GOLDENSON et al v. STEFFENS et al
ORDER denying 148 Appeal from Magistrate Judge Decision to District Court ; affirming Report and Recommended Decision re 136 Report and Recommendations; denying 106 Motion for Sanctions By JUDGE JOHN A. WOODCOCK, JR. (jgw)
UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
DANIEL R. GOLDENSON, et al.,
JOHN L. STEFFENS, et al.,
ORDER DENYING THE PLAINTIFFS’ APPEAL OF THE MAGISTRATE
JUDGE’S ORDER ON THEIR MOTION TO COMPEL AND AFFIRMING
THE MAGISTRATE JUDGE’S RECOMMENDED DECISION ON THE
DEFENDANTS’ MOTION FOR SANCTIONS
This securities fraud case involves fall-out from the fraudulent activities of
the notorious Bernard Madoff. According to the Plaintiffs, they placed money in
funds that unknown to them had been invested in Madoff funds. Having suffered
losses, the Plaintiffs are now claiming that the Defendants, investment funds or
investment advisors, defrauded them by misrepresenting to them where and by
whom their money was going to be invested. During discovery, the Plaintiffs sought
documents from the New York law firm of Simpson Thacher & Bartlett, LLP, which
represented some of the funds.
The Court affirms the Magistrate Judge’s
recommendation that the Plaintiffs’ request for production of documents be denied
on the ground that the documents are protected by the attorney-client privilege.
The Court also affirms the Magistrate Judge’s recommendation that the
Defendants’ motion for sanctions be denied.
On April 12, 2012, Daniel R. Goldenson, Suzanne K. Goldenson, SKG
Partners LP, and SKG General Corp. (Plaintiffs), moved to compel the production of
Pls.’ Mot. to Compel the Produc. of Docs. (ECF No. 104) (Mot. to
Compel). That same day John L. Steffens, Gregory P. Ho, Spring Mountain Capital
GP, LLC, Spring Mountain Capital LP, and Spring Mountain Capital, LLC,
(Defendants) moved for sanctions. Defs.’ Mot. and Incorporated Mem. of Law for
Sanctions and an Award of Costs Incurred in Opposing Pls.’ Mot. to Compel against
Simpson Thacher & Bartlett LLP (ECF No. 106) (Defs.’ Mot. for Sanctions).
On April 23, 2012, the Defendants responded to the Plaintiffs’ motion to
compel, Defs.’ Opp’n to Pls.’ Mot. to Compel (ECF No. 109) (Defs.’ Opp’n), and the
Plaintiffs responded to the Defendants’ motion for sanctions. Pls.’ Opp’n to Defs.’
Mot. for Sanctions and an Award of Costs Incurred in Opposing Pls.’ Mot. to Compel
Against Simpson Thacher & Bartlett LLP (ECF No. 108) (Pls.’ Opp’n). On April 24,
2012, the Plaintiffs replied to the Defendants’ opposition, Pls.’ Reply to Defs.’ Opp’n
to Pls.’ Mot. to Compel the Produc. of Doc. (ECF No. 110) (Pls.’ Reply), and the
Defendants responded to the Plaintiffs’ opposition to their motion for sanctions.
Defs.’ Reply Mem. (ECF No. 112) (Defs.’ Reply).
On May 31, 2012, the Magistrate Judge denied the Plaintiffs’ motion to
compel the production of documents and recommended that the Court deny the
Defendants’ motion for sanctions.
Mem. Decision on Pls.’ Mot. to Compel and
Recommended Decision on Defs.’ Mot. for Sanctions (ECF No. 136) (Order & Rec.
Dec.). The Plaintiffs appealed the Magistrate Judge’s decision to deny their motion
to compel on June 14, 2012. Pls.’ Appeal of the Magistrate Judge’s Mem. Decision on
Pls.’ Mot. to Compel (ECF No. 148) (Pls.’ Appeal). The Defendants responded to the
Plaintiff’s appeal on July 2, 2012. Defs.’ Resp. to Pls.’ Appeal of the Magistrate
Judge’s Decision on Pls.’ Mot. to Compel (ECF No. 157) (Defs.’ Opp’n to Pls.’ Appeal).
The Court adopts the Magistrate Judge’s detailed recitation of the facts and
includes a factual summary to give immediate context. See Order & Rec. Dec. The
Plaintiffs bring this eleven-count action against Defendants, to recover damages for
significant financial losses they sustained as a result of the Defendants’ investment
of the Plaintiffs’ money in two “hedge funds”, which were entangled in Bernard
Madoff’s (Madoff) infamous Ponzi scheme. First Am. Compl. and Demand for Jury
Trial (Am. Compl.) ¶¶ 1-6 (ECF No. 38). Notably, “[i]nvestors in hedge funds are
typically ‘limited partners’ in a private investment formed pursuant to a limited
Id. ¶ 23.
