UNITED STATES DISTRICT COURT FOR THE SOUTHERN … · MAYER, BROWN, ROWE & MAW LLP, and JOSEPH P....
Transcript of UNITED STATES DISTRICT COURT FOR THE SOUTHERN … · MAYER, BROWN, ROWE & MAW LLP, and JOSEPH P....
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
In re REFCO, INC. SECURITIES LITIGATION,
No. 07-MDL-1902 (JSR)
THOMAS H. LEE EQUITY FUND V, L.P., THOMAS H. LEE PARALLEL FUND V, L.P., and THOMAS H. LEE EQUITY (CAYMAN) FUND V, L.P.,
Plaintiffs,
vs.
MAYER, BROWN, ROWE & MAW LLP, and JOSEPH P. COLLINS,
Defendants.
Case No. 07-cv-6767 (JSR)
MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFFS’ APPEAL FROM THE JUNE 17, 2010 SPECIAL MASTER’S ORDER FINDING WAIVER OF WORK
PRODUCT PROTECTION
Plaintiffs Thomas H. Lee Equity Fund V, L.P.; Thomas H. Lee Parallel Fund V,
L.P. and Thomas H. Lee Equity (Cayman) Fund V, L.P. (collectively, “THL”), appeal from the
order dated June 17, 2010 of Special Master Ronald Hedges finding that THL had waived work
product privilege protection with regard to deposition preparation sessions of lawyers from Weil,
Gotshal & Manges (“WGM”) at which lawyers from Paul, Weiss, Rifkind, Wharton & Garrison
LLP (“Paul, Weiss”) representing THL were also present.
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PRELIMINARY STATEMENT
This appeal concerns one of the bedrock protections afforded clients and counsel
in our adversary system – the attorney work product doctrine – and the Special Master’s
incorrect determination that THL waived its attorney work product privilege with regard to
communications that occurred between or among WGM witnesses, WGM attorneys, and Paul,
Weiss attorneys during the preparation sessions of WGM witnesses attended by Paul, Weiss.
Special Master Order On Privilege (“Order”) ¶1. THL is represented in the MDL by WGM,
Paul, Weiss, and Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C. (“Kellogg, Huber”).
WGM also represented THL and Refco in connection with certain transactions at issue in this
case and the MDL. As a result of its representation of THL and Refco in these transactions,
some WGM attorneys are fact witnesses and have been deposed in the MDL. Paul, Weiss, as co-
counsel with WGM to THL in defense of actions that are part of the MDL, attended some of the
deposition preparation sessions of WGM witnesses in the Fall of 2009. At the time of those
sessions, WGM and THL were parties to a standstill agreement which tolled the statute of
limitations relating to hypothetical claims that THL might assert against WGM as a result of
WGM’s representation of THL involving THL’s investment in Refco.
Mayer Brown sought discovery of communications, notes and/or memoranda over
which an assertion of work product was being made, claiming that any attorney work product
protection was waived by disclosure to an adversary. Mayer Brown claimed that the adversarial
relationship between THL and WGM was evidenced by the standstill agreement between WGM
and THL tolling the statute of limitations relating to potential claims that THL might assert
against WGM as a result of WGM’s representation of THL in connection with THL’s investment
in Refco. In response THL pointed out that WGM represents THL in the MDL as co-counsel
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with Paul, Weiss and Kellogg, Huber and argued that the standstill agreement did not create
adversity between THL and WGM such that the presence of Paul, Weiss attorneys at the WGM
witness preparation sessions resulted in a waiver of attorney work product privilege protection
and, in any event, by virtue of WGM and Paul, Weiss being co-counsel no such waiver occurred.
The Special Master held that
1. With respect to communications that occurred between or among WGM witnesses, WGM attorneys and Paul Weiss LLP (“Paul Weiss”) attorneys during WGM witness deposition preparation sessions at which counsel from Paul Weiss was present, there has been a waiver of any attendant work product privilege. At the time of the preparation sessions, as demonstrated by the standstill agreement between WGM and THL, there was a reasonable anticipation of litigation between WGM and THL. Witnesses may be questioned at the upcoming depositions with respect to such communications.
2. With regard to any notes taken during the deposition preparation sessions and/or memoranda prepared by WGM and/or Paul Weiss attorneys related to the deposition preparation sessions, substantial need has not been shown. However, if, when questioned with respect to communications that took place at these preparation sessions, WGM witnesses do not recall such communications, Mayer Brown may contact Special Master Hedges during the deposition. Special Master Hedges will then determine if substantial need for the production of this core work product has been established.
Special Master Order On Privilege (“Order”) ¶¶1, 2.
There has been no waiver and the order of the Special Master must be reversed.
The Special Master’s decision is legally deficient because: (1) Paul, Weiss attended the WGM
witness preparation sessions as co-counsel with WGM in defense of THL in the MDL and the
existence of potential adversity because of the standstill agreement does not result in the waiver
of the work product privilege; (2) with regard to fact work product, Mayer Brown did not
demonstrate a substantial need and the inability to obtain this work product without undue
hardship such that the work product might be discoverable pursuant to Rule 26(b)(3)(A)(ii) and
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the Special Master failed to apply this standard to the factual work product being sought; and (3)
any notes taken during the deposition preparation sessions were not shared so there was no
waiver with regard to the notes; in addition the Special Master failed to apply the heightened
standard for disclosure for notes taken by WGM and Paul, Weiss attorneys during the
preparation sessions and, in any event, the passage of time and the failure of WGM witnesses to
recall communications that took place during preparation sessions does not meet the substantial
need and undue hardship test.
