-THK Leviton Manufacturing Co. Inc. v. Greenberg Traurig LLP et al, No. 1:2009cv08083 - Document 71 (S.D.N.Y. 2010)

Court Description: MEMORANDUM OPINION AND ORDER, that Defendants' motion to compel production of documents subpoenaed from Plaintiff's successor counsel is denied. (Signed by Magistrate Judge Theodore H. Katz on 12/6/10) (pl)
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- . .- -THK Leviton Manufacturing Co. Inc. v. Greenberg Traurig LLP et al Doc. 71 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK LEVITON MFG. CO., INC., intiff, against­ MEMORANDUM OPINION AND ORDER GREENBERG TRAURIG LLP, et al., ,'. De s. ---------/:.. / Plaintiff Leviton ­x ­( Co. ("Leviton") in its "/ Complaint that rg Defendant g ., erta LLP individual attorneys at Greenberg Traur"ig were professionally negligent in prosecuting a number of patent applications be ice ("USPTO" or "Patent the United States Patent and Trademark fice") . As a consequence, t "on­sale patentability of Leviton's inventions, " foreclos because were on sale in the United States for more than one date of patent ications. is a dispute over Levi ton's invocat responsibility for handling was terminated as inventions r prior to Presently before Court of the attorney­client privilege and work­product doctrine in re issued by Defendants to the se to subpoenas, third­party law firms that assumed patents after Greenberg ton's counsel. g The subpoenas seek a wide array of documents from the successor law firms, including all Dockets.Justia.com documents relating inventions, to documents rding the s the patent ility containing any of analysis of of the cIa the Leviton or ision relevant Leviton patents, documents containing analysis relating to the decision to abandon contemplat Traurig. the patents, and or actual documents relating to any action taken against Greenbe Greenberg Traurig contends that any lege s been impliedly waived through the "at issue" waiver doctrine, as has raised claims which can only be fairly assess through examination of the subpoenaed documents. For the reasons there has not been a waiver that follow, the Court concludes of privil BACKGROUND In the Complaint, ton alleges that it disclosed to Defendants certain inventions, and that the inventions would sold to the public by a certain date. They that, over the course of several years, Defendants failed to file at least f patent applications within one year from first public sale of the inventions, that Levi ton was t pending patent applications "on­sale bar" rule, and, as refore forced to abandon lor a ents because of the consequence, ton The action was referred to this Court for general pretrial supervis n, pursuant to 28 U.S.C. § 636(b) (1) (A). 1 2 was financially harmed. (See Second Amended Complaint ("Sec. Am. Compl. ") enen 167 ­214. ) Greenberg Traurig contends that a Leviton, Trademark Leviton retained new it was dis counsel Office proceedings. for According the to rged by Patent Defendants, and at Leviton's direction, the new firms continued to prosecute some of the patents for nearly a year, and, consultation with Leviton, abandoned or disclaimed some of them only shortly before this action was fi involved in the Greenberg Traurig argues that it was not cisions to abandon or disclaim the patents, and no publicly available documents were abandoned. sclose reasons that they Consequently, Greenberg Traurig argues that, the only way for Defendants to refute Leviton's allegations its Second Amended Compla that its actions to abandon or disclaim were taken because of the Defendants' alleged failure to timely file the applications ­ and not for another reason, such as a business judgment not to pursue them or because the alleged inventions were not actually patentable is by reviewing the very documents Leviton refuses to produce. (Letter­Brief from Aaron P. Maurer, Esq. to the Court, dated Oct. 14 , 2010 ( " De f s .' Br . ") at 3.) That is, it seeks to review all of successor counsels' files relating to the patents, including the communications between Leviton and its counsel that relate to the patents and why they were abandoned. 