TODAY’S GENER AL COUNSEL FALL 2019
Executive Summaries PAGE 46
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Shareholder’s Rights v. the Accountant-Client Privilege
In-House Management of Appeals
Making the 30(b)(6) Witness Work for the Defense
By Allen M. Levine and Jonathan D. Silver Becker & Poliakoff
It is common for a business or its executives to be presented with allegations of mismanagement or wrongdoing by a minority shareholder, accompanied by requests for company financial records. When such allegations arise, it is important to efficiently address the allegations while protecting privileged communications with accountants. Shareholders and members have an absolute right to inspect and copy the corporation’s articles of incorporation and bylaws. A shareholder’s right to examine additional company documents and private financial records is not absolute. In one Colorado case, shareholders demanded to inspect financial records possessed by the corporation’s accountants. The court upheld the defendants’ assertion of accountant-client privilege. In another case, the same court concluded that the petitioners “established good cause to put aside the protections of the accountantclient privilege,” focusing on the fact that the discovery requests related to communications that were directly related to the allegations. Since it is difficult to reconcile the two Colorado cases, it appears that the only court that has considered this issue twice has ruled in favor of providing the shareholders with the requested information. However, when documents other than financial records satisfy the shareholder’s request or the privileged information can be redacted, the accountant-client privilege should continue to trump the shareholder’s right to inspect a corporation’s privileged financial records.
By Svetlana K. Ivy Harris Beach PLLC
Although larger in-house teams often include attorneys with a litigation background, managing cases on appeal can be out of the comfort zone for many. Trust your outside counsel but be aware of the potential pitfalls and common mistakes even experienced attorneys make. When an attorney lives and breathes a case through years of litigation, it often is difficult to view it objectively. Consider adding fresh eyes to the team. If you lost in lower court, be open to reframing your arguments or abandoning some of them on them on appeal. If you won, consider that maybe you shouldn’t have. Talk through the arguments, and their order. Once there is a draft, re-consider whether what you thought might be a throwaway point should be featured. The strongest argument at trial court may not be the strongest on appeal. Remember that the case may go up another level or be remanded to the trial court. This is critical because arguments you make to intermediate appellate court may backfire should you win, and the opposing party seeks leave to appeal to the higher court. Depending on the circumstances, a published appellate decision may have an impact well beyond the case at hand, whether it be for your organization or for an entire industry. Not every case warrants the same level of scrutiny or resources, but every appeal should be a collaborative process aimed at maximizing your chances of success.
By Matthew D. Keenan Shook, Hardy & Bacon L.L.P.
The plaintiff’s bar is enamored of Rule 30(b)(6). These days even the most basic lawsuits may see several 30(b)(6) notices. In multi-district litigation proceedings, they have become so prolific that some would say they are borderline abusive. However, the 30(b)(6) witness offers as much to the defense as any perceived advantage to the plaintiff. Enabling counsel to choose their best and most important witness is a gift to the defense. You can check the obvious boxes: be credible, confident and employ good judgment. The most important box to check, however, is this one: available time. This assignment demands a significant time commitment, often weeks. The witness has the right to refer to whatever documents are required to answer questions. Offer a brief narrative of what a typical negligence jury instruction will contain so the witness understands how plaintiffs may spin their testimony, and collaboratively identify witnesses for the 30(b)(6) candidate to interview. With a roadmap defined and the initial documents identified, let the witness go to work. The rule requires a good faith effort to gather all available information on the noticed topics, under penalty of sanction for failure to do otherwise. The 30(b)(6) witness can tell the story that others can benefit from, particularly without the limitations of personal knowledge. We know that company witnesses — versus outside experts — win cases. Jurors want to know the company, and witnesses put a face on their efforts.
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