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_____________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
Amendment No. 2 to
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
____________
KANSAS CITY POWER & LIGHT COMPANY
(Name of Subject Company)
KANSAS CITY POWER & LIGHT COMPANY
(Name of Person Filing Statement)
Common Stock, no par value
(Title of Class of Securities)
____________
485134100
(CUSIP Number of Class of Securities)
____________
Jeanie Sell Latz, Esq.
Senior Vice President-Corporate Services
Kansas City Power & Light Company
1201 Walnut
Kansas City, Missouri 64106-2124
(816) 556-2200
(Name, address and telephone number of person authorized
to receive notice and communications on behalf
of the person filing statement)
____________
Copy to:
Nancy A. Lieberman, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
(212) 735-3000
_____________________________________________________________
This statement amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9 of Kansas
City Power & Light Company, a Missouri corporation ("KCPL"),
filed with the Securities and Exchange Commission (the
"Commission") on July 9, 1996, as amended, (the "Schedule 14D-
9"), with respect to the exchange offer made by Western
Resources, Inc., a Kansas corporation ("Western Resources"), to
exchange Western Resources common stock, par value $5.00 per
share, for all of the outstanding shares of KCPL common stock, no
par value ("KCPL Common Stock"), on the terms and conditions set
forth in the prospectus of Western Resources dated July 3, 1996
and the related Letter of Transmittal.
Capitalized terms used and not defined herein shall have the
meanings assigned to such terms in the Schedule 14D-9.
Item 8. Additional Information to be Furnished.
On July 9, 1996, the District Court issued an order granting
KCPL's motion to stay the order to produce documents pending
disposition of a petition for writ of mandamus, and suspending
all discovery until the United States Court of Appeals for the
Eighth Circuit (the "Eighth Circuit") rules on KCPL's petition
for a writ of mandamus. Also on July 9, 1996, KCPL filed its
petition for a writ of mandamus with the Eighth Circuit, along
with a motion to expedite the disposition of such petition.
Item 9. Material to be Filed as Exhibits.
The following Exhibits are filed herewith:
Exhibit 40. Order regarding Motion for Stay Pending
Disposition of a Petition for Writ of
Mandamus and Suspension of Discovery (dated
July 9, 1996, C.A. No. 96-552-CV-W-5, U.S.
District Court for the Western District of
Missouri, Western Division).
Exhibit 41. Excerpt from script for KCPL employee
information hotline bulletin.
Exhibit 42. Excerpt from script for KCPL employee
information hotline bulletin.
Exhibit 43. Petition for Writ of Mandamus filed by KCPL on
July 9, 1996, in the U.S. Court of Appeals for the
Eighth Circuit.
Exhibit 44. Petitioner's Motion for Expedited
Disposition of Petition for Writ of Mandamus filed
by KCPL on July 9, 1996, in the U.S. Court of Appeals
for the Eighth Circuit.
SIGNATURE
After reasonable inquiry and to the best of her knowledge
and belief, the undersigned certifies that the information set
forth in this Statement is true, complete and correct.
KANSAS CITY POWER & LIGHT COMPANY
By: /s/Jeanie Sell Latz
Jeanie Sell Latz
Senior Vice President-Corporate Services
Dated: July 10, 1996
EXHIBIT INDEX
Exhibit No. Description Page
_________ ________________________________________________ ____
Exhibit 40 Order regarding Motion for Stay Pending
Disposition of a Petition for Writ of Mandamus
and Suspension of Discovery (dated July 9,
1996, C.A. No. 96-552-CV-W-5, U.S. District
Court for the Western District of Missouri,
Western Division).
Exhibit 41 Excerpt from script for KCPL employee
information hotline bulletin.
Exhibit 42 Excerpt from script for KCPL employee
information hotline bulletin.
Exhibit 43 Petition for Writ of Mandamus filed by KCPL
on July 9, 1996, in the U.S. Court of Appeals
for the Eighth Circuit.
Exhibit 44 Petitioner's Motion for Expedited Disposition
of Petition for Writ of Mandamus filed by
KCPL on July 9, 1996, in the U.S. Court of
Appeals for the Eighth Circuit.
Exhibit 40
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
KANSAS CITY POWER & LIGHT )
COMPANY,
Plaintiff, )
vs. ) No. 96-0552-CV-W-5
WESTERN RESOURCES, INC. and )
ROBERT T. RIVES,
Defendants. )
ORDER
Pursuant to the July 9, 1996 teleconference,
It is hereby
ORDERED that plaintiff's Motion For Stay Pending Disposition
of a Petition for Writ of Mandamus is granted. It is further
ORDERED that all discovery shall be suspended until the
United States Court of Appeals for the Eighth Circuit rules on
plaintiff's Petition for Writ of Mandamus.
/s/Scott O. Wright
SCOTT O. WRIGHT
Senior United States District Judge
July 09, 1996
Exhibit 41
[Excerpt from KCPL employee Hotline information bulletin]
Thanks for calling the Hotline for Tuesday, July 9.
Kansas City Power & Light Company announced, in response to
Western Resources, Inc. formally commencing its unsolicited
exchange offer, that the Company's Board of Directors will review
the exchange offer shortly.
KCPL stated that shareholders need not take any action at this
time with respect to Western's exchange offer and requested that
shareholders await the recommendation of the KCPL Board.
A complete copy of the news release is in the Merger Update icon
in the CorpInfo group of Windows.
#####
Exhibit 42
[Excerpt from KCPL employee Hotline information bulletin]
Thanks for calling the Hotline for Wednesday, July 10.
The members of the board of directors of Kansas City Power
& Light Company, by a unanimous vote of those directors present,
recommended that KCPL shareholders reject Western Resources,
Inc.'s hostile exchange offer. At the same time, the KCPL Board
reaffirmed its decision to merge with UtiliCorp United Inc. to
form Maxim Energies, Inc.
In rejecting Western's unsolicited hostile offer, the KCPL
Board reviewed KCPL's long-term strategic plan and the benefits
of a merger with UtiliCorp, and determined that Western's offer
is not in the best interests of KCPL, its shareholders,
customers, employees and other constituencies.
"There are many reasons why we think that Western is an
unattractive partner. Of paramount concern is our belief that
Western's hostile offer is based on a number of faulty
assumptions that raise serious questions as to Western's
financial prospects and its ability to sustain dividends at its
promised dividend rate," said Drue Jennings, chairman, president
and chief executive officer of KCPL. Mr. Jennings cited the
following:
- Western faces significant rate reductions which KCPL
believes will imperil its ability to sustain promised
dividends.
- KCPL believes that reductions in merger-related savings
realized and/or retained will further hamper Western's
ability to make its promised dividend payments.
- KCPL believes that Western will be under pressure to
reduce rates for its KGE customers, and any reduction to
Western's revenue base would further threaten Western's
ability to makes its promised dividend payments.
- A KCPL/Western combination would concentrate risk in a
single asset and a single geographic market. A combined
KCPL/Western entity would own 94% of the Wolf Creek
nuclear plan, concentrating a significant amount of
capital and risk in a single asset.
- The KCPL Board questions Western's commitment to KCPL
employees. Western has stated that no layoffs would
result from its proposal, but Western's filings with the
Kansas Corporation Commission state that 531 employee
positions will be eliminated and assume that all
resulting savings will be available by January 1, 1998.
The KCPL Board does not believe that Western can reduce
531 positions in such a short time without laying off
KCPL employees.
- Western's hostile offer is conditioned on its transaction
being accounted for as a "pooling of interests," and KCPL
does not believe that such accounting treatment will be
available.
The KCPL Board also reaffirmed its support for a merger with
UtiliCorp to form Maxim Energies, Inc. The KCPL Board believes
that Maxim will be a customer-focused, low-cost energy supplier
with diversified assets and the financial resources to grow and
thrive in the electric utility industry which is on the verge of
deregulation. The KCPL Board believes that Maxim will allow KCPL
shareholders improved opportunities for long-term earnings and
dividend growth which are superior to that offered by Western's
hostile offer.
