Securities Investor Protection Corporation v. Bernard L. Madoff Investment Securities, LLC. et a

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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SECURITIES INVESTOR PROTECTION 	:
CORPORATION, 	: 	Adv. Proc. No. 08-01789 (SMB)
:
Plaintiff, 	: 	SIPA LIQUIDATION
:
-against- 	: 	(Substantively Consolidated)
:
BERNARD L. MADOFF INVESTMENT 	:
SECURITIES LLC, 	:
:
Defendant. 	:
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:
In re: 	:
:
BERNARD L. MADOFF, 	:
:
Debtor. 	:
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:
IRVING H. PICARD, trustee for the liquidation :
of Bernard L. Madoff Investment Securities 	: 	Adv. Proc. No. 10-04292 (SMB)
LLC, 	:
:
Plaintiff, 	:
:
-against- 	:
:
ROBERT ROMAN, 	:
:
Defendant. 	:
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MEMORANDUM DECISION AND ORDER GRANTING IN PART AND
DENYING IN PART TRUSTEE’S MOTION TO COMPEL DISCOVERY
A P P E A R A N C E S:
BAKER & HOSTETLER LLP
45 Rockefeller Plaza
New York, NY 10111
David J. Sheehan, Esq.
Nicholas J. Cremona, Esq.
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Maximillian S. Shifrin, Esq.
Of Counsel
Attorneys for Irving H. Picard, Trustee
for the Liquidation of Bernard L. Madoff
Investment Securities LLC
CHAITMAN LLP
465 Park Avenue
New York, NY 10022
Helen Davis Chaitman, Esq.
Gregory M. Dexter, Esq.
Of Counsel
Attorneys for Robert Roman
Irving H. Picard (the “Trustee”), the trustee for the liquidation of Bernard L.
Madoff Investment Securities LLC (“BLMIS”) under the Securities Investor Protection
Act, 15 U.S.C. §§ 78aaa, et seq. (“SIPA”), has moved to compel discovery from the
defendant Robert Roman (“Roman”) regarding certain written communications with
Bernard Madoff. (See Trustee’s Memorandum of Law In Support of His Motion to
Compel Discovery Pursuant to Fed. R. Bankr. P. 7037(a)(3)(B), dated June 14, 2017
(the “Motion”) (ECF Doc. # 88 1).) Having reviewed the written communications in
camera and the relevant authorities cited by the parties, the Court concludes that the
Motion should be granted in part and denied in part.
BACKGROUND
The Court assumes familiarity with the circumstances surrounding Bernard
Madoff’s Ponzi scheme and the on-going prosecution of hundreds of avoidance actions
by the Trustee against former BLMIS customers. See SIPC v. BLMIS (In re BLMIS),
1 	“ECF Doc. # __” refers to documents filed on the electronic docket of this adversary proceeding.
“ECF Main Case Doc. # __” refers to documents filed on the electronic docket of the BLMIS SIPA
liquidation.
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424 B.R. 122, 125-32 (Bankr. S.D.N.Y. 2010), aff’d, 654 F.3d 229 (2d Cir. 2011), cert.
denied, 133 S. Ct. 25 (2012); SIPC v. BLMIS (In re BLMIS), 531 B.R. 439, 446-47
(Bankr. S.D.N.Y. 2015). In this adversary proceeding, the Trustee seeks to avoid and
recover alleged fictitious profits in the sum of $410,000 that Roman withdrew from his
BLMIS account within two years of December 11, 2008 (the “Filing Date”) as intentional
fraudulent transfers under 11 U.S.C. § 548(a)(1)(A). (See Complaint, dated Nov. 12,
2010 (“Complaint”), at ¶ 38 & Ex. B, Column 10 (ECF Doc. # 1).) Roman is the husband
of Joan Roman 2 (together, the “Romans”), who is Bernard Madoff’s sister-in-law. (Id., ¶
8; Answer and Affirmative Defenses, dated Aug. 13, 2015, at ¶ 8 (ECF Doc. # 51).)
On October 19, 2016, the Trustee served Roman with his First Set of Requests for
Production of Documents (“Document Requests”) and First Set of Interrogatories
(“Interrogatories,” and together with the Document Requests, the “Discovery
Requests”). 3 Relevant to the Motion, the Discovery Requests sought information
regarding any communications Roman, or his counsel—Chaitman LLP (“Chaitman”), 4
had with Madoff since the Filing Date. (See Document Requests at ¶¶ 22, 23;
Interrogatories at ¶ 21.) Roman objected to those Discovery Requests claiming, among
other things, that the communications were privileged. (See Shifrin Declaration, Ex. C
at 7; and Ex. D at 9.)
