UNITED STATES COURT OF FEDERAL CLAIMS
FAIRHOLME FUNDS, INC., ET )
AL., )
Plaintiffs, ) Case No. 13-465C
vs. )
UNITED STATES OF AMERICA, )
Defendant. )
———————————-)
Courtroom 4
Howard T. Markey National Courts Building
717 Madison Place, N.W.
Washington, D.C.
Wednesday, January 28, 2015
10:00 a.m.
Status Conference
BEFORE: THE HONORABLE MARGARET M. SWEENEY
Susanne Bergling, RMR-CRR-CLR, Transcriber APPEARANCES:
ON BEHALF OF THE PLAINTIFFS:
CHARLES J. COOPER, ESQ. (Via telephone)
VINCENT J. COLATRIANO, ESQ.
DAVID THOMPSON, ESQ.
Cooper & Kirk, PLLC
1523 New Hampshire, NW
Washington, DC 20036
(202) 220-9600
ccooper@cooperkirk.com
ON BEHALF OF THE DEFENDANT:
KENNETH MICHAEL DINTZER, ESQ.
GREGG M. SCHWIND, ESQ.
ELIZABETH M. HOSFORD, ESQ.
U.S. Department of Justice
Post Office Box 480
Ben Franklin Station
Washington, DC 20044
(202) 616-0385
kenneth.dintzner@usdoj.gov
ALSO PRESENT:
Christine Cubias, Esq. (Via telephone) I N D E X
REMARKS PAGE
By Mr. Thompson 5, 34
By Mr. Schwind 15
P R O C E E D I N G S
– – – – –
(Proceeding called to order, 10:05 a.m.)
THE COURT: As a preliminary matter, before we
begin, I just wanted to mention that my chambers
continues to receive phone calls from individuals
claiming to be shareholders or other interested members
of the public and apparently offering commentary —
favorable commentary with regards to my rulings, less
than perhaps courteous descriptions of other judges’
rulings at the DDC, also offering or referring me to
both blogs, books, other writings of people that are
interested or that may be ultimately witnesses in this
case.
What I’ll just let all of you know — so, that
explains why I issued the order that I did on the 26th
of January. I realize counsel is not — and I’m sort of
looking now at — obviously, no one at the Justice
Department is calling me. It would be the Plaintiffs.
I realize that you can’t control members of the public,
and sometimes you can’t even control clients, but just
in case anyone would ask you, my judicial assistant
knows not to convey any of the specific information. I
don’t know what information they want to bring to my
attention. That is the job of counsel. Now, I know you all know that, but I’m just
explaining why I issued that order, and, frankly, if a
party calls and says I’m just the greatest thing since
sliced bread, it’s rather offputting. I’m certainly not
going to in some way penalize the Plaintiff because
someone is calling me, trying to butter me up, but just
so they know, it doesn’t work. So, in any event, you
know, Mr. Thompson, again, I know you’re not encouraging
people to do it.
MR. THOMPSON: Yeah.
THE COURT: I just wanted to give the background
on why the order issued.
MR. THOMPSON: And we appreciate that, Your Honor
and we want to assure you, anyone over whom we have
control will not contact the Court ex parte, and we
appreciate the Court informing the general public not to
contact the Court.
THE COURT: Yes, right, exactly. Since we have
other people — other individuals here in the Court
today, I just wanted to say that during this proceeding.
So, thank you for indulging me with this little
commentary this morning, and I do appreciate it. So,
let’s move forward with the contents of the status
report and the concerns that the parties have.
MR. THOMPSON: Well, and good morning, Your Honor, David Thompson for the Plaintiffs. I’m joined
today by Mr. Colatriano.
MR. COLATRIANO: Good morning, Your Honor.
THE COURT: Yes, good morning.
MR. THOMPSON: And Mr. Cooper could not be here
in Washington, D.C., today, but he’s on the phone.
THE COURT: On the phone, yes.
MR. THOMPSON: And our client, Christine Cubias,
General Counsel of Fairholme, is on the line as well.
MR. DINTZER: Good morning, Your Honor.
THE COURT: Good morning.
MR. DINTZER: Kenneth Dintzer for the United
States Department of Justice.
THE COURT: Good morning.
MR. DINTZER: And with me at counsel table today
are Greg Schwind and Elizabeth Hosford, also from our
office.
THE COURT: It’s good to see all three of you
again. Yes, good morning. Thank you.
