Case Information
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-----------------------------------------------------------------X
GMO GAMECENTER USA, INC. and GMO
INTERNET, INC.,
Plain�ffs / 22-CV-5974 (JPC) (KHP) Counterclaim- defendants , against - OPINION AND ORDER ON MOTION TO COMPEL
WHINSTONE US, CORPORATION, WHINSTONE AND RIOT TO PRODUCE DOCUMENTS Defendant/ WITHHELD AS PRIVILEGED Counterclaim- plain�ff . -----------------------------------------------------------------X
KATHARINE H. PARKER, United States Magistrate Judge:
This case concerns an alleged breach of a contract for services (among related claims) in connec�on with Whinstone’s construc�on and opera�on of a bitcoin mining data center maintained in Texas. Plain�ffs/Counterclaim defendants GMO Gamecenter US, Inc. and GMO Internet, Inc. (together, “GMO”) move to compel produc�on of documents withheld by Whinstone US, Corp. (“Whinstone”) and Riot Blockchain, Inc. (“Riot”) — Whinstone’s parent company — as privileged. For the reasons that follow, GMO’s mo�on is granted in part and denied in part.
Relevant Background The Court summarizes only the relevant facts to the instant mo�on. GMO is a global company that offers various services including internet infrastructure, online adver�sing and media, internet finance, cryptocurrency mining and trading, and game development. Whinstone operates data centers intended for large scale cryptocurrency mining and high - speed video rendering, including North America’s largest bitcoin mining and hos�ng facility in Texas. Whinstone is currently owned by Riot , a publicly traded bitcoin mining and hos�ng company.
In November 2018, Whinstone and GMO entered into the W Coloca�on Services Agreement (the “Louisiana Agreement”), pursuant to which Whinstone agreed to construct a data center in Louisiana that would begin opera�ons in January 2019. GMO paid $5.8 million as an ini�al deposit and, once it began using the data center, paid a fee for space in the data center, power to operate its mining machines, internet connec�on, networking and cooling services, a license to use certain IP addresses, and various other services related to security and maintenance of equipment. The Louisiana data center opened in March 2019 – later than expected – and with a smaller capacity than an�cipated and insufficient power to operate the bitcoin mining machines. In July 2019, the Louisiana data center had to suspend opera�ons because of insufficient power. As a result, GMO demanded a return of its ini�al deposit and other damages flowing from the breach of the agreement.
At the �me of the breach of the Louisiana Agreement, Whinstone was building a new data center in Texas. It offered GMO favorable terms for a new coloca�on agreement at its facility in Texas, which GMO accepted (the “Texas Agreement”). The Texas Agreement contained provisions intended to resolve disputes stemming from the Louisiana Agreement and provisions for providing power and services for GMO’s bitcoin mining machines going forward, which would be relocated to Texas. GMO paid a fee to Whinstone under the Texas Agreement and also provided a $33.6 million loan to fund construc�on at the Texas data center.
Eventually, the Texas data center was constructed and GMO placed certain miners into Building A at the center. The claims in this ac�on arose therea�er and relate principally to breaches of the Texas agreement. GMO claims that Whinstone breached its obliga�ons under the Texas agreement, including with respect to the provision of power to Building A and maintenance of the building, leading to its miners not genera�ng the income GMO expected. GMO also asserts other breaches, related to the sharing of profit from the sale of power. Whinstone denies this and contends GMO failed to adhere to its obliga�ons under that agreement.
At the �me the Texas Agreement was signed, Northern Data, a German company that develops and operates high performance compu�ng infrastructure solu�ons, owned Whinstone. In late 2020, Riot started discussing the acquisi�on of Whinstone from Northern Data. Outside advisors assisted Riot with the Whinstone acquisi�on. Riot retained XMS Capital Partners, LLC (“XMS”) as its financial advisor and retained Sidley Aus�n LLP (“Sidley”) as a legal advisor. Riot also retained Ernst & Young (“EY”) as its tax and accoun�ng advisor. Similarly, Whinstone hired Greenhill & Co. (“Greenhill”) to serve as financial advisor and Sullivan & Cromwell LLP (“S&C”) as legal advisor. Whinstone consulted with its auditor, Mazars USA LLP (“Mazars”) regarding tax and accoun�ng issues.
O n May 26, 2021, Riot closed on the acquisi�on of Whinstone. Subsequent to the acquisi�on, Riot provided legal services to Whinstone pursuant to a Shared Services Agreement.
The Stock Purchase Agreement (“SPA”) between Northern Data, Riot, and Whinstone provided a period subsequent to closing of the acquisi�on during which Riot could review the purchase price for Whinstone and inform Northern Data of any objec�ons. See SPA § 2.3 (Apr. 8, 2021), htps://perma.cc/TN8Q - P4B4 . The agreement provided for a period of 75 days a�er the closing for Riot to prepare a proposed final closing statement regarding the price and deliver it to Northern Data. Id. Upon delivery of the proposed final closing statement, Northern Data had 60 days to review and object. The SPA contemplated a period of good faith nego�a�ons on differences regarding the final closing price calcula�ons and, if the par�es could not resolve the differences through nego�a�ons, submi�ng them to an independent accoun�ng firm that would resolve the disputes, not as an arbitrator but as an accoun�ng expert, within 45 days a�er submission of the dispute to it. The independent accountant’s determina�on was to be final and binding as to the purchase price absent “manifest error.”
