Hatamian et al v. Advanced Micro Devices, Inc. et al

Filing 162

ORDER RE: DISCOVERY DISPUTE. Signed by Magistrate Judge Jacqueline Scott Corley on 11/16/2015 (ahm, COURT STAFF) (Filed on 11/16/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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BABAK HATAMIAN, et al.,

Case No. 14-cv-00226-YGR (JSC)

Plaintiffs,
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v.

ORDER RE: DISCOVERY DISPUTE

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United States District Court
Northern District of California

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ADVANCED MICRO DEVICES, INC., et
al.,

Re: Dkt. No. 157

Defendants.

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In this securities fraud putative class action, Plaintiffs contend that defendant Advanced

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Microdevices, Inc. (“AMD”) made misrepresentations regarding the launch of its “Llano”

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microprocessor, and in particular, misstatements regarding the Llano manufacturing plant’s chip

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yield. Now pending before the Court is the parties’ joint letter brief regarding a discovery dispute.

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Specifically, Plaintiffs seek an order compelling Defendant to (1) expand the temporal scope of

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discovery, (2) identify and provide contact information for its customer, and (3) produce all human

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resources documents for certain current and former employees. (Dkt. No. 157.) Having reviewed

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the parties submissions, the Court concludes that oral argument is unnecessary, see N.D. Cal. Civ.

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L.R. 701(b), and GRANTS IN PART Plaintiffs’ request for an order compelling AMD to respond

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to certain discovery requests as set forth below.

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LEGAL STANDARD
A party can discover any nonprivileged information which is relevant to the claims or

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defenses of any other party. Fed. R. Civ. P. 26(b)(1). Relevant information does not have to be

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admissible; relevance is construed broadly, and litigants may obtain discovery so long as it is

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“reasonably calculated to lead to the discovery of admissible evidence.” Surfvivor Media, Inc. v.

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Survivor Prods., 406 F.3d 625, 635 (9th Cir. 2005) (internal quotation marks and citation omitted).

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Pursuant to Rule 26(b)(2), the court must limit the extent of discovery if it determines that: (1) the

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discovery sought is unreasonably cumulative; (2) the party seeking discovery has already had

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ample opportunity to obtain the information; or (3) the burden or expense of the proposed

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discovery outweighs it likely benefit. Fed. R. Civ. P. 26(b)(2). “The party who resists discovery

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has the burden to show discovery should not be allowed, and has the burden of clarifying,

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explaining, and supporting its objections.” Keith H. v. Long Beach Unified Sch. Dist., 228 F.R.D.

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652, 655-56 (C.D. Cal. 2005) (citation omitted); see also Blankenship v. Hearst Corp., 519 F.2d

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418, 429 (9th Cir. 1975) (“Under the liberal discovery principles of the Federal Rules defendants

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were required to carry a heavy burden of showing why discovery was denied.”).
DISCUSSION

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United States District Court
Northern District of California

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A.

Temporal Scope of Discovery
The temporal scope of Plaintiffs’ First Set of Requests for Production of Documents

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(“RFPs”) is January 1, 2010 through October 2013. (Dkt. No. 157-1 at 7 (defining the “Relevant

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Period” for the purposes of the RFPs).) Plaintiffs are presently seeking documents from April 1,

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2010 through April 1, 2013. (Dkt. No. 157 at 1.) AMD objects to this time period, arguing that

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the relevant time period should be limited to 2011 and 2012. (Dkt. No. 157 at 4.)

