Discovery of documents: boundaries in question
In an unusual development, documents in a regulatory investigation are being used as the basis for a civil action.
An action commenced in an American court is raising issues that will affect a wide range of financial services businesses and others.
In an action brought against Merrill Lynch and a broker, the claim is founded upon e-mails and other internal Merrill documents which were disclosed in the course of an investigation by the New York Attorney General.
The suit seeks class action status and has been filed in the United States District Court for the Southern District of New York. It alleges conflict of interest in making "buy" recommendations at the same time as trying to win other business from the subject of the recommendations.
The attorneys who have filed the suit are inviting interested investors in the company concerned to join the action and is seeking a "lead plaintiff."
The action raises issues as to the publication of documents in regulatory or criminal investigations where they may be used in civil actions. Class actions are common in the USA but often struggle to get passed the first hurdle of getting enough people interested to meet the ongoing costs of the action.
However, in the post Enron etc. days, it is possible that more cases of this nature will be brought, especially where there is a feeling of a breakdown of a Chinese wall or even outright fraud on the investing public (we do not allege that this is in any way the case in the Merrill claim).
There is therefore likely to be growing concern with the objective of "name and shame" policies by regulators where documents may be disclosed and then create the opportunity for a raft of such actions.
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