Opinion
Opinion By: Albert B. Chandler III, Attorney General; James M. Ringo, Assistant Attorney General
Open Records Decision
This matter is before the Attorney General on appeal from the City of Louisville's denial of that portion of the open records request of Royden K. Cullinan which asked to inspect public records reflecting:
2. The amount of funds that LAGIT [Louisville Area Government Self Insurance Trust] reserved or recorded as a liability with respect to the litigation styled Cullinan, et al v Abramson, et al.
Responding on behalf of LAGIT and the City, Stephanie Harris, Assistant Director of Law, denied this portion of Mr. Cullinan's request, stating:
With regards to item # 2, we recently denied your request in our response dated February 25, 2000. Again, your request for the amount of funds that LAGIT reserved with respect to the Cullinan, et al v. Abramson, et al lawsuit is denied based on the exemptions codified in KRS 61.878(1)(l) and (1)(i)(j) and (l) (KRE 503). The reserve amount reflects the opinions of city attorneys as to the liability, damages, attorney's fees, and costs. Plus, you are requesting this information on behalf of a party to the litigation.
In his letter of appeal, Mr. Cullinan argued that, because an amount was reserved to reflect the claim value of Cullinan v. Abramson , and that figure was incorporated into the City's Comprehensive Annual Financial Report and LAGIT's annual report, the reserving of those funds constituted a final agency decision by virtue of its inclusion in the fiscal year-end document. In further support of his position that the City improperly denied him access to the requested records, Mr. Cullinan argued:
The City of Louisville cannot legitimately claim any of the exceptions available to the strict provisions of the Open Records Act. The decision as to what amount to reserve was made by LAGIT, a public entity legally distinct from the City of Louisville. LAGIT is a third party, therefore any communications among the City of Louisville, its attorneys and LAGIT necessarily waive the privileges relied upon by the city in denying the records at issue.
Ladegast & Heffner, yet another third party, was also involved in LAGIT's determination of the amount it reserved with respect to the subject litigation. The communications between the city, LAGIT and Ladegast & Heffner serve to waive any privilege, thereby rendering moot any dispute as to my relationship to any party litigants. The involvement of third parties makes the records at issue entirely open to inspection. The interaction of the city, LAGIT and Ladegast & Heffner also nullifies any withholding of records based on the preliminary drafts, notes, internal or inter-office correspondence exception.
After receipt of the Notification to Agency of Receipt of Open Records Appeal, Ms. Harris, on behalf of the City, provided this office with a response to the issues raised in the appeal. In her response, Ms. Harris, elaborating on her initial response, explained:
In order to understand the City's position it is important to note the role each party plays in the operation of the Louisville Area Government Self Insurance Trust (LAGIT). LAGIT is a group of government entities which joined together to form a liability self insurance group pursuant to KRS 304.48-030 (Exhibit 1). An Interlocal Cooperation Agreement was signed on December 23, 1986 for this purpose, and a Certificate to operate was issued by the Kentucky Department of Insurance. The LAGIT Trust is governed by a Trust Agreement (Exhibit 2).
Pursuant to these agreements, the City of Louisville is the Administrator and Fiscal Agent of the Trust. The LAGIT Trust does not have any employees. The Executive Director of the Trust is also the Administrator of Risk Management for the City of Louisville. The legal services for the Trust are provided under the direction of the City of Louisville Department of Law. Currently LAGIT contracts with adjusters to provide claims adjusting services for all Members' claims.
Under Article XI of the Trust, the City's duty as Administrator includes management of all claims-processing, including establishing reserves for each claim. These reserves are determined based upon advice from the Members' Attorney and LAGIT's attorneys taking into account the liability and damage assessment for each case. The reserve is the estimated ultimate valuation of the case by the attorneys and LAGIT, and the estimate changes as necessary when relevant information is discovered. A record of the reserve on each general liability case is kept by LAGIT's general liability adjuster, Ladegast & Heffner, for actuarial evaluation purposes.
Mr. Cullinan is entitled to the "aggregated" claim information compiled by the City Finance and Budget Department for reporting purposes. However, Mr. Cullinan is not entitled to the "individual" reserve amount with regards to his father's lawsuit, Cullinan et.al. v. Abramson, et.al. The "individual" reserve amount estimated for each case is exempt from the Open Records Act pursuant to KRS 61.878(1) and (1)(i) and (j) and KRE 503.
