THE UNITED STATES OF AMERICA, )
Defendant. )
Courtroom 4
Howard T. Markey National Courts Building
717 Madison Place, N.W.
Washington, D.C.
Wednesday, February 25, 2015
11:00 a.m.
Status Conference
BEFORE: THE HONORABLE MARGARET M. SWEENEY
Sara J. Vance, CERT, Digital Transcriber
UNITED STATES COURT OF FEDERAL CLAIMS
FAIRHOLME FUNDS, INC., ET AL.,)
?Fairholme Funds, Inc., et al. v. USA
ALL: Good morning, Your Honor.
THE COURT: I’m ready to begin whenever counsel is. MR. SCHWIND: Very well, Your Honor. Thank you. May I begin, Your Honor?
THE COURT: Yes.
MR. SCHWIND: The first subject for the Court this
morning is a general status of document discovery in this case. I just thought it would be helpful if you —
THE COURT: I think Mr. Cooper was simply just going to identify himself for the record. Would you like to identify yourself for the record and then have your colleagues identify themselves?
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for —
MR. SCHWIND: Oh, sure, Your Honor. Gregg Schwind
THE COURT: I just think so the record is clear.
MR. SCHWIND: Yes.
THE COURT: In case someone orders a transcript. I
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Incorporated vs. the United States, Case Number 13-465. THE COURT: Good morning, everyone. Please be
don’t think he was trying to cut you off.
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MR. DINTZER: Kenneth Dintzer for the United
States, Your Honor.
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MR. SCHWIND: I’m not sure, but, yes, I am Gregg
Schwind for the United States.
THE COURT: Thank you. And your colleagues,
MS. HOSFORD: And Elizabeth Hosford for the United States, Your Honor.
THE COURT: Thank you.
And for the Plaintiffs?
MR. COOPER: Thank you, Your Honor. Charles Cooper
for the
well known to the Court, Mr. Colatriano.
Plaintiffs’ side of the case. With me this morning, MR. COLATRIANO: Good morning, Your Honor.
MR. COOPER: Of course Mr. Thompson. And
is our turn to speak, Your Honor, Mr. Thompson will
the Court.
when it
address
THE COURT: Very good.
MR. COOPER: With the Court’s permission.
THE COURT: Thank you.
MR. SCHWIND: Thank you, Your Honor, and good
Again, I’d like to start with the general status of
morning.
document discovery in this case. As we stated at the previous status conference back on — at the end of January, at that time, we had produced to Plaintiffs in this case and
1 not in other cases, but in this case, approximately 175,000
2 pages of documents. Since that status conference, we have
3 made two further document productions on February 12th and
4 February 18th, and we have now produced over 300,000 pages of
5 documents from FHFA and Treasury.
6 And our document review, of course, continues. We
7 have a Russian process that we’re in the midst of, of course,
8 and we expect to complete our document production by April of
9 this year. The parties have among themselves agreed to go to
10 the Court jointly and ask for an extension of the discovery
11 period previously authorized by the Court. The Court
12 previously extended discovery until March 27th, and so the
13 parties again have agreed to come to the Court and ask for an
14 extension of three months to that period of time. And, so,
15 we expect to file that joint motion either today or tomorrow
16 with the Court. And we are hopeful that the Court will grant
17 the extension.
18 THE COURT: I will.
19 MR. SCHWIND: We appreciate that, Your Honor. One
20 other update that may be less of a problem than we thought
21 based on a conversation I had with counsel this morning is
22 that in January Plaintiffs served the Government a second —
23 served on the Government a set second of production requests,
24 not seeking documents that are necessarily relevant to the
25 claims or the Government’s motion to dismiss, but seeking
1 what we call and what they — and they call as well —
2 electronic hit reports, that is, reports from our document
3 vendor showing how many the universe of — the universe of
4 documents are for particular search terms.
5 Courts — other courts have called that type of
6 discovery “discovery about discovery.”
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9 requests,
10 amount of
11 to agree,
12 on our conversation this morning, we — that may or may not
13 end up in a formal motion, at least not in the short term.
14 THE COURT: Well, I hope you can resolve it. Some
15 courts permit it; some courts do not. I don’t have a
16 position on it at this time, so we’ll just have to see. It
17 would be great if you all can work that out, but I’ll just
18 stay tuned.
19 MR. SCHWIND: All right. Thank you, Your Honor.
20 And that’s, again, where we are at least on subjects one and
21 four as far as the current status of discovery, and then
22 potential extension of time for that. So, I’ll just turn the
23 floor over to the Plaintiffs if they have anything to add.