MR. THOMPSON: Good morning, Your Honor. Your
Honor, we come before you today to report and we regret
to inform you, there has been a serious breakdown in the
discovery process, which I will describe for you in a
moment, but I want to emphasize at the threshold that
today I’m in no way casting aspersions at Mr. Schwind or Ms. Hosford, both of whom I hold in the highest
professional regard, but I want to focus on their
clients, Your Honor, on the United States Treasury and,
to a lesser degree, the FHFA.
Your Honor, the Department of Treasury has
utterly failed to fulfill its obligations, its discovery
obligations in this matter, and I’d like, with the
Court’s indulgence, just to take a moment or two and
trace the history of how we got to this moment.
THE COURT: Please.
MR. THOMPSON: As the Court will remember, in
February of last year, the Court authorized discovery on
certain limited topics. There was a discovery order
that the parties put in, a plan, and pursuant to that
plan, on April 7th, we submitted discovery — document
requests.
In the ensuing months, FHFA produced thousands of
documents. In the ensuing months, the United States
Treasury, by the time the original discovery cutoff of
July 31 had come and gone, they had produced precisely
zero — zero documents — in four months. And by the
end of August, we still had zero documents from
Treasury. So, we had to renegotiate a new schedule.
And we did that, and in the September joint
status report where we, you know, jointly said March 27th would be a new, appropriate discovery cutoff line,
the Government said the following: “Defendant currently
estimates that it should be able to complete the
production of nonprivileged, responsive documents within
approximately four months, i.e., by the middle of
January 2015. Defendant reserves the right to request
additional time for document discovery should anything
unforeseen arise during the four-month period allocated
for this purpose.” So, that was the state of play as of
September.
As you may recall, there was a dispute with the
Government about the extent of discovery that was
permissible, and we worked in good faith and diligently
with our friends at the Department of Justice, and we
reached a global agreement on October 14th, that this is
what they’re going to produce, subject to claims of
privilege, and we would not file a motion to compel at
that time. And then 14 days later, the Department of
Justice filed their stay application.
Since that stay request was filed on October
28th, we have not received one single document from the
FHFA. There is no unforeseen change in circumstance
that would preclude them, the FHFA, from continuing to
produce documents to us. The FHFA seems to be acting as
though the stay was granted by not having given us a single additional document since October 28th.
Moreover, you know, we took comfort in the
knowledge that, all right, we haven’t been receiving
rolling productions from FHFA, but we have this
commitment, this statement that by mid-January, that
documents will be produced, and we did not hear, Your
Honor, one single peep out of the Treasury indicating
that there was any unforeseen circumstance. And so when
the middle of January came, we reached out, and we
asked, “Where are we?” And we learned at that moment
that they now want — we learned, in fact, Saturday at
5:00 p.m. — that they want three or four more months.
They want until April to produce the additional
documents.
Your Honor, if they had told us — if the
Treasury had told us we’ve hit, you know, turbulence,
there are unforeseen circumstances, we would have worked
with them to try to get to a compromise. If we hadn’t
been able to agree with them, we would have come to the
Court in advance of the middle of January. And it’s
important to understand, we’re not talking about sending
an astronaut to Mars, Your Honor. You know, if the
Court had been convinced mid-January really is
appropriate, they could put additional reviewers. I
mean, that’s what we’re talking about. We’re talking about documents, reviewing the documents, you put more
reviewers on it, you go through them more quickly. It
is just that simple, Your Honor.
But we were deprived of that opportunity because
the Treasury and the Government made a conscious
decision not to tell us, not to tell us that there was
some alleged unforeseen circumstance, Your Honor. And I
want to talk about whether there were unforeseen
circumstances, but whether there were or not, there is
no excuse, Your Honor, in our opinion for them to have
remained silent and made that conscious decision to be
silent during the run-up to the middle of January.
Your Honor, as for changed circumstances, there’s
no changed circumstance that we — that the Plaintiffs
have caused. We haven’t added to the discovery burdens
of the Government. And just to give you one example
that I think is telling to show that the Department of
Treasury is not — their conduct cannot be explained by
legitimate considerations, I want to take one example,
and it’s the Grant Thornton projections, Your Honor.
This was in our initial document request from
April. This was document request number one. These are
projected that are referenced in the administrative
record in front of Judge Lamberth but that were not
produced in that administrative record. They are projections of Fannie Mae and Freddie Mac’s
profitability — we think, we don’t have them — but
that’s what it appears that they are. They fall,
therefore, within the heart of the Court’s February
order in which we were entitled to projections.
