'Round about April 26th, the Judge issued an order adopting the parties' stipulation to response dates, discovery timelines, and on the 27th issued an order setting July 18, 2011, 9:00 AM as the hearing date.
Apparently, things went awry in the discovery process, and the parties whined to the judge via correspondence. No dice, said the Judge. Move me.
Thus was born yesterday's Motion to Vacate, which was accompanied by an interesting Memorandum in Support and three exhibits: Exhibits A, B and C. The most interesting is Exhibit A, a memorandum from SEC attotrney David Berman to AEHI's lawyers, indicating AEHI's reluctance or refusal to produce relevant emails and documents in time for the SEC to be able to use them in a deposition tomorrow! (May 19th) Check out some of the names and topics referred to in the memo: (emphasis and embedded links added)
Re: Securities and Exchange Commission v. Alternate Energy Holdings, Inc. etal., Case No.AEHI's "Management Structure?" Ha! Four hundred pages of emails about a 10-Q? No wonder they were late. AEHI's Insider trading policy? What's a policy?
Rich and Dick,
I write regarding the privilege log that you sent us last night for the documents produced by Pillsbury Winthrop Shaw Pittman. It is evident that defendants have directed Pillsbury to withhold a number of documnents that are clearly not privileged - either because of the basic nature of the documents, or because of the privilege waiver in this case, or both. Moreover, notwithstanding my previous request, defendants have not provided any explanation in the log as to why they believe the documents are privileged after the Waiver. Accordingly, we must ask that defendants reconsider their position and produce all responsive, non-privileged documents immediately, and in no event later than this Monday, May 16. This time frame is necessary to mitigate prejudice to the Commission, given that we are deposing Louis Bevilacqua - the Pillsbury partner at the center of defendants’ privilege waiver - on May 19 in Washington, D.C. in preparation for our response to defendants Summary Judgment Motion.
Because Mr. Bevilacqua’s deposition is scheduled for this coming Thursday, We do not have the time to identify each and every deficiency in the 163 page privilege log. Therefore, We have summarized below a few core categories of documents that have been improperly withheld.
A. Communications that are not privileged because they copy third parties.
A communication between a lawyer and his client is not privileged if a third party is present or copied. See generally In re Grand Jury Investigation, 974 F.2d 1068, 1071 n.2 (9th Cir. 1992) (test for privilege includes requirement that communication be “made in confidence.”). This is clearly the case for a large percentage of communications reflected in the log. For example:
PWSP00008-11 - Email copies David Waldman of Crescendo Communications
PWSP 000119-124 - Email copies Richard Kreger of Source Capital Group, Inc
PWSP 000533 - Email between Gillispie and Richard Hammond of UBS. Not only is no attorney party to the email, the email relates to “sale of Jenníe’s shares.”
PWSP 000540-541 - Email copies Martin Johncox and Cooper.
PWSP 000569 - Email copies Louis Shi, Jack Wynn, Tom Doss, Eric Cooper and Eddie Smith.
PWSP 001073 Email copies Jack Wynn.
PWSPOOOISO7-1509 - Email is between Gillispie and Richard Hammond of UBS (no attorney is party to the communication).
PWSP 0003003-4134 - More than 1,000 pages of letters are between Brian Buck of Pillsbury and Interwest Transfer Company (no client is party to the communication).
B. Documents that do not contain legal advice or Work product.
Documents are only privileged if they contain: (a) attorney-client communiications providing or reflecting legal advice, and/or (b) attomey work product created in anticipation of litigation. See . generally re Grand Jury Investigation, 974 F.2d at n.2; Admiral Ins. Co. v. US. Dist Ct., 881 F.2d 1486, 1494 (9th Cir. 1989) (citing Fed. R. Civ. P. 26(b)(3)). Cf United States v. Martin, 278 F.3d 988, 999 (9th Cir. 2002) (“The fact that a person is a lawyer does not make all communications with that person privileged.”) (internal citation omitted). Defendants have nowhere disclosed on which theory they are relying for the documents on the log. In fact, many of the documents on the log appear to fall into neither category. For example:
PWSP 0002953-2991 - Pillsbury invoices to AEHI
PWSP 00029923002 - Retention agreement between AEHI and Pillsbury
PWSP 0004250-4251 - Email summary is “Discussion regarding new counsel”
PWSP 007652-7656 Email summary is “Discussion re Pillsbury termination”
PWSP 007665 - Email summary is “Discussion about Revised Pillsbury legal bill”
C. Documents that are not priveleged because they are subject to defendants’ voluntary privilege Waiver.
Defendants have affirmatively claimed that Ms. Ransom is not liable under Section 16 of the Exchange Act because she relied on the advice of her counsel at Pillsbury when, in 2010, she chose not to publicly disclose her sale of a million AEHI shares. Defendants have rested this claim on the assertion that Mr. Bevilacqua was “the most knowledgeable and experienced person who had personal knowledge of Ms. Ransom’s title and obligations.”
A defendant “cannot be allowed, after disclosing as much as he pleases, to withhold the remainder.” Weil v. Inv. Indicators, Research & Mgmt., Inc., 647 F.2d l8, 24 (9th Cir. 1981) (quoting VIII J. Wigrnore, Evidence 2291, at 636). Said another way, defendants here cannot use the privilege as both a “sword” and a “shield.” And yet, this is what they appear to have done. The Pillsbury privilege log reflects that defendants have withheld documents related to the very same subject matter on which they have affirmatively waived privilege, and other documents that are necessary for the Commission to respond to their claim of reasonable reliance on counsel. For example:
PWSP 002120-2143, 00374-443 100 pages of email discussions between AEHI and Pillsbury regarding the filing of Forms 3 and 4 under Section 16 of the Exchange Act- the very statute under which Ms. Ransom is charged.
PWSP 002144-2149 - Emails relating to insider stock purchases and AEHI’s insider trading policy. These matters implicate the same disclosure issues and legal analyses that are at the center of defendants’ privilege Waiver.
PWSP 000573, 581-582 - Emails relating to “due diligence,” presumably regarding AEHI. These are plainly relevant to the question of what Mr. Bevilacqua knew (and was told) about AEHI and its management structure.
PWSP 000632-1019 - Almost 400 pages of emails relating to the drafting of AEHI’s 10-Q. These are plainly relevant to the question of what Mr. Bevilacqua knew (and was told) about AEHI and its management structure.
PWSP 006700-6735 - Same.
PWSP 004495-4497, 5691, 5693-5760, 5774-5775 - Emails relating to AEHI Private Placement Memoranda. These are plainly relevant to the question of what Mr. Bevilacqua knew (and was told) about AEHI and its management structure. For example, several AEHI PPMS describe Ms. Ransom as a “key member of management.”
This is definitely getting more interesting.
More updates as they are filed on PACER.