In their Amended Complaint, the Plaintiffs
allege that the Defendants did not “carefully select [ ] sub-managers” or “monitor
their trading strategies and performance” but rather “simply funneled [the
Plaintiffs’] money to Madoff Investment Securities (MIS),” through investments in
the “QP 1 Fund” and “Ascot Fund.” Id. ¶¶ 5, 32, 36-37.
The Plaintiffs learned of Madoff’s Ponzi scheme on December 11, 2008 but
were unaware that their investments in the Ascot or QP 1 Funds were at risk. Id.
On December 12, 2008, the Plaintiffs received a letter from the
Defendants stating, “[a]lthough we do not have any direct investments with Madoff
Securities, some of our underlying managers do have exposure.”
Id. ¶ 91. On
December 15, 2008, the Defendants sent the Plaintiffs correspondence confirming
that both the Ascot Fund and the QP 1 Fund had direct exposure to Madoff
Id. ¶ 93.
In that same letter, the Defendants stated, “[s]ince the
announcement of the Madoff Securities fraud, we have taken affirmative steps to
protect our interests. We have retained Simpson Thacher & Bartlett LLP (STB) to
provide us with legal advice concerning all transactional, structural, regulatory and
litigation issues that may arise in connection with this matter.” Mot. to Compel
Attach. 1, Letter from Spring Mountain Capital to Investor (Dec. 15, 2008) (ECF No.
The Defendants contacted STB on December 11, 2008 and later retained STB
to represent various Spring Mountain entities and affiliates. Defs.’ Opp’n Attach 2,
Decl. of James G. Kreissman ¶ 2 (ECF No. 109-2) (Kreissman Decl.). Before filing
this lawsuit, the Plaintiffs never communicated with STB to obtain legal advice in
writing, in person or by phone. Id. ¶ 5. However, after threatening to file this
lawsuit, the Plaintiffs’ counsel communicated with James Kreissman, a partner at
STB, and therefore was aware that he represented adverse parties―the Defendants.
See id. ¶¶ 1, 6.
On October 24, 2011, the Plaintiffs served a subpoena on STB seeking
documents created or collected in the course of STB’s representation of the
Defendants. Id. ¶ 7. Specifically, the subpoena sought:
All documents . . . concerning your provision of professional legal
services to the investors of the Spring Mountain QP 1, LP (the “Fund”),
or to persons or entities having authority to obtain professional legal
services on behalf of the Fund or its investors, between December 1,
2008 and the present.
All non-privileged documents . . . arising out of your provision of
legal services to [the Defendants] . . . or to persons or entities having
authority to obtain professional legal services on behalf of [the
Defendants] . . . between January 1, 2001 and the present, that relate
to or reference J. Ezra Merkin, Bernard Madoff, Bernard L. Madoff
Investment Securities, LLC, Ascot Partners, L.P, the Ascot Fund,
Ascot Fund Limited, Gabriel Capital, L.P., the Gabriel Fund, Ariel
Capital, L.P., or the Ariel Fund.
Decl. of David Spears in Supp. of Defs.’ Mot. for Sanctions and an Award of Costs
(ECF No. 107) (Spears Decl.) Attach 1, Subpoena to Produce Docs., Information, or
Objects or to Permit Inspection of Premises in a Civil Action ¶¶ 1-2 (ECF No. 107-1)
(Subpoena). On November 7, 2011, STB served written objections to the subpoena.
Kreissman Decl. ¶ 7. On December 8, 2011, Thimi R. Mina, one of the Plaintiffs’
attorneys, wrote STB charging that if STB was not retained to provide legal services
for the benefit and protection of the Plaintiffs and the Defendants, the Defendants’
December 15, 2008 letter was false and misleading. Spears Decl. Attach 3, Letter
from Thimi R. Mina to James Kreissman (Dec. 8, 2011) at 2 (ECF No. 107-3).
Attorney Mina’s letter also stated that if STB did in fact provide services for the
benefit of the Plaintiffs, attorney-client privilege could not be asserted against them
and that the letter would serve as the Plaintiffs’ only notice to STB that at trial the
Plaintiffs would offer evidence that STB declined to cooperate with them. Id. STB
did not respond and there was no further contact between the Plaintiffs and STB
until the Plaintiffs moved to compel in the Southern District of New York.
Kreissman Decl. ¶¶ 8-9.
On or about February 9, 2012, the Plaintiffs served a second request for
production of documents on STB.
