Opinion
No. 4697–10.
12-27-2016
NYAHSA SERVICES, INC.SELF INSURANCE TRUST, Plaintiff, v. PEOPLE CARE INCORPORATED, Defendant. People Care Incorporated, Third–Party Plaintiff, Cool Insuring Agency, Inc., Cool Risk Management, Inc., LeadingAge New York Services, Inc. f/k/a Nyahsa Services, Inc. and LeadingAge New York f/k/a New York Association of Homes and Services for the Aging, Inc. Third–Party Defendants.
(Stephen C. Cunningham, Robert J. Grande and John J. Iacobucci, Jr., of counsel), Keidel, Weldon & Cunningham, LLP, White Plains, Attorneys for Cool Insuring Agency, Inc. and Cool Risk Management, Inc. (Stuart F. Klein, of counsel), Bond, Schoeneck & King, PLLC, Albany, Attorneys for Plaintiff. (Linda J. Clark and David M. Cost, of counsel), Barclay Damon, LLP, Albany, Attorneys for People Care Inc.
(Stephen C. Cunningham, Robert J. Grande and John J. Iacobucci, Jr., of counsel), Keidel, Weldon & Cunningham, LLP, White Plains, Attorneys for Cool Insuring Agency, Inc. and Cool Risk Management, Inc.
(Stuart F. Klein, of counsel), Bond, Schoeneck & King, PLLC, Albany, Attorneys for Plaintiff.
(Linda J. Clark and David M. Cost, of counsel), Barclay Damon, LLP, Albany, Attorneys for People Care Inc.
RICHARD M. PLATKIN, J.
Third-party defendants Cool Insuring Agency, Inc. and Cool Risk Management, Inc. (collectively "Cool") move pursuant to CPLR 3124 to compel defendant/third-party plaintiff People Care, Inc. ("People Care") to produce: (a) a report prepared by Towers Perrin, an independent insurance-claims consultant; and (b) certain emails and others documents relating to the preparation of the Towers Perrin report. Plaintiff NYAHSA Services, Inc. Self–Insurance Trust ("Trust") moves separately for the same relief. People Care opposes the motions.
BACKGROUND
Plaintiff is a group self-insured trust ("GSIT") formed in 1995. Members of the Trust were employers within the home health-care industry that conducted business in New York State and were required to provide workers' compensation insurance to their employees. People Care became a member of the Trust effective June 15, 2000, and it remained a member until June 15, 2008. After terminating its membership, People Care refused to pay assessments issued by the Trust arising from open claims on People Care employees, and the Trust commenced this collection action on or about July 15, 2010.
Unlike most other GSITs, members of the Trust are financially responsible only for the claims of their own employees.
On September 17, 2010, People Care filed an answer to the complaint that alleged nine counterclaims. Following unsuccessful efforts to resolve the case through mediation, People Care commenced a third-party action against Cool, which served as group administrator to the Trust. People Care's counterclaims and third-party claims are premised, at least in part, on allegations that Cool and the Trust failed to properly manage, analyze and administer the workers' compensation claims of People Care employees.
Also named as third-party defendants are LeadingAge New York Services, Inc. and LeadingAge New York. These entities have not appeared in connection with the instant motions.
On or about February 6, 2015, Cool served People Care with a Notice for Discovery and Inspection, requesting production of the report prepared by Towers Perrin ("Towers Perrin Report" or "Report"), as well as documents and written communications relating thereto. People Care refused to comply, asserting various privileges. The dispute was a subject of a court conference held on March 28, 2016, and Cool thereafter served People Care with a Second Notice for Discovery and Inspection for the same records. People Care again objected, claiming that: (a) the Report was protected from disclosure because it was prepared in anticipation of litigation and/or constituted attorney work product; and (b) the withheld documents pertaining to the preparation of the Report were protected by attorney-client privilege, the attorney work-product doctrine or were prepared in anticipation of litigation. The instant motion practice ensued.
DISCUSSION
Article 31 of the Civil Practice Law & Rules ("CPLR") mandates the "full disclosure of all matter material and necessary in the prosecution or defense of an action" (CPLR 3101[a] ). The party claiming an immunity or privilege from disclosure bears the initial burden of demonstrating that the requested materials are protected (Madison Mut. Ins. Co. v. Expert Chimney Servs., Inc., 103 AD3d 995, 996 [3d Dept 2013] ).
