The opinion of the court was delivered by: BOYLE
This is a diversity action. The plaintiffs, Janet and Joseph Sackman (hereinafter called the "Sackmans"), are citizens of New York. The defendant tobacco company, The Liggett Group, Inc. (hereinafter called "Liggett") is a Delaware corporation. The Sackmans are suing Liggett for damages resulting from the cancer plaintiff Janet Sackman suffered, allegedly caused by her use of Liggett's product, Chesterfield cigarettes.
I. Contentions of The Parties and Background
The documents at issue involve the Council on Tobacco Research (hereinafter called "CTR") an entity existing pursuant to the laws of the State of New York which funded allegedly independent unbiased scientific research relating to any causal nexus between tobacco use and health. All the members of CTR are tobacco companies including the defendant, Liggett. CTR is the successor of the Tobacco Industry Research Committee ("TIRC"), formed by several tobacco companies in 1954. The purpose of its formation is embodied in a document entitled "A Frank Statement to the Public -- By the Makers of Cigarettes" ("Frank Statement"). The Frank Statement was published in several national newspapers, and in part states:
We accept an interest in people's health as a basic responsibility, paramount to every other consideration in our business. We believe the products we make are not injurious to health.... We are pledging aid and assistance to the research effort into all phases of tobacco use and health. . . . In charge of [the TIRC] will be a scientist of impeachable integrity and national repute. In addition there will be an Advisory Board of scientists disinterested in the cigarette industry. Frank Statement, Exhibit "B" to Letter, dated November 21, 1995 from plaintiff's counsel Kenneth B. McClain.
Although Liggett was not one of the founding members of TIRC, it became a member in 1964. During testimony before Congress in 1994, Dr. James F. Glenn, then Chairman of CTR, reconfirmed the mission, testifying that CTR "seek[s] scientific truth" on tobacco and related health issues. Regulation of Tobacco Products: Hearings Before the Subcommittee on Health and the Environment of the Committee on Energy and Commerce, 103rd Cong., 2d Sess. 103-153 at 341 (April 28, May 17 and 26, 1994)(testimony of James F. Glenn, Chairman, Council for Tobacco Research, USA).
CTR funded scientific research projects through research grants and awards. Letter of James Kearney, dated November 22, 1995 at 2. Liggett states that many of the research projects it supported were also provided funding by "the federal government and various national health organizations such as the National Institute of Health, the National Cancer Institute, the Environmental Protection Agency, the American Cancer Society, and the American Heart Association....." Id. Liggett asserts that all researchers were free to publish their research results, including Special Projects researchers involved here, and all such projects undertaken by CTR are reported in CTR's annual reports which are available to the public.
There are two methods of scientific research grant funding through CTR. The first is its grant-in-aid program, under which research proposals are reviewed by CTR's Scientific Advisory Board (also referred to as "SAB"), comprised of eminent, independent scientists in their respective fields. The SAB makes decisions on whether research requests should be funded by CTR. The second funding method was through CTR's Special Projects, in which the tobacco companies themselves, on the advice and recommendation of counsel, decide whether or not to approve a request for funding. Liggett claims that Special Projects funded research that a member tobacco company, or companies, believed would be beneficial in future litigation or Congressional hearings. SAB did not participate in any way in the selection process.
Although there is some overlapping, the documents fall into three main categories. The first category, comprising the overwhelming majority of the documents, are documents to or from counsel relating to specific scientific projects, either conducted or recommended to be conducted, under CTR Special Projects. The second category consists of documents of minutes and agenda of meetings of various general counsel to the tobacco companies in which CTR Special Projects, or a particular project, is discussed. The third category consists of documents relating to meetings held by tobacco company executives wherein CTR Special Projects were discussed. Two miscellaneous documents involve a description of various methods of tobacco product research and public relations, and annual budget expenditures by Liggett for research and other legal expenses, which include references to CTR Special Projects.
