The opinion of the court was delivered by: Gabriel W. Gorenstein, Magistrate Judge
Bombardier Capital, Inc. ("Bombardier Capital") has moved for a protective order pursuant to Rule 26(c) of the Federal Rules of Civil Procedure with respect to a number of documents listed on its privilege log. Originally, Bombardier Capital moved for a protective order solely on the ground that the documents were protected by the joint defense or common interest rule, an extension of the attorney-client privilege. After a telephone conference on February 3, 2003, however, Bombardier Capital was granted leave to brief its assertion that the materials were also protected by the work-product doctrine. Gulf Islands Leasing, Inc. ("Gulf") has opposed Bombardier Capital's motion for a protective order. For the reasons stated below, Bombardier Capital's motion is denied.
Bombardier Capital and Bombardier Aerospace Corporation ("Bombardier Aerospace") are separate corporations that are each wholly-owned subsidiaries of Bombardier Inc. See Memorandum of Law of Bombardier Capital, Inc. in Support of its Assertion of the Joint Defense Privilege, dated December 5, 2002 ("Def. Mem."), at 1. Bombardier Inc. is in the business of manufacturing aircraft. Id. Bombardier Aerospace manages and sells "fractional ownership interests" of aircraft manufactured by Bombardier Inc. Id. A fractional ownership interest allows the buyer to use a Bombardier airplane for a period of time and have the plane serviced by Bombardier Aerospace. Id. Bombardier Capital offers financing for the sales of Bombardier Inc. aircraft, including sales of fractional ownership interests. Id.
On July 31, 2000, Gulf purchased a 50% fractional ownership interest in a Bombardier Global Express corporate aircraft. See Gulf Island Leasing, Inc.'s Memorandum of Law in Opposition to Bombardier Capital, Inc.'s Assertion of the Joint Defense Privilege, dated December 13, 2002 (Docket #25) ("Pl. Mem."), at 1. Gulf executed a Purchase Agreement and a Management Agreement (collectively the "Aerospace Agreements") with Bombardier Aerospace. The Purchase Agreement governed the terms of sale of the interest in the aircraft. See Purchase Agreement, dated July 31, 2000 ("Purchase Agreement") (reproduced in Declaration of Patrick P. Salisbury, dated December 5, 2002 ("Salisbury Decl."), Ex. C). The Management Agreement governed the use and management of the aircraft. See Management Agreement, dated July 31, 2000 ("Management Agreement") (reproduced in Salisbury Decl. Ex. D). Gulf paid $19,600,000 for its ownership interest. See Def. Mem. at 1. To finance its purchase of the airplane, Gulf obtained a loan of $16,339,488.50 from Bombardier Capital. This loan transaction is reflected in a Loan Agreement and a Security Agreement (collectively the "Capital Agreements"). See id.; Loan Agreement, dated July 31, 2000 ("Loan Agreement") (reproduced in Salisbury Decl. Ex. A); Security Agreement, dated July 31, 2000 ("Security Agreement") (reproduced in Salisbury Decl. Ex. B).
While the agreements with Bombardier Capital and Bombardier Aerospace were separate, a default by Gulf under the Aerospace Agreements would have consequences under the Capital Agreements, and vice versa. For example, upon a default by Gulf under the Management Agreement, Bombardier Capital could foreclose upon and sell the airplane. See Management Agreement, § 10. Other sections in the Aerospace and Capital Agreements give both Bombardier Aerospace and Bombardier Capital rights upon a default by Gulf on either set of agreements. See Purchase Agreement, §§ 4(a)-(c); Security Agreement, §§ 8(a)-(c).
Soon after the purchase, Gulf became dissatisfied with Bombardier Aerospace's performance. Ultimately, Bombardier Aerospace filed a lawsuit against Gulf in the United States District Court for the Northern District of Texas alleging breach of contract. See Complaint, filed January 12, 2001 (reproduced in Affidavit of Jennifer L. Conrad in Support of Gulf Island Leasing, Inc.'s Memorandum of Law in Opposition to Bombardier Capital, Inc.'s Assertion of the Joint Defense Privilege, dated December 13, 2002 (Docket #26) ("Conrad Aff."), Ex. 7). Several days later, Gulf filed suit against Bombardier Aerospace in Washington state court also alleging breach of contract. See Complaint, dated January 22, 2001 (reproduced in Conrad Aff. Ex. 6). While the lawsuits between Gulf and Bombardier Aerospace proceeded, Gulf continued to make payments to Bombardier Capital under the Capital Agreements. See Deposition of Andrew L. Evans (undated) (reproduced in Conrad Aff. Ex. 8), at 38. Bombardier Capital was not a party to either lawsuit.
