Opinion
02 Civ. 3392 (GEL)
January 14, 2003
John Linsenmeyer (LisaAnne Rega Biccochi, on the brief), Morgan, Lewis Bockius LLP, New York, NY, for Plaintiff.
Monroe Weiss (Lawrence Lambert, on the brief), Lambert Weiss, New York, NY, for Defendants Daniel Paduano and Nancy Paduano.
Bennett R. Katz (Allison A. Snyder, on the brief), Ohrenstein Brown, LLP, New York, NY, for Defendants 19 East 72nd Street Corp. and Brown Harris Stevens Residential Management, LLC.
OPINION AND ORDER
In this action to recover damages arising from an apartment fire, plaintiff Charlotte Weber ("plaintiff" or "Weber") has moved to compel the production of certain documents that the defendants have withheld as protected by the work product doctrine or attorney-client privilege. Plaintiff seeks the production of a number of investigative reports and claim file documents compiled during the course of the insurance investigation of the fire, performed on behalf of defendants Daniel and Nancy Paduano (collectively, the "Paduano defendants"), and also documents and correspondence created in connection with the insurance policies of defendants 19 East 72nd Street Corporation and Brown Harris Stevens Residential Management, LLC (collectively, the "building defendants"). Plaintiff also seeks an order compelling various third parties to comply with subpoenas seeking the production of documents related to the insurance investigations. For the reasons discussed below, plaintiff's motion will be granted with respect to the majority of the documents.
BACKGROUND
On March 19, 2001, a fire occurred in the Paduano defendants' apartment, which was located directly below plaintiff's apartment. As a result, plaintiff's apartment and possessions were severely damaged, and she sustained losses allegedly totaling $750,000. (Compl. ¶ 27.) On May 2, 2002, plaintiff filed this action against the Paduanos, as well as 19 East 72nd Street Corporation and Brown Harris Stevens Residential Management (respectively, the apartment building's owner and managing agent). (Pl. Mem. at 1.) She alleges that all four defendants were negligent in allowing the fire to occur, and that the Paduano defendants breached the terms of their lease by refusing to indemnify her for her losses. (Compl. ¶¶ 18-56.) In discovery, plaintiff sought from the defendants all documents relating to the fire, the resulting damages, and the investigations undertaken by the insurance companies. (Biccochi Aff. ¶ 3.) The defendants have withheld many of these documents, asserting that they constitute work product created in anticipation of litigation or materials protected by attorney-client privilege. Plaintiff subsequently served third-party subpoenas on the Paduano defendants' insurer and the investigators who investigated the fire on the insurers' behalf, seeking any reports and other documents generated in the course of investigation and claims evaluation. (Paduano Defs. Mem. at 4-5.) The Paduano defendants objected to the subpoenas insofar as compliance would require the production of protected materials. (Id. at 5.) Both sets of defendants have described the documents for which they assert work product protection or attorney-client privilege in a series of privilege logs, discussed in detail below.
Immediately after the fire, the defendants' insurers began investigating the causes and extent of the fire, generating the reports and claim documents that plaintiff now seeks. The Paduanos are insured by Great Northern Insurance Company, a division of Chubb Group of Insurance Companies ("Chubb"), and their policy includes both first-party loss and third-party liability coverage. (Id. at 1-2.) The day after the fire, Chubb retained P.M.R. Consultants ("P.M.R.") to conduct an investigation into the fire. (Id. at 3.) Several months later, on August 15, Chubb retained Public Investigation Service, Inc. ("P.S.I.") to conduct additional investigations. (Id.) Chubb placed the investigative report created by P.M.R. and the two reports written by P.S.I. in the Paduanos' liability claim file, and apparently gave copies to the Paduanos. (Id. at 4.) The Paduano defendants contend that these documents were created in anticipation of litigation, and are protected as work product under Fed.R.Civ.P. 26(b)(3). These three documents make up the entirety of a privilege log produced by the Paduano defendants in response to plaintiff's request for documents pertaining to the fire (the "Paduano Liability File Privilege Log 1"), attached as Exhibit 1 to the Affidavit of LisaAnne Rega Biccochi.
The Paduano defendants also assert work product protection as to several other documents in the liability claim file that Chubb maintains for them, which are listed on another privilege log, attached as Exhibit K to the Affidavit of Lawrence Lambert (the "Paduano Liability File Privilege Log 2"). These documents, unlike the three investigative reports, are not in the Paduano defendants' possession, but have remained in Chubb's liability file. Plaintiff seeks production of these documents through a third-party subpoena served on Chubb. The documents fall into two categories: (1) eighteen liability claim files representing claims against the Paduanos made by other residents of the apartment building as a result of the fire; and (2) the notes of Chubb's liability claims adjuster, Keegan Lee, who was in charge of the Paduanos' file, and related correspondence about the Paduanos' coverage. (Lambert Aff. ¶ 21.) The Paduano defendants assert work product protection as to all of these documents. (Id. Ex. K.)
Weber also seeks several documents relating to the fire that are maintained in Chubb's first-party claim file on the Paduanos. In connection with the Paduanos' first-party insurance coverage, Chubb retained the law firm Cozen and O'Connor on March 20, 2001, to "pursue [its] subrogation interests" and conduct an investigation. (Paduano Defs. Mem. at 3; Lambert Aff. Ex. D.) Cozen and O'Connor then hired Affiliated Engineering Laboratories, Inc. to investigate the fire. (Paduano Defs. Mem. at 3.) These investigations resulted in correspondence between Cozen and O'Connor, Chubb, Affiliated, and P.M.R., dated between March and June of 2001, all of which was placed into Chubb's first-party file on the Paduanos. (Biccochi Aff. Ex. 2.) These documents are not in the Paduanos' possession, but Chubb has withheld them at the Paduano defendants' request. The Paduanos have asserted work product protection, and where applicable, attorney-client privilege, as to these documents in a third privilege log (the "Paduano First-Party Privilege Log"), attached as Exhibit 2 to the Biccochi Affidavit. Plaintiff challenges the assertion of both privileges.
