Third-party defendant Team Industrial Services, Inc. (Team) moves pursuant to CPLR 2308(b)(1) to compel non-parties ABSG Consulting Inc. (ABS) and Lucius Pitkin, Inc. (LPI) to comply with subpoenas duces tecum served on them, pursuant to CPLR 3103(a) for an order directing defendant and third-party plaintiff Consolidated Edison Company of New York, Inc. (Con Ed) to cease and desist from interfering with subpoenas, and for sanctions against Con Ed. [*2]Plaintiffs support; Con Ed and non-parties oppose.

Con Ed, owner and operator of the steam pipe, thereafter commenced an investigation to determine what caused the rupture, and to develop an action plan to reduce the risk of

The Department of Public Service (DPS) of the New York Public Service Commission (PSC), which regulates the steam line, also commenced an investigation, retaining engineering firm Keifner and Associates, Inc. (KAI) as a metallurgical consultant to assist it in performing evaluations and examinations of the pipe system. (NYSCEF 462, 517).

On July 26, 2007, Con Ed conducted tests on the steam traps affected by the rupture. Con Ed's engineer explained that the traps may have been working before the explosion, and that the impact of the explosion may have damaged them, or may have forced dirt and debris into them, thereby keeping them closed. (NYSCEF 515).

In a preliminary report dated July 31, 2007, ABS opined as follows: Due to heavy rainfall the morning of the incident, an excessive amount of water entered and flooded the steam pipe system at the intersection where the rupture occurred. Included in its report is an explanation of the process by which water, in contact with a steam pipe, boils rapidly and generates condensate, which is periodically drained via steam traps. On July 18, however, due to the flooding, excessive condensate remained in the system, despite period drainage throughout the day, and a steam bubble thus became entrapped by the cooler condensate. As the bubble rapidly condensed to water, the surrounding condensate created a powerful pressure surge known as a "water hammer," which could cause a rupture. ABS emphasized that as the steam traps could not have withstood the rapidly generating condensation, a malfunctioning steam trap would have had a negligible impact in causing the rupture. (NYSCEF 514).

Thereafter, LPI removed the steam traps near the fractured pipe, and analyzed them in August and September of 2007. (NYSCEF 560).

Within weeks, plaintiffs commenced actions against Con Ed. By discovery demand dated September 21, 2007, plaintiffs sought from Con Ed, among other things, all documents related to the post-incident investigations and possible causes of the rupture. (NYSCEF 564).

In a report dated December 17, 2007, LPI found that the traps were obstructed by debris resembling leak sealant that had been injected into a flange near the fractured pipe. (NYSCEF 560).

The following day, on December 18, 2007, ABS issued its final report, finding, in pertinent part, that the traps were substantially clogged with phenolic resin material, which is the main constituent of the compound used to seal leaks at gasketed joints, and that an adjacent [*3]flange had been leak-sealed on March 14, 2007. ABS thus opines that it is likely that sealant was pumped through the flange and into the steam traps, and it now identifies two primary factors in causing the rupture: 1) rapidly generating condensate, as noted in the preliminary report, and

In a press release dated December 27, 2007, Con Ed publicized non-parties' findings, attributing the rupture to: 1) the irregular condensate level, and 2) the existence of "epoxy materials, injected by an outside contractor who had sealed a leaking flange (joint) months earlier." (NYSCEF 463).

On January 4, 2008 KAI released a draft report, in which, in pertinent part, it identified a rupture in the pipe seam, which it found had developed in the manufacturing process. It explained that the rupture showed signs of prior high-pressure exposure, that indentations on the pipe evince prior attempts to weld cracks, and that water hammer events had occurred in the area. It also observes that seam ruptures tend to fail spontaneously at high pressure levels and that a branch connection had been installed in the seam's adjacent pipe joint one month before the incident. The changed operating conditions, coupled with the existing rupture, KAI concluded, may have aggravated the July 18 water hammer event, resulting in the explosion. (NYSCEF 516).

On January 31, 2008 KAI released its final report, noting non-parties' findings that the steam traps were clogged by sealant. It postulates that the lack of drainage could also have been a factor in aggravating the water hammer. (NYSCEF 517).