Background
The Fraud Scheme
The Refco MDL arise out of a massive, multi-year fraudulent scheme orchestrated
by Refco’s former Chief Executive Officer, Philip Bennett, and carried out by Bennett and his
co-conspirators, including, among others, two senior Refco executives (Robert Trosten and Santo
Maggio), a former owner of Refco (Tone Grant) and Mayer Brown senior partner Joseph Collins,
the company’s principal outside counsel. Each of these individuals, including Joseph Collins,
has either pleaded guilty or been tried and convicted of participating in this fraud. The scheme,
which was designed to mask the company’s true financial condition, began at least six years
before the THL Funds made their investment through a leveraged buyout in Refco in August
2004, when the THL Funds were defrauded into investing approximately $452 million in Refco
(“2004 Purchase” or “LBO”). Second Amended Complaint (“SAC”) ¶ 84 (Broderick Decl., Exh.
A). The scheme continued through the initial public offering (“IPO”) in August 2005 until early
October 2005, when members of the Refco Board of Directors (including the THL Funds’
designees) learned for the first time of the existence of an approximately $430 million related-
party obligation that Refco Group Holdings, Inc. (“RGHI”), Bennett’s unconsolidated company
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in which he held his Refco interests, owed to Refco. SAC ¶ 88 (Broderick Decl., Exh. A). The
Audit Committee of the Board of Directors immediately took various steps upon learning of the
undisclosed related-party debt, including initiating an internal investigation into Bennett’s
actions, retaining independent counsel and a forensic accounting firm. SAC ¶ 88 (Broderick
Decl., Exh. A).
On October 10, 2005, Refco issued a press release announcing Bennett’s
manipulation of the Company’s financial statements. Refco also announced that its financial
statements for various periods between 2002 and 2005 should no longer be relied upon. Shortly
thereafter, Bennett was arrested. SAC ¶ 89 (Broderick Decl., Exh. A). On October 17, 2005,
Refco and certain of its subsidiaries or affiliates filed for Chapter 11 bankruptcy protection.
SAC ¶ 90 (Broderick Decl., Exh. A).
THL’s Attorneys and WGM Witnesses
WGM attorneys represented THL in connection with THL’s purchase of a
majority interest in Refco in 2004. WGM attorneys also represented Refco in connection with
the 2005 exchange offer and subsequent IPO. (Broderick Decl. at ¶ 17). Allegations related to
the 2004 Purchase, the 2005 exchange offer and IPO are contained in the various complaints
filed in the MDL, including THL’s law suit against Mayer Brown and Joseph Collins. As a
consequence, some current and former WGM attorneys have been deposed in the MDL. Six
current and former WGM attorneys have been deposed in connection with the MDL: James
Westra; Jay Tabor; Alex Lynch; Barbra Broudy; Adam Nelson and Daniel Gewirtz. (Broderick
Decl., ¶ 24). In the Fall of 2009, James Westra, Jay Tabor, and Alex Lynch, (the “WGM
witnesses”) were deposed regarding their roles in the Refco transactions. When these WGM
witnesses were asked about the content of discussions with Paul, Weiss during their deposition
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preparation sessions, WGM attorneys objected to these questions based on work product and
common interest grounds and instructed the witnesses not to answer. See Lynch Depo. Tr. 18
(Broderick Decl. Exh. P); Westra Depo. Tr. 19 (Broderick Decl. Exh. Q); Tabor Depo. Tr. 11
(Broderick Decl. Exh. R).1
At least one Paul, Weiss attorney attended one or more of the deposition
preparation sessions for all six of the WGM attorneys deposed as witnesses. (Broderick Decl., ¶
24). To the extent notes were taken by a WGM or Paul, Weiss attorney during these preparation
sessions, they did not share those notes with one another. (Broderick Decl., Exh. H at 1). Paul,
Weiss attended these preparation sessions as co-counsel for THL with WGM in the Trustee
actions, the securities class action, the RCM actions and the Sphinx action. Paul, Weiss did not
and does not represent THL in its action against Mayer Brown.
Refco’s Bankruptcy Examiner and the Criminal Trial of Joseph Collins
On October 17, 2005, Refco and certain of its subsidiaries or affiliates filed for
Chapter 11 bankruptcy protection. The bankruptcy court appointed an examiner (the
“Examiner”) on March 16, 2006 to investigate “potential claims which might be brought by the
Debtors’ estates against any of Refco’s pre-petition professionals, and any causes of action that
might be brought to recover the $82.2 million dividend paid in connection with the IPO.” (See
Broderick Decl., Exh. M at 5). As part of his investigation the Examiner conducted interviews
of, among others, various professionals involved in the 2004 Purchase, exchange offer and IPO,
including certain WGM attorneys. In 2007 the Examiner interviewed WGM attorneys James
Westra, Jay Tabor, Alex Lynch and Barbra Broudy concerning their involvement in, among
other things, the 2004 Purchase, exchange offer and IPO. (See id. at 283-284). WGM and its
1 Mayer Brown did not contact Special Master during the depositions in question to obtain a ruling.
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witnesses agreed to Examiner’s request to have the interviews transcribed.2 (Id. at 284).
