East Hampton Union Free School Dist. v Sandpebble Builders, Inc.

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East Hampton Union Free School Dist. v Sandpebble Builders, Inc. 2012 NY Slip Op 30941(U) April 9, 2012 Sup Ct, Suffolk County Docket Number: 07-01113 Judge: Thomas F. Whelan Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] copy SHORT FORM ORDER INDEX No. CAL. No. 07-01113 SUPREME COURT - STATE OF NEW YORK IAS. PART 33 - SUFFOLK COUNTY PRESENT: Hon. THOMAS F. WHELAN Justice of the Supreme Court MOTION DATE 2/24/12 ADJ. DATE Mot. Seq. # 008- MolO Conf. Date: 4/27/12 ---------------------------------------------------------------X EAST HAMPTON UNION FREE SCHOOL DlSTRJCT, Plaintiff, - against - PINKS ARBEIT & NEMETH Attorneys for Plaintiff 140 Fell Court, Suite 303 Hauppauge, NY 11788 ESSEKS HEFTER & ANGEL Attorneys for Defendants 108 East Main Street, PO Box 279 Riverhead, NY 11901 SANDPEBBLE BUILDERS INC. and VICTOR CANSECO, Defendants. ----------------------------------- - ········-X Upon the following papers numbered 1 to 30 read all this motion to compel discovery ; Notice of MOlionl Order to Show Cause and supporting papers 1 - 16 ; Notice of Cross Molion and supporting papers ; Answering Affidavits and supporting papers 17 - 22 ; Replying Affidavits and supporting papers 23 - 28 ; Other defendant's memorandum onaw 29 - 30 ; (ltlld llltC, helll iug.eotlliseJ ill .~l1pperr1 Imd ()pposed to tile litOlion) it is, ORDERED that defendants' motion for an order pursuant to CPLR 3]24 compelling the plaintiff to comply with and respond to the defendants' first demand for discovery and inspection dated January 23, 2007 and second demand for discovery and inspection dated July 17, 2008 is determined as set forth below; and it is further ORDERED that plaintiff is directed to serve the documents for which the Court has found that the School District has waived the attorney-client privilege, and those documents which do not fall under lhe work product doctrine within thirty days of service of a copy of this order with notice of entry; and it is further [* 2] E8St Ilmnplon Union Free School District v Sandpcbble Builders Index Number 07-01 I 13 Page 2 ORDERED that if plaintiff falls to comply with this order, defendants may move for relief pursuant to CPLR 3126; and it is further ORDERED that the parties are directed to appear for a compliance conference in the chambers of the undersigned on Friday, April 27, 2012 at 9:30 a.m. In this breach of contract action, plaintiO' East I-lampton Union Free School District (hereinafter "the School District") seeks, in the [LfStcause of action. ajudgment declaring a written conrract, dated 1\priI2002, to be void. abandoned and/ofterrninated and unenforceable, in the second cause of action. ajudgment declaring that defendants, Sand pebble Builders. Inc. and Victor Canscco (hereinafter "Sandpebblc''). breached the duty of good faith and fair dealing. and in the third cause of action, damages for defendants' alleged breach of an oral estimating services contract. The complaint alleges that in April of 2002 Sandpebble entered into a contract with the School District to perform cerlain construction management services in connection with a proposed $18 million construction project for renovations and expansions to the school system. The complaint alleges that the April 2002 contract and the $18 million project were abandoned in late 2004. Subsequcntly. the School District contemplated a new $90 million project for renovations and expansions to the schoo! system. On June 21, 2005, a $90 million municipal bond ollering was put to a vote and rejected by thc voters of the School District. Thereafter, the School District contemplated a new $80 million renovation project for its school system. In early 2005, it is alleged that the School Districl requested and Sandpebble agreed to perform certain estimating services in anticipation of [he $80 million project and the District paid Sandpebblc approximately $200,000.00 to perform under the Estimating Services Contract. The complaint alleges that Sandpebble never performed the Estimating Services Contract. On March 21. 200o, an $80 million municipal bond offering was put [0 a vote and approved by the voters ofthe School District. The complaint further alleges that the parties engaged in negotiations for an agreement (0 have Sand pebble perform construction management services in connection with the $80 million project, however negotiations j~li ed. 011 September 19,2006, the School District issued a request for proposals and Imcd another l construction1l13nager. On December 4,2006, the complaint alleges that Sand pebble served a notice or claim 011 the School District. The instant action was commenced on January 7, 2007. Subscqucntly. Sundpebblc moved for summary judgment dismissing the complaint and for partial summary judgment on its first counterclaim against plaintifr. In determining Sandpebblc's motion I-orsummary judgment. by Order dated May 12, 20 I0 (Pines . .I.).the Cour! granted that branch of Sandpebble's summary judgment mOlion