Securities And Exchange Commission v. Berry
Filing
235
ORDER DENYING 175 Defendant's Motion to Compel Further Interrogatory Responses. Signed by Magistrate Judge Howard R. Lloyd on 6/15/2011. (hrllc1, COURT STAFF) (Filed on 6/15/2011)
1
** E-filed June 15, 2011 **
2
3
4
5
6
IN THE UNITED STATES DISTRICT COURT
9
FOR THE NORTHERN DISTRICT OF CALIFORNIA
10
For the Northern District of California
NOT FOR CITATION
8
United States District Court
7
SAN JOSE DIVISION
11
SECURITIES AND EXCHANGE
COMMISSION,
No. C07-04431 RMW (HRL)
12
ORDER DENYING DEFENDANT’S
MOTION TO COMPEL FURTHER
INTERROGATORY RESPONSES
Plaintiff,
13
v.
14
[Re: Docket No. 175]
LISA C. BERRY,
15
16
17
18
Defendant.
____________________________________/
BACKGROUND
The Securities and Exchange Commission (“SEC”) filed this civil enforcement action in
19
2007 in relation to alleged improper stock option backdating at KLA-Tencor Corporation (“KLA”)
20
and Juniper Networks, Inc. (“Juniper”). Defendant Lisa Berry (“Berry”) was General Counsel of
21
KLA from September 1996 to June 1999 and of Juniper from June 1999 to January 2004. The SEC
22
alleges that she oversaw these companies’ stock option granting processes.
23
Fact discovery closed on March 25, 2011. See Docket Nos. 154, 181. Berry timely moved to
24
compel the SEC to provide further responses to three of her interrogatories (Interrogatory Nos. 2, 4,
25
and 6) that essentially ask the SEC to identify all untrue statements and/or material omissions in
26
violation of law and to identify all facts that show that Berry substantially participated in or was
27
28
1
intricately involved in making any such statements.1 Docket No. 175 (“MTC”). These three
2
interrogatories (along with three others which Berry has not moved to compel) are set forth below:
•
Interrogatory No. 2 asks the SEC, “[f]or each untrue statement YOU identified in response
to Interrogatory 1, state the specific language or phrase(s) that YOU contend constitutes the
misstatement.”
•
Interrogatory No. 3 asks the SEC to “[i]dentify each and every omission of material fact that
YOU contend MS. BERRY made in violation of the FEDERAL SECURITIES LAWS.”
•
Interrogatory No. 4 asks the SEC, “[f]or each omission of material fact YOU identified in
response to Interrogatory 3, identify which affirmative statement YOU contend was rendered
false or misleading by virtue of the alleged omission.”
•
Interrogatory No. 5 asks the SEC, “[f]or each untrue statement or omission of material fact
identified in response to Interrogatories 1 and 3, state all facts supporting YOUR contention
that the untrue statements or omissions were material.”
•
4
Interrogatory No. 1 asks the SEC to “[i]dentify each and every untrue statement that YOU
contend MS. BERRY made in violation of the FEDERAL SECURITIES LAWS.”
•
3
Interrogatory No. 6 asks the SEC, “[f]or each statement YOU contend constitutes an untrue
statement or omission of material fact in response to Interrogatories 1 and 3, state all facts,
DOCUMENTS or information YOU contend demonstrate MS. BERRY’S substantial
participation or intricate involvement in making those statements.”
