In re CURRENCY CONVERSION FEE Antitrust Litigation No. MDL 1409, M 21–95 United States District Court, S.D. New York October 21, 2003 Counsel Merrill G. Davidoff, Berger & Montague, P.C., Philadelphia, Pennsylvania, for Plaintiffs. Charles E. Buffon, Covington & Burling, Washington, D.C., for Defendants Bank One Corporation and First USA Bank, N.A. Pauley, William H., United States District Judge MEMORANDUM AND ORDER *1 This consolidated class action alleges violations of the Sherman Act, 15 U.S.C. § 1 et seq., and the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq., arising out of an alleged price-fixing conspiracy by and among Visa and Mastercard and their member banks with respect to currency conversion fees.[1] Presently before this Court is plaintiffs' motion to compel defendants Bank One Corporation and First USA Bank, N.A. (collectively, “First USA”) to produce documents that defendants claim are shielded by various privileges including the attorney-client privilege, attorney work product privilege and self-critical analysis privilege. For the reasons set forth below, plaintiffs' motion is granted in part and denied in part. DISCUSSION I. Legal Standards The burden of establishing the existence of the attorney-client privilege rests on the proponent of the privilege. von Bulow v. von Bulow, 811 F.2d 136, 144 (2d Cir.1987); Nat'l Educ. Training Group, Inc. v. Skillsoft Corp., No. M8–85 (WHP), 1999 WL 378337, at *3 (S.D.N.Y. June 10, 1999). “To invoke the attorney-client privilege, a party must demonstrate that there was: (1) a communication between client and counsel, which (2) was intended to be and was in fact kept confidential, and (3) made for the purpose of obtaining or providing legal advice.” United States v. Constr. Prod. Research, Inc., 73 F.3d 464, 473 (2d Cir.1996); accord Liberty Envtl. Sys., Inc. v. County of Westchester, No. 94 Civ. 7431(WK)(MHD), 1997 WL 471053, at *1 (S.D.N.Y. Aug. 18, 1997). A party waives privilege, however, “by a voluntary disclosure of an otherwise privileged communication to a third party.” Skillsoft, 1999 WL 378337, at *3; see also In re Horowitz, 482 F.2d 72, 81 (2d Cir.1973) ( “subsequent disclosure to a third party by the party of a communication with his attorney eliminates whatever privilege the communication may have originally possessed”); Nelson v. Greenspoon, 103 F.R.D. 118, 123–24 (S.D.N.Y.1984) (“[D]ocumentary communications to or from third parties are not confidential.”) II. The First Data Documents 1The first category of documents that plaintiffs allege are discoverable (the “First Data Documents”) are documents that First USA disclosed to employees of First Data Resources, Inc. (“First Data”), a “company that provides computing services, consulting services, and other support services to credit card issuers,” including First USA. (First USA Opp. at 1.) Plaintiffs do not, for the purposes of this motion, contest First USA's claim that the First Data Documents are shielded by the attorney-client privilege in the first instance. Rather, plaintiffs allege that because First Data is a third party, i.e., is a distinct corporate entity, “[t]he disclosure of confidential information to [First Data] constitutes a waiver of the attorney-client privilege.” (Pl. Br. at 8.) First USA, however, claims that the First Data Documents remain privileged because the First Data employees to whom they were disclosed were the “functional equivalent” of First USA employees. *2 To buttress its position, First USA relies on the “limited number of cases” holding that the corporate attorney-client privilege extends to communications between a corporation's attorney and outside agents or consultants to the corporation who act as the functional equivalent of a corporate employee. SR Int'l Bus. Ins. Co. v. World Trade Ctr. Props. LLC, No. 01 Civ. 9291(JSM), 2002 WL 1334821, at *2 (S.D.N.Y. June 19, 2002). Chief among these cases are In re Beiter Co., 16 F.3d 929, 937 (8th Cir.1994), and In re Copper Market Antitrust Litig., 200 F.R.D. 213, 218 (S.D.N.Y.2001). In Beiter, the Eighth Circuit extended the attorney-client privilege to an independent consultant who acted as the de facto principal of a limited purpose corporation in its quest to develop real property, and in the litigation stemming from that project's failure. 