Free Motion in Limine - District Court of Arizona - Arizona

1 2 3 4 5 6 7 8 9 10 11
LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

Dan W. Goldfine (#018788) Richard G. Erickson (#019066) SNELL & WILMER L.L.P. One Arizona Center 400 East Van Buren Street Phoenix, AZ 85004-2202 Telephone: (602) 382-6000 Facsimile: (602) 382-6070 [email protected] [email protected] Attorneys for Plaintiffs and Grant Woods, Esq. (#006106) GRANT WOODS, P.C. 1726 North Seventh Street Phoenix, Arizona 85006 Telephone: (602) 258-2599 Facsimile: (602) 258-5070 [email protected] Attorneys for Plaintiffs and Counterdefendants and Third Party Defendants

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Snell & Wilmer L.L.P.

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Meritage Homes Corporation, et al., Case No. CV-04-0384-PHX-ROS Plaintiffs, v. Greg Hancock, et al., Defendants. PLAINTIFFS' MOTION IN LIMINE TO BAR DEFENDANTS' USE OF ATTORNEY-CLIENT PRIVILEGED COMMUNICATIONS (Assigned to the Honorable Roslyn O. Silver)

In a recent filing, Defendant disclosed Meritage's attorney-client privileged communications to this Court. Despite prior assurances to the contrary, Defendant makes it patently clear in that filing that he intends to continue to use Meritage's attorney-client privileged communications throughout the upcoming trial and before the jury. The parties attempted to resolve this dispute. Declaration of Dan Goldfine at ¶ 3 (attached hereto as Exhibit 4). Those efforts have failed.
8876461

Case 2:04-cv-00384-ROS

Document 571

Filed 06/26/2008

Page 1 of 10

1 2 3 4 5 6 7 8 9 10 11
LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

.

BACKGROUND During this litigation, Meritage reviewed more than several million documents and

produced more than 75,000 documents to comply with Defendant's document request. See Note 3, infra. It also provided Defendant with an itemized and detailed privilege log with more than 400 items in compliance with Fed. R. Civ. P. 26(b)(5). Declaration of Maureen Zachow at ¶ 7 (attached hereto as Exhibit 5). On March 17, 2006, however, Meritage inadvertently produced two documents to Defendant. See Exhibits 1 and 2 (motion for filing under seal and in camera herewith is pending).1 One was entitled "Material Litigation and Miscellaneous Legal Department Status Report as of February 13, 2006" and contained detailed descriptions of the status and legal strategies of certain division (not main corporate) litigation. The other

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

document was entitled "Meritage Homes Phoenix Division Quarterly Summary of Legal Activities" and also contained detailed descriptions of the status and legal strategies of certain division (not main corporate) litigation. The privilege log provided to Defendant contained more than 25 references to documents withheld from production with strikingly similar names such as "Material Litigation and Miscellaneous Legal Issues Status Report," "Litigation Status Report," "Legal Activities Report," and "Quarterly Summary of Legal Activities." See Exhibit 5 at ¶ 3. Both documents were prepared by in-house legal counsel at one of Meritage's divisions (and not corporate) and expressly summarized the strategies and mental impressions of the in-house counsel and several other wellknown attorneys in Phoenix and elsewhere in Arizona. Despite reading the two documents, specifically deciding to mark them as trial exhibits, and despite having the privilege log with strikingly similar documents on it, Defendant's counsel's did not notify Meritage about its receipt of Exhibits 1 and 2 on March 17, 2006 or at any time afterwards. See Local Rule 83.2 (incorporating Arizona Rule of Professional Conduct 4.4(b), which requires "[a] lawyer who receives a document Meritage files Exhibits 1 and 2 under seal and only for in camera review. Meritage believes that given this context that this process does not amount to a waiver of attorneyclient privilege or work product protections, but if the Court disagrees, Meritage requests that the Court return the two exhibits before lifting the seal.
8876461

Snell & Wilmer L.L.P.

