FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ---------------------------------------------------------------------X PEOPLE OF THE STATE OF NEW YORK, by LETITIA JAMES, Attorney General of the State of New York, Petitioner, Index No. 451685/20 -againstMotion Seq. No.: 002 THE TRUMP ORGANIZATION, INC., DJT HOLDINGS LLC, DJT HOLDINGS MANAGING MEMBER LLC, SEVEN SPRINGS LLC, ERIC TRUMP, CHARLES MARTABANO, MORGAN, LEWIS & BOCKIUS, LLP, and SHERI DILLON, Respondents. ---------------------------------------------------------------------X MEMORANDUM OF LAW OF THE TRUMP ORGANIZATION, INC. DJT HOLDINGS LLC, DJT HOLDINGS MANAGING MEMBER LLC, SEVEN SPRINGS, LLC AND ERIC TRUMP IN OPPOSITION TO THE OFFICE OF THE ATTORNEY GENERAL’S PEITION AND MOTION TO COMPEL COMPLIANCE WITH INVESTIGATORY SUBPOENAS LAROCCA HORNIK ROSEN & GREENBERG LLP 40 Wall Street, 32nd Floor New York, NY 10005 T: (212) 530-4823 Attorneys for Respondents The Trump Organization, Inc., DJT Holdings LLC, DJT Holdings Managing Member LLC and Seven Springs LLC MUKASEY FRENCHMAN & SKLAROFF, LLP 2 Grand Central Tower 140 East 45th Street, 17th Floor New York, NY 10017 T: (212) 466-6400 -andLAW OFFICES OF ALAN S. FUTERFAS 565 Fifth Avenue, 7th Floor New York, NY 10017 T: (212) 684-8400 Attorneys for Respondent Eric Trump 1 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 TABLE OF CONTENTS TABLE OF AUTHORITIES………………………………………………………… iii PRELIMINARY STATEMENT……………………………………………………… 1 ARGUMENT…………………………………………………………………………… 3 I. TTO IS PROPERLY ASSERTING THE ATTORNEY-CLIENT PRIVILEGE…………………………………………………………………… A. The attorney-client privilege doctrine…………………………………… 3 B. Protection is afforded to attorney-client communications disclosed to third-party professionals…………………………………… 4 The specific documents identified by the OAG are covered by attorney-client privilege…………………………………… 5 1. The redacted email referring to Seven Springs “to do”………… 5 2. The four redacted and/or withheld emails relating to the Trump Golf LA easement…………………………………… 7 3. The redacted email referring to Seven Springs………………… 8 4. The two withheld emails involving Donald Bender…………… 10 5. The withheld 40 documents relating to communications with Ralph Mastromonaco concerning the Seven Springs Property………………………………………………… 10 TTO did not waive all privilege claims involving communications with Mr. Mastromonaco……………………… 12 TTO HAS COMPLIED WITH THE OAG’S REQUEST FOR DOCUMENTS AND INFORMATION CONCERNING THE CHICAGO AND SEVEN SPRINGS TRANSACTIONS…………………… 14 TTO HAS PROPERLY ASSERTED ATTORNEY-CLIENT AND ATTORNEY WORK PRODUCT PRIVILEGES WHICH PROTECT THE MORGAN LEWIS DOCUMENTS FROM DISCLOSURE………………………………………………………………… 20 C. 6. II. III. 3 A. Attorney work product under CPLR 3101(c)…………………………… i 2 of 50 21 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 The OAG’s blanket challenge of the Morgan Lewis privilege logs is improper………………………………………………………… 21 Sheri Dillon’s communications relating to preliminary valuations are entitled to absolute immunity from disclosure as attorney work product and attorney-client communications…………………… 23 The OAG has failed to meet its burden of showing that documents protected by New York’s are “material and necessary”……………………………………………………………… 25 The work product of Morgan Lewis consists of materials prepared in anticipation of litigation and is afforded protection under CPLR 3101(d)(2)……………………………………………………… 31 TTO HAS NOT WAIVED ALL PRIVILEGE PROTECTIONS………… 34 B. C. D. E. IV. A. B. C. V. RECEIVED NYSCEF: 09/17/2020 Privileged materials were not disclosed to the Internal Revenue Service……………………………………………… 35 Privileged materials were only disclosed by the Trump Organization to third parties with whom it had a confidential relationship……………………………………………… 38 TTO’s limited disclosures to the OAG did not waive all privileges related to, or undermining, the claimed $21.1 million valuation of the Seven Springs easement……………………………………… 39 ERIC TRUMP HAS BEEN, AND CONTINUES TO BE, WILLING TO APPEAR PURSUANT TO SUBPOENA………………… CONCLUSION………………………………………………………………………… ii 3 of 50 40 41 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 TABLE OF AUTHORITIES Page(s) 915 2nd Pub Inc. v. QBE Ins. Corp., 107 A.D.3d 601 (1st Dep’t 2013)………………………………………… 21 Acwoo Intern. Steel Corp. v. Frenkel & Co., 165 A.D.2d 752 (1st Dep’t 1990)………………………………………… 21 Allstate Ins. Co. v. Belt Parkway Imaging, P.C., 70 A.D.3d 530 (1st Dep’t 2010)………………………………………… 26 Altonen v. Kmart of N.Y. Holdings, Inc., 94 A.D.3d 920 (2d Dep’t 2012)………………………………………… 26 Appleyard v. Tigges, 66 Misc.3d 390 (Sup. Ct. Bronx Cnty. 2019)…………………………… 25, 26 In re Bank of N.Y. Mellon, 2013 WL 1966736 (Sup.Ct. N.Y. Cnty. May 6, 2013)………………… 9 Becerril v. City of N.Y. Dep’t of Health and Mental Hygiene, 110 A.D.3d 517 (1st Dep’t 2013)……………………………………… 27 Besicorp Grp. Inc. v. Enowitz, 268 A.D.2d 846 (3d Dep’t 2000)……………………………………… 30 Bew Parking Corp. v. Apthorp Associates LLC, 141 A.D.3d 425 (1st Dep’t 2016)……………………………………… 38 Bluebird Partners, L.P., 248 A.D.2d at 225 (1st Dep’t 1998)…………………………………… n.18, 39 Bodega Invs., LLC v. United States, 2009 WL 1456642 (S.D.N.Y. May 14, 2009)………………………… 4 Bryant v. Christopher Hyland, Inc., 115 A.D.3d 525 (1st Dep’t 2014)……………………………………… 25 Careccia v. Enstrom, 174 A.D.2d 48 (3d Dep’t 1992)………………………………………… 34 Carlisle v. Bennett, 268 N.Y.212 (1935)……………………………………………………… 29 iii 4 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 Carpenter v. Commissioner, T.C. Memo. 2012-1……………………………………………………… n.13 Carvel Corp. v. Lefkowitz, 106 Misc.2d 284 (Sup. Ct. Westchester Cnty. 1979)…………………… 29 Charter One Bank, F.S.B. v. Midtown Richester, LLC, 191 Misc.2d 154 (Sup. Ct. Monroe Cnty. 2002)……………………… passim City of New York v. 130/40 Essex Street Development Corp., 302 A.D. 2d 292 (1st Dep’t 2003)……………………………………… 25 Cosby v. Am. Media, Inc., 197 F.Supp. 3d 735 (E.D. Pa. 2016)…………………………………… 27 Denburg v. Parker Chapin Flattau & Klimpl, 82 N.Y.2d 375 (1993)………………………………………………… 25 Dep’t of Investigation v. Passannante, 148 A.D.2d 101 (1st Dep’t 1989)……………………………………… 29 Deutsche Bank Trust Co. of Ams. v. Tri–Links Inv. Trust, 43 A.D.3d 56 (1st Dep’t 2007)………………………………………… n.8, 31 Drizin v. Sprint Corp., 3 A.D.3d 388 (1st Dep’t 2004)………………………………………… 34 Esgar Corp. v. Commissioner, T.C. Memo. 2012-35, aff’d, 744 F.3d 648 (10th Cir. 2014)…………… n. 21 Galasso v. Cobleskill Stone Prods., Inc., 169 A.D.3d 1344 (3d Dep’t 2019)……………………………………… 9 Gama Aviation Inc. v. Sandton Capital Partners, L.P., 99 A.D.3d 423 (1st Dep’t 2012)………………………………………… n.18, 38 Gordon v. Grossman, 183 A.D.2d 669 (1st Dep’t 1992)……………………………………… 14, 16, 18 Gramm v. Horsehead Indus., Inc., 1990 WL 14204 (S.D.N.Y. Jan. 25, 1990)……………………………… 39 In re Grand Jury Proceedings, 219 F.3d 175 (2d Cir. 2000)…………………………………………… 37 In re Grand Jury Proceedings, 350 F.3d 299 (2d Cir. 2003)……………………………………………… 34 iv 5 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 Hallock v. State, 64 N.Y.2d 224 (1984)…………………………………………………… 25 Hickman v. Taylor, 329 U.S. 495 (1947)……………………………………………………… 21 Hiller v. Amella, 128 A.D.3d 897 (2d Dep’t 2015)………………………………………… 26 Hoffman v. Ro-San Manor, 73 A.D.2d 207 (1st Dep’t 1980)………………………………………… 21 Hudson Ins. Co. v. Oppenheim, 72 A.D.3d 489 (1st Dep’t 2010)………………………………………… 4, 5, 21 Hunt v. Merck-Medco Managed Care, LLC, 2004 WL 2186433 (E.D. Pa. Sept. 23, 2004)…………………………… 13 Kiva Dunes Conservation, LLC v. Commissioner, T.C. Memo. 2009-145…………………………………………………… n.21 Kozel v. Kozel, 145 A.D.3d 530 (1st Dep’t 2016)……………………………………… n.2 Matthews Indus. Piping Co., Inc. v. Mobil Oil Corp., 114 A.D.2d 772 (1st Dep’t 1985)……………………………………… 14, 16, 18 Merrill Lynch & Co., Inc. v. Allegheny Energy, Inc., 229 F.R.D. 441 (S.D.N.Y. 2004)………………………………………… 39 Minnick v. Commissioner, T.C. Memo. 2012-345, aff’d, 796 F.3d 1156 (9th Cir. 2015)…………… n. 13 Myerson v. Lentini Bros. Moving & Storage Co., Inc., 33 N.Y.2d 250 (1973)…………………………………………………… 29 Nab-Tern-Betts v. City of New York, 209 A.D.2d 223 (1st Dep’t 1994)……………………………………… 24, 34 In re New York City Asbestos Litig., 151 A.D.3d 550 (1st Dep’t 2017)……………………………………… 13 New York Times Newspaper Div. of New York Times Co. v. Lehrer McGovern Bovis, Inc., 300 A.D.2d 169 (1st Dep’t 2002)……………………………………… 7, 8 v 6 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 In re New York County Data Entry Worker Prod. Liability Litigation, 162 Misc. 2d 263 (Sup. Ct. N.Y. Cnty. 1994), aff’d, 222 A.D.2d 381 (1st Dep’t 1995)………………………………… 25 In re New York Renu with Moistureloc Prod. Liability Litig., 2009 WL 2842745 (“In re New York Renu II”) (D.S.C. July 6, 2009)…… 24, 33, 39 NYAHSA Servs. Inc., Self-Insured Trust v. People Care Inc., 155 A.D.3d 1208 (3d Dep’t 2017)……………………………………… 22 Oakwood Realty v. HRH Const. Corp., 51 A.D.3d 747 (2d Dep’t)………………………………………………… 31 Oliveira v. Cairo-Durham Central School District, 2013 WL 4678313 (N.D.N.Y. August 30, 2013)………………………… 13 Peerenboom v. Marvel Entertainment, LLC, 160 A.D.3d 439 (1st Dep’t 2018)………………………………………… 31 People v. Ackerman McQueen, 67 Misc.3d 1206(A) (Sup. Ct. N.Y. Cnty. 2020)………………………… 27 People ex rel. Schneiderman v. Sprint Communications, 2016 WL 3751148……………………………………………………… 19 People v. Osorio, 75 N.Y.2d 80 (1989)…………………………………………………… 3, 4 Rainey v. Plainfield Cmty. Consolidated Sch., 2009 WL 1033654 (N.D. Ill. Apr. 16, 2009)…………………………… 24 Rossi v. Blue Cross and Blue Shield of Greater New York, 73 N.Y.2d 588 (1989)…………………………………………………… 6, 10 Roth v. Aon Corp., 254 F.R.D. 538 (N.D. Ill. 2009)………………………………………… 6 Saran v. Chelsea GCA Realty P’ship, 174 A.D.3d 759 (2d Dep’t 2019)………………………………………… 6 Slate v. State, 267 A.d.2d 839 (3d Dep’t 1999)………………………………………… 16 Spectrum Sys. Int’l Corp. v. Chemical Bank, 78 N.Y.2d 371 (1991)…………………………………………………… passim vi 7 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 Spicer v. GardaWorld Consulting (UK) Ltd., 181 A.D.3d 413 (1st Dep’t 2020)……………………………………… passim SR Int’l Bus. Ins. Co. v. World Trade Ctr. Props., LLC., 2002 WL 1998195 (S.D.N.Y. Aug. 29, 2002)…………………………… 31 State Dept. of Taxation and Finance v. State Dept. of Law— Statewide Organized Crime Task Force, 58 A.D.2d 298 (4th Dep’t 1977), aff’d 44 N.Y.2d 575 (1978)…………… 14, 16, 18 In re Steinhardt Partners, L.P., 9 F.3d 230 (2d Cir.1993)………………………………………………… 34 Stenovich v. Wachtell, Lipton, Rosen & Katz, 195 Misc. 2d 99 (Sup. Ct. N.Y. Cnty. 2003)…………………………… 4 Stroh v. General Motors Corp., 213 A.D.2d 267 (1st Dep’t 1995)……………………………………… 38 TC Ravenswood, LLC v. Nat’l Union Fire Ins. Co., 2013 WL 3199817 (Sup. Ct. N.Y. Cnty. June 20, 2013)……………… 9 United States v. Adlman, 68 F.3d 1495 (2d Cir. 1995)……………………………………………… 9, 32 United States v. Kovel, 296 F.2d 918 (2d Cir. 1961)……………………………………………… passim United States v. Richey, 632 F.3d 559 (9th Cir. 2011)…………………………………………… passim United States v. Sanmina Corp., 968 F.3d 1107 (9th Cir. 2020)…………………………………………… 33, 36 U.S. v. Davita, Inc., 301 F.R.D. 676 (N.D. Ga. 2014)………………………………………… 25 Whitehouse Hotel Ltd. P’ship v. Commissioner, 139 T.C. 304 (2012), aff’d in part, vacated in part, 755 F.3d 236 (5th Cir. 2014)…………………………………………… n.21 Williams v. New York City Housing Authority, 22 A.D.3d 315 (1st Dep’t 2005)………………………………………… 14, 16, 18 vii 8 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 Respondents The Trump