16 F.3d at 939–40. In doing so, the court recognized that the consultant often acted as the “sole representative” of the client corporation in its attempt to develop the property, “the development of which appear[ed] to be the sine qua non of the client's existence.” Beiter, 16 F.3d at 934. Further, in the ensuing litigation, the consultant's “involvement with counsel was rather extensive ... [and h]e often attended meetings with counsel, either alone or with [the client].” Beiter, 16 F.3d at 934. Considering the consultant's central role in the transaction and ensuing litigation, the court found that “[t]here [was] no principled basis to distinguish [the consultant's] role from that of an employee....” Beiter, 16 F.3d at 938. Relying on an expansive interpretation of Beiter,[2] the court in Copper Market extended the attorney-client privilege to a “crisis management” public relations firm hired by a corporation to deal with “issues relating to publicity arising from high profile litigation.” 200 F.3d at 215. The Copper Market court based its decision on a number of factors, including that: (1) the public relations firm “was, essentially, incorporated into [the corporation's] staff to perform a corporate function that was necessary in the context of” various litigations; (2) the public relations firm “possessed authority to make decisions on behalf of [the corporation] concerning its public relations strategy;” (3) the public relations firm often consulted the corporation's attorneys in formulating this strategy; and (4) the communications at issue “were for the purpose of obtaining legal advice.” 200 F.R.D. at 219.[3] This Court need not pass upon the validity of the so-called “functional employee” exception to the doctrine of third-party waiver in the privilege context because the facts of this case are materially different from Beiter and similar cases. The purpose of the attorney-client privilege is to “encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice.” Upjohn Co. v. United States, 449 U.S. 383, 389, 101 S.Ct. 677, 66 L.Ed.2d 584 (1981). In contrast to the “functional principal” relationship of the consultant in Beiter, or even the expansive interpretation of Beiter in Copper Market, First Data was merely a transaction processing and computer services corporation that provided standard trade services to First USA and a vast number of other credit card companies.[4] (First USA Opp. at 3 (“Once First USA made the decision to adopt a 2% rate increase, [First Data], working in conjunction with First USA, supplied the computer functionality and expertise....”).) In this manner, First Data's role is akin to that of an accountant or other ordinary third party specialist, disclosure to whom destroys the attorney-client privilege. See, e.g., Calvin Klein Trademark Trust v. Wachner, 198 F.R.D. 53, 55 (S.D.N.Y.2000) (holding that extension of attorney-client privilege to public relations firm hired by company would “broaden the privilege well beyond prevailing parameters” where the firm did “not appear to have been performing functions materially different from those that any ordinary public relations firm would have performed if they had been hired directly by [the company]”). *3 Since the attorney-client privilege “stands in derogation of the public's ‘right to every man's evidence, ... it ought to be strictly confined within the narrowest possible limits consistent with the logic of its principle.” ’ In re Horowitz, 482 F.3d at 81; accord United States v. Weissman, 195 F.3d 96, 100 (2d Cir.1999) (attorney-client privilege “should be narrowly construed and expansions cautiously extended”); Skillsoft, 1999 WL 378337, at *3 (“The attorney-client privilege must be narrowly construed to provide no broader protection than is necessary to accomplish its purpose given that its invocation ‘constitutes an ‘obstacle’ to the truth-finding process.” ') (quotation omitted). Applying such a narrow construction of the putative exception, this Court finds that employees of First Data were not “functional employees” of First USA, and therefore disclosure of the First Data Documents to First Data employees destroyed any privilege that may have existed. Accordingly, plaintiff's motion to compel the production of documents disclosed to First Data is granted.[5] See SR Int'l, 2002 WL 1334821, at *2–3 (refusing to apply the “functional employee” exception to communications between insurance broker and attorneys for insured). III. Inadvertently Produced Documents Aside from the First Data Documents, plaintiffs argue that certain individual documents that First USA claims were inadvertently produced to plaintiffs are, in fact, discoverable. This Court addresses each in turn. A. Control Nos. 269A, 269C and 269D 2Plaintiffs claim that Control No. 269A (First USA Ex. D, 269A), described by First USA as an “issues matrix” drafted during a pricing review undertaken in response to a different lawsuit (First USA Opp. at 16), is discoverable because: (1) it conveys business rather than legal advice, and thus is not protected by the attorney-client privilege; and (2) First USA's claim of self-critical analysis privilege is unavailing. Two individual sections of Control No. 269A, “Item 2.1” and “Item 2.2,” are the subject of this motion.