The opinion of the court was delivered by: Read, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Petitioner Sam Wyly was an absent class member in a federal securities class action lawsuit; an absent class member is a member of a putative or certified class who is not a named party (see Hansberry v Lee, 311 US 32, 40-41 ). Respondents Milberg Weiss Bershad & Schulman, LLP; Stull, Stull & Brody; and Schiffrin & Barroway, LLP (collectively, the law firms) served as class counsel in the litigation. In this appeal, we are asked whether Wyly like a represented party in traditional individual litigation enjoys a presumptive right of access to the law firms' case files upon the representation's termination (see Matter of Sage Realty Corp. v Proskauer Rose Goetz & Mendelsohn, 91 NY2d 30 ). We hold that Wyly does not possess a presumptive right of access, and further conclude that the Appellate Division did not abuse its discretion when it denied Wyly access to the requested records.
In April 2000, Wyly acquired 971,865 stock options in Computer Associates International, Inc. (CA),*fn1 a large, publicly traded provider of information technology management software, when he sold his software business to CA. As a result of this transaction, Wyly became a major shareholder in CA.
Between 1998 and 2002, several federal securities class actions were commenced against CA in the United States District Court for the Eastern District of New York. The first 11 lawsuits, brought in 1998, were consolidated into a single class action under the auspices of District Court Judge Thomas C. Platt, who designated Milberg Weiss and Stull, Stull & Brody as co-lead class counsel. Thirteen additional class actions were begun in 2002. These lawsuits were consolidated into another single class action by the same Judge, who designated Milberg Weiss and Schiffrin & Barroway as co-lead counsel. The lawsuits alleged generally that CA and certain of its officers and directors had violated the Securities Exchange Act of 1934 by engaging in questionable accounting practices to improve the appearance of CA's financial performance and condition.
In December 2003, after a fairness hearing (see FRCP 23 [e] ), the District Court certified the 1998 and 2002 class actions for purposes of settlement "on behalf of all persons or entities who purchased or transacted in common stock of CA or common stock options during the period January 20, 1998 through and including February 25, 2002 and who sustained damages as a result of such transactions," and approved the proposed settlement. Wyly was a member of the settlement class. Pursuant to the settlement's terms, CA made 5.7 million shares of its common stock available to the settlement class and certain of its officers and directors received broad releases of civil liability. The law firms were awarded 1,443,673 of these shares in fees, and $3,181,486.94 (subject to a cap of 150,000 shares) as reimbursement of expenses. The District Court retained "[e]xclusive jurisdiction . . . over the parties and the Settlement Class Members for all matters relating to the Actions."
On October 18, 2004, P. Kent Correll of Bickel & Brewer, representing Wyly, wrote to Barry A. Weprin of Milberg Weiss, claiming that the class action settlement was "likely procured by fraud upon shareholders, their counsel and the Court." He noted that CA's former general counsel who pleaded guilty to conspiracy to commit securities fraud and obstruction of justice in September 2004 admitted that he had impeded the government's investigation of CA's accounting practices. Correll also asserted that Weprin had told him on October 4, 2004 "that neither you nor your firm knew" of the existence of 23 boxes of "crucial" CA documents until September 2004, when an article in the Wall Street Journal reported their sudden appearance at the offices of the outside law firm retained by CA's Board of Directors. Stating that "we believe . . . a motion should be filed with [the District Court Judge] pursuant to Fed.R.Civ.P. 60 (b) to relieve plaintiffs from the final judgment approving the settlement," Correll asked Weprin what his position was regarding this proposed action*fn2. On November 24, 2004, Weprin informed Correll that the law firms would not move to reopen the judgment of settlement; he also subsequently declined to provide Correl with a requested affidavit.
On December 7, 2004, Bickel & Brewer filed a Rule 60 (b) motion in the District Court on behalf of Wyly, Cheryl Wyly and other entities connected with Wyly (collectively, the Wyly movants), who were all members of the settlement class. The Wyly movants sought to vacate the final judgment as to them on the grounds of new evidence, misconduct and fraud upon the Court. They also asked for expedited discovery in support of their motion; CA objected to their discovery requests. At the time the Wyly movants made their motion, they estimated that they were entitled to roughly 1% of the shares that were about to be distributed to class members to carry out the settlement; these shares, in total, were thought to be worth about $120 million in December 2004.*fn3
On January 24, 2005, while the Wyly movants' Rule 60 (b) motion was pending, William A. Brewer III of Bickel & Brewer wrote to Melvyn I. Weiss of Milberg Weiss and requested "access to and a right to review documents reflective of Class Counsel's pre-trial investigations related to the Class Actions; all the discovery produced or taken in the Class Actions; and all requests for discovery, indices, summaries, or other materials created by Class Counsel in relation to the Class Actions."
Brewer asserted that the Wyly movants were entitled to these documents because the law firms "had an attorney-client relationship with the Wyly Movants, as substantial members of the Settlement Class, at least through the negotiation and execution of the settlement documents, the fairness hearing, and the entry of the final judgments in the Class Actions."
Weprin informed Brewer on January 28, 2005 that the law firms would not respond to his request until the District Court ruled on the "matters currently being briefed, including [the Wyly movants'] application for discovery." In a February 8, 2005 letter to Weprin, Brewer reiterated that he was seeking the documents based on the Wyly movants' attorney-client relationship with Milberg Weiss; therefore, he considered the District Court's prospective ruling on discovery to be "irrelevant."
In a February 28, 2005 letter to Weiss, Brewer again pressed his case, asserting that the law firms' files were needed to counter opposition to the Wyly movants' Rule 60 (b) motion and related discovery requests. Specifically, he claimed, the opposing parties were arguing that the law firms had neglected to pursue discovery diligently in the class actions, and that this excused CA's nondisclosure of the 23 boxes "before, during, and after the settlement negotiations."
By that time, the District Court Judge had already referred the discovery issues related to the Rule 60 (b) motion to a federal magistrate. On June 14, 2005, the Judge ordered the Wyly movants to serve CA with a notice of production making the 23 boxes of documents returnable to the Court on July 1, 2005. Wyly acknowledges that, as a consequence of this federal court order, he "obtained some of the materials that he sought from Class Counsel." But he complains that the law firms still "refused to produce the most critical category of documents within [their] Class Action Files: Class Counsel's work product and analysis."
On August 2, 2007, the District Court Judge denied the Wyly movants' Rule 60 (b) motions and related discovery requests. In a subsequent order dated September 12, 2007, he reiterated that they had "failed to set forth cause to permit further discovery to be conducted in conjunction with their 60 (b) motions. This Court has repeatedly made clear that additional discovery was to be confined to the 'fraud' alleged to be within the '23 boxes.' To date, . . . [the Wyly movants have not] produced any 'new' evidence of fraud upon this Court and consequently, have failed to establish that the contents of the '23 boxes' allegedly withheld during discovery and prior to settlement warranted granting further discovery and the reopening of the 2003 Settlement" (Matter of Computer Assoc. Class Action Sec. Litig., 2007 WL 2713336, *3, 2007 US Dist LEXIS 67928, *12-13 [ED NY 2007]).
The Wyly movants' subsequently appealed the Judge's order to the United States Court of ...