At some point, Riot concluded that Northern Data incorrectly calculated Whinstone’s working capital, infla�ng the dollar amount Riot paid to acquire it. Sidley engaged a li�ga�on support group at EY to provide forensic accoun�ng services in connec�on with evalua�ng the claim. Riot and Whinstone do not provide the date when Sidley engaged a li�ga�on support group at EY to provide such serves or the date when they an�cipated li�ga�on as opposed to simply following the contractual process for making post - closing price adjustments. [1]
However, the li�ga�on between Riot and Northern Data is a mater of public record. On
September 7, 2022, Riot filed a complaint against Northern Data in Delaware Chancery Court
alleging that it had tried for more than a year post closing to try to resolve a dispute over the
purchase price (to the tune of $30 million) in accordance with the SPA provisions but that Northern Data refused to submit the dispute to the independent accoun�ng expert in bad faith.
Riot Blockchain, Inc. v. Northern Data AG
, No. 2022 0792,
Four issues were submited to the independent accoun�ng expert , though none concerned adjustments related to the instant dispute . All were resolved in favor of Riot. Therea�er, in 2023, Northern Data sued Riot in Delaware Chancery Court contending the accoun�ng expert failed to adhere to generally accepted accoun�ng principles (“GAAP”) with regard to two issues and that two other issues were indemnity claims that should have been accounted for differently . [3] Id. at *1. The Delaware court recently ruled in favor of Riot on the GAAP issues and in favor of Northern Data on the indemnity issues . Id. at *19.
Addi�onally, on or about June 29, 2023, Riot and/or Whinstone terminated the Texas Agreement, causing GMO to amend its complaint in this ac�on to add claims related to the termina�on of the agreement and to significantly increase its damages demand. ECF No. 106.
I n the instant mo�on, GMO challenges Whinstone’s and Riot’s asser�ons of privilege over a number of relevant and responsive documents. GMO largely asserts these documents cons�tute business and factual informa�on which is not privileged or that privilege was waived due to the inclusion of third par�es in communica�ons, including investment bankers, financial advisors and accountants engaged in connec�on with Riot’s purchase of Whinstone and post - closing price adjustment dispute. Whinstone and Riot counter that the documents it have withheld are all protected by the atorney -client privilege and/ or work -product doctrine. The �ming of the various li�ga�ons referenced above is relevant to a considera�on of work product, as some of the documents on the log were withheld by Riot/Whinstone on the ground that they were made in an�cipa�on of li�ga�on with Northern Data over the adjustment of the purchase price of Riot’s acquisi�on of Whinstone or in an�cipa�on of or because of li�ga�on with GMO . With respect to the later, Riot/Whinstone have withheld virtually all documents concerning the termina�on of the Texas Agreement, which occurred during the course of this li�ga�on, on the ground that it was driven and decided by lawyers.
The Court finds that some of the documents were properly withheld , whereas others were not and must be produced or produced in part .
Legal Standards
Mo�ons to compel are “entrusted to the sound discre�on of the district court,”
United
States v. Sanders
,
1. Attorney client Privilege
The Court begins with a general note about the applicable choice of law in this case. The
law of the forum state — here, New York — generally governs a determina�on of atorney -client
privilege where this court’s subject mater jurisdic�on is based upon diversity. Fed. R. Evid. 501;
Allied Irish Banks v. Bank of America, N.A.
,
The atorney client privilege protects communica�ons between client and counsel made
for the purpose of obtaining or providing legal advice that were intended to be and in fact kept
confiden�al.
In re County of Erie
,
While in- house lawyers commonly provide legal advice protected by the privilege, they
also some�mes provide business advice which is unprotected.
In re County of Erie
, 473 F.3d at
418, 420;
In re Grand Jury Subpoena Duces Tecum
,
Courts also have applied the privilege to communica�ons among non lawyer employees
of a corpora�on where the purpose of the communica�on was to provide informa�on to
counsel or aid counsel in providing legal advice.
Upjohn Co.
,
Generally, atorney - client privilege is waived “if the holder of the privilege voluntarily
discloses or consents to disclosure of any significant part of the mater or communica�on over
which the privilege is claimed.”
Fullerton v. Prudential Ins. Co.
,
However, there are excep�ons to waiver. For example, “an agent, such as a financial
advisor, may have communica�ons with an atorney that ‘are covered by the atorney -client
privilege if the financial advisor’s role is limited to helping a lawyer give effec�ve advice by
explaining financial concepts to the lawyer.’”
Urban Box Office Network, Inc. v. Interfase
Managers, L.P.
, 01 -CV- 8854 (LTS) (THK),
As an example, the court in
Ackert
,
In another more recent example, a court held that communica�ons between a lawyer
and a financial advisor were not privileged.
Walsh
,
One other excep�on to waiver recognized by some courts is the “ func�onal equivalent ”
doctrine. This theory recognizes that an independent contractor of a client may be a de facto
employee of the employee for purposes of privilege. Under this excep�on, courts must assess
“ whether the consultant had primary responsibility for a key corporate job,” the closeness and
longevity of the rela�onship between the consultant and the company’s management and/or
leadership on maters cri�cal to the company’s posi�on in li�ga�on, and whether the
consultant has informa�on not possessed by others at the company , whether the consultant
served as the company’s representa�ve to third par�es, and whether the consultant sought
legal advice from corporate counsel to guide his/her work for the company, among other
f actors .
Exp. Imp. Bank of the United States v. Asia Pulp & Paper Co., Ltd
.,
2. Attorney Work Product Doctrine
In contrast to the law governing privilege, “ [ f ]ederal law governs the applicability of the
work product doctrine in all ac�ons in federal court.”
Wultz v. Bank of China Ltd.
,
The work product doctrine exists to promote our adversarial system of jurisprudence
and permit atorneys to work “with a certain degree of privacy free from unnecessary intrusion
by opposing par�es and their counsel.”
Hickman v. Taylor
,
The key factor in determining applicability of this doctrine is whether the documents or
things were prepared “with an eye toward” or “in an�cipa�on of” or “because of the prospect
of li�ga�on.”
