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In re Application of Bacon

United States District Court, D. Colorado

May 24, 2019

IN RE APPLICATION OF LOUIS BACON FOR AN ORDER PURSUANT TO 28 U.S.C. § 1782 TO CONDUCT DISCOVERY FOR USE IN FOREIGN PROCEEDINGS Petitioner,
v.
CATHY ARCHER, Respondent.

          ORDER

          KRISTEN L. MIX UNITED STATES MAGISTRATE JUDGE

         This matter is before the Court on Respondent's Motion for a Protective Order [#23][1] (the “Motion”). Petitioner timely filed a Response [#41] in opposition to the Motion [#23], and Respondent filed a Reply [#43]. The Court has reviewed the Motion [#23], the Response [#41], the Reply [#43], the entire case file, and the applicable law, and is sufficiently advised in the premises. For the reasons set forth below, the Motion [#23] is DENIED.

         I. Background

         Petitioner Louis Bacon (“Petitioner”) commenced this action on November 11, 2017, pursuant to 28 U.S.C. § 1782. See Ex Parte Application [#1]. The ex parte application was submitted to assist Petitioner in connection with two defamation lawsuits (the “Bahamian Actions”) he filed in the Bahamas against a Bahamian publisher named Wendall Jones (“Jones”) and the media outlets owned and operated by Mr. Jones. Id. at 1-2. Mr. Jones is the publisher of the Bahama Journal and, according to Petitioner, is a proxy of Peter Nygård (“Nygård”). Id. at 3-4. Mr. Nygård is the alleged orchestrator of a smear campaign against Petitioner. Id. He allegedly conducts the campaign through proxies in an effort to hide his own involvement. Id.

         Petitioner maintains that Mr. Nygård's alleged smear campaign continues through columns published by Respondent Cathy Archer (“Respondent”) in the Bahama Journal. Ex Parte Application [#1] at 5. Respondent is a citizen of the Bahamas and writes a biweekly column for the Bahama Journal under the byline P.J. Malone. Decl. of Respondent [#7-1] at 2. Petitioner considers some of Respondent's columns defamatory. Ex Parte Application [#1] at 5.

         Pursuant to Petitioner's subpoena, the Court previously ordered Respondent to produce documents and communications related to Petitioner, the “smear campaign, ” Mr. Nygård, Mr. Jones, and others. See generally Order [#17] (providing a more detailed background on the Bahamian Actions). Respondent produced these documents, along with a purported confidential indemnification agreement (the “Agreement”) which came into her possession through the following circumstances.

         The Agreement appears to have been created in California by Lavely & Singer, P.C. (“L&S”) and Mr. Nygård, relating to separate litigation in that jurisdiction. Motion [#23] at 2. Mr. Nygård then sent the Agreement to Richard Good (“Good”), who, along with L&S, served as counsel for Mr. Nygård. Decl. of Richard I. Good [#34] at 2. Mr. Good contends that he received the Agreement “as a confidential attorney-client communication.” Id. at 2. On March 27, 2017, Respondent received the Agreement from the office of Mr. Good in an email response to her request for copies of documents relating to a California lawsuit between Petitioner and Bianca McKinney. Ex. 1 to Decl. of S. Shackelford [#41-1] at 1. On September 17, 2017, this Court ordered Respondent to produce documents related to Petitioner, the “smear campaign, ” Mr. Nygård, and others. See generally Order [#17]. Respondent provided these documents to her attorney, Kenneth Morris (“Morris”), along with the Agreement. Decl. of Kenneth R. Morris [#37] at 1-2. Mr. Morris reviewed the documents produced by Respondent for privilege, identified the Agreement as potentially confidential, and contacted Mr. Good to inquire whether his office had intended to disclose the Agreement to Respondent. Id. at 2. Mr. Good stated that disclosure of the Agreement to Respondent must have been inadvertent, and Mr. Morris informed Mr. Good that the Agreement would be removed from the production. Id. Mr. Morris failed to do so, however, and the Agreement was produced to Petitioner's attorneys. Id. On January 11, 2019, Mr. Morris notified counsel for Petitioner of the purported inadvertent disclosure and requested immediate return of the Agreement, but counsel for Petitioner refused to comply. Id. at 2.

         In the present Motion [#23], Respondent moves for a protective order to claw back the Agreement on behalf of L&S, the author of the document and one purported holder of privilege therefor. Motion [#23] at 2. Respondent argues that California's substantive law of privilege applies to this clawback dispute and that the Agreement is protected as privileged under both attorney-client privilege and attorney work product doctrine. Id. at 3-7. Respondent also claims that the inadvertent disclosure of the Agreement did not operate as a waiver and that the crime-fraud exception is not applicable. Id. at 8-11. Petitioner contends that the federal common law of privilege applies and that the Agreement is not protected under either attorney-client privilege or attorney work product doctrine. Response [#41] at 2-7. Petitioner also argues that the disclosure of the Agreement operated as a waiver and that the Agreement is discoverable under the crime-fraud exception. Id. at 8-11.

         Because the Court holds that Respondent has no standing to assert the privilege rights of third parties to this dispute, the Court does not address the issues of whether the Agreement is protected under either attorney-client privilege or work product doctrine, whether the disclosure of the Agreement operated as a waiver of privilege, or whether the Agreement is otherwise discoverable under the crime-fraud exception.

         II. Analysis

         The Court first addresses whether California law or federal common law with respect to privilege applies to this dispute. The Court then addresses Respondent's standing to assert the privilege rights of third parties to this dispute.

         A. Choice of Law

         Respondent argues that California state law controls the issue of privilege in this action because L&S, party to and purported privilege holder of the Agreement, is located in California, and because Petitioner's attorneys are making use of the document to defend against claims in California state court. Motion [#23] at 3. Thus, Respondent argues that California has a strong interest in having its privilege law apply. Id. Petitioner contends that federal common law governs questions of privilege because Petitioner brought this case pursuant to 28 U.S.C. § 1782, a federal statute. Response [#41] at 3.

         The Tenth Circuit has not directly addressed the issue of whether federal or state privilege law applies where one party received a purportedly privileged document due to the other party's alleged inadvertent disclosure pursuant to a federal court-ordered subpoena, and where the receiving party subsequently used the document in a separate state court proceeding. In Motley v. Marathon Oil Co., the Tenth Circuit held that where a plaintiff asserts both a federal and a state claim, the court should look to the law of the state in deciding privilege issues as to the state causes of action. 71 F.3d 1547, 1551 (10th Cir. 1995). However, this holding is ...


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