Securities and Exchange Commission v. Ripple Labs Inc.

Background

The defendants moved for an order requiring the Securities and Exchange Commission (SEC) to withdraw foreign Requests for Assistance, stop further discovery through those requests, and produce all previously served requests and related communications with foreign regulators. The SEC used a multilateral memorandum of understanding and bilateral agreements that promote information sharing among foreign securities regulators. Under those agreements, a foreign regulator may decline a request or agree to facilitate the production of documents from a foreign entity within that regulator’s jurisdiction.

The SEC represented that this cooperation was important to its mission of protecting investors and maintaining fair and transparent global markets. The parties disputed whether a foreign business’s compliance with a request was compulsory, but the court stated that this dispute did not affect the motion’s outcome.

The Parties’ Arguments

The defendants argued that the requests were improper because they fell outside the Federal Rules of Civil Procedure, letters rogatory, and the Hague Convention procedures for obtaining foreign discovery. They also argued that the requests operated outside the supervision of the court and foreign regulators, that the relevant agreements did not require notice to interested parties, and that the SEC should be required to use the Hague Convention process like other litigants. The defendants also contended that the requests could intimidate or harass foreign business partners.

The court found no evidence that the SEC had issued the requests in bad faith and therefore addressed only the defendants’ argument about the discovery process.

Court’s Analysis

The court concluded that the SEC’s use of the requests was permissible and did not improperly interfere with the court’s authority. No party argued that the requests exceeded the scope of an applicable bilateral agreement. The court relied on decisions rejecting the argument that the Hague Convention is the exclusive or preferred method for obtaining foreign discovery. It also cited a prior decision concluding that the SEC may issue such requests to gather foreign discovery during pending civil litigation.

The court further concluded that the one-sided nature of the discovery tool did not make it unlawful. The court noted that litigation can involve unequal resources and that Federal Rule of Civil Procedure 1 seeks the just, speedy, and inexpensive resolution of cases. The court stated that the SEC’s memorandum-of-understanding process could obtain information more quickly and inexpensively than other methods.

The court declined to prevent the SEC from acting within the authority of the information-sharing agreements. It stated, however, that the court could later prevent the SEC from introducing discovery obtained through the requests if the material had not been disclosed previously or if the defendants established another basis for excluding it.

Disposition

Judge Sarah Netburn denied the defendants’ motion. The SEC was ordered to produce all documents obtained in response to the requests. It was also ordered to produce copies of all previously served requests within 14 days and copies of any later requests within 14 days after service. If the SEC claimed privilege, it was required to provide a privilege log at the same time. The clerk was directed to deny the motion listed at ECF No. 121.