.

'
DISTRICT COURT, CITY AND COUNTY OF
DENVER, COLORADO
1437 Bannock St.
Denver, Colorado 80202

DATE FILED: June II, 2015 4 48PM

CASE NUMBER: 20l4CV3l3 6

Plaintiff:

PREMIUM PET HEALTH, LLC, a Delaware Limited

Liability Company

_. COURT USE ONLY _.

v.
Defendants:

Case No:
ALL AMERICAN PET PROTEINS, LLC, a Colorado
limited liability company; CRAIG A. BROUGHTON, an Courtroom:
individual; JOHN F. LANDERS, an individual; GARY
"RON" DEAN, an individual; and MICHAEL YOUSIF,
an individual

2014CV31356
259

ORDER

THIS MATTER is before the Court on the Motion to Overrule the Defendants' Improper
Assertions of Privilege and Work-Product Protection Over Evidence Relevant to Spoliation of
Evidence (the "Privilege Motion") filed by plaintiff Premium Pet Health, LLC ("PPH"). PPH
has also filed with this Court a Motion for Default Judgment or, in the Alternative, an Order
Granting an Adverse Inference, which the Court has addressed in a separate order. The Court
has reviewed the Privilege Motion and all pertinent pleadings and authority and, being otherwise
fully advised in the premises, finds and orders as follows:
Relevant Background

I.

Following his February 27, 2014 resignation from PPH, but before this litigation

commenced, John F. Landers attempted to purge his AOL account, which he exclusively used to
conduct PPH business. According to Landers, this deletion of electronically-stored information
("ESI") was for the purpose of ridding himself of any information from PPH, PPH' s customers,
or PPH's suppliers. (April!O, 2014 Landers Aff. in Supp. ofDefs.' Emergency Mot. for Ruling
on Request for Prelim. Inj. at ~ 19 ("Landers Aff. ").)

2.

Landers realized that manually purging the more than 8,000 emails on the AOL

account would be challenging, so sometime in March 2014 he enlisted a "computer specialist" to

erase the remaining files. (ld) This "computer specialist" was Michael Yousif. (Landers's Supp.
Resps. to PPH's First Set of Interrogs. No. 7.) Landers and Yousif did not keep a record or log
of the ESI deletions. (/d. Nos. 7, 8.) It is undisputed that these pre-litigation deletions cannot be
restored. (YousifDep. at 194:25-95:6 ("[T]here's no way to recreate thee-mails that were deleted
in March."); April 13, 2014 Email from Randall Miller to Zhonette Brown ("I believe the main
deletions are long gone .... ").)
3.

On March 21, 2014, pursuant to an engagement letter, All American Pet Proteins

("AAPP") engaged Randall Miller of Bryan Cave LLP for services on transition matters. (Errata
to Defendants' Response to Plaintiff's [Spoliation Motion]; Amendment to Miller Deposition.)
Craig Broughton had also retained Bryan Cave prior to litigation for advice on transition matters.
(Miller Dep. at 4:24-5:10, 6:24-7:7.)
4.

Landers had also retained Bob Roth of Kutak Rock LLP for assistance with

financing and transition matters. (Landers Dep. at 41:6-9, 44:23-45:2, 157:22-158:22.) Landers
and Roth discussed the possibility of litigation, and Roth communicated with Colorado Business
Bank regarding litigation risks in February 2014. (Defendants' Response at 7-8; Algrim Dep. at
67:6-13; 68:4-8.)
5.

On April 3, 2014, PPH filed its Complaint in this Court, along with a Motion for a

Temporary Restraining Order and Preliminary Injunction. On April 4, 2014, the Defendants
were served with these pleadings.
6.

After the lawsuit was filed, Landers, Broughton, and AAPP retained Bryan Cave

under a new engagement agreement to represent them in the PPH litigation. (Errata to
Defendants' Response to Plaintiffs [Spoliation Motion].)
7.

