Lefkoe v. Jos. A. Bank Clothiers, Inc.

Decision Date13 August 2009
Docket NumberNo. 08-2059.,08-2059.
Citation577 F.3d 240
PartiesRoy T. LEFKOE, on behalf of himself and all others similarly situated; The Haverhill Retirement System; Lefkoe/Yannuzzi; Ceferino Fajardo; Massachusetts Laborers' Annuity Fund, Plaintiffs, v. JOS. A. BANK CLOTHIERS, INCORPORATED; Robert N. Wildrick; R. Neal Black; David E. Ullman, Defendants-Appellees, v. The Doe Client, Movant-Appellant.
CourtU.S. Court of Appeals — Fourth Circuit

ARGUED: Russell Beck, Foley & Lardner, LLP, Boston, Massachusetts, for Appellant. Michael Broughton Mac-Williams, Venable, LLP, Baltimore, Maryland, for Appellees. ON BRIEF: Marie Scheibert, Foley & Lardner, LLP, Boston, Massachusetts, Michael J. Lockerby, Foley & Lardner, LLP, Washington, DC, for Appellant. James L. Shea, Venable, LLP, Baltimore, Maryland, James A. Dunbar, Heather L. Mitchell, Venable, LLP, Towson, Maryland, for Appellees.

Before SANDRA DAY O'CONNOR, Associate Justice (Retired), Supreme Court of the United States, sitting by designation, and NIEMEYER and GREGORY, Circuit Judges.

Affirmed by published opinion. Judge NIEMEYER wrote the opinion, in which Associate Justice O'CONNOR and Judge GREGORY joined.


NIEMEYER, Circuit Judge:

In the deposition of a law firm representing an unidentified nonparty witness noticed in this securities fraud class action and taken in the District of Massachusetts pursuant to a subpoena that issued there, the nonparty witness asserted a right to anonymity under the First Amendment. The Massachusetts district court, having authority over the subpoena, denied the law firm's motion to quash the subpoena and ordered the law firm to reveal the nonparty witness' identity. But the court also entered a protective order prohibiting the lawyers for the parties from disclosing the identity of the nonparty witness to anyone else, including the parties. Finally, the court stated that its protective order was subject to modification by the Maryland district court, where the action is pending.

By order dated September 3, 2008, the Maryland district court modified the protective order to allow disclosure of the nonparty witness' identity to the attorneys' clients but to no one else.

From the Maryland district court's order, the nonparty witness filed this interlocutory appeal, contending (1) that the Maryland district court had no authority to modify the Massachusetts district court's protective order and (2) that the Maryland district court's modification nonetheless violates the nonparty witness' First Amendment right to remain anonymous. For the reasons that follow, we reject both arguments and affirm.


In the pending securities fraud litigation, the plaintiffs on behalf of themselves and a purported class of persons who purchased stock of Jos. A. Bank Clothiers, Inc. during the period from December 5, 2005, to June 7, 2006, claim that Jos. A. Bank and insiders issued a series of false and misleading statements about the company's earnings, profits, and inventory and thereby allowed the insiders to profit from inflated stock prices. The plaintiffs allege that when the true facts were disclosed in June 2006, the price of Jos. A. Bank stock fell 29%, causing the plaintiffs "tens of millions of dollars of investor losses."

During the period defining the class, Jos. A. Bank received a letter dated March 15, 2006, from the law firm of Foley & Lardner LLP in Boston, Massachusetts, who represented a client whom it did not identify (referred to herein as "the Doe Client"). The letter, addressed to Jos. A. Bank's Audit Committee, stated:

Foley & Lardner LLP represents a shareholder of Jos. A. Bank Clothiers, Inc. (the "Company") who has held several hundred thousand shares of the Company for some time. Our client is concerned about the Company's public communications and financial reporting with respect to its inventory.

The letter proceeded to detail multiple allegations regarding the handling, accounting, and reporting of inventory. Some allegations suggested specific, nonpublic knowledge. But other allegations were generalized, such as claims that the public "assertions by management that [Jos. A. Bank's] inventory levels [were] necessary, appropriate or advantageous [were] not credible and defy common business sense." The letter concluded:

This communication is a formal report on behalf of our client to the Company's Audit Committee regarding the integrity of the Company's financial statements and the Company's compliance with ethics policies and legal and regulatory requirements. Our client requests that this letter be shared with the Company's auditors, Deloitte & Touche LLP. Please advise us promptly as to what steps the Company's Board, Audit Committee and/or auditors are taking in response to this letter.

