Securities and Exchange Commission v. North Star Finance LLC
8:15-cv-01339
D. MarylandOct 10, 2017Background
- SEC sued Michael K. Martin and has sought Martin's Yahoo emails since discovery began; the court ordered Martin to send a specific "Consent Email" authorizing Yahoo to release a designated account's emails to the SEC.
- Martin refused to send the Court-prescribed Consent Email, submitted an altered authorization that limited disclosure and changed language (e.g., "protested signature," no attachments), and did not comply with subsequent court orders.
- The court warned that continued noncompliance could result in contempt, monetary sanctions (deemed ineffective), and issuance of an arrest warrant to secure compliance; the court later held Martin in contempt and notified him an arrest warrant would issue unless he complied by a set date.
- Martin filed a Motion for Reconsideration arguing the order violated his Fourth and Fifth Amendment rights and attorney-client privilege, and sought a stay and permission to pursue an interlocutory appeal.
- The SEC proposed a produce-and-filter protocol: Yahoo would release emails to the SEC, and a segregated reviewer team would screen for privileged emails before investigators see non‑privileged, responsive material.
- The court denied reconsideration, finding (1) it had authority to order the consent as a discovery sanction, (2) the order did not violate the Fifth Amendment or attorney-client privilege given the proposed filter protocol, and (3) interlocutory appeal certification and a stay were not warranted.
Issues
| Issue | Plaintiff's Argument (SEC) | Defendant's Argument (Martin) | Held |
|---|---|---|---|
| Authority to compel Martin to sign consent directing Yahoo to produce his emails | Court may order party to produce documents in its possession, custody, or control; ordering consent to obtain emails is an appropriate discovery sanction | Court lacks authority to compel the specific consent form / cannot force disclosure through consent | Court: Fed. R. Civ. P. 34/37 and case law permit ordering party to sign consent as a discovery sanction; order was within court's authority |
| Fifth Amendment (self-incrimination) | Compelled production of emails is civil discovery and non-testimonial; signing consent is not a testimonial act that would incriminate Martin | Signing consent and producing emails would compel self-incrimination in violation of the Fifth Amendment | Court: Signing is non-testimonial and emails are pre-existing documents; no Fifth Amendment violation |
| Attorney-client privilege and privilege screening | SEC: proposed filter team and search terms will protect privileged communications; only non-privileged responsive emails would be seen by investigation team | Martin: forced disclosure will reveal privileged communications and violate privilege | Court: Adopted produce-and-filter protocol as adequate safeguard; privilege will be protected; order does not violate privilege |
| Interlocutory appeal / stay (28 U.S.C. § 1292(b)) | No substantial ground for difference of opinion; immediate appeal would not materially advance termination | Requests interlocutory appeal and stay if court won’t grant motion | Court: Denied certification for interlocutory appeal and denied stay |
Key Cases Cited
- United States v. Fisher, 425 U.S. 391 (Sup. Ct.) (documents prepared by defendant are not protected testimonial communications under the Fifth Amendment)
- Doe v. United States, 487 U.S. 201 (Sup. Ct.) (to invoke the Fifth Amendment, compelled act must be testimonial)
- Fayelleville Investors v. Commercial Builders, Inc., 936 F.2d 1462 (4th Cir. 1991) (Rule 54(b) governs interlocutory reconsideration motions)
- Am. Canoe Ass'n v. Murphy Farms, Inc., 326 F.3d 505 (4th Cir. 2003) (district court discretion under Rule 54(b))
- In re Subpoena Duces Tecum to AOL, Inc., 550 F. Supp. 2d 606 (E.D. Va. 2008) (federal court may order party to consent to provider disclosure under pain of sanctions)