The opinion of the court was delivered by: Judge Jones
Shirley Craig and others (collectively, "Plaintiffs") initiated this action for overtime compensation under the Fair Labor Standards Act ("FLSA") with the filing of a collective action complaint on December 29, 2009. (Doc. 1.) At bottom, the case concerns Plaintiffs' claims that Rite Aid misclassified Assistant Store Managers as exempt employees under the FLSA. The District Court in this case subsequently entered an order conditionally certifying the following collective class for purposes of providing notice of the action and an opportunity to opt-in: "All individuals classified as exempt from the FLSA's overtime pay provisions and employed as salaried Assistant Store Managers during any workweek within the previous three years in any of the 4,901 stores identified in Rite Aid Corporation's April 17, 2009 Annual Report as being operated by Rite Aid Corporation." (Doc. 72.) Thus far, more than 1,000 individuals have identified themselves as putative opt-in plaintiffs in the course of this litigation.
B. Defendants' Assertion of the Attorney-Client Privilege or the Work-Product Doctrine as a Basis to Resist Production of Certain Written Discovery that Plaintiffs Have Requested.
Now pending before the Court is a dispute between the Plaintiff and Defendants regarding Defendants' assertion that the attorney-client privilege and work-product doctrine shield from disclosure various corporate documents that Plaintiffs have requested be produced as part of discovery in this collective action. Informed assessment of these privilege claims, in turn, requires some consideration of the factual context in which these documents were created at Rite Aid. In broad terms, the allegedly privileged documents appear to relate to a multi-faceted internal corporate restructuring analysis that was undertaken at Rite Aid, examining the organization and operation of its stores, many of which had been acquired over time from other companies, and had different corporate and organizational cultures. This multi-faceted analysis entailed many non-attorney participants and included, on occasion, corporate in-house counsel. This process examined multiple business facets of store operations, including on occasion legal compliance issues, and was inspired by a host of business concerns, including occasionally potential legal liability concerns. In sum, the records at dispute in this matter are not simply the fruit, or product, of some preparation for litigation, or legal analysis of a discrete corporate issue. Rather, these documents are inspired by a multiplicity of business operation and reorganization concerns, and reflect a thorough assessment and analysis of this broad array of matters relating to issues of corporate structure, governance and organization, only some of which are legal in nature.
Cast against this background, Defendants initially asserted that these documents were virtually all protected by both the attorney-client privilege and the work-product doctrine, and provided Plaintiffs with a privilege log setting forth the basis for withholding production. Plaintiffs disputed the adequacy of Defendants' privilege log and, by extension, the legitimacy of Defendants' assertions of privilege or work-product protection. Plaintiffs ultimately moved the Court to examine the entire collection of documents that had been withheld and listed on Defendants' privilege log.
Defendants demurred, arguing that their privilege log was legally sufficient, and maintaining that no in camera review of the documents was warranted. Upon consideration, the Court directed Defendants to submit for in camera review the 30 documents that Plaintiffs' had identified on Defendants' privilege log as having the most relevance to Plaintiffs' case, and as to which Plaintiffs had the most substantial questions concerning the application of the attorney-client privileges and other asserted bases for withholding production.*fn1 (Doc. 380.) Thereafter, Defendants submitted these documents to the Court for the Court's review, which has now concluded.
The documents that have been provided to the Court, and Defendants' various assertions of the reasons for withholding production of these documents, exemplify of the difficulty that courts often face when tasked with assessing the application of privileges to corporate-level documents that, on their face, often do not provide any clear indication that they were generated primarily for the purpose of obtaining legal advice, or that they were prepared in connection with or anticipation of litigation. In some instances, certain of the documents that have been provided to the Court indicate that the author of the document was providing legal advice to a representative of the company, or that one or more of the company's officers were seeking legal advice from in-house counsel with respect to a particular legal issue. It appears further that these particular instances of legal counsel were provided in the context of the larger store restructuring process that the company had undertaken in 2008 and 2009.