The City and LAGIT share a common interest in the outcome of the pending lawsuit Mr. Cullinan's father and his company has brought against the City and are entitled to discuss the pending lawsuit with the knowledge that their discussions will be confidential and privileged.
The individual reserve amounts are also protected by the attorney work-product doctrine. Fed. CR 26(b)(3); Simon v. G.D. Searle & Co., 816 F.2d 397 (8th Cir. 1987). The individual case reserves set by the City and LAGIT attorneys is an estimate of anticipated legal expenses, settlement values, duration of litigation and other factors. The amount reserved for cases reveals the mental impressions, thoughts and conclusions of City and LAGIT attorneys in evaluating a legal claim. The underlying task of estimating the value of a case is performed by attorneys. As the Court in Simon noted, "establishing the value of a claim is analytically complex, requiring assessment of the body of evidence and the particular legal issues involved in each case, as well as an evaluation of the case's strengths and weaknesses. It is one of the more challenging and difficult tasks a lawyer confronts." Simon v. G.D. Searle & Co., 816 F.2d [397], 406 (8th Cir. 1987).
In addition to being protected as attorney work product, the records are exempt from open records inspection pursuant to KRS 61.878(1)(i) and (j). The individual reserve amount estimated by attorneys is preliminary, inter-office information, non-final, reflecting their opinions and recommendations. The initial reserve amount estimated by the attorney does not reflect a final dollar amount. The amount of an individual reserve is subject to change based on a number of factors. For financial reporting purposes, the aggregate dollar amount of all claims are reflected in both the City and LAGIT annual financial reports. However, the fact that the aggregated dollar amount of all claims is released and made public does not warrant the release of individual reserve amounts which are subject to change at any given time. Simon v. G.D. Searle & Co., 816 F.2d 397 (8th Cir. 1987).
Mr. Cullinan's father and his company are parties in the lawsuits pending against the City of Louisville. Neither party is allowed to use the open records act to avoid the rules of discovery. In 00-ORD-10, the Attorney General concluded that Roy Cullinan was indeed a surrogate for a party in the pending lawsuit against the City of Louisville. If the reserve information is discoverable, then the senior Mr. Cullinan must utilize the rules of discovery rather than the open records law.
The Cullinans have already been provided the aggregate reserves. They now want to know how much of the estimate applies to their case against the City. A court would order the information non-discoverable under the rules of procedure. The current estimated valuation of the case is also not disclosable under the open records law.
We are asked to determine whether the City properly withheld from inspection its records reflecting the amount of funds that LAGIT reserved with respect to the Cullinan, et al v. Abramson, et al litigation. For the reasons that follow, we conclude that the City properly relied upon the work product doctrine in denying Mr. Cullinan's request.
This office has consistently held that records which are the work product of an attorney in the course of litigation or advising a client are not discoverable under CR 26.02 and are therefore exempt under KRS 447.154 and KRS 61.878(1)(l). 95-ORD-67. This doctrine, authority for which is derived from KRS 447.154, is formally recognized at CR 26.02(3) and incorporated into the Open Records Act by KRS 61.878(1)(l). The latter provision authorizes public agencies to withhold "public records or information the disclosure of which is prohibited or restricted or otherwise made confidential by enactment of the General Assembly." At KRS 447.154, the General Assembly recognizes "the power of the Court of Justice to make rules governing practice and procedure in the courts," declaring that no statute shall "be construed to limit in any manner, that power." The Court has affirmatively exercised this authority by promulgating CR 26.02(3), which provides:
a. Subject to the provisions of paragraph (4) of this rule, a party may obtain discovery of documents and tangible things otherwise discoverable under paragraph (1) of this rule and prepared in anticipation of litigation or for trial by or for another party or by or for that other party's representative (including his attorney, consultant, surety, indemnitor, insurer, or agent) only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of his case, and that he is unable without undue hardship to obtain the substantial equivalent of the materials by other means. In ordering discovery of such materials when the required showing has been made, the court shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the litigation.
The rationale underlying the work product doctrine has been described as follows:
The work product doctrine is a court made rule, created in Hickman v. Taylor, 329 U.S. 495, 91 L. Ed. 451, 67 S. Ct. 385 (1947), and subsequently formalized in Federal Rules of Civil Procedure 26(b)(c), and CR 26.02(3)(a). The rule recognizes that 'it is essential that a lawyer work with a certain degree of privacy, free from unnecessary intrusion by opposing party and their counsel.' The work product immunity is the embodiment of a policy that a lawyer doing a lawyer's work in preparation of a case for trial should not be hampered by the knowledge that he might be called upon at any time to hand over the result of his work to an opponent.
