Privilege & Work Product Apply to Public Relations Firm — Log Must Show All Elements of Priv. — Detailed Discussion of Fiduciary Exception (Inapt in Securities Fraud Case), Waiver, Predominant Business v. Legal Purpose, Crime-Fraud
Pearlstein v. Blackberry Ltd., 2019 U.S. Dist. LEXIS 45098, 2019 WL 1259382 (S.D.N.Y. March 19, 2019):
OPINION AND ORDER REGARDING BLACKBERRY'S PRIVILEGE DESIGNATIONS
KATHARINE H. PARKER, UNITED STATES MAGISTRATE JUDGE
This case is a putative class action alleging securities fraud brought pursuant to Section 10(b)(5) of the Securities and Exchange Act of 1934 (the "Exchange Act"). Plaintiffs contend that BlackBerry Limited ("BlackBerry") made various material misrepresentations and omissions concerning the 2013 launch of its Z10 smartphone in the United States which artificially inflated its stock price for a period of time. They identify four specific documents in which the alleged misrepresentations and omissions were made: BlackBerry's fiscal year 2013 financial results (published on March 28, 2013), an April 12, 2013 press release refuting a negative market research report published by Detwiler Fenton & Co. ("Detwiler") stating that Z10 [*3] return rates were exceptionally high (the "Detwiler Report"), BlackBerry's financial results for the first quarter of fiscal year 2014 (published on June 28, 2013), and an August 12, 2013 press release announcing a potential sale of the company, among other strategic alternatives being considered by BlackBerry's board. All of these documents were filed with the U.S. Securities and Exchange Commission ("SEC") via a Form 6-K.1 The Court assumes familiarity with other background facts and does not repeat them here. See Pearlstein v. BlackBerry Ltd., No. 13-cv-7060 (CM), 2019 U.S. Dist. LEXIS 45098, 2018 WL 1444401 (S.D.N.Y. Mar. 19, 2018); Pearlstein v. BlackBerry Ltd., 93 F. Supp. 3d 233 (S.D.N.Y. 2015), aff'd sub nom. Cox v. BlackBerry Ltd., 660 F. App'x 23 (2d Cir. 2016).
The procedural history of the case is lengthy. In brief, Defendants moved to dismiss the First Amended Complaint in March 2015, which the Court granted. (Doc. No. 54, 56, 59, 62, 63.) Plaintiffs appealed. In August 2016, the Second Circuit affirmed dismissal of the complaint but remanded on the issue of leave to amend in light of the U.S. Supreme Court's 2018 decision in Omnicare, Inc. v Laborers Dist. Council Constr. Indus. Pension Fund, 135 S. Ct. 1318, 191 L. Ed. 2d 253 (2015), which altered the standard for determining whether a statement of opinion is misleading for purposes of a securities fraud case. (Doc. No. 64.) Plaintiffs then requested permission to amend the complaint based on new information learned [*4] since filing the First Amended Complaint. Specifically, it had come to light that a former executive at Wireless Zone, a retailer that sold BlackBerry Z10s, illegally sold real-time data on Z10 returns to Detwiler and that real-time data was the basis for Detwiler's report that customers were returning Z10s at unusually high rates. The Court granted Plaintiffs' motion to amend the complaint. (Doc. No. 81.) BlackBerry then filed another motion to dismiss. In March 2018, the Court denied the motion on the ground that it was plausible BlackBerry had information about Z10 returns at Wireless Zone that contradicted its public statements made in the April 12, 2013 press release to the effect that customers were satisfied with the Z10 and return rates were at or below the company's forecasts and in line with the industry. Pearlstein, 2019 U.S. Dist. LEXIS 45098, 2018 WL 1444401, at *4. The parties then commenced discovery.
1. Burden of Demonstrating Privilege Through Privilege Log
The party withholding a document on the basis of attorney-client privilege or the work product doctrine bears the burden of establishing facts to demonstrate applicability of the protective rule. In re Grand Jury Subpoena Dated Jan. 4, 1984, 750 F.2d 223, 224-25 (2d Cir. 1984). Federal Rule of Civil Procedure 26(b)(5) and Local Civil Rule 26.2 require the party withholding a document to prepare a privilege log. The Local Civil Rule specifies that the party must provide complete identifying information, date, type of document, and subject matter in a privilege log at the time the party responds to discovery. Dey, L.P. v. Sepracor, Inc., No. 07-cv-2353 (JGK) (RLE), 2010 U.S. Dist. LEXIS 130330, 2010 WL 5094406, at *2 (S.D.N.Y. Dec. 8, 2010) (citing Local Civ. R. 26.2(c)). "The standard for testing the adequacy of the privilege log is whether, as to [*10] each document, it sets forth specific facts that, if credited, would suffice to establish each element of the privilege that is claimed." In re Methyl Tertiary Butyl Ether Prods. Liab. Litig., 274 F.R.D. 106, 112 (S.D.N.Y. 2011); Orbit One Commc'ns, Inc. v. Numerex Corp., 255 F.R.D. 98, 109 (S.D.N.Y. 2008) (a party must justify assertion of privilege by providing sufficient information by its adversary to assess any potential objections).
