In re General Instrument Corp. Securities Litigation

190 F.R.D. 527, 46 Fed. R. Serv. 3d 451, 2000 U.S. Dist. LEXIS 2436, 2000 WL 14684
CourtDistrict Court, N.D. Illinois
DecidedJanuary 7, 2000
DocketNo. 96 C 1129
StatusPublished
Cited by8 cases

This text of 190 F.R.D. 527 (In re General Instrument Corp. Securities Litigation) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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In re General Instrument Corp. Securities Litigation, 190 F.R.D. 527, 46 Fed. R. Serv. 3d 451, 2000 U.S. Dist. LEXIS 2436, 2000 WL 14684 (N.D. Ill. 2000).

Opinion

MEMORANDUM ORDER

BOBRICK, United States Magistrate Judge.

Before the court is the motion of plaintiffs for an order compelling the production of certain documents identified on defendant’s third revised privileged log.

I. BACKGROUND

This matter has been pending in this court for nearly four years, since February of 1996. It began on Judge Marovich’s docket, and Magistrate Judge Rosemond was assigned discovery matters. On August 4, 1999, the executive committee reassigned the proceeding to Judge Leinenweber and directed the clerk of the court to assign a different magistrate judge by lot. In view of the time Magistrate Judge Rosemond had spent on the various discovery disputes the parties have had, the defendants moved for a reconsideration of the executive committee’s order for a reassignment of magistrate judges. The committee denied the motion, and on November 23, 1999, the instant discovery dispute was assigned to this magistrate judge. Consequently, with a great deal of water under the bridge, we are constrained to go back to the beginning to get a sense of this ease.

We draw our understanding of this matter from orders entered by Judge Marovich. This matter appears to encompass three consolidated actions, a class complaint, and two derivative suits. The Class Complaint alleges securities fraud on behalf of all persons who purchased or otherwise acquired the common stock of defendant GI during the period from March 21, 1995 through October 18, 1995. Plaintiffs contend that GI, certain of its officers and directors and Forstmann Little & Co., GI’s largest shareholder, made false representations to the investing public about the development and success of two new telecommunications products GI manufactured. Plaintiffs maintain that these representations misled the market and artificially inflated the price of GI stock during the Class Period, thus allowing defendants, among other things: (1) to ensure the success of a secondary public offering by Forst-mann Little; (2) to complete successfully the acquisition of Next Level Communications using GI common stock as consideration; (3) to conceal damaging financial information from the investing public; and (4) to sell shares of GI stock that they personally owned at artificially inflated prices. Plaintiffs assert that when the truth about the problems affecting GI’s new products became known, the closing price of GI stock fell dramatically to its lowest price in two years.

In addition to the Class Complaint, the sharp decrease in the price of GI stock also precipitated two derivative lawsuits arising out of the same course of events. One lawsuit was brought by Plaintiff Seymour Lazar (“Lazar”), a GI shareholder, as a derivative action against GI and certain members of its board of directors alleging that they breached their fiduciary duty to the Company. A second derivative action was brought on behalf of a group of Next Level Communications’ former shareholders against Next Level, currently a wholly-owned subsidiary of GI. This Complaint alleges that GI made false and misleading statements during the pen-dency of a merger agreement with Next Level which resulted in GI obtaining the plaintiffs’ Next Level stock — pursuant to a stock swap — based on an artificially inflated value of GI’s stock.

Now, we turn to the discovery dispute, which, according to correspondence in the record has been going on for a little more than three years. It would appear that defendant GI first produced a privilege log in November of 1996, added documents in December of that year, and produced a revised log in February of 1997. Plaintiffs requested a computer disk of the log in May of 1998, which defendant provided a month later. In December of 1998, plaintiffs issued challenges as to defendant’s claims of privilege for 899 of 925 documents. In response, defendant produced 33 documents in February of 1999. Many of these, however, were ap[529]*529parently merely cover sheets, which plaintiffs pointed out to defendant. Plaintiffs also asked that defendants identify 125 individuals named in the document descriptions. In response, defendants essentially stated that “anyone with even a passing familiarity with this case” would know the identities. Plaintiffs then brought their motion to compel. On April 1, 1999, defendants produced an additional 20 documents. Presently, plaintiffs seek production of 396 documents.

II. ANALYSIS

The party seeking to withhold materials from discovery bears the burden of establishing the essential elements to demonstrate the materials are privileged. United States v. Evans, 113 F.3d 1457, 1461 (7th Cir.1997). The elements have been summarized as follows:

(1) Where legal advice of any kind is sought (2) from a professional legal advisor in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected from disclosure by himself or by the legal adviser, (7) except the protection may be waived.

Id. (quoting 8 John Henry Wigmore, Evidence in Trials at Common Law § 2292 (John T. McNaughton rev.1961)). Furthermore, the privilege must be established on a document-by-document basis; a blanket claim failing to specify what information is protected will not suffice. United States v. White, 970 F.2d 328, 334 (7th Cir.1992).

It is important to remember that, because the privilege impairs the court’s search for the truth, it is narrowly construed. Evans, 113 F.3d at 1461. Not all information transmitted to an attorney becomes cloaked with the privilege. White, 970 F.2d at 334. For example, when information is transmitted to an attorney with the intent that it be transmitted to a third party, the material is not privileged. United States v. Lawless, 709 F.2d 485,487 (7th Cir.1983).

Beyond that, plaintiffs in this case raise a specific exception to the attorney-client privilege, the fiduciary duty exception, which we address at the outset. In the leading case on this exception, the court in Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir.1970) held that:

where the corporation is in suit against its stockholders on charges of acting inimieally to stockholder interests, protection of those interests as well as those of the corporation and those of the public require that the availability of the privilege be subject to the right of the stockholders to show cause why it should not be invoked in the particular instance.

430 F.2d at 1103-04. While the Seventh Circuit has not addressed this matter, the courts of this district have followed Gamer in several instances. See, e.g. J.H. Chapman Group, Ltd. v. Chapman, 1996 WL 238863 (N.D.Ill.1996); Heyman v. Beatrice Company, Inc., 1992 WL 245682 (N.D.Ill.1992); Hashim v. First Nat’l Bank of Chicago, 1987 WL 6563 (N.D.Ill.1987); Ferguson v. Lurie, 139 F.R.D. 362 (N.D.Ill.1991); Bailey v. Meister Brau, Inc., 55 F.R.D. 211 (N.D.Ill. 1972).

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190 F.R.D. 527, 46 Fed. R. Serv. 3d 451, 2000 U.S. Dist. LEXIS 2436, 2000 WL 14684, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-general-instrument-corp-securities-litigation-ilnd-2000.