United States Securities and Exchange Commission v. Mack

Background

The United States Securities and Exchange Commission (SEC) alleges that Jeffrey C. Mack and Lawrence C. Blaney violated federal securities laws by causing Digiliti Money Group, Inc. to enter into undisclosed side agreements with a large customer. According to the allegations described in the order, those agreements allowed the customer to cancel four contracts without payment, causing Digiliti to recognize $1.65 million in revenue improperly. The SEC alleges that Digiliti used financial statements containing the overstated revenue in securities filings and other public materials to raise money.

The order addressed two discovery motions concerning requests for admission. The SEC sought to have Blaney admit the genuineness of documents, including emails he forwarded between his work and personal email accounts, emails within those chains, and attachments. Blaney sought to compel the SEC to change objections and responses to his requests for admission, including requests about alleged Digiliti chief financial officer Bryan Meier.

SEC’s Motion Regarding Document Authentication

Federal Rule of Civil Procedure 36 allows a party to request an admission about the genuineness of a described document. The court concluded that Blaney’s supplemental responses admitted the authenticity of the emails he forwarded and the attachments. The court further held that, where the SEC specifically sought authentication of underlying emails in the same chains, Blaney’s authentication of the forwarded email chains extended to those underlying emails.

The court rejected Blaney’s reliance on the statement that a document speaks for itself. It explained that such a response does not directly admit or deny the genuineness of the described documents or explain why the responding party cannot do so. The court also rejected the position that Blaney could refuse to authenticate emails he did not author, particularly because he was a sender or recipient of most of the emails at issue and had not stated that he could not admit or deny their authenticity.

The court emphasized that its ruling addressed authentication only. It did not decide what the documents ultimately meant or what facts they established; those issues remained for the factfinder if the documents were admitted into evidence.

Blaney’s Motion to Compel

For Request Nos. 3–5, 11–14, 16–24, 26, and 37, the SEC had both objected and denied the requests. At the hearing, the SEC represented that its denials would not change even if the court overruled the objections, including privilege objections. The court accepted those representations and denied Blaney’s motion to compel as to those requests.

For Request Nos. 29–36, Blaney sought admissions about Meier’s duties and actions involving Digiliti’s financial statements and public Securities and Exchange Commission filings. The court found those requests relevant because they related to the same issues as Blaney’s requests concerning his own alleged conduct and could support his effort to place responsibility on Meier. However, the court concluded that the requests were not proper requests for admission under the circumstances. They required the SEC to interpret broad wording and determine how testimony from a nonparty outside the SEC’s control related to disputed issues between the parties. The court also concluded that the SEC had satisfied Rule 36 by stating that, after reasonable inquiry, it lacked enough information to admit or deny the requests.

Disposition

The court ordered that the SEC’s motion to deem admissions admitted was denied in part as moot as to the First and Second Sets of Requests for Admissions and granted to the extent consistent with the document-authentication analysis in Section II.A. The court denied Blaney’s motion to compel further responses. United States Magistrate Judge Elizabeth Cowan Wright signed the order.