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Only the Westlaw citation is currently available.

United States District Court,

S.D. California.

In re: ASHWORTH, INC. SECURITIES LITIGATION

No. 99-CV-121.

May 10, 2002.

William S. Lerach, Lerach CoughlinStoia Geller

Rudman and Robbins, San Diego, CA, for Brian

Johnson.

Arthur Charles Leahy, Lerach CoughlinStoia Geller

Rudman and Robbins, San Francisco, CA, Kurt B.

Olsen, Klafter and Olsen, Washington, DC, Todd S.

Collins, Berger and Montague, Philadelphia, PA, for

Brian Johnson, John Gervais, Debra Kopp, Tony Le,

Thomas Kidder, James R. Sandoval, Shirley Sandoval, New Hampshire Retirement System.

Jeffrey R. Krinsk, Finkelstein and Krinsk, San Diego,

CA, for Thomas Kidder, James R. Sandoval, Shirley

Sandoval.

Robert Scott Dreher, Dreher Law Firm, San Diego,

CA, for New Hampshire Retirement System.

Elizabeth Ann Warke Brem, Gibson Dunn and

Crutcher, Irvine, CA, for Ashworth Inc., Andre P.

Gambucci, John Newman, John David Hanson.

ORDER GRANTING IN PART AND DENYING IN

PART DEFENDANTS' MOTION FOR PROTECTIVE ORDER AND TO QUASH THIRD PARTY

SUBPOENAS

HOUSTON, Magistrate J.

[DOC. # 94]

INTRODUCTION

*1 This matter is now before the Court on defendants'

motion for protective order and to quash third party

subpoenas. Plaintiffs have filed an opposition to the

motion and defendants have filed a reply brief. This

Court, after reviewing the pleadings and relevant

exhibits submitted by both parties, and for the reasons

set forth below, GRANTS IN PART AND DENIES

IN PART defendants' motion.

BACKGROUND

Plaintiffs' second amended complaint alleges certain

fraudulent acts perpetrated by defendants. See Brem

Decl., Exh. A at 34 (Order Granting in Part and Denying in Part Motion to Dismiss and Order Granting

Motion to Strike, Docket # 83). On July 19, 2001,

plaintiffs filed an ex parte application to serve twenty-eight third party subpoenas seeking preservation of

documents deemed relevant to the instant litigation

pending a decision by the District Court on defendants' motion to dismiss. See Docket # 71. The District

Court, in its December 3, 2001 order granting in part

and denying in part defendants' motion to dismiss,

dismissed two individual defendants and struck some

of the allegations presented in the second amended

complaint as insufficiently pled. See Docket # 83. This

Court subsequently, on December 6, 2001, denied

plaintiffs' ex parte application regarding third party

subpoenas as moot. See Docket # 90.

On February 7, 8, 11 and 13, 2002, plaintiffs served

nineteen subpoenas on various third parties. See Brem

Decl., Exhs. B, C, D, E. Defendants objected to the

subpoenas.

DISCUSSION

Defendants now move this Court for a protective order

and to quash the third party subpoenas on the grounds

that the subpoenas are overbroad. Plaintiffs oppose the

motion on the grounds that: (1) defendants lack

standing to object to subpoenas served on third parties;

and (2) defendants fail to meet their burden as to relevance.

1. Standing

Plaintiffs initially oppose defendants' motion on the

grounds that defendants lack standing. Defendants
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assert that they have standing under both Rule 26 and

Rule 45 of the Federal Rules of Civil Procedure. Reply

at 1-2.

A. Rule 26

Rule 26 of the Federal Rules of Civil Procedure provides, in pertinent part, that:

Upon motion by a party or by the person from whom

discovery is sought ... the court ... may make any

order which justice requires to protect a party or

person from annoyance, embarrassment, oppression, or undue burden or expense ...

Fed.R.Civ.P. 26(c)(emphasis added).

Defendants contend that, under Rule 26, they clearly

have standing to seek a protective order against

plaintiffs' attempts to obtain overbroad and irrelevant

discovery from third parties based on their status as

parties. See Reply at 2 (citing Alliance General Ins.

