United States District Court, E.D. Arkansas, Western Division
Signed October 07, 2009
Brandon W. Lacy, Tony L. Wilcox, Wilcox Parker Hurst Lancaster & Lacy, Jonesboro, AR, Scott J. Lancaster, Wilcox Parker Hurst Lancaster & Lacy, Maumelle, AR, for Plaintiffs.
Michael S. Moore, Harold Wayne Young, Jr., Friday, Eldredge & Clark, LLP, Little Rock, AR, for Defendant
*1 Pending before the Court is Plaintiffs' Second Motion to Compel, which seeks the production of documents that Defendant, Kohler Co. (hereinafter “Kohler”), alleges are protected by the attorney-client privilege and/or the work-product privilege. (Docket entry #34.) Before addressing the merits of Plaintiffs' Motion, the Court will briefly view the genesis of this discovery dispute. Kohler operates a manufacturing facility in Searcy, Arkansas (the “Searcy facility”). (Docket entry #22, Dft's Ans. to Sec. Amnd. Cmplt.
at 6.) On December 5, 2006, a Collective Bargaining Agreement between Kohler and the United Auto Workers (“UAW”) expired. (Docket entry #27, Ex. A, Stone Aff.
at 4.) Four days later, the UAW Local 1000 membership voted to go on strike at the Searcy facility. Id.
at 5. Kohler took the position that this was an “economic strike,” not
an unfair labor practices strike,” and began hiring replacement workers to fill the positions vacated by the striking UAW members. Id.
at 6. Plaintiffs are 111 of 123 replacement workers who were hired by Kohler to work at the Searcy facility. Id.
In early 2007, the UAW filed unfair labor practice charges against Kohler with the National Labor Relations Board (“NLRB”). The Regional Director of the NLRB subsequently filed a Consolidated Complaint against Kohler which alleged that the strike at the Searcy facility had been converted from an economic strike, to an unfair labor practice strike, as of February 2007. (Docket entry #29, Dft's Stmt of Undisputed Facts
On March 6, 2008, Kohler, the UAW, and the NLRB entered into a Settlement Agreement resolving all of the charges in the Consolidated Complaint. (Docket entry #27, Ex. A, Stone Aff.
at 7.) Pursuant to the terms of the Settlement Agreement, Kohler terminated all 123 replacement workers and rehired 103 of the former employees who went on strike. Id.
at 10. As a result, all of the Plaintiffs lost their jobs.
On March 20, 2008, Plaintiffs filed the Complaint initiating this action.
(Docket entry #1.) They assert that Kohler wrongfully induced them to take so-called “permanent” jobs which they were told would not
be affected by the outcome of the strike. Plaintiffs further allege that Kohler “promised the replacement workers that their positions were not only permanent, but that they would not be replaced by striking workers should those striking workers elect to end their strike.” (Docket entry #21, Pltf's Second Amend. Cmplt.
at 14.) Based upon these allegations, Plaintiffs assert claims against Kohler for: (1) violating the Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2101 et seq. (the “WARN Act”); (2) breach of contract; (3) fraud; (4) unjust enrichment; (5) promissory estoppel; and (6) civil conspiracy.
On July 29, 2008, Plaintiffs served Kohler with Interrogatories and Requests for Production of Documents. On March 25, 2009, after receiving a number of extensions of the deadline for responding to that written discovery, Kohler served its Responses.
*2 On June 26, 2009, Kohler filed a Motion for Partial Summary Judgment on Plaintiffs' WARN Act claim.
(Docket entry #27.)
On July 1, 2009, Plaintiffs filed a Motion to Compel Kohler to produce a privilege log.
(Docket entry #30.) Along with that Motion, Plaintiffs requested an extension of the deadline for responding to Kohler's Motion for Partial Summary Judgment. (Docket entry #31.) On July 6, 2009, the Court entered an Order giving Plaintiffs until September 21, 2009, to respond to Kohler's Motion for Partial Summary Judgment.
(Docket entry #32.) On July 21, 2009, the Court entered an Order denying Plaintiffs' Motion to Compel, as moot, based on Plaintiffs' representation that Kohler had produced a privilege log. (Docket entry #33.)
On August 7, 2009, Plaintiffs filed the pending Second Motion to Compel.
(Docket entry #34.) On August 13, 2009, the Court conducted a telephone conference with counsel for the parties and directed Kohler to supplement its privilege log with certain additional information. (Docket entry #37.) On August 20, 2009, Kohler provided Plaintiffs with supplemental discovery responses and additional documents. On August 21, 2009, Kohler filed its Response to Plaintiffs' Second Motion to Compel, along with a Revised Privilege Log. (Docket entry #38.) On August 31, 2009, Plaintiffs filed their Reply to Kohler's Response to Plaintiffs' Second Motion to Compel. (Docket entry #40.)
Based on Kohler's production of additional documents and its supplemental responses to Plaintiffs' written discovery, the scope of Plaintiffs' Second Motion to Compel has been narrowed to the following issues: (1) by indicating that it intends to call two of its in-house attorneys as witnesses, has Kohler “impliedly waived” the attorney-client privilege, which otherwise would protect from disclosure numerous documents listed on the Revised Privilege Log?; (2) assuming Kohler has “impliedly waived” the attorney-client privilege protecting those documents, does this mean it has also waived the work-product privilege which otherwise would protect other documents listed in the Revised Privilege Log?; (3) should Kohler be required to produce its “Pro Forma Income Statements?;” and (4) has Kohler properly searched for, produced, and preserved all “discoverable electronic information”? The Court will analyze each of these issues separately.
A. Attorney-Client Privilege
Almost all of the documents that Kohler seek to protect from disclosure under the attorney-client privilege involve communications to and from two of its in-house attorneys, Paul Ten Pas (“Ten Pas”) and Jack Pawley (“Pawley”).
In its discovery responses, Kohler identified these two attorneys as “persons with knowledge” in the following areas:
*3 INTERROGATORY NO. 16: Please identify each individual who took part or otherwise has knowledge of the decision to hire and/or fire each Plaintiff.
