Veleron Holding, B.V. v. BNP Paribas SA et al
Filing
219
OPINION AND ORDER: For the foregoing reasons, Morgan Stanley's request for an order to compel Veleron to produce all relevant documents concerning communications with foreign attorneys that it has withheld on the basis of attorney-client privilege and work product immunity is GRANTED. Veleron shall produce all such documents by August 27, 2014. (Signed by Magistrate Judge Ronald L. Ellis on 8/22/2014) (mro)
USOCSDNY
DOCUMENT
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
~I
VELERON HOLDING, B.V.,
BrF.Cl'RONICAILY FILED
DOC II:
------------------0 ATB FILED: ~ - z.z_- t j
Plaintiff,
OPINION
AND ORDER
- against 12-CV-5966 (CM) (RLE)
BNP PARIBAS SA, et al.,
Defendants.
RONALD L. ELLIS, United States Magistrate Judge:
Plaintiff Veleron Holding, B. V. ("Veleron") brings this action against Defendants
Morgan Stanley, Morgan Stanley Capital Services, Inc., Morgan Stanley & Co., Incorporated,
Morgan Stanley & Co. (together "Morgan Stanley") for securities fraud.'
Before the Court is
Morgan Stanley's request for an order to compel Veleron to produce documents concerning
communications with foreign attorneys that it has withheld on the basis of attorney-client
privilege and work product immunity. For the following reasons, Morgan Stanley's request is
GRANTED.
I. BACKGROUND
Morgan Stanley claims that Veleron has improperly withheld documents concerning
communications with individuals who appear to be Veleron's "in-house" or "outside" counsel
based in foreign jurisdictions, specifically Russia and the Netherlands. (Def. Letter to the Court,
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0n April 16, 2014, the Court dismissed a number of other Defendants from the case, including Defendants
BNP Paribas S.A., Credit Suisse International, Nexgen/Natixis Capital Limited, the Royal Bank of Scotland, N.V.,
ABN Amro Bank N.V., Fortis Bank (Nederland) N.V., and Magna International, Inc. (Docket No. 162.) The Court
also dismissed Veleron's breach of contract and tortious interference with contract claims against Morgan Stanley.
(Id.)
June 26, 2014, at 1-2, Ex. A.) These documents were listed in Veleron's privilege log, which
was produced on February 11, 2014. (Id. at 1; Pl. Letter to the Court, July 3, 2014, at 1.)
Morgan Stanley claims that Veleron did not state the source of law on which its privilege
assertions were based or provide information on whether the attorneys were licensed to practice,
and, if so, in which jurisdictions. (Id. at 1-2.) Morgan Stanley wrote to Veleron on May 16,
2014, challenging Veleron' s assertions of privilege in the documents at issue. (Def. Letter to the
Court, June 26, 2014, at Ex. C.) Referring to the documents, Morgan Stanley asserted that
"Russian law does not recognize attorney-client privilege or work product immunity for legal
advice or work product provided by Russian-qualified in-house attorneys or unlicensed outside
counsel," and "the Netherlands does not recognize any attorney-client privilege or work product
immunity for legal advice or work product provided by unlicensed attorneys." (Id.) Morgan
Stanley additionally asserted that United States law has only limited protections for legal advice
and work product provided by attorneys who are not admitted in any United States jurisdiction.
(Id.) Morgan Stanley requested that Veleron provide information on 1) the sources of law on
which its claim of privilege relied; and 2) information on whether the attorneys at issue were
licensed, and if so, in which jurisdictions.
On May 22, 2014, Veleron objected to Morgan Stanley's request, arguing that such
information was not required under either Federal Rule of Civil Procedure 26(b )(5) or Local
Civil Rule 26.2, and Morgan Stanley's demand was improper because it was not made on a
specific "document-by-document" basis. (Id. at Ex. D.) On June 26, Morgan Stanley requested
an order to compel Veleron to produce the documents at issue. (Docket No. 200.) Veleron
objected on June 30, asserting that Morgan Stanley had failed to meet and confer with Veleron
before requesting the order. (Docket No. 201.) In response, Morgan Stanley asserted that it had
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met and conferred with Veleron on April 25, 2014, and through its May 16, 2014 letter
requesting additional information. (Docket No. 202.) On July 3, 2014, Veleron objected
substantively to Morgan Stanley's request. (Docket No. 203.)