Co. v. Louisiana Sheriff's Auto., Risk Program, 1999

WL 221120 (E.D.La. April 9, 1999). Defendants point

out that “[c]ourts within the Ninth Circuit, including

the Southern District of California, also recognize this

sound principle of law.” Reply at 2 (citing Portland

Gen. Elec. Co. v. U.S. Bank Trust Nat'l Assoc., 38

F.Supp.2d 1202, 1206 n. 3 (D.Or.1999),rev'd on other

grounds,218 F.3d 1085 (2000)(noting that parties

have standing to challenge third party subpoenas under Rule 26(c)); Springbook Lenders v. Northwestern

Nat'l Ins. Co., 121 F.R.D. 679, 680

(N.D.Cal.1988)(same); Integra Lifesciences I. Ltd. v.

Merck KgAa, 190 F.R.D. 556, 562 n. 3

(S.D.Cal.1999)(noting party has standing to seek

protective order against third party discovery in violation of court order)). Defendants also point out that

plaintiffs' standing challenge is based upon Rule 45,

and “noticeably” fails to mention Rule 26. Reply at 3.

This Court's review of the pleadings reveals that

plaintiffs do not clearly dispute defendants' standing

under Rule 26, apparently opposing this motion on

Rule 45 grounds only. See Opp. at 5-6. This Court

finds defendants' authorities persuasive and, therefore,

finds defendants have standing to seek a protective

order under Rule 26.

B. Rule 45

*2 Plaintiffs do, however, contend in their opposition

that defendants lack standing to seek an order quashing the subpoenas “ ‘because [defendants were] not

the recipient of the subpoenas.” ’ Opp. at 5 (quoting

Diamond State Insurance Co. v. Rebel Oil Co., Inc.,

157 F.R.D. 691, 695 (D.Nev.1994)). According to

plaintiffs, defendants may only challenge the subpoenas if a privilege is asserted. Id. This Court construes plaintiffs' argument as asserting a challenge to

standing under Rule 45.

Rule 45 does not clearly indicate who may move to

protect a third party from undue burden or oppression.

Rule 45 provides only that: “[o]n timely motion, the

court by which a subpoena was issued shall quash or

modify the subpoena if it ...subjects a person to undue

burden.” Fed.R.Civ.P. 45. Defendants contend that

Rule 45 allows a party who “ ‘allege[s] some personal

right to the requested documentation” ’ to “ ‘challenge

the subpoenas.” ’ Reply at 4 (quoting New Park Entertainment LLC v. Electric Factory Concerts, Inc.,

2000 WL 62315 *5 (E.D.Pa. Jan.13, 2000))(emphasis

omitted). Defendants explain that the documents

sought by plaintiffs in their subpoenas “pertain to any

and every aspect of Ashworth's entire business and, as

such, contain confidential research, development and

commercial information that is critical to Ashworth

maintaining a competitive business.” Reply at 4. Thus,

defendants are asserting, at the least, a proprietary

interest in some of the information requested in the

third party subpoenas.

This Court finds defendants have an interest in the

information requested in the subpoenas. Accordingly,

this Court finds defendants have standing to move to

quash the third party subpoenas under Rule 45 on

overbreadth grounds.

2. Relevance

A. Legal Standard

On its own initiative or on the motion of a party, the

court may limit “the frequency or extent of use of the

discovery methods otherwise permitted” if it is determined that: “(i) the discovery sought is unreasonably cumulative or duplicative, or is obtainable from

some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking

discovery has had ample opportunity by discovery in

the action to obtain the information sought; or (iii) the
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burden or expense of the proposed discovery outweighs its likely benefit ...” Fed.R.Civ.P.

26(b)(2)(i)-(iii). “All discovery is subject to the limitations imposed by Rule 26(b)(2)(i), (ii), and (iii).”

Fed.R.Civ.P. 26(b)(1). For good cause shown, the

court “may make any order which justice requires to

protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense....”

Fed.R.Civ.P. 26(c).

Prior to the recent amendments to the Federal Rules,

parties were entitled to “obtain discovery regarding

any matter, not privileged, which is relevant to the

subject matter involved in the pending action.”

Fed.R.Civ.P. 26(b)(1) (West 1999). Based on the

amendments made to the Federal Rules, effective

December 1, 2000, parties may now “obtain discovery

regarding any matter, not privileged, that is relevant to

the claim or defense of any party.” Fed.R.Civ.P.

