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WEIZMANN INSTITUTE OF SCIENCE v. NESCHIS

March 16, 2004.

WEIZMANN INSTITUTE OF SCIENCE, Plaintiff, -against-, JANET C. NESCHIS, individually and in her capacities as Trustee of the Jacques and Natasha Gelman Trust dated November 18, 1997, and as Trustee of Trust Created Under the Last Will and Testament of Natasha Gelman dated April 23, 1993, ROBERT R. LITTMAN, individually and in his capacity as Successor of Trustee of the Trust Created Under the Last Will and Testament of Natasha Gelman dated April 23, 1993, and MARYLIN G. DIAMOND, in her capacity as Trustee of the Jacques and Natasha Gelmen Trust dated November 18, 1997, and as Trustee of the Trust Created Under the Last Will and Testament of Natasha Gelman dated April 23, 1993, Defendants ALICE ANN JUNG, et al., Plaintiffs, -against- JANET C. NESCHIS, et al., Defendants


The opinion of the court was delivered by: THEODORE KATZ, Magistrate Judge

MEMORANDUM OPINION AND ORDER

These consolidated actions were referred to this Court for general pretrial supervision, by the Honorable Richard M. Herman, Page 2 United States District Judge. Presently before the Court is a discovery dispute about whether Plaintiffs have waived the attorney — client privilege with regard to certain communications with their attorneys. For the reasons discussed below, the Court concludes that the privilege has been waived.

BACKGROUND

  This action arises out of the modification of the by — laws of a Liechtenstein foundation, which resulted in a change in the distribution of the assets of the foundation. Plaintiffs claim that the modification was the result of fraud and undue influence.

  In 1985, Jacques and Natasha Gelman, who were wealthy philanthropists, established the Anturia Foundation ("Anturia" or the "Foundation") in Liechtenstein, into which they placed a substantial portion of their assets. Mr. Gelman predeceased his wife, and Anturia's by — laws provided that upon Mrs. Gelman's death the potential beneficiaries listed in the by — laws would receive specified percentages of Anturia's assets. Prior to their amendment in 1992, the Anturia by — laws had included the Weizmann Institute of Science ("Weizmann") and members of the Jung family, who were Mrs. Gelman's closest living relatives, as beneficiaries of the Foundation. The Anturia by — laws were amended in 1992 to eliminate the Weizmann Institute as a beneficiary, and to substantially reduce the Jung's allocation of the assets, while increasing asset distributions to Defendant Marilyn Diamond, Mrs. Page 3 Gelman's former attorney, and Defendant Robert R. Littman, her friend and companion. The amended by — laws also provided for the distribution of most of the assets of Anturia to a New York inter vivos trust (the "Trust") which Mrs. Gelman had established with the assistance of Defendant Janet C. Neschis, her attorney, and Defendant Littman. The Trust is controlled by Neschis and Diamond, Neschis's former law partner, who serve as trustees. Neschis was also the executor of Mrs. Gelman's Will. In her capacity as executor and trustee she has earned substantial commissions. As a result of the amended by — laws of Anturia, Littman and Diamond received substantial bequests from the Foundation, and Littman was given custody of the Gelman's substantial collection of Mexican modern art. Plaintiffs contend that Neschis, Diamond, and Littman exercised undue influence over Mrs. Gelman at a time when she was suffering from Alzheimer's disease and was mentally incompetent, and caused her to make changes to the Foundation's by — laws, as well as her Will.*fn1

  Shortly after Mrs. Gelman's death, on May 2, 1998, counsel for the Jung Plaintiffs wrote to one of the Anturia board members, raising questions about the validity of the then — current by — laws, and demanding that Anturia refrain from making distributions to any beneficiaries while the Jungs further investigated. Anturia Page 4 appears to have complied with the demand. By August 1998, the Jungs had retained Liechtenstein counsel in connection with their claims against Anturia. On January 21, 1999, the Lichtenstein lawyers for the Trust and Trustees Neschis and Diamond served a demand on Anturia for distributions to the Trust. When no distributions were forthcoming, on July 16, 1999, the Trust served Anturia with a notice of arbitration. In the period between the demand for distributions and the notice of arbitration, Weizmann had contacted both a Swiss attorney (on March 8, 1999), and Dr. Peter Monauni, a Liechtenstein attorney (on June 30, 1999), regarding Anturia. Dr. Monauni was formally retained on July 14, 1999.

  On October 14, 1999, an arbitration complaint was filed in Liechtenstein, on behalf of the Trust, Neschis, and Diamond. On January 12, 2000, Anturia filed its answer to the arbitration complaint, and simultaneously provided formal notice of the dispute to Liechtenstein counsel for Weizmann and the Jungs, inviting them to join the arbitration as interveners. Both did so, with Weizmann filing its formal pleadings in March 2000, and the Jungs filing their pleadings in July 2000. The arbitrators ultimately concluded that the amendments to the by — laws were not procured by fraud or undue influence, and that the bequests in the by — laws could be effectuated.

