Loustalet v. Refco, Inc.

154 F.R.D. 243, 1993 U.S. Dist. LEXIS 20099, 1993 WL 594588
CourtDistrict Court, C.D. California
DecidedNovember 10, 1993
DocketNo. CV 92-7628 RJK
StatusPublished
Cited by8 cases

This text of 154 F.R.D. 243 (Loustalet v. Refco, Inc.) is published on Counsel Stack Legal Research, covering District Court, C.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Loustalet v. Refco, Inc., 154 F.R.D. 243, 1993 U.S. Dist. LEXIS 20099, 1993 WL 594588 (C.D. Cal. 1993).

Opinion

MEMORANDUM OF DECISION AND ORDER

KELLEHER, District Judge.

BACKGROUND

Defendants, Refco Inc., et al. (“Refeo”) move to compel deposition testimony by third party witnesses, Steven D. Wymer and Michael F. Perlis (“Perlis”), and to compel third party witnesses, Steven D. Wymer (“Wymer”) and Stroock & Stroock & Lavan (“Stroock”), to produce documents.

The following issues were submitted for resolution by this Court:

1. Whether Wymer and Perlis must answer questions concerning communications among Wymer, Perlis, and Stroock, and legal advice given by Perlis or Stroock during the period Wymer was still engaging in fraudulent activities prior to December 1991.

2. Whether Wymer and Perlis must answer questions concerning communications between Perlis or Stroock made to any attorney to the various municipalities defrauded by Wymer.

3. Whether Perlis and Stroock must produce documents exchanged with, received from, or delivered to any attorney to the various municipalities defrauded by Wymer.

DISCUSSION

A. Attorney Client Privilege: Crime-Fraud Exception Communications Among Wymer, Perlis, and Stroock Prior to 1991

Generally, discovery may be had as to any matter, not privileged, which is relevant to the subject matter of the pending action. Fed.R.Civ.P. 26(b)(1) (emphasis added). An attorney client privilege exists to encourage full and frank disclosure of information between an attorney and his client, and to further the interests of justice. Upjohn Co. v. U.S., 449 U.S. 383, 389, 101 S.Ct. 677, 682, 66 L.Ed.2d 584 (1981). The attorney client privilege does not, however, protect communications that further a future crime or fraud. U.S. v. Zolin, 491 U.S. 554, 562-63, 109 S.Ct. 2619, 2626, 105 L.Ed.2d 469 (1989). This crime-fraud exception applies even where the attorney is unaware that his advice is sought to further such an illegal purpose. U.S. v. Laurins, 857 F.2d 529, 540 (9th Cir.1988) (citing U.S. v. Hodge & Zweig, 548 F.2d 1347, 1354 (9th Cir.1977)).

To invoke the crime-fraud exception, the party seeking disclosure must “make out a prima facie case that the attorney was retained in order to promote intended or continuing criminal or fraudulent activity.” In Re Nat’l Mortg. Equity Corp., 116 F.R.D. 297, 300 (C.D.Cal.1987) (quoting U.S. v. Hodge & Zweig, 548 F.2d 1347, 1354 (9th Cir.1977)). Next, it must be shown that there is some relationship between the particular communications sought and the illegality. Laurins, 857 F.2d at 540 (referring to In re Sealed Case, 754 F.2d 395, 399 (D.C.Cir.1985)).

Wymer and Perlis assert that the communications made between them prior to 1991 are protected by the attorney-client privilege. Refco claims that the communications are not protected because they fit within the crime-fraud exception.

[246]*246Refco asserts that Wymer testified to the fact that during the time he sought advice from Perlis, Wymer was defrauding his clients. When the SEC launched an investigation into Denman, one of Wymer’s companies, Wymer retained Perlis to assist in preparing a written response to the SEC. Perlis testified that he “participated in the preparation” of Wymer’s letter to the SEC regarding the dissemination of false financial statements by Denman. Wymer has acknowledged that his letter dated September 27 contained false statements intended to mislead the SEC. Therefore, Refco claims that Perlis’ assistance promoted Wymer’s intended and continuing illegal activities. As such, the communications fit within the crime-fraud exception to the attorney client privilege.

Wymer and Perlis contend that Refco has failed to make the requisite prima facie showing because Perlis was not retained to further Wymer’s fraudulent activities. Furthermore, the particular communications sought did not further a crime or fraud. The services rendered between May of 1990 and September 1991 involved advice on how to comply with the law. Perlis in no way affirmatively furthered Wymer’s fraudulent conduct. Wymer, not Perlis, issued the letter to the SEC. Perlis had no communications with, and made no representations to, the SEC. Hence, Perlis asserts that he was not used by Wymer to further his crimes.

In cases where the Court has invoked the crime-fraud exception, counsel was in some way affirmatively used to further the client’s crime or fraud. See e.g., U.S. v. Laurins, 857 F.2d 529, 540-41 (9th Cir.1988) (court noted that the attorney furthered his client’s fraud by affirmatively representing his client’s lies to the IRS and to the Court); In re Sealed Case, 754 F.2d 395, 402 (D.C.Cir.1985) (court noted that attorneys essentially served as “front men” in a scheme to destroy evidence and subvert the judicial process).

Here, Wymer, not Perlis, drafted and sent the deceptive letter to the SEC. Perlis was not affirmatively used to further Wymer’s illegal activity. Wymer simply sought advice from counsel concerning the legality of his conduct before responding to the SEC. Such communications are -within the attorney client privilege. See, U.S. v. White, 887 F.2d 267, 272 (D.C.Cir.1989) (court stated that “where a client seeks counsel’s advice to determine the legality of conduct before the client takes any action,” the justifications for the attorney client privilege are strongest).

Although it is difficult to determine whether Perlis was affirmatively used to further Wymer’s fraud, allowing Refco to discover all communications made prior to 1991 under the crime-fraud exception would be to virtually deny the existence of any attorney-client privilege between Wymer and Perlis. As such, disclosure as to all communications pri- or to 1991 will not be compelled by this Court.

B. Attorney Work Product: Communications and Documents Exchanged with Counsel for the Municipalities Defrauded by Wymer

The work product doctrine protects documents and things prepared in anticipation of litigation or trial by or for a party or his representatives. Fed.R.Civ.P. 26(b)(3). The protection, however, is qualified. The court may order disclosure if “the party seeking discovery [shows a] substantial need of the materials in the preparation of the party’s case and that the party is unable without undue hardship to obtain the substantial equivalent of the materials by other means.” Id. The work product privilege is designed to balance the needs of the adversary system to promote an attorney’s preparation in representing a client against society’s general interest in revealing all true and material facts relevant to the resolution of a dispute. In re Subpoenas Duces Tecum,

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Bluebook (online)
154 F.R.D. 243, 1993 U.S. Dist. LEXIS 20099, 1993 WL 594588, Counsel Stack Legal Research, https://law.counselstack.com/opinion/loustalet-v-refco-inc-cacd-1993.