A shareholder vote to consider the UtiliCorp transaction has
been scheduled for Wednesday, August 7, 1996.
A complete copy of this news release is available in the
Merger Update icon in the CorpInfo group of Windows, as well as
in Merger Central.
#####
Exhibit 43
IN THE UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
No. 96-__________
IN RE KANSAS CITY POWER
& LIGHT CO.
Petitioner
PETITION FOR WRIT OF MANDAMUS
Thomas C. Walsh
BRYAN CAVE LLP
One Metropolitan Square
211 North Broadway, Suite 3600
St. Louis, Missouri 63102
Telephone: (314) 259-2000
Facsimile: (314) 259-2020
David F. Oliver
BRYAN CAVE LLP
3500 One Kansas City Place
1200 Main
Kansas City, Missouri 64105
Telephone: (816) 374-3200
Facsimile: (816) 374-3300
Steven J. Rothschild
R. Michael Lindsey
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
Telephone: (302) 651-3000
Facsimile: (302) 651-3001
Attorneys for Petitioner
SUMMARY
In the course of litigation arising from a hostile
corporate takeover attempt, the District Court for the Western
District of Missouri, The Honorable Scott O. Wright, Senior
District Judge, has ordered Petitioner to turn over attorney-
client privileged materials (including minutes of conversations
between Petitioner's Board of Directors and its counsel regarding
the takeover) to its opposing parties, including the counsel for
the company making the hostile takeover bid. Petitioner Kansas
City Power & Light Co. ("KCPL") hereby petitions the Court
pursuant to 28 U.S.C. 1651 and Federal Rule of Appellate
Procedure 21 for a Writ of Mandamus to the District Court,
directing the District Court to vacate its oral ruling of July 3,
1996 ordering KCPL to produce these attorney-client privileged
documents. The grounds for this petition are set forth herein.
KCPL requests oral argument, with 20 minutes necessary
to present its argument, because of the important issues of first
impression raised by the order of the District Court, including
the application of Garner v. Wolfinbarger, 430 F.2d 1093 (5th
Cir. 1970), cert. denied, 401 U.S. 974, 28 L. Ed. 2d 323, 91
S. Ct. 1191 (1971), in the State of Missouri.
TABLE OF CONTENTS
PAGE
SUMMARY..............................................................I
PRELIMINARY STATEMENT................................................1
STATEMENT OF ISSUES..................................................3
STATEMENT OF THE CASE................................................5
ARGUMENT............................................................13
I. THE COURT'S REVIEW OF THIS PETITION IS APPROPRIATE.............13
II. THE COURT SHOULD ISSUE A WRIT OF MANDAMUS VACATING THE
ORDER OF THE DISTRICT COURT....................................16
A. The District Court Abused Its Discretion In Ordering
The Production Of Attorney-Client Privileged Documents
Without Any Record Or Briefing By The Parties..............16
B. The District Court Erred As A Matter Of Law In
Adopting Garner v. Wolfinbarger............................17
C. The District Court Erred As A Matter Of Law In
Implicitly Finding That The Intervenor And Rives Had
Demonstrated "Good Cause" Under Garner Despite
Their Failure To Make Shareholder Demand And Lack Of
Significant Stockholdings..................................21
D. The District Court Abused Its Discretion In Ordering
The Production Of Attorney-Client Privileged Documents
To Counsel For Western Resources, A Non-Stockholder........23
CONCLUSION..........................................................27
TABLE OF AUTHORITIES
PAGE
Cases Cited:
Admiral Ins. Co. v. United States,
881 F.2d 1486, 1491 (9th Cir. 1989) 14
Bauman v. United States Dist. Court,
557 F.2d 650, 654-55 (9th Cir. 1977) 14-16
Blair v. Armontrout,
916 F.2d 1310, 1333 (8th Cir. 1991),
cert. denied, 502 U.S. 825 (1991) 4
Borden v. Sylk,
410 F.2d 843, 845 (3d Cir. 1969) 15
Chase Manhattan Bank, N.A. v. Turner & Newall, PLC,
964 F.2d 159, 163 (2d Cir. 1992) 13
Commodity Futures Trading Comm'n v. Weintraub,
471 U.S. 343 (1985) 1, 18, 20, 21
Diversified Indus., Inc. v. Meredith,
572 F.2d 596, 599 (8th Cir. 1977) 13, 18
Garner v. Wolfinbarger,
430 F.2d 1093 (5th Cir. 1970), cert. denied,
401 U.S. 974, 28 L. Ed. 2d 323,
91 S. Ct. 1191 (1971) I, 3, 11, 15-25
Goodwin v. Goodwin,
583 S.W.2d 559, 560-61 (Mo. App. 1979) 21
Haines v. Liggett Group Inc.,
975 F.2d 81, 89 (3d Cir. 1992) 13
Harper & Row Publishing Co. v. Decker,
423 F.2d 487, 492 (7th Cir. 1970),
aff'd by an equally divided court,
400 U.S. 348 (1971) 13
In re Bieter Co.,
16 F.3d 929 (8th Cir. 1994),
reh'g, en banc, denied U.S. App.
LEXIS 8898 (8th Cir. April 25, 1994) 3, 13-16
In re Burlington Northern, Inc.,
822 F.2d 518, 523 (5th Cir. 1987),
cert. denied, 484 U.S. 1007, (1988) 14
In re Federal Skywalk Cases,
95 F.R.D. 477 (W.D. Mo. 1982) 18
In re Multi-Piece Rim Products Liability Litigation,
612 F.2d 377 (8th Cir. 1980) 26
In re Remington Arms Co., Inc.,
952 F.2d 1029 (8th Cir. 1991) 3, 15-17
In re Shalala,
996 F.2d 962 (8th Cir. 1993) 15, 17
In re Von Bulow,
828 F.2d 94, 98 (2d Cir. 1987) 15
Iowa Beef Processors, Inc. v. Bagley,
601 F.2d 949, 953 (8th Cir.),
cert. denied, 441 U.S. 907 (1979) 13, 15
Jaffee v. Redmond,
64 U.S.L.W. 4490 (1996) 20
McLeese v. J.C. Nichols Co.,
842 S.W.2d 115, 119 (Mo. App. 1992) 21
Milroy v. Hanson,
875 F. Supp. 646 (D. Neb. 1995),
appeal after remand, 902 F. Supp. 1029,
rev'd, vacated sub nom., In re Milroy,
1996 U.S. App. LEXIS 13018
(8th Cir. February 22, 1996) 3, 19, 20, 24
Ohio-Sealy Mattress Mfg. Co. v. Kaplan,
90 F.R.D. 21 (N.D. Ill. 1980),
cert. denied, 459 U.S. 943 (1982) 4, 22, 24
Pfizer Inc. v. Lord,
456 F.2d 545 (8th Cir. 1972) 3, 13
Rhone-Poulenc Rorer, Inc. v. Home Indemn. Co.,
32 F.3d 851, 861 (3d Cir. 1994) 13
Saigh v. Busch,
396 S.W.2d 9, 16 (Mo. App. 1965),
cert. denied, 384 U.S. 942 (1966) 21
State ex rel. Great American Ins. Co. v. Smith,
574 S.W.2d 379 (Mo. banc 1978) 3, 19
State ex rel. Syntex Agri-Business, Inc. v. Adolf,
700 S.W.2d 886, 888 (Mo. App. 1985) 19
State of Arkansas v. Dean Food Products Co. Inc.,
605 F.2d 380 (8th Cir. 1979), overruled in part,
612 F.2d 377 (8th Cir. 1980) 4, 26
Torchmark Corp. v. Bixby,
708 F. Supp. 1070 (W.D. Mo. 1988) 4, 25
Upjohn Co. v. United States,
449 U.S. 383 (1981) 18, 20
Ward v. Succession of Freeman,
854 F.2d 780, 786 (5th Cir. 1988),
cert denied, 490 U.S. 1065 (1989) 22, 24
Weil v. Investment/Indicators, Research & Management,
647 F.2d 18 (9th Cir. 1981) 21, 24
White v. Nix,
43 F.3d 374, 377 (8th Cir. 1994) 15
Wolgin v. Simon,
722 F.2d 389 (8th Cir. 1983) 4, 21
Statutes Cited:
28 U.S.C. 1292(b) 15
28 U.S.C. 1651 I, 2, 13
28 U.S.C. 1291 15
28 U.S.C. 1332 2
R.S.Mo. 351.310 18
R.S.Mo. 351.347 23, 25
Other Authorities:
Fed.R.Evid. 501 18
F.R.A.P. 21 I
John Gergacz, The Attorney-Corporate Client Privilege,
6-32 (2d ed. 1990) 21, 24
Missouri Rules of Professional Conduct, Rule 1.7 25, 26
Missouri Rules of Professional Conduct, Rule 1.8(b) 26
PRELIMINARY STATEMENT
The district court has made a fundamental error in
concluding that KCPL's privileged communications with its counsel
must be divulged to two adverse shareholders, one of whom is
represented by counsel for the company making the hostile
takeover bid at issue in this litigation. In an oral ruling made
without the benefit of an evidentiary record or briefing of the
important legal issues implicated, the District Court ruled that
KCPL must produce in discovery documents reflecting confidential
attorney-client communications concerning the hostile takeover
and KCPL's own merger plans. This is an unprecedented virtual
eradication of the corporate privilege at a time when its
application is crucial to KCPL's board's ability to protect
corporate constituencies from a threat to corporate policy and
effectiveness.
