United States District Court, N.D. California
CHARLOTTE B. MILLINER, et al., Plaintiffs,
MUTUAL SECURITIES, INC., Defendant.
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANT'S MOTION TO COMPEL
THELTON E. HENDERSON United States District Judge.
February 8, 2017, the Defendant Mutual Securities, Inc.
(“MSI”) filed a Motion to Compel Plaintiffs'
Production of Documents. ECF No. 81 (“Mot.”).
Plaintiffs timely opposed the motion, ECF No. 83
(“Opp'n”), and Defendant timely replied, ECF
No. 86 (“Reply”). The Court heard oral arguments
on the motion on March 20, 2017. After carefully considering
the parties' written and oral arguments, the Court GRANTS
IN PART AND DENIES IN PART Defendant's motion for the
reasons set forth below.
parties are familiar with the factual background of this
case, the Court provides only a brief summary of the facts.
class action is related to another class action separately
filed in this Court: Milliner v. Bock Evans Financial
Counsel, Ltd., No. 15-cv-1763 TEH (the “Bock Evans
Class Action”). The Bock Evans Class Action was brought by
the same Plaintiffs as the present class action, to challenge
the “‘one size fits all' investment approach
implemented by their investment advisor, Defendant Bock Evans
Financial Counsel, Ltd. (‘BEFC').” Compl.
¶ 1 (EFC No. 1). Plaintiffs brought the present class
action against MSI because of MSI's relationship with
BEFC. Specifically, BEFC required that clients hire MSI as
their broker-dealer. Id. ¶ 9. Plaintiffs allege
one reason BEFC required clients to use MSI is because Thomas
Bock (“Bock”) and Mary Evans
(“Evans”), the principal executive officers of
BEFC, were registered representatives of MSI. Id.
¶ 9. In other words, Bock and Evans were “dually
registered as registered representatives and commissioned
brokers of MSI and as investment advisors and principals of
BEFC.” ECF No. 32, at 1:27-2:1. Plaintiffs allege BEFC
“plac[ed] 100% or nearly 100% of their assets in high
risk and highly speculative foreign mining stocks, including
over-the counter and penny stocks” resulting in the
value of BEFC's portfolios going “from $60 million
to $4.17 million in just a few years, a drop of roughly
$55.83 million, or 93%.” Compl. ¶¶ 1-2.
prior orders, the Court has established: “MSI owed
Plaintiffs a contractual duty to ‘determine the
suitability of any investment recommendations and advice'
in accordance with the express terms of their Brokerage
Agreement, ” ECF No. 38, 4:27-5:3; MSI had a duty to
supervise the outside advisory investment activities of Bock
and Evans pursuant to FINRA rules, ECF No. 52, at 12; and MSI
breached its duty under FINRA rules to determine suitability,
ECF No. 87 at 8:23-24.
before the Court is MSI's Motion to Compel
Plaintiffs' Production of Documents. MSI alleges that the
Plaintiffs have not produced any documents in response to its
Requests for Production and seeks an order from the Court
compelling Plaintiffs to do so.
may bring a motion to compel discovery when another party has
failed to respond adequately to a discovery request.
Fed.R.Civ.P. 37(a)(3). A party “may obtain discovery
regarding any nonprivileged matter that is relevant to any
party's claim or defense and proportional to the needs of
the case, considering the importance of the issues at stake
in the action, the amount in controversy, the parties'
relative access to relevant information, the parties'
resources, the importance of the discovery in resolving the
issues, and whether the burden or expense of the proposed
discovery outweighs its likely benefit.” Fed.R.Civ.P.
26(b). As the moving party, MSI must inform the court which
discovery requests are the subject of the motion to compel,
why Plaintiffs' objections are not justified or why the
response provided is deficient, and how proportionality and
the other requirements of Federal Rule of Civil Procedure
26(b)(2) are met. See Civil L.R. 37-2. “A
district court has wide latitude in controlling discovery . .
. .” Lane v. Dep't of Interior, 523 F.3d
1128, 1134 (9th Cir. 2008) (citation and internal quotation
Scope of Relief
motion, MSI specifically asks the Court to order the
Plaintiffs to produce documents in response to MSI's
Requests for Production Nos. 1-78. Mot. at 1:7-10. However,
in its reply, MSI asks the Court to “order Plaintiffs
to produce the documents responsive to MSI's narrow 18
categories of requests.” Reply at 12:2-4. Because MSI
voluntarily narrowed its requests in good faith before the
motion to compel and because MSI's reply only asks for an
order relating to these 18 categories, the Court only
considers these 18 categories for purposes of the motion.
Requests for Productions Regarding Plaintiffs' Non-MSI
Accounts, Tax Returns, and Financial Statements are
Rule of Civil Procedure 26(b)(1) allows parties to obtain
discovery on “any nonprivileged matter that is relevant
to any party's claim or defense and proportional to the
needs of the case.” Here, Plaintiffs object to
MSI's requests for the production of Plaintiffs'
non-MSI accounts, tax returns, and financial statements on
the basis that these records are not relevant to case.
Opp'n at 7:14-16, 8:11. Notably, however, while
Plaintiffs' objections focused on arguing that these
requests are not relevant to suitability - Plaintiffs failed
to refute MSI's suggestion that the requests are relevant
to issues of class certification (e.g., typicality of claims
and Plaintiffs' adequacy to represent the class). Because
the Plaintiffs' financial profiles and investment
experience could raise unique defenses for MSI against
Plaintiffs' specific claims, see, ...