Hickman
,
So, for example, if a company is contempla�ng a corporate transac�on and requests an atorney’s assessment of poten�al li�ga�on and its likely outcome to aid in its business decision about the transac�on, the atorney’s strategies and assessments would be opinion work product protected under the work product doctrine. Id . at 1199 1200. Similarly, if a business prepares financial statements to assist its execu�ves, prospec�ve investors and business partners in evalua�ng future courses of ac�on and the business’s auditor requests an opinion by the business’s atorneys es�ma�ng the likelihood of success in projected li�ga�on for which it is maintaining reserve funds, the atorney’s analysis is protected opinion work product. Id .
As these examples illustrate, the mental impressions of atorneys are given broad
protec�on under the work product doctrine provided there is some an�cipated li�ga�on or
prospect of li�ga�on. By contrast, the doctrine does not protect documents created “in the
ordinary course of business or that would have been created in essen�ally similar form
irrespec�ve of the li�ga�on.”
Id
. at 1202. Thus, where the withheld document is not a mental
impression of an atorney, a court must determine if the materials would have been prepared in
essen�ally similar form irrespec�ve of the li�ga�on; if the answer to this ques�on is “yes,” the
document is not work product.
See Schaeffler
,
And unlike the atorney client privilege, work product protec�on is not waived merely
because the material is disclosed to a third party.
See, e.g.
,
Adlman,
However, as noted above, the court may order produc�on of fact work product upon a
showing of “substan�al need” by the party seeking the documents.
U.S. Securities and
Exchange Commission v. Collector’s Coffee Inc
.,
3. Scope of Waiver
Under Federal Rule of Evidence 502(a), when disclosure of work product or privileged informa�on is made in a federal proceeding, waiver is generally limited to the precise communica�on or informa�on disclosed. Fed. R. Evid. 502(a); Fed. R. Evid. 502 Advisory Commitee's Note (revd . 11/28/2007). But the waiver will extend to all undisclosed communica�ons and informa�on if (1) the disclosure was voluntary or inten�onal, (2) the disclosed and undisclosed informa�on concerns the same subject mater, and (3) in fairness ought to be considered together. Fed. R. Evid. 502(a); In re Symbol Techs., Inc. Sec. Litig. , 2017 WL 1233842, at *9 (cita�ons omited); Mitre Sports Int'l Ltd. v. Home Box Office, Inc. , 304 F.R.D. 369, 371 72 (S.D.N.Y. 2015).
4. Privilege Log
A party may waive protec�on by failing to iden�fy in its privilege log the par�cular
privilege it is relying on when withholding a document from produc�on.
Monterey Bay Military
Housing, LLC v. Ambac Assurance Corp
., 19 Civ. 9193,
Discussion The Court begins with an ini�al note about Whinstone’s efforts to show that it an�cipated li�ga�on. It then turns to an analysis of the documents submited in camera.
A. Whinstone’s Anticipation of Litigation with Northern Data As an ini�al mater, the Court finds that Whinstone has failed to prove when it an�cipated li�ga�on with Northern Data regarding the working capital adjustment – an issue that affects the Court’s analysis of whether certain documents are protected by the work product doctrine.
Whinstone offers nothing except generalized, blanket asser�ons regarding the working capital adjustment, seeming to suggest that merely because there was a dispute about the acquisi�on price, li�ga�on was therefore inevitable. This asser�on is not persuasive. The SPA— which Whinstone did not offer the Court on this mo�on and was located by GMO through public Securi�es and Exchange Commission fi l ings — contain s a dispute resolu�on process regarding the purchase price that was wholly apart from any li�ga�on process. This procedure easily could have resulted in a resolu�on which would have made any contemplated li�ga�on unnecessary. Presumably, there would be litle reason to supply such a procedure in the SPA otherwise. It is far more likely that the par�es hoped that process would resolve the dispute without any li�ga�on. Whinstone details virtually nothing of these procedures in its mo�on papers.
But the Court can “take judicial no�ce of documents filed in other courts . . . not for the
truth of the maters asserted in the other li�ga�on, but rather to establish the fact of such
li�ga�on and related filings.”
Carruthers v. Flaum
,
Court documents clarify the �ming of “ongoing li�ga�on” with Northern Data referenced in Mr. McGonegal’s declara�on. (ECF No. 294 ¶ 8.) Upon searching for Delaware Chancery Court filings between Riot and Northern Data, it became apparent that the li�ga�on commenced nearly sixteen months after the closing date of the acquisi�on. Reference to the face of the documents submited in camera and the SPA make clear that for much of those sixteen months, Riot and Northern Data were not engaged in the li�ga�on process at all but were atemp�ng to resolve their dispute through an established procedure in the SPA which was a binding accoun�ng reconcilia�on process designed to obviate li�ga�on .
Accordingly, absent stronger proof by Whinstone (and Riot) that they actually an�cipated li�ga�on almost immediately upon closing of the acquisi�on, the Court will not credit the asser�on that documents related to the working capital adjustment process are all subject to work product protec�on . Rather, the Riot- ND Complaint and the Delaware Court’s now released summary judgment opinion show that the price adjustment process was reaching an exhaus�on point no earlier than June 2022. Thus, Whinstone and Riot fail to show that documents preceding June 1, 2022 related to the working capital adjustment were created in an�cipa�on of li�ga�on. The fact that the li�ga�on first commenced in September 2022 supports this conclusion. D ocuments prepared a�er June 1, 2022 related to the working capital adjustment , however, are poten�ally protected under the work product doctrine .
By contrast, Whinstone has adequately shown that its discussion to terminate the GMO agreement began with the legal team, given the ongoing li�ga�on between the par�es in January 2023. Thus, there is no �meline issue with respect to when li�ga�on with GMO was an�cipated .
