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In re Wilmington Trust Securities Litigation

United States District Court, D. Delaware

June 7, 2017

IN RE WILMINGTON TRUST SECURITIES LITIGATION,

          MEMORANDUM ORDER

          Sherry R. Fallon United States Magistrate Judge

         I. INTRODUCTION

         Presently before the court in this consolidated class action for securities fraud brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 ("Exchange Act") is the motion for clarification and to unseal the August 16, 2016 Report and Recommendation, filed by the Merced County Employees' Retirement Association, the Coral Springs Police Pension Fund, the St. Petersburg Firefighters' Retirement System, the Pompano Beach General Employees Retirement System, and the Automotive Industries Pension Trust (collectively, "Lead Plaintiffs"). (D.I. 484) For the following reasons, Lead Plaintiffs' motion to unseal the August 16, 2016 Report and Recommendation in the redacted form proposed by Lead Plaintiffs is granted. (D.I. 485) The motion for clarification is denied to the extent that it seeks to expand the scope of the Report and Recommendation to encompass documents in the possession of third parties such as Treliant Risk Advisors ("Treliant").

         II. BACKGROUND [1]

         Lead Plaintiffs are institutional investors who purchased the common stock of Wilmington Trust Corporation ("WTC") between January 18, 2008 and November 1, 2010 ("the class period"). (D.I. 149 at ¶¶ 25-30) Lead Plaintiffs claim that WTC's lending practices were part of a "massive criminal conspiracy that 'fraudulently conceal[ed] the Bank's true financial condition' and 'deceive[d] regulators and the public.'" (Id. at ¶ 1) In September 2009, the Board of Governors of the Federal Reserve System (the "Federal Reserve") required WTC to enter into a Memorandum of Understanding ("MOU"), which identified failings in the Bank's lending, risk management, and accounting functions and forced the Bank to restructure the way it originated, monitored, and accounted for its loans. (Id. at ¶¶ 12-13, 152-56)

         During the second quarter of 2010, WTC utilized Treliant to serve as a third party reviewer of its risk rating and loan collateral values as a result of the MOU. (D.I. 149 at ¶¶ 90, 150) Plaintiffs allege that Treliant's updated appraisals preceded WTC's fire sale to M&T Bank Corp. (Id.) On May 13, 2014, Lead Plaintiffs served a document subpoena on Treliant to obtain documents in connection with Treliant's evaluation and review of WTC's loan portfolio. (D.I. 484 at 2; D.I. 342 at 18 n.19; 11/4/14 Tr. at 29:19-30:2)

         Lead Plaintiffs submitted a formal administrative request to the Federal Reserve on June 4, 2014, seeking a waiver of the bank examination privilege to authorize Defendants to disclose confidential supervisory information ("CSI") to Lead Plaintiffs. (D.I. 484 at ¶ 2 n.2; D.I. 235, Ex. L at 1-8) The Federal Reserve denied the administrative request. (D.I. 484 at ¶ 2 n.2) Following the denial of the request for a waiver, Lead Plaintiffs filed a motion to compel in this court on August 5, 2014, which sought confidential bank examination documents and an injunction against future assertions of bank examination privilege. (D.I. 233)

         On February 19, 2016, the court issued an order requesting the production of a sampling of certain categories of documents for in camera review. (D.I. 432) Following the in camera review, the court issued a sealed Report and Recommendation on August 16, 2016, granting in part and denying in part Lead Plaintiffs' motion to compel. (D.I. 459) The court evaluated various categories of documents, concluding that a number of the documents were factual and therefore not subject to the bank examination privilege, and the majority of documents that were subject to the privilege should be produced in accordance with the good cause exception. (Id.) The court recommended denial of the motion to compel with respect to a limited number of documents. (Id.) On September 12, 2016, the court adopted the Report and Recommendation after receiving no objections to its findings. (D.I. 460)

         On October 12, 2016, Lead Plaintiffs contacted Treliant to determine whether Treliant would produce documents in response to the May 13, 2014 subpoena following the adoption of the August 16, 2016 Report and Recommendation. (D.I. 484 at ¶ 7) Treliant declined to produce any documents prior to reviewing the sealed Report and Recommendation. (Id.) Consequently, Lead Plaintiffs asked Defendants, the Federal Reserve, and other regulators if they would consent to unsealing the August 16, 2016 Report and Recommendation to allow for its distribution to subpoenaed third parties such as Treliant. (D.I. 484 at ¶ 8) Defendants did not object, but the Federal Reserve and other regulators refused to consent to unsealing the Report and Recommendation. (Id.)

         On November 1, 2016, Lead Plaintiffs provided proposed redactions to the Report and Recommendation in an effort to obtain the consent of the Federal Reserve and other regulators to unseal the Report and Recommendation. (Id.) The Federal Reserve rejected the proposed redactions, and on November 3, 2016, offered to provide Lead Plaintiffs with its own set of proposed redactions. (Id. at ¶ 9) To date, the Federal Reserve has not provided its proposed redactions or consented to the redactions proposed by Lead Plaintiffs. (Id. at ¶ 10) On November 29, 2016, Lead Plaintiffs filed the instant motion, seeking to unseal the August 16, 2016 Report and Recommendation and clarify the scope of the ruling to extend to third parties such as Treliant. (D.I. 484)

         III. DISCUSSION

         A. Motion to Unseal

         In support of the pending motion, Lead Plaintiffs contend that the August 16, 2016 Report and Recommendation should be unsealed so that it may be provided to subpoenaed third parties such as Treliant. (D.I. 484 at ¶ 8) According to Lead Plaintiffs, Defendants do not object to the request to unseal, and the Federal Reserve and other regulators have provided no reasons for their objection. (Id.) The Federal Reserve's brief in opposition to the motion does not address Lead Plaintiffs' request to unseal the Report and Recommendation in its opposition to Lead Plaintiffs' motion. (D.I. 487)

         When a responding party fails to defend against an issue which is the subject of a motion, courts consistently construe the failure to respond as an abandonment of the issue or a concession that the moving party is correct. See Blakeman v. Freedom Rides, Inc., C.A. No. 12-416-LPS-CJB, 2013 WL 3503165, at *13 (D. Del. July 10, 2013) (citing additional cases). Consequently, Lead Plaintiffs' motion to unseal the August 16, 2016 ...


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