Pacific Life Insurance Company v. Wells Fargo Bank, NA
MEMORANDUM OPINION AND ORDER Granting in Part and Denying in Part 84 Motion to Compel. Signed by Magistrate Judge Ajmel Ahsen Quereshi on 9/19/2023. (bas, Deputy Clerk) Modified on 11/13/2023 (bas, Deputy Clerk).
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
PACIFIC LIFE INSURANCE CO.,
WELLS FARGO BANK, NA,
Civil Case No. 8:21-cv-00737-PJM
MEMORANDUM OPINION AND ORDER
This is a case concerning the alleged illegal generation of a life insurance policy. Pending
before the Court is Plaintiff Pacific Life Insurance Company’s Motion to Compel the production
of documents from Defendant Wells Fargo Bank, NA, and Non-Parties Viva Capital 3, L.P.,
Blackstone Tactical Opportunities Advisors, LLC, and Preston Ventures, LLC (hereinafter
Defendant). ECF No. 84. 1 The sole remaining issue from the pending Motion is Plaintiff’s request
that the Court compel Defendant to produce certain communications protected by the attorneyclient privilege on account of Defendant’s alleged “at-issue waiver.” Given the unique nature of
the factual allegations in this case, the test applicable to Wells Fargo’s counter-claim for unjust
enrichment under Delaware law, and the responses of Defendant’s witness during his deposition,
the Court finds that a limited production for the purposes of an in-camera review is appropriate.
Accordingly, for these reasons and the reasons discussed below, Plaintiff’s Motion is granted, in
part, and denied, in part.
As discussed below, the Court recognizes the differing standards governing a request for the
production of documents and a subpoena to a non-party. However, both Wells Fargo and NonParties have filed joint briefings which turn on a singular legal determination of whether privileged
communications must be produced.
The facts of this case are recounted in detail in the Court’s Memorandum Opinion of April
24, 2023. ECF No. 113. Accordingly, the Court will focus on the facts relevant to the pending
On October 25, 2021, Wells Fargo filed a counterclaim against Plaintiff, alleging that if
the Schwartzberg Policy (hereinafter “the Policy”) was found to lack a valid insurable interest,
Plaintiff would be obligated to return the premiums related to the Policy, including those Wells
Fargo had paid on Viva Capital 3 L.P. (“Viva”)’s behalf. ECF No. 34, at 22-26. Importantly for
the purpose of the pending Motion, Wells Fargo specifically alleged:
Separately, Securities Intermediary’s customer, the [Defendant], did
not blind itself to red flags before it acquired the Policy on the
tertiary market. Securities Intermediary’s customer did
sophisticated due diligence and concluded that there was not a
significant risk that Pacific — which has never been in the business
of seeking to invalidate its life insurance policies through litigation
— would challenge the Policy’s validity. And if Pacific did
challenge the Policy, Securities Intermediary’s customer concluded
that there was not a significant risk that a Court would agree that the
Policy was invalid, and therefore, Pacific would be excused from
paying the Policy’s death benefit.
Id., at ¶ 48; see also id., at ¶ 42 (“After the current beneficial owner of the Policy acquired the
beneficial interest in the Policy, Securities Intermediary (on behalf of its customer) has continued
to pay premiums to Pacific in good faith through Dr. Schwartzberg’s death.” (emphasis added));
id., at ¶ 49 (“Pacific is also far more culpable than Securities Intermediary (and its customer)”).
On November 8, 2022, Plaintiff filed a Motion to Compel the Production of Documents
and Interrogatory Responses from Defendant. ECF No. 84. On January 6, 2023, the parties
completed briefing the pending Motion. ECF Nos. 92, 98.
On May 8, 2023, the Court held a hearing on the pending Motion, during which the Court
resolved several issues that Plaintiff had raised. ECF No. 117. However, the Court deferred ruling
on the parties’ main dispute – whether Defendant was obligated to produce certain
communications it had with counsel, reasoning that the production of attorney-client
communications should be a matter of last resort. ECF No. 118. Accordingly, to the extent that
Plaintiff could obtain the information needed to defend against Wells Fargo’s counterclaim
through other means, it should. Specifically, the Court asked whether Plaintiff had attempted to
depose a representative of Viva to see whether the representative, in fact, asserted the attorney
client privilege in response to questions related to Wells Fargo’s basis for its unjust enrichment
claim and Wells Fargo’s assertions of good faith in its pleadings. In response to Plaintiff’s answer
that it had not, the Court ordered Plaintiff to complete this deposition and granted Plaintiff leave
to renew its motion if it was unable to garner sufficient evidence to defend against Wells Fargo’s
unjust enrichment claim. Id.
On May 31, 2023, Plaintiff conducted a 30(b)(6) deposition of Jon Nelson, the CEO of
Preston Ventures LLC, the investment advisor to Viva, which is Wells Fargo’s customer in this
case. 2 ECF No. 128-2, at 5. During the deposition, Mr. Nelson made several statements relevant
to the resolution of the pending Motion. Specifically, he testified that the Policy was one of 450
policies that Viva purchased in 2017. Id. at 7.