26(b)(1)(West 2002) (emphasis added). The change to

Rule 26 is significant. “The rule change signals to the

court that it has the authority to confine discovery to

the claims and defenses asserted in the pleadings, and

signals to the parties that they have no entitlement to

discovery to develop new claims or defenses that are

not identified in the pleadings.” Fed.R.Civ.P. 26(b)(1),

Advisory Committee Notes to 2000 Amendments

(West 2002). “For good cause shown, 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.” Fed.R.Civ.P. 26(b)(1)(West

2002). In other words, the focus of discovery has

shifted to a more narrow “claim or defense” standard

unless good cause is shown to broaden the scope of

discovery to the former “subject matter” standard.

B. Analysis FN1

FN1.Plaintiffs initially oppose the motion on

the grounds that defendants fail to meet their

“burden of establishing that plaintiffs' subpoenas are over broad or will cause an undue

burden.” Id. at 6-7. Defendants disagree with

plaintiffs' interpretation of the rules regarding undue burden. SeeReply at 6. Defendants

assert that the rules do not “focus solely on

the burden of production” but “depend[ ]

upon ‘such factors as relevance, the need of

the party for the documents, the breadth of

the document request, the time period covered by it, [and] the particularity with which

the documents are described....” ’ Id. at 5

(quoting Concord Boat Corp. v. Brunswick

Corp., 169 F.R.D. 44, 49 (S.D.N.Y.1996).

Notwithstanding this disagreement, defendants contend that their burden has been met

because the motion “sets forth in detail how

and why the subpoenas are both overbroad

and not limited to material relating to the

claims or defenses in the litigation.” Id. This

Court concurs with defendants and declines,

therefore, to further address the disagreement.

*3 Defendants' motion is based predominantly on the

fact that the District Court's December 3, 2001 order

severely limited the claims in plaintiffs' second

amended complaint. Plaintiffs explain that, after the

District Court's order, the following claims remain in

this case:

defendants fraudulently portrayed Ashworth as staging a major turnaround ... by improperly:

[r]ecognizing revenue on goods shipped to customers on consignment-which customers had a right

to return; [r]ecognizing revenue in the first and

second quarters of fiscal 1998 by shipping goods

before customers ordered them or wanted them;

[r]ecognizing revenue on phony sales of goods

shipped to a freight carrier called Riteway which

were later returned from Riteway; [r]ecognizing

revenue in each quarter by ‘reopening’ that quarter

to record, as sales, goods shipped in the days following each quarter's end; and [r]ecognizing revenue on sales despite unrecorded discounts, liberal

rights of return, and extended payment terms.

Opp. at 1-2 (citations omitted). Defendants do not

appear to dispute this summarization. See Mot. at 3-4

(outlining remaining claims in the second amended

complaint); Reply at 6-7.

Defendants contend that plaintiffs' third party discovery served upon defendants' customers, a newspaper, several analysts and two investment companies

fail to meet the narrower standard. Defendants further

contend the subpoenas are overbroad as they relate to

the time period alleged in the instant litigation.

1. Customer Subpoenas
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Thirteen of the nineteen subpoenas at issue were

served upon customers of defendants and each contained five identical requests for documents. Defendants assert that the subpoenas seek all documents

within the customers' possession that relate to defendants and are, therefore, not tailored to the claims and

defenses in this litigation, as Rule 26(b)(1) now requires. Mot. at 11-12.

a. Request Nos. 1 through 4

Defendants specifically argue that Request Nos. 1 and

2 are not tailored to the claims or defenses in this

action because they are not limited to “specific types

of sales,” or specific “terms of the customers' purchases, and customer returns.” Mot. at 11-12. Request

No. 1 seeks “[a]ll documents concerning purchase of

Ashworth's products, including, without limitation,

any and all purchase records, contracts, letter agreements, side agreements, purchase orders, invoices,

bills of lading, shipping documentation, return merchandise authorizations, credit memos and any communication between you and Ashworth, including any

person representing Ashworth, related to all purchases

(product, service or otherwise).” Brem Decl., Exh. B

at 56. Request No. 2 seeks “[a]ll documents concerning storage of Ashworth's products in warehouses,

including without limitation, storage of product at

freight forwarders, shippers warehouses and/or other

warehouses, storage of product in trailers, and

agreements with freight forwarders, shippers and

warehouse facilities.” Id.

