The opinion of the court was delivered by: A. Kathleen Tomlinson, Magistrate Judge
This document relates to all actions
Plaintiffs have filed three separate motions to compel the production of documents by MetLife Co. and MetLife Inc. (collectively, "MetLife" or "Defendant") as well as MetLife's outside counsel Debevoise & Plimpton LLP ("Debevoise"). Specifically, Plaintiffs seek the production of approximately 1,400 documents for which MetLife has asserted a claim of privilege as well as the production of documents in the possession of Debevoise relating to tax advice provided to MetLife in connection with MetLife's demutualization.
A thorough recitation of the facts may be found by reading Judge Platt's previous decisions in this matter: In re MetLife Demutualization Litig., 229 F.R.D. 369 (E.D.N.Y. 2005); In re MetLife Demutualization Litig., 322 F. Supp. 2d 267 (E.D.N.Y. 2004); In re MetLife Demutualization Litig., 156 F. Supp. 2d 254 (E.D.N.Y. 2001). Familiarity with these facts is therefore presumed and I will only briefly summarize those facts which are applicable to these motions.
In April 2000, MetLife changed from a mutual life insurance company to a stock life insurance company, a process known as "demutualization." This action was originally filed in April 2000 as a class action alleging a non-fraud securities violation concerning the allocation of ten shares of MetLife stock to each policyholder and the cost of a policyholder trust. Pl. June 1, 2006 Mem. at 2. An Amended Complaint was filed in 2004, asserting claims pursuant to Section 12(a)(2) of the Securities Act of 1933, 15 U.S.C. § 77l(a)(2) and Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b). This matter has been certified as a class action by Judge Platt. See In re MetLife Demutualization Litig., 229 F.R.D. 369 (E.D.N.Y. 2005). The Plaintiff Class includes "all persons who were participating [MetLife] Policyholders on or about September 28, 1999, for whom MetLife Co. calculated a positive actuarial equity share ("participating policyholders") and whose rights as participating policyholders were exchanged for shares of stock in MetLife Co., pursuant to Defendant's plan of demutualization." In re MetLife Demutualization Litig., 229 F.R.D. at 372.
According to Plaintiffs, the principal vehicle for carrying out the alleged securities fraud was the prospectus that MetLife delivered to policyholders to solicit their vote on the demutualization (the "Prospectus"). Id. The Prospectus included the Policyholder Information Booklet Parts One and Two ("PIB"), a letter from MetLife's Chairman, a brochure entitled "Important! Read Me First!," a ballot and a notice of a January 24, 2000 public hearing to be held by the Superintendent of Insurance of the State of New York to determine whether the Plan was fair and equitable and should be approved. Def. June 9, 2006 Mem. at 1.
Plaintiffs allege that as a result of the demutualization, and in exchange for their rights as participating policyholders, they "received only 54 cents on the dollar for their policies, that dividends were reduced, and that MetLife engage[d] in fraud by not stating this in the [Prospectus]." In re Metlife Demutualization Litig., 322 F.Supp.2d at 269. Specifically, Plaintiffs allege that MetLife made four misrepresentations in the Prospectus: (i) omitting to state that the actuarial method used to calculate policyholders' contributions to MetLife's surplus arrived at a value of $15,300,000,000, far higher than the $8,400,000,000 in stock that these policyholders received as compensation; (ii) omitting to state that MetLife's method of reorganization, i.e., an exchange of policies for stock with the right to elect cash, as opposed to an exchange of policies for cash with the right to elect stock, was chosen for the benefit of MetLife and not the policyholders, because Plaintiffs would allegedly have received double the compensation under the latter method; (iii) omitting to state that policyholders would surrender their right to annual dividends from their contributions to MetLife's surplus; and (iv) misstating that reasonable dividends would "continue to be paid as declared," when, in Plaintiffs' view, the assets allocated to pay dividends had been limited. Id.
