Federal Deposit Insurance Corporation, as Receiver for Tennessee Commerce Bank v. Ashmore

Filing 24

ORDER granting in part 14 Motion to Compel, denying 19 Motion to Quash, and denying 22 Motion to Quash. Counsel for the Defendant and Fiserv are directed to confer and see if they can agree on an appropriate protective order, the scope of the emails, and who will do the recovery and search and provide a deadline for completion of such discovery by July 18, 2014. Objections must be called to the Magistrate Judges attention on or before July 25, 2014. The scheduling order in the case 9 is MODIFIED to provide that discovery may remain open until September 8, 2014. Dispositive motions will be filed by October 6, 2014. Signed by Magistrate Judge Joe Brown on 7/2/2014. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(ds)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
FEDERAL DEPOSIT INSURANCE
CORPORATION, as Receiver of
Tennessee Commerce Bank,

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Plaintiff
v.
JAMES D. ASHMORE,
Defendant

No. 3:13-0519
Judge Nixon/Brown
Jury Demand

O R D E R
Presently

pending

in

this

case

are

three

motions

concerning discovery.
Docket Entry 14 is a motion to compel a third–party
plaintiff Fiserv, Inc. (Fiserv)

to comply with a subpoena duces

tecum served on September 12, 2013, or a slightly revised subpoena
duces tecum served on Fiserv on June 6, 2014.
This motion quickly produced a motion to quash and a
response in opposition to the motion to compel by the Plaintiff as
Receiver (FDIC-R) (Docket Entry 19), and a motion to quash the
subpoena and response and opposition to the motion to compel by
Fiserv (Docket Entry 22).
The Magistrate Judge set the matter for oral argument on
July 1, 2014, and conducted a lengthy telephone conference with the
parties about the matter.
As an initial matter, this is a prime example of a
failure to communicate between the parties and failure to take
timely action. The Defendant served a lengthy subpoena on September

12, 2013, and after being initially told that there were objections
to the subpoena by Fiserv, let the matter rest until May 29, 2014,
when Defendant’s counsel made a specific request to Fiserv’s
counsel concerning whether they would comply with the September
subpoena or not. At that point they got a firm “No.”
The case management order (Docket Entry 9) specifically
provided that discovery would be closed on June 2, 2014, and that
prior

to

filing

any

discovery

dispute

motions,

a

telephone

conference would be conducted with the Magistrate Judge. The first
the Magistrate Judge learned of the problem was on June 12, 2014,
when the Defendant filed his motion to compel. Letting an important
discovery matter rest without action for almost nine months does
not constitute due diligence.
The motion to compel produced objections by both the
Plaintiff FDIC-R and the Third-Party Fiserv. Although the FDIC-R
was aware of the subpoena as early as October, and instructed
Fiserv not to comply with it, and also knowing that they had not
been properly served by the Defendant with a copy of the subpoena
as required by Fed. R. Civ. Pro. 45(4), they did not communicate
any of this to Defendant’s counsel until their June 19th motion.
Issues were raised concerning the FDIC-R’s standing to
object to a third-party subpoena. Fiserv then filed its own motion
to quash the subpoena.

2

As noted above, the Magistrate Judge is not happy with
any of the counsel due to their failure to get this matter resolved
early on.
After discussion with the parties it appears that what
the Defendant is actually seeking are emails between his client and
a

number

of

other

people

and

several

banks

involved

in

a

complicated financial arrangement in which Defendant admittedly
signed a promissory note for several million dollars. The FDIC sued
him on the note. He is attempting to raise as a defense an
agreement between signers of the note and various banks that could
substantially reduce his liability on the note. Admittedly, he did
not sign the agreement himself.
The FDIC has taken the position that a timely subpoena
was

never

served;

that,

regardless

of

service,

any

attempts

regarding an unsigned understanding is precluded by the D’Oench,
Duhme doctrine as announced by the Supreme Court in D’Oench, Duhme
& Co., Inc. v. Federal Department Insurance Corporation, 315 U.S.
447 (1942). They argue that doctrine essentially holds that when a
bank fails borrowers may not later defend against collection
efforts by the FDIC on a note by arguing that they had an unwritten
or oral agreement with the bank. Id. at 459-60. They point out that
the holding of this case was subsequently codified and expanded in
12 U.S.C. § 1823(e), which provides:
(c)

Agreements against interests of the [FDIC]
(1)

