Securities Exchange Commission v. J.H. Darbie & Co., Inc.

Background

The parties, through counsel, agreed to a protective order under Federal Rule of Civil Procedure 26(c). They represented that discovery would involve confidential documents or information whose public disclosure could harm the producing person or a third party owed a duty of confidentiality. The court found good cause to enter a tailored order governing the pretrial phase of the action.

Confidential information and permitted disclosures

The order allows a producing person to designate as confidential only information whose disclosure is restricted by law or would harm business, commercial, financial, or personal interests. Listed categories include previously undisclosed financial information; ownership or control information about a nonpublic company; business, product-development, or marketing information; personal or intimate information; and information showing whether a suspicious-activity report was filed with the Treasury Department’s Financial Crimes Enforcement Network, including related communications and drafts. The court may also designate other categories as confidential.

People receiving designated material generally may disclose it only to specified persons, including the parties and their counsel, litigation vendors, mediators, certain witnesses and experts who sign nondisclosure agreements, court personnel, jurors during trial, government personnel involved in a parallel criminal or administrative matter, and others authorized by the parties or the court. The material may be used only to prosecute or defend this action and any appeals, not for business, competitive, or other litigation purposes.

Challenges, court filings, and personal information

A party may object to a confidentiality designation or request stricter limits, such as an attorneys’-eyes-only restriction, before trial. If the parties cannot resolve the issue, they must bring it to the court under the court’s individual rules. The order does not create a right to file material under seal. Parties seeking to file protected material must publicly file a redacted version and separately file the unredacted version under seal, and the court retains discretion over whether sealing is justified.

Personally identifying information exchanged in discovery must be kept securely even if it is not marked confidential. The order includes exceptions for uses or disclosures by the Securities and Exchange Commission that are required by law or allowed under Commission Form 1662, information obtained independently, and certain filings or uses in this action. The parties must also comply with federal and local rules concerning personal information in court filings.

Privilege, case conclusion, and enforcement

An accidental disclosure of material protected by attorney-client privilege or work-product protection does not waive that protection under the order. The receiving party generally must return or destroy the material within five business days after a claim of inadvertent disclosure and provide a certification; the producing party must then provide a privilege log. The receiving party may ask the court to compel production, while the producing party retains the burden of establishing privilege or protection.

The order continues after the litigation ends. Within 30 days after final disposition, confidential discovery material and copies must be returned or destroyed, subject to stated exceptions for the Commission’s record-keeping, legal, and other permitted obligations and for archival copies retained by attorneys specifically representing the parties. The court retains jurisdiction to enforce the order, and willful violations may result in contempt penalties.

Disposition

The parties stipulated and agreed to the order, and the court stated “SO ORDERED” on April 17, 2023. This was a discovery and confidentiality ruling, not a decision on the merits of the Securities and Exchange Commission’s claims or J.H. Darbie & Co., Inc.’s defenses.