Ceglia v. Zuckerberg et al

Filing 382

MEMORANDUM in Support re 381 Sixth MOTION to Compel And For Other Relief filed by Facebook, Inc., Mark Elliot Zuckerberg. (Snyder, Orin)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
-----------------------------------PAUL D. CEGLIA,
Plaintiff,
v.
MARK ELLIOT ZUCKERBERG and
FACEBOOK, INC.,
Defendants.
------------------------------------

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Civil Action No. 1:10-cv-00569RJA

DEFENDANTS’ REDACTED MEMORANDUM OF LAW IN SUPPORT OF THEIR
SIXTH MOTION TO COMPEL AND FOR OTHER RELIEF

Thomas H. Dupree, Jr.
GIBSON, DUNN & CRUTCHER LLP
1050 Connecticut Avenue, NW
Washington, DC 20036
[phone]
Terrance P. Flynn
HARRIS BEACH PLLC
726 Exchange Street
Suite 1000
Buffalo, NY 14210
[phone]
May 24, 2012

Orin Snyder
Alexander H. Southwell
GIBSON, DUNN & CRUTCHER LLP
200 Park Avenue, 47th Floor
New York, NY 10166-0193
[phone]

TABLE OF CONTENTS
Page
BACKGROUND ............................................................................................................................ 2
ARGUMENT .................................................................................................................................. 4
I.

Ceglia Improperly Omitted The Kasowitz Letter From His Production ................ 4

II.

The Kasowitz Letter Is Responsive To This Court’s Expedited Discovery
Orders. ..................................................................................................................... 5

III.

The Kasowitz Letter Is Not Privileged. .................................................................. 8

CONCLUSION ............................................................................................................................. 12

i

TABLE OF AUTHORITIES
Page(s)
Cases
Abu Dhabi Commercial Bank v. Morgan Stanley & Co. Inc.,
2011 WL 3738979 (S.D.N.Y. Aug 18, 2011) ........................................................................... 4
Brown v. Department of Correctional Services,
2011 WL 2182775 (W.D.N.Y. June 2, 2011) ........................................................................... 9
C.T. v. Liberal School Dist.,
2008 WL 217203 (D.Kan. Jan. 25, 2008) ................................................................................. 9
Chase Manhattan Bank, N.A. v. Turner & Newall, PLC,
964 F.2d 159 (2d Cir. 1992).................................................................................................... 10
CP Solutions PTE, Ltd. v. General Electric Co.,
2006 WL 1272615 (D.Conn., Feb. 6, 2006) ............................................................................. 4
In re Application of Chevron Corp.,
749 F. Supp.2d 135 (S.D.N.Y. 2010)...................................................................................... 10
PSEG Power N.Y., Inc. v. Alberici Constructors, Inc.,
2007 WL 2687670 (N.D.N.Y. Sept. 7, 2007) ........................................................................... 4
Robbins & Myers, Inc. v. J.M. Huber Corp.,
274 F.R.D. 63 (W.D.N.Y. 2011) ............................................................................................. 10
U & I Corp. v. Advanced Med. Design, Inc.,
251 F.R.D. 667 (M.D.Fla.2008)................................................................................................ 4
United States v. Int’l Bhd. of Teamsters,
119 F.3d 210 (2d Cir. 1997).................................................................................................... 11
Rules
N.Y. Rules of Professional Conduct, Rule 1.2(d) ........................................................................... 7
N.Y. Rules of Professional Conduct, Rule 8.4 (b)-(d) .................................................................... 7

ii

MEMORANDUM OF LAW
Paul Ceglia has been concealing for months a document that confirms his fraud: a letter
from his former lawyers to co-counsel in which Ceglia’s lawyers

REDACTED
.
On April 13, 2011, Ceglia’s lawyers at the New York-based law firm of Kasowitz,
Benson, Torres & Friedman LLP sent a letter (the “Kasowitz Letter”) to their co-counsel at DLA
Piper LLP and Lippes Mathias Wexler Friedman LLP. The Kasowitz Letter

REDACTED

and DLA
Piper and Lippes Mathias have since withdrawn from the case as well.
Ceglia has been concealing the existence of the Kasowitz Letter for months. Only after
this Court overruled his baseless privilege objections did Ceglia produce the email transmitting
the Kasowitz Letter. But Ceglia—knowing full well the explosive nature of its contents—still
stubbornly refuses to produce the Kasowitz Letter itself.
This Court should order the immediate production of the Kasowitz Letter. It is an
attachment to an email (Item 379) that Ceglia has already produced pursuant to this Court’s
order. It is plainly improper for Ceglia to produce the email but refuse to produce the attached
document that the email transmitted. Moreover, the Kasowitz Letter contains
; it therefore falls squarely within

