In re: Public Offering Ple Antitrust Litigation. Jeffrey A. Weinman, As Trustee for… v. Stuart Cable

United States Court of Appeals
For the First Circuit
No. 05-1690
IN RE: PUBLIC OFFERING PLE ANTITRUST LITIGATION.
________________________
JEFFREY A. WEINMAN, AS TRUSTEE FOR WESTERN PACIFIC AIRLINES;
EQUALNET COMMUNICATIONS CORPORATION,
Appellants,
v.
STUART CABLE,
Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Selya, Circuit Judge,
Coffin, Senior Circuit Judge,
and Howard, Circuit Judge.
Roger W. Kirby with whom David Kovel, Andrew C. Griesinger,
Kirby McInerney & Squire LLP and Griesinger, Tighe & Maffei, LLP
were on brief for appellants.
Christopher T. Holding with whom Henry S. Dinger and Goodwin
Procter LLP were on brief for appellee.
October 20, 2005

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We are informed that class certification papers are soon to be 1
submitted.
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COFFIN, Senior Circuit Judge. This is an appeal of an order
of the United States District Court for the District of
Massachusetts granting a motion to quash a discovery subpoena of a
nonparty witness. It is ancillary to an antitrust action brought
in the Southern District of New York by two formerly publicly
traded companies against some twenty-eight investment banks
alleging a conspiracy to fix fees for underwriting services related
to initial public offerings of stock (IPOs). Plaintiffs- 1
appellants sought both documents and testimony from a Boston
attorney, appellee Stuart Cable. For reasons we explain below, we
vacate the district court’s ruling and remand the case for further
consideration.
I. Factual Background
The stimulus of appellants' efforts was an article in 2001 in
the IPO Journal, largely quoting Cable's comments concerning his
law firm, his IPO experience (representing nine companies issuing
IPOs and three investment bank-underwriters), and his "Top Ten"
tips for corporate chief executives contemplating an IPO process.
His second "tip," labeled "Cutting the Economic Deal Among your
Bankers," asserted: "The deal between you and the bankers is non-
negotiable (7% of the gross)." In the same paragraph, he continues
with the advice to "[m]ake certain that the economics among

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underwriters [i.e., lead underwriter vs. others involved] are
negotiated up-front . . . ." (emphasis in original). The eighth
tip, entitled "Pricing Your Deal," states in part, "You will not
have a meaningful opportunity to negotiate . . . . [T]he managing
underwriter (without dissent from his co-managers) will present you
with the results of their order book -- a fait accompli as to
pricing . . . ."
Appellants, on February 25, 2005, served a subpoena on Cable
asking him to testify in a deposition on March 17, 2005, and to
produce non-privileged documents "that form the basis for your
assertions in the IPO Journal" that an issuer of common stock pays
a non-negotiable, fixed price of seven percent of gross. The
subpoena also called for documents relating to a subsequent article
in another publication, not at issue here, and documents relating
to any testimony or interviews he may have given, as well as
articles or lectures by him concerning the pricing of underwriting
fees.
Appellee Cable moved to quash the subpoena, averring by
affidavit that he had not been involved in any of appellants' IPOs,
that his views in the articles cited had been shaped by his twenty-
five years of dealing with IPOs, and that identifying any pertinent
documents would require him to canvass the files of these years and
perhaps to consult with clients.

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On March 17, the scheduled date for deposition, a magistrate
judge held a telephone conference with counsel. The transcript of
that conference reveals the exchange between the parties. Appellee
based his motion to quash on Fed. R. Civ. P. 45(c)(3)(B)(ii), which
allows suppression of a subpoena seeking an "unretained expert's
opinion . . . resulting from the expert's study made not at the
request of any party." Appellants' counsel rejoined that they were
not seeking Cable's opinion or expertise, but "his observation of
an event that happened." In a brief order issued the same day, the
magistrate judge reported that appellants had come forth with no
evidence that Cable had any factual information about the specific
transactions at issue, only the argument that it was likely that,
given his experience representing both sides in many IPOs, he had
some non-privileged factual information. The magistrate judge
rested her conclusion on her perception that appellants were
seeking an unretained expert's opinion, contrary to the safeguards
of Fed. R. Civ. P. 45(c)(3)(B)(ii). The motion to quash was
granted without prejudice.
Appellants objected and moved for reconsideration of the
order. They argued first that the magistrate judge had erred in
placing the burden on them to produce relevant evidence since Fed.
R. Civ. P. 26(b)(1) sets the standard as producing evidence
"reasonably calculated to lead to the discovery of admissible