On February 3, 2008, a consultant retained by Con Ed sought from a DPS employee a preliminary draft of the PSC report, offering him a gift certificate to an expensive steak restaurant "if [the draft report is] good." Later that day, the employee sent the consultant a 14-page excerpt of the draft report, as well as his own comments concerning an order to show cause that the PSC had served on Con Ed. The comments reflect a concern about the steam trap conditions and the use of sealant. (NYSCEF 518-523). In the following weeks, the DPS employee sent other documents about the rupture to the consultant. (NYSCEF 524-526). The DPS employee eventually resigned as a result of a disciplinary action prosecuted by the Office of the Inspector General which determined that the employee, in violation of DPS policy: 1) accepted gifts, including meals and golf outings from unnamed regulated utility companies, and 2) shared confidential information, including drafts of documents to be submitted to the PSC, with an unnamed utility consultant. (NYSCEF 464).

The PSC, in a report released on February 13, 2008, relies in part on the ABS report. It identifies two primary causes of the rupture: 1) excess water that upon contact with the pipeline, resulted in rapid condensation, and 2) debris that almost completely clogged the steam traps and severely disabled them from removing the condensate from the steam main. (NYSCEF 462).

On or about March 4, 2008, Con Ed responded to plaintiffs' September 2007 discovery demand, agreeing to conduct a reasonable search for and produce responsive documents from its own investigation files and from those of non-parties. (NYSCEF 565).

Between March and November 2008, in response to plaintiffs' discovery demand, Con Ed produced material from non-parties' files and redacted them. (NYSCEF 548).

On or about May 28, 2008, Con Ed commenced a third-party action against Team, the [*4]entity that sealed leaks at the steam main on Lexington Avenue and 41st Street. In the complaint, Con Ed alleges that Team negligently caused sealant to enter the steam system, thereby clogging the steam traps and causing the rupture. (NYSCEF 563).

Discussions ensued between Team and non-parties resulting in the June 19, 2013 issuance of modified subpoenas. (NYSCEF 480). By letters dated June 29, 2013, non-parties repeated their objections, claiming that Team had already received a complete production of responsive documents. (NYSCEF 482, 483). By letter dated July 2, 2013, Con Ed wrote to Team, copying non-parties, again objecting to and requesting the withdrawal of the modified subpoenas. (NYSCEF 484). Despite efforts, non-parties and Team failed to resolve the issue (NYSCEF 485, 486), and by notice dated November 26, 2013, Team moved for an order compelling non-parties' compliance with the modified subpoenas (NYSCEF 460).

Team asserts that Con Ed improperly interfered with non-parties' investigations, thereby contradicting its public representations that the investigations were independent, and resulting in non-parties' ultimate identification of the sealant as a primary cause of the accident, and a corresponding minimization of Con Ed's responsibility. According to Team, non-parties' conclusion about the sealant was relied upon by KAI in its draft report, and thereafter incorporated into the PSC report. It observes that Con Ed's July 26, 2007 trap test findings and the preliminary ABS report essentially contradict Con Ed's theory that the rupture was caused by clogged steam traps, and that on October 24, 2007, before the release of the KAI reports, a KAI principal investigator conveyed his "informal opinion" to a DPS employee that the water hammer may have been aggravated by Con Ed's recent addition of a side branch to the piping system, thereby causing the rupture. (NYSCEF 534). That the investigators ultimately reached contrary conclusions is, in Team's view, the product of Con Ed's manipulation, especially in light of the evidence of the misconduct of Con Ed's consultant. (NYSCEF 460, 461).

Team also maintains that many of the documents it received from Con Ed are redacted or reference information that is either missing or unaccounted for, such as online access information used by ABS, Con Ed, and LPI to share, review, and edit documents on ABS's online collaborative read-write site and Con Ed's dispatcher logs. (NYSCEF 508). It denies receiving draft reports, recommendations, and presentations referenced in emails among the entities (NYSCEF 488-507), and argues that discovery of the material directly and unredacted from non-parties is crucial to its defense. It accuses Con Ed of suggesting that non-parties not comply with the subpoenas when it copied them on its letters to Team. It also complains that non-parties' [*5]counsel was once employed by Davis Polk, Con Ed's counsel's law firm. (NYSCEF 460, 461).