The building defendants have also withheld a number of documents as work product, but produced a privilege log only after being ordered to do so by the Court on October 11, 2002. The building defendants have a third-party liability policy through OneBeacon Insurance (administered by Crawford Co. Inc. and Vanderbilt Properties), and a first-party policy through Travelers Insurance Company, and their privilege log includes documents created pursuant to both policies. (Katz Affirm. ¶ 5.) The documents listed in the privilege log (the "Building Defendants' Privilege Log"), attached as Exhibit 3 to the Biccochi Affidavit, are mostly notes and correspondence between the two insurers regarding the interpretation of the policies and the evaluation of the damage to the Paduanos' apartment, created between March 20, 2001, and September 2002 four months after the litigation began. (Biccochi Aff. Ex. 3.) The building defendants have subsequently produced to plaintiff some of the documents listed on the log, but plaintiff challenges the assertion of work product protection as to the remaining documents.
Plaintiff does not seek the documents numbered 6, 9, 10, and 11, which the building defendants have withheld not as work product, but as protected by attorney-client privilege. Plaintiff does not challenge the assertion of attorney-client privilege as to these documents. (Biccochi Aff. Ex. 3; Pl. Mem. at 5.)
Plaintiff has served third-party subpoenas on Affiliated and P.M.R., in addition to Chubb, seeking all documents relating to the fire (Pl. Mem. at 2), presumably attempting to obtain the documents that defendants had refused to produce. The Paduano defendants objected to all three subpoenas, but, as noted above, produced privilege logs only for the documents in Chubb's possession. Plaintiff then filed the instant motion to compel defendants to produce virtually all of the documents listed in their privilege logs, and to obtain a ruling that the third-party subpoenas do not require the production of privileged documents. (Pl. Mem. at 1.)
DISCUSSION
I. Applicable Law
The Federal Rules of Civil Procedure provide for broad discovery. As an initial matter, "[p]arties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party . . . ." Fed.R.Civ.P. 26(b)(1). At the same time, however, the Rules endeavor to "preserve a zone of privacy" in which lawyers, insurers, and other representatives of litigants may develop legal theories and strategies uninhibited by the possibility that an adversary may become privy to the resulting documents, by protecting certain work product prepared for the litigation. United States v. Adlman, 134 F.3d 1194, 1196 (2d Cir. 1998). Fed.R.Civ.P. 26(b)(3) provides that
a party may obtain discovery of documents and tangible things otherwise discoverable . . . and prepared in anticipation of litigation or for trial by or for that other party's representative . . . only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of the party's case and that the party is unable without undue hardship to obtain the substantial equivalent of the materials by other means.
Thus, the work product doctrine does not constitute a true privilege, as it affords only qualified protection to the materials within its scope, allowing discovery of the documents if the party seeking production can establish substantial need and undue hardship. Mount Vernon Fire Ins. Co. v. Try 3 Bldg. Servs., No. 96 Civ. 5590 (MJL), 1998 WL 729735, at *4 (S.D.N.Y. Oct. 16, 1998); 8 Charles Alan Wright et al., Federal Practice and Procedure § 2022. at 324 (2d ed. 1994).
While state law generally provides the rules of decision for questions of privilege in diversity actions, "federal law governs the applicability of the work product doctrine in all actions in federal court." Mount Vernon, 1998 WL 729735, at *4; see also, e.g., United Coal Companies v. Powell Constr., 839 F.2d 958, 966 (3d Cir. 1998). In order to be protected as work product, the materials must be (1) documents or tangible things, (2) that were prepared in anticipation of litigation, and (3) were prepared by or for a party, or by or for his representative. Id. Documents prepared in anticipation of litigation are those that, "in light of the nature of the document and the factual situation in the particular case . . . can fairly be said to have been prepared or obtained because of the prospect of litigation." Adlman, 134 F.3d at 1202 (emphasis in original). Thus, documents that were prepared in the ordinary course of business or that "would have been created in essentially similar form irrespective of the litigation" are not protected by the work product doctrine. Id.
The determination as to whether materials are protected under this definition is necessarily fact-specific. This is even more true where, as here, the documents in question were created by or for an insurance company in the course of its investigation, since "the very business of the producing party is to evaluate claims that may ultimately ripen into litigation." Arkwright Mutual Ins. Co. v. National Union Fire Ins. Co., No. 90 Civ. 7811 (AGS), 1994 WL 698298, at *2 (S.D.N.Y. Dec. 13, 1994). This is equally the case whether the documents were created during an investigation pursuant to a third-party policy, the very nature of which is anticipating litigation, or pursuant to a first-party policy, since a first-party insurer must anticipate that the denial of a claim may lead to a lawsuit. See, e.g., 6 Moore's Federal Practice § 26.70[c], at 26-214 (3d ed. 1998) (stating that case-by-case approach to liability insurance documents is appropriate). Thus, courts presented with work product disputes in the insurance context must be careful not to hold that documents are protected from discovery simply because of a party's "ritualistic incantation" that all documents created by insurers are made in preparation for litigation, and mindful of the fact that insurer-authored documents are more likely than attorney-authored documents to have been prepared in the ordinary course of business, rather than for litigation purposes. American Ins. Co. v. Elgot Sales Corp., No. 97 Civ. 1327 (RLC) (NRM), 1998 WL 647206 at *1 (S.D.N.Y. Sept. 21, 1998) (discussing need for limiting principle to avoid allowing "virtually the entirety of an insurance company's files" to be exempt from discovery). Overprotecting insurance documents would hinder the broad discovery contemplated by the Rules, while doing little to foster uninhibited deliberation concerning insurance claims, since insurers have a duty — as well as business incentive — to carefully investigate every potential claim, whether or not it will likely erupt into litigation. See, e.g., Fine v. Bellefonte Underwriters Ins. Co., 91 F.R.D. 420, 422 (S.D.N.Y. 1981).