However, many of the documents Defendants have submitted bear no indication at all that they were prepared at the direction of counsel; that they were prepared primarily for the purpose of obtaining or furnishing legal advice, or that they were created at the direction of a lawyer for legal reasons; or that they had any obvious relation to a lawyer's work in connection with litigation involving the company, whether actual or anticipated. Indeed, very few of the documents submitted to the Court were prepared by a lawyer, and many documents were circulated among entirely non-legal corporate personnel who appear to have been evaluating a number of business considerations with respect to a store-wide restructuring effort with respect to certain employment positions within the company.
We acknowledge the fact that a senior counsel to Defendants has submitted a sworn declaration from in-house counsel, Mr. Chima, stating that many of the documents that are the subject of the current discovery dispute were prepared in connection with a review and assessment of the impact of store structure changes on the exempt status of certain store-level employment positions, and was undertaken at the direction of in-house counsel "in large part" because of existing or anticipated litigation. (Doc. 269, Ex. 6, Decl. of Ron S. Chima, ¶ 6.) However, Mr. Chima's declaration is extraordinarily broad, and essentially asserts that every piece of documentation provided to the Court for in camera review was part of a large corporate restructuring initiative that was undertaken at the direction of in-house counsel. However, as we discuss below, the declaration lacks specificity regarding any of the particular documents in question, and instead relies upon sweeping generalities made by in-house counsel who serves many corporate functions, only some of which would cloak documents in privilege. Taken together, we find that these factors undermine the evidentiary value of this declaration when we conduct a document-by-document review of privilege claims, as we are required to do.
In addition, we are mindful that Kristin Crandall, Rite Aid's Vice President of Field Human Relations, previously submitted a separate sworn declaration in connection with a separate, and now-resolved, discovery dispute concerning Defendants' assertion that the self-critical analysis privilege should protect a number of related documents from discovery in this case. (Doc. 232, Ex. A, Decl. of Kristin Crandall.) In that declaration, Ms. Crandall represented that her review of the company's then existing store structure was undertaken at the direction of in-house counsel for Rite Aid, and that her team of human resources, compensation, legal, and operations personnel worked under the understanding that the information gathered as part of this collective effort would be provided to in-house counsel to assist in providing legal advice to the company. (Id., ¶¶ 5-6.) For this reason, Ms. Crandall represented that these personnel were informed that the communications exchanged during this project would be treated as confidential. (Id., ¶ 7.)
Fairly construed, we believe that Ms. Crandall's declaration confirms our more nuanced view regarding the complex corporate decision-making process reflected in these records, a process which was inspired by, driven by, and informed by a host of inter-related business considerations, many of which do not fall within the paradigm of the attorney-client or work-product privileges. As explained below, we have carefully assessed each of the documents that Defendants submitted for in camera review, and we have done so through the perspective of the multi-faceted business planning reflected in these documents, guided by the relevant law governing the application of the privileges asserted in this particular setting, and balancing the general assertions of Rite Aid's in-house counsel and Ms. Crandall against a review of what each document actually reveals. As explained further below, while in some instances this review sustains claims of privilege, we find that in a number of instances Defendants have not carried their burden of demonstrating that certain documents are, in fact, subject to the attorney-client privilege or work-product protection. Where we have not found a sufficient basis to conclude that either of these evidentiary privileges applies to the documents in question, we will order the documents to be produced. With respect to the remaining documents, we have concluded that they are properly shielded from disclosure either by the attorney-client privilege or the work-product doctrine, and we will uphold Defendants' decision to withhold production.
II. SUMMARY OF THE APPLICABLE LAW
In endeavoring to resist the disclosure of a number of corporate-level documents that Plaintiffs have requested for production, Defendants have invoked the protections of either the attorney-client privilege or the work-product doctrine.
