UWBK 2-17-2012 REPLY TO RESPONSE TO NOTICE OF IN CAMERA PRODUCTION OF DOCUMENTS

8/3/2019 UWBK 2-17-2012 REPLY TO RESPONSE TO NOTICE OF IN CAMERA PRODUCTION OF DOCUMENTS

1/32

1

UNITED STATES DISTRICT COURTFOR THE DISTRICT OF COLUMBIA

__________________________________________)

UNITED WESTERN BANK, ))Plaintiff, ) CIVIL ACTION

)

v. )

) Case No. 11-408 (ABJ)OFFICE OF THE COMPTROLLER )

OF THE CURRENCY, et al., )

)Defendants. )

__________________________________________)

REPLY TO RESPONSE TO NOTICE OF

IN CAMERA PRODUCTION OF DOCUMENTS

Purporting to respond to the one-page Notice of In Camera Production filed on

February 15, 2012, by the Federal Deposit Insurance Corporation in its corporate capacity

(FDIC-C), Plaintiff in fact seeks reconsideration of FDIC-Cs already-granted Motion for

Limited Intervention. No reconsideration is warranted, as Plaintiffs response rests on

uninformed speculation about the contents of documents that are already before the Court

and misrepresentations of the record in this case.

ARGUMENT

I. PLAINTIFF MISCHARACTERIZES THE FDICS RESPONSE TO THECOURTS ORDER AS AN ADMISSION THAT DOCUMENTS ARE NOT

PRIVILEGED.

The FDIC-C has already explained the reasons for its Motion for Limited

Intervention, and the timing of that motion. See Docket No. 75 at 1-2. Plaintiffs

inaccurate portrayal of the FDICs decisionmaking, however, requires a response:

Plaintiff asserts that the FDIC-C admitted that some of the withheld documents are not

Case 1:11-cv-00408-ABJ Document 79 Filed 02/17/12 Page 1 of 10


2/32

2

privileged, but the FDIC-C has admitted no such thing.

The FDIC-C pointed out in its motion that Plaintiff, unaccountably, had never

requested any of the documents in question from the FDIC directly, despite Defendants

repeated encouragement. See Docket No. 75 at 4-5. The FDIC-C explained that the

proper course for seeking release of FDIC materials in the custody of another party is to

request discretionary disclosure under 12 C.F.R. 309.6(b)(8)(i), which provides:

Third parties seeking disclosure of exempt records or testimony in

litigation to which the FDIC is not a party shall submit a request fordiscretionary disclosure directly to the General Counsel. Such request

shall specify the information sought with reasonable particularity and shall

be accompanied by a statement with supporting documentation showing indetail the relevance of such exempt information to the litigation, justifying

good cause for disclosure, and a commitment to be bound by a protective

order.

Id. Absent the FDICs authorization, third parties are prohibited from releasing FDIC

material. Id. 309.7(c). Notwithstanding Plaintiffs failure to abide by the regulations,

the FDIC-C offered to make the withheld documents available for the Courts in camera

review.

In response, the Courts February 12, 2012, order directed the FDIC-C simply to

consider Plaintiffs requests for the material a request for release under 309.6(b)(8)(i).

To the extent that the FDIC-C did not make such a discretionary disclosure, the Court

directed the FDIC to submit the withheld material to the Court for in camera review.

The FDIC-C accordingly evaluated the material in light of the record thus far, and

elected to make discretionary disclosures of the majority of the documents. Specifically,

the FDIC-C informed Plaintiff that it would release nearly 200 pages of previously

withheld material, subject to the protective order required by 12 C.F.R. 309.6(b)(8)(i).

Plaintiff refused to consent to the protective order, however, so the FDIC-C moved for



3/32

3

the entry of a protective order and has not yet released the materials to Plaintiff.1

The

FDIC-C found that release of the remaining material was not justified, and submitted 46

pages of documents to the Court for in camera review.

