NITA L. STORMES, Magistrate Judge.
This case involves cross actions between Charles Erhart, an internal auditor, and his former employer BofI Federal Bank (BofI). Erhart filed a whistleblower and retaliation action against BofI. BofI countered with its own lawsuit based on Erhart allegedly stealing confidential information from BofI and disseminating it.
Before this court is third-party Carol Gillam's Motion to Quash the Subpoena served on her by BofI. Carol Gillam is the attorney representing Charles Erhart. Gillam argues that BofI's alleged need to depose her is outweighed by the risk of disclosing privileged and protected work product information, and that there are other available sources for the information. BofI argues that Gillam's deposition is necessary to determine what confidential information Gillam—as an agent for Erhart—disclosed to third parties. For the following reasons, the court
This case arises from a whistleblower retaliation action commenced under the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and California state law. Case No. 15cv2287, Erhart's First Amended Complaint (Erhart FAC), Dkt. No. 32. BofI employed Erhart as an internal auditor at its headquarters in San Diego, California. Erhart FAC ¶ 3. After Erhart discovered conduct he believed was unlawful, he reported the issue to BofI's chain of command. Id. Erhart alleges that rather than being thanked for reporting unlawful activity, he was threatened, harassed, and ultimately fired. Id. Subsequently, Erhart filed a complaint against BofI under federal and state whistleblower protection provisions. Erhart FAC ¶¶ 77, 90, 101.
Erhart alleges he was wrongfully terminated because BofI retaliated against him for reporting unlawful activity to the government. Erhart FAC ¶80. Upon filing the complaint, BofI alleges that Erhart publicly disclosed confidential information to the New York Times (NYT). Case No. 15cv2353, BofI FAC, Dkt. No. 12 ¶ 46. By the next day, BofI's stock price plummeted 30.2%. Id. On October 19, 2015, BofI filed a countersuit, alleging that Erhart violated the Computer Fraud and Abuse Act for publishing BofI's confidential information and deleting hundreds of files from his company-issued laptop. BofI FAC ¶¶ 65, 94. BofI did not name Erhart's counsel as a defendant in that case.
On November 10, 2015, the district judge granted the parties' joint motion for a temporary restraining order (TRO) against Erhart. Case No. 15cv2353, TRO, Dkt. No. 10. Under the TRO, Erhart and his agents were restrained from disclosing, copying, destroying, deleting, or altering any confidential information from BofI. TRO, p.2.
At the deposition Erhart testified that he did not share BofI's confidential information with the NYT and turned over only select documents to federal regulators. Case No. 15cv2353, Jt. Mtn. Discovery Dispute, Dkt. No. 39-8 (Gillam Decl. ¶¶6). He also cooperated in allowing the bank to have forensic auditors inspect his computer. Id. ¶ 7. Erhart further testified that he feared the bank would destroy the information, so he sent it to his mother, who never looked at it. Case No. 15cv2353, Jt. Mtn. Discovery Dispute, Dkt. No. 39-11 (Erhart Decl. ¶¶ 76-81).
BofI suspects that Erhart's attorney, Carol Gillam, was complicit in disseminating BofI's confidential information to the NYT and other third parties. Case No. 15cv2353, Joint Motion for Discovery Dispute, Dkt. No. 39, p.6. BofI served a subpoena on Gillam demanding production of her non-privileged communications with the media and other third parties regarding BofI. Id. Gillam objected to all requests. Case No. 15cv2353, Jt. Mtn. for Discovery Dispute, Dkt. No. 39-7 (Ex. E to Cronthall Decl.).
Specifically, BofI's subpoena sought Gillam's communications with: (1) the NYT; (2) Peter Eavis, writer for the NYT; (3) Seeking Alpha, Inc., an investment blog favored by short sellers; (4) people that write articles for submission to Seeking Alpha; (5) people seeking or sharing information on BofI, such as brokerage firms, short sellers, investors, law firms, investigators, and others; and (6) any person during the time period between September 23, 2013, to the present. Case No. 15cv2353, Apr. 26, 2016 Order, pp.3-4. After reviewing Gillam's objections in a discovery motion, the court ordered Gillam to produce all documents in her possession, custody and control that were responsive to the subpoena. Id. at 10. The court noted:
Id. at 9 (emphasis added).
