Opinion
M 8-85, (Action pending in U.S. District Court for the Western District of Missouri No. 09-0377-CV-W-GAF (W.D. Mo.)).
November 10, 2010
MEMORANDUM OPINION ORDER
Hallmark Cards, Inc. has moved to compel Weil Gotshal Manges, LLP ("Weil"), a non-party, to comply with a subpoena issued in this District. Hallmark seeks documents relating to its underlying litigation with Janet Murley in the Western District of Missouri, in which Hallmark asserts claims for breach of contract and misappropriation of trade secrets. Weil has withheld certain responsive documents on grounds that they are protected by the attorney-client privilege and/or the work-product doctrine.
This Court held a hearing on Hallmark's motion to compel on September 7, 2010, and subsequently conducted an in camera review of the 200-plus documents Weil has withheld.
This Court has concluded that the documents in question were created "in anticipation of litigation." The Court has further concluded that (1) Hallmark has not demonstrated a "substantial need" for these documents, and (2) Weil has not made an adequate showing that each of these documents contains "mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the litigation." Fed.R.Civ.P. 26(b)(3). Accordingly, Hallmark will be ordered to make a submission demonstrating its "substantial need" for these documents and, in the event that Weil intends to press its work-product objection as to all of the 200-plus documents, it will make a submission demonstrating — as to each document individually — why application of the work-product doctrine is appropriate.
BACKGROUND
In December 2001, Hallmark and the Monitor Company Group Limited Partnership ("Monitor") entered into a Consultant Services Agreement. As a consultant for Hallmark, Monitor was allegedly given access to "Hallmark's most sensitive and proprietary information" and "worked on redesigning Hallmark's core greeting card business model and co-developed specific action plans." (O'Toole Decl., Ex. A at HALL 0006653) The consultant agreement requires Monitor to keep certain Hallmark information confidential. Monitor's services for Hallmark ended in 2002.
Monitor Clipper Partners, LLC ("Clipper") is a sister company of Monitor, albeit a separate legal entity with separate management. (Weil Br. 2; Hallmark Br. 3, n. 1 ("[Clipper] is a private equity firm and sister company to [Monitor].") In July 2005, Clipper was presented with an opportunity to acquire Recycled Paper Greetings ("RPG") through its investment funds, and in December 2005 Clipper's investment fund invested in RPG. RPG is a direct competitor of Hallmark. (O'Toole Decl., Ex. A at HALL 0006652)
In a November 22, 2005 letter to Monitor, Hallmark stated that it was "shocked to learn that you are entering into direct competition with Hallmark Cards after you obtained Hallmark's most confidential core business trade secrets," referring to media reports that Clipper planned to invest in RPG. (O'Toole Decl., Ex. A at HALL 0006652) Hallmark warned Monitor that "it now appears that you have likely breached [the confidentiality agreement] and are on the brink of engaging in unfair competition with Hallmark." (Id. at HALL 0006653) Hallmark also asserted that if Monitor was using data obtained from its work for Hallmark, "such actions would constitute breach of contract . . ., breach of confidentiality agreements, breach of fiduciary duty, breach of confidential relationship, unfair competition and misappropriation of trade secrets." (Id. at HALL 0006654) Hallmark's letter ended with a retention notice directing Monitor to maintain all documents related to nine topics, including the greeting card industry, RPG, Monitor's consulting work for Hallmark, and "any other claims or complaints regarding misappropriation or misuse of confidential information." (Id.)
