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FILED: WESTCHESTER COUNTY CLERK 09/11/2019 03:26 PM INDEX NO. 60767/2018
NYSCEF DOC. NO. 560 RECEIVED NYSCEF: 09/11/2019
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF WESTCHESTER
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PAMELA GOLDSTEIN, ELLYN & TONY BERK,
as Administrators of the Estate of Winifred Berk,
and PAUL BENJAMIN, on behalf of themselves
and all other similarly situated, Index No. 60767/2018
Plaintiffs,
Hon. Linda S. Jamieson
-against-
HOULIHAN/LA WREN CE INC.,
Defendants.
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REPORT AND RECOMMENDATION
OF DISCOVERY REFEREE
INTRODUCTION
In this putative class action, familiarity with which is presumed (Docket Nos. 1-120), the
parties are engaged in pre-class certification discovery and have now reached an impasse
regarding non-party Subpoenas served by Defendant upon the Rubenstein Public Relations firm. 1
Plaintiffs and non-party Rubenstein seek to quash the Subpoenas. 2
PROCEDURAL BACKGROUND
I. The Rubenstein Subpoenas
On or about July 5, 2019, Plaintiffs served a non-party Subpoena Duces Tecum and
Subpoena ad Testificandum upon Rubenstein Public Relations, Inc. ("Rubenstein"), the well-
lmown public relations firm retained by Plaintiffs' counsel. Rubenstein drafted a July 14, 2018
1
On July 18, 2019, I conducted an initial conference with counsel. Certain rulings were made on various
discovery issues which have permitted certain Plaintiffs' depositions to be conducted the week of August 12, 2019.
That process will continue.
2
All submission with respect to the motion are annexed to the Appendix submitted with this Report and
Recommendation.
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Press Release concerning this litigation which is at the heart of this dispute. The Subpoena
Duces Tecum seeks the following four categories of documents from Rubenstein:
1. Documents concerning or related to the allegations in the Complaint
filed by Pamela Goldstein in the above-referenced matter, including without
limitation all communications with Pamela Goldstein, her counsel, or involving any
Rubenstein agent or employee.
2. Documents related to or referencing the Complaint filed by Pamela
Goldstein in the above-referenced matter.
3. Documents related to or referencing the lawsuit captioned Goldstein
v. Houlihan/Lawrence Inc., Index No. 60767/2018 (Sup. Ct., Westchester County).
4. Documents related to or referencing, and communications
concerning, any press release concerning the lawsuit captioned Goldstein v.
Houlihan/Lawrence Inc., Index No. 60767/2018 (Sup. Ct., Westchester County).
(Appendix, Ex. 1.)
The Subpoena ad Testificandum seeks to depose Ryan Carbain, a Rubenstein vice
president, regarding the aforesaid category of documents. (Id., Ex. 2.) The stated purpose of
both Subpoenas is "to obtain documents, facts, and evidence to enable Defendant to obtain
admissible documents and testimony to prosecute and defend this action." Both Subpoenas
annexed copies of the Plaintiffs' third amended complaint and Defendant's answer thereto.
(Docket Nos. 557 and 559.)
II. Plaintiffs' and Rubenstein's Application to Quash
By letter briefs dated July 30, 2019, counsel for Plaintiffs and Rubenstein moved to quash
the Subpoenas. (Appendix, Exs. 3 and 4.) 3 By letter brief dated August 5, 2019, Defendant
opposed the motion to quash. (Id., Ex. 5.) At my request, the parties submitted supplemental
letter briefs on September 4, 2019. (Id., Exs. 6 and 7.)
3
Rubenstein's counsel essentially incorporated by reference the arguments advanced by Plaintiffs' counsel.
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Defendant principally argues that the Rubenstein documents and testimony are relevant
to the issue of whether the Boies Schiller firm satisfies the "adequacy of representation" prong of
the well settled class certification standard under CPLR 901(a). 4
Defendant asserts that Plaintiffs' counsel cannot adequately represent the putative class
because the firm allegedly engaged in unethical and improper conduct in (i) using the Rubenstein
firm to craft and issue the July 14, 2018 Press Release regarding the pending action which
"presented as facts" to the public the following:
• "A huge proportion of Houlihan Lawrence's growing sales have come through
ill-gotten gains on undisclosed, non-consensual dual-agent deals where the firm
followed a systematic strategy and policy by which it abandoned its duty of
undivided loyalty to its clients to grab double-commissions and choke out its
competitors."