Organization, Inc., DJT Holdings LLC, DJT Holdings Managing Member LLC, Seven Springs, LLC (collectively “TTO”) and Eric Trump (hereinafter, collectively the “TTO Respondents”), submit this Memorandum of Law in opposition to the request of the Office of the New York State Attorney General (the “OAG”) to compel compliance with investigatory subpoenas.1 PRELIMINARY STATEMENT More than 18 months ago, the OAG launched an investigation into the financial affairs of the President and his businesses. Pursuant to its authority under N.Y. Executive Law § 63(12) and CPLR §2302(a), the OAG issued subpoenas to multiple entities and individuals, seeking documents and information for the purpose of investigating supposed concerns relating to TTO’s valuation of assets on annual statements of financial condition. To date, the OAG has obtained voluminous documents and testimony under oath from TTO’s present and former employees, its banks, accountants, insurance companies, and professional consultants (including its appraisers and engineers) and, upon information and belief, numerous other third parties that provide or have provided services and/or transact(ed) business with TTO. Over the trailing 18 months, lawyers for TTO--both in-house and outside counsel-have participated in weekly, if not at times daily, “meet and confer” sessions with the OAG, along with extensive email correspondence. Indeed, the OAG acknowledges this in its compel motion: “the parties have engaged in extensive good-faith discussions to facilitate Respondents’ compliance with the subpoenas, and subsequently to attempt to resolve OAG’s concerns regarding the responses to those subpoenas,” resulting in a “narrowed … subset of disputed issues.” 1 The TTO Respondents acknowledge the page limit of 30 pages for memoranda of law set forth in Local Rule 14. Because the OAG’s 58-page memorandum of law involves multiple factual and legal issues relating to TTO’s assertion of privileges in connection with multiple co-respondents, the TTO Respondents respectfully request that the Court also consider this Memorandum of Law, which also exceeds the page limit. 9 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 (NYSCEF Doc. No. 13, at 1-2). Moreover, in its moving papers, the OAG has acknowledged that it has not reached a determination regarding whether the facts identified in its investigation to date establish a violation of any applicable laws. (NYSCEF Doc. No. 13, at 1). At issue now are investigatory subpoenas issued to TTO’s lawyers, including Charles Martabano, Esq., who is a land-use lawyer who was retained by TTO in or about 2011 to provide legal advice in connection with the potential subdivision and residential development of a property located in Westchester County. The OAG also issued investigatory subpoenas to Sheri Dillon, Esq. (and her present and former law firms), a tax lawyer who has provided confidential legal advice to TTO for many years, including in connection with certain actual and proposed conservation easement donations of properties located in New York and California that are the subject of the OAG’s subpoenas. In response to these subpoenas, TTO has asserted attorney-client and attorneywork product privileges, but only after carefully reviewing the documents at issue (some on multiple occasions), and have otherwise produced all communications (in full or redacted form) with lawyers where the communications did not involve the provision of legal advice. Despite TTO’s good faith compliance, the OAG has taken the unprecedented step of insisting that TTO produce thousands of pages of privileged communications involving its lawyers. By doing so, the OAG seeks to vitiate TTO’s attorney-client privilege, which is among the oldest of the commonlaw evidentiary privileges. The OAG continues to insist that TTO produce communications and documents shared and exchanged between TTO, its lawyers, and the professional consultants retained to assist the lawyers, broadly asserting that much of the services the lawyers provided were supposedly for “business purposes,” and not predominantly legal in character. The OAG is mistaken, and it will 2 10 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 be shown through an in camera review of the withheld materials that the lawyers were rendering legal advice as they assisted TTO in navigating the complex land use, statutory, and/or regulatory requirements associated with sophisticated real estate projects and transactions. As discussed in detail below, there is no merit to the balance of the OAG’s contentions. TTO has to date, and will continue to provide the OAG with all non-privileged materials and produce witnesses in compliance the OAG’s subpoenas. The OAG’s request to compel compliance with investigatory subpoenas should thus be denied in its entirety. ARGUMENT POINT I TTO IS PROPERLY ASSERTING THE ATTORNEY-CLIENT PRIVILEGE A. The attorney-client privilege doctrine. The attorney-client privilege is among the oldest of the common-law evidentiary privileges, and “fosters the open dialogue between lawyer and client that is deemed essential to effective representation.” Spectrum Sys. Int’l Corp. v. Chemical Bank, 78 N.Y.2d 371, 377 (1991). The privilege protects both communications from the client to the attorney, as well as communications from the attorney to the client. Id. The privilege belongs to the client, and as such, it is the client’s option to waive the privilege over a particular communication that is otherwise protected from disclosure. People v. Osorio, 75 N.Y.2d 80, 84 (1989). Whether a particular document is or is not protected is necessarily a fact-specific 3 11 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 determination, most often requiring in camera review2. See Spectrum Sys. Int’l Corp. 78 N.Y.2d at 378 (citations omitted). The “critical inquiry” when assessing the attorney-client privilege is whether, “viewing the lawyer’s communication in its full content and context, it was made in order to render legal advice or services to the client.” Id. at 379. The fact that business advice may be sought or even given in the same communication does not automatically vitiate the privilege where the advice given is predominantly legal. Stenovich v. Wachtell, Lipton, Rosen & Katz, 195 Misc. 2d 99, 106–07 (Sup. Ct. N.Y. Cnty. 2003) (citations omitted); see also Bodega Invs., LLC v. United States, 2009 WL 1456642, at *4-5 (S.D.N.Y. May 14, 2009) (communications between client and its tax counsel regarding the establishment of a tax shelter were not business, but rather privileged legal communications). B. Protection is afforded to attorney-client communications disclosed to third-party professionals. Although generally a communication made between a client and attorney in the known presence of a third party is not privileged, communications between a client and attorney in the presence of one serving as an agent of either the attorney or the client to facilitate the provision of legal advice will be privileged. See, e.g., Osorio, 75 N.Y.2d at 84. (citations omitted); Hudson Ins. Co. v. Oppenheim, 72 A.D.3d 489, 489-90 (1st Dep’t 2010). Pursuant to the “Kovel Doctrine,” a consulting expert qualifies under the attorney-client privilege as a privileged agent if the expert is consulted to improve the attorney’s comprehension of the facts. In United States v. Kovel, 296 F.2d 918, 922 (2d Cir. 1961), the Second Circuit Court 2 The presumption in favor of in camera review arises from a practical recognition that a privilege determination “cannot responsibly be based on generalized descriptions or labels designed by the parties, but rather on complete information as to content and context.” Spectrum Systems Int’l Corp., 78 N.Y.2d at 379. The best way to obtain this “complete information” is through in camera review. Kozel v. Kozel, 145 A.D.3d 530, 532 (1st Dep’t 2016). The appointment of a special master or court appointed mediator would be acceptable to the TTO Respondents, should the Court opt to proceed in that fashion. 4 12 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 extended the attorney-client privilege to include communications between a lawyer and an accountant hired by the lawyer to better understand the client’s financial information for the purpose of providing legal advice. The Second Circuit held that the attorney-client privilege was not voided by the presence of the accountant, analogizing him to an interpreter. The court recognized that attorneys may need an “interpreter” to fully understand the complex details of a client’s particular problem in order to competently represent or advise a client. Sixty years later, the Appellate Division, First Department further broadened and clarified Kovel when it held in Spicer v. GardaWorld Consulting (UK) Ltd., 181 A.D.3d 413 (1st Dep’t 2020) that a communication in the presence of a third party is nevertheless protected as a privileged communication where (i) the third party’s “presence was necessary to enable attorney-client communication” and (ii) the client “had a reasonable expectation that the confidentiality of communications … would be maintained.” Id. at 414. In Spicer, the First Department found that the presence of the plaintiffs’ financial advisor was necessary to enable the attorney-client communications relating to plaintiffs’ sale of their company. Critically, the court found that although the financial adviser was not specifically retained to assist the plaintiff’s counsel, the advisor nonetheless spent at least some portion of its time helping counsel to understand various aspects of the stock sale transaction for that purpose. Id.; see, Hudson Ins. Co., 72 A.D.3d at 48990 (communications involving defense counsel’s consultant retained to assist in handling forensic accounting issues were subject to attorney-client privilege). C. The specific documents identified by the OAG are covered by attorney-client privilege. 1. The redacted email referring to Seven Springs “to do.” The OAG argues that this email should be produced without redactions because it relates to business purposes and is not predominantly of a legal character. The limited redactions to the 5 13 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 email from attorney to client, relating to things “to do” in connection with the Seven Springs property, are proper. Ex. 56 (NYSCEF Doc. No. 70).3 As will be shown during an in camera review of this email, the redacted portion consists of a communication from Sheri Dillon (TTO’s outside counsel) to Eric Trump (TTO’s Executive Vice President of Development and Acquisitions), and discusses legal strategy, including Ms. Dillon’s thoughts, impressions, judgment, and opinions. See e.g., Spectrum Sys. Int’l Corp., 78 N.Y.2d at 380; Rossi v. Blue Cross and Blue Shield of Greater New York, 73 N.Y.2d 588, 594 (1989) (communication was determined to be for the purpose of facilitating the lawyer’s rendition of legal advice where communication concerned legal rights and obligations and it evidenced other professional skills such as the lawyer’s judgment and recommended legal strategies). In rendering legal services in the setting of a proposed sophisticated commercial transaction, lawyers are frequently required to address business considerations as part of their role as legal advisors. Provided a communication is primarily or predominantly of a legal character, the privilege is not lost merely by reason of the fact that it also refers to certain nonlegal matters. Rossi, 73 N.Y.2d at 594; see also Roth v. Aon Corp., 254 F.R.D. 538, 541 (N.D. Ill. 2009) (email requesting comments on a draft Form 10K from chief financial officer to head of investor relations, deputy general counsel, and personnel in controller’s office was privileged where the “determination of what information should be disclosed for compliance is not merely a business operation, but a legal concern”). Compare Saran v. Chelsea GCA Realty P’ship, 174 A.D.3d 759, 760-61 (2d Dep’t 2019), cited by the OAG, where the subject communications related to the business of defendants rather than legal issues, and the defendants merely made conclusory Citations to “Ex.” are to the exhibits annexed to the First Affirmation of Matthew Colangelo dated August 21, 2020 (“First Affirmation”) (NYSCEF Doc. No. 10). 