Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_04-cv-01026/USCOURTS-cand-5_04-cv-01026-6/pdf.json

Nature of Suit Code: 720
Nature of Suit: Labor Management Relations Act
Cause of Action: 28:1331 Fed. Question

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United States District Court

For the Northern District of California

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NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

ROBERT SCHMIDT and THOMAS WALSH,

Plaintiffs,

 v.

LEVI STRAUSS & CO., LAURA LIANG and

DOES 1-50,

Defendants. /

RELATED COUNTER-ACTION

 /

No. C04-01026 RMW (HRL)

ORDER DENYING PLAINTIFFS’

MOTION TO COMPEL PRODUCTION

OF THIRD PARTY DOCUMENTS

[Re: Docket No. 101]

Plaintiffs Robert Schmidt and Thomas Walsh move for an order compelling third-party

Steven Todrys to produce documents in response to a subpoena. Todrys opposed the motion, as

did defendant Levi Strauss & Co. Neither Todrys nor defendants raised issues as to any

procedural defects in plaintiffs’ subpoena, and the dispute was submitted to this court for

resolution. Having considered the moving and responding papers, as well as the arguments

presented at the February 20, 2007 hearing, this court denies the motion.

I. BACKGROUND

This is an action brought under the Sarbanes-Oxley Act, 18 U.S.C. § 1541A. Plaintiffs

are former employees of defendant Levi Strauss & Co. (“LS&Co.”) and worked under the

supervision of defendant Laura Liang. They claim that they were terminated in retaliation for

*E-FILED ON 2/28/07*

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filing complaints about defendants’ alleged tax fraud and other accounting irregularities. They

also allege that defendants defamed them. Defendants contend that plaintiffs were fired for

insubordination and for work performance issues. Before filing the instant action, plaintiffs

filed a similar wrongful termination lawsuit in San Francisco Superior Court, alleging violations

of state common law and statutes. Pursuant to the parties’ stipulation, the state court case has

been stayed while they litigate the defamation and Sarbanes-Oxley claims here.

Todrys is a tax attorney and a partner at the Simpson, Thacher & Bartlett (“STB”) law

firm. He was retained by LS&Co. in 2003 to conduct an audit with respect to the tax fraud

allegations raised by plaintiffs in their state court lawsuit. STB hired Ernst & Young (“E&Y”)

to assist Todrys in the investigation. According to plaintiffs, his investigation concluded that

LS&Co. had improperly released tax reserves and income for the purpose of lowering its

effective tax rate, resulting in a significant overstatement of income.

Plaintiffs served a subpoena on Todrys, seeking his deposition testimony and all

documents pertaining to his investigation.1

 According to Todrys, he produced several boxes of

documents in response to the subpoena, including all documents that were received from

LS&Co. or that were disclosed to LS&Co. and all other entities and persons outside STB and

E&Y. However, Todrys says that he has withheld 331 documents (comprising 1,915 pages)

which, he claims, comprise his opinion work product (i.e., his mental impressions, conclusions,

opinions and legal theories). He represents that these withheld documents were never disclosed

to anyone beyond STB or E&Y. Plaintiffs argue that the work product doctrine either does not

apply or has been waived. Further, they contend that they have an overriding need for the

documents in any event.

II. DISCUSSION

Preliminarily, this court notes that Todrys’ Privilege and Redaction Log identifies

several documents which are being withheld (or which were redacted) for reasons other than the

work product doctrine. (See Rubin Decl., Ex. B). Insofar as no issue has been raised with

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respect to these documents, this court assumes that the instant motion concerns only those

documents that the log identifies as work product.

A. Todrys’ Privilege and Redaction Log

Plaintiffs first argue that Todrys’ Privilege and Redaction Log is insufficient under Fed.

R. Civ. P. 26(b)(5), which requires that the withheld materials be described “in a manner that,

without revealing information itself privileged or protected, will enable other parties to assess

the applicability of the privilege or protection.” FED.R.CIV.P. 26(b)(5). Plaintiffs contend that

the log is insufficient because it describes documents by category rather than on an individual

basis. Although a document-by-document description is generally preferred, the rules do not

mandate a particular level of specificity. See Advisory Committee Note to Fed.R.Civ.P. 26(b)

(1993 amendments) (“Details concerning time, persons, general subject matter, etc. may be

appropriate if only a few items are withheld, but may be unduly burdensome when voluminous

documents are claimed to be privileged or protected, particularly if the items can be described

by categories.”). Upon review of Todrys’ Privilege and Redaction Log, this court concludes

that Todrys has sufficiently described the documents to enable an assessment of the

applicability of the work product doctrine.