Mr. Nelson stated that although Viva had some information that the policy was part of a
premium finance program, which would indicate that there was not an insurable interest, the
information was not dispositive. See id. at 24-25 (“the evidence was just as strong that it wasn’t a
Mr. Nelson appeared at the deposition on behalf of Viva Capital 3 LP, Preston Ventures, LLC,
and Blackstone Tactical Opportunities Advisors, LLC. ECF No. 128-2, at 5.
LaSalle premium financed through the PFIC program policy as it was.”). Plaintiff attempted to
delve into the basis for this statement. Plaintiff asked whether Preston Ventures – an investment
advisor that assists in the management of Viva – was told that the Policy was in-part funded
through a premium finance program administered by American Insurance Group, Inc. Id. at 25.
Mr. Nelson responded that he did not recall whether or not they were informed of such. Id.
During the deposition, Mr. Nelson stated that Preston, as well as Blackstone Tactical
Opportunities Advisors, LLC – a separate entity which, with Preston, manages Viva, conducted
due diligence both on the portfolio level, as well as on the individual Policy at issue in this case.
Id. at 26. The due diligence for Preston and Blackstone, and in essence Viva, was done by lawyers
at the law firm of Schulte, Roth and Zabel, who Viva hired in March 2017 to assess the risk that
the policies in the portfolio that the Policy was part of had insurable interests supporting them. Id.
Plaintiff sought to inquire further into the role that the legal advice played in Viva’s
determination that the Policy was supported by an insurable interest. Id. Defendant’s counsel
instructed Mr. Nelson not to answer on the basis of privilege. Id. Mr. Nelson similarly refused to
answer a question as to whether Viva reached a conclusion “about the level of interest risk that the
Schwartzberg policy carried” because he could not answer the question without bringing into his
answer “direct communication and advice from counsel.” Id. at 28. Plaintiff followed that
question by asking whether “everything that Viva relied upon in connection with the extent to
which the policy carried insurable interest risk came either directly from counsel or derived from
privileged advice from counsel[.]” Id. After initially refusing to answer, Mr. Nelson confirmed
that neither Preston nor Viva conducted any analysis that was separable from the legal analysis
which Viva’s counsel conducted. Id. Accordingly, he would refuse to answer any questions
regarding any conclusion it reached as to whether the Policy, or any other individual policy, was
supported by an insurable interest, id. at 29; see also id. at 29 (“When you’re talking of specific
policies, I cannot . . . extract the legal advice of counsel from the answer to whether there was or
wasn’t insurable interest risk associated with that Policy.”), because any analysis associated with
an individual policy would require a lawyer’s analysis. Id. (“any individual policy with the facts
and circumstances associated with that policy may be very unique and would require a lawyer to
evaluate individualized insurable interest risk.”). However, at the portfolio level, Mr. Nelson
admitted to considering the fact that the portfolio had been subject to a limited number of legal
challenges. Id. at 29; see also id. at 29-30 (“The business will use reasonable judgment when
evaluating litigation risk broadly . . . we very much were focused on the fact that literally thousands
and thousands of death benefits had been collected by AIG across their entire portfolio where no
litigation had been brought. . . . And that, for sure, was something that we . . . talked about . . . as
a good fact in why we should consider this a good portfolio to own . . . and invest in.”).
Upon further questioning by Plaintiff, Mr. Nelson again emphasized what Viva did on a
portfolio-wide basis as opposed to relating to any individual policy, including the Policy at issue
in this case:
We, on the business side, did evaluate the history of litigation that
AIG had experienced on literally thousands of death claims as one
of the data points that we would draw on about the likelihood of
future litigation, as history is the best predictor of the future. But . .
. it becomes much more complex and nuanced when you start to
evaluate it within the context of what the lawyers told us. And as
I’ve already testified, anything that the lawyers told us about any
individual policy, I cannot answer, based on advice from counsel.
Id. at 30; see also id. at 33 (“[Mr. Nelson] has given you testimony that that any such assessment
on an individual-policy basis is privileged.”). While at one point towards the end of the deposition,
Mr. Nelson stated facts that, “looking back,” evidenced that the Policy was supported by an
insurable interest, id. at 65, he clarified that these facts would only have been used to assess
whether a portfolio as a whole should be purchased. See id. at 66 (confirming that evidence related
to Pacific Life’s acceptance of premiums and whether a policy had been through multiple changes
of ownership was used to assess policies on a portfolio-wide basis.). Mr. Nelson testified that he,
and by extension Viva, did not have any specific recollection of what led Viva to ultimately clear
the Policy at issue in this case for purchase. Id. at 56. Finally, relevant to the pending Motion,
Mr. Nelson confirmed that any advice Viva may have received would have been received by email.
Id. at 31.
On July 13, 2023, Plaintiff filed a second Memorandum in support of its Motion to Compel,
renewing its request that the Court compel production of the attorney-client privileged
communications as it relates to the advice Defendant received regarding the Schwartzberg policy.
