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American Manufacturers Mutual Insurance Co. v. Payton Lane Nursing Home

December 11, 2008


The opinion of the court was delivered by: A. Kathleen Tomlinson, Magistrate Judge



Before the Court is Defendant Payton Lane Nursing Home Inc.'s ("Payton Lane") motion to compel [DE 96] Plaintiffs American Manufacturers Mutual Insurance Company and American Motorists Insurance Company (collectively, "Plaintiffs") to produce certain email and hard copy communications (the "Documents"). Payton Lane contends that Plaintiffs have improperly withheld these Documents from production of the grounds of attorney-client privilege. It appears that the Documents at issue all involve communications exchanged between representatives of non-party Greyhawk, N.A. ("Greyhawk") and counsel for Plaintiffs. In opposition, Plaintiffs argue that they have properly withheld approximately 2,400 emails and 80 hard copy communications because they are protected by the attorney-client privilege [DE 98].

For the reasons set forth below, the Court finds that communications between non-party Greyhawk and Plaintiffs' counsel may properly be analyzed for the existence of the attorney-client privilege. However, the Court finds that the privilege log submitted by Plaintiffs does not comply with the Federal Rules of Civil Procedure. Plaintiffs are directed to produce and serve a revised privilege log, in accordance with the rulings and principles outlined below, no later than December 31, 2008.


A motion to compel is entrusted to the sound discretion of the district court. Am. Sav. Bank, FSB v. UBS Paine Webber, Inc. (In re Fitch, Inc.), 330 F.3d 104, 108 (2d Cir. 2003); United States v. Sanders, 211 F.3d 711, 720 (2d Cir. 2000). The Second Circuit has noted that a "trial court enjoys wide discretion in its handling of pre-trial discovery, and its rulings with regard to discovery are reversed only upon a clear showing of an abuse of discretion." DG Creditor Corp. v. Dabah (In re DG Acquisition Corp.), 151 F.3d 75, 79 (2d Cir. 1998) (citing Cruden v. Bank of New York, 957 F.2d 961, 972 (2d Cir. 1992)). A district court is considered to have abused its discretion only "if it bases its ruling on a mistaken application of the law or a clearly erroneous finding of fact." Milanese v. Rust-Oleum Corp., 244 F.3d 104, 110 (2d Cir. 2001).


A. Availability of the Attorney-Client Privilege

Where, as here, the Court has diversity jurisdiction over a matter, "state law provides the rule of decision concerning the claim of attorney-client privilege." Allied Irish Banks, P.L.C. v. Bank of Am., N.A., No. 03 Civ. 3728, 2008 WL 783544, at *3 (S.D.N.Y. Mar. 26, 2008) (citing Fed. R. Evid. 501; Dixon v. 80 Pine St. Corp., 516 F.2d 1278, 1290 (2d Cir. 1975)). Under New York's Civil Practice Law and Rules ("CPLR"), the attorney-client privilege protects "confidential communication[s] made between attorney and client in the course of professional employment." NY CPLR § 4503(a). "In order for a communication to be privileged under New York law, it must, among other things have been made principally to assist in obtaining or providing legal advice or services for the client." Ross v. UKI Ltd., NO. 02 Civ. 9297, 2004 WL 67221, at *2 (S.D.N.Y. Jan. 15, 2004) (citing People v. Osario, 549 N.E.2d 1183 (1989)).

The issue before the Court in this instance is whether the Documents are entitled to the protection of the attorney-client privilege when they involve communications made between representatives of non-party Greyhawk and Plaintiffs' counsel. Plaintiffs argue that they retained Greyhawk to act as their agent and as their "'eyes and ears'" on the construction project at issue. Plaintiffs contend that Greyhawk acted on Plaintiffs' behalf "and always held itself out as the [Plaintiffs'] agent." According to Plaintiffs, Greyhawk's involvement "was necessary and indispensable given that the [Plaintiffs] had no onsite presence and no in-house construction expertise." DE 98 at 1. Payton Lane argues that Greyhawk simply provided "construction management services" to Plaintiffs as an independent contractor and that the services Greyhawk provided to Plaintiff were identical to the services Greyhawk has provided on thousands of other projects. DE 96 at 2.