1

Case 2:04-cv-00384-ROS

Document 571 - 2 -Filed 06/26/2008

Page 2 of 10

1 2 3 4 5 6 7 8 9 10 11
LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

and knows or reasonably should know that the document was inadvertently sent shall promptly notify the sender"). Defendant disclosed his trial exhibits in early September 2007. On September 12, 2007, counsel for Meritage reviewed Defendant's trial exhibits and noticed that Defendant had listed Exhibits 1 and 2. Later on the same day, Meritage wrote Defendant that three exhibits (Exhibit 1 and 2 plus a third exhibit (an unsigned version of a complaint)) "are clearly privileged communications and were inadvertently disclosed" citing to and quoting from Arizona Rule of Professional Conduct 4.4(b). Exhibit 3. The next day, Defendant's counsel wrote Meritage that he had never seen the three exhibits and that there should be no problem therefore in destroying the three exhibits. Id. Indeed, as to the third exhibit, Defendant substituted a nonprivileged document shortly thereafter. See Exhibit 5 at ¶ 4. Meritage believed on September 13, 2007 that the inadvertent disclosure issue had been resolved through consultation between counsel and without Court intervention. One month later, on Thursday October 18, 2007, Defendant provided Meritage for the first time hardcopies of his trial exhibits. Exhibit 3. On the following Monday, October 22, 2007, in reviewing the hardcopies, Meritage discovered that Defendant had not destroyed Exhibits 1 and 2 despite his counsel's September 13, 2007 email. Id. Meritage then wrote Defendant's counsel the following at 3:23 pm on Monday October 22, 2007: Bob: Despite our exchange [in September attached below], we received your Exhibit Book 2 last Thursday, October 18th, and it included [Exhibits 1 and 2]. We assumed that you had destroyed the records pursuant to [Arizona Rule of Professional Conduct] 4.4 (again, see the excerpted Rule below). Because it appears that you have provided us with originals, we will go ahead and destroy those records and expect that you will do the same with any copies you may have. Unless we hear otherwise within the next 10 days, we understand that you have withdrawn both exhibit designations. Id. (emphasis added). Defendant's counsel responded six minutes later at 3:29 pm asking what the exhibits were ­ feigning that his only set had been provided to Meritage. Id.
8876461

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Snell & Wilmer L.L.P.

Case 2:04-cv-00384-ROS

Document 571 - 3 -Filed 06/26/2008

Page 3 of 10

1 2 3 4 5 6 7 8 9 10 11
LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

Removing any doubt as to the attorney-client privileged nature of the two exhibits, Meritage answered less than an hour later, at 4:21 pm, and provided descriptions that told of their privileged nature: Meritage Homes Phoenix Division ­ Quarterly Summary of Legal Activities, MER0500347-57 Meritage Corporation Material Litigation and Miscellaneous Legal Department Status Reports 2/13/06 ­ MER050533-43 Id. Outside this string of emails, however, Defendant claims to have sent the following email to Rick Erickson at 3:37 pm ­ which if the time sequence is correct was after his initial request at 3:29 pm on October 22, 2007 asking what the documents were but before Meritage's 4:21 pm email explaining what the documents were: Rick: If the exhibits are the litigation summaries, I don't know that I will agree with you that they are privileged unless you stipulate that the Hancock litigation is nowhere mentioned in any of the Meritage corporate legal documents. I don't know that the disclosure was "inadvertant," and as you know, there is a big body of case law about when and under what circumstances any privilege claim is waived. Bob F Mr. Erickson believes that he did not receive Defendant's 3:37 pm email. Declaration of

12 13 14 15 16 17

Snell & Wilmer L.L.P.

Rick Erickson at ¶ 3 (attached hereto as Exhibit 6). Snell & Wilmer's electronic records 18 do not reflect receipt of the email. Id. (Defendant has been asked to provide an electronic 19 version of the email or provide access to IT staff, but to date more than 10 days after he 20 used the attorney-client privileged communications and work product he has refused to do 21 so despite promises otherwise. See Exhibit 4 at ¶ 3.) 22 Shortly thereafter, in late October 2007, Defendant nevertheless removed 23 Exhibit 1 and 2 from Defendant's Exhibit Book. See Exhibit 5 at ¶ 5. 24 Eight more months passed. On June 16, 2008, however, Defendant used the 25 Exhibits 1 and 2 in a court filing. See Response to Meritage [sic] Motion in Limine re 26 27 28 Eileen Carlson at 3:22 to 4:4 (June 16, 2008) (#566).2 Expressly admitting the privileged 2 As part of the investigation after Defendant's June 16, 2008 filing, Meritage learned that shortly before the May 20, 2008 trial date Defendant replaced Exhibit 1 and 2 back into his Exhibit Book. See Exhibit 5 at ¶ 6.
8876461