24 THE COURT: Very good. Thank you.
25 MR. THOMPSON: Good morning, Your Honor.
THE COURT: Yes, exactly.
MR. SCHWIND: We have objected to those document and under the Court’s order, we have a certain time to confer with Plaintiffs, and if we’re unable to then file a motion for protective order. Based
?7
1 THE COURT: Good morning.
2 MR. THOMPSON: David Thompson. Your Honor, we
3 would like to bring to the Court’s attention a controversy
4 that has emerged between ourselves and the Government. And
5 with the Court’s permission, I’d like to just sketch a little
6 bit of background. Tomorrow will be the one-year anniversary
7 of this Court’s order authorizing discovery into specific
8 topics. And in April of last year, we submitted document
9 requests.
10 And under the rules of this Court, the Government
11 had one of two choices, but only two choices, when it
12 received those document requests and identified responsive
13 material: either, number one, the Government had to produce
14 that — those materials to us; or they had to assert
15 privilege over those materials. And that’s what the rules of
16 this Court, Rule 26 specifically, says, “When a party
17 withholds information otherwise discoverable by claiming that
18 the information is privileged or subject to protection as
19 trial-preparation material, the party must expressly make the
20 claim.”
21 And that’s what the Government did, or so we
22 thought. Six months ago, on August 22nd, we got the
23 Government’s first privilege log from FHFA. And then in
24 January of this year, we got the Treasury’s first privilege
25 log. And we looked at those logs. We had concerns about
1 them. We sent DOJ a letter saying we’d like to meet and
2 confer about the propriety of some of these designations.
3 And eight days later, on February 13th, for the first time,
4 six months after we got the privilege log, we were told these
5 were just provisional designations — provisional
6 designations.
7 Your Honor, this is an invented way of proceeding.
8 This is not contemplated by the rules. It is not permitted
9 by the rules. We have looked far and wide to see if there is
10 any court that has ever authorized a party to say — to come
11 up with a third option rather than producing or asserting
12 privilege, to say, well, maybe it’s privileged, so I’m not
13 going to give it to you. And we have found no authority,
14 Your Honor. We have told the Department of Justice we know
15 of no authority, and they have pointed us to no authority.
16 And this places us, Your Honor, in a purgatory
17 where we don’t have documents; we don’t have a final
18 designation of privilege by the Government; and we have an
19 absolute right to either get those documents or to have a
20 final designation of them as privileged. In the world we’re
21 living in, Your Honor, we may get documents that they
22 themselves subsequently acknowledge are not privileged, and
23 get them months and months and months after they’ve
24 identified them as responsive. We’re talking about six
25 months we’ve had this privilege log, and now they tell us,
1 oh, it’s temporary, it’s provisional.
2 Your Honor, we know of no authority for this. We
3 wanted to bring it to the Court’s attention, and it’s part of
4 our effort to keep the Court apprised of how discovery is
5 going. So, that was why we put that on the agenda for today,
6 Your Honor.
7 THE COURT: And there’s — is there a — I assume
8 there’s a clawback agreement in place?
9 MR. THOMPSON: There is a clawback. And, so, if
10 the Government were to produce something to us and then
11 inadvertently — and decide, oh, you know, that was
12 inadvertently produced, of course, we would give that back
13 pursuant to the clawback. But what they’re not permitted to
14 do is take months and months and months without making up
15 their mind. When they find a responsive document, they are
16 obligated under the rules of this Court, to give it to us or
17 to — or conclude that it’s privileged and to turn it over.
18 THE COURT: Okay. So, you articulated a concern.
19 You have not requested relief this morning. So, you’re just
20 flagging it.
21 MR. THOMPSON: Yes, Your Honor. And we will be
22 filing a motion to compel on the underlying designations,
23 Your Honor, in short order. And, so, that will be coming to
24 the Court, potentially as early as next week. But we reject
25 this notion that these are provisional and that somehow it’s
1 premature for us to be filing a motion to compel, because it
2 is inappropriate to designate them and the rules do not
3 contemplate this third category, this purgatory for
4 documents.
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THE COURT: I see. Thank you.
MR. THOMPSON: Thank you.
MR. SCHWIND: May I respond, Your Honor?
THE COURT: Certainly.