RESPONSE: * * * *. Regarding the decision to hire replacement workers to replace the striking workers and the terms of the strike settlement, such decisions were made by Paul Ten Pas, Jack Pawley, Bryan Drescher [the Director of Operations for “Cast Iron & Stainless Steel”], and Jerry Stone [Kohler's Plant Manager in Searcy].
INTERROGATORY NO. 17: Please identify all persons with knowledge of the following:
(e) The Terms related to the settlement of the Searcy plant strike.
(f) All internal discussions and all internal communications concerning the Searcy plant strike, rehiring the striking workers and/or hiring or firing of replacement workers.
(h) All communications with the Union concerning potential settlement agreement and/or rehiring striking workers and/or the termination of replacement workers.
(i) The status of employment of the replacement workers and/or Kohler's plans for hiring or firing replacement workers and all changes or amendments thereto at any time between the strike date and the replacement workers termination date.
(j) All notices which Kohler agreed to post as part of the settlement and those actually posted following the settlement.
RESPONSE: Paul Ten Pas and Jerry Stone.
(o) All notices of the pending mass layoff or termination of the replacement workers.
RESPONSE: Paul Ten Pas and Jerry Stone.
(p) The decision to hire or fire each of the Plaintiffs.
RESPONSE: See Response to Interrogatory No. 16.
(Docket entry #30, Ex. 2.)
During and after the strike at Kohler's facility, Jerry Stone (“Stone”) was the Plant Manager. During Stone's deposition, he testified that Ten Pas communicated with him about the decision to have Plaintiffs declared to be “permanent replacement workers” and advised Stone on what he should tell Plaintiffs regarding their “status” as Kohler employees:
Q: Did what they were — did the instructions on what the tell the [replacement] applicants change over time?
A: The only thing that changed was after Kohler Company declared the replacement workers to be permanent replacement workers, then that changed.
Q: Okay, And when you say Kohler Company declared the replacement workers to be permanent replacement workers, tell me how that happened.
Q: Did that communication instruct you on what to tell or not tell the replacement workers?
*4 A: The e-mail said that — [
Q: Did you derive instruction on what to tell or not to tell the replacement workers as to their status as employees at Kohler for anyone other than an attorney?
Q: And whatever advice that the attorney, whether it be Mr. Ten Pas or anyone else, gave you with respect to what type or manner of communication or content of the communication to make to the employees, did you act on that advice?
Q: Now, would you agree with me that on multiple occasions, these replacement workers were told that they were permanent employees?
[DEFENDANT'S COUNSEL]: Object to the form. You can answer.
A: They were told many times that they were permanent replacement associates, permanent — permanent employees.
(Docket entry #40, Ex. 1 at 24-28.) (emphasis added).
During the settlement negotiations among Kohler, the UAW, and the NLRB, Stone testified that he did not know if the UAW had demanded that the replacement workers be terminated. Id.
at 35. When asked who at Kohler had knowledge of the UAW's demands during the settlement negotiations, Stone identified attorneys Ten Pas and Pawley, because they “were the only two at the meeting.” Stone did not know who at Kohler made the final decision to enter into the settlement agreement with the UAW and the NLRB. Id.
Thus, based on Stone's deposition testimony and other documents in the record, the following facts appear to be undisputed:
1. At the time Kohler hired Plaintiffs as replacement workers, it believed that the UAW's strike at its Searcy plant was an “economic strike,” rather than an “unfair labor practices strike.” (Docket entry #2, Ex. 1, Stone's March 6, 2007 letter to Plaintiffs; Docket entry #40, Ex. 1, Stone Depo. at 24-25.)
2. As an “economic strike,” Kohler believed that it could hire permanent
replacement workers and that it would not
be required to rehire any of the former employees, who were members of the UAW. (Docket entry #2, Ex. 1, Stone's March 6, 2007 letter to Plaintiffs; Docket entry #40, Ex. 1, Stone Depo. at 24-25.)
3. After Kohler hired Plaintiffs, its Plant Manager, Stone, provided them with a letter dated March 6, 2007. In this letter, Stone explained to them that: (a) they were being hired as “permanent replacement workers because the strike called by UAW is an economic strike”; (b) “While this is the company's position, legal issues also require that I [Jerry Stone, Plant Manager] advise you that the UAW has filed unfair labor practice charges against Kohler Co. with the [NLRB]”; (c) the UAW's position “is that the strike is an unfair labor practice strike, not an economic strike”; and (d) “if there is a [NLRB] finding or a settlement that the strike is an unfair labor practice strike or that otherwise requires the company to return the strikers to work, the company will be legally bound to release you from employment to the extent necessary to create openings for any strikers who may want to return to work.
” (Docket entry #2, Ex. 1, Stone's March 6, 2007 letter to Plaintiffs) (emphasis added).
*5 4. In a November 5, 2007 email from Stone to the Searcy plant supervisors, he advised them that the “rumors” were “not true” that the strike had settled and strikers were returning to work with backpay. He directed the plant supervisors to reassure Plaintiffs “that they are permanent Kohler associates and any strike settlement would not affect that.” (Docket entry #2, Ex. 3, Stone's November 5, 2007 email to Searcy plant supervisors).
5. In-house attorneys Ten Pas and Pawley represented Kohler in connection with the unfair labor practice charges brought by the UAW and NLRB.
6. Ten Pas and Pawley subsequently negotiated the settlement agreement resolving those charges. Under the terms of that settlement, Kohler agreed to terminate Plaintiffs and reinstate the striking UAW workers. (Docket entry #2, Ex. 4, Stone's March 6, 2008 letter to Plaintiffs).
2. Kohler's Revised Privilege Log
In Kohler's Revised Privilege Log, it asserts 257 individual claims of attorney-client privilege, work-product privilege, or a combination of both, to avoid producing hundreds of pages of documents. Typical examples of Kohler's attorney-client privilege claims are: “discussion between Ten Pas and client to gather information concerning legal issues with layoffs of salaried employees;” “discussion between Ten Pas and client re: issues with picketers;” “discussion between Ten Pas and client;” “discussion between Ten Pas and client re: strategy of negotiating with union;” “discussion between Ten Pas and client on how to respond to correspondence from union;” “memorandum from attorney to client re: counsel's opinions and mental impressions of negotiations with union and legal proceedings of unfair labor practice charges;” “discussion between Ten Pas and client re: recent legal precedent relative to strike;” “discussion between attorneys re: legal precedent and standards as well as mental impressions and recommendation for action.”
