Woodmen of the World Life Insurance Society v. US Bank National Association

Filing 302

ORDER - The plaintiff's Motion to Compel (Filing No. 277 ) is granted, in part, and denied, in part. On or before February 22, 2012, U.S. Bank shall produce unredacted copies of the Goodwin Procter report, the Deloitte report, and the Rul e 38a-1 report. Any objection to this Order shall be filed with the Clerk of the Court within fourteen (14) days after being served with a copy of this Order. Failure to timely object may constitute a waiver of any objection. Ordered by Magistrate Judge Thomas D. Thalken. (AOA)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
WOODMEN OF THE WORLD LIFE
INSURANCE SOCIETY,
Plaintiff,
v.
U.S. BANK NATIONAL ASSOCIATION,
et al.,
Defendants.

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8:09CV407
ORDER

This matter is before the court on the plaintiff’s Motion to Compel (Filing No. 277).
The plaintiff Woodmen of the World Life Insurance Society seeks an order of the court
compelling the defendant U.S. Bank National Association to produce documents requested
by Woodmen of the World Life Insurance Society in its requests for production of
documents. U.S. Bank National Association contends the documents are subject to
privilege.
Woodmen of the World Life Insurance Society filed a brief (Filing No. 278) and an
index of evidence (Filing No. 279) in support of the motion. U.S. Bank National Association
filed a brief (Filing No. 282) and an index of evidence (Filing No. 283) in opposition to the
motion to compel. Woodmen of the World Life Insurance Society filed a brief (Filing No.
286) and an index of evidence (Filing No. 287) in reply. All briefs and indexes of evidence
were filed under restricted access.

BACKGROUND
This action arises out of losses the plaintiff sustained through its participation in the
defendants’ securities lending and cash collateral investment program. See Filing No. 143
- Second Amended Complaint. Woodmen of the World Life Insurance Society (Woodmen)
alleges the defendants U.S. Bank National Association, U.S. Bancorp Asset Management,
Inc., and U.S. Bancorp (collectively U.S. Bank) breached a securities lending agreement
and U.S. Bank and its employee, the defendant Emil C. Busse, Jr. (Busse), made
misrepresentations and omissions of material fact with respect to investments in mortgage-

backed securities.

Id.

The parties’ current dispute relates to discovery sought by

Woodmen.
Woodmen argues U.S. Bank, in response to Woodmen’s requests for documents
and upon order of this court (Filing No. 88), produced several privilege logs. Woodmen
argues U.S. Bank “asserts attorney-client and work product protection for thousands of
documents . . . [without] set[ting] forth a sufficient factual basis upon which valid assertions
of privilege may rest.” See Filing No. 277 - Motion p. 2. Woodmen argues U.S. Bank has
waived its claims of privilege by failing to set out sufficient facts to establish the basis for
its claims of privilege, and asks the court to “direct[ ] U.S. Bank to produce all documents
withheld on the basis of privilege, or alternatively, order[ ] that all documents withheld by
U.S. Bank on the basis of privilege be reviewed by a special master in order to determine
the validity of U.S. Bank’s claims of privilege.” Id. at 4. While Woodmen generally
challenges the entirety of U.S. Bank’s privilege log, Woodmen states “[b]ecause of the
avalanche of documents involved, it is not possible to deal with each individual assertion
of privilege.” See Filing No. 278 - Brief p. 7. Instead, Woodmen singles out three specific
documents or categories of documents and discusses U.S. Bank’s assertions of the
attorney-client privilege and the work product doctrine with respect to each. See Filing
Nos. 278 and 286. The court will describe each document seriatim.

a.

Goodwin Procter report - In early April 2008, during an internal investigation

of Busse’s reallocation of lending opportunities conducted by David Lui, Chief Compliance
Officer for FAF Advisors, Inc.1 (FAF Advisors), U.S. Bancorp, FAF Advisors’ parent
company, retained the Boston law firm Goodwin Procter LLP (Goodwin Procter) to conduct
an independent investigation and prepare a report regarding Busse’s actions. See Filing
No. 283 - Manzoni Decl. ¶ 4 (Page ID# 4903).

Goodwin Procter conducted the

investigation “by collecting and reviewing documents, as well as by interviewing various
U.S. Bank, U.S. Bancorp, and FAF Advisors employees. The investigation resulted in
preparation of numerous memoranda documenting the work of Goodwin Procter attorneys,
1

FAF Advisors, Inc. is now known as U.S. Bancorp Asset Managem ent, Inc., a nam ed defendant in
this action. See Filing No. 143 - Second Am ended Com plaint.
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a report describing Goodwin Procter’s factual findings, and a report describing Deloitte’s
loss analysis.” See Filing No. 283 - Manzoni Decl. ¶ 5 (ID# 4904). Goodwin Procter issued
its report (the Goodwin Procter report) on June 18, 2008. See Filing No. 279 - Ex. K - Lui’s
PowerPoint presentation (Page ID# 4734).

b.

