MCFADYEN et al v. DUKE UNIVERSITY et al
Filing
325
REPLY, filed by Defendant DUKE UNIVERSITY, to Response to #316 MOTION to Compel filed by DUKE UNIVERSITY. (Attachments: #1 Exhibit A - Unpublished Case 2010 WL 1667285, #2 Exhibit B - Gettliffe Deposition Excerpts, #3 Exhibit C - Drummond Deposition Excerpts, #4 Exhibit D - Unpublished Case 2009 WL 324054, #5 Exhibit E - McFadyen Deposition Excerpts)(SEGARS, THOMAS)
EXHIBIT D
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Only the Westlaw citation is currently available.
United States District Court,
D. Maryland.
SAINT ANNES DEVELOPMENT COMPANY, LLC, et
al.
v.
Neal TRABICH, et al.
Civil No. WDQ–07–1056.
Feb. 9, 2009.
West KeySummaryPrivileged Communications and
Confidentiality 311H
80
311H Privileged Communications and Confidentiality
311HII Family Privileges
311HII(B) Spousal Privilege
311Hk80 k. Confidential or Private Character of
Communications. Most Cited Cases
Privileged Communications and Confidentiality 311H
86
311H Privileged Communications and Confidentiality
311HII Family Privileges
311HII(B) Spousal Privilege
311Hk86 k. Objections; Claim of Privilege.
Most Cited Cases
Under New York law, the defendant's wife could not
assert spousal communications privilege in all communications with her husband. She could only assert the privilege in confidential communications. The record did not
include the requisite specific information that allowed
analysis of the privilege's applicability. If the deposition
was reconvened, the husband and wife could not assert the
privilege unless the record contained specific facts that
validated the assertion of the privilege. McKinney's CPLR
4502(b).
Steven Bennett Gould, Brown and Gould LLP, Bethesda,
MD, Kenneth A. Novikoff, Rivkin Radler LLP, Uniondale,
NY, for Saint Annes Development Company, LLC, et al.
Andrew Radding, Adelberg Rudow Dorf and Hendler
LLC, John Robert Fischel, Richard L. Costella, Miles and
Stockbridge PC, Baltimore, MD, for Neal Trabich, et al.
JAMES K. BREDAR, United States Magistrate Judge.
*1 TO ALL COUNSEL OF RECORD
Dear Counsel:
This matter has been previously referred to me for
resolution of discovery disputes. Before the Court is
Plaintiffs' Motion to Overrule Objections at Deposition
and to Compel Defendant Terry Trabich to Answer Questions; in addition to seeking the Court's ruling on objections, Plaintiffs are asking the Court to award attorneys'
fees incurred in connection with the motion. (Paper No.
127, p. 1.) The matter has been fully briefed in Defendants'
Supplemental/Amended Opposition to Plaintiffs' Motion
(Paper No. 133, incorporating Paper No. 132) and Plaintiffs' Reply (Paper No. 134). No hearing is necessary.
Local Rule 105.6. The MOTION is GRANTED IN PART
AND DENIED IN PART.
The undersigned entered a ruling on a similar motion
pertaining to the deposition of Ms. Trabich's husband, Neal
Trabich. (Paper No. 126 (“November 4 Order”).) As noted
in that ruling, the Court has already entered partial summary judgment in Plaintiffs' favor on the claim of breach of
contract and awarded damages of $2,999,792.71 plus
post-judgment interest. (Paper No. 86.) Remaining issues
in the case include claims of fraud and conspiracy to defraud. (Paper No. 1.)
Plaintiffs deposed Ms. Trabich on June 19, 2008.
(Paper No. 127, Exh. 1.) As occurred in Mr. Trabich's
deposition on July 9, 2008, Defendants' counsel objected
many times to various questions and instructed Ms. Trabich not to answer on grounds of either attorney-client
privilege or spousal communications privilege or both.
(Paper No. 127 Supp. Mem. pp. 2–3.) Plaintiffs argue that
Ms. Trabich failed to establish valid grounds for assertion
of these privileges, that she waived any privileges she
might have had to certain questions by responding on the
merits in Defendants' Answer as well as an Answer and
Affidavit filed in a related New York case, and that her
participation in a fraudulent course of conduct defeated
any available privilege as to other questions. (Id.) Plaintiffs
also contend that Ms. Trabich's counsel once improperly
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instructed her not to answer on grounds of relevancy and,
in another instance, improperly coached her not to answer
due to a claimed privilege when the real objection to the
question was based on relevancy. (Id. p. 4.) The factual
background for analysis of Plaintiffs' motion was set forth
in the November 4 Order:
Neal and Terry Trabich and Ronald and Irene Coruzzi
entered into a Facility Agreement in May 2006 with
Saint Annes Development Company (“SADC”). (Paper
No. 110, Exh. 3.) Under the agreement, SADC agreed to
arrange a $1,000,000 line of credit, through a bank, for
the Trabiches and Coruzzis to use for the sole purpose of
financing construction of Saint Annes golf course and
clubhouse in Delaware. (Id.) One of the considerations
given was an agreement by Terry Trabich to grant
SADC a mortgage on the Trabiches' New York residence, which was titled in her name; SADC agreed not
to record the mortgage in exchange for the Trabiches'
agreement not to put any further encumbrances on their
property ahead of SADC's unrecorded mortgage. (Id.)
