Wultz et al v. Bank of China Limited

Filing 244

OPINION AND ORDER: #103100 For the foregoing reasons, plaintiffs' motion to compel is granted with respect to BOC and denied without prejudice with respect to the OCC. (Signed by Judge Shira A. Scheindlin on 4/9/2013) (rdz) Modified on 4/12/2013 (jab).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

-------------------------------------------------------- )(
SHERYL WULTZ, individually, as personal
representative of the Estate of Daniel Wultz,
and as the natural guardian of plaintiff
Abraham Leonard WuItz; YEKUTIEL
WULTZ, individually, as personal
representative of the Estate of Daniel Wultz,
and as the natural guardian of plaintiff
Abraham Leonard Wultz; AMANDA
WULTZ; and ABRAHAM LEONARD
WULTZ, minor, by his next friends and
guardians Sheryl WuItz and Yekutiel Wultz,

OPINION & ORDER
11 Civ. 1266 (SAS)

Plaintiffs,
- againstBANK OF CHINA LIMITED,
Defendant.

-------------------------------------------------------­

)(

SHIRA A. SCHEINDLIN, U.S.D.J.:
I.

INTRODUCTION
This suit arises out of the death of Daniel Wultz and the injuries of

Yekutiel Wultz, suffered in a 2006 suicide bombing in Tel Aviv, Israel. Four
members of the Wultz family brought suit against Bank of China ("BOC"),
alleging acts of international terrorism and aiding and abetting international

1

terrorism under the Antiterrorism Act (“ATA”), among other claims.1 The general
facts and procedural history of the case were laid out in previous opinions, and
familiarity with them is assumed.2 Plaintiffs’ attempts to obtain discovery from
and related to BOC have a long, complex, and contested history that I will discuss
below as necessary.3
Before the Court is plaintiffs’ motion to compel defendant BOC and
non-party the Office of the Comptroller of the Currency (“the OCC”) to produce
various investigative files and U.S. regulatory communications.4 For the reasons
stated below, I grant plaintiffs’ motion to compel with regard to BOC, and deny

1

See 18 U.S.C. § 2333.

2

See, e.g., Wultz v. Bank of China Ltd., — F. Supp. 2d —, No. 11 Civ.
1266, 2012 WL 5378961, at *1 & n.3 (S.D.N.Y. Oct. 29, 2012) (collecting earlier
opinions). See also Wultz v. Islamic Republic of Iran, 864 F. Supp. 2d 24 (D.D.C.
2012) (granting default judgment to plaintiffs).
3

See generally 2/1/13 Memorandum of Law in Support of Plaintiffs’
Motion to Compel Production of Investigative Files and U.S. Regulatory
Communications (“Pl. Mem.”) at 2–7; 2/15/13 Memorandum of Law on Behalf of
Bank of China, Ltd. in Opposition to Plaintiffs’ Motion to Compel Discovery
(“BOC Opp.”) at 3–6; 2/19/13 Non-Party Office of the Comptroller of the
Currency’s Response in Opposition to Plaintiffs’ Motion to Compel Production of
Investigative Files and U.S. Regulatory Communications (“OCC Opp.”) at 2–11;
Pl. Mem. at 1–2.
4

Plaintiffs have also filed a motion to compel BOC to produce various
communications with the Chinese government and BOC-internal Chinese
documents. The motion is now fully briefed and I will address it in a subsequent
opinion.
2

plaintiffs’ motion without prejudice with regard to the OCC.
II.

APPLICABLE LAW
A.

Motion to Compel
As noted above, plaintiffs seek an order compelling the production of

documents from two sources: defendant BOC and non-party the OCC. The two
requests are governed by different legal standards. I address each in turn,
summarizing the procedural history of this case where necessary.
1.

Materials from the OCC

The Second Circuit has held that “motions to compel agency
compliance with discovery requests” are governed by “the administrative
exhaustion requirement of [Administrative Procedure Act (“APA”)] § 704.”5 This
is so because
[a]bsent a waiver of sovereign immunity, a federal agency, as
representative of the sovereign, cannot be “compel[led] . . . to
act.” But the federal government, in enacting the APA, waived its
immunity with respect to those “action[s] in a court of the United
States” which seek review of “agency action.” . . . [W]e [have]
held that a motion to compel agency compliance with a [discovery
request] qualified as an “action” seeking review of “agency
action” for purposes of APA § 702, and, therefore, that a federal
court’s consideration of such a motion did not violate sovereign

5

In re S.E.C. ex rel. Glotzer, 374 F.3d 184, 190 (2d Cir. 2004).
3

immunity.6
Because the federal government’s waiver of sovereign immunity occurred through
the enactment of the APA, “a party seeking judicial review of an agency’s
non-compliance with a [discovery request] must first exhaust his or her
administrative remedies pursuant to APA § 704. Judicial review under APA § 702
is expressly conditioned, under APA § 704, on the existence of a ‘final’ agency
action.”7
Here, plaintiffs served the OCC with a subpoena duces tecum on April
4, 2011, requesting a broad range of documents related to the OCC’s enforcement
actions against BOC, and placing no time limit on the documents requested:
regardless of when the documents were created, plaintiffs’ subpoena requested
them. The OCC objected to the subpoena, and instructed plaintiffs to submit an
administrative request for documents.8
Like other federal banking regulators, the OCC has developed

6

Id. at 190 (quoting United States EPA v. General Elec. Co. (“EPA v.
GE I”), 197 F.3d 592, 597–99 (2d Cir. 1999), opinion amended on reh’g, 212 F.3d
689 (2d Cir. 2000)) (citations and footnotes omitted).
7

Id. at 192.

8

See OCC Opp. at 5–6; Pl. Mem. at 5–6.
4

administrative regulations governing the release of non-public information.9 Such
regulations, promulgated pursuant to the so-called “Housekeeping Statute,” 5
U.S.C. § 301, are known as “Touhy” regulations, after the Supreme Court decision
upholding the validity of such regulations in United States ex rel. Touhy v. Ragen.10
The OCC’s Touhy regulations appear at 12 C.F.R. §§ 4.31 et seq.
The parties’ submissions do not clearly distinguish between the
governing law in the Second Circuit and elsewhere. But other courts, such as the
District of Columbia Circuit, the Ninth Circuit, and the Sixth Circuit, have
approached conflicts between Touhy regulations and the Federal Rules of Civil
Procedure very differently than the Second Circuit.11 For example, the D.C.
Circuit offered the following analysis of some of the issues addressed by the
Second Circuit in Glotzer:
When a litigant seeks to obtain documents from a non-party
federal governmental agency, the procedure varies depending on
whether the underlying litigation is in federal or in state court. In

9

See generally OCC Opp. at 3–4.

10

340 U.S. 462 (1951). Accord EPA v. GE I, 197 F.3d at 595.

11

See, e.g., Linder v. Calero-Portocarrero, 251 F.3d 178, 181 (D.C. Cir.
2001) (reviewing conflicts between the Circuits and reiterating that in the D.C.
Circuit, sovereign immunity does not insulate the federal government from
complying with a third-party subpoena, “because in federal court the government
has waived its sovereign immunity for actions ‘seeking relief other than money
damages’ in 5 U.S.C. § 702”).
5

state court the federal government is shielded by sovereign
immunity, which prevents the state court from enforcing a
subpoena. . . . Thus, a state-court litigant must request the
documents from the federal agency pursuant to the agency’s
regulations . . . .
A federal-court litigant, on the other hand, can seek to
obtain the production of documents from a federal agency by
means of a federal subpoena. In federal court, the federal
government has waived its sovereign immunity, see 5 U.S.C.
§ 702, and neither the Federal Housekeeping Statute nor the
Touhy decision authorizes a federal agency to withhold documents
from a federal court. To the extent that the Comptroller’s
regulation . . . may be to the contrary, it conflicts with Federal
Rule of Civil Procedure 45 and exceeds the Comptroller’s
authority under the Housekeeping Statute.12
Setting aside the details of the doctrinal disputes that underlie the various Circuits’
positions, the practical effect of the disagreement is that the Second, Fourth and
Tenth Circuits as a general rule give primacy to agencies’ Touhy regulations over