ECF No. 128. The parties have since completed briefing the pending Motion, including an
additional Opposition and Reply. ECF Nos. 144, 151.
Federal Rule of Civil Procedure 37(a) “authorizes the basic motion for enforcing discovery
obligations.” CHARLES ALAN WRIGHT, ET AL., 8B FED. PRAC. & PROC. CIV. § 2285 (3d
ed. 1998). Where a party fails to answer a request for production of documents or an interrogatory,
the Rule allows the opposing party to move for an order compelling an answer. Fed. R. Civ. P.
37(a)(3)(B)(iii)-(iv). The moving party must certify in the motion that it has conferred, or
attempted to confer, in good faith with opposing counsel in an effort to obtain the desired material
without court involvement. Fed. R. Civ. P. 37(a)(1). District courts enjoy substantial discretion
in managing discovery, including granting or denying motions to compel. Lone Star Steakhouse
& Saloon, Inc. v. Alpha of Va., Inc., 43 F.3d 922, 929 (4th Cir. 1995).
Regarding the request to compel subpoenaed documents, the Court must begin by
reviewing Plaintiff’s subpoena under the relevancy standards set forth in Rule 26(b). Crete
Carrier Corp. v. Sullivan and Sons, Inc., No. ELH-21-0328, 2022 WL 1203652, at *15 (D. Md.
Apr. 21, 2022). Pursuant to Fed. R. Civ. P. 26(b)(1):
Parties may obtain discovery regarding any nonprivileged matter
that is relevant to any party’s claim or defense and proportional to
the needs of the case, considering the importance of the issues at
stake in the action, the amount in controversy, the parties’ relative
access to relevant information, the parties’ resources, the importance
of the discovery in resolving the issues, and whether the burden or
expense of the proposed discovery outweighs its likely
benefit. Information within this scope of discovery need not be
admissible in evidence to be discoverable.
However, a subpoena to a third party which “requires disclosure of privileged or other protected
matter” or “subjects a person to undue burden,” must be quashed or modified. Fed. R. Civ. P.
45(d)(3)(A)(iii)-(iv). As explained in Maxtena, Inc. v. Marks, 289 F.R.D. 427, 439 (D. Md. 2012),
“[w]hether a subpoena subjects a witness to undue burden within the meaning of Rule
45[(d)](3)(A)(iv) usually raises a question of the reasonableness of the subpoena,” an analysis that
requires “weighing a subpoena’s benefits and burdens” and “consider[ing] whether the
information is necessary and whether it is available from any other source.” (citing 9A Charles
Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2463.1 (3d ed. 2008)). This
inquiry is “highly case specific” and involves “an exercise of judicial discretion.” Id. “The burden
of proving that a subpoena is oppressive is on the [responding party].” Fleet Bus. Credit, LLC v.
Solarcom, LLC, No. Civ.AMD05-901, 2005 WL 1025799, at *1 (D. Md. May 2, 2005) (internal
quotation marks omitted).
Although Defendant correctly analyzes the pending Motion as being subject to New York
law, it incorrectly cabins the applicable precedents thereunder and, as a result, their application in
this particular case. By pursuing a claim for unjust enrichment – which, under Delaware law,
requires an inquiry into Defendant’s actual knowledge; specifically pleading that it acted in good
faith; and then testifying that any analysis it may have been done was subject to the attorney client
privilege and that it lacks any recollection of any basis for decision it may have had separate and
apart from that provided by counsel, Defendant has made production of these communications not
merely relevant, but necessary to this case.
Choice of Law
Although the parties agree that the question of privilege in this case is governed by state
law, they disagree as to the law of which state applies. Pursuant to Federal Rule of Evidence 501,
“state law governs privilege regarding a claim or defense for which state law supplies the rule of
decision.” Fed. R. Evid. 501. Likewise, as this Court has held, “the law of the forum state in a
federal diversity action controls the applicability of a claim of privilege.” Saint Annes Dev. Co.,
LLC v. Trabich, No. WDQ–07–1056, 2009 WL 324054, at * 2 (D. Md. Feb. 9, 2009). In the
instant case, that is the law of Maryland. However, as “this Court in Hill v. Huddleston, 263
F.Supp. 108 (D. Md. 1967), predicted, in the absence of authoritative Maryland precedent, . . .
Maryland courts . . . apply the law of the state that has the most significant relationship with the
communication to a claim of privilege asserted at a deposition.” Id.; see also Bogard Const., Inc.
v. Oil Price Info. Serv., LLC, 604 F. Supp. 3d 895, 901 (N.D. Cal. 2022) (“Under Maryland choice
of law rules, the Court looks to the Second Restatement of Conflict of Laws for privilege questions.
. . . Under the Second Restatement, the Court applies the law of the state with the most significant
relationship to the communications at issue.”). Defendant asserts and Plaintiff does not dispute
that: 1) Maryland does not have authoritative precedent on the relevant question; and 2) the state
with the most significant relationship to the question of privilege in this case is New York. See
ECF No. 144, at 5; ECF No. 151, at 2.
