230 F.R.D. 290 | S.D.N.Y. | 2003
OPINION AND ORDER
On March 18,2003, Laura Zubulake moved for an order compelling UBS Warburg LLC, UBS Warburg, and UBS AG (collectively, “UBS”) to produce certain e-mails. That motion is the subject of a companion Opinion and Order issued today. Zubulake also moved for an order directing UBS to reimburse her for the costs of the deposition of Christopher Behny. That motion, however, was withdrawn at a March 26, 2003, conference.
I. BACKGROUND
The general background of this case and Zubulake’s motions is set forth in the accompanying Opinion, familiarity with which is assumed. The following facts, however, are relevant to the Behny deposition motions.
On December 2, 2002, the parties appeared before United States Magistrate Judge Gabriel W. Gorenstein to address the e-mail dispute. At that conference, Judge Goren-stein reserved judgment and instead ordered UBS to produce an individual knowledgeable about UBS’s e-mail retention and retrieval policies. On January 14, 2003, UBS produced Christopher Behny, Manager of Global Messaging, for deposition via teleconference. At the deposition, Behny testified to the structure of UBS’s backup system, its backup tape destruetion/retention policy, and the feasibility and estimated cost of restoring the data that Zubulake had requested.
Upon review of the Behny deposition — the contents of which were designated by UBS as confidential, pursuant to a May 20, 2002, Confidentiality Stipulation and Order — Zubu-lake concluded that UBS was in violation of section 17(a) of the Securities Exchange Act of 1934 and SEC Rule 17a-4 promulgated thereunder, which impose certain document retention obligations on brokerage firms.
Relying on those representations, Zubu-lake (herself a licensed broker) now asks the Court to permit her to disclose the Behny deposition to the NYSE and NASD so that she may discharge her ethical obligation.
II. LEGAL STANDARD
Although parties are free to enter into stipulations of confidentiality, “[t]he management of discovery lies within the sound discretion of the district court.”
When the designation of material as confidential is disputed, the court must weigh one party’s “good cause” for requesting confidentiality against the other party’s interest in disclosure.
III. DISCUSSION
In this case, UBS has designated the Behny deposition as confidential because it “contains information concerning UBS’s tech
In any event, Zubulake does not question the initial designation. Rather, she claims that she has a reporting obligation that trumps UBS’s concerns. In support of this proposition, Zubulake relies on (1) the testimony of Messrs. Chapin, Vail and Hardisty; (2) NYSE Rule 351; and (3) NASD Rule 3070. Of course, Chapin, Vail and Hardisty are neither lawyers nor compliance officers. The fact that they believe a duty exists does not make it so. If Zubulake really has a duty to disclose violations of SEC Rules, that duty must be imposed by the SEC, the NYSE, or the NASD.
The NYSE rule cited by Zubulake require: Each member not associated with a member organization ... shall promptly report to the Exchange whenever such member or member organization, or any member ... has violated any provision of any securities law or regulation ...10
And the NASD rule provides:
Each member shall promptly report to the Association whenever such member or person associated with the member ... has been found to have violated any provision of any securities law or regulation____11
The critical question, then, is whether Zubu-lake is a “member” of the NYSE or NASD. If she is, then she has a reporting obligation; if not, then she has not proffered any duty to disclose.
The NYSE rules define the term “member” as “a natural person who is a member of the Exchange.”
Zubulake is not one of the 1,366 listed “regular members” of the NYSE,
Similarly, under the NASD Rules, “[t]he term ‘member’ means any individual, partnership, corporation or other legal entity admitted to membership in the [NASD] under the provisions of Articles III and IV of the By-Laws.”
IV. CONCLUSION
Because Zubulake is not a member of either the NYSE or the NASD, the reporting regulations upon which she relies do not apply to her. Having proffered no reason for disclosing the contents of the Behny deposition other than NYSE Rule 351 and NASD Rule 3070, her motion is denied. Furthermore, the March 17, 2003, Affirmation of James A. Batson and the March 21, 2003, Declaration of Kevin B. Leblang — both of which contain excerpts from the Behny deposition — are ordered sealed.
A conference is scheduled in Courtroom 12C at 4:30 p.m. on June 17, 2003.
. See also 4/2/03 Letter from James A. Batson, Plaintiff’s counsel, to the Court.
. SEC Rule 17a-4 provides, in pertinent part:
Every [ ] broker and dealer shall preserve for a period of not less than 3 years, the first two years in an accessible place ... [o]riginals of all communications received and copies of all communications sent by such member, broker or dealer (including inter-office memoranda and communications) relating to his business as such.
17 C.F.R. § 240.17a-4(b) and (4).
. See 2112/03 Deposition of Matthew Chapin at 101, Ex. H to the Affirmation of James A. Batson; 2/26/03 Deposition of Jeremy Hardisty at 73-75, Ex. A to the 4/2/03 Letter from James A. Batson to the Court; 3/6/03 Deposition of Dominic Vail at 253, Ex. B to the 4/2/03 Letter from James A. Batson to the Court.
. See NYSE Rule 440; NASD Rule 3110.
. Grady v. Affiliated Cent., Inc., 130 F.3d 553, 561 (2d Cir.1997).
. Pansy v. Borough of Stroudsburg, 23 F.3d 772, 784 (3d Cir.1994) (citing In re Agent Orange Prod. Liab. Litig., 821 F.2d 139, 145 (2d Cir.1987)). See also Liveware Publishing, Inc. v. Best Software, Inc., 252 F.Supp.2d 74, 79 (D.Del. 2003).
. See 5/20/02 Confidentiality Stipulation and Order ("All Confidential Information ... shall (unless necessary to comply with any court order ...) not be disclosed....").
. See Glenmede Trust Co. v. Thompson, 56 F.3d 476, 483 (3d Cir.1995) (identifying seven factors to be weighed in applying this balancing test). See also Arthur R. Miller, Confidentiality, Protective Orders, and Public Access to the Courts, 105 Harv. L.Rev. 427, 432-33 (1991).
. 4/4/03 Letter from Kevin B. Leblang, Defendant’s counsel, to the Court.
. NYSE Rule 351(a) and (1) (emphasis added).
. NASD Rule 3070(a) and (1) (emphasis added).
. NYSE Constitution, Article I, 111003. See also NYSE Rule 2 (defining the term "member" as used in the NYSE Rules according to Article I, It 1003 of the NYSE Constitution).
. NYSE Constitution, Article II, 11 1051(a)-(c).
. See 1 NYSE Guide (CCH) H 609, at 211-48 (2003) (listing all NYSE members); http://www.nyse.com/members/members.html (same). See generally NYSE Constitution, Article III, 1i 1051(a) (describing regular membership in the NYSE).
. See NYSE Constitution, Article 1,111003(e).
. See id. H 1003(m).
. NASD Rule 0120®.
. NASD By-Laws, Article III, Sec. 1(b).
. See NASD By-Laws, Article IV, Sec. 4.
. See NASD Manual (CCH) 11380, at pp. 511-717 (2002) (listing all NASD members).
. See N.Y.Code of Professional Responsibility Ethical Consideration 7-21 (1998); id. D.R. 7-105, codified at, 22 N.Y.C.R.R. § 1200.36.
. See, e.g., In the Matter of Deutsche Bank Sec., Inc., Exchange Act Release No. 46937 (Dec. 3, 2003), available at, http://www.sec.gov/litigation/admin/34-46937.htm.
. By referencing the above-cited ethical canons, I do not suggest that Zubulake’s counsel has acted unethically.