Pershing LLC v. Kiebach

         SECTION: “I” (5)

          ORDER AND REASONS

          MICHAEL B. NORTH UNITED STATES MAGISTRATE JUDGE

         Pursuant to this Court's Order of January 4, 2017 (rec. doc. 85) and two subsequent Minute Entries dated March 6, 2017 (rec. doc. 124) and March 10, 2017 (rec. doc. 126), Pershing has (finally) produced to the Court privilege logs and associated documents for in camera review. Along with and as part of that production, Pershing submitted its “Brief Accompanying Incident Reports and Log for In Camera Review” (rec. doc. 116), in which it argues that the Incident Reports are protected from disclosure by the Suspicious Activity Report (“SAR”) privilege under federal law.

         The Court has reviewed multiple rounds of briefing submitted by the parties on the issue; entertained oral argument; held numerous status conferences; reviewed the statutes, regulations and case law germane to the invocation of the SAR privilege; and reviewed the subject documents in camera and considering all of the foregoing, concludes that some, but not all, of the previously withheld documents should be produced.

         THE PRODUCTION OF DOCUMENTS FOR IN CAMERA REVIEW

         In an unnecessarily drawn-out saga, three separate productions of two “types” of documents have finally been accomplished. And within those productions, the Court has been provided both redacted and un-redacted documents.^[1] In its first production, Pershing provided the Court with 74 tabbed “Incident Reports, ” accompanied by a privilege log. Despite the fact that the discovery requests giving rise to the present motion sought documents from January 1, 2005 through the date the FINRA statement of claim - June 13, 2013 - Pershing's production inexplicably included documents only through February 2009. Accordingly, the Court convened a status conference and ordered Pershing to produce any additional responsive documents dated between February 17, 2009 and June 13, 2013. (Rec. doc. 124).

         Following issuance of the aforementioned order, Pershing produced another set of documents, this time denominated as “Summary Reports.” These 14 documents were also accompanied by a privilege log. There were two notable differences between the documents in this second production and those in the first production. First, the Summary Reports contained the same type of information as the Incident Reports, but also contained follow-up notes that were not reflected in any of the documents originally produced. Second, portions of the Summary Reports were redacted by counsel.

         The Court was forced by these anomalies to convene yet another status conference, during which it ordered Pershing to: (1) produce the Summary Reports that coincided with Tabs 68-74^[2] of the Incident Reports originally produced to the Court for in camera review and (2) produce to the Court un-redacted versions of all documents so that the Court could determine whether the information redacted was actually subject to the SAR privilege. (Rec. doc. 126). This last ordered production was accomplished on March 14, 2017.

         The Court has now reviewed and cross-referenced all of the documents produced by Pershing and is prepared to rule on their production.

         ANALYSIS AND PRODUCTION ORDER

         A. Application of the SAR Privilege to the Documents

         The Incident Reports produced by Pershing are described by it as “document[s] at Pershing related to the potential filing of Suspicious Activity Reports” and that it “uses Incident Reports to begin its process of internally investigating potential suspicious activity. (Rec. doc. 89-1 at pp. 1, 8)(emphasis added). Standing alone, Pershing's own description of the purpose of the documents tends to establish two important facts: First, they are clearly documents created in the ordinary course of business, albeit as an ordinary function of Pershing's “process of internally investigating potential suspicious activity.”^[3] Second, the potential link between Incident Reports in general and the creation of an actual SAR is too tenuous to implicate the privilege, which protects documents that would reveal the existence or nonexistence of a SAR. See 31 C.F.R. § 1023.320(e)(1)(i). While it may be possible for certain Incident Reports to fall within the protection of the privilege, that would depend on what the report actually said on its face. Here, none of the Incident Reports reviewed by the Court qualify for protection under the SAR privilege because they are devoid of any information by which the reader can determine whether the matter identified therein progressed beyond the making of the report, much less whether an actual SAR was ever created. They are not subject to the SAR privilege.

         The Summary Reports are somewhat different animals, as they generally contain the same narrative information as their counterpart Incident Reports but also contain certain follow-up information. Pershing believes that some of this information is subject to the SAR privilege and, as a consequence, it redacted those portions it thought privileged. Now that the Court has been provided with the un-redacted language and had an opportunity to review it against the applicable law, it agrees with Pershing that the redacted language is privileged and should not be disclosed pursuant to 31 C.F.R. § 1023.320(e)(1)(i). As to the un-redacted portions of the Summary Reports produced by Pershing and reviewed in camera, the Court finds they are not subject to the SAR privilege.

         B. Discoverability of ...