Chesapeake Energy Corporation v. The Bank of New York Mellon Trust Company, N.A.

Filing 77

OPINION & ORDER: For the reasons stated, BNY's request that the end date of Chesapeake's privilege waiver be extended beyond February 21, 2013, is denied. Chesapeake is directed to submit a letter to the Court, by noon on April 16, 2013, confirming that the materials about which the Court has inquired in this opinion have in fact been produced to BNY. (Signed by Judge Paul A. Engelmayer on 4/15/2013) (djc)

USIlCSDNY

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

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13 Civ. 1582 (PAE)

Plaintiff,
OPINION & ORDER
-v-

THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A.,
Defendant.

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PAUL A. ENGELMAYER, District Judge:
This memorandum opinion addresses the Court's ex parte review of certain materials
withheld from production in this expedited litigation by plaintiff Chesapeake Energy Corporation
("Chesapeake"), on grounds of attorney-client privilege, attorney work product, or both.
I.

Background
The Court assumes familiarity with the claims in and procedural history of this lawsuit.

The issue at hand involves an application by defendant Bank of New York Mellon Trust
Company, N.A. ("BNY"), to compel Chesapeake to produce privileged documents outside the
scope of Chesapeake's voluntary privilege waiver. That privilege waiver, embodied in the
Court's March 27,2013 protective order, applies to all documents and communications
concerning the "drafting, meaning, interpretation, andlor application of section 1.7 of the Ninth
Supplemental Indenture" governing the 2019 Notes at issue in this action (the "Subject Matter").
By its terms, Chesapeake's privilege waiver governs documents and communications through
and including February 21, 2013, a date more than a year after the Ninth Supplemental Indenture
was executed. Chesapeake represents that it selected February 21, 2013, as the end date for its

privilege waiver, on the grounds that on that date Chesapeake began to contemplate litigation of
the controversy relating to the Ninth Supplemental Indenture, and that its privileged
communications with counsel from that point forward were likely to be separately protected by
the attorney work-product doctrine. By its terms, Chesapeake's waiver did not extend to
attorney work product. BNY agreed to the terms of the waiver, but reserved the right to object to
the end date of the waiver.
In a letter submitted to the Court on April 10,2013, BNY exercised that right. It argued
that the February 21, 2013 end date that Chesapeake had chosen for its waiver of privileged
materials relating to the Subject Matter was improperly selective; that using that date served to
deny BNY access to probative materials relating to that Subject Matter; and that that end date
permitted Chesapeake to use its privileged materials as both a sword and a shield. Dkt. 73, at 25 (citing Newmarkets Partners, LLC v. Sal. Oppenheim Jr. & Cie, S.CA., 258 F.R.D. 95, 110
(S.D.N.Y.2009)). In a letter response submitted to the Court on April 10,2013, Chesapeake
disputed these points. Dkt. 74, at 2-3.
At a conference convened on Thursday, April 11, 2013, to discuss discovery issues that
had arisen, the Court heard argument on these points. In light of the telescoped time period of
this litigation and the need for prompt resolution, the Court agreed to review, ex parte, materials
reflecting communications as to which Chesapeake has claimed privilege, covering the period
between February 22, 2013, i.e., the first date after the privilege waiver, and March 8, 2013, the
date when this litigation commenced. The Court, however, limited the scope of its review to
communications to which one or more of the three attorneys at Bracewell & Giuliani LLP
("Bracewell"), who had advised Chesapeake with regard to the Ninth Supplemental Indenture,
were party: Michael Telle, Esq., Erica Hogan, Esq., and Clay Brett, Esq. (collectively, the

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"Bracewell Fact Witnesses"). The Court's judgment was that communications involving
Chesapeake's litigation counsel but not the Bracewell Fact Witnesses were likely instead to
consist of attorney work product, including relating to litigation strategy and assessments, to
which BNY has no claim of fair entitlement.
Late Friday, April 12,2013, counsel for Chesapeake supplied the Court with two binders
of material, for its in camera review. "Making an in camera submission of materials that
counsel contends are privileged is a practice both long-standing and routine in cases involving
claims of privilege." In re Grand Jury Subpoena Dated July 6, 2005,510 F.3d 180, 184 (2d Cir.
2007) (citation omitted). The first binder ("Binder One") contains 119 sets of emails and
attachments relating to the Subject Matter in which one or more of the Bracewell Fact Witnesses
appears in the "to," "from," or "cc" fields. The second binder ("Binder Two") contains an
additional 67 such emails and attachments (all dated March 6 or 7, 2013); the materials in this
binder differ in that one or more lawyers from Jenner & Block, which commenced work for
Chesapeake on this matter on March 6, 2013, are party to each of these emails. Chesapeake also
supplied the Court with indexes to the two binders; the Court understands that these indexes
were also furnished to counsel for BNY. Finally, on April 12, 2013, at the Court's invitation,
counsel for both Chesapeake and BNY submitted letters setting forth their views as to the
applicable principles governing the Court's in camera review. Dkt. 75-76.

