Richmond Global Compass Fund Management GP, LLC, et al. v. Decio Nascimento et al.
Categories
Attorneys and Parties
Brief Summary
This dispute arose in the investment fund industry and concerns alleged misuse of confidential information, competition by a departing chief investment officer, investor solicitation, employee raiding, and discovery from nonparty counsel about the formation and launch of a competing fund.
The lower court quashed subpoenas duces tecum served on nonparties Jeremy E. Deutsch and Cozen O'Connor, granted Deutsch partial protection from further discovery, and did not require a privilege log for documents withheld as privileged.
The Appellate Division reversed both orders, denied the motion to quash and the motion for a protective order, and directed respondents to provide a privilege log for documents withheld on privilege grounds under CPLR 3122(b) [requires a withholding party to provide information sufficient to assess privilege claims].
The court held that respondents did not meet the high burden for quashing a nonparty subpoena because they failed to show the requested information was utterly irrelevant or that the subpoena's futility was obvious. The requested communications were material to plaintiffs' claims about the competing fund's formation, defendants' departure, and investor outreach. The court also held that nonparties, including attorneys, may be required to produce privilege logs, and any possible overlap with defendants' own privilege log did not matter under CPLR 3101 [governs full disclosure in civil actions and does not require the requesting party to show the information cannot be obtained elsewhere].
Background
Plaintiffs alleged that Decio Nascimento, while formerly serving as Chief Investment Officer of Richmond Global Compass Funds Management LLP (Compass), signed a contract containing confidentiality, noncompete, and nonsolicitation provisions. After resigning, he allegedly formed a competing investment fund and hired Sean Jussen and Frank Jones, who had also worked for Compass. Plaintiffs claimed the new fund solicited Compass investors and promoted itself as using the same team and investment strategy that had succeeded at Compass. Based on those allegations, plaintiffs sued for breach of contract, unjust enrichment, unfair competition, misappropriation of trade secrets, and breach of fiduciary duty.
Lower Court Decision
Supreme Court, New York County, granted the nonparties' motion to quash subpoenas seeking communications between defendants and attorney Jeremy E. Deutsch about forming the competing fund, planning defendants' departure, and contacting investors. In a separate order, the court also granted Deutsch partial protection against further discovery and declined to require a privilege log for withheld documents.
Appellate Division Reversal
The Appellate Division unanimously reversed both orders. It held that the subpoenaed communications were material and relevant to plaintiffs' claims and that respondents had not shown the information sought was utterly irrelevant or that disclosure would inevitably be futile under Matter of Kapon v Koch. The court further held that nonparties, including attorneys, are not exempt from producing privilege logs, citing Kozel v Kozel, and directed respondents to produce such a log. The court noted that the log was necessary to test privilege assertions, including whether communications had been shared with third parties, and that the dates of the communications could themselves be relevant. It also rejected the argument that plaintiffs should seek the same information from defendants instead.
Legal Significance
This decision reinforces New York's liberal nonparty discovery standard and confirms that attorneys and other nonparties cannot avoid subpoenas merely by asserting privilege in general terms. It also makes clear that privilege logs are required from nonparties when documents are withheld, so that the requesting party and the court can evaluate whether the privilege claim is valid and whether any waiver may have occurred.
A nonparty attorney seeking to quash a subpoena must show the requested material is plainly irrelevant or obviously futile to pursue, and if documents are withheld as privileged, the attorney must generally provide a privilege log; possible duplication from another source is not a valid basis to block disclosure.