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Lawson v. Spirit Aerosystems, Inc.

United States District Court, D. Kansas

October 8, 2019

LARRY A. LAWSON, Plaintiff,
v.
SPIRIT AEROSYSTEMS, INC., Defendant.

          MEMORANDUM AND ORDER

          ANGEL D. MITCHELL U.S. MAGISTRATE JUDGE

         This matter comes before the court on defendant Spirit AeroSystems, Inc.'s (“Spirit”) motion to compel. (ECF No. 105.) Spirit asks the court to compel plaintiff Larry A. Lawson (“Lawson”) and third parties Elliott Associates, L.P. and Elliott International, L.P. (together, “Elliott”) to produce certain documents and redacted information that Lawson and Elliott contend are protected by the attorney-client privilege, the work-product doctrine, the common-interest doctrine, and/or the joint-client privilege. For the reasons discussed below, Spirit's motion is granted in part, denied in part, and denied in part without prejudice. Lawson and Elliott shall produce documents as set forth in this Memorandum and Order. The parties shall then meet and confer about any disputes as to specific privilege log entries and, to the extent disagreements remain as to particular documents, Spirit shall file a renewed motion to compel and the court will conduct an in camera review of those documents.

         I. BACKGROUND OF THE CASE

         The background of this lawsuit is more thoroughly set forth in the court's Memorandum and Order on Spirit's motion to dismiss. See Lawson v. Spirit AeroSystems, Inc., No. 18-1100-EFM, 2018 WL 3973150, at *1-*4 (D. Kan. Aug. 20, 2018). Highly summarized, Spirit is a tier-one manufacturer of aerostructures and aircraft components. Lawson is Spirit's former chief executive officer (“CEO”), who retired on July 31, 2016. His Retirement Agreement provided him with substantial financial benefits and extended his non-compete obligations for two years, until July 31, 2018.

         At the heart of this lawsuit is Lawson's involvement with business dealings between Arconic, Inc. (“Arconic”) and Elliott, which Spirit contends constituted a breach of Lawson's Retirement Agreement. Arconic is an aircraft component manufacturer, and Elliott is an investor in Arconic. In January of 2017, Elliott engaged Lawson to provide consulting services in connection with a proxy contest Elliott launched to replace five Arconic board members. Spirit contends that this arrangement violated Lawson's non-compete because Spirit and Arconic are in the same “business”-i.e., Spirit and Arconic are competitors. Once Spirit learned about Lawson's consulting arrangement with Elliott regarding Arconic's board of directors, Spirit notified Lawson that this constituted a breach of his non-compete. Spirit stopped paying Lawson and demanded that he repay what the company had already paid him under the Retirement Agreement. Lawson disputes that he breached the non-compete. He filed this lawsuit against Spirit seeking to recover what he believes Spirit owes him under the terms of the Retirement Agreement.

         Against this backdrop of the gist of the case in general, the court now turns to the present dispute. Spirit seeks to compel Lawson and Elliott to produce certain communications between them, including communications involving their attorneys. Lawson and Elliott have withheld these communications based on the attorney-client privilege, the work-product doctrine, the common-interest doctrine, and/or the joint-client privilege. In order to decide the issues raised, it is necessary to understand the detailed history behind Elliott and Lawson's relationship, as well as the respective lawyers and law firms involved.

         A. Elliott Retains Willkie Farr & Gallagher, LLP

         On September 24, 2015, Elliott retained the law firm of Willkie Farr & Gallagher, LLP (“Willkie Farr”). (See ECF No. 103, at 28-32.[1]) Since then, Willkie Farr has represented Elliott in connection with various matters, including its investment in Arconic. (ECF No. 111-1 ¶ 3, at 1.)