Although Hallmark's letter was addressed to Monitor and premised on the confidentiality agreement between Monitor and Hallmark, Clipper was discussed at length in the letter. "Monitor and [Clipper] are located in the same building. The monitor.com website reveals that [Clipper] has `privileged access to the proprietary resources of The Monitor Group' and that the `close proximity of the Group Companies within the Cambridge office allows for ready collaboration.'" (Id. at HALL 0006653 (emphasis in original)) "Most disturbing of all" to Hallmark were statements on monitorclipper.com indicating that Clipper "identifies `a substantial number of potential investments through Monitor's business relationships and through initiatives to target industries where Monitor has significant knowledge and expertise.'" (Id. at HALL 0006653-54 (emphasis in original)) Hallmark asserted that "we can only conclude that it is probable that Monitor and/or [Clipper] used information or data gleaned from Hallmark . . . in targeting [RPG] as a potential investment . . . and in deciding to proceed with that investment." (Id. at HALL 0006654)
On January 17, 2006, Hallmark sent Monitor another letter in which it accused Clipper of misappropriating Hallmark's information. Hallmark asserted that "Clipper necessarily acquired Hallmark confidential information." (Id. at HALL 0006706) Hallmark demanded "straightforward responses" if "Monitor wishes to avoid litigation." (Id.) Hallmark concluded this letter by asserting that it would "use legal proceedings . . . if it cannot get timely, credible, direct and binding assurances . . . on or before January 23, 2006." (Id. at HALL 0006709) Hallmark initiated an arbitration proceeding against Monitor on January 23, 2006 (id. ¶¶ 7-8), arguing that Monitor had misused its confidential information in connection with the RPG acquisition. (Id., Ex. B at HALL 0006475)
In January 2006, Weil represented Clipper. Monitor's counsel forwarded to Weil copies of Hallmark's letters, and Weil thus became aware of Hallmark's allegations that Monitor may have shared Hallmark information with Clipper in connection with the RPG acquisition. (Id. ¶¶ 4-5) Weil became aware of Hallmark's arbitration claims against Monitor on January 26, 2006. (Id. ¶ 8) Patrick O'Toole, a litigation attorney at Weil, was assigned to this matter in January 2006 "because of Clipper's concern that litigation between Hallmark and Clipper might also ensue." (Id. ¶ 9)
In August 2006, RPG began a search for a new CEO. Clipper identified Janet Murley — a former Hallmark executive — as a candidate. Murley declined the position but was hired by RPG as a consultant in October 2006. (Id. ¶ 13) In January 2007, RPG and Clipper became concerned that Murley might have provided them with Hallmark documents. Accordingly, RPG and Clipper jointly retained Weil and directed the firm to determine whether Murley had provided any documents to RPG and Clipper that "c[a]me from her previous employment with Hallmark." (Id.) Weil in turn retained a computer forensic consulting company — Lucidata — to assist it with searching for and removing from "the computers of RPG, Clipper, and others," and preserving, documents provided to RPG and Clipper by Murley. Lucidata completed its duties in approximately February 2007. (Id. ¶ 19)
The arbitration between Hallmark and Monitor concluded on March 21, 2007, with Hallmark obtaining an award in its favor. (Id. ¶ 20; Ex. B at HALL 0006475) The arbitrator found that "Monitor employees providing advice to [Clipper] accessed confidential Hallmark documents in the course of the acquisition of RPG," and "electronic documents containing Hallmark confidential data were accessed and used by Monitor Group employees in connection with the RPG acquisition." (Id. at HALL 0006475) Months later, Hallmark and Clipper reached an agreement whereby Clipper would search its computer systems and files for information that may have been confidential to Hallmark, and in exchange Hallmark would provide a release to Clipper. In late 2008, however, Hallmark sued Clipper in the Western District of Missouri. (Id. ¶ 23) Hallmark subsequently filed a separate lawsuit against Murley in the Western District of Missouri.
On February 4, 2010, Hallmark served a subpoena on Weil seeking documents related to its suit against Murley. On February 19, 2010, and April 16, 2010, Weil produced responsive documents. Weil made a supplemental production on May 4, 2010.
In January 2009, RPG filed for bankruptcy and was subsequently acquired by American Greetings. (Blegen Decl. ¶ 7) On May 5, 2010, American Greetings and RPG provided a letter to Hallmark expressly waiving the attorney-client privilege with respect to RPG's communications with Weil. (Id.)
