Wultz et al v. Bank of China Limited
Filing
271
OPINION AND ORDER re: #103247 #248 MOTION for Reconsideration re: #244 Memorandum & Opinion, filed by Office of the Comptroller of the Currency, #250 MOTION for Reconsideration, filed by Bank of China Limited.This Order addresses two pending discovery disputes: (1) plaintiffs' objection to the April 17, 2013 decision of Special Master Theodore H. Katz approving Bank of China, Ltd.'s ("BOC's") redactions to certain discovery documents; and (2) motions for reconsideration of this Court's April 9, 2013 Opinion and Order ("April 9 Order") submitted by BOC and non-party the Office of the Comptroller of the Currency ("the OCC"). For the reasons stated herein, plaintiffs' objection to the Special Master's decision is rejected, and the OCC's and BOC's motions for reconsideration of the April Order are denied. In sum, none of the OCC's arguments support granting the OCC's motion for reconsideration. The OCC's and BOC's motions for reconsideration are denied. The Clerk of Court is directed to close BOC's and the OCC's motions [Dkt. Nos. 248, 250]. (Signed by Judge Shira A. Scheindlin on 5/23/2013) (ja) Modified on 6/7/2013 (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 Wultz; 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 Wultz and Yekutiel Wultz,
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OPINION & ORDER
11 Civ. 1266 (SAS)
Plaintiffs,
- againstBANK OF CHINA LIMITED,
Defendant.
--------------------------------------------------------
)(
SHIRA A. SCHEINDLIN, U.S.D.J.:
This Order addresses two pending discovery disputes: (1) plaintiffs'
objection to the April 17,2013 decision of Special Master Theodore H. Katz
approving Bank of China, Ltd.' s ("BOC's") redactions to certain discovery
1
,
documents;1 and (2) motions for reconsideration of this Court’s April 9, 2013
Opinion and Order (“April 9 Order”) submitted by BOC and non-party the Office
of the Comptroller of the Currency (“the OCC”).2
For the reasons stated below, plaintiffs’ objection to the Special
Master’s decision is rejected, and the OCC’s and BOC’s motions for
reconsideration of the April 9 Order are denied.
I.
Plaintiffs’ Objection to Special Master’s April 17 Decision
I assume the parties’ familiarity with the background of the dispute
over the Shurafa Investigative Files, which has already been described in previous
opinions.3 In accordance with this Court’s April 17, 2013 Memorandum Opinion
and Order (“April 17 Order”), the Special Master agreed to review BOC’s
redactions to a document that BOC had produced to plaintiffs under the title of the
1
See 4/25/13 Plaintiffs’ Objection to the Special Master’s Decision
Concerning Bank of China Ltd.’s Redactions of the Shurafa Investigative Report
(“Plaintiffs’ Objection”); Ex. A (“Special Master Decision”) to 4/19/13 Letter from
Lanier Saperstein, Counsel for BOC, to the Court; Fed. R. Civ. P. 53(f)(2)
(procedure for objecting to master’s order).
2
See 4/23/13 Memorandum of Law in Support of Motion by Bank of
China, Ltd[.] for Reconsideration of April 9 and April 17, 2013 Orders (“BOC
Mem.”); 4/22/13 Non-Party Office of the Comptroller of the Currency’s
Memorandum in Support of Motion for Reconsideration (“OCC Mem.”).
3
See Wultz v. Bank of China Ltd., — F. Supp. 2d —, No. 11 Civ. 1266,
2013 WL 1832186, at *9–10 (S.D.N.Y. May 1, 2013) (summarizing earlier
opinions).
2
“Shurafa Investigative Report.”4 The Special Master concluded that “the
redactions that [BOC] made were appropriate.”5 Pursuant to Federal Rule of Civil
Procedure 53(f)(2), plaintiffs object to the Special Master’s conclusion.6
Based on a comparison of the unredacted and redacted versions of the
documents in question, as well as a review of the sealed transcript of BOC’s ex
parte hearing with the Special Master on April 17, 2013,7 plaintiffs’ objection is
rejected and the Special Master’s decision is adopted. Because of the sensitive
nature of the privilege asserted by BOC, it would be inappropriate to offer a more
detailed analysis. However, I provide two clarifications — including an order —
based on non-confidential aspects of the sealed records:
First, contrary to plaintiffs’ and this Court’s assumption, BOC’s
internal investigation did not result in the preparation of a report. The testimony
by BOC’s Rule 30(b)(6) designee John Beauchemin that gave rise to this mistaken
4
See Wultz v. Bank of China Ltd., No. 11 Civ. 1266, 2013 WL
1788559, at *2 (S.D.N.Y. Apr. 17, 2013).
