Dobina v. Weatherford International Ltd. et al

Filing 207

ORDER granting in part and denying in part 177 Motion to Compel: For the reasons discussed above, the motion to compel additional document discovery (Docket no. 177) is granted to the extent that Weatherford shall produce all non-duplicative documents turned over to the SEC in response to Subpoenas 2 5, and is otherwise denied. (Signed by Magistrate Judge James C. Francis on 10/28/2013) Copies Mailed By Chambers. (tn)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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IN RE WEATHERFORD INTERNATIONAL
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SECURITIES LITIGATION
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JAMES C. FRANCIS IV
UNITED STATES MAGISTRATE JUDGE

11 Civ. 1646 (LAK) (JCF)
MEMORANDUM
AND ORDER

The plaintiffs bring this putative class action on behalf of
purchasers of securities issued by Weatherford International Ltd.
(“Weatherford” or the “Company”), alleging that Weatherford and
certain of its officers made false and misleading statements in
violation of federal securities laws.

Pursuant to Rule 34 of the

Federal Rules of Civil Procedure, the plaintiffs move for an order
compelling the defendants to immediately produce all documents
relating to Weatherford’s prior and anticipated future responses to
subpoenas by the Securities and Exchange Commission (the “SEC”) and
the Department of Justice (the “DOJ”).

The motion is granted in

part and denied in part.
Background
A complete discussion of the factual background of this
litigation is set forth in Dobina v. Weatherford International
Ltd., 909 F. Supp. 2d 228 (S.D.N.Y. 2012).

1

The plaintiffs allege

that the defendants made false and misleading statements regarding
the quality of Weatherford’s internal controls over its income tax
and other financial reporting between April 25, 2007 and March 1,
2011.
The SEC has issued a total of five subpoenas on Weatherford
since March 1, 2011.
2011.

The first subpoena was issued on March 17,

(SEC Subpoena dated March 17, 2011 (“Subpoena 1”), attached

as Exh. 10 to Plaintiffs’ Motion to Compel Production of Documents
Related

to

Parallel

(“Motion”)).

Government

Investigations

of

Defendants

Three more were issued the following year.

(SEC

Subpoena dated March 28, 2012 (“Subpoena 2”), attached as Exh. 11
to Motion; SEC Subpoena dated June 8, 2012 (“Subpoena 3”), attached
as Exh. 12 to Motion; SEC Subpoena dated Aug. 16, 2012 (“Subpoena
4”), attached as Exh. 13 to Motion).

The most recent SEC subpoena

was issued on August 8, 2013, and requested, among other things,
copies

of

the

depositions

taken

connection with this case.

and

discovery

produced

in

(SEC Subpoena dated Aug. 8, 2013

(“Subpoena 5”), attached as Exh. 6 to Motion). In addition to this
latest subpoena, the SEC issued a voluntary document request to
Weatherford’s

Audit

Committee

asking

it

to

find

and

produce

documents responsive to an expanded list of search terms, including
“all search terms agreed to by Weatherford [in] In Re Weatherford
International Securities Litigation.”
2

(SEC Document Request dated

Aug. 7, 2013 (“Doc. Request”), attached as Exh. 5 to Motion).
At the start of discovery, the plaintiffs requested any
documents “concerning or produced in connection with the SEC and
DOJ investigations” of Weatherford’s income tax restatements and
the quality of internal controls over its financial reporting.
(Lead Plaintiff’s First Set of Requests for the Production of
Documents to Defendants, attached as Exh. 1 to Motion, at 16;
Motion at 1).

The plaintiffs claim that the Company has not fully

complied with this request because it has failed to produce (1)
documents that have been or will be produced in response to the
most recent SEC demands to Weatherford (Subpoena 5 and Doc.
Request), and (2) all documents “relating to,” but not necessarily
produced

in

connection

Subpoenas 1-4.

with,

(Motion at 2).

Weatherford’s

responses

to

SEC

They seek to compel discovery of

all documents relating to or produced in response to all five SEC
subpoenas within seven days of an order on this motion. (Motion at
4; Proposed Order Granting Plaintiffs’ Motion to Compel Production
of Documents Relating to Parallel Government Investigations of
Defendants).
The defendants agree that the SEC subpoenas themselves and at
least some of the documents produced in connection with the
subpoenas are discoverable, but they argue that any demand for
documents that Weatherford “may someday provide to the SEC” is
3

unreasonable

and

speculative.

(Defendants’

Opposition

to

Plaintiffs’ Motion to Compel Production of Documents Relating to
Government Investigations of Weatherford (“Def. Memo.”) at 2).
They also challenge the breadth of the document requests, claiming
that some of the documents, particularly those “relating to” these
responses, are not discoverable under Rule 26(b) because (1) they
are not relevant to the issues in this litigation and are “outside
the discovery parameters established by [this court],” or (2) they
have already been turned over to the plaintiffs, making the request
duplicative.

(Def. Memo. at 2).

Discussion
Parties

are

entitled

to

discovery

of

documents

“possession, custody, or control” of other parties.
P. 34.

in

the

Fed. R. Civ.

