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November 8, 2005.


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 documents separately)).

  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 three-word phrases.

  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, Exh. E).

  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 ...

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