Safeco Insurance Company of America v. M.E.S., Inc et al
Filing
281
MEMORANDUM AND ORDER. Defendants' appeals of Judge Scanlon's orders, Dkt. # 228 , 249 & 253 , are denied. Ordered by Judge Allyne R. Ross on 4/16/2013. (Siegfried, Evan)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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)(
SAFECO INSURANCE COMPANY OF AMERICA,
09-CV-33I2 (ARR)(VMS)
Plaintiff,
NOT FOR ELECTRONIC
OR PRINT PUBLICATION
-againstM.E.S., INC., M.C.E.S., INC., HIRANI ENGINEERING & :
LAND SURVEYING, P.C., HIRANI/MES, JV, GEORGE
MAKHOUL, JITENDRA S. HIRANI, and SARITA
HIRANI,
MEMORANDUM AND
ORDER
Defendants.
)(
ROSS, United States District Judge:
Defendants M.E.S., Inc., M.C.E.S., Inc., and George Makhoul ("defendants" or "MES")
appeal two non-dispositive orders of Magistrate Judge Vera M. Scanlon. Their complaints
primarily allege legal error relating to multiple documents ruled privileged. First, defendants
argue that Judge Scanlon erred in conducting in camera review of certain documents in the
possession of plaintiff Safeco Insurance Company of America ("Safeco"), which she
subsequently ruled were protected by attorney-client privilege and work product privilege;
second, defendants argue Judge Scanlon misapplied the Second Circuit's decision in United
States v. Adlman, 134 F.3d 1194 (2d Cir. 1998), when determining that some ofthe documents
were protected by work product privilege. Finally, defendants argue that Judge Scanlon's orders
are internally inconsistent. Because I find that Judge Scanlon neither failed to apply nor
misapplied the relevant law, I deny both of defendants' appeals.
BACKGROUND
I assume familiarity with the facts of the case from previous orders. Of relevance here,
on August 17, 20 II, MES filed a motion for discovery of documents that Safeco claimed were
privileged before then-Magistrate Judge Andrew L. Carter. Dkt. #174. Safeco simultaneously
filed its own motion to compel. Dkt. #175. Safeco resisted MES's motion to compel on the
grounds that the documents "plainly constitute work product prepared by Safeco or its
representatives in anticipation oflitigation and attorney-client communications between Safeco
and its counsel." Dkt. #178, at I. MES disputed Safeco's claim of privilege for multiple
reasons, but most relevant here is the fact that Safeco shared documents with its third-party
surety consultant, Cashin, Spinelli & Ferretti LLC ("CSF"), Dkt. #174-4, at 12, and its takeover
contractor, Perini Corporation ("Perini"), id. at 13. Both MES and Safeco urged Judge Carter to
conduct an in camera review of the documents to determine whether they should be produced or
not. See id. at 3 ("Safeco should be required to produce the documents identified in this brief to
the court for inspection."); Dkt. # 178, at I 0 n.5 (noting Safeco documents are "available for in
camera review by the Court as the Court may deem necessary").
On December 6, 2011, Judge Carter issued an order "set[ting] forth the applicable
standards that the parties must meet in order to assert the attorney-client privilege or workproduct doctrine." Dkt. #185, at 3. The order went on to explain that both parties' privilege logs
were not adequately detailed. ld. at 7-9. Judge Carter did not conduct in camera review ofthe
documents. However, he held that an affidavit submitted by one of Safeco's attorneys was
insufficient to establish that Perini was an agent of Safeco, such that communications between
Safeco and Perini would be protected by the attorney-client privilege (he did not rule as to work
2
product privilege for the Perini documents). !d. at I 0. With respect to whether the work product
privilege covered CSF's "consultant reports," id. at II, Judge Carter explained the legal standard
and stated, "[U]nder the facts provided, Safeco has not met i[t]s burden of showing that
documents created by CSF are entitled to work-product protection." !d. at 13.
