Free Order to Show Cause - District Court of Colorado - Colorado

Case 1:01-cv-01451-REB-KLM

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 01-cv-01451-REB-CBS (Consolidated with Civil Action Nos. 01-cv-01472-REB-CBS, 01-cv-01527-REB-CBS, 01-cv01616-REB-CBS, 01-cv-01799-REB-CBS, 01-cv-01930-REB-CBS, 02-cv-00333-REB-CBS, 02-cv-00374-REB-CBS, 02-cv-00507-REB-CBS, 02-cv-00658-REB-CBS, 02-cv-00755-REBCBS, 02-cv-00798-REB-CBS, 04-cv-00238-REB-CBS) In re QWEST COMMUNICATIONS INTERNATIONAL, INC. SECURITIES LITIGATION

ORDER TO SHOW CAUSE

Magistrate Judge Craig B. Shaffer Pending before the court is Lead Plaintiffs'Second Motion for an Order Compelling the Production of Documents from Defendants Qwest Communications International, Inc., Philip F. Anschutz, Craig D. Slater and Drake S. Tempest Concerning an Advice of Counsel Defense, or in the alternative, Precluding Defendants Philip F. Anschutz, Craig D. Slater and Drake S. Tempest From Asserting an Advice of Counsel Defense [hereinafter " Lead Plaintiffs'Second Motion for an Order Compelling the Production of Documents" ](Document # 686), filed on June 13, 2005. A brief review of the procedural history of these consolidated cases will place this Order to Show Cause in the proper context. These consolidated lawsuits have spawned several disputes concerning the discovery of privileged documents. On February 28, 2005, Lead Plaintiffs moved to compel production of various documents, including " documents Qwest produced to governmental agencies investigating Qwest, but which Qwest has refused to produce to Plaintiffs under claims of attorney-client privilege and/or the attorney work-product doctrine." After reviewing the parties' briefs and considering the arguments of counsel during hearings on March 1

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1, and April 18, 2005, I issued an Order on May 31, 2005 granting Lead Plaintiffs' Motion to Compel Production of Documents from Defendant Qwest (Document # 671). In that Order, I concluded that Qwest voluntarily chose to disclose certain privileged documents to the Securities and Exchange Commission (" SEC" presumably on the assumption that those voluntary ), disclosures would inure to the company' benefit in connection with the SEC investigation. s Under the particular circumstances of these consolidated cases, I held that Qwest had waived the attorney-client and work product privileges for the 220,000 privileged documents produced to the SEC. See May 31, 2005 Order Granting Lead Plaintiffs' Motion to Compel Production of Documents from Defendant Qwest Communications International, Inc. (Document # 671). Over Defendant Qwest' Objection (Document # 691), the District Court affirmed my Order requiring s production of the documents which Qwest had previously disclosed to government agencies. See Order Concerning Rule 72 Objections, dated August 15, 2005.1 On March 9, 2005, Lead Plaintiffs addressed the discovery implications raised by Defendants Anschutz, Slater and Tempest' putative " s advice of counsel defense." See Lead Plaintiffs'Motion for an Order Compelling the Production of Documents Concerning an Advice of Counsel Defense (Document # 585). Lead Plaintiffs'motion asked the court to either compel the production of documents by Qwest and the Individual Defendants concerning the advice of counsel defense, or enter an order precluding the Individual Defendants from asserting that
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On September 28, 2005, this court granted Defendant Qwest' Motion to Stay s Production of Privileged Documents Produced to Government Pending Review by Court of Appeals (Document # 791). The Qwest appeal implicates many of the documents that Defendants Anschutz and Slater have identified as pertinent to their " advice of counsel"defense. It seems reasonable to assume that the disposition of Qwest' interlocutory appeal may have a significant s bearing on the " advice of counsel"issue and any future depositions of Defendants Anschutz, Slater and Tempest. See Transcript of the Hearing on September 28, 2005, at p. 18. 2

