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Gibson, Dunn & Crutcher LLP

KEVIN S. ROSEN (SBN 133304) KRosen@gibsondunn.com DOUGLAS FUCHS (SBN 196371) DFuchs@gibsondunn.com MICHAEL H. DORE (SBN 227442) MDore@gibsondunn.com GIBSON, DUNN & CRUTCHER LLP 333 South Grand Avenue Los Angeles, CA 90071-3197 Telephone: (213) 229-7000 Facsimile: (213) 229-7520

Attorneys for Defendant Bryan Cave LLP

UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA

NORTHERN DIVISION

In re:

ESTATE FINANCIAL, INC.,

Debtor.

Chapter 11

CASE NO. 9:08-bk-11457-PC Adv. No. 9:11-ap-01147-PC

Assigned to the Hon. Peter H. Carroll

APPENDIX OF UNPUBLISHED AUTHORITIES IN SUPPORT OF BRYAN CAVE’S OPPOSITION TO MOTION OF PLAINTIFF, THOMAS P. JEREMIASSEN, CHAPTER 11 TRUSTEE, TO COMPEL PRODUCTION OF DOCUMENTS

[Opposition Brief and Declaration of Michael Dore filed concurrently]

Hearing:

Date: April 13, 2017 Time: 10:00 a.m. Place: Courtroom 201

1415 State Street Santa Barbara, CA

THOMAS P. JEREMIASSEN, chapter 11 Trustee,

Plaintiff,

v.

BRYAN CAVE LLP, a professional limited liability partnership, and KATHERINE M. WINDLER, an individual,

Defendants.

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Gibson, Dunn & Crutcher LLP

Pursuant to United States Bankruptcy Court for the Central District of California Local Rule

9013-2(b)(4), Defendant Bryan Cave LLP hereby submits copies of the following unpublished

authorities:

Cabessa v. Burbank Blvd Apartments Owner, LLC, 2015 WL 9692804 (C.D. Cal. Dec. 9, 2015) ................................................................ Exhibit 1

Bob Barker Co. v. Ferguson Safety Prod., Inc., 2006 WL 648674 (N.D. Cal. Mar. 9, 2006) .................................................................. Exhibit 2

Prop. Rights Law Grp., P.C. v. Lynch, 2013 WL 4791485 (D. Haw. Sept. 6, 2013) ................................................................. Exhibit 3

Hurt v. Vantlin, 2016 WL 3144992 (S.D. Ind., June 6, 2016) ............................................................... Exhibit 4

Weller v. American Home Assur. Co., 2007 WL 1097883 (N.D.W.V. Apr. 10, 2007) ............................................................. Exhibit 5

Gilead Sciences, Inc. v. Merck & Co., Inc., 2016 WL 146574 (N.D. Cal. Jan. 13, 2016) ................................................................. Exhibit 6

Thelen Reid & Priest LLP v. Marland, 2007 WL 578989 (N.D. Cal. Feb 21, 2007) ................................................................. Exhibit 7

In re SonicBlue Inc., 2008 WL 170562 (Bankr. N.D. Cal. Jan. 18, 2008) .................................................... Exhibit 8

Grobee v. Corr. Corp. of Am., 2014 WL 229266 (S.D. Cal. Jan. 17, 2014) .................................................................. Exhibit 9

Stock v. Schnader Harrison Segal & Lewis, 2016 WL 3556655 (N.Y. App. Div. June 30, 2016)).................................................. Exhibit 10

DATED: March 30, 2017

KEVIN S. ROSEN DOUGLAS FUCHS MICHAEL H. DORE GIBSON, DUNN & CRUTCHER LLP

By: /s/ Michael Dore Michael Dore

Attorneys for Defendant Bryan Cave LLP

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EXHIBIT 1

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Cabessa v. Burbank Blvd Apartments Owner, LLC, Not Reported in F.Supp.3d (2015)

2015 WL 9692804

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 1

2015 WL 9692804Only the Westlaw citation is currently available.

United States District Court,C.D. California.

Mecheal Cabessa, et al., Plaintiffs,v.

Burbank Blvd ApartmentsOwner, LLC, et al., Defendants.

Case No. CV 14–8807 DSF (SS)|

Signed December 9, 2015

Attorneys and Law Firms

Craig P. Fagan, Law Offices of Craig P. Fagan, SanDiego, CA, for Plaintiffs.

Barry J. Reagan, Michael H. Brody, Slaughter Regan& Cole LLP, Ventura, CA, Brian Slome, Lewis BrisboisBisgaard & Smith LLP, San Francisco, CA, forDefendants.

ORDER GRANTING IN PART AND DENYINGIN PART PLAINTIFFS' MOTION TO COMPELDEFENDANTS' SUPPLEMENTAL RESPONSESTO SECOND SET OF INTERROGATORIES AND

SECOND SET OF REQUESTS FOR PRODUCTION

SUZANNE H. SEGAL, UNITED STATESMAGISTRATE JUDGE

I.

INTRODUCTION

*1 On November 19, 2014, Mecheal Cabessa, hiswife Tova Cabessa, and their children U.C. and A.C.,by and through the children's guardian ad litem,Devorah Lapin (collectively, “Plaintiffs”), filed the instantaction alleging violations of the Fair Housing Act, 42U.S.C. §§ 3601 et seq., and various state statutory andcommon law causes of action. Plaintiffs contend thatthey were wrongfully evicted from their apartment byDefendants, the owners and managers of the Burbank

Blvd Apartments complex, 1 solely because U.C. and A.C.

played outside in common areas of the complex and werenoisy, and due to their familial status. (See Complaint,Dkt. No. 3, ¶¶ 12–29).

1 Defendants Burbank Blvd Apartments Owner, LLC;Premier Burbank Fee Owners, LLC; JB PartnersGroup, Inc. (erroneously sued as “JB PartnersGroup, LLC”); and The Laramar Group, LLC jointlyanswered the Complaint on December 30, 2014. (Dkt.No. 17).

On December 1, 2015, Plaintiffs filed a “Motion toCompel Defendants to Provide Supplemental Responsesto Second Set of Interrogatories and Second Set ofRequests for Production.” As required by Local Rule37–2, the Parties filed a Joint Stipulation in support ofand in opposition to the Motion. (“Motion” or “MTC,”Dkt. No. 62). On December 2, 2015, Defendants filed thedeclaration of counsel Michael H. Brody. (“Brody Decl.,”Dkt. No. 63). The Court granted Plaintiff's Ex ParteApplication to Shorten Time for Hearing on December

4, 2015. 2 (Dkt. No. 64). On December 9, 2015, theCourt held a telephonic hearing. For the reasons statedbelow, Plaintiffs' Motion is GRANTED IN PART ANDDENIED IN PART.

2 Plaintiffs filed an Ex Parte Application to ShortenTime for Hearing on November 23, 2015, beforefiling the instant Motion. (Dkt. No. 60). Defendantsfiled an opposition to the Ex Parte Application onNovember 30, 2015. (Dkt. No. 61).

II.

THE MOTION

Plaintiffs seek supplemental responses to five requests forproduction (“RFP”) and four interrogatories (“Int. ”). Asfurther noted below, there is significant overlap betweenthe information sought by the requests for production andthe information sought by the interrogatories.

The requests for production ask Defendants to producedocuments for the period from September 1, 2014 to thepresent that identify: (1) tenants who were late with theirmonthly check (RFP 19); (2) the date each late paymentwas received (RFP 20); or constitute: (3) written warningnotices to the tenants that their payment was late (RFP21); (4) written warning notices to the tenants that an

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unlawful detainer action would be filed against them (RFP22); and (5) any lawsuit filed against any tenant for failureto pay rent in a timely fashion (RFP 23).

The interrogatories seek the following information for thesame period: (1) the name and address of any tenant at thecomplex who was late with their monthly rent (Int. 20); (2)the date each late payment was received (Int. 21); (3) themonth Defendants gave written notice to the tenant thattheir rent was late (Int. 22); and (4) the month an unlawfuldetainer complaint was filed against the tenant (Int. 23).

*2 Plaintiffs argue that the information they are seekingis necessary to prove that they were singled out for harshtreatment while other similarly situated tenants were“given leeway to pay their rent” late without being evicted.(MTC at 1). Defendants contend that the informationPlaintiffs seek is irrelevant, unduly burdensome, andinfringes on the privacy rights of third parties. (Id. at 2–8).

III.

STANDARD

A. Scope Of Permissible DiscoveryA party may “obtain discovery regarding anynonprivileged matter that is relevant to any party's claimor defense—including the existence, description, nature,custody, condition, and location of any documents orother tangible things.” Fed. R. Civ. P. 26(b)(1). Relevancyis construed broadly to encompass “any matter that bearson, or that reasonably could lead to other matter[s] thatcould bear on any issue that is or may be in the case.”Chavez v. DaimlerChrysler Corp., 206 F.R.D. 615, 619(S.D.Ind.2002) (internal quotations omitted; emphasisadded); see also E.E.O.C. v. Jewel Food Stores, Inc., 231F.R.D. 343, 349–50 (N.D.Ill.2005) ( “[T]he concept ofrelevance is different for purposes of discovery than foradmissibility at trial ....”).

Nonetheless, the right to discovery, even plainly relevantdiscovery, is not limitless. “A court can limit discoveryif it determines, among other things, that the discoveryis: (1) unreasonably cumulative or duplicative; (2)obtainable from another source that is more convenient,less burdensome, or less expensive; or (3) the burdenor expense of the proposed discovery outweighs itslikely benefit.” Favale v. Roman Catholic Diocese of

Bridgeport, 235 F.R.D. 553, 558 (D.Conn.2006) (internalquotation marks omitted). “The district court enjoysbroad discretion when resolving discovery disputes, whichshould be exercised by determining the relevance ofdiscovery requests, assessing oppressiveness, and weighingthese factors in deciding whether discovery should becompelled.” Id. (internal quotation marks omitted).The party resisting discovery bears the burden ofdemonstrating that its objections should be sustained. Id.

B. Privacy“Federal courts ordinarily recognize a constitutionally-based right of privacy that can be raised in responseto discovery requests.” Soto v. City of Concord, 162F.R.D. 603, 616 (N.D.Cal.1995) (citing cases). “Unlikea privilege, the right of privacy is not an absolute barto discovery. Rather, courts balance the need for theinformation against the claimed privacy right.” Lind v.United States, 2014 WL 2930486, at *2 (D. Ariz. June30, 2014); see also E.E.O.C. v. California PsychiatricTransitions, 258 F.R.D. 391, 395 (E.D.Cal.2009) (“[T]heright to privacy is not a recognized privilege or absolutebar to discovery, but instead is subject to the balancingof needs.”); Ragge v. MCA/Universal Studios, 165 F.R.D.601, 604 (C.D.Cal.1995) (same); Soto, 162 F.R.D. at616 (“Resolution of a privacy objection or request for aprotective order requires a balancing of the need for theinformation sought against the privacy right asserted.”).

IV.

DISCUSSION

A. Requests for ProductionPursuant to Rule 34, any party may serve on anyother party a request for the production of documents.Rule 34(b) requires the requesting party to describe theitems to be produced with “reasonable particularity.”Fed.R.Civ.P. 34(b)(1). “ 'All-encompassing demands' thatdo not allow a reasonable person to ascertain whichdocuments are required do not meet the particularitystandard of Rule 34(b)(1)(A).” In re Asbestos ProductsLiability Litigation (No. VI), 256 F.R.D. 151, 157(E.D.Pa.2009).

*3 Following a reasonable investigation to locateresponsive materials, a responding party must serve a

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written response to each request either (1) stating thatthe materials requested will be produced, in whole or inpart; (2) affirming that no responsive documents existin the party's possession, custody or control, or (3)posing an objection to the request, including the reasons.Fed.R.Civ.P. 34(b)(2)(B); see also Burlington N. & SantaFe Ry. Co. v. U.S. Dist. Court for Dist. of Mont., 408F.3d 1142, 1149 (9th Cir.2005) (boilerplate objections areinsufficient to assert a privilege).

The Court rules as follows on the five disputed RFPs:

• RFP 19: All documents that identify the name of eachtenant at the COMPLEX ... who was late with theirmonthly rent at anytime between September 1, 2014and the current time.

The information sought is relevant. The Court also findsthat any privacy concerns are adequately addressed bythe operative Stipulated Protective Order. However, theCourt finds that the scope of the requests is overbroadand that information for the period from September 1,2014 through April 1, 2015 would sufficiently addressPlaintiffs' needs. (Dkt. No. 44). Plaintiffs acknowledgedthat the information sought by RFP 19 is duplicativeof and fully encompassed by the information requestedin Interrogatory 20. Accordingly, Plaintiffs' Motion isDENIED AS MOOT with respect to RFP 19 becausea complete response to Interrogatory 20 will adequatelyprovide the requested information.

• RFP 20: All documents that list the date upon whichany tenant who was late paying rent at anytimebetween September 1, 2014 and the current time,actually paid their entire rent that was due in anysuch month in which they were late with their rentpayment.

The information sought is relevant and privacyconcerns are adequately addressed by the operativeProtective Order. However, because the period for whichinformation is sought is overbroad, the scope of theproduction shall be limited to September 1, 2014 throughApril 1, 2015. Plaintiff's counsel represented at the hearingthat this RFP may be satisfied by production of “rentrolls” or spreadsheets sufficient to show the date latepayments were made. Accordingly, Plaintiffs' Motionis GRANTED IN PART with respect to RFP 20, asmodified by the Court.

• RFP 21: All written warning notices given by YOU toany tenant at the COMPLEX who was late payingrent at anytime between September 1, 2014 and thecurrent time, which notice made reference to the factthat such tenant(s) [sic] rent was late.

The information sought is relevant and privacyconcerns are adequately addressed by the operativeProtective Order. However, because the period forwhich information is sought is overbroad, the scope ofthe production shall be limited to September 1, 2014through April 1, 2015. Accordingly, Plaintiffs' Motionis GRANTED IN PART with respect to RFP 21, asmodified by the Court.

• RFP 22: All written warning notices given by YOU toany tenant at the COMPLEX who was late payingrent at anytime between September 1, 2014 and thecurrent time, which notice made reference to the factthat such tenant(s) rent [sic] was going to have anunlawful detainer lawsuit filed against them.

The information sought is relevant and privacyconcerns are adequately addressed by the operativeProtective Order. However, because the period forwhich information is sought is overbroad, the scope ofthe production shall be limited to September 1, 2014through April 1, 2015. Accordingly, Plaintiffs' Motionis GRANTED IN PART with respect to RFP 22, as

modified by the Court. 3

*4 • RFP 23: Copies of any unlawful detainer lawsuitsfiled by YOU against any tenant at the COMPLEX atanytime between September 1, 2014 and the currenttime, due to such tenant(s) failing to pay rent in atimely fashion.

3 Although it appears likely that documents responsiveto RFP 22 will largely be the same documentsthat are responsive to RFP 21, Defendants' counselrepresented at the hearing that to the extent thatDefendants use different forms to notify tenants ofoverdue rent payments and the imminence of anunlawful detainer action, both sets of documents shallbe produced.

The information sought is relevant and privacyconcerns are adequately addressed by the operativeProtective Order. However, because the period forwhich information is sought is overbroad, the scope of

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the production shall be limited to September 1, 2014through April 1, 2015. Accordingly, Plaintiffs' Motionis GRANTED IN PART with respect to RFP 23, asmodified by the Court.

B. InterrogatoriesRule 33 governs the use of interrogatories as a discoverydevice in federal courts. Like all discovery requests,interrogatories must be “reasonably calculated” to lead tothe discovery of admissible evidence. Fed.R.Civ.P. 26(b)(1). Overly broad and unduly burdensome interrogatories“are an abuse of the discovery process” and are routinelydenied. See Lucero v. Valdez, 240 F.R.D. 591, 594(D.N.M.2007).

A party must respond to interrogatories by answer orobjection; objections must clearly state the reason for theobjection. See Fed.R.Civ.P. 33(b). “Each interrogatorymust, to the extent it is not objected to, be answeredseparately and fully in writing under oath.” Fed.R.Civ.P.33(b)(3). However, pursuant to Rule 33(d), where theanswer to an interrogatory may be determined byexamining the responding party's business records, andthe burden of deriving the answer from the documentsis substantially the same for either party, the respondingparty may satisfy its obligation by specifying in its writtenresponse the records that must be reviewed to obtain theinformation sought by interrogatory. Fed.R.Civ.P. 33(d).

The Court rules as follows on the four disputedinterrogatories:

• Interrogatory 20: Please identify the name and lastknown address of any tenant at the COMPLEX ...who was late with their monthly rent at any timebetween September 1, 2014 and the current time.

The information sought is relevant and privacyconcerns are adequately addressed by the operativeProtective Order. However, because the period for whichinformation is sought is overbroad, the relevant periodshall be limited to September 1, 2014 through April 1,2015. Accordingly, Plaintiffs' Motion is GRANTED INPART with respect to Interrogatory 20, as modified by theCourt.

• Interrogatory 21: In regard to any tenant at theCOMPLEX who was late with their monthly rent atanytime between September 1, 2014 and the current

time, please list the date(s) that each late payment(s)was received by YOU ... from such tenant(s).

The information sought is relevant and privacyconcerns are adequately addressed by the operativeProtective Order. However, because the period for whichinformation is sought is overbroad, the relevant periodshall be limited to September 1, 2014 through April 1,2015. Furthermore, because the information sought bythis Interrogatory is duplicative of and fully encompassedby the information requested in RFP 20, to the extent thatDefendants make a complete production of documentsresponsive to RFP 20, reference to that production willsatisfy Defendants' obligation to respond to Interrogatory21. See Rule 33(d). Accordingly, Plaintiffs' Motion isGRANTED IN PART with respect to Interrogatory 21,as modified by the Court.

*5 • Interrogatory 22: In regard to any tenant atthe COMPLEX who was late with their monthlyrent at anytime between September 1, 2014 and thecurrent time, please indicate which month(s) YOUgave written notice to such tenant that their rent waslate.

The information sought is relevant and privacyconcerns are adequately addressed by the operativeProtective Order. However, because the period for whichinformation is sought is overbroad, the relevant periodshall be limited to September 1, 2014 through April 1,2015. Furthermore, because the information sought bythis Interrogatory is duplicative of and fully encompassedby the information requested in RFP 21, to the extent thatDefendants make a complete production of documentsresponsive to RFP 21, reference to that production willsatisfy Defendants' obligation to respond to Interrogatory22. See Rule 33(b). Accordingly, Plaintiffs' Motion isGRANTED IN PART with respect to Interrogatory 22,as modified by the Court.

• Interrogatory 23: In regard to any tenant at theCOMPLEX who was late with their monthly rent atanytime between September 1, 2014 and the currenttime, please indicate which month(s) such tenant(s)had an unlawful detainer complaint filed againstthem by YOU for failing to pay such rent in a timelyfashion.

The information sought is relevant and privacyconcerns are adequately addressed by the operative

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Protective Order. However, because the period for whichinformation is sought is overbroad, the relevant periodshall be limited to September 1, 2014 through April 1,2015. Furthermore, because the information sought bythis Interrogatory is duplicative of and fully encompassedby the information requested in RFP 23, to the extent thatDefendants make a complete production of documentsresponsive to RFP 23, reference to that production willsatisfy Defendants' obligation to respond to Interrogatory23. Accordingly, Plaintiffs' Motion is GRANTED INPART with respect to Interrogatory 23, as modified by theCourt.

V.

CONCLUSION

For the foregoing reasons, Plaintiffs' Motion to Compelis GRANTED IN PART AND DENIED IN PART.Defendants shall serve supplemental responses (asoutlined above) to the Second Set of Requests forProduction 20–23 and the Second Set of Interrogatories20–23, and shall produce documents to Plaintiffs, withinfourteen days of the date of this Order.

All Citations

Not Reported in F.Supp.3d, 2015 WL 9692804

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EXHIBIT 2

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Bob Barker Co., Inc. v. Ferguson Safety Products, Inc., Not Reported in F.Supp.2d (2006)

2006 WL 648674

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 1

2006 WL 648674Only the Westlaw citation is currently available.

United States District Court, N.D. California,San Jose Division.

BOB BARKER COMPANY, INC., Plaintiff,v.

FERGUSON SAFETY PRODUCTS,INC., et al., Defendants.

No. C 04 04813 JW (RS).|

March 9, 2006.

Attorneys and Law Firms

Donald G. Hunt, Jr., Akins, Hunt & Fearon, P.C.,Fuquay–Varina, NC, James E. Towery, Allison B. Short,Hoge, Fenton, Jones & Appel, Inc., San Jose, CA, forPlaintiff.

Mark D. Baute, Jeffrey Alan Tidus, Baute & Tidus LLP,Los Angeles, CA, for Defendants.

ORDER RE MOTION TO COMPELDISCOVERY AND MOTION FOR SANCTIONS

RICHARD SEEBORG, Magistrate J.

I. INTRODUCTION

*1 In this action for Lanham Act violations andrelated claims, plaintiff Bob Barker Company, Inc.(“BBC”) moves to compel defendants to produce furtherdocuments in response to requests seeking variousfinancial information that BBC contends is relevant eitherto its remedy of disgorgement of profits or to its punitivedamages claim, or both. Defendants contend that therequests are overbroad and that, as a small businessoperation, they do not maintain many of the kinds ofrecords sought.

Defendants, however, have failed to identify clearly theextent to which they are refusing to produce documents, asopposed to representing that the documents do not exist.The motion will therefore be granted, subject to certainlimitations as to requests that are overbroad or otherwiseinappropriate. No sanctions will be imposed.

II. BACKGROUND

BBC and defendant Ferguson Safety Products, Inc.(“Ferguson”) are competitors in the business of supplyingequipment to state and federal correctional facilities.As characterized by BBC in its complaint in thisaction, Ferguson is a “relatively small” business thatmanufactures and markets only three basic products—a“suicide prevention smock,” a blanket, and a sleeping bag.Complaint paras. 17–18. BBC, in contrast, “manufacturesand sells a vast array of products ... [including] personalcare items, metal furnishings, mattresses, uniforms,clothing and linens.” Complaint para. 8. In its oppositionto these motions, Ferguson endorses this characterizationof the parties' relative sizes, describing itself as being“David to BBC's Goliath.” Opposition at p. 10.

This action is the second case between these two litigants.In the prior action Ferguson was the plaintiff, andobtained a jury verdict against BBC. The matter was thensettled prior to appeal. Complaint, paras. 22–24.

This case arose after Ferguson distributed a promotionalflier containing certain statements regarding BBC andits products that BBC contends are defamatory. Inits opposition to this motion, Ferguson repeatedlycharacterizes the present dispute as involving only thedistribution of “less than 50” copies of a single flier.The complaint, however, specifically alleges that Fergusonalso 1) caused defamatory statements about BBC to bepublished in a nationally-distributed industry publication—Correctional News; 2) verbally defamed BBC to oneof its customers at a trade show after this action wasfirst filed and a stipulated restraining order entered;and 3) sent a letter to a correctional facility as recentlyas August of 2004 that enclosed the same or anotherdefamatory flier, in alleged violation of the restrainingorder. Complaint, paras. 28–32. On “information andbelief” BBC further alleges that defendants have “issuedhundreds, if not thousands, of other inaccurate, false anddefamatory communications concerning BBC” and itsproducts. Complaint para. 34.

III. STANDARDS

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Under the Federal Rules of Civil Procedure, Rule 26(b)(1),

*2 [p]arties may obtain discoveryregarding any matter, notprivileged, that is relevant tothe claim or defense of anyparty ... For good cause, thecourt may order discovery of anymatter relevant to the subjectmatter involved in the action.Relevant information need notbe admissible at the trial ifthe discovery appears reasonablycalculated to lead to the discoveryof admissible evidence.

Evidence is relevant if it has “any tendency to makethe existence of any fact that is of consequence tothe determination of the action more probable or lessprobable than it would be without the evidence.” FederalRules of Evidence, Rule 401. Discovery may be limitedby the court for good cause shown “to protect a party orperson from annoyance, embarrassment, oppression, orundue burden or expense.” Fed.R.Civ.P. 26(c)).

Discovery requests for documents and tangible thingsare governed by Rule 34 of the Federal Rules of CivilProcedure. The rule in relevant part states that,

Any party may serve on any otherparty a request to produce andpermit the party making the request,or someone acting on the requestor'sbehalf, to inspect and copy, anydesignated documents (includingwritings, drawings, graphs, charts,photographs, phonorecords, andother data compilations fromwhich information can be obtained,translated, if necessary, bythe respondent through detectiondevices into reasonably usableform), or to inspect and copy, test,or sample any tangible things whichconstitute or contain matters withinthe scope of and which are in thepossession, custody or control of

the party upon whom the request isserved.

Fed.R.Civ.P. 34(a).

Motions to compel are authorized by Rule 37 of theFederal Rules of Civil Procedure:

[If] a party fails to answeran interrogatory submitted underRule 33, or if a party, inresponse to a request for inspectionsubmitted under Rule 34, fails torespond that inspection will bepermitted as requested or fails topermit inspection as requested, thediscovering party may move for anorder compelling an answer, or adesignation, or an order compellinginspection in accordance with therequest. The motion must include acertification that the movant has ingood faith conferred or attemptedto confer with the person or partyfailing to make the discovery in aneffort to secure the information ormaterial without court action.

Fed.R.Civ.P. 37(a)(2)(B).

IV. DISCUSSION

A. General FindingsBBC's motion seeks to compel Ferguson to producefurther documents in response to 25 specific documentrequests, all of which generally relate to Ferguson'sfinancial condition or its sales, including its costsof goods sold. As noted, BBC contends that therequested documents are material to its alleged right fordisgorgement of profits or its claim for punitive damages,or both. BBC explains that it formulated the documentrequests in consultation with a financial consulting firmthat it retained to quantify and establish Ferguson's profitsand net worth, and that the requests were tailored to elicitthe information needed for that purpose.

*3 Ferguson does not challenge the basic notion thatBBC is entitled to information regarding its net worthand profits. Ferguson has already produced tax returns

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for 2002 through 2004 and a profit and loss statementfor 2005. (Ferguson asserts that its 2005 tax return isnot yet available). Ferguson asserts that these documentsare sufficient to “show BBC how much gross revenuethe company made in each year, its cost of goods sold,salaries, rents, etc., and the company's bottom line profiteach year. BBC, however, complains that the corporatetax returns appear “incomplete” and that the profit andloss statement is only “three lines, non-detailed.” Nor,BBC points out, do these few documents even come closeto being responsive to all of the 25 separate requests.

Ferguson's proffered basis for not producing additionaldocuments is two fold. First, in its responses and inopposition to this motion Ferguson explained that it is a“just a small company” that employs “just a few peoplewho work hard” and that it “has never relied on expensiveor sophisticated computer programs or software or relatedfinancial printouts, and does not track inventory, income,payables or receivables in the way contemplated by thedocument requests.” Second, Ferguson argues that thedocument requests are overbroad and go far beyondmatters directly related to net worth or profits. Fergusonasserts that the requests would allow BBC “to learn aboutevery aspect of a competitor's business” and suggests thatis the true motive behind the requests.

Having reviewed the requests at issue, the Court concludesthat many of the requests are in fact overbroad,particularly to the extent that they seek informationrelated to sales and marketing strategies or futureplanning, rather than actual historical sales data. BBC'sclaim for disgorgement of profits entitles it to inquire intowhat profits were in fact made, and to the production ofsufficient back up documentation to allow it to test anyfigures listed on tax returns, profit and loss statements,or the like. Neither the claim for disgorgement of profitsnor the punitive damages claim, however, opens the doorfor an unbridled examination into Ferguson's businessplanning and strategies. Also, as will appear in thediscussion of specific requests below, in some instancesBBC seeks materials that are so far removed from the salesand related data that will ultimately be admissible at trialthat the requests cannot be deemed “reasonably calculatedto lead to the discovery of admissible evidence,” evenif there is some theoretical possibility that the materialssought could contain information bearing on the issues.

Finally, all of the document requests set a time frameof January 1, 2001 through the present. Even thoughthere appears to be no dispute that the allegedly wrongfulconduct complained of began no earlier than January of2003, BBC contends that it needs sufficient historical datato permit a reliable analysis of the effect, if any, suchallegedly wrongful conduct had on Ferguson's sales. Inbalancing that need against the relatively minimal burdencreated by extending the time frame back to January 1,2001, the Court concludes that the time period set forth inthe requests should be permitted to stand.

*4 As to Ferguson's claim that it simply does not createor maintain many of the kinds of records “contemplatedby the document requests,” Ferguson's responses are tooambiguous to permit BBC or the Court to determine theextent to which Ferguson may be withholding responsivedocuments based on its other objections rather thanasserting that no responsive documents exist. WhileFerguson's responses were not “boilerplate” in the senseof containing only generalized objections of a sort thatmight be found in any case, Ferguson did repeat the samelong paragraph of objections and explanations in all of itsresponses, regardless of the applicability of that recitationto the particular request. That practice may have beensufficient to make clear that Ferguson does not possessmany of types of records sought by the requests, but it doesnot establish that all responsive documents that may exist

have been produced. 1

1 At the hearing, Ferguson's counsel's commentsimplied that additional responsive documents exist inat least some of the categories.

Accordingly, while nothing in this order requiresFerguson to produce what it does not have, wherethis order compels a further response to a request,Ferguson must either produce all documents responsiveto the request (as limited by this order), or serve afurther response plainly and unequivocally stating that nodocuments exist in its possession, custody, or control thatare responsive to that specific request.