The United States Court of Appeals for the Third Circuit recently summarized the purposes of, and distinctions between, the attorney-client privilege and the work-product doctrine, and the importance of limiting recognition of evidentiary privileges when necessary to achieve their purposes, as follows:
Though they operate to protect information from discovery, the work-product doctrine and the attorney-client privilege serve different purposes. The purpose behind the attorney-client privilege is "'to encourage clients to make full disclosure of facts to counsel so that he may properly, competently, and ethically carry out his representation. The ultimate aim is to promote the proper administration of justice.'" In re Impounded, 241 F.3d 308, 316 (3d Cir. 2001) (quoting In re Grand Jury Proceedings, 604 F.2d 798, 802 (3d Cir. 1979)). The work-product doctrine, by contrast, "promotes the adversary system directly by protecting the confidentiality of papers prepared by or on behalf of attorneys in anticipation of litigation. Protecting attorneys' work product promotes the adversary system by enabling attorneys to prepare cases without fear that their work product will be used against their clients." Westinghouse Elec. Corp. v. Republic of the Phil., 951 F.2d 1414, 1428 (3d Cir. 1991) (citations omitted).
Though evidentiary privileges have important purposes, their recognition may result in the withholding of relevant information and so may obstruct the search for truth. Indeed, the protections are effective only if they shield relevant evidence and thus they necessarily obstruct the search for the truth at a trial at which they are recognized either implicitly or explicitly. Consequently, privileges should be recognized only when necessary to achieve their respective purposes. See Fisher v. United States, 425 U.S. 391, 403 (1976).
In re Chevron Corp., 633 F.3d 153, 164 (3d Cir. 2011).
Because the assertion of a claim of privilege "may result in the withholding of relevant information and so may obstruct the search for truth," In re Chevron Corp., 633 F.3d 153, 164 (3d Cir. 2011), it is also well-established that, " 'The burden of proving that the . . . privilege applies is placed upon the party asserting the privilege.' United States v. Landof, 591 F.2d 36, 38 (9th Cir. 1978)." Matter of Grand Jury Empanelled February 14, 1978, 603 F.2d 469, 474 (3d Cir. 1979). Therefore, the burden of proof is this case rests squarely with Rite Aid, which has asserted the privilege. With this preliminary guidance in mind, we turn to consideration the attorney-client privilege and work-product doctrines.
1. The Attorney-Client Privilege
The attorney-client privilege is meant to facilitate "full and frank communication between attorneys and their clients." Wachtel v. Health Net, Inc., 482 F.3d 225, 231 (3d Cir. 2007). The privilege "recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyer's being fully informed by the client." Upjohn v. United States 449 U.S. 383, 389 (1981). The privilege "applies to any communication that satisfies the following elements: it must be '(1) a communication (2) made between [the client and the attorney or his agents] (3) in confidence (4) for the purpose of obtaining or providing legal assistance for the client.'" In re Teleglobe Communications Corp., 493 F.3d 345, 359 (3d Cir. 2007) (quoting the Restatement (Third) of the Law Governing Lawyers § 68 (2000)). Thus, the privilege reaches "[c]onfidential disclosures by a client to an attorney made in order to obtain legal assistance." Fisher v. United States, 425 U.S. 391, 403 (1976); see also In re Ford Motor Co., 110 F.3d 954, 965 n.9 (3d Cir. 1997) (communications made by client and an attorney are privileged if made "for the purpose of securing legal advice."); United States v. Amerada Hess Corp., 619 F.2d 980, 986 (3d Cir. 1980).
The privilege applies both to information that the client provides to the lawyer for purposes of obtaining legal advice, as well as to the advice the attorney furnishes to the client. To this end, the Supreme Court has explained that "the privilege exists to protect not only the giving of professional advice those who can act on it but also the giving of information to the lawyer to enable him to give sound and informed advice." Upjohn, 449 U.S. at 390. However, the privilege extends only to the disclosure of the communications, and does not extend to disclosure of the underlying facts conveyed in those communications. Id. at 385.
