FAIRHOLME FUNDS, INC. et al v. USA

Filing 315

Docketed For Administrative Purposes REPORTED ORDER granting Motion to De-Designate Seven Documents. Signed by Judge Margaret M. Sweeney. (jt1) Copy to parties.

In the United States Court of Federal Claims
No. 13-465C
(Filed Under Seal: April 11, 2016)
(Reissued for Publication: April 13, 2016)1
*************************************
FAIRHOLME FUNDS, INC. et al.,
*
*
Plaintiffs,
*
*
v.
*
*
THE UNITED STATES,
*
*
Defendant.
*
*************************************

Motion for De-Designation; Protective
Order; Protected Information

Charles J. Cooper, Washington, DC, for plaintiffs.
Kenneth M. Dintzer, United States Department of Justice, Washington, DC, for defendant.
ORDER GRANTING MOTION TO DE-DESIGNATE SEVEN DOCUMENTS
SWEENEY, Judge
Before the court is the March 31, 2016 joint motion filed by Perry Capital LLC,
Arrowood Indemnity Co., Joseph Cacciapalle et al., and plaintiffs in the above-captioned case
(“Perry Capital appellants”) to “Remove the ‘Protected Information’ Designations From
Documents Filed in the D.C. Circuit Cited in the Merits Briefing, and, in the Alternative, Joint
Motion to Modify the Protective Order to Permit Reference to these Materials at Oral Argument”
(“Perry Capital appellants’ joint motion to de-designate”). On April 8, 2016, the government
filed Defendant’s Opposition to Motion to Remove the “Protected Information” Designations
From Documents Filed in the D.C. Circuit and, in the Alternative, to Modify the Protective
Order, and Opposition to Motion for Leave to File Amicus Brief of Professor John Yoo” (“Def.’s
Opp.”).2 Later that same day, Perry Capital appellants filed their reply in support of their joint
motion. For the reasons explained below, Perry Capital appellants’ motion to de-designate seven
documents is granted.

1

The court provided the parties with an opportunity to suggest redactions to this ruling,
but in an April 13, 2016 joint status report, they indicated that no redactions were necessary.
2

By separate order filed contemporaneously with this decision, the court denies
Professor Yoo’s request to file his proposed amicus brief.

By way of background, on July 29, 2015, Fairholme Funds, Inc. (“Fairholme”), with this
court’s permission, filed protected information under seal in the above-captioned case with the
United States Court of Appeals for the District of Columbia (“D.C. Circuit”) as part of a motion
requesting that the D.C. Circuit take judicial notice of the protected information filed in Perry
Capital v. Lew, No. 14-5243 (“Perry Capital”). Subsequently, on August 6, 2015, the D.C.
Circuit entered an order suspending merits briefing in that appeal. Perry Capital, No. 14-5243,
Aug. 6, 2015. Thereafter, on November 3, 2015, the D.C. Circuit motions panel referred
Fairholme’s motion for judicial notice to the merits panel for resolution. In that order, the court
permitted “[t]he parties [to] refer to the lodged supplement to the appellate record in their
remaining briefs.” Perry Capital, No. 14-5243. Ultimately, the merits briefing schedule was
entered by the D.C. Circuit on November 5, 2015. Because the parties in Perry Capital could
now reference certain sealed documents from this case in their merits briefing before the D.C.
Circuit, this court entered an order on November 9, 2015 granting Perry Capital’s motion to be
admitted to the protective order and access protected information.
The D.C. Circuit scheduled oral argument in Perry Capital for April 15, 2016. Perry
Capital, No. 14-5243. Accordingly, Perry Capital appellants have now filed the instant motion,
requesting the court to grant the “joint renewed motions and enter an order removing the
‘Protected Information’ designation from the information filed in the D.C. Circuit with
Fairholme’s Motion for Judicial Notice that are cited in Appellants’ Reply Brief. In the
alternative,” Perry Capital appellants argue, “this Court should modify the protective order to
permit counsel at oral argument in Perry Capital to reference those documents.” Perry Capital
Appellants’ Joint Motion to De-designate 8 (italics in original).
Specifically, Perry Capital appellants jointly renew six of Fairholme’s prior motions,
seeking to remove protected information designations from a total of seven documents produced
or generated in this case. Those six motions are: (1) Plaintiffs’ Sealed Motion to Remove the
“Protected Information” Designation from the Depositions of Edward DeMarco and Mario
Ugoletti; (2) Plaintiffs’ Sealed Motion to Remove the “Protected Information” Designation from
Certain Grant Thornton Documents; (3) Plaintiffs’ Sealed Motion to Remove the “Protected
Information” Designation from Certain Treasury and FHFA Documents; (4) Plaintiffs’ Sealed
Motion to Remove the “Protected Information” Designation from Certain Unredacted
Information in Documents Produced by Deloitte; (5) Plaintiffs’ Sealed Motion to Remove the
“Protected Information” Designation from Certain Unredacted Information in Documents
Produced by Fannie Mae; and (6) Plaintiffs’ Sealed Motion to Remove the “Protected
Information” Designation from Certain Unredacted Information in Documents Produced by
Freddie Mac. Perry Capital appellants have attached the seven documents to the instant motion,
and again, renew plaintiffs’ prior motions to de-designate other documents.
Defendant opposes Perry Capital appellants’ request, arguing that it is premature because:
(1) the seven documents at issue are not part of the judicial record, Def.’s Opp. 2-3;
(2) Perry Capital appellants are not prejudiced by the designations of the protected information,
id. at 3-4; 3) the public does not have a right of access to the documents, id. at 4; (4) Perry
Capital appellants failed to demonstrate that the documents are improperly designated as
protected, id. at 4-6; and (5) that Perry Capital appellants’ alternative, i.e., that the court modify