3. Implied Waiver of Attorney-Client Privilege Arising From Ten Pas and Pawley Being Called As Witnesses for Kohler
According to Plaintiffs, Ten Pas and Pawley have been identified by Kohler as employees who have detailed knowledge of the facts surrounding why they were terminated from employment with Kohler and the circumstances surrounding Kohler's settlement of the unfair labor practice charges with the UAW and NLRB. Additionally, in Stone's deposition, he makes it clear that: (1) “upper-management” was involved in making the decision on what he should tell Plaintiffs regarding their status as “permanent” Kohler employees; and (2) he believed he “acted properly
” in all of his dealings with Plaintiffs and the other replacement workers because he was following “the advice of that attorney [Ten Pas].” (Docket entry #40, Ex. 1.) Finally, in Kohler's Response to Plaintiffs' Second Motion to Compel, it directly states that: “Mr. Ten Pas and Mr. Pawley are fact witnesses in this case involved in the facts surrounding the hiring and discharge of the Plaintiffs.” (Docket entry #39 at 3.) This statement makes it clear that Kohler intends to call Ten Pas and Pawley as witnesses at trial.
Plaintiffs argue that Kohler has “impliedly waived” the attorney-client privilege as to all documents exchanged between or among Ten Pas, Pawley and other Kohler employees regarding the strike at the Searcy facility because Ten Pas and Pawley are important fact witnesses for Kohler. Additionally, Plaintiffs argue that it is inevitable that, at some point, one or more of Kohler's witnesses will assert “advice of counsel” as a defense to Plaintiffs' claims that they were wrongfully terminated.
(Docket entry #34 at 4.)
*6 Plaintiffs rely on Rutgard v. Haynes, 185 F.R.D. 596, 601-02 (S.D. Cal. 1999), and Dion v. Nationwide Ins. Co., 185 F.R.D. 288, 295-96 (D. Mont. 1988), to support their argument that Kohler has impliedly waived the attorney-client privilege.
, plaintiff sued his former attorney, Haynes, for malpractice arising from Haynes's filing a civil anti-trust action on his behalf against his former employees. Plaintiff's former employees subsequently sued him for malicious prosecution arising from the anti-trust action filed by Haynes. Plaintiff hired another lawyer, Royce, to defend him against the malicious prosecution claims and those claims were later settled. In plaintiff's malpractice action against Haynes, he sought to recover the attorneys' fees he paid to Royce for defending him in the malicious prosecution action, along with the amount he was required to pay to settle the malicious prosecution claims arising from Haynes filing the anti-trust action.
During discovery in the malpractice case, Haynes sought to obtain all of the documents in Royce's possession that were relevant to his representation of plaintiff in the malicious prosecution action. Royce moved to quash the production of those documents on the ground they were protected by the attorney-client privilege. The narrow issue before the court was whether plaintiff had implicitly waived the attorney-client privilege by suing Haynes for malpractice.
In holding that plaintiff had waived the privilege, the court relied heavily on the fact that plaintiff intended to call Royce as a witness in the malpractice action against Haynes. The court was “unable to conclude that Royce will be able to testify about the malicious prosecution case without commenting on why he believes Haynes is liable for the settlement paid by plaintiff without relying in some measure on privileged information from his files.” The court reasoned that, in order for Haynes to effectively cross-examine Royce, he needed to know the factual support for his conclusions and opinions, and the documents in Royce's files might contain that kind of information.
, the insured sued Nationwide, her automobile insurer, seeking a declaratory judgment on her underinsured motorist coverage (“UIM”), and damages against Nationwide for bad faith and unfair trade practices in denying her UIM claim. After the parties settled the declaratory judgment aspect of the case, Nationwide designated its former attorney in the case as an expert witness regarding insurance law, bad faith, and unfair trade practices. Applying Montana privilege law, the court examined whether Nationwide had impliedly waived the attorney-client and work-product privilege by naming its attorney as an expert witness.
While Nationwide stated that it did not
intend to rely on advice of counsel as a defense, the court concluded that it had nonetheless waived the attorney-client privilege:
If Nationwide were to assert the advice of counsel defense, any and all communications with its attorney would clearly be discoverable. Nevertheless, while Nationwide may not formally raise an advice of counsel defense, its decision to name attorney Meismer as an expert witness, bespeaks volumes about the posture of Nationwide's defense. Moreover, irrespective of the legal defenses Nationwide expects to raise, Dion's case will perforce place at issue Meismer's handling of the underlying claim. To permit Nationwide to offer Meismer's conclusions and expert opinions regarding the underlying claim, where such conclusions and opinions serve Nationwide's purposes, without permitting Dion access to all the communications between Meismer and Nationwide, would unduly prejudice Dion in the prosecution of the present action.
*7 Consequently, the court concludes that Nationwide, upon naming its attorney as an expert witness, assumed the risk that any subsequent invocation of the attorney-client privilege would be abrogated. Accordingly, the court concludes that the communications between Meismer and Nationwide, up until that point in time at which the claim for underinsured motorist benefits was settled, should be made available to Dion.
Dion, 185 F.R.D. at 295-96 (internal citation omitted).
Plaintiffs also rely on other cases to support the proposition that, if Kohler calls witnesses (like Stone) who testify that they “acted properly” in dealing with Plaintiffs because they were following the advice of Kohler's attorneys, then “the privilege is completely waived.”
(Docket #34 at 4.) See
Nguyen v. Excel Corp., 197 F.3d 200 (5th Cir. 1999) (employer defending FLSA claim waived attorney-client privilege by failing to assert the privilege when privileged information was sought and then selectively disclosed portions of the privileged confidential communications); Rhone-Poulenc Rorer, Inc. v. Home Indem. Co., 32 F.3d 851 (3rd Cir. 1994) (vacating district court's order compelling production of documents — “Advice [of counsel] is not in issue merely because it is relevant, and does not necessarily become an issue merely because the attorney's advice might affect the client's state of mind in a relevant manner. The advice of counsel is placed in issue where the client asserts a claim or defense, and attempts to prove that claim or defense by disclosing or describing an attorney client communication.”); Cox v. Administrator, 17 F.3d 1386 (11th Cir. 1994) (party affirmatively asserting a good faith belief that its actions were legal waived attorney-client privilege — “[h]aving gone beyond mere denial, affirmatively to assert good faith, USX injected the issue of its knowledge of the law into the case and thereby waived the attorney-client privilege.”), opinion modified on other grounds
, 30 F.3d 1347.
