Haggard et al v. Burrey
Filing
102
ORDER denying 98 Motion to Compel. Signed by Magistrate Judge Terence P Kemp on 10/4/2011. (pes1)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
Kenneth E. Haggard, et al.
Plaintiffs,
v.
Case No. 2:09-cv-0044
Thomas J. Ossege, et al.
JUDGE JAMES L. GRAHAM
Magistrate Judge Kemp
Defendant/
Third-Party Plaintiffs,
v.
Federal Deposit Insurance
Corporation,
Third-Party Defendant.
ORDER
This case is before the Court to consider a motion to compel
discovery filed by defendants and third-party plaintiffs, Thomas
J. Ossege, Jean E. Huffer, and Emma Erb (“Ossege Defendants”).
For the following reasons, this Court will deny the Ossege
Defendants’ motion to compel.
I.
Introduction
This case involves allegations of intentional
misrepresentation made by officers or directors of Miami Valley
Bank (“Bank”) in connection with certain loan transactions.
Plaintiffs, Kenneth E. Haggard and Maryann Tomczyk, who are,
respectively, the sole shareholder and the chair of the board of
directors of the Bank, filed suit against the Ossege Defendants,
each of whom was an officer or director of the Bank, asserting
various claims against them relating to transactions conducted
between the Bank and another entity, MVB Mortgage Corporation.
The Ossege Defendants then filed a third-party complaint against
the FDIC as receiver of the Bank (FDIC-R), alleging that if they
are found liable on the plaintiffs’ claims, the FDIC-R would be
obligated to indemnify them for their attorney’s fees, expenses,
and any judgment.
In their motion to compel, the Ossege Defendants argue that
FDIC-R improperly refused to produce documents after being served
with a request for production under Fed.R.Civ.P. 34.
The motion
seeks an order compelling FDIC-R to produce documents responsive
to requests numbers 16-19.
II.
Discussion
The first three requests for production of documents at
issue, numbers 16 through 18, requested that the FDIC-R produce
each balance sheet and trial balance of the Bank and its
receiver, including documents showing the sale or loss of any
assets of the Bank or its receivership; each income statement of
the Bank or its receiver, including all documents showing any
income or expense of the Bank or its receivership, including
documents showing any income or expenses; and documents relating
to the existence of all non-book assets of the Bank or its
receivership, including possible causes of action against
directors, officers, controlling shareholders, attorneys, and
accountants. See #98, Ex. A.
In essence, the Ossege Defendants
have asked the FDIC-R to produce documents relating to the value
of the Bank prior to and during the period of its receivership.
The FDIC-R has objected to these document requests because,
among other things, it believes the Ossege Defendants are seeking
discovery in order to challenge a “no value” determination that
was made by the FDIC on March 28, 2011.
See Determination of
Insufficient Assets, 76 Fed. Reg. 18551-02 (April 4, 2011).
The
no value determination states that “[T]he FDIC has determined
that insufficient assets exist to make any distribution on
general unsecured creditor claims (and any lower priority claims)
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and therefore, all such claims, asserted or unasserted, will
recover nothing and have no value.”
Id.
The FDIC-R argues that
the information being sought in requests 16 through 18 is
relevant only to the Ossege Defendants’ attempt to collaterally
attack the no value determination.
However, the FDIC-R asserts
that the administrative “no value” determination is conclusive
and binding on the Court and all creditors and is subject to
challenge only under the Administrative Procedures Act (“APA”).
In support of their motion to compel, the Ossege Defendants
argue that because the FDIC is a party to this suit and the
actions of the FDIC elsewhere indicate that the receivership is
not insolvent, they are entitled to discovery on the insolvency
question.
Ordinarily, the solvency of a party against whom a
claim for damages is asserted would not be a proper subject of
discovery until a judgment is actually entered on that claim.
However, the Ossege Defendants point out that the FDIC has moved
to dismiss this action on grounds of mootness, and has cited to
the no value determination as the basis of its motion.
Thus, the
Ossege Defendants appear to be arguing that because the FDIC-R
itself has raised an issue tied to the Bank’s financial
condition, they are entitled to conduct discovery about it.
A no value determination by an agency, such as the FDIC, is
a final agency action “which is reviewable under the provisions
of the Administrative Procedure Act[, 5 U.S.C. §§ 701–706,] in an
action against the [agency], but not subject to collateral attack
through discovery or other means in individual lawsuits against
the receiver.”
Federal Sav. & Loan Ins. Corp. v. Locke, 718
F.Supp. 573, 586 (W.D.Tex.1989). See Adams v. Resolution Trust
Corp., 927 F.2d 348, 355 n. 15 (8th Cir. 1991); 281-300 Joint
Venture v. Onion, 938 F.2d 35, 38 (5th Cir. 1991).1
1
In their
Cases involving the Resolution Trust Corporation (“RTC”)
and the Federal Savings and Loan Insurance Corporation (“FSLIC”)
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Second Amended Complaint, the Ossege Defendants have not made a
claim under the APA to challenge the no value determination.
