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United States District Court, Southern District of New York

April 2, 2003


The opinion of the court was delivered by: Constance Baker Motley, United States District Judge


The court is in receipt of two letter briefs from parties in this action. The first, from defendant Keefe, Bruyette & Woods, Inc. ("Keefe"), requests an informal discovery conference to address five different disputes over the production of documents and the taking of depositions; the letter explains the grounds for their position in each of the five disputes. The second, from plaintiffs, opposes the request for a conference and explains their position in each of the disputes.*fn1

The court, having reviewed the letter briefs and examined the case law cited by each party, has concluded that it can resolve the disputes on the papers submitted. Accordingly, no conference is necessary.

1. Summary Financial Information Concerning Plaintiffs

"Defendants seek limited, summary financial information probative of the issue of whether each of the plaintiffs has the financial wherewithal to repay any costs or expenses advanced by plaintiffs' counsel in the event this lawsuit does not result in a recovery for the class." Keefe at 1. In support of this request, Keefe cites Auscape Int'l v. Nat'l Geographic Soc'y, 2002 WL 31250727 at *3 (S.D.N.Y. Oct. 8, 2002) for the proposition that defendants are entitled to "limited discovery regarding plaintiffs' ability to bear litigation costs." Keefe at 2. While that is an accurate characterization of the holding, the limited discovery granted by the court was an order directing plaintiffs to answer deposition questions on their ability to bear litigation costs. Auscape Int'l, 2002 WL 31250727 at *3. Accordingly, plaintiffs are hereby ordered to answer those questions should they be deposed on them. Those questions, however, must be limited to plaintiffs' ability to pay only their pro rata share of costs. See Wilner v. OSI Collection Services, Inc., 201 F.R.D. 321, 326. Plaintiffs need not produce documents relating to this issue as long as they are forthcoming at their depositions.

2. Counsel Engagement Letter/Fee Arrangements with Plaintiffs

In its First Request for Production of Documents to Lead Plaintiffs, defendant Life Financial Corporation ("LFC") asked for "[a]ny contract, agreement, arrangement, understanding or communication, whether oral or written, between [plaintiffs] and Lead Counsel or other counsel, or any other person, firm or entity that relates, in any way, to this action." Keefe, Ex. 2 ("LFC Request for Production"), ¶ 14. This request is clearly overbroad and intrudes upon matters protected by the attorney client privilege. While it is true that fee arrangements per se are not privileged, see Vingelli v. United States (Drug Enforcement Agency), 992 F.2d 449, 452 (2d Cir. 1993), the court is concerned that the retainer agreements may contain communications that are privileged. Accordingly, following Judge Chin's lead in Sokol v. Coombe, 1995 WL 301349 (S.D.N.Y. May 16, 1995), the court orders plaintiffs to produce their retainer agreements for the court's in camera review.

3. Limited Portions of Tax Returns Relating to Investment at Issue

"Defendants seek only those few lines from plaintiffs' tax returns that bear on their sales of [LFC] securities." Keefe at 2. The court agrees with plaintiffs that unless defendants can provide a good faith basis for believing the information provided in plaintiffs' "limited production," Keefe at 3, is not sufficient to identify all of their respective purchases, sales, and present holdings of Life Financial securities," Plaintiffs at 2, they are not entitled to plaintiffs' tax returns, even in redacted form. See Lemanik, S.A. v. McKinley Allsopp, Inc., 125 F.R.D. 602, 609 (S.D.N.Y 1989) ("Although tax returns are not privileged, their disclosure in civil actions requires a balancing of the policy of liberal discovery against the policy of maintaining the confidentiality of tax returns" (citations and internal quotation marks omitted)).

4. Documents Reflecting Purchases of Other Securities

"Defendants requested documents regarding "any investments of any kind by you during the period from five years before the first day of the putative class period to the present," Keefe at 3, which request was subsequently narrowed to "trades in companies that are in a similar business. . . ." Id. If defendants had knowledge of the "relevant accounting issues," submits Keefe, "this would subject them to a unique defense under Section 11 that would then become a focus of the litigation." Id. (citing 15 U.S.C. § 77k(a)). Judge Sweet denied a virtually identical request for production in Weiss v. Blech, 1997 WL 458678 (S.D.N.Y. Aug. 11, 1997), holding that "inasmuch as reliance is not an element of a Section 11 or Section 12(2) claim, a plaintiffs "sophistication' regarding securities and investment practices is irrelevant" Id. at *3 (citations omitted). While information related to plaintiffs' trading history with respect to the defendant company and its underwriter is relevant, the court will not order plaintiffs to produce documents relating to other trades in similar companies since their "sophistication in general says nothing about [their] actual knowledge about" LFC or Keefe. Id. at 4.

5. Depositions of Lead Plaintiffs William Brisben and David Buse

With respect to Mr. Brisben, Keefe objects to his request either to be deposed after May 1, 2003 or in Cincinnati, Ohio (his home state). Keefe writes that his objection to appearing in New York for his deposition earlier violates the "April 21, 2003 cut-off period agreed to by the parties and ordered by the court." Keefe at 3. The Order in question, however, signed by this court on March 10, 2003, states that "parties will attempt to complete the depositions by April 21. . . ." Id. at 2 (emphasis added). A delay of two weeks to allow Mr. Brisben to run his real-estate business should not be too burdensome for the parties and does not in fact violate this court's Order. To avoid further disputes on this issue, the court hereby orders Mr. Brisben to appear in New York or Los Angeles for his deposition by May 9, 2003.

With respect to Mr. Buse, defendants state that plaintiffs' counsel has represented that he is "no longer available to serve as lead plaintiff." Keefe at 4. Plaintiffs counsel, however, states that we have simply been unable to contact [Mr. Buse], despite repeated attempts," and make no mention of his desire to withdraw as a lead plaintiff. Plaintiffs at 3. At this point, then, the court sees no need to address the issue of his withdrawal and simply orders that he also appear for his deposition in New York or Los Angeles for his deposition by May 9, 2003.


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