Two days after Judge Carter issued his order, he became United States District Judge for
the Southern District ofNew York. The Southern District's gain was MES's loss, however,
because Judge Scanlon, who ultimately took over the case, reversed Judge Carter's order. On a
motion for reconsideration by Safeco, Dkt. #195, Judge Scanlon undertook in camera review of
the documents at issue, which, she noted, "effectively grants the kind of review that both sides
sought on the initial matter but which the Court did not conduct at the time." Dkt. #249, at 6. In
a pair of orders, Dkt. #228 & 249, she determined, based on her in camera review, that Perini
was, in fact, Safeco's agent. Dkt. #249, at 9-10. Accordingly, she ruled, the Perini documents
were protected by attorney-client privilege. !d. at 13-17.
With respect to work product privilege, Judge Scanlon noted that documents "prepared
both for litigation and business purposes may be protected" by the privilege, "but if the material
was prepared in the ordinary course of business or would have been created in essentially similar
form irrespective of the litigation, then it is not afforded protection." !d. at II (quoting Adlman,
134 F.3d at 1202) (internal quotation marks omitted). She further noted that determining
whether a document was produced in anticipation of litigation was especially difficult in
insurance cases, since the potential for litigation always exists when an insurance company
investigates a claim; nevertheless, the work product doctrine may be applied following a "factsensitive inquiry by the Court." !d. at 11-12 (quoting Magee v. Paul Revere Life Ins. Co., 172
..3
F.R.D. 627, 640 (E.D.N.Y. 1997)) (internal quotation marks omitted). Applying these principles
to her in camera review of the Perini documents, Judge Scanlon found they were prepared in
anticipation of litigation, and were thus protected by work product privilege. Id. at 13-17.
MES moved separately to compel the production of thirty-five documents, including
documents shared with Perini and CSF. Dkt. #202. Judge Scanlon again conducted in camera
review of the documents and held discovery hearings. See Dkt. #253, at 2. She granted MES's
motion in part and denied it in part. Id. Among the documents Judge Scanlon held were
privileged, all but four were protected by either ;1ttomey-client privilege or both attorney-client
and work product privilege. See id. at 3- II. Only three documents were protected solely by
work product privilege. Id. at 4-5 (S-677, S-801, C-106). 1
Defendants now appeal Judge Scanlon's reconsideration of Judge Carter's order, as well
as her order on the motion to compel, to the extent that it denied their motion.
DISCUSSION
I.
Standard of Review
Rule 72(a) and the Federal Magistrates Act establish that a district court shall reverse a
Magistrate Judge's order regarding a non-dispositive matter only where the order is "clearly
erroneous or contrary to Jaw." 28 U.S.C. § 636(b)(l)(A); Fed. R. Civ. P. 72(a). Because pretrial
discovery matters are generally considered "non-dispositive," they are reviewed under this
"clearly erroneous" standard. See Thomas E. Hoar, Inc. v. Sara Lee Com., 900 F.2d 522, 525 (2d
Cir. 1990); Popular Imports. Inc. v. Wong's Int'l. Inc., 166 F.R.D. 276,277 (E.D.N.Y. 1996).
'Judge Scanlon deferred decision on the sole remaining document that she observed
might be protected by work product privilege, S-14, see id. at 3, but Safeco subsequently
produced this document with a redaction, see Dkt. #269, at 2.
4
A party seeking to overturn a magistrate judge's discovery order bears a "heavy burden."
Perez v. Canso!. Edison Co., No. 02 Civ. 2832(SAS), 2003 WL 22586492, at *2 (S.D.N.Y. Nov.
7, 2003) (citing Com-Tech. Assocs. v. Computer Assoc. Int'l, 753 F. Supp. 1078, 1079
(E.D.N.Y. 1990), affd, 938 F.2d 1574 (2d Cir. 1991)). A finding is "clearly erroneous" if the
reviewing court is "left with the definite and firm conviction that a mistake has been committed."
