Elizabeth A. OSBORN, Plaintiff, v. John M. GRIFFIN, et al., Defendants. Linda G. Holt, et al., Plaintiffs, v. Dennis B. Griffin, et al., Defendants CONSOLIDATED CIVIL ACTION NOS. 2:11-CV-89-WOB-REW, 2:13-CV-32-WOB-REW United States District Court, E.D. Kentucky, Northern Division at Covington Signed July 07, 2014 Counsel Benjamin Joel Lewis, Janet P. Jakubowicz, Natalie Donahue Montell, Bingham Greenebaum Doll LLP, Elizabeth Graham Weber, J. Kent Wicker, Justin L. Knappick, Dressman Benzinger LaVelle PSC, Louisville, KY, Anthony J. Bickel, Christopher B. Markus, Dressman Benzinger LaVelle P.S.C., Crestview Hills, KY, Eva Christine Trout, Trout Law Office, PLLC, Lexington, KY, for Plaintiff. Benjamin William Snyder, Gregory G. Garre, Melissa Arbus Sherry, Latham & Watkins, LLP, Washington, DC, Caitlin E. Murphy, Jacob D. Rhode, Robert G. Sanker, Steven C. Coffaro, Joseph M. Callow, Jr., Sarah A. Vonderbrink, Thomas F. Hankinson, Keating, Muething & Klekamp, PLLC, Carolyn A. Taggart, Porter, Wright, Morris & Arthur, David P. Kamp, Jean Geoppinger McCoy, White, Getgey & Meyer Co., L.P.A., Cincinnati, OH, Heather A. Waller, Latham & Watkins, Chicago, IL, John E. Floyd, Bondurant, Mixson & Elmore LLP, Atlanta, GA, for Defendants. Wier, Robert E., United States Magistrate Judge ORDER *1 Plaintiff, Elizabeth A. Osborn, filed a motion to compel Defendant Robert Griffin and non-party Griffin Industries, LLC, to produce certain documents. DE #439 (Motion to Compel). Plaintiffs, Linda G. Holt, Judith E. Prewitt, and Cynthia L. Roeder, joined the motion. See DE #448 (Motion for Joinder); DE #449 (Order Granting Joinder Motion). Robert Griffin and Griffin Industries (collectively “Respondents”) filed a timely response in opposition to the motion (DE #450 (Response)), and Plaintiff Osborn replied (DE #452 (Reply)). The matter is ripe for review. Plaintiffs' motion to compel stems from documents listed on a supplemental privilege log produced by non-party Thompson Hine, LLP, on December 9, 2013. See DE #439-5 (Thompson Hine Privilege Log, 12/4/13 Revision) (added pages only). According to Plaintiffs, despite discovery requests served on Defendants and multiple subpoenas served on Griffin Industries and Thompson Hine that would have encompassed the newly listed papers and communications, the documents were never before disclosed on the privilege logs of Defendants, Griffin Industries, or Thompson Hine. DE #440 at 2 (Sealed Memorandum); DE #448 at 2-4. Plaintiffs note that, shortly before Thompson Hine's December 9 supplemental production, Judge Bertelsman ruled, in part, that, with respect to Defendants Dennis and John M. Griffin, Plaintiffs made the requisite prima facie showing under the crime-fraud exception to justify disclosure of documents and communications, previously withheld on the basis of attorney-client privilege, relating to transfer of the Cold Spring property. DE #359 (Order). Plaintiffs argue that Judge Bertelsman's analysis also applies to Robert Griffin and Griffin Industries, and to the documents withheld here.[1] Thus, Plaintiffs ask the Court for an order compelling Robert Griffin and Griffin Industries to respond fully to written discovery previously served by producing the documents and communications newly listed on Thompson Hine's supplemental privilege log.[2] See DE #439. *2 Robert Griffin and Griffin Industries counter that Judge Bertelsman's analysis with respect to Dennis and John M. Griffin is not transferable to them. See DE #450 at 6 (“The Court's November 27, 2010 Order relied on Dennis Griffin's and John M. Griffin's duties to Plaintiff and her sisters as executors and trustees for the legacy of John L. Griffin.”). Specifically, Respondents contend that Plaintiffs have failed to make any prima facieshowing that either Griffin Industries or Robert Griffin engaged in salient crime or fraud, and they further contend that Plaintiffs have not presented evidence to establish a relationship between the communications at issue and the asserted crime or fraud. Respondents also claim that some of the documents at issue do not concern the Cold Spring property, and they argue that several do not involve Robert Griffin. Id. at 2. Additionally, Respondents argue that the communications at issue that do relate to the Cold Spring property all date from November 5 to November 22, 2010, before contemplation of the allegedly improper Estate transfer on December 17 of that year. Id. The crime-fraud exception holds that the attorney-client privilege “has no application to legal advice in aid of a fraudulent scheme or criminal activity.” Fausek v. White, 965 F.2d 126, 129 (6th Cir. 1992) (citing In re Antitrust Grand Jury, 805 F.2d 155, 162 (6th Cir. 1986) (“All reasons for the attorney-client privilege are completely eviscerated when a client consults an attorney not for advice on past misconduct, but for legal assistance in carrying out a contemplated or ongoing crime or fraud.”)). In order for the exception to