EFiled: Apr 09 2024 04:SoPMERT
`Transaction ID 72703097
`(FENWy}
`Case No. 2023-1060-NAC Yesis)ar
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`OFDAS
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`EXHIBIT 2
`EXHIBIT 2
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`EFiled: Apr 09 2024 04:59PM EDT
`Transaction ID 72703097
`Case No. 2023-1060-NAC
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`

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`IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
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`IN THE MATTER OF THE
`LIQUIDATION OF
`INDEMNITY INSURANCE
`CORPORATION, RRG
`
`
`C.A. No. 8601-VCZ
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`)
`)
`)
`)
`
`
`ORDER DENYING MOTION TO COMPEL
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`This Order addresses the Receiver’s December 31, 2018 Motion to
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`1.
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`Compel (the “Motion”)1 documents from intervening third-party Plaintiff, Branch
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`Banking and Trust Company (“BB&T”). The Receiver requests that the Court order
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`a production under the “at issue” exception to the attorney-client privilege. I deny
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`the Motion.
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`2.
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`The “broad scope of discovery is limited by a number of privileges,
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`including the attorney-client privilege, codified in Rule 502 of the Delaware Rules
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`of Evidence, which protects from discovery certain communications between
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`attorney and client.”2 “However, the attorney-client privilege is not absolute.”3
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`“[T]he so-called ‘at issue’ exception to the attorney-client privilege applies where
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`either ‘(1) a party injects the privileged communications themselves into the
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`litigation, or (2) a party injects an issue into the litigation, the truthful resolution of
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`1 Docket Item (“D.I.”) 671. I refer to briefing on the Motion as the Motion, the Opposition,
`and the Reply. See D.I. 671, 680, 687.
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`2 In re Quest Software Inc. S’holders Litig., 2013 WL 3356034, at *2 (Del. Ch. July 3,
`2013).
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`3 Id.
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`EFiled: Mar 18 2019 12:04PM EDT
`Transaction ID 63075559
`Case No. 8601-VCZ
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`which requires an examination of confidential communications.’”4 The exception
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`“recognizes that a party cannot use the attorney-client privilege as both a ‘shield’
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`from discovery and a ‘sword’ in litigation.”5
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`3.
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`“A party’s admission that it sought legal counsel does not imply that
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`the party necessarily acted in reliance upon the legal advice received, thereby placing
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`the communications with counsel ‘at issue.’”6 Such an admission, without more,
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`“does not reflect reliance on that advice . . . . [n]or does it inject the substance of any
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`specific advice into this case.”7 Privileged communications may fall under the “at
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`issue” exception where a party attempts to both shield and weaponize arguments that
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`the party, for instance, “acted in accordance with the legal advice they received,”
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`“cannot be liable because they relied on some specific advice of counsel,” or that
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`otherwise “make bare factual assertions[] ‘the veracity of which are central to the
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`resolution of the parties’ dispute, and then assert the attorney-client privilege as a
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`barrier to prevent a full understanding of the facts disclosed.’”8
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`4 In re William Lyon Homes S’holder Litig., 2008 WL 3522437, at *3 (Del. Ch. Aug. 8,
`2008) (quoting Donald J. Wolfe, Jr. & Michael A. Pittenger, Corporate and Commercial
`Practice in the Delaware Court of Chancery § 7.02[c][2] (2008)).
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`5 In re Quest Software, 2013 WL 3356034, at *2.
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`6 Id. at *3.
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`7 In re Comverge, Inc. S’holders Litig., 2013 WL 1455827, at *4 (Del. Ch. Apr. 10, 2013)
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`8 Id. at *5; In re Kent Cty. Adequate Pub. Facilities Ordinances Litig., 2008 WL 1851790,
`at *5 (Del. Ch. Apr. 18, 2008) (quoting Tackett v. State Farm Fire & Cas. Ins. Co., 653
`A.2d 254, 259 (Del. 1995)).
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`2
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`4.
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`The Receiver claims that BB&T waived an unspecified quantum of
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`privileged communications between BB&T’s predecessor in interest, Susquehanna
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`Bank, and its counsel, related to the loan transaction at issue on summary judgment
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`(the “Transaction”).9 The Receiver asserts BB&T waived its privilege over these
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`communications via a statement in its summary judgment brief that Susquehanna
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`“was represented by eminent counsel” in the Transaction,10 a four-page section in
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`James Wrynn’s rebuttal expert report titled “[t]he Bank Sought the Advice of
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`Professionals When Structuring the Loan Agreement,”11 related statements from that
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`expert’s deposition,12 and similar representations.13
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`5.
