Opinion
00 Civ. 9214 (RWS).
September 27, 2006
BUTLER, FITZGERALD POTTER Attorneys for Plaintiff New York, NY, By: RAYMOND FITZGERALD, ESQ. DAVID J. McCARTHY, ESQ. Of Counsel.
KATTEN MUCHIN ROSENMAN LLP Attorneys Pro Se New York, NY, By: ANTHONY PACCIONE, ESQ. DANIEL A. EDELSON, ESQ. Of Counsel.
OPINION
Plaintiff The Jordan (Bermuda) Investment Company, Ltd. ("Jordan") has moved pursuant to Rules 37(a) and 45, Fed.R.Civ.P., to compel Fred Santo, Esq. ("Santo") to answer questions and to compel his firm Katten Muchin Rosenman ("Rosenman") to produce documents and for sanctions. Rosenman has opposed the motion on grounds of the attorney-client privilege. For the reasons set forth below, the motion is denied.
Prior Proceedings
Jordan filed its complaint December 5, 2000 as the assignee of the claims of The Jordan Trust, alleging that The Jordan Trust was fraudulently induced to transfer five million dollars to the Beacon Emerging Debt Fund, Ltd. ("Beacon"), presently in dissolution in the British Virgin Islands.
The Second Amended Complaint ("SAC") was filed on November 21, 2003.
Previous motions seeking Rosenman documents withheld on the basis of the attorney-client privilege were addressed by orders dated January 26, March 2, June 29, and July 27, 2005.
The instant motion was filed February 6, 2006, and heard and marked fully submitted on March 15, 2006.
The Facts
During the time of the events which are the subject of this action, Santo, a partner with the Rosenman firm, represented Investment Management Services, Inc. ("IMS"); International Fund Services, N.A., LLP; International Fund Services Ireland, Ltd. ("IFSI"); Beacon Emerging Debt Fund, Ltd. ("Beacon Emerging"); Beacon Growth Fund LLP ("Beacon"); and Hunter Green Investments, Ltd. ("Hunter Green").
The role of Rosenman in relation to these business entities was described in the Private Placement Memorandum ("PPM") referred to in the SAC, which states that Rosenman acted as U.S. counsel to Beacon (identified in the PPM as the "Fund") in connection with the offering, and as counsel to Hunter Green (identified as the "Investment Manager") and IFSI (identified as the "Administrator"). These are separate legal entities and, as recognized in the Court's order of March 2, 2005, are each entitled to the attorney-client privilege as joint clients of Rosenman.
Andrew Bickerton, the liquidator of the Beacon entities, waived the attorney-client privilege of the Beacon entities on April 26, 2005. (Letter from Bickerton to Fred Santo and Raymond Fitzgerald dated April 26, 2005, attached as Exhibit 1 to the Affidavit of Raymond Fitzgerald.)
The Privilege Has Not Been Waived
The instant motion to compel presents issues previously raised by Rosenman's letter requesting clarification dated July 21, 2005, which led to the Court's order of July 27, 2005, determining that Beacon's waiver did not waive the attorney-client privilege as to Rosenman's non-Beacon clients,i.e., IMS, IFSI, and Hunter Green.
Jordan has suggested that waiver by one joint client of its communications with an attorney enables a third party to discover each of the other joint clients' communications with the same counsel. However, "[o]ne co-client does not have authority to waive the privilege with respect to another co-client's communications to their common lawyer." Restatement (Third) of The Law Governing Lawyers, § 75 cmt. e (2000). In instances where a communication involves "two or more co-clients, all those co-clients must join in a waiver, unless a nonwaiving co-client's communication can be redacted from the document." Id.; see also Paul R. Rice, Attorney-Client Privilege in the United States § 9.67 (1999) ("Because these privilege claims are held in common, it is generally agreed that none of the joint clients may waive that privilege protection without the consent of the others.").
Jordan has cited cases for the proposition that the attorney-client privilege that attaches to joint communications can be waived unilaterally by any of the joint clients, and that such waiver makes the privileged communications discoverable by third parties. (See Pl.'s Mem. at 16-19, citing Bass Pub. Ltd. v. Promus Cos., 868 F. Supp. 615 (S.D.N.Y. 1994); Polycast Tech. Corp. v. Uniroyal, Inc., 125 F.R.D. 47 (S.D.N.Y. 1989); and Medcom Holding Co. v. Baxter Travenol Labs., Inc., 689 F. Supp. 841 (N.D. Ill. 1988)).
The cited cases from this District are inapposite, as each relied implicitly on the inter sese rule that "in any later controversy between or among [joint] clients, the privilege [cannot] stand as a bar to full disclosure at the instance of any one of them." In re Grand Jury Subpoena Duces Tecum Dated Nov. 16, 1974, 406 F. Supp. 381, 386 (S.D.N.Y. 1975); see also Restatement (Third) of The Law Governing Lawyers, § 75(2) ("Unless the co-clients have agreed otherwise, a communication described in Subsection (1) is not privileged as between the co-clients in a subsequent adverse proceeding between them." (emphasis added)). In each case, an acquiring corporation sued the former parent or subsidiary of an acquired corporation, and sought to compel the production of communications for which the acquired corporation and its former parent or subsidiary held a joint attorney-client privilege. In each case, the court viewed the acquiring corporation as having "effectively acquired the subsidiary's share of the privilege as a result of the sale." Bass, 868 F. Supp. at 619 (citing Polycast, 125 F.R.D. at 49). Both cases thus stand for the undisputed proposition that a joint client may use the privileged communication in litigation against another joint client, a situation not present here.
To the extent that Medcom Holding, a case from the Northern District of Illinois, stands for the proposition that unilateral waiver by any joint client waives the privilege as to third parties, it is contrary to the general rule, and this Court declines to follow it.
Jordan additionally has contended that Beacon's waiver of the privilege also waives the privilege of its employees or agents with respect to their communications related to their corporate role, and that IMS, IFSI, and Hunter Green acted as agents for Beacon. (Pl.'s Mem. at 19-21).
Here, Rosenman represented a group of joint clients comprised of distinct corporate entities that shared a common interest entitling them to the joint client privilege. See SCM Corp. v. Xerox Corp., 70 F.R.D. 508, 514 (D. Conn. 1976); Restatement (Third) of The Law Governing Lawyers, § 75(1). These separate entities sought counsel from Rosenman to better pursue their legal interests. The relationship between Beacon, IMS, IFSI, and Hunter Green is distinct from that between a corporation and its employees and officers.
It is well-established that a corporation owns and controls the right to the privilege with respect to communications by its officers and employees concerning the corporation, In re Grand Jury Investigation No. 83-30557, 575 F. Supp. 777, 780 (N.D. Ga. 1983); In re O.P.M. Leasing Servs., Inc., 13 B.R. 64, 68 (S.D.N.Y. 1981); In re Grand Jury Subpoena Duces Tecum, 391 F. Supp. 1029, 1034 (S.D.N.Y. 1975), but neither Beacon nor its liquidator own the privilege as to the communications of separate business entities and independent Rosenman clients.
Conclusion
For the reasons stated above, the motion is denied.
It is so ordered.