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December 10, 1984

EIGENHEIM BANK, Plaintiff, against COLIN HALPERN and NPS CORP., Defendants.

The opinion of the court was delivered by: KRAM



 The above-captioned action is before this Court upon defendants' motion, pursuant to Rule 26(c) of the Federal Rules of Civil Procedure, for an order compelling plaintiff to return a document allegedly subject to the attorney-client privilege and upon plaintiff's cross-motion, pursuant to Rule 37, for an order compelling defendant Halpern to answer certain questions regarding the document. For the reasons stated below, defendants' motion is denied and plaintiff's motion is granted.


 Plaintiff is the alleged holder in due course of a promissory note. Defendant Halpern was the maker of the note, payment of which defendant NPS Corp. guaranteed. Plaintiff initiated this lawsuit after defendants apparently asserted that the note was not their obligation.

 In February, 1984, in the course of discovery in this action, defendants produced 712 pages of documents in response to plaintiff's First Set of Interrogatories. (Affidavit of Ronald S. Herzog dated September 24, 1984, P5 ("Herzog Aff.")). Thereafter, plaintiff ascertained that two substantially identical lawsuits had previously been brought against these defendants. (Herzog Aff., P6) Based upon this similarity, plaintiff requeested the documents produced by defendants in those cases, as well as copies of any depositions of the defendants. (Herzog Aff., P7) Defendants produced the transcripts of Halpern's depositions in those casees. (Id.)

 On August 15, 1984, after reviewing the depositions from those cases, plaintiff requested the production of thirty specific additional documents. (Herzog Aff., P8) Of these thirty documents, twenty-two had been identified during the deposition of Halpern in one of the earlier cases. (Id.) One of those twenty-two is the document in question here.

 The document is a draft of a proposed letter, not on letterhead, prepared by Halpern with his corporate counsel. (Affidavit of Anthony P. Coles dated September 19, 1984, P2 ("Coles Aff.")). The document contains hand-written notations of Halpern and counsel, and is a preliminary draft for a letter that was never finalized or sent. (Id.)

 Apparently, this document was disclosed in connection with a deposition that was taken of defendant Halpern in one of the previous cases (Volksbank Hamm v. Halpern and NPS Corp., 82 Civ. 1273 (S.D.N.Y.)). When the document was introduced at the deposition, defendant Halpern claimed that it had been produced inadvertently and asserted his privilege and declined to answer questions concerning the document. (Coles Aff., P3) The plaintiff in that case made no further use of the document, nor was the issue pursued at the deposition. Subsequently, the Volksbank documents were placed in defendants' attorneys' files, segregated from any other documents, subject to an agreement of confidentiallity with plaintiff in that case. (Id.)

 In response to plaintiff's request for the thirty additional documents, on Septgember 4, 1984, defendant produced the twenty-two documents that had been identified at the Volksbank deposition. (Herzog Aff., P9) These twenty-two documents consist of approximately twenty-five pages and include the document which defendants now claim is privileged. (Id.) Defendants did not indicate in any way at the time of their September 4 response that they believed any of the twenty-two documents was privileged. Nonetheless, on September 17, 1984, when plaintiff sought to use the document at a deposition of defendant Halpern, Halpern stated that he considered this document to be privileged, and refused to answer any questions concerning the document. (Herzog Aff., P11)

 Defendants now claim that this allegedly privileged document was again produced inadvertently. (Coles Aff., P5) Thus, defendants urge this Court to rule that the document is privileged and that the attorney-client privilege with respect to this document was not waived in this case. Defendants further request that plaintiff be compelled to return or destroy that document. Plaintiff urges this Court to rule that the document is not privileged or that any privilege was waived, and to compel Halpern to answer certain questions concerning the document.


 The parameters of the claimed privilege in this diversity action are defined by state law.Fed. R. Evid. 501. The attorney-client privilege in New York is governed by section 4503 of the New York Civil Practice Law and Rules ("CPLR"); however, it is deeply rooted in common law. See People v. O'Connor, 85 A.D.2d 92, 447 N.Y.S.2d 553, 556 (4th Cep't 1982).

 The existence of such a privilege is based upon a policy of encouraging openness and full disclosure between a client and his or her attorney. See Upjohn Co. v. United States, 449 U.S. 383, 389, 66 L. Ed. 2d 584, 101 S. Ct. 677 (1981); Priest v. Hennessy, 51 N.Y.2d 62, 67-68, 431 N.Y.S.2d 511, 513-514, 409 N.E.2d 983 (1980). Nonetheless, the application of the privilege serves to exclude reliable evidence and, often, to block the truth-determinning processes of the courts. Priest, 51 N.Y.2d at 68, 431 N.Y.S.2d at 514; In re Jacqueline F., 47 N.Y.2d 215, 219, 417 N.Y.S.2d 884, 886-87, 391 N.E.2d 967 (1979). Since the attorney-client privilege stands in derogation of the overriding interest in full disclosure of all competent evidence and intrudes upon the ascertainment of truth, it should be "strictly confined within the nararowest possible limits consistent with the ...

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