Easley v. Cromartie, 532 U.S. 234, 242 (2001) (quoting United States v. U.S. Gypsum Co., 333
U.S. 364, 395 (1948)) (internal quotation marks omitted). A finding "is 'contrary to law' 'when
it fails to apply or misapplies relevant statutes, case law or rules of procedures."' MacNamara v.
City ofN.Y., 249 F.R.D. 70, 77 (S.D.N.Y. 2008) (quoting Thompson v. Keane, No. 95 Civ.
2442(SHS), 1996 WL 22987, at *I (S.D.N.Y. May 6, 1996)). Under this "highly deferential
standard of review," magistrate judges are '"afforded broad discretion in resolving discovery
disputes and reversal is appropriate only if their discretion is abused."' Lyondell-Citgo Ref.. LP
v. Petroleos de Venez., S.A., No. 02 Civ. 0795(CBM), 2005 WL 1026461, at *3 (S.D.N.Y. May
2, 2005) (quoting Derthick v. Bassett-Walker Inc., Nos. 90 Civ. 5427 (JMC), 90 Civ. 7479
(JMC) and 90 Civ. 3845 (JMC), 1992 WL 249951, at *8 (S.D.N.Y. Sept. 23, 1992); see also
Perez, 2003 WL 22586492, at *2.
II.
Grounds for Appeal
MES does not quarrel with any of Judge Scanlon's specific findings based on her in
camera review of the Perini and CSF documents. Instead, defendants raise the following
arguments with respect to Judge Scanlon's orders on both reconsideration of Judge Carter's order
and her order denying in part MES's motion to compel: (I) Judge Scanlon erred in reconsidering
Judge Carter's order on the basis of in camera review ofSafeco's documents. Dkt. #262-1, at
5
13-15. (2) Judge Scanlon misapplied Second Circuit case law in her determination as to work
product privilege, because she did not determine whether the documents would have been
created in essentially similar form irrespective of litigation. Dkt. #262-1, at 15-18; Dkt. #263-1,
at 3-6. (3) Judge Scanlon's orders are internally inconsistent because they hold the CSF
documents are privileged work product while "leav[ing] untouched," Dkt. #262-1, at 20, Judge
Carter's finding that Safeco had not met its burden of showing that the CSF documents were
entitled to work product protection. !d.; Dkt. #263-1, at 6. 2 I address each point briefly:
(I)
In Camera Review
MES complains that Judge Scanlon should not have conducted in camera review of the
Perini document because "[t]he issue ... was squarely before Magistrate [Judge] Carter, yet he
declined to conduct the in camera inspection." Dkt. #262-1, at 14. MES argues that because the
decision whether to conduct in camera review is within the sound discretion of the court, Judge
Scanlon could not have conducted in camera review unless she found that Judge Carter abused
his discretion. Id.
This argument misconstrues the standard for reconsideration. Reconsideration may be
granted if the moving party can point to "controlling decisions or data that the court overlookedmatters, in other words, that might reasonably be expected to alter the conclusion reached by the
court." Shrader v. CSX Transp .. Inc., 70 F.3d 255, 257 (2d Cir. 1995). This standard does not
2
MES also contends within its first argument that Safeco never raised work product
privilege as to the Perini documents at issue in Judge Scanlon's reconsideration order. See Dkt.
#262-1, at 11-13. However, even presuming this were true (a presumption easily rebutted by the
invocations of the work product privilege in Safeco's memorandum in opposition to the motion
to compel before Judge Carter, see Dkt. # 178), it is immaterial because Judge Scanlon ruled the
Perini documents were protected both by the work product privilege and the attorney-client
privilege.
6
become more or less stringent simply because the case is reassigned to a different judge. See
Dandong v. Pinnacle Performance Ltd., No. 10 Civ. 8086(JMF), 2012 WL 6217646, at *2
(S.D.N.Y. Dec. 3, 2012).
