. . . . it is sufficient if the inquiry is within the authority of the agency, the demand is not too indefinite and the information sought is reasonably relevant." Morton Salt, 338 U.S. at 652.
Respondents do not dispute that the RTC "has statutory authority to issue subpoenas to former directors and officers and others to determine whether as a result of their dealings with failed savings associations such persons may be liable for damages." RTC Petition, at 13. Rather, respondents contend, the financial information RTC seeks is not discoverable for the stated purpose of determining the cost-effectiveness of civil litigation. Respondents' argument is persuasive.
During the course of discovery in pending civil litigation, courts have routinely denied