2 	Joan Roman is a defendant in a separate avoidance action. See Picard v. Joan Roman, Adv. Proc.
No. 10-04302 (SMB).
3 	Copies of the Document Requests and the Interrogatories are attached as Exhibits A and B to the
Declaration of Maximillian S. Shifrin in Support of the Trustee’s Motion to Compel, dated June 14, 2017
(“Shifrin Declaration”) (ECF Doc. # 89).
4 	Chaitman represents defendants in many claw back proceedings brought by the Trustee.
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The Trustee deposed Roman on May 17, 2017. The Trustee’s counsel asked
Roman about his post-Filing Date communications with Madoff, and Roman testified
that he and Madoff had exchanged a total of six “letters,” three from Roman to Madoff
and three from Madoff to Roman. (Transcript of May 17, 2017 Deposition at 55:19-
56:22).5 When the Trustee’s counsel attempted to question Roman about the
communications, Roman’s lawyer, Helen Chaitman, Esq., directed Roman not to answer
based on the work product privilege. (Id. at 56:25-58:8; 59:12-60:8; 61:19-62-7.)
The Motion, filed one month later, sought to compel Roman to produce the six
“letters.” The Motion argued that the “letters” sent by Madoff to Roman were not
privileged, and the Trustee could not determine if the “letters” sent by Roman to Madoff
constituted work product because Roman had not produced a privilege log. (Motion at
2.) Nevertheless, the communications were relevant and discoverable under Federal
Civil Rule 26(b) because Madoff had been designated as an important fact witness in the
PW Proceeding and the Fraud Proceeding (each defined below). (Id. at 5.) The Trustee
also argued that the communications were relevant for impeachment purposes. (Id. at
5-6.) Finally, the Trustee asserted that communications sent by Madoff fell outside the
scope of the work-product doctrine, (id. at 6-7), and Roman waived any work-product
protection when he sent communications to Madoff. (Id. at 7-10.)
Roman objected, (see Defendant’s Memorandum of Law in Opposition to the
Trustee’s Motion to Compel Discovery Pursuant to Fed. R. Bankr. P. 7037(a)(3)(B),
dated June 20, 2017 (the “Objection”) (ECF Doc. # 91)), arguing that the discovery was
5 	A copy of the deposition transcript is annexed as Exhibit E to the Shifrin Declaration.
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irrelevant and privileged work product. (Id. at 5-7.) He also requested that the Court
sanction the Trustee. (Id. at 9-10.)
At the June 29, 2017 hearing on the Motion, the Court directed Roman to
produce a privilege log and the underlying documents for in camera review. Chaitman
provided an initial privilege log on July 17, 2017 which turned out to be somewhat
misleading. It identified four documents, including a certain October 8, 2015 email sent
by Chaitman to the Romans and other claw back defendants (the “Chaitman E-mail”),
but failed to reveal that the Chaitman E-mail had been attached to an October 28, 2015
letter sent by the Romans to Madoff. Chaitman thereafter provided an amended
privilege log which stated that the October 28 letter included an enclosure, but did not
identify the enclosure, to wit, the Chaitman E-mail. After further inquiry and in camera
review of the documents, the Court confirmed that the Chaitman E-mail was sent by the
Romans to Madoff with the October 28 letter. 6 Thus, a complete privilege log would
consist of the following four entries as to which Roman and/or Chaitman assert the
work product privilege:
A. An October 28, 2015 letter from the Romans to Madoff attaching (i) a draft of the
Declaration of Bernard L. Madoff, dated November 17, 2015 (the “Madoff
Declaration”) prepared by Chaitman, and (ii) the Chaitman E-mail;
B. The Chaitman E-mail; 7
C. An November 11, 2015 blank transmittal email from Joan Roman to Chaitman
forwarding Madoff’s edits to the Madoff Declaration; and
6 	After the Court discovered the earlier omissions, it granted the parties the opportunity to
supplement their pleadings to address Roman’s disclosure of the Chaitman E-mail.
7 	Roman also asserts that the Chaitman E-mail is protected by the attorney-client privilege.
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D. A November 11, 2015 letter from the Romans to Madoff attaching (i) two copies
of the execution version of the Madoff Declaration, and (ii) a prior version of the
Madoff Declaration with his edits.
DISCUSSION
A. 	Relevance
Rule 26(b) of the Federal Rules of Civil Procedure defines the scope of discovery:
Parties may obtain discovery regarding any nonprivileged matter that is
relevant to any party’s claim or defense and proportional to the needs of
the case, considering the importance of the issues at stake in the action,
the amount in controversy, the parties’ relative access to relevant
information, the parties’ resources, the importance of the discovery in
resolving the issues, and whether the burden or expense of the proposed
discovery outweighs its likely benefit. Information within this scope of
discovery need not be admissible in evidence to be discoverable.
