No privilege of work product between potential adversaries – Civil law
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When parties with a common interest share the attorney’s work product in anticipation of litigation, the parties often expect that the work product will be shielded from disclosure in subsequent litigation. If, however, a party shares the work product with another party with whom it has a common interest but who is also a potential adversary, the work product may be discovered by third parties, even if the sharing parties had a common interest. when they exchanged the work product
U.S. Magistrate Judge Gabriel W. Gorenstein of the Southern District of New York recently addressed this specific issue in Pilkington N. Am. v. Mitsui Sumitomo Ins. Co. of Am., 341 FRD 10, 16 (SDNY 2022). Prior to litigation, the prospective plaintiff, Pilkington North America, exchanged attorney work product with its insurance broker, Aon Risk Services Central, with which it shared a common interest at the time, but has then named defendant in the action. Common interest notwithstanding, Judge Gorenstein held that the work product could be discovered by the other defendant in the action, Mitsui Sumitomo Insurance Company of America (MSI), because (1) when the documents were exchanged , Aon and Pilkington were foreseeable adversaries and (2) the work product was relevant to the subject matter of potential litigation between the parties. The ruling urges caution for parties considering sharing work product with a party that may later become an adversary.
‘Pilkington vs. MSI & Aon’
In 2009, Plaintiff Pilkington purchased insurance from Defendant MSI with the assistance of Pilkington’s insurance broker, Defendant Aon. The insurance policy originally provided coverage of up to more than $300 million for damage caused by windstorms. In 2015, MSI requested certain changes to the insurance policy, one of which would cap the policy limit for windstorm damage at $15 million. According to the complaint, Pilkington only agreed to the policy changes after Aon informed Pilkington that the changes would not affect the storm limit.
In February 2017, a tornado hit the Pilkington plant in Illinois, allegedly causing damage of up to $100 million. The day after the tornado, Pilkington applied for coverage under its insurance policy with MSI. In response, Aon alerted Pilkington that the insurance policy limited storm losses to $15 million. Shortly thereafter, Pilkington retained Aon as a consultant to help Pilkington prepare an insurance claim to seek recovery from MSI. Pilkington’s General Counsel then contacted outside counsel for assistance in responding to MSI’s coverage defenses and they discussed, among other things, Pilkington’s upholding of Aon and MSI’s assertion that which the revised storm insurance policy limit capped coverage at $15 million.
Pilkington and Aon’s consulting agreement provided that Aon would help settle claims with MSI and that Aon would provide expert testimony. Pursuant to this counsel agreement, Pilkington’s outside counsel communicated with Aon and sent Aon documents containing the work product of the outside counsel.
In response to Pilkington’s insurance claim, MSI ultimately compensated Pilkington for only $15 million. Citing the revised windstorm limit, MSI denied coverage for any damages over that amount.
Pilkington responded by suing MSI and Aon, seeking additional relief from MSI under the insurance policy, and seeking damages from Aon based on its allegedly improper advice to Pilkington regarding the 2015 changes to the policy that introduced the $15 million storm limit. After defendants’ motions to dismiss were denied, MSI filed a motion to compel Pilkington to produce certain documents that Pilkington had shared with Aon when Aon was acting as a consultant to Pilkington and assisting Pilkington in preparing its insurance claim against MSI. Pilkington declined to produce the documents, saying the documents were protected from disclosure by the attorney’s work product doctrine.
Relevant legal principles
In resolving the motion to compel, Justice Gorenstein began by discussing the relevant law governing the work product doctrine. Justice Gorenstein observed that the doctrine generally protects from discovery “documents and tangible things which are prepared in anticipation of litigation or for trial by or for another party or his representative”. Pilkington, 341 FRD at 13 (citing Fed. R. Civ. P. 26(b)(3)).
The purpose of the doctrine is to provide a zone of confidentiality for lawyers to prepare for litigation without unnecessary intrusion from adversaries. Identifier.