On April 9, 2014, after learning that the Defendants' pre-litigation ESI deletions

had destroyed only the emails in Landers's Inbox folder, Defendants' counsel Sarah Hartley at
Bryan Cave ordered them to delete additional material. Hartley informed co-counsel Miller of
her actions in an email that same day:
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Turns out [Landers and Yousit] only deleted the Inbox, not all other folders. So
I've instructed them to delete every single file predating [Landers's] departure
from PPH, including Outbox, Sent Mail, any archives, Drafts, Trash/Deleted
Files.
(April 9, 2014 Email from Sarah Hartley to Randall Miller.)
8.

Hartley's post-complaint instruction to delete emails came about due to a

purported "miscommunication" between Miller and Hartley; Miller apparently told Hartley to
"confirm" that Landers was no longer in possession of any PPH emails predating his resignation,
and Hartley "presumed" that this meant that Miller wanted Landers to delete all remaining files.
(Hartley Dep. at 41-45.)
9.

According to Hartley, she thought that a "litigation hold" instruction had already

been issued, and that the documents had already been preserved in some fashion, but did not take
any steps to inquire whether the documents had, in fact, been preserved before issuing the
destruction order to her clients. (!d. at 45-47.)
10.

Upon realizing the "miscommunication" and that Landers's AOL account had not

yet been preserved, Defendants attempted to restore and preserve the emails. This involved
registering Landers's AOL account for a "premium" service with AOL which allowed for the
recovery of emails deleted within the prior seven days. (Yousif Dep. at 169:1-9, 208:20-209:7,
211 :3-14; Landers Dep. at 53:15-23; Miller Dep. at 62:5-14.) On April 14, 2014, five days after
the counsel-ordered deletions, Yousif called AOL and requested that the files be restored. (Miller
Dep. at 42:4-43:1; YousifDep. at 211:3-8.)
II.

Bryan Cave did not issue an official litigation hold until April 18, 2014, 14 days

after Defendants had been served with the lawsuit and nine days after Hartley ordered the
deletion of the files. (Yousif Privilege Log at 2.)
12.

On April 10, 2014, only one day after Defendants deleted email files from

Landers's outbox, sent mail, archives, drafts, and trash/deleted folders at the instruction of
counsel, Landers swore in an affidavit that he "did not take any documentation, customer lists,
supplier lists, contracts, or other PPH materials" with him when he resigned from PPH. (Landers
Aff. at '1['1[19-20.) The affidavit contains no reference to the post-resignation possession of files
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in the outbox, sent mail, archives, drafts, or trash/deleted folders, nor that Defendants had deleted
those files at the instruction of counsel only a day earlier. Miller reviewed and filed the affidavit
with the Court.
13.

When asked why the affidavit he reviewed and filed with the Court failed to

disclose "this deletion that occurred the day before, on April 9," Miller responded, "I don't
know." (Miller Dep. at 46:8-10.)
14.

Landers admitted at his deposition that he does not know how many documents

he deleted. (Landers Dep. at 55:1-56:21.) Nor does he know the extent to which any of that
evidence may have been recovered:
Q. So you can't tell us with any degree of assurance that all such information that
had been deleted by you in the first document destruction exercise, the second
document destruction exercise, and the third document destruction exercise
conducted on the advice of your lawyer, that all of those information -- all of
those pieces of electronically-stored information were actually restored, can
you?
A. I'd say that's accurate, yes.

(Id at 56:13-21.)
15.

Defendants claim that all of the post-complaint deletions were restored,

(November 13, 2014 Letter from Randall Miller to Stephen Sayers), and have provided a
purported screenshot of Landers's AOL account showing folders including "Recovered Mail"
with 48 emails, and "Recovered Sent Mail" with I ,096 emails. (Screen Shot of Restored File
Folders, attached to Defendants' Response as Ex. 17.) However, this screenshot is undated and
un-Bates-stamped.
16.

When questioned at the May 28, 2014 Preliminary Injunction hearing about the

destruction of ESI, Landers discussed the pre-litigation deletions but neglected, however, to
inform the Court about the post-complaint deletions, or that the deletions were at the instruction
of counsel. (Prelim. Inj. Hr'g Tr. at 359-61.)
17.

On November 3, 2014, PPH's counsel Stephen Sayers sent a letter to Miller in

which Sayers outlined his concerns regarding potential sworn falsehoods made by Defendants,
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and raised the issue of spoliation of evidence concerning the pre-litigation deletions. (Nov. 3,
2014 Letter from Stephen Sayers to Randall Miller.)
18.

