Securities and Exchange Commission v. Contrarian Press, LLC

Background

This Securities and Exchange Commission enforcement case was before Magistrate Judge Debra Freeman for resolution of a discovery dispute referred by District Judge Vernon S. Broderick. Contrarian Press, LLC and Scott S. Fraser sought to depose an SEC representative designated under Federal Rule of Civil Procedure 30(b)(6). The deposition notice listed nine topics and 34 sub-topics, largely concerning the facts and evidence underlying the SEC’s claims. The SEC requested a protective order barring the deposition under Rule 26(c), arguing that it would be annoying, oppressive, and unduly burdensome and would intrude on attorney work product and attorney-client privilege.

The defendants said the deposition was needed to investigate alleged inconsistencies in the SEC’s discovery responses, learn the factual bases for those responses, and examine the SEC’s record-keeping and document production. The parties had met and conferred but did not resolve the dispute. Judge Freeman also held a telephone conference with counsel on June 16, 2020.

Rulings on the Deposition and Written Discovery

The court found that decisions within the Southern District of New York generally supported the SEC’s position that the proposed deposition was improper. Those decisions treated a deposition seeking the SEC’s investigative theories, the significance of documents, witness credibility assessments, and intended use of evidence as similar to attempting to depose the opposing party’s attorney or seeking protected work product. The court also found that the defendants had not persuasively shown that the factual information they wanted could not be obtained through less intrusive methods.

The court therefore granted the SEC’s request for a protective order barring the noticed Rule 30(b)(6) deposition. Instead, it ordered the SEC to supplement its written discovery. For requests for admission that the SEC had denied in part, the SEC had to identify the portions it admitted. The SEC also had to review and, if necessary, revise its responses to contention interrogatories so that documents and witnesses supporting particular factual contentions were identified specifically. In addition, the SEC had to supplement its required initial disclosures if it had not already done so.

Search of the Investigation B File

The court separately addressed the defendants’ claim that a deposition was needed to explore the SEC’s record-keeping and document production. Before filing the complaint, the SEC had conducted two investigations, referred to in the order as Investigation A and Investigation B. Investigation A led to this litigation, and some documents from the Investigation B file had been transferred to the Investigation A file. The SEC acknowledged that, when responding to discovery requests, it had searched only the Investigation A file.

The court did not find that the SEC deliberately withheld responsive documents. It nevertheless found that the SEC had not conducted a reasonable search of all documents in its possession, custody, or control that might respond to the defendants’ requests because it had not separately searched the existing Investigation B file. The court directed the SEC to conduct a reasonable search of that file. If the search raised concerns about proportionality, relevance, or burden, counsel were directed to discuss those concerns in good faith.

Disposition

Judge Freeman granted the protective order concerning the Rule 30(b)(6) deposition, required the SEC to supplement other discovery responses, and directed the SEC to search the Investigation B file. Based on those rulings, the Clerk of Court was directed to close the motion filed at Docket 116. The opinion states that Nathan Yeung was no longer a party because of a final consent judgment dated August 28, 2019.