Thus, in the insurance context, it is particularly important that the party opposing production of the documents, on whom the burden of proof as to privilege rests, demonstrate by specific and competent evidence that the documents were created in anticipation of litigation. Harrigan v. Electronic Pre-Press Systems, Inc., No. 90 Civ. 4081 (MEL), 1992 WL 121438, at *3 (S.D.N.Y. May 15, 1992). A party withholding insurance documents may not rest on conclusory allegations of privilege, but must establish, by objective evidence, that the author of the document anticipated litigation at the time that the document was created, and would not have created the document in essentially the same way had the prospect of litigation not existed. Adlman, 134 F.3d at 1202.
II. The Paduano Defendants' Privilege Logs
The documents that the Paduano defendants seek to withhold as work product are predominantly analyses of the circumstances surrounding the fire and explanations of the Paduanos' coverage under their policies. The Paduano defendants do not assert, in their logs, briefs, or affidavits, that any of the documents at issue contain the mental impressions of their attorneys or Chubb's attorneys (with the exception of those documents for which they assert the attorney-client privilege), or Chubb's internal strategy as to how to handle any potential litigation arising from the fire. Thus, these documents are outside of the "core" of materials that are most strongly protected by the work product doctrine.In re Leslie Fay Companies, Inc. Securities Litigation, 161 F.R.D. 274, 279 (S.D.N.Y. 1995) (internal citations omitted) (stating that the work product doctrine most strongly protects "the mental processes of the attorney, providing a privileged area within which he can analyze and prepare his client's case"). Where, as here, the documents at issue consist of factual materials and analyses of facts, the Rules' policy of liberal discovery weighs more heavily in favor of allowing discovery, since production of the documents is less likely to inhibit a party's preparation for litigation. See Upjohn Co. v. United States, 449 U.S. 383, 398-401 (1981).
A. Documents Listed in the Paduano Liability File Privilege Logs 1 and 2
The Paduano defendants have provided plaintiff with two separate privilege logs listing different documents maintained in Chubb's liability file on the Paduanos, asserting that each document is work product. The listed documents include three investigative reports, produced between April and August 2001; eighteen liability insurance files of third parties; and notes made by the claims adjuster in charge of the Paduanos' file. Because the Paduano defendants have provided the Court with little or no concrete evidence as to Chubb's intent or deliberative processes, the Court finds that the defendants have failed to satisfy their burden with respect to all of the contested documents.
As a threshold matter, the Paduano defendants argue that all documents created in furtherance of a liability insurance policy are, as a matter of law, created in anticipation of litigation. (Paduano Defs. Mem. at 3, 11.) The authority cited for this proposition, however, derives from state law, which the Paduanos apparently believe furnishes the rule of decision for work product disputes. (Id. at 6.) Under New York law, there is authority that all documents generated by a liability insurance carrier are considered work product, because "liability insurance coverage entails the defense and settlement of claims made against the insured by third parties and is in essence 'litigation insurance.'"Gentile v. Wakeel, 514 N.Y.S.2d 878, 878 (Sup.Ct. Oneida Co. 1987) (citing Kandel v. Tocher, 256 N.Y.S.2d 898,900 (1st Dep't 1965) (Breitel, J.))
As noted above, however, the scope of work product protection is determined by federal, not state, law. Because automatically granting protection to all documents prepared by liability insurers would contravene the Second Circuit's holding in Adlman that courts should avoid protecting documents created in the ordinary course of business — a directive that requires careful delineation of the scope of protection on a case-by-case basis — the courts in this district that have considered work product protection in the context of liability insurance documents have declined to follow any per se rule. See, e.g.,Insurance Co. of North America v. M/V Savannah, No. 94 Civ. 8846 (CSH), 1995 WL 608295, at *1 (S.D.N.Y. Oct. 17, 1995); American Ins. Co., 1998 WL 647206, at *1. Liability insurance carriers, like first-party insurers, prepare documents in the ordinary course of their business — a business that includes more than simply preparing for litigation. Liability insurers promise to pay third-party claims against their insured if the insured is liable, and presumably do not litigate to avoid paying a third-party claim when their own investigations have led them to conclude that the insured is indeed liable. Thus, the assumption that a liability insurer anticipates that a lawsuit will result from every accident in which its insureds are involved fails to take into account the possibility that the insurer will decide to avoid litigation by paying the third-party claim. Consequently, the liability insurer's documents, like those authored by carriers of other types of insurance, may be protected from discovery only if they were prepared "in furtherance of a sufficiently identifiable resolve to litigate." Fine, 91 F.R.D. at 423. That resolve may be particularly difficult to identify in the liability insurance context, but the difficulty of determining the insurer's intentions does not relieve the Paduano defendants of their burden of demonstrating, by specific evidence, that each document was prepared in anticipation of litigation.