Spears Decl. Attach 4, Pls.’ Second Req. for
Produc. of Docs. and Things (ECF No. 107-4) (Second RFP). On February 28, 2012,
the Defendants moved for a protective order with respect to twelve of the Plaintiffs’
thirteen requests in its second request for production. Defs.’ Mot. for a Protective
Order Relating to Pls.’ Second Req. for the Produc. of Docs. and Things at 1 (ECF
No. 89) (Defs.’ Protective Order). On March 6, 2012, the Plaintiffs filed an omnibus
motion in the Southern District of New York to compel the Defendants to respond to
several subpoenas including STB’s subpoena. See Goldenson v. Merkin, No. 1:12-mc68-PI (S.D.N.Y.) (New York Action), Notice of Mot. to Compel the Produc. of Docs.
Pursuant to FED. R. CIV. P. 45(c)(2)(B)(i) (NY ECF No. 1). On or about March 12,
2012, the Defendants served a written response to the Plaintiffs’ second request for
production, objecting to all thirteen requests. Mot. to Compel Attach 6, Defs.’ Objs.
to Pls.’ Second Req. for Produc. of Docs. (ECF 104-6).
In a telephone conference on March 15, 2012, Plaintiffs’ counsel stated they
would consider withdrawing the motion to compel against STB if STB stipulated
that it had not been retained to represent the Plaintiffs. Kreissman Decl. ¶ 11. STB
stipulated to that fact; however, the Plaintiffs’ counsel decided to proceed with its
motion to compel. See id. Shortly thereafter, on March 19, 2012, STB opposed the
Plaintiffs’ motion to compel. New York Action, Simpson Thacher & Bartlett LLP’s
Mem. of Law in Opp’n to Mot. to Compel the Produc. of Docs. (NY ECF No. 19). As
of that date, STB had identified almost one hundred custodians of documents
relevant to the Plaintiffs’ subpoena, estimated it would take several weeks to
arrange all the documents, and stated it would cost approximately $100,000 in
attorney and staff time to respond to the subpoena. Kreissman Dec. ¶¶ 12, 14.
On March 22, 2012, the Magistrate Judge held a hearing in Maine on three
pending motions and denied the Defendants’ motion for a protective order relating
to the Plaintiffs’ second request for production of documents. Report of Hr’g and
Order RE: Disc., Scheduling Mot. at 1, 6 (ECF No. 98).
At the hearing, the
Magistrate Judge directed the parties to meet and confer before April 5, 2012, to
narrow the scope of the second request for production of documents so that the
Defendants could reasonably produce all the documents by April 23, 2012, and for
the parties to submit letters to the Court by April 9, 2012, describing their positions
as to any remaining disputes after their meeting. Id. at 7-8.
On March 26, 2012, the Plaintiffs filed a reply memorandum in support of
their motion to compel in the New York action.
New York Action, Movant’s
Consolidated Replies to Resp’ts’ Opp’n to Movants’ Mot. to Compel the Produc. of
Docs. (NY ECF No. 30).
On March 27, 2012, the Plaintiffs’ counsel sent the
Defendants’ counsel proposals to narrow the scope of the Plaintiffs’ second request
for production of documents. Spears Decl. Attach 8, Email from Alfred Frawley to
James Kilbreth, David Spears, and Michelle Skinner (Mar. 27, 2012) (ECF No. 1078).
Next, on April 2, 2012, following United States District Court Judge Barbara
S. Jones’ March 27, 2012 granting of their motion to intervene as of right, the
Defendants filed an opposition to the Plaintiffs’ motion to compel the production of
documents from STB in New York. New York Action, Order (NY ECF No. 32);
Spring Mountain Intervenors’ Opp’n to Mot. to Compel Produc. of Docs. from
Simpson Thacher & Bartlett, LLP (NY ECF No. 37) (Intervenors’ Opp’n/S.D.N.Y.).
In that motion, the Defendants argued that this Court, not the Southern District of
New York, should resolve the dispute over the Plaintiffs’ request for production of
documents from STB. Intervenors’ Opp’n/S.D.N.Y at 2-3. The Defendants also
charged that the Plaintiffs had mischaracterized the record in this Court. Id. at 6-7.
On April 3, 2012, Judge Jones held a hearing in New York on the omnibus
subpoena enforcement proceeding and dismissed the Plaintiffs’ motion to compel
because she and Magistrate Judge John H. Rich III agreed that “[the motion]
should be handled in Maine.” See Pls.’ Opp’n Attach 4, Tr. of Proceedings of April 3,
2012 (ECF No. 108-4). On or about April 9, 2012, the parties submitted a letter to
the Magistrate Judge confirming they had reached an agreement concerning all
document requests in the second request for production except requests nine and
thirteen. Report of Hr’g and Order Re: Disc., Scheduling Mot. (ECF No. 103). The
Magistrate Judge set a briefing schedule for the motion to compel and the motion
for sanctions and directed the Plaintiffs to address “the narrowing of RFP No. 13” in
their motion to compel. Id. at 4.