3 , 4;1 Leviton responds that it does not intend to rely on privileged communications in proving its claims; rather, it will simply establish the dates on which the assignments were given to Defendants, and the dates on which the products went on sale. It contends that Defendants allowed five or more years to go by between receiving their assignments and applying for the patents, during which time the products were on sale. Thus, as a matter of law, the "on sale bar" foreclosed patentability. According to Plaintiff, because the one­year "on­sale bar" is absolute and cannot be waived, Defendants' malpractice can be established on the basis of a clear legal standard and objective argues that any defenses to its claims must shion, traditional through normal testimony, not by reference to Letter­Brief from Jef dated Oct. 14, 2010 (" Y A. cts. Leviton be proven in discovery and expert s privileged communications. Jannuzzo, Esq. to the Court, .'s Br.") , at 2­4.) DISCUSSION I. At­Issue Waiver The attorney­client privilege affords confidentiality to communications among clients and their attorneys for the purpose of seeking and rendering an opinion on law or legal se assistance in some legal proceeding, communications were intended to be, so long and were in 4 gn ces, or as the kept Uni ted States v. Int' 1 Bhd. of Teamsters, 119 confidential. F.3d 210, 214 (2d Cir. 1997) i Grand Jury Witnesses), 979 F.2d 939, 943 (2d Cir. 1992); John Doe Corp. v. United States (In re John Doe Corp.), 675 F.2d 482, 48788 (2d Cir. (Suisse) S.A., States v. Mass. 1982); Bank 160 F.R.D. Brussels 437, United Shoe Mach. 1950)). and truthful and "exists 89 F. for the for privilege truth," 100 "stands it necessary to achieve (2d Cir. must s as be an 2003); see situations "improver] also L.P. 1993 ) of 358-59 encouraging Salomon where the obstacle the that (D. Bros. Treasury the privilege client's attorney-client conduct "only 5 sorts to t extent v. United 22 v. (1st Cir. Steinhardt 9 F.3d 230, does to the Corp. Litig. relationship") 665 F.2d 1214, 1221 client." 1991). However, of does full accord United 348 F. 3d 16, (In re Steinhardt Partners), (finding 1987); underlying goals." XYZ (In re Keeper of the Records), Cir. (citing 357, (2d Cir. applied States Partners, Supp. purpose 926 F.2d 1285, 1292 search 1995) Lyonnais communication between an attorney and his the Credit is among the oldest of the common 828 F.2d 94, because v. (S.D.N.Y. Corp., The privilege law privileges 441 Lambert not not 235 (2d apply in serve to (quoting Permian (D.C. Cir. 1981)). The attorney­client privilege may be wa Defendants' rely primarily upon f Although ral law in arguing the issue of waiver, Leviton correctly argues that it is New York law that provides the law of decision for Leviton's claim of legal No. 05 Civ. 8360 malpractice. See (NRB) , 2008 WL 2073934, at *4 (S.D.N.Y. May 8, 2008) ("when a discovery dispute involves an attorney­client relationship with a New York attorney, New York privilege law appl ies ") . Nevertheless, the parties cite both New York and federal law in support of their positions, and appear to hold the view that there is no material difference New York and federal law on this issue. (See Plo's Br. at 2.) Under Second Circuit law, waiver of attorney­client privilege may occur, when a client testifies concerning portions of the attorney­client communication, when a client places the attorney­client relationsh directly at issue, and when a client asserts reliance on an attorney's advice as an element of a claim or defense. 546 F.3d 222, 228 (2d Cir. 2008) (quoting Sedco Int'l S.A. v. Cory, 683 F.2d 1201, 1206 (8th Cir. 1982)). Courts have recognized that a party need not explicitly rely upon advice of counsel to implicate privileged communications. Instead, advice of counsel may be placed in issue where, for example, a party's state of mind, such as his good faith bel 6 f in lawfulness of his conduct, is relied upon in support of a claim defense. Because legal advice that a party received may well demonstrate the falsity of its claim of good faith belief, waiver in these instances arises as a matter of fairness, that is, it would be unfair to allow a party to "use[] an assertion of fact to influence the decisionmaker while denying its adversary access to privileged material potentially capable of rebutting the assertion." John Doe Co. v. United States, 350 F.3d 299, 306 (2d Cir. 2003); County of Erie, 546 F.3d at 229; see also Bilzerian, 926 F.2d at 1292; von Bulow, 828 F.2d at 103; Am. S.S. 232 F.R.D. 191, 199 (S.D.N.Y. 2005). As the Second Circuit has cautioned, however, of fairness must be specif terminations cided on a case­by­case basis, in the context in which the ivilege has been asserted, rather than on the basis of generalizations. See John Doe, 350 F. 3d at 302. Moreover, in the Erie decision, the Second Circuit reined in what it perceived to doctrine, ba F.R.D. 574 an overbroad invocation of the fairness on principles set forth in Hearn v. Rhay, 68 (E.D. Wash. 1975). Under the Hearn standard, an implied waiver or forfeiture of privilege would be found if: (1) assertion of the privilege