First American Corp v. Al-Nahyan, Civil Action No. 93-1309 (JHG)(PJA).

• Decision Date: 04 May 1998
• Docket Number: Civil Action No. 95-0877 (JHG)(PJA).,Civil Action No. 93-1309 (JHG)(PJA).
• Parties: FIRST AMERICAN CORP., et al., Plaintiffs, v. Sheikh Zayed Bin Sultan AL-NAHYAN, et al., Defendants. Clark M. CLIFFORD and Robert A. Altman, Plaintiffs, v. FIRST AMERICAN CORP. and First American Bankshares, Inc., Defendants.
• Court: U.S. District Court — District of Columbia

2 F.Supp.2d 58

FIRST AMERICAN CORP., et al., Plaintiffs, v. Sheikh Zayed Bin Sultan AL-NAHYAN, et al., Defendants.

Clark M. CLIFFORD and Robert A. Altman, Plaintiffs, v. FIRST AMERICAN CORP. and First American Bankshares, Inc., Defendants.

Civil Action No. 93-1309 (JHG)(PJA).

Civil Action No. 95-0877 (JHG)(PJA).

United States District Court, District of Columbia.

May 4, 1998.

Stephen J. Brogan, Mary Ellen Powers, David E. Miller, Jones, Day, Reavis & Pogue, Washington, DC, for First American Corp. and First American Bankshares, Inc.

William H. Jeffress, Jr., Douglas F. Curtis, Timothy J. Preso, Miller, Cassidy, Larroca & Lewin, Washington, DC, for Clifford and Altman.

MEMORANDUM OPINION AND ORDER

JOYCE HENS GREEN, District Judge.

These consolidated cases are two of a group of aftershocks generated by the international financial earthquake that was the collapse of the Bank of Credit and Commerce International ("BCCI"). Civil Action No. 93-1309 was brought by plaintiffs (collectively "First American") against 30 defendants alleging a complex course of conduct, and series of transactions, in violation of federal and state law. See First American Corp. v. Al-Nahyan, 948 F.Supp. 1107, 1112-15 (D.D.C. 1996) (explaining allegations in fuller detail); see also First American Corp. v. Al-Nahyan, 175 F.R.D. 411 (D.D.C.1997). Defendants Clark M. Clifford ("Clifford") and Robert A. Altman ("Altman") are two of the four active defendants remaining in that case.

Civil Action No. 95-0877 was brought by Clifford and Altman against First American for indemnification under Virginia law for the costs of defending against the criminal prosecution brought against them by the State of New York. First American has asserted a series of counterclaims roughly tracking its allegations in No. 93-1309 and also challenging the reasonableness of the attorneys' fees paid by Clifford and Altman in their defense of the criminal proceedings.

These cases were consolidated for discovery by Order of November 26, 1996. Subsequently, they were also consolidated for trial, set to commence on October 5, 1998.

Presently pending is Clifford and Altman's motion for reconsideration, in part, of an order by Magistrate Judge Attridge requiring them to produce certain documents arising from the New York criminal proceedings. The crux of the dispute is whether Clifford and Altman have waived the protection from disclosure they may have otherwise enjoyed under a New York statute, assuming federal common law would recognize such a privilege, by filing an indemnification action against First American. Magistrate Judge Attridge concluded that the documents were not shielded, and this Court agrees. The motion for reconsideration must be denied.

BACKGROUND

Among the many consequences of the momentous collapse of BCCI and related entities was a criminal prosecution brought by the State of New York against Clifford and Altman for their respective roles as officers and directors of, among other entities, First American. Because of Clifford's failing health, the cases against the two were severed. The case against Altman went to trial in March 1993. Certain counts were dismissed by the court during the trial. The remaining counts were submitted to the jury, which acquitted Altman on August 14, 1993. The State subsequently dismissed the pending charges against Clifford. During the pendency of the Altman trial, on June 25, 1993, First American filed its Complaint in Civil Action No. 93-1309.

During the course of discovery in these consolidated cases, First American served document requests on Clifford and Altman seeking, inter alia, discovery material Clifford and Altman or their counsel received from the Office of the District Attorney of New York ("DANY") in the course of the criminal proceedings against them.¹ Clifford and Altman refused to produce those materials in reliance upon N.Y.Crim. Proc. L. §§ 160.50, 160.60 ("Sealing Statute"), which provides that the record from a criminal proceeding in which the charges have been dismissed, or in which the defendant has been acquitted, shall be placed under seal. This discovery dispute ensued. Magistrate Judge Attridge resolved it by ordering Clifford and Altman to produce "all documents provided them or their counsel by the New York prosecutor in connection with the criminal proceedings brought against them in New York." First American Corp. v. Al-Nahyan, Civ. No. 93-1309 (Order of Sept. 12, 1997). It is that aspect of the Order that Clifford and Altman ask this Court to review.