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Rule 26(b)(1) states in part: 2
Parties may obtain discovery regarding any matter, not
privileged, that is relevant to the claim or defense of
any party . . . . For good cause, the court may order
discovery of any matter relevant to the subject matter
involved in the action. Relevant information need not be
admissible at the trial if the discovery appears
reasonably calculated to lead to the discovery of
admissible evidence.
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evidence." In any event, they asserted that they had met any 2
burden, since appellee’s statements in the IPO Journal article were
"factual assertions" and they were seeking the "factual
underpinnings" for those assertions. They noted that any evidence
implicating any defendants in a broad-ranging conspiracy would
impact the case of the named plaintiffs, even in the absence of
class certification, and pointed out that Cable had represented six
issuers between 1995 and 1997 in IPOs within the ranges specified
in the complaint ($20 to $80 million), where the underwriting fee
was seven percent.
A second subpoena was soon served seeking the witness’s
testimony and documents relating only to the IPO Journal piece.
Appellee Cable moved again to quash, supplying an affidavit that he
could not recall considering any documents, and had no files, and
that his statements were based on his twenty-five years of
practice. Appellee's memorandum supporting his motion made two
arguments: (1) that, given his lack of any information concerning
the appellants' own IPOs, the only conceivable reason for seeking

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his deposition was to obtain opinion evidence concerning general
industry practice; and (2) the subpoena would subject Cable to an
"undue burden," barred by Fed. R. Civ. P. 45(c)(3)(A)(iv). Not
only would appellee face the burdensome task of trying to identify
specific incidents and considering what is privileged information,
but his status as a nonparty was entitled to special weight.
Appellants opposed the motion by filing an affidavit of one of
their attorneys, making more specific the information concerning
Cable's representation of issuers of IPOs between 1995 and 1997.
Of the deals noted in the article, six were in the target range of
$20 to 80 million, all at seven percent. Five of the six
underwriters were defendants in the instant case.
On May 3, 2005, the district court allowed the motion to quash
without opinion.
II. Issues Presented
In reviewing a district court’s discretionary judgment, the
underlying issue is, of course, whether the court abused its
discretion by overlooking a relevant factor, improperly giving
weight to an improper factor or committing “a palpable error of
judgment in calibrating the decisional scales," Texas Puerto Rico,
Inc. v. Dep’t of Consumer Affairs, 60 F.3d 867, 883 (lst Cir.
1995). See Bogosian v. Woloohojian Realty Corp., 323 F.3d 55, 64
n.7 (1st Cir. 2003) (trial-court discovery rulings reviewed for
abuse of discretion). In discovery matters, the bar is high.

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There must be a "clear showing" that the court's order was “plainly
wrong and resulted in substantial prejudice to the aggrieved
party." Heidelberg Americas v. Tokyo Kikai Seisakusho, Ltd., 333
F.3d 38, 41 (1st Cir. 2003) (quoting Mack v. Great Atl. & Pac. Tea
Co., 871 F.2d 179, 186 (1st Cir. 1989)).
Despite this demanding standard of review, the existence of
unanswered questions presented by the record makes us reluctant to
affirm without the benefit of the district court's informed and
particularized assessment. We explain.
We have traced the proceedings to surface the variety of
issues presented. Although the magistrate judge identified the
basis of her ruling, i.e., that impermissible "unretained expert"
testimony was being sought, we are reviewing the decision of the
district court. Since the court did not set forth its reasoning,
we may affirm based on any dispositive issue that is both readily
evident and sufficiently supported by the record. See Reich v.
Simpson, Gumpertz & Heger, Inc., 3 F.3d 1, 4 (lst Cir. 1993).
Hence our search for such an issue.
There is, first of all, the issue dealt with by the magistrate
judge – whether appellants seek unretained expert testimony or
whether, as they argue, they seek not opinion but "factual
underpinnings" of Cable's IPO Journal statements. The nature of
the testimony sought from appellee – observations from years of
practice – raises the question whether the information sought is of