Deloitte report - In the process of its investigation, Goodwin Procter retained

the services of Deloitte Financial Advisory Services, LLP (Deloitte) to determine which
investors had been negatively affected by the reallocations and the amount of damages
for the affected investors. See Filing No. 283 - Manzoni Decl. ¶ 4 (Page ID# 4903). U.S.
Bank made reimbursements to the investors identified by this analysis to the extent of their
damages determined by Deloitte. See Filing No. 279 - Ex. 2 Lui Depo. p. 81 (Page ID#
4383). The Deloitte report was issued on June 26, 2008. See Filing No. 279 - Ex. K (Page ID# 4736). U.S. Bank produced a summary of the Deloitte report on December 6,
2011, by agreement of the parties with the express condition that U.S. Bank is not waiving
its claim of privilege with respect to other related materials. See Filing No. 279 - Ex. 1
Vipond Aff. ¶ 15. Woodmen seeks an unredacated copy of the report.

c.

Rule 38a-1 Annual Compliance report (Rule 38a-1 report) - The Securities

and Exchange Commission (SEC) requires chief compliance officers at registered
investment companies to provide a written report to the board of directors on at least an
annual basis. See 17 C.F.R. § 270.38a-1(a)(4)(iii). As Chief Compliance Officer and
under the direction of Charles R. Manzoni, Jr., then Vice President of U.S. Bank and
General Counsel of FAF Advisors, Lui began his own compliance investigation on March
31, 2008. See Filing No. 279 - Ex. K - Lui’s PowerPoint presentation (Page ID# 4722).
According to Lui, “Rule 38a-1 . . . calls for a written report which we came out with every
year, and it calls for material compliance matters to be reported to a board of directors in
that written report.” See Filing No. 279 - Ex. 2 Lui Depo. p. 12 (Page ID# 4368). Lui issued
his annual compliance report on April 16, 2008, which was presented at the Board of
Directors’ meeting on May 6-7, 2008. See Filing No. 279 - Ex. K - (Page ID# 4726); Filing
No. 279 - Ex. E - Rule 38a-1 report (redacted).
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The Rule 38a-1 report was initially

produced by U.S. Bank, then “clawed back” and replaced with a redacted version. See
Filing No. 279 - Ex. J.
ANALYSIS
“Parties may obtain discovery regarding any nonprivileged matter that is relevant to
any party’s claim or defense--including the existence, description, nature, custody,
condition, and location of any documents . . .” Fed. R. Civ. P. 26(b)(1). However, “[t]he
District Court does have discretion to limit the scope of discovery.” Credit Lyonnais v.
SGC Int’l, Inc., 160 F.3d 428, 431 (8th Cir. 1998). A person opposing production of
documents based on privilege or seeking protection for documents that fall under the
attorney-client privilege has the burden of establishing the privilege applies. See Fed. R.
Civ. P. 26(b)(5). Similarly, a person opposing production bears the burden of establishing
a waiver, by disclosure or otherwise, did not occur. See United States v. Hatcher, 323
F.3d 666, 675 (8th Cir. 2003) (Bye, J., concurring).

1.

Meet and Confer
The parties disagree as to whether Woodmen made an adequate showing of its

efforts to meet and confer with U.S. Bank in an attempt to resolve their discovery disputes
prior to filing the motion to compel. The Local Rules state:
To curtail undue delay in the administration of justice, this court
only considers a discovery motion in which the moving party,
in the written motion, shows that after personal consultation
with opposing parties and sincere attempts to resolve
differences, the parties cannot reach an accord. This showing
must also state the date, time and place of the
communications and the names of all participating persons.
“Personal consultation” means person-to-person conversation,
either in person or on the telephone. An exchange of letters,
faxes, voice mail messages, or e-mails is also personal
consultation for purposes of this rule upon a showing that
person-to-person conversation was attempted by the moving
party and thwarted by the nonmoving party.
See NECivR 7.0.1(i). The Federal Rules of Civil Procedure also require good faith efforts
by the moving party to resolve the dispute, prior to filing a motion to compel or for