F ED. R. CIV. P. 26(b)(1). Even after the 2015 amendment to Rule 26(b), “[r]elevance is
still to be ‘construed broadly to encompass any matter that bears on, or that reasonably
could lead to other matter that could bear on’ any party’s claim or defense,” State Farm
Mut. Auto. Ins. Co. v. Fayda, No. 14 Civ. 9792 (JCF), 2015 WL 7871037, at *2 (S.D.N.Y.
Dec. 3, 2015) (quoting Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978)),
aff’d, No. 14 Civ. 9792 (WHP), 2016 WL 4530890 (S.D.N.Y. Mar. 24, 2016); accord
Malanga v. NYU Langone Med. Ctr., No. 14cv9681 (WHP), 2016 WL 7477561, at *2
(S.D.N.Y. Dec. 29, 2016), and “the quantum of relevance necessary to warrant discovery
is still lower than the quantum of relevance necessary for admissibility at trial.”
Almonte v. Hines, No. 15 Civ. 6843 (HBP), 2016 WL 6834015, at *1 (S.D.N.Y. Nov. 18,
2016) (citations omitted).
The documents at issue are relevant to this adversary proceeding. Some
background is helpful. Roman is currently a party to two separate omnibus proceedings
that bear on issues in this adversary proceeding and are common to many of the
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Trustee’s avoidance actions. The first concerns the meaning of the notation “PW” that
appears on BLMIS’ books and records. As outlined in this Court’s recent decision, SIPC
v. BLMIS (In re BLMIS), No. 08-01789 (SMB), 2017 WL 2602332, at *2-3 (Bankr.
S.D.N.Y. June 15, 2017), the PW Proceeding addresses whether “PW” reflected actual
cash withdrawals by BLMIS customers for the purpose of computing net equity and
fictitious profits. Although it is not clear that BLMIS’ books and records included any
“PW” notations relating to Roman, his lawyer filed opposition on his behalf as a
“Participating Claimant” to the Trustee’s motion seeking a determination that the PW
notation reflected an actual cash withdrawal. (See Declaration of Helen Davis
Chaitman in Support of Participating Claimants’ Memorandum of Law in Opposition
to Trustee’s Motion Seeking Affirmance of His Treatment of Profit Withdrawals, dated
Sept. 23, 2016, Ex. A at 9 (ECF Main Case Doc. # 14162).)
The second proceeding primarily concerns the date that Madoff’s Ponzi scheme
began (the “Fraud Proceeding”). (See Order Authorizing the Deposition of Bernard L.
Madoff, dated Sept. 29, 2016 (ECF Main Case Doc. # 14213).) The date is critical in
determining whether the profits Roman and others withdrew from their BLMIS
accounts resulted from actual trades or were based on fictitious transactions listed in
their account statements. Profits resulting from actual trades would not be fictitious or
subject to claw back. During his allocution, Madoff stated that his Ponzi scheme began
in the “early 1990s,” (Transcript of March 12, 2009 Allocution of Bernard Madoff at
25:12-13),8 but the Trustee contends that it began much earlier. Although the
8 	The transcript of Madoff’s allocution is available on the docket of the District Court criminal
proceeding, United States v. Madoff, No. 09 CR 213 (DC) (S.D.N.Y.).
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Complaint alleges that Roman opened his account in July 1997, his account was initially
funded with an inter-account transfer from another account, and according to the
Trustee, the initial transfer in the sum of $1,239,795.18 consisted entirely of fictitious
profits. (See Complaint, Exs. B, C (transaction summary table).) 9
The four documents at issue are relevant to the PW Proceeding and/or the Fraud
Proceeding. They fall into four categories: (1) Chaitman’s drafts of the Madoff
Declaration, (2) Madoff’s edits to the initial draft, (3) the correspondence authored by
one or both Romans transmitting the drafts to Madoff, and (4) the Chaitman E-mail.
The Madoff Declaration has already been submitted to the Court in connection with
other proceedings, see, e.g., Marshall v. Capital Growth Co. (In re BLMIS), 568 B.R.