[6] Item 2.1 of Control No. 269A is a one-paragraph description of a potential legal issue relating to First USA's foreign currency conversion rate. It was drafted by a First USA employee after consultation with First USA's in-house counsel, and reflects that employee's discussions with counsel concerning certain aspects of First USA's foreign currency conversion rate. (First USA Ex. H ¶ 5 .) While “[t]he attorney-client privilege ... protects communications seeking legal advice, not business advice,” In re Currency Conversion Fee Antitrust Litig., MDL No. 1409, M 21–95(WHP), 2002 WL 31458230, at *2 (S.D.N.Y. Nov. 4, 2002), this Court finds plaintiffs' argument concerning Item 2.1 to be without merit after conducting an in camera review. Item 2.1 characterizes legal advice sought and obtained by a First USA employee; therefore, it is within the scope of the attorney-client privilege. Currency Conversion Fee, 2002 WL 31458230, at *2; see also United States v. Davis, 132 F.R.D. 12, 16 (S.D.N.Y.1990) (“[a]lthough the solicitation or giving of business advice is not privileged, ... ‘[t]he mere fact that business advice is given or solicited does not, however, automatically render the privilege lost: where the advice given is predominantly legal, as opposed to business, in nature the privilege will still attach.” ’) (quotation omitted). *4 3First USA does not, however, claim attorney-client privilege for Item 2.2 of Control No. 269A, a paragraph outlining certain problems with currency conversion rates. (First USA Ex. D, Control No. 269A.) Instead, First USA relies solely on the self-critical analysis privilege, claiming that Item 2.2 is the product of “a voluntary, self-critical analysis of First USA's pricing practices.” (First USA Opp. at 17.) The self-critical analysis privilege recognizes that in very limited circumstances, “an intrusion into the self-evaluative analyses of an institution would have an adverse effect on the [evaluative] process, with a net detriment to a cognizable public interest.” Trezza v. The Hartford, Inc., No. 98 Civ. 2205(MBM)(KNF), 1999 WL 511673, at *1 (S.D.N.Y. July 20, 1999) (quotation omitted). First USA's argument, however, is unavailing. In the first instance, this Court notes that the availability of the self-critical analysis privilege is an open question in this Circuit. Tortorici v. Goord, 216 F.R.D. 256, 258–59 (S.D.N.Y.2003); see also Wimer v. Sealand Serv., Inc., No. 96 Civ. 8730(KMW)(MHD), 1997 WL 375661, at *1 (S.D.N.Y. July 3, 1997) (the self-critical analysis privilege “has led a checkered existence in the federal courts”) (collecting cases). This Court need not reach this issue, however, because even assuming the availability of the privilege, it would not apply to Item 2.2 of Control No. 269A. Item 2.2 was not produced pursuant to any type of review that serves a “cognizable public interest” sufficient for the application of this privilege. See, e.g., In re: Salomon Inc. Sec. Litig., Nos. 91 Civ. 5442, 5471(RPP), 1992 WL 350762, at *4 (S.D.N.Y. Nov.13, 1992) (“[M]anagement control studies and internal audit reports are not the type of studies or reports whose flow would be curtailed if discovery is allowed.”). Therefore, the self-critical analysis privilege is not applicable to Item 2.2 of Control No. 269A. Since First USA did not claim attorney-client or work product privilege for Item 2.2 on its privilege log (First USA Ex. K, Control No. 269A Item 2.2), plaintiffs are entitled to its production. Accordingly, plaintiffs' motion to compel production of Control No. 269A Item 2.1 is denied, while plaintiffs' motion to compel production of Control No. 269A Item 2.2 is granted. Control No. 269C is a document memorializing the legal department's discussion and resolution of the issues dealt with in Control No. 269A Item 2.1. (First USA Ex. F, Control No. 269C.) Therefore, like Control No. 269A Item 2.1, it is protected by the attorney-client privilege. Accordingly, plaintiffs' motion to compel production of Control No. 269C is denied. In contrast, Control No. 269D is, according to First USA's privilege log, a “[d]ocument describing findings regarding [I]tem 2 .2 and closeout of [that] item.” (First USA Ex. K, Control No. 269D.) Accordingly, it is not covered by the self-critical analysis privilege for the same reasons that applied to Control No. 269A Item 2.2. As First USA asserts no other privilege with respect to Control No. 269D in its privilege log (First USA Ex. K, Control No. 269D), plaintiffs' motion to compel production of Control No. 269D is granted. B. Control No. 269B *5 4Plaintiffs claim that First USA waived its privilege with respect to Control No. 269B (First USA Ex. D, 269B), an incident report summarizing in-house legal advice on and resolution of a particular