Consequently, even though the FDIC-R has asked the Court to take
into account the fact that the receivership has no assets to
satisfy claims from creditors in the posture of the Ossege
Defendants, the information which the Ossege Defendants seek in
discovery could not be submitted to the Court in order to
controvert the FDIC-R’s claim of mootness.
Otherwise, the Court
would be entertaining an improper collateral attack on the
administrative no value determination.
Therefore, because the no
value determination is not subject to collateral attack in this
action, the documents requested in numbers 16 through 18 are not
relevant or reasonably calculated to lead to the discovery of
admissible evidence.
Fed. R. Civ. P. 26(b).
The fourth request for production of documents, number 19,
requests documents contained in the record of an FDIC enforcement
action, In re Haggard and Tomczyk, FDIC-09-545e & FDIC-09-547k,
including exhibits offered in evidence, whether or not admitted.
FDIC-R objected to this request on the basis that the documents
contained in the record of that administrative proceeding are not
in its possession, custody, or control.
It asserted that a
request for these documents can only be made under 12 C.F.R. Part
309 through the office of the Executive Secretary of the FDIC.
The basis of this argument is the FDIC-R’s position that the
FDIC, in its corporate capacity as the party which pursues
administrative proceedings, is a different party from the FDIC-R
are instructive to cases interpreting the FDIC. See FDIC v. Rahn,
116 F.3d 1142, 1145 (6th Cir. 1997)(noting that discussion of the
FDIC’s powers apply equally to the FSLIC); See also Nasoordeen v.
FDIC, No. CV 08-05631 MMM, 2010 WL 1135888, at *2 n.5 (C.D. Cal.
March 17, 2010)(noting that because the FDIC is governed by the
Financial Institutions Reform, Recovery, and Enforcement Act,
just as the RTC was, case law interpreting the statute during the
period the RTC was in existence is instructive).
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as a receiver of failed financial institutions.
The FDIC functions “in several different guises (as
receiver, as conservator, and as a corporation)” and “each
organization can conduct arm's length transactions with itself in
these various capacities.”
(6th Cir. 1997).
FDIC v. Rahn, 116 F.3d 1142, 1145
“On one hand, the FDIC acts as receiver of a
failed bank, marshaling its assets in order to pay the bank's
creditors.
On the other hand, the FDIC-Corp. acts as an insurer
of member banks.
In its corporate capacity, the FDIC must make
the most of the assets purchased from the FDIC as receiver.”
Id.
quoting Trigo v. FDIC, 847 F.2d 1499, 1502 n.3 (11th Cir. 1988);
see Locke, 718 F.Supp. at 579 -580.
Courts have applied this distinction in the context of
discovery.
At least one court observed that “[t]he distinction
plaintiff draws between the FDIC as a Receiver and the FDIC as a
corporate regulator is a valid one.
ruse to obstruct discovery.”
It is not . . . merely a
FDIC v. Wachovia Insurance
Services, Inc., No. 3:05 CV 929(CFD), 2007 WL 2460685, at *2
(D.Conn. August 27, 2007).
Request for production of document number 19 requests
documents contained in the record in In re Haggard and Tomczyk,
FDIC-09-545e & FDIC-09-547k, which is an enforcement action
initiated by the FDIC acting in its corporate capacity, not its
receivership capacity.
The FDIC, in its corporate capacity, is
simply not a party to this lawsuit.
As such, the documents
created or submitted during the course of the administrative
proceeding initiated by the FDIC in its coporate capacity are not
in the “possession or control” of FDIC-R and the Ossegee
Defendants cannot obtain them through a Rule 34 request.
See
Fed. Rule Civ. P. 34 (obligating all parties to respond to
discovery requests for documents, electronically stored
information, or tangible things which are within their
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possession, custody, or control subject to the limitations in
Fed. R. Civ. P. 26(b)).
Of course, the Ossege Defendants may
pursue these documents from the FDIC, in its corporate capacity,
through whatever legal means available, just as they would be
permitted to do with respect to any other discovery sought from a
non-party.
III.
Order
Based on the foregoing, the Ossege Defendants’ motion to
compel (#98) is denied.
IV.
Appeal Procedure
Any party may, within fourteen days after this Order is
filed, file and serve on the opposing party a motion for
reconsideration by a District Judge. 28 U.S.C. §636(b)(1)(A),
Fed. R. Civ. P. Rule 72(a); Eastern Division Order No. 91-3, pt.
I., F., 5. The motion must specifically designate the order or
part in question and the basis for any objection. Responses to
objections are due fourteen days after objections are filed and
replies by the objecting party are due seven days thereafter.
The District Judge, upon consideration of the motion, shall set
aside any part of this Order found to be clearly erroneous or
contrary to law.
This order is in full force and effect, notwithstanding the
filing of any objections, unless stayed by the Magistrate Judge
or District Judge. S.D. Ohio L.R. 72.3.
/s/ Terence P. Kemp
United States Magistrate Judge
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