Plaintiff argues that because Defendant’s counterclaim for unjust enrichment is arguably
governed by Delaware state law, pursuant to Federal Rule of Evidence 501, the question of
privilege must be governed by the law of the same state. ECF No. 85, at 6. Plaintiff’s argument
reads into the federal rule an additional requirement beyond its text. While Rule 501 specifies that
questions of privilege shall be governed by state law, nowhere in the Rule does it require that it be
the same state law that governs the underlying claim. Nor do the cases that Plaintiff cites support
such a rule. Although they involved circumstances in which courts applied the same state law to
both the plaintiff’s substantive claims and the questions of privilege in those cases, in none of those
cases did the court hold that the determination of the former was determinative as to the latter – as
Plaintiff argues. See ECF No. 98, at 3 (citing ContraVest Inc. v. Mt. Hawley Ins. Co., No. 201915, 2021 WL 4782687 (4th Cir. 2021); Wells v. Liddy, 37 Fed. App’x 53 (4th Cir. 2002)). In
many cases, the two questions will be subject to the law of the same state, as the rule of decision
will come from the forum state. See ECF No. 98, at 3 (citing Gresser v. Wells Fargo Bank, N.A.,
No. CCB–12–0987, 2014 WL 293518, at *1 (D. Md. Jan. 24, 2014) (“Maryland law, which
supplies the rule of decision, also governs the applicability of the attorney-client privilege.”);
Cont’l Cas. Co. v. Under Armour, Inc., 537 F. Supp. 2d 761, 765 (D. Md. 2008) (same)). However,
in this case, if Delaware law governs the underlying claim, as Plaintiff argues, the two questions
will be subject to two separate state’s laws.
Accordingly, in light of this Court’s prior rulings, the lack of precedent to the contrary, and
the undisputed connection between the privileged communications and the state of New York,
New York law applies to the present privilege-related dispute.
At Issue Waiver
Under New York law, it is well-established that:
“At issue” waiver of privilege occurs where a party affirmatively
places the subject matter of its own privileged communication at
issue in litigation, so that invasion of the privilege is required to
determine the validity of a claim or defense of the party asserting
the privilege, and application of the privilege would deprive the
adversary of vital information.
Deutsche Bank Tr. Co. v. Tri-Links Inv. Tr., 837 N.Y.S.2d 15, 23 (N.Y. App. Div. 2007). New
York courts have held that mere relevance to a claim at issue is not sufficient to waive the privilege.
Id. Rather, “at issue” waiver occurs: 1) “when the party has asserted a claim or defense that he
intends to prove by use of the privileged materials[,]” id.; 2138747 Ont. Inc. v. Lehman Brothers
Holdings, Inc., 176 N.Y.S.3d 636, 637 (N.Y. App. Div. 2022); or 2) where production of the
materials is necessary for the plaintiff to prove its claim or for the defendant to defend against a
claim, Vill. Bd. of Vill. of Pleasantville v. Rattner, 515 N.Y.S.2d 585, 586 (N.Y. App. Div. 1987);
Tupi Cambios, S.A. v. Morgenthau, 989 N.Y.S.2d 572, 576 (Sup. Ct. N.Y. Cnty. 2014); William
Tell Sers., LLC v. Cap. Fin. Plan., LLC, 999 N.Y.S.2d 327, 333 (Sup. Ct. Rensselaer Cnty. 2014);
In re Bank of New York Mellon, 977 N.Y.S.2d 560, 564 (Sup. Ct. N.Y. Cnty. 2013); Neogenix
Oncology, Inc. v. Gordon, CV14-4427(JFB)(AKT), 2015 WL 13735953, at *7 (E.D.N.Y. Jul. 31,
2015); Leviton Mfg. Co., Inc. v. Greenberg Traurig LLP, No. 09Civ.8083(GBD)(THK), 2010 WL
4983183, at *8 (S.D.N.Y. Dec. 6, 2010); Chin v. Rogoff & Co., P.C., No. 05Civ.8360(NRB), 2008
WL 2073934, at *5 (S.D.N.Y. May 8, 2008). See also Securitized Asset Funding v. Canadian
Imperial Bank of Com., 138 N.Y.S.3d 309, 310 (N.Y. App. Div. 2021) (“This is unlike [a] case . .
. in which this Court upheld an at-issue waiver, despite the defendant’s avowed intention not to
use privileged communications and documents in its defense, because the plaintiff was required to
use them to prove its claim”); Metro. Bridge & Scaffolds Corp. v. N.Y. City Hous. Auth., 92
N.Y.S.3d 248, 250 (N.Y. App. Div. 2019) (“The court correctly found that having placed the
knowledge of its law department at issue, NYCHA waived attorney-client privilege with respect
to the subject documents.”); Nomura Asset Cap. Corp. v. Cadwalader, Wickersham & Taft LLP,
62 A.D.3d 581, 582 (N.Y. App. Div. 2009) (“defendant fails to show that any such
communications are necessary to either plaintiff’s claim or its defense”); Goetz v. Volpe, 812
N.Y.S.2d 294, 296 (Sup. Ct. Nassau Cnty. 2006) (“New York courts have recognized a broad
interpretation of the at issue theory of waiver.
