Opinion
20-cv-1743
08-22-2022
Miller v. Anderson et al.,
Dear Judge Adams:
Wollmuth Maher & Deutsch LLP (“WMD” or the “Firm”) writes in response to the Court's instruction in its July 29, 2022 order for lead counsel applicants to provide proposals to guide discovery in the above-referenced action (ECF No. 335) (the “Order”). As a preliminary matter we respectfully assure the Court that we routinely manage massive discovery projects in highly complex litigations, many of which involve hundreds of millions (and sometimes billions) of dollars. Attorneys responsible for discovery in this matter will be thoroughly experienced in managing the information flow and discovery disputes that will likely be involved in this case. WMD also has the wherewithal and intention to devote the substantial resources necessary to fully develop the record in this case and make sure that the responsible parties are held to account for their conduct. We have followed this matter from the outset and are familiar with the context in which the dispute arose, the motivations for the illegal conduct, the parties most likely to benefit from the illegal conduct, and the complex web of not-for-profit organizations and lobbyists that was used to effectuate the bribes. We believe testimony of third parties is likely to be very important in this matter. If selected, our Firm will use the available discovery tools with vigor to bring to light what was done and by whom to develop the strongest and most thorough case possible.
Our understanding of the status of discovery in this case is necessarily shaped by publicly available information. Namely, document productions were to be complete by January 17, 2022 (ECF No. 160); the parties have been filing periodic updates with the Court as to the status of discovery for each party (see, e.g., ECF No. 269); in February 2022, the parties began scheduling depositions (id.); and an expert was retained to address corporate governance demands. See Employees Ret. Sys. of St. Louis v. Jones, No. 20-cv-4813 (S.D. Ohio) (ECF No. 170-5). That said, following a February 2022 mediation, we understand that discovery effectively stopped, no discovery disputes were brought to the Court's attention, and no depositions were taken. See, e.g., March 9, 2022 Hr'g Tr. at 33:10-34:7. Additionally, the Court is concerned about:
• incomplete written discovery
• no testimony under oath from any Defendant or other witness
• incomplete privilege logs detailing withheld documentation
• an incomplete forensic examination to identify possible missing communications contained on Defendant Charles Jones' personal electronic devices and;
• an inadequate period to review and analyze the documents that were produced.
ECF No. 331 at 3.
The following discovery proposal in response to the Order is informed by these specific concerns, WMD's experience in litigating complex commercial cases, and developments in other cases related to the underlying conduct in this litigation.
I. Completing Written Discovery Lays the Groundwork for any Discovery Plan.
In a case like this, the Firm typically starts by serving written document requests and interrogatories on all parties to set the course for follow-on discovery, including depositions. To the extent non-parties are known to have relevant material at the outset of the case, the Firm would also promptly serve document subpoenas on those non-parties, particularly given the protracted nature of non-party discovery. The Firm has extensive experience in managing this initial stage of discovery, including handling and reviewing approximately one million documents from fifty different defendants over the lifetime of 200 coordinated actions seeking indemnification from mortgage originators. Lehman Brothers Holdings Inc. v. 1st Advantage Mortgage, LLC et al., Adv. Pro. No. 16-01019 (SCC) (Bankr. S.D.N.Y.). And as co-lead counsel in a class action alleging that certain financial institutions, including Bank of America Corp., Barclays Bank PLC, and Goldman Sachs & Co. LLC, artificially inflated interest rates on securities known as variable-rate demand obligation bonds, the Firm recently negotiated complicated search term protocols, received and reviewed over 3.1 million documents from defendants and third parties, and served multiple sets of interrogatories and requests to admit on defendants. City of Philadelphia, et al. v. Bank of America, et al., No. 19-cv-1608 (S.D.N.Y.). And the Firm is not afraid of motion practice to compel written discovery when needed, as recently it successfully moved to compel responses to twenty interrogatories in a residential mortgage-backed securities (“RMBS”) litigation alleging that an RMBS trustee failed to protect investors by abdicating its duties under agreements governing the RMBS. RMBS Recovery Holdings, I, LLC, et al., v. HSBC Bank USA, N.A., No. 2017-7583 (Va. Cir. Ct., Fairfax Cnty.).
