Federal Trade Commission v. Manatt, Phelps & Phillips, LLP
Filing
24
ORDER granting 1 MISCELLANEOUS CASE INITIATING DOCUMENT - MOTION to Compel Manatt, Phelps & Phillips, LLP to produce. It is hereby ORDERED that, by September 17, 2021, Respondent shall produce the seven documents in question. (Signed by Judge Lorna G. Schofield on 9/15/2021) (jca)
Case 1:21-mc-00466-LGS Document 24 Filed 09/15/21 Page 1 of 5
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------------------------------X
:
FEDERAL TRADE COMMISSION,
:
Petitioner,
:
:
-against:
:
MANATT, PHELPS & PHILLIPS, LLP,
:
Respondent.
:
------------------------------------------------------------- X
LORNA G. SCHOFIELD, District Judge:
21 Misc. 466 (LGS)
ORDER
WHEREAS, a conference was held on August 26, 2021, to discuss Petitioner’s motion to
compel.
WHEREAS, on August 26, 2021, the Court ordered Respondent to produce the seven
documents identified in the parties’ joint letter (Dkt. No. 20), unless BakerHostetler LLP or Boies
Schiller Flexner LLP provide a written basis for the assertion of the attorney-client or other
privilege, which Respondent shall file on ECF, in which case Respondent would email to the
Court for in-camera review any of the seven documents claimed to be privileged. (Dkt. No. 21.)
WHEREAS, on September 2, 2021, Respondent filed a letter, including Boies Schiller
Flexner LLP’s and BakerHostetler LLP’s written basis for the assertion of the attorney-client
privilege and work product doctrine over the seven documents (Dkt. No. 22) and submitted the
documents for in-camera review.
WHEREAS, on September 3, 2021, Petitioner filed a letter in response. (Dkt. No. 23.)
WHEREAS, on September 7, 2021, Boies Schiller Flexner LLP emailed a letter to the
Court in response to Petitioner’s September 3, 2021, letter, which is attached hereto.
WHEREAS, the Court has since reviewed the seven documents and determined that the
documents are not covered by the attorney-client privilege, common-interest doctrine or workproduct doctrine. The work-product doctrine is inapplicable because the documents were not
Case 1:21-mc-00466-LGS Document 24 Filed 09/15/21 Page 2 of 5
“prepared in anticipation of litigation,” as required under Federal Rule of Civil Procedure
26(b)(3)(A). The documents are not protected by the attorney-client privilege because the emails
are not exclusively between a client and his or her attorney. Bryce Johnson, a third-party, is
included on all seven emails. In addition, the emails do not appear to be sent for the purpose of
obtaining or providing legal advice. See United States v. Mejia, 655 F.3d 126, 132 (2d Cir. 2011)
(“The attorney-client privilege protects communications (1) between a client and his or her
attorney (2) that are intended to be, and in fact were, kept confidential (3) for the purpose of
obtaining or providing legal advice.”). Nor has Respondent established that the common interest
doctrine applies. VR Optics, LLC v. Peloton Interactive, Inc., No. 16 Civ. 6392, 2019 WL
2121690, at *3 (S.D.N.Y. May 15, 2019) (“To be eligible for this exception, the disclosure must
be made in circumstances where a joint defense effort or strategy has been decided upon and
undertaken by the parties and their respective counsel . . . in the course of an ongoing common
enterprise . . . [and] multiple clients share a common interest about a legal matter.”) Even if the
common interest doctrine applied, the doctrine would not cover the emails in question because
the emails contain no legal advice. Restatement (Third) of the Law Governing Lawyers § 76,
cmt. d (2000) (“The exchanged communication must itself be privileged. The doctrine does not
create new kinds of privileged communications aside from client-lawyer and similar types of
communications[.]”). It is hereby
ORDERED that, by September 17, 2021, Respondent shall produce the seven
documents in question.
Dated: September 15, 2021
New York, New York
2
Case 1:21-mc-00466-LGS Document 24 Filed 09/15/21 Page 3 of 5
MATTHEW L. SCHWARTZ
Tel.: (212) 303-3646
E-mail: mlschwartz@bsfllp.com
September 7, 2021
VIA EMAIL
Honorable Lorna G. Schofield
Thurgood Marshall
United States Courthouse
40 Foley Square
New York, NY 10007
Schofield_nysdchambers@nysd.uscourts.gov
Re:
Federal Trade Commission v. Manatt, Phelps & Phillips, LLP,
Case No. 21 Misc. 466 (LGS)
Dear Judge Schofield:
We represent Robert Zangrillo, Dragon Global Holdings LLC, Dragon Global
Management LLC, Dragon Global LLC, and On Point Capital Partners LLC (collectively, the
“Dragon Defendants”). We write to address several accusations that the FTC lodged against the
Dragon Defendants in its letter dated September 3, 2021, in addition to several factual and legal
inaccuracies. ECF No. 23.