They have held that where an individual
affirmatively places the underlying conduct at issue by bringing a civil suit, the courts have
consistently held that the statutory protection is waived.” (internal citations and quotation marks
omitted)); DH Holdings Corp. v. Marconi Corp. PLC, 809 N.Y.S.2d 404, 407 (Sup. Ct., N.Y.
County 2005) (“Here, . . . the plaintiffs unquestionably must demonstrate that the settlement and
fees were reasonable, withholding the entirety of all the documents specified in plaintiffs[’]
privilege log would deprive the defendants of vital information, necessary to challenge this claim.
The heart of this matter is to determine if the settlement was appropriate, and if so, was it
reasonable. Inquiries that, of necessity, place these documents at issue.”); Allen v. W. PointPepperell Inc., 848 F.Supp. 423, 430 (S.D.N.Y. 1994) (“Defendants can show neither that the
subject of the privileged communications is critically relevant to the issue of plaintiffs’ delay in
attacking the releases, nor that absent disclosure of the privileged communications there would be
no other source of direct proof of laches.”). Where the party holding the privilege does not intend
to rely on the documents, the party arguing that the privilege has been waived must demonstrate
that production of the documents is necessary. See IDT Corp. v. Morgan Stanley Dean Witter &
Co., 107 A.D.3d 451, 452 (N.Y. App. Div. 2013) (“Although the privileged information sought by
defendant is relevant to plaintiff’s fraud claims, plaintiff disavows any intention to use privileged
materials and defendant fails to show that the materials are necessary to determine the validity of
the claims or to its defense against them.”) (internal citations omitted). “The New York Court of
Appeals has adopted the Second Circuit’s view that ‘to what extent waiver has occurred is
inherently factual and turns on case-by-case considerations of “fairness.”’” Leviton Mfg. Co., 2010
WL 4983183, at *4 (quoting People v. Kozlowski, 869 N.Y.S.2d 848, 863 (2008)); see also Gen.
Elec. Co. v. APR Energy, 19-CV-3472(VM)(KNF), 2020 WL 2061423, at *8 (S.D.N.Y. Apr. 29,
Although Defendant asks the Court to disavow the second category of cases, its argument
ignores a significant line of caselaw allowing for the production of privileged communications
even if a party does rely on them. 3 As another federal district court stated:
The First Department’s statement in Deutsche Bank that at issue
waiver occurs when the party has asserted a claim or defense that he
intends to prove by use of the privileged materials did not purport to
identify the exclusive basis for “at issue” waiver under New York
law. As described above, the First Department’s description of the
“at issue” waiver was broader. Subsequent decisions of New York
courts have not construed the Deutsche Bank decision in the manner
that [the opposing party] has suggested. . . . Accordingly, under New
York law, there are no exclusive requirements for finding an implied
MBIA Ins. Corp. v. Patriarch Partners VIII, LLC, No. 09Civ.3255, 2012 WL 2568972, at *6
(S.D.N.Y. July 3, 2012) (internal citations and quotation marks omitted); Bowne of N.Y.C., Inc. v.
However, cases in which a party relies on privileged communications will be the majority of
cases involving an at-issue waiver. Windsor Sec., LLC v. Arent Fox LLP, 273 F.Supp.3d 512, 519
AmBase Corp., 150 F.R.D. 465, 488 (S.D.N.Y. 1993) (“As summarized by the New York courts,
a waiver may be found where invasion of the privilege is required to determine the validity of the
client’s claim or defense and application of the privilege would deprive the adversary of vital
information.”) (internal citations and quotation marks omitted); Sparrow Fund Mgmt. LP v.
MiMedx Grp., Inc., No. 18-cv-4921(PGG)(KHP), 2021 WL 1930294, at *5 (S.D.N.Y. May 13,
2021) (“in some cases, even when a party asserts that it has not relied on advice of counsel, such
advice may have been impliedly placed in issue where the party’s state of mind, such as his good
faith belief in the lawfulness of his conduct, is relied upon in support of a defense.”).
