Bofi Fed. Bank v. Erhart

• Decision Date: 05 August 2016
• Docket Number: Case No.: 15cv2353 BAS (NLS)
• Parties: BofI FEDERAL BANK, a federal savings bank, Plaintiff, v. CHARLES MATTHEW ERHART, an individual; and DOES 1-25, inclusive, Defendant.
• Court: U.S. District Court — Southern District of California

BofI FEDERAL BANK, a federal savings bank, Plaintiff, v. CHARLES MATTHEW ERHART, an individual; and DOES 1-25, inclusive, Defendant.

Case No.: 15cv2353 BAS (NLS)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

August 5, 2016

ORDER DETERMINING JOINT MOTION FOR DISCOVERY DISPUTE NO. 2 AND DENYING PLAINTIFF'S MOTION FOR CONTEMPT

[Dkt. No. 50]

Plaintiff BofI Federal Bank (BofI) filed an action against its former employee, defendant Charles Matthew Erhart, for federal computer fraud and various state claims based on his alleged theft and dissemination of BofI's confidential, privileged and proprietary information.¹ BofI and third party Carol Gillam—counsel of record for Erhart—filed a joint discovery motion in April 2016 to determine the propriety of discovery requests sent to Ms. Gillam through a Rule 45 subpoena. The court issued an order on April 26, 2016 compelling Ms. Gillam to produce all non-privileged, responsive documents, and to produce a privilege log.

Now BofI complains that Ms. Gillam is in contempt of that order because she is withholding documents protected by a purported law enforcement privilege and on other grounds. For the following reasons, the court DENIES BofI's motion for contempt.

I. RELEVANT BACKGROUND

In Joint Discovery Motion No. 1, BofI sought documents showing Ms. Gillam's own communications with third parties concerning BofI.² While the subpoena sought all communications with third parties, the briefing focused on only Ms. Gillam's communications with the media, and did not mention her communications with law enforcement agencies. This court found the documents relevant and overruled Ms. Gillam's objections as to vagueness, ambiguity, breadth, undue burden and procedural defect, and ordered her to produce them by May 10, 2016. But it allowed Ms. Gillam to produce a privilege log for any documents over which she claimed work product protection. See Apr. 26 Order, pp. 6-8.

BofI reviewed Ms. Gillam's May 10 production and believed it was incomplete. The parties were ultimately able to meet and confer on June 21, 2016 and resolved most issues. Also, albeit late, Ms. Gillam provided a privilege log to BofI. The primary issue here is whether Ms. Gillam's communications with law enforcement agencies are privileged.

II. LEGAL STANDARD

Ms. Gillam asserts that the relevant legal standard is discoverability under Rule 26(b) and Rule 45(d). But that standard was relevant for the original discovery order, and not for this motion for contempt.

In a contempt proceeding, "The court... may hold in contempt a person who, having been served, fails without adequate excuse to obey the subpoena or an order related to it." Fed. R. Civ. P. 45(g). "The party moving for contempt has the burden to establish by clear and convincing evidence that the contemnor has violated a clear and specific court order." Forsythe v. Brown, 281 F.R.D. 577, 587 (D. Nev. 2012) (citation omitted). Once the moving party meets its clear and convincing evidence burden, the burden shifts to the contemnor to show that "she took every reasonable step to comply and to explain why compliance was not possible." Id. To assess whether every reasonable step has been taken, courts can consider "(1) a history of noncompliance and (2) failure to comply despite the pendency of a contempt motion." Id. (internal citation and quotations omitted).

III. DISCUSSION

A. Law Enforcement Privilege.

In her initial response to the subpoena, Ms. Gillam generally objected to the requests on the basis of an unidentified privilege and work product doctrine. She did not produce a privilege log. The parties did not specifically litigate any privilege issue in the underlying motion because Ms. Gillam did not specifically assert or argue one. Instead, she argued for work product protection. But now—for the first time—Ms. Gillam asserts a "law enforcement privilege." She argues that her communications with federal regulators in her capacity as an attorney for a whistleblower are privileged and constitute attorney work product.

After this court considered the underlying discovery motion and ordered her to produce documents, Ms. Gillam asserted a "law enforcement privilege" as to her communications with the Securities and Exchange Commission (SEC) and Office of Comptroller of Currency (OCC). Because she never asserted this objection in the underlying discovery dispute, though, the court overrules it as waived. Richmark Corp. v. Timber Falling Consultants, 959 F.2d 1468, 1473 (9th Cir. 1992); see Fed.R.Civ.Proc. 45(d)(3)(A)(iii) (stating that privilege can be waived in response to subpoenas).