On November 13, 2014, Defendants' counsel Randall Miller responded to the

letter and, for the first time, revealed the April 9, 2014 post-complaint destruction ofESI, as well
as the role that counsel played in ordering the deletions. (November 13, 2014 Letter from
Randall Miller to Stephen Sayers.) Defendants then granted a "very limited waiver" of the
attorney-client

communication

privilege

and

work-product

protection,

limited

to

communications between April 9, 2014 and April 14, 2014 and restricted to the topic of the

removal and restoration of emails associated with Landers's AOL account, so that PPH could
inquire into that issue. (Id)
19.

Throughout the period of November 2014 to March 2015, PPH deposed Randall

Miller, Sarah Hartley, John Landers, and Michael Yousif to inquire into the removal and
restoration ofthe emails.
20.

On March 30, 2015, PPH filed the instant Privilege Motion. PPH moves the Court

to overrule the Defendants' assertions of the attorney-client privilege and work-product

protection regarding the alleged bad faith spoliation of evidence. PPH also requests that the
Court order the Defendants to produce all documents relevant to the spoliation issues and related
alleged misconduct, and to order Defendants to make available for re-deposition those witnesses
who were instructed not to answer questions on the basis of privilege and work-product. PPH
further seeks all of its attorney fees incurred in bringing the Privilege Motion.
Applicable Law

The attorney-client privilege, codified in Colorado by statute at C.R.S. 13-90-1 07(1 )(b),
operates to protect communications between attorney and client relating to legal advice. The
privilege is "rooted in the principle that candid and open discussion by the client to the attorney
without fear of disclosure will promote the orderly administration of justice." Wesp v. Everson,
33 P.3d 191, 196 (Colo. 2001) (citation omitted). The related but distinct theory of work-product
protection, described by C.R.C.P. 26(b)(3), protects the "privacy of the attorney from opposing
parties and counsel" and generally applies to those documents and tangible things prepared in
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anticipation of litigation or trial. A v. Dist. Court of Second Judicial Dist., 550 P.2d 315, 327
(Colo. 1976).
However, neither the attorney-client privilege nor the work-product protection 1s
absolute. Law Offices of Bernard D. Morley, P. C. v. MacFarlane, 647 P.2d 1215, 1220 (Colo.
1982). When the social policies underlying each doctrine "conflict with other prevailing public
policies ... , the attorney-client privilege and the work product doctrine must give way." !d.
(citations omitted).

Colorado thus recognizes limited exceptions to the protections of the

attorney-client privilege and the work-product exemption, including waiver, see People v.
Madera, 112 P.3d 688 (Colo. 2005), and the crime-fraud exception. See People v. Tucker, 232
P.3d 194 (Colo. App. 2009).
Discussion

PPH argues that Defendants' assertions of the attorney-client privilege and work-product
protection regarding the alleged spoliation are improper, and that the Court should overrule those
assertions. PPH puts forth three legal arguments in support of its position. First, PPH contends
that the "sword and shield" or "fairness" principle prevents Defendants from waiving certain
portions of otherwise protected communications, but withholding other relevant information
concerning the exact same subject matter. The Court agrees with PPH that Defendants' waiver
should not be limited in time by the narrow April9-14, 2014 window that Defendants previously
imposed on PPH' s inquiries into destruction of ESI.
Second, PPH asserts that under the "in issue" doctrine, by affirmatively putting at issue
their own professed, subjective beliefs that litigation was not reasonably foreseeable, Defendants
have impliedly waived any privilege over communications with counsel on this subject. The
Court again agrees with PPH. Because Defendants rely on their belief that litigation was not
reasonably foreseeable to defend against allegations that they had a duty to preserve evidence,
any communications or other information relevant to whether or not they reasonably believed
that PPH would sue them is discoverable.
Third, PPH contends that under the "crime-fraud" exception to the attorney-client
privilege and the work-product exemption, certain communications between Defendants and
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counsel are not protected. The Court finds that there is probable cause to believe that Defendants
have committed perjury regarding destruction of ESI, and therefore any communications
regarding that perjury are not privileged.

I.