Thus, Plaintiffs assertion that the FDIC admits that many of the materials . . .

are not privileged, Response at 1-2, is inaccurate. The FDIC has made no such

admission. Rather, in response to the Courts direction to consider Plaintiffs motion a

request for release, it has conducted the review required by the governing regulations and

has determined that discretionary release to Plaintiff of certain documents is appropriate

under these circumstances. Accordingly, the FDIC-C has informed Plaintiff that the

FDIC will provide those documents under a protective order. The FDIC-C did not

change[] course; it complied with its own regulations and the Courts order.2

II. THE REMAINING DOCUMENTS ARE PRIVILEGED.Plaintiff goes on to speculate at length that the Board materials submitted to the

Court for in camera review are not in fact privileged. Plaintiffs conjectures about

documents it has not seen are erroneous and should be rejected.

First, the Board materials submitted to the Court are privileged. Those documents

are predecisional materials directed to the FDIC Board containing recommendations for

the Boards action, namely the authorization of the FDICs Division of Resolutions and

Receiverships (DRR) to act as a receiver for United Western. That information is

1

The Court, on February 15, 2012, requested revisions to the FDICs proposed protective order; the FDIC-C has revised the proposed order and has provided it to Plaintiff, again seeking Plaintiffs consent. The

FDIC-C hopes to file a revised proposed protective order shortly.2 Plaintiff attempts to cite another case involving FDIC documents,In re Citigroup, Inc. Bond Litigation,

No. 08-cv-9522 (S.D.N.Y.), for the proposition that the FDIC should have intervened earlier, but overlooks

that the court in that case expressly invitedthe FDIC to intervene, an invitation that the FDIC chose not to

reject. Citigroup, Docket No. 122 (The Board of Governors of the Federal Reserve System's motion to

intervene (Dkt. No. 110) is GRANTED for the limited purpose of asserting and defending the bank

examination privilege. Any other agency intending to assert the bank examination privilege shall move to

intervene for the same limited purpose on or before August 15, 2011.).



4/32

4

protected by the deliberative process privilege. See Taxation with Representation Fund v.

IRS, 646 F.2d 666, 677 (D.C. Cir. 1981) (privilege protects documents reflecting

advisory opinions, recommendations, and deliberations comprising part of a process by

which governmental decisions and policies are formulated). Those documents also

contain agency opinions and recommendations reflecting regulators confidential

communications with United Western, and that information is protected by the bank

examination privilege. Schreiber v. Society of Savings Bancorp, Inc., 11 F.3d 217, 222

(D.C. Cir. 1993).

Plaintiff asserts that the FDIC-C is asserting the privilege as to factual information

in the Case Memorandum that cannot be protected by the deliberative process and bank

examination privileges. Response at 11. In fact, as the FDIC-Cs February 15, 2012

letter to the Court (copied to Plaintiff), attached as Exhibit A, clearly explains, the FDIC-

C is prepared toproduce the segregable factual information in the Board materials, and

is awaiting the Courts ruling on the remaining portions. Exhibit A at 1 ([W]e have

identified segregable factual information in those documents that is not privileged.

Because those documents do contain privileged material, however, we are submitting the

unredacted versions of the documents to the Court for in camera review.). Nor is

Plaintiff correct that factual information can never be protected by the deliberative

process and bank examination privileges. In re Sealed Case, 116 F.3d 550, 558 (D.C.

Cir. 1997) (factual material protected when it is so inextricably intertwined with the

deliberative sections of documents that its disclosure would inevitably reveal the

government's deliberations); Schreiber, 11 F.3d at 220 (If the factual and privileged

material are inextricably intertwined, then the court must determine whether the



5/32

5

privilege, which is qualified, should be overridden for good cause and the documents

produced.); Petroleum Info. Corp. v. United States Dept of Interior, 976 F.2d 1429,

1433 (D.C. Cir. 1992) (To the extent that predecisional materials, even if factual in

form, reflect an agency's preliminary positions or ruminations about how to exercise

discretion on some policy matter, they are protected by the privilege).