B. In Camera Analysis
The Court now turns to its analysis of the documents submited for in camera review. Because the Court has reviewed only a sample of documents, its holdings herein should be applied to duplicates and near duplicate documents. Similarly, its holdings about when an�cipa�on was an�cipated should be applied to all documents on the privil ege log. Whinstone/Riot also should apply other principles stated herein in a re - review of withheld documents, which the Court an�cipates will result in a supplemental produc�on of documents ini�ally withheld as privileged.
A ddi�onally , before turning to specific documents, the Cour t notes its determina�ons herein are necessarily document specific. [4] It also notes that Whinstone was overinclusive in withholding documents insofar as it withheld business and profitability analyses that were not shown to have been prepared for the primary purpose of reques�ng or conveying legal advice [5] or in an�cipa�on of li�ga�on or, in some cases, prepared differently because of li�ga�on (i.e., the document would have been prepared in the same way regardless of li�ga�on) . One email submited by Whinstone — WUS 256 — contained only a screenshot of a sec�on from a signed agreement to which GMO was a party . The Court is aware of no legal basis to withhold this document, and Whinstone offered none. Th ese prac�ces frustrated the par�es’ ability to obtain discovery to which they were en�tled and wasted the par�es’ and the Court’s �me. They also understandably invited a response from GMO that discounted the validity of Whinstone’s asser�ons even as to documents to which the asser�ons properly apply.
The Court now addresses three categories of documents: (1) non privileged documents or documents to which privilege or work product protec�on has been waived, all of which must be produced; (2) par�ally privileged and par�ally non privileged documents, which must be produced in redacted form such that only privileged/work product por�ons are redacted; and (3) documents properly withheld as privileged/work product.
1. Documents to be Produced Unredacted
CAT 48, WUS 373.
These documents are transmital sheets only and thus are not
privileged or protected by work product . There is no legal advice communicated and no fact or
opinion work product contained in the emails.
See Travelers Indem. Co. v. Northrop Grumman
Corp.
, 12 cv 3040 (KBF),
CAT 20, 51, 52; WUS 26, 27, 256, 348, 349, 374, 516; RIOT 136, 140. These documents
represent business emails and atachments regarding business discussions which do not request or transmit any legal advice. S ome of the email communica�ons may involve communica�ons with atorneys, but the emails and atachments are primarily of a business nature and are not en�tled to wo r k product protec�on (to the extent claimed) because they would have been prepared/had irrespec�ve of any an�cipated li�ga�on. These documents must be produced in full.
The Court also specifically addresses addi�onal arguments made by the par�es:
• CAT 20: This document was withheld on the basis of atorney client privilege and the work product doctrine. Whinstone argues it should not be produced because it atached an analysis using counsel’s response from CAT 16. However, the informa�on contained in CAT 20 does not correspond to the legal advice offered in CAT 16. Rather, it corresponds to a por�on of CAT 21 which will be produced. (As explained later in this opinion, CAT 21 will be produced redac�ng the legal advice por�on, which corresponds to CAT 16). Furthermore, there is nothing in the email cons�tu�ng fact or opinion work product. Rather, the email contains business analyses that would have been prepared regardless of any an�cipated or pending li�ga�on . Thus, CAT 20 should be produced unredacted. CAT 51 & 52: This email and atachment were withheld on the basis of atorney - client privilege and the work product doctrine. Whinstone argues they should not be produced because they reflect Whinstone’s contempla�on of “the legal implica�ons of termina�ng the [GMO] contract.” If that were so, it is not evident from the face of the document, and Whinstone’s briefing makes it no clearer. Indeed, the Court’s evalua�on of these documents strongly suggest that Whinstone seeks to shield its business and profitability assessments of the termina�on decision under the cloak of privilege. With respect to CAT 51, no legal advice is requested or transmited. Indeed, the only atorney on the thread is copied and never says anything. Whinstone cannot claim privilege over documents merely by copying counsel. In re Signet Jewelers Limited Securities Litig. ,332 F.R.D. 131 , 136 (S.D.N.Y. 2019); accord ACE Securities Corp. v. DB Structured Products, Inc. ,40 N.Y.S.3d 723 , 733 (Sup. Ct. N.Y. Cnty. 2016) (ci�ng Fed. Hous. Fin. Auth. v . HSBC N. Am. Holdings, Inc. , 11 cv 6189 (DLC), 2014 WL 1327952, at *3 ( S.D.N.Y. April 3, 2014)). Furthermore, there is no apparent work product of the atorneys. Rather, the analysis discussed and contained in CAT 52 appears to be en�rely a business and profitability analysis assessing the various scenarios rela�ng to termina�ng or not termina�ng the GMO contract. Accordingly, both documents must be produced. WUS 256: This document was withheld under the atorney client privilege.
Whinstone argues that “[a]t the �me this email was sent, Northern Data was nego�a�ng a payment to GMO to release Whinstone from its obliga�ons under that agreement,” no�ng the payment was made four days later. This argument is unavailing. The �ming of the payment by GMO with respect to Sec�on 16.3 of the contract provision at issue this case does not make this e mail privileged. The email is contentless apart from containing a screenshot of a provision of a contract to which GMO was a party and that is at issue in this case. Reference to the Texas Agreement filed to the docket as ECF No. 30 1 confirms that the language is unchanged in the signed Texas Agreement. The email must be produced. WUS 348 & 349: These documents were withheld under the atorney -client
privilege and work product doctrine. Whinstone argues these documents should be withheld because Sidley had sought informa�on regarding power curtailments from XMS in order to provide legal advice to Riot in the purchase price dispute. The arguments are unavailing. Whinstone has not met its burden to show that the documents are privileged or protected as work product.
