Eletson Holdings Inc. v. Levona Holdings Ltd.

Background

Levona Holdings Ltd. moved under Federal Rule of Civil Procedure 45 to compel non-party Reed Smith LLP to respond to an October 16, 2024 document subpoena. Reed Smith opposed the motion. The court stated that Levona’s amended petition and the motion did not ask it to relitigate issues already decided by the arbitrator. Instead, the relevant questions included whether Eletson committed fraud in the arbitration and whether equitable tolling—an exception that can extend the time for bringing a claim—applied.

The court referred to its earlier finding that Levona had presented substantial evidence of alleged fraud, including the withholding of highly relevant documents and critical evidence and the presentation of allegedly false testimony. The court had also found evidence that Eletson created extraordinary barriers to Levona’s discovery of that alleged fraud. Because additional documents might support Levona’s allegations, the court had permitted discovery to proceed.

Analysis

The court concluded that the subpoena requests were tailored to finding evidence about the alleged fraud and equitable tolling. The requests addressed, among other things, when relevant people learned about the withheld documents; why the documents were not produced; what the documents meant; whether they conflicted with Eletson’s testimony and arguments; the allegedly false testimony and evidence concerning its truthfulness; and efforts to prevent Levona from discovering the alleged fraud.

The court rejected Reed Smith’s relevance objection, explaining that the requests could help determine whether the arbitration decision was procured by fraud. It also rejected the undue-burden objection because Reed Smith provided no evidence supporting its assertion that production would be burdensome. The court declined to impose the proposed cutoff dates because documents created after the relevant events could shed light on the meaning of the withheld documents, the participants’ understanding of them, and whether extraordinary circumstances delayed Levona’s discovery.

The court also found that documents from Reed Smith’s representation of Eletson in other proceedings could be relevant because the parties had placed the bankruptcy proceeding and its relationship to Eletson’s withholding of documents at issue. The court rejected Reed Smith’s argument that discovery should be narrowly limited because arbitration is intended to be prompt and inexpensive. It distinguished an earlier decision limiting discovery where the facts were undisputed and the issues were almost entirely legal, finding that this matter involved disputed factual questions about alleged fraud.

Attorney-client privilege

The court agreed that Levona was correct that Reed Smith could not independently assert the attorney-client privilege as its own privilege. However, the court stated that a subpoenaed attorney may assert privilege on a client’s behalf when the client has instructed the attorney to withhold information and there is a well-founded basis for the assertion. Reed Smith therefore could withhold documents on that basis if it provided a detailed privilege log containing the information required by Local Civil Rule 26.2(a)(2).

Ruling

The court granted Levona’s motion to compel, except as to Request No. 14(c). That request sought documents and communications that Reed Smith and its clients intended to cite, use, or rely on in connection with filings or evidentiary hearings in the proceeding. The court sustained Reed Smith’s objection to that request because the only clients Reed Smith had represented in the proceeding were Eletson Corporation and Eletson Holdings, and the court had determined that Reed Smith could not represent either of them. The court stated that the request could become proper if Reed Smith later represented a client in the proceeding or other relevant information came to the court’s attention.

Reed Smith was ordered to produce the documents called for by the subpoena, other than those covered by the sustained objection, by May 20, 2025. It was also ordered to provide an itemized privilege log by that date identifying each withheld document and the reason for withholding it.