3 6 14 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 allegations that the emails were privileged without pointing to any particular communication in which in-house counsel gave legal advice. 2. The four redacted and/or withheld emails relating to the Trump Golf LA easement. Contrary to the OAG’s contention, this series of communications is “predominantly of a legal character, and will be shown as such upon in camera review.”4 The documents consist of emails that are part of the same conversation thread between The documents are privileged because they (i) reflect communications and requests of a legal nature originating from TTO’s legal department and outside counsel; and (ii) were internal communications not disclosed to a third party. Indeed, the emails state very clearly that the requests are all “coming from ,” an in-house lawyer for TTO, together with outside counsel, who in this instance was Ms. Dillon, whose contact information is copied into the body of one of the emails in the thread. Ex. 57 (NYSCEF Doc. No. 71). Although Cushman & Wakefield, Inc. (“Cushman & Wakefield” or “Cushman”) is mentioned in the unredacted portion of the email as being part of team, the OAG’s assumption that the communication was for the business purpose of estimating the value of a conservation easement will be belied upon the Court’s in camera review. See New York Times Newspaper Div. of New York Times Co. v. Lehrer McGovern Bovis, Inc., 300 A.D.2d 169 (1st Dep’t 2002) (protective order prohibiting use of memorandum sent to outside counsel granted where outside counsel orally requested client to prepare memorandum setting forth facts and analysis of opposing party’s claims; Charter One Bank, F.S.B. v. Midtown Richester, LLC, 191 Misc.2d 154, 161 (Sup. Ct. Monroe Cnty. 2002) 4 The documents at issue are identified by the OAG on TTO privilege logs as NYAGREV00105537 (TTO_0022928 – TTO_0022929), NYAGREV00105546 (TTO_0022930), NYAGREV00113009 (TTO_0022945), and NYAGREV00113084 (TTO_022946). Ex. 54 (NYSCEF Doc. No. 768); Ex. 57 (NYSCEF Doc. No. 71). 7 15 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 (finding that a communication between a client’s employees that relays legal advice from counsel is subject to the attorney-client privilege). 3. The redacted email referring to Seven Springs. The OAG argues that this email should be produced because it is not predominantly of a legal character and that any privilege was in any event waived by including Donald Bender on the communication. However, the email is a communication between attorney and client responding to a request from counsel for background documents and information that will be necessary for her (i.e., that she “required”) to provide the legal advice and achieve the legal goals sought by TTO concerning the possible conservation easement donation in connection with the Seven Spring property. Ex. 16 (NYSCEF Doc. No. 30). In response to the request by TTO’s lawyer, Eric Trump, her client, states that he is forwarding the attached documents and information to provide a “better context” to the legal advice being requested, and he asks her to advise on “how we should proceed.” This more than satisfies the requirement that the communication be primarily or predominantly of a legal character. N.Y. Times Newspaper Div., 300 A.D. at 171-72 (attorneyclient privilege attached to a memorandum prepared by client in response to counsel’s request and for the purpose of enabling counsel to render legal advice). Moreover, the email clearly satisfies the criteria set forth in Spicer to maintain the privilege, even while including Mr. Bender on the thread. Mr. Bender is a senior tax accounting partner at Mazars, and this was a real estate project for which his guidance to Ms. Dillon would at times be necessary given the nuances and complexities of this highly specialized area requiring the expertise of tax accounting and tax law. Mr. Bender has specialized accounting, and financial skills, all of which would aid and inform Ms. Dillon’s understanding of the complex tax, economic, and accounting issues raised by the easement donation so that she could comply with hyper-technical 8 16 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 treasury regulations and render appropriate legal advice to TTO on various related issues.5 Kovel, supra; In re Bank of N.Y. Mellon, 2013 WL 1966736 (Sup.Ct. N.Y. Cnty. May 6, 2013) (internet consulting firm’s “presence” did not constitute a waiver of the attorney-client privilege where consulting firm served as an agent of counsel); TC Ravenswood, LLC v. Nat’l Union Fire Ins. Co., 2013 WL 3199817 (Sup. Ct. N.Y. Cnty. June 20, 2013) (upholding privilege where broker retained by client and counsel to explain complex insurance policies in assisting the provision of legal advice was included in communications). Compare also Galasso v. Cobleskill Stone Prods., Inc., 169 A.D.3d 1344, 1347 (3d Dep’t 2019) (Kovel privilege did not attach to valuation report concerning plaintiff’s stock in defendant where the purpose of the report was not to facilitate or clarify communications between plaintiff and his attorney and the report did not include any legal information, nor did it disclose plaintiff’s confidences); Compare also, United States v. Adlman, 68 F.3d 1495, 1500 (2d Cir. 1995) (Kovel privilege did not apply where party’s lawyer, who also served as a company officer, consulted an accounting firm for tax advice and not for the purpose of helping the lawyer reach the understanding he needed to furnish legal advice). It is irrelevant that Mr. Bender did not respond to this particular e-mail. If it were, the sender of a communication would never have confidence that any communication would remain privileged because they would have no way of knowing at the time of sending whether or not any recipient would respond. Such a troublesome and far-reaching result would be contrary to the underlying principle behind the attorney-client privilege, which is to foster the open dialogue between lawyer and client that is so essential for effective representation. See Spectrum Sys. Int’l Corp. 78 N.Y.2d at 371. 5 ). 9 17 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 4. RECEIVED NYSCEF: 09/17/2020 The two withheld emails involving Donald Bender. The OAG argues that these two emails should be produced because the communications were allegedly for business purposes and that, in any event, the privilege was waived by including Mr. Bender on the e-mail thread.6 As will be shown at an in camera review, both documents are protected by the attorney-client privilege as both documents are “predominantly of a legal character.” NYAGREV00106651 is an email from to Ms. Dillon (TTO tax counsel), requesting her legal advice as to how to treat a payment made in connection with the Trump Golf LA easement transaction. NYAGREV00100293 is also “predominantly of a legal character,” consisting of an email from concerning compliance with certain financial reporting obligations set forth in a loan agreement relating to 40 Wall Street. See Rossi, 173 N.Y.2d at 594. Here, the subject matter of both emails are topics about which Mr. Bender regularly provides professional guidance to TTO, and his presence was necessary so as to foster the legal representation. See Spicer, 181 A.D.3d at 415. 5. The withheld 40 documents relating to communications with Ralph Mastromonaco concerning the Seven Springs property. Ralph Mastromonaco was a licensed engineer who was retained by TTO to perform engineering services in connection with TTO’s then plans to subdivide and develop (e.g., residential lots/homes) the Seven Springs property in or about 2011. Of note, this work was several years prior to the Seven Springs conservation easement transaction in 2015. At that time, Mr. Mastromonaco worked very closely with Charles Martabano, Esq., a land-use attorney who had been hired by TTO to, among other things, obtain the necessary municipal approvals in connection 6 The documents at issue are identified by the OAG on TTO privilege logs as NYAGREV00106651 and NYAGREV00100293. Ex. 54 (NYSCEF Doc. No. 68). 10 18 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 with the proposed subdivision work. The documents at issue now largely consist of emails by and among Mr. Martabano and Mr. Mastromonaco and members of TTO including Eric Trump, .7 It is important to note that TTO has not asserted any privilege with respect to Mr. Mastromonaco’s own engineering materials, such as his drawings, maps, and the like, or any communications where the subject matter is the performance of his job as a project engineer.8 The OAG makes the blanket assertion that all communications involving Ralph Mastromonaco are not privileged because he is a third party. However, as discussed in Spicer, a court should not accept a “blanket challenge” to privilege assertions of documents sent to third parties. Instead, privilege assertions must be evaluated on a case by case basis. See Spectrum Sys. Int’l Corp., 78 N.Y.2d at 381 (“[d]etermining document immunity claims, and reviewing them, are largely fact-specific processes”). Moreover, just as in Spicer, Mr. Mastromonaco without question--as will be shown during the in camera review--“spent some portion of [his] time helping counsel to understand various aspects of the transaction” so that counsel could provide legal advice to the client. Id. at 414. Mr. Mastromonaco’s presence and involvement as a consultant in untangling and complying with the complex land use and other regulations is very similar to the involvement of accountants and other experts that courts have held necessary to the provision of The withheld documents are identified by the OAG on TTO’s privilege log dated August 7, 2020 at NYAGREV00049607, 00049608, 00049609, 00049610, 00049786, 00049790, 00049793, 00049795, 00049797, 00049802, 00049853, 00049854, 00049856, 00049859, 00049866, 00049868, 00049869, 00049875, 00049877, 00049880, 00049883, 00049884, 00049885, 00049897, 00049913, 00049917, 00049935, 00049936, 00049937, 00049938, 00049941, 00049944, 00049946, 00049948, 00049949, 00049950, 00049954, 00049955, 00049961, 00049962. Ex. 55 (NYSCEF Doc. No. 69). 