SPV-LS, LLC v. Transamerica Life Insurance Company
Filing
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ORDER granting in part and denying in part 252 Motion to Compel. Signed by US Magistrate Judge Veronica L. Duffy on 8/11/2016. (CG)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
SPV-LS, LLC,
4:14-CV-04092-LLP
Plaintiff,
vs.
TRANSAMERICA LIFE INSURANCE
COMPANY,
vs.
Defendant and ThirdParty Plaintiff,
ORDER ON MOTION TO COMPEL
BRIAN DONOHOE TO COMPLY WITH
SUBPOENA
DOCKET NO. 252
NACHMAN BERGMAN, as Trustee of The
N Bergman Insurance Trust dated
December 18, 2006; MALKA
SILBERMAN, as Successor Trustee of The
N Bergman Insurance Trust dated
December 18, 2006; LIFE TRADING
TRUST, dated August 8, 2007; T-LEG,
LLC, a/k/a TLEG LLC; FINANCIAL LIFE
SERVICES, LLC; SPV II LLC; and THE
REPRESENTATIVE OF THE ESTATE OF
NANCY BERGMAN,
Third-Party
Defendants.
INTRODUCTION
This diversity matter is pending before the court on the complaint of plaintiff
SPV-LS, LLC. See Docket No. 1. Plaintiff and third-party defendants Life Trading
Trust, Financial Services, LLC, and SPV II LLC (collectively the Krasnerman
Entities), served on Sioux Falls, South Dakota, attorney Brian Donahoe a
subpoena duces tecum seeking the production of “all retainer agreements, invoices,
proof of payments, and non-privileged client communications with respect to your
representation of the N. Bergman Insurance Trust, Nachman Bergman, Malka
Silberman, and/or the Estate of Nancy Bergman in any proceeding involving life
insurance on the life of Nancy Bergman.” See Docket No. 254-1 at p. 3.
Mr. Donahoe objected to the subpoena. Docket No. 254-6 at pp. 5-7. The
Krasnerman Entities then filed a motion to compel Mr. Donahoe to comply with
the subpoena. See Docket No. 252.
The district court, the Honorable Lawrence L. Piersol, referred the motion to
this magistrate judge for decision. See Docket No. 276. This court has authority
to rule on the motions pursuant to the October 16, 2014, standing order of the
Honorable Karen E. Schreier, district judge, and 28 U.S.C. § 636(b)(1)(A).
FACTS
A thumbnail sketch of the facts of this action, recited only to provide
context for discussion of the discovery disputes, is as follows. Nancy Bergman,
a school teacher of modest means, obtained a $10 million life insurance policy
on herself from defendant Transamerica Life Insurance Company and placed
that policy into the N. Bergman Insurance Trust dated December 18, 2006.
Nancy’s grandson, third party defendant Nachman Bergman, was the
beneficiary and trustee of the trust. Allegedly, Malka Silberman took over as
trustee of the trust in 2008, though that is a disputed fact. Transamerica
claims it was never notified of the change in the identity of the trustee until
after Nancy’s death in 2014.
Nancy also apparently obtained a $5 million insurance policy on her life
from another insurer, Sun Life Assurance Company, and also placed that
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policy into a trust. That policy is not part of this District of South Dakota
litigation. Separate litigation concerning the Sun Life policy is pending in the
District of New Jersey. See Sun Life Assurance Co. of Canada v. Wells Fargo
Bank, N.A. as Securities Intermediary, 3:14-CV-05789-PGS-LHG (D.N.J.).
Regarding the Transamerica policy at issue in this litigation, in 2009,
Nachman is alleged to have sold the insurance policy from the N. Bergman
trust to FLS. After the sale, FLS discovered that the premiums on Nancy’s life
insurance policy had not been paid. It also discovered that Nachman’s
representations that Nancy was on death’s doorstep were inaccurate.
Nachman, for his part, denies that he ever entered into these transactions with
FLS, suggesting an imposter posing as Nachman dealt with FLS. He claims
someone forged his signature to the pertinent sale documents involving FLS.
FLS brought suit against the trust in federal district court for the
Eastern District of New York. Default was entered against the trust because it
never answered. Thereafter, an auction of Nancy’s life insurance policy was
held in 2012. FLS bought the policy at the auction for $1.19 million. FLS then
transferred the policy to the plaintiff herein, SPV-LS, LLC.
On April 6, 2014, Nancy died. Thereafter, both SPV-LS, LLC and Malka
Silberman on behalf of the trust, submitted claims to Transamerica for the
policy proceeds. SPV-LS, LLC brought this suit against Transamerica in this
court, alleging a claim of breach of contract. Transamerica interpleaded the
policy proceeds and sued Nachman, Ms. Silberman, Nancy’s estate, and other
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third-party defendants, alleging that Transamerica was unable to determine
which of the claimants was legitimately entitled to the proceeds of the policy.