was a result of some affirmati ve act, such as ling suit by the asserting party; (2) through the affirmative act, the asserting 7 party has put the protected information at issue by making it relevant to the case; and (3) the application of the privilege would have denied the opposing party access to information vital to the defense. Id. at 581. In the Second Circuit concluded that simply because privileged information is relevant to a claim or defense in the case does not give rise to an implied waiver; rather, to forfeit privilege, "the party must rely on pr his counsel to make his cla 1eged advice from or defense." The court declined, however, to speci , 546 F.3d at 229. what degree of reliance is required. The New York Court Appeals has adopted the Second 's view that "to what extent wa inherently factual and turns on case , fa i r n e s s' ." , 11 r has occurred is se considerations of N.Y.3d 222, 246, 869 N.Y.S.2d 848, 863 (2008) (citing John Doe Co. v. United States, 350 F.3d 299, 302 (2d Cir. 2003)) (quoting In re Grand Jury 291 F.3d at 183). And, New York courts have defined "at issue" waiver as occurring where a party affirmatively places the subject matter of its own privileged communication at issue litigation, so that invasion of the privilege is required to determine the validity of a claim or defense of the pa asserting the privilege, and application of the privilege would deprive the adversary of vital information. 8 Deutsche Bank Trust Co. of Ams. v. Tri­Link Inv. Trust, 43 A.D.3d 56, 63, 837 N.Y.S.2d 15, 23 (1st Dep't 2007); Capi tal Corp. v. Cadwalader, Wickersham & Taft LLP, 62 A. D. 581, 582, 880 N.Y.S.2d 617, 619 (1st Dep't 2009); IMO Indus., Inc. v. Anderson Kill & Olick, P.C., 192 Misc. 2d 605, 609, 746 N.Y.S.2d 572, 575 (S. Ct. N.Y. Cty. 2002); Chin, 2008 WL 2073934, at *5. Li issue wa the Second rcuit, New York courts will not find an at r merely because privileged information is relevant to the issues being litigated; "( r] ather, at i ssue waiver occurs when the party has asserted a claim or defense that he intends to prove by use of the privileged materials," Deutsche Bank, A.D.3d at 23, 837 N.Y.S.2d at 64 43 (internal quotation marks omitted; accord Veras Inv. Partners, LLC v. Akin Gump Strauss 52 A.D.3d 370, 374, 860 N.Y.S.2d 78, 82 (1st Dep't 2008), or, where rather than being merely relevant, "the privileged documents are indispensable to a party's claims or defenses." Chin, 2008 WL 2073934, at *5; Carl v. Cohen, 23 Misc. 3d 1110(A), 886 N.Y.S.2d 66 (Table), 2009 WL 997517, at *3 (S. Ct. N.Y. Cty. 2009). For example, where a claim of malpractice is premised upon reliance on the erroneous advice of predecessor counsel, under both New York and federal law, the legal advice received from any other counsel on the same issue is placed at 9 issue. See, e. g., 98, Goldberg v. Hirschberg, 10 Mi sc. 806 N.Y.S.2d 333, 337 "remarkable similarity" (S. Ct. N.Y. Cty. 2005) to Bank No. 21277139 (S.D.N.Y. Apr i l l , 2005), June 2, 96 Brussels Civ. 2003), 292, 297- (citing to the Lambert 7233 v. Fiddler, (LMM) (RLE), 2003 aff'd 2005 WL 756859 for the proposition that "because WL (S.D.N.Y. aintiff was claiming that it relied on fendant's advice on a certain issue to advice its detriment, on lawyers the that legal related issue it received to the from any ot reasonableness of plaintiff's reliance and was not subject to the attorney-client privilege") . II. Application Plaintiff argues that there has been no forfeiture of attorney-client pri t s lege because it does not intend to rely on advice of counselor any privileged communications to prove its aims. indisputable Rather, law that Leviton argues, Defendants' failure it to is a file matter t of patent applications in a timely fashion resulted in an "on-sale bar" and inability to secure the patents, thus requiring that the applications be withdrawn and that the patents be abandoned. Nor does Plaintiff intend to rely on its state of mind to advance its claims, which could only be rebutted by viewing what it learned from its successor attorneys. lO Defendants respond that this is an oversimplification. In order to establish its claim of legal malpractice, Plaintiff must establish, as alleged in its Complaint, that each of the on­sale bar applications concerned a valuable commercial invention, and the loss of patent protection to each was because of Defendants' malpractice. (See Sec. Am. 214. ) CompI. 