SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. WILSON J. RONDINI, III, FALCON CAPITAL LLP, and FALCON CAPITAL PARTNERS LIMITED, Defendants Case No. 23-cv-81285-MDDLEBROOKS/MATTHEWMAN United States District Court, S.D. Florida Signed April 03, 2024 Counsel Alexandra B. Lavin, Jonathan T. Menitove, Richard M. Harper II, U.S. Securities and Exchange Commission, Boston, MA, Jeffrey Thomas Cook, United States Attorney's Office, Miami, FL, for Plaintiff. Brian Paul Miller, Ross Elliot Linzer, King & Spalding, Miami, FL, David Reich Chase, David R. Chase PA, Fort Lauderdale, FL, for Defendants Wilson J. Rondini, III, Falcon Capital Partners Limited. Middlebrooks, Donald M., United States District Judge ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR PROTECTIVE ORDER *1 THIS CAUSE is before the Court upon the following: (1) Plaintiff U.S. Securities and Exchange Commission's (“SEC”) Motion for Protective Order Quashing Deposition Notice Seeking Disclosure of Privileged Work Product and Expert Opinion (“Motion for Protective Order”) (DE 33); (2) Defendants Wilson J. Rondini, III, Falcon Capital, LLP, and Falcon Capital Partners Limited's Opposition to the Motion for Protective Order (DE 35); and (3) the SEC's Reply Brief in Support (DE 36). I. BACKGROUND On December 8, 2023, the SEC filed an Amended Complaint (DE 16) against Defendants, alleging that “[f]rom at least 2018 through the end of 2022, Defendants ... acted as brokers and dealers, engaged in the business of both effecting transactions in securities for the accounts of others and buying and selling securities for their own accounts.” (DE 16 at 1). The SEC alleged that “[d]uring that time, Defendants raised tens of millions of dollars on behalf of over a dozen companies that issued stock ... and bought and sold millions of dollars’ worth of securities for their own accounts,” but that “at no time during the relevant period did [Defendants] ... register as a broker-dealer with the [SEC] or associate with a broker-dealer registered with the [SEC].” Id. Accordingly, in the Amended Complaint, the SEC has alleged three Counts—violation of Section 15(a)(1) of the Exchange Act against Defendants, for failure to register as a broker (“Count I”); violation of Section 15(a)(1) of the Exchange Act against Defendants, for failure to register as a dealer (“Count II”); and violation of Section 20(a) of the Exchange Act against Defendant Wilson J. Rondini, III, as the controlling person responsible for the violations of Section 15(a)(1) of the Exchange Act (“Count III”). II. MOTION, RESPONSE, AND REPLY A. The SEC's Motion for Protective Order (DE 33) The SEC seeks “a protective order quashing topics 1 through 6, and 8 through 9 of the Rule 30(b)(6) deposition notice served by Defendants Wilson J. Rondini, III and Falcon Capital Partners Limited.”[1] (DE 33 at 1). According to the SEC, “[d]eposition topics 1 through 6, and 9 seek testimony about the SEC's claims and remedies, and any facts supporting those claims and remedies.” Id. at 2. Moreover, deposition topic 8 seeks testimony about “any restraints” on the Defendants’ “activities had they been registered as required by law.” Id. The SEC maintains that these topics should be quashed because they seek information outside the scope of permissible discovery. Id. at 1. First, the SEC argues that deposition topics 1–6 and 9 “seek the privileged work product of SEC Enforcement counsel.” Id. at 3. On this matter, the SEC notes that the case “has been investigated by attorneys in the SEC's Division of Enforcement,” Id. The SEC argues that “[s]eeking an SEC deponent to compile evidence is, in effect, asking that an Enforcement Division attorney use legal judgment to make evidentiary decisions and then disclose them through an agency designee.” Id. It is the SEC's position that “where a law enforcement agency investigates and litigates through attorneys, and Defendants seek to depose the agency to have those attorneys marshal evidence and disclose their work product, then the proposed deposition goes beyond the scope of permissible discovery.” Id. at 4. In this regard, because “Defendants have made no effort, either before or after the parties’ meet and. confer, to seek non-privileged clarification of factual assertions or claims,” the SEC maintains that requiring it to reveal attorney work product is beyond the scope of permissible discovery under Rule 26. Id. at 4–5. *2 Second, the SEC argues that deposition topic 8 “improperly seeks expert opinion from the SEC.” Id. at 5. In support, the SEC notes that Defendants “failed to disclose an intent to use expert testimony by [the February 8, 2024, Rule 26(a)(2) disclosure] deadline.” Id. at 