Furthermore, as the FDIC-Cs letter also clearly explains, see Exhibit A, the

agenda for the FDICs Board meeting and its November 5, 2010 e-mail to Board

members in advance of that meeting were withheld because they contain information

pertaining to institutions other than Plaintiff, and it would not be proper to release that

information to Plaintiff. Plaintiffs generalizations about whether a meeting agenda can

be protected by the privilege are neither accurate nor helpful.

As for the redacted OTS memoranda, the FDIC-C has only recently obtained the

unredacted versions of those materials. It is reviewing them now and, in the next few

days, will either request supplemental in camera review for some portion of them or

authorize their release to Plaintiff under a protective order.

III. THE FDICS PRIVILEGED DOCUMENTS WERE PROPERLYWITHHELD FROM PLAINTIFF.

Plaintiff further argues that, even if the Board documents are privileged, the Court

should override the privilege.3

Plaintiffs argument rests on distortions of the record

before the Court and baseless conjecture about the documents.

A. The Board Materials Are Not Relevant.First, Plaintiff incorrectly asserts that the Board materials were relied upon or

3 Plaintiff asserts that the Court has already ruled that the privilege should be overridden in this case,

Response at 1, but the Court has not addressed that issue, nor did Plaintiffs motion to compel even raise

that question.



6/32

6

considered by the Director of the Office of Thrift Supervision. Response at 4. On

August 31, 2011before the Board materials were identified as responsiveDefendants

informed the Court that they had produced all materials considered, directly or

indirectly, by Acting Director John Bowman in connection with the decision to place

United Western in receivership:

I have reviewed the copy of the administrative record provided to Plaintiffand the Court in this matter. It is a true and complete copy of the

administrative record before me at the time I determined to appoint a

receiver for the Bank and contains an accurate and complete record of allinformation that I considered, directly or indirectly, and upon which I

relied in making the January 21, 2011 decision to appoint a receiver for

the Bank pursuant to 12 U.S.C. 1464(d)(2)(A).

Declaration of John Bowman, Docket No. 54-1, 5 (Sept. 1, 2011).

Subsequently, Plaintiff submitted proposed discovery requests that went beyond

the scope of the materials that had previously been provided. See Docket No. 55.

Specifically, Plaintiff requested information that was merely provided to the Director,

even if not considered or relied upon in the Directors decision to appoint a

receivera much broader request. See Exhibit B at 14. Defendants response to the

discovery requests identified the FDIC Board materials as responsive. In short,

Defendants did not include the Board documents among materials relied upon or

considered by the OTS Director; it identified them as responsive to Plaintiffs much

broader request for materials provided to, directly or indirectly considered by, or relied

upon by the Director.

Thus, Plaintiff has the requested inference precisely backwards: the clear import

of this record is that the Board materials were notconsidered or relied upon by the



7/32

7

Director in the appointment decision, but were merely provided to the Director.4

Plaintiffs assertions that the FDICs privileges should be overridden because the

documents are decidedly relevant, Response at 4, therefore fall flat.

Plaintiffs arguments also rest on a persistent misunderstanding of the FDICs

role, or lack thereof, in the decision to appoint a receiver. As the FDIC-C has previously

shown, the OTS, and only the OTS, made the decision to appoint the FDIC as receiver;

the FDIC plays no role in that decision, and indeed is not authorized to block or alter it.

12 U.S.C. 1821(c)(2)(A)(ii) (The Corporation shall be appointed receiver, and shall

accept such appointment, whenever a receiver is appointed for the purpose of liquidation

of or winding up the affairs of an insured Federal depository institution . . . by the

appropriate Federal banking agency.). The FDIC Board therefore did not decide

whether a receiver should be appointed; it authorized the DRR to act as receiver for

United Western should such an appointment be made, a step that the perilous condition of

the bank made all too likely by the fall of 2010. The internal administrative matter that

the Board addressedauthorizing the DRR to act and setting forth its powers and

responsibilitieshas no bearing on the propriety of the OTSs appointment decision.

