Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-04435/USCOURTS-cand-3_06-cv-04435-29/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:78m(a) Securities Exchange Act

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SECURITIES AND EXCHANGE

COMMISSION,

Plaintiff,

 v.

 REYES, et al.,

Defendants. /

No. C 06-04435 CRB

ORDER DENYING MOTION TO

QUASH SUBPOENAS

The SEC has issued subpoenas duces tecum to Merrill Lynch and Deutsche Bank,

seeking information about accounts owned by Defendant Gregory Reyes. Reyes has moved

to quash these two subpoenas on the ground that they are an unwarranted intrusion on his

financial privacy. Reyes does not dispute that much of the information sought by the SEC is

relevant, but he argues that all information relating to his transactions in Brocade has already

been disclosed to the SEC (albeit in the form of redacted materials) and that the SEC’s

interest in additional, non-Brocade information is outweighed by his privacy interest in his

financial history.

Contrary to the SEC’s suggestion, the Court concludes that Reyes has standing to

challenge the two subpoenas, although they are not directed to him. See United States v.

Miller, 425 U.S. 435, 436-37 (1976) (considering a criminal defendant’s motion to suppress

evidence obtained through the service of a subpoena duces tecum on two banks); see also In

re Grand Jury Proceedings, 867 F.2d 562, 563 (9th Cir. 1989) (considering a challenge by a

Case 3:06-cv-04435-CRB Document 321 Filed 06/11/07 Page 1 of 3
United States District Court

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defendant on privacy grounds to a grand jury subpoena served on his psychotherapist),

overruled on other grounds by, Jaffee v. Redmond, 518 U.S. 1, 7 (1996) (holding that a

patient has a right to privacy in his psychotherapist’s files).

Nonetheless, the Court concludes that the materials targeted by the subpoenas duces

tecum are within the broad bounds of discovery set forth under Rule 26, and that the SEC’s

interest in them is not outweighed by legitimate concerns for Reyes’ privacy. First, as Reyes

himself concedes, the materials identified by the subpoenas are relevant to this litigation. 

Indeed, the thrust of the subpoenas is to obtain information regarding Reyes’ own

transactions in Brocade. Although Reyes has propounded some discovery of these materials,

the SEC notes that such discovery consists of highly redacted information, and the agency

justifiably argues that it should not be limited in its discovery requests to the materials as

circumscribed by its adversary. Second, there is some indication in the materials already

gathered by the SEC that Reyes may interpose as a defense to the timing of his stock options

that he was able to “time” the market with great skill. Significantly, the papers indicate that

Reyes has suggested his fortuitous timing is not limited to the context of Brocade, but may

extend to the market more generally. See Decl. of Robert Leach (Docket No. 317), Ex. 40, at

10 (suggesting the timing of the Brocade grants might be due to Reyes’ reading of “news

events, competitive events, announcements, and in the wake of stock market implosions,”

also including Reyes’ experience in “trad[ing] options before coming to Brocade”). Such a

suggestion justifies further investigation by the SEC, including the examination of the

financial records targeted by the subpoenas.

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Because the subpoenas duces tecum are “reasonably calculated to lead to the

discovery of information,” Fed. R. Civ. P. 26(b)(1), and because Reyes’ admittedly

legitimate privacy interests do not outweigh the SEC’s interest in obtaining evidence to

refute contentions that Reyes himself has raised, the motion to quash the subpoenas is hereby

DENIED.

IT IS SO ORDERED.

Dated: June 11, 2007 

CHARLES R. BREYER

UNITED STATES DISTRICT JUDGE

Case 3:06-cv-04435-CRB Document 321 Filed 06/11/07 Page 3 of 3