Bolton v Weil, Gotshal & Manges LLP

[*1] Bolton v Weil, Gotshal & Manges LLP 2005 NY Slip Op 52329(U) [14 Misc 3d 1220(A)] Decided on September 16, 2005 Supreme Court, New York County Madden, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on September 16, 2005
Supreme Court, New York County

Michael Bolton and MR. BOLTON'S MUSIC, INC., Plaintiffs,

against

Weil, Gotshal & Manges LLP and ROBERT G. SUGARMAN, Defendants.



602341/03

Joan A. Madden, J.

Plaintiffs move to compel defendants to serve documents responsive to items 40 and 41 of their document request dated March 25, 2004, to compel defendants to serve all documents withheld pursuant to a privilege log dated October 4, 2004, and to fully comply with plaintiffs' demand for insurance information. Defendants oppose the motion, which is granted to the extent set forth below.

Background

This action was brought by Michael Bolton ("Bolton"), and Mr. Bolton's Music, Inc., his personal services company, against Weil, Gotshal & Manges LLP ("Weil Gotshal") and Weil Gotshal partner Robert Sugarman ("Sugarman"), arising out of Weil Gotshal's representation of Bolton, a musician and songwriter, in connection with a copyright infringement action brought by Three Boys Music, Inc. in 1994 ("the Three Boys Music action"). The plaintiffs in the Three Boys Music action contended that Bolton's 1991 hit "Love is a Wonderful Thing," which Bolton co-authored with Andrew Goldmark ("Goldmark"), infringed on the copyright of a song of the same title written by the Isley Brothers in 1964. Plaintiffs herein allege that Weil Gotshal and Sugarman breached their fiduciary duties to them as a result of a conflict of interest while representing them and their co-defendants Warner-Chappell Music Limited, Bolton's music publishing company ("Warner-Chappell"), and Sony Music Entertainment, Inc., Bolton's record [*2]company ("Sony"), and Goldmark..[FN1] The Three Boys Music action resulted in a jury verdict against the defendants, which was upheld on appeal.

Plaintiffs further allege that Bolton was not aware of his indemnity obligations to Warner Chappell and Sony Music, did not know that TIG Insurance Company, Warner Chappell's insurer (TIG), intended to assert its subrogration rights against him, and did not knowingly consent to joint representation in light of divergent interests giving rise to a conflict of interest among the defendants (Complaint, ¶ 9). Plaintiffs also allege that Weil Gotshal failed to assert an insurance coverage claim on their behalf (id.). Specifically, plaintiffs allege that Weil Gotshal's handling of Bolton's defense was tainted by the fact that it was being paid by TIG, whose sole agenda was pushing the case to trial, because obtaining an adverse judgment was the only way it could fully recover from Bolton under an indemnity agreement (id.). Plaintiffs also allege that, since settlement was not in TIG's interests, Weil Gotshal took steps to purposely undermine his ability to settle the Three Boys Music action, including failing to advise him of several settlement opportunities (id., ¶¶ 9, 53-62, 70-76). Bolton asserts that, as a result of Weil Gotshal's alleged conflict of interest, he was unable to settle the Three Boys Music action (id., ¶¶ 52-83).[FN2]

Items 40 and 41 of plaintiffs' document request, seek, in relevant part, (1) "all documents concerning guidelines, procedures, or standard established or followed by defendant for...(ii) the process by which new client or new matters are checked for conflicts," and (2) "all documents concerning any research analysis or review (including but not limited to those referred to generally among members of the legal community as conflict checks') by defendant of conflicts or potential conflicts that were or could have been created by or present by reason of defendant's representation of any of the parties to the Three Boys Music litigation."

Defendants objected to item 40 on the grounds that it was not directed to "material and necessary" information and on the grounds that it "seeks confidential and proprietary information." However, after Bolton made the instant motion, defendants produced a memorandum from Weil Gotshal's Ethics Committee regarding "internal conflict clearance guidelines."