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protective order, the absence of which precludes the issuance of an award of expenses.
See Fed. R. Civ. P. 37(a)(5).
U.S. Bank contends Woodmen did not meet and confer about the alleged
deficiencies in U.S. Bank’s latest produced privilege log. U.S. Bank suggests the “claimed
deficiencies are easily explained or easily fixed,” and notes U.S. Bank has “cooperated with
Woodmen with respect to U.S. Bank’s privilege log from the beginning.” See Filing No. 282
- Response p. 1. U.S. Bank states it previously addressed Woodmen’s concerns and
provided additional information and revised its privilege log in response to Woodmen’s
concerns. However, U.S. Bank states Woodmen did not confer with U.S. Bank regarding
any concerns about the most recent version of the privilege log and instead filed the motion
to compel.
Woodmen’s motion to compel does not include any discussion of its efforts to meet
and confer with U.S. Bank to resolve their differences prior to filing the motion.
Woodmen’s brief includes a general description of multiple written and oral conversations
with U.S. Bank over the year-long period during which U.S. Bank produced several
versions of its privilege log. See Filing No. 278 - Brief. In addition, Woodmen submits
copies of correspondence between counsel addressing these issues. See Filing No. 279 Index. However, Woodmen does not include details of any “meet and confer” as required
by NECivR 7.0.1(i). According to Woodmen, the parties continue to disagree about the
sufficiency of U.S. Bank’s privilege log. In its reply brief, Woodmen argues U.S. Bank’s
latest revised privilege log, intended to supersede all others, contains the same
“conclusory assertions of privilege without factual support,” and despite U.S. Bank’s claim
of reviewing its assertions of privilege, U.S. Bank did not produce any additional
documents. See Filing No. 286 - Reply p. 3. Woodmen also argues that in spite of
multiple requests for the Goodwin Procter and Deloitte reports, U.S. Bank refuses to
provide them, erroneously maintaining the reports are privileged under the holding of
Diversified Indus., Inc. v. Meredith, 572 F.2d 596 (8th Cir. 1978) (en banc). Woodmen
contends “[a]t some point, further efforts to resolve discovery disputes becomes futile.”
See Filing No. 286 - Reply p. 3. Woodmen maintains it met its obligation to meet and
confer with U.S. Bank before filing the motion to compel. Woodmen argues “[t]o require
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more would permit U.S. Bank to forestall judicial resolution of these claims by endlessly
revising their privilege logs, releasing information in drips and drabs, until the clock runs
out on discovery.” Id. at 4.
Woodmen arguably did not comply with the local rule. Some of its concerns with
U.S. Bank’s privilege log might have been addressed and potentially resolved had the
parties conferred.

For example, the parties might have addressed and resolved

Woodmen’s complaint that U.S. Bank’s privilege log lists documents for which either the
author or the recipient of the document is not identified, and that “U.S. Bank has invented
a new doctrine of privilege whereby documents ‘attached to a privileged document’
become privileged themselves.” See Filing No. 278 - Brief p. 8-9. U.S. Bank offered some
explanation for those criticisms in its brief. See Filing No. 282 - Response p. 12-15.
However, the issues surrounding U.S. Bank’s assertion of the attorney-client privilege and
application of the work-product doctrine with respect to the Goodwin Procter report, the
Deloitte report, the Rule 38a-1 report, and their supporting materials, are not likely to be
resolved by the parties. Moreover, Woodmen’s belief that any “meet and confer” would be
futile may be well founded. The court notes that when document production began in
2010, the court deemed it necessary to direct U.S. Bank to provide a privilege log by a
court-ordered deadline and to supplement the log every two weeks until document
production was completed. See Filing No. 88 - Order. Apparently, Woodmen has been
receiving revised or supplemented privilege logs from U.S. Bank for more than a year and
Woodmen’s concerns about the adequacy of those logs have not yet been addressed to
its satisfaction. See Filing No. 283 - Exs. C, E-G, J email correspondence. In any event,
the court will address the merits of U.S. Bank’s assertions of the attorney-client privilege
and work product doctrine with respect to the Goodwin Procter report, the Deloitte report
and the Rule 38a-1 report.

2.

Attorney-Client Privilege
Rule 501 of the Federal Rules of Evidence provides that state law supplies the rule

of decision on privilege in diversity cases. White Cap Constr. Supply, Inc. v. Tighton
Fastener & Supply Corp., 2010 WL 3259355, at *8 (D. Neb. Aug. 16, 2010) (citing

