Flagstar Bank v. FREESTAR Bank 09-CV-225-SM 11/09/09 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Flagstar Bank, FSB, Plaintiff

v. Civil No. 09-CV-225-SM Opinion No.

FREESTAR Bank. N.A., Defendant

O R D E R

Plaintiff Flagstar Bank, FSB ("Flagstar") filed suit against

Defendant FREESTAR Bank, N.A. ("Freestar") in the U.S. District

Court for the Central District of Illinois alleging, among other

things, trademark infringement. As part of discovery in that

suit, Flagstar served a subpoena duces tecum on The Tracey

Edwards Company, Inc. ("Tracey Edwards"), a Bedford, New

Hampshire, marketing firm that assisted Freestar in choosing a

new name and logo. Freestar then moved, in this court, to quash

the subpoena served on Tracey Edwards. The magistrate judge

denied Freestar's motion to quash and Freestar's motion for

reconsideration. Before the court is Freestar's timely objection

to the magistrate judge's order. F e d . R. C i v . P. 72(a). For the

reasons set forth below, the magistrate judge's order is

affirmed. I. BACKGROUND AND PROCEDURAL HISTORY

The subpoena served on Tracey Edwards requested:

All documents and things including, but not limited to, correspondence, memoranda, surveys, tests, studies and reports, which evidence, refer or relate to the creation and/or selection of the name Freestar Bank and the mark Freestar Bank "Life Keeps Getting Better," as well as any names or marks which were considered and rejected by the Tracey Edwards Company, Inc. and/or Freestar Bank.

(Pl.'s Resp. to Def.'s O b j . (document no. 22), Ex. B.) In

response to the subpoena, Tracey Edwards produced some documents

but withheld four it claims are privileged. (See i d ., Ex. E.)

The withheld documents are: (1) an April 13, 2006, letter from

Malcolm McCaleb, an attorney with Barack Ferrazano Kirschbaum &

Nagelberg, LLP ("Barack Ferrazano"1), to Edward Vogelsinger,

Freestar's president; (2) a handwritten note from Vogelsinger to

Tracey Edwards employee Jason Knights, on the April 13 letter;

(3) a September 4, 2007, email from Barack Ferrazano attorney

Robert Kearney to Vogelsinger and Scott Dixon, Freestar's vice

president; and (4) a September 5 email from Knights to Dixon.

On March 16, 2009, Freestar moved to quash the subpoena

served on Tracey Edwards. It argued that the subpoena should be

quashed because the April 13 letter was subject to the attorney-

1 Barack Ferrazano is the Chicago, Illinois, law firm that advised Freestar throughout the trademark registration process

2 client privilege. Flagstar objected, arguing that the

handwritten note and the September 5 email were not privileged

and that Freestar waived any privilege with respect to the April

13 letter and September 4 email by disclosing them to Knights.

In a May 7 order, the magistrate judge stated that he could not

rule on the motion to quash without first examining the four

documents in camera.

Following in camera review of the documents, the magistrate

judge denied the motion to quash, ruling that none of the four

documents were privileged. Freestar sought reconsideration,

which the magistrate judge denied. Freestar objected to the

magistrate judge's order, pursuant to Rule 72(a) of the Federal

Rules of Civil Procedure.2

II. STANDARD OF REVIEW

A district judge may modify or set aside a magistrate

judge's order that is "clearly erroneous or is contrary to law."

F e d . R. C i v . P. 72(a). Under the clearly erroneous standard, the

2 Freestar also moved to quash a subpoena served on Barack Ferrazano in the Northern District of Illinois. While the objection to the magistrate judge's order in this case was pending, a magistrate judge in the Northern District of Illinois issued an order denying in part the motion before him. (Memo. Op. & Order (document no. 29-2), at 2.) He ruled that Freestar waived any privilege with respect to the April 13 letter and note when it disclosed the letter to Knights. (I d . at 13-14.) The September 4 and 5 emails were not at issue in that motion.

3 court "must accept both the trier's findings of fact and the

conclusions drawn therefrom unless, after scrutinizing the entire

record, [the court] form[s] a strong unyielding belief that a

mistake has been made." Phinnev v. Wentworth Douglas H o s p .,

(1st Cir. 1999) (citation and internal quotation

omitted).

