ATTORNEYS AT LAW
CASE NO. SACV 17-00118 AG (DFMx)
DFT. SUGARMAN’S REPLY ISO MOTION TO
COMPEL RE PRIVILEGE LOGS
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LATHAM & WATKINS LLP
Manuel A. Abascal (Bar No. 171301)
manny.abascal@lw.com
Brian T. Glennon (Bar No. 211012)
brian.glennon@lw.com
Kristen M. Tuey (Bar No. 252565)
kristen.tuey@lw.com
355 South Grand Avenue, Suite 100
Los Angeles, CA 90071-1560
Tel: (213) 485-1234
Fax: (213) 891-8763
LATHAM & WATKINS LLP
Michele D. Johnson (Bar No. 198298)
michele.johnson@lw.com
Andrew R. Gray (Bar No. 254594)
andrew.gray@lw.com
650 Town Center Drive, 20th Floor
Costa Mesa, CA 92626-1925
Tel: (714) 540-1235
Fax: (714) 755-8290
Attorneys for Defendant
Steven A. Sugarman
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
IN RE BANC OF CALIFORNIA
SECURITIES LITIGATION
CASE NO. SACV 17-00118 AG (DFMx)
consolidated with
SACV 17-00138 AG (DFMx)
DEFENDANT STEVEN A.
SUGARMAN’S REPLY IN SUPPORT
OF MOTION TO COMPEL
PRODUCTION OF IMPROPERLY
WITHHELD DOCUMENTS AND
AMENDED PRIVILEGE LOGS
Judge: Honorable Douglas F. McCormick
Date: February 8, 2019
Time: 10 a.m.
Place: Courtroom 6B
This Document Relates to:
ALL ACTIONS
Case 8:17-cv-00118-AG-DFM Document 499 Filed 02/04/19 Page 1 of 11 Page ID #:19773
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CASE NO. SACV 17-00118 AG (DFMx)
DFT. SUGARMAN’S REPLY ISO MOTION TO
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I. INTRODUCTION
In the Opposition, Banc of California, Inc. (“Banc”) belatedly offers to
amend and correct many of its admittedly deficient privilege log entries. Putting
aside the fact that this offer should have been made months ago—at the
commencement of the parties’ meet and confer discussions—the bottom line is
many of the documents listed on the challenged logs are not privileged and/or any
potentially applicable privilege has long been waived. No amount of amendment
of Banc’s admittedly deficient logs changes that fact. The time for producing these
documents has come and gone, and Defendant Steven Sugarman has been
prejudiced by his inability to use this evidence in the depositions that already have
occurred. Banc must produce these documents immediately.
For three months, Mr. Sugarman sought to meet and confer with Morrison &
Foerster (“MoFo”) and Jones Day regarding the deficiencies in privilege logs of
Banc and non-parties Sanford Michelman, Jonah Schnel, and Robert Sznewajs
(together with Banc, the “Producing Parties”). For three months, those meet and
confer requests were ignored. It was not until Mr. Sugarman stated his intent to
file this Motion that MoFo finally agreed to a meet and confer call—but even then,
after expressly representing that MoFo would address Mr. Sugarman’s challenges
before the deadline to file this Motion, MoFo again failed to do anything. Now
that Mr. Sugarman has filed his Motion, MoFo readily offers to address multiple
deficiencies by preparing and providing amended logs that purport to correct the
precise deficiencies identified by Mr. Sugarman months ago (yet MoFo has still
not done so). Simply addressing the concerns that Mr. Sugarman raised months
ago—before many of the depositions in this case had taken place—by offering to
produce amended logs is not enough. Fundamental fairness requires that the
documents identified below be produced.
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II. BANC IS CONTINUING TO CLAIM PRIVILEGE OVER
DOCUMENTS WHERE PRIVILEGE HAS BEEN WAIVED
The Producing Parties’ privilege logs, and Banc’s Opposition, are the latest
example for Banc’s abuse of the attorney-client privilege. Banc has (again)
produced documents involving communications with attorneys when it furthers its
own interests, but has asserted privilege over substantially similar communications
on the same subject matter when they support Mr. Sugarman’s position. Multiple
categories of documents on the Producing Parties’ privilege logs fall into subject
matters over which privilege already has been waived. As noted, Mr. Sugarman
has been prejudiced by this selective invocation of privilege because he has been
deprived of the opportunity to use these documents in most of the depositions in
this case. These documents must be produced now. See Flatworld Interactions v.