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Blackledge v. Martin K. Eby Constr. Co., Inc., 542 F.2d 474, 476 n.1 (8th Cir. 1976)
(“Privileges created by state law are, of course, applicable in a diversity action.”)); Gray v.
Bicknell, 86 F.3d 1472, 1482 (8th Cir. 1996) (“In diversity actions, state law determines
the existence and scope of attorney-client privilege.”) (internal citations omitted). Under
Nebraska law:
A client has a privilege to refuse to disclose and to prevent any
other person from disclosing confidential communications
made for the purpose of facilitating the rendition of
professional legal services to the client (a) between himself
or his representative and his lawyer or his lawyer’s
representative, or (b) between his lawyer and the lawyer’s
representative, or (c) by him or his lawyer to a lawyer
representing another in a matter of common interest, or (d)
between representatives of the client or between the client and
a representative of the client, or (e) between lawyers
representing the client.
Neb. Rev. Stat. § 27-503(2) (emphasis added). “A communication is confidential if not
intended to be disclosed to third persons other than those to whom disclosure is in
furtherance of the rendition of professional legal services to the client or those reasonably
necessary for the transmission of the communication.” Neb. Rev. Stat. § 27-503(1)(d).
Such communications between a client or a client’s representative and the lawyer are
privileged. A “client” is “a person, public officer, or corporation, association, or other
organization or entity, either public or private, who is rendered professional legal services
by a lawyer, or who consults a lawyer with a view to obtaining professional legal services
from him.” Neb. Rev. Stat. § 27-503(1)(a).
The primary purpose of the attorney-client privilege “is to encourage full and frank
communication between attorneys and their clients and thereby promote broader public
interests in the observance of law and administration of justice.” Upjohn Co. v. United
States, 449 U.S. 383, 389 (1981). “The party asserting attorney-client privilege has the
burden of proving that the information sought is protected.” State ex. rel Stivrins v.
Flowers, 729 N.W.2d 311, 316 (Neb. 2007); see also Greenwalt v. Wal-Mart Stores,
Inc., 567 N.W.2d 560, 566 (Neb. 1997) (“In response to a motion to compel production,
the asserting party must make out a prima facie claim that the privilege or doctrine
applies.”). Therefore, one issue before the court is whether the communications were
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made for the purpose of seeking legal advice. In addition, the asserting party must show
“the information contained in the requested documents includes confidential
communications, as required by the attorney-client privilege.” Greenwalt, 567 N.W.2d at
567. Moreover, the privilege protects only the disclosure of attorney-client communications
and does not protect disclosure of the underlying facts by those who communicated with
the attorney. Upjohn, 449 U.S. at 395.
In support of its position that the attorney-client privilege applies to the reports
sought by Woodmen, U.S. Bank relies heavily on the decision of the Eighth Circuit in
Diversified Industries, Inc. v. Meredith, 572 F.2d 596 (8th Cir. 1977). In that case,
Diversified Industries, Inc. (Diversified), in the course of earlier “proxy fight” litigation,
discovered the existence of a “slush fund” used to bribe purchasing agents from other
companies that purchased Diversified’s product. Id. at 600. In light of this discovery and
the attention it drew from the SEC, Diversified’s board of directors decided an internal
investigation of the company’s business practices was warranted and a law firm was
employed to conduct an investigation and report to the board of directors. Id. In the
course of its investigation the law firm retained the services of an accounting firm and its
findings were included in the law firm’s report to the board. Id. at 601. When a customer
of Diversified, brought suit against Diversified alleging an unlawful conspiracy, it sought to
obtain the law firm’s report. Diversified withheld the report maintaining it was subject to the
attorney-client privilege and the work product doctrine. In determining the report was
protected by the attorney-client privilege, the Eighth Circuit held that when a matter is
committed to a professional legal advisor, it is “prima facie committed for the sake of legal
advice and [is], therefore, within the privilege absent a clear showing to the contrary.”
Diversified, 572 F.2d at 610; see also In re Bieter Co., 16 F.3d 929, 938 (8th Cir. 1994).
In arguing that “[t]he Diversified court squarely faced the issues presented here
respecting the application of attorney-client privilege,” U.S. Bank overlooks an important
distinction. That is, the case before this court is a diversity action and, as U.S. Bank has
acknowledged, Nebraska law governs the attorney-client privilege issue in diversity cases.
As such, the court finds U.S. Bank’s argument that the decision of the Eighth Circuit in
Diversified “constitutes binding precedent supporting denial of Woodmen’s motion”

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unconvincing. See Filing No. 282 - Response p. 22. U.S. Bank has failed to show that
Nebraska has adopted the Eighth Circuit’s Diversified decision, which shifts the burden
from the party withholding the documents to the party seeking the documents. Nebraska
case law clearly places the burden of proof on the party asserting the privilege. See
Greenwalt, 567 N.W.2d at 566.