Where a properly prepared privilege log has been served, the withholding party's obligation to produce evidence to sustain its assertions of privilege is generally limited to those elements of the privilege or protection challenged by the adversary. 8 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure § 2016.1 at 318 n.1 (3d ed. 2010) (citing SEC v. Beacon Hill Asset Mgmt. LLC, 231 F.R.D. 134, 140 (S.D.N.Y. 2004)); ECDC Envtl., L.C. v. N.Y. Marine & Gen. Ins. Co., No. 96-cv-6033 (BSJ) (HBP), 1998 U.S. Dist. LEXIS 8808, 1998 WL 614478, at *3-4 (S.D.N.Y. June 4, 1998). A party may, however, submit additional affidavits or evidentiary material to support its claim of privilege if challenged. See Johnson Matthey, Inc. v. Research Corp., No. 01-cv-8115 (MBM) (FM), 2002 U.S. Dist. LEXIS 18802, 2002 WL 31235717, at *3 (S.D.N.Y. Oct. 3, 2002) ("[W]here the information in the log is insufficient to establish a factual basis for the privilege, the proponent of the privilege bears the burden of showing its applicability, a gap which often is filled through an affidavit or deposition testimony.").
[*11] 2. Attorney-Client Privilege
The attorney-client privilege protects communications between client and counsel made for the purpose of obtaining or providing legal advice that were intended to be and in fact kept confidential. In re County of Erie, 473 F.3d 413, 418-419 (2d Cir. 2007); United States v. Constr. Prods. Research, Inc., 73 F.3d 464, 473 (2d Cir. 1996). As the U.S. Supreme Court explained in Upjohn Co. v. United States, the privilege encourages full and frank communications between a client and counsel, which in turn promotes an understanding of and compliance with the law and the administration of justice. 449 U.S. 383, 389, 101 S. Ct. 677, 66 L. Ed. 2d 584 (1981). The privilege is narrowly construed, however, because it renders relevant information undiscoverable. Fisher v. United States, 425 U.S. 391, 403, 96 S. Ct. 1569, 48 L. Ed. 2d 39 (1976); In re County of Erie, 473 F.3d at 418.
The privilege applies to a company's communications with its external and in-house lawyers. But, in light of the two hats often worn by in-house lawyers, communications between a corporation's employees and its in-house counsel though subject to the attorney-client privilege must be scrutinized carefully to determine whether the predominant purpose of the communication was to convey business advice and information or, alternatively, to obtain or provide legal advice. If the former, the communication is not protected by the attorney-client privilege. In re County of Erie, 473 F.3d at 418, 420; In re Grand Jury Subpoena Duces Tecum, 731 F.2d 1032, 1036-37 (2d Cir. 1984). When determining the predominant purpose of a [*12] communication between a company's employees and its in-house lawyers, a court must assess the communication "dynamically and in light of the advice being sought or rendered, as well as the relationship between advice that can be rendered only by consulting legal authorities and advice that can be given by a non-lawyer." In re County of Erie, 473 F.3d at 420-421. The determination "also may be informed by the overall needs and objectives that animate the client's request for advice." Id. at 421. Importantly, the fact that a lawyer may highlight collateral non-legal risks and costs relating to "expense, politics, insurance, commerce, morals and appearances" or report "what other persons are doing or thinking about the matter" in the course of rendering legal advice does not compromise the privilege so long as the predominant purpose of the communication was to render legal advice. Id. at 420.
It is not just communications that are subject to the privilege. Internal investigation notes and documents also may be privileged. Because the "first step in the resolution of any legal problem is ascertaining the factual background and sifting through the facts with an eye to the legally relevant," Upjohn Co., 449 U.S. at 390-91, factual investigations conducted or directed by an attorney [*13] fall within the attorney-client rubric. Id. at 391 (employee factual responses to questionnaires from counsel in connection with internal investigation to provide legal advice protected by attorney-client privilege); Gucci Am., Inc. v. Guess?, Inc., 271 F.R.D. 58, 71 (S.D.N.Y. 2010) (citations omitted) (collecting cases).
Courts also have applied the privilege to communications among non-lawyer employees of a corporation where the purpose of the communication was to provide information to counsel or aid counsel in providing legal advice. Upjohn Co., 449 U.S. at 394; People's United Bank v. PeoplesBank, No. 08-cv-1858 (PCD), 2009 WL 10689492, at *2 (D. Conn. Dec. 28, 2009); see also Cuno, Inc. v. Pall Corp., 121 F.R.D. 198, 203 (E.D.N.Y. 1988) (attorney-client privilege protects the giving of information from an employee to a superior for transmission to lawyer if made for the purpose of securing legal advice, requested by corporate superior, provided within the scope of the employees' corporate duties and confidentiality maintained).