Transcripts of these interviews have been produced to Mayer Brown and other parties in the
MDL. The Examiner issued a report of his findings dated July 11, 2007.
James Westra and Jay Tabor each testified in the government’s case-in-chief at
the criminal trial of Mayer Brown senior partner Joseph Collins in May 2009, and were subjected
to extensive cross examination by counsel for Joseph Collins.3 Mr. Tabor was also a government
rebuttal witness. Prior to their testimony, the government produced 3500 material for Messrs.
Westra and Tabor, including notes taken by representatives of the government during interviews
and trial preparation sessions. (Broderick Decl., ¶ 23). Mayer Brown and other parties to the
MDL have copies of the 3500 material for Messrs. Westra and Tabor. Id.
The Standstill Agreement Between WGM and THL
WGM and THL entered into an agreement entitled Standstill Agreement with the
effective date of September 25, 2008. (See Broderick Decl., Exh. B). THL entered into this
agreement to preserve its ability “to bring claims, if any, relating to WGM’s representation of
THL involving THL’s investment in Refco to the extent such claims are based at least in part
upon material facts unknown to THL as of [September 25, 2008].” Standstill Agreement at 1
(See Broderick Decl., Exh. B). On May 20, 2009, Scott Schoen, who led the THL deal team that
worked on the 2004 Purchase and subsequently became a Refco Board member, testified during
the criminal trial of Joseph Collins that THL “reached an agreement with Weil Gotshal that said,
based on everything we know, we have no claim against you, but if something ever comes out in
2 Mayer Brown and its witnesses objected to the presence of the court reporter so the interviews of the Mayer Brown witnesses were not transcribed. (Broderick Decl., Exh. M at 233). 3 At the time of his criminal trial, Joseph Collins was still a partner at Mayer Brown, albeit on leave. Cr. Tr. at 3498 (Broderick Decl. Exh. O).
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the future that changes those circumstances, we still have the right to consider whether we have
any reason to pursue a claim against them.” Tr. 1080 (Broderick Decl., Exh. D).4 Mr. Schoen
was also questioned about the Standstill Agreement during his deposition. On September 24,
2009, Mr. Schoen testified that THL “asked for a tolling agreement from Weil, Gotshal to protect
our investors as fiduciaries, and we've made clear in that tolling agreement that any claims we
might have would have to be based on, at least in part on additional information that we currently
don't have.” Tr. 675 (Broderick Decl., Exh. C).
Procedural History of the Work Product Dispute
In accordance with directions from the Special Master, on May 12, 2010 THL and
Defendants jointly made written submissions to Special Master Hedges regarding various
disputes, including whether the work product doctrine protects from discovery the
communications and notes made during the deposition preparation sessions of the WGM
witnesses while attorneys from Paul, Weiss were present. (See Broderick Decl., Exh. E). At a
discovery hearing on May 13, 2010, Special Master Hedges heard oral argument on the work
product dispute, but decided to give the parties the opportunity to further brief the work product
issue through submission of three-page briefs. (See Broderick Decl., Exh. F).
On May 17, 2010, THL submitted a brief to Special Master Hedges, arguing that
the Standstill Agreement did not create adversity between THL and WGM such that the presence
of Paul, Weiss attorneys at the WGM witness preparation sessions resulted in a waiver of the
work product privilege and that, in any event, given WGM’s role as counsel in this case to THL
there was no such waiver. (See Broderick Decl., Exh. H). On May 20, 2010, Mayer Brown
4 While THL still has not asserted any claims against WGM, on March 29, 2010, THL and WGM entered into an agreement that terminated the Standstill Agreement. Under that agreement, WGM agreed to contribute $15 million to THL’s settlement with the securities class action plaintiffs in In Refco, Inc. Securities Litigation, 05 Civ. 8626 (JSR). (See Broderick Decl., Exh. G).
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submitted a response (See Broderick Decl., Exh. I) addressing WGM and THL’s claims of work
product protection and asserting substantial need for the information at issue. THL submitted a
reply on May 24, 2010 limited to the Defendants’ claims of substantial need and assertion that
Federal R. Evidence 612 mandated production of the information. (See Broderick Decl., Exh. J).
On June 1, 2010, during a telephonic hearing, Special Master Hedges found that
THL’s counsels’ notes from the WGM witness preparation sessions were core work product, for
which Defendants had failed to show substantial need. (See Broderick Decl., Exh. K). With
respect to communications that occurred among WGM witnesses, WGM attorneys, and Paul,
Weiss attorneys during the WGM witness deposition preparation sessions, Special Master
Hedges considered such information discoverable, finding that the Standstill Agreement between
WGM and THL evidenced adversity, which constituted a waiver of the attorney work product
privilege. See Id at 3-4. Special Master Hedges did not discuss or make a finding with regard to
substantial need and undue burden with regard to the communications.