5
6
7
8
9
For the Northern District of California
United States District Court
10
11
12
13
14
In its original responses, the SEC responded to Interrogatory Nos. 1 and 3. Docket No. 198
15
16
(“LaMarca Decl.”), Ex. A at 4-7, 8-11. It objected to Interrogatory Nos. 2 and 4 in part because it
17
considered them to be duplicative of the information set forth in Interrogatory Nos. 1 and 3. Id. at 7-
18
8, 11. It also objected to Interrogatory Nos. 5 and 6 because, in its opinion, they were “interposed
19
for the purpose of requiring [the SEC] to set forth an entire case in response to an ‘interrogatory’”
20
1
21
22
23
24
25
26
27
28
Interrogatories of these types are frequently referred to as “contention interrogatories.” See In re
Convergent Technologies Securities Litigation, 108 F.R.D. 328, 332 (N.D. Cal. 1985) (As
Magistrate Judge Brazil explained: “[T]he phrase ‘contention interrogatory’ is used imprecisely to
refer to many different kinds of questions. Some people would classify as a contention
interrogatory any question that asks another party to indicate what it contends. Some people would
define contention interrogatories as embracing only questions that ask another party whether it
makes some specified contention. Interrogatories of this kind typically would begin with the phrase
‘Do you contend that . . . .’ Another kind of question that some people put in the category
‘contention interrogatory’ asks an opposing party to state all the facts on which it bases some
specified contention. Yet another form of this category of interrogatory asks an opponent to state all
the evidence on which it bases some specified contention. Some contention interrogatories ask the
responding party to take a position, and then to explain or defend that position, with respect to how
the law applies to facts. A variation on this theme interrogatories that ask parties to spell out the
legal basis for, or theory behind, some specified contention.”).
2
1
and responding to them would be unduly burdensome and would involve answering more than 25
2
separate questions. Id. at 12-13.
3
4
5
6
7
After meeting and conferring with Berry, the SEC agreed to supplement its responses. It then
provided supplemental substantive responses to Interrogatory Nos. 5 and 6. LaMarca Decl., Ex. B.
Berry thereafter moved to compel further responses to Interrogatory Nos. 2, 4, and 6. See
MTC. The SEC opposed Berry’s motion. Docket No. 197 (“Opp’n”).
LEGAL STANDARD
8
“Rule 33 of the Federal Rules of Civil Procedure governs contention interrogatories which
9
seek to discover the factual basis for allegations in a complaint.” In re eBay Seller Antitrust Litig.,
For the Northern District of California
United States District Court
10
No. C07-01882 JF (RS), 2008 WL 5212170, at *1 (N.D. Cal. Dec. 11, 2008) (footnote omitted).
11
“Rule 33(a)(2) provides that interrogatories may relate to any matter that may be inquired into under
12
Rule 26(b) and is not objectionable merely because it asks for contentions that relate to fact or the
13
application of law to fact.” Id. “[C]ourts tend to deny contention interrogatories filed before
14
substantial discovery has taken place, but grant them if discovery almost is complete.” Id. (citing
15
Fischer & Porter Co. v. Tolson, 143 F.R.D. 93, 95 (E.D. Pa. 1992); In re Convergent Technologies
16
Securities Litigation, 108 F.R.D. 328, 332-38 (N.D. Cal. 1985)).
17
Subject to the limitations imposed by subsection (b)(2)(C), under Federal Rule of Civil
18
Procedure 26, “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to
19
any party’s claim or defense . . . .” FED. R. CIV. P. 26(b)(1). “Relevant information need not be
20
admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of
21
admissible evidence.” Id. However, “[o]n motion or on its own, the court must limit the frequency
22
or extent of discovery otherwise allowed by these rules or by local rule if it determines that: (i) the
23
discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other
24
source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery
25
has had ample opportunity to obtain the information by discovery in the action; or (iii) the burden or
26
expense of the proposed discovery outweighs its likely benefit, considering the needs of the case,
27
the amount in controversy, the parties’ resources, the importance of the issues at stake in the action,
28
and the importance of the discovery in resolving the issues.” FED. R. CIV. P. 26(b)(2)(C).
3
DISCUSSION
1
A. Interrogatory Nos. 2 and 4
2
Interrogatory Nos. 1 and 3. LaMarca Decl., Ex. A. It referred to specific paragraphs in the Second
5
Amended Complaint that identified the material misrepresentations and omissions Berry allegedly
6
made. Id. at 4-5, 8-9. In addition, it provided lengthy lists of the kinds of statements Berry allegedly
7
“made or caused to be made, either directly or indirectly” that either were untrue or were misleading
8
due to her omissions. Id. at 5-6, 9-11. It also provided the original grant dates for the stock option
9
grants at issue. Id. at 7. The SEC did not, however, provide substantive responses to Interrogatory
10
For the Northern District of California
In her original responses and objections, the SEC provided substantive responses to
4
United States District Court
3
Nos. 2 and 4. Instead, it objected on several grounds, including that its responses to Interrogatory
11
Nos. 1 and 3 “necessarily identifie[d]” how the statements or omissions were untrue or misleading
12
and specifically referred Berry to the SEC’s allegations in this regard. Id. at 7, 11.