DISCUSSION

These cases were referred to Magistrate Judge Attridge for discovery pursuant to Rule 72(a) of the Federal Rules of Civil Procedure. The reference authorized the Magistrate Judge to determine non-dispositive pretrial matters, and his orders are final unless objected to within 10 days or unless this Court determines them to be clearly erroneous or contrary to law. See FED. R. CIV. P. 72(a); DIST. CT. OF D.D.C.R. 503. Clifford and Altman timely raised their objection to one portion of the September 12, 1997 Order. The issues presented by Clifford and Altman's motion involve a mix of legal conclusions and factual determinations. The former are considered de novo, and the latter are reviewed for clear error.

A. The New York Sealing Statute

The Sealing Statute on which Clifford and Altman rely to resist discovery provides that "[u]pon the termination of a criminal action or proceeding against a person in favor of such person ... the record of such action or proceeding shall be sealed." NYCPL § 160.50(1). The statute further provides that:

(c) all official records and papers, including judgments and orders of a court but not including published court decisions or opinions or records and briefs on appeal, relating to the arrest or prosecution, including all duplicates and copies thereof, on file with the division of criminal justice services, any court, police agency, or prosecutor's office shall be sealed and not made available to any person or public or private agency;

(d) such records shall be made available to the person accused or to such person's designated agent, and shall be made available to [certain government agencies in six delineated categories].

NYCPL § 160.50(1)(c),(d) (emphasis added).

That section was supplemented by § 160.60, which provides:

Upon the termination of a criminal action or proceeding against a person in favor of such person ... the arrest and prosecution shall be deemed a nullity and the accused shall be restored, in contemplation of law, to the status he occupied before the arrest and prosecution. The arrest or prosecution shall not operate as a disqualification of any person so accused to pursue or engage in any lawful activity, occupation, profession, or calling. Except where specifically required or permitted by statute or upon specific authorization of a superior court, no such person shall be required to divulge information pertaining to the arrest or prosecution.

NYCPL § 160.60 (emphasis added).

There is no dispute that, as an initial matter, the New York Sealing Statute applies to both Clifford, NYCPL § 160.50(3)(a) (dismissal), and Altman, id. § 160.50(3)(c) (acquittal). After the conclusion of the Altman trial, the presiding judge, Justice Bradley, rejected argument that the record of the criminal proceedings against Clifford and Altman should remain unsealed and determined that the Sealing Statute compelled sealing. See People v. Abedi, 159 Misc.2d 1010, 607 N.Y.S.2d 862, 865 (N.Y.Sup.Ct. 1994) (Bradley, J.).

B. Law Applicable to Clifford and Altman's Claim of Privilege

Notwithstanding the fact that Clifford and Altman's argument is phrased almost entirely in terms of interpretation of New York law, federal law applies with respect to the pending motion. See von Bulow By Auersperg v. von Bulow, 811 F.2d 136, 141 (2d Cir.1987). Specifically, this opinion concerns interpretation and application of Rules 26 and 34 of the Federal Rules of Civil Procedure and Rules 501 and 1101 of the Federal Rules of Evidence.² Clifford and Altman argue that the Sealing Statute, which provides that "no such person [protected by the Sealing Statute] shall be required to divulge information pertaining to the arrest or prosecution," NYCPL § 160.60, creates a privilege from non-disclosure in a federal civil action.

The evidentiary rule of privilege, FED. R. EVID. 501, applies at all stages of this proceeding, including discovery. See FED. R. EVID. 1101(c). Rule 501 provides that the privilege of a person "shall be governed by the principles of the common law as they may be interpreted by the courts of the United States in the light of reason and experience" unless State law supplies the rule of decision for an element or claim, in which case a claim of privilege will be determined in accordance with State law. See FED. R. EVID. 501. Where, as here, evidence claimed to be privileged is relevant to both federal and state law claims,³ federal common law is applied to claims of privilege. See von Bulow, 811 F.2d at 141, 8 WRIGHT, MILLER & MARCUS, FEDERAL PRACTICE AND PROCEDURE § 2016 n. 13.

Thus the question presented is whether federal common law recognizes the privilege created by the Sealing Statute, and if so, whether Clifford and Altman have waived it. Unlike cases concerning grand jury secrecy, see Socialist Workers Party v. Grubisic, 619 F.2d 641 (7th Cir.1980), there is no clear analogue to the Sealing Statute in federal law. Castellett, 156 F.R.D. at 95. The federal courts have tended not to expand federal common law privileges to embrace unique state-created privileges. See, e.g., United States v. One Parcel of Property, 930 F.2d 139, 140-41 (2d Cir.1991) (admitting evidence in federal forfeiture proceeding over claim of privilege under similar Connecticut sealing statute); 23 WRIGHT & GRAHAM, FEDERAL PRACTICE AND PROCEDURE § 5434 n. 26 (Supp.1998). The Court need not decide the issue,...