Both parties focus their arguments on the legal principles set forth by the Eighth Circuit in In re Bieter Co., 16 F.3d 929 (8th Cir. 1994).*fn1 The question before the court in Bieter was whether communications between a party and a non-party consultant were entitled to the protections of the attorney-client privilege. Ultimately, the court held that the application of the attorney-client privilege was warranted and the communications were protected "because the consultant was involved in the activities which were the subject matter of the ensuing litigation and because the consultant possessed the information required by the attorney for informed advice." In re Copper Market Antitrust Litig., 200 F.R.D. 213, 218 (S.D.N.Y. 2001) (summarizing the holding in Bieter).

The court in In re Copper Market Antitrust Litigation adopted the reasoning of the Eighth Circuit in Bieter as it analyzed whether to award attorney-client privilege protection to communications made between counsel for a party corporation and a non-party public relations consultant hired by the party corporation. Id. at 218-19. The court found that the non-party consultant "can fairly be equated with the [party corporation] for purposes of analyzing the availability of the attorney-client privilege" after an examination of the following factors: (1) the consultant was "essentially[ ] incorporated into [the party corporation's] staff to perform a [necessary] corporate function"; (2) the party corporation's resources were "insufficient to cover the task" that it hired the consultant to complete; (3) the consultant had authority to make decisions on behalf of the party corporation; (4) the communications made by the consultant on behalf of the party corporation had potential legal ramifications; and (5) the consultant, in formulating its communications, sought legal advice from the party corporation's counsel. Id. at 219. Because these factors were present, the court found that the non-party consultant was the "functional equivalent" of an employee of the party corporation. Id. at 221. As such, confidential communications made between the consultant and the party corporation or its counsel "that were made for the purpose of facilitating the rendition of legal services" were protected by the attorney-client privilege. Id. at 220.

Subsequently, the court in Export-Import Bank of the United States v. Asia Pulp & Paper Co., Ltd., 232 F.R.D. 103 (S.D.N.Y. 2005)*fn2 applied the reasoning of the courts in Bieter and In re Copper Market Antitrust Litigation. In adopting that rationale, the court noted that "communications by a company's lawyers and its independent contractor merit protection if, by virtue of assuming the functions and duties of full-time employee, the contractor is a defacto employee of the company." Id. at 113. The court laid out the following factors to be considered when deciding whether an independent contractor was the "functional equivalent of an employee" within this framework: (1) "whether the consultant had primary responsibility for a key corporate job;" (2) "whether there was a continuous and close working relationship between the consultant and the company's principals on matters critical to the company's position in litigation;" and (3) "whether the consultant is likely to possess information possessed by no one else at the company." Id. The party asserting the privilege bears the burden to demonstrate that this "standard of integration" has been met. Id.

After reviewing the submission by Plaintiffs, the Court finds that Plaintiffs have met their burden to demonstrate that the factors set forth by the courts in Bieter, In re Copper Market Antitrust Litigation, and Export-Import Bank have been satisfied here. Plaintiffs did not have resources to oversee the day-to-day operations of the construction project as they had no on-site representatives and no in-house construction experience. Plaintiffs have also demonstrated that Greyhawk had the authority to make decisions related to the construction project on Plaintiffs' behalf. Greyhawk's involvement (on Plaintiffs' behalf) in the negotiation of the various contracts with contractors and subcontractors had clear legal ramifications for Plaintiffs. Moreover, Greyhawk's services in connection with pursuing payment from Payton Lane, including articulating positions on behalf of Plaintiffs, required consultation with and the receipt of legal advice from Plaintiffs' counsel. ...

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