The party claiming work product protection bears the burden of establishing that the protection applies. Identifier. To qualify for protection, the withheld material must be “(1) a document or tangible thing, (2) which was prepared in anticipation of litigation, and (3) was prepared by or for a party, or by his representative.” Identifier. (citing Allied Irish Banks, PLC v. Bank of Am., NA, 252 FRD 163, 173 (SDNY 2008)). To demonstrate that a document has been prepared”[i]In anticipation of litigation”, the withholding party must show that “having regard to the nature of the document and the factual situation in the particular case, it can reasonably be said that the document was prepared or obtained because of prospect of litigation. Id. at 13-14 (citing United States v. Adlman, 134 F.3d 1194, 1202 (2d Cir. 1998)). Therefore, documents that are created in the normal course of business are not protected, although documents created in anticipation of litigation are protected even if they were also intended to be used to facilitate business transactions. ID at 13
Unlike attorney-client privilege, a party does not waive work product protection simply by disclosing the work product to a third party. Identifier. at 14 (citing Bank of Am., NA v. Terra Nova Ins. Co., 212 FRD 166, 169 (SDNY 2002)).
The lack of an automatic waiver when work product is disclosed to a third party exists because “attorneys must often rely on the assistance of investigators and other agents in compiling documents for trial.” Identifier. at 13 (citing United States v. Nobles, 422 US 225, 238-39 (1975)).
Accordingly, a party may share work product with third parties without waiving privilege where “the disclosing party and the third party share a common interest”. Identifier. at 16 (citing Merrill Lynch & Co. v. Allegheny Energy, 229 FRD 441, 446 (SDNY 2004)). However, “[a] party waives work product protection by taking actions inconsistent with … its purpose, such as disclosing the work product to its opponent …” Id. at 14 (citing NY Times Co. v. US Dep’t of Justice, 939 F.3d 479, 494 (2nd Cir. 2019)).
Application of Relevant Legal Principles to “Pilkington”
Applying the above principles, Justice Gorenstein held that even though the documents Pilkington shared with Aon had been created in anticipation of litigation and thus constituted “work product”, Pilkington had waived work product protection by disclosing the documents to Aon, because (1) at the time of the disclosure, Aon was likely a potential adversary of Pilkington and (2) the documents related to the subject matter of the potential litigation between them. Identifier. at 14-15.
Thus, in finding that the shared documents were not entitled to work product protection, Justice Gorenstein focused both on the relationship between Pilkington and Aon and the nature of the documents they exchanged. Identifier. If the shared documents had related to a subject other than the foreseeable dispute between Pilkington and Aon, according to Justice Gorenstein’s analysis, the privilege would not have been destroyed. See id. But because Pilkington and Aon were potential adversaries, and the documents shared concerned the parties’ foreseeable dispute (they concerned the limit of the windstorm), Judge Gorenstein found that sharing the documents was inconsistent with the purpose of the privilege (allowing a lawyer to shield his or her thought process from an adversary) and therefore constituted a waiver of privilege. Identifier.
In concluding that Aon was a foreseeable adversary of Pilkington, Judge Gorenstein observed that as Pilkington’s insurance broker, Aon reviewed the proposed 2015 changes to the insurance policy and advised Pilkington of their impact . Identifier. at 15. Given that Aon’s role was to provide advice to Pilkington regarding the 2015 changes, Judge Gorenstein found that it was clearly possible for Pilkington to claim that the advice was legally deficient and that Aon would become the opponent of Pilkington. Identifier. Furthermore, Judge Gorenstein noted that Pilkington had titled one of the withheld documents “PNA-MSI-Aon Litigation strategy”, suggesting that Pilkington was in fact viewing Aon as a potential adversary at the same time that he was sharing work product. . Identifier. Judge Gorenstein further noted that Pilkington evidently failed to file an affidavit asserting that he did not view Aon as a potential adversary when sharing work product with him. Identifier.
Gorenstein J. went on to find that the fact that Pilkington and Aon shared a common interest at the time the documents were shared (i.e. “taking Pilkington out of the [$15 million]
limit claimed by MSI”) was insufficient to avoid waiver. adversary or a conduit to a potential adversary.” Id. (citing Merrill Lynch, 229 FRD at 447). Here, however, Pilkington and Aon were potential adversaries, and so that the parties may have shared a common interest could not negate the waiver that occurred when Pilkington shared the documents with his potential adversary. Judge Gorenstein noted that to hold otherwise would lead to the untenable result that “even today, during the course of this litigation, Pilkington and Aon could freely share the work product without waiver given that they share a common interest in eliminating [$15 million] limit – at the same time, Pilkington is suing Aon for tens of millions of dollars.” Id.
Although parties may exchange attorney’s work product with third parties in anticipation of litigation without waiving privilege, such documents may be discovered if, at the time of disclosure, that third party was foreseeably a potential adversary. and the documents related to the subject matter of their potential litigation. .
Originally published by the New York Law Journal
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