In re Worldcom, Inc., Case No. 02-13533 (AJG) (Jointly Administered) (Bankr. S.D.N.Y. 8/25/2008)
| Decision Date | 25 August 2008 |
| Docket Number | Case No. 02-13533 (AJG) (Jointly Administered) |
| Parties | In re WORLDCOM, INC., et al., Chapter 11, Reorganized Debtors. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
STINSON MORRISON HECKER LLP, Special Counsel for Reorganized Debtors, Kansas City, MO, Mark A. Shaiken, Esq. Sara E. Welch, Esq.
UNGARETTI & HARRIS, LLP, Attorneys for Kennedy & Associates, Inc., Chicago, IL, Dean J. Polales, Esq. and LAW OFFICES OF ALEX PIROGOVSKY, LTD., Lincolnshire, IL, Alex Pirogovsky, Esq.
Kennedy has made two discovery-related motions, which the Court largely denies for the reasons discussed below. The Court also will not disqualify Kennedy's law firms for any conflict arising from their prior representation of a WorldCom employee, for the reasons discussed below.
The two discovery-related motions that are the subject of the current ruling are a Motion for Rule To Show Cause Why Debtors Should Not Be Held in Contempt for Failure to Comply With the March 19, 2007 Order (the "Motion for Rule to Show Cause"), and a Second Motion to Compel Production of Documents (the "Second Motion to Compel"). Both seek WorldCom, Inc. ("WorldCom" or "the Debtors") to, among other things, review and produce relevant documents from the three million documents that were gathered from WorldCom's Boca Raton office by an unrelated law firm representing WorldCom in connection with a class-action Employee Retirement Income Security Act of 1974 ("ERISA") action1 (the "ERISA Action") and or a securities class action case.2 Boca Raton is where a certain WorldCom employee, Dona Miller ("Miller") — who is alleged to be Kennedy's primary contact — worked. Miller is relevant in many ways to the current ruling, as the Court will also address a potential conflicts issue that it discovered, and that was subsequently briefed by the parties.
Prior to the two pending motions, the Court ruled on Kennedy's first motion to compel production. In the February Opinion, the Court narrowed the scope of Kennedy's requests. The Court found that the Debtors should be compelled "to produce certain documents as the requests concern the parties' course of performance and could conceivably help Kennedy establish the existence of an agreement." (Id. at 6.) The Court excused the Debtors from certain document requests because they were "not relevant to the parties' specific claims or defenses." (Id. at 6.) Furthermore, the Court stayed certain requests, such as requests relevant to damages, until the Court decides the threshold issue of whether an agreement exists between the parties. An order consistent with the February Opinion was entered on March 19, 2007 (the "March Order"). In the subsequent decision on Kennedy's motion for relief from that order, the Court made clear that it had, in the February Opinion, informally bifurcated the case with the Court to first determine that an agreement between Kennedy and WorldCom existed. (See Op. Regarding Kennedy & Assocs., Inc.'s Mot. for Relief from Order on Mot. to Compel Produc. of Docs. at 3, Dkt. No. 19057, Aug. 21, 2007.)
In the Second Motion to Compel, Kennedy asks the Court to compel WorldCom to respond to nineteen document requests that were not included in Kennedy's first motion to compel. The Motion for Rule to Show Cause, in contrast, complains that WorldCom's supplemental production of documents in response to the March Order has been insufficient and seeks further discovery and sanctions against WorldCom. In both discovery-related motions, Kennedy classifies the document requests into three broad groups — the "Boca Raton Documents," the "Dixon Documents," and "VEBA Documents."3 The specific, actual document requests will be discussed in the sub-sections relating to each of the two discovery-related motions.
As stated above, the Boca Raton Documents are a large — 3 million plus pages — collection of documents compiled by WorldCom for review in connection with the ERISA Action and the securities class action. Kennedy describes the Dixon Documents as documents, including correspondence and law firm fee statements, concerning Sharon Q. Dixon, an attorney from a law firm that did legal work for WorldCom. Kennedy states that Kennedy has previously requested certain documents relating to Dixon, and that the Court has ordered production of some, but that WorldCom has produced "virtually no correspondence or other documents." (Mot. for Rule to Show Cause, 14.) Kennedy describes the VEBA Documents as relating to WorldCom's benefit plans, such as audit reports and accountings of overpayment refunds. Kennedy alleges that it has been requesting such documents from WorldCom but that WorldCom has refused to provide them.