12

Houston Bus. Journal, Inc. v. Office of Comptroller of Currency, U.S.
Dep’t of Treasury, 86 F.3d 1208, 1212 (D.C. Cir. 1996) (citations omitted).
Accord In re Bankers Trust Co., 61 F.3d 465, 469–71 (6th Cir. 1995) (noting that
general statutory authorities relied on by bank regulating agency, including 5
U.S.C. § 301, “simply do not give [the agency] the power to promulgate
regulations in direct contravention of the Federal Rules of Civil Procedure,” and
concluding “we find no compelling reason to discard the relatively straightforward
discovery methods outlined in the Federal Rules of Civil Procedure simply because
[the agency] has attempted to mandate a different procedure”); Exxon Shipping Co.
v. United States Dep’t of Interior, 34 F.3d 774, 777–78 (9th Cir. 1994) (noting that
Congress amended 5 U.S.C. § 301 in 1958 out of concern that it was being
“twisted from its original purpose as a ‘housekeeping’ statute into a claim of
authority to keep information from the public.” Congress added to the statute:
“This section does not authorize withholding information from the public or
limiting the availability of records to the public.”).
6

the Federal Rules of Civil Procedure when the two conflict, requiring litigants to
exhaust their administrative remedies before moving to compel production from a
governmental agency, while the D.C., Ninth, and Sixth Circuits generally give
primacy to the Federal Rules over conflicting Touhy regulations.13
Here, plaintiffs partially circumvented the conflict by submitting, on
September 7, 2012, an administrative request to the OCC for the production of
documents pursuant to 12 C.F.R. § 4.33 (the “Touhy request”).14 The Touhy
request was limited to documents in the OCC’s control between July 1, 2003 and
December 31, 2006, but was otherwise broader than the earlier subpoena duces
tecum. Like the subpoena, plaintiffs’ Touhy request sought documents associated
with any OCC examination of BOC. But plaintiffs’ Touhy request also sought
documents concerning the Shurafa accounts, Shurafa, or Shurafa affiliates; and
documents concerning BOC’s provision of banking services to the Palestinian
13

For the position of the Tenth Circuit, see, for example, In re Gray, 162
F.3d 1172 (table), 1998 WL 712663, at *1 (10th Cir. 1998) (unpublished)
(quashing state court order to enforce subpoena against subordinate federal agent,
where agent did not have authorization from superior to comply with subpoena,
and noting that requestor’s remedies included “an action in federal court pursuant
to the Administrative Procedure Act”); Quezada v. Mink, No. 10 Civ. 00879, 2010
WL 4537086, at *3–5 (D. Colo. Nov. 3, 2010) (collecting cases, and concluding
“this Circuit has interpreted Touhy to allow federal officials to limit subordinates’
authority to produce documents or provide testimony pursuant to duly-enacted
regulations”).
14

See OCC Opp. at 6–7; Pl. Mem. at 5–6.
7

Islamic Jihad, Hamas, Iran, or Syria.15 On October 29, 2012, the OCC issued a
final agency decision in response to plaintiffs’ Touhy request, largely denying
plaintiffs’ requests, and only producing two letters from the OCC to BOC in
2006.16
As the OCC correctly argues, plaintiffs have failed to exhaust their
administrative remedies with respect to any documents not described in their
Touhy request.17 There has been no “‘final’ agency action”18 with respect to such
documents. Consequently, under the Second Circuit’s rulings in Glotzer, this
Court lacks the power to review the OCC’s refusal to produce any documents not
mentioned in plaintiffs’ Touhy request. This includes any documents that the OCC
only controlled before July 1, 2003 or after December 31, 2006. Plaintiffs’
inclusion of these documents in their 2011 subpoena duces tecum does not alter
this analysis.19
15

See id.

16

See OCC Opp. at 8–10; Pl. Mem. at 6–7.

17

See OCC Opp. at 14–15.

18

Glotzer, 374 F.3d at 192.

19

Because I conclude that under the reasoning of Glotzer, the federal
government’s sovereign immunity deprives this Court of the power to order the
OCC to produce documents requested in plaintiffs’ 2011 subpoena but not in the
2012 Touhy request, it is unnecessary to reach the issue of whether this Court
would have jurisdiction to enforce the 2011 subpoena, which was issued out of the
8

Under the APA, an agency decision will be upheld “if it is not
‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with
law,’ 5 U.S.C. § 706(2)(A), or ‘unsupported by substantial evidence,’ id.
§ 706(2)(E).”20 Under this deferential standard of review, the court “‘must assess,
among other matters, whether the decision was based on a consideration of the
relevant factors and whether there has been a clear error of judgment.’”21 The
court will set aside the agency’s decision only if the agency
“has relied on factors which Congress had not intended it to
consider, entirely failed to consider an important aspect of the
problem, offered an explanation for its decision that runs counter
to the evidence before the agency, or is so implausible that it
could not be ascribed to a difference in view or the product of
agency expertise.”22
The Second Circuit has expressly declined to decide whether a final
agency decision regarding a discovery request must be reviewed using the
deferential standard under APA § 706 or under the Federal Rules of Civil

U.S. District Court for the District of Columbia. See OCC Opp. at 11.
20

Bechtel v. Administrative Review Bd., U.S. Dep’t of Labor, — F.3d
—, 2013 WL 791334, at *2 (2d Cir. Mar. 5, 2013).
21

Id. (quoting Judulang v. Holder, 132 S. Ct. 476, 484 (2011) (quotation
marks omitted)).
22

Id. (quoting National Ass’n of Home Builders v. Defenders of Wildlife,
551 U.S. 644, 658 (2007) (quotation marks omitted)).
9

Procedure.23 Other courts are divided on the appropriate standard.24
2.

Materials from BOC

“The Supreme Court has acknowledged the ‘fundamental maxim of
discovery that [m]utual knowledge of all the relevant facts gathered by both parties
is essential to proper litigation.’”25 “‘To that end, either party may compel the

23

See Glotzer, 374 F.3d at 191 (citing United States EPA v. General
Elec. Co. (“EPA v. GE II”), 212 F.3d 689, 690 (2d Cir. 2000)). See also SEC v.
Chakrapani, No. 09 Civ. 325, 2010 WL 2605819, at *9 (S.D.N.Y. June 29, 2010)
(“The Second Circuit has not yet articulated the correct standard of review for a
denial of a Touhy request.”); Solomon v. Nassau Cnty., 274 F.R.D. 455, 458
(E.D.N.Y. 2011) (“‘The Second Circuit has not decided which standard of review
applies in determining whether a federal agency has properly refused to comply
with a subpoena: the arbitrary and capricious standard of the APA, . . . or the
standard set forth in Rule 45 of the Federal Rules of Civil Procedure . . . .’”
(quoting Abdou v. Gurrieri, No. 05 Civ. 3946, 2006 WL 2729247, at *4 (E.D.N.Y.
Sept. 25, 2006))).
24

See Glotzer, 374 F.3d at 191–92 (comparing Linder, 251 F.3d at
180–81 (holding that APA § 706 does not apply to motion to compel agency
compliance with subpoena duces tecum); Exxon Shipping, 34 F.3d at 778–79
(same), with COMSAT Corp. v. National Sci. Found., 190 F.3d 269, 277 (4th Cir.
1999) (holding that because a federal court’s power to review an agency’s refusal
to comply stems solely from APA § 702, such power must be exercised in
accordance with the other provisions of the APA, including APA § 706); Edwards
v. United States Dep’t of Justice, 43 F.3d 312, 315 (7th Cir.1994) (reviewing
motion to compel pursuant to standards set forth in APA § 706(2)(A))).
25

S.E.C. v. Rajaratnam, 622 F.3d 159, 180–81 (2d Cir. 2010) (quoting
Société Nationale Industrielle Aérospatiale v. United States Dist. Court for the S.
Dist. of Iowa, 482 U.S. 522, 540 n.25 (1987)) (some quotation marks omitted).
10

other to disgorge whatever facts [it] has in [its] possession.’”26
Plaintiffs’ motion to compel BOC to produce documents is governed
by the Federal Rules of Civil Procedure, and in particular Rule 26(b)(1), which
embodies the principles of full discovery articulated by the Supreme Court. Rule
26(b)(1) states that “[p]arties may obtain discovery regarding any nonprivileged
matter that is relevant to any party’s claim or defense,” and that, “[f]or good cause,
the court may order discovery of any matter relevant to the subject matter involved
in the action.”
B.

Bank Examination Privilege
“Stated broadly, the bank examination privilege is a qualified

privilege that protects communications between banks and their examiners in order
to preserve absolute candor essential to the effective supervision of banks.”27 “It

26

Id. (quoting Hickman v. Taylor, 329 U.S. 495, 507 (1947)).