B. Specific Requests

Requests 33 through 42; Requests 47 through 48; Request50; Request 52; and Request 54.With the exception of Request 40, these requests allseek primary internal documents or tax returns that

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relate directly to the disgorgement of profits or networth or both. Request 40 is somewhat more tangentialas it calls for reports of commission payments onsales, but it is sufficiently related to the issues tobe permissible discovery. Ferguson shall produce alldocuments responsive to these requests, or a further

response where no responsive documents exist. 2

2 Ferguson's suggestion at the hearing that theserequests somehow be limited to apply only as tocustomers who received the “approximately 50” fliersis impractical and unwarranted. Ferguson was unableto suggest how such a limitation could be crafted thatwould be reliable and, more fundamentally, BBC'sclaims are based on allegations that the defamatorymaterial was distributed far more widely than justthrough 50 fliers—including through publication in anational trade magazine.

Requests 43 through 46These requests seek projections and planning informationthat is not sufficiently related to the actual sales or networth data at issue to be discoverable, as discussed above.No further responses to these requests will be required.

Request 49This request seeks “all external and internalcorrespondence concerning items described in” thepreceding requests. As to those of the preceding requeststhat the Court has found need no further response, thisrequest obviously also needs no further response. Even asto those of the preceding requests that do require furtherresponse, it is too speculative to presume that “all externaland internal correspondence” would contain or lead to thediscovery of admissible evidence to justify the burden ofproducing such correspondence. Accordingly, no furtherresponse to this request will be required.

Request 51This request seeks “[a]ll financial software databasesutilized in the operation of the business.” From Ferguson'sresponses, it appears that it may not have any suchsoftware. Assuming that Ferguson does have some formof financial database software, however, no furtherproduction specific to this request need be made, becauseit is unclear how a party could go about producing“a database,” which ordinarily is a dynamic collectionof data that changes over time. BBC's other requests

for various reports and data are broad enough torequire Ferguson to produce any data that may nowexist, regardless of whether it was ever maintained in a“financial software database.” Thus, Ferguson may notwithhold any documents (including electronic documents)that are responsive to any other request simply becausethey were created by or exist in a financial databaseprogram, but it need not produce documents specificallyunder this request.

*5 Additionally, at the hearing, BBC raised the conceptof permitting its expert direct access to whatever databasesoftware Ferguson may have, so that he or she coulddirectly generate reports containing the information BBCcontends it needs, even if Ferguson does not presentlyhave such reports in its possession. While permitting suchan intrusive procedure might be warranted in some casesupon an adequate showing of need, and with adequateprocedural safeguards in place to minimize businessdisruption and to restrict disclosure of irrelevant orproprietary material, it would be premature to authorizesuch a procedure here. If, after reviewing the responsesFerguson provides in response to this order, BBC believesgood cause exists to permit its expert to have direct accessto any such database, BBC may seek such access bymaking an adequate showing of why it is necessary, andby proposing a procedure containing adequate safeguardsto protect Ferguson's interests.

Request 53This request seeks production of all “bank statements,cancelled checks, deposit slips and deposit books.” Suchdocuments are cumulative to the other requests and likelywould contain no additional admissible evidence or leadto the discovery of admissible evidence, absent fraud inthe other documents. Without any indicia of fraud, thepossibility of discovering admissible evidence in or fromthese documents is too speculative to justify the burdenof production. Accordingly, no further response to thisrequest will be required.

Request 55This request seeks “all adjusting journal entries preparedby an outside CPA or accounting firm.” It is sufficientlyrelated to the issues to require further production of anyresponsive documents, or a statement that none exist.

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Requests 56 and 57These requests seek correspondence with any outside CPAor accounting firm, and any “workpapers” used by suchaccountants in the preparation of financial statementsor tax returns. It is possible that any accountants'“workpapers” included documents that must be producedin response to other requests, and Ferguson shall notuse the Court's decision on this request as a basis towithhold any documents responsive to other requests.However, production of “workpapers” as such, orof correspondence between Ferguson and accountants,would be cumulative to the other requests and likelywould contain no additional admissible evidence or leadto the discovery of admissible evidence, absent fraud inthe other documents. For the same reasons as discussedregarding Request 53, no further response to theserequests will be required.

C. Status of Defendant Lonna SpeerDefendant Lonna Speer is a principal of Ferguson. Themoving papers were not entirely clear as to whether BBCintended this motion to apply to her individual documentresponses and production or not. The papers in placesrefer to defendants in the plural, and elsewhere in thesingular. No argument is specifically directed to Speerindividually. The accompanying motion for sanctionsomits any mention of the requests directed at Speer

individually. 3

3 Also, the declaration of Donald Hunt in support ofthe motion to compel asserts that Speer's individualresponses would be attached as exhibit 2, butno exhibit 2 was included in the document aselectronically filed or as an attachment to thechambers copy. At the hearing, BBC's counselexplained that exhibit 2 was omitted because Speerserved no responses concurrently with Ferguson'sinitial responses, but that her responses were servedwith Ferguson's supplemental responses and weretherefore attached as exhibit 14 to the Huntdeclaration.

*6 Although it is now apparent that BBC did intend tocompel further responses from Speer individually as wellas from Ferguson, the briefing does not permit the Court

to evaluate the extent to which differences in the requestsdirected at Speer individually or differences arising fromher status as an individual might warrant a differentanalysis with respect to any specific requests. The Courttherefore declines to issue specific rulings regarding Speerand instead directs the parties to meet and confer furtherregarding her responses in light of the rulings the Courthas made as to Ferguson. Should any issues remain as toSpeer that the parties cannot resolve taking this order as aguide, BBC may renew its motion as to Speer.

D. Motion for Sanctions 4

4 BBC initially submitted its request for sanctions aspart of its motion to compel. It then withdrew thatportion of the motion, and refiled the sanctionsrequest as a separate motion, as required by the localrules.

As reflected in the rulings above, Ferguson's priorresponses and document production were not adequate.Even where a document request is overbroad or containsportions to which legitimate objections may be made, aparty must respond as to those requests for which noobjection is invoked. Conversely, however, the requestshere were overbroad in certain respects, as discussedabove. Under these circumstances, the Court finds that theimposition of sanctions is not warranted.

V. CONCLUSION

The motion to compel is GRANTED, IN PART.Ferguson shall produce documents or further responses,as described and limited above, to Requests 33 through42, 47 through 48, 50 through 52 and 54 through 55.

The motion to compel is otherwise DENIED.

The motion for sanctions is DENIED.

IT IS SO ORDERED.

All Citations

Not Reported in F.Supp.2d, 2006 WL 648674

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EXHIBIT 3

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Property Rights Law Group, P.C. v. Lynch, Not Reported in F.Supp.2d (2013)

2013 WL 4791485

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 1

2013 WL 4791485Only the Westlaw citation is currently available.

United States District Court, D. Hawai'i.

PROPERTY RIGHTS LAW GROUP, P.C., anIllinois Professional Corporation, Plaintiffs,

v.Sandra D. LYNCH, John Kang, alias Lee Miller;

and Keala Rodenhurst James, Defendants.

Civil No. 13–00273 SOM/RLP.|

Sept. 6, 2013.

Attorneys and Law Firms

Peter S. Knapman, Law Offices of Peter Knapman,Honolulu, HI, Robert L. Stone, Property Rights LawGroup, Honolulu, HI, for Plaintiffs.

Sandra D. Lynch, Honolulu, HI, for Defendants.

ORDER GRANTING IN PART ANDDENYING IN PART DEFENDANTS

KEALA RODENHURST JAMES ANDLEE MILLER'S MOTION TO DISMISS

SUSAN OKI MOLLWAY, Chief Judge.

*1 Currently before the court is Defendant KealaRodenhurst James and Lee Miller's motion to dismissPlaintiff Property Rights Law Group's Complaint(“Motion”). The court grants the Motion with respect tothe breach of contract claim and part of the statutory tradesecrets claim. In all other respects, the Motion is denied.

I. BACKGROUND.Property Rights Law Group (“PRLG”) says that itemployed attorney Sandra Lynch from May 1, 2012,through April 24, 2013, to work on PRLG's cases inIllinois and Hawaii. Compl. ¶ 3. PRLG asserts that“Defendant John Kang, alias Lee Miller,” as Lynch's“employee and business partner,” as well as her agent,secretly worked with Lynch in violation of Lynch'semployment agreement (the “Agreement”) with PRLG.Id. ¶ 4. In addition, PRLG asserts that “Defendant KealaRodenhurst James is an employee of Defendant Lynch

and her agent, and a former employee of the Plaintiff. Sheconspired with Defendant Lynch against their employerwhile both were employees.” Id. ¶ 5.

PRLG alleges that James, Miller, and Lynch “conspiredto breach the terms of Defendant Lynch's Agreementwith PRL Group; to violate the Illinois Trade SecretAct; to violate the Computer Fraud and Abuse Act;to slander Mrs. Lynch's and Mrs. James's employerpublically and with clients and to interfere with theiremployer's prospective economic advantage.” Id. ¶ 1.Before the court is James and Miller's Motion. WhileLynch is appearing as counsel for James and Miller, Lynchis not presenting any motion on her own behalf at thistime.

At the hearing, the parties disagreed over whether it wasappropriate to apply Hawaii law or Illinois law withrespect to Counts I, IV, and V. James and Miller contendthat Hawaii law applies. Even accepting that argument,the court denies the motion with respect to those claims,without deciding the issue of choice of law.

II. STANDARD OF REVIEW.“[T]o survive a Rule 12(b)(6) motion to dismiss, factualallegations must be enough to raise a right to reliefabove the speculative level, on the assumption that all theallegations in the complaint are true even if doubtful infact.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007))(internal quotation marks omitted); accord Ashcroft v.Iqbal, 556 U.S. 662, 678 (2009) (“the pleading standardRule 8 announces does not require ‘detailed factualallegations,’ but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation”). “While acomplaint attacked by a Rule 12(b)(6) motion to dismissdoes not need detailed factual allegations, a plaintiff'sobligation to provide the ‘grounds' of his ‘entitlement torelief’ requires more than labels and conclusions, and aformulaic recitation of the elements of a cause of actionwill not do.” Twombly, 550 U.S. at 555. The complaintmust “state a claim to relief that is plausible on its face.”Id. at 570. “A claim has facial plausibility when theplaintiff pleads factual content that allows the court todraw the reasonable inference that the defendant is liablefor the misconduct alleged.” Iqbal, 556 U.S. at 677.

III. ANALYSIS.

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A. Count I: Breach of Contract.*2 James and Miller say that Count I is deficient because

“Plaintiff merely alleges that Defendant James ‘workedfor’ PRL Group in Hawaii.” Motion at 9. Defendantsalso say that “the complaint makes a naked allegationthat ‘John Kang’ is an ‘alias' for ‘Lee Miller’ without anycontext.” Id. Finally, Defendants attach the Agreementbetween Lynch and PRLG and argue that “[n]othingcontained in the Agreement indicates that a previousbusiness relationship between Ms. Lynch and any partyconstitutes a violation of the Agreement.” Id.

To prevail on a claim for breach of contract, a partymust prove: “(1) the contract at issue; (2) the partiesto the contract; (3) whether Plaintiff performed underthe contract; (4) the particular provision of the contractallegedly violated by Defendants; and (5) when and howDefendants allegedly breached the contract.” EvergreenEng'g, Inc. v. Green Energy Team LLC, 884 F.Supp.2d1049, 1059–60 (D.Haw.2012).

Count I is not adequately supported by factual allegationsthat support a breach of contract claim against James andMiller. PRLG complains that James and Miller's “actionsin their pre-termination solicitation of PRL Group'sclients, Defendants Lynch's and James's manner of leavingPRL Group, and their wrongful down-loading and useof confidential information all constitute clear breachesof the terms of the Agreement and of the fiduciaryrelationship between employer and employees.” Compl. ¶34.

At the hearing, PRLG admitted that the Agreementin issue was only between Lynch and PRLG. PRLGargued it was nonetheless entitled to sue James andMiller for breach of contract under either a principal/agent relationship or an implied contract theory. Noagency relationship is pled. The only reference to Lynch'salleged agents does not speak to whether James orMiller is or was Lynch's agent. Instead, that reference(in paragraph 39 of the Complaint) is part of theprayer for injunctive relief and states that such relief issought against: “Defendant Lynch, her agents, servants,employees, officers, attorneys, successors and assigns, andall persons, firms, and corporations acting in connectionor participation with her or on her behalf....” Compl. ¶39(c)(3). The term “agents” in the quoted language in noway makes it clear that any Defendant is an alleged agentof a co-Defendant.

Nor is an implied contract sufficiently pled. The terms ofand parties to any implied contract are not described at all.

To the extent Count I is intended to be a breach offiduciary duty claim notwithstanding its heading, thealleged duty is not identified at all.

Under these circumstances, Count I is dismissed as toJames and Miller.

B. Count II: Illinois Trade Secrets Act.Count II asserts violations of the Illinois Trade SecretsAct (“ITSA”). James and Miller claim that, while “itis unclear exactly what Defendants are alleged to havedone and “what trade secrets PRLG claims to have,”it is impossible for Defendants to have violated ITSAbecause “any information PRLG provided to Ms. Lynchor Ms. James (if any) is not and has never beensufficiently secret to satisfy the statute).” Motion at19. In particular, responding to allegations that they“downloaded” PRLG's documents, James and Miller saythat “there is no factual basis to conclude that any of thealleged ‘documents' ‘downloaded’ contained trade secrets,especially since the allegations concern a law firm.” Id. at18. James and Miller do not show on this Motion that alaw firm cannot have trade secrets, or that documents withtrade secrets could not have been downloaded. Instead,they put competing allegations before the court that donot, without more, justify dismissal of Count II.

*3 To establish trade secret misappropriation underthe ITSA, a claimant must show that: “(1) a tradesecret existed; (2) the secret was misappropriated throughimproper acquisition, disclosure, or use; and (3) the ownerof the trade secret was damaged by the misappropriation.”Parus Holdings, Inc. v. Banner & Witcoff, Ltd .,585 F.Supp.2d 995, 1005 (N.D.Ill.2008). The ITSAdefines a trade secret as: “information, including butnot limited to, technical or non-technical data, aformula, pattern, compilation, program, device, method,technique, drawing, process, financial data, or list ofactual or potential customers or suppliers....” 765 ILCS1064/2(d). “ITSA plaintiffs are not required to pleadhighly specific facts on improper trade secret use, becausesuch facts will often not be available before discovery.”Motorola, Inc. v. Lemoko Corp., 609 F.Supp.2d 760, 770(N.D.Ill.2009).

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PRLG's Complaint says that “Defendants' actions indownloading and retaining PRL Group's clients list,forensic research, draft pleadings, research library, andstrategic documents” constitute a violation of ITSA.Compl. ¶ 42. James and Miller argue in their Motion thatthe ITSA refers to a “list of actual or potential customers”as a trade secret, but that, as a law firm, PRLG didnot have “customers.” Motion at 19. This court is notpersuaded. Nothing about the word “customers” excludesa lawyer's clients, or, for that matter, a piano teacher'sstudents. One does not need to call patrons “customers”to fall within the ITSA. Moreover, PRLG articulatesnumerous injuries, so that even if a law firm's list of clientsis not covered by the ITSA, that would not defeat CountII in its entirety.

C. Count III: Computer Fraud and Abuse Act.Count III asserts a violation of the Computer Fraudand Abuse Act (“CFAA”). James and Miller argue thatCount III is deficient because the CFAA prohibits theintentional accessing of a computer without authorization,and “[t]here is no evidence that any ‘computer’ wasaccessed. Instead, any files from clients were maintainedon a cloud.” Motion at 21–22. According to James andMiller, “no stand-alone computer ... was breached” and“the use of ‘mapping’ to a drive is no more than a shortcutto use of a shared folder or ‘cloud’ platform.” Id. at 21.

The CFAA creates a private right of action for “[a]nyperson who suffers damage or loss” when an individual“intentionally accesses a protected computer withoutauthorization, and as a result of such conduct, recklesslycauses damage.” See 18 U.S.C. § 1030(g), 1030(a)(5)(B).The CFAA provides:

(a) Whoever—

....

(2) intentionally accesses a computer withoutauthorization or exceeds authorized access, and therebyobtains ...

(C) information from any protected computer

....

(4) knowingly and with intent to defraud, accesses aprotected computer without authorization, or exceedsauthorized access, and by means of such conduct

furthers the intended fraud and obtains anything ofvalue ...;

*4 (5)....

(B) intentionally accesses a protected computerwithout authorization, and as a result of suchconduct, recklessly causes damage;....

....

shall be punished ....

18 U.S.C. § 1030.

PRLG cites to §§ 1030(a)(2), (a)(4), and (a)(5). Violationsof subsections (a)(2) and (a)(5) do not need to be pledwith particularity. Motorola, Inc. v. Lemko Corp., 690F.Supp.2d 760, 765 (N.D.Ill.2009). “By contrast, section1030(a)(4) is violated only if a defendant acts ‘withintent to defraud’ and her conduct ‘furthers the intendedfraud.’ “ Id. (quoting § 1030(a)(4)). An intent to defraudneed not be pled with particularity, but “Rule 9(b)'srequirement that ‘[i]n alleging fraud ..., a party must statewith particularity the circumstances constituting fraud,’ ...quite plainly applies to section 1030(a)(4)'s requirementthat the defendant's acts further the intended fraud.” Id.(internal citations omitted).

It is not entirely clear which portions of the statute PRLGis relying on for the various portions of its CFAA claim.To the extent PRLG is relying on subsections (a)(2)and (a)(5), the Complaint passes muster at this stage inthe proceedings. However, PRLG does not sufficientlyallege circumstances constituting fraud for purposes ofsubsection (a)(4), and any portion of Count III broughtunder that portion for the CFAA is dismissed.

D. Count IV: Defamation.Count IV states a claim for defamation. James and Millerargue that Count IV is deficient because “Plaintiff canprovide no evidence that any of the documents it allegesare defamatory were read by anyone, believed by anyone,or known to be published at all.” Id. at 25–26.

To sustain a claim for defamation, a claimant mustshow: “(1) a false and defamatory statement concerninganother; (2) an unprivileged publication to a third party;(3) fault amounting at least to negligence on the partof the publisher [actual malice where the plaintiff is a

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public figure]; and (4) either actionability of the statementirrespective of special harm or the existence of specialharm caused by the publication.” Gonsalves v. NissanMotor Corp. in Hawaii, Ltd., 100 Haw. 149, 171, 58 P.3d1196, 1218 (2002).

PRLG attaches to the Complaint copies of the allegedlydefamatory statements, which appear to have been postedon the internet. At this stage of the litigation, the courtallows Count IV to proceed.

E. Count V: Tortious Interference.Count V asserts a claim for tortious interference withprospective business advantage. James and Miller arguethat “Plaintiff has not properly alleged elements of thetort, nor provided any factual allegations sufficient tosupport” a claim for tortious interference with prospectivebusiness advantage. Motion at 18.

The elements this claim are:

(1) the existence of a valid businessrelationship or a prospectiveadvantage or expectancy sufficientlydefinite, specific, and capable ofacceptance in the sense thatthere is a reasonable probabilityof it maturing into a future

economic benefit to the plaintiff;(2) knowledge of the relationship,advantage, or expectancy by thedefendant; (3) a purposeful intentto interfere with the relationship,advantage, or expectancy; (4) legalcausation between the act ofinterference and the impairmentof the relationship, advantage, orexpectancy; and (5) actual damages.

*5 Robert's Hawaii School Bus, Inc. v. LaupahoehoeTrans. Co., 91 Haw. 224, 257, 982 P.2d 853,888 (1999).The court does not identify any deficiency in the factualallegations of Count V justifying dismissal.

IV. CONCLUSION.The court dismisses Count I and the portion of Count IIIrelating to 18 U.S.C. § 1030(a)(4). The remaining portionsof Count III, as well as Counts II, IV, and V, remain foradjudication.

IT IS SO ORDERED.

All Citations

Not Reported in F.Supp.2d, 2013 WL 4791485

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EXHIBIT 4

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Hurt v. Vantlin, Slip Copy (2016)

2016 WL 3144992

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 1

2016 WL 3144992Only the Westlaw citation is currently available.

United States District Court,S.D. Indiana, Evansville Division.

William Hurt, Deadra Hurt, AndreaHurt, Debbie Hurt, Plaintiffs,

v.Jeff Vantlin, Jack Spencer, William Arbaugh,Jason Pagett, Larry Nelson, Richard Blanton,

Dan Deyoung, City of Evansville, Matthew Wise,Zachary Jones, Amy Burrows-Beckham, Defendants.

No. 3:14-cv-00092-JMS-MPB|

Signed 06/06/2016

ORDER

Matthew P. Brookman, United States Magistrate Judge

*1 This matter is before the Court on Plaintiffs (“theHurts”) Motion to Compel Certain “Post-Incident”Discovery from Defendant City of Evansville, filed onMarch 28, 2016. (Docket No. 174; Docket No. 175).Defendant, City of Evansville, filed a response to themotion on April 11, 2016. (Docket No. 187). Plaintiffsfiled a reply on April 13, 2016. (Docket No. 189). Becausethis Motion to Compel and certain corresponding exhibitsare being maintained under seal, the Court will simplyincorporate those facts by reference herein and onlydetail specific facts as necessary to address the parties'arguments.

On March 8, 2016, counsel for all parties participatedin a conference with the Court, which included, amongother topics, the discovery disputes at issue in the presentMotion to Compel. (Docket No. 166; Docket No. 207 at3; Docket No. 209 at 3). At that time, the Court indicatedit would be inclined to deny the Hurts' Motion to Compelif the Hurts chose to file it. As outlined above, Hurtsdid file the Motion to Compel. The Court denied theMotion to Compel on April 19, 2016, in whole. (DocketNo. 193). This Order was appealed to the Honorable JaneMagnus-Stinson, District Judge, and on May 25, 2016,Judge Stinson remanded the matter for further findingsand to elaborate the basis for the decision, such that the

Court could apply the requisite standard of review shouldPlaintiffs renew their objection. (Docket No. 210).

The Hurts' Motion to Compel requests that this Courtorder the City of Evansville to answer Plaintiffs' FirstSet of Requests for Production No. 31, Plaintiffs' FirstSet of Requests to Admit Nos. 9 & 10, Plaintiffs' ThirdSet of Interrogatories Nos. 5, 6, and 7, and to re-presentDetective Brian Turpin for a limited-purpose deposition.For the reasons that follow, the Hurts' Motion to Compelis now GRANTED IN PART and DENIED IN PART.

In the event that parties cannot informally resolve adiscovery dispute, Rule 37 provides a vehicle for theaggrieved party to request an order from the Courtcompelling discovery. See Chavez v. DaimlerChryslerCorp., 206 F.R.D. 615, 619 (S.D. Ind. 2002). Districtcourts have broad discretion in matters relating todiscovery. See Patterson v. Avery Dennison Corp., 281F.3d 676, 681 (7th Cir. 2002) (citing Packman v. ChicagoTribune Co., 267 F.3d 628, 646-47 (7th Cir. 2001)). FederalRule of Civil Procedure 26(b)(1) sets the standard for thescope of general discovery, providing that “[p]arties mayobtain discovery regarding any matter, not privileged,that is relevant to the claim or defense of any party...Forgood cause, the court may order discovery of any matterrelevant to the subject matter involved in the action.”Fed. R. Civ. P. 26(b)(1). Discovery is relevant if itappears reasonably calculated to lead to the discovery ofadmissible evidence. Id.

The Hurts' first request that the City of Evansville becompelled to answer Plaintiffs' First Set of Requestsfor Production No. 31 and Plaintiffs' First Set ofRequests to Admit Nos. 9 & 10 (Docket No. 176-D).Defendant objected on relevance grounds. The Hurtsassert that they “wish to establish whether the [2014drug investigation into Deadra Hurt] was a formal,EPD-endorsed investigation...”—which they conclude isrelevant for Plaintiffs' malicious prosecution and Monellclaims, as well as impeachment materials. (Docket No.176 at 6). As to the malicious prosecution claim,subsequent acts can be probative as to prior intent.United States v. Anifowoshe, 307 F.3d 643, 646-47 (7thCir. 2002). However, subsequent acts still must meetthe requirements of Rule 26(b)(1) as being relevant orreasonably likely to lead to relevant information. In thecases cited in the Hurts' memorandum, the subsequentacts were either similar or related to the initial alleged

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misconduct. Here, the Court finds that the 2014 druginvestigation into Deadra Hurt is unrelated to theGolike homicide investigation underlying the maliciousprosecution. Therefore, whether any defendant involvedin the 2014 investigation had any motive or intentto initiate that investigation is irrelevant to establishthe requisite malice for the prosecutions underlying themalicious prosecution claim. Fed. Rule Civ. P. Rule 26(b)(1).

*2 In Monell v. New York City Dep't of Soc. Servs.,436 U.S. 658 (1978), the Supreme Court held thatmunicipalities and other local governments may be heldliable under 42 U.S.C. § 1983 for any deprivation ofconstitutional rights caused by an official policy orpractice. A plaintiff must show that the municipal policyor custom and usage proximately caused the allegedunconstitutional conduct, which usually requires morethan a single incident of unconstitutional conduct. Powev. City of Chicago, 664 F.2d 639, 650 (7th Cir. 1981).Moreover, subsequent conduct usually cannot be used toestablish municipal liability. Calusinski v. Kruger, 24 F.3d931, 936 (7th Cir. 1994). Here, the Court finds that the2014 drug investigation into Deadra Hurt is unrelated tothe Plaintiffs' Monell claim and, specifically, is unrelatedto the municipal policy or custom regarding interrogationmethods, police reports, and arrests and detentions,which Hurts allege proximately caused their deprivationof constitutional rights. Lastly, as to the “potential”impeachment value of the 2014 drug investigation, theHurts have not provided any argument or authorityas to how they would use the 2014 drug investigationto impeach any defendant, therefore, the Court is notpersuaded by this “potential” use. Thus, Plaintiffs' Motionto Compel with respect to the First Set of Requests forProduction No. 31 and Plaintiffs' First Set of Requests toAdmit Nos. 9 & 10 is DENIED.

Next, the Hurts request the City of Evansvillebe compelled to answer Plaintiffs' Third Set ofInterrogatories Nos. 5, 6, and 7 (Docket No. 176-B). Defendant again objected on relevance grounds.The Hurts assert that these interrogatories are relevantto establishing the malice element of their maliciousprosecution claim, to their claim for punitive damages,and to their Monell claim against the City of Evansville.Because the Court finds that these interrogatories arerelevant to the Hurts' malicious prosecution claim, itwill not outline whether the evidence is relevant, and

potentially admissible, as to the Hurts' other purportedpurposes.

To state a malicious prosecution claim under § 1983, aplaintiff must demonstrate in part that he satisfied theelements of a state law cause of action for maliciousprosecution, which in Indiana requires a showing thatthe defendant acted with malicious intent. Welton v.Anderson, 770 F.3d 670, 674 (7th Cir. 2014) (citing GoldenYears Homestead, Inc. v. Buckland, 557 F.3d 457, 462(7th Cir. 2009)). Malice can be established by evidenceof personal animosity. Id. Fed. Rule of Evid. 404(b)provides that evidence of another act may be admissiblefor the purpose of proving motive or intent. Relevancyof discovery requests cannot be determined by reviewinga mere chronology of the potential evidence, instead thecritical question is whether the evidence is “sufficientlyprobative of a matter.” United States v. Anifowoshe, 307F.3d at 646-47. Here, Plaintiffs have referenced evidencethat a May to August 2013 investigation was terminatedby Defendant Vantlin due to the suspect assisting withthe Golike homicide investigation—an incident for whichthe last Plaintiff was acquitted of just a few monthsprior. The Court finds that, given the case law regardingsubsequent acts applicability to prior malice, that thereferenced interrogatories will yield relevant evidence orinformation that is reasonably calculated to lead to thediscovery of admissible evidence. Fed. R. Civ. P. Rule26(b). Accordingly, Plaintiffs' Motion to Compel as toPlaintiffs' Third Set of Interrogatories Nos. 5, 6, & 7 isGRANTED. The City of Evansville has thirty (30) daysfrom the date of this Order to comply.

Finally, the Hurts request that Detective Brian Turpinbe re-presented for a limited-purpose deposition (DocketNo. 174 at 3). The Hurts indicate that they noticedthe deposition of Detective Turpin, who oversaw theinvestigation referenced in Plaintiffs' Third Set ofInterrogatories Nos. 5, 6, and 7 to determine what roleDefendant Vantlin played in the decisions made duringthat investigation and whether the Evansville PoliceDepartment authorized and approved Vantlin's decisionin the same. (Docket No. 176 at 5). In other words,the Hurts attempted to obtain the same informationas the aforesaid interrogatories. The City of Evansvilleobjected to the bulk of the questions on grounds ofrelevance. (Docket No. 176 at 6). Because the limited-purpose deposition is likely to reveal the same evidenceas the Plaintiffs' Third Set of Interrogatories Nos. 5, 6 &

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7, which the Court has compelled the City of Evansvilleanswer, the Court DENIES Plaintiffs' Motion to Compelas to Plaintiffs' request to re-present Detective Turpin for alimited-purpose deposition with leave to refile this request,if necessary, upon receipt of the City of Evansville'sanswers to these interrogatories.

*3 SO ORDERED.

All Citations

Slip Copy, 2016 WL 3144992

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EXHIBIT 5

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Weller v. American Home Assur. Co., Not Reported in F.Supp.2d (2007)

2007 WL 1097883

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 1

2007 WL 1097883Only the Westlaw citation is currently available.

United States District Court,N.D. West Virginia.

Reba WELLER and Raymond H.Weller, her husband, Plaintiffs,

v.AMERICAN HOME ASSURANCE

COMPANY, Defendant.

Civil Action No. 3:05-cv-90.|

April 10, 2007.

Attorneys and Law Firms

James G. Bordas, III, James G. Bordas, Jr., Bordas &Bordas, PLLC, Wheeling, WV, for Plaintiffs.

Don C.A. Parker, Spilman Thomas & Battle, PLLC,Charleston, WV, Michael G. Gallaway, Spilman, Thomas& Battle, PLLC, Weirton, WV, for Defendant.