To carry out SADC's obligations under the agreement,
Aaron Young, a principal in SADC, arranged for a
friend, Gerald David, to secure a line of credit through
Wachovia Bank; Young personally guaranteed repayment. (Paper No. 34, Exhs. 8 & 10; Paper No. 110, p. 5.)
Trabich immediately drew down the entire one million
dollars and deposited it into the Trabiches' joint account.
(Paper No. 110, p. 5.) Plaintiffs indicate that $350,000 of
that amount went to Terry Trabich and $100,000 went to
an entity called Global Golf. (Id.)
*2 Neal Trabich is owner and president of Global
Golf. (Paper No. 110, Exh. 10.) Gordon Lenz is owner of
an entity called Confer Bethpage. (Id.) On November 3,
2006, Global Golf, Neal Trabich, and his wife, Terry
Trabich, sued, among others, Aaron Young (a plaintiff in
the instant suit) and Saint Annes Development Company
(“SADC”) (also a plaintiff in the instant suit) to void the
May 2006 Facility Agreement and accompanying
promissory note and consulting agreement at issue in the
present case; Jay Edmond Russ was the attorney filing
this lawsuit in New York. (Id. Exh. 5.) On December 15,
2006, Global Golf assigned golf concession rights at
Bethpage (N.Y.) State Park to Confer Bethpage. (Id.
Exh. 10.) On December 21, 2006, Terry Trabich executed a mortgage note on the Trabiches' residence for a
loan of $500,000 from Gordon Lenz; Jay Edmond Russ
was the notary public on the note. (Id. Exh. 8.) That
mortgage note was recorded on January 5, 2007. (Id.
Exh. 9 .) The defendants in the New York case were
served in February or early March 2007. (Paper No.
110–2, p. 6.)
Another lawsuit was brought by an entity named AP
Links (also controlled by Aaron Young and his
co-principal, Peter Rubin) in the District of Maryland
against Confer Bethpage, Gordon Lenz, Global Golf,
and Neal and Terry Trabich. AP Links, LLC v. Global
Golf, Inc., et al., No. CCB–08–705, Paper Nos. 1 & 6.
This Court determined it lacked personal jurisdiction
over Confer Bethpage and Terry Trabich and transferred
the case to the Eastern District of New York. Id. Paper
Nos. 27 & 29. In the Court's Memorandum Opinion, it
was noted that Neal Trabich was hired as Confer Bethpage's Director of Golf at a yearly salary of $350,000
sometime after Gordon Lenz created Confer Bethpage
on October 19, 2006; Confer Bethpage's designated
agent was Daniel Rosenthal, who was of counsel to Jay
Russ's law firm. Id. Paper No. 26, p. 3.
(Paper No. 126, pp. 3–4.)
As this Court ruled in the November 4 Order, the law
of the forum state in a federal diversity action controls the
applicability of a claim of privilege; in the instant case, that
is the law of Maryland. (Id. p. 1.) See Ashcraft v. Conoco,
Inc., 218 F.3d 282, 285 n. 5 (4th Cir.2000) (in diversity
case, “the availability of an evidentiary privilege is governed by the law of the forum state,” citing Fed.R.Evid.
501). However, this Court in Hill v. Huddleston, 263
F.Supp. 108 (D.Md.1967), predicted, in the absence of
authoritative Maryland precedent, that Maryland courts
would apply the law of the state that has the most significant relationship with the communication to a claim of
privilege asserted at a deposition. Id. at 110 & n. 2 (noting
that Maryland courts have relied upon the Restatement of
the Law Second, Conflict of Laws, in their decision-making and applying present-day section 139 thereof). See also Hare v. Family Publications Service, Inc., 334
F.Supp. 953, 960–61 (D.Md.1971) (finding that law of
New York, which otherwise would govern question of
privilege for communication having most significant relationship with that state, would not apply because it did not
recognize an accountant-client privilege and, therefore,
applying Maryland law because absence of accountant-privilege would violate Maryland's public policy). The
Court is not aware of a Maryland case that contradicts
these two decisions. Thus, New York law as to privilege
would seem to apply since the communications at issue
took place there and involved New York citizens, the
Trabiches, and because there is no real issue of public
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policy as in Hare. See also Aetna Cas. & Sur. Co. v.
Lloyd's London, 176 Misc.2d 605, 676 N.Y.S.2d 727, 730
n. 4 (N.Y.Sup.Ct.1998) (applying New York rather than
English law because communications at issue occurred in
New York), aff'd, 263 A.D.2d 367, 692 N.Y.S.2d 384
(N.Y.App.Div.1999). Evidentiary privileges are to be
strictly construed in a fashion that is consistent with their
purposes. See Priest v. Hennessy, 51 N.Y.2d 62, 431
N.Y.S.2d 511, 514, 409 N.E.2d 983 (N.Y.1980) (“It has
long been recognized that ‘the attorney-client privilege
constitutes an “obstacle” to the truth-finding process, the
invocation of which should be cautiously observed to
ensure that its application is consistent with its purpose.’ “
(citations omitted)).
A.