203, 216-17 (Bankr. S.D.N.Y. 2017) (describing the Madoff Declaration and finding that
portions of it were conclusory and contradicted Madoff’s prior deposition testimony),
appeal docketed, No. 17-cv-02230 (VSB) (S.D.N.Y. Mar. 28, 2017), and purports to
undercut the Trustee’s theory regarding the meaning of the PW notation. (See Madoff
Declaration at ¶¶ 1-3.) In addition, it includes a statement implying that the Ponzi
scheme began “[p]ost 1990” when, “[i]n order to raise money, I began to defraud my
customers.” (Id. at ¶ 4.) The drafts and the transmittal letters are relevant to both
9 	It does not appear that the fictitious or real nature of the inter-account transfer makes a
difference in this case. Even if Roman received full credit for the inter-account transfer, he still withdrew
$570,204.82 more than he deposited. Roman’s potential claw back liability is the lesser of his
withdrawals during the two-year period preceding the Filing Date and the total amount of fictitious profits
he withdrew over the life of the account. See Picard v. Greiff (In re BLMIS), 476 B.R. 715, 729 (S.D.N.Y.
2012), aff’d sub nom., Picard v. Ida Fishman Revocable Trust (In re BLMIS), 773 F.3d 411 (2d Cir. 2014),
cert. denied, 135 S. Ct. 2858 (2015). Hence, even if he withdrew only $570,204.82 in fictitious profits,
this amount would still exceed the $410,000 the Trustee is seeking to recover.
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omnibus issues, and therefore, to the litigation against Roman. In addition, the
Chaitman E-mail directly addresses the PW issue and is also relevant to that issue.
B. 	The Work Product Doctrine
Notwithstanding their relevance, the documents may be withheld or produced in
redacted form to the extent they are privileged. The work-product doctrine protects
documents and tangible things from discovery “that are prepared in anticipation of
litigation or for trial by or for another party or its representative (including the other
party’s attorney, consultant, surety, indemnitor, insurer, or agent).” F ED. R. CIV. P.
26(b)(3)(A). The purpose of work-product protection is to provide an attorney with a
“zone of privacy in her work, ‘free from unnecessary intrusion by opposing parties and
their counsel.’” SEC v. Gupta, 281 F.R.D. 169, 171 (S.D.N.Y. 2012) (quoting Hickman v.
Taylor, 329 U.S. 495, 510 (1947)). The work-product privilege “is not absolute [and]
may be waived,” United States v. Nobles, 422 U.S. 225, 239 (1975), through voluntary
disclosure, Salomon Bros. Treasury Litig. v. Steinhardt Partners, L.P. (In re Steinhardt
Partners, L.P.), 9 F.3d 230, 235 (2d Cir. 1993), provided that the disclosure is “either
inconsistent with maintaining secrecy against opponents or substantially increases the
opportunity for a potential adversary to obtain the protected information.” Ricoh Co.,
Ltd. v. Aeroflex Inc., 219 F.R.D. 66, 70 (S.D.N.Y. 2003) (quotation omitted); accord In
re Quigley Co., Inc., No. 04-15739 (SMB), 2009 WL 9034027, at *8 (Bankr. S.D.N.Y.
Apr. 24, 2009) (“[T]he deliberate disclosure of work product must create a ‘substantial
danger’ that it will be disclosed thereafter to an adversary.”) (citation omitted),
supplemented by, No. 04-15739 (SMB), 2009 WL 2913450 (Bankr. S.D.N.Y. June 19,
2009). When the disclosing party and the third party share a common interest, there is
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no waiver of the work product privilege. Merrill Lynch & Co., Inc. v. Allegheny Energy,
Inc., 229 F.R.D. 441, 446 (S.D.N.Y. 2004).
1. 	Draft Declarations
The drafts of the Madoff Declaration prepared by Chaitman are protected work
product. Inst. for the Dev. of Earth Awareness v. People for the Ethical Treatment of
Animals, 272 F.R.D. 124 (S.D.N.Y. 2011) (“PETA”) is directly on point. In PETA, the
plaintiff sought production of the drafts of two affidavits and other materials exchanged
between counsel and the non-party affiants; the defendants objected to the production
asserting the work product privilege. Id. at 125. Noting that a lawyer’s notes of a non-
party witness interview are “classic work product and may contain both facts and mental
impressions of the lawyer,” id., the Court concluded that the draft non-party affidavits
were entitled to the same protection:
Here, the executed affidavits of non-party witnesses remained work
product until the lawyer elected to serve and file them. Until the moment
of service and filing, the lawyer reserves the right to reverse course and
refrain from using the affidavits. The lawyer’s drafts, which have not been
adopted or executed by the non-party witness, do not lose their character
as work product because a final executed version has been affirmatively
used in the litigation.
Id.; accord Carpenter v. Churchville Greene Homeowner’s Assoc., No. 09-CV-6552T
(MWP), 2011 WL 4711961, at *9 (W.D.N.Y. Sept. 29, 2011), adopted by, No. 09-CV-6552
(MAT), 2011 WL 6012539 (W.D.N.Y. Dec. 1, 2011); Randleman v. Fid. Nat’l Title Ins.