On May 19, 2010, Weil made another production of documents and produced its privilege log. On July 20, 2010, Hallmark sent Weil a letter demanding the production of all documents identified in Weil's privilege log. The instant motion to compel followed.
DISCUSSION
I. THE WORK-PRODUCT DOCTRINEWeil has asserted the work-product doctrine in withholding all 200-plus documents at issue here. Most of the documents are email communications between Weil and Lucidata, the data consulting firm Weil retained in conducting its investigation. The documents at issue also include several Weil memoranda summarizing the document search process, and Lucidata summaries and reports prepared during its search and collection effort. Weil argues that these documents are protected from disclosure because they were prepared in anticipation of litigation. (Weil Br. 7) Hallmark contends, however, that these documents are not covered by the work-product doctrine because they were prepared for business purposes and not in anticipation of litigation. (Hallmark Br. 10)
Only twelve of these documents are allegedly protected by the attorney-client privilege.
A. "In Anticipation of Litigation"
"The work-product doctrine, codified for the federal courts in Fed.R.Civ.P. 26(b)(3), is intended to preserve a zone of privacy in which a 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) (quoting Hickman v. Taylor, 329 U.S. 495, 510-11 (1947)). "Analysis of one's case `in anticipation of litigation' is a classic example of work product and receives heightened protection under Fed.R.Civ.P. 26(b)(3)." Id. at 1196-97 (citing NLRB v. Sears. Roebuck Co., 421 U.S. 132, 154 (1975)).
Rule 26(b)(3) . . . states that 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. Even where this showing has been made, however, the Rule provides that the court "shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the litigation."Id. at 1197 (quoting Fed.R.Civ.P. 26(b)(3)). There are three initial prerequisites for application of the work-product doctrine: "`The material must (1) be a document or a tangible thing, (2) that was prepared in anticipation of litigation, and (3) was prepared by or for a party, or by his representative.'"In re Veeco, No. 05 MD 01695 (CM), 2007 WL 724555, at *4 (S.D.N.Y. Mar. 9, 2007) (quoting A.I.A. Holdings, S.A. v. Lehman Bros., Inc., No. 97 Civ. 4978 (LMM), 2002 WL 31556382, at *4 (S.D.N.Y. Nov. 15, 2002)).
The Second Circuit held in Adlman that "[w]here a document was created because of anticipated litigation, and would not have been prepared in substantially similar form but for the prospect of that litigation, it falls within Rule 26(b)(3)." Adlman, 134 F.3d at 1195. Therefore, this Court's analysis of whether the work-product doctrine applies begins with the question of whether the documents in question would have been prepared in substantially similar form "but for" the prospect of litigation with Hallmark.
Here, it is clear that the retention of Weil to conduct an investigation concerning whether Murley had provided Hallmark documents to RPG and Clipper was driven primarily by well-founded concerns about litigation risk. When RPG and Clipper retained Weil in January 2006, there was already a long history of disputes between Hallmark and Monitor and its sister company Clipper concerning Monitor and Clipper's alleged use of Hallmark's confidential information. Beginning in November 2005, Hallmark repeatedly accused Monitor and Clipper of misappropriating Hallmark's confidential information, and threatened legal action, including claims for breach of contract, breach of fiduciary duty, unfair competition, and misappropriation. (O'Toole Decl., Ex. A at HALL 0006654, HALL 0006706) Hallmark ultimately followed up on its threats, instituting arbitration proceedings against Monitor on January 23, 2006. The claims in the arbitration turned on Hallmark's allegations that Monitor and Clipper had misappropriated Hallmark's confidential information. (Id., Ex. B at HALL 0006475) Accordingly, when Weil was retained to investigate RPG and Clipper's concerns that a former Hallmark executive — Murley — had provided them with Hallmark documents, both these entities and Weil had every reason to be concerned that Murley's possible disclosure of confidential information to RPG and Clipper could result in litigation.