         B. Elliott's Negotiations with Lawson in January of 2017

         In January of 2017, Elliott identified Lawson as a potential candidate for Arconic's board of directors or its CEO. (Id. ¶ 4, at 1.) On January 10, 2017, Elliott and Lawson met. (See ECF No. 109-2, at 2.) That same day, Lawson initiated dialogue with Spirit about his proposed involvement with Elliott and Arconic; Spirit initially reacted with concern about potential overlap. (See Id. at 1-2; ECF No. 111-1, at 5.)

         On January 19, Willkie Farr attorney Maurice Lefkort reached out to Stacy Cozad, Spirit's General Counsel, regarding Lawson's Retirement Agreement and non-compete. (ECF No. 109-4, at 2.) Lefkort did so “on behalf of Elliott.” (Id.) On January 23, Lefkort again clarified that Willkie Farr's role was as counsel to Elliott and not counsel to Lawson, but that Willkie Farr was authorized to submit a request to Spirit on Lawson's behalf because Lawson “understandably . . . wants to ensure there are no possible complications.” (Id.) Lefkort asked Spirit to either (1) confirm that Lawson's service on Arconic's board of directors would not breach the Retirement Agreement, or (2) consent to Lawson serving on Arconic's board of directors and waive any provisions of the Retirement Agreement that Spirit would deem breached by such service. (Id.)

         On January 26, Cozad responded. (Id. at 1.) She stated that Spirit reviewed Lawson's request and concluded that he would violate his Retirement Agreement if he were to serve on Arconic's board of directors, or otherwise provide services directly or indirectly to Arconic. (Id.) Furthermore, she stated that “if Arconic or Elliott engages with Mr. Lawson to violate his obligations, [Spirit] will take all appropriate actions - and seek all available remedies - against Mr. Lawson and against anyone that tortiously interferes with Mr. Lawson's contractual obligations.” (Id.) Elliott then made an offer to Spirit (the terms of which are presently unknown), which Spirit rejected on January 29 when it declined to waive the terms of Lawson's Retirement Agreement or release him from his non-compete obligations. (ECF No. 109-5, at 1.)

         C. Elliott Engages Lawson as a Consultant

         On January 31, Lawson and Elliott entered into two agreements: (1) a Consulting Agreement, and (2) an Indemnification Agreement. The Consulting Agreement required Lawson to “provide to Elliott general advisory and professional consulting services . . .[2] in connection with Elliott's nomination of individuals for election to the board of directors of Arconic.” (ECF No. 111-1 § 2, at 12.) Lawson's engagement expired by default on May 31, 2017, if not properly terminated sooner or renewed. (Id. § 7(a), at 14.) The Consulting Agreement provided for certain additional payouts depending on whether Lawson was Arconic's CEO by July 31, 2017. (See Id. § 3(c)-(d), at 12.) The Consulting Agreement required Elliott to indemnify Lawson “as set forth in that certain Indemnification Agreement . . . by and between Elliott and [Lawson].” (Id. § 8, at 14.) Notices under the Consulting Agreement were to be copied to the receiving party's separate counsel: Willkie Farr for Elliott, and Cadwalader, Wickersham & Taft LLP (“Cadwalader”) for Lawson. (Id. § 11, at 15-16.)

         The Indemnification Agreement required Elliott to indemnify Lawson as follows:

In the event [Lawson] . . . becomes a party to . . . a Claim by reason of . . . an Indemnifiable Event, Elliott, to the fullest extent permitted by applicable law, shall indemnify and hold harmless [Lawson] from and against any and all Losses suffered, incurred or sustained by [him] or to which [he] becomes subject, resulting from, arising out of or relating to such Claim . . . .

(ECF No. 123-1 § 2(a), at 2.) It defines a “Claim” as:

any threatened, pending or completed action, suit, . . . or proceeding . . . or setoff or failure to pay amounts otherwise due and payable, whether instituted by Elliott, [Arconic] or any other party, or any inquiry or investigation that [Lawson] in good faith believes might lead to the institution of any such action, suit or proceeding, setoff or failure to pay.

