Blackrock Allocation Target Shares: Series S Portfolio et al v. Wells Fargo Bank, National Association et al

Filing 373

OPINION & ORDER: Accordingly, Wells Fargo is ORDERED to complete production of the IMM Database entries associated with the Trusts and loans in those Trusts at issue in this consolidated action, consistent with the Court's ruling, by March 27, 2017. Production shall be made on a rolling basis. SO ORDERED. (Signed by Magistrate Judge Sarah Netburn on 3/9/2017) (anc)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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3/9/2017

BLACKROCK ALLOCATION TARGET
SHARES: SERIES S PORTFOLIO, et al.,
Plaintiffs,

14-CV-09371 (KPF)(SN)
OPINION & ORDER

-againstWELLS FARGO BANK, NATIONAL
ASSOCIATION,
Defendant.
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ROYAL PARK INVESTMENTS SA/NV,
Plaintiff,

14-CV-09764 (KPF)(SN)

-againstWELLS FARGO BANK, N.A.,
Defendant.
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NATIONAL CREDIT UNION ADMINISTRATION
BOARD,
Plaintiff,
-againstWELLS FARGO BANK, N.A.,
Defendant.
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14-CV-10067 (KPF)(SN)

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PHOENIX LIGHT SF LTD. et al.,
Plaintiffs,

14-CV-10102 (KPF)(SN)

-againstWELLS FARGO BANK, N.A.,
Defendant.
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COMMERZBANK A.G.,
Plaintiff,

15-CV-10033 (KPF)(SN)

-againstWELLS FARGO BANK, N.A.,
Defendant.
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SARAH NETBURN, United States Magistrate Judge:
Plaintiffs seek the non-privileged information associated with the loans and RMBS trusts
at issue in Wells Fargo’s Issue Management Module (“IMM”) Database. On November 22,
2016, the Court denied plaintiffs’ motion to compel production of the IMM Database. See ECF
No. 258 at 3. The Court’s decision was based on the declaration of Mary Sohlberg, Vice
President of the Corporate Trust Services’ Structured Products Group, stating that the
information stored in the Database is “substantially derived from privileged attorney-client
communications with external and internal counsel.” Id. In their February 9, 2017 letter,
however, plaintiffs contend that this representation is contradicted by Sohlberg’s subsequent
deposition testimony, which suggests that the Database actually contains factual information

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regarding repurchase claims and servicer defaults recorded and monitored by the Default and
Restructuring Group (“DRG”). See ECF No. 345. Essentially, plaintiffs argue, the Database is a
factual repository “created and maintained by business personnel to track business issues,” id. at
2, and that the bulk of the Database’s contents was generated and used by non-lawyers in the
ordinary administration of Wells Fargo’s duties as trustee. Wells Fargo reaffirms that the
information in the Database is privileged and not subject to production. To resolve this issue, the
Court ordered the parties on February 13, 2017, to submit exemplars reflecting the information in
the IMM Database.
The Court has reviewed the following materials: (1) excerpts of the IMM Database
reports for issues relating to five trusts selected by plaintiffs after a meet and confer with Wells
Fargo on February 16, 2017 (Exhibit 1 of Wells Fargo’s submission); (2) excerpts of the
February 1, 2017 IMM Database report selected by Wells Fargo (Exhibit 2 of Wells Fargo’s
submission); and (3) secondary documents surrounding the creation and purpose of the Database,
such as the CTS Watchlist Committee Charter, Wells Fargo’s May 2013 Issue Management and
Consulting Process Training presentation, and the DRG’s Event of Default reporting guidelines
(Exhibit 3 of Wells Fargo’s submission and Exhibits 1 and 2 of plaintiffs’ submission,
respectively).
Applying the attorney-client privilege depends on “whether the communication was
generated for the purpose of obtaining or providing legal advice as opposed to business advice.”
In re Cnty. of Erie, 473 F.3d 413, 419 (2d Cir. 2007). Obtaining legal advice must be the
“predominant purpose” of a privileged communication. Favors v. Cuomo, 285 F.R.D. 187, 198
(E.D.N.Y. 2012) (internal citation and quotation marks omitted). “Communications that
principally involve the performance of nonlegal functions by an attorney are not protected.”