The "Sword and Shield" or "Fairness" Principle

The Colorado Supreme Court has held that the law does not permit a client to use as a

sword the protection of a privilege which is awarded him as a shield. People v. Trujillo, 144 P.3d
539, 543 (Colo. 2006) (citation omitted); see also In re Qwest Commc'ns Int'l, Inc., No. 01-CV01451-REB-CBS, 2005 U.S. Dist. LEXIS 19129, at *14 (D. Colo. 2005) (a client's voluntary
disclosure of documents otherwise protected by the attorney-client privilege effects a waiver of
the privilege not only as to the disclosed documents, but also as to all documents relating to the
subject matter of the disclosed documents). As explained by the United States Court of Appeals
for the First Circuit, if the privilege could be wielded selectively as both a sword and a shield,
then a litigant could "disclose fragments helpful to its cause, entomb other (unhelpful) fragments,
and in that way kidnap the truth-seeking process." In re Keeper of the Records, 348 F.3d 16, 24
(I st Cir. 2003 ).
Here, Defendants agreed to a "very limited waiver of the attorney-client communication
privilege between Bryan Cave LLP and the Defendants and work-product protection between
April 9, 2014 and April 14, 2014 and limited solely to the removal and restoration of email
associated with Mr. Landers' AOL account .... "(November 13, 2014 Letter from Randal H.
Miller to Stephen Sayers.) Subject to this subject matter- and time frame-limited waiver, PPH
was allowed limited inquiries into the removal and restoration of email associated with Mr.
Landers' AOL account. (See March 4, 2015 Dep. of Sarah L. Hartley; March 16, 2015 Dep. of
Randall H. Miller; February II, 2015 Dep. of John Landers; November 19, 2014 Dep. of
Michael Yousif.)

During these inquiries, counsel for AAPP and counsel for the individual

deponents regularly objected to questions on the grounds that it required the deponent to discuss
matters outside of the April9-14, 2014 window. (See id.)
Defendants cannot selectively wield the attorney-client privilege to disclose certain
details of the events surrounding the destruction of ESI while also withholding other information
of equal relevance and importance to the same subject matter. Defendants argue that scope7

limited waivers are both appropriate and commonly adopted, and cite several cases in support of
that proposition. See See Magnetar Techs. Corp. v. Six Flags Theme Park Inc., 886 F. Supp. 2d
466, 482 (D. De. 20 12) ("Although, in general, litigation hold letters are privileged, courts have
adopted the view that when spoliation occurs those letters become discoverable."); Cache La

Poudre Feeds, LLC v. Land O'Lakes, Inc., 244 F.R.D. 614, 634 (D. Colo. 2007) (permitting
plaintiff to take deposition to explore procedures used to preserve documents after finding
defendants expunged hard drives of employees after litigation had begun); United Medical

Supply Co v. United States, 77 Fed. Cl. 257, 262 (Fed. Cl. 2007) (ordering production of
defendant's hold letters after finding defendant spoliated evidence).
However, all of the cases cited by Defendants only support the premise that a waiver can
be limited in terms of scope of subject matter, which PPH does not contest. The cited cases do
not support the notion that the waiver can also be limited in terms of time frame. As such,
Defendants' waiver of the attorney-client privilege and work-product protection is to be limited
only in terms of subject matter (e.g. spoliation issues), and not in terms of time frame.

II.

The "In Issue" Doctrine

Intertwined with the "sword and shield" principle is the broader "in issue" doctrine,

which provides that a party impliedly waives the attorney-client privilege if that party puts a
confidential communication at issue as part of a claim or defense. See Mountain States Tele. &

Telegraph Co. v. DiFede, 780 P.2d 533, 543 (Colo. 1989). In other words, "if a client asserts a
claim or defense that depends upon privileged information, she cannot simultaneously use the
privilege to keep that information from the opposing party." Trujillo, 144 P.3d at 543. The
Colorado Supreme Court has adopted a three-prong test for implied waiver of the attorney-client
privilege in such circumstances which asks whether:
(I) assertion of the privilege was a result of some affirmative act, such as filing suit, by
the asserting party;
(2) through this affirmative act, the asserting party put the protected information at issue
by making it relevant to the case; and
(3) application of the privilege would have denied the opposing party access to
information vital to his defense.

