Inre: US ( 2013 )

Case: 13-163 Document: 21 Page: 1 Filed: 10/16/2013
NOTE: This order is nonprecedential.
United States Court of Appeals
for the Federal Circuit
__________________________
IN RE UNITED STATES,
Petitioner.
__________________________
Miscellaneous Docket No. 163
__________________________
On Petition for Writ of Mandamus to the United
States Court of Federal Claims in No. 11-CV-0779, Judge
Thomas C. Wheeler.
__________________________
ON PETITION
______________________
Before DYK, MOORE, and TARANTO, Circuit Judges.
DYK, Circuit Judge.
ORDER
An investor seeking to represent the class that owned
common shares in the American International Group, Inc.
(“AIG”) during the financial crisis of 2008 has sued the
United States in the United States Court of Federal
Claims (“Claims Court”). It asserts that the actions of the
Federal Reserve Board, Federal Reserve Bank of New
York, and Department of Treasury relating to its provid-
ing AIG credit under Section 13(3) of the Federal Reserve
Act, Pub. L. No. 63-43, § 13(3) (1913) (codified as amended
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IN RE US 2
at 12 U.S.C. § 343), gave rise to a claim for damages
under that statute or the Fifth Amendment of the United
States Constitution. In pursuit of its claims, the investor
seeks to depose Ben S. Bernanke, Chairman of the Board
of Governors of the Federal Reserve. Before this court is
the government’s petition for a writ of mandamus seeking
to direct the Claims Court to issue a protective order. For
the following reasons, we grant the petition.
BACKGROUND
Respondent Starr International Co., Inc. (“Starr”) is
the lead plaintiff in a class action filed in the Claims
Court. The suit was brought on behalf of investors that
had owned AIG common stock between September 16,
2008, and September 22, 2008, or had the right to vote at
AIG shareholders meeting on June 30, 2009.
At the center of Starr’s complaint is the September
2008 line of credit secured by AIG from the government
pursuant to section 13(3) of the Federal Reserve Act.
That provision authorizes a Federal Reserve Bank to
provide credit in “unusual and exigent circumstances,”
which must be approved by no less than five members of
the Board of Governors of the Federal Reserve System.
Section 13(3) further requires that any notes, drafts, and
bills of exchange be secured to the satisfaction of the
Federal Reserve Bank.
After the Federal Reserve Board voted in favor of
authorizing AIG section 13(3) credit, AIG was offered a
term sheet that would allow access to $85 billion secured
by all of AIG’s assets with an initial annual cost to AIG of
approximately 14.5% per annum on the condition that the
government was given control of AIG as controlling lender
and controlling shareholder. The term sheet further
required that AIG provide to the government a nearly
80% equity share in AIG.
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3 IN RE US
According to Starr’s complaint, the government co-
erced AIG’s Board of Directors into accepting its terms,
which Starr characterizes as grossly disproportionate
given that the loan was fully secured and a 14.5% interest
rate was also imposed. Starr premises the Claims Court’s
jurisdiction on 28 U.S.C. § 1491(a), alleging that the
government took AIG’s property, including 562,868,096
shares of AIG common stock, without due process or just
compensation as required by the Takings Clause of the
Fifth Amendment of the U.S. Constitution. Starr’s com-
plaint further asserts that by demanding a 79.9% interest
in AIG as part of the terms of line of credit, the govern-
ment exceeded its authority under Section 13(3), thus
illegally exacting the property of AIG’s shareholders.
In March 2012, the government moved the Claims
Court to dismiss Starr’s complaint for lack of jurisdiction
and for failure to state a claim upon which relief could be
granted. Among other things, the government argued
that Starr’s illegal exaction theory should be dismissed
because Section 13(3) fails to mandate the return of
money to it or AIG. In its discussion of that portion of the
government’s motion, the Claims Court explained that
“this case involves novel applications of Section 13(3),”
and “it is premature at this stage to rule decisively on the
issue . . . .” Starr Intern. Co. v. United States, 106 Fed.
Cl. 50, 84 (2012).
