New Concept Energy, Inc. v. Gentile

Background

New Concept Energy, Inc. and Avalon Holdings Corporation separately sued Guy Gentile and MintBroker International, Ltd. under Section 16(b) of the Securities Exchange Act of 1934. After summary judgment found Gentile liable and later proceedings on damages, District Judge Denise L. Cote entered final judgments on March 20, 2024, awarding each plaintiff more than $8 million, including prejudgment interest.

The plaintiffs then used federal judgment-enforcement procedures to locate assets and enforce the judgments. Gentile did not respond to post-judgment subpoenas, and Judge Cote found him in civil contempt, issued a bench warrant for his arrest anywhere in the United States, and ordered that he be incarcerated until he responded to the subpoenas.

The plaintiffs served information subpoenas on the Ford O’Brien Landy LLP law firm, which had represented Gentile for most of the underlying proceedings. The firm answered 26 of 27 requests. Request No. 21 asked whether the firm or its partners had been paid for representing Gentile in either case before March 20, 2024, and sought the payer, payment dates, payment methods, banks used for checks or wire transfers, and copies of checks or payment records.

Privilege and relevance

The Ford Firm declined to answer Request No. 21, asserting lack of relevance and attorney-client privilege. The firm argued that the payment information could reveal Gentile’s whereabouts, which it claimed was privileged even though the firm no longer represented Gentile in these cases.

Judge Lehrburger found the information plainly relevant because it could assist the plaintiffs in locating Gentile and enforcing the judgments. He explained that attorney-client privilege generally protects confidential communications made for obtaining legal advice, not every fact connected with the attorney-client relationship. The Ford Firm had not shown that Gentile’s address, whereabouts, fee payments, payment sources, or payment methods were themselves the subject of legal advice.

The court also found that the argument linking payment information to Gentile’s whereabouts was too speculative. Even if a check contained address information, it would be more than a year old and might not show Gentile’s current location. Information about a bank or account would still require additional discovery to obtain an address, which might also be outdated.

The court considered the Ford Firm’s reliance on New York cases involving disclosure of a client’s address and payment records, but found those authorities distinguishable or less persuasive than federal decisions allowing disclosure of fee information in similar circumstances. The court also rejected the plaintiffs’ alternative reliance on the crime-fraud exception because the plaintiffs had not shown that Gentile’s payments to the firm were made in furtherance of a crime or fraud.

Ruling

Judge Lehrburger denied the Ford Firm’s motion for a protective order. The Ford Firm was ordered to provide the information requested in Request No. 21 within seven days of the order and to serve a privilege log within fourteen days. The court did not decide whether the firm must be deposed or whether Matthew Ford must serve as its representative under Rule 30(b)(6). Instead, it ruled that a deposition request was premature. The plaintiffs may meet and confer with the firm and renew that request if they still need information after receiving the written response. The clerk was directed to terminate the related letter motions in both cases.