3. Work Product Doctrine
Pursuant to Rule 26(b)(3) of the Federal Rules of Civil Procedure, documents and tangible things prepared by a party or its representative in anticipation of litigation are protected under the work product doctrine. See Fed. R. Civ. P. 26(b)(3)(A); Welland v. Trainer, No. 00-cv-0738 (JSM), 2001 U.S. Dist. LEXIS 15556, 2001 WL 1154666, at *2 (S.D.N.Y. Oct. 1, 2001) (if document "was prepared 'because of existing or expected litigation" it is eligible for work product protection) [*14] (quoting United States v. Adlman, 134 F.3d 1194, 1202 (2d Cir. 1998)); see also Hickman v. Taylor, 329 U.S. 495, 67 S. Ct. 385, 91 L. Ed. 451 (1947) (establishing and articulating application of the work product doctrine). The key factor in determining applicability of this doctrine is whether the documents or things were prepared "with an eye toward" or "in anticipation of" or "because of the prospect of litigation." Hickman, 329 U.S. at 510-511; Schaeffler v. United States, 806 F.3d 34, 43 (2d Cir. 2015); Adlman, 134 F.3d at 1202. "[T]he doctrine is not satisfied merely by a showing that the material was prepared at the behest of a lawyer or was provided to a lawyer. Rather the materials must result from the conduct of 'investigative or analytical tasks to aid counsel in preparing for litigation.'" In re Symbol Techs., Inc. Sec. Litig., No. 05-cv-3923 (DRH) (AKT), 2017 U.S. Dist. LEXIS 50530, 2017 WL 1233842 (E.D.N.Y. Mar. 31, 2017) (quoting Wultz v. Bank of China Ltd., 304 F.R.D. 384, 393-94 (S.D.N.Y. 2015)). Thus, a court must determine if the materials would have been prepared in essentially similar form irrespective of the litigation. 2017 U.S. Dist. LEXIS 50530, [WL] at *8 (citing Adlman, 134 F.3d at 1202); Clarke v. J.P. Morgan Chase & Co., No. 08-cv-2400 (CM) (DF), 2009 U.S. Dist. LEXIS 30719, 2009 WL 970940, at *7 (S.D.N.Y. Apr. 10, 2009). But, unlike the rule for invoking attorney-client privilege, the predominant purpose of the work product need not be to assist with litigation to be protected; rather, the work product need only have been prepared or obtained because of the prospect of litigation. Adlman, 134 F.3d at 1202; In re Symbol Techs., Inc. Sec. Litig., 2017 U.S. Dist. LEXIS 50530, 2017 WL 1233842, at *8.
Work product comes in two forms. Opinion work product consists of the mental impressions, [*15] conclusions, opinions and legal theories of an attorney or other representative of a party and is given heightened protection. Fact work product consists of factual material, including the results of a factual investigation. This latter type of work product is subject to disclosure upon a showing of substantial need and an inability to obtain the equivalent without undue hardship. Upjohn Co., 449 U.S. at 400; Hickman, 329 U.S. at 511; In re Grand Jury Subpoena Dated July 6, 2005, 510 F.3d 180, 183-84 (2d Cir. 2007); Adlman, 134 F.3d at 1204.
Courts in the Second Circuit have held that "[a] substantial need exists 'where the information sought is "essential" to the party's defense, is "crucial" to the determination of whether the defendant could be held liable for the acts alleged, or carries great probative value on contested issues.'" Gucci Am., 271 F.R.D. at 74-75 (quoting Nat'l Cong. for Puerto Rican Rights v. City of New York, 194 F.R.D. 105, 110 (S.D.N.Y. 2000)). The documents must "have a unique value apart from those already in the movant's possession." FTC v. Boehringer Ingelheim Pharms., Inc., 778 F.3d 142, 155-56, 414 U.S. App. D.C. 188 (D.C. Cir. 2015). Disclosure is warranted only when the moving party makes a strong showing of the relevance and importance of the fact work product and that "it is likely to be significantly more difficult, time-consuming or expensive to obtain the information from another source." In re Aggrenox Antitrust Litig., No. 14-md-2516 (SRU), 2017 U.S. Dist. LEXIS 196151, 2017 WL 5885664 (D. Conn. Nov. 29, 2017) (internal citations omitted).
4. Exceptions [*16] to Privilege and Work Product Protection
Courts recognize several exceptions to privilege and work product protection which Plaintiffs say apply here. First, a party may waive privilege or work product protection by voluntarily disclosing otherwise protected information to a third party or injecting protected material into a litigation. The party asserting privilege has the burden of establishing that there has been no waiver. Egiazaryan v. Zalmayev, 290 F.R.D. 421, 427 (S.D.N.Y. 2013). Second, courts will not recognize the attorney-client privilege or work product protection if doing so would serve to hide a crime under the so-called crime-fraud exception. The burden of demonstrating applicability of the crime-fraud exception falls on the party seeking disclosure. In re Richard Roe, Inc., 68 F.3d 38, 40 (2d Cir. 1995). Third, in some circumstances, courts find that a party who stands in a fiduciary capacity vis-à-vis its adversary may not shield its attorney-client communications from disclosure if the communications relate to fiduciary matters. The party seeking documents under the fiduciary exception bears the burden of demonstrating good cause for disclosure. In re Omnicom Group, Inc. Sec. Litig., 233 F.R.D. 400, 412 (S.D.N.Y. 2006). Each of these exceptions is discussed in more detail below.