With respect to item 41, defendants initially objected to it on various grounds, including that it sought matters absolutely privileged as work product under CPLR 3101[c]. However, on August 12, 2004, the parties entered into a consent order under which defendants agreed to produce documents responsive to item 41, with a log of all withheld or redacted documents as required by the CPLR. Defendants subsequently produced an inter-office memo dated March 24, 1992 addressed to Mr. Sugarman advising there were "matches" with the "entities and person identified" on Mr. Sugarman's "New Matter Form." The form then states that "the following matters resulted in Matches' with the entities and persons identified on your new matter sheet." It then instructs the recipient, in this case Mr. Sugarman, to "PLEASE COMPLETE THIS [*3]FORM AND SEND IT TO THE ETHICS COMMITTEE MEMBER IDENTIFIED ABOVE WITHIN ONE WEEK." The remainder of that page and the next six pages are blank. Next, there is a 2-page form dated March 19, 1992, that is entitled New Matter Sheet which identifies Michael Bolton as the client in the Three Boys action and also identified his co-clients. The form is stamped "pending conflicts clearance."[FN3] The next eleven pages are blank.[FN4] Then, there is a second, apparently a duplicate copy of the March 19, 1992 New Matter Sheet.

Plaintiffs also seek certain documents which were withheld pursuant to a privilege log dated October 4, 2004. A review of the 19-page log containing 162 items indicates that the majority of the documents involve communications with or concern Bolton's co-defendants, Warner-Chappell, Sony, and Goldmark, who, as previously noted, were also represented by Weil Gotshal and Sugarman in the Three Boys Action, and were withheld on the basis of the attorney-client and/or work product privileges. Certain other documents were withheld as "internal" Weil Gotshal documents and it is specified on the log that these documents concern "outstanding fees" (items 83, 84, 122), internal memoranda (items 4,5), internal analyses/ assessments (items 56, 61,94,153), or internal administrative matters (items 124, 125, 149,151,161). Other items are withheld/redacted on the ground that they contained personal information unrelated to the case (items 155-160).

Plaintiffs next seek insurance information pursuant to CPLR 3101(f). Defendants object, arguing, inter alia, that plaintiffs seek information beyond that permitted under CPLR 3101(f), and that plaintiffs obtained certain insurance information when the parties attempted to resolve their dispute through mediation.

Discussion

The central issue on this motion concerns the extent to which defendants must provide plaintiffs, as their former clients, with documents in Weil Gotshal's file regarding its joint representation of Bolton and his co-defendants, in the Three Boys Action. Both sides agree that the resolution of this issue is controlled by the Court of Appeals decision in Sage Realty Corp. v. Proskauer Rose Goetz & Medelsohn, LLP, 91 NY2d 30 (1997).

Sage Realty Corp, like this case, involved a dispute regarding the extent to which the former clients of a law firm were entitled to the contents of a law firm's file relating to their representation. In Sage Realty Corp, the law firm represented the clients in a mortgage financing and commercial real estate ownership restructuring. After the transactions were completed, the clients had a falling out with the law firm and retained new counsel in connection with matters related to the transaction. When their new lawyers sought the file in the matter, the law firm refused to turn over a large number of items, primarily on the grounds that the clients were only entitled to finished product of their representation, and, thus, excluded various items, including those identified as internal legal memorandum, drafts of instruments and notes. The trial court and the Appellate Division, First Department decided the matter in favor of the law firm, and the clients appealed to the Court of Appeals, which reversed. [*4]

In doing so, the Court of Appeals rejected the minority view followed by the First Department which "distinguish[es] between documents representing the end product' of an attorney's services, which belong to the client, and the attorney work product' leading to the creation of those end product documents, which belongs to the attorneys." 91 NY2d at 35 (citations omitted). Instead, the Court of Appeals adopted the majority position on the issue which "upon termination of the attorney-client relationship, where no claim of unpaid legal fees is outstanding, presumptively accord[s] the client full access to the entire attorney's file on a represented matter with narrow exceptions." Id. at 34 (citations omitted). Thus, the Court of Appeals held that in the absence of a showing by the law firm "of good cause to refuse client access, [the clients] should be entitled should be entitled to inspect and copy work product materials, for the creation of which they paid during the course of the firm's representation." Id at 37.