Gillam produced her communications with the NYT, as well as her responses to public inquiries after the lawsuit was filed; she sent the complaint to callers who requested it. Gillam Decl. ¶¶ 9-11; Gillam Reply Decl. ¶ 9. She also sent copies of the filed complaint to family and colleagues. Id. She says she did not disclose any confidential information. Id. Meanwhile, BofI claims that these emails are evidence of Gillam's dissemination of confidential information. See, e.g., Opp'n, p.4.
The document production shows that Gillam began communicating with Peter Eavis, a reporter for the NYT, in May 2015. Case No. 15cv2353, Gillam Document Production, Dkt. No. 56-2, p.1.
After reviewing the dozen or so documents that Gillam produced in response to the subpoena, BofI subpoenaed Gillam to testify at a deposition. BofI believes that only a deposition of Gillam will reveal the content and extent of her disclosures to non-regulator third parties. Opp'n, pp.1, 2. BofI believes that Gillam and Erhart "were part of the short seller conspiracy to manipulate BofI's stock price." Id. Gillam asked BofI to withdraw the deposition subpoena, arguing that the only purpose it could serve is to help BofI build a case against Erhart and her. Mem. Ps&As, p.8; Reply, p.1. BofI refused to withdraw it, and then Gillam filed this motion to quash.
BofI complains that the motion to quash should be denied for failure to meet and confer. The court notes that counsel exchanged emails and that they are not located in the same county and thus need not meet and confer in person. Further, Gillam is not a party to this litigation, so she was not expressly bound by Judge Stormes' procedural chambers rules that govern resolution of discovery disputes. The noticed motion is properly before this court, and the court denies BofI's request to deny it on procedural grounds.
The Federal Rules of Civil Procedure allow parties to obtain discovery regarding "any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case." Fed. R. Civ. P. 26(b)(1). For discovery purposes, relevance is construed more broadly than discovery for trial. Garneau v. City of Seattle, 147 F.3d 802, 812 (9th Cir. 1998). This same broad scope of discovery applies to subpoenas. Amini Innovation Corp v. McFerran Home Furnishings Inc., 300 F.R.D. 406, 4099 (C.D. Cal. 2014). A subpoena, however, must be quashed if it requires disclosure of privileged information or subjects a person to an undue burden. Fed. R. Civ. P. 45(d)(3)(A)(iii)(iv). Courts must weigh the burden imposed on a subpoenaed party against the value of the information the subpoena seeks. Moon v. SCP Pool Corp., 232 F.R.D. 633, 637 (C.D. Cal. 2005).
The Eighth Circuit developed a test on the appropriateness of deposing opposing counsel that has been expressly adopted by several other circuits and this district. Shelton v. Am. Motors Corp., 805 F.2d 1323 (8th Cir. 1986); see Am. Cas. Co. of Reading, Pa. v. Krieger, 160 F.R.D. 582, 585, 588 (S.D. Cal. 1995) (applying Shelton test) and Textron Financial Corp. v. Gallegos, 2016 WL 4169128, *2 (S.D. Cal. Aug. 5, 2016) (stating "Shelton is generally considered the leading authority, and has been adopted in this district") and Townsend v. Imperial County, 2014 WL 2090689, *2 (S.D. Cal. May 19, 2014) (stating "The most recent and analogous cases from the Southern District of California apply Shelton") and Light Salt Investments, LP v. Fisher, 2013 WL 3205918 (S.D. Cal. June 24, 2013) (applying Shelton test); see also Mass. Mutual Life. Ins. Co. v. Cerf., 177 F.R.D. 472, 479 (N.D. Cal. 1998) (stating that Shelton "is generally regarded as the leading case on attorney depositions"). Shelton notes that while counsel is not totally immune from being deposed, the court viewed the practice "as a negative development in the area of litigation, and one that should be employed only in limited circumstances." Shelton, 805 F.2d at 1327.
A party moving to quash a subpoena normally has the burden of persuasion. Moon, 232 F.R.D. at 637. But under Shelton the burden shifts, as the party seeking opposing counsel's deposition must show it needs the deposition by demonstrating these factors:
Shelton, 805 F.2d at 1327. Accordingly, BofI bears the burden to show Gillam's deposition satisfies the Shelton test. Id.; see Am. Cas. Co. of Reading, 160 at 588.
A party must demonstrate that the information it seeks through opposing counsel's deposition is not obtainable from any other source. Shelton, 805 F.2d at 1327. BofI argues that this information is not available from other sources because only Gillam can identify all third parties with whom she communicated, and she is the only person who has complete knowledge of her communications.
