Securities and Exchange Commission v. Carrillo Huettel LLP et al
Filing
221
MEMORANDUM AND ORDER granting in part and denying in part 192 Motion to Compel: For the reasons set forth above, the SEC's motion to compel (Docket no. 192) is granted in part and denied in part. CHLLP, Luis J. Carrillo, and Wade D. Huettel shall produce within one week of the date of this Order all documents previously withheld on the basis of privilege relating to Pacific Blue, Tradeshow, Sandstrom, and Skymark Media Group Ltd. (including Skymark Research). They shall also testify wi th respect to communications with these entities. They need not, however, produce privileged documents or testify as to privileged communications with respect to Punch Line Games, GMU Wireless, or Gibraltar, though the Gibraltar document shall be su bmitted for my in camera review within one week. Luniel de Beer has waived the attorney-client privilege by asserting an advice-of-counsel defense and may not withhold related documents or object to testifying concerning pertinent legal advice. Benja min T. Kirk will likewise waive the attorney-client privilege unless, within one week of the date of this Order, he advises the SEC that he is withdrawing any advice-of-counsel defense. (Signed by Magistrate Judge James C. Francis on 4/8/2015) Copies Transmitted By Chambers. (tn)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - -:
SECURITIES AND EXCHANGE
:
COMMISSION,
:
:
Plaintiff,
:
:
- against :
:
CARRILLO HUETTEL LLP, LUIS J.
:
CARRILLO, WADE D. HUETTEL,
:
GIBRALTAR GLOBAL SECURITIES,
:
WARREN DAVIS, JOHN B. KIRK,
:
BENJAMIN T. KIRK, DYLAN L. BOYLE, :
JAMES K. HINTON JR., LUNIEL DE
:
BEER, JOEL P. FRANKLIN, PACIFIC
:
BLUE ENERGY CORPORATION, and
:
TRADESHOW MARKETING COMPANY LTD., :
:
Defendants.
:
- - - - - - - - - - - - - - - - - -:
JAMES C. FRANCIS IV
UNITED STATES MAGISTRATE JUDGE
13 Civ. 1735 (GBD) (JCF)
MEMORANDUM
AND ORDER
This is an enforcement action brought by the Securities and
Exchange Commission (the “SEC”), alleging that the defendants
engaged in a “pump and dump” scheme in connection with Tradeshow
Marketing
Company
Ltd.
(“Tradeshow”)
Corporation (“Pacific Blue”).
¶ 1).
and
Pacific
Blue
Energy
(Amended Complaint (“Am. Compl.”),
Two of the defendants, Luis Carrillo and Wade Huettel, are
attorneys who, together with their firm, Carrillo Huettel LLP
(“CHLLP”), are alleged to have furthered the illegal activity by
assisting the promoters to acquire the Pacific Blue corporate
shell, by drafting misleading public filings and legal opinions, by
1
allowing the promoters to funnel sales proceeds through the law
firm, and by obscuring the promoters’ ownership of Pacific Blue.
(Am. Compl., ¶¶ 2-4).
According to the SEC, the defendants’
activities constituted securities fraud in violation of Section
17(a) of the Securities Act of 1933 (the “Securities Act”), 15
U.S.C. § 77q(a), and Section 10(b) of the Securities Exchange Act
of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder,
17 C.F.R. § 240.10b-5, as well as sale of unregistered securities,
in violation of Sections 5(a) and (c) of the Securities Act, 15
U.S.C. § 77e(a) & (c).
(Am. Compl., ¶ 9).
The SEC now moves pursuant to Rule 37 of the Federal Rules of
Civil Procedure for an order (1) compelling production of all
documents previously withheld by Mr. Carrillo, Mr. Huettel, and
CHLLP on grounds of attorney-client privilege, (2) compelling the
testimony of Mr. Carrillo and Mr. Huettel on issues for which they
previously asserted the privilege, and (3) finding that defendants
Benjamin T. Kirk and Luniel de Beer waived the privilege by relying
on the advice-of-counsel defense.
(“Pl. Memo.”) at 1, 5-18).
(Plaintiff’s Motion to Compel
I will discuss the relevant facts as
they pertain to specific aspects of the legal analysis.
Discussion
A. Attorney-Client Privilege
The attorney-client privilege protects from disclosure “(1) a
2
communication between client and counsel that (2) was intended to
be and was in fact kept confidential, and (3) was made for the
purpose of obtaining or providing legal advice.”
