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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA _______________________________________ ) UNITED WESTERN BANK, ) ) Plaintiff, ) ) v. ) ) OFFICE OF THE COMPTROLLER ) OF THE CURRENCY, et al., ) ) Defendants. ) _______________________________________)

1:11-cv-00408 The Honorable Amy Berman Jackson

PLAINTIFFS RESPONSE TO INTERVENOR FDICS NOTICE OF IN CAMERA PRODUCTION This Court has already ruled that Defendants should produce certain documents to Plaintiff United Western Bank (United Western or the Bank). Defendants had argued, on behalf of the Federal Deposit Insurance Corporation (FDIC), that the bank examination and deliberative process privileges should shield those documents from discovery. The Court rejected Defendants claims for two reasons. First, Defendants had not established that any privilege applied. Second, even if the documents were privileged, the Court believed that the privilege should be overridden in this case. Defendants were to produce these documentsand any other responsive documentson or before March 7, 2012. But then, just as the end of discovery was in sight, the FDIC intervened and asked the Court to reverse itself. In a motion to intervene coming after the Court had already reached its decision, the FDIC insisted that all of the relevant documents were privileged and appropriately withheld. See ECF No. 75 at 10-13. But when the Court ordered the FDIC to produce the documents to the Bank or the Court for review, the agency changed course for a third time. Now it admits that many of the materials,

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including all of the relevant liquidity reports, are not privileged. Nevertheless, the FDIC still seeks to withhold several pieces of relevant information from the Bank, including a critical memorandum on the Bank, agendas, an email, and certain portions of Office of Thrift Supervision (OTS) Regulatory Profiles. Nothing has changed between the Courts original decision and the FDICs intervention. Even if the privileges did apply, it would still be appropriate to override them in this case. Defendants have conceded that these documents were relied upon or considered by the Acting Director in making the decision to seize the Bank. As such, they are properly part of the administrative record and must be made available to the Court and Plaintiffs in their entirety. If a court is to review an agencys action fairly, it should have before it neither more nor less information than did the agency when it made its decision. Walter O. Boswell Meml Hosp. v. Heckler, 749 F.2d 788, 792 (D.C. Cir. 1984). From the beginning of this case, United Western has sought review of a complete administrative record. This Court should not allow a non-party that by its account played no part in the decision to appoint a receiver, ECF No. 27 at 9, now to thwart those efforts. Consequently, for the same reasons as it did before, this Court should deny this second attempt to avoid production and order Defendants to comply with its February 9, 2012 Order. ECF No. 74. I. EVEN IF THE FDIC DOCUMENTS ARE SUBJECT TO QUALIFIED PRIVILEGES, THEY ARE PART OF THE ADMINISTRATIVE RECORD AND SHOULD BE PRODUCED IN THEIR ENTIRETY. Even granting the FDIC assertion that the documents in question are privileged (which we do not), that qualified privilege is properly overridden in this case. Defendants have admitted that the Acting Director relied upon or considered the withheld documents in reaching the

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decision to seize the Bank, see ECF No. 60-2 at 6-8, 14-16, and therefore, these documents must be available to the Court to consider in evaluating whether the Acting Directors decision was arbitrary, capricious or unlawful. The FDIC assumes that the Court cannot consider documents that meet the technical requirements for either privilege in deciding this case. Such an approach ignores the fact that both the deliberative process privilege and the bank examination privilege are qualified privileges and that the documents are properly part of the administrative record. Even when asserted to protect deliberative material, the [bank examination] privilege may be overridden where necessary to promote the paramount interest of the Government in having justice done between litigants, or to shed light on alleged government malfeasance, or in other circumstances when the publics interest in effective government would be furthered by disclosure. In re Subpoena, 967 F.2d at 634 (internal marks and citations omitted); see also In re Sealed Case, 121 F.3d at 737-38 (same as to deliberative process privilege). Thus, before finding that either privilege applies, a court must apply a balancing test that [a]t a minimum considers: (i) the relevance of the evidence sought to be protected; (ii) the availability of other evidence; (iii) the seriousness of the litigation and the issues involved; (iv) the role of the government in the litigation; and (v) the possibility of future timidity by government employees who will be forced to recognize that their secrets are violable. Schreiber, 11 F.3d at 220-21 (quoting In re Subpoena, 967 F.2d at 634). This Court has already held that the balancing test favors production of the disputed documents. The FDIC has chosen not to address this fundamental aspect of the Courts decision and has not discussed the five balancing test factors. That oversight should be fatal to the agencys argument, as all five balancing test factors favor production.