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The putative Class Period in this securities litigation action is April 4, 2011 through

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October 18, 2012. (Dkt. No. 61 ¶ 1.) In the amended complaint, Plaintiffs allege that AMD made

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actionable misleading statements about the Llano microprocessing chip as early as April 4, 2011

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when it falsely represented that the Llano’s production yield problems had been resolved and it

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was set to launch on time, and that the truth of the statements were revealed to the public by

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October 18, 2012. (Id. ¶¶ 1, 8, 22; see also Dkt. No. 110 at 3-4.) At bottom, Plaintiffs allege that

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AMD concealed that yield problems still existed and had persisted since 2010, and that AMD’s

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Llano production was significantly supply-constrained, and that AMD continued to mislead the

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market about the status of the Llano through October 2012. (Dkt. No. 110 at 4.) The amended

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complaint details AMD’s statements about the status of Llano production as early as July 2010,

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which indicated that the Llano was initially scheduled to launch in the fourth quarter of 2010, but

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was delayed due to production issues. (Dkt. No. 61 ¶¶ 76, 123, 124.) Plaintiffs’ expert alleges
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that the typical supply chain timeline indicates that good production yields take six to nine months

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before the product can reach consumers, so a launch in the fourth quarter of 2010 would start the

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relevant time period in April 2010. (Id. ¶ 126.)

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“In general, courts allow discovery to extend to events before and after the period of actual

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liability so as to provide context.” In re New Century, No. CV 07-0931 DDP (FMOx), 2009 WL

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9568860, at *2 (C.D. Cal. July 8, 2009) (citations omitted); see, e.g., Owens v. Sprint/United

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Mgmt. Co., 221 F.R.D. 649, 655 (D. Kan. 2004) (“[D]iscovery of information both before and

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after the liability period . . . may be relevant and/or reasonably calculated to lead to the discovery

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of admissible evidence and courts commonly extend the scope of discovery to a reasonably
number of years both prior to and following such period.”); Empire Volkswagen, Inc. v. World-

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United States District Court
Northern District of California

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Wide Volkswagen Corp., 95 F.R.D. 398, 399 (S.D.N.Y. 1982) (discovery “routinely goes beyond

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the statutory period” and plaintiffs are generally entitled to discovery “for a reasonable period of

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time antedating the earliest possible date of the actionable wrong”) (quotation marks and citation

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omitted).

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Plaintiffs rely on In re New Century for the proposition that there is a presumptive five-

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year discovery period regardless of the scope of the Class Period or timing of the events giving

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rise to liability. Not so. First, In re New Century is a non-precedential opinion not intended for

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publication. 2009 WL 9568860, at *7. Moreover, the case itself does not provide the support that

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Plaintiffs urge. While the In re New Century court indicated that its review of case law

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“suggest[s] a presumptive five-year discovery period[,]” 2009 WL 9568860, at *2 (citation

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omitted), the court relied on Miller v. Hygrade Food Prods. Corp., 89 F. Supp. 2d 643, 657 (E.D.

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Pa. 2000)), which discussed the scope of discovery in Title VII employment discrimination cases,

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not civil cases in general. 89 F. Supp. 2d at 657 (“The scope of discovery through interrogatories

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and requests for production of documents is particularly broad in a Title VII case.”) (citations

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omitted); see also, e.g., Adams v. Pinole Point Steel Co., No. C 92-1962, 1995 WL 73088, at *8

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(N.D. Cal. Feb. 10, 1995) (allowing interrogatories to request information from five years prior to

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class period in employment discrimination case). Plaintiffs’ reliance on Calix Networks, Inc. v.

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Wi-Lan, Inc., No. 09-cv-06038-CRB DMR, 2010 WL 3515759, at *7 (N.D. Cal. Sept. 8, 2010),
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fares no better. In Calix Networks, the court also permitted a five-year discovery period, citing

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other cases that did the same. Id. at *7. But both Calix and the authorities on which it relies

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pertain to jurisdictional discovery into whether the defendant had sufficient minimum contacts in

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the forum state, not merits discovery as here. Thus, the “presumptive 5-year discovery period”

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that Plaintiffs cite is not applicable to the instant securities litigation action. Instead, without

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applying such a presumption, the Court must balance the information’s relevance against the

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burden on the defendant. See Fed. R. Civ. P. 26(b)(2).