REDACTED

categories of documents this Court has ordered Ceglia to produce. Nor can Ceglia conceal the
Letter on grounds of privilege: it is an attachment to an email (Item 379) this Court has already
held is not privileged, and Ceglia has waived any privilege by failing to identify the Kasowitz
1

Letter on a privilege log at any point in this case. At a bare minimum, this Court should direct
Ceglia to produce the Kasowitz Letter (and attachments) for in camera inspection before
crediting his unfounded privilege claims.
BACKGROUND
This is the sixth motion to compel necessitated by Ceglia’s refusal to comply with this
Court’s discovery orders. See Doc. Nos. 95, 129, 155, 245, 295. This Court granted each of
Defendants’ five previous motions to compel. See Doc. Nos. 107, 117, 152, 208, 272, 317, 357.
The Court has also sanctioned Ceglia for his obstinate refusal to comply, ordering Ceglia to pay
both a $5,000 fine for “obstruction” and Defendants’ attorney’s fees totaling $92,627.79. See
Doc. Nos. 283, 292, 370, 371. When the Court compelled Ceglia to produce Item 379 from his
privilege log in granting Defendants’ Fifth Motion to Compel, Defendants discovered that Ceglia
had been concealing the very existence of the bombshell Kasowitz Letter.
Item 379 is a lengthy compilation of emails, the majority of which include third-party,
non-lawyer Jason Holmberg, a wood-pellet salesman. See Doc. No. 361 at 4. Item 379 was
discovered by Defendants’ digital forensics expert Stroz Friedberg from the recently-acquired
preserved image of Ceglia’s Gmail account, which was obtained only after multiple motions to
compel filed by Defendants. Pursuant to the Electronic Assets Inspection Protocol (Doc. No.
85), on February 1, 2012 Stroz Friedberg produced to Plaintiff Item 379 among other presumed
relevant materials. Plaintiff withheld Item 379 as privileged on a privilege log dated February 9,
2012 (see Doc. No. 296-1), and on February 21, 2012 Defendants moved to compel, inter alia,
the in camera inspection of that document because Ceglia’s privilege designation was
unsupported and improper (see Doc. No. 295).

2

On March 27, 2012, the Court ordered that Item 379 and other challenged documents be
produced for in camera review (Doc. No. 317). After reviewing the document, on April 19,
2012 the Court overruled Ceglia’s designation of Item 379 as privileged and required it to be
produced within 10 days, by April 30, 2012 (Doc. No. 357). Ceglia filed first a “motion for
clarification” of the April 19 Order (Doc. No. 358) and then a motion to stay the April 19 Order
(Doc. No. 362), both of which were denied (Doc. Nos. 361, 365). Ceglia produced Item 379,
along with the three other items the Court ordered produced, on April 30, 2012. That same day,
Ceglia filed objections to the April 19 Order before Judge Arcara, which remain pending. Doc.
No. 367.
Upon review of Item 379, it became clear to Defendants that there was a critical
document missing from the production: the Kasowitz Letter, which was an attachment to an
April 13, 2011 email from Kasowitz to Ceglia’s then-counsel that was produced, and which was
located at page 14 of Item 379. See Southwell Decl. Ex. A at 14. Accordingly, on May 3, 2011,
Defendants sent Ceglia’s counsel a letter demanding the production of the Kasowitz Letter,
which should have been previously produced in response to this Court’s expedited discovery
orders. See Southwell Decl. Ex. B. On May 7, 2012, Ceglia’s counsel responded, refusing to
produce the Kasowitz Letter on the basis that the Court’s orders did not call for its production,
and on the ground that it is protected from disclosure by the attorney-client privilege. See
Southwell Decl. Ex. D. In a May 9, 2012 telephone conversation with Plaintiff’s counsel
Sanford Dumain, Orin Snyder and Alexander H. Southwell reiterated Defendants’ request that
the Kasowitz Letter be produced. Dumain indicated that he would take the request under
advisement. See Southwell Decl., ¶ 7. On May 14, 2012, Dumain informed Snyder that Ceglia
would not produce the Kasowitz Letter. See Southwell Decl., ¶ 8.

3

ARGUMENT
I.

