Opinion
Index No. 652334/2017
07-29-2022
Michael Brawer, Plaintiff, v. Hebert Lepor, MedReviews, LLC, Jeffrey Arnold, Steven Black, Defendant.
Unpublished Opinion
ROBERT R. REED, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 011) 352, 353, 354, 355, 356, 357, 358, 359, 361, 367, 368, 369, 370, 371, 372, 373, 374, 375, 381 were read on this motion to/for DISCOVERY.
This is essentially an action between founders of MedReviews LLC ("medreviews"), a company that publishes medical journals, podcasts, webcasts, and seminars. Plaintiff Michael Brawer ("Brawer"), a minority member of medreviews, commenced this action against medreview's President, Vice President, and majority member for allegedly mishandling company funds.
Brawer moves to compel disclosure of several documents withheld by defendants. Defendants assert that the documents are properly withheld as they constitute attorney work product, documents prepared in anticipation of litigation, and documents covered by the attorney client privilege.
By interim order, this court directed defendants provide the withheld documents for an in-camera review. Upon review of the withheld documents, plaintiff's motion to compel is granted, only to the extent that defendants must disclose DLA retention and engagement letters and DLA invoices. The motion is otherwise denied.
CPLR 3101 requires full disclosure of all matter material and necessary in the prosecution or defense of an action. The phrase "material and necessary" is "to be interpreted liberally to require disclosure, upon request, of any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity. The test is one of usefulness and reason" (Allen v Crowell-Collier Publishing Co., 21 N.Y.2d 403[1968]).
New York courts generally favor open and liberal discovery. However, the CPLR establishes three categories of protected materials: privileged matter, attorney work product and trial preparation materials (Spectrum Sys. Int'l Corp. v Chem. Bank, 78 N.Y.2d 371, 377 [1991]).
The attorney-client privilege shields from disclosure confidential communications between an attorney and client made for the purpose of obtaining legal advice (CPLR 4503[a][1]). It is narrowly construed so to not be in tension with the court's policy favoring liberal discovery (Spectrum 78 N.Y.2d at 377). The party asserting the privilege bears the burden of establishing entitlement to the privilege, as well as the burden of showing confidentiality has not been waived (id.).
Communications do not automatically obtain privilege status merely because they were created or communicated by an attorney (Spectrum v Chem. Bank, 157 A.D.2d 444, 447, citing, Rossi v Blue Cross, 73 N.Y.2d 588, 594 [1989][where corporations are concerned, caution [must] be exercised to prevent the mere participation of an attorney in an internal investigation from being used to seal off disclosure]). Only if the communications are transmitted in the course of professional employment, that convey a lawyer's assessment of the client's legal position, does the privilege apply (Spectrum 78 N.Y.2d at 378).
A review of the in-camera submission makes clear that Jeff Legault of DLA Piper LLP ("Legault") was hired as an attorney to represent medreviews in connection with claims asserted by Brawer. Legault was not simply hired to conduct a neutral third-party investigation of Brawer's claims. Legault was hired to provide legal advice to medreviews and to assist with the defense against Brawer's claims. Legault's communications with medreview's corporate officers are not subject to disclosure (id.).
Also exempted from disclosure are communications with J. Allen Kosowsky, the accounting expert hired by DLA to assist in providing counsel (Hudson Ins. v Oppenheim, 72 A.D.3d 489, 490 [2010]). The attorney-client privilege extends to communications of one serving as an agent of an attorney. The work of experts retained as consultants to assist in analyzing or preparing a case, qualifies for complete exemption from disclosure under attorney work-product doctrine and statutes limiting discovery of materials prepared in anticipation of litigation (id.).
Plaintiff argues that the fiduciary exception and the crime-fraud exception justify disclosure of the otherwise privileged communications between DLA and defendants. "The crime/fraud exception to the attorney-client privilege is aimed at serious misconduct, and it can be invoked only if the party seeking to invoke it demonstrates that there is probable cause to believe that a fraud or crime has been committed and that the communications in question were in furtherance of the fraud or crime" (HSH Nordbank AG New York Branch v Swerdlow, 259 FRD 64 [SDNY 2009]). Based upon the in-camera inspection of the subject documents, this court is not persuaded that defendants' communications were undertaken in the furtherance of a crime or criminal enterprise.
With respect to the fiduciary exception to the attorney-client privilege, this court declines to apply the exception in this instance. "English courts first developed the fiduciary exception as a principle of trust law in the 19th century. The rule was that when a trustee obtained legal advice to guide the administration of the trust, and not for the trustee's own defense in litigation, the beneficiaries were entitled to the production of documents related to that advice. The courts reasoned that the normal attorney-client privilege did not apply in such situation because the legal advice was sought for the beneficiaries' benefit and was obtained at the beneficiaries' expense by using trust funds to pay the attorney's fees" (Stock v Schnader Harrison Segal & Lewis LLP, 142 A.D.3d 210, 217 [1st Dept 2016], citing, U.S. v Jicarilla Apache Nation, 564 U.S. 162 [2011]). Whether the fiduciary exception applies depends on whom the communications ultimately served (Stock v Schnader, 142 A.D.3d at 220).