III. DISCUSSION

Freestar contends that the magistrate judge erred by failing

to determine that the April 13 letter is presumptively

privileged. Further, Freestar argues that the magistrate judge

erred by ruling that it had waived its claim that the September 4

and 5 emails are privileged, and by finding that the emails were

not communicated for the purpose of seeking legal advice.

Finally, Freestar argues that the magistrate judge erred by

ruling that trademark searches are not privileged.

A. Attorney-Client Privilege

The attorney-client privilege primarily protects

communications by a client to his or her lawyer for the purpose

of procuring legal advice; it secondarily protects communications

by a lawyer to his or her client as needed to prevent inferential

disclosure of what the client said to the lawyer. See United

States v. Billmver,

(1st Cir. 1995). "By

4 safeguarding communications between client and lawyer, the

privilege encourages full and free discussion, better enabling

the client to conform his conduct to the dictates of the law and

to present legitimate claims and defenses if litigation ensues."

XYZ Corp. v. United States (In re Keeper of the Records (Grand

Jury Subpoena Addressed to XYZ Corp.)).

(1st Cir.

2003) (citing Upjohn Co. v. United States.

(1981) ) .

This circuit follows a multi-part test for determining

whether a communication by a client to his or her lawyer is

privileged:

(1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal adviser, (8) except the protection be waived.

Cavallaro v. United States.

(1st Cir. 2002)

(quoting 8 J.H. W i g m o r e , E v i d e n c e § 2292, at 554 (McNaughton rev.

1961)). But where, as in this case, a party asserts privilege

with respect to a document provided by the lawyer, that party

must show:

(1) that [the party asserting privilege] was or sought to be a client of [the attorney]; (2) that [the attorney] in connection with the [document] acted as a

5 lawyer; (3) that the [document] relates to facts communicated for the purpose of securing a legal opinion, legal services or assistance in legal proceedings; and (4) that the privilege has not been waived.

Maine v. U.S. Dep't of the Interior,

, 71 (1st Cir.

2002) (quoting United States v. Bay State Ambulance & Hosp.

Rental Serv., Inc..

, 27-28 (1st Cir. 1989)).

As the party asserting the attorney-client privilege,

Freestar has the burden to prove that the privilege exists.

United States v. Bisanti.

(1st Cir. 2005)

(citing In re Keeper of the Records.

). If

Freestar fails to meet its burden as to any one element, it

cannot invoke the privilege. United States v. Wilson.

(1st Cir. 1986) .

B. The April 13 Letter and Note

Freestar first argues that the magistrate judge's ruling

regarding the April 13 letter and note is clearly erroneous,

because he failed to determine that the letter is presumptively

privileged. Freestar relies upon United States v. Chen.

(9th Cir. 1996). Flagstar responds that the burden is on

Freestar to prove that the letter and note pertain to legal

advice and that Chen is inconsistent with the law of this

circuit.

6 This circuit has not held that attorney-client

communications are presumptively privileged.3 Rather the First

Circuit has made clear that the party asserting privilege with

respect to a document provided by the lawyer has the burden to

prove that the privilege exists. See Dep't of the Interior. 298

F.3d at 71; Bay State Ambulance. 874 F.2d at 27-28; Wilson.

. Therefore, the magistrate judge's failure to apply

a presumption of privilege is hardly clear error, but, rather, a

correct application of First Circuit law.

Leaving aside the fact that Chen does not establish the law

of this circuit, the presumption articulated in Chen is not

applicable here. Chen involved communications made by clients to

their attorneys.

. The Chen presumption,

then, applies to the first and second elements of the Cavallaro

test — whether a client sought legal advice from a lawyer acting

in his capacity as a lawyer. See Chen.

("if a

person hires a lawyer for advice, there is a rebuttable

presumption that the lawyer is hired 'as such' to give 'legal

advice' "). This case, however, involves a document transmitted

by an attorney to his client, so the applicable test is not the

3 The Ninth Circuit's decision in Chen, moreoever, articulates no such presumption. Rather, the Chen presumption is that when a person hires a lawyer for advice, the advice the client is seeking is legal advice, as opposed to some other kind of advice. See Chen.