B. Applicability of the Work Product Doctrine

In order to qualify as work product, the material in question must have been

(1) “prepared in anticipation of litigation or for trial” (2) “by or for another party or by or for

that other party’s representative (including the other party’s attorney, consultant, surety,

indemnitor, insurer, or agent).” FED.R.CIV.P. 26(b)(3). Plaintiffs argue that the withheld

materials do not satisfy these requirements for work product protection.

Plaintiffs first contend that Todrys’ investigation was not conducted “in anticipation of

litigation.” Here, they assert that Todrys was hired merely to advise LS&Co.’s Audit

Committee and that his investigation was part of a routine audit in the normal course of

LS&Co.’s business. However, plaintiffs acknowledge that at the time Todrys was retained, they

had already filed their state court lawsuit. Moreover, the record presented shows that Todrys’

retention was precipitated by plaintiffs’ state court lawsuit and that the primary purpose of the

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engagement was to aid LS&Co.’s Audit Committee in evaluating the issues raised in plaintiffs’

complaint. The May 8, 2003 engagement letter specifies that:

• Todrys was being retained to conduct “a legal review and assessment of the

international tax transactions (the “transactions”) raised in the wrongful

termination action recently filed against the Company in the Superior Court of

the State of California, San Francisco, CA. (Walsh v. Levi Strauss & Co., et al.),

No. CGC-03-419398 (the “Wrongful Termination Suit”)”;

• Todrys was to provide a “substantive legal analysis of the tax issues raised by the

transactions” as well as “legal advice regarding any actions that may be required

under federal securities law as a result of your review of the tax issues raised by

the transactions”; and

• Todrys “will not perform any non-legal or business advisory functions in the

course of this representation.”

(See Rubin Decl., Ex. D). Further, Albert F. Moreno, LS&Co.’s former General Counsel and

Senior Vice President, attests that Todrys was hired as a direct result of plaintiffs’ state court

action and that the investigation was requested to allow LS&Co.’s Audit Committee to assess

the level of risk presented by that lawsuit. (Moreno Decl., ¶ 5).

Plaintiffs next assert that Todrys has no standing to assert any claim of work product

here because he has not been hired as any party’s trial counsel. They contend that Todrys is

merely a subpoenaed third party who should be deemed the functional equivalent of a testifying

expert. They point out that Todrys cannot be considered counsel to LS&Co. because the

engagement letter identifies LS&Co.’s “Audit Committee” as the client. However, the parties

have provided no reason to distinguish between LS&Co. and its Audit Committee. Moreover,

nothing in the record before this court indicates that Todrys has been retained or disclosed as an

expert witness who would be subject to the disclosure requirements of Federal Rule of Civil

Procedure 26. Quite the contrary, LS&Co. represents that it does not intend to rely upon

Todrys or his investigation at trial.

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Plaintiffs cite some authority indicating that Fed.R.Civ.P. 26(b)(3) is inapplicable to

persons or entities who are merely subpoenaed in connection with litigation. See In re

Subpoena Served on California Public Utilities Comm’n, 892 F.2d 778, 781 (9th Cir. 1989)

(“the language of [Fed. R. Civ. P. 26(b)(3)] makes clear that only parties and their

representatives may invoke its protection”); see also Doubleday v. Ruh, 149 F.R.D. 601, 606

(E.D. Cal. 1993) (“the work product immunity cannot be claimed by one who would ordinarily

hold the right to assert the immunity unless that person/entity is a party (or a party’s

representative) to the litigation in which the immunity is asserted. Simply being a subpoenaed

witness is not enough.”).

These cases are distinguishable from the situation under consideration. Unlike the

instant action, the cases plaintiffs rely upon concern documents which were not created by or on

behalf of any party. See, e.g., In re Subpoena Served on California Public Utilities Comm’n,

892 F.2d at 781 (concluding that the California Public Utilities Commission could not assert

work product protection over its records because the documents were not created by or for a

party to the litigation between Westinghouse and California Edison). Moreover, in Doubleday,

the court stated that the criminal nature of the prior action was a key factor in its analysis; and,

it expressly limited its holding to situations where a criminal action is followed by a civil

lawsuit. See Doubleday, 149 F.R.D. at 607 n.6.

Here, by contrast, Todrys was retained as LS&Co.’s attorney, and the materials in

question were created on LS&Co.’s behalf. Accordingly, this court is satisfied that the withheld

documents constitute protected work product. The court now turns to the parties’ arguments as

to whether that protection has been waived.

C. Whether the Work Product Protection has been Waived

“[T]he work product privilege is not automatically waived by any disclosure to third

persons. . . . Rather, the courts generally find a waiver only if the disclosure ‘substantially

increases the opportunity for potential adversaries to obtain the information.’” Samuels v.