MEMORANDUM, OPINION, AND ORDERGRANTING IN PART AND DENYINGIN PART PLAINTIFFS' MOTION TO

COMPEL REGARDING INTERROGATORY13 AND REQUEST FOR PRODUCTION 11

JAMES E. SEIBERT, United States Magistrate Judge.

*1 On April 3, 2007 came the above named Plaintiffs,by James B. Stoneking, in person, and Defendant, byMichael G. Gallaway, in person, for Plaintiffs' Motion toCompel. Testimony was not taken, and no other evidencewas introduced.

I. Introduction

A. Background.This case concerns a statutory insurance “bad faith”claim under the West Virginia Unfair Trade PracticesAct (UTPA), W. Va.Code § 33-11-4(9). On December 18,2002, a driver insured by Defendant rear ended a cardriven by Plaintiff Reba Weller. Plaintiff Reba Weller fileda claim against the driver's insurance policy with AHAC,

alleging injuries from the accident. Plaintiffs ultimatelyfiled a civil action against the driver, which ended insettlement. Plaintiffs assert in this action that Defendantviolated the UTPA in the handling of the underlyingclaim.

The parties engaged in discovery and a dispute arose.Plaintiffs filed a Motion to Compel on March 19, 2007.Defendant filed a Response on March 28, 2007. Plaintiffsfiled a Reply on March 30, 2007. An evidentiary hearingand argument was held regarding the Motion on April 3,2007.

B. The Motion.Plaintiffs' Motion to Compel (docket 31)

C. Decision.Plaintiffs' Motion to Compel is GRANTED IN PARTand DENIED IN PART regarding interrogatory 13and request for production 11. Although the Motion toCompel also concerned request for production 1, thatrequest shall be dealt with in a separate subsequent orderdue to the complexity of the issues.

II. Facts

1. Plaintiffs served interrogatories and requests forproduction on Defendant on December 6, 2006.Defendant responded on January 12, 2006.

2. Plaintiffs found some of Defendant's responsesunsatisfactory. On February 12, 2007, Plaintiffssent Defendant a letter requesting it supplementsome of its responses. Defendant responded withanother letter on February 21, 2007. Defendantsupplemented some of its discovery responses.

3. Plaintiffs remained unsatisfied with Defendant'sresponses to interrogatory 13 and requests forproduction 1 and 11. Plaintiffs filed the instantMotion to Compel, which proceeded as set forthabove.

III. Plaintiffs' Motion to Compel

A. Contentions of the Parties

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Plaintiffs ask the Court to grant their Motion toCompel. Plaintiffs argue interrogatory 13 containsrelevant information and, given the broad scope ofdiscovery, should be produced. Plaintiffs make the sameargument regarding request for production 11.

Defendant requests the Court to deny the Motionto Compel. Defendant asserts interrogatory 13 isoverly broad and unduly burdensome. If the Courtshould disagree, Defendant asks the Court limit theinterrogatory's scope to circumstances similar to the factsof this suit. Defendant contends the material sought inrequest for production 11 is covered by a privilege foremployee privacy.

B. The Standards1. Discovery-Scope. The Federal Rules provide that“Parties may obtain discovery regarding any matter,not privileged, that is relevant to the claim or defenseof any party, including the existence, description,nature, custody, condition, and location of any books,documents, or other tangible things and the identity andlocation of persons having knowledge of any discoverablematter.” Fed.R.Civ.P. 26(b)(1). The Rules further givecourts the authority to “order discovery of any matterrelevant to the subject matter involved ... Relevantinformation need not be admissible at the trial if thediscovery appears reasonably calculated to lead to thediscovery of admissible evidence. All discovery is subjectto the limitations imposed by Rule 26(b)(2)(i), (ii), and(iii).” Id.

*2 2. Discovery-Scope. It has been repeatedly held thatthe “discovery rules are to be accorded a broad and liberaltreatment.” Hickman v. Taylor, 329 U.S. 495, 507, 67 S.Ct.385, 392, 91 L.Ed. 451, 460 (1947). However, the discoverysought must be relevant. Fed.R.Civ.P. 26(b)(1); see alsoHerbert v. Lando, 441 U.S. 153, 177, 99 S.Ct. 1635, 1649,60 L.Ed.2d 115, 134 (1979) (stating that “the requirementof Rule 26(b)(1) that the material sought in discovery be‘relevant’ should be firmly applied”).

3. Discovery-Relevancy. A court must strike a balancebetween the broad scope of the rules of discovery and thediscovery of relevant evidence that is ultimately deemedadmissible or inadmissible at trial. The test for relevancyunder the discovery rules is necessarily broader than thetest for relevancy under Rule 402 of the Federal Rules ofEvidence. Fed.R.Civ.P. 26(b)(1) ( “relevant information

need not be admissible at the trial if the discoveryappears reasonably calculated to lead to the discovery ofadmissible evidence.”). In striking the appropriate balancebetween these two tensions, “[d]istrict courts enjoy nearlyunfettered discretion to control the timing and scope ofdiscovery and impose sanctions for failures to comply withits discovery orders.” Hinkle v. City of Clarksburg, 81 F.3d416, 426 (4th Cir.1996) (citations omitted).

4. Discovery-Duty to Supplement. Once the discoveryprocess has commenced, a party has “a duty seasonablyto amend a prior response ... if the party learns thatthe response is in some material respect incomplete orincorrect and if the additional or corrective informationhas not otherwise been made known to the other partiesduring the discovery process or in writing.” Fed.R.Civ.P.26(e)(2).

5. Discovery-Duty to Respond Fully and Completely-NoGamesmanship. Parties must respond truthfully, fullyand completely to discovery or explain truthfully, fullyand completely why they cannot respond. Hansel v.Shell Oil Corporation, 169 F .R.D. 303 (E.D.Pa.1996).Gamesmanship to evade answering as required is notallowed. United States v. Marshall, 132 F.3d 63, 69(D.C.Cir.1998); Kalejs v. INS, 10 F.3d 441, 463 (7thCir.1993); Outley v. City of New York, 837 F.2d 587, 590(2d Cir .1988).

6. Discovery-Interrogatories. Federal Rule of CivilProcedure 33 governs interrogatories. It states that “Eachinterrogatory shall be answered separately and fully inwriting under oath, unless it is objected to, in which eventthe objecting party shall state the reasons for objectionand shall answer to the extent the interrogatory is notobjectionable.”

7. Discovery-Objections to Interrogatories. All objectionsmust be stated with specificity and any objection notraised is waived. Fed.R.Civ.P. 33(b)(4). “Mere recitationof familiar litany that interrogatory is ‘overly broad,burdensome, oppressive, and irrelevant’ “ does not sufficeas specific objection. Momah, v. Albert Einstein Med. Ctr.,164 F.R.D. 412, 417 (E.D.Pa.1996) (quoting Josephs v.Harris Corp., 677 F.2d 985, 992 (3d Cir.1982)).

*3 8. Discovery-Requests for Production. A party seekingdiscovery may serve a request on another party asking himto permit the requesting party “to inspect and copy, test,

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or sample any tangible things which constitute or containmatters within the scope of Rule 26(b) and which are inthe possession, custody or control of the party upon whomthe request is served.” Fed.R.Civ.P. 34(a).

9. Discovery-Requests for Production-Objections. WhileRule 34 of the Federal Rules of Civil Procedure does notcontain the same specificity and waiver provisions as Rule33 of the Federal rules of Civil Procedure, the AdvisoryCommittee notes to Rule 34 states that “the procedureprovided for in Rule 34 is essentially the same as thatin Rule 33.” Pulsecard v. Discover Card Servs., Inc., 168F.R.D. 295, 303 (D.Kan.1996).

10. Discovery-Motion to Compel. Motions to compelresponses to interrogatories and requests for productionare governed by Federal Rule of Civil Procedure 37(a)(2)(B). This Rule provides that if a party declines to answeran interrogatory or request for production, the servingparty “may move for an order compelling an answer,or a designation, or an order compelling inspection inaccordance with the request.” Id.

11. Discovery-Motion to Compel-Burden of Proof. Theparty opposing a motion to compel bears the burden ofshowing why it should not be granted. Roesberg v. Johns-Manville Corp., 85 F.R.D. 292, 296-97 (E.D.Pa.1980);Rogers v. Tri-State Materials Corp., 51 F.R.D. 234, 247(N.D.W.Va.1970).

C. Discussion

I.

Interrogatory 13

Interrogatory 13 asked Defendant to identify every claimsadjuster it employed to handle bodily injury claims inWest Virginia from 2000 to the present. If the personwas still employed, Defendant was asked to state theperson's current position. The interrogatory also askedfor contact information regarding the person. Plaintiffsargue the information is relevant to their claims andshould therefore be produced. Defendants argue theinterrogatory's scope is overly broad, unduly burdensome,and largely irrelevant. Defendant contends it coversareas of bodily injury claims that have nothing todo with this case, such as commercial, marine, and

environmental bodily injuries, among others. Defendantalso argues it will take hundreds of hours to search its filesand identify the relevant information. Plaintiffs counterDefendant's arguments regarding burdensomeness bystating that Defendant may identify the relevant personsby simply sending an email to its adjusters or office heads.Alternatively, it could simply place a few calls.

The Court must first determine if the information in theinterrogatory is relevant. To succeed on a third party badfaith claim such as this one, Plaintiffs must demonstrateDefendant violated the law with such frequency as todemonstrate the conduct constituted a general businesspractice. Jenkins v. J.C. Penney Cas. Ins. Co., 167 W. Va.597, 610, 280 S.E.2d 252, 260 (1981). The West VirginiaSupreme Court later defined what constitutes a generalbusiness practice by holding that a plaintiff must prove

*4 that the conduct in questionconstitutes more than a singleviolation of W. Va.Code §33-11-4(9), that the violations arisefrom separate, discrete acts oromissions in the claim settlement,and that they arise from a habit,custom, usage, or business policyof the insurer, so that, viewing theconduct as a whole, the finder offact is able to conclude that thepractice or practices are sufficientlypervasive or sufficiently sanctionedby the insurance company thatthe conduct can be considered a“general business practice” and canbe distinguished by fair minds froman isolated event.

Holloman v. Nationwide Mut. Ins. Co., 217 W. Va. 269,273, 617 S.E.2d 816, 820 (2005) (quoting Syl. Pt. 4, Dodrillv. Nationwide Mut. Ins. Co., 201 W. Va. 1, 491 S.E.2d 1(1997)); see also Jackson v. State Farm Mut. Auto. Ins. Co.,215 W. Va. 634, 645-46, 600 S.E.2d 346, 357-58 (2004)(discussing how a plaintiff may show a general businesspractice).

The Court believes the information sought in thisinterrogatory passes the minimum test of relevanceunder Rule 26. The insurance adjusters handling bodilyinjury claims for Defendant will almost certainly haveinformation regarding Defendant's business practices.

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Plaintiffs need this type of information to prove theirclaims. Jenkins, 167 W. Va. at 610. However, the Courtalso believes the interrogatory is overly broad to theextent it seeks information about claims adjusters otherthan those handling automobile accident bodily injuryclaims. Limiting the interrogatory to these persons willgive Plaintiffs the information most applicable to theirclaims while avoiding unnecessary discovery. In a furthereffort to limit unnecessary discovery, the Court limits thetemporal scope of the interrogatory to five years beforethe filing of this action.

The Court now turns to the issue of undue burden. Aparty seeking to avoid discovery on the basis of an undueburden has the burden of producing evidence of thatburden. Graham v. Casey's Gen. Stores, Inc., 206 F.R.D.251, 254 (S.D.Ind.2002). It must be specifically shownhow compliance with the discovery request would resultin an undue burden. Martin v. Easton Publ'g Co., 85F.R.D. 312, 316 (E.D.Pa.1980). If evidence is produced,“a court should balance the burden on the interrogatedparty against the benefit to the discovering party of havingthe information.” Hoffman v. United Telecommunications,Inc., 117 F.R.D. 436, 438 (D.Kan.1987).

The issue of burden in this case is a complicated onesince Defendant does not employ its own claims adjusters.Rather, Defendant hires other companies to act as itsclaims adjusters. In this case, Defendant hired AIGPersonal Lines. It is unknown how many other companiesDefendant has utilized in other claims. As evidence ofburden, Defendant submitted an affidavit from one TimGattis, an employee of AIG Personal Lines. Gattis statedthat to provide the information as originally requestedby Plaintiffs would be a herculean task. It would requirea number of computer searches. Alternatively, a list ofclaims could be examined. However, this would take “atleast hundreds of man hours.” To determine the currentpositions of the relevant claims adjusters, a manual searchwould have to be conducted of the human resourcesfiles. Gattis stated this would again consume hundredsof hours. Plaintiffs argue that even if production of therequested information is burdensome, it is not undulyburdensome.

*5 The Court first holds Defendant may not use the factthat it farms out its claims adjusting to other companiesto avoid discovery. As Justice Cardozo stated long ago,it is a fundamental principle of the law that “ ‘He

who prevents a thing from being done may not availhimself of the non-performance which he has himselfoccasioned .’ “ R.H. Stearns Co. v. United States, 291U.S. 54, 61, 54 S.Ct. 325, 328, 78 L.Ed. 647, 653 (1934)(quoting Dolan v. Rodgers, 149 N.Y. 489, 491, 44 N.E.167 (1896)). Another court stated this principle by holdingthat “Since plaintiff created this situation ... it seems onlyreasonable that plaintiff should bear the burden of anyinconvenience resulting from the situation it has created.”Calabrian Co. v. Bankok Bank, Ltd., 55 F.R.D. 82, 87(S.D.N.Y.1972). Indeed, allowing Defendant to argueundue burden since it chooses to hire other companiesto handle its claims adjusting rather than employ its ownclaims adjusters would simply encourage Defendant toadopt other practices in order to avoid discovery. Thislaw does not permit this. Defendant must bear the cost ofhaving a complex claims handling process.

It will now be considered whether, ignoring Defendant'scorporate structure, Defendant has satisfied its burdenof showing complying with this interrogatory would beunduly burdensome. In Beach v. City of Olathe, 203F.R.D. 489, 493-94 (D.Kan.2001), the court considered anobjection based on burdensomeness where the respondingparty produced an affidavit stating complying wouldrequire hundreds of hours to examine files. Nevertheless,the court found the benefit to the party seeking discoveryoutweighed the burden of production and thereforeordered discovery. Id. at 494. On the other hand, inFlatow v. Islamic Republic of Iran, 202 F.R.D. 35,37-38 (D.D.C.2001), the court found a subpoena undulyburdensome where it was estimated compliance wouldtake 1,500 hours and the search was unlikely to producerelevant information.

The Court finds Defendant has failed to meet its burdenof showing an undue burden. Defendant has failedto produce specific information regarding the amountof time compliance will take, except that it will takehundreds of hours for AIG Personal Lines to compilethe information. It is unknown how long it would takeany other companies involved to produce responsiveinformation. The Court will not assume that it wouldtake them the same amount of time as AIG PersonalLines. Linder v. Dep't of Defense, 133 F.3d 17, 24(D.C.Cir.1998) (holding that where the FBI and CIA weresubject to a subpoena and the FBI produced evidenceof burden, but the CIA did not, it was inappropriateto assume the CIA would face the same burden as the

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FBI). Defendant has also not produced any evidenceregarding the monetary cost of compliance. Furthermore,the information sought here is highly relevant to Plaintiffs'claims. As noted above, claims adjusters will likelyhave information about Defendant's business practices.Plaintiffs must demonstrate a general business practice ofDefendant to succeed on their claims. Jenkins, 167 W.Va. at 610. Thus, the Court finds Defendant has failed todemonstrate an undue burden.

*6 Therefore, the Motion to Compel regardinginterrogatory 13 is GRANTED IN PART and DENIEDIN PART. Defendant shall comply with the interrogatoryto the extent it seeks information regarding claimsadjusters handling automobile accident bodily injuryclaims in West Virginia from five years prior to the filingof this action.

II.

Request for Production 11

Request 11 asked Defendant to produce the completepersonnel file of any employee who handled or supervisedthe insurance claims of Plaintiffs in the underlying matter.Defendant objected that the material was irrelevant andprotected by the employees' privacy rights. Plaintiffs arguethe material is relevant to showing the bad faith ofDefendant and should therefore be subject to discovery.Defendant cites several cases holding the personnel filesof employees are only subject to discovery in limitedcircumstances. Defendant also contends that Plaintiffs donot know exactly what they seek in this request and giventhe privacy rights of employees, the material is not subjectto discovery.

Numerous courts have recognized the personnel filesof employees are subject to discovery only in limitedcircumstances. This is because “personal privacy andaccurate, employee evaluations are important publicpolicy concerns.” Blount v. Wake Elec. Membership Corp.,162 F.R.D. 102, 105 (E.D.N.C.1993). If courts frequentlyallowed discovery of employee files, they “woulddiscourage future candid evaluations of employees,making it difficult for the firm to maintain its standardsand improve its performance.” Id. Nevertheless, courtshave recognized the broad scope of discovery providedin the Federal Rules competes with the interest of

employee privacy. In re Hawaii Corp., 88 F.R.D. 518,524 (D.Haw.1980). The Rules “make a trial less a gameof blindman's bluff and more a fair contest with thebasic issues and facts disclosed to the fullest practicableextent.” United States v. Procter & Gamble Co., 356 U.S.677, 682, 78 S.Ct. 983, 986-87, 2 L.Ed.2d 1077, 1082(1958). Therefore, courts have formulated a two part testto determine if material in an employee personnel fileshould be discoverable. It “is permissible only if ‘(1) thematerial sought is clearly relevant and (2) the need fordiscovery is compelling because the information sought isnot otherwise readily obtainable.’ “ Coker v. Duke & Co.,177 F.R.D. 682, 685 (M.D.Ala.1998) (quoting In re OneBancorp Secs. Litig., 134 F.R.D. 4, 12 (D.Me.1991)).

In applying the above test, a distinction exists betweenemployees whose conduct is directly at issue and otheremployees. Where the personnel files of employees whoseparticular actions are relevant is sought, “the relevancerequirement is generally satisfied by the fact that thepersonnel file and employee evaluations should indicatethe training, experience, work record, and qualificationsof the, employee.” Blount, 162 F.R.D. at 106. Aplaintiff's need for this information is often sufficientto outweigh the public policy against disclosure since“the personnel files possess an inherent reliability whichcannot now be duplicated through any other source.”Id. Another court stated that “where the files soughtare those of employees whose action or inaction has adirect bearing on the Plaintiff's claims or Defendant'saffirmative defenses and especially where, as here, thecourt has issued an appropriate confidentiality order,personnel files are subject to discovery.” Cason v. BuildersFirstsource-Southeast Group, Inc., 159 F.Supp.2d 242,247 (W.D.N .C.2001). A discovering party must makea separate showing of why the personnel files of otheremployees are discoverable. Id. at 248.

*7 In this case, Plaintiffs have sought only thepersonnel files of “employees and/or representatives ofthis defendant that in any way handled, adjusted and/or supervised the claims of plaintiff.” The work historyof the persons who handled Plaintiffs' insurance claimare obviously critical to their allegations of bad faith byDefendant. Materials in these persons' records relating totheir qualifications, experience, training, and work historyeasily passes the test of relevance. Blount, 162 F.R.D. at106. Moreover, it is difficult to see how Plaintiffs couldobtain equivalent material from other sources. As the

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Blount court noted, the materials in the personnel files“were contemporaneous and made without litigation inmind.” Id. These materials will reflect how the personswere viewed at the time they handled Plaintiffs' claim. Thisrepresents critical information.

The Court does have concerns that some material in thepersonnel files is irrelevant. Such material would be thingslike health records. Not only is this material irrelevant, butits disclosure is highly intrusive to the persons' privacy. Itwas these concerns that led courts to develop the employeeprivacy privilege. The Court believes the best way toaccount for these concerns is to limit the request to theareas of relevance identified by the Blount court-namely,material relating to “the training, experience, work record,and qualifications” of the person. Id.

The Court is also concerned that the material subject todiscovery may be unnecessarily revealed to third parties.This would again represent a highly intrusive act violatingthe privacy of the employees. The Court will follow thesuggestion of the Cason court and enter a protectiveorder providing Plaintiffs may not disclose the materialproduced to persons outside this litigation and mustreturn all material at the conclusion of the litigation.Cason, 159 F.Supp.2d at 247.

Accordingly, the Motion to Compel regarding request forproduction 11 is GRANTED IN PART and DENIEDIN PART. It is granted to the extent that Defendantshall produce the portions of the personnel files pertainingto training, experience, work record, and qualificationsof all persons who meet the description of the request.

It is denied to the extent that Defendant need notproduce records not relating to the areas identified above.Furthermore, Plaintiffs shall not reveal any informationreceived from these files to persons outside this litigationand shall return all materials received at the conclusion ofthe litigation.

IV. Decision

Plaintiffs' Motion to Compel is GRANTED IN PARTand DENIED IN PART regarding interrogatory 13and request for production 11. Although the Motion toCompel also concerned request for production 1, thatrequest shall be dealt with in a separate subsequent orderdue to the complexity of the issues.

Any party may, within ten (10) days after being servedwith a copy of this Order, file with the Clerk of the Courtwritten objections identifying the portions of the Order towhich objection is made, and the basis for such objection.A copy of such objections should also be submitted tothe District Court Judge of Record. Failure to timely fileobjections to the Order set forth above will result in waiverof the right to appeal from a judgment of this Court basedupon such Order.

*8 Filing of objections does not stay this Order.

All Citations

Not Reported in F.Supp.2d, 2007 WL 1097883

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EXHIBIT 6

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Gilead Sciences, Inc. v. Merck & Co, Inc., Not Reported in F.Supp.3d (2016)

2016 WL 146574

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2016 WL 146574Only the Westlaw citation is currently available.

United States District Court,N.D. California.

Gilead Sciences, Inc., Plaintiff,v.

Merck & Co, Inc., et al., Defendants.

Case No. 5:13-cv-04057-BLF|

Signed 01/13/2016

Attorneys and Law Firms

Douglas E. McCann, Elizabeth M. Flanagan, GregoryRobert Booker, Joseph B. Warden, Kelly A. Del Dotto,Robert M. Oakes, Fish Richardson PC, Wilmington,DE, Jonathan Elliot Singer, Fish & Richardson, P.C.,P.A., Minneapolis, MN, Juanita R. Brooks, Fish &Richardson P.C., San Diego, CA, Matthew Lore Levine,Law Offices of Matthew L. Levine, PLLC, New York,NY, John Michael Farrell, Rebecca Charnas Grant, Fishand Richardson, PC, Tamara E. Fraizer, Attorney at LawFish & Richardson P.C., Redwood City, CA, for Plaintiff.

Stanley E. Fisher, Jessamyn Sheli Berniker, Bruce R.Genderson, Williams & Connolly, LLP, Washington, DC,Patrice Polyxene Jean, Wanda French-Brown, StefanieMichelle Lopatkin, Mitchell E. Epner, David Lansky,Stephen Solomon Rabinowitz, James W. Dabney, HughesHubbard & Reed LLP, Naz Erdeniz Wehrli, Randy C.Eisensmith, Fried, Frank Harris, Shriver, et al, New York,NY, Joshua H. Lerner, Laura Elizabeth Miller, DurieTangri LLP, San Francisco, CA, for Defendants.

ORDER DENYING MOTION TO COMPEL

(Re: Docket No. 158)

PAUL S. GREWAL, United States Magistrate Judge

*1 Proportionality in discovery under the Federal Rulesis nothing new. Old Rule 26(b)(2)(C)(iii) was clear thata court could limit discovery when burden outweighedbenefit, and old Rule 26(g)(1)(B)(iii) was clear that alawyer was obligated to certify that discovery served wasnot unduly burdensome. New Rule 26(b)(1), implemented

by the December 1, 2015 amendments, simply takes thefactors explicit or implicit in these old requirements to fixthe scope of all discovery demands in the first instance.

What will change—hopefully—is mindset. No longer isit good enough to hope that the information soughtmight lead to the discovery of admissible evidence. Infact, the old language to that effect is gone. Instead,a party seeking discovery of relevant, non-privilegedinformation must show, before anything else, that thediscovery sought is proportional to the needs of the

case. 1 The present dispute offers a good example ofthe wisdom of the Advisory Committee on Civil Rulesin elevating proportionality in defining the scope ofpermissible discovery.

1 See Fed. R. Civ. P. 26(b)(1).

Merck asserts that Gilead infringes two of its patents to a

certain kind of nucleoside analog. 2 Among other things,Gilead says it was the one to conceive and reduce topractice the inventions, in 2003, in a compound named

PSI-6130. 3 And so a key issue in this case is what didGilead synthesize and when did it know it.

2 See Docket No. 158 at 4-5.

3 See id.

As part of a related litigation in Canada, Gilead's expertDr. Christopher Seeger produced a photograph of various

tubes of compounds. 4 At least one of the tube labels lists

a molecular weight of 259.2, the weight of PSI-6130. 5 In alater deposition in this case, Seeger testified that he got thecompounds before 2003 from the founder of an entity later

acquired by Gilead. 6 Given the importance of figuringout when Gilead first synthesized the disputed compound,Merck immediately demanded further production offurther information about the tubes and their contents,

including the tubes themselves. 7 At this point, Merckwould seem to be on solid ground in making its demands.

4 See id. at 8.

5 See id.

6 See id. at 9.

7 See id. at 11. Merck also demanded a furtherdeposition of another witness, Dr. John Secrist, but

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has since dropped that demand. See id. at 23; DocketNo. 180-4 at 10-11.

But lots of compounds share the same molecular weight.In fact, Merck's own patents list different nucleosides that

share the same molecular weight. 8 Most importantly,Merck has long had information from Gilead thatconfirms that the tubes in question held PSI-0194and PSI-1834, two entirely different nucleosides from

PSI-6130. 9 This information includes the laboratorynotebook from the chemist at the Gilead acquisitionthat identifies the compounds as PSI-0194 and not

PSI-6130. 10 Gilead also provided a further letter fromSeeger's source that confirmed that the compounds were

not PSI-6130, the compound Merck sought. 11 Notsatisfied, Merck presses on, protesting that it should nothave to take Gilead's word as to what exactly is in thosetubes.

8 See Docket No. 173 at 16 n.57.

9 See id. at 12

10 See Docket No. 159-40.

11 See Docket no. 173 at 3-4.

*2 Merck's demands are exactly the type ofdisproportionate demands that Rule 26(b)(1) proscribes.Sure, it's possible that Gilead's evidence confirming thecompounds are not PSI-6130 is false and even concocted.But Merck offers no real evidence that this is the case,and as the court recently explained in denying a motionto compel by Gilead, “[w]ithout more specific informationtriggering some reason for doubt, the Court must take the

producing party...at its word.” 12

12 Docket No. 210 at 8 (quoting Aristocrat Techs. v. Int'lGame Tech., Case No. C 06-03717 RMW (RS), 2009WL 3573327, at *3 (N.D. Cal. Oct. 30, 2009)).

And so that leaves Gilead in the position of having toproduce discovery on all sorts of compounds that bear noindication of any nexus to the disputes in this case. Thisis untenable. It would be like requiring GM to producediscovery on Buicks and Chevys in a patent case aboutCadillacs simply because all three happen to be cars. Inthe absence of any reason to doubt the proof Gilead hastendered about the identity of the disputed compounds,and given the cost and potential delay introduced by therequested production, Merck's request is precisely the kindof disproportionate discovery that Rule 26—old or new—

was intended to preclude. 13

13 Merck also argues that the requested discoveryis relevant to impeaching Seeger's credibility. SeeDocket No. 180-4 at 7. However, in making thispoint, Merck refers to documents produced byGilead to point out inconsistencies with Seeger'sdeposition testimony. See id. In other words, Merck'spapers show that it already has the material itneeds to challenge Seeger's credibility, and thefurther discovery it seeks would be cumulative anddisproportionate to the needs of the case.

Merck's motion to compel is DENIED.

SO ORDERED.

All Citations

Not Reported in F.Supp.3d, 2016 WL 146574

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EXHIBIT 7

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KeyCite Yellow Flag - Negative Treatment

 Declined to Follow by Garvy v. Seyfarth Shaw LLP, Ill.App. 1 Dist.,

March 1, 2012

2007 WL 578989Only the Westlaw citation is currently available.

United States District Court,N.D. California.

THELEN REID & PRIEST LLP, Plaintiff,Counterdefendant, and Counter-Counterclaimant,

v.FranÇOIS MARLAND, Defendant,

Counterclaimant, and Counter-Counterdefendant.

No. C 06-2071 VRW.|

Feb. 21, 2007.

Attorneys and Law Firms

Benedict Y. Hur, Attorney at Law, Robert A. Van Nest,Benjamin Berkowitz, Steven K. Yoda, Keker & Van Nest,LLP, San Francisco, CA, for Plaintiff, Counterdefendant,and Counter-Counterclaimant.

Donald W. Carlson, Guy D. Calladine, Carlson Calladine& Peterson LLP, San Francisco, CA, Andrew WallaceHayes, Esq., Matthew Green Friedman, Hayes & HardyLLP, New York, NY, for Defendant, Counterclaimant,and Counter-Counterdefendant.

Wendy J. Thurm, Keker & Van Nest, San Francisco, CA.

ORDER

VAUGHN R. WALKER, United States District ChiefJudge.

*1 Defendant Francois Marland (“Marland”) seeksan order directing plaintiff Thelen Reid & Priest LLP(“Thelen”) to produce 64 documents for which Thelenhas asserted attorney-client and work product privileges.Doc # 66 at 2, Doc # 93. Marland also seeks an orderdirecting Thelen to identify, on its privilege log, certaindocuments from after February 2005 that Thelen alsoclaims are privileged. Doc # 99 at 8.

