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Securities and Exchange v. Stephen M. Kovzan

February 21, 2013

SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF,
v.
STEPHEN M. KOVZAN, DEFENDANT.



The opinion of the court was delivered by: K. Gary Sebelius U.S. Magistrate Judge

MEMORANDUM AND ORDER

This matter comes before the court upon the Securities and Exchange Commission's Motion to Quash Defendant Stephen M. Kovzan's Rule 30(b)(6) Notice (ECF No. 143). The SEC requests that the court issue a protective order prohibiting the Fed. R. Civ. P. 36(b)(6) deposition of its representative. The court agrees that while the deposition topics are in some cases broad and perhaps seek information similar to what was sought through written discovery, the SEC has not carried its burden of making a specific showing justifying the entry of a protective order prohibiting its deposition. Therefore, the court denies the SEC's motion.*fn1

I.Background

This is a civil enforcement action brought by the SEC against Mr. Kovzan under the Securities Act of 1933, 15 U.S.C. § 77a, et seq., and the Securities Exchange Act of 1934, 15 U.S.C. § 78a, et seq. Highly summarized, the SEC alleges that Mr. Kovzan was involved with the preparation and signing of public SEC filings for his employer, NIC, Inc., from 2002 to 2006 that were materially false and misleading because they failed to disclose as income the NIC chief executive officer's perquisites.

On December 18, 2012, Mr. Kovzan served on the SEC his Rule 30(b)(6) Notice of the SEC's Deposition. The notice lists twenty-six deposition topics that fall into one of three general categories.*fn2 Several topics concern the factual basis for the SEC's contentions and theories of this case and the related case, SEC v. NIC, Inc., 11-2016-EFM. *fn3 Other topics concern the steps the SEC took to obtain and produce discovery documents in this case and the reasons for the SEC's objections to certain discovery requests.*fn4 The remainder of the topics concern the interpretation and meaning of certain regulatory terms and guidance and any confusion regarding those terms and guidance.*fn5 The SEC has now moved for a protective order barring the deposition.

II.Discussion

Fed. R. Civ. P. 26(c) governs protective orders. The rule states, "The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense[.]"*fn6 The district court has broad discretion to fashion the scope of a protective order.*fn7 Despite this substantial latitude, "a protective order is only warranted when the movant demonstrates that protection is necessary under a specific category set out in Rule 26(c)."*fn8 The party seeking a protective order bears the burden of establishing good cause for it.*fn9

To do this, the movant must make "a particular and specific demonstration of fact, as distinguished from stereotyped and conculsory statements."*fn10

The SEC argues a protective order is warranted because Mr. Kovzan is essentially seeking the deposition of opposing counsel and because other more efficient means exist to obtain the information sought through the deposition. As discussed below, the court agrees that questions on some topics could venture into privileged or protected information and that in some cases, written discovery may prove a more efficient way for Mr. Kovzan to discover the information he seeks. The notice does not itself seek the deposition of opposing counsel, and the SEC would be able to assert privilege and work-product objections to specific questions during the deposition. As to the burden of the deposition, the SEC has failed to come forward with a particular and specific demonstration of fact that would allow the court to conclude that the deposition would result in an undue burden or expense, justifying the entry of a protective order.

Fed. R. Civ. P. 30(b)(6) expressly allows for the deposition of a governmental agency. In this type of deposition, there is no distinction between the deponent and the agency.*fn11 The notice of the deposition "must describe with reasonable particularity the matters for examination."*fn12

The agency must then produce a deponent or deponents to testify on the agency's behalf.*fn13 The designee or designees must be prepared to testify about the information known or reasonably available to the organization.*fn14

A.Deposition of Opposing Counsel

On its face, the deposition notice does not seek the deposition of opposing counsel. The SEC, however, argues that a number of topics seek the judgment and assessments of the SEC's attorneys in responding to discovery and articulating the factual basis for the SEC's clams in this case. The SEC argues that other topics essentially require the SEC to articulate and explain the law, and the SEC has cited several cases in which courts have prohibited the depositions of governmental agencies. First, there is no blanket rule prohibiting the deposition of a governmental agency in an action such as this one. The court acknowledges that some judges, in their discretion, have found it appropriate to prohibit Rule 30(b)(6) depositions of governmental agencies lacking any first-hand knowledge of the facts at issue. This line of cases, however, does not relieve the SEC of its obligation to come forward with a particular and specific demonstration of fact that would justify the entry of a protective order-particularly when Rule 30(b)(6) expressly allows for the depositions of governmental agencies.

Second, Rule 30(b)(6) deponents need not have independent personal knowledge of the deposition topics. The rule requires deponents "to testify about information known or reasonably available to the organization."*fn15 "In other words, personal knowledge of the designated subject matter by the selected deponent is of no consequence."*fn16 Thus, a party is not permitted to undermine the ...


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