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Firefighters' Retirement System v. Citco Group Ltd.

United States District Court, M.D. Louisiana

May 21, 2018

FIREFIGHTERS' RETIREMENT SYSTEM, ET AL.
v.
CITCO GROUP LIMITED, ET AL.

          RULING AND ORDER ON MOTION TO COMPEL

          ERIN WILDER-DOOMES UNITED STATES MAGISTRATE JUDGE

         Before the court is a Motion to Compel Production of Documents Listed on Supplemental Privilege Log Pursuant to Court Order (ECF 513) (the “Motion to Compel”)[1] filed by plaintiffs, Firefighters' Retirement System (“FRS”), Municipal Employees' Retirement System of Louisiana (“MERS”), and New Orleans Firefighters' Pension & Relief Fund (“NOFF”) (collectively, “Plaintiffs”). Defendants, Citco Technology Management, Inc. (“CTM”), Citco Banking Corporation N.V. (“Citco Banking”), Citco Fund Services (Cayman Islands) Limited (“CFS Cayman”), and The Citco Group Limited (“Citco Group”) (collectively, the “Citco Defendants”) have filed an Opposition.[2] The Motion to Compel was discussed during the May 7, 2018 status conference. For the reasons set forth herein, Plaintiffs' Motion to Compel is DENIED.

         I. Background

         On March 1, 2013, Plaintiffs filed suit against 23 defendants, including the Citco Defendants, asserting claims under the Louisiana Securities Act and Louisiana Unfair Trade Practices Act, as well as third party beneficiary, unjust enrichment, breach of contract, negligent misrepresentation and general tort claims.[3] Plaintiffs' claims arise from a $100 million investment loss. In April of 2008, the Louisiana Funds purchased 100, 000 Series N Shares offered and issued by FIA Leveraged Fund (“Leveraged”) for $100 million.[4] After a series of investment transactions initiated by Leveraged, in March of 2011, Plaintiffs sought to redeem their Series N shares.[5]Ultimately, the shares went unredeemed and Plaintiffs determined that the investment was illiquid and, thus, the N shares, for which there was no market, were valueless.[6]

         By the instant Motion to Compel, Plaintiffs seek to compel production of: (1) 267 written communications between in-house lawyers for Citco Group, Citco Group's outside counsel (Linklaters), and UBS AG (the “UBS Documents”);[7] and (2) 38 written communications between employees of Richcourt Fund Advisors S.A.S. (“Richcourt”) and employees of Citco Group postdating June 21, 2008 (the date Richcourt was purchased by Fletcher) (the “Richcourt Documents”).[8] The Citco Defendants argue that the UBS Documents are protected under either English privilege law (which they contend applies) or Louisiana and federal common law attorney-client privilege (which this court has previously explained are materially similar) and that Plaintiffs fail to establish “at issue” waiver as to these documents. With respect to the Richcourt Documents, the Citco Defendants assert that withheld communications involve Richcourt employees who at the time of the communication worked for an affiliate of the Citco Defendants.[9]

         II. Law and Analysis

         A. UBS Documents

         1. The Richcourt Transaction & UBS Documents

         In opposition to the portion of Plaintiff's Motion to Compel seeking production of the UBS Documents, the Citco Defendants explain that “[u]ntil 2008, Citco Group (through its wholly owned subsidiary Citco Trading) owned and operated the Richcourt group of companies.”[10] The Citco Defendants attach the declaration of Mr. Nicholas James Braham, General Counsel for Citco Group, who states that he was “intimately involved in the Richcourt Transaction.”[11] Mr. Braham explains that:

In 2007, Citco Trading decided to sell Richcourt. To assist Citco Trading in selling Richcourt Holding, Citco Trading retained Linklaters LLP, a U.K. law firm, to provide legal advice on the sale of Richcourt. Citco Trading also retained UBS as its investment banker to, among other things, conduct the sale of Richcourt Holding and to provide Citco Trading and Citco Group with advice regarding that transaction. Specifically, UBS's role was to conduct an auction process for the sale of the Richcourt group of companies, assess the bids that were received by prospective purchasers and provide recommendations on those bids, and assist Citco Group's in-house and outside counsel in negotiating a purchase agreement with the ultimate purchaser.[12]

         2.Choice of Law

         The Citco Defendants assert in opposition to the Motion to Compel that English law applies to the issue of whether the UBS Documents are privileged. The Citco Defendants argue that “England is the only jurisdiction that has any relationship to the communications at issue here”[13]because the Linklaters attorneys, Citco Group in-house attorneys, and UBS employees who worked on the Richcourt transaction were all based in the United Kingdom, and point out that the UBS employees operated “under an engagement letter that contained a mandatory U.K. choice-of-law provision.”[14] The Citco Defendants aver that “English law affords attorney-client protection to the entire ‘continuum of communications' between an attorney and his client, even if those communications do not specifically contain legal advice or involve third parties.”[15] The Citco Defendants further assert that “English law like Louisiana law, upholds the attorney-client privilege over communications between a client, his attorney, and a third-party representative.”[16]