a. Goodwin Procter report and Deloitte report
Woodmen argues the reports are not protected by the attorney-client privilege
because U.S. Bank fails to establish Goodwin Procter was retained to provide “legal
advice” or that Goodwin Procter’s work was “legal in nature.” See Filing No. 278 - Brief p.
16-17. Woodmen argues the Goodwin Procter law firm was retained as an independent
investigator into the facts surrounding Busse’s improper reallocation activities, not to
provide professional legal services. Woodmen contends the law firm was retained merely
to conduct an “independent factual investigation and provide U.S. Bank with cover so U.S.
Bank could credibly represent to its clients and to the SEC that Busse’s wrongdoing had
been remedied.” Id. at 17. “The fact that this investigator[, Goodwin Procter,] was a law
firm does not convert a factual investigation into a legal one.” Id. at 15.
In opposition to Woodmen’s arguments, U.S. Bank relies on the similarities between
the retention of Goodwin Procter by FAF Advisors to investigate Busse’s reallocation
activities and Diversified’s retention of a law firm to investigate the “slush fund.” See Filing
No. 282 - Response p. 21-22. U.S. Bank argues that it faced “a likely prospect of litigation
with affected clients, as well as the possibility of the prompt adversarial action, including
judicial or administrative enforcement action by the SEC” prior to retaining Goodwin
Procter. Id. at 21; Filing No. 283 - Manzoni Decl. ¶ 5 (Page ID# 4904). U.S. Bank argues
Woodmen’s assertions that Goodwin Procter’s role was limited to conducting an
independent investigation into issues of fact “have no bearing on the privileged status that
is accorded under Diversified.” See Filing No. 282 - Response p. 22. Further, U.S. Bank
contends Woodmen has failed to make a clear showing disputing U.S. Bank’s claim that
the Goodwin Procter and Deloitte reports were prepared in response to a request for legal
advice.
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As discussed above, the court finds that the burden shifting recognized by the court
in Diversified does not apply to this matter which is before the court under diversity
jurisdiction. The court cannot assume Goodwin Procter’s investigative work was work
acting as an attorney for purposes of privilege. The court finds U.S. Bank fails to make a
sufficient showing that the investigation was committed to Goodwin Procter, a professional
legal advisor, for legal advice rather than as an independent investigation to aid FAF
Advisors in determining the extent of Busse’s reallocation activities and their impact on
investors in an effort to reimburse those affected. Accordingly, U.S. Bank has not met its
burden of showing such documents are subject to the attorney-client privilege.

b. Rule 38a-1 report
U.S. Bank provided Woodmen with a redacted version of the Rule 38a-1 report
claiming the withheld portions contain attorney-client privileged communications obtained
by Lui, as chief compliance officer obtained during his internal investigation into Busse’s
reallocation activities. Woodmen argues that Rule 38a-1 reports are “meant to be made
available to the [SEC] and the [SEC] staff and, thus they are not subject to the attorneyclient privilege, the work-product doctrine, or other similar protections.” See Filing No. 278
- Brief p. 18-19 (citing 68 F.R. 74714–01 n.94 (Rule 381-1 Adopting Release)). Woodmen
contends U.S. Bank’s position that information contained in the Rule 38a-1 report is
confidential is not credible. See Filing No. 278 - Brief p. 19. In response, U.S. Bank
argues the language of the Adopting Release should be interpreted as prohibiting claims
of privilege only with respect to providing the Rule 38a-1 report to the SEC, not with respect
to parties in separate litigation. See Filing No. 282 - Response p. 30.
The court finds that although the Rule 38a-1 report is subject to disclosure to the
SEC, the report was prepared by Lui, the chief compliance office and an attorney, and
ultimately disclosed to the SEC “in furtherance of the rendition of professional legal
services to the client” and as such may be considered a confidential communication under
Nebraska law. See Neb. Rev. Stat. § 27-503(1)(d). As such, the Rule 38a-1 report is
subject to the attorney-client privilege.

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3.

Work-Product Doctrine
In addition to the attorney-client privilege, a party may shield information from

discovery if it is subject to the attorney work-product doctrine. The work product doctrine
is “distinct from and broader than the attorney-client privilege.” In re Murphy, 560 F.2d
326, 337 (8th Cir. 1977) (quoting United States v. Nobles, 422 U.S. 225, 238 n.11
(1975)).

“The work-product doctrine protects documents prepared by attorneys in

anticipation of litigation for the purpose of analyzing and preparing a client’s case.” Sandra
T.E. v. South Berwyn Sch. Dist. 100, 600 F.3d 612, 618 (7th Cir. 2010). The workproduct doctrine was established by Hickman v. Taylor, 329 U.S. 495 (1947), and is now
codified in Fed. R. Civ. P. 26(b)(3)(A): “Ordinarily, a party may not discover documents
and tangible things that are prepared in anticipation of litigation or for trial by or for another
party or its representative (including the other party’s attorney, consultant, surety,
indemnitor, insurer, or agent).” However, under certain circumstances, such materials may
be discoverable if “the party shows that it has substantial need for the materials to prepare
its case and cannot, without undue hardship, obtain their substantial equivalent by other
means.” Fed. R. Civ. P. 26(b)(3)(A)(ii). In any event, the court “must protect against
disclosure of the mental impressions, conclusions, opinions, or legal theories of a party’s
attorney or other representative concerning the litigation.” Fed. R. Civ. P. 26(b)(3)(B).2