As for the identity of all third parties, Gillam already produced documents that identify the third parties with whom she communicated regarding Erhart's complaint. Gillam Decl. ¶ 9. BofI points to no evidence that suggests Gillam communicated with other third parties regarding the complaint. BofI's suspicion that "Erhart and Gillam were part of the short seller conspiracy to manipulate BofI's stock price" is not sufficient to overcome the significant burden it has to show that no other available sources of information exist. See Opp'n, p.4. Further, it assumes that Gillam, an officer of the court, failed to fully respond to the discovery ordered by this court.
BofI next contends that Gillam's deposition is necessary because she "is the only person who possesses complete knowledge regarding her own communications." Opp'n, p.10. To attempt to meet the burden, BofI simply states that "given the extent of her communications, there is reason to believe that Gillam may have had telephone calls or meeting with third parties with whom she did not exchange written communications." Opp'n, p.11. But BofI points to no evidence as to why Gillam would have sent certain short sellers the complaint via email but only communicate via telephone with other short sellers without any written follow-up.
As evidence that Gillam failed to produce at least one email, BofI points to "Eavis' October 15, 2015 New York Times' article [that] included a quote from Gillam that the article notes was provided to Eavis `in an email.'" Opp'n, p.11.
Finally, BofI argues that Gillam inserted herself into this litigation and "should have considered the possibility that she would become a witness before she engaged in numerous third party communications and voluntarily interjected herself into the effort to disseminate Erhart's theories beyond the regulators and the Court." Opp'n, p.12. Here, BofI conflates responses to media inquiries with active dissemination of allegedly confidential information; if this were the case, consider the impact such a principle would have on any press statements made by any attorneys concerning active litigation. And even if this baseless assertion were considered true and Gillam was considered a witness, it still would not bestow her with "exclusive information" over the requested information. See Opp'n, p.13.
In sum, Gillam provided a document production with the names and contact information for third parties. BofI does not show any reason why the other parties to the communications could not provide the same information that Gillam could provide. It is insufficient to show that Gillam's deposition is the most convenient source of the information. Accordingly, BofI does not meet its burden in showing that the requested information is unavailable from other sources.
Addressing the second Shelton factor, this court already found that Gillam's communications with third parties are relevant:
Case No. 15cv2353, Dkt. No. 44, pp.5-6 (emphasis in original). In response to this discovery order, Gillam produced all documents in her possession. But nothing in the documents indicate that Gillam disseminated confidential information to third parties or that further information exists.
While the nature and extent of Gillam's communications with third parties may be non-privileged, deposing Gillam on her already-produced documents runs the risk of involving privilege objections and collateral matters not relevant to the litigation:
Shelton, 805 F.2d at 1327. BofI relies on suspicion to justify its request for additional information. In light of BofI failing to show that this information is unavailable from other sources, the frowned-upon practice of deposing opposing counsel except when absolutely necessary and the potential for compromising the quality of client representation in this case, the court finds that the potential intrusion on attorney-client privilege and the burden Erhart would bear in this situation weigh against the utility of deposing Gillam.
In the final Shelton factor BofI must show that the information sought is crucial to the preparation of its case. Shelton, 805 F.2d at 1327. It argues that further information on Gillam's third-party communications are crucial to its claim of dissemination of BofI's confidential information. But BofI fails to establish a link between Gillam and the alleged dissemination of confidential information. Nothing in Gillam's document production shows that her communications with third parties involved confidential information.
To support its argument that Gillam disseminated confidential information, BofI points to an email from Peter Eavis to Gillam where he asks her to comment on a non-public SEC subpoena to BofI.
The heart of BofI's case concerns the alleged dissemination of confidential information. That question to Gillam has been asked and answered through her document production. Even the district judge noted the speculative nature of BofI's claims regarding an alleged conspiracy with short sellers:
Case No. 15cv2353, Order Denying Preliminary Injunction, Dkt. No. 70, p.19. In sum, having reviewed Gillam's document production, the court does not see a link between non-defendant Gillam and BofI's claim against Erhart for dissemination of confidential information. Such a tenuous tie cannot justify a deposition of Gillam.
The court finds that the speculative basis for potentially intruding on Erhart's attorney-client relationship is insufficient to justify a deposition of opposing counsel Carol Gillam, especially where BofI has not met its burden to show that the information is unavailable elsewhere. The court therefore