Ceglia Improperly Omitted The Kasowitz Letter From His Production
Ceglia produced Item 379, which includes the April 13, 2011 transmittal email indicating

the Kasowitz Letter is attached along with

REDACTED

See Southwell Decl., Ex. A at 14. Ceglia has not, however, produced the Kasowitz Letter, and
has produced only one of the documents it references (discussed in greater detail below). It is
established practice that the full document — an email and all of its attachments — should be
produced where the email or any of the attachments are responsive. See Abu Dhabi Commercial
Bank v. Morgan Stanley & Co. Inc., 2011 WL 3738979 at *4-5 (S.D.N.Y. Aug 18, 2011) (noting,
in ordering that certain email attachments be produced, that review of the case law indicates that
“there is an implication that attachments must be produced with emails,” and that “prevailing
practice . . . is for parties to produce any non-privileged attachment to an email if the email is
determined to be relevant, and to produce the email if any of the attachments are determined to
be relevant”); see also PSEG Power N.Y., Inc. v. Alberici Constructors, Inc., 2007 WL 2687670,
at *12 (N.D.N.Y. Sept. 7, 2007) (“Without question, attachments should have been produced
with their corresponding emails as such are kept in the usual course of business.”); CP Solutions
PTE, Ltd. v. General Electric Co., 2006 WL 1272615, at *4 (D.Conn., Feb. 6, 2006)
(“Defendants chose to provide the documents in the manner in which they were kept in the
ordinary course of business. Attachments should have been produced with their corresponding emails”); U & I Corp. v. Advanced Med. Design, Inc., 251 F.R.D. 667, 675 n. 14 (M.D.Fla.2008)
(“The dubious practice of producing e-mails without attachments in federal discovery has not
gone unnoticed by other courts.”).
The Kasowitz letter is part and parcel of Item 379, which the Court has directed Ceglia to
produce and which contains an email

REDACTED
4

.

Ceglia continues to conceal critical evidence of his fraud on this Court, REDACTED
. Accordingly, Defendants respectfully
request that this Court order Ceglia to produce the full Kasowitz Letter, with all attachments
and/or embedded images. This is exactly the approach this Court has followed with regard to
similar compendium documents. See, e.g., March 22, 2012 Order (Doc. No. 317) (holding that
an entire compendium document, the “Lawsuit Overview,” containing copies of a responsive
document falls within the scope of the Court’s orders and must be produced).
II.

The Kasowitz Letter Is Responsive To This Court’s Expedited Discovery Orders.
Even if the Kasowitz Letter had not been included in Item 379, it would be responsive

standing alone and should have been produced many months ago. This Court’s August 18, 2011
Order directed Ceglia to identify and produce “all electronic copies or images of the purported
contract,” “all electronic versions or purported versions of any contract,” and “all electronic
versions of any emails or purported emails” among the relevant parties. See Doc. No. 117 ¶¶ 23. The Kasowitz Letter falls within all of these categories.
First, the Kasowitz Letter contains emails that are responsive to the Court’s orders.
Ceglia himself has conceded that the Kasowitz Letter is responsive by producing these attached
emails to Defendants earlier this year. On February 28, 2012, in response to the Court’s
expedited discovery orders and after much delay, Ceglia’s former counsel Lake APC produced a
PDF document entitled “Scanned StreetFax Emails attached to Letter from Marks to Vacco
041311.” See Southwell Decl. Ex. E. Plaintiff did not designate this PDF, which discloses
publicly the existence of a letter from Mr. Marks to Mr. Vacco, dated April 13, 2011, as
confidential. This document is an attachment to the Kasowitz Letter, and contains emails by and
among Zuckerberg, Ceglia, and/or other persons associated with StreetFax. The emails in this
document contain handwritten notations, presumably from a Kasowitz attorney. See Southwell
5

Decl. Ex. E at 1, 4-6. Specifically, those notations are asterisks calling attention to emails
between Zuckerberg and Ceglia regarding the payment terms of the agreement between them.
The payment terms discussed in these emails are consistent with the authentic StreetFax
Contract, and inconsistent with the fraudulent Work for Hire Document, a point Defendants
noted in moving to dismiss. See Doc. No. 319 at 35-38 (discussing contemporaneous emails
referencing payment terms of the contract between the parties, which provides further evidence
that the StreetFax Contract is authentic and the Work for Hire Document is a forgery). The
Kasowitz firm appears to have

By

REDACTED

producing the email collection that had been attached to the Kasowitz Letter in response to the
Court’s orders, Ceglia has acknowledged that the Kasowitz Letter is itself responsive to this
Court’s orders.
Second, it is evident from the context surrounding the April 13, 2011 email by which
Aaron Marks of Kasowitz transmitted the Kasowitz Letter that it contained or included copies,
In addition to containing this April 13

