Silver Bow Partnerships. The misconduct includes: fraudulent representations in the Private Placement Memoranda and Partnership Agreements regarding the use of subscription funds and oil production revenues, undercapitalization of several Partnership Programs accomplished through fraud, commingling of Partnership funds with Silver Bow Resources & Chemical Corporation's operating funds, expenditures from the commingled account designed to benefit Raymond Whalen and his affiliates personally, fraudulent conversion of oil production revenues and misrepresentation of the oil production revenue distribution schedule to the limited partners, tax fraud, and securities fraud. E.g., Affidavit of W.A.W. Van Limburg Stirum, attached to Doc. 14; Affidavit of James M. Van Metre, Doc. 40; Affidavit of James C. Mote with exhibits, Doc. 17; Affidavit of Linda Candido (Henderson) with exhibits, Doc. 16; Affidavit of Linda (Candido) Henderson, Doc. 102; Partnership Agreements, Exhs. A-M attached to Doc. 112. Prior proceedings based on this record have resulted in the appointment of a receiver to manage Silver Bow Partnership affairs pending resolution of this lawsuit, and a preliminary injunction enjoining Silver Bow Resources & Chemical Corporation from receiving or using any proceeds from its various interests in the oil revenues of Silver Bow Partnerships. See Minute Entry recording Decision from the Bench on May 22, 1991, Doc. 74; Order dated May 31, 1991, Doc. 77, as amended by Order dated June 6, 1991, Doc. 79; Transcript of Decision from the Bench on October 28, 1991, Doc. 133; Order dated November 1, 1991, Doc. 131. The evidence of misconduct by the Whalen defendants which led to the appointment of a receiver and the granting of a preliminary injunction is equally persuasive here to establish a prima facie case of fraud against the Whalen defendants. The court concludes, on the record before it, that the prima facie evidence of fraud by the Whalen defendants in connection with the formation and operation of Silver Bow Partnerships is sufficient to remove the protective shield of the attorney-client privilege from all documents confidentially conveyed between the Whalen defendants and Bartlett, Pontiff involving the formation and/or operation of Silver Bow Partnerships. Therefore, the attorney defendants are directed to disclose to plaintiffs all communications responsive to items 10, 13, 20, and the remaining portions of items 1, 8, 9, 11, 12, 14, 16, 17, 18, 23, 28, 29, 30, 33, and 34 of plaintiffs' document production request.
There is one item which requests documents that may fall outside the scope of the court's ruling on the crime-fraud exception. Item 22 requests Bartlett, Pontiff's entire files "relating to legal work performed for [Silver Bow Resources & Chemical Corporation, Whalen Drilling and Mining Corporation], or the Silver Bow Partnerships." It is conceivable, and indeed likely, that some documents responsive to this request do not involve the formation or operation of Silver Bow Partnerships and thus do not fit within the category of documents for which the court has determined the crime-fraud exception applies. However, the attorney defendants' motion for an order authorizing them to disclose all documents and testify about their role in all aspects of the events which gave rise to this lawsuit adequately covers item 22, and any other request plaintiffs make for discovery from the attorney defendants.
Ethical Consideration 4-1 of the Model Code of Professional Responsibility ("Code"), which governs the conduct of all attorneys practicing law in New York State, sets forth the "ethical obligation of a lawyer to hold inviolate the confidences and secrets of his client." N.Y. Judiciary Law EC 4-1 (McKinney 1992). Nonetheless, Disciplinary Rules 4-101(C)(2) and (4) of the Code authorize the attorney to reveal confidential communications "when permitted under Disciplinary Rules or required by law or court order," and when necessary "to defend the lawyer or his or her employees or associates against an accusation of wrongful conduct." N.Y. Judiciary Law DR 4-101(C) (McKinney 1992). Courts have held that when an attorney is accused of wrongful conduct, whether or not the attorney is named as a formal party to the litigation, the attorney is permitted under DR 4-101(C)(4) to reveal confidential communications in an effort to clear his or her name. E.g., Eckhaus v. Alfa-Laval, Inc., 764 F. Supp. 34, 37-38 (S.D.N.Y. 1991) (and cases cited therein); SEC v. Forma, 117 F.R.D. 516, 524 (S.D.N.Y. 1987).
Plaintiffs' second amended complaint in the case at bar includes numerous allegations of wrongdoing by Bartlett, Pontiff in connection with securities fraud and other causes of action leveled against the Whalen defendants. While the court draws no conclusions as to the truthfulness of the allegations against the attorney defendants, the court finds the allegations to be objectively reasonable given the facts in the record at this time. See SEC v. Forma, 117 F.R.D. at 525. Hence, the attorney defendants certainly must be permitted to defend themselves, and in so doing must be permitted to reveal confidential communications between themselves and the Whalen defendants consistent with DR 4-101(C)(4). Therefore, the court grants the attorney defendants' motion for an order authorizing them to disclose documents and testify about their role in all aspects of the events which gave rise to this lawsuit. In view of this authorization, the attorney defendants are directed to respond to item 22 of plaintiffs' document production request, and any other outstanding discovery request.
To summarize, plaintiffs' cross-motion pursuant to Fed.R.Civ.P. 37(a) to compel discovery is granted in part, and defendants Bartlett, Pontiff and Paul Pontiff are directed to respond forthwith to the items in plaintiffs' discovery requests enumerated in this decision. The motion by defendants Bartlett, Pontiff, Stewart, Rhodes & Judge, P.C. and Paul Pontiff for an order authorizing them to disclose documents and testify about their role in all aspects of the events which gave rise to this lawsuit is also granted, and defendants are directed to respond forthwith to all outstanding discovery requests.
It is So Ordered.
Dated: January 26, 1993
Syracuse, New York
HOWARD G. MUNSON
SENIOR UNITED STATES DISTRICT JUDGE