In our global agreement with the Department of
Justice, they said they’d either give us the documents
or they would assert privilege over them. Your Honor,
we still do not have these projections which we
requested in April, and we still don’t have any
privilege log including them. We were told on January
16th, well, we expect to put a — you know, to assert
privilege over them, but the reality is, we have no way
to challenge that assertion of privilege because we
don’t have a log.
And that feeds into a broader concern about the
privilege logs, Your Honor. We know they are going to
assert sweeping privilege over thousands of documents.
In their most recent production, they gave us 83 emails
from August of 2012, 61 of them they asserted privilege
over, Your Honor, but we don’t — we have a log of only
two — well, first of all, we didn’t get any privilege
log until January 16th from the Treasury, and when we
did get it, it had only 231 entries on it, even though
we know there are going to be thousands of entries on it. So, we can’t assert — we can’t challenge the
assertion of privilege over what they haven’t given us a
log on.
Now, we may hear that now, we may hear that they
have hit some trouble with automation, that they thought
they could, you know, hit a button and that that would
generate the privilege log and now it’s that they have
to type it manually, but, Your Honor, I would make four
points about that.
Number one, that there’s no excuse for not giving
us the nonprivileged documents. The fact that they have
problems with an automated privilege log isn’t an excuse
for not giving us promptly the nonprivileged materials.
Number two, the FHFA has produced a privilege log
in a timely way. They didn’t seem to have any
technological problems.
Number three, we should have been getting this
log on a rolling basis.
And, number four, there is no excuse for them not
telling us that they had hit these problems.
Your Honor, all of this stands in stark contrast
to the third parties. We have also issued subpoenas to
Fannie Mae and Freddie Mac and their auditors,
PriceWaterhouse and Deloitte, and we had extensive
negotiations with those parties about the scope of discovery. We worked through those difficult issues,
and I’m happy to say that those third parties have
largely fulfilled their obligations.
PriceWaterhouse has provided the documents
they’ve said they were going to give to us. They did it
by the middle of January, working very diligently
towards that timetable. And this can’t be explained on
the ground of, well, the third parties don’t have as
much information. PriceWaterhouse has produced more
pages of documents than the Treasury and FHFA combined,
and they’re a third party, Your Honor. So, this was
possible to do, the third parties have done it, and the
Treasury has not.
There’s a real cost to all of this, Your Honor.
There’s a monetary cost in terms of, you know, the
opportunity cost of the capital that’s at stake here,
but there’s also — you know, some of these events that
are at issue took place in 2008, seven years ago. As
memories more delay, memories fade, and that impedes the
truth-finding process.
Your Honor, the bottom line is the Government
should have come to us if there were unforeseen
circumstances, and they chose not to, and our prayer for
relief, Your Honor, is this: We ask this Court to order
them to give us all of the responsive documents in two weeks. This can be done, Your Honor. They have the
documents from the custodians. They either have run the
keyword searches or they could do it in a day, and then
all that remains is to do a responsiveness review and a
privilege review.
With respect to responsiveness, we will take that
burden upon ourselves, Your Honor, just so that we can
get through this process. And with respect to
privilege, we are willing to give them a 60-day
claw-back, where we will give them any document that
they assert privilege over within 60 days; we will give
them any copy; we will give them any notes that contain
any reference to that; and it will all be under the
protective order so that there won’t be any prejudice of
them with having produced them. So, that is what we
would ask. We believe that is a fair, measured response
to what I’ve outlined for the Court.
The one last thing I’d like to point out, Your
Honor, is with respect to depositions. They said in the
joint status report that they wanted to talk about the
fact that we have had preliminary conversations with
counsel for Fannie Mae and Freddie Mac about the
possibility of deposing individuals with knowledge about
the net worth sweep, and, of course, this Court’s
February order specifically referenced “document and deposition discovery.” So, this is not a surprise, you
know, that we’re taking depositions of people with
knowledge.
And, Your Honor, we’re starting with the third
parties, because they’re the ones who gave us the
documents. If the Treasury had given us all of their
documents, we would be deposing their individuals. We
don’t have all of the documents. It is prejudicial.
And so, Your Honor, that’s all I have to say about that.
Obviously, I am not really sure why the
Government has standing to complain about a subpoena
that hasn’t been issued and that we’re still trying to
work through, you know, in good faith with Fannie Mae
and Freddie Mac. So, that’s all I have to say, Your
Honor.
THE COURT: Thank you very much.
MR. THOMPSON: Yes.
MR. DINTZER: Your Honor, Mr. Schwind will be
addressing these matters.