Berry argues that the SEC’s responses to Interrogatory Nos. 2 and 4, which refer her to the
13
14
SEC’s substantive responses to Interrogatory Nos. 1 and 3, are not good enough.2 This Court
15
disagrees. In its responses, the SEC described the basic false statements or omissions that Berry
16
allegedly made (e.g., “false representations that Juniper’s stock options were granted with strike
17
18
19
20
21
22
23
24
25
26
27
28
2
Citing a few cases, Berry says that she is entitled to know the specific allegedly false and
misleading language underlying the SEC’s claims against her. MTC at 6-8 (citing Con’t Ill. Nat’l
Bank & Trust Co. of Chi. v. Caton, 136 F.R.D. 682, 689 (D. Kan. 1991); French v. Wachovia Bank,
N.A., No. 06-CV-869, 2010 WL 2643385, at *1-2 (E.D. Wis. June 29, 2010); United States v.
Chapman Univ., 245 F.R.D. 646, 649 (C.D. Cal. 2007); Pac. Lumber Co. v. Nat’l Union Fire Ins.
Co., No. C 02-4799 SBA(JL), 2005 WL 318811, at *8 (N.D. Cal. Jan. 5, 2005)); Reply at 3 (citing
Ziemack v. Centel Corp., No. 92 C 3551, 1995 WL 729295, at *2 (N.D. Ill. Dec. 7, 1995); French,
2010 WL 2643385, at *1). For instance, Berry relies on language from the district court in French v.
Wachovia Bank, in which the plaintiffs simply referenced their expert report in their supplemental
responses to two interrogatories seeking specific information about their allegations. French, 2010
WL 2643385, at *1. The district court in that case granted the defendants motion to compel more
specific responses: “Referring to a multiple page report does not constitute a proper response to an
interrogatory. It is not the defendant’s duty to sift through an expert report in an attempt to glean the
information sought in the interrogatory.” Id. These decisions, however, were all highly fact specific
and of little help here. The French court, for instance, did not establish a general rule for
interrogatory responses. Instead, the court concluded that the plaintiffs’ vague reference to a
particular document was insufficient. Here, the SEC referred Berry to its other interrogatory
responses, not another document.
4
1
prices at the fair market value of the common stock when the options were issued”; “false
2
representations that Juniper’s financial statements conformed with GAAP”; “false representations
3
that Juniper’s stock options were granted at the fair market value on the date of grant”; “failure to
4
disclose in the above[-described] Forms 10-K that the strike prices and dates of Juniper’s stock
5
options granted to employees were selected with hindsight in order to grant them with lower strike
6
prices, typically rendering the options in-the-money when issued”). It also provided the alleged
7
“false grant dates.”
8
Berry wants the SEC to, in effect, highlight the specific language in the public filings on
For the Northern District of California
which the SEC based its responses to Interrogatory Nos. 1 and 3. Quite simply, that is unnecessary.
10
United States District Court
9
While Berry complains that the SEC’s responses require her to “sift through” the documents cited
11
by the SEC, she is overstating it. For instance, in her motion, Berry complains that Paragraph 76 of
12
the Second Amended Complaint only contains the vague allegation that she did not “inform others
13
involved in the Form 10-K preparation process that Juniper’s stock option related disclosures were
14
false and misleading.” MTC at 8 (citing SAC ¶ 76). But in its responses to Interrogatory Nos. 1 and
15
3, the SEC provided numerous descriptions of the types of false and misleading statements and
16
omissions that Berry allegedly made and which were incorporated into the Forms 10-K. By stating,
17
in response to Interrogatory Nos. 1 and 3, the types of statements or omissions Berry made, the SEC
18
has done enough. Berry’s motion to compel further responses to Interrogatory Nos. 2 and 4 is
19
DENIED.