The Sackman's fraud argument is based on the claim that CTR was held out to the public to be an independent non-profit entity dedicated to scientific research to serve the interests of public health. Letter of Kenneth B. McClain, dated November 28, 1995 at 3. The Sackmans assert that CTR Special Projects did not fund independent research on health related smoking issues for the public good, but instead focused on research likely to produce findings -- intended for public relations purposes and in the tobacco companies' economic interest -- that would disprove or undermine any causational link between health and the use of tobacco products. The Sackmans point to the counsels' distinct role in the selection of research for Special Projects and to the absence of participation by SAB to support their claim that Special Projects lacked scientific value, and was devoid of any concern with public health issues.
Liggett implicitly acknowledges the lack of any independence in CTR's goals with respect to Special Projects by asserting that the projects were undertaken to assist in the defense of anticipated litigation against member tobacco companies. Liggett asserts that the scientists and/or medical physicians involved in Special Projects research were free to publish their results. Examples of such publishings reflect that, although a project was identified by a Special Project grant number, there was no statement that the project was undertaken for purposes of defense in litigation, nor was there any indication that the project had not been approved by the SAB. Liggett claims the attorney-client, joint defense and attorney work-product privileges asserting that CTR Special Projects was funded by the individual tobacco companies on the advice of their counsel for purposes of defending unspecific but anticipated litigation.
Previous litigation in New Jersey involved the 123 documents involved here, in addition to many others. In Haines v. Liggett Group, Inc. the federal magistrate judge appointed a special master to review over 1500 documents relating to CTR and the various tobacco companies named as defendants,
including Liggett. The special master found that the documents were protected by the attorney-client privilege. The Magistrate Judge confirmed this and further found that the documents did not fall within the crime-fraud exception. This decision was reversed by the District Court, Haines v. Liggett Group, Inc., 140 F.R.D. 681 (D.N.J. 1992)(then District Judge now Circuit Judge Sarokin), on the ground that there was ample evidence to support the plaintiffs' claim that Special Projects was part of a public relations fraud perpetrated on an unknowing public by using the credibility of CTR and its independent board of scientists to publicize the results of secret research projects undertaken, on the advice of tobacco company counsel, to undermine research results that had found a causal nexus between smoking and illness. The Third Circuit vacated the District Court's ruling, on the ground that the District Court had considered documents and information outside the record before the magistrate judge. Haines v. Liggett Group, Inc., 975 F.2d 81 (3d Cir. 1992).
A. Rule 501 -- Governing Privilege Laws
There is a threshold choice of law issue, which is essential before engaging in a discussion on the merits of the parties' assertions. Discovery of privileged material in a civil case is governed by Rule 26(b)(1) of the Federal Rules of Civil Procedure, which provides that the parties "may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action. . . ." Federal courts are further guided on the issue of discoverability of privileged material by Rule 501 of the Federal Rules of Evidence which states that in diversity cases the court should apply state law with respect to privilege issues. Rule 501 provides:
Except as otherwise required by the Constitution of the United States or provided by Act of Congress or in rules prescribed by the Supreme Court pursuant to statutory authority, the privilege of a witness, person, government, State or political subdivision thereof shall be governed by the principles of the common law as they may be interpreted by the courts of the United States in the light of reason and experience. However, in civil actions and proceedings, with respect to an element of a claim or defense as to which State law supplies the rule of decision, the privilege of a witness, person, government, State, or political subdivision thereof shall be determined in accordance with State law.
The "rationale underlying [Rule 501] is that federal law should not supersede that of the States in substantive areas such as privilege absent a compelling reason." Notes of Comm. on the Judiciary, H.R. No. 93-650.
If the privilege question relates to claims which will be decided under substantive state law, then the state's privilege law applies. Application of American Tobacco Co., 880 F.2d 1520, 1527 (2d Cir. 1989); Republic Gear v. Borg-Warner Corp., 381 F.2d 551, 555-56 n.2 (2d Cir. 1967); Riddell Sports, Inc. v. Brooks, 158 F.R.D. 555, 560 (S.D.N.Y. 1994) (in a diversity case, New York attorney-client privilege law applicable where New York law applicable to all substantive claims).
