In a recent decision by the Appellate Division, Third Department, Lerner v. New York, the Court confirmed that documents prepared in anticipation of litigation, including appraisal reports, would lose their protection as “work-product” if disclosed to a third party. However, the Court went beyond this general rule holding that appraisal reports that were subject to review in connection with federal reimbursement programs were not protected as work-product, even if those reports were not actually provided to a third party.
In Lerner, Claimant filed suit against New York State alleging that the Department of Transportation (“DOT”) trespassed and caused property damage during a highway construction project that received federal funds. Prior to construction, the DOT obtained an appraisal of the parcel at issue. Claimant sought disclosure of the report to support its claim for damages. The issue before the Court was whether DOT’s application for federal funding waived the work-product protection for the State’s appraisal report. There was no dispute that the terms of the federal reimbursement program allowed the Federal Highway Administration (“FHA”) to review the supporting documentation, including appraisal reports. However, it was also undisputed that the FHA did not request or review the appraisal report in this case. In fact, the FHA had not reviewed supporting appraisals for many years.
Reversing the Court of Claims, the Third Department held that Claimant was entitled to disclosure of the appraisal report. The Court reasoned that relying on an appraisal report when submitting a federal reimbursement application waives the work-product protection for that report. The Court did not appear to be concerned that the appraisal report was never provided to the government.
Lurking behind the holding in this case is the fact that Claimant desperately needed the State’s appraisal report to prove its case. Claimant had only three photographs of the property prior to construction and was unable to otherwise obtain documents establishing the property’s pre-construction condition. As a result, the Court noted that, in the alternative, disclosure of the appraisal report was required because Claimant had a substantial need that could not otherwise be satisfied.
Lerner sends a strong message to both sides in eminent domain cases. Government officials must carefully consider the implications of future litigation when making applications for federal funding, even if an appraisal report is not attached to the application for federal funding. On the other hand, claimants should be aware of this potential source of useful information, which can be obtained on a showing of relevance, rather than need. It remains to be seen whether the Third Department’s reasoning will be adopted by other courts in the State.
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