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SEC v. LAVIN

August 13, 1996

SECURITIES AND EXCHANGE COMMISSION, Applicant,
v.
JACK LAVIN, Respondent.



The opinion of the court was delivered by: URBINA

 Granting the SEC's Motion to Compel

 This matter comes before the court upon the Securities and Exchange Commission's (SEC) motion to compel compliance with its subpoena to Respondent, Jack Lavin. The subpoena requested disclosure of the tapes of seven telephone conversations between Mr. Lavin and his wife. *fn1" Mr. Lavin argues that these conversations are not subject to disclosure due to the confidential marital communications privilege.

 Upon consideration of the submissions of the parties and the entire record herein, the court concludes that the conversations at issue did not take place in a confidential setting and, therefore, the confidential marital communications privilege does not attach to those conversations. *fn2" Furthermore, the court determines that even if the privilege did attach, Mr. Lavin's actions resulted in a waiver of the privilege because he did not protect the confidentiality of the conversations. The court further concludes that Mrs. Lavin may not assert the privilege as to the subject conversations. Lastly, assuming arguendo that Mrs. Lavin could assert the privilege, the court decides that her actions have also resulted in a waiver of any confidential communications privilege claim she may have been able to assert. In an effort to address the Lavins' privacy concerns, the court will redact the segments of the conversations that do not specifically relate to Mr. Lavin's business matters. *fn3"

 I. BACKGROUND

 In 1993, Jack Lavin was working in the New York office of Bankers Trust (BT). *fn4" One of Mr. Lavin's responsibilities in the New York office was to supervise traders. *fn5" These traders bought and sold various financial instruments, including derivatives, for BT clients. Due to the highly speculative nature of derivatives and other financial instruments, BT maintained a policy of tape recording all telephone calls that took place on certain telephones in the New York office. *fn6" These telephones were located on a trading floor within the New York office and were used primarily by the traders in their dealings with clients. *fn7" All the telephones on the trading floor were marked with a plaque to remind users that conversations on those telephones were tape recorded. *fn8" It was common knowledge among the members of the division where Mr. Lavin worked that BT maintained a tape recording policy. *fn9"

 In January 1994, Mr. Lavin was transferred to become the head of BT's Chicago office. *fn10" Prior to Mr. Lavin's arrival in Chicago, that office did not have a tape recording policy because the employees in that office did not trade in derivatives. *fn11" When Mr. Lavin learned of this fact, he engaged in discussions with other BT employees concerning the implementation of a tape recording policy in the Chicago office. Mr. Iannuzzi, who at the time was in charge of BT's telecommunications, testified that Mr. Lavin himself, wanted a tape recording system in place because Mr. Lavin, among others, was to begin trading in derivatives from the Chicago office. *fn12"

 After learning of alleged improprieties in BT's marketing of derivatives, the SEC and the Federal Reserve Bank initiated collateral investigations. As part of these investigations, the SEC and the Federal Reserve Bank have requested and received thousands of tape recordings of conversations involving BT employees. The Federal Reserve Bank currently has copies of the tapes at issue in this case and continues to enjoy access to them.

 II. ANALYSIS

 The confidential marital communications privilege is one of two testimonial privileges available to married couples. *fn13" A person invoking the confidential marital communications privilege must satisfy a three-part test. United States v. Duran, 884 F. Supp. 537, 540 (D.D.C. 1995)(citing United States v. Evans, 966 F.2d 398, 401 (8th Cir.), cert. denied, 506 U.S. 988, 113 S. Ct. 502, 121 L. Ed. 2d 438 (1992)).

 The privilege prevents the disclosure of private, confidential communications that take place between spouses as long as: (1) the words or actions at issue were intended by one spouse to be a communication to the other spouse; (2) the communication occurred during a valid marriage; and (3) the spouse intended for the communication to be confidential. Id. at 540. This privilege, like most other testimonial and evidentiary privileges, can be waived. Id.

 A. CONFIDENTIALITY

 1. Legal Standard

 Testimonial privileges in federal courts are governed by Fed. R. Evid. 501. It states, in pertinent part:

 
Except as otherwise required by the Constitution of the United States or provided by Act of Congress or in rules prescribed by the Supreme Court pursuant to statutory authority, the privilege of a witness. . . shall be governed by the principles of the common law as they may be interpreted by the courts of the United States in light of reason and experience.

 In order for a conversation between spouses to be considered privileged, it must be confidential. A communication between spouses is presumed to be confidential. Wolfle v. United States, 291 U.S. 7, 14, 78 L. Ed. 617, 54 S. Ct. 279 (1934); Blau v. United States, 340 U.S. 332, 333, 95 L. Ed. 306, 71 S. Ct. 301 (1951). However, this presumption can be rebutted. Wolfle, 291 U.S. at 14. The burden is on the SEC to rebut the presumption of confidentiality. Blau, 340 U.S. at 333. If the circumstances surrounding the communication indicate a lack of confidentiality, then no privilege will attach to the communication. Wolfle, 291 U.S. at 14; see also Pereira v. United States, 347 U.S. 1, 6, 98 L. Ed. 435, 74 S. Ct. 358 (1954)(same). Disclosure to a third party rebuts the presumption of confidentiality accorded marital communications. Wolfle, 291 U.S. at 14.

 The issue before the court is whether the conversations between Mr. and Mrs. Lavin were confidential and, therefore, protected by the privilege. *fn14" This determination depends on whether or not Mr. Lavin knew or should have known that these conversations were being tape recorded. See Wolfle, 291 U.S. at 16-17. The record demonstrates clearly that Mr. Lavin knew or should have known that conversations on his Chicago telephone were subject to being ...


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