Opinion
MDL 1446, Consolidated Civil Action No. H-01-3624 (Consolidated), Civil Action No. H-02-4788 (Coordinated).
August 2, 2005
Sidney S. Liebesman, Jay W. Eisenhofer (DE Bar No. 2864), Attorney in Charge Lauren E. Wagner, GRANT EISENHOFER P.A., Wilmington, DE, Attorneys for the Ohio Retirement Systems.
Seeking to turn the discovery process into a weapon to punish Plaintiffs for bringing legitimate claims, and without any regard for wasting the Court's or the parties' resources, Defendants Citigroup Inc., Credit Suisse First Boston LLC (f/k/a Credit Suisse First Boston Corp.), JP Morgan Chase Co., Lehman Brothers Holdings Inc., and Merrill Lynch Co., Inc. (collectively, the "Bank Defendants" or "Defendants") filed a motion to compel Plaintiffs, Public Employees' Retirement System of Ohio ("PERS"), State Teachers' Retirement System of Ohio ("STRS"), School Employees' Retirement System of Ohio ("SERS"), and Ohio State Highway Patrol Retirement System ("HPRS") (collectively, the "Ohio Retirement Systems" or "Plaintiffs") to supplement their document production. However, the Bank Defendants' Motion seeks to compel the production of many documents that have already been produced and which are in the Bank Defendants' possession. They also seek — in violation of clear and consistent authority — to compel deposition dates for more than twenty witnesses — many of whom the Bank Defendants have been told have no relevant knowledge — to occur away from the witnesses' principal place of business.
Citations in the form "Def. Br. at ____" refer to the Bank Defendants' Motion to Compel Plaintiffs to Provide a Supplemental Production of Documents, to Comply with the Deposition Protocol Order Regarding the Provisions of Deposition Dates for Witnesses and Request for Expedited Consideration (filed July 19, 2005) (the "Bank Defendants' Motion").
STATEMENT OF FACTS
After public disclosure of the massive fraud at Enron — which could not have occurred without the Bank Defendants' material participation — the Ohio Retirement Systems filed a Complaint against the Bank Defendants and others in Ohio State court on September 4, 2002. Over the objections of the Ohio Retirement Systems, defendants removed the action to the United States District Court for the Southern District of Ohio, and the Judicial Panel on Multidistrict Litigation transferred the action to this Court on December 6, 2002. The Ohio Retirement System's action was coordinated with the Newby action on January 7, 2003, for pre-trial and discovery proceedings. Plaintiffs thus were compelled to conduct all of their discovery, including appearing for depositions, in concert with the massive Newby consolidated litigation.By Order dated March 11, 2004, the Court entered an Order establishing the Deposition Protocol Order ("DPO") to govern depositions of fact witnesses in all coordinated and consolidated Enron cases, including the Ohio Retirement Systems' action. (DPO at Part I). Depositions for all cases were to begin on June 2, 2004 and were to be concluded 18 months later on Nov. 30, 2005. (DPO at Part III). After Plaintiffs responded in January 2005 to extensive written Document Requests and Interrogatories propounded by the Bank Defendants, the Bank Defendants nominated 8 witnesses, including 6 Board members, from the Ohio Retirement Systems for 8 separate 7-9 hour depositions in May and June 2005. See Exhibit A to the Declaration of Sidney S. Liebesman filed in Support of The Ohio Retirement Systems' Memorandum Of Law In Opposition To The Bank Defendants' Motion To Compel Plaintiffs To Provide A Supplemental Production Of Documents, To Comply With The Deposition Protocol Order Regarding The Provision Of Deposition Dates For Witnesses ("Liebesman Decl.") (Excerpt from Bank Defendants' Cycle 11 nominations). Shortly thereafter, Defendants nominated 20 additional Ohio Retirement System representatives and external managers for Cycle 13 and 14 depositions. The Defendants have insisted that all of the Cycle 11 and 13 depositions proceed during certain weeks in July and August 2005 in New York City. The Bank Defendants have refused to schedule any depositions for the Ohio Retirement Systems in Columbus, Ohio, where their principal place of business is located, although they have taken other plaintiff depositions outside of New York.