*3 The Court first considers the issue of attorney-client privilege. In New York, that privilege attaches
only to confidential communications made by a client to an
attorney for the purpose of obtaining legal advice or service. Priest, 431 N.Y.S.2d at 514, 409 N.E.2d 983. The
burden of proving each element of the privilege rests on the
party asserting it. Id. Under the Federal Rules of Civil
Procedure,
[w]hen a party withholds information otherwise discoverable by claiming that the information is privileged
... the party must:
stances which may constitute an exception to the assertion of the privilege; (iii) any circumstances which may
result in the privilege having been waived; and (iv) any
circumstances that may overcome a claim of qualified
privilege.
D. Md. Loc. R.App. A, Guideline 6.
Defendants have advanced an interesting, but ultimately unsuccessful, argument that Plaintiffs had an “affirmative burden ... to ‘make a record that would permit
meaningful judicial evaluation of the privilege claimed, to
include the nature of the privilege claimed, and the basic
rationale for asserting the privilege,’ “ that Plaintiffs failed
to carry their affirmative burden, and that, therefore,
Plaintiffs' motion must be denied. (Paper No. 133, p. 3.) As
authority, Defendants cite the treatise by Judge Paul W.
Grimm, Charles S. Fax, and Paul Mark Sandler, Discovery
Problems and their Solutions 102 (2005) ( “Discovery
Problems” ). Defendants have misconstrued the cited
authority and Guideline 6, to which Discovery Problems
refers. Neither Guideline 6 nor Discovery Problems shifts
the burden of proof on the issue of privilege from the party
asserting the privilege to the opposing party; instead, those
authorities merely offer a suggested framework for the
mechanics of making a record for evaluation of a claimed
privilege. Thus, Discovery Problems states:
Consistent with Rule 26(b)(5)(A), the District Court of
Maryland has promulgated Guideline 6 as an adjunct to its
Local Rules. Under that Guideline pertaining to the assertion of a privilege at a deposition, when the claimant has
not provided information as to the basis for privilege, then
The inquiring lawyer should make sure that the information [provided by the claimant's lawyer setting
forth the basis for the asserted privilege] complies with
Rule 26(b)(5) and the guidance of the above cited cases,
and should be prepared to conduct additional examination of the witness to learn sufficient facts about the
nature of the privilege asserted, the general type of information at issue, and whether there are any facts that
would support an argument that the privilege does not
apply or has been waived.... If [the defending lawyer]
had merely said ... “Objection—instruct not to answer on
the ground of privilege,” the interrogating lawyer should
have followed up with questions establishing that the
communication was between the lawyer and client only,
with no one else present, that it involved legal advice as
opposed to a nonprivileged topic, and that such communication was never divulged to another.
the person seeking disclosure shall have reasonable latitude during the deposition to question the witness to
establish other relevant information concerning the assertion of privilege, including: (i) the applicability of the
particular privilege being asserted; (ii) any circum-
*4 Discovery Problems 103–04. Notably, the material
on page 102 of Discovery Problems that is quoted by Defendants is derived from a parenthetical of one of the cited
cases referred to in the preceding excerpt, Moloney v.
United States, 204 F.R.D. 16, 20–21 (D.Mass.2001), and is
(i) expressly make the claim; and
(ii) describe the nature of the documents, communications, or tangible things not produced or disclosed—and do so in a manner that, without revealing
information itself privileged or protected, will enable
other parties to assess the claim.
Rule 26(b)(5)(A).
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equally distorted in its treatment by Defendants; at no point
did Discovery Problems or the parenthetical for the
Moloney case refer to an “affirmative burden” on the inquiring lawyer to make a record or suffer denial of a motion to compel if he did not. In fact, Discovery Problems
pointedly observed, “Unless counsel asserting the privilege
can establish that each of these elements is satisfied, the
privilege cannot be invoked.” Discovery Problems 101.
That fairly refutes Defendants' argument.
Beyond that, Defendants have grossly misinterpreted
this Court's November 4 Order by their additional contention that it had “noted, in order to support a Motion to
Compel and override the assertion of a privilege, the record
must ‘contain enough information to test the privilege with
respect to the question in issue.’ ” (Paper No. 133, pp. 3–4.)
What this Court said was the following:
The record does not contain enough information to test
the privilege with respect to the question in issue. Assertion of the privilege can only be validated by reference to facts that establish the confidential nature or lack
thereof for a particular communication.... If Plaintiffs
reconvene the deposition of Mr. Trabich, appropriate
questions may be asked to explore the applicability of
the spousal communications privilege.
1. “Ma‘am, what's Confer Bethpage Inc.?”
(Paper No. 126, p. 8.) The November 4 Order did not
place an affirmative burden on Plaintiffs to disprove the
applicability of a privilege asserted by Defendants. Further, it must be pointed out that the Court overruled Defendants' objection to the question in issue and granted
Plaintiffs' motion to compel. (Id.)
The foregoing discussion is perhaps a long way of
saying that the burden remains on the Defendants to establish their entitlement to the claimed privileges, and if
they do not carry their burden, then they may not refuse to
answer deposition questions on that basis. This principle
applies to both the attorney-client privilege and the spousal
communications privilege asserted by Defendants.
Plaintiffs have highlighted thirteen instances when
their counsel questioned Ms. Trabich and the response was
a claim of attorney-client privilege FN1:
FN1. Some of these instances were also times
when Ms. Trabich declined to answer based on
the spousal communications privilege. Analysis
of that privilege will be made separately.