.

7 Cavallaro test but the four-part test articulated in Dep't of the

Interior, 298 F.3d at 71, a test not at issue in Ch e n .

Accordingly, the magistrate judge did not err in failing to apply

the Chen presumption in this case.

Further, even if the magistrate judge did err in determining

that the April 13 letter was not privileged, any privilege that

may have attached was waived when Vogelsinger passed the letter

on to Knights. Generally, disclosing privileged information to a

third party waives the attorney-client privilege. See Cavallaro.

. However, where a third party is "employed to

assist a lawyer in rendering legal advice," the disclosure of

information to the third party does not waive the privilege.

.

Here, Freestar argues that the privilege was not waived,

because Tracey Edwards was "necessary, or at least highly

useful," to the rendering of legal advice about the name change.

I d . at 246 (quoting United States v. Kovel.

(2d

Cir. 1961)). Flagstar counters that Tracey Edwards was not

involved in the rendering of any legal advice and that Freestar

waived the privilege by voluntarily disclosing the letter to

Knights.

8 Cavallaro holds that to avoid waiver, the disclosure of

information to a third party must be "necessary, or at least

highly useful," to the "facilitating of a legal communication"

between the client and his lawyer.

.

Therefore, to avoid waiver in this case, the disclosure of the

letter to Knights must have been necessary to his assisting

Barack Ferrazano in providing legal advice to Freestar. But

Vogelsinger did not pass the letter on to Knights so that he

could assist Barack Ferrazano in providing legal advice to

Freestar about the name change.4 Rather, Vogelsinger passed the

letter on to Knights to help him decide upon a new name. Thus,

any privilege that attached to the letter was waived.

C. The September 4 and 5 Emails

With respect to the September 4 and 5 emails, Freestar

argues that the magistrate judge erred in finding that Freestar

waived its right to claim that the emails are privileged, by

ruling as he did on the merits, and by failing to recognize that

the emails were generated in an effort to transmit information to

counsel for legal review.

5 The magistrate judge in the Northern District of Illinois made a similar ruling, stating that Freestar "failed to meet its burden of showing that the letter was disclosed to Mr. Knights for the ■'rendition of legal advice' or the ■'protection of a legal interest'." (Memo. Op. & Order (document no. 29-2), at 13 .)

9 Freestar first argues that the magistrate judge incorrectly

concluded that it waived any argument regarding the emails when

it failed to claim that the emails are privileged in its motion

to quash. Flagstar counters that, given the fact that Freestar

knew of the emails when it filed the motion to quash but did not

mention them, the magistrate judge properly exercised his

discretion not to consider Freestar's belated arguments that the

emails are privileged.

The magistrate judge correctly noted that where an argument

appears for the first time in a motion for reconsideration, "the

district court has substantial discretion in deciding whether

. . . to allow the losing party to argue new material or a new

theory." Appeal of Sun Pipe Line Co..

(1st Cir.

1987); see also Palmer v. Champion Mortgage.

(1st

Cir. 2006) (stating that a motion for reconsideration is "not a

promising vehicle for revisiting a party's case").

Freestar was aware of the September 4 and 5 emails at the

time it filed the motion to quash, yet chose not to argue that

they are privileged. Freestar served Flagstar with an updated

privilege log, which contained a reference to the emails, on the

same day it filed the motion to quash. Moreover, even after

Flagstar argued that the emails are not privileged in its

10 objection to the motion to quash, Freestar did not file a reply

to Flagstar's objection or otherwise argue that the emails are

privileged. The magistrate judge was thus well within his

discretion in ruling that Freestar waived any argument that the

emails are privileged.

Turning to the merits, Freestar argues, in reliance on Muro

v . Target Corp.,

(N.D. 111. 2007), that the

magistrate judge should have considered the emails as a string

and thus determined that they are privileged in their entirety.