'·
Here, Judge Scanlon applied the correct standard and found that reconsideration was
warranted based on in camera review of the documents at issue. Dkt. #249, at 6-7. The fact that
Judge Carter did not conduct in camera review of the Perini documents means, ipso facto, that he
'
"overlooked" material in the documents, which,both parties proposed making available to the
court.' In camera review is "a practice both long-standing and routine in cases involving claims
of privilege." In re Grand Jurv Subpoenas Dated Mar. 19. 2002 & Aug. 2. 2002, 318 F.3d 379,
386 (2d Cir. 2003); see. e.g., In re Dow Coming Com., 261 F.3d 280,282-83 (2d Cir. 2001)
(submitting documents to district court for in camera review of attorney-client and work product
claims); In re Richard Roe, Inc., 168 F.3d 69, 71 (2d Cir. 1999) (reviewing documents in camera
to evaluate claims of attorney-client and work product protection); Adlman, 134 F .3d at 1204
(conducting in camera review of memorandum for which work product protection was asserted);
In re Six Grand Jurv Witnesses, 979 F.2d 939, 942 (2d Cir. 1992) (reviewing cost analyses in
camera where witnesses claimed preparation was at behest of counsel and constituted work
product); In re Grand Jurv Subpoenas Dated Oct. 22, 1991 & Nov. 1, 1991,959 F.2d 1158, 1162,
1167 (2d Cir. 1992) (affirming district court's finding, after in camera review, that subpoenaed
telephone company records did not constitute attorney work product). Accordingly, Judge
3
It is not even clear from Judge Carter's order that he did, in fact, decide not to conduct in
camera review, as defendants contend. The decision is tentative, contemplates further actions of
the parties based on the principles set forth in the,orqer, and nowhere does it preclude in camera
review from being conducted later. Under either interpretation of Judge Carter's order, however,
Judge Scanlon's reconsideration based on in camera review is appropriate.
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Scanlon's decision to review the documents, as requested by both Safeco and MES, and her
reconsideration of Judge Carter's order based on that review, was neither "clearly erroneous" nor
"contrary to
(2)
Ia~."
28 U.S.C. § 636(b)(1)(A).
Work Product Privilege
MES's next argument is that Judge Scanlon misapplied circuit case law in her
determination as to work product privilege, because she did not determine whether the
documents would have been created in essentially similar form irrespective of litigation. Dkt.
'
I
#262-1, at 15-18; Dkt. #263-1, at 3-6. In Adlman, the Second Circuit rejected the requirement
that documents be produced "primarily or exclusively to assist in litigation" in order to be
protected by the work product privilege. 134 F.3d at 1198. The court instead adopted the
formulation of the Wright & Miller treatise, that documents should be deemed prepared in
anticipation oflitigation when they were prepared "because of' litigation, id. at 1202 (citing 8
Charles Alan Wright, Arthur R. Miller & Richard L. Marcus, Federal Practice and Procedure§
2024 (1994)), even if the documents were also created in order to assist with a business decision,
id. However, the court warned, "it should be emphasized that the 'because of formulation that
we adopt here withholds protection from documents that are prepared in the ordinary course of
business or that would have been created in essentially similar form irrespective of the
litigation." !d. MES argues that Judge Scanlon did not apply this rule of law and did not
determine, before deciding the documents were prepared in anticipation of litigation, that they
would not have been created in essentially similar form irrespective of litigation.
