United States District Court, D. Connecticut
ORDER ON NON-PARTY OAK MANAGEMENT'S MOTION TO
QUASH RULE 30(b)(6) SUBPOENA
Bond Arterton, U.S.D.J.
civil enforcement action brought by Plaintiff the Securities
and Exchange Commission (the "SEC" or the
"Commission") against Defendant Iftikar Ahmed
("Mr. Ahmed") and Relief Defendants, non-party Oak
Management Corporation ("Oak") moves this Court
[Doc. # 453] to quash Relief Defendants' 30(b)(6)
deposition notice. For the reasons that follow, Oak's
Motion is granted in part and denied in part.
Court assumes the parties' familiarity with the relevant
facts of this case.
"may obtain discovery regarding any nonprivileged matter
that is relevant to any party's claim or defense."
Fed. R .Civ. P. 26(b)(1). Although not unlimited
"relevance, for purposes of discovery, is an extremely
broad concept." Alaska Elec. Pension Fund v. Bank of
Am. Corp., No. 14-CV-7126 (JMF), 2017 WL 280816, at *1
(S.D.N.Y. Jan. 20, 2017); see also Oppenheimer Fund, Inc.
v. Sanders, 437 U.S. 340, 351 (1978). However, discovery
is not boundless, and "[the] court may, for good cause,
issue an order to protect a party or person from annoyance,
embarrassment, oppression, or undue burden or expense."
Fed.R.Civ.P. 26(c)(1). In fact, a court "must quash or
modify a subpoena that... subjects a person to undue
burden." Fed.R.Civ.P. 45(d)(3)(A)(iv).
Deposition Topics 1-3
Defendants wish to inquire about "any valuation work
conducted by Oak, or done at Oak's request
regarding" Company C (Topic 1), "[t]he disposition
of [Company C] shares Oak purchased from [Relief Defendant]
I-Cubed Domains LLC" (Topic 2), and "Oak's
decision to invest in Company C" (Topic 3). (Ex. 4 to
Def.'s Opp'n at 7.)
Defendants argue that because the SEC is seeking
disgorgement, the difference between what Oak paid for the
Company C shares and what the Company C shares were actually
worth (the subjects of topics 1 and 2) is relevant to
Defendant Mr. Ahmed's alleged unjust enrichment.
(Def.'s Opp'n at 7.) Oak contends, though, that
topics 1 and 2 are not relevant because disgorgement is not
aimed at compensating an investor for economic loss but
rather at returning the wrongdoer to his status quo prior to
the wrongdoing. (Oak's Reply at 2-3.) While
"disgorgement is an equitable remedy that prevents
unjust enrichment, " S.E.C. v. Contorinis, 743
F.3d 296, 306 (2d Cir. 2014), the distinction Oak offers
between the investor's loss and Defendant's
ill-gotten gains is too narrowly drawn for purposes of
relevancy in discovery. In many instances involving
fraudulent conduct the economic loss caused by a
defendant's wrongdoing is directly tied to his or her
unjust enrichment, and the Court will not preclude Relief
Defendants from pursuing this topic.
maintains that topic 3, the reason why Oak invested in
Company C, is similarly not relevant to whether the SEC is
entitled to disgorgement. (Oak's Reply at 3.) In
opposition, Defendants incredulously respond that "it is
difficult to understand" how Oak can claim irrelevance
where "the very gravamen of the SEC's claim
regarding Company C is the allegation that Oak's decision
to invest was improperly influenced by Mr. Ahmed because of
his nondisclosure of his interest in Company C."
(Def.'s Opp'n at 8.) The Court agrees that the
reasons Oak decided to enter into the Company C transaction
are relevant to the question of whether "Mr. Ahmed
affirmatively misled Oak into entering into a transaction
that was prohibited, absent proper consent, by Oak's
internal policies, procedures and partnership documents with
its investors." (Oak's Reply at 3.) Consequently,
like topics 1 and 2, topic 3 addresses potentially relevant
evidence and will not be quashed.
Deposition Topic 4
objects to topic 4, which relates to the subject of
"carried interest in connection with any Oak funds,
" again because it is a topic on which it claims Relief
Defendants have already received extensive testimony from an
Oak representative pursuant to Rule 30(b)(6). (Oak's
Reply at 4.) Relief Defendants do not dispute this fact, and
represent that they "will avoid simply asking the same
questions that were asked during the hearing and previous
deposition, " while also arguing that in the time since
Relief Defendants took the initial deposition testimony they
have been able to educate themselves more effectively
regarding the SEC's claims. (Def.'s Opp'n at
8-9.) Still, Oak protests that "Relief Defendants have
provided no indication regarding what relevant or additional
information regarding carried interest that they believe they
still need at this point in time" and urges the Court to
quash this purportedly "duplicative" topic.
(Oak's Reply at 4.) Nonetheless, Oak additionally
indicates that in order for it to prepare a Rule 30(b)(6)
witness it requires a more particularized notice regarding
the subject of carried interest. (Id.)
light of the vagueness of topic 4, especially given the
potential for overlap with previous testimony and the absence
of an explanation of what aspect of carried interest
testimony Relief Defendants need to address due to their more
developed understanding of the case, the deposition notice
for topic 4 is quashed.
Deposition Topics 5-13
5-13 all inquire about "[t]he negotiation and terms of
Oak's agreement to invest in" various different
Companies other than Company C. (Def.'s Opp'n at
9-10.) Oak asserts that these "categories of
testimony... are ... overbroad, seeking testimony on topics
that are not relevant to any claim or defense in this
action." (Id. at 4.) Relief Defendants maintain
that these topics are appropriate subjects of testimony in
this action because they could relate to whether the alleged
fraud occurred in connection with a domestic ...