Bolton v Weil, Gotshal & Manges Llp

[*1] Bolton v Weil, Gotshal & Manges LLP 2004 NY Slip Op 51118(U) Decided on September 10, 2004 Supreme Court, New York County 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 10, 2004
Supreme Court, New York County

MICHAEL BOLTON and MR. BOLTON'S MUSIC, INC., Plaintiffs,

against

WEIL, GOTSHAL & MANGES LLP, Defendant.



602341/03

Joan A. Madden, J.

Plaintiffs' personal attorneys, Robert J. Epstein and Joel H. Weinstein, and their law firm Levinsohn, Bodine, Hurwitz & Weinstein LLP (hereinafter referred to collectively as "the Epstein firm") move for a protective order to quash and/or limit and modify subpoenas served on them by defendant Weil, Gotshal & Manges, LLP ("WGM") on various grounds, including that the information sought is protected by the attorney/client or work product privileges, and plaintiffs support the motion. WGM opposes the motion, arguing that plaintiffs have waived any privilege by bringing this action which places the subject matter of the Epstein firm's advice at issue.

Background

This action arises out of WGM's joint representation of Michael Bolton ("Bolton"), Bolton's music publishing company, Warner-Chappel Music Limited ("Warner-Chappell"), and Bolton's record label, Sony Music Entertainment, Inc. ("Sony") in connection with a copyright infringement action brought by Three Boys Music Inc. ("the Three Boys Action"). The Three Boys Action alleged that a song that plaintiff Michael Bolton ("Bolton") co-authored with Andy Goldmark ("Goldmark") infringed a song of the same title written by the Isley Brothers in 1964.

The Three Boys Action resulted in a jury verdict against defendants, and based on the jury's findings, the trial judge ordered Sony to pay $4,218,838; Bolton to pay $932,924; Goldmark to pay $220,785; and Warner-Chappell to pay $75,900. The verdict was upheld on appeal.

The gravamen of this action is that WGM breached its fiduciary duties to Bolton (1) by failing to advise Bolton of conflicts of interests arising from WGM's joint representation of Bolton, Warner-Chappell and Sony, and (2) by failing to advise Bolton of settlement developments or following Bolton's instructions regarding settlement. It is alleged that the May 1989 music publishing agreement with Warner-Chappell contained a representation and warranty by Mr. Bolton's Music, Inc. that the compositions licensed thereunder did not and would not [*2]infringe on the copyright of any party, and an indemnification provision in which Mr. Bolton's Music, Inc. agreed to indemnify Warner-Chappell from all claims and liabilities, including legal fees, in the event of a final judgment of copy infringement. It is alleged that Sony's 1991 recording agreement with Mr. Bolton's Music, Inc. contained similar provisions.

Plaintiffs allege that WGM partner Robert Sugarman ("Sugarman")[FN1], who served as trial counsel in the Three Boys Action, failed to discuss and explain to Bolton that based on the indemnification provisions, Bolton had differing legal and economic interests in the litigation than Warner-Chappell and Sony. It is further alleged that throughout the litigation, WGM was paid by Warner-Chappell's insurer, Transamerica Insurance Company ("TIG"), and that Sugarman failed to advise Bolton that, inter alia, TIG intended to assert its subrogation rights with respect to payments it made under the insurance policy which potentially included Warner-Chappell's indemnity rights under the music publishing agreement.

On January 23, 2004, after joinder of issue, WGM served various discovery requests on plaintiffs and subpoenas on the Epstein firm seeking documents as well as the deposition testimony of Mr. Epstein and Mr. Weinstein.

There are 17 document requests. The first four requests seek "without time limitation" executed copies and drafts of the music publishing agreement with Warner-Chappell and the recording agreement with Sony Music, and all documents relating to the negotiation, drafting, and execution of these agreements. Requests nos. 5 and 6 seek documents relating to the obligation of plaintiffs and their agents to indemnify Warner-Chappell or Sony and in connection with a settlement or judgment in the Three Boys Music Action. Request no. 7 seeks all documents related to plaintiffs' obligations to indemnify any person in connection with any music publishing agreement or recording agreement.

Requests nos. 8 ,9, and 10 seek all documents concerning any communications related to the Three Boys Action with Warner-Chappell, Sony and TIG respectively. Request no. 11 seeks "[a]ll documents concerning any communications with any person concerning Robert Sugarman's actual or potential representation of Michael Bolton, Mr. Bolton's Music, Inc., Warner-Chappel and/or Sony in the Three Boys Music Action." Requests nos. 12 and 13 seek all documents and communications to and from WGM relating to the Three Boys Action.

