The 2002 Lawrence R. Buchalter Alaska Trust et al v. Philadelphia Financial Life Assurance Company

Filing 84

MEMORANDUM AND ORDER re: 80 MOTION to Compel Plaintiffs to Produce Documents . filed by Philadelphia Financial Life Assurance Company. Defendant's motion to compel is therefore DENIED. The Clerk shall terminate Dkt. 80. (Signed by Magistrate Judge Paul E. Davison on 3/11/2016) (rj)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
The 2002 Lawrence R. Buchalter Alaska Trust, ci al.,
Plaintiffs,
-

12 Civ. 6808 (KMK)(PED)

against

Philadelphia Financial Life Assurance Company,

MEMORANDUM AND
ORDER

Defendant.
PAUL E. DAVISON, U.S.M.J.:

Before the Court is defendant’s motion to compel production of documents withheld by
third-party William Lipkind. Esq.. an attorney for plaintiff on grounds of attorney-client
privilege. [Dkt. 80.] As directed, the parties have filed memoranda briefing the issues) [Dkt. 81,
82. 83.] The motion is before me pursuant to an Order of Reference dated May 5, 2015. [Dkt.
61.] For the reasons set forth below, defendant’s motion is DENIED.
Background

In 2002, plaintiff purchased a private placement life insurance policy from defendant. in
2005. in accordance with the terms of that policy, plaintiff selected a hedge fund called SSR from

defendant’s menu of investment options and directed that premiums be allocated to SSR. In
2008, plaintiff sustained substantial losses associated with the SSR investment within the policy.
Plaintiff brought this action in 2012. Plaintiffs surviving claims center on allegations that
defendant failed to adequately vet SSR before including SSR on its investment platform and

Defendant originally raised these issues in a short letter dated January 19. 2016. in
accordance with this Court’s customary Order setting forth streamlined procedures for the
resolution of discovery issues, [Dkt. 62.] On February 1. 2016. the Court granted defendant
leave to file a formal motion to compel after determining that summary disoosition was
inappropriate.

allowing plaintiff to allocate premiums to SSR.
Defendant contends that plaintiffs claims are time-barred under Alaska law. Plaintiff
asserts that his claims are timely under Alaska’s discovery rule. Thus, a key issue is when
plaintiff had enough information to alert him that he had a potential cause of action or should
begin an inquiry to protect his rights.

Gefre v. Davis Wright Tremaine, LLP. 306 P.3d 1264,

1274 (Alaska 2013). Defendant maintains that plaintiff has manipulated his pleadings and relies
on an artificial distinction between 2008 misgivings about SSR as opposed to later-arising
suspicions about PFLAC’s role in his losses to avoid dismissal of his claims on statute of
limitations grounds.
Against this backdrop, defendant subpoenaed documents from William Lipkind, Esq.,
plaintiffs estate planning attorney. Responding to the subpoena, attorney Lipkind withheld a
number of documents on privilege grounds, itemizing the documents withheld on a privilege log.
Defendant’s motion focuses on three communications enumerated on the privilege log, each of
which occurred during the key November 2008 timeframe associated with the SSR losses and is
identified on the log with the subject: “To litigate or not to litigate, that is the question.” The
privilege log indicates that each of the three communications is an e-mail chain between Mr.
Buchalter, Attorney Lipkind, and Thomas Gentile, who defendant identifies as Mr. Lipkind’s law
partner and a ‘litigation attorney.”
Focusing on the timing, the participants, and the provocative Shakespearean subject
description of these c-mails, defendant surmises that these communications “appear to relate a
litigation inquiry. investigation, suspicion of wrongdoing and/or discussion of a perceived injury
related to PFLAC and/or SSR in 2008.” [Dkt. 81, p. 10.] Thus, defendant asserts that these e

mails are ‘relevant and possibly dispositive on the statute of limitations issue.” [Dkt. 81, p. 1
Analysis
The attorney-client privilege is one of the “oldest recognized privileges for confidential
communications.” Swidler & Berlin v. United States, 524 U.S. 399. 403 (1998). Its purpose is to
“encourage full and frank communication between attorneys and their clients and thereby
promote broader public interests in the observance of law and the administration of justice.” j.
at 403 (internal quotation marks omitted). Rules which result in the waiver of this privilege and
thus possess the potential to weaken attorney-client trust must therefore be “formulated with
caution.” In Re County of Erie, 546 F.3d 222. 228 (2d Cir. 2008).
Defendant does not dispute the proposition that the pertinent 2008 e-mail
communications between Mr. Buchalter and his attorneys are, in the first instance, covered by the
attorney-client privilege. Defendant instead argues that plaintiff has forfeited the privilege and
placed these 2008 communications with counsel “at issue” by asserting
statute of limitations defense

—

in response to the

that there was no investigation of or suspicion of wrongdoing by

PFLAC until 2012. Defendant asserts that the touchstone for “at issue” waiver is unfairness, and
that it is unfair for plaintiff to allege that he did not discover his claim against PFLAC until 2012
while withholding 2008 communications with his attorneys that appear relevant to, and might
indeed undermine, that contention.
Defendant’s waiver argument fails because the Second Circuit in
it perceived to be.