• "Through high-pressure tactics and sleight of hand, Houlihan Lawrence was
able to pressure lawyer Pamela Goldstein into a dual-agent transaction without
her informed consent."
• "'Dual agency was never intended to be a routine business practice. In fact, the
law makes it extraordinarily difficult for real estate brokers like Houlihan
Lawrence to lawfully act as a dual agent. But Houlihan Lawrence has
aggressively used dual agency and has taken over the Westchester County real
estate market in the process,' added Jeremy Vest, a paiiner at Boies Schiller
Flexner LLP."
(Appendix, Ex. 5, pp. 1-2.) Specifically, Defendant argues that the Rubenstein Press Release
violates Rule 6.3 of the New York Rules of Professional Conduct because: (i) it has a
"substantial likelihood of materially prejudicing an adjudicative proceeding" since it has released
into the potential jury pool alleged facts ("ill gotten gains" and "non consensual dual agent
deals") which could compromise Defendant's right to a fair trial and (ii) it "portrays as facts"
that Defendant "abandoned its duty of undivided loyalty to its clients to grab double
4
See CPLR 90l(a)(4): "the representative parties will fairly and adequately protect the interests of the class."
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commissions and choke out competitors." (Id., p. 3.) Therefore, Defendant argues discovery
from Rubenstein concerning the Press Release and the instant action are relevant to the issue of
the adequacy of the Boies Schiller firm to represent the putative class. 5
Plaintiffs assert three fundamental arguments to quash the Subpoenas. First, they argue
the statements in the Rubenstein Press Release are appropriate, ethical, "rooted in the complaint"
and, therefore, do not constitute grounds to disqualify the Boies Schiller firm as class counsel
under the "fair and adequacy" prong of the class certification standard. They further argue that
press releases are standard in announcing the filing of a putative class action and such
publication required by law, citing 15 U.S.C. § 78u-4(a)(3)(A). 6 See Appendix, Ex. 3, pp. 2-7. I
need not address this argument as the propriety of the Press Release will be addressed by the
Court in the class certification motion.
Second, citing Gentile v. State Bar of Nevada, 501 U.S. 1030, 1043 (1991) and In Re
Grand Jury Subpoenas, 265 F.Supp.2d 321 (S.D.N.Y. 2003), Plaintiffs' counsel argues that the
information sought by the Subpoenas is protected under the attorney-client privilege because the
Boies Schiller firm retained Rubenstein "in connection with this development and
implementation of the class' pre-filing legal strategy." (Appendix, Ex. 3, pp. 5-6.)
Finally, the Plaintiffs allege that the information sought by the Subpoena is irrelevant,
would unduly burden and harass the Plaintiffs and Rubenstein and needlessly expand discovery
with its attendant delays and costs.
Defendant also alleges that July 25, 2018, Plaintiffs' counsel improperly wrote to Plaintiffs CEO, approximately
one week after the litigation was commenced. (Appendix, Ex. 5, p. 2.)Plaintiffs' counsel denies any impropriety of
this communication and explains the circumstances which prompted the letter. (Id.,Ex. 3.) Since this
communication does not involve the Subpoenas, I need not address it. The alleged impact of the letter, if any, upon
the adequacy of the Boies Schiller firm to be class counsel will be determined in the class certification motion
ultimately determined by the court.
6
While this is not a federal case, Plaintiffs argue correctly that publication of the filing of state class actions is
typical by both Plaintiffs' counsel and the media.
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DISCUSSION
I. Attorney-Client Privilege
If the documents are privileged, the relevance of the documents sought is moot.
The burden of establishing any right to the protection [of the attorney-client
privilege] is on the party asserting it;the protection claimed must be
narrowly construed and its application must be consistent with the purposes
underlying the immunity.