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First, these materials are decidedly relevant. See Five Borough Bicycle Club v. City of New York, No. 07 Civ. 2448 (LAK), 2008 WL 4302696, at *1 (S.D.N.Y. Sept. 16, 2008) (The more important the presumptively privileged information is to the proper resolution of the controversy, the more likely the party seeking the discovery is to prevail on the point.). In response to the Banks court-approved discovery requests, Defendants conceded that the Acting Director relied upon or considered the withheld materials in reaching his decision to seize the Bank. See ECF No. 60-2 at 6-8, 14-16. That acknowledgment is unsurprising. In his role as director of the FDIC Board and in his role as head of the OTS, the Acting Director relied upon all of the information that the FDIC now seeks to withhold, including information contained in the memorandum detailing the FDICs view on the resolution of the United Western. One would expect him to place heavy reliance on the condensed conclusions and analyses of a sister regulatory agency. In short, the November 9, 2010 FDIC Board decision to authorize the FDIC to act as receiver for the Banka decision made months before the alleged grounds for seizure arguably even existedis inextricably linked with Defendants decision to seize the Bank and decidedly relevant to the present case. Furthermore, many of the materials can be expected to speak directly to the grounds upon which the Acting Director ostensibly relied, such as the Banks purported lack of sufficient liquidity. See, e.g., In re Franklin Natl Bank, 478 F. Supp. at 587 (finding, in case challenging the OCCs regulation and management of a bank, that certain documents were crucial because they spoke to the knowledge of OCC officials of the financial condition of the bank.). Such materials are not only relevant, but must be included in the administrative record. Amfac Resorts, LLC v. U.S. Dept of the Interior, 143 F. Supp. 2d 7, 12 (D.D.C. 2001) ([A] complete administrative record should include all materials that might have influenced the agencys

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decision, and not merely those on which the agency relied in its final decision.). Without them, no fair decision can be reached. See Walter O. Boswell Meml Hosp., 749 F.2d at 792. Second, these materials are not available from any other source. Neither Defendants nor the FDIC have suggested otherwise. Without production from Defendants (or the FDIC directly), the Bank would be forced to argue this case, and the Court would be forced to decide it, on an incomplete administrative record. Third, the seriousness of this litigation cannot reasonably be disputed. Defendants without any basis in the lawseized a viable bank. This government expropriation erased hundreds of millions of dollars in private equity interests while saddling the FDIC with a similarly large loss. This litigation is the only means to review that otherwise ex parte act. It comports with the clear Congressional intent to allow such review. James Madison Ltd. by Hecht v. Ludwig, 82 F.3d 1085, 1094 (D.C. Cir. 1996) (Congress sought to protect the rights of financial institutions by allowing them to appeal their seizures ). Regulators have seized over 400 banks since 2008. A careful review of Defendants decision signals to the relevant agencies that any future seizure must be careful, deliberate, well-substantiated, and within the bounds of the law. Consequently, decisions in this case may have broad implications for other litigation as well as executive and legislative branch policy repercussions. Dairyland Power Coop. v. United States, 77 Fed. Cl. 330, 342 (2007); accord Chisler v. Johnson, 796 F. Supp. 2d 632, 641 (W.D. Pa. 2011) (suggesting disclosure might be appropriate because allegations, if proven true, could have serious repercussions within the [state] government). Fourth, the government plays a central role in this case. Not only is the government itself a party, but its actions are directly at issue. In fact, it might be said that the government initiated this action by seizing the Bank in the first place. Cf. In re Apco Liquidating Trust, 420 B.R. 648,

