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Silverman v. Motorola

July 7, 2010

SILVERMAN
v.
MOTOROLA, INC. ET AL



Name of Assigned Judge Sitting Judge if Other or Magistrate Judge Amy J. St. Eve than Assigned Judge

DOCKET ENTRY TEXT

Plaintiffs' Motion to Compel Improperly Withheld Documents [289] is granted in part and denied in part.

O[ For further details see text below.] Notices mailed by Judicial staff.

STATEMENT

Before the Court is Plaintiffs Macomb County Employees' Retirement System and St. Clair Shores Police and Fire Pension System's (collectively "Plaintiffs") Motion to Compel Improperly Withheld Documents. For the following reasons, the Court grants in part and denies in part Plaintiffs' motion.

BACKGROUND

As the Court has previously explained in its rulings on the parties' discovery motions, this class action concerns Motorola, Inc.'s ("Motorola") and certain of its officers and directors' (collectively "Defendants") alleged violations of §§10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. Plaintiffs allege that Defendants made public misstatements and material omissions regarding Motorola's 3G mobile handset portfolio. Plaintiffs contend that throughout the Class Period (July 2006-January 2007), Motorola's 3G portfolio was not on track or running on the Argon platform due, in part, to third party supplier Freescale Semiconductor, Inc.'s ("Freescale") failure to provide chipsets to Defendants on time. Plaintiffs further allege that rather than disclosing the potential delays in the 3G product launch, Motorola continued to assert that its products would ship in late 2006. Motorola, however, did not launch a Motorola 3G phone until 2007.

During the discovery period, Plaintiffs filed a motion to compel Defendants to produce documents related to licensing agreements that Defendants entered into with Freescale and Qualcomm, Inc. ("Qualcomm") at the end of the third quarter of 2006 ("3Q06"). The Court granted Plaintiffs' motion to compel in part noting that, "[t]he fact that Defendants entered into licensing agreements with Freescale and Qualcomm in late 3Q06, especially considering Freescale's role in the delay of the 3G releases, and that Defendants included the earnings from those agreements in their 3Q06 earnings statements could evidence an attempt to cover up the failed 3G developments." (R. 200, pp. 3-4.) Plaintiffs Second Amended Complaint, filed on March 15, 2010, contains allegations that Defendants "failed to disclose the nature and financial effect of either the Freescale and Qualcomm 3Q06 IP transactions, which far exceeded $50.00 million, in blatant violation of GAAP and SEC rules." (R. 211-1, Second Amended Complaint, ¶ 153.) In their answer to the Second Amended Complaint, Defendants asserted an affirmative defense that, "Motorola accounted for and/or disclosed all material transactions consistent with generally accepted accounting principles and the requirements of the Securities and Exchange Commission." (R. 220, Fifty-Seventh Affirmative Defense, p. 126.)

The present motion concerns Plaintiffs' request for documents concerning the accounting for and disclosure of the 3Q06 IP deals with Freescale and Qualcomm. Plaintiffs assert that Defendants have improperly withheld numerous documents on the basis that they are protected from disclosure as privileged materials.

LEGAL STANDARD

I. Motion to Compel

"Parties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party.... Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence." Fed. R. Civ. P. 26(b)(1) (emphasis added). In the context of motions to compel, the Seventh Circuit instructs that a "district court may grant or deny the motion in whole or in part, and similar to ruling on a request for a protective order under Rule 26(c), the district court may fashion a ruling appropriate for the circumstances of the case." Gile v. United Air Lines, Inc., 95 F.3d 492, 496 (7th Cir. 1996) (citing Fed. R. Civ. P. 37(a)(4)(B), (C)). "Thus, a district court is not limited to either compelling or not compelling a discovery request; in making its ruling, a district court should independently determine the proper course of discovery based upon the arguments of the parties." Id. As with all discovery matters, district courts have broad discretion in determining motions to compel. See id.; see also Reynolds v. Jamison, 488 F.3d 756, 761 (7th Cir. 2007).

II. Attorney-Client Privilege

"In order for the attorney-client privilege to attach, the communication in question must be made: (1) in confidence; (2) in connection with the provision of legal services; (3) to an attorney; and (4) in the context of an attorney-client relationship." United States v. BDO Seidman, LLP, 492 F.3d 806, 815 (7th Cir. 2007). "The purpose of the privilege is to 'encourage full disclosure and to facilitate open communication between attorneys and their clients.'" Id. (internal citations omitted). "'[B]ecause the privilege is in derogation of the search for the truth, it is construed narrowly.'" Jenkins v. Bartlett, 487 F.3d 482, 491 (7th Cir. ...


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