27

Linde v. Arab Bank, PLC, No. 04 Civ. 2799, 2009 WL 3055282, at *1
(E.D.N.Y. Sept. 21, 2009) (citing In re Bankers Trust Co., 61 F.3d at 471; In re
Subpoena Served upon Comptroller of Currency (“Fleet”), 967 F.2d 630, 634
(D.C. Cir. 1992)). Accord In re Citigroup Bond Litig., No. 08 Civ. 9522, 2011 WL
8210671, at *1 (S.D.N.Y. Dec. 5, 2011) (citing In re Bankers Trust Co., 61 F.3d at
471; Bank of China v. St. Paul Mercury Ins. Co., No. 03 Civ. 9797, 2004 WL
2624673, at *4 (S.D.N.Y. Nov. 18, 2004)). See also McKinley v. Board of
Governors of Fed. Reserve Sys., 647 F.3d 331, 340 (D.C. Cir. 2011), cert. denied,
132 S. Ct. 1026 (2012) (noting that supervised institutions frequently provide bank
examiners with “highly sensitive commercial information . . . that they do not
customarily disclose to the public” (citation and quotation marks omitted)).
11

arises out of the practical need for openness and honesty between bank examiners
and the banks they regulate, and is intended to protect the integrity of the
regulatory process by privileging such communications.”28
“The bank examination privilege belongs solely to . . . banking
regulatory entities, and may not be asserted by third parties on behalf of the
banking agencies.”29 “‘[W]here a claim of the privilege is appropriate, the [banking
agency] must be allowed the opportunity to assert the privilege and the opportunity
to defend its assertion.’”30 “The agency asserting the privilege has the burden of
establishing its applicability to the documents at issue.”31 Some courts have held
that this burden includes “demonstrat[ing] that the materials are deliberative rather
than factual,” and that “the deliberative portions cannot be redacted from the

28

Merchants Bank v. Vescio, 205 B.R. 37, 42 (D. Vt. 1997). The
doctrinal basis for the bank examination privilege has not always been clear. As
the D.C. Circuit noted, the “privilege has been referred to variously as an aspect of
the privilege for ‘official information,’ or ‘intragovernmental opinions,’ or even of
the ‘deliberative process privilege.’” Fleet, 967 F.2d at 633 (quoting Delozier v.
First Nat’l Bank of Gatlinburg, 113 F.R.D. 522, 525 (E.D. Tenn. 1986); Lundy v.
Interfirst, Corp., 105 F.R.D. 499, 502 (D.D.C. 1985); Seafirst Corp. v. Jenkins, 644
F. Supp. 1160, 1163 (W.D. Wash. 1986)).
29

Merchants Bank, 205 B.R. at 42 (citing In re Bankers Trust, 61 F.3d

at 472).
30

Id. (quoting In re Bankers Trust, 61 F.3d at 472).

31

Schreiber v. Society for Sav. Bancorp, Inc., 11 F.3d 217, 220 (D.C.

Cir. 1993).
12

documents.”32 “Purely factual material falls outside the privilege, whereas
opinions and deliberative processes do not.”33
“If the documents fall within the privilege, a court can override the
privilege if the requesting party demonstrates ‘good cause.’”34 “[T]he privilege
may be defeated ‘where necessary to promote the paramount interest of the
Government in having justice done between litigants, . . . or to shed light on

32

In re Providian Fin. Corp. Sec. Litig., 222 F.R.D. 22, 26 (D.D.C.
2004) (citing Schreiber, 11 F.3d at 220).
33

Merchants Bank, 205 B.R. at 42 (citing In re Bankers Trust, 61 F.3d
at 471). Plaintiffs argue that “documents that postdated agency decision-making
cannot be privileged, as they are generated after the agency’s deliberations.” Pl.
Mem. at 11 (citing Seafirst, 644 F. Supp. at 1163 (stating that privileged materials
must be “predecisional”)). According to the iterative model of regulation
described by the D.C. Circuit in Fleet, however, agency deliberations are often
ongoing. See Fleet, 967 F.2d at 633. As a result, a bright-line distinction between
predecisional and postdecisional materials would be inappropriate in the case of
the bank examination privilege. By contrast, such a rule applies under the
deliberative process privilege to agency decisionmaking processes that culminate
in the adoption of a policy. See, e.g., National Day Laborer Org. Network v.
United States Immigration & Customs Enforcement Agency, 811 F. Supp. 2d 713,
742 (S.D.N.Y. 2011), amended on reconsideration (Aug. 8, 2011) (“‘The most
basic requirement of the [deliberative process] privilege is that a document be
antecedent to the adoption of an agency policy.’” (quoting Judicial Watch, Inc. v.
United States Postal Serv., 297 F. Supp. 2d 252, 260 (D.D.C. 2004)) (citations and
some quotation marks omitted)). Accord United W. Bank v. Office of Thrift
Supervision, 853 F. Supp. 2d 12, 15 (D.D.C. 2012), on reconsideration in part
(Apr. 4, 2012).
34

In re Citigroup, 2011 WL 8210671, at *1 (citing In re Bankers Trust,
61 F.3d at 471). Accord Merchants Bank, 205 B.R. at 42.
13

alleged government malfeasance, . . . or in other circumstances when the public’s
interest in effective government would be furthered by disclosure.’”35 In order to
evaluate claims of “good cause,” courts “balance the competing interests of the
party seeking the documents and those of the government,”36 taking into account
factors such as the following:
1) the relevance of the evidence sought to be protected;
2) the availability of other evidence;
3) the “seriousness” of the litigation and the issues involved;
4) the role of the government in the litigation; and
5) the possibility of future timidity by government employees
who will be forced to recognize that their secrets are violable.37
“The performance of this balancing of interests may require examination of
disputed documents in camera.”38 “Redaction and a protective order may be
appropriate to ensure that sensitive information, particularly with regard to third
parties, is not unnecessarily disclosed.”39
C.

Attorney-Client Privilege

35

Merchants Bank, 205 B.R. at 42 (quoting Fleet, 967 F.2d at 634)
(some quotation marks omitted).
36

In re Bankers Trust, 61 F.3d at 472 (quotation marks omitted).

37

Fleet, 967 F.2d at 634 (quoting In re Franklin Nat’l Bank Sec. Litig.,
478 F. Supp. 577, 583 (E.D.N.Y. 1979) (Weinstein, J.) (omitting citations
collecting cases)) (formatting altered).
38

Merchants Bank, 205 B.R. at 42 (citing Fleet, 967 F.2d at 634).

39

Id.
14

“Attorney-client privilege ‘is one of the oldest recognized privileges
for confidential communications.’”40 The privilege is designed to “encourage full
and frank communication between attorneys and their clients.’”41 It “‘protects
communications (1) between a client and his or her attorney (2) that are intended to
be, and in fact were, kept confidential (3) for the purpose of obtaining or providing
legal assistance.’”42 “It is well settled that ‘[t]he burden of establishing the
existence of an attorney-client privilege, in all of its elements, rests with the party
asserting it.’”43
D.

Work-Product Privilege
“The work-product privilege is . . . more broad than the attorney-client

privilege.”44 It “exists to protect ‘attorneys’ mental impressions, opinions or legal

40

Catton v. Defense Tech. Sys., Inc., No. 05 Civ. 6954, 2007 WL
3406928, at *2 (S.D.N.Y. Nov. 15, 2007) (quoting Swidler Berlin v. United States,
524 U.S. 399, 403 (1998)).
41

Id. (quoting Upjohn Co. v. United States, 449 U.S. 383, 389 (1981)).

42

Brennan Ctr. for Justice at N.Y. Univ. Sch. of Law v. United States
Dep’t of Justice, 697 F.3d 184, 207 (2d Cir. 2012) (citing United States v. Mejia,
655 F.3d 126, 132 (2d Cir. 2011)).
43

In re Grand Jury Proceedings, 219 F.3d 175, 182 (2d Cir. 2000)
(quoting United States v. International Bhd. of Teamsters, 119 F.3d 210, 214 (2d
Cir. 1997)) (some quotation marks omitted).
44

Strougo v. BEA Assocs., 199 F.R.D. 515, 520 (S.D.N.Y. 2001) (citing
In re Grand Jury Proceedings, 219 F.3d at 190).
15

theories concerning specific litigation’ from discovery.”45 “Notwithstanding the
importance of the doctrine, work product immunity is a ‘qualified privilege’ as
opposed to the ‘absolute privilege’ granted to attorney-client communications.”46
The principles of the work-product privilege are codified at Federal Rule of Civil
Procedure 26(b)(3),47 which states in part that if a court orders discovery of
materials prepared in anticipation of litigation by or for another party or its
representative, “it must protect against disclosure of the mental impressions,
conclusions, opinions, or legal theories of a party’s attorney or other representative
concerning the litigation.”
“The Second Circuit has interpreted the ‘in anticipation of litigation’
requirement broadly. Documents should therefore be deemed prepared in
‘anticipation of litigation’ if ‘in light of the nature of the document and the factual
situation in the particular case, the document can fairly be said to have been

45

Id. (quoting Horn & Hardart Co. v. Pillsbury Co., 888 F.2d 8, 12 (2d

Cir. 1989)).
46

Carte Blanche (Singapore) PTE., Ltd. v. Diners Club Int’l, Inc., 130
F.R.D. 28, 32 (S.D.N.Y. 1990) (citing Fed. R. Civ. P. 26(b)(3); United States v.
Nobles, 422 U.S. 225, 237 (1975)).
47

See Strougo, 199 F.R.D. at 520 (citing Hickman, 329 U.S. at 67).
16

prepared or obtained because of the prospect of litigation.’”48
E.

