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Frank v. Morgans Hotel Group Management LLC

Supreme Court, New York County

January 13, 2020

Ilana Frank, Plaintiff,
Morgans Hotel Group Management LLC, MORGANS HOTEL GROUP CO., SKYBAR HOLDINGS, LLC, Defendants.

          German Rubinstein LLP, New York, NY (Steven J. German of counsel), for plaintiff.

          Nicholas Goodman & Associates, PLLC, New York, NY (Patrick L. Selvey of counsel), for defendants Morgans Hotel Group Management LLC and Morgans Hotel Group Co.


         This discovery motion arises from a deposition dispute in a personal-injury action. Plaintiff, Ilana Frank, alleges that while a patron of the bar at a hotel owned and operated by defendants (collectively, Morgans), she fell and seriously injured her foot due to unsafe conditions on the premises.

         In discovery, Morgans produced nonparty Steven Benjamin for deposition as a person with knowledge of the circumstances of the accident. At the time of Frank's fall in 2015, Morgans employed Benjamin as its director of risk management. Benjamin now functions as Morgans' director of risk management on a contract basis. During Benjamin's deposition, counsel for Frank sought to question him about, among other things, (i) communications between Benjamin and Morgans' outside counsel (Nicholas Goodman & Associates), and (ii) a conversation that Benjamin had with another Morgans employee (Schantel Mansfield) in a three-way conference call among Benjamin, Mansfield, and a Nicholas Goodman attorney. In each instance, counsel for Morgans objected and directed Benjamin not to answer these questions, asserting that Benjamin was shielded by the attorney-client privilege as the functional equivalent of a Morgans employee.

         Frank asks this court to determine whether Morgans validly asserted privilege over the disputed conversations involving Benjamin. Morgans does not object to Frank's request for a privilege determination; it merely argues that its counsel's assertions of privilege were proper.


         I. Whether the Attorney-Client Privilege Shielded Benjamin's Conversations with Counsel for Morgans

         A. The "Functional Equivalent of an Employee" Privilege Doctrine

         The attorney-client privilege has been codified in New York at CPLR 4503. It applies to "a confidential communication made between the attorney or his or her employee and the client in the course of professional employment i.e., for the purpose of obtaining or supplying legal advice or other legal services. (CPLR 4503 [a] [1]; see also Rossi v Blue Cross & Blue Shield of Greater New York, 73 N.Y.2d 588, 593 [1989].)

         "Corporations, as other clients, may avail themselves of the attorney-client privilege for confidential communications with attorneys relating to their legal matters," whether that attorney is in-house or outside counsel. (Rossi, 73 N.Y.2d at 592.) The privilege thus applies to communications "between a corporation's employees and the corporation's in-house" or outside counsel "for the purpose of providing legal advice to the corporation." (Stock v Schnader Harrison Segal & Lewis LLP, 142 A.D.3d 210, 216 [1st Dept 2016].)

         It is undisputed that Benjamin's conversations with the outside counsel representing Morgans in this action were confidential and made for the purpose of facilitating counsel's provision of legal services to Morgans in the action. It is also undisputed, though, that at the time of those conversations Benjamin was no longer an employee of Morgans, but instead retained as a consultant for Morgans on a contract basis. The question is thus whether Benjamin comes within Morgans' attorney-client privilege regardless.

         Counsel for Morgans contended, both in the deposition and on the present motion, that the privilege shielded Benjamin's communications with counsel because Benjamin was the "functional equivalent" of a Morgans employee. (See Aff. of Patrick L. Selvey, NYSCEF No. 84, at 3-5; Deposition Tr. NYSCEF No. 74, at Tr. 43:22-44:13, 48:19-49:5.) Under this doctrine, the attorney-client privilege will shield otherwise-qualifying communications between a corporation's counsel and an individual providing services to the corporation on a contract basis, where the individual is, functionally speaking, acting as a corporate employee rather than a fully independent contractor. (See Pecile v Titan Capital Grp., 119 A.D.3d 446, 447 [1st Dept 2014], citing Matter of Copper Mkt. Antitrust Litig., 200 FRD 213, 219-219 [SDNY April 30, 2001]. [1])

         The attorney-client privilege must be "narrowly construed," because the "privilege shields from disclosure pertinent information and therefore 'constitutes an 'obstacle' to the truth-finding process.'" (Ambac Assur. Corp. v Countrywide Home Loans, Inc., 27 N.Y.3d 616, 623 [2016], quoting Matter of Jacqueline F., 47 N.Y.2d 215, 219 [1979].) Since the functional-equivalent doctrine expands ...

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