The Paduano defendants have not proffered sufficient evidence to demonstrate that the documents in the privilege logs are work product. The point at which an insurance company begins to prepare for litigation can often be determined by using the insurer's documented course of action to reconstruct its deliberative process. See, e.g., Fine, 91 F.R.D. at 422. While the actions that an insurance company takes immediately after being notified of a potential claim are almost always part of its ordinary business of claim investigation, "[a]t a certain point [its] activity shifts from the ordinary course of business to anticipation of litigation." Id. Here, the Paduano defendants have proffered evidence that Chubb began to investigate the causes of the fire one day after it occurred, hiring P.M.R. that day, and retaining P.S.I. in August. (Paduano Defs. Mem. at 3.) These actions are consistent with an insurer's normal business practice of claims investigation. There is little other objective evidence of Chubb's deliberative process as to the Paduanos' liability insurance.
With respect to the three investigative reports listed on the Paduano Liability File Privilege Log 1, investigations into the causes and effects of an accident, undertaken soon after the event itself, are generally considered part of an insurance company's ordinary course of business. See, e.g., Insurance Co. of North America, 1995 WL 608295, at *1. Absent any evidence indicating that one or more of the reports was produced after Chubb began to prepare for litigation rather than in its ordinary business of investigating potential insurance claims, none of the documents can be considered work product.
Even under the New York rule cited above, it is not clear that work product protection would extend to the documents in question. The very cases applying a per se rule to liability insurers' investigations note that "[t]he rule in cases involving insurance coverage with respect to losses such as a fire is very different," and that when a fire insurer "retains an expert to investigate a fire loss, that expert's report will be discoverable unless the carrier can make a showing that at the time the report was prepared, the insurer had rejected the insured's claim or had reasonable grounds for disclaiming it." Gentile, 514 N.Y.S.2d at 878 (citations omitted). Chubb was a first-party as well as liability insurer of the Paduanos, and undertook an immediate investigation into the causes of the fire. That Chubb chose to place the investigative report in the liability claim file is not sufficient evidence, if it is evidence at all, to refute the inference that it investigated the fire in the ordinary course of business. See Spectrum Systems Int'l Corp. v. Chemical Bank, 78 N.Y.2d 371, 381 (1991) ("A party's own labels are obviously not determinative of work product.").
The documents listed in the Paduano Liability File Privilege Log 2 are also not work product. The claims adjuster's notes and correspondence, dated between March 2001 and the present, relate to "liability coverage under the policy," "comments regarding claims made by third parties," and "fire investigation." (Lambert Aff. Ex. K.) These labels do not on their face indicate that the notes were prepared in anticipation of litigation rather than as part of the normal course of investigating the claim and determining whether the Paduanos would be covered under their policy.See Bogan v. Northwestern Mutual Life Co., 163 F.R.D. 460, 466 (S.D.N.Y. 1995) (finding that notations on privilege log contradicted assertion that documents were work product). Even those notes authored after the filing of this lawsuit are not necessarily work product, since the institution of a lawsuit does not relieve the party opposing production of its burden of demonstrating that the documents would not have been prepared but for the litigation. In re Kidder Peabody Securities Litigation, 168 F.R.D. 459, 467 n. 6 (S.D.N.Y. 1996). Without any evidence to assist the Court in drawing the line between business and litigation, the Court cannot conclude that any of these documents are work product.
Finally, the eighteen liability claim files kept by Chubb in its liability file on the Paduanos must also be produced. Rather than detailing the substance of each allegedly protected document within the claim files, the Paduano defendants have simply asserted that each file, in its entirety, is protected. (Lambert Aff. Ex. K.) Blanket assertions of work product protection as to entire files, rather than specific documents, are never sufficient to prevent discovery, since the party opposing discovery must establish that each document is work product.Condon v. Stephan Machinery Corp., No. 90 Civ. 0283 (PKL), 1990 WL 311599, at *2 (S.D.N.Y. June 18, 1990). In addition, the Paduano defendants have not produced any evidence as to when the documents were created, their contents, and their part in Chubb's deliberative process. As the Court cannot determine whether these files were prepared in anticipation of litigation, the Paduano defendants have failed to meet their burden of establishing work product protection. Chubb must respond to Weber's third-party subpoena by producing all of the documents listed on the Paduano Liability File Privilege Log 2.
B. Documents Listed in the Paduano First-Party Privilege Log
1. Documents Withheld as Work Product
The Paduano defendants have also objected to the production of a number of documents contained in Chubb's first-party policy file on them, all of which constitute correspondence between Chubb, Cozen and O'Connor, Affiliated, and P.M.R. The Paduano defendants contend that all of this material is privileged work product, as Chubb began to prepare for the possibility of a lawsuit in connection with the Paduanos' first-party coverage as soon as it learned of the fire's occurrence. (Paduano Defs. Mem. at 3, 11.) They have not proffered any evidence to support this claim with respect to the documents in the first-party file, however, and thus have not satisfied their burden of establishing work product protection.
