In re Teleglobe Communications Corp.

• Decision Date: 07 August 2008
• Docket Number: Bankruptcy No. 02-11518 (MFW).,Adversary No. A-04-53733(MFW).
• Citation: 392 B.R. 561
• Parties: In re TELEGLOBE COMMUNICATIONS CORP. et al., Debtors. Teleglobe USA, Inc. et al., Plaintiffs, v. BCE Inc. et al., Defendants.
• Court: U.S. Bankruptcy Court — District of Delaware

Page 561

392 B.R. 561

In re TELEGLOBE COMMUNICATIONS CORP. et al., Debtors Teleglobe USA, Inc. et al., Plaintiffs, v. BCE Inc. et al., Defendants.

Bankruptcy No. 02-11518 (MFW).

Adversary No. A-04-53733(MFW).

United States Bankruptcy Court, D. Delaware.

August 7, 2008.

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David C. Albalah, Bracewell & Giuliani LLP, Rita D. Dumain, New York City Law Department, Michael Friedman, Richards Spears Klbbe & Orbe LLP, David M. Posner, Otterbourg, Steindler, Houston & Rosen, Stephen B. Selbst, McDermott Will & Emery LLP, Eric D. Statman, Lovells, New York, NY, D. Scott Barash, Eric R. Markus, Wilmer, Cutler & Pickering, Beatriz T. Saiz, U.S. Department of Justice, Tax Division, Washington, DC, Karen C. Bifferato, Charles J. Brown, Archer & Greiner, P.C., Stuart M. Brown, Edwards Angell Palmer & Dodge LLP, William J. Burnett, Blank Rome LLP, Noel C. Burnham, Montgomery McCracken Walker & Rhoads LLP, L. Jason Cornell, Fox Rothschild LLP, Victoria Watson Counihan, Greenberg Traurig, LLP, Tobey M. Daluz, Ballard Spahr Andrews & Ingersoll LLP, Robert J. Dehney, Morris, Nichols, Arsht & Tunnell, John D. Demmy, Esq., Joseph Grey, Joseph H. Huston, Jr., Stevens & Lee, P.C., Paul J. Dougherty III, William F. Taylor, Jr., McCarter & English, Stephen P. Doughty, Lyons, Doughty & Veldhuis, P.A., Brian Edward Farnan, Robert S. Goldman, John C. Phillips, Jr., Phillips, Goldman & Spence, P.A., Megan Nancy Harper, Landis Rath & Cobb, James E. Huggett, Margolis Edelstein, Carl N. Kunz, III, Morris James LLP, Gwendolyn M. Lacy, Jeffrey C. Wisler, Connolly Bove Lodge & Hutz, Ricardo Palacio, Esq., Ashby & Geddes, P.A., Marc J. Phillips, Connolly Bove Lodge & Hutz LLP, Laurie Selber Silverstein, Potter Anderson & Corroon LLP, William David Sullivan, William D. Sullivan, LLC, Thomas D. Walsh, Fox Rothschild LLP, Christopher A. Ward, Polsinelli Shalton Flanigan Suelthaus, Duane David Werb, Werb & Sullivan, Thomas G. Whalen Jr., Stevens & Lee, P.C., Wilmington, DE, Connolly, Bove, Lodge & Hutz, Linda Boyle, Time Warner Telecom, Inc., Littleton, CO, Tomie Burton, Treasurer-Tax Collector, Barbara R. Gross, Esq., Pyle Sims Duncan & Stevenson, APC, San Diego, CA, Daniel J. Carragher, Day Pitney LLP, Boston, MA, Leslie A. Cohen, Liner Yankelevitz Sunshine & Regenstreif, Santa Monica, CA, Michaela Crocker, Vinson & Elkins L.L.P., Clifton R. Jessup, Jr., Greenberg Traurig, Glenn A. Portman, Bank One Center, Helen Elizabeth Weller, Linebarger Goggan Blair & Sampson, LLP, Dallas, TX, Robert L. Eisenbach, III, Gregg S. Kleiner, Cooley Godward Kronish LLP, Christopher Todd Lenhart, Dorsey & Whitney LLP, San Francisco, CA, Michael S. Greger, Allen Matkins Leck Gamble & Mallory, Irvine, CA, Beth-Ann E. Herschaft, Governmental Center, Fort Lauderdale, FL, Bonnie Maria Holcomb, Office of the Attorney General, Los Angeles, CA, Jeffrey A. Kramer, Lowenstein Sandler, P.C. Roseland, NJ, Nancy F. Loftus, Office of the County Attorney, Fairfax, VA, Ronald J. Miller, Division of Employment Security, Jefferson City, MI, Mark Minuti, Saul Ewing LLP, Francis A. Monaco Jr., Monzack and Monaco, P.A., Thomas Paxton, Hughes & Luce LLP, Geraldine E. Ponto, Gibbons, Del Deo, Dolan, et al., Newark, NJ, Rex D. Rainach, Baton Rouge, LA, Steven Rosenthal, ACI Billing Services, Inc., Northridge, CA, Dwight E. Steiner, Fraser Stryker Meusey Olson Boyer, Broomfield, CO, Robert D. Towey, Lowenstein Sandler, Roseland, NJ, John J. Winter, The Chartwell Law Offices, LLP, Norristown, PA, for Creditors.

Rebecca L. Booth, Morgan Lewis & Bockius, Philadelphia, PA, Cynthia L. Collins, Mark D. Collins, Daniel J. DeFranceschi, Shannon Stacy Frazier, John Henry Knight, Michael Joseph Merchant, Mark E. Felger, Jeffrey R. Waxman, Cozen O'Connor, Shelley A. Kinsella, Cooch and Taylor, P.A., Kimberly D. Newmarch, Marcos Alexis Ramos, Christopher M. Samis, Russell C. Silberglied, Richards, Layton & Finger, Wilmington, DE, Marc T. Foster, Rebecca Lee Scalio, for Debtors.

