Securities Action Plaintiff Required to Identify Confidential Informants
On November 14, 2011, in Plumbers and Pipefitters Local Union No. 630 Pension-Annuity Trust Fund v. Arbitron, Inc., the United States District Court for the Southern District of New York held that a defendant is entitled to discover the identities of confidential informants referenced in a securities class action complaint. This advisory examines the court’s decision.
In the course of discovery in this securities class action, defendant Arbitron, Inc. moved to compel lead plaintiff to identity the 11 former company employees referred to in the operative complaint only as “Confidential Informants” and also to produce documents that the informants had provided to plaintiff’s counsel. The court granted the motion to compel, subject to permitting plaintiff additional time to substantiate its claim that disclosure of the informants’ names could result in retribution.
Plaintiff objected to the disclosure of the informants’ identities on three grounds. First, plaintiff asserted that it did not need to disclose specifically the identities of the informants in light of the fact that their names were contained in plaintiff’s initial disclosures, which provided a list of 83 current or former Arbitron officers or employees likely to have discoverable information. Second, plaintiff asserted that the identities of the informants were protected by the attorney work product doctrine on the grounds that disclosure would reveal which witnesses plaintiff’s counsel considers important, thereby revealing mental impressions, opinions and/or legal theories regarding information provided by the informants. Finally, plaintiff asserted that the informants have legitimate concerns that they will suffer retaliation in their current or future employment if they are identified.
Noting that the complaint “prominently states that its allegations of securities fraud ‘are supported by the first-hand knowledge’” of the informants, the court concluded that Rule 26(b)(1) “clearly requires that the names of the 11 informants be produced (unless they are held to be privileged).” The court determined that the identities of the informants were not entitled to work product protection because, among other things, the informants described in the complaint were “not a reliable indicator of counsel’s actual thought process,” in that there were many plausible reasons that counsel may have chosen to describe or not describe certain witnesses in the complaint.
The court further observed that it would be unduly burdensome to require Arbitron to “engage in a costly process of elimination in which it would take numerous depositions simply to smoke out which of the 83 disclosed names are the 11 [confidential informants].” The court considered it relevant that the informants’ names “will almost certainly eventually become known during this litigation,” because each of the 83 disclosed employees ultimately would be obligated to indicate whether he or she had made statements to plaintiff’s counsel along the lines of those attributed to a particular informant. In this regard, the court reasoned: “Denying the instant motion would thus not permanently keep the 11 [informants’] identities under wraps. Instead, it would merely elongate the deposition discovery process, imposing costs and burdens on all parties.”
With respect to plaintiff’s assertion that the informants would suffer retaliation, the court found that there was “no reliable, non-conclusory basis to find that any of the [confidential informants] here faces a risk of retaliation sufficient to justify non-disclosure of his or her name to the defense.” Nonetheless, the court agreed to permit the plaintiff one week to provide additional support for its position that the disclosure of any particular informant’s name would result in retaliation.