Former Stock Exchange President Grasso Wins Fight to Unseal Investigation Report

March 30, 2005

Numerous recent decisions have dealt with the discoverability of investigation reports into possible corporate wrongdoing. When well-known lawyer Dan Webb completed an investigation report into the New York Stock Exchange’s dealings with its former head Richard Grasso, Grasso sought the report in discovery – arguing that NYSE’s disclosure of the Webb Report to the New York State Attorney General’s Office and the SEC waived any privilege.

After reviewing the Webb Report in camera, a New York state court found that the Webb Report did not deserve any privilege ab initio. State v. Grasso, No. 401620/04 (N.Y. Sup. Ct. Jan. 27, 2005), at
2005JAN/3004016202004C1SCIV.pdf [PDF format]. The court found that the Report “contains no legal analysis or advice” – instead indicating on its face that Webb “will separately provide the NYSE with legal advice and analysis.” Id. at 2 (citation omitted). The court concluded that “the Webb Report merely offers a factual analysis and recommendations or comments for desirable future business practices.” Id. at 2.

Ironically, the court’s ruling might provide more protection than a finding that the NYSE waived the privilege by sharing the Report with the government. Such a waiver ruling would almost surely have resulted in a subject matter waiver – requiring the NYSE to produce additional documents on the same subject matter (perhaps even the entire investigation file). No subject matter waiver results from disclosure of a non-privileged document even if it obviously resulted from privileged communications – or else no litigator could file a brief in court without triggering a subject matter waiver.