7 8 Attorney-client privilege is not waived by producing non-privileged documents related to the same issues. Deutsche Bank Trust Co. of Ams. v. Tri–Links Inv. Trust, 43 A.D.3d 56, 64 (1st Dep’t 2007). 11 19 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 legal services to the client. 6. TTO did not waive all privilege claims involving communications with Mr. Mastromonaco. There is no merit to the OAG’s argument that TTO has waived the privileges and protections afforded it by CPLR 3101 with respect to Mr. Mastromonaco’s communications with Mr. Martabano. Indeed, it is completely disingenuous for the OAG to argue that TTO agreed to a blanket waiver of privilege with respect all communications involving Mr. Mastromonaco relating to the development of the Seven Springs property. On December 10, 2019, the OAG sought clarification as to whether TTO would not assert any privilege regarding any communications with Ralph Mastromonaco or Ralph Mastromonaco, P.E. Ex. 153 (NYSCEF Doc. No. 167). In an email dated December 16, 2019, TTO responded that TTO is not asserting privilege regarding communications between Cushman and Mr. Mastromonaco or Ralph Mastromonaco, P.E. Ex. 160 (NYSCEF Doc. No. 174). In this context, when the OAG then sought to further “clarify” TTO’s position with respect to Mr. Mastromonaco so that TTO’s privilege withdrawal would not be limited to just “communications,” the clear import was that the OAG was seeking to also include documents (e.g. drawings) that were exchanged between Mr. Mastromonaco and Cushman & Wakefield in connection with any work on the Seven Springs conservation easement. It did not appear to TTO then (or now) that at that time the OAG was seeking to expand the request to include any of Mr. Mastromonaco’s communications that did not involve Cushman, including those with Mr. Martabano, who had been engaged years earlier to handle the legal issues associated with subdividing and developing the property (i.e., not to handle the conservation easement transaction). Ex. 162. (NYSCEF Doc. No. 176). Indeed, the OAG and TTO subsequently expressly confirmed that TTO was not withdrawing any assertions of privilege that had arisen, or 12 20 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 may arise in the future, in connection with other persons or entities unrelated to Cushman & Wakefield and that TTO did not intend a subject matter waiver. Ex. 155 (NYSCEF Doc. No. 169). Accordingly, TTO did not voluntarily waive any privilege protections relating to communications between Mr. Mastromonaco and Mr. Martabano involving the subdivision and development of Seven Springs property years before Cushman & Wakefield was retained by TTO and years before the conservation easement donation was completed. See U.S. ex rel. Hunt v. Merck-Medco Managed Care, LLC, 2004 WL 2186433, at *2–3 (E.D. Pa. Sept. 23, 2004) (defendants’ outside counsel’s communications with defendant’s independent investigator were not subject to disclosure where ambiguous written waiver agreement could be read to either include or exclude communications between the two parties); Oliveira v. Cairo-Durham Central School District, 2013 WL 4678313 *2 (N.D.N.Y. August 30, 2013) (voluntary disclosure of privileged communications between defendants and their counsel regarding the limited topic of the determination of teachers’ seniority did not result in wholesale waiver of the attorney-client privilege with respect to all other litigation matters handled by defendants’ counsel); In re New York City Asbestos Litig., 151 A.D.3d 550, 551 (1st Dep’t 2017) (defendant continually objected to use of unredacted version of memorandum and did not waive attorney-client privilege as to the unredacted memorandum in asbestos-related litigation, notwithstanding public availability of redacted memorandum); see also Charter One Bank, F.S.B., 191 Misc.2d at 161 (waiver of the attorney-client privilege does not prevent a document from being protected as work product of an attorney). 13 21 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 POINT II TTO HAS COMPLIED WITH THE OAG’S REQUEST FOR DOCUMENTS AND INFORMATION CONCERNING THE CHICAGO AND SEVEN SPRINGS TRANSACTIONS Disclosure of tax returns has long been disfavored in New York. See e.g., State Dept. of Taxation and Finance v. State Dept. of Law—Statewide Organized Crime Task Force, 44 N.Y.2d 575 (1978). The party seeking disclosure must make a “strong showing of necessity and demonstrate that the information contained in the returns is unavailable from other sources.” Williams v. New York City Housing Authority, 22 A.D.3d 315, 316 (1st Dep’t 2005); Gordon v. Grossman, 183 A.D.2d 669 (1st Dep’t 1992); Matthews Indus. Piping Co., Inc. v. Mobil Oil Corp., 114 A.D.2d 772 (1st Dep’t 1985). As noted by the OAG in its motion to compel, the stated purpose of its investigation concerns TTO’s reporting of assets on statements of financial condition that were allegedly used to secure loans and obtain economic and tax benefits. (NYSCEF Doc. No. 13 at 1). The statutory basis for the OAG’s investigation is N.Y. Executive Law § 63(12). As part of its investigation, the OAG has focused on valuations used by Seven Springs LLC to claim a $21.1 million conservation easement charitable donation in the tax year 2015. Id. The OAG has also directed its attention to a discounted prepayment that TTO made to satisfy a loan relating to the Trump International Hotel and Tower in Chicago, a property that was historically omitted from . Id. at 9-10. Neither of the subpoenas addressed to TTO mention 14 22 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 fall well outside the scope of the OAG’s .9 Based on these definitions, investigation. Indeed, during “meet and confer” communications with TTO, the OAG confirmed to counsel for TTO that the OAG TTO has fully cooperated with the OAG’s investigation during the last 18 months, having produced voluminous records and multiple witnesses, interspersed with numerous meet-andconfer sessions. 9 15 23 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 . . Such an “unbridled fishing expedition” is disfavored by the courts. Slate v. State, 267 A.D.2d 839, 841 (3d Dep’t 1999). See State Dept. of Taxation and Finance v. State Dept. of Law—Statewide Organized Crime Task Force, 44 N.Y.2d 575 (1978); Williams v. New York City Housing Authority, 22 A.D.3d 315, 316 (1st Dep’t 2005); Gordon v. Grossman, 183 A.D.2d 669 (1st Dep’t 1992); Matthews Indus. Piping Co., Inc. v. Mobil Oil Corp., 114 A.D.2d 772 (1st Dep’t 1985). . 10 (NYSCEF Doc. No. 13, at 1.) 11 See also Exs. 58 (NYSCEF Doc. No. 72), 62 (NYSCEF Doc. No. 76), and 65 (NYSCEF Doc. No. 79). 16 24 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 In good faith and in an effort to narrow the issues for this court’s consideration, following the filing of the OAG’s instant motion to compel, TTO 12 12 (ii) Seven Springs LLC’s Form 8283, Ex. 29 is in fact incomplete, as the OAG failed to include Form 8283, the appraisal, and other schedules. 17 25 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 identifying the $21.1 million conservation easement as “Donated Property” (Ex. 32, NYSCEF Doc. 46); and (iii) Cushman and Wakefield’s Appraisal of the Seven Springs estate and conservation easement as of December 1, 2015 (Ex. 25, NYSCEF Doc. 39). The OAG has yet to articulate why these documents do not sufficiently confirm the tax treatment of the Seven Springs conservation easement charitable donation or on what possible basis the tax returns of the entities holding ownership interests in Seven Springs LLC could possibly be “material and necessary” to its investigation. Moreover, the OAG will be able to confirm, through the , that these forms were used to prepare these other returns that were filed with the IRS. Simply put, there is no dispute that in 2015 Seven Springs LLC claimed a conservation easement charitable donation of $21.1 million, as verified by a third-party appraiser, Cushman & Wakefield, and the donee, NALT, all as evidenced by their signatures on the IRS Form 8283, which confirmed the charitable donation and TTO voluntarily produced. ((Ex. 32, NYSCEF Doc. 46.) Whether the individual members of Seven Springs LLC reported the conservation easement charitable donation on their tax returns has no relevancy to the stated purpose of the OAG’s investigation. Even assuming, arguendo, that the OAG could show that the documents and testimony already in its possession are insufficient and that the tax treatment issue are even relevant to its investigation, which it cannot, the OAG would not be entitled to further tax documentation due to the highly confidential and private nature of such materials. State Dept. of Taxation and Finance, 44 N.Y.2d 575 (1978); Williams, 22 A.D.3d at 316; Gordon, 183 A.D.2d 669; Matthews Indus. Piping Co., Inc., 114 A.D.2d 772. 18 26 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 In State Dept. of Taxation and Finance, the Appellate Division quashed a subpoena issued by the AG seeking tax returns, finding that “the provisions of the Executive Law vesting the Organized Crime Task Force with wide-ranging investigatory powers are also general in nature and do not specifically permit disclosure of tax return information.” 58 A.D.2d at 301. Likewise, the provisions of Executive Law 63(12) are “general in nature,” and do not permit disclosure of TTO tax information and tax returns. Interestingly, in a proceeding brought by the OAG against Sprint Communications, the OAG argued strenuously on the grounds of “tax secrecy” to prevent tax records from being disclosed in discovery. In opposing a motion by Sprint to compel the State to produce information concerning other companies’ sales tax practices, the OAG argued that such a request “ignores binding precedent broadly interpreting the Tax Law’s relevant secrecy provision, and (if granted) would eviscerate the Legislature’s promise of tax secrecy and thus seriously hamper the State's administration of the Tax Law.” People ex rel. Schneiderman v. Sprint Communications, 2016 WL 3751148 (Pltf’s Memo. of Law in Opp. to Defendant’s Motion to Compel). The court in Sprint agreed with the OAG and held that other companies’ tax records were not the “main issue” so as to warrant the disclosure of confidential tax records. People v. Sprint Nextel Corp., 2016 WL 3647243 (Sup. Ct. N.Y. Cty. 2016). This Court should hold the OAG to its statements in its Sprint Communications brief, and reject the OAG’s efforts to obtain the confidential tax information, including tax returns, of TTO and related entities, which are not the “main issue” in the OAG’s investigation. 