Free Reply to Response to Motion - 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-1451-REB-CBS (Consolidated with Civil Action Nos. 01-RB-1472, 01-RB-1527, 01-RB-1616. 01-RB1799, 01-RB-1930, 01-RB-2083, 02-RB-333, 02-RB-374, 02-D-507, 02-RB-658, 02-RB755, 02-RB-798)

In re QWEST COMMUNICATIONS INTERNATIONAL, INC. SECURITIES LITIGATION ________________________________________________________________ REPLY IN SUPPORT OF QWEST COMMUNICATIONS INTERNATIONAL INC.'S OBJECTION TO ORDER OF MAGISTRATE JUDGE SHAFFER CONCERNING MOTION TO COMPEL PRODUCTION OF DOCUMENTS ________________________________________________________________

I.

The Limited Waiver Doctrine Should Be Adopted By This Court Under The Facts Of This Case. Although they concede that the United States Court of Appeals for the Tenth

Circuit has not addressed the limited waiver doctrine, Lead Plaintiffs erroneously assert that the "great weight of authority" has rejected it. Opposition Brief at 1, 4. In fact, the decisions that have declined to recognize the limited waiver doctrine in cases where confidentiality agreements exist between the producing party and the government are hardly "overwhelming," In re Columbia/HCA Healthcare Corp. Billing Practices, 293 F.3d 289, 307 (6th Cir. 2002) (Boggs, J. dissenting), and numerous courts have recognized the validity of the doctrine in these circumstances. See, e.g., Diversified Indus. v. Meredith, 572 F.2d 596, 611 (8th Cir. 1978) (en banc) (party's production of privileged documents to SEC results in waiver of privilege only as to that agency); see also In re Steinhardt Partners, LP, 9 F.3d 230, 236 (2d Cir. 1993) (recognizing that limited waiver

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may be appropriate in "situations in which the SEC and the disclosing party have entered into an explicit agreement that the SEC will maintain the confidentiality of the disclosed materials."); In re Sealed Case, 676 F.2d 793, 824 (D.C. Cir. 1982) (concluding that policy objectives of Diversified court can be accomplished if "SEC or any other government agency . . . expressly agree[s] to any limits on disclosure to other agencies consistent with their responsibilities under law."); In re Keeper of Records, 348 F.3d 16, 28 (1st Cir. 2003) (reservations against waiver of privileges in presenting information to the government were "fully effective"). Indeed, the federal interest in the effective enforcement of the nation's laws requires that agreements limiting waiver of privilege for documents produced to federal law enforcement agencies be honored.1 At most, the cases cited in Lead Plaintiffs' opposition brief recognize the unsettled legal landscape surrounding the limited waiver doctrine for attorney-client privilege. For example, Lead Plaintiffs cite United States v. Massachusetts Inst. of Tech., 129 F.3d 681 (1st Cir. 1997) ("MIT") as a supposed example of the "clarity" of the law on this issue. Unlike the instant case, however, the government in MIT never promised to maintain the produced documents in confidence. Id. at 683. Indeed, the First Circuit has since indicated that a producing party's reservations against waiver of

The SEC has advised the federal courts that its ability to obtain documents pursuant to such agreements is an important element of its enforcement powers, and has urged that the courts honor those agreements to promote the basic policies of the federal securities laws. See, e.g., Brief of Amicus Curiae Securities and Exchange Commission In Support of McKesson Corporation and Supporting Reversal, 2004 WL 1394246, US v. McCall, (9th Cir. No. 03-10511, Feb. 2004), Mag. Ex. 3.

