
    Mutual Life Insurance Company of New York, Appellant, v. Tailored Woman, Inc., Respondent.
    First Department,
    December 12, 1949.
    
      
      George A. Spiegelberg of counsel (Robert H. Preiskel with him on the brief; Riegelman, Strasser, Schwarz & Spiegelberg, attorneys), for appellant.
    
      M. James Spitzer of counsel (Philip Feldman with him on the brief; Strauss, Reich & Boyer, attorneys), for respondent.
   Callahan, J.

The plaintiff and one of its officers have been adjudged in contempt (with fines imposed) and the complaint dismissed for refusal to answer questions on examination before trial pursuant to direction of the court.

At different times the plaintiff as landlord entered into separate leases with the defendant for three rental areas or space in a building at 742 5th Avenue, New York City. The premises demised under each lease were to he used and occupied by the tenant for the sale of women’s apparel at retail. The so-called main floor ” lease for the lower floors of the building required the payment of additional rent ” based on a percentage of the gross sales in excess of a specified amount. The leases for the fifth and eighth floors provided for a fixed or flat rental. The several floors were connected by elevators for the exclusive use of the tenant.

The present action was brought to recover ‘ ‘ additional rent ’ ’ under the percentage lease on the ground (1) that certain sales of fur garments purportedly made on the fifth floor were in fact consummated on the main floor, and (2) that the defendant diverted fur sales from the main floor to the fifth floor in violation of the terms of the percentage lease.

The merits of the case are not before us at this time, but only a question of pretrial practice.

The defendant obtained an order for examination of the plaintiff before trial. There was no appeal from this direction. The officer appearing on behalf of the plaintiff was questioned as to the factual matters involved in the examination, but denied any personal knowledge of the facts. When his verification of the complaint was called to attention, it was explained that such verification was made solely on the advice of the plaintiff’s attorneys. It was developed that the action was brought as the result of information obtained by the plaintiff’s attorneys and contained in reports of investigators and shoppers employed by them. The production of these reports or statements was requested. On the ground of privilege," however, the plaintiff’s attorneys declined to comply or reveal any information or facts developed in the course of their investigation. There was no proof as to when or how such reports were prepared, and no showing that they were communications between attorney and client or otherwise privileged.

At this time, however, it. is unnecessary to pass on any point of privilege or decide whether the production of nonprivileged statements of witnesses in an attorney’s files should be ordered. On the record before us it is clear that the defendant is only seeking particulars in respect to the factual proofs that the plaintiff intends to offer as to the locale and alleged diversion of sales from the main floor to the fifth floor of the premises, and not the statements of witnesses in the possession of the plaintiff’s attorneys. Thus, the real issue on this appeal is not so much a question of privilege, but rather the power of the court to require a party to disclose the particulars of his claim or proof in order to assure a fair trial. The existence of such power will not be denied. The plaintiff may not be excused from furnishing required information on the theory that the facts are known only to its attorneys and that such information in their possession is privileged. (See Hickman v. Taylor, 329 U. S. 495.)

Under the circumstances of this case we think that the defendant with a large number of sales people and others in its employ will be unable to make adequate preparation for trial without particulars or information as to the plaintiff’s proof regarding sales allegedly in violation of the defendant’s main floor ” lease. It would not contribute to the orderly administration of justice to have such matters revealed to the defendant for the first time on the trial. The plaintiff’s proof might refer to sales transactions completed by any number of the defendant’s employees or former employees. If it is required that the defendant await such proof on the trial, an adjournment or continuance of the trial may be necessary to afford the defendant an opportunity to locate the sales people involved in such transactions and obtain their version of the facts. The impracticality of such procedure requires no demonstration. Further, the defendant’s own books and records of the alleged diverted sales will be of little assistance. If any indication is contained in such records, it will undoubtedly appear that the transactions challenged by the plaintiff took place in a portion of the premises other than the main floor. Heedless to say, the plaintiff’s evidence will be to the contrary, and the inquiry at this stage is simply directed to the nature or content of the plaintiff’s proof or claims in this regard.

