United States District Court, S.D. California
HOUSTON MUNICIPAL EMPLOYEES PENSION SYSTEM, Individually and On Behalf Of All Others Similarly Situated, Plaintiff,
BOFI HOLDING, INC., GREGORY GARRABRANTS, ANDREW J. MICHELETTI, PAUL J. GRINBERG, NICHOLAS A. MOSICH, AND JAMES S. ARGALAS, Defendants.
ORDER REGARDING JOINT MOTION FOR DETERMINATION OF
DISCOVERY DISPUTE DOC. NO. 90
Karen S. Crawford United States Magistrate Judge
the Court is the parties' Joint Motion for Determination
of Discovery Dispute No. 2. [Doc. No. 90.] Therein, plaintiff
seeks an order permitting it to review and use documents
provided by a former employee of defendant, Bof I Holding,
Inc. ("Bof I"), subject to the proposed Protective
Order submitted with this Motion and defendants'
privilege review. [Doc. No. 90, at pp. 2, 29.] Defendants
seek an order for plaintiff to return documents that they
claim are "stolen" and to destroy any copies of
such documents in its possession (or in the possession of its
agents and affiliates). [Doc. No. 90, at pp. 25, 30.]
Court finds the Joint Motion for Determination of Discovery
Dispute No. 2 is appropriate for resolution without oral
argument and submits it on the papers under Civil Local Rule
reasons outlined more fully below, the Court DENIES
plaintiffs request for an order permitting it to review and
use documents provided by a former employee of defendant
subject to a Protective Order and defendants' privilege
review. The Court GRANTS defendants' request for a Court
Order requiring plaintiff to return the documents provided by
a former employee of Bof I and to destroy any copies in its
operative Second Amended Complaint ("SAC") in this
case was filed on November 25, 2016, alleging violations of
federal securities laws by defendants. [Doc. No. 79.] On
December 23, 2016, defendants filed a Motion to Dismiss the
SAC, which is currently pending before the District Court.
[Doc. No. 88.] Here, because the pleadings remain unsettled
(i.e., a Motion to Dismiss is pending) and no answer
has been filed, the Court has not scheduled an Early Neutral
Evaluation Conference, a Case Management Conference, or a
Rule 26(f) conference.
current dispute arises out of plaintiffs informal
investigations into the facts, when a former employee of Bof
I provided 1, 189 pages of documents (hereinafter
"Documents") to an investigator employed by counsel
for lead plaintiff ("Lead Counsel"). [Doc. No. 90,
at pp. 6, 12.] Defendants contend that the Documents contain
a variety of confidential and non-public banking documents,
sensitive customer financial information, and internal
documents of Bof I. Id. at 13. Specifically,
defendants assert nearly 150 pages of the Documents include
portions of private third party financial information such as
identifying information, social security numbers, tax forms,
account numbers, financial information and balances, and
tenant information. Id. at 21-22. Defendants further
assert that the Documents include some of Bof I internal
emails and loan policies, Bofl's Code of Conduct, and
various internal lending guidelines marked "Confidential
- Internal Use Only."/J. at 13.
contends that once received, the Documents were reviewed by a
single contract attorney working with Lead Counsel to
ascertain whether any of the Documents included privileged or
otherwise protected information. Id. at 7. Once
privilege concerns were positively determined, the Documents
were quarantined, the contract attorney was ethically
screened, and the Documents were shipped to plaintiffs
outside legal ethics counsel ("Outside Ethics
Counsel"). Id. The Documents were not reviewed
by any other member of plaintiff s Lead Counsel's firm
and the sole copy remains with Outside Ethics Counsel.
October 20, 2016, plaintiffs Outside Ethics Counsel contacted
defendants' counsel requesting a privilege review of the
Documents and a privilege log of any documents they believed
should be withheld or redacted. Id. On October 28,
2016, defendants' counsel responded, objecting to the
release of any of the Documents and seeking their immediate
return. Id. at 13. On November 4, 2016, plaintiffs
Lead Counsel responded that the Documents should not be
destroyed and that the Documents would remain with Outside
Ethics Counsel pending the resolution of the dispute.
Id. at 8.
December 1, 2016, after receiving no response, plaintiffs
Lead Counsel proposed a telephonic meet and confer.
Id. at 8, 14. On December 5 and 8, 2016, the parties
met and conferred in an effort to resolve the current issue
but reached an impasse. Id. at 2.
Rule of Civil Procedure 26(d) provides "[a] party may
not seek discovery from any source before the parties have
conferred as required by Rule 26(f)." As already noted,
the Court knows of no authority that would permit it to enter
a Rule 26(c) protective order before discovery has begun.
[Doc. No. 80, at p. 7.] Notably, plaintiff cited to no such
authority in seeking a protective order herein.
26(c) is entitled "Duty to Disclose; General Provisions
Governing Discovery." Fed.R.Civ.P. 26. Rule 26(c)
addresses "Protective Orders" and states that
"[a] party or any person from whom discovery is sought
may move for a protective order in the court where the action
is pending ....*' Fed.R.Civ.P. 26(c). The plain language
of Rule 26(c) does not provide authority for a protective
order over prediscovery, informal investigations. Plaintiff
argues herein that its Lead Counsel may review and use
Documents provided by a former Bof I employee subject to a
protective order. [Doc. No. 90, at p. 3.] However, plaintiff
cites no authority for its position. Accordingly, the Court
DENIES plaintiffs request for an order permitting it to
review and use Documents provided by a former employee of
defendant subject to a Protective Order and defendants'
Court further concludes that plaintiffs position, to the
extent it is based on In re: JDS Uniphase Corp. Sec.
Litig.,238 F.Supp.2d 1127 (N.D. Cal. 2002) and
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