Request no. 14 seeks all documents to and from Michael Bolton concerning the Three Boys Music Action. Request no. 15 seeks all documents regarding the settlement in the Three Boys Action, while request no. 16 seeks all documents concerning the settlement agreement involving Goldmark. Request 17 no. seeks all documents concerning the Three Boys Music Action.

WGM asserts that information sought in the subpoenas are "integrally bound up in the facts concerning Mr. Bolton's claims" and that the information is "likely unobtainable from any other source." Specifically, it is alleged that Messrs. Epstein and Weinstein during the relevant time period, were Bolton's personal lawyers, and that Mr. Epstein personally negotiated the music publishing agreement containing the indemnity provisions. WGM also claims that documents show that through Bolton's attorneys at the Epstein firm, Bolton specifically requested that Sugarman represent him in the Three Boys Music Action, and that Bolton, working through [*3]Epstein, used the existence of the indemnity provision to convince TIG to retain Sugarman as trial counsel. In addition, WGM contends that after TIG retained Sugarman as trial counsel, it continued to correspond with Bolton's personal attorneys regarding insurance and indemnity matters.

Discussion

a. Preliminary Issues

WGM argues that the Epstein firm's motion should be denied as untimely since it was made twenty-five days after the service of the subpoenas instead of within twenty days as provided under CPLR 3122(a). Assuming arguendo that the deadline in CPLR 3122 applies under the circumstances here, the court excuses the five-day delay, particularly as the objections were raised before the return date of the subpoenas. See Fogelson v. Barst & Mukamal, 192 AD2d 321 (1st Dept 1993); CPLR 2304.

In addition to objections based on privilege, the Epstein firm argues that the subpoenas should be quashed as (i) the subpoenas did not contain a notice setting forth the reasons the disclosure is sought as required under CPLR 3101(a)(4), (ii) there are no "special circumstances" warranting non-party disclosure since it has not been demonstrated that the information sought cannot be obtain from other sources, and (iii) certain of the document requests in the subpoenas are overly broad.

CPLR 3101(a)(4) provides that there "shall be full disclosure of all matters material and necessary in the prosecution or defense of an action" by a non-party "upon notice stating the circumstances or reasons such disclosure is sought or required." The subpoenas served by WGM lacked the notice provided for under CPLR 3101(a)(4), and the court rejects WGM's position that notice was not required on the ground that Epstein firm should be considered plaintiffs' agents as defined under CPLR 3101(a)(1) (See e.g., In re Ehmer, 272 AD2d 540 (2d Dept 2000)), or as a result of the 2002 amendments to CPLR 3120 and related provisions, permitting non-party discovery in the absence of a court order. At the same time, however, as the return date of the subpoenas has passed, and the reasons for seeking the disclosure have been briefed by WGM, the lack of a notice statement does not provide a sufficient basis for denying the discovery sought in the subpoenas.

Next, contrary to plaintiffs' position, in determining whether the materials sought of a non-party are "material and necessary" the First Department no longer requires a showing of special circumstances. See Schroder v. Consolidated Edison Co. of New York Inc., 249 AD2d 69 (1st Dept 1998). Instead, the proper inquiry is whether "the information sought bears on the controversy and will assist in the preparation for trial; the ultimate test is one of 'usefulness and reason.'"In re New York County DES Litigation, 171 AD2d 119 (1st Dept 1991)(citations omitted). At the same time, however, it has been held that the subpoena, like other discovery devices, should not be "used as a tool of harassment or for the proverbial 'fishing expedition' to ascertain the existence of evidence." Reuters Ltd. v. Dow Jones Telerate, Inc., 231 AD2d 337 (1st Dept 1997)(citation omitted). Under this standard, the majority of the requests are subject to discovery. However, requests 1 to 4 are overly broad insofar as they seek all documents relating to the music publishing agreement and the recording agreement with Sony, including the negotiation and interpretation of such agreements. First, only the indemnification provision of the agreements are at issue. Accordingly, the Epstein firm only needs to respond to requests 1 [*4]through 4 to the extent that the documents relate to the indemnification provision of the agreements, including drafts reflecting changes in the indemnification provisions.[FN2]

Request no. 7, which seeks all documents concerning generally the obligation of plaintiffs to indemnify any person in connection with any music publishing agreement or recording agreement is overly broad, and the Epstein firm need not respond to it.

b. Objections Based on Privilege

The Epstein firm asserts that certain of the information sought by WGM is subject to the attorney-client and/or work-product privilege and is therefore immune from disclosure. See CPLR 3101(b).

Confidential communications made between an attorney and client during the course of professional employment are generally privileged unless waived. See CPLR 4503(a). In addition, an attorney's work product is immune from disclosure (CPLR 3101(c)), as are materials prepared in anticipation of litigation unless a party shows "substantial need" and is unable to duplicate them "without substantial hardship." CPLR 3101(d)(2). "The burden of establishing any right to protection is on the party asserting it; the protection claimed must be narrowly construed , and its application must be consistent with the purposes of the underlying immunity." Spectrum Systems Intern. Corp v. Chemical Bank, 78 NY2d 371, 377 (1991).