Robert D. Clark, Denver, CO, Charlene D. Davis, Bayard, P.A., Frederick B. Rosner, Jaspan Schlesinger Hoffman, David B. Stratton, Pepper Hamilton LLP, Wilmington, DE, David W. Dykhouse, Patterson, Belknap, Webb, & Taylor, David Neier, Winston & Strawn LLP, Anna C. Palazzolo, Dechert, Conor Desmond Reilly, Gibson, Dunn & Crutcher, New York, NY, Thomas C. Herbertson, Kenneth W. Irwin, Morrison & Foerster LLP, Scott Andrew Shail, Hogan & Hartson, Washington, DC, John R. Knapp, Jr., Cairncross & Hempelmann, P.S., Seattle, WA, Nancy H. Pagliaro, Cornell University, Ithaca, NY, Bryn H. Sherman, Deckelbaum Ogens & Raftery, Bethesda, MD, Derrick M. Talerico, Loeb & Loeb LLP, Los Angeles, CA, for Interested Party.

OPINION¹

MARY F. WALRATH, Bankruptcy Judge.

Before the Court is a discovery dispute where the Plaintiffs seek the production of documents which the Defendants assert are protected by the attorney-client privilege or attorney work product doctrine (the "Motion to Compel") and a related Motion of the Defendants to exclude testimony of the Plaintiffs' experts as a sanction for the spoliation of information considered in forming their opinions (the "Spoliation Motion"). The Motions are opposed. For the reasons set forth below, the Court will deny both the Spoliation Motion and the Motion to Compel.

I. BACKGROUND

The Debtors² are the wholly owned United States subsidiaries of a Canadian company, Teleglobe, Inc. ("Teleglobe"). Teleglobe is a wholly owned subsidiary of BCE, Inc. ("BCE"). Teleglobe and the Debtors filed petitions under the Canadian Companies' Creditors Arrangement Act ("CCCAA"). In addition, the Debtors filed voluntary chapter 11 petitions under the Bankruptcy Code in the District of Delaware.

The discovery dispute has had a tortured path. On or about May 26, 2004, the Debtors and the Creditors' Committee (collectively "the Plaintiffs") filed an adversary proceeding³ against BCE and various officers and directors of BCE (the "Defendants") in the Bankruptcy Court. During that proceeding, the Plaintiffs filed the Motion to Compel. The District Court withdrew the reference of the adversary proceeding and referred the discovery dispute to a Special Master.

After reviewing the approximately 1,000 withheld documents, the Special Master held that they must all be produced. The Special Master concluded that the Defendants had over-designated as privileged many of the documents (ultimately withdrawing their claim of privilege to thousands of pages of documents) and that production of all of the documents as a sanction might be appropriate. Further, the Special Master concluded that the Plaintiffs were entitled to all documents relating to the joint representation of BCE and Teleglobe because BCE could not withhold them from Teleglobe and Teleglobe had waived the privilege in favor of the Plaintiffs in its CCCAA plan. The Special Master also concluded that any privilege with respect to documents from or to BCE's outside counsel had been lost because those documents had been sent to in-house counsel who was jointly representing BCE and Teleglobe.

On June 2, 2006, the District Court accepted the Special Master's recommendations and reasoning and ordered the production of all of the withheld documents. Teleglobe Commc'ns Corp. v. BCE, Inc. (In re Teleglobe Commc'ns Corp.), No. Civ. 04-1266-SLR, 2006 WL 2567880, at * 2 (D.Del. June 2, 2006).

In a decision dated July 17, 2007, the Third Circuit reversed. Teleglobe Commc'ns Corp. v. BCE, Inc. (In re Teleglobe Commc'ns Corp.), 493 F.3d 345 (3d Cir.2007). The Third Circuit remanded for additional findings of fact on the following issues: (1) Whether any attorneys jointly represented BCE and the Debtors on a matter of common interest, in which case any documents within the scope of that joint representation would be discoverable. (2) Whether the fiduciary exception to the attorney-client privilege⁴ is applicable. (3) Whether the attorney-client privilege should be abrogated as a sanction for the Defendants' abuse of the discovery process because of "bad faith, wilfulness, or fault" on the part of the Defendants or their counsel. Id. at 386-87.

On remand, the District Court referred the adversary proceeding back to the Bankruptcy Court. After consultation with counsel for the parties, the Court scheduled an evidentiary hearing on the factual issues identified by the Third Circuit for determination in the Motion to Compel.

In preparation for the hearing on the Motion to Compel, the parties conducted additional discovery, including expert discovery. On July 17, 2007, the Defendants filed the Spoliation Motion⁵ asking the Court to exclude the testimony and/or reports of two of the Plaintiffs' expert witnesses (Paul Charnetzki and Carlyn Taylor) because they had destroyed notes, drafts of their expert reports, and other information that the Defendants contended the experts had considered in forming their opinions. The Plaintiffs opposed the Spoliation Motion and a hearing was held on October 24, 2007. At the conclusion of the hearing, the Court denied the Spoliation Motion, but directed counsel for the Plaintiffs to produce (to the Defendants and to the Court) its notes of a meeting held between counsel and the experts on March 1, 2006, and copies of emails or other communications in which counsel or other experts had forwarded comments or information to the experts for consideration in forming their opinions.

In compliance with the October 26 Order, the Plaintiffs produced 11 boxes of documents. On December 3, 2007, the Defendants filed a response to that document production contending that the documents produced are no substitute for the destroyed documents and reiterating their request that the Court preclude the experts' testimony and/or reports at the trial. Specifically, the Defendants complain that the Plaintiffs have produced no...