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SECURITIES AND EXCHANGE COMMISSION v. JACK LAVIN AND ROBIN LAVIN </h1> <p class="docCourt"> </p> <p> May 2, 1997 </p> <p class="case-parties"> <b>SECURITIES AND EXCHANGE COMMISSION, APPELLEE<br><br>v.<br><br>JACK LAVIN AND ROBIN LAVIN, APPELLANTS</b><br><br> </p> <div class="caseCopy"> <div class="facLeaderBoard"> <script type="text/javascript"><!-- google_ad_client = "ca-pub-1233285632737842"; /* FACLeaderBoard */ google_ad_slot = "8524463142"; google_ad_width = 728; google_ad_height = 90; //--> </script> <script type="text/javascript" src=""> </script> </div class="facLeaderBoard"> <div class="numbered-paragraph"><p><br> Appeal from the United States District Court for the District of Columbia (No. 95ms00393)</p></div> <div class="numbered-paragraph"><p> Before: Wald, Ginsburg and Rogers, Circuit Judges.</p></div> <div class="numbered-paragraph"><p> Rogers, Circuit Judge</p></div> <div class="numbered-paragraph"><p> FOR PUBLICATION</p></div> <div class="numbered-paragraph"><p> FOR THE DISTRICT OF COLUMBIA CIRCUIT</p></div> <div class="numbered-paragraph"><p> Argued February 14, 1997</p></div> <div class="numbered-paragraph"><p> Opinion for the Court filed by Circuit Judge Rogers.</p></div> <div class="numbered-paragraph"><p> Appellants Jack and Robin Lavin appeal from an order enforcing a subpoena for seven taped telephone conversations that they maintain are protected from disclosure by the privilege for confidential marital communications. The district court rejected the Lavins' claim of privilege, finding that their communications were not confidential and that, even if initially confidential, the Lavins waived the right to assert the privilege. The Lavins contend that the district court's finding that their conversations were not confidential was unsupported by the evidence, and that the district court erred in denying their request for discovery on the disputed issue of the confidentiality of their conversations. The Lavins also contend that the district court's finding of waiver of the privilege was erroneous as a matter of law insofar as the court based its conclusion on their failure to secure physical possession of all copies of their taped conversations and on the inclusion in their pleadings of an excerpt from the conversations. We hold that because the record was insufficiently developed to determine whether the communications were confidential, the district court erred in limiting discovery on the issue of confidentiality. We also hold that the Lavins took all reasonable steps to protect the confidentiality of their conversations, and thus did not waive the right to assert the privilege. Accordingly, we reverse and remand the case to the district court to permit the Lavins discovery.</p></div> <div class="numbered-paragraph"><p> I.</p></div> <div class="facAdFloatLeft"> <script type="text/javascript"><!-- google_ad_client = "ca-pub-1233285632737842"; /* FACContentLeftSkyscraperWide */ google_ad_slot = "1266897617"; google_ad_width = 160; google_ad_height = 600; //--> </script> <script type="text/javascript" src=""></script> </div class="facLeaderBoard"> <div class="numbered-paragraph"><p> On June 30, 1995, the Securities and Exchange Commission ("SEC") issued a subpoena duces tecum to Mr. Lavin as part of its ongoing investigation, commenced in June 1994, into fraudulent sales practices in derivative securities at Bankers Trust Company ("Bankers Trust" or "the bank") and BT Securities Corporation ("BT Securities"), a broker-dealer registered with the SEC. <a href="#D*fn1" name="S*fn1">*fn1</a> The subpoena sought production of tape recordings of seven conversations that Mr. Lavin had with his wife from mid-June to mid-July 1994. By the time it sought the Lavins' conversations, the SEC had already obtained from the bank over 5,000 tape-recorded conversations of bank employees involved in selling derivatives. In December 1994, the SEC reached a settlement with the bank but continued its investigation of certain BT Securities employees.</p></div> <div class="numbered-paragraph"><p> At the time of the conversations, Mr. Lavin was a managing director of BT Securities and head of its U.S. Corporate Capital Markets Group, which sold derivatives to corporate customers, and was head of BT Securities' Chicago office. Until January 1994, Mr. Lavin had worked at BT Securities' main office in New York. There, he had a desk on a trading floor, and, consistent with the New York office's policy, the telephone on his trading desk was taped. He also shared a personal office in New York and conversations on his office telephone were not taped.</p></div> <div class="numbered-paragraph"><p> Before Mr. Lavin's appointment in January 1994 as head of the BT Securities' Chicago office, that office dealt primarily in corporate financings and did not have a taping system for its telephone calls. With the arrival of Lavin's derivatives group, Mr. Lavin decided that the Chicago office should have a system for the routine taping of telephone calls with its customers. The taping system was put in place between February and April 1994, and it recorded the seven conversations between Mr. and Mrs. Lavin. Whether Mr. Lavin had originally arranged for the telephones of all three persons engaged in selling derivatives, including himself, to be recorded, or whether he had requested all those lines except his private line in his office to be recorded was in dispute. Mr. Lavin claimed the latter instruction was the one he gave, and testified that as soon as he became aware of the tape recording of the conversations on his private line, he ordered the taping stopped. It is undisputed that by September 2, 1994, pursuant to Mr. Lavin's instructions, the tape recording of his private office line had ceased.