1 William S. Haynes, Kentucky Jurisprudence; Kentucky Civil Procedure § 26.02. The mandatory disclosure provisions of the Open Records Act thus cannot be construed to limit the power of the court to protect "the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party" concerning the anticipated litigation. 98-ORD-156.
The City maintains that the individual case reserves for the Cullinan, et al v. Abramson, et al litigation, set by the City and LAGIT attorneys, reflect an estimate of anticipated legal expenses, settlement values, duration of litigation, and other factors. The City further maintains that the amount reserved for a case reveals the mental impressions, thoughts, and conclusion of the attorneys in evaluating and estimating the value of the legal claim.
In Simon v. G.D. Searle & Co., 816 F.2d 397, 401-02 (8th Cir. 1987), a case cited by the City, the Eighth Circuit found that although risk management documents were not themselves prepared in anticipation of litigation, they may be protected from discovery to the extent that they disclose the individual case reserves calculated by the defendants' attorneys. The court reasoned that individual case reserve figures revealed the mental impressions, thoughts, and conclusions of an attorney in evaluating a legal claim. Therefore, it held that the information was nondiscoverable opinion work product.
In Work Product of the Rulesmakers , 53 Minn.L.Rev. 1269 (1969), Professor Edward H. Cooper discusses the importance of an attorney's private evaluation of a claim in facilitating the bargaining process inherent in our system of justice:
Some of the areas in which the work product doctrine forecloses discovery are easily comprehended * * * as well. One obvious example is the need for protection against forced revelation of a party's evaluation of his case; as long as voluntary settlement is encouraged, it would be an intolerable intrusion on the bargaining process to allow one party to take advantage of the other's assessment of his prospects for victory and an acceptable settlement figure.
Id. at 1283.
We find the Eighth Circuit's reasoning sound and adopt its reasoning here. Accordingly, we conclude that the City properly denied Mr. Cullinan's request for records reflecting the amount of funds the City had reserved for the Cullinan, et al v. Abramson, et al litigation on the basis of the work product doctrine. Disclosure of the records would reveal the mental impressions, thoughts, and conclusion of the attorneys in evaluating and estimating the value of the legal claim and thus would be nondiscoverable and exempt from disclosure under the Open Records Act. CR 26.02; KRS 447.154; and KRS 61.878(1)(l). The City cites Fed. CR 26(b)(3), the federal counterpart to CR 26.02. The same reasoning and result under the Open Records Act would apply under the federal civil rule. KRS 61.878(1)(k) authorizes the withholding of records made confidential by federal law or regulation.
Moreover, we further conclude that disclosure of this information to LAGIT and Ladegast & Heffner did not constitute a waiver of the privileged work product information. As the City explained in its response, LAGIT is a group formed by the City and other government entities to create a liability self-insurance group pursuant to KRS 3.04.48-030. Under the LAGIT Trust Agreement, the City is the Administrator and Fiscal Agent of the Trust. The Executive Director of the Trust is also Administrator of Risk Management for the City and legal services for the Trust is under the direction of the City's law department. Ladegast & Heffner is LAGIT's general liability adjuster for actuarial purposes and also maintain a record of the reserve on each general liability case.
Under this arrangement, all three entities share a common purpose in the assessment and handling of potential liability of the City in pending litigation. Disclosure of the attorneys' mental impressions as to the value of the litigation to entities sharing this common interest and purpose is not inconsistent with the policy of privacy protection underlying the work product doctrine. See Stix Prods. v. United Merchants & Mfgrs., 47 F.R.D. 334, 338 (S.D.N.Y. 1969) ("The work product privilege should not be deemed waived unless the disclosure is inconsistent with maintaining secrecy from adversaries.")
The attorneys' mental impressions and evaluation as to the strengths and weakness of a case and the value of a legal claim go to the very essence of the work product privilege. We conclude the communication of this information concerning the City's potential liability in a particular case with its self-insurer, of which the City was a member, and LAGIT's general liability adjuster, Ladegast & Heffner, did not constitute a waiver of the work product privilege. Accordingly, we find the City properly denied Mr. Cullinan's request for the records at issue.
A party aggrieved by this decision may appeal it by initiating action in the appropriate circuit court pursuant to KRS 61.880(5) and KRS 61.882. Pursuant to KRS 61.880(3), the Attorney General should be notified of any action in circuit court, but should not be named as a party in that action or in any subsequent proceeding.