A series of lawyers in New York have allegedly represented the trust,
though Ms. Silberman now claims she never hired these New York lawyers. In
this litigation, a succession of lawyers have made appearances on behalf of
Ms. Silberman. First attorneys Pamela Reiter and Ronald Parsons appeared.
They withdrew after thirteen months. Then after a month’s lapse, Matthew
Dorothy appeared. Mr. Dorothy withdrew less than five months later. Andrew
Citron of New York purported to represent Ms. Silberman and communicated
with counsel for other parties in that capacity (see Docket No. 198), but
Mr. Citron never formally entered a notice of appearance in this case. On April
8, 2016, Aaron Twersky of New York City and James Moore, as local counsel,
noticed their appearance on behalf of Ms. Silberman. The estate of Nancy
Bergman has been represented from September 18, 2015, until the present by
Mr. Donahoe and Mr. Gerald Kroll.
A number of subpoenas duces tecum were issued to lawyers in
connection with the litigation surrounding the life insurance policies on Nancy
Bergman. In the New Jersey litigation, the attorneys for Sun Life served Sioux
Falls attorney Pamela Reiter (fka Bollweg) with a subpoena duces tecum
requesting documents relating to any life insurance policy on Nancy Bergman’s
life. See Sun Life Assurance Co. of Canada v. Wells Fargo Bank N.A. as
Securities Intermediary, 4:15-mc-00116-KES, Docket No. 1-1 (D.S.D.).
Ms. Reiter moved to quash the subpoena and for a protective order, asserting
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the documents requested were protected by the attorney-client privilege or the
work product doctrine. Id. at Docket No. 1. Judge Schreier denied the motion
to quash and denied the request for a protective order, holding that Ms. Reiter
had not demonstrated that the documents were protected.1 Id. at Docket No.
7.
In this litigation, the Krasnerman Entities served subpoenas duces tecum
on three New York attorneys, Nelson Bloom, Stuart Davis, and Andrew Citron,
who either had previously represented Malka Silberman or the N. Bergman
Trust, or who were alleged to have done so. See In re: Rule 45 Subpoenas
Issued to Nelson Bloom, Stuart Davis, and Andrew Citron, 1:16-mc-00156-P1
(S.D.N.Y.). Those attorneys resisted the subpoenas on grounds of attorneyclient privilege and work product doctrine. The Krasnerman Entities moved to
compel compliance with the subpoenas in federal district court for the
Southern District of New York.2 The Honorable Katherine B. Forrest, United
States District Judge, found the documents requested were not protected and
ordered the three attorneys to comply with the subpoenas. Id. at Docket No.
20.
The proper forum for a motion to compel compliance with a subpoena, or for
a motion to quash a subpoena, is the district court where compliance with the
subpoena is required. See FED. R. CIV. P. 45(d)(2)(A)(i) and (d)(3). Because the
subpoena issued in connection with the District of New Jersey case required
compliance in the District of South Dakota, the motion to quash was properly
venued here. Id.
1
Because the subpoenas required compliance in New York, the proper forum
for a motion to compel compliance with the subpoenas was New York. See
Footnote 1, supra.
2
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The Krasnerman Entities also served Sioux Falls attorneys Matthew
Dorothy and Alan Peterson with subpoenas duces tecum. Those two attorneys
voluntarily complied with the subpoenas, asserting attorney-client privilege and
work product doctrine arguments as to only a portion of the documents
requested in the subpoenas. The Krasnerman Entities filed motions to compel
further compliance with those subpoenas. See Docket Nos. 258 & 261. The
court ordered both attorneys to provide additional documents responsive to the
subpoenas. See Docket Nos. 309, 310 & 321.
The Krasnerman Entities also served Pamela Reiter and Ronald Parsons
with subpoenas duces tecum. Ms. Reiter and Mr. Parsons served as counsel of
record for third-party defendants Nachman Bergman and Malka Silberman in
this case from September 25, 2014, until October 20, 2015. See Docket Nos.
41, 42 & 111. Both attorneys resisted the subpoenas on the basis of attorneyclient privilege and work product doctrine. See Docket No. 303. The court
granted the motion to compel compliance with the subpoenas in part. See
Docket No. 327. Specifically, the court ordered Ms. Reiter and Mr. Parsons to
produce bank records, retainer agreements, and client invoices. Id. The court
allowed redactions of the client invoices as necessary to protect trial strategy
and attorney recommendations, so long as those redactions were accompanied
by a privilege log. Id. The court now considers the subpoena served on
Mr. Donahoe.
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DISCUSSION
A.
