White v. NYLIFE Sec.
| Docket Number | 3:21-cv-00012-JMK |
| Decision Date | 07 June 2023 |
| Parties | TERRY WHITE, Plaintiff, v. NYLIFE SECURITIES, LLC, Defendant. |
| Court | U.S. District Court — District of Alaska |
ORDER GRANTING IN PART MOTION TO QUASH
Before the Court at Docket 63 is Plaintiff Terry White's Motion to Quash (the “motion”). The motion is fully briefed.[1]The Court took the motion under advisement before staying the matter on February 22, 2023, pending mediation.[2]Settlement attempts were unsuccessful, and on May 4, 2023, the parties resumed litigation.[3]The Court now addresses the motion.
Plaintiff moves the Court to quash two subpoenas issued by Defendant NYLIFE Securities, LLC (“NYLIFE”), one to Anchorage attorney Frank Nosek and the other to Mr Nosek's entity, Nosek Law Group (collectively, the “subpoenas”). The subpoenas are identical and request the following:
Plaintiff invokes his attorney-client privilege to prevent Defendant from obtaining this information. Defendant appears to agree that the subpoena requests at least some documents and communications that normally would be covered by Plaintiff's attorneyclient privilege. However, Defendant argues that Plaintiff waived this privilege in two ways: (1) implicitly, by filing this suit and putting his attorney's advice “at issue,” and (2) explicitly, by sharing the advice with third parties. Defendant further asserts that the privilege does not apply to any pre-existing documents and factual materials sent by Plaintiff to Mr. Nosek or received by Mr. Nosek from third parties. The Court addresses these arguments in turn.
The privilege “only protects disclosure of communications it does not protect disclosure of the underlying facts by those who communicated with the attorney.”[6]
A party may explicitly or implicitly waive its attorney-client privilege. ARE 510 provides that a person expressly waives their attorney-client privilege if the person “voluntarily discloses or consents to disclosure of any significant part of the matter or communication.” A party implicitly waives attorney-client privilege when it puts a confidential communication at issue and fairness dictates its disclosure.[7] The Alaska Supreme Court has adopted the three-pronged Hearn test to determine when an implied waiver of attorney-client privilege has occurred.[8]Under Hearn, implied waiver occurs if “(1) assertion of the privilege was a result of some affirmative act, such as filing suit, by the asserting party; (2) through this affirmative act, the asserting party put the protected information at issue by making it relevant to the case; and (3) application of the privilege would have denied the opposing party access to information vital to his defense.”[9] In applying the Hearn test, “an overarching consideration is whether allowing the privilege to protect against disclosure of the information would be ‘manifestly unfair' to the opposing party.”[10]
Defendant argues that Plaintiff put his attorney's advice “at issue” by alleging that he is a “novice investor” and that he “justifiably relied” on statements made by Defendant's agent, Buddy Bailey, when purchasing an interest in Golden Harvest.[11]Justifiable reliance is an element of Plaintiff's intentional misrepresentation claim and his claim under the Alaska Securities Act, AS 45.56.100 et seq. Defendant explains that if Plaintiff “clos[ed] his eyes to a known risk,” any reliance on Mr. Bailey's statements likely would be unreasonable and unjustified.[12]Because of this, Defendant argues it is “entitled to know what White knew about this investment before he committed to it,” and that the advice Plaintiff received from his attorney is “vital” to its defense.[13]
Defendant's argument asks the Court to stretch the doctrine of implied waiver far beyond its bounds. Even assuming that filing suit satisfies the first prong, Plaintiff did not put his attorney's communications at issue by alleging that he relied on Mr. Bailey's representations. In no way does Plaintiff's Amended Complaint rely on or incorporate Mr. Nosek's advice; his claims are entirely based on the acts and omissions of Defendant and Defendant's agent, Buddy Bailey.[14] This is distinct from Gefre v. Davis Wright Tremaine, LLP, the case on which Defendant relies.[15]In Gefre, defendants asserted a statute-of-limitations defense, to which plaintiffs raised the discovery rule. The Alaska Supreme Court found implied waiver of the attorney-client privilege because plaintiffs' confidential communications were “material” to the opposing party's defense.[16]By asserting the discovery rule, plaintiffs put their knowledge of defendants' conduct directly at issue. Given the specific facts of the case, the court explained that preventing access to the confidential communications would “frustrate proof of knowledge” required to negate plaintiffs' claims.[17]Here, Mr. Nosek's advice is far from “directly relevant and necessary” to refute Plaintiff's claims.[18]The Court strains to see how Mr. Nosek's ordinary legal advice materially impacts Plaintiff's ability to rely on Mr. Bailey's representations. There is no indication that Mr. Nosek's advice contains new factual information or seafood processing expertise that could render reliance on Mr. Bailey's representations unjustified.[19]Any such information would have been disclosed to Mr. Nosek by Plaintiff or by a third party, and as discussed below, this information is not privileged and therefore discoverable. Further, the allegation that Plaintiff is a “novice” investor does not hinge on him being unrepresented or refusing legal advice; as used in the Amended Complaint, it differentiates Plaintiff from being an “accredited” investor as defined by the Securities and Exchange Commission.[20]The cornerstone of implied waiver relies on fairness: a party cannot use an attorney's communications both as a sword and a shield.[21]This is not the quintessential case in which a party raises a claim or defense that involves privileged information, while simultaneously trying to prevent access to that information. Here, fairness does not require disclosure when Mr. Nosek's advice is tangentially relevant to NYLIFE's defense and not vital to its case.
Next, Defendant argues that Plaintiff voluntarily disclosed his attorney's advice to third parties, and thus, waived any privilege related to those communications. In support, Defendant attaches an email chain containing notes from a shareholder meeting (the “minutes”) in which the author reports that Plaintiff said that he invested in Golden Harvest “[e]ven though my attorney said I shouldn't get into it.”[22]Plaintiff disputes the reliability of the minutes as both unauthenticated and inadmissible. However, Defendant also submits deposition testimony from Mr. Bailey, who testified that Plaintiff told him that his attorney advised him against the investment.[23]
Assuming the minutes and Mr. Bailey's testimony are accurate regarding Plaintiff's statements, this still does not constitute a voluntary waiver under ARE 510. Under ARE 510, a party must disclose a “significant part of the matter or communication” in order to waive his privilege. While it does not appear that the Alaska Supreme Court has elaborated on this phrase, California courts interpreting identical language have held that the disclosure must be “wide enough in scope and deep enough in substance to constitute ‘a significant part of the communication.'”[24] According to Mr. Bailey's deposition, Plaintiff expressed to Mr. Bailey a general annoyance that his attorney “told him not to do it,” that is, invest in Golden Harvest.[25]This is the full extent of Plaintiff's alleged disclosure: he did not elaborate why his attorney gave him that advice, the concerns the attorney had with the investment, or even whether this advice was legal in nature. The singular off-hand comment made before litigation and as recited by Mr. Bailey, cannot serve to destroy Plaintiff's attorney-client privilege years later. The phrase “[d]o not do it” is simply too broad and vague to constitute a ...
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