PERRY A. GRUSS, Plaintiff,
DANIEL B. ZWIRN, D.B. ZWIRN & CO., L.P., and D.B. ZWIRN PARTNERS, L.L.C., Defendants.
MEMORANDUM OPINION & ORDER
PAUL G. GARDEPHE, District Judge.
This is a defamation, breach of contract, and promissory estoppel action brought by Plaintiff Perry A. Gruss against Defendants D.B. Zwirn & Co., L.P.; D.B. Zwirn Partners, LLC (collectively, the "Zwirn Entities"); and Daniel B. Zwirn. (Dkt. No. 1 (Complaint)) Gruss was formerly Chief Financial Officer of, and a partner in, D.B. Zwirn & Co., L.P. and its predecessor company. Zwirn is the Chief Executive Officer and managing partner of the Zwirn Entities. (Cmplt. ¶ 8)
Pending before the Court is Gruss's objection - brought under Federal Rule of Civil Procedure 72(a) - to Magistrate Judge Dolinger's July 14, 2011 order (the "Order") denying Gruss's motion to compel production of certain interview notes and summaries that Defendants claim are protected by the attorney-client privilege and work-product doctrine. For the reasons set forth below, Judge Dolinger's July 14, 2011 Order will be reversed to the extent that it holds that Defendants did not waive the attorney-client privilege and work product protection as to attorney notes and summaries of interviews, excerpts of which were voluntarily supplied to the Securities and Exchange Commission.
In 2006, Defendants operated several hedge funds holding billions of dollars in assets. In the summer of 2006, it came to light that investor funds had been used to purchase Zwirn's Gulfstream IV jet and that the Zwirn Entities had collected management fees from investor funds before they were due. (Cmplt. ¶¶ 1-2, 25-29) The Zwirn Entities hired Schulte, Roth and Zabel, LLP to conduct an internal investigation regarding these financial irregularities. (Cmplt. ¶ 30) Schulte Roth attorneys interviewed employees of the Zwirn Entities, including Gruss and Zwirn, and drafted summaries of these interviews. Gruss v. Zwirn , 276 F.R.D. 115, 122 (S.D.N.Y. 2011). Gruss was ultimately blamed for the financial irregularities and resigned in the fall of 2006. Id .; (Cmplt. ¶¶ 31-33).
In October 2006, Zwirn contacted investors in the Zwirn Entities' hedge funds and other stakeholders in the Zwirn Entities to inform them of Gruss's resignation. Gruss , 276 F.R.D. at 122; (Cmplt. ¶ 34). In these communications, Zwirn relied on talking points prepared by Schulte Roth. Gruss , 276 F.R.D. at 122.
Defendants later hired Gibson, Dunn and Crutcher LLP to conduct a second internal investigation regarding the financial irregularities, and to notify the SEC of those irregularities and of the firm's findings. (Cmplt. ¶ 39) Gibson Dunn made presentations to the SEC concerning these matters on January 9 and March 20, 2007. See Gruss , 276 F.R.D. at 122-23. The Commission subsequently commenced its own investigation of the Zwirn Entities. Id. at 123; (Cmplt. ¶ 41). Defendants' disclosures to the SEC were entirely voluntary, and were not in response to a subpoena or any sort of investigative demand.
After Gibson Dunn completed its investigation, Zwirn disclosed the financial irregularities and the internal investigations to investors in the Zwirn Entities. Gruss , 276 F.R.D. at 123. In these disclosures, Zwirn blamed Gruss for the irregularities and absolved himself of any responsibility. Id .; (Cmplt. ¶¶ 34-56).
In the Complaint, Gruss asserts that Zwirn's statements to investors were false and defamatory. (Cmplt. ¶¶ 65-84) In particular, Gruss asserts that Zwirn misrepresented the results of Schulte Roth's investigation, which "concluded that Harold Kahn, the Chief Operating Officer of the Zwirn Entities, was at a minimum willfully blind to both the use of investor funds for Zwirn's private jet and the early taking of management fees.'" (Id. (quoting Oct. 12, 2010 Pltf. Br. 3)) The Complaint also includes breach of contract and promissory estoppel claims in which Gruss asserts that he is owed several million dollars under the partnership agreement. (Cmplt. ¶¶ 57-64, 85-96)
Defendants produced a number of documents regarding the Schulte Roth and Gibson Dunn internal investigations during discovery, including (1) a Schulte Roth memorandum dated September 11, 2006, which describes the firm's findings; (2) talking points generated by Schulte Roth for Zwirn's communications with hedge fund investors regarding Gruss's resignation; (3) Gibson Dunn PowerPoint presentations that the firm used in reporting its findings to the SEC on January 9 and March 20, 2007; (4) a second set of talking points, also generated by Schulte Roth, for Zwirn's further communications with investors regarding the financial irregularities and the internal investigations; and (5) a March 26, 2007 memorandum from the Zwirn Entities - concerning Gibson Dunn's findings - that the Zwirn Entities issued to investors. Gruss , 276 F.R.D. at 123.
