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| November/December 2024 | BAEC Bulletin
BAEC Bulletin | November/December 2024 |
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WESTERN DISTRICT CASE NOTES
of §1335(a) either. In the Court’s view, the interpleader statute is clear -- to invoke subject matter jurisdiction, a plaintiff must either deposit the funds into the registry of the court or post an appropriate bond. The Court thus de- nied plaintiff’s motion but allowed it to submit a renewed motion for interpleader deposit accompanied by sufficient detail why any proposed bond was adequate to satisfy the purposes of the deposit requirement. FOIA and Vaughn Indeces In Robert F. Kennedy Human Rights, et al. v. United States Immigration and Customs Enforcement, 22-CV- 929-LJV-HKS (Aug. 28, 2024), a Freedom of Information Act (“FOIA”) action, the Court entered an order requiring defendant to produce a disclosure plan, monthly updates reporting the number of pages produced, and a so-called Vaughn index listing documents withheld or redacted pursuant to a specified FOIA exemption. Based on a de- cision from the D.C. Circuit, a Vaughn index or affidavit is the means by which an agency specifically describes any withheld or redacted documents and justifies why the re- sponsive records are exempt from disclosure under FOIA. The Vaughn index should provide enough detail to permit the requesting party to contest the failure to produce the record in an adversarial fashion, or a reviewing court to engage in a de novo review of the withheld information. In FOIA cases involving a large volume of responsive doc- uments, such as was involved here, the producing agency also is permitted to use representative sampling in its Vaughn index, rather than itemizing every withheld re- cord, to test the agency’s FOIA exemption claims. Other- wise, to require a Vaughn index to itemize every withheld record would unnecessarily burden the limitations of time and resources that constrain agencies, courts and FOIA requestors alike. As a result, in an order addressing the completeness of defendant’s FOIA responses, including its Vaughn index, the Court held that defendant was per- mitted to rely on a representative sampling of every 25th page of the withheld or redacted documents. The Court reasoned that allowing the proposed representative sam- pling of 4 percent should bring this matter to an earlier resolution while still affording plaintiff the relief it sought. Privilege Log Requirements In Homeland Ins. Co. of Delaware v. Indep. Health Ass’n, Inc., 22-cv-462-WMS-HKS (Sept. 26, 2024), an insurer sought a declaratory judgment that it had no obligation to defend and indemnify its insureds in a federal qui tam action and related arbitration. During discovery, a dispute arose and plaintiff moved to compel defendants to re- spond to certain interrogatories and document requests. The Court granted that motion and, in doing so, specifical- ly noted that if the defendants assert the attorney-client privilege in response, they are required by the Federal and Local Rules of Civil Procedure to prepare and pro- duce a privilege log. Thereafter, defendants responded
to plaintiff’s discovery demands and provided a privilege log identifying certain materials that were withheld based on the common-interest, work-product, and attorney-cli- ent privileges. Plaintiff objected to the sufficiency of the privilege log, contending the log failed to comply with the applicable rules, and that it could not meaningfully eval- uate defendants’ assertion of privilege. Counsel for the parties then met and conferred but they were unable to reach an agreement, so plaintiff moved to compel chal- lenging the sufficiency of defendants’ privilege log. In evaluating the motion, the Court first observed that Local Rule of Civil Procedure 26(d)(1)(B)(i) requires a party with- holding allegedly privileged documents to identify: the type of document; the general subject matter of the docu- ment; the date of the document; and “such other informa- tion as is sufficient to identify the document for a subpoe- na duces tecum, including, where appropriate, the author of the document, the addressees of the document and any other recipients shown in the document, and, where not apparent, the relationship of the author, addressees and recipients to each other.” The Court then noted that, while categorical privilege logs are presumptively prop- er where a party asserts the same privilege for multiple documents, the use of categorical privilege logs does not obviate a party’s obligation to provide sufficient detail, and may not be vague or generic. Ultimately, the Court found that the privilege log ran afoul of the requirements because, among other things, the descriptions of the sub- ject matter of the withheld documents were vague and generic, and because the log did not identify the titles or roles of the individuals involved in the communications. As a result, defendants were directed to revise their privi- lege log so as to break the communications into separate categories that: (1) are described with specific detail as to their subject matter so as to support the claimed privilege; (2) span no more than one year per category; (3) identify the titles and roles of the individuals involved in the