Case Information
*1 ___ ,FtiD ~ENTEREO
IN THE UNITED STATES DISTRICT COURT--_,t.lOOJl __ ,flCEI'IED FOR THE DISTRICT OF MARYLAND OCT 102017 SOli them Divisio/l "'. un.£N~ElT C\.ERl< u.•. OllITPlICT COUll, DlSl1l&T O~ IIA!l'1t1J«l SECURITIES AND EXCHANGE * COMMISSION,
* Plaintiff, Case No.: G.III-15-1339 v. * NOIHII STAR FINANCE, LLC, l't ul.,
* ()efendants. * *
* * * * * * * * * * * * *
MEMORANDUM OPINION PlaintilTSecurities & Exchange Commission ("SEC') brought the present enll)rCement action against Defendant Michael K. Martin ("Martin") on May II. 2015. and has been attempting to obtain Martin's emails via discovery since September 29.2016. when Martin Iiled a Motion to Stay Dise()\'ery. ECF No. 211. Presently pending betllTe the Court is Martin's Motion to Reconsider this Court's September 25.2017 Order holding Martin in contempt Illr failing to consent to the release of his emails by his service provider by sending an email granting authorization (the "Consent Email"). ECF No. 336. No hearing is necessary. See Loc. R. 105.6 (D. Md. 2016). For the lollo\\'ing reasons. Defendants' Motion for Rewnsideration is denied. I. BACKGROUND
On December 29. 2016. the Court issued an Order directing Martin to send a Consent Email to Yahoo. Inc" his email service provider. authorizing Yahoo to release Martin's acwunt inll))')nation and certain ofMartin's emails to the SEC: specilieally.the Yahoo email aeconnt *2 with the Yahoo ID "capitalsourcclcnding@yahoo.com."' ECF No. 235. Martin did not comply with this Ordcr. and on February 3. 2017. the Court issucd anothcr Ordcr. dirccting Martin to show causc \\hy he should not be held in contempt. ECF No. 252. I'laintilTSEC has sincc endeavored to subpocna Martin's cmails Ii'om Yahoo dircctly. an cfTi.lI"twhich Yahoo has opposed. See ECF No. 275. ECF No. 291. The Court hcld a motions hearing on Junc 30.2017 to hcar argumcnt on thc administrativc subpoena issuc. and Martin did not appcar. See ECF No. 307. On August 4. 2017. this Court again ordcrcd Martin to sign thc Conscnt Email sct fi.mh in ECF No. 235. a copy of which was attached to that Ordcr. ECF No. 321. Thc Court warncd Martin that:
If Martin fails to do so within tcn (10) days of this Ordcr. thc Court will hold Martin in contcmpt pursuant to Fcd. R. Civ. P. 37(b)(2)(vii). Furthcr. bccausc Dcfendants' funds havc bcen Irozen by the Court fi.lr the bcnefit of the allegcd victims. a monctary finc would not effectively compcl production in this casc. Thcrcforc. ifthc Court holds iVlartin in contempt. it will also issuc an arrcst warrant and dircct that Martin be hcld by thc U.S. Marshals unlil he complics with this Order.
Ill. at 2. [1] On August 16.2017. during a telephonc status call \\'ith thc parties. Martin statcd that hc would comply with this Court's Ordcr and send thc Conscnt EmaiI.ECFNo.323.llowcver. on August I~. 2017. the SEC provided this Court with a copy of an "Amendcd Authorization fllr the Release of Yahoo Emails," which Martin had scnt to the SEC. Exhibit A. The SEC takes the position that the document "f~lils to comply with the Court's Order," and rclayed to thc Court that Yahoo's counsel "confirmed that Yahoo docs not decm the so-called authoriz.ation surticient to permit it to release the emails sought by thc Commission," Indeed. despite the Court's explicit instruction thai Martin send the Consent Email contained in ECF No. 235. Martin made a number of significant changes before returning the document. Specifically. Martin's "Amend cd I Pin cites to documents tiled on the C01ll1"s electronic filing system (Cl\l'ECF) refer to the page numbers generated by that system. *3 Authorization" gives his "protested signature" rather than his "express consent."