*4 Defendants further argue that Request Nos. 3 and 4

“bear no limitations whatsoever” and, as such, are

“defective and should not be enforced,” even if plaintiffs limit these requests to the subject matter of Requests 1 and 2 as they had previously suggested. Mot.

at 12. Request No. 3 seeks “[a]ny documents concerning communications and meetings between you

and Ashworth or the Individual Defendants.” Brem.

Decl., Exh B. at 56. Request No. 4 seeks “[a]ll electronic mail (‘e-mail’) concerning Ashworth.” Id.

Plaintiffs contend that the requests are relevant to the

fraud claims that withstood defendants' motion to

dismiss. Opp. at 10. Specifically, plaintiffs argue that

the documents sought are relevant to the claims regarding defendants' portrayal of Ashworth “as a ‘turnaround’ story.” Id. Plaintiffs contend they need information relating to “patterns and trends of defendants' sales, shipment, and inventory practices ... [as

well as] storage of ... goods” in order to discover the

“context” of that “turnaround” story. Id. (emphasis

omitted). The subpoenas at issue are, according to

plaintiffs, tailored to that claim. Plaintiffs further

contend that the information is tailored to defendants'

affirmative defenses regarding misstatements and

misrepresentations relating to revenues, earnings, and

growth prospects which “necessarily includes all

purchases and sales and not just ‘specific types' of

transactions.” Opp. at 11.

Defendants take issue with plaintiffs' use of “ ‘context’ to justify its sweeping discovery requests,” insisting that such use is a “slippery slope” because

“[c]ontext ... has no implicit bounds.” Reply at 7.

Defendants point out that “Ashworth's entire business

provides context for any particular transaction.” Id.

Defendants also assert that the defenses FN2 on which

plaintiffs base their argument are based on

“[p]laintiffs' inability to prove various elements of

their claims.” Id. at 8 (emphasis omitted). Thus, defendants assert, “they are limited to those allegations

ratified by [the District] Court's Order.” Id. This Court

construes defendants as arguing that their defenses are

limited to those claims that survived the motion to

dismiss.FN3

FN2. Defendants assert that their defenses

are not “affirmative” but present no authority

in support. See Reply at 8. This Court's independent research has found no authority

that delineates defenses presented in an answer as affirmative or not affirmative. On the

contrary, it appears that all defenses, other

than direct denials of the claims, are considered affirmative. SeeFed.R.Civ. P. 8(b)-(c).

In any event, defendants do not clearly explain what difference it makes in this Court's

determination. Therefore, this Court declines

to address the issue.

FN3. For example, defendants' affirmative

defense regarding plaintiffs' failure to exercise reasonable care to discover the facts relating to alleged misstatements or omissions

now only relates to misstatements or omissions concerning revenue on goods shipped

to customers on consignment, goods shipped

before customers ordered them, goods
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shipped through Riteway, and goods shipped

in the days following each quarter's end.

This Court finds that the newly worded rule has narrowed the scope of discovery and that Request Nos. 1

through 4 seek, even if modified as suggested, an

extensive amount of information from defendants'

customers without clear limitation based on the actual

claims or defenses surviving after the District Court's

order. Thus, in this Court's view, the requests are

broader than contemplated by the new rule. Plaintiffs'

efforts to equate the theory of the case (i.e., turnaround

story) as its “claim” for discovery purposes or plaintiffs' efforts to use defendants' defenses as a tool to

broaden discovery beyond the claims that withstood

the motion to dismiss are not acceptable to this Court.

Therefore, this Court finds that Request Nos. 1

through 4 fail to meet the “claim or defense” standard

of Rule 26. This Court further finds that plaintiffs have

made no showing of good cause to expand discovery

to the broader “subject matter” standard.

SeeFed.R.Civ.P. 26(b)(1).

c. Request No. 5

*5 Request No. 5 seeks “[a]ll documents concerning

communications between any defendant and you (or

your attorney) referring or relating to this subpoena or

to this litigation.” Brem Decl., Exh. B at 57. Defendants contend the request is improperly overbroad

because it uses the terms “any defendant” and “this

litigation” without specifically detailing the newly

narrowed defendants and allegations. Id.

Plaintiffs claim that Request No. 5 clearly seeks relevant information despite defendants' assertion that

the dismissal of two individual defendants made

plaintiffs' use of the term “defendants” improper. Id.