5
Special Master Decision at 50–51.
6
See Plaintiffs’ Objection at 1.
7
See Special Master Decision at 50 (noting that the parties agreed that
BOC would be given an ex parte hearing before the Special Master). The Special
Master delivered a copy of the sealed transcript of the ex parte hearing to this
Court’s chambers for in camera review.
3
assumption appears to have been part of a good faith attempt by BOC to answer
plaintiffs’ questions without violating any laws.8
Second, based on non-confidential aspects of BOC’s representations
to the Special Master, there are only two categories of documents relating to the
internal investigations that BOC conducted in response to plaintiffs’ January 23,
2008 demand letter: (i) the 1,473 pages of documents collected by Beauchemin
and already produced by BOC with appropriate redactions; and (ii) other materials
related to BOC’s internal investigations of Shurafa and the Shurafa accounts, but
not collected by Beauchemin.
Under the reasoning of prior orders, including the April 9 Order, the
materials in category (ii) must be produced.9 To the extent that BOC asserts the
attorney-client or work product privileges over the materials in category (ii), BOC
is ordered to produce to plaintiffs, by May 31, 2013, a standard privilege log of any
withheld materials.10
8
See Plaintiffs’ Objection at 1.
9
At the same time, for reasons related to the sensitive privilege issues
in this case and the language of this Court’s prior orders, BOC’s failure to produce
these materials until now is not evidence of bad faith.
10
BOC does not appear to assert any other privileges over the materials.
If this is incorrect, however, and BOC does assert other privileges, such assertions
should be brought to this Court’s attention immediately — if necessary, through ex
parte communication with notice to plaintiffs, as in the case of BOC’s ex parte
4
II.
The OCC’s and BOC’s Motions for Reconsideration of this
Court’s April 9 Order
“Motions for reconsideration are governed by Local Rule 6.3 and are
committed to the sound discretion of the district court.”11 “‘[R]econsideration will
generally be denied unless the moving party can point to controlling decisions or
data that the court overlooked — matters, in other words, that might reasonably be
expected to alter the conclusion reached by the court.’”12 “Typical grounds for
reconsideration include ‘an intervening change of controlling law, the availability
of new evidence, or the need to correct a clear error or prevent manifest
injustice.’”13 Yet, because “the purpose of Local Rule 6.3 is to ‘ensure the finality
of decisions and to prevent the practice of a losing party examining a decision and
communications with the Special Master.
11
Virtual Solutions, LLC v. Microsoft Corp., No. 12 Civ. 1118, 2013
WL 593764, at *14 (S.D.N.Y. Feb. 15, 2013), reconsideration denied (Mar. 7,
2013) (citing Patterson v. United States, No. 04 Civ. 3140, 2006 WL 2067036, at
*1 (S.D.N.Y. July 26, 2006); McCarthy v. Manson, 714 F.2d 234, 237 (2d Cir.
1983)).
12
United States v. Blumenberg, No. 11 Cr. 3300, 2012 WL 6634066, at
*2 (2d Cir. Dec. 21, 2012) (quoting Shrader v. CSX Transp., Inc., 70 F.3d 255, 257
(2d Cir.1995) (alteration in original)).
13
Gucci Am., Inc. v. Guess?, Inc., No. 09 Civ. 4373, 2011 WL 6326032,
at *1 (S.D.N.Y. Dec. 16, 2011) (quoting Virgin Atl. Airways, Ltd. v. National
Mediation Bd., 956 F.2d 1245, 1255 (2d Cir. 1992)).
5
then plugging the gaps of a lost motion with additional matters,’”14 the Rule must
be “narrowly construed and strictly applied so as to avoid repetitive arguments on
issues that have been considered fully by the Court.”15 “[A] motion for
reconsideration is not a substitute for [an] appeal.”16
The OCC moves for reconsideration of this Court’s April 9 Order,
which granted plaintiffs’ motion to compel BOC to produce four categories of
requested documents, including certain non-public communications between BOC
and the OCC.17 The dispute over one category of materials, the Shurafa
Investigative Files, has already been addressed above. Another category,
14
Medisim Ltd. v. BestMed LLC, No. 10 Civ. 2463, 2012 WL 1450420,
at *1 (S.D.N.Y. Apr. 23, 2012) (quoting Grand Crossing, L.P. v. United States
Underwriters Ins. Co., No. 03 Civ. 5429, 2008 WL 4525400, at *3 (S.D.N.Y. Oct.
6, 2008)).
15
United States v. Treacy, No. 08 Cr. 0366, 2009 WL 47496, at *1
(S.D.N.Y. Jan. 8, 2009) (quotation omitted).