In Muro, the court held that a party served with a subpoena was

not required to individually list emails in its privilege log but

could list related emails as a string. I d . at 363. Here,

however, Freestar's privilege log already listed the September 4

and 5 emails individually. Muro says that a court cannot force a

party to individually list emails that appear in a privilege log

as a string; it does not say that a court must string together

emails that are listed separately. Therefore, the magistrate

judge's decision not to consider the September 4 and 5 emails as

a string is not clearly erroneous or contrary to law.

Additionally, the type of email at issue in Muro is not

analogous to the emails in this case. Muro suggests that an

email which forwards to counsel information contained in a

11 previous email might be privileged.

No such email is at

issue here. The September 4 email from Kearney to Vogelsinger

and Dixon was not forwarded to counsel but sent by counsel.

Further, the September 4 email contains no information from a

previous email. Finally, the September 5 email from Knights is a

reply to the September 4 email. Muro is thus unhelpful.

Freestar next argues that the magistrate judge's ruling is

clearly erroneous because the emails were generated to provide

documents to Barack Ferrazano for legal review. As the privilege

log indicates, Kearney sent the September 4 email to Dixon and

Vogelsinger to gather discovery documents which Flagstar had

requested. Dixon sent the September 4 email to Knights, whose

September 5 email is a response to the request for documents.

Viewed in this context, the purpose of the emails was not to

provide documents to Barack Ferrazano for legal review but, as

the magistrate judge found, merely to gather discovery documents

for Flagstar.

Although Cuno, Inc. v Pall Corp. holds that communications

between non-attorneys may be privileged where they are

transmitted to counsel for the purpose of obtaining legal advice,

(E.D.N.Y. 1988), in this case, the September

5 email from Dixon to Knights was not transmitted for such a

12 purpose. Rather, the September 4 and 5 emails are better

understood as a response to Flagstar's discovery request. Cuno

says nothing about privilege with respect to communications

transmitted to counsel for the purpose of responding to discovery

requests. Accordingly, the magistrate judge's ruling that the

emails are not privileged is not clearly erroneous or contrary to

law.

D. Trademark Searches

Finally, Freestar argues that the magistrate judge's ruling

that trademark searches are not privileged is clearly erroneous,

and underscores the fact that opinions based on trademark

searches and communications between a client and his or her

attorney regarding trademark searches are privileged. Flagstar

responds that even if the trademark search transmitted by the

April 13 letter were privileged, Freestar waived the privilege by

disclosing the letter to Knights. Further, Flagstar argues that

Freestar is obligated to redact the privileged portions of the

letter and disclose the rest of it.

As an initial matter, the magistrate judge's comment about

trademark searches was made in the context of ruling that the

September 5 email does not contain privileged information, not as

a basis for his ruling that the letter is not privileged. But,

13 even if the magistrate judge's statement about trademark searches

relates to the letter, the magistrate judge correctly recited the

applicable law when he stated that trademark searches are not

privileged but only the legal advice based on the searches is

privileged. Contrary to Freestar's assertion, the case cited by

the magistrate judge reaffirms rather than contradicts his

comment about trademark searches. See Klavman v. Freedom's

Watch. No. 07-22433-CIV,

, at *5 (S.D. Fla. Dec.

14, 2007) (holding that a defendant who had turned over a

trademark search was not required to turn over privileged

communications which contained legal advice about that search).

Here, the April 13 letter is merely a transmittal of a

trademark search performed by McCaleb; it contains no legal

advice with respect to that search and thus is not privileged.

Similarly, the September 5 email references a trademark search, a

patent search, and a domain name search, but it does not reveal

any confidential information or legal advice based on those

searches. Therefore, the magistrate judge's ruling regarding

trademark searches is not clearly erroneous or contrary to law.

IV. CONCLUSION

For the reasons given, the magistrate judge's order

(document no. 19) is affirmed. Accordingly, Freestar is ordered

14 to produce the four documents at issue, and the clerk of the

court is directed to close this case.

SO ORDERED.

Steven J.'McAuliffe Chief Judge

November 9, 20 09

cc: William C. Saturley, Esq. Holly J. Kilibarda, Esq. Robert A. Kearney, Esq. Stephen D. Coppolo, Esq. Chanille Carswell, Esq.

15