MR. SCHWIND: This third category that counsel
was essentially created for or at Plaintiffs’
Some background, Your Honor. We have produced
THE COURT: Could I just ask, and please give me
14 the background, but when you say it was — when you get into
15 your explanation, please give me the details of how this was
16 created at the Plaintiffs’ insistence or at their request.
17 MR. SCHWIND: The short answer to that —
18 THE COURT: Thank you. But then please give me the
19 — lay the foundation as you were going to. Thank you.
20 MR. SCHWIND: I will, Your Honor. But I can say in
21 a sentence, the short answer is Plaintiffs requested rolling
22 privilege logs, and we agreed to that. That’s the — that’s
23 the short answer.
24 The longer answer is this, and it starts with some
25 history. We have produced three privilege logs as part of
1 our ongoing document review. Somewhere over 600 documents
2 are on those three logs combined. These are documents that
3 we believe are likely protected, in whole or in part, by
4 various privileges. In this type of case, it’s not uncommon
5 to expect that the Government would assert the deliberative
6 process privilege, perhaps the presidential communications
7 privilege, in addition to the ordinary privileges like
8 attorney/client and work product.
9 On September — I’m sorry, on February 5th, we
10 received, a somewhat surprising letter from Plaintiffs
11 challenging the privilege assertions as to almost every
12 document that we had put on those logs, for one basis or
13 another — some, it was four bases — and then demanding to
14 meet and confer and then ostensibly leading to a motion to
15 compel.
16 Our response, and we don’t think this is unusual,
17 is that these — that the challenge at this point, when our
18 document is continuing, we’re not at all finished with our
19 document review and production, is that a challenge to
20 privilege is entirely premature. Ordinarily, I mean, in I
21 think almost every case I’ve worked on — I’m not sure if
22 this happened otherwise — a party does its document review,
23 it produces documents to the other side, and then at some
24 point thereafter produces a privilege log.
25 Again, Plaintiffs requested, hey, instead of doing
1 that, can you give us some rolling privilege logs. We — you
2 know, we think it served a purpose of at least letting
3 Plaintiffs know the types of privileges we would be
4 asserting, perhaps to formulate some categorical type
5 objections that we can talk about at the proper time. And,
6 so, we did that. We continue — our intent is to continue to
7 provide rolling logs to Plaintiffs to the extent we can.
8 But those rolling logs will be revisions in some
9 cases of what’s on previous logs. And, again, this isn’t —
10 we don’t think it’s particularly unusual as document review
11 continues for us to reevaluate our privilege determinations.
12 I mean, we are not, for example, at the point in this
13 document review where we are ready to go and formally assert
14 deliberative process privilege or presidential communications
15 privilege and obtain the necessary declarations from the
16 right person at Treasury, the right person at FHFA, or the
17 right person at the White House. That’s not where we are at
18 this at all, because, again, we’re still in the middle of
19 document review and production.
20 Will the final privilege logs contain these types
21 of privileges? I’d expect they will. I expect they will.
22 And that’s, again, one of the purposes of our rolling logs,
23 but as to which documents and which part of the documents,
24 it’s not final. The fact is, Your Honor, at this point, we
25 have not produced redacted documents to Plaintiffs.
For The Record, Inc.
(301) 870-8025 – www.ftrinc.net – (800) 921-5555
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Fairholme Funds, Inc., et al. v. USA 2/25/2015
1 Our expectation is that a number of the documents
2 on the logs are going to be redacted. In other words,
3 Plaintiffs will get a lot of the documents themselves. It
4 may be that when Plaintiffs see the redacted versions of
5 these documents they no longer have a challenge to them.
6 But, again, we haven’t reached that point in the document
7 production yet.
8 And, of course, when we go — we’ll be happy to
9 meet and confer with them in talking about their challenges,
10 but at this time, Plaintiffs’ desire to challenge document by
11 document our assertions of privilege, it’s premature and it
12 would be very, very disruptive to our ongoing document review
13 process. We don’t think it’s necessary; we don’t think it’s
14 warranted. And we would hope that Plaintiffs would not file
15 a motion to compel and pull us into that process at this
16 stage.
17 THE COURT: Thank you. Certainly, I don’t have a
18 motion in front of me at this stage, but I think that the
19 Government makes very good points this morning. I think a
20 motion to compel at this stage would be — and I realize the
21 case has been ongoing for some time now, but given the
22 breadth of this litigation, given the voluminous nature of
23 the production, I don’t think a motion to compel is wise at
24 this stage. I think the Government should be given more
25 time. And once the Government has had adequate time to
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Fairholme Funds, Inc., et al. v. USA 2/25/2015
1 review the documents, produce them to the Plaintiff, and the
2 parties have had the opportunity to have a realistic meet-
3 and-confer, and if Plaintiffs’ concerns are not satisfied,
4 then a motion to compel would be appropriate.