In re County of
Erie, 473 F.3d 413, 419 (2d Cir. 2007) (citing United States v.
Construction Products Research, Inc., 73 F.3d 464, 473 (2d Cir.
1996)); accord United States v. Mejia, 655 F.3d 126, 132 (2d Cir.
2011); National Immigration Project of the National Lawyers Guild
v. United States Department of Homeland Security, 842 F. Supp. 2d
720, 728 (S.D.N.Y. 2012).
The privilege protects not only the
advice of the attorney to the client, but also the information
communicated by the client that provides a basis for giving advice.
See Upjohn Co. v. United States, 449 U.S. 383, 390 (1981); In re
Six Grand Jury Witnesses, 979 F.2d 939, 943-44 (2d Cir. 1992); OakJin Oh v. Sim & Park, LLP, No. 12 MC 66, 2012 WL 1193755, at *1
(S.D.N.Y. April 10, 2012).
“It is axiomatic that the burden is on
a party claiming the protection of a privilege to establish those
facts
that
are
the
essential
elements
of
the
privileged
relationship, a burden not discharged by mere conclusory or ipse
dixit assertions.”
In re Grand Jury Subpoena Dated Jan. 4, 1984,
750 F.2d 223, 224-25 (2d Cir. 1984) (citations omitted) (internal
quotation marks omitted); accord von Bulow by Auersperg v. von
Bulow, 811 F.2d 136, 144 (2d Cir. 1987); Schanfield v. Sojitz Corp.
of America, 258 F.R.D. 211, 214 (S.D.N.Y. 2009).
3
In a case such as
this, which is governed by federal law, “interpretation of the
privilege’s scope is guided by
‘the principles of the common law
. . . as interpreted by the courts . . . in the light of reason and
experience.”
Swidler & Berlin v. United States, 524 U.S. 399, 403
(1998) (quoting Fed. R. Evid. 501).
B. CHLLP Documents
CHLLP has submitted a 27-page privilege log indicating that it
has withheld documents relating to legal advice concerning the
following clients: Skymark Research, Scottsdale Capital Advisors,
Gibraltar Global Securities Inc. (“Gibraltar”), Punch Line Games,
Pacific Blue, Tradeshow, GMU Wireless, and Sandstrom OnTV Company
(“Sandstrom”).
(Privilege Log - Carrillo Huettel LLP - In Re:
Skymark No. NY-8377, attached as Exh. A to Declaration of Todd D.
Brody dated Feb. 24, 2015 (“Brody 2/24/15 Decl.”)).
contends
that
represented
are
(1)
now
the
corporate
defunct
and
entities
therefore
that
no
The SEC
CHLLP
once
attorney-client
privilege can be asserted on their behalf (Pl. Memo. at 5-8); (2)
any privilege that might once have existed has been waived (Pl.
Memo. at 8, 12-13); and (3) even if there is a privilege that may
currently be asserted, the crime/fraud exception applies (Pl. Memo.
at 13-18).
Because the first argument is fully dispositive with
respect to most of the entities at issue, I will not reach the
other arguments except where necessary.
4
The Fourth Circuit has characterized the issue of whether “the
corporate attorney-client privilege survives the dissolution of the
corporate entity” as an “unsettled legal question.”
In re Grand
Jury Subpoena # 06-1, 274 F. App’x 306, 309 (4th Cir. 2008) (per
curiam); see also Nelson Construction Co. v. United States, No.
51205C, 2008 WL 5049304, at *2 (Fed. Cl. Nov. 18, 2008) (“[T]he
issue of whether the attorney-client privilege can be invoked by a
defunct corporation is ultimately unsettled.”); Lewis v. United
States, No. 02-2958, 2004 WL 3203121, at *3 (W.D. Tenn. Dec. 7,
2004) (“[C]ourts are split over whether a corporation is entitled
to
protection
from
the
corporation’s ‘death.’”).
attorney-client
privilege
after
the
The weight of authority, however, holds
that a dissolved or defunct corporation retains no privilege.