('OIl/fllII'" Exhibit A willi Exhibit B. Furthermore. he gives Yahoo permission to "disclose only logs. containing names and addresses received and sent without attachments" rather than ..,a Jil emails. induding ddeted emails.togetherwiththeirattaehments."COlllflOl''' Exhibit A \I'illl Exhibit B. Finally. Martin states that he "doles] not hold harmless Yahoo Illr the disclosure:' whereas the Consent Email provided that he should "agree to hold harmless .. , Yahoo I"orthe disclosure:' COlli/WI''' Exhibit A \filll Exhibit B.
On September 25. 2017. the Court held Manin in contempt 01" court and ordered that an arrest warrant would be issued I()r Martin. to be held in abeyance until 12 noon on October 2. 2017: the Coun ordered that il"Manin complied with the Court's order and signed the Consent Email prior to that time. the court would indelinitely stay the arrest warrant. ECF No. 335 at 3. Rather than complying with this Order. however. on September 26.2017. Martin Iiled a Motion I(lr Reconsideration. lOCI' No, 336. In his Motion Ill[ Reconsideration. Manin generally asks the Court to "deny the ... ISECrs application I()r mandated/compelled disclosure 01" DetCndant Martin's Yahoo email account:' Idat 1. Speeilically. Manin makes a litany 01" arguments- which are at times di rticult to parse through - ineluding that the compelled production 01" his emails violates his Fourth and Fifih Amendment rights. along with his Attorney-Client Privilege. S"" hi. at 4. 6-16. On September 27, 2017. the SEC Iiled an Opposition to Martin's Motion. arguing that Martin "merely rehashes arguments that this Court previously rejected:' and that Martin is not entitled to a reconsideration ol"the Court's prior orders. ECF No. 338 1.4.
II.
STANDARD OF' REVIF:\V
Although Martin does not cite to a particular Federal Rule permitting reconsideration 01" the Court's prior decision. because no Iinaljudgment has been entered in this case. Martin's ,
,I
*4 Motion is controllcd by Rule 54(b) of the Federal Rules ofCivill'roeedure, That rule providcs. in rclcvant part:
IAlny order or other dccision. however dcsignated. that adjudicates 1C\I'er than all the claims or the rights and liabilities of fewer than all the parties, , , may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities,
Fed, R. Civ. P. 54(b): see also Ce::air \', .J1',l/orgall Chase Balik. NA .. No. CIV.A, DKC 13- 2928.2014 WI. 4955535. at * 1 (D. Md. Sept. 30. 2(14)
(citing Fayelle!'ille IIIl'eslors \', Commercial Builders. IlIc .. 936 F,2d 1462. 1469-70 (4th Cir. 1991)) ("It is well-established that the appropriate Rule under which to tile motions l()r reconsideration of an interlocutory order is Rule 54(b)."). The power to grant relief under Rule 54(b) "is committed to the discretion of the district court." Am, ('alloe Ass "I \', Murphy Farms. IIIC,. 326 FJd 505. 515 (4th Cir. 2(03) I', ,l/erclIIY COIISI, CIII'l'.. 460 U.S, I. 12. 103 S,C!. 927 (citing Moses H. COile Mem, liosp, (1983)),
The United States Court of Appeals lor the Fourth Circuit has not detined the precise standard governing a motion for reconsideration under Rule 54(b), See Fayellel'i1le. 936 F.2d at 1472. Courts in this district have. however. Ji'equently looked toward the standards articulated in Rules 59(e) and 60(b) tor guidance in considering such motions, See Ce::air. 2014 WI. 4955535. at * I (citing Ake\'({, I.LC 1'. Adidas Am" IIIC,. 385 F, Supp, 2d 559. 565-66 (M,D,N.C, 2(05)). Thus. "[mlost courts hm'e adhered to a fairly narrow sct of grounds on which to reconsider their interlocutory ordcrs and opinions. Courts will reconsider an intcrlocutory order in the 1()lIowing situations: (I) there has been an intervening change in controlling law: (2) there is additional cvidence that was not previously available: or (3) the prior dccision was based on clear error or would work manifest injustice." Ake\'({. 385 F. Supp. 2d at 565-66: ,lee also IlIlIes \', Btl. oJ' Regellls o/'lhe Ullil', -")'.1, o{Md .. 121 F. Supp, 3d 504. 506-07 (D, Md, 2(15) (applying this *5 three-part test when evaluating a motion for reconsideration under Rule 54(h)). Importantly. "a motion to reconsider is not proper where it only asks the Court to rethink its prior decision. or presents a hetter or more compelling argument that the party could have presented in the original hriefs on the matter:' lJoykin Allchor Co. \'. Wong. NO.5: IO-CY -591-FL. 2012 WI. 937182. at *2 (E.D.N.C. Mar. 20. 2012): ct: I/lI/chi/l.l"On \'. Sill/Oil. 994 F.2d 1076. 1082 (4th Cir. 1993) (noting that "mere disagreement". with the court"s ruling does not support a motion to alter or amend thc judgment).
