Federal Home Loan Mortgage Corporation v. Deloitte & Touche LLP ( 2015 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
__________________________________
)
FEDERAL HOME LOAN MORTGAGE )
CORPORATION, )
)
Plaintiff, )
)
v. ) Misc. Action No. 15-mc-568 (RMC)
)
DELOITTE & TOUCHE LLP, )
)
Defendant-Petitioner, )
)
v. )
)
FEDERAL HOUSING FINANCE )
AGENCY )
)
Respondent. )
_________________________________ )
MEMORANDUM OPINION
Before the Court is Deloitte & Touche LLP’s (Deloitte) Motion to Transfer its
Motion to Compel Document Production by Respondent Federal Housing Finance Agency
(FHFA) to the United States District Court for the Southern District of Florida, where the
underlying action, in which Deloitte is the defendant, is pending. For the reasons below, the
Court will grant Deloitte’s Motion to Transfer and will transfer its Motion to Compel to the
Southern District of Florida where the underlying action is pending. See Federal Home Loan
Mortgage Corporation v. Deloitte & Touche LLP, No: 1:14-cv-23713-UU (S.D. Fla) (the
Underlying Action).
I. FACTS
In the Underlying Action, Plaintiff Federal Home Loan Mortgage Corporation
(Freddie Mac) seeks $1.3 billion in damages from Deloitte for alleged negligent
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misrepresentations in Deloitte’s audit opinions on the consolidated financial statements of
Taylor, Bean & Whitaker Mortgage Corp., a Freddie Mac business partner, for fiscal years 2002
through 2008. See Mot. to Compel [Dkt. 1] at 1. FHFA has been Freddie Mac’s conservator
since September 2008. Prior to that time, the Office of Federal Housing Enterprise Oversight,
FHFA’s predecessor, was Freddie Mac’s regulator. Deloitte identified FHFA, which is not a
named party, as a potential “Fabre defendant” based on FHFA’s alleged failure to pursue a tip
about the fraud that purportedly caused Freddie Mac’s claimed loss. See id. at 2. Under the
Fabre doctrine, Deloitte’s liability would be reduced in proportion to FHFA’s responsibility for
Freddie Mac’s losses. 1 See id.
Deloitte has sought discovery from FHFA and now seeks to enforce a third-party
subpoena duces tecum that it served on FHFA in the District of Columbia for the production of
documents. See Mot. to Compel. Deloitte moves to transfer the Motion to Compel to the
Southern District of Florida where the Underlying Action is pending, and FHFA opposes. See
Mot. to Transfer [Dkt. 2]; Opp’n [Dkt. 4] ; Reply [Dkt. 6].
II. LEGAL STANDARD
Federal Rule of Civil Procedure 45(f) authorizes the transfer of subpoena-related
motions from the court where production is required to the court where the underlying action is
pending if the “person subject to the subpoena consents or if the court finds exceptional
circumstances.” Fed. R. Civ. P. 45(f). The Advisory Committee Note provides guidance on the
application of the rule:
In the absence of consent, the court may transfer in exceptional
circumstances, and the proponent of transfer bears the burden of
showing that such circumstances are present. The prime concern
1
The Florida Supreme Court established the doctrine in Fabre v. Marin, 623 So. 2d 1182 (Fla.
1993).
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should be avoiding burdens on local nonparties subject to
subpoenas, and it should not be assumed that the issuing court is in
a superior position to resolve subpoena-related motions. In some
circumstances, however, transfer may be warranted in order to avoid
disrupting the issuing court’s management of the underlying
litigation, as when that court has already ruled on issues presented
by the motion or the same issues are likely to arise in discovery in
many districts. Transfer is appropriate only if such interests
outweigh the interests of the nonparty served with the subpoena in
obtaining local resolution of the motion.
Fed. R. Civ. P. 45(f) advisory committee’s note (2013 amendments).
III. ANALYSIS
FHFA opposes transfer of Deloitte’s Motion to Compel to the Southern District of
Florida. Consequently, the Court may only transfer the motion upon a finding of exceptional
circumstances. The Court finds that Deloitte has met its burden of showing that such
circumstances are present here.
Deloitte argues that resolution of its Motion to Compel implicates substantive
issues in the highly complex Underlying Action. See Mot. to Transfer at 3. Deloitte states that
FHFA has withheld documents critical to Deloitte’s defenses in the Underlying Action by
invoking qualified executive privileges. See Reply at 3. Deloitte argues that good cause
supports setting aside FHFA’s privileges in this case, a determination that requires ad hoc
balancing of multiple factors, including the “seriousness of the litigation and the issues
involved,” and the government’s “role” in the litigation. Id. (citing First E. Corp. v.
Mainwaring, 21 F.3d 465, 468 n.5 (D.C. Cir. 1994)). In opposition, FHFA maintains that Judge
Ungaro has little familiarity with the substantive issues in the case because Judge Ungaro has not
ruled on any substantive motions and has referred discovery issues to a magistrate judge. Id. at
4-5. FHFA also contends that nearly all motions to compel would be subject to transfer if the
rule were so broad as to encompass any motion where another court has to make a relevancy
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determination. See Opp’n at 4. According to FHFA, this would “turn the exception into the
rule.” Id.
FHFA’s generalized concern that the exception would become the rule is
inapplicable here. FHFA does not dispute Deloitte’s argument that resolution of the Motion to
Compel requires delving into substantive issues in the highly complex Underlying Action.