167:21–22 2
of Terry Trabich, June 19, 2008, attached as Exhibit 1 to Plaintiffs' motion (Paper No. 127).
FN2. All transcript references are to Deposition
2. “Isn't it true, Mrs. Trabich, that you were aware that New
York State and/or Suffolk County was investigating Global
Golf prior to your execution of [the May 2006 Facility
Agreement]?”
186:23–187:8
3. “Let's look at Bethpage.[3] Bethpage was relinquished by
assignment of the facility agreement in 2006. Who received
the assignment?”
194:11–14
FN3. Bethpage: This refers apparently to the golf
concession contract held by Global Golf on the
golf course at Bethpage, New York, State Park.
See supra, p. 2.
4. “Well, did your attorney send you a draft complaint, a draft 11:14–16
answer to look at?”
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5. “Did you authorize your attorney to file an answer on your 12:10–11
behalf?”
6. “And without disclosing the sum and substance of any
81:2–5
communication with Mr. Devack, what was the general nature
of his representation of you 15 years earlier?”
7. “And did you authorize Mr. Russ to send to this entity
164:9–12
Monzack, Mersky [, McLaughlin and Browder] a statement of
your financial condition as of November 1, 2007?”
8. “What's the basis for your denial [in the Answer filed by
162:8–9
Defendants in this case] of the allegation in paragraph 23 [of
the Complaint]?” 4
FN4. Paragraph 23 of the Complaint alleged: “An
attorney for the Trabiches told Mr. Young that the
Trabiches and Coruzzis cannot repay the
$1,000,000, and had no intention of fulfilling its
[sic] obligations to pay the various fees provided
for within the Agreement.” (Paper No. 1, p. 6.)
9. [Referring to an affidavit made by Terry Trabich on De204:21–6
cember 26, 2007:] “Let's look at paragraph five. You write, or
I'm sorry, you swore under oath that ‘the transaction was based
entirely upon the credit of Gerald David and his wife which
Wachovia Bank accepted as security for the credit facility.’ ...
What is the basis for your belief as to the sentence that I just
read and that you swore to on December 26, 2007?”
10. “I would like you to tell me what your attorney said to you 206:7–12
with regard to the sentence ‘the transaction was based entirely
upon the credit of Gerald David and his wife which Wachovia
accepted as security for the credit facility’?”
11. “Let's go to paragraph 13 on page three. You swear that 231:10–18
‘prior to the commencement of this action, Mr. Russ was informed by Mr. Young that Mr. Young and/Mr. Rubin [sic]
were going to pay off the credit facility at Wachovia Bank to
remove any exposure or involvement of Gerald David and his
wife.’ When did Mr. Russ make this statement to you?”
12. [Referring to Defendants' Answer filed in this case:] “The 60:10–18
first part of your answer to paragraph 15 states as follows:
‘Defendants admit that Neal Trabich arranged with Aaron
Young to provide Mr. Trabich and defendant Ronald Coruzzi
with a one million dollar credit facility.’ Do you see that? [Ms.
Trabich answered, “Yes.”] What was the basis for your ad-
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mission of that allegation?”
13. “I am going to follow up on my deposition question. When 259:9–12
did you speak with counsel in preparation for this deposition?”
*5 A number of these questions, specifically, Questions 1 through 4, 6, 8, 9, and 12, do not request Ms. Trabich to disclose attorney-client communications. Instead,
they request facts, which are not protected by the attorney-client privilege. See Niesig v. Team I, 76 N.Y.2d 363,
559 N.Y.S.2d 493, 497, 558 N.E.2d 1030 (N.Y.1990)
(citing Upjohn v. United States, 449 U.S. 383, 395–96, 101
S.Ct. 677, 66 L.Ed.2d 584 (1981)). See also In re Allen,
106 F.3d 582, 604 (4th Cir.1997) (same). Additionally,
Questions 8, 9, and 12 ask Ms. Trabich to disclose the basis
for her assertions in court filings. As a general principle,
she cannot make assertions of fact in court documents
while also claiming attorney-client privilege to shield the
basis for her assertions; she has waived that privilege because she is deemed to have testified in those filings. See
Brown v. United States, 356 U.S. 148, 154–55, 78 S.Ct.
622, 2 L.Ed.2d 589 (1958) (concluding that a witness who
voluntarily testifies in his own behalf subjects himself to
cross-examination and may not claim privilege against
self-incrimination for cross-examination); In re Edmond,
934 F.2d 1304, 1308–09 (4th Cir.1991) (“An affidavit
operates like other testimonial statements to raise the possibility that the witness has waived the Fifth Amendment
privilege”; “[T]he Fifth Amendment privilege cannot be
invoked as a shield to oppose depositions while discarding
it for the limited purpose of making statements to support a
summary judgment motion.”); Nutramax Laboratories,
Inc. v. Twin Laboratories, Inc., 32 F.Supp.2d 331, 334–36
(D.Md.1999) (corporate designee waived privilege against
self-incrimination by testifying through affidavits and at
deposition).
