Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_02-cv-01486/USCOURTS-cand-4_02-cv-01486-74/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

In re: JDS UNIPHASE CORPORATION

SECURITIES LITIGATION

 

This document relates to ALL ACTIONS

 /

No. C-02-1486 CW (EDL)

ORDER GRANTING IN PART LEAD

PLAINTIFF’S MOTION TO COMPEL

LIMITED ADDITIONAL DISCOVERY

Lead Plaintiff seeks documents about Defendant Kalkhoven’s and the individual JDSU

Defendants' personal finances to rebut their assertion that the JDSU stock sales were part of a

diversification strategy. To obtain relief from the discovery cut-off, Lead Plaintiff must show good

cause for modification of the schedule. Fed. R. Civ. Proc. 16(b). The Court finds the matter suitable

for decision without a hearing and grants in part Lead Plaintiff’s motion for the reasons stated

below.

Kalkhoven's expert, Wayne Guay, opined that Kalkhoven's stock sales were consistent with a

strategy of investment diversification, as Kalkhoven was a "poorly diversified individual." Hart

Decl., Ex. A (Guay Report) at 2-3. Professor Guay based this analysis on the assumption “that Mr.

Kalkhoven's stock and option holdings in JDS Uniphase comprised a very large proportion of his

personal wealth.” Id. at 12. Kalkhoven argues that, in making that assumption, Professor Guay

relied upon “the testimony of Mr. Kalkhoven and that of his stockbroker, Mr. Jeffrey Oster, who

strongly encouraged Mr. Kalkhoven to diversify his holdings.” Guay Rep., ¶ 22. Kalkhoven also

argues that Lead Plaintiff is not entitled to discover material that was not used by Professor Guay in

forming his expert opinion. Kalkhoven Opp. at 11. See Rule 26(a)(2)(B) (expert report shall

Case 4:02-cv-01486-CW Document 1064 Filed 04/10/07 Page 1 of 3
United States District Court

For the Northern District of California

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contain "the data or other information considered by the witness in forming the opinions"). 

In discovery, Lead Plaintiff sought "documents concerning the proceeds or use of proceeds

from any sale of JDS securities." Hart Decl., Ex.B at 14 (Request for Production No. 45(d)). 

Kalkhoven refused to produce such documents on the grounds that, inter alia, they are not relevant

and are subject to his right to privacy. Sundel Decl., Ex. A (Kalkhoven Response to RPDs). Lead

Plaintiff has sufficiently shown that Kalkhoven has put his personal wealth and assets at issue,

though he previously argued that his net worth was not at issue, and therefore not discoverable. See

Hart Decl., Ex. C (Kalkhoven Opp. Mot. Compel) at 10. Although Kalkhoven argues that Professor

Guay only assumed that his wealth was heavily weighted to JDSU stocks before the stock sales at

issue, Lead Plaintiff is entitled to test this assumption. Kalkhoven’s privacy interest in his financial

records is modest compared to other privacy interests such as medical information or sexual history,

and is outweighed by the need for discovery, as raised in Professor Guay’s expert report. 

Furthermore, his privacy interest is sufficiently protected by the September 21, 2005 Order

Regarding Confidentiality. Moreover, producing a limited set of financial records from a limited

time period would not be unduly burdensome. Kalkhoven’s relevance and privacy objections to

Lead Plaintiff’s Request No. 45(d) are therefore overruled.

The Court agrees with Defendants that a defense based on diversification strategy should not

come as a surprise to Lead Plaintiff. Nonetheless, the Court concludes that Lead Plaintiff acted

reasonably diligently by moving to compel documents about the individual Defendants' finances

and, having been denied information about their net worth, choosing not to further move to compel

financial documents based on its understanding of the Court’s ruling (albeit this understanding was

somewhat overbroad). See September 7, 2005 Order re: Lead Plaintiff's Motion to Compel (docket

no. 342) (denying motion as to “documents related to net worth but without prejudice to deposition

inquiries regarding spending.”) Having established good cause to modify the discovery deadline,

Lead Plaintiff is entitled to test Professor Guay's opinion that Kalkhoven's stock sales were

consistent with investment diversification strategy and Professor Guay’s assumption “that Mr.

Kalkhoven's stock and option holdings in JDS Uniphase comprised a very large proportion of his

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1 Defense counsel has indicated, however, that the individual JDSU Defendants might

testify that they sold JDSU stock to diversify their portfolios. JDSU Defs. Opp. at 3; Patz Decl., ¶ 2.

The Court notes that such testimony could put the individuals’ financial transactions and investment

portfolios at issue, and does not address whether that eventuality would justify further discovery or other

steps.

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personal wealth.” Guay Rep., ¶ 22. 

Lead Plaintiff’s motion for limited additional discovery is granted as to documents sufficient

to show the use of proceeds from any sale of JDSU securities by Kalkhoven, and documents

reflecting the total values of Kalkhoven’s JDSU portfolio compared to his non-JDSU stock portfolio

and other investments during the relevant time period defined in Lead Plaintiff’s requests for

production: January 1, 1999 to the date of the Guay report. Kalkhoven shall produce such

documents to Lead Plaintiff by April 24, 2007. Lead Plaintiff’s motion to compel any other

information about Kalkhoven’s personal finances is denied for insufficient showing of relevance to

Kalkhoven’s purported diversification strategy.

Lead Plaintiff further moves to compel additional discovery of the individual JDSU

Defendants’ financial transactions. The Court’s March 28, 2007 Order re: Defendants’ Motions to

Strike Portions of the Seyhun Rebuttal Report struck the portions of the Guay Report addressing

trading by the Defendants other than Kalkhoven. Lead Plaintiff’s motion is therefore denied without

prejudice to the extent it seeks to compel financial records for Straus, Miller and Abbe, based on

Defendants’ representations to the Court that their financial condition is not relevant to the issues in

this action. See JDSU Defs Opp. Mot. Compel (docket no. 297) at 20.1

 

This Order disposes of docket number 984.

IT IS SO ORDERED.

Dated: April 10, 2007 

ELIZABETH D. LAPORTE

United States Magistrate Judge

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