UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK. "x In Re NYSE Specialist Securities Litigation Master File No.: 03 CV 8264 (RWS) + CLASS ACTION : DECLARATION OF JAMES M. : MeCARRICK IN SUPPORT OF THE : REPLY TO THE SPECIALIST : DEFENDANT'S OPPOSITION TO ‘THE MOTION TO QUASH THE, : SUBPOENAS JAMES M. MeCARRICK, pursuant to 28 U.S.C. § 1746, declares as follows: 1. Tam anattomey duly admitted to the Bar of the State of New York and have been admitted pro hac vice to address this Court. I am also presently before the Court in the related action, Sea Carriers Corporation v. Empire Programs, Inc., 04 CV 7395 (RWS)(the “Related Action”). Conversations with Counsel 2. As admitted by E. Michael Bradley in his January 12, 2007 Certification that accompanied the Specialist Defendants’ Opposition to Sea Carriers’ Motion to Quash, 1 did contact Mr. Bradley on several occasions after receiving the document requests, interrogatories, and again after receiving the subpoenas. 3. T respectfully disagree with Mr, Bradley’s characterization of our dealings, as these conversations did indeed include attempts to work out an agrecable solution before resort to the court.4. When I received the requests for party discovery, I called Mr. Bradley and expressed the position that party discovery could not be obtained from Sea Carriers and Mr. Barre, Nonetheless, I agreed to forward these requests to our clients so as to preserve responsive materials for potential future production. I then did so. 5. I subsequently received a telephone call from an associate requesting that Becker Meisel accept service of process of two subpoenas, one for Sea Carriers and one for Per G. Barre, While consenting, I informed her that a number of elements of such subpoenas, if similar to earlier discovery requests, would be subject to challenge by Sea Carriers on various grounds, including the existence of a protective order. She indicated that these requests could be negotiated. 6. Upon receipt of these subpoenas, copies were forwarded to counsel for Empire Programs, Inc., and Robert A. Martin. 1 also notified their counsel in the related action. Almost immediately, Empire and Martin demanded that Sea Carriers hold off production of any and all Empire-related materials pending their own motion to quash. 7. After notifying Mr. Bradley of these facts, 1 indicated that his colleague's invitation to negotiate on particulars would not be practicable unless such discussions also included Empire and Martin, 8. Mr, Bradley stated his colleague had no authority to suggest negotiations. At this point, Treferred him to my partner, Mr. Borosko, to find a means to break the impasse. 9. Neither of my two partners, Mr. Borosko nor Mr. Harrake, could reach any accommodation, such that a hearing before this Court was precipitated. Sea Carriers filed a letter brief with the Court secking additional time to respond to the subpoenas.10. At such hearing, I was made aware of the Defendants’ concems with exhausting the time before the close of discovery on class certification. No further accommodations were offered by Defendants. Privilege Log 11, The documents requested by the Specialist Defendants, but not produced by Sea Cautiers, are entitled to protections, including trade secret protection and protection for attorney- client and work-product privileges. Such documents include: (1) proprietary trading records; (2) litigation reports; (3) resource documents; (4) correspondence between client, counsel, and a third-party consultant; (5) emails between client, counsel, and a third party consultant; or (6) ‘memoranda prepared by counsel for the client. 12, In its original Brief in Support of the Motion to Quash, the reasons for the objections to production have been thoroughly explained. In addition, the Motion to Quash was accompanied by a chart detailing the objections for each type of request. 13, To the extent the Specialist Defendants seek more detailed explanations, Sea Cattiers should first be provided with the assurance of reimbursement before undertaking the task of creating a detailed privilege log. Submissions for Defendant Specialists 14, Attached hereto as Exhibit 1 is a true and correct copy of the May 31, 2006 Declaration of Marco Palomba for Spear, Leeds & Kellog Specialist LLC (“SLKS"). 15, [declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Dated: Livingston, New Jersey January 22, 2007 1es M. McCarrick (JM 2893)EXHIBIT 1‘UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK. PE eeeeCeeeeS Se eeeeces erect Inse NYSE SPECIALISTS SECURITIES LITIGATION x 2 Master File No. 03-CV-8264 (RWS) This Document Relates To: ‘i ALL ACTIONS. ne CLs OP, J, Maroo Palomba, declare as follows: 1. Tam currently Regulstory and Operations Officer for Spear, Leeds & Kellogg Specilists LLC (*SLKS"), an NYSE specialist fim, 1 have been employed by SLKS andlor its affiliate Spear, Leeds & Kellogg, LP, (now known ss Goldman Sachs Execution & Clearing, LP, but “Spear Leeds” herein), since February 1999. 