Mitchell, 155 F.R.D. 195, 201 (N.D. Cal. 1994) (quoting In Re Grand Jury, 561 F. Supp. 1247,

1257 (E.D.N.Y. 1982)).

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2 At the motion hearing, plaintiffs’ counsel advised that some of the withheld

materials had been inadvertently produced by, and later returned to, Todrys. However, he

stated that plaintiffs do not contend that the inadvertent production constitutes a waiver of

the work product protection.

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In this case, plaintiffs’ argument as to waiver is two-fold.2

 First, they assert that Todrys’

work product claims have been waived by virtue of LS&Co.’s express waiver of the attorneyclient privilege and the work product protection with respect to certain substantive tax issues

raised in plaintiffs’ complaint. Second, plaintiffs contend that Todrys himself has waived any

work product claim by (a) producing other documents concerning his investigation in response

to the subpoena at issue; and (b) disclosing to LS&Co. and several government entities his

opinions and conclusions with respect to his investigation.

LS&Co. has, with some qualification, expressly waived the attorney-client privilege and

the work product doctrine with respect to certain substantive tax issues raised in plaintiffs’

complaint. (See Schwing Decl., Ex. A). LS&Co. now says that the waiver was intended to

apply only to the work product of its in-house counsel and argues that it does not control

Todrys’ work product in any event. Plaintiffs disagree that LS&Co.’s waiver should be so

narrowly construed. Nevertheless, they do not seriously dispute that, unlike the attorney-client

privilege (which belongs solely to the client), the work product protection also belongs to the

attorney. See generally In re Sealed Case, 676 F.2d 793, 809 n.56 (D.C. Cir. 1982) (“To the

extent that the interests do not conflict, attorneys should be entitled to claim privilege even if

their clients have relinquished their claims.”); In re Special September 1978 Grand Jury (II),

640 F.2d 49, 63 (7th Cir. 1980) (“[T]he work product doctrine may be asserted by both the

client and the attorney . . ..”); Doubleday, 149 F.R.D. at 606 n.5 (E.D. Cal. 1993) (noting “the

commonly accepted law that the work product privilege equally belongs to the attorney who

prepared it, and not just the party for whom it was prepared.”). Here, there is no indication that

Todrys consented to any waiver of his work product.

Plaintiffs nonetheless argue that Todrys effected a broad subject matter waiver of the

work product protection by producing documents in response to their subpoena and by

disclosing information about his investigation to several government entities, including the

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Internal Revenue Service and the Securities Exchange Commission. Because the withheld

materials pertain to the same investigation, plaintiffs contend that it would be unfair to allow

Todrys to selectively waive the work product protection.

However, this is not a situation where Todrys is refusing to produce documents which

were otherwise disclosed to LS&Co. or to the government. Indeed, as noted above, Todrys

represents that he is only withholding internal notes, drafts, memoranda, emails, etc. which

were never disclosed outside STB and E&Y. Plaintiffs have otherwise been given all

documents concerning his investigation that Todrys or his colleagues received from LS&Co. or

which were disclosed beyond his firm and E&Y. Moreover, as noted above, LS&Co. says that

it has no intention of relying upon Todrys or his investigation at trial. See, e g., Hollinger Int’l,

Inc. v. Hollinger, Inc., 230 F.R.D. 508 (N.D. Ill. 2005) (concluding that where documents given

to the SEC were also produced to the opposing party, undisclosed documents used to prepare

corporate committee’s report were nonetheless protected by the work product doctrine and the

protection was not waived).

Plaintiffs are not aided by their cited cases, which concern analysis of the attorney-client

privilege (which is not at issue here); situations in which the same documents which were

selectively disclosed to one entity, but not another; or cases in which the material in question

was relied upon (or otherwise put at issue) by the party opposing disclosure. See, e.g., Weil v.

Investment/Indicators, Research and Mgmt., Inc., 647 F.2d 18 (9th Cir. 1981) (analyzing claims

of attorney-client privilege); Burlington Indus. v. Exxon Corp., 65 F.R.D. 26, 46 (D. Md. 1974)

(stating that “privileges cannot be used as both a sword and a shield,” but concluding that

confidential information disclosed during settlement negotiations did not constitute a waiver);

United States v. Bergonzi, 216 F.R.D. 487 (N.D. Cal. 2003) (finding, in a criminal action, that

the work product protection was waived as to documents disclosed to the government); Atari

Corp. v. Sega of America, 161 F.R.D. 417 (N.D. Cal. 1994) (concluding that the work product

doctrine did not apply to a defense expert’s videotaped interview where the defendant

voluntarily produced the tape to plaintiff).

