Opinion
603405/2001.
September 15, 2004.
Lawrence A. Nathanson, Esq., Siegal Napierkowski, For Century Indemnity Co.
Joseph F. Fields, Esq., Dickstein Shapiro Morin Oshinsky LLP, New York NY, For Brooklyn Union Gas/KeySpan.
Richard T. Apiscopa, Esq., Robert P. Firriolo, Esq., Mendes Mount, LLP, New York NY, For the London Defendants.
DECISION AND ORDER
The following papers, numbered 1 to 4 were read on this motion to/for
PAPERS NUMBERED
Notice of Motion/ Order to Show Cause — Affidavits — Exhibits . . . 1 Answering Affidavits — Exhibits 2 Replying Affidavits 3Cross-Motion [X] Yes [] No
Upon the foregoing papers, it is ordered that this motion and cross motion are determined in accordance with the annexed memorandum decision and order, amending this court's interim decision and order of February 19, 2004 which held final resolution of the issues in dispute In abeyance pending in camera review of documents.
The following papers, numbered 1 to 4 were read on this motion to/forPAPERS NUMBERED
Notice of Motion/ Order to Show Cause — Affidavits — Exhibits . . . 1 Answering Affidavits — Exhibits 2 Replying Affidavits 3,4Cross-Motion [] Yes [X] No
Upon the foregoing papers, it is ordered that this motion and cross motion are determined in accordance with the annexed memorandum decision and order, amending this court's interim decision and order of February 19, 2004 which held final resolution of the Issues In dispute in abeyance pending In camera review of documents.
In these two related actions, Century Indemnity Company seeks a declaratory judgment that it has no obligation to indemnify Brooklyn Union Gas, as regards the costs arising from the investigation and cleanup of environmental contamination at several of Brooklyn Union's former manufactured gas plant ("MPG") sites, and Brooklyn Union seeks a declaratory judgment and damages for breach of contract because of the purported refusal of Century and other insurers, here in particular, Certain Underwriters of Lloyd's London and London Market Insurance Companies ("London defendants"), to fulfill their obligations to defend and indemnify it under excess liability policies allegedly issued by the insurers as concerns the MPG sites.
In the course of discovery, certain documents were withheld from production on various grounds and were the subject of the instant motions and cross-motion to compel production. Pursuant to a so-ordered stipulation and compliance conference order dated February 19, 2004, the parties have submitted their privilege logs and the disputed documents for in camera review. Final determination of these discovery related motions and cross motion was held in abeyance pending this court's in camera review of the allegedly privileged documents. That review, of thousands of pages of documents, having been completed, the court now decides the two motions.
The law favors "full disclosure of all matter material and necessary in the prosecution or defense of an action" (CPLR 3101 [a]), and therefore creates only three categories of protected materials: privileged matter which is absolutely immune from discovery (CPLR 3101[b]; attorney work product, also absolutely immune from discovery (CPLR 3101[c]), and trial preparation materials, which are conditionally immune (CPLR 3101 [d][2]). The burden of demonstrating an immunity from discovery is on the party asserting the immunity ( Koump v Smith, 25 NY2d 287, 294). Here, the parties allege the withheld documents are variously attorney work product, prepared in anticipation of litigation, or subject to attorney-client privilege, and many of the documents themselves are labeled as such. However, the use of such designations is not conclusive in the court's analysis ( Graf v Aldrich, 94 AD2d 823 [3rd Dept. 1983]; Aetna Cas. Sur. Co. v Certain Underwriters at Lloyd's, London, 176 Misc 2d 605, 609 [Sup. Ct., New York County 1998]).