With respect to the narrow exceptions to the general rule that a client should be afforded full access to its file, the court wrote that the law firm "should not be required to disclose documents which might violate a duty of nondisclosure owed to a third party, or otherwise imposed by law." 91 NY2d at 37. Furthermore, it wrote that "nonaccess would be permissible as to firm documents intended for internal law office review and use." Id. In construing the internal law office exception, the court wrote:

The need for lawyers to be able to set down their thoughts privately in order to assure effective and appropriate representation warrants keeping such documents secret from the client involved.' (quoting, Restatement [Third] of Law Governing Lawyers, § 58, comment c). This might include, for example, documents containing a firm attorney's general or other assessment of the client, or tentatively preliminary impressions of the legal or factual issues presented in the representation, recorded primarily for the purpose of giving internal direction to facilitate performance of legal services entailed in that representation. Such documents presumably are unlikely to be of any significant usefulness to the client or successor attorney.

Id. at 37-38.

Upon remittal, the court directed that the disputes concerning access to internal law firm files should be resolved by the trial court "through a hearing which might necessitate in-camera review." Id. at 38.

Applying the principles established by Sage Realty Corp to this case, the court finds that defendants must provide to plaintiffs documents responsive to items no. 40 and 41. While the documents sought in items 40 and 41 concern Weil Gotshal's internal process and guidelines for checking for conflicts regarding new clients or matters, the rationale for the exemption for internal law firm documents as set forth in Sage Realty Corp is inapplicable to these documents. The court in Sage Realty Corp, wrote that "[s]uch documents presumably are unlikely to be of any significant usefulness to the client or successor attorney." 91 NY2d at 38. In contrast, here, where Bolton claims that Weil Gotshal and Sugarman breached their fiduciary duties based on a conflict of interest arising out of their joint representation of Bolton, Warner-Chappell, Sony, and Goldmark, the documents are directly relevant to the issues in this action.

In addition, to the extent that documents reflecting Weil Gotshal's internal guidelines [*5]contain proprietary information, a confidentiality order can be issued to protect such information. See e.g., McLaughlin v. G.D. Searle, Inc., 38 AD2d 810 (1st Dept 1972)(holding that party is entitled to discovery of relevant and necessary information which is confidential but that such information should be accorded judicial safeguards where possible); Burkwell v. BIC Corp., 168 AD2d 532 (2d Dept 1990)(permitting disclosure of documents containing trade secret information where court adopted reasonable and adequate safeguards to prevent dissemination of such information). Based on the submissions on this motion, it is unclear whether any of the documents contain proprietary information. However, to the extent the parties can agree as to which documents or portions thereof contain proprietary information, they may enter into a confidentiality stipulation with respect to such documents. In the absence of such agreement, defendants are directed to provide any documents that are purported to contain proprietary information to the court for in-camera inspection, together with a specific explanation as to reasons for designating the information proprietary.

Next, the documents withheld in the privilege log as internal Weil Gotshal documents should be produced for in-camera inspection. In addition, the documents withheld or redacted as personal documents not relevant to the dispute should be produced for in-camera inspection. All documents produced for in camera inspection shall include an explanation specifically delineating the basis for the objection. However, with respect to those documents identified as internal firm documents which concern payment of "outstanding fees" and which defendants are seeking to protect under the work product privilege, the court notes that, in general, information about fees, paid by a client are not privileged. Priest v Hennessy, 51 NY2d 62, 69 (1980). Accordingly, defendants are directed to provide the internal documents concerning outstanding fees to plaintiffs

