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Keywords

plaintiffattorneyfiduciarypartnershippiracy
plaintiffattorneystatutemotionpartnershipcommon law

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Roberts v. Heim, 123 F.R.D. 614, 57 USLW 2449, Fed. Sec. L. Rep. P 94,338, 27 Fed. R. Evid. Serv. 344

Facts

The plaintiffs, six individuals who invested in four limited partnerships aimed at oil and gas production, alleged a conspiracy to defraud investors out of hundreds of millions of dollars. They claimed that the partnerships were formed to sell unproven enhanced oil recovery technology and that the general partners and their law firm, Baskin & Steingut, engaged in fraudulent practices. The plaintiffs sought access to documents from the law firm, which had been withheld under claims of privilege.

Plaintiffs in this action are six individuals who invested in four limited partnerships ostensibly organized to produce oil and gas through the use of new 'enhanced oil recovery technology' ('EOR').

Issue

The main legal issues included whether the limited partners were clients of the law firm and co-holders of the attorney/client privilege, whether the law firm could withhold documents generated during the formation of the partnerships, and whether the work-product privilege could be asserted against the limited partners.

The issues presented include: (1) What law of privilege should be applied in deciding this motion, federal common law or the law of California or both? (2) Who are Baskin & Steingut's clients for purposes of attorney/client privilege?

Rule

The court applied the principle that limited partners have the right to inspect all documents affecting the partnership, including those held by the partnership's attorney, and that attorney/client privilege does not bar disclosure of partnership-related matters.

We conclude that absent any restriction by statute or by the partnership agreement, a limited partner has the right to inspect all documents and papers affecting the partnership, including those held by the partnership's attorney.

Analysis

The court determined that the limited partners were indeed clients of the law firm and co-holders of the attorney/client privilege. It reasoned that the fiduciary relationship between the general partners and limited partners necessitated full disclosure of all documents related to the partnership, including those generated during the formation stage. The court emphasized that withholding such documents would undermine the duty of full disclosure inherent in the fiduciary relationship.

The Special Master agrees with this latter assertion. In their initial briefing none of the parties to this motion cited any authority on the issue of the relationship between an attorney for a limited partnership and the promoter/general partner vis-a-vis the limited partner/investors.

Conclusion

The court ordered the production of the documents in question, concluding that the limited partners had a right to access them as clients of the law firm. The court adopted the recommendations of the Special Master in their entirety.

The court ordered the production of the documents in question, concluding that the limited partners had a right to access them as clients of the law firm.

Who won?

The plaintiffs prevailed in this case as the court ruled in their favor, allowing them access to the documents they sought based on their status as clients of the law firm.

The plaintiffs prevailed in this case as the court ruled in their favor, allowing them access to the documents they sought based on their status as clients of the law firm.

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