Spectrum Sys. Int'! Corp. v. Chemical Bank, 78 N.Y.2d 371,377 (1991).
New York State courts have looked to the "thoughtful decisions" of Federal District
Courts on the issue of the application of the attorney-client privilege to communications with
public relations firms. In Gottwaldv. Sebert, 58 Misc. 3d 625, 63 N.Y.S.3d 818 (N.Y. Co. Sup.
2014) affirmed 161 A.D.3d 679, 79 N.Y.S.3d 7 (1st Dept. 2018), the court engaged in a thorough
discussion of various federal district court decisions applicable here. See Chevron C01p., 749
F.Supp.2d 141, 164-165 (S.D.N.Y. 2010) affirmed sub non Lago Agrio Plaintiffs v. Chevron
Corp., 409 Fed. Appx. 393 (2d Cir. 2010); Abu Dhabi Commercial Bank v. Morgan Stanley &
Co., 2011 WL 4716334, 2011 U.S. Dist. LEXIS 116850 (S.D.N.Y. 2011) (and cases cited in
Gottwald at fn. 6).
Based upon the foregoing, courts have applied the following standard:
... the party claiming privilege must demonstrate that the client: (1)
had a reasonable expectation of confidentiality under the circumstances, and
(2) [that} disclosure to the third party was necessary for the client to obtain
informed legal advice. [T]he 'necessity' element means more than just
useful and convenient, but rather requires that the involvement of the third
party be nearly indispensable or serve some specialized purpose in
facilitating the attorney-client communications. Thus, where [***9] the
third party's presence is merely useful but not necessary, the privilege is
lost. (Fine v. ESPN, Inc., 2015 WL 3447690, *JO, 2015 US. Dist. LEXIS
68704, *27-28 [ND NY, May 28, 2015, No. 5:12-CV-0836 (LEKIDEP)7
[emphasis added; citations and internal quotation marks omitted]).
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In support of the application of the attorney-client privilege, Plaintiffs assert that
"plaintiffs' counsel utilized Rubenstein, as a third party strategic advisor ... in connection with
its development and implementation of the class' pre-filing legal strategy." (Appendix, Ex. 3, p.
6.) Such a generalized statement of counsel does not satisfy the requisite standard for the
invocation of the attorney-client privilege. Moreover, the facts presented simply do not support
the application of the attorney-client privilege to the Rubenstein Subpoenas.
Whatever function a "third party strategic advisor" may provide in a given case is sui
generous and does not justify in this case the blanket application of the attorney-client privilege
to communications between Plaintiffs' counsel and Rubenstein. There is no asse1iion, let alone
proof, that the involvement of Rubenstein was necessary for Plaintiffs to secure informed legal
advice, so that Rubenstein's involvement was" ... indispensable or served some specialized
purpose in facilitating the attorney-client communications. Fine v. ESPN Inc., 215 WL 3447690
*10, 2015 U.S. Dist. LEXIS 68704 (N.D.N.Y. 2015). As such, on this record the attorney-client
privilege does not apply. 7
The cases relied upon by Plaintiffs do not support application of the attorney-client
privilege to the Subpoenas. Gottwald, supra, declined the application of the privilege
notwithstanding the appropriate observation that the attorney-client privilege "is not
automatically vitiated merely by virtue of the involvement of a public relations firm. There, like
here, the party asserting the privilege did not meet the requisite burden. In re Grand Jury
Subpoena dated March 24, 2003, 265 F. Supp. 321 (S.D.N.Y. 2003) is distinguishable. There
the attorney for the target of a grand jury investigation in a high-profile criminal case hired a
7
See also,Egiazarayan v. Zalmayev, 290 FRD 421 (S.D.N.Y. 2013) (privilege rejected where public relations firm
provided ordinary public relations advice in high profile case); Hugh v. Schroader Inv.Mgt. N. Am Inc., (2003 WL
21998674, 2003 U.S. Dist. LEXIS 14586 (S.D.N.Y. 2003) (privileged rejected).
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public relations firm to aid in developing a public relations campaign to neutralize "unbalanced
and often inaccurate press reports" calling for the indictment of their client. The focus of the
campaign was to reach the prosecution and regulators to address and counter balance the media
pressure to indict the target client.
