United Western Bank v. Office of the Comptroller of the Currency , 853 F. Supp. 2d 12 ( 2012 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
____________________________________
)
UNITED WESTERN BANK, )
)
Plaintiff, )
)
v. ) Civil Action No. 11-0408 (ABJ)
)
OFFICE OF THRIFT SUPERVISION, )
et al., )
)
Defendants. )
____________________________________)
MEMORANDUM OPINION & ORDER
On February 10, 2012, the Court granted a motion filed by the Federal Deposit Insurance
Corporation in its corporate capacity (“FDIC”) to intervene for the limited purpose of addressing
the production of documents by defendant Office of the Comptroller of the Currency (“OCC”).
FDIC asserts that certain documents, which OCC has determined are responsive to plaintiff’s
discovery requests and which the Court has ordered OCC to produce, are protected by FDIC’s
bank examiner’s privilege and/or the deliberative process privilege. FDIC contends that under
the applicable statute and regulations, including 12 U.S.C. § 1821(t)(1) and 12 C.F.R. § 309.6(a),
OCC is prohibited from producing FDIC’s privileged material without its consent. In its ruling
on the motion to intervene, the Court ordered FDIC to consider plaintiff’s motion to compel
[Dkt. # 60] as a request to waive the asserted privileges over the documents and to either
authorize OCC to produce the documents or submit them in camera for the Court’s review.
Minute Order, Feb. 10, 2012.
On February 15, 2012, FDIC notified the Court that it had undertaken further review of
the documents and elected to make a discretionary disclosure of some of them. Specifically, the
FDIC agreed to produce all of the liquidity reports and accompanying emails that OCC identified
as responsive. FDIC represented that it would provide these documents to plaintiff after the
Court ruled on it motion for protective order. [Dkt. # 77].
The Court will enter an appropriate protective order that limits the distribution of FDIC
materials and restricts their use to the instant litigation as provided in paragraphs 1, 2, 6, and 7 of
FDIC’s proposed order. The Court also has no objection to the provision in paragraph 4 that
calls for the redaction of irrelevant material from any confidential documents filed with the
Court. However, paragraphs 3, 4, and 5, which require the filing of these materials under seal if
submitted in connection with the upcoming briefing on the merits, are inconsistent with the D.C.
Circuit’s general view about the sealing of pleadings. Furthermore, the sealing requirement does
not appear to be necessary unless plaintiff moves for leave to file materials related to its financial
condition under seal pursuant to LCvR 5(j) and shows good cause to do so. Therefore, it is
ORDERED that FDIC must submit a revised protective order for the Court’s signature in
accordance with these instructions on or before March 2, 2012.
There are three additional documents before the Court that OCC has identified as
responsive but for which FDIC does not agree to waive its asserted privileges. They are:
(1) an email circulated among FDIC Board Members on November 5, 2010;
(2) a Case Memorandum to the FDIC Board dated October 25, 2010, which includes
two attachments entitled “Cost Test Summary” and “Resolution”; and
(3) an agenda for the FDIC Board closed meeting on November 9, 2010.
ANALYSIS
I. The Privileges Asserted by FDIC
The deliberative process privilege “protects documents reflecting advisory opinions,
recommendations, and deliberations comprising an agency’s decisionmaking process.” First
2
Eastern Corp. v. Mainwaring, 21 F.3d 465, 468 (D.C. Cir. 1994), citing NLRB v. Sears, Roebuck
& Co., 421 U.S. 132, 150 (1975). “[T]he ultimate purpose of this long-recognized privilege is to
prevent injury to the quality of agency decisions.” Sears, Roebuck & Co., 421 U.S. at 149–151
(discussing the privilege in the context of FOIA Exemption 5, which covers any documents
“normally privileged in the civil discovery context”). As such, the privilege only applies to
predecisional communications. Id. The privilege is similarly restricted to deliberative materials.