Indeed, whether “good cause” justifies overruling FHFA’s invocation of qualified executive
privileges requires nuanced legal analysis based on a full understanding of the Underlying
Action. It is not a mere relevancy determination. Although FHFA questions Judge Ungaro’s
familiarity with the Underlying Action, the magistrate judge has already resolved various
discovery disputes. See Reply at 3. The Court finds that the Southern District of Florida is better
situated to deal with the full scope of issues raised in the Motion to Compel, “as well as any
implications the resolution of the motion will have on the underlying litigation.” Wutz v. Bank of
China, 304 F.R.D. 38, 46 (D.D.C. 2014).
Deloitte further argues that transfer would avoid interference with the time-
sensitive discovery schedule set by the Florida Court in which all discovery is scheduled to close
by September 4, 2015. See Mot. to Transfer at 6. For support, Deloitte cites the Advisory
Committee Note, which states that “transfer may be warranted in order to avoid disrupting the
issuing court’s management of the underlying litigation, as when that court has already ruled on
issues presented by the motion or the same issues are likely to arise in discovery in many
districts.” Fed. R. Civ. P. 45(f) advisory committee’s note (2013 amendments). FHFA responds
that Deloitte fails to take into account the Florida District Court’s limited prior involvement in
similar discovery issues. FHFA argues that transfer is not warranted because the Florida District
Court has not ruled on the applicability of executive privileges and that the issues presented in
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the Motion to Compel are unlikely to arise in discovery in many districts. See Opp’n at 5.
FHFA reads the Advisory Committee Note too narrowly: it interprets the Note’s example—“as
when that court has already ruled on issues presented by the motion or the same issues are likely
to arise in discovery in many districts”—as the only circumstance in which transfer is justified to
avoid disrupting management of the underlying case. Nothing in the Advisory Committee Note,
or subsequent case law, precludes this Court from relying on other aspects of case management,
such as impending discovery deadlines and case-specific issues, to transfer a subpoena-related
motion. In light of the short discovery window and the complexity of the issues raised by the
Motion to Compel, the Court finds that transfer is appropriate to avoid disrupting the Southern
District of Florida’s management of the Underlying Action. 2
The Advisory Committee Note to Rule 45 in the 2013 amendments emphasized
that the main focus in determining the propriety of transfer should be the burden on local
nonparties. Deloitte presented several reasons why transfer would impose only a de minimis
burden on FHFA—none of which is disputed by FHFA: (1) FHFA, as Freddie Mac’s
conservator, is an active participant in the Underlying Action as Freddie Mac’s conservator;
(2) FHFA is a federal agency with nationwide jurisdiction; and (3) FHFA has filed multiple
actions on Freddie Mac’s behalf in the Southern District of Florida, the venue to which Deloitte
seeks transfer. See Mot. to Transfer at 8-9. As these facts suggest, FHFA is not the kind of
“local” party about which the Advisory Committee was likely concerned. See In re Subpoena to
Kia Motors Am., Inc., SACV 14-315 JLS RNBX, 2014 WL 2118897, at *1 (C.D. Cal. Mar. 6,
2
Deloitte also argues that transfer is appropriate to avoid the risk of future inconsistent rulings.
See Mot. to Transfer at 7-8; Reply 4-5.
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2014) (granting a motion to transfer because it would not significantly burden Kia Motors, which
is a national corporation and not an individual resident of the local jurisdiction).
FHFA identifies a specific burden: it would “lose the benefit of this District’s
experience with challenges to the executive privileges.” Opp’n at 7. To emphasize the
familiarity of this District compared to the Southern District of Florida, FHFA notes that only
nine opinions in the Southern District of Florida contain the term “deliberative process
privilege,” whereas there have been 597 such opinions issued here. Id. at 7. FHFA overstates
the import of the volume of opinions. The D.C. Circuit has recognized that “‘[a]lthough there
are many cases in this Circuit which discuss the deliberative process privilege, these cases ‘are of
limited help . . . because the deliberative process privilege is so dependent upon the individual
document and the role it plays in the administrative process.’” Citizens For Responsibility &
Ethics in Wash. v. Nat’l Archives & Records Admin., 583 F. Supp. 2d 146, 157 (D.D.C. 2008)
(quoting Coastal States Gas Corp. v. Dep’t of Energy, 617 F.2d 854, 867 (D.C. Cir. 1980)). This
District has decided more cases involving executive privilege than the Southern District of
Florida, but the Court has every confidence that the Southern District of Florida can handle
Deloitte’s Motion to Compel.
The Court finds that transferring the Motion to Compel will impose a minimal
burden on FHFA—if any—which is far outweighed by the exceptional circumstances present
here. Due to the highly complex nature of the Underlying Case, consolidated case management
by the Southern District of Florida is warranted.
IV. CONCLUSION
For the foregoing reasons, the Court finds that “exceptional circumstances” exist
so that the United States District Court for the Southern District of Florida, where the Underlying
Action is pending, should resolve Deloitte’s Motion to Compel. The Court will grant Deloitte’s
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Motion to Transfer and will transfer its Motion to Compel to the Southern District of Florida.
The parties’ Consent Motion for a Briefing Schedule, Dkt. 5, will be denied as moot. A
memorializing Order accompanies this Opinion.
Date: May 28, 2015
/s/
ROSEMARY M. COLLYER
United States District Judge
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