Rule 45
Rule 45 of the Federal Rules of Civil Procedure provides the procedure for
serving subpoenas on nonparties. See FED. R. CIV. P. 45(a) and (b). The same rule
also describes by what procedure a nonparty served with a subpoena may assert
an objection to that subpoena. See FED. R. CIV. P. 45(d)(2)(B). Objections to
producing documents pursuant to a subpoena must be served on the party issuing
the subpoena within 14 days after the subpoena is served or prior to the time
specified for compliance with the subpoena. Id. After an objection is made, the
party which issued the subpoena may bring a motion for an order compelling
compliance with the subpoena. See FED. R. CIV. P. 45(d)(2)(B)(i).
Rule 45 specifies what is required if a party withholds subpoenaed
documents under a claim that it is privileged or subject to protection as trialpreparation material. See FED. R. CIV. P. 45(e)(2)(A). The party must (1) expressly
make the claim of privilege and (2) describe the nature of the documents being
withheld in such a manner that does not reveal information that is privileged or
protected, but which allows the parties to assess the claim of privilege. Id.
B.
Brian Donahoe Subpoena
1.
Meet and Confer “Requirement”
In responding in opposition to the Krasnerman Entities’ motion to compel,
Mr. Donahoe cites Rule 37 and argues that the motion should be denied because
the movants did not attempt to meet and confer with him prior to filing the motion.
See Docket No. 301 at p. 3. However, with regard to a subpoena, the operative
Rule of Civil Procedure is Rule 45, not Rule 37. Rule 45 contains no requirement
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that the party serving the subpoena meet and confer with the person on whom the
subpoena was served prior to filing a motion to compel. See FED. R. CIV. P.
45(d)(2)(B)(i).
The provisions of Rule 37 specifically apply to discovery sought under Rules
26, 30, 31, 33 and 34 of the Rules of Civil Procedure. See FED. R. CIV. P. 37(a)(3).
Here, discovery is sought pursuant to Rule 45, not one of the rules specifically
mentioned in Rule 37. In addition, this court’s local rule regarding the meet and
confer requirement states that “parties” must confer in good faith before a
discovery motion is filed. See DSD LR 37.1. Here, it is Mr. Donahoe from whom
the discovery is sought. He is not a party to this litigation; rather, he is an
attorney for one of the parties. The court concludes that Krasnerman Entities’
failure to meet and confer with Mr. Donahoe (if in fact that failure occurred) is not
an impediment to this court’s consideration of the motion.
2.
Attorney Work Product and Attorney-Client Privilege
As of the date the Krasnerman Entities filed this motion to compel,
Mr. Donahoe had not provided any documents in response to the subpoena. He
also had not produced any privilege log. In reference to the lack of a privilege log,
he claims that any privilege log would itself necessarily reveal the protected work
product. After the motion to compel was filed, Mr. Donahoe produced some
records, many heavily redacted. Again, no privilege log was provided to support
the claim of privilege with regard to the redactions.
Mr. Donahoe also claims he is “only” local counsel for the Estate. He
asserts he only has three categories of documents in his possession:
(1) communications with co-counsel Gerald Kroll, (2) pleadings filed in the court’s
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docket, and (3) communications with counsel for other parties in this matter. As
to the latter two categories of documents, Mr. Donahoe asserts that those
documents are already in the possession of the Krasnerman Entities either
because they have been electronically served on them (i.e. pleadings) or because
they were sent to them directly (communications). As to the communications
between Mr. Kroll and Mr. Donahoe, he asserts these communications are
attorney work product which reveal counsel’s trial strategy and legal theories. He
further asserts that the communications between himself and Mr. Kroll number in
the thousands and it would be unduly burdensome for him to produce a privilege
log for those communications.
It is hard to see how communications between Mr. Donahoe and Mr. Kroll
are called for by the subpoena. The subpoena, to repeat, asks for: “all retainer
agreements, invoices, proof of payments, and non-privileged client
communications with respect to your representation of the . . . Estate of Nancy
Bergman in any proceeding involving life insurance on the life of Nancy Bergman.”
See Docket No. 254-1 at p. 3. Co-counsel Gerald Kroll is not Mr. Donahoe’s client
herein; the Estate of Nancy Bergman is Mr. Donahoe’s client. See Docket No. 302
at p. 3, ¶ 6 (Affidavit of Brian Donahoe stating “My client is the Estate of Nancy
Bergman.”). The person appointed as the representative of the estate is Sym Jared
Bergman. Id. at p. 2, ¶ 2. Therefore, “non-privileged client communications with
respect to [Donahoe’s] representation of the . . . Estate” would be communications
between Donahoe and Sym, of which Mr. Donahoe asserts there are no such
communications. The subpoena does not even ask for communications between
the two lawyers, Kroll and Donahoe. To the extent the subpoena did request such
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documents, it specifies that it is requesting only those communications that are
non-privileged. This issue is a red herring.