On June 17, 2010, Special Master Hedges entered an order on the work product
dispute (“Order”). According to the Order, THL waived its attorney work product privilege with
regard to communications that occurred between or among WGM witnesses, WGM attorneys
and Paul, Weiss attorneys during the preparation sessions of WGM witnesses attended by Paul,
Weiss. Order ¶1; (See Broderick Decl., Exh. L). The Order further states that “[a]t the time of
the preparation sessions, as demonstrated by the standstill agreement between WGM and THL,
there was a reasonable anticipation of litigation between WGM and THL.” Id.
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ARGUMENT
As a matter of law, there has been no waiver of the attorney work product
privilege. As discussed in more detail below, the Special Master’s ruling to the contrary
constitutes legal error and fails to apply the applicable standard to determine whether or not a
waiver of work product has occurred, and if so whether the work product materials need to be
disclosed.
A. Work Product Protection Extends to the Deposition Preparation Sessions of the WGM Witnesses and There Has Been No Waiver of This Protection
The attorney work product doctrine protects an “attorney’s trial preparations from
the discovery attempts of the opponent,” rather than “against all others outside a particular
confidential relationship.” U.S. v. AT&T Co., 642 F.2d 1285, 1299 (D.C. Cir. 1980). The
purpose of the doctrine is to “preserve a zone of privacy in which a lawyer can prepare and
develop legal theories and strategy ‘with an eye toward litigation,’ free from unnecessary
intrusion by his adversaries.” United States v. Adlman, 134 F.3d 1194, 1196 (2d Cir.
1998)(quoting Hickman v. Taylor, 329 U.S. 495, 510-11 (1947)). Work product immunity
“extends to both tangible and intangible work product.” In re Cendant Corp. Sec. Litig., 343
F.3d 658, 662 (3d Cir. 2003)(citing Hickman v. Taylor, 329 U.S. 495 (1947)).
Therefore, the protection extends to attorney notes like the notes taken by WGM
and Paul, Weiss lawyers during the WGM witness preparation sessions. Indeed, the Special
Master recognized this during the May 13, 2010 hearing when he said that the notes taken by
attorneys during witness preparation sessions are classic core work product protected from
discovery, and confirmed this view in the Order. See Tr. 32:11-19 (Broderick Decl., Exh. F),
Order ¶ 2 (Broderick Decl. Exh. L); see also Hickman, 329 U.S. at 510; SEC v. Strauss, No. 09
Civ 4150 RMB/HBP, 2009 WL 3459204, at *4 (S.D.N.Y. Oct. 28, 2009) (“[t]o the extent the
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interview notes and memoranda were prepared by counsel, they easily fit within the protection of
the work-product doctrine”). In addition, work product privilege protection also extends to the
oral communications that took place during the deposition preparation sessions. See Transmirra
Prods. Corp. v. Monsanto Chem. Co., 26 F.R.D. 572, 579 (S.D.N.Y. 1960) (“Nor would the fact
that oral communications or conversations, rather than written materials, are involved seem to
preclude application of the ‘work product’ immunity.”).
Paul, Weiss attended the WGM witness preparation sessions as co-counsel for
THL with WGM in defense of THL in the MDL. Moreover, Paul, Weiss was not adverse to
WGM or the WGM witnesses. Therefore, its presence at the WGM witness preparation sessions
does not constitute waiver of work product protection. In fact, WGM continues to represent
THL, as well as the WGM witnesses (who also represented THL in some of the transactions at
issue in this litigation). As lawyers for THL in the MDL, the Paul, Weiss attorneys and WGM
attorneys share a mutual client and common obligations to that client.
Even if the disclosures made during the preparation sessions could be viewed as
disclosures to a third party, the “mere ‘disclosure of [such information] to third persons does not
waive the work-product immunity’ as to opposing counsel and parties.” Morales v. United
States, No. 94 Civ 4865 (JSR), 1997 WL 223080, at *1 (S.D.N.Y. May 5, 1997)(quoting Wright,
Miller & Marcus, Federal Practice and Procedure: Civil 2d § 2024, at 367-69 (2d ed. 1994)). In
fact, there is often “good reason” to disclose attorney work product to persons outside the
attorney-client relationship. See Adlman, 134 F.3d 1194, 1200 n.4. Having Paul, Weiss and
WGM -- who both represent THL in the MDL -- combine efforts in preparing witnesses for
depositions is one such good reason.
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“[D]isclosure simply to another person who has an interest in the information but
who is not reasonably viewed as a conduit to a potential adversary will not be deemed a waiver
of the protection of the rule.” In re Gulf Oil /Cities Service Tender Offer Litigation, No. 82 Civ.