Defendants take issue with the reliance on legal authority pertaining to the testimonial waiver of the privilege
against self-incrimination, implicitly arguing that it is
inapplicable to testimonial waiver of the attorney-client
privilege. (Paper No. 133, p. 24.) Defendants fail to offer a
reason for treating the attorney-client privilege as more
sacrosanct than the privilege against self-incrimination,
and the Court believes that any argument on that basis is
without merit. Thus, to the extent that a testimonial assertion is made, then Ms. Trabich may not claim a privilege
for the basis of her assertion.
That conclusion is clear as to Question 9, pertaining to
the affidavit filed by Ms. Trabich in the New York case,
and as to Question 12, pertaining to a factual admission in
Defendants' Answer. It is less clear as to Question 8, which
pertains to the denial by Defendants of Paragraph 23 of the
Complaint. Whether a simple denial in a responsive
pleading is sufficient to put a confidential communication
at issue, see, e.g., Deutsche Bank Trust Co. v. Tri–Links
Investment Trust, 43 A.D.3d 56, 837 N.Y.S.2d 15, 23
(N.Y.App.Div.2007) (“ ‘At issue’ waiver of [attorney-client] privilege occurs where a party affirmatively
places the subject matter of its own privileged communication at issue in litigation, so that invasion of the privilege
is required to determine the validity of a claim or defense
of the party asserting the privilege, and application of the
privilege would deprive the adversary of vital information”), would seem to depend upon a defendant's subsequent amplification of that response. Under Rule 8(b)(2),
Federal Rules of Civil Procedure, “[a] denial must fairly
respond to the substance of the allegation”; additionally, in
accordance with Rule 11(b)(4), an answer to a complaint
represents to the Court that a denial, unless specifically
based upon a lack of knowledge or information, is “warranted on the evidence.” Thus, asking a party to provide the
factual basis for a denial is designed to test if a denial is
warranted on the evidence.
*6 When Question 8 was posed at Ms. Trabich's
deposition, defense counsel objected and instructed her not
to answer
because the only way you would know the truth or non
truth of that statement is through consultation with
counsel because the allegation in the complaint is that an
attorney for the Trabich's [sic] told Mr. Young A, B, C
and D. The only way this witness would know whether
that allegation is true or not true is through a communication with counsel.
(Paper No. 127, Exh. 1, 162:10–20.) To the extent that
Plaintiffs' counsel sought a factual basis for Ms. Trabich's
denial of Paragraph 23 of the Complaint, the question was
clearly proper. However, defense counsel's subsequent
amplification of the denial indicated that it was premised
entirely upon a communication with counsel. Presuming
that Defendants would assert that the communication with
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counsel was confidential, the Court believes that denial of
the Motion to Compel with respect to Question 8 is appropriate. The MOTION TO COMPEL is GRANTED as
to Questions 1 through 4, 6, 9, and 12. The MOTION TO
COMPEL is DENIED as to Question 8. Questions 5, 7, 10,
11, and 13 require further analysis.
Question 5 asks the deponent whether she authorized
her attorney to file Defendants' Answer in her behalf. Arguably, this question requests disclosure of a communication from Ms. Trabich to her counsel. Whether the communication, presuming such occurred, was in confidence is
unknown; Ms. Trabich has not provided information to
elucidate this point. However, giving her the benefit of the
doubt, the Court would expect her to claim that this
communication with her attorney was in confidence.
Consequently, the MOTION TO COMPEL is DENIED as
to Question 5. Even so, the Court observes that she has
given it no reason not to believe that she consented to the
filing of the Answer on her behalf, and until the Court
receives reliable information to the contrary, it will continue to assume that is the case. If Ms. Trabich were to
contest consent on that point, though, then she would put
into issue a communication between her and her attorney,
thereby waiving the attorney-client privilege.
Question 7 asks Ms. Trabich whether she authorized
her attorney, Jay Russ, to send to a third party a statement
of her and her husband's financial condition. What is not at
issue is the contents of the financial statement, which was
disclosed to Plaintiffs. Preliminarily, the Court presumes
that this communication may be considered a confidential
communication between attorney and client for the purpose of obtaining legal services; therefore, it falls within
the attorney-client privilege. Plaintiffs have offered two
rationales for compelling an answer to this question. The
first is that Ms. Trabich waived any privilege attaching to
her authorization to Russ because whether he was authorized was put into issue by her. (Paper No. 127 Supp. Mem.
p. 9.) Plaintiffs assert:
In response to questions about the contents of the financial condition statement, Mrs. Trabich invoked the
spousal privilege. Thus, the fact of whether she authorized Mr. Russ to deliver this document to a third party
bears on whether any spousal communications about the
contents of the statement were intended to be confidential.
*7 (Id. p. 9 n. 6, 837 N.Y.S.2d 15 (citations omitted).)
Plaintiffs' argument appears to conflate the two, distinct
privileges at issue, i.e., attorney-client privilege and
spousal communications privilege. To the extent the Court
understands this argument, Plaintiffs seem to be saying
that any privilege for spousal communications regarding
the contents of the statement was lost when Ms. Trabich
authorized Russ to send the statement to a third party. This
is not a compelling argument. Conversations between Mr.
and Ms. Trabich about the statement's contents are separate
from any communication between Ms. Trabich and Russ
regarding whether to send the statement to a third party.
