Law Firm's Client Didn't Have First Amendment Right To Be Anonymous

We'll probably never know the identity of the Appellant in Lefkoe v. Jos. A. Bank Clothiers, Inc., decided yesterday by the Fourth Circuit.  Whether anyone, including the Defendant, was entitled to know that person's name was the whole point of the appeal by the party referred to by the Fourth Circuit as the "Doe Client."

The Doe Client had accused Jos. A. Bank, a publicly traded company, of serious accounting fraud. That individual, who claimed a constitutional right to anonymity, appealed a ruling of a trial judge in the District of Maryland ordering his or her identity to be disclosed to the Defendant.

The Fourth Court's ruling touches both deposition and subpoena procedure under the Federal Rules of Civil Procedure as well as issues of freedom of speech under the First Amendment.

Background

You'll need more than a little bit of background, as the case has elements of a John Grisham novel. Lefkoe is a securities class action. Plaintiffs assert fraud based on a sharp drop in the clothing company's share price when it delayed an earnings report.

The delay occurred because Bank's Audit Committee had received, shortly before the report's due date, a letter from the law firm of Foley & Lardner making detailed charges of accounting improprieties.The letter was sent by the law firm on behalf of a shareholder who it said "held several hundred thousand shares" of Bank stock. The shareholder was not identified in the letter.

Bank hired lawyers and accountants to investigate the charges. The conclusion of the investigation was that the charges were "without substance." In the securities lawsuit, filed in federal court in Maryland, Bank sent a subpoena to the law firm seeking to require it to present a witness to testify as to the identity of its client. The subpoena was issued from the Massachusetts district court.

The law firm objected there to the subpoena, asserting that its client had "a right of anonymity as protected by the First Amendment." The Massachusetts judge permitted the deposition to take place. The law firm presented the Doe Client as the witness. The Court ordered the deposition sealed and entered a protective order stating that the lawyers for Bank couldn't tell their client the name of the Doe Client.

The lawyers for Bank investigated the Doe Client, and found facts suggesting it had taken "deliberate and successful actions to drive down the market price" of Bank stock, and furthermore that it was a short seller who held a substantial quantity of puts on Bank stock.  The Doe Client therefore stood to profit from the decline in Bank stock.

The clothing company's lawyers then asked the Maryland judge to permit them to provide the name of  the Doe Client to Bank. The Maryland judge agreed to a wider disclosure, but only to Bank's in-house counsel.

The Doe Client appealed to the Fourth Circuit, arguing that the Maryland court didn't have the authority to modify the Massachusetts' court's ruling, and furthermore that the ruling violated the Doe Client's First Amendment rights.

The Authority Of The Maryland Court

On the question of authority, the Fourth Circuit observed that the jurisdiction of the Maryland and Massachusetts federal courts overlapped, and that the Doe Client could have applied to either court for protection per Rule 26(c), and to the Massachusetts court per Rule 45. The Fourth Circuit held:

Even though Rule 26(c) authorized the Doe Client to seek protection from either the Maryland court, where the case is pending, or the Massachusetts court, where the deposition was being taken, it could also invoke Rule 45(c) to obtain protection specifically from the Massachusetts court where the subpoena issued. These multiple accommodations to the deponent . . . afford flexibility so that the nonparty witness can facilely obtain protection and not be unduly burdened.

Op. at 12.

The Maryland court, in which  the action was pending, therefore had authority to modify the Massachusetts court's protective order.

First Amendment Issues

The Court then turned to the Doe Client's claim that the Maryland court had violated "its fundamental First Amendment right to speak anonymously." The Court said that the First Amendment "does appear to include some aspect of anonymity in protecting free speech," but that the letter involved was commercial speech, which warranted only a limited measure of protection.

The Court ruled that the asserted First Amendment right was "subject to a substantial governmental interest in disclosure so long as disclosure advances that interest and goes no further than reasonably necessary."

The Court concluded:

Once it is recognized that the deposition of the Doe Client and information that it could present could be relevant and useful to Jos. A. Bank's defense of the litigation, the substantial governmental interest in providing Jos. A. Bank a fair opportunity to defend itself in court is served by requiring the Doe Client to reveal its identity and provide the relevant information.  Rule 26 explicitly expresses this interest, providing that Jos. A. Bank 'may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense. . . .'

Op. at 17.

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