Sometimes we need reminding that the work-product doctrine’s protection is not absolute. A Florida federal court obliged.

In a high-dollar lawsuit involving a Sea Ray yacht, the court found that the work-product doctrine covered Sea Ray’s investigation report but forced production because the plaintiff proved a substantial need. A lingering question, though, is why the attorney–client privilege’s absolute protection failed to provide adequate shelter.  Molbogot v. MarineMax East, Inc., 2021 WL 917984 (S.D. Fla. Mar. 10, 2021). You may read the opinion here.

A Sea Lemon?

Jay Molbogot wanted a yacht so that, according to his Complaint, he could spend time “driving the boat in the intercoastal, going out to the open ocean, crossing to the Bahamas, or simply anchoring his boat at Lake Boca or Peanut Island and enjoy the day.” Sign me up for that.

He purchased from MarineMax a Sea Ray 400DA Sundancer for this very purpose but alleges that the vessel was not what it was represented to be. Alleged problems ranged from the engine to the generator to the barbeque grill.  And if you’re going to sail to the Bahamas, you definitely need an operable BBQ grill.

The Investigation

MarineMax contacted the boat’s manufacturer, Sea Ray, and Sea Ray retained engineer James Cote of Cote Marine to investigate Molbot’s complaints and prepare a report. Cote testifies in lawsuits of this nature, and Sea Ray said that it anticipated litigation at the time it retained Cote’s services. Cote completed the investigation and report, and then Sea Ray sent the boat to the factory for alterations. (Cue the foreshadowing classical music).

Molbogot sued MarineMax, but not Sea Ray, but subpoenaed Sea Ray’s documents, including Cote’s report. Sea Ray produced a privilege log identifying the report and objecting to its production based on the attorney–client privilege and the work-product doctrine.

Work Product Protection

The court properly noted that, even though the case involved state-law claims, federal civil-procedure rules govern work-product assertions. The court interpreted Fed. R. Civ. P. 26(b)(3) as establishing two tiers of protections. First, a party’s work product is discoverable only upon a sufficient showing of need and hardship. Second, while fact work product is potentially discoverable, courts afford opinion work product “near absolute protection.”  So, it is a party’s fact work product that an adversary may obtain “by showing both a substantial need and undue hardship in obtaining the materials or their equivalent by other means.”

Ruling

Sea Ray persuaded the court that it retained the investigator in anticipation of litigation with Molbogot. And that held even though Molbogot ultimately did not sue Sea Ray.  The court found that the work-product doctrine therefore protected the investigator’s report, but it nevertheless ordered production because the plaintiff proved a substantial need and undue hardship.  How?

Because, immediately after the inspection, Sea Ray sent the vessel to the factory and altered it, presumably through repairs. Molbogot successfully persuaded the court that he could not obtain photographs taken during the inspection or emulate the investigator’s findings because he no longer had access to the boat in the condition in which the investigator inspected it.  The court ordered Sea Ray to produce the entire report.

Privilege?

The privilege log asserts that the attorney–client privilege also protected the investigator’s report from discovery.  And, unlike the work-product doctrine, the privilege—if established—provides absolute protection. The court did not explain why the privilege failed to protect the report, stating simply that the investigator’s report “is solely protected by the work-product doctrine and not by the attorney–client privilege.”

Did Sea Ray’s internal or outside counsel launch the investigation so that it could provide the company with legal advice? Did the investigator work under counsel’s direction? Did the investigator return the report solely to legal counsel for legal-advice purposes?  I do not see those issues addressed, so I guess we will never know.

But Molbogot will know the report’s contents.

That great philosopher, Yogi Berra, once quipped that “it ain’t over till it’s over.” Justice Amy Coney Barrett could have used that phrase to summarize her first signed majority opinion since joining the Supreme Court. Writing for a 7–2 majority, the newest justice ruled that the deliberative process privilege protects an agency’s non-final draft opinion even though the opinion effected a rule change. In other words, it ain’t final until it’s final.  U.S. Fish & Wildlife Serv. v. Sierra Club, Inc., 2021 WL 816352 (Mar. 4, 2021). You may read the Court’s decision here.