Because they are separate communications implicating
separate privileges, the Court fails to see how the one
communication acts as a waiver of the other communication's privilege.
The second argument offered by Plaintiffs on Question 7 is that an attorney-client privilege covering Ms.
Trabich's authorization to Russ to send the financial
statement to a third party is unavailable to her under the
crime-fraud exception to the privilege. See Surgical Design Corp. v. Correa, 21 A.D.3d 409, 799 N.Y.S.2d 584,
586 (N.Y.App.Div.2005) (noting that client communications in furtherance of a fraudulent scheme are not protected by the attorney-client privilege). Specifically,
Plaintiffs say that “any privilege that may have inhered in a
communication by Mrs. Trabich to Mr. Russ is obviated by
the crime-fraud exception ... because the Trabiches sought
Mr. Russ's services in furtherance of their fraudulent
scheme .” (Id. p. 9, 799 N.Y.S.2d 584.) The Court faced a
similar contention when it ruled upon Plaintiffs' motion to
compel in reference to Mr. Trabich's deposition. In that
earlier proceeding, the Court noted that the only question
that seemed to be aimed at communications in furtherance
of a fraudulent scheme was broadly worded and could
encompass legitimate attorney-client communications;
additionally, the undersigned indicated a lack of information before it from which a conclusion could be drawn
about the existence of a fraudulent scheme. (Paper No.
126, pp. 2–3.) Defendants have interpreted the latter point
as the Court's rejection of a crime-fraud exception to the
attorney-client privileges claimed in this case. (Paper No.
133, p. 23.) That interpretation is more expansive than
what the Court intended, which was not to foreclose assertion of the argument but was, instead, only to note that it
could not make a conclusive determination of the issue
based upon the facts of which the undersigned was then
aware.
The Court first must consider the process involved in
deciding whether to apply the crime-fraud exception to the
attorney-client privilege. This process is described in In re
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Grand Jury Proceedings, Thursday Special September
Term 1991, 33 F.3d 342 (4th Cir.1994):
All of our prior decisions indicate that the crime-fraud
exception can be invoked on the basis of a prima facie
showing of fraud or crime. We do not require absolute
proof of fraud or crime. A prima facie showing, however, does seem to contemplate an opportunity to rebut,
or a shifting of the burden. Initially, the party asserting a
privilege bears the burden of establishing that privilege.
Likewise, the party invoking the crime-fraud exception
to the privilege bears the initial burden of making a
prima facie showing of fraud or crime. The crime-fraud
standard does seem to contemplate the possibility that
the party asserting the privilege may respond with evidence to explain why the vitiating party's evidence is not
persuasive.
protective order, filed after the November 4 Order, they
provided reference to an earlier filing, ruled upon by the
presiding judge in the case, that contained additional information regarding the conduct of Defendants. (Paper
Nos. 102, 123, 130, p. 1.) The timeline and details in Paper
No. 102 evidence a troubling course of conduct from
which one could infer that the Trabiches have dealt improperly with various creditors, including the Plaintiffs,
and that they have utilized the services of Russ's firm in
this endeavor.FN5
FN5. The Court offers no opinion on whether
Russ shares any culpability with the Trabiches for
their conduct, nor is that consequential to its
analysis. “[T]he attorney-client privilege may be
vitiated without showing that the attorney knew
of the fraud or crime.” In re Grand Jury # 5, 401
F.3d 247, 252 (4th Cir.2005).
*8 Id. at 352 (footnote omitted).
Unlike the Grand Jury Thursday Special case, the
proponents of the crime-fraud exception here did not
submit their evidence ex parte to the Court; instead,
Plaintiffs relied solely upon material in court filings. Thus,
it cannot be said that Defendants have not had an opportunity to respond with evidence to explain why Plaintiffs'
evidence is not persuasive, presuming that Plaintiffs have
established a prima facie case. Nevertheless, to the extent
that the November 4 Order could be interpreted as conclusive on the point, at least at the discovery stage, the
Court could, in an abundance of caution, offer an additional opportunity to Defendants to refute Plaintiffs' evidence. The Court, however, believes that resolution of the
matter is possible without resorting to protracted proceedings.
Plaintiffs have theorized that the Trabiches intended to
defraud them of a million dollars when they entered into
the May 2006 Facility Agreement and that their actions
since, including the $500,000 mortgage note to Gordon
Lenz and the New York lawsuit to declare the Agreement
unenforceable, were designed to achieve their goal. In the
current motion, Plaintiffs have referred to information that
is helpful in addressing the issue of crime-fraud exception.
Plaintiffs indicate that the law firm to whom Russ sent the
financial statement was one “which specializes in, among
other things, bankruptcy and restructuring.” (Paper No.
134, p. 10.) That fact could be an indicator that the Trabiches intended to declare bankruptcy, thereby putting into
jeopardy repayment of the loan balance due to Plaintiffs.
Also, when Plaintiffs responded to Defendants' motion for
Is the foregoing sufficient to establish a prima facie
case of fraud? The Fourth Circuit's decision in Duplan
Corp. v. Deering Milliken, Inc., 540 F.2d 1215 (4th
Cir.1976), offers some guidance on that point:
[W]hile a prima facie showing need not be such as to
actually prove the disputed fact, it must be such as to
subject the opposing party to the risk of non-persuasion
if the evidence as to the disputed fact is left unrebutted.
