An irreverent Wall Street Blog
by Bill Singer
by Bill Singer
Stifel Nicolaus Email Tested For Attorney Client Privilege And Work Product
December 18, 2013
Welcome to the fascinating and, at times, infuriating world of federal discovery. In today's installment, we find ourselves in the Middle District of Georgia, where litigants in a federal civil case are thrashing out who has to produce what and whether it's discoverable.
A Matter Of Privilege
As to the specific issue that made its way into the Court's Order, it apparently involved Defendant Stifel, Nicolaus & Company, Inc.'s ("Stifel") production of a privilege log listing hundreds of pages of documents that the firm contends are protected by the attorney-client privilege or the work product doctrine. All well and fine but for the fact that the Plaintiffs have petitioned the Court because they're not buying some of the exceptions claimed by Stifel. Owens et al. v. Stifel, Nicolaus & Company et al. (MDGA, Order, 12-CV-144, December 6, 2013).
As set forth in its log, Stifel had grouped the documents into two batches:
- email and attachments dated July 20, 2010, which Stifel argued were privileged under the attorney-client privilege; and
- the remaining documents which Stifel characterized as in response to an internal investigation, FINRA investigation, and Florida Office of Financial Regulations investigation -- and, accordingly, were protected by the attorney-client privilege and/or the work product doctrine.
Following a teleconference, the Court ordered Stifel to produce all of the documents claimed as privileged on the log for in camera inspection - and, thereafter, the Court had the fun of sifting through some 900 pages of contested materials.
Attorney-Client Privilege Test
In setting forth the burden on the party invoking attorney-client privilege, the Court set forth three elements:
1. the asserted holder of the privilege is or sought to become a client;2. the person to whom the communication is made
(a) is (the) member of a bar of a court, or his subordinate and(b) in connection with this communication is acting as a lawyer; and the communication relates to a fact of which the attorney was informed
- by his client
- without the presence of strangers
- for the purpose of securing primarily either
- opinion on law or
- legal services or
- assistance in some legal proceeding, and not for the purpose of committing a crime or tort; and
3. the privilege has been
(a) claimed and(b) not waived by the client.
Side Bar: It's important for laypersons -- particularly compliance and supervisory staff -- to understand that just because your in-house lawyer's or outside counsel's name appears on a document is no guarantee of the protection of the attorney-client privilege. Too often, folks take false comfort in the mistaken belief that because the Sender, Recipient, CC, or BCC of an email is a lawyer purportedly acting on their or their firm's behalf that this automatically renders the communication as confidential and privileged. Please note all the elements in the above test, as enunciated by the federal court.One, if you are going to seek protection under a claim of attorney-client privilege, then you must be a "client" or at least circumstances indicating that such a status was sought. Two, the document sought to be covered under the privilege was sent by you to lawyer (or a recognized subordinate) in his or her role as a lawyer (not as your friend or in another non-lawyer role). Three, the communication was transmitted in a somewhat hermetically sealed environment without involving certain outside parties. Four, the communication is seeking a legal opinion or services. Finally, you did not intentionally or inadvertently waive the privilege that you are seeking to enforce.
Work Product Test
Separately, the Court noted that the work product privilege protects materials prepared in anticipation of litigation by a party, an attorney, or other representatives of the party and where Federal Rule of Civil Procedure 26(b)(3)(A)(ii) applies, such materials are protected from discovery unless it can be shown by a party opposing the privilege that there is a substantial need for the materials to prepare its case and cannot, without undue hardship, obtain their substantial equivalent by other means.
SIDE BAR: Federal Rules of Civil Procedure: Rule 26. Duty to Disclose; General Provisions Governing Discovery, (b) Discovery Scope and Limits:(3) Trial Preparation: Materials.(A) Documents and Tangible Things. Ordinarily, a party may not discover documents and tangible things that are prepared in anticipation of litigation or for trial by or for another party or its representative (including the other party's attorney, consultant, surety, indemnitor, insurer, or agent). But, subject to Rule 26(b)(4), those materials may be discovered if:(i) they are otherwise discoverable under Rule 26(b)(1); and(ii) the party shows that it has substantial need for the materials to prepare its case and cannot, without undue hardship, obtain their substantial equivalent by other means.(B) Protection Against Disclosure. If the court orders discovery of those materials, it must protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of a party's attorney or other representative concerning the litigation. . .
The Grunt Work
In deciding whether various documents on Stifel's privilege log would be ordered to be produced, the Court undertook an exacting investigation of the subject materials and offered a detailed rationale. For industry participants and investors engaged in litigation (or contemplating same), I would commend the full-text Order to you for guidance - similarly, in-house Compliance and Legal Departments would be well advised to consider what factors may tip the balance against your firm's future claims of privilege.
Many documents were deemed protected by the Court under the work-product doctrine because they were prepared under the "prospect of litigation," as is the frequent legal terminology used in such matters. Below, I offer some insight into a few of the reviews undertaken by the Court.