REDACTED

transmittal email, Item 379 contains numerous emails that

REDACTED

See Southwell Decl. Ex. A at 4-5, 19-20. The emails establish

REDACTED

The emails in Item 379 tell the following story. On March 29, 2011, REDACTED

See Southwell Decl. Ex. A at 22.
on March 30, 2011 at 4:16 p.m.,

REDACTED

6

Marks received an email from Brian Halpin of Capsicum Group with the subject REDACTED
The body of the email message says

REDACTED

. Id. at 11-12. Subsequently, the Kasowitz firm

REDACTED

writing in an email:

REDACTED

Id. at 19-20 (emphasis added). In short, after

REDACTED

See N.Y. Rules of
Professional Conduct, Rule 1.2(d) (“A lawyer shall not counsel a client to engage, or assist a
client, in conduct that the lawyer knows is illegal or fraudulent . . . .”); Rule 8.4 (b)-(d) (“A
lawyer or law firm shall not . . . engage in illegal conduct . . . ; engage in conduct involving
dishonesty, fraud, deceit or misrepresentation; [or] engage in conduct that is prejudicial to the
administration of justice.”).
DLA Piper and Lippes Mathias did not notice appearances in this case until April 11,
2011 (see Doc. No. 38), the same day they filed the Amended Complaint (Doc. No. 39). Two
days later, on April 13, 2011 at 9:50 a.m., Marks emailed the Kasowitz Letter to DLA Piper,
Lippes Mathias, and Paul Argentieri along with the documents referenced in the letter. See
Southwell Decl. Ex. A at 14. Later that day, Dennis Vacco of Lippes Mathias responded via
email,

REDACTED
7

Id. at 13-14. Given this context, the Kasowitz Letter

REDACTED

REDACTED
1

Because the Kasowitz Letter includes copies of both emails

responsive to this

Court’s orders and should have been produced in its entirety long ago, Defendants respectfully
request that this Court order Ceglia to produce immediately the complete Kasowitz Letter, with
all attachments and/or embedded images.
III.

The Kasowitz Letter Is Not Privileged.
Ceglia has a well-established history of asserting unsustainable and improper privilege

designations in attempt to hide damaging evidence of his fraud from this Court, Defendants, and
the public. See Doc. Nos. 208, ¶¶ 14–15 (overruling privilege designations), 107, 357. His
assertion that the Kasowitz Letter is “protected from disclosure by the attorney client privilege”
follows this established pattern and is baseless. See Southwell Decl. Ex. D.
First, this Court has already ruled that the communication contained in the email
transmitting the Kasowitz Letter, which by implication includes its attachments, is not
privileged. Doc. No. 357. After having briefed this issue before the Court and having had his
arguments rejected by the Court, Ceglia cannot be heard to now assert that the Kasowitz Letter
attached to the non-privileged email is privileged.

1

It should be noted that DLA Piper and Lippes Mathias filed the Amended Complaint notwithstanding the

REDACTED

Southwell Decl. Ex. A at 19-20. And, of course, the Milberg firm
and Dean Boland continue to represent Ceglia notwithstanding the
REDACTED

8

Second, Ceglia did not disclose the Kasowitz Letter on any privilege log accompanying
his various productions under the Court’s expedited discovery orders. See Southwell Decl., ¶ 10.
His first assertion of privilege over the Kasowitz Letter occurs in a May 7, 2012 letter to
Defendants’ counsel. See Southwell Decl., ¶ 10 and Ex. D. This assertion occurred after Ceglia
was ordered to produce all responsive images and emails and provide access to his webmail
accounts, after Ceglia submitted the false and inaccurate August 29, 2011 Declaration, after
Defendants filed five successful motions to compel Ceglia’s compliance with the expedited
discovery orders, after Defendants’ forensic expert Stroz Friedberg searched the preserved
webmail accounts from the webmail providers, after Stroz Friedberg uncovered Item 379
containing emails revealing the very existence of this document, after Stroz Friedberg produced
Item 379 to Plaintiff for review pursuant to the Electronic Assets Inspection Protocol, after
Defendants challenged Ceglia’s improper privilege assertions over Item 379, after the Court
overruled those improper assertions, after the Court denied a motion for reconsideration and a
motion to stay, and after Ceglia finally produced Item 379 which included the emails containing
references to the Kasowitz Letter.
Ceglia has concealed the existence of this document for months. His attempt to assert
privilege over this responsive document only after he has been caught red-handed trying to hide
it should not be countenanced. Because he failed to provide a privilege log listing that
responsive document as required by Local Civil Rule 26(e) and Federal Rule of Civil Procedure
26(b)(5), Ceglia has waived any privilege claims over the Kasowitz Letter. See Doc. No. 357 at
10 (holding that failure to timely assert privilege in a privilege log waives the privilege) (citing
Brown v. Department of Correctional Services, 2011 WL 2182775, at *15 (W.D.N.Y. June 2,
2011)); C.T. v. Liberal School Dist., 2008 WL 217203, at *9 (D.Kan. Jan. 25, 2008) (finding