In developing the media campaign the public relations firm interacted with the client's
attorneys to develop legal defense strategies as well as the public relations campaign. Under
these unique circumstances not present here, the court held that the communications between the
public relations firm and the client's attorney were in furtherance of and aided the attorneys in
providing legal advice to their client. See also, United States v. Kave!, 296 F .2d 918 (2d Cir.
1961) (communications between lawyers and accountants privileged because legal counsel
"needed outside help" from the retained accountants).
Therefore, the documents and testimony sought by the Subpoenas are not privileged.
II. The Alleged Unethical Conduct of Plaintiffs' Firm
Determining the propriety of the requested discovery warrants some discussion of the
adequate representation standard for class certification under both Federal and State law.
Adequate representation depends on two factors: (a) the plaintiffs attorney
must be qualified, experienced, and generally able to conduct the proposed
litigation and (b) the plaintiff must not have an interest antagonistic to the
class.
Meachum v. Outdoor World Corp., 654 N.Y.S.2d 240,244 (N.Y. Sup. Ct. 1996) (citing Susman
v. Lincoln Am. Corp., 561 F.2d 86, 90 (7th Cir. 1977)). "[O]nly the most egregious misconduct
on the part of the plaintiffs' lawyer could ever arguably justify denial of class status." Id. (citing
Halverson v. Convenient Food Mart, 458 F.2d 927, 932 (7th Cir. 1972)). "Class action status
should be denied where counsel's unethical conduct has been or is prejudicial to the interests of
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the class or results in creating a conflict of interest between the attorney and the class and the
attorney is therefore unable to protect the interests of the class." Id.
As previously noted, the impact of the Press Release, if any, upon the adequacy of the
Boies Schiller firm to act as class counsel will be determined by the court in the class
certification motion. Therefore, there is no need to address in detail Plaintiffs' substantive
defense of the Press Release or Defendant's attack of same. However, press releases
accompanying the filing of any new litigation, class action or otherwise, are commonplace.
Defendant does not object to the fact that there was a press release but rather, the alleged
improper content of the Release. The issue at this juncture is the propriety of Defendant's
request for discovery of information, beyond that which is in the public domain, of potential
additional alleged misconduct by the Boies Schiller firm's retention of Rubenstein.
III. Relevance of the Information Sought by the Subpoenas
"Adequate representation depends on two factors: (a) the plaintiff's attorney must be
qualified, experienced, and generally able to conduct the proposed litigation, and (b) the plaintiff
must not have interests antagonistic to those of the class." Meachum v. Outdoor World Corp.,
654 N.Y.S.2d 240,244 (N.Y. Sup. Ct. 1996) (citing cases). Courts have indeed held that the
unethical conduct of class counsel can serve as a predicate for the denial of class status.
"Although a slight breach of ethics may be overlooked in light of the circumstances, or a
reasonable, good-faith belief of propriety, serious misconduct does constitute a ground for denial
of class action status." Id. at 245. "Only the most egregious misconduct on the part of plaintiffs'
lawyer could ever arguably justify denial of class status." Id.
Houlihan Lawrence has not made a sufficient showing that all "[ d]ocuments related to or
referencing, and communications concerning" the Press Release are material and necessary to
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the adequacy of representation question. As an initial matter, Houlihan Lawrence argues that the
Press Release, on its face, is sufficient to establish unethical conduct. Assuming that to be true,
additional discovery on this point would be cumulative and lack proportionality. This reason
alone is sufficient to quash the Subpoena.
