Herzfeld & Rubin, P.C.- Publications

Products Liability *Experts, Privileged Info; Secret 'High-Low' Agreements* By Michael Hoenig - New York Law Journal - October 11, 2006	Print article

This column reports on two recent decisions, one federal, one state. The first is by the U.S. Court of Appeals for the Sixth Circuit, a major pronouncement on whether experts must disclose attorney work product. The second is the Fourth Department's Reynolds decision dealing with an undisclosed "high-low" settlement.

In our May column,¹ we reported on a seemingly inexorable march of federal decisions favoring a prodisclosure trend when it comes to discovery of privileged information that attorneys furnish to their testifying experts. Our discussion supplemented prior articles dealing with a then "raging debate" about whether even so-called "core" attorney work product, i.e., the attorney's mental impressions, opinions and litigation strategies, must be disclosed.² Later, in our November 2005 article,³ we reported on a U.S. Magistrate Judge's decision that drafts of an affidavit prepared by a lawyer and submitted by a litigant's employee were protected from disclosure. However, that case did not involve disclosure by an expert.

A Sixth Circuit decision issued in the middle of August, Regional Airport Authority of Louisville and Jefferson County v. LFG,⁴ considers afresh, as a matter of first impression for the circuit, "whether attorney opinion work product communicated to testifying experts is protected from disclosure." A regional authority sued for costs incurred in remediation of contaminated property the defendants previously owned. Defendants won a summary judgment on the CERCLA claim filed by plaintiff under a federal statute.⁵ Defendants also won a magistrate's order compelling the production of certain privileged documents. The appeal by the regional authority concerned these issues. We focus here on the question of discoverability of attorney work product provided to testifying experts.

1993 Amendments

The Sixth Circuit examined the points of tension. Prior to 1993, there was general agreement that Federal Rule of Civil Procedure 26 excluded categorically the discovery of attorney opinion work product provided to testifying experts. Rule 26 was amended in 1993, however. Parties now had to submit expert reports for all testifying experts. The advisory committee note on the amendments spoke of "a duty to disclose." The rule itself, 26(a)(2)(A) and (B), requires disclosure of the identity of the testifier and, further, the expert's report "Shall contain" a "complete statement" of all opinions to be expressed at trial plus the "basis and reasons" therefore; plus the "data or other information" considered by the witness in forming the opinions; plus a slew of other details. The words "or other information" are used by some courts to justify prying out work product information.

Since the 1993 amendments, a "minority" line of cases, notably district court decisions, has held that attorney work product is not discoverable merely because it has been shared with a testifying expert. The Sixth Circuit panel called this the "Haworth" line of cases because of the name of one of the lead cases espousing the minority view.⁶ A second line of cases, the "majority" view, holds that Rule 26 creates a "bright-line rule requiring disclosure of all information provided to testifying experts, including attorney opinion work product."⁷ The cases cited by the panel for this view included several circuit court decisions. The majority's approach relies mostly on statements in the advisory committee notes.

Here the authority argued that its attorney work product should be disclosed only in "exceptional circumstances," a position similar to the Haworth line of cases. This argument relies on Rule 26(b)(3) which, subject to Rule 26(b)(4), makes work product generally discoverable only upon a party's showing of "substantial need" and the party's inability, "without undue hardship, to obtain the substantial equivalent of the materials by other means." Subdivision (b)(4) speaks only about discovery of facts and opinions held by testifying experts. But the district court rejected this reasoning relying, instead, on Rule 26(a)(2) which specifically applies to the disclosure of information provided to testifying experts. The Sixth Circuit agreed. In effect, the disclosure provisions of (a)(2) trumped subdivision (b)'s more general protection of attorney work product.

Disclosure Required

The appellate court said it is "axiomatic that a general provision yields to a specific provision when there is a conflict." Thus, nothing in subdivision (b) displaces or limits a party's obligation under subsection (a)(2) to disclose information provided to testifying experts. The court found instructive the statements in the advisory committee notes to the 1993 amendments: "Given [Rule 26's] obligation of disclosure, litigants should no longer be able to argue that materials furnished to their experts to be used in forming their opinions -- whether or not ultimately relied upon by the expert -- are privileged or otherwise protected from disclosure when such persons are testifying or being deposed."⁸

If the rule mandates such disclosure, what is the extent? Is it limited to facts? "No," said the panel. Since Rule 26(a)(2)(B) requires parties to provide "a complete statement of . . . the data or other information considered by the witness," the phrase "or other information" goes beyond mere facts. A reading to the contrary would render those words "surplusage," a result to be avoided. The court further observed that neither the text nor the advisory notes alone are clear on the extent of required disclosure. However, neither source "places any qualifier as to the extent of the 'information' . . . or 'materials' . . . given to testifying experts." Accordingly, said the court, "we must conclude that none was intended." Rule 26(a)(2) is to be read, therefore, as requiring disclosure of all information provided to testifying experts.

