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April 7, 2003


The opinion of the court was delivered by: Gerard E. Lynch, United States District Judge


In this prolonged litigation, plaintiff Tyco International, Inc. ("Tyco"), the corporate parent of plaintiff Grinnell Corporation, seeks indemnification pursuant to the asset purchase agreement governing its acquisition of Grinnell from Grinnell's former parent, defendant ITT Corporation ("ITT"), for expenses arising from numerous asbestos personal-injury lawsuits filed against Grinnell. In the present discovery dispute Tyco seeks to compel ITT and its insurer, Pacific Employers Insurance Company ("PEIC") to produce 27 documents withheld on grounds of the attorney-client and/or attorney work product privileges. All of the documents were created by James Moher, a California attorney who was "retained" by PEIC (P. Mem. at 3), before this lawsuit began, to investigate the underlying personal-injury claims that had been filed against Grinnell (the "asbestos lawsuits"). ITT claims both attorney-client and work product privileges for eight letters and a faxed draft of a letter sent by Moher to ITT and/or its insurer (the "correspondence"); PEIC asserts the privilege for four of these. The remaining 18 documents (the "internal documents") are memoranda Moher produced for his own use, for which ITT claims the work-product privilege.

Tyco argues that the attorney-client privilege does not apply to the correspondence because Moher was hired not as an attorney, but as a claims investigator, in order to conduct a "routine" factual inquiry to see "whether the asbestos personal injury claims fell within the terms of the indemnification provisions of the [asset-sale a]greement." (P. Mem. 1, 15.) Tyco further argues that none of the documents are protected by the work product privilege because they were not created in anticipation of litigation. ITT and PEIC deny these contentions, and have provided the court with the documents in question for in camera review.*fn1

Because the correspondence, based upon ITT and PEIC's privilege logs and examination of the documents themselves, is clearly of a "legal character" providing "legal advice or services," Tyco's request to compel its production will be denied. Spectrum Systems Int'l Corp. v. Chemical Bank, 78 N.Y.2d 371, 378 (1991). It is therefore unnecessary to consider whether the correspondence is protected by the work product privilege. With respect to the internal documents, Tyco's request to compel will be denied, because the documents appear to have been prepared in anticipation of possible litigation, and plaintiffs have not demonstrated a substantial need for the materials.

1. Attorney-Client Privilege

In federal diversity actions such as this one, issues of attorney-client privilege are governed by New York law. Fed.R. Ev. 501; 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." C.P.L.R. § 4503(a)(1). The party asserting the privilege bears the burden of establishing its elements. Weber v. Paduano, Dkt. No. 02 Civ. 3392 (GEL), 2003 WL 161340, at *10 (S.D.N.Y. January 22, 2003) (citing Arkwright Mutual Ins. Co. v. National Union Fire Ins., Dkt. 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, 78 N.Y.2d at 377-78 (internal quotation and citation omitted).

ITT has established that, whatever the circumstances of Moher's initial retention by ITT and PEIC, this correspondence is privileged. The descriptions of the letters in ITT's log state either that they contained "analysis" of the underlying asbestos lawsuits or of Tyco's claims against ITT, or that they discussed "ITT's position" regarding indemnification. In camera review of the letters confirms the accuracy of these descriptions, and that the "analysis" involved was legal in nature. These letters are clearly legal communications between an attorney and his client. Therefore, Tyco's motion to compel will be denied as to the correspondence.

II. Work Product Privilege

ITT has withheld the eighteen internal documents solely on basis of the work product privilege. 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." Weber, 2003 WL 161340, at *3 (quoting Mount Vernon Fire Ins. Co. v. Try 3 Bldg. Services. Inc., Dkt. No. 96 Civ. 5590 (MJL) (HBP), 1998 WL 729735, at *4 (S.D.N.Y. Oct. 16, 1998)).

A. Eligibility for the Privilege

For documents to be protected as work product, the party opposing production must show that they were "prepared in anticipation of litigation or for trial." Fed.R.Civ.P. 26(b)(3). The Second Circuit has held that "documents should be deemed prepared "in anticipation of litigation' . . . if "in light of the nature of the document and the factual situation in the particular case, the document can fairly be said to have been prepared or obtained because of the prospect of litigation.'" U.S. v. Adlman, 134 F.3d 1194, 1202 (2d Cir. 1998) (quoting Charles Alan Wright, Arthur R. Miller, and Richard L. Marcus, 8 Federal Practice & Procedure § 2024, at 343 (1994)). 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 fact that Moher was retained by ITT's insurer, ostensibly to investigate claims pursuant to a third-party insurance policy, obscures rather than clarifies application of work product doctrine with respect to the products of his investigation. The dispute over ITT's and its insurer's potential liability here hinges not simply, as in the usual insurance case, on the nature and outcome of the underlying personal-injury lawsuits and the insurer s obligations under its insurance contract with the insured, but turns principally on the scope of the indemnification clause in the asset-sale agreement governing Tyco's acquisition of Grinnell from ITT. Tyco correctly argues (P. Mem. at 10-11) that a third-party insurer's investigation of a legal claim against its insured is generally considered to be part of "the ordinary course of business," and therefore not subject to work product protection, since "the very nature" of that business is "anticipating litigation." Weber, 2003 WL 161340, at *4. But the asbestos lawsuits here were not filed directly against the insured, ITT. Rather, they were filed against Grinnell, and ITT can be held responsible only by virtue of the asset-sale agreement with Tyco — an agreement that emphatically does not establish an insurer-insured relationship. Indeed, the applicability of the indemnity clause of that agreement to the asbestos lawsuits is at the heart of this litigation, and the parties do not dispute that Moher's investigation was largely concerned with that question.

Thus, it is hardly the case that, as argued by Grinnell (P. Mem. at 10-11), PEIC's investigation of ITT's indemnity obligation should be "presumed" to have been part of its "ordinary course of business," as would have been, say, an investigation by Grinnell's insurer of the facts underlying the asbestos lawsuits themselves. Framing the issue in terms of whether or not there was an "identifiable resolve [by ITT or PEIC] to litigate" the indemnity obligation (P. Reply at 5, quoting Weber, 2003 WL 161340, at *6) is inappropriate, since that is the standard for determining when "an insurance company's activity shifts from the ordinary course of business to anticipation of litigation." Fine v. Bellefonte Underwriters Ins. Co., 91 F.R.D. 420, 422-23 (S.D.N.Y. 1981). This case is quite different from those addressing the specific problem of work product created in the course of routine insurance investigations. Accordingly, the Court turns to the more general framework for determining work product protection established by the Second Circuit in Adlman, and simply examines whether the evidence demonstrates that the documents in question were prepared because of the prospect of litigation.

Many of the facts presented in the parties' briefs are not very helpful in determining whether or not documents created by Moher as part of his investigation were created "because of the prospect of litigation" over ITT's contractual indemnity obligation. The fact that Moher's investigation ended prior to the filing of this lawsuit (Lombardi Tr., P. Mem. Ex. A, at 331-32) is irrelevant both as a matter of law, Adlman, 134 F.3d at 1200 (work product privilege can apply even to documents created before the events giving rise to the litigation), and as a factual matter, since there is evidence that Moher's involvement ended only because Tyco chose to file this action in New York, and not because he was hired only to perform a routine insurance investigation rather than to prepare for litigation. (Lombardi Tr. 331-32) ...

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