UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

UNITED STATES SECURITIES AND

EXCHANGE COMMISSION,

Case No. 09-12950

Plaintiff, Honorable David M. Lawson

v.

JOHN J. BRAVATA, RICHARD J. 

TRABULSY, ANTONIO M. BRAVATA,

BBC EQUITIES, LLC, BRAVATA 

FINANCIAL GROUP, LLC, and SHARI A. 

BRAVATA,

Defendants.

___________________________________________/

ORDER DENYING DEFENDANT’S MOTION FOR RECONSIDERATION

On January 26, 2011, the Court authorized the Receiver to turn over the paper documents

in its possession to the grand jury and to waive any attorney-client privilege that might exist with

respect to BBC Equities, LLC, and Bravata Financial Group, LLC. The order was entered after

hearing oral argument on the United States’s motion to compel the Receiver to comply with the

grand jury subpoena. On February 1, 2011, John Bravata filed a motion for reconsideration and

asked the Court to reverse its earlier rulings regarding the paper documents and the Receiver’s

authority to waive the attorney-client privilege with respect to the receivership entities.

Motions for reconsideration may be granted pursuant to E.D. Mich. LR 7.1(h)(1) when the

moving party shows (1) a “palpable defect,” (2) that misled the court and the parties, and (3) that

correcting the defect will result in a different disposition of the case. E.D. Mich. LR 7.1(h)(3). A

“palpable defect” is a defect which is obvious, clear, unmistakable, manifest, or plain. Mich. Dep’t

of Treasury v. Michalec, 181 F. Supp. 2d 731, 734 (E.D. Mich. 2002) (citations omitted).

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The defendant has not presented a palpable defect in the Court’s decision to authorize the

Receiver to turn over the paper documents in its possession. The government subpoenaed the

relevant documents over ten months ago. The reason behind the delay in dealing with the subpoena

was the difficulty in accessing the electronically stored information (ESI). The Court had to find

a way to allow access to the ESI without corrupting the data so the defendants could state their

position regarding privilege, but the integrity of the documents would not be compromised. The

paper documents have been available all along, and the defendants never raised an objection to the

subpoena’s request for the paper documents or sought to interpose a privilege of any kind as to their

production by the Receiver. The defendants’ failure to raise an objection until now in a motion for

reconsideration acts as a waiver. Scottsdale Insur. Co. v. Flowers, 513 F.3d 546, 553 (6th Cir. 2008)

(“We have found issues to be waived when they are raised for the first time in motions for

reconsideration.”).

The defendant argues that the Court erred in allowing the grand jury access to information

that was not requested by its subpoena. The Receiver is in possession of documents relating to the

Receivership entities. The Receiver has not taken possession of the defendants’ personal documents,

and there is no order directing the Receiver to do so. To the extent that the defendant’s objection

intends to assert the constitutional rights of the receivership entities, the individual defendants are

not competent to do so because they are not in a position to raise the constitutional rights of another.

See Rakas v. Illinois, 439 U.S. 128, 132 n.2 (1978); Shepard v. Wellman, 313 F.3d 963, 970 (6th

Cir. 2003); see also United States v. Mudd, No. , 2007 WL 2815842, *2 (W.D. Ky. Sept. 24, 2007)

(“‘In general, the attorney-client privilege is personal and cannot be asserted by anyone other than

the client.’” (quoting United States v. Hatcher, 323 F.3d 666, 675 n.2 (8th Cir. 2003))). Moreover,

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the Court determined that requiring toe Receiver to cull through the voluminous material in search

of items responsive to the subpoena would not be a prudent use of the Receiver’s time and the

resulting expense. 

The defendant argues that the Court was not scheduled to hear arguments on whether the

Receiver had the ability to waive the attorney-client privilege of the receivership entities. This is

a curious objection. The Receiver’s ability to waive the attorney-client privilege was the only legal

obstacle concerning compliance with the subpoena by the Receiver. This was the exact issue

presented for review. Turning to the merits, Bravata cites Commodity Futures Trading Com’n v.

Weintraub, 722 F.2d 338 (7th Cir. 1984), for the proposition that a trustee in bankruptcy does not

have the power to waive the attorney-client privilege on behalf of an incorporated entity. The

problem with Bravata’s reliance on that authority is that the case was reversed by the Supreme

Court. Commodity Futures Trading Com’n v. Weintraub, 471 U.S. 343 (1985). In that case, the

Supreme Court observed:

The parties also agree that when control of a corporation passes to new management,

the authority to assert and waive the corporation's attorney-client privilege passes as

well. New managers installed as a result of a takeover, merger, loss of confidence

by shareholders, or simply normal succession, may waive the attorney-client

privilege with respect to communications made by former officers and directors.

Displaced managers may not assert the privilege over the wishes of current

managers, even as to statements that the former might have made to counsel

concerning matters within the scope of their corporate duties. 

Id. at 349. The Court reasoned that for the purpose of the bankruptcy, the trustee amounted to “new

management” and had the power to act in the business’s interest, which included waiving the

corporation’s evidentiary privileges. The Court held“that the trustee of a corporation in bankruptcy

has the power to waive the corporation’s attorney-client privilege with respect to prebankruptcy

communications.” Id. at 358. In this case, the Receiver is functioning in the same manner as a

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bankruptcy trustee, marshaling and preserving assets as circumstances allow. The appointing order

provides the Receiver with broad authority to act on behalf of the receivership entities. That

authority includes the right to waive the attorney-client privilege, if the Receiver in his judgment

deems that course prudent. There was no palpable defect in the Court’s decision on that issue.

The defendant argues that the attorney-client privilege issue should have been argued at a

later date because he did not have sufficient time to retain counsel. On November 24, 2010, Gregory

Bartko, counsel for John J. Bravata, Antonio M Bravata, and Shari A Bravata, was suspended from

the practice of law in this District as a result of a felony conviction in the United States District

Court for the Eastern District of North Carolina. In re Bartko, No. 10-MC-51299. On November

29, 2010, the Court disqualified Gregory Bartko from serving as counsel in this matter and stayed

this case through December 30, 2010 to allow the defendants time to secure representation. John

Bravata represented to this Court that he had contacted an attorney about appearing in this matter,

and he had retained an attorney in New York to represent him in the criminal investigation. The

government avers that it contacted Aaron Phelps, the attorney who Mr. Bravata hoped to retain in

this matter, and Jeffrey Lichtman, the attorney who Mr. Bravata stated was his criminal attorney.

Mr. Phelps has not returned the government’s phone call, and Mr. Lichtman stated that he did not

plan to file an appearance in this case and was not representing Mr. Bravata in this matter. The

Court provided Mr. Bravata with time to secure counsel, and he apparently did so. Further delay

is not warranted.

Mr. Bravata has failed to demonstrate a palpable defect that misled the Court and the parties;

therefore, his motion will be denied.

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Accordingly, it is ORDERED that defendant John Bravata’s motion for reconsideration [dkt.

#392] is DENIED.

s/David M. Lawson 

DAVID M. LAWSON

United States District Judge

Dated: February 11, 2011

PROOF OF SERVICE

The undersigned certifies that a copy of the foregoing order was served

upon each attorney or party of record herein by electronic means or first

class U.S. mail on February 11, 2011.

s/Deborah R. Tofil 

DEBORAH R. TOFIL

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