United States District Court, S.D. New York
December 7, 2005.
MSF HOLDING, LTD., Plaintiff,
FIDUCIARY TRUST COMPANY INTERNATIONAL, Defendant.
The opinion of the court was delivered by: JAMES FRANCIS IV, Magistrate Judge
MEMORANDUM AND ORDER
The defendant in this action, Fiduciary Trust Company
International ("FTCI"), previously moved for a protective order
seeking the return of two documents inadvertently produced during
the course of discovery. In a Memorandum and Order dated November
10, 2005, I denied that motion, finding that FTCI had not met the
threshold requirement of demonstrating that the documents were
immune from discovery. FTCI has now moved for reconsideration on
the ground that I addressed only its claim of work product
protection and not its assertion of the attorney-client
privilege. The application for reconsideration is granted, but,
for the reasons set forth below, I adhere to my prior
determination and deny FTCI's motion for a protective order.
The relevant facts are set forth in the November 10 Order. FTCI
is correct that I did not explicitly address its claim of
privilege. However, just as FTCI did not carry its burden of demonstrating that the two e-mails at issue were created in
anticipation of litigation, so did it fail to show that those
documents were authored by an attorney acting in her legal, as
opposed to business, capacity. In-house counsel often fulfill the
dual role of legal advisor and business consultant. See Bank
Brussels Lambert v. Credit Lyonnais (Suisse),
220 F. Supp. 2d 283, 286 (S.D.N.Y. 2002). Accordingly, to determine whether
counsel's advice is privileged, "we look to whether the
attorney's performance depends principally on [her] knowledge of
or application of legal requirements or principles, rather than
[her] expertise in matters of commercial practice." Note Funding
Corp. v. Bobian Investment Co., N.V., No. 93 Civ. 7427, 1995 WL
662402, at *3 (S.D.N.Y. Nov. 9, 1995). In this case, the analysis
is complicated slightly by the fact that the business decision of
whether to honor the letter of credit necessarily occurs against
the background of any legal obligation to do so.
Nevertheless, the e-mails at issue here reflect the exercise of
a predominantly commercial function. Susan Garcia, the author of
the communications and FTCI's Senior Vice President and Deputy
Corporate Counsel, never alluded to a legal principle in the
documents nor engaged in legal analysis. Instead, she collected
facts just as any business executive would do in determining
whether to pay an obligation. In doing so, she evidently relied
on her knowledge of commercial practice rather than her expertise
in the law. The documents are therefore not privileged.
Even if the e-mails were subject to the attorney-client
privilege, that privilege would have been waived by their
production in discovery. In determining whether the release of
documents during litigation was a "knowing waiver" or "simply a
mistake, immediately recognized and rectified," courts in this
district consider four factors: (1) the reasonableness of the
precautions taken to prevent inadvertent disclosure, (2) the time
taken to rectify the error, (3) the scope of the discovery in
proportion to the extent of the particular disclosure at issue,
and (4) overarching issues of fairness. Lois Sportswear, U.S.A.,
Inc. v. Levi Strauss & Co., 104 F.R.D. 103, 105 (S.D.N.Y. 1985);
see also Denney v. Jenkins & Gilchrist,
362 F. Supp. 2d 407, 416-17 (S.D.N.Y. 2004); United States v. Rigas,
281 F. Supp. 2d 733, 737-38 (S.D.N.Y. 2003); Securities and Exchange
Commission v. Cassano, 189 F.R.D. 83, 85 (S.D.N.Y. 1999).
Here, FTCI has failed to demonstrate that it took reasonable
steps to prevent disclosure. Neither of the e-mails in question
bears any legend identifying it as an attorney-client
communication or as a document prepared in anticipation of
litigation. Had FTCI intended to preserve the confidentiality of
these documents, it should have taken such an elementary
precaution. Furthermore, although the two documents produced were
initially reviewed by counsel and identified for redaction, FTCI has offered no
explanation of how they then came to be released in unredacted
FTCI did act promptly upon learning of the disclosure. When the
plaintiff relied upon the e-mails in its summary judgment motion,
FTCI immediately sought their return.
The scope of disclosure, however, is an important factor that
weighs against FTCI's claim of inadvertence. These two e-mails
were contained in a production of only 154 documents totaling 202
pages. This was not a disclosure of numerous electronic documents
where privilege review might legitimately be based on an
imperfect computerized search rather than individual document
review. Nor was it a massive production of paper, such that some
degree of human error was inevitable.
Finally, there is no overarching principle of fairness favoring
either side. If deprived of the ability to rely on the e-mails,
the plaintiff would simply be relegated to the position it would
have been in had FTCI properly preserved any privilege.
Conversely, if a privilege is breached, that is a price FTCI pays
for its own negligence.
Considering all of the Lois Sportswear factors, the balance
tips in favor of the plaintiff. FTCI was simply too cavalier in
protecting any privilege, and it has failed to adequately explain
the circumstances of the disclosure in the context of a very
modest document production. These considerations outweigh FTCI's
promptness in seeking to rectify its error and the absence of any
serious prejudice to the plaintiff.
Upon reconsideration, I find that FTCI has failed to
demonstrate that the two documents in question are either
attorney-client communications or work product and, even if they
were, their disclosure has waived any immunity. FTCI's motion for
a protective order is therefore denied.
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