SAR Privilege
Regulations promulgated under the Annunzio-Wylie Act, 31 U.S.C.

§ 5318(g), require specified financial institutions to file a Suspicious Activity
Report (“SAR”) when they detect a known or suspected violation of federal law or
a suspicious transaction related to a money laundering activity or a violation of the
Bank Secrecy Act.49 According to the OCC’s SAR regulations:
Any national bank, and any director, officer, employee, or agent
of any national bank that is subpoenaed or otherwise requested to
disclose a SAR, or any information that would reveal the
existence of a SAR, shall decline to produce the SAR or such
information . . . .50
A court in the Western District of New York has concluded that the OCC’s
prohibition on the disclosure of the existence or content of a SAR is broader than
the prohibition in the authorizing statute, but notes that the regulation has been

48

Strougo, 199 F.R.D. at 520 (quoting United States v. Adlman, 134
F.3d 1194, 1202 (2d Cir. 1998)) (some quotation marks omitted).
49

See Lee v. Bankers Trust Co., 166 F.3d 540, 543 (2d Cir. 1999) (citing
12 C.F.R. § 208.20(d) (1997) (Office of Thrift Supervision SAR regulation), now
12 C.F.R. § 563.180(d)).
50

12 C.F.R. § 21.11(k)(1)(i) (emphasis added).
17

held consistent with the statute by the Eastern District of New York.51
III.

DISCUSSION
A.

Motion to Compel BOC to Produce Materials
BOC does not contest plaintiffs’ characterization of BOC as

withholding the following four categories of documents, all of which fall within
the previously ordered scope of discovery:52
(1)

BOC’s 2008 Shurafa investigative files [(the “Shurafa
Investigative Files”)]. These files relate to an internal
investigation that BOC conducted in response to Plaintiffs’
demand letter dated January 23, 2008 and ended with a
report. The investigation concerned Said al-Shurafa and
Shurafa’s wire transfer patterns, which BOC eventually
concluded were not suspicious.

(2)

BOC’s periodic AML/CTF and other compliance
communications [(“BOC’s Communications”)]. These
communications concern periodic risk reports, self-analyses
of BOC’s compliance systems, proposed actions and
changes to BOC’s compliance procedures, and other

51

See United States v. Holihan, 248 F. Supp. 2d 179, 185 (W.D.N.Y.
2003) (citing Weil v. Long Island Sav. Bank, 195 F. Supp. 2d 383, 387–88
(E.D.N.Y. 2001)).
52

In an Order published on January 10, 2013, I stated: “BOC is ordered
to produce all documents, including communications, concerning any examination,
investigation, or sanction of BOC’s New York Branch, BOC’s Guangdong Branch,
and BOC’s Head Office by the U.S. or PRC governments or any of their agencies
regarding Anti-Money Laundering (AML), Counter-Terrorism Financing (CTF),
and AML or CTF problems or deficiencies from January 1, 2003 to September
2008,” subject to certain restrictions stated earlier in the Order. Wultz v. Bank of
China Ltd., No. 11 Civ. 1266, 2013 WL 132664, at *2 (S.D.N.Y. Jan. 10, 2013).
18

communications that the OCC, having found deficiencies
in BOC’s compliance function, required BOC to submit to
the OCC over approximately seven years during the
relevant period.
(3)

O CC reports and communications [(“O CC’s
Communications”)]. These documents include the OCC’s
bank examination reports, evaluations of BOC policies and
practices, recommendations to BOC, and other
communications related to problems or deficiencies in
BOC’s [Anti-Money Laundering and Counter–Terrorism
Financing (“AML/CTF”)] compliance function.

(4)

General information related to BOC’s SAR filing practices
[(“SAR Information”)]. This information includes BOC’s
SAR filing practices, the aggregate number of SARs filed
during the relevant years, and the compliance areas to
which those SARs relate.53

BOC has offered three general justifications for not producing the documents
requested by plaintiffs: the bank examination privilege; the attorney-client and
work product privileges; and federal law prohibiting the disclosure of SARs.54 I
will address each justification in turn.
First, however, I address BOC’s argument that before this Court
orders BOC (not the OCC) to produce any non-public OCC information not listed
in plaintiffs’ 2012 Touhy request — including any documents predating July 1,
2003 or postdating December 31, 2006 — plaintiffs are required to file a Touhy
53

BOC Opp. at 2–3.

54

See id. at i.
19

request for those additional documents.55 BOC cites section 4.37(b) of the OCC’s
Touhy regulations, which prohibits banks from producing non-public OCC
information unless the requester has followed the OCC’s Touhy procedures and a
federal court has ordered production “in a judicial proceeding in which the OCC
has had the opportunity to appear and oppose discovery.”56
BOC misunderstands the nature of this Court’s deference to the
OCC’s Touhy regulations. Under Second Circuit law, this deference is “grounded
in the doctrine of sovereign immunity. Absent a waiver of sovereign immunity, a
federal agency, as representative of the sovereign, cannot be ‘compel[led] . . . to
act.’”57 As noted earlier, there is a dispute between the Circuits regarding the
extent of a federal court’s power to order a federal agency to produce documents in
contravention of the procedures laid out in the agency’s Touhy regulations.58 But
neither the OCC nor BOC cite any precedent for concluding that the OCC may
promulgate regulations under the Housekeeping Statute that limit a federal court’s
ability to order private litigants to produce documents under the Federal Rules of

55

See id. at 1 n.1.

56

12 C.F.R. § 4.37(b)(1)(i). See BOC Opp. at 1.

57

Glotzer, 374 F.3d at 190 (quoting EPA v. GE I, 197 F.3d at 597).

58

See id. at 191–92.
20

Civil Procedure. BOC is not covered by the OCC’s sovereign immunity, nor may
the OCC extend the shelter of its immunity to the BOC through regulations
promulgated under a statute intended to deal with internal housekeeping matters.
When a federal court, after duly considering the bank examination privilege,59
orders a bank to produce non-public OCC information under the bank’s control,
the sovereign is not “compelled to act,” nor is there any risk of the federal
government being turned into a “‘speakers’ bureau for private litigants.’”60
59

Some courts have held that the bank examiner must be granted “‘the
opportunity to assert the privilege and the opportunity to defend its assertion.’”
Merchants Bank, 205 B.R. at 42 (quoting In re Bankers Trust, 61 F.3d at 472). If
so, this is a matter of federal common law, grounded in policy considerations, and
not a consequence of any agency’s Touhy regulations.
60

Exxon Shipping Co., 34 F.3d at 779 (quoting appellee’s brief). To
preempt any confusion, I also note that the OCC’s housekeeping regulations do not
possess any general priority over the Federal Rules of Civil Procedures, which to
the contrary “are deemed to have ‘the force [and effect] of a federal statute.’”
Bright v. United States, 603 F.3d 1273, 1279 (Fed. Cir. 2010) (quoting Sibbach v.
Wilson & Co., 312 U.S. 1, 13 (1941)) (emphasis added). Through the Rules
Enabling Act, Congress affirmed the Supreme Court’s “power to prescribe general
rules of practice and procedure . . . for cases in the United States district courts”
and indeed stated that “[a]ll laws in conflict with such rules shall be of no further
force or effect after such rules have taken effect.” See 28 U.S.C. § 2072. If the
OCC were to rely on section 4.37(b) of its Touhy regulations to penalize a bank for
complying with a federal court order issued in accordance with the Federal Rules,
questions might be raised about the validity of the penalty on various grounds,
including: whether the Housekeeping Statute purports to grant the OCC the legal
authority to penalize a bank for complying with an otherwise valid federal court
order; if so, whether the Rules Enabling Act invalidates that authority; and either
way, whether separation-of-powers concerns argue against upholding such a
penalty.
21

1.