The next issue concerns the propriety of withholding certain documents on the grounds that they are privileged as they concern communications between Weil Gotshal and Bolton's co- defendants in the Three Boys Action. As indicated above, Weil Gotshal and Sugarman jointly represented Bolton, Warner-Chappell, Sony, and Goldmark in the Three Boys Action. While Sage Realty Corp indicated disclosure to a former client should not be required when such disclosure might violate a duty owed to a third party, that exception does not apply here, as the third-parties at issue were jointly represented with the party seeking the discovery, and the underlying action is against the law firm which jointly represented them, and is based on allegations of a conflict arising out of such joint representation.

When an attorney represents multiple parties concerning a matter of common interest, any confidential communications exchanged are protected from disclosure from third-parties. See Wallace v. Wallace, 216 NY 28, 33 (1915); People v. Pennachio, 167 Misc 2d 2d 114 (Sup Ct Kings Co. 1995). In contrast, when an attorney represents clients jointly, a client cannot reasonably expect that the attorney will keep information from the other clients. See e.g. Talvy v. American Red Cross of Greater New York, 205 AD2d 143, 150 (1st Dept 1994), aff'd, 87 NY2d 826 (1995)(holding that where attorney represents an employer and employee jointly, the employee could not have reasonably assumed that the attorney would have withheld information from the employer that it had received from the employee during their joint representation); Frontline Communications Intern'l Inc. v. Sprint Communications Co., 232 F2d Supp 281 (SD NY 2002)(same); see also, Restatement (Third), The Law Governing Lawyers, § 75, Comment d [*6](noting that "[r]ules governing the co-client privilege are premised on the an assumption that co-clients usually understand that all information is to be disclosed to all of them").

Thus, it has been held that "the attorney-client privilege may not be raised to prevent disclosure of communications relevant to the common interest of former joint clients in subsequent litigation." In the Matter of McCormick, 287 AD2d 457 (2d Dept 2001); see also Wallace v. Wallace, 216 NY at 33; In the Matter of Friedman, 64 AD2d 70, 84 (2d Dept 1978). This exception is based on the public policy underlying the attorney-client privilege which is to "encourag[e] full disclosure between a client and his attorney and the need to protect their confidential relationship" rather than to "conceal[ ] evidence..." See Finn v. Morgan, 46 AD2d 229, 234 (4th Dept 1974). Moreover, "the fact that allegedly confidential information may operate to the client's disadvantage does not operate to extend the privilege to areas where it does not otherwise exist." Id. ; see also, Arnold Constable Corp. v. Chase Manhattan Mortgage and Realty Trust, 59 AD2d 666 (1st Dept 1977).

Here, the disclosure of documents in Weil Gotshal's files which reflect communications between the Weil Gotshal and Sugarman, as counsel, and their clients Warner-Chappell, Sony, and Goldmark in the Three Boys Action, are not protected by the privilege as the documents concern matters that were relevant to the common interest of the joint clients, including Bolton, and are relevant to the issues in the instant litigation. Thus, Warner-Chappell, Sony, and Goldmark have no reasonable expectation of confidentiality with respect these documents. Moreover, although this disclosure could be potentially disadvantageous to them, as indicated above, this fact does not in itself bar its disclosure. Additionally, to the extent the plaintiffs and Warner-Chappell, Sony, and Goldmark are alleged to have had conflicting interests in the Three Boys Action, any such purported conflict does not render their individual communications with their joint attorneys confidential. Finn v. Morgan, 46 AD2d 229 (noting that if clients "decide

[ ]... to cast their lot together ...in a fact situation implicit with conflicting interests, there is no reason to protect them from the consequences of that choice when their interests later diverge." ).