It must be observed, however, that the point at issue is not whether the defendant might preferably have procured such information by way of a bill of particulars rather than on an examination before trial. The fact is that the defendant did obtain an order for examination of the plaintiff. Though purporting to comply with this order, the plaintiff has attempted to frustrate its effectiveness by claiming that only its attorneys and investigators employed by them are acquainted with the facts sought to be elicited on the pretrial examination, and that such information or knowledge is privileged. The plaintiff might well have ascertained the facts and disclosed such information to the examining party without production of allegedly confidential reports or statements in the files of its attorneys.

In the circumstances of this case, however, it is our view that the controversy over privilege may be avoided and the ends of justice equally well served by a bill of particulars setting forth a general outline of the transactions of which the plaintiff complains and detailed information as to any inquiries, sales or other transactions concerning which the plaintiff intends to offer proof for the purpose of establishing its claims of locale and diversion of sales. The particulars should include the dates and approximate time, the location in the premises, and the persons in the defendant’s employ, if known, with whom such sales were consummated. There should also be stated the articles and amounts of money involved in each transaction as well as the number of each sales slip or check, if available.

If such information is not furnished by way of a bill of particulars pursuant to demand or order as aforesaid, or should prove to be inadequate as given, the defendant may move to preclude or for examination of the investigators or shoppers as witnesses or agents of the plaintiff having knowledge of the facts on a proper showing of special circumstances. If the latter step becomes necessary and the production of written reports is sought, the question of privilege may then be determined on a record showing the circumstances under which such statements were prepared.

The order appealed from should be reversed, without costs, and the parties should proceed as herein directed.

Dore, J.

(dissenting in part). The witness Traynor, officer of plaintiff directed to appear and be examined as to his knowledge ” of the items, repeatedly testified that the only information he or plaintiff corporation had was set out in the complaint: that such information had been furnished when plaintiff’s attorney submitted the complaint for verification and advised Traynor to sign it; and that the information was in writing in the complaint and the advice to sign was oral. Defendant’s counsel then called on Traynor ‘ ‘ to produce and bring with you all such evidence, facts, and knowledge, oral and documentary, if any, in the possession or under the control of plaintiff’s attorneys.” (Emphasis supplied.) To this plaintiff’s attorney replied that all the information in his possession consists of statements of witnesses and investigators and statistical data procured by us [the attorneys] in preparation for the trial of the pending action ” and that it would not be produced. Defendant’s counsel then asked: And you also refuse to give us the names of the witnesses to which you have referred? ” He received the same answer. Defendant’s counsel then asked plaintiff’s attorney himself to take the witness stand and reveal the information he had in his possession, but plaintiff’s attorney refused to do so.

Counsel for defendant on argument and in his brief expressly stated that he “ is not seeking to obtain the files of appellant’s attorneys, their trial statements of witnesses, investigation reports, or statistical data.” But this record indicates that such evidence is precisely what defendant is seeking.

Memoranda and statements taken by an attorney in the course of preparation for trial of an action are not evidence and differ from documents created without privilege prior to the existence of the cause of action. Obviously the statements of shoppers who may be witnesses would be hearsay. In People ex rel. Lemon v. Supreme Court (245 N. Y. 24) defendant in a criminal case demanded that the prosecution produce statements of an accomplice, a postmortem examination and a chemical analysis of the alleged victim’s body. The trial court granted the demand, but the Court of Appeals reversed, Cabdozo, J., speaking for that court, said (p. 29): “ Documents are not subject to inspection for the mere reason that they will be useful in supplying a clew whereby evidence can be gathered. Documents to be subject to inspection must be evidence themselves [citing cases] * * Applying that rule to the case before us, I think it clear that statements of the attorneys, shoppers and proposed witnesses are not evidence in themselves, not at least at this stage of the litigation. Judge Cabdozo in People ex rel. Lemon (supra) immediately after what is quoted above, continues : “ No precedent can be found even in civil causes for compelling disclosure, in advance of the trial, of the office notes or memoranda prepared by an attorney after consultation with his witnesses, and summarizing his understanding of the testimoney that is likely or expected.” So in Falco v. New York, New Haven H. R. R. Co. (161 App. Div. 735, 737 [2d Dept.]), the court said: “ The documents sought to be discovered are not evidence within the purview of the statute or the rules. It is not enough that the documents suggest or may furnish a clew to evidence.” (See, also, People ex rel. Mergenthaler Linotype Co. v. Mills, 273 App. Div. 860 [2d Dept.].)

