(addressing derivative plaintiff shareholders' motion compelling production of Cravath's documents generated during its representation of a Special Litigation Committee; explaining the court's role in analyzing a Special Litigation Committee's recommendation to dismiss the derivative case, and ultimately ordering an in camera review of privileged and work product-protected documents relating to Cravath's investigation, and indicating that the court probably would order production of documents; among other things, noting that the Special Litigation Committee lawyers represent the Committee "and the corporation as a whole (e.g., the [derivative] plaintiff shareholders]"; "Plaintiffs move for an order compelling the Special Litigation Committee of the W.R. Grace & Co. Board of Directors (the SLC) to produce witness outlines, notes and summaries of interviews conducted by the SLC and its counsel, which interviews form the basis of the SLC's pending motion to dismiss the amended complaint."; explaining that the derivative action alleges the company's favoritism toward the former CEO J. Peter Grace and his family; "On May 9, 1997, the Board created the SLC to investigate the allegations in the amended complaint. Specifically, the SLC was charged with determining whether continued pursuit of this lawsuit was in the best interests of Grace. The Board resolution appointing the SLC accorded the committee full authority to deal with this lawsuit without any further reference to the Board. The SLC retained the firm of Cravath, Swaine & Moore (Cravath) to act as its counsel. The SLC conducted its investigation by reviewing documents and conducting interviews of defendants and other personnel concerning the matters raised in the complaint. The committee relied heavily on its counsel in its investigation. Indeed, counsel conducted 10 of the 14 interviews and then reported back to the SLC about the substance of the interviews."; pointing to ZaPata Corp. v. Maldonado (430 A2d 779 (Del. Sup. Ct. 1981) as indicating how Delaware court handle Special Litigation Committees; "[T]he court finds that the production of the notes, summaries and outlines regarding the committee's interviews of witnesses is necessary and will facilitate determination of the reasonableness and good faith of the SLC's investigation. Contrary to the SLC's contentions, plaintiffs' requests do not constitute all-encompassing merits discovery. In order for plaintiffs to reasonably challenge the thoroughness of the SLC's factual investigation, they must be able to examine the questions posed and the subjects explored in the witness interviews. Similarly, it is impossible for the court to assess whether the SLC pursued its charge with diligence and zeal, if the court is unable to review the development of the factual record that underlies the Revised Report."; "[T]he SLC in the instant case relied heavily on counsel who conducted 10 of the 14 interviews which formed the factual basis for its Revised Report. Likewise, the witness interviews were not transcribed. The only witness record of the interviews are counsel's notes, outlines and summaries. To deny plaintiffs the opportunity to discover the questions asked of the key witnesses, and whether the responses thereto were used or ignored by the SLC in forming its conclusions and preparing its report, would impermissibly allow the SLC to insulate its investigation from scrutiny by simply using counsel to conduct the interviews. . . . this court is troubled by the issue of whether the SLC acted in good faith when it preserved the interview testimony in such a way that it could then protect it from examination by asserting."; "When assessing the good faith and reasonableness of the SLC's investigation, the court must also determine whether the committee's reliance on counsel was in good faith. . . . To successfully challenge the committee's good-faith reliance on counsel, plaintiffs must show overreaching by counsel or neglect by the SLC. . . . If counsel incompetently conducted the interviews, the SLC's reliance and good faith would be called into question."; "The court recognizes that some of the documents sought may contain privileged matter which may be immune from discovery, notwithstanding their relevance to issues of good faith and the reasonableness of the investigation. Thus, an in camera review is the appropriate procedural vehicle to ensure that those privileges are not violated, while permitting plaintiffs to obtain the discovery necessary to challenge the SLC's good faith. However, the court notes that the application of the attorney-client privilege is problematic. The SLC's counsel represents both the SLC and the corporation as a whole (e.g., the plaintiff shareholders). Under such circumstances, the attorney-client privilege would not bar discovery of all communications between counsel and the SLC."; also addressing the work product protection; "The work product doctrine protects materials specifically written in preparation for threatened or anticipated litigation. . . . Again, even if the SLC's materials qualify for work product protection, they may still be discoverable if the shareholder seeking such discovery from the corporation can demonstrate 'good cause.'"; "In this case, plaintiffs have shown that there are many shareholder interests at stake, including the interests of one of the corporation's largest shareholders, the California Public Employees Retirement System. In addition, plaintiffs have demonstrated that the discovery they seek is not available from other sources since the interviews were not recorded. Plaintiffs have also established that the communications do not necessarily disclose counsel's advice to the SLC regarding this litigation. However, before ordering production of the requested documents, the court will review the documents in camera. . . . The in camera review will protect against disclosure of the mental impressions, conclusions, opinions or legal theories of SLC's counsel."; "Accordingly, it is ordered that the motion to compel is held in abeyance pending the court's in camera review, and it is further ordered that the SLC shall submit the subject documents to the court within 15 days of service of a copy of this decision with notice of entry.")
Case Date |
Jurisdiction |
State |
Cite Checked |
2006-12-06 |
Federal |
IL |
|