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Gruss v. Zwirn

United States District Court, Second Circuit

November 20, 2013

PERRY A. GRUSS, Plaintiff,
DANIEL B. ZWIRN, D.B. ZWIRN & CO., L.P., and D.B. ZWIRN PARTNERS, L.L.C., Defendants.


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. (the "Company"); 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. (Cmplt. ¶¶ 3, 7, 13) Zwirn is the Chief Executive Officer and managing partner of the Zwirn Entities. (Cmplt. ¶ 8)

Pending before the Court is an application (Gibson Dunn Mem. (Dkt. No. 62)) by Gibson, Dunn & Crutcher LLP - formerly counsel to Defendant D.B. Zwirn & Co., L.P. - for clarification of this Court's Memorandum Opinion and Order, dated July 10, 2013, which ordered Defendants to produce for this Court's in camera inspection interview notes and summaries pertaining to twenty-one witnesses whose statements Defendants disclosed to the SEC. Gruss v. Zwirn, No. 09 Civ. 6441 (PGG) (MHO), 2013 WL 3481350 (S.D.N.Y. July 10, 2013) (Dkt. No. 52). Gibson Dunn objects to producing interview notes taken by Gibson Dunn lawyers during its representation of D.B. Zwirn & Co., L.P., on grounds of work product privilege and public policy. For the reasons set forth below, Gibson Dunn will be ordered to produce its interview notes in accordance with the July 10, 2013 order.


A. Plaintiff's Claims and Motion to Compel Production of Documents

In 2006, Defendants operated several hedge funds holding billions of dollars in assets. (Cmplt. ¶¶ 1-2) 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) (Dkt. No. 37). Gruss was ultimately blamed for the financial irregularities and resigned in the fall of 2006. Id.; (Cmplt. ¶¶ 31-33).

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. Gruss, 276 F.R.D. at 122-23; (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 123. The Commission subsequently commenced its own investigation of the Zwirn Entities. (Cmplt. ¶ 41) Defendants' disclosures to the SEC were entirely voluntary, and were not in response to a subpoena or any sort of investigative demand. (Answer (Dkt. 7) ¶ 29)

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." Gruss, 276 F.R.D. at 123 (emphasis in original) (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 Gibson Dunn PowerPoint presentations that the firm used in reporting its findings to the SEC on January 9 and March 20, 2007, and 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)

After receiving the PowerPoint presentations and other documents 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 Plaintiffs discovery requests, claiming that the notes and summaries were 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.

B. The July 10, 2013 Decision on Plaintiff's Motion to Compel Production

This Court referred the parties' discovery dispute to Magistrate Judge Dolinger on November 12, 2010. (Dkt. No. 30) On July 14, 2011, Judge Dolinger issued an order denying Plaintiff's motion to compel on the grounds of attorney-client privilege and work product protection. Gruss, 276 F.R.D. 115.

On July 27, 2011, Plaintiff objected to that portion of Judge Dolinger's Order holding that "Defendants did not waive any privileges associated with the Gibson Dunn and Schulte interview notes and summaries when they produced the findings of these firms' investigations - including portions of the substance of the interview notes and summaries in the form of witness statements to the Securities and Exchange Commission." (July 27, 2011 Pltf. Br. (Dkt. No. 38) 1) Plaintiff sought "factual interview notes reflecting the statements made by the witness[es]," and not the disclosure of the interview notes and ...

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