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John Dugan, et al v. Lloyds Tsb Bank

March 26, 2013


The opinion of the court was delivered by: Nandor J. Vadas United States Magistrate Judge

Not For Publication


United States District Court Northern District of California


In December 2012, plaintiffs John Dugan, et al. ("Plaintiffs") took the depositions of 15 Stuart Cheetham and Richard Drean, who were designated as corporate representatives by 16 defendant Lloyds TSB Bank, PLC ("Lloyds") pursuant to Federal Rule of Civil Procedure 17 30(b)(6).

Pursuant to the terms of a Stipulated Protective Order (Doc. No. 105), Lloyds 18 designated certain portions of the deposition transcripts as "confidential." Also pursuant to the 19 terms of the Stipulated Protective Order, Plaintiffs challenged Lloyds' confidentiality 20 designations. See Doc. No. 105, ¶ 6.3. Plaintiffs did not challenge them in the context of a 21 specific motion, but generally challenged the propriety of Lloyds' designations. After the parties 22 were unable to resolve their disagreements through appropriate meet and confer efforts, Lloyds 23 filed the instant motion. Doc. No. 111. That motion was fully briefed and argued before the 24 undersigned on March 12, 2013. Pursuant to the undersigned's request at oral argument, Lloyds 25 filed a supplemental declaration in support of its motion. Doc. No. 128-1. For the reasons stated 26 below, the undersigned will grant in part and deny in part Lloyds' motion. 27 28



Plaintiffs allege that they purchased from Lloyds "highly risky and complex variable rate, 4 and often variable currency, loans . . . The Loans' distinctive feature was that the interest rate was 5 set at 1.5%, or other fixed number, above Lloyds' 'Cost of Funds,' a number not explicitly tied by 6 the written loan documents to any published index, and incalculable by borrowers on a prospective 7 basis." Doc. No. 114 at 2. They further allege that: 8

the variable interest rate described in the Loan Documents was arbitrarily increased by Lloyds to the detriment of Plaintiffs and the Class. Based on Lloyds' "Cost of Funds" -- as applied by Lloyds, an incalculable number untied to any published index -- the interest rate charged to Borrowers inexplicably increased by more than 50% in less than two years, and is now almost double its original amount.

FAC, ¶ 3. To reach this ever-increasing spike, Lloyds has more than quadrupled its alleged "Cost of Funds" during a time when indexes measuring the actual cost of funds to banks' lending in Yen, Swiss Francs, or other currencies, for example, the Tokyo and London Inter-Bank Offered Rates for Yen ("TIBOR" and "LIBOR," respectively) fell dramatically.



Plaintiffs deposed Cheetham and Drean on a number of topics, including Lloyds' Cost of Funds and the manner in which it was calculated. Portions of the depositions consisted of 19 questions and answers regarding documents that Lloyds had designated as confidential. Lloyds 20 accordingly designated certain passages of the depositions as confidential.*fn1 Plaintiffs challenged 21 those designations. When the parties could not resolve their differences of opinion regarding the 22 propriety of Lloyd's designations, Lloyds filed the instant motion. Lloyds bore the burden of 23 persuasion on this motion. See Doc. No. 116 ("The burden of persuasion in any such challenge 24 proceeding shall be on the Designating Party"). 25

To support the appropriateness of its designations, Lloyds submitted a one-page declaration by Nicholas Harrison, the Head of Risk & Compliance, ASIA, for the Hong Kong 2 Branch of Lloyds TSB Bank plc. See Doc. No. 110-1. The two substantive paragraphs of the 3 Harrison declaration state: 4

3. The design and performance of the [International Mortgage Service ("IMS")] loan program, the components of Lloyds' Cost of

Funds over time, how the components are and were calculated, and internal policies and procedures affecting pricing of Lloyds TSB

Bank plc's products are treated as confidential information and shared, only when disclosure is required by the necessity of the particular situation or law, with the expectation that the party receiving the information will maintain the information in

confidence and not share the information with competitors or the public.

4. I believe that knowledge of this information would be of use to Lloyds' competitors and could be used to Lloyds' detriment.

Id. at ¶¶ 3-4. In his declaration, Harrison does not (1) state that the information at issue in the

motion has not been shared publicly; (2) attempt to describe how "knowledge of this information" could be used to Lloyds' detriment; or (3) attempt to address with any specificity the bases for 15 confidentiality for any category of information at issue in the motion. The court therefore cannot 16 determine whether the particular information at issue should be kept confidential "to protect 17 competitively sensitive business information" (Doc. No. 116 at 1), or how disclosure of the 18 information would "cause [Lloyds] competitive injury" (id. at 2). The Harrison declaration 19 essentially asks the court to uphold the confidentiality designations because Lloyds considers all 20 internal information relating to the IMS program confidential. During the hearing, counsel for 21

Lloyds argued that Lloyds did not consider all information relating to the IMS program, but only 22 those categories of information Harrison listed in his declaration. Given the breadth and 23 generality of those ...

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