See
In re Behr Dayton Thermal Products, LLC, 298 F.R.D. 536, 541-43
(S.D. Ohio 2014); Trading Technologies International, Inc. v. GL
Consultants, Inc., Nos. 05-4120, 05 C 5164, 2012 WL 874322, at *4
(N.D. Ill. March 14, 2012); Official Committee of Administrative
Claimants ex rel. LTV Steel Co. v. Moran, 802 F. Supp. 2d 947, 94849 (N.D. Ill. 2011); Lopes v. Viera, 688 F. Supp. 2d 1050, 1059-69
(E.D. Cal. 2010); TAS Distributing Co. v. Cummins Inc., No. 071141, 2009 WL 3255297, at *1-2 (C.D. Ill Oct. 7, 2009); City of
Rialto v. United States Department of Defense, 492 F. Supp. 2d
1193, 1200 (C.D. Cal. 2007); Gilliland v. Geramita, No. 2:05-CV5
1059, 2006 WL 2642525, at *4 (W.D. Pa. Sept. 14, 2006); Lewis, 2004
WL 3203121, at *4; In re Fundamental Long Term Care, Inc., No.
8:11-bk-22258, 2012 WL 4815321, at *8-10 (Bkrtcy. M.D. Fla. Oct. 9,
2012).
Several
rationales
support
this
conclusion.
First,
the
interests that are furthered by the extension of the privilege
beyond the death of a natural person simply do not apply in the
context of a corporate entity.
In Swidler & Berlin, the Supreme
Court found that “[i]t has been generally, if not universally,
accepted,
for
well
over
a
century,
that
the
attorney-client
privilege survives the death of the client” where the client is an
individual.
524 U.S. at 410.
The Court reasoned that “[k]nowing
that communications will remain confidential even after death
encourages
the
client
to
communicate
fully
and
frankly
with
counsel” because “[c]lients may be concerned about reputation,
civil liability, or possible harm to friends or family. Posthumous
disclosure of such communications may be as feared as disclosure
during the client’s lifetime.”
no
“tradition”
corporation.
of
the
Id. at 407.
privilege
By contrast, there is
surviving
the
demise
of
a
Furthermore, “[t]he possibility that a corporation’s
management will hesitate to confide in legal counsel out of concern
that
such
communication
may
become
unprivileged
after
the
corporation’s demise is too remote and hypothetical to outweigh the
6
countervailing policy considerations supporting discoverability.”
Gilliland, 2006 WL 2642525, at *4. For example, after dissolution,
“the corporation would no longer have any goodwill or reputation to
maintain.” Id.; accord Trading Technologies International, 2012 WL
874322, at *4 (“When the corporation is gone, so to is its interest
in protecting its communications; the need to promote full and
frank exchanges between an attorney and agents of his corporate
clients disappears when the corporation employing those clients has
departed.”); City of Rialto, 492 F. Supp. 2d at 1200.
there tangible assets left to protect.
Nor are
See City of Rialto, 492 F.
Supp. 2d at 1200 (“As there are usually no assets left and no
directors, the protections of the attorney-client privilege are
less meaningful to the dissolved corporation.”); Lewis, 2004 WL
3203121, at *4 (“The company is bankrupt and has no assets,
liabilities, directors, shareholders, or employees.”).
Next, as a practical matter, there is no one who can speak for
a defunct corporation in order to assert the privilege.
While a
corporate entity is still in the process of dissolution, there may
be a trustee or someone serving a similar function who represents
the corporation.
See Commodities Futures Trading Commission v.
Weintraub, 471 U.S. 343, 352-53 (1985) (holding that bankruptcy
trustee retains control of corporate privilege for pre-bankruptcy
communications); Official Committee of Administrative Claimants,
7
802 F. Supp. 2d at 949 (“If the trustee controls the privilege,
then the privilege must still exist.
Similarly, a dissolved
corporation should be permitted to assert its privilege during the
windup process at least until all matters involving the company
have been resolved and no further proceedings are contemplated.”
(internal quotation marks omitted)).
truly
extinct,
privilege.
it
has
lost
But once a corporation is
practical
ability
to
assert
the
See Fundamental Long Term Care, 2012 WL 4815321, at *9
(“So there is no one left to assert or waive the privilege on [the
corporation’s]
behalf.”);
Gilliland,
2006
WL
2642525,
at
*3
(“[T]here is no current management personnel who can now assert the
attorney-client privilege on behalf of the corporation.”).