Although the Defendants' subpoenas to SERS's five external managers have scheduled their depositions in the cities where the managers are located, the Bank Defendants are unwavering in their demand that all of Plaintiffs' employees be deposed in New York.
As explained more fully below, the Bank Defendants recently deposed employees from Calpers in Sacramento and Palo Alto, California.
The Bank Defendants also seek additional documents from Ohio. However, as explained below, Plaintiffs have already produced to the Bank Defendants the responsive documents in their files including extensive and detailed spreadsheets reflecting each of the Ohio Retirement Systems' purchases and sales of Enron securities, the dates of the transactions, and resulting gains and losses. Inexcusably, the Bank Defendants filed their motion to compel before carefully reviewing the documents in their possession.
ARGUMENT
I. PLAINTIFFS' DOCUMENT PRODUCTION IS SUBSTANTIAL AND RESPONSIVEThe Bank Defendants contend that Plaintiffs have not provided sufficient documents relating to Plaintiffs' Enron-related securities, email correspondence, document retention/destruction polices, investment agreements, analyst reports, annual reports and corporate governance policies, board rules and board minutes. However, contrary to the Bank Defendants' claims, a thorough review of the documents that have been produced shows that all such documents in Plaintiffs' possession have already been produced.
On July 8, 2005, the Bank Defendants issued subpoenas to five of SERS's external managers. The subpoenas make forty separate request for documents relating to SERS's Enron-related transactions. The subpoenas also have scheduled depositions for each manager. In other instances, the Bank Defendants have simply ignored Plaintiffs' attempts to direct them to third parties that may have more documents. For example, many of the Plaintiffs' funds are externally managed; thus, more information regarding Plaintiffs' Enron-related transactions may be found with the funds' external managers. Accordingly, Plaintiffs cannot be compelled to produce documents that may lie exclusively in the external managers' control. See Fed.R.Civ.P. 34(a) (document requests are limited to documents that are within the "possession, custody or control of the party upon whom the request is served. . . ."). The Bank Defendants were expressly informed of Plaintiffs' use of external managers weeks before they filed their motion to compel. Liebesman Decl. Ex. B, 6/21/05 letter from S. Liebesman to J. O'Toole. Additionally, they have had documents identifying the managers for at least four months before they filed their "expedited" motion to compel. Only eleven days before filing their motion to compel did the Bank Defendants finally issue five subpoenas to SERS's external managers.
A. The Bank Defendants' Motion Seeks Documents That Have Already Been Produced
1. The Bank Defendants seek to compel Plaintiffs' trading data even though this information has already been produced
The Bank Defendants seek to compel "securities that form the basis of Plaintiffs' claims, including documents reflecting the types of securities purchased, purchase and sale dates of such securities, and Plaintiffs' gains and losses on such securities. . . ." Def. Br. at 5. Notwithstanding the foregoing statement, the Bank Defendants then proceeded to attach a "stock account card" for HPRS to their motion showing HPRS': (1) trade dates for Enron securities; (2) buy/sell indication; (3) number of shares transacted; (4) a running tally of shares; (5) share price information; (6) the gross funds transacted; (7) commission data; (8) identification of other fees involved in the transaction; (9) net proceeds transacted; (10) average cost; (11) book value; (12) the CUSIP number for the securities; and (13) Enron's ticker symbol. See Ex. J attached to the Affidavit of Morgan F. Kelly. Thus, the Bank Defendants' own motion shows they have received the very documents they seek to compel. Other funds have also produced fully responsive information relating to the securities that are the subject of this litigation. See e.g., Liebesman Decl. Ex. C, ENE PERS 000009-22, ENE PERS 000029-31; Ex. D, ENE SERS 000001-04, 000098-111, 000113-14, 000825-32; Ex. E, ENE STRS 000262-63, ENE STRS 000812-13.