In making its findings, the court relies on the first-person affidavits where provided, the content as well as the descriptions of the documents in the privilege logs, and the various decisions, both State and Federal, cited by the parties. An attorney's work product is defined narrowly in New York and pertains solely to documents created by an attorney, which could only have been created by a lawyer, and which contain the attorney's analysis and strategy ( see, Graf v Aldrich, 94 AD2d at 824; E.B. Metal Indus. v State of New York, 138 Misc 2d at 702; CPLR 3101 [c]). Case law holds that materials prepared in the regular course of business to aid an insurance carrier in deciding whether to allow or reject a claim are discoverable ( see, Bertalo's Restaurant, Inc. v Exchange Ins. Co., 240 AD2d 452 [2d Dept. 1997]). Where an insurance company does not express an intent to deny coverage nor hint at impending litigation, reports are not work product nor done in anticipation of litigation ( Westhampton Adult Home Inc. v National Union Fire Ins. Co. of Pittsburgh, 105 AD2d 627, 628 [1st Dept. 1984]); Chemical Bank v National Union Fire Ins. Co. of Pittsburgh, Pa., 70 AD2d 837 [1st Dept. 1979]; E. B. Metal Industries v State, 138 Misc 2d 698, 701 [Ct. Claims 1988]). However, communications between the attorney and client in which the communication either integrates facts and the lawyer's legal advice or is of a primarily or predominantly legal nature or, if from the client, requests legal assistance, are privileged under CPLR 4503(a), even when the client is an insurance company ( Aetna Cas. Sur. Co. v Certain Underwriters at Lloyd's, London, 176 Misc 2d 605, 609 [Sup Ct. New York County 1998]; see also Rossi v Blue Cross and Blue Shield of Greater New York, 73 NY2d 588, 593).
Generally, work product applies to "documents prepared principally or exclusively to assist in anticipated or ongoing litigation" rather than in the ordinary course of business, "even if the party is aware that the document may also be useful in the event of litigation" ( Stenovich v Wachtell, Lipton, Rosen Katz, 195 Misc 2d 99, 116 [Sup. Ct. New York County 2003], quoting Martin v Valley Natl. Bank of Ariz., 140 FRD 291, 304 [1991]).
Many of the documents concern reserves. At the April 28, 2004 conference with the parties' attorneys, it was essentially agreed that these documents are irrelevant at this point and need not be produced ( see, Karta Indus. v Insurance Co. of Penn., 258 AD2d 685 [1st Dept. 1999] [reserve documents held irrelevant]; Independent Petrochemical Corp. v The Aetna Cas. Surety Co., 117 F.R.D. 283, 288 [Dist. Ct., D.C. 1986] ["a reserve essentially reflects an assessment of the value of a claim taking into consideration the likelihood of an adverse judgment," and "such estimates of potential liability do not normally entail an evaluation of coverage based upon a thorough factual and legal consideration when routinely made as a claim analysis"]; but see, Champion Intl. Corp. v Liberty Mut. Ins. Co., 1989 WL 299156 [SDNY 1989] [holding that courts have recognized that reserve information is sufficiently relevant at least in certain cases and that it should be produced unless the resisting party can demonstrate privilege or work product]). It is understood that the issue may need to be revisited by the parties and the court at a later date.
Each of the parties alleges through its counsel, that it anticipated litigation many years before the actual commencement of litigation, and withheld certain documents accordingly. Only Century includes an affidavit from someone with actual knowledge; neither Brooklyn Union nor the London defendants provide anything other than the documents themselves, which do not clearly establish any particular time after which the business actually anticipated litigation. In 1998, to toll any statute of limitations issues, Brooklyn Union signed standstill agreements with the insurers (Apiscopa Aff. in Opp. Ex. E, Draft Standstill Agreement). However, both in the years before and after the standstill agreements were entered into, Brooklyn Union and the insurers continued to gather information to determine the nature and extent of the claims and assess their respective positions and potential liability relative to the demands by New York City and New York State for remediation and clean-up of the MFGs. The standstill agreements were made with an explicit intent to "further the negotiation" of a resolution and "to avoid unnecessary litigation" (Draft Standstill Agreement, at 1). The parties agreed not to sue or bring any actions or claims against each other during the time the standstill agreements were in force ( Id. at 2). None of the parties has pointed to studies which demonstrate that a standstill agreement is always a precursor to litigation, or that these types of environmental claims are never settled prior to litigation. The court cannot make findings based on conclusory statements, and places the burden on the parties themselves to establish their claims.