5 But I wouldn’t dare suggest to the Plaintiff how
6 they should conduct this litigation. They are people of
7 integrity; they are — these are the finest law firms in the
8 country, so they will — they will do what they will, and I
9 have great respect for them, and we’ll just see what happens.
10 But I’m just saying, just sort of flying blind here, and just
11 giving you just initial take, I think a motion to compel at
12 this stage would be ill-advised, and no hard feelings if you
13 file one. You do what you have to do for your client, but
14 what Government counsel has represented to me today makes
15 eminent good sense, and I think the Government is proceeding
16 — I know from the Plaintiffs’ point of view, I’m sure it
17 seems glacial, but I think they are doing the very best they
18 can.
19 So, again, that’s just my take on it without seeing
20 everything laid out in motion and memoranda. So, I’ll just
21 wait and see if you file something, and then I’ll read it and
22 I will pay attention to what you have
23 we’ll have argument, perhaps not, and
24 ruling.
25 Is there anything else, Mr.
to say, and perhaps
then you’ll see my
Thompson, for me this
1 morning? 2
3 that last point, Your Honor. So, we had asked the Government
4 to meet and confer with us and they declined to do so. We
5 would like to ask the Court to order them to meet and confer
6 with us by the end of March.
7 THE COURT: Well, you know what —
8 MR. THOMPSON: So, to give them four weeks to make
9 their determination with respect to these documents that
10 they’ve identified six months ago, and then sit down with us
11 in good faith, as we have done repeatedly throughout this
12 process, and give us an opportunity to try to work through
13 this. So, that’s — that’s what we would ask as a middle
14 ground, Your Honor.
MR. THOMPSON: Well, if I may just follow up on
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20 we do expect there are going to be significantly more
21 documents that are ultimately withheld on the basis of
22 various privileges. Our hope is that at the close of this,
23 when we finally finish producing our final privilege logs,
24 that somehow the parties can then meet and confer and figure
25 out a way to logically put these documents in categories for
THE COURT: Without being ordered to do so, if I to do it and I put it in an order that you’re
to do it, would you meet with Plaintiffs’ counsel? MR. SCHWIND: Your Honor, of course we’ll always Plaintiffs’ counsel, but I just want to point out,
1 the Court’s consideration.
2 And I’ll say that Plaintiffs, to their credit, in
3 their February 5th letter, in their privilege challenge
4 letter, identified some possible categories. For example,
5 Plaintiffs — and this is just as an example — Plaintiffs
6 disagree with the ability of FHFA to assert what’s known as
7 the bank examination privilege. FHFA has asserted that —
8 asserted that privilege as to, I don’t know, how many hundred
9 documents. That’s a category. It’s not document-dependent.
10 It just simply says as a matter of law do you think you have
11 the ability to do this.
12 That’s the type of thing that would take care of a
13 whole lot of documents. But right now, since FHFA, we
14 haven’t produced their final log and we do expect more
15 documents to be shielded by that privilege, it seems
16 premature to talk about that.
17 THE COURT: You know — if you don’t mind, thank
18 you. Pardon me.
19 You know, I used to sit at the table where you sat,
20 and I knew that on the other side it was citizens of this
21 country bringing a lawsuit against the sovereign. And I just
22 always think it’s important when you know that it’s citizens
23 of the United States that are trying to redress a grievance
24 that — that as much as we are advocates for the sovereign
25 that we also have an obligation in the administration of
1 justice to somehow increase the comfort level of a plaintiff
2 that we are being diligent, that we are being fair, we are
3 being honest.
4 So, I would ask you if by the end of March if you
5 would carve out part of your day to meet with Mr. Thompson
6 and/or Mr. Cooper or whomever, and just spend a couple of
7 hours with them just to have an initial — you may not cover
8 the entire universe of documents. I know that couldn’t be
9 accomplished, but maybe if you could just take — you and
10 some of your colleagues could take some time, would you be
11 willing to do that?
12 MR. SCHWIND: Yes, Your Honor, to the extent —
13 again, it’s a category-type challenge. And maybe we can talk
14 to Plaintiffs’ counsel about this, but the minute it descends
15 into a document-by-document challenge, that’s where we’re
16 somewhat more resistant.