'J!'J! 177, 180, 188, 202, 209, Defendants argue that it was only after Levi ton hired successor couns ,who continued to prosecute the patents, that a decision was made to abandon the patents. Although Plaintiff can claim that it abandoned the patents because of Defendants' failure to timely file the patent applications, Defendants argue that they are not required to take Leviton at its word. According to Defendants, it is apparent that the decision to cease prosecution of the patents was reached in consultation with successor counsel; that decision could have been reached for any number of reasons, including a determination that the patents were not economically valuable or because the alleged inventions were not actually patentable; and, without access to Leviton's communications with successor counsel, Defendants are deprived of any opportunity to disprove that it was Defendants' professional errors that were the true reason for the abandonment of the patents and the proximate cause of Plaintiff's damages. 11 Although there is some superficial appeal to Defendants' argument, the Court concludes that there has not been an at issue wa of privilege by privil on. Leviton will not rely on advice to prove its claims against Defendants. And, it does not intend to rely on any pri leged communications advancing its claims. straight rward Instead, s cIa on this issue is Defendants committed malpractice when they led to file timely patent applications, thus resulting in the inability to secure ents because the on­sale bar rule. Although it might be useful to Defendants to know what Plaintiff's new attorneys were th king about the patents after Defendants were discharged as counsel, that knowledge is not malpractice claim. critical to defending against t Defendants can attempt to establish that they were not professionally negligent, and, even if they were, that their negligence was not the proximate cause of injury to Leviton, by demonstrating that they timely filed the patent applications or, even if they did not, notwithstanding the on­s e bar rule, it was still possible to secure the patents. reference to object Those propositions can be established by facts and law. advice of counsel is not in issue. on's state of mind or Car I , 2 00 9 WL 9 97 5 1 7, at *4 (defendant attorney in malpractice action was free to argue, and could demonstrate, that successor counsel could 12 taken action within allegedly the caused statute by of limitations defendant to attorney, remedy without injury invading privileged communications of successor counsel); Yules & Yules, No. 99 Civ. 3378 (KMW) (MHO), 1999 WL 1029712, at *2­3 (S.D.N.Y. Nov. 12, 1999) (where fendant attorney was sued for malpractice for failing to file an action within the statute of limitations, he did not require access to confidential communications with successor counsel who continued to ligate the action, in order to demonstrate that there were arguments successor counsel could have made to protect the plaintiff's interests) . Similarly, Defendants argue that with respect to some of the patents in issue, there was no on­sale and that in some cases the products on sale were not necess ly covered by the patent. Transcript of Oral Argument, da t ("H. Tr.") at 46 47.) through traditional S 29, 2010 Those propositions, as well, can be proved discovery, and do not require invading the attorney­client privilege. Contrary to what Defendants argue, they do not have to demonstrate that there were other reasons why Plaintiff abandoned the patents. Defendants simply to demonstrate that the ents did not have to be abandoned because the applications were not filed prior to a certa 13 date. It is the untimely filing that is the sole claim of negligence that Plaintiff is advancing, and if the failure to timely fi the patent applications need not have been a reason to abandon the patents, that can be proved without access to Plaintiff's confidential communications with its successor attorneys. Moreover, in order to address Plaintiff's claim that it is Defendants' negligence that resulted in the destruction of the tents' value, Defendants can attempt to demonstrate, as they imply as possible explanations for Plaintiff's abandoning the patents, that the alleged inventions economic value. commercial were not litigation, more lacked Such damage and causation issues are standard in are and traditional fact and expert A patentable or otherwise difficult, capable of proof through scovery. but ultimately, similarly resolved question is presented by Defendants' contention that for four out of five of the patent applications in issue that were transferred to third­party law firms, the Patent Office issued various office actions during the course of the subsequent representation. two of the applications, the office actions made no re For rence to the