Given the nature of the relevant test governing Wells Fargo’s counterclaim, Defendant’s
actual knowledge is central to the resolution of this case. 4 Pursuant to the Delaware Supreme
Court’s decision in Geronta Funding v. Brighthouse Life Ins. Co. (hereinafter “Seck”), the court
applies a “fault-based analysis as framed by the Restatement as the test to determine whether
premiums should be returned when a party presents a viable legal theory, such as unjust
Although Defendant disputes whether Florida law governs Plaintiff’s claim that the policy is
void, Defendant does not dispute that its counter-claim for unjust enrichment – which would
require that the Court first find that the policy is void – is governed by Delaware law. See ECF
No. 92, at 15 (“At summary judgment, the Court will have to decide whether the ‘last act’ to form
the Policy occurred in Delaware, as Pacific argues, or whether it occurred elsewhere, such as
Florida, the state where virtually everything leading to the Policy’s inception took place (which
would mean the Policy is valid and incontestable).”); see id. (“If the Court holds that Delaware
law is controlling on policy validity and if the Court further holds that the Policy is void ab initio
under Delaware law, then it is true Delaware law – and the Seck test – will apply to the premiumreturn issue.”). Further, beyond generally noting that it contests whether Delaware law governs
the claims in this case, Defendant fails to present any argument as to what the applicable test should
be governing Wells Fargo’s counterclaim. See id. at 14-15. Finally, to the extent that Defendant
disputes that Delaware law governs the claims in this case, it does so only to highlight the error of
Plaintiff’s argument that Delaware privilege law should apply to this case. See id. at 15
(“Securities Intermediary highlights this issue to underscore why it would be nonsensical to apply
Delaware’s privilege law based on Pacific’s incorrect assertion that ‘[t]here is no dispute that
Delaware law governs the question of the Policy’s validity or Wells Fargo’s counterclaim for
unjust enrichment.’” (internal citations omitted)).
enrichment, and seeks the return of paid premiums as a remedy.” 284 A.3d 47, 50 (Del. 2022).
Specifically, the court considers whether:
(1) there would be a disproportionate forfeiture if the premiums are
not returned; (2) the claimant is excusably ignorant; (3) the parties
are not equally at fault; (4) the party seeking restitution did not
engage in serious misconduct and withdrew before the invalid
nature of the policy becomes effective; or (5) the party seeking
restitution did not engage in serious misconduct, and restitution
would put an end to the situation that is contrary to the public
Id. at 72 (emphasis added); see also id. at 72-73 (“A court analyzing the exceptions outlined in
Section 198 should consider the following questions: whether the party knew the policy was void
at purchase or later learned the policy was void; whether the party had knowledge of facts tending
to suggest that the policy is void; whether the party procured the illegal policy; whether the party
failed to notice red flags; and whether the investor’s expertise in the industry should have caused
him to know or suspect that there was a substantial risk that the policy it purchased was void.”).
Accordingly, what Defendant actually knew as to whether an insurable interest supported the
Policy is not merely relevant, but central to Wells Fargo’s claim for unjust enrichment. 5
The deposition of Mr. Nelson clarified that the only direct evidence of Defendant’s actual
knowledge regarding the Policy were communications from counsel as to whether an insurable
interest supported the Policy. As Mr. Nelson testified, the only due diligence regarding the Policy
was conducted by attorneys and then communicated to Wells Fargo’s customer Viva via privileged
communications. While there may have been other due diligence conducted, any such diligence
was conducted on a portfolio-wide basis.
Accordingly, as Mr. Nelson testified, Viva’s
Defendant, in response, emphasizes that Plaintiff’s knowledge is also important to the case.
While this may be the true, it does not decrease the importance of Defendant’s knowledge to the
resolution of this case.
determination as to the Policy could not be separated from the work of its attorneys. Further, to
the extent that Viva had any information regarding its knowledge of the Policy at the time, separate
and apart from its attorneys’ conclusions, Mr. Nelson testified that he has no recollection of such.
Defendant’s identification of facts on which it intends to rely does not direct a different
result. See ECF No. 144, at 17-18; ECF No. 92, at 18-19. While there may have been facts that
may have supported Defendant’s belief that the Policy had an insurable interest, focusing on these
facts alone ignores the relevant question, which asks not whether Defendant’s belief would have
been reasonable, but what Defendant actually knew at the time it purchased the policy. 6 The facts
which Defendant identifies, are, at best, only indirect evidence of Defendant’s actual knowledge
as to the nature of the Policy. Further, beyond their limited relevance under the applicable test,
their persuasiveness, as noted above, is weakened by Mr. Nelson’s later admission that these facts
were used to make assessments on a portfolio-wide basis; his prior admission that he did not recall
relevant facts regarding the nature of the Policy, separate and apart from those which were
intertwined with legal advice; and the admittedly central role that the legal due diligence played in
Defendant’s conclusion as to the nature of the Policy. 7
Were this not enough, Wells Fargo, in pleading its counterclaim, has specifically alleged
that it lacked knowledge regarding the nature of the Policy. 8 See also ECF No. 85-2, at 43
Defendant’s reliance on the fact that Mr. Nelson believes the Policy is valid, ECF No. 144, at 22,
again ignores relevant question – what Defendant knew when it purchased the Policy.
Additionally, the transcript of Mr. Nelson’s deposition is unclear as to whether Mr. Nelson was
testifying as to facts that formed Defendant’s actual knowledge at the time or looking back support
the conclusion that the Policy was supported by an insurable interest. See ECF No. 128-2, at 65
(testifying that Viva had “so much evidence” that the policy was valid and that the “preponderance
of evidence . . . even today, looking back at this policy, this was a valid policy.”).
As noted above, Defendant does not dispute that its unjust enrichment claim would be governed
by Delaware law, but even if it did, it has conceded the importance of the issue by pleading its
counterclaim in such a manner that its actual knowledge is central to the resolution of the claim.