5. Moreover, because the SEC does not intend to use expert testimony, the SEC argues that “[r]equiring the SEC to expend the time and resources to prepare a witness to provide expert testimony on a topic the Defendants have selected is an unfair reversal of the SEC's choice not to use expert testimony.” Id. B. Defendants’ Response (DE 35) Defendants begin by arguing that the SEC's Motion for Protective Order (DE 33) is “nothing more than a rehash of arguments that have consistently been rejected by courts within the Eleventh Circuit.” (DE 35 at 1). Defendants argue that the protective order sought by the SEC is “patently overbroad” and that “[w]hile the SEC claims that it is not taking the position that a. government agency can never be deposed, it – in fact – seeks a protective order over every single category sought to which it agrees information currently exists.” Id. at 2. To this end, Defendants note that “Rule 30(b)(6) contains no requirement that a defendant first seek by other means of discovery the facts underlying. the claim; against him.” Id. at 3 (alteration omitted) (quoting S.E.C. v. Kramer, 778 F. Supp. 2d 1320, 1328 (M.D. Fla. 2011)). Moreover, to the extent the SEC argues the Rule 30(b)(6) is “simply a pretext for the SEC to reveal its attorney work product,” Defendants note that the deposition topics were carefully crafted and that some topics are nearly identical to categories explicitly found permissible by another district court, citing S.E.C. v. Merkin, 283 F.R.D. 689 (S.D. Fla. 2012). Further, with respect to topic 8 in particular, Defendants argue: It is not disputed that, during the relevant time period, Defendants were not registered with the SEC as brokers or dealers. Defendants anticipate that the SEC will argue that had Defendants been registered as brokers or dealers, they would have had certain restraints imposed upon them. It is wholly appropriate and fair, in the context of liberal discovery, to simply ask the SEC to explain what any such restraints are, in advance of trial.. Id. at 5. However, Defendants note that if the SEC “will not contend that Defendants would have faced any restraints on their activities had they been registered as brokers or dealers that would have prevented them from engaging in the specific securities transactions alleged by the SEC, ... then Defendants are willing to forego inquiry on Topic No. 8.” Id C. The SEC's Reply (DE 36) First, the SEC argues that its Motion for Protective Order “is not based on how the Defendants drafted their notice; rather, the SEC's Motion [for Protective Order] concerns what Defendants seek to discover.” (DE 36 at 2). In this regard, during the meet and confer process, the SEC argues that “[r]ather than pointing to any specific allegation or claim that they did not understand or heeded factual clarity on, the Defendants said they wanted SEC counsel to compile the evidence the agency would use to prove its claims either on summary judgment or at trial.” Id. Moreover, “the SEC initiated two meet and confer sessions in which the Defendants stated their goal, unambiguously, was to obtain evidentiary compilations.” Id. Thus, according to the SEC, because “the Defendants have not identified any non-privileged areas of examination they wish to cover in Topics 1–6 and 9, the Court should grant the SEC's motion.” Id. at 3. *3 With respect to topic 8, the SEC argues that “[t]o the extent that the Defendants seek an SEC regulatory expert to review the facts and apply Ms a certain set of transaction-based facts, Defendants are seeking expert opinion on how the law applies to their particular facts.” Id. at 3. Thus, the SEC maintains, that the Court “should narrow the scope of the deposition topic to non-expert testimony concerning rules and regulations applicable to registered brokers and dealers generally and allow the SEC to substitute such testimony with a sworn declaration.” Id. at 4. III. ANALYSIS AND RULINGS Rule 26(b)(1) of the Federal Rules of Civil Procedure defines the scope of discovery as “any non-privileged 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, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery, and whether the burden of the discovery outweighs the likely benefit. Fed. R. Civ. P. 26(b)(1). Courts should interpret the discovery rules broadly to keep with “the liberal spirit of the Rules.” Abridge v. Alfa Mut. Ins. Co., 1 F.4th 1271, 1276 (11th Cir. 2021) (quoting Burns v. Tiokol Chem. Corp., 483 F.2d 300, 305 (5th Cir. 1973)). To that end, the onus of demonstrating that the requested discovery is not relevant to the issues in the case is on the party resisting discovery. See Panola Land Buyers Ass'n v. Shuman, 762 F.2d 