Bussing v. Legent Clearing, LLC et al

Filing 155

ORDER on Parties' Joint Statement of Discovery Issues #154 . Ordered by Magistrate Judge Cheryl R. Zwart. (Zwart, Cheryl)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
JULIE A. BUSSING,
Plaintiff,

8:12CV238

vs.
ORDER
COR CLEARING, LLC, COR
SECURITIES HOLDINGS, Inc.; CARLOS
P. SALAS, CHRISTOPHER L.
FRANKEL, JEFFREY N. SIME, AND
STEVEN A. SUGARMAN,
Defendants.
Pending before me is the parties’ dispute over Plaintiff’s proposed Subpoena
Duces Tecum to be served on FINRA, and whether Defendants must produce emails to
Plaintiff in native format. (Filing No. 154).
FINRA Subpoena
The plaintiff’s proposed subpoena demands FINRA’s production of:
--

All documents or records relating to:
 the FINRA Rule 8210 notice dated April 25, 2012;
 FINRA Disciplinary Proceeding# 2009016234701; and
 FINRA Disciplinary Proceeding# 2007007133001.1

--

All recordings or transcripts of proceedings relating to Kevin Daniels v.

COR Clearing LLC, FINRA Arbitration Case No. 13-01262.2

1

Based on the parties’ representations, this proceeding pre-dates Bussing’s
employment for Legent by approximately two years.
2

As the court understands it, this arbitration proceeding involved a former Legent
employee who had worked under Bussing’s supervision.

--

As to the FINRA 8210 notice dated April 25, 2012; FINRA Disciplinary

Proceeding# 2009016234701; FINRA Disciplinary Proceeding #2007007133001;
the Bank Secrecy Act; anti-money laundering rules or requirements; or any
investigation or proceeding pending or in effect at any time between September 1,
2011, to May 31, 2012, inclusive.
 A list of all pending and all closed arbitration cases or disciplinary
investigations, proceedings, or matters involving Legent Clearing, LLC,
n/k/a COR Clearing, LLC, or any director, officer, shareholder,
supervisor or party currently or formerly associated or registered with
the firm;
 All documents or records relating to Defendant Steven A. Sugarman,
CRD # 4749281;
 All documents or records relating to Defendant Carlos P. Salas, CRD #
4024491;
 All documents or records relating to Defendant Christopher L. Frankel,
CRD # 1756659; and
 All documents or records relating to Jeffrey N. Sime, CRD # 1554798.
(Filing No. 154-2). Defendants object, asserting Plaintiff’s proposed subpoena is overly
broad and unduly burdensome, compliance will violate the investigatory privilege, and as
to some of the information requested, “Plaintiff has not and cannot demonstrate the
probity of such information to her case.” (Filing No. 154, at CM/ECF p. 8).
1.

Overly Broad/Unduly Burdensome.

As to Defendants’ claim of burden, the defendants have not shown how FINRA’S
compliance with the document subpoena will burden Defendants. “A party generally
lacks standing to challenge a subpoena issued to a third party absent a claim of privilege,
proprietary interest, or personal interest in the subpoenaed matter.” Washington v.
Thurgood Marshall Academy, 230 F.R.D. 18, 21 (D.D.C. 2005). “A motion to quash, or
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for a protective order, should generally be made by the person from whom the documents
or things are requested.” Id. (citing 9A Charles Alan Wright & Arthur R. Miller, Federal
Practice and Procedure § 2459 (2d ed.1995)). Simply stated, Defendants lack standing to
argue compliance with Plaintiff’s proposed subpoena will unduly burden FINRA.
2.

Investigatory Privilege.

Defendants claim Plaintiff’s proposed FINRA subpoena requests information
subject to the “well-recognized investigatory privilege to protect civil and criminal
investigation files from discovery.” (Filing No. 154, at CM/ECF p. 7). Defendants
cannot claim any privilege as to the documents they submitted to FINRA. As stated in
the FINRA 8212 Notice:
As a matter of policy, FINRA conducts its investigations on a non-public
basis. Nonetheless FINRA may sometimes provide access to its
investigative files to other regulatory and law enforcement authorities, and,
if subpoenaed, to litigants in civil actions. In addition, pursuant to FINRA's
Code of Procedure, FINRA is required to produce documents and
transcripts to respondents during discovery. We will not ( 1) entertain
requests for confidential treatment of any information or documents you
provide in response to this request; (2) give you notice of any subpoena or
access request we receive that encompasses any such information or
documents; or (3) undertake to return documents when this investigation is
completed.
(Filing No. 154-2, at CM/ECF p. 10) (emphasis added). Whether compelled to provide
the information to FINRA or not, the 8212 Notice advises Defendants that the documents
they produce to FINRA will not deemed confidential. Defendants cannot raise a valid
privilege objection to disclosure of such documents.

FINRA no doubt possesses responsive documents other than those initially
produced by Defendants. Even if the court assumes FINRA is an agency which can

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assert the law enforcement investigatory privilege,3 under the long-standing definition of
this privilege:
(1)

there must be a formal claim of privilege by the head of the
department having control over the requested information;

(2)

assertion of the privilege must be based on actual personal
consideration by that official; and

(3)

the information for which the privilege is claimed must be specified,
with an explanation why it properly falls within the scope.

In re Sealed Case, 856 F.2d 268, 271 (D.C. Cir. 1988) (holding SEC met the
requirements for asserting the investigatory privilege based on the declaration of the
Secretary of the SEC).

Defendants are not FINRA officials, and they have no standing to assert the
investigatory privilege as to FINRA’s records. In addition, the court fails to see how
FINRA’s mere listing of all pending and closed arbitration cases or disciplinary
investigations, proceedings, or matters involving Defendants could be considered
confidential investigatory information.
3.