One day after the fire occurred, Chubb hired the law firm of Cozen and O'Connor to "pursue [its] subrogation interests," (id. at 3; Lambert Aff. Ex. D), and the Paduano defendants argue that this establishes that Chubb immediately anticipated litigation. (Paduano Defs. Mem. at 3.) An insurer's retaining a law firm and having it conduct its own investigation of a claim is a "significant factor in determining when the insurer anticipates litigation," but is not determinative. Mount Vernon, 1998 WL 729735, at *7; Westhemeco Ltd. v. New Hampshire Ins. Co., 82 F.R.D. 702, 708 (S.D.N.Y. 1979). The fact that Cozen and O'Connor was hired to investigate the potential for subrogation does suggest that, soon after the fire occurred, Chubb was at least considering the possibility that it might be able to sue a third party to recover the losses suffered by the Paduanos. On the other hand, an insurer does not have an "identifiable resolve to litigate," Fine, 91 F.R.D. at 423, until it has made a decision regarding subrogation. Until that point, an investigation into the potential for subrogation is simply part of an insurer's ordinary practice of investigating all issues arising from an accident involving its insureds, and documents created as part of this process would have been created in the same form regardless of the insurer's eventual decision as to litigation. American Ins. Co., 1998 WL 647206, at *2 (holding that documents authored after law firm was retained to investigate subrogation, but before subrogation decision was made, were not created in anticipation of litigation). Here, Cozen and O'Connor was retained immediately after the fire, to conduct an "initial investigation regarding subrogation" (Lambert Aff. Ex. D), indicating that Chubb had not yet decided to attempt to subrogate the Paduanos' losses. Since insurance companies often hire attorneys as part of the normal claim investigation process, before litigation is anticipated and before a subrogation decision has been made, see, e.g., Fine, 91 F.R.D. at 422-23, the retention of Cozen and O'Connor does not by itself establish that documents subsequently created by Chubb, and documents created for Cozen and O'Connor by Affiliated, were work product.
It appears that Cozen and O'Connor was retained only in connection with the Paduanos' first-party policy, and not in connection with the liability policy, as the Paduano Liability Privilege Logs do not contain any documents generated by Cozen and O'Connor. (Biccochi Aff. Ex. 1; Lambert Aff. Ex. K.)
The Paduano defendants have not presented any evidence as to when, or if, Chubb made a decision on subrogation, and so it is impossible to determine whether any of these documents were prepared in anticipation of litigation with third parties. Most of the documents pertain to "investigation of [the] fire," suggesting that they were created as part of Chubb's customary investigation, rather than specifically in preparation for any lawsuit. The one letter from Cozen and O'Connor to Chubb whose subject is described as "subrogation of loss" is dated May 1, 2001, just over a month after the fire. Without more information about the contents of the letter, or affidavits or other evidence regarding when a decision as to subrogation was made, the Court cannot conclude that the Cozen and O'Connor letter, or any of the other documents, was created in furtherance of an identifiable resolve to litigate. American Ins. Co., 1998 WL 647206, at *2; see also Adlman, 134 F.3d at 1202.
There are no other objective benchmarks in the investigative process that indicate the point at which Chubb turned its attention to potential litigation. Since Chubb did not deny the Paduanos' claim (Pl. Mem. at 7), the presumption that the denial of the insureds' claim marks the beginning of litigation preparation does not apply here. See, e.g., Mount Vernon, 1998 WL 729735, at *6 (stating that some courts presume that denial of a claim marks the point at which litigation is anticipated. and listing cases). In addition, all of the documents listed on the privilege log were created well before this litigation began, between March and June 2001. Documents created immediately after the occurrence of an accident that may give rise to an insurance claim are almost always created as part of the insurance company's normal practice of investigating claims. Fine, 91 F.R.D. at 422. Here, all of the documents were authored within three months of the fire, suggesting that they were not prepared in anticipation of litigation.
Since the Paduano defendants have not proffered any evidence establishing that the documents generated by P.M.R., Affiliated, Cozen and O'Connor, and Chubb were created in anticipation of litigation, the documents listed on the Paduano First-Party Privilege Log are not protected as work product.
2. Documents Withheld on Grounds of Attorney-Client Privilege
The Paduano First-Party Privilege Log lists three pieces of correspondence to or from Cozen and O'Connor, for which the Paduano defendants assert attorney-client privilege in addition to work product privilege. (Biccochi Aff. Ex. 2.) Plaintiff seeks these documents to the extent that they are related to the investigative reports. (Pl. Mem. at 3 n. 1.) Two of the letters are from Cozen and O'Connor to Chubb, and one is from Affiliated to Cozen and O'Connor. (Biccochi Aff. Ex. 2.) The Paduano defendants have satisfied their burden of establishing that the two letters between Cozen and O'Connor and Chubb are privileged, but have not established that the Affiliated letter is a confidential communication.
In federal diversity actions such as this one, issues of attorney-client privilege are governed by New York law. Bank Brussels Lambert v. Credit Lyonnais (Suisse). S.A., 210 F.R.D. 506, 508 (S.D.N.Y. 2002). Under New York law, the attorney-client privilege protects "confidential communication[s] made between the attorney or his employee and the client in the course of professional employment," N.Y. C.P.L.R. § 4503(a) (McKinney 2002), and the party asserting the privilege bears the burden of establishing the elements of the privilege. Arkwright Mutual Ins. Co. v. National Union Fire Ins., No. 90 Civ. 7811 (AGS), 1994 WL 510043, at *4 (S.D.N.Y. Sept. 16, 1994). When the communication at issue originated with the attorney rather than the client, the party opposing production must establish that the communication was made "for the purpose of facilitating the rendition of legal advice or services," and that it is "predominantly of a legal character," consisting of more than facts known to third parties. Spectrum Systems Int'l Corp. v. Chemical Bank, 78 N.Y.2d 371, 377-78 (1991) (internal citations omitted).