1. Circumstances Giving Rise to Waiver
Slightly different rules [*17] govern waiver of attorney-client privilege and work product protection. In the case of the attorney-client privilege, "if the holder of the privilege voluntarily discloses or consents to disclosure of any significant part of the matter or communication over which the privilege is claimed," the privilege is waived. Fullerton v. Prudential Ins. Co., 194 F.R.D. 100, 102 (S.D.N.Y. 2000) (quoting United States v. Int'l Bhd. of Teamsters, 961 F. Supp. 665, 673 (S.D.N.Y.1997)); see also Gruss v. Zwirn, No. 09-cv-6441 (PGG) (MHD), 2013 U.S. Dist. LEXIS 100012, 2013 WL 3481350, at *11 (S.D.N.Y. July 10, 2013) (citing In re Steinhardt Partners, L.P., 9 F.3d 230, 235 (2d Cir. 1993)); In re Visa Check/MasterMoney Antitrust Litig., 190 F.R.D. 309, 314 (E.D.N.Y. 2000). As relevant here, the waiver rule does not apply if the disclosure of attorney-client communications is made to a public relations consultant hired by the lawyer for the purpose of assisting the lawyer in rendering legal advice or to achieve a legal goal. For example, in In re Grand Jury Subpoenas Dated March 24, 2003, lawyers hired a public relations firm to assist them in generating favorable publicity during a high profile grand jury investigation in order to lessen pressure on the prosecutors to secure an indictment against their client. See 265 F. Supp. 2d 321, 323-24 (S.D.N.Y. 2003). The Court found the privilege had not been waived because the purpose of the disclosure was to help the lawyers achieve a legal goal—avoidance of indictment. Id. However, the public relations exception recognized in In re Grand Jury Subpoenas Dated March 24, 2003 [*18] is narrowly construed. Id. at 329-30; see Ravenell v. Avis Budget Group, Inc., No. 08-cv-2113 (SLT), 2012 U.S. Dist. LEXIS 48658, 2012 WL 1150450, at *3 (E.D.N.Y. Apr. 5, 2012) ("The reach of [In re Grand Jury Subpoenas Dated March 24, 2003 is] limited by its context: the Court couched its finding in the narrow scenario of public relations consultants assisting lawyers during a high profile grand jury investigation."); In re Chevron Corp., 749 F. Supp. 2d 170, 184 n.64 (S.D.N.Y. 2010), aff'd sub nom. Lago Agrio Plaintiffs v. Chevron Corp., 409 F. App'x 393 (2d Cir. 2010) (interpreting In re Grand Jury Subpoenas Dated March 24, 2003 as having a "very narrow holding" and applicable only in "cases such as . . . high profile grand jury investigation[s]"). That is, when a public relations consultant has performed nothing other than standard public relations services, the normal rule applies and disclosure of privileged communications to the consultant will result in a waiver. See Haugh v. Schroder Inv. Mgmt. N. Am. Inc., No. 02-cv-7955 (DLC), 2003 U.S. Dist. LEXIS 14586, 2003 WL 21998674, at *3 (S.D.N.Y. Aug. 25, 2003) (communications not privileged because Plaintiff did not show that the public relations specialist performed anything other than standard public relations services or that communications were necessary to the provision of legal advice); Calvin Klein Trademark Trust v. Wachner, 198 F.R.D. 53, 55 (S.D.N.Y. 2000) (exception to waiver rule inapplicable to public relations communications that "simply serve[ ] to assist counsel in assessing the probable public reaction to various strategic alternatives, as opposed to enabling counsel to understand aspects of the client's own communications that could not otherwise be appreciated in the rendering of legal advice").
Unlike the attorney-client privilege, work product protection is not waived merely because the material is disclosed to a third party. See, e.g., Adlman, 134 F.3d at 1200 n. 4 (work product may be shown to others "simply because there [is] some good reason to show it" without waiving the protection). Protection is waived only when work product is disclosed to a third party in a manner that is inconsistent with the purpose of the protection. See In re Steinhardt Partners, L.P., 9 F.3d at 235; In re Symbol Techs., Inc. Sec. Litig., 2017 U.S. Dist. LEXIS 50530, 2017 WL 1233842, at *9 (disclosure that substantially increases the opportunities for potential adversaries to obtain the information results in a waiver of work product protection); In re Visa Check/MasterMoney Antitrust Litig., 190 F.R.D. at 314 (purpose of work product doctrine [*19] is "to keep counsel's work from his opponent in the litigation so that it will not be used against him").
So, what is the purpose of the work product doctrine? The U.S. Supreme Court in Hickman v. Taylor explained that the doctrine exists to promote our adversarial system of jurisprudence and permit attorneys to work "with a certain degree of privacy free from unnecessary intrusion by opposing parties and their counsel." 329 U.S. at 510-511; see also AT&T, 642 F.2d at 1299 (work product doctrine exists to "promote the adversary system by safeguarding the fruits of an attorney's trial preparation from the discovery attempts of an opponent."). Disclosure of work product to a privately retained public relations consultant would not typically result in a waiver of protection because it is unlikely the material disclosed will end up in the hands of an adversary and such disclosures are typically subject to confidentiality agreements.
