You Don’t Want Discovery Overdraft Charges

Discovery deadlines matter. Wells Fargo learned that the hard way with producing a relevant email 8 months after the close of discovery. Given the nature of the relevancy to the lawsuit, limited additional discovery was reopened.

Opps_iStock_Here is the short overview of the case: Plaintiff’s asked Wells Fargo if the other Defendants (now dismissed) were a legitimate business engaged in securities sales. The bank said yes and the Plaintiff transferred $80,000 to the Defendant’s bank account in order to purchase securities that would yield a return of $280,000.

The second transaction involved reinvesting $250,000 of the promised $280,000 to fund a $500,000 loan to renovate an office building, plus an additional $50,000 transaction fee. Gazian v. Wells Fargo Bank Na, 2015 U.S. Dist. LEXIS 69701, *2-3.

The Plaintiffs attempted to withdraw $30,000 and transfer the $250,000 to the Defendants. Wells Fargo informed the Plaintiffs that the dismissed Defendants accounts had been emptied and no money would be transferred to the Plaintiffs. Id.

The Plaintiff’s sued Wells Fargo on the theory the bank “knowingly or negligently made false representations to Plaintiffs” about the dismissed Defendants. Gazian, at *3.

Enter the late-produced email message:

From: BROWN, Patrick [Wells Fargo]

Sent: Tue 8/2/2011 5:36:42 PM

Re: HSBC Bank Guarantee Registration Number BH5843[.]

I have conducted a review on the signor, Craig Cason, for this account, [redacted]7443 — Increase Capital Investments LLC and found several items of concern . . .

This individual has been investigated by the SEC for securities violations and accusations of fraud.

The address on the account is a virtual office that can be rented for $50/month, used frequently by shell companies to give the appearance of legitimacy even though no actual business is conducted there.

The client has filed multiple bankruptcies and has several outstanding judgments (some in excess of $100K), which is not consistent with someone purporting to have $250mil in assets.

Please do not process the receipt of this security. We will be restricting the account and referring the matter to our Security Fraud group. Additionally, please DO NOT disclose this information to the client or the outcome of our review. Please advise the client that we cannot assist him with his request.

Gazian, at *4.

The Defendants claimed this messaged pertained to another securities deal and was not relevant. Gazian, at *5. The Plaintiff and the Court did not agree.

The Court reopened discovery so the Plaintiffs could conduct 5 additional depositions of no more than 20 hours of depo time; 10 additional requests for production; and 10 additional interrogatories. The Court went further to say that the additional depositions and written discovery could inquire into the preservation of emails sent to and from one of the Wells Fargo custodians. Gazian, at *7-8.

Bow Tie Thoughts

A lawsuit can hinge on one smoking gun email that was produced late. This sort of situation is one that needs to be avoided by litigants. The problem when this happens is often one of not having an effective information governance solution, or not issuing a litigation hold correctly, or not collecting ESI, or not knowing how to leverage early case assessment tools to find potentially relevant information. To put it mildly, disaster can happen for many reasons.

How can parties avoid these situations? Use sound technologies to manage data that can issue a litigation hold and preserve relevant ESI. This does require determining what is relevant, but these are problems that can be solved by knowing what actions to take and the tools to properly litigate a case.

2 thoughts on “You Don’t Want Discovery Overdraft Charges

  1. According to the brief filed by Wells Fargo, the late-produced emails were not in its “custody or control” and were received by it in an unrelated litigation matter from Wells Fargo Securities LLC. Wells Fargo then spends several pages briefing why the “smoking gun” email is irrelevant to the allegations in the lawsuit. Seems to me you don’t produce documents “out of an abundance of caution” if truly believe them to be irrelevant.

    • Thank you for explaining the late-production further. I also agree with the not producing something that you do not think is relevant.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s