We interrupt our regularly scheduled FY 2021 U.S. Securities and Exchange Commission (SEC) Enforcement overview to address a recent discovery opinion in the closely followed SEC v. Ripple Labs, Inc., et. al matter out of the U.S. District Court for the Southern District of New York. In December 2020, the SEC charged Ripple and two of its executives with purportedly raising more than $1.3 billion through an unregistered offering of digital asset securities. The crux of the lawsuit involves whether Ripple's token - XRP - is a security under the federal securities laws. As with two recent opinions out of the Southern District of New York in 2020, the resolution of this matter will likely have widespread impact across the digital asset and cryptocurrency markets.
Last year, the parties exchanged blows on the scope of discovery, including whether the SEC needed to turn over certain internal communications. On Jan. 13, 2022, Judge Sarah Netburn issued the court's opinion on the defendants' motion to seek certain documents from the SEC that the agency claimed were protected by various privileges, including the "deliberative process privilege." The defendants argued that the agency failed to meet its burden to establish the privileges and the documents needed to be produced. In this SECond Opinions post, we explore the court's holding around the SEC's deliberative process privilege argument and the opinion's far-reaching implications beyond the digital asset/cryptocurrency space.
What Is the Deliberative Process Privilege?
The deliberative process privilege shields from disclosure "documents reflecting advisory opinions, recommendations and deliberations comprising part of a process by which governmental decisions and policies are formulated." SEC v. Ripple Jan. 13, 2022 Opinion (Opinion), at 2 quoting NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 150 (1975). "The privilege therefore distinguishes between predecisional, deliberative documents, which are exempt from disclosure, and documents reflecting a final agency decision and the reasons supporting it, which are not." Opinion, at 2-3 quoting U.S. Fish & Wildlife Serv. v. Sierra Club, Inc., 141 S. Ct. 777, 785-86 (2021). "Generally, 'documents are "predecisional" if they were generated before the agency's final decision on a matter, and they are "deliberative" if they were prepared to help the agency formulate its position.'" Opinion,at 3 quoting Nat. Res. Def. Council v. U.S. Env't Prot. Agency, 19 F. 4th 177...
