Wells Fargo Securities, LLC v. LJM Investment Fund, L.P.

Background

LJM Investment Fund, L.P., LJM Partners, Ltd., LJM Master Trading Fund, L.P., LJM Offshore Fund, Ltd., and PFC-LJM Preservations and Growth Fund, L.P. asked the court to require Wells Fargo Securities, LLC to remove redactions from documents it had produced in discovery. The documents concerned the risk levels of customers during a high-volatility event on February 5–6, 2018.

LJM has a breach-of-contract counterclaim alleging that Wells Fargo recklessly coerced LJM into completely liquidating its portfolios in a commercially unreasonable way, violating the parties’ Futures and Cleared Swaps Agreement. Whether Wells Fargo acted in a commercially reasonable manner is a material issue in that counterclaim. The motion concerned two example documents: a report concerning day-over-day changes in customer business-as-usual stress tests and a firm risk report. Wells Fargo had redacted the names and financial calculations of customers other than LJM.

Parties’ Positions

LJM argued that the reports would show how Wells Fargo treated other customers during the same event and would help LJM prepare for depositions. LJM also argued that the information was relevant, that the confidentiality order protected it, and that removing the redactions would impose little burden.

Wells Fargo argued that the other customers’ names and financial information were confidential and not relevant to whether Wells Fargo breached LJM’s agreement. Wells Fargo maintained that the relevant comparison was between its treatment of LJM and what LJM’s contract allowed, required, or prohibited. It also argued that disclosure would risk exposing commercially sensitive information about other customers.

Legal Standard

Federal Rule of Civil Procedure 26(b)(1) generally permits discovery of nonprivileged information relevant to a claim or defense and proportional to the needs of the case. Courts have broad discretion to limit discovery and may allow redactions when the producing party shows good cause—meaning a specific, fact-based need to protect a party or person from harm such as undue burden or disclosure of commercially sensitive, non-relevant information.

For LJM’s breach-of-contract counterclaim, the court stated that LJM must establish an agreement, its own adequate performance, Wells Fargo’s breach, and damages. The court also described commercial reasonableness as an objective standard of conduct.

Court’s Analysis

The court treated the limited issue as whether Wells Fargo had shown good cause for the redactions, noting that Wells Fargo did not argue that the produced Risk Documents were irrelevant. After reviewing the unredacted sample reports, the court found good cause to keep the names of Wells Fargo’s other customers redacted. LJM had not shown that those names were relevant to whether Wells Fargo’s treatment of LJM was commercially reasonable, and the court’s own research found no authority establishing that relevance.

The court reached a different conclusion about the financial data. It found that, without the associated customer names, the lines of financial data did not reveal commercially sensitive information about any individual customer. The court also noted that Wells Fargo had agreed that disclosure of the financial data would be less problematic. Because the names could remain redacted, the parties could use anonymous labels such as “Customer A” and “Customer B” when discussing the data at depositions.

Disposition

The court granted in part and denied in part LJM’s motion to compel. Wells Fargo was permitted to keep the names of its other customers redacted, but it was ordered to remove the redactions from the financial data in the Risk Documents and reproduce those documents by March 16, 2022.