Co., 251 F.R.D. 281, 285 (N.D. Ohio 2008). While work product may still be
discoverable based upon a showing of substantial need, A.F.L. Falck S.p.A. v. E.A.
Karay Co., Inc., 131 F.R.D. 46, 49-50 (S.D.N.Y. 1990) (requesting party showed
substantial need for third-party draft affidavit where affiant was the only person with
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personal knowledge of a material fact and lived in Greece); accord Sequa Corp. v.
Gelmin, No. 91 Civ. 8675 (MHD), 1993 WL 276081, at *4 (S.D.N.Y. July 16, 1993) (draft
affidavits were not protected as work product where, inter alia, the adversary showed a
substantial need for the materials), the Trustee has not argued that he has a substantial
need for the drafts of the Madoff Declaration.
Madoff’s edits present a closer question that was not directly decided in PETA.
The Trustee maintains that communications from Madoff to Roman fall outside the
scope of the work-product doctrine. (Motion at 6-7.) On the one hand, communications
from non-parties to counsel for parties in a lawsuit do not generally qualify as work
product. Ricoh, 219 F.R.D. at 69; Carpenter, 2011 WL 4711961, at *10. On the other
hand, the work product protection generally extends to an attorney’s communications
with a third party witness relating to the party’s completion of the affidavit. Boyer v.
Gildea, 257 F.R.D. 488, 492-93 (N.D. Ind. 2009); Tuttle v. Tyco Elecs. Installation
Servs., Inc., No. 2:06-cv-581 (GLF), 2007 WL 4561530, at *2 (S.D. Ohio Dec. 21, 2007);
see also 8 CHARLES A LAN WRIGHT , ET . AL, F EDERAL PRACTICE AND P ROCEDURE CIV. § 2024,
at 510 n. 23 (3d ed. 2010) (“Recent cases have generally held that draft affidavits, and
communications with counsel relating to affidavits, are covered by the work–product
rule.”).
Chaitman’s drafts and Madoff’s edits constitute communications between a
party’s attorney and a non-party witness relating to the completion of the Madoff
Declaration. Moreover, his edits are intertwined with the drafts prepared by Chaitman
that are her work product. Except for a couple of interlineations, his edits simply struck
Chaitman’s language and cannot be viewed in isolation from the language he struck.
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Finally, the Trustee questioned Madoff at length about the draft declaration and his
edits. (See Transcript of June 15, 2016 Deposition of Bernard L. Madoff at 90:3-100:20
(ECF Main Case Doc. # 14162-8).)
Accordingly, the drafts of the Madoff Declaration and Madoff’s edits to the drafts
are work product. The Trustee nevertheless maintains, relying SEC v. Gupta, 281 F.R.D.
169 (S.D.N.Y. 2012), that Roman waived work product protection by sending Madoff the
drafts of the Madoff Declaration. 10 (Motion at 7-10; see also Trustee’s Reply
Memorandum of Law in Support of his Motion to Compel Discovery Pursuant to Fed.
R. Bankr. P. 7037(a)(3)(B), dated June 27, 2017, at 4-8 (ECF Doc. # 96).) In Gupta, the
SEC and representatives of the United States Attorney’s Office (“USAO”) met with third-
party witness Lloyd Blankfein, CEO of Goldman Sachs, to prepare him for his deposition
in connection with an insider trading civil enforcement action. Id. at 170. When
defense counsel asked Blankfein about the meeting at his deposition, including what the
participants discussed and what documents Blankfein was given to review, the SEC
objected invoking the work product doctrine. Id. at 170-71. It argued that the topics the
SEC and USAO attorneys discussed with Blankfein and the documents they showed him
were protected work product because they revealed the attorneys’ legal opinions,
thought processes and strategy. Id. at 171.
10 	The use of Robert and Ruth Roman as go-betweens did not destroy the privilege or waive it. The
Romans were acting as Chaitman’s agents in transmitting drafts of the Madoff Declaration between
Chaitman and Madoff, and the protections afforded by the work-product doctrine are not waived when
materials are shared with an attorney’s agent. Oxyn Telecomms., Inc. v. Onse Telecom, No. 01 Civ 1012
(JSM), 2003 WL 660848, at *2-4 (S.D.N.Y. Feb. 27, 2003); cf. Nobles, 422 U.S. at 238-39 (materials
prepared by an attorney’s agent are protected under the work product doctrine).