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Complex Sys., Inc. v. ABN AMRO Bank N.V., 279 F.R.D. 140, 150 (S.D.N.Y. 2011)
(“Moreover, even if a business decision can be viewed as both business and legal evaluations,
the business aspects of the decision are not protected simply because legal considerations are
also involved.” (internal citation and quotation marks omitted)). On the other hand, the fact that
legal advice is contained in a business presentation “does not render it ‘business’ rather than
‘legal’ in nature. Business transactions inevitably involve legal matters on which privileged
advice is sought.” JA Apparel Corp. v. Abboud, et al., No. 07 Civ. 7787 (THK), 2008 WL
111006, at *1 (S.D.N.Y. Jan. 10, 2008).
At the outset, the Court addresses the plaintiffs’ contention that the information in the
IMM Database cannot be privileged because the contact person for an issue entry was almost
always a member of the DRG (i.e., a business person), not internal or external counsel. But just
because non-lawyers are responsible for maintaining and updating the information in the
Database does not automatically qualify the contents of the issue entries as business advice.
Plaintiffs’ assertion overlooks the reality that a member of the DRG may consult with attorneys
in recording and generating responses for the IMM Database.
Based on the Court’s review, the IMM Database consists of both privileged legal advice
and attorney impressions, and non-privileged factual descriptions of the issues. With regards to
the former category, the “Updates,” “Reserve Amount,” and “Potential Exposure” sections of
each entry reflect counsel’s strategies, impressions, and opinions, and are therefore
presumptively privileged. For instance, the “Updates” for a lawsuit by a municipal plaintiff
references external counsel’s ongoing research into case law. Other “Updates” include
notifications from counsel on tolling agreements, deal document amendments, and evaluation of
settlement agreements. These sections do not relate to ordinary business matters and constitute

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predominantly legal advice. Therefore, they are appropriately withheld on the basis of privilege,
and Wells Fargo is not required to conduct an independent privilege review.
The “Description of Issue,” however, appears in large measure to be a recording of facts
as they existed at the time the entry was created. In other words, much of this section contains
raw factual data, such as the role of Wells Fargo for a particular trust, the date on which a lawsuit
was commenced, the specific allegations, the identity of external counsel, etc. But the
“Description of Issue” is not 100 percent factual. The section also includes legal impressions and
attorney advice that will need to be redacted. For example, the Description of Issue for the Serve
All Help All, Inc. Litigation contains counsel’s characterization of the allegations (“Beyond the .
. .”). Regarding the Natixis 07-HE2 Litigation, the Description of Issue includes discussion of the
similarity in language between the claims against Wells Fargo and the claims asserted in a thirdparty complaint. To the extent portions of the Database are produced in accordance with the
Court’s instructions below, Wells Fargo is directed to review the Description of Issue sections
for each of the relevant entries, to redact all attorney impressions and opinions, and to produce
all underlying factual information.
Plaintiffs have represented that they are seeking all non-privileged information in the
IMM Database associated with the Trusts and loans in the Trusts at issue in this consolidated
action. Wells Fargo represents that the volume of issue entries for the Trusts would total
approximately 980 issue entries. See ECF No. 372. Wells Fargo also represents that a custom
report from the Database may be programmed to return a list of both active and inactive issues
for the trusts at issue. See id.
Accordingly, Wells Fargo is ORDERED to complete production of the IMM Database
entries associated with the Trusts and loans in those Trusts at issue in this consolidated action,

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consistent with this Court’s ruling, by March 27, 2017. Production shall be made on a rolling
basis.
SO ORDERED.

DATED:

New York, New York
March 9, 2017

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