Securities & Exchange Commission v. Drexel Burnham Lambert Inc.

128 F.R.D. 47, 1989 U.S. Dist. LEXIS 12498
CourtDistrict Court, S.D. New York
DecidedOctober 16, 1989
DocketMDL No. 732; M21-45-MP; No. 88 Civ. 6209 (MP)
StatusPublished
Cited by16 cases

This text of 128 F.R.D. 47 (Securities & Exchange Commission v. Drexel Burnham Lambert Inc.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Securities & Exchange Commission v. Drexel Burnham Lambert Inc., 128 F.R.D. 47, 1989 U.S. Dist. LEXIS 12498 (S.D.N.Y. 1989).

Opinion

DECISION

MILTON POLLACK, Senior District Judge.

Michael Milken and Lowell Milken are defendants in parallel civil' and criminal cases brought respectively by the Securities and Exchange Commission (“SEC”) and the United States Attorney (“Justice”) and pending in the Southern District of New York. Defendants have moved in the civil case under Rule 37(a), Fed.R.Civ.P., to compel production for inspection of documents requested under Rule 34 which are said to be in the files of the SEC as part of its investigative files and in the files of Ivan F. Boesky’s attorneys, Fried, Frank, Harris, Shriver & Jacobson (“Fried, Frank”); Boesky is a defendant in cases consolidated and coordinated for discovery in MDL Dkt. No. 732 and a prospective witness in the criminal suit against the Milkens.

The documents sought are those detailing the financial transactions of Boesky and the communications of Boesky, his employees and affiliates, with SEC and Justice and the documents received and created by those agencies in regard to Boesky’s negotiations and eventual settlements and cooperation with the SEC and Justice. Work product of Fried, Frank and their documents relating to Boesky’s cooperation with the Government are included by the requesting parties.

Justice has interposed objection to the disclosure of a minimal number of requested items at this time on the ground that it would be harmful to the criminal prosecution and that the criminal discovery rules do not allow defendants under criminal indictment to compel inspection of these documents from any source at this time since they do not constitute so-called “Brady material,” Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), and, if not privileged, are “3500” material (18 U.S.C. § 3500) and not discoverable until the criminal trial, which is scheduled for March, 1990. At the argument of the motion, counsel for the Milkens conceded as follows: “I am willing, for the purpose of this motion, to accept arguendo that the documents that we’re talking about would not be discoverable under the criminal rules in the criminal case.”

The Milkens’ motion seeks to vacate so much of ¶ 10A of this Court’s Order No. 45 as provides that: “Documentary production by any witness on subjects designated by the [U.S.] Attorney as posing a threat to ongoing related criminal investigation or proceedings shall be deferred temporarily until further order of the Court.” The motion also seeks to vacate so much of Order No. 46 as provides that certain documents in the possession of Fried, Frank, which have been identified by the Court after an in camera inspection, “should be temporarily withheld from production in discovery proceedings, in the public interest ,..”1

Discussion

A. Problems of Discovery in Parallel Proceedings:

Discovery differs greatly in civil and criminal cases. Fed.R.Civ.P. 26(b)(1) provides that a party to a civil litigation is presumptively entitled to “obtain discovery [49]*49regarding any matter, not privileged, which is relevant to the subject matter involved in the pending case.” Fed.R.Crim.P. 16(a)(1) is more restrictive: the defendant is entitled thereunder to those documents “which are material to the preparation of the defendant’s defense or are intended for use by the government as evidence in chief at the trial ...”

No question of relevancy or privilege is now being argued; and, though, there is an indication that some of the documents demanded may be privileged from disclosure as attorney work product or for other reasons, that point is not now before the court. Order No. 46 directs that the Fried, Frank documents, and any others being temporarily withheld, must be disclosed “not later than 60 days before trial of any of the coordinated [civil] cases.” Even assuming necessity for trial preparation purposes, disclosure at that time, in the Court’s opinion, would provide ample opportunity for defendants to cope with their contents before trial of any of the civil cases in which the Milkens are named.

B. Court’s Discretion:

When, as here, there are parallel criminal and civil proceedings relating to the same subject, matter, the court is confronted with the conflict inherent in providing fair discovery sufficient to allow the defendants adequately to defend their civil case(s) while at the same time protecting the Government’s interest and greater evidentiary burden in prosecuting the criminal case. The scope of the district court’s discretion thereon is substantial. Ross v. Bolton, 106 F.R.D. 22, 23 (S.D.N.Y.1985) (Callaghan, J.) (“District courts are granted wide discretion in supervising the extent of discovery before trial, and in limiting discovery where there is a showing of good cause.”).

C. Deferral of Civil Discovery:

The leading case addressing the problem of balancing discovery interests in parallel proceedings is Campbell v. Eastland, 307 F.2d 478 (5th Cir.1962) (Wisdom, J.), cert. denied, 371 U.S. 955, 83 S.Ct. 502, 9 L.Ed.2d 502 (1963). Judge Wisdom, speaking for the Fifth Circuit, has pointed out that the public interest in the criminal case is entitled to precedence over the civil litigant: “a trial judge should give substantial weight to [the public interest in law enforcement] in balancing the policy against the right of a civil litigant to a reasonably prompt determination of his civil claims or liabilities.” Id. at 487. When faced with parallel proceedings,

Judicial discretion and procedural flexibility should be utilized to harmonize the conflicting rules and to prevent the rules and policies applicable to one suit from doing violence to those pertaining to the other.

Id.

In such situations, a stay of all civil proceedings, or at least of all disclosure, or the imposition of protective orders is well within the informed discretion of the court; therefore, of course, so are less severe remedies such as the temporary deferral of discovery. SEC v. Dresser Industries, Inc., 628 F.2d 1368, 1375 (D.C.Cir.1980) (Wright, J.), cert. denied, 449 U.S. 993, 101 S.Ct. 529, 66 L.Ed.2d 289 (1980) (“a court may decide in its discretion to stay civil proceedings, postpone civil discovery, or impose protective orders and conditions ...”).

Arguing that the court should compel the production of all documents at this time, the Milkens assert that, beyond the fact that criminal discovery is narrower in scope than civil, the Government has shown no justification for withholding what has been referred to as 3500 material and the transcripts of the private investigative inquiries by the SEC. Further, they contend that any need for withholding disclosure thereof has passed now that the grand jury investigation has resulted in the indictment of the Milkens.

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128 F.R.D. 47, 1989 U.S. Dist. LEXIS 12498, Counsel Stack Legal Research, https://law.counselstack.com/opinion/securities-exchange-commission-v-drexel-burnham-lambert-inc-nysd-1989.