on­sale bar, yet Leviton failed to respond to those actions. And, with respect to several applications, Notices of were issued, but lowance on ultimately disclaimed the patents or abandoned the applications. Defendants argue that it is possible 14 that Leviton, in consultation th successor counsel, de ded to abandon these applications because of patentability concerns having nothing to do with an on­sale bar, for example, because of prior either art independently. ci ted by the Patent Office or located They argue that they must be able to examine Leviton's communications with its attorneys to disprove that it was the on­sale bar that caus Levi ton not to respond to the Patent Office actions, and that they should not be limited to accepting Leviton'S explanation for its conduct. Leviton, of course, will be required communications with the Patent Office. to disclose Moreover, required to explain why it failed to act Office actions and Notices of Allowance. it will be response to Patent Any facts that Leviton was aware of in making those decisions must be revealed. long as Leviton communications or does the not choose advice of its to rely on successor But, so privileged counsel in demonstrating why it abandoned the patents, under New York law, as set forth in which is consistent with federal law, Leviton has not placed its privileged communications with counsel at issue. Simply because those communications might be useful in undermi ng Levi ton's explanation does not mean that the attorney­client privilege has been impliedly waived. To conclude otherwise would require an implied waiver of privilege 15 1 1 rna ractice action in which the defendant atto causation and claimed that the former client had through successor counsel, avai act to avoid the consequences alternat of Jakobleff v. Cerrato, Sweeney and Cohn, his rna courses of ice. 97 A. D. 2d 834, 835, 468 N. Y S. 2d 895 (2d Dep't 1983) (in legal malpractice action where . iff sought to recover medical expenses counsel's negligence insurance premiums in failing as part to because of require of defendant raised arguments as to how t to pay though ses could have been avoided and why successor counsel could have taken remedial actions to avoid paying the expenses, court finds no waiver of privilege with respect to communications with successor counsel "to conclude otherwise would render the pr lege illusory in all legal malpractice actions"). This is not a case whi ton was simultaneously represented by Greenberg Traurig successor firms, and was relying on each of them to t ly file the patents. See Goldberg v. Hirschberg, 10 Misc. 3d at 298, 806 N.Y.S.2d at 337 (in malpractice action, where p iffs cla that they relied on advice of counsel with regard to t acti vi ty for which they were subsequently investi lient privilege was waived wi th respect to any 1 received from other counsel's concurrent advice on subjects); Chin, 2008 WL 2073934, at *6 (court finds wa lege where plaintiff claimed it was given erroneous defendant about executing a release, when plaintiff was also the release by the law firm which invoked privil ); 192 Misc. 2d at 611, 746 N.Y.S. 2d 16 The Deutsche Bank case is instructive on this point. The plaintiff in that action brought suit to obtain indemnificat for the amount which it settled another action. hough the reasonableness of the settlement it negotiated was in issue, the court found that the plaintiff had not received aced the 1 settling the action at issue because r indemnity was not p 1 advice it (1) its claim sed on the legal advice it received in settling the action; (2) it had not made self­serving select disclosure of privileged material; and (3) it committed to not using i vileged material in establishing the reasonableness of its settlement. Instead, it intended to rely on the non­ privileged discovery it had produced to the while fendant. Thus, s privileged communications were no doubt relevant to the issues the parties were litigat the court found that the "mass of nonprivileged material provides a more than­ample basis for the parties to litigate the reasonableness standard of [the] ision to settle the an objective action rather than take the risk of going to trial." Deutsche Bank, 43 A. D. 3d at 65, 837 N.Y.S.2d at 24. at 576 ("[Plaintiff] claims that Farella and Anderson Kill concurrently represented it the California Action, the outcome of which is the sis for [plaintiff's] alleged harm."). 