III.
DISCUSSION
Martin's Motion fllr Reconsideration does not raisc any "intcrvcning change in controlling law" or "additional cvidcnce that was not previously availablc:' As such. t\.1artin's Motion fiJr Reconsideration has mcrit only ifthc Court's prior ruling was "hased on clcar error or would work manifcst injustice:' Martin raises a numher ofargumcnts allcging that thc Court's ruling violates his rights. which the Court addresses in turn.
A. The Court has the authority to order Mal.tin to consent to the release of his emails As an initialmattcr. the Court notes that it possesscs clcarly established authority to order Martin to consent to thc releasc of his cmails by Yahoo as a discovcry sanction. Undcr Fedcral Rulc of Civil Proccdurc 34(a). a party may rcqucst the production of documcnts and various other categorics of items that arc "in the rcsponding party's possession. custody. or control:' Fcd. R. Civ. 1'. 34(a)(I). The items that may bc sought under thc Rulc includc "clcctronically storcd Fcd. R. Civ. 1'. 34(a)( I). which plainly cneompasses information:' both clectronic communications and archivcd copics of such communications that arc prcservcd in clectronic form. sec Fed. R. Civ. 1'. 34. Advisory Committee Notc to 2006 Amcndmcnts: luhlllllkc \', UIJS fJ'lIrhllrg HC 217 F.R.D. 309.317 nn. 36-38 (S.D.N. Y.2003), A rcqucst fllr production undcr *6 Rulc 34 "nccd not bc con lined to documents or othcr itcms in a party's posscssion. but instcad ... Flagg \', ('ily o(Delroil. 252 may properly extend to itcms that arc in that party's 'control. 34(a)( I )): see a/so Cooper Illduslries. F.R.D. 346. 353 (E.D. Mich. 2008) (quoting Fed.R.Civ.P. IIIC, \'. Brilish Aero.IJUlce, !Ill'.. 102 F.R.D. 918. 919 (S.D.N, Y .1984) ("Documents nccd not bc in the posscssion ofa party to be discoverablc. they nccd only be in its custody or control.")
Wherc a party Hlils to comply with its discovcry obligations. "a party may mo\'C I()I' an order compelling disclosure or discovcry," Fed. R. Civ. P. 3 7(a)( I ). Spcci lically. thc party "may movc for an ordcr compclling ... production, . , if. , . a party I[lils to produce documcnts or lails to rcspond that inspcction will bc pcrmitted -- or fails to pc I'mit inspcction -- as rcqucstcd undcr Rule 34," Fcd. R. Civ.l'. 37(a)(3)(B)(iv). It is wcll-cstablishcd that COlitis may compcl parties to sign consent I(11'111S authorizing the rclcase ofthcir cmails whcrc thosc parties rcfuscd to producc in Lite Techn%gies COll' .. a magistratc judgc issucd a the emails through discovery, For instancc. consent dircctivc to a dclendant who had refused to produce emails in disco\'cry. Uti! Techs, C"r", \', Uti! Tecl1s. Cor".. Mag. Rcp, and Rccommcndations. Civ. Casc No, 8: IOcv3527. ITF No. 122 (.Ian. 9.2014). adopled hy. Ordcr. IOcr No. 132 (Mar. 4. 2(14) (Titus . .I.), This typc o I'discovery tool has been utilizcd or recognizcd in a numbcr ofothcr courts. See S.E.c. I'. Co/!. BO/l/lel.Inc .. 155 F.R.D. I. 2 (D.D.C. 1994) ("An ordcr to compcl dclcndants to sign a conscnt form is a pcrmissiblc mcthod of obtaining that discovcrable inlormation in a civil contcxt. provided that thc 1(11'111 ofthc conscnt does not abrogate detendants' Fitih Amcndmcnt or due proccss rights"): In re Suhpa<'l1a Du('('s TecuIJI 10 AUL. Ue. 550 F. Supp. 2d 606. 614 (E.D. Va. 20(8)