Non-parties advise that Con Ed contacted them after it received plaintiffs' September 2007 discovery demand, and at Con Ed's request, they transferred documents to it for a responsiveness review. It is their understanding that Con Ed ultimately produced voluminous documentation and argue that, having already provided them to Con Ed, they ought not be compelled to produce them again. In the alternative, they ask that if they are obliged to produce the documents, Team should pay the reasonable production costs incurred in complying. Non-parties' counsel denies that he was involved in this litigation when he worked at Davis Polk.(NYSCEF 544-546).

Con Ed denies Team's allegation that it manipulated the investigations, alleging that Team's role in causing the rupture became apparent only after LPI analyzed the steam traps, and observes that the investigators' preliminary theories do not negate Team's responsibility in causing the rupture. It also denies that its consultant influenced DPS, as the excerpt sent to him is substantively identical to the corresponding section in the final PSC report. Con Ed explains that the vast majority of its redactions protect sensitive information such as personal telephone numbers, usernames, and passwords and that the log-in information for the online collaborative site was redacted out of a concern that parties to the ligation would tamper or alter documents stored therein. The dispatcher logs, generated by Con Ed but also located in non-parties' files, were redacted to exclude information about jobs at locations other than the 41st Avenue and Lexington Avenue intersection, which Con Ed deems irrelevant. Con Ed otherwise denies any inappropriate conduct. (NYSCEF 547, 548).

Plaintiffs also protest Con-Ed's alleged interference with the investigations, maintaining

In reply, Team contends that the Con Ed consultant is withholding production of his records at Con Ed's request (NYSCEF 582, Exhs. C, D), and that production of all of the draft PSC reports remains outstanding. Team thus argues that Con Ed has no basis for arguing that the consultant's interference was de minimis.(NYSCEF 581).

At oral argument of this motion, Con Ed agreed to produce, unredacted, all ABS drafts, explaining that it had not before been asked to produce them and that they are in the process of reviewing them for production, and it denied redacting the presentations. Team reiterated its demand that the material be produced directly from non-parties and contended that there exists a likelihood of collusion between non-parties' counsel and Davis Polk. (NYSCEF 593).

It is well settled that litigation should be a search for truth rather than a contest (Arnold Constable Corp. v Chase Manhattan Mortg. and Realty Trust, 59 AD2d 666, 667 [1st Dept 1977]), that litigants are entitled to the full disclosure of all evidence material and necessary to their case, and that a subpoena compelling a non-party to produce such material constitutes an important mechanism to enforce this right. (CPLR 3101[a][4] Kapon v Koch, __ NE3d __, 2014 [*6]NY Slip Op 02327 [2014] Velez v Hunts Point Multi-Serv. Ctr. Inc., 29 AD3d 104, 112 [1st Dept 2006]). Pursuant to CPLR 2308(b)(1), if a person fails to comply with a subpoena, the issuer may move to compel compliance.

In keeping with New York's policy of liberal discovery, the subpoenaing party need not establish its inability to obtain the requested disclosure from other sources. (Kapon, at *4-5). Rather, the party opposing the subpoena must show that the discovery sought is utterly irrelevant, or that the futility of uncovering anything legitimate is inevitable or obvious. (Id., at *5).

Here, Team seeks the documents from non-parties to lay bare the process by which they arrived at their findings. Thus, they are material and relevant to Team's defense, particularly given the conduct of Con Ed's consultant, and non-parties offer insufficient evidence that Team has all of the requested documentation, or that Team's effort to uncover anything legitimate is futile.

In Christie's, Inc. v Koch, the court upheld the quashing of a subpoena when a party sought material duplicative of a prior subpoena served on the same non-party. (110 AD3d 651 [1st Dept 2013]). Here, by contrast, non-parties had never before been served with a subpoena or discovery demands. Rather, they transferred documents to Con Ed, at Con Ed's behest, for review. Team is thus entitled to the subpoenaed material, unredacted except as to claims of privilege, confidentiality, and upon application to the court.

Non-parties' request for reasonable production expenses is denied as premature. (See Tener v Cremer, 89 AD3d 75, 82 [1st Dept 2011] [in light of insufficiency of record, court remanded and directed lower court to conduct hearing to determine reasonable production expenses] Dow Chem. Co. v Reinhard, 2008 WL 1968302 [SD NY 2008] [that subpoenaed party should have anticipated becoming embroiled in litigation factor to be considered in assessing entitlement to reasonable production expenses]).