People v. Madera, 112 P.3d 688, 691-92 (Colo. 2005) (citing DiFede, 780 P.2d at 543-44
(quoting League v. Vanice, 221 Neb. 34, 44,374 N.W.2d 849, 856 (1985)).
Here, in response to PPH' s allegations that Defendants had a pre-litigation duty to
preserve ESI, Defendants have repeatedly relied on the defense that litigation was not reasonably
foreseeable. (See, inter alia, Defendants' Response to Spoliation Motion at 3 ("Mr. Landers and
his counsel believed the possibility of any litigation arising out of Mr. Lander's [sic] resignation
and preparation to compete was remote .... "), 7 ("Defendants had no reason to believe that
litigation was likely."), 11 ("[Mr. Landers] had no reason to believe there would be litigation ...
."), 18-19 ([Mr. Landers] and his counsel believed there would be no legal consequences."), 21
("Neither Mr. Landers, nor his counsel, believed there would be litigation.").) As is made clear
by the foregoing selections from the record, Defendants invoke not only their own beliefs about
the likelihood of litigation, but the beliefs of counsel as well, whether or not a formal litigation
assessment was ever prepared.
By firmly placing in issue their own belief, as well as their counsel's belief and advice, on
the likelihood of litigation, they have waived all privilege protection over communications
relating to that subject matter.
Defendants argue that the "in issue" doctrine is inapplicable because there is "no
evidence" that Defendants' subjective belief regarding foreseeability of litigation was based on
the advice of counsel." (Privilege Motion Response at 3.) This is effectively a concession that if
Defendants' beliefs regarding foreseeability were based on advice of counsel, then the "in issue"
doctrine would apply. The record is replete with Defendants' express reliance on their counsel's
assessment and advice about the foreseeability of litigation. (See citations to record, supra.)
Accordingly, the Court is not persuaded by Defendants' argument that there is "no evidence"
that Defendants considered the advice of counsel in their assessment of whether litigation was
foreseeable, and such argument actually goes in favor of waiver.
Defendants also contend that there has been no "affirmative act" that would trigger the
three-part implied waiver test as described by the Colorado Supreme Court in Madera and

DiFede. The Court is again unpersuaded. As described above, Defendants have testified and
affirmatively stated on numerous occasions in pleadings that they and their counsel could not
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have reasonably anticipated litigation. By doing so, they have affirmatively put these matters
directly "in issue" as a defense to PPH's spoliation claims in this case.
As a final note on the "in issue" doctrine, the relevant inquiry as to the foreseeability of
potential litigation is an objective inquiry, not a subjective one. See Micron Tech., Inc. v. Rambus
Inc., 645 F.3d 1311, 1320 (Fed. Cir. 2011) (explaining that the "reasonably foreseeable" standard

"is an objective standard, asking not whether the party in fact reasonably foresaw litigation, but
whether a reasonable party in the same factual circumstances would have reasonably foreseen
litigation."). Therefore, to assess the reasonableness of the asserted belief of Defendants and
their counsel that litigation was not reasonably foreseeable, it is necessary to analyze all of the
communications on that subject matter.
III.

The "Crime-Fraud" Exception

As discussed supra, the attorney-client privilege is not absolute. MacFarlane, 647 P.2d at

1220. Where communications between an attorney and client are used to aid a crime or fraud,
the protections of the attorney-client privilege do not apply. People v. Tucker, 232 P.3d 194, 199
(Colo. App. 2009). This "crime-fraud" exception, as it has come to be known, enables a court to
pierce the attorney-client privilege where the party asserting the exception demonstrates facts
"adequate to support a good faith belief by a reasonable person that wrongful conduct sufficient
to invoke the crime or fraud exception ... has occurred." Id at 199-200 (citation omitted). The
party asserting the exception must go farther than showing that the communication is relevant
evidence of a crime; rather the party must at least demonstrate probable cause to believe that a
crime or fraud has taken place and that the communications with counsel were in furtherance of
that misconduct. Id at 200.
The attorney-client privilege can be abrogated even if the attorney is not aware of the
misconduct for which the client seeks advice. Caldwell v. Dist. Court In & For City & Cnty. of
Denver, 644 P.2d 26, 33 (Colo. 1982) (explaining that the policy considerations for recognizing

an exception to the attorney-client privilege are equally applicable whether or not an attorney is
aware of the wrongful purpose for which advice is sought).

