the attorney-client privilege a party must show that "there was: (1) a communication between client and counsel, which (2) was intended to be and was in fact kept confidential, and (3) made for the purpose of obtaining or providing legal advice." United States v. Construction Products Research, Inc., 73 F.3d 464, 473 (2d Cir. 1996).
C. Burden
A party seeking to invoke either the attorney-client privilege or the work product doctrine to avoid producing documents bears the burden of establishing its applicability. Id. at 473; United States v. Adlman, 68 F.3d 1495, 1500 (2d Cir. 1995).
D. The Disputed Documents
The Disputed Documents fall into three basic categories: (i) notes and materials compiled by Morson or Davis; (ii) drafts of pleadings and other legal documents apparently created by Davis; and (iii) correspondence between Morson and Davis relating to the subject matter of this litigation. The documents in the first two categories clearly were created in anticipation of and in preparation for this litigation, and therefore are work product. The documents in the third category plainly involve confidential communications between the Defendants and their original counsel which constitute, or were made for the purpose of obtaining, legal advice, and therefore are subject to the attorney-client privilege.
E. Waiver by Implication
The conclusion that the Disputed Documents ordinarily would be protected from disclosure is not the end of the necessary analysis since a party may waive protection through its actions or failure to act. The "waiver by implication" doctrine provides that the production of privileged documents can "in some circumstances . . . waive the privilege not only with respect to the disclosed documents but also as to all other communications made about the same subject between the attorney and the client." In re Leslie Fay Cos. Sec. Litig., 161 F.R.D. 274, 282 (S.D.N Y 1995) (Conner, J.). "The principal consideration animating the rule governing such `waiver by implication' is one of fairness." Koster v. Chase Manhattan Bank, No. 81 Civ. 5018, 1984 WL 883, at *4 (S.D.N.Y. Sept. 18, 1984) (Dolinger, M.J.); see von Bulow v. von Bulow, 828 F.2d 94, 103 (2d Cir. 1987). Generally, if the disclosure of privileged communications "may be misleading because only favorable material has been disclosed, waiver is likely to be found for so much of the withheld information as will make the disclosure complete and not misleadingly one-sided." Koster, 1984 WL 883, at *4.
My in camera review confirms that the Disputed Documents contain either attorney-client communications or attorney work product relating to the subjects addressed in the Waiver Documents. Nevertheless, the withholding of certain of these Disputed Documents could cause the Defendants' prior disclosures to be misleading to the Plaintiff. In keeping with Judge Grubin's prior order, I will therefore require the Defendants to disclose certain Disputed Documents, or portions of Disputed Documents, necessary to ensure that the disclosure of the Waiver Documents is not misleading. The additional documents to be disclosed are set forth in the Appendix to this Memorandum Opinion and Order.
Additionally, in light of the prior disclosure of the Waiver Documents and the further disclosure now required, Palazetti's application to depose Davis is granted. Davis is directed to appear for that deposition on or before September 5, 2000.
F. Cross-Motion for Costs and Attorney's Fees
On February 15, 2000, the Davis Davis firm filed a cross-motion to recover the costs and fees it incurred in the course of helping the Defendants respond to Palazetti's subpoena. The Davis firm, however, is no longer the Defendants' counsel. While Congress has permitted certain financial institutions to recover the cost of furnishing documents to the Government, see 12 U.S.C. § 3415, there is no similar legislation granting special rights to law firms in a suit involving private parties. Accordingly, unless Davis Davis has a retainer agreement which affords it greater rights, it is in no better position than any other third party who must respond to a subpoena duces tecum.
The Court, of course, also has the inherent power to impose sanctions for abusive discovery practices. In this case, Davis Davis contends that it was the victim of such misconduct as a consequence of Johnston's allegedly slipshod document reviews. (See Decl. of Joyce Davis, Esq. ¶¶ 13-15). On the other hand, Johnston contends that the multiple visits that he made to Davis Davis's office were necessitated by that firm's incomplete document productions. (See Johnston Decl. I ¶¶ 5-18). Since it is not possible to resolve these differing views of the facts and, more importantly, because the burden to which Davis Davis was subjected was not exceptionally onerous even under its view of the facts, the Davis firm's cross-motion is denied, without prejudice to its possible right to seek reimbursement as part of its separate state court action against the Defendants for payment of unpaid legal fees.
I also note, as a separate ground for denial of the cross-motion, the Davis firm's failure to submit the memorandum of law required by Rule 7.1 of the Local Rules of this Court. See Carson v. Kentucky Fried Chicken, No. 96 Civ. 8519, 1997 WL 615240, at *1 (S.D.N.Y. Oct. 3, 1997) (Preska, J.)("Under Rule 7.1 of the Local Rules, failure to submit a memorandum with moving papers is grounds for granting or denying a motion without reaching the merits."); Dodson v. Runyon, 957 F. Supp. 465, 468 (S.D.N.Y. 1997) (Edelstein, J.) (denying cross-motion because no memorandum of law was filed).
IV. CONCLUSION
For the foregoing reasons, the motion to compel discovery is granted and the Defendants are directed to produce to the Plaintiff by July 31, 2000, the Disputed Documents, or portions thereof, set forth in the Appendix. Thereafter, Palazetti shall take the deposition of Eric Davis, Esq., on or before September 5, 2000. The cross-motion of the Davis Davis firm to recover fees is denied.
SO ORDERED.