The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge
Before the Court is a brief in support of a claim of privilege made by Defendant Stone and Webster, Inc. ("Shaw") as to Document No. SHAW E0015714607 ("Document"). The brief was provided after I requested more detailed briefing following a letter motion made by Plaintiffs GenOn Mid-Atlantic, LLC and GenOn Chalk Point, LLC (collectively, "GenOn") on October 25, 2011, asking that I find that the Document was not privileged and could be introduced at certain depositions.*fn1 For the reasons set forth below, I find that the Document is privileged work product, and GenOn's letter motion is consequently DENIED.
Because a more extensive review of the background of this case is
available in my opinion of June 6, 2011, GenOn Mid-Atlantic, LLC
Stone & Webster, Inc. (GenOn I), 11 Civ. 1299, 2011 WL 2207513, at
*1-*2 (S.D.N.Y. June 6, 2011), and an extensive recent opinion issued
by Magistrate Judge Frank Maas on the status of various privilege
claims made as to other disputed documents, GenOn Mid-Atlantic, LLC v.
Stone & Webster, Inc. (GenOn II), No. 11 Civ. 1299, 2011 WL 5439046,
at *1-*2 (S.D.N.Y. Nov. 10, 2011), a short summary of this action will
suffice. To comply with the passage of a 2006 Maryland environmental
law, GenOn undertook the upgrade of the air quality control systems at
three of its power plants. GenOn I, 2011 WL 2207513, at *1. Under the
Turnkey Agreement, dated July 30 2007, Shaw was to design and build
these improved air quality control systems. Id. Compensation under the
contract was not fixed, but would be determined by applying a formula
containing two variables: (1) the target cost set out in the contract;
and (2) the total amount of reimbursable costs incurred by the
contractor to complete the work, or the actual costs. Id. The target
cost was also subject to modification by "change order."*fn2
GenOn brought this declaratory judgment action claiming that
it does not have to pay Shaw for some of the work performed above the
contract amounts after cost overruns for the project were projected to
exceed $100 million. Id.
The Document in dispute consists of financial spreadsheets and illustrations graphing the calculations contained in the spreadsheets. The spreadsheet, originally created in 2009, shows the combination of charges and change orders that would maximize Defendant Shaw's profits on the project based on the elaborate compensation formulas provided for under the Turnkey Agreement. The Document is not addressed to anyone and does not have any privilege markings.
Work-product privilege, established by Hickman v. Taylor, 329 U.S. 495 (1947), and codified in FRCP 26(b)(3)(A), precludes discovery of "documents and tangible things that are prepared in anticipation of litigation or for trial by or for another party or its representative (including the other party's attorney, consultant, surety, indemnitor, insurer, or agent)." FRCP 26(b)(3)(A). The privilege applies to documents prepared "becauseof" litigation. United States v. Adlman, 134 F.3d 1194, 1202 (2d Cir. 1998). There is a heavy burden on the party claiming work-product protection. In re Grand Jury Subpoenas Dated March 19, 2002 and August 2, 2002, 318 F.3d 379, 384 (2d Cir. 2003).
"[D]ocuments prepared in the ordinary course of business, or that otherwise would have been prepared absent the prospect of litigation, do not receive work product protection." Gucci Am., Inc. v. Guess?, Inc., 271 F.R.D. 58, 74 (S.D.N.Y. 2010). At the same time, a document prepared because of the prospect of litigation does not lose its work-product protection merely because it may assist in business decisions. Adlman, 134 F.3d at 1195 ("We hold that a document created because of anticipated litigation, which tends to reveal mental impressions, conclusions, opinions or theories concerning the litigation, does not lose work-product protection merely because it is intended to assist in the making of a business decision influenced by the likely outcome of the anticipated litigation."). If a document is work product, the privilege applies unless the party opposing the privilege can demonstrate "substantial need" for the document. Id. at 1204.