Document III is a letter from Cozen and O'Connor to Chubb, dated May 1, 2001, concerning "subrogation of loss." (Biccochi Aff. Ex. 2.) Since Cozen and O'Connor was hired specifically to examine the potential for subrogation claims arising out of the fire (Lambert Aff. Ex. D), it is possible to infer from the privilege log's description that Cozen and O'Connor sent this letter for the purpose of giving legal advice or discussing its legal opinions. Since the document is predominantly legal in character, the fact that it may contain nonprivileged information does not destroy its immunity, Spectrum Systems, 78 N.Y.2d at 378, and so the description on the privilege log is a sufficient basis on which to conclude that this letter is protected by the attorney-client privilege.
Document V is a letter sent by Cozen and O'Connor to Chubb on May 7, 2001, which the Paduano defendants state pertains to the investigation of the fire. (Biccochi Aff. Ex. 2.) The law firm conducted its own investigation into the causes of the fire as part of its examination of the potential for Chubb to subrogate the Paduanos' losses. The fire investigation was therefore a component of Cozen and O'Connor's larger task of analyzing the legal issues arising in connection with the Paduanos' coverage, and the substance of the firm's advice to Chubb regarding its subrogation rights was, to some extent, dependent on the results of that investigation. Thus, the stated subject matter of Cozen and O'Connor's retainer, and the relationship between the investigation and the legal issues implicated by the subrogation question, make it possible to infer that any discussion of the fire investigation would be adjunct to, and intertwined with, the firm's legal advice to Chubb. See id. at 380 (recognizing that attorney's discussion of an investigative report could "relate and integrate the facts with the law firm's assessment of the client's legal position"). Therefore, the privilege log's description is a sufficient basis on which to conclude that Document V is predominantly legal in character, and is protected by the attorney-client privilege.
Finally, Document IV is a letter from Affiliated to Cozen and O'Connor dated May 2, 2001, also concerning the investigation of the fire. (Biccochi Aff. Ex. 2.) Since Affiliated is not a law firm, the letter cannot have been sent primarily for the purpose of giving legal advice. In addition, insofar as the letter pertains to Affiliated's investigation and its results, it is not protected by the attorney-client privilege, since "information received by the attorney from other persons and sources while acting on behalf of a client does not come within the attorney-client privilege." Kenford Co. v. County of Erie, 390 N.Y.S.2d 715, 718 (4th Dep't 1977) (Cardamone, J.); see also Spectrum Systems, 78 N.Y.2d at 379. There is no indication that the report contains any statements made by the client to the investigator acting as an assistant to the lawyer. Cf. United States v. Kovel, 296 F.2d 918, 921-23 (1961) (holding that statements of client to accountant assisting lawyer in providing legal services were privileged). Given the lack of evidence that the letter references any of Cozen and O'Connor's legal opinions, or contains any confidential information, the Court concludes that it is not privileged.
C. Chubb Documents Not Listed on the Paduano Defendants' Privilege Logs
Plaintiff asserts that Chubb is in possession of "at least one" other investigative report that the Paduano defendants have not listed on any of their privilege logs, but have not produced. (Pl. Mem. at 13, 16.) Thus, plaintiff argues, the Paduanos have waived any privilege as to these documents. The Paduanos, for their part, state that they have produced all documents they considered non-privileged, and listed on their privilege logs all those documents for which they assert any privilege. (Paduano Defs. Mem. at 12.)
Plaintiff bases her assertion on evidence that an Investigator Russo examined the scene of the fire and interviewed Mrs. Paduano (id. at 16; Biccochi Aff. Ex. 4 at 4), noting that no documents authored by Investigator Russo have been logged or produced, and speculating that other, similar, documents might exist. She produces no evidence suggesting that Russo's investigation led to the creation of any documents, however, and thus has not established the existence of any document that has not been either logged or produced. The Court has no basis to find that the Paduano defendants have not complied with their discovery responsibilities in good faith. If at a later stage in the litigation, the Paduano defendants attempt to rely on documentary evidence that they have improperly failed to produce or include in their privilege logs, plaintiff may bring the matter to the Court's attention, and the Paduanos will not be permitted to make use of any documents that they have wrongfully withheld. Fed.R.Civ.P. 37(c). Plaintiff has not, however, established any basis to believe that any Chubb document exists that has not been either produced or listed in a privilege log, and accordingly the motion to compel production of such hypothetical documents is denied.
D. Documents in the Possession of P.M.R. and Affiliated
In addition to Chubb, plaintiff has served third-party subpoenas on Affiliated and P.M.R., seeking "all documents relating to the fire," including photographs and evidence taken from the scene of the fire, and subsequently prepared reports and notes. (Pl. Mem. at 2; Lambert Aff. Exs. H, I.) The Paduano defendants have not produced privilege logs for the documents in the possession of P.M.R. and Affiliated, but have objected to the subpoenas, arguing that the production of the documents sought would lead to the disclosure of protected work product. (Paduano Defs. Mem. at 4-5.) Plaintiff asserts that the Paduano defendants have waived work product protection as to these documents (Pl. Mem. at 13), as Fed.R.Civ.P. 26(b)(5) requires that a party must describe the documents for which privilege is claimed on a privilege log.
The parties have provided the Court with copies of the subpoenas served on Chubb and P.M.R., but not on Affiliated. (Lambert Aff. Exs. H, I.) Given that the Chubb and P.M.R. subpoenas are virtually identical, however, the Court will assume that the Affiliated subpoena follows the same pattern.