Soon after defeating the government’s motion to
dismiss, Starr sought to depose Chairman Bernanke
concerning the above-mentioned events and the Federal
Reserve’s decision-making process. In response, the
government moved the Claims Court for a protective
order. The government’s motion urged that Bernanke
was currently the chairman of the Federal Reserve with a
broad range of responsibilities, that his deposition would
be disruptive and that Starr had not exhausted all other
methods of discovery before deposing the Chairman,
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noting that Starr had scheduled depositions of former
Vice-Chairman Donald Kohn and other key decision
makers from the Department of the Treasury and Federal
Reserve Bank of New York. The government further
argued that it would be improper for Starr to depose
Chairman Bernanke concerning the Board’s internal
deliberations regarding its decisions or Chairman
Bernanke’s thought processes on related issues.
In response, Starr argued that there were several
reasons why Mr. Bernanke’s deposition was important to
the case. Starr argued that Bernanke was a key decision
maker in the government’s evaluation and initiation of
the AIG taking. Starr further argued that Chairman
Bernanke had knowledge of various relevant aspects of
the case. In addition, Starr pointed out that Chairman
Bernanke had provided testimony before Congress, given
various public speeches and written a book about the AIG
events.
On July 29, 2013, the Claims Court issued an order
denying the government’s motion. The Claims Court
found that Mr. Bernanke was a key witness in this case,
and his testimony would be highly relevant to the issues
presented. The court acknowledged that generally high-
ranking officials cannot be forced to testify absent ex-
traordinary circumstances. However, because of Mr.
Bernanke’s personal involvement in the decision-making
process to bail out AIG, the court concluded that it is
“improbable that Plaintiff would be able to obtain the
same testimony or evidence from other persons or
sources.” Because granting the protective order would in
effect “deprive the Court of important relevant evidence in
its fact-finding and resolution of this case,” the Claims
Court held that Starr should be permitted to depose Mr.
Bernanke, although the Claims Court trial judge would
himself attend the deposition “to assure that proper and
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5 IN RE US
efficient use of time is maintained.” Starr Intern. Co., Inc.
v. United States, 112 Fed. Cl. 56, 59 (2013).
The government petitioned this court for a writ of
mandamus to vacate the July 29, 2013, order and direct
the Claims Court to enter a protective order. We have
jurisdiction under 28 U.S.C. § 1651. See In re United
States, 463 F.3d 1328 (Fed. Cir. 2006).
DISCUSSION
I
Pursuant to the All Writs Act, 28 U.S.C. § 1651(a),
this court has authority to issue a writ of mandamus “as
‘necessary or appropriate in aid of’ our jurisdiction.” Miss.
Chem. Corp. v. Swift Agric. Chems. Corp., 717 F.2d 1374,
1379 (Fed. Cir. 1983) (citing 28 U.S.C. § 1651(a)). The
remedy of mandamus is available only in extraordinary
situations to correct a clear abuse of discretion or usurpa-
tion of judicial power.” In re Calmar, Inc., 854 F.2d 461,
464 (Fed. Cir. 1988). A party seeking a writ bears the
burden of proving “‘that its right to issuance of the writ is
clear and indisputable, . . . and that it lacks adequate
alternative means to obtain the relief sought.’” In re
Spalding Sports Worldwide, Inc., 203 F.3d 800, 804 (Fed.
Cir. 2000) (quoting In re Regents of Univ. of Cal., 101 F.3d
1386, 1387 (Fed. Cir. 1996)).
We agree with the government that this discovery
order warrants mandamus. A number of our sister cir-
cuits have recognized that mandamus may properly be
used as a means of immediate appellate review of a denial
of a protective order to prevent deposition of high-ranking
government officials. See In re United States (Jackson),
624 F.3d 1368, 1372-73 (11th Cir. 2010); In re Cheney,
544 F.3d 311, 314 (D.C. Cir. 2008); In re Sec. Exch.
Comm’n, 374 F.3d 184, 187-88 (2d Cir. 2004); In re United
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States (Holder), 197 F.3d 310, 316 (8th Cir. 1999); In re
FDIC, 58 F.3d 1055, 1060 (5th Cir. 1995); In re United
States (Kessler), 985 F.2d 510, 513 (11th Cir. 1993). As
they have explained, if the law were otherwise, serious
repercussions for the relationship between different
branches of government could result if an official was
required to place him or herself in contempt to seek
immediate review. Jackson, 624 F.3d at 1372. The right
to not appear during deposition would be lost if review
was denied until final judgment.
