Scholtisek v. Eldre Corp.

• Decision Date: 01 August 2006
• Docket Number: No. 03-CV-6656L.,03-CV-6656L.
• Citation: 441 F.Supp.2d 459
• Parties: Frederick SCHOLTISEK, on behalf of himself and all other employees similarly situated, et al., Plaintiffs, v. ELDRE CORPORATION, Defendant.
• Court: U.S. District Court — Western District of New York

Page 459

441 F.Supp.2d 459

Frederick SCHOLTISEK, on behalf of himself and all other employees similarly situated, et al., Plaintiffs, v. ELDRE CORPORATION, Defendant.

No. 03-CV-6656L.

United States District Court, W.D. New York.

August 1, 2006.

Stanley J. Matusz, Rochester, NY, for Plaintiffs.

Robert C. Weissflach, Harter, Secrest and Emery LLP, Buffalo, NY, for Defendant.

DECISION AND ORDER

LARIMER, District Judge.

Plaintiff, Fredrick Scholtisek, commenced this action against his former employer, Eldre Corporation ("Eldre"), alleging that Eldre has violated the Fair Labor Standards Act, 29 U.S.C. § 201 et seq., and the New York Labor Law by willfully making impermissible deductions from the pay of employees who are paid on a salary basis. Plaintiff seeks declaratory relief and money damages, on behalf of himself and all other similarly situated employees. The Court has previously certified this action as a class action under Rule 23(b)(3) of the Federal Rules of Civil Procedure, and directed that notice of plaintiffs claims be sent to all class members. 229 F.R.D. 381 (W.D.N.Y.2005).

In anticipation of trial, Eldre has filed a motion in limine seeking an order precluding the use of any testimony concerning certain conversations between Kathleen Davis, Eldre's former Human Resources Manager, and Arthur Abelson who prior to his death was Executive Vice President of Eldre. Abelson made the subject statements in response to Davis' inquiry concerning certain wage matters, on behalf of a particular employee. Because the comments reference Eldre's attorneys, Eldre contends that the conversations are protected by the attorney-client privilege. For the reasons that follow, Eldre's motion is denied.

BACKGROUND

Davis testified at her deposition that her duties as Human Resources Manager included screening and interviewing job applicants, conducting exit interviews, helping employees obtain benefits, explaining their benefits to them, and generally acting as a liaison between employees and management. Dkt. # 154 Ex. G at 20. She was not primarily responsible for handing Eldre's payroll, though she served as a backup for the person who did handle the payroll. Id. at 20, 78.

Davis helped type Eldre's 1999 revised handbook for exempt employees (which contained various information about Eldre's wage and hour policies and practices), but she did not make decisions with respect to the policies set forth in the handbook. Id. at 25, 41.

At one point, Davis testified that on a certain occasion in about the second or third year of her employment at Eldre, she "had an employee get angry because their pay was docked." Id. at 39. She stated that she "went to Mr. Abelson at the time with the employee's complaint, and [she] was told that this handbook had been gone over by the company's attorneys and everything in it was legal." Id.¹ It is this conversation to which Eldre objects.

Davis testified that she told Abelson that she "d[id]n't recall seeing a policy like that before for a salaried employee." Dkt. # 161 Ex. A at 44. The policy she was referring to was Eldre's policy of docking salaried employees' pay for partial-day absences. Id. at 43, 46. Davis stated that she "wanted to get an answer [from Abelson] to have something to say to this employee to hopefully make them understand that this was company policy and, you know, that was it." Id. at 45.

After plaintiffs' attorney had asked her a few more questions about this topic, Eldre's attorney stated, "I think I just want to put an objection on the record to preserve an argument that any conversations with Mr. Abelson regarding attorneys is [sic] protected by the attorney/client privilege by virtue of Miss Davis' position." Id. at 47. Plaintiffs' attorney responded, "Obviously we'll be litigating that at a later point...." Id.

DISCUSSION

I. Privileged Communications

Defendant contends that Abelson's alleged statements to Davis that Eldre's attorneys had reviewed the company handbook and that "everything in it was legal" are protected by the attorney-client privilege. Plaintiffs contend that Eldre has waive the privilege with respect to those statements, in a number of ways.

Before reaching the issue of waiver, though, there is a threshold question whether any privileged information was transmitted by Abelson to Davis in the first place. I am not convinced that it was.