2

The doctrine was designed to prevent “‘unwarranted inquiries into the files
and m ental im pressions of an attorney’” and “recognizes that it is ‘essential
that a lawyer work with a certain degree of privacy, free from unnecessary
intrusion by opposing parties and their counsel.’” Simon v. G.D. Searle &
Co., 816 F.2d 397, 402 (8th Cir. 1987) (quoting Hickman v. Taylor, 329
U.S. 495 (1947)). . . .
There are two types of protected work product. “Ordinary” work
product is subject to production only upon a showing of substantial need and
inability to secure the substantial equivalent without undue hardship. In re
Chrysler Motors Corp. Overnight Evaluation Program Litig., 860 F.2d
844, 846 (8th Cir. 1988). . . . “Opinion” work product includes docum ents
that contain the m ental im pressions, conclusions or opinions of an attorney
and is discoverable only in “rare and extraordinary circum stances.” In re
Chrysler Motors Corp., 860 F.2d at 846; Simon, 816 F.2d at 402 n.3
(quoting In re Murphy, 560 F.2d 326, 336 n. 20 (8th Cir. 1977)). Opinion
work product is virtually absolutely im m une from discovery. In re Grand
Jury Proceedings, 473 F.2d 840, 848 (8th Cir. 1973).
Bieter Co. v. Blom quist, 156 F.R.D. 173, 179 (D. Minn. 1994).
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As relevant here, “[w]ork-product protection applies to attorney-led investigations
when the documents at issue can fairly be said to have been prepared or obtained
because of the prospect of litigation.” Sandra T.E., 600 F.3d at 622 (internal quotation and
citation omitted). Work-product protected documents are only those documents prepared
under the prospect of litigation. Id. Accordingly, “precautionary documents,” for example
those documents “developed in the ordinary course of business” or for the “remote
prospect of litigation” are not subject to protection. Id. A party must show the disputed
documents were “prepared because some articulable claim, likely to lead to litigation, [has]
arisen.” Id. (internal quotation and citation omitted). Determining whether documents were
prepared in anticipation of litigation is a fact question governed by federal law. Baker v.
General Motors Corp., 209 F.3d 1051, 1053 (8th Cir. 2000); St. Paul Reinsurance Co.,
Ltd. v. Commercial Fin. Corp., 197 F.R.D. 620, 627 (N.D. Iowa 2000). The test within the
Eighth Circuit is
whether, in light of the nature of the document and the factual
situation in the particular case, the document can fairly be said
to have been prepared or obtained because of the prospect of
litigation. But the converse of this is that even though litigation
is already in prospect, there is no work product immunity for
documents prepared in the regular course of business rather
than for purposes of litigation.
Simon, 816 F.2d at 401 (quoting 8 C. Wright & A. Miller, Federal Practice and Procedure
§ 2024, at 198-99 (1970)). See also Diversified, 572 F.2d at 604 (“[T]he work product
rule does not come into play merely because there is a remote prospect of litigation.”).

a. Goodwin Procter report and Deloitte report
Woodmen argues U.S. Bank has failed to establish that the Goodwin Procter and
Deloitte investigations were performed in anticipation of litigation. Rather, Woodmen
contends the purpose of those investigations was to determine which investors had been
negatively affected by Busse’s reallocations and to make restitution. Woodmen argues the
investors were not notified of Busse’s actions until after U.S. Bank had made restitution to
those identified as being affected by Busse’s reallocations as determined by Goodwin
Procter and Deloitte investigations. See Filing No. 286 - Reply p. 6.
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U.S. Bank argues it anticipated litigation after it discovered Busse’s reallocation
activity because Busse’s actions caused some investors to have increased risk and others
did not get an equitable share of lending opportunities. “Because of the certain prospect
of litigation, U.S. Bank retained Goodwin Procter in order to understand the full scope of
this problem and to advise U.S. Bank concerning potential solutions–in short, to obtain
classically privileged legal advice.” See Filing No. 282 - Response p. 24. According to
Manzoni,
[i]t was clear to [him] as General Counsel of FAF Advisors that
such reallocation activity would likely need to be reported to
the . . . [SEC] and very possibly prompt adversarial action,
including judicial or administrative enforcement action by the
SEC against U.S. Bank. [He] also [knew] that because the
reallocation activity denied certain securities lending
participants the equitable lending opportunities they were
entitled to increased exposure to certain risks in the Short
Term Bond Fund and U.S. Bank faced a very real and likely
prospect of litigation with affected clients.
Filing No. 283 - Manzoni Decl. ¶ 3 (Page ID# 4903).
U.S. Bank has failed to demonstrate a reasonable anticipation of litigation existed
when FAF Advisors retained Goodwin Procter to conduct an independent investigation in
early April 2008. The court finds Manzoni’s December 22, 2011, declaration to the contrary
self-serving in the face of Woodmen’s challenge to U.S. Bank’s assertion of the workproduct doctrine and not supported by the deposition testimony of Lui. See Filing No. 279 Ex. 2 Lui Depo. Upon discovery of Busse’s reallocation activity, FAF Advisors was left to
evaluate or assess the ramifications of Busse’s alleged manipulation of lending
opportunities and determine an efficacious course of action. By retaining Goodwin Procter
as an independent entity to investigate Busse’s recently discovered activities, FAF Advisors
did just that. Arguably, FAF Advisors chose to follow the recommendations of Goodwin
Procter and Deloitte by reimbursing those investors identified as being affected by Busse’s
reallocation actions, presumably decreasing the likelihood of litigation.