In its Response, Kohler makes the broad assertion that “it does not intend to put in issue Mr. Ten Pas's or Mr. Pawley's legal advice to Kohler, and neither attorney will testify about any privileged matter, thereby protecting the privilege as to all communications.” In making this argument, Kohler apparently has chosen to ignore Stone's deposition testimony that he believed he “acted properly” in dealing with Plaintiffs because he was relying on the legal advice he received from attorney Ten Pas:
Q: Is it your position here today that, because you [Stone] acted on the advice of that attorney [Ten Pas], you acted properly?
(Docket entry #40, Ex. 1.)
Thus, Kohler's plant manager appears to have already injected “advice of counsel” as a defense to Plaintiffs' claims.
*8 Kohler admits that attorneys Ten Pas and Pawley were “involved in the facts surrounding the hiring and discharge of Plaintiffs.” Docket entry #39 at 3 However, it attempts to draw a distinction between Plaintiffs' hiring and discharge, and its in-house attorneys' legal advice on other “labor matters”: “[in-house counsel] have not been identified to testify about the legal representation they gave their client with respect to these labor matters.”
(Docket entry #39 at 4.) In other words, Kohler is attempting to use the attorney-client privilege as a sword to allow Ten Pas and Pawley to testify to so-called “facts” within their knowledge that are favorable to Kohler's position that it acted properly in hiring and then discharging Plaintiffs, but as a shield to protect Ten Pas and Pawley from having to disclose any emails or other documents they sent or received from other Kohler employees regarding the hiring and discharge of Plaintiffs because those documents contain only legal advice, as opposed to so-called “facts.” The Court finds it telling that Kohler has cited no legal authority
to support its position. Instead, Kohler makes the conclusory argument that the cases cited by Plaintiffs “outline factors” where the privilege is waived, and that “none of the factors are present in this case.”
Because jurisdiction is based on a federal question, federal common law governs Kohler's privilege claims.
Although Congress failed to enact Proposed Federal Rule of Evidence 503, also known as Supreme Court Standard 503, the Eighth Circuit has recognized it as an “accurate definition” of the federal common law of attorney-client privilege. See
In Re Bieter Co., 16 F.3d 929, 935 (8th Cir. 1994). Standard 503's statement of the attorney-client privilege is as follows:
A client has a privilege to refuse to disclose and to prevent any other person from disclosing confidential communications made for the purpose of facilitating the rendition of professional legal services to the client, (1) between himself or his representative and his lawyer or his lawyer's representative, or (2) between his lawyer and his lawyer's representative, or (3) by him or his lawyer to a lawyer representing another in a matter of common interest, or (4) between representatives of the client or between the client and a representative of the client, or (5) between lawyers representing the client.
Supreme Court Standard 503(b). The party claiming attorney-client privilege has the burden of establishing it. See
Hollins v. Powell, 773 F.2d 191, 196 (8th Cir. 1985).
Courts have sometimes referred to “implied waiver” of the attorney-client privilege as “at issue waiver” because the party claiming the privilege has impliedly waived it by affirmatively placing the privileged communications “at issue.” See
John Doe Co. v. United States, 350 F.3d 299, 302 (2d Cir. 2003) (“It is well established doctrine that in certain circumstances a party's assertion of factual claims can, out of considerations of fairness to the party's adversary, result in the involuntary forfeiture of privileges for matters pertinent to the claims asserted. The loss of the privilege in these circumstances is sometimes described as implied waiver ... sometimes as ‘at issue’ waiver because it results from the party having placed a contention at issue”) (internal citations omitted). Courts have also found implied waiver where the party claiming privilege relies on advice of counsel as an element of a claim or defense. See
In re County of Erie, 546 F.3d 222, 228 (2d Cir. 2008) (“The assertion of an ‘advice-of-counsel’ defense has been properly described as a ‘quintessential example’ of an implied waiver of the privilege.”)
*9 Still other courts have discussed “implied waiver” in the context of a party attempting to use the attorney-client privilege as both a “sword” and “shield.” See
Newmarkets Partners, LLC v. Sal. Oppenheim Jr., 258 F.R.D. 95, 106 (S.D.N.Y. 2009) (“Also known as ‘implied waiver’ or ‘at-issue waiver,’ forfeiture of privilege may arise ‘when the party attempts to use the privilege both as ‘a shield and a sword’ by ‘partially disclos[ing] privileged communications or affirmatively rely[ing] on [them] to support its claim or defense and then shield[ing] the underlying communications from scrutiny.’ ”) (quoting
In re Grand Jury Proceedings, 219 F.3d 175, 182 (2d Cir. 2000)); see also
Willy v. Administrative Review Bd., 423 F.3d 483, 497 (5th Cir. 2005) (“when a party entitled to claim the attorney-client privilege uses confidential information against his adversary (the sword), he implicitly waives its use protectively (the shield) under that privilege.”), Computer Network Corp. v. Spohler, 95 F.R.D. 500, 502 (D. D.C. 1982) (“A party cannot voluntarily disclose facts in his favor before a judicial tribunal, when they are helpful to his cause, and then invoke the attorney-client privilege as a shield to prevent a searching inquiry so that a court may determine the truthfulness of the facts initially presented. A litigant cannot convert the privilege into a tool for selective disclosure.”).