There are other ways attorney-client privilege and work product protection can be waived. A party cannot assert reliance on counsel as a defense or selectively proffering protected information in litigation without waiving privilege. Fairness requires waiver in these circumstances so a party's adversary [*20] and fully explore the validity of the defense of advice of counsel and prepare cross examination. In re County of Erie, 546 F.3d 222, 228-29 (2d Cir. 2008); In re Grand Jury Proceedings, 219 F.3d 175, 191 (2d Cir. 2000); In re Lehman Bros. Holdings, Inc., No. 10-cv-6200 (RMB) (FM), 2011 U.S. Dist. LEXIS 72125, 2011 WL 2651812, at *2 (S.D.N.Y. June 22, 2011); In re Omnicom Group, Inc. Sec. Litig., 233 F.R.D. at 413-14.
2. Scope of Waiver
When a waiver of attorney-client privilege or work product protection has occurred, the court then must address the scope of the waiver. The scope of waiver of attorney-client privilege is determined based on the "fairness doctrine" as described by the Second Circuit in In re von Bulow. 828 F.2d 94, 101 (2d Cir. 1987). The doctrine is designed "to prevent prejudice to a party and distortion of the judicial process that may be caused by the privilege-holder's selective disclosure during litigation of otherwise privileged information." Id.; see United States v. Bilzerian, 926 F.2d 1285, 1292 (2d Cir. 1991) ("[T]he attorney-client privilege cannot at once be used as a shield and a sword. A defendant may not use the privilege to prejudice his opponent's case or to disclose some selected communications for self-serving purposes.") (citations omitted). When there has been a selective disclosure of attorney-client communications in the litigation, courts typically find the party has waived privilege as to all documents pertaining to the subject disclosed. In re Symbol Techs., Inc. Sec. Litig., 2017 U.S. Dist. LEXIS 50530, 2017 WL 1233842, at *16-18 (ordering disclosure of nine memoranda on confidential witnesses' [*21] statements because five other memoranda were disclosed for withholding party's strategic benefit) (citations omitted); Tribune Co. v. Purcigliotti, No. 93-cv-7222 (LAP) (THK), 1997 U.S. Dist. LEXIS 228, 1997 WL 10924, at *5 (S.D.N.Y. Jan. 10, 1997), modified, 1998 U.S. Dist. LEXIS 5155, 1998 WL 175933 (S.D.N.Y. Apr. 14, 1998) ("[W]here there is partial disclosure in the context of the litigation for the benefit of the privilege holder, there may be a complete subject matter waiver as to all communications on the subject."); In re Kidder Peabody Sec. Litig., 168 F.R.D. 459, 470-71 (S.D.N.Y. 1996) (finding waiver, as "[t]his disclosure to the [Securities and Exchange] Commission was not 'extrajudicial' in the sense meant by the Second Circuit in von Bulow").
When a privileged communication is disclosed outside of a litigation or extrajudicially, the scope of the waiver typically is limited to those matters actually revealed. In re Grand Jury Proceedings, 219 F.3d at 186-187; In re von Bulow, 828 F.2d at 103. Thus, in the von Bulow case, where privileged communications were revealed to the public in a book and not in a litigation, the court found waiver only with respect to the particular communications or portions of communications disclosed. 828 F.2d at 101-03.
When disclosure of work product or privileged information is made to a governmental agency Federal Rule of Evidence 502(a) applies. Under that rule, waiver is generally limited to the precise communication or information disclosed to the governmental agency. Fed. R. Evid. 502(a); Fed. R. Evid. 502 Advisory [*22] Committee's Note (revised 11/28/2007). But, the waiver will extend to all undisclosed communications and information if (1) the disclosure to the governmental agency was voluntary or intentional, (2) the disclosed and undisclosed information concerns the same subject matter, and (3) in fairness ought to be considered together. Fed. R. Evid. 502(a); In re Symbol Techs., Inc. Sec. Litig., 2017 U.S. Dist. LEXIS 50530, 2017 WL 1233842, at *9 (citations omitted); Mitre Sports Int'l Ltd. v. Home Box Office, Inc., 304 F.R.D. 369, 371 (S.D.N.Y. 2015). In other words, the principles underlying the fairness doctrine have been incorporated to some extent into Rule 502(a) and, depending on the facts and circumstances, disclosure of privileged information or work product to a governmental agency may result in a broader subject matter waiver of undisclosed attorney-client communications and fact work product pertaining to the subject matter of the disclosure. In re Symbol Techs., Inc. Sec. Litig., 2017 U.S. Dist. LEXIS 50530, 2017 WL 1233842, at *10; see also Gruss, 2013 U.S. Dist. LEXIS 100012, 2013 WL 3481350 (ordering production of interview notes and summaries because portions of them were voluntarily and selectively disclosed to the SEC in a PowerPoint presentation; confidentiality agreement with SEC did not restrict SEC's use of the disclosed information); In re Weatherford Int'l Sec. Litig., 2013 U.S. Dist. LEXIS 176278, 2013 WL 6628964 (S.D.N.Y. Dec. 16, 2013) (court ordered production of materials actually disclosed to the SEC and factual work product contained in underlying attorney interview notes; opinion work product protected from [*23] disclosure); Favors v. Cuomo, 285 F.R.D. 187, 200 (E.D.N.Y. 2012) ("[C]ourts generally permit discovery of work product based on implied or subject-matter waiver only where the privileged communications have been put at issue or when the defendant seeks to exploit the doctrine for a purpose inconsistent with the privilege."); SEC v. Vitesse Semiconductor Corp., No. 10-cv-9239 (JSR), 2011 U.S. Dist. LEXIS 77538, 2011 WL 2899082, at *3 (S.D.N.Y. July 14, 2011) (a report given to SEC containing detailed summaries of interviews and near-verbatim recitations of interview notes taken by counsel waived privileged and required production of factual portions of attorney interview notes); In re Initial Pub. Offering Sec. Litig., 249 F.R.D. 457, 460, 466 (S.D.N.Y. 2008) ("[v]oluntary disclosure of attorney work product, regardless of the existence of a confidentiality agreement, will waive work product privilege absent special circumstances.").
