Scott v. Chipotle Mexican Grill, Inc.

67 F.Supp.3d 607

Maxcimo SCOTT and Jay Ensor, et al., on behalf of themselves and all others similarly situated, Plaintiffs

v.CHIPOTLE MEXICAN GRILL, INC., Defendant.

No. 12–CV–08333 ALCSN.

United States District Court, S.D. New York.

Signed Dec. 18, 2014.

Arsenio David Rodriguez, Brian Scott Schaffer, Frank Joseph Mazzaferro, Joseph A. Fitapelli, Fitapelli & Schaffer, Justin Mitchell Swartz, Melissa Lardo Stewart, Naomi Briana Sunshine, Ossai Miazad, Outten & Golden, LLP, New York, NY, Gregg I. Shavitz, Keith M. Stern, Shavitz Law Group, P.A., Boca Raton, FL, for Plaintiffs.

Abigail Nitka, Deborah J. Denenberg, Jean Claude Mazzola, Messner Reeves LLP, Lisa M. Lewis, Richard J. Simmons, Sheppard Mullin Richter & Hampton, LLP, Brian Daniel Murphy, Seyfarth Shaw L.L.P., New York, NY, Bruce A. Montoya, Scott L. Evans, John Karl Shunk, Andrew A. Smith, Messner & Reeves LLC, Denver, CO, for Defendant.

OPINION & ORDER

SARAH NETBURN, United States Magistrate Judge:

The plaintiff and class representative Maxcimo Scott filed a nationwide class and collective action complaint on November 15, 2012, alleging violations of the Fair Labor Standards Act, 29 U.S.C. §§ 201, et seq. (“FLSA” or the “Act”), and the New York Minimum Wage Act, N.Y. Lab. Law, art. 6 § 190 et seq., art. 19 § 650 et seq. (“NYLL”), against the defendant Chipotle Mexican Grill, Inc. (“Chipotle”). Later amendments to the complaint added class action claims under Missouri, Colorado, Washington, Illinois and North Carolina law. The plaintiffs—salaried “apprentices” employed or formerly employed by Chipotle restaurants nationwide—allege that Chipotle did not pay them overtime and spread-of-hours compensation as required by federal or state law. On December 7, 2012, the Honorable Andrew L. Carter, Jr. referred this matter to my docket for general pretrial supervision. Judge Carter conditionally certified the plaintiffs' collective action on June 20, 2013. As of the issuance of this order, over 580 current and former apprentices have joined the six named plaintiffs as opt-in plaintiffs.

As part of its affirmative defenses, Chipotle invokes 29 U.S.C. § 259 to claim that it relied on administrative authority in classifying the plaintiffs and is thus free from liability (the “Eleventh Affirmative Defense”), and 29 U.S.C. § 260 for the proposition that it did not act willfully and thus should not be subjected to FLSA's liquidated damages provision (the “Twelfth Affirmative Defense”). Under the language of Chipotle's Answer to the Second Amended Complaint, it claims to have relied on state and federal regulations, “but not upon advice of counsel.” Answer to Second Am. Compl. at 23.

Before the Court is Chipotle's Motion for a Protective Order under Federal Rule of Civil Procedure 26(c) to prohibit plaintiffs from discovery of Chipotle's attorney-client communications regarding the decision to classify apprentices as “executives” and thus exempt from overtime pay. Following pre-motion letters, Chipotle filed its Motion for a Protective Order on September 19, 2014. On October 1, 2014, the plaintiffs filed their opposition to the motion, including the Declaration of Justin M. Swartz (the “Swartz Declaration”) and appending Exhibits A through E. On October 8, 2014, the defendant replied, including the Declaration of Lisa M. Lewis (the “Lewis Declaration”) and appending Exhibit A. The Court heard argument on the motion on November 20, 2014, and further submissions were permitted thereafter.

LEGAL STANDARDS

I. At–Issue Waiver of Attorney–Client Privilege

The purpose of the attorney-client privilege is “to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice.” Upjohn Co. v. United States, 449 U.S. 383, 393, 101 S.Ct. 677, 66 L.Ed.2d 584 (1981) ; see also In re Grand Jury Subpoena Duces Tecum Dated September 15, 1983, 731 F.2d 1032, 1036 (2d Cir.1984). Because the privilege “stands in derogation of the public's right to every man's evidence ... it ought to be strictly confined within the narrowest possible limits consistent with the logic of its principle.” In re Grand Jury Proceedings, 219 F.3d 175, 182 (2d Cir.2000) (internal quotation marks and citation omitted).

