Compeer Financial, ACA v. Corporate America Lending, Inc.

Background

The court addressed the receiver’s motion about continued sealing of the receiver’s First Written Report and sharing documents with the plaintiffs. The court had already issued an oral order granting that motion in part. Among other things, the earlier order authorized the receiver to provide the arbitration panel in American Arbitration Association Case No. 01-24-0005-4234 with an unredacted copy of the First Written Report and later reports required by the receivership order.

The court also directed Corporate America Lending, Inc. (CAL) to state whether it withdrew objections to producing the unredacted First Written Report and bank records obtained by the receiver. CAL withdrew those objections, subject to the protective order in the underlying arbitration. CAL also stated that it did not object to the receiver interviewing certain third parties, serving discovery on them, or requesting their bank records. CAL maintained one objection: that entries involving transfers to law firms were protected by the attorney-client privilege, which generally protects confidential communications made for the purpose of obtaining or providing legal advice.

Attorney-Client Privilege Objection

The court overruled CAL’s privilege objection. It noted that CAL had not supported the objection in its written response, had cited only one case during the hearing, and had declined to provide supplemental briefing or evidence showing that the bank-record entries revealed protected information.

The court was not persuaded by CAL’s reliance on a California case concerning attorney invoices. It stated that it was not clear California privilege law applied because the agreement provided that Minnesota law governed the dispute. The court also noted that CAL cited no Minnesota case protecting entries in bank records showing financial transactions between a client and an attorney. The court stated that, under either Minnesota or California law, CAL had the burden of making an initial showing that the privilege applied.

The court further stated that the record did not show that the entries revealed litigation strategy, an impending filing, unusual concern about a recent event, or other privileged information. It therefore authorized the receiver to produce unredacted copies of all bank records obtained by the receiver to the arbitration panel and the plaintiffs no later than 15 days after the order. The court stated that the records apparently covered February 2024 through March 2025. It authorized production of all records the receiver had, but said it could not authorize production of records going back to January 1, 2024 because the receiver did not appear to possess those records.

Continued Sealing of the First Written Report

The court ordered that certain portions of the First Written Report no longer remain sealed. It identified the descriptions of CAL’s business operations in paragraphs 8, 12, 13, 14, 20, 29, and 33, as well as the name of an entity in paragraph 10. The court found that CAL had not shown that those descriptions or the entity’s name contained confidential, proprietary, or trade-secret information.

The court kept other information sealed because privacy interests outweighed the public’s right to access it at that point in the litigation. The protected information included the names of parties to transactions, transaction amounts, account numbers, and the cash-book balances for identified accounts in the last sentence of paragraph 11. The court specified paragraphs 23 and 26.a through 26.r, including the tables in paragraph 26, for continued sealing. It stated that this decision did not determine whether the information could remain sealed in the future if the reports were considered in connection with later motions.

The receiver was ordered to publicly file a redacted First Written Report within 10 days after the order, unless a party filed a good-faith motion for further consideration of sealing within 7 days. Responses to such a motion were due within 7 days after the motion was filed.

Procedures for Future Reports and Discovery

The court directed the receiver to file future reports according to the deadlines in the receivership order and to file each report under temporary seal. A party objecting to unsealing had to identify the specific portions it wanted redacted and explain the basis for the objection within 7 days after the report was filed. If no objection was filed on time, the report would be unsealed. The court had already authorized the receiver to provide the reports in unredacted form to the arbitration panel.

Because the receivership order authorized and required the receiver to provide reports to the plaintiffs, CAL had only 3 days after a report was filed to object to providing it to the plaintiffs. If CAL did not timely object, the receiver was required to provide the plaintiffs an unredacted copy without another court order. The court also required the receiver to copy the plaintiffs and CAL on discovery requests and to provide CAL with discovery responses and productions no later than 3 days after they were served on the receiver. The order established additional deadlines for CAL’s objections, required a meet-and-confer by telephone or video conference, and set response deadlines.

The receiver also reported that it had begun reviewing CAL’s emails for privilege. The court directed the parties to meet and confer about any claimed privilege in those communications. If they could not resolve the dispute, CAL had to file a motion seeking a protective order within 7 days after the meet-and-confer. The court cautioned that it might award attorney fees and costs if an objection or opposition was not substantially justified.

Disposition and Classification

The order overruled CAL’s attorney-client privilege objection to producing the unredacted bank records, authorized their production to the plaintiffs and the arbitration panel, ordered a redacted First Written Report to be publicly filed, continued sealing of specified information, and established procedures for future reports and discovery. This is a procedural order because it concerns sealing, disclosure, and discovery rather than deciding the underlying dispute.