Finally,
limiting
the
duration
of
the
attorney-client
privilege to the life of a corporation is consistent with the
principle that the privilege is to be construed narrowly because it
withholds relevant information from the judicial process. See City
of Rialto, 492 F. Supp. 2d at 1200; Gilliland, 2006 WL 2642525, at
*4; see generally Fisher v. United States, 425 U.S. 391, 403 (1976)
(“[S]ince the privilege has the effect of withholding relevant
information from the fact-finder, it applies only where necessary
to achieve its purpose.”); County of Erie, 473 F.3d at 418 (holding
that courts should “construe the privilege narrowly because it
renders relevant information undiscoverable”).
8
Cases that hold that the privilege survives the dissolution of
a corporation generally do so on the basis of state law.
See PCS
Nitrogen, Inc. v. Ross Development Corp., No. 2:09-3171, 2011 WL
3665335, at *4 (D.S.C. Aug. 19, 2011); Wallace v. Huntington
National Bank, Nos. 2:09-CV-104, 2:10-CV-469, 2010 WL 3603494, at
*7 (S.D. Ohio Sept. 10, 2010).
In diversity cases, this is
consistent with Rule 501 of the Federal Rules of Evidence, which
provides that “in civil actions and proceedings, with respect to an
element of a claim or defense as to which State law supplies the
rule of decision, the privilege of a witness . . . shall be
determined in accordance with State law.”
Fed. R. Evid. 501.
Thus, in PCS Nitrogen, South Carolina privilege law applied to
state law claims of fraudulent conveyance, civil conspiracy, and
breach of fiduciary duty.
2011 WL 3665335, at *1.
Likewise, in
Wallace, the court relied on Ohio law to determine whether a
defunct corporation retained the privilege where the plaintiff
asserted state law claims of breach of obligations under a guaranty
and a note.
2010 WL 3603494, at *1.
These cases do not undermine
the principle that where federal law supplies the rule of decision,
as it does here, the question of whether the corporate attorneyclient privilege survives the demise of the corporation is answered
9
by reference to federal common law.1
This is not to say that state law is altogether irrelevant.
It may dictate, for example, whether a corporation is, in fact,
defunct, such that there is no privilege to be asserted.
Indeed,
in this case the parties debate whether the corporations at issue
have ceased to exist.
The SEC has presented evidence that Pacific
Blue’s business license expired and that its status as a domestic
Nevada corporation was revoked on April 30, 2011.
(Printout from
Nevada Secretary of State for Pacific Blue Energy Corp., attached
as Exh. K to Brody 2/24/15 Decl.).
It also represents that the
last public filing made by Pacific Blue was on November 15, 2011,
and was simply a notification of its inability to file timely
quarterly financial statements.
(Pl. Memo. at 5).
Counsel for
CHLLP, Mr. Carrillo, and Mr. Huettel argues that the SEC’s position
ignores communications to the SEC from the President and Chairman
1
One case that deviates from this precept is Official
Committee of Administrative Claimants v. Bricker, No. 1:05 CV 2158,
2011 WL 1770113 (N.D. Ohio May 9, 2011). There, even though the
plaintiffs asserted claims of bankruptcy fraud under federal as
well as state law, the court assessed the corporate attorney-client
I
privilege in light of state corporations law.
Id. at *2.
respectfully disagree with this result because it cannot be
reconciled with Rule 501, which governs “vertical choice of law” -that is, the determination of whether federal or state law applies,
23 Charles Alan Wright & Kenneth W. Graham, Jr., Federal Practice
and Procedure § 5432 (1980) at 846 -- for “all issues pertaining to
the applicability of a privilege in a given set of circumstances.”
Fitzpatrick v. American International Group, Inc., 272 F.R.D. 100,
104-05 (S.D.N.Y. 2010).
10
of Pacific Blue that post-date the company’s apparent demise.
(Letter of William B. Fleming dated March 20, 2015 (“Fleming
Letter”) at 4).
They also contend that by moving for default
against Pacific Blue, the SEC implicitly acknowledged its ongoing
existence.
(Fleming Letter at 4).
arguments is persuasive.
Neither of the defendants’
The fact that former officers attempted
to exercise some role in connection with Pacific Blue does not
demonstrate that they had the authority to do so.
Nor do the SEC’s
efforts to protect its interests constitute any admission as to the
status of the corporation.
In short, the SEC’s evidence has not
been rebutted, and Pacific Blue -- the party with the burden of
demonstrating the applicability of the privilege -- has not shown
that it continues to exist such that it could assert any privilege.