In so ruling, the District Court overlooked the United
States Supreme Court's recognition in Commodity Futures Trading
Comm'n v. Weintraub, 471 U.S. 343 (1985), that it is the
directors and management of a corporation that are empowered to
control the assertion or waiver of the corporation's attorney-
client privilege, as well as Missouri law (i) placing the
management of a corporation's property and business in the hands
of its board of directors and (ii) favoring the expansive
application of the attorney-client privilege. Thus, this
Petition implicates not only the corporate attorney-client
privilege, but also the issues of corporate governance
inextricably intertwined with it.
Petitioner respectfully urges this Court to issue a
Writ of Mandamus directing that the District Court's order
requiring disclosure of KCPL's attorney-client communications be
vacated. Alternatively, KCPL respectfully requests that this
Court direct that counsel for Western Resources be barred from
any access to such communications.
The District Court has jurisdiction over the case below
pursuant to 28 U.S.C. Section 1332. This Court has jurisdiction to
entertain this petition pursuant to 28 U.S.C. Section 1651.
STATEMENT OF ISSUES
1. Whether KCPL has satisfied the requirements for review of
its petition for writ of mandamus by this Court. See Pfizer Inc.
v. Lord, 456 F.2d 545 (8th Cir. 1972); In re Bieter Co., 16 F.3d
929 (8th Cir. 1994), reh'g, en banc, denied U.S. App. LEXIS 8898
(8th Cir. April 25, 1994).
2. Whether KCPL is entitled to the issuance of a writ of
mandamus because of clear abuse of discretion or clear legal
error by the District Court which would result in irremediable
harm. See In re Bieter, supra (8th Cir. 1994).
3. Whether the District Court clearly abused its discretion by
ordering the production of attorney-client privileged documents
without the submission of record evidence or briefing. See In re
Remington Arms Co., Inc., 952 F.2d 1029 (8th Cir. 1991).
4. Whether the District Court committed clear legal error by
adopting Garner v. Wolfinbarger, supra, in a case governed by
Missouri law. State ex rel. Great American Ins. Co. v. Smith,
574 S.W.2d 379 (Mo. banc 1978); Milroy v. Hanson, 875 F. Supp.
646 (D. Neb. 1995), appeal after remand, 902 F. Supp. 1029,
rev'd, vacated sub nom., In re Milroy, 1996 U.S. App. LEXIS 13018
(8th Cir. February 22, 1996).
5. Whether the District Court committed clear legal error in
ordering the production of attorney-client privileged documents
to shareholders who had not made a shareholder demand prior to
bringing suit against the corporation. See Wolgin v. Simon, 722
F.2d 389 (8th Cir. 1983); Ohio-Sealy Mattress Mfg. Co. v. Kaplan,
90 F.R.D. 21 (N.D. Ill. 1980), cert. denied, 459 U.S. 943 (1982).
6. Whether the District Court abused its discretion by ordering
the production of attorney-client privileged documents to counsel
for hostile takeover bidder. See Torchmark Corp. v. Bixby, 708
F. Supp. 1070 (W.D. Mo. 1988); Blair v. Armontrout, 916 F.2d
1310, 1333 (8th Cir. 1991), cert. denied, 502 U.S. 825 (1991);
State of Arkansas v. Dean Food Products Co. Inc., 605 F.2d 380
(8th Cir. 1979), overruled in part, 612 F.2d 377 (8th Cir. 1980).
STATEMENT OF THE CASE
The Parties
For the sake of clarity, the designation of the parties
in the District Court shall be used below.
1. Plaintiff KCPL is a Missouri corporation whose
headquarters and principal place of business are located in
Kansas City, Missouri. (KCPL Complaint ("KCPL Complt.") paragraph 6,
attached hereto as Exhibit "A"; Answer of Defendant Western
Resources, Inc. and Robert L. Rives ("WR&R Ans.") paragraph 6, attached
hereto as Exhibit "B"; Answer and Counterclaim in Intervention,
Counterclaim ("Intrv. Ans. & Cntrclm., Cntrclm."); paragraph 2 attached
hereto as Exhibit "C.") KCPL is a public utility which provides
electricity to over 430,000 customers in western Missouri and
eastern Kansas. (KCPL Cmplt. paragraph 6; WR&R Ans. 6; Intrv. Ans. &
Cntrclm., Cntrclm. paragraph 7.) Each of KCPL's directors have been
named as counterclaim defendants in this action. (Intrv. Ans &
Cntrclm., Cntrclm. paragraph 3.)
2. Defendant Western Resources ("Western") is a
Kansas corporation whose headquarters and principal place of
business are located in Topeka, Kansas. (KCPL Cmplt. paragraph 7; WR&R
Ans. paragraph 7; Intrv. Ans & Cntrclm., Cntrclm. paragraph 8.) Western
Resources is engaged principally in the production and
distribution of electricity and the sale of natural gas. (KCPL
Cmplt. paragraph 7; WR&R Ans. paragraph 7; Intrv. Ans & Cntrclm., Cntrclm.
paragraph 8.)
3. Defendant Robert L. Rives ("Rives") purports to be a
holder of KCPL common stock and has acted on Western's behalf in
demanding a list of KCPL shareholders for use in soliciting
proxies for Western. (KCPL Cmplt. paragraph 8; WR&R Ans. paragraph 8.)
Western and Rives share the same attorneys in this action -- Sullivan &
Cromwell of New York, New York and Stinson, Mag & Fizzell of
Kansas City, Missouri. (WR&R Ans. at 9.)
4. Intervenor Jack R. Manson (hereafter referred to as
"Manson" or "Intervenor") is a shareholder of KCPL. (Intrv. Ans.
& Cntrclm., Cntrclm. paragraph 1; Plaintiff's and Counterclaim
Defendants' Reply to Intervenor's Counterclaim ("Reply to
Intrv."), attached hereto as Exhibit "D," paragraph 1.) Manson seeks to
represent a class consisting of KCPL shareholders in challenging
the Revised Merger Agreement and the conduct of KCPL's board.
(Intrv. Ans. & Cntrclm., Cntrclm. paragraphs 32-42.)