dismissing that pan of the first cause of action of the complaint which sought a declaration that the April 2002 document is void. Ilowever. the Court found that triable issues or fact remained regarding whcther the project contcmplatcd by thc 2002 Agreemcm was subscqucntly abandoned and if so. whether plaintilTproperly terminated thc contract with Sandpebble and denied the remainder of defendants' [* 3] East I fampton Union Free School District v Sandpebbk Builders Index Number 07-01113 Page 3 motion seeking dismissal of the second and third causes counterclaim lor breach of contract 0 f action. as well as defendants' Upon appeal of the Court's Order. by Order dated Deccmber 20.2011, Division, Scnmd Department held: the Appellate The order is l1lodilied, on the law, by deleting the provision thereof denying that branch of thc defcndants' motion which was 1'01' summary judgmcnt dismissing the second cause of action, and substituting therefor a provision granting that branch of the motion; as so modi lied. the ordcr is arJirmcd insofar as appealed and cross-appealed from, without costs or disbursements, and the maHer is remitted to the Supreme Court, Suffolk County, for further proceedings on so much of the first cause of action as sought a judgment declaring that thc plaintilTproperly terminated the contract in accordance 'with its terms, the third cause of action, and the counterclaims and, thereafter, for the entry of a judgment, inter alia. declaring that the contract dated April 2002 is valid and enforceable and dismissing the second cause of action. Sandpebble now moves for an order pursuant to CPLR 3124 to compel the School District to comply with its discovery demands dated January 23, 2007. and July 17,2008. Counsel lor Sand pebble aftirms that there are six categories of documents which have been withheld from Sandpebble which are: documents which were either authored by, sent to, or copied to Michael E. Peters, Esq., documents that were either authored by, or sent to, attorneys with the law 1irm or Hawkins, Delafield & Wood, documents which appear to be solicitations by the School District for counsel lor a bond referendum, documents that are identified as privileged but tbe author and recipicnt are not identilicd. and documents that arc identified in a letter dated April 29, 2010 from the School District's former counsel. In support of Its motion, Sandpcbblc contends that its position in this case is that it was hired by the School District to act as constTuction manager for a project that varied in scope. The School District considered various projects a" low as $20 million and as high as $120 milhon, but linally settled on an $80 million project that was approved by the District's voters. Sandpebble asserts that there never was a discreet $18 million project. Sand pebble further argues that the School District's reliance on the allorney-clicnt privilege and/or the work product privilege. and the dcficient manner in which it has responded to other discovcry dcmands. has frustrated Sand pebble 's CflOl1sto obtain l~lctsthat bear upon the issues ofwhcther the April 2002 contract was tern1illatcd and abandoned and whcth~r the School District has sustained any damages as a rcsuli of what it claims is the breach of an oral ~stil11atingservices agreement with Sandpebblc. In addition, Sand pebble claims that the [* 4] East !-Iampton Union Free School District v Sand pebble Builders Indcx Nurnber07~01113 Page 4 School DistTict's refusal 10complete document discovery is delaying the scheduling and completion of depositions. Sandpebblc submits. among other things. its first and second demands fordiscovcry and inspection. thc School District's responses, copies ofthc School District's privilege logs, and the personal anidavit by Michael E. Peters, Esq. with attachments. Sand pebble argucs that, in particular, the 19-page personal aflidavit by Michael E. Petcf.'O. Esq., submitted to r<liscan issue of fact in opposition to S<lndpebble's motion for sLll11ll1aryjudgment with rcspcct to abandonment o1'the project, disl.:usses facts [hat were based upon his own personal knowledge and upon a revicw urlhe file retaincd by the finn while he was ernployed by Morgan Lewis. the former counsel to the School District. Petcrs states that he worked on the School District's contemplatcd construction projects for the renovation and expansion of ils f~lcilities Irom 2004 through 2007. and had extensive contact with the School District and its Board, individuals in the School District's business office and defendant Canseco, the principal of Sandpebble. His affidavit discloses the details of his negotiations between the School District and Sand pebble. Sandpebble contends that the affidavit demonstrates that Peters is a central figure in the litigation by his char2.cteri7.ation of termination letters that he sent to SandpebbJe on April 13.2005. May 20. 