The Audit Committee received the letter roughly two weeks before Jos. A. Bank was scheduled to release its earnings report and hold its earnings call. To investigate the letter's claims, the Audit Committee hired the law firm of Wilmer, Cutler, Pickering, Hale & Dorr LLP and the accounting firm of Ernst & Young LLP. This investigation, which was substantially completed by Friday, March 31, 2006, at a cost of approximately $600,000, concluded that the allegations were "without substance." The investigation, however, caused Jos. A. Bank to delay its earnings report and call by 10 days, to April 13, 2006. On the next trading day after Jos. A. Bank announced the delay in reporting its earnings, the price of its stock dropped 5.8%.

Several months later, the plaintiffs commenced this action in the District of Maryland, filing it on July 24, 2006.

In this litigation, Jos. A. Bank served a notice to depose the Foley & Lardner law firm in Massachusetts to obtain the identity of and information about the Doe Client, suspecting that the Doe Client could provide information relevant to the pending action, particularly relating to the causation of losses claimed by the plaintiffs and the bases for defining the class. To compel Foley & Lardner to attend the deposition and reveal the identity of and other information about the Doe Client, Jos. A. Bank caused a subpoena to be issued from the district court in the District of Massachusetts pursuant to Federal Rule of Civil Procedure 45.

Foley & Lardner filed a motion in the Massachusetts district court to quash the subpoena, arguing that it "is punitive, seeks irrelevant information, and violates Foley's client's right of anonymity as protected by the First [A]mendment and federal common law." The district court, however, allowing for the possibility that the Doe Client might be complicit with the plaintiffs and that its letter was "part of a cabal ... to affect [the] stock price [of Jos. A. Bank] and then [to] sue," denied the motion to quash and allowed a two-hour deposition to be taken directly under its supervision. The court also ordered that the deposition be sealed and directed counsel not to disclose the identity of the Doe Client to anyone "absent an order of the judge presiding in the lawsuit." In response to the district court's sealing order, Foley & Lardner on behalf of the Doe Client then took the following position with respect to the Doe Client's First Amendment rights, which the court rejected:

Counsel for Doe Client: Your Honor, I appreciate the effort to narrow this, but it doesn't obviate the threshold issue from their standpoint which is that they are looking for complete anonymity here.

The Court: Well, they may be, but they have no legal right to complete anonymity.

Counsel for Doe Client: Under the First Amendment cases that we've identified—I understand Your Honor's—

The Court: I'm not creating, I'm not creating some new privilege here. I'm sorry. That's intriguing. This was, this was very interesting. But we're not going there.

(Emphasis added).

The deposition took place in camera, and Foley & Lardner, instead of designating a representative of the firm as required by the notice of deposition and Federal Rule of Civil Procedure 30(b)(6) produced the Doe Client itself.* At the conclusion of the deposition, the court summarized its order:

The deposition as I've earlier ordered will be entirely sealed without prejudice to application being made to the presiding judge [in Maryland] for whatever treatment, and that also means application made to the presiding judge to call for additional depositions or expand the scope of this deposition; I express no opinion on that.

I have a small piece of this dispute, and I've tried to balance the interests of the entity that wished to remain anonymous against the justified interests under Rule 45 of Jos. A. Bank of obtaining discovery.

My ruling is based upon what seems to me the appropriate limits of discovery, not any privilege as I said when we were in open court. But I am willing that the presiding judge who has the lawsuit under his care make the final call as to all of these matters and Foley may find itself before that ... presiding judge, defending or seeking to modify the limits that I've put on it.

When counsel for Jos. A. Bank requested that he be allowed to disclose the identity of the Doe Client to his client, the Massachusetts district court instructed that counsel had to keep the Doe Client's identity to himself and his partners. It directed counsel, however, to "go to the presiding judge [in Maryland] and say, this was far too limited, open it up.... And that judge, I'm sure, will give notice to Foley, and Foley can be heard.... This is a sealed proceeding; sealed, unless the presiding judge should otherwise order." But the court allowed that Jos. A. Bank's counsel could "go out and investigate" the Doe Client, but could not reveal its identity to in-house counsel or anyone else, except with permission of the Maryland district court.

Jos. A. Bank's outside counsel accordingly sought out all publicly available information on the Doe Client and uncovered several facts...

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