17 Similarly, in Green v. Beer, No. 06 Civ. 4156 (KMW) ( ), 2010 WL 2653650 (S.D.N.Y. July 2, 2010), the plaintiff sought to recover payments made in settlement with the IRS, from who were al to have made f investments and their tax cons court the den lent representations about s. are what were alleged to have 1 defendants s Those representations to the IRS settlement. access to the The iff's communications with counsel, even though the reasonableness of the IRS settlement and the reasonableness of the plaintiff's reliance on sentations alleged mis were at issue, stating: Here, the legal advice the plaintiffs received prior to settling with the IRS and r taxing authori ties is no doubt evant to their claim for reimbursement of what y id in those settlements. However, they are not relying on that ce to demonstrate the reasonableness of their decision to settle. Consequently, the att lient pr lege has not been ted, and defendant['s] ication to 1 production of leged documents must be rej 2010 WL 2653650, at *6, aff'd in relevant part and Green v. Beer, No. 06 Civ.4l56 (KMW) (JCF) , 2010 WL 342272 3 ( S . D. N Y . . Aug 24 , 2010); Nomura Asset =======, 62 A.D.3d at 582, 880 N.Y.S.2d at 619 (finding no wa of lege P where counsel's negligent malpractice action was based in forming a trust, that all 18 r on y resul ted in plaintiff's ne relating to the trust; to subsequently settle an action "While plaintiff and its [successor] ce transaction are certa y between [action] that in the allegedly bungled relevant to the issue of defendant's alleged malpractice, pla to use such communications communications attorneys in the evaluated defendant's prior [trust] any iff disavows any intention de fails to show that any such communications are necessary to e plaintiff's claim or its defense.") In sum, while Greenberg Trau is free to attempt to trate that factors other than its patent applications resulted in t t value of the patents, it is not necessa ilure to timely file loss of the economic to invade Levi ton's ial communications with its att conf The same analysis applies to documents wi of t in order to do so. ld on the basis work­product doctrine, although ton's documents on i vilege log appear to have been withheld solely on the basis of work­product. See 52 A.D.3d at 372, 860 N.Y.S.2d at 82­83 (where plaintiffs brought rna aim based, investi atory subsequent settlement agreement with did not place with re on representation dur ice ators issue or waive successor attorney's wor ct to rationale for entering into the 19 settlement agreement); Deutsche Bank, 43 A.D.3d at 66, 837 N.Y.S.2d at 25 (commencement of indemnity action did not, in self, imply an at issue waiver of the protection of the attorney­client i vi or work­product doctrine, for documents concerning t defense and settlement of the underlying action); Goldberg v. Hirschberg, 10 Misc. 3d at 298­99, ., protection 806 N. Y. S. 2d 337 338 ("work­product like the attorney­client privilege, may be waived pursuant to the 'at issue' doctrine"). However, there is one caveat on work­product. is inapplicable to documents prepared for, or in product doct anticipation of, submission to the Patent prosecution of a patent is not, standing alone, ion. of liti 69, 85 The wor See Office. The anticipation In re Rivastigmine Patent Litig., 237 F.R.D. (S.D.N.Y. 2006) ("In patent matters, the work product doctrine is less likely to be applicable, because the drafts of patent applications, unlike draft legal memoranda, are generally prepared pr r to any expectation of 1 igation."); Genal Strap, Inc. v. Dar, No. CV2004­1691 (SJ) (MDG), 2006 WL 525794, at *3 (E.D.N.Y. Mar. 3, 2006) ("work performed by an attorney to prepare and prosecute a patent application does not fall within the parameters of the work­product protection because it is not created 'in anticipation of lit tion'''); Prods. Corp. v. Haworth, Inc., No. 97 C 20 Softview Computer 8 815 (KMW) (H BP), 2 0 0 0 WL 351411, at *5 (S.D.N.Y. Mar. 31, 2000) generated in connection with prote by t a ("Documents that are patent application are not work­product doctrine simply because an issued patent may g rise to an infringement action."); Ltd. v. Minebea Co., Ltd., 143 F.R.D. 494, 499 (S.D.N.Y. 1992) ("Generally, prosecute work performed by a patent an attorney to prepare and application does not fall within the rameters of the work­product protection, since the prosecution of a patent application is non­adversarial a proceeding.") . It is not c r from the privil such documents were withheld by PIa logs, however, that any iff. CONCLUSION For the reasons set compel production of rth above, documents Defendants' motion to subpoenaed from Plaintiff's successor counsel is denied. So Ordered. THEODORE H. KATZ / /,' UNITED STATES MAGISTRATE JUDGE Dated: December 6, 2010 New York, New York 21