In response, the Plaintiffs proposed limiting their request for documents in
request No. 13 to six STB attorneys. Mot to Compel Attach 8, Decl. of Alfred C.
Frawley IV in Support of Pls.’ Mot. to Compel the Produc. of Docs. ¶¶ 9-11 (ECF No.
104-5) (Frawley Decl.).
Request No. 13 of the Plaintiffs’ second request for
production of documents demanded:
Between December 1, 2008 and April 6, 2009, all documents and
communications within the Defendants’ custody or control, including
without limitation communications in the possession of their agent
STB, depicting or concerning STB’s provision of Madoff-related legal or
investigative services to [Defendants} . . . and/or any general partner,
manager, member or employee thereof, including without limitation,
John L. Steffens, Gregory P. Ho, and J. Ezra Merkin.
Id. ¶ 10. The Plaintiffs also sought an order directing the Defendants to request
these documents from STB. Mot. to Compel at 1.
Order on the Plaintiffs’ Motion to Compel
The Magistrate Judge concluded that “the [D]efendants’ have the better
argument” and denied the Plaintiffs’ motion to compel. Order & Rec. Dec. at 16, 35.
First, the Magistrate Judge determined that the Plaintiffs were not clients of STB
and were barred from accessing the requested documents by attorney-client
privilege. Id. at 19, 21. He noted that STB represented the partnership, not the
limited partners, such as the Plaintiffs, and that there was no objective or
subjective evidence supporting the Plaintiffs’ belief that STB represented them. Id.
Next, the Magistrate Judge rejected the Plaintiffs’ argument that the
Defendants failed to properly distinguish which documents were protected by
attorney-client privilege. Id. at 21-22. Referencing the Plaintiffs’ blanket request
for production, the Magistrate Judge pointed out that “[b]y definition, [the
Plaintiffs] seek documents shielded by attorney-client privilege.”
Id. at 22.
Therefore, the Magistrate Judge decided that although some documents might be
unprotected, the burden of requiring the Defendants to create a privilege log and
produce the desired documents outweighed their benefit to the Plaintiffs and the
case. Id. at 22.
The Magistrate Judge also considered the Plaintiffs’ motion in light of the socalled Garner doctrine, which provides that a “corporation is not barred from
information enjoy the status of stockholders.”
Id. at 22-29 (quoting Garner v.
Wolfinbarger, 430 F.2d 1093, 1103-04 (5th Cir. 1970)).
Under Garner, the
Magistrate Judge determined that the Plaintiffs would have to show (1) a mutuality
of interest and (2) good cause to pierce attorney-client privilege. Order & Rec. Dec.
at 24-25. Noting that some federal courts have required a “good cause” showing in
the limited partner context, the Magistrate Judge was not persuaded by the
Plaintiffs’ contention that the “good cause” requirement did not apply to their case.
Id. at 26-27.
Furthermore, the Magistrate Judge concluded that the Plaintiffs did not
show good cause. Id. at 28. Specifically, the Court found that the Plaintiffs’ “small
stake [two percent of the QP I Fund], together with their self-described status as
‘unique investors’ and their bringing of suit for their own personal benefit,
potentially in conflict with the interests of other QP I Fund investors, weigh[ed]
against a finding of good cause.” Id. Also, the Court pointed out that the Plaintiffs
did not show a “substantial need” for particular documents; rather, they wished to
embark on a broad search for evidence. Id. at 29.
Finally, the Magistrate Judge denied the Plaintiffs’ motion on a separate
ground―overbreadth―because the Plaintiffs expanded the scope of their request for
production. Id. at 30. Instead of limiting their request to documents concerning
“legal advice,” as they had in their original request, the Plaintiffs requested all
documents concerning “legal or investigative services” in their narrowed request.
Compare Frawley Decl. ¶ 11, with Second RFP. Thus, “the continuing overbreadth
of [the] Second RFP No. 13” further supported the Magistrate Judge’s denial of the
Plaintiffs’ motion. Order & Rec. Dec. at 30.
Recommended Decision Regarding the Defendants’ Motion for
The Magistrate Judge recommended that the Court deny the Defendants’
motion for sanctions.
Id. at 35.
First, the Court concluded that the Plaintiffs’
“simultaneous pursuit of a similar set of documents from STB in the S.D.N.Y. and
the [D]efendants in this Court, was an aggressive, but not abusive discovery tactic.”
Id. at 32. The Magistrate Judge found that the Plaintiffs did not renounce all
efforts to enforce the subpoena in their December 8, 2011 letter and that at the time
they filed the motion, it was not reasonably foreseeable to them that Judge Jones
would dismiss their motion to compel on the ground that Maine was better suited to
resolve the issue. Id. at 32-33.