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`The Receiver argues that BB&T injected the substance of privileged
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`communications into the litigation through those statements. I disagree. The
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`Receiver has not identified any statements in the summary judgment briefing or
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`9 BB&T brought its third-party complaint as successor to Susquehanna. See D.I. 512 ¶ 3.
`The Receiver supports its argument with case law from other jurisdictions. I have reviewed
`those cases, but find that Delaware’s existing jurisprudence controls these facts and does
`not require me to seek persuasive authority from outside this state.
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`10 D.I. 655, Opening Br. 49. The Receiver points to additional, similar statements
`elsewhere in the summary judgment briefing. See id. at 33 n.50, 49 (stating generally that
`each side was represented by counsel in their negotiations).
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`11 Mot. Ex. B at 14.
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`12 Mot. Ex. C.
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`13 See, e.g., Reply Ex. C at 97 (deposition of another BB&T expert, Brian Casey, who
`testified that “when they inquired with [representatives from other parties to the
`Transaction] and [Susquehanna’s] own counsel, nobody raised a stop sign to say that you
`can’t do it this way”). The Receiver did not focus on these statements in its briefing, and
`so I do not linger on them here. They do not alter my analysis.
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`3
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`Wrynn’s report through which BB&T or its expert injected the substance of, or
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`advice from, a privileged communication. BB&T and its expert merely refer to
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`Susquehanna having hired and consulted with counsel when structuring the
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`Transaction.14 Those representations do not place “the communications with
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`counsel ‘at issue.’”15
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`6.
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`As to the second prong of the “at issue” exception, the Receiver argues
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`that BB&T injected the issue of whether Susquehanna complied with counsel’s
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`advice into the litigation, and that the truthful resolution of that issue requires an
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`examination of confidential communications.16 I again disagree. BB&T’s
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`statements in its summary judgment briefing are one-off, factual representations that
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`it sought and received counsel when structuring the Transaction. BB&T countered
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`14 See D.I. 655, Opening Br. 33 n.50 (“There is no issue that the Loan transaction was an
`arms’ length transaction entered into by sophisticated parties represented by separate
`counsel.”), 49 (“More than five years after the discovery of IIC’s fraud, and long after
`Cohen’s indictment and sentencing, the Receiver now argues that certain irregularities with
`the transaction should have been obvious to the Bank. But the Receiver ignores that the
`Bank was represented by eminent counsel[.]”); Mot. Ex. B at 14-15 (“[T]he Bank sought
`advice from professionals on how the loan proceeds could be used that included lawyers
`and accountants . . . . The Bank relied upon at least two lawyers from the offices of Ballard
`Spahr, LLP . . . .”).
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`15 In re Quest Software, 2013 WL 3356034, at *2; see also In re Comverge, 2013 WL
`1455827, at *4. The closest statement is made by Wrynn in his expert rebuttal report, but
`I consider this infra under the second prong of the “at issue” exception. See Mot. Ex. B at
`16 (“It is submitted that none of the parties or their representatives knew about the prior
`approval requirement referenced by the [Receiver’s] experts, so they clearly never intended
`to defraud anyone.”).
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`16 See In re William Lyon Homes, 2008 WL 3522437, at *3.
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`4
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`the Receiver’s argument “that certain irregularities with the transaction should have
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`been obvious to [Susquehanna]” by stating that Susquehanna was “represented by
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`eminent counsel.”17 BB&T’s statements “do[] not reflect reliance on that advice
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`. . . . [n]or [do they] inject the substance of any specific advice into this case.”18
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`Further, BB&T has assured the Court and the Receiver that it is not intending to
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`assert an advice of counsel defense.19 I interpret the statements to reflect only that
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`Susquehanna consulted counsel for the Transaction, and not to signal or assert any
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`reliance on substantive advice.20
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`17 D.I. 655, Opening Br. 49.
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`18 In re Comverge, 2013 WL 1455827, at *4; see also In re Quest Software, 2013 WL
`3356034, at *2-3. The Receiver attempts to distinguish Quest and Comverge by claiming
`that they addressed board processes, and “the conduct of boards related to the process of a
`merger or buy-out is not at issue in this case.” Reply 6. I do not read Quest or Comverge
`to be so limited. The Receiver also argues that “unlike Quest [], BB&T does not claim that
`it never considered these communications when making decisions regarding the
`Transaction.” Reply 8. That, however, is not the standard under the “at issue” exception.