1550, 1559 (11th Cir. 1985). The touchstone upon which courts increasingly rely in determining whether discovery is allowable under Rule 26(b) is proportionality, which should be viewed through the lens of common sense. See B. T. by & through Jackson v. Battle, No. 21-10318, 2021 WL 4147087, at *3 (11th Cir. Sept. 13, 2021) (listing several factors that impact the proportionality inquiry); Chief Justice John Roberts, 2075 Year–End Report on the Federal Judiciary 6 (2015). The needs of the case dictate whether relevant information is discoverable. Here, the deposition topics at issue are as follows: DEPOSITION TOPICS 1. The SEC's claims, and any facts demonstrating, that defendants should be barred from participating in any offering of penny stock. 2. The SEC's claims, and any facts demonstrating, that defendants should be permanently enjoined as sought in the Amended Complaint [ECF No. 16] in the above-styled litigation (the “Action”). 3. The SEC's claims, and any facts demonstrating, that defendants violated, and unless enjoined will again violate Section 15(a)(1) of me Securities Exchange Act of 1934 (“Exchange Act”), necessary to obtain the injunctive relief requested by the SEC, other than the specific events giving rise to the instant, singular Action. 4. The SEC's claims, and any facts demonstrating, that investors in defendants’ corporate issuer clients suffered pecuniary harm from defendants’ conduct, and the identification of any such investor(s). 5. The specific facts, information, documents, investigative testimony, and/or Other direct and/or circumstantial evidence, including but not limited to the factual portions of the Staff's “Action Memo” to the full Commission, and/or specifically relied upon by the Plaintiff, which support the specific allegations, causes of action, and various forms of requested relief asserted by, or requested by the Plaintiff from/against defendants in the Amended Complaint. 6. Any exculpatory facts, information, documents, investigative testimony, and/or other direct and/or circumstantial evidence, including but not limited to the factual portions of the Staff's “Action Memo” to the full Commission, which support defendants’ innocence, defenses, and/or affirmative defenses, which Plaintiff uncovered during its investigation of WPD Pharmaceuticals, Inc., and/or defendants, or at any other time, prior to filing, or after the filing of the Amended Complaint. *4 ... 8. Any restraints defendants would have faced on their activities had they been registered as broker-dealers that would have prevented defendants from engaging in the specific securities transactions alleged by the SEC to violate Section 15(a)(1) of the Exchange Act. 9. All facts, supporting the SEC's claims that defendants, acted as dealers under Section 15(a)(1) of the Exchange Act. (DE 33-1). A. Deposition Topics 1–6 and 9 The SEC takes issue with deposition topics 1–6 and 9 on the basis that Defendants seek a “compilation” of evidence, which would constitute privileged work product. The SEC cites to S.E.C. v. Monterosso, No. 07-61693-CIV, 2009 WL 8708868 (S.D. Fla. June 2, 2009), for the proposition that “[h]ow the SEC intends to marshal facts, documents and testimony in its possession” constitutes privileged work product. Id. at *1. In Monterosso, the court noted the SEC is an enforcement agency without independent knowledge of the facts underlying the action, and that the SEC's “sole source of knowledge [wa]s derived from the investigations its attorneys undertook in anticipation of litigation.” Id. The court thus found that any question pertaining to the “factual basis” for the allegations implicated attorney work-product privilege. Id. Although not controlling on this court, I find the reasoning of the district judge in the factually analogous case of A.R. ex rel. Root v. Dudek, 304 F.R.D. 668 (S.D. Fla. 2015), more persuasive than the reasoning in Monterosso. There, the SEC's position was rejected with the following explanation: It seems fundamental that a defendant should be able to inquire into the facts upon which a plaintiff relies in support of its complaint., To require the State to independently depose the list of witnesses provided to them in order to cobble together the basis of the United States’ Complaint would be an unworkable requirement. Therefore, this Court determines that there is no rule excepting the United States from complying with Rule 30(b)(6) and the State is seeking that which it is entitled to know—not work product. As such, the United States must designate a representative who can be prepared to testify on the relevant facts of the investigation that are known or reasonably available to the United