In Sedco Intern., S.A. v. Cory, 683 F.2d 1201 (8th Cir. 1982), the Court defined the essential elements of implied waiver as follows:
In determining whether there has been an implied waiver, two elements must be examined: (1) implied intention and (2) fairness and consistency. Courts have found waiver by implication when a client testifies concerning portions of the attorney-client communication, see, e.g.,
Kantaris v. Kantaris, 169 N.W.2d 824 (Iowa 1969), when a client places the attorney-client relationship directly at issue, see, e.g.,
Tasby v. United States, 504 F.2d 332, 336 (8th Cir. 1974), cert. denied, 419 U.S. 1125, 95 S.Ct. 811, 42 L.Ed.2d 826 (1975) (client charged attorney incompetence), and when a client asserts reliance on an attorney's advice as an element of a claim or defense, see, e.g.,
Hearn v. Rhay, 68 F.R.D. 574 (E.D. Wash. 1975) (advice of attorney element of good faith defense in civil rights action). Dean Wigmore has said that “(a) waiver is to be predicated ... when the conduct ... places the claimant in such a position, with reference to the evidence, that it would be unfair and inconsistent to permit he retention of the privilege.” 8 J. Wigmore, Evidence § 2388, at 855 (McNaughton rev. 1961).
Sedco, 683 F.2d at 1206.
In Baker v. General Motors Corp., 209 F.3d 1051, 1055 (8th Cir. 2000), the Court described two situations where “at-issue waiver is commonly found”: (1) “when proof of a party's legal contention implicates evidence encompassed in the contents of an attorney-client communication-for example, when a client uses reliance on legal advice as a defense or when a client brings a legal malpractice action”; and (2) “when a client's testimony refers to a specific privileged document.” The Eighth Circuit has also recognized that the “attorney client privilege cannot be used as both a shield and sword[.]” United States v. Workman, 138 F.3d 1261, 1264 (8th Cir. 1998) (criminal defendant implicitly waived privilege by claiming that he relied on advice of counsel in cashing checks in prosecution for converting government property).
*10 Kohler contends that Ten Pas and Pawley should be allowed to testify about the facts surrounding Kohler's decision to hire and subsequently terminate Plaintiffs, without impliedly waiving the attorney-client privilege. Obviously, Ten Pas and Pawley learned all of these facts while representing Kohler during the UAW strike and the subsequent NLRB administrative proceeding which resulted in the settlement of the charges brought against it by the UAW and the NLRB. During Stone's deposition, he made it clear that: (1) “upper management” made the decision to declare “the replacement workers [Plaintiffs] to be permanent replacement workers ...” and this was based on “Kohler's position this was an economic strike ...;” and (2) Ten Pas was involved with upper management in making that decision and it was an e-mail from Ten Pas which communicated to Stone the decision of “upper management.”
In presenting the facts surrounding the hiring and termination of Plaintiffs, one option available to Kohler is to call the upper-management employees who were personally involved in making those decisions. This would obviate the need for Ten Pas and Pawley to testify and place Kohler on solid legal footing to argue that the attorney-client privilege protects all
e-mails and other documents exchanged between Ten Pas, Pawley, and other Kohler employees concerning: (1) Kohler's decision to hire and later discharge Plaintiffs; (2) Kohler's defense of the unfair labor practice charges before the NLRB; and (3) Kohler's subsequent decision to settle those unfair labor practice charges with the UAW and the NLRB.
Instead of pursuing that option, it appears Kohler intends to call Ten Pas and Pawley to testify about why Kohler's decision to terminate Plaintiffs was proper. Yet, Kohler believes it should still be allowed to use the attorney-client privilege to bar Plaintiffs' counsel from asking Ten Pas and Pawley any questions which might elicit less favorable testimony about: (1) how Kohler arrived at its decision to terminate Plaintiffs; (2) why Kohler went from its position on November 5, 2007, that Plaintiffs were “permanent Kohler associates” and “any strike settlement would not affect that,” to the position, on March 6, 2008, that it would agree to terminate Plaintiffs and rehire the UAW employees; and (3) what lead Kohler to change its earlier position that the UAW was engaged in an “economic strike” and conclude that the UAW was striking based on unfair labor practices at the Searcy plant. If Kohler were permitted to do this, it would create an utterly unfair playing field on which it could elicit favorable testimony from its in-house attorneys to justify its decision to discharge Plaintiffs, while preventing opposing counsel from developing any unfavorable testimony on the grounds of privilege.
Kohler makes the self-serving argument that it only intends to elicit “facts” from Ten Pas and Pawley that are not
covered by the attorney-client privilege and that all of the other facts that Plaintiffs' counsel might want to elicit from them involve matters protected by the privilege. In essence, Kohler suggests that the party asserting the privilege should be allowed to be the gate keeper in deciding which facts its attorneys should be permitted to reveal, while still preserving the privilege to protect from disclosure other facts that the asserting party wishes to keep secret. Simply put, allowing an attorney to testify to only hand-picked facts supporting his or her client's position would make a mockery of the privilege. This is the reason why lawyers rarely testify as fact witnesses at trial and, why courts have consistently held that, when they do, an implied waiver of the attorney-client privilege has occurred.
Based upon the record before it, the Court concludes that Kohler's decision to call Ten Pas and Pawley as witnesses at trial would constitute an implied waiver of the attorney-client privilege. Accordingly, none of the e-mails or other documents identified in Exhibit A to this Order would be protected by the attorney-client privilege. If Kohler reconsiders this decision and elects not
to call Ten Pas and Pawley as witnesses, but instead, calls the upper-management employees who were personally involved in making the decision to hire and later terminate Plaintiffs and to settle the unfair labor practice charges brought by the UAW and NLRB, then Kohler can preserve the attorney-client privilege and avoid disclosing any of the documents listed on Exhibit A hereto.
*11 Finally, while Kohler has made the conclusory statement that, during the trial, it does not intend to raise “advice of counsel” as a defense to any of Plaintiffs' claims, it has not explained how that conclusory statement can be squared with Stone's deposition testimony that at least he believes
that he acted properly in his dealings with Plaintiffs based upon legal advice he received from Ten Pas. The Court concludes that, if Kohler wishes to avoid waiving the attorney-client privilege, based on what appears to be Stone's assertion of the “advice of counsel defense,” it must make a clear and unequivocal statement, on the record, that notwithstanding the deposition testimony of Stone, it will not in any way seek to rely on “advice of counsel” as a defense to any of Plaintiffs' claims at trial.
