2008-00008457-CU-MC

The People of the State Of California vs. State Street Corp

Nature of Proceeding: Motion to Compel Production of Documents

Filed By: Benedetto, Matthew D.

State Street Defendants’ Motion to Compel Russell Investments’ Production of
Documents Pursuant to Subpoena is GRANTED.

This is one of two cross-motions, together with State Street’s Motion to Compel
Production of Documents Pursuant to Subpoena, being heard concurrently. The
arguments and evidence in support of each motion is essentially identical.

Russell shall produce the responsive documents, as narrowed by the agreements of
the parties, and subject to the June 3, 2011 Amended protective Order, should Russell
agree to its terms. The date of the production shall be mutually agreed upon.

Payment of costs incurred by Russell is limited to actual, reasonable costs incurred in
the production itself, in the amount of $11,2000, not all costs incurred in preservation
of data, as requested by the People.

The minute order is effective immediately. No formal order pursuant to CRC Rule
3.1312 or further notice is required.

Item 2 2008-00008457-CU-MC

The People of the State Of California vs. State Street Corp

Nature of Proceeding: Motion for Protective Order

Filed By: Kula, Donald J. Third party Russell Investments’ Motion for Protective Order against Defendant State
Street is DENIED.

This is one of two cross-motions, together with State Street’s Motion to Compel
Production of Documents Pursuant to Subpoena, being heard concurrently. The
arguments and evidence in support of each motion is essentially identical.

On September 20, 2013, State Street filed a motion to compel Russell to produce
three discrete categories of documents: (1) a set of approximately 3,600 email
documents for three key custodians, which Russell has already prepared for
production; (2) FX studies and analyses; and (3) hard copy documents responsive to
Subpoena Request Nos. 1, 2, 4-5, 11 and 18-19 (including documents such as
Russell’s contracts with the Funds, communications with the Funds concerning FX
rates, and industry publication or conference materials). On October 15, 2013, Russell
filed this cross-motion for a protective order, seeking nearly $150,000 in preservation
costs and attorneys’ fees and an order excusing it from producing hard copy
documents.

Specifically, Russell seeks a Protective Order that Defendant State Street Corporation:
(1) must pay the costs Russell has incurred complying with State Street’s subpoena,
which includes the costs of data preservation; (2) must pay the costs associated with
distilling the subpoenaed data for production, which includes review of the data and
isolation and removal of attorney-client privileged materials or confidential client
information unrelated to the State Street litigation; (3) must pay Russell’s attorneys’
fees associated with defending against State Street’s Motion to Compel, especially
because this dispute has been protracted by State Street’s refusal to pay anything
other than the most superficial costs associated with data production; and (4) must
limit the scope of production to the three key fileholders who most likely have
responsive data and the time period of production between January 1, 2006, and May
26, 2011, as previously agreed.

Allegations of the Pleadings

The People prosecute this action asserting claims under the California False Claims
Act and the California Unfair Competition Law against defendants State Street. Plaintiff
alleges that defendants violated the False Claims Act in the manner in which they
priced foreign exchange currency (FX) trades that they executed on behalf of
CalPERS and CalSTRS (Pension Funds). Plaintiff contends that defendants
misrepresented the prices by saying that they were “based on” the interbank rates.
One of the issues in this case is whether CalSTERS and CalPERS were aware of the
manner in which the foreign currency exchange trades were priced, which would
undermine plaintiff’s claims that the pricing was fraudulent.

Prior Motions to Compel

Defendant State Street previously propounded Request for Production of Documents
to the People for production of documents. A motion to compel that production was
filed by State Street. Although the People were ordered to produce those documents
in the possession of CalPERS and CalSTRS, the Court denied the request that
Plaintiff be required to supplement its discovery responses with responsive documents
belonging to each of the Funds’ third party agents not under its “legal control” and
therefore not subject to production.

Russell is one of those third party external investment managers of the Funds.

On Nov. 7, 2011, the Court denied State Street’s Motion to Compel Production by the
People, concluding that the People did not have control over the non-party documents.
th
People v Superior Court of San Diego County (Cole) (2004) 122 Cal.App.4 1060,
1078. Defendants State Street’s remedy was to seek the non-party documents by
subpoena to the third parties, rather than directly from the People.

Subpoena

In June 2011, defendant State Street served a subpoena duces tecum on third party
Russell for the production of relevant documents. Russell does not dispute the
relevance of the documents, but seeks a protective order, including compensation for
its costs of retention and production of the relevant records.

Moving party Russell now asserts that although the subpoena was not served upon it
by State Street until Jan. 2011, the request to preserve documents relevant to State
Street’s defenses was made much earlier.

State Street’s original discovery request to the People, resulted in the Attorney
General sending Russell a letter dated June 16, 2010, asking that Russell take steps
to “ensure that evidence relevant to the People’s claims and State Street Bank’s
potential defenses is available for production and use during this litigation.” (Williams
Dec., Exh. C, Att. 1)

Russell asserts that the responsive documents and data are available for production in
response to State Street’s subpoena, only because of the earlier request from the
People. A further letter from the Attorney General’s office emphasized that
reimbursement for the discovery costs of the retention of these documents would be
the responsibility of the party seeking discovery.