See Jordan v. U.S. Dept. of Justice, 591 F.2d 753, 774 (D.C. Cir. 1978), overruled in part on
other grounds, Crooker v. BATF, 670 F.2d 1051 (D.C. Cir. 1981) (en banc). Thus, a requested
document “must be a direct part of the deliberative process in that it makes recommendations or
expresses opinions on legal or policy matters.” Id. “[M]emoranda consisting only of compiled
factual material or purely factual material contained in deliberative memoranda and severable
from its context would generally be available for discovery by private parties in litigation with
the Government.” EPA v. Mink, 410 U.S. 73, 87–88 (1973), superseded by statute, Public Law
No. 93-502, 88 Stat. 1561 (1974).
Similarly, the bank examination privilege is a qualified privilege protecting bank
examiners’ reports and related information. See In re Subpoena Served Upon Comptroller of
Currency, 967 F.2d 630, 633–34 (D.C. Cir. 1992) (“Fleet”). Like the deliberative process
privilege, the bank examination privilege protects opinions and recommendations but does not
protect factual materials. Schreiber v. Society for Sav. Bancorp, Inc., 11 F.3d 217, 220 (1993).
The privilege exists to protect open communication between banks and regulators, which is
essential to effective bank supervision. Fleet, 967 F.2d at 633–34. “The agency asserting the
privilege has the burden of establishing its applicability to the documents at issue.” Schreiber,
11 F.3d at 220.
3
When discussing the deliberative process privilege, the D.C. Circuit has stated that the
privilege does not apply when the plaintiff’s cause of action is directed at the government’s
intent. In re Subpoena Duces Tecum Served on Office of Comptroller of Currency, 145 F.3d
1422, 1424 (D.C. Cir. 1998). “If Congress creates a cause of action that deliberately exposes
government decisionmaking to the light, the privilege’s raison d’être evaporates.” Id. However,
on rehearing, the court clarified this statement by reiterating that in most cases where a party is
challenging agency action, the assessment of that action is based upon the administrative record
alone:
According to the government, our reasoning could be interpreted as suggesting
that the deliberative process privilege would not apply in a case where the
government action is challenged as arbitrary and capricious under the APA . . . .
....
[T]he ordinary APA cause of action does not directly call into question the
agency’s subjective intent. And our holding that the deliberative process privilege
is unavailable is limited to those circumstances in which the cause of action is
directed at the agency’s subjective motivation.
In re Subpoena Duces Tecum Served on the Comptroller of the Currency, 156 F.3d 1279 (D.C.
Cir. 1998) (on petition for reh’g).
This case seems to fall somewhere between the two precedents. There is a specific
statute that authorizes this court to review agency action – 12 U.S.C. §1464(d)(2)(B) – but the
weight of authority indicates that this review should ordinarily be confined to the administrative
record as in an ordinary APA case. See Franklin Sav. Ass’n v. Office of Thrift Supervision, 934
F.2d 1127, 1136 (10th Cir. 1991); Guaranty Sav. & Loan Ass’n v. Fed. Home Loan Bank Bd.,
794 F. 2d 1339, 1342 (8th Cir. 1986); Gibralter Savings v. Ryan, 772 F. Supp. 1290, 1293
(D.D.C. 1991). Plaintiff presented the Court with authority in support of its second motion to
compel that led the Court to grant the motion and permit the limited discovery that has resulted
4
in the instant motion, see [Dkt. # 39-1], citing Amfac Resorts, L.L.C. v United States DOI, 143 F.
Supp. 2d 7 (D.D.C. 2001), but even the case law relied upon by the plaintiff in its effort to
expand the record before the Court underscored that deliberative intra-agency memoranda are
ordinarily privileged and need not be included. Id. at 13. So, the Court is of the view that this is
a case in which the privilege may properly be asserted.