`BB&T may state that its predecessor in interest sought and consulted with counsel without
`injecting any privileged communications or issues into the litigation. See In re Quest
`Software, 2013 WL 3356034, at *2; In re Comverge, 2013 WL 1455827, at *4.
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`19 Opp. 2 (“As the Bank advised the Receiver prior to the filing of the Motion, the Bank is
`not relying on the advice of counsel in its motion for summary judgment or otherwise.”).
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`20 Even if BB&T used privileged communications as both a sword and shield, which I do
`not find to be the case here, refusing to assign any improper weight to those
`communications can extinguish the potential prejudice. See Chesapeake Corp. v. Shore,
`771 A.2d 293, 301 (Del. Ch. 2000) (“As a result, the only fair way to proceed is not to give
`any weight to any advice” to the privileged discussions because “[t]he potential for abuse
`is simply too great”). At the hearing on the Motion, BB&T’s counsel stated that if it “were
`to rely on advice of counsel, then the Court could preclude it.” D.I. 700 at 92.
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`5
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`7. While Wrynn’s rebuttal report treads closer to the substance of
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`counsel’s advice, I find that he, too, was responding to the Receiver’s arguments,
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`this time made through one of the Receiver’s experts, J. Michael Pickens. Pickens
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`issued a report opining that “an insurance regulatory attorney . . . would recognize a
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`structure like [the Transaction] in this case” was not the appropriate means to achieve
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`the Transaction’s purported goals, and that “[i]nstead of focusing on the propriety of
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`the [Transaction] and whether it would pass regulatory review, BB&T focused its
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`attorneys on making sure the loan proceeds were under the complete control of the
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`bank, secured, and that the Delaware insurance commissioner could not set aside the
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`bank’s lien.”21 Based on those and other opinions, he concluded that the Transaction
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`“constituted little more than a sham and . . . a fraudulent transaction the true purpose
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`of which was to serve as ‘window dressing’” for more frauds.22 Wrynn strives to
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`rebut Pickens’ report, in part, by contending that Susquehanna “sought advice from
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`professionals on how the loan proceeds could be used that included lawyers and
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`accountants,” and “that none of the parties or their representatives knew about the
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`prior approval requirement referenced by the [Receiver’s] experts, so they clearly
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`never intended to defraud anyone.”23
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`21 Opp. Ex. 1 at 9, 14.
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`22 Id. at 20.
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`23 Mot. Ex. B at 14-18.
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`6
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`8. Wrynn was responding to the concerns about Susquehanna’s counsel
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`raised or injected by the Receiver’s expert, not by Wrynn in the first instance. Other
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`statements in dispute are similar. For example, at Wrynn’s deposition, the
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`Receiver’s counsel made an extended attempt to extract testimony that injected or
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`relied on communications from Susquehanna’s counsel, although, as Wrynn and
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`BB&T’s counsel explained, Wrynn had not seen any of the privileged
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`communications.24
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`9.
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`To waive privilege under the second prong of the “at issue” exception,
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`the party claiming privilege must inject the issue requiring an examination of
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`privileged communications. The Receiver cannot first raise the issue of counsel’s
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`advice and then seek a privilege waiver when BB&T responds in defense.25
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`Otherwise, parties could goad their adversaries into privilege waivers by accusing
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`them of relying on ineffective or improper counsel and then pouncing on the
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`inevitable denial.26 The statements contested in the Motion are not instances of
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`24 Mot. Ex. C; Reply Ex. B.
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`25 See Morris v. Spectra Energy Partners (DE) GP, LP, 2018 WL 2095241, at *3 (Del. Ch.
`May 7, 2018) (denying motion to compel under the “at issue” exception where, in part, the
`moving party first raised or injected the issue relating to privileged communications); In re
`Comverge, 2013 WL 1455827, at *3 (same).
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`26 See Morris, 2018 WL 2095241, at *4 (“Here, by contrast, [defendants] did not raise the
`issue that led the [p]laintiff to seek discovery regarding the Committee’s beliefs . . . .