The fiduciary exception does not apply to a fiduciary who seeks legal advice to protect its interests in litigation as opposed to legal advice obtained in furtherance of the performance of duties to the beneficiary (id.). Neither does fiduciary exception apply to circumstances where the fiduciary is in an adversarial relationship with the beneficiaries and the communications sought concern communications that speak directly to the issues at the heart of litigation (Beck v Manufacturers Hanover Trust Co. (218 A.D.2d 1 [1st Dept 1995]).
In Beck v Manufacturers Hanover Trust Co., the Appellate Division assessed whether the fiduciary exception to the attorney-client privilege warranted disclosure of information held by a trustee as against the trust beneficiaries. The court in declining to recognize the exception wrote:
"[T]o the extent that plaintiffs seek access to communications and documents concededly falling within the protective ambit of the attorney-client privilege, their disclosure request is without merit. While plaintiffs as trust beneficiaries seek access to the materials under the exception to the privilege articulated in Hoopes v Carota
[i.e. the fiduciary exception], that exception is not applicable here. As the record shows, plaintiffs have been in an adversary relation with the Trustee since the late 1970's and the disclosure plaintiffs apparently seek concerns communications not generally relevant to the administration of the trust, but specifically relevant to the handling of the very issues the plaintiffs had been threatening to litigate. It is precisely where, as here, the trustee consults counsel in order to defend itself against the conflicting claims of beneficiaries that the exception delineated in Hoopes is inapplicable"(id. at 18).
142 A.D.2d 906, affd. 74 N.Y.2d 716 [1989].
Here, Brawer's initial demand for accounting was made through counsel to medreviews under threat of legal action. Medreviews' acts in retaining counsel and investigating member expenses were undertaken in response to Brawer's threat. Defendants' correspondence with DLA Piper were undertaken in defense of medreviews' operations and in defense of claims asserted against medreviews' officers individually.
Both Brawer and Lepor were using medreviews finances to pay for personal expenses. Brawer cannot competently argue that his demands were made only as a beneficiary in furtherance of medreviews' fiscal interests. Brawer was not a beneficiary of the investigation as it was not undertaken in furtherance of any fiduciary duties owed to him. Rather, the hiring of DLA, the retention of a forensic accountant and the investigation of medreview expenses were all undertaken in defense of claims made by Brawer. The fiduciary exception to the attorney-client privilege does not compel disclosure of the DLA correspondence with medreviews in this circumstance.
The communications between defendants are similarly not discoverable. Generally, communications between attorney and client made in the presence of or subsequently disclosed to third parties are not protected by the attorney-client privilege. Under the common interest doctrine, however, attorney-client communications disclosed to a third party remain privileged if shared with parties of common legal interest in pending or anticipated litigation (Ambac v Countrywide, 27 N.Y.3d 616, 620 [2016]). In cases such as this, when one attorney represents multiple clients concerning a matter of common interest, any confidential communications exchanged among them are privileged against the outside world (id., citing, Wallace v Wallace 216 NY 28, 35 [1915]). This court's review of the withheld communications found written communications between defendants that were privileged by virtue of the parties' common legal interests in the defense of this action.
It is well established that documents drafted by an attorney during litigation are exempted from disclosure as attorney work product (Venture v Preferred Mut. Ins. Co., 180 A.D.3d 426 [1st Dept 2020]). Draft word documents generated by counsel in response to demands, fall within this category. However, retention and engagement letters and invoices are discoverable (In re Nassau Cnty. Grand Jury Subpoena Duces Tecum 4 N.Y.3d 665, 679 [2005][communications regarding the identity of a client and information about fees paid by the client are not generally protected under the attorney-client privilege, nor are communications regarding the payment of legal fees by a third person]; Matter of Priest v Hennessy, 51 N.Y.2d 62, 69 [1980][fee arrangements are not confidential communications and are not privileged]). DLA Piper invoices and engagement letters were improperly withheld by defendants.
Accordingly, it is
ORDERED that plaintiff's motion to compel is granted in part; and it is further
ORDERED that, within ten (10) days, defendants shall exchange the following batestamp documents : 6144431_00008600 001-007, 6144431_00061658 001-005, 6144431_00250865 001-005, and the seven-page DLA Engagement and Conflict Waiver Letter dated March 7, 2017, bearing bates stamp 6144431_00008592 001-007 ; and it is further
With redacting of account numbers, transit numbers and swift codes.
The court notes that there were two different documents submitted in-camera bearing bates stamp 6144431_00008592. The first is an undated seven-page word document drafted to Michael J. King at Greenberg Traurig. The second document is a seven-page DLA Piper engagement letter. It is this court's order that the DLA engagement letter be disclosed.
ORDERED that all remaining grounds of plaintiff's motion to compel are denied.