17 THE COURT: Okay, can we agree to that?
18 MR. THOMPSON: Yes, Your Honor. And I would point
19 out, I think the bank examination privilege that Mr. Schwind
20 points to is a perfect example of why we thought it was ripe
21 to bring a motion to compel now. We may not know whether
22 there are going to be five documents or a hundred documents
23 that the bank examination privilege is going to be asserted
24 to, but we know they’re going to assert it, we know we’re
25 going to contest it, and rather than having that resolved at
1 the end of discovery and maybe having to reopen depositions
2 if we prevail and we get additional documents.
3 We thought it would be sensible to tee that
4 categorical question up now, perhaps leaving aside specific
5 documents, where we could get the Court’s guidance. It’s a
6 live controversy. They’re going to assert it. And then we
7 could move forward and it would really narrow down the
8 document-by-document type of discussion. So, that’s — that
9 was our contemplation and what we’d like to do.
10 THE COURT: Well, so, what we will do, then, what
11 you all will do by the end of March is you will take a macro,
12 not micro, a macro approach to the various categories of
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where privileges may be asserted. Is that fair?
MR. SCHWIND: Yes, Your Honor.
THE COURT: Okay.
MR. THOMPSON: Thank you, Your Honor.
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24 MR. SCHWIND: Yes.
THE COURT: That satisfies?
MR. THOMPSON: Yes, thank you.
THE COURT: Do you have your calendars here today?
MR. SCHWIND: I do not.
THE COURT: All right. Are you available to have a
conference with Mr. Thompson either today or
25 THE COURT: — for the end of the month?
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THE COURT: Absolutely. You know what, that’s
MR. SCHWIND: — the end of March.
THE COURT: I’m just — I just — I thought if you
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MR. THOMPSON: Yeah.
MR. SCHWIND: I mean, there’s — that’s not at
THE COURT: Okay. Well, then, what I would ask is if you would confer today and then just contact my Chambers. You may call Ms. Ahmed and let her know what the date in that you will be meeting in March, and I will put that in an order so it will be reflected.
MR. THOMPSON: Thank you, Your Honor.
MR. SCHWIND: And we’ve had no problem scheduling phone calls.
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THE COURT: All right? Is that — is that all right? Again, and I’m not — really, this is just simply cooperation. I’m just noting the Government’s cooperation. You know, Mr. Schwind, I think you hung the moon. I think you’re a great guy. You’re a fine lawyer. You’re the perfect public servant, so — but I just —
MR. SCHWIND: Well, I can say, Your Honor, is it not sufficient for the Government to state here on the record, we will meet and confer in good faith with Plaintiffs well before —
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1 wanted a deadline, I would just put it in the order, but
2 that’s fine. If that’s sufficient for you, that’s fine with
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MR. THOMPSON: That’s fine, Your Honor.
THE COURT: That’s good. That works. That’s good. All right.
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MR. THOMPSON: Nothing further, Your Honor.
THE COURT: Is there anything else for the
Government this morning?
MR. SCHWIND: Yes, Your Honor, one final issue. And that has to do with our concerns regarding Plaintiffs continuing and expanding third-party discovery in this case. And we touched on this briefly at the last status conference, and I’d like to devote a few more minutes to it this morning.
I’d like to start by reminding the Court of the obvious, that we are still at the motion-to-dismiss stage in this litigation. We are not in merits discovery where third- party discovery might be more common and is more common. We filed our motion to dismiss over a year ago. As the Court knows, we raised multiple bases that we believe as a matter
MR. SCHWIND: Thank you.
THE COURT: Fine.
MR. THOMPSON: Thank you, Your Honor.
THE COURT: Is there anything else for the
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1 of law require the Court to dismiss Plaintiffs’ complaint,
2 even assuming the facts in Plaintiffs’ complaint as true.
3 Plaintiffs then responded with their motion for
4 discovery, also in December 2013, saying they needed some
5 discovery from the Government in order to meet — I think
6 there were three particular issues that they picked out, that
7 were raised by the motion to dismiss.
8 THE COURT: Are you suggesting there’s something
9 unprincipled or improper about seeking discovery from a third
10 party that would prove the jurisdiction of this Court or that
11 would support it?