Plaintiffs point out that the information sought from

third party customers is relevant to show “defendants'

attempts to cover up the alleged fraud” and to identify

“third part[y] credibility [issues] and/or any Ashworth

employee or agents who are contacting these third

parties regarding this lawsuit.” Id. at 12. In addition,

plaintiff notes that the two defendants, although dismissed as parties, were employees or agents of the

defendant corporation and, as such, could have had

relevant communications with the third party customers. Id.

This Court's review of the request reveals that it is not

sufficiently narrowed to the claims or defenses in this

litigation. The request does not indicate the claims or

defenses that remain in this litigation, nor does the

request limit the scope of the “communications”

sought to any subject at all. This Court, therefore,

finds Request No. 5 also fails to meet the narrower

“claim or defense” standard of Rule 26 and plaintiffs

have, again, made no showing of good cause to expand discovery.

Accordingly, defendants' motion for protective order

and to quash the third party customer subpoenas as

overbroad is GRANTED.

2. Press, Analysts and Investment Companies

The third party subpoenas issued to one financial

newspaper and five financial analysts and investment

companies each contain seventeen (17) identical requests FN4 for documents. See Brem Decl., Exhs. B-E.

Defendants also move for a protective order or to

quash these subpoenas as overbroad.

FN4. Request No. 1 seeks: “[a]ll documents

concerning Ashworth, including, without

limitation, any: (a) analysts' reports; (b)

analysts' recommendations; (c) analysts'

opinions; (d) research files; (e) research reports; (f) daily comments; (g) valuations; (h)

press releases; (i) financial statements or

reports; (j) documents filed with the SEC; (k)

newspaper articles; and (l) notes or minutes

of any meetings or communications.” Brem

Decl., Exh. C at 127.

Request No. 2 seeks: “[a]ll documents

concerning any meetings or conferences of

financial of securities analysts, roadshows,

meetings of members of the investment

community or meetings with investors or

potential investors concerning Ashworth.”

Id.

Request No. 3 seeks: “[a]ll documents

concerning the operations, expenses, profitability or projected profitability of Ashworth.” Id.

Request No. 4 seeks: “[a]ll documents

concerning current or projected sales fig-
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ures for Ashworth's products during the

relevant time period, including, without

limitation, any and all reports, drafts of

reports, and communication with Ashworth or the individual Defendants.” Id. at

127-28.

Request No. 5 seeks: “[a]ll documents

concerning shipment of Ashworth's products to warehouses, including without limitation, storage or products at freight

forwarders, shippers warehouses and/or

other warehouses, storage of product in

trailers, and agreements with freight forwarders, shippers and warehouse facilities.” Id. at 128.

Request No. 6 seeks: “[a]ll documents

concerning annual, quarterly, monthly or

other periodic financial statements of

Ashworth, including without limitation, all

summaries thereof.” Id.

Request No. 7 seeks: “[a]ll documents

provided by you to, or received by you

from, any of the following persons or entities concerning Ashworth or Ashworth

Securities: (a) any independent accountant

or auditor; (b) any attorney or law firm; (c)

any investment bank or banker; (d) any

stock market analyst; (e) any research

analyst; (f) any management consultant;

(g) any marketing consultant; (h) any securities or regulatory agency; (i) any of

Ashworth's customers or distributors; (j)

any of Ashworth's sales representatives;

(k) Ashworth; and (l) the Individual Defendants.” Id.

Request No. 8 seeks: “[a]ll documents

concerning communications and meeting

between you and Ashworth or the Individual Defendants.” Id. at 129.

Request No. 9 seeks: “[a]ll documents

concerning communications between any

defendant and you (or your attorney) referring or relating to this subpoena or to

this litigation.” Id.

Request No. 10 seeks: “[a]ll documents

concerning communications with any of

the members of Ashworth's Board of Directors, all committees thereof and Ashworth's public relations or investor relations departments.” Id.

Request No. 11 seeks: “[a]ll documents

concerning any meetings or conferences

you attended regarding the golf apparel

industry.” Id.

Request No. 12 seeks: “[a]ll documents

concerning Ashworth's financial statements.” Id.

Request No. 13 seeks: “[a]ll documents

concerning Ashworth's revenue recognition policies.” Id.

