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In re Bof I Holding, Inc. Securities Litigation

United States District Court, S.D. California

July 21, 2017



          Hon. Gonzalo P. Curiel United States District Judge

         Before the Court are Objections, Dkt. No. 100, to Magistrate Judge Karen Crawford's March 23, 2017 order, Dkt. No. 97, ruling on the parties' Joint Motion for Determination of Discovery Dispute No. 2, Dkt. No. 90. In the March 23 order, the magistrate judge denied Lead Plaintiff's “request for an order permitting it to review and use documents provided by a former employee of defendant subject to a Protective Order and defendant's privilege review” and granted “defendant's 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 possession.” Dkt. No. 97 (the “March 23 order” or “the order”). Lead Plaintiff filed objections to the magistrate judge's order on April 6, 2017. Dkt. No. 100. The objections have been fully briefed. Defendants filed an opposition on April 17, 2017. Dkt. No. 105. Lead Plaintiff filed its reply on April 28, 2017. Dkt. No. 108.

Upon consideration of the moving papers and the applicable law, and for the reasons set forth below, the Court DENIES Lead Plaintiff's Objections to Magistrate Judge Crawford's March 23, 2017 Order Regarding Joint Motion for Determination of Discovery Dispute No. 2. Dkt. No. 100-1.


         This discovery dispute arises from Lead Plaintiff's informal investigations into the facts bearing on its securities fraud suit against Defendants.

         As part of its pre-discovery informal investigations into its claims, Lead Plaintiff has interviewed a number of Bof I's former employees. One of these employees, upon being approached by Lead Plaintiff's investigator, provided Lead Plaintiff with 1, 189 pages of documents associated with her employment at Bof I. Dkt. No. 97 at 2. Once received, a contract attorney working for Lead Plaintiff reviewed the documents to determine whether the documents contained privileged or protected information. Id. at 3. The contract attorney concluded that the documents did contain such information. Id. As a result, Lead Plaintiff shipped the documents to outside legal ethics counsel and screened the contract attorney from any future participation in the litigation against Bof I. Id. A copy of the documents have remained with outside legal ethics counsel pending the resolution of this dispute. Id.

         On October 20, 2016, Lead Plaintiff's outside legal ethics counsel contacted Defendants about the documents. Outside counsel requested that Defendants perform a privilege review of the documents and complete a privilege log of any documents that should be withheld or redacted. Id. After reviewing the documents, Defendants objected, on October 28, 2016, to the release of any of the documents and sought their immediate return. Id. According to Defendants, the documents contain “highly confidential, non-public banking documents” that include customer loan files; sensitive financial information about Bof I's customers, such as federal tax forms, social security numbers, account numbers, financial information and balances; Bof I's code of conduct; various internal lending guidelines marked “Confidential - Internal Use Only”; and internal emails sent and received at Bof I.[1] Dkt. No. 90 at 13. On November 4, 2016, Lead Plaintiff informed Defendants that it would not destroy or return the documents until the dispute was settled. Id.

         On December 5 and 8, 2016, the parties conferred regarding the documents. Id. During the meetings, the parties discussed having the documents remain in the sole custody of outside legal counsel until the Fed. R. Civ. P 16 (“Rule 16”) conference took place. Id. Ultimately, however, the parties were unable to reach an accord and the Joint Motion for Determination of Discovery Dispute No. 2 soon followed. Dkt. No. 90 (filed January 18, 2017).

         On March 23, 2017, Magistrate Judge Karen Crawford denied Lead Plaintiff permission to review the documents subject to a protective order. Dkt. No. 97. The magistrate judge concluded (1) that the court did not have authority under Rule 26(c) to issue the requested protective order because formal discovery had yet to begin and (2) that Lead Plaintiff's position was not persuasive under the legal authority cited, most notably the district court opinion in Brado v. Vocera Comms., Inc., 14 F.Supp.3d 1316 (N.D. Cal. 2014). Accordingly and in light of the fact that formal discovery had not yet begun, the magistrate judge ordered that Lead Plaintiff return the documents to Defendants and “destroy any copies in its possession.” Dkt. No. 97 at 10.


         Under Federal Rule of Civil Procedure 72(a), aggrieved parties may file objections to the rulings of a magistrate judge in non-dispositive matters within fourteen days. Fed.R.Civ.P. 72(a). In reviewing a magistrate judge's order, the district judge “must consider timely objections and modify or set aside any part of the order that is clearly erroneous or is contrary to law.” Fed.R.Civ.P. 72(a); 28 U.S.C. § 636(b)(1)(A); see also U.S. v. Raddatz, 447 U.S. 667, 673 (1980); Osband v. Woodford, 290 F.3d 1036, 1041 (9th Cir. 2002).

         Under the “clearly erroneous standard, ” a court should overturn a magistrate judge's ruling when it is “left with the definite and firm conviction that a mistake has been committed.” See Concrete Pipe & Prods. of Cal., Inc. v. Constrs. Laborers Pension Trust, 508 U.S. 602, 622 (1993). A magistrate judge's legal conclusions as to non-dispositive matters are reviewable for clear error. Grimes v. City & Cnty. of San Francisco, 951 F.2d 236, 240-41 (9th Cir. 1991) (citing Maisonville v. F2 America, Inc., 902 F.2d 746, 747-48 (9th Cir. 1990)). “An order is contrary to law when it fails to apply or misapplies relevant statutes, case law, or rules of procedure.” DeFazio v. Wallis, 459 F.Supp.2d 159, 163 (E.D.N.Y. 2006) (internal citations omitted).

         Nondispositive decisions issued by magistrate judges under 28 U.S.C. § 636(b)(1)(A) are entitled to “great deference by the district court.” U.S. v. Abonce-Barrera, 257 F.3d 959, 969 (9th Cir. 2002). As such and in making its determination, the “reviewing court may not simply substitute its judgment for that of the deciding court.” Grimes, 951 F.2d at 240-41.


         Lead Plaintiff argues that the Magistrate Judge's March 23, 2017 order should be reversed because it is “contrary to law” and suffers from a number of legal errors. Dkt. No. 100-1.

         Lead Plaintiff argues that the first legal error arises from the order's conclusion that the court lacked authority to enter a pre-discovery protective order. Citing to this Court's opinion in In re Bof I Holding, Inc. Sec. Litig., 318 F.R.D. 129, 135-36 (S.D. Cal. 2016), Lead Plaintiff argues that the magistrate judge erred by failing to ...

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