THE COURT: Thank you.
MR. SCHWIND: Good morning, Your Honor, and Happy
New Year.
THE COURT: Thank you. Same to you.
MR. SCHWIND: Plaintiffs have very much
exaggerated their dire straits, and this seems to be happening — this seems to be the pattern of these
status conferences, that the Plaintiffs complain that
the sky is falling when it’s not.
As far as the first round of status of discovery,
at previous status conferences in July and August, we
advised the Court that we had collected millions of
documents from both FHFA and Treasury in response to the
limited discovery allowed in this case. We’re trying to
do it in a way so that if we do get to the point of
merits discovery, we’re not going to be repeating a lot
of what we’re doing now. So, we did collect quite a bit
of documents, quite a volume of documents, again,
millions of documents.
That document collection, for purposes of the
limited discovery, has been reduced somewhat because
we’ve — the parties have been able to agree on search
terms, have been able to agree on which custodians would
be searched, and, therefore, the Court issued its order
in July 2014, and we then had date ranges to go forward
on to conduct a search for ESI and hard-copy documents.
We’ve done that.
And after that status conference in August, the
parties submitted a joint status report estimating that
discovery would take until the end of March, and that
estimate was based in part on the Government’s estimate that we would be done with document review and
production by mid-January.
The Court will recall, however, that at the time
of that joint status report and at the time of the
status conference that preceded it, there was a major
dispute looming out there, and that was the parties’
dispute over responsiveness review; that is,
Plaintiffs — well, Plaintiffs believe that their
document requests should govern document review. Our
view was that document review should be tied to what the
Court specifically allowed in its February 26th order
allowing discovery in the first place.
And so in — starting in September, the parties
engaged in weeks of negotiation over that, over this
dispute, managed to avoid bringing it to the Court. As
part of that negotiation, the outcome in October that
counsel referred to, Plaintiffs withdrew a number of
their document requests; however, the Government agreed
to a number of the document requests that we had
previously objected to. And so we went forward.
We have been reviewing documents — we had been
reviewing documents during that process. We continue to
review documents. And let me say at the outset, I am
going to have to emphasize this several times, we did
not grant ourselves essentially a stay of discovery, as Plaintiffs seem to suggest. We have continued to review
documents. We have continued to make productions of
both documents and privilege logs through this entire
process. Obviously, our review continues today.
We have now completed, we estimate, more than
half of the document review and production process, and
it is a process. It’s not as simple as Plaintiffs would
like — and they know this, they are attorneys. We
assume they’ve done large document reviews or been — or
seen — overseen large document reviews in their time.
It’s not as simple as sitting down in the old days with
a box of documents and putting in, you know, colored
slip sheets and then producing — making a production to
Plaintiffs the next day.
We have made productions to Plaintiffs so far of
over 12,000 documents consisting of over 150,000 pages.
We’ve provided three privilege logs, and we expect to
produce several more privilege logs. FHFA — I’m not
sure when FHFA’s second privilege log was produced, but
it — we have told Plaintiffs that there will be another
privilege log from FHFA and that there will be another
document production. So, we’ve expressly told them
this. So, for Plaintiffs to stand up here today and say
it looks like FHFA has stopped the train is — it’s
wrong, and we’ve told them that it’s wrong, and we will be making a further production and a further privilege
log from FHFA.
Plaintiffs — and, again, we’ve told them that we
do require additional time, and I will get to that in a
second, but before — again, it’s as if Plaintiffs are
creating this perception that they’re getting nothing.
They did, as counsel said, serve document requests
directly on the GSEs, directly on Fannie Mae and Freddie
Mac. What’s interesting is that discovery from the GSEs
was not requested, or I should say, to make it active
voice, Plaintiffs did not request discovery from the
GSEs in their motion for discovery that led to the
Court’s February order. In fact, they stated several
times in the declaration that supported that motion that
the discovery they needed was only in the possession of
the Defendant, the United States, the identified
government agencies only.
The Court, in granting its order in February,
found — essentially sided with Plaintiffs and said
several times in its order “The evidence Defendants seek
is in the hands of Defendant only.” And then out of the
blue, we get a — we see document requests, subpoenas
going to the GSEs. We didn’t object. We didn’t object
because we looked at it as it wasn’t putting additional
burden on us, and it wasn’t going to slow the discovery process or otherwise delay the Court’s consideration of
our motion to dismiss.
THE COURT: Well, isn’t it also the position of
the United States Freddie and Fannie are not part of the
United States, that they’re separate and independent
components, and, therefore, you — that would help form
the basis of your motion to dismiss?
