General Electric Company v. APR Energy PLC

Background

General Electric Company (GE) claimed that APR Energy PLC failed to pay resale fees under a Master Supply Agreement for nine mobile gas turbine generators. APR and related third-party plaintiffs asserted that GE breached warranties in a Business Transfer Agreement and the Master Supply Agreement, including warranties concerning title to assets and the condition of turbines. APR alleged more than $60 million in damages from the title issue and additional damages from defective turbines.

GE moved to compel APR to produce communications, information, and documents concerning APR’s earlier malpractice litigation against Baker McKenzie and the resolution of that litigation. GE argued that APR had previously attributed losses involving the seizure of turbines to Baker McKenzie’s advice, while APR’s claims against GE attributed the same losses to GE’s alleged contractual breaches. GE sought documents about the earlier litigation, documents produced in it, related proceedings, settlement materials, and agreements concerning the relevant turbines.

APR withheld approximately 35,000 responsive documents based on attorney-client privilege, work-product protection, and mediation privilege. After reviewing APR’s privilege log and a representative sample of documents in camera, the Court addressed the discovery requests under Federal Rule of Civil Procedure 26 and GE’s motion under Rule 37.

Choice of Law and Privilege Standards

The Court held that New York law governed the claims and defenses because both agreements contained New York choice-of-law provisions. The Court also held that New York law governed the privilege dispute because the case was based on diversity jurisdiction and New York supplied the governing substantive law.

Under the Court’s analysis, attorney-client privilege protects confidential communications made primarily for obtaining or providing legal advice, but it does not protect underlying facts. The party asserting the privilege must establish both the privilege and the absence of waiver. Work-product protection generally covers materials prepared for litigation, subject to the discovery standards in Rule 26. The Court also determined that New York does not recognize a general mediation privilege under the Uniform Mediation Act.

Rulings on the Discovery Requests

The Court overruled APR’s relevance objections to Document Request Nos. 1, 2, and 3 and Interrogatory No. 11. The Court found that APR had waived relevance objections as to documents listed on its privilege log. The Court also overruled all of APR’s objections to Interrogatory No. 11 because APR had not identified responsive privilege-log entries, had not challenged GE’s assertion that identifying agreements would not reveal protected information, and had not offered another basis for refusing to answer.

The Court overruled APR’s mediation-privilege objections to Document Request Nos. 1, 2, and 3 because New York law governed and does not recognize the asserted mediation privilege. The Court also required APR to disclose the settlement agreement and settlement amount from its earlier malpractice litigation. It found those materials relevant to GE’s defense seeking a setoff or recoupment for damages, and found that APR had not shown that they were privileged. The ruling did not require disclosure of communications connected with the settlement agreement and settlement amount based on the relevance showing described in the opinion.

The Court rejected GE’s unsupported general argument that communications between APR and Baker McKenzie were unprotected merely because the parties had been adverse in the earlier litigation. Whether a particular document is protected depends on the facts concerning that document. The Court sustained APR’s work-product objections because GE did not challenge the work-product protection asserted in the privilege log.

The Court also sustained APR’s attorney-client privilege objections. It concluded that APR had placed Baker McKenzie’s advice at issue in the earlier malpractice litigation, but had not asserted claims or defenses in this case that APR intended to prove using privileged materials. The Court rejected GE’s argument that the earlier waiver automatically bound APR in this later contract case. It also held that GE could not create an at-issue waiver merely by raising theories such as bad faith, setoff, recoupment, or other defenses without identifying privileged material on which APR relied.

Disposition

The Court denied in part and granted in part GE’s motion to compel. It required APR to answer Interrogatory No. 11 and to disclose the settlement agreement and settlement amount, among other consequences of overruling the relevance and mediation-privilege objections. It sustained APR’s objections based on work-product protection and attorney-client privilege and rejected GE’s broader argument concerning unidentified communications. The opinion was signed by Kevin Nathaniel Fox, United States Magistrate Judge.