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privileges in presenting information to the government were "fully effective." In re Keeper of Records, 348 F.3d 16, 28 (1st Cir. 2003).2 Moreover, to the extent the law of limited waiver for attorney-client privilege remains unsettled, that is not true for work product ­ especially opinion work product. In another case cited by Lead Plaintiffs to illustrate the supposed "clarity" of the law on these subjects, Permian Corp. v. United States, 665 F.2d 1214 (D.C. Cir. 1981), the District of Columbia Circuit affirmed the district court's ruling that conduct that waived attorney-client privileges did not waive the separate work product protections. Id. at 1219-20; see also In re McKesson HBOC, Inc., 2005 WL 934331 (N.D. Cal. March 31, 2005) (sustaining work product protections in spite of waiver of the attorney-client privilege by production to the SEC); United States v. Graham, No. 03-CR-089, 2003 WL 23198792 at * 6 (D. Colo. Dec. 2, 2003) ("[e]ven selective disclosure to an adversary does not necessarily require a blanket application of the subject matter waiver rule). While the law is not settled on the doctrine of limited waiver, numerous courts have recognized it, particularly where, as here, a written confidentiality agreement exists with the government. Given that the doctrine serves a vital law enforcement function ­

More recently, the Ninth Circuit and a Magistrate Judge in the Second Circuit have highlighted the uncertain nature of the law in their respective jurisdictions, see Bittaker v. Woodford, 331 F.3d 715, 720, n.5 (9th Cir. 2003) (characterizing the law as "not settled" in the Ninth Circuit); In re Natural Gas Commodity Litig., 2005 WL 1457666 (S.D.N.Y. June 21, 2005) (Exhibit 1) (noting that the Second Circuit declined to adopt a per se waiver approach and had recognized that privilege might be preserved where, as in this case, "the [government agency] and the disclosing party have entered into an explicit agreement that the [government agency] will maintain the confidentiality of the disclosed materials."); see also In re Steinhart Partners, LP, 9 F.3d 230, 236 (2d Cir. 1993).

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that of securing effective cooperation from corporate entities -- it should be recognized by this Court under the facts of this case. II. Lead Plaintiffs Have Demonstrated No Prejudice Justifying The Remedy They Seek. Lead Plaintiffs' assertions of prejudice are transparent. As detailed in its opening brief, Qwest does not seek to inject its privileged information in this case; indeed, it is taking all reasonable efforts to avoid that result. Put differently, Qwest does not seek to rely on some of the privileged documents produced to the government while shielding others from production. Any allusions to swords and shields are simply misplaced. Qwest seeks to use its privilege as a shield; period. Under these circumstances, Lead Plaintiffs find themselves in precisely the situation they would be in had Qwest never cooperated with federal law enforcement ­ Lead Plaintiffs must litigate their case based on the non-privileged record evidence, the same evidence upon which Qwest relies. Claims of prejudice simply ring hollow against this truth. Cf. Upjohn v. United States, 449 U.S. 383, 395 (1981) ("Application of the attorney-client privilege to communications such as those involved here . . . puts an adversary in no worse position than if the communication had never taken place."); Frontier Refining Inc. v. Gorman-Rupp Co., Inc., 136 F.3d 695, 704 (10th Cir. 1998) ("Frontier did not use its work product as a sword and is not, therefore, prohibited from shielding the material from discovery."); Saito v. McKesson HBOC, Inc., 2002 WL 31657622 at *6 (Del. Ch. Nov. 13, 2002) ("[F]airness has little relevance in the context of selective waivers . . . because disclosure to one adversary does not prejudice a

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subsequent adversary any more than it would have if the initial disclosure had never been made.")3 III. At A Minimum, The Court's Order Should Be Modified To Conform With Graham. Even if this Court were to reject the limited waiver doctrine, it should at least modify the Magistrate Judge's Order to conform to this Court's opinion in United States v. Graham. Graham held that Qwest's production of investigative materials ­ indeed, some of the same documents at issue here ­ did not waive "opinion" work product, and it ordered that documents be redacted to remove that "opinion" work product before production. 2003 WL 23198792 at *7.4 The Magistrate Judge's Order does not authorize similar redactions of the approximately 220,000 pages of documents at