12 MR. SCHWIND: In this case, it is improper, Your
13 Honor, given that Plaintiffs in their motion for discovery
14 stated only that they needed — that the need — and this is
15 articulated in a declaration from counsel for Plaintiffs, the
16 need they said —
17 THE COURT: Well, but why would — I mean, in this
18 Court, the only defendant is the United States Government, so
19 is silence with respect to other individuals a commentary
20 that — or an affirmation that no other discovery would be
21 taken from any other individuals? Or is it — I’m just —
22 MR. SCHWIND: The short answer, Your Honor, is
23 absolutely yes. I mean, we are, again, at the motion-to-
24 dismiss stage where discovery is highly unusual. Now, we’re
25 not relitigating that motion for discovery. We are saying
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that the Court granted limited discovery, given Plaintiffs’ stated need for discovery to meet certain aspects of our motion to dismiss.
THE COURT: But if a Plaintiff needs discovery to meet the jurisdictional allegations raised by the United States, let them have it.
MR. SCHWIND: Well, they didn’t make that argument, Your Honor. They have not asked the Court for discovery from third parties. They asked the Court for discovery from Government agencies. That’s our point. What Plaintiffs are doing, essentially they’ve arrogated to themselves and then expanded this right to discovery in this case. And we do think under the circumstances it’s improper. We —
THE COURT: But wouldn’t that be for the third- parties to have their counsel come in and complain?
MR. SCHWIND: Certainly —
THE COURT: Rather than the United States?
MR. SCHWIND: No, Your Honor. Certainly, the third
parties have their reasons to object, and —
THE COURT: Is that because it might show the
United States controls those third parties?
MR. SCHWIND: No, Your Honor. The United States
does not control these third parties. We’re talking about one of the —
THE COURT: Who are the third parties?
1 MR. SCHWIND: — we’re talking about one of the big
2 three bond credit rating agencies, Moody’s.
3 THE COURT: Okay. Okay.
4 MR. SCHWIND: The United States does not control
5 Moody’s. We’re talking about —
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7 are. 8
9 Deloitte — Deloitte and PricewaterhouseCoopers, and that’s
10 the kind of — that’s how far we’ve gone astray from
11 Plaintiffs’ request for discovery from the Government
12 agencies, to see, the Court will recall, the main question is
13 whether or not FHFA was controlled by Treasury, whether FHFA
14 acted at the behest of Treasury when it executed — when it
15 entered into the third amendment.
16 THE COURT: Well, why aren’t those — why aren’t
17 the lawyers for the third parties coming in?
18 MR. SCHWIND: Your Honor, we don’t know what the —
19 again, those are independent companies. We’re not telling
20 them what to do. All we are saying —
21 THE COURT: But — but if they have — but if a
22 third party has a complaint or — what is the connection — I
23 guess what I — what I’m — and I apologize, Mr. Schwind,
24 really. I’m not trying to give you a hard time. It’s just
25 I’m trying to wrap my head around the Government complaining
THE COURT: So, I don’t know who the third parties
MR. SCHWIND: — two major accounting forms,
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Fairholme Funds, Inc., et al. v. USA 2/25/2015
1 about a third party responding to discovery. If a third
2 party is served with a discovery request by the Plaintiff,
3 it’s up to that third party to come in and complain to me,
4 not the United States Government.
5 MR. SCHWIND: With respect, Your Honor, we believe
6 that is not a correct statement of the law.
7 THE COURT: Okay.
8 MR. SCHWIND: We think that where this discovery
9 does place some type of burden on a party, such as us.
10 And —
11 THE COURT: What’s your — what is your authority?
12 MR. SCHWIND: The authority, Your Honor, is that
13 the burden — well, for standing, there are plenty of cases
14 out there, for example, that talk about if that third party
15 production impinges on the Government assertions of
16 privilege. Some of these documents we may, the United
17 States, need to reach out and assert privilege on, but
18 because Plaintiffs have done the end-around, it would deny us
19 that opportunity. It doesn’t recover all the third-party
20 discovery they request, but it definitely covers some of it.
21 But the fundamental point is that when this third-
22 party discovery creates a burden on us, and we’re talking —
23 we heard the last discovery — at the last status conference
24 that one of the accounting firms or both have produced almost
25 as much or more documents than we have in this litigation,
1 but now we have that burden of reviewing all these documents.
2 We know, for example, recently that Plaintiffs have
3 approached counsel for Fannie Mae and Freddie Mac seeking to
4 depose their current chief executive officers and their
5 former chief financial officers. That is obviously a burden
6 on us to prepare for these depositions. And, so, we see that
7 just growing and growing and growing, this third-party
8 discovery that does, again, create a burden on us. And we
9 think under the circumstances we certainly have standing to
10 object and say no, particularly where we are at the motion-
11 to-dismiss stage.