Within eleven (11) days of the entry of this Order, Kohler must file a Stipulation that: (1) clearly states whether it intends to call Ten Pas and Pawley as witnesses at trial; and (2) unequivocally states whether it will rely on “advice of counsel” as a defense to any of Plaintiffs' claims. If this Stipulation affirmatively states that Kohler intends to call Ten Pas and Pawley as witnesses, or
that it will rely on “advice of counsel” as a defense, then Kohler will be deemed to have impliedly waived the attorney-client privilege and it will be required to produce all of the documents identified on Exhibit A to this Order. If Kohler's Stipulation negates both of those propositions, then it will not
be required to produce any of the documents listed in the Revised Privilege Log.
B. Work-Product Privilege
In Plaintiffs' Second Motion to Compel, they make the conclusory argument that they “believe that all [work-product] privilege has been waived,” presumably for the same reasons asserted to support their claim that Kohler had impliedly waived the attorney-client privilege. In a similarly conclusory fashion, Plaintiffs contend that, even if the documents are entitled to protection as work product, they can “demonstrate substantial need of this information and are unable to obtain a substantial equivalent without undue hardship” under Rule 26(b)(3)(A)(ii).
In Kohler's Response, it asserts that the work-product privilege protects various legal research articles, spreadsheets, legal memoranda and notes, and emails listed in the Revised Privilege Log.
Kohler makes it clear that many of these documents contain the mental impressions and legal advice of its attorneys:
Paul Ten Pas and Jack Pawley's legal memoranda to its client and notes to the file are the most sensitive, confidential and clearly privileged documents identified in the Privilege Log. Many of these memos are communications with Kohler management, which mean they are also protected by the attorney/client privilege. These memos concern the attorney's legal opinions, conclusions, mental impressions, and recommendations concerning the administrative proceedings before the NLRB. Federal Rule of Civil Procedure 26(b)(3)(B) prohibits the Court from allowing the disclosure of “mental impressions, conclusions, opinions, or legal theories of a party's attorney or other representatives concerning a litigation.” These memoranda fall squarely within that definition. Rule 26(b)(3)(B) prohibits disclosure even if the factors in Rule 26(b)(3)(A)(ii) are satisfied.
(Docket entry #39 at 5.)
In Plaintiffs' Reply, they contend that Kohler's reliance on Rule 26(b)(3)(B) is misplaced, because the allegedly protected documents relate to administrative proceedings before the NLRB
, and were not prepared in anticipation of this litigation
, as required by Rule 26(b)(3)(B). Beyond citing Rule 26, neither party relies on any case law to support their respective positions.
*12 “The work product privilege is designed to promote the operation of the adversary system by ensuring that a party cannot obtain materials that his opponent has prepared in anticipation of litigation.” Pittman v. Frazer, 129 F.3d 983, 988 (8th Cir. 1997). “The work product doctrine is to be applied in a commonsense manner in light of reason and experience as determined on a case-by-case basis.” Pittman v. Frazer, 129 F.3d 983, 988 (8th Cir. 1997).
The Federal Rules of Civil Procedure distinguish between “ordinary” and “opinion” work product as follows:
(A) Documents and Tangible Things. Ordinarily, a party may not discover documents and tangible things that are prepared in anticipation of litigation or for trial by or for another party or its representative (including the other party's attorney, consultant, surety, indemnitor, insurer, or agent). But, subject to Rule 26(b)(4), those materials may be discovered if:
(i) they are otherwise discoverable under Rule 26(b)(1); and
(ii) the party shows that it has substantial need for the materials to prepare its case and cannot, without undue hardship, obtain their substantial equivalent by other means.
(B) Protection Against Disclosure. If the court orders discovery of those materials, it must protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of a party's attorney or other representative concerning the litigation.
Fed. R. Civ. P. 26(b)(3)(A)-(B).
The Eighth Circuit has explained this distinction between “ordinary” work product and “opinion” work product as follows:
There are two kinds of work product-ordinary work product and opinion work product. Ordinary work product includes raw factual information. See
Gundacker v. Unisys Corp., 151 F.3d 842, 848 n. 4 (8th Cir. 1998). Opinion work product includes counsel's mental impressions, conclusions, opinions or legal theories. See
id. at n. 5. Ordinary work product is not discoverable unless the party seeking discovery has a substantial need for the materials and the party cannot obtain the substantial equivalent of the materials by other means. See
Fed.R.Civ.P. 26(b)(3). In contrast, opinion work product enjoys almost absolute immunity and can be discovered only in very rare and extraordinary circumstances, such as when the material demonstrates that an attorney engaged in illegal conduct or fraud. See
In re Murphy, 560 F.2d 326, 336 (8th Cir. 1977).
Baker v. General Motors Corp., 209 F.3d 1051 (8th Cir. 2000). Finally, the Eighth Circuit has recognized that work-product privilege is not absolute, and may be impliedly waived. Pamida, Inc. v. E.S. Originals, Inc., 281 F.3d 726, 732 (8th Cir. 2002) (citing United States v. Nobles, 422 U.S. 225, 239, (1975)).
*13 Although not addressed by either party, the threshold issue the Court must decide is whether the implied waiver of the attorney-client privilege also impliedly waives the work-product privilege. In Baker v. General Motors Corp., 209 F.3d 1051, 1055 (8th Cir. 2000), the Court considered but declined to decide this issue. However, the Court was “skeptical” that a finding a party had impliedly waived the attorney-client privilege required
a finding the party had also waived the work-product privilege. Baker, 209 F.3d at 1055 (citing In re Martin Marietta Corp., 856 F.2d 619, 626 (4th Cir. 1988) (waiver of attorney-client privilege does not waive protection accorded to opinion work product)).
Plaintiff argues that the “opinion” work-product protections of Rule 26(b)(3)(B) are inapplicable in this case because Kohler seeks to invoke this protection for materials and documents generated in the administrative proceeding before the NLRB, and not this litigation.
Such a narrow reading of the scope of work-product privilege has been uniformly rejected by the courts. See
Faloney v. Wachovia Bank, N.A., 254 F.R.D. 204 (E.D. Pa. 2008) (“Rule 26(b)(3) requires only that the material be prepared in anticipation of some litigation, not necessarily in anticipation of the particular litigation. Nevertheless, the work product doctrine applies only in related litigation.”) (internal citations and quotations omitted); First Wisc. Mortg. Trust v. First Wisc. Corp., 86 F.R.D. 160, 165 (D. Wis. 1980) (“The scope of Rule 26(b)(3) is not limited to lawyer work product prepared for use in the particular litigation in which discovery is sought.”); Pamida, 281 F.3d at 731 (“The work product privilege extends beyond the termination of litigation.”).