Request No. 14 seeks: “[a]ll documents

concerning the sale of Ashworth's common

stock, or the exercise of options on Ashworth securities, by any defendant.” Id.

Request No. 15 seeks: “[a]ll phone bills or

logs memorializing telephonic contacts

between you and Ashworth or any of the

Individual Defendants.” Id.

Request No 16 seeks: “[a]ll electronic mail

(“e-mail”) concerning Ashworth.” Id.

Request No. 17 seeks: “[a]ll documents

concerning your document retention

and/or destruction policies, including, but

not limited to, any such policies concerning electronic documents and e-mail.” Id.

at 130.

a. Analysts and Investment Company Subpoenas

Defendants contend that all of the requests are overbroad, pointing out that plaintiffs' examples of documents sought, “such as ‘research files,’ ‘valuations,’

and ‘newspapers articles” ’ do little to limit the requests. Mot. at 13. Defendants further point out that

plaintiffs' limitation on the categories of people from

which the third parties must locate information is

insufficient, in that “Ashworth sells its products

through six different distribution channels, including
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golf shops in nearly 50 states, retail stores, distributors

to corporate users and to numerous international

markets.” Id. Therefore, according to defendants,

“because the [second amended complaint] names

merely 14 of Ashworth's customers, the request seeks

an endless amount of irrelevant information.” Id. In

addition, defendants contend that plaintiffs' requests

seeking information regarding communications or

meetings are not limited to those concerning the allegations in the second amended complaint. Id. at 14.

Thus, defendants argue these requests “seek documents pertaining to any meeting or communication in

which the name Ashworth was uttered or any of the

[d]efendants were present.” Id. Defendants also take

issue with the remaining requests, arguing that “none

of [p]laintiffs' requests are directed” at the claims

surviving the motion to dismiss. Id.

*6 Plaintiffs contend that these subpoenas are relevant

to disprove defendants' affirmative defenses. Opp. at

12. Plaintiffs explain that because defendants have put

forth a defense that “the ‘market or other factors'

caused the collapse of Ashworth's stock price (as

opposed to defendants' fraud) ... defendants cannot

prevent plaintiffs from obtaining evidence relevant to

those defenses.” Id. In addition, plaintiffs point out

that the second amended complaint contains allegations that “defendants lied to analysts who then repeated defendants' lies.” Id. Thus, plaintiffs claim they

need the information to prove those allegations. Id.

Defendants contend, in reply, that the defenses alluded

to by plaintiffs are “limited to those particular allegations ratified” by the District Court because they are

based on “[p]laintiffs' inability to prove various elements of their claims.” Reply at 8 (emphasis omitted).

Defendants assert that because the District Court

“sustained [p]laintiffs' allegations that Ashworth's

representations were false or misleading only on those

particular grounds [p]laintiffs were able to plead with

specificity,” plaintiffs should not be entitled to seek

discovery of every document that might show a false

or misleading representation by defendants. Id.

This Court agrees with defendants. This Court's review of the subpoenas issued to the financial analysts

and investment companies reveals that the requests are

overwhelmingly broad in category and content. As

they are phrased, the requests appear, in this Court's

view, to seek all documents in the third party financial

analysts' possession that refer to or mention Ashworth

in any shape or form. The majority of the requests

contained in these subpoenas are not limited to sales or

storage as were the customer subpoenas and plaintiffs

have not indicated an inclination to revise the subpoenas in order to narrow the requests.FN5

FN5. Defendants note that plaintiffs have

offered to “ ‘limit request nos. 8 and 16 to

documents and e-mails that relate to or concern the subject matter of requests nos. 1-7,

9-15 and/or 17.” ’ Mot. at 16 n. 11. Defendants dismiss this offer as untenable because

requests 1-7, 9-15 and 17 are “unjustifiably

overbroad.” Id. This Court agrees. Requests

1-7, 9-15 and 17 are not, in this Court's view,

adequately limited to any claim or defense in

this litigation. Accordingly, this Court finds

plaintiffs' offer ineffective.

As with the customer subpoenas, this Court finds that

the financial analyst and investment company subpoenas are overbroad pursuant to the new rule. This

Court further finds that there is nothing to indicate that

the discovery sought by plaintiffs meets the newer,

more narrow “claim or defense” standard of Rule

26(b)(1). In addition, this Court finds that plaintiffs

have failed to show good cause to expand the scope of

discovery to the broader “subject matter” standard.