16
Scienton Techs., Inc. v. Computer Assocs. Intern. Inc., No. 04 Civ.
2652, 2013 WL 1856653, at *3 (E.D.N.Y. May 1, 2013) (quotation marks and
citations omitted). Accord Massop v. United States Postal Serv., 493 Fed. App’x
231, 232 (2d Cir. 2012) (“Finally, to the extent Massop was using the motion for
reconsideration to challenge the merits of the district court’s judgment, she was
improperly using the motion as a substitute for appeal.”) (citing Stevens v. Miller,
676 F.3d 62, 67 (2d Cir. 2012) (“In no circumstances . . . may a party use a Rule
60(b) motion as a substitute for an appeal it failed to take in a timely fashion.”)).
17
See Wultz v. Bank of China Ltd., No. 11 Civ. 1266, 2013 WL
1453258, at *5, *11, *13 (S.D.N.Y. Apr. 9, 2013).
6
consisting of general information related to BOC’s SAR filing practices, is not
contested in the OCC’s or BOC’s motions. If this general information has not
already been produced,18 BOC is ordered to produce it now. The two remaining
categories of documents that the April 9 Order directed BOC to produce are:
. . .
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 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.
. . .
OCC reports and communications [(“OCC’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.19
These categories of documents are the subject of the OCC’s and BOC’s motions
for reconsideration. Specifically, the OCC, joined by BOC,20 argues that the April
18
On April 11, 2013, this Court stayed the April 9 Order, except the
order to produce the Shurafa Investigative Files, to allow BOC an opportunity to
file the motion for reconsideration at issue in this Opinion. See Wultz, 2013 WL
1788559, at *1 (summarizing procedural background).
19
Wultz, 2013 WL 1453258, at *5.
20
See BOC Mem. at 1 (adopting by reference the OCC’s arguments).
To the extent that BOC offers arguments beyond those offered by the OCC, BOC’s
7
9 Order erred in three respects by ordering the production of BOC’s
Communications and the OCC’s Communications: first, by concluding that the
OCC waived the bank examination privilege with respect to certain documents in
BOC’s possession;21 second, by ordering the production of documents in the
possession of BOC that may contain non-public OCC information, without first
requiring plaintiffs to make a Touhy request for these documents through the
OCC;22 and third, by “fail[ing] to properly weigh” the relevant factors in deciding
to override the bank examination privilege.23
I address each of the OCC’s arguments in turn. First, the agency
asserting the bank examination privilege “has the burden of establishing its
applicability to the documents at issue.”24 In preparing the April 9 Order, this
Court was aware of each of the three ostensible assertions of privilege cited by the
arguments concern the production of the Shurafa Investigative Files. See id.
21
See OCC Mem. at 1–3.
22
See id. at 4–6.
23
Id. at 2, 6–9.
24
Schreiber v. Society for Sav. Bancorp, Inc., 11 F.3d 217, 220 (D.C.
Cir. 1993) (citing Friedman v. Bache Halsey Stuart Shields, Inc., 738 F.2d 1336,
1341 (D.C. Cir. 1984)). “If the agency can establish that a document is privileged
merely by filing a conclusory affidavit . . ., then the agency itself and not the court
can determine the extent of the privilege. Surely something more is required.” Id.
8
OCC in its current submission.25 None of these statements contains a specific
assertion of privilege over “(a) BOC’s internal reports and communications,
including the Shurafa investigative report, along with attachments, supporting
documents, and related investigative files; [and] (b) documents that BOC
submitted to the OCC other than in response to OCC communications regarding
Matters Requiring Attention (‘MRAs’).”26 The OCC was given the opportunity to
make specific assertions of privilege over any of these materials, but the OCC
failed to do so in its briefing to this Court.27 As a result, this Court correctly
concluded in the April 9 Order that the OCC failed to establish the applicability of
the bank examination privilege to the materials in categories (a) and (b).
Indeed, even now, after this Court’s conclusion in the April 9 Order
that the OCC failed to carry its burden, and after the OCC has had the opportunity
to submit two supplemental briefs, the OCC continues to refuse “to assert the bank
examination privilege with respect to specific documents.”28 The OCC states that it
“cannot” do so “until it is provided an opportunity to review the materials pursuant
25
See OCC Mem. at 4 & n.4.
26
Wultz, 2013 WL 1453258, at *6.
27
See id. at *7.
28
OCC Mem. at 3–4 (emphasis added).
9
to a Touhy request.”29 Rather than asserting the bank examination privilege over
specific documents or clearly specified categories of documents, the OCC
continues to state only that it “does not waive its right to assert” the bank
examination privilege over any “non-public OCC information” in BOC’s
possession.30 The OCC does not specify which of the materials in categories (a)
and (b) it views as non-public OCC information.