Bank Examination Privilege

The bank examination privilege must be asserted by the banking
regulator, and the regulator has the burden of establishing that the privilege applies
to the documents at issue.61 BOC argues that three of the categories of documents
sought by plaintiffs are subject to the bank examination privilege. Using the
shorthand introduced earlier, these three categories are: (i) the Shurafa
Investigative Files, (ii) BOC’s Communications, and (iii) OCC’s
Communications.62 Plaintiffs specifically claim in their opening brief that the OCC
up to that point in time had not asserted any privilege over three categories of
documents, which overlap with categories (i) to (iii) in ways noted below: (a)
BOC’s internal reports and communications, including the Shurafa investigative
report, along with attachments, supporting documents, and related investigative
files; (b) documents that BOC submitted to the OCC other than in response to OCC
communications regarding Matters Requiring Attention (“MRAs”); and (c) factual
matter.63 Thus, this Court’s first task is to determine whether the OCC has in fact

61

Merchants Bank, 205 B.R. at 42 (citing In re Bankers Trust, 61 F.3d
at 472); Schreiber, 11 F.3d at 220.
62

See BOC Opp. at 2.

63

See Pl. Mem. at 12–13. The reasoning behind plaintiffs’ claim
regarding the OCC’s assertion of privilege could be questioned. In a September
11, 2012 letter to this Court, the OCC stated: “Documents such as OCC
22

asserted privilege over some or all of the documents in categories (i) to (iii) and (a)
to (c).
I note at the outset that the OCC’s detailed description of the history
of plaintiffs’ discovery requests shows that the OCC is aware of the nature and
extent of plaintiffs’ requests, including the requests for the documents in categories
(i) to (iii), and the claim that the OCC has not asserted privilege over the
documents in categories (a) to (c).64 Thus, the OCC has been given “‘the
opportunity to assert the [bank examination] privilege and the opportunity to
defend its assertion.’”65 While the OCC states that plaintiffs are “incorrect[]” to
suggest that the OCC waived the bank examination privilege with respect to
categories (a) and (b),66 the OCC offers no basis for concluding that documents

examination reports, Supervisory Letters and communications about Matters
Requiring Attention, and the bank’s response to the same, are clearly protected by
the bank examination privilege, as explained in [Fleet, 967 F.2d at 633–34].”
Excerpts from the 2/20/13 Declaration of John Beauchemin, Exhibit (“Ex.”) 8 to
2/25/13 Declaration of Olav A. Haazen (“Haazen Decl.”), at 1. Ignoring that the
OCC’s list of privileged documents was illustrative rather than exhaustive,
plaintiffs inferred that the OCC did not assert privilege over the materials in
categories (a) to (c). See Pl. Mem. at 12. Nevertheless, plaintiffs’ claim shifted the
burden to the OCC to assert privilege over the contested materials.
64

See OCC Opp. at 5–11.

65

Merchants Bank, 205 B.R. at 42 (quoting In re Bankers Trust, 61 F.3d

at 472).
66

OCC Opp. at 20.
23

falling under categories (a) or (b) are in fact, as a legal matter, covered by the bank
examination privilege. The OCC merely states in the abstract that “[i]t would be a
mistake to assume that any category of documents . . . would automatically fall
outside the scope of the bank examination privilege without subjecting any specific
document belonging to such a category to a privilege analysis using the Fleet
factors.”67
The OCC’s convoluted construction — that is, its statement that it
does not necessarily not assert the bank examination privilege over the documents
in categories (a) and (b) — is inadequate to serve as an assertion of the privilege.
It does not establish the applicability of the bank examination privilege to the
documents at issue.68 As a result, the documents in categories (a) and (b) do not
fall under the bank examination privilege. Because category (a) encompasses the
Shurafa Investigative Files (that is, category (i)), these Files do not fall under the
privilege. Likewise, because category (b) encompasses all of BOC’s
Communications (that is, category (ii)) except documents submitted by BOC to the
OCC in response to OCC communications regarding MRAs, the latter documents
are the only materials in BOC’s Communications that are covered by the privilege.

67

Id.

68

See Schreiber, 11 F.3d at 220.
24

Finally, the OCC attempts to assert the bank examination privilege
over the entirety of its bank examination reports.69 The OCC’s position contradicts
the well-established principle that factual materials fall outside the bank
examination privilege,70 and the consistent finding by numerous courts that the
OCC’s bank examination reports are at least partly factual: “‘[E]very court that
has examined the nature of bank examination reports thus far has found them to be
at least partly factual.’”71 As a court in the Eastern District of New York recently
noted, “[t]he OCC takes a limited view of what constitutes purely factual

69

See OCC Opp. at 18–19.

70

See Merchants Bank, 205 B.R. at 42 (citing In re Bankers Trust, 61

F.3d at 471).
71

In re Providian, 222 F.R.D. at 26 (quoting Schreiber, 11 F.3d at 221).
See also id. at 27–28 (finding that OCC attempted to assert bank examination
privilege over purely factual materials). Earlier, a court in the Eastern District of
New York reached similar conclusions in a case involving FDIC bank examination
reports:
Several courts have addressed the question of whether bank
examination reports and related correspondence are factual or
deliberative. It is very persuasive that some district courts have
actually examined bank examiners’ reports in camera and found
them to be all or partially factual.
Principe v. Crossland Sav., FSB, 149 F.R.D. 444, 448 (E.D.N.Y. 1993) (citing
Seafirst, 644 F. Supp. at 1163; Delozier, 113 F.R.D. at 525; In re Franklin, 478 F.
Supp. at 585).
25

material.”72 Even more recently, after bank regulators including the OCC asserted
that the bank examination privilege should not be overridden with regard to
hundreds of documents, a court in the Southern District of New York completed a
“laborious” in camera review of the documents, only to conclude that dozens of
them were not privileged to begin with.73 The OCC does not explain why these
numerous judicial precedents were incorrectly decided.74 I conclude, in agreement
with the case law, that the factual portions of the OCC’s bank examination reports,
as well as all other factual materials (that is, category (c)), by definition fall outside
the scope of the bank examination privilege. Thus, BOC must produce all factual
portions of the documents in categories (i) to (iii) — where “factual” has its
ordinary meaning, and not any narrower meaning adopted by the OCC.75

72

Linde, 2009 WL 3055282, at *1.

73

In re Citigroup, 2011 WL 8210671, at *1–2.

74

The closest that the OCC comes to a defense of its decision not to
permit the production of the factual portions of its bank examination reports is to
suggest that the application of Judge Weinstein’s Franklin factors somehow leads
to this result. See OCC Opp. at 18–19. But this misunderstands the role of the
factors: they are not used to determine what falls within the bank examination
privilege, but to determine whether materials falling within the privilege should
nevertheless be produced. Materials that do not fall within the bank examination
privilege, such as factual materials, cannot be brought within the privilege by
applying the Franklin factors.
75

If, after BOC has produced all factual material that it has withheld
based on the bank examination privilege, plaintiffs believe that BOC has applied
26

To summarize the analysis up to this point: BOC has withheld the
materials in categories (i) to (iii) in part based on the possibility that the OCC
would assert the bank examination privilege over those documents. Despite
plaintiffs’ explicit and detailed request for these materials in plaintiffs’ opening
brief, the OCC failed to assert and establish the bank examination privilege with
regard to the materials in categories (i) to (iii) except the non-factual portions of the
OCC’s Communications, and the non-factual portions of documents submitted by
BOC in response to OCC communications regarding MRAs.
With regard to these latter two categories of documents, plaintiffs
argue that the bank examination privilege should be overridden.76 The burden is on
plaintiffs to demonstrate “good cause” for production based on factors such as
those articulated by Judge Jack B. Weinstein of the Eastern District of New York
in In re Franklin.77 With regard to relevance, I have already ruled that such

an incorrect definition of “factual,” this Court will, if necessary, conduct an in
camera review of the contested materials, or of a sample of the materials.
76

See 2/25/13 Reply Memorandum of Law in Support of Plaintiffs’
Motion to Compel Production of Investigative Files and U.S. Regulatory
Communications (“Pl. Reply”) at 1 (arguing that “all categories of documents
Plaintiffs seek, including BOC’s responses to MRAs and the OCC’s bank
examination reports and opinions, must be produced because Plaintiffs have a
substantial evidentiary need for these uniquely relevant documents”).
77