(rcasoning that a tedcral court "could order thc [party] to conscnt to [their cmail providcr] disclosing the contcnts ofthcir e-mailsunderthcpainofsanctions .. ):s.E.C.\ .. KarroulJI.No. 15-590 (.IEBIDAR). 2015 WI. 8483246. at *2-3 (D.D.C. Dcc. 9. 2(15) (rcasoning that ..the Collti certainly has thc authority to
I must conscnt order" the dctendant to sign an ordcr "which spcci Iicd that [the dclcndant to *7 having his Internet Service Provider (ISP) turn over his emails to the SEC"), In fact. eventhc Electronic Frontier Foundation. which liled anolllie/ls brief in this case. EC I' No. 300-1. pointed out that the SEC could "compel compliance with its [discovery I requests"
through "litigation sanctions," ECF No, 300.1 at 11. As such. the Court finds that it was not outside the authority of the Court to order Martin to sign the Consent Email. The Court next looks to whether the Court's order violates Martin's Constitutional rights or Attorney-Client privileges.
B. The Court's order docs not violate Martin's Fifth Amendment Constitutional rights Throughout his Motion for Reconsideration. Martin argues that the Court's order !iJrces him to violate his Filih Amendment right against sell~inerimination." .\'rr ECF No, 336 at 10, The Sell:'-Incrimination Clause of the Fitih Amendment provides that "[nJo person. , , shall be compelled in any criminal case to be a witness against himself:' The Supreme Court has explained that ..the privilege protects a person only against being incriminated by his own Fis!la \" Vlli/rd Slalrs. 425 U.S, 391. 409 (1976) compelled testimonial communications," (citing Se!llllaha \', Coli(iJrnio. 384 U.S. 757 (1966): Ulli/rd Slalrs \', Wodr. 388 U.S. 218 (1967): and Gi/hrrt \', Co/!fiJrnio. 388 U.S. 263 (1967)). Where a court compels a party to sign a consent directive. such an order may violate the Fitih Amendment only if ..the act of executing the form is a .testimonial communication, ... Doe \', Vlliled Sloles. 487 U,S. 201. 207 (1988), It is clear that the required production of documents "does not compel oral testimony," nor would it "compel the [reeipienlj to restate. repeat. or aflinn the truth of the contents of the documents ! Martin also makes relerences to a violation of his Fourth Amendment rights. 5;1;'(' ECF [1] 0 .336 at I. 4-9.12. I.t. 1I00\"cvcr. MaJ1in"s Fourth Amendment argument appears to be in reference to the administrative subpoena that the issued to Yahoo. Set.' id at 7. At issue here is Mm1in"s lailure to comply with his discovery SEC previously obligations. and the validity of the administrative subpoena is a separate issue which the C01ll1 will not consider at this time. *8 sought:' Fisher. 425 U.S. at 408-09. Emails are "pre-existing. voluntarily prepared documents. which are not covered by the Fi fih Amendment." S. E. C. \'. K(l/TOUIIl. No. 15-590 (.IEB/DA R). 2015 WI. 8483246. at *3 (D.D.C. Dec. 9. 2015). "[1 In order to be testimonial. an aeeused's communication must itself. explicitly or implicitly. relate a factual assertion or diselose information. Only then is a person compelled to be a '\\'itness' against himself:' Doe. 487 U.S. at 210. Where the parties already know that certain accounts and documents exist. the controlling party's compelled disclosure of those accounts and documents likely docs not communicate a lilctual assertion or disclose inl()J'Jllation. See //1 re Vl/rious C;rl/lld ./tIlY Suhpoe/1l/s. 248 F. Supp. 3d 472 (S.D.N.Y. 2017) ("[Blecause the parties already kno\\' that such accounts do exist the potential risk of a Fifih Amendment violation arising Irom ... a Ilawed consent dircctive is mi tigated. ").