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Here, some discovery before and after the putative Class Period is relevant to give context
to the misrepresentations alleged. Indeed, the amended complaint references AMD’s comments

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about its Llano production slowdown beginning in July of 2010. While the actionable statements

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United States District Court
Northern District of California

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post-date these initial comments, under the broad definition of relevance, Plaintiffs are entitled to

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documents from this time period to give context to the company’s later statements about the status

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of the Llano chip’s production. As for the period following the putative Class Period, Plaintiffs

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have not explained why discovery through April 1, 2013 is relevant, given that the putative Class

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Period ended on October 18, 2012—more than five months earlier. Without further explanation,

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the Court cannot conclude that half a year’s worth of post-Class Period discovery is relevant.

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Instead, the Court will order AMD to produce documents for the rest of 2012, but not thereafter.

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These additional two and a half months should be sufficient to give context to the allegations

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made during the putative Class Period.

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While AMD may well have produced already an “enormous production” of over 330,000

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documents from the time period between March 1, 2011 and October 18, 2012 (id. at 157), the

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scope of the existing production alone does not bar Plaintiffs from discovery of other relevant

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documents. AMD has not met its burden of demonstrating that the burden or expense of this

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relevant discovery outweighs its likely use, instead offering only the conclusory assertion that it

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does so. (Dkt. No. 157 at 3.) This is not enough to demonstrate that the requested discovery

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should not be granted.

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During the course of the parties’ negotiations, Plaintiffs also offered the concession that
AMD need not produce documents from the extended discovery period for those custodians
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exclusively relevant to the Llano inventory write-down that occurred during the second half of the

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putative Class period. (See Dkt. No. 157 at 1-2.) This concession is a reasonable limit on the

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requested production. In addition, the pre-Class Period discovery shall not include any documents

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concerning Plaintiffs’ allegations that AMD made false and misleading misrepresentations about

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its 2012 guidance and performance in the second and third quarters of 2012, as 2010 discovery is

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not reasonably calculated to lead to discovery of admissible evidence about 2012 forecasting.

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Accordingly, Plaintiff is entitled to discovery from April 2010 through December 31, 2012,

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excluding custodians relevant only to the Llano inventory write-down or documents responsive to

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the 2012 forecasting allegations. The parties shall meet and confer to determine the identities of
the relevant custodians for these requests.

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United States District Court
Northern District of California

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B.

Customer Information

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Next, Plaintiffs seek an order compelling AMD to identify its customers and other third

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parties in response to Plaintiffs’ First Set of Interrogatories. Specifically, the interrogatories at

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issue ask AMD to identify all of AMD’s original equipment manufacturers, all third party

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distributors that sell AMD’s products, all original design manufacturers, and all motherboard

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manufacturers who manufactured or intended to manufacture motherboards containing AMD’s

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accelerated processing units—including but not limited to the Llano microprocessing chip—by

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name, address, website, email, and phone number. (Dkt. No. 157-2 at 5.) Plaintiffs allege that

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AMD prioritized its Llano shipments to original equipment manufacturers over third-party channel

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distributors, which left little to no Llano product for the channel customers, and that AMD did not

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disclose that strategy, which was misleading. (See Dkt. No. 110 at 12.) Thus, Plaintiffs seek

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discovery from these third parties “to provide context and unbiased testimony on these issues.”

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(Dkt. No. 157 at 5.)

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Notably, AMD does not contend that its customers’ identities are irrelevant. Nor does

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AMD argue that its customer information is confidential proprietary business information that

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must be kept secret. Instead, its objection centers on the potential burden to the third parties

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themselves, arguing that the third-party subpoenas Plaintiffs have issued to date have been overly

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broad, as they were not limited to customers for the Llano chip at issue in this litigation, and that
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answering the Interrogatories at issue will result in even more broad and improperly premature

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third-party discovery. (See Dkt. No. 157 at 5.) And indeed, Plaintiffs appear to concede that the

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purpose of the Interrogatories is to obtain the information they need to serve third-party discovery

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requests on these customers. (See Dkt. No. 157 at 4-5 (arguing that Plaintiffs “have a fundamental

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right to secure testimony from third parties unhindered by Defendants’ sequencing preferences”).)