Similarly, the SEC has proffered evidence that Tradeshow’s
status as a Nevada domestic corporation was revoked when its
business license expired on December 31, 2011.
(Printout from
Nevada Secretary of State for Tradeshow Marketing Company Ltd.,
attached as Exh. L to Brody 2/24/15 Decl.). Its last public filing
was on July 17, 2008.
(Pl. Memo. at 5).
No party has presented
any contrary evidence, and Tradeshow is therefore incapable of
asserting the privilege.
Sandstrom was an affiliate of Tradeshow, which apparently
acquired all of Sandstrom’s assets sometime prior to December 2006.
11
(Excerpts
from
Form
10-SB/A,
Amendment
No.
3,
for
Tradeshow
Marketing Co., Ltd., attached as Exh. A to Declaration of Todd D.
Brody dated March 27, 2015 (“Brody 3/27/15 Decl.”)).
Thus, since
Tradeshow
any
is
defunct,
so
too
is
Sandstrom.
In
event,
Sandtrom’s business license expired and its status as a Nevada
Corporation was revoked on March 31, 2011.
(Printout from Nevada
Secretary of State for Sandstrom OnTV Company, attached as Exh. C
to Brody 3/27/15 Decl.).
It is therefore unable to assert a
privilege.
Next, the SEC has submitted a printout from the Government of
Alberta, Canada, showing that the “Legal Entity Status” of Skymark
Media Group Ltd. is “Struck.”
(Printout of Corporate Registration
System, Government of Alberta, attached as Exh. M to Brody 2/24/15
Decl.).
A corporation may be struck from Alberta’s Corporate
Registry for failure to file required annual returns.
Alberta,
Dissolve
or
Revive
a
Legal
Entity,
(Service
available
at
http://www.serviceablberta.gov.ab.ca/707.cfm (last visited April 7,
2015).
In response, defendant Benjamin T. Kirk contends that
CHLLP’s
privilege
log
lists
the
firm’s
client
as
“Skymark
Research,” not Skymark Media Group Ltd., and that since these are
separate entities, there is no evidence that Skymark Research is
defunct.
(Memorandum of Law in Opposition to the Securities and
Exchange Commission’s Motion to Compel the Production of Privileged
12
Communications (“Kirk Memo.”) at 3).
In support of this argument,
Mr. Kirk points out that in the SEC’s pleadings, he is identified
as a principal of Skymark Research, while defendant John Kirk is
listed as sole director of Skymark Media Group Ltd. (Kirk Memo. at
3; Am. Compl., ¶¶ 20-21).
However, there is compelling evidence
that Skymark Research was no more than a division of Skymark Media
Group Ltd. and had no independent corporate existence.
For
example, the mission statement submitted by Skymark Media Group
Ltd.
to
the
Alberta
Securities
Commission
references
Skymark
Research along with two other entities (Emerging Stock Report and
Liberty Analytics) as if they were all branches of Skymark Media
Group Ltd.
(Mission Statement for Skymark Media Group Ltd.
(“Mission Statement”), attached as Exh. D to Brody 3/27/15 Decl.).
And, while Benjamin T. Kirk makes much of the fact that the SEC’s
Amended Complaint associates him with Skymark Research and John
Kirk with Skymark Media Group Ltd., it is Benjamin T. Kirk who
submitted Skymark Media Group Ltd.’s mission statement to the
Canadian
regulator.
(Mission
Statement).
Similarly,
a
nondisclosure agreement for an employee of Skymark Media Group Ltd.
was drafted by the account manager of Skymark Research, forwarded
for review to Benjamin T. Kirk, and has a signature line for the
account
manager
(characterized
there
as
the
Chief
Operating
Officer) to sign on behalf of “Emerging Stock Report, Skymark
13
Research, Liberty Analytics Co., and The Entire Skymark Media
Group.”
(E-mail from Joshua Anderson dated March 29, 2010,
attached as Exh. E to Brody 3/27/15 Decl.).
Skymark Research,
then, is as extinct as Skymark Media Group Ltd., and neither
retains the attorney-client privilege.
Benjamin T. Kirk also points out that CHLLP’s privilege log
lists documents related to two entities, Punch Line Games and GMU
Wireless, which are never mentioned in the SEC’s pleadings.
Memo. at 1-2).
related
to
(Kirk
Indeed, the SEC has not suggested how documents
these
businesses
might
be
relevant,
nor
has
it
demonstrated that they are defunct or otherwise lack the ability to
assert the privilege.