See Merchants Bank, 205 B.R. at 42; In re Franklin, 478 F. Supp. at

583.
27

documents are relevant to plaintiffs’ claims, because the documents may show
whether BOC had notice of criticisms of its AML/CTF practices, and if so, how it
responded to such notice.78 Whether recovery under section 2333(a) of the ATA
requires “that a defendant knew that the group it supported targeted American
nationals,” or instead may be satisfied merely by recklessness,79 evidence that BOC
knew of problems in its AML/CTF practices yet failed to correct those problems
could play a significant role in determining BOC’s liability.
The OCC is correct that plaintiffs’ Touhy request for “[d]ocuments
associated with any OCC examination of BOC” is too broad and would require
production of irrelevant materials.80 As the OCC notes, “OCC examination reports
usually cover many topics with no relevance to [the] pending litigation,” such as
the “discussion of BOC’s asset quality and . . . credit risk.”81 Plaintiffs have

78

See Wultz, 2013 WL 132664, at *2. Accord Transcript of 12/26/12
Conference at 23–26.
79

Gill v. Arab Bank, PLC, — F. Supp. 2d —, 2012 WL 4960358, at
*30–31 (E.D.N.Y. Oct. 17, 2012) (concluding, as a matter of first impression, that
proof of recklessness is sufficient).
80

10/29/12 Letter from Michael L. Brosnan, Senior Deputy
Comptroller, Comptroller of the Currency, to Lee Wolosky, Counsel for Plaintiffs
(“OCC Touhy Letter”), Ex. E to 2/15/13 Declaration of Eric B. Epstein in
Opposition to Plaintiffs’ Motion to Compel Discovery, at 2. See also OCC Opp. at
9, 13.
81

OCC Touhy Letter at 2.
28

remedied this overbreadth, however, in category (iii) of their current document
requests. Plaintiffs now seek only OCC reports and communications “‘related to
problems or deficiences in BOC’s AML/CTF compliance function.’”82
With regard to the availability of substitutes for the requested
evidence, the OCC argues that materials already available to plaintiffs provide a
“reasonably suitable” substitute for the requested non-factual portions of OCC
reports and communications.83 For example, the OCC notes that BOC has
produced records related to wire transfers to Shurafa’s accounts in China, internal
compliance manuals, and audit reports.84 BOC states that piercing the bank
examination privilege “‘likely would only give plaintiffs access to opinions,
analysis and deliberations regarding the data that plaintiffs already have
received.’”85
In this case, however, the opinions, analysis, and deliberations
communicated by the OCC to BOC are themselves relevant to the issue of scienter
under the ATA. Merely showing that problems existed in BOC’s AML/CTF

82

OCC Opp. at 11 (quoting Pl. Mem. at 1–2).

83

See id. at 9, 13.

84

See id. at 9.

85

BOC Opp. at 17.
29

practices may not show that BOC was aware of those problems.86 Moreover, if
BOC is unable to produce communications with its Chinese banking regulators,87
then the OCC might be the only external entity in a position to have put BOC on
notice of problems with its AML/CTF practices. There is no substitute for the
requested non-factual portions of the OCC’s Communications.
With regard to the seriousness of the litigation and the role of the
government, I have already ruled that this case implicates “[t]he interest of the
United States in depriving international terrorist organizations of funding that
could be used to kill American citizens,” which is a “‘profound and compelling
interest.’”88 The Second Circuit recently stated in an ATA case involving a foreign
bank’s failure to comply with discovery orders:
[T]he interests of the United States weigh heavily in this case,
even though it is a private lawsuit brought by individual victims
of terrorism. . . . [P]rivate lawsuits can, by virtue of the statutory
rights upon which they rely, be so “infused with the public
interest” that the distinction between private civil suits and public
enforcement actions is of reduced significance.
. . . [T]he ATA’s legislative history reflects that Congress

86

Plaintiffs cite evidence that the OCC did, in fact, criticize BOC
practices related to AML/CTF. See Pl. Mem. at 15.
87

As noted earlier, this dispute is addressed in a separate, pending

motion.
88

Wultz, 2012 WL 5378961, at *7 (quoting Strauss v. Credit Lyonnais,
S.A., 249 F.R.D. 429, 443–44 (E.D.N.Y. 2008)).
30

conceived of the ATA, at least in part, as a mechanism for
protecting the public’s interests through private enforcement. One
of the Act’s sponsors . . . declared that the Act would “empower[]
victims with all the weapons available in civil litigation,
including: [s]ubpoenas for financial records, [and] banking
information [of alleged terrorists].”89
In addition, as plaintiffs note, the D.C. District has already entered a default
judgment in excess of three hundred million dollars against the Iranian and Syrian
defendants in this case.90 The financial stakes of the litigation are serious.
The OCC’s role in this case is its submission, which largely concerns
itself with the fifth of the Franklin factors, the risk of a chilling effect,91 to which I
now turn. OCC and BOC reiterate the importance of maintaining candor in
communications between OCC examiners and the bank, echoing the familiar
arguments made by the D.C. Circuit in Fleet.92 While the public interest in candor
is a serious concern, it is present in every case involving the bank examination
privilege — and yet the privilege remains qualified, not absolute. There must be

89

Linde v. Arab Bank, PLC, 706 F.3d 92, 112 (2d Cir. 2013) (quoting
Minpeco, S.A. v. Conticommodity Servs., Inc., 116 F.R.D. 517, 520 (S.D.N.Y.
1987), and citing 137 Cong. Rec. S. 1771 (daily ed. Feb. 7, 1991) (Senator Charles
Grassley commenting after enactment)).
90

See Wultz, 864 F. Supp. 2d at 43.

91

See OCC Opp. at 15–20.

92

See BOC Opp. at 20–22; OCC Touhy Letter at 3.
31

cases in which the other factors discussed above outweigh the public interest in
candor between banking regulators and banks. I conclude this is one such case.
The relevance of the non-factual portions of the OCC’s Communications, the lack
of adequate substitutes, and in particular the seriousness of the litigation and the
role of the government in passing the ATA, outweigh the risk of a chilling effect.
Moreover, just as the party seeking to uphold the bank examination
privilege can point as a matter of course to the importance of maintaining candor
between bank examiners and banks, so the party seeking to override the bank
examination privilege can routinely offer reasons to believe that the risk of a
chilling effect has been overstated. Plaintiffs provide several of the latter
arguments, including: that banks are required by law to cooperate with their
regulators, and “banks willing to take the risk of withholding relevant information
. . . are unlikely to be swayed by whether ‘their communication with the examiner
[is] privileged as opposed to merely confidential;’”93 that a protective order is
sufficient to protect the government’s legitimate interests in confidentiality;94 and
that permitting BOC to avoid discovery “would create a perverse incentive for

93

Pl. Reply at 6 & n.5 (quoting Seafirst, 644 F. Supp. at 1163). See also
Pl. Mem. at 18 (citing Principe, 149 F.R.D. at 449).
94

See Pl. Reply at 6. See also Pl. Mem. at 18 (citing Schreiber, 11 F.3d
at 222; Lundy, 105 F.R.D. at 502).
32

financial institutions to voluntarily submit documents to the OCC just to avoid
discovery in private litigation.”95
I also note, without placing a great deal of weight on these
considerations, that the D.C. Circuit’s regulatory model in Fleet was developed
over two decades ago, based in part on materials written by bank regulators.96 The
description of the “iterative process” of communication between banks and
regulators in Fleet is more the prescription of an ideal than the description of an
observed state of affairs.97 Fleet describes the “extensive and informal”
communications between the regulated banking firm and the bank regulatory
agency as follows:
The supervisory relationship . . . calls for adjustment, not
adjudication. In the process of comment and response, the bank
may agree to change some aspect of its operation or accounting;
alternatively, if the bank and the examiners reach impasse, then
their dispute may be elevated for resolution at higher levels within
the bank regulatory agency. . . .
Because bank supervision is relatively informal and more
or less continuous, so too must be the flow of communication
between the bank and the regulatory agency. Bank management

95

Pl. Reply at 6.