5253, 1990 WL 108352, at *4 (S.D.N.Y. July 20, 1990). Neither Paul, Weiss, WGM counsel,
nor the WGM witnesses can be fairly viewed as a conduit to Mayer Brown or any other potential
adversary. Moreover, Mayer Brown has not and cannot make a showing that Paul, Weiss
attended the preparation sessions to represent THL against WGM or that Paul, Weiss was hostile
in anyway to WGM. Indeed all of the litigation attorneys present during the preparation sessions
were attorneys representing THL in the MDL who had a professional obligation to keep
confidential any disclosures made during those sessions. See GAF Corp. v. Eastman Kodak Co.,
85 F.R.D. 46, 51-52 (S.D.N.Y. 1979)("The majority rule provides that disclosure of the
privileged information by the party asserting the attorney work product privilege to a third-party
does not constitute waiver unless such disclosure, under the circumstances, is inconsistent with
the maintenance of secrecy from the disclosing party's adversary.")(emphasis added)(citing 8
Wright & Miller, Federal Practice and Procedure § 2024 at 210 (1970)); See Bluebird Partners,
L.P., v. First Fidelity Bank, N.A, 248 A.D.2d 219, 225 (1st Dep’t 1998) (“Work product privilege
is waived upon disclosure to a third party only when there is a likelihood that the material will be
revealed to an adversary, under conditions that are inconsistent with a desire to maintain
confidentiality.”) (emphasis added). Therefore, any disclosures made during the preparation
sessions were entirely consistent with the purpose of the work product doctrine. Adlman, 134
F.3d at 1196. With regard to notes taken by WGM and Paul, Weiss attorneys during the
preparation sessions, there is no basis to argue waiver since the attorneys did not share their
notes with one another.
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B. The Existence of the Standstill Agreement Does Not Result in a Waiver of the Work Product Privilege
The existence of the Standstill Agreement at the time of the preparation sessions
does not create adversity so as to result in a waiver of work product protection.5 The existence
of potential adversity between WGM and THL at the time of the preparation sessions does not
result in waiver of the attorney work product doctrine such that the communications and notes
become discoverable. The Special Master’s ruling to the contrary is legal error. Both WGM and
Paul, Weiss represent THL in the MDL, and thus have a mutual client and common obligations.
We have found no case were the presence of co-counsel at a deposition preparation session of a
third party witness has resulted in a waiver. By analogy, where disclosure of work product is
made by parties that are directly adverse (e.g., defendant to a plaintiff), if parties are found to
have mutual interest in defending against the claims of another party, “the work product
privilege is not waived by their sharing of information.” Reliance Ins. Co. v. McNally Inc., Civ.
No. 89-2401-V, 1992 U.S. Dist. LEXIS 22605, *8-10 (D. Kan. Feb. 5, 1992) (finding no waiver
where plaintiff insured disclosed information to defendant insurer); see also Plew v. Limited
Brands, Inc., No. 08 Civ. 3741 (LTS), 2009 U.S. Dist. LEXIS 39715, at *1 (S.D.N.Y. Apr. 23,
2009) (holding no waiver where defendant and third party supplier’s interests were aligned in
avoiding a finding of infringement, despite potential adversity in defendant suing third party
supplier for sale of infringing product); Morales v. United States, 1997 WL 223080, at *1
(S.D.N.Y. May 5, 1997)(denying motion to compel because deposition questions concerning
attorney’s communications with non-party witness might reveal legal strategy and thought 5 As the Court noted at the May 13, 2010 hearing, adversity, or lack thereof, is determined at the time of the disclosure. See United States v. Gulf Oil Corp., 760 F.2d 292, 296 (Temp. Emer. Ct. App. 1985) (rejecting work product waiver argument because the parties were not adverse at the time disclosure was made). The Standstill Agreement was entered into on September 25, 2008. The deposition preparation sessions were held in the Fall of 2009. The agreement that terminated the Standstill Agreement was entered into on March 29, 2010, and is therefore not relevant to the waiver analysis.
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processes). Similarly, a complete unity of interests is not required in situations involving
assertions of a common interest privilege. See Haines v. Liggett Group Inc., 975 F.2d 81, 94 (3d
Cir. 1992) (stating that claims of common interest privilege are grounded in the attorney client
privilege or attorney work product doctrine); In re Value Prop. Trust v. Zim Co. (In re Mortg.
Realty Trust), 212 B.R. 649, 653 (Bankr. C.D. Cal. 1997) (“The [common interest] privilege
does not require a complete unity of interests among the participants . . . and it applies even
where the parties’ interests are adverse in substantial respects.”); In re Grand Jury Subpoena
Duces Tecum, 406 F. Supp. 381, 392 (S.D.N.Y. 1975) (finding joint defense privilege was not
waived with regard to protected statements among potential adversaries as long as they
concerned common issues).
