MEDIA

October 18, 2001

On Compelling Discovery Of Materials From An Internal Investigation

Published in: New York Law Journal | volume 226
Written by: Peter R. Schlam and Harvey M. Stone

This column reports on several significant, representative decisions handed down recently in the U.S. District Court for the Eastern District of New York. Subject matter and issues included the following: compelling discovery of materials from an employer’s internal investigation, deciding whether an injury to a police officer’s heel is a disability under the Americans With Disabilities Act and deciding remedies available to a contractor under the Miller Act.

Internal Investigation

In McGrath v. Nassau Health Care Corp., 00 CV 6454 (EDNY, Sept. 28, 2001), Magistrate Judge William D. Wall granted plaintiff’s motion in a sexual harassment suit to compel discovery of materials from the defendant employer’s internal investigation, despite defendant’s claims of attorney-client privilege and attorney work product.

Plaintiff, an employee of Nassau Health Care Corp., alleged sexual harassment against another employee, Rosenblum, and against the company for alleged negligence in permitting Mr. Rosenblum to continue his harassment. After hearing reports of plaintiff’s claims from a third party, company representatives met with her on July 20 and 21, 2000, to "discuss and implement corrective actions." On July 21, she was reassigned to a new department.

On July 25, plaintiff filed a charge of discrimination with the EEOC. Company interviews by outside counsel took place until at least late August 2000, and other investigatory tasks took place in September.

In response to plaintiff’s motion to compel production of documents and information concerning the company’s internal investigation, the company asserted attorney-client and work-product privileges. But in Magistrate Judge Wall’s view, those privileges were implicitly waived by virtue of the "at issue waiver" doctrine. Here, that is, the company put its internal investigation "at issue" by asserting an affirmative defense of appropriate remedial action; part of that remedial action was the company’s investigation.

The company contended that the investigation could not be remedial because it commenced after plaintiff had filed her discrimination charge and thus was done in anticipation of litigation. The record submitted for in-camera review, however, showed that the investigation began the day before plaintiff filed her charge.

In any event, the court was not convinced that the precise starting date of the investigation was determinative. The issue, rather, was whether the corrective actions taken by the company were reasonable in light of what it learned from its investigation. The company had defended itself by relying upon the reasonableness of its response to plaintiff’s allegations. The adequacy of the investigation therefore became critical to the issue of liability, and the only way for plaintiffs or the fact-finder to determine the reasonableness of the investigation was through disclosure of its contents. Slip op. 4-5. As Magistrate Judge Wall also observed, the fact that the company’s attorney purportedly acted with a dual purpose (to remedy discrimination and to prepare for litigation) does not overcome the unfairness of limiting discovery of the investigative report and notes.

Disabilities Act

In Feeley v. New York City Police Department, 97 CV 2891 (EDNY, Sept. 4, 2001), Judge Raymond J. Dearie, granting summary judgment to defendants, found that plaintiff a former transit police officer who had injured her right heel in the line of duty did not have a "disability" under the Americans with Disabilities Act of 1990 (ADA), and even with reasonable accommodations she could not perform the essential functions of a police officer.

Plaintiff’s injury, in June 1995, caused her to feel pain when she ran, walked, climbed stairs or stood for long periods of time. She took sick leave until Aug. 7, 1995, and then, until Dec. 25, 1995, was assigned to limited-capacity status, which allowed her to work in seated positions.

On Jan. 3, 1996, defendants returned her to full duty based upon evaluations of New York Police Department (NYPD) physicians. Plaintiff failed to report to her full-duty assignment, and continued for a few days to perform her duties while seated. She claimed that she still could not walk, run or stand. On Jan. 10, 1996, plaintiff called in sick and defendants suspended her for failure to return to full-duty status. On Jan. 30, 1996, she was discharged.

After traversing the various channels of review, she filed the complaint here alleging discrimination under the ADA (as well as City and State statutes).

As Judge Dearie concluded, while plaintiff’s condition affected her ability to walk, which is admittedly a "major life activity" under the ADA, she failed to present evidence that her walking was substantially limited. Accordingly, her injury did not render her "disabled" under the ADA.

In addition, the temporary nature of her "disability" made her ineligible for ADA relief. In her deposition, for example, she testified that her pain, at some later point, was "completely healed by a praying saxophone player at a church." Slip op. 13-14.

Plaintiff fared no better with regard to whether she was "otherwise qualified" to "perform the essential functions" of police officer. She argued that, by failing to permit her to remain on restricted duty indefinitely, defendants refused to reasonably accommodate her.

But as Judge Dearie found, at the time of her discharge plaintiff, by her own admission, was not otherwise qualified to perform the essential functions of police officer either with or without reasonable accommodation. No rational trier of fact, the court noted, could conclude that such functions do not include duties well beyond the limited clerical work that plaintiff could perform.

