IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

LAST ATLANTIS CAPITAL, LLC, )

et al., ) Nos. 04 C 0397

) 05 C 5600

Plaintiffs, ) 05 C 5671

)

vs. ) JUDGE ELAINE BUCKLO

) MAGISTRATE JUDGE ARLANDER KEYS

AGS SPECIALIST PARTNERS, ) 

et al., )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

The plaintiffs in this case allege violations of §10b of the

Exchange Act and SEC Rule 10b-5 (a), (b) and (c), as well as

state law claims, including breach of contract, common law fraud,

breach of fiduciary duty, tortuous interference, and violations

of the Illinois Consumer Fraud and Deceptive Practices Act. The

case has a long history here; filed in 2004, it has meandered

through the discovery stage, giving rise to more disputes, and

requiring far more judicial intervention and attention than most.

The case is currently before the Court on two deposition-related

motions. 

The first motion before the Court is plaintiffs’ motion for

an order directing Goldman Sachs to comply with rules 30(b)(6)

and 30(c)(2). According to the plaintiffs, they served GSEC with

a deposition notice, seeking 30(b)(6) testimony concerning eight

delineated areas of inquiry. GSEC agreed to produce Warner Howe
for deposition, but advised the plaintiffs – two days before his

scheduled deposition – that he was prepared to testify about just

one of the 8 topics; GSEC objected to the remainder of the

topics. What’s worse, the plaintiffs contend, is that, at the

deposition, GSEC further limited discovery by instructing Mr.

Howe not to answer numerous questions because they were “beyond

the scope” of that topic. The plaintiffs seek an order directing

GSEC to comply with Rule 30(b)(6) and 30(c), and awarding them

the costs of conducting further depositions necessitated by

GSEC’s behavior.

The defendants offer a slightly different take on the events

leading up to Mr. Howe’s deposition. According to the

defendants, after deposing several 30(b)(6) witnesses, the

plaintiffs served the May 15, 2013 deposition notice, and the

defendants designated prior testimony as responsive 30(b)(6)

testimony for several of the topics delineated therein – a proper

procedure and one to which plaintiffs’ counsel did not object. 

Additionally, the defendants designated Mr. Howe to offer

additional 30(b)(6) testimony on topics 2 and 4. The defendants

objected to several of the topics on various grounds. 

Plaintiffs’ counsel proceeded as if he agreed with the plan. 

Then, after getting the additional deposition testimony and going

along with the plan laid out by the defendants, he moved to

compel and charged them with violating the rules of discovery.

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The two sides’ versions are not entirely inconsistent. It

is true, as the plaintiffs emphasize, that the defendants

produced a 30(b)(6) witness who was not prepared to testify about

all 8 topics listed in the deposition notice; and it is also true

that counsel instructed the witness not to answer questions. The

real question is whether, under all of the surrounding

circumstances, those actions were proper. 

To be sure, as the plaintiffs point out, when served with a

30(b)(6) notice, a corporate defendant is required to produce a

designated representative who is fully prepared to testify about

all topics identified in the deposition notice. But, as the

Court sees it, the defendants appear to have done that – way back

in 2008. On December 4, 2008, the plaintiffs deposed Dennis

Kerlin, who offered 30(b)(6) testimony on behalf of both GSEC and

SLK-Hull. Additionally, in response to the May 15, 2013

deposition notice, GSEC and SLK-Hull designated as 30(b)(6)

testimony certain portions of John Smollen’s testimony from his

deposition on March 19, 2013. The plaintiffs have not suggested

that these witnesses were unprepared or improperly designated. 

The plaintiffs do complain that Donna McDonald, who was also

deposed in March of this year, had trouble remembering things. 

But it’s not clear that she was intended to serve as a 30(b)(6),

and, in any event, having waited to depose her until 2013, it’s

hardly surprising that she had trouble recalling events from a

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decade earlier. 

When the plaintiffs served an additional 30(b)(6) notice,

with discovery coming to a close, the defendants responded

appropriately. And, in the Court’s view, they have cooperated

with the plaintiffs to a reasonable extent. Given the topics

listed and the timing of the notice, it does seem as if the

notice was intended more to cause work for the defendants than to

yield anything new in the way of relevant evidence. 

Very briefly, the eight topics listed in the notice covered:

(1) defendants’ efforts to advertise, promote or market products

or services offered concerning the trading of options; (2) the

process by which the specialists disseminated quotes, received

and executed orders, etc.; (3) information on profits and losses

from trading options; (4) defendants’ understanding of the

applicable laws, rules, customs and practices to ensure

compliance with SEC and Exchange rules; (5) information about the

various types of audit trail data created by the Exchanges and

third parties; (6) information about SEC investigations; (7) the

factual bases for defendants’ affirmative defenses; and (8)

information about the defendants’ websites, including statements

made and documents posted thereon. 

The defendants designated prior deposition testimony in

response to several of the topics, objected to others, and

advised counsel for the plaintiffs that they would produce one

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additional witness concerning topic two, which, sought

information concerning: 

[t]he process by which the defendant and/or individual

specialists employed by the defendant: (a) disseminated

quotes for the options that it/they traded as a

specialist; (b) received, identified and executed

orders and requests to cancel orders that were

electronically transmitted or routed to defendant’s

specialists from Auto Ex for “manual” executions, and

9c) reported, confirmed, and/or disseminated

information about defendant’s receipt and execution of

orders and requests to cancel orders.

Deposition Notice, p. 18, ¶II (attached as Exhibit A to the

Declaration of Andrew Friedman in Support of Plaintiffs’ Motion).

The defendants advised that Mr. Howe would also offer testimony

with regard to topic four, which sought information concerning

“Defendant’s understanding of the laws and rules, customs and

practices applicable to its specialist business and defendant’s

efforts to ensure compliance with all rules enacted by the SEC

(“SEC Rules”) and/or the Exchanges (“Exchange Rules”) that are

specifically applicable to the handling of orders to buy and sell

options by exchange specialists, market makers and floor brokers

on the Exchanges (collectively referred to herein as “Order

Handling Rules”), and rules concerning the maintenance and

destruction of documents, data and records, including but not

limited to SEC Rules 17a-3 and 17a-4, CBOE Rule 15.1 and similar

rules promulgated by the other Exchanges.” Deposition Notice, p.

18-19, ¶IV. More specifically, the defendants advised that Mr.

Howe would testify “solely regarding efforts to ensure compliance

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with Order Handling Rules.” GSEC and SLK-Hull’s Responses and

Objections to Plaintiffs’ Revised Rule 30(b)(6) Notice, p. 7

(attached as Exhibit F to the Declaration of Eric A. Bensky in

Opposition to Plaintiffs’ Motion to Compel Additional 30(b)(6)

Testimony). 

As the plaintiffs correctly note, Rule 33 provides that “[a]

person may instruct a deponent not to answer only when necessary

to preserve a privilege, to enforce a limitation ordered by the

court, or to present a motion under Rule 30(d)(3).” It is clear

from the parties’ submissions that both sides have instructed

witnesses not to answer when none of these applied. But,

candidly, had the parties sought court intervention prior to Mr.

Howe’s deposition, the Court would have entered an order limiting

it to the scope sketched out by the defendants. In fact, if the

defendants had sought court intervention to bar the plaintiffs

from taking additional 30(b)(6) depositions, the Court likely

would have granted such relief. The defendants provided 30(b)(6)

testimony – they presented Mr. Kerlin in 2008 and Mr. Smollen

earlier this year; even now, the plaintiffs have not explained

what additional testimony they require or why the testimony they

got was inadequate. As generally seems to be the case here, the

plaintiffs simply want more. The time has come to say: “Enough.” 

The Court appreciates that the case involves complex issues, but

the plaintiffs have had nine years to build their case; if they

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haven’t been able to do so by now, additional discovery is not

going to help them . . . which brings the Court to the second

motion.

The second motion before the Court is GSEC and SLK-Hull’s

motion for a protective order concerning discovery directed at

Duncan Niederauer and Stuart Sternberg. The plaintiffs served

both of these individuals with subpoenas on May 9, 2013,

requiring them to appear for deposition on, respectively, May

29th and May 30th. Goldman Sachs Execution & Clearing (GSEC) and

SLK-Hull Derivatives have moved, pursuant to Federal Rule of

Civil Procedure 26(c), for an order forbidding the plaintiffs

from taking those depositions. 

Federal Rule of Civil Procedure 26(c) allows a party or a

person from whom discovery is sought to “move for a protective

order in the court where the action is pending – or as an

alternative on matters relating to a deposition, in the court for

the district where the deposition will be taken.” Fed. R. Civ.

P. 26(c)(1). The Rule allows the court, for good cause, to

“issue an order to protect a party or person from annoyance,

embarrassment, oppression, or undue burden or expense . . . .” 

Id. Among other things, the Rule empowers the court to enter an

order “forbidding the disclosure or discovery”; “specifying

terms, including time and place, for the disclosure or

discovery”; or “prescribing a discovery method other than the one

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selected by the party seeking discovery.” Fed. R. Civ. P.

26(c)(1)(A), (B), (C).

 Defendants GSEC and SLK-Hull Derivatives ask the Court to

enter an order forbidding the plaintiffs from taking the

depositions of Duncan Niederauer and Stuart Sternberg. Duncan

Niederauer is the current head of the New York Stock Exchange,

but was formerly the head of GSEC. Stuart Sternberg is a current

owner of the Tampa Bay Rays baseball franchise, and was formerly

the co-head of SLK-Hull. The plaintiffs have subpoenaed them both

for deposition. The Goldman Sachs defendants argue that neither

has any first hand knowledge of the underlying facts of this

case; nor were they in any way involved in the events underlying

the plaintiffs’ complaint. They argue that, because Mr.

Niederauer and Mr. Sternberg are high level executives who had

absolutely nothing to do with this case, the Court should enter

an order forbidding the plaintiffs from deposing them. The

defendants represent that, although they have repeatedly asked

the plaintiffs to explain what information these witnesses might

possess, the plaintiffs have consistently declined to elaborate

on what it is they hope to gain in terms of discovery from

deposing these very high level witnesses. 

The plaintiffs argue that high level executives are not

automatically exempt from the discovery process. That is true,

but, as the defendants note, there are some special rules that

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apply to these types of witnesses. “Because high level

executives are vulnerable to numerous, repetitive, harassing, and

abusive depositions,” they may need “some measure of protection

from the courts”; courts often decline to compel the deposition

of such witnesses absent some showing that the executive “has

unique or personal knowledge of the situation.” Meharg v. I-Flow

Corp., No. 1:08-cv-0184-DFH-TAB, 2009 WL 1404603, at *1 (S.D.

Ind. May 15, 2009)(citing, among other cases, Patterson v. Avery

Dennison Corp., 281 F.3d 676, 681-82 (7th Cir. 2002)). 

Here, there really is no evidence to support the plaintiffs’

contention that Mr. Niederauer and Mr. Sternberg possess relevant

information, let alone unique or personal knowledge. Certainly,

none of the plaintiffs has identified any information these

witnesses might possess; indeed, some of the plaintiffs didn’t

even know who these guys are. At his deposition, Bryan Rule, one

of the named plaintiffs, testified that he had never heard of Mr.

Sternberg and did not know Duncan Niederauer. Rule Dep., p. 529

(attached as Exhibit D to Bensky’s Declaration). Brad Martin,

another named plaintiff, testified that he had never had any

communications with SLK-Hull Derivatives, that he does not recall

ever speaking to Stuart Sternberg and that he is not aware of any

information Mr. Sternberg might have that might be relevant to

this proceeding. Martin Dep., p. 371 (attached as Exhibit F to

Bensky’s Declaration). Mr. Martin similarly testified that he

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does not recall ever communicating with Duncan Niederauer and

that he does not know of any information Mr. Niederauer may have

that might be relevant to this proceeding. Martin Dep., p. 372. 

Brent Starck said the same thing at his deposition; he testified

that he did not know either witness and that he was not aware of

any information either witness may have that might be relevant to

this case. Starck Dep., p. 130 (attached as Exhibit G to

Bensky’s Declaration). 

Nor has plaintiffs’ counsel been able to explain why these

witnesses should be deposed. At a status conference on May 10,

2013, counsel for the plaintiffs represented that he wanted to

depose Mr. Niederauer and Mr. Sternberg because they were the comanagers and principals of the defendants and they oversaw the

operations of defendant companies. Transcript of proceedings, p.

9 (attached as Exhibit H to Bensky’s Declaration). Counsel

conceded that these individuals are very important people, with

very important jobs; however, he represented that they have

information and that, in particular, Mr. Sternberg is

“important.” Id., p. 10. Counsel agreed to talk, to try to work

something out; however, he did not withdraw the subpoenas; nor

did he indicate that he could do without one or both of the

witnesses. Thus, as of this moment, it would appear that counsel

for the plaintiffs is still taking the position that he has the

right to depose both Mr. Niederauer and Mr. Sternberg, though he

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has provided no further explanation concerning what, exactly,

they can offer in terms of relevant testimony. 

To support their position that Mr. Sternberg’s testimony is

relevant, the plaintiffs reference an affidavit signed by Mr.

Sternberg on July 12, 2000 and submitted in an unrelated action. 

In that affidavit, Mr. Sternberg represented that he joined SLK

in 1987 as a specialist and, in 1991 became the Managing Director

responsible for SLK’s options specialist and market making unit. 

Sternberg Affidavit, ¶3 (attached as Exhibit I to Bensky’s

Declaration). The affidavit then goes on to detail SLK’s

responsibilities with respect to particular options series, as

well as the logistics and background information concerning

options trading. Id., ¶¶6-15. 

Significantly, the affidavit does nothing to undermine the

defendants’ assertion that these witnesses do not possess unique

or personal knowledge about the claims and issues raised in this

lawsuit. Indeed, Mr. Sternberg’s affidavit was executed July 12,

2000, which is outside the relevant period defined by the

plaintiffs in their complaint. See Complaint, ¶1(a)(defining the

“Relevant Period” as September 11, 2000 through and including,

the present day, which would have been January 20, 2004); Amended

Complaint, ¶1(a)(defining the “Relevant Period” as April 1, 2001

through the present day, which would have been June 1, 2005);

Second Amended Complaint, ¶2 (defining the “Relevant Period” as

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April 1, 2001 through October 4, 2005); Consolidated Complaint, 2

(same, which “present day” being November 7, 2005); Amended

Consolidated Complaint, ¶I(A)(1)(continuing the use of April 1,

2001 as the start date of the Relevant Period). Given the

plaintiffs’ definition of the “Relevant Period,” what was going

on with SLK, the exchanges, options specialists, etc. in July of

2000 simply is not relevant. In fact, in their motion to compel

additional 30(b)(6) testimony, the plaintiffs fault GSEC for

producing a witness who was only employed by SLK-Hull during the

first two years of the relevant time period; Mr. Howe testified

that he left his job as an options specialist at AMEX in early

2003. See Plaintiffs’ Memorandum in Support, p. 3. It is

difficult to imagine what they would hope to gain from someone

whose knowledge base concerning the relevant issues would have

ended even earlier.

The plaintiffs argue that they have uncovered evidence

demonstrating that Mr. Niederauer and Mr. Sternberg have

knowledge of facts and information relevant to the claims and

defenses in this case. For example, the plaintiffs argue that

Mr. Niederauer was “in charge of several subsidiaries of GS Group

that provided electronic routing and execution services to public

customers and broker dealers, and which provided clearing

services and sent confirmation statements about securities trades

to public customers . . . .” Plaintiffs’ Response in Opposition

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to Motion for Protective Order, p. 2. But that does not mean he

has knowledge concerning the actual issues involved in this case;

nor does it say anything about whether that information could be

obtained from some other witness, whose deposition would wreak

less havoc and cause less of a burden. 

On the contrary, the defendants have demonstrated that these

witnesses do not possess unique or personal knowledge concerning

the specific claims raised in this lawsuit. Although they surely

possess knowledge and expertise concerning options trading, that

is not enough to justify hauling them in for deposition; too many

other witnesses fall into that category to justify requiring

these high level individuals to disrupt their schedules and sit

for depositions that are unlikely to yield anything of particular

relevance or significance.

The Court is persuaded that neither Mr. Niederauer nor Mr.

Sternberg possesses the type of unique, personal knowledge that

would make their depositions appropriate; the Court is similarly

persuaded that, whatever knowledge or information they do possess

generally about issues tangentially relevant to this case may be

obtained (and has been obtained) from numerous other witnesses. 

Accordingly, the Court grants the motion for a protective order

concerning the depositions of Mr. Niederauer and Mr. Sternberg. 

Conclusion

For the reasons explained above, the Court denies

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Plaintiffs’ Motion for an order directing the Goldman Sachs

Defendants to comply with Rules 30(b)(6) and 30(c) [Docket

#1251], and grants GSEC and SLK-Hull Derivatives’ motion for

protective order concerning plaintiffs’ subpoenas to Duncan

Niederauer and Stuart Sternberg [Docket #1224]. 

DATED: September 4, 2013

ENTERED:

______________________________

ARLANDER KEYS

United States Magistrate Judge

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