First, the FTC accuses the Dragon Defendants of misrepresenting that the FTC issued its
subpoena in an attempt to generate evidence of contempt. This is not true. When it served Manatt,
Phelps & Phillips, LLP (“Manatt”) with the subpoena, the FTC made very clear that its intent was
to find evidence that Mr. Zangrillo knew about the 2014 order in Acquinity, a case to which he was
not a party, even though the Court had not issued an order to show cause as to Mr. Zangrillo (and,
at the time, the FTC had not even requested such an order). See ECF No. 11-2. The fact that the
FTC has attempted to come up with after-the-fact arguments for why the documents it seeks could
also be relevant to the On Point case now that the Court has rejected its request for an order to
show cause as to Mr. Zangrillo does not change this. And as the Court can see from the face of
the documents, the documents are not relevant to the On Point case.
Second, the FTC accuses the Dragon Defendants of telling “two stories” to “two different
courts” because they submitted a declaration from Bryce Johnson to this Court stating that his
September 2014 emails with Manatt related to the potential acquisition of DMV.com, but stated
in a summary judgment motion in On Point that Burton Katz was presented with the opportunity
to purchase DMV.com “at some point” after October 2014. This one-month discrepancy (which,
as we explain below, is not actually a discrepancy) hardly amounts to “two stories.” The facts
presented in the Dragon Defendants’ summary judgment motion were based on Katz’s deposition
testimony – he testified that he began discussing the DMV.com transaction with Mr. Zangrillo in
2014, but he could not remember the precise timeline (as is to be expected since his deposition
occurred approximately six years after the transaction closed). ECF No. 22-1 at 27:17–24. Mr.
Johnson was able to slightly clarify the timeline in his declaration. Further, the fact that the
DMV.com transaction was not finalized until June 2015 has no bearing on whether the emails at
issue related to that transaction. The FTC itself submitted documents to the Court showing that
Case 1:21-mc-00466-LGS Document 24 Filed 09/15/21 Page 4 of 5
DG DMV LLC, the entity used to acquire DMV.com and that was created for that purpose, was
formed in October 2014. ECF No. 2-3 at 83–84, 106; see also ECF No. 22-1 at 44:8–45:15.1
Third, the FTC’s legal position that the common interest doctrine does not apply because
the Dragon Defendants “have failed to establish they had agreed on a legal strategy, either orally
or in writing” is incorrect. The FTC’s suggestion that the Dragon Defendants and Katz were
required to enter into a formal common interest agreement is not supported, as the Dragon
Defendants need only show “actual cooperation toward a common legal goal.” In re Rivastigmine
Patent Litigation, No. 05 MD 1661, 2005 WL 2319005, at *4 (S.D.N.Y. Sep. 22, 2005). As Mr.
Johnson’s declaration states, and as Katz and Mr. Zangrillo testified during their depositions, Katz
and Mr. Zangrillo discussed entering into a transaction together and their attorneys were working
together to share information necessary to further a common legal goal. The FTC does not explain
why this is insufficient, and it does not cite any authority for its position.
Fourth, the FTC’s contention that the common interest here is solely commercial is also
incorrect. It cites only one case in arguing that the Dragon Defendants failed to set out a common
legal interest, and that case is easily distinguishable. In that case, the only “legal” aspect of the
transaction at issue “was a desire that the transaction be legally appropriate.” Bank of Am., N.A. v.
Terra Nova Ins. Co., 211 F. Supp. 2d 493, 496 (S.D.N.Y. 2002). Here, the Dragon Defendants
have set out the legal components of the transaction with specificity, which included ensuring that
Katz could oversee DG DMV’s operations. See ECF No. 22-1 at 3. Further, in Terra Nova, the
relationship between the parties sharing confidential information was debtor and creditor – they
were not co-investors on the same side of the transaction, as in this case, but were rather
counterparties. Id. at 495. As the Second Circuit has held, the “financial interest of a party, no
matter how large, does not preclude a court from finding a legal interest shared with another party
where the legal aspects materially affect the financial interests.” Schaeffler v. United States, 806
F.3d 34, 42 (2d Cir. 2015). And the FTC does not even attempt to address the cases the Dragon
Defendants cited where courts have held that parties to transactions do not waive privilege by
sharing information with each other if they have a legal common interest in addition to commercial
interests.