o While counsel was copied on WUS 348, the email merely provides a factual update on weather related customer power credits and does not clearly contain a request for or otherwise relay or transmit legal advice. While the email references the SPA, nothing contained in the email represents atorney opinion work product about its provisions. Moreover, there is no showing this document was prepared in an�cipa�on of li�ga�on. Further, Whinstone has not shown how the email contains fact work product resul�ng from, e.g., any atorney -led inves�ga�on into the credits. Only Mr. McGonegal’s (a non- lawyer) “beliefs” about the SPA are discussed. Indeed, the email begins with Mr. McGonegal sta�ng he “wanted to” provide the update — not that he was following up on Sidley’s request, as Whinstone claims. Thus, WUS 348 must be produced. [6]
o As to WUS 349, no atorneys or legal personnel appear on the email. There is no evidence that the ques�ons discussed in the communica�on were directed by the legal team. Nor do the par�cipants appear to request or convey legal advice . Furthermore, the atachment is a signed agreement between Rhodium 30 MW LLC, Jordan HPC LLC, and Whinstone that necessarily was shared with the counterpar�es to the agreement. Whin stone also has not adequately explained how this can be work product, as it appears to relate primarily to business discussions, such as filing taxes and weather event setlements (which at the �me were “all complete”), and something that would have been prepared regardless of any an�cipate d li�ga�on . Thus, the document and atachment must be produced. WUS 374: This document was withheld under atorney client privilege and work -
product doctrine. Whinstone argues that the translator excep�on applies, ci�ng Cytec Industries v. Allnex (Luxembourg) & Cy S.C.A. , 14 cv 1561 (PKC), 2016 WL 3542453 (S.D.N.Y. June 23, 2016). However, the contents of this spreadsheet differ substan�ally from those of the document discussed in Cytec Industries, Inc. There, the Court made clear that a similar email chain "was a confiden�al communica�on from the client simultaneously sent to the law firm represen�ng Allnex and to E&Y for the purpose of understanding Allnex's legal rights in the event that the cash le� in the business was less than contemplated." Id. at *3. Because "[t]he answer could have turned on either contract interpreta�on or accoun�ng principles or both," the Court upheld the privilege asser�on. See id. Here, WUS 373 (the email to which WUS 374 was atached) does not evince any legal ques�on at all. Instead, this document and the transmital sheet show only that Whinstone was sharing its working capital file with both its atorneys and accountants. Thus, there is no showing of atorney client privilege. Further, as noted above, Whinstone has failed to show li�ga�on was an�cipated before June 2022, such that work product privilege does not apply to these August 2021 emails and atachments. Thus, Whinstone has not met its burden to show that this document is protected, and it must be produced. RIOT 136: This document was withheld under the atorney client privilege and
work product doctrine. This email thread is a chain between EY and businesspeople at Riot. T he thread is trained on the development of talking points regarding the working capital adjustments that Riot would discuss with Northern Data. However, there is no transmital of or request for legal advice in the thread. Further, the Court has concluded that Whinstone has failed to show li�ga�on was an�cipated prior to June 2022. Thus, these January 2022 communica�ons regarding crea�on of talking points are not privileged and must be produced. The other emails likewise contain no requests for or transmission of legal advice and are merely transmital emails and discussions of rou�ne administra�ve and logis�cal maters which are not within the scope of the atorney client privilege or work product doctrine. RIOT 140: Th ese document s w ere withheld under the atorney -client privilege
and work -product doctrine. Whinstone argues that they were appropriately withheld because “[a]t the �me, Riot was dra�ing talking points in collabora�on with Sidley to respond to Northern Data’s objec�ons to Whinstone’s proposed purchase price adjustments.” Whinstone also says EY provided an accoun�ng analysis which was incorporated into the dra�. However, Whinstone has not met its burden to show this document’s en�tlement to protec�on. The top email of RIOT 140 from Mr. McGonegal is a transmital sheet only; the remainder are business discussions regar ding revenue analyses and discussions of the mere fact whether certain contracts were signed, which would have been created irrespec�ve of contemplated li�ga�on. Any asser�on this cons�tutes fact work product is contradicted by the fact that the ini�al analysis was sent only among businesspeople, with counsel looped into the communica�ons later . While Mr. Silvertown at EY suggests the crea�on of “talking points” and Mr. McGonegal references the “other side,” this Court has concluded that in the period before June 2022, when these emails were sent, Whinstone has not shown it an�cipated li�ga�on. As a result, RIOT 140 must be produced.
RIOT 21. This document was withheld under the atorney client privilege and work - product doctrines. It represents a dra� claim no�ce under an insurance policy of a “No�ce of Breach or Poten�al Breach” and Third Party Claim. It appears to have been dra�ed i n April 2022, at a �me before the period where Whinstone has proven li�ga�on was an�cipated (i.e., June 2022). Furthermore, the fact that it is a claim under an insurance policy demonstrates it was not developed as part of any li�ga�on strategy. Moreover, it is not a confiden�al communica�on because the privilege was waived by copying EY. Whinstone has not shown EY was opera�ng as a translator with respect to this document; indeed, on the face of the document, that seems unlikely, and there is no record evidence that EY was retained by counsel to assist with insurance claims and act as a translator. Thus, the document must be produced.
WUS 215, 325, 350, 567, 568, 723, 841, and 862. These documents were privileged or protected by the work -product doctrine , but the protec�on was waived. The Court analyzes each document separately. WUS 215: This document was withheld under the atorney client privilege. This
document is an email chain between and among S&C, outside legal counsel,
Northern Data, Mazars, and Greenhill concerning the set up of a virtual data
room in connec�on with due diligence preceding Riot’s acquisi�on of Whinstone.
