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An e-mail Martha Stewart sent to both her attorney and her daughter during a grand jury investigation is still protected as attorney work product, a federal judge ruled Monday. Analyzing the work-product doctrine in the context of an “unusual set of facts,” Southern District Judge Miriam Goldman Cedarbaum said that “although the e-mail to Stewart’s daughter does not realistically risk revealing the thought processes of Stewart’s attorneys, I conclude that it is protectible as preparation for litigation.” The ruling in United States v. Stewart, 03 Cr. 717, came in response to a motion by the government for clarification of whether the e-mail was covered by the doctrine and whether Stewart had waived the privilege when she forwarded the message to her daughter. Stewart is facing a January trial, along with co-defendant and former broker Peter Bacanovic, for conspiracy, obstruction of justice, making false statements and securities fraud in connection with her alleged coverup of her sale of ImClone Systems Inc. stock based on inside information. Stewart was not charged with insider trading. Stewart composed an e-mail for attorney Andrew Nussbaum of Wachtell, Lipton, Rosen & Katz on June 23, 2002, outlining her version of events on the ImClone sale. She forwarded the same e-mail to her daughter, Alexis Stewart, the next day. In August 2002, the grand jury investigating the ImClone sale sent a subpoena to Martha Stewart Living Omnimedia. Through a document production agreement with the government, the company provided a series of computers and files, and then followed up with two lists identifying documents that were responsive to the subpoena. The lists also designated which documents were being withheld based on attorney-client privilege. Cedarbaum noted that while the June 23 e-mail to Nussbaum appeared on the log of privileged computer files, the company inadvertently omitted the June 24 e-mail to Alexis Stewart from the log. The judge said that an assistant U.S. attorney, unaware of the agreement between the government and Stewart’s company, began reviewing the documents the company had produced. Once the assistant discovered the e-mail to Stewart’s daughter, and learned of the agreement on document production, review of the company documents stopped. Shortly after Stewart’s indictment, the government, led by Southern District Criminal Division Chief Karen Seymour, asked Cedarbaum for a determination of the status of the e-mail. Lawyers for Stewart, Robert Morvillo and John J. Tigue of Morvillo, Abramowitz, Grand, Iason & Silberberg made several arguments against allowing the e-mail into evidence, including that the government should not be allowed to benefit from its violation of the document production agreement. Cedarbaum first dealt with the attorney-client privilege issue, noting that the June 23 e-mail to Nussbaum was “clearly protected by her attorney-client privilege.” As for the June 24 e-mail, the judge said, “Stewart cites no authority for the proposition that the Government should be barred from using documents that it reviewed in inadvertent violation of an informal document review agreement.” UNUSUAL SITUATION But the judge’s analysis was different on the issue of attorney work product and the “unusual” situation before her. She noted that “nearly every reported case involving waiver of work-product protection based on disclosure, the individual to whom the disclosure was made had some litigation-based interest in the matter disclosed, whether as an adversary, potential adversary, ally, or assistant.” Here, she said, the affidavits submitted by the defendant “indicate that while Stewart’s lawyers do not appear to have requested this specific e-mail, she prepared it in response to her attorneys’ ongoing requests for factual information in the furtherance of their legal representation.” “By forwarding the e-mail to a family member, Stewart did not substantially increase the risk that the Government would gain access to materials prepared in advance of litigation,” the judge said, citing an affidavit from Stewart saying her daughter was a “valued” confidant and counselor, and by “sharing the e-mail with her, I knew she would keep its content strictly confidential.” “The disclosure affected neither side’s interest in this litigation: it did not evince an intent on Stewart’s part to relinquish work-product immunity for the document, and it did not prejudice the Government by offering Stewart some litigation-based advantage,” Cedarbaum said. “Accordingly, I hold that Stewart did not waive work product protection over the June 23 and June 24 e-mails.”

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