Redwine v. Starboard Llc

• Jurisdiction: Oregon
• Decision Date: 16 February 2011
• Docket Number: 08CV0397ST; A143771.
• Citation: Redwine v. Starboard Llc, 240 Or.App. 673, 251 P.3d 192 (Or. App. 2011)
• Parties: David REDWINE, dba David Redwine/Pension Plan; and Laurie Turner–Redwine, Plaintiffs–Respondents,v.STARBOARD, LLC, an Oregon limited liability company, Defendant,andTamara Sawyer, Appellant.
• Court: Oregon Court of Appeals

240 Or.App. 673

251 P.3d 192

David REDWINE, dba David Redwine/Pension Plan; and Laurie Turner–Redwine, Plaintiffs–Respondents,

v.STARBOARD, LLC, an Oregon limited liability company, Defendant,andTamara Sawyer, Appellant.

08CV0397ST; A143771.

Court of Appeals of Oregon.

Argued and Submitted Dec. 30, 2010.Decided Feb. 16, 2011.

Marc D. Blackman, Portland, argued the cause for appellant. With him on the briefs were Kendra M. Matthews and Ransom Blackman LLP.Michael H. McGean, Bend, argued the cause for respondents. With him on the brief were Martin E. Hansen and Francis Hansen & Martin, LLP.Before HASELTON, Presiding Judge, and ARMSTRONG, Judge, and DUNCAN, Judge.HASELTON, P.J.

Appellant Tamara Sawyer (Sawyer) ¹ challenges a judgment of summary contempt, ORS 33.096, based on her refusal to produce documents and answer certain questions in a judgment debtor examination arising from a money judgment that plaintiffs secured against the defendant corporation, Starboard, LLC. She argues, in part, that the trial court erred in directing her to answer those questions and produce documents, and in imposing sanctions, notwithstanding her invocation of the privilege against self-incrimination pursuant to Article I, section 12, of the Oregon Constitution and the Fifth Amendment to the United States Constitution. As amplified below, we conclude that the trial court erred in determining that Sawyer was not entitled to invoke the privilege and, consequently, in imposing contempt sanctions for her refusal to comply with its directives. Accordingly, we reverse.

The relevant facts are undisputed. In May 2008, plaintiffs filed a lawsuit against Starboard, seeking payment on several delinquent promissory notes. In March 2009, plaintiffs obtained a judgment against Starboard for over $900,000, including interest and attorney fees. After the judgment was entered, Tamara and Kevin Sawyer were ordered to appear for a judgment debtor examination, ORS 18.265(1), and to produce certain documents pertaining to Starboard's property and its financial affairs.² Previously, Tamara Sawyer had made public statements as to her and her husband's involvement with Starboard's assets and its business dealings.

At the time the judgment debtor examination was to be held, published reports indicated that the Sawyers and Starboard were the subjects of a criminal investigation by the FBI and that Starboard was under investigation by the IRS. Indeed, it is undisputed for the purposes of our review that Tamara Sawyer was, in fact, a “target” of a continuing federal criminal investigation involving, inter alia, Starboard.

The debtor examination, held May 18, 2009, was attended by the Sawyers and counsel for Starboard. The Sawyers, invoking the privilege against self-incrimination, refused to answer plaintiffs' questions or produce any documents, whereupon plaintiffs initiated contempt proceedings against them seeking “remedial” sanctions.³

The first contempt hearing was held on August 6, 2009. At that hearing, the Sawyers again stated their intention to invoke the privilege against self-incrimination as to plaintiffs' questions and requests for the production of documents. The trial court determined that the best course of action was to continue the hearing so that it could preside over the debtor examination and rule on the Sawyers' invocations of the privilege on a “question-by-question basis.” See Empire Wholesale Lumber Co. v. Meyers, 192 Or.App. 221, 226, 85 P.3d 339 (2004) (privilege “must be invoked, and ruled upon, on a question-by-question, document-by-document basis”). Accordingly, the trial court continued the contempt proceedings to October 5, 2009.

At the October 5 hearing, plaintiffs, Kevin Sawyer, and Tamara Sawyer—who was represented by counsel—appeared. No person appeared for Starboard, and Starboard was not represented by counsel. Kevin Sawyer was first sworn and called to testify. Plaintiffs asked Kevin Sawyer about his “position past or present with Starboard,” and he invoked the privilege under Article I, section 12, and the Fifth Amendment. Tamara Sawyer's counsel contended that Kevin Sawyer's invocation of the privilege was proper because answering plaintiffs' question

“would be potentially subjecting him to disclosure of information that could be used against him in the pending criminal investigation because Starboard * * * we've * * * read in the newspaper is a focus of this criminal investigation. So obviously, an officer or director of, of a company could be, that answer could be used against them.”

