Averza v. Super Micro Computer, Inc.

Background

This putative securities class action arises from alleged misrepresentations disseminated by Super Micro Computer, Inc. and two of its executives. Crain Walnut Shelling, LP (CWS) and Universal-Investment-Gesellschaft mbH (Universal) were competing to become lead plaintiff. The presiding judge, Edward J. Davila, had declared CWS the presumptive lead plaintiff but found that Universal had raised serious questions about CWS’s fitness for that role.

Judge Davila authorized discovery on three narrow subjects: CWS’s ownership structure and decision-making processes; CWS’s financial condition; and the circumstances of CWS’s purchases of Super Micro stock. Universal then served requests for production and interrogatories on CWS and noticed the deposition of Charles Crain, whom the opinion identifies as CWS’s ultimate owner. The parties asked the court to resolve CWS’s objections to the written discovery and CWS’s proposed limits on the deposition.

Written discovery

The court ordered CWS to provide supplemental productions and responses consistent with its request-by-request rulings by January 31, 2025. The relevant period was the proposed class period, August 10, 2021, through August 26, 2024.

For Request for Production (RFP) 5, the court found that documents concerning legal structure, ownership, organizational structure, and decision-making were relevant to the first discovery topic. But the request was overbroad insofar as it sought documents about entities outside CWS’s ownership chain or about entities’ business and operations. The court ordered CWS to produce documents sufficient to show the legal structure, ownership, organizational structure, and the identities of current or former partners during the relevant period, as well as decision-making processes, for CWS and entities with a direct or indirect ownership interest in CWS.

The court applied the same revised scope to RFP 6 and ordered CWS to produce responsive formation documents for entities within that scope. The court sustained CWS’s objection to RFP 7, finding that documents about the legal structure, ownership, and decision-making process of a revocable trust had, at most, speculative relevance to the third topic. RFP 8 was resolved by reference to the ruling on RFP 7.

For RFP 9, the court found the requested trading documents relevant to the third topic because Mr. Crain had represented that he had sole ownership and decision-making authority for CWS. The court ordered CWS to respond concerning CWS and any other entity or account identified in the request in which Mr. Crain maintained a controlling interest. RFP 10 was narrowed by reference to RFP 9: CWS had to provide documents and communications, if any, showing why the transactions were made, limited to entities within the court’s limitations on RFP 9.

For RFP 12, the court found that financial information about entities other than CWS was, at most, of speculative relevance to the second topic. It ordered CWS to respond with respect to CWS itself. The court sustained CWS’s objection to RFP 15 because it sought information outside the three authorized topics; the opinion states that there were no responsive documents notwithstanding the objection.

The court also narrowed Interrogatory 1. CWS was ordered to identify and describe the legal structure, ownership, organizational structure, decision-making process, current or former partners, board members, and final decision-making authority during the relevant period for CWS and entities with a direct or indirect ownership interest in CWS. The court sustained CWS’s objection to Interrogatory 7 because the requested sources of funds were outside the scope of the three topics. Interrogatory 14 was resolved by reference to RFP 15; the opinion states that there were no responsive documents.

Deposition of Charles Crain

CWS asked the court to convert the deposition into a deposition of CWS through a designated representative under Federal Rule of Civil Procedure 30(b)(6), limit questioning to Topics 1–3, reduce the deposition to two hours, and require the deposition to occur in Los Molinos, California.

The court held that Universal could depose Mr. Crain as a non-party under Rule 30(b)(1), based on the deposition notice identifying Mr. Crain rather than CWS as the deponent and Mr. Crain’s representation that he had sole ownership and decision-making authority for CWS. If Universal instead intended to depose him as CWS’s representative, it could do so under Rule 30(b)(1) but would have to issue a new notice clarifying that he would testify for CWS.

The court held that questioning had to remain within Topics 1–3. Topic 1 could include all entities in CWS’s ownership chain. Topic 2 generally did not include the financial condition of entities other than CWS unless Universal made a non-speculative showing that another entity’s financial condition affected CWS’s ability to continue as a going concern. An entity’s affiliation with CWS or Mr. Crain alone did not establish relevance.

The court declined to shorten the deposition from the seven-hour default under Rule 30(d)(1), finding that CWS had offered only a conclusory assertion that seven hours would be unreasonable. The court also required Mr. Crain to appear for the deposition in the Northern District of California at a location noticed by Universal. It reached that result regardless of whether Mr. Crain was deposed as CWS’s representative or in his individual capacity.

Motions to seal and disposition

CWS requested sealing in connection with the discovery submissions. The court stated that its reasoning did not depend on the information CWS sought to seal and did not expressly discuss that information. It therefore terminated the motions to seal as moot. Documents identified as Docket Nos. 105-3, 105-4, 105-5, and 107-3 remained under seal, and the court preserved CWS’s redactions in the attached chart.

The order was signed by Susan Van Keulen, United States Magistrate Judge, on January 27, 2025.