In Bloodgood v. Lynch (293 N. Y. 308) plaintiff’s witness Prior testified on the trial itself that he had in his possession a photograph of the front view of defendant Lynch’s car but refused to produce it on demand of defendant’s counsel; and the trial court refused to direct him to do so. The Court of Appeals reversed and sent the case back for a new trial but carefully pointed out that on the record it was not clear “ whether the photograph in question was made in preparation for the trial under the direction of defendants or their counsel. The general rule is that the court has the power to direct production of documents which are within the court room so long as the client could have been compelled to produce them by service of a subpoena duces tecum. * * * Neither the client nor the counsel may be compelled, however, to produce a document which has the status of a privileged communication between attorney and client when the privilege is claimed by the client.” (P. 314.)

Defendant has failed to produce a case in this court or the Court of Appeals that would compel a pretrial revelation of all the evidence defendant is here attempting to secure. I think plaintiff’s attorneys should not be compelled, directly or indirectly, to yield up such pretrial work in an examination of plaintiff before trial.

The disputed issues between the parties are not as broad as defendant indicates. After summarizing plaintiff’s complaint, defendant in its brief then states categorically that the “ answei contains a general denial. ’ ’ But the pleadings show that before any of defendant’s six affirmative defenses are alleged, defendant in the part of the answer relating to denials expressly makes the following significant admissions of allegations in plaintiff’s complaint:

(1) that since on or about August 1, 1945, and continuing up to the present time, all sales of ‘ furs ’ by defendant have been made from the fifth floor premises ’ ”;

(2) that infrequently, and for a comparatively short time after August 1, 1945, inconsequential displays of ‘ furs ’ were made by defendant in the premises covered by the ‘ main lease ’

(3) “ that customers of the defendant interested in the purchase of ‘ furs ’ from the defendant enter the ‘ fifth floor premises ’ through the ‘ main premises ’ in elevators running from the ‘ main premises ’ operated by the defendant and used exclusively by defendant’s employees and customers, and that from time to time customers of the defendant interested in the purchase of furs ’ are escorted to the 6 fifth floor premises ’ by sales people of the defendant stationed in its main premises ’ or are given cards by such people and directed to particular employees of the defendant stationed in the fifth floor premises ’

,(4) “ that some ‘ furs ’ sold by the defendant are packed in and shipped from the basement of the ‘ main premises ’

(5) that1 furs ’ purchased by the defendant are received by it in the first instance in the basement of the ‘ main premises ’ and are sent from there direct to the ‘ fifth floor premises ’ for sale to its customers

(6) that from time to time the defendant has advertised its ‘ furs ’ in newspapers and periodicals published in the City of New York and elsewhere and that said fur department is located on the ‘ fifth floor premises ’ ”.