Defendants also seek documents relating to Plaintiffs' decision "not to invest in Enron securities." Def. Br. at 5-6. This request should be denied. Setting aside the inherent vagueness in this request, the claims in this case are based upon the injuries sustained by the Plaintiffs when purchasing Enron's fraudulently-inflated securities, which were inflated by the Defendants' conduct. The transactional data produced to the Bank Defendants clearly shows that the Ohio Retirement Systems had significant positions in Enron. These documents also show that the transactions that are the subject of this action did in fact take place. As such, it is nonsensical for the Bank Defendants to harp on unspecified documents that show why non-existent transactions did not occur. See Aries Aluminum Corp. v. King, 194 F.3d 1311 (Table), 1999 WL 801523, at *3 (6th Cir. Sept. 30, 1999) (affirming lower court's ruling on a motion to compel which limited production to documents that dealt with the purchase of stock). Moreover, as a practical matter, is not even clear which documents (if any) could evidence transactions that did not take place.
2. Plaintiffs have produced all responsive non-privileged emails that are accessible
Defendants speculate that Plaintiffs have not provided sufficient emails and then generally aver that certain attachments are missing from emails that have been produced. Def. Br. at 6. However, Plaintiffs have provided hundreds of pages of email communications. See e.g., Liebesman Decl. Ex. F, ENE SERS 000226; ENE SERS 000229-33; ENE STRS 000001; ENE STRS 000007-15; ENE STRS 0000020-41; ENE STRS 0000046-85; ENE STRS 000089-194; ENE STRS 000200-27; ENE STRS 000229-41. Many of these emails included the attachments. See e.g., Liebesman Decl. Ex. G, ENE STRS 000046-63; ENE STRS 000278-87; ENE STRS 000290-99; ENE STRS 000316-19. In fact, the Bank Defendants have not specifically identified a single email in their motion that is alleged to have been produced without an attachment. Nor did they do so prior to filing their motion to compel. See L.R. 7.1(D) (requiring party filing motion to aver that they have conferred with opposing counsel and that counsel cannot agree as to the disposition of the motion). See also Exxon Chem. Patents, Inc. v. The Lubrizol Corp., 131 F.R.D. 668, 675 (S.D. Tex. 1990) (ordering parties to confer prior to filing motion to compel). Rather than seek to resolve this matter without burdening the Court, the Defendants opted to engage in a sloppy review of the documents that were produced, sit idle for months, and then file an "expedited" but baseless motion to compel. Defendants also state that certain individuals who appear to have knowledge of Enron securities appear infrequently as authors of emails. Def. Br. at 6. It is unclear what the Bank Defendants are implying by this conclusory statement. Plaintiffs have produced all responsive non-privileged emails.
3. Plaintiffs have produced document retention and destruction policies
The Bank Defendants boldly claim that Plaintiffs have not "produced any documents showing" Plaintiffs' policies and practices concerning the preservation, maintenance, archiving, filing or destruction of documents. Def. Br. at 6 (emphasis added). Once again the Defendants have revealed their carelessness by seeking to compel documents that are within their possession. Specifically, ENE SERS 000845-82 identifies SERS's document retention policies. Liebesman Decl. Ex. H, ENE SERS 000845-82. Accordingly, the Court should deny Defendants' motion to compel and order them to more thoroughly review the documents within their possession.
4. Plaintiffs have produced all responsive investment management reports within their possession
Defendants next criticize Plaintiffs' production of investment agreements and argue that Plaintiffs failed to produce investment management agreements for certain funds. Def. Br. at 7. In support of their argument the Bank Defendants argue that such agreements may identify "outside investment managers that may have traded Enron securities." Id. However, based on Plaintiffs' production of investment agreements, the Bank Defendants recently subpoenaed five of SERS's external investment managers. More surprising than the Defendants sending subpoenas to five investment managers while simultaneously seeking to compel investment management agreements, is the fact that they have failed to do anything with respect to at least four other managers identified through Plaintiffs' production of investment management agreements. Liebesman Decl. Ex. I, ENE HPRS 000007-17, ENE HPRS 000020-28, ENE HPRS 000029-37, ENE HPRS 000039-63. Plaintiffs recently supplemented their production with an investment agreement for STRS. Liebesman Decl. Ex. J, ENE STRS 002180-89.
5. Plaintiffs have produced all responsive analyst reports within their possession
The Bank Defendants move to compel production of Plaintiffs' analyst reports but once again the Defendants have failed to carefully review Plaintiffs' production. Plaintiffs have produced all the responsive reports within their possession from the relevant time period. See e.g., Liebesman Decl. Ex. K, ENE STRS 000016-19; ENE STRS 000042-45; ENE STRS 000323-89, ENE PERS 000048-51, 000058-59, 000093-116, 000143-49.