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the nature described by Fed. R. Civ. P. 45(c)(3)(B)(ii), i.e.,
does it result from Cable's "study made not at the request of any
party"?
Associated with this is the threshold of relevance to which
the evidence sought should rise. Need it be reasonably calculated
to lead to evidence directly connected with the transactions
involving the appellants, or is it enough if it is likely to lead
to proof of a general conspiracy that inevitably would impact
appellants?
Moreover, even if what is sought is factual and, if
admissible, relevant, how likely is it that Cable’s testimony could
survive claims of privilege? Presumably Cable could not, in the
absence of a waiver of privilege, breach confidences entrusted to
him by either issuer or underwriter clients. At oral argument,
appellants sketched two different scenarios. Were Cable to testify
to representations or communications of a third party in the course
of representing either an issuer or an underwriter, such would not
violate the attorney-client privilege. Similarly, had Cable been
instructed to tell something to a third party, the privilege would
not survive.
Since data already exists of the widespread prevalence of
parallel pricing, another question that must be addressed is
whether inquiries into these scenarios would be calculated to

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produce non-cumulative evidence pointing to a traditional
conspiracy.
Finally, there remains the question not addressed below:
whether appellants' discovery requests pose such an "undue burden"
on appellee Cable that, under Rules 26©) and 45(c)(3)(a)(iv),
quashing the subpoena is warranted even though relevant materials
or testimony is sought. Although the subpoena at issue requested
documents that were considered in the preparation of the IPO
Journal article, appellants now say in their brief that, since
appellee claims to have no such documents, the only remaining
question is whether appellants may examine him. Appellants cite
Moore’s Federal Practice for the proposition that “quashing a
subpoena ad testificandum is very rare because until the witness is
asked specific questions, usually there is nothing on which to base
a motion to quash.” 9 James Wm. Moore et al., Moore’s Federal
Practice, § 45.04[3][a] (3d ed. 2005).
Even with appellants’ reduced request, the evaluation of
benefit to appellants versus burden on appellee is a demanding and
sensitive one. On the one hand, appellee is a nonparty to the
underlying litigation. This fact is entitled to special weight in
evaluating the balance of competing needs. Cusumano v. Microsoft
Corp., 162 F.3d 708, 717 (1st Cir. 1998). On the other hand,
appellee’s participation in the production of the IPO Journal
article highlighted his breadth of experience representing both

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sides in IPOs; his extensive work in the field enabled him to make
unqualified assertions concerning the lack of any meaningful
negotiation in arriving at underwriting fees. Even appellee admits
that his information is “not wholly irrelevant to plaintiffs’
claims.”
III. Conclusion
While findings of fact and conclusions of law are not required
by Fed. R. Civ. P. 52(a) for granting or denying such a motion as
that before us, and we ordinarily may assume that the district
court weighed all appropriate factors, Microfinancial, Inc. v.
Premier Holidays Int’l, Inc., 385 F.3d 72, 76-77 (lst Cir. 2004),
we cannot say here with confidence that "the record permits a clear
understanding of why the district court ruled as it did," id. at 77
n.2.
The underlying antitrust litigation in another circuit is not
trivial. Prompt appeal of this ancillary matter is afforded in
this circuit and, despite the additional burden on our resources,
such a proceeding must be and be seen to be meaningful. Because of
the variety of issues to which we have alluded and particularly
because of the requirement for the sensitive balancing of interests
that we have described, and that has hitherto not been addressed,
we conclude that we need the benefit of the district court's
reasoning.

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We therefore vacate the judgment and remand the case to allow
the district court to consider the issues we have identified and
set forth its conclusions.
Vacated and remanded. All parties to bear their own costs.

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