A. Factual Background to the Privilege Claims
In July 2008, People Care received an invoice from Cool seeking the payment of more than $800,000 in additional contributions allegedly owed to the Trust. People Care did not timely pay the invoice. Bruce Jacobson, the chief executive officer of People Care, claims to have received a voice mail from Cool in November 2008, threatening to "involve the lawyers" if the invoice remained unpaid. In a November 5, 2008 letter to Cool, Jacobson took issue with Cool's "unreasonably confrontational" approach with respect to the unpaid invoice, explaining that People Care required supporting documents "sufficient to establish that [it had] incurred a liability that [it was] legally or contractually obligated to pay". In particular, Jacobson reiterated a request for eight types of documents said to bear on the propriety and reasonableness of the invoice.
Cool disputes this characterization of the voice mail.
At this point, Jacobson claims to have realized that litigation regarding the invoice was a real possibility. He avers that People Care retained Joel Hodes, Esq. of the law firm of Whiteman, Osterman & Hanna ("WOH") for legal advice. In April 2009, Hodes allegedly recommended that People Care retain an outside consultant to review the propriety of the assessment. Hodes further recommended that WOH retain the consultant directly, without the participation of People Care, to ensure the consultant's review would be privileged if the matter proceeded to litigation. According to Jacobson, Towers Perrin was not retained as part of any normal business decision, but rather to assess potential legal liability with respect to the claimed adjustment should the matter proceed to litigation.
Meanwhile, on April 16, 2009, Jerry Lewkowitz, the president of People Care, wrote to Cool with respect to the invoice. While conceding that Cool had supplied much of the requested supporting documentation, Lewkowitz "expressed considerable skepticism as to the accuracy and appropriateness of [the requested] contribution adjustments." Lewkowtiz also expressed his view that "the Trust and [People Care] would [not be able to] come to terms on whether any additional contributions [were] due the Trust unless the level of discussion could be elevated by the introduction of technical expertise" that People Care did not maintain in-house. "In the hopes of facilitating an intelligent conversation with [Cool's] claims department", People Care advised Cool that it had accepted its counsel's recommendation that a consultant be retained to assist in a comprehensive claims review. This letter was focused solely on resolving the parties' impasse over the unpaid invoice, and there was nothing in the letter that referred directly to legal issues or the prospect of litigation.
On May 1, 2009, Hodes emailed John Snow, a Cool vice president, to advise that Towers Perrin, an independent claims consultant, had been engaged to advise WOH on all aspects of the contributions invoiced to People Care. The email stated that Towers Perrin would conduct a comprehensive review of the Trust's reserving practices and Cool's administration of the workers' compensation claims of People Care employees. The email further advised that Deborah Turner, a Towers Perrin consultant, would need to travel to Cool's offices for approximately one week to review pertinent documents in the possession of Cool and to interview Cool personnel.
Hodes then proceeded to negotiate and execute a consulting contract between WOH and Towers Perrin. Among other things, the consulting contract imposed a confidentiality obligation on the contracting parties. All of the communications with Towers Perrin went through the law firm and, for the most part, were not copied to People Care employees. Ultimately a final report was issued by Towers Perrin to WOH on or about June 11, 2009, which then was sent to People Care. Thereafter, Hodes provided People Care with certain legal advice regarding Cool and the Trust's demand for payment.
Neither Cool nor plaintiff challenge People Care's invocation of privilege with respect to these attorney-client communications.
In reply, Snow submits an affidavit stating that Cool understood from People Care that the claims review process undertaken by Towers Perrin simply was a means by which People Care could verify the accuracy of the claimed adjustments invoiced to People Care in furtherance of renewed business negotiations between the companies. Snow also claims that Turner, the Towers Perrin consultant, specifically represented that she would discuss her findings with Cool at the completion of the review. Matthew Webber, a Cool vice president, echoes Snow's averments and further maintains that Turner verbally did share certain findings with him.
B. Analysis
The documents withheld by People Care fall into four categories: (1) the Towers Perrin Report; (2) communications between WOH and Towers Perrin ("Attorney–Consultant Communications"); (3) communications between WOH and People Care ("Attorney–Client Communications"); and (4) communications among WOH, Towers Perrin and People Care ("Group Communications"). The Court will consider each of these categories in turn.