         A threshold question before engaging in a choice-of-law analysis is to determine whether there is an actual conflict between Louisiana law and English law on the issue of attorney client privilege.[17] As the party moving to apply English law, the Citco Defendants have the “burden of proving its substance to a reasonable certainty” such that this court may apply it to the documents at issue.[18] “Absent such proof, the district court should apply the law of the forum.”[19] Here, the Citco Defendants provide a total of three cases from the United Kingdom.[20] The Citco Defendants assert that “[a]s long as the ‘continuum of communications' is aimed at providing legal advice, the communications fall within the scope of the attorney-client privilege.”[21] In support of that proposition, the Citco Defendants cite the following passage from Balabel and Another v. Air India [1988] Ch. 317:

Privilege obviously attaches to a document conveying legal advice from solicitor to client and to a specific request from the client for such advice. But it does not follow that all other communications between them lack privilege. In most solicitor and client relationships, especially where a transaction involves protracted dealings, advice may be required or appropriate on matters great or small at various stages. There will be a continuum of communication and meetings between the solicitor and client….Where information is passed by the solicitor or client to the other as part of the continuum aimed at keeping both informed so that advice may be sought and given as required, privilege will attach.[22]

         The issue presented in Balabel was whether the “legal professional privilege” “extends only to communications seeking or conveying legal advice, or to all that passes between solicitor and client on matters within the ordinary business of the solicitor.”[23] A review of the case indicates that the English Court of Appeal did not directly consider the effect of the presence of a third party on the privilege.[24] Further, while the Citco Defendants also cite Buttes Gas and Oil Co. and Another v. Hammer and Another [1981] Q.B. 223, [25] they contend that case upholds “like Louisiana law, ” “the attorney-client privilege over communications between a client, his attorney, and a third-party representative.”[26] Based on the case law submitted by the Citco Defendants, the undersigned finds that the Citco Defendants have not carried their burden of proving “with a reasonable certainty the substance”[27] of English law with respect to the question of privilege over the UBS Documents. Moreover, in light of the Citco Defendants' assertion that “English law like Louisiana law, upholds the attorney-client privilege over communications between a client, his attorney, and a third-party representative, ”[28] the undersigned is not convinced that a conflict of law actually exists here. Accordingly, the undersigned proceeds with the analysis of privilege over the UBS Documents pursuant to Louisiana/federal common law of attorney-client privilege.

         3. UBS As A Representative of Citco Trading

          “A party invoking the attorney-client privilege must establish: (1) that there was a communication between client and counsel; (2) the communication was intended to be confidential; (3) the communication was, in fact, kept confidential; and (4) the communication was made for the purpose of obtaining or providing legal advice.”[29] “Under both Louisiana law and federal common law, which are materially similar, the attorney-client privilege protects confidential communications between the client or a representative of the client and the client's lawyer or a representative of the lawyer….”[30]

         “The attorney-client privilege exists to protect confidential communications and to protect the attorney-client relationship and is waived by disclosure of confidential communications to third parties.”[31] “However, the privileged nature of the communication depends on whether the third parties were ‘representatives' of the client ‘who [made] or receive[d] a confidential communication for the purpose of effectuating legal representation for the client, while acting in the scope of employment for the client, ' in which case no waiver of the privilege occurs.”[32] “When agents or employees…participate as members of a team to provide information and documents to litigation counsel and to obtain from counsel answers to the client's questions, with the primary purpose of effectuating counsel's rendition of legal advice to the client, communications between the client's legal personnel and the third-party agents are privileged, and the privilege is not waived by the communications.”[33]

         A “representative of a client” is defined in Louisiana Code of Evidence, article 506, as “[a] person having authority to obtain professional legal services, or to act on advice so obtained, on behalf of the client” or “[a]ny other person who makes or receives a confidential communication for the purpose of effectuating legal representation for the client, while acting in the scope of employment for the client.”[34] Here, the Citco Defendants have asserted various communications between themselves, UBS employees, and Linklaters (Citco's counsel) are privileged because UBS was a representative of Citco “and had authority to obtain professional legal services and to act on advice so obtained on behalf of Citco.”[35] The burden of establishing that these communications are subject to the attorney-client privilege lies with the Citco Defendants, the party asserting the privilege.[36]

         In U.S. v. Kovel, 296 F.2d 918, 920 (2d Cir. 1961), the Second Circuit Court of Appeals considered “under what circumstances, if any, the attorney-client privilege may include a communication to a nonlawyer by the lawyer's client….” The Kovel court noted that “the complexities of modern existence prevent attorneys from effectively handling client's affairs without the help of others…” and analogized the use of a third party accountant to the use of a translator:

This analogy of the client speaking a foreign language is by no means irrelevant to the appeal at hand. Accounting concepts are a foreign language to some lawyers in almost all cases, and to almost all lawyers in some cases. Hence the presence of an accountant, whether hired by the lawyer or by the client, while the client is relating a complicated tax story to the lawyer, ought not destroy the privilege, any more than would that of the linguist…the presence of the accountant is necessary, or at least highly useful, for the effective consultation between the client and the lawyer which the privilege is designed to permit.