96

See Fleet, 967 F.2d at 634 (citing O FFICE OF THE C OMPTROLLER OF
THE C URRENCY, C OMPTROLLER’S H ANDBOOK FOR N ATIONAL B ANK E XAMINERS
§ 1.1, at 1–3 (1990); B OARD OF G OVERNORS OF THE F EDERAL R ESERVE S YSTEM,
C OMMERCIAL B ANK E XAMINATION M ANUAL § 1.1 at 1–2 (1988)).
97

Id. at 633.
33

must be open and forthcoming in response to the inquiries of bank
examiners, and the examiners must in turn be frank in expressing
their concerns about the bank.98
Against Fleet’s idealized model of the regulatory process, compare a recent Senate
report describing the actual, observed process of communication between the OCC
and one of the nation’s largest banks:
Prior to media reports of the whale trades in April 2012,
JPMorgan Chase provided almost no information about the CIO’s
Synthetic Credit Portfolio [(“SCP”)] to its primary regulator, the
Office of the Comptroller of the Currency (OCC) . . . .
. . . Both the OCC and JPMorgan Chase bear fault for the
OCC’s lack of knowledge — at different points, the bank was not
forthcoming and even provided incorrect information, and at other
points the OCC failed to notice and follow up on red flags . . . .
[T]he bank [filed] risk reports with the OCC disclosing that the
CIO repeatedly breached [its] stress limits in the first half of 2011,
triggering them eight times, on occasion for weeks at a stretch, but
the OCC failed to follow up with the bank. . . .
...
Beginning in January and continuing through April 2012,
. . . multiple breaches of CIO risk limits . . . were disclosed on an
ongoing, timely basis in standard risk reports provided by the
bank to the OCC, yet produced no reaction at the time from the
agency. . . .
On April 6, 2012, when media reports unmasked the role of
JPMorgan Chase in the whale trades, the OCC told the
Subcommittee that it was surprised to read about the trades and
immediately directed inquiries to the bank for more information.
...
It was not until May 2012, a few days before the bank was
forced to disclose $2 billion in SCP losses in its public SEC
filings, that the OCC learned of the problems besetting the
98

Id. at 634.
34

portfolio. On May 12, OCC staff told staff for a Senate Banking
Committee member that the whale trades would have been
allowed under the draft Volcker Rule, an assessment that, a few
days later, the OCC disavowed as “premature.” At the instruction
of the OCC’s new Comptroller, Thomas Curry, the OCC initiated
an intensive inquiry into the CIO’s credit derivatives trading
activity. Even then, the OCC told the Subcommittee that
obtaining information from JPMorgan Chase was difficult, as the
bank resisted and delayed responding to OCC information
requests and sometimes even provided incorrect information.
...
JPMorgan Chase had dodged OCC oversight of the SCP for
years by failing to alert the agency to the establishment of the
portfolio, failing to provide any portfolio-specific information in
CIO reports, and even disputing OCC access to daily CIO
profit-loss reports.99
In the course of documenting what the OCC ultimately acknowledged as multiple
failures of oversight,100 the report presents scenes such as the following:
[T]he OCC Examiner-In-Charge at JPMorgan Chase told the
Subcommittee that it was “very common” for the bank to push
back on examiner findings and recommendations. He recalled one
instance in which bank executives even yelled at OCC examiners
and called them “stupid.” . . . [At one meeting,] a single risk
manager . . . was, in his words, “ambushed” by all the heads of
risk divisions from all the lines of business at the bank . . . [T]he
bank’s risk personnel criticized the OCC’s findings and
recommendations, and the meeting assumed a loud and
“combative” tone. . . .
Still another instance involved profit and loss reports. . . .
99

S TAFF OF S ENATE P ERMANENT S UBCOMMITTEE ON INVESTIGATIONS,
JPM ORGAN C HASE W HALE T RADES: A C ASE H ISTORY OF D ERIVATIVES R ISKS AND
A BUSES 8–10, 12 (Mar. 15, 2013).
100

See id. at 10.
35

[T]he bank informed [the OCC] that Chief Executive Officer
Jamie Dimon had ordered the bank to cease providing the
Investment Bank’s daily P&L reports, because he believed it was
too much information to provide to the OCC.101
Apart from such anecdotes, questions have repeatedly been raised about the OCC’s
independence from the banks it oversees.102
101

Id. at 224–225 (citations omitted).

102

See, e.g., Cuomo v. Clearing House Ass’n, L.L.C., 557 U.S. 519, 533
(2009) (rejecting OCC interpretation of National Banking Act and presenting OCC
as “attempt[ing] to do what Congress declined to do: exempt national banks from
all state banking laws, or at least state enforcement of those laws”); Gillian E.
Metzger, Federalism and Federal Agency Reform, 111 C OLUM. L. R EV. 1, 27
(2011) (noting that “[f]ederal agency failure loomed particularly large in the
background of Cuomo, with the OCC repeatedly characterized as an agency
captured by the entities it was charged with regulating, the classic example of
agency failure” (citing amicus brief and scholarship)); Keith R. Fisher, Toward A
Basal Tenth Amendment: A Riposte to National Bank Preemption of State
Consumer Protection Laws, 29 H ARV. J.L. & P UB. P OL’Y 981, 1028–29 (2006)
(“OCC largely subsists . . . on fees paid by the institutions they regulate . . . .
Those financial incentives make the agency’s decision-making process susceptible
to error in ways that are not as likely when the decision maker is an elected
body.”); Arthur E. Wilmarth, Jr., The OCC’s Preemption Rules Exceed the
Agency’s Authority and Present a Serious Threat to the Dual Banking System and
Consumer Protection, 23 A NN. R EV. B ANKING & F IN. L. 225, 232 (2004) (“Given
the OCC’s financial self-interest and its empire-building agenda, the OCC faces a
clear conflict of interests (and the risk of regulatory capture) whenever the agency
considers the desirability of . . . taking vigorous enforcement measures against one
of its most important constituents.”). See also S HEILA B AIR, B ULL BY THE H ORNS:
F IGHTING T O S AVE M AIN S TREET FROM W ALL S TREET AND W ALL S TREET FROM
ITSELF 41 (2012) (former FDIC Chairman noting that “the deeper I got into
interagency discussions, the more convinced I became that the OTS and OCC
generally took whatever positions were most advantageous to their larger
institutions”); Jeff Horwitz & Maria Aspan, How Promontory Financial Became
Banking’s Shadow Regulator, A M. B ANKER (online), Mar. 15, 2013 (noting
36

The details of the OCC’s regulatory processes are not at issue in this
case. But to the extent that Fleet rested in part on judge-made hypotheses
regarding the likely effects of overriding the bank examination privilege, it is at
least worth noting that the Fleet court’s observations on the regulatory process
were not statements of immutable law, nor the result of empirical investigation.
While the risk of a chilling effect is serious, the risk of regulatory inaction is as
well — as the U.S. Congress recognized through the ATA by empowering private
parties to enforce the public interest using the weapons of civil litigation. Given
the limited resources of bank regulators, the OCC’s supervisory mission might in
some cases be helped as much as hindered by the intervention of private litigants.
With these considerations in mind, and based on the preceding
analysis of the Franklin factors, I conclude that plaintiffs have shown good cause
to override the bank examination privilege with regard to the non-factual portions
of the OCC’s Communications.103 BOC is ordered to produce all such materials in

“revolving door” between the OCC and Promontory Financial, a banking
consulting firm founded by a former Comptroller of the Currency).
103

These materials will include the non-factual portions of
communications regarding MRAs that address problems or deficiencies in BOC’s
AML/CTF practices.
37

accordance with the existing protective order, or, if necessary, a modified order.104
2.

Attorney-Client and Work Product Privileges

BOC argues that the Shurafa Files are covered by the attorney-client
and work-product privileges.105 BOC’s argument does not clearly distinguish
between the two privileges, instead asserting generally that the Shurafa
investigative material “is privileged because it was prepared in connection with a
BOC investigation that was prompted by the receipt of Plaintiffs’ demand
letter.”106 BOC also states that the “investigation was led by in-house counsel at
BOC, as well as [outside] counsel of BOC who were retained promptly after
receipt of the demand letter.”107
Plaintiffs note that BOC’s submission to the Court, which addresses
plaintiffs’ second motion to compel, is the first time that BOC has raised either the
attorney-client or work-product privileges:

104

See Pl. Reply at 6 & n.6 (inviting use of modified protective order, if
necessary, and noting that BOC drafted the existing protective order and stated that
it was needed because “‘BOC operates under confidentiality requirements
established by both U.S. and PRC law’” (quoting 8/10/11 Letter from Mitchell R.
Berger, Counsel for BOC, to the Court, Ex. 7 to Haazen Decl., at 2)).
105

See BOC Opp. at 22.

106

Id.