Thelen seeks an order compelling production of an August27, 2002 letter to Marland from his European counselthat Marland claims was inadvertently produced. Doc #106-1. Marland seeks sanctions against Thelen, includingdisqualification of Thelen's counsel, Keker & Van Nest(“Keker”), for alleged misconduct relating to Marland'sinadvertently produced documents.

I

This issue arises out a contract dispute between Thelenand Marland. Thelen is a California limited liabilitypartnership and a law firm. Doc # 11 at 1. Marland isa citizen of France, a French attorney and currently aresident of Switzerland. Id.

A

In 1997, Marland approached the New York law firmof Reid & Priest, claiming to possess information aboutan undisclosed fronting agreement, or contrat de portage,through which Crédit Lyonnais, a French bank, hadillegally acquired the insurance assets of Executive LifeInsurance Company (ELIC), an insolvent Californiainsurance company, at an auction conducted by theCalifornia Department of Insurance (CDOI) in 1991. Doc# 78 at 13. Marland wanted to know whether he couldobtain a financial benefit by divulging information abouta July 1991 contrat de portage he claimed to have in hispossession to parties in the United States. Id. After Reid &Priest merged with Thelen, Marrin, Johnson & Bridges in1998, Marland met with Gary Fontana, a Thelen partnerin San Francisco who had previously worked for otherclients on ELIC proceedings. Id.

Between October 1998 and February 1999, Thelenpartners met with representatives of CDOI and attemptedto negotiate an agreement between CDOI and Marland.Id at 14. Ultimately, CDOI failed to offer acceptablecompensation. Id at 15. As a result, Thelen recommendedthat Marland initiate his own qui tam lawsuit on behalf ofthe state of California and CDOI. Id. In February 1999,Thelen and Marland signed an attorney-client agreement,providing that Thelen would file a qui tam lawsuitagainst Crédit Lyonnais and advise or assist CDOI and/or the California Attorney General in connection with thelawsuit, in exchange for a percentage of any recovery that

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Marland received. Id. Thelen helped Marland incorporatean entity called RoNo LLC to protect his anonymitythrough the process. Doc # 72 at 2. Marland allegesthat Thelen hurried him to accept an unconsionable feeagreement and that Fontana signed the agreement withoutobtaining the necessary firm approvals. Id at 33.

On February 18, 1999, Thelen filed the qui tam lawsuitin San Francisco superior court. Doc # 78 at 15. Thatsame day, CDOI independently filed a separate complaintin Los Angeles County superior court, raising almostidentical claims against many of the same defendants. Id.

*2 Subsequently, in May 1999, CDOI asked Thelento represent CDOI in its lawsuit. Id. CDOI agreed toallow Marland and Marland's European counsel to sharea portion of Thelen's legal fees if it succeeded in thelitigation. Id at 16. Thelen claims that it informed Marlandand Marland's European counsel of CDOI's proposal andof the potential conflicts between CDOI's lawsuit andMarland's own qui tam lawsuit. Doc # 98 at 3-4. Marlandcontends that Thelen never disclosed its potential conflictsfrom the dual representation. Doc # 72 at 34.

Thelen alleges that Marland's claim to possess a copy ofthe July 1991 contrat de portage was critical to CDOI'sdecision to retain Thelen and CDOI's consent to Thelen'ssharing fees with Marland. Doc # 78 at 16. Marlandcontends that Thelen never told him he had an obligationto preserve or produce evidence that might have identifiedhim as the whistleblower. Doc # 72 at 33.

On May 25, 1999, Thelen and CDOI signed a formalattorney-client agreement, under which CDOI agreed topay Thelen a percentage of any recovery it received. Doc# 78 at 16. On June 2, 1999, Thelen and Marland executeda written amendment to the February 1999 agreementunder which Marland agreed that Thelen would take allreasonable steps to dismiss the qui tam action. Id. OnJune 3, 1999, Thelen, Marland and Marland's Europeancounsel entered into an agreement under which Thelenagreed to share any legal fees it received from CDOI withMarland and European counsel. Id.

By July 2001, the Attorney General completed hisinvestigation of the qui tam action and elected to intervenein the action. Doc # 98 at 4. The Attorney Generalobjected to Thelen's continued representation of RoNo asthe qui tam relator. Id. Thelen withdrew from representing

RoNo in the qui tam action and assisted Marland inretaining other counsel. Id. Thelen continued to serve asgeneral counsel to RoNo. Id.

Thelen alleges that by December 2001, CDOI's lawsuithad become much more costly than the parties hadanticipated. Doc # 78 at 18. Thelen wanted to ask CDOIfor a non-recourse advance to the firm. Id. Because theJune 1999 agreement required Thelen to pay to Marlanda percentage of any fees received from CDOI, Thelenapproached Marland to negotiate a restructuring of theirfee sharing relationship. Id.

In June or July of 2002, Thelen requested that Marlandproduce the July 1991 portage. Id. Marland refused toproduce the document and said for the first time thathe had destroyed it. Id. On July 8, 2002, pursuant tothe terms of the February 1999 agreement, Thelen gaveMarland 30 days' written notice of its decision to withdrawfrom representing him. Id. Thelen extended the noticeperiod once, to August 30, 2002. Doc # 98 at 5. Thelenclaims that “[a]fter that date,” Thelen's attorney-clientrelationship with Marland ended. Id. Presumably, Thelenmeans that its attorney-client relationship with Marlandended immediately after August 30, 2002 (i e, September1, 2002).

*3 Thelen contends that Marland's actions constituted amaterial breach of the June 1999 agreement and providedgrounds for rescission, excuse of performance or both.Doc # 98 at 6. Thelen considered any future performanceon its part under the June 1999 agreement excused byMarland's breach. Id.

On December 19, 2002, Thelen, Marland, and Marland'sEuropean counsel entered a new agreement whichreplaced “any and all other agreements among them.”Doc # 78 at 19. Under the terms of the December 2002agreement, Thelen agreed to pay Marland and Europeancounsel 35% of the fees paid to Thelen by CDOI, inexchange for the parties' mutual release and waiver of allclaims. Id at 19-20.

Marland alleges that Thelen used the litigation costs andthe portage as a pretense to get Marland to reduce hisshare of the recoveries from the litigation. Doc # 72 at 37.Marland alleges he was coerced into signing the December2002 agreement through intentional misrepresentations

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and inadequate respresentation of his interests by Thelen.Id at 37-39.

Thelen claims that, in reliance on the December 2002agreement, it continued to expend time and resourceson the litigation and ultimately succeeded in obtainingnearly $1 billion in settlements and judgments. Doc # 78at 20. Thelen has paid, and Marland has accepted, over$19 million pursuant to the terms of the December 2002agreement. Id.

On February 13, 2006, Marland commenced anarbitration proceeding against Thelen in New York City,asserting that the December 2002 agreement is not fairand is unenforceable and that the release and waiverprovisions of that agreement are void. Id. Marland allegesthat the December 2002 agreement never went into effectand that the February 1999 and June 1999 agreementsremain valid and binding. Doc # 72. Marland claims thatit had an attorney-client relationship with Thelen untilFebruary 4, 2005. Doc # 102, Ex A.

Thelen initiated this action against Marland, seeking toenforce the December 2002 agreement and to enjoinMarland from pursuing the New York arbitration. Doc1,11. Thelen maintains that its attorney-client relationshipwith Marland ended in 2002. Supra.

B

Thelen claims that its attorneys on the CDOI case andits executive committee sought and gave legal adviceinternally in connection with the litigation. Doc # 98 at2, 6-10. This included communications with the firm'sgeneral counsel, Wynne Carvill. Id. According to Thelen,Carvill gathered facts, analyzed legal issues, advised firmmanagement of its legal options and represented the firmin its negotiations with Marland and CDOI, as the partiesworked toward new agreements in 2002. Id.

Carvill was appointed to the bench and left Thelenin November 2003. Thelen's current general counsel isRobert Blum. Until Marland commenced the arbitrationproceeding against Thelen in February 2006, Blum wasThelen's “only litigation counsel.” Doc # 101 at 7.

C

*4 Marland sought leave of court on November 21,2006, December 1, 2006 and December 18, 2006 to bringa discovery motion regarding (1) electronic discoveryrequests, (2) testimony of Thelen's 30(b)(6) witnesses, and(3) Thelen's privilege log. Doc66, 77, 87. At the hearingon January 3, 2007, the parties reported that they hadresolved the electronic discovery dispute. The parties alsoagreed that a motion on Thelen's FRCP 30(b)(6) witnesseswas premature. The court requested additional briefing onthe privilege log issues.

The parties submitted simultaneous opening briefs onJanuary 11, 2007. Doc98, 99. The parties submittedsimultaneous reply briefs on January 16, 2007. Doc 101,103. The matter was heard on January 18, 2007.

D

The privilege log identifies 64 documents for whichThelen asserts attorney-client privilege, work productprivilege, or both. Doc # 93. The documents containcommunications between and among Carvill, Thelen staffworking at the direction of Carvill, members of Thelen'sexecutive committee, Gary Fontana and Karl Belgum (thelead attorneys on the CDOI case), and Robert Blum andStephen O'Neal (Thelen partners). Doc # 98 at 6-10.

According to Thelen, documents 1-10, 12, 14, 25-31,33-34, 50-51, and 57-64 “show Carvill providinginformation and legal analysis of various terms underdiscussion, answering questions posed by management,analyzing Thelen's legal options in light of Marland'sadmitted destruction of key documents, and analyzing thepotential ramifications of not reaching a new agreement.”Id at 7.

According to Thelen, documents 11, 13, 15-19, 20, 24,35, 38-43, 47-48, and 52-56 “reflect Carvill's efforts toadvise Thelen management regarding the progress ofnegotiations with CDOI over the terms of an amendmentto the CDOI-Thelen fee agreement and the potentialconsequences of failed negotiations.” Id at 8. Thesedocuments “show Carvill providing information and legalanalysis of various terms under discussion, answeringquestions posed by management, analyzing the potential

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specifications of CDOI's proposals, and of not agreeing toan amendment at all.” Id at 8-9.

According to Thelen, document 46 is a memo from Carvillto the executive committee providing advice on a partner'ssuggestion that the firm withdraw from its representationof RoNo and CDOI. Id at 9. Document 9 is an emailfrom the same partner to Carvill asking for Carvill'slegal opinion on the February 1999 agreement and theJune 1999 fee sharing agreement. Id. Document 49 isan email from Blum to Carvill, various firm partners,and the executive committee providing analysis on anAttorney General memorandum that claimed that Thelenhad a conflict of interest in representing RoNo andCDOI. Id. Documents 21-23 and 36-37 are emails fromBelgum to Carvill asking about the agreements Carvill hadnegotiated in 2002 and 2003. Id at 10.

According to Thelen, documents 32, 44, and 45 areemails among Carvill and others at the firm discussingnegotiation of the new fee agreement with CDOI. Doc #93.

*5 Thelen has not logged certain Blum documents,containing attorney-client communications and attorneywork product, created after February 5, 2005, whenMarland terminated Thelen. Doc # 101 at 6-7. In additionto seeking an order compelling production of the 64logged documents, Marland seeks an order directingThelen to individually log the Blum documents. Doc # 99at 8.

E

Just prior to and during the hearing on Thelen's privilegelog, the parties raised two additional discovery disputes.

1

One of these new disputes stems from Thelen's depositionof Marland's European counsel, Philippe Brunswick.Brunswick is a named cross-defendant in this action. OnJanuary 12, 2007, Thelen deposed Brunswick in New YorkCity. Doc # 104 at 1. According to Thelen, just before thedeposition commenced, Brunswick provided Thelen witha letter from the Paris Bar stating that Brunswick would becommitting a breach of French secrecy and confidentiality

rules should he testify regarding any element or factrelating to his representation of any client. Id at 2. Basedon this letter, Brunswick refused to answer any questionsabout Thelen and the ELIC litigation. Id. Thelen seeks acourt order compelling Brunswick's deposition testimony.Id. The parties, including Brunswick's counsel, havesubmitted letter briefs on this issue. Doc104, 107, 113.

2

The other recent discovery dispute involves theinadvertent production of certain documents byMarland's counsel, Andrew Hayes (“Hayes”).

Specifically, during the January 2007 Brunswickdeposition mentioned above, Thelen's counsel sought touse a document that Marland had produced in October2006. Doc # 106-1 at 1. The document was a letterdated August 27, 2002 from Brunswick to Marland andFrancois Chateau (Marland's other European counsel).Id. Hayes claimed that the letter was privileged andinadvertently produced. Id.

Prior to this, there had been three other occasions whereHayes claimed that his office had inadvertently producedone or more privileged documents. Id. Accordingly,following the Brunswick deposition, both sides decidedto investigate the discrepancies in the defense production.Doc # 112-1, Exs 17-18. Hayes reports that, followingthe Brunswick deposition, he discovered for the first timethat his copy service had erroneously sent all of Marland'sprivileged documents to Thelen's counsel, Keker and VanNest. Doc # 107 at 1.

Thelen now seeks an order compelling production ofthe August 27 Brunswick letter. Doc # 106-1. Marlandseeks sanctions against Thelen including disqualificationof Keker for their alleged misconduct in handling theinadvertently produced documents. Doc # 107. Theparties have briefed these issues by letter. Doc106-1, 107,111-1, 114-1.

II

Thelen's Privilege Log Documents

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Federal courts sitting in diversity apply the law of theforum state on attorney-client privilege issues but applyfederal common law to attorney work product issues.Bank of the West v. Valley Nat. Bank of Arizona, 132F.R.D. 250, 251 (N.D.Cal.1990).

*6 In California, the attorney-client privilege is codifiedin Cal Evid Code § 954 and specifies that, subject to certainexceptions, “the client * * * has a privilege to refuse todisclose, and to prevent from disclosing, a confidentialcommunication between client and lawyer if the privilegeis claimed by * * * the holder of the privilege * * *.”“Confidential communication is defined as including ‘alegal opinion formed and the advice given by the lawyerin the course of that [attorney-client] relationship.’ * ** [T]he attorney-client privilege applies to confidentialcommunications within the scope of the attorney-clientrelationship even if the communication does not relateto pending litigation; the privilege applies not only tocommunications made in anticipation of litigation, butalso to legal advice when no litigation is threatened.”Roberts v. City of Palmdale, 5 Cal.4th 363, 371, 20Cal.Rptr.2d 330, 853 P.2d 496 (1993) (internal citationsomitted).

“At its core, the work-product doctrine shelters the mentalprocesses of the attorney, providing a privileged areawithin which he can analyze and prepare his client'scase.” In re Grand Jury Subpoena, 357 F.3d 900, 907 (9thCir.2004). “[T]he work product doctrine only attaches todocuments prepared in anticipation of litigation or for usein trial.” Hickman v. Taylor, 329 U.S. 495, 511-12, 67 S.Ct.385, 91 L.Ed. 451 (1947); FRCP 26(b)(3).

A

Assuming that the communications at issue reflectprivileged attorney-client communications as defined byCalifornia law, the issue is whether the attorney-clientprivilege applies where a law firm is attorney to both anoutside client and to itself. Thelen argues that it does,citing United States v. Rowe, 96 F.3d 1294 (9th Cir.1996).

In Rowe, a law firm senior partner assigned associates atthe firm to investigate the conduct of another of the firm'sattorneys in handling client funds. When the governmentattempted to question the associates in connection with agrand jury investigation, the law firm claimed attorney-

client privilege. After the trial court ordered the associatesto testify, the court of appeals held that the privilege couldapply to intra-firm communications. While Thelen relieson Rowe here, the case involved the assertion of privilegeagainst a third party. Rowe does not address whether theattorney-client privilege can be asserted against the firm'sthen-current client.

Thelen cites no case in which an intra-firm communicationrelating to the firm's representation of a client waswithheld from the client under a claim of privilege. Thecourt finds In re Sunrise Sec Litig., 130 F.R.D. 560(E.D.Pa.1989) instructive.

In re Sunrise was multidistrict litigation arising out of thecollapse of the Sunrise Savings and Loan Association. Oneof the defendants was a Philadelphia law firm that hadserved as Sunrise's general counsel. An issue before thecourt was whether the firm had properly withheld fromdiscovery on the ground of the attorney-client privilege anumber of documents to and from lawyers in the samefirm who had consulted with each other during the timewhen the firm was general counsel to Sunrise and after theSunrise litigation against the firm had been instituted. Thecourt recognized the theoretical existence of an attorney-client privilege between the law firm as attorney and itselfas client. The court held, however, that:

*7 [A] law firm's consultation within house counsel may cause specialproblems which seldom arise whenother businesses or professionalorganizations consult their in housecounsel. A law firm's representationof a client, and its ability to meetits ethical and fiduciary obligationsto that client, may be affected byits representation of another client,even if the second client is the lawfirm itself. So, for example, whena law firm seeks legal advice fromits in house counsel, the law firm'srepresentation of itself (through inhouse counsel) might be directlyadverse to, or materially limit, thelaw firm's representation of anotherclient, thus creating a prohibitedconflict of interest.

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Id at 595. The court ordered in camera inspection ofindividual documents to determine “if the communicationimplicates or creates a conflict between the law firm'sfiduciary duties to itself and its duties to the client seekingto discover the communications.”

Similarly in Veruslaw Inc. v. Stoel Rives, 127 Wash.App.309, 334, 111 P.3d 866 (2005), a legal client sued alaw firm for malpractice, and the firm asserted privilegeover documents concerning legal and ethical issues inrepresenting the client, created during the representation.The court held that whether documents relating to adviceto one attorney given by other members of the firm werecovered by attorney-client privilege required in camerareview to determine whether there was a conflict betweenthe firm's own interests and its fiduciary duty to the client.

Based on these authorities, the court grants Marland'srequest to order Thelen to produce the documents listedin its privilege log. The logged documents relate to theMarland representation and were created during theMarland representation. While Thelen states that someof the documents pertain to the CDOI representation,Thelen represented Marland and CDOI for the samepurpose; and the interests of Thelen, CDOI and Marlandintertwined. As a result, all of these documents implicateor affect Marland's interests, and Thelen's fiduciaryrelationship with Marland as a client lifts the lid on thesecommunications. Accordingly, the court orders Thelen toproduce all the logged documents other than those thatfall within the narrow exception discussed next.

The court recognizes that law firms should and do seekadvice about the their legal and ethical obligations inconnection with representing a client and that firmsnormally seek this advice from their own lawyers. Indeed,many firms have in-house ethics advisers for this purpose.A rule requiring disclosure of all communications relatingto a client would dissuade attorneys from referringethical problems to other lawyers, thereby underminingconformity with ethical obligations. Such a rule wouldalso make conformity costly by forcing the firm eitherto retain outside counsel or terminate an existingattorney-client relationship to ensure confidentiality ofall communications relating to that client. This courtdeclines to follow such a strict rule, preferring one that isconsistent with a law firm in-house ethical infrastructure.Accordingly, Thelen is to produce some but not all

communications in which a Thelen lawyer seeks or givesadvice on the firm's ethical obligations to Marland.

*8 Specifically, while consultation with an in-houseethics adviser is confidential, once the law firm learnsthat a client may have a claim against the firm or thatthe firm needs client consent in order to commenceor continue another client representation, then the firmshould disclose to the client the firm's conclusions withrespect to those ethical issues. See ABA Model Rule ofProf Conduct 1.7. See also N.Y. Eth Op 789, 2005 WL3046319 at 4.

In sum, Thelen must produce the documents listed onits privilege log except for certain documents reflectingconsultations between Thelen lawyers on the firm'sethical and legal obligations to Marland. Regarding theconsultations, Thelen must produce certain conclusionsof those consultations: Thelen must produce anycommunications discussing claims that Marland mighthave against the firm or discussing known errors inits representation of Marland. Thelen must produceany communications discussing known conflicts in itsrepresentation of Marland or other circumstances thattriggered Thelen's duty to advise Marland and obtainMarland's consent. Conflicts include any representation-whether of Thelen itself, CDOI, or another-adverselyimplicating or affecting the interests of Marland, whenThelen was receiving information from and/or providinglegal advice to its own lawyers while at the same timecontinuing to represent Marland.

Finally, the court notes that, while the logged documentsextend through 2003, the parties disagree over when theirattorney-client relationship ended. The court also notesthat this issue relates in part to the merits of the case.Thelen argues that the attorney-client relationship ended“after” August 30, 2002, which the court presumes isSeptember 1, 2002. Doc # 98 at 5. Marland argues thatthe relationship lasted until 2005 on the grounds that the2002 agreement, which purportedly terminated the priorrelationship, is invalid and unenforceable. Doc # 102, ExA. The court finds that Marland's argument is neitherfrivolous nor made for an improper purpose. Accordingly,for purposes of this motion only, and without reachingthe merits of the underlying claims, the court ordersproduction of all the logged documents, subject to thelimited exception described above. The court will refer thisdispute to a United States Magistrate Judge to review in

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camera all of Thelen's logged documents and determinewhich ones should be produced to Marland, based on thisdirective.

B

The court notes that Thelen has asserted two privileges formost of the logged documents: attorney-client and workproduct. While the above cases only address attorney-client privilege, the court finds the same issues of conflictpertain to the work product protection:

Like the attorney-client privilege,protection afforded by the work-product doctrine is not absolute.Clearly, lawyers cannot cloakthemselves in its mantle when theirmental impressions and opinions aredirectly at issue. The doctrine doesnot apply where a client, as opposedto some other party, seeks discoveryof the lawyer's mental impressions.It cannot shield a lawyer's papersfrom discovery in a conflict ofinterest context anymore than canthe attorney-client privilege.

*9 Koen Book Distributors, Inc. v. Powell, Trachtman,Logan, Carrle, Bowman & Lombardo, PC, 212 F.R.D.283, 286 (E.D.Pa.2002) (internal citations omitted) (Courtordered production of firm's communications to counselit retained after client threatened legal malpracticeproceedings where firm had continued to represent client).Similarly, the court finds that Thelen's logged documentsshould be produced here, subject to the above guidelines.

III

The Blum Documents

Under FRCP 26(b)(5):

When a party withholds informationotherwise discoverable under theserules by claiming that it is privilegedor subject to protection as trial-preparation material, the party

shall make the claim expresslyand shall describe the nature ofthe documents, communications, orthings not produced or disclosed ina manner that, without revealinginformation itself privileged orprotected, will enable other partiesto assess the applicability of theprivilege or protection.

Accordingly, Marland's request to direct Thelen to logBlum documents created between February 4, 2005and the commencement of the New York arbitrationproceeding is GRANTED. The court also DIRECTSMarland individually to log otherwise responsivedocuments for which it is claiming privilege for this timeperiod.

IV

Brunswick Testimony

The court lacks jurisdiction to compel Brunswick'stestimony at this time. The deposition subpoena issuedfrom the Southern District of New York, and thedeposition occurred in New York City. Doc # 113.Under FRCP 45(a)(2), a motion to compel concerning asubpoena must be presented to the court for the districtin which the deposition would occur. See Adv Commnote to 1991 amendment (“[T]he court in whose namethe subpoena issued is responsible for its enforcement.”)Thelen does not dispute that this court is unable togrant the relief it requests. Accordingly, the courtDENIES Thelen's request that it issue an order compellingBrunswick's testimony, although the court does notforeclose reconsideration of the issue at a later time uponprocedurally proper request.

V

Marland's Inadvertently Produced Documents

Last, the court addresses both parties' requestssurrounding Marland's inadvertently produceddocuments, including the August 27, 2002 Brunswickletter.

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A

Thelen's Request to Compel Brunswick Letter

Thelen seeks an order compelling production of theBrunswick letter. Thelen contends that the Brunswickletter is not privileged because: (1) Marland's delay inasserting the privilege and failure to include the documenton his privilege log created a waiver, and (2) the crime-fraud exception to the attorney-client privilege applies.The court need only address Thelen's first argument toconclude that it is correct.

Thelen states that Marland's counsel never identifiedBrunswick's letter “on any version of Marland's privilegelog: not the log produced on October 3; not the draftrevised log produced on October 27, and not the secondrevised log produced on January 2, 2007.” Doc # 111-1 at6. Marland's counsel does not dispute that he never loggedthis document and offers no explanation.

*10 As stated above, FRCP 26(b)(5) requires a detailedshowing to withhold discovery on privilege grounds. Thelaw is well settled that failure to produce a privilege log orproduction of an inadequate privilege log may be deemedwaiver of the privilege. See, e g, Burlington Northern &Santa Fe Ry. Co. v. U.S. Dist. Court for Dist. of Mont,408 F.3d 1142 (9th Cir.2005) (railroad waived discoveryprivileges claimed in privilege log it filed in response torequest for production of documents in environmentallitigation, where railroad filed privilege log five monthsafter the document request, rather than within the 30-day time limit for filing written response to discoveryrequest, was a sophisticated corporate litigant and arepeat player in environmental lawsuits and regulatoryaction involving site that was subject of the suit, andmade substantive changes to privilege log after producingit); Universal City Development Partners, Ltd. v. Ride &Show Engineering, Inc., 230 F.R.D. 688 (M.D.Fla.2005)(Litigant waived attorney-client privilege for documents itproduced where litigant did not provide privilege log orgenerally describe documents to which it asserted privilegeuntil eight months after written response was due, logfailed to identify capacity of many recipients and did notprovide sufficient information to assess claim of privilege,litigant's counsel reviewed all 13,000 pages of documentsin single evening, and litigant did not review production

after it learned that one privileged document had beenturned over to opponent to determine whether otherprivileged documents had been produced.)

Weighing all the factors here, the court finds thatMarland has waived any privilege for the Brunswick letter.Marland asserts that all of its privileged documents wereinadvertently produced, Doc # 107 at 1, and that the batesnumbers for these documents range from 1 to 533. Doc# 115 ¶ 4. Thelen states that only 24 of these documentsappear on the privilege log. Doc # 111-1 at 2. Hayes doesnot dispute that he failed to log the additional documentsand gives no explanation. Moreover, Hayes was puton notice at least three times prior to the Brunswickdeposition that he had produced privileged documentsand that there were discrepancies between what Kekerreceived and what Hayes intended Keker to receive. Doc# 111-1 at 3-4. Specifically, Brunswick's deposition wasthe third consecutive deposition conducted by Thelenin which Hayes asserted that a privileged documentwas inadvertently produced. Even prior to that, Kekerattorneys had notified Hayes that they had found whatappeared to be two privileged defense documents. Id at 3.Keker contends that it regularly prompted Hayes to senda revised privilege log and that Hayes revised his privilegelog twice. Id at 4, 6. Yet Hayes never logged the Brunswickletter. Id at 6. Hayes does not dispute any of this. The courttherefore finds that Marland failed timely and adequatelyto make his objections.

*11 The court also notes that, while Hayes reports thathe inadvertently produced all of Marland's privilegeddocuments, Marland does not move to compel return ofthose documents. Doc107, 114-1. Rather, Marland seekssanctions and mentions no other relief. Id. Accordingly,the court finds that Marland has waived any privilegeclaim over the Brunswick letter.

B

Marland's Requests for Sanctions IncludingDisqualification of Thelen's Counsel

Marland seeks an order imposing sanctions on Thelenincluding disqualification of Keker for alleged misconductin Keker's handling of the inadvertently produceddocuments. Doc107, 114-1. Marland contends that, basedon the scope of Marland's privilege claims regarding

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communications from Brunswick, Keker knew thatMarland had produced many privileged documents andfailed to comply with its ethical obligation to promptlynotify Marland's counsel and refrain from examining thematerials. Doc # 114-1 at 1-2. The court disagrees.

Marland urges the court to apply ABA Comm on Ethicsand Prof Responsibility, Formal Op 92-368, which states:

A lawyer who receives materialsthat on their face appear tobe subject to the attorney-clientprivilege or otherwise confidential,under circumstances where it isclear they were not intended forthe receiving lawyer, should refrainfrom examining the materials, notifythe sending lawyer and abide theinstructions of the lawyer who sentthem.

Doc # 107.

Thelen points out that this opinion was withdrawn bythe ABA in 2005 and replaced with ABA Formal EthicsOpinion 05-437, which states:

A lawyer who receives a documentfrom opposing parties or theirlawyers and knows or reasonablyshould know that the document wasinadvertently sent should promptlynotify the sender in order topermit the sender to take protectivemeasures. To the extent that FormalOpinion 92-368 opined otherwise, itis hereby withdrawn.

Doc # 111-1.

Under either authority, the first question is whether thereceiving lawyer had reason to know that the documentswere subject to a claimed privilege. Marland's onlyargument is that Keker knew Marland was assertingprivilege over communications from Marland's Europeancounsel, including Brunswick, that were not sharedwith Thelen. Doc # 114-1 at 1-2, 5-6. The court findsthat blanket and general objections do not providesufficient detail about the documents in this case in orderto trigger the obligations under the foregoing ethical

rule. This is why FRCP 26(b)(5) requires a detailedshowing to withhold discovery on privilege grounds. SeeUniversal City Development Partners, Ltd. v. Ride & ShowEngineering, Inc., 230 F.R.D. 688 (M.D.Fla.2005). Indeedhere, Thelen points out that Marland had producednearly 800 pages of communications between and amongBrunswick, Marland, and Chateau. Doc # 112-1 at 8.

Even as to the 24 inadvertently produced documentsthat Marland did log, the court cannot find an ethicalviolation. Marland did not provide bates numbers onits log. Id at 7. Marland cites no authority, and thecourt knows of none, requiring a receiving party tocross-check documents produced against the producingparty's privilege log. Nonetheless, where Keker becameaware of logged documents that had been produced,it notified Hayes immediately. Id at 2. Following theChateau deposition, the second consecutive depositionwhere Hayes asserted that a privileged document wasinadvertently produced, Keker emailed Hayes stating:“You have indicated at various times that your officeinadvertently produced one or more privileged documentsfrom Mr Marland. In order to be sure we are understand[sic] fully the documents you believe are privileged andwere inadvertently produced, please provide us promptlywith a list of these documents, and a revised privilege log.”Doc # 112-1 Ex 13. Hayes responded: “I am not aware ofany other inadvertently-produced documents.” Id.

