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September 20, 2002


The opinion of the court was delivered by: Ellis, United States Magistrate Judge.




In May 1991, AroChem International Ltd. ("AIL") requested financing from CLS of certain transactions involving back-to-back contracts for the purchase and sale of oil in the United States. Memorandum of Law of Third-Party Plaintiff Credit Lyonnais (Suisse) S.A. in Support of Motion to Compel Production of Documents from Third-Party Defendant Rogers & Wells and For Other Relief ("Pl. Mem.") at 3. At that time, CLS retained R & W to advise it on the proposed financings and to document the financings in order to properly perfect CLS's first priority security interest. Id. CLS financed AIL pursuant to R & W's advice from May through August 1991, when CLS terminated its relationship with AIL. Id. In October 1993, Bank Brussels Lambert, Swiss Bank Corporation, Banque Indosuez, and Skopbank (hereinafter, "the RCA Banks") commenced litigation ("the underlying litigation") against CLS alleging that it had violated RICO and intentionally committed fraud, conversion, and other common law torts when it financed the contracts assigned to AIL by AroChem. Memorandum of Law of Third-Party Defendant Rogers & Wells in Opposition to the Motion by Credit Lyonnais (Suisse) S.A. to Compel the Production of Privileged Documents (Def.Mem.) at 2-3. R & W defended CLS in the underlying litigation until December 1994. Pl. Mem. at 2-3.

In or around September 1993, Kikka Harrison ("Harrison"), a CLS vice president, met with Donald F. Luke and Peter Williams, two R & W partners, to discuss the underlying litigation. Def. Mem. at 4. During this meeting, Harrison stated that if CLS were found liable to the RCA Banks, R & W would be liable to CLS. Id. Harrison's statement was brought to the attention of Richard A. Cirrillo ("Cirrillo"), the chair of R & W's Clients and Ethics Committee, who determined that R & W needed to perform an internal review of its 1991 representation of CLS. Id.

The internal review process generated a variety of materials, including a series of handwritten interview notes and memoranda and other communications from Cirrillo containing legal advice. Id. at 5. In addition, Cirrillo responded to queries by members of the CLS litigation team as to how they should conduct themselves vis-a-vis CLS during the pendency of the internal review. In addition to the internal review, R & W also performed a conflicts check with respect to the other parties in the litigation when R & W was asked to represent CLS in the underlying litigation. Id. at 5. Further, during the course of R & W's representation of CLS, R & W also performed conflicts checks regarding prospective clients. Id. at 5-6. In November 1993, R & W asked that Indosuez, an RCA lender, waive a conflict of interest and consent to R & W's representation of CLS in the underlying litigation. Affidavit of Peter C. Harrar in Support of Motion of Third Party Plaintiff Credit Lyonnais (Suisse) S.A. to Compel Production of Documents From Third Party Defendant Rogers & Wells and for Other Relief ¶ 38.

On July 7, 1995, CLS filed a third-party complaint against R & W alleging: (1) malpractice and breach of contract on its advice about the AIL financings in 1991; and (2) breach of fiduciary duty, fraud and breach of contract in connection with its defense of this action during the period from October 1, 1993 until CLS terminated R & W's representation in December 1994. Pl. Mem. at 2-4. CLS alleges that during this latter period, R & W concealed from CLS its own malpractice in 1991, and concealed from CLS the extent and significance of its representation or attempted representation of other parties contemporaneously adverse to CLS. Id. at 4.

CLS sought discovery about R & W's conflicts of interest, both in continuing to represent CLS despite its alleged malpractice, and R & W's attempted or actual representation of other AroChem-related entities. The only discovery that R & W produced on the conflicts issues, other than conflicts memos, new matter forms and correspondence concerning efforts to obtain conflict waivers, are two privilege logs. Id. at 4-5. The privilege logs describe the subject matter of the withheld documents as "internal review of representation issues." Id. at 5; Affidavit of Peter C. Harrar in Support of Motion of Third-Party Plaintiff Credit Lyonnais (Suisse) S.A. to Compel Production of Documents from Third-Party Defendant Rogers & Wells and For Other Relief at ¶ 47. R & W provided CLS a breakdown of those documents into two categories: (1) review of its own liability; and (2) review of its representation of other AroChem-related entities. Id. These documents are the subject of this motion to compel. CLS argues that the documents sought were collected in violation of its fiduciary duty to CLS, and therefore CLS is entitled to a review of the documents. R & W maintains that its internal conflict check is protected by the attorney-client privilege.


A. Production of Documents

Although it is unnecessary at this point in the litigation to decide whether or not R & W had an actual conflict of interest in representing CLS, it is important to note a few things about the ethical responsibilities of attorneys in the State of New York. Attorney conduct in New York is governed by the Code of Professional Responsibility Disciplinary Rules. The provisions regarding conflicts of interest are found in DR 5-105.*fn1 The conflict of interest rules "preserve[s] the client's expectation of loyalty [and] promote[s] public confidence in the integrity of the Bar." Tekni-Plex, Inc. v. Meyner & Landis, 89 N.Y.2d 123, 131, 651 N.Y.S.2d 954, 674 N.E.2d 663 (N.Y. 1996). They are also essential to "ensur[e] that attorneys remain faithful to the fiduciary duties of loyalty and confidentiality owed by attorneys to their clients." Kassis v. Teacher's Insurance and Annuity Association, 93 N.Y.2d 611, 616, 695 N.Y.S.2d 515, 717 N.E.2d 674 (N.Y. 1999). The fiduciary duties of an attorney owed to a client are very serious. As Justice Cardozo once observed, "[n]ot honesty alone, but the punctilio of an honor the most sensitive, is the standard of behavior." Meinhard v. Salmon, 249 N.Y. 458, 464, 164 N.E. 545 (N.Y. 1928). Therefore, while R & W was still in the employ of CLS, it was still obligated to maintain a fiduciary duty to CLS, even in performing its internal conflict review.

Turning to R & W's privilege claims, the attorney-client privilege is perhaps the oldest recognized common law privilege sanctioned by the courts. The purpose of the privilege is "to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice." Upjohn Co. v. United States, 449 U.S. 383, 393, 101 S.Ct. 677 (1981). However, because the privilege "stands in derogation of the public's `right to every man's evidence, . . . it ought to be strictly confined within the narrowest possible limits consistent with the logic of its principle.'" In re Grand Jury Proceedings, 219 F.3d 175, 182 (2d Cir. 2000) (citation omitted). Accordingly, the privilege will only attach "(1) [w]here legal advice of any kind is sought (2) from a professional legal advisor in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or the legal advisor, (8) except the protection be waived[.]" United States v. Int'l Broth. of Teamsters, 119 F.3d 210, 214 (2d Cir. 1997) (quoting In re Grand Jury Subpoena Duces Tecum, 731 F.2d 1032, 1036 (2d Cir. 1984)).

The privilege was designed to protect the individual client. However, it has also been granted to corporations when consulting in-house counsel on legal matters. See generally, Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1970). In cases involving corporations and in-house counsel, courts have maintained a stricter standard for determining whether to protect confidential information through the attorney-client privilege. The stricter standards are the result of suspicion that "because they are employees of their client, and their livelihood depends on that single corporate client, in-house counsel are not as independent as outside counsel." Janet J. Higley, Robert C. Jones, Peter C. Buck, Confidentiality of Communications by In-House Counsel for Financial Institutions, 6 N.C.Banking Inst. 265, 280 (2002). There is also a concern that in-house attorneys are more ...

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