Opinion
98 Civ. 7123 (JFK).
June 7, 2005
MEMORANDUM ORDER
This case was transferred to this Court upon the passing of the Honorable Milton Pollack on August 13, 2004. On January 21, 2005, the parties appeared for a conference to address several issues. There are five areas of dispute: (1) The proposed settlement between the Receiver and defendants Ng and Rade Management Corp. (collectively "Rade"); (2) disclosure of Plaintiff's personal tax returns and other documents showing Plaintiff's assets; (3) disclosure of sealed reports and fee applications submitted by the Receiver to Judge Pollack; (4) the Receiver's refusal to provide a privilege log to Rade; and (5) the scheduling of the Plaintiff's deposition.
The complete file, including the Receiver's sealed and impounded reports, finally found its way from Judge Pollack's former Chambers to this Court's Chambers during the week of May 16, 2005. The file in hand, the Court now rules as follows:
1. The Proposed Settlement
The Settlement Agreement reads "Subject to the Approval of the Honorable Milton Pollack United States District Judge*," and "*This Agreement is not subject to the approval of any other person or entity." (Ltr. from K. Miller to Court, Dec. 22, 2004, Exh. C at 6). The Receiver claims that the Agreement was effective as of Judge Pollack's passing, and that Rade owes him the agreed-upon $290,000 plus the New York statutory rate of interest from August 17, 2004 to the date of payment. See N.Y. CPLR 5001. Rade contends that the Agreement is not yet effective because it was not so-ordered by Judge Pollack, or any other Judge of this Court standing in his stead. (Miller Ltr. at 4).
Rade's position contraverts the plain language of the Agreement. Other than Judge Pollack, the Agreement was subject to the approval of no other person or entity (a polite way of saying "no other Judge"). Once Judge Pollack passed, the Agreement became effective. The fixing of pre-judgment interest is a more complicated matter, however. There are any number of possible starting dates. The Agreement provided that "Payment will be made . . . within 60 days after all Parties have signed this Agreement." (Miller Ltr., Exh. C at 2). The last signature was that of the Receiver on July 8, 2004. One logical starting point for computation of interest is 60 days after that date (September 6, 2004). Another possibility is 60 days after Judge Pollack's death (October 4, 2004). The Receiver suggests August 17, 2004, "the date RADE first enforced the Settlement Agreement." (Ltr. from A. Tomback to Court, Feb. 1, 2005, at 2). If the Court is going to rule on this issue, it will need to hear more from the parties. For the present, the Court will so-order the Agreement to keep things moving forward. This action has no bearing on the Agreement's actual effective date, or the computation of pre-judgment interest. Of course, the Agreement in no way binds Plaintiff.
2. Discovery from Plaintiff
Rade demands various documents, including tax returns, relating to Plaintiff's financial sophistication and the source of the invested funds at issue in this case. Rade articulates no compelling reason to set aside the general rule that tax returns are not discoverable. See Cooper v. Hallgarten Co., 34 F.R.D. 482, 484 (S.D.N.Y. 1964) (Weinfeld, J.). On the other hand, Plaintiff's account statements, documents identifying Plaintiff's assets, and documents showing any other of Plaintiff's investments are certainly relevant to the issue of investor sophistication in fraud actions. Plaintiff is thus ordered to produce documents responsive to Defendants' Request for Production ## 23, 24 35, but not #21 (tax returns).
Rade has made supplemental demands for documents relating to the source of the funds Plaintiff invested. (Ltr. from K. Miller to M. Lebouw, Nov. 15, 2004). Plaintiff does not mention these demands in either of his letters to the Court. As there is no objection, Plaintiff is ordered to produce documents responsive to demands S13 to S20 in the November 15 letter.
3. Unsealing of the Receiver's Reports to the Court
The Receiver has been submitting sealed reports to the Court since 1999. Rade did not object at that time. Now Rade wants those documents unsealed. The Court finds convincing the Receiver's representation that an understanding existed between him and Judge Pollack concerning the sealing of his reports. The Court also agrees that unsealing at this point might have a chilling effect on Receivers who file sealed documents with the Court. The docket is replete with orders from Judge Pollack directing Rade's counsel to pay fees to the Receiver's firm and other professionals. These orders were prompted by the sealed reports. If the Defendants objected to the sealing, they could have brought their objection to Judge Pollack long ago. The request to unseal the Receiver's reports is denied.
4. Privilege Log from the Receiver
Rade demands a privilege log describing those documents withheld from the Receiver's document production. See Fed.R.Civ.P. 26(b) (5) (describing the privilege log requirement). The Receiver has not produced a log because of the cost. Rade cites Section 4(c) of the Agreement, which states that "[t]he Receiver agrees to provide Rade and Ng access to all non-privileged . . . documents obtained by the Receiver in the course of performance of his duties in this proceeding." Without a log, Rade argues, it cannot determine whether the Receiver has fulfilled this obligation. In light of Rade's challenges to the Receiver's various assertions of privilege, the Receiver must provide a privilege log. Practically speaking, the log will facilitate future rulings on Rade's challenges to the Receiver's assertions of privilege. See United States v. Constr. Products Research Inc., 73 F.3d 464, 473 (2d Cir. 1996).
Now for the real issue. Who pays for the log? The Court refers to Section 10 of the Agreement, which states that "the Parties to this Agreement agree that they shall each pay their own attorney's fees, costs and expenses, if any, incurred in connection with this matter." The Court understands the Receiver's position that his firm has incurred enough expenses in this matter, and that costs associated with the preparation of such a log will come out of the Receiver's estate. Nevertheless, at this point, the Court cannot see why Rade should pay for the log if the Receiver is the one asserting the privileges. The Receiver bears the cost of producing the log, per Section 10.
5. Plaintiff's Deposition
The parties should come to an agreement on the date of Plaintiff's deposition here in New York. That deposition should take place no later than September 30, 2005. If the parties cannot come to an agreement, or if that date is not feasible, the parties should notify the Court. All future queries or disputes concerning discovery, whether covered in this Order or not, should be referred to Chief Magistrate Judge Peck.
SO ORDERED.