2. T make this Declaration based on my personal knowledge and based on conversations Ihave had with members of Spear Leeds’ technology department in support of the Specialists’ proposal to limit merits discovery in this matter pending resolution of class certification so 28 to exclude production of the Specialists’ trading-related data, and other derivative data, in the interim, Toward thet end, in this declaration I describe generally the electronic data that SLES received in the normeal course of business from the NYSE from 1999to 2003 in connection with the execution of trades by SLKS specialists, and the basic categories of SLKS” use of that data in its ordinary business operations.' 3, SLKS specialists rum the suction in their assigned stocks from “posts” on the NYSE floor, The specialists? posts contain a “Display Book” provided by the NYSE that connects to the NYSE’s computer system for handling orders from NYSE member firms, some of which are public customer orders. That computer system routes certain public orders in a specialist’s assigned stock to the NYSE's Display Book. The specialist is only able to see an onder fot the first time when it appears on the Display Book, although there can be various reasons why a specialist does not become aware of the order until sometime later, In addition to receiving electronic orders via the Display Book, a specialist may also receive orders from ‘NYSE floor brokers and other non-electronic orders. 4. Accordingly, SLKS specialists conduct and record their trading activity entirely on NYSE owned and operated computer systems. None of the foregoing trading activity is recorded in the first instance on e systema owned by SLKS. As a result, the NYSE owns the data related to trades executed by an SLKS specialist, and SLKS relies entirely on the NYSE to provide the data necessary to facilitate the execution, clearing ond settlement of SLKS-executed transactions. 5, From 1999 to 2003, it is my understending that the NYSE provided such data in tree forms: + SLKS, the specialist fim, relies on Spear Leeds for virtually all data-related fictions. ‘Spear Leeds is also a clearing firm, but because I understand that chis lawsuit is about only the ‘conduct of SLKS and the other specialist firms, I do vot address any of Spear Leeds's data practices with respect to its overall clearing operations.Finst, the NYSE provided the Specialist Position Activity Report, or “SPARS.” The SPARS report is a data feed thet Spear Leeds receives regularly throughout the day while the market is open. The report includes data about executions done on behalf of SLKS dealer accounts, such as whether a given execution was a purchase or a sale (and, ifa sale, whether it was a short or long sale), the number of shares executed, the price per share, the time of execution, and a notation of the “tick,"or market direction for the ‘stock, During the relevant period, itis my understanding that Spear Leeds used the data in the SPARS feed to book, clear, and reconcile the positions in SLKS proprietary, dealer accounts. ‘Second, the NYSE provided data for SLKS to prepare Form 81 reports, which were filed swith the Exchange. ‘These data compilations were received daily from SIAC, the ‘NYSE’s date vendor, end contained a range of data fields. ‘Third, the NYSE provided the Daily Merged Order Log file, called the “MRO file, to each Specialists’ clearing firs, including Spear Leeds for SLRS. The MRO file is a data file provided ovemight each night the market is open that contains data about customer orders and SLKS interactions with those orders, if any. During the relevant period, SLKS used this data for commission billing purposes. 6. _ Itis my understanding that none of the foregoing files contained data showing when an order becatne visible on a specialist's NYSE Display Book, which I understand to be a key piece of information relating to Plaintiffs’ claims of trading ahead and interpositioning. 7. From 1999 through the bulk of 2003, SLKS, either direetly or through Spear Leeds, did not retain the raw data files reccived from the NYSE in the Specialist Position Activity Report (“SPARS”), Daily Merged Order Log (called the “MRO” file), or data 3conspilations necessary to prepare Form 81 reports for more than 60 days, and in some cases less, Rather than retaining these raw data files, tis my understanding that SLKS would extract the data it peeded from them for clearing, settlement, commission billing and other internal ‘purposes, and then discard the raw data, SLKS accordingly does not currently have these data files forthe period at issue Thereby declare under penalty of perjury that the foregoing is true and correct. Executed jo Marco Palomba at New York, New York on May 31, 2006.