In all cases, courts must evaluate the factual circumstances of a disclosure to determine whether the disclosing party waived privilege or work product protection and the extent or scope of any waiver.
B. Crime-Fraud Exception
Another exception to protection is the so-called crime-fraud exception. Communications "in furtherance of contemplated or ongoing criminal or fraudulent conduct" fall under the exception. In re Richard Roe, Inc., 68 F.3d at 40. The party seeking disclosure of protected information [*24] via the crime-fraud exception has the burden of demonstrating that there is probable cause to believe that (1) a crime or fraud has been attempted or committed; and (2) the privileged communications and work product were in furtherance thereof. Id. There must be "substantial reason to believe that the party resisting disclosure engaged in or attempted to commit a fraud and used communications with its attorney to do so." In re Omnicom Group, Inc. Sec. Litig., No. 02-cv-4483 (WHP) (MHD), 2007 U.S. Dist. LEXIS 60298, 2007 WL 2376170, at *11 (S.D.N.Y. Aug. 10, 2007); see also United States v. Zolin, 491 U.S. 554, 572, 109 S. Ct. 2619, 105 L. Ed. 2d 469 (1989); Amusement Indus., Inc. v. Stern, 293 F.R.D. 420, 426-27 (S.D.N.Y. 2013). This standard, while "fairly robust," does not require proof by a preponderance of the evidence. In re Omnicom Group, Inc. Sec. Litig., 2007 U.S. Dist. LEXIS 60298, 2007 WL 2376170, at *11. Rather, it requires that the court be "persuaded of at least a substantial possibility of . . . fraud." 2007 U.S. Dist. LEXIS 60298, [WL] at *11 n.13.
Plaintiffs argue that the crime-fraud exception applies to several documents on BlackBerry's privilege log, including the Zipperstein Documents. However, having reviewed nearly 100 documents in camera, nothing in them persuades this Court that there is a substantial possibility that a fraud was committed or that Defendants used the communications with counsel to commit a crime or fraud. Nor have Plaintiffs provided other facts to persuade this Court of a substantial possibility of fraud. In re Richard Roe, Inc., 68 F.3d at 40; Amusement Indus., Inc. v. Stern, 293 F.R.D. at 426-27; In re Omnicom Group, Inc. Sec. Litig., 2007 U.S. Dist. LEXIS 60298, 2007 WL 2376170, at *11. Therefore, [*25] the crime-fraud exception does not apply to any of the documents, and the Court will not further address this exception in the Analysis section below.
C. The Fiduciary Exception/Real Client Doctrine
The last exception to privilege Plaintiffs raise is the fiduciary exception or real client doctrine. This exception derives from trust law and applies to communications between a fiduciary and her counsel pertaining to the conduct of fiduciary duties. In re Omnicom Group, Inc. Sec. Litig., 233 F.R.D. at 410. The theory underlying the exception is that an attorney advising a fiduciary as to her fiduciary obligations to a trust is in actuality focused on the beneficiary of the trust. In other words, the real client served by the legal advice is the beneficiary (not the fiduciary) and, hence, the privilege flows to the beneficiary. Given the rationale for the exception, when the communications concern legal advice given to the fiduciary in his personal capacity (that is, when the fiduciary is the real client), the exception does not apply. See, e.g., In re Long Island Lighting Co., 129 F.3d 268, 271 (2d Cir. 1997); In re Omnicom Group, Inc. Sec. Litig., 233 F.R.D. at 410; Lawrence v. Cohn, No. 90-cv-2396 (CSH) (MHD), 2002 U.S. Dist. LEXIS 1222, 2002 WL 109530, at *5 n.2 (S.D.N.Y. Jan. 25, 2002); Hudson v. Gen. Dynamics, 73 F. Supp. 2d 201, 202-03 (D. Conn. 1999); Martin v. Valley Nat'l Bank of Arizona, 140 F.R.D. 291, 325 (S.D.N.Y. 1991).