In the administrative proceeding before the NLRB, the parties litigated issues surrounding Kohler's decision to hire the replacement workers and whether it had engaged in unfair labor practices at the Searcy facility. Those are the same issues involved in this litigation. Thus, the Court rejects any distinction between those two matters, for purposes of Kohler's assertion of work-product privilege, and concludes that Kohler is entitled to work product protection on all of the claimed documents in the Revised Privilege Log.
C. Pro Forma Income Statements
According to Plaintiffs, Stone testified in his deposition that Kohler maintained “pro forma income statements” that detailed the “operating income” of the Searcy facility.
(Docket entry #34 at 5.) Following Stone's deposition, Plaintiffs' counsel wrote defense counsel requesting production of those statements for the time period between February, 2006 and March, 2007. (Docket entry #34, Ex. 2.) Kohler refused to produce the statements.
In their Second Motion to Compel, Plaintiffs argue that they are entitled to these documents “given their claim for unjust enrichment.”
(Docket entry #34 at 5.)
In its Response, Kohler argues that Plaintiffs are attempting to “end run” the requirement that a party make a prima facie showing of entitlement to punitive damages before such information is discoverable. Kohler further argues that its income and profits are not an element of Plaintiffs' damages, and that, even if an unjust enrichment claim is cognizable in an employment/discharge context, their remedy would be “tort damages, such as lost wages and consequential damages.” (Docket entry #39 at 5.) In support of its position on damages, Kohler cites Northport Health Servs., Inc. v. Owens, 356 Ark. 630, 158 S.W.3d 164 (2004), where the Court held that damages in a “public-policy wrongful discharge action” consist of lost wages from termination until trial (less actual earnings) and “any other tangible employment benefit lost[.]”
*14 In their Reply, Plaintiffs argue that their unjust enrichment claims entitle them to the “value of the benefit received,” which is “the operating income derived from these operations during this time period.” (Docket entry #40 at 5-6.) Plaintiffs rely on Arkansas cases generally discussing the law of unjust enrichment. Importantly, none of these cases involve employment claims. See
El Paso Production Co. v. Blanchard, 371 Ark. 634, 646, 269 S.W.3d 362, 372 (2007) (surface owner of land was not entitled to unjust enrichment damages from oil and gas lessee's seismic operations conducted on surface lands — “To find unjust enrichment, a party must have received something of value, to which he or she is not entitled and which he or she must restore.”); Pro-Comp Management, Inc. v. R.K. Enterprises, LLC, 366 Ark. 463, 237 S.W.3d 20 (2006) (unjust enrichment as an element of damages under the Arkansas Trade Secrets Act includes “unjust enrichment caused by misappropriation where that is not taken into account in computing damages for actual loss”); Roberts Contracting Co., Inc. v. Valentine-Wooten Rd. Pub. Fac., 2009 Ark. App. 437, 2009 WL 1471809 (May 27, 2009) (sewer system contractor sued public facility board for breach of contract and board counterlclaimed for contractor's failure to complete and repair the system — even though contractor failed to substantially perform under contract it was still entitled to unjust enrichment recovery for the reasonable value of its services).
Suffice it to say, the Court can find no legal support for Plaintiffs' contention that, if they prevail on their unjust enrichment claims, they are entitled to Kohler's “operating income” from its Searcy facility, during the relevant time period. Furthermore, in the context of the claims being asserted by Plaintiffs in this case, such a recovery does not seem to correspond to the “value of the benefit received” by Kohler in terminating Plaintiffs' employment. Thus, Plaintiffs' request to compel Kohler to produce their “pro forma income statements” at its Searcy facility will be denied.
D. Preservation of “Electronic Discoverable Information”
In Stone's deposition, he testified that he had not searched his computer for any information about this case and no one had instructed him to do so. Plaintiffs contends that this testimony is in conflict with Kohler's Rule 26(f) Report, which represented that it had taken measures to preserve discoverable electronic data.
After Stone's deposition, Plaintiffs' counsel wrote defense counsel requesting that Stone and other Searcy employees be instructed to search their computers to preserve all discoverable electronic data. (Docket entry #34, Ex. 2.)
Based on these discrepancies, Plaintiffs request the following relief:
Plaintiffs have asked Mr. Stone to search his computer for emails or any other documents maintained on his hard drive which could be responsive to any of the Plaintiffs' Requests for Production of Documents and supplement their responses accordingly. Plaintiffs have also requested that Kohler ask all personnel at the Searcy facility with potentially discoverable information on their computers to take appropriate measures to secure such information, search their records, and produce responsive information. Given Kohler's silence following this request, Plaintiffs request that this Court order Kohler to take these steps.
(Docket entry #34 at 6.)
In its Response, Kohler states the following:
Kohler has complied with both its representation to preserve discoverable electronic information as well as the Federal Rules of Civil Procedure. Mr. Stone has not even had the opportunity to read and signed [sic] his deposition. Moreover, Mr. Stone was not designated as an official representative of Kohler with respect to matters of document retention.
(Docket entry #39 at 6.)
Although the above-quoted language is somewhat vague, the Court interprets it to mean that Kohler is now stating that: (1) it has fully complied with its obligation to preserve all discoverable electronic data
(including such data stored on the computers of Stone and other employees in the Searcy facility or elsewhere), as required by the Federal Rules of Civil Procedure; and (2) after Stone has had the opportunity to review and sign his deposition, it may produce additional new or recently discovered documents.
*15 Thus, the Court will deny, as moot, Plaintiffs' request that Kohler be required to preserve “electronic discoverable information.” The Court's denial of this request is without prejudice to Plaintiffs seeking further relief, at a later date, should grounds arise to support such a request.
IT IS THEREFORE ORDERED THAT Plaintiffs' Second Motion to Compel (docket entry #34) is GRANTED IN PART, and DENIED IN PART.
This case is not a class action. Plaintiffs contend that they are asserting “common claims” which are properly joined pursuant to Rule 20 of the Federal Rules of Civil Procedure.