`Instead, the [p]laintiff is simply seeking discovery relevant to allegations he himself
`advanced in his Complaint. That does not give him carte blanche to invade the attorney-
`client privilege as to discovery material that bears on those allegations.”).
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`7
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`BB&T injecting communications or issues into litigation. Although Wrynn’s
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`rebuttal statements come close to the line of improperly injecting such matters,27 I
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`find no waiver in this factual scenario. As with my findings on BB&T’s summary
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`judgment briefing, however, I will limit the potential for prejudice by interpreting
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`any ambiguity to reflect only representations that Susquehanna consulted with
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`counsel, rather than as presenting anything related to an advice of counsel defense.28
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`IT IS SO ORDERED, this 18th day of March, 2019.
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`/s/ Morgan T. Zurn
`
`
`Vice Chancellor Morgan T. Zurn
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`27 See, e.g., Mot. Ex. B at 16. By my ruling, I do not mean to exclude the possibility that
`parties could waive privilege under the “at issue” exception in appropriate circumstances
`where they are responding to similar accusations and allegations. But I find no waiver on
`these facts.
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`28 See supra at n.20.
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`8
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`EXHIBIT 3
`EXHIBIT 3
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`

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` 1
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`IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
`
`
`CAROLYN J. LOGAN, :
` :
`Plaintiff, :
` :
` v : C. A. No.
` : 2019-0059-SG
`SALIX PHARMACEUTICALS, LTD., and :
`VALEANT PHARMACEUTICALS :
`INTERNATIONAL, N/K/A BAUSCH :
`HEALTH AMERICAS, INC., :
` :
`Defendants. :
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`
`
` - - -
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` Chancery Court Chambers
` Court of Chancery Courthouse
` 34 The Circle
` Georgetown, Delaware
` Wednesday, September 14, 2022
` 9:32 a.m.
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` - - -
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`BEFORE: HON. SAM GLASSCOCK III, Vice Chancellor
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` - - -
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`TELEPHONIC ORAL ARGUMENT AND PARTIAL RULINGS OF THE
`COURT ON PLAINTIFF'S MOTION TO COMPEL DISCOVERY
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`
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`------------------------------------------------------
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`
`CHANCERY COURT REPORTERS
`New Castle County Courthouse
`500 North King Street - Suite 11400
`Wilmington, Delaware 19801
`(302) 255-0524
`
`EFiled: Sep 23 2022 09:22AM EDT
`Transaction ID 68150437
`Case No. 2019-0059-SG
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`

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` 2
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`APPEARANCES:
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` MATTHEW E. FISCHER, ESQ.
`CALLAN R. JACKSON, ESQ.
` Potter, Anderson & Corroon LLP
` for Plaintiff
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`
` MICHAEL A. BARLOW, ESQ.
`ADAM K. SCHULMAN, ESQ.
` Abrams & Bayliss LLP
` -and-
` FAITH E. GAY, ESQ.
`HANNAH BELITZ, ESQ.
`CLAIRE O'BRIEN, ESQ.
` of the New York Bar
`Selendy Gay Elsberg PLLC
` for Defendants
`
`
`- - -
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`CHANCERY COURT REPORTERS
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`THE COURT: Good morning, counsel.
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`This is Sam Glasscock.
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`Who do I have on the line, please?
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`ATTORNEY FISCHER: Good morning,
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`Your Honor. Matt Fischer at Potter Anderson on behalf
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`of plaintiff. And with me is it Callan Jackson of our
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`office.
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`THE COURT: Welcome.
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`ATTORNEY BARLOW: Good morning,
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`Your Honor. Mike Barlow from Abrams & Bayliss,
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`together with Adam Schulman of my firm, as well as
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`Faith Gay, Hannah Belitz, and Claire O'Brien of
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`Selendy Gay Elsberg, on behalf today of defendant
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`Salix Pharmaceuticals and Bausch Health Americas.
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`With Your Honor's permission, Ms. Gay
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`will be making the argument today.
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`THE COURT: All right. And,
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`Mr. Fischer, are you going to be arguing for the
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`plaintiff?
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`ATTORNEY FISCHER: I am, Your Honor.
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`THE COURT: All right. Anyone else?
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`(No response.)
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`THE COURT: Thank you for making time
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`for me, counsel. I have reviewed the motion to
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`CHANCERY COURT REPORTERS
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`compel. Let me tell you how I view it generally, and
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`then you can make any comments you wish to.