While legal advice is conveyed regarding how to set up and what to inclu de in a
virtual data room, privilege is waived because of the presence of third par�es
Mazars and Greenhill. Neither Mazars nor Greenhill are needed as translators for
the provision of legal advice. Addi�onally, Whinstone does not argue that either
en�ty is the func�onal equivalent of an employee. Nor is it clear that that
doctrine would apply because there is no evidence that Mazars and Greenhill
were integrated into the corporate structure and vested with discre�on to make
decisions on behalf of Northern Data.
Sec. & Exch. Comm'n v. Rayat
, No. 21 -CV-
4777 (LJL),
• WUS 325: This document was withheld under the atorney client privilege. GMO argues the exchange is not privileged because Mazars and Greenhill employees were corresponding on this chain. The chain starts with a request for informa�on from S&C (outside counsel) made to the client, Greenhill, and Mazars, in service of genera�ng a document for the closing of the Riot acquisi�on. The informa�on requested and provided is factual, and Whinstone has failed to demonstrate that Greenhill’s response was in the nature of a translator response necessary for the lawyer to provide legal advice. Moreover, including Mazars in the chain would have waived privilege even if Greenhill were a translator, since Whinstone has failed to show Mazars was a translator or func�onal equivalent. Thus, privilege is waived. WUS 350 & 862: WUS 350 was withheld under the atorney client privilege,
while WUS 862 was withheld under both the atorney client privilege and work - product doctrine. These documents (reflec�ng parallel email chains) contain a request for legal advice intermingled among business informa�on and communica�ons. Whinstone argues these must be shielded from disclosure for substan�ally the same reasons given with respect to WUS 348 & 349. The arguments are equally unavailing, but the analysis differs in key respects. Notably, the request for legal advice is contained at paragraphs C and D of Mr. McGonegal’s June 11, 2021 email sent at 5:43 p.m., and the response from counsel is contained in Mr. Michaels’s email of June 14, 2021, at 10:56 a.m. A third party, XMS, was copied on the emails. It is clear from the email that XMS was not needed to translate informa�on provided to Sidley because the client provided an explana�on and was simply asking for an interpreta�on of the SPA – something the atorney was equipped to do without input from XMS. In other words, XMS was not needed to translate informa�on provided to the atorney in order for the atorney to provide legal advice. Thus, privilege was waived by copying XMS. The same analysis applies to WUS 862 with respect to the asser�on of atorney client privilege.
o As to the claim for work product concerning WUS 862, the work product doctrine does not apply because there has been no showing that this communica�on was had “with an eye toward” or “in an�cipa�on of” or “because of the prospect of li�ga�on.” Rather , as discussed, the SPA provided for a post closing price adjustment period and this email concerned computa�ons of price adjustments pursuant to the contractual process. The �me period of this communica�on is relevant to the determina�on because it occurred just weeks a�er the closing of Riot’s acquisi�on of Whinstone and in the 75 day period when Riot was preparing its proposed final closing statement and before it communicated with Northern Data about price adjustments. Further, the SPA contempla ted that pricing adjustments would be resolved, if there were objec�ons, through a period of nego�a�on and, if needed, resolu�on by an expert accountant. McGonegal states in the email that the adjustment would be communicated and that he expected the issue to be resolved “over the next 7 10 months,” which is consistent with how the SPA contemplated adjustments to be made – that is, without li�ga�on and at worst decided by an independent expert accountant. While McGonegal does ask whether the adjustment could create an issue that could result in Northern Data poten�ally looking to Whinstone to ini�ate an ac�on, that ques�on in and of itself does not mean that li�ga�on was an�cipated. Rather, the ques�on is in the nature of obtaining advice about compliance with terms of the contract while working out a price adjustment and was necessarily pre an�cipa�on of li�ga�on. In other words, it is simply a request for legal advice concerning a business mater when no li�ga�on was actually an�cipated or pending. But, as noted above, privilege was waived. Thus, both documents must be produced. WUS 567 & 568: These documents were withheld under the atorney -client privilege and work product doctrine. However, the documents must be produced, as Whinstone has not shown it an�cipated li�ga�on at the �me, and any confiden�ality as to the communica�on was waived. As to WUS 567, this email thread contains a request for legal advice and transmital of legal advice in Mr. McGonegal’s email of March 11, 2022, at 9:56 a.m. and Mr. Michaels’s reply of March 11, 2022, at 9:33 a.m. The advice concerns how to communicate with Northern Data regarding its objec�ons to the proposed final closing statement and when to submit the dispute to the independent accountant for resolu�on. The emails make clear that Riot and Northern Data have not yet begun to nego�ate in good faith and there is no indica�on that Northern Data has indicated it will not follow the SPA procedures. Thus, Whinstone/Riot have not demonstrated that li�ga�on was an�cipated at this point regarding purchase price adjustments. Whinstone/Riot also have not demonstrated that the EY people copied on the email were forensic accountants hired by Sidley as opposed to accountants that were simply assis�ng with computa�on of post closing pricing adjustments. EY and Riot are dra�ing a communica�on about the price resolu�on but there is no indica�on that EY is necessary as a translator to Sidley. Thus, privilege is waived by EY’s inclusion in the email chain. A similar analysis applies to WUS 568, though the Court adds that the dra�, ini�ally prepared by Mr. McGonegal, a businessperson, represents EY’s comments on responses to Northern Data’s objec�ons. The comments by EY deal expressly with business strategy rather than with legal advice or atorney opinion or fact work product. There is no transla�on occurring for the atorneys. Further, consistent with this Court’s view that Whinstone has not proven it an�cipated li�ga�on in advance of June 2022, this April 2022 document has not been shown to be protected as work product. Thus, the document must be produced. WUS 723: This document was withheld under the atorney client privilege. This
email contains a request for informa�on made by counsel to Whinstone and Greenhill and includes a response from Mr. Harris and Greenhill. The informa�on requested and provided is factual and the informa�on provided by Greenhill is not needed for transla�on of client informa�on to counsel. Thus, the inclusion of Greenhill waives any privilege. These emails should be produced.