MR. SCHWIND: It is, Your Honor.
THE COURT: Okay. So, I don’t understand — it
sounds like you’re somehow trying to say that the — or
imply that the Government has been circumvented when the
Plaintiff seeks documents from — directly from Fannie
and Freddie, but how can you complain because you’re
saying that Freddie and Fannie are not components of the
United States Government, therefore, this case should be
dismissed? It sounds to me like you’re trying to have
it both ways, but perhaps I’m missing something.
MR. SCHWIND: Well, Your Honor, we’re not trying
to have it both ways.
THE COURT: Okay.
MR. SCHWIND: We did not object to the document
discovery from the GSEs. Our position is, yes, they are
independent — independent companies —
THE COURT: Right.
MR. SCHWIND: — and when FHFA placed the companies in conservatorship, they stepped into the
shoes of those independent companies and lost their
character as government agencies, and, of course,
that’s — as a government agency, for purposes of this
Court’s jurisdiction, that —
THE COURT: So, I’m just confused. So, what —
what — of what moment is it that they — that the
Plaintiffs sought discovery from these entities? Isn’t
Plaintiffs’ complaint that documents have not been
forthcoming from the Treasury that are within the
control of the United States Treasury? Isn’t that the
point?
MR. SCHWIND: That’s one of Plaintiffs’ points,
Your Honor, but we just want to remind —
THE COURT: But that’s an important point.
MR. SCHWIND: And we’re definitely going to
respond to that, because that is our responsibility.
THE COURT: Okay, because it seems like
everything else is kind of a sidebar issue, but —
MR. SCHWIND: It may be a sidebar issue, Your
Honor, but what Plaintiffs are embarking on is very
different from what they requested in their motion for
discovery and what the Court allowed, in our view. In
our view, the Court — the Court’s order did not
contemplate this kind of discovery from outside entities, such as the GSEs, such as their auditors.
Now, we —
THE COURT: Well, no, let’s be clear, then. I
wasn’t focused — I wasn’t concerning myself at that
point with any — because these are third parties. I
mean, it’s up to a third party to come in and complain
that they have been served with a document request.
It’s not up to the United States Government to do that,
and, in fact, it would lend credence to — and support
to Plaintiffs’ position that, in fact, these third-party
entities are controlled by the United States Government,
because the Justice Department, who represents
government agencies in Federal Court, is coming in to
complain on their behalf.
MR. SCHWIND: Your Honor, we don’t control them,
and with respect, we don’t think pointing out to the
Court that discovery directly from the GSEs and from the
auditors exceeds what — not only what Plaintiffs asked
for in limited discovery but what the Court has allowed.
We think we are allowed — we do have standing,
essentially, to come in here and say that the discovery
that Plaintiffs seek exceeds what the Court has allowed,
and we would bring a motion.
Now, there are certain motions — the Court is
correct, if — that we — the sort of motions that the GSEs themselves would bring, such as why you shouldn’t
allow a deposition of the CEOs based on, you know,
established law and things like that, that would
probably come from the GSEs themselves. We’re not
representing them.
However, for purposes of what the Court — the
discovery the Court has allowed, we do think it’s
significant that Plaintiffs are doing this, and we do
think that — we hope to leave the Court with the
impression this morning that the discovery that the
Court — essentially, when the Court opened the door a
little bit to allow limited discovery into whether or
not this case should go forward at all, that what
Plaintiffs are doing is transforming that into something
far different.
Now, with respect to the Treasury’s discovery,
we, again, approached them recently with a request that
the parties agree to an extension of time given the
current outlook, again, given what’s happened as far as
the parties’ agreement to additional subjects back in
October and the pace of discovery that we’ve seen so
far.
THE COURT: But have you produced anything from
the Treasury Department to date? Because it’s my
impression from Plaintiffs’ counsel — perhaps I misunderstood Mr. Thompson — but, again, just focusing
exclusively on the United States Treasury, that
documents have not been produced. Have they been
produced?
MR. SCHWIND: Yes, Your Honor.
THE COURT: Okay. That was —
MR. SCHWIND: Absolutely.
THE COURT: Because this is —
MR. SCHWIND: Again, what we’re trying to — the
misperception that they’re leaving the Court with, you
know, the first production — it wasn’t really a
production, but the first group of documents is the
administrative record that the Treasury —
THE COURT: Well, yeah —
MR. SCHWIND: — put together in the District
Court, thousands of pages of documents —
THE COURT: But that’s not in this Court, of
course.