Mr. Donahoe’s assertions do not explain why he cannot produce the retainer
agreement, billing statements, and proof of payments in his case, even if those
must be redacted in some fashion. Rule 45 does not allow one responding to a
subpoena to assert a privilege and not comply with the requirement of a privilege
log. See FED. R. CIV. P. 45(e)(2)(A). Counsel has not complied with this
requirement. Counsel can certainly provide a privilege log that does not disclose
attorney work product or attorney-client privilege but that describes the
documents being withheld sufficiently to allow the Krasnerman Entities to
evaluate the claim of privilege. If portions of a document are not privileged, the
document should be redacted to provide the portion that is not protected; a
privilege log should be provided to cover the portion of any document being
redacted.
Mr. Kroll, who practices law in the state of California, has submitted a
declaration stating that, under California law, attorney retainer agreements are
protected by the attorney-client privilege. See Docket No. 251. However, the
subpoena at issue here was served on Mr. Donahoe, not Mr. Kroll. The
Krasnerman Entities’ motion to compel does not seek to obtain Mr. Kroll’s retainer
agreement with the Estate. It seeks to obtain Mr. Donahoe’s retainer agreement.
That retainer agreement was entered into in South Dakota and, by Mr. Donahoe’s
own assertions, nearly all the work Mr. Donahoe has done on behalf of the Estate
has been done in the state of South Dakota. Even Mr. Donahoe asserts that South
Dakota state law regarding attorney-client privilege applies to the disclosure of his
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retainer agreement. See Docket No. 301 at p. 8. The court agrees South Dakota
law controls the substantive law of attorney-client privilege.
In a diversity case such as this, state law controls the question of attorneyclient privilege. Baker v. Gen. Motors Corp., 209 F.3d 1051, 1053 (8th Cir. 2000).
The party asserting the privilege has the burden of demonstrating a factual basis
for the privilege. State v. Rickabaugh, 361 N.W.2d 623, 624 (S.D. 1985). To
establish the privilege applies, four elements must be established: (1) a client, (2)
who made a confidential communication, (3) to facilitate the rendition of
professional legal services to the client, (4) between the client and the attorney.
Nylen v. Nylen, 873 N.W.2d 76, 79 n.1 (S.D. 2015). Absent unusual
circumstances, fee agreements between lawyer and client have been held not to
come within the attorney-client privilege in South Dakota. See Matter of Discipline
of Rensch, 333 N.W.2d 713, 715-16 (S.D. 1983) (citing Hedges v. Hedges, 209
N.W.2d 660 (S.D. 1973); Higgs v. Bigelow, 164 N.W. 89 (S.D. 1917)).
Here, Mr. Donahoe has not carried his burden of showing why his retainer
agreement, his billing statements, or payment receipt documents come within the
purview of the attorney-client privilege instead of coming within the purview of the
normal rule that fee agreements are generally not privileged. These documents
must be produced pursuant to the subpoena.
CONCLUSION
Based on the foregoing law, facts and analysis, it is hereby
ORDERED that the Krasnerman Entities’ motion to compel as to Mr.
Donahoe [Docket No. 252] is granted in part and denied in part as follows:
Documents already in the possession of the Krasnerman Entities’ (pleadings and
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communications to them or on which they are copied) need not be reproduced.
The remaining documents described in the subpoena shall either be produced to
the Krasnerman Entities within 15 days from the date of this order, or a privilege
log in compliance with Rule 45 must be served on the Krasnerman Entities, also
within 15 days from the date of this order. If a particular document contains both
privileged and nonprivileged material, the document shall be produced with the
privileged portion redacted and a privilege log provided for the redaction.
NOTICE OF RIGHT TO APPEAL
Pursuant to 28 U.S.C. ' 636(b)(1)(A), any party may seek reconsideration
of this order before the district court upon a showing that the order is clearly
erroneous or contrary to law. The parties have fourteen (14) days after service
of this order to file written objections pursuant to 28 U.S.C. ' 636(b)(1)(A),
unless an extension of time for good cause is obtained. See FED. R. CIV. P.
72(a); 28 U.S.C. ' 636(b)(1)(A). Failure to file timely objections will result in
the waiver of the right to appeal questions of fact. Id. Objections must be
timely and specific in order to require review by the district court. Thompson
v. Nix, 897 F.2d 356 (8th Cir. 1990); Nash v. Black, 781 F.2d 665 (8th Cir.
1986).
DATED August 11, 2016.
BY THE COURT:
VERONICA L. DUFFY
United States Magistrate Judge
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