Ferguson v. Ruane Cuniff & Goldfarb Inc.

Background

Michael L. Ferguson, Myrl C. Jeffcoat, and Deborah Smith participated in the DST Systems, Inc. 401(k) Profit Sharing Plan. They asserted claims under the Employee Retirement Income Security Act (ERISA) against Ruane Cunniff & Goldfarb, Inc. (RCG), DST Systems, Inc., the Plan’s Advisory Committee, and DST’s Compensation Committee. The claims concerned RCG’s management of the Plan’s profit-sharing account, including the alleged investment of substantial Plan assets in Valeant Pharmaceuticals, Inc. stock.

The opinion describes several related proceedings involving Plan participants, arbitration claimants, RCG, and the DST defendants. RCG entered into a June 5, 2020 settlement agreement with the plaintiffs in two related cases and with hundreds of arbitration claimants. The agreement required the settling plaintiffs to sign individual releases and to take steps to dismiss their claims against RCG. RCG represented that 486 settling plaintiffs had signed releases.

The agreement included confidentiality and non-disparagement provisions. It also allowed the settling plaintiffs to continue pursuing their remaining claims against the DST defendants in court or arbitration. The Ferguson plaintiffs requested the settlement agreement and related releases. RCG refused to produce them, stating that disclosure would violate the settlement agreement’s confidentiality clause.

Discovery Dispute

The court treated a joint letter from the Ferguson plaintiffs and RCG as the plaintiffs’ motion to compel discovery. The court ordered RCG to submit the complete settlement agreement for private judicial review and received the agreement, an example release, and a written order from an arbitration panel tentatively concluding that the settlement evidence should be produced to non-settling respondents because double recovery is not allowed in ERISA claims.

Federal Rule of Civil Procedure 26(b) generally permits discovery of nonprivileged information that is relevant to a claim or defense and proportional to the needs of the case. The court explained that Federal Rule of Evidence 408 limits the use of settlement communications and agreements as evidence for certain purposes, but does not make those materials privileged or immune from discovery. A confidentiality provision or filing under seal likewise does not by itself prevent discovery.

The court found the settlement agreement and releases relevant to the proposed class claims in the Ferguson case because they resolved and released claims held by hundreds of potential class members against RCG. If a class were certified, the amounts allocated to settling plaintiffs could be relevant to their potential recoveries against the DST defendants. The documents could also bear on the credibility, bias, interest, or motivation of settling plaintiffs who might testify.

Ruling

Judge Barbara Moses ordered RCG to promptly produce the complete RCG Settlement Agreement, including its exhibits, and every release executed by a settling plaintiff. RCG may designate those documents as confidential under the parties’ existing Confidentiality Agreement and Protective Order. The order did not decide when or under what conditions the documents could be filed publicly, and it stated that production in discovery would not necessarily make them admissible at trial or for another purpose.