Welch v. Cardinal Bankshares Corp., 2003-SOX-15 (ALJ Aug. 1, 2003)

U.S. Department of Labor

Office of Administrative Law Judges 800 K Street, NW, Suite 400-N Washington, DC 20001-8002

Issue Date: 01 August 2003

CASE NO: 2003-SOX-15

In the Matter of:

DAVID WELCH,
    Complainant,

v.

CARDINAL BANKSHARES CORP.,
    Respondent.

   This matter is presently scheduled for hearing in Roanoke, Virginia beginning Monday, August 25, 2003. Complainant has recently filed a motion requesting that I conduct an in camera inspection of certain discovery materials withheld by Respondent, and a motion seeking a protective order with respect to a second deposition of Complainant scheduled for Tuesday, August 5, 2003. Each motion is discussed below.

A. Complainant's Motion for In Camera Inspection.

   In a motion filed July 24, 2003, Complainant asked that Respondent Cardinal Bankshares Corporation be required to produce for my in camera inspection minutes of joint meetings of the Audit Committees of Cardinal Bankshares and Bank of Floyd on September 17, 2002 and September 25, 2002. Complainant asserts that nearly fifty percent of the text of the Audit Committee minutes produced by Respondent during discovery in this case were redacted based on Respondent's assertion of the attorney-client privilege. Complainant further argues that Respondent's insertion of "redacted-attorney client privilege" in the blank portions of the documents, with nothing more, precludes him from assessing the validity of Respondent's entitlement to the privilege with respect to the redacted material. He therefore asks that I review this material in camera and determine whether Respondent's assertion of the attorney-client privilege is valid.

   On July 30, 2003, Respondent filed an opposition to Complainant's motion. The only basis asserted by Respondent for denying the motion is that "[t]he motion should be denied because the Claimant [sic] asserts no reason to cast doubt on whether the privilege asserted by the Respondent is valid and cites no authority for challenging the assertion of the privilege." Respondent's Memorandum in Opposition to Motion for In Camera Inspection at 1.

   The Fourth Circuit, in whose jurisdiction this case arises, has adopted the "classic test" for determining the existence of the attorney-client privilege:

"The privilege applies only if (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion on law or (ii) legal services or (iii) assistance in some legal proceeding, and not (d) for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client."

United States v. Jones, 696 F.2d 1069, 1072 (4th Cir.1982) (quoting United States v. United Shoe Machinery Corp., 89 F.Supp. 357, 358-59 (D.Mass.1950)). "The burden is on the proponent of the attorney-client privilege to demonstrate its applicability." Jones, 696 F.2d at 1072.

   The insertion of "redacted-attorney client privilege" in the omitted portions of the Audit Committee meeting minutes is inadequate to meet Respondent's burden to demonstrate that the attorney-client privilege is applicable to the communications at issue. Respondent shall therefore submit to me for in camera inspection copies of the unredacted minutes of these meetings. Respondent shall also file with these documents such additional documentation and argument as is necessary to allow me to make an informed determination with respect to whether the privilege applies.

B. Motion for Protective Order.

   On July 30, 2003, Complainant filed a motion in which he asks that I issue a protective order precluding Respondent from going forward with an August 5, 2003 deposition of him. In support of this motion, Complainant states that his discovery deposition was previously taken by Respondent on June 10, 2003, and he asserts that Respondent's allegation that a second deposition is needed to cover "new issues" raised by deposition testimony of other witnesses deposed by Complainant is unfounded. Complainant further asserts that he is unable to attend the August 5 deposition because he only recently obtained new employment and does not have sufficient leave available to attend a deposition on that date.

   Although Respondent has not yet replied to Complainant's motion, I will be on travel next week when the deposition at issue is scheduled to occur. I will therefore grant Complainant's motion subject to reconsideration once Respondent has had an opportunity to respond and provide information which might justify allowing the deposition to occur at some future date. Therefore,

   IT IS HEREBY ORDERED that Complainant's motion for in camera inspection is GRANTED. Respondents shall file within ten (10) days from the date of this order the minutes of the joint meetings of the Audit Committees of Cardinal Bankshares and Bank of Floyd which occurred on September 17, 2002 and September 25, 2002. Respondent shall also file such additional documentation and argument as is necessary to allow me to make an informed determination with respect to whether the attorney-client privilege applies to the communications at issue.

   IT IS FURTHER ORDERED that Complainant's motion for protective order is GRANTED and Respondent shall be prohibited from proceeding with the deposition of Complainant presently scheduled for August 5, 2003.

      STEPHEN L. PURCELL
      Administrative Law Judge