While recognizing the value served by the privilege, courts must also be mindful that the privilege obstructs the truth-finding process and should be "applied only where necessary to achieve its purpose." Wachtel, 482 F.3d at 231; see also Westinghouse Elec. Corp., 951 F.2d at 1423. Therefore, because the purpose of the privilege is to protect and promote the "dissemination of sound legal advice," it applies only to communication conveying advice that is legal in nature, as opposed to where the lawyer is providing non-legal, business advice. Wachtel, 482 F.2d at 231; see also Allendale Mut. Ins. Co. v. Bull Data Sys., Inc., 152 F.R.D. 132, 137 (N.D. Ill. 1993) (stating that the privilege is inapplicable where the legal advice is incidental to business advice); Hardy v. New York News, Inc., 114 F.R.D. 633, 643 (S.D.N.Y. 1987) ("The attorney-client privilege is triggered only by a client's request for legal, as contrasted with business advice . . . .").
Federal courts are further required to assess the application of the privilege on an individualized case-by-case basis. Thus, "Rule 501 [of the Federal Rules of Evidence] requires the federal courts, in determining the nature and scope of an evidentiary privilege, to engage in the sort of case-by-case analysis that is central to common-law adjudication." Id. at 230; see also Upjohn, 449 U.S. at 386, 396-97; In re Processed Egg Prods. Antitrust Litig., MDL No. 2002, 08-Md.-2002, 2011 U.S. Dist. LEXIS 120708, at *10-11 (E.D. Pa. Oct. 19, 2011). In addition, the party asserting the privilege bears the burden of providing that it applies to the communication at issue. In re Grand Jury, 603 F.2d 469, 474 (3d Cir. 1979). Accordingly, we may not rely upon broad and sweeping assertions of privilege to wholly excuse an individualized examination of particular communications.
2. The Work-Product Doctrine
The work-product doctrine is embodied within Rule 26(b)(3) of the Federal Rules of Civil Procedure, which provides that "a party may not discover documents and tangible things that are prepared in anticipation of litigation or for trial" unless otherwise discoverable or a party shows substantial need for the material. Fed. R. Civ. P. 26(b)(3). The doctrine is, in essence, a recognition that a lawyer requires a "certain degree of privacy, free from unnecessary intrusion by opposing parties and their counsel." Hickman v. Taylor, 329 U.S. 495, 511 (1947).
The doctrine thus is intended "to protect material prepared by an attorney acting for his client in anticipation of litigation." United States v. Rockwell Int'l, 897 F.2d 1255, 1265 (3d Cir. 1990); see also United States v. Nobles, 422 U.S. 225, 238 (1975) ("At its core, the work-product doctrine shelters the mental processes of the attorney, providing a privileged area within which he can analyze and prepare his client's case."). Notably, the doctrine does not extend to protect documents that were prepared "in the ordinary course of business, or pursuant to public requirements unrelated to litigation, or for other nonlitigation purposes.'" Martin v. Bally's Park Place Hotel & Casino, 983 F.2d 1252, 1260 (3d Cir.1993) (quoting Fed. R. Civ. P. 26(b)(3) advisory committee note).
In order for the doctrine to apply, Rule 26(b)(3) requires "that the material be prepared in anticipation of some litigation, not necessarily in anticipation of the particular litigation in which it is being sought." In re Ford Motor Co., 110 F.3d at 967 (emphasis omitted). It is not necessary that litigation has been commenced or even threatened before a document can be found to have been prepared in anticipation of litigation. See In re Processed Egg Prods. Antitrust Litig., MDL No. 2002, 08-Md.-2002, 2011 U.S. Dist. LEXIS 120708, at *16 (E.D. Pa. Oct. 19, 2011) (citing Hydramar, Inc. v. Gen. Dynamics Corp., 115 F.R.D. 147, 150 n.3 (E.D. Pa. 1986)). However, documents will come within the scope of the work-product doctrine only where the documents were prepared primarily in anticipation of future litigation. See In re Diet Drugs Prods. Liability Litig., MDL No. 1203, 2001 U.S. Dist. LEXIS 5494, 2001 WL 34133955, at *5 (E.D. Pa. Apr. 19, 2001).
