In re Lifetrade Litigation

Background

The plaintiffs are individual and institutional investors who purchased shares in three mutual funds that invested in life insurance policies. The funds later could not satisfy redemption requests or repay a $500 million credit line from a Wells Fargo predecessor entity. In 2012, Wells Fargo acquired the funds’ assets in exchange for canceling the debt, and the plaintiffs lost their investments. The litigation began in 2017, and several actions were consolidated for discovery and common legal and factual issues. Some claims and defendants were later dismissed or resolved; the remaining defendants included Wells Fargo and the Roy Smith Estate.

The Motion to Compel

The defendants asked the court to require production of documents that the plaintiffs had withheld or redacted based on attorney-client privilege, the common-interest doctrine, and attorney work-product protection. The disputed materials included communications shared with brokers, financial advisers, accountants, consultants, employees, spouses, children, and an investor who did not ultimately join the lawsuit. The defendants argued that disclosure to these people waived protection. They also argued that documents created before November 21, 2016 were subject to disclosure because the plaintiffs had placed their knowledge and discovery of potential claims at issue. The court reviewed selected examples from the plaintiffs’ privilege log privately.

Legal Standards

The party asserting privilege or work-product protection bears the burden of showing that the protection applies and was not waived. Because New York law supplied the applicable privilege rule for the relevant claims and defenses, the court applied New York law to attorney-client privilege. That privilege generally protects confidential communications between a client and attorney made to obtain legal advice. It can be waived by disclosure to a third party, but disclosure to an agent of the client or attorney may not waive protection when confidentiality was reasonably expected and the disclosure was needed to obtain legal advice.

Federal law governed work-product protection. That doctrine protects documents and materials prepared because of expected litigation. Opinion work product—an attorney’s mental impressions, conclusions, opinions, and legal theories—receives heightened protection. Factual work product may be disclosed only if the opposing party shows substantial need and cannot obtain the equivalent without undue hardship. Work-product protection is not automatically waived by sharing material with a third party; waiver generally requires disclosure inconsistent with the doctrine’s purpose of protecting the adversarial litigation process.

The common-interest doctrine protects qualifying communications among parties with aligned legal interests, but it is not an independent privilege. It applies only when the communication is otherwise protected by attorney-client privilege or the work-product doctrine.

Court’s Analysis

The court found that most of the exemplar documents were privileged or protected and that the protected material could not easily be separated from unprotected material. Communications about the fact of retaining a lawyer, fee negotiations, and engagement terms were not themselves protected by attorney-client privilege or work-product protection. However, portions of those communications that revealed why counsel was being sought, specific legal advice, litigation strategy, or material prepared because of expected litigation could be protected. The court also found that the actual or proposed engagement terms were not relevant to any claim or defense and therefore fell outside the permitted scope of discovery.

The presence of an investor who discussed engaging counsel but did not ultimately become a plaintiff did not waive protection. The court found that the communications could remain confidential and that the investors shared a common legal purpose: considering claims to recover their Lifetrade investments. Similarly, the court found no waiver from including brokers or financial advisers who assisted with engaging lawyers and acted as the plaintiffs’ agents. The court reached similar conclusions regarding employees and, on the privilege log, spouses. It also found that communications involving a child who helped a parent engage counsel remained protected under the circumstances described in the exemplars.

The court treated certain communications without lawyers as protected work product when they were prepared in anticipation of litigation or conveyed legal advice and litigation strategy. For example, it found that an analysis prepared for Plaza Asset Management was work product and that a communication between Plaza and another Lifetrade investor qualified as work product and involved a common legal interest. The court found that a forwarding email in one category was not privileged or work product, but it did not need to be produced because it contained no relevant information. In another category, a nonprivileged portion had already been produced, while the remainder contained protected work product and privileged material.

The defendants’ “at issue” waiver argument also failed. The court found that the plaintiffs were not relying on advice of counsel and had not placed their attorney-client communications or work product at issue. The fact that privileged communications might be relevant to when the plaintiffs learned facts supporting their claims did not itself waive privilege. The defendants could investigate that timing through nonprivileged documents, interrogatories, depositions, and other discovery, including asking whether the plaintiffs explored litigation before 2016, without examining the substance of protected communications. The court also found that the defendants had not shown substantial need for the work-product material.

Disposition

The court denied the defendants’ motion to compel production. The opinion did not order production of the protected exemplar materials.