The attorney-client privilege applies to “(1) a communication between client and counsel that (2) was intended to be and was in fact kept confidential and (3) was made for the purpose of obtaining legal advice.”In re County of Erie, 473 F.3d 413, 419 (2d Cir.2007) (“Erie I ”); see also United States v. Mejia, 655 F.3d 126, 132 (2d Cir.2011).¹ The party asserting the privilege bears the burden of establishing facts to prove “the essential elements of the privileged relationship.” In re Grand Jury Subpoena Dated Jan. 4, 1984, 750 F.2d 223, 224–25 (2d Cir.1984). “The privilege protects not only the advice of the attorney to the client, but also the information communicated by the client that provides a basis for giving advice.” United States v. Ghavami, 882 F.Supp.2d 532, 536 (S.D.N.Y.2012).

That privilege, however, is not sacrosanct. In United States v. Bilzerian, the Court of Appeals held that where a party pleads that it “thought [its] actions were legal,” it puts its own “knowledge of the law and the basis for ... [its] understanding of what the law required in issue,” including “conversations with counsel.” 926 F.2d 1285, 1292 (2d Cir.1991). In Bilzerian, a defendant sought to use good faith as a defense to securities fraud charges, while also claiming that his conversations with counsel were privileged. The Court of Appeals held that the privilege normally protecting attorney-client communications regarding the relevant issue “may implicitly be waived when defendant asserts a claim that in fairness requires examination of protected communications.” Id. The court explained that even though the defendant claimed his belief was “personal” rather than one based on the advice of counsel, his “conversations with counsel regarding the legality of his schemes would have been directly relevant in determining the extent of his knowledge and, as a result, his intent.” Id.

The Court of Appeals continues to apply the at-issue waiver doctrine as articulated in Bilzerian.² In In re County of Erie, 546 F.3d 222 (2d Cir.2008) (“Erie II ”). a case under 42 U.S.C. § 1983, plaintiffs sought discovery of e-mails between defendants regarding allegedly unconstitutionally invasive strip-search policies for those entering county detention facilities. The court explained that “the assertion of a good-faith defense involves an inquiry into state of mind, which typically calls forth the possibility of implied waiver of the attorney-client privilege.” 546 F.3d at 228–29. Ultimately, the court held that “[u]nderlying any determination that a privilege should be forfeited is the notion of unfairness,” and that, for at-issue waiver to occur, “a party must rely on privileged advice from his counsel to make his claim or defense.” Id. at 229.³ The court specifically “decline[d] to specify or speculate as to what degree of reliance is required,” noting that rather than claiming good faith or state of mind, which would have put the privileged communications at issue, the defendant in Erie II claimed a defense of qualified immunity. Id.

Under Bilzerian, Erie II and their progeny, if (1) a defendant claims the defense of good faith, and (2) that claim can only be scrutinized by examining the disputed communications, then that defendant has waived the privilege. “Forfeiture of this type is premised on the unfairness to the adversary of having to defend against the privilege holder's claim without access to pertinent privileged materials that might refute the claim.” John Doe Co. v. United States, 350 F.3d 299, 304 (2d Cir.2003). “[C]ourts within this Circuit, relying on Bilzerian, have reaffirmed the broader principle that forfeiture of the privilege may result where the proponent asserts a good faith belief in the lawfulness of its actions, even without expressly invoking counsel's advice.”Favors v. Cuomo, 285 F.R.D. 187, 199 (E.D.N.Y.2012). Thus, as a matter of fairness, waiver may apply even if the defendant claims to have ignored the advice of counsel because “[e]ven if ... [Defendant's] beliefs about the lawfulness of his conduct were actually separate from legal advice ... Plaintiffs still would be entitled to know if [Defendant] ignored counsel's advice.” Arista Records LLC v. Lime Grp. LLC, 06 Civ. 5936(KMW), 2011 WL 1642434, at *3 (S.D.N.Y. Apr. 20, 2011) (internal citations and quotation marks omitted).

Courts have recognized that a party need not explicitly rely upon advice of counsel to implicate privileged communications. Instead, advice of counsel may be placed in issue where, for example, a party's state of mind, such as his good faith belief in the lawfulness of his conduct, is relied upon in support of a claim of defense. Because legal advice that a party received may well demonstrate the falsity of its claim of good faith belief, waiver in these instances arises as a matter of fairness....

Leviton Mfg. Co. v. Greenberg Traurig LLP, 09 Civ. 8083(GBD)(THK), 2010 WL 4983183, at *3 (S.D.N.Y. Dec. 6, 2010). See also, e.g., John Doe, 350 F.3d at 304 (“[I]n Bilzerian, because the legal advice the defendant in fact received might well have demonstrated the falsity of his claim to the jury about his belief, he could not fairly both assert testimony that implicitly communicated his version of the legal advice he received and simultaneously withhold disclosure of the legal advice he actually received.”); MBIA, 2012 WL 2568972, at *7–8 (collecting cases and stating that, “[a]fter Erie [II ], the Southern District has continued to recognize the broader waiver principles endorsed by the Second Circuit”); Bowne of New York City, Inc. v. AmBase Corp., 150 F.R.D. 465, 488 (S.D.N.Y.1993) (“[E]ven if a party does not attempt to make use...