II.

Discussion
A. Binder One
The Court has closely examined the contents of Binder One. Without disclosing the

substance of these communications, the Court summarizes the emails in this binder as falling
into the following categories:

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•

(1) transmittal emails-i. e., emails that transmit to counsel documents from in or
around February 2012 relating to the Note offering, or that forward to counsel
embedded email chains from in or around February 2012;

•

(2) scheduling emails--emails that arrange calls to discuss legal strategy with
regard to the developing dispute with BNY relating to the Ninth Supplemental
Indenture;

•

(3) emails soliciting or seeking updates on the status of a memorandum containing
analysis of potential litigation options which Chesapeake commissioned from a
Bracewell & Giuliani litigation partner (not one of the Bracewell Fact Witnesses);

•

(4) an email attaching two memoranda from the Bracewell & Giuliani litigation
partner, one discussing Chesapeake's options with regard to declaratory relief and
another assessing whether Chesapeake had the right to redeem the 2019 Notes
pursuant to the special early redemption process so long as notice of such
redemption was given on or before March 15, 2013 (both are contained at Tab
35);

•

(5) emails discussing strategy for anticipated phone call(s) with BNY's counsel
relating to the dispute, and emails reporting communications with BNY;

•

(6) emails discussing potential means of resolving, out of court, Chesapeake's
dispute with BNY;

•

(7) emails commenting on the strategic merits, and mechanics, of potential
applications for injunctive or other emergency relief from a court;

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•

(8) an email from a Bracewell & Giuliani litigation partner discussing a potential
litigation option (Tabs 76 and 86) and emails from counsel commenting on this
option;

•

(9) emails discussing the need to retain lead litigation counsel from a firm other
than Bracewell & Giuliani and arranging the process for doing so; and

•

(10) emails discussing the option of issuing a notice of special early redemption
that would be ineffective ifheld untimely for that purpose.

In reviewing these emails, the Court has considered, as to each email: (1) whether it is
privileged; (2) whether it falls within the scope of the attorney work-product doctrine; (3)
whether it reveals facts or evidentiary material relevant to the issues before the Court, as opposed
to post hoc legal judgments on those issues; and (4) whether anything in the emails could fairly
be used as impeachment material with respect to the potential testimony of any of the Bracewell
Fact Witnesses.
The Court's conclusions are as follows.
1. Each email is a privileged communication between attorney and client.
2. The vast majority of the emails in the binder squarely qualify as attorney work
product. There are none which the Court is prepared to hold are not attorney work product. The
emails as to which more information or briefing would be needed to enable the Court to make
such a determination are those that deal with potential non-litigation resolutions to the
controversy between Chesapeake and BNY, or non-substantive emails scheduling calls that
appear likely to have been intended to address Chesapeake's litigation options, but of which the
intended subject matter is not always transparent on the face of the email. However, in the

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Court's judgment, none of these emails has any conceivable bearing on the issues before the
Court.
3. A number of emails, as noted, attach documents from 2012 relating to the loan
offering or embed email chains from 2012. In particular, a number of emails early in the binder
are of this nature (e.g., Tabs 2, 3, 8, 9, 10, 11,13). The Court expects that Chesapeake has
already produced to BNY the attached 2012 documents and embedded email strings from 2012:
The loan offering documents from 2012 appear to be discoverable and potentially relevant and
the embedded email strings from 2012 all appear to fall within the subject-matter and temporal
scope of Chesapeake's privilege waiver. The Court directs Chesapeake to confirm, by letter to
the Court and counsel due by noon on Tuesday, April 16,2013, that all attached documents from
2012 relating to the loan offering and all embedded email strings from 2012 that appear in this
binder have been produced to BNY. To the extent that any have not been produced, the Court
directs that Chesapeake either produce them forthwith or explain, by letter to the Court, why
each is properly withheld. (For avoidance of doubt, the Court is not requiring Chesapeake to
produce the 2013 emails transmitting these 2012 documents or communications. Chesapeake is
required only to confirm that the documents and communications from 2012 themselves have
been produced.)
The Court has closely reviewed the materials in the binder for the purpose of determining
whether they draw upon or reveal documents, facts, or other evidentiary material that may not
have been disclosed to BNY. Most relevant here is the litigation assessment by the Bracewell &
Giuliani litigation partner. The documents referenced in the litigation assessment are the text of
the indentures and the prospectus supplement; the assessment also refers generally to preliminary
drafts of the supplemental indenture. The Court expects that Chesapeake has produced such