apply, the party seeking privileged communications first “must make a prima facie showing that a sufficiently serious crime or fraud occurred to defeat the privilege[.]” In re Antitrust Grand Jury, 805 F.2d at 164. The party then “must establish some relationship between the communication[s] at issue and the prima facie violation.” Id. As a practical matter, once a party has made a prima facie showing of a crime or fraud, courts review the privileged communications in camera to determine whether they were made in furtherance of that crime or fraud, and therefore must be produced in discovery. See id. at 168. This is the model Judge Bertelsman previously endorsed. In Judge Bertelsman's referenced prior Order, he concluded that Plaintiffs had met the prima facie burden as to a crime or fraud with respect to the Cold Spring property transfer. Specifically, he held as follows: The Court first concludes that plaintiffs have made the requisite prima facie showing under the “crime fraud” exception with regard to documents relating to the transfer of the Cold Spring (headquarters) real estate .... Plaintiffs allege that defendants made improper conveyances of the Cold Spring, Kentucky property on which Griffin Industries' headquarters is located, as well as several other properties allegedly improperly conveyed to Martom Industries. Based on these transfers, plaintiffs allege claims for fraudulent conveyance, actual fraud, and breach of fiduciary duty. Evidence adduced to date as to irregularities in these transfers and the steps taken to accomplish them satisfies the applicable prima facieshowing. See Fausek v. White, 965 F.2d 126, 133 (6th Cir. 1992); In re Antitrust Grand Jury, 805 F.2d 155, 164 (6th Cir. 1986). That is, the title to the Cold Spring property was held in John L. Griffin's (hereinafter “the Patriarch”) name such that, under Kentucky law, it would pass through his estate to the plaintiffs. When this fact came to defendants' attention during due diligence for the impending and enormously lucrative merger with Darling Industries, defendant John M. Griffin, who was executor, arranged for the Patriarch's probate estate to be reopened and the property to be transferred to Griffin Industries, in which he and his brothers held the majority ownership. Such admitted conduct on the part of a fiduciary (conveying a valuable asset from the estate to himself or those in privity with him without notice to the beneficiaries of the estate) is prima facie evidence of crime or fraud. *3 ... The parties' privilege logs indicate that numerous communications occurred specifically between defendants and their counsel concerning these conveyances. Whether the specific documents actually evidence the alleged fraud and were used in furtherance thereof—thereby voiding any assertion of privilege—will have to be determined by the reviewing United States Magistrate Judge. The Court recognizes that the defendants claim to have valid defenses to the above claims, which may prove to be successful when all the returns are in, but at the present stage we are concerned with a prima facieshowing only. DE #359, at 2-5; see also DE #406, at 10-11 (11/25/13 Hearing Transcript). Judge Bertelsman thus directed the relevant defendants to review each putatively privileged document and determine whether any privilege exception applied. DE #359, at 8. To the extent defendants determined, in good faith, that no exception applied, the defendants were to submit the document for in camera review. Id. To the extent they determined that an exception was applicable, the defendants were to produce the document to the requesting party. Id. Although Judge Bertelsman's ruling does not, by its express terms, apply to Robert Griffin and Griffin Industries, see supra n. 1, the undersigned finds that it is broad enough, in context, to settle the issue of Plaintiffs' prima facieshowing of a crime or fraud on the pending motion to compel. Judge Bertelsman noted that executor John M. Griffin arranged for the “probate estate to be reopened and the property to be transferred to Griffin Industries, in which he and his brothers held the majority ownership.” DE #359, at 3 (emphasis added). And, Judge Bertelsman found that “[s]uch admitted conduct on the part of a fiduciary (conveying a valuable asset from the estate to himself or those in privity with him without notice to the beneficiaries of the estate) is prima facie evidence of crime or fraud.” Id.(emphasis added). Clearly, this language indicates that Griffin Industries had a role in the fraud alleged by Plaintiffs. Having made a prima facieshowing as to Dennis Griffin and John M. Griffin, Plaintiffs also made the showing as to Griffin Industries and Robert Griffin, president of the company at the time of the purported fraudulent transfer. Certainly, Judge Bertelsman's analysis provides a framework that must guide this secondary inquiry. The fraud exception does not perfectly transfer to Robert Griffin and the Company, since those were not fiduciaries like the Co-Trustees. Nevertheless, the District Judge's concerns hinged on the way in which the Company and Griffin brothers went about trying to cure the late-discovered title defect. The Company and Robert Griffin obviously were—indeed had to be—closely involved in clearing title to allow the merger. While the December arguable subterfuge was Judge Bertelsman's focus, the November events allegedly (per DE #373 (Third Amended Complaint), Section B, paras. 