1. Towers Perrin Report
a. Attorney–Client Privilege
People Care argues that the Towers Perrin Report is insulated from disclosure by the attorney-client privilege. "The attorney-client privilege shields from disclosure any confidential communications between an attorney and his or her client made for the purpose of obtaining or facilitating legal advice in the course of a professional relationship" (Ambac Assur. Corp. v. Countrywide Home Loans, Inc., 27 NY3d 616, 623 [2016] ; see CPLR 4503[a] [1] ). "The party asserting the privilege bears the burden of establishing ... that the communication at issue was between an attorney and a client for the purpose of facilitating the rendition of legal advice or services, in the course of a professional relationship, that the communication is predominantly of a legal character, that the communication was confidential and that the privilege was not waived" (Ambac, 27 NY3d at 624 [internal quotation omitted] ).
People Care's claim that the Report is attorney-client privileged comes for the first time in opposition to the instant motions. Its privilege log asserts only that the Report is attorney work product and/or material prepared in anticipation of litigation.
The Towers Perrin Report is a communication between People Care's attorney and a non-client, third-party. Nonetheless, People Care argues that the attorney-client privilege shields the Report from disclosure because it is "expert analysis commissioned in the course of an attorney-client relationship for the purpose of rendering legal advice" (Memorandum in Opposition, at 6).
Based upon an in camera inspection, the Court finds that the Towers Perrin Report is not itself a communication of a legal character. The text of the Report makes clear that its purpose was two-fold: (1) to provide an independent review of the Trust's case-reserving policies and practices; and (2) to examine the manner in which Cool administered the workers' compensation claims of People Care employees. The Report does not include any legal advice, legal analysis or discussion of legal issues. Nor does the Report disclose any confidences of People Care. Rather, the facts underlying the Report are based almost exclusively upon information that Towers Perrin obtained from Cool, including: the independent consultant's interviews with Cool employees; review of Trust documents in Cool's possession; and review of the claim files of injured People Care employees.
Moreover, this is not a case where the participation of the outside insurance consultant was needed to facilitate effective communication between the attorney and the client. The purpose of the attorney-client privilege is to "foster[ ] the open dialogue between lawyer and client that is deemed essential to effective representation" (Spectrum Sys. Intl. Corp. v. Chemical Bank, 78 N.Y.2d 371, 377 [1991] ). For this reason, it is well settled that the privilege extends to communications between an attorney and an outside consultant where the consultant's participation was necessary to facilitate or clarify communications between the attorney and the client (see United States v. Kovel, 296 F.2d 918, 922 [2d Cir1961] ["presence of the accountant is necessary, or at least highly useful, for the effective consultation between the client and the lawyer" where relevant "accounting concepts" were essentially "a foreign language"]; see also People v. Osorio, 75 N.Y.2d 80, 94 [1989] ).
A communication from a third party does not become privileged, however, merely because it was made for the attorney "to gain information and to better advise his client" (United States v. Ackert, 169 F3d 136, 139 [2d Cir1999] [rejecting claim of privilege with respect to communications between a tax attorney and a non-client investment banker regarding the tax implications of proposed transaction under legal review] ). "[I]f the advice sought is the [outside consultant's] rather than the lawyer's, no privilege exists" (Kovel, 296 F.2d at 922 ). This is true even where the communications from the third-party consultant "significantly assisted the attorney in giving his client legal advice" and were "important to the attorney's ability to represent the client" (Ackert, 169 F3d at 139 ; see also Spectrum, 78 N.Y.2d at 379 ["[A]n investigative report does not become privileged merely because it was sent to an attorney"]; People v. Edney, 39 N.Y.2d 620, 625–626 [1976] [attorney-client privilege does not extend to communications between criminal defendant and psychiatric consultant retained by his defense counsel]; Doe v. Poe, 244 A.D.2d 450 [2d Dept 1997] ).
Further militating against application of the attorney-client privilege here is People Care's failure to establish that the Report was a confidential communication made for the purpose of facilitating the rendition of legal services. While People Care and its counsel may have desired to imbue the Report with confidentiality and the protection of the attorney-client privilege, the Court is mindful of People Care's contemporaneous representations that induced Cool to open its offices, files and personnel to Towers Perrin. As stated by Lewkowitz in his letter of April 16, 2009, People Care caused Towers Perrins to be retained as part of its effort to "facilitat [e] an intelligent conversation with [Cool's] claims department" and allow executives from People Care and Cool to "come to terms on whether any additional contributions are due the Trust".
Thus, when confronted with an invoice that it believed to be excessive and unreasonable, People Care represented to Cool that it was bringing in an independent consultant for a typical business purpose: to facilitate the parties' efforts to negotiate a satisfactory business resolution of a billing dispute. And having represented that the outside consultant's Report would serve as a basis for renewed business negotiations with Cool's claims department—a process that plainly contemplated some discussion of the Report's findings—People Care cannot credibly maintain that the substance of the Report was intended to remain confidential and privileged. Indeed, the Towers Perrin consultant not only committed to provide her findings to Cool but did, in fact, orally share portions of her analysis with Cool.