However, a moving party must show that the requested

documents are at least “reasonably calculated to lead to the
discovery of admissible evidence.” Fed. R. Civ. P. 26(b)(1). Even
if the sought-after documents are relevant, the court must limit
discovery

if

the

request

is

“unreasonably

cumulative

or

duplicative,” the requesting party has had “ample opportunity to
obtain the information by discovery,” or the “burden or expense of
the proposed discovery outweighs its likely benefit” considering
the needs of the case and importance of the documents.
Civ. P. 26(b)(2)(C).
4

Fed. R.

The fact that Weatherford may have easily producible copies of
its responses to SEC subpoenas does not automatically entitle the
plaintiffs to that information and anything related to it.
possible,

indeed

likely,

that

some

portions

of

It is

Weatherford’s

responses to the SEC are duplicative of materials already produced
to the plaintiffs and that the burden of producing documents
“relating

to”

the

subpoenas

plaintiffs suggest.

is

not

as

insignificant

as

the

Rule 26(b) guides discovery in this case

regardless of what was turned over to the SEC, and a balancing
analysis indicates that the appropriate scope of document discovery
here is more limited than what the plaintiffs request.
A.

Documents Produced in Response to Subpoenas 1-4

The first subpoena issued by the SEC in March 2011 is directly
relevant to the allegations made by the plaintiffs in this case,
calling for documents related to “the circumstances and events
leading up to the identification of the material weakness in
accounting for income taxes in Weatherford’s internal control over
financial

reporting.”

(Attachment

to

Subpoena

1

at

2).

Weatherford states that it has already given the plaintiffs all
documents produced to the SEC pursuant to Subpoena 1. (Def. Memo.
at 3).

Accordingly, no court order is warranted with respect to

this request.
Subpoenas 2-4 focus largely on events that occurred in 2012.
5

I previously ruled that evidence pertaining to the Company’s 2012
income tax restatements may shed light on the allegations of false
and misleading statements made during the class period ending on
March 1, 2011, and thus be relevant for discovery purposes.

In Re

Weatherford International Securities Litigation, No. 11 Civ. 1646,
2013 WL 2355451, at *4 (S.D.N.Y. May 28, 2013).

“[C]ognizant of

[this] view” and given the “tenor” of my order, the defendants
“voluntarily” gave the plaintiffs copies of Subpoenas 2-4 along
with “800,000 pages of documents” -- much, though perhaps not all,
of the material produced in response to those subpoenas.

(Def.

Memo. at 3 (conceding that it was “arguably relevant” and a “far
lesser

burden”

to

disclose

given

that

it

had

already

been

collected, reviewed, and produced to the SEC)).
The general subject matter of Subpoenas 2-4 suggests that
Weatherford’s responses are reasonably likely to lead to admissible
evidence in this case and are therefore discoverable.

To the

extent that the defendants have not yet provided the plaintiffs
with all of the documents that Weatherford submitted in response to
SEC Subpoenas 2-4, they shall now do so.
B.

Documents “Related To” Responses to Subpoenas 1-4.

In addition to the documents Weatherford has actually turned
over or will turn over to the SEC, the plaintiffs seek discovery of
four additional categories of documents “relating to” the subpoena
6

responses:

“(ii) communications between the Company and the SEC

and DOJ; (iii) non-privileged internal Weatherford documents and
emails discussing or relating to the SEC and DOJ investigations;
(iv) non-privileged underlying documents created or collected in
connection with the investigations; and (v) communications with
third parties regarding the SEC and DOJ investigations.”

(Motion

at 2; Letter of Eli R. Greenstein dated June 28, 2013, attached as
Exh. 2 to Motion, at 2; Letter of Eli R. Greenstein dated July 10,
2013, attached as Exh. 3 to Motion, at 2).
documents

are

“squarely

relevant”

and

They claim that these
“related

to

the

same

restatements and internal control weaknesses” at issue in this
case.

(Motion

at

3,

n.4

(citing

Deposition

Transcript

of

[Weatherford Representative] Steven Gyeszly dated June 5, 2013,
attached as Exh. 9 to Motion, at 102, 287)).

The defendants argue

that these “related” documents are not relevant, in part because of
the broader scope of the SEC’s investigations.

(Def. Memo. at 4).

The plaintiffs fail to adequately specify how these related
documents are reasonably calculated to lead to the discovery of
admissible evidence.
relevant

may

explain

That the subject matter of the subpoenas is
why

documents

produced

to

the

SEC

are

discoverable, but not why disclosure of internal discussions,
communications, or preparations related to those subpoenas is
warranted.

The only specific example of information “related to”
7

the subpoenas that the plaintiffs provide is a series of meetings
between the defendants and SEC investigators during which the
former provided “findings” of their interviews and “results” of
their ongoing investigations.

(Motion at 3).

But pointing to one

example of potentially discoverable material does not transform an
overbroad request into one that is “properly tailored.”

