Rising Tide I, LLC v. Fitzsimmons
- Thomas Hixson
- 3:17-cv-01232
- U.S. District Court · Northern District of California
- 3
In Rising Tide I v. Fitzsimmons, Judge Hixson granted subpoenas for Latham documents and denied plaintiffs’ motion to strike advice-of-counsel defenses.
The order affects defendants, the investor plaintiffs in both related cases, and nonparty Latham & Watkins, LLP. It requires Latham to produce documents responsive to defendants’ subpoenas and leaves plaintiffs’ motion to strike denied.
What happened
In Rising Tide I, LLC v. Fitzsimmons and the related Abdo v. Fitzsimmons case, investors alleged that former Delivery Agent, Inc. directors and officers made fraudulent statements that led them to buy securities. Defendants sought documents from Delivery Agent’s former law firm, Latham & Watkins, LLP.
Latham argued that it had to protect Delivery Agent’s attorney-client privilege. The court said privileges generally are presumed no longer viable when a corporation has filed bankruptcy and ceased functioning. It also said the party asserting a privilege must prove that it applies, and found that Delivery Agent’s trustee had not provided a basis for the privilege.
The court granted defendants’ motions to compel Latham to produce documents responsive to the subpoenas and denied plaintiffs’ motion to strike the advice-of-counsel defenses. Judge Thomas S. Hixson also vacated the scheduled hearing.
The detailed version
- Rising Tide I, LLC v. Fitzsimmons · No. 3:17-cv-01232
- Thomas Hixson
- Oct. 2, 2019
Background
The court addressed linked discovery motions in two related securities cases. The investors 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 filed for Chapter 11 bankruptcy in September 2016 and ceased functioning.
In both cases, defendants moved under Federal Rule of Civil Procedure 45 to compel nonparty Latham & Watkins, LLP, Delivery Agent’s former counsel, 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 Rule 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 the Abdo case filed a notice joining that motion.
Court’s Analysis
The court explained that Rule 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)(1) permits discovery of nonprivileged matters relevant to a claim or defense and proportional to the needs of the case.
The court relied on decisions recognizing a presumption that evidentiary privileges, including attorney-client privilege and the work-product doctrine, are no longer viable after a corporate entity ceases to function. It also explained that the party asserting a privilege bears the burden of proving that the privilege applies. Although Delivery Agent’s trustee indicated that he did not intend to waive any applicable privilege, the court found that he had not provided a basis showing that a privilege existed. The court therefore concluded that the burden of proving a privilege had not been met.
Ruling
The court GRANTS defendants’ motions to compel Latham to produce documents responsive to the subpoenas. It DENIES plaintiffs’ motion to strike the advice-of-counsel defenses because the order likely resolved the discovery issue underlying that motion. The court found the matters suitable for decision without oral argument and vacated the October 10, 2019 hearing. Judge Thomas S. Hixson issued the order.
Read the full 3-page opinion on CourtListener, the free public archive maintained by the Free Law Project.