20
21
B. Interrogatory No. 6
In its original responses, the SEC objected to Interrogatory Nos. 5 and 6 on the grounds that
22
(1) they were not calculated to lead to the discovery of admissible evidence but instead asked it to
23
set forth its entire case in response to an interrogatory and (2) responding to them would be unduly
24
burdensome and require it to respond to far more than 25 separate questions. LaMarca Decl., Ex. A
25
at 12-13.
26
After meeting and conferring with Berry, the SEC supplemented its responses. With respect
27
to Interrogatory No. 6, the SEC says that it agreed to describe its “factual theory in support of its
28
claim that [Berry] is primarily liable for fraud with respect to false statements and omissions of
5
1
material facts contained or included in public filings that [she] did not herself sign.”3 LaMarca
2
Decl., Ex. B at 12. “Accordingly, the [SEC’s] response necessarily [did] not include the many false
3
statements or omissions of material fact (including many of those set forth in Responses to
4
Interrogatory Nos. 1 and 2) that were not made in public filings.” Id. (emphasis added). The SEC
5
went on to describe for 3 pages the types of false statements or omissions that it alleges Berry made.
6
Id. at 12-15.
7
“Contention interrogatories asking for ‘each and every fact,’ or application of law to fact,
8
that supports particular allegations in an opposing pleading may be held overly broad and unduly
9
burdensome.” WILLIAM W. SCHWARZER, A. WALLACE TASHIMA & JAMES M. WAGSTAFFE, CAL.
For the Northern District of California
United States District Court
10
PRAC. GUIDE: FED. CIV. PRO. BEFORE TRIAL § 11:1682 (The Rutter Group 2010) (emphasis in
11
original) (citing IBP, Inc. v. Mercantile Bank of Topeka, 179 F.R.D. 316, 321 (D. Kan. 1998)).
Berry complains that the SEC’s response to Interrogatory No. 6 contains only “generalized
12
13
allegations” describing her role in the alleged fraud and that it does not identify or refer to any
14
documents (whether publicly-available or not), specific deposition testimony, or other evidence
15
showing Berry’s substantial participation in making false or misleading statements. MTC at 8-9;
16
Reply at 7. While it is true that the SEC’s response does not do this, it does refer in narrative form to
17
documents such as drafts of public filings and board minutes and suggests that relevant responsive
18
emails or deposition testimony also exist.4 LaMarca Decl., Ex. B at 12-15.
19
3
20
21
22
The SEC claims that the parties agreed while meeting-and-conferring that the phrase “substantial
participation or intricate involvement” in Interrogatory No. 6 was intended to single out public
filings that Berry did not herself sign. Opp’n at 4. Berry says that she did not agree to this limitation.
MTC at 7-8; Reply at 6 n.7.
4
23
24
25
26
27
28
The SEC says that “[i]n keeping with [its] Responses to the other interrogatories, [it] did not list
each ‘document’ or other source of information that could support or describe [Berry’s]
involvement. To do so would have required a pointless combing of the voluminous discovery record
numbering in the hundreds of thousands of documents, including documents [it is] still awaiting
from [Berry] herself.” Opp’n at 4. In any event, the SEC also argues that it does not have to catalog
each and every fact and documents in support of its claims. Id. at 4-7. Again, the parties both cite to
cases for the point that that contention interrogatories that ask for “all facts” in support of a party’s
allegations are or are not overly broad and/or permissible. See id. at 4-7 (citing, e.g., In re eBay
Seller Antitrust Litig., No. C 07-1882 JF (RS), 2008 WL 5212170, at *2 (N.D. Cal. Dec. 11, 2008);
Anaya v. CBS Broadcasting, Inc., No. CIV 06-0476 JBKBM, 2007 WL 2219458, at *6 (D.N.M.