Go Fish

This case involved interagency communications regarding protection of aquatic wildlife.  The EPA proposed a rule on the design and operation of “cooling water intake structures,” which—as we all know— draws large volumes of water to cool industrial equipment. The problem is that the water drawn contains fish and other aquatic wildlife.

If an EPA rule may adversely affect a protected species, then the agency must seek a “biological opinion” from the U.S. Fish & Wildlife Service and National Marine Fisheries Service regarding whether the EPA’s proposed rule will jeopardize endangered species. The Services characterize these opinions, simply enough, as a “jeopardy” or “no jeopardy” opinion.

I am sure there is a Yogi-ism in there somewhere.

Final Not Final

The EPA sent a proposed rule to the FWS/NMFS in 2013, and these Services agreed to issue a draft jeopardy or no-jeopardy opinion by December 6, 2013 and a final opinion by December 20, 2013. The Services issued their draft opinion, but the decisionmakers did not issue a final opinion—instead deciding that “more work needed to be done” and to continue discussions with the EPA.

As a result of those discussions, the EPA issued a significantly different rule in 2014, and the Services issued a final no-jeopardy opinion.  Do you see what happened here? The Services’ so-called draft jeopardy opinion in December 2013 was apparently final enough to cause the EPA to significantly alter course.

The Sierra Club noticed this and filed a FOIA suit seeking the Services’ December 2013 “draft opinion” because it was effectively a final opinion.

Deliberative Process Privilege

The FWS/NMFS refused to disclose the draft opinion, claiming that the deliberative process privilege protected it under Exemption 5 to FOIA. The deliberative process privilege protects governmental agencies’ pre-decisional advisory opinions, recommendations, debates, discussions, and other deliberations that comprise the governmental decision-making process. The purpose is to encourage agency officials to communicate candidly while debating various courses of action. The absence of such protection would chill debate and lessen the effectiveness of the ultimate decision.

The privilege therefore prevents disclosure of documents that are both predecisional and deliberative. Documents are predecisional if agency officials generated them before the agency’s final decision. Documents are deliberative if agency officials prepared them to formulate a particular position.

Dying on the Vine

So, was the Services’ action-provoking December 2013 “draft” opinion predecisional, meaning generated before the Services’ “final” opinion? Justice Barrett noted that a document “is not final because nothing else follows it” as often “a proposal dies on the vine.” The question, then, is “not whether a document is last in line, but whether it communicates a policy on which the agency has settled.”

Courts must consider whether the agency treated the document sought as its “final view on the matter.” In other words, does the document have “real operative effect”? If the document leaves the agency’s decisionmakers “free to change their minds,” then the document is not final for privilege-protection purposes.

Ruling

Here, the Services’ draft opinion was labeled “draft.” And while not dispositive, that is some indication that the Services could “change their mind.” But the context, too, proved the draft, predecisional status. In fact, a regulation, 50 CFR § 402.14(g)(5), contemplates that the Services will provide the EPA with a draft for review with the “possibility of changes to the biological opinion after the Services” send the draft to the EPA. (emphasis by Justice Barrett).

But the Sierra Club argued that the Services’ December 2013 draft jeopardy opinion effected change—it caused the EPA to submit a significantly different rule. Justice Barrett recognized that a draft opinion “might carry a practical consequence if it prompts agency action,” but holding as “final” any agency action that provokes a response “would gut the deliberative process privilege.”

The justice rejected this “effects-based” test, holding instead that—

To determine whether the privilege applies, we must evaluate not whether the drafts provoked a response from the EPA but whether the Services treated them as final.

The Services did not treat the draft opinion as final. Instead, like countless agency opinions, this one “died on the vine.” Justice Barrett upheld the privilege, and the Sierra Club will never see that draft jeopardy opinion.

*******

Justice Barrett did not author any significant privilege-related opinions while on the Seventh Circuit bench, so this appears to be her first foray, as a jurist, into the privilege world. We will be watching to see how she handles future privilege issues because, as Yogi would say, you can observe a lot just by watching.