Plaintiffs argue generally that the fiduciary exception should apply to advice given by an in-house lawyer to a company because company shareholders are the [*26] ultimate beneficiary of the advice. In the context of this case, they assert that when Zipperstein and other in-house lawyers provided legal advice to BlackBerry, they were advising company executives on their fiduciary obligations to the company. From there Plaintiffs argue that they as shareholders were the ultimate beneficiaries of any advice such that no privilege can be asserted against them—that they were the real clients. There are obvious problems with Plaintiffs' argument. First, none of the Plaintiffs were in fact shareholders at the time of the privileged communications that are the subject of this motion. Second, they represent a putative class of individuals who represent only a portion of BlackBerry's shareholders, many of whom may not have been shareholders at the time of the privileged communications that are the subject of this motion. Indeed, Plaintiffs' claims in this securities fraud action are that Defendants made fraudulent misrepresentations and omissions in securities filings that induced them to buy shares in BlackBerry at an inflated share price. The misconduct, by its very nature, benefitted shareholders who sold their stock at the inflated share price and [*27] harmed individuals who became shareholders when they bought stock at the inflated price. The advice concerned actions directed at the market, and the actions harmed individual investors, not the company as a whole. In other words, the rationale for the fiduciary exception to the attorney-client privilege (a/k/a the real client doctrine) does not fit the facts of this case or indeed most securities fraud cases.
The Second Circuit has never recognized the fiduciary exception to the attorney-client privilege in the context of a securities fraud case like this one. District courts within this circuit have taken varying approaches. Some courts have applied the exception to securities fraud cases regardless of whether the plaintiffs were shareholders at the time of the privileged communication being sought in discovery by the plaintiffs. However, these courts have held that the plaintiffs must demonstrate good cause for disclosure. See In re Pfizer Inc. Sec. Litig., No. 90-cv-1260 (SS), 1993 U.S. Dist. LEXIS 18215, 1993 WL 561125, at *11-14 (S.D.N.Y. Dec. 23, 1993) (fiduciary exception applicable in securities fraud case but plaintiffs could not show good cause warranting disclosure); In re Int'l Bus. Machs. Corp. Sec. Litig., No. 92-cv-9076 (GLG), 1993 U.S. Dist. LEXIS 21474, 1993 WL 760214, at *6 (S.D.N.Y. Nov. 30, 1993) (fiduciary exception applicable [*28] in securities fraud case; plaintiffs showed good cause for disclosure); In re Bairnco Corp. Sec. Litig., 148 F.R.D. 91, 97-99 (S.D.N.Y. 1993) (same). Other courts have found that the fiduciary exception can apply in securities fraud cases but that (1) the plaintiffs must have been shareholders at the time of the privileged communication to take advantage of the exception and (2) must show good cause for disclosure. In re Kidder Peabody Sec. Litig., 168 F.R.D. at 475 (declining to extend fiduciary exception to prospective shareholders because they were not in a fiduciary relationship at the time of the allegedly fraudulent conduct); Quintel Corp. v. Citibank, N.A., 567 F. Supp. 1357, 1363-1364 (S.D.N.Y. 1983) (same). One court in this District has rejected application of the fiduciary exception as inapplicable to claims of securities fraud. In re Omnicom Group, Inc. Sec. Litig., 233 F.R.D. at 411-412. The court in that case noted in particular that the claims in a securities fraud case focus on injury to members of investing public who had not yet purchased stock, not injury to the company and its shareholders. Id. Therefore, it reasoned that the rationale for the exception does not apply in the context of a securities fraud claim. The court also noted that the exception should not apply when a substantial portion of the putative class was not a shareholder at the time of the privileged communication, as this would allow non-beneficiaries [*29] access to privileged advice given to the company. Id.
This Court need not resolve whether the exception should apply to securities fraud cases generally, because even if it did, plaintiffs have not demonstrated good cause for it to apply in this case. As noted above, those courts in this District that have applied the exception have held that plaintiffs must demonstrate good cause to gain access to a privileged communication. The factors relevant to a good cause finding including: (1) the number of shareholder plaintiffs and percentage of stock they represent; (2) the bona fides of the shareholder plaintiffs; (3) whether the claim raised is obviously colorable; (4) the apparent necessity or desirability of the shareholders having the information and the information's availability from other sources; (5) the nature of the shareholders' claim; (6) whether the privileged communication relates to past or prospective actions; (7) whether the privileged communication is advice concerning the litigation itself; (8) the extent to which the privileged communication is identified versus the extent to which the shareholders are blindly fishing; and (9) the risk of revelation of trade secrets or [*30] other information in whose confidentiality the corporation has an interest for independent reasons. In re Omnicom Group, Inc. Sec. Litig., 233 F.R.D. at 411 n.8; In re Pfizer Inc. Sec. Litig., 1993 U.S. Dist. LEXIS 18215, 1993 WL 561125, at *11 n.8.
