Securities and Exchange Commission v. Ripple Labs Inc.
- Analisa Torres
- 1:20-cv-10832
- U.S. District Court · Southern District of New York
- 9
In SEC v. Ripple Labs, Judge Netburn denied the SEC’s privilege motion and ordered production of speech-related documents.
The ruling affected the Securities and Exchange Commission’s attempt to withhold or redact internal documents about William Hinman’s 2018 speech and the defendants’ access to those documents in the enforcement action.
What happened
In Securities and Exchange Commission v. Ripple Labs, Inc., the defendants sought internal SEC documents about a 2018 speech by William Hinman, then a senior SEC official. They argued the documents could help challenge the SEC’s claims about whether XRP was a security and whether the defendants had fair notice.
The SEC argued that attorney-client privilege protected the documents because SEC lawyers had helped draft and edit the speech. The court reviewed sample documents and concluded that their main purpose was policy and communication advice—not legal advice intended to guide the SEC’s decisions or conduct.
Magistrate Judge Sarah Netburn denied the SEC’s motion. She ordered the documents produced, while directing the SEC to submit two proposed redactions for further court review under the deliberative-process privilege.
The detailed version
- Securities and Exchange Commission v. Ripple Labs Inc. · No. 1:20-cv-10832
- Analisa Torres
- July 12, 2022
Background
The Securities and Exchange Commission brought an enforcement action under Section 5 of the Securities Act of 1933 against Ripple Labs, Inc., Bradley Garlinghouse, and Christian Larsen. 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.
The defendants sought SEC documents concerning a June 14, 2018 speech by William Hinman, then Director of the SEC’s Division of Corporate Finance. The defendants sought the documents to challenge the SEC’s allegations that Larsen and Garlinghouse were objectively reckless in believing that XRP was not a security and that Ripple had fair notice that XRP was a security.
The court had previously ordered the SEC to produce emails related to, and drafts of, the speech, subject to an exception for communications among agency staff concerning how the speech implicated separate agency deliberations. The SEC then argued that attorney-client privilege protected the documents. Attorney-client privilege generally protects confidential communications made to obtain or provide legal advice.
The SEC’s Privilege Argument
The SEC argued that Hinman and other SEC staff acted in their official capacities when they drafted and edited the speech and communicated with SEC attorneys. It maintained that the documents involved legal advice about applying securities law to digital assets, should remain confidential, and should either be withheld or redacted.
The defendants argued that Hinman was not an SEC-lawyer client for advice concerning an outside activity, because the speech reflected Hinman’s personal views and was expressly not agency policy.
Court’s Analysis
The court did not decide whether Hinman was a client of SEC lawyers for purposes of the speech-related communications. Instead, it held that the evidence showed the communications’ predominant purpose was not to provide legal advice.
The court explained that legal advice must involve interpreting or applying legal principles to guide future conduct or assess past conduct. Advice about policy—such as whether a public figure should make a particular statement—or about communications—such as whether a statement was consistent with an agency’s position—is not legal advice merely because lawyers provided it.
The court found that the speech was primarily a statement of Hinman’s personal views about policy and cryptocurrency regulation. It also relied on Hinman’s testimony that he circulated the draft to obtain reactions to its content and did not recall the specific comments he received. The fact that the speech discussed securities law did not make all comments about the speech legal advice.
Disposition
The court denied the SEC’s motion. It held that the documents must be produced because their predominant purpose was not to provide legal advice to help the SEC conduct public business. The court also directed the SEC to submit two proposed redactions from Entries 29 and 35 for in-camera review under the deliberative-process privilege.
Judge
The opinion identifies Sarah Netburn as the United States Magistrate Judge who issued the ruling.
Read the full 9-page opinion on CourtListener, the free public archive maintained by the Free Law Project.