Judge Dearie rejected plaintiff’s contention that she should have been permitted to remain on restricted duty indefinitely. As the court stated, the light-duty position was not meant to be permanent and defendants were not even required to provide that position, given plaintiff’s inability to perform the essential functions of police officer. "Nor could defendants be asked to create a permanent restricted-duty police officer position for plaintiff since this goes beyond the obligation to provide a ‘reasonable’ accommodation." Slip op. 19-20.

The Miller Act

In United States ex rel. Maris Equipment Co., Inc. v. Morganti, Inc., 96 CV 2205 (EDNY, Sept. 20, 2001), Judge Frederic Block, ruling on post-trial motions, upheld the jury verdict on liability and recommended that Maris accept a remittitur of $409,927 of its profit award, but otherwise upheld the jury’s damage award. The decision dealt, inter alia, with remedies available to a contractor under the Miller Act; the rights of a surety when a bonded contractor is financially unstable; and the correct procedures under Federal Rule of Evidence 1006.

The litigation arose from the construction of the federal detention center in Brooklyn, N.Y. Morganti/Tratros Joint Venture was the project’s general contractor and Maris was a subcontractor, responsible for fabricating and installing the cells. Work on the project was hampered by delays due to the government’s faulty design. As a result, Maris experienced financial strains and had to enter into an agreement with its surety company, Liberty Bond Services Inc., which provided financial assistance. Based on reports from Surety & Construction Consultants that Morganti was mismanaging the project and not honoring its payment obligations to Maris, Liberty concluded that Morganti had breached the subcontract with Maris and terminated funding Maris’s performance. Then, at Liberty’s behest, Maris declared Morganti to be in default and walked off the job.

Because a lien cannot attach to federal property, the Miller Act, 40 U.S.C. 270a-270d, was enacted to provide subcontractors and suppliers on federal construction projects an alternate remedy to the mechanics’ lien ordinarily available on private construction projects. Under the Miller Act, a contractor who performs any work on any public building or public work of the United States must provide both a performance bond to protect against defaults and a payment bond to protect persons supplying labor and material. A subcontractor may sue on a payment bond posted by the prime contractor for the amount unpaid at the time of the commencement of a suit, but does not have the right to recover losses directly from the government. A subcontractor may join a Miller Act claim with a state law breach of contract claim, but must specifically plead each claim.

Maris claimed for common-law breach of contract, seeking rescission and quantum eruit damages of $5,770,260 and, under the Miller Act, the principal amount of the payment bond, $2.5 million. The jury awarded Maris $8,001,249 in quantum meruit damages based upon $6,576,997 for direct costs, $712,126 for profit and $712,126 for overhead.

This determination arose from the privity of contract between the government and the general contractor, which allowed the general contractor to recover damages directly from the government, while the subcontractor could not recover directly from the government. Thus, Maris could claim under the payment bond against Morganti for delay damages, even though the delay was caused by the government.

The court also dismissed the action by Morganti against Maris’s surety Liberty Bond Services Inc. When a bonded contractor is in danger of defaulting, a surety may: (1) tender the penal limit of the bond; (2) take over the contract and have it completed; (3) tender a completing contractor and a new bond; or (4) finance the contractor through completion, curing any defects. Slip op. 34. Here, Liberty opted to finance the project without assuming or taking over the contract. Liberty also arranged for all progress payments to be made to it in order to monitor the funds. But arranging for payments to be made directly to Liberty did not place it in the subcontractor’s shoes. The court concluded that "Liberty had every right to cease financing Maris and to instruct Maris to declare Morganti in breach; it had the right to run the risk of liability under its bond were Maris to have been found in default." Slip op. 35.

Judge Block also precluded a summary of costs submitted by Maris. Maris’s witness testified that the cost report summary was based upon two computer printouts representing thousands of pieces of paper, which had been produced but not specifically identified. Federal Rule of Evidence 1006 allows a party to prove the contents of voluminous writings that cannot be examined without inconvenience and a waste of time by presenting the evidence in summary form. To comply with Rule 1006, the underlying documents must be admissible evidence and "made available to the adverse party in sufficient time to permit examination, preparation of a response to the summary and avoidance of surprise and costly delays at trial." Slip op. 47. To meet the "made available" requirement, the party seeking to use a summary must identify its exhibit as a summary, provide a list or description of the underlying documents and state when and where they might be reviewed. The submission by Maris did not comply with the Rule.

Peter R. Schlam and Harvey M. Stone are partners at Schlam Stone & Dolan. Bennette D. Kramer, a partner of the firm, assisted in the preparation of the article.

[Reproduced with permission from New York Law Journal Volume 226, Thursday, October 18, 2001.  Copyright 2001 ALM Properties, Inc.  All rights reserved.]