25-37) included a) the Company lawyer trying to get the sisters to sign off on a deed that declared the property would have been an Estate asset, and yet offered only nominal ($10.00) consideration to the sisters; b) Robert Griffin allegedly, at one point, offering $200,000 each to the sisters for a quitclaim deed; and c) Robert Griffin allegedly threatening extensive personal liability against the sisters if they failed to cooperate in the deed-based solution. Later, the Company accepted the contested deeds from the fiduciaries to preserve the merger. *4 This may all be explainable or justifiable, but there is prima facie proof of fraud (in the form of breached fiduciary duties and potential misrepresentations). The standard is one of probable cause, whether a “prudent person [would] have a reasonable basis to suspect the perpetration of a ... fraud.” In re Antitrust Grand Jury, 805 F.2d at 166(quoting In re Grand Jury Subpoena Duces Tecum Dated Sept. 15, 1983, 731 F.2d 1032, 1039 (2d Cir. 1984)). The evolution and culmination of the title cure, with the mix of fiduciary duties, alleged conspiracy, failures of transparency, manipulation of values, threats, and ultimate notice-free fiduciary transfers, creates reasonable grounds to suspect fraud. Robert Griffin, though not a fiduciary as to the sisters, is accused of actionably conspiring with the titular fiduciaries. DE #373, at 29-30 (Count V). Thus, the methods or plans discussed for resolving the title concern, which culminated in a transfer for $1.00, are fairly subject to further scrutiny. The fact that Griffin Industries is not a party to the litigation does not change the Court's conclusion. As explained by Judge Bertelsman, Plaintiffs have adduced evidence that Griffin Industries was used as a vehicle for the alleged fraudulent transfer of the Cold Spring property, and Griffin Industries was effectively controlled by the Griffin brothers who are named as individual defendants in this case; Robert Griffin was CEO, a Director, and a major shareholder. See id. at 3; see also DE #406, at 10 (“[I]nstead of acting on behalf of his beneficiaries, [the executor] conveyed [the Cold Spring property] to the corporation because the corporation was about to be sold and they were about to get the money. Maybe a few other stockholders as well.”). Under these circumstances, the Court finds the crime-fraud exception applicable, despite Griffin Industries' status as a non-party. SeeFausek, 965 F.2d at 131. The documents added to Thompson Hine's privilege log in December 2013, beginning with Bates Number TH008628 and ending with Bates Number TH008737, largely relate to the Cold Spring property, see DE #439-5, matters highly relevant to Plaintiffs' claims in this litigation. See DE #359, at 3 (noting that the issue of title to the Cold Spring property came to light during Defendants' due diligence for the impending merger with Darling Industries). Further, it appears that the documents may contain information responsive to prior discovery requests and/or subpoenas. See DE #439-3 (Osborn Discovery to Robert Griffin); DE #439-4 (Osborn Subpoena to Griffin Industries); DE #448-4 (Subpoena to Griffin Industries); DE #448-5 (Roeder's Discovery to Robert Griffin). Respondents argue that the documents pre-date the decision to directly effect transfer of the Cold Spring property, and therefore the alleged fraud, rendering them outside the scope of the crime-fraud exception. The Court is unpersuaded, however, that the scope of the exception defined by Judge Bertelsman is so narrow. During the hearing that led to the District Court's prior Order (DE #359), Judge Bertelsman noted that the relevant defendants would need to produce those documents and communications “pertinent to” the Cold Spring property transaction. See DE #406, at 18; id. at 16-17. As to the specific documents, the Court excludes from this Order only the documents described as only related to the merger proper, rather than the Cold Spring property issues, i.e., TH8628, TH8630, and TH 8632 (though if those reference the property in any way, that portion shall be subject to the Order). Likewise, the invoices are not subject to this Order except to the extent that invoice entries discuss the Cold Spring transfer. Otherwise, all documents on the new log are within this Order. Plaintiffs seek sanctions in the form of attorneys' fees and costs for having to bring this motion to compel. DE #440, at 3. Plaintiff Osborn argues that the documents at