Mike Scarcella is a reporter for The National Law Journal, an American Lawyer affiliate.
Seeking time to fight a court order in a subpoena enforcement dispute, lawyers for a Deloitte Touche Tohmatsu unit in China filed "emergency" papers in Washington asking a judge to postpone a hearing scheduled for next week.
The U.S. Securities and Exchange Commission in September 2011 turned to Washington’s federal trial court to try to convince a judge to force the audit and tax firm to turn over information about its work for Longtop Financial Technology Ltd.
The subpoena enforcement action has been on hold since the SEC said it was negotiating with Chinese officials to acquire audit documents concerning a Deloitte unit in that country. Those talks, however, failed, SEC attorneys said. In court papers, SEC lawyers said Chinese officials remain "unwilling or unable to provide the SEC with meaningful assistance in its enforcement investigations."
Magistrate Judge Deborah Robinson on March 4 lifted the six-month hold on the subpoena proceedings and ordered the lawyers in the spat to meet next week in court. On Wednesday, Deloitte’s attorneys at Sidley Austin and Latham & Watkins asked that a hearing on the merits of the subpoena fight, scheduled for March 13, be postponed. Deloitte’s request is here.
The attorneys fighting for Deloitte–Latham partner Miles Ruthberg, chair of the firm’s litigation department, and Sidley partner Michael Warden, a top lawyer in the firm’s accountants and professional services firms liability practice–said the company has a right to challenge Robinson’s stay decision before any hearing on the merits of the subpoena.
"Any haste in ruling on the SEC’s application is particularly unwarranted here, in light of the sensitive issues of international comity that are involved and must be considered," Deloitte’s lawyers said in court papers filed Wednesday in U.S. District Court for the District of Columbia.
Rulings made by a federal magistrate can in some instances be appealed to a U.S. district judge. Deloitte’s lawyers said in their papers that Magistrate Judge John Facciola–a colleague of Robinson’s–"always" grants a stay after he issues an order to allow the resolution of any objection.
"This proceeding is not a run-of-the-mill subpoena enforcement action," Deloitte’s lawyers said. The merits hearing, the attorneys said, "will address the substantial and complex question of whether to enforce a subpoena that would require the recipient to violate the laws of its home country."
David Mendel, assistant chief litigation counsel at the SEC, in December said any extension of the stay in the subpoena fight will hurt the commission’s ability to obtain "critical" documents in the ongoing investigation of Longtop, a foreign private issuer whose securities were registered with the commission.
Deloitte "has refused to comply with the Subpoena claiming, among other things, that to do so would constitute a violation of the laws of the People’s Republic of China," Mendel said in papers. The company, he said, "has maintained this refusal notwithstanding the fact that it has registered in the United States with the Public Company Accounting Oversight Board and conducted numerous audits for U.S.-listed companies."
Robinson wrote in her decision that "staying this proceeding for an indefinite period will not promote judicial efficiency." She didn’t immediately rule on whether to postpone next week’s hearing.