In an action brought against a title company for losses in connection with a property sale, Justice Elizabeth H. Emerson, in JBGR LLC v. Chicago Title Ins. Co., denied the title insurer’s motion to amend its answer to add defenses, but also denied plaintiffs’ motion for a protective order concerning a withheld memorandum prepared by plaintiffs’ “expediter”.
This is the latest suit involving a 286-acre parcel of property for the development of homes surrounding a golf course on Long Island. In an earlier suit, the court awarded $2.97 million in damages against the plaintiffs in the current action based upon a promissory note default. In turn, plaintiffs sued Chicago Title, title insurer of the sale. In short, plaintiffs allege they were unaware of a 1997 declaration that restricted development to 140 homes, of which the title insurer failed to advise. Plaintiffs intended to build another 55 homes on the property, but couldn’t.
After years of discovery and motion practice, the case was certified trial ready, and note of issue filed in December 2016. Post note of issue motions were then filed. Defendant filed a motion to amend its answer to withdraw certain defenses, modify others and add six more. Plaintiffs cross-moved for a protective order, seeking to prevent disclosure of a memorandum produced to defendant, based upon attorney client privilege and work product doctrines.
As to the proposed amendments, the court concluded that the delay, coupled with prejudice, warranted denial. In considering the prejudice, the court applied the same elements used in the laches context, and noted that once certified as “trial ready”, the court’s discretion “should be discrete, circumspect, prudent, and cautious”. In this case, the court focused particularly on how long defendant was aware of the facts, which had been since June 2015.
An even more significant ruling, however, was the denial of the motion for a protective order. The memorandum in question was a memo generated by Joseph Dempsey, an attorney, summarizing a meeting held in 2010, at which the municipal applications for the development were discussed. Defendant obtained the document through a third-party subpoena served upon one of the participants to the meeting, Victor Prusinowski. Mr. Prusinowski described in his deposition that he was an expediter or “land-use consultant”. The court held that the memo was not protected from disclosure on three grounds. First, Prusinowski’s advice, as a non-lawyer service provider, while “important” to the legal advice given to the clients, was not “given to facilitate such legal advice”, and therefore the agency principle did not apply here and his presence waived any privilege. Second, even if it were privileged, the court concluded that there was a waiver, since “plaintiffs’ took no concrete steps to obtain a ruling” or seek a claw-back for nearly two years. Finally, the court concluded that the memo prepared by Dempsey was not considered “work product”, since he wasn’t acting as counsel when prepared. The memo did not contain “language uniquely reflecting a lawyer’s learning an [sic] professional skills, including legal research, analysis, conclusions, legal theory or strategy”.
And all this means what? As to amendments, consider amending or seeking leave soon after the new facts arise. Although there may be strategy in waiting to amend, the courts will focus on how long you knew, and whether you had a reasonable excuse for the delay. As to privilege, when working with non-lawyer service providers, courts will carefully scrutinize their retention, scope of services and their “necessity” for the rendering or facilitation of legal advice. Consider whether counsel — and not the client — should retain the provider, and whether a Kovel agreement is needed.