As referenced above and based on the information available to the Firm, the parties appear to have started this process already. WMD would need access to the already-produced discovery material in order to address specific areas where further written discovery would be necessary. That said, the written discovery produced to date apparently already shows that Charles Jones and Michael Dowling “devised and orchestrated FirstEnergy's payments to public officials.” ECF No. 291-1 ¶ 4. While that is encouraging, Defendants Jones and Dowling “have vehemently denied acting improperly”, id. ¶ 6, and it is unlikely that only two of the defendants acting alone implemented such a scheme. Indeed, additional document (and subsequent deposition) discovery would focus on what each of the defendants knew about the bribery scheme and when they knew it. For example, Defendant Strah allegedly signed the checks used to make the bribery payments, Amended Complaint (“Am. Compl.”) (ECF No. 31) ¶ 49, yet was not identified in response to a question about “who paid the bribes in this matter[.]” ECF No. 290 at 9. Similarly, the Amended Complaint lays out in detail how Defendants Jones, Strah, Reffner, Dowling, and Yeboah-Amankwah “sold or otherwise disposed of millions of dollars' worth of FirstEnergy stock” from 2017 through 2020, while the bribes were being paid. Am. Compl. ¶¶ 64-71.
Related to this issue is whether FirstEnergy's oversight committees, including the Audit Committee and Corporate Governance and Corporate Responsibility Committee (and the defendants who sat on those committees), were in a position to stop the bribery scheme. Id. ¶¶ 8791. Each defendants' knowledge of the scheme is particularly important in light of the board's 2017 recommendation for shareholders to vote against a proposal about the disclosure of lobbying policies and payments, id. ¶¶ 101-104, and the alleged receipt by Defendants Jones, Strah, and Pearson of millions of dollars in compensation in 2018. Id. ¶ 118. As a result, the timing of each defendants' knowledge of the scheme is an important area for extensive written discovery, including through the collection and production of emails, text messages, notes or minutes from committee meetings, and responses to interrogatories about these issues.
In addition to this party discovery, further written non-party discovery could also prove informative. For example, to the extent not already served with document subpoenas, FirstEnergy's external consultants or advisors may have information that furthers discovery about what the defendants knew of the bribery scheme and when they learned it. Similarly, while many participants in the bribery scheme will presumably invoke their 5th Amendment rights, it is possible that those who have already pled guilty, such as Jeffrey Longstreth and Juan Cespedes, could provide limited discovery to identify the specific defendants they communicated with.
II. Obtaining Testimony Under Oath to Assess the Harm Caused by Defendants.
We expect that, as written discovery nears completion, deposition discovery would focus on many of the same issues outlined above. In cases like this, the Firm would normally obtain testimony from every witness with knowledge of the facts at issue, including the defendants and any non-parties, and often in expedited fashion if need be. For example, in City of Philadelphia, et al. v. Bank of America, et al., No. 19-cv-1608 (S.D.N.Y.), referenced above, the Firm will have taken approximately 20-30 party, non-party, and corporate witness depositions within three months.
We understand that the deposition phase of discovery has not started here, and so identifying specific deposition witnesses as promptly as possible is important, starting with the defendants. The written discovery received will dictate the sequencing and lines of questioning for these depositions, as well as what non-parties may need to be deposed. But the defendants' testimony in particular is essential to developing the record needed to prove the claims in this action, especially to give both supporting context for and direct responses about the bribery scheme.