Even if there were an additional business purpose for the creation of these documents, Adlman and its progeny make clear that where a document is prepared for both a business purpose and in anticipation of litigation, the document may be protected by the work-product doctrine so long as it would not have been prepared in a substantially similar manner but for the prospect of litigation. See Adlman, 134 F.3d at 1198-99 ("Nothing in [Rule 26(b)(3)] states or suggests that documents prepared `in anticipation of litigation' with the purpose of assisting in the making of a business decision do not fall within its scope.");id. at 1204 ("Whether it can fairly be said that the Memorandum was prepared because of . . . expected litigation really turns on whether it would have been prepared irrespective of the expected litigation. . . . If the district court concludes that substantially the same Memorandum would have been prepared in any event — as part of the ordinary course of business . . . — then the court should conclude that the Memorandum was not prepared because of the expected litigation. . . ."); In re Veeco, 2007 WL 724555, at *5 ("[A] document created for two purposes — a business purpose as well as a litigation purpose — is protected under the work product doctrine as long as the document would not have been prepared in substantially similar form if not for the prospect of litigation."). Under Adlman, even if the search and collection served a dual business and litigation purpose, that is not sufficient to defeat Weil's invocation of the work-product doctrine. Based on this Court's in camera review of the documents in question, it is clear that the documents would not have been prepared in substantially the same manner but for the prospect of litigation. In sum, the circumstances here demonstrate that Clipper and RPG did not retain Weil's litigation department purely for a business purpose. Instead, RPG and Clipper retained Weil to reduce their litigation risk.
Given Lucidata's role in assisting Weil in conducting its investigation, Weil's communications with its vendor are potentially subject to work-product protection. Fed.R.Civ.P. 26(b)(3) makes clear that "[o]rdinarily a party may not discover documents and tangible things that are prepared in anticipation of litigation . . . by or for another party or its representative (including the other party's attorney, consultant, surety, indemnitor, insurer or agent)." Fed.R.Civ.P. 26(b)(3) (emphasis added).
Hallmark argues, however, that documents prepared by Lucidata, and Weil's communications with Lucidata, are not covered by the work product doctrine because "Lucidata was performing computer forensics analysis and not legal analysis." (Hallmark Br. 15) Hallmark's assertion has been rejected by the courts, which have recognized that communications between attorneys and the agents or representatives that they have retained in anticipation of litigation — such as consultants and document specialists — are covered by the work-product doctrine. See United States v. Nobles, 422 U.S. 225, 238-39 (1975) ("the [work product] doctrine is an intensely practical one, grounded in the realities of litigation in our adversary system. One of those realities is that attorneys often must rely on the assistance of investigators and other agents in the compilation of materials in preparation for trial. It is therefore necessary that the doctrine protect material prepared by agents for the attorney as well as those prepared by the attorney himself."); Rodriguez v. SLM Corp., No. 07 Civ. 1866 (WWE), 2010 U.S. Dist. LEXIS 33639, at *8 (D. Conn. Apr. 5, 2010) ("the Court finds that defendants have shown that any tests, studies or analyses conducted by Sallie Mae constitutes work product as it can `fairly be said to have been prepared or obtained because of the prospect of litigation'" (quoting Adlman, 134 F.3d at 1202)); Haugh v. Schroder Inv. Mgmt. N. Am. Inc., No. 02 Civ. 7955 (DLC), 2003 U.S. Dist. LEXIS 14586, at *15 (S.D.N.Y. Aug. 25, 2003) (communications between public relations consultant engaged by plaintiff's former counsel subject to work product protection because "they were prepared by a party, her agent, attorney or consultant in anticipation of litigation"); McDaniel v. Freightliner Corp., No. 99 Civ. 4292 (FM), 2000 WL 303293, at *7 (S.D.N.Y. Mar. 23, 2000) ("[I]t is settled law that materials produced or information possessed by an attorney's agent, `such as an investigator, may [also] be protected as work product, particularly when disclosure of such information would reveal the attorney's thinking and strategy, i.e., opinion work product.'" (quoting U.S. v. District Council, No. 90 Civ. 5722 (THK), 1992 WL 208284, at *9 (S.D.N.Y. Aug. 18, 1992))); Weinhold v. Witte Heavy Lift, Inc., No. 90 Civ. 2096, 1994 WL 132392, at *2 (S.D.N.Y. Apr. 11, 1994) ("The definition of the term `representative' in Fed.R.Civ.P. 26(b)(3) goes beyond attorney work product and includes the work prepared on an attorney's behalf.").