Martinez

v. Robinson, No. 99 Civ. 11911, 2002 WL 424680, at *2 (S.D.N.Y.
March 19, 2002).
The plaintiffs justify their requests by pointing out that the
burden on Weatherford is trivial as many of these documents “have
already been (or soon will be) gathered, reviewed and provided by
Weatherford to the SEC and can simultaneously be produced to
Plaintiffs.”

(Motion at 4).

But that does not apply with respect

to the “related to” document request, which specifically seeks the
kinds of documents that were not turned over to the SEC, and that
would not necessarily be readily available for production.
minimal

benefit

of

producing

questionably

relevant

The

“related”

material is outweighed by the burden of production on Weatherford.
C.

Subpoena 5 and the Voluntary Document Request

The plaintiffs argue that any documents produced pursuant to
Subpoena 5 and the voluntary document request of Weatherford’s
Audit Committee are directly relevant to the present case. (Motion
at 3).

That is unsurprising, given that this latest SEC request
8

specifically asks for documents produced in the instant litigation.
(Def. Memo. at 1; Subpoena 5; Doc. Request). The defendants do not
dispute the relevance of the Company’s response to Subpoena 5.

At

the time this motion was filed, however, Weatherford had not yet
given the plaintiffs any documents related to Subpoena 5 because it
had not yet actually produced any documents to the SEC. (Def. Memo.
at 1-2).

Instead, the defendants agreed to consider giving the

plaintiffs some of the documents after a response to the SEC
subpoena is submitted. (Def. Memo. at 1; Letter of Peter A. Wald
dated Sept. 19, 2013, attached as Exh. 7 to Motion).
According to the defendants, the first production in response
to Subpoena 5 consisted entirely of documents that were already
produced to the plaintiffs in this matter.

(Def. Memo. at 2).

The

plaintiffs’ attempt to piggyback on the SEC’s investigation of
Weatherford has created a discovery loop in which they ask for what
is given to the SEC, but what is given to the SEC is precisely what
they

have

already

asked

for

and

received.

This

is

plainly

cumulative and unnecessarily burdensome.

Weatherford need not

disclose

those

documents

given

to

the

SEC

if

documents

had

previously been produced to the plaintiffs.
The plaintiffs are also upset at the pace of the response to
Subpoena 5.

Alas, the consequence of making their discovery

requests contingent on other investigations is that the plaintiffs
9

must now wait their turn for a copy of Weatherford's response.

The

Company need not disclose its Subpoena 5 responses before they have
been submitted to the SEC.

Once they have been turned over to the

SEC, any documents not already turned over to the plaintiffs shall
be produced forthwith.
Conclusion
For

the

reasons

discussed

above,

the

additional document discovery (Docket no. 177)

motion

to

compel

is granted to the

extent that Weatherford shall produce all non-duplicative documents
turned over

to

the

SEC

in

response

to

Subpoenas

2 5,

otherwise denied.
SO ORDERED.

UNITED STATES MAGISTRATE JUDGE

Dated: New York, New York
October 28, 2013
Copies mailed this date to:

Jala Amsellen, Esq.

Lionel Z. Glancy, Esq.

Michael Goldberg, Esq.

Robert V. Prongay, Esq.

Glancy Binkow & Goldberg LLP

1801 Avenue of the Stars, Suite 311

Los Angeles, CA 90067

10

and

is

Howard G. Smith, Esq.

Smith & Smith

3070 Bristol Pike, Suite 112

Bensalem, PA 19020

Curtis V. Trinko, Esq.

Law Offices of Curtis V. Trinko, LLP

16 west 46th Street, Seventh Floor

New York, New York 10036

Eli R. Greenstein, Esq.

Erik D. Peterson, Esq.

Ramzi Abadou, Esq.

Stacey M. Kaplan, Esq.

Jennifer L. Joost, Esq.

Kessler Topaz Meltzer & Check, LLP

One Sansome St., Suite 1850

San Francisco, CA 94104

Darren J. Check, Esq.

Kessler Topaz Meltzer & Check, LLP

280 King of Prussia Road

Radnor, PA 19087

David R. Scott, Esq.

Scott & Scott LLC

156 South Main Street

P.O. Box 192
Colchester, ct 06415
Mary K. Blasy, Esq.
Scott & Scott LLC
707 Broadway, Suite 1000
San Diego, CA 92101
Darren J. Robbins, Esq.
Robbins Geller Rudman & Dowd LLP
655 West Broadway, Suite 1900
San Diego, CA 92101
David A. Rosenfeld, Esq.
Evan J. Kaufman, Esq.
Robbins Geller Rudman & Dowd, LLP
58 South Service Road, Suite 200
Melville, New York 11747
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Robert J. Malionek, Esq.

Sarah A. Greenfield, Esq.

Latham & Watkins LLP

885 Third Avenue, Suite 1000

New York, New York 10022

Kevin H. Metz, Esq

Latham & Watkins LLP

555 Eleventh Street, NW, Suite 1000

Washington, DC 20004

Peter A. Wald, Esq.

Latham & Watkins LLP

505 Montgomery Street, Suite 2000

San Francisco, CA 94111

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