The materials submitted to the FDIC Board to guide its decision need not be produced.5

B. Other Policy Considerations Support Withholding of the BoardMaterials.

Equally baseless are Plaintiffs assertions that production will not chill future

internal government deliberations. See Response at 6. Plaintiff claims that bank

4Because the Director, pursuant to statute, was also a member of the Board, see 12 U.S.C. 1812(a)(1)(B)

(2010), the Board materials were provided to him in that capacity.5 Indeed, the FDICs decision to authorize DRR to act as a receiver is wholly separate from the substantive

appointment decision; in some instances, the Board has adopted similar resolutions for banks that were

never, in fact, placed in receivership.



8/32

8

regulators already understand that their actions are subject to challenge and thus are

already aware that their deliberations may be disclosed, but that exception would swallow

the privilege: any agency action subject to review under the Administrative Procedure

Act (which is to say, all final agency actions, see 5 U.S.C. 704, unless otherwise

exempted by statute) is subject to challenge, and the Freedom of Information Act, 5

U.S.C. 552, requires disclosure in other scenarios as well. Courts have not viewed

agencies awareness that disclosure is possible as obviating concern about the chilling

of internal deliberations or candid discussions among examiners. See, e.g.,Department

of the Interior v. Klamath Water Users Protective Assn, 532 U.S. 1, 8-9 (2001)

([O]fficials will not communicate candidly among themselves if each remark is a

potential item of discovery and front page news; the purpose of the deliberative

privilege is to enhance the quality of agency decisions by protecting open and frank

discussion among those who make them within the Government.);Baker & Hostetler

LLP v. United States Dept of Commerce, 473 F.3d 312, 321 (D.C. Cir. 2006) (disclosure

would hinder government officials from debating issues internally, deter them from

giving candid advice, and lower the overall quality of the government decisionmaking

process);In re Subpoena, 967 F.2d 630, 633 (D.C. Cir. 1992) (Bank management must

be open and forthcoming in response to the inquiries of bank examiners, and the

examiners must in turn be frank in expressing their concerns about the bank. These

conditions simply could not be met as well if communications between the bank and its

regulators were not privileged.). Here, the Board materials (the Case Memorandum in

particular) reflect FDIC department directors recommendations to the Board in light of

examiners appraisals of the banks condition; the possibility of disclosure could



9/32

9

encourage both the department directors and the examiners to tailor or temper their

discussions. The deliberative process privilege and bank examination privilege should

not be overridden here.

Finally, Plaintiffs assertion that the Board documents are not available from any

other source and that the Court, absent production of the 46 pages at issue, will be

forced to decide this case on an incomplete administrative record, Response at 5,

ignores that Defendants have already produced thousands of pages of material to

Plaintiff, encompassing not only materials considered or relied upon by the OTS Director

but also vast quantities of other material. The notion that the administrative record will

only be complete if it encompasses FDIC materials that the Director did not consider in

the appointment decision is fanciful at best.

CONCLUSION

Plaintiff, while complaining about the FDICs attempt to relitigate this already

decided issue, Response at 12, has sought reconsideration of the Courts February 10,

2012 Order permitting the FDIC to submit documents for in camera review, speculating

that the documents are not privileged and that any privilege can be overridden. Plaintiffs

speculations are groundless; the documents submitted to the Court are in fact privileged

and were properly withheld.

Respectfully submitted,

COLLEEN J. BOLESAssistant General Counsel

BARBARA SARSHIK

Senior Counsel

_____/s/__________________________

DUNCAN N. STEVENS D.C. Bar No. 473550Counsel



10/32

10

Federal Deposit Insurance Corporation3501 N. Fairfax Drive, D-7028

Arlington, VA 22226

[email protected](703) 562-2402 (phone)

(703) 562-2477 (fax)[email protected]

Attorney for Federal Deposit Insurance Corporation

in its corporate capacity

February 17, 2012



11/32

FDICFederal Deposit Insurance Corporation

rn50 17th Street, NW, Washington, DC 20429February 15, 2012

By Hand Delivery

Legal Division

Hon. Amy Berman JacksonUnited States District Court for the District of Columbia333 Constitution Ave. N.W.Washington, DC 20001

Re: United Western Bank v. 0CC, No. 11-408 (ABJ)Dear Judge Jackson:

As you know, a dispute has arisen in the above-referenced matter concerning certainFDIC materials in Defendants custody. Plaintiff has moved to compel the production of thosematerials. On February 10, 2012, the Court ordered the FDIC to deem the motion to compel arequest for discretionary disclosure pursuant to 12 C.F.R. 309.6(b)(8)(i). The Court furtherordered the FDIC to either produce the materials to Plaintiff or submit them for in camera reviewno later than February 15, 2012.

