Free Reply to Response to Motion - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 00-cv-1864-REB-BNB (Consolidated with 00-cv-1908-REB-BNB, 00-cv1910-REB-BNB, 00-cv-1919-REB-BNB, 00-cv-1945-REB-BNB, 00-cv-1954-REB-BNB, 00-cv-1957-REB-BNB, 00-cv-1963-REB-BNB, 00-cv-1996-REB-BNB, 00-cv-2040-REBBNB, 00-cv-2074-REB-BNB, 00-cv-2149-REB-BNB, 00-cv-2243-REB-BNB, and 00-cv2316-REB-BNB) In re ICG COMMUNICATIONS, INC. SECURITIES LITIGATION ______________________________________________________________________ DEFENDANTS' REPLY IN FURTHER SUPPORT OF THEIR MOTION TO COMPEL DISCOVERY PURSUANT TO FED. R. CIV. P. RULE 37(A) ______________________________________________________________________ PRELIMINARY STATEMENT Plaintiffs' Opposition to this motion simply confirms that it should be granted. To attempt to avoid their discovery obligation, Plaintiffs misstate Defendants' positions and then seek to rebut these straw-man arguments: Plaintiffs assert that Defendants are demanding wholesale production of investment advisors' files that have nothing to do with Plaintiffs. But all Defendants ask is what the Federal Rules require--that Plaintiffs retrieve for production from their agents documents related to Plaintiffs. Plaintiffs maintain that Defendants are seeking discovery concerning Plaintiffs' trading histories to demonstrate their sophistication, which is supposedly irrelevant. But Defendants seek trading history documents to determine whether Plaintiffs are subject to unique reliance and other defenses because of their trading strategies, not to establish "sophistication." And Plaintiffs' undue burden argument is deficient because Plaintiffs offer only speculation, not competent evidence, to support it. While Plaintiffs assert that their retainer agreements with counsel are irrelevant because they relate solely to Plaintiffs' financial capacity to fund the litigation, Defendants seek this discovery primarily to test whether Plaintiffs have negotiated an engagement agreement that preserves their control over the litigation. Plaintiffs only response that does address Defendants' arguments is meritless. Plaintiffs assert that they should not be ordered to disclose the identities of former ICG

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employees Plaintiffs interviewed in preparing the Consolidated Amended Complaint because those names constitute attorney work product. Even if this were correct (and it is not), Defendants have demonstrated a substantial need for that information to focus on knowledgeable witnesses among the more than 150 that Plaintiffs have identified. In addition, despite a lengthy meet-and-confer process, Plaintiffs chose to wait until after Defendants briefed and filed their motion to compel to make several concessions. Most notably, Plaintiffs' Opposition confirms that there are "no business or familial dealings between Lead Counsel and Lead Plaintiffs that go beyond the scope of representation in various litigations." (Pls. Opp. at 13 n.16.) In view of this belated admission, Defendants withdraw their motion to compel documents in response to Request No. 14. Plaintiffs also now suggest they have no responsive calendars or appointment books, whereas they previously refused to search for such documents. If there are no responsive documents, Defendants will also withdraw their motion to compel in response to Request No. 5. Otherwise, Plaintiffs should be compelled to produce documents in response to this and the other outstanding requests. ARGUMENT I. PLAINTIFFS MUST PRODUCE DOCUMENTS IN THEIR AGENTS' POSSESSION Plaintiffs concede that their investment advisors possess responsive documents, but attempt to avoid their production obligation by asserting that Defendants are demanding Plaintiffs to compel their investment advisors to produce documents completely unrelated to Plaintiffs' investments. (Pls. Opp. at 3 (asserting that Defendants are seeking to compel Plaintiffs to produce their investment advisors' "tax