On defendant’s own pleading it thus appears that since August 1, 1945, defendant admits that it has conducted its fur business [probably the most expensive and lucrative part of its entire business], not in the main premises where it previously did, but on the fifth floor. Such change was made obviously to avoid paying the percentage rental. This is, in part at least, an admission by defendant of plaintiff’s main charge in the complaint that from the very day in question defendant purported to move its fur department from the main premises at 742 5th Avenue to the “ fifth floor premises ”. Whether that was a breach by the defendant, the tenant, of the lease of the main premises in 742 is largely a question of law depending on interpretation, in the light of all the facts, of the language of the main lease. In that lease defendant expressly agreed it will operate in plaintiff’s premises at 742 5th Avenue (the main premises here in question) “ a store ” for the sale of women’s apparel and that “ the business will be conducted and maintained in a manner substantially similar to the Tenant’s present store at #729 Fifth Avenue, New York City ”.

Under the terms of the main lease plaintiff, the landlord, had the right to examine the books of account and memoranda from the cash register records and other evidence of the tenant’s gross receipts from the main premises and the tenant was obligated periodically to give sworn statements certified by a reputable certified public accountant showing in detail such gross receipts. Presumably such examinations were had and such statements given so that what sales, if any defendant excluded from reported sales in the main premises should be easily established by its own records of which it has at all times first hand knowledge.

Accordingly, of all the numerous items of examination on which five of plaintiff’s witnesses already have been examined by this tenant, the nub of the difference between the parties is the direction in the order for examination to produce certain documents; viz., all reports of visits and inspections by agents of plaintiff and all reports in plaintiff’s possession relating to defendant’s use of the main premises and the fifth and eighth floor premises and all papers and records which evidence or support the allegations contained in the operative paragraph of the complaint that the sales purportedly made on the fifth floor actually were in truth and fact made in the main premises.

The order appealed from in my judgment is clearly erroneous and I entirely concur in its reversal. The majority opinion, however, states that defendant is entitled either hy a bill of particulars or on the plaintiff’s examination before trial to elicit all necessary information including a general outline of the transactions of which the plaintiff complains and ‘ ‘ detailed information as to any inquiries, sales or other transactions concerning which the plaintiff intends to offer proof for the purpose of establishing its claims of locale or diversion of sales ” including ‘ ‘ the articles and amounts of money involved in each transaction as well as the number of each sales slip or check, if available.” It also provides that if such information is not furnished by a bill of particulars or if the bill is inadequate, defendant may move to preclude or for further examination 11 of the investigators or shoppers as witnesses or agents of the plaintiff having knowledge of the facts # * I think that the detailed information as to any inquiries, sales or other transactions ” and the alternative of an examination of plaintiff’s investigators or shoppers as witnesses, permits defendant a compulsory pretrial disclosure of plaintiff’s attorneys’ files disgorging to defendant’s attorneys all the work plaintiff’s attorneys did in preparation for trial and also permits in part an examination of nonevidentiary documents not subject to pretrial examination. The sole issue is a very limited and narrow one, i.e., whether as plaintiff claims sales not reported by defendant as made in the main premises were actually made there but were not considered in computing the required percentage rent in that part of plaintiff’s building.

It may well be that a bill of particulars by plaintiff giving dates when the sales or transactions relied on by plaintiff were made; the name, if known, of defendant’s employee or agent involved, and copies of the sales slips if available — should be furnished by plaintiff. Such bill would give defendant all the information material and necessary for it in the light of the information it already has to prepare to meet the single limited claim of plaintiff. But the majority opinion goes much further than that and to such extent I cannot concur in it. In the alternative direction for an examination of plaintiff’s “ shoppers and witnesses ”, the majority opinion grants defendant what defendant itself, formally at least, admits it is not in law entitled to.

I am convinced that the result indicated is not warranted by the facts before us on this record. Accordingly, I concur in the reversal but do not concur in either the scope or the result reached in the majority opinion herein; and to that extent I dissent in part and vote to reverse the order appealed from in all respects and to deny the motion.

Peck, P. J., Cohn and Shientag, JJ., concur with Callahan, J.; Dore, J., dissents in part and votes to reverse the order and deny the motion, in opinion.

Order reversed, without costs. The parties should proceed as directed in opinion. Settle order on notice.  