Opinion
Civil Action No. 00-1674, Section: "N"(4)
December 17, 2001
On August 10, 2001, the defendants, James E. Ryder, Jr., Philip S. Brooks, William L. Hyde, Jr., and Ruth U. Fertel, Inc. ("RUFI"), filed a Motion to Compel Answers to Interrogatories and to Assess Attorney's Fees (doc. # 79) requesting that the plaintiff, Ralph J. Giardina, provide the source of information he received outside of the discovery process. The plaintiff objects to the motion contending that the source of the information is not relevant to a claim or defense of either party in this litigation.
I. Factual Summary
This lawsuit arises out of the alleged violation of federal securities laws and breach of fiduciary duty by the defendants. The plaintiff filed this suit seeking damages arising out of the sale of 10,000 shares of stock to the RUM defendants. According to the plaintiff, the stock value was 45% less then its true value and shortly after selling the stock to the defendants, the defendants extinguished their stock for cash payments of $31.17 per share, over twice the value of what he received for the stock.
On January 18, 2001, the plaintiff responded to RUFI's first set of requests for production of documents. In its response, the plaintiff produced many documents to RUFI, including a letter dated February 10, 1998 written by Wendell Clark, Esq. to William L. Hyde, Jr., President of RUFI ("Clark letter"). The letter was written by Clark to follow up on previous discussions concerning the termination of Greg Faia, an employee of RUFI, and the provisions of his employment contract. The plaintiff contends that he obtained the Clark letter outside of the discovery process but refuses to reveal how he obtained the letter.
The interrogatories tat are the subject of the present motion read as follows:
(1) Identify all documents, written or originated by Ruth U. Fertel Inc. ("RUFI"), or any employee or agent of RUFI, which have been obtained by the Plaintiff, Ralph Giardina, or Plaintiff's attorney, through sources other tan RUFI's responses to discovery and the formal discovery process instituted in this litigation; and with respect to each, please identify by name, address, and telephone number, the person or persons who provided the Plaintiff with each such document.
(2) Identify all documents, received by RUFI from outside sources, but not written or originated by RUFI, or any employee or agent of RUFI, including but not limited to the letter attached hereto as Exhibit A, which have been obtained by the Plaintiff, Ralph Giardina, or Plaintiff's attorney, through sources other than RUFI's discovery and the formal discovery process instituted in this litigation; and with respect to each, please identify by name, address, and telephone number, the person or persons who provided the Plaintiff with each document.
The defendants seek the source of the Clark letter, contending that it pertains to a legal opinion rendered by Clark and is subject to the attorney-client privilege. They contend that the acquisition of the letter outside of the discovery process allowed the plaintiff to circumvent the discovery process and prevented RUFI from arguing against its production. They claim that acquisition of the letter is highly suspicious and may have been acquired through inappropriate ex parte communications in violation of Rule 4.2 of the Louisiana Rules of Professional Conduct. The defendants contend further that once the source of the document is revealed, they will be able to use the information for impeachment purposes.
The plaintiff on the other hand, refuses to reveal the source of the Clark letter, contending that the source of the letter is not relevant to a claim or defense of either party in the instant litigation. The plaintiff contends further that the defendants seek the source of the Clark letter in order to develop claims not yet pleaded. The plaintiff contends that the request to compel the source of the letter for these reasons should be denied.
II. Analysis A. Rule 26
The scope of discoverable information is delineated in Rule 26 of the Federal Rules of Civil Procedure. Rule 26(b)(1) provides in relevant part:
Parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether it relates to the claim or defense of the party seeking discovery or to the claim or defense of any other party, including the existence, description, nature custody, condition and location of any books, documents, or other tangible things and the identity and location of persons having knowledge of any discoverable matter. It is not ground for objection that the information sought will be inadmissible at the trial if information sought appears reasonably calculated to lead to the discovery of admissible evidence.
In order to fulfill discovery's purposes of providing both parties with "information essential to the proper litigation of all relevant facts, to eliminate surprise, and to promote settlement," the discovery rules mandate a liberality in the scope of discoverable material. See Seattle Times Co. v. Rhinehart, 467 U.S. 20, 34 (1984) ("Liberal discovery is provided for the sole purpose of assisting in the preparation and trial, or the settlement, of litigated disputes."); Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978); SDI Operating Partnership, L.P. v. Neuwirth, 973 F.2d 652 (8th Cir. 1992). Thus, as long as the parties request information or documents relevant to the claims at issue in the case, and such requests are tendered in good faith and are not unduly burdensome, discovery shall proceed. M. Berenson Co., Inc. v. Faneuil Hall Marketplace, Inc., 103 F.R.D. 635, 637 (D.Mass. 1984).
B. Rule 4.2
In the instant case, the RUFI has filed a Motion to Compel seeking the identity of the person or persons that provided the plaintiff with the Clark letter. RUFI claims that the letter contains information that is subject to the attorney-client privilege and claims to be concerned that the plaintiff may have obtained the letter by way of an inappropriate ex pane communication in violation of Rule 4.2 of the Louisiana Rules of Professional Conduct. The plaintiff however, has refused to reveal the source of the letter contending that the information is irrelevant.
Rule 4.2 of the Louisiana Rules of Professional Conduct provides:
In representing a client, a lawyer shall not communicate about the subject of the representation with a party the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer, or is authorized by law to do so. A lawyer shall not effect the prohibited communication through a third person, including the lawyer's client.
In applying this rule to corporations, there are three categories of employees that an attorney should treat as parties for the purposes of the rule: (1) employees with managerial responsibility; (2) employees whose acts or omissions concerning the subject of the representation may be imputed to the organization for liability purposes; and (3) employees whose statements may constitute admissions on the part of the organization. See Model Rules of Professional Conduct, Rule 4.2 comment.