13

b. Rule 38a-1 report
Any argument put forth by U.S. Bank suggesting that the Rule 38a-1 report was
prepared in preparation for litigation clearly fails. The Rule 38a-1 report was prepared by
FAF Advisor’s chief compliance officer, Lui, pursuant to the SEC rules and arguably in the
ordinary course of business. “Rule 38a-1 . . . calls for a written report which we came out
with every year, and it calls for material compliance matters to be reported to a board of
directors in that written report.” See Filing No. 279 - Ex. 2 Lui Depo. p. 12 (Page ID#
4368). As such, U.S. Bank’s assertion of work-product protection of the Rule 38a-1 report
cannot be sustained.

4.

Waiver
The party claiming the attorney-client privilege must show not only that the privilege

was applicable absent any waiver, but also that a waiver did not occur.3 Pursuant to
Nebraska law:
“A person upon whom these rules confer a privilege against
disclosure of a confidential matter or communication waives
the privilege if he or his predecessor, while holder of the
privilege, voluntarily discloses or consents to disclosure of any
significant part of the matter or communication. This rule does
not apply if the disclosure is itself a privileged communication.”
Neb. Rev. Stat. § 27-511.
Although the court finds that the attorney-client privilege does not apply to the
Goodwin Procter and Deloitte reports, the court will briefly address the issue of waiver. In
addition to its argument that the attorney-client privilege is not available to U.S. Bank,
Woodmen argues in the alternative that U.S. Bank waived any such privilege by disclosing
information contained in the Goodwin Procter and Deloitte reports, and the Rule 38a-1
report to other participants in the Short Term Bond Fund, as well as to the SEC. See Filing
No. 278 - Brief p. 19-24. The court will address each assertion of waiver along with U.S.
Bank’s response.

3

Finding that work product doctrine does not apply to the three reports sought by W oodm en, a
discussion of waiver with respect to that doctrine unnecessary.
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a. Disclosures to Participants in the Short Term Bond Fund
Woodmen contends Kenneth Delecki, head of U.S. Bank’s securities lending
program, in a letter to Bill Sanden, representing the 8th District Electrical Pension Plan (8th
District), discussed various findings of the Goodwin Procter and Deloitte investigations and
described Deloitte’s process for identifying those investors affected by Busse’s reallocation
activities and determining the level of reimbursement required. Id. at 23-24; See Filing No.
279 - Ex. H. U.S. Bank contends the reports were not disclosed to the 8th District but
rather “a limited number of certain facts, which are not privileged” were disclosed and such
limited disclosure “cannot support a waiver.” See Filing No. 282 - Response p. 29-30.
In addition, Woodmen argues
U.S. Bank did more than disclose the end results of Goodwin
Procter and Deloitte’s work, however. It assured at least one
customer that U.S. Bancorp would ‘provide [it] with a copy of
the final report produced by such counsel with respect to the
facts of these events.’ . . . Presumably, U.S. Bancorp made
good on its promise to the client and provided a copy of the
Goodwin Procter report. By doing so, it waived any privilege
that may have attached to this document and any related
materials.
See Filing No. 278 - Brief p. 24. In response, U.S. Bank states that the “customer” referred
to by Woodmen, U.S. Bank Pension Plan (Pension Plan), is “so closely tied to U.S. Bank,
it must be considered an affiliate.” See Filing No. 282 - Response p. 28. As such, U.S.
Bank describes disclosure of the Goodwin Procter report to the Pension Plan as a “limited
disclosure . . . across the corporate structure to officers and employees of U.S. Bank who
administered the Pension Plan consistent with maintenance of confidentiality of the
document.” Id. at 28-29. In its reply brief, Woodmen states “[t]he Pension Plan not a
wholly owned subsidiary or affiliate of U. S. Bank” but rather is “a separate legal entity and
a participant in the Long Term Bond Fund” and as such “had the same right to sue U.S.
Bank for damages arising out of the improper reallocation activities as did Woodmen.” See
Filing No. 286 - Reply p. 12-13.
The court finds the correspondence between Joseph M. Ulrey, III, of FAF Advisors,
and Christopher Alan Weals, counsel for the Pension Plan, undermine U.S. Bank’s position
15

that disclosure of the Goodwin Procter report to the Pension Plan does not constitute a
waiver of the attorney-client privilege. See Filing No. 279 - Exs. F & G. Moreover, the
court finds U.S. Bank fails to meet its burden of showing it did not waive privilege with
respect to the Deloitte report when it discussed the accounting firm’s methodology in
correspondence with the 8th District.