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654 (Bankr. M.D. La. 2009) (The government initiated this dispute by filing a proof of claimessentially a demand for payment.). The FDIC, despite its denials to the contrary, played a vital role in the ultimate decision to seize the Bank, making key determinations and providing information considered or relied upon by the Acting Director in making the seizure decision. Thus, disclosure is appropriate because [d]iscovery is favored where the government is involved in the litigation in light of the obligation that every party has to be forthcoming with relevant information. Forstmann Leff Assocs., Inc. v. Am. Brands, Inc., No. 88 Civ. 4485 (JMC), 1991 WL 168002, at *4 (S.D.N.Y. Aug. 16, 1991). Fifth, future timidity on the part of government employees seems highly unlikely. Bank regulatory agencies already understand that their actions are subject to challenge. They can appreciate that their statements may eventually become part of an administrative record (and the regulated entities themselves understand the same). See, e.g., In re Subpoena Duces Tecum Served Upon the Office of the Comptroller of the Currency, 151 F.R.D. 1, 3 (D.D.C. 1992) ([I)t is unlikely as a general matter that government employees will be significantly inhibited in their duties by the possibility of limited disclosure at a later date in circumstances analogous to those present here.). Agency officials, out of a desire to fulfill their professional obligations, will retain a strong incentive to speak candidly about a banks condition. Although disclosure of bank-related materials can sometimes cause collateral consequences, there is no prospect that the release of this limited information will cause such damage here. In re Subpoena, 151 F.R.D. at 3; In re Franklin Natl Bank, 478 F. Supp. at 586 (noting that the breach of privilege as to bank examination documents could not endanger a bank that had already closed). In sum, any concerns about chilling are largely absent here.

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To the extent the FDIC still has concerns about the chilling of agency communications, such concerns can be alleviated with a protective order that reconciles the agencies interest in confidentiality with the plaintiffs potential need to introduce some or all of the [requested] documents (or information therefrom) into evidence at a public trial. Schreiber, 11 F.3d at 304. The Bank does not oppose the imposition of a reasonable protective order and, pursuant to the Courts February 15, 2012 Order, is working with the FDIC in order to propose a consent protective order to the Court. Finally, in addition to the five basic factors, another consideration suggests that any privilege should be overridden in this case. A party with highly privileged information typically guards that privilege zealously. In fact, to preserve privilege, a party must do just that: he must treat his confidential documents like jewelsif not crown jewels. Navajo Nation v. Peabody Holding Co., Inc., 255 F.R.D. 37, 45 (D.D.C. 2009) (quoting In re Sealed Case, 877 F.2d 976, 980 (D.C. Cir. 1989)). The FDICs actions do not in any sense comport with the actions of a party guarding his jewels. As early as September 22, 2011, the FDIC was aware that its documents were potentially subject to disclosure in light of the Banks discovery requests. See ECF No. 60-2 at 24. It did not intervene in this case to preserve the privilege. United Western then moved to compel those same documents, but still the FDIC sat on the sidelines for over five months while the disclosure of these documents was at issue.1 Only after the Court ordered

The FDIC suggests that it did not intervene because it did not wish to make a separate filing that argued the same points as those raised by Defendants. ECF No. 75, at 2. But contrast the FDICs behavior in this case with the agencys behavior in a case where it did have a clear interest in keeping documents confidential, In re Citigroup, Inc. Bond Litig., No. 08 CV 9522 (SHS) (S.D.N.Y. filed Nov. 5, 2008). There, in response to a motion to compel certain documents arguably covered by the bank examination privilege, the FDIC filed a motion to intervene and briefed the issue. See FDICs Memorandum of Law Regarding Bank Examination Privilege, No. 08 CV 9522 (SHS) (S.D.N.Y. Aug. 16, 2011), ECF No. 129. The FDIC took this aggressive approach despite the fact that two other agencies had also briefed the same issues, the 7

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production of these documents did the FDIC take action. Although the FDIC initially claimed all the withheld documents were privileged, it has now abandoned that claim with respect to many of the documents and agreed to release them. II. NEITHER THE DELIBERATIVE PROCESS PRIVILEGE NOR THE BANK EXAMINATION PRIVILEGE APPLIES TO THE MAJORITY OF THESE DOCUMENTS. The FDIC invokes two qualified privileges: the deliberative process privilege and the bank examination privilege. The agency bears the burden of showing the privileges apply. See, e.g., In re Providian Fin. Corp. Sec. Litig., 222 F.R.D. 22, 26 (D.D.C. 2004); United States v. Philip Morris USA Inc., 218 F.R.D. 312, 314 (D.D.C. 2003). Neither applies to the bulk of these materials as they appear to be factual. A. The Deliberative Process and Bank Examination Privileges Do Not Apply to Factual Documents.