The Gibson Dunn PowerPoint presentations to the SEC purport to set forth summaries of what twenty-one witnesses told Gibson Dunn and Schulte Roth. (Oct. 12, 2010 Brecher Aff., Exs. F, G) Gibson Dunn's presentations to the Commission are governed by a November 14, 2006 agreement entered into by Fried, Frank, Harris, Shriver & Jacobson LLP -Defendants' regulatory counsel - and the SEC. (Oct. 26, 2010 O'Brien Decl., Ex. H) That agreement reads as follows:
Our firm represents D.B. Zwirn & Co. L.P. ("DBZ") and in connection with that representation we contacted the Staff of the U.S. Securities and Exchange Commission (the "Staff") on October 30, 2006. As a result of that call, a meeting is scheduled with the Staff of the Northeast Regional Office on November 15, 2006. This letter is written to set forth the understandings between the Staff and DBZ with respect to that meeting.
On or about October 16, 2006, DBZ retained Gibson, Dunn & Crutcher LLP ("Gibson Dunn") to commence an investigation into certain issues at DBZ. In connection with this matter, Schulte Roth & Zabel LLP ("Schulte Roth") previously reviewed certain issues at DBZ currently under investigation by Gibson Dunn. Fried, Frank, Harris, Shriver & Jacobson LLP is representing DBZ in connection with the subject matter of the investigation and in any litigation or other matters arising out of the investigation, including regulatory interaction. In light of the interest of the Staff in determining whether there have been any violation of the federal securities laws, and DBZ's interest in investigating and analyzing the circumstances and people involved in the events at issue, DBZ will provide an oral briefing by the above counsel to the Staff on November 15, 2006 and in the future at agreed upon intervals (the "Briefings"). In the course of the Briefings, it is anticipated that counsel for DBZ, including Schulte Roth and Gibson Dunn, may discuss and disclose, among other things, matters that are subject to DBZ's attorney-client privilege or to work product protection ("Protected Materials").
Please be advised that by providing or disclosing the Protected Materials to the Staff pursuant to this agreement, DBZ does not intend to waive the protection of the attorney-work product doctrine, attorney-client privilege, or any other privilege applicable as to third parties. DBZ believes that the Protected Materials are protected by, at minimum, the attorney work product doctrine and the attorney client privilege. DBZ believes that the Protected Materials warrant protection from disclosure.
The Staff will maintain the confidentiality of the Protected Materials pursuant to this agreement and will not disclose them to any third party, except to the extent that the Staff determines that disclosure is required by law or would be in furtherance of the Commission's discharge of its duties and responsibilities.
The Staff will not assert that the disclosure of the Protected Materials constitutes a waiver of the protection off the attorney work product doctrine, the attorney-client privilege, or any other privilege applicable as to any third party. The Staff agrees that disclosure of the Protected Materials provides the Staff with no additional grounds to subpoena testimony, documents or other privileged materials from DBZ, although such grounds that may exist apart from such discussions shall remain unaffected by this agreement.
The Staff's agreement to the terms of this letter is signified by your signature on the line provided below.
After receiving the PowerPoint presentations and the other documents listed above in discovery, Gruss sought production of attorneys' notes and summaries of all witness interviews conducted by Schulte Roth and Gibson Dunn attorneys during their respective investigations. Gruss , 276 F.R.D. at 123-24. Defendants opposed Plaintiff's discovery requests, claiming that the notes and summaries are protected by the attorney-client privilege and the work-product doctrine. Id. at 124. Plaintiff subsequently moved to compel production of these materials under Federal Rule of Civil Procedure 37. Id.
The Magistrate Judge's Decision
This Court referred the parties' discovery dispute to Magistrate Judge Dolinger on November 10, 2010. (Dkt. No. 30) On July 14, 2011, Judge Dolinger issued an order denying Plaintiff's motion to compel. Gruss , 276 F.R.D. 115; (Dkt. No. 37).
In a thorough and scholarly opinion, Judge Dolinger made a number of rulings that Plaintiff has not challenged, including the following:
1. the notes and summaries of interviews prepared by Gibson Dunn and Schulte Roth are protected by the attorney-client privilege (id. at 125);
2. to the extent that the witness interview notes and summaries contain opinion work product, they are protected by the work-product privilege (id. at 129); and
3. Plaintiff has not made a sufficient showing to justify discovery of the opinion work product contained in the interview notes and summaries. Id. at 131.
Judge Dolinger also addressed Plaintiff's argument that Defendants had waived the attorney-client privilege and work product protection as to the witness interview notes and summaries by making "selective use of [these] privileged materials'" - quoting certain portions of the interview notes and summaries - in ...