If the ruling of the Special Master were indeed the law, parties would be
paralyzed in many situations where there exists some potential for adversity at some point in the
future that may never come to pass. In many multi-party litigations like this, parties aligned on
certain issues may not be aligned on all issues or they may have the potential to become adverse
in the future. The ruling by the Special Master would prevent these parties from preparing a
witness or sharing information even if they believe that their interests are not in conflict at that
time and they have every expectation of confidentiality. Such a rule is untenable and would
result in unfair and unintended consequences. Indeed, the natural outgrowth of the Special
Master’s ruling would result in waiver in a variety of circumstances where there is a plain
expectation of confidentiality such as, in the common instance, where an employee facing
criminal or civil proceedings has been prepared for testimony by his own lawyer, with his
employer's counsel sitting in on parts of those sessions. Certainly Mayer Brown would not take
the position that Joseph Collins (who has his own counsel) could testify as to what William &
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Connolly (Mayer Brown's counsel) told him during his preparation sessions for his criminal trial
testimony because Williams & Connolly helped prepare him to testify at certain of those sessions
even though his criminal conviction could result in adversity in the future, including with regard
to fees paid to Mr. Collins’s personal attorneys at Cooley Godward to the extent Mr. Collins did
not pay the fees himself.6
In addition, as a factual matter, THL did not believe it had any claims against
WGM. On May 20, 2009, Scott Schoen, who led the THL deal team on the Refco transactions,
testified during the criminal trial of Joseph Collins that THL “reached an agreement with Weil
Gotshal that said, based on everything we know, we have no claim against you, but if something
ever comes out in the future that changes those circumstances, we still have the right to consider
whether we have any reason to pursue a claim against them.” Tr. 1080 (Broderick Decl. Exh.
D). Similarly, on September 24, 2009, Mr. Schoen testified during his deposition that THL
“asked for a tolling agreement from Weil, Gotshal to protect our investors as fiduciaries, and
we've made clear in that tolling agreement that any claims we might have would have to be
based on, at least in part on additional information that we currently don't have.” Tr. 675
(Broderick Decl. Exh. C). Therefore, no actual adversity existed as a matter of fact. Moreover,
as further evidence that no actual adversity existed at the time of the deposition preparation
sessions, THL continues to use WGM as co-counsel in all of the Refco-related litigations, both
before during and after the Standstill Agreement was in effect. If truly adverse, THL would not
have entrusted WGM with representing its interests in these significant litigations, which have
claims in the hundreds of millions of dollars. WGM’s continued representation totally belies any
notion that there was adversity here. 6 At the time his of his deposition in the MDL (and presumably at the time of his criminal trial), Mr. Collins had a joint defense agreement with Mayer Brown. Collins Tr. 451 (Broderick Decl., Exh. N).
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C. The Special Master Failed to Apply the Appropriate Standard Under Rule 26 With Regard to Fact and Opinion Work Product
1. Mayer Brown Has Not Demonstrated Substantial Need and Undue Burden Such That Disclosure May be Required of Communications Between or Among WGM Witnesses, WGM Attorneys and Paul, Weiss Attorneys During the Preparation Sessions of WGM Witnesses
With regard to communications that occurred between or among WGM witnesses,
WGM attorneys and Paul, Weiss attorneys during the preparation sessions of WGM witnesses
attended by Paul, Weiss, the Special Master failed to apply the standard set forth in Rule
26(b)(3)(A)(ii) of the Federal Rules of Civil Procedure. Instead the Special Master based his
ruling entirely on the existence of the Standstill Agreement. Specifically, the Special Master
ruled
With respect to communications that occurred between or among WGM witnesses, WGM attorneys and Paul Weiss LLP (“Paul Weiss”) attorneys during WGM witness deposition preparation sessions at which counsel from Paul Weiss was present, there has been a waiver of any attendant work product privilege. At the time of the preparation sessions, as demonstrated by the standstill agreement between WGM and THL, there was a reasonable anticipation of litigation between WGM and THL. Witnesses may be questioned at the upcoming depositions with respect to such communications.
Order ¶ 1. The Special Master did no further analysis; he failed to apply Rule 26(b)(3)(A)(ii).
Therefore, the ruling should be reversed.
Work product privileged material is ordinarily not discoverable. See Fed. R. Civ.
P. 26(b)(3)(A). “There are two types of work product, ordinary or fact . . . and opinion.” In Re
Grand Jury Subpoena, 510 F.3d 180, 183 (2d Cir. 2007). Although “fact” work product
“encompass[es] factual material,” “opinion” work product “reveals the ‘mental impressions,
conclusions, opinions, or legal theories of an attorney or other representative,’ and is entitled to
greater protection than fact work product.” Id. (quoting United States v. Adlman, 134 F.3d 1194,
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1197 (2d Cir. 1998)). Factual work product may be discovered if the party seeking discovery
shows a “substantial need for the materials to prepare its case and cannot, without undue
hardship, obtain their substantial equivalent by other means.” Fed. R. Civ. P. 26(b)(3)(A)(ii).
Substantial need is shown for purposes of overcoming the protection of fact work
product by establishing that the facts contained in the requested documents are essential elements
of the requesting party’s prima facie case, Hendrick v. Avis Rent A Car Sys., 916 F. Supp. 256,
261 (W.D.N.Y. 1996) (plaintiff failed to show substantial need to attend defendant’s crash
testing, where plaintiff failed to allege inability to conduct own crash testing or associated costs,
or why attendance was critical to preparation of own case), or where the work product at issue is
central to the substantive claims in litigation. See Madanes v. Madanes, 199 F.R.D. 135, 150
(S.D.N.Y. 2001). Substantial need is also shown when the information sought is essential to the
party’s defense, is crucial to the determination of whether the defendant could be held liable for
the acts alleged, or carries great probative value on contested issues. See Nat’l Cong. for Puerto
Rican Rights v. City of New York, 194 F.R.D. 105, 110 (S.D.N.Y. 2000) (substantial need for
police records shown). But where work product documents “might possibly be helpful” to a
thorough preparation of a party’s case, but are not essential, production will not be ordered.