*12 Finally, following the Brunswick deposition, Kekerdid undertake its own investigation into the discrepanciesby cross-checking Marland's production against the logand then promptly notifying Hayes that it had found24 logged documents in the production. Doc # 112-1at 8-9. Because the log did not include bates numbers,Keker associates and staff were forced to crosscheckthe documents using the date, author, recipient, anddescription information on the log, taking several days. Id.

Marland does not dispute this. “We note that whenevera lawyer seeks to hold another lawyer accountable formisuse of inadvertently received confidential materials,the burden must rest on the complaining lawyer topersuasively demonstrate inadvertence. Otherwise, alawyer might attempt to gain an advantage over hisor her opponent by intentionally sending confidentialmaterial and then bringing a motion to disqualify thereceiving lawyer.” State Compensation Ins Fund v. WPS,Inc, 70 Cal.App.4th 644, 657, 82 Cal.Rptr.2d 799 (1999).

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Accordingly, the court does not find an ethical violationin Thelen or Keker's handling of the documents andDENIES Marland's request for sanctions.

VI

For the reasons discussed above, the court will refer thismatter to Chief United States Magistrate Judge Larsonfor random assignment to a United States MagistrateJudge. Thelen shall within two days of entry of this ordersubmit all of its logged documents under seal to theassigned magistrate judge, who is directed to review thedocuments in camera as soon as practicable. The assignedmagistrate judge shall determine which, if any, of thedocuments can be withheld based on the limited exceptiondescribed above. The court ORDERS Thelen to produceto Marland all documents falling outside of the exceptionas determined by the magistrate judge. Such productionshall be made within two days of the magistrate judge'sdetermination.

Additionally, as discussed above, the court DIRECTSboth Marland and Thelen to revise their privilege logsto include documents created between February 4, 2005and the commencement of the New York arbitration. Thecourt DENIES without prejudice Thelen's request for anorder compelling Brunswick's deposition testimony. Thecourt GRANTS Thelen's request to compel productionof the August 27, 2002 Brunswick letter and ORDERSMarland to produce that letter. The court DENIESMarland's request for sanctions including disqualificationof Thelen's counsel.

The court has received Thelen's letter of February 20,2007, Doc # 128, requesting a conference regarding adispute over the continuation of Marland's deposition.The parties are to appear for a conference on February 23,2007 at 9:00 am.

SO ORDERED.

All Citations

Not Reported in F.Supp.2d, 2007 WL 578989

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EXHIBIT 8

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KeyCite Yellow Flag - Negative Treatment

 Declined to Follow by Stock v. Schnader Harrison Segal & Lewis LLP,

N.Y.A.D. 1 Dept., June 30, 2016

2008 WL 170562Only the Westlaw citation is currently available.

United States Bankruptcy Court,N.D. California.

In re SONICBLUE INCORPORATED, DiamondMultimedia Systems, Inc., Replaytv, Inc.,

and Sensory Science Corporation, Debtors.Sonicblue Claims LLC, a Delaware

Limited Liability Company, Plaintiff,v.

Portside Growth & Opportunity Fund, aCayman Islands Corporation; Smithfield

Fiduciary LLC, a Cayman Islands Corporation;and Citadel Equity Fund LTD., a Cayman

Islands Corporation, Defendants.

Bankruptcy Nos. 03–51775, 03–51776, 03–51777, 03–51778–MM.

|Adversary No. 07–5082.

|Jan. 18, 2008.

Attorneys and Law Firms

Anne E. Wells, Levene, Neale, Bender, Rankin and Brill,Austin K. Barron, Law Offices of O'Melveny and Myers,Los Angeles, CA Elizabeth Gehlhar, Haight, Brown andBonesteel, Mark Porter, Law Offices of Fenwick andWest, Richard A. Rogan, Jeffer, Mangels, Butler andMarmaro, San Francisco, CA, Matthew A. Gold, ArgoPartners, New York, NY, for Debtor.

Christopher D. Sullivan, William McGrane, McGraneGreenfield, San Francisco, CA Frank A. Merola, HardenAlexander Fisch, K. John Shaffer, Stutman, Treister andGlatt, Los Angeles, CA, for Plaintiff.

Lewis Kruger, Stroock, Stroock and Lavan, New York,NY, Kurt E. Ramlo, Skadden, Arps, Slate, Meagher &Flom, Los Angeles, CA, for Defendants.

MEMORANDUM DECISION AND ORDER ONMOTION BY SONICBLUE CLAIMS LLC TO

COMPEL PRODUCTION OF DOCUMENTS FROMPILLSBURY WINTHROP SHAW PITTMAN LLP

MARILYN MORGAN, U.S. Bankruptcy Judge.

INTRODUCTION

*1 Before the court is the motion of SonicBlue ClaimsLLC (“SBClaims”) to compel production of documentsfrom Pillsbury Winthrop Shaw Pittman, LLP (PWSP).The chapter 11 trustee, Dennis Connolly, filed a statementin support of the motion. The trustee has waived allthe debtors'privileges for the period of time before hisappointment. As former counsel for the debtors, however,PWSP claims that at least 435 documents, reflectingcommunications among various PWSP attorneys, areprotected from disclosure by its own attorney-clientprivilege and the work product doctrine.

The facts in this case are evolving as the chapter 11trustee's investigation into PWSP's representation of thedebtor is ongoing. The following recitation of facts istruncated to focus on the unfolding conflicts faced byPWSP as I presently understand them.

FACTUAL BACKGROUND

PWSP has served as SONICblue's general corporate,securities, and litigation counsel since approximately1989. SONICblue Incorporated and its three operatingsubsidiaries, Diamond Multimedia Systems, Inc.,ReplayTV, Inc., and Sensory Science Corporation(collectively SONICblue), designed, developed, andmarketed consumer electronic products.

In September 1996, SONICblue raised financing bya private placement of 5¾% subordinated convertibledebentures (the “Junior Notes”) with a face value of$103.5 million that were acquired at a discount by variousentities (the “1996 Noteholders”).

In January 2001, SONICblue formed S3 Graphics Co.,Ltd., a joint venture with VIA Technologies, Inc., tooperate SONICblue's graphics chip business. SONICblue

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contributed its graphics intellectual property to the jointventure, including rights under a patent cross-license withIntel Corporation. These intellectual property rights wereso valuable that the joint venture agreement includeda liquidated damages clause entitling the joint ventureand VIA each to damages from SONICblue of up to$70 million if the joint venture were ever enjoined fromusing the Intel cross-license. From the inception of thejoint venture, there were serious disputes and threatenedlitigation between SONICblue and VIA.

In April 2002, after it was already experiencing financialdifficulties, SONICblue raised additional financing froma $75 million private placement issuance of 7¾% seniorsecured subordinated convertible debentures (the “SeniorNotes”). The Junior Notes are contractually subordinatedto the Senior Notes. Three institutional bondholders,Portside Growth & Opportunity Fund Ltd., SmithfieldFiduciary LLC, and Citadel Equity Fund Ltd. (the “2002Noteholders”), acquired the Senior Notes at a discount for$62.5 million.

The indenture for the Senior Notes provided that the noteswere subordinated to all Senior Indebtedness, defined asfollows:

(g) All indebtedness of the Companydue and owing to Via Technologies,Inc. in an aggregate principalamount not to exceed $15,000,000 orthe equivalent thereof in any othercurrency of composite currency (the“Via Indebtedness”)....

*2 In connection with its representation of SONICblueregarding the private placement offering for the SeniorNotes, PWSP issued to the 2002 Noteholders an opinionletter on April 22, 2002 concerning the enforceabilityof the debentures and the related agreements, stating inpertinent part:

2.... [T]he Purchase Agreement, the RegistrationRights Agreement, the Indenture, the Pledge andSecurity Agreement and the Option Agreement, whenduly executed and delivered by the Buyers, willeach constitute a valid and binding agreement ofthe Company, enforceable against the Company inaccordance with its terms.

* * *

3. The issuance and sale of the Debentures havebeen duly authorized. Upon issuance and deliveryagainst payment therefor in accordance with theterms of the Indenture and the Purchase Agreement,the Debentures will constitute valid and bindingobligations of the Company, enforceable against theCompany in accordance with their terms.

* * *

9 .... (b) Our opinion in paragraph 2above is subject to and limited by (i) theeffect of applicable bankruptcy, insolvency,reorganization, fraudulent conveyance, receivership,conservatorship, arrangement, moratorium or otherlaws affecting or relating to the rights of creditorsgenerally....

In what may have been a scrivener's error, the bankruptcylimitation in paragraph 9 referenced only paragraph 2 ofthe opinion letter concerning the related agreements andnot paragraph 3 concerning the debentures themselves.

Shortly after the issuance of the Senior Notes, SONICbluewas unable to meet its maturing financial obligations andentered into an engagement agreement for PW SP torepresent it in restructuring its debt. PWSP's engagementagreement dated October 25, 2002 states: “The Firmagrees that it will not represent any person other thanSONICblue in connection with this engagement orSONICblue's chapter 11 filing.” Continuing operatinglosses forced SONICblue and its operating subsidiariesto file chapter 11 petitions on March 21, 2003. PWSP'sinitial Bankruptcy Rule 2014 disclosures filed April 11,2003 were unremarkable for a large firm:

3. The Firm has been engaged as the Debtors'corporate and litigation counsel since approximately1989. During that time, the Firm has providedlegal representation to the Debtors in a variety ofareas, including corporate and securities matters,mergers and acquisitions, litigation, and intellectualproperty matters. The Firm has been working withthe Debtors in connection with their restructuringsince approximately October 25, 2002 when theFirm was retained to provide advice concerning therestructuring of the Debtor's liabilities and businessoperations.

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* * *

6.... [T]he Firm, and certain of its partners, counsel,and associates may have in the past represented, andmay presently and likely in the future will representcreditors or stockholders of the Debtors in mattersunrelated to these Chapter 11 Cases. A preliminaryconflicts search performed at my direction disclosesthat the Firm may have represented or representsentities that are involved in some capacity with oneor more of the Debtors, or may have some otherrelationships with these entities, in matters unrelatedto the Debtors. To the best of my knowledge, theFirm's relationships with these entities is as follows....

*3 It added, “The Firm will continue to monitor itsrelationship with the creditors and other parties in interestin these cases and, as it discovers additional informationrequiring disclosure, will promptly supplement thisapplication with any appropriate disclosures.” However,PWSP did not disclose its issuance of the opinion letterto the 2002 Noteholders in connection with the privateplacement offering one year earlier.

The Office of the United States Trustee appointed anOfficial Committee of Unsecured Creditors the same datethat the petitions were filed. The committee, as originallyconstituted, was comprised of eight members, includingeach of the 2002 Noteholders, Portside Growth andOpportunity Fund, Ltd., Smithfield Fiduciary LLC andCitadel Equity Fund Ltd. After the initial months of thecase, however, only the three 2002 Noteholders and twoother creditors remained active on the committee.

Conflict with the Directors and Oficers

On April 21, 2005 several of the 1996 Noteholders (the“Noteholder Plaintiffs”) filed a complaint in state courtagainst the former officers and directors of SONICblue,including the last remaining director, the former ChiefFinancial Officer, who was serving as the responsibleindividual in the case. The lawsuit asserted claimsfor breach of fiduciary duty and constructive fraud,contending that the defendants improperly authorizedand caused SONICblue to issue the Senior Notes in 2002while it was in the zone of insolvency and hopelesslyunable to honor its long-term bond obligations to the 1996Noteholders.

The defendants removed the action to this court on June14, 2005 on the basis that they may have substantial claimsfor contribution and indemnification against the debtor.SONICblue tendered its defense of the claim to its insurerpursuant to directors' and officers' liability policies (the“D & O Policy”). The D & O Policy covered claims firstmade against the officers and directors between December16, 2002 and December 16, 2003. The insurer declinedcoverage.

Thereafter, on December 23, 2005, the primary and theexcess insurers filed a complaint for declaratory reliefin this court. The insurers contend that the officersand directors received the first of several demand lettersfrom counsel for the Noteholder Plaintiffs on July 11,2002, before the policy period. They also contend thatfrom July 2002 through the commencement of the policyperiod on December 16, 2002, counsel for the officersand directors, counsel for the 1996 Noteholders, andcounsel for the 2002 Noteholders engaged in discussionsconcerning a dispute over the insolvency of SONICblue,the duties owed by the officers and directors, and thepotential breach of their fiduciary duties to creditors.Notwithstanding these discussions, SONICblue failedto disclose any existing demands for relief against theofficers and directors in their application for coverage.The insurers sought reformation of the D & O Policy toexclude the undisclosed claims or, alternatively, rescissionof the D & O Policy. The officers and directors assertedcounterclaims for damages against the insurance carriers.The court stayed the coverage action pending dispositionof the noteholder litigation.

*4 Over the course of a four-day mediation thatextended from October 13, 2005 through June 6, 2006,the Noteholder Plaintiffs, the defendant officers anddirectors, and the insurance carriers entered into astipulation for settlement. The settlement terms providethat the Noteholder Plaintiffs will recover only to theextent that insurance coverage exists. Pursuant to thestipulation, the Noteholder Plaintiffs substituted into thecoverage action in place of the officers and directors andhave become the real parties in interest. The NoteholderPlaintiffs dismissed the underlying lawsuit with prejudiceon May 4, 2007. The coverage lawsuit remains pending.

Based on the insurance carriers' refusal to providecoverage in the noteholder litigation, counsel for theofficers and directors apparently made demand on PWSP

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and requested a tolling agreement in or around June2006. June 26, 2006 is the date of the first documentfor which PWSP claims privilege. PWSP, in fact, enteredinto a tolling agreement with the officers and directorson August 18, 2006 recognizing, “[D]isputes have arisenas to whether Pillsbury is liable to the Directors fordamages that may have been incurred by the Directors asa result of the Coverage Denial....” The tolling agreementoperates to suspend the applicable statutes of limitationsfrom the effective date of the agreement until furthernotice. PWSP did not at any time disclose to the courtthe demand by the officers and directors or the existenceof the tolling agreement. Internal correspondence betweenPWSP attorneys shows that PWSP was aware as early asJune 13, 2005 that the insurers' refusal to provide coverageposed a potential problem in PWSP's representation ofSONICblue. On that date, the partner in charge of thisbankruptcy case received an email communication thatthe insurance carrier declined coverage for the noteholderlitigation, including the following commentary:

This has some ramifications for ourrepresentation of the company atthe time of the transactions at issueas well as the current situation.Note the reference particularly tothe effort by the bankrupt entity werepresent to take action that wouldplace the insurance in jeopardy....[N]ot sure who is handling this but Ithink we ought to consider this fromall perspectives, including that of thefirm's involvement at various stages.

The author of that email also forwarded it to an associateworking on the bankruptcy case, adding: “Needless to saythe position taken about the insurance policy on behalfof the bankruptcy estate that facilitates the rescission ofthe policy is troubling.” The associate then forwardedthe email to a colleague, also working on the bankruptcycase, under a cover that states: “This is that email that Ithought seems to blame us for Admiral's efforts to get outof coverage.” Notwithstanding these articulated concernsabout PWSP's potential liability, it declined to reveal thepotential claim in five subsequent Bankruptcy Rule 2014supplemental disclosures filed after June 2005.

Conflicts Arising from the Opinion Letter

*5 In the progress of this bankruptcy case, VIA andS3 Graphics filed proofs of claim for $70 million each,asserting that SONICblue had breached the joint ventureagreement by failing to fulfill its duties in the operationof the joint venture. SONICblue countered by objectingto the claims and filing an adversary complaint foraffirmative relief. It asserted a breach by VIA and S3of the joint venture agreement and a breach by VIAof its fiduciary duties in the operations of the jointventure and the settlement of patent litigation with Intel.Concurrently, SONICblue was engaged in litigation withIntel Corporation concerning the parties' respective rightsunder the patent cross-license. Because of PWSP's priorrepresentation of Intel, PWSP represented the debtorsonly in the VIA litigation. The debtors retained speciallitigation counsel in the dispute with Intel.

SONICblue, VIA, and S3 commenced settlementdiscussions in earnest in August 11, 2005 when the partiesand their counsel met and ultimately included Intel inattempts to reach a global settlement. Although not partyto the action, counsel for the 2002 Noteholders activelyparticipated in the discussions concerning the terms ofsuch a settlement.

In September 2005, counsel for VIA and SONICbluereached a tentative agreement for a settlement of $12.5million, subject to the agreement of their respective clientsand the creditors. The debtor, VIA, and S3 agreed to thesettlement amount without condition. However, the 2002Noteholders, who were participating as interested parties,only consented to the settlement on the condition thatit include, inter alia, a provision that the allowed claimbe neither senior nor junior to other general unsecuredclaims. Inclusion of this provision would be beneficial forthe 2002 Noteholders because it would entitle them to anadditional $8 million from the estate, but with the resultthat general unsecured creditors would receive less. VIAagreed to language waiving “Senior Indebtedness” statuson June 1, 2006 and the settlement agreement was filedunder seal.

Neither the motion to approve the settlement or the noticeto creditors highlighted the waiver of Senior Indebtednessstatus of VIA's claim or addressed its significance tocreditors. September 6, 2006 is the date of the firstdocument for which PWSP claims privilege on thissubject. The court approved the settlement with VIA onOctober 31, 2006.

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In prosecuting the objections to claims by the estate,PWSP analyzed the claims of both the 2002 Noteholdersand the 1996 Noteholders. On July 20, 2006, PWSP sentan email to counsel for the 2002 Noteholders asserting thattheir claim may be subject to partial disallowance under§ 502(b)(2) to the extent of the unamortized original issuediscount.

[I]n light of the anticipateddistribution in these cases(in the range of 30–35% assuming substantiveconsolidation), disallowance of OIDwill result in your clients notreceiving 100% of the principal andinterest due on their claim....

*6 PWSP's analysis reflected that the unamortizedportion of the original issue discount was just over $43million. In response, counsel for the 2002 Noteholdersreminded PWSP of the April 22, 2002 opinion letter anddemanded indemnification from PWSP for any shortfallto which the 2002 Noteholders may be subjected as a resultof SONICblue's objection to their claim. On September 5,2006, he wrote to PWSP's managing partner:

In ... its Opinion Letter, Pillsbury Winthrop representedthat SONICblue's Debentures were “valid and bindingobligations of the Company, enforceable against theCompany in accordance with their terms.” Under eachDebenture, SONICblue agreed to pay the DebentureHolder “Twenty–Five Million Dollars and 00/100($25,000,000.00),” the full principal amount of eachDebenture....

If we are unable to obtain SONICblue's payment ofthe full principal amount, the Debenture Holders intendto pursue claims for, perhaps among other things,negligent misrepresentation and negligence, againstPillsbury Winthrop in connection with the April 22,2002 Opinion Letter.

PWSP then notified committee counsel of the demand forindemnification by the 2002 Noteholders and transferredto the committee the responsibility for prosecuting theobjection to claim. PWSP forwarded its work file tocommittee counsel on September 6, 2006. However,PWSP did not submit a supplemental Bankruptcy Rule2014 statement to disclose the claim asserted against

it by the 2002 Noteholders. When it filed its eighthinterim application for compensation on October 18,2006, with respect to the objection to the claim of the2002 Noteholders, PWSP simply stated, “The matter wasturned over to the Creditors' Committee for prosecution.”

The joint disclosure statement and plan prepared byPWSP and committee counsel disclosed PWSP's conflictvis-à-vis the 2002 Noteholders in a cursory fashion:

[U]ntil recently, the Debtors werein charge of analyzing the SeniorNotes claims. However, as a resultof a conflict that has been assertedby the Senior Noteholders withrespect to counsel to the Debtors,the Creditors' Committee is now incharge of analyzing the Senior NotesClaims.

In response to creditor inquiry, the disclosure statementwas amended to elaborate on the description of theconflict of debtors' counsel, as follows:

[U]ntil recently, counsel to theDebtors was in charge of analyzingthe Senior Notes Claims. As aresult of the Senior Noteholders'contention that counsel to theDebtors had pre-petition issuedto the Senior Noteholders anunqualified legal opinion that theSenior Notes were enforceableagainst the Debtors in accordancewith their terms, counsel to theDebtors requested the Creditors'Committee to assume the role ofanalyzing the Senior Notes Claims.

Despite the significance of the provision, the disclosurestatement cryptically described the Senior Indebtednesswaiver:

Under the settlement, among otherthings, VIA and [S3] received a $12.5million general unsecured claimagainst SONICblue (which VIAagreed is not senior indebtednessunder the documentation evidencingthe Senior Notes)....

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*7 Moreover, nothing suggested that for every dollarthe 2002 Noteholders benefitted by the waiver, PWSP'scorresponding exposure for indemnification decreased.

However, in February 2007, SBClaims brought to light thefacts underlying the conflict, filing copies of PWSP's April22, 2002 opinion letter and the September 5, 2006 demandby the 2002 Noteholders for indemnification from PWSP.That same month, the United States Trustee brought amotion to appoint a chapter 11 trustee and, five days later,a motion to disqualify PWSP as debtor's counsel based onthe appearance of improprieties raised by PWSP's conflictand the firm's failure to disclose the conflict.

Only after the United States Trustee's motion fordisqualification of PWSP was on file, did PWSP file asupplemental Bankruptcy Rule 2014 disclosure on March5, 2007, stating:

Portside Growth and OpportunityFund, Ltd., Smithfield FiduciaryLLC and Citadel Equity FundLtd. (collectively, the “SeniorNoteholders”), are holders of the7¾% Senior Secured SubordinatedConvertible Debentures due 2005(the “Senior Notes”). The Debtorsscheduled the claim of the SeniorNoteholders for in excess of $77million, and each of the three SeniorNoteholders filed its own proofs ofclaim in unspecified amounts relatedto the Senior Notes. In connectionwith its Application, the Firmpreviously disclosed its substantialpre-petition representation of theDebtors, including for corporateand securities matters. As partof that representation, the Firmrepresented SONICblue in issuingthe Senior Notes. As is typicalin such financing transactions, theFirm issued a legal opinion tothe Senior Noteholders. Pursuantto letter dated September 5, 2006,counsel to the Senior Noteholderssought indemnity from the Firmrelated to the Senior Notes (the“Demand”). The Firm has rejected

the Demand and declined toprovide any indemnity to the SeniorNoteholders, and immediately uponreceipt of the Demand the Firminformed counsel for the Creditors'Committee of the Demand andturned over the analysis of allissues regarding the allowance ofthe Senior Noteholders'claims tothe Committee. No lawyer in thefirm who handled the financingtransaction was involved in thefirm's analysis regarding the SeniorNoteholders' claims. Whether theDemand creates any disablingconflict or renders the Firm not“disinterested” is presently beforethe Court on motions filed by theU.S. Trustee.

At the March 19, 2007 hearing on the United StatesTrustee's motions to disqualify PWSP and to appoint atrustee, outside counsel for PWSP asserted that PWSP didnot have its debtor clients' consent to oppose the motionfor disqualification. He expressed that:

The current circumstances haveput Pillsbury in a difficult positionbecause with the accusationsagainst it and the effort todisqualify the firm it has not beenable to confer with its client oradvise its client, the Debtor, orthe Debtors, about what theirpreferences might be or whatwould be appropriate in termsof responding to the request forrelief that are before the Courttoday....[O]n the difficult issues ofwhat the Debtors' position wouldbe on disqualification, on whatthe Debtors' position would beon retaining Pillsbury as Debtors'counsel in a general counselcapacity or any more limitedcapacity we simply have not beenable to speak with the firm's client.

*8 This was the first time that outside counsel, Howard,Rice, Nemerovski, Canady, Falk & Rabkin, PC, appeared

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on behalf of PWSP. Additionally, the debtors appeared atthat hearing through proposed special counsel.

After the motions were granted, the United States Trusteeselected Dennis J. Connolly on April 16, 2007 to serveas trustee. Upon his appointment, the court directedthe trustee to conduct an investigation of the apparentimproprieties that had transpired to date and to proposea remedy for the lack of disclosures.

On May 30, 2007, SBClaims, having acquired the VIAclaim, commenced this adversary proceeding againstthe 2002 Noteholders for equitable subordination andreclassification of their claim and seeking a declarationthat the VIA claim is entitled to “Senior Indebtedness”status. The discovery in this proceeding has beenconsolidated with the trustee's investigation pursuant toa joint discovery plan. Through discovery, SBClaims hasuncovered the August 18, 2006 tolling agreement betweenPWSP and the officers and directors.

Omissions

Over the course of the case, PWSP assisted the debtors inliquidating the substantial assets of the estates, amassingapproximately $84 million for distribution to creditorsand received interim compensation of approximately$4 million. During that period, PWSP filed sevensupplemental disclosures on May 30, 2003, January 23,2004, October 27, 2004, July 13, 2005, July 27, 2005,November 4, 2005, and June 5, 2006, all of which wereunremarkable. None mention the opinion letter thatPWSP provided to the 2002 Noteholders or the tollingagreement with the officers and directors. Neither thedisclosure statement nor the first amended disclosurestatement revealed the waiver in the VIA settlement orthat the Chief Financial Officer and responsible individualof the debtors was a defendant in the litigation by theNoteholder Plaintiffs. The debtors and the committeedid not address the fact that the 2002 Noteholders werecontrolling members of the committee, which had beencharged with objecting to the claim of the very same 2002Noteholders. PWSP did not disclose its opinion letterassuring payment, the demand by the 2002 Noteholdersfor indemnification, or the benefit that PWSP stood torealize from full payment of the 2002 Noteholders.

Positions of the Parties

SBClaims and the trustee seek further information inorder to better understand PWSP's conduct and motives.PWSP seeks to protect at least 435 communications within-house counsel documented in its privilege log. As of thehearing date, PWSP had not provided a privilege log of itscommunications with its outside counsel, Howard, Rice.

LEGAL DISCUSSION

I. PWSP Cannot Use The Attorney–Client PrivilegeOr The Work Product Doctrine To Shield ItsCommunications With In–House Counsel After ItsConflict Of Interest Became Apparent.The attorney-client privilege is one of the oldest privilegesknown to common law, and its policy of protectingthe administration of justice by encouraging full andfrank communication between attorneys and their clientsis a time-honored one. Upjohn v. United States, 449U.S. 383, 389, 101 S.Ct. 677, 682, 66 L.Ed.2d 584(1981). Nevertheless, as with all privileges, its goalis counter-balanced by the equally fundamental legalconcept that fact-finders are entitled to every litigant'sevidence. Because the attorney-client privilege operatesto withhold relevant evidence from the fact-finder, itshould be construed narrowly and only applied wherenecessary to achieve it purpose. Fisher v. United States,425 U.S. 391, 403, 96 S.Ct. 1569, 1577, 48 L.Ed.2d 39(1976). Strict construction also reflects the assumptionthat lawyers are consulted to comply with, not break,the law. If circumstances erode that underlying premise,then the protection accorded by the privilege should,correspondingly, diminish. Id. The burden of establishingthe applicability of the privilege lies with the partyasserting it.

*9 In light of these competing principles, courts generallyhave followed a restrictive approach in granting theprotection of attorney-client privilege to confidentialcommunications with in-house legal counsel. BankBrussels Lambert v. Credit Lyonnais (Suisse), 220F.Supp. 283, 286 (S.D.N.Y.2002). Moreover, a law firm'sconsultation with in-house counsel, like that of PWSP'shere, raises an additional layer of concern that is uniqueto the legal profession. As one court noted, “[a] lawfirm's representation of a client, and its ability to meet

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its ethical and fiduciary obligations to that client, maybe affected by its representation of another client, evenif the second client is the law firm itself.” In re SunriseSecurities Litigation, 130 F.R.D. 560, 595 (E.D.Pa.1989).In other words, when a law firm chooses to representitself, it runs the risk that the representation may createan impermissible conflict of interest with one or more ofits current clients. In light of these ethical concerns, thecourts that have considered the issue have resoundinglyfound that, where conflicting duties exist, the law firm'sright to claim privilege must give way to the interest inprotecting current clients who may be harmed by theconflict. Id.; Burns v. Hale and Dorr LLP, 242 F.R.D.170 (D.Mass.2007); Thelen Reid & Priest LLP v. Marland,2007 WL 578989 (N.D.Cal. Feb.21, 2007); Koen BookDistributors v. Powell, Trachtman, Logan, Carrle, Bowman& Lombardo P.C., 212 F.R.D. 283 (E.D.Pa.2002); BankBrussels, 220 F.Supp. 283. As a result, a law firm cannotassert the attorney-client privilege against a currentoutside client when the communications that it seeks toprotect arise out of self-representation that creates animpermissible conflicting relationship with that outsideclient.

At the same time, public policy encourages lawyersto consult with in-house counsel to understand andcomply with their professional responsibilities and ethicalrestraints. Elizabeth Chambliss, The Scope of In–FirmPrivilege, 80 Notre Dame L.Rev. 1721 (2005). This policyfavors allowing the privilege to be asserted until suchtime as the firm has, or should have, determined thatdual representation of itself and an outside client shouldnot continue without the informed consent of the outsideclient. Accord Thelen, 2007 WL 578989, at *7–8.

PWSP's argument that this case law is not controllingand is contrary to the Ninth Circuit's limitations onthe fiduciary exception to the attorney-client privilege isunpersuasive. In United States v. Mett, 178 F.3d 1058(9th Cir.1999), the Ninth Circuit held that an ERISA planadministrator, a fiduciary, was disabled from assertingthe attorney-client privilege against the plan beneficiariesfor any legal advice it received regarding administrationof the ERISA trust. This is known as the fiduciaryexception to the attorney-client privilege. The court alsofound, however, an exception to that exception. Where afiduciary seeks legal advice, on its own behalf, not thatof the trust, in an effort to defend against beneficiaries'claims of improper trust administration, the attorney-

client privilege could be asserted. By analogy, PWSPasserts that it is entitled to the benefit of the Mett personalliability exception to the fiduciary exception. Because allthe communications for which it claims privilege were partof legal advice that PWSP sought on its own behalf in itseffort to defend against the several claims that have beenlodged against it, PWSP urges that Mett applies to keepPWSP's right to invoke the attorney-client privilege intact.

