360 Construction Co. v. Atsalis Bros. Painting Co.
Docket: No. 11-12344
Court: District Court, E.D. Michigan; April 12, 2012; Federal District Court
Defendants Atsalis Brothers Painting Company, Garry Manous, and Nick Atsalakis sought a protective order to block codefendant Andrew Richner and his law firm, Clark Hill, PLC, from producing documents requested by the plaintiff, 360 Construction Company, Inc., arguing that the documents were shielded by attorney-client privilege or the attorney work product doctrine. The court determined that the moving defendants had waived the attorney-client privilege regarding the documents and that the work product doctrine was inapplicable. Consequently, the court denied the motion for a protective order and mandated the production of the documents.
360 Construction filed suit against the moving defendants for defamation related to their communications with the Michigan Department of Transportation (MDOT) during the bidding process for a contract to clean and recoat the Mackinac Bridge’s structural steel. Despite being the lowest bidder, the plaintiff alleges a smear campaign by the moving defendants commenced after MDOT announced their bid. A key document in question is a June 23, 2010 memorandum by Andrew Richner, which argued for the disqualification of the plaintiff due to a connection with a previously sued company. Although most allegations were found to be meritless, it was determined that a former Allstate Painting employee was unsuitable for the project, resulting in a delayed contract award to the plaintiff.
The plaintiff's complaint, filed on May 27, 2011, included claims for defamation and interference with business relations stemming from the defendants' communications with MDOT. The defendants later filed a notice of non-party fault against Richner and others. The plaintiff amended its complaint to add Richner as a defendant and included a negligence claim. The moving defendants acknowledged sending the memorandum and produced it along with its attachments in response to interrogatories. Subsequently, subpoenas were issued to Richner and Clark Hill for drafts of the memorandum, related communications, and supporting research.
The document outlines a series of requests regarding the production of various records and communications related to a Memorandum, including notes, transmittal documents, responses, and billing records associated with attorney Andrew C. Richner and the Clark Hill law firm. It notes that on December 12, 2011, the moving defendants claimed Richner acted independently in creating and sending the Memorandum to the Michigan Department of Transportation (MDOT) without their authorization. However, this position was retracted on December 22, 2011, when it was revealed that the moving defendants had indeed seen and approved the Memorandum prior to its release. On December 27, 2011, the moving defendants sought a protective order to prevent the production of the requested documents, citing attorney-client privilege and the attorney work product doctrine.
Federal Rule of Civil Procedure 26 allows for broad discovery while also protecting materials covered by evidentiary privileges. The moving defendants argue that the requested documents are protected under the attorney-client privilege, which requires that legal advice is sought from a professional legal adviser in confidence and that the communications remain protected unless waived. The privilege aims to foster open communication between clients and attorneys, but confidentiality is crucial; once it is compromised, the basis for the privilege diminishes.
The attorney-client privilege is a narrowly construed legal principle that limits the discoverability of information in lawsuits. A client waives this privilege if they voluntarily disclose an attorney's advice to a third party, as this violates confidentiality. Under Federal Rule of Evidence 501, state law governs privilege in claims that arise under that state's law; here, Michigan law applies. Michigan recognizes attorney-client privilege for direct communications between clients and their attorneys and extends to communications made through agents. The privilege pertains to both written and oral communications made for the purpose of obtaining legal advice, but it is limited to confidential communications.
Once a holder of the privilege discloses information to a third party, the privilege is lost. In this case, the moving defendants provided the final version of a Memorandum to the Michigan Department of Transportation (MDOT), thereby waiving the privilege for that document. However, they argue that earlier drafts of the Memorandum remain protected. A court ruling indicates that waiving privilege for a final document does not automatically extend to its drafts, which may contain confidential information. Nonetheless, if a waiver occurs, all communications on the same subject matter become disclosable.
Furthermore, if a client alleges a breach of duty by their attorney, the privilege is waived for all communications relevant to that claim. This principle is significant because the moving defendants' argument is complicated by their attribution of fault to an attorney, which affects the scope of the privilege.
The Michigan Rules of Professional Conduct provide an exception to attorney-client privilege, allowing attorneys to disclose confidences necessary to establish or collect fees or to defend against accusations of wrongful conduct. This applies when a legal or disciplinary claim implicates the lawyer in the client's misconduct, permitting the lawyer to respond as necessary to defend themselves. In this case, 360 Construction initially sued only Atsalis Brothers Painting and others, but later amended its complaint to include attorney Andrew Richner after the moving defendants named him in a Notice of Non-Party Fault. The Michigan Supreme Court has established that the duty of confidentiality is waived when clients or their representatives accuse an attorney of fraud or misconduct, allowing the attorney to testify about relevant facts. Consequently, the moving defendants have waived attorney-client privilege concerning specific documents related to the Memorandum and its drafts due to their allegations against Richner.
The subpoena requests various documents and communications linked to the Memorandum, which the moving defendants have waived privilege over. Additionally, a bill for legal services is only protected if it contains confidential client information; otherwise, it does not enjoy privilege. The requests for Richner's research and documents related to the Memorandum do not involve attorney-client communications and are thus not privileged. The request for documents showing the transmittal of the Memorandum to entities like the MDOT does not seek privileged communications either.
Furthermore, the defendants claim that the requested documents are protected under the attorney work product doctrine, which safeguards trial preparation materials to maintain the adversarial process's integrity. However, in diversity cases, federal law governs the work product doctrine, specifically Federal Rule of Civil Procedure 26.
Rule 26(b)(3) provides protection for documents and tangible items created in anticipation of litigation by or for another party. To qualify for this protection, it must be established that a document was prepared due to a party’s subjective anticipation of litigation, which must also be objectively reasonable. The burden is on the party claiming this protection to demonstrate that anticipated litigation was the primary reason for the preparation of the documents. In this case, the moving defendants failed to prove that the requested materials were prepared in anticipation of litigation, as their counsel admitted during the hearing that the relevant Memorandum and its drafts were not created with any litigation in mind. This concession leads to the conclusion that the subpoenaed materials are not protected by the work product doctrine. Additionally, the moving defendants waived attorney-client privilege by naming their attorney as a non-party at fault, which also negates the work product protection. Consequently, the court ruled that the materials sought are not protected by either privilege and denied the motion for a protective order, ordering compliance with the subpoena by April 26, 2012.