2

the protective order to allow them to discuss the protected information in open court without
violating the terms of the protective order, would undermine the protective order, id. at 6-7.
After careful consideration of the parties’ competing arguments, the court finds that Perry
Capital appellants’ request is reasonable and that defendant’s opposition is not well-founded. As
a preliminary matter, the court finds that, in light of the oral argument in Perry Capital that is set
for April 15, 2016 before the D.C. Circuit, Perry Capital appellants’ request is ripe for decision.
Moreover, in its re-examination of the documents attached to Perry Capital appellants’ motion,
the court notes that the contents of these documents refer to, among other things, events—
including decisions and forecasts—that occurred more than three years ago. For that reason, the
court finds that sufficient time has passed to alleviate its initial concerns that disclosure of certain
information to the public had the potential to adversely influence United States financial markets.
With the passage of time, the court’s initial concern regarding a negative impact on the Nation’s
financial markets or financial institutions has dissipated.
At issue here are excerpts from three deposition transcripts, as well as excerpts from four
documents that are more than three years old. As a result, the government’s continued reliance
on the May 29, 2014 declaration of Federal Housing Finance Agency (“FHFA”) Director Melvin
L. Watt no longer retains the same potency that it did when originally supplied to the court in
support of the entry of a protective order. Nevertheless, the government reiterates its original
arguments when it asserts that “the futures of Fannie Mae and Freddie Mac are still uncertain and
subject of vigorous debate,” Def.’s Opp. 5, once again relying on the Declarations of Melvin L.
Watt and Michael A. Stegman, the Director of the FHFA and Former Counselor to the Treasury
Secretary for Housing Finance Policy at the United States Department of the Treasury,
respectively. While the court recognizes that protection of the Nation’s financial markets and
fledgling financial institutions were legitimate goals when the court first entered its order, with
the passage of time, the potential for harm to the Nation’s markets and then-fledgling financial
institutions no longer exists. Instead of harm to the Nation resulting from disclosure, the only
“harm” presented is the potential for criticism of an agency, institution, and the decision-makers
of those entities. The court will not condone the misuse of a protective order as a shield to
insulate public officials from criticism in the way they execute their public duties. Thus,
avoidance of “second-guessing” an agency’s decisions several years after the fact, as described
by Mr. Watt, is, with the passage of time no longer a legitimate basis to maintain documents
under a protective order. The court notes that from the inception of this litigation, the
government has consistently maintained that the court lacks jurisdiction over this case because
the United States had no control over the enterprises. Taking the government at its word, it is
surprising that defendant is concerned with the unsealing of government officials’ deposition
testimony.
Moreover, there can be no serious dispute that it is extremely rare for a document filed
under seal in a civil case to remain so for all time. There is no suggestion that the documents
subject to the protective order are classified as relating to national security. Nor do these
documents contain trade secrets or proprietary information. However, even cases in which trade
secrets and proprietary information are filed under seal and subject to a protective order, it is not
unusual that after the passage of time, that same information is eventually unsealed because the
protective order has outlived its usefulness. Indeed, because the government does not argue that
3

information that it requests remain protected concerns matters involving national security, trade
secrets, or proprietary information, or that specific privileges attach to any of the seven
documents, it is clear that there is no longer a need to maintain the protected designation for
them.
Ultimately, there is nothing contained in these documents that gives the court pause
regarding de-designation. Although defendant seeks to preserve the status quo and maintain the
protected status of all of the documents at issue, proposing that discussion of protected material
could be conducted in a closed session at the end of the oral argument, the information contained
within the seven documents no longer needs to be subject to the protective order. Further, as
Perry Capital appellants assert, preventing them from discussing the documents during other
parts of the oral argument would potentially undermine their ability to fully prosecute their case,
as these documents may be relevant to all aspects of their appeal. Consequently, this court does
not deem it necessary to constrain that proceeding in the manner that defendant suggests.
Accordingly, Perry Capital appellants’ motion to de-designate the seven documents
attached thereto is GRANTED. However, plaintiffs’ renewed motions to de-designate other
documents not contained in those seven attachments are DENIED WITHOUT PREJUDICE.
As the court indicated previously, it will address those requests after briefing regarding the
renewed motion to dismiss has been completed. The court has filed this order under seal. The
parties shall confer to determine proposed redactions that are agreeable to all parties. Then, by
no later than Monday, April 18, 2016, the parties shall file a joint status report indicating their
agreement with the proposed redactions and attaching a complete copy of the court’s order
with all redactions clearly indicated.
NO COSTS.
IT IS SO ORDERED.

s/ Margaret M. Sweeney
MARGARET M. SWEENEY
Judge

4