Shaw asserts that the disputed Document is privileged work product, which was created in preparation for the mediation between GenOn and Shaw scheduled for March 1, 2011. Shaw's Brief 3. The Document has a creation date of 2009 because it was based off a document created earlier by GenOn's sourcing manager, Priya Gill ("Gill"). Shaw's Brief, Ex. 3 Ferguson Decl. ¶ 6. In January or February 2011, Michael A. Branca, outside counsel for Shaw, "requested Stone & Webster, Inc. to create scenarios showing how the compensation factors in Section 13 of the Contract would operate under various potential outcomes of the various disputed costs and change orders." Id. at ¶ 4. Peter Ferguson ("Ferguson"), Shaw's Project Director, forwarded the Document to Greg Hill and Mark Monahan to develop these compensation scenarios under relevant articles of the parties' contract, id. at ¶ 6, to assist in illustrating how the compensation formulas worked as guidance for Mr. Branca at the mediation. Shaw's brief 3. Shaw has submitted a declaration in support of these assertions from Ferguson, which avers that "Document No. SHAW E0015714607 was created solely as the result of Mr. Branca's request as passed on by me to Messrs. Hill and Monahan. Stone & Webster had not previously created such scenarios." Ferguson Decl. ¶ 7.
GenOn asserts that this Document was created in the ordinary course of business. GenOn Reply 2. According to GenOn, Shaw and GenOn have both created similar compensation scenarios throughout their business relationship, as evidenced, for example, by the fact that the original spreadsheets that the Document was based off of came from Gill. Id. at 3. Further, GenOn asserts that the purpose of this Document was for Shaw to determine how to maximize its profits, as demonstrated by Shaw's alteration of its change order and accounting assertions after updating the spreadsheet in February 2011, such that by June 2011, Shaw claimed it was entitled to change orders placing it near the peak compensation zone identified in the February 2011 calculations. Id. at 4.
Based on the explanation presented by Shaw, including the sworn declaration of Ferguson, this Document is protected work product. The Document would not have been created in the same form "irrespective of the litigation," but rather was created specifically in preparation for mediation. Adlman, 134 F.3d at 1195, 1202 ("Where a document was created because of anticipated litigation, and would not have been prepared in substantially similar form but for the prospect of that litigation, it falls within Rule 26(b)(3)."). The protection of Rule 26(b)(3) is not limited exclusively to materials prepared to assist at trial. Id. at1198. ("The text of Rule 26(b)(3) does not limit its protection to materials prepared to assist at trial. To the contrary, the text of the Rule clearly sweeps more broadly. It expressly states that work-product privilege applies not only to documents 'prepared . . . for trial' but also to those prepared 'in anticipation of litigation.' ") (quoting FRCP 26(b)(3)(A)).
Even if, as GenOn argues, the Document was used by Shaw to determine what levels of change orders and charges to assert against GenOn, because the Document was prepared because of litigation, to assist with an upcoming mediation, the work-product privilege applies. Adlman, 134 F.3d at 1202 (finding that a document prepared because of litigation does not lose its work-product protection merely because it may be used to assist in business decisions). Shaw has met its heavy burden, In re Grand Jury Subpoenas, 318 F.3d at 384, of demonstrating that this Document would not have been prepared in "essentially similar form irrespective of the litigation." Adlman, 134 F.3d at 1202. GenOn has not presented evidence of a "substantial need" for the Document to overcome the privilege. Id. at 1204.
GenOn makes two additional arguments, relying on the earlier decisions by Judge Maas and myself addressing various assertions of privilege. Both arguments fail. First, GenOn asserts that the situation addressed by my decision on June 6, 2011, was "very similar." GenOn Brief 4. There, I found that documents created in connection with GenOn's third-party audit of Shaw's accounting information were not entitled to work-product protection, explaining that the documents served a "dual purpose" of fulfilling "a contractual right in the ordinary course of business" and also assessing "the availability and strength of potential legal claims." GenOn I, 2011 WL 2207513, at *3. That situation, however, is clearly distinguishable: those documents were ...