1. Century Indemnity Co. v Brooklyn Union Gas Co. , Index No. 603405/01 (Seq. 008) A. Documents Withheld by Brooklyn Union
With two exceptions, the documents in Brooklyn Union's privilege log were classified as "work product," a category which is clearly a mischaracterization when the author is not an attorney, and does not apply merely because a document is created by an attorney if it is not created in actual anticipation of litigation. In addition, many of its documents are undated and either have no author or no recipient. While the court recognizes the sensitive nature of many of these documents, it is not for the court to assume or hypothesize as to the factual basis which would possibly warrant a finding of privilege. As noted above, Brooklyn Union has not provided a first-person affidavit from a member of Brooklyn Union, Hale Dorr, or Putnam Hayes Bartlett that would elucidate the reason the documents were created, whether they were shared between the law firm and Brooklyn Union, or the company's understanding of its legal position and the question of anticipatory litigation. Furthermore, the court will not presume, based on the extant record, that litigation was anticipated either at the time Brooklyn Union Gas suggested the parties enter into standstill agreements, or as of the date they signed the standstill agreements. Equally as valid an assumption would be that the standstill agreements were an attempt to preserve all options. Simply put, the papers in support of Brooklyn Union Gas fail to make the requisite showing. Accordingly, Brooklyn Union is directed to produce all documents with the exception of those listed below:
BU 015758-015789 (misidentified; is actually attorney-client) BU 024037-024040
B. Documents Withheld by Century Indemnity Co.
Century withheld a total of eight documents on the basis of work product, although they were prepared by a non-attorney who states that he "began to anticipate" litigation upon receiving the July 16, 1997 letter from Brooklyn Union's attorney which proposed entering a standstill agreement (Benjamini Aff. in Opp. ¶ 4). Century is directed to turn over to Brooklyn Union all of its withheld documents, with the exception of the third item, concerning the establishment of a reserve. The remaining seven documents are undated or initially prepared prior to any time Century could reasonably have anticipated litigation, and then updated, and were thus created for more than one purpose ( see, Chemical Bank v National Union Fire Ins. Co. of Pittsburgh, Pa., 70 AD2d 837 [1st Dept. 1979] [court held that statement taken from employee by house counsel and a financial report, characterized by the insurer as developed for "possible use in litigation," had as other purposes to assess the insurer's liability]; Smith v Ford Foundation, 231 AD2d 456 [1st Dept. 1965]).
2. Brooklyn Union Gas Co. v Century Indemnity Co. , Index No. 403087/2002 (Seq. 003)
The London defendants produced a 22-page privilege log through its counsel at Mendes Mount, LLP. With certain exceptions, Mendes Mount, counsel for the London defendants, produced for in camera review the documents which were dated prior to the commencement of litigation on July 9, 2001. The firm argues that it provides ongoing legal advice to the London defendants, that its work should not be understood as pertaining to the "business" of the insurance company and that its reports are attorney work product, created in anticipation of litigation, or attorney-client communications, citing Spectrum Sys. Intl. Corp. v Chemical Bank, 78 NY2d 371, 379 (1991) ("critical inquiry is whether, viewing the lawyer's communication in its full content and context, it was made in order to render legal advice or services to the client"); Rossi v Blue Cross and Blue Shield of Greater New York, 73 NY2d 588 9 (1989). Nonetheless, the court finds that many of the documents are multi-motivated reports or communications of a primarily business rather than legal nature. As indicated below, where certain of the otherwise discoverable documents contain a small section of legal advice, these documents are directed to be redacted and then produced. Based on the privilege log, the London defendants are directed to produce the following documents as indicated:
In addition to documents dated after the commencement of litigation, Mendes Mount has not produced the documents authored by "LMCS," unauthored spreadsheets, and documents concerning escrows, reserves, and reinsurance.
In addition, the following items which were not produced for in camera review, are directed to be produced based on their description or lack of description:
100940-100945 Site analysis matrix 101647 Electronic communicationThe remaining Mendes Mount documents are privileged and should not be produced.
The parties are advised that should they move to reargue or to renew any part of the court's decision, for each and every document which remains in dispute, the party should supply a first-person affidavit and citations to case law in support of its position. Without at least this much, the court is left to speculate as to the genesis of the document, its import, and the applicability of the privilege. Accordingly, it is
ORDERED that the parties are to produce the documents, as indicated above, to the opposing counsel within twenty (20) days of the date of entry of this order; and it is further
ORDERED that each party shall arrange to retrieve the boxes and envelopes of documents provided to the court from the Part 7 courtroom, room 949 of 111 Centre Street, by contacting the Part Clerk, Mr. Michael Kasper, at (212) 374-8780. If counsel fails to arrange for a representative bearing written authorization to retrieve the documents within twenty (20) days of entry of this order, the copies of the documents provided to the court will be discarded.
This constitutes the decision and order of the court. The court, has mailed copies of this decision to counsel.