The deliberative process privilege protects agency documents that are both predecisional and deliberative. Pub. Citizen, Inc v. Office of Mgmt. & Budget, 598 F.3d 865, 874 (D.C. Cir. 2010). A document is predecisional if it was generated before the adoption of an agency policy and deliberative if it reflects the give-and-take of the consultative process. Id. Put differently, the relevant document must be a direct part of the deliberative process in that it makes recommendations or expresses opinions on legal or policy matters. Vaughn v. Rosen, 523 F.2d 1136, 1144 (D.C. Cir. 1975). Consequently, the privilege will not apply to a purely factual document unless the facts cannot be separated from the deliberative elements. In re Sealed Case, 121 F.3d 729, 737 (D.C. Cir. 1997). Even if a given document does offer a

case involve[d] documents of interest to the other two banking regulatory agencies, [and] the agencies all agree[d] on the application of the privilege. Id. at 1. The agencys assertive approach in Citigroup undermines any suggestion in this case that the FDIC takes a generally passive approach to protected genuinely privileged documents.

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window into the give-and-take, the segregable factual elements must still be disclosed. Army Times Publg Co. v. Dept of Air Force, 998 F.2d 1067, 1071-72 (D.C. Cir. 1993). The bank examination privilege is a close cousin of the deliberative process privilege. In re Subpoena Duces Tecum Served on the Office of the Comptroller of the Currency, 145 F.3d 1422, 1423 (D.C. Cir. 1998). This privilege protects from disclosure agency opinions and recommendations and banks responses thereto. In re Bankers Trust Co., 61 F.3d 465, 471 (6th Cir. 1995) (citing Schreiber v. Socy for Sav. Bancorp, 11 F.3d 217, 220 (D.C. Cir. 1993)). But just as with the deliberative process privilege, the bank examination privilege does not apply to purely factual material. In re Subpoena Served Upon the Comptroller of the Currency & the Secy of the Bd. of Governors of the Fed. Reserve Sys., 967 F.2d 630, 634 (D.C. Cir. 1992). Also, like the deliberative process privilege, an agency generally must produce the factual portions of documents, even if those same documents contain some deliberative material. Schreiber, 11 F.3d at 220. B. The FDIC Has Not Addressed the Redactions of the OTS Regulatory Profiles and Has Not Provided these Materials to the Court for In Camera Review.

As the Bank initially argued in its Second Renewed Motion to Compel, the redactions of the OTSs Regulatory Profiles of the Bank would not appear to protect privileged information. See ECF No. 64-1, at 46-119. The FDIC does not discuss, much less explain, these redactions in any of its numerous submissions to the Court on the privilege issue. See generally, e.g. ECF Nos. 75, 76 and 77. Nor does it appear that the FDIC has provided unredacted versions of these documents for in camera review. Notably, Defendants also omitted the redacted information from their privilege log. See ECF No. 60-2 at 56-57. Because the agency bears the burden of showing that either of the relevant privileges applies, the FDIC has effectively conceded that no privilege applies. Therefore, Defendants should be ordered to immediately produce unredacted

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versions of the Regulatory Profiles to the Bank. Even if the FDIC had attempted to meet its burden, it would have failed. There is every indication that FDIC-mandated redactions on the Regulatory Profiles are factual, as the documents themselves are almost exclusively factual in nature. Additionally, it is hard to understand how the FDIC can make any assertion of privilege over these documents, as they were created and maintained by Defendants. Defendants, the rightful holders of any privilege, do not assert that the documents are privileged. C. The FDIC Has Not Established that the Information It Seeks to Redact Is Privileged.