To be sure, courts must be careful in cases involving insurance and surety disputes "not to
hold that documents are protected form discovery simply because of a party's 'ritualistic
8
incantation' that all documents created by insurers are made in preparation for litigation." Weber
v. Paduano, No. 02 Civ. 3392(GEL), 2003 WL 161340, at *4 (S.D.N.Y. Jan. 22, 2003); accord
U.S. Fid. & Guar. Co. v. Braspertro Oil Servs. Co., Nos. 97Civ.6124 (JGK)(THK), 98Civ.3099
(JGK)(THK), 2000 WL 744369, at *12-13 (S.D.N.Y. June 8, 2000) (applying Aidman to
documents prepared in course of surety investigation). "Because all insurance investigations are
likely performed with an eye towards the prospect of future litigation, 'it is particularly important
that the party opposing production ... demonstrate by specific and competent evidence that the
documents were created in anticipation of litigation."' OBE Ins. Com. v. Interstate Fire & Safety
Equip. Co., No. 3:07cvl883 (SRU), 2011 WL 692982, at *3 (D. Conn. Feb. 18, 2011) (quoting
Weber, 2003 WL 161340, at *4). In assessing work product privilege in such a context, courts in
this circuit "have declined to follow any per se rule." Weber, 2003 WL 161340, at *6. Instead,
courts engage in a "fact-sensitive inquiry," Magee, I72 F.R.D. at 640, to determine whether a
document may be protected as work product. See U.S. Fid. & Guar. Co., 2000 WL 744369, at *9
n.7 (citing cases in which courts undertake a "fact-specific determination").
It is plain from Judge Scanlon's orders that she was acutely aware of the relevant case law
and engaged in just the sort of fact-sensitive inquiry that other courts follow. Judge Scanlon
quoted directly the passage from Adlman that defendants now contend she ignored. Dkt. #249, at
II. She cited a decision of Magistrate Judge James Orenstein discussing .the difficulty of
determining whether documents constitute work product in insurance cases. Id. at 11-12.
Moreover, in the hearing on the motion to compel underlying Judge Scanlon's order at Dkt.
#253, MES presented argument on precisely whether the CSF documents would have been
created as part of a normal surety investigation. Dkt. #263-2, at 4. Judge Scanlon thus
9
•
considered the relevant legal principles when she conducted her in camera investigation of each
document. MES complains that it was "erroneous for the court to have made its work product
rulings without first determining a benchmark from which to determine what part of Safeco' s
investigation was in the ordinary course of business and would have been conducted irrespective
of litigation." Dkt. #263-l, at 5. But neither the case law of the circuit nor that of my sister
district courts requires a court to first determine'suciJ a "benchmark"- only a fact-sensitive
inquiry is required. Judge Scanlon plainly engaged in such an inquiry, reviewing each document,
after taking into consideration the legal standard and the difficulty of applying it to a case such as
this one. Accordingly, I cannot say her rulings were clearly erroneous or contrary to law.
(3)
Internal Consistency of Judge Scanlon's Orders
Finally, MES argues Judge Scanlon's orders are internally inconsistent because they
determined some of the documents were privileged work product while "leav[ing] untouched,"
Dkt. #262-1, at 20, Judge Carter's finding that Safeco had not met its burden of showing that the
CSF documents were entitled to work product protection. !d.; Dkt. #263-1, at 6. This argument
is unavailing. First, as noted above, Judge Scanlon ruled all but four documents (one of which
Safeco eventually produced in redacted form) were protected by both attorney-client and work
product privilege, soMES's argument touches only three documents. Second, and more
importantly, the ruling of Judge Carter on which defendants rely stated, "Thus, under the facts
provided, Safeco has not met i[t]s burden of showing that documents created by CSF are entitled
to work-product protection." Dkt. #185, at 13 (emphasis added). The emphasized clause makes
clear that the ruling was based on the facts then before Judge Carter; in other words, excluding
the facts revealed by in camera review. As has now been repeated enough, Judge Scanlon's
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rulings were based on her in camera review of the documents. Therefore, her finding that the
CSF documents were protected by work product privilege is not in any way inconsistent with
Judge Carter's finding that absent in camera review,Safeco had not established work product
protection. Judge Scanlon's orders are internally consistent and display no clear error that would
warrant reversal.
CONCLUSION
For the foregoing reasons, defendants' appeals of Judge Scanlon's orders, Dkt. # 228, 249
& 253, are denied.
SO ORDERED.
s/ ARR
'1
Allyne R. R4s
United States District Judge
Dated: April 16, 2013
Brooklyn, New York
II
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