But even if the court were to consider this privilege, it would still overrule it. According to the Ninth Circuit, "[T]he federal privilege applicable to the government interest in preserving confidentiality of law enforcement records has various names," including "the official information privilege," the "law enforcement privilege," and "executive privilege." Deocampo v. City of Vallejo, 2007 U.S. Dist. LEXIS 43744, at *13-14 (E.D. Cal. June 1, 2007); Hayslett v. City of San Diego, 2014 U.S. Dist. LEXIS 37738, at *5 (S.D. Cal. Mar. 21, 2014). It serves a specific purpose:

Although the Ninth Circuit has only mentioned the law enforcement privilege in passing . . . [t]he Second Circuit has explained that the law enforcement privilege is designed "to prevent disclosure of law enforcement techniques and procedures, to preserve the confidentiality of sources, to protect witness and law enforcement personnel, to safeguard the privacy of individuals involved in an investigation, and otherwise to prevent interference with an investigation."

Ibrahim v. Dep't of Homeland Sec., 2009 U.S. Dist. LEXIS 122598 at *41 (N.D. Cal. Dec. 17, 2009) (quoting In re Department of Investigation of City of New York, 856 F.2d 481, 484 (2d Cir. 1988)). "In determining what level of protection should be afforded by this privilege, courts conduct a case-by-case balancing analysis, in which the interests of the party seeking discovery are weighed against the interests of the governmental entity asserting the privilege." Hayslett, 2014 U.S. Dist. LEXIS 37738, at *5 (emphasis added). But a prerequisite for invoking any law enforcement privilege is that the asserting party "must make a substantial threshold showing by way of a declaration or affidavit from a responsible official with personal knowledge of the matters to be attested to in the affidavit." Perez v. United States, 2016 U.S. Dist. LEXIS 11036, at *10-11 (S.D. Cal. Jan. 29, 2016) (internal quotations and citations omitted).

At the threshold of this inquiry, this privilege is not available to Ms. Gillam because she is not a government entity. Even if she could show a connection to one, she does not adequately assert a law enforcement privilege because she fails to make a "substantial threshold showing" through a personal statement by an official withknowledge of the underlying issues. She also does not specifically assert the protection of confidential techniques, procedures, investigations, or personnel of law enforcement. Further, the documents at issue are her submissions to law enforcement, and not documents produced by the SEC or OCC. To the extent that Ms. Gillam claims a law enforcement privilege, her communications with the SEC and OCC do not fall under any such privilege. Therefore, even if the court considered the objection timely, it would overrule it on the merits.

B. Privilege for Government Agencies.

Ms. Gillam argues that her communications with the SEC and OCC are also privileged because forcing her to turn them over will have a chilling effect on whistleblowing. She cites to the SEC's rules that state "the Commission . . . shall not disclose any information, including information provided by a whistleblower to the Commission, which could reasonably be expected to reveal the identity of a whistleblower." 5 U.S.C. § 78u-6. First, under this rule the SEC specifically provides a privilege from disclosure by the SEC, and not by individuals. Second, when Erhart filed his complaint, he revealed his identity as a whistleblower. Thus, any purported protection by the SEC rules do not apply to Ms. Gillam and to her communications with the SEC.

Next, Ms. Gillam contends that the OCC's rules "exempt a slew of information and files from public disclosure, including a record furnished in confidence or a record or information compiled for law enforcement purposes." Jt. Mtn., p.19; see 12 C.F.R. 4.12 (citing OCC records exempt from disclosure under FOIA). Ms. Gillam states that after she filed the whistleblower complaint, the OCC sent a letter to her stating that "any supervisory correspondence in either party's possession constitutes privileged non-public OCC information, which, absent OCC authorization or a Federal court order, you are prohibited by law from using in connection with the above civil actions [i.e. the whistleblower action]." See 12 C.F.R. Part 4, Subpart C; Jt. Mtn., p.19. Thus, she argues that she cannot disclose any communications she had with the OCC.

The court finds that the cited OCC rule does not protect any communication from Ms. Gillam to the OCC. The rule itself states that "[a] record contained in or related to an examination, operating, or condition report prepared by, on behalf of, or for the use of the OCC or any other agency responsible for regulating or supervising financial institutions" is exempt from disclosure to the public under FOIA. 12 C.F.R. 4.12(b)(8). First, it is unclear whether Ms. Gillam, a third party individual, would be protected by this statute. Second, these documents do not have to be publicly disclosed and can be produced as a confidential production under the protective order. [Dkt. No. 21.] Third, the OCC allows "disclosure" if ordered by a Federal court.

Not seeing any available protection under the SEC or OCC rules for Ms. Gillam's communications, the court overrules her objections on...