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`The issue for me is the good faith of
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`the board and the audit committee. And as I've
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`already opined in this case, that puts at issue the
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`information that was presented to the audit committee
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`and the board. That is necessary to test the good
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`faith of the board and the audit committee.
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`Extraneous matters that were not presented to the
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`board don't do that, in my view.
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`There was a limited waiver of
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`attorney-client privilege and work product, to the
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`extent it is represented by materials that were shared
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`with or intended to be shared with the audit committee
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`or the board.
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`The issue here revolves around the
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`general questions that the defendants have asked about
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`the sufficiency or thoroughness of the investigation
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`by lawyers who advised the board. But unless the
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`investigation was less than thorough and the board or
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`the committee knew that it really doesn't, it seems to
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`me, go to the issue that is before me here.
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`So given that, and without determining
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`whether or the extent to which the opinions elicited
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`relied on work product, it seems to me that there's an
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`easy resolution, and that is to simply exclude this
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`testimony, which should be properly excluded, in any
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`event, because it's not relevant to the issue that
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`will be presented at trial.
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`So my tentative conclusion is that the
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`motion to compel should be denied, but that a
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`protective order or order i n l i mi n e should be put in
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`place to limit any testimony that was elicited
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`concerning the thoroughness of the investigation.
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`Mr. Fischer, having said that, I'll
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`let you make whatever argument you wish.
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`ATTORNEY FISCHER: No, I appreciate
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`that, Your Honor. And Your Honor addressed our
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`primary concern. As we put forth in the papers, the
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`defendants very strategically called a lawyer who --
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`when we were dealing with the limited waiver, we were
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`focused on things that went to the board, and the
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`lawyer that they called wasn't a principal
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`communicator with the board. We know Brad Bondi was.
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`He confirmed that in his testimony. But they asked
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`him a lot of questions, and he gave open-ended answers
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`on the investigation as to the process itself, which,
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`Your Honor, just based on the limited documents we
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`received, is subject to attack.
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`And they, late in the game, felt like
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`they had to put up this lawyer really as an expert
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`witness. The first few questions they asked was about
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`his investigation experience. And then -- and we
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`don't know how they prepped him, Your Honor, but he
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`gave open-ended answers and affirmatively testified
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`about the integrity of the process. From their
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`perspective, it was a risk-free deposition because
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`they knew we couldn't effectively cross-examine him
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`without the underlying documents.
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`But as Your Honor is saying, they
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`can't put forth testimony from this witness or any
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`other witness, i.e., Brad Bondi, who is yet to be
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`deposed, that goes to the process itself, because if
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`they do, we have to get access to what we think we got
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`a limited, small subset of the materials here, but if
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`they're not permitted -- and I think this is
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`Your Honor's ruling -- to sort of bring in a lawyer as
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`expert or a character witness and give his views on
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`the process and how thorough it is, I mean, the last
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`few questions they asked him are pretty remarkable and
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`really blew wide open the limited waiver that we've
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`been operating up until the point that the audit
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`committee decided or the defendants decided to call
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`their own lawyer, but they said -- they asked
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`questions like, were any facts not presented to the
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`audit committee that should have? Do you have a view
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`on that? What about documents? I mean, how are we
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`supposed to question this guy in any effective way
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`without the underlying work product materials?
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`So as long as Your Honor is saying,
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`listen, the process itself -- and we think there may
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`be some evidence that this wasn't an objective
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`process; it was -- there was a preordained narrative
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`designed to get the audit committee off. But we'll
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`make those arguments based on the documents we have.
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`We are just concerned about defense
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`witnesses -- and they put their lawyer on their trial
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`witness list, so presumably, we'd come into court and
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`he'd say what he'd say at his deposition, plus much
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`more, about the process and about the thinking of the
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`investigators and how the investigators viewed the
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`evidence. I mean, if they're going to put on that
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`kind of testimony, either through Peter Clark or
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`through Brad Bondi or Bill Bertrand, the general
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`counsel, then they are blowing open the limited waiver
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`here, and we need those materials.
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`But if Your Honor's ruling is, I don't
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`want to hear that evidence at trial, then we're fine
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`with that.
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`THE COURT: All right. I'm going to
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`turn to Ms. Gay, but what I am anticipating, and more
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`so based on your answer, Mr. Fischer, or your
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`argument, is that the parties will come up with an
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`order in li m i ne that clarifies this issue of whether
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`and to what extent the evidence that we're talking
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`about here is excluded. And it seems to me it's not
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`relevant to any issue, but I'm going to turn to
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`Ms. Gay.
