Securities and Exchange Commission v. Ripple Labs Inc.

Background

The SEC sued Ripple Labs Inc., Bradley Garlinghouse, and Christian Larsen under Section 5 of the Securities Act of 1933. The SEC alleged that the defendants were engaging in unlawful offers or sales of securities and that Larsen and Garlinghouse aided and abetted Ripple’s violations.

During discovery, the defendants sought SEC documents relevant to their efforts to challenge the SEC’s allegations that Larsen and Garlinghouse acted recklessly in believing that XRP was not a security and that Ripple lacked fair notice that XRP was a security. The SEC objected to producing some documents, invoking the deliberative process privilege. That privilege generally protects certain internal government discussions used to develop agency policies.

The court previously reviewed sample documents privately and ordered production of some parts of one category and all of another category, identified as Entry 9 of Appendix A. The SEC then sought reconsideration of the ruling concerning Entry 9 or, alternatively, clarification about whether the ruling required production of all emails concerning and drafts of Hinman’s June 14, 2018 speech.

Reconsideration

The court denied reconsideration. It found that the SEC identified no intervening change in controlling law and no controlling decision that the court had overlooked. The court also rejected the SEC’s claim that it had overlooked factual issues concerning the speech’s purpose and the extent of staff collaboration on its drafts.

The SEC argued that the speech communicated the approach of the SEC’s Division of Corporation Finance to regulating digital-asset offerings and resulted from extensive collaboration among SEC staff. The court found that this position conflicted with the SEC’s and Hinman’s earlier position that the speech expressed Hinman’s personal views. The court also concluded that the speech’s text, the SEC’s regulations, and the SEC’s later digital-assets framework did not establish that the speech itself was agency guidance.

The court further held that any agency deliberations about regulating digital-asset offerings were occurring separately and in parallel with the drafting of the speech. The speech drafts and related emails were not an essential link in those separate policy deliberations. Because the speech was not an agency communication, the court concluded that deliberations about its content were not protected by the deliberative process privilege.

Clarification

The court granted the SEC’s request for clarification. It explained that communications about edits to the speech, and the edits themselves, generally were not part of deliberations about how to communicate agency policy. However, if communications discussed the speech in the context of separate agency deliberations—not deliberations about the speech’s content—the SEC could seek permission to redact those communications from its production. The court identified a particular comment in one draft as an example and allowed the SEC to redact that comment without seeking further permission.

Apart from communications of that type, the court clarified that its January 13, 2022 order required production of all emails related to and drafts of the speech listed on the SEC’s privilege log. The court also noted that, where appropriate, the SEC could renew a privilege assertion for a document if the deliberative process privilege was found not to apply.

Disposition

The court denied the SEC’s motion for reconsideration and granted its motion for clarification. The clerk was directed to terminate the motion.