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Internal Investigation Not Protected From Discovery

New York Law Journal, July 31, 2015
By Adam R. Shaw

This column discusses a decision by Senior District Court Judge Lawrence E. Kahn ordering disclosure of internal investigation documents and communications of a public relations firm; a decision by Chief Judge Gary L. Sharpe dismissing an appeal of a bankruptcy order because the notice of appeal was untimely; and a decision by Senior District Judge Norman A. Mordue dismissing a case because of bad service of process.

Internal Investigation

The high-profile reporting of sexual abuse allegations against a college basketball coach led to the coach's wife bringing libel claims against ESPN. After the case survived a motion to dismiss, the wife moved to compel discovery of information relating to the college's internal investigation of the abuse allegations and its communications with its public relations firm. In Fine v. ESPN,,1 Judge Kahn ordered that the materials must be produced.

The issues in the case were whether documents and notes related to an internal investigation conducted by the college's human resource department and its lawyers were protected as legal work product and whether the documents of a public relations firm that worked with the college and its lawyers were privileged attorney-client communications.

The work product doctrine protects a party's documents that were prepared in anticipation of litigation. The court explained that a document is prepared "in anticipation of litigation" when it is "prepared or obtained because of the prospect of litigation." Documents that "are prepared in the ordinary course of business or that would have been created in essentially similar form irrespective of the litigation" are not protected.

The college argued that its internal investigation documents were protected because the investigation had a dual purpose of a business investigation and an investigation in anticipation of litigation. The court disagreed. According to the court, creating documents for the additional purpose of being in anticipation of litigation is not enough to protect a document as work product. If there is a dual purpose, the court reasoned, then the question becomes whether the documents would have been created in the same form in the absence of the litigation.

Thus, even if the court were to accept that the college had a dual purpose in creating the documents, it ruled that the college failed to prove that the documents would not have been created in the same form if there were no litigation. The court found that the college and its lawyers routinely conducted investigations into employees' conduct, and, notwithstanding that the alleged wrongdoing was sensitive, the college did not show that the investigation itself was carried out in any different way because of anticipated litigation.

The court also rejected the college's claim of privilege over its public relations firm's documents. The attorney-client privilege protects communications between a lawyer and client relating to legal advice sought by the client. Normally when that communication is shared with a third party, the privileged is waived. There is an exception, however, the court noted, for communications made to an agent to assist the attorney in providing the advice.

The court disagreed that the public relations firm's communications were made to assist in providing legal advice. The court found that it did not matter that the public relations firm was helping the college and its lawyers maintain a consistent message amid the heightened media scrutiny, nor did it matter that the firm was helping to issue press releases that incorporated legal advice.

The court ruled that the key issue was whether the "public relations firm's communications were "necessary to facilitate [the] attorney-client communications." The court found that they were not. It is not enough, the court reasoned, that the public relations firm was being helpful. According to the court, the communications did not assist "directly with the lawyer's public advocacy on behalf of a client that was necessary to achieve a circumscribed legal goal." Instead, the communications at issue "merely provided ordinary public relations advice" that "assisted counsel in assessing the probable public reaction to various strategic alternatives."

Filing Deadlines

Paying attention to filing deadlines can be critical, especially when they are jurisdictional. The appellant learned that the hard way in Domazet v. Willoughby Supply Company.2

There, Amra Domazet, a creditor, had filed an adversary complaint alleging that a debt the bankrupt debtor Willoughby Supply Company owed to Domazet was non-dischargeable. The Bankruptcy Court dismissed the adversary complaint on summary judgment. Domazet moved for reconsideration, and the Bankruptcy Court denied that motion on Nov. 14, 2014. Domazet filed a notice of appeal to the District Court on Dec. 1, 2014. The time period from denial of the motion to filing of the notice of appeal spanned the Thanksgiving holiday.

Unfortunately for Domazet, Chief Judge Sharpe found that the appeal was untimely and because the filing of the notice of appeal was jurisdictional, he dismissed the appeal. District courts only have jurisdiction to hear appeals of bankruptcy court orders where a notice of appeal is filed within 14 days after entry of the order; otherwise, as the court found, the "district court is without jurisdiction to consider the appeal, regardless of whether the appellant can demonstrate excusable neglect."