In addition, "[t]he Court of Appeals has consistently held that a subpoena duces tecum
'may not be used for the purpose of discovery or to ascertain the existence of evidence,' but
rather 'to compel the production of specific documents that are relevant and material to facts at
issue in a pending judicial proceeding."' Sinai v. 0 'Connor, 2019 NY Slip Op 31492(U), ~ 3
(N. Y. Sup. Ct. 2019). Houlihan' s requested discovery ("[ d]ocuments related to or referencing,
and communications concerning" the Press Release) is quite broad and fails to identify
documents with any specificity. It is simply not clear from the Subpoena or Defendant's letter
briefs what specific documents it seeks. Indeed, the Subpoena's breadth improperly places the
burden on Rubenstein to determine and disclose what is, or is not, "related to" or "concerning"
the Press Release. See, e.g., Weiss v. Meiselman, 155 A.D.2d 533, 533-34 (2d Dept. 1989) ("use
of the description 'all' with broad categories ... rendered the notice palpably improper by failing
to specify the documents sought with sufficient particularity"). Where, as here, a subpoena "fails
to specify the particular records sought, the party subject to the subpoena is not required to 'cull
the good from the bad."' Sinai v. O'Connor, 2019 NY Slip Op 31492(U), ~ 3 (Sup. Ct.).
"Courts have the option to quash those subpoenas in their entirety, rather than prune them."
Glassman v. Weinberg, 2018 NY Slip Op 32001(U), ~ 5 (N.Y. Sup. Ct. 2018).
Courts can also consider the "merits, or lack thereof, of the claim" in determining what
discovery is material and necessary. See Garcia v. First Spanish Baptist Church, 259 A.D.2d
465,466 (2d Dept. 1999). Regarding the substance of the Press Release, the cherry-picked
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phrases that Houlihan Lawrence criticizes are, in most cases, flanked by words such as "alleges"
and "allegations." In addition, Houlihan has not shown to any reasonable likelihood that the July
2018 Press Release, or the subsequent contemporaneous press coverage based off of it, will
cause a taint to the jury pool whenever this case goes to trial. Houlihan has certainly not
demonstrated a breach of ethics of the magnitude mentioned in the cases it cited. The weakness
of Houlihan' s proffer on these points is compounded by the intrusiveness of the discovery, which
should also be considered. See Garcia, 259 A.D.2d at 466 ("it is within the court's wide
discretion to determine what is 'material and necessary' while striking a sensitive balance
between the intrusiveness of the discovery device and the merits"). In this case, the discovery
would be very intrusive, potentially exposing the mental impressions of counsel concerning the
complaint's allegations.
To support its position, Houlihan Lawrence principally relies on Korn v. F'ranchard
Corp., 67 Civ. 3445., 1970 U.S. Dist. LEXIS 9787 (S.D.N.Y. Oct. 22, 1970). 8 In Korn, the
Court held that class counsel would not "fairly and adequately represent the members of the
purported class" because he had "abused the trust of the court" by using the names and addresses
of potential class members for an unauthorized purpose. Id. at *11-13. No such conduct is
alleged (let alone shown) here, making Korn factually distinguishable. In addition, Korn did not
define or discuss the proper scope of discovery on the adequacy of representation of class
counsel, making the case largely inapposite. Houlihan does not cite to any case that would
warrant the discovery it seeks.
8
It is also notewo1thy that Korn was reversed by the Second Circuit, albeit without passing on the propriety of the
trial court's ruling that original class counsel would not fairly and adequately represent the members of the
purported class. Korn v. Franchard Corp., 456 F.2d 1206, 1208 (2d Cir. 1972).
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Ultimately, it appears Houlihan is hoping that something useful will turn up via the
Subpoena. "The mere possibility that admissible evidence may be uncovered, however, does not
entitle a party to unlimited discovery." Sundaram v. Brookhaven Nat '! Lab., 1996 U.S. Dist.
LEXIS 22811, at *10 (E.D .N.Y. Mar. 11, 1996).
In light of the foregoing, the Subpoenas should be quashed in their entirety. See Higgins
v. Montemurro, 203 A.D.2d 799, 800 (3d Dept. 1994) ("the scope of permissible discovery is not
entirely unlimited and the trial court is invested with broad discretion to supervise discovery and
to determine what is ' material and necessary' as that phrase is used in CPLR 3101 (a)").
CONCLUSION
For the reasons set forth above, I respectfully report and recommend the Rubenstein
Subpoenas be quashed.
Dated: White Plains, NY
September 11, 2019 JJ t
William P. Harringto ,, Esq.
Discovery Referee
TO: All Counsel via NYSCEF
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