The opinion of the court was delivered by: JAMES FRANCIS IV, Magistrate Judge
The defendant and the plaintiff in this action have each moved
pursuant to Rule 37 of the Federal Rules of Civil Procedure for
orders compelling discovery. The defendant, the Asia Pulp & Paper
Company, Ltd. ("APP" or "the company"), contends, among other
things, that the plaintiff has applied the deliberative process
privilege improperly. The plaintiff, the Export-Import Bank of
the United States ("Ex-Im" or "the agency"), objects to the
defendant's use of the "functional equivalent" doctrine, which
extends the attorney-client privilege to communications between a
corporation's counsel and corporate consultants who are de facto
employees. Ex-Im also asserts that APP forfeited its
attorney-client privilege over an entire subject by discussing an
attorney's advice on the subject during a deposition. Background
Ex-Im brought this lawsuit against APP and its affiliates to
recover funds due under several promissory notes. (Second Amended
Complaint ("SAC"), ¶ 1). Organized under federal law as an agency
of the United States of America, Ex-Im has a statutory mandate to
promote American employment by aiding in the financing of
purchases by overseas buyers of American goods.
12 U.S.C. § 635(a)(1). The agency does this by offering several kinds of
financial products, including loan guarantees. (SAC, ¶ 10). The
credit extended in this case involved loan guarantees to various
commercial banks and financial institutions that financed
purchases of American products by APP and its affiliated
companies. (SAC, ¶¶ 12, 17).
APP, a Singapore corporation, together with its related
companies in Indonesia, constitutes one of the largest paper
manufacturers in the world. (SAC, ¶¶ 5-8, 18). In March 2001, APP
and its affiliates, with worldwide debts approaching $14 billion,
announced a decision to stop servicing all of APP's loans and to
seek an out-of-court negotiated restructuring of its
international debt. (Declaration of Ferry Siswojo Djongianto in
Opposition to Plaintiff's Motion to Compel Disclosure ("Ferry
Decl."), ¶ 4). This triggered close to three years of intensive
negotiations between APP and its creditors, including Ex-Im and
the Indonesia Bank Restructuring Agency ("IBRA"), an agency of
the Indonesian government. (Declaration of Kenneth R. Puhala in
Support of Defendant's Motion to Compel and Certification of Good Faith
("Puhala Decl."), ¶¶ 5, 6). In October 2003, Ex-Im withdrew from
the negotiations and filed suit to collect on APP's indebtedness.
(Puhala Decl., ¶¶ 5, 6).
APP raises the affirmative defense of equitable estoppel, which
forms a principal basis for its discovery requests. The company
contends that Ex-Im is estopped from asserting its claims because
the agency actively negotiated with APP and obtained onerous
concessions by leading APP to believe that it would sign the
restructuring agreement. (Puhala Decl., ¶ 7).
Document production to date has been extensive. APP has
produced in excess of 90,000 documents and a 450-page privilege
log. (Puhala Decl., ¶ 8; Declaration of AUSA Nicole Gueron in
Support of Plaintiff's Motion to Compel ("Gueron Decl."), Exh.
E). The log lists approximately 6,500 documents, all described as
shielded by either the attorney-client privilege, work product
immunity, or both. (Gueron Decl., Exh. E). A number of entries
list as recipients of privileged documents Nicky Tan, a financial
consultant who was engaged by APP to help the company restructure
its debt, or employees of Mr. Tan's consulting business. (Gueron
Decl., Exh. E).
Ex-Im has produced roughly 190,000 pages of documents
(Declaration of AUSA Sarah Light in Support of Plaintiff's
Opposition to Defendant's Motion to Compel ("Light Decl."), ¶ 3), and a 1,100-page privilege log. (Puhala Dec., Exh. F). Ex-Im
claims the attorney-client privilege, work product immunity, or a
combination of the two over a great preponderance of documents
listed in its privilege log. Approximately 500 documents are
identified as protected solely by the deliberative process
privilege. (Puhala Decl., Exh. F; Declaration of James K. Hess,
Chief Financial Officer, U.S. Export-Import Bank ("Hess Decl."),
Att. A (extracting and listing the deliberative process privilege
In response to APP complaints, Ex-Im has expanded its
descriptions of the deliberative process documents in its
privilege log, elaborating upon what had been brief phrases such
as "status report," "draft document," and "draft correspondence."
(Puhala Decl., Exh. D, at 5; Light Decl., Exh. I, at 2). The new
entries give more specific information. However, Ex-Im has not
altered entries describing documents protected by attorney-client
and work product privileges, and many of those are merely two- or
The parties have deposed a number of witnesses. APP conducted a
deposition of a former Ex-Im employee, Reyhana Mostofi, in May
2005 in Hong Kong, reserving a right to seek a reopening of the
deposition. (Letter of Kenneth R. Puhala dated May 15, 2005,
attached as Exh. L to Puhala Decl.). Ex-Im has deposed six APP
witnesses, including Bertie Mehigan, a partner at White & Case
who served as an advisor to APP during the restructuring process.
During the deposition, Mr. Mehigan, who testified as a designated
representative of APP, discussed his advice to APP to abstain
from making a $90 million payment to IBRA, despite alleged
pressure from Ex-Im to make the payment (Gueron Decl., Exh L at
15-17), and despite APP's $1 billion debt to IBRA.
In November 2004, APP served a subpoena on the United States
Department of State ("the State Department") seeking testimony
and all documents relating to APP over a period stretching from
January 2001 to December 2004. (Nov. 22, 2004 Subpoena; Letter of
Benjamin P. Deutsch dated Nov. 16, 2004, attached as Exhs. B and
C, respectively, to Declaration of Sarah E. Light in Support of
Specially Appearing Non-Party State Department's Opposition to
Defendant's Motion to Compel dated June 7, 2005 ("Light Decl.
II")). In response to the subpoena, the State Department produced
a red-weld containing documents, a privilege log listing 184
documents, and a letter addressed to APP counsel from James
Thessin, Acting Legal Advisor to the State Department. Mr.
Thessin expressed his conclusion that production of documents
sought by APP is governed by 22 C.F.R. part 172, which grants the
State Department discretion to determine whether it should
produce requested documents. (Puhala Decl., ¶ 21; Light Decl. II,
All of this discovery had given rise to an assortment of
challenges by each party. I will address each party's motion in turn.
A. Defendant's Motion to Compel
APP seeks an order compelling Ex-Im to produce documents
withheld based on the deliberative process privilege; to cure
deficiencies in its privilege log, either by producing all
documents or revising the log; and to reopen the deposition of
Ms. Mostofi. It also seeks to compel the State Department to
produce a sworn statement justifying its invocation of the
deliberative process privilege.
For the reasons discussed below, the application for an order
seeking documents withheld on the basis of the deliberative
process privilege is denied; the request for an order compelling
Ex-Im to revise its privilege log is granted; the request for an
order to reopen Ms. Mostofi's deposition at Ex-Im's expense is
denied; and ...