MR. SCHWIND: Not in this Court, but as far as
Plaintiffs saying we have — we have to see what’s going
on —
THE COURT: Okay, but wait. Wait, wait, wait.
Please confine your remarks in terms of documents being
produced in response to Plaintiffs’ discovery requests
to this case. I mean no disrespect, Mr. Schwind, but I don’t care what was produced to Plaintiffs before Judge
Lamberth or before any other judge in this country. The
only case I’m concerned about is this one and what you
have done in this case.
MR. SCHWIND: In this case, Your Honor —
THE COURT: Okay.
MR. SCHWIND: — we have produced over 120,000
pages of Treasury documents —
THE COURT: Treasury.
MR. SCHWIND: — to these Plaintiffs in this
case.
THE COURT: Okay.
MR. SCHWIND: It was directly to Mr. Colatriano
on DVDs —
THE COURT: Okay.
MR. SCHWIND: — and messengered over to Cooper &
Kirk. We have also produced a privilege log. In
addition to that, we’ve produced — I don’t know how
many pages exactly — an additional 30,000 pages of FHFA
documents — and two privilege logs, again, in this
case.
THE COURT: Okay.
MR. SCHWIND: There is no agency — and certainly
we’re not stopping the train or not following our
obligations to produce the documents as the Court’s ordered and as we’ve agreed to do and, again, in
negotiations with the Plaintiffs.
THE COURT: I just wanted the tension explained
between Plaintiffs saying no documents had been produced
by Treasury and your talking about the 150,000 pages of
documents from FHFA. So, that’s why I — I just wanted
to make sure that there wasn’t something that I was
missing here. So, I’ll have Mr. Thompson respond to
this after you complete your remarks.
MR. SCHWIND: Yes, Your Honor. To be clear,
150,000 pages from both agencies; 122,000 of those pages
are from Treasury.
THE COURT: Thank you.
MR. SCHWIND: So, the bulk of what we’ve produced
has been from Treasury.
THE COURT: Well, but if there’s a big
difference — even if it was 50,000, there is a big
difference between zero and —
MR. SCHWIND: Yes.
THE COURT: — and a sum greater than zero, so
thank you.
MR. SCHWIND: Mathematically, yes, Your Honor.
Fair enough.
THE COURT: Yes.
MR. SCHWIND: But we did approach Plaintiffs recently with a request that they — that we could come
to the Court together and ask for more time. Again, the
discovery period ends at the end of March. That was
based on an estimate — our estimate before the
negotiations back in September/October — but our
estimate that we could complete discovery by
mid-January. Obviously, the fact that we’re here this
morning, you know, we agree that that’s not the case,
and that’s why we intend to raise this in a motion for
extension.
In the Court’s order, after the parties’ joint
status report back in August, the Court stated that “If
the need for additional time should arise, the parties
should file the appropriate motions.” Again, we intend
to do that, and we don’t think our request is
unreasonable, and we think it’s justified from the
circumstances. There have been a number of unexpected
circumstances.
THE COURT: And could you describe those? And
also, I’d like you to detail, if you would, please —
and, again, I don’t want to get into attorney-client
privilege or anything of that manner, but if you could
just tell me what it is that the Treasury Department is
doing to respond to all the Plaintiffs’ discovery
requests. Can you tell me what kind of resources have been appropriated to deal with responding to discovery?
Is it one attorney? Is it one paralegal? It —
do you have any idea what’s happening and do you feel
comfortable —
MR. SCHWIND: I’m certain, Your Honor, it’s —
you know, we have — well, first of all, the unexpected
incidents that have come up —
THE COURT: And what are those?
MR. SCHWIND: Well, again, going back to the
agreement with Plaintiffs to agree to a number of
document requests to which we had previously objected.
We also have had some problems with simply the
technology involved in reviewing these documents. They
are on what’s called a review platform, we’re talking
about the ESI, and also the hard-copy documents were
loaded to that platform as well, and that review process
is more cumbersome — I’ll just say it — more
cumbersome than promised from the contractor, from the
vendor.
So —
THE COURT: In all fairness, it often is, so I
do — I sympathize with that.
MR. SCHWIND: Well, we have eight attorneys doing
document review. We have — and, you know, one of those
attorneys is overseeing the preparation of privilege logs.
THE COURT: And let me ask you, with the eight
attorneys performing the document review, are they doing
this full-time or are the eight attorneys working a half
hour each day on the project? Can you give me a little
more information?