The Original Merger Agreement
5. On January 19, 1996, KCPL entered into a merger
agreement (the "Original Merger Agreement") with UtiliCorp, an
energy company headquartered in Kansas City. (KCPL Cmplt. paragraph 9;
WR&R Ans. paragraph 9; Intrv. Ans. & Cntrclm., Ans. paragraph 5.) Under the
Original Merger Agreement, both KCPL and UtiliCorp would have
been merged into a new corporation ("Newco"). (KCPL Cmplt. paragraph 10;
WR&R Ans. paragraph 10; Intrv. Ans. & Cntrclm., Ans. paragraph 5.) Each share
of KCPL stock would have been converted into one Newco share, and
each share of UtiliCorp stock would have been converted into
1.096 Newco shares, representing an effective exchange ratio of
1.096 KCPL shares for 1 UtiliCorp share. (KCPL Cmplt. paragraph 10; WR&R
Ans. paragraph 10; Intrv. Ans. & Cntrclm., Ans. paragraph 5.) The original
transaction would have required the approval of two-thirds of the
outstanding KCPL shares. (KCPL Cmplt. paragraph 12; WR&R Ans. paragraph 12;
Intrv. Ans. & Cntrclm., Ans. paragraph 7.) The shareholder vote on the
Original Merger Agreement was scheduled to occur at KCPL's
May 22, 1996 annual meeting. (KCPL Cmplt. paragraph 12; WR&R Ans.
paragraph 12; Intrv. Ans. & Cntrclm., Ans. paragraph 7.)
Western Resources' Hostile Takeover Proposal
6. On April 14, 1996 Western sent to Mr. Drue Jennings,
KCPL's Chairman and CEO, a letter proposing a merger in which
each KCPL shareholder would purportedly receive $28 worth of
Western common stock for each KCPL share. (KCPL Cmplt. paragraph 13;
WR&R Ans. paragraph 13; Intrv. Ans. Cntrclm., Ans. paragraph 8.)
Shortly after delivery of the letter, Western publicly announced its
delivery and released the letter to the Dow Jones News Service and certain
other media outlets. (KCPL Cmplt. paragraph 14; WR&R Ans. paragraph 14;
Intrv. Ans. & Cntrclm., Ans. paragraph 9.)
KCPL's Board Rejects Western
Resources' Proposal As Not In The
Best Interests Of Its Shareholders
7. On April 22, 1996 KCPL issued a press release
announcing that its board of directors had unanimously rejected
the merger proposal received from Western as not in the best
interests of KCPL shareholders. (KCPL Cmplt. paragraph 15; WR&R Ans.
paragraph 15; Intrv. Ans. & Cntrclm., Ans. paragraph 10.) The press
release noted that the KCPL board had also reaffirmed its support for
KCPL's strategic combination with UtiliCorp. (KCPL Cmplt. paragraph 15;
WR&R Ans. paragraph 15; Intrv. Ans. & Cntrclm., Ans. paragraph 10.)
Western Resources Announces Its
Intention To Commence An Exchange Offer
8. Shortly after KCPL announced its board's decision on
April 22, 1996 Western filed preliminary proxy materials with the
SEC to solicit KCPL shareholders to vote against approval of the
Original Merger Agreement at the May 22 annual meeting. (KCPL
Cmplt. paragraph 16; WR&R Ans. paragraph 16; Intrv. Ans. & Cntrclm.,
Ans. paragraph 11.) At the same time, Western publicly announced its
intention to commence an exchange offer for KCPL stock in which KCPL share
holders would purportedly receive $28 per KCPL share. (KCPL
Cmplt. paragraph 16; WR&R Ans. paragraphs 13, 14, 16; Intrv. Ans. & Cntrclm.,
Ans. paragraph 11.)
KCPL and UtiliCorp Determine to Improve the Terms
of Their Strategic Combination to KCPL Shareholders
Shareholders and Adopt the Revised Merger Agreement
9. KCPL contends that by May 20, 1996 -- two days prior to
the scheduled vote of KCPL's shareholders -- KCPL turned over to
the inspectors of election proxies representing a majority of
KCPL's outstanding shares voting in favor of the strategic
combination of KCPL and UtiliCorp. (Plaintiff's Reply to the
Counterclaim of Western, Inc. and Robert L. Rives and
Counterclaim of Kansas City Power & Light Co. (Reply to WR&R and
KCPL Cntrclm.), attached hereto as Exhibit "E," Cntrclm. paragraph 24.)
However, Western had apparently succeeded in assembling a
minority coalition of financial institutions and takeover
arbitrage speculators sufficient to block approval by an absolute
2/3 of KCPL's outstanding shares, as required by Missouri statute
for the transaction structure contemplated by the Original Merger
Agreement. (Reply to WR&R and KCPL Cntrclm., Cntrclm. paragraph 24.)
10. On May 20, 1996 KCPL and UtiliCorp entered into an
Amended and Restated Agreement and Plan of Merger ("Revised
Merger Agreement") (attached hereto as Exhibit "F," art. II.),
and withdrew the approval of the original merger from
consideration at the May 22 annual meeting. (KCPL Cmplt. paragraph 17;
WR&R Ans. paragraph 17; Intrv. Ans. & Cntrclm., Ans. paragraph 12.)
The Revised Merger Agreement will be considered at a special meeting of
shareholders on August 7, 1996. (KCPL Notice of Special Meeting
of Shareholders, attached hereto as Exhibit "G.") The
transaction contemplated by the Revised Merger Agreement will
have the same ultimate effect as the transaction contemplated by
the Original Merger Agreement -- the strategic combination of the
businesses of KCPL and UtiliCorp. (KCPL Cmplt. paragraph 18; WR&R Ans.
4 paragraph 18.) However, it contemplates an exchange ratio of 1 KCPL
share for 1 UtiliCorp share -- a 9.6% improvement for KCPL
shareholders. KCPL contends that the new transactional structure
requires that the issuance of additional shares by KCPL be
approved by a majority of a quorum of KCPL voting shares, rather
than the 2/3 supermajority required for approval of the merger
under the Original Merger Agreement. (KCPL Cmplt., paragraph 21.)
The Litigation
11. This action was commenced by KCPL on May 20, 1996 in
anticipation that Western (and/or Rives) would commence
litigation challenging the new transactional structure
contemplated by the Revised Merger Agreement, and, particularly,
the change in the required level of KCPL shareholder approval.
(KCPL Cmplt. paragraph 21.) Thus, KCPL sought declaratory judgments that
the Revised Merger Agreement was valid under Missouri law and
that KCPL's directors had not breached their fiduciary duties by
adopting it. Id.
12. On May 24, Intervenor filed a motion to intervene as a
representative of a class consisting of similarly situated KCPL
shareholders and sought leave to answer and file counterclaims
that, inter alia, would challenge the legality of the Revised
Merger Agreement and the conduct of KCPL's directors in adopting
it. On June 7, Manson's motion to intervene was granted. (Order
of Court, attached hereto as Exhibit "H.") Also on June 7,
Western and Rives filed similar counterclaims.
13. Thereafter, in a telephone conference, Judge Wright
scheduled a hearing for July 25 on two issues -- whether the
Revised Merger Agreement is legally valid under Missouri law and
whether KCPL's directors breached their fiduciary duties in
adopting it. On June 28 KCPL responded to its opponents'
requests for document production, delivering non-privileged,
responsive documents to counsel for Western and Rives and for the
Intervenor. (See Transmittal Letter dated June 28, 1996,
attached hereto as Exhibit "I.") On July 2, KCPL provided to
opponents' counsel a privilege log identifying and describing the
documents withheld from discovery, and stating the basis for
KCPL's assertions of privilege and immunity. (KCPL Privilege
Log, attached hereto as Exhibit "J.")
14. The privilege log listed twelve items. The first eight
are memoranda prepared by Skadden, Arps, counsel for KCPL, and
provided to various officers and directors of KCPL. These
memoranda contain legal advice communicated by Skadden, Arps to
KCPL regarding the KCPL/UtiliCorp transaction (4 items) or the
Western proposal (4 items). Items 9 through 11 list redactions
of portions of KCPL board minutes reflecting legal advice from
counsel. Item number 12 lists a redaction from handwritten notes
created by Drue Jennings, KCPL's chairman and CEO, reflecting
communications with counsel for KCPL./1
The Challenged Ruling Of The District Court
15. On July 3 during a teleconference between the parties
and Judge Wright, counsel for Intervenor objected to KCPL's
assertions of attorney-client privilege, arguing that since
Intervenor is a shareholder of KCPL, and since the shareholders
of KCPL are its owners, KCPL's directors could not keep from
KCPL's shareholders the contents of KCPL's confidential
communications with its attorneys. Counsel for Intervenor asked
that KCPL be ordered to produce its privileged documents for
discovery.