The FDIC has undertaken further review of the materials, pursuant to the Courts order,and has elected to make a discretionary disclosure of the majority of them. Specifically, theFDIC is prepared to produce all of the liquidity reports and accompanying e-mails thatDefendants identified as responsive to Plaintiffs discovery requests (Bates numbered 0CC-UWB 00799-970), along with one of the e-mails circulated among FDIC Board members (Batesnumbered OCC-UWB 01012). Because the governing regulations require a protective order forthe confidential supervisory information contained in those reports and e-mails, see 12 C.F.R. 309.6(b)(8)(i), we sought Plaintiffs consent to the entry of a protective order, but Plaintiffdeclined to consent. Accordingly, we are enclosing those materials and will move for aprotective order shortly; we are prepared to provide them to Plaintiff once the Court has ruled onour motion for protective order.

As for the remaining materials, specifically an e-mail circulated among FDIC Boardmembers on November 5, 2010 (OCC-UWB 00971), a Case Memorandum to the FDIC Boarddated October 25, 2010 (OCC-UWB 00972-1011), and the agenda for the FDIC Boards closedmeeting on November 9, 2010 (OCC-UWB 01013-17), we have identified segregable factualinformation in those documents that is not privileged. Because those documents do containprivileged material, however, we are submitting the unredacted versions of the documents to theCourt for in camera review. For the Courts convenience, we are submitting both a clean copyof the documents and a copy with brackets around the privileged portions, along with notationsindicating the nature of the privilege asserted. Portions marked "BEP" are withheld under thebank examination privilege, portions marked "DPP" are withheld under the deliberative processprivilege, portions marked "BEP-DPP" are withheld under both privileges, and a few phone

Case 1:11-cv-00408-ABJ Document 79-1 Filed 02/17/12 Page 1 of 2


12/32

Hon. Amy Berman JacksonFebruary 15, 2012

numbers have been redacted to safeguard FDIC employees privacy. To avoid confusion andpotentially duplicative production, we have not yet produced the redacted versions of thosedocuments to Plaintiff, once the court has ruled on whether the redacted information is in factprivileged, we will produce the documents with such redactions as the Court deems appropriate.

We are also submitting the declaration of Serena Owens, Associate Director of the RiskManagement Examination Branch of the FDIC s Division of Risk Management Supervision,explaining the basis for the assertion of the privileges as to the Case Memorandum. Theredacted material in the November 5, 2010 e-mail and the meeting agenda relates solely toinstitutions other than United Western and is withheld to safeguard the confidentiality of thoseinstitutions and the Boards deliberations regarding them.

We appreciate your careful consideration of this important issue. Please contact me at(703) 562-2402 with any questions.

Sincerely,

Duncan N. StevensCounselcc :hristopher A. Sterbenz, Esq.Andrew L. Sandler, Esq. (w/o enclosures)Kirby D. Behre, Esq. (w/o enclosures)Theodore J. Abariotes (w/o enclosures)

2

Case 1:11-cv-00408-ABJ Document 79-1 Filed 02/17/12 Page 2 of 2


13/32

Case 1:11-cv-00408-ABJ Document 60-2 Filed 11/02/11 Page 3 of 60Case 1:11-cv-00408-ABJ Document 79-2 Filed 02/17/12 Page 1 of 20


14/32



15/32



16/32



17/32



18/32



19/32



20/32



21/32



22/32



23/32



24/32



25/32



26/32



27/32



28/32



29/32



30/32



31/32



32/32


Documents

UWBK 2-17-2012 REPLY TO RESPONSE TO NOTICE OF IN CAMERA PRODUCTION OF DOCUMENTS