II. DISCUSSION
"[T]he burden is on a party claiming the protection of a privilege to establish those facts
that are the essential elements of a privileged relationship." Von Bulow by Auersperg v. Von
Bulow, 811F.2d136, 144 (2d Cir. 1987) (internal quotations omitted). Once an assertion of
privilege is challenged, the withholding party must "submit evidence ... establishing only the
challenged elements of the applicable privilege or protection, with the ultimate burden of proof
resting with the party asserting the privilege or protection." A.IA. Holdings, SA. v. Lehman
Bros., Inc., 97-CV-4978 (LMM) (HBP), 2002 WL 31385824, at *6 (S.D.N.Y. Oct. 21, 2002),
supplemented sub nom. A.IA. Holdings v. Lehman Bros, Inc., 97-CV-4978 (LMM) (HBP), 2002
WL 31556382 (S.D.N.Y. Nov. 15, 2002).
Morgan Stanley challenged Veleron's assertions of privilege in the documents at issue on
May 16, 2014. (Def. Letter to the Court, June 26, 2014, at Ex. C.) Once Morgan Stanley
challenged Veleron' s claims of privilege, by asserting that Russian and Dutch law did not
recognize attorney-client privilege or work product immunity for the attorney communications at
issue, Veleron was required to submit evidence establishing the challenged elements of the
privilege. A.IA. Holdings, SA. v. Lehman Bros., Inc., 2002 WL 31385824, at *6. Veleron
failed to do so, and has thus failed to sustain the claim of privilege.
A.
Morgan Stanley has satisfied its obligations.
Veleron argues that the Court must deny Morgan Stanley's request for an order to compel
because Morgan Stanley failed to meet and confer with Veleron regarding the disputed
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documents. Morgan Stanley claims that it met and conferred with Veleron about the dispute on
April 25, 2014, and that it referred to this meeting in its May 16, 2014 letter. (Def. Letter to the
Court, July 1, 2014.) Morgan Stanley's May 16, 2014 letter stated: "As we have discussed
during previous meet and confer conferences, the Privilege Log and its accompanying legend
suggest that Veleron has withheld from production on the purported bases of attorney-client
privilege and work product immunity a large number of communications that appear to have
originated from foreign-qualified attorneys .... " (Def. Letter the Court, June 26, 2014, Ex. C.)
Veleron claims that although the Parties met and conferred on April 25, 2014 about other
discovery issues, the Parties never substantively discussed this particular issue. (Pl. Letter to the
Court, July 3, 2014, at n.2.)
Under Rule 37, a motion to compel must include "a certification that the movant has in
good faith conferred or attempted to confer with the person or party failing to make disclosure or
discovery in an effort to obtain it without court action." Fed. R. Civ. P. 37(a)(l). Courts have
excused the meet-and-confer requirement "where temporal exigencies required speedy action
and where efforts at informal compromise would have been clearly futile." Prescient Partners,
L.P. v. Fieldcrest Cannon, Inc., 96-CV-7590 (DAB)(JCF), 1998 WL 67672, at *3 (S.D.N.Y.
Feb. 18, 1998). Ordinarily, however a motion to compel must be denied where the parties have
failed to meet and confer. Id.
The Court finds Morgan Stanley's assertion that the parties met and conferred to be
credible. Based on the July 15, 2014 Telephone Conference, it is clear that any further
discussions by the Parties would not have resolved the issue. The principle separating the
Parties was not amenable to compromise: either the privilege applied or it did not. Veleron gave
no indication that it would yield on its claim of privilege in the absence of a court order.
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B.
Morgan Stanley was not required to challenge the disputed documents on a documentby-document basis.
Veleron argues that Morgan Stanley was required to challenge the assertion of privilege
by identifying each document that did not meet the elements of the privilege. This is incorrect, if
a class of documents share a common characteristic, they may be challenged on the basis of that
characteristic. This could include, for example, documents challenged because there is an
assertion that the privilege was not applicable during a certain time period, or with respect to a
certain individual, or because of any clearly defined criteria. Here, Morgan Stanley identified
the categories of documents it was challenging in its May 16, 2014 letter as "communications
that appear to have originated from foreign-qualified attorneys, including Russian in-house
counsel and purported 'outside' counsel from Russia and the Netherlands." (Def. Letter to the
Court, June 26, 2014, at Ex. C.) Morgan Stanley also attached to its letter a list of the individual
attorneys for whom it sought licensure information. By identifying the documents both by
individual attorney and generally by attorney status as foreign-qualified, in-house and outside
counsel, Morgan Stanley provided sufficient information to notify Veleron which documents it
was challenging. Requiring Morgan Stanley to identify each individual document would be
unnecessarily time-consuming. Furthermore, Veleron has itself categorized the information in
its privilege log by individual attorney and by in-house or outside counsel status in the legend it
provided to Morgan Stanley. (Pl. Letter to the Court, July 3, 2014, Ex. C.) Therefore, Veleron
cannot argue that it is incapable of identifying the documents based on those identifiers.