Among the more nuanced determinations was the finding of an email and attachment as NOT protected by the attorney client privilege, the Court explained that
The email was sent from a member of Stifel's compliance department to the director of branch offices with respect to broker reviews conducted on Anthony Fisher and another broker. The email and attachments are not protected by the attorney-client privilege because they do not seek or contain legal advice. While Stifel's in-house counsel was copied on the email, information that is not otherwise privileged will not become so simply by being communicated to or filtered through an attorney. However, the information regarding the second broker is not relevant to this case, so Stifel will not be required to produce that attachment . . .
In the case of one email string, the Court found that although the communication did not necessarily seek legal advice, they were covered by the work product doctrine:
[I]n-house counsel is involved in the email string, but the emails do not explicitly seek or contain legal advice. However, the emails are protected by the work product doctrine because the emails were prepared because of the prospect of litigation.
Another email and attachment were found NOT protected by the attorney-client privilege or work product doctrine because:
[W]hile the email was sent to in-house counsel at one point, the email does not seek or contain legal advice. The document is further not protected by the work product doctrine because it was not prepared because of the prospect of litigation. The substantive portions of the email were created in 2010, as well as the attachment, long before Fisher's termination in 2012. Thus, it appears the document was prepared in the regular course of business, and not in anticipation of litigation.
In the case of a email and attachment that were deemed protected by the attorney-client privilege and the work product doctrine, the Court explained that:
The document is an email string involving in-house counsel about the FINRA investigation, along with a draft response concerning the FINRA investigation. The documents are protected by the attorney-client privilege because they contain confidential communications and contain legal advice. The documents are also protected by the work product doctrine because they were prepared because of the prospect of litigation.The March 13, 2012 email and attachment (STIF_REV000308-0001, STIF_REV000309-0001) are protected by the work product doctrine. The documents contain a draft response concerning the FINRA investigation. The documents are protected by the work product doctrine because they were prepared because of the prospect of litigation.
In the case of another email and attachments found protected by the attorney-client privilege and the work product doctrine, the Court explained that:
The document is an email string involving in-house counsel about the FINRA investigation, along with draft responses concerning the FINRA investigation. The documents also contain instructions and suggestions from in-house counsel regarding the FINRA response. The documents are protected by the attorney-client privilege because they contain confidential communications and contain legal advice. The documents are also protected by the work product doctrine because they were prepared because of the prospect of litigation. Further, the documents are protected as opinion work product because they contain the mental impressions, conclusions, opinions, or legal theories of in-house counsel.
In a finding that an email and attachments were NOT protected by the attorney-client privilege or work product doctrine, the Court noted that the subject email was
[S]ent from a member of Stifel's compliance department to the director of branch offices with respect to broker reviews conducted on Anthony Fisher and another broker. The email and attachments are not protected by the attorney-client privilege because they do not seek or contain legal advice. While Stifel's in-house counsel was copied on the email, information that is not otherwise privileged will not become so simply by being communicated to or filtered through an attorney. However, the information regarding the second broker is not relevant to this case, so Stifel will not be required to produce that attachment. There is also no indication that the documents were prepared because of the prospect of litigation, so the work product doctrine does not apply either.
Bill Singer's Comment
A few practice pointers for brokerage firms and registered persons.
If you are engaging in exchanging emails and/or documents with lawyers or pursuant to contemplated or ongoing litigation (or a regulatory investigation), it is often advisable to create a "LEGAL" directory or file and save such documents in that directory. With such a segregated archive in place, should you receive any demands to produce communications/documents involving your lawyers or materials prepared in contemplation of litigation, you already have them walled off from your other communications. No -- the mere fact that you have set aside these "LEGAL" materials does not mean that you will not have to prepare a log or ultimately produce them, but it does offer some positive indication that you understood that the segregated materials were either confidential or privileged. Such a designated status may make it easier to obtain a preliminary or permanent protection for such documents than if you had commingled them with other archived communications.
Similarly, make sure to limit the use of CC's and BCC's on emails involving communications with your lawyers and the preparation of materials for litigation. In some instances, the copying of third parties will destroy the confidentiality or privileged nature of communications that you may subsequently seek to avoid producing.
It is often advisable and helpful to include some boldface notice in the Subject line of email or atop the body of the text that declares: ATTORNEY CLIENT CONFIDENTIAL COMMUNICATION -- but be careful because a lack of consistently characterizing communications with that warning may deem communications missing that declaration as not intended to by confidential attorney communications.
Now that you understand some of the nuances of claiming confidentiality and/or privilege, it might be a good time to revisit your firm's policies concerning such issues. Also, take the opportunity to consult with a qualified attorney and prepare some guidelines for ensuring that you do everything possible to preserve the confidentiality and work-product nature of critical documents.
Read the full-text Order
Also READ: Supreme Court Reverses SEC V. Gabelli On Discovery Rule Grounds (BrokeAndBroker, February 27, 2013)