</p></div> <div class="numbered-paragraph"><p> In mid-November 1994, Mr. Lavin's counsel was notified by Bankers' Trust's counsel that copies of the tapes of the Lavins' seven conversations had been provided as part of a production of several thousand tapes earlier that month to the Federal Reserve Bank of New York in response to a request made pursuant to the Federal Reserve's examination powers. <a href="#D*fn2" name="S*fn2">*fn2</a> Mr. Lavin's counsel immediately alerted Bankers Trust and its counsel that the Lavins were asserting the confidential marital communications privilege as to the conversations between Mr. and Mrs. Lavin, and requested that the bank take all steps necessary to preserve the privilege. Consistent with this request, Bankers Trust asserted the marital privilege to the Federal Reserve on behalf of the Lavins as part of a privilege list on which Bankers Trust asserted its own privileges with respect to the thousands of tapes provided to the Federal Reserve. The Lavins also secured an agreement with Bankers Trust that it would provide them with notice and an opportunity to seek judicial relief prior to any further disclosure of the tapes. Thereafter, in January 1995, the Lavins formally requested that Bankers Trust return all copies of the tapes to the Lavins; the bank denied the request on the grounds that there were outstanding document requests and subpoenas for the production of the tapes, but confirmed its intention to abide by its agreement with the Lavins.</p></div> <div class="numbered-paragraph"><p> In January 1995, the SEC learned that Bankers Trust had withheld production of the seven Lavin tapes from previously produced materials because of the Lavins' claim of privilege. Four months later, the SEC deposed Mr. Lavin on the circumstances surrounding the making of the tapes, and also conducted four ex parte investigatory depositions of BT Securities personnel. After the Lavins denied its renewed request for the tapes, the SEC served a subpoena on Mr. Lavin for production of the tapes. <a href="#D*fn3" name="S*fn3">*fn3</a> Following the Lavins' formal objection to production on the ground of the confidential marital communications privilege, the SEC, on November 9, 1995, applied to the district court for an order enforcing its subpoena, and Mrs. Lavin intervened in the proceeding.</p></div> <div class="numbered-paragraph"><p> Meanwhile, the issue of the Lavins' privilege also arose in a civil suit brought against Bankers Trust and BT Securities by one of their derivatives customers. See Procter & Gamble Co. v. Bankers Trust Co., 909 F. Supp. 525 (S.D. Ohio 1995). In October 1995, Procter & Gamble sought to compel the bank to produce the Lavins' taped conversations. After the bank, which asserted the confidential marital communications privilege on the Lavins' behalf, refused to produce the tapes, the Lavins intervened to assert their privilege claim. The Lavins contend that although the SEC was not a party to the proceedings, the district court's denial of Proctor & Gamble's motion was based upon a record identical in all relevant respects to that in the instant case. Id. at 526. The court found that neither Mr. nor Mrs. Lavin was aware that their conversations were being recorded, id. at 527, and without reaching the question of whether Mr. Lavin waived the privilege, the court concluded that Procter & Gamble made no showing that Mrs. Lavin had done so. Id. at 528. Ruling that even if one spouse desires to disclose confidential marital communications without the consent of the other spouse, the privilege can still be asserted by the non-waiving spouse, the court affirmed the Lavins' assertion of the privilege. Id.</p></div> <div class="numbered-paragraph"> <p> Subsequently, the district court here ordered the SEC's subpoena to be enforced. SEC v. Lavin, 937 F. Supp. 23 (D.D.C. 1996). The court found that because Mr. Lavin knew or should have known that his telephone conversations were being recorded, "the conversations at issue did not take place in a confidential setting and, therefore, the confidential marital communications privilege does not attach." Id. at 25. Alternatively, assuming the privilege did attach, the district ...</p> </div> </div> </div> <div id="caseToolTip" class="caseToolTip" style="display: none;"> <div class="toolTipHead"> </div> <div class="toolTipContent"> <p> Our website includes the first part of the main text of the court's opinion. To read the entire case, you must purchase the decision for download. With purchase, you also receive any available docket numbers, case citations or footnotes, dissents and concurrences that accompany the decision. 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