Of relevance here is the so-called "at issue" waiver doctrine under which the attorney-client privilege is deemed waived when "a client places the subject of a privileged communication in issue or where the invasion of the privilege is required to determine the validity of the client's claim or defense and application of the privilege would deprive the adversary of vital information." IMO Industries, Inc. v. Anderson Kill & Olick, P.C., 192 Misc2d 605, 609 (Sup. Ct. NY Co. 2002); see also, Jakobleff v. Cerrato, Sweeney & Cohn, 97 AD2d 834 (2d Dept 1983). The work-product privilege can also be waived under the "at issue" doctrine. Royal Indemnity Co. v. Salomon Smith Barney, Inc., 4 Misc3d 1006 (Sup Ct NY Co. 2004).

The "at issue" waiver has been applied when, for example, a client asserts as a defense that he has relied on the advice of counsel. See e.g. Orco Bank v. Proteinas Del Pacifico, S.A., 179 AD2d 390 (1st Dept 1992). However, the waiver has been applied more broadly to cover circumstances in which a client does not expressly claim that he has relied on counsel's advice, but where the truth of the parties' position can only be assessed by examination of a privileged communication. See IMO Industries, Inc. v. Anderson Kill & Olick, P.C., 192 Misc2d 605; Bank Brussels Lambert v. Credit Lyonnais (Suisse) S.A., 210 FRD 506, 510 (S.D. N.Y. 2002).[FN3]

IMO Industries, Inc. v. Anderson Kill & Olick, P.C., 192 Misc2d 605, involved an action for legal malpractice arising out of the defendant law firm's alleged negligence in drafting a joint stipulation while representing plaintiff IMO Industries, Inc. ("IMO"), which purportedly resulted [*5]in a March 1995 decision requiring IMO to reimburse its insurance company for defense and settlement costs in an underlying litigation. Subsequent to the court's March 1995 decision, IMO hired a second law firm which unsuccessfully sought relief from the court's decision, and eventually settled the action unfavorably.

In the legal malpractice action, the defendant law firm sought certain documents containing communications between IMO employees and the second law firm made after the March 1995 decision. The court permitted disclosure of the documents, finding that such documents were relevant to proving that IMO's loss was casually related to the defendant law firm's alleged acts of malpractice.

In Bank Brussels Lambert v. Credit Lyonnais, 210 FRD 506, the court held that the defendant bank, Credit Lyonnais ("CLS") waived the attorney-client privilege as to certain documents prepared by its in-house counsel and other outside counsel, by filing a third-party legal malpractice action against its former lead counsel, Rogers & Wells ("R & W). The court found that as CLS consulted with its in-house and outside counsel regarding R&W's advice, and CLS would filter information to R &W through its in-house and outside counsel, that the attorney-client privilege was waived as to documents exchanged between CLS and these counsel during the course of R&W's representation.

It explained that "[s]ince CLS claims that its problems in the underlying litigation were caused by the actions (or inactions) of R&W, 'the legal advice [it] received from any other lawyers on that subject relates to the reasonableness of its reliance and is not subject to the attorney client privilege.'" Id. at 510, quoting, Pereira v. United Jersey Bank, 1997 WL 773716, *5 (SD NY 1997).

Thus, in both Bank Brussels Lambert and IMO Industries, Inc., it was held that when a plaintiff in legal malpractice action obtained advice from another lawyer in connection with the underlying action, that the communications with the other lawyer were no longer privileged since such communications were relevant as to the extent of the plaintiff's reliance on the advice of the defendant law firm, and whether such advice resulted in damages to the plaintiff.

In contrast, in Jakobleft v. Cerrator, Sweeney & Cohn, 97 AD2d 834 (2d Dept 1983), the court found that the privilege cannot be invaded by a defendant law firm in a malpractice case by asserting a third-party claim for contribution against a plaintiff's present counsel finding that "[t]o conclude otherwise would render the privilege illusory in all legal malpractice actions: the former could, merely by virtue of asserting a third-party claim for contribution against the present attorney, effectively invade the privilege in every case." Id. at 835.

It has also been held that the attorney-client privilege is not waived when the information sought relates primarily to a plaintiff's knowledge rather than the legal advice given or information conveyed to counsel. See Standard Chartered Bank PLC v. Ayala International Holdings, Inc., 111 FRD 76 (SD NY 1986); Asset Value Fund Limited Partnership v. The Care Group, Inc., 1997 WL 706320 (SD NY 1997); see also, Manufacturers and Traders Trust Co. v. Servotronics, Inc., 132 AD2d 392 (4th Dept 1987). Notably, these precedents do not involve circumstances in which a client sues its former counsel for malpractice and thus puts in issue advice given by another counsel during the period of the alleged malpractice.