There is no dispute that all factual portions of the materials must be produced. The FDIC proposes producing redacted versions of three documents: an agenda for a November 9, 2010 FDIC Board meeting, the Case Memorandum, and a November 5, 2010 email circulated among FDIC Board members. The Bank does not object to redactions of information relating to other institutions, however, the Bank does not believe that the FDIC has established that other redactions are warranted because the FDIC has not met its burden of demonstrating the materials are privileged. 1. The November 9, 2010 Meeting Agenda

Simple board meeting agendas are descriptive rather than deliberative. See, e.g., MacNamara v. City of New York, No. 04 Civ. 9216(KMK)(JCF), 2007 WL 1169204, at *3 (S.D.N.Y. Apr. 20, 2007) (holding that agendas were not entitled to deliberative process privilege). The contents of an agenda, for example a list of attendees or even summaries of issues to be discussed, do not reflect deliberations or discussions and are not privileged. See id.; Tummino v. Von Eschenbach, CV 05-366 (ERK)(VVP), 2006 U.S. Dist. LEXIS 81286, at *3031 (E.D.N.Y. Nov. 6, 2006) (holding agendas neither predecisional nor deliberative and,

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therefore, not privileged). 2. The Case Memorandum

The FDIC declaration demonstrates that much of the information in the Case Memorandum is factual and therefore must be produced. Defendants concede that they have identified segregable factual information in the withheld materials, but argue that some factual information is privileged because such information was derived from confidential examination, operating, and condition reports. See Letter from D. Stevens, counsel for FDIC, to the Honorable Amy Berman Jackson, U.S. District Court Judge (Feb. 15, 2012). The source of the factual information makes no difference because all factual information must be produced. See, e.g., In re Franklin Natl Bank Sec. Litig., 478 F. Supp. 577, 585 (E.D.N.Y. 1979), cited with approval in In re Subpoena, 967 F.2d at 635 (finding that an examiners conclusions about a banks liquidity position were factual and needed to be disclosed); cf. Schreiber, 11 F.3d at 221; accord Principe v. Crossland Sav., FSB, 149 F.R.D. 444, 450 (E.D.N.Y. 1993) ([A]n overwhelming majority of courts that have considered the disclosure of reports of bank examiners have ruled in favor of their production, and the FDIC has failed to cite any cases to the contrary.). 3. The November 5, 2010 Email

Neither the FDIC nor Defendants have provided sufficient descriptive information regarding the November 5, 2010 email for Plaintiff to have a basis to opine on whether the document is privileged. The only specific information provided to the Bank indicates that it was the transmittal email for the Case Memorandum sent to the Acting Director and others. Nevertheless, for the reasons set forth above, even if the Court determines that limited portions of these documents are privileged, the balancing test favors full disclosure of all documents even

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if a privilege applies. III. Conclusion This Court should reject the FDICs attempt to relitigate this already decided issue. The Court should order Defendants to comply with the February 9, 2012 Order and permit this case to proceed.

Respectfully submitted,

/s/ Andrew L. Sandler . Andrew L. Sandler (DC Bar No. 387825) Samuel J. Buffone (DC Bar No. 161828) Liana R. Prieto (DC Bar No. 987287) BUCKLEYSANDLER LLP 1250 24th St., NW, Suite 700 Washington, DC 20037 (202) 349-8001 (Telephone) (202) 349-8080 (Facsimile) Attorneys for Plaintiff United Western Bank

/s/ Kirby D. Behre . Kirby D. Behre (DC Bar No. 398461) Lawrence D. Kaplan (DC Bar No. 415186) PAUL HASTINGS LLP 875 15th Street NW Washington, DC 20005 (202) 551-1719 (Telephone) (202) 551-0119 (Facsimile) Attorneys for Plaintiff United Western Bank

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/s/ Theodore J. Abariotes . Theodore J. Abariotes Deputy General Counsel United Western Bancorp, Inc. 700 17th Street, Suite 2100 Denver, Colorado 80202 (720) 932-4216 (Telephone) (720) 946-1218 (Facsimile) Attorneys for Plaintiff United Western Bank Dated: February 16, 2011

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CERTIFICATE OF SERVICE I hereby certify that on this 16th day of February, 2012, a true copy of the foregoing was filed electronically. Notice of this filing will be sent by email to all parties by operation of the Courts electronic filing system. Parties may also access this filing through the Courts electronic filing system.

. /s/ Liana Prieto Liana R. Prieto

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