Empire State Judge OKs Late Trading Suit Discovery

New York Supreme Court Justice Rolando Acosta ordered LeBoeuf, Lamb, Greene & MacRae and Seward & Kissel to turn over documents to DLA Piper Rudnick Gray Cary on the grounds that their clients’ malpractice suit against DLA Piper had also placed the other two firms’ representations at issue, the New York Law Journal reported.

“Here, since plaintiffs claim that their problems were caused by the actions or inactions of defendants, any legal advice they received from any other lawyer … on any subject related to the reasonableness of their reliance on defendants’ advice is not subject to the attorney-client privilege,” Acosta wrote.

According to the Law Journal, Ryan Goldberg and Michael Grady, former brokers with Brean Murray & Co. sued DLA Piper last year after they became targets of investigations by the Securities and Exchange Commission (SEC) and state Attorney General Eliot Spitzer.

Brean Murray had carried out late trades for a number of large institutional investors, including hedge fund Canary Capital Partners, which paid $40 million in 2003 to settle government late-trading charges (See  Spitzer Fund Abuse Probe Pumps Out More Subpoenas ).

The Brean Murray brokers claim they received advice in October 2001 from Michael Hirschberg, a partner at the firm then, that late trading was legal. As damages, the brokers are seeking the $2 million in legal fees they have incurred in the course of the investigation, in which they have been represented by LeBoeuf Lamb.

DLA Piper has argued that it should have access to documents from the other firms because the brokers also received legal advice on late trading from those firms. Both LeBoeuf and Seward & Kissel have denied providing such advice, but Acosta said DLA Piper had the right to inquire into their roles.

“This Court cannot in all fairness permit plaintiffs to hold defendants wholly responsible for their predicament and then allow plaintiff’s attorney to deny defendants the opportunity to examine possibly exonerating documents, albeit, of a very sensitive nature given the ongoing investigations,” the judge wrote.

The judge said the documents to be turned over would include work product detailing LeBoeuf lawyers’ “mental impressions, conclusions and strategic thoughts related to plaintiffs’ jeopardy from the investigations.”