Rossi v. Blue Cross and Blue Shield of Greater New York

• Decision Date: 06 June 1989
• Citation: 542 N.Y.S.2d 508,73 N.Y.2d 588,540 N.E.2d 703
• Parties: , 540 N.E.2d 703, 58 USLW 2042 Dennis ROSSI, Appellant, v. BLUE CROSS AND BLUE SHIELD OF GREATER NEW YORK, Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 508

542 N.Y.S.2d 508

73 N.Y.2d 588, 540 N.E.2d 703, 58 USLW 2042

Dennis ROSSI, Appellant, v. BLUE CROSS AND BLUE SHIELD OF GREATER NEW YORK, Respondent.

Court of Appeals of New York.

June 6, 1989.

Steven Cohen and Arnold V. Goldstein, New York City, for appellant.

Kevin B. Pollak and John V. Fabiani, Jr., New York City, for respondent.

OPINION OF THE COURT

KAYE, Judge.

An internal memorandum from a corporate staff attorney to a corporate officer communicating advice regarding a company form that was the subject of an imminent defamation action is protected from disclosure in that action by the attorney-client privilege (CPLR 4503 [a].

As alleged in the complaint, in April 1984, plaintiff, a physician specializing in radiology, opened a facility for medical diagnostic testing through the use of a Diasonics NMR (nuclear magnetic resonance) Imaging Scanner. Over the next year and a half, plaintiff performed NMR scans on numerous patients, among them subscribers of defendant health insurer, Blue Cross and Blue Shield. Defendant allegedly rejected more than 2,000 claims by plaintiff's patients seeking reimbursement for the scans. In rejecting claims, defendant sent its subscribers a form containing the following statement: "Your contract does not cover procedures which are experimental or whose effectiveness is not generally recognized by an appropriate governmental agency." Apparently, the procedure had in fact been approved by the Federal Food and Drug Administration, National Center for Devices and Radiological Health.

After several times notifying defendant of the FDA approval and unsuccessfully seeking correction of the statement, on May 2, 1985, plaintiff drew up a summons and complaint for defamation. In the complaint, plaintiff pleaded that hundreds of his patients who had received defendant's rejection notice condemned him for using an unapproved, experimental nuclear procedure that could harm them physically. Plaintiff alleged that Blue Cross knew that the language used in rejecting his patients' claims was false and fraudulent, but that it nonetheless persisted in sending the statement to his patients, gravely damaging his practice and reputation.

The focus of this appeal is an internal Blue Cross memorandum dated May 2, 1985--the date of the summons and complaint--from Edward Blaney, Jr., to Dr. Mordecai Berkun. Blaney was a lawyer employed by Blue Cross on its counsel's staff, not a company officer; Berkun was an officer of Blue Cross and its Medical Director. Copies of the memorandum were indicated for C. Ammarati, Blue Cross Vice-President of Professional Affairs (Berkun's staff superior), and J.L. Shurtleff, Blue Cross Vice-President and General Counsel (Blaney's staff superior).

In response to discovery requests, defendant identified the Blaney memorandum but withheld production on grounds of attorney-client privilege, work product and material prepared for litigation. While the document has not been made public, defendant has described its contents, paragraph by paragraph, as follows. According to defendant, the first paragraph refers to conversations between Blaney and plaintiff's attorney regarding a possible defamation suit based on the rejection form; the second concerns conversations between Blaney and the FDA regarding plaintiff's NMR Imaging System; the third paragraph sets forth Blaney's understanding of Blue Cross' NMR reimbursement policy and his understanding of new language that was going to be used to deny NMR claims; and the final paragraph expresses Blaney's opinion and advice regarding the rejection language of the form, and requesting comments from the Medical Director.

On plaintiff's motion for production of the memorandum in its entirety, Supreme Court reviewed the document in camera and directed that it be turned over to plaintiff. A divided Appellate Division reversed, concluding that the memorandum was a privileged attorney-client communication as well as work product, and it granted plaintiff leave to appeal to this court on a certified question. The dissenters would have ordered production because the thrust of the memorandum "concerns the quality of a business judgment and does not in any significant way involve a lawyer's learning and professional skills reflecting legal research or theory." (140 A.D.2d 198, 201, 528 N.Y.S.2d 51.) We now affirm on the ground that the memorandum is privileged, and therefore do not reach the alternative arguments advanced by defendant.

To begin with points of agreement, no one questions that corporations, as other clients, may avail themselves of the attorney-client privilege for confidential communications with attorneys relating to their legal matters (see, Upjohn Co. v. United States, 449 U.S. 383, 101 S.Ct. 677 66 L.Ed.2d 584; 5 Weinstein-Korn-Miller, N.Y.Civ.Prac. p 4503.06; McCormick, Evidence § 87, at 206-209 [Cleary 3d ed. 1984]. A corporation's communications with counsel, no less than the communications of other clients with counsel, are encompassed within the legislative purposes of CPLR 4503, which include fostering uninhibited dialogue between lawyers and clients in their professional engagements, thereby ultimately promoting the administration of justice (see, Matter of Vanderbilt [Rosner--Hickey], 57 N.Y.2d 66, 76, 453 N.Y.S.2d 662, 439 N.E.2d 378; Matter of Priest v. Hennessy, 51 N.Y.2d 62, 67-68, 431 N.Y.S.2d 511, 409 N.E.2d 983; Matter of Jacqueline F., 47 N.Y.2d 215, 218-219, 417 N.Y.S.2d 884, 391 N.E.2d 967; Hurlburt v. Hurlburt, 128 N.Y. 420, 424, 28 N.E. 651). The privilege applies to communications with attorneys, whether corporate staff counsel or outside counsel (see, e.g., Allied Artists Picture Corp. v. Raab Prods., 38 A.D.2d 537, 327 N.Y.S.2d 167). Finally, while the cases largely concern communications by clients to their attorneys, CPLR 4503 speaks of communications "between the attorney * * * and the client" (CPLR 4503 [a], and the privilege thus plainly extends as well to the attorney's own communications to the client (Matter of Creekmore, 1 N.Y.2d 284, 296, 152 N.Y.S.2d 449, 135 N.E.2d 193; Richardson, Evidence § 415, at 410 [Prince 10th ed.]; 5 Weinstein-Korn-Miller, N.Y.Civ.Prac. p 4503.11a).

Beyond these points of agreement, the attorney-corporate client privilege has raised nettlesome questions--particularly as to communications from corporate agents to counsel (see, e.g., Waldman, Beyond Upjohn: The Attorney-Client Privilege in the Corporate Context, 28 Wm. & Mary L.Rev. 473 [1987]; Saltzburg, Corporate and Related Attorney-Client Privilege Claims: A Suggested Approach, 12 Hofstra L.Rev. 279 [1984]; Sexton, A Post-Upjohn Consideration of the Corporate Attorney-Client Privilege, 57 NYU L.Rev. 443 [1982]. But even where the communication in issue is--as here--from the staff attorney to the corporate agent, difficult questions may arise.

For example, unlike the situation where a client individually engages a lawyer in a particular matter, staff attorneys may serve as company officers, with mixed business-legal responsibility; whether or not officers, their day-to-day involvement in their employers' affairs may blur the line between legal and nonlegal communications; and their advice may originate not in response to the client's consultation about a particular problem but with them, as part of an ongoing, permanent relationship with the organization. In that the privilege obstructs the truth-finding process and its scope is limited to that which is necessary to achieve its purpose (Matter of Priest v. Hennessy, supra, 51 N.Y.2d...