Furthermore, the Magistrate Judge noted that the Defendants essentially
acquiesced to resolving any expected issues over the second request for production
in the Southern District of New York. Id. at 33. Finally, he pointed out that the
Plaintiffs’ actions following Judge Jones’ dismissal were consistent with his oral
order on March 22, 2012 and that the parties’ New York discovery litigation was
productive for both parties. Id. at 34, 34 n.13.
Next, the Court considered the Plaintiffs’ alleged misrepresentations to
Judge Jones. Id. at 34-35. The Magistrate Judge noted that a statement by the
Plaintiffs in the Frawley Declaration left the misimpression that the Defendants’
motion for protection concerned the Plaintiffs’ thirteenth request in their second
request for production of documents and that the Court considered but declined to
rule on the issue of privilege in its denial of the Defendants’ motion for protection.
Id. at 35. Nevertheless, the Magistrate Judge concluded that “in the absence of any
indication that Judge Jones or the S.D.N.Y. was actually misled, or that STB or the
defendants were otherwise prejudiced, the statement does not, standing alone,
warrant the sanction of the requested imposition of costs and fees.” Id.
Plaintiffs’ Motion to Compel
The Plaintiffs appeal the Magistrate Judge’s order denying their motion to
compel on three grounds. Pls.’ Appeal at 1. First, the Plaintiffs argue that the
Magistrate Judge committed clear error by concluding that the Plaintiffs waived
their right to argue that the work product doctrine does not protect the Defendants’
documents and that the Plaintiffs’ payment of STB’s legal fees supports piercing
Id. at 1, 4-6.
Second, the Plaintiffs argue that the
Magistrate Judge’s statement, “[b]y definition, [the Plaintiffs’] seek documents
shielded by the attorney-client privilege,” clearly shows that he did not hold the
Defendants to the required burden of proof for claiming privilege under the
attorney-client privilege and work product doctrines. Id. at 1, 6-9. In support, the
Plaintiffs cite an eight-element test that they say parties must satisfy to invoke
attorney-client privilege and they contend that the Magistrate Judge failed to make
fact-intensive inquiries into elements four through eight. Id. at 6-7. Third, the
Plaintiffs criticize the Magistrate Judge’s “broad” ruling that a limited partner
seeking to use the fiduciary exception to pierce the attorney-client privilege must
show good cause under Garner and they cite a series of cases to support the
contention that this case is factually distinguishable from Garner. Id. at 1, 9-10.
The Defendants respond that the Plaintiffs’ waiver arguments fail because
the Plaintiffs were not responding to “new matter” in their reply brief. Defs.’ Opp’n
to Pls.’ Appeal at 3-4. Instead, for both the work product and the allocation of legal
fees arguments, the Defendants assert that the Plaintiffs did not make either
argument in their motion to compel despite having fair warning of the availability
and utility of both arguments.
Next, the Defendants maintain that the
Plaintiffs’ second ground for appeal―the Magistrate Judge’s failure to hold the
Defendants to the correct burden of proof―should be reviewed under the “clearly
erroneous” standard rather than the “contrary to law” standard. Id. at 5-6. The
Defendants also dispute the Plaintiffs’ claim that the Magistrate Judge should have
determined the identity of STB’s client.
Id. at 7.
“At bottom, Plaintiffs are
attempting to flip discovery on its head, using the attorney-client relationship to
determine which communications to seek as opposed to avoid.” Id. at 8 (emphasis in
Third, the Defendants assert that the Magistrate Judge’s application of the
“good cause” requirement was not contrary to law because he “took explicit care to
follow the decisions of other courts” in deciding that “the ‘good cause’ requirement
applies in the context of a limited partnership.” Id. at 8. Finally, the Defendants
point out that even if the Court is persuaded by the Plaintiffs’ objections, the
Magistrate Judge’s decision should be upheld because the Plaintiffs’ document
request is overbroad and would be “extremely burdensome.” Id. at 10.
Defendants’ Motion for Sanctions
The Defendants did not object to the Magistrate Judge’s recommendation
that their motion for sanctions be denied. The Court has reviewed that part of the
Magistrate Judge’s recommended decision and affirms it without objection. See 28
U.S.C. § 636(b)(1)(C); PowerShare, Inc. v. Syntel, Inc., 597 F.3d 10, 14 (1st Cir.
2010) (“[a]bsent a timely objection, the recommended decision ripens into an order”).
Standard of Review: Motion to Compel
After a party files a timely objection to the Magistrate Judge’s order on a nondispositive matter, the District Court must “modify or set aside any part of the
order that is clearly erroneous or is contrary to law.” FED. R. CIV. PRO. 72(a). Under
the “clearly erroneous standard”, the Court “must accept both the trier’s findings of
fact and conclusions drawn therefrom unless, after scrutinizing the entire record,
[it] ‘form[s] a strong, unyielding belief that a mistake has been made.’” Phinney v.