(Id. § 1, at 1.) And it defines an “Indemnifiable Event” as an event or occurrence relating to or arising out of Lawson's consulting services, the Arconic proxy contest, and “Elliott's announcement of its intention to propose [Lawson] as an employee, officer or director of [Arconic], including any breach or alleged breach of any non-competition or non-solicitation obligations . . . to which [Lawson] is subject pursuant to any agreement with Spirit.” (Id. § 1, at 1-2.)

         The Indemnification Agreement did not require Elliott to assume the defense of covered Claims. Rather, it stated that “[i]n the case of the commencement of any Claim against [Lawson] in respect of which he may seek indemnification from Elliott hereunder, Elliott will be entitled to participate therein, including, without limitation, with respect to the negotiation and approval of any settlement of such action.” (Id. § 2(b), at 3.) Elliott could choose to “assume the defense of any Claim against [Lawson] in respect of which [he] may seek indemnification from Elliott hereunder” by giving “written notice of Elliott's election to so assume the defense of such Claim.” (Id.) The Indemnification Agreement further provided that, if Elliott made indemnification payments to Lawson, “Elliott shall be subrogated to the extent of such payment to all of the rights of recovery of [Lawson].” (Id. § 9(a), at 5.)

         That same day, Elliott issued a press release announcing that it had nominated five candidates to Arconic's board. (ECF No. 111-1, at 20.) In addition, Elliott announced that it had engaged Lawson as a consultant. (Id.) The press release highlighted his “extensive executive leadership experience, ” touting that he “‘has the ideal set of skills needed to turnaround [sic] Arconic's woefully and continually underperforming business.'” (Id.)

         D. Spirit Alleges Breach

         On February 2, Spirit notified Lawson that his “engagement by Elliott constitutes an egregious violation of . . . the [Retirement] Agreement.” (ECF No. 111-1, at 10.) Spirit ceased making payments to Lawson under the Retirement Agreement and terminated his right to continue vesting in Spirit shares under a long-term incentive plan. (See id.) Spirit also demanded that Lawson tender back to the company all payments made to him under the Retirement Agreement, as well as $2 million that Lawson had received pursuant to a deferred compensation plan. (Id.)

         E. Lawson Retains Willkie Farr Under the Terms of a Joint Representation with Elliott

         On February 21, 2017, Lawson signed an engagement letter retaining Willkie Farr to represent him “in connection with a dispute with his former employer, Spirit.” (ECF No. 103, at 22.) The engagement letter stated that Willkie Farr represented Elliott with respect to the same dispute, and that Willkie Farr was “not aware of any conflict of interest that would preclude [it] from representing both [Lawson and Elliott].” (Id. at 23-24.) Lawson agreed to joint representation and, in doing so, he acknowledged that in such a relationship, “each of the participating clients is entitled to know what any of the other clients has told [Willkie Farr]” and that “all participating clients [must] take common positions as to all issues.” (Id. at 24.) Under the terms of the engagement letter, Elliott agreed to pay Willkie Farr's fees associated with the joint representation. (Id. at 23.)

         F. Lawson and Elliott's Joint Defense Agreement

          Over a year later, on March 28, 2018, Lawson and Elliott entered into a Common Interest and Joint Defense Agreement. (See ECF No. 103, at 33-43.) The agreement governs the joint defense of “Indemnification Claims, ” defined as “any ‘Claim' (as that term is defined by the Indemnification Agreement) for which Lawson may seek indemnification, including in connection with Spirit.” (Id. at 33.) The agreement recites that Lawson and Elliott have a common interest regarding these claims and that “Elliott assumed the defense of the Indemnification Claims by letter dated February 3, 2017.” (Id.) Elliott selected Willkie Farr “to act as litigation counsel . . . to the Parties with respect to the Indemnification Claims.” (Id.)

         As further recited in the agreement, Lawson, his personal counsel Shearman & Sterling LLP (“Shearman”), Elliott, and Willkie Farr had “collaborated and intend to continue to collaborate . . . with respect to the Indemnification Claims” and this lawsuit. (Id. at 34.) In connection with this ...


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