Apple Inc., No. C1201956JSWEDL, 2013 WL 11319071, at *2 (N.D. Cal. Dec. 24,
2013) (“Disclosure of the content of privileged communications constitutes a
waiver of the privilege as to all other communications on the same subject
matter.”).
A. Communications With Michelman Regarding the Same Subject
Matter as the Michelman Letters Must be Produced
Banc contends that certain communications between Sanford Michelman
and WilmerHale regarding the Special Committee investigation are privileged,
even though it allowed the production of other communications between those
exact same parties on the exact same topic.
As the Court is aware, Banc allowed the production of letters from Sanford
Michelman of Michelman & Robinson to Randall Lee of WilmerHale dated
December 30, 2016 and January 2, 2017, because it concluded that Michelman was
not working on behalf of Banc at that time, but instead was working to interfere
with WilmerHale’s investigation. However, Banc is inexplicably withholding
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other communications between Michelman and WilmerHale from the exact same
time period, claiming that those documents are privileged. For example, Banc is
withholding entry 759 from its September 3, 2018 privilege log, which is a January
4, 2017 email from Michelman to Randall Lee and Timothy Perry of WilmerHale
“concerning Special Committee investigation.” Banc does not even attempt to
explain how correspondence from Michelman to Lee on January 4, 2017 regarding
the Special Committee investigation could be privileged, but correspondence from
Michelman to Lee on December 30, 2016 and January 2, 2017 regarding that exact
same topic is not privileged. See Garcia v. Progressive Choice Ins. Co., No. 11-
CV-466-BEN NLS, 2012 WL 3113172, at *7 (S.D. Cal. July 30, 2012) (holding
that because contemporaneous e-mails between the same people on the same topic
had been disclosed, defendant expressly waived attorney-client privilege over
communications concerning the same subject matter).
Similarly, entry MR000823 on the August 29, 2018 Michelman Production
Privilege Log identifies another document that must be produced. This entry is for
“a letter from Randall Lee of WilmerHale to David Aronoff of Winston & Strawn,
dated January 1, 2017 and described as ‘correspondence regarding [an] interview,’
made in connection with WilmerHale’s investigation.” (Opp. at 5-6.) Notably, the
entry itself reflects that this document was not in the possession of WilmerHale,
but rather was in the possession of Michelman & Robinson. The privilege log does
not indicate how this document came into Michelman & Robinson’s possession,
but given that Banc has waived privilege over other communications between
WilmerHale and Michelman & Robinson in connection with the Special
Committee investigation, the waiver necessarily extends to the communication
through which MR000823 came into Michelman’s possession. Similarly, because
Banc has asserted that Michelman was acting adversely to Banc’s interests in
connection with the Special Committee investigation and hence communications
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between WilmerHale and Michelman are not privileged, the document logged at
MR000825—an email between Michelman and David Aronoff that Banc claims
relates to the Special Committee investigation—is not privileged.
Finally, Banc fails to address Mr. Sugarman’s well-founded belief that Mr.
Michelman received reports from whistleblowers regarding director misconduct, or
the fact that these reports are not privileged and should be produced. (Mot. at 8.)
As set forth in the Motion, these reports would not be privileged because the
callers were not seeking legal advice from Mr. Michelman and Mr. Michelman
was not giving legal advice by documenting the whistleblower communications. If
Mr. Michelman is in possession of any such documents—which Mr. Sugarman
believes are reflected at entries MR 980-1009 on the Michelman Log—they must
be produced. See Freescale Semiconductor, Inc. v. Maxim Integrated Prod., Inc.,
No. A-13-CV-075-LY, 2013 WL 5874139, at *4 (W.D. Tex. Oct. 30, 2013)
(finding that initial submission by an anonymous whistleblower was not protected
by the attorney-client privilege because there was insufficient evidence to
demonstrate that the anonymous whistleblower was seeking legal advice).
B. Communications Regarding the Winston & Strawn Investigation
and the Potential Defamation Suit Against SeekingAlpha,
Regardless of Date, Must be Produced
Banc acknowledges that it “agreed to waive privilege over the Winston &
Strawn investigation” (Opp. at 5), but is nevertheless improperly asserting
privilege over communications that clearly relate to that subject matter simply
because the communications occurred at a later point in time. Banc does not get to
define its waiver so narrowly: documents regarding the Winston & Strawn
investigation, and other subject matters over which privilege has been waived,
must be produced, regardless of the dates of the documents. See Bd. of Trustees of
Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc., 237 F.R.D. 618, 625
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(N.D. Cal. 2006) (“The scope of a waiver of attorney-client privilege extends the
privilege to all communications on the same subject matter.”).