Because the "bright-line approach" is the majority rule, represents the "most natural reading" of Rule 26, and finds "strong support" in the advisory committee notes, the Sixth Circuit joined the "overwhelming majority" of courts mandating disclosure of all documents given to testifying experts.⁹ As a result, litigators feeding experts with materials to help shape their testimony need to view such information as discoverable. And, while the Sixth Circuit was concerned here with written materials only, our May 2006 article reported on a district court ruling that had ordered disclosure even of oral communications about privileged matters. The court there saw "no principled distinction" between the discoverability of oral and written communications that a testifying expert considers in fashioning opinions.¹⁰Counsel beware!

Secret 'High-Lows'

Hot off the press is a divided Appellate Division, Fourth Department, decision that should be of importance to New York attorneys thinking of concluding so-called "high-low" settlements with one or more defendants while other defendants who go to trial are not informed about the arrangement. Because the Sept. 29 decision, Reynolds v. Amchem Prods., Inc.,¹¹ could perhaps be overlooked by many, we hasten to call it to the attention of readers.

The "high-low" settlement has variations but, in essence, it specifies a "low" figure the claimant will get if he or she loses the case or is awarded damages in an amount at or under the low figure. In effect, plaintiff is assured of at least some recovery. On the flip side of the arrangement, there is the "high," a specified amount that plaintiff will get even if the verdict exceeds that amount. In effect, the "high" caps damages to be paid by a settling defendant protecting the latter against an excessive or runaway award.

There are variants that may cover the scenario when an award falls between the "high" and the "low." One approach is to pay the awarded figure between the extremes. A sub-variant of this, perhaps, is to agree to forgo an appeal. Or the parties can agree to allow post-trial and appellate proceedings which ultimately will determine the amount to be paid, i.e., the low or the high or something in between. Creativity can foster still other stipulations. Such arrangements are popular where uncertainties or hidden case weaknesses dot the landscape and cause each side anxieties about liability or damages or both. Essentially, the litigants are hedging their bets.

Many courts not only tolerate "high-lows," they like them. The arrangement is another settlement-inducing mechanism, particularly useful when settlement-seeking judges try to point out strengths, weaknesses and values of the litigants' cases. "High-lows" also are useful when parties are far apart since talking about lows and highs can create momentum towards bridging the gap. Negotiation of a high-low is not necessarily a cakewalk, however, since the parties now have to haggle over two figures. Plaintiffs will want a high "low" and defendants a low "high."

Multiple Defendants

Now, let's say there are multiple defendants. Plaintiff wants to settle with one or some but not others. Let's say plaintiff enters into a high-low agreement with only some defendants. Because the agreement does not abate trial of the case as to the "settling" parties -- they are still fighting over the gap -- if the arrangement is not revealed to the court and other parties, the proceedings could go forward as if everyone is participating in a normal trial. But, in reality, because there is this high-low "settlement," the circumstances arguably have changed appreciably. The motivations of the "settling" parties among themselves may be changed. Their litigation interface with the other parties may be affected materially. The tactical positions of the unsuspecting, nonsettling defendants may be altered or prejudiced. Ignorance of a settlement, albeit the partial one we call a "high-low," may cause certain strategies to be pursued by a nonsettling defendant that would not have been had the arrangement been disclosed.

Inevitable Questions

So, a number of important, practical questions inevitably ensue. Must (or should) the trial judge be told? If the judge is told, must (or should) he or she reveal it to the nonsettling parties? If the high-low settlers tell the judge about the arrangement without disclosing it to other parties, is that an ex parte communication that offends judicial rules discouraging such contacts? Is it fair for the judge to preside over a trial in which key pertinent facts regarding the potential alignment of the parties and the trial process are not revealed to all litigants? If the high-low figures are relatively close (not a large gap), might that circumstance affect issues such as the number of peremptory challenges allowed unsuspecting defendants, or the need to take the lead on cross-examinations? Had the ignorant defendants known about the settlement, might that have affected their decisions regarding whether to seek their own settlement? These kinds of questions and others flow in the wake of the dueling opinions issued in the Fourth Department's Reynolds decision.