May 16, 2007); Johnson v. Kraft Foods N. Am., Inc., 236 F.R.D. 535, 544 (D. Kan. 2006); Safeco
of Am. v. Rawstron, 181 F.R.D. 441, 448 (C.D. Cal. 1998); IBP, Inc. v. Mercantile Bank of Topeka,
179 F.R.D. 316, 321 (D. Kan. 1998)); Reply at 5 (citing Chapman v. Cal. Dep’t of Educ., No. C-016
The Court believes that the SEC’s response is sufficient. The SEC’s response is a 4-page
1
2
narrative that describes the types of documents Berry alleged reviewed, edited, or to which she
3
otherwise contributed. Like its responses to Interrogatory Nos. 1 and 3, the SEC did not list each
4
line out of each document, but, as the SEC points out, it is not obligated to put forth its entire case in
5
response to a single interrogatory.5 Berry’s motion to compel further responses to Interrogatory No.
6
6 is DENIED.
CONCLUSION
7
Based on the foregoing, Berry’s motion to compel further interrogatory responses is
8
9
DENIED.
For the Northern District of California
United States District Court
10
IT IS SO ORDERED.
11
12
Dated: June 15, 2011
13
HOWARD R. LLOYD
UNITED STATES MAGISTRATE JUDGE
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
1780 CRB (EMC), 2002 WL 32854376, at *3 (N.D. Cal. Feb. 6, 2002); IBP, 179 F.R.D. at 323).
But again, these decisions were all highly fact-specific and are of little help here.
5
The Court does not reach the SEC’s argument that Berry’s interrogatory violates the presumptive
25-interrogatory limit.
7
1
C07-04431 RMW (HRL) Notice will be electronically mailed to:
2
Amy M. Ross
Benjamin Cunningham Geiger
Edward W. Swanson
Elena Ro
James A. Meyers
James Neil Kramer
Jeffrey Bruce Coopersmith
3
4
5
6
7
8
9
For the Northern District of California
United States District Court
10
Jeremy Emerson Pendrey
Joni L. Ostler
Judith L. Anderson
Katherine Collinge Lubin
Marc J. Fagel
Mark Philip Fickes
Matthew Austen Tolve
Matthew Eric Sloan
12
Michael David Torpey
Nancy E. Harris
Randall Scott Luskey
13
Rebecca Felice Lubens
14
Robert John Nolan
Robert Lootfi Tashjian
11
15
16
17
18
Steven Andrew Hong
Susan F. LaMarca
Thomas R. Green
aross@orrick.com
bgeiger@orrick.com
eswanson@swansonmcnamara.com
roe@sec.gov
jmeyers@orrick.com
jkramer@orrick.com
jeff.coopersmith@dlapiper.com,
bradley.meissner@dlapiper.com,
evelyn.dacuag@dlapiper.com
pendreyj@sec.gov
jostler@wsgr.com, pbaird@wsgr.com
andersonju@sec.gov, huangw@sec.gov, johnstonj@sec.gov
klubin@orrick.com, swortman@orrick.com
fagelm@sec.gov
fickesm@sec.gov
mtolve@orrick.com
Matthew.Sloan@skadden.com, eaviad@skadden.com,
jlyons@skadden.com, mtroost@skadden.com
mtorpey@orrick.com
nharris@orrick.com, vsweet@orrick.com
Randall.Luskey@usdoj.gov, elise.etter@usdoj.gov,
gpackard@orrick.com
jcopoulos@orrick.com, klubin@orrick.com,
nharris@orrick.com, rlubens@orrick.com, sjaffer@orrick.com
robert.nolan@pillsburylaw.com, docket@pillsburylaw.com
tashjianr@sec.gov, bukowskij@sec.gov, huangw@sec.gov,
johnstonj@sec.gov
shong@orrick.com
lamarcas@sec.gov, huangw@sec.gov, johnstonj@sec.gov
thomas.green@usdoj.gov, daniel.charlier-smith@usdoj.gov,
lily.c.ho-vuong@usdoj.gov
Counsel are responsible for distributing copies of this document to co-counsel who have not
registered for e-filing under the court’s CM/ECF program.
19
20
21
22
23
24
25
26
27
28
8
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?