Republic Gear Co. v. Borg-Warner Corp., 381 F.2d 551, 558 (2d Cir. 1967). Thus, the extent to
which a party substantiates his asserted substantial need is an important factor. See In re Grand
Jury Subpoena Dated Nov. 9, 1979, 484 F. Supp. 1099, 1103 (S.D.N.Y. 1980).
The fact that a party can discover the contents of documents by deposing
witnesses who created the materials weighs against a finding of “substantial need.” See Nat’l
Union Fire Ins. Co. v. AARPO, Inc., No. 97 Civ. 1438, 1998 WL 823611, at *1 (S.D.N.Y. Nov.
25, 1998) (refusing to order disclosure of transcripts of attorney interviews where a party failed
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to show that his ability to prepare for trial would be adversely affected by non-disclosure, and
where the party had an opportunity to depose same witnesses). Furthermore, a party’s desire to
find corroborating evidence is insufficient to establish substantial need. See Director, Office of
Thrift Supervision v. Vinson & Elkins LLP, 124 F.3d 1304, 1308 (D.C. Cir. 1997) (corroborative
evidence can rarely be found to be “necessary”); cited with approval in A.I.A. Holdings, S.A. v.
Lehman Bros., Case No. 97 Civ. 4978, 2000 U.S. Dist. LEXIS 15820, *8 (S.D.N.Y. Oct. 27,
2000) (holding that “in order to pierce the work product doctrine, the information in issue must
do more than meet the broad standard of relevance applicable in discovery.”).
Mayer Brown has not shown substantial need and undue hardship such that the
communications from the deposition preparation sessions are discoverable. See Fed. R. Civ. P.
26(b)(3)(A)(ii). Indeed, Mayer Brown cannot make such a showing. The only argument Mayer
Brown made before the Special Master with regard to substantial need was with regard to the
notes taken during the WGM witness deposition preparation sessions. Specifically, Mayer
Brown argued that the passage of time between the deposition preparation sessions and today
amounts to substantial need because “it is now highly likely that the WGM witnesses will either
fail to recall conversations that occurred during their preparation sessions or will have faulty
memories of those conversations.” (Broderick Decl., Exh. I at 3). The passage of time and the
failure of WGM witnesses to recall communications made during their preparation sessions
under the facts of this case do not meet the standard of substantial need and undue hardship
under Rule 26.7
The passage of time does not explain why Mayer Brown has any need, let alone a
substantial need, to know what was said during the WGM witness preparation sessions nor does 7 It should be noted that Mayer Brown could have contacted the Special Master during the depositions in question to obtain a ruling but failed to do so.
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it explain why core work product -- attorney’s notes -- may be subject to disclosure.8 Each of the
WGM witnesses has been deposed about their participation in the transactions at issue, and there
has been no indication that they have forgotten what their role was in connection with those
transactions. Nor was there any indication that their memories had faded such that they needed
to be refreshed in the deposition preparation sessions. Moreover, Mayer Brown has transcripts
from interviews conducted by the Bankruptcy Examiner. James Westra, Jay Tabor, Alexander
Lynch and Barbra Broudy were each interviewed by the Examiner in 2007 about many of the
same transactions and events at issue in the MDL.9
WGM witnesses James Westra and Jay Tabor also testified at the criminal trial of
Joseph Collins in May 2009 and were subjected to extensive cross examination by counsel for
Joseph Collins. Prior to their testimony, the government produced 3500 materials for Messrs.
Westra and Tabor, including notes taken by representatives of the government during interviews
and trial preparation sessions. In short, Mayer Brown has extensive and detailed documentation
of what most of the WGM witnesses remember concerning the transactions at issue; therefore,
Mayer Brown does not have a need to know what was said during the deposition preparation
sessions. Indeed, in light of all of the factual testimony and notes available to Mayer Brown
related to the WGM witnesses, it is clear that Mayer Brown is engaged in a thinly veiled attempt
to obtain the mental impressions and opinions of THL’s lawyers, not the factual recollections of
8 SR International Business Insurance Co. v. World Trade Center Properties, LLC, No. 01 Civ. 9291, 2002 WL 1334821 (S.D.N.Y. June 19, 2002), cited by Mayer Brown below as supporting its substantial need for the notes taken by WGM and Paul Weiss attorneys is inapposite and easily distinguished. The delay at issue in SR International related to the time immediately after 9/11 when the Willis insurance witnesses met with attorneys for the Silverstein parties and their depositions, not the delay between their deposition preparation sessions and their depositions. Here, unlike the insurers in SR International, as described in more detail above, Mayer Brown has contemporaneous Examiner interview transcripts for four WGM witnesses, notes taken during preparation sessions by the government and testimony from the Collins criminal trial for James Westra and Jay Tabor. 9 WGM and its witnesses agreed to the Examiner’s request to have the interviews transcribed whereas Mayer Brown and its witnesses objected to the presence of the court reporter. See Examiner Report at Exh. M at 233, 283.