12 Plaintiffs asked for limited discovery just from
13 Government agencies, essentially that was part of the deal.
14 The Court allowed that, and now we feel like somewhat we’re
15 being subjected to a bait-and-switch, where now Plaintiffs
16 are saying, well, we’re going to now seek all this other
17 material. So, we do intend to bring this — raise this in a
18 motion for the Court’s attention. We would appreciate Your
19 Honor today, again because this has happened and all this —
20 these conversations are going on without Government counsel.
21 You know, the Plaintiffs are reaching out to these major
22 firms without us and perhaps negotiating discovery. We don’t
23 know what they’re negotiating.
24 What we would ask from the Court this morning is
25 that the Court simply direct Plaintiffs to stop third-party
1 2 3 4 5 6 7 8 9
discovery until the Court has a chance to rule on our motion. We think Plaintiffs should have to come —
THE COURT: I want to have — I want a motion in front of me with authority. I want you to explain the burden, explain the obligation. I’m not going to enter — hamstring the Plaintiff until I see things laid out.
MR. SCHWIND: Well, we can definitely do that, Your Honor, but, again, when —
THE COURT: I mean, this —
time frame as to which those companies have to
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17 if a privileged document is produced, there are remedies,
18 there are remedies for that, which you know. So, but —
19 proceed.
20 MR. SCHWIND: Well, our — Your Honor, again, our
21 fundamental point is that this Court — Plaintiffs did not
22 request, and this Court certainly did not authorize
23 Plaintiffs to seek discovery from wherever they wanted.
24 Again, at this stage of this, we are not at the point at
25 which Plaintiffs appear to be transforming this case into
MR. SCHWIND: — these subpoenas — these subpoenas the Plaintiffs are serving on major companies, you know, have
a certain
THE COURT: And if —
MR. SCHWIND: And what we are concerned —
THE COURT: — and not only that, but if third —
1 merits discovery, trying to prove up allegations in their
2 complaint, as opposed to simply figure out whether or not
3 this Court has jurisdiction, whether FHFA acted at the behest
4 of Treasury.
5 It seems strange to us. And I don’t want to go to
6 any more extreme adjectives, but at least strange to us that
7 for this Court to figure out whether or not it has
8 jurisdiction over Plaintiffs’ complaint, the Plaintiffs get
9 to go out to Deloitte, Pricewaterhouse, Moody’s, and other
10 firms for documents. We think that’s entirely incongruous,
11 inappropriate, and rather strange. And that’s why, again,
12 given that there are time frames on this discovery and it
13 will take the Court —
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14 THE COURT: I don’t know if it is or not. I don’t
15 know what’s been requested. I don’t know what’s been
16 produced. 17
MR. SCHWIND: Well —
THE COURT: It may help them.
MR. SCHWIND: — we don’t know either, Your Honor.
But, again —
THE COURT: Well, then, if you don’t know what it
is, then you’re just making it up as you go along.
MR. SCHWIND: We’re definitely not, Your Honor.
And —
THE COURT: Well, of course you are. You’re saying
1 you don’t know what they’ve asked for, you don’t know what’s
2 been produced. Oh, by the way, but it simply goes to merits,
3 and it can’t possibly help them with respect to their
4 jurisdictional defenses or their jurisdictional allegations.
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6 asking in
7 going out
8 example, Plaintiffs said in their motion for discovery they
9 only needed discovery from the Government. It made sense,
MR. SCHWIND: This is why, Your Honor, we are
our motion that Plaintiffs demonstrate that before there and embarking on third-party discovery. For
10 whether or not, for example, whether FHFA acted at the behest
11 of Treasury. It has to do with the relationship between FHFA
12 and Treasury, not the relationship between Fannie Mae’s
13 auditor and Fannie Mae, for example.
14 So, we don’t think — well, Plaintiffs have never
15 come forth and established why this is necessary. The Court
16 has never agreed with Plaintiffs that this type of discovery
17 is necessary. It does create a burden on us. And, again,
18 given the time frames, we think it would be wise for the
19 Court simply to say — and we’re going to file our motion
20 probably within — within two weeks.
21 THE COURT: Well, that’s fine. I just — I just
22 don’t — as I sit here today, I mean, I don’t have every
23 pleading that’s ever been filed in front of me memorized. I
24 don’t remember a declaration from counsel stating that in no
25 uncertain terms that the Plaintiffs would not seek — I’m not
1 saying you’re making it up. I just — I just didn’t remember
2 them saying affirmatively they would not seek discovery from
3 third parties.