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returns, internal investment policies, internal e-mails and correspondence, litigation histories, and so on.").) This is not what Defendants seek. Rather, all Defendants ask is what the Federal Rules require--that Plaintiffs retrieve from their investment advisors files related to Plaintiffs and produce responsive documents (again--related to Plaintiffs) from those files.1 Accordingly, Plaintiffs' assertion that they have "no right to obtain" documents unrelated to them, such as "other customers' trading records," is beside the point. Plaintiffs do not and cannot contest that the Federal Rules require them to produce responsive documents related to them from their investment advisors, and they should be compelled to do so. Plaintiffs also take issue with Defendants' decision not to subpoena their investment advisors. (Pls. Opp. at 15.) The short and complete response to this argument is that Plaintiffs have not identified these investment advisors or their documents in Plaintiffs' Rule 26(a) disclosures, even though the Federal Rules plainly require it. 2 Thus, Plaintiffs' discovery deficiencies--and not any harassment motive-- have foiled any subpoena efforts. II. PLAINTIFFS MUST PRODUCE RELEVANT, NON­PRIVILEGED DOCUMENTS A. Plaintiffs' Trading History Is Relevant and Discoverable

Defendants are entitled to discovery concerning Plaintiffs' investments into securities other than ICG stock to determine whether Plaintiffs pursue investing
See Fed. R. Civ. P. Rule 34(a) (allowing request for documents within the "possession, custody or control" of another party); see also Swarthmore Radiation Oncology, Inc. v. Lapes, No. CIV. A. 92-3055, 1993 WL 517734, at *1 (E.D. Pa. Dec. 1, 1993) ("[I]nformation within the hands of [a party's] `agents and others within its control must be supplied.'") (citation omitted) (Mot. Ex. V).
1 2

See Fed. R. Civ. P. Rule 26(a)(1).

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strategies that might subject them to unique defenses.3 Plaintiffs ignore this established principle and instead address an argument Defendants do not make. They contend that Defendants' motion to compel trading records production should be denied because Plaintiffs' "level of sophistication" is irrelevant to class certification. Because Plaintiffs' sophistication is not the discovery target, this argument is beside the point. Nor can the cases that Plaintiffs cite justify their refusal to produce these documents. Far from demonstrating that Defendants' authorities compelling production are "the exception," Plaintiffs' cases either (i) have nothing to do with unique defenses arising from a proposed class representative's investment strategies that function independent of the market or (ii) acknowledge that courts are split on the issue.4 Indeed, Plaintiffs' own authority held that discovery concerning trading in other securities is proper in circumstances like those here. Sussman v. Paradigm Partners, Inc., No. 91 Civ. 2891, 1993 U.S. Dist. LEXIS 13436, at *2 (S.D.N.Y. Sept. 23, 1993). (Pls. Opp. Ex. 13.) Plaintiffs' undue burden plaint is equally meritless. A party asserting such an objection "must show specifically how each discovery request is burdensome or

3

See, e.g., Cohen v. Laiti, 98 F.R.D. 581, 583-84 (E.D.N.Y. 1983); Lewis v. Johnson, 92 F.R.D. 758, 75960 (E.D.N.Y. 1981).
4

See Epstein v. MCA, Inc., 54 F.3d 1422, 1423 (9th Cir. 1995) (discovery unrelated to unique defenses because the complaint alleged only a Rule 14d-10 claim); In re AST Research Sec. Litig., No. CV 941370 (SHX), 1994 U.S. Dist. LEXIS 20850, at *9-*10 (C.D. Cal. Nov. 8, 1994) (trading records discovery dispute unrelated to unique defenses; holding that willful failure to provide the discovery did not itself disqualify proposed class representative) (Pls. Opp. Ex. 11); Burstein v. Applied Extrusion Tech. Inc., 153 F.R.D. 488, 490-91 (D. Mass. 1994) (acknowledging split in cases concerning trading records' discoverability); Steiner v. Ideal Basic Indus., Inc., 127 F.R.D. 192, 193-94 (D. Colo. 1987) (denying trading records discovery because it sought information to establish the public disclosures on which plaintiff relied, which is irrelevant under the "fraud on the market" presumption, not investment strategies that are independent of the market).

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oppressive by submitting affidavits or offering evidence revealing the nature of the burden."5 Plaintiffs here offer no competent evidence concerning their production burden, instead relying exclusively on conclusory assertions that they are large investment vehicles and speculation that their production "likely" would include tens of millions of pages. These meanderings are plainly insufficient, and Plaintiffs should be compelled to produce the documents. B. Plaintiffs Must Produce Their Retainer Agreements