Fifth, the FTC challenges Mr. Johnson’s sworn representation that he is an attorney and
that his duties at Dragon Global included providing legal advice. The FTC cites a complaint that
1
The FTC appears to be correct that the emails at issue were sent approximately three weeks
after Holly Melton and Burton Katz signed the settlement agreement with the FTC, but the
stipulated order in Acquinity was not so-ordered by the District Court judge or entered onto the
docket until October 2014. ECF No. 2-1. The FTC’s contempt case relates to that October order,
not a settlement agreement, as individuals can be held in contempt of only court orders, not
agreements. Further, under clear Eleventh Circuit precedent, even if Mr. Johnson or our clients
actually had notice of a prior (even if substantively identical) version of an as-yet-entered order –
which they did not – that could not give rise to a finding of contempt. Sovereign Military
Hospitaller v. Fla. Priory of Knights of Hospitallers, No. 09-81008-CIV, 2019 WL 4731984, at
*5–6 (S.D. Fla. July 10, 2019), report and recommendation adopted, 2019 WL 4730235 (S.D. Fla.
Aug. 7, 2019) (finding that active participation in settlement negotiations was insufficient to prove
contempt of injunction by clear and convincing evidence).
Case 1:21-mc-00466-LGS Document 24 Filed 09/15/21 Page 5 of 5
Mr. Johnson filed against Mr. Zangrillo that had nothing to do with the events at issue, apparently
to argue that because that complaint did not mention that Mr. Johnson acted as a lawyer, he never
did. But the reality – as Mr. Johnson stated under oath – is that he was a lawyer for Dragon Global.
This is not a newfound position to justify a claim of privilege; the Dragon Defendants have put the
FTC on notice from literally the inception of this case that Mr. Johnson was a lawyer and that his
communications were privileged. For example, in Dragon Global Management LLC’s responses
to the FTC’s interrogatories in the On Point case, it listed Mr. Johnson as an attorney. Ex. F at 10.
And in a list of attorneys provided to the FTC for the purpose of a privilege review of documents
seized from On Point Global, the Dragon Defendants listed Mr. Johnson as a former “Dragon
Global GC.” Ex. G at 3.2 The FTC has known that Mr. Johnson acted as an attorney for the Dragon
Defendants for nearly two years, so its attempt to now dispute that fact, without any actual evidence,
is disingenuous. That Mr. Johnson held “dual roles” does not change his testimony that, in this
instance, he was acting as an attorney and the purpose of the communication was to obtain
information to provide legal advice.
Finally, the FTC ends its letter by accusing the Dragon Defendants of attempting to
“impede” enforcement of the FTC’s subpoena to Manatt. But the FTC leaves out important context
in contending that the Dragon Defendants threatened to hold the FTC in contempt of a court order
“without basis.” When the FTC first served discovery requests on the Dragon Defendants, it
sought all communications relating to the Acquinity order. ECF No. 2-5 at 2. The Dragon
Defendants objected on relevance grounds because whether the Dragon Defendants were in
contempt of the Acquinity order was not relevant to any claim or defense in the On Point case,
meaning the requests fell outside the scope of Rule 26. Id. The Magistrate Judge sustained that
relevance objection, holding that documents relating to the Acquinity order are only relevant if
they demonstrate Mr. Zangrillo’s control over On Point Global LLC. ECF No. 2-5 at 36–39. In
light of this clear ruling, the Dragon Defendants objected to the FTC’s attempt to use third-party
discovery to try to obtain evidence of contempt that the Magistrate Judge held it could not obtain
from parties under Rule 26 as an abuse of process and a violation of the Magistrate Judge’s order.
ECF No. 2-5 at 1–3. Lodging objections to a third-party subpoena, and informing the third party
in question of those objections, is not “impeding” the subpoena or “abus[ing] the discovery process”
– it is protecting and enforcing a party’s rights.
Thank you for your consideration. As before, if the Dragon Defendants can provide any
additional information relevant to this dispute, they would be happy to do so.
Respectfully,
/s/ Matthew L. Schwartz
Matthew L. Schwartz
2
In the event that this letter is filed on the docket, the Dragon Defendants request that Exhibit
G, a list of all of their attorneys and their email addresses provided to the FTC on a confidential
basis, be filed under seal.
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