Motion for Protective Order

In making this motion for protective order, Russell relies upon the general proposition
that discovery procedures are generally less onerous for strangers to the litigation. The
distinction between parties and nonparties reflects the notion that, by engaging in
litigation, the parties should be subject to the full panoply of discovery devices, while
nonparty witnesses should be somewhat protected from the burdensome demands of
litigation. Monarch Healthcare v. Superior Court (2000) 78 Cal. App. 4th 1282, 1290.

Moving party cites to C.C.P., sec. 1985.8, which provides the procedure for the
production of electronically stored information. Subsection (g) provides that: “If the
court finds good cause for the production of electronically stored information from a
source that is not reasonably accessible, the court may set conditions for the discovery
of the electronically stored information, including allocation of the expense of
discovery.”

Payment of the costs Russell has incurred

Russell seeks payment of costs it has incurred in complying with State Street’s
subpoena, which includes the costs of data preservation.

Russell’s attorney Williams declares that since June 16, 2010, Russell has incurred
over $144,025.18 as the result of preserving electronically stored information (“ESI”)
and hard copy records for the purpose of responding to discovery requests form State
Street. Russell continues to incur costs on a monthly basis. (Williams Dec. para. 3.)

State Street has offered to pay the amount of $11,2000, the estimated costs of
producing copies of responsive ESI from the top three Russell fileholders. This
amount does not include the costs of preserving the data for review and screening the
data for attorney-client privileged communications or confidential information related to
clients other than CalPERS or CalSTRS.

Evid Code § 1563 (b) entitles Russell to be paid by State Street for “All reasonable
costs incurred in a civil proceeding by any witness which is not a party with respect to
the production of all or any part of business records the production of which is
requested pursuant to a subpoena duces tecum may be charged against the party
serving the subpoena duces tecum.”

The Williams Declaration fails to itemize or detail the basis for the amount claimed for
reimbursement to establish that it is “reasonable” or even that it is directly related to
the production of the subpoenaed records.

No evidence that the records sought are not reasonably accessible ,as required by
C.C.P., sec. 1985.8(g), is provided by the Williams declaration.

In opposition, State Street asserts that the amount sought by Russell (now referred to
as $150,000) consists exclusively of attorneys’ fees incurred in connection with
document review.

The Court concurs with State Street, that attorneys’ fees incurred in connection with
document review are not compensable production costs under Evid. Code, sec. 1563.

Although Russell characterizes the costs incurred in complying with the subpoena,
State Street asserts that as Russell incurred those costs in fulfilling its fiduciary duty to
as investment manager for both CalPERS and CalSTRS.

Neither Evid. Code, sec. 1563(b) (1) nor C.C.P., sec. 1985.8 authorizes
reimbursement of preservation costs or of attorneys’ fees. None of the cases cited by
Russell have awarded a third party preservation costs.

(1) Costs Russell has actually incurred complying with State Street’s subpoena,
excluding the costs of data preservation must be paid.

(2) Costs associated with distilling the subpoenaed data for production and (3)
attorneys’ fees associated with defending against State Street’s Motion to Compel,
need not be paid.

The second and third categories of costs requested, includes review of the data and
isolation and removal of attorney-client privileged materials or confidential client
information unrelated to the State Street litigation is similarly a demand for attorneys’
fees. No case awarding attorneys’ fees to nonparties producing documents has been cited.

(4) Limitation of the scope of production to the three key fileholders who most likely
have responsive data and the time period of production between January 1, 2006, and
May 26, 2011, as previously agreed.

Cal Code Civ. Proc. § 2025.420(b)(13) permits the court to issue a protective order,
“for good cause shown” Subsection (13) permits this protective order to include, an
order that a trade secret or other confidential research, development, or commercial
information not be disclosed or be disclosed only to specified persons or only in a
specified way.

Here, again, the Williams Declaration fails to provide sufficient admissible evidence to
show good cause for the requested order. A memorandum of points and authorities
alone cannot constitute “good cause”.

Russell states that it “has never made the [materials], in their entirety, widely available
to anyone” and speculates that these materials ”may relate to clients other than the
California pension funds . . . .” (Mot. at 10) Speculation is not evidence. However,
Russell does not dispute that the FX study documents are likely to demonstrate what
Russell knew and communicated to clients and investment managers about rates
State Street charged its clients. Russell also concedes that it “has provided summaries
of its findings and data in publicly available sources.” [emphasis added](Mot. at 10).
This alone defeats Russell’s attempt to avoid production. See In re Providian Credit
Card Cases (2002) 96 Cal. App. 4th 292, 304 (public disclosure shows lack of
secrecy). Russell has failed to explain how the information it claims is proprietary
differs from the information publicly disclosed.

State Street has appropriately agreed to limit the scope of the production of documents
containing proprietary data, by not seeking special financial tools or algorithms that
Russell may have used to generate data underlying its studies, but only reports
showing FX costs and spreads and how Russell could save clients such as the Funds
money on FX transaction. State Street has also appropriately agreed to allow Russell
to redact client names and account information, other than CalPERS and CalSTRS or
State Street.

State Street notes that pursuant to the Amended Protective Order filed June 3, 2011, it
has offered and Russell may request to be included in the protections of that Order
extended to third parties. (See, Protective Order, paras. 2, 19) Russell may, if it
chooses, designate documents as Confidential, redact portions, or mark as for
attorneys’ eyes only.

Given these limitations and protections, and the absence of evidence entitling Russell
to anything further, the motion for protective order is denied in its entirety.

The minute order is effective immediately. No formal order pursuant to CRC Rule
3.1312 or further notice is required.