In general

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No agreement which tends to diminish or defeat
the interest of the [FDIC] in any asset acquired by
it under this section or section 1821 of this
title, either as security for a loan or by purchase
or
as
receiver
of
any
insured
depository
institution, shall be valid against the [FDIC]
unless such agreement –
(A)

is in writing,

(B)

was
executed
by
the
depository
institution and any person claiming an
adverse interest thereunder, including
the obligor, contemporaneously with the
acquisition
of
the
asset
by
the
depository institution,

(C)

was approved by the board of directors of
the depository institution or its loan
committee, which approval shall be
reflected in the minutes of said board of
committee, and

(D)

has been, continuously, from the time of
its execution, an official record of the
depository institution.

They argue that if an agreement fails to meet any one of
Section 1823(e)’s requirements, it is not valid against the FDIC.
Langley v. Federal Deposit Insurance Corporation, 484 U.S. 86
(1987).
Fiserv argues that as a third party they should not be
required to bear the expense of answering subpoenas given its
breadth and that they should be allowed attorneys’ fees for
objecting to it. They argue that emails must be recovered from
backup files and then searched for relevant material at great time
and expense.

4

The Magistrate Judge must admit that after reading the
definitions contained in the subpoena, even the revised subpoena
(Docket Entry 14-7 at pp. 4-9), he has little, if any, idea of what
the Defendant actually asked for. It now only involves emails.
It appears that both Fiserv and Defendant’s counsel have
used

a

provider

that

can

perform

these

recovery

and

search

services. The Magistrate Judge agrees with Fiserv that they should
not be responsible for the costs of producing this material.
Defendant’s counsel agreed that they would be responsible for the
cost of recovering and searching for relevant documents.
The

Magistrate

Judge

believes

that

is

entirely

appropriate in this matter. However, the Magistrate Judge is not
willing to impose attorneys’ fees for Fiserv opposing the motion to
compel, given the failure on both sides to really communicate about
this problem for a prolonged period of time.
Likewise, given the fact that the FDIC was aware of the
defect in serving the original subpoena in October and chose to lay
low, the Magistrate Judge is not willing to grant the FDIC’s motion
to quash, particularly given the fact that there is now a revised
subpoena, although outside the discovery deadline, which does
comply with Rule 45.
The remaining nut which must be cracked, despite all the
sound and fury over the subpoenas, is whether the material sought
by the Defendant meets the relevancy requirements of Rule 26.

5

Having read the D’Oench case and the statute, the Magistrate Judge
has reservations as to whether such evidence will be relevant.
Defendant is pushing the edge of whether such emails, as he seeks
are reasonably calculated to lead to the discovery of admissible
evidence.
It may well be that such discovery will not lead to
admissible

evidence

given

the

statute

and

the

D’Oench

case.

However, even at this date, the Magistrate Judge is not in the
position to make that determination. The Defendant will be allowed
to fish for emails to see if he can come up with something.
However, the Defendant will have to buy a fishing license, which
includes the cost of such discovery from the third party.
Counsel for the Defendant and Fiserv are directed to
confer and see if they can agree on an appropriate protective
order, the scope of the emails, and who will do the recovery and
search and provide a deadline for completion of such discovery by
July 18, 2014.
Counsel for the FDIC indicated that, given the Magistrate
Judge’s rulings, they probably would not have further objections.
Nevertheless, if they do have any objections, they must be called
to the Magistrate Judge’s attention on or before July 25, 2014.
Accordingly, the motion to compel (Docket Entry 14) is
GRANTED in part as modified–limited to emails.
The FDIC’s motion to quash (Docket Entry 19) is DENIED.
6

Fiserv’s motion to quash (Docket Entry 22) is DENIED in
part.

However,

the

cost

of

production

will

be

borne

by

the

Defendant.
The scheduling order in the case (Docket Entry 9) is
MODIFIED to provide that discovery may remain open until September
8, 2014.
Dispositive motions will be filed by October 6, 2014.
Responses to dispositive motions shall be filed within 21 days
after service. Briefs shall not exceed 25 pages without leave of
Court. Optional replies, limited to five pages, shall be filed
within seven days after service of the response. If dispositive
motions are filed early, the response and reply dates are moved up
accordingly.
It is so ORDERED.
/s/
Joe B. Brown
JOE B. BROWN
United States Magistrate Judge

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