Accordingly, this court does not find that the work product protection has been waived.

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D Plaintiffs’ Asserted Need for the Documents

Plaintiffs nonetheless contend that they have a substantial need which overrides Todrys’

interest in protecting his work product. It is true that the work product doctrine is not absolute. 

However, work product may be discovered “only upon a showing that the party seeking

discovery has substantial need of the materials in the preparation of the party’s case and that the

party is unable without undue hardship to obtain the substantial equivalent of the materials by

other means.” FED.R.CIV.P. 26(b)(3). Courts generally distinguish between ordinary work

product (purely factual information) and opinion work product (mental impressions,

conclusions and legal theories) and require a stronger showing of need with respect to the latter. 

See, e.g., Holmgren v. State Farm Mutual Auto. Ins. Co., 976 F.2d 573, 577 (9th Cir. 1992) (“A

party seeking work product must make a showing beyond the substantial need/undue hardship

test required under Rule 26(b)(3) for non-opinion work product.”) (citing Upjohn Co. v. United

States, 449 U.S. 383, 401-02 (1981)); Bio-Rad Labs., Inc. v. Pharmacia, Inc., 130 F.R.D. 116,

122 (N.D. Cal. 1990) (“‘an attorney’s opinion work product is discoverable where such

information is directly at issue and the need for production is compelling”) (quoting

Handguards, Inc. v. Johnson & Johnson, 413 F. Supp. 926, 933 (N.D. Cal. 1976)).

Here, the record appears to support Todrys’ representation that the withheld materials

are not ordinary work product and comprise internal memoranda, notes, drafts, emails, etc.

containing mental impressions, legal conclusions and opinions. Plaintiffs argue that Todrys’

work product “go[es] to the very heart of [their] allegations . . ..” (Mot. at 12:5). However, in

the instant action, plaintiffs allege that they were wrongfully terminated for complaining about

LS&Co.’s alleged financial improprieties. This court is unpersuaded that Todrys’ work product

pertaining to his after-the-fact investigation is relevant to their claims.

Plaintiffs nevertheless maintain that they need these documents because they believe

that Todrys’ analysis is flawed and that the “best evidence” of those flaws are in the withheld

materials. They speculate that the withheld materials may reveal that certain information was

ignored by Todrys in his final report. Plaintiffs further argue that they need Todrys’ work

product to impeach witnesses – namely, Paul Smith, LS&Co.’s current Vice President of Global

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Tax. According to plaintiffs, Smith was formerly employed at E&Y, and they believe that

Smith assisted Todrys in the investigation. As such, they say that they need to access Todrys’

work product because they believe that those documents contain opinions and conclusions

which will impeach Smith’s testimony, as well as that of other (unspecified) witnesses.

These arguments fail to convince. Plaintiffs apparently have Todrys’ report, as well as

the documents Todrys used to form his opinions. They are free to conduct their own evaluation

of the material. Reportedly, plaintiffs have deposed many of the witnesses identified in Todrys’

documents. They also deposed Todrys himself about his investigation. In sum, plaintiffs have

failed to show why they need Todrys’ work product to challenge any perceived weaknesses or

errors in his analysis. Moreover, since LS&Co. has no intention of using Todrys or his

investigation as part of its defense, plaintiffs have not convincingly demonstrated that the

withheld documents will be needed for impeachment purposes.

III. ORDER

Based on the foregoing, IT IS ORDERED THAT plaintiffs’ motion to compel is

DENIED.

Dated:

 

HOWARD R. LLOYD

UNITED STATES MAGISTRATE JUDGE

February 28, 2007

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5:04-cv-1026 Notice will be electronically mailed to:

Joseph Heathcliff Ainley JAinley@popelka.com, gsimmons@popelka.com 

Franklin Edward Bondonno fbondonno@popelka.com, dlee@popelka.com 

Philip Edward Kay phil@nosexualharassment.com 

Rebecca Justice Lazarus rjustice@gibsondunn.com, rmcbain@gibsondunn.com 

Jeffrey A. Leon jleon@leonandleon.com, leonandleon@leonandleon.com 

Jeffry W. Lochner jlochner@popelka.com, kanderson@popelka.com; jlochner@verizon.net 

Sheila Marie Pierce sheila.pierce@bingham.com 

Gabriel Neil Rubin grubin@stblaw.com, jlaw@stblaw.com; hlelaind@stblaw.com 

Erin E. Schneider eschneider@gibsondunn.com 

Austin Van Schwing aschwing@gibsondunn.com 

Counsel are responsible for distributing copies of this document to co-counsel who have

not registered for e-filing under the court’s CM/ECF program.

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