16. Counsel for KCPL responded that (i) Intervenor was
attempting to invoke Garner v. Wolfinbarger, 430 F.2d 1093 (5th
Cir. 1970), in which the Fifth Circuit created a limited
exception to the attorney-client privilege in shareholder
litigation; (ii) Garner had not been adopted in the Eighth
Circuit and had in fact been rejected by one District Court in
the Circuit; and (iii) that even if Garner were to be applied,
the Intervenors had not even attempted to show "good cause," as
Garner requires.
____________
1/If the Court wishes, KCPL will make the disputed documents available
for in camera review.
17. The District Court summarily ordered production of
KCPL's privileged documents to the Intervenor. KCPL sought
clarification that it was not being ordered to produce documents
to counsel for Western and Rives. The District Court initially
ruled that Western was not entitled to the privileged documents,
thus tacitly acknowledging that the privilege had been properly
asserted. However, counsel for Western and Rives pointed out
that they represent not only Western, but also Rives, who is a
shareholder of KCPL. The District Court then modified its
ruling, ordering that KCPL's privileged documents be produced to
counsel for Western and Rives, but that counsel was prohibited
from showing the privileged materials to any Western personnel.
18. On July 5, 1996 KCPL filed a motion in the District
Court to stay its order compelling discovery pending review in
this Court. The briefing in that motion included an explanation
of why the District Court's order was erroneous as a matter of
law. On July 9, 1996, the District Court entered an Order not
only staying his order compelling discovery of the documents KCPL
claims are protected by the attorney-client privilege but staying
all discovery pending a decision by this Court. The District
Court further threatened to postpone the hearing scheduled for
July 25, 1996 and enjoin the shareholders meeting set for
August 7, 1996. A copy of the District Court's Order of July 9
is attached hereto as Exhibit "K."
ARGUMENT
I. THE COURT'S REVIEW OF THIS PETITION IS APPROPRIATE.
Under the "All Writs Act," 28 U.S.C. 1651, this Court
possesses discretionary authority to issue a writ of mandamus.
Iowa Beef Processors, Inc. v. Bagley, 601 F.2d 949, 953 (8th
Cir.), cert. denied, 441 U.S. 907 (1979). This Court has
recognized that "mandamus is available as a means of immediate
appellate review" when "a claim of attorney-client privilege has
been raised in and rejected by a district court." Diversified
Indus., Inc. v. Meredith, 572 F.2d 596, 599 (8th Cir. 1977) See
In re Bieter Co., 16 F.3d 931. As this Court stated in Pfizer
Inc. v. Lord, 456 F.2d 545, 547-48 (8th Cir. 1972):
[B]ecause maintenance of the attorney-
client privilege up to its proper limits has
substantial importance to the administration
of justice, and because an appeal after
disclosure of the privileged communication is
an inadequate remedy, the extraordinary
remedy of mandamus is appropriate.
(quoting Harper & Row Publishing Co. v. Decker, 423 F.2d 487, 492
(7th Cir. 1970), aff'd by an equally divided court, 400 U.S. 348
(1971).)/2
____________
2/ Other circuits have agreed. See Rhone-Poulenc Rorer, Inc.
v. Home Indemn. Co., 32 F.3d 851, 861 (3d Cir. 1994) (writ
issued to vacate order requiring insured corporations to
produce privileged documents containing evaluations of their
Regarding entertaining a petition for a writ of
mandamus and issuing the writ, this Court has found the following
factors "at a minimum, instructive:"
(1) The party seeking the writ has no
other adequate means, such as direct appeal,
to attain the relief desire. (2) The
petitioner will be damaged or prejudiced in a
way not correctable on appeal . . . . (3)
The district court's order is clearly
erroneous as a matter of law. (4) The
district court's order is an oft-repeated
error, or manifests a persistent disregard of
the federal rules. (5) The district court's
order raises new and important problems, or
issues of law of first impression.
____________
potential liability to their insurers); Haines v. Liggett
Group Inc., 975 F.2d 81, 89 (3d Cir. 1992) (granting writ to
vacate order requiring production of attorney-client commu
nications and work product created by defense counsel in
response to tobacco litigation, and removing district judge
who lacked impartiality); Chase Manhattan Bank, N.A. v.
Turner & Newall, PLC, 964 F.2d 159, 163 (2d Cir. 1992)
(granting mandamus to vacate order which required defendant
to produce privileged documents to plaintiffs' counsel on
attorneys' eyes only basis for determination by counsel as
to whether documents were privileged); In re Burlington
Northern, Inc., 822 F.2d 518, 523 (5th Cir. 1987), cert.
denied, 484 U.S. 1007 (1988) (writ issued to vacate order
compelling railroads to turn over work product documents to
pipeline company alleging antitrust violations); Admiral
Ins. Co. v. United States, 881 F.2d 1486, 1491 (9th Cir.
1989) (issuing writ to vacate order compelling production of
privileged statements made by former corporate officers to
corporate counsel during course of internal investigation).
In re Bieter Co., 16 F.3d at 932 (quoting Bauman v. United States
Dist. Court, 557 F.2d 650, 654-55 (9th Cir. 1977)). Entertaining
petitions for writ of mandamus and issuing the writs is largely
discretionary; a writ may issue even though not all of the Bauman
factors are satisfied. In re Bieter Co., 16 F.3d at 932. In
this case, the Court's exercise of discretion should be heavily
influenced in favor of granting the requested writ because all of
the Bauman factors are satisfied.
Because this Petition seeks review of an order
compelling discovery of allegedly privileged materials, the first
two Bauman factors are satisfied./3 In re Bieter Co., 16 F.3d at
932. As explained below in Part II, the District Court's order
is clearly erroneous as a matter of law and a clear abuse of
discretion, satisfying the third Bauman factor. Although not a
____________
3/ Mandamus is the only avenue through which immediate
appellate review may be had because orders to compelling the
production of documents are not appealable. Iowa Beef
Processors, 601 F.2d at 953; see Borden v. Sylk, 410 F.2d
843, 845 (3d Cir. 1969) (orders compelling discovery not
final orders under 28 U.S.C. 1291, and do not qualify as
collateral orders subject to appeal); see also In re Von
Bulow, 828 F.2d 94, 98 (2d Cir. 1987) (even if party
adjudges to be in contempt for disobedience to discovery
order, it has no immediate right to appeal). In addition,
under the law of this Circuit, a discovery order is not
appropriate for certification under 28 U.S.C. 1292(b).
White v. Nix, 43 F.3d 374, 377 (8th Cir. 1994) (discovery
orders will never involve controlling questions of law).
mandatory factor, the fourth Bauman factor is satisfied. The
District Court has several times in the past issued oral
decisions compelling the production of privileged or non-
discoverable materials without providing an opportunity for a
full hearing or briefing of the issues, as it has done in this
case. See In re Remington Arms Co., Inc., 952 F.2d 1029 (8th
Cir. 1991); In re Shalala, 996 F.2d 962 (8th Cir. 1993).
Finally, the present petition raises an important issue of first
impression _ the applicability in Missouri, and in this Circuit
of the exception to the attorney-client privilege created by the
Fifth Circuit in Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir.
1970), cert. denied, 401 U.S. 974 (1971).
Thus, the instant petition warrants "full-blown
review," In re Bieter Co., 16 F.3d at 932, if it is not granted
summarily.
II. THE COURT SHOULD ISSUE A WRIT OF MANDAMUS VACATING THE ORDER
OF THE DISTRICT COURT.