(admitting that Wells Fargo has pled disproportionate forfeiture, excusable ignorance, and
comparative culpability). Accordingly, it is not merely the test in Seck, but Wells Fargo’s own
pleadings which place the privileged communications at issue. New York courts have ordered the
production of privileged communications where a party refusing disclosure makes such
allegations. See William Tell Sers., LLC, 999 N.Y.S.2d at 333 (“Although plaintiff’s complaint
alleges that Roth and Avdoyan signed the non-compete agreements in January 2011 . . . , Roth and
Avdoyan maintain that the agreements were signed during the meeting with Ventura held in the
office of Smith Hoke, PLLC on February 2, 2011. . . . In the Court’s view, there has been an
implied or “at issue” waiver of the attorney-client privilege.”); Bolton v. Weil, Gotshal & Manges
LLP, No. 602341/03, 2004 WL 2239545, at *6 (Sup. Ct. N.Y. Cnty. 2004) (“Such communications
may bear directly on Bolton’s allegations that he was not informed of the potential conflict of
interest under the indemnity provisions arising out of WGM’s joint representation, which may
impact on the proof regarding Bolton’s burden to show that “but for” WGM’s breach of fiduciary
duty he “would have prevailed in the underlying matter or would not have sustained ascertainable
damages.”). As noted above, these allegations are not ancillary, but central to Wells Fargo’s
counterclaim. See Ambac Assur. Corp. v. DLJ Mortg. Cap., Inc., 92 A.D.3d 451, 452 (N.Y. App.
Div. 2012) (refusing request to order production of privileged communications where “All
references to the ‘third-party consultant’ in their complaint could be stricken and it would still
stand. Mention of a third-party consultant was not made as an element of the claim, but as a goodfaith basis for the allegations made.”).
This case mirrors those in which courts have found that disclosure of privileged
communications was appropriate even though the party holding the privilege did not rely on them.
For example, in Chin v. Rogoff, the “[p]laintiffs’ claims for damages depend[ed] entirely on the
presence of a causal link between [the defendant’s] alleged erroneous advice and the plaintiffs’
ultimate decision to execute that release.” 2008 WL 2073934, at *6. However, defendant alleged
that after he provided the advice, plaintiff’s counsel provided contrary advice. Id., at *2, *6. The
court reasoned that causation was central to the case and whether counsel’s advice broke the chain
of causation could only be determined through production of the underlying privileged
communications. Id., at *6. See also Tupi Cambios, 989 N.Y.S.2d at 577 (ordering production of
privileged communications where “plaintiffs’ actual notice and/or knowledge with respect to the
forfeiture action against BHSC and the restraint of their funds has been placed at issue. . . . The
specifics of what plaintiffs knew and when they knew it are key to the viability of their remission
causes of action[.]”). Likewise, here, Wells Fargo has alleged that Viva and Wells Fargo were
unaware of the lack of an insurable interest supporting the Policy. It is undisputed that Viva asked
its counsel to conduct due diligence on this precise issue. If Defendant in fact received a
conclusion that the Policy lacked an insurable interest, it directly undercuts its claim that it lacked
knowledge of the nature of the Policy. However, the only means of conclusively determining such
is production of the privileged communications. Accordingly, as in Chin, there “are dispositive
issues here” that “cannot be adequately resolved without invasion of the privilege.” 2008 WL
2073934, at *6.
This case is distinguishable from one in which the applicable legal test applies an objective
standard. In such a case, production of the privileged communications is usually not necessary,
for what Plaintiff actually knew is only ancillary. See Windsor Sec., LLC v. Arent Fox LLP, 273
F.Supp.3d 512, 520 (S.D.N.Y. 2017) (“the question before the jury will be whether defendants
failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member
of the legal profession. . . . Defendants are not “required” to learn what new counsel thought of
defendants’ performance in order to address this issue.”); Parneros v. Barnes & Noble, Inc., 332
F.R.D. 482, 502-03 (S.D.N.Y. 2009) (“fairness does not require that Parneros have access to the
attorney-client communications of Barnes & Noble . . . because there is ample objective evidence
that Parneros may use in his effort to meet the [grossly irresponsible] standard.”); Berkley Custom
Ins. Managers v. York Risk Servs. Grp., Inc., 18-cv-9297(LJL), 2020 WL 5439636, at *3 (S.D.N.Y.
September 10, 2020) (“The standard York will have to satisfy is an objective one. It does not
matter whether York changed its position based on Wade Clark’s advice or whether Wade Clark
properly advised Berkley or not regarding the applicability of New York Insurance Law[.]”);
Leviton Mfg. Co., 2010 WL 4983183, at *5 (denying motion to compel privileged communications
where propositions needed for defense “can be established by reference to objective facts and law.
Leviton’s state of mind or advice of counsel is not in issue.”); Bovis Lend Lease, LMB, Inc. v.