19 27 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 POINT III TTO HAS PROPERLY ASSERTED ATTORNEY-CLIENT AND ATTORNEY WORK PRODUCT PRIVILEGES WHICH PROTECT THE MORGAN LEWIS DOCUMENTS FROM DISCLOSURE TTO engaged Sheri Dillon and her law firms to provide confidential legal advice in connection with the actual and proposed conservation easement donations that are the subject of the OAG’s subpoenas. Morgan Lewis & Brockius LLP (“Morgan Lewis”) attorneys assisted TTO in navigating the complex statutory and regulatory donation requirements for those easements, where a single misstep or incorrect interpretation of the applicable Internal Revenue Code and Treasury Regulation terms could result in the complete denial of a conservation easement charitable donation.13 The OAG broadly asserts that Morgan Lewis has improperly withheld or redacted approximately 3,000 documents relating to the legal services of Morgan Lewis, Vinson & Elkins, LLP (“Vinson & Elkins”), and rendered to TTO in connection with the conservation easements and related matters. See Exs. 100-116 (NYSCEF Doc. Nos. 114-130). The OAG argues that Morgan Lewis is withholding documents and witness testimony that is not protected, but instead relates to what the OAG believes is the allegedly apparent “business purpose” of much of Ms. Dillon’s work on the easement donation projects.14 13 See, e.g., Turner v. Commissioner, 126 T.C. 299 (2006); Carpenter v. Commissioner, T.C. Memo. 2012-1; Minnick v. Commissioner, T.C. Memo. 2012-345, aff’d, 796 F.3d 1156 (9th Cir. 2015). 14 The TTO Respondents hereby adopt and incorporate by reference herein the facts and points and authorities set forth in the opposition briefs of Morgan Lewis and Sheri Dillon, to the extent not otherwise addressed herein. 20 28 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 A. INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 Attorney work product under CPLR 3101(c). CPLR 3101(c) establishes an unqualified privilege from disclosure for attorney work product. See Spectrum Sys. Int’l Corp., 78 N.Y.2d at 376. As enunciated by the U.S. Supreme Court, the purpose of the work product doctrine is to enable an attorney to “assemble information, sift what [s/he] considers to be the relevant from the irrelevant facts, prepare [her/his] legal theories and plan [her/his] strategy without undue and needless interference” from [his/her] adversary. Hickman v. Taylor, 329 U.S. 495, 511 (1947). The work product of an attorney includes materials produced and obtained by an attorney in his or her professional capacity and with the use of his or her professional skills involving legal reasoning, legal research, analysis, conclusions, legal theory, and strategy. Acwoo Intern. Steel Corp. v. Frenkel & Co., 165 A.D.2d 752, 753 (1st Dep’t 1990); see also Hoffman v. Ro-San Manor, 73 A.D.2d 207, 211 (1st Dep’t 1980). An attorney’s work product can be reflected in “interviews, statements, memoranda, correspondence, briefs, mental impressions, personal beliefs, and countless other tangible and intangible ways.” Hickman, 329 U.S. at 511. Work product encompasses not only the work of attorneys themselves, but also the work of “consultants [retained] to assist in analyzing or preparing the case, as an adjunct to the lawyer’s strategic thought processes.” Hudson Ins. Co., 72 A.D.3d at 490 (1st Dep’t 2010) (citation omitted); 915 2nd Pub Inc. v. QBE Ins. Corp., 107 A.D.3d 601, 601 (1st Dep’t 2013) (appraisal report prepared by an expert at counsel’s direction was protected as attorney work product under CPLR 3103(c)). B. The OAG’s blanket challenge of the Morgan Lewis privilege logs is improper. The OAG points to 16 privilege logs prepared by Morgan Lewis in support of the OAG’s contention that TTO’s assertion of privileges is over broad. The privilege logs indicate that the withheld and/or redacted documents relate to the Seven Springs, Palos Verdes, and/or Briarcliff 21 29 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 conservation easement projects maintained in the law firm files of Morgan Lewis, Vinson & Elkins, and . These documents include attorney-client communications; internal communications of attorneys; attorneys’ handwritten notes; attorneys’ internal memoranda reflecting legal research, strategy, analysis of tax implications, legal theories and conclusions; working drafts; draft conservation easement documents with attorneys’ handwritten notes and revisions; attachments necessary to confidential email communications between the client and attorneys; attorney-selected, non-final attachments created by experts retained by counsel to aid necessary and confidential email communications between the client and attorneys; client-selected attachments to aid necessary and confidential email communications between the client and attorneys; and communications between attorneys and consultants in furtherance of providing and communicating legal advice to the client in connection with proposed conservation easements. See Exs. 100-116 (NYSCEF Doc. Nos. 114-130). In sum, the documents are protected under attorney-client and attorney work product privileges because they specifically discuss and reflect the attorneys’ mental impressions, thought processes, legal analyses, legal strategies, conclusions, and strategic choices necessary for effective representation of the client in connection with the conservation easements and related legal matters. See, e.g., TC Ravenswood, 2013 WL 3199817 at *2. Compare NYAHSA Servs. Inc., Self-Insured Trust v. People Care Inc., 155 A.D.3d 1208, 1211 (3d Dep’t 2017), a case cited by the OAG, wherein the report and certain related documents that did not incorporate information or opinion from counsel or discuss legal issues or conclusions prepared by a claims consultant retained by defendant’s counsel regarding the third-party defendant’s management and administration of workers compensation claims of defendant’s employees were not protected by attorney-client privilege. 22 30 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 C. INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 Sheri Dillon’s communications relating to preliminary valuations are entitled to absolute immunity from disclosure as attorney work product and attorney-client communications. In support of its overbroad conclusory contention that Ms. Dillon’s work was largely for business purposes, and relying on cherry-picked documents and testimony, the OAG argues that TTO’s coordination through counsel of the preliminary valuations—and the business decision of whether to make conservation easement donations relying on the valuations—by definition makes the communications business, and not legal, in nature. Because TTO (with Ms. Dillon’s counsel) purportedly used the preliminary valuations as one part of the analysis used to consider TTO’s business decision of whether donating an easement would provide sufficient economic benefit to TTO, the OAG leaps to the conclusion that all services provided by Ms. Dillon relating to the preliminary valuations could not possibly be predominantly legal in character. See Ex. 112 (NYSCEF Doc. No. 126) at 86-93. .15 With respect to her work evaluating the transaction from a legal standpoint, 15 It is respectfully submitted that the redacted, cherry-picked testimony of a Cushman appraiser and/or a Morgan Lewis associate provides little insight, let alone is dispositive, of the reasons why preliminary valuation work was done or what the purpose of Morgan Lewis’ work was in connection with the easements. Ex. 126 (NYSCEF Doc. No. 140) at 337:3-338:6; 453:4-6; Ex. 127 (NYSCEF Doc. No. 141) at 37:16-22;75:18-76:9. 23 31 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 It bears TTO to allow to attend and directly In TTO's to violate protected privilege advice of bill ("when 107 2009 law WL and privilege with document a draft in in her afforded it the assertions made professional or vitiate refused to oppoitüuity at her oral responsibilities work "[t]he does Cmty. comm2mication not product include and of and protections, York York Renu Il"), at *12 operate Consolidated sent and the modern as a waiver Sch., for an of 2009 the WL attorney's 24 32 of 50 with 1033654, advice that counsel. July are at *2 before though the satisfy the and other the legal Stenovich, and (1st work (N.D. being waiver Liability New (applying by product"); Ill. 1994) contractual Prod. 6, 2009) that from Dep't a draft Moistureloc is to hold drafts drafts are reflecting 224 223, ( D.S.C. trend, the by contractor Renu otherwise lawyer "communiention A.D.2d another and even notes a privileged 209 re New and developed is York, hearing drafts review, comments file" of New as the strategies a client § 3101(c), an in camera by In view, is so long see e.g. re New better parties, attorney's City CPLR under concepts [an] between product TTO by default product); ("In work exchanged be confirmed v. a contract work documents to third legal draft ("[A] 2842745 finding v. Plainfeld of withheld Nab-Tern-Betts client"); constituted a final Rainey the have comm1mications and incorporate of particulars provision drafts as would Here, and at to that valuations counsel Misc.2d attorney of of would complied privileged to be published requirements. ofpreliminary York all Dillon communications is intended copies Litig., Ms. absence, established privileged product (draft address attorney-client It is well 195 which examination, OAG the that testifying final Dillon's contemporaneously examination. refused Ms. that mentioning Apr. finalized, disclosure see 16, the also 2009) draft FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 itself is a privileged document even if the final version is not”); see also U.S. v. Davita, Inc., 301 F.R.D. 676, 683 (N.D. Ga. 2014) (“attorney-client privilege applies to confidential, non-public drafts of documents which were prepared by an attorney at the request of the client; communications attaching a draft to an attorney with a request for legal advice regarding its content; or communications that contain notes or comments of the attorney reflecting legal advice regarding a document’s content”). D. The OAG has failed to meet its burden of showing that documents protected by New York’s “settlement privilege” relating to the are “material and necessary.” New York has a strong policy encouraging litigants to settle disputes privately. Denburg v. Parker Chapin Flattau & Klimpl, 82 N.Y.2d 375, 383 (1993). Promoting settlements “not only serves the interest of efficient dispute resolution but also is essential to the management of court calendars and integrity of the litigation process.” City of New York v. 130/40 Essex Street Development Corp., 302 A.D. 2d 292, 293 (1st Dep’t 2003) (quoting Hallock v. State, 64 N.Y.2d 224, 230 (1984)). “A negotiated compromise of a dispute avoids potentially costly, timeconsuming litigation and preserves scarce judicial resources; courts could not function if every dispute required a trial.” In re New York County Data Entry Worker Prod. Liability Litigation, 162 Misc. 2d 263, 267 (Sup. Ct. N.Y. Cnty. 1994), aff’d, 222 A.D.2d 381, (1st Dep’t 1995) (“NY County Data Entry”). See also Appleyard v. Tigges, 66 Misc.3d 390, 392 (Sup. Ct. Bronx Cnty. 2019). This strong public policy in favor of parties privately settling their disputes is embodied by statute in CPLR 4547, which protects all settlements, settlement offers, and conduct or statements made during compromise negotiations from the introduction at trial as evidence in most instances. See CPLR 4547; see also Bryant v. Christopher Hyland, Inc., 115 A.D.3d 525, 526 (1st 25 33 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 Dep’t 2014) (vacating jury verdict due to trial court’s admission of material exchanged in the course of settlement negotiations). Against this backdrop, New York courts will, however, permit discovery of settlementrelated documents