*10 PWSP's argument fails to account for the uniqueattributes of the fiduciary relationship between the firmas the attorney and its client, SONICblue. First, thevery nature of the attorney-client relationship exceedsother fiduciary relationships where the fiduciary mustexecute its duties faithfully on behalf of its beneficiaries.Attorneys are governed by an ethical code that requiresthe utmost loyalty on the part of the attorney, includingthe duty not to represent another client if it would createa conflict of interest with the first client. Second, thescope of PWSP's fiduciary relationship with SONICblueincluded much more than simply administering an ERISAplan as in Mett. In Mett, the Ninth Circuit recognizedthat the fiduciary could not assert the attorney-clientprivilege against its beneficiaries for all matters within thescope of its fiduciary duties—there, the administration ofthe ERISA plan. Here, however, the scope of PWSP'sfiduciary duties were broad-ranging and prohibited PWSPfrom engaging in any activity that was adverse toSONICblue's interests. Applying Mett's reasoning, PWSPcannot invoke the privilege as to any matter withinthat broad scope of fiduciary activities. This wouldinclude its failure to comply with its duty of loyaltyby entering into a second representation that created aconflict with its representation of SONICblue. Finally, itis important to note that in this bankruptcy setting thereis an additional overlay of fiduciary duties. Under theBankruptcy Code, PWSP, as debtor's counsel, had a dutyto remain disinterested and not to represent any adverseinterests. It owed this duty not just to SONICblue butto the creditors on whose behalf it was administering theestate and to the court. The ethical lapses alleged againstPWSP clearly fall within the scope of the broad fiduciaryduty that it owed to all of these parties. As a result, PWSP'spersonal defense theory will not excuse production in theconflict of interest context.

In addition to the attorney-client privilege, PWSP hasalso asserted the work product doctrine as a basisfor withholding many of the documents listed in its

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privilege log. Like the attorney-client privilege, however,the protections afforded by the work product doctrineare not absolute. The policies discussed above applyequally to PWSP's claims of work product. As one courtexplained, in the conflict of interest context, the workproduct doctrine does not protect an attorney's papersany more or less than the attorney-client privilege. Thelen,2007 WL 578989, at *8, citing, Koen Book, 212 F.R.D. at286.

Turning to the record currently before the court, it appearsthat PWSP had some inkling of impending ethical issuesas early as June 2005 when emails among several lawyersin the firm expressed concern over the ramifications ofthe insurance coverage dispute. Nevertheless, the presentrecord does not establish the existence of a conflictat that time. Circumstances giving rise to at least apotential conflict arose in or around June 2006, whenSONICblue's officers and directors requested the tollingagreement from PWSP. Still, there may have been ashort period of time following that request, but beforeany conflict of interest became apparent, during whichPWSP attorneys sought in-house advice regarding thefirm's ethical duties to SONICblue. Even so, the evidenceplainly establishes that PWSP knew of its conflictinginterests by the time the firm executed the tollingagreement with the SONICblue's directors on August18, 2006. As to this issue, on that date, PWSP's abilityto withhold intra-firm communications related to itsrepresentation of SONICblue became impaired. Similarly,by September 5, 2006, when the 2002 Noteholders madetheir indemnification demand, PWSP knew it had anotherdisabling conflict of interest. Finally, by January 2007,PWSP was aware that accusations regarding malpracticeand its failure to adequately disclose conflicts of interesthad arisen. In light of this evidence, PWSP has no rightto claim privilege for any communications with in-housecounsel between September 7, 2007 and March 26, 2007that are set forth in its privilege log.

II. The Current Record Does Not Establish That AnException From The Attorney–Client Privilege Applies ToPWSP's Communications With Its Outside Counsel.*11 In support of its argument that PWSP should be

compelled to produce its communications with Howard,Rice, SBClaims offers two theories. First, PWSP allegedlybreached fiduciary duties owed to its client by revealingclient confidences to Howard, Rice without SONICblue'spermission and, therefore, should lose its ability to

assert privilege just as it did with respect to in-housecounsel communications once a conflict of interestdeveloped. Second, SBClaims argues that the crime-fraudexception to the attorney-client privilege applies becausethe consultations with Howard, Rice are part of a schemeto further, or at least cover-up, a fraud on the court.

With respect to the first theory, research has notuncovered any decision where a court denied theapplication of the privilege between a law firm andits outside counsel due to the law firm's breach of afiduciary duty owed to its own client, and SBClaimshas offered none. Further, there is no evidence in therecord demonstrating that any fiduciary duty has beenviolated in PWSP's consultations with Howard, Rice.While SBClaims “can only imagine” the extent of PWSP'sshared confidences with Howard, Rice, it would beimproper for this court to compel production based onimaginings or supposition.

Turning to SBClaims' second theory, communicationsotherwise protected by the attorney-client privilege willnot be shielded from disclosure if they are made infurtherance of a crime, fraud or other misconduct. Inre Napster, Inc. Copyright Litigation,479 F.3d 1078,1090 (9th Cir.2007). To receive the benefit of outrightdisclosure based on the crime-fraud exception to theattorney-client privilege, SBClaims must establish, by apreponderance of the evidence, that PWSP was engagedin or planning a criminal or fraudulent scheme at thetime of its communications with Howard, Rice. Id.at 1090. It also must demonstrate that the attorney-client communications were sufficiently related to and infurtherance of the intended scheme. Id.

While SBClaims has offered some evidence that suggeststhat a fraud might have been committed, at this juncture,PWSP's privilege log does not include its communicationswith Howard, Rice. As a result, it is impossible to identifythe communications at issue or to determine whetherthey were made in furtherance of an alleged fraudulentscheme. While the privilege log, once provided, may ormay not be enough to make that determination, it isa necessary starting point. Additionally, PWSP has notyet been provided an opportunity to offer countervailingevidence. As the Ninth Circuit held in Napster, wherea party requests outright disclosure of documents basedon their connection to a crime or fraud, the party

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seeking to preserve the privilege has the right to introducecountervailing evidence.

CONCLUSION

Consistent with this memorandum decision, PWSP shallproduce, within ten business days of receipt of thisdecision, all documents for which it claims either attorney-client or work product privilege in its privilege log afterits conflicting interests became apparent. Based on therecord before me, all conflicting interests became apparentno later than September 6, 2007. Within that same tenbusiness day period, PWSP may submit for in camera

inspection, any of the five documents, dated on or beforeSeptember 6, 2006 and listed on the privilege log, whichPWSP believes, in good faith, falls outside the classof documents to be produced. PWSP shall provide anexplanation as to why any document submitted in camerashould be excluded from discovery. Otherwise, PWSPshall produce those documents as well.

*12 Good cause appearing, IT IS SO ORDERED.

All Citations

Not Reported in B.R., 2008 WL 170562

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EXHIBIT 9

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Grobee v. Corrections Corporation of America, Not Reported in F.Supp.3d (2014)

2014 WL 229266, 121 Fair Empl.Prac.Cas. (BNA) 837

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 1

2014 WL 229266United States District Court,

S.D. California.

Dan GROBEE, an individual, Plaintiff,v.

CORRECTIONS CORPORATION OF AMERICA,a Tennessee Corporation dba Cca, Does 1–2

o, inclusive, Defendants.

No. 13cv1060–GPC (DHB).|

Jan. 17, 2014.

Attorneys and Law Firms

Matthew B. Butler, Michael G. Olinik, The Butler Firm,San Diego, CA, for Plaintiff.

Paul M. Gleason, Gleason & Favarote LLP, Los Angeles,CA, for Defendant.

ORDER REGARDING JOINT MOTION FORDETERMINATION OF DISCOVERY DISPUTE

DAVID H. BARTICK, United States Magistrate Judge.

*1 On December 27, 2013, the parties filed a JointMotion for Determination of Discovery Dispute. (ECFNo. 21.) The parties' dispute concerns whether Defendantshould be required to produce personnel files for severalof its employees who are not parties to this action. Afterreviewing the Joint Motion, the Court hereby DENIESPlaintiff's motion to compel, as outlined below.

I. BACKGROUND

On March 29, 2013, Plaintiff filed a Complaint inSan Diego Superior Court alleging claims for wrongfultermination, discrimination, harassment, and severalviolations of California's labor laws. Thereafter, thecase was removed to federal court. (ECF No. 1.)Plaintiff claims he was wrongfully terminated due tohis age and physical disabilities. Defendant assertsPlaintiff was terminated following an investigation into acomplaint of sexual harassment, that uncovered a pattern

of inappropriate conduct by Plaintiff towards femaleemployees. Plaintiff contends that the sexual harassmentclaims were only a pretext for his termination.

Plaintiff propounded requests for production ofdocuments on Defendant, seeking among other things,the personnel files for nine of Defendant's employeeswho gave witness statements during the investigationof the sexual harassment complaint. (ECF No. 21–2 at27–31, Requests Numbers 35–43.) Defendant objectedto the requests on grounds that they are overly broad,unduly burdensome, and call for information that isirrelevant, protected by the right to privacy, and protectedby the attorney client privilege and/or attorney work

product doctrine. 1 (Id.) On November 22, 2013, theCourt granted the parties' joint request to extend timeto file a Joint Motion for Determination of DiscoveryDispute concerning the disputed document requests.(ECF No. 18.) After exhausting their efforts to resolve thedispute informally, the parties filed the instant motion onDecember 27, 2013.

1 It appears Defendant has abandoned its objectionsregarding overbreadth, burden, and the attorneyclient privilege/attorney work product doctrine. In theinstant motion, Defendant has only argued that thedocuments are protected by the constitutional right ofprivacy. (See ECF No. 21 at 9–12.)

Plaintiff requests the Court to compel Defendant toproduce all documents responsive to Requests Numbers35 through 43. Alternatively, Plaintiff proposes the Courtshould compel production, but order any informationregarding the employees' health issues, bank accounts,or social security information be redacted from theresponsive documents. Plaintiff argues the personnel filesare relevant to test the credibility of the witnesses, touncover the witnesses' potential bias against Plaintiff, andto reveal any relationships between the witnesses. Plaintiffstates the personnel files may also lead to the namesof other potential witnesses. Defendant urges the Courtto decline to order production of the files. Defendantcontends that the employee personnel files are protectedby the constitutional right of privacy and Plaintiff has notshown a compelling need for the personnel files, or shownthat the information could not be obtained through lessintrusive means.

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II. DISCUSSION

1. Legal StandardUnder Rule 26(b)(1), parties may obtain discovery of“any non privileged matter that is relevant to any party'sclaim or defense.” Fed.R.Civ.P. 26(b)(1). “Relevantinformation need not be admissible at the trial if thediscovery appears reasonably calculated to lead to thediscovery of admissible evidence.” Id. However, the Courtmust limit discovery if it determines that “the burden orexpense of the proposed discovery outweighs its likelybenefit, considering the needs of the case, the amountin controversy, the parties' resources, the importance ofthe issues at stake in the action, and the importanceof the discovery in resolving the issues.” Fed.R.Civ.P.26(b)(2)(C)(iii). “The party who resists discovery has theburden to show discovery should not be allowed, and hasthe burden of clarifying, explaining, and supporting itsobjections.” Duran v. Cisco Sys., Inc., 258 F.R.D. 375, 378(C.D.Cal.2009) (citing Blankenship v. Hearst Corp., 519F.2d 418, 429 (9th Cir.1975); Sullivan v. Prudential Ins. Co.of Am., 233 F.R.D. 573, 575 (C.D.Cal.2005)).

*2 Privacy is a valid objection that can be raisedin response to discovery requests. Seattle Times Co. v.Rhinehart, 467 U.S. 20, 35, n. 21, 104 S.Ct. 2199, 81L.Ed.2d 17 (1984). Because jurisdiction in this actionis based upon diversity, state law governs Defendant'sprivacy claims. Fed.R.Evid. 501; Oakes v. HalvorsenMarine Ltd., 179 F.R.D. 281, 284 (C.D.Cal.1998). UnderCalifornia law, personnel records of employees areprotected by California's constitutional right of privacy.Cal. Const., art. I, § 1; El Dorado Savings & Loan Assn.v. Superior Court, 190 Cal.App.3d 342, 345, 235 Cal.Rptr.303 (Cal.Ct.App.1987); Board of Trustees v. SuperiorCourt, 119 Cal.App.3d 516, 525–26, 174 Cal.Rptr. 160(Cal.Ct.App.1981). However, “[t]he constitutional rightof privacy is ‘not absolute,’ it may be abridged when,but only when, there is a ‘compelling’ and opposing stateinterest.” Board of Trustees, 119 Cal.App.3d at 525, 174Cal.Rptr. 160.

A finding of relevancy, alone, is not enough to justifycompelled disclosure of private information. Board ofTrustees, 119 Cal.App.3d at 525, 174 Cal.Rptr. 160. Whenprivate information, such as personnel files, is shown tobe relevant, the court must then balance the need for thediscovery against the fundamental right of privacy. Id.;

Harding Lawson Assoc. v. Superior Court, 10 Cal.App.4th7,10, 12 Cal.Rptr.2d 538 (Cal.Ct.App.1992). “[T]hebalance will favor privacy for confidential information inthird party personnel files unless the litigant can show acompelling need for the particular documents and thatthe information cannot reasonably be obtained throughdepositions or from nonconfidential sources.” HardingLawson Assoc., 10 Cal.App.4th at 10, 12 Cal.Rptr.2d 538.Even if the balance weighs in favor of disclosure, “thescope of disclosure must be narrowly circumscribed.” Id.

2. Requests for Production Numbers 35 Through 43Here, the Court finds that Requests Numbers 35 through43 seek information that may be relevant to witnesscredibility. See Oakes v. Halvorsen Marine, Ltd., 179F.R.D. 281, 283 (C.D.Cal.1998) (stating that Rule 26“permits the discovery of information which may simplyrelate to the credibility of a witnesses or other evidencein the case”). However, because relevance alone is nota sufficient basis invade a non-party's privacy rights,the Court must consider whether Plaintiff has shown acompelling need for the information. The Court concludesthat he has not. Plaintiff's arguments that the personnelfiles may contain information that will show witnessbias or be useful to test credibility are speculative. SeeBoard of Trustees, 119 Cal.App.3d at 525, 174 Cal.Rptr.160 (stating inquiry into one's private affairs will not beallowed simply because it might lead to relevant evidence).In addition, the Court has reviewed the partial transcriptfrom Theresa Castrejon's deposition and finds that itdoes not justify Plaintiff's request for the personnel files.Therefore, because disclosure of the personnel files wouldinvade the third party employees' right to privacy underthe California Constitution, and because the informationis sought to pursue a speculative argument, the Courtbelieves that the employees' interest in maintaining theprivacy of these records outweighs Plaintiff's need forthem. See Harding Lawson Associates, 10 Cal.App.4th at10, 12 Cal.Rptr.2d 538 (finding Plaintiff failed to show acompelling need for confidential documents in third partypersonnel files).

*3 Moreover, Plaintiff is not left without alternative,less intrusive means to inquire into the credibility orpotential bias of the third party employees. Plaintiff hasthe ability to depose the employees who gave witness

statements during the sexual harassment investigation. 2

Indeed, Plaintiff has already deposed at least one of the

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witnesses, Theresa Castrejon, and has plans to deposeWarden Lawrence, who handled the investigation. (SeeECF No. 21 at 6; 21–2 at 39–48.) Accordingly, the Courtdenies Plaintiff's request to compel Defendant to producethe personnel files.

2 If Plaintiff determines that he needs to take more than10 depositions, and the parties are unable to reach astipulation, the Court is willing to entertain a motionto expand the number of depositions allowed.

III. CONCLUSION

For the foregoing reasons, Plaintiff's motion to compel isDENIED.

IT IS SO ORDERED.

All Citations

Not Reported in F.Supp.3d, 2014 WL 229266, 121 FairEmpl.Prac.Cas. (BNA) 837

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EXHIBIT 10

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Stock v. Schnader Harrison Segal & Lewis LLP, 142 A.D.3d 210 (2016)

35 N.Y.S.3d 31, 2016 WL 3556655, 2016 N.Y. Slip Op. 05247

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 1

142 A.D.3d 210Supreme Court, Appellate Division,

First Department, New York.

Keith STOCK, Plaintiff–Respondent,v.

SCHNADER HARRISON SEGAL & LEWISLLP, et al., Defendants–Appellants,

Association of Corporate Counsel, WillkieFarr & Gallagher LLP, David Polk &

Wardwell LLP, Morrison & Foerster LLP,Pillsbury Winthrop Shaw Pittman LLP, Weil,Gotshal & Manges LLP, et al., Amici Curiae.

June 30, 2016.

SynopsisBackground: Former client filed action alleging that lawfirm and attorneys committed malpractice when theyfailed to advise him that termination of his employmentaccelerated expiration of his vested stock options, andbreached their fiduciary duties by attempting to coverup alleged malpractice. The Supreme Court, New YorkCounty, Melvin L. Schweitzer, J., 2014 WL 6879923,granted client's motion to compel disclosure of attorneys'communications with firm's in-house counsel seekingadvice as to their ethical obligations, and defendantsappealed.

[Holding:] The Supreme Court, Appellate Division,Friedman, J., held that fiduciary exception to attorney-client privilege did not apply to require disclosure ofattorneys' communications with in-house counsel.

Reversed.

West Headnotes (6)

[1] Privileged Communications andConfidentiality

Corporations, partnerships, associations,and other entities

Attorney-client privilege applies tocommunications between corporation'semployees and corporation's in-house counselfor purpose of providing legal advice tocorporation. McKinney's CPLR 4503.

Cases that cite this headnote

[2] Privileged Communications andConfidentiality

Communications between attorneys

Law firm, rather than client, was firm'sin-house counsel's real client when firmattorneys sought advice regarding their ethicalobligations after one attorney was called asfact witness in client's arbitration againsthis former employer, and thus fiduciaryexception to attorney-client privilege did notapply to require disclosure of attorneys'communications with in-house counsel inclient's legal malpractice suit against firmand attorneys, even though firm was stillrepresenting client when communicationstook place, and relations between attorneysand client had not yet become openly adverse,where in-house counsel never worked on anymatter for client, and did not bill his time toclient, and interests of firm and its attorneysin adhering to their ethical obligations didnot necessarily coincide with client's interestin successfully and efficiently prosecutingarbitration. McKinney's CPLR 4503.

Cases that cite this headnote

[3] Privileged Communications andConfidentiality

Fiduciary exception

Fiduciary exception to attorney-clientprivilege does not apply to attorney-clientcommunications of fiduciary who seeks legaladvice to protect his or her own individualinterests, rather than to guide fiduciaryin performance of his or her duties tobeneficiary.

Cases that cite this headnote

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Stock v. Schnader Harrison Segal & Lewis LLP, 142 A.D.3d 210 (2016)

35 N.Y.S.3d 31, 2016 WL 3556655, 2016 N.Y. Slip Op. 05247

© 2017 Thomson Reuters. No claim to original U.S. Government Works. 2

[4] Privileged Communications andConfidentiality

Fiduciary exception

Where party seeks to require disclosure ofattorney-client communications pursuant tofiduciary exception, question of good causefor disclosure arises only after it has beendetermined that party seeking disclosure wasreal client entitled to invoke exception.

Cases that cite this headnote

[5] Attorney and ClientPartners and associates

Rule of professional conduct generallyprohibiting attorneys in same law firm fromrepresenting outside clients that are adverseto each other does not bar firm's in-housecounsel from advising his firm on matterinvolving potential conflict of interest betweenfirm and current outside client. Rules ofProf.Conduct, Rule 1.10(a).

Cases that cite this headnote

[6] Privileged Communications andConfidentiality

Communications Through or in Presenceor Hearing of Others; Communications withThird Parties

Client's mere intent to disclose to third personssubstance of discussion held with attorneydoes not mitigate attorney-client privilege;there must be actual disclosure, otherwiseconfidence has not been breached.

Cases that cite this headnote

Attorneys and Law Firms

**32 Patterson Belknap Webb & Tyler LLP, New York(Frederick B. Warder III and Jesse A. Townsend ofcounsel), for appellants.

The Roth Law Firm, PLLC, New York (Jordan M. Kamof counsel), for respondent.

Stone Bonner & Rocco LLP, New York (Ralph M. Stoneof counsel), Amar D. Sarwal, Washington, DC, of the barof the District of Columbia, admitted pro hac vice, andWendy E. Ackerman, Washington, DC, of the bar of theDistrict of Columbia, admitted pro hac vice, of counsel,for Association of Corporate Counsel, amicus curiae.

Willkie Farr & Gallagher LLP, New York (Francis J.Menton, Jr. of counsel), David Polk & Wardwell LLP,New York (Paul Spagnoletti of counsel), Morrison &Foerster LLP, New York (James M. Bergin of counsel),Pillsbury Winthrop Shaw Pittman LLP, New York(David G. Keyko of counsel) and Weil, Gotshal & MangesLLP, New York (Irwin H. Warren of counsel), for WillkieFarr & Gallagher LLP, David Polk & Wardwell LLP,Morrison & Foerster LLP, Pillsbury Winthrop ShawPittman LLP, Weil, Gotshal & Manges LLP, et al., amicicuriae.

ANGELA M. MAZZARELLI, J.P., DAVIDFRIEDMAN, ROSALYN H. RICHTER, SALLIEMANZANET–DANIELS, JUDITH J. GISCHE, JJ.

Opinion

FRIEDMAN, J.

***1 *212 The primary issue on this appeal iswhether attorneys who have sought the advice of theirlaw firm's in-house general counsel on their ethicalobligations in representing a firm client may successfullyinvoke attorney-client privilege to resist **33 the client'sdemand for the disclosure of communications seeking orgiving such advice. We hold that such communications arenot subject to disclosure to the client under the fiduciaryexception to the attorney-client privilege (recognized inHoopes v. Carota, 142 A.D.2d 906, 531 N.Y.S.2d 407 [3dDept.1988], affd. 74 N.Y.2d 716, 544 N.Y.S.2d 808, 543N.E.2d 73 [1989] ) because, for purposes of the in-firmconsultation on the ethical issue, the attorneys seeking thegeneral counsel's advice, as well as the firm itself, werethe general counsel's “ ‘real clients' ” (United States v.Jicarilla Apache Nation, 564 U.S. 162, 172, 131 S.Ct. 2313,180 L.Ed.2d 187 [2011] [Apache Nation ], quoting RiggsNatl. Bank of Washington, D.C. v. Zimmer, 355 A.2d 709,711–712 [Del.Ch.1976] ). Further, we decline to adoptthe “current client exception,” under which a numberof courts of other jurisdictions (see e.g. Bank BrusselsLambert v. Credit Lyonnais [Suisse] S.A., 220 F.Supp.2d283 [S.D.N.Y.2002] ) have held a former client entitled to

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disclosure by a law firm of any in-firm communicationsrelating to the client that took place while the firmwas representing *213 that client. Because we also findunavailing the former client's remaining arguments forcompelling the law firm and one of its attorneys to disclosethe in-firm attorney-client communications in question,we reverse the order appealed from and deny the motionto compel.

In 2008, the defendant law firm, Schnader Harrison Segal& Lewis LLP (SHS & L), through the managing partner ofits New York City office, defendant M. Christine Carty,Esq., represented plaintiff Keith Stock in the negotiationof his separation agreement from his former employer,MasterCard International. Unbeknownst to plaintiffduring the negotiation of the separation agreement, histermination by MasterCard triggered the acceleration ofthe ending dates of the exercise periods of certain stockoptions granted to him under MasterCard's Long–TermIncentive Plan (LTIP). Specifically, the termination ofplaintiff's employment caused the exercise periods of hisvested stock options under the LTIP to shrink from 10years to between 90 and 120 days. Although SHS & Lnegotiated a delay of the date of plaintiff's termination forthe purpose of allowing additional stock options to vest,the firm did not negotiate an extension of the truncatedexercise periods of the vested options.

In January 2009, plaintiff learned from MorganStanley Smith Barney (MSSB), the administrator of theMasterCard LTIP, that all of his vested stock options,which allegedly had been worth more than $5 million inaggregate, had already expired under the terms of theLTIP as a result of the termination of his employment.Plaintiff thereupon consulted with SHS & L concerningpossible remedies for this loss. Plaintiff, represented bySHS & L, subsequently commenced a lawsuit in federalcourt against MasterCard and an arbitration proceedingbefore the Financial Industry Regulatory Authority(FINRA) against MSSB. The SHS & L attorneys whorepresented plaintiff in these litigations were Theodore

Hecht, Esq., and Cynthia Murray, Esq. 1

1 It appears that Carty, the SHS & L partner who hadadvised plaintiff on the negotiation of his separationagreement with MasterCard, did not representor advise him in connection with the arbitrationagainst MSSB or the federal court action againstMasterCard. As described below, however, Carty

involuntarily became involved in the arbitration in adifferent capacity.

***2 On January 8, 2011, 11 days before the hearingof plaintiff's arbitral proceeding against MSSB wasscheduled to begin, MSSB's counsel gave notice that itintended **34 to call Carty to *214 testify as a fact

witness at the arbitration. 2 This development promptedCarty, Hecht and Murray to seek legal advice fromSHS & L's in-house general counsel, Wilbur Kipnes,

Esq. 3 The subject on which Carty, Hecht and Murraysought Kipnes's advice was their and the firm's ethicalobligations, in light of MSSB's demand for Carty'stestimony, under the lawyer-as-witness rule (see Rules ofProfessional Conduct [22 NYCRR 1200.0] [RPC] rule

3.7). 4 Kipnes never worked on any matter for plaintiff,and plaintiff was not billed for any of the time he devotedto the consultations with Carty and Hecht.

2 In the same email stating their intention to callCarty as a witness, MSSB's counsel alerted SHS &L that MSSB would be taking the position in thearbitration “that your firm's failures respecting thecontract negotiations, specifically here re: the optionexercise window (particularly as pains were taken toextend the window to vest more options) are centralto your client's woes.”

3 At their depositions in this action, Carty and Hechttestified about the general subject matter of theirconsultation with Kipnes. Plaintiff agreed on therecord not to treat this testimony as a waiver ofattorney-client privilege.

4 RPC rule 3.7 (“Lawyer as witness”) provides inpertinent part:

“(a) A lawyer shall not act as advocate before atribunal in a matter in which the lawyer is likelyto be a witness on a significant issue of fact unless[one or more of five exceptions, none of which isrelevant here, applies].“(b) A lawyer may not act as advocate before atribunal in a matter if:“(1) another lawyer in the lawyer's firm is likelyto be called as a witness on a significant issueother than on behalf of the client, and it isapparent that the testimony may be prejudicialto the client; or“(2) the lawyer is precluded from doing so byRule 1.7 or Rule 1.9.”

RPC rule 1.7 prohibits a lawyer's undertaking therepresentation of a client whose interests conflict

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with those of another current client or with thelawyer's own interests, absent each affected client'sinformed consent given in writing. RPC rule 1.9prohibits a representation that might prejudicethe interests of a former client, absent the formerclient's informed consent given in writing.

The FINRA arbitral hearing opened on January 19,2011. Carty, who had been prepared by Murray forher appearance, testified on April 4, 2011. On April 5,2011, the parties delivered their closing arguments to thearbitrators. Later that month, the arbitral tribunal issuedan award denying all of plaintiff's claims against MSSB.Around the same time, most of plaintiff's claims in thefederal court action against MasterCard were dismissed,and the case subsequently settled.

In April 2013, plaintiff commenced this action againstSHS & L and Carty in Supreme Court, New York County.*215 Plaintiff alleges that SHS & L and Carty committed

malpractice when they counseled him in connection withthe termination of his employment by MasterCard inthat they failed to advise him that his termination wouldaccelerate the expiration of his vested stock options underthe LTIP. Plaintiff also asserts claims against SHS & Land Carty for breach of fiduciary duty and violation ofJudiciary Law § 487 by allegedly “attempt[ing] to coverup” the alleged malpractice and “[b]y trying to blameMasterCard and MSSB for their own mistakes.” Themerits of plaintiffs' claims against SHS & L and Carty arenot at issue on this appeal.

In response to plaintiff's disclosure demands in this action,SHS & L and Carty served a privilege log that listedabout two dozen emails that had been exchanged amongKipnes, Carty, Hecht and Murray between January 10and January 18, 2011 (the January 2011 emails) inconnection with the consultation with Kipnes prompted**35 by MSSB's statement of its intention to call Carty as

a witness at the arbitration. Plaintiff made an applicationto the court for an order compelling SHS & L and Cartyto produce the January 2011 emails. By order enteredDecember 8, 2014, the court granted the application anddirected SHS & L and Carty to produce the documentson the privilege log. In so doing, the court appears tohave relied on the fiduciary exception to attorney-clientprivilege recognized in Hoopes v. Carota, 142 A.D.2d906, 531 N.Y.S.2d 407 (3d Dept.1988), affd. 74 N.Y.2d716, 544 N.Y.S.2d 808, 543 N.E.2d 73 (1989), supra. Thecourt also relied on its view that the record showed that

Carty, one of the parties to the January 2011 emails,had not expected the communications with Kipnes tobe held confidential as against plaintiff, who was thenSHS & L's client. Finally, the court found that SHS &L had waived any privilege that would otherwise haveattached to the documents by placing their contents atissue and by selectively disclosing communications amongits attorneys. This appeal ensued.