In a letter attached as an exhibit to their Motion to Compel, the Bank Defendants claim that Plaintiffs failed to produce any documents responsive to Document Request No. 57, which sought organizational charts. See Liebesman Decl. Ex. L, 5/31/05 letter from M. Kelly to L. Wagner. However, Plaintiffs' annual reports, which were received by the Bank Defendants between March 30, 2005 and May 20, 2005, contain the organizational charts complained of in Defendants' May 31st letter. See e.g., Liebesman Decl. Ex. M, SERS's organizational charts from annual reports, ENE SERS 000030, 000281, 000474 and 000566.
6. Plaintiffs have produced all responsive non-privileged annual reports, corporate governance policies, board rules and board minutes that are in their possession
Finally, Defendants seek to compel production of annual reports, corporate governance policies, board rules and board minutes. Def. Br. at 7. Plaintiffs have produced annual reports for each plaintiff mooting the Defendants' motion to compel on this issues. Liebesman Decl. Ex. N, ENE SERS 000276-641; Liebesman Decl. Ex. O, ENE HPRS 000064-457; Liebesman Decl. Ex. P, ENE STRS 001838-2179; Liebesman Decl. Ex. Q, ENE PERS 000286-781. Plaintiffs' document production also includes the production of Board minutes ( see e.g., Liebesman Decl. Ex. R, ENE SERS 00001080); memoranda to the Board (Liebesman Decl. Ex. S, ENE SERS 0000265-67; Liebesman Decl. Ex. T, ENE STRS 000590, and Board presentations Liebesman Decl. Ex. U, ENE STRS 0001061-62.
As is the case with all the documents the Defendants seek to compel, they have filed their motion without reviewing the documents already produced to them. Plaintiffs cannot produce documents they do not have.
II. THE BANK DEFENDANTS SHOULD NOT BE PERMITTED TO USE THE DPO TO HARASS THE PLAINTIFFS
A. Depositions Of Corporate Employees Are Presumed To Take Place At The Corporation's Principal Place of Business
It is well-settled law that federal courts presume that depositions of corporate employees should take place at the corporation's principal place of business. See Salter v. UpJohn Co., 593 F.2d 649, 651 (5th Cir. 1979) (it "is well settled that `[t]he deposition of a corporation by its agents and officers should ordinarily be taken at its principal place of business.'") (citation omitted); Tailift USA, Inc. v. Tailift Co., Ltd., No. 03-CV-0196-M, 2004 WL 722244, at *1 (N.D. Tex. Mar. 26, 2004) ("the deposition of a corporation by its agents and officers should ordinarily be taken at its principal place of business. . . .") (citations omitted). Moreover, "[w]hen a corporation objects to a deposition being taken at a place other than its principal place of business, `the objection should be sustained unless there are unusual circumstances which justify such an inconvenience to the corporation.'" Chris-Craft Indus. Products, Inc. v. Kuraray Co., Ltd., 184 F.R.D. 605, 607 (N.D. Ill. 1999).
Courts will often allow a plaintiff to be deposed in the forum where they have chosen to litigate by filing their case. See Hartman Eng'g, Inc. v. Metropolitan Life Ins. Co., No. 01-2570, 2002 WL 1000978, at *6 (E.D. La. May 13, 2002) ("if the party deposed is a plaintiff or its agent, deposition is generally appropriate at the litigation forum.") (citations omitted). Here, that forum is also Ohio.
The party seeking to depose corporate employees in locations other than the corporation's principal place of business has a heavy burden to show why a deposition in a foreign location is necessary. See Tailift, 2004 WL 722244, at *2 ("the burden to show sufficient circumstances to overcome the presumption that . . . [the] corporate representative should be deposed at its principal place of business" is on the party seeking to depose corporate representatives in locations other than the corporation's principal place of business). Here, the Ohio Retirement Systems filed this case in Ohio and they maintain their principal places of business in Ohio. Thus, Ohio is presumed to be the appropriate location for deposing the Ohio Retirement Systems' agents and employees.