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But the particular discovery sought is not, in and of itself, third-party discovery. There are

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no Rule 45 subpoenas before the Court. The identities of AMD’s customers that sell the Llano

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microprocessing chip—not all of its customers, as the Interrogatories are written, rather only those

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who purchased the chip at issue in this litigation—are relevant to Plaintiffs’ claims. If Plaintiffs
decide to move ahead with third-party discovery using that customer information, it is the

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United States District Court
Northern District of California

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customers themselves, not AMD, that will have standing to challenge the resulting third-party

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subpoenas as overly broad or unduly burdensome. See Fed. R. Civ. P. 45(c)(2)(B), 45(c)(3).

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Indeed, the adversary of the party seeking the information cannot move to quash or otherwise

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challenge a third-party subpoena, nor can the adversary advise third parties to object to the

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subpoena or ignore its production command. See Price v. Trans Union, L.L.C., 847 F. Supp. 2d

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788, 794 (E.D. Pa. 2012) (“Nowhere in the Rule is it contemplated that the adversary of the party

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seeking the information may advise, no matter the reasons, the person commanded by the

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subpoena to produce the information to ignore the subpoena’s commands.”); see also Lofton v.

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Verizon Wireless (VAW) LLC, 308 F.R.D. 276, 290 (N.D. Cal. 2015) (collecting cases).
Accordingly, the Court orders AMD to respond to Interrogatories Nos. 1 through 4 by

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providing the identity and requested contact information for its customers and motherboard

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manufacturers involved with the Llano microprocessing chip at issue in this litigation. While the

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Court declines AMD’s invitation to restrict Plaintiffs from sending any further third-party

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subpoenas until after party discovery is substantially complete (Dkt. No. 157 at 6), Plaintiffs are

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cautioned that when considering motions to quash subpoenas courts generally consider whether

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the information sought could be obtained from a party.

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C.

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Human Resources Documents
Finally, the parties dispute RFP Nos. 73 and 74 in Plaintiffs’ Second Set of RFPs, which
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request “[human resources (“HR”)]-related documents and HR files for any former or current

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AMD employee referenced in the Complaint, including but not limited to Dan Jensen, David

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Tidwell, Kursad Albayraktaroglu, Mike Lowe, and the Individual Defendants, including any

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employment agreement entered into between AMD and those persons” and “any former or current

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AMD employee deposed in this action[.]” (Dkt. No. 157-3 at 8.) AMD objects to this discovery

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on the grounds that Plaintiffs have not met their burden of overcoming the employees’ right to

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privacy in their HR files.

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Under California’s constitutional right to privacy, the personnel records of employees are
confidential and thus protected from discovery “unless the litigant can show a compelling need for
the particular documents and that the information cannot reasonably be obtained through

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United States District Court
Northern District of California

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depositions or from nonconfidential sources.” Foster v. ScentAir Techs., Inc., No. 13-cv-05772-

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TEH (MEJ), 2014 WL 4063160, at *2 (N.D. Cal. Aug. 15, 2014) (citing Harding Lawson Assocs.

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v. Super. Ct., 10 Cal. App. 4th 7, 10 (1992)). Thus, it is insufficient for a party to state only that

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discovery of an employee’s personnel record is necessary to facilitate the prosecution of the

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action. El Dorado Sav. & Loan Ass’n v. Super. Ct. of Sacramento Cnty., 190 Cal. App. 3d 342,

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345-46 (1987). The party must also show that there are no less intrusive means to “satisfy [the

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party’s] legitimate need for relevant information.” Id. at 346.