issue, because the subject matter of Control No. 269B was disclosed to First Data. (Pl. Br. at 14.) The disclosure of certain documents to First Data, see supra Section II, does not, however, automatically trigger the broad subject-matter waiver sought by plaintiffs. See, e.g., Currency Conversion Fee, 2002 WL 31458230, at *3 (“[T]he extrajudicial disclosure of attorney-client communications concerning the legality of the 2% fee/adjustment does not waive the privilege as to the entire subject-matter of the legality of the 2% fee/adjustment.”). The Second Circuit has cautioned that: [W]here as here, disclosures of privileged information are made extrajudicially and without prejudice to the opposing party, there exists no reason in logic or equity to broaden the waiver beyond those matters actually revealed. Matters actually disclosed in public lose their privileged status because they obviously are no longer confidential. The cat is out of the bag, so to speak. But related matters not so disclosed remain confidential. Although it is true that disclosures in the public arena may be “one-sided” or “misleading,” so long as such disclosures are and remain extrajudicial, there is no legal prejudice that warrants a broad court-imposed subject matter waiver. The reason is that disclosures made in public rather than in court—even if selective—create no risk of legal prejudice until put at issue in the litigation by the privilege holder. von Bulow, 828 F.2d at 103 (emphasis in original). Thus, First USA's disclosure of the First Data Documents, and the resultant waiver of the attorney-client privilege as to those documents, does not extend to the contents of Control No. 269B since plaintiffs concede that Control No. 269B was never disclosed to First Data. (Pl. Br. at 14.) Further, Control No. 269B is shielded by the attorney-client privilege for the same reasons as Control No. 269A Item 2.1. See supra Section III.A. 5Plaintiffs argue that even if Control No. 269B is found to be privileged, the crime/fraud exception applies and therefore opens it to disclosure. “The crime-fraud exception removes the privilege from those attorney-client communications that are ‘relate[d] to client communications in furtherance of contemplated or ongoing criminal or fraudulent conduct.” ’ United States v. Jacobs, 117 F.3d 82, 87 (2d Cir.1997) (quoting In re John Doe, Inc., 13 F.3d 633, 636 (2d Cir.1994)). To establish the crime-fraud exception, a district court must make “(i) a determination that ‘the client communication or attorney work product in question was itself in furtherance of the crime or fraud’ and (ii) [find] ‘probable cause to believe that the particular communication with counsel or attorney work product was intended in some way to facilitate or to conceal the criminal activity.” ’ In re Richard Roe, Inc., 168 F.3d 69, 71 (2d Cir.1999) (quoting In re Richard Roe, Inc., 68 F.3d 38, 40 (2d Cir.1995)); see also Jacobs, 117 F.3d at 87 (“A party wishing to invoke the crime-fraud exception must demonstrate that there is a factual basis for a showing of probable cause to believe that a fraud or crime has been committed and that the communications in question were in furtherance of the fraud or crime.”). *6 Procedurally, a district court should apply a two-step process in determining whether the crime/fraud exception applies: (1) “the proposed factual basis must strike ‘a prudent person’ as constituting ‘a reasonable basis to suspect the perpetration or attempted perpetration of a crime or fraud, and that the communications were in furtherance thereof;” ’ (2) after that showing is made, the Court has discretion whether to review the subject document in camera, and if it does, then the Court must in its discretion, determine whether the exception applies. Jacobs, 117 F.3d at 87 (quoting In re John Doe Inc., 13 F.3d 633, 637 (2d Cir.1994)); accord United States v. Zolin, 491 U.S. 554, 572–74, 109 S.Ct. 2619, 105 L.Ed.2d 469 (1989). Plaintiffs argue that the crime/fraud exception applies because of “First USA's deliberate policy to frustrate the disclosure requirements set forth in TILA.” (Pl. Br. at 21.) They buttress that assertion by pointing out that First USA “knew that its 2% mark-up was a fee,” and that First USA “through its Legal Department ... orchestrated a series of steps to keep the fees under wraps and to suppress cardholder inquiries on the subject.” (Pl. Br. at 21–23.) As this Court noted in its prior Memorandum and Order resolving another motion to compel by plaintiffs, conclusory allegations of criminal or fraudulent intent such as these would not strike a prudent person as constituting “a reasonable basis to suspect the perpetration or attempted perpetration of a crime or fraud,” or that the communications at issue were “in furtherance