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Here, the communications in question involve the preparation of the April 10, 2014
affidavit of John F. Landers. In his sworn affidavit, Landers affirmed that he "did not take any
documentation, customer lists, supplier lists, contracts, or other PPH materials" with him when
he resigned from PPH. The affidavit contains.no reference to the post-resignation possession of
PPH materials in the form of ESI, nor that Defendants had deleted the ESI at the instruction of
counsel only a day earlier. Miller reviewed the Landers Affidavit and filed it with this Court,
thereby suborning perjured testimony from Landers that Landers had no PPH materials after he
left PPH, a fact that Miller knew to be untrue due to the email he received from Hartley only a
day earlier. Miller also failed to alert the Court or opposing counsel to the spoliation that Bryan
Cave had ordered the day before, another clear violation of professional and ethical obligations.

See In re Fisher, 202 P.3d 1186, 1202 (Colo. 2009) (holding that "failure to disclose material
information to a tribunal is the equivalent of making a false statement of material fact").
The failure to disclose material information continued at the May 28, 2014 Preliminary
Injunction hearing before this Court, where Landers discussed the pre-litigation deletions but
neglected, however, to inform the Court about the post-complaint deletions, or that the deletions
were at the instruction of counsel. Miller again also failed to disclose the post-complaint ESI
destruction.
Only on November 13,2014- more than seven months after the spoliation occurred- did
Defendants and counsel disclose the post-complaint destruction of ESI as well as counsel's
involvement in the spoliation. Far from "proactive" as Defendants assert, this disclosure was in
response to the November 3, 2014 letter from PPH's counsel Stephen Sayers, which outlined
concerns regarding Defendants' truthfulness and raised the issue of spoliation of evidence.
The Court finds that there is probable cause to believe that Landers has committed
perjury and that counsel at Bryan Cave suborned that perjury. Furthermore, Defendants' counsel
had a duty not to allow a false statement of material fact - in the form of the omission from
Landers's affidavit regarding the deletions that took place the day prior- to be presented to the
Court.

Counsel also had a duty to "take reasonable remedial measures" to correct a false

statement of fact, "including, if necessary, disclosure to the tribunal." See Colo. R. Prof. Conduct
3.3(a)(3). These steps were not taken. Accordingly, under the crime-fraud exception to the
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'.

attorney-client privilege, communications between Defendants and counsel regarding destruction

of ESI are not protected.
Conclusion

WHEREFORE, as set forth above, the Court hereby GRANTS PPH's Motion to Overrule
the Defendants' Improper Assertions of Privilege and Work-Product Protection Over Evidence
Relevant to Spoliation of Evidence. The Court ORDERS that Defendants produce all documents
relevant to issues of (1) deletion and restoration of emails and other ESI; (2) whether Defendants
may have anticipated litigation at the time they destroyed relevant ESI; (3) the preparation and
factual accuracy of Landers's AprillO, 2014 affidavit; and (4) the nature and extent of any PPHrelated documents, materials, or other information retained by Defendants after leaving PPH' s
employ. The Court ORDERS that Defendants and former Defendants' counsel be made
available for re-deposition regarding these matters, limited only by subject-matter, and not by
time frame.
The Court further GRANTS PPH's request for attorney fees incurred in bringing the
Privilege Motion and for those attorney fees incurred in prosecuting the Motion for Default
Judgment or Adverse Inference. PPH shall submit an affidavit of fees not later than 21 days
from the date of this Order. The attorney fees awarded to Plaintiff in prosecuting the Privilege
Motion, and those attorney fees incurred in prosecuting the Motion for Default Judgment or
Adverse Inference are awarded against the Defendants, All American Pet Proteins, LLC, John F.
Landers and Michael A. Yousif, Attorney Sarah L. Hartley, Attorney Randall H. Miller, and
Bryan Cave LLP, joint and several.
Dated this 11th day of June, 2015.
BY THE COURT:

MICHAEL A. MARTINEZ
District Court Chief Judge

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