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District Judge Rakoff overruled the objection. He explained that the privilege is
waived when the privileged materials are disclosed “to anyone without ‘common
interests in developing legal theories and analyses of documents.’ ” Id. at 171 (quoting In
re Sealed Case, 676 F.2d 793, 817 & n. 97 (D.C. Cir. 1982)). Neither Blankfein nor
Goldman Sachs shared any common interest with the SEC; “Blankfein is simply a third-
party witness in this case.” Id. at 172.
Gupta is distinguishable. Under Gupta, the Trustee was free to question Madoff
about the circumstances and communications surrounding the execution of the Madoff
Declaration. The Trustee did so, without objection, asking Madoff about the substance
of the Madoff Declaration as well as the changes he made to an earlier draft and his
communications with opposing counsel. Under PETA, however, a draft declaration sent
to a third party witness retains its privilege, and as discussed, communications relating
to the preparation and execution of the declaration are also protected by the work
product privilege. 	Consequently, the privilege was not waived by the exchange of
drafts, including drafts containing Madoff’s edits, between Chaitman and Madoff
through the Romans, Chaitman’s agents.
2. 	The Transmittal Letters
The privilege log lists an October 28, 2015 letter from the Romans to Madoff
which also enclosed a draft of the declaration and the Chaitman E-mail in addition to a
November 11, 2015 letter from the Romans to Madoff. 11 Both letters included two types
11 	Joan Roman’s November 11, 2015 email transmitting Madoff’s edited draft declaration to
Chaitman did not contain any content.
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of communications: (i) instructions from Chaitman regarding the review and
completion of the Madoff Declaration, and (ii) statements by one or both Romans
unrelated to the review and completion of the Madoff Declaration. As noted, the work
product protection extends to an attorney’s communications with a third party witness
relating to the party’s completion of the affidavit. For the most part, the Romans’
transmittal letters to Madoff included Chaitman’s instructions to Madoff regarding the
completion of the declaration, and as stated, sending the communications through the
Romans does not change the analysis because the Romans were acting as Chaitman’s
agents.
Other portions of the letters are not privileged. The first paragraph of the
October 28 letter refers to the enclosed copy of the Chaitman E-mail. The first
paragraph of the November 11 letter expresses the Romans’ appreciation for Madoff’s
cooperation. These portions of the two letters should be disclosed with the balance of
the text redacted.
3. 	The Chaitman E-mail
Roman asserts both the work product and attorney-client privileges with respect
to the Chaitman E-mail. The Chaitman E-mail was sent by Chaitman to her clients on
October 8, 2015 and described her factual investigation into the PW issue, identified the
scope of the PW Proceeding, and provided instructions on how to participate in the PW
Proceeding. The Romans sent it to Madoff along with the initial draft declaration on
October 28, 2015.
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The attorney-client privilege protects “communications (1) between a client and
his or her attorney (2) that are intended to be, and in fact were, kept confidential (3) for
the purpose of obtaining or providing legal advice.” United States v. Mejia, 655 F.3d
126, 132 (2d Cir.), cert. denied, 565 U.S. 992 (2011). The purpose behind the privilege
“is to encourage full and frank communications between attorneys and their clients and
thereby promote broader public interests in the observance of law and administration of
justice.” Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). However, the attorney-
client privilege should be “narrowly construed, applying only where necessary to achieve
its purpose.” Misek-Falkoff v. Int’l Bus. Machs. Corp., 144 F.R.D. 48, 49 (S.D.N.Y.
1992) (citing Fisher v. United States, 425 U.S. 391, 402-04 (1976)). The “burden of
establishing the existence of an attorney-client privilege, in all of its elements, rests with
the party asserting it.” In re Grand Jury Proceedings, 219 F.3d 175, 182 (2d Cir. 2000)
(quoting United States v. Int’l Bhd. of Teamsters, Chauffeurs, Warehousemen and
Helpers of Am., 119 F.3d 210, 214 (2d Cir. 1997)).
The Chaitman E-mail meets the elements of the attorney-client privilege because
it was a confidential communication sent by Chaitman to her clients providing legal
advice regarding the PW issue. It also constitutes attorney work product because it was
prepared by Chaitman in anticipation of litigating the PW issue against the Trustee. The
Court turns, therefore, to whether either or both privileges were waived when Roman
sent the Chaitman E-mail to Madoff.
a. 	Waiver of Attorney-Client Privilege
The attorney-client privilege is waived by the voluntary disclosure of the
confidential communication to a third party “because disclosure is viewed as an
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indication that confidentiality is no longer intended.” In re Horowitz, 482 F.2d 72, 81
(2d Cir.), cert. denied, 414 U.S. 867 (1973); accord In re Bank of New York Mellon
Corp. Forex Transactions Litig., 66 F. Supp. 3d 406, 410 (S.D.N.Y. 2014). The privilege
belongs to the client, and only the client can waive it. von Bulow v. von Bulow, 828
F.2d 94, 100 (2d Cir. 1987); Republic Gear Co. v. Borg–Warner Corp., 381 F.2d 551,
556 (2d Cir. 1967).