II
Rule 26(b)(1) of the Rules of the Claims Court author-
izes “discovery regarding any nonprivileged matter that is
relevant to any party’s claim or defense . . . .” FCL CT
Rule 26(b)(1). The Claims Court concluded that the depo-
sition of Chairman Bernanke was highly relevant given
his personal involvement in the events, and thus his
testimony should be discoverable. Although exceptions to
the general rule that the public has a right to evidence
must be narrowly construed, United States v. Bryan, 339
U.S. 323, 331 (1950), mandamus should issue to prevent
such a deposition because Chairman Bernanke is a highly
ranked government official and Starr has not shown
extraordinary circumstances. Jackson, 624 F.3d at 1377;
Holder, 197 F.3d at 316; Kessler, 985 F.2d at 513.
A
We begin with the Supreme Court’s decision in United
States v. Morgan, 313 U.S. 409, 422 (1941), which has
long stood for the general proposition that high officials
should rarely be compelled to testify regarding the delib-
erative process used to arrive at a decision within the
scope of their government duties. In Morgan, the trial
court had allowed the Secretary of Agriculture to be
examined as to how he had arrived at his decision to set
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rates to be charged by market agencies for their services.
Id. As an aside to the merits of the case, the Supreme
Court admonished the trial court for allowing the Secre-
tary to be questioned at length regarding the manner and
extent of his study of the record and his consultation with
his subordinates. Id.In cases following Morgan, two primary rationales for
limiting the examination of current high-ranking gov-
ernment officials have emerged. First, that allowing such
examination can disturb the integrity of the administra-
tive process. Id. For example, in Montgomery Ward &
Co. v. Zenith Radio Corp., 673 F.2d 1254, 1264 (CCPA
1982), our predecessor, the Court of Customs and Patent
Appeals, ruled that it would be improper to allow the
plaintiff challenging a settlement agreement to probe into
the Department of Commerce’s motives and processes
behind the settlement. Likewise, in Bacon v. Department
of Housing and Urban Development, we ruled that a
plaintiff could not call the Secretary of Housing and
Urban Development to testify regarding his reduction-in-
force decision, citing the Supreme Court’s strong warning
“against inquiry into the mental processes of an agency
head.” 757 F.2d 265, 270 (Fed. Cir. 1985). Second, that
high-ranking officials must be permitted to perform their
official tasks without disruption or diversion. NEC Corp.
v. United States, 151 F.3d 1361, 1375 (Fed Cir. 1998)
(citing Simplex Time Recorder Co. v. Sec’y of Labor, 766
F.2d 575, 586 (D.C. Cir. 1985)). The rationale of this
exclusion from testimony is that such officials “have
greater duties and time constraints than other witnesses”
and “without appropriate limitations, such officials will
spend an inordinate amount of time tending to pending
litigation.” Bogan v. City of Boston, 489 F.3d 417, 423
(1st Cir. 2007).
Our sister circuits have provided substantial guidance
as to what is required to justify deposing current high-
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ranking government officials. As an initial matter, courts
have held that even in cases such as this, in which the
government is a movant, the party seeking deposition
bears the burden of proving extraordinary circumstances.
See, e.g., Holder, 197 F.3d at 316. In deciding whether
that burden has been met, courts have held that the
government official must have personal involvement or
first-hand knowledge of the underlying dispute. See, e.g.,
Bogan, 489 F.3d at 423. In addition, courts have set forth
requirements that are helpful in analyzing whether the
deposition is truly necessary, including whether the
official has “first-hand knowledge related to the claim
being litigated,” and “discovery is permitted only where it
is shown that other persons cannot provide the necessary
information.” Id. at 423. (citing Holder, 197 F.2d at 314).
