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Paribas v. The Bank of New York Trust Co., N.A.

United States District Court, Second Circuit

June 5, 2013

BNP PARIBAS, Plaintiff,
v.
THE BANK OF NEW YORK TRUST COMPANY, N.A., Defendant.

OPINION AND ORDER

HENRY PITMAN, District Judge.

I. Introduction

I write to resolve a dispute between the parties concerning certain documents that plaintiff is withholding on the bases of the attorney-client privilege and the work-product doctrine. The documents in issue all relate to a May 11, 2011 Letter from MBIA Insurance Company ("MBIA") to The Bank of New York Trust Company, N.A. ("BONY") that is annexed to the Amended Complaint as Exhibit C (the "MBIA Letter"). For the reasons set forth below, I conclude that, with a few exceptions described in more detail below, the documents in issue must be produced.

II. Facts

The facts that give rise to this action are set forth in detail in the Opinion of the Honorable Paul G. Gardephe, United States District Judge, dated March 28, 2012 (Docket Item 25), granting in part and denying in part defendant's motion to dismiss. I recite the facts here only to the extent necessary for an understanding of the dispute before me.

Plaintiff, BNP Paribas ("Paribas"), purchased certificates issued by the Flagstar Home Equity Loan Trust, of which defendant, BONY, is the trustee. If certain conditions occurred, purchasers of the trust certificates were entitled to receive payments from an insurance policy BONY had purchased from MBIA. The certificates were issued in different classes. This action arises from a dispute as to how the payments from MBIA should be allocated among the classes of trust certificate holders.

Paribas claims that the insurance payments should be distributed pro rata among all certificate holders. BONY has been distributing the insurance payments sequentially such that certificate holders with a higher priority are fully paid before certificate holders with a lower priority receive any payment. BONY, not MBIA, controls how insurance payments are allocated among certificate holders, and the amount of MBIA's liability is not affected by the manner of allocation. Neither Paribas nor BONY has asserted any claims against MBIA, and the record does not even suggest that claims against MBIA have ever been contemplated by anyone.

The present dispute arises out of a letter annexed as Exhibit C to Paribas' Amended Complaint (Docket Item 15) - the MBIA Letter. The MBIA Letter is dated May 11, 2011 - the same day the amended complaint was filed - and was sent by Brian Hynes, a Director of MBIA, to Robert E. Bailey, a Managing Director and Senior Managing Counsel of BONY. In substance, the MBIA Letter sets forth MBIA's belief that BONY's understanding of the appropriate method for distributing insurance payments is incorrect and that the insurance payments should be distributed on a pro rata basis rather than sequentially. In short, MBIA's letter asserts that Paribas' interpretation of the manner in which insurance payments should be allocated is correct and that BONY's interpretation is incorrect.

During the course of discovery, BONY learned that there were documents in the possession of Paribas and its counsel concerning the MBIA Letter that had not been produced in discovery. In addition, these documents had not been listed on Paribas' privilege log as a result of the parties' agreement that documents created after the commencement of the lawsuit need not be logged. BONY sought production of the documents concerning the MBIA Letter, and Paribas refused. The parties raised their dispute in a March 11, 2013 joint letter to Judge Gardephe who subsequently referred the matter to me for resolution. I heard oral argument on April 9, 2013, and directed Paribas to prepare an index of the documents withheld and to submit the documents to me for in camera review. Twenty-five documents are in issue; they consist of: (1) emails between Paribas' counsel and MBIA concerning the dispute between Paribas and BONY and the MBIA Letter, (2) emails between Paribas' outside counsel and its inhouse counsel concerning discussions with MBIA or the MBIA Letter, (3) emails substantially internal to Paribas describing the status of discussions between Paribas' outside counsel and MBIA, (4) emails substantially internal to Paribas describing the status of the action or the MBIA Letter and (5) emails transmitting a draft amended complaint.

III. Analysis

A. The Attorney-Client Privilege Privilege and Work-Product Doctrine: General Principles

1. The Attorney-Client Privilege

The elements of the attorney-client privilege are well settled:

"The [attorney-client] privilege applies only if (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom communication was made (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion on law or (ii) legal services or (iii) assistance in some legal proceeding, and not (d) for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client."

Bank Brussels Lambert v. Credit Lyonnais (Suisse) S.A. , 160 F.R.D. 437, 441 (S.D.N.Y. 1995) (Francis, M.J.), quoting United States v. United Shoe Mach. Corp. , 89 F.Supp. 357, 358-59 (D. Mass. 1950) (Wyzanski, D.J.); see United States v. Davis , 131 F.R.D. 391, 398 (S.D.N.Y. 1990) (Conboy, D.J.). The privilege "exists to protect not only the giving of professional advice to those who can act on it but also the giving of information to the lawyer to enable him to give sound and informed advice." Upjohn Co. v. United States , 449 U.S. 383, 390 (1981). Therefore, "[i]t is now [also] well established that the privilege attaches not only to communications by the client to the attorney, but also to advice rendered by the attorney to the client, at least to the extent that such advice may reflect confidential information conveyed by the client." Bank Brussels Lambert v. Credit Lyonnais (Suisse) S.A., supra , 160 F.R.D. at 441-42; see also O'Brien v. Bd. of Educ. , 86 F.R.D. 548, 549 (S.D.N.Y. 1980) (Leval, then D.J., now Cir. J.); SCM Corp. v. Xerox Corp. , 70 F.R.D. 508, 520-22 (D. Conn.), appeal dismissed, 534 F.2d 1031 (2d Cir. 1976).

"[T]he burden is on a party claiming the protection of a privilege to establish those facts that are the essential elements of the privileged relationship.'" von Bulow by Auersperg v. von Bulow , 811 F.2d 136, 144 (2d Cir. 1987), quoting In re Grand Jury Subpoena Dated Jan. 4 , 1984, 750 F.2d 223, 224 (2d Cir. 1984). Thus, "the party seeking to invoke the privilege must establish all elements of the privilege." Bowne of N.Y. City, Inc. v. AmBase Corp. , 150 F.R.D. 465, 470 (S.D.N.Y. 1993) (Dolinger, M.J.) (collecting cases). In addition, courts "construe the privilege narrowly because it renders relevant information undiscoverable" and "apply it only where necessary to achieve its purpose.'" In re Cnty. of Erie , 473 F.3d 413, 418 (2d Cir. 2007), quoting Fisher v. United States , 425 U.S. 391, 403 (1976).

2. The Work-Product Doctrine

The work-product doctrine arises out of the ...


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