In response, the Bank Defendants' point to the DPO and claim that the DPO mandates that all depositions must be held in New York, Houston or Chicago. But the DPO's provisions were intended to be flexible and allow for reasonable divergence. For example, as the Court stated at the January 22, 2004, hearing discussing the DPO:
I'm very concerned about people who were, if you will, you know, left out of this magic committee. I did tell you all to go off and do this, and you all did a great job and you did form a committee and that's the kind of thing I want to see, but obviously some people were not in the loop and that's caused some distress and I can understand that completely.
I do think that having read this protocol, it does give flexibility to allow me to step in and say Ms. Addison is being given a raw deal here and you all need to take a look at this and she needs to have some time or whatever it is that she feels that she's not being given.
Liebesman Decl. Ex. V, 1/22/04 Hr'g Tr. at 71. Additionally, as stated by a drafter of the DPO in open Court, "we recognize, with new law firms coming in, if they stay, and with other defendants or plaintiffs with some specific needs, we'll sit down and talk." See id. at 13 (comments from G. Paul Howes).
The Ohio Retirement Systems were not on the "magic committee" negotiating the DPO and never contemplated that the proposed DPO required them, or other Category 2 Private-Action Plaintiffs, to appear for depositions in New York. In fact this issue was not raised when the DPO was negotiated, and Plaintiffs never would have agreed to any such proposal. Moreover, the Bank Defendants have noticed and taken several plaintiffs' depositions in locations other than those specified in the DPO in other cases. For example, the Bank Defendants admittedly have deposed Calpers' witnesses in California. Def. Br. at 8 n. 4. Contrary to their representations to the Court, two of the Calpers' witnesses were deposed at Calpers' headquarters in Sacramento, California and not in remote cities in California. Liebesman Decl. Ex. W, Notice of Depositions. Other depositions were noticed for Palo Alto, California. Id.
The only reason that the Calpers depositions purportedly have been expensive or burdensome is because the Bank Defendants' counsel have refused to hold additional depositions at Calpers headquarters in Sacramento (and avoid paying for leased deposition facilities) and instead have insisted that the depositions go forward in expensive hotels or in counsel's offices in the California Bay Area. Moreover, only an approximate total of 7 lawyers for all of the Bank Defendants attended the Calpers depositions, and no one participated remotely. Therefore, there is no basis for the Bank Defendants' contention that holding Category 2 depositions of Private Action Plaintiffs like Calpers or the Ohio Retirement Systems requires the staff, resources, amenities or remote access of the deposition center in New York. See Def. Br. at 8.
Accordingly, the Court should deny the Bank Defendants' motion to compel and permit the Ohio Retirement Systems' witnesses to be deposed in Ohio.
B. The Bank Defendants' proposed depositions are unreasonable, burdensome and cumulative
The Bank Defendants have thus far designated 28 individuals from the Ohio Retirement Systems and their external managers to be deposed, including 6 Board members, multiple securities analysts, a deputy executive director of investments, 2 portfolio managers, a finance director, a chief financial officer and a receptionist. Each of these proposed witnesses has been designated to be deposed for approximately 7 to 9 hours. See Liebesman Decl. Ex. A, Excerpts from Defendants Cycle 11, 13 and 14 Nominations.
The Ohio Retirement Systems are large public pension funds with billions of dollars under management and investments in thousands of securities. The Boards of Directors for these institutional investors have no role in any specific investment (including Enron investments). See, e.g., Fidelity Bancorporation v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, No. 90-1866, 1992 WL 46881, at *5 (E.D. Pa. Mar. 5, 1992) (chairman could not be deposed until lower level employees were deposed); Salter, 593 F.2d at 651-52 (parties should first depose lower-level employees with relevant information before deposing a corporation's senior officials); Consol. Rail Corp. v. Primary Indus. Corp., No. 92 Civ. 4927 (PNL), 1993 WL 364471, at *1 (S.D.N.Y. Sept. 10, 1993) ("it may be appropriate to preclude a redundant deposition of a highly-placed executive.") (citations omitted). In response to the Bank Defendants' broad interrogatories requesting the names of anyone with familiarity with the Ohio Retirement Systems' investment policies, Plaintiffs listed the names of the Board members because they had approved general investment policies for the pension funds. See Ex. A to Kelly Decl., Plfs' Resp. to Interrog. No. 14. The Bank Defendants seized upon the names of 6 of the listed directors (several of whom have retired) and relentlessly have demanded dates for their depositions, which they again insist must go forward in New York. Similarly, the Bank Defendants have nominated and insist on deposing Renee Sammons of HPRS for a deposition lasting 9.5 hours, although Plaintiffs have expressly informed Defendants' counsel that Ms. Sammons is a receptionist with some clerical responsibilities to pay bills. Notwithstanding the incredibly remote chance that Ms. Sammons will have any relevant information, the Bank Defendants state that they nominated Ms. Sammons because they believe that she was a "bookkeeper" and refuse to remove her from the list of designees. Almost all of the individuals noticed for deposition have no unique or specialized knowledge of the Ohio Retirement Systems' purchases of Enron securities.