3. Application of these Privileges to Complex, Multi-Faceted Corporate Decision-Making Involving In-House Counsel
The application of these legal privileges to documents generated in complex multi-faceted corporate restructuring decision-making has, in turn, led to the development of a series of additional guiding principles. The work of applying the law of privileges to records generated in corporate restructuring involving in-house counsel has typically fallen to the lower courts, which have identified several key tenets to guide their analysis of these claims.
First, in a corporate business restructuring setting, it is evident that: "The involvement of in-house counsel alone is not enough for the attorney-client privilege to be applicable. 'Because in-house counsel is often extensively involved in the business matters of the company (not infrequently holding executive positions), ...
[c]courts have not been willing to presume that the services provided were of a legal, as opposed to a business, nature.' 1 Rice, Attorney--Client Privilege § 3:14, at 55--56 & n. 32 (citing cases)." Visa U.S.A., Inc. v. First Data Corp., 02-1786, 2004 WL 1878209, 10 (N.D.Cal. Aug. 23, 2004).
This refusal to automatically extend the privilege to matters which touch upon in-house counsel reflects a simple corporate reality:
[U]nlike outside counsel, in-house attorneys can serve multiple functions within the corporation. In-house counsel may be involved intimately in the corporation's day to day business activities and frequently serve as integral players in business decisions or activities. Accordingly, communications involving in-house counsel might well pertain to business rather than legal matters. The privilege does not protect an attorney's business advice. Corporations may not conduct their business affairs in private simply by staffing a transaction with attorneys. Fischel, 557 F.2d at 211. Because in-house counsel may operate in a purely or primarily business capacity in connection with many corporate endeavors, the presumption that attaches to communications with outside counsel does not extend to communications with in-house counsel. Accord, U.S. v. Chevron Corp., 1996 WL 264769, *4 (N.D. Cal.1996). United States v. ChevronTexaco Corp., 241 F.Supp.2d 1065, 1076 (N.D.Cal. 2002). These corporate realities, in turn, prescribe the showing which must be made to assert a claim of privilege in this setting: "With respect to internal communications involving in-house counsel, [a party] must make a 'clear showing' that the 'speaker' made the communications for the purpose of obtaining or providing legal advice. In re Sealed Case, 737 F.2d 94 (D.C.Cir.1984)." United States v. ChevronTexaco Corp., 241 F.Supp.2d at1076.
Corporate culture, and the role of in-house counsel in that culture, define the legitimate scope of these privileges in another fundamental respect. In this setting, "[t]here are substantial policy reasons for holding that business documents submitted for attorney review are not by that virtue automatically exempt as privileged or work product protected communications." In re Seroquel Products Liability Litigation, 06-1769, 2008 WL 1995058, 4 (M.D.Fla. May 7, 2008)(citations omitted). As one court has observed:
The structure of certain business enterprises, when their legal departments have broad powers, and the manner in which they circulate documents is broad, has consequences that those companies must live with relative to their burden of persuasion when privilege is asserted. See, e.g., In re Vioxx Products Liability Litigation, 501 F.Supp.2d 789, 805 (E.D.La.2007). When the business "simultaneously sends communications to both lawyers and non-lawyers, it usually cannot claim that the primary purpose of the communication was for legal advice or assistance because the communication served both business and legal purposes." Id. (citing United States v. Chevron Corp., 1996 WL 444597 (N.D.Cal.1996)); United States v. International Business Machines Corp., 66 F.R.D. 206, 213 (S.D.N.Y.1974) ("If the document was prepared for purposes of simultaneous review by legal and non-legal personnel, it cannot be said that the primary purpose of the document is to secure legal advice."). Consequently, the privilege does not protect such communications. In re Vioxx, 501 F.Supp.2d at 805; Attorney-Client Privilege § 7.2.1 ("Because of the ease with which e-mail technology allows in-house counsel to be brought into discussions, counsel are contacted far more frequently, and through those contacts, are likely encouraged to participate in regular business matters far more frequently and broadly than was the case in the past.").
