Securities and Exchange Commission v. Gallagher

Background

The Securities and Exchange Commission (SEC) asked the court to compel Steven M. Gallagher to produce documents from his Twitter account under Federal Rule of Civil Procedure 34. The requested materials included direct messages between Gallagher and Jennifer Rosebrugh, whom the SEC described as an alleged confederate, as well as documents referring to particular stock ticker symbols.

The documents had been obtained by the Office of the United States Attorney for the Southern District of New York (USAO) through a search warrant served on Twitter during a parallel criminal investigation of Gallagher’s stock-trading activities. The USAO told Gallagher that it would provide him with the search-warrant returns if he requested them. Gallagher had not made that request.

Gallagher’s objections

Gallagher argued that the documents were not in his possession, that the SEC’s request was a fishing expedition, and that the request sought material cumulative of documents already produced. He also argued that the request was disproportionate under Rule 26(b)(1), that the documents were not material to the case, and that the SEC already possessed or constructively possessed them because of its alleged joint investigation with the USAO. Gallagher argued that the SEC should obtain the documents directly from the USAO through a subpoena.

Court’s analysis

Rule 34 requires a party to produce documents within that party’s possession, custody, or control. A party need not produce documents it does not possess or cannot obtain, but production may be ordered when the party has access to and the practical ability to obtain the documents.

The court concluded that Gallagher had access to and the practical ability to obtain the search-warrant returns from the USAO. The court compared the situation to documents addressed to a party and available for pickup at a post office after the party provides identification and signs for them. The possibility that the SEC could subpoena the documents from the USAO did not eliminate Gallagher’s duty to obtain and produce relevant documents.

The court also concluded that the SEC’s requests were not a fishing expedition. The requests identified specific categories of potentially relevant documents rather than seeking the entire search-warrant return. The court found the requests proportional to the size and needs of the case, likely to produce noncumulative material, and otherwise proper.

Ruling

The court GRANTED the SEC’s motion to compel. It ORDERED Gallagher to produce by June 3, 2024, all nonprivileged and non-work-product documents responsive to the SEC’s First Request for Production of Documents that were in his possession, custody, or control. The court stated that this included relevant documents within the Twitter search-warrant return available for Gallagher to pick up.

If Gallagher claimed attorney-client privilege or attorney work-product protection, the court ordered him to comply with Local Civil Rule 26.2 by the same deadline. The court stated that failure to fully comply would result in imposition of a sanction authorized by Rule 37.