and communications under CPLR 3101(a), but only when they are shown to be “material and necessary” to the present dispute. NY County Data Entry, 162 Misc.2d at 268 (finding that “the compelling need for privacy articulated by the plaintiffs outweighs the reasons stated by defendants for discovery of the settlement agreements”); Appleyard, 66 Misc.3d at 394 (denying motion to compel disclosure for failure to establish that the terms were “material and necessary” to the defense); Hiller v. Amella, 128 A.D.3d 897, 898 (2d Dep’t 2015) (affirming denial of defendant’s motion to compel settlement documents on the basis that the settlement agreement and related documents were “not material and necessary” to the defense); Altonen v. Kmart of N.Y. Holdings, Inc., 94 A.D.3d 920, 920 (2d Dep’t 2012) (citing CPLR 3101(a) and Allstate Ins. Co. v. Belt Parkway Imaging, P.C., 70 A.D.3d 530 (1st Dep’t 2010), in affirming denial of defendants’ cross motion to compel production of a confidential settlement agreement concerning certain prior unrelated actions as not “material or necessary” to the defense). Contrary to the OAG’s contention, the “material and necessary” standard under CPLR 3101(a) also applies in the context of this law enforcement subpoena issued under N.Y. Executive Law § 63(12). Indeed, the Executive Law explicitly provides that “the attorney general is authorized to take proof and make a determination of the relevant facts and to issue subpoenas in accordance with the civil practice law and rules.” N.Y. Exec. Law § 63(12) (emphasis added). Moreover, the order to show cause entered by this Court, based on a form submitted by the OAG, states that the OAG’s application is made pursuant to CPLR 2308(b), 402 and 403. See NYSCEF Doc. No. 192. Having grounded its special proceeding and instant motion to compel on the CPLR, 26 34 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 the OAG is now estopped from asserting that the CPLR’s “material and necessary” standard is inapplicable. Becerril v. City of N.Y. Dep’t of Health and Mental Hygiene, 110 A.D.3d 517, 519 (1st Dep’t 2013) (noting that a litigant is not permitted to advance a contrary position “simply because his or her interests have changed”). Tellingly, the OAG cites no case law for its contention that the CPLR’s “material and necessary” standard does not apply to its efforts to obtain the .16 The primary case relied on by the OAG to obtain the , People v. Ackerman McQueen, 67 Misc.3d 1206(A) (Sup. Ct. N.Y. Cnty. 2020), has nothing to do with confidential settlement-related documents (as in this case). Rather, the OAG in Ackerman McQueen sought to prevent the NRA from enforcing a nondisclosure provision in a services agreement17 with its public relations firm. The Ackerman McQueen decision therefore has no bearing on the matters currently before the Court, namely, whether the OAG has shown that confidential settlement related documents are “material and necessary” to its investigation. The OAG’s brief notes that Ackerman McQueen relies on a Pennsylvania case, Cosby v. Am. Media, Inc., 197 F.Supp. 3d 735, 742 (E.D. Pa. 2016). But the Cosby decision is equally unhelpful in evaluating whether a party can obtain discovery of confidential settlement materials. In Cosby, the court refused to enforce a confidential settlement agreement that prevented its signatories from disclosing crime-related information to law enforcement authorities. Discovery of settlement documents therefore was not at issue--rather, Cosby concerned the enforceability of 16 In other portions of its brief, the OAG asserts that it has virtually unfettered discretion to subpoena private documents as part of its investigatory powers. (NYSCEF Doc. No. 13 at 4-5). None of those cases involve efforts to obtain confidential settlement related materials, and therefore are not applicable to the OAG’s efforts to compel production of the . 17 The provision gave the NRA the right to preview all documents responsive to a law enforcement subpoena. The court concluded that such a pre-screening would compromise the integrity of the OAG’s investigation of the NRA’s non-profit operations, and granted the OAG’s petition to compel the public relations firm to produce documents without pre-screening by the NRA. 27 35 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 a confidentiality OAG here related is not settlement The subject be disclosed As explained reached time at that OAG No. 13, prior conduct 2014 conservation TTO OAG's goes for the at 49). very But the a meet over that taxpayer and they confer were law.18 or by session thus first makes time L.P., The of the in protecting as part confidential, Ex. settlement on that i.e., the underscores fact the Los Angeles Nowhere or "persistent does not and only satisfy or a 2015 does fraud the the or OAG illegality" CPLR's for a proffer, as to "material suggests in would No. 152.) that nature of these explain under N.Y. that this in Executive that connected connection 10-year Law in now, (NYSCEF fashion easement how OAG the necessary." and conclusory conservation mamdate TTO's to a with attenuated gap § 63(12). The the necessary." certain documents purposes 28 36 of 50 were provided to in a only. ITO and Ms. Dillon also had an as copEdmhal given the by Cushman, Gama Aviation Inc. v. Sandton Capital Cushman would be mhtahed involving See e.g., Ex. 30 (NYSCEF Doc. No. 44). 423 (1st Dep't 2012); Bluebird Partners, L.P., 248 A.D.2d esp,;esc..'. 99 A.D.3d appeals they Doc. the 2, 2020, July of the (NYSCEF 138 requests its proffer "proffer" OAG's confer" and that all cosm=nications of Cushman's policy. Id. 18 an in camera review would reveal that By way of example, password-protected format and others were marked for ::c"'c...;;.: Partners, policy to only "meet in estate. "repeated" proffer expectation York provided the multiple the easement be "material terms New against public production compelling were believed communications. TTO's Springs a in Pennsylvania's is somehow Seven suggests interest motion TTO by during with ignoring Doc. to be against co.........4cations authorized as settlement papers, found policy OAG's and unless its motion the and a settlement After public documents to the documents court materials. process, not the any fact, of settlement the asserting documents-in privacy which provision, at 225 (1st Dep't 1998). FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 New York courts have long recognized that the Attorney General cannot “embark upon any roving course for the purpose of generally prying into the affairs of any person.” Carlisle v. Bennett, 268 N.Y.212, 218 (1935) (requiring that the “books and papers called for have some relevancy and materiality to the matter under investigation”). See also Myerson v. Lentini Bros. Moving & Storage Co., Inc., 33 N.Y.2d 250, 260 (1973) (quashing subpoena where “the slim showing made to support inquisitorial action directed against [target of subpoena], if allowed to justify the broad subpoena issued in this or in future cases, might too easily subject innocent parties to administrative abuse”); Dep’t of Investigation v. Passannante, 148 A.D.2d 101 (1st Dep’t 1989). In Passannante, the Appellate Division, First Department overturned a lower court’s order granting the petitioner’s motion to compel a response to a broad investigatory subpoena. The Court found the subpoena to be overbroad, noting that “it is ancient law that no agency of government may conduct an unlimited and general inquisition into the affairs of persons within its jurisdiction solely on the prospect of possible violations of law being discovered, especially with respect to subpoenas duces tecum.” Id. at 103-04. See also Carvel Corp. v. Lefkowitz, 106 Misc.2d 284, 290 (Sup. Ct. Westchester Cnty. 1979), (limiting scope of subpoena from 8 ½ years to 4 years, because “the Attorney General does not have an arbitrary and unbridled discretion as to the scope of his investigation regardless of the fact that he seeks the information as part of an ongoing investigation”). In Slate v. State, 267 A.D.2d 839, 841 (3d Dep’t 1999), the court found that the State’s request for discovery of an attorney’s income tax and office records for four calendar years was overly broad and not material and necessary to resolve the state’s claim to recover overpayments for legal fees. The court noted that “[s]uch unbridled fishing expeditions are not to be encouraged and the Court of Claims properly exercised its discretion to strike those demands as being overly 29 37 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 burdensome and without the necessary specificity.” Id. at 841. See also Besicorp Grp. Inc. v. Enowitz, 268 A.D.2d 846, 848-849 (3d Dep’t 2000) (finding that discovery request seeking materials dating back two years prior to the resignation of corporation’s CFO was overly broad and sought irrelevant information in corporation’s action seeking a declaration that the officer was not permanently disabled). Simply put, the is far too attenuated from the 2014 Trump Golf LA easement and the 2015 Seven Springs conservation easement donations to support any claim that the requested documents are “material and necessary.” Moreover, the requested settlement documents fall well outside of the scope of the subpoenas, as set forth on its face, . Exs. 1 and 2 ( NYSCEF Doc. Nos. 15 and 16). TTO acted in good faith in withholding the pending an adequate showing that they are “material and necessary,” which the OAG refused to provide until it filed the instant motion. In light of the OAG’s failure to identify how the are “material or necessary” in prosecuting its claim regarding easements in 2014 and 2015, TTO maintains its position that the OAG is not entitled to these documents. However, in good faith and so as to reduce the issues under consideration by the Court, TTO authorized Morgan Lewis to produce 12 of the 24 withheld documents, namely those that are Cushman documents. Notwithstanding this limited production by Morgan Lewis on September 14, 2020, TTO does not waive any of the protections afforded to the remaining 12 documents. 30 38 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 E. INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 The work product of Morgan Lewis consists of materials prepared in anticipation of litigation and is afforded protection under CPLR 3101(d)(2). Even assuming arguendo, that Ms. Dillon’s work product is not entitled to full work product protection under CPLR 3101(c), it is nevertheless entitled to qualified immunity from discovery because the materials were prepared in anticipation of litigation.19 Peerenboom v. Marvel Entertainment, LLC, 160 A.D.3d 439 (1st Dep’t 2018). To protect lawyers from undue and needless interference by their adversaries, New York law severely limits disclosure of materials prepared in defense of litigation. Such material may not be discovered unless the court finds a showing of substantial need for the materials or that substantially equivalent materials cannot be obtained without undue hardship. CPLR 3101(d); Spectrum Sys. Int’l Corp. 78 N.Y.2d at 376-77. Materials prepared in anticipation of litigation or for trial, which are governed by CPLR 3101(d)(2), include such matters as “(1) the trial preparations of an attorney, or of those working for the attorney that are not classified as attorney’s work product, that is, that do not involve revelation of legal analysis and strategy; (2) material created by the client at the lawyer’s request; and (3) materials prepared in contemplation of litigation by non-lawyers and lawyers acting in a non-legal capacity.” Deutsche Bank AG v. Sebastian Holdings, Inc., 2019 WL 132534 (Sup. Ct. N.Y. Cnty. Jan. 8, 2019) (citation omitted); see Oakwood Realty v. HRH Const. Corp., 51 A.D.3d 747, 749 (2d Dep’t). The test is whether the documents at issue were prepared primarily in anticipation of litigation, not whether similar documents could have hypothetically been created in a non-litigation context. See, e.g., SR Int’l Bus. Ins. Co. v. World Trade Ctr. Props., LLC., 2002 WL 1998195, at *2 (S.D.N.Y. Aug. 29, 2002) (stating that although “employees may at times have 19 See Exs. 100-116 (NYSCEF Doc. Nos. 114-130). 31 39 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 engaged in similar investigations and prepared similar account reviews in the ordinary course of the business … in the absence of a threat of litigation” this did not render unprotected documents that were created because of “anticipated litigation” after counsel was retained). Ms. Dillon . Indeed, that scrutiny that—barring resolution through the led to —would conclude in federal court litigation. Simply put, TTO reasonably anticipated litigation regarding each conservation easement.20 Putting any potential technical missteps that could be argued aside, also routinely challenges conservation easement valuations.21 Tax attorneys who assist their clients in planning and executing conservation easements necessarily view all materials through the lens that the easement donations will likely become the focus of litigation. See, e.g., United States v. Adlman, 134 F.3d 1194, 1202 (2d Cir. 1998) (a legal tax analysis generated in anticipation of a possible IRS audit may constitute attorney work product, even if that material also assisted in making a business decision). The OAG cites United States v. Richey, 632 F.3d 559, 566-68 (9th Cir. 2011) for the overbroad proposition that documents and communications prepared to satisfy Treasury Regulations and to receive a tax deduction for a conservation easement donation do not constitute materials prepared in anticipation of litigation. However, the Richey decision does not state nor support a rule that when a statute or other source of law requires an appraisal to be created, each and every communication that is related to the preparation and drafting of that appraisal per se, is 20 Indeed, TTO was already embroiled in a dispute with concerning the that was heading toward litigation. See Ex. 138 (NYSCEF Doc. No. 152); Point III (D), supra. 21 See, e.g., Kiva Dunes Conservation, LLC v. Commissioner, T.C. Memo. 2009-145; Esgar Corp. v. Commissioner, T.C. Memo. 2012-35, aff’d, 744 F.3d 648 (10th Cir. 2014); Whitehouse Hotel Ltd. P’ship v. Commissioner, 139 T.C. 304 (2012), aff’d in part, vacated in part, 755 F.3d 236 (5th Cir. 2014). 32 40 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 for business purposes and cannot constitute work product. Rather, the Richey court rejected a blanket assertion of privilege over the appraiser’s file, not the lawyer’s work product. See also In re New York Renu II, 2009 WL 2842745 at *12 (“[i]t is common knowledge that reports made pursuant to legal obligations are not prepared in only one way. It is up to lawyers (and necessary consultants) to figure out how to comply with the reporting obligations and yet retain the optimal legal position for their client under the circumstances,” i.e., the specter of future litigation where those same reports “could be subject to admission on behalf of plaintiffs in a forthcoming lawsuit”); United States v. Sanmina Corp., 968 F.3d 1107 (9th Cir. 2020) (memoranda authored by taxpayer’s in-house counsel and expressly relied upon by outside counsel in preparation of valuation report submitted to the IRS in support of “worthless stock” deduction was found to have been prepared in anticipation of litigation). In Richey, based on advice from their counsel, taxpayers claimed a deduction for the charitable contribution of an easement. Id. at 562. Counsel hired Richey, who appraised the value of the easement at $1.5 million and issued a report that contained the note: “[t]his report may not include full discussion of the data, reasoning, and analyses that were used in the appraisal process to develop the appraiser’s opinion of value. Supporting documentation concerning the data, reasoning, and analyses is retained in the appraiser’s file.” Id. at 563 (emphasis supplied). Richey simply did not reach the issue of which documents in the appraiser’s file were discoverable, it merely ruled that the appraiser was required to testify about the non-privileged materials. Id. at 567. Indeed, the court remanded the matter for in camera review to determine whether the appraiser’s file contained privileged materials. Id. at 568. Finally, despite having the burden to show substantial need to overcome the protection provided to Morgan Lewis’ work product under CPLR 3101(d)(2), the OAG has utterly failed to 33 41 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 make any such proffer whatsoever. Careccia v. Enstrom, 174 A.D.2d 48, 51 (3d Dep’t 1992) (the party seeking discovery has the burden of proving the elements necessary to obtain an order for production of material prepared for litigation). POINT IV TTO HAS NOT WAIVED ALL PRIVILEGE PROTECTIONS A party may waive the protection of the work product doctrine by voluntarily disclosing protected documents or information to an adversary or to a third party in such a way that the adversary is likely to learn of the information. See, e.g., Nab-Tern-Betts v. City of New York, 209 A.D.2d 223, 224 (1st Dep’t 1994). Clearly, if a party voluntarily discloses work product to an adversary, the reasons for the privilege vanishes. A second method of waiver is sometimes referred to as an “implied waiver” or an “at issue waiver.” Drizin v. Sprint Corp., 3 A.D.3d 388, 390 (1st Dep’t 2004). This type of “implied waiver” is “justified by considerations of fairness to the adversary.” In re Grand Jury Proceedings, 350 F.3d 299, 302 (2d Cir. 2003). In that regard, courts are hesitant to allow “a party asserting contentions to an adjudicating authority to then rely on its privileges to deprive its adversary of access to material that might disprove or undermine the party’s contentions” Id.; see also In re Steinhardt Partners, L.P., 9 F.3d 230, 236 (2d Cir.1993) (when faced with issues involving voluntary disclosure of privileged information to governmental authorities and whether such disclosure destroys the privilege as to third parties, the Second Circuit declined to adopt a per se rule that such disclosure constitutes a waiver, instead holding that whether fairness requires disclosure is to be decided on a case-by-case basis). The OAG contends that any applicable privilege that ever existed over the materials that are the subject of the OAG’s compel motion have been waived by TTO. Specifically, the OAG 34 42 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 argues that (i) by producing appraisals relating to the Seven Springs and the Trump Golf LA conservation easement donations to the IRS, TTO waived any privilege or protection from discovery it has over all other materials that in any way even remotely touch upon the value of the properties as reflected in the appraisals; (ii) waivers occurred by TTO disclosing to third parties the 2015 Seven Springs appraisal and/or “conclusions of value” in the President’s Statements of Financial Condition; and (iii) through selective disclosures to the OAG, TTO waived any privileges related to, or undermining, the claimed $21.1 million valuation of the Seven Springs conservation easement. There is no merit to the OAG’s allegations as TTO has not waived, expressly or impliedly, its privilege protections. A. Privileged materials were not disclosed to the Internal Revenue Service. The OAG asserts that it would be unfair for TTO to have been able to submit valuations based on certain assumptions to the IRS, but withhold information in TTO’s possession purportedly undermining those assumptions. (NYSCEF Doc. No. 13 at 54). However, the OAG does not present any evidence that the appraisals submitted to the IRS disclosed or relied on any privileged materials. The OAG must first show that the appraisals disclosed attorney-client communications or attorney work product before analyzing whether such a disclosure entitles the OAG to additional communications or materials under the doctrine of waiver. The OAG made no showing of disclosure because, the appraisals do not, in fact, disclose any attorney-client communications or work product.22 The OAG relies on Richey, for the proposition that TTO waived all attorney-client and 22 Significantly, in his First Affirmation, Mr. Colangelo, highlights the fact that Cushman & Wakefield rigidly followed the Uniform Standards of Professional Appraisal Practice in preparing the appraisals and declined to accommodate a number of counsel’s modification requests. See (NYSCEF Doc. No. 10 at ¶¶ 183-84); Ex. 131 (NYSCEF Doc. No. 145); Ex. 132 at MLB_EM00001913 (NYSCEF Doc. No. 146; and Ex. 134 (NYSCEF Doc. No. 148). 35 43 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 work product privileges when it submitted appraisals to the IRS in support of the conservation easement charitable donations. Importantly, the court in Richey did not hold that producing a valuation report to the IRS results in the subject matter waiver of all materials related to the report, regardless of whether such materials are relied upon or disclosed in the report. Rather, based on the record, including the fact that the subject memoranda expressly stated that pertinent “supporting documentation concerning the data, reasoning, and analyses is retained in the appraiser’s file” and the fact that the defendant and intervenors failed to identify the allegedly privileged documents in the appraiser’s file, the court remanded the matter for in camera review to determine whether the appraiser’s file contained privileged materials and directed that the appraiser testify about the non-privileged ones. Richey, 632 F.3d at 563, 568; see also Charter One Bank, F.S.B. v. Midtown Rochester, LLC, 191 Misc.2d 154, 163-64 (Sup. Ct. Monroe Cnty. 2002) (citation omitted) (court rejected subject matter waiver rule finding that it “effectively undermine[s] the purpose of the attorney-client privilege for allowing free flowing information between counsel and client,” and suggesting that there should never be a subject matter waiver brought about by a partial disclosure of a privileged matter). The OAG also cites the decision in United States v. Sanmina Corp., 2018 WL 4827346 (N.D. Cal. 2018), which the Ninth Circuit recently affirmed in part and reversed in part. In United States v. Sanmina Corp., 968 F.3d 1107 (9th Cir. 2020), the IRS sought production of memoranda authored by the taxpayer’s in-house counsel and expressly relied on by the taxpayer’s outside