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preliminary drafts to BNY. (For avoidance of doubt, the Court directs Chesapeake to confirm in
its April 16, 2013 letter that it has done so.) If so, all documents referred to in the litigation
assessment are equally available to the parties to this lawsuit. The litigation assessment also
references the fact that other participants in the underlying transaction-a partner at Cravath,
Swaine & Moore ("CSM") and representatives of Merrill Lynch, Pierce, Fenner & Smith, Inc.
("Merrill")-had been consulted as to their views whether a notice of special early redemption
would be timely if given by March 15,2013. The Court expects that BNY is aware of the names
of the CSM and Merrill personnel referenced in the litigation assessment and that these persons
participated in the underlying transaction. (For avoidance of doubt, the Court directs
Chesapeake to confirm in its April 16, 2013 letter that this is so.) If so, the potential fact
witnesses revealed in the litigation assessment are also equally available to the parties to this
lawsuit to be deposed. As to the other materials in the binder, they do not identify relevant
evidence bearing on the parties' dispute.
4. The Court has closely examined the communications in the binder, post-dating
February 21,2013, involving Mr. Telle and Ms. Hogan. (There do not appear to be any
involving Mr. Brett.) The Court has done so on the understanding that Mr. Telle, Ms. Hogan,
and Mr. Brett may be fact witnesses in this litigation. The Court is satisfied that none of these
communications bears substantively on the issues before the Court. To the limited extent these
parties are participants in (as opposed to passive recipients of) these emails, their emails address
non-substantive organizational or logistical topics (e.g., transmitting documents, arranging calls,
and/or confirming the timetable for the litigation assessment by the Bracewell & Giuliani
litigation partner) or attach drafts of Chesapeake's special early redemption notice. The Court
wishes to assure counsel for BNY that it has scrutinized these documents closely. The Court is

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satisfied that these documents do not contain, explicitly or implicitly, any representations by any
of the Bracewell Fact Witnesses as to any ofthe facts at issue. Nor do they supply any basis not
already readily apparent to the Court and counsel (e.g., Bracewell's interest in retaining a role as
Chesapeake's outside counsel; and/or the reputational or other potential adverse consequences to
Bracewell if the deal documents that it prepared were held deficient) for attempting to impeach
the testimony of these witnesses.
In light ofthis review, the Court denies BNY's request that it order the production of any
of the privileged communications in Binder One to the extent that they postdate February 21,
2013. The Court has broad authority to issue rulings relating to the scope and parameters of a
privilege waiver. See John Doe Co. v. United States, 350 F.3d 299,306 (2d Cir. 2003); United
States v. Adlman, 68 F.3d 1495, 1499 (2d Cir. 1995). The Court declines to disturb the time
parameters of the existing privilege waiver, for several independent reasons.
First, the Court's review of the Binder One materials has confirmed Chesapeake's
representation to the Court and counsel that Chesapeake's privileged attorney-client
communications after February 21, 2013, are overwhelmingly, if not entirely, protected by the
work-product doctrine. These documents are overwhelmingly addressed to the prospect of
litigation (or a pre-litigation settlement) with BNY. The parties' written privilege waiver
explicitly did not waive attorney work-product communications. That agreement warrants
deference, as does a party's interest in protecting its work product. Moreover, the Second Circuit
has instructed that a court should engage in a separate waiver analysis as to work product,
addressing fairness concerns and making particularized findings. In re Grand Jury Proceedings,
219 F.3d 175, 190-91 (2d Cir. 2000). Unless fairness requires it, the Court will not modify the
agreed-upon scope of the waiver. See Alpex Computer Corp. v. Nintendo Co., Ltd., No. 86 Civ.

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1749 (KMW), 1994 WL 330381, at *2 (S.D.N.Y. July 11,1994) ("The scope of the subject
matter waiver is of particular concern in cases involving opinion work product. ... Courts should
simply take care to extend the scope of the waiver only so far as necessary to ensure fairness to
the litigants."); see also Resolution Trust Corp. v. Mass. Mut. Life Ins. Co., 200 F.R.D. 183, 194
(W.D.N.Y. 2001) ("[W]aiver of one privilege will not necessarily mean waiver ofthe other."
(citing In re Pfohl Bros. Landfill Litig., 175 F.R.D. 13,21 (W.D.N.Y.l997)); Bowne ofN. Yc.,