NFL Commissioner Roger Goodell once quipped that his job is “protecting the shield,” a phrase referencing the League’s iconic shield-shaped logo and conveying that he protects the game’s integrity. Perhaps it also means protecting the NFL’s attorney–client privilege.

In a coverage dispute with several insurers over costs related to the defense of CTE Litigation, the NFL defeated the insurers’ privilege-piercing arguments that the insurance contracts’ cooperation clauses and the insurers’ common interest in the underlying CTE litigation required production of privileged materials. Alterra Am. Ins. Co. v. National Football League, 2021 WL 500143 (N.Y. App. Div. Feb. 11, 2021). You may read the opinion here.

CTE Litigation

Starting in 2011, several former NFL players filed a variety of lawsuits, including a putative class action, alleging that the League failed to protect them from chronic risks associated with concussive head injuries, including Chronic Traumatic Encephalopath (CTE), and then concealed those risks.

The lawsuits were consolidated into an MDL in the U.S. District Court for the Eastern District of Pennsylvania and, in 2015, that Court approved the parties’ settlement terms, including the NFL establishing an uncapped monetary award fund. For a detailed review of the claims and settlement approval, you may read the Court’s order here.  The Third Circuit affirmed the approval in an opinion you may read here.  And PBS provided a good summary, which you may read here.

Coverage Dispute and Privilege Issue

The NFL, of course, made a claim to its insurers for reimbursement of defense and settlement costs related to the CTE Litigation. Many of those insurers sought a declaratory judgment that the policies did not provide coverage. You may read one of the Complaints here.

During the coverage litigation, the insurers sought production of the NFL’s “underlying defense files” generated by the NFL and its counsel. The carriers specifically sought—

1.  The NFL’s analysis of the underlying plaintiffs’ claims and the NFL Parties’ defenses to those claims;

2.  The NFL’s valuation of the underlying claims; and

3.  The negotiations of the underlying settlement.

The NFL refused, arguing that the attorney–client privilege and the work-product doctrine protected the information from compelled disclosure.

Three Arguments and a Referee

The insurers made three primary arguments to pierce the privilege, and the trial court delegated the matter to a Discovery Referee for a determination. First, they argued that their insurance contracts’ cooperation clauses obligated the NFL to disclose all of its defense materials, including privileged information. Second, they argued that the NFL and the insurers had a common interest in the CTE Litigation and, therefore, disclosing the privileged materials to the insurers would not waive the protections. Third, they argued that the NFL put its defense-related materials “at issue” by seeking coverage.

Ruling

The Discovery Referee, in a thorough opinion available here, rejected each of these arguments. The Referee, citing several cases, held that an insurance contract’s cooperation provision does not operate as a per se waiver of privileged information—unless the clause contains explicit waiver statements.  And here, the general provision did not override the NFL’s reasonable expectation of confidentiality in communicating during the defense of the CTE Litigation.

The Referee also rejected the insurers’ attempted offensive use of the common-interest doctrine. The doctrine typically permits—but does not require—parties with a common legal interest to share privileged information without waiving the privilege. The Referee rejected this argument for multiple reasons, including that the insurers’ “argument for reading this doctrine as a rule mandating disclosure by a party to another person based on their asserted common interest is incompatible with the rationale for, and substance of, the doctrine.”

And the Referee rejected the at-issue-waiver argument, finding that, at this stage of the litigation, the NFL has not indicated that it intended to rely on its counsel’s settlement analysis of the CTE Litigation.

Affirmed

The Trial Court, in an Order available here, approved the Referee’s findings and conclusions after the insurers argued that the Referee had “overlooked” a few things. And most recently, the Appellate Court affirmed the Trial Court, succinctly stating—

Cooperation clauses in insurance policies do not operate as waivers of the NFL’s attorney–client privilege and work-product protection;

There was no privilege waiver simply because the NFL and the insurers had a common interest in the outcome of the CTE Litigation; and

The NFL did not put its protected information “at issue” by “merely seeking coverage.”

Shield successfully protected.