First, none of the Plaintiffs were owners of BlackBerry stock at the time of the attorney-client communications that are the subject of the instant motions. The communications all predate May 13, 2013, the earliest date when any of the Plaintiffs purchased company stock. (Exs. O-Q, at Resp. to ROG #1). Hence, as noted above, none of the Plaintiffs were owed a fiduciary duty at the time of the communications. Moreover, Plaintiffs held only a tiny fraction of BlackBerry shares outstanding during the class period, and Plaintiffs have not shown that the putative class held a substantial portion of BlackBerry's stock at the time the privileged communications at issue took place. (See Doc. No. 10 at 7-8, 13-14; Doc. No 13-1.) See RMED Int'l, Inc. v. Sloan's Supermarkets, Inc., No. 94-cv-5587 (PKL) (RLE), 2003 U.S. Dist. LEXIS 71, 2003 WL 41996, at *5 (Jan. 6, 2003); In re Int'l Bus. Machs. Corp. Sec. Litig., 1993 U.S. Dist. LEXIS 21474, 1993 WL 760214, at *5. Second, this Court questions the bona fides of Plaintiffs' argument that they should be viewed as the ultimate beneficiaries of the legal advice to the company given that they are in an adversarial position to the company and this suit is for personal money damages stemming from personal investment [*31] losses, not for damages incurred by the company. Id. Moreover, the class they seek to represent does not constitute all shareholders of the company. Third, although Plaintiffs' claims survived a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the basis for the Court's ruling on that motion was that it was plausible that Defendants' public statements in response to the Detwiler Report contradicted contemporaneous data they allegedly had from Wireless Zone showing above-average return rates for the Z10. Pearlstein, 2019 U.S. Dist. LEXIS 45098, 2018 WL 1444401, at *3. None of the documents submitted to this Court in camera, however, support the allegation that BlackBerry was aware of above-average return rates at Wireless Zone, and Plaintiffs have not otherwise offered factual support for their contention that BlackBerry omitted facts known to it about high rates of return at Wireless Zone as of the date of the April 12 press release. The Rule 12(b) plausibility standard does not apply to discovery motions, and this Court certainly is not required to ignore information reviewed by it in the in-camera documents that undermine the plausibility of Plaintiffs' material omissions theory. Thus, Plaintiffs do not satisfy the third "clearly colorable" factor of the good cause test. In re Omnicom Group, Inc. Sec. Litig., 233 F.R.D. at 412. Next, [*32] Plaintiffs already have received and will receive information about Z10 sales and return rates during the relevant period, so the information about what BlackBerry knew about sales and return rates as of April 12, 2013 is available from other sources. Thus, the fourth factor is not met. Finally, the other good cause factors are neutral or do not, on balance, warrant application of the fiduciary exception here. Accordingly, this Court will not apply the exception to any of the attorney-client communications at issue in the present motions.
The majority of courts to have addressed the issue have found that the fiduciary exception is not applicable to work product. In reaching this conclusion, these courts have observed that there is no mutuality of interest between shareholder plaintiffs and a company once litigation against the company is anticipated. See, e.g., In re Int'l Sys. and Controls Corp. Sec. Litig., 693 F.2d 1235, 1239 (5th Cir. 1982); Tatum v. R.J. Reynolds Tobacco Co., 247 F.R.D. 488, 501 (M.D.N.C. 2008); In re Unisys Corp. Retiree Med. Benefits ERISA Litig., No. MDL 969, 1994 U.S. Dist. LEXIS 1344, 1994 WL 6883, at *4 n.3 (E.D. Pa. 1994). Some courts also note that "work product belongs to the litigator not the litigant fiduciary, and [that] it is the lawyer's impressions, strategies, and theories" the work product doctrine protects. Gill v. Bausch & Lomb Supplemental Ret. Income Plan I, 284 F.R.D. 84 (W.D.N.Y. 2012); City of New York v. A-1 Jewelry & Pawn, Inc., No. 06-cv-2233 (JBW), 2007 WL 9710558 (E.D.N.Y. Dec. 10, 2007); [*33] Lugosch v. Congel, 219 F.R.D. 220 (N.D.N.Y. 2003); see also Henry v. Champlain Enters., Inc., 212 F.R.D. 73, 88 (N.D.N.Y. 2003) (citing Strougo v. BEA Assocs., 199 F.R.D. 515, 524 (S.D.N.Y. 2001)); Mui v. Union of Needletrades, Indus. and Textile Employees, AFL-CIO, No. 97-cv-7270 (HB) (KNF), 1998 U.S. Dist. LEXIS 20346, 1998 WL 915901, at *3-4 (S.D.N.Y. Dec. 30, 1998) (disclosing work product would reveal defense of a lawsuit). But see Osage Nation and/or Tribe of Indians of Oklahoma v. United States, 66 Fed. Cl. 244, 250-52 (2005) (the few courts that have applied the exception to work product reason that a trustee's fiduciary obligations to keep the beneficiary informed trumps the work product doctrine).
This Court agrees with the majority of courts that the rationale underlying the fiduciary exception to the attorney-client privilege does not support its application to work product. Thus, this Court declines to extend the exception to work product.
1 An SEC Form 6-K is utilized by a foreign private issuer to provide communications and material information that is made public in its home country. The form promotes cross-border information sharing by allowing U.S. investors in foreign securities to have the same access to information that investors in the foreign company's home market receive.
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