In the Second Motion to Compel, Kennedy asks the Court to compel WorldCom to respond to nineteen documents requests that were not included in Kennedy's first motion to compel. Kennedy states the impetus is the discovery of "millions of pages of documents in the Debtors' control and/or possession that contain documents that are responsive to those Document Requests" to which the Debtors' have purportedly responded. (Second Mot. to Compel 3.) For most of those document requests, Kennedy states that it has received minimal documents, and that a review of the Boca Raton Documents and the Dixon Documents will yield additional responsive documents.
Kennedy states that there are at least nineteen document requests to which some of the three million documents are relevant and responsive.4 WorldCom argues that Kennedy has failed to take account of the February Opinion and the March Order, which limited, stayed or denied similar requests, as well as WorldCom's original objections discussed by the Court in the February Opinion. WorldCom argues that none of Kennedy's supporting theories for the purported relevancy of the documents relate to whether the parties entered into an agreement.
The Motion for Rule to Show Cause concerns document requests that were subject to the February Opinion and March Order. Essentially, Kennedy complains that WorldCom has not sufficiently responded to multiple document requests,5 especially in light of the discovery of the Boca Raton Documents.
In response to the Second Motion to Compel and the Motion for Rule to Show Cause, WorldCom asserts that it has produced 1,929 pages of documents pursuant to the March Order, in addition to the approximately 1,200 pages of documents it produced prior to the first motion to compel. WorldCom alleges that the latest motions contain requests that are too broad and seek irrelevant material, particularly since the February Opinion stated the Court's intention to first determine whether the parties entered into an agreement before turning to any damages claims.
WorldCom also asserts that it has reviewed multiple documents, nearly twenty-five boxes, from the Boca Raton office, an office, it notes, that has been closed for more than five years.
The Court recently discovered that Ungaretti & Harris, LLP ("Ungaretti"), a law firm representing Kennedy against WorldCom, formerly represented Miller, the former WorldCom employee, in the ERISA Action in which she was a defendant alleged to have breached her fiduciary duties while acting in a fiduciary capacity for WorldCom.6 Alex Pirogovsky ("Pirogovsky"), who represents Kennedy along with Ungaretti, was a member of Ungaretti until he left that firm to establish his own practice in September 2007. After discovering that potential conflict, the Court held a hearing on March 18, 2008 (the "March 18 Hearing") to express its concerns about the possible attorney-client conflict and to ask the parties to further explain the background of Ungaretti's representation of Miller.
One issue of the potential conflict, which the Court asked the parties to address, is that Ungaretti and Pirogovsky, in representing Kennedy, have attacked the veracity of Miller, Ungaretti's former client.7 For example, in Kennedy's Reply to WorldCom's Response to Kennedy & Associates, Inc.'s Motion to Compel Production of Documents, Dkt. No. 16867, August 26, 2005, Kennedy made the following allegations — "A number of statements that Dona Miller makes in her declaration under penalty of perjury directly contradict the contemporaneous documents Kennedy already produced to WorldCom." (Id. at 3-4.)
"Other of Ms. Miller's statements clearly appear to be self-serving statements designed to create `facts' to fit WorldCom's present story." (Id. at 4.)
"Ms. Miller's statements that WorldCom retained Kennedy to coordinate social security benefits . . . are necessarily false." (Id. at 6.)
"Kennedy would not have entered into the arrangement that Ms. Miller claims, under oath, to have existed." (Id. at 7.)
"The above-identified statements, as well as others, that Dona Miller makes in her declaration are incredible." (Id. at 7.)
Kennedy's attorneys also assert that WorldCom's refusal to review the three million documents stem from a desire to protect Miller and her credibility. (See Mot. for Rule to Show Cause, at 8 ().)8
After the March 18 Hearing, Ungaretti, WorldCom, and Pirogovsky filed letter briefs as requested by the Court. The Court then subsequently advised the parties that it wished to hear from Miller regarding the potential...
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