Given the foregoing circumstances and the fact that the communication at issue was between counsel and an outside consultant commissioned to provide an independent analysis of non-legal matters, the Court further finds that any possible claim of attorney-client privilege with respect to the Report was waived. In this connection, the Court notes that People Care has not argued that Towers Perrin acted as its agent in this matter (see Upjohn Co. v. United States, 449 U.S. 383, 390 [1981] ), and, in any event, such an argument is foreclosed by the Towers Perrin retainer agreement, which establishes that "People Care is seeking ... an independent opinion to assist them in clarifying the appropriate premium assessment amount owed" and expressly disavows "any agency, employment, master-servant or any other relationship" between Towers Perrin and People Care.
As the Court of Appeals has recognized, "[o]bvious tension exists between the policy favoring full disclosure and the policy permitting parties to withhold relevant evidence. Consequently, the burden of establishing any right to protection is on the party asserting it; the protection claimed must be narrowly construed; and its application must be consistent with the purposes underlying the immunity" (Spectrum, 78 N.Y.2d at 37 [citations omitted] ). Here, People Care has failed to establish that the Report is protected by the attorney-client privilege or that application of the attorney-client privilege under these facts and circumstances would serve any of the purposes animating the privilege.
b.Attorney Work Product
CPLR 3101(c) provides that the work product of an attorney shall not be discoverable. This doctrine "applies only to documents prepared by counsel acting as such, and to materials uniquely the product of a lawyer's learning and professional skills, such as those reflecting an attorney's legal research, analysis, conclusions, legal theory or strategy" (Brooklyn Union Gas Co. v. American Home Assur. Co., 23 AD3d 190, 190–191 [1st Dept 2005] ). Thus, the "privilege should be narrowly applied to materials prepared by an attorney, acting as an attorney, which contain his [or her] analysis and trial strategy" (Kinge v. State, 302 A.D.2d 667, 670 [3d Dept 2003] ).
The Report was prepared by Towers Perrin, an outside technical consultant, not by People Care's counsel. Further, the Report does not incorporate any information of a legal nature obtained from counsel or include any discussion of legal issues. And the facts underlying the consultant's analysis were drawn from Cool's files and personnel. As there is nothing in the Report that would reveal an attorney's legal research, analysis, conclusions, legal theories or strategy, People Care has failed to demonstrate that the Report constitutes the work product of an attorney.
c. Materials Prepared in Anticipation of Litigation
Finally, People Care argues that the Report was prepared in anticipation of litigation and, for that reason, is protected from disclosure. CPLR 3101(d)(2) provides a qualified privilege for otherwise discoverable material prepared in anticipation of litigation. "To be immune from discovery, [the party resisting discovery] must demonstrate that the material sought was prepared exclusively for litigation. Multipurpose reports are not free from disclosure" (Carden v. Allstate Ins. Co., 105 A.D.2d 1048, 1049 [3d Dept 1984] ). Disclosure of material prepared in anticipation of litigation may be obtained only upon a showing that the requesting party has a substantial need for the materials in the preparation of its case and is unable, without undue hardship, to obtain the substantial equivalent of the materials by other means (CPLR 3101[d][2] ).
People Care has failed to meet its "burden of showing that the [Report was] prepared solely and exclusively for litigation purposes" (Madison Mut. Ins. Co. v. Expert Chimney Servs., Inc., 103 AD3d 995, 996 [3d Dept 2013] ). Indeed, People Care's own contemporaneous written admissions establish that one of the purposes of the Report—if not its principal object—was to facilitate business negotiations between People Care and Cool in an effort to reach agreement on a disputed invoice. Accordingly, the Report, which itself is of a non-legal character, cannot be said to have been prepared solely for litigation (see Plimpton v. Massachusetts Mut. Life Ins. Co., 50 AD3d 532, 533 [1st Dept 2008] ), and it therefore falls outside of the qualified protection accorded by CPLR 3101(d)(2).
d. Conclusion
Based on the foregoing, People Care has failed to establish that the Report is protected from disclosure under the attorney-client privilege, as attorney work product, or as material prepared exclusively for litigation.