While such a showing may justify a finding in favor of
the offering party, it does not necessarily compel such a
finding.
Id. at 1220 (emphasis added) (citations omitted).
Although the evidence provided by Plaintiffs strikes
the Court as perhaps sufficient to justify a finding in their
favor, the Court is not persuaded that the evidence compels
that result. This is a close call, but the circumstances
counsel modesty and caution because once the privilege is
ruled invalid, any damage from compelled disclosure
cannot be undone. When considering the two options, the
route taken here does the lesser harm. Of particular concern in the Court's analysis is that a conclusion at this point
whether fraud has occurred precedes a fact-finder's decision on the ultimate issue of fraud. The choice made here is
not irrevocable, however. The Court's determination now
that the crime-fraud exception does not apply to the Trabiches' relationship with Russ does not preclude a later,
contrary finding by the presiding judge at trial, where he
will have the advantage of observing the witnesses and
hearing their testimony. See Duplan, 540 F.2d at 1222. In
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light of the Court's conclusion, the MOTION TO COMPEL is DENIED as to Question 7. The Court, though, notes
the following caveat: If Ms. Trabich were to deny authorization to Russ for transmitting the financial statement to
Monzack, Mersky, then she would put that communication
into issue, and even if she could otherwise claim privilege
for it, the privilege would then be defeated.
*9 Question 10 was, “I would like you to tell me what
your attorney said to you with regard to the sentence ‘the
transaction was based entirely upon the credit of Gerald
David and his wife which Wachovia accepted as security
for the credit facility’?” In isolation, the question could be
interpreted as asking for an attorney-client communication.
However, it is clear from the context in which the question
was posed that Ms. Trabich had claimed an attorney-client
privilege for a statement in an affidavit that she had sworn
was based upon personal knowledge. (Paper No. 127, Exh.
1, 204:21–205:6 .) As observed earlier, Ms. Trabich cannot
testify to something while claiming a shield of privilege for
the basis of her testimony. On that ground alone, the claim
of privilege is invalid. In addition, Ms. Trabich acknowledged that Jay Russ was not her attorney on December 26,
2007, when she signed the affidavit (Id. 208:11–209:7),
and she failed to put on the record any facts to show that
she was in a client relationship with any other attorney.
Thus, she cannot claim privilege as to Question 10, and the
MOTION TO COMPEL as to that question is GRANTED.
Question 11 was premised upon a statement by one of
the Plaintiffs, Aaron Young, to Jay Russ, the contents of
which were reflected in Ms. Trabich's affidavit. (Id.
231:10–18.) Plaintiffs' counsel effectively asked, when did
Russ relay that communication to her. Given that the
contents of the communication are not confidential, any
argument that the timing of the relay of that communication is somehow privileged is illogical. The MOTION TO
COMPEL is GRANTED as to Question 11.
Question 13 asks when did Ms. Trabich speak with
counsel in preparation for her deposition. Defendants asserted attorney-client privilege for this question but have
failed to argue to the Court the rationale for that assertion.
Since it was acknowledged that Ms. Trabich spoke with
counsel to prepare for her deposition (Paper No. 127, Exh.
1, 256:22–257:2, 261:24–262:2), and since the question
did not seek disclosure of confidential communications
between client and counsel, Defendants have not established that the timing of the deposition preparation impinges upon the attorney-client privilege. The MOTION
TO COMPEL as to Question 13 is GRANTED.
B.
The Court next addresses the spousal communications
privilege. Under New York law,
A husband or wife shall not be required, or, without
consent of the other if living, allowed, to disclose a
confidential communication made by one to the other
during marriage.
N.Y. C.P.L.R. 4502(b) (McKinney 2007). The rule
requires any waiver to be joint. Advisory Committee Notes
to N.Y. C.P.L.R. 4502. The rule protects only confidential
communications.
The statutory privilege does not protect “all the daily and
ordinary exchanges between the spouses, but merely
those which would not have been made but for the absolute confidence in, and induced by, the marital relationship.” Not forbidden are “ordinary conversations
relating to matters of business which there is no reason to
suppose [one spouse] would have been unwilling to hold
in the presence of any person.”
*10 Fed. Dept. Stores, Inc. v. Esser, 96 Misc.2d 567,
409 N.Y.S.2d 353, 354–55 (N.Y.Sup.Ct.1978) (citations
omitted).
Plaintiffs have referred in their Motion to forty-six
instances when questions posed to Ms. Trabich resulted in
a claim of spousal privilege. (Paper No. 127 Supp. Mem.
pp. 2–4.) These questions will not be addressed individually here. Defense counsel's position during the deposition
was, “If it comes from a communication with her spouse, I
am going to assert spousal privilege.” (Paper No. 127, Exh.
1, 126:12–14.) Clearly, such a position is not congruent
with applicable law; its overbreadth is apparent because it
seeks to apply the privilege to every communication between Mr. and Ms. Trabich. The Court has reviewed the
entire deposition of Ms. Trabich and has concluded that
she has failed to establish entitlement to the privilege for
any of the questions posed that are in contention in Plaintiffs' Motion. To the extent that Plaintiffs' counsel tried to
obtain information to test the privilege, Ms. Trabich's usual
response was, “I don't recall.” It bears repeating that the
party claiming a privilege has the burden of proving a valid
basis for the claim. Defendants have failed to do so. The
Court could potentially be convinced that the privilege
applies in some instances of communication between the
Trabiches, but Defendants have not put on the record the
requisite specific information that would allow a
thoughtful analysis of the privilege's applicability.