Kohler argues that the termination of its replacement workers was not a “mass layoff” under the WARN Act.
While Kohler had apparently advised Plaintiffs' counsel that a privilege log would be forthcoming, Plaintiffs requested in their Motion that it be produced immediately so that all discovery disputes could be resolved prior to responding to Kohler's pending Motion for Partial Summary Judgment.
On September 17, 2009, the Court extended this deadline again. (Docket entry #42.)
That same day, the Court referred the Motion to the undersigned United States Magistrate Judge for disposition. (Docket entry #35.)
Ten Pas is a “Senior Staff Attorney” for Kohler. Pawley is a “Senior Labor Relations Attorney” for Kohler.
Kohler's counsel interposed an objection on the ground that the discussions between Ten Pas and Stone were protected by the attorney-client privilege. Counsel agreed to proceed with Stone's deposition, reserving the right to revisit Kohler's privilege claim after reviewing the Privilege Log.
Stone's testimony strongly suggests that members of Kohler's management must have also been involved in making the decisions regarding: the hiring and termination of the replacement workers; how to respond to the ongoing strike at the Searcy facility; and the resolution of the NLRB's Consolidated Complaint alleging unfair labor practices at the Searcy facility. Thus, it would appear Kohler may need to supplement its Responses to some of the sub-parts of Plaintiffs' Interrogatory No. 16.
As indicated previously, Ten Pas and Pawley are in-house attorneys for Kohler. In all of the noted documents, Ten Pas and Pawley appear to be discussing with management-level Kohler employees issues surrounding the strike at the Searcy facility.
Based on his deposition testimony, it would appear Stone has already injected “advice of counsel” as a defense justifying why he believes he “acted properly” in dealing with Plaintiffs.
In their Motion papers, Plaintiffs speculate that Kohler may also have asserted attorney-client privilege to protect documents that its in-house attorneys sent to or received from third parties outside the company. (Docket entry #34 at 4.) Kohler responds that there are no documents
in the Revised Privilege Log that fall into this category, and that Plaintiffs have identified none. In their Reply, Plaintiffs appear to abandon this argument because they make no attempt to identify any documents in the Revised Privilege Log that Kohler's attorneys purportedly sent to or received from third parties. (Docket entry #40.)
Shortly before Stone answered this question, Kohler's attorney objected and made it clear that they believed the attorney-client privilege barred Plaintiffs' counsel from asking Stone any questions about the legal advice he received from Ten Pas. Plaintiffs' counsel reserved the right to revisit Kohler's assertion of the privilege after they had reviewed Kohler's privilege log.
Kohler does not specify the nature of these “other labors matters.” However, from the parties' Motion papers, it is clear that Kohler is referring to the UAW strike and the subsequent settlement negotiations with the UAW and the NLRB that resulted in Kohler apparently agreeing to discharge Plaintiffs.
Fed. R. Evid. 501; S.E.C. v. Microtune, Inc., ––– F.R.D. ––––, 2009 WL 1574872 (N.D. Tex. June 4, 2009) (“Where, as here, the existence of a federal question provides the basis for federal subject matter jurisdiction, federal common law governs the resolution of the privilege issue.”); Woodward Governor Co. v. Curtiss Wright Flight Systems, Inc., 164 F.3d 123, 126 (2d Cir. 1999) (“questions about privilege in federal question cases are resolved by the federal common law.”); Hancock v. Dodson, 958 F.2d 1367, 1373 (6th Cir. 1992) (pendent state law claims in a federal question case did not “relieve us of our obligation to apply the federal law of privilege”); compare with
Gray v. Bicknell, 86 F.3d 1472, 1482 (8th Cir. 1996) (“In diversity actions, state law determines the existence and scope of attorney-client privilege.”).
The Court in Sedco
cited Hearn v. Rhay, 68 F.R.D. 574 (E.D. Wash. 1975). The so-called “Hearn
test” has been characterized as the majority rule, and provides for an implied waiver where: (1) assertion of the privilege was a result of some affirmative act, such as filing suit by the asserting party; (2) through this affirmative act, the asserting party put the protected information at issue by making it relevant to the case; and (3) application of the privilege would have denied the opposing party access to information vital to his defense. See
Union County, IA v. Piper Jaffray & Co., Inc. 248 F.R.D. 217, 220 (S.D. Iowa 2008) (citing Hearn, 68 F.R.D. at 581).
Examples of these categories of documents are: “periodical article re labor law;” “spreadsheet of benefit history of Searcy facility;” “discussion of revisions to CBA;” “attorney's notes;” “discussion re unfair labor practice allegations.”
In their Second Motion to Compel, Plaintiffs make no distinction between “ordinary” work product and “opinion” work product. In their Reply, Plaintiffs argue that “the information in the privilege log which Plaintiffs' seek concerns ‘the attorney's legal opinions, conclusions, mental impressions, and recommendations concerning the administrative proceeding before the NLRB.’ ” (Docket entry #40 at 5, quoting Docket entry #39 at 5.) This statement strongly implies that the work product Plaintiffs seek is opinion work product, not
ordinary work product.
Plaintiffs also assert that Kohler has improperly claimed work-product protection for “Daily Labor Report Articles.” Plaintiffs believe that, based on certain deposition testimony from Stone, these “articles” are actually reports of work-related injuries at the Searcy plant. In its Response, Kohler explains that the “Daily Labor Report Articles” are from a labor law periodical and that Ten Pas and Pawley collected these articles as part of their legal research.
Plaintiffs have not provided the Court with this deposition testimony. According to Kohler, “Plaintiffs' counsel attempted to ask Jerry Stone about the operating income of the facility at his deposition, and Kohler's counsel objected.” (Docket entry #39 at 5.)
Plaintiffs contend that Kohler was “unjustly enriched” as a result of its decision to wrongfully terminate Plaintiffs, and that the amount of this unjust enrichment should be measured by Kohler's “operating income” from the Searcy facility.
Plaintiffs also emphasize that one of the exhibits to their Complaint is a print-out of one of Kohler's emails that has not been produced by Kohler “in its original form.”
Kohler must immediately notify the Court and opposing counsel if the Court's interpretation of this language is not accurate.
End of Document.