The first motion to compel which is the subject of this Memorandum and Order was filed by Plaintiffs on June 1, 2006, and seeks an order compelling Defendant to produce certain documents which Defendant claims are privileged, pursuant to the attorney-client privilege and the work product doctrine, and which are therefore immune to production. The documents, according to Plaintiffs, were prepared for the public hearing on MetLife's demutualization and include a Briefing Book used at the hearing as well as related drafts, memoranda and e-mails. Plaintiffs sought the production of 63 documents protected by the work product doctrine, 84 protected by the attorney client privilege, and 191 additional documents protected by both. Def. June 9, 2006 Mem. at 3-4. Plaintiffs argued that any privilege had been waived as to a Briefing Book containing testimony to be given by witnesses at the Public Hearing to consider the Plan, as well as to a draft response written by lawyers answering questions raised at the public hearing, because those documents had been inadvertently produced by a third party. Plaintiffs also challenged Defendant's assertion of privilege with respect to the remaining documents prepared for the public hearing on the following grounds: (a) the documents were intended for public distribution and therefore no privilege applies; (b) the documents were not prepared in anticipation of litigation; (c) the privilege was waived because the documents were provided to a third party; (d) Defendant waived any privilege by affirmatively claiming that it did not have guilty knowledge of the fraud at issue; (e) the documents should be disclosed under the crime-fraud exception to the attorney-client privilege; and (f) under the Garner doctrine, MetLife cannot assert a claim of privilege against its shareholders. See Pl. June 1, 2006 Mem. at 1-2.
Plaintiffs filed a second motion to compel on July 10, 2006. In connection with this second motion, Plaintiffs seek an order from the Court requiring MetLife to "produce drafts of the Plan of Reorganization, the PIB, the remainder of the Prospectus, the S-1, and requests for legal advice and responses from outside counsel, and witnesses to testify about the documents." Pl. July 10, 2006 Letter Mot. at 2. According to Plaintiffs "[t]his is the only way plaintiffs can obtain direct evidence that MetLife intentionally omitted facts to deceive policyholders." Id. Plaintiffs contend that the arguments set forth in their original motion to compel concerning the crime-fraud exception, the Garner doctrine, and waiver by affirmative defense apply equally to the documents sought by their second motion to compel. Defendant repeats its position with respect to each of these legal arguments and also contradicts Plaintiffs' assertion that Plaintiffs have a need for privileged communication to obtain otherwise unavailable information about the alleged fraud. According to Defendant, the information allegedly omitted was either (1) never omitted at all, but rather was moved to a separate section of the Prospectus or (2) omitted at the request of the Securities and Exchange Commission. See Def.July 13, 2006 Letter at 3.
Following oral argument on the first two motions to compel, the parties were ordered to meet and confer regarding, inter alia, "the documents as to which a claim of privilege (attorney-client and work product) has been asserted and which Plaintiffs argue should be produced." July 20, 2006 Order. The parties were directed to provide the Court with a detailed list of the documents covered by the first two motions to compel and as to which the parties were unable to reach agreement. Id. In addition, Defendant's counsel was advised that the Court did not have sufficient information and support from any individual with first-hand knowledge of the facts which would shed light on the preparation of these documents in order for the Court to render a decision on the motions to compel. Id. Accordingly, Defendant was afforded an opportunity to provide additional support for its claims of privilege by filing an affidavit from an individual with first-hand knowledge of facts supporting Defendant's assertions of privilege. Id.
Shortly after the hearing on Plaintiffs' first two motions to compel, Plaintiffs moved the Court for a third time seeking an order to compel, this time "requiring MetLife's outside counsel . . . to produce all subpoenaed documents relating to its tax opinion published in the Policyholder Information Booklet and its related work as independent tax counsel in MetLife's demutualization." Pl. Aug. 2, 2006 Letter Mot. Defendant objects to the production of the requested tax related documents on the grounds that (1) such documents are not relevant to the claims asserted in the Second Amended Complaint, and (2) to the extent the Court finds such documents are relevant, the majority of the documents requested are privileged communications. See Def. Aug. 11, 2006 Letter. The documents that are responsive to this request which Defendant claims are privileged are not included on any of the privilege logs provided to the Court to date. Nevertheless, Plaintiffs take the position that the arguments with respect to attorney-client privilege which it has set forth in the two prior motions (waiver by denial of guilty knowledge, Garner doctrine and crime-fraud exception) relate to these documents as well.