During 2001, Gulf and Bombardier Aerospace engaged in settlement negotiations and ultimately reached a settlement that was signed on December 21, 2001. Under the terms of the Settlement Agreement (also referred to as the "repurchase agreement"), Bombardier Aerospace agreed to repurchase Gulf's fractional interest in the airplane. See Confidential Settlement Agreement, dated December 21, 2001 ("Settlement Agreement") (reproduced in Conrad Aff. Ex. 10), § 5.3(b). Bombardier Aerospace agreed to pay Gulf the fair market value of Gulf's fractional interest in the airplane less the amount Gulf owed under the Capital Agreements, which Bombardier Aerospace would pay directly to Bombardier Capital on Gulf's behalf. See id. Thus, after Bombardier Capital was paid the portion it was owed, Bombardier Aerospace was to pay the remainder — minus a management fee of $165,368.94, see id., § 5.3(a) — to Gulf. See id., § 5.3(b).
Bombardier Capital was not part of the negotiations of the settlement with Gulf although, as is discussed more fully later, Bombardier Aerospace and Bombardier Capital had communications regarding the transaction — both before and after the Settlement Agreement was signed. Gulf contends that Bombardier Aerospace told Gulf that Bombardier Capital would play no part in the Settlement Agreement. See Pl. Mem. at 3. The Settlement Agreement itself provides that it shall not "affect the rights of Gulf Islands with regard to Bombardier Capital, Inc. ("BCI") and no terms of this agreement shall be construed to include BCI or affect its relationship with Gulf Islands unless it is specifically referred to therein." Settlement Agreement, § 2.4. Bombardier Capital was specifically exempted from the provision of the Settlement Agreement releasing the parties from liabilities, id., § 3.1, and the requirement that mutual releases be executed. Id., § 7.
One issue that arose as a result of the settlement was the extent that Gulf would be responsible for "breakage costs," which Bombardier Capital defines as a charge to compensate for "the loss [Bombardier Capital] suffered when Gulf prepaid the loan as a result of the attendant early termination of an interest rate swap transaction that [Bombardier Capital] entered into relating to the Gulf loan." Def. Mem. at 5. Also at issue was a "make-whole payment," which Bombardier Capital defines as "the prepayment fee required to make [Bombardier Capital] whole for a `loss of yield' on the loan due to early repayment of the loan." Id.
Bombardier Capital contends that, in connection with the repurchase, it agreed to waive "breakage costs" due from Gulf but only in exchange for receiving the "make-whole payment" allegedly owed by Gulf under the Capital Agreements. See Def. Mem. at 5. Gulf disputes that it was obligated to pay the "make-whole payment." See Pl. Mem. at 3-4. On February 1, 2002, pursuant to the Settlement Agreement, Bombardier Aerospace transferred $16,775,053.58 to Bombardier Capital — an amount that included a "make-whole payment" of $1,002,235.62. See Bombardier — Gulf Islands Leasing, Inc., Closing Statement, dated February 1, 2002 (reproduced in Conrad Aff. Ex. 18), at 1. Gulf's liability for this "make-whole payment" is the subject of the current lawsuit.
Bombardier Capital has submitted an index of the documents that it asserts are privileged. See Bombardier Capital Inc.'s Joint Defense Privileged Documents Index (undated). It has also submitted the documents themselves to the Court, which the Court has reviewed in camera. The documents, primarily in the form of e-mails, consist of communications between employees of Bombardier Aerospace and Bombardier Capital. On the Bombardier Aerospace side, the communications are to or from Dylan Haynie, an in-house attorney, and/or Cheryl Hayes, a legal assistant. On the Bombardier Capital side, the employees sending or receiving the communications were Julia Males, an in-house attorney; Patrick Mathieson, the Director of Asset Management and Collections; Carolyn Gipson, a Collections Manager; and/or Lynn Parah, a Collections Coordinator.
The documents are divisible into two broad categories. First, there are a number of documents generated after the January 2001 lawsuits were filed, almost all of which relate to the amount owed by Gulf to Bombardier Capital under the Capital Agreements. Exhibits 9-13, 25, 28. The bulk of these documents were generated in late July and early August 2002. Second, there are a series of e-mails sent between employees of Bombardier Aerospace and Bombardier Capital from January 29 through February 1, 2002 — after the Settlement Agreement had been signed. These communications also involve discussions of the amount of money owed under the Capital Agreements as well as what documentation would be required to consummate the Settlement Agreement. Exhibits 3-8, 14-23, 26-27.*fn1
Bombardier Capital seeks to avoid production of these documents and to prevent Gulf from obtaining deposition testimony of the persons involved in the communications. As noted, Bombardier seeks to protect these documents and communications under two theories: the attorney-client/joint-defense privilege and work product protection. Each is discussed separately.
II. ATTORNEY-CLIENT/JOINT DEFENSE ...