It would seem beyond cavil that Roman waived his attorney-client privilege
concerning the Chaitman E-mail. He voluntarily sent it to Madoff. Chaitman
nevertheless argues that she “did not intend for any of [her] clients to disclose the
[Chaitman E-mail] . . . to anyone,” and Roman sent it to Madoff “[w]ithout
[Chaitman’s] knowledge.” (Declaration of Helen Davis Chaitman in Support of
Defendant’s Opposition to the Trustee’s Motion to Compel Discovery Pursuant to Fed.
R. Bankr. P. 7037(a)(3)(B), dated Sept. 6, 2017, at ¶¶ 5-6 (ECF Doc. # 104); accord
Defendant’s Supplemental Memorandum of Law in Opposition to the Trustee's Motion
to Compel Discovery Pursuant to Fed. R. Bankr. P. 7037(a)(3)(B), dated Sept. 6, 2017
(“Defendant Supp. Brief”), at 1 (ECF Doc. # 103).)
The question posed by the opposition is whether Roman could waive his
attorney-client privilege attaching to the Chaitman E-mail without her or her other
clients’ consent. Chaitman has not argued that Roman and her other clients share a
joint defense privilege that precluded Roman from waiving the common attorney-client
privilege without their consent. See Quigley, 2009 WL 9034027, at *3 (discussing the
waiver of the attorney-client privilege in the joint defense/common interest context).
Instead, she contends that Roman shared a common interest with Madoff (discussed
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below) who had no attorney-client privilege with respect to the Chaitman E-mail.
Accordingly, when Roman sent the Chaitman E-mail to Madoff, a third party, he waived
his attorney-client privilege with respect to that document.
b. 	Waiver of Work Product Privilege
Unlike the attorney client privilege, disclosure of work product to a third party
constitutes a waiver only if it substantially increases the likelihood of disclosure to the
adversary. Quigley, 2009 WL 9034027, at *8. Thus, for example, the District Court in
United States v. Stewart ruled that no waiver occurred when a defendant shared work
product with her daughter. 287 F. Supp. 2d 461, 469 (S.D.N.Y. 2003). Roman argues
that his disclosure of the Chaitman E-mail to Madoff is similar to the disclosure in
Stewart. (Defendant Supp. Brief at 3.)
The argument lacks merit. Unlike the third party in Stewart whose only
connection to the case was as the defendant’s daughter, Stewart, 287 F. Supp. 2d at 466
(“the defendant forwarded a purportedly work product-protected document to a
nonlawyer family member whose interest in the case can only be described as
personal”), Madoff is a fact witness in both the PW Proceeding and the Fraud
Proceeding. In addition, Chaitman implies that Roman sent the Chaitman E-mail to
Madoff so that he would understand why she wanted his declaration, (Defendant Supp.
Brief at 3), but her accompanying declaration does not state that she asked Roman to
forward the Chaitman E-mail to Madoff for that or any other purpose, and the October
28 letter does not indicate why Roman decided to share it with Madoff. Furthermore,
Chaitman directed Roman not to answer any questions about the “letters” at his
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deposition, and hence, his deposition testimony does not support the reasons given in
his brief.
Finally, Chaitman suggests that Roman and Madoff share a common interest “in
their search for the truth.” (Defendant Supp. Brief at 4.) Given Roman’s and
Chaitman’s other clients’ contention that Madoff is a liar who defrauded them, (see, e.g.,
Third Amended Complaint, filed Aug. 29, 2015, at ¶¶ 3-4 (“Madoff . . . lied to [his
customers], failed to disclose information he was legally obligated to disclose, and
thereby induced [his customers] to entrust Madoff with their money. . . . Madoff
defrauded [his customers, and their claims arose when they] wired funds to Madoff and
released in some instances their life savings into the hands of a thief.”) (ECF Adv. Proc.
No. 15-01293 Doc. # 1-1)), the assertion is absurd. Moreover, despite Chaitman’s
criticisms of the Trustee’s motives and tactics, see BLMIS, 2017 WL 2602332, at *3, *5-
8, I know of no evidence suggesting that the Trustee does not share the same common
interest with Roman and Madoff in the “search for the truth.” In any case, the receiving
party must have a “common litigation interest[]” with the disclosing party for waiver not
to occur, Medinol, Ltd. v. Boston Scientific Corp., 214 F.R.D. 113, 115 (S.D.N.Y. 2002),
and an interest in the “search for the truth,” while admirable, is not a “litigation
interest.”
