Purple Mountain Trust v. Wells Fargo & Company

Background

At the court’s request, the parties combined several discovery disputes into one letter brief. The underlying case includes securities claims under Section 10(b) of the Securities Exchange Act and Securities and Exchange Commission Rule 10b-5 concerning alleged misleading statements about known problems with collateral protection insurance (CPI) and guaranteed auto protection (GAP) practices. This order addressed discovery and privilege issues, not the ultimate merits of those securities claims.

Senate QFR response documents

Wells Fargo and the other defendants withheld documents concerning the preparation of a response to a United States Senate question-for-the-record request, asserting attorney-client privilege and work-product protection. Purple Mountain Trust argued that the defendants had waived those protections by putting the documents’ contents at issue in defending against the securities claims, including by asserting lack of knowledge of CPI and GAP problems.

The court resolved this issue solely on waiver and granted Purple Mountain Trust’s production request in part. It concluded that the defendants had placed the QFR documents into issue to a limited degree because they relied on the alleged ignorance of the lawyers and others who drafted or approved the response. The defendants therefore had to produce all documents withheld on privilege grounds for this issue that mentioned or referred to CPI or GAP. If no such documents existed, a defendant custodian or representative had to submit a sworn declaration stating that fact. The court set May 16, 2022, as the deadline, unless the parties jointly agreed to another date.

Justice Department and state-attorney-general presentations

The defendants represented that they had produced the presentations made to the United States Department of Justice and state attorneys general. Purple Mountain Trust sought the documents prepared for those presentations, despite the defendants’ attorney-client and work-product assertions.

The court denied this request. It found that the defendants had not relied on the presentations in their defense, so the record did not show the kind of “sword and shield” use that could support waiver. The court stated that it could reconsider the issue if the defendants later relied on the presentations as material to the case.

One-page document prepared by David Marks

The disputed document, identified as WF_PM_00470570, was a one-page document containing five lines prepared by bank vice president David Marks. The court determined that the first three lines related directly to legal advice and were protected by attorney-client privilege. The defendants had not waived that protection through their scienter allegations, and they had withdrawn a good-faith defense.

The court concluded that the remaining two lines were not directed toward obtaining legal advice or another potentially privileged matter. It therefore ordered the defendants to produce the document with the first three lines redacted by May 9, 2022.

Sales-practices documents and August 15, 2016 board presentation

The court treated the dispute over documents concerning sales practices and the August 15, 2016 board presentation as a relevance issue rather than a privilege issue. It found the record insufficiently developed for a dispositive order and said it was unclear both whether the documents contained information relevant to CPI and GAP issues and what documents the defendants had already produced.

The court directed the parties to meet and confer by May 11, 2022. If a dispute remained, the parties could present it at the May 12, 2022 hearing on class certification.

Disposition

Judge James Donato granted the request for QFR-related documents in part, denied the request for preparation documents concerning the Justice Department and state-attorney-general presentations, ordered limited production of the Marks document with redactions, and deferred the sales-practices and board-presentation dispute for further discussion and possible presentation at the class-certification hearing.