Defendants are entitled to Plaintiffs' retainer agreements because they are relevant to Plaintiffs' ability to maintain and manage the litigation. Plaintiffs have apparently abandoned their objection that retainer agreements are privileged. Instead, Plaintiffs assert that their retainer agreements are irrelevant. But Plaintiffs' own authorities demonstrate that they are wrong. The cases Plaintiffs cite generally involve efforts to discover proposed class representatives' financial information, not retainer agreements.6 Those courts held that the proposed class representative's financial wherewithal is generally irrelevant where the proposed representative's lawyer has agreed to advance litigation costs.7 But Plaintiffs cannot
5

Oleson v. Kmart Corp., 175 F.R.D. 560, 565 (D. Kan. 1997); accord St. Paul Reins. Co., Ltd. v. Commercial Fin. Corp., 198 F.R.D. 508, 511-12 (N.D. Iowa 2000).
6

See, e.g., In re Alcoholic Beverages Litig., 95 F.R.D. 321 (E.D.N.Y. 1982) (denying request for disclosure of financial information); Kamens v. Horizon, 81 F.R.D. 444, 446 (S.D.N.Y. 1979) (denying discovery of plaintiff's financial resources after plaintiff provided deposition testimony that her attorneys were authorized to advance all costs with respect to class notice). Plaintiffs' reliance on Epstein v. Am. Reserve Corp., No. 79 C 4767, No. 80 C 6251, No. 81 C 1475, 1985 U.S. Dist. LEXIS 15842 (N.D. Ill. Sept. 18, 1985) (Mot. Ex. CC), cited by Defendants, is similarly misplaced as discussed further below.
7

See, e.g., In re Alcoholic Beverages Litig., 95 F.R.D. at 321; Kames, 81 F.R.D. at 446; cf. Ditty v. Check Rite, Ltd., 182 F.R.D. 639, 643 (D. Utah 1998) (dismissing challenge to adequacy of proposed representative based on personal resources where court was otherwise satisfied notice costs would be met by counsel).

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deny that the engagement terms they negotiated touch on their adequacy in that they relate to Plaintiffs' ability to supervise counsel, an issue completely independent from their financial condition.8 Insofar as retainer agreements are concerned, Sanderson v. Winner, 507 F.2d 477 (10th Cir. 1975), "did not squarely hold that a plaintiff seeking to maintain a class action would not be required to disclose fee arrangements. . . . The court instead found the issue irrelevant in that particular case, as the plaintiff's finances and ability to maintain and manage the class were not at issue."9 Kerns v. Spectralink Corp., No. 02D-315, 2003, U.S. Dist. LEXIS 11711, at *8-*9 (D. Col. July 1, 2003) (Pls. Opp. Ex. 4), is also not to the contrary. There, the court concluded only that plaintiffs were not atypical simply because counsel was advancing the cost of litigation, but it did not address whether such discovery was appropriate to determine whether the proposed class representative was adequate and could supervise counsel appropriately. Id. at *8. C. Plaintiffs Must Produce Calendars and Appointment Books Concerning Their Allegations

Plaintiffs assert that there is no dispute with respect to Request No. 5 of Defendants' Second Request for Production of Documents, which seeks "desk

8

See, e.g., Epstein, 1985 U.S. Dist. LEXIS 15842, at *7 (compelling discovery of fee arrangements, although plaintiffs responded to an interrogatory about financial resources by stating counsel agreed to advance all costs of suit, and observing that "[f]ee arrangements are relevant to the ability of named plaintiffs to protect the interest of potential class members and hence are a proper subject for discovery").
9

Porter v. NationsCredit Consumer Disc. Co., CIV. ACTION NO. 03-3768, 2004 U.S. Dist. LEXIS 13641, at *6­*7 (E.D. Pa. July 8, 2004) (emphasis added) (Mot. Ex. Z); see also Sanderson, 507 F.2d at 480; Zapata v. IBP, Inc., C.A. No. 93-2366, 1994 U.S. Dist. LEXIS 16285, at *34-*37 (D. Kan. Nov. 10, 1994) (acknowledging Sanderson allowed for possible exceptions but finding circumstances did not warrant compelling deposition testimony about financial responsibility and ability to pay costs) (Pls. Opp. Ex. 1). Indeed, the Sanderson court expressed no objection to an in camera examination of the fee arrangement if deemed desirable by the district court. 507 F.2d at 480.