Second, the OCC fails to cite any controlling decision contrary to the
analysis of the OCC’s Touhy regulations in the April 9 Order. Instead, the OCC
cites several mostly unreported decisions from district courts in other Circuits
concluding that Touhy requests must be submitted not only for the production of
materials in the possession of banking regulators, but also for the production of
privately held materials over which a banking regulator may wish to assert the
bank examination privilege.31 As the April 9 Order discussed at length, however,
29
Id. at 4.
30
See id. at 4 (citing 12 C.F.R. § 4.32(b)(2)).
31
See id. at 5 n.5 (citing In re Countrywide Fin. Corp. Sec. Litig., No. 07
Civ. 5295, 2009 WL 5125089, at *2 (C.D. Cal. Dec. 28, 2009); F.D.I.C. v.
Flagship Auto Ctr., Inc., No. 3:04 Civ. 7233, 2005 WL 1140678, at *5–6 (N.D.
Ohio May 13, 2005); Union Planters Bank, N.A. v. Continental Cas. Co., No. 02
Civ. 2321, 2003 WL 23142200, at *7–8 (W.D. Tenn. Nov. 26, 2003); Raffa v.
Wachovia Corp., 242 F. Supp. 2d 1223, 1225 (M.D. Fla. 2002); American Sav.
Bank v. Painewebber Inc., 210 F.R.D. 721, 723 (D. Haw. 2001)). It gives this
Court pause that plaintiffs have cited no opinions in which a court compelled a
10
the Second Circuit follows a different approach to Touhy regulations than other
Circuits, and it is the Second Circuit’s approach that governs this Court.32 Because
ordering BOC to produce the materials at issue in the April 9 Order did not
“compel [the government] to act,” the order did not violate the principle of
sovereign immunity, and fell within the Court’s powers under the Federal Rules of
Civil Procedure.33 Under different circumstances, this Court might have deferred
to the OCC’s preference for using its Touhy procedures to evaluate the
applicability of the bank examination privilege to documents in private hands. But
under the circumstances of this case as they existed on April 9, 2013, such an
approach was neither legally required nor in the interests of justice, for the reasons
stated in the April 9 Order.34
Third, with regard to this Court’s weighing of the Franklin factors for
private party to produce non-public OCC materials that would have required a
Touhy request to obtain from the OCC. See Plaintiffs’ Memorandum in Opposition
to the Motions for Reconsideration Submitted by Defendant Bank of China and
Non-Party Office of the Comptroller of the Currency at 4. Nevertheless, the OCC
has provided no basis for concluding that the April 9 Order was incorrect as a
matter of first impression in the Second Circuit.
32
See Wultz, 2013 WL 1453258, at *1–3, *6.
33
United States E.P.A. v. General Elec. Co., 197 F.3d 592, 597 (2d Cir.
1999), opinion amended on reh’g, 212 F.3d 689 (2d Cir. 2000).
34
See Wultz, 2013 WL 1453258, at *8–9.
11
overriding the bank examination privilege,35 none of the OCC’s arguments rest on
“‘controlling decisions or data that the court overlooked.’”36 In particular, it is not
correct that “the Court essentially [gave] . . . no weight” to the risk of a chilling
effect.37 The April 9 Order gave due weight to this risk.38 It is not necessary for
every judicial consideration of the chilling effect to be accompanied by a lengthy
paean to the virtues of candor in regulatory communications.
In sum, none of the OCC’s arguments support granting the OCC’s
motion for reconsideration. The OCC’s and BOC’s motions for reconsideration
are denied. The Clerk of Court is directed to close BOC’s and the OCC’s motions
[Dkt. Nos. 248, 250].
35
See id. at *3–4 (laying out the factors for determining whether “good
cause” exists to override the bank examination privilege, as articulated in In re
Franklin Nat’l Bank Sec. Litig., 478 F.Supp. 577, 583 (E.D.N.Y. 1979) (Weinstein,
J.)), *8–9 (analyzing whether to override the bank examination privilege based on
the factors articulated in Franklin).
36
Blumenberg, 2012 WL 6634066, at *2 (quoting Shrader, 70 F.3d at
257 (alteration in original)).
37
OCC Mem. at 8.
38
See Wultz, 2013 WL 1453258, at *9.
12
SO ORDERED:
Dated:
May 23,2013
New York, New York
13
- 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
(212) 446-2350
Mitchell R. Berger, Esq.
Patton Boggs LLP (DC)
2550 M Street, N.W.
Washington, D.C. 20037
(202) 457-5601
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
(212) 415-9309
14
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