In a similar case, In re Shell Oil Refinery, 143 F.R.D. 105 (E.D.La. 1992), a class action suit was filed against Shell Oil following an explosion at one of its oil refineries. During the course of discovery, it became apparent that the plaintiffs legal committee ("PLC") had gained possession of Shell documents that were not obtained through the discovery process. The PLC did not dispute the fact that they obtained the documents from a Shell employee but they refused to reveal the documents or the name and position of the employee who provided them with the information.
Concerned that ex parte communications in violation of Rule 4.2 may have occurred, Shell filed a motion to compel answers to interrogatories seeking identification of all documents obtained by the PLC through means other than the discovery process. Shell also sought the identity of the persons who provided the documents. The PLC refused to provide the information contending that it was irrelevant. An attorney from the PLC did however submit an affidavit to the Court indicating that before initiating any communication with the Shell employee, he verified that the Shell employee did not hold a managerial position and was not an individual whose actions or non-actions would visit liability on Shell Oil Company, thus the employee was not a "party" under Rule 4.2.
Emphasizing its duty to preserve the integrity of the judicial proceeding, the Court in In re Shell held that the PLC was prohibited from making any use of the documents, required the PLC to identify and produce the documents to Shell, and prohibited the PLC from any further ex parte contact with any Shell employees other than those who are plaintiffs in this suit. The Court however, did not require the PLC to identify the source of the documents stating that "learning the identity of the source of these documents is not necessary to remedy any unfair advantage gained by the PLC." Id. at 108-09.
In the instant case, unlike In re Shell, the plaintiff has provided no indication as to whether the Clark letter was obtained from a "party" within the meaning of Rule 4.2. However, regardless of whether the plaintiff's communication was in violation of Rule 4.2, the plaintiff's receipt of the Clark letter in this manner was inappropriate and contrary to fair play. See id. at 108. The acquiring of the Clark letter by the plaintiff was more than informal fact-gathering. The plaintiff effectively circumvented the discovery process and prevented RUFI from being able to raise any objections against the production of the letter. Had the plaintiff sought to obtain the letter through the discovery process, RUFI would have had an opportunity to prevent its production by asserting the attorney-client privilege.
C. Judicial Integrity
Federal courts have authority to remedy litigation practices that threaten judicial integrity and the adversary processes. Indeed, the "district court is obliged to take measures against unethical conduct occurring in connection with any proceeding before it." In re Shell Oil Refinery, 143 F.R.D. 105, 108 (E.D.La. 1992) (citing Musicus v. Westinghouse Electric Corp., 621 F.2d 742 (5th Cir. 1980)). "The role of the district court in enforcing the Rules of Professional Conduct is a limited one however, and unless an attorney's questionable conduct threatens to taint the litigation pending before the court, "the business of the court is to dispose of litigation and not to act as a general overseer of the ethics of those who practice here.'" Id. (citing MMR/Wallace Power Industrial, Inc. v. Thames Assoc., 764 F. Supp. 712 (D.Conn. 1991)); see Dondi Properties Corp. v. Commerce Savings and Loan Assoc., 121 F.R.D. 284, 290 (N.D.Tex. 1988).
Here, learning the identity of the source of the Clark letter is not necessary to remedy any unfair advantage gained by the plaintiff. RUFI contends that because they have testimony from witnesses who claim that they did not remove the letter or a copy of the letter from RUFI's premises, learning the identity of the person who supplied the plaintiff with the letter has significant impeachment value. However, the Court is unaware of any impeachment value the identity of the source will provide and RUFI has failed to indicate exactly what impeachment value such information will provide. Further, RUFI has also failed to cite any authority for this proposition. Thus, the plaintiff is not required to provide the identity of the source of the Clark letter.
Although the plaintiff is not required to provide the identity of the source of the Clark letter, the plaintiff is required to help preserve the integrity of this judicial proceeding. What matters here is balancing the scales. See In re Shell, 143 F.R.D. at 108-09. This can be accomplished by prohibiting the plaintiff from making any use of the Clark letter and prohibiting the plaintiff from any further contact with any RUFI employees. See id. at 109.
D. Attorney's Fees and Expenses
The mover also seeks to recover reasonable attorneys fees and costs. Rule 37(a)(4)(A) of the Federal Rules of Civil Procedure provides that when a motion to compel is granted in its entirety or when the requested discovery is provided after the motion to compel is filed, the court "shall, after affording an opportunity to be heard, require the party whose conduct necessitated the motion or the party or attorney advising such conduct or both of them" to pay the reasonable expenses and attorney fees incurred in making the motion, unless the court finds that the opposing party's conduct was "substantially justified, or that other circumstances make an award of expenses unjust." See Fed.R.Civ.P. 37 (a)(4)(A).
Here, sanctions are not otherwise warranted under Rule 37(a)(4)(A) because the Court is not granting RUFI's Motion to Compel.
Accordingly,
IT IS ORDERED that the Motion to Compel Answers to Interrogatories and to Assess Attorney's Fees (doc. # 79) is DENIED.
IT IS FURTHER ORDERED that the request for attorney's fees and costs is DENIED.
IT IS FURTHER ORDERED that the plaintiff may not make any use of the Clark letter or any use of the information contained therein, including keeping any copies or notes of the information contained in the documents, unless the documents are publicly available or were previously produced by RUFI.
IT IS FURTHER ORDERED that the plaintiff shall not have any ex parte contact or communication in any manner, either directly, indirectly, or through a third party, with any RUFI employees.