Defendant has "withdrawn the assertion that (1) the public hearing on the Plan constitutes litigation, and (2) certain documents prepared for the public hearing were also prepared in anticipation of court litigation." Def. Supp. Br. at 2. Accordingly, Defendant has agreed to produce those documents prepared for use at the public hearing that were withheld from production solely on work product privilege grounds. However, Defendant maintains its claim of privilege as to drafts of documents used at the public hearing which purportedly contain attorney client communications.
On August 15, 2006, the parties provided the Court with a list containing 1,577 entries representing the documents for which the parties could not reach an agreement regarding privilege. That list was revised and shortly thereafter, the Court was provided with another list containing 1,583 entries, describing the document, author, recipients and basis for the claim of privilege. On September 8, 2006, the Court received a log listing the basis for Plaintiffs' objections to Defendant's claim of privilege. I note for the record that the following three objections are asserted by Plaintiffs for over 1,400 of the 1,600 documents on the privilege log:
(1) Defendant waived any privilege by affirmatively claiming that it did not have guilty knowledge of fraud; (2) the Garner doctrine precludes MetLife from asserting a claim of attorney client privilege against Plaintiffs; and (3) the documents listed on the privilege log must be disclosed under the crime-fraud exception to the attorney-client privilege. Defendant argues that Plaintiffs have not articulated any grounds for disputing privilege as to 1,327 documents on Defendant's log which do not relate to the topics that Plaintiffs have identified as the subject of their motion to compel (i.e., drafts prepared before the public hearing, drafts of the Plan of Reorganization, the PIB, the remainder of the Prospectus, the S-1, and tax related documents). Def. Supp. Br. at 2. Thus, according to Defendant, this Court should summarily deny Plaintiffs' motion as to those 1,327 documents. Plaintiffs take the position that each one of those documents falls within one of the legal arguments advanced above with respect to privilege.
There are five issues, then, that must be decided in connection with the three pending motions to compel:
(1) are the tax documents relevant and, if so, are they privileged or has privilege been waived?
(2) to what extent are draft documents privileged generally (which will impact any finding with respect to the tax documents as well)?
(3) has Defendant waived any privilege by affirmatively claiming that it did not have guilty knowledge of the fraud?
(4) does the Garner doctrine preclude MetLife from asserting a claim of attorney client privilege, and if so, have Plaintiffs established "good cause" to require the production of the privileged documents? and
(5) to what extent, if any, should the 1,400 documents listed on the privilege log and challenged by Plaintiffs be disclosed under the crime-fraud exception to the attorney-client privilege?
A. Relevancy of the Tax Documents
Plaintiffs seek the production of all "documents relating to [Debevoise's] tax opinion published in the PIB and its related work as independent tax counsel." Pl. Aug. 2, 2006 Letter Mot. According to Plaintiffs, "this tax discovery relates to omissions regarding the closed block and to obtaining evidence that contradicts MetLife's Rule 30(b)(6) testimony." Id. More specifically, Plaintiffs contend that MetLife's tax disclosures "omit any information about the loss in $3 billion in tax benefits caused by the closed block." Id. at 2. At oral argument, counsel for Plaintiffs again stated that Plaintiffs were interested in the tax analysis issue with respect to the closed block. Defendant contends that "[t]he tax implications to MetLife of a hypothetical overfunding of the closed block have nothing to do with the tax disclosures that are referenced in the Tax Opinion." Def. Aug. 11, 2006 Letter. Debevoise takes the position that its tax opinion discussed the tax consequences to eligible policyholders of the exchange of their shares rather than tax implications for MetLife flowing from the demutualization generally. Id.
Plaintiffs also argue that they are entitled to discovery from Debevoise relating to its tax opinion and its associated work as independent tax counsel in connection with the demutualization to undermine MetLife's asserted positions in this case, such as those set out by its Rule 30(b)(6) witnesses. Pl. Aug. 2, 2006 Letter Mot. at 2. As Defendant points out, "Plaintiffs do not . . . cite any deposition testimony that they claim contradicts the private letter ruling request, nor do they explain even generally the nature of the supposed contradictions, or how the alleged inconsistencies would be material to any issue in this case." Def. Aug. 11, 2006 Letter at 2.
Rule 26 sets forth the general standards for discovery and provides: that [p]arties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action. . . . The information sought need not be admissible at trial if the information ...