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United States v. Klein

United States District Court, E.D. New York

February 28, 2017

UNITED STATES OF AMERICA
v.
TIBOR KLEIN and ROBERT SCHULMAN, Defendants.

          Wm. Smith Greig U.S. Securities and Exchange Commission Attorney for Securities and Exchange Commission

          Christopher B Mead London and Mead Attorney for Defendant Schulman

          Jonathan S. Sack Curtis Brett Leitner Morvillo, Abramowitz, Grand Iason & Anello P.C. Attorney for Defendant Schulman

          MEMORANDUM & ORDER

          Joan M. Azrack United States District Judge

         Before the Court is a motion filed by the non-party Securities and Exchange Commission (the “SEC”) to quash defendant Robert Schulman's Rule 17 subpoena. Schulman requests production of a number of categories of documents insofar as those documents had not already been produced by the SEC to the United States Attorney's Office for the Eastern District of New York. Among the requested documents is an SEC Action Memorandum.

         With the exception of the requested Action Memorandum, the SEC has represented that it has provided all non-privileged responsive materials either to the United States Attorney's Office or directly to Schulman. The SEC has moved to quash Schulman's subpoena with respect to the Action Memorandum, arguing that the memorandum is protected by a number of legal privileges and that, even were it not privileged, the memorandum would be inadmissible at trial and is therefore not properly the subject of a Rule 17 subpoena. In response, Schulman requested that the Court conduct an in camera review of the Action Memorandum.

         The Court ordered the SEC to produce the Action Memorandum for in camera review. After reviewing the Action Memorandum, the Court grants the SEC's motion to quash.

         I. DISCUSSION

         For the reasons laid out below, the Court agrees with the SEC that the Action Memorandum is protected by the attorney-client and deliberative process privileges and by the work product doctrine. The Court also concludes that the Action Memorandum would be inadmissible at trial under Federal Rule of Evidence 403 and, therefore, is not properly the subject of a Rule 17 subpoena.

         A. The Action Memorandum is Privileged in its Entirety

         In its motion to quash, the SEC argues that the Action Memorandum is protected by the attorney-client privilege, the deliberative process privilege, the law enforcement privilege, and the attorney work product doctrine. (SEC Mem. at 4-8 (ECF No. 92).) Schulman appears to concede that the memorandum is protected by the work product doctrine. (Schulman Opp. at 10 n.3 (ECF No. 91).) In opposition to the SEC's motion to quash, however, Schulman argues that the attorney-client and deliberative process privileges do not apply to any factual findings contained within the Action Memorandum and that the memorandum is not subject to the law enforcement privilege. (Id. at 4-7.) Because the Court finds that the Action Memorandum is protected by both the attorney-client and deliberative process privileges, it need not determine whether it is also protected by the law enforcement privilege.

         The attorney-client privilege protects (1) communications between a client and her attorney that (2) are intended to be, and in fact were, kept confidential, (3) where those communications are made for the purpose of obtaining or providing legal advice. U.S. v. Mejia, 655 F.3d 126, 132 (2d Cir. 2011). Documents prepared by attorneys are protected only to the extent that they are, in fact, communications made for the purpose of obtaining or providing legal advice. That is, the attorney-client privilege “extends only to communications and not to facts.” Fed. Hous. Fin. Agency v. UBS Americas Inc., No. 11-cv-5201, 2013 WL 1700923, at *1 (S.D.N.Y. Apr. 16, 2013) (quoting Upjohn v. United States, 449 U.S. 383, 395 (1981)).

         The deliberative process privilege protects agency documents that (1) are “predecisional” and (2) contain deliberative material. Mr. & Mrs. B v. Bd. of Educ. of Syosset Cent. Sch. Dist., 35 F.Supp.2d 224, 228 (E.D.N.Y. 1998) (quoting Hopkins v. U.S. Dep't of Hous. & Urban Dev., 929 F.2d 81, 84 (2d Cir. 1991)). A document is “predecisional” where it is “prepared in order to assist an agency decisionmaker in arriving at his decision.” Id. A document contains deliberative material if its content is “related to the process by which policies are formulated.” Id.

         Schulman argues that each privilege applies only to the portions of the memorandum that either have the purpose of seeking or providing legal advice or are deliberative in some way. (Schulman Opp. at 4-5.) To the extent the Action Memorandum contains factual findings, Schulman argues that those findings are not protected by either privilege insofar as they are “reasonably segregable” from the portions of the memorandum that either provide legal advice or are ...


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