Abdo et al v. Fitzsimmons et al

Filing 135

AMENDED ORDER by Judge Thomas S. Hixson granting 117 Motion to Compel; granting 119 Motion for Joinder. (cdnS, COURT STAFF) (Filed on 10/2/2019)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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JOHN E. ABDO, et al.,
Plaintiffs,

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AMENDED ORDER RE: MOTION TO
COMPEL AND MOTION TO STRIKE

v.

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MICHAEL FITZSIMMONS, et al.,

Re: Dkt. No. 117, 119

Defendants.

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United States District Court
Northern District of California

Case No. 17-cv-00851-TSH

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RISING TIDE I, LLC, et al.,

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Case No. 17-cv-01232-TSH

Plaintiffs,

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Re: Dkt. No. 102, 111

v.

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MICHAEL FITZSIMMONS, et al.,

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Defendants.

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In these two related cases, investors allege they purchased millions of dollars in securities

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in reliance on fraudulent misrepresentations by Defendants,1 former directors and officers of a

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now-bankrupt corporation named Delivery Agent, Inc. In both cases, Defendants move to compel

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the production of documents responsive to subpoenas served on non-party Latham & Watkins,

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LLP, Delivery Agent’s former counsel. 17-851, ECF No. 117; 17-1232 ECF No. 111. As the

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recipient of the subpoenas, Latham maintains it must “take steps to maintain the privilege of its

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former client.” Opp’n at 2, ECF No. 120. 2

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In case 17-1232, Plaintiffs Rising Tide I, LLC and Rising Tide II, LLC move to strike the

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Defendants are Michael Fitzsimmons, Peter Lai, Chris G. Power, Peter J. Goettner, Christian
Borcher, Ernest D. Del, Marc S. Yi, James C. Peters, and Souheil Badran
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Because the motion to compel was filed in both cases, the Court’s citations herein refer to the 171232 docket numbers, unless otherwise noted.

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advice-of-counsel defenses asserted by Defendants,3 pursuant to Federal Rule of Civil Procedure

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12(f), or, in the alternative, move to preclude Defendants from offering advice-of-counsel

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evidence at trial. ECF No. 102. In case 17-851, Plaintiffs John E. Abdo, as Trustee of the John E.

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Abdo Trust Dated June 11, 2014, and John E. Abdo, as Trustee of the John E. Abdo Trust Dated

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March 15, 1976 filed a notice of joinder. ECF No. 119. Because the issues in both motions are

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linked, the Court considers them together. The Court finds these matters suitable for disposition

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without oral argument and VACATES the October 10, 2019 hearing. See Civ. L.R. 7-1(b).
As to the motion to compel, Rule 45 governs discovery of non-parties by subpoena, but the

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scope of discovery through a Rule 45 subpoena is the same as the scope of discovery permitted
under Rule 26(b). Beaver Cty. Employers Ret. Fund v. Tile Shop Holdings, Inc., 2016 WL

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United States District Court
Northern District of California

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3162218, at *2 (N.D. Cal. June 7, 2016) (citing Fed. R. Civ. P. 45 Advisory Comm.’s Note

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(1970); Fed. R. Civ. P. 34(a)). Rule 26 provides that a party may obtain discovery “regarding any

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nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs

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of the case[.]” Fed. R. Civ. P. 26(b)(1).
Here, Delivery Agent filed for Chapter 11 bankruptcy in September 2016 and ceased to

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function. In such cases, there is a presumption that evidentiary privileges such as attorney-client

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privilege or the work-product doctrine are no longer viable. See Gilliland v. Geramita, 2006 WL

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2642525, at *4 (W.D. Pa. Sept. 14, 2006) (“[T]here should be a presumption that the attorney-

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client privilege is no longer viable after a corporate entity ceases to function, unless a party

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seeking to establish the privilege demonstrates authority and good cause.”); TAS Distrib. Co. v.

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Cummins Inc., 2009 WL 3255297, at *2 (C.D. Ill. Oct. 7, 2009) (“Absent some compelling reason

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to the contrary, the attorney client privilege does not survive the death of the corporation.”);

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Trading Techs. Int’l, Inc. v. GL Consultants, Inc., 2012 WL 874322, at *4 (N.D. Ill. Mar. 14,

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2012) (“When the corporation is gone, so too is its interest in protecting its communications; the

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need to promote full and frank exchanges between an attorney and agents of his corporate clients

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In their Answers, Defendants asserted an advice-of-counsel defense to Plaintiffs’ claims, alleging
that, to the extent the actions alleged in the FAC occurred, they were acting upon advice of
counsel, including Latham. 17-851, ECF Nos. 85-86; 17-1232, ECF Nos. 79-80.
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disappears when the corporation employing those clients has departed.”); City of Rialto v. Dep’t of

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Def., 492 F. Supp. 2d 1193, 1200-01 (C.D. Cal. 2007) (finding the need for full disclosure

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outweighs the dissolved corporation’s need to protect pre-dissolution communications); Lewis v.

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United States, 2004 WL 3203121, at *4 (W.D. Tenn. Dec.7, 2004) (allowing no privilege when a

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“company is bankrupt and has no assets, liabilities, directors, shareholders, or employees.”).

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Further, the burden of proving an evidentiary privilege applies rests not with the parting

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contesting the privilege, but with the party asserting it. Weil v. Investment/Indicators, Research

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and Mgmt., Inc., 647 F.2d 18, 25 (9th Cir. 1981) (attorney-client privilege); Sidibe v. Sutter

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Health, 2018 WL 783808, at *2 (N.D. Cal. 2018) (work-product). Although Delivery Agent’s
Trustee indicated he does not intend to waive any applicable privilege held by the company,

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United States District Court
Northern District of California

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Quartaraolo Decl. ¶ 6, ECF No. 120-1, he has failed to provide any basis for why such a privilege

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exists. Thus, even if Delivery Agent had a viable evidentiary privilege, its burden of proof has not

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been met.

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Accordingly, the Court GRANTS Defendants’ motion to compel Latham to produce

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documents responsive to their subpoenas. As for Plaintiffs’ motion to strike, it is based on their

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purported inability to conduct discovery into Defendants’ advice-of-counsel defense. As this

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order likely resolves that issue, the Court DENIES Plaintiffs’ motion.

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IT IS SO ORDERED.

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Dated: October 2, 2019

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THOMAS S. HIXSON
United States Magistrate Judge

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