• WUS 841: This document was withheld under the atorney client privilege. This document contains legal advice, but the privilege was waived by copying third par�es because the legal advice provided was outside the scope of the engagement of the third- party agent and it does not appear that the third party agent was necessary to assist the lawyer in rendering legal advice, and thus the Kovel excep�on does not apply.
2. Documents to be Produced in Redacted Form
RIOT 26, 51, 137, 141; WUS 49, 223, 577, and 870; and CAT 21, 46, 49, and 54. These documents contain some privileged/work product content and shall be produced in redacted form. The Court specifically addresses the redacted content: RIOT 26: This document was withheld under the atorney -client privilege and
work -product doctrine. Mr. Jackman is copied on this email in his capacity as in - house counsel. The emails are in service of dra�ing work product and contain material which was intended to be input into work -product in connec�on with this li�ga�on. However, the three emails sent on May 6, 2022, are in the nature of transmital and are not privileged or otherwise protected. Apart from those three emails, the thread should be redacted, and the three transmital emails (which contain no request for or transmital of legal advice) should be produced. • RIOT 51: This document was withheld under the atorney client privilege . This document represents an email chain ini�ated by businesspeople at Riot reques�ng legal advice from inhouse counsel regarding a hos�ng agreement. The email chain that ensues occurs en�rely among inhouse counsel and businesspeople, and thus no waiver occurred. The dra� document atached to the chain includes counsel’s advice and is privileged, as are the communica�ons at the beginning of the chain through the March 31, 2022 email sent at 9:24 p.m. from Jason Les. These emails can be redacted. The other emails in the thread concern business discussions concerning computa�on of the net revenue share of fees for the Whinstone hos�ng of Riot’s miners and methods for compu�ng revenue and are not conveying or transmi�ng legal advice. These emails should be produced. Thus, the document should be produced in redacted form. RIOT 137 & 141: Th ese document s w ere withheld under the atorney -client privilege and the work -product doctrine. The document s detail dra� discussion points rela�ng to the working capital adjustments. However, the dra�s are not work product because Whinstone and Riot have not shown that they an�cipated li�ga�on at th e �me of these documents/communica�ons were created . The vast majority of the documents also contain no requests for legal advice. However, page eight of WUS 141 contains a request for legal advice at paragraph four, beginning “INTERNAL NOTE.” The same is true of page eleven, at Open Item B, beginning “INTERNAL NOTE.” These two por�ons can be redacted. The remainder should be produced . The other “Open Items” in RIOT 137 (on pages 5- 6, 7, and 8) may also be redacted because they reflect requests for legal advice . There is no third party copied and no waiver issue.
• WUS 49, 870: These documents were withheld under the atorney -client privilege. These documents are iden�cal copies represen�ng chiefly a business communica�on between businesspeople. However, there are two lines — highlighted in the in- camera submissions — where the businesspeople discuss legal strategies and contemplate requests for legal advice. These two lines were rightly redacted in the version that was produced. There is no waiver issue because no third party was included.
• WUS 223: This document was withheld under the atorney client privilege. This document concerns pre closing communica�ons between and among Whinstone, Northern Data, and S&C with no third party copied where S&C is seeking informa�on from its client in connec�on with legal advice it is providing. There is no waiver of privilege as to the first seven emails. Earlier emails on the chain also relate to collec�on of informa�on for due diligence and are shared with Greenhill. Greenhill is not needed for transla�on to S&C and thus privilege is waived as to these emails. And, as with WUS 215, the func�onal equivalent doctrine is not argued and does not apply. WUS 577: This document was withheld under the atorney client privilege. This
document represents email communica�ons ini�ated by counsel to discuss a request made by GMO. While the first email in the chain is from GMO, the subsequent emails are wholly internal between businesspeople and in house counsel to facilitate providing legal advice regarding GMO’s request. No waiver occurred. Thus, the document is privileged. The document is properly produced redac�ng all but the ini�al email from GMO.
• CAT 21 & 49: These documents were withheld under the atorney -client privilege and work -product doctrine. Th ese document s represent slide decks and contain atorney work product on three slides each. The privileged content reflects legal advice regarding legal risks of termina�ng the GMO contract whereas the remainder of the slides reflect business considera�ons in termina�ng the GMO contract. While the termina�on of the GMO contract was done while this li�ga�on was pending and Whinstone/Riot did an�cipate li�ga�on, the business analysis would have been done regardless of li�ga�on and therefore cannot be shielded by the work product privilege. Indeed, the explana�on provided by Whinstone/Riot for suppor�ng applica�on of work product and atorney -client privilege makes clear that only certain por�ons were legal analysis and work product. These should therefore be produced with the privileged por�ons redacted. The privileged por�ons on CAT 21 are on the botom of side 2 and slides 5 and 12. The privileged por�ons on CAT 49 are on the botom of slide 2 and slides 6 and 14. CAT 46 & 54: These documents were withheld under the atorney -client privilege
and work -product doctrine. These document s represent email communica�ons which include provision of legal advice and transmit atorney work product to the client. The communica�ons in the nature of legal advice and discussions regarding development of dra� documents are privileged. In CAT 46, the privileged discussion runs from Mr. Wooding’s email of June 28, 2023, at 7:40 p.m. through Mr. Yee’s June 29, 2023 email at 6:59 a.m. In CAT 54, the privileged discussion runs from Mr. Wooding’s June 28, 2023 email at 4:40 p.m. un�l Mr. Wooding’s Wednesday, June 28, 2023 email at 7:08 p.m. These por�ons of the email threads should be redacted. The remainders of these threads are not privileged because they do not request or convey legal advice and are of the nature that the analysis would have been done regardless of li�ga�on and were properly produced in redacted form. There are no waiver issues.