4 MR. SCHWIND: Your Honor —
5 THE COURT: And I’m not saying they didn’t say it.
6 I’m just saying I just don’t recall. And —
7 MR. SCHWIND: Okay. In the motion for discovery
8 dated December 20th, 2013, there was a declaration — the
9 motion itself, that has the declaration attached to it
10 justifying the need for the documents that they said they
11 needed. Every category of document they said they needed was
12 filed with some statement that the discovery should include
13 documents in the possession of Treasury, FHFA, and/or other
14 relevant government agencies. At no time did they say in
15 their motion or in their reply they would go outside of that.
16 THE COURT: Well, is there something —
17 MR. SCHWIND: And I would say, Your Honor —
18 THE COURT: — in that declaration that says that
19 they will not, that they would refrain from seeking discovery
20 from a third party?
21 MR. SCHWIND: No, Your Honor. And, again —
22 THE COURT: Okay, well, that’s — okay, fine.
23 MR. SCHWIND: — you can’t —
24 THE COURT: Thank you. There’s — thank you.
25 MR. SCHWIND: Well, Your Honor, we understand what
1 the Court’s saying, but again, we have been — this is —
2 THE COURT: Well, yeah, it’s a big distinction.
3 You said — you made an affirmative statement to me that the
4 Plaintiffs said they would not seek third-party discovery.
5 MR. SCHWIND: No, Your Honor. What I said was that
6 Plaintiffs never said they would seek third-party discovery,
7 and the Court never — that is what I said, Your Honor,
8 Plaintiffs have never said, prior to serving the first few
9 subpoenas on Fannie Mae and Freddie Mac, that they were
10 seeking third-party discovery, not in their motion for
11 discovery, not in their reply.
12 Again, the Court never had that before it. And I’m
13 sorry if I’ve — if I’ve suggested otherwise, but that is
14 what’s in their motion, Your Honor. This is — this came as
15 a surprise to us. We’ve allowed it to continue. We allowed
16 it to continue for some — again, document productions from
17 Fannie Mae and Freddie Mac, even from the auditors, but we
18 don’t see an end to it. This has never been authorized by
19 the Court. It is disruptive. It is burdensome. And we do
20 intend to bring it to the Court’s attention.
21 THE COURT: That’s fine.
22 MR. THOMPSON: The Court — Your Honor, if I may
23 just very briefly —
24 THE COURT: Certainly.
25 MR. THOMPSON: — make a couple of points. This is
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1 really a search for a controversy. They are very able
2 lawyers from Wilmer Hale and King & Spaulding representing
3 these third parties. We have had productive and cooperative
4 negotiations with all of them. We have resolved all of the
5 issues. They are well aware of the limits on discovery that
6 were in this Court’s February order, and that’s why we’ve
7 been able to negotiate through successfully.
8 We raised in May of last year the need to go to
9 third parties, which was in part born of the fact that the
10 Government wasn’t going to give us the Fannie Mae and Freddie
11 Mac documents, unlike in the Winstar cases, where when
12 entities were in conservatorship, you know, the Government
13 gave us all those documents. And, so, we thought we would
14 get the Fannie Mae and Freddie Mac documents from the
15 Government. When they said no, we said, okay, well, then,
16 we’ll issue a subpoena.
17 And we told the Government that in May; we told the
18 Court that in May. This is — this is nothing new, Your
19 Honor, and so we are confident we will continue to be able to
20 work productively with these very fine lawyers representing
21 the third parties. We don’t think there’s going to
22 controversy, Your Honor.
23 THE COURT: Thank you. Is there anything
24 the Plaintiff this morning?
25 MR. THOMPSON: No, Your Honor.
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1 THE COURT: Thank you.
2 Is there anything else for the United States this
3 morning?
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MR. SCHWIND: No, Your Honor. Thank you.
THE COURT: Thank you very much. We’re adjourned.
MR. SCHWIND: Thank you, Your Honor.
(Whereupon, the hearing was adjourned at 11:37
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CERTIFICATE OF TRANSCRIBER
I, Sara J. Vance, court-approved transcriber, certify that the foregoing is a correct transcript from the official electronic sound recording of the proceedings in the above-titled matter.
DATE: 2/26/2014
s/Sara J. Vance
SARA J. VANCE, CERT
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