Abdo v. Fitzsimmons

Background

The two related cases involve investors who alleged that former directors and officers of Delivery Agent, Inc. made fraudulent misrepresentations on which the investors relied when purchasing millions of dollars in securities. Delivery Agent had filed for Chapter 11 bankruptcy in September 2016 and had ceased functioning.

In both cases, defendants moved to compel Latham & Watkins, Delivery Agent’s former counsel and a nonparty, to produce documents responsive to subpoenas. Latham argued that it had to take steps to preserve any privilege belonging to its former client. In the Rising Tide case, Rising Tide I, LLC and Rising Tide II, LLC moved under Federal Rule of Civil Procedure 12(f) to strike defendants’ advice-of-counsel defenses, or alternatively to prevent defendants from presenting advice-of-counsel evidence at trial. The plaintiffs in Abdo joined that motion.

Court’s analysis

Federal Rule of Civil Procedure 45 governs subpoenas to nonparties, but the permissible scope of subpoena discovery is the same as the scope under Rule 26(b). Rule 26(b) allows discovery of nonprivileged information that is relevant to a claim or defense and proportional to the needs of the case.

The court applied authorities recognizing a presumption that evidentiary protections such as attorney-client privilege and the work-product doctrine no longer remain viable when a corporate entity has ceased functioning, unless the party seeking to preserve the protection shows authority and good cause. The court also explained that the party asserting a privilege bears the burden of proving that it applies.

Although Delivery Agent’s trustee stated that he did not intend to waive any applicable privilege held by the company, the trustee did not provide a basis for concluding that a privilege existed. The court therefore concluded that, even if Delivery Agent had a viable privilege, the burden of proving it had not been met.

Disposition

The court granted defendants’ motions to compel Latham & Watkins to produce documents responsive to the subpoenas. The court denied plaintiffs’ motion to strike because that motion was based on plaintiffs’ claimed inability to conduct discovery into defendants’ advice-of-counsel defense, and the order likely resolved that issue. The court also vacated the scheduled hearing and decided the matters without oral argument. Judge Thomas S. Hixson signed the order.