Accordingly, the SEC has withdrawn for the
present its request for these documents.
(Plaintiff’s Memorandum
of Law in Further Support of Its Motion to Compel at 4 n.2).
Finally, one of the documents listed on CHLLP’s privilege log
is a communication between counsel and Gibraltar Global Securities,
Inc. (“Gibraltar”).
I previously determined in a related action
that Gibraltar has not been dissolved.
Securities and Exchange
Commission v. Gibraltar Global Securities, Inc., No. 13 Civ. 2575,
2015 WL 1514746, at *2-3 (S.D.N.Y. April 1, 2015). It is therefore
capable of asserting a privilege, which CHLLP properly did on its
behalf.
There remains the possibility, however, that the document
at issue is subject to the crime/fraud exception.
14
CHLLP shall
therefore submit the Gibraltar document (identified as CH645-46)
for my in camera review.
To the extent that I have determined that entities are
incapable of asserting the privilege, CHLLP shall produce documents
previously withheld that relate to those entities.2
Likewise, Mr.
Carrillo and Mr. Huettel shall testify concerning communications
with those entities.
B. Implied Waiver
The SEC contends that defendants Luniel de Beer and Benjamin
T. Kirk have waived the attorney-client privilege with respect to
any communications with their attorneys by asserting an advice-ofcounsel defense.
(Pl. Memo. at 10-12).
The attorney-client
privilege may be waived “when the defendant asserts a claim that in
fairness requires examination of protected communications.” United
States v. Bilzerian, 926 F.2d 1285, 1292 (2d Cir. 1991).
“The key
to a finding of implied waiver . . . is some showing by the party
arguing
for
a
waiver
that
the
opposing
party
relies
on
the
privileged communication as a claim or defense or as an element of
a claim or defense.”
County of Erie, 546 F.3d at 228; accord
Leviton Manufacturing Co. v. Greenberg Traurig LLP, No. 09 Civ.
2
To the extent that CHLLP intended to assert work product
protection with respect to any document, it has provided no support
whatsoever. Accordingly, CHLLP may not rely on the work product
doctrine to continue to withhold documents.
15
8083, 2010 WL 4983183, at *4 (S.D.N.Y. Dec. 6, 2010); Aristocrat
Leisure Ltd. v. Deutsche Bank Trust Co. Americas, 727 F. Supp. 2d
256, 271 (S.D.N.Y. 2010) (collecting cases).
Assertion of an
advice of counsel defense is the “quintessential example” of an
implied
waiver.
County
of
Erie,
546
F.3d
at
228
(internal
quotation marks omitted); accord Shaub and Williams, L.L.P. v.
Augme Technologies, Inc., No. 13 Civ. 1101, 2014 WL 1033862, at *3
(S.D.N.Y.
March
17,
2014).
Nevertheless,
“whether
fairness
requires disclosure . . . is best decided on a case by case basis,
and
depends
primarily
on
privilege is asserted.”
299,
302
(2d
Cir.
the
specific
context
in
which
the
John Doe Co. v. United States, 350 F.3d
2003)
(alteration
in
original)
(internal
quotation marks omitted); see Freedman v. Weatherford International
Ltd., No. 12 Civ. 2121, 2014 WL 3767034, at *3-4 (S.D.N.Y. July 25,
2014).
In this case, Mr. De Beer has plainly argued that he should be
relieved of liability because he relied on the advice of counsel.
His Answer asserts as an affirmative defense that he “acted at all
times in good faith and without reckless disregard for, knowledge
of, or intent to engage in any supposed wrongdoing.”
(Separate
Answer of Defendant Luniel De Beer to the Amended Complaint at 27).
This
alone
would
not
communications at issue.
be
enough
to
place
attorney-client
However, in moving to dismiss the
16
Complaint, he explicitly contended that he was “entitled to rely on
counsel when it came to securities law issues.” (Memorandum of Law
In Support of Defendant Luniel De Beer’s Motion to Dismiss (“de
Beer Dismissal Memo.”) at 1-2).
capacity
as
corporate
Further, he argued that “[i]n its
counsel,
Carrillo
Huettel
crafted
the
transactions; drafted the public filings and corporate documents
and opined that they complied with federal securities laws.
As a
non-lawyer, De Beer was entitled to rely on corporate counsel’s
opinions on matters of securities law, particularly complex ones.”