The only case law from this District Veleron cites to defend its proposition that
documents must be challenged on a document-by-document basis is In re Delphi Corp., 276
F.R.D. 81, 87 (S.D.N.Y. 2011). Veleron's reliance on this case is misplaced. In In re Delphi
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Corp., the plaintiffs requested in camera review of withheld documents on the basis of their
claim that the privilege log and affidavits filed by the government were "insufficient because
they contain[ ed] conclusory, self-serving language." The Court denied in camera review, finding
that such a "general challenge to 'conclusory' language" to be insufficient. In this case, Morgan
Stanley has not made a general challenge to the basis on which the documents at issue were
withheld. Rather, by providing the specific categories of documents challenged, Morgan Stanley
has provided the information necessary for Veleron to identify each document challenged.
C.
Veleron was required to provide information to establish the challenged elements of its
claim ofprivilege.
Veleron argues that requiring it to submit evidence establishing the challenged elements
of the privileges claimed would contradict Federal Rule of Civil Procedure 26(b)(5) and Local
Civil Rule 26.2, which specifically do not require a party to allege facts establishing an
attorneys' admission to the bar at the time of an allegedly privileged communication. Veleron
relies on A.I.A. Holdings, SA. v. Lehman Bros., Inc., 2002 WL 31385824, at *4 (S.D.N.Y. Oct.
21, 2002). However, the Court in A.I.A. Holdings held that while a party is not initially
obligated to provide information establishing the elements of an applicable privilege or
protection, and need only provide the information required by Rule 26(b)(5) and Local Civil
Rule 26.2, once an assertion of privilege is challenged, "the withholding party then has to submit
evidence .... establishing only the challenged elements of the applicable privilege or
protection." A.I.A. Holdings, SA. v. Lehman Bros., Inc., 2002 WL 31385824, at *6. Because
Morgan Stanley has challenged Veleron's claims of privilege, Veleron was required to provide
information establishing the challenged elements of its claims.
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D.
Morgan Stanley correctly applied the "touch-base" test
Veleron argues that even ifthe Court finds it was required to establish the challenged
elements of its claims of privilege, Morgan Stanley's request to compel must be denied because
Morgan Stanley relies on a misunderstanding of choice of law doctrine regarding assertions of
attorney client privilege and work product immunity in connection with foreign-qualified
attorneys.
The Second Circuit applies the "touch base" test to determine what country's law of
privilege applies to foreign documents. Under the Second Circuit's "touch base" choice oflaw
analysis, this Court must apply the law of the country that has the "predominant or the most
direct and compelling interest in whether [the] communications should remain confidential" to
disputes involving foreign attorney-client communications, "unless that foreign law is contrary
to the public policy of this forum." Wultz v. Bank of China Ltd., 979 F. Supp. 2d 479, 486
(S.D.N.Y. 2013), on reconsideration in part, 11-CV-1266 (SAS), 2013 WL 6098484 (S.D.N.Y.
Nov. 20, 2013) (quoting Anwar v. Fairfield Greenwich Ltd., No. 09-CV-118 (VM)(FM), 2013
WL 3369084, at *l (S.D.N.Y. July 8, 2013)) (internal quotation marks omitted). The
jurisdiction with the predominant interest is "either 'the place where the allegedly privileged
relationship was entered into' or 'the place in which that relationship was centered at the time
the communication was sent."' Anwar v. Fairfield Greenwich, Ltd., No. 09-CV-118 (VM)(FM),
2013 WL 3369084, at* 1 (S.D.N.Y. July 8, 2013), aff'd, 982 F. Supp. 2d 260 (S.D.N.Y. 2013)
(quoting Astra Aktiebolag v. Andrx Pharmaceuticals, Inc., 208 F.R.D. 92, 98 (S.D.N.Y. 2002)).