To invoke the attorney-client privilege, a party must demonstrate that there was (1) a communication between client and counsel, which (2) was intended to be and was in fact kept confidential, and (3) made for the purpose of obtaining or providing legal advice. United States v. Construction Products Research, Inc., 73 F.3d 464, 473 (2d Cir.), cert. denied, 519 U.S. 927, 117 S.Ct. 294, 136 L.Ed.2d 213 (1996). "It is ... well established that the party invoking a privilege bears the burden of establishing its applicability to the case at hand." In re Grand Jury Subpoenas Dated March 19, 2002 and August 2, 2002, 318 F.3d 379, 384 (2d Cir.2003); see also United States v. International Bhd. of Teamsters, 119 F.3d 210, 214 (2d Cir.1997) (holding that party invoking attorney-client privilege bears the burden of establishing "all of its elements"); United States v. Construction Prods. Research, Inc., 73 F.3d 464, 473-74 (2d Cir.1996) (rejecting attorney-client and work product privilege claims where party failed to establish the essential elements). "The burden is a heavy one, because privileges are neither `lightly created nor expansively construed.'" In re Grand Jury Subpoenas, 318 F.3d at 384 (quoting United States v. Nixon, 418 U.S. 683, 710, 94 S.Ct. 3090, 41 L.Ed.2d 1039 (1974)).

There are several problems with Eldre's assertion of the privilege here. First, it has not been established that there was a "communication between client and counsel" concerning Eldre's pay-docking policies. See In re Subpoena of Curran, No. 3:04-MC-039, 2004 WL 2099870, at *5 (N.D.Tex. Sept.20, 2004) ("The first element of the attorney-client privilege test looks to see if any confidential communications took place"). Eldre has expressly disclaimed any reliance on an advice-of-counsel defense, and several of its officers have testified that Eldre did not obtain any legal advice or opinions about those policies or the employee handbook. See Declaration of Robert C. Weissflach (Dkt.# 154) ¶ 1126, 27, and deposition excerpts cited therein.

In addition, even taking Abelson at his (alleged) word that Eldre's attorneys had gone over the employee handbook, he never said that the attorneys had stated that everything in the handbook was legal. According to Davis, Abelson told her only that (1) the attorneys had reviewed the handbook and (2) everything in it was legal.

Taken together, those two statements might reasonably be interpreted as implying that the attorneys had told Eldre that everything in the handbook was legal, but that conclusion is not inescapable. It could also reasonably be inferred to mean only that the attorneys had not, to Abelson's knowledge, stated that anything in the handbook was it legal, and that it was simply Abelson's own opinion that everything in it was legal.

As stated, the burden of establishing the applicability of the privilege is on Eldre, and because of that, any ambiguities are to be construed against Eldre. See, e.g., Matter of Grand Jury Empanelled February 14, 1978, 603 F.2d 469, 474 (3d Cir. 1979) ("To the extent that the record is ambiguous as to the elements which are necessary to establish the claim of privilege, `The burden of proving that the (attorney-client) privilege applies is placed upon the party asserting the privilege'") (quoting United States v. Landof, 591 F.2d 36, 38 (9th Cir.1978)); Bell v. Pfizer, Inc., No. 03 Civ. 9945, 2005 WL 1560488, at *7 n. 6 (S.D.N.Y. July 5, 2005) ("Since defendants bear the burden of demonstrating the existence of the attorney-client privilege, the ambiguity [concerning the date on which a certain document was created] must be construed against them"); Heublein, Inc. v. E & J Gallo Winery, Inc., No. 94 Civ. 8155, 1995 WL 645438, at *2 (S.D.N.Y. Nov.1, 1995) ("The burden of sustaining the claim of privilege is on Heublein. Because the record is ambiguous, Heublein has not sustained its burden") (citing von Bulow by Auersperg v. von Bulow, 811 F.2d 136, 144 (2d Cir.), cert. denied, 481 U.S. 1015, 107 S.Ct. 1891, 95 L.Ed.2d 498 (1987)). To the extent that Abelson's alleged statements were ambiguous with respect to what, if anything, Eldre's attorneys said about the policies set forth in the employee handbook, that ambiguity is construed against Eldre, and I do not find that defendant has established that any privileged communications occurred in that regard.

II. Waiver

Even if Abelson's alleged statements were taken to mean that Eldre's attorneys had given the employee handbook their imprimatur, I find that any privilege that had attached to such communications was waived when Abelson related them to Davis.²

There is case law to the effect that disclosure of an attorney's advice by one corporate employee to another does not necessarily waive the privilege if there is a genuine need for such disclosure, such as where the recipient has some responsibility for the area to which the advice relates. See, e.g., Strougo v. BEA Associates, 199 F.R.D. 515, 519-20 (S.D.N.Y.2001) ("although dissemination of privileged information to third parties generally waives attorney-client privilege, the distribution within a corporation of legal advice received from its counsel does not, by itself, vitiate the privilege"); SCM Corp. v. Xerox Corp., 70 F.R.D. 508, 518 (D.Conn.) (privileged communications will not lose "protection if an executive relays legal advice to another who shares responsibility for the subject matter underlying the consultation"), appeal dismissed, 534 F.2d 1031, 1032 (2d Cir.1976)). This principle "follows from the recognition that since...