Defendants argue that as this litigation does not involve a dispute among former co-clients, i.e. between Bolton and Warner-Chappell, Sony, and Goldmark, that the documents at issue are protected by the attorney-client and/or work product privilege. In support of this argument, defendants assert that case law holding that the attorney-client communications are not privileged in subsequent litigations involves disputes between former clients. See e.g. Wallace v. Wallace, 216 NY at 33 (attorney-client communications "are not privileged in a controversy between the two original parties");In the Matter of Friedman, 64 AD2d at 84 ("nothing that is said by the parties or the attorney is deemed confidential in an action arising subsequently thereto between the parties or their personal representatives.").

Defendants' position is unavailing. Although the cases relied on by plaintiffs are factually distinct from the instant one in that they involve disputes between former co-clients, this distinction does not provide a basis for denying disclosure of communications between the defendants and Warner-Chappell, Sony, and Goldmark in the Three Boys Action. Significantly, like cases involving disputes between former co-clients, in the instant case, as previously indicated, Warner-Chappell, Sony, and Goldmark , as co-clients represented by defendants, would have no reasonable expectation of confidentiality with respect the documents containing communications which were relevant to their common interest as joint clients, and are at issue in [*7]this litigation between Bolton and the defendants. Moreover, as the instant action involves a dispute between a former co-client and the law firm which provided the joint representation, and not a third-party or stranger to the original litigation, there is no basis for retaining confidentiality of the communications. See e.g. Old Homestead Enterprises of Saratoga, Inc. v. William R. Hall, Jr. Enterprises, Inc., 102 AD2d 935, 936 (3d Dept 1984) (holding that where attorney jointly represented plaintiff and various other clients in connection with a real estate transaction, that attorney-client privilege did not apply to protect communications between the lawyer and the various clients in a subsequent action arising out the transaction in which plaintiff sued its attorney for legal malpractice as well as its former co-clients).[FN5]

Accordingly, as the privilege does not apply, the documents withheld on the ground that they involve privileged communications between defendants, as counsel, and Warner-Chappell, Sony, and Goldmark in the Three Boys Action must be turned over to the plaintiffs.

Plaintiffs also seeks insurance information from defendants pursuant to CPLR 3101(f). Specifically, plaintiffs seek disclosure of the following information: (1) complete copies of all primary excess and umbrella insurance policies by which a judgment in this action may be satisfied, (2) as to each policy, specific data pertaining to unrelated claims against Weil Gotshal that are covered by the subject insurance policies, and (3) a sworn statement describing to the extent to which Weil Gothshal is self-insured.

CPLR 3101(f) provides in relevant part that "[a] party may obtain discovery of the existence and the contents of any insurance agreement under which any person carrying on an insurance business may be liable to satisfy part of all of a judgment which may be entered in an action or to indemnify or to reimburse payments made to satisfy the judgment."

The statute is intended "to accelerate the settlement of claims by affording the plaintiff the knowledge of the limits of the defendant's liability policy." Spotlight Co., Inc. v. Imperial Equities Co., 107 Misc 2d 124, 125 (App Term 1st Dept 1981). In keeping with this policy and based on the language of 3101(f), courts have required defendants to provide a certified or true copy of the insurance policies demanded by the plaintiff. See Russo by Russo v. Rochford, 123 Misc 2d 55, 68-69 (Sup Ct Queens Co. 1984); Evans v. Lerch, 182 Misc 2d 887 (Sup Ct. NY Co. 1999). Moreover, it has been held that the disclosure of an insurance policy includes all primary and excess coverage. Love v. Meisner, 107 Misc 2d 1003, 1004 (Sup Ct Schenectady Co. 1981); 44 NYJur2d Disclosure § 171 (2d ed 2005).

Next, contrary to defendants' argument, there is no basis for finding that CPLR 3101(f) [*8]applies only to tort actions.[FN6] Notably, the statute does not include any such limitation. In addition, while plaintiffs were provided with certain information regarding defendants' insurance in connection with mediation, defendants have not provided plaintiffs with copies of the requested insurance policies. As plaintiffs are entitled to such policies, defendants must produce them.In addition, while it appears that defendants indicated the amount of their self-insurance during the mediation, plaintiffs are entitled to a sworn statement or other evidence verifying this statement.