Id. at 921-922. The Kovel court further explained that “[w]hat is vital to the privilege is that the communication be made in confidence for the purpose of obtaining legal advice from the lawyer. If what is sought is not legal advice but only accounting service…or if the advice sought is the accountant's rather than the lawyer's, no privilege exists.” Id. at 922. The Fifth Circuit has cited Kovel with approval in the context of a case applying the federal common law of attorney-client privilege, [37] and courts in this Circuit have relied on Kovel when determining whether communications with third parties are privileged.[38] Following these principles, other courts have found that communications with third-party financial advisors or investment bankers are protected by the attorney-client privilege where such communications were indispensable to the provision of the attorney's legal advice.[39]

         In support of their Motion to Compel, Plaintiffs primarily rely on the Second Circuit's decision in U.S. v. Ackert, 169 F.3d 136, 139 (2d Cir. 1999).[40] In Ackert, the Second Circuit explained that “Kovel held that the privilege can protect communications between a client and his accountant, or the accountant and the client's attorney, when the accountant's role is to clarify communications between attorney and client.” The court considered whether communications between Paramount Corporation's in-house counsel and a representative of an investment banking firm (Goldman Sachs) were privileged. There, Goldman Sachs had approached Paramount with an investment proposal and Paramount's in-house counsel had subsequently communicated with David Ackert, a Goldman Sachs representative, to learn more details about the proposed transaction and its potential tax consequences so that he could advise Paramount. Years later, the IRS issued a summons to Ackert seeking his testimony about the investment proposal and Paramount asserted such communications were protected by the attorney-client privilege. The Second Circuit disagreed, explaining that while it assumed that Paramount's in-house counsel “interviewed Ackert in order to gain information and to better advise his client Paramount” that was “insufficient to give rise to the privilege.”[41] The court explained that “the privilege protects communications between a client and an attorney, not communications that prove important to an attorney's legal advice to a client.”[42] Because “Ackert's role was not as a translator or interpreter of client communications, ” the court found that “the principle of Kovel” did not, as a blanket proposition, shield those communications from disclosure.[43]

         Plaintiffs contend that “Ackert has been interpreted by other district courts around the country to provide a very narrow and limited exception to expanding the attorney-client privilege to third party persons who are not clients.”[44] As an initial matter, the undersigned finds Ackert itself, which dealt with an investment banker approaching a client with an unsolicited business deal rather than a client's specific retention of an investment banker to aid with a particular transaction, distinguishable.[45] Moreover, while the undersigned agrees that other courts, relying on Ackert, have found third-party communications with investment advisors to fall outside the scope of attorney-client privilege, the controlling factor in these cases is whether the third-party was necessary for the rendering of legal advice or was instead providing business advice.[46]

         Per the engagement letter between Citco Trading and UBS, [47] UBS was to provide the following “financial advice and assistance” with respect to a potential sale transaction involving Richcourt and a third party:

(a) In consultation with [Citco Trading], developing, updating and reviewing a list of potential purchasers and contacting potential purchasers;
(b) In conjunction with [Citco Trading's] other professional advisors, preparation and circulation of sale documentation to potential purchasers;
(c) Together with [Citco Trading's] other professional advisors, assisting in the negotiation of the terms of the Transaction for and on [Citco Trading's] behalf.[48]

         The engagement letter provides that “[f]or the avoidance of doubt, the duties and responsibilities of UBS shall not include (a) giving tax, legal, regulatory, accountancy or other specialist or technical advice or services…” and that Citco Trading will rely on its own “expertise and that of specialist legal, accounting and tax advisors in respect to any due diligence exercise and in assessing the conclusions.”[49] The Standard Terms and Conditions incorporated into the engagement letter provide that “Advice (including any opinion or report) whether written or oral by UBS to [Citco Trading], or any communications between UBS and [Citco Trading] in connection with the Engagement may only be used and relied upon by [Citco Trading] and may not be used or relied on by any third party and may not be disclosed to any third party without the prior written approval of UBS (other than [Citco Trading's] professional advisors who may place no reliance on such advice).”[50]

