Litton Industries, Inc. v. Lehman Bros.

125 F.R.D. 51, 1989 U.S. Dist. LEXIS 3709, 1989 WL 34620
District Court, S.D. New York·Decided March 29, 1989·No. No. 86 Civ. 6447 (JMC)·Published·Cited by 17 cases

Opinion

MEMORANDUM AND ORDER

CANNELLA, District Judge:

The objection of nonparty witness Sheldon I. Goldfarb to Magistrate Gershon’s Order of February 16, 1989, is dismissed. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(a).

BACKGROUND

In 1986 defendant Dennis B. Levine, along with several other individuals, was charged by the Securities and Exchange Commission [the “SEC”] with illegal trading based on material nonpublic information [“insider trading”]. Pursuant to a Final Judgment entered by United States District Judge Richard Owen, Levine was enjoined from violating the securities laws and directed to disgorge assets of approximately $11.5 million to a court appointed receiver. Under the terms of the Final Judgment, Sheldon I. Goldfarb, an attorney with Reavis & McGrath (now known as Fulbright Jaworski & Reavis McGrath), was named as receiver and conservator of the disgorged assets.

During the course of his inquiries, Goldfarb interviewed and requested documents from Levine and other witnesses, visited Levine’s apartment and obtained information and documents from two Swiss banks utilized by Levine in effectuating his insid[53] er trading scheme. In addition, Goldfarb’s counsel, James Nespole, Esq., either singularly or together with Goldfarb, conducted interviews with Levine’s father, brothers, tax accountant, architect, interior designer and several other people who had significant contact with Levine in the previous six years. Pursuant to the terms of the Final Judgment, Goldfarb filed two reports with the United States Court for the Southern District describing his efforts to collect, liquidate and conserve Levine’s non-exempt assets.

On October 9, 1987, plaintiff Litton Industries Incorporated [“Litton”], served Goldfarb with a deposition subpoena seeking his testimony and documents he obtained during the performance of his duties as receiver. On November 13, 1987, Goldfarb filed a motion for a protective order and to quash the deposition subpoena. On February 16, 1989, Magistrate Nina Gershon, to whom the case has been transferred for the purpose of supervising discovery, denied the motion. Goldfarb now appeals that decision claiming that discovery of the products of his investigation are precluded by either the work-product, deliberative process or law enforcement privileges. Litton opposes Goldfarb’s motion.

DISCUSSION

Appeals from decisions of magistrates are subject to the clearly erroneous standard of review. 28 U.S.C. § 636(b)(1)(A). In the past, the Court has held that “in reviewing discovery disputes, the Magistrate is afforded broad discretion, which will be overruled only if abused.” Citicorp v. Interbank Card Ass’n, 478 F.Supp. 756, 765 (S.D.N.Y.1979); see also Detection Systems, Inc. v. Pittway Corp., 96 F.R.D. 152, 154 (W.D.N.Y.1982) (citing Citicorp, 478 F.Supp. at 765); Empire Volkswagen, Inc. v. World-Wide Volkswagen, 95 F.R.D. 398, 399 (S.D.N.Y.1982) (same).

The common law deliberative process privilege is an evidentiary privilege available to the government in the context of civil discovery. See Jordan v. United States Dep’t of Justice, 591 F.2d 753 (D.C. Cir.1978). “This privilege permits the government to withhold documents that reflect advisory opinions, recommendations and deliberations comprising part of a process by which government decisions and policies are formulated.” FTC v. Warner Communications Inc., 742 F.2d 1156,1161 (9th Cir.1984) (citing NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 150, 95 S.Ct. 1504, 1516, 44 L.Ed.2d 29 (1975)).

The privilege only applies, however, if the document is predecisional and is not purely factual in nature, but rather, contains opinions, recommendations and advice about agency policies. See EPA v. Mink, 410 U.S. 73, 93 S.Ct. 827, 35 L.Ed.2d 119 (1973).

The law enforcement investigative privilege is “ ‘based primarily on the harm to law enforcement efforts which might arise from public disclosure of government investigatory files.’ ” Association for Women in Science v. Califano, 566 F.2d 339, 343 (D.C.Cir.1977) (quoting Black v. Sheraton Corp. of America, 564 F.2d 531, 541 (D.C.Cir.1977)). As noted by the Court of Appeals for the District of Columbia “ ‘if investigatory files were made public ... the ability of any investigatory body to conduct future investigations would be seriously impaired.’ ” Black, 564 F.2d at 531 (quoting Aspin v. Department of Defense, 491 F.2d 24, 30 (D.C.Cir.1973)). As with the deliberative process privilege, however, the law enforcement privilege is one that may only be claimed by the government. See Women in Science, 566 F.2d at 343; Black, 564 F.2d at 541-42.

Magistrate Gershon concluded that Goldfarb’s cooperation with the government did not make him the equivalent of the government. In addition, Magistrate Gershon found that there were no policy reasons which would justify extending these governmental privileges to a court appointed receiver. See Opinion and Order, at 3, 124 F.R.D. 75 (S.D.N.Y.1989). The Court agrees.

Goldfarb, in his capacity as receiver, was an agent of the court and not a government agent. Goldfarb’s function was to marshal [54] and account for assets disgorged by Levine pursuant to a civil settlement. Goldfarb neither participated in the formulation of government policy, nor effectuated government regulations. In addition, as noted by Magistrate Gershon, plaintiff has specifically disavowed any interest in Goldfarb’s deliberative or other thought processes and requests only those documents consisting of factual material.

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Litton Industries, Inc. v. Lehman Bros., 125 F.R.D. 51, 1989 U.S. Dist. LEXIS 3709, 1989 WL 34620 (S.D.N.Y. 1989).

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