Wentworth Douglas Hosp., 199 F.3d 1, 4 (1st Cir. 1999) (citing Cumpiano v. Banco
Santander P.R., 902 F.2d 148, 152 (1st Cir. 1990)).
Rulings in the Magistrate
Judge’s order will be reviewed under the “contrary to law” standard when the
motion “turns on a pure question of law.” PowerShare, Inc., 597 F.3d at 15. “This
means that, for questions of law, there is no practical difference between review
under Rule 72(a)’s ‘contrary to law’ standard and review under Rule 72(b)’s de novo
Plaintiffs’ Motion to Compel
Waiver of the Plaintiffs’ Arguments in their Reply Brief
Under Local Rule 7(c), a moving party’s reply memoranda “shall be strictly
confined to replying to new matter raised in the objection or opposing
D. ME. LOC. R. 7(c).
Whether the Plaintiffs’ work product and
allocation of legal fees arguments were waived is reviewable under the clearly
erroneous standard. See Phinney, 199 F.3d at 4.
In his recommended decision, the Magistrate Judge found that the Plaintiffs
had waived two arguments by failing to raise them until their reply: work product
privilege and allocation of fees.
Order & Rec. Dec. at 16 n.4, 29, n.10. In the
recommended decision, the Magistrate Judge notes that the Plaintiffs made a work
product protection and allocation of fees arguments “for the first time in their reply
memorandum” and that these arguments “could have been raised in their motion.”
Id. at 16 n.4, 29 n.10. He concluded that the arguments had been waived. Id.
In their appeal, the Plaintiffs do not contend that they raised these issues in
their initial motion, but insist that—as allowed by Local Rule 7(c)—they were
merely “replying to a new matter raised” in the Defendants’ response. Pls.’ Appeal
at 4-5 (quoting D. ME. LOC. RUL. 7(c)).
It is true that in their response, the
Defendants observed that the “Plaintiffs completely ignore the work product
doctrine, which independently protects STB’s communications with Defendants
depicting or concerning legal services because those communications occurred in
anticipation of litigation.” Defs.’ Opp’n at 4. Thus, the Plaintiffs’ contention that
they were responding to an issue raised by the Defendants has some salience.
However, it does not carry the day.
Local Rule 7 contemplates a point, counterpoint, and rejoinder sequence: (1)
the moving party raises in its motion the legal issues reasonably generated by its
requested relief, (2) the non-movant responds to those issues, and (3) the movant
answers the non-movant’s arguments. D. ME. LOC. R. 7(a)-(c). When a movant fails
to raise an issue that should have been raised, the orderly sequential briefing of the
issue is disturbed. Here, for example, the Defendants noted in their response that
the Plaintiffs had failed to raise the work product issue. Defs.’ Opp’n at 4. In their
reply, the Plaintiffs discussed the work product privilege for the first time. Pls.’
Reply at 2-5. In addressing this question, the Magistrate Judge was therefore left
without the sequential briefing the Local Rule contemplates. The failure to raise
issues in the first instance is to be discouraged because it circumvents the normal
process for airing issues and may be used strategically for the movant to gain an
unfair advantage, remaining silent on an important issue in hopes that the nonmovant does not raise it. It is in this context that the Magistrate Judge concluded
that the Plaintiffs “could and should have raised” the work product issue in the first
instance. Order & Rec. Dec. at 16 n.4.
Although another judge could reasonably have concluded that the work
product issue was not waived, it is another matter for this Court to conclude that
the Magistrate Judge’s determination of the issues that “could and should have
been raised,” which is essentially a discretionary judgment, is either clearly
erroneous or contrary to law.
As the work product privilege is commonly
determination that if the Plaintiffs raised one, they should have raised or waived
the other, is neither clearly erroneous nor contrary to law.
Burden of Proof for Invoking Attorney-Client Privilege
and the Continuing Overbreadth of the Plaintiffs’
Request for Production
The Court concludes that the clearly erroneous standard of review applies to
whether attorney-privilege bars the Plaintiffs’ request for documents because it
involves a mixed question of law and fact. See In re Grand Jury Subpoena, 662 F.3d
65, 71 (1st Cir. 2011) ([d]etermining whether documents are privileged demands a
highly fact-specific analysis); Order & Rec. Dec. at 21-22 (concluding that this case
presented the Court with “an unusual circumstance”, which relieved the Defendants
from meeting the “customary burden of proving that attorney-client privilege
attaches to each [document]”). As the Magistrate Judge correctly noted, the party
invoking attorney-client privilege “must carry the devoir of persuasion to show that
it applies to a particular communication.” In re Grand Jury Subpoena, 662 F.3d at
71; Order & Rec. Dec. at 21. “Whatever quantum of proof is necessary to satisfy this
obligation, a blanket assertion of privilege is generally insufficient.” In re Grand
Jury Subpoena, 662 F.3d at 71. The First Circuit has stated that “the cloak of
confidentiality has costs as well as benefits, and courts must take care to construe
this privilege narrowly.” Id.; In re Keeper of Records, 348 F.3d 16, 22 (1st Cir. 2003)
(noting that attorney-client privilege “come[s] with substantial costs and stands as
an obstacle of sorts to the search for truth”).
