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Green v. Beer

July 2, 2010

ALLAN GREEN, HANA GREEN, WHITE BUFFALO, LLC, DEAN JANSSEN, KATHLEEN JANSSEN, JAMES MICHAEL DUNIGAN, NENA M. DUNIGAN, ABILENE TRADING, LLC, CHRIS C. MALETIS III, KRISTINE K. MALETIS, THOMAS M. MALETIS, SUSAN E. MALETIS, JAMES D. INGSTAD, VICTORIA S. INGSTAD, THOMAS E. INGSTAD, FARGO TRADING, LLC, AND TEI TRADING, LLC, PLAINTIFFS,
v.
ANDREW D. BEER AND SAMYAK C. VEERA, DEFENDANTS.



The opinion of the court was delivered by: James C. Francis IV United States Magistrate Judge

MEMORANDUM AND ORDER

The plaintiffs in this action allege that the defendants, Andrew D. Beer and Samyak C. Veera, committed fraud in promoting a tax shelter scheme known as the "COINS Strategy." Defendant Beer now moves for an order compelling the plaintiffs to produce information falling into four categories:

(1) Documents as to which the plaintiffs have asserted the attorney-client privilege, but which were created by or shared with non-parties who are not attorneys;

(2) Documents concerning legal advice regarding settlements that the plaintiffs entered into with the Internal Revenue Service and other taxing authorities concerning their liability for COINS Strategy investments;

(3) Documents regarding legal advice that the plaintiffs received in connection with their initial investment in the COINS Strategy; and

(4) Documents regarding each category of damages alleged by the plaintiffs.

I will address each set of documents in turn.

Communications Shared with Non-Attorneys

The plaintiffs have asserted the attorney-client privilege with respect to a variety of communications that were authored by or sent to persons who are neither attorneys nor parties to this litigation. Those persons have been identified as Paul Lenker, financial advisor to plaintiffs James Michael and Nena M. Dunigan; Brenda Lazzaroni, a certified public accountant who possessed financial information regarding plaintiffs Dean and Kathleen Janssen; Terry Nielsen, the Chief Financial Officer of Ace Tomato Co., Inc., a company owned by the Janssens; and Daniel Green, the son of plaintiffs Allan and Hana Green. (Plaintiffs' Amended Supplemental Privilege Log, attached as Exh. A to Letter of David L. Katsky dated June 9, 2010 ("Katsky 6/9/10 Letter"); Plaintiffs' Second Supplemental Privilege Log, attached as Exh. B to Katsky 6/9/10 Letter; Amended Affidavit of Paul Lenker dated June 14, 2010 ("Lenker Aff."), attached as Exh. 1 to Letter of Jeven Sloan dated June 15, 2010; Affidavit of Mark Foster dated June 12, 2010 ("Foster Aff."), attached as Exh. 3 to Letter of Jeven Sloan dated June 14, 2010 ("Sloan 6/14/10 Letter"); Affidavit of Terry Nielsen dated June 14, 2010 ("Nielsen Aff."), attached as Exh. 4 to Sloan 6/14/10 Letter; Affidavit of Daniel Green dated June 14, 2010 ("Green Aff."), attached as Exh. 1 to Sloan 6/14/10 Letter).

Federal jurisdiction in this case is based on diversity, and the substantive claims are governed by New York law. See Green v. Beer, No. 06 Civ. 4156, 2009 WL 911015, at *4-5 (S.D.N.Y. March 31, 2009); Green v. Beer, No. 06 Civ. 4156, 2007 WL 576089, at *2-6 (S.D.N.Y. Feb. 22, 2007). Consequently, privilege issues are also controlled by New York law. Fed. R. Evid. 501; Dixon v. 80 Pine Street Corp., 516 F.2d 1278, 1280 (2d Cir. 1975); Allied Irish Banks, p.l.c. v. Bank of America, N.A., 240 F.R.D. 96, 102 (S.D.N.Y. 2007). And, in New York, the attorney-client privilege is codified in the Civil Practice Law and Rules:

[A]n attorney or his or her employee, or any person who obtains without the knowledge of the client evidence of a confidential communication made between the attorney or his or her employee and the client in the course of professional employment, shall not disclose, or be allowed to disclose such communication, nor shall the client be compelled to disclose such communication[.]

N.Y.C.P.L.R. § 4503(a)(1).

Nevertheless, the New York Court of Appeals has characterized the attorney-client statute as a "'mere re-enactment of the common law rule.'" Spectrum Systems International Corp. v. Chemical Bank, 78 N.Y.2d 371, 377, 575 N.Y.S.2d 809, 813-14 (1991) (quoting Hurlburt v. Hurlburt, 128 N.Y. 420, 424, 28 N.E. 651, 652 (1891)).

Accordingly, New York courts rely on the common law, including federal case law, to evaluate claims of privilege. See Spectrum Systems, 78 N.Y.2d at 377, 575 N.Y.S.2d at 814; Charter One Bank, F.S.B. v. Midtown Rochester, L.L.C., 191 Misc. 2d 154, 165 n.10, 738 N.Y.S.2d 179, 189 n.10 (Monroe Sup. Ct. 2002). In any event, the parties in this case have cited exclusively to federal cases, and there appears to be no material ...


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