Judge Approves Disclosure of Company's Efforts to Discredit Blogger-Critic

Federal judge rejects executive seminar company NXIVM's privilege bid in dispute with anti-cult blogger Rick A. Ross

New York Law Journal/March 5, 2007
By Anthony Lin

A New York federal magistrate judge has ruled that a controversial executive seminar company cannot invoke attorney-client privilege to prevent disclosure of its efforts to discredit one of its most well-known critics.

NXIVM Corp., formerly known as Executive Success Program Inc., operates a series of seminars that some say are intended to foster a cult-like following. One of the group's most outspoken critics has been anti-cult blogger and deprogrammer Rick A. Ross. NXIVM has sued Ross in New York and New Jersey for violating its copyright by disseminating NXIVM course materials.

In 2003, the group hired Joseph J. O'Hara, an Albany-based businessman and lobbyist also admitted to practice law in Washington, D.C., to draft a plan to deal with the negative publicity stemming from its litigation with Ross. While employed by NXIVM, O'Hara engaged private investigation firm Interfor, which produced a report on Ross, including information on his personal banking transactions and telephone calls.

The report was also shared with Sitrick and Co., a Los Angeles public relations firm hired by O'Hara to counter Ross.

Interfor also set up a "sting" operation, luring Ross to a November 2004 meeting with a supposedly distraught mother who claimed her daughter was involved with NXIVM. At the time, Ross and NXIVM were engaged in litigation with both sides represented by counsel. Ross has claimed he was questioned at the meeting about the lawsuit and his legal strategy, without knowing Interfor had been hired by NXIVM. The distraught mother was portrayed by an actress.

O'Hara, who formally severed his business relationship with NXIVM in March 2005, was sued by the group a few months later for allegedly defrauding members Clare and Sara Bronfman, daughters of Edgar Bronfman Sr., of $2 million in loans and payments. The following year, O'Hara informed Ross about the Interfor report and sting operation. NXIVM's efforts against Ross were also shared with a reporter at the Albany alternative weekly Metroland, which published a story about them.

NXIVM asked Northern District Magistrate Judge Randolph Treece to grant a protective order, arguing that information about the Interfor report and sting were both covered by attorney-client privilege. But Treece ruled in NXIVM Corp. v. O'Hara, 05-Civ.-1546, that both fell within exceptions to the privilege and could be subject to discovery by Ross.

The magistrate judge found that much of the work O'Hara was involved with at NXIVM did not merit protection because he was acting as a marketing and public relations consultant rather than a lawyer. But he said the parties clearly intended for such a privilege to apply after July 2004, at which time O'Hara re-constituted his Washington law practice, purely for the purpose of invoking attorney-client confidentiality.

Protection waived

The magistrate judge found that the Interfor report was an attorney work-product, but ruled that any protection had been stripped by NXIVM's sharing of the report with Sitrick with the goal of discrediting Ross in the press.

"Delivering the Interfor Report to Sitrick was a deliberate, affirmative and selective strategic decision to disclose this information for another benefit other than aiding the lawyer pitched in the battled of litigation," Treece wrote. "The benefit was for the control of the airwaves and print media, which NXIVM hoped to profit ... A party cannot selectively share a work product and then expect it to remain as a shield."

The magistrate judge said information about the sting operation was subject to the crime-fraud exception to the attorney-client privilege. He said O'Hara, who attended meetings with Interfor at which the sting was discussed, should have known the fake meeting constituted a highly improper ex parte contact, and his acquiescence could be construed as an endorsement of the plan.

"Thus his sublime concurrence can also be viewed as being used in furtherance of a fraud or misconduct and, in this case, the subversion of an adversary's attorney-client rights that undermines the integrity of the adversary system," Treece said. "This is the only mechanism for attorney supervision upon which NXIVM can lay claim that the facts and related conversations concerning the sting operation can even be considered privileged."

NXIVM was represented by Douglas C. Rennie of Proskauer Rose. O'Hara's counsel was William J. Dreyer of Albany's Dreyer Boyajian. Ross was represented by Peter L. Skolnik and Michael Norwick of Roseland, N.J.'s Lowenstein Sandler.