These considerations are designed to ensure that current
high-ranking officials are only deposed in cases of “ex-
traordinary circumstances” or “special need.” Jackson,
624 F.3d at 1372.
B
The Claims Court held that Starr had demonstrated
the extraordinary circumstances necessary to warrant
deposing Chairman Bernanke at this time. We disagree.
On the record before us, we find that there are at least
two reasons why Chairman Bernanke should not be
deposed as Starr proposes, and why a protective order
should issue.
First, Chairman Bernanke is currently serving as the
Chairman of the Federal Reserve Board and his term does
not expire until February 1, 2014. As the government
points out, the Chairman carries the same rank as a
Cabinet-level Secretary and is the active executive officer
of the Board and chair of the Federal Open Market Com-
mittee. Scheduling Chairman Bernanke’s deposition
while he occupies his current position creates all the risks
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of disrupting significant ongoing government activities
identified in the courts of appeals decisions following
Morgan. Moreover, a current deposition creates the risks
of probing into the decision-making process discussed
below. There appears to be no substantial prejudice to
Starr in postponing the deposition of Chairman Bernan-
ke, if one occurs, until after he leaves his post. The dead-
line for discovery should, if necessary, be extended beyond
the current close on December 20, 2013, for that purpose.
Second, Starr proposes to inquire into the Federal
Reserve’s deliberative processes or Chairman Bernanke’s
mental processes. Morgan and its successors set a very
high standard before any such inquiry of a high govern-
ment official is allowed, requiring a showing of extraordi-
nary circumstances. Starr has not made the necessary
showing.
Starr asserts a takings claim based on the theory that
AIG was coerced into accepting the terms of the bailout
and a statutory violation based on the theory that the
government did not have the authority to take an equity
stake in AIG.
To support this theory, as best as we can make out,
Starr seeks to question Chairman Bernanke on the follow-
ing issues, which pertain to the Federal Reserve’s deliber-
ative processes and the Chairman’s mental state: (1)
whether Chairman Bernanke and the Federal Reserve
believed that the Federal Reserve had the authority to
take an equity stake in AIG; (2) whether they believed
that the Federal Reserve’s actions were within the Feder-
al Reserve Bank’s “incidental powers” under the Federal
Reserve Act and whether the interest rules were fixed
with a view to accommodating business and commerce; (3)
whether Chairman Bernanke or the Federal Reserve
intended the terms of the bailout to be “punitive.” We do
not agree that Starr has established extraordinary cir-
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IN RE US 10
cumstances justifying the inquiry into the Chairman’s
mental processes or the Federal Reserve’s deliberative
processes.
On this record, Starr’s efforts to inquire into these
issues have all the appearance, and vices, of a fishing
expedition rather than an effort to establish legally mate-
rial facts.
In short, Starr has not established the extraordinary
circumstances necessary to justify the deposition of
Chairman Bernanke at all while he holds the position of
Federal Reserve Board Chairman, much less to inquire
into the Federal Reserve’s deliberative processes or the
Chairman’s mental processes. We note that the process-
inquiry rationale of Morgan and its successors hardly
becomes inapplicable upon an official’s departure from his
office; though we need not say how, that rationale, among
other considerations, would play out if Starr seeks to
depose Chairman Bernanke even after he leaves his
position. Those are matters best addressed in the first
instance by the Claims Court and, if necessary, thereafter
on further petition to this court. The writ is granted.
Accordingly,
IT IS ORDERED THAT:
The government’s petition is granted to the extent
that the Claims Court’s July 29, 2013 order is vacated
and the Claims Court is directed not to allow Starr to
depose Chairman Bernanke until such time that Starr
has meet its burden consistent with the foregoing analysis
and no sooner than February 1, 2014.
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FOR THE COURT
/s/ Daniel E. O’Toole
Daniel E. O’Toole
Clerk
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