In In re Bieter Co., supra, this Court held that a writ
of mandamus will issue to prevent irremediable harm threatened by
"clear legal error" or "clear abuse of discretion," the third
Bauman factor. 16 F.3d at 932-33; In re Remington Arms Co., F.2d
at 1031. The District Court's July 3 order constitutes both
legal error and an abuse of discretion, and should be vacated.
A. The District Court Abused Its Discretion In Ordering
The Production Of Attorney-Client Privileged Documents Without
Any Record Or Briefing By The Parties.
The District Court's action here is strikingly similar
to that vacated by this Court by writ of mandamus in In re
Remington Arms Co., supra. In Remington Arms, the District Court
summarily and without briefing ordered a corporation to produce
documents which the corporation claimed contained trade secrets.
The district court ordered production of
the documents in question following a brief
teleconference without affording Remington
the opportunity to demonstrate that the
documents contain trade secrets and that
disclosure would be harmful.
952 F.2d at 1032. This Court concluded that, in so doing, the
District Court had "clearly abused its discretion."
Just so here. The authority relied upon by the
District Court, Garner v. Wolfinbarger -- even if it were
applicable in Missouri, which it is not -- requires the
discovering shareholder to sustain a burden of demonstrating
"good cause" for discovery of attorney-client privileged
communications. 430 F.2d at 1104. The Garner court identified
nine factors that should be considered by a court in determining
whether the discovering shareholder has demonstrated "good
cause." Id. Many of these factors simply cannot be demonstrated
by a shareholder or evaluated by a court without the submission
of record evidence. For instance, under Garner, the court is to
consider: "the number of shareholders and the percentage of
stock they represent; the bona fides of the shareholders; the
nature of the shareholders' claim and whether it is obviously
colorable; the apparent necessity or desirability of the
shareholders having the information and the availability of it
from other sources . . . ." Id.
Neither the Intervenor nor Rives submitted evidence
regarding any of these factors _ thus, they could not possibly
have borne their burden of demonstrating "good cause." Id.; see
also In re Remington Arms, 952 F.2d at 1030-32. The District
Court determined to adopt Garner as the law of Missouri and apply
its nine-factor balancing test not merely without evidence, but
also without giving KCPL the opportunity to brief the legal
questions involved. See In re Shalala, supra (case made more
confusing because privilege issues were decided without briefs).
These stunning procedural deficiencies are an abuse of discretion
sufficient to warrant mandamus relief. In re Remington Arms, 952
F.2d at 1032.
B. The District Court Erred As A Matter Of Law In Adopting
Garner v. Wolfinbarger.
Even had the District Court issued the July 3 order on
a proper record after briefing, mandamus would be justified
because of the District Court's clear error of law in adopting
and applying Garner.
It is well settled that corporations, like individuals,
enjoy the protections of the attorney-client privilege. Upjohn
Co. v. United States, 449 U.S. 383 (1981); Diversified Indus. v.
Meredith, supra. It is also well settled that the directors and
officers of a corporation -- not its shareholders -- control the
exercise of the privilege. Commodity Futures Trading Comm'n v.
Weintraub, 471 U.S. 343, 349 (1985). See also R.S.Mo. 351.310
(property and business of a corporation controlled and managed by
board of directors).
Despite these settled principles, the District Court
adopted Garner, and held that it is inappropriate for KCPL to
assert an attorney-client privilege to prevent the Intervenor, as
a shareholder of KCPL, from having access to communications
between the directors and officers of KCPL and its counsel. In
Garner, the Fifth Circuit adopted a balancing test permitting
disclosure of otherwise privileged matter if a shareholder
plaintiff satisfies a burden of showing "good cause for
production" in an action charging that corporate fiduciaries
acting inimically to stockholder interests. 430 F.2d at 1104.
The Garner exception is not the law of Missouri, whose
law governs here. See Fed.R.Evid. 501 (where state law provides
the rule of decision, state law governs privilege); In re Federal
Skywalk Cases, 95 F.R.D. 477 (W.D. Mo. 1982) ("[t]he state law of
Missouri guides this Court in determining what substantive rule
should apply with respect to the definitions of privileged
documents"). No Missouri court has indicated that the Garner
exception would be adopted by the Missouri Supreme Court. On the
contrary, the Missouri Supreme Court has rejected the narrow
attorney-client privilege advocated by Dean Wigmore -- whose
analysis formed the foundation of the Fifth Circuit's opinion in
Garner. State ex rel. Great American Ins. Co. v. Smith, 574
S.W.2d 379, 382-83 (Mo. banc 1978) ("the Wigmore approach does
not provide enough protection for the confidentiality of attorney-
client communications to accomplish the objective for which the
privilege was created and now exists"). See Garner, 430 F.2d at
1100-01 (adopting Wigmore's balancing test). See also State ex
rel. Syntex Agri-Business, Inc. v. Adolf, 700 S.W.2d 886, 888
(Mo. App. 1985) (Missouri Supreme Court has adopted a "very broad
concept of attorney-client privilege"). Having already rejected
the theoretical underpinnings of Garner, there is no reason to
believe that the Missouri Supreme Court would adopt Garner
itself.
Nor is the Garner exception the law in this circuit.
Recently, in Milroy v. Hanson, supra, the court expressly
declined to follow Garner in an action brought by a minority
stockholder seeking discovery of communications between corporate
counsel and the board of directors. The court explained:
. . . Garner has not been adopted by the
United States Court of Appeals for the Eighth
Circuit. In fact, "Garner's continued
vitality is suspect . . . even in federal
courts." Many commentators believe "Garner
was wrong and the attorney-client privilege
in shareholder cases should apply just as it
does in other litigation."
875 F. Supp. at 651 (citations omitted).
The court in Milroy noted that two opinions of the
United States Supreme Court decided after Garner -- Upjohn Co. v.
United States, 449 U.S. 383 (1981) and Commodity Futures Trading
Comm'n v. Weintraub, 471 U.S. 343 (1985) -- cast doubt on Garner's
viability:
In my opinion, Garner, adopted as it was
prior to the Supreme Court's opinions in
Upjohn and Weintraub, is problematic because
(a) it is in effect a lower-court-created
exception to the general rule announced by
the Supreme Court in Upjohn and Weintraub
that a corporation has the right to assert an
attorney-client privilege, and (b) the Garner
opinion does not focus on the critical issue
of "management," as the Supreme Court did in
Weintraub, and the relevant substantive law
of corporations for purposes of determining
who may assert, waive, or otherwise frustrate
the attorney-client privilege for a solvent
corporation.
875 F. Supp. at 651.
Indeed, the fundamental premise of Garner, the use of a
balancing test to determine the existence of a privilege, has now
been explicitly disapproved by the United States Supreme Court.
In the recent case Jaffee v. Redmond, 64 U.S.L.W. 4490 (1996),
the Court reversed a lower court which had applied a balancing
component in the psychotherapist-patient privilege akin to
Garner's balancing test. The Court held that permitting a
judicial balancing test to determine whether a privilege would
apply was insufficiently predictable to serve the important
purposes of the privilege. "An uncertain privilege, or one which
purports to be certain but results in widely varying applications
by the courts, is little better than no privilege at all." Id.
(quoting Upjohn, 449 U.S. at 393). Similarly here, if KCPL's
directors had thought that their confidential communications with
legal counsel might, at the discretion of the District Court, be
subject to discovery by attorneys for a hostile bidder, they
would have had a strong incentive not to consult with counsel at
all -- hardly a desirable result for the company. Id.; Weintraub,
471 U.S. at 348 (attorney-client privilege encourages observance
of the law and aids the administration of justice by promoting
full and frank communications between attorneys and their
clients).
C. The District Court Erred As A Matter Of Law In
Implicitly Finding That The Intervenor And Rives Had Demonstrated
"Good Cause" Under Garner Despite Their Failure To Make
Shareholder Demand And Lack Of Significant Stockholdings.