Caselaw has carved out an eight-element test to determine when attorneyclient privilege attaches to a document. In re Grand Jury Subpoena, 662 F.3d at 71
(quoting Cavallero v. United States, 284 F.3d 236, 245 (1st Cir. 2002)) (listing the
eight-element test). The burden for each element of the test lies with the party
asserting privilege. Id. “A failure to satisfy any one of the enumerated elements
defeats the claim of privilege.”
Here, the Plaintiffs complain that the
Magistrate Judge did not engage in a “fact-intensive inquiry into the 
elements”―specifically elements (4)-(8)―but rather “allowed the Defendants to
escape their burden of proof by ruling that the Plaintiffs ‘[b]y definition,  seek
documents shielded by attorney-client privilege.’” Pls.’ Appeal at 6-7.
The Court observes that the continuing overbreadth of the Plaintiffs’ request
for documents played a large role in the Magistrate Judge’s decision to uphold the
Defendants’ claim of attorney-client privilege. See Order & Rec. Dec. at 21-22, 30.
The Magistrate Judge concluded that by requesting “all documents and
communications . . . [in the Defendants’ and STB’s custody or control], depicting or
concerning STB’s provision of Madoff-related legal or investigative services,” the
Plaintiffs were inevitably seeking documents protected by the attorney-client
privilege. Id. at 22, 22 n.8; see In re Keeper of Records, 348 F.3d at 22 (the attorneyclient privilege “protects only those communications that are confidential and are
made for the purpose of seeking or receiving legal advice”). “While it is conceivable
that some small quantity of responsive documents might be unprotected,” the
Magistrate Judge ultimately concluded that the burden of creating a privilege log
and granting the Plaintiffs’ motion to compel outweighed the benefit of a log or
access to what would likely be a small number of documents. Order & Rec. Dec. at
22; see Amorim Holding Financeira S.G.P.S., S.A. v. C.P., No. 09-10641-DPW, 2011
U.S. Dist. LEXIS 134877, *4-5 (D. Mass. Nov. 22, 2011) (holding in the context of an
attorney-client privilege challenge that “while [a series of documents are] arguably
relevant . . . the burden of proposed discovery will outweigh its likely benefit
considering the importance of this discovery in resolving issues”) (citing FED. R. CIV.
The First Circuit generally applies attorney-client privilege’s eight-element
test regardless of whether documents facially appear to be protected by attorneyclient privilege in order to make a final determination on their privileged status.
See In re Grand Jury Subpoena, 662 F.3d at 71; Cavallaro, 284 F.3d at 245
(citations omitted). Nevertheless, as here, where the burden of proving the privilege
of each document within a voluminous request appears to outweigh the documents
benefit to the parties and the case, the Magistrate Judge’s ruling does not amount
to clear error.1 See FED. R. CIV. P. 26(b)(2)(C)(iii) (“When required . . . on its own the
court must limit the frequency or extent of discovery . . . if it determines that . . .
the burden or expense of the proposed discovery outweighs its likely benefit . . . .”)
(emphasis in original); In re Grand Jury Subpoena, 662 F.3d at 71 ([d]etermining
whether documents are privileged demands a highly fact-specific analysis . . .
[which] often requires the party seeking to validate a claim of privilege to do so
document by document”).
This conclusion is also supported by the Magistrate
The Court also concludes that the Plaintiffs’ document requests under the work product
doctrine are similarly barred. See Gavin v. Liberty Mut. Group Inc., No. 11-cv-159-LM, 2012 U.S.
Dist. LEXIS 109416, at *15-16 (D. N.H. Aug. 6, 2012) (“[h]ere, the deposition question that prompted
Gavin’s motion to compel, and the motion to compel itself, do expressly call for the substance of
communications between Mullane and Liberty Mutual’s counsel. Thus, the inquiry here ‘clearly
fall[s] within the boundaries of the work product doctrine . . . .’”).