Pursuant to the rules of the chief administrator, a court, in its discretion, may impose sanctions on any party or attorney who engages in frivolous conduct. (22 NYCRR § 130-1.1). Conduct is deemed frivolous if it is, inter alia, undertaken primarily to delay or prolong the resolution of the litigation or to harass or maliciously injure another. (Id., subd. c). The purpose of this rule is to deter vexatious or dilatory litigation tactics. (Kernisan v Taylor, 171 AD2d 869, 870 [2d Dept 1991]). As officers of the court with special responsibilities (Rules of Professional Conduct [22 NYCRR § 1200.0]), lawyers are duty-bound to refrain from pursuing frivolous litigation strategies (Rule 3.1). Lawyers are also prohibited from "improperly influencing witnesses, obstructionist tactics in discovery procedure, and the like." (Rule 3.4 Comment 2).

In Fox Industries, Inc. v Gurovich, 2006 WL 2882580, *8 (ED NY 2006), the sole authority cited by Team in its motion, the court sanctioned counsel, who had abused process on a prior occasion, for directing non-parties not to comply with subpoenas served on them. The court held that the letters constituted unilateral rulings and attempts to usurp the court's authority. (Id.; see also Price v Trans Union, LLC, 847 F Supp 2d 788, 795-96 [ED Pa 2012] [sanctions imposed for counsel's advice to non-parties to disregard subpoenas, finding conduct vexatious, in bad faith, caused needless motion practice and judicial proceedings thereby wasting judicial resources and delaying litigation] Robbins & Myers, Inc. v J.M. Huber Corp., 2011 WL [*7]3359998 [WD NY 2011] [plaintiff fined and sanctioned for advising its auditor to refuse production on grounds of untimeliness of subpoena]). Here, by contrast, Con Ed issued no directives.

Team has not demonstrated that Con Ed falsely contended in its correspondence that the subpoenas are duplicative, as most of the materials sought by Team was produced by Con Ed in the first production. Moreover, that ABS reached conclusions distinct from those set forth in the preliminary report does not evidence fraud, and there is an insufficient basis upon which to sanction Con Ed for copying non-parties on its correspondence with Team, conduct that significantly differs from that found worthy of sanction in Fox Industries, notwithstanding the message conveyed in that correspondence.

However, Con Ed's consultant's communications with DPS raise troubling questions about the integrity of DPS's ultimate findings, even if "substantively identical" to the corresponding section in the final PSC report, as it is the conduct that warrants the sanction. Accordingly, should this case go to trial, the finder of fact should be given the opportunity to consider the communications and draw an adverse inference, the contours of which are left to the trial court's discretion.

Team's allegation that non-parties' counsel and Davis Polk colluded need not be addressed, absent any basis for it beyond the prior association.

Pursuant to CPLR 3103(a), a court may issue a protective order regulating the use of any disclosure device in order to "prevent unreasonable annoyance, expense, embarrassment, disadvantage, or other prejudice to any persons or the court."

While not sanctionable (supra, V.A.), Con Ed's interference with the discovery sought by Team from non-parties warrants a protective order prohibiting it from directly or indirectly discouraging any party or non-party in this case from complying with a discovery device, conduct that may unreasonably disadvantage or prejudice a party or non-party.

Accordingly, it is hereby

ORDERED, that third-party defendant Team Industrial Services, Inc.'s motion compelling non-parties ABSG Consulting Inc. (ABS) and Lucius Pitkin, Inc. (LPI) to comply with the subpoenas duces tecum dated June 19, 2013 and to produce documentary evidence in their custody relating to Schedule "A" attached to the subpoenas is granted; it is further

ORDERED, that ABS and LPI comply with Team's subpoenas within 30 days of the date of this order; it is further

ORDERED, that Team's motion for sanctions is granted to the extent that should this case go to trial, the finder of fact be given the opportunity to consider the communications and draw an adverse inference, the contours of which is left to the discretion of the trial court; it is further

ORDERED, that Team's motion for a protective order is granted to the extent that defendant Consolidated Edison Company of New York, Inc. is prohibited from directly or indirectly discouraging any party or non-party from complying with a discovery device; and it is further

ORDERED, that the remainder of Team's motion is denied.

ENTER:

_______________________________

Barbara Jaffe, JSC