2. Attorney–Consultant Communications
People Care argues that the Attorney–Consultant Communications are privileged from disclosure. In camera inspection of these communications (P34–42, P102–107, P124–125, P131–133, P130, P134–44, P147–152, P162–P163, P199–209, annexed to Affirmation of David M. Cost as Exhibits F–I, K–L) reveals that the communications involve: (a) the transmittal of factual data to the consultant regarding People Care's workers' compensation claims; (b) discussion of the methodology by which the independent claims evaluation would be conducted; (c) the fee to be charged by Towers Perrin for its work; (d) the Towers Perrin retainer agreement; and (e) a discussion of various Cool personnel.
For substantially the same reasons as stated above, the Court finds that People Care has failed to demonstrate that the Attorney–Consultant Communications are privileged from disclosure. The communications are of a non-legal character and were made between an attorney and a third-party consultant under circumstances where the participation of the consultant was not necessary to foster communications between the attorney and the client. Nor can the communications be considered attorney work product, since the emails from the consultant were not prepared by counsel, and counsel's emails do not include or reflect his legal research, analysis, conclusions, legal theories or strategy. Finally, the Attorney–Consultant Communications were not prepared exclusively for litigation.
3. Attorney–Client Communications
People Care asserts privilege with respect to three email exchanges between People Care and its counsel. Based upon in camera inspection of the materials, the Court finds that P5–9 (Cost Aff., Ex. E) is protected by the attorney-client privilege. However, the remaining two documents have not been shown to be privileged. P109–114 (Cost Aff., Ex. H) merely is a transmittal of non-privileged Attorney–Consultant Communications to the client. And P117–118 (Cost Aff., Ex. J) is an email by which People Care's counsel forwarded the proposed Towers Perrin retainer agreement to his client and requested authority to execute it. There simply is nothing of a legal character in these exchanges.
This document also includes an email from the consultant to counsel that is not protected by the attorney-client privilege, but the same email is included within the Attorney–Consultant Communications, which are subject to disclosure.
4.Group Communications
The final category of withheld documents are communications among counsel, the client and the outside consultant. In camera review of P101 (Cost Aff., Ex. G) reveals that the communication is directed at the retention of the outside consultant and the fee to be charged for the work. Thus, in addition to the waiver of privilege attendant to copying third parties on the communication, there has been no showing that the communication is of a legal character or includes attorney work product. Similarly, the other withheld Group document, P127–129 (Cost Aff., Ex. K) concerns payments to Towers Perrin. Accordingly, People Care has not established that any of the Group Communications are privileged.
CONCLUSION
The Court has considered People Care's remaining arguments, but finds them to be lacking in merit. With respect to the confidentiality provisions of Towers Perrin retainer agreement, the Court notes that nothing therein precludes People Care from producing the document in response to legal process.
ORDERED that the motions of Cool and the Trust to compel are granted in part and denied in part, in accordance with the foregoing; and it is further
ORDERED that People Care shall, within twenty (20) days from service of this Decision & Order upon it, produce the documents at issue on Cool's motion, with the exception of P5–9.
This constitutes the Decision & Order of the Court. The original of this Decision & Order is being transmitted to counsel for Cool. All other papers are being transmitted to the Albany County Clerk for filing, except the Unredacted Affidavit of David M. Cost, Esq., which is being returned to Barclay Damon, LLP. The signing of this Decision and Order shall not constitute entry or filing under CPLR Rule 2220. Counsel is not relieved from the applicable provisions of that Rule respecting filing, entry and Notice of Entry.
| Papers | Considered: |
|---|---|
| Notice of Motion, | dated July 21, 2016; |
| Good Faith Affirmation of Robert J. Grande, Esq., | dated July 21, 2016; |
| Affirmation of Robert J. Grande, Esq., in Support of Motion, | dated July 21, 2016, with attached Exhibits A–G; |
| Memorandum of Law in Support, | dated July 21, 2016; |
| Unredacted Affirmation of David M. Cost, Esq., | dated September 23, 2016, with attached Exhibits A–O (redacted version being sent for filing with the County Clerk); |
| Affidavit of Bruce J. Jacobson in Opposition, | sworn to September 21, 2016, with Exhibit A; |
| Memorandum of Law in Opposition, | dated September 263, 2016; |
| Reply Affirmation of Robert J. Grande, Esq., | dated October 13, 2016, with attached Exhibits A–E; |
| Reply Memorandum of Law, | dated October 13, 2016; |
| Notice of Motion, dated August 26, 2016; Affirmation of Stuart F. Klein, Esq., in Support, | dated August 26, 2016, with attached Exhibits A–B. |