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defense. Defendant Qwest challenged this motion as premature in the absence of an evidentiary record sufficient to define the subject matter and context of any advice the Individual Defendants might wish to introduce in a future trial. See Qwest' Opposition to Lead Plaintiffs'March 9, s 2005 Motion, at 1. Qwest further argued that Lead Plaintiffs had failed to sustain their burden of proving a waiver by the privilege holder, Qwest, since " privileged communications have been no disclosed and no privileged advice has been put at issue." Id. On April 19, 2005, I denied without prejudice Lead Plaintiffs' Motion for an Order Compelling the Production of Documents Concerning an Advice of Counsel Defense. In the same written Order, the court directed Defendants Anschutz, Slater and Tempest to supplement their Fed.R.Civ.P. 26(a)(1)(B) disclosures, after reasonable inquiry and on information and belief, to identify by category those documents, if any, that each defendant " may use"to support their advice of counsel defense. I also permitted Lead Plaintiffs " seek leave to serve early contention to interrogatories directed to the Individual Defendants' advice of counsel defense should future discovery rulings warrant such relief. As noted, Lead Plaintiffs filed their Second Motion for an Order Compelling the Production of Documents on June 13, 2005. This motion was addressed during a hearing on August 17, 2005. At that hearing, Defendant Qwest renewed its argument that any order compelling production of documents concerning an advice of counsel defense would be premature in advance of the depositions of Defendants Anschutz, Slater and Tempest. Also at that hearing, Lead Plaintiffs withdrew their prior contention interrogatories directed to the advice of counsel defense and indicated they would serve a revised set of contention interrogatories. On August 3, 2005, Intervenor United States Attorney' Office moved for a stay of s 3

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discovery proceedings in these consolidated cases during the pendency of various related criminal matters.2 The Intervenor' motion acknowledged that " s [b]oth the Government and the parties to this litigation are interested in many of the same witnesses because of the overlapping nature of the allegations in the respective cases." The Government' motion identified 28 individuals, s including Defendants Anschutz, Slater and Tempest, whose premature depositions could jeopardize criminal proceedings. Defendants Anschutz and Slater apparently remain on the Government' list of " s embargoed"witnesses.3 On November 23, 2005, Lead Plaintiffs filed an Unopposed Motion for Preliminary Approval of Class Action Settlement (Document # 887), along with a [Proposed] Order Preliminarily Approving Partial Settlement and Approving Form and Manner of Notice (Document # 888). The Unopposed Motion indicates that Anschutz, Slater and Tempest are included in the group of Settling Defendants. Lead Plaintiffs'motion contemplates that a final settlement hearing could not be held any earlier than 110 days after the District Court approves issuance of a Class Notice. Given the present posture of these consolidated cases, the court finds no judicial efficiency to be gained by holding Lead Plaintiffs'Second Motion for an Order Compelling the Production of Documents indefinitely in abeyance. The positions of the respective parties may change in the

Presumably, the Government' perceived need for a stay of parallel civil proceedings has s been heightened with the recent indictment of Defendant Nacchio. On December 29, 2005, this court granted the parties' Agreed Motion Modifying the October 27, 2005 Minute Order Regarding Requests for Admissions and Contention Interrogatories (Document # 901). In that Agreed Motion, the parties noted that I had " delayed the depositions of various defendants, including all the individual parties to this action,"at the request of the United States Attorney' Office. s 4
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wake of answers to contention interrogatories and the deposition testimony of Defendants Anschutz, Slater and Tempest. There seems to be little gained from holding in abeyance a motion that may be significantly altered by future events. The court' reluctance to hold the pending s motion in abeyance also stems, in part, from an inability to anticipate when Defendant Qwest' s interlocatory appeal will be decided or the duration of any civil discovery stay necessitated by the pending criminal prosecution of Defendant Nacchio. The court is reluctant to hold this motion in abeyance for an indefinite period. Moreover, from a practical perspective, any " advice of counsel"defense raised by Defendants Anschutz, Slater and Tempest may be moot should the District Court grant the Unopposed Motion for Preliminary Approval of Class Action Settlement and any final settlement. Accordingly, Lead Plaintiffs are ORDERED to show cause, on or before January 20, 2006, why Lead Plaintiffs' Second Motion for an Order Compelling the Production of Documents from Defendants Qwest Communications International, Inc., Philip F. Anschutz, Craig D. Slater and Drake S. Tempest Concerning an Advice of Counsel Defense, or in the alternative, Precluding Defendants Philip F. Anschutz, Craig D. Slater and Drake S. Tempest From Asserting an Advice of Counsel Defense should not be denied without prejudice, but with leave to renew that motion should future events require such action. Dated this 6th day of January 2006. BY THE COURT:

s/Craig B. Shaffer Craig B. Shaffer United States Magistrate Judge 5