Recent decisions, or those that might not be readily available, such as Saito, are not attached if they were provided previously in connection with Qwest's initial pleading. Other recent decisions that have not been previously provided to the Court are attached. Plaintiffs contend that Qwest disclosed the "entire contents" of one document at issue, referred to as the BSF Memo, to Mark Iwan, who then served as the Company's outside auditor, and they maintain that this necessitates production of the BSF Memo and what Plaintiffs characterize as "the underlying materials" used to compile it. Opp. at 7-10 and n.10 thereof. Plaintiffs are mistaken. As reflected in the record submitted to the Magistrate Judge, while some disclosure of the BSF Memo was made to Mr. Iwan, the "entire contents" were not. Had the complete BSF Memo been provided to Mr. Iwan, Mr Iwan would have recognized ­ as did Mr. Treadway ­ that BSF's work was at a preliminary stage. Qwest provided the BSF Memo to the Magistrate Judge in chambers, and will provide that same document to this Court in chambers as well if the Court desires. As the Court can confirm, Mr. Iwan's testimony that he understood that the BSF inquiry was essentially complete confirms that the entire contents of that document were not shared with him.
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issue.5 This clear error must be corrected, even if the remainder of the Magistrate Judge's Order were allowed to stand. CONCLUSION Qwest respectfully requests that this Court vacate and set aside the Magistrate Judge's Order Granting Lead Plaintiffs' Motion To Compel Production Of Documents From Defendant Qwest Communications International, Inc. and that an order be entered, recognizing the continued viability of Qwest's attorney-client and work product privileges in this litigation.

DATED: July 13, 2005

Respectfully submitted,

s/Terence C. Gill_________________ Terence C. Gill SHERMAN & HOWARD, L.L.C. 633 Seventeenth Street, Suite 300 Denver, CO 80202 Telephone: (303) 297-2900 Facsimile: (303) 298-0940 Jonathan D. Schiller BOIES, SCHILLER & FLEXNER LLP 5301 Wisconsin Avenue, N.W. Washington, DC 20015 Telephone: (202) 237-2727 Facsimile: (202) 237-6131 Nowhere is that more true than with the BSF Memo, which, as an in camera review will reveal, is the essence of attorney work product, and particularly "opinion" work product. Graham thus dictates that the Company be allowed to redact any "opinion" work product from that document if its production is ordered. Graham, 2003 WL 23198792 at *7. Equally important, "subject matter waiver" principles do not apply here. Id. at *5 -*6. Thus, no production of the so-called "underlying materials" is justified.
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CERTIFICATE OF SERVICE I hereby certify that on July 13, 2005, I electronically filed the foregoing REPLY IN SUPPORT OF QWEST COMMUNICATIONS INTERNATIONAL INC.'S OBJECTION TO ORDER OF MAGISTRATE JUDGE SHAFFER CONCERNING MOTION TO COMPEL PRODUCTION OF DOCUMENTS with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following email addresses: Jeffrey Allen Berens [email protected] James E. Nesland [email protected]; [email protected];[email protected] Thomas E. Egler [email protected];[email protected] James Michael Lyons [email protected];[email protected] Neil Peck [email protected];[email protected];[email protected] Mark T. Drooks [email protected];[email protected] Bruce F. Black [email protected];[email protected] Stephanie Erin Dunn [email protected];[email protected] Charles A. Stillman [email protected] Timothy Granger Atkeson [email protected] John A. Freedman [email protected]

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and I hereby certify that I have served the foregoing via U.S. mail and Federal Express as indicated on this 13th day of July, 2005 to the following individuals: William S. Lerach (via Fed Ex) Lerach, Coughlin, Stoia & Robbins LLP 401 B. Street, suite 1700 San Diego, CA 92101-4297 Jason R. Llorens (via mail) Lerach, Coughlin, Stoia & Robbins LLP 9601 Wilshire Blvd. Suite 510 Los Angeles, CA 90210 Joe R. Whatley, Jr. (via mail) Whatley Drake, L.L.C. P.O. Box 10647 Birmingham, Al 35202-0647 Wesley R. Powell (via mail) Clifford Chance US LLP 31 West 52nd Street New York, NY 10019-6131 s/Debra S. Sikes

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