2005. and November 11,2005, which led the Supreme Court to determine that there were issues of fact sullieient to defeat Sandpcbble's motion for summary judgment. Sandpcbble contends that such testimony demonstrates that the School district is deemed to have impliedly waived the attorncyclient privilege and any related work product privilege that might apply to anything Peters authored or received pertaining to the alleged termination and abandonment of the April 2002 agreement. The remainder of the documents which Sand pebble requests are based upon its observation that the privilege log does not contain sufficient information to be able to determinc whether the communications werc confidcntial communications made for the purpose of obtaining legal advicc or services, or whether they contain any underlying factual information that is relevant to the issues in this case and would not be protected by a privilege, such as, among other things, a description of the project that is relevant to this case. In addition, Sandpcbble claims that the School District has refused to disclose doculllents that pertain to the amount or damages that it will be claiming at trial. In opposition. the School District claims that Sand pebble 's motion to compel is a merit less attcmpt to eviscerate the School district"s attorney-client/work product privilege by manufactured discovery disputes which arc four years old. The School District further arguc5that it has not waived any privileged by the tiling or Michael E. Peters' affidavit. and denies that it has placed any pnvilcgcd communications at issue in this lawsuit In addition. the School District argues that the privileged material is 1101required to determine the validity of the School District's claims or dclcnses nor is such information vital to Sandpebblc. The School Dislrict further states that extensive discovery has already been provided and all that remains is the material listed in the privilege logs. [* 5] East j-Jampton Union Free School District v SandpcbbJe Builders Index Number 07-01113 Page 5 In reply, Sand pebble asserts that motion practice and five subsequent appeals have consumed the five years that have passed since the commencement of this action and none of the parties have been deposed_ In addition, Sandpebble recalls that plaintifPs counsel did not want to proceed \vith any discovery until the pending appeals were determined, which did not occur until recently, on December 20, 2011. With regard to Peters' affidavit, in light of the fact that he interposed himself as a fact witness for the purpose of defeating Sandpebble's motion for summary judgment, and because there IS no other documentary support or basis fix the statements that Peters made on behalf of the School District that there was an $18 million project that had been abandoned are at issue in this case, Sandpebble is entitled to diselosure of the basis of his personal knowledge, of his "percipient" knowledge and of his knowledge based upon information and beliefofmatters that he believes are true. Sand pebble contends that the issue of outstanding document disclosure must be resolved before it can proceed with any party depositions of the School District. The burden of establishing that certain documents arc privileged and that the privilege has not been waived is on the party asserting the privilege (Spectrum S)!s.lntl. Corp. I' Chemical Bank, 78 NY2d 371,377,575 NYS2d 809[1991J; 148 il1agnolia, LLCv Merrimack Milt. Fire fns. Co., 62 AD3d 486, 487, 878 NYS2d 727 [1st Dept 2009]; Jolm Blair Communications v Reliance Capital Group, L.P., 182 AD2d 578, 582 NYS2d 720 [1st Dept 1992]). The burden cannol be satisfied by counsel's eonc!usory assertions of privilege and competent evidence establishing the privilege must be sel forth by the party asserting the privilege (Claverack Coop. Ins. Co. v. Nielsen, 296 AD2d 789, 745 NYS2d 604 [3d Oept 2002]; Agovino v Taco Bell SOX3, 225 AD2d 569, 639 NYS2d III [2d Dep11996j; Martillo v Kalbachel", 225 AD2d 862, 639 NYS2d 144 [3d DepI1996]; Smith v Ford Foundation, 231 AD2d 456, 647 NYS2d 82 [1st Dep1 1996]). The burden of proving each element of the privilege rests upon the party asserting it and even if the technical requirements of the privilege are satisfied, it may, nonetheless, yield in a propcr case where strong public policy requires disclosure (Ro.\·siv Blue Cross & Blue Shield, 73 NY2d 588, 592, 542 NYS2d 5081.1989]; Priest v Helllles!)y, 51 NY2d 62. 68-69, 431 NYS2d 51] [1980]). Whether a particular document is or is not protected by a privilege is necessarily a fact-specij-ic determination, usually requiring an in camera review (Spectrum Sys. Jlltl. Corp., supra; Roni v Blue Cross & Blue Shield, supra). "1 D]ocumenlary communications are not confidential if copies thereof are sent to third parties" (see /Vetherhy Ltd. v G. V. Trademark b,v!"