.

.

has “reined in what

overbroad invocation of the fairness doctrine” in this context. Leviton Mfg.

Co. v. Greenberg Traurig, 2010 U.S. Dist. LEXIS 128849 at *8 (S.D.N.Y. Dec. 6. 2010). In Erie.
the Court of Appeals noted that courts have found waiver by implication when a client testifies
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concerning portions of the attorney—client communication....when a client places the

attorney-client relationship directly at issue.

.

.

and when a client asserts reliance on an

attorneys advice as an element of a claim or defense

.J”

56 F.3d at 228 (quotation omitted).

The “key to a finding of implied waiver in the third instance 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.”

.

Recognizing “uncertainty” and the “need for

clarification” of the rules regarding “at issue” waiver, the Court in je explicitly rejected the socalled “Flearn tesL” under which “an assertion of privilege by one who pleads a claim or
affirmative defense put[s] the protected information at issue by making it relevant to the case.”’
546 F.3d at 224. 229. quoting Beam v. Rhay. 68 F.R.D. 574. 581 (ED. Wash.

1975).2

Lnder

e. a party “must re/v on privileged advice from his counsel to make his claim or defense[.j” so
factual relevance is not sufficient to trigger “at issue” waiver. 546 F.3d at 229.
In the instant case. defendant argues that by invoking Alaska’s discovery rule to
overcome defendanfs statute of limitations defense, plaintiff has put his “state of mind” at issue.
triggering waiver. But the discovery rule centers on facts the plaintiff knew or should have
known, not on his state of mind concerning some question of law which necessarily implicates
contemporaneous attorney-client communications. Although defendant is correct that some postErie decisions have stressed that “a party need not explicitly rely on advice of counsel to

Because the Second Circuit has rejected the Hearn standard. the out-of-circuit decision
in Landmark Screens. LLC v. Morgan. Levis & Bockius liP. 2009 U.S. Dist. LEXIS 102579
(\.D. Ca. Oct. 21. 2009. lends no support to detndant’s argument. Although the court in that
case concluded that the plaintiff had waived protection for privileged communications
demonstrating when and how it learned of the alleged fraud by invoking a discovery rule to toll a
limitations period, that court explicitly applied I learn to reach that conclusion.
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implicate

the privileged communications[.]” leviton Mf. Co.. 2010 LS. Dist. LEXIS 128849 at

*7 my review of the post-Erie caselaw confirms that such implied reliance is confined to
situations involving a party s state of mind concerning a question of law. such as the party’s
belief as to the lawfulness of its conduct. ee Scott. Chipotle Mexican Grill. 67 F.Supp.3d 607
(S.D.N.Y. 2014)(defendant’s decision to classify employees as exempt under labor regulations
implicated attorney-client communications concerning proper classification): Arista Records v.
Lime Group, 2011 U.S. Dist. LEXIS 42881 (S.D.N.Y. April 20, 2011)(defendants’ “purported
good faith belief in the lawfulness of their conduct” implicated communications with counsel).
Here, plaintiff’s claim that he was not on notice of actionable conduct by defendant until
2012 does not, on its thee, have anything to do with attorney-client communications or legal
advice. Defendant seeks the To litigate or not to litigate” c-mails because that provocative
subject line suggests that plaintiff may have discussed potential legal claims with counsel in
2008, communications which might shed light on what plaintiff knew or should have known
about defendant’s role in plaintiff’s SSR losses at that time, Those c-mails may well be
relevant, but in the Court’s view this is no different from any other situation in which a party
seeks an adversary’s privileged communications in hopes of discovering damaging admissions
therein. Under Erie, “[sjimply because.. communications might be useful in undermining
.

[plaintiffs claimi does not mean that the attorney-client privilege has been impliedly waived.”
Leviton Mf Co.. 2010 US Dist. LEXIS 128849 at * I 8.
Defendant’s motion to compel is therethre DENIED. The Clerk shall terminate Dkt. 80.
The Court directed plaintiff to submit the subject c-mails to chambers to facilitate any
in camera inspection deemed appropriate, and plaintiff complied. ‘So parts has requested in
Lameru review. however, and the Court rules without reference to the documeins provided.

Dated: March 11. 2016
White Plains. Ne York

SO ORDERED

Paul E. Davison, U.S.M.J.

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