For example, Banc asserts privilege over entries 10 and 15 on the November
19, 2018 Schnel Privilege Log, which Banc claims in its Opposition “are January
18, 2017 emails between” Schnel and Aronoff “regarding [a] meeting.” (Opp. at
6.) Banc claims that because the communications supposedly came after the
Winston investigation and the October 18, 2016 press release, they are outside the
scope of the waiver even though they relate to the same subject matter. Banc is
mistaken. First, according to the privilege log, these emails are from January 2016,
not 2017, and are clearly within the scope of the Winston waiver. January 2016 is
a central point in the Winston investigation because at this time John Grosvenor
wrote an email to the disinterested members of the Board of Directors (all of whom
responded) stating that Jonah Schnel would be leading Winston’s investigation,
and Mr. Schnel sent an email to Mr. Aronoff of Winston directing him to give a
report to the disinterested members of the Board to be selected by Mr. Grosvenor.
These facts directly support Mr. Sugarman’s position and are clearly within the
scope of Banc’s existing waiver.
Second, even if these emails were from 2017, that does not change the
analysis: they relate to the Winston investigation and thus are therefore within the
scope of the subject matter waiver. Banc does not (and cannot) claim these
communications are unrelated to the Winston investigation, only that they “came
after” it. That argument misses the mark. Banc chose to waive privilege over the
subject matter of the Winston investigation, and any documents regarding that
investigation, regardless of the date of any such document, fall within the waiver.
For the same reason, Banc cannot withhold documents regarding a possible
defamation claim against SeekingAlpha. Banc has acknowledged that it waived
“privilege over communications occurring on or about October 18, 2016 regarding
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a potential defamation suit against SeekingAlpha,” but claims that because the
“communications Sugarman seeks postdate the preparation of that letter,” they do
not fall within the waiver. Again, Banc is drawing arbitrary lines around the scope
of the waiver instead of accepting the fact that the waiver encompasses subject
matter, not date ranges. As noted above, subject-matter waiver encompasses all
communications regarding a particular subject matter that should in fairness be
considered together. Theranos, Inc. v. Fuisz Techs., Ltd., No. C 11-5236 PSG,
2013 WL 2153276, at *1 (N.D. Cal. May 16, 2013). The topic is a potential
defamation suit against SeekingAlpha, and that topic is not limited to the
preparation of a letter. If Banc’s strategy regarding a possible defamation suit
changed following preparation of the letter, that still relates, directly, to the same
subject matter and should be considered together.
Banc’s reliance on Bittaker v. Woodford, 331 F.3d 715 (9th Cir. 2003)
actually supports Mr. Sugarman’s argument. Banc claims that Bittaker stands for
the proposition that “Banc’s express waiver extends only to that which was
disclosed to the SEC.” (Opp. at 10.) To the contrary, the Bittaker court explained
that express waiver extends not only to the materials that were disclosed, but also
to related matters. 331 F.3d at 720 (“[O]nce documents have been turned over to
another party voluntarily, the privilege is gone, and the litigant may not thereafter
reassert it to block discovery of the information and related communications by his
adversaries.”) (emphasis added). Again, Banc does not attempt to argue that the
withheld documents do not fall within the scope of the subject matter of the
waiver. Instead, Banc attempts to impose date ranges on the scope of the waiver
regardless of the subject matter of the underlying documents. There is zero
support in the law for Banc’s aggressive and selective invocation of the waiver,
and the authorities Banc cites in its Opposition get Banc nowhere.
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III. DOCUMENTS UNDERLYING SUSPICIOUS ACTIVITY REPORTS
MUST BE PRODUCED
To be clear, Defendant Sugarman is not requesting that any party violate a
legal obligation not to disclose documents withheld pursuant to the Bank Secrecy
Act (“BSA”). However, documents reflecting facts giving rise to suspicious
conduct described in a Suspicious Activity Report, such as a wire transfer or check,
are not privileged under the BSA. If any of the documents Banc has withheld
merely reflect such factual information, as opposed to reflecting the actual
preparation of a SAR, they must be produced. See Cotton v. PrivateBank & Tr.
Co., 235 F. Supp. 2d 809, 815 (N.D. Ill. 2002) (stating that documents which gave
rise to suspicious conduct “are to be produced in the ordinary course of discovery
because they are business records made in the ordinary course of business”).