***3 The attorney-client privilege, “the oldest of theprivileges for confidential communications known tothe common law” (Upjohn Co. v. United States, 449U.S. 383, 389, 101 S.Ct. 677, 66 L.Ed.2d 584 [1981] ),exists for the purpose of “encourag[ing] full and frankcommunication between attorneys and their clients[,] ...thereby promot[ing] broader public interests in theobservance of law and administration of justice” (id.).New York has codified the attorney-client privilege atCPLR 4503, which provides in pertinent part:

*216 “(a) 1. Confidentialcommunication privileged. Unlessthe client waives the privilege, anattorney or his or her employee,or any person who obtains withoutthe knowledge of the client evidenceof a confidential communicationmade between the attorney or his orher employee and the client in thecourse of professional employment,shall not disclose, or be allowedto disclose such communication,nor shall the client be compelledto disclose such communication,in any action, disciplinary trial orhearing[.]”

[1] Nothing in CPLR 4503 suggests that consultationsbetween a law firm, as client, and its in-house counsel, asattorney, are not covered by the privilege. In the corporatecontext, the Court of Appeals has recognized thatthe attorney-client privilege applies to communicationsbetween a corporation's employees and the corporation'sin-house counsel for the purpose of providing legal adviceto the corporation (see Rossi v. Blue Cross & Blue Shieldof Greater N.Y., 73 N.Y.2d 588, 591–592, 542 N.Y.S.2d508, 540 N.E.2d 703 [1989] ). It has been recognizedthat lawyers associated in a firm have the same right toconfide in their firm's in-house counsel (see United States

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v. Rowe, 96 F.3d 1294, 1296 [9th Cir.1996] [conversationsbetween law firm's senior partner and junior attorneyswho acted as the firm's in-house counsel were privileged];accord Hertzog, Calamari & Gleason v. Prudential Ins.Co. of Am., 850 F.Supp. 255 [S.D.N.Y.1994] ). In anaction for legal malpractice, this principle has beenapplied to protect from disclosure records of consultationsbetween the defendant law firm's attorneys and its in-house counsel concerning the firm's work for the plaintiff,where the consultations apparently occurred after thefirm's representation of the plaintiff had ended (see LamaHolding Co. v. Shearman & Sterling, 1991 WL 115052,1991 U.S. Dist. LEXIS 7987 [S.D.N.Y.1991, No. 89 Civ.3639(KTD) ] ).

[2] Plaintiff does not take issue with the right of SHS& L and Carty to invoke attorney-client privilege withrespect to **36 the January 2011 emails as against therest of the world. Plaintiff contends, however, that thesedocuments cannot be withheld from him, on the groundthat the communications in question took place whilethe firm was still representing him and related to thatrepresentation. Plaintiff's primary reliance in seeking toobtain the January 2011 emails is on a doctrine knownas the fiduciary exception to the attorney-client privilege.*217 Disagreeing with plaintiff and Supreme Court, we

find that the fiduciary exception does not apply to theJanuary 2011 emails.

***4 The fiduciary exception to the attorney-clientprivilege has been described by the United States SupremeCourt as follows:

“English courts first developed the fiduciary exceptionas a principle of trust law in the 19th century. Therule was that when a trustee obtained legal advice toguide the administration of the trust, and not for thetrustee's own defense in litigation, the beneficiaries wereentitled to the production of documents related to thatadvice. The courts reasoned that the normal attorney-client privilege did not apply in this situation becausethe legal advice was sought for the beneficiaries' benefitand was obtained at the beneficiaries' expense by usingtrust funds to pay the attorney's fees.

“The fiduciary exception quickly became an establishedfeature of English common law, but it did not appearin this country until the following century. Americancourts seem first to have expressed skepticism. By the1970's, however, American courts began to adopt the

English common-law rule” (Apache Nation, 564 U.S. at

170–171, 131 S.Ct. 2313 [citations omitted] ). 5

5 See also Restatement (Third) of the Law GoverningLawyers § 84, Comment b (the fiduciary exceptionprevents a trustee from invoking attorney-clientprivilege to withhold from trust beneficiaries“evidence of the trustee's communications with alawyer retained to advise the trustee in carrying outthe trustee's fiduciary duties”); Restatement (Third)of Trusts § 82, Comment f (“legal consultations andadvice obtained in the trustee's fiduciary capacityconcerning decisions or actions to be taken in thecourse of administering the trust ... are subjectto the general principle entitling a beneficiary toinformation that is reasonably necessary to theprevention or redress of a breach of trust”); id.,Reporter's Note, Comment f; 17 Alan Newman,Bogert on Trusts and Trustees § 962 at 66–73 (3d ed2010); 3 Scott & Ascher on Trusts § 17.5 at 1202–1205(5th ed. 2007).

Apache Nation identifies as “[t]he leading Americancase on the fiduciary exception” (564 U.S. at 171, 131S.Ct. 2313) the Delaware Chancery Court's decisionin Riggs, 355 A.2d 709 [Del.Ch.1976], supra, in whicha trustee was compelled to produce to the trust'sbeneficiaries an attorney's legal memorandum (theWorkman memorandum) that had been prepared for thetrustee, at the trust's expense, in anticipation of potentialtax litigation on behalf of the trust (355 A.2d at 710).In rejecting the trustee's *218 claim of attorney-clientprivilege with respect to the Workman memorandum, theDelaware court looked to “the purpose for which it wasprepared, and the party or parties for whose benefit it wasprocured” (355 A.2d at 711), and found

“that the Workman memorandum was preparedultimately for the benefit of the trust and not forthe purpose of the trustees' defense in any litigationagainst themselves.... [T]he ultimate or real clientswere the beneficiaries of the trust, and the trustee,Mr. Porter, in his capacity as a fiduciary, was, or atleast should have been, acting only on behalf of thebeneficiaries in administering the trust. At that stage,there were no proceedings requiring the trustees to seeklegal advice personally. As of that time there are inthe record no allegations **37 of litigation, or eventhreats of it, against the trustees. Moreover, there isnothing before the Court to suggest that the purposeof the Workman memorandum was defensive on the

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trustees' part. Clearly then, the rights of the beneficiarieswould have been the foremost consideration in Mr.Porter's consultations and communications with hislegal advisors. Moreover, the payment to the law firmout of the trust assets is a significant factor, not onlyin weighing ultimately whether the beneficiaries oughtto have access to the document, but also it is in itselfa strong indication of precisely who the real clients

were” (355 A.2d at 711–712). 6

6 In the latter regard, the court noted: “The distinctionhas often been drawn between legal advice procuredat the trustee's own expense and for his ownprotection and the situation where the trust itselfis assessed for obtaining opinions of counselwhere interests of the beneficiaries are presently atstake” (355 A.2d at 712, citing Restatement [Second]of Trusts § 173, Comment b ).

***5 In concluding that the fiduciary exception appliedto the memorandum, the Riggs court observed:

“As a representative for the beneficiaries of the trustwhich he is administering, the trustee is not the realclient [of the attorney who prepared the memorandum]in the sense that he is personally being served. And,the beneficiaries are not simply incidental beneficiarieswho chance to gain from *219 the professional servicesrendered. The very intention of the communicationis to aid the beneficiaries.... The fiduciary obligationsowed by the attorney at the time he prepared thememorandum were to the beneficiaries as well as tothe trustees. In effect, the beneficiaries were the clientsof Mr. Workman as much as the trustees were, andperhaps more so” (355 A.2d at 713–714).

Thus, under the Riggs analysis, whether the fiduciaryexception applies depends on whether the “real client”of the attorney from whom the fiduciary sought advicewas the beneficiary of the fiduciary relationship or,alternatively, the fiduciary in his or her individualcapacity.

In New York, the fiduciary exception was recognizedand applied in Hoopes, 142 A.D.2d 906, 531 N.Y.S.2d407 (3d Dept.1988), affd. 74 N.Y.2d 716, 544 N.Y.S.2d808, 543 N.E.2d 73 (1989), supra, in which a trustee wascompelled to disclose the content of his communicationswith the trust's attorneys concerning certain transactionsand proposals involving the trust and the corporation of

which it was majority shareholder. Although the Hoopesdecisions (from the Appellate Division and the Courtof Appeals) do not use the term “real client,” each ofthem cites Riggs, and the Third Department, in holdingthe fiduciary exception applicable, observed, among otherthings, that the trustee had not shown

“any factors which would militate in favor of applyingthe privilege to the information sought. For example,defendant [the trustee] might have shown that hesolicited advice from counsel solely in an individualcapacity and at his own expense, as a defensive measureregarding potential litigation over his disputes withthe trust beneficiaries” (142 A.D.2d at 910–911, 531N.Y.S.2d 407, citing, inter alia, Riggs, 355 A.2d at 711).

Because no such showing had been made, and the recordin fact “suggest[ed] that counsel acted on behalf ofdefendant both in his role as trustee and as the chiefexecutive officer of the corporation” (142 A.D.2d at 911,531 N.Y.S.2d 407), the claim of attorney-client privilegewas rejected. In substance, the assertion of the privilege**38 was overruled in Hoopes based on a finding that the

trust's beneficiaries, not the trustee individually, were the“real clients” of the attorney who had advised the trustee.

[3] Because the applicability of the fiduciary exceptiondepends on whether the “real client” of the attorneyrendering *220 counsel was the fiduciary in his orher individual capacity or, on the other hand, thebeneficiaries to whom the fiduciary duty was owed, thefiduciary exception does not apply to the attorney-clientcommunications of a fiduciary who seeks legal advice toprotect his or her own individual interests, rather than toguide the fiduciary in the performance of his or her dutiesto the beneficiary. This principle is illustrated by thisCourt's decision in Beck v. Manufacturers Hanover TrustCo., 218 A.D.2d 1, 632 N.Y.S.2d 520 (1st Dept.1995), inwhich we wrote:

***6 “[T]o the extent that plaintiffs seek access tocommunications and documents concededly fallingwithin the protective ambit of the attorney-clientprivilege, their disclosure request is without merit.While plaintiffs as trust beneficiaries seek access tothe materials under the exception to the privilegearticulated in Hoopes v. Carota, 142 A.D.2d 906, 531N.Y.S.2d 407, affd. 74 N.Y.2d 716, 544 N.Y.S.2d808, 543 N.E.2d 73, that exception is not applicablehere. As the record shows, plaintiffs have been in

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an adversary relation with the Trustee since the late1970's and the disclosure plaintiffs apparently seekconcerns communications not generally relevant to theadministration of the trust, but specifically relevant tothe handling of the very issues the plaintiffs had beenthreatening to litigate. It is precisely where, as here, thetrustee consults counsel in order to defend itself againstthe conflicting claims of beneficiaries that the exceptiondelineated in Hoopes is inapplicable” (218 A.D.2d at17–18, 632 N.Y.S.2d 520, citing Hoopes, 142 A.D.2d at

910–911, 531 N.Y.S.2d 407). 7

7 See also Restatement (Third) of the Law GoverningLawyers § 84, Comment b (the fiduciary exception“does not apply to communications between thetrustee and a lawyer specifically retained by thetrustee to represent, not the trust or the trustee withrespect to executing trust duties, but the trustee in thetrustee's personal capacity”); Restatement (Third) ofTrusts § 82, Comment f (“A trustee is privileged torefrain from disclosing to beneficiaries or co-trusteesopinions obtained from, and other communicationswith, counsel retained for the trustee's personalprotection in the course, or in anticipation, oflitigation [e.g., for surcharge or removal]”); 3 Scott& Ascher on Trusts § 17.5 at 1202–1203 (“But whenthere is a conflict of interest between the trusteeand the beneficiaries and the trustee procures anopinion of counsel for the trustee's own protection,the beneficiaries are generally not entitled to inspectit”); N.Y. St. Bar Assn. Comm. on Prof. Ethics Op.789 [Oct. 26, 2005], Topic: Consultation with a LawFirm's In–House Counsel on Matters of ProfessionalEthics Involving One or More Clients of the Law Firm,2005 WL 3046319 (NYSBA Opinion 789) ¶ 4 n. 1(noting that, under the fiduciary exception analysis ofHoopes and Beck, “when a fiduciary seeks legal adviceconcerning the fiduciary's own potentially conflictingobligations, including with respect to potentiallydifferent interests of beneficiaries, the fiduciary mayassert privileges against the beneficiaries”).

*221 The parties advise us that no prior reporteddecision of any New York state court has consideredthe application of the fiduciary exception in a casewhere the fiduciaries invoking the attorney-client privilegeare lawyers who, during their representation of aclient, sought legal advice (whether from their firm'sin-house counsel or outside counsel) concerning issuesof professional ethics or potential malpractice liabilitiesarising from the firm's representation of that client. In

recent years, however, the courts of a number of otherstates—including the **39 highest courts of Georgia (St.Simons Waterfront, LLC v. Hunter, Maclean, Exley &Dunn, P.C., 293 Ga. 419, 427–429, 746 S.E.2d 98, 107–108 [2013] ) and Massachusetts (RFF Family Partnership,LP v. Burns & Levinson, LLP ), 465 Mass. 702, 713–716, 991 N.E.2d 1066, 1074–1076 (2013)—have held thatthe fiduciary exception to the attorney-client privilege,assuming that the jurisdiction recognizes it, does not applyto communications between lawyers and their firm's in-house counsel addressing such concerns arising from theongoing representation of a firm client (see also Garvy v.Seyfarth Shaw LLP, 359 Ill.Dec. 202, 215, 966 N.E.2d523, 536 [Ill.App.Ct.2012] [declining to adopt the fiduciaryexception but noting that it would not apply in the case atbar if Illinois recognized it] ). These courts have concludedthat, when lawyers seek the advice of their firm's in-housecounsel concerning possible conflicts, ethical obligationsand potential liabilities arising from the representation ofa current firm client, the in-house counsel's “real clients”are the lawyers and the firm itself—not the firm client fromwhose representation the issues arise—and, therefore,evidence of communications seeking or rendering suchadvice may be withheld from the firm client as privileged.

The American Bar Association (ABA), in a resolutionadopted by its House of Delegates in 2013, has taken aposition on the operation of the fiduciary exception inthe law firm context consistent with the holdings of theGeorgia Supreme Court and the Massachusetts SupremeJudicial Court, endorsing the view that

***7 “the ‘fiduciary exception’ to the attorney-clientprivilege ..., if recognized by the jurisdiction, does notapply to confidential communications between law firmpersonnel, acting on behalf of the *222 law firmin its individual capacity, and the firm's in-house oroutside counsel, even if those communications regardthe law firm's own duties, obligations, and potentialliabilities to a current client” (ABA, House of Delegates

Resolution 103 [ABA Resolution 103] [2013] ). 8

8 Without specifically referencing the fiduciaryexception, the Restatement has taken a similarposition:

“A lawyer may refuse to disclose to the clientcertain law-firm documents reasonably intendedonly for internal review, such as a memorandumdiscussing ... whether a lawyer must withdrawbecause of the client's misconduct, or the

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firm's possible malpractice liability to theclient. The need for lawyers to be able toset down their thoughts privately in order toassure effective and appropriate representationwarrants keeping such documents secret fromthe client involved” (Restatement [Third] of theLaw Governing Lawyers § 46, Comment c ).

The relevant facts of this case—which are not in materialdispute—establish that the fiduciary exception does notapply to the January 2011 emails because SHS & L andits attorneys were the “real clients” for purposes of theseattorneys' consultation with Kipnes, the firm's in-housegeneral counsel, whose time spent on the consultationwas not billed to plaintiff and who never worked onany matter for plaintiff. The three SHS & L attorneyswho sought Kipnes's legal advice—Carty, whom plaintiff'sadversary in the FINRA arbitration intended to call totestify about her past representation of plaintiff in thenegotiation of his separation agreement, and Hecht andMurray, the litigators who were representing plaintiff inthe arbitration—had their own reasons, apart from anyduty owed to plaintiff, for seeking the legal guidance.MSSB's announced intention to call Carty to testifyagainst plaintiff raised an obvious issue under RPCrule 3.7, the lawyer-as-witness rule. The attorneys, not**40 plaintiff, would be subject to disqualification or

professional discipline for any violation of the RPC intheir handling of the arbitration. In addition, SHS & Litself had an obligation “to ensure that all lawyers in thefirm conform[ed]” to the RPC (RPC rule 5.1[a] ) andthus to have Carty, Hecht and Murray receive appropriatelegal counsel about their ethical duties.

The interests of SHS & L and its attorneys in adheringto their ethical obligations did not necessarily coincidewith plaintiff's interest in successfully and efficientlyprosecuting the arbitration against MSSB. For example,an opinion by SHS & L's in-house counsel that thefirm should withdraw from representing plaintiff wouldhave protected the professional *223 interests of thefirm and its attorneys but would not have directlyadvanced plaintiff's claims in the arbitration or the federalcourt action. Indeed, the firm's withdrawal from therepresentation likely would have significantly delayedthe resolution of plaintiff's claims and increased theexpense of the arbitration. Any benefit to plaintiff fromhis attorneys' adherence to their ethical obligations as aresult of the consultation with the in-house counsel wouldhave been indirect and incidental (cf. Riggs, 355 A.2d

at 713 [ordering disclosure of the trustee's attorney-clientcommunications to the trust beneficiaries, who were “notsimply incidental beneficiaries who chance to gain from

the professional services rendered”] ). 9 Thus, because thepurpose of the consultation with Kipnes—for whose time,to reiterate, plaintiff was not billed—was to ensure that theattorneys and the firm understood and adhered to theirethical obligations as legal professionals, the attorneysand the firm, not plaintiff, were the “real clients” in thisconsultation.

9 Because plaintiff might well incidentally benefit fromhis attorneys' consultation with their firm's in-housecounsel on an ethical issue, the denial in defendants'answer of plaintiff's allegation that the consultationswith Kipnes “were adverse to, or to the detrimentof, or otherwise ‘not for the benefit of Plaintiff’” is consistent with defendants' position that thefirm and its attorneys were the “real clients” in thatconsultation.

***8 We also reject plaintiff's argument that the January2011 emails are necessarily subject to the fiduciaryexception because his relationship with SHS & L had notyet reached the stage of actual hostility as of the time ofthose communications. The considerations that supportsustaining SHS & L's invocation of attorney-clientprivilege as to these communications are not diminishedby the fact that, when the communications took place,neither plaintiff nor SHS & L was threatening to suethe other. The protection afforded by the attorney-clientprivilege encourages lawyers to seek advice concerningtheir ethical responsibilities and potential liabilities ina timely manner so as to minimize any damage to theclient from any conflict or error. Much of this benefit—to both lawyers and clients—would be lost if the attorney-client privilege could be invoked by a lawyer who soughtlegal advice to protect his or her own interests only forconsultations that took place after the lawyer or the clienthad openly taken a position adverse to the other.

In rejecting plaintiff's proposed distinction between casesin which relations between lawyer and client have becomeopenly adverse and cases in which they have not,we find illuminating the following discussion by theMassachusetts Supreme Judicial Court:

*224 “[A]n attorney's or a law firm's duty of loyaltyto a client is not always painted in bright lines. It maynot always be clear when the interests of the client and

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the law firm have become so adverse that withdrawalis required in the absence **41 of client waiver, andeven when it is clear that withdrawal is necessary, a lawfirm may need to consider how to minimize the potentialadverse consequences of withdrawal to the client, suchas where a law firm's withdrawal may imperil a businessdeal that is near a closing or where a law firm representsthe client ... in multiple legal matters.... The in-housecounsel whom the law firm has designated to help itsattorneys comply with all applicable ethical rules is thelogical counsel to turn to for advice as to how the firmmay best comply with rule 1.7, especially where timeis of the essence.... Soliciting ... advice [concerning aconflict], whether from an in-house counsel at the lawfirm or from an attorney at another law firm, is notin and of itself adverse to the client, and doing so mayultimately benefit the client.... Ultimately, it is usuallyin the interests both of the attorney seeking advice andof the client that the ethical issues be examined bya competent advisor who has been fully informed ofall relevant facts, with none withheld out of fear thatthe consultation may not remain private” (RFF FamilyPartnership, 465 Mass. at 711, 991 N.E.2d at 1073

[internal quotation marks and brackets omitted] ). 10

10 See also TattleTale Alarm Sys., Inc. v. Calfee,Halter & Griswold, LLP, No. 2:10–CV–226, 2011WL 382627, *5, 2011 U.S. Dist. LEXIS 10412,*14–15 (S.D.Ohio 2011): “[I]ndividual lawyers whocome to the realization that they have made someerror in pursuing the client's legal matters shouldbe encouraged to seek advice promptly about howto correct the error, and to make full disclosure tothe attorney from whom that advice is sought aboutwhat was done or not done, so that the advice maystand some chance of allowing the mistake to berectified before the client is irreparably damaged. Ifsuch lawyers believe that these communications willeventually be revealed to the client in the context of alegal malpractice case, they will be much less likely toseek prompt advice from members of the same firm....[T]here are societal values to be served by allowingmembers of a law firm to converse openly and freelyabout potential mis-steps in their representation of aclient without worrying about whether the client willeventually be able to use those communications to thelawyer's disadvantage.”

*225 In sum, we find that the fiduciary exception simplyhas no application to the January 2011 emails. Thosecommunications were part of a consultation between

three SHS & L attorneys and the firm's in-house counselto obtain advice about the ethical obligations of thefirm and the attorneys, in representing plaintiff in hisarbitration against MSSB, in light of the demand byplaintiff's adversary for the testimony of Carty, a memberof the firm. The in-house counsel had never worked onany matter for plaintiff, and plaintiff was not charged forthe time the in-house counsel devoted to the consultation.While plaintiff, as the firm's client, might well havebenefited incidentally from this consultation, SHS & Land the attorneys concerned, not plaintiff, were the in-house counsel's “real client” in rendering his advice.

***9 Further, even if (as plaintiff speculates) theconsultation extended beyond the ethical implicationsof the demand for Carty's testimony to the questionof whether plaintiff had a colorable malpractice claimagainst the firm based on the earlier transactionalrepresentation, this would not change our conclusionthat the January 2011 emails do not fall within the

fiduciary exception. 11 Indeed, this conclusion would beonly reinforced by an assumption that the consultationwith SHS & L's in-house **42 counsel extended toconsideration of the firm's potential malpractice liability.Needless to say, plaintiff could not have been the “realclient” for purposes of internal discussions at SHS & Lconcerning the firm's potential liability to him (see St.Simons Waterfront, 293 Ga. at 428, 746 S.E.2d at 108[holding that the fiduciary exception did not apply to aconsultation between attorneys and their firm's in-housecounsel because “[a]ttorneys within a firm seeking adviceto defend against threatened litigation by a current clientclearly do not share a mutuality of interest with thatclient”] ).

11 We note that SHS & L represents that theconsultation concerned only the ethical issue underthe lawyer-as-witness rule presented by the demandfor Carty's testimony.

[4] Because we conclude that the fiduciary exceptiondoes not apply to the January 2011 emails, we neednot consider whether plaintiff has made a showing ofgood cause for requiring disclosure of those documents.Where a party seeks to require disclosure of attorney-client communications pursuant *226 to the fiduciaryexception, the question of good cause for disclosurearises only after it has been determined that the partyseeking the disclosure was the “real client” entitled toinvoke the exception (see Hoopes v. Carota, 142 A.D.2d

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at 910, 531 N.Y.S.2d 407 [directing disclosure pursuant tothe fiduciary exception where “(t)he information soughtis highly relevant to and may be the only evidenceavailable on whether defendant's actions respecting therelevant transactions and proposals were in furtheranceof the interests of the beneficiaries of the trust orprimarily for his own interests”]; see also Beck, 218A.D.2d at 17–18, 632 N.Y.S.2d 520 [denying motion fordiscovery of attorney-client communications pursuant tothe fiduciary exception, on the ground that the exceptionwas not applicable, without reaching the question of good

cause] ). 12

12 Since this appeal was submitted, this Court hasdecided NAMA Holdings, LLC v. Greenberg TraurigLLP, 133 A.D.3d 46, 18 N.Y.S.3d 1 (1st Dept.2015),which deals with the fiduciary exception in thecontext of a dispute between the managers of alimited liability company (Alliance), in the role ofthe fiduciary, and a major investor in Alliance, inthe role of the beneficiary of the fiduciary duty.The investor brought an action asserting directand derivative claims against Alliance's managersand the law firm that represented both Allianceand the managers. In response to the investor'sdiscovery demands, the law firm invoked attorney-client privilege to withhold from production morethan 3,000 documents generated over several years. Inthe order appealed from, Supreme Court had directedthe law firm to produce all of the documents on theground that the parties did not have an adversarialrelationship during the period in which the documentswere generated. This Court reversed, holding that“ ‘adversity’ is not a threshold issue in determiningwhether the fiduciary exception is applicable in agiven case, but one of several factors to consider inmaking that determination, and that adversity cannotbe determined without a review of the purportedlyprivileged communications” (133 A.D.3d at 48, 18N.Y.S.3d 1). NAMA plainly presented a far morecomplex privilege issue than does this appeal, whichconcerns only two dozen emails generated over aperiod of nine days as a result of a consultationtriggered by a specific event (the demand for Carty'stestimony) with a lawyer (Kipnes) who had neverrepresented plaintiff. By contrast, in NAMA, thedefendant law firm had represented both Allianceand the managers over a period of several years,and the privilege was being asserted as to thousandsof documents generated over this period. As thisCourt recognized, even if the relationship betweenthe managers and the investor was adversarial at

the time that a given document had been generated,that document would still be subject to the fiduciaryexception if it reflected a consultation concerning themanagement of Alliance, as opposed to the personalinterests of the managers vis-a-vis the investor (see133 A.D.3d at 58–59, 18 N.Y.S.3d 1). In essence,we ordered an in camera review of the documentsat issue in NAMA to determine whether the “realclient” for which each document was generated wasAlliance or, on the other hand, the managers intheir individual capacities (see 133 A.D.3d at 53,18 N.Y.S.3d 1 [recognizing that the purpose of thefiduciary exception is to prevent a fiduciary fromhiding legal advice obtained in a fiduciary capacityfrom the beneficiaries of the fiduciary duty wherethose beneficiaries were the attorney's “ ‘real clients' ”in the consultation] ). In this case, for the reasons wehave discussed, SHS & L and its lawyers, not plaintiff,were plainly the “real clients” in the consultation withKipnes that generated the handful of emails at issue,and the fiduciary exception therefore does not apply.

**43 *227 Plaintiff argues that, even if the fiduciaryexception is found not to apply, he is entitled todisclosure of the January 2011 emails under a doctrineknown as the “current client exception,” which somecourts have recognized (see e.g. Bank Brussels Lambertv. Credit Lyonnais [Suisse] S.A., 220 F.Supp.2d283 [S.D.N.Y.2002], supra; Koen Book Distributors v.Powell, Trachtman, Logan, Carrle, Bowman & Lombardo,P.C., 212 F.R.D. 283 [E.D.Pa.2002]; In re SunriseSec. Litig., 130 F.R.D. 560 [E.D.Pa.1989]; In reSonicBlue Inc., 2008 WL 170562, 2008 Bankr. LEXIS181 [Bankr.N.D.Cal.2008] ). Applicable specifically toattorneys (as opposed to fiduciaries in general), thecurrent client exception holds that a law firm cannotinvoke attorney-client privilege to withhold from a clientevidence of any internal communications within thefirm relating to the client's representation, includingconsultations with the firm's in-house counsel, thatoccurred while the representation was ongoing. Unlikethe fiduciary exception, the current client exceptionapparently bars invocation of the attorney-client privilegeregardless of the identity of the “real client” to whom thelegal advice in question was rendered.

***10 The rationale behind the current client exceptionappears to be that the law firm's in-house counsel'sadvice to the other firm attorneys, on a matter asto which the firm's interests and those of a currentoutside client are not congruent, involves the firm in an

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impermissible simultaneous representation of conflictinginterests, namely, those of the outside client and thoseof the firm, as the in-house counsel's client. Theimpermissible conflict, in this view, emerges from theimputation to the in-house counsel, pursuant to RPCrule 1.10(a), of the firm's representation of that client,at the same time that the in-house counsel is actuallyrepresenting the firm's interests against the client in the in-house consultation. RPC rule 1.10(a) provides in pertinentpart: “While lawyers are associated in a firm, none ofthem shall knowingly represent a client when any one ofthem practicing alone would be prohibited from doingso by Rule 1.7 ..., except as otherwise provided therein.”RPC rule 1.7(a) provides, in pertinent part, that, absenteach affected client's informed consent given in writing asprovided in rule 1.7(b),

*228 “a lawyer shall not represent a client if areasonable lawyer would conclude that either:

“(1) the representation will involve the lawyer inrepresenting differing interests; or

“(2) there is a significant risk that the lawyer'sprofessional judgment on behalf of a client willbe adversely affected by the lawyer's own financial,

business, property or other personal interests.” 13

13 As explained by the Massachusetts SupremeJudicial Court in its decision rejecting the currentclient exception, “the underlying theme [of casesrecognizing the exception] seems to be that ... [when]the attorneys in the firm seek legal advice from thelaw firm's in-house counsel [concerning an actualor possible conflict with the client] ..., the law firm[through its in-house counsel] is both the attorneyfor the outside client and itself a client, and thesetwo ‘clients' have conflicting interests” (RFF FamilyPartnership, 465 Mass. at 718, 991 N.E.2d at 1077).This is borne out by the decisions recognizing theexception (see Bank Brussels, 220 F.Supp.2d at 288[rejecting claim of privilege as to lawyers' consultationwith in-house counsel on the ground that “a conflictas to one attorney at a firm is a conflict as toall”]; Sunrise Sec., 130 F.R.D. at 597 [“a law firm'scommunication with in house counsel is not protectedby the attorney client privilege if the communicationimplicates or creates a conflict between the law firm'sfiduciary duties to itself and its duties to the clientseeking to discover the communication”]; SonicBlue,2008 WL 170562, *9, 2008 Bankr. LEXIS 181, *26–

27 [“a law firm cannot assert the attorney-clientprivilege against a current outside client when thecommunications that it seeks to protect arise outof self-representation that creates an impermissibleconflicting relationship with that outside client”] ).