  Plaintiffs contend in this action, inter alia, that the Page 5 arbitration should not be given collateral estoppel effect because they were not afforded a full and fair opportunity to have their rights adjudicated there.*fn2 For example, they contend that they did not become parties in the arbitration until after the arbitrators had been selected by Anturia and the Trust. Plaintiffs also contend that the arbitration should not be given preclusive effect because they were compelled to participate, and they had diminished status and rights as third — party interveners. It is this last contention which has precipitated the instant dispute over attorney — client privilege.

  Plaintiffs have asserted as one of their defenses to the claim that they are collaterally estopped from relitigating issues determined in the Liechtenstein arbitration, that they "essentially had no choice but to join the arbitration." (Letter from Elise A. Yablonski, Esq. to Jane W. Parver, Esq., dated Nov. 26, 2003, at 2, attached to Letter from Jane W. Parver, Esq., dated Jan. 30, 2004 ("Parver Ltr."), as Ex. 2.) Moreover, in a letter to the Court (Berman, J.) in the context of motions to dismiss, Weizmann's counsel stated that Weizmann "has appeared as "third party' in [the Liechtenstein Arbitration] because it was advised by Liechtenstein Page 6 counsel that if it did not, it might be precluded from contesting the validity of the Anturia by — laws in any Liechtenstein tribunal." (Letter from Leon Gold, Esq., dated Nov. 7, 2000 ("Gold Ltr."), at 2, attached to Parver Ltr. as Ex. 3.) Defendants contend that
[b]ecause Plaintiffs have put their lawyers' advice regarding Plaintiffs' decision to participate in the Liechtenstein arbitration directly at issue, Plaintiffs should be precluded from asserting this argument in opposition to Defendants' summary judgment motion unless they agree to waive the privilege and allow discovery with respect to the subject matter of their lawyers' advice.
(Parver Ltr. at 2.) Plaintiffs respond that Mr. Gold's statement did not reveal any client confidence and therefore did not give rise to a waiver of the attorney — client privilege. Alternatively, Plaintiffs argue that there has been no implied waiver of privilege because Plaintiffs have
 
not contended, nor do [they] plan to contend, that [they] relied on advice of counsel, or acted in good faith, or had a reasonable belief of some kind, in deciding whether to participate in the Liechtenstein arbitration. Rather, [Plaintiffs'] argument is that [they were] in fact compelled to take part in the Liechtenstein arbitration by defendants' machinations and the operation of Liechtenstein law.
(Letter from Elise A. Yablonski, dated Mar. 2, 2004 ("Yablonski Ltr."), at 3-4.)*fn3

  DISCUSSION

 I. Legal Principles Page 7

  The attorney — client privilege affords confidentiality to communications among clients and their attorneys, for the purpose of seeking and rendering an opinion on law or legal services, or assistance in some legal proceeding, so long as the communications were intended to be, and were in fact, kept confidential. See United States v. International Brotherhood of Teamsters, 119 F.3d 210, 214 (2d Cir. 1997); In re Six Grand Jury Witnesses, 979 F.2d 939, 944 (2d Cir. 1992), cert. denied, 509 U.S. 905, 113 S.Ct. 2997 (1993); In re John Doe Corp., 675 F.2d 482, 487-88 (2d Cir. 1982); Bank Brussels Lambert v. Credit Lyonnais (Suisse) S.A., 160 F.R.D. 437, 441 (S.D.N.Y. 1995) (citing United States v. United Shoe Machinery Corp., 89 F. Supp. 357, 358-59 (D. Mass. 1950)). The privilege is among the oldest of the common law privileges and "exists for the purpose of encouraging full and truthful communication between an attorney and his client. . . ." In re von Bulow, 828 F.2d 94, 100 (2d Cir. 1987); accord United States v. Bilzerian, 926 F.2d 1285, 1292 (2d Cir.), cert. denied, 502 U.S. 813, 112 So. Ct. 63 (1991). Thus, the burden of breaching the privilege is particularly onerous.

  The attorney — client privilege will be waived if the holder of the privilege discloses or consents to disclosure of any significant part of a privileged communication to a third party or stranger to the attorney — client relationship. See In re Grand Jury Proceedings, No. M-ll-189 (LAP), 2001 WL 1167497, at *7 (S.D.N.Y. Page 8 Oct. 3, 2001); In re Kidder Peabody Sec. Litig., 168 F.R.D. 459, 468 (S.D.N.Y. 1996). Moreover, " [a] defendant may not use the privilege to prejudice his opponent's case or to disclose some selected communications for self — serving purposes." Bilzerian, 926 F.2d at 1292. To selectively disclose privileged communications would cause the attorney — client privilege to be used as both a sword and a shield, resulting in fundamental unfairness. See id. Accordingly, where there has been a prejudicial disclosure of some attorney — client ...


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