Preferred Care Partners Holding Corp. v. Humana, Inc., 258 F.R.D. 684, 689-90 (S.D.Fla. 2009).
Applying these benchmarks, courts have eschewed broad claims of privilege premised upon the involvement of in-house counsel in multi-participant corporate restructuring processes, in favor of a far more narrowly tailored and fact specific analysis of privilege claims.
With this legal framework in mind, we turn to the parties' competing positions with respect to the documents that Defendants have sought to withhold from production. In doing so, the parties take divergent, sweeping positions: Defendants contend that all of the documents enjoy broad protection, whereas Plaintiffs insist that Defendants' assertions of privilege were improper and all of the documents should, accordingly, be disclosed. Upon consideration, and in summary, we find that with respect to a number of the challenged documents, Defendants simply have not carried their burden of showing that either the attorney-client privilege or the work-product doctrine applies. With respect to these documents, because it is not evident that the privilege applies, and because Defendants have not persuaded us that the privilege should be found applicable, we will require Defendants to produce the documents. In other cases, we conclude that the documents are, in fact, protected from disclosure under either theory and we will not compel their disclosure.
In endeavoring to carry its obligation to establish that each document at issue is privileged, United States v. LeCroy, 348 F. Supp. 2d 375, 382 (E.D. Pa. 2005), Defendants have primarily chosen to rely on the content of the documents themselves, the explanatory notes contained in the privilege log provided to Plaintiffs -- many of which are substantively identical -- and on two paragraphs from the declaration of Ron S. Chima, a senior in-house counsel to Rite Aid who was assigned to the corporate team that was charged with evaluating and assessing the existing store structure.
(Doc. 269 and Exhibit 6 thereto, ¶¶ 5-6.) In addition, Mr. Chima has referred generally to Kristin Crandall's sworn declaration, which was previously submitted in support of Defendants' assertion that a number of related documents should be deemed protected from discovery by the self-critical-analysis privilege. (Doc. 223, Ex. A.) Defendants did not submit declarations or evidence from any other corporate counsel or members of the team that was engaged in the assessment of Rite Aid's store structure at the time. Nor did the defendants provide declarations addressing in a particularized way the application of the privilege to specific document, despite the fact that " '[t]he burden of proving that the . . . privilege applies is placed upon the party asserting the privilege.' United States v. Landof, 591 F.2d 36, 38 (9th Cir. 1978)," Matter of Grand Jury Empanelled February 14, 1978, 603 F.2d 469, 474 (3d Cir. 1979), and "[w]ith respect to internal communications involving in-house counsel, [a party] must make a 'clear showing' that the 'speaker' made the communications for the purpose of obtaining or providing legal advice. In re Sealed Case, 737 F.2d 94 (D.C.Cir.1984)." United States v. ChevronTexaco Corp., 241 F.Supp.2d at 1076.
Given the exacting, and specific standards applied by the courts to corporate restructuring communications between in-house counsel and non-lawyers, we find this categorical approach unpersuasive, and decline to adopt this approach. However, upon an individualized review of these records, we conclude that the following documents are privileged and exempt from disclosure. The bases for our decisions with respect to these records are set forth below:
A. Analysis of Privileged Documents PRV 000094 through PRV 000108
These documents, all of which have been labeled as "confidential" and covered by "work product / attorney client privilege" appear to be internal corporate Power Point communications identifying a number of activities being undertaken in connection with the corporate assessment and restructuring of Rite Aid's front end store leadership structure, and assigning responsibility for the various initiatives to one or more team members. ...