**44 Since 2012, a significant body of case lawhas accumulated in state courts around the country—including the highest courts of Georgia (St. SimonsWaterfront, 293 Ga. 419, 746 S.E.2d 98 [2013], supra ),Massachusetts (RFF Family Partnership, 465 Mass. 702,991 N.E.2d 1066 [2013], supra ), and Oregon (CrimsonTrace Corp. v. Davis Wright Tremaine LLP, 355 Or. 476,326 P.3d 1181 [2014] )—that unequivocally rejects thecurrent client exception to the attorney-client privilege (seealso Edwards Wildman Palmer LLP v. Superior Court, 231Cal.App.4th 1214, 180 Cal.Rptr.3d 620 [Cal.App.2014];TattleTale Alarm, 2011 WL 382627, 2011 U.S. Dist.LEXIS 10412 [S.D.Ohio 2011], supra ). In addition, theABA, in the aforementioned resolution adopted by itsHouse of Delegates in 2013, urged all federal and statecourts to uphold the application of the attorney-clientprivilege to communications between a firm's attorneysand the firm's in-house counsel on issues arising from therepresentation of a current client—recommending, *229

in effect, that the current client exception be rejected. 14

For the reasons discussed below, we agree with the weightof recent national decisional authority, as well as withABA Resolution 103, that the current client exceptionshould not be adopted.

14 Insofar as addressed to the current client exception,the resolution urged courts to recognize that

“any conflict of interest arising out of a law firm'sconsultation with its in-house counsel regardingthe firm's representation of a then-current clientand a potentially viable claim the client may haveagainst the firm does not create an exception tothe attorney-client privilege” (ABA Resolution103).

The report accompanying the proposal thatbecame ABA Resolution 103 notes that theRestatement (Third) of the Law GoverningLawyers, in the comment to section 46 quotedat footnote 8 above, implicitly rejects the currentclient exception (see ABA, Resolutions withReports to the House of Delegates, 2013 AnnualMeeting, Report 103 [ABA Report 103], at 6).

Before explaining our reasons for rejecting the currentclient exception, we observe that we do not believethat a consultation by attorneys with their firm's in-

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house counsel on a purely ethical issue arising fromthe representation of a current client—which, accordingto SHS & L and Carty, was the sole subject of theconsultation with Kipnes—inherently gives rise to aconflict of interest between the firm and the client. Thisprecise point is directly addressed in NYSBA Opinion789. Referring to the close analogue of current RPC1.7(a)(1) (prohibiting the simultaneous representation of“differing interests”) in the former Code of ProfessionalResponsibility (DR 5–105 [former 22 NYCRR 1200.24] ),the authors of the opinion framed the question as“whether an in-house ethics advisor represents interests‘differing’ from those of clients” (NYSBA Opinion 789 ¶14). The question was answered as follows:

***11 “We think not. The Code defines ‘differinginterests' to mean ‘every interest that will adverselyaffect either the **45 judgment or the loyalty of alawyer to a client, whether it be conflicting, inconsistent,diverse or other interest.’ [This definition is now foundat RPC 1.0(f).] The key phrase is that the interest mustbe one that will ‘adversely affect either the judgment orthe loyalty of a lawyer to a client.’ Because the Coderequires adherence to its rules in service of the manyduties a lawyer owes, a law firm's consideration of itsown legal and ethical obligations in connection with itsrepresentation of one or more clients cannot be said toimplicate a *230 ‘differing interest’ that will adverselyaffect the lawyer's exercise of professional judgment northe loyalty due a client within the meaning of the Code.

“To suggest otherwise is counter to everything the Codeembodies. The purpose of consultation on a lawyer'sethical and legal obligations is to facilitate the inquirer'sadherence to applicable law and rules. Seeking advicefrom an in-house ethics advisor is intended to facilitatethe lawyer's proper exercise of professional judgmentand a lawyer's appropriate discharge of the duty ofloyalty owed to the client in the same way that anoutside client's consultation with a lawyer in the firmis intended to facilitate the client's lawful achievementof legitimate objectives. Considering a lawyer's ethicalobligation to represent a client within the bounds ofthe law, for instance, does not give rise to any rightfulclaim that such consideration alone adversely affectsthe lawyer's professional judgment or loyalty, for thisis what lawyers are supposed to do” (NYSBA Opinion789 ¶¶ 15–16 [paragraph numbers and footnotesomitted] ).

NYSBA Opinion 789 similarly rejected the view thatconsulting with a firm's in-house counsel on a client-related ethical matter necessarily posed a problem underformer Code of Professional Responsibility DR 5–101(a)(former 22 NYCRR 1200.20[a] ), the close analogue ofcurrent RPC 1.7(a)(2) (prohibiting a representation thatraises “a significant risk that the lawyer's professionaljudgment on behalf of a client will be adversely affectedby the lawyer's own financial, business, property or otherpersonal interests”):

“We believe that a lawyer's interest in ensuringcompliance with the lawyer's ethical duties orobligations is, or considering the effects of a possibleviolation of those duties, does not generally raise issuesunder DR 5–101(A). A lawyer's interest in carrying outthe ethical obligations imposed by the Code is not aninterest extraneous to the representation of the client. Itis inherent in that representation and a required part ofthe work in carrying out the representation. It is, in otherwords, not an interest that ‘affects' the lawyer's exercise ofindependent professional judgment, but rather is an *231inherent part of that judgment ” (NYSBA Opinion 789 ¶

12 [paragraph number omitted; emphasis added] ). 15

15 The ABA has expressed agreement with the view ofNYSBA Opinion 789 that an attorney's consultationwith his or her law firm's in-house counsel on a client-related ethical issue does not necessarily involve aconflict of interests between the firm and the client(see ABA Standing Comm. on Ethics and Prof.Responsibility Formal Op. 08–453, at 2–3 [Oct. 17,2008]; see also ABA Report 103, at 3–4).

***12 The foregoing analysis of NYSBA Opinion 789persuades us that no conflict arose solely by virtue of thefact that defendant Carty and the SHS & L attorneysrepresenting plaintiff in the arbitration consulted withthe firm's in-house counsel as to their ethical obligationsunder the attorney-as-witness rule when informed thatopposing counsel in the arbitration intended **46 tocall Carty as a witness. Since the existence of a conflictbetween the law firm and its outside client with respectto the subject matter on which the in-house counsel wasconsulted is the lynchpin of the applicability of the currentclient exception, that exception, even if we were to adoptit, would not apply to a consultation with the in-housecounsel on that purely ethical matter. Still, insofar as theconsultation at issue in this case might have extended towhether SHS & L was potentially liable to plaintiff for

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malpractice, or how the firm should prepare to defenditself against such a claim, the consultation concerned amatter as to which plaintiff's interests and those of thefirm unquestionably conflicted. Under that scenario, thecurrent client exception, if we were to adopt it, apparentlywould apply to the January 2011 emails generated bythe consultation. But we find compelling the argumentsagainst the adoption of that rather draconian exception to

the attorney-client privilege. 16

16 As previously noted, SHS & L represents thatthe question of potential malpractice liability wasnot a subject of the consultation with Kipnes,notwithstanding that the email from opposingcounsel demanding Carty's testimony stated thatMSSB, in defending itself against plaintiff's claim,would take the position that plaintiff's loss was relatedto “your firm's [i.e., SHS & L's] failures respecting thecontract negotiations.” Without questioning SHS &L's representation as to the scope of the consultationwith Kipnes, we dispose of the appeal assuming, asplaintiff seemingly asks us to assume at certain pointsin his brief, that the consultation also covered themalpractice question.

First, even if we were to adopt plaintiff's position thatKipnes would have violated RPC rules 1.10(a) and 1.7(a)by advising SHS & L, as its in-house counsel, on a matterinvolving a conflict of interest between the firm and anoutside client (i.e., plaintiff), any such ethical violationwould not result in the *232 abrogation of an otherwisevalid evidentiary privilege attaching to the consultation.The ethical rules governing the legal profession and thelaw of evidence are two separate and distinct bodiesof law. A violation of the former, even if warrantingthe imposition of professional discipline, does not vitiatea privilege otherwise available under the latter. In thisregard, the Preamble to the RPC states:

“[T]he purpose of the Rules can be subverted when theyare invoked by opposing parties as procedural weapons.The fact that a Rule is a just basis for a lawyer'sself-assessment, or for sanctioning a lawyer under theadministration of a disciplinary authority, does notimply that an antagonist in a collateral proceeding ortransaction has standing to seek enforcement of the

Rule” (RPC Preamble ¶ 12). 17

17 The Preamble and Comments to the RPC, althoughnot officially enacted in New York, were promulgated

with the ABA Model Rules of Professional Conduct,on which the RPC is based, and may providepersuasive guidance for the interpretation of the RPC.

Permitting a former client to invoke a possible ethicalviolation by his former law firm as grounds for abrogationof the firm's attorney-client privilege, as plaintiff seeksto do here, would be the equivalent of allowing theclient to use the RPC as a procedural weapon againsthis former lawyers. We conclude that this proposed use,one plainly inconsistent with the guidance afforded us bythe Preamble to the RPC, is not an intended or properfunction of a code of legal ethics. Our view is consistentwith the position taken by the highest courts of Georgia,Massachusetts, and Oregon in recent cases presentingfactual contexts substantially similar to the one presented

**47 here. 18

18 See Crimson Trace, 355 Or. at 501, 326 P.3d at1195 (while “rules of professional conduct [forlawyers] may require or prohibit certain conduct,and the breach of those rules may lead todisciplinary proceedings,” this “has no bearing onthe interpretation or application of a rule of evidencethat clearly applies”); St. Simons Waterfront, 293Ga. at 425–426, 746 S.E.2d at 106 (“the potentialexistence of an imputed conflict of interest between in-house counsel and the firm client is not a persuasivebasis for abrogating the attorney-client privilegebetween in-house counsel and the firm's attorneys”);RFF Family Partnership, 465 Mass. at 721, 991N.E.2d at 1079 (concluding that the principle that “‘when an attorney [improperly] represents two clientswhose interests are adverse, the communicationsare privileged against each other notwithstandingthe lawyer's misconduct’ ” applies “even if th(e)‘client’ [invoking the privilege] is a law firm and the‘attorney’ is an in-house counsel within that samelaw firm”), quoting In re Teleglobe CommunicationsCorp., 493 F.3d 345, 368 (3d Cir.2007); accordTattleTale Alarm, 2011 WL 382627, *8, 2011 U.S.Dist. LEXIS 10412, *25 (in sustaining a law firm'sassertion against its former client of attorney-clientprivilege as to its communications with its in-housecounsel concerning a possible malpractice claim bythat client, the court noted the “widely accepted”principle that “the attorney's failure to comply withethical norms should not deprive the client of thebenefit of the attorney-client privilege”) (internalquotation marks omitted); Garvy, 359 Ill.Dec. at 217,966 N.E.2d at 538 (in a similar factual context, notingthat “while a violation of the [ethical] rules may have

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relevance to the underlying claims, it has no relevanceto the issue of whether the documents in question areprotected by the attorney-client privilege”).

***13 [5] *233 More fundamentally, however, we donot believe that SHS & L's in-house counsel, who neverpersonally represented plaintiff on any matter, would haveviolated his ethical obligations by advising his colleagueswithin the firm on a matter as to which their interests,and those of the firm, conflicted with plaintiff's interest.The contention that Kipnes's consultation violated theRPC depends upon the construction of the term “a client”in RPC rule 1.10(a)—the rule providing that any lawyerwithin a firm “ shall [not] knowingly represent a clientwhen any one of [the firm's lawyers] practicing alonewould be prohibited from doing so” (emphasis added)—to include the firm itself when its interests conflictwith those of a current outside client. We agree withthe view of the Massachusetts Supreme Judicial Court,which, drawing upon a scholarly analysis of the issue (seeElizabeth Chambliss, The Scope of In–Firm Privilege, 80Notre Dame L. Rev. 1721, 1745–1748 [2005] [hereinafter,Chambliss] ), concluded in RFF Family Partnership thatthe imputation rule of Rule 1.10(a) of the MassachusettsRules of Professional Conduct (which, like New York'sRPC rule 1.10[a], is based on rule 1.10[a] of the ABAModel Rules of Professional Conduct) does not bar a lawfirm's in-house counsel from advising his firm on a matterinvolving a potential conflict of interest between the firmand a current outside client. The court explained:

“[I]t is plain that the rule of imputation in rule 1.10(a)... generally prohibits attorneys in the same law firmfrom representing outside clients that are adverse toeach other, but there is nothing in the language orcommentary to [rule 1.10(a) ] to suggest that the rule ofimputation was meant to prohibit an in-house counselfrom providing legal advice to his own law firm inresponse to a threatened claim by an outside client.Nor does it make *234 sense to apply the rule in thiscontext. ‘The primary reasons for imputation are to“ [give] effect to the principle of loyalty to the clientas it applies to lawyers who practice in a law firm”and to prevent the misuse of confidential informationby lawyers in the same firm.’ Chambliss, **48 supraat 1747–1748, quoting Rule 1.10 comment 2 of theABA Model Rules of Professional Conduct (2003).Neither purpose is accomplished by applying the rule ofimputation to the representation of a law firm by its in-house counsel.

“The rule of imputation safeguards the duty of loyaltyby prohibiting a law firm from representing two clientswho are adverse to each other, where loyalty to oneclient may risk disloyalty to the other client. A law firmcan avoid conflicting loyalties by refusing to representan adverse outside client. But where a law firm isalready representing a client and that client threatensto bring a claim against the law firm, the potentialconflict between the law firm's loyalty to the clientand its loyalty to itself cannot be avoided and mustinstead be addressed, either by resolving the conflictsatisfactorily to the client or withdrawing from therepresentation. However, a law firm is not disloyal toa client by seeking legal advice to determine how bestto address the potential conflict, regardless of whetherthe legal advice is given by in-house counsel or outsidecounsel. See Chambliss, supra at 1748 (law firm's dutyof loyalty ‘to the client does not prevent the firmfrom attempting to defend against client claims,’ and‘effort to defend is no more “disloyal” when it involvesinside rather than outside counsel’). Applying the ruleof imputation in such circumstances therefore wouldnot avoid conflicting loyalties or prevent disloyalty; itwould simply prevent or delay a law firm from seekingthe expertise and advice of in-house counsel in decidingwhat to do where there is a potential conflict.

***14 “The rule of imputation also protects theconfidentiality of client information by eliminating therisk that information provided by one client will bemisused to the advantage of an adverse client. Whenthe adverse client, however, is the law firm *235 itself,the outside client's information is not protected fromthe law firm client by imputing the conflict to the in-house counsel because the law firm already possessesthe outside client's information, and it has a rightto defend itself against the outside client's adversarialclaims even to the point of disclosing information givento the law firm in confidence [citing the Massachusettsanalogue of New York RPC rule 1.6(b)(5)(i) and Rule1.6(b)(5) of the ABA Model Rules of ProfessionalConduct]. Even if the rule of imputation were toprohibit a law firm's in-house counsel from representingthe law firm against an adverse outside client, thelaw firm would still be entitled to reveal confidentialclient information to outside counsel where necessaryto the law firm's own defense. ‘Thus, the imputationof conflicts to firm in-house counsel adds nothing tothe protection of the outside client's interest in loyalty

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or confidentiality.’ Chambliss, supra ” (RFF FamilyPartnership, 465 Mass. at 719–721, 991 N.E.2d at 1078–

1079 [footnotes omitted] ). 19

19 The difference between the relevant language of NewYork RPC rule 1.6(b)(5)(i) (permitting disclosureto the extent necessary “to defend the lawyer orthe lawyer's employees and associates against anaccusation of wrongful conduct”) and the relevantlanguage of Rule 1.6(b)(2) of the MassachusettsRules of Professional Conduct and Rule 1.6(b)(5)of the ABA Model Rules of Professional Conduct(permitting disclosure to the extent necessary “toestablish a claim or defense on behalf of the lawyerin a controversy between the lawyer and the client”)does not, in our view, diminish the validity forNew York of RFF Family Partnership's above-quotedanalysis.

For the reasons set forth in the above-quoted analysis ofthe issue in RFF Family **49 Partnership, we concludethat the consultation between the SHS & L attorneys andthe firm's in-house counsel on issues involving a potentialconflict of interest between plaintiff and the firm did notviolate RPC rule 1.10(a). Although plaintiff, unlike theclient in RFF Family Partnership, had not yet threatenedto sue his lawyers when the intra-firm consultation at issuetook place, we do not believe that this factual distinctionshould lead to a different result. In arguing for adoption ofthe current client exception, plaintiff seeks to distinguishRFF Family Partnership, as well as St. Simon Waterfrontand Edwards Wildman Palmer, on the ground that intra-firm consultation in those other cases took place *236

after the client had threatened to sue the law firm. 20 Wereject that suggestion for essentially the same reasons thatlead us, as previously discussed, to reject plaintiff's similarargument that the fiduciary exception should not applybefore the attorney-client relationship has become openlyhostile.

20 We note that this attempt by plaintiff to distinguishthe out-of-state authority rejecting the currentclient exception is difficult to harmonize with hisbrief's initial affirmative argument for applying theexception “after [the law firm's] conflict of interest[with the client has] bec[o]me apparent” (internalquotation marks omitted) (quoting SonicBlue, 2008WL 170562, *8–9, 2008 Bankr. LEXIS 181, *31).

We further note that the current client exception, becauseit is based on the supposed conflict between the in-house

counsel's (imputed) duty of loyalty to the outside clientand his or her duty of loyalty to the firm as a client,would not apply to a law firm's consultation with alawyer at another law firm having no relationship withthe client. Thus, the current client exception has the effectof penalizing the law firm for seeking advice from one ofits own lawyers, even if that lawyer (like Kipnes in thiscase) has never actually represented or advised the outsideclient. Requiring a law firm to consult outside counselwould not remove or remedy any potential conflict ofinterest that created the need for the consultation inthe first place. Further, limiting a law firm's abilityto invoke attorney-client privilege to consultations withoutside counsel would not only increase the cost ofobtaining ethical advice, but, more importantly, wouldlikely substantially delay the process of obtaining suchadvice. We decline to impose a requirement that wouldresult in such a delay and concomitantly increase thepotential prejudice to both the client and the law firm,with no compensating benefit to the client (see RFFFamily Partnership, 465 Mass. at 713, 991 N.E.2d at1074 [requiring a law firm to retain outside counsel forethical advice “may delay the receipt of the ethical advicebecause new counsel will need to be retained and thenew counsel's law firm will need to complete its ownconflicts check”]; TattleTale Alarm, 2011 WL 382627, *5,2011 U.S. Dist. LEXIS 10412, *15 [“by the time a matterhas progressed to the point where outside counsel arecalled in, it may be too late to protect the client fromdamage”]; NYSBA Opinion 789 ¶ 8 [“To hold that alaw firm must always seek guidance outside its halls inorder to preserve an attorney-client relationship—thatis, to hire outside counsel (whose fiduciary duties mayextend only to the firm) in every instance in which such anadversity arises—is simply impractical in the day-to-day*237 life of many law firms, when issues of professional

responsibility frequently require prompt responses mostusefully provided by lawyers knowledgeable about thefirm, its client relationships and its culture”] ).

***15 In RFF Family Partnership, the MassachusettsSupreme Judicial Court pointed **50 out that theadoption of a rule essentially equivalent to the currentclient exception—that lawyers should not be permitted tohave a privileged consultation with their firm's in-housecounsel on a potential conflict with a client “unless thelaw firm first either withdraws from the representationor fully advises the client about the conflict of interestand obtains the consent of the client to engage in such

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communications” (465 Mass. at 712, 991 N.E.2d at 1073)—would have “dysfunctional” consequences for “both ...the client and the law firm” (465 Mass. at 713, 991 N.E.2dat 1074). This is because the adoption of the current clientexception would present the lawyer involved with

“four practical alternatives: first, he could withdrawfrom the representation without first consultingwith better informed [on ethical rules] and moredispassionate in-house ethics counsel; second, he couldadvise the client of the conflict without first consultingwith in-house counsel, and seek the client's consent toconfer with in-house counsel; third, he could confer within-house counsel without first having withdrawn fromthe representation or obtaining the client's informedconsent, recognizing that the communications wouldnot be protected from disclosure to the client; or fourth,he could retain an attorney in another law firm todiscuss how best to proceed” (465 Mass. at 712, 991N.E.2d at 1073–1074).

We agree with the Massachusetts court that “[n]oneof these alternatives best serve[s] the interests of theclient” (465 Mass. at 713, 991 N.E.2d at 1074).Accordingly, we decline to adopt the current clientexception.

In its brief urging us to affirm the order directing SHS &L to disclose the January 2011 emails to plaintiff, amicuscuriae the Association of Corporate Counsel (ACC) takesa position even more hostile to a law firm's assertionof attorney-client privilege against a client than thatof the decisions adopting the current client exception.The ACC argues that “when an attorney engages inconfidential communications regarding a *238 currentclient's representation with another attorney, the ‘client’for purposes of privilege law is the current client—not hisor her lawyer. Thus, the privilege is the right of the client,not his or her lawyer, to assert.” The ACC makes clearthat it believes that this principle should apply “whether[the lawyer being consulted is] employed by the [inquiring]lawyer's law firm or an outside law firm.” Thus, the ACCwould have us essentially eliminate the applicability of theattorney-client privilege, as against a lawyer's client, to anyconsultation by the lawyer relating to his or her work forthat client while the representation was ongoing, even ifthe consultation was with outside counsel, and even if theintended purpose of the consultation was to benefit thelawyer, not the client, as in consideration of whether amalpractice claim might exist. The ACC argues that any

other rule “would fly in the face of [a lawyer's] duty to actwith undivided loyalty” to a client.

***16 Having rejected the current client exception, wealso decline to adopt the even stricter rule urged uponus by the ACC, which apparently has not, to date,been endorsed by any American court. Beyond question,“[l]oyalty and independent judgment are essential aspectsof a lawyer's relationship with a client,” and “[t]heprofessional judgment of a lawyer should be exercised,within the bounds of the law, solely for the benefitof the client and free of compromising influences andloyalties” (RPC rule 1.7 Comment [1] ). The issuehere, however, is how lawyers should deal with thedilemma that arises when they realize, in the courseof an ongoing representation, that they and the clientmay **51 have conflicting interests in the matter. Inthis regard, the ACC overlooks that a law firm's dutyof loyalty to its client, as strong as it is, “does notprevent the firm from attempting to defend against clientclaims” (Chambliss, 80 Notre Dame L. Rev. at 1748), andthat the firm's right to defend itself includes the right toreveal client confidences to the extent reasonably believednecessary “to secure legal advice about compliance with[the RPC] or other law” (RPC rule 1.6[b][4] ) or “todefend [the firm] ... against an accusation of wrongfulconduct” (RPC rule 1.6[b][5] [i] ). Accordingly, the endresult of adopting the ACC's position would be to“encourag[e] the firm to withdraw at the first hint of aproblem,” thereby “limit[ing] the firm's opportunity ...to mitigate harm to the client” (Chambliss, 80 NotreDame L. Rev. at 1747 [footnote omitted]; see also RFFFamily Partnership, 465 Mass. at 712–713, 991 N.E.2dat 1074 [noting that denial of the *239 privilege to in-house consultations may prompt a firm to “withdrawwithout adequately protecting the client's interests”] ). Aspreviously discussed, we think it preferable, for both lawfirms and clients, to afford consultations with a firm'sin-house counsel the protection of the attorney-clientprivilege, even as against the client, so as to “encouragefirm members to seek early advice about their duties toclients and to correct mistakes or lapses, if possible, toalleviate harm” (Chambliss, 80 Notre Dame L. Rev. at1724).

Plaintiff argues, in support of all his theories for requiringdisclosure, that affording the protection of the attorney-client privilege to consultations between lawyers andtheir firm's in-house counsel, without an exception for

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the client to whose matter the consultation related, willenable lawyers “to forever shield from their own clients”evidence of the firm's malpractice or other misconduct.This argument fails to persuade us. As noted in oneof the decisions upholding a law firm's privilege as toconsultations with in-house counsel against a formerclient:

“It is simply not the case that a legal malpracticeplaintiff will be functionally unable to prove negligencewithout gaining access to intra-firm communicationsmade during loss prevention efforts. The client stillhas access to every communication between the clientand the firm and to every communication made by thelawyer, whether within the firm or outside of it, thatreflects how the lawyer was carrying out the client'sbusiness. It is hard to conceive of a case where the onlyevidence of legal malpractice is found within the firm'sloss prevention communications” (TattleTale Alarm,2011 WL 382627, *6, 2011 U.S. Dist. LEXIS 10412,*15–16).

***17 In this case, defendants are asserting theprivilege with respect to only about two dozen emailcommunications that were exchanged over a nine-dayperiod among SHS & L's in-house counsel and thethree attorneys in the firm who were then representingplaintiff or had previously represented him. Every otherdocument that SHS & L generated in the course of itsrepresentation of plaintiff apparently is available to himin his present lawsuit against the firm. If, as plaintiffclaims, SHS & L committed malpractice in representinghim in the negotiation of the terms of his departurefrom his former employer, MasterCard, in 2008, anysuch malpractice should *240 be readily provable bymeans of the documents generated in that representation,the documents (apart from the January 2011 emails)generated in the firm's subsequent representation ofplaintiff in the litigation against MasterCard and MSSB,and testimony concerning those representations. In thisregard, it should be borne in mind that the attorney-clientprivilege “applies only to confidential communications**52 with counsel (see, CLPR 4503), it does not

immunize the underlying factual information ... fromdisclosure to an adversary” (Niesig v. Team I, 76 N.Y.2d363, 372, 559 N.Y.S.2d 493, 558 N.E.2d 1030 [1990] ).In sum, without expressing any view on the strength ofplaintiff's claims in this action, we do not believe thataffording the protection of the attorney-client privilege

to the two dozen January 2011 emails will substantially

impair his ability to prosecute those claims. 21

21 Referring to his cause of action under JudiciaryLaw § 487, plaintiff also contends that disclosureof the January 2011 emails should be requiredunder the crime-fraud exception to the attorney-client privilege, an argument that Supreme Courtdid not address in granting plaintiff's motion tocompel. Plaintiff has not made the showing requiredto trigger application of the crime-fraud exception(see Matter of New York City Asbestos Litig., 109A.D.3d 7, 10–11, 966 N.Y.S.2d 420 [1st Dept.2013][“A party seeking to invoke the crime-fraud exceptionmust demonstrate that there is a factual basis fora showing of probable cause to believe that afraud or crime has been committed and that thecommunications in question were in furtheranceof the fraud or crime”] [internal quotation marksomitted], lv. dismissed 22 N.Y.3d 1016, 981 N.Y.S.2d347, 4 N.E.3d 357 [2013] ). While the record providesgrounds for concluding that SHS & L had a conflictof interest in continuing to represent plaintiff afterhis adversary in the arbitration announced that itwould call Carty as a witness, this does not amountto a showing of probable cause to believe that SHS& L was committing a fraud or a crime or that thecommunications between SHS & L's in-house counseland the other firm attorneys were in furtherance ofany such fraud or crime.

[6] Finally, we find that Supreme Court's relianceon three additional grounds for ordering disclosureof the January 2011 emails was erroneous. SupremeCourt concluded that the communications betweenKipnes, the in-house counsel, and the other SHS & Lattorneys relating to plaintiff's representation had notbeen confidential based on certain deposition testimonyby Carty. The court interpreted Carty's testimony toindicate that she had not subjectively expected hercommunications with Kipnes to be held confidential fromplaintiff. Even if this is a correct reading of Carty'stestimony, it is undisputed that the communicationsbetween Kipnes and the other SHS & L attorneys werenever actually disclosed to plaintiff, and “a client's mereintent to disclose to third persons the substance of thediscussion held with the attorney does not mitigate theprivilege. There must be actual disclosure, otherwise the*241 confidence ... has not been breached” (Matter

of Vanderbilt [Rosner–Hickey ], 57 N.Y.2d 66, 77, 453

N.Y.S.2d 662, 439 N.E.2d 378 [1982] ). 22 Contrary to

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Supreme Court's view, defendants have not waived theirprivilege as to the January 2011 emails by placing them atissue; defendants have never indicated, and expressly denyhaving, any intention to use the privileged documentsto prove any claim or defense in this action, such useof privileged materials being the sine qua non of “atissue” waiver (see Deutsche Bank Trust Co. of Am. v. Tri–Links Inv. Trust, 43 A.D.3d 56, 64, 837 N.Y.S.2d 15 [1stDept.2007] ). Neither does the record support SupremeCourt's finding that defendants waived their privilege as tothe January 2011 emails by selectively disclosing privilegedcommunications in this action.

22 Plaintiff argues that the circulation of the January2011 emails to Murray breached the privilege becauseMurray prepared plaintiff for his testimony in thearbitration. This argument overlooks the fact thatMurray, as one of the SHS & L attorneys representingplaintiff in the arbitration, had reason to be madeaware of Kipnes's advice about the firm's ethicalobligations under the lawyer-as-witness rule in lightof opposing counsel's announced intention to call

Carty, another SHS & L attorney, to testify in thearbitration.

**53 ***18 Accordingly, the order of Supreme Court,New York County (Melvin L. Schweitzer, J.), enteredDecember 8, 2014, which granted plaintiff's motion tocompel defendants to produce certain documents that hadbeen withheld on the basis of attorney-client privilege,should be reversed, on the law, with costs, and the motiondenied.

Order, Supreme Court, New York County (Melvin L.Schweitzer, J.), entered December 8, 2014, reversed, on thelaw, with costs, and the motion denied.

All concur.

All Citations

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