The trial court, reasoning that, because Kevin Sawyer's status with respect to Starboard “should be a public record, and so it's discoverable [in] * * * other ways,” ruled that the privilege did not apply and held Kevin Sawyer in contempt for not answering.

Plaintiffs then asked Kevin Sawyer, “[W]hich of [the requested] documents have you produced today?” and Kevin Sawyer again invoked the privilege. The trial court, after hearing further argument as to what sanction for contempt against Kevin Sawyer should be imposed, took the matter under advisement.⁴

Tamara Sawyer was next placed under oath, and plaintiffs asked the following question:

“[W]hat has been your past and your present connection with Starboard LLC?”

(Emphasis added.) Sawyer refused to answer, invoking the privilege under Article I, section 12, and the Fifth Amendment. Plaintiffs' counsel asserted that “[t]he Fifth Amendment does not apply to that broad a question.” Sawyer's counsel, renewing the contentions that had been expressed with respect to Kevin Sawyer, remonstrated:

“The fact that something may be discoverable through an independent source such as the public record does not affect the validity of the privilege assertion on the part of the witness.

“So I respectfully disagree with the Court's analysis with respect to the, whether she is required to answer questions about whether she holds a position with Starboard. I believe she does in fact have a good-faith basis to believe that an answer to that question could be used against her in the ongoing criminal investigation and criminal proceedings and, therefore, it's her privilege which I would urge the Court to honor.”

The trial court then asked Sawyer's counsel to explain why an answer to that question was potentially incriminating, and counsel responded:

“Starboard is, by published report, the subject of allegations of a criminal nature with respect to the management of funds and other things. The acknowledgement by someone that they are in a position of responsibility in that company, irrespective of whether it could be proved some other way, demonstrates knowledge and an admission on their part that could be used to establish their responsibility for the conduct of the entity.

“With the, say, public record, someone could attempt to persuade a jury, for example, that the person holds that position and is responsible, but they don't have the admission by the person that they hold the position. And that's very different.”

The trial court, apparently rejecting that reasoning, advised Sawyer that her answer was not privileged and ordered her to respond. Again, she declined to do so.

Plaintiffs then asked Sawyer whether she had “brought any of [the] * * * documents today as ordered” by their subpoena and the court's citation to the debtor examination. Sawyer again invoked the state and federal privileges against self-incrimination, whereupon the following colloquy ensued:

“[SAWYER'S COUNSEL]: The act of production privilege, Your Honor, the personal interests of a person can involve not merely the substantive answer, but also whether or not they're knowledgeable about the existence of records from which can be inferred a knowledge of the contents. Therefore, a person who has a reason to believe that they are under criminal investigation has a right to decline as a constitutional matter both state and federal, the request to produce documents, because the act of production may tend to incriminate them.

“THE COURT: And you believe the case law supports your theory of that?

“[SAWYER'S COUNSEL]: Absolutely. The act of production privilege has been well-documented and recognized by the United States Supreme Court. * * *

“ * * * * *

“[PLAINTIFFS' COUNSEL]: Your Honor, this, again the record is clear already, we can belabor this for hours, but it's very apparent that the, both defendants, * * * Kevin Sawyer, Tammy Sawyer, and the defendant Starboard [are] subject to this Court's order, both prior to today and then in the presence of the Court in open defiance of this Court's order, have refused to answer even the most general of questions, improperly hiding behind the Fifth Amendment.

“And this Court indulged them to the point of having this hearing so you could piecemeal take up valid objections, not global ‘I'm not going to answer anything, I won't bring anything’ objection * * *.

“ * * * I can't conduct a debtor's exam as ordered by this Court with no documents and no answers.”

The trial court issued the following ruling from the bench at the conclusion of the October 5 hearing:

“I am holding [Tamara Sawyer] in contempt as well in her capacity [ sic ]. You know, one would argue that they're here both individually as well as with regard to their capacity with Starboard.

“They are, the Court is finding that both of them are in contempt with regard to the questions that were answered, and * * * they've insisted that the Fifth Amendment applies.”

The court once again continued the hearing—to October 30—to entertain arguments from the parties as to what sanctions to impose.

On October 30, the trial court reiterated its determination that the Sawyers were both in summary contempt. The court ordered both Sawyers to relinquish their passports and Tamara Sawyer to report to custody on November 6, 2009. Thereafter, the court issued a judgment, entered November 5, 2009, in which it stated that it...