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If Plaintiffs reconvene Ms. Trabich's deposition, then
Defendants may not assert the spousal communications
privilege unless the record contains specific facts that
validate the assertion of privilege. Moreover, the privilege
does not protect underlying facts from disclosure and may
not be used in a blanket fashion to shield information about
business transactions or other such events. See G–Fours,
Inc. v. Miele, 496 F.2d 809, 811–13 (2nd Cir.1974) (applying New York law and holding that inquiry of judgment
debtor's spouse as to existence and location of her husband's bank accounts and his ownership and transfer of
property did not invade marital privilege). In addition,
questions about the basis of testimonial assertions in affidavits, pleadings, or depositions may not be avoided by the
claim of privilege. See this Letter Order, supra, p. 7. Finally, the deposition of Ms. Trabich is subject to the ruling
made earlier by the Court during the deposition of Mr.
Trabich as to the lack of spousal privilege for matters to
which Aaron Young was within the orbit of confidence, i.e
., discussions between the Trabiches regarding the May
2006 Facility Agreement prior to its signing. (Paper No.
126, p. 7.)
As to all of the questions to which Defendants have
asserted spousal communications privilege, the Court
denies their objections and GRANTS Plaintiffs' MOTION
TO COMPEL.
C.
Plaintiffs have also argued that Defendants' counsel,
in one instance, improperly instructed Ms. Trabich not to
answer on the ground of relevancy and, in another instance, improperly coached her not to answer due to a
claimed privilege when the real objection to the question
was based on relevancy. (Paper No. 127 Supp. Mem. p. 4 .)
The first instance was Question 13, which asked Ms. Trabich when she met with counsel in preparation for her
deposition. Counsel made a two-prong objection based on
attorney-client privilege and on relevancy. (Paper No. 127,
Exh. 1, 259:9–266:8.) The Court does not agree that the
instruction not to answer was premised upon relevancy; a
reasonable interpretation of defense counsel's statement is
that, while he objected on both grounds, the instruction not
to answer was based upon attorney-client privilege. The
propriety of the objection as to attorney-client privilege has
been addressed supra, page 12.
*11 The second instance was in response to a series of
questions about various golf course operations overseen by
Mr. Trabich or the Trabiches together. The question posed
was, “Given your definition of successful as you have just
identified it for me, is Northport still a successful operation?” (Id. 15:23–16:2.) Defendants' counsel objected on
the ground of relevancy in a long discourse and colloquy
with Plaintiffs' counsel, in the presence of the deponent.FN6
(Id. 16:3–19:7.) Defense counsel then said:
FN6. Defendants' counsel have noted several instances when Ms. Trabich was asked to step out
of the deposition room. (Paper No. 133, p. 25 n.
5.) This was not one of them.
If you can answer that question without revealing a
communication with your husband and/or your counsel,
I will let you answer that question.
(Id. 19:8–14.) Given that Ms. Trabich had not asserted
privilege to the question, it was improper for defense
counsel to coach her in this fashion. See Fed.R.Civ.P.
30(c)(2) (“An objection must be stated concisely in a
nonargumentative and nonsuggestive manner.”) and
1993 Advisory Committee Note (“Depositions frequently have been unduly prolonged, if not unfairly
frustrated, by lengthy objections and colloquy, often
suggesting how the deponent should respond.”). The
Court's conclusion is reinforced by reference to the Local Rules:
During the taking of a deposition, it is presumptively
improper for an attorney to make objections which are
not consistent with Fed.R.Civ.P. 30(d)(1) [now 30(c)(2)
]. Objections should be stated as simply, concisely and
non-argumentatively as possible to avoid coaching or
making suggestions to the deponent, and to minimize
interruptions in the questioning of the deponent .... If an
attorney desires to make an objection for the record
during the taking of a deposition that reasonably could
have the effect of coaching or suggesting to the deponent
how to answer, then the deponent, at the request of any
of the attorneys present ... shall be excused from the
deposition during the making of the objection.
D. Md. Loc. R.App. A, Guideline 5b. Counsel is cautioned to observe these rules or to risk imposition of
sanctions.
D.
Accordingly, Plaintiffs' MOTION TO COMPEL is
DENIED as to Question 5, Question 7, and Question 8 and
GRANTED in all other respects. The Court declines to
award attorneys' fees. Anticipating that Defendants may
file a motion to limit the length of a second deposition of
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Ms. Trabich, the Court concludes that at least half of her
first deposition was spent in unmeritorious objections and
argument by Defendants' counsel. Therefore, Plaintiffs
shall be permitted to depose Ms. Trabich for an additional
three-and-one-half hours.
Despite the informal nature of this letter, it should be
flagged as an opinion and docketed as an Order.
D.Md.,2009.
Saint Annes Development Co., LLC v. Trabich
Not Reported in F.Supp.2d, 2009 WL 324054 (D.Md.)
END OF DOCUMENT
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