issue “should have been disclosed months, if not years, earlier pursuant to Defendants' and Griffin Industries' discovery obligations and this Court's Orders.” Id. at 3 n. 2. Respondents counter that the belated listing of the documents on Thompson Hine's privilege log simply was a product of Thompson Hine's electronic discovery process and efforts to confer with Plaintiffs' counsel regarding the scope of Thompson Hine's electronic search. DE #450 at 8-9. Respondents flatly aver that they listed or identified the papers when they became known. *5 Under Rule 37, if the court grants a motion to compel, “the court must, after giving an opportunity to be heard, require the party ... whose conduct necessitated the motion, the party or attorney advising that conduct, or both to pay the movant's reasonable expenses incurred in making the motion, including attorney's fees.” Fed. R. Civ. P. 37(a)(5)(A). However, the court shall not order this payment if the opposing party's nondisclosure or objection was “substantially justified” or if “other circumstances make an award of expenses unjust.” Id. at 37(a)(5)(A)(ii)-(iii). Here, the Court does not find sanctions warranted. In light of the electronic discovery process and the volume of documents that have changed hands during the course of this litigation, it is unsurprising that some potentially relevant documents were missed or overlooked. The Court emphasizes that the documents are only potentially relevant and discoverable, as the Court has yet to conduct an in camera review to determine whether any of the communications were in furtherance of alleged fraudulent conduct. Thus, although the Court grants Plaintiffs' motion to compel, the Court still may find that the documents should not be produced to Plaintiffs. Further, this is a hotly contested case with sophisticated lawyers on all sides, and the Court would expect zealous advocacy in the highly sensitive, complicated area of attorney-client privilege. Indeed, the Court granted Plaintiffs leave to file the instant motion to compel after finding that Judge Bertelsman's November 2013 Order did not directly apply to Griffin Industries, a non-party, and Robert Griffin. Even if the documents had come to light sooner, the same privilege litigation, which involves substantially justified disputes over legitimate issues, would have resulted. Under these facts and circumstances, an award of attorneys' fees and expenses would be unjust. Accordingly, for the reasons discussed above, the Court ORDERS as follows: 1. The Court GRANTS the motion to compel (DE #439), consistent with the terms stated in this Order; 2. Respondents shall promptly and carefully review the documents newly listed on Thompson Hine's supplemental privilege log in December 2013 and determine whether, in light of the Court's ruling, any document should be produced to Plaintiffs. If so, Respondents shall produce the document to Plaintiffs within seven (7) days of the date of entry of this Order. If Respondents determine, in good faith, that the crime-fraud exception does not apply to any such document, Respondents shall submit the document for in camera review within seven (7) days of the date of entry of this Order. To submit a document for in camera review, counsel shall email same, ex parte, to Chambers (wier_chambers@kyed.uscourts.gov) in PDF format;[3] 3. The Court DENIES Plaintiffs' request for attorneys' fees and expenses under Rule 37 (DE #438); and 4. The Court issues this Order resolving a non-dispositive pretrial matter under 28 U.S.C. § 636(b)(1)(A). Any party objecting to this Order must do so within seven (7) days. The Court accelerates the objection period due to the pending summary judgment motions. See id.; Fed. R. Civ. P. 72(a). Failure to object waives a party's right to review. Footnotes [1] Prior to filing the formal motion to compel, Plaintiffs properly brought the instant dispute before the undersigned through a request for a telephonic conference. At the telephonic conference, the Court found that Judge Bertelsman's November ruling did not encompass the records currently in dispute, as the motion precipitating that ruling did not seek documents from Robert Griffin or Griffin Industries. DE #404 (Minute Entry Order). Based on the timing of Thompson Hine's supplemental privilege log, however, the Court granted Plaintiffs leave to file a motion to compel, as a vehicle for testing the privilege assertions. Id. The Court noted that Judge Bertelsman's prior ruling obviously would inform any analysis. Id. [2] In the reply memorandum, Plaintiff Osborn, citing Judge Bertelsman's Order (DE #359) and In re Antitrust Grand Jury, 805 F.2d 155, 165 (6th Cir. 1986), acknowledges that, as a matter of mechanics, the documents and communications would first be produced to the Court for in camera review, then to Plaintiffs as the Court determines on a document by document basis. [3] This is the protocol Judge Bertelsman created in DE #359 (Order), at 8-9, ¶ 6.