$FNMA court transcription from last session

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

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