States. Id. at 670–71. Thus, like the court in Dudek, I find the deposition topics at issue are relevant and proportional to the needs of the case. Simply stated, this is a case involving allegations that Defendants failed to register as brokers and/or dealers under Section 15(a)(1) of the Securities Exchange Act of 1934. In this regard, the Eleventh Circuit noted in SEC v. Ibrahmin Almagarby, 92 F.4th 1306, 1318 (11th Cir. 2024), that the determination of whether; a professional investor qualifies as a “dealer” under the Securities Exchange Act is a multi-factorial inquiry. “The most frequently cited factors ... consist of whether a person (1) works as an employee of the issuer, (2) receives a commission rather than a salary, (3) sells or earlier sold the securities of another issuer, (4) participates in negotiations between the issuer and an investor, (5) provides either advice or valuation as to the merit of an investment, and (6) actively (rather than passively) finds investors.” S.E.C. v. Kramer, 778 F. Supp. 2d 1320, 1334 (M.D. Fla. 2011) (quoting S.E.C. v. Hansen, No. 83 Civ. 3692, 1984 WL 2413, at *10 (S.D.N.Y. 1984)). Accordingly, despite the SEG's position, the facts underlying the allegations in the Amended Complaint (DE 16)—which topics 1–6 and 9 are designed to elicit—are discoverable as relevant and proportional to the needs of the case. *5 Accordingly, Defendants are entitled to question the SEC's Rule 30(b)(6) regarding topics 1–6 and 9. The SEC can, of course, interject a work-product or privilege objection, as appropriate, during the deposition. Counsel for both Parties should make a meaningful effort to balance the SEC's interest in protecting the legitimate work product of its counsel against. Defendant's entitlement to inquire into the facts supporting the SEC's claims. B. Deposition Topic 8 The SEC takes issue with deposition topic 8 on the basis that it improperly seeks an expert opinion. I agree that, as phrased, topic 8 appears to be seeking an opinion. However, Defendants have clarified that if the; SEC “Will not contend that Defendants would have faced any restraints on their activities had they been registered as brokers or dealers that would have prevented them from engaging in the specific securities transactions alleged by the SEC, ... then Defendants are willing to forego inquiry on Topic No. 8.” (DE 35 at 5). Further, the SEC states that it is “willing to comprise by providing a sworn declaration providing an overview of the rules and regulations applicable to registered brokers and dealers generally.” (DE 36 at 4). I find that the SEC's proposed sworn declaration as to an overview of the rules and regulations applicable would be responsive to deposition topic 8. Moreover, I find the SEC's proposed sworn declaration to be appropriate in light of the specific circumstances, and that such a declaration would obviate the need for deposition topic 8 entirely. IV. CONCLUSION Based on the foregoing, it is ORDERED AND ADJUDGED as follows: 1. Plaintiff U.S. Securities and Exchange Commission's Motion for Protective Order Quashing Deposition Notice Seeking Disclosure of Privileged Work Product and Expert Opinion (DE 33) is GRANTED IN PART AND DENIED IN PART. 2. Specifically, the Motion for Protective Order is DENIED to the extent the SEC seeks to quash deposition topics 1–6 and 9, as Defendants are entitled to inquire into the specific facts that underlie the allegations in the Amended Complaint. However, the SEC may lodge all appropriate work-product or privilege objections during the Rule 30(b)(6) deposition. 3. The Motion for Protective Order is GRANTED to the extent that deposition topic 8 shall no longer be required. Rather, the SEC shall provide a sworn affidavit prior to the Rule 30(b)(6) deposition that provides an overview of the rules and regulations applicable to registered brokers and dealers generally. 4. I caution the parties that discovery closes, on April 4, 2024. (DE 9). In light of this Order, I will extend the discovery deadline to April 12, 2024, for the limited purpose of conducting the Rule 30(b)(6) deposition at issue. The Parties shall cooperate in good faith to ensure that they comply with this deadline. 5. I decline to award reasonable expenses, including attorney's fees, pursuant to Rule 37(a)(5)(C) of the Federal Rules of Civil Procedure. SIGNED in Chambers at West Palm Beach, Florida, this 3rd day of April, 2024. Footnotes [1] Although there are three defendants in this case, me Rule 30(b)(6) Notice of Deposition was served on behalf of Defendants Wilson J. Rondini, IIII, and Falcon Capital Partners Limited. Those two defendants shall be referred to hereinafter as “Defendants.”