Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-03932/USCOURTS-cand-3_04-cv-03932-16/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 18:1962 Racketeering (RICO) Act

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

UKIAH AUTOMOTIVE INVESTMENTS,

Plaintiff(s),

 vs.

MITSUBISHI MOTORS OF NORTH

AMERICA, INC., et al.,

Defendant(s). /

and related counterclaims

No. C-04-3932 MMC (MEJ)

ORDER DENYING PLAINTIFF'S

REQUEST TO COMPEL

DEPOSITION TESTIMONY AND

DOCUMENT PRODUCTION UNDER

THE CRIME-FRAUD EXCEPTION

I. INTRODUCTION

Plaintiff Ukiah Automotive Investments ("Ukiah") brings this action against Mitsubishi

Motors North America and Mitsubishi Motors Credit of America (together, "Mitsubishi") for fraud

and coercion, and breach of contracts related to Ukiah's Mitsubishi dealership, which is now out of

business. On May 22, 2006, the parties filed a joint letter in which Ukiah and cross-claimant

Thomas Cogliano seek to compel deposition testimony and the production of documents based upon

an assertion of the crime-fraud exception to the attorney-client privilege. Upon review of the parties'

letter, relevant legal authority, and good cause appearing, the Court hereby DENIES Ukiah's request

for the reasons set forth below.

///

Case 3:04-cv-03932-MMC Document 211 Filed 06/05/06 Page 1 of 4
United States District Court

For the Northern District of California

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II. DISCUSSION

In its complaint, Ukiah alleges that Mitsubishi's fraud and breach of contracts included the

accelerated delivery ("dumping") of vehicles to dealers and the "burning of RDRs" (reporting a car

as having been sold when it really had not). In the parties' letter, Ukiah argues that John McElroy,

former VP of Franchise Development and current Senior VP and General Counsel, and Greg

O'Neill, former President of Mitsubishi Motor Sales, testified that all discussions concerning vehicle

dumping occurred in the presence of Mitsubishi's General Counsel, Ellen Gleberman. Both

deponents further claimed that they knew nothing about the dumping until after it occurred and then,

as soon as they learned about it, they sought Ms. Gleberman's counsel. As to RDRs, Ukiah argues

that Messrs. O'Neill and McElroy asserted the attorney-client privilege when questioned on this

subject.

Ukiah argues that contradictory deposition testimony concerning when Mitsubishi first

became aware of the car dumping and burning of the RDRs, including testimony that Messrs.

O'Neill and McElroy had participated in strategic discussions well in advance of the implementation

of the dumping scheme. Thus, Ukiah argues that Mitsubishi was engaged in the fraudulent conduct

before consulting with counsel and the utilization of in-house counsel was done to further the

unlawful schemes. 

In response, Mitsubishi argues that Ukiah and Cogliano fail to make the required prima facie

showing for in camera review because Messrs. O'Neill and McElroy knew nothing about the

dumping until after it occurred and then, as soon as they learned about it, they sought Ms.

Gleberman's counsel. Thus, Mitsubishi argues, the evidence cited by Ukiah and Cogliano shows

that the attorney-client discussions at issue served the permitted purposes of full and frank disclosure

to an attorney. Mitsubishi further argues that Ukiah and Cogliano fail to show that Messrs. O'Neill

and McElroy intended to solicit attorney advice for the purpose of furthering a fraud. 

A. Legal Standard

"The protection afforded by the attorney-client privilege does not extend to any

communication 'in furtherance of intended, or present, continuing illegality.'" In re Grand Jury

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For the Northern District of California

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Proceedings, 87 F.3d 377, 381 (9th Cir. 1996) (quoting United States v. Hodge & Zweig, 548 F.2d

1347, 1354 (9th Cir. 1977)). A party who seeks discovery under this crime-fraud exception must

make a showing of a violation sufficient to defeat protection and establish some relationship

between the communication at issue and the prima facie violation. Id. at 389 n.4 (citing United

States v. Laurins, 857 F.2d 529 (9th Cir. 1988)). 

To make this prima facie case, the party seeking discovery must satisfy a two-part test. First,

evidence must show that the party "was engaged in or planning a criminal or fraudulent scheme

when it sought the advice of counsel." Id. at 381 (internal citations omitted). Second, evidence

must also show that the counsel's assistance was obtained in furtherance of the criminal or fraudulent

activity. Id. Thus, a court must find reasonable cause to believe that the attorney's services were

utilized in furtherance of an ongoing unlawful scheme. Id. (internal citations omitted). The

"exception does not sweep so broadly that it discourages clients from 'making full disclosure to their

attorneys of past wrongdoings, in order that the client may obtain the aid of persons having

knowledge of the law and skilled in its practice.'" Id. (internal quote omitted; emphasis in original). 

B. Application to the Case at Bar

Here, the Court finds that Ukiah and Cogliano have failed to make the required prima facie

showing. They argue that Mitsubishi was engaged in the fraudulent conduct before consulting with

counsel. However, even if Mitsubishi was engaged in such conduct, they have not shown that

Messrs. O'Neill and McElroy sought Ms. Gleberman's advice in furtherance of it. If anything, their

testimony shows that they either requested an investigation of the conduct upon learning of the

conduct, which was undertaken by Ms. Gleberman as Mitsubishi's General Counsel, or first learned

of the conduct through Ms. Gleberman. See, e.g., Doc. #202, Ex. A at 66:11-67:10, 71:2-72:23,

76:11-24; Ex. B at 56:17-63:15, 123:5-124:9; and Ex. G at 75:11-24. As stated above, the crimefraud exception does not discourage Mitsubishi from making full disclosure to its general counsel of

past wrongdoings. In re Grand Jury Proceedings, 87 F.3d at 381. Ukiah and Cogliano present no

evidence suggesting that the alleged dumping or misreporting of RDRs continued after discussions

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with counsel, nor do they show that Mitsubishi sought Ms. Gleberman's advice in furtherance of

them. For these reasons, the Court finds that Ukiah and Cogliano have failed to meet their burden.

III. CONCLUSION

Based on the foregoing analysis, the Court hereby DENIES Ukiah and Cogliano's request for

deposition testimony and document production under the crime-fraud exception.

IT IS SO ORDERED.

Dated: June 5, 2006 

MARIA-ELENA JAMES

United States Magistrate Judge

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