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Nyahsa Services, Inc. v. People Care Inc.

Supreme Court of New York, Third Department

November 9, 2017

NYAHSA SERVICES, INC., SELF-INSURANCE TRUST, Respondent,
v.
PEOPLE CARE INCORPORATED, Defendant and Third- Party Plaintiff- Appellant; COOL INSURING AGENCY, INC., et al., Third-Party Defendants- Respondents, et al., Third-Party Defendants.

          Calendar Date: September 12, 2017

          Barclay Damon, LLP, Albany (Linda J. Clark of counsel), for defendant and third-party plaintiff-appellant.

          Bond, Schoeneck & King, PLLC, Albany (Stuart F. Klein of counsel), for respondent.

          Keidel, Weldon & Cunningham, LLP, White Plains (Robert J. Grande of counsel), for third-party defendants-respondents.

          Before: Peters, P.J., McCarthy, Rose, Mulvey and Rumsey, JJ.

          MEMORANDUM AND ORDER

          MULVEY, J.

         Appeal from an order of the Supreme Court (Platkin, J.), entered January 5, 2017 in Albany County, which partially granted motions by plaintiff and third-party defendants Cool Insuring Agency, Inc. and Cool Risk Management, Inc. to compel discovery.

         Defendant, a home health care provider, was a member of plaintiff, a group self-insured trust that provided workers' compensation benefits to defendant's employees. After defendant's membership in the trust ended, it refused to pay plaintiff an assessment in excess of $800, 000 for open claims on defendant's employees. Plaintiff commenced this collection action against defendant alleging breach of contract and unjust enrichment [1]. Defendant answered, counterclaimed and then commenced a third-party action against, among others, third-party defendants Cool Insuring Agency, Inc. and Cool Risk Management, Inc. (hereinafter collectively referred to as Cool), the trust's group administrators. Defendant's third-party complaint alleged, among other things, that Cool had mismanaged and improperly administered the workers' compensation claims of defendant's employees. Plaintiff thereafter moved to dismiss the counterclaims and Cool moved to dismiss the third-party complaint, and the movants ultimately received partial relief as detailed in prior decisions of this Court (141 A.D.3d 792');">141 A.D.3d 792 [2016]; 141 A.D.3d 785');">141 A.D.3d 785 [2016]).

         During this collection litigation, Cool made a discovery request to produce a report commissioned by defendant's then-counsel, Whiteman Osterman and Hanna, LLP (hereinafter WOH) and prepared by a consultant, Towers Perrin, regarding Cool's management and administration of the workers' compensation claims of defendant's employees. Cool also sought documents and written communication related to that report. Defendant refused to comply with the discovery request, claiming that the materials were protected by, among other things, the attorney-client privilege. Cool and plaintiff then moved to compel production of the requested report and materials. Supreme Court examined the requested materials in camera and partially granted the motions to compel, ordering defendant to disclose the report and related documents, but denied disclosure as to one email exchange between defendant's executives and WOH attorney Joel Hodes. Defendant appeals.

         Pursuant to CPLR 3101 (a), there shall generally be "full disclosure of all matter material and necessary in the prosecution or defense of an action" (see Madison Mut. Ins. Co. v Expert Chimney Servs., Inc., 103 A.D.3d 995, 996 [2013]), and defendant bore "the burden of demonstrating that particular items are exempt or immune from disclosure [as] the party asserting such immunity" (Salzer v Farm Family Life Ins. Co., 280 A.D.2d 844, 845 [2001]). "Supreme Court is vested with broad discretion in controlling discovery and disclosure, and generally its determinations will not be disturbed in the absence of a clear abuse of discretion" (Gold v Mountain Lake Pub. Telecom., 124 A.D.3d 1050, 1051 [2015] [internal quotation marks and citation omitted]).

         Defendant argues that the report was protected by the attorney-client privilege, as attorney work product and as material prepared in anticipation of litigation. Supreme Court properly rejected these claims. "The attorney-client privilege shields from disclosure any confidential communications between an attorney and his or her client made for the purpose of obtaining or facilitating legal advice in the course of a professional relationship" (Ambac Assur. Corp. v Countrywide Home Loans, Inc., 27 N.Y.3d 616, 623 [2016], citing CPLR 4503 [a] [1]; see Spectrum Sys. Intl. Corp. v Chemical Bank, 78 N.Y.2d 371, 377-378, [1991]). As the party asserting the privilege, defendant was required to show "that the communication at issue was between an attorney and a client for the purpose of facilitating the rendition of legal advice or services, in the course of a professional relationship, that the communication is predominantly of a legal character, that the communication was confidential and that the privilege was not waived" (Ambac Assur. Corp. v Countrywide Home Loans, Inc., 27 N.Y.3d at 624 [internal quotation marks and citation omitted]; see Spectrum Sys. Intl. Corp. v Chemical Bank, 78 N.Y.2d at 379).

         The record, including the report itself, reflects that WOH, defendant's counsel, retained Towers, an independent claims consultant, to undertake a comprehensive claims review to include the trust's reserve practices and Cool's administration of claims of defendant's employees, in order to resolve the parties' impasse over defendant's unpaid assessments. Towers was given in-house access to Cool's documents for this purpose in addition to supporting documentation already provided by Cool. To that end, defendant's president sent a letter to Cool's vice-president reflecting that the purpose of the consultant's review of Cool's records was to "facilitat[e] an intelligent conversation with [Cool's] claims department, " which Supreme Court aptly characterized as a "typical business purpose." Cool's vice- president submitted an affidavit attesting that it was his understanding that the purpose of the consultant's review was to verify the accuracy of the assessments billed to defendant, and that Towers assured him that it would discuss its findings with Cool; another Cool vice-president attested that Towers did share certain findings with Cool, including that it did not find any problems with inappropriate payment of claims by Cool.

         As Supreme Court correctly concluded, the report "does not include any legal advice, legal analysis or discussion of legal issues" nor does it disclose confidences of defendant, and we further note that it was based almost exclusively on information provided by Cool and, as such, it is not a communication "of a legal character" (Ambac Assur. Corp. v Countrywide Home Loans, Inc., 27 N.Y.3d at 624). Further, we discern no error in the court's conclusion - after crediting the proof that defendant did not expect that the report would remain confidential and that the contents of the report were not, in fact, kept confidential - that the report was not a confidential communication, and that any privilege was waived (see id. at 623-624). Thus, the report was not protected by the attorney-client privilege.

         We further find that the report was not protected from disclosure as attorney work product, as this "privilege should be narrowly applied to materials prepared by an attorney, acting as an attorney, which contain his [or her] analysis and trial strategy" (Kinge v State of New York, 302 A.D.2d 667, 670 [2003] [internal quotation marks and citation omitted; emphasis added]; see CPLR 3101 [c]; Cioffi v ...


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