Seasons Contracting Corp., No. 00Civ.9212(DF), 2002 WL 31729693, at *16 (S.D.N.Y. Dec. 5,
2002) (“the reasonableness of the attorneys’ fees actually incurred in a case can ‘in all probability
. . . be determined . . . by examination of attorney time records and documents filed in court.’”
(internal citations omitted)). In this case, the facts that were known to Defendant, while relevant,
are not determinative as to the issue. Rather, the question is what Defendant actually knew at the
time it purchased the Policy. In such cases, where a party’s actual knowledge is at issue, and that
actual knowledge was based largely on the advice of counsel, courts have ordered production. See
Valutron, N. v. Pennie & Edmonds, 800 N.Y.S.2d 358, 2004 WL 3093273, at *2 (Sup. Ct. N.Y.
Cnty. 2004) (“Since plaintiffs assert that the patent infringement litigation against NCR would
have been commenced earlier and would not therefore have been dismissed for laches had P & E
properly advised them about the problem, P & E may be entitled to show that its failure to so
advise or warn plaintiffs was not the proximate cause of plaintiffs’ damages because, even if it had
raised the issue with plaintiffs, they were already familiar with the possible applicability of the
laches doctrine, were aware of the risks attendant in delaying the commencement of their patent
infringement action against NCR and would nevertheless have knowledgeably exposed themselves
to that risk in order to use the time to obtain the necessary funding.”); MBIA Ins. Corp., 2012 WL
2568972, at *7 (ordering production of privileged communications where the privilege holder “has
made factual assertions about his ‘understanding’ of the Master Agreement as well as what was
‘intended’ by the parties in the Agreement.”); Meskunas v. Auerbach, No. 17Civ.9129(VB)(JCM),
2020 WL 7768486, at *5 (S.D.N.Y. Dec. 30, 2020) (“Since Plaintiffs’ malpractice claim rests on
the supposition that they relied on Defendants’ negligent advice, ‘legal advice they received from
any other lawyers on that subject relates to the reasonableness of [Plaintiffs’] reliance [on
Defendants’ advice] and is not subject to the attorney/client privilege.’”).
Finally, this is not a case in which Viva was “required to waive attorney-client privilege to
defend against liability.” Scott v. Chipotle Mexican Grill, Inc., 67 F.Supp.3d 607, 617 (S.D.N.Y.
2014); see also ECF No. 92, at 28. Wells Fargo, on behalf of Viva, affirmatively advanced a claim
for unjust enrichment separate from and in addition to its defenses, as well as its separate counter
claim for breach of contract. ECF No. 34, at 22. Furthermore, as discussed above, this case is
unique in that Viva has testified regarding the central role that its attorneys played in formulating
its actual knowledge regarding the Policy.
Having determined that an at-issue waiver has occurred in this case, the only remaining
question is the scope of disclosure necessary to the resolution of this case. Plaintiff requests that
Wells Fargo, Viva, Blackstone, and Preston each respond to eight separate requests for the
production of documents and that Viva additionally provides responses to three additional
interrogatories. ECF No. 85, at 3. While there may be some privileged information responsive to
each of these requests, Defendant need not produce all responsive information to resolve this case.
Likewise, it is unclear if production of each of the privileged communications related to due
diligence identified in Wells Fargo’s, Viva’s, Preston’s, and Blackstone’s privilege logs are
necessary to the resolution of this case, as Plaintiff argues. ECF No. 128, at 14. Accordingly, at
this time, the Court orders Wells Fargo, Viva, Preston, and Blackstone to each produce 9 within
thirty days for in-camera inspection, non-redacted versions of: 1) any information provided to
Schulte, Roth and Zabel that the law firm used for the purposes of due diligence related to the
Policy; 2) all results of any due diligence Schulte, Roth, and Zabel conducted regarding the Policy
communicated to Wells Fargo, Viva, Preston, or Blackstone, including but not limited to the
electronic mail communications that Mr. Nelson specifically referenced in his deposition; 3) any
recommendations related to the Policy from Schulte, Roth and Zabel, including, but not limited to
any recommendations from Schulte, Roth and Zabel that Wells Fargo, Viva, Preston, or Blackstone
reduce the amount it pay for the Policy and the basis for any such recommendation. Upon review
of the communications, the Court will determine whether disclosure to Plaintiff, under seal, is
warranted. To the extent that these communications reference other communications that are
necessary to the case, the Court may order their production. If Wells Fargo, Viva, Preston, and
Blackstone are unable to produce any documents related to the Policy specifically, the Court will
consider whether privileged communications regarding the portfolio of which it was part are
necessary. Finally, while the Court denies Plaintiff’s request to re-depose Mr. Nelson at this time,
to the extent that the produced documents leave any material ambiguity as to Defendant’s
knowledge, the Court may reconsider this request.
To the extent that any document is in the possession of more than one entity, only one entity must
produce each responsive document.
For the reasons stated above, Plaintiff’s Motion to Compel is granted, in part, and denied,
Date: September 19, 2023
Ajmel A. Quereshi
U.S. Magistrate Judge
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