Case 2:04-cv-00384-ROS

Document 571 - 4 -Filed 06/26/2008

Page 4 of 10

1 2 3 4 5 6 7 8 9 10 11
LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

nature of the two exhibits, Defendant's counsel wrote: Hilton, Seay and White are hiding the details and lack of merit of this lawsuit from Meritage's Board of Directors. White prepares Quarterly Summaries of Legal Activities describing law suits, potential legal actions and other settlements involving "Legal Expenses of $25,000 and over." For example, on the September 30, 2005 report (Trial Exhibit 560 [Exhibit 1 hereto]) there are 10 such matters, but not this lawsuit. On the February 13, 2006 report (Trial Exhibit 561), described as "Material Litigation" report, there are 21 litigation or claim matters mentioned, but not this lawsuit. The same is true of all other company litigation summaries. Id. at 3:22 to 4:4. Defendant erroneously states that Tim White, the current General Counsel of the entirety of Meritage at the corporate level, wrote both exhibits, which is not true (they were prepared by low-level counsel for one of the Divisions of Meritage) and one of the documents was prepared before Mr. White was even an employee of Meritage. Id. Defendant also states that he erroneously has knowledge of "all other company litigation summaries" (difficult to believe since the remaining more than 25 other Meritage "litigation summaries" were on the privilege log and not produced unless he has had unethical contacts with other Meritage employees). Id. Defendant's reference to the two exhibits in a public filing is abhorrent, although he avoided further irreparable harm by not attaching the two exhibits to his filing. Perhaps his failure to attach was an implied admission of the harm in which he was engaging. Nevertheless, Defendant has made it abundantly clear that he intends to

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Snell & Wilmer L.L.P.

introduce both exhibits and their substance before the jury at the upcoming trial. Id. at 3:1-4 (listing and quoting from the two exhibits in support of this trial theme). . MOTION IN LIMINE Exhibits 1 and 2 are attorney-client privileged communications, and their direct and indirect use (e.g., by reference to existence or absence in witness questioning or argument) at trial or in pretrial motion practice is barred. A.R.S. § 12-2234; see, e.g., Roman Catholic Diocese v. Superior Court, 204 Ariz. 225, 228, 62 P.3d 970, 973 (App. 2003). Any review of the exhibits' titles reveals that both are privileged and work product. Indeed, as noted above, Defendant received a privilege log with more than 25 similarly
8876461

Case 2:04-cv-00384-ROS

Document 571 - 5 -Filed 06/26/2008

Page 5 of 10

1 2 3 4 5 6 7 8 9 10 11
LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

titled documents that Meritage withheld from production as privileged. Fed. R. Evid. 26(b)(5). As expressly conceded by Defendants, both exhibits' texts (e.g., status, estimate of exposure, strategies, theories of recovery) reveal attorney-client privilege communications and work product. During both the September 2007 and October 2007 when Defendant discussed the exhibits with Meritage, Defendant never asserted that either exhibit was not privileged. Exhibit 3.3 Likewise, Local Rule 83.2(e) and Arizona Rule of Professional Conduct 4.4(b) bar Defendant's use of the inadvertently disclosed attorney-client privileged communications set forth in Exhibits 1 and 2, including the contents of both exhibits. In Local Rule 83.2(e), this Court adopted the Supreme Court of Arizona's Rules for Professional Conduct for all matters before it. Those Rules limit counsel's use of inadvertently