b. Disclosures to the SEC
Woodmen contends information obtained from Lui’s internal investigation, Goodwin
Procter’s investigation, and Deloitte’s analysis was included in a PowerPoint presentation
given to SEC examiners after U.S. Bank voluntarily reported Busse’s reallocation activities
to the SEC therefore waiving U.S. Bank’s claim of privilege. See Filing No. 278 - Brief p.
20. U.S. Bank argues that under the Eighth Circuit’s analysis in Diversified, disclosures
to the SEC do not result in waiver under that case’s recognition of a “selective waiver.”
Woodmen argues that U.S. Bank’s reliance on the Eighth Circuit’s acknowledgment of
“selective waiver” with respect to disclosures to the SEC is misplaced under the
circumstances in this case. The court agrees.
As discussed above, Nebraska law governs attorney-client privilege issues in
diversity cases. U.S. Bank has failed to show Nebraska has adopted the holding of the
Eighth Circuit with respect to “selective waiver” or that “selective waiver” is consistent with
Nebraska law.4 In any event, the court notes U.S. Bank overlooks an important difference
between the disclosure to the SEC in Diversified and the disclosure to the SEC in the
case before the court. In Diversified, the law firm’s report was produced to the SEC
pursuant to a subpoena. Diversified, 572 F.2d at 604 n.1. In the matter before the court,
the reports were provided to the SEC after Lui contacted the SEC and notified it of Busse’s
reallocation activities. “The sense that we had internally was that the issue was of a nature
that the SEC, while it’s not required, would appreciate having it disclosed to them through
a voluntary mechanism.” See Filing No. 279 - Ex. 2 Lui Depo. p. 41 (Page ID# 4369).

4

U.S. Bank cites a num ber of cases from this court, however, none of those cases are diversity cases
and none indicate that the “selective waiver” recognized by the Eighth Circuit in Diversified is applicable to
diversity cases in this district.
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For the reasons stated, the court finds U.S. Bank failed to meet its burden of showing that
its disclosures to the SEC did not constitute a waiver of the attorney-client privilege.
In any event, had the court found the privilege to apply, the court would find that
U.S. Bank failed to meet its burden of showing that no waiver of any such privilege
occurred.

5.

Sufficiency of U.S. Bank’s privilege log
Woodmen argues “U.S. Bank has, with few exceptions, provided nothing but

conclusory assertions of privilege, with no further explanation. In many instances, the
information provided could not even arguably support a claim of privilege.” See Filing No.
278 - Brief p. 8. Woodmen asserts it is unable to address “each individual assertion of
privilege” due to the large number of documents withheld. Id. at 7. Nevertheless,
Woodmen contends that, based on the inadequacy of its privilege log, U.S. Bank should
be ordered to produce all of the withheld documents. Id. at 9.
In response, U.S. Bank contends its privilege log contains the information required
by the initial progression order and further, any specific deficiencies or confusion in the
privilege log can be addressed by the parties. See Filing No. 282 - Response p. 12-16.
Therefore, as discussed above, the court has limited its decision to those three categories
of documents described and discussed in Woodmen’s motion to compel and its briefs in
support of that motion, and will leave the remaining unspecified documents for the parties
to address between themselves.

CONCLUSION
U.S. Bank failed to meet its burden of establishing that the Goodwin Procter report,
the Deloitte report, and the Rule 38a-1 report are entitled to protection under either
attorney-client privilege or work product doctrine or that any such privilege has not been
waived. The court orders those reports be produced to Woodmen. Furthermore, the court
will not impose a general waiver based on U.S. Bank’s privilege log’s lack of factual basis
for assertion of privilege, as argued by Woodmen. The court suggests the parties meet
and confer on the remaining challenged assertions of privilege and if necessary Woodmen
17

may renew its motion to compel production of specifically identified documents taking into
consideration the current findings of the court. Upon consideration,

IT IS ORDERED:
1.

The plaintiff’s Motion to Compel (Filing No. 277) is granted, in part, and

denied, in part.
2.

On or before February 22, 2012, U.S. Bank shall produce unredacted

copies of the Goodwin Procter report, the Deloitte report, and the Rule 38a-1 report.

ADMONITION
Pursuant to NECivR 72.2 any objection to this Order shall be filed with the Clerk of
the Court within fourteen (14) days after being served with a copy of this Order. Failure to
timely object may constitute a waiver of any objection. The brief in support of any objection
shall be filed at the time of filing such objection. Failure to file a brief in support of any
objection may be deemed an abandonment of the objection.
DATED this 2nd day of February, 2012.
BY THE COURT:
s/ Thomas D. Thalken
United States Magistrate Judge

*This opinion m ay contain hyperlinks to other docum ents or W eb sites. The U.S. District Court for
the District of Nebraska does not endorse, recom m end, approve, or guarantee any third parties or the services
or products they provide on their W eb sites. Likewise, the court has no agreem ents with any of these third
parties or their W eb sites. The court accepts no responsibility for the availability or functionality of any
hyperlink. Thus, the fact that a hyperlink ceases to work or directs the user to som e other site does not affect
the opinion of the court.
18