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the WGM witnesses about events and issues related to the MDL. Mayer Brown is not entitled to
such material.
2. Special Master’s Ruling With Regard to the Notes of WGM and Paul, Weiss Attorneys is Legally Deficient Because Substantial Need Cannot be Demonstrated for any Work Product Material and the Special Master Failed to Apply the Heightened Standard for Core Work Product
The Special Master’s ruling permitting Mayer Brown to contact him during the
reopened depositions of WGM witnesses if they do not recall communications that took place
during the preparation sessions so that he could “determine if substantial need for the production
of this core work product has been established” is legal error for two reasons. First, as discussed
above, Mayer Brown has not demonstrated substantial need for the notes. Second, the Special
Master failed to apply the heightened standard required for core work product.
While “fact” work product “encompass[es] factual material,” “opinion” work
product “reveals the ‘mental impressions, conclusions, opinions, or legal theories of an attorney
or other representative,’ and is entitled to greater protection than fact work product.” In Re
Grand Jury Subpoena, 510 F.3d 180, 183 (2d. Cir. 2007)(quoting United States v. Adlman, 134
F.3d 1194, 1197 (2d Cir. 1998)). If a court orders discovery of work product materials “it must
protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of a
party's attorney or other representative concerning the litigation.” Fed. R. Civ. P. 26(b)(3)(B).
Core or opinion work product receives greater protection than ordinary work product, and is
discoverable, if at all, only upon a showing of extraordinary need. See Upjohn Co. v. United
States, 449 U.S. 383, 401-02 (1981)(“As Rule 26 and Hickman10 make clear, such [opinion]
work-product cannot be disclosed simply on a showing of substantial need and inability to obtain
10 Hickman v. Taylor, 329 U.S. 495 (1947).
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the equivalent without undue hardship” instead a “far stronger showing of necessity and
unavailability” must be made.); Jean v. City of New York, No. CV-09-801, No. CV-09-801 RJD
VVP, 2010 WL 148420, at *2 (E.D.N.Y. Jan. 12, 2010)(opinion work product is “entitled to
more stringent protection, protection described by some courts as ‘absolute’ or ‘near
absolute’”)(citing In re Cendant Corp. Secs. Litig., 343 F.3d 658, 663 (3d Cir. 2003)); Astra
Aktiebolag v. Andrx Pharms., Inc., 208 F.R.D. 92, 104 (S.D.N.Y. 2002)(“As to [opinion work-
product] documents, a far greater showing is required to pierce the doctrine’s protection, and
there is some authority that the protection afforded such opinion work product may be
absolute.”)(quotations omitted).
During the May 13, 2010 hearing the Special Master said that the notes taken by
attorneys during witness preparation sessions are classic core work product (Tr. 32:11-19), and
he confirmed this view in the Order where he referred to the notes as “core work product.”
Order ¶ 2. These notes prepared while litigation was pending clearly fall within the confines of
the work product doctrine and should be protected because the “purpose of the [work product]
doctrine is to allow an attorney or another party representative to prepare for trial with a certain
degree of privacy, ‘free from unnecessary intrusion by opposing counsel.’” Carter v. Cornell
Univ., 173 F.R.D. 92, 95 (S.D.N.Y. 1997)(quoting Hickman, 329 U.S. at 510-11). Moreover,
consistent with the Special Master’s determination on May 13 and his Order, under Second
Circuit law, an attorney’s notes which contain discussions of the principle issues and responses
during an interview or preparation sessions are considered “classic, core work product.” See
e.g., In re Cardinal Health, Inc., Sec. Litig., No. C2 04 575 ALM, 2007 WL 495150, at *6
(S.D.N.Y. Jan. 26, 2007)(finding documents “squarely covered by the work product doctrine
since they represent [the attorneys’] legal analysis, opinions, and mental impressions concerning
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the issues investigated.”); SEC. v. Strauss, No. 09 Civ 4150 RMB/HBP, 2009 WL 3459204, at
*4 (S.D.N.Y. Oct. 28, 2009)(“To the extent the interview notes and memoranda were prepared
by counsel, they easily fit within the protection of the work-product doctrine.”)(citing other cases
in the circuit holding the same). Therefore, to the extent the protection of core work product is
not absolute, the Special Master’s ruling with regard to the notes failed to apply the appropriate
heightened standard for core work product. In any event, as demonstrated above, whether under
the substantial need and undue hardship test or the heightened standard used for core work
product, the notes taken by WGM and Paul, Weiss attorneys during preparation sessions of the
WGM witnesses should not be ordered disclosed.
CONCLUSION
WHEREFORE, THL respectfully requests that the June 17, 2010 Order of Special
Master Hedges be overturned and that the Court find that the deposition preparation sessions of
the WGM witnesses and any notes taken during those sessions by Paul, Weiss and WGM
attorneys are protected work product.
Dated: June 28, 2010 New York, New York
WEIL, GOTSHAL & MANGES LLP
/s/ Vernon Broderick Vernon Broderick (VB-4332) 767 Fifth Avenue New York, New York 10153 (212) 310-8000
Attorneys for Plaintiffs
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