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Gentry T. Beach, et al v. Touradji Capital Management

August 21, 2012


The opinion of the court was delivered by: Abdus-salaam, J.

Beach v Touradji Capital Mgt., LP

Decided on August 21, 2012

Appellate Division, First Department

Abdus-Salaam, 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.

First Judicial Department David Friedman,J.P. Leland G. DeGrasse Helen E. Freedman Sheila Abdus-Salaam, JJ.

Defendants/counterclaim plaintiffs Touradji Capital Management, LP and Paul Touradji and counterclaim plaintiff Deeprock Venture Partners, LP appeal from the order of the Supreme Court, New York County (Richard B. Lowe III, J.), entered September 29, 2011, which denied their motion for review of the Special Referee's ruling and to obtain discovery of forensic reports.

At issue in this appeal is whether reports prepared by a computer forensic analyst retained by plaintiff's counsel in connection with a discovery demand by defendants for production of plaintiff's computers are privileged. The motion court held that the reports are privileged and that the privilege was not waived when the analyst read his reports to refresh his recollection prior to testifying. We reverse, and remand the matter to the motion court for an in camera inspection to determine what portions, if any, of the reports are privileged attorney work product, as the remaining portions are discoverable pursuant to CPLR 3101(d)(2).

Plaintiffs Gentry Beach and Robert Vollero were employed as portfolio managers by defendant-counterclaim plaintiff Touradji Capital Management LP (Touradji) from 2005 through 2008. After their departure, plaintiffs commenced this action seeking more than $50 million in compensation they claimed was owed to them. Defendants filed counterclaims against plaintiffs and their new business, Vollero Beach Capital Funds, including a claim that plaintiffs had stolen its proprietary information in order to form their new venture, which directly competes with defendants.

During discovery, in response to a demand by defendants, Vollero produced a CD containing electronic files related to his work at Touradji. Defendants sought to obtain Vollero's personal laptop computers for a forensic examination, believing they contained stolen proprietary information. The Special Master denied that request, instead ordering Vollero to be deposed concerning the electronic files he had produced. At deposition, Vollero testified that he believed the files he had produced on the CD had been transferred from his personal Sony Vaio computer. He also testified that he owned an IBM Thinkpad, but did not recall putting any Touradji data on that computer. In response to this testimony, Touradji requested that it be permitted to examine both of the personal computers, or that the computers be analyzed by a third-party forensic examiner. Vollero did not comply with that request, but his counsel arranged for a forensic examination of the computers, and Touradji identified specific areas of inquiry for the examiner.

The forensic computer analyst retained by Vollero's counsel performed an examination which revealed that none of the electronic files produced by Vollero had been located on the Sony Vaio, but instead had been on the IBM Thinkpad. Additionally, the forensic analyst identified hundreds of deleted files related to Touradji on the IBM Thinkpad and restored them. He also found other files on both the Sony Vaio and the IBM Thinkpad that were responsive to Touradji's discovery demands. Those files were produced to Touradji. A subsequent application by defendants for an order compelling Vollero to turn over the two computers to their own vendor for inspection and analysis was denied; instead the Special Referee ordered a four-hour deposition of the forensic analyst.

The forensic analyst testified about the searches, software, and methods he used to examine the computers, although he could not recall all the specifics of his findings. Touradji's counsel asked the forensic analyst whether he had prepared a "written report" of his findings concerning the Vollero computers. Plaintiffs' counsel objected to the question on the grounds of privilege. The Special Referee permitted the question to be asked, as it simply called for a yes or no answer, and the forensic analyst responded, "yes." Touradji's counsel then asked the forensic analyst if he had reviewed the reports prior to his deposition and the analyst replied that he had reviewed his reports. Touradji made an application to the Referee seeking production of those reports, asserting that the reports were not privileged, and that even if they were, the privilege was waived when the forensic analyst used the reports to refresh his recollection prior to his deposition. The Referee denied the application, noting that the reports were privileged or material prepared for litigation and not subject to discovery.

In moving to review the Referee's ruling and obtain discovery of the forensic analyst's reports, Touradji argued that this Court's decision in Herrmann v General Tile & Rubber Co. (79 AD2d 955 [1981]), held that once a witness has reviewed a document to refresh his recollection for a deposition, the adverse party is entitled to it, even if it is otherwise privileged. Plaintiffs opposed the motion, arguing that although the Herrmann case seemed to direct release of the report, ...

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