There are technical rules for computing the time for filing that permit an extension of the last day to file if the last day falls on a weekend, legal holidays or "if the clerk's office is inaccessible." Domazet claimed that she filed her notice on the first business day after Nov. 28, and that Nov. 28 was either the Thanksgiving legal holiday or was a date the clerk's office was inaccessible because the Second Circuit ordered the court closed that date. Chief Judge Sharpe disagreed.

First, the court found that only Thanksgiving day, and not the day after Thanksgiving is listed as an official legal holiday in the Federal Rules of Bankruptcy Procedure and that the Second Circuit's order applied only to the Second Circuit and not the district courts or bankruptcy courts within the Second Circuit. Further, the order did not purport to declare the date a legal holiday.

Second, the court found that the clerk's office was not inaccessible on Nov. 28, 2014. Domazet claimed, without proof, that the clerk's office was closed because it was the day after Thanksgiving. The court noted that although there have been cases that allowed extensions when the courthouse was physically closed or inaccessible due to inclement weather, those cases were inapplicable because electronic case filing (ECF) was available.

Domazet, like any represented party, was required to file her papers by ECF. And, as the court reasoned, the more modern cases hold that because of ECF "a clerk's office is no longer

'inaccessible' just because it may be closed on a particular day." According to the court, "whether the clerk's office was physically open or closed for business is of no moment here, as Domazet was required to file her notice of appeal electronically."

Service of Process

Serving legal process by a substitute method to personal service, such as affixing papers to a door of a business or residence, so-called "nail and mail" service, only works when diligent efforts to make personal service are unsuccessful. When are those efforts at personal service too weak to support substitute service? When your server does little more than drives up to a house and beeps the horn. That is what Judge Mordue decided in Constitution Pipeline Co. v. A Permanent Easement for .037 Acres.3

Constitution Pipeline Company sought to condemn property for its pipeline under Rule 71.1 of the Federal Rules of Civil Procedure. That rule requires condemnation proceedings be commenced with personal service of process under Rule 4 of the Federal Rules of Civil Procedure, which in turn allows for service to be made under the state law where the district court sits, i.e., under New York law. Under New York law, the court found, "nail and mail" service is proper where service by personal delivery "cannot be made with due diligence." The court initially rejected the property owner's personal jurisdiction arguments, but on reconsideration it considered whether the attempts to personally serve the summons were adequate.

The process server attested that he made four attempts to personally serve process on the property owners at their house. On three of those attempts he noted that there was no car visible in the driveway and no tracks in the snow to indicate that any cars had been there. Because he saw 'No Trespassing' signs, he did not enter the property and instead honked the horn from the street to see if he could stir up a response from someone. Because no one responded to his horn and he saw no sign of cars, he figured no one was home. After reconfirming the address, he went a fourth time at 8 p.m., and this time he honked the horn and then knocked on the back door and got no answer and saw no lights on. After that he attached the summons to the door and went back to his office and put a copy in the mail.

According to the court, the due diligence required before allowing for substitute service must be "strictly observed" because of the reduced likelihood that someone will actually receive the papers under those alternate methods. And while there is no set rule for what constitutes proper due diligence, the court reasoned that the focus is on the quality and not the quantity of the effort. Courts have found efforts diligent where the attempts were made at a home or business at various times on various days when a defendant could reasonably be expected to be there and where efforts were made at a place of employment in addition to one's home.

The court held that the efforts made by Constitution Pipeline's process server were not sufficient. The court reasoned that the absence of a response to a horn and the lack of tire tracks in the snow "do not necessarily support [the] conclusion that no one was home." "Nor," according to the court, "does honking the car horn at the foot of the driveway amount to a genuine attempt to effect service."

The court also ruled that the three attempts were at weekday times when a person would likely be at work or away from the home. Similarly, the trip to the back door and the fact he saw no lights were not convincing enough reasons by themselves for not going to the front door. The court noted that it appreciated the obstacle of the no trespassing signs, but in the end, the court held that there was not a diligent effort made at personal service to allow for substitute service and it dismissed the complaint for lack of personal jurisdiction.

1.    12-cv-0836 (N.D.N.Y. May 28, 2015).

2.    14-CV-1455 (N.D.N.Y. July 10, 2015).

3.    14-CV-2108 (N.D.N.Y. July 14, 2015).

Adam R. Shaw is a partner in the Albany office of Boies, Schiller & Flexner.

Reprinted with permission from the July 31 edition of the New York Law Journal © 2014 ALM Media Properties, LLC. All rights reserved.

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