MR. SCHWIND: These attorneys right now — excuse
me, Your Honor. These attorneys right now are working
nearly full-time on this.
THE COURT: And has — you say right now.
MR. SCHWIND: Right.
THE COURT: Prior to right now —
MR. SCHWIND: It has not always — I will
confess, it has not always been that way, just given the
availability of resources and other cases that
Plaintiffs have been able to — that our attorneys have
been able to do that.
THE COURT: And are they DOJ attorneys? Are they
Treasury attorneys?
MR. SCHWIND: Well, we have —
THE COURT: A mixture?
MR. SCHWIND: Well, the eight I referred to are
just DOJ.
THE COURT: Okay.
MR. SCHWIND: But, of course, there are in-house counsel at Treasury that do play a role as well. But,
again, without getting too much into the — you know,
the inner workings of —
THE COURT: Well, I’m just trying to understand
just how committed — I know Justice is committed to
fulfilling its responsibilities. I just wanted to make
sure that if Treasury had assigned one paralegal to work
a half hour every day on this, I — you know, I — you
know, I wanted to know where I could perhaps inspire
either an agency or the Department of Justice to move
into a higher gear to respond to Plaintiffs.
MR. SCHWIND: Well, Your Honor, Treasury itself,
in-house counsel has also committed resources to the
review effort, and they are doing I’d call it a
second-level review of documents before they go out the
door. So, you know, without getting too much into the
inner workings of our process, I mean, between DOJ and
Treasury, there are, I’d say, 10 or 11 attorneys that
are part of the review process right now.
We don’t think that’s unreasonable. We are —
again, at least on our side, we are trying more and more
to commit more and more time of these attorneys to the
review process, and that’s part of our proposal for the
three months, is that we’ll be able to do that because
these attorneys will be able to devote more of their time to the review.
One final — well, it’s not final, but one — the
next item is we’ve gotten recently a second set of
document requests from Plaintiffs. They’re asking for
what is known in numerous court opinions as “discovery
into discovery.” The Court will recall, at a previous
status conference, that we talked about — Plaintiffs
talked about what is known as hit reports, essentially
reports that the review platform can generate showing
how the documents were searched, how many documents came
up for each search term, things like that.
Plaintiffs admitted they want these things just
to monitor our document review and object to our review
process if they think it’s necessary, and we consider
that to be an improper use of discovery under the case
law and under the Court’s rules, and we expect this to
give rise to yet another contested motion. So, this
is — this is essentially where we are right now.
We intend to bring a motion to the Court for
additional time. If Plaintiffs won’t agree, if, you
know, Plaintiffs take this absolutist position that we
have heard this morning, that, no, we want essentially
all of the Government’s documents in two weeks, we think
that’s preposterous, but if they continue to stick to
that position, we’ll file the motion ourselves, but if Plaintiffs want to at least say, okay, how much more
time do they think they need on the end of our
discovery, then we can maybe file that motion in some
way jointly.
But, Your Honor, with respect to the — I do want
to reiterate that with respect to the motion to stay, we
have continued reviewing documents and adding resources
and making productions to Plaintiffs during this entire
period of time, including most recently — you know, in
January, we have had either one or two document
productions and we have had the production of the first
Treasury privilege log.
We do expect there to be privilege logs —
additional privilege logs from both FHFA and Treasury
that Plaintiffs will get in the next several months, but
our estimate really is based on the fact that, for
example, we’re not going to get in — dragged into
depositions during this period of time. Plaintiffs
agree — and I think that it’s reasonable — that
depositions shouldn’t start until the document
productions are complete. So, we’re hoping that
essentially we’ll have the deck cleared to complete
document review and the production of privilege logs
during the three-month period that we’re asking for.
THE COURT: Very good. I — just kind of – hopefully you all can negotiate this out, but I will
just tell you that I think two weeks realistically is
not enough time. Perhaps it should be, but the reality
is it has to be done right. So, I certainly will give
you more time. I’ll also let you know, although the
decision or the order hasn’t issued yet, the stay will
not be granted. So, you — there wouldn’t have been a
legitimate basis for you to — and I’m not saying you
did — to delay discovery. You’ve moved forward with
it, but the stay request will be denied.
But if a motion — if you can’t agree to a motion
and a motion is filed for an enlargement, I won’t go
beyond four months, because the — I think we have to
move — we have to move things along. But, I mean,
obviously I want the Justice Department to be
comfortable that the documents they’re turning over are
appropriate, that — and I certainly appreciate the
claw-back provision. I mean, that’s appropriate.