107

Id.
38

BOC has waived any privileges by failing to assert that the Report
is protected by privilege until now, nearly two years after
Plaintiffs requested such documents, and after numerous letters to
Plaintiffs and the Court purporting to state BOC’s objections to
producing the Report.108
In addition, plaintiffs argue that even if the privileges were not waived, they would
not apply to the Shurafa Investigative Files “because BOC’s investigation of the
Shurafa transactions was conducted by and at the initiative of the New York
Compliance and Clearing Departments, not BOC’s legal counsel.”109 According to
plaintiffs, “BOC’s counsel had no involvement beyond being notified of the
investigation by BOC’s Chief Compliance Officer.”110
Plaintiffs have failed to carry their burden of establishing that the
Shurafa Files contain “‘communications (1) between a client and his or her
attorney (2) that are intended to be, and in fact were, kept confidential (3) for the
purpose of obtaining or providing legal assistance,’”111 or “‘attorneys’ mental
impressions, opinions or legal theories concerning specific litigation.’”112 The

108

Pl. Reply at 8.

109

Id. at 9.

110

Id.

111

Brennan Ctr., 697 F.3d at 207 (quoting Mejia, 655 F.3d at 132).

112

Strougo, 199 F.R.D. at 520 (quoting Horn & Hardart Co., 888 F.2d at

12).
39

evidence cited by both parties consists solely of an excerpt from the deposition of
BOC’s Chief Compliance Officer John Beauchemin as well as his declaration.113
These materials do not show that any attorneys were involved in the preparation of
the Shurafa Files, nor that the Files contain attorney work-product or attorneyclient communications. As plaintiffs suggest, the cited materials indicate that after
Beauchemin received plaintiffs’ demand letter, he called outside counsel, then set
about performing the investigation within the Compliance Department — without
the involvement of any counsel, and not for the purpose of obtaining legal
assistance.114
113

See BOC Opp. at 22–24 (citing excerpts from 12/5/12 Deposition of
John Beauchemin, BOC Chief Compliance Officer (“Beauchemin Dep. Tr.”), Ex. 3
to Haazen Decl.; 2/20/13 Declaration of John Beauchemin (“Beauchemin Decl.”),
Ex. 8 to Haazen Decl.); Pl. Reply at 8–10 (citing Beauchemin Dep. Tr.). BOC also
cites a page of the deposition transcript that was not included in the excerpt. See
BOC Opp. at 22 (citing Beauchemin Dep. Tr. at 255).
114

Beauchemin stated: “[W]hen we got the demand letter, we did an
investigation . . . and we provided the result[s] of that investigation to the OCC.”
Beauchemin Dep. Tr. at 248. Asked whether anyone else was involved in the
investigation, Beauchemin replied: “I was and Bertha produced records and that’s
what I recall now.” Id. at 252. It is true that Beauchemin stated, when asked
whether he talked to anyone during the investigation: “Thomas Fung, in-house
counsel.” Id. at 253. Elsewhere in the transcript, however, Fung was identified not
as in-house counsel but as the head of the risk management department. See id. at
67, 220. Plaintiffs’ reply brief clarifies that “[s]ince referring to Mr. Fung as ‘inhouse counsel’ in its Opposition . . ., BOC has confirmed that Mr. Fung was not
BOC’s in-house counsel at that time, and may not even be a lawyer.” Pl. Reply at
9 n.10. Beauchemin’s declaration also presented the preparation of the report as
solely the work of BOC’s Compliance Department. See Beauchemin Decl. ¶ 17.
40

3.

SAR Privilege

The SAR Information requested by plaintiffs consists of general
information related to BOC’s SAR filing practices: “This information includes
BOC’s SAR filing practices, the aggregate number of SARs filed during the
relevant years, and the compliance areas to which those SARs relate.”115 The OCC
emphasizes the importance of protecting the confidentiality of SARs and the act of
filing a SAR, but does not address or take a position on whether producing the
general information requested by plaintiffs would violate any law or privilege.116
BOC argues that producing this general information would violate federal law
prohibiting the disclosure of whether a SAR was filed and what its contents
were.117
However, as already noted, the OCC’s SAR regulations, at their most
expansive, prohibit the disclosure of “any information that would reveal the
existence of a SAR.”118 BOC’s argument that the production of the general
Because I conclude that BOC has failed to carry its burden to establish
the existence of either the attorney-client or work product privileges, I do not reach
the remainder of plaintiffs’ arguments.
115

Pl. Mem. at 2.

116

See OCC Opp. at 20–22.

117

See BOC Opp. at 3.

118

12 C.F.R. § 21.11(k)(1)(i).
41

information requested by plaintiffs could indirectly indicate whether a particular
SAR was filed is unpersuasive.119 “For example,” BOC argues, “if, hypothetically,
BOC has filed zero SAR[s] from 2003 through the present, this data would reveal
to Plaintiffs whether or not a SAR was filed with respect to Shurafa.”120 But the
OCC’s regulations prohibit the disclosure of information that would reveal the
existence of a particular SAR,121 not the non-existence of any SARs.
It is true that in some circumstances, requiring a bank to answer
sufficiently detailed questions about when it did not file SARs could indirectly
reveal the existence of a SAR filing. A questioner might ask whether the bank
filed a SAR in response to a number of specific incidents; each time the bank
refused to answer, rather than answering that it not file a SAR, the bank’s refusal
would reveal the existence of a SAR. But such concerns are not present here. At
most, discovery of the requested information will reveal a year in which BOC filed
no SARs. It is difficult to see how such a revelation could harm the law
enforcement interests that 31 U.S.C. § 5318(g) was intended to promote.122 If

119

BOC Opp. at 24.

120

Id. at 25.

121

12 C.F.R. § 21.11(k)(1)(i).

122

See Cotton v. PrivateBank & Trust Co., 235 F. Supp. 2d 809, 815
(N.D. Ill. 2002) (“Release of [a] SAR could compromise an ongoing law
42

anything, such a revelation would seem more likely to promote future vigilance
and thorough reporting by BOC and other banks.
For the foregoing reasons, I conclude that the general information
sought by plaintiffs is not covered by the SAR privilege, and must be produced by
BOC.
B.

Motion to Compel the OCC to Produce Materials
Based on the broad discovery ordered from BOC, I deny without

prejudice plaintiffs’ motion to compel the production of documents from the OCC.
Because it is unclear whether the OCC possesses any relevant and discoverable
documents that are not in the possession of BOC, it is not yet necessary to confront
the difficult issues that might be involved in reviewing the OCC’s denials of
plaintiffs’ requests.
If BOC’s production reveals that certain materials in categories (i) to
(iv) can only be obtained through the OCC, plaintiffs may move again to compel
the OCC to produce the materials. As noted earlier, based on Glotzer, plaintiffs
may only move to compel the OCC to produce documents that plaintiffs have
requested through the OCC’s Touhy procedures. With regard to the documents
that plaintiffs already sought from the OCC in the September 2012 Touhy request,
enforcement investigation, tip off a criminal wishing to evade detection, or reveal
the methods by which banks are able to detect suspicious activity.”).
43

no further input from the acc will be necessary - though the

acc may choose

to provide further briefing. If plaintiffs seek the production of documents not
requested in the first Touhy request, however, a second request to the acc will be
necessary.
If plaintiffs find it necessary to file a second motion to compel
production from the OCC, the parties' briefs should include arguments addressing
whether the OCC's rejection(s) of plaintiffs' requests should be reviewed under the
arbitrary and capricious standard, or another standard; and whether the subject of
review should be the OCC's Touhy decision(s), the OCC's submission(s) to this
Court, or both.

IV.

CONCLUSION
For the foregoing reasons, plaintiffs' motion to compel is granted with

respect to BOC and denied without prejudice with respect to the OCC.

Dated:

April 9, 2013
New York, New York

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- Appearances For Plaintiffs:

For Defendant:

Lee S. Wolosky, Esq.
Steven I. Froot, Esq.
Marilyn C. Kunstler, Esq.
Jaime Sneider, Esq.
Boies, Schiller & Flexner LLP
575 Lexington Avenue
New York, NY 10022
[phone]

Mitchell R. Berger, Esq.
Patton Boggs LLP (DC)
2550 M Street, N.W.
Washington, D.C. 20037
[phone]
Zachary Carter, Esq.
Lanier Saperstein, Esq.
Neil McDonell, Esq.
Eric Epstein, Esq.
Daniel Goldberger, Esq.
Dorsey & Whitney LLP
51 West 52nd Street
New York, NY 10019
[phone]

45