(de Beer Dismissal Memo. at 5).
And, in his reply brief on the
motion to dismiss, Mr. de Beer maintained that “the Complaint
established the elements of good faith based upon advice of
counsel” and that “[s]igning documents drafted or blessed by
counsel
cannot
standards.”
amount
to
an
extreme
departure
from
accepted
(Reply Memorandum in Support of Motion to Dismiss of
Defendant Luniel de Beer at 3).
Mr. de Beer cannot make these
assertions and at the same time cast the cloak of privilege over
the communications on which he purports to have relied as well as
others addressing the same subject matter.
He shall therefore be
required to produce documents and provide testimony with respect to
the advice he received from counsel.
The analysis with respect to Benjamin T. Kirk is somewhat
different.
Like Mr. de Beer, Mr. Kirk asserted an affirmative
17
defense in which he contends that “Plaintiff’s claims are barred as
the Defendant reasonably relied upon the advice of legal counsel
and other professionals with respect to the transactions that are
the subject of the Amended Complaint.”
(Answer at 15).
However,
unlike Mr. de Beer, Mr. Kirk has taken no further steps to inject
advice of counsel into the litigation. He is therefore entitled to
choose whether he will pursue an advice-of-counsel defense, a
choice he must now make.
Unless Mr. Kirk advises the SEC within
one week of the date of this Order that he is abandoning any such
defense, he will be deemed to have waived the attorney-client
privilege
with
respect
to
advice
concerning
the
relevant
transactions.
Conclusion
For the reasons set forth above, the SEC’s motion to compel
(Docket no. 192) is granted in part and denied in part.
CHLLP,
Luis J. Carrillo, and Wade D. Huettel shall produce within one week
of the date of this Order all documents previously withheld on the
basis of privilege relating to Pacific Blue, Tradeshow, Sandstrom,
and Skymark Media Group Ltd. (including Skymark Research).
They
shall also testify with respect to communications with these
entities.
They need not, however, produce privileged documents or
testify as to privileged communications with respect to Punch Line
Games, GMU Wireless, or Gibraltar, though the Gibraltar document
18
shall be submitted for my in camera review within one week.
Luniel
de Beer has waived the attorney-client privilege by asserting an
advice-of-counsel defense and may not withhold related documents or
object to testifying concerning pertinent legal advice.
Benjamin
T. Kirk will likewise waive the attorney-client privilege unless,
within one week of the date of this Order, he advises the SEC that
he is withdrawing any advice-of-counsel defense.
SO ORDERED.
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C. FRANCIS IV
UNITED STATES MAGISTRATE JUDGE
Dated: New York, New York
April 8, 2015
Copies transmitted this date:
Todd D. Brody, Esq.
Andrew M. Calamari, Esq.
Joshua M. Newville, Esq.
Katherine S. Bromberg, Esq.
Michael D. Paley, Esq.
Securities & Exchange Commission
Three World Financial Center
New York, NY 10281
Thomas J. Curran, Esq.
Doris D. Short, Esq.
Jonathan s. Konovitch, Esq.
Peckar & Abramson, P.C.
41 Madison Ave.
20th Floor
New York, NY 10010
19
Juan M. Marcelino, Sr., Esq.
David E. Fialkow, Esq.
Nelson Mullins Riley & Scarborough LLP
One Post Office Sq., 30th Floor
Boston, MA 02109
William B. Fleming, Esq.
Gage, Spencer & Fleming, LLP
410 Park Ave.
New York, NY 10022
Nicholas M. DeFeis, Esq.
Philip C. Patterson, Esq.
Allison S. Menkes, Esq.
De Feis O'Connell & Rose, P.C.
500 Fifth Ave., 26th Floor
New York, NY 10110
Steven D. Feldman, Esq.
Murphy & McGonigle, P.C.
1185 Avenue of the Americas, 21st Floor
New York, NY 10036
James D. Sallah, Esq.
Mark J. Astarita, Esq.
Sallah Astarita & Cox, LLC
60 Pompton Ave.
Verona, NJ 07044
David R. Chase, Esq.
David R. Chase P.A.
1700 East Las Olas Blvd., Suite 305
Fort Lauderdale, FL 33301
David U. Gourevitch, Esq.
Law Office of David Gourevitch,
950 Third Ave., 32nd Floor
New York, NY 10022
P.C.
20
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