Even had the Intervenor and Rives attempted to offer
evidence in satisfaction of the Garner test, they could not have
succeeded. First of all, the Intervenor and Rives failed to
carry their burden of demonstrating that their claims are
"obviously colorable." Weil v. Investment/Indicators, Research &
Management, 647 F.2d 18 (9th Cir. 1981) (Garner not applied where
plaintiff had not alleged a well-documented series of allegations
showing substantial harm to shareholders); John Gergacz, The
Attorney-Corporate Client Privilege, 6-32 (2d ed. 1990)
("Gergacz"). In fact, given Missouri's clear shareholder demand
requirement, the Intervenor's and Rives' claims are obviously not
colorable. See Wolgin v. Simon, 722 F.2d 389 (8th Cir. 1983);
Goodwin v. Goodwin, 583 S.W.2d 559, 560-61 (Mo. App. 1979);
McLeese v. J.C. Nichols Co., 842 S.W.2d 115, 119 (Mo. App. 1992);
Saigh v. Busch, 396 S.W.2d 9, 16 (Mo. App. 1965), cert. denied,
384 U.S. 942 (1966). A shareholder of a Missouri corporation is
not entitled to prosecute litigation -- much less take discovery
of the corporation's attorney-client privileged documents -- prior
to exhausting all remedies and reasonable efforts within the
corporation, including a demand upon the shareholders as a group
to institute the requested litigation. Id. Moreover, in Ward v.
Succession of Freeman, 854 F.2d 780, 786 (5th Cir. 1988), cert
denied, 490 U.S. 1065 (1989), the Fifth Circuit applied greater
scrutiny and refused to apply Garner in a case, similar to this
case, in which the shareholder demanding privileged documents was
bringing a claim for individual damages rather than a derivative
action. Thus, irrespective of whether Rives' and the
Intervenor's claims are individual claims or derivative claims,
Garner cannot be satisfied under these circumstances.
Additionally, the Intervenor and Rives hold a very
small percentage of KCPL's stock. In such circumstances, federal
courts have refused to apply the Garner exception, because the
shareholder seeking discovery cannot be relied upon to represent
the interest of the corporation. See Ohio-Sealy Mattress Mfg.
Co. v. Kaplan, 90 F.R.D. 21, 31-32 (N.D. Ill. 1980) (plaintiffs
holding fewer than 1% of corporation's shares had not
demonstrated good cause under Garner); see also Ward, 854 F.2d at
786 (ownership of less than 4% of the stock). Even the Garner
court recognized that "nonparty stockholders" may be injured by
impinging on the privilege because "[t]he corporation is
vulnerable to suit by shareholders whose interests or intention
may be inconsistent with those of other shareholders . . . ."
Garner, 430 F.2d at 1101 n.17. The potential disparity of
interests between a minority shareholder and the corporation is
exacerbated here, where Missouri statute contemplates that the
KCPL board will consider the interests of corporate
constituencies other than the shareholders. R.S.Mo. 351.347.
In determining how to manage attorney-client privileged
communications in the present context, the Intervenor and Rives
can hardly be relied upon to consider the interests of
"employees, suppliers, customers and . . . communities," as the
KCPL board has done. Id.
Here, again, even if the District Court had ruled on a
record after briefing, its ruling would be clearly erroneous as a
matter of law.
D. The District Court Abused Its Discretion In Ordering
The Production Of Attorney-Client Privileged Documents To Counsel
For Western Resources, A Non-Stockholder.
The unreasonableness of the District Court's order is
made crystal clear when it is considered that the privileged
information will be divulged to Western either directly or in the
course of further discovery or trial. Even if the Intervenor
were entitled to discovery of privileged communications under
Garner, Western and its conduit, Rives, would not be. As the
District Court recognized, Western is not a shareholder of KCPL
and is not entitled to discovery under the Garner exception.
Although a shareholder, Rives is not entitled to access to KCPL's
privileged communications, even under Garner, because he is not
acting on behalf of the KCPL shareholders, but rather is acting
on behalf of Western.
Western's proxy statement discloses that Rives is a
retired Executive Vice President of Western who will solicit
proxies on its behalf. Rives has also demanded a copy of KCPL's
stockholder list in order to facilitate Western's proxy solicitation.
Through Rives, Western now hopes to gain access to privileged
communications of KCPL, its clear adversary. No authority
exists to support such a result.
Rives holds just 500 shares of KCPL stock. As
explained above, such small holdings do not create the kind of
unity of interest with the corporation necessary to trigger the
Garner exception. See Ohio-Sealy, 90 F.R.D. at 31-32.
Additionally, as Western's pawn, Rives' personal interests are
plainly inimical to those of the KCPL stockholders as a whole.
In such circumstances, federal courts, including the court that
decided Garner, have not hesitated to reject an application of
the Garner exception. See Ward v. Succession of Freeman, 854
F.2d at 786; Weil v. Investment/Indicators, Research &
Management, 647 F.2d at 23 ("Garner's holding and policy
rationale simply do not apply" where shareholder sought personal
benefit apart from the corporation); Milroy, 875 F. Supp. at 651
(Garner "has no applicability where the plaintiff stockholders
asserts claims primarily to benefit himself"); Ohio-Sealy, 90
F.R.D. at 31-32 (Garner did not apply where information sought
could be used to the corporation's detriment); Gergacz at 6-28-29
(Garner requires the discovering party to "demonstrate that it
has a major stake in the fiduciary relationship that Garner
balances against the policies of the attorney-corporate client
privilege").
Finally, if they were permitted access to KCPL's
attorney-client communications, counsel for Western and Rives --
Sullivan & Cromwell and Stinson Mag & Fizzell -- would face an
impermissible conflict of interest. The basis of the District
Court's ruling that counsel for Western and Rives be given access
to KCPL's privileged materials was that Rives is a shareholder of
KCPL and therefore is an "owner" of KCPL. Thus, based upon one
aspect of the rationale of Garner, the District Court reasoned
that there exists a unity of interest between Rives and KCPL. At
the same time, Rives' co-client, Western, has its own interests
here -- to prevent the KCPL/UtiliCorp strategic combination, and
to complete a hostile takeover of KCPL. See, e.g., Torchmark
Corp. v. Bixby, 708 F. Supp. 1070, 1076-78 (W.D. Mo. 1988)
(recognizing fundamental divergence of interests between takeover
bidder and target company shareholders). Western's interests are
directly adverse to those of KCPL, its shareholders, employees,
suppliers, customers and communities, as determined by KCPL's
board pursuant to authority specifically granted under Missouri
law. R.S.Mo. 351.347.
With respect to KCPL's attorney-client privilege, the
interests of Western and Rives must be viewed as adverse and an
impermissible conflict of interest arises. See Missouri Rules of
Professional Conduct, Rule 1.7. The effect of the District
Court's July 3 ruling essentially permits Rives to act on KCPL's
behalf with respect to its attorney-client privilege. Thus,
Sullivan & Cromwell and Stinson, Mag represent (1) Rives, whose
theoretical "unity of interest" with KCPL purportedly renders
KCPL's privilege inapplicable to him and (2) Western, a stranger
to the corporation which seeks to frustrate KCPL's strategic goal
of combining with Utilicorp and which is prosecuting litigation
against KCPL concerning the very subject matter of the privileged
communications at issue. Rule 1.7 specifically forbids such a
direct conflict absent consent -- and to hold that Rives,
Western's agent, could validly consent to the eradication of
KCPL's attorney-client privilege vis-a-vis Western would indeed
be a perverse result.
The suggestion by the District Court that the conflict
could be eliminated by requiring counsel not to share KCPL's
attorney-client communications with Western personnel is unwork
able. Counsel for Western and Rives would be faced with an
irreconcilable conflict between its obligation to Rives under
Rule 1.8(b) (forbidding use of information relating to
representation to client's disadvantage) and its obligation to
zealously represent Western. Actual receipt by Western's counsel
of KCPL's attorney-client communications would require
disqualification because there is no practical way, when the same
individual lawyers represent both Western and Rives, to isolate
KCPL's attorney-client communications so that knowledge of them
is only used for Rives' benefit. Cf. State of Arkansas v. Dean
Food Products Co. Inc., supra (applying Model Code, Court held
"confidential disclosures, actual or presumed, necessitate
disqualification of the attorney when he represents an adverse
interest in a related matter"), overruled on other grounds, In re
Multi-Piece Rim Products Liability Litigation, 612 F.2d 377 (8th
Cir. 1980).