Judge’s determination that “[t]he continuing overbreadth of [the] Second [request
for production No. 13], which the [D]efendants represent would have made their
compliance with discovery deadline impracticable . . . further weighs in favor of the
denial of the Motion to Compel.”2 Order & Rec. Dec. at 30 (observing that the
Plaintiffs’ “narrowed Second RFP No. 13 is, in at least one respect, broader than the
original” because it requests documents concerning “legal or investigative services”
rather than simply “legal advice”); see In re One Bancorp. Sec. Litigation, 134 F.R.D.
4 at 11-12 (D. Me. 1991).
Furthermore, the Plaintiffs’ request for production
continues to be overbroad and this is an independent ground to uphold the
Magistrate Judge’s denial of the Plaintiffs’ motion.
Application of the “Good Cause” Requirement
The Court reviews the Magistrate Judge’s ruling that Garner’s “good cause”
requirement applies to the Plaintiffs under the contrary to law standard of review
because this issue turns on a pure question of law. See PowerShare, Inc., 597 F.3d
at 15. Pursuant to Garner, a party may pierce attorney-client privilege under the
fiduciary exception where the party establishes a mutuality of interest in seeking
legal advice and, depending on the legal context, good cause to pierce the privilege.
See In re Alt. Fin. Agmt. Sec. Litig., 121 F.R.D. 141, 146 (D. Mass. 1988) (describing
the mutuality of interests requirement); compare Solis v. Food Empls. Labor
Relations Ass’n, 644 F.3d 221, 228-29 (4th Cir. 2011) (declining to apply “good
cause” in the ERISA context concerning Madoff-related investments), and Lawrence
Because the Court affirms the Magistrate Judge’s decision because of undue burden and
overbreadth, the Court does not reach the Plaintiffs’ arguments relating to individual elements in
the eight-element test, including the mentioned “collateral issues.” See Pls.’ Appeal at 7-8.
v. Cohn, No. 90 Civ. 2396, 2002 WL 109530, at *3 (S.D.N.Y. Jan. 25, 2002) (deciding
not to apply “good cause” in the context of a dispute between the executor and
beneficiaries of an estate), with Forston v. Winstead, McGuire, Sechrest & Minick,
961 F.2d 469, 475 n.5 (4th Cir. 1992) (applying “good cause” in the limited
partnership context), and Garner, 430 F.3d at 1103-04 (apply “good cause” in a
Despite the Magistrate Judge’s Order, the Plaintiffs argue against
application of “good cause” to this case; however, the Court views the Plaintiffs’
authority as materially distinguishable from this situation. See Order & Rec. Dec.
at 26; compare Mot. to Compel at 8-9, with Pls.’ Appeal at 9-10. The Plaintiffs
contend that these cases highlight the principal that “because fiduciaries are held to
an increased standard of loyalty―whether they are partners, trustees, executors, or
members of a closely-held corporation―they are not permitted to shield their
conflicts of interest by hiding behind the attorney-client privilege.” Pls.’ Appeal at
Yet, the Defendants properly note that “the good cause requirement
incorporates [fiduciary duty] policies, balancing them against [policies] underlying
the attorney-client privilege.” Defs.’ Opp’n to Pls.’ Appeal at 9; see In re ML-Lee
Acquisition Fund II, L.P., 848 F. Supp. 527, 563-64 (D. Del. 1994) (“Requiring
Plaintiffs to demonstrate good cause protects the purposes that underline the
communications may be necessary in certain instances to ensure that those in
fiduciary positions, such as general partners, are acting in the best interest of their
beneficiaries”). Like the Magistrate Judge, the Court is persuaded by decisions that
apply Garner’s “good cause” requirement in the limited partnership context and
concludes that the Magistrate Judge’s decision was not contrary to law.3
Forston, 961 F.2d at 475 n.5; In re ML-Lee Acquisition Fund II, L.P., 848 F. Supp. at
1. It is therefore ORDERED that Plaintiffs’ appeal of the Magistrate
Judge’s decision on their motion to compel the production of documents
(ECF No. 148) be and hereby is DENIED.
2. It is further ORDERED that the Recommended Decision of the
Magistrate Judge (ECF No. 136) be and hereby is AFFIRMED.
3. It is further ORDERED that the Motion for Sanctions (ECF No. 106)
be and hereby is DENIED.
/s/ John A. Woodcock, Jr.
JOHN A. WOODCOCK, JR.
UNITED STATES DISTRICT JUDGE
Dated this 14th day of January, 2013
The Court agrees with the Defendants that Abbot v. Equity Group, No. 86 Civ. 4186, 1988
WL 86826, at *3 (E.D. La. Aug. 10, 1998) is inapplicable as the Magistrate Judge correctly concluded
that the Plaintiffs were not STB’s clients; a conclusion not challenged by the Plaintiffs on appeal.
See Order & Rec. Dec. at 16-21; Defs.’ Opp’n to Pls.’ Appeal at 9 n.8.
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