3. Documents Properly Withheld
CAT 16 and 58; RIOT 19, 118, 149, 238, and 243; and WUS 30, 31, 104, 355, 359, 377, 378, 421, 524, 525, 549, 593, 722, 831, 837, 850, 900, and 981. These documents represent confiden�al atorney -client email communica�ons and atachments sent between businesspeople and counsel regarding the provision legal advice. No waiver occurred. To the extent GMO argues that these documents represent business communica�ons, the Court finds this argument unavailing upon in camera review of the documents. Further, t o the extent third par�es received these communica�ons, it was in the capacity as translators. The documents are privileged.
The Court addresses some specific arguments of the par�es: CAT 16: This document was withheld under the atorney -client privilege and work -product doctrine. The first email in the threat makes clear that in house business and legal personnel are preparing something for outside counsel in connec�on with outside counsel’s damages analysis. Therefore, the en�rety of the thread reflects the gathering and prepara�on of informa�on in order to obtain legal advice. While the decision being contemplated in this document may have been a business decision, the advice sought clearly regarded the legal dimension of that decision, and it is clear confidence was expected. The Court does not reach the work - product claim, finding the atorney - client privilege claim sufficient to withhold the document , par�cularly insofar as this was internal and there is no waiver issue.
• CAT 58: This document was withheld as atorney - client privileged and under the work product doctrine. GMO argues that because it is a communica�on between business personnel regarding a business decision (i.e., termina�ng the Texas Agreement), it is not privileged or en�tled to work product protec�on. The document shows something substan�ally different from GMO’s asser�ons. Indeed, GMO is correct that the email represents a parallel thread to CAT 54; however, unlike CAT 54, the only discussion relates to comments on atorney work product. The en�re exchange, therefore, may be withheld. There is no issue of waiver. WUS 31: This document was withheld under atorney client privilege. WUS 31 is
atorney client privileged. It represents a hos�ng agreement term sheet transmited only between in house counsel and businesspeople at Riot and conveyed for purposes of counsel dra�ing a contract. The document is properly withheld as privileged. WUS 831: This document was withheld under the atorney -client privilege and
work -product doctrine. GMO argues the document is not privileged because it pertains to the capacity of the Rockdale facility. However, the Court disagrees upon reviewing the document in camera . The document represents an email communica�on containing a request for informa�on made by counsel to the client and responsive informa�on provided by the client for purposes of obtaining legal advice in connec�on with the closing. Thus, the document is privileged.
4. Substantial Need for Work Product
GMO argues it has a substan�al need for the materials protected as work product.
While courts allow work product to be produced where a party shows “it has substan�al need
for the materials to prepare its case and cannot, without undue hardship, obtain their
substan�al equivalent by other means,”
von Kahle v. Cargill, Inc.
,
5. Fees
In considera�on of the mixed result, the Court concludes that Whinstone’s objec�ons to the disclosure were “substan�ally jus�fied,” and thus the Court does not award fees for this mo�on to either party. Fed. R. Civ. P. 37(a)(5)(A)(ii).
Conclusion For the foregoing reasons, GMO’s mo�on to compel is granted in part . Whinstone shall produce the documents as required by this Opinion and Order within two weeks. Furthermore, Whinstone shall re review its other withheld documents to see if the principles ar�culated in this Opinion require produc�on of addi�onal documents (in whole or in part) that have been withheld as privileged .
SO ORDERED.
Dated: May 30, 2025 ______________________________ New York, NY Katharine H. Parker
United States Magistrate Judge
Notes
[1] Whinstone and Riot appear to be deliberately vague in the affidavits they submit as to when li�ga�on with Northern Data was an�cipated and when Sidley retained EY in connec�on with an�cipated li�ga�on. As discussed in greater detail, infra , based on the facts, it appears the earliest an�cipa�on of li�ga�on with Northern Data was June 2022, when it appeared Northern Data was not following the SPA procedures for ge�ng to a final, binding post closing price adjustment. See Riot-ND Complaint ¶¶ 29 43. Whinstone/Riot fail to provide sufficient facts to demonstrate li�ga�on was an�cipated regarding post closing price adjustments prior to this �me when the par�es were simply following the procedures set forth in the SPA to get to a final price.
[2] The Complaint in this ac�on was filed on June 13, 2022 in New York State Supreme Court and then removed to this Court. ECF No. 1.
[3] Rhodium and Whinstone/Riot have been embroiled in various li�ga�on and/or arbitra�on proceedings since in or about May 2023. Rhodium, like GMO, used Whinstone’s facili�es for cryptomining and has contended that Riot unlawfully tried to cut off power to its machines and evict it from the Texas facility. Addi�onally, another en�ty called SBI Crypto Co., Ltd. filed a complaint against Whinstone in April 2023 in connec�on with claims associated with alleged poor condi�ons/lack of sufficient power at the Texas facility – similar claims as made by GMO in this li�ga�on. Commitments and Con�ngencies Disclosure, 3 months ended Mar. 31, 2023, htps://perma.cc/WC69 - G7SH .
[4] The Court concludes there was no broad subject mater waiver of the atorney client privilege as to any subject in dispute for the same reasons that these determina�ons were document specific. In total, only a handful of the documents contained a waiver, and the Court sees no reason why considering undisclosed documents rela�ng to the same subject mater would be fair.
[5]
See Hurst v. F.W. Woolworth Co.
, 95-cv-6584 (CSH),
[6] The Court was not to its knowledge provided with the atachment to this email and cannot evaluate its contents.