., 261 AD2d 161,689 NYS2d 488 1-1t Dept 1999]). s Pursuant to CPLR 4503 (a), the client may expressly or impliedly waive the pnvilegc. Waiver is implied when a clicnt voluntarily testifies to a privileged matter, publicly discloses such matter, or permits their attorney to testify regarding the matter (Jakohlej(v Cerrato, Sweeney & Cohn, 97 i\D2d 834, 468 NYS2d 895 [2d Dept 1983]). "A privilege may be impliedly \vaived vvhere a party makes assertions in the litigatioll or asserts a claim that in fairness requires examination ofprotectcd communications" (Granite Partners v Bear, Steams & Co., Inc., 184 FRD 49,55,42 Fcd R SeTv 3d 806 rSDNY ] 999]). A waiver may also be found v·,rhcrethe client places [* 6] East Hampton Union Free School District v Sand pebble Builders Index Number (n-011!3 Page 6 the subject matter orthe privileged communication in issue (Jalwbleffv Cerm/o, Sweeney & Cohn, An at issue waiver requires that the pal1y asserting privilege: SlIprtt). "places the subject matter of its own privileged communication at issue in litigation, so that the invasion of the privilege is required to detennine the validity ofa claim or defense of the party asserting the privilege. and application of the privilege would deprive the adversary of vital infomlation" (Deutsche Balik Trust Co. of Ams. )1 Tri-Links Illv. I'm . ¢ ¢ 43 AD3d 56, 63. 837 NYS2d t, 15llst Dept 2007]). Ilere, the Court finds that the School District has failed to meet its burden of demonstrating that its communications with counsel are protected by the attorney-client privilege. Moreover, selective disclosure is not pemlitted as a party may not rely on the protection of the privilege regarding damaging communications while disclosing other self-serving communications (see Village Board of Pleasantville v Rattner, J 30 AD2d 654, 515 NYS2d 585 [2d Dept J 987]). Peters' aftidavit submitted in opposition to Sandpebble's motion for summary judgment represents an implied waiver of the attomey-client privilege as a matter of law (Jakob/effv Cerrato, Sweeney & Colrn. SlIpl'Cl). The Court also finds that the School District has placed the subject matter of its privileged communications at issue inasmuch as the communications between the school district oflicials and counsel are crucial to learning whether there was, in fact, an $18 million project or an $80 million pro.iect for which it contracted with Sandpebble to manage, and the issues that follow. Accordingly, under these circumstances. the Court finds that the privilege has been waived and disclosure is requircd. With respect to the qualified privilege of "materials prepared in anticipation of litigation," the pany asserting the privilege must first demonstrate that the materials were prepared "excluslvcly for litigation" (Commerce & Int/us,lm. Co. II. S.H. L(ll~fer Vision World, 225 AD2d 313, 314, 639 NYS2d 8 11st Oert 1996]): see CPLR. 3101 (dJI.2D. Materials prepared I~")f ore than one reason. m and not exclusively for litigation, may subject the materials to disclosure (Commerce & Int/us. hU". Co. II. S.II. Llll~fer Vi.\·iollWorld, supra at 314). !fthe party asserting the privilege has established that the materials were prepared exclusively for litigation. the party seeking the disclosure may obtain the disclosure ··only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of the case and is unable without undue hardship to obtam the substantial equivalent of the materials by other means" (CPLR 310 I ldJ[2l). But. if the materials \VL'.re prepared exclusively for litigation -- that is. the materials were created for mixed purposes not (Commerce & IIll/us. /IIS. Co. II. SoH. Laufer VisiOJl World, supra at 314. citing Mavdkl ¢ ¢ II. Brook~'lJIUnioll Gas Co.. 196 AD2d 689. 601 NYS2d 612 r15t Dept 19931) -- then § 3101 (d)(1) docs not apply and the party seeking the disclosure is "under no obligation to justify disclosure or [* 7] Eastl'lamplon Union Free School District v Sandpebble Builders Index Number 07-01113 Page 7 !the matcrialsJ with a showing of undue hardship" (Commerce & Indu.~. 111.5. Co. v. S.H. Laufer Vi.\'iOJl World. supra at 314). The School District makes no showing in its opposition that any of the documents al issue were prepared exclusively for litigation. Initially, the Court noles that the documented communications betwecn the School District and Martin Geiger, Esq. regarding a bond referendum for land acquisition. bond authori7..1ltion.and bond financing, documents to and from Hawkins, Delalleld & Wood, as bond counsel to the School District, and documents related to solicitations by the School District for counsel for a bond referendum would not have been prepared exclUSively for litigation and are discovcrable. Therefore. Sandpebble is not required to justify disclosure of these materials. Finally, the remaining issues, regarding the documents that arc identified as privileged wherein the author and recipient are not identified, the documents that are identified in a letter dated April 29, 2010 and not entered in the privilege log. and documents to and from Robert Sapir, Esq. counsel 10 the School District, arc referred to a conference on April 27, 2012 at 9:30 a.m, in the chambers of the undersigned, Counsel for the School District is directed to serve the aforementioned documents, other than documcnts pcrtaining to the remaining issues, upon counsel for Sand pebble \vithin thirty days or service of a copy of this order with notice of entry.

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