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Plaintiffs’ broad requests for “HR related documents and HR files” including employment

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agreements are the type of “personnel files” subject to the California right of privacy. The

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California legislature has defined “personnel records” as those files “that the employer maintains

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relating to the employee’s performance or to grievances concerning the employee.” Cal. Labor

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Code § 1198.5(a); see also Teamsters Local 856 v. Priceless, LLC, 112 Cal. App. 4th 1500, 1515

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(2003) (noting that the U.S. Supreme Court has stated that an individual’s personnel file usually

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contains personal data including “where he was born, the names of his parents, where he has lived

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from time to time, his high school or other school records, results of examinations, evaluations of

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his work performance”), disagreed with on other grounds by Int’l Fed’n of Prof. & Tech. Eng’rs,

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Local 21, AFL-CIO v. Super. Ct., 42 Cal. 4th 319, 335-36 (2007). Employment agreements

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contain the type of “sensitive” information subject to privacy concerns that the California
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constitution protects. See Alch v. Super. Ct., 165 Cal. App. 4th 1412, 1433 (2008); Kolker v.

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VNUS Med. Techs., Inc., No. C 10-0900 SBA (PSG), 2011 WL 5057094, at *4-5 (N.D. Cal. Oct.

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24, 2011).

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Plaintiffs first urge that any information relevant to the employees’ credibility is relevant,

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and these records—inasmuch as they evidence promotions or demotions, disciplinary proceedings,

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work reviews or evaluations, and complaints—are discoverable as they reflect on the employees’

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credibility. (Dkt. No. 157 at 6.) This credibility argument is not enough to overcome the

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employees’ privacy interest in their HR files; to conclude otherwise would eviscerate the

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protections that the California constitution provides by mandating discovery of confidential
personnel files for every witness in every case. Ragge v. MCA/Universal Studios, 165 F.R.D. 601

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United States District Court
Northern District of California

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(C.D. Cal. 1995), does not hold otherwise. Ragge is an employment discrimination case in which

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the court noted that the sought-after personnel records were relevant to the employer’s knowledge

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of a hostile work environment. Id. at 604. The court also found that the documents were relevant

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to the credibility of the named defendants as they “provide a means to compare statements made

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during depositions to documents maintained by the employer.” Id. No such showing has been

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made here.

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Plaintiffs also argue that the employees’ HR files are relevant inasmuch as they may

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contain responsive documents concerning Llano and the fraud alleged in this action. (See Dkt. No.

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157 at 7.) That may be so. But the RFPs as written are much broader than that: they do not

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request documents contained in employees’ personnel files describing any job responsibilities

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pertaining to the Llano product or referencing any disciplinary action taken with respect to such

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duties. And to the extent that this limited category of information contained in employees’

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personnel files may be relevant, Plaintiffs have not established that there is no less intrusive source

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of this information. See El Dorado Sav. & Loan Ass’n, 190 Cal. App. 3d at 346.

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Balancing the employees’ significant interest in their human resources files with Plaintiffs’

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interest in the documents, the Court concludes that Plaintiffs have not met their burden of

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demonstrating a compelling need for the information that could not be obtained through other

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sources.
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CONCLUSION

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For the reasons described above, the Court ORDERS AMD to (1) produce relevant

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documents from the time period of April 2010 through December 31, 2012, excluding custodians

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relevant only to the Llano inventory write-down and documents responsive to the 2012 forecasting

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allegations; and (2) respond to Interrogatories Nos. 1 through 4 by providing the identity and

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requested contact information for its customers and motherboard manufacturers involved with the

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Llano microprocessing chip at issue in this litigation. Plaintiffs’ request for the human resources-

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related documents requested in RFP Nos. 73 and 74 is DENIED.

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United States District Court
Northern District of California

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This Order disposes of Docket No. 157.
IT IS SO ORDERED.
Dated: November 16, 2015

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________________________
JACQUELINE SCOTT CORLEY
United States Magistrate Judge

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