In Barbini v. First Niagara Bank, N.A., 16-cv-7887, 2019 WL 1922041 (S.D.N.Y. April 29, 2019), the court held, inter alia, that defendant waived the attorney-client privilege in connection with asserting the Faragher/Ellerth defense to plaintiffs’ sexual harassment claims.
Under that defendant may escape liability if it can show two things, namely, (1) the employer exercised reasonable care to prevent and correct any-harassing behavior and (2) that the plaintiff unreasonably failed to take advantage of the preventative or corrective opportunities that the employer provided.
While the defendant did not expressly assert an “advice of counsel” defense in its answer and expressly disclaimed reliance on counsel in a letter, “these facts alone do not control whether Defendants waived their privilege because even where defendants have not asserted an advice of counsel defense, courts have found waivers if the evidence implies that defendants relied on counsel’s advice …, or defendants assert that they undertook good faith efforts to prevent and remedy any alleged discrimination or retaliation pursuant to their internal procedures and plaintiffs failed to fully avail themselves of available avenues—i.e. raised a Faragher/Ellerth defense.”
The court found that defendants “did—through testimony relating to their use of counsel’s advice and through the content of their answer—waive their privilege,” reasoning:
Turning first to Defendants’ implied reliance on counsel, throughout his deposition, McMichael [HR representative] stated that Bechtel [in-house counsel] made or assisted in making pivotal determinations regarding how to handle the sexual harassment investigation and how to discipline the individuals involved. … Although a close call, McMichael’s testimony went further than just “generalized references to counsel’s advice.” (See e.g. id. at 47-48) (“Q: So, you made the decision to issue him a final warning. Why did you choose to issue him a final warning instead of terminate?; A: We thoroughly discussed it internally through our process and talked—(interrupted); Q: Who is we?; A: We being our in-house counsel, Irina …”); (id. at 55) (“Q: In fact, it wasn’t confirmed that [Lawless’ sending the inappropriate text message] was an accident, you were relying on what people were telling you; is that right?; A: Correct.”) …
[T]he Second Circuit has explained at-length that waiver by implication typically occurs when a client testifies about portions of the attorney-client communication, places the relationship directly at issue, or asserts reliance on the attorney’s advice as part of its claim or defense. … [T]he “key to a finding of implied reliance” is assessing whether the witness testified about “the basis of his understanding that his actions were legal.” …
Judge McCarthy was not clearly erroneous in finding that McMichael[] decided to issue a final written warning to Lawless after “thoroughly discuss[ing] it” with his in-house counsel and relying on facts and characterizations that others relayed to him. The Bank’s defense that its reason for terminating Plaintiffs was not discrimination or retaliation and was solely due to Plaintiffs’ violating the notary policy hinges on the two investigations being truly separate. But the only way to assess their separateness is by accepting McMichael’s testimony that he relied on Bechtel’s advice and handled the first one appropriately and independently of the second. The Court finds that this argument opens the door under In re County of Erie as the Bank indirectly asserts reliance on Bechtel’s legal advice as a defense to Plaintiffs’ employment discrimination claims.
More significantly, Defendants have also raised a Faragher/Ellerth defense twice in their answer. They raise it first by asserting that “First Niagara asserts that it undertook good faith efforts to prevent and remedy any alleged discrimination or retaliation and that Plaintiffs unreasonably failed to avail themselves of First Niagara’s internal procedures for remedying any such discrimination or retaliation” …, and second by stating that “any employment actions taken by First Niagara towards Plaintiffs was for reasons that were job-related and consistent with business necessity.” …
In stating that the Bank “undertook good faith efforts to prevent and remedy any alleged discrimination or retaliation,” and that Plaintiffs’ failed to avail themselves of a particular remedy, the Bank is raising the quintessential Faragher/Ellerth defense. It is implying that the sexual harassment investigation was handled according to protocol and had nothing to do with their subsequently firing Plaintiffs for violating the notary policy. But again, in making this compound defense, the Bank is unilaterally relying on the confidential and privileged sexual harassment investigation, which it suggests was handled appropriately.
Such one-sided reliance creates the type of unfairness to opposing counsel that waives the communication’s privilege. …
Therefore, the court concluded that the Magistrate Judge did not clearly err in finding that defendant “functionally raised a Faragher/Ellerth defense, which waived its attorney-client privilege.”