Despite Roman’s disclosure of the Chaitman Email, Chaitman has standing to
object to her client’s waiver of the work product privilege, to the extent the work product
includes “opinion work product.” In re Asia Global Crossing, Ltd., 322 B.R. 247, 262-
63 (Bankr. S.D.N.Y. 2005). “Opinion work product” contains an attorney’s “mental
impressions, conclusions, opinions, or legal theories.” F ED. R. CIV. P. 26(b)(3)(B);
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United States v. Adlman, 134 F.3d 1194, 1197 (2d Cir. 1998). An in camera review of the
Chaitman E-mail reveals that it is mostly factual in nature and does not convey
Chaitman’s legal strategy. For instance, Chaitman described her investigation into the
profit withdrawal issue and provided instructions on how to participate in the PW
Proceeding. These matters constitute fact work product, In re Grand Jury Subpoena
Dated July 6, 2005, 510 F.3d 180, 183 (2d Cir. 2007) (“fact work product may
encompass factual material, including the result of a factual investigation”), cert. denied
sub nom., Doe v. United States, 553 U.S. 1094 (2008), and Chaitman lacks standing to
object to her client’s waiver. On the other hand, a few portions of the email contained
legal conclusions or reflected her mental impressions and legal theories, and are entitled
to protection as opinion work product. Accordingly, the Chaitman E-mail should be
produced, but the portions containing opinion work product – the first sentence of the
third paragraph, and the third and fourth sentences of the fourth paragraph – should be
redacted.
D. 	Sanctions
In the penultimate paragraph of his opposition, Roman requests sanctions
against the Trustee under the Court’s inherent authority, 28 U.S.C. § 1927 and Rule 37
of the Federal Rules of Civil Procedure based on his failure to cite “controlling authority
that expressly prohibits the relief he seeks.” (Objection at 9.)
Roman’s request for sanctions is denied. Roman has not identified the
“controlling” authority that the Trustee omitted, but I assume that at a minimum he is
referring to PETA (which the Trustee attempted to distinguish in his reply). According
to its website, our District Court has forty-three District Court judges. They sometimes
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disagree among themselves. While their decisions in unrelated cases are persuasive
authority, no individual district court judge’s decision in an unrelated case can be
considered “controlling authority.” See Barnett v. Jamesway Corp. (In re Jamesway
Corp.), 235 B.R. 329, 336 n. 1 (Bankr. S.D.N.Y. 1999) (“where the bankruptcy court sits
in a multi-judge district, it is not bound by principles of stare decisis by the decision of a
district judge in that district”) (listing cases); cf. In re Moore, 441 B.R. 732, 738 (Bankr.
N.D.N.Y. 2010) (“the bankruptcy court is a ‘unit’ of the district court, and thus is not
bound by the decision of a single district court judge”).
In addition, Roman identified six “letters” that he exchanged with Madoff, but
failed to provide a timely and accurate privilege log. Hence, the Trustee could not have
known that the six “letters” included the draft declaration when he filed the Motion.
Finally, Roman has failed to demonstrate a right to sanctions. Under the Court’s
inherent authority and 28 U.S.C. § 1927, “a court must find clear evidence that (1) the
offending party’s claims were entirely without color, and (2) the claims were brought in
bad faith—that is, ‘motivated by improper purposes such as harassment or delay.’”
Eisemann v. Greene, 204 F.3d 393, 396 (2d Cir. 2000) (quoting Schlaifer Nance & Co.
v. Estate of Warhol, 194 F.3d 323, 336 (2d Cir. 1999)). Given Roman’s testimony about
an exchange of “letters” with Madoff and Chaitman’s direction to Roman not to answer
any questions about them at his deposition, the motion to compel their production was
not entirely without color, improper in any sense or designed to harass or delay.
Nor is Roman entitled to sanctions under Rule 37. If a motion to compel
discovery is granted in part and denied in part the court may apportion the reasonable
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expenses of the motion. See F ED. R. CIV. P. 37(a)(5)(C). The Trustee has not asked to
apportion any of his expenses to Roman, and for the reasons stated, including the
submission of misleading privilege logs that added time and expense to the disposition
of the Motion, I decline to foist any of Roman’s expenses on the Trustee.
So ordered.
Dated: New York, New York
October 17, 2017
/s/ Stuart M. Bernstein
STUART M. BERNSTEIN
United States Bankruptcy Judge
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