com- munications; and (4) state the specific privilege asserted for the communications within each category. Defendants were also specifically warned that “should their revised log entries not meet the above standards, the Court may exercise its discretion to require a document-by-docu- ment log of those communications” rather than utilizing a categorical log. Bankruptcy In Official Committee of Equity Securities Holders v. Inte- grated Nano-Technologies, Inc., et al., 23-CV-6350-FPG, 23-CV-6351-FPG (Aug. 19, 2024), related appeals arose from a Chapter 11 bankruptcy in which the Bankruptcy Judge dismissed the case due to the debtor’s failure to retain counsel and concluded that the committee of secured creditors must be automatically dissolved. Ear- lier in the proceeding, the Bankruptcy Judge had denied the debtor’s motion to retain a certain law firm as counsel because that law firm had not disclosed numerous poten-
BY KEVIN M. HOGAN AND SEAN C. MCPHEE
Removal and Fraudulent Joinder In Woolf v. Precision Technologies LLC, 23-cv-1023-EAW (Sept. 18, 2024), plaintiffs filed a complaint in New York State Supreme Court asserting causes of action against two defendants based on negligence and strict products liability, seeking damages for personal injuries. One of the defendants removed the action contending that diversity jurisdiction existed, and plaintiffs moved to remand based on the “forum defendant rule,” since the co-defendant is a citizen of New York. The removing defendant did not dispute that its co-defendant is a citizen of New York, but instead argued that the co-defendant was fraudulently joined, so its citizenship should not be considered in determining the right to remove. In making this argument, the removing defendant contended that the co-defendant was merely a “pass-through distributor” of the product at issue and should, therefore, be disregarded as a nominal party. Noting first that a defendant seeking removal bears a heavy burden of proving fraudulent joinder by clear and convincing evidence, and that all factual and legal issues must be resolved in favor of the plaintiff, the Court then observed that fraudulent joinder can be established in one of two ways: (1) by showing fraud in the plaintiff’s pleadings; or (2) by demonstrating that there is no possibility, based on the pleadings, that a plaintiff can state a cause of action against the non-diverse defendant in state court. The Court then found that, by merely disputing the nature of the co-defendant’s involvement in the distribution of the product at issue, the removing defendant failed to establish that its co-defendant was fraudulently joined in order to defeat diversity. Rather, as the Court observed, there was no dispute that the co-defendant had at least some connection to the controversy, as evidenced by the fact that the removing defendant asserted a cross-claim against the co-defendant for contri- bution and/or indemnification prior to removing the action to federal court. Ultimately, because the removing defendant failed to show by clear and convincing evidence that the co-defendant was fraudulently joined for the purpose of defeating diversity jurisdic- tion, the Court held that it lacked subject matter jurisdiction in light of the forum defen- dant rule and granted plaintiffs’ motion to remand. Interpleader In Raymond James & Associates, Inc. v Ellison, et al., 23-CV-6497-EAW (Aug. 29, 2024), an interpleader action brought pursuant to 28 U.S.C. §1335 concerned two individual retirement accounts maintained by plaintiff that were the subject of state court disputes between alleged beneficiaries of the accounts following the creator’s death. At the time of the action, the combined value of the two accounts was approximately $493,000.00. Plaintiff moved for an interpleader deposit, to be secured by a bond in the amount of $1,000.00, in which Plaintiff would continue to hold the accounts pending resolution of the competing claims but immediately receive a full and final discharge from any liability with respect to the accounts. Pursuant to 28 U.S.C. §1335(a), a federal District Court has original jurisdiction over an interpleader action if i) the value of the money or property in dispute is at least $500, ii) two or more adverse claimants are of diverse citizenship, and iii) the plaintiff has deposited the money or property into the registry of the court or has given bond payable to the court in such amount as the court deems proper. Thus, without a deposit or a bond, the court does not have subject matter jurisdiction and has no authority to hear the dispute. Here, plaintiff sought to use a nominal bond while it continued to hold the assets in controversy in its investment accounts. Although the Court has discretion to determine the appropriate amount of an interpleader bond, here the Court was not persuaded that a nominal bond satisfied the purposes of the deposit requirement under §1335(a). The Court also rejected defendants’ request that the funds currently in the investment accounts instead be deposited with a third party investment agency, because such a third party deposit did not satisfy the jurisdictional requirements
KEVIN M. HOGAN Partner Phillips Lytle LLP
SEAN C. MCPHEE Partner Phillips Lytle LLP
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