Morgan Stanley claims that the jurisdiction with the "predominant interest" for the
documents at issue is either Russia or the Netherlands. It argues that because the documents
concern communications that occurred in Russia or the Netherlands between Veleron's Russian
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and Dutch executives with Veleron' s Russian or Dutch counsel, Russia and the Netherlands are
the "place[ s] where the allegedly privileged relationship[ s] ... [were] entered into" and the
places "where the relationship[ s] ... [were] centered at the time the communication[ s] ...
[were] sent." Anwar, 2013 IL 3369084, at *1.
Veleron disputes this analysis, arguing that it is the "substance of the communications in
question that is critically important to the touch-base test." (Pl. Letter to the Court, July 3, 2014,
at 3) (emphasis in original). Because the "majority of the communications" at issue relate to
Russian Machine's guaranty, which Veleron asserts is governed by British law, and the Magna
investment and related agreements, which are governed by Canadian law, Veleron asserts that
British and Canadian attorney-client privilege law apply.
For this proposition, Veleron relies on the same cases cited by Morgan Stanley, Wultz v.
Bank a/China Ltd. and Anwar v. Fairfield Greenwich Ltd. Specifically, Veleron focuses on the
Anwar court's application of the touch base test. The Anwar court noted that "American law
typically applies to communications concerning 'legal proceedings in the United States' or
'advice regarding American law,' while communications relating to ... foreign law .. are
generally governed by foreign privilege law." Anwar, 2013 1L 3369084, at * 1. The court then
reasoned that an unlicensed Dutch attorney's communications "likely 'touch base[d]' with the
United States because they are related to legal issues arising out of the Citco Defendants' role in
the administration of key feeder funds." Id. at * 1. However, the court explicitly did not make a
finding on this point, stating "I say 'likely' because the communications at issue were not
provided to me," and ultimately determining that there was "no need to resolve [the] question"
because the same result applied regardless of whether it applied Dutch or American law. Id.
Veleron also relies on Wultz v. Bank a/China, Ltd., 979 F. Supp. 2d 479 (S.D.N.Y.
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2013). However, the court in Wultz held that, "the applicable privilege law should be of those
'countries [that] have the predominant interest in whether those communications should remain
confidential,' which are the nations 'where the allegedly privileged relationship was entered
into."' Id. at 486. In this case, those nations are not the United Kingdom or Canada, but Russia
and the Netherlands.
Finally, Veleron relies on Golden Trade, S.r.L. v. Lee Apparel Co., 143 F.R.D. 514, 522
(S.D.N.Y. 1992). In Golden Trade, however, the court applied Norwegian, German, and Israeli
law for communications between an Italian corporation and its patent agents in Norway,
Germany, and Israel regarding patent law in those countries. Id. at 522. The court reasoned that
Norway, Germany and Israel had the "predominant interest in whether those communications
should remain confidential." In this case, the only connection the United Kingdom and Canada
have to the communications at issue is through choice of law clauses in the relevant contracts for
Russian Machine and Magna that dictate that any dispute shall be subject to and governed by
British and Canadian law, respectively. Comparatively, Russia and the Netherlands have a
strong interest in the uniform application of attorney client privilege law for Russian and Dutch
attorneys and for communications that occur in their respective countries. Accordingly, the touch
base analysis favors the application of Russian and Dutch attorney-privilege law to the
communications at issue.
The Parties do not dispute that Russian law does not recognize attorney-client privilege
or work product immunity for communications between or work product provided by 1) inhouse counsel; or 2) "outside" counsel who are not licensed "advocates" registered with the
Russian Ministry of Justice. (Def. Letter to the Court, June 26, 2014, Ex. B ilil 4, 7-9.)
Therefore, since Veleron has not provided any information establishing that the outside counsel
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whose communications are at issue were advocates registered with the Russian Ministry of
Justice, it has not carried its burden of showing that the communications at issue are protected
under Russian law. Dutch law does not recognize attorney-client privilege for unlicensed
lawyers. Anwar, 2013 WL 3369084, at *2. Because Veleron has not provided any information
establishing that the Dutch attorneys whose communications were at issue were licensed, it has
not carried its burden of showing the communications at issue are protected under Dutch law.
III. CONCLUSION
For the foregoing reasons, Morgan Stanley's request for an order to compel Veleron to
produce all relevant documents concerning communications with foreign attorneys that it has
withheld on the basis of attorney-client privilege and work product immunity is GRANTED.
Veleron shall produce all such documents by August 27, 2014.
SO ORDERED this 22nd day of August 2014
New York, New York
The Honorable Ronald L. Ellis
United States Magistrate Judge
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