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`ATTORNEY GAY: Good morning,
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`Your Honor. Can you hear me?
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`THE COURT: I can hear you fine.
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`ATTORNEY GAY: Thank you.
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`I just want to make sure, because I'm
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`sitting in the corner of a hotel room somewhere. Just
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`checking.
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`THE COURT: Just pretend you're in
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`your broadcasting studio, Ms. Gay.
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`ATTORNEY GAY: Excellent. Thank you.
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`If that changes, let me know. Not that my words will
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`be particular pearls.
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`But, first of all, I appreciate
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`hearing Your Honor's observations and Mr. Fischer's.
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`We have, we think, been generous in
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`producing under the limited waiver. That wasn't
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`because we had an advice of counsel defense, but
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`because we fully recognized early on that the
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`plaintiff has a right to test the board's decision.
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`We agree with the Court, and I agree
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`with what I think I hear Mr. Fischer saying, that
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`what's relevant in this case is solely what the board
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`knew and how it based -- made its decision based on
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`what it knew. So we've produced --
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`THE COURT: If the board's lawyers,
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`unbeknownst to the board, were slothful or in some
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`other way not producing a full record, that doesn't
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`have anything to do with the good faith of the board,
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`in my view. Maybe I'm missing something.
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`But the board is allowed to rely on
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`its advisors and their good faith, and unless they --
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`now, if they knew something, that's something else,
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`but I don't know what an opinion of a third attorney,
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`who was related to the investigation, his opinion of
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`the thoroughness of the investigation, to my mind, is
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`not dispositive of any issue I need to address.
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`ATTORNEY GAY: So, again, Your Honor,
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`just to be clear, from my perspective -- obviously, I
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`can't speak for Mr. Fischer, but I think he would
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`agree -- we agree, the sole issue in the case is what
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`the board knew, and so to that extent, plaintiffs have
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`from us and from the law firms involved here, subject
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`to the limited 501 waiver, some 30,000 pages, 4,000
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`documents, you know, not just board presentations, but
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`notes of witness interview summaries, anything that
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`was prepared with the idea that the board would see
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`it, and then things the board saw, and not the
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`collective board, Your Honor, but any -- if any board
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`member saw it or was going to be present, such as at
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`the SEC, we have, you know, interview summaries,
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`drafts, you name it. Those were produced.
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`THE COURT: Good, because that's my
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`understanding of the stipulated order that I signed.
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`ATTORNEY GAY: Correct, Your Honor.
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`And unlike many cases where there is a limited waiver
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`under 501 or in this court or any other, where what
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`you get is pretty anodyne stuff, this is everything
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`that the board touched -- the board and the audit
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`committee here were extremely active, and so there's
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`plenty of work product here, and that's been in the
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`plaintiff's hands for some time, and I don't think
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`they would say otherwise.
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`This witness, Peter Clark, was the
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`custodian identified by the plaintiffs. And let me
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`just say very briefly that the whole reason he was
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`called is that our understanding, based on this motion
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`to compel, the opening brief by our friends, and
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`generally in this case, is that their defense is there
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`was something shoddy about this investigation, and so
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`to the extent the board knew whatever it is they're
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`saying, they have our work product, they have our
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`privileged communications on that to excess.
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`But the reason these questions were
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`asked about thoroughness -- and we agree, they should
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`be irrelevant on both sides, and I think we can easily
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`work out a stipulation that says any discussion of the
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`thoroughness of the investigation but for what the
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`board knew is irrelevant here.
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`But our response -- these were
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`responsive questions. More time was spent with this
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`witness in this deposition by the plaintiff than by
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`us. Totally their right.
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`THE COURT: I don't mean to cut you
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`off, Ms. Gay. I'm sure you're acting in good faith,
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`and I don't mean to forestall your argument, but it
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`sounds like we're all on the same page, that you're
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`not going to have this witness or some other witness
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`testify in a vacuum that the actions taken by
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`attorneys on behalf of the audit committee or the
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`board, to the extent not known by the board, were
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`nonetheless thorough. I mean, I don't care. All I
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`care about is if the board knew something; this is
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`about the board's good faith. So it sounds like we're
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`all on the same page.
