In re Initial Public Offering Secur. Litig., 2008 WL 400933 (S.D.N.Y. Feb. 14, 2008)

Brief Summary
The court granted plaintiffs’ motion to compel discovery of certain documents, finding that the defendant waived work product protection when it released documents to the United States Attorney and SEC under a confidentiality agreement.

Complete Summary
In December 1999, Credit Suisse Securities (USA), LLC (“Defendant”) retained outside counsel to assist in an internal inquiry into alleged misconduct relating to the allocation of shares during initial public offerings. Outside counsel conducted a series of interviews with Defendant’s employees, and summarized them in internal legal memoranda (the “Memoranda”).

Pursuant to a confidentiality agreement, Defendant produced the Memoranda and other documents to the United States Attorney for the Southern District of New York (“USAO”) and the SEC. Defendant also discussed the contents of some of the Memoranda with officers of the National Association of Securities Dealers Regulation, Inc.

Three former employees of Defendant, the “Plaintiffs”, sued defendant in arbitration for wrongful discharge. Plaintiffs moved for disclosure of the Memoranda on the ground that the Memoranda were not work product or, in the alternative, that Defendant had waived any privilege by producing them to the government.

The court noted the Second Circuit decision in In re Steinhardt Partners, 9 F.3d 230 (2d Cir. 1993), a class action against a company and certain individuals accused of market manipulations. The defendants in that case resisted production of a document prepared by their attorneys and supplied to the SEC, asserting that they had made a selective, but not general, waiver. Reasoning that the defendants had clearly been in an adversarial relationship with the SEC and that their disclosure to the SEC was different from production compelled by court order, the Second Circuit rejected the doctrine of selective waiver as applied to the facts of that case. Central to the court’s determination was the fact that the defendants knew they were the subject of an SEC investigation and the memorandum was sought and provided to the SEC as part of the investigation. The Steinhardt decision did not completely foreclose all possibility of selective waiver, but provided that a determination be made on a case-by-case basis.

The court in the instant matter adopted the Second Circuit’s case-by-case approach. After finding that the Memoranda were “fact” work product, the court rejected Defendant’s arguments that its production of the Memoranda to the government constituted only a selective waiver. The court rejected Defendant’s assertion that it shared common interests with the USAO and SEC and thus that disclosure did not waive work product protection. The court noted that the USAO and SEC were investigating Defendant and that Defendant disclosed the Memoranda to limit or escape liability.

The court also rejected Defendant’s argument that the Memoranda were disclosed to the SEC pursuant to a confidentiality agreement that “manufactured a common interest.” In re IPO Sec. Litig.,    2008 WL 400933 at *7. The court stated that “such an agreement cannot manufacture a common interest ipse dixit.” Id. Finally, the court found that Defendant failed to show the existence of any special circumstances that would otherwise justify selective waiver.

Significance of Opinion
This opinion is one more in a series that generally rejects the selective waiver doctrine. Attorneys and their clients must weigh the benefit of cooperating with government investigations against the risk that the surrendered information may become discoverable.

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.

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Hinshaw & Culbertson LLP and The Hildebrandt Institute Present: The Three-Part Law Firm Risk Management Virtual Seminar Series

Two Remaining Seminars:

May 15, 2008: Third Party Claims for Lawyers: Is There Life After Stoneridge

July 16, 2008: Impaired and Poorly Behaving Partners: Managing the Risks

Third Party Claims for Lawyers: Is There Life After Stoneridge

May 15, 2008, Noon-1:30 pm EST

Speakers
Rebecca Lambreth, Partner, Duane Morris LLP
Anthony Davis, Partner, Lawyers for the Profession® Practice Group, Hinshaw & Culbertson LLP

Program Overview
One of the most important (and disturbing) developments in law firm risk management in recent years has been the increased willingness of plaintiff’s lawyers, government agencies, and courts to hold lawyers and law firms culpable for the actions or omissions of their clients. We have seen these so-called “third party claims” in a wide variety of contexts, from securities fraud cases to abusive tax shelter claims to cases involving circumstances of deepening insolvency. In January, the Supreme Court handed down its decision in Stoneridge Investment Partners v. Scientific-Atlanta, a case that affirms the limited ability of plaintiffs in securities fraud cases to reach lawyers and other providers of services to defendant companies.

This virtual seminar will bring together two highly knowledgeable and experienced practitioners to discuss these and related issues.

Topics to Include

• The circumstances under which lawyers can still be held liable for the actions or omissions of their clients;
• Potential liability for lawyers as third-party defendants in securities fraud cases after Stoneridge, and whether the “aiding and abetting” claim still has relevance;
• The seriousness of the threat of lawyers being held liable for the actions of their clients in deepening insolvency circumstances;
• What lawyers and law firms can do to protect themselves against such claims going forward;
• Red flags” in this area that firm managements should pay attention to.

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Impaired and Poorly Behaving Partners: Managing the Risks

July 16, 2008, Noon-1:30 pm EST

Speakers
Thomas L. Browne, Lawyers for the Profession® Practice Group, Hinshaw & Culbertson LLP
Tom H. Luetkemeyer, Lawyers for the Profession® Practice Group, Hinshaw & Culbertson LLP
Dr. Larry R. Richard, Vice President and Head of the Leadership & Organization Development Practice Group, Hildebrandt International

Program Overview
Dealing with “problem” partners has always been a challenge for law firm leaders. In recent years, however, it has also become a serious area of risk exposure as state bars, regulatory agencies, clients, and plaintiff’s lawyers have been increasingly willing to charge firms with accountability for the “lack of supervision” often evidenced in such behaviors. In this virtual seminar, you will hear three experts ― two professional responsibility lawyers and one lawyer/psychologist ― describe the nature of these risks and offer some practical advice on dealing with these problems.

Topics to Include

• Ways of identifying “problem” partners before the problems cause serious damage;
• Methods for dealing with impaired or poorly behaving partners that protect the interests of the partners and the firm;
• Circumstances in which “problem” partners must be reported to the local bar;
• Understanding the psychological issues that can give rise to problems and how to short-circuit them;
• Discussing “problem” partner issues with clients; and
• Managing the damage to the firm when and if problems become public.

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