United States District Court, E.D. New York
DORSEY R. GARDNER, JOHN FRANCIS O'BRIEN, Plaintiffs,
MAJOR AUTOMOBILE COMPANIES, INC., BRUCE BENDELL, ERIC L. KELTZ, STEVEN HORNSTOCK, JEFFREY M. WEINER, ALAN PEARSON, DAVID EDELSTEIN, Defendants.
MEMORANDUM AND ORDER
VERA M. SCANLON, Magistrate Judge.
Plaintiffs Dorsey R. Gardner and John Francis O'Brien (collectively "Plaintiffs") have brought this action alleging, inter alia, breach of fiduciary duty against Defendants Major Automobile Companies, Inc. ("Major"); Bruce Bendell ("Bendell"); Eric L. Keltz ("Keltz"); Steven Hornstock ("Hornstock"); Jeffrey M. Weiner ("Weiner"); Alan Pearson ("Pearson"); and David Edelstein ("Edelstein") (hereinafter collectively "Defendants"). Docket No. 1 (original); Docket No. 120 (amended). In sum, Plaintiffs allege that Defendants improperly bought out Major's minority shareholders including Plaintiffs at an artificially low price (the "Transaction"). Id.
Before the Court is Defendants' motion for an order quashing Plaintiffs' subpoena of Defendant Major's outside counsel Littman Krooks LLP's ("Littman") records and for a related protective order. Docket Nos. 149, 152, 153. The Parties dispute whether Littman can rightfully refuse to produce documents responsive to a subpoena on the basis of Defendant Major's attorney-client privilege because Plaintiffs believe that Defendant Major waived its privilege in the records. Id.
The Court grants Defendants' motion for an order quashing Plaintiffs' Littman subpoena, and for a related protective order, because the Court finds that Defendant Major did not implicitly waive its privilege in the Littman documents for the following reasons. Docket No. 149-1.
I. Factual Background
The Court assumes the Parties' knowledge of the general facts underlying the litigation and will only summarize facts from Plaintiffs' amended complaint and discovery motion papers as relevant to the instant dispute. See Docket Nos. 120, 149, 152, 153.
Plaintiffs are suing Defendants, which include a corporation and various officers of that corporation, for what Plaintiffs claim was an unfair buyout of minority shareholders, including Plaintiffs, at an artificially low price. Docket No. 149-3. In brief, Plaintiffs allege that Defendants sanctioned the Transaction even though they knew it was the product of an unfair share valuation process and unfair price, and thus unfair to the minority shareholders. Id.
In March 2013, Plaintiffs deposed Defendant Keltz, who is Defendant Major's corporate secretary and general counsel. Docket No. 149-1. Defendant Major had designated Defendant Keltz as its Federal Rule of Civil Procedure ("FRCP") 30(b)(6) witness, and Defendants' counsel Robert F. Brodegaard ("RFB") attended. Id . According to Plaintiffs, during the deposition Defendant Keltz testified that the Board relied on Littman's advice in structuring the Transaction and Plaintiffs believe that, as a result, Defendant Keltz waived Defendant Major's attorney-client privilege with Littman such that Plaintiffs may now subpoena formerly privileged discovery from Littman. Docket No. 149-3. In particular, Plaintiffs quote the following Defendant Keltz deposition testimony as material to their privilege-waiver claim. The first exchanges deal with the fairness of the valuation process:
Q: Did the board ever consider appointing a special committee to evaluate [the Transaction]?
A: My recollection of the events was that this was amongst some of the topics that were discussed with Mr. Littman, and we proceeded based on his advice.
Q: Ultimately, was there a special committee appointed?
Q: Is there a reason why a special committee was appointed for the transaction in 2006 but not appointed for this particular transaction?
RFB: If it is possible for you to answer without disclosing attorney-client information, please try. But if you can't, I direct you not to answer.
A: Both decisions were made as a result of our counsel.
A: To the best of my recollection, the board asked for Mr. Littman's counsel, received Mr. Littman's counsel on a variety of topics that this would engender and decided to go forward in the way that it went forward based on those conversations and that advice.
A: Again, I don't care to speculate what could have or maybe should have been done in someone else's opinion. We sought the advice of counsel and we followed the advice of ...