Hcre. it is beyond dispute that the Yahoo email account with Yahoo ID capitalsoureelending@yahoo.com is Martin's email account. under his control. In Martin's own Motion l(lr Reconsideration. he describes the account as "Martin's Yahoo email account:' ECF No. 336 at I. Furthcrmore. Martin has uscd this samc account numcrous timcs in email communications with thc COln1. As Martin docs not contest that thc eapitalsoureclending@yahoo.eom is his account. his signing of the Consent Email is not testimonial as it does not "relatc a factual assertion or diselose in!()J'Jllation:' Martin's act of signing the Consent Email does not reveal anything that the parties did not already know. The documcnts themselves arc "pre-existing. voluntarily prepared documents. which arc not covered by the Fifih Amendment:' As such. the Court's order directing Martin to sign the Conscnt Email docs not violate the Fi fih Amendment.
*9 C. The Court's order docs not violate Martin's Attorney-Client privile~e Martin tinallv makes the ar~ument ~..... that the Court's order direetin~ Martin to si~nthe
••... ••... Consent Email violates attorney-client privilege, as it is liJreing him to rcleased privileged documents. ECl' No. 336 at 12. The Court tinds that the SECs proposed document review protocol is suftieient to safeguard Martin's attorney-client privilege rights. The Commission suggested, and the Court adopted. that once Martin's emails are released to the SEC:
The emails would then be subjected to a ..tilter team" review process that would ensure that only non-privileged. relevant emailsweresecnbythcCommission.slitigation and investigation team. The Commission has already proposed search terms to Martin on several occasions and invited his commems on them. Because he has not responded to these requests. the Commission requests that the Court allow these scarch terms to be used to identity responsive emails.
ECF No. 224 at 10. In the similar case of S.EC. \', Kal'l'OlIlII. No. 15-590 (.IEBIDAR). 2015 WI. 8483246. at *3 (D.D.C. Dee. 9, 2(15), the defendant also resisted the rclease of his emails, arguing that the documents were privileged. There, the SEC suggested that "it will safeguard his attorney-client and marital privileges by including any emails between [the defendant] and one of his attorneys or his spouse in the list of emails to be screened by a team of attorneys not associated with the investigation," It/. The court found ..this proposed course of action \\holly appropriate in balancing Karroum's right to assert these privileges against the SEC's statutory It!. Here. the Court agrees thaI. subpoena authority and interest in conducting its investigation," given Martin's lack of cooperation with the SEC in producing his emails. this produce-and-tilter protocol is the best way of balancing the SECs right to discovery and Martin's privileges. As such, the Court tinds that Martin's attorney-client privilege will not be violated by his signing of the Consent Email.
*10 D. Request for Interlocutory Appeal Martin requests that "11'the Court cannot grant my motions Defendant is seeking a stay of
the case and order allowing him to a make an interlocutory appeal to the Fourth Circuit Court of Appeals'" ECF No. 336 at 15. Under 28 U.S.C. ~ 1292(b). the Court may certif)' an "Interlocutory decision" as appealable where "such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal fi'om the order may materially advance the ultimate termination of the litigation'" The Court tinds that there is not substantial ground lor difference of opinion, and will not certilY this issue for an interlocutory appeal. nor will the Court issue a stay.
IV. CONCLUSION
For the foregoing reasons. the Court finds that its initial orders directing Martin to sign the Consent Email were not in clear error. and did not violate Martin's constitutional rights or attorney-client privilege. As Martin has not raised any instances of a change in controlling law or new evidence previously unavailable. the Court hereby denies his Motion fiJI' Reconsidcration. ECF No. 336. The arrest warranlmentioned in the Court's September 25. 2017 Order. ECF No. 335. will issue on Friday. October 13.2017. unless at that time Martin is in complete compliance with the Court's Orders. i\ separate Order shall issue.
&/{- {b. 7017 Date: October GliORGE.I.IIi\I'.EL United States District .Judge