         As evidence of the roles served by UBS, the Citco Defendants submit a Declaration from Citco Groups' General Counsel, Mr. Braham, wherein he asserts that Citco Trading retained Linklaters “to provide legal advice on the sale of Richcourt” and retained UBS “to, among other things, conduct the sale of Richcourt Holding and to provide Citco Trading and Citco Group with advice regarding that transaction.”[51] Mr. Braham avers that UBS's role “was to conduct an auction process for the sale of the Richcourt group of companies, assess the bids that were received by prospective purchasers and provide recommendations on those bids, and assist Citco Group's in-house and outside counsel in negotiating a purchase agreement with the ultimate purchaser.”[52] Mr. Braham further asserts that throughout the sales process, “attorneys at Linklaters (and Citco Group) regularly asked questions of and received input from UBS concerning, among other things, the structuring of the transaction, the impact of certain changes being proposed by the purchaser with respect to the draft transaction agreements, responses to queries received from several foreign regulatory authorities, and the coordination of the closing.”[53] Mr. Braham asserts that “[t]hese communications with UBS were for the central purpose of assisting Linklaters in providing legal advice concerning the Richcourt Transaction”[54] and that “[w]ithout UBS's participation and input, Citco Trading and Citco Group would not have been able to obtain fully informed legal advice from Linklaters regarding the negotiation of the legal terms of the Richcourt Transaction.”[55]

         Per the terms of the engagement letter and Mr. Braham's Declaration, UBS was retained by Citco Trading to provide various services. Some of these services - specifically with respect to developing and contacting potential purchasers, and preparing and circulating sales documentation - do not appear to be focused on providing services necessary for the rendering of legal, rather than business, advice. However, other services (i.e., assisting in the negotiation of the terms of the transaction) may fairly be within the scope of that necessary for Linklaters to provide legal advice to Citco Trading. The Citco Defendants concede that certain communications with UBS do not fall within the scope of the privilege, and explain that they have “produced several thousand communications involving UBS where UBS was in fact providing routine business advice or was ‘merely copied.'”[56] However, with respect to the withheld UBS Documents, the Citco Defendants assert that these “communications involve UBS working hand-in-hand with Linklaters and in-house counsel to provide legal advice to Citco Group.”[57] The detailed descriptions set forth on the Citco Defendants' privilege log reflect that the withheld communications were primarily for the purpose of obtaining or rendering legal advice.

         Pursuant to Local Civil Rule 26(c):

A party withholding information claimed privileged or otherwise protected must submit a privilege log that contains at least the following information: name of the document, electronically stored information, or tangible things; description of the document, electronically stored information, or tangible thing, which description must include each requisite element of the privilege or protection asserted; date; author(s); recipient(s); and nature of the privilege.[58]

         “[A] privilege log's description of each document and its contents must provide sufficient information to permit courts and other parties to ‘test[ ] the merits of' the privilege claim.”[59] “The standard for testing the adequacy of the privilege log is whether, as to each document, the entry sets forth facts that ‘would suffice to establish each element of the privilege or immunity that is claimed.' The focus is on the specific descriptive portion of the log, and ‘not on conclusory invocations of the privilege or work-product rule, since the burden of the party withholding documents cannot be discharged by mere conclusory' assertions.”[60] “Objections based on the attorney client privilege or work product doctrine “can only be sustained if they are both properly asserted and the facts supporting the privileges are established by the evidence, not merely declared by lawyer argument.”[61] “The party claiming the privilege must ‘describe those documents to the best of its ability without revealing the information privileged.'”[62]

         Here, the privilege log setting out withheld UBS Documents contains descriptions that meet the Citco Defendants' burden of establishing that UBS was involved in these communications with the primary purpose of obtaining or facilitating the rendition of legal advice. The descriptions of the communications include “email discussing intent to request legal advice from counsel (N. Braham) re: Project Rainier draft disclosure agreement for UBS, ”[63] “email chain from counsel reflecting legal advice re: summary of key legal terms in Richcourt bids, ”[64] “email from counsel reflecting legal advice re: draft share purchase agreement for Richcourt sale, ”[65] “email chain with counsel providing legal advice and requesting information in order to provide legal advice re: non-compete provisions in Project Rainier share purchase agreement, ”[66] and “email chain with counsel reflecting and requesting legal advice re: Project Rainier financial regulatory issues.”[67] Plaintiffs do not point to any particular entry on the privilege log describing withheld UBS Documents which they assert is deficient. Instead, Plaintiffs contend that none of the documents withheld can possibly be within the scope of the attorney-client privilege. As set forth above, under Louisiana law, the attorney-client privilege can include communications by and with a “representative of a client.” The attorney-client privilege is not destroyed by communications by and through a representative ...


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