9

privilege waived for attachments to emails that were not separately logged with the allegedly
privileged email communication and ordering responsive attachments to be produced); see also
In re Application of Chevron Corp., 749 F. Supp.2d 135, 140 (S.D.N.Y. 2010) (finding claims of
privilege waived where party failed to provide a privilege log pursuant to local and federal
rules); Chase Manhattan Bank, N.A. v. Turner & Newall, PLC, 964 F.2d 159, 166 (2d Cir. 1992)
(finding that the failure to provide a privilege log may result in a finding that the privilege has
been waived).
Third, even assuming that at some point the Kasowitz Letter was protected by the
attorney-client privilege and the work product doctrine, the protection has been waived by the
disclosure of the subject matter of the information to Holmberg, a third-party non-lawyer. See
Doc. No. 357 at 10-11; Doc. No. 361 at 4-5. This Court has already determined that information
to which Holmberg was privy is not privileged: “even if Holmberg was neither a direct nor
indirect recipient of any specific email,” there has been a subject-matter waiver because
“Holmberg was nevertheless privy to the information contained therein.” See Doc. No. 361 at 4;
see also Robbins & Myers, Inc. v. J.M. Huber Corp., 274 F.R.D. 63, 95-96 (W.D.N.Y. 2011)
(citing cases for proposition that subject matter waiver occurs where holder of the privilege
discloses a significant part of the matter of the communication). The Court therefore found
Ceglia’s privilege assertions with regard to Item 379 containing the transmittal email
unsubstantiated and ordered it produced. Doc. No. 361. Ceglia has already produced several
emails on the topic of

, including the email transmitting the

REDACTED

Kasowitz Letter. Thus, there is a general subject matter waiver on the subject of

REDACTED . See also Doc. No. 361 (finding that Ceglia has waived any privilege that
existed on the subject of communications involving the participation of attorneys in this lawsuit

10

“until Plaintiff retained DLA Piper LLP as counsel”). Ceglia cannot now be heard to claim
privilege over a communication that is at the heart of

REDACTED

the subject

matter over which the Court has already found a privilege waiver.
Because there is no valid privilege claim over the Kasowitz Letter, the Court should order
Ceglia to produce immediately the Kasowitz Letter and all attachments and/or embedded images
to Defendants. Alternatively, because Ceglia, as “the party asserting” the privilege bears the
“burden of establishing [its] existence,” United States v. Int’l Bhd. of Teamsters, 119 F.3d 210,
214 (2d Cir. 1997), the Court should order Ceglia to produce immediately the Kasowitz Letter
(and all attachments to the Letter) for in camera inspection and file with the Court evidentiary
support justifying his privilege claims with a copy of any such filing served on Defendants.

11

CONCLUSION
For the foregoing reasons, this Court should enter an order requiring Ceglia to produce
the Kasowitz Letter to Defendants, along with all attachments and/or embedded images.
Alternatively, the Court should inspect in camera the Kasowitz Letter and its attachments and/or
embedded images over which Ceglia claims privilege, and require Ceglia to bear his burden of
justifying his privilege claims by competent evidence. This Court should also award Defendants
their attorneys’ fees and costs, and all other relief to which they may be entitled.

Dated:

New York, New York
May 24, 2012
Respectfully submitted,
/s/ Orin Snyder
Orin Snyder
Alexander H. Southwell
Matthew J. Benjamin
Amanda M. Aycock
GIBSON, DUNN & CRUTCHER LLP
200 Park Avenue, 47th Floor
New York, NY 10166-0193
[phone]

Thomas H. Dupree, Jr.
GIBSON, DUNN & CRUTCHER LLP
1050 Connecticut Avenue, NW
Washington, DC 20036
[phone]
Terrance P. Flynn
HARRIS BEACH PLLC
726 Exchange Street
Suite 1000
Buffalo, NY 14210
[phone]

Attorneys for Defendants Mark Zuckerberg and Facebook, Inc.

12