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`ATTORNEY GAY: I think so, Your Honor.
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`And I'm happy to be cut off. But in terms of anything
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`in a vacuum, absolutely not. My only concern is that,
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`given the emphasis, as best we can tell -- and
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`everybody has a right to develop their theory as they
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`go -- but to the extent the plaintiff makes an issue
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`of what the investigation did extra to what the board
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`knew and that huge expanse of testimony and documents
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`and the Court lets it in, I think we have to be able
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`to respond.
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`If the plaintiff is going to stand up
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`and say, look, we concede that Ms. Logan did -- the
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`plaintiff did X, Y, and Z, but the real issue here for
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`the board was that this was a crap investigation, if
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`that is their argument, I do think we have to be able
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`to respond.
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`So my suggestion is that, yes, we are
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`happy to see these questions go. We'd never introduce
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`it in a vacuum. Our case is based on our -- our
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`defense is wholly based on what the board knew and
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`what it did as a result. What the board did, what the
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`board knew. That's us.
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`But if they are going to make an issue
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`of this, I do think we have to be able to respond, but
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`other than that, you had me at "hello."
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`THE COURT: Okay. Well, I think it's
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`13
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`fair game for the plaintiffs to say, here's what was
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`presented to the board; the board must have known this
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`was inadequate.
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`ATTORNEY GAY: Fair. Fair. Yes, I
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`17
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`agree.
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`THE COURT: But to the extent they're
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`going to say, unbeknownst to the board, this
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`20
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`investigation was improper, I don't think that's
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`21
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`relevant, and the evidence, I think, would be excluded
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`22
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`on relevance grounds.
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`23
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`But rather than argue about this back
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`24
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`and forth here, what I'd like the parties to do is
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`meet and confer and come up with an order i n li m in e
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`that makes this clear.
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`Is that something you can do, Ms. Gay?
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`ATTORNEY GAY: Yes, Your Honor, I'm
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`completely agreeable to do that, and I think that that
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` 6
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`is an appropriate solution, to the extent you're
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`asking me.
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`THE COURT: All right. I was about to
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`turn to Mr. Fischer, but someone was trying to speak.
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`10
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`ATTORNEY FISCHER: That was me,
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`11
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`Your Honor. Matt Fischer. Sorry for jumping over
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`12
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`you. I just wanted to make a clarifying point.
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`13
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`I think Your Honor and Ms. Gay
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`14
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`addressed it, but, I mean, there is evidence that --
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`15
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`in the limited documents we've received, that the
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`16
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`board knew there were issues, knew or arguably should
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`17
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`have known. We're obviously, as Your Honor just
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`18
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`indicated, free to present that.
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`19
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`But another issue is that the
`
`20
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`contractual party here that has the good-faith
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`21
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`obligation is the company, so the concern we have is,
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`22
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`if the company has the good-faith obligation in
`
`23
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`connection with this contractual arrangement, it does
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`24
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`focus on the decision made by the board, but the
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`corporation is the party to the agreement, arguably,
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` 2
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`you know, sort of a lack of good faith by its agents
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` 3
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`or advisors would maybe implicate that duty. We don't
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` 4
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`want to lose that argument. We actually amended our
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` 5
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`complaint quite some time ago to include that.
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` 6
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`But we agree with the board -- with
`
` 7
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`the Court and Ms. Gay that, critically, it's what the
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` 8
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`board knew here, but we do think there were issues
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` 9
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`with the investigation that the board knew about, and
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`10
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`we want to be free. But we will work with the defense
`
`11
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`counsel to come up with a limiting order.
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`12
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`I just don't want my silence to be
`
`13
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`taken as that we're giving up our implied covenant
`
`14
`
`claim that implicates, arguably, the good faith of the
`
`15
`
`audit committee's advisors, because if they weren't
`
`16
`
`operating in good faith, that obviously implicates the
`
`17
`
`company's good-faith obligation.
`
`18
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`The only other issue -- I'm sorry,
`
`19
`
`Your Honor, I'll let --
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`20
`
`THE COURT: I'll tell you, quite
`
`21
`
`honestly, Mr. Fischer, I don't get that argument. The
`
`22
`
`idea that the board causes the company to act by
`
`23
`
`hiring advisors who were secretly acting in bad faith,
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`24
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`and that means the company's action, via the board, is
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`in bad faith, doesn't make sense to me. I mean, I'm
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