Accordingly, because the reports prepared by Lucidata, and the communications between Weil and Lucidata, concern the work Lucidata undertook at Weil's direction, such documents are potentially protected by the work-product doctrine. See Adlman, 134 F.3d at 1202-03 ("[A]lthough a finding under this test that a document is prepared because of the prospect of litigation warrants application of Rule 26(b)(3), this does not necessarily mean that the document will be protected against discovery. Rather, it means that a document is eligible for work-product privilege." (emphasis in original)). In sum, Weil has demonstrated that the documents at issue are potentially protected by the work-product doctrine, because they were prepared by an attorney or agent in anticipation of litigation. This does not end the inquiry, however.
B. "Substantial Need" and "Attorney's Mental Impressions"
Once it is determined that a document was created in anticipation of litigation, Rule 26(b)(3) requires the requesting party to make a showing of "substantial need." Hallmark has made no such showing here. Instead, Hallmark relies only on conclusory statements, asserting that it "has an obvious and substantial need for the withheld documents" and "the importance . . . is plain." (Hallmark Br. 9) Hallmark leaves it to this Court to make the connection between its litigation claims against Murley and its "substantial need" for the documents withheld by Weil. Incantation of the substantial need standard and assertions that the need is "obvious" are not sufficient to meet that standard, however.
If and when Hallmark is able to make a showing of "substantial need," the burden would then shift to Weil to demonstrate that the documents in question reflect an attorney's mental impressions or thought processes. Courts in this District have noted that once it is determined that a document is potentially subject to work-product protection,
[s]uch material is accorded an almost absolute protection from discovery because any slight factual content that such items may have is generally outweighed by the adversary system's interest in maintaining the privacy of an attorney's thought processes and in ensuring that each side relies on its own wit in preparing their respective cases.District Council, 1992 WL 208284, at *8. Weil has not yet demonstrated, however, that "an attorney's thought processes" (or those of its agent) are reflected in the withheld documents. For example. Weil asserts that "Lucidata . . . provided [O'Toole] with updates and reports based on the work it was performing at [O'Toole's] direction and request" (O'Toole Decl. ¶ 17), but this does not resolve whether these documents contain mental impressions of an attorney or mere factual summaries. See Women's InterArt Center, Inc. v. N.Y.C. Economic Dev., 223 F.R.D. 156, 161 (S.D.N.Y. 2004) ("Documents 41, 42, 53, and 54 contain factual information that does not include any materials that could properly be termed `attorneys' mental impressions, opinions or legal theories,' Strougo v. BEA Assocs., et al., 199 F.R.D. 515, 520 (S.D.N.Y. 2001) (quoting Horn Hardart Co. v. Pillsbury Co., 888 F.2d 8, 12 (2d Cir. 1989)), and thus do not trigger work product protection.").
Given the lengthy delay associated with resolution of the parties' disputes concerning the documents Weil has withheld, this Court will set a schedule for additional briefing concerning the "substantial need" and "attorneys' mental impressions" issues.
CONCLUSION
Weil has demonstrated that the documents it has withheld were prepared in anticipation of litigation. Accordingly, Hallmark will make a submission by November 15, 2010, demonstrating its substantial need for the withheld documents. Weil will respond to Hallmark's submission by December 3, 2010. Weil will also make anex parte submission by December 3, 2010, demonstrating, as to each document it claims is subject to work-product protection, how disclosure of that document would reveal the "mental impressions, conclusions, opinions, or legal theories of an attorney or other representative."
SO ORDERED.