III. Predicting Potential Discovery Disputes, Including Privilege Disputes.
While it is impossible to predict every potential dispute, the unique nature of this case means privilege assertions and the invocation of 5th Amendment rights will pervade much of the written and deposition discovery. Indeed, this Court has already anticipated privilege disputes for some of the approximately 12,000-logged documents. March 9, 2022 Hr'g Tr. at 34:2-7. And given the government investigations into the underlying conduct here, we anticipate there will be additional disputes tied to defendants' potential invocation of 5th Amendment rights, as well as privilege assertions related to those rights, such as disputes about FirstEnergy's deferred prosecution agreement and any ongoing government cooperation. See, e.g., Owens v. FirstEnergy Corp., No. 20-cv-3785 (S.D. Ohio) (ECF Nos. 317 & 318). The Firm has ample experience addressing sweeping privilege assertions in large privilege logs, which have started with iterative meet-and-confers to address specific concerns in advance of motion practice. As an example, in another RMBS trustee litigation following extensive negotiation efforts with the defendant, the Firm successfully moved to compel the production of hundreds of documents off a privilege log, along with the defendant's re-review of its privilege assertions to ensure its log complied with the Federal Rules. Commerzbank AG v. Wells Fargo Bank, N.A., No. 15-cv-10033 (S.D.N.Y.) (ECF No. 314 at 3).
IV. Retaining Consultants and Experts to Support the Claims in This Action.
As for a potential discovery dispute that may also overlap with expert discovery, the Firm has experience using outside consultants to locate difficult-to-obtain discovery, such as missing communications from Defendant Jones' personal electronic devices. In Preston Hollow Capital LLC v. Nuveen LLC, No. N19C-10-107 (Del. Super. Ct.), a defamation action in the municipal bond industry where telephone recordings were an important source of discovery, the Firm retained an audio expert to help non-parties search for, identify, and collect audio recordings for review. In our experience, the best way to resolve disputes like this is to facilitate communications directly between the expert and the producing vendor. This collaborative process tends to cut down on the miscommunication associated with such technical discovery and can help streamline any issues for judicial resolution or avoid motion practice altogether.
Turning to expert discovery generally, we understand that this Court initially planned to “revisit the issue of expert discovery at the status conference scheduled in this matter.” ECF No. 160 at 2. In light of the various fact discovery issues that will shape expert discovery in this action, phasing expert discovery in this manner may be appropriate. That said, when expert discovery does take place, we would anticipate retaining an expert to value the impact of the bribery scheme on FirstEnergy in addition to the corporate governance expert who has already been retained. As reflected below, any schedule would need to build in the necessary time for the submission of opening, rebuttal, and reply reports from testifying experts, as well as depositions of these experts.
V. Leaving Sufficient Time to Obtain the Discovery Needed to Reach a Resolution of This Action for FirstEnergy and its Shareholders.
The goal of additional discovery is to understand which defendants were involved in the scheme and their level of involvement, how the bribery scheme began, how widespread it became, and how it was able to continue. This information will help shape the necessary corporate governance reforms needed to prevent something like this from happening at FirstEnergy again, as well as determine the value that needs to be returned to FirstEnergy and its shareholders, and who should be responsible for restoring that value. For example, we understand that the current settlement is funded only by various insurance policies, ECF No. 277 at 2, and carves out compensation-based claims. Id. Discovery aimed at identifying and determining the egregiousness of defendants' conduct is needed to assess whether these two settlement criteria are appropriate, or whether damages should be allocated amongst defendants, and if so, by how much.
The Court in Owens v. FirstEnergy Corp., No. 20-cv-3785 (S.D. Ohio) (ECF No. 318), referenced above, is dealing with many of the same issues as those outlined above and the recently revised schedule in that case is instructive. There, the Court scheduled briefing on a privilege dispute related to FirstEnergy's deferred prosecution agreement to be completed by December 23, 2022, which leaves June 30, 2023 for the end of fact discovery and December 15, 2023 for expert discovery. Id. While the specific dates for discovery here may need to be adjusted given the posture of this case, we believe that an approximately one-year period for fact discovery and approximately six months for expert discovery provide a reasonable starting place for re-setting the discovery deadlines in this action.
WMD appreciates the opportunity to submit this proposal for the Court's consideration and will be available to discuss it further at the Court's convenience.
Respectfully submitted, WOLLMUTH MAHER & DEUTSCH LLP
David H. Wollmuth
R. Scott Thompson
Sean P. McGonigle