Opinion
No. C 06-04435 CRB.
June 11, 2007
ORDER DENYING MOTION TO QUASH SUBPOENAS
The SEC has issued subpoenas duces tecum to Merrill Lynch and Deutsche Bank, seeking information about accounts owned by Defendant Gregory Reyes. Reyes has moved to quash these two subpoenas on the ground that they are an unwarranted intrusion on his financial privacy. Reyes does not dispute that much of the information sought by the SEC is relevant, but he argues that all information relating to his transactions in Brocade has already been disclosed to the SEC (albeit in the form of redacted materials) and that the SEC's interest in additional, non-Brocade information is outweighed by his privacy interest in his financial history.
Contrary to the SEC's suggestion, the Court concludes that Reyes has standing to challenge the two subpoenas, although they are not directed to him. See United States v. Miller, 425 U.S. 435, 436-37 (1976) (considering a criminal defendant's motion to suppress evidence obtained through the service of a subpoena duces tecum on two banks); see also In re Grand Jury Proceedings, 867 F.2d 562, 563 (9th Cir. 1989) (considering a challenge by a defendant on privacy grounds to a grand jury subpoena served on his psychotherapist), overruled on other grounds by, Jaffee v. Redmond, 518 U.S. 1, 7 (1996) (holding that a patient has a right to privacy in his psychotherapist's files).
Nonetheless, the Court concludes that the materials targeted by the subpoenas duces tecum are within the broad bounds of discovery set forth under Rule 26, and that the SEC's interest in them is not outweighed by legitimate concerns for Reyes' privacy. First, as Reyes himself concedes, the materials identified by the subpoenas are relevant to this litigation. Indeed, the thrust of the subpoenas is to obtain information regarding Reyes' own transactions in Brocade. Although Reyes has propounded some discovery of these materials, the SEC notes that such discovery consists of highly redacted information, and the agency justifiably argues that it should not be limited in its discovery requests to the materials as circumscribed by its adversary. Second, there is some indication in the materials already gathered by the SEC that Reyes may interpose as a defense to the timing of his stock options that he was able to "time" the market with great skill. Significantly, the papers indicate that Reyes has suggested his fortuitous timing is not limited to the context of Brocade, but may extend to the market more generally. See Decl. of Robert Leach (Docket No. 317), Ex. 40, at 10 (suggesting the timing of the Brocade grants might be due to Reyes' reading of "news events, competitive events, announcements, and in the wake of stock market implosions," also including Reyes' experience in "trad[ing] options before coming to Brocade"). Such a suggestion justifies further investigation by the SEC, including the examination of the financial records targeted by the subpoenas.
Because the subpoenas duces tecum are "reasonably calculated to lead to the discovery of information," Fed.R.Civ.P. 26(b)(1), and because Reyes' admittedly legitimate privacy interests do not outweigh the SEC's interest in obtaining evidence to refute contentions that Reyes himself has raised, the motion to quash the subpoenas is hereby DENIED.