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From Securities Regulation Daily, November 21, 2013

Gibson Dunn ordered to produce witness interview notes provided to SEC in defamation action

By Amanda Maine, J.D.

A law firm hired by a hedge fund manager to interview witnesses for an internal investigation was ordered to produce for in camera review notes and summaries pertaining to witness statements that had been voluntarily disclosed to the SEC (Gruss v. Zwirn, November 20, 2013, Gardephe, P).

Background. Perry A. Gruss was a partner and CFO at D.B. Zwirn & Co., L.P. (Zwirn), an unregistered investment adviser that operated several hedge funds. After it was discovered that investor funds had been used to purchase a Gulfstream jet for Zwirn’s CEO and that management fees had been collected before they were due, Zwirn hired two law firms to conduct internal investigations regarding these financial irregularities. The second investigation was conducted by Gibson, Dunn and Crutcher LLP (Gibson Dunn). Gibson Dunn conducted several interviews with Zwirn employees and presented its findings to the SEC. The disclosures to the SEC were voluntary and not in response to any sort of investigative demand.

Following the Gibson Dunn investigation, Zwirn CEO and managing partner, Daniel B. Zwirn, disclosed the financial irregularities, which he blamed on Gruss, absolving himself of any responsibility. Gruss sued Daniel Zwirn and his associated entities, alleging that the statements to investors about Gruss were false and inflammatory. During discovery, the Zwirn entities produced a PowerPoint presentation summarizing witness statements that had been disclosed to the SEC. Gruss moved to compel production of the attorneys’ notes and summaries of all witness interviews in both investigations. The defendants argued that they were protected by attorney-client privilege and the work product doctrine. The magistrate judge agreed and denied the motion to compel, but the district court reversed the magistrate judge’s decision, finding that the defendants waived attorney-client privilege and work product protection when they disclosed the interview notes and summaries to the SEC. The defendants asked the court to clarify whether they must produce particular notes.

Distinct privacy interest. Gibson Dunn argued that it has a “distinct privacy interest” in the interview notes, citing a New York state case that prevented access to firm documents intended for internal office use. The court disagreed, stating that even if that case governed here, which it does not because federal law governs issues related to work product, it would still not support Gibson Dunn’s claims. Zwirn had paid for the witness interviews conducted and the notes taken by Gibson Dunn attorneys; therefore, it had a presumptive right of access to the entire file, according to the court.

The court also pointed out that the exception for internal documents only applies to documents that are “unlikely to be of significant usefulness to the client.” The court found the interview notes were directly relevant to the instant case because they could reveal whether the defendants accurately reported that the witnesses blamed Gruss for the financial irregularities. Finally, the court concluded that because the defendants have a right to the interview notes, the notes are under their control. The defendants had waived attorney-client and work product protection when they were disclosed to the SEC; therefore, Gibson Dunn must produce the notes for an in camera review.

Opinion work product. The court also rejected Gibson Dunn’s argument that the interview notes consist entirely of opinion work product and not fact work product, and therefore should not be required to be produced. The court pointed out that it is not required to accept Gibson Dunn’s declaration that the notes consist entirely of opinion work product. By requiring in camera review, the court can determine what portion of the notes constitute opinion work product, and then order production of the notes that constitute fact work product, the court concluded.

The case is No. 09 Civ. 6441 (PPGG) (MHD).

Attorneys: Jeffrey Lew Liddle (Liddle & Robinson, LLP) for Perry A. Gruss. Daniel E. Reynolds (Lankler Siffert & Wohl LLP) for Daniel B. Zwirn. Alan Levine (Cooley LLP) for D.B. Zwirn & Co., L.P. and D.B. Zwirn Partners, L.L.C.

Companies: D.B. Zwirn & Co., L.P.; D.B. Zwirn Partners, L.L.C.; Gibson, Dunn & Crutcher LLP

MainStory: TopStory InvestmentAdvisers NewYorkNews

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