Based on the above precedent, the court finds that the attorney-client privilege has been waived with respect to information relating to the Epstein firm's communications with Bolton [*6]concerning WGM's joint representation of Bolton, Warner-Chappell and Sony, including any legal advice provided by the Epstein firm regarding potential conflicts of interest arising out of such representation in light of the indemnification provisions and TIG's subrogation rights.

Such communications may bear directly on Bolton's allegations that he was not informed of the potential conflict of interest under the indemnity provisions arising out of WGM's joint representation, which may impact on the proof regarding Bolton's burden to show that "but for" WGM's breach of fiduciary duty he "would have prevailed in the underlying matter or would not have sustained ascertainable damages." See Weil Gotshal & Manges v. Fashion Boutique of Short Hills, Inc., AD2d , 780 NYS2d 593, 595 (1st Dept 2004) (citations omitted). Moreover, while Bolton is correct that a lawyer's fiduciary responsibilities cannot be delegated to another lawyer,(Fund of Funds, Ltd. v. Arthur Andersen & Co., 567 F.2d 225 [2d Cir. 1977]), as indicated, plaintiffs' recovery in this action nonetheless requires a showing of causation.

The attorney-client privilege has also been waived with respect to communications and information regarding the legal effect of the indemnity provisions, and the subrogation rights of TIG, since such information relates directly to Bolton's assertion that WGM's failure to explain the legal effect of these provisions on potential future claims for indemnification by Warner-Chappel (or made on its behalf by TIG) and Sony caused injury to Bolton.

Furthermore, unlike Jakobleft, the communications sought in this case were made concurrently with the representation of the plaintiffs in the Three Boys Action, rather than afterwards. See IMO Industries, Inc. v. Anderson Kill & Olick, P.C., 192 Misc2d at 609-610; Bank of Brussels v. Credit Lyonnais, 210 FRD at 511 (finding at issue waiver where the confidential information is sought from counsel who provided concurrent advice to the client during the period of the alleged malpractice). And, the concerns raised in Jakobleft are not present here as the Epstein firm does not represent plaintiffs in this action. See IMO Industries, Inc. v. Anderson Kill & Olick, P.C., 192 Misc2d at 609-610.

The attorney-client privilege also has been waived as to any communications or other privileged information between Bolton and the Epstein firm regarding the settlement of the Three Boys Action since such information is directly relevant to establishing Bolton's alleged reliance on the Sugarman's advice (or lack of advice) as to settlement of the Three Boys Action, and whether Sugarman's alleged breach of fiduciary duties caused plaintiffs' damages.

While this motion was pending, in a letter brief dated June 14, 2004, WGM also sought to compel discovery of certain documents from the files of Russell Frackman, Esq. ("Frackman") and George Fearon, Esq. ("Fearon"), two other attorneys that Bolton hired to represent his interests after the verdict in the Three Boys Action. WGM assert that Frackman and Fearon represented Bolton "on numerous matters related to the Three Boys action, including insurance and indemnity issues," and that any work product or attorney-client privilege with respect to these attorney's files was subject issue waiver. However, unlike the Epstein firm, these attorneys represented Bolton after the alleged breach of fiduciary duty by WGM resulted in damages to plaintiffs, so that the contents of their advice would not appear to be directly related to plaintiffs' claims. Under these circumstances, and as it is unclear at this juncture whether any of these communications are directly at issue in the subject action, the request for confidential material from the files of Frackman and Fearon is denied subject to renewal upon completion of discovery. [*7]

Conclusion

In view of the above, it is

ORDERED that the motion for a protective order is granted to the extent set forth herein, conditioned upon the Epstein firm providing WGM with a privilege log in accordance with CPLR 3122(b) within thirty days of entry of this order; and it is further

ORDERED that within thirty days of entry of this order the Epstein firm shall provide all other documents sought which have not be found to be either irrelevant or privileged; and it is further

ORDERED that Mr. Epstein and Mr. Weinstein shall appear on or before November 8, 2004 for a deposition, and respond to questions regarding confidential communications with plaintiffs to the extent consistent with this decision and order.

DATED: September 10,2004

J.S.C. Footnotes

Footnote 1:Plaintiffs have brought a separate action against Mr. Sugarman under Index No. 600121/04.

Footnote 2:Plaintiffs agreed to produce such drafts in a stipulation so-ordered by the court on August 12, 2004.

Footnote 3: Federal cases involving the litigation of claims under New York state law apply New York law to issues regarding the attorney-client privilege. Bank Brussels Lambert v. Credit Lyonnais, 210 FRD at 508.