If you’re handing something over that you
shouldn’t — particularly with this volume. It’s one
thing if you have just one banker’s box worth of
documents, a claw-back may not be necessary. If you
have one in place, 30 days might very well cover it.
But when you’re talking about hundreds of thousands, if
not, you know, millions of pages of documents, a 60-day claw-back may very well not be realistic. But anyway,
that’s the glimpse behind the curtain for today.
MR. SCHWIND: Thank you, Your Honor.
THE COURT: But I do want to hear from
Mr. Thompson.
MR. SCHWIND: If I can just add one thing, Your
Honor?
THE COURT: Sure.
MR. SCHWIND: On the motion for stay, we are
concerned that the deposition and the contested motions
practice over privilege logs and whatnot are going to be
fairly time-consuming, not only for us but also for the
Court. We understand that document discovery is
essentially winding down. If the Court would consider
simply, you know, allowing the document discovery to
reach its end and then stay further depositions and
contested motions practice, that would obviously be, you
know, favorable to us as well. We would ask the Court
to consider that.
THE COURT: I understand your position. If I
were in your shoes, I’d make the same motion, but it
will not be granted. So, I’m just letting you know
that. Thank you.
MR. SCHWIND: Thank you, Your Honor.
MR. THOMPSON: Your Honor, I just wanted to clarify a couple of points. With respect to the
Treasury’s productions, I was saying that for the first
five months of discovery, you know, from April until,
you know, September, we received zero documents. I
agree with Mr. Schwind that they have given us documents
since that time, but obviously —
THE COURT: You seemed to say both, and I missed
the time frame that you were —
MR. THOMPSON: Yeah.
THE COURT: — and so that’s why I was — I
wanted to hear back from you on that inconsistency.
MR. THOMPSON: Right, yes. Apologies for any
confusion on that.
THE COURT: No, no, no, that was my error. Thank
you.
MR. THOMPSON: And then I also just wanted to
say, you know, on the Grant Thornton document that we
requested on April 7th, we still don’t have that, and we
don’t have an assertion of privilege either.
So, I think everything — if the Court doesn’t
have further questions, the one point of clarification I
want to make is, when I was speaking about depositions
of Fannie Mae and Freddie Mac, I was saying, well, we’re
starting with them because we have the documents. We
reserve all rights, Your Honor, you know, to proceed with discovery within the rules, you know, on whatever
timetable we want to. I just wanted to be clear on
that.
THE COURT: Well, no, absolutely, although I will
say this, and Plaintiffs have to litigate as they
believe is the best strategy, and I completely
understand and respect that, but the Government has a
finite number of resources, just like the Plaintiffs,
and if they’re trying to produce documents, they can’t
be in two places at one time, as much as I’m sure they’d
like to be. Since they haven’t perfected cloning, they
are going to have to put their resources in one
particular area.
Since you have filed for — understandably for
the document production first, it may very well delay
other depositions that you may want to take. So, their
point with regard to producing documents is well taken,
but, again, I — it would be — as soon as Treasury can
identify and provide the documents to the — all the
attorneys who are performing this document review, the
better. So — and I’m sure they will.
I mean, it’s not in the Justice Department’s
interest to delay. I know that that happens in criminal
cases because they’re hoping that memories will fade,
and that certainly does impact this case as well, but I know these attorneys, and that’s not their strategy. I
think their strategy is just to get the job done, and
it’s trying to drink from a fire hose to go through
millions of pages of documents, which I’m sure you’ve
found in your practice as well.
MR. THOMPSON: Yes, Your Honor.
THE COURT: All righty. Is there anything else?
MR. THOMPSON: Nothing further at this time from
the Plaintiffs, Your Honor.
THE COURT: Is there anything else for Justice?
MR. SCHWIND: No, Your Honor.
THE COURT: Very good.
Well, I wish you all the best in trying to
resolve the discovery issue. I will rule on the motion
as soon as it’s received, and I think as many instances
as you can agree on things, the better off you are, but
I’m happy to rule on whatever you present to me. So,
thank you very much and good morning.
(Whereupon, at 10:46 a.m., the proceedings were
adjourned.)
CERTIFICATE OF TRANSCRIBER
I, Susanne Bergling, court-approved transcriber,
certify that the foregoing is a correct transcription
from the official digital sound recording of the
proceedings in the above-titled matter.
DATED: 1/28/2015 s/Susanne Bergling
SUSANNE BERGLING, RMR-CRR-CLR