CONCLUSION
For all of the foregoing reasons, KCPL respectfully
requests that the Court issue a writ of mandamus to the District
Court vacating the order of the District Court rendered July 3,
1996.
/s/Thomas C. Walsh
Thomas C. Walsh
BRYAN CAVE LLP
One Metropolitan Square
211 North Broadway, Suite 3600
St. Louis, Missouri 63102
Telephone: (314) 259-2000
Facsimile: (314) 259-2020
and
David F. Oliver
BRYAN CAVE LLP
3500 One Kansas City Place
1200 Main
Kansas City, Missouri 64105
Telephone: (816) 374-3200
Facsimile: (816) 374-3300
and
Steven J. Rothschild
R. Michael Lindsey
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
Telephone: (302) 651-3000
Facsimile: (302) 651-3001
ATTORNEYS FOR PETITIONER
Certificate of Service
I hereby certify that a copy of the foregoing was
served on this 9th day of July, 1996, to:
Lawrence M. Berkowitz, Esq. VIA HAND DELIVERY
Kurt D. Williams, Esq.
STINSON, MAG & FIZZELL, P.C.
1201 Walnut Street
Kansas City, MO 64106
and
John L. Hardiman, Esq. VIA TELECOPIER
Tariq Mundiya, Esq.
SULLIVAN & CROMWELL
125 Broad Street
New York, NY 10004
ATTORNEYS FOR WESTERN RESOURCES, INC.
and ROBERT L. RIVES
Michael E. Waldeck, Esq. VIA HAND DELIVERY
William J. DeBauche, Esq.
Angela K. Green, Esq.
Michael E. Griffin, Esq.
NIEWALD, WALDECK & BROWN
1200 Main Street, Suite 4100
Kansas City, MO 64105
and
OF COUNSEL: VIA TELECOPIER
David Harrison, Esq.
LOWEY, DANNENBERG, BEMPEROD
& SELINGER, P.C.
747 Third Avenue, 30th Floor
New York, NY 10017
ATTORNEYS FOR JACK R. MANSON
The Honorable Scott O. Wright VIA HAND DELIVERY
United States District Court
811 Grand Avenue, Room 741
Kansas City, MO 64106
/s/Thomas C. Walsh
Attorney for Petitioner
Exhibit 44
IN THE UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
IN RE KANSAS CITY POWER )
& LIGHT CO., )
) No. ___________________
Petitioner. )
)
PETITIONER'S MOTION FOR EXPEDITED
DISPOSITION OF PETITION FOR WRIT OF MANDAMUS
Kansas City Power & Light Company ("KCPL"), through its
attorneys, hereby moves the Court for an order expediting proceed
ings on KCPL's Petition for Writ of Mandamus ("KCPL's Petition").
1. As set forth in KCPL's Petition for Writ of Mandamus,
filed herewith, in the course of litigation arising from a
hostile corporate takeover attempt, the District Court for the
Western District of Missouri, The Honorable Scott O. Wright,
Senior District Judge, has ordered Petitioner to turn over
attorney-client privileged materials (including minutes of
conversations between Petitioner's Board of Directors and its
counsel regarding the takeover) to its opposing parties,
including the counsel for the company making the hostile takeover
bid. Petitioner KCPL has today petitioned the Court pursuant to
28 U.S.C. Section 1651 and Federal Rule of Appellate Procedure 21 for a
Writ of Mandamus to the District Court, directing the District
Court to vacate its oral ruling of July 3, 1996 ordering KCPL to
produce these attorney-client privileged documents.
2. On July 5, 1996, KCPL presented to the District Court a
motion to stay the challenged order pending disposition of KCPL's
Petition. The briefing in that motion included an explanation of
why the District Court's order was erroneous as a matter of law.
On July 9, 1996, the District Court entered an Order not only
staying his order compelling discovery of documents KCPL claims
are protected by the attorney-client privilege but staying all
discovery pending a decision by this Court. The District Court
further threatened to postpone the hearing scheduled for July 25,
1996 and enjoin the KCPL shareholders Special Meeting set for
August 7, 1996. At that Special Meeting, KCPL's shareholders
will vote upon whether to approve the issuance of KCPL shares to
facilitate a strategic business combination with UtiliCorp United
Inc. Western Resources, Inc., an opposing party in the
proceedings before the District Court, launched a hostile bid for
KCPL in order to prevent the KCPL/UtiliCorp combination.
3. An order enjoining KCPL from holding its August 7
Special Meeting as scheduled would be error because KCPL's opponents
cannot demonstrate that they will face irreparable harm in
the event the KCPL vote occurs prior to adjudication of the
issues currently scheduled for hearing on July 25. Thus, KCPL
faces the likely need to prosecute an expedited appeal of such an
injunctive order.
4. Expedited emergency treatment of KCPL's Petition for
Writ of Mandamus could obviate the need for such an expedited
appeal and would hopefully permit the July 25 hearing to proceed
as scheduled by the District Court.
5. Accordingly, KCPL requests relief, in the form of the
attached Order fixing a shortened time for response to KCPL's
Petition and expediting the disposition of KCPL's Petition.
DATED: July 9, 1996
/s/Thomas C. Walsh
Thomas C. Walsh
BRYAN CAVE LLP
One Metropolitan Square
211 North Broadway, Suite 3600
St. Louis, Missouri 63102
Telephone: (314) 259-2000
Facsimile: (314) 259-2020
and
David F. Oliver
BRYAN CAVE LLP
3500 One Kansas City Place
1200 Main
Kansas City, Missouri 64105
Telephone: (816) 374-3200
Facsimile: (816) 374-3300
and
Steven J. Rothschild
R. Michael Lindsey
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
Telephone: (302) 651-3000
Facsimile: (302) 651-3001
ATTORNEYS FOR PETITIONER
Certificate of Service
I hereby certify that a copy of the foregoing was
served on this 9th day of July, 1996, to:
Lawrence M. Berkowitz, Esq. VIA HAND DELIVERY
Kurt D. Williams, Esq.
STINSON, MAG & FIZZELL, P.C.
1201 Walnut Street
Kansas City, MO 64106
and
John L. Hardiman, Esq. VIA TELECOPIER
Tariq Mundiya, Esq.
SULLIVAN & CROMWELL
125 Broad Street
New York, NY 10004
ATTORNEYS FOR WESTERN RESOURCES, INC.
and ROBERT L. RIVES
Michael E. Waldeck, Esq. VIA HAND DELIVERY
William J. DeBauche, Esq.
Angela K. Green, Esq.
Michael E. Griffin, Esq.
NIEWALD, WALDECK & BROWN
1200 Main Street, Suite 4100
Kansas City, MO 64105
and
OF COUNSEL: VIA TELECOPIER
David Harrison, Esq.
LOWEY, DANNENBERG, BEMPEROD
& SELINGER, P.C.
747 Third Avenue, 30th Floor
New York, NY 10017
ATTORNEYS FOR JACK R. MANSON
The Honorable Scott O. Wright VIA HAND DELIVERY
United States District Court
811 Grand Avenue, Room 741
Kansas City, MO 64106
/s/Thomas C. Walsh
Attorney for Petitioner
IN THE UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
IN RE KANSAS CITY POWER )
& LIGHT CO., )
) No. ___________________
Petitioner. )
)
ORDER OF COURT
This _____ day of July, 1996, upon consideration of
Kansas City Power & Light Company's Motion for Expedited
Disposition of Petition for Writ of Mandamus, and for good cause
shown, it is hereby
ORDERED that responses to Kansas City Power & Light
Company's Petition for Writ of Mandamus shall be filed on or
before July 11, 1996;
IT IS FURTHER ORDERED that argument and proceedings on
Kansas City Power & Light Company's Petition for Writ of Mandamus
shall be expedited.
IT IS SO ORDERED.
____________________________
Date: ___________