Under certain circumstances, the failure to provide a privilege log can result in a waiver of privilege as to the documents that have not been produced. See, e.g., Strougo v. BEA Assocs., 199 F.R.D. 515, 521 (S.D.N.Y. 2001). While a party is obligated to provide a privilege log for those documents within its control, however, it does not have to log those documents that it does not have the power to produce itself, since it cannot be compelled to produce them. Arkwright, 1994 WL 510043, at *15 (stating that plaintiff had not waived privilege by failing to provide privilege log for third-party documents not in its control); see also Fed.R.Civ.P. 30(a). Here, there is no indication that documents possessed by P.M.R. and Affiliated, investigators hired by Chubb and Cozen and O'Connor, have ever been in the control of the Paduano defendants. P.M.R. and Affiliated have no direct relationship with the Paduanos, and unlike Chubb, have no involvement in the Paduanos' defense of this action. Thus, while the Paduano defendants were able to produce privilege logs for the documents in Chubb's possession, they were not responsible for logging the documents in the possession of P.M.R. and Affiliated, and have not waived work product protection as to these documents.
The lack of privilege logs does prevent the Court from determining whether its rulings on the Chubb subpoena and the documents withheld by the Paduanos apply to the documents sought in these subpoenas, however. To the extent that the documents sought in these two subpoenas are the same documents sought from the Paduanos and Chubb, then the above discussion applies, and the documents are not work product. To the extent that any of the P.M.R. and Affiliated documents are similar to the documents in the possession of Chubb and the Paduano defendants, the parties should work out a reasonable solution in light of the Court's rulings on the logged documents.
III. Documents Withheld by the Building Defendants
A. Documents Withheld as Work Product
Plaintiff also seeks a number of documents described on the building defendants' privilege log as work product. (Biccochi Aff. Ex. 3.) These documents, like those withheld by the Paduano defendants, are apparently not "mental impressions" at the core of the work product doctrine, Leslie Fay, 161 F.R.D. at 279, but are mostly reports on the damages from the fire and clarifications of the building defendants' policy coverage. Like the Paduano defendants, the building defendants have not proffered any evidence to support their contention that these documents were prepared in anticipation of litigation. Indeed, the privilege log itself suggests that many of the documents were prepared as part of the customary insurance investigation into potential claims against the building defendants, since most of the documents were created immediately following the fire, and are labeled "evaluation of damages" or "evaluation of policy coverage." (Biccochi Aff. Ex. 3.) In addition, the building defendants state that the withheld documents concern "the valuation of claims and the scope of policy coverage therefor, the strategy for handling claims and the cause and origin of the fire." (Katz Affirm. ¶ 8) There is also no evidence as to the insurers' deliberative processes, whether or not any of the building defendants' claims were denied, when and if counsel was retained in anticipation of litigation, or any other evidence of benchmarks in the progression from claim to litigation that could enable the Court to infer that subsequent documents were prepared in anticipation of litigation. Thus, none of the documents listed on the Building Defendants' Privilege Log can be considered work product.
The building defendants do state that some of their "computerized claims progress notes," listed as the fifth entry on their privilege log, contain the claims examiner's "mental impressions concerning the valuation of claims." (Katz Affirm. ¶ 13.) The mental impressions at the core of the work product doctrine are those involving the progress of, and preparation for, the litigation, not the mental impressions of an examiner conducting the insurer's ordinary business of valuing claims. Thus, the building defendants have not asserted that any of the documents constitute the type of material that is most strongly protected by the work product doctrine. See Upjohn Co., 449 U.S. at 398-401.
The one entry whose description could suggest that the listed documents were created in anticipation of litigation is labeled "computerized claims progress notes." Some of these notes apparently pertain to the "nature of claims likely to result in litigation." (Biccochi Aff. Ex. 3.) These notes are not separately described in the entry, however, but are listed with other notes pertaining to different subjects, so there is no way of knowing when these notes were written, or by whom. It is entirely possible that an insurer would evaluate the potential for lawsuits to arise from an accident as part of its customary evaluation of a claim, before it specifically anticipates litigation, or has formed a resolve to litigate. Given the lack of evidence as to when or why these notes were created, the building defendants have not established that there notes can be considered work product. See Condon, 1990 WL 311599, at *2 (indicating that party could not successfully assert privilege without listing details as to each withheld document so that the court could determine when and why they were created).
The building defendants, like the Paduano defendants, appear to believe that state law controls the scope of work product protection, and that therefore all materials prepared in the process of evaluating claims pursuant to liability insurance are protected. (Katz Affirm. ¶ 9.) Since, as noted above, the Second Circuit does not distinguish between first- and third-party insurance for purposes of work product protection, the building defendants would have to establish that the documents would not have been created in essentially the same manner for ordinary business purposes in order to avoid producing them. Adlman, 134 F.3d at 1202.
This conclusion applies even to those documents that were created after the litigation began. The fifth entry on the building defendants' privilege log lists "computerized claims progress notes," which are dated between March 2001 and September 2002, and apparently have a variety of authors and institutional origins. (Biccochi Aff. Ex. 3.) As discussed above, even documents created after the institution of litigation must be proven to have been created because of the lawsuit. Kidder Peabody, 168 F.R.D. at 467 n. 6. Since the building defendants have not proffered any evidence as to these materials, they cannot be protected as work product.
B. Documents Withheld on Grounds of Attorney-Client Privilege
The building defendants also assert the attorney-client privilege as to the "computerized claims progress notes" listed as the fifth entry on their privilege log, because some of the notes were authored by their attorney, Bennett Katz, and pertain to "attorney analysis of liability and damage issues." (Biccochi Aff. Ex. 3.) The entry on the privilege log does not distinguish between the attorney-authored notes and those withheld on grounds of work product protection alone, however, so it is impossible to determine, without more specific descriptions of each document, which privilege pertains to each document. Nevertheless, as plaintiff does not seek any of the documents for which the building defendants have asserted attorney-client privilege (Pl. Mem. at 5, 17), the building defendants should not have to produce Mr. Katz's notes. The remainder of the claims progress notes in the entry are not protected as work product, and so the building defendants must turn over all of the notes except for those written by Mr. Katz, as to which they assert attorney-client privilege.