Inc. v. AmBase Corp., 150 F.R.D. 465, 479 (S.D.N.Y. 1993) ("The protection ofthe workproduct rule is less readily waived [than attorney-client privilege]."). Here, Chesapeake has not
voluntarily waived its work-product materials, and fairness does not require that these materials
be produced to BNY.
Second, the Court's review of Binder One-and the directives it has given Chesapeake to
confirm that certain 2012 materials are contained within its existing production-serve to assure
that BNY has access to all relevant evidence (e.g., documents) and notice of the names of
potential witnesses referenced in the materials in Binder One. The vast majority of
communications in the binder involve either non-substantive communications, which have no
bearing on the issues before the Court, or communications regarding litigation strategy, which
are irrelevant to the issues before the Court and are core work product. See Adlman, 68 F.3d at
1501 (discussing extent and purposes of work-product doctrine). They do not shed light on the
intent of the drafters or negotiators or on the meaning of the special early redemption provision.
To the very limited extent that the materials in Binder One do comment upon the merits of that
issue, these materials (the litigation assessment by the Bracewell litigation partner and emails
relating to it) are core opinion work product to which BNY has no claim of entitlement. This
core opinion work product merits greater protection than attorney-client privilege or fact work

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product. See In re Grand Jury Subpoena DatedJuiy 6,2005,510 F.3d at 183 ("[O]pinion work
product ... is entitled to greater protection than fact work product. "); The Shinnecock Indian
Nation v. Kempthorne, 652 F. Supp. 2d 345, 367 (E.D.N.Y. 2009) ("[E]ven in those cases in
which courts have held that selective or partial disclosure has impliedly waived the privilege,
courts have been reluctant to hold that implied waiver of non-opinion work product extends to
opinion work product. In fact, the Court's research has yielded no case in this Circuit reaching
such a conclusion."); In re Kidder Peabody Sec. Litig., 168 F.R.D. 459, 473 (S.D.N.Y.1996)
(limiting work-product waiver to purely factual materials, leaving protected "core attorney
mental processes"). Extending the end date of Chesapeake's privilege waiver would thus breach
Chesapeake's privilege as to core opinion work product without conferring any benefit upon
BNY to which it may legitimately lay claim.
Third, BNY's speculative fear that limiting Chesapeake's privilege waiver to
communications before February 22,2013, would allow Chesapeake to use privileged materials
as both a sword and a shield does not have a basis in fact. Chesapeake has represented that it
does not intend to offer into evidence any privileged documents created following the closing of
the offering. Dkt. 76, at 4; Transcript of April 11, 2013 Conference ("Tr."), at 41. And, based
on the Court's review, none of those documents would appear to be probative and admissible to
advance Chesapeake's cause. Thus, BNY has failed to demonstrate that it would suffer prejudice
unless these materials were produced, a showing necessary to justify invading Chesapeake's
work-product privilege. See In re von Bulow, 828 F .2d 94, 101 (2d Cir. 1987) (aim of "the
fairness doctrine" is "to prevent prejudice to a party and distortion of the judicial process");
Newmarkets Partners, 258 F.R.D. at 106-07 (work-product protection only waived where,
"given the particular circumstances of a case, 'it would be unfair for a party asserting

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contentions ... to then rely on its privileges to deprive its adversary of access to material that
might disprove or undermine the party's contentions'" (quoting John Doe Co., 350 F.3d at 302»;

Granite Partners v. Bear, Stearns & Co., Inc., 184 F.R.D. 49, 54 (S.D.N.Y. 1999) ("The work
product privilege is waived when a party to a lawsuit uses it in an unfair way that is inconsistent
with the principles underlying the doctrine of privilege."); Alpex Computer Corp., 1994 WL
330381, at *2 ("Subject matter waiver is found only in the event that the initial disclosure is
made during the course of litigation and results in prejudice to the opposing party."). Because
BNY has not demonstrated prejudice, the Court will not broaden the scope of Chesapeake's
voluntary privilege waiver.

B. Binder Two
The Court has also closely reviewed the materials in Binder Two-which consist of
privileged communications to which its newly retained litigation counsel Jenner & Block was a
party. These materials are all dated March 6 and 7, 2013. These materials do not have any
bearing on the merits of the dispute before the Court. They are core work product: They address
the strategy and mechanics of the lawsuit that Chesapeake filed, and the request for emergency
relief that Chesapeake made, on Friday, March 8,2013. There is no basis for granting BNY's
request for access to these materials. See In re Grand Jury Proceedings, 219 F.3d at 190-91
("As for work-product that shows 'mental impressions, conclusions, opinions, or legal theories
of an attorney,' we have held that, 'at a minimum such material is to be protected unless a highly
persuasive showing [of need] is made.'" (alteration in original) (quoting Fed. R. Civ. P 26(b)(3);

Adlman, l34 F.3d at 1204».

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CONCLUSION
For the reasons stated, BNY's request that the end date of Chesapeake's privilege waiver
be extended beyond February 21, 2013, is denied. Chesapeake is directed to submit a letter to
the Court, by noon on April 16,2013, confirming that the materials about which the Court has
inquired in this opinion have in fact been produced to BNY.

SO ORDERED.

Paul A. Engelmayer
United States District Judge
Dated: April 15, 2013
New York, New York

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