The Bank Defendants also demand that Plaintiffs provide deposition dates for certain former employees such as Jana Harris, a former analyst at PERS, who Plaintiffs have indicated has information regarding PERS's Enron investments. See Liebesman Decl. Ex. X, 6/27/05 letter from J. O'Toole to S. Liebesman. As the Bank Defendants were informed, Ms. Harris is no longer employed by the Ohio Retirement Systems and Plaintiffs are making efforts to locate her. See Liebesman Decl. Ex. B, 6/21/05 letter from S. Liebesman to J. O'Toole. As per the DPO, the location of Ms. Harris's deposition will be set in accordance with Fed.R.Civ.P. 45 if she is unwilling to travel. (DPO, at Part H).
Because of the unlikely probability that the majority of the witnesses nominated for lengthy depositions have any information that is relevant to the Ohio Retirement Systems' Enron investments or the facts at issue in this case, Plaintiffs' respectfully urged Defendants to reconsider their chosen deponents and use Rule 30(b)(6) depositions to try and identify people who might really have relevant information. In addition, Plaintiffs' counsel suggested that they would work cooperatively with Defendants' counsel to identify these persons, and requesting only that such depositions take place in Columbus, Ohio. See Liebesman Decl. Ex. B, 6/21/05 letter from S. Liebesman to J. O'Toole. In response, the Bank Defendants refused any efforts of cooperation and instead nominated four additional Rule 30(b)(6) witnesses, insisted on dates for all nominated witnesses (including the receptionist) and issued subpoenas for Rule 30(b)(6) depositions for five third-party external investment managers for SERS. In total, the Bank Defendants have now designated over twenty depositions, which they insist must go forward between August and September 2005 and must take place in New York. Defendants' insistence on taking these twenty cumulative depositions in New York is intended to harass Plaintiffs and should not be condoned by the Court. See Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 353 n. 17 (1978) ("[D]iscovery should be denied when a party's aim is to . . . harass the person from whom he seeks discovery."). See also Liebesman Decl. Ex. Y, Order entered on Mar. 28, 2003 in In re Enron Corp. Sec., Deriv., ERISA Litig., MDL 1446 (granting protective order and limiting depositions to most knowledgeable employee).
The Bank Defendants have already noticed Rule 30(b)(6) depositions for persons with the most knowledge, inter alia, of:
• the Ohio Retirement Systems' Enron investments and resulting damages;
• the Ohio Retirement Systems' internal and external investment managers responsible for Enron investments and related investment strategies;
• the Ohio Retirement Systems' investment strategies, procedures, consultants and analysts responsible for investments in Enron;
• the authenticity of documents relating to any investments for which the Ohio Retirement Systems seek recovery in this action.See Liebesman Decl. Ex. Y and attachments to Rule 30(b)(6) Deposition Notices therein. The Ohio Retirement Systems believe that their proffered Rule 30(b)(6) representatives will provide the relevant information concerning all of their investments in Enron securities.
Although the Bank Defendants have agreed to postpone the nominated Board members' depositions until after the Rule 30(b)(6) depositions are held, they refuse to substantially reduce the number of depositions, or release the nominations of any other witnesses that clearly have no relevant information such as HPRS's receptionist.
CONCLUSION
For the forgoing reasons plaintiff respectfully requests that this Court deny the Bank Defendant's motion to compel.