Posted: January 6, 2021

Stock Loan Lowdown: A Duo of Discovery Disputes

It’s been a while since posted an update on the Iowa Public stock loan dispute. But, truth be told discovery has been rolling right along, and there has not been overmuch to discuss. I’m going to use this post to do a quick recap on some of the more interesting discovery disputes that have arisen since our last post, and otherwise cross my fingers for some more substantive briefing in 2021!

Before I launch in, you may want to take a peek at our other Stock Loan Lowndowns:

First, in the course of negotiating an ESI agreement, Plaintiffs proposed a review procedure known as an “elusion” analysis.  This type of analysis is designed to ensure the adequacy and accuracy of search terms by reviewing a small, random sample (Plaintiffs requested 2000 documents) of documents in Defendants’ possession that would not otherwise be reviewed for responsiveness, as they did not hit on any of the negotiated search terms. As proposed by plaintiffs, Defendants would first review the requested sample for privilege, then produce the remainder to Plaintiffs with the understanding that the parties would subsequently meet and confer to assess whether the results of the elusion analysis warranted any revisions to the existing search terms.

In opposition, Defendants argue that Plaintiff’s request was untimely, with the initial proposal coming two months after the parties first exchange initial search terms lists, and likely to cause significant delays in the exchange of documents. Challenging the case law cited by Plaintiffs, Defendants also point out that elusion analysis most frequently arises in cases utilizing technology-assisted review (“TAR”), rather than search term-based review used here, because TAR requires non-responsive samples in order to better “train” the AI used in predictive coding. Finally, Defendants note that the would be willing to meet and confer regarding additional search terms should Plaintiffs, after review of the hits produced by the existing terms, identify significant holes in Defendant’s productions.

Judge Polk Faillla ordered the parties to appear for a telephone conference, and the parties argued the matter at length.  I’ll link the transcript here for anyone interested. After a brief recess, the judge issued a decision on the record denying the motion for the elusion analysis. While the court did agree that the review of an additional 2000 documents was not especially burdensome for the Defendants, Judge Polk Failla was persuaded that “elusion, as an analysis, as a mechanism of analysis [was] more appropriate to technology-assisted review cases or cases in which there has been less forethought placed into search terms or a less granular view at the front end of the case.” Insofar as plaintiffs had hoped that elusion analysis would provided a valuable cross-check as to the accuracy of their search terms, the court found that the plaintiff’s ability to request additional search terms if new information was gleaned from the documents or through depositions would be sufficient.  The questions posed by the court showed that it was a thoughtful decision, but having been on the plaintiff’s side in actions with wide-ranging discovery, I am personally very sympathetic to the idea that “you don’t know what you don’t know,” and, of course the discovery-centric corollary, “you can’t reduce to a search term what you don’t know.”

The second discovery dispute I thought worthy of a quick note was a request by Plaintiffs that Defendant Bank of America/Merrill Lynch (“BoA/ML”) produce information reflecting its profits and loses in the stock lending market. The P&L data would show the prices BoA/ML paid to borrow securities from class members, the prices BoA/ML charged class members to lend securities, and, from those numbers, the “spread” kept by BoA/ML—that is, the spread that Plaintiffs argue Defendants inflated by way of the alleged conspiracy. While the actual relevance of the P&L data wasn’t up for much dispute in this context, Defendants argued that, while the reports themselves may be relevant, Plaintiffs had not adequately demonstrated that the underlying databases contributing to the reports contained relevant information. They further argued that, despite deposing a BoA/ML employee on the issue, “Plaintiffs still have not identified what additional databases, reports and information they want[.]”  Again, I’m inclined to side with Plaintiffs here – deposition or no, identifying specific databases and report types is a heck of a lot easier from inside the company than out. Judge Polk Failla took the same position, ultimately granting Plaintiffs’ motion to compel.

The court also made fairly short work of Defendant’s argument that Plaintiffs had not adequately met their meet and confer obligations prior to bringing their letter motion.  While admonishing Plaintiffs with the observation that they “may have acted more carefully to better chronicle a record that they had conferred with [BoA/ML] before filing their motion,” the court found it sufficient that “Plaintiffs had given [BoA/ML] a deadline to respond to their discovery requests, which had already been the subject of repeated conversations between the parties, [and] [BoA/ML] failed to respond within the requested timeframe.” A copy of the brief decision is available here.

Pursuant to the most recent scheduling order, we should see Plaintiff’s opening motions in support of class certification and supporting expert reports by early February, so keep your eyes peeled for a post on that topic. And with that, signing off for now!

This post was written by Alexandra M.C. Douglas.

We welcome your feedback. If you have questions or comments about this post, please e-mail John M. Lundin, the Manipulation Monitor’s editor, at or Alexandra M.C. Douglas at or call John or Alexandra at (212) 344-5400.

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