However, both the bank examination privilege and the deliberative process privilege may
be overcome by a good cause showing of competing interests. First Eastern Corp., 21 F.3d at
468 n.5; Fleet, 967 F.2d at 634. In making this determination, the Court must balance the
following factors:
(i) the relevance of the evidence sought to be protected; (ii) the availability of
other evidence; (iii) the ‘seriousness’ of the litigation and the issues involved;
(iv) the role of the government in the litigation; and (v) the possibility of future
timidity by government employees who will be forced to recognize that their
secrets are violable.
Fleet, 967 F.2d at 634 (announcing the five-factor balancing test for bank examination
privilege); First Eastern Corp., 21 F.3d at 468 n.5, quoting Fleet, 967 F.2d at 634 (noting that
the Fleet balancing test should be applied to the deliberative process privilege).
II. The Court’s Rulings on the Documents in Question
Having reviewed the three documents in camera, the Court makes the following rulings
on the FDIC’s assertions of privilege:
Email circulated among FDIC Board Members on November 5, 2010: FDIC
argues that the bank examiner’s privilege and the deliberative process privilege
shield the names of two of the three attachments to this email that are shown on
the document. With respect to the name of the third attachment, which relates to
a financial institution not involved in this lawsuit, the Court will permit the
5
redaction since the name is not called for by the discovery request. But with
respect to the name of the first attachment, neither of the privileges applies. The
information that FDIC seeks to redact is simply a file name – it does not reflect
any agency opinions or recommendations nor does it reveal anything about the
agency’s deliberative process. The Court notes that it is unlikely that production
of a file name document will create a chilling effect on the candidness of
government employees. See Fleet, 967 F.2d at 634. It is therefore ORDERED
that this document be produced with only the name of the third attachment,
involving an unrelated financial institution, redacted.
Case Memorandum to the FDIC Board dated October 25, 2010: This document
includes two attachments labeled “Cost Test Summary” and “Resolution,” which
will be addressed separately. With respect to the memorandum itself, the Court
cannot determine whether the privileges are applicable and whether or not they
have been overcome in this case without knowing whether OCC identified this
document as responsive to plaintiff’s discovery requests because it was “directly
or indirectly considered by, or relied upon by the Acting Director in making the
Seizure Decision,” or because it was “provided to” the Acting Director. It is
therefore ORDERED that OCC notify the Court on or before March 2, 2012 of
the answer to this question.
Attachment 1 to the Oct. 25, 2012 Memorandum entitled “Cost Test Summary”:
This record is not protected by the bank examiner’s privilege that was asserted
because it contains financial information that is purely factual and not does not
6
involve agency opinions or recommendations. It is therefore ORDERED that
Attachment 1 be produced.
Attachment 2 to the Oct. 25, 2012 Memorandum entitled “Resolution”: This
document is not protected from disclosure by the deliberative process privilege
because it is a decisional document and is neither deliberative nor pre-decisional.
Even if the privileges were applicable, they would be overridden because under
the Fleet balancing test, good cause exists for disclosure because of the strong
relevance of the evidence to the ultimate issue the Court must resolve under 12
U.S.C. § 1464(d)(2)(A), the limited availability of other evidence, and the
seriousness of the litigation. This conclusion is strengthened by the facts that the
bank has been shut down and placed in receivership, that the decision to place the
bank in receivership was made exclusively by the government, and the low
possibility that production of this document will create a chilling effect on the
candidness of government employees. See Fleet, 967 F.2d at 634. It is therefore
ORDERED that Attachment 2 be produced in full without redactions.
7
Agenda for the FDIC Board of Director’s closed meeting on November 9, 2010:
The Court rules that this document may be redacted as proposed by FDIC under
the asserted privileges because they reflect internal agency deliberations regarding
potential actions involving institutions other than plaintiff. It is therefore
ORDERED that this document be produced subject to the redactions proposed by
FDIC.
SO ORDERED.
AMY BERMAN JACKSON
United States District Judge
DATE: February 24, 2012
8