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

disclosed documents, particularly when counsel fails to comply with the Rules: A lawyer who receives a document and knows or reasonably should know that the document was inadvertently sent shall promptly notify the sender and preserve the status quo for a reasonable period of time in order to permit the sender to take There was no waiver of the privilege in these circumstances under Ninth Circuit law. See United States v. De La Jara, 973 F.2d 746, 749-50 (9th Cir. 1992) (the Ninth Circuit examines all the circumstances in determining whether the privilege has been waived by a disclosure to determine the reasonableness of the disclosure); Transamerica Computer v. IBM, 573 F.2d 646, 652 (9th Cir. 1978) (same). Meritage hired Snell & Wilmer, a prominent law firm with collective centuries of complex litigation experience, to handle, among other things, document production in this matter. See Exhibit 4 at ¶ 4; In re Grand Jury Investigation, 142 F.R.D. 276, 277-80 (M.D.N.C. 1992) (implementation of adequate procedures, even if they ended up failing, is a key factor in determining whether an inadvertently disclosed privileged document remains privileged). Snell & Wilmer assigned a senior associate, who in 2006 was an eight-year attorney at the two largest firms in Phoenix, and a paralegal, who at the time had eleven years of complex litigation and document production experience, to head up the review of documents for document production in this case in coordination with in-house attorneys and others in finance and IT at Meritage. See Exhibit 4 at ¶ 6. The document review team at Snell & Wilmer employed a tagging and double review system, meaning that all documents produced were reviewed by two separate sets of eyes before production. See Exhibit 4 at ¶ 6. The Snell & Wilmer attorney and paralegal were supervised by a litigator with 20 years of complex litigation experience and who addressed specific document production questions. Id. Meritage and Snell & Wilmer reviewed more than several million documents to comply with Defendants' document requests. Id. It produced more than 75,000 batestamped documents, including the electronic data, and provided a lengthy and detailed privilege logs with more than 400 items set forth on them, including litigation summaries like Exhibits 1 and 2. Upon discovery of the inadvertent disclosure, Meritage and Snell & Wilmer took immediate steps to rectify the disclosure ­ all of which Defendant agreed to. Exhibit 3; see De La Jara, 973 F.2d at 750 (disclosing party's immediacy in raising the issue is a favorable factor for preserving the privilege).
8876461

Snell & Wilmer L.L.P.

3

Case 2:04-cv-00384-ROS

Document 571 - 6 -Filed 06/26/2008

Page 6 of 10

1 2 3 4 5 6 7 8 9 10 11
LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

protective measures. Ariz. R. Prof. Conduct 4.4(b). When counsel receives a privileged document and fails to comply with his or her ethical obligations, the court should impose a remedy that avoids prejudice to the other side and "deters others from following the ill-advised path" of not abiding by his or her ethical obligations. Transportation Equipment Sales Corp. v. BMY Wheeled Vehicles, 930 F.Supp. 1187, 1188 (N.D. Ohio 1996). Equipment Sales, the court-ordered remedy was; 1. 2. 3. 4. 5. 6. 7. return of the inadvertently disclosed documents; order prohibiting any further use of the document or any information gained as a result of its disclosure; undertake a search to identify all persons who saw the document or became aware of its contents; provide a copy of the court's order to all persons identified in 3, above; provide to the court under seal a copy of all documents created by the receiving party or counsel that reference the documents; provide to the court under seal a list of all persons who were identified in 3, above; and provide to the court under seal a description of the steps taken to ensure no improper use of the information learned as a result of the inadvertent disclosure of documents. In Transportation

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Id.

Snell & Wilmer L.L.P.

Defendant's counsel's violation of the Local Rules and the Rules for Professional Conduct was two-fold. First, he failed to notify Meritage upon receipt of Exhibits 1 and 2 and listed Exhibits 1 and 2 as trial exhibits. The fact that Exhibits 1 and 2 are privileged is obvious from their titles, "Meritage Homes Phoenix Division ­ Quarterly Summary of Legal Activities" and "Meritage Corporation Material Litigation and Miscellaneous Legal Department Status Reports 2/13/06." See Exhibits 1 and 2. Defendant's counsel should have also known from the contents of the two exhibits, which detail strategies, opinions and mental impressions of the lawyer drafting the two exhibits, a point that Defendant concedes. See Response to Meritage [sic] Motion in Limine re Eileen Carlson at 3:22 to 4:4. Second, after agreeing to the protective measures of not using the two exhibits at trial
8876461