The facts are relatively simple. The policy issues seem profound. This was an asbestos exposure case. Plaintiff claimed his incurable disease was caused by asbestos attributable to numerous defendants including defendants G and N. The jury awarded about $3.75 million, later reduced to $2.7 million. Plaintiff and N entered into a pretrial "narrow high-low agreement" in which N's liability would fall within the specified range of $155,000 on the low and $185,000 as a maximum recovery. The trial court was advised but he informed neither G nor the jury. G was unaware of the high-low. G unsuccessfully moved post-trial to set aside the verdict and, on appeal, raised the secrecy issue. The Fourth Department majority, in a Memorandum decision, rejected G's contention with only a few sentences: "Absent evidence of collusion between [N] and plaintiffs to the detriment of [G], the failure to disclose the high-low agreement does not mandate reversal."¹² Here, said the court, N "retained the incentive to minimize its own culpability and to magnify the culpability of [G] and decedent and thus [G] has failed to show how the [high-low] agreement realigned loyalties so as to prejudice [it]."¹³

Potential Prejudice?

A vigorous dissenting opinion, however, would reverse the judgment and grant a new trial "based on Supreme Court's failure to disclose to [G] until after the jury had returned its verdict the existence and terms of a 'narrow high-low agreement' of settlement entered into between plaintiffs and [N], the other remaining defendant in the action."¹⁴ The dissenting Justice reasoned that Judicial Canons, with limited exceptions, disallow ex parte communications¹⁵ or, at least, encourage prompt notification to other parties or their lawyers as to the substance of those communications that do occur.

Here it was "unfair to [G] and prejudicial to its substantive rights and interests to be compelled to participate in the trial without knowledge of the critical procedural and substantive fact" of N's settlement. Citing cases from other jurisdictions, the dissenting Justice found that G's interests in the integrity of the adversarial process may have been at least "potentially affected" by the court's withholding of the critical information.

Further, G was deprived of the opportunity to cross-examine plaintiff's or N's witnesses regarding the agreement or any resultant financial interest or bias of a party or witness, or to argue the existence of collusion. Additionally, without informing G, the court was deprived of contemporaneous, meaningful input from all the parties as to whether and to what extent the agreement should have been disclosed to the jury. As a result, "the court could not have fairly and properly balanced the competing interests at stake."¹⁶ Given the ubiquity of high-lows, the frequency of multiple defendant cases, and issues implicating public policy, Reynolds may not be the last word on the subject.

Michael Hoenig is a member of Herzfeld & Rubin.

Endnotes:
_________________________________________________________________________________________
[1]. Hoenig, "Discovery of Privileged Information Furnished to Experts," New York Law Journal, May 8, 2006, p. 3.
[2]. Hoenig, "Experts' Reports, Drafts and Attorney Work Product," NYLJ, Sept. 8, 2003, p. 3; Hoenig, "More on Attorney Work Product and Testifying Experts," NYLJ, Nov. 10, 2003, p. 3.

[3]. Hoenig, "Drafts of Affidavit Protected From Disclosure," NYLJ, Nov. 15, 2005, p. 3.
[4]. 2006 U.S. App. LEXIS 21035 (6th Cir. Aug. 17, 2006).
[5]. "CERCLA" is a popular acronym for the Comprehensive, Environmental Response Compensation and Liability Act of 1980, 42 USC §§9601-75, providing recovery of "necessary" contamination cleanup costs.

[6]. Regional Airport Authority, 2006 U.S. App. LEXIS 21035, at *47-*48 (citing Haworth, Inc. v. Herman Miller, Inc., 162 FRD 289, 292-96 (W.D. Mich. 1995) and other decisions).

[7]. Regional Airport Authority, LEXIS, at *48 (citing cases).
[8]. Id. LEXIS, at *51-53.
[9]. Id. LEXIS, at *55-*56.
[10]. Hoenig, supra n. 1, NYLJ, May 8, 2006, p. 3 (discussing Synthes Spine Co. v. Walden, 232 FRD 460, 465 (ED Pa. 2005)).
[11]. 2006 NY Slip Op 06953 (App. Div., 4th Dep't, Sept. 29, 2006).
[12]. Reynolds, 2006 NY Slip Op 06953, at p. 2 (citing cases outside New York).
[13]. Id. (citing cases outside New York).
[14]. Id. at 3 (dissenting opinion).
[15]. Id. at 4 (dissenting opinion) (citing Code of Judicial Conduct Canon 3 [22 NYCRR 100.3[B][4], [6]).
[16]. Id. at 5.