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Kingsway Financial Services, Inc. v. PricewaterhouseCoopers

September 12, 2008

KINGSWAY FINANCIAL SERVICES, INC., ET AL., PLAINTIFFS,
v.
PRICEWATERHOUSE-COOPERS LLP, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Pitman, United States Magistrate Judge

OPINION AND ORDER

I. Introduction

Defendants PricewaterhouseCoopers LLP ("PWC") and John A. Dore (the "Moving Defendants") move to vacate my Order dated May 26, 2006 (Docket Item 104) which established a procedure under which they could attempt to contact former employees of plaintiffs American Country Holdings, Inc. ("ACHI") and Kingsway Financial Services, Inc. ("Kingsway"). Alternatively, the Moving Defendants seek relief from this Order with respect to four of these former employees. For the reasons set forth below, the Moving Defendants' motion for reconsideration of the May 26, 2006 Order is denied, and their motion for relief from this Order is granted in part, and denied in part.

II. Facts

Kingsway and ACHI bring this action against Martin L. Solomon, Edwin W. Elder, William J. Barrett, John A. Dore, Wilmer J. Thomas, Jr., Karla Violetto ("Outside Director Defendants") and PWC, alleging securities fraud, common law fraud and conspiracy in connection with Kingsway's purchase of ACHI. Plaintiffs' allegations are set forth in detail in an opinion issued by the Honorable Richard M. Berman, United States District Judge, Kingsway Fin. Serv., Inc. v. PricewaterhouseCoopers, LLP, et al., 420 F. Supp. 2d 228 (S.D.N.Y. 2005) (granting defendants' motion to dismiss in part and denying defendants' motion to dismiss in part); familiarity with this decision is assumed.

The present dispute was first raised with me in April 2006 after the plaintiffs objected to the defendants' attempt to interview a former employee of plaintiff, James Zuhlke. The defendants sought a declaratory order that they were not prohibited from contacting plaintiffs' former employees. The plaintiffs opposed this application on the ground that ex parte interviews were inappropriate with regard to persons like Zuhlke who might inadvertently disclose privileged material. On May 26, 2006, I entered an Order("May 26, 2006 Order") setting forth the following procedure for the parties to use in situations where defendants sought to interview plaintiffs' former employees:

(1) Defendants' counsel shall submit a list of all individuals defendants seek to interview to plaintiffs' counsel.

(2) If plaintiff contends that a prospective interviewee had access to information that was subject to a legal privilege held by plaintiff or an affiliate, within ten (10) business days of defendants' identification of an interviewee, plaintiff shall submit an affidavit, or declaration pursuant to 28 U.S.C. § 1746, to defendants' counsel attesting to that fact. If such an affidavit or declaration is submitted to defendants' counsel, defendants' counsel are prohibited from contacting such interviewees directly without further order of the court.

(3) In the alternative, or in addition to the procedures set forth in the preceding paragraph, within ten (10) business days of defendants' identification of an interviewee, plaintiffs' counsel may also submit a statement signed by the prospective interviewee confirming that he or she is represented by counsel and that he or she does not wish to speak to defendants' counsel without her counsel present. Defendants' counsel are prohibited from directly contacting prospective interviewees who submit such a statement without further order of the court.

Kingsway Fin. Servs., Inc. v. PricewaterhouseCoopers LLP, 03 Civ. 5560 (RMB)(HBP), 2006 WL 1520227 at *4-*5 (S.D.N.Y. June 1, 2006). Pursuant to this Order, on May 31, 2006, defendants submitted a list of seventeen individuals whom the defendants sought to interview (Letter of Lewis J. Liman, Esq., dated May 31, 2006, attached as Ex. H to the Declaration of Ryan T. Becker, Esq., dated June 9, 2008 ("Becker Decl.")). On June 14, 2006, plaintiffs' counsel represented that 16 of these 17 individuals had access to privileged information (Declaration of Harold J. Ruvoldt, Esq., dated June 14, 2006, attached as Ex. 4 to the Declaration of Eric C. Williams, Esq., dated June 23, 2008 ("Williams Decl.")).

On May 14, 2008, the defendants wrote to me requesting that I vacate the May 26, 2006 Order. This request to vacate the May 26, 2006 Order was denied without prejudice on May 29, 2008 (Docket Item 278). At the time, I informed the defendants that even though I was denying their request, I would grant them leave to seek relief from the May 26, 2006 Order with respect to no more than five individuals based on a specific factual showing that there was no risk of the inadvertent disclosure of privileged information.

On June 6, 2008, the Outside Director Defendants and PWC filed the instant motion for reconsideration of my May 26, 2006 Order and seeking relief from the May 26, 2006 Order with respect to four former employees of ACHI and American Country Insurance Company ("ACIC"), a wholly owned subsidiary of ACHI. Subsequent to the filing of this motion, defendants Martin L. Solomon, Edwin W. Elder, William J. Barrett and Wilmer J. Thomas, Jr. entered into a settlement agreement with plaintiff and were dismissed from this action (Docket Item 291).

III. Analysis

A. Motion for ...


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