IV. In Camera Review of the Allegedly Privileged Documents
When faced with claims of privilege, courts often undertake in camera review in order to supplement the parties' privilege logs and determine the content of the documents. However, in camera review of the documents, while potentially helpful to the determination of privilege, is "not . . . to be routinely undertaken . . . as a substitute for a party's submission of an adequate record for its privilege claims," especially where, as here, the Court would have to examine a large quantity of documents. Bowne, 150 F.R.D. at 475 (internal citations omitted). The Paduano defendants and the building defendants simply have not produced sufficient evidence from which the Court can conclude that the bulk of the documents may be privileged. Given the scanty factual showing in the defendants' privilege logs and motion papers, in camera review of the documents, even had the defendants provided them to the Court, is not warranted.
V. Plaintiff's Substantial Need for the Documents
Even if the defendants had satisfied their burden of establishing that the withheld documents are work product, Weber would be entitled to almost all of the documents because she has substantial need for them, and would suffer undue hardship if denied access to the materials. Fed.R.Civ.P. 26(b)(3) (providing that work product protection can be overcome by showing of substantial need and undue hardship). The bulk of the documents listed on the Paduano Liability File Privilege Log 1, the Paduano First-Party Privilege Log, and the Building Defendants' Privilege Log, are investigative reports and other documents relating to the causes of the fire and the extent of the damages it caused. These documents concern facts that are at the heart of plaintiff's case, since she alleges that the fire was the result of the defendants' collective negligence.
Plaintiff has substantial need for these documents because they contain information that is essential to her theory of why the fire occurred and why the defendants are responsible. "A substantial need for work product materials exists where the information sought . . . is 'crucial' to the determination of whether the defendant could be held liable for the acts alleged, or carries great probative value on contested issues," National Congress for Puerto Rican Rights v. City of New York, 194 F.R.D. 105, 110 (S.D.N.Y. 2000) (internal citations omitted), as is clearly the case here.
The Paduano defendants argue, however, that the information in these documents is already available to plaintiff, since her experts could simply review the reports created by the Fire Department and Crawford Investigation Services, all of which are in plaintiff's possession. (Paduano Defs. Mem. at 14.) Contrary to the Paduanos' assertions, the reports sought by plaintiff are apparently more thorough and elaborate than the Crawford and Fire Department reports, and contain information that may be essential to establishing whether or not the building defendants failed to properly maintain the apartment building. The Crawford report contains summaries of an on-site investigation of the room in which the fire started and interviews with witnesses (Biccochi Aff. Ex. 4), and the Fire Department reports are similar, consisting of a very brief summary of an inspection of the premises, and short interviews with witnesses (Lambert Aff. Ex. B). In contrast, the Affiliated report apparently describes a structural investigation of the building, and an electrical engineering analysis (id. Ex. E; Pl. Mem. at 22), and the P.M.R. reports appear similar (Lambert Aff. Ex. C), suggesting that these documents in particular might be necessary to plaintiff's theory of the building defendants' liability. While it is unclear whether every document described on defendants' logs as pertaining to the investigation of the fire and its damages contains information is not otherwise available to plaintiff, the fact that several of the insurers' reports are more elaborate than those already available to plaintiff suggests that the documents in the defendants' and insurers' possession are not simply duplicative of the Crawford and Fire Department reports. See National Congress for Puerto Rican Rights, 194 F.R.D. at 110 (suggesting that if all documents sought were duplicative of material publicly available, plaintiff would not have brought the motion to compel). Thus, production of these documents would not simply provide Weber with information she already has, but will furnish her with information necessary to the preparation of her case.
Plaintiff has also demonstrated that she will suffer undue hardship in obtaining the equivalent of the materials she seeks, because her experts cannot now produce their own evaluations of the fire and its damages. Since the fire occurred over a year ago and the damage has long since been repaired, plaintiff has no means of obtaining information as to the causes of the fire, other than through reviewing the reports created by the defendants' insurers in the immediate aftermath of the fire. See id. (finding undue hardship where replication of information sought would be difficult and costly). While the Paduano defendants assert that plaintiff should have hired her own investigator to evaluate the cause of the fire in the immediate aftermath of the fire (Paduano Defs. Mem. at 13), it is unreasonable to require a victim of a fire to begin to prepare for litigation within days or weeks of the fire, when she might not yet suspect negligence, or anticipate that the issues raised by the fire might not be resolved amicably. Thus, as plaintiff has established both substantial need and undue hardship, she would be entitled to production of the documents relating to the investigation of the fire, even if the defendants had established that those documents were work product.
CONCLUSION
The Paduano defendants are directed to produce the documents listed on the Paduano Liability File Privilege Log 1, within 30 days of the date of this Opinion and Order. Chubb is directed to comply with plaintiff's subpoena, and to produce the documents listed on the Paduano Liability File Privilege Log 2 and the Paduano First-Party Privilege Log, with the exception of Documents III and V, within 30 days. Affiliated and P.M.R. are directed to comply with plaintiff's subpoenas seeking documents relating to the fire, also within 30 days, to the extent that any of the responsive documents have been listed on the Paduano defendants' privilege logs, and ruled upon in this Opinion and Order. The building defendants are directed to produce the documents listed on their privilege log, with the exception of those documents in entry number 5 for which attorney-client privilege is asserted, and the documents numbered 6, 9, 10, and 11, within 30 days.
SO ORDERED: