UNITED STATES DISTRICT COURT 

DISTRICT OF OREGON 

PORTLAND DIVISION 

LAWRENCE P. CIUFFITELLI, for himself Case No. 3:16-cv-00580-AC 

and as Trustee of CIUFFITELLI 

REVOCABLE TRUST; GREG and 

ANGELA JULIEN; JAMES and SUSAN 

MACDONALD, as Co-Trustees of the 

MACDONALD FAMILY TRUST; R.F. 

MACDONALD CO.; ANDREW NOWAK, 

for himself and as Trustee of the ANDREW 

NOWAK REVOCABLE LIVING TRUST 

U/A 2/20/2002; WILLIAM RAMSTEIN; and 

GREG WARRICK, for himself and, with 

SUSAN WARRICK, as Co-Trustees of the 

WARRICK FAMILY TRUST, individually 

and on behalf of all others similarly situated; 

ORDER ON SIDLEY AUSTIN'S 

MOTION TO COMPEL 

Plaintiffs, 

V. 

DELOITTE & TOUCHE LLP; 

EISNERAMPER LLP; SIDLEY AUSTIN 

LLP; TONKON TORP LLP; TD 

AMERITRADE, INC.; INTEGRITY BANK 

& TRUST; and DUFF & PHELPS, LLC; 

Defendants, 

V. 

Case 3:16-cv-00580-AC Document 448 Filed 01/24/19 Page 1 of 9
N. SCOTT GILLIS; ROBERT J. JESENIK; 

and BRIAN A. OLIVER; 

Intervenors. 

ACOSTA, Magistrate Judge: 

Presently before the court is a Motion to Compel (ECF No. 406) filed by Defendant Sidley 

Austin, LLP ("Sidley"). The matters has been fully briefed, and the court heard oral argument on 

the motion on January 22, 2019. For the reasons that follow, Sidley' s motion is denied. 

Pertinent Factual Background 

The parties and the court are well acquainted with the facts of this case and the comi 

discusses here only those facts pe1iinent to resolution of the parties' current discovery dispute. 

Plaintiffs seek to represent a class of investors who purchased various securities from Aequitas 

Capital Management and its affiliated entities ("Aequitas"). Plaintiffs allege the Defendants 

pmiicipated or materially aided the sale of Aequitas securities by means of untrue statements of 

material fact or omissions of material fact and are liable under Oregon Revised Statutes ("ORS") § 

59.115(3). On August 21, 2018, Plaintiffs filed an Amended Motion for Preliminary Approval of 

a Pmiial Settlement ("Proposed Settlement"). (Am. Mot. Partial Settlement, ECF No. 350.) In that 

motion, Plaintiffs seek approval of a settlement between the Class Representatives and Defendant 

Tonkon Torp LLP ("Tonkon"). The settlement is conditioned upon entry by the court of a 

contribution claims bar, with a pro tanto credit for non-settling Defendants. 

Sidley and Tonkon have engaged in limited discovery pertaining to the fairness and 

reasonableness of the Proposed Settlement, and Tonkon' s assertion of"pmiial solvency" as it relates 

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Case 3:16-cv-00580-AC Document 448 Filed 01/24/19 Page 2 of 9
to the pro tan to claims bar. Tonkon represents that it has provided Sidley with financial information 

pertaining to its income and distributions to partners in the aggregate. In its motion, Sidley seeks 

an additional subset of information relating to the distribution of monies by Tonkon to those 

individual partners who worked on Aequitas matters. Sidley contends the requested discovery is 

critically relevant to assessing whether the Proposed Settlement should be approved. Tonkon argues 

that the additional information sought by Sidley is not relevant. 

Legal Standards 

Under Federal Rule of Civil Procedure ("Rule") 37(a)(3)(B), a party may move for an order 

compelling the production of requested documents. FED. R. CIV. P. 37(a)(3)(B)(iv). The party 

seeking to compel discove1y has the burden of establishing its request is relevant under Rule 

26(b)(l). Sarnowski v. Peters, Case No. 2:16-cv-00176-SU, 2017 WL 4467542, at *2 (D. Or. Oct. 

6, 2017). The party opposing discovery has the burden of showing that discovery should not be 

allowed and has the burden of clarifying, explaining, and supporting its objections. Id.; Yufa v. Hach 

Ultra Analytics, No. 1 :09-cv-3022-PA, 2014 WL 11395243, at *1 (D. Or. Mar. 4, 2014)("If a paiiy 

elects to oppose a discovery request, the opposing paiiy bears the burden of establishing that the 

discove1y is overly broad, unduly burdensome, or not relevant. Boilerplate, generalized objections 

are inadequate and tantamount to not making any objection at all." ( citation and quotation omitted)). 

If a paiiy objects to a discovery request, it is the burden of the paiiy seeking discovery on a motion 

to compel to demonstrate why the objection is not justified. Weaving v. City of Hillsboro, No. CV10-1432-HZ, 2011 WL 1938128, at *1 (D. Or. May 20, 2011). 

In general, the paiiy seeking to compel discove1y must inform the court which discove1y 

requests are the subject of the motion to compel, and, for each disputed request, inform the comi why 

3 - ORDER ON SIDLEY AUSTIN'S MOTION TO COMPEL 

Case 3:16-cv-00580-AC Document 448 Filed 01/24/19 Page 3 of 9
the information sought is relevant and why the objections are not meritorious. Id. 

Rule 26(b )(1) provides in relevant part: 

Parties may obtain discovery regarding any nonprivileged matter that is relevant to 

any party's claim or defense and proportional to the needs of the case, considering 

the importance of the issues at stake in the action, the amount in controversy, the 

parties' relative access to relevant info1mation, the parties' resources, the impmiance 

of the discovery in resolving the issues, and whether the burden or expense of the 

proposed discovery outweighs its likely benefit. lnfo1mation within this scope of 

discove1y need not be admissible in evidence to be discoverable. 

FED. R. CIV. P. 26(b)(l). Among the limitations Rule 26(b) provides is the direction that the court 

must limit the extent of discovery if it determines that the discovery sought is outside the scope of 

Rule 26(b )(1) or if it is "unreasonably cumulative or duplicative, or can be obtained from some other 

source that is more convenient, less burdensome, or less expensive." FED. R. CIV. P. 26(b )(2)(C)(i); 

Quaiz v. Rockier Retail Group, Inc., Case No. 3:16-cv-01879-SI, 2017 WL 960360, at *l (D. Or. 

Mar. 31, 2017). Also, the court has discretion to limit the scope of discovery if "the burden or 

expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the 

case, the amount in controversy, the paiiies' resources, the importance of the issues at stake in the 

litigation, and the importance of the proposed discove1y in resolving the issues." FED. R. CIV. P. 

26(b )(2)(C)(iii). 

Discussion 

Sidley seeks responses to Inte1Togatory No. 2, which asks Tonkon to specify the amount of 

money it distributed to paiiners of the firm who provided legal services for Aequitas entities. 

Specifically, it provides: 

For each attorney identified in response to Inte1Togatory No. 1 above [ attorneys who 

provided legal services for Aequitas] who was a partner at Your firm at any point 

between 2010 and the present, identify the amount of money that you distributed to 

4 - ORDER ON SIDLEY AUSTIN'S MOTION TO COMPEL 

Case 3:16-cv-00580-AC Document 448 Filed 01/24/19 Page 4 of 9
each such partner in income and capital distributions for each year between 2014 and 

the present. 

(Templeton Deel. Ex. A at 2, ECF No. 407-1.) Sidley also seeks responses to Request for 

Production No. 7, which provides in relevant part: 

Documents sufficient to identify all distributions of income, draws, loans, or other 

capital disbursements made to each of Your partners between October 1, 2015, and 

the present. 

(Id. Ex.Bat 2.) 

Sidley argues that the documents are relevant to: (1) assessing whether the proposed 

settlement is fair, adequate, and reasonable; and (2) to test Tonkon's asse1iion that it is "partially 

solvent." 

Sidley argues that the Proposed Settlement and release provides sweeping protection not only 

for Tonkon, but also for the individual Tonkon partners. Sidley complains that Tonkon authored the 

majority of the PPMs at issue in this case, yet the Proposed Settlement covers only three percent of 

the total losses ($450 million) in the case. Sidley contends that the Proposed Settlement between 

Plaintiffs and Tonkon also requires entry of an order releasing all claims against the individual 

Tonkon partners. According to Sidley, eve1y paiiner who provided legal services to Aequitas faces 

potential personal liability under ORS§§ 67.105(4) and 58.185. See ORS§ 67.105(4) (providing 

that "paiiners of a limited liability partnership who are professionals shall be personally liable in 

their capacity as paiiners to the same extent . . . as provided for shareholders of a domestic 

professional corporation under ORS 5 9 .18 5"); 0 RS § 5 8 .185 (3) (providing that shareholders shall 

be "personally liable as if the shareholder were rendering the service or services as an individual, 

only for negligent or wrongful acts or omissions or misconduct committed by the shareholder, or by 

5 - ORDER ON SIDLEY AUSTIN'S MOTION TO COMPEL 

Case 3:16-cv-00580-AC Document 448 Filed 01/24/19 Page 5 of 9
a person under the direct supervision and control of the shareholder"). Sidley argues that the 

Proposed Settlement unfairly shields the individual Tonkon partners from any liability and raises 

fairness concerns because the settlement class may be releasing substantial claims for no 

consideration. 

In response, Tonkon asserts that the detailed information relating to the income and 

distributions to those specific Pminers who worked on Aequitas matters is not relevant to any issue 

concerning the Motion for Partial Settlement. Tonkon argues that any claims against individual 

Tonkon patiners under ORS§§ 67.105(4) and 58.185(3) and (4) are claims belonging to persons 

"receiving the service or services," in this case, the Receivership Entity who stepped into Aequitas' s 

shoes. (Tonkon Resp. at 8 n.8, ECF No. 419.) The Receivership Entity is not a member of the 

settlement class. Consequently, Tonkon contends, the settlement class is not foregoing any claims 

against individual partners because the settlement class members have no claims, and the discovery 

sought is not relevant to any fairness issues in assessing the Proposed Settlement. 

The court is not persuaded by Sidley's argument that the documents are relevant to whether 

the settlement is fair, adequate, and reasonable for several reasons. First, in this action, no individual 

Tonkon partners have been named as defendants. "In order to reach the individual assets of a 

pminer, the partner must be joined as a party." San Ysidro Associates III v. Cambridge East, Ltd., 

111 Or. App. 496, 500 (1992); Ha lone 's Auto Repair v. B&R Auto Wrecking, 251 Or. App. 818, 823 

(2012). Sidley contends that individual partners and associates may be held personally liable in 

securities cases, citing Ainslie v. Spolyar, 144 Or. App. 134 (1996). In Ainslie, a partner and 

associate were found liable for materially aiding the sale of securities under ORS § 59.115(3). 

However, unlike the present case, the partner and associate were named as individual defendants in 

6 - ORDER ON SIDLEY AUSTIN'S MOTION TO COMPEL 

Case 3:16-cv-00580-AC Document 448 Filed 01/24/19 Page 6 of 9
Ainslie. Id. at 137. 

Second, it is not clear that settlement class would be releasing any claims against individual 

Tonkon partners if the Proposed Settlement and release are approved because such claims may 

belong to the Receivership Estate. Tonkon indicates that its partners may be liable to the 

Receivership Entity for any potential claims. (Tonkon Resp. at 8, n.8.) The parties do not cite cases 

that discuss imposing liability against individual partners under ORS§§ 67.105(4) and 58.185 in 

circumstances involving receivers, and the court declines to unde1iake such research. Regardless, 

no individual partners have been named as defendants; therefore, on this record, the court finds that 

distributions to Tonkon partners who performed work on Aequitas matters are not relevant to the 

fairness of the Proposed Settlement and its release of individual partners. 

Third, the distributions to individual paiiners are not relevant to whether Tonkon as a whole 

is "partially solvent." Plaintiffs and Tonkon have asked the court to use that term in considering 

whether a pro tan to contribution claims bar order is appropriate in Plaintiffs' Amended Motion for 

Preliminaiy Approval. (See Pls.' Am. Mot., ECF No. 350; Merrihew v. Schwab, Case No. 0907-

10596 (Multnomah Cty. Cir. Ct.), attached as Ex. B to Van Der Weele Deel. in Supp. Am. Mot. 

Prelim. Approval, ECF No. 386-2.) As used in Merrihew, "partially solvent" refers to the inability 

of a settling defendant to satisfy a judgment against it in the hypothetical world where there is no 

settlement. Here, whether Tonkon is partially solvent refers to the law firm as a whole. Tonkon has 

produced documents showing its income, distributions, balance sheets, and unbilled work in progress 

on a firm-wide basis. Sidley' s requested information concerning income and distributions to specific 

partners who worked on Aequitas matters is not relevant to whether the firm as a whole would be 

able to satisfy a judgment. Accordingly, the court concludes that Sidley's requested discovery is not 

7 - ORDER ON SIDLEY AUSTIN'S MOTION TO COMPEL 

Case 3:16-cv-00580-AC Document 448 Filed 01/24/19 Page 7 of 9
relevant to Tonkon's assertion of partial solvency. 

Finally, the court is not persuaded by Sidley's argument that the Proposed Settlement is 

unfair because it represents only three percent of the total losses. As Sidley aclmowledges, in 

evaluating the fairness of the Proposed Settlement, the court must balance the amount obtained in 

recovery against the maximum amount of damages recoverable in a successful litigation. See In re 

Mego Fin. Corp. Sec. Litig., 213 F.3d 454,459 (9th Cir. 2000) ("It is well-settled law that a cash 

settlement amounting to only a fraction of the potential recovery does not per se render the 

settlement inadequate or unfair." (quoting Officers for Justice v. Civil Serv. Comm 'n, 688 F.2d 615, 

628 (9th Cir.1982)). Tonkon has offered a guaranteed settlement amount of $12.9 million. If the 

Proposed Settlement and its attendant release are not approved, the settlement will be revoked and 

Tonkon will proceed trial. In doing so, Tonkon will continue to incur attorney fees, thereby lowering 

the potential sum available to pay a judgment should Plaintiffs ultimately prevail. Should Plaintiffs 

prevail, the purported losses to the class are estimated to be $450 million, an amount Tonkon is 

unlikely to ever satisfy. Additionally, the individual partner's liability would need to be established 

(a debatable position, as noted above), necessarily incmTing additional attorney fees and further 

prolonging any chance of recovery well into the future. Given that the insurance policies are 

"wasting policies" the amount Tonkon can offer now will be reduced greatly later, even if it could 

be established that individual partners also may be personally liable. Because fairness to the class, 

not to Sidley, is the court's inquiry at this stage, Sidley's requested discovery into what additional 

sums, if any, may be provided by individual Tonkon partners does not appear to appreciably increase 

the overall settlement amount that the class realistically could be expected to recover in the future. 

Therefore, a recovery from Tonkon alleged to be only three percent of the total losses claimed does 

8 - ORDER ON SIDLEY AUSTIN'S MOTION TO COMPEL 

Case 3:16-cv-00580-AC Document 448 Filed 01/24/19 Page 8 of 9
not raise fairness issues meriting the additional discovery Sidley seeks. 

Conclusion 

Based on the foregoing, the court concludes that the requested documents are not relevant 

to whether the Proposed Settlement is fair, adequate, and reasonable. Accordingly, Sidley' s Motion 

to Compel (ECF No. 406), is DENIED. 

IT IS SO ORDERED. 

,-!J,//;::(_ DATED this~ day of January, 2019. 

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