In a lengthy opinion, the Court of Appeals in People v Kozlowski, 2008 NY Slip Op 07759 [10/16/08], upheld the larceny (and related) convictions of the former CEO Kozlowski and CFO Swartz of Tyco and the fines of $35 and $70 million imposed on Swartz and Kozlowski, respectively. Although this decision rejected the defendants’ arguments for a reversal and/or vacateur of the fines, it is likely to be cited more frequently by defendants than by prosecutors.
First, the decision contains a very helpful analysis of the standard for enforcing a third-party subpoena duces tecum which was set forth nearly 30 years ago in People v Gissendanner (48 NY2d 543, 550 [1979]). Under Gissendanner, defendants must proffer a good-faith factual predicate sufficient for a court to draw an inference that specifically identified materials are reasonably likely to contain information that has the potential to be both relevant and exculpatory.
What constitutes a sufficient showing under Gissendanner is often in dispute. In this case, the Court made clear that the standard is not to be set too high. In Kozlowski the the People’s case centered on the charge that defendants’ bonuses were not approved by Tyco’s Compensation Committee or the Board of Directors. Defendants maintained that the bonuses were properly approved through the efforts of either of two directors. Among other things, their subpoena seeks specifically identified statements made by the director-witnesses regarding key issues in this case, including, most notably, “Compensation Events.”
The Court held that “Although defendants have certainly not made a robust showing under Gissendanner, we disagree with the People’s contention that defendants were simply fishing for “general credibility” evidence.” The Court’s anaylsis, set forth here, is worth keeping in hand, when a prosecutor claims that the defendant has failed to prove what a requested document actually states:
In meeting the burden for production, defendants need not — and indeed could not — show that director-witness statements are “actually” relevant and exculpatory (see Gissendanner, 48 NY2d at 550. Gissendanner does mandate, however, that they point to specific facts demonstrating a reasonable likelihood that such material may be disclosed and that they are not engaged in a fishing expedition. In applying this standard, we must give due regard to the accused’s right to a fair trial (Ritchie, 480 US at 56; Nixon, 418 US at 711).
Here, defendants were not engaged in “general discovery,” regarding the director-witness statements. Instead, they identified the specific director-interview notes and memorandum that they sought by referring Supreme Court to Tyco’s privilege log. Defendants pointed to undisputed facts, arguing that after the directors were made aware of at least some of defendants’ questionable activities through the Boies Schiller investigation, they continued to permit Swartz to exercise substantial authority as the CFO of Tyco until September 11, 2002 — the day before he was indicted — and voted to pay him $50 million in severance just one day after the last of the relevant director interviews. On the basis of these facts, defendants asserted that the “director witnesses . . . did not believe Swartz had engaged in any wrongful conduct and only ‘changed their tune’ after the District Attorney obtained an indictment.”
So how did the defendants lose if they met their burden under Gissendanner? The Court held that there was another hurdle which was not met — the documents were privileged as trial preparation materials (which may be disclosed “only upon a showing that the party seeking discovery has a substantial need of the materials in the preparation of the case and is unable without undue hardship to obtain the substantial equivalent of the materials by other means”) (CPLR 3101 [c], [d] [2]). The Court held that
Although we agree with defendants that the director-witness statements are trial preparation materials and not absolutely privileged, enforcement of their subpoena was directed to the trial court’s discretion (citations omitted). In making its discretionary determination that defendants did not establish an inability to “obtain the substantial equivalent” of the facts contained in the director witness interview notes without “undue hardship” (see CPLR 3101 [d] [2], Weinstein-Korn-Miller, NY Civ Prac § 3101.55), Supreme Court relied upon defendants’ failure to “explain[] why the defense could not have sought to conduct its own interviews of these witnesses at an earlier time.” We cannot say that this conclusion represents an abuse of the trial court’s discretion. Defendants made no effort to show any “undue hardship” that would have prevented them from securing their own “substantial[ly] equivalent” interviews with the director-witnesses (see CPLR 3101 [d] [2]). As Tyco pointed out in its reply submission on its motion to quash, defendants “have access to the same witnesses as Tyco does.”…(see Hickman v Taylor, 329 US 495, 513 [1947] [production of attorney’s account of witness statements is justified only in “rare” cases and is not appropriate when potential for “direct interviews with witnesses themselves” is possible]
The Court also rejected the argument that the privilege of specific requested documents covering trial preparation materials had been waived by the disclosure of other historical privileged documents created earlier.
The Court did not address whether and when the constitutional right to a fair trial limits a trial court’s discretion to apply a statutory privilege so as to preclude a defendant from receiving otherwise subpoenable materials (see, e.g. Davis v Alaska, 415 US 308 [1974]; People v Davis, 86 AD2d 856 [1982]).
Although this decision hurt Swartz and Kozlowski, it is likely to be helpful to more defendants than prosecutors, since it is more common for defense attorneys to attempt to assert the privilege, than prosecutors.