Overly Broad/Relevancy

Defendants argue investigations or proceedings involving the named defendants
and Jeffrey Sime at any time between September 1, 2011, to May 31, 2012, and the
recordings or transcripts of proceedings relating to Kevin Daniels v. COR Clearing LLC,
FINRA Arbitration Case No. 13-01262, are wholly irrelevant to Plaintiff’s retaliation
3

With mediation scheduled for November 18, 2015, the court has expedited the
parties’ presentation of the issues, and the drafting and filing of this order. As such, the
court will not address every argument raised by the parties, some of which may require
extensive research and discussion. That said, while FINRA is a private corporation, its
rules governing the disclosure of investigative files (see, e.g., FINRA Rule 9251), parallel
rules governing law enforcement files, such as including an equivalent to the Brady rule
in criminal proceedings. FINRA Rule 9251(b)(3).
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claim. They also claim documents generated and claims filed outside of Plaintiff’s
employment dates for Legent are wholly irrelevant:
If this case was solely about Plaintiff’s retaliation allegations, the court may agree
with Defendants’ argument. But in their Answer and Counterclaims, Defendants allege
Bussing failed to perform the functions, responsibilities, supervision and duties
commensurate with and customary to her position for Legent, disregarded FINRA
regulatory requirements, exposed Legent to significant legal risk of noncompliance with
its regulatory obligations, substantially contributed to penalties and restitution paid by
Legent to FINRA, and prompted an arbitration which lead to a $240,000 award in favor
of a former Legent employee. See e.g., Filing No. 112, at ¶¶ 7, 43, 65, 91, 97-99..

Bussing was employed by Legent for less than six months, beginning on January
1, 2012 and ending on May 21, 2012. Bussing’s Complaint alleges Legent had a history
of failing to comply with FINRA regulations dating back to at least 2009. (Filing No. 96,
¶¶ 18-23). To the extent Defendants’ counterclaims allege Bussing caused Legent’s
regulatory noncompliance, Bussing is entitled to show, if it is true, that Legent had a
corporate culture of noncompliance that she was unable to repair in less than six
months—with her attempts to do so prompting a termination notice. And since Legent
claims Bussing’s mismanagement placed the company at serious risk of future regulatory
noncompliance,4 Bussing is entitled to gather FINRA records post-dating her termination
to challenge or confirm that allegation.
However, the court finds that as to some of Bussing’s proposed document
requests, date limitations would be appropriate. That is, the unlimited time frame of the

4

Defendants allege Bussing “mismanage[ed] Legent so that key positions within
the Company were understaffed or unfilled thereby exposing the Company to operating
risk, regulatory sanctions and restitution to the detriment of the Company.” (Filing No.
112, ¶ 99).
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requests as written would include irrelevant documents. And while Defendants lack
standing to object to Plaintiff’s proposed subpoena as unduly burdensome, FINRA could
raise such objections. Rather than risk delay associated with foreseeable objections
asserted by FINRA, sub-paragraphs (d) and (e) of paragraphs 5 through 11 of Plaintiff’s
proposed subpoena, (Filing No. 154-2), will be limited to the time frame of January 1,
2009 through the present. In all other respects, Defendants’ objections to Plaintiff’s
proposed FINRA subpoena, (Filing No. 154-2), are denied.

Emails in Native Format
Bussing demands production of the native version of emails produced by
Defendants. Defendants object, stating they are preparing for mediation, and sifting
through 60,000 pages of discovery to find emails, and then producing the native version
of those emails, will require a substantial investment of time for no real purpose. They
assert that as to some of the emails, Defendants have redacted privileged information, and
producing a native format of those emails will eliminate these appropriate redactions.
Finally, Defendants argue the emails are entitled to be identified as “Confidential” under
the court’s protective order.

Plaintiff may not want or need a native copy of every email, and may choose not
to request emails that include privilege redactions. To allocate the workload of Plaintiff’s
request, prevent unnecessary and wholesale copying of native files, and perhaps avert the
need to create further privilege logs and the associated motion practice, the plaintiff will
be required to first identify the emails, by Bates number, for which it requests a native
file. To the extent the requested emails are not privileged,5 Defendants will then produce
the native files of the emails on a disk or other suitable electronic media storage device.

5

This order shall not be construed as requiring Defendants to produce native files
of emails containing privileged information.
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And if the emails are considered confidential under the operative protective order, the
disclosed storage device will be marked “Confidential.”
Accordingly,
IT IS ORDERED that the parties’ jointly identified discovery issues, (Filing No.
154), are decided as follows:
1)

Sub-paragraphs (d) and (e) of paragraphs 5 through 11 of Plaintiff’s
proposed subpoena, (Filing No. 154-2), will be limited to the time frame of
January 1, 2009 through the present. In all other respects, Defendants’
objections to Plaintiff’s proposed FINRA subpoena, (Filing No. 154-2), are
denied

2)

As to the production of native versions of Defendants’ emails, Plaintiff
shall first identify the requested emails, by Bates number, for which it
requests a native file. Defendants will then produce the native files of the
non-privileged emails on a disk or other suitable electronic media storage
device. As to those emails considered confidential under the operative
protective order, the storage device will be marked “Confidential.”

3)

The court’s decision on Plaintiff’s request for native versions of all
documents, other than emails, produced by Defendants is held in abeyance
pending the outcome of the parties’ scheduled mediation.

October 16, 2015.

BY THE COURT:
s/ Cheryl R. Zwart
United States Magistrate Judge

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The court accepts no responsibility for the availability or functionality of any hyperlink. Thus, the fact that a
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