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MAZ Partners LP v. Shear

United States District Court, D. Massachusetts

September 15, 2016

MAZ PARTNERS LP, Individually and on behalf of Others Similarly Situated, Plaintiff,
v.
BRUCE SHEAR, et al., Defendants.

          MEMORANDUM AND ORDER ON PLAINTIFF'S MOTION TO COMPEL DISCOVERY (#240).

          M. Page Kelley United States Magistrate Judge

         I. INTRODUCTION.

         Familiarity with the facts of this case as set out in the District Court's Summary Judgment Order (#258 at 3-7) is presumed. Plaintiff MAZ Partners LP seeks discovery pertaining to investigations conducted by the U.S. Securities and Exchange Commission (SEC) of alleged insider trading based on non-public information concerning the merger that is at the heart of this case. (## 240, 241.) The subjects of the investigations are connected in varying degrees to defendants PHC, Inc. (PHC) and Acadia Healthcare Co. Inc. (Acadia).[1] Id. Initially, plaintiff sought to depose the four individuals named in the SEC investigations along with defendant Bruce Shear[2] and to discover all relevant, non-privileged documents concerning insider information and trading with regard to the named individuals. (#241 at 5, 13.) Plaintiff also asked this court to order defendants to appoint a corporate representative from PHC and Acadia to explain when defendants became aware of the SEC investigations and why defendants faild to produce information about the investigations pursuant to plaintiff's original discovery request. (#241 at 15-17.)

         The court held a hearing on the motion on September 8, 2016. In a letter submitted after the hearing, plaintiff narrowed its requests. (#268).[3] Plaintiff no longer seeks to depose Robert Hanner or Danny Carpenter, the Acadia officers; no longer seeks the appointment of corporate representatives; and has identified more clearly the documents it is seeking. (#268.) Defendants argue that the requested information is both factually and legally irrelevant to the case. (See ## 243, 250, 267.)

         II. FACTS.

         Plaintiff served its first request for production of documents on defendants on July 25, 2011. (#241 at 6.) Among other things, plaintiff requested:

#10 Documents sufficient to identify the benefits received by the Directors and any officers of PHC in connection with the Merger. . .
*****
#48 All [d]ocuments concerning any of the Directors' purchases, sales, gifts, grants, options or ownership, either directly, indirectly, or beneficially, of PHC, Acadia, Jefferies, or Jefferies Finance securities of any type or class.
*****
#50 All [d]ocuments concerning communications between you and any federal, state or local government agency concerning the merger.

(#242-1.) On August 21, 2011, defendants served formal responses to plaintiff's discovery requests and agreed to produce any responsive documents with respect to requests ##10, 48, and 50. (#242-2.) Discovery closed on April 30, 2015, at which point plaintiff believed that it had obtained all relevant documents. (#241 at 3.)

         Four months later, on September 4, 2015, the SEC entered orders to cease-and-desist and for sanctions against Donald Robar, Eric Shear, Robert Hanner, and Danny Carpenter with respect to allegations of illicit trades based on non-public information relating to the merger of PHC and Acadia. (##241 at 4; 242-4-7.) Defendants never disclosed any information pertaining to these SEC investigations to plaintiff. (#241 at 4.) On December 24, 2015, plaintiff learned of the SEC investigations. (#241 at 5.) Plaintiff conferred with defendants regarding the investigations; defendants took the position that the material was not germane to the case and refused to disclose anything. Plaintiff notified the court of the dispute and urged the court to withhold its Class Certification and Summary Judgment rulings. To date, no additional material has been disclosed to plaintiff, and the Class Certification and Summary Judgment Orders have been issued. (##234, 258.)

         III. STAND ...


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