United States District Court, E.D. Louisiana
ORDER AND REASONS
M. AFRICK, UNITED STATES DISTRICT JUDGE
consolidated action, Pershing LLC seeks to confirm an
arbitration panel's decision in its favor. The
defendants, “Louisiana Retirees, ” Dr. Thomas J.
Kiebach, et al., seek to vacate the arbitration panel's
decision. Since the lawsuits were consolidated, the focus has
been on whether the Louisiana Retirees are entitled to any
discovery before this Court renders its decision.
Court referred the discovery issue to the U.S. Magistrate
Judge. Before rendering a decision, the Magistrate Judge
entertained multiple rounds of briefing from the parties,
heard oral arguments, held multiple status conferences,
considered the statutes, regulations, and case law, and
reviewed in camera the numerous documents that
Pershing submitted through three separate productions. The
three separate productions were necessitated by
Pershing's inexplicable and repeated failure to fully
comply with the Magistrate Judge's discovery orders.
Those repeated unresponsive productions-at least one of
which, the redacted production, was clearly intentionally
unresponsive-needlessly delayed the resolution of the
stands, the Magistrate Judge ultimately decided that only
some of the documents produced by Pershing for in
camera review should be produced to the Louisiana
Retirees. See R. Doc. No. 132. The documents which
the Magistrate Judge held non-discoverable were either not
relevant to the present matter or were protected from
disclosure by the Suspicious Activity Report
(“SAR”) privilege under federal law. As to the
remaining documents which the Magistrate Judge ordered
produced to the Louisiana Retirees, the Magistrate Judge held
that they were relevant and that they fell outside the
protection of the SAR privilege.
before the Court are Pershing's objections to the Magistrate
Judge's order. Pershing argues that all of the documents
the Magistrate Judge ordered produced to the Louisiana
Retirees are protected from disclosure by the SAR privilege,
and it asks this Court to overturn the Magistrate Judge's
order. With respect to the issues discussed herein, the order
of the Magistrate Judge may be reversed “where it has
been shown that the magistrate judge's order is clearly
erroneous or contrary to law.” 28 U.S.C. §
636(b)(1)(A); see also Fed. R. Civ. P. 72(a). For
the following reasons, the objections are denied.
Court previously discussed the SAR privilege in its order and
reasons denying Pershing's first objection to the
Magistrate Judge's discovery order, see R. Doc.
No. 114, though at that time the Court made no ruling as to
the applicability of the SAR privilege to the documents at
issue. Instead, the Court simply noted that “the
applicability of the SAR exception to the documents described
by Pershing is not as black-and-white as Pershing would have
the Court believe, ” and that “this Court is not
prepared to hold that Magistrate Judge North's decision
to order the creation of a privilege log and have the
documents produced for an in camera review was
clearly erroneous or contrary to law.” See R.
Doc. No. 114, at 9.
the Court has already discussed, albeit briefly, the
fundamental aspects of the SAR privilege, and considering
that the parties agree on the basic legal framework for
analyzing whether a document related to SARs may be
disclosed, the Court wastes no time here repeating that
framework. The Court instead proceeds to directly address
each of Pershing's arguments as to why the Magistrate
Judge's decision was clearly erroneous or contrary to
first argues that the Magistrate Judge erred in finding that
Pershing's Incident Reports were prepared in the ordinary
course of business as part of Pershing's process of
internally investigating potential suspicious activity.
Pershing argues that this conclusion flies in the face of the
“sole piece of evidence in the record regarding the
role that Incident Reports play at Pershing: the declaration
of Alma Angotti, a former senior enforcement official . . .
who reviewed Pershing's [Anti-Money Laundering]
program.” See R. Doc. No. 133-1, at 3. Ms.
Angotti swears that the Incident Reports are created
expressly for the purpose of determining whether activity is
in fact suspicious, requiring a SAR, and that the reports are
“not a record created in [Pershing's] ordinary
course of business about a transaction, an account or a
business relationship that may give rise to Pershing's
suspicions.” See R. Doc. No. 89-3, at 5.
initial matter, the Court observes that Ms. Angotti is not an
employee of Pershing, but rather an expert whom Pershing
hired to review its Anti-Money Laundering (“AML”)
program. Her declaration states that she
“understand[s] the general steps undertaken by Pershing
to file SARs.” See R. Doc. No. 89-3, at 4. To
the extent Ms. Angotti is offered her opinion, based on a
review of Pershing's program, as to whether the Incident
Reports were prepared in the ordinary course of business, the
Magistrate Judge was not obligated to accept her conclusion
packaged as an expert opinion.
is also reason to doubt Ms. Angotti's conclusion. It goes
without saying that “detecting fraud is simply part of
a financial institution's ordinary course of business,
” see R. Doc. No. 114, at 8, and that
Pershing-like other financial institutions-would investigate
suspicious activity even if it was not required by federal
law to adopt AML programs and prepare SARs. Pershing does not
argue otherwise. Instead, it simply asserts that
“[t]here is nothing to suggest Incident Reports are
used for loss prevention, employee discipline, credit
decisions, or other matters.” See R. Doc. No.
133-1, at 5. Notably absent from Pershing's briefing is
any explanation of how its procedures for detecting loss
prevention and the like-which undoubtedly exist-are
implemented separately from the AML program. Pershing seems
content to rely on the fact that the Louisiana Retirees
have not introduced evidence that Pershing's loss
prevention procedures overlap with Pershing's AML
procedures. However, as the party advocating for the
privilege, it is Pershing's burden ...