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MSF HOLDING, LTD. v. FIDUCIARY TRUST CO. INTL.

United States District Court, S.D. New York


December 7, 2005.

MSF HOLDING, LTD., Plaintiff,
v.
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.

Attorney-Client Privilege

  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.

  Inadvertent Disclosure

  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 form.

  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.

  Conclusion

  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.

  SO ORDERED.

20051207

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