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calendars, appointment books, datebooks, diaries, business journals, business notebooks and notes Relating to the Amended Complaint's allegations against Defendants that the Court sustained in its August 24 Order." (Pls. Opp. at 3 n.1.) While Plaintiffs previously represented they have no non-privileged responsive journals, notebooks or notes "in their possession" (Mot. Ex. K at 3), they have consistently refused to search for relevant calendars or appointment books. If Plaintiffs are now representing that there are no documents responsive to the remainder of Request No. 5, Defendants will withdraw their motion to compel with respect to this request. Otherwise, Plaintiffs have offered no opposition to the motion to compel these documents' production and the motion should be granted. D. Plaintiffs Must Identify Witnesses Interviewed During Their Investigation

Plaintiffs accuse Defendants of targeting counsel's investigative files, which Plaintiffs claim are protected attorney work product. (Pls. Opp. at 7.) But in reality, Defendants seek only a list of names.10 While Plaintiffs suggest their position is supported by the "overwhelming majority of law on this issue" (Pls. Opp. at 10),11

Interrogatory No. 2 asks Plaintiffs to "Identify the `over 20 former ICG employees and customers' who were `contact[ed] and interview[ed]' as part of the `investigation' described in paragraphs 2 and 38 of the Amended Complaint." (Mot. Ex. E at 4.) Thus, In re Gupta Corp. Sec. Litig., No. C-94-1517, 1995 U.S. Dist. LEXIS 21847 (N.D. Cal. July 14, 1995) (Pls. Opp. Ex. 9) and Uinta Oil Refining Co. v. Cont'l Oil Co., 226 F. Supp. 495, 505-06 (D. Utah 1964), are inapposite because (among other things) the requests at issue sought not only witness names but also the witness statements' substance, and the defendants did not even attempt to show substantial need.
10 11

Plaintiffs rely heavily on cases in which the courts expressed particular concern with the policy considerations implicated by disclosure of current and former employees acting as informants and the risk of retaliation. See, e.g., In re Ashworth, Inc. Sec. Litig., 213 F.R.D. 385 (S.D. Cal. 2002); In re MTI Tech. Corp. Sec. Litig. II, No. SACV 00-0745 DOC (ANx), 2002 U.S. Dist. LEXIS 13015 (C.D. Cal. June 13, 2002) (Mot. Ex. GG). Plaintiffs do not dispute that no such risk exists here, as Defendants are former ICG employees who no longer have any power to retaliate against any informants.

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numerous courts subscribe to the better-reasoned view that interviewees' identities are not protected.12 Even if the interviewees' identities were work product, Defendants' substantial need for the information vitiates that protection.13 Plaintiffs' Rule 26(a) disclosures, even as amended, identify over 150 current and former ICG employees alone, providing limited or no contact information for many of them. Moreover, the disclosures attribute the same generic subjects of "potential information" to most individuals and offer no description of several other witnesses' knowledge. (Mot. Ex. U at 8­34.) Contrary to Plaintiffs' assertions, Defendants are not in the best position to determine what relevant information, if any, the individuals possess because Beans and Bryan have not worked with most of the witnesses at all (and have not supervised others for approximately five or six years) and do not have ICG's resources at their disposal.14 Requiring Defendants
12

See In re Theragenics Corp. Sec. Litig., 205 F.R.D. 631, 633, 636 (N.D. Ga. 2002) (concluding names and addresses of individuals interviewed, as alleged in complaint, are not protected and compelling disclosure); In re Aetna Inc. Sec. Litig., No. CIV. A. MDL 1219, 1999 WL 354527, at *2 (E.D. Pa. May 26, 1999) (finding that names and addresses of individuals interviewed by plaintiffs' counsel are not protected by attorney work product doctrine and compelling disclosure of witnesses described in complaint and witnesses relied on for allegations in complaint) (Mot. Ex. DD); see also Miller v. Ventro Corp., No. C0101287 SBA (EDL), 2004 WL 868202, at *1­*2 (N.D. Cal. Apr. 21, 1004) (adopting the reasoning of Aetna and Theragenics over MTI and Ashworth and holding a list of 22 confidential witnesses does not constitute work product) (Mot. Ex. HH); Puricelli v. Houston, No. Civ.A. 99-2982, 2000 WL 298922, at *6 (E.D. Pa. Mar. 15, 2000) (compelling disclosure of individuals relied upon to deny each paragraph of complaint) (Mot. Ex. EE); Orgulf Transp. Co. v. Magnolia Marine Transp., No. 97-1411, 1998 U.S. Dist. LEXIS 9732 (E.D. La. June 25, 1998) (compelling response to interrogatory seeking the identities of persons who were interviewed or gave statements, which "does not seek privileged attorney-client communications, work product or trial preparation materials") (Mot. Ex. II); Levit v. Filmways, Inc., No. 80586 CMW, 1984 U.S. Dist. LEXIS 19775, at *15 (D. Del. Feb 3, 1984) (compelling identification of persons interviewed) (Mot. Ex. FF).
13 14