Accordingly, defendants' motion for protective order

and to quash these third party subpoenas as overbroad

is GRANTED.

b. Financial Newspaper Subpoena

The parties disagree as to whether the District Court's

order expressly dismissed plaintiffs' claims relating

the Wall Street Journal's article. See Mot. at 15-16;

Opp. at 13. Defendants contend that “the only reference to the Wall Street Journal in the [second amended

complaint] did not survive the motion to dismiss” and,

therefore, the requests contained in this third party

subpoena is overbroad.FN6 Mot. at 15-16. Plaintiffs

contend that the Court upheld their claims that alleged

“the Wall Street Journal article ... falsely stated that

Ashworth was ‘in the middle of nifty turnaround’ and

that [defendant] Herrel was ‘fixing ... the [company's]

seasonal inventory problems.” Opp. at 13 (citing Brem

Decl., Exh. A at 21, 24, 27, 29 and 34). The District

Court's order did not, in this Court's view, clearly

dismiss plaintiffs' reference to the Wall Street Journal

as defendants claim. Thus, this Court finds plaintiffs'
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argument more persuasive. Accordingly, this Court

finds that the subpoena issued to the Wall Street

Journal is not in contravention to the District Court's

order, as defendants' contend. Therefore, defendants'

motion is DENIED as to this third party subpoena.

FN6. It does not appear that defendants' motion as to this third party subpoena is based

on any other contention than that the allegation was dismissed as insufficiently pled. See

Mot. at 15-16; Reply at 9-10.

3. Time Period

*7 Defendants, lastly, take issue with the time period

used by plaintiffs in the third party subpoenas. Because this Court grants defendants' motion as it relates

to the customer subpoenas and the financial analyst

subpoenas, this issue is only relevant to the subpoena

issued to the Wall Street Journal.

Plaintiffs' initial requests stated that the relevant time

period for the subpoeanas was January 1, 1997

through the present but agreed to modify the time

period to a two year period: January 1, 1997 through

January 31, 1999. Defendants contend that this two

year period is overbroad because the second amended

complaint alleges fraud during a ten month period

only. Mot. at 16. Plaintiffs point out that the fraud

alleged in their second amended complaint relates to

events that began three months earlier than the September 4, 1997 date stated in their second amended

complaint. Opp. at 14. Plaintiffs further point out that

the ending date of January 31, 1999 is proper to discover the contrasting “trends from Ashworth's reported turnaround period.” Id. at 15.

Defendants do not dispute that a two year time period

is overbroad “as applied to [p]laintiffs' wholly unlimited categories of requested documents.” Reply at 9

(emphasis omitted). Defendants state they “would not

object to a request for documents created anytime

during or after the class period relating to alleged

consignment sales occurring within the class period;

or similarly, documents relating to Ashworth's accounting, either during or in the quarter following the

class period, of alleged consignment sales occurring

during the class period.” Id. at. 9. Thus, this Court

construes defendants as agreeing that the time frame

suggested by plaintiffs would be appropriate if plaintiffs' requests were properly tailored to the claims or

defenses in this case.

Because defendants are amenable to plaintiffs' proposed time period if the requests are narrowly tailored,

this Court finds that the January 1, 1997 through

January 31, 1999 time period presented by plaintiffs is

an appropriate period of time for the one subpoena that

has been upheld. Accordingly, defendants' motion is

DENIED as it relates to the two year time period

presented by plaintiffs in the subpoena served upon

the Wall Street Journal only.

CONCLUSION

For the reasons set forth above, IT IS HEREBY

ORDERED that:

1. Defendants' motion for protective order and to

quash the third party customer subpoenas is

GRANTED;

2. Defendants' motion for protective order and to

quash the financial analyst subpoenas is GRANTED;

3. Defendants' motion for protective order and to

quash the subpoena served upon the Wall Street

Journal is DENIED; and

4. Defendants' motion for protective order and to

quash is DENIED as to the relevant time period presented by plaintiffs in the subpoena served upon the

Wall Street Journal.

S.D.Cal.,2002.

In re Ashworth, Inc. Securities Litigation

Not Reported in F.Supp.2d, 2002 WL 33009225

(S.D.Cal.)

END OF DOCUMENT