IV. DOCUMENTS UNDERLYING DEFICIENT LOG ENTRIES MUST
BE PRODUCED
In the Opposition, Banc effectively concedes the many deficiencies in its
logs by repeatedly offering to amend the flawed logs. That should have been done
long ago, at the outset of the meet and confer discussions. Banc instead forced Mr.
Sugarman to pursue motion practice, and at the same time, deprived Mr. Sugarman
of the opportunity to use these documents in most of the depositions of the case.
Banc’s offer is too little too late—the opportunity to amend has come and gone.
Banc should produce the underlying documents for which its log descriptions are
admittedly deficient.
Numerous entries are insufficient because they do not specify that the
underlying documents related to “legal review” of certain matters. (Opp. at 3-4,
14-15.) For example, Entry 614 on the September 3, 2018 privilege log, which is
an email from Cynthia Abercrombie to Jonah Schnel, states only that it is an
“[e]mail concerning insurance issues.” Not only does this communication not
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include an attorney, but the description does not indicate that the email related to or
reflected privilege legal communications. This is plainly insufficient. See Vieste,
LLC v. Hill Redwood Dev., No. C-09-04024 JSW DMR, 2010 WL 4807058, at *7
(N.D. Cal. Nov. 18, 2010) (finding that even though there was a lawyer as part of
the communication, “regarding status” and “regarding insurance” descriptions
appeared to relate to routine business matters and not legal advice). In its
Opposition, Banc explains that the document is privileged because it “wholly
concerns communications seeking legal advice from Banc’s outside counsel ...
regarding an insurance issue.” (Opp. at 4.) But that is not what the log says, and
Mr. Sugarman was forced to commence motion practice to get this simple
explanation (which, again, is not supported by the log entry itself).
Mr. Sugarman respectfully submits that the time to amend privilege logs has
come and gone. The Producing Parties’ privilege logs are materially deficient in
numerous respects. Mr. Sugarman pointed out these deficiencies three months ago
and sought to meet and confer, but Banc ignored those requests. Mr. Sugarman
has been prejudiced by Banc’s repeated refusal to amend its clearly deficient logs
or produce the underlying documents, and allowing Banc to simply amend its logs
now—after the close of fact discovery—would not cure the prejudice. Instead,
applicable law, and tenets of fundamental fairness, dictate that Banc should be
ordered to produce these documents. See Burlington N. & Santa Fe Ry. Co. v. U.S.
Dist. Court for Dist. of Mont., 408 F.3d 1142, 1149 (9th Cir. 2005) (stating that in
determining whether an insufficient privilege log amounts to a waiver, the court
must take a “holistic reasonableness analysis”); see also, e.g., Wormuth v.
Lammersville Union Sch. Dist., No. 215CV01572KJMEFB, 2017 WL 2505195, at
*3–4 (E.D. Cal. June 9, 2017) (affirming magistrate judge’s determination that
attorney client privilege was waived as to the defendant’s privilege assertions and
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noting that the privilege assertions did not describe the documents in a manner so
as to enable other parties to assess the claim of privilege).
In any event, even with the explanations and clarifications Banc provides for
the first time in its Opposition—information Mr. Sugarman had been seeking for
months—several entries are still legally deficient. For example, Banc claims that
the documents logged as entries 203, 212, 215, and 576 on the September 3, 2018
privilege log are privileged because they include attorneys at O’Melveny & Myers
and Sullivan Cromwell, who respectively represented a Banc officer and a director.
(Opp. at 3.) These individuals are third parties, and communications with a third
party waive privilege in the absence of a common interest. It is possible that such
a common interest might have existed in regards to entries 212 and 576, which
supposedly concern the Special Committee investigation. But entry 203 is
described merely as an “[e]mail concerning communications with outside
counsel,” and entry 215 is described as an “[e]mail concerning draft D&O
questionnaire.” Banc provides no basis for why it and its directors had a common
interest concerning these documents. Banc has also provided no support for any
common interest agreement with O’Melveny & Myers, who represented former
Chief Financial Officer Fran Turner. Indeed, Banc forced Fran Turner to resign
based on allegations of misconduct, thus negating any potential common interest.
V. CONCLUSION
For the reasons set forth above and in his opening brief, Mr. Sugarman
respectfully requests that the Court grant his Motion, and order the Producing
Parties to produce improperly withheld documents that are not privileged or where
privilege has been waived.
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Dated: February 4, 2019 LATHAM & WATKINS LLP
By: /s/ Manuel A. Abascal
Manuel A. Abascal
Attorneys for Defendant
Steven A. Sugarman
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