Case 2:04-cv-00384-ROS

Document 571 - 7 -Filed 06/26/2008

Page 7 of 10

1 2 3 4 5 6 7 8 9 10 11
LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

and destroying all copies in his possession, a resolution that is envisioned by Ariz. R. Prof. Conduct 4.4(b), Defendant's counsel (and perhaps others) continued to possess and use the two exhibits. These violations are additional grounds for excluding the two exhibits at trial. Lastly, regardless of the rules governing privilege and the rules of professional conduct, Defendant's own agreement and breach thereof are even further grounds for barring the use of Exhibits 1 and 2 at trial. Defendant, through his counsel, agreed to remove Exhibits 1 and 2 from his list of trial exhibits. Exhibit 3. He also agreed to destroy all copies of the two exhibits in his possession. Id. Defendant further removed the two exhibits from his Exhibit Book in late October 2007. See Exhibit 5 at ¶ 5. Although disqualification is a potential remedy in these circumstances,4 Meritage seeks an order in limine barring Defendant and his counsel from introducing Exhibit 1 or 2 or making any reference in testimony, questioning or argument to either exhibit. In addition, given the argument already made by Defendant, Meritage also seeks an order in limine barring Defendant and his counsel from making any reference in testimony, questioning or argument to the contents or the lack of certain information in the contents of Exhibit 1 or 2. Furthermore, the Court should order Defendant's counsel to undertake a search to identify all persons who saw the document or became aware of its contents and provide a copy of this Court's order to all such persons. Lastly, Defendant's Response to Meritage [sic] Motion in Limine re Eileen Carlson at 3:22 to 4:4 (June 16, 2008) (#566) should be stricken from the record and the clerk should be ordered to remove it from the file and PACER. III. EXPEDITED RELIEF IS WARRANTED Expedited relief is warranted because Defendant has disclosed Meritage's attorneyclient privilege information in his Response to Meritage [sic] Motion in Limine re Eileen 4 Judge Sedgwick disqualified counsel who received the opposing party's information in violation of Local Rule 83.2(e) and the Arizona Rules of Professional Conduct. See, e g., Unisys Corp. v. Varilease Tech Group, 2:98-cv-02251-JWS (Order dated November 16, 1999) (Item #163 on PACER); see e.g., Moss v. Tacc Int'l Corp., 776 F.Supp. 622, 623 (D. Mass. 1991). Meritage reserves seeking further remedies, depending on whether and when Defendant provides the electronic version of the email.
8876461

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Snell & Wilmer L.L.P.

Case 2:04-cv-00384-ROS

Document 571 - 8 -Filed 06/26/2008

Page 8 of 10

1 2 3 4 5 6 7 8 9 10 11
LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

Carlson. Meritage respectfully requests that the Court address this Motion as quickly as possible. CONCLUSION For the reasons set forth above, Meritage respectfully requests the Court enter an Order: · barring Defendant and his counsel from introducing Exhibit 1 or 2 or making any reference in testimony, questioning or argument to either exhibit; · barring Defendant and his counsel from making any reference in testimony, questioning or argument to the contents or the alleged lack of certain information in the contents of Exhibit 1 or 2; · directing Defendant's counsel to undertake a search to identify all persons who saw the document or became aware of its contents and provide a copy of this Court's order to all such persons; · striking Defendant's Response to Meritage [sic] Motion in Limine re Eileen Carlson at 3:22 to 4:4 (June 16, 2008) (#566) from the record; · ordering the Clerk to remove it from the file and PACER; and · ordering Defendant's counsel to pay Meritage the fees and costs it has incurred and will incur with respect to the instant Motion, any reply, any oral argument and any fees application associated with the Motion. RESPECTFULLY SUBMITTED this 26th day of June, 2008. SNELL & WILMER L.L.P.

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Snell & Wilmer L.L.P.

By s/ Dan W. Goldfine Dan W. Goldfine Richard G. Erickson Snell & Wilmer, L.L.P. One Arizona Center 400 E. Van Buren Street Phoenix, Arizona 85004-2202 Attorneys for Meritage and

8876461

Case 2:04-cv-00384-ROS

Document 571 - 9 -Filed 06/26/2008

Page 9 of 10

1 2 3 4 5 6 7 8 9 10 11
LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

By s/ Grant Woods Grant Woods, Esq. GRANT WOODS, P.C. 1726 North Seventh Street Phoenix, Arizona 85006 Attorneys for Meritage

CERTIFICATE OF SERVICE I hereby certify that on June 26th, 2008, I electronically transmitted the foregoing document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the all CM/ECF registrants:

s/ Lindsey M. Perez

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
8876461

Snell & Wilmer L.L.P.

Case 2:04-cv-00384-ROS

Document 571- 10 Filed 06/26/2008

Page 10 of 10