On the other hand, plaintiffs may not obtain data pertaining to unrelated claims against Weil Gotshal that are covered by the subject insurance policies. Such information has been held to be beyond the parameters of CPLR 3101(f) and is not otherwise discoverable. See Weiner v. Lenox Hill Hospital, 164 Misc 2d 759 (Sup Ct NY Co. 1995), aff'd, 224 AD2d 299 (1st Dept 1996)(holding that CPLR 3101(f) does not authorize discovery of information from hospital regarding other claims); Evans v. Lerch, 182 Misc 2d at 891 (holding that information regarding third-party (insurance) claims is not discoverable), together with a specific explanation as to the basis for withholding the documents. Accordingly, defendants need to provide the information regarding unrelated claims covered by the relevant policies.

Conclusion

In view of the above it is

ORDERED that within 20 days of the date of this decision and order, defendants shall submit to the court for in-camera inspection all documents identified on the privilege log dated October 4, 2004, as internal memoranda (items 4,5), internal analyses/ assessments (items 56, 61,94,153),internal administrative matters (items 124, 125, 149,151,161), and as documents withheld or redacted on the ground that they contained personal information unrelated to the case (items 155-160); and it is further

ORDERED that within 20 days of the date of this decision and order, defendants shall provide to plaintiffs, (1) all documents responsive to items 40 and 41 of plaintiffs' document request dated March 25, 2004, (except those alleged to contain proprietary information), (2) all documents identified on the privilege log, except those documents which are not subject to in-camera inspection as ordered in the preceding paragraph, (3) all documents identified on the privilege log dated October 4, 2004, as internal documents regarding outstanding fees (items 83, 84, 122), and (4) complete copies of all primary excess and umbrella insurance policies by which a judgment in this action may be satisfied, and a sworn statement describing to the extent to which Weil Gothshal is self-insured; and it is further

ORDERED that within 45 days of the date of this decision and order defendants shall provide to this court for in-camera inspection any documents which are claimed by defendants to contain proprietary information and for which the parties have not agreed to maintain their [*9]confidentiality pursuant to a confidentiality stipulation.

DATED: September,2005

J.S.C.

Footnotes

Footnote 1:Goldmark and his company, NonPareil Music, Inc. originally was represented by separate counsel. However, defendants subsequently took over their representation.

Footnote 2: In its third-party complaint, Weil Gotshal sets forth a claim for contribution against third-party defendants Epstein, Levinsohn, Bodine, Hurwitz & Weinstein, LLP and Robert J. Epstein (Epstein), Bolton's personal lawyers.

Footnote 3:Plaintiffs contend that the second page of the form is not signed by the "Ethics Committee Designee," as appears to be required as the New Matter Sheet is stamped "Match."

Footnote 4:All blank pages are presumably redacted.

Footnote 5:Defendants also argue that under section 46 of The Restatement (Third) Governing Lawyers, there is an exception to disclosure of documents to a client where "a substantial grounds" exists to refuse to produce such documents. However, the comments to the section indicate that such substantial grounds relate to when, inter alia, the documents contain confidences of another client that the lawyer was required to protect, and, as indicated above, there is no basis here for withholding the documents on that ground. The comments further state that an attorney may refuse to disclose certain internal documents, but also provide that under such circumstances "a tribunal may properly order discovery of the document[s], when discovery rules so provide."

Footnote 6:Defendants cite St. Paul Fire and Marine Insurance Co. v. Bernstein Management Corp., 158 Misc 2d 1047 (Civ Ct City of NY 1993) in support of this position. However, while remarking that tort suits were the main concern fueling the passage of CPLR 3101 (f), the court in St. Paul Fire did not hold that the statute applies only tort actions. Instead, the court held, that the statute was inapplicable since it was a subrogation action and the insurance policy was directly relevant to the issues involved.