See Fed. R. Civ. P. Rule 26(b)(3).

For these reasons, Plaintiffs' authorities are inapposite. Electronic Data Sys. Corp. v. Steingraber, No. 4:02 CV 225, 2003 U.S. Dist. LEXIS 11816, at *7 (E.D. Tex. June 27, 2003) (59 witnesses; corporation was a defendant) (Pls. Opp. Ex. 7); In re MTI Tech. Corp. Sec. Litig. II, 2002 U.S. Dist. LEXIS 13015 (no effort to establish substantial need); In re Ashworth Sec. Litig., 213 F.R.D. 385 (S.D. Cal. 2002) (company was defendants); United States v. District Council, 90 Civ. 5722 (CSH), 1992 U.S. Dist. LEXIS 12307

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to attempt to determine which of the 150-plus individuals have information about Plaintiffs' allegations would be unnecessarily time consuming, expensive and inefficient. Accordingly, Plaintiffs should be compelled to respond to this interrogatory.15 CONCLUSION While Plaintiffs have apparently finally recognized that they must provide some of the discovery Defendants sought to compel, they are continuing to withhold information critical to the Court's determination whether they are appropriate class representatives. To do so, they have (i) ignored Defendants' arguments and instead responded to straw men that have no role in this motion and (ii) offered meritless assertions that Defendants are trying to invade their privileges. These efforts should be rejected and the motion to compel should be granted. Dated: September 2, 2005 Denver, Colorado O'MELVENY & MYERS LLP Bradley J. Butwin Jonathan Rosenberg William J. Sushon 7 Times Square New York, New York 10036 (212) 326-2000 Respectfully submitted, s/ Peter J. Korneffel Peter J. Korneffel Jr. Brownstein Hyatt & Farber, P.C. 410 17th Street, 22nd Floor Denver, CO 80202-4437 T:(303) 223-1100 F:(303) 223-1111 [email protected] Attorneys for Defendants

(S.D.N.Y. Aug. 14, 1992) (fewer witnesses) (Pls. Opp. Ex. 6). The Ashworth court itself held that Laxalt v. McClatchy, 116 F.R.D. 438 (D. Nev. 1987) and Gupta were "not directed" to the confidential witness issue. Ashworth, 213 F.R.D. at 387 n.5.
15

Nor do Plaintiffs' other Interrogatory Responses or the SAC qualify as a substantial equivalent. The other Interrogatory Responses identify only a handful of individuals, including Plaintiff representatives, with knowledge about the allegations. (Mot. Ex. S.) And while the SAC may identify sources cited in the prior pleading, Plaintiffs nowhere indicate that those are the only witnesses the SAC relied on.

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CERTIFICATE OF SERVICE I hereby certify that on this 2nd day of September, 2005, a true and correct copy of the foregoing Defendants' Reply in Further Support of their Motion to Compel Discovery Pursuant to Fed. R. Civ. P. Rule 37(a) was filed electronically with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses: [email protected] [email protected]

and I hereby certify that I have served the document to the following non CM/ECF participants as indicated below: Via FedEx and facsmilie Daniel L. Berger Mark Lebovitch Eric T. Kanefsky Bernstein Litowitz Berger & Grossmann, LLP 1285 Avenue of the Americas New York, NY 10019 Norman Berman Bryan A. Wood Joseph C. Merschman Berman DeValerio Pease Tobacco Burt & Pucillo One Liberty Square Boston, MA 02109

s/ Peter J. Korneffel Peter J. Korneffel, Jr. Brownstein Hyatt & Farber, P.C. 410 17th Street, 22nd Floor Denver, CO 80202-4437 T:(303) 223-1100 F:(303) 223-1111 [email protected] Attorney for Defendants

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