Federal jurisdiction here is based solely on diversity. The Sackmans' claims are based upon New York causes of action, which will be decided by New York law. Thus, New York attorney-client privilege law is applicable under Rule 501, Fed. R. Evid.
B. New York Choice of Law
Once the court determines that state substantive law applies, it must next look to the forum state's conflict of laws principles to determine whether any other law applies. Klaxon v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941). In Farmland Dairies v. Barber, 65 N.Y.2d 51, 489 N.Y.S.2d 713, 478 N.E.2d 1314 (N.Y. 1985), New York's highest court held that where "litigation involves multistate contacts of parties residing in different States . . . the forum State is free to resolve those conflicts and choose the applicable law based upon an evaluation of the State contacts with the parties and the transactions." Farmland Dairies, 65 N.Y.2d at 58.
The court in David Tunick, Inc. v. E.W. Kornfeld, 813 F. Supp. 988 (S.D.N.Y. 1993) summarized the state of New York law as follows:
New York utilizes an interest analysis approach to choice of law problems. Under New York conflicts principles, 'the law of the jurisdiction having the greatest interest in the litigation will be applied and . . . the facts or contacts which obtain significance in defining State interests are those which relate to the purpose of the particular law in conflict.' The Court must evaluate the nexus between each jurisdiction and the controversy in light of the policies and purposes to be vindicated by the conflicting laws. The Court will apply the laws of the jurisdiction which has the greatest interest in, and is most intimately concerned with, the outcome of a given litigation. Thus, under New York conflicts principles, controlling effect is accorded to the law of the jurisdiction 'which has the greatest concern with, or interest in, the specific issue raised in the litigation.'
New York courts (and federal courts sitting in New York) have seldom addressed the choice of law issue regarding the assertion of a privilege. In Detroit Coke Corp. v. NKK Chemical USA, Inc., 1993 U.S. Dist. LEXIS 12880, 1993 WL 367060 (W.D.N.Y. 1993), the court recognized the lack of authority on this issue, holding that "although not without some apparent and not uncommon confusion in this area of jurisprudence, New York case authorities appear predominantly to apply the so-called grouping of contacts' approach, or its proximate variation, in determining the choice of applicable privilege rules." Id. at *1. Similarly, the center of gravity or grouping of contacts test has been applied in determining what law is applicable to the assertion of the attorney-client privilege. Brandman v. Cross & Brown Co. of Florida, Inc., 479 N.Y.S.2d 435, 436, 125 Misc. 2d 185 (N.Y. Sup. 1984). That court held that New York law was applicable to the assertion of the attorney client privilege, based upon the center of gravity or grouping of contacts rules, even though "Florida law may govern other portions of the controversy." Id. In Shaklee Corp. v. Oberman, 1993 U.S. Dist. LEXIS 13029, 1993 WL 378268 (S.D.N.Y. 1993), the court, sitting in diversity, held that New York law was applicable to the issue of attorney-client privilege where the action was for attorney malpractice. The court reasoned that "New York has the predominant interest in issues involving legal malpractice allegedly committed by a New York attorney with respect to the performance of his duties in this state. Accordingly, New York law governs any questions of privilege." Id. at *1.
Based on the foregoing, it is clear that New York privilege law is applicable to Liggett's assertion of the attorney-client privilege. Although Liggett is incorporated in Delaware, the plaintiffs are New York citizens; plaintiff Janet Sackman was a resident of New York when she smoked Liggett's tobacco product, and when she was allegedly harmed by that product. Liggett sold, marketed and advertised its products in New York. The documents which Liggett claims are privileged concern Liggett's role in the CTR, an entity headquartered and existing pursuant to the laws of New York.
There is no other state which has a ...