thereof.” See Currency Conversion Fee, 2002 WL 31458230, at *3–4. Further, after an in camera review of Control No. 269B, this Court concludes that the document does not support the application of the crime/fraud exception. Accordingly, plaintiffs' motion to compel production of Control No. 269B is denied. C. Control No. 270 6Finally, plaintiffs claim that the redacted portions of Control No. 270 (First USA Ex. D, 270), which contain communications between First USA's in-house attorneys and employees concerning another litigation, are not covered by the attorney-client privilege because “the information is factual in nature.” (Pl. Br. at 17.) To support their position, plaintiffs rely on Upjohn, 449 U.S. at 395. However, plaintiffs overlook the pronouncement in Upjohn that “the privilege exists to protect not only the giving of professional advice ... but also the giving of information to the lawyer to enable him to give sound and informed advice.” 449 U.S. at 390. After reviewing Control No. 270 in camera, it is clear that the attorney-client privilege applies to that document.[7] Accordingly, plaintiffs' motion to compel production of Control No. 270 is denied. CONCLUSION For the reasons set forth above, plaintiffs' motion to compel is: (1) granted with respect to any documents actually disclosed to First Data, including those documents identified as Control No. 268 and Control No. 271; (2) denied with respect to Control No. 269A Item 2.1; (3) granted with respect to Control No. 269A Item 2.2; (4) denied with respect to Control No. 269B; (5) denied with respect to Control No. 269C; (6) granted with respect to Control No. 269D; and (7) denied with respect to Control No. 270. Footnotes [1] For a comprehensive overview of the facts and legal issues at the heart of this action, this Court refers to its prior decision, familiarity with which is presumed. See In re Currency Conversion Fee Antitrust Litig., 265 F.Supp.2d 385 (S.D.N.Y.2003). [2] “[A]lthough the immediate context of the Bieter court's decision was factual communications with a consultant who had in effect functioned as a principal with respect to the events underlying the litigation, the principles to be gleaned from the decision are not so limited.” Copper Market, 200 F.R.D. at 219. [3] See also Federal Trade Commission v. GlaxoSmithKline, 294 F.3d 141, 147–48 (D.C.Cir.2002) (extending attorney-client privilege to public relations and government affairs consultants); Twentieth Century Fox Film Corp. v. Marvel Enters., Inc., No. 01 Civ. 3016(AGS)(HBP), 2002 WL 31556383, at *2 (S.D.N.Y. Nov. 15, 2002) (holding that certain independent contractors were “functional equivalent of employees” where “the use of independent contractors is the result of the sporadic nature of employment in the motion picture industry”). [4] In fact, First USA concedes that it outsourced its processing functions to First Data solely because it “has found it more efficient,” and that “[m]any credit card issuers perform these functions in-house.” (First USA Opp. at 2.) [5] This includes the documents separately identified as Control No. 268 (First USA Ex. D, entry 268) and Control No. 271 (First USA Ex. D, entry 271), which were disclosed to First Data employees. However, to the extent that the redacted portions of any First Data Documents identified by plaintiffs consist solely of handwritten notes of First USA employees not circulated to First Data, or documents that were not in fact shared with First Data, see infra Section III.B, these documents remain privileged. (See First USA Opp. at 3 n. 2.) [6] First USA claims that the balance of Control No. 269A was not produced because “it does not pertain to foreign currency conversion rates,” and is thus irrelevant. (First USA Ex. D, 269A Cover Page.) This Court makes no determination concerning this representation. [7] Further, even if the attorney-client privilege did not apply, Control No. 270 would not be discoverable because it is protected by the attorney work product doctrine, which shields from discovery all materials “prepared in anticipation of litigation or for trial by or for another party or by or for that other party's representative....” Fed.R.Civ.P. 26(b)(3); see also Bank of New York v. Meridien BIAO Bank Tanzania, No. 95 Civ. 4856(SS)(JCF), 1996 WL 490710, at *2 (S.D.N.Y. Aug. 27, 1996) (“[A] document prepared in anticipation of litigation, need not have been created at the behest of counsel.”). While the protection for work product is not absolute and may be overcome if the party seeking discovery shows that it has a “substantial need” for the materials and is unable without “undue hardship” to obtain the substantial equivalent of the materials by other means, see Fed.R.Civ.P. 26(b)(3), plaintiffs have made no such showing here.