counsel in preparing a valuation report to support a “worthless stock” deduction claimed on a federal tax return. The memoranda were determined to be covered by attorney-client and attorney work product privileges, but the Ninth Circuit affirmed the district court’s finding that any attorney-client privilege was waived when the memoranda were provided to the outside counsel 36 44 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 for a non-legal purpose. Despite the fact that the Ninth Circuit found that the taxpayer “implicitly waived protection over any factual or non-opinion work product in the [memoranda] that served as foundational material for the valuation report,” the Ninth Circuit did not find a waiver with respect to the “mental impressions, conclusions, opinions or legal theories” of the in-house counsel contained in the work product and remanded the matter for further review of the attorney workproduct protection. Id. at 1125. Four factors make the proceeding at bar a clearer case for a finding of no waiver of privileges than Richey and Stamina. First, the materials withheld by Morgan Lewis are plainly protected by attorney-client and work product privileges. Second, unlike in Richey and Stamina, the appraisal submitted by TTO to the IRS did not disclose privileged materials. Third, unlike in Richey but similar to Stamina, TTO provided privilege logs that support its claim. Fourth, unlike in Richey but similar to Stamina, TTO has turned over all the supporting non-privileged documents in Morgan Lewis’ files relating to the easement transaction. Even if the OAG established that TTO’s appraisal disclosed privileged content, the OAG’s waiver argument still fails because the OAG did not produce any evidence that Morgan Lewis’ files, should, in fairness, be considered together with the appraisals. Although the value of the conservation easements may have been at issue between TTO and the IRS, Ms. Dillon’s legal advice was not. With respect to fairness, “[t]he quintessential example is the defendant who asserts an advice-of-counsel defense and is thereby deemed to have waived his privilege with respect to the advice that he received.” In re Grand Jury Proceedings, 219 F.3d 175, 182-83 (2d Cir. 2000). Here, except for vague and conclusory allegations, the OAG has not produce any evidence of unfairness that would warrant the wholesale rummaging through of Morgan Lewis’ internal files. In fact, the OAG does not provide any explanation whatsoever as to why the thousands of pages 37 45 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 of non-privileged documents and testimony from multiple witnesses does not adequately provide the OAG with the underlying foundation for the appraised values of the easements. Accordingly, the OAG failed to provide the Court with a record on which it could base a finding of unfairness. B. Privileged materials were only disclosed by the Trump Organization to third parties with whom it had a confidential relationship. The OAG contends that TTO disclosed the 2016 Seven Springs appraisal to at least three third parties, but the OAG refuses to reveal the parties’ identities to respondents. In addition, the OAG alleges that TTO repeatedly disclosed to third parties “conclusions of value” for Seven Springs in the President’s Statements of Financial Condition, without revealing the recipients’ identities to respondents. Even without knowing the identities of the third parties, it goes without saying that TTO would not have disclosed such highly confidential materials to any third party other than those with whom it had a confidential relationship. The OAG is required to demonstrate that a disclosure to a third party was inconsistent with maintaining the confidential nature of TTO’s attorney-client relationship in order to such disclosure to constitute a waiver. Stroh v. General Motors Corp., 213 A.D.2d 267, 268 (1st Dep’t 1995) (stating “[t]he scope of the privilege is not to be defined by a third party’s employment or function; it rather depends upon whether the client had a ‘reasonable expectation of confidentiality under the circumstances.’”); Gama Aviation Inc., 99 A.D.3d at 423 (rejecting defendants’ assertion privilege was waived because plaintiff’s communications were copied to, sent to, or authored by a third party where third party was acting as plaintiff’s agent and plaintiff had a reasonable expectation that the third party would keep the communication confidential); Bew Parking Corp. v. Apthorp Associates LLC, 141 A.D.3d 425 (1st Dep’t 2016) (denying motion to compel where there was an expectation by defendant that communications with its agents would be held in 38 46 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 confidence); see also Merrill Lynch & Co., Inc. v. Allegheny Energy, Inc., 229 F.R.D. 441, 448 (S.D.N.Y. 2004) (plaintiff’s disclosure of an investigative report to plaintiff’s outside auditor did not waive work product protection because auditor was not an adversary or a conduit to a potential adversary); Gramm v. Horsehead Indus., Inc., 1990 WL 142404 at *5 (S.D.N.Y. Jan. 25, 1990) (same). Here, there is no basis for finding a work product waiver because any third party who received a copy of an appraisal would not be considered an adversary. Bluebird Partners, L.P. 248 A.D.2d at 225 (“[t]he work product privilege is waived upon disclosure to a third party only when there is a likelihood that the material will be revealed to an adversary, under conditions that are inconsistent with a desire to maintain confidentiality”). Moreover, the disclosure of a document protected by the work-product doctrine does not result in a waiver of the privilege as to other documents on the same subject. CharterOne Bank, F.S.B., 191 Misc.2d at 161. C. TTO’s limited disclosures to the OAG did not waive all privileges related to, or undermining, the claimed $21.1 million valuation of the Seven Springs conservation easement. Morgan Lewis has produced, and will continue to, produce all non-privileged third-party communications and documents. Production of these communications and documents does not result in a waiver of work product protections over Morgan Lewis’ purely internal files or other communications with third parties. See In re New York Renu II, 2009 WL 2842745, at *12. Moreover, TTO’s limited withdrawals of certain privilege assertions did not result in a blanket waiver of privilege with respect to the claimed $21.1 million valuation of the Seven Springs conservation easement. As discussed in Point I (C)(6), supra, TTO’s limited and narrow withdrawal of privilege relating to Mr. Mastromonaco and Ralph Mastromonaco, P.E. was as to documents and communications with Cushman relating to the Seven Springs conservation easement. At no time did TTO withdraw or waive any privileges relating to Mr. Mastromonaco’s 39 47 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 communications with Mr. Martabano. With respect to TTO’s withdrawal of privileges relating to Cushman’s documents and testimony, TTO reserved and did not withdraw any “assertions of privilege that may arise in connection with other persons or entities unrelated to Cushman.” Ex. 155 (NYSCEF Doc. No. 169). In fact, the OAG and TTO confirmed that with respect to that withdrawal, TTO “does not intend a subject matter waiver.” Id. For the OAG to now argue that TTO somehow agreed (expressly or impliedly) to a blanket waiver of privilege with respect to all documents in Morgan Lewis’ files and all testimony to be taken at witness examinations that TTO will not be permitted to attend, is completely disingenuous. POINT V ERIC TRUMP HAS BEEN, AND CONTINUES TO BE, WILLING TO APPEAR PURSUANT TO SUBPOENA The OAG’s motion with respect to Eric Trump was both pre-mature and ultimately unnecessary. First, Mr. Trump at no time indicated that he was refusing to comply with the OAG subpoena; rather, counsel simply requested certain assurances first from OAG- which were never provided – such as that the OAG confirm that it “has not provided, and will not provide any materials, information or transcripts developed or collected in the course of its investigation to any other law enforcement authority, agency or regulator.” Rather than engage in a back-and-forth over what was asserted in the written correspondence, we respectfully refer the Court to the letter submitted on behalf of Mr. Trump dated July 20, 2020. Ex. 69 (NYSCEF Doc. No. 83); the OAG response dated July 21, 2020. Ex. 70 (NYSCEF Doc. No. 84); and counsel’s reply dated July 27, 2020. Ex. 71 (NYSCEF Doc No. 85). 40 48 of 50 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 INDEX NO. 451685/2020 RECEIVED NYSCEF: 09/17/2020 In any event, in recent correspondence, counsel for Mr. Trump have made clear that he is willing to appear pursuant to the subpoena, and have also proposed four available dates after the Presidential election on November 3, 2020. In this regard, we note that the OAG investigation has been ongoing for approximately 18 months, and that additional § 63(12) examinations are scheduled into October 2020 for certain other individuals. In good faith, counsel for Mr. Trump proposed multiple dates beginning shortly after the election - just two weeks later on November 19 – because of Mr. Trump’s extreme travel schedule and related unavailability between now and the election, and to avoid the use of his deposition attendance for political purposes. It is well known that most, if not all, law enforcement and regulatory agencies studiously avoid certain actions within the 60-day period prior to a major election. Given all the circumstances and the fact that counsel’s requested dates are, for all practical purposes, just 30 days after other scheduled depositions, and given the importance of avoiding any appearance of politicizing the investigatory process, we respectfully submit that the proposed dates are reasonable. CONCLUSION Based on the foregoing, the TTO Respondents respectfully requests that the OAG’s request to compel compliance with investigatory subpoenas be denied in its entirety. However, if the Court is inclined to grant the OAG’s request with respect to one or more categories of documents, the TTO Respondents respectfully request an in camera review by the Court, a Special Referee, or a court appointed mediator, of the subject documents before the OAG’s motion is decided, and grant to the TTO Respondents such other and further relief as the Court may deem just and proper. 41 49 of 50 INDEX NO. 451685/2020 FILED: NEW YORK COUNTY CLERK 09/17/2020 12:52 AM NYSCEF DOC. NO. 237 RECEIVED NYSCEF: 09/17/2020 Dated: New York, New York September 16, 2020 /s/ Amy Carlin ________________________________ LAROCCA HORNIK ROSEN & GREENBERG LLP 40 Wall Street, 32nd Floor New York, NY 10005 T: (212) 530-4823 Attorneys for Respondents The Trump Organization, Inc., DJT Holdings LLC, DJT Holdings Managing Member LLC and Seven Springs LLC /s/ Alan S. Futerfas ______________________________________ MUKASEY FRENCHMAN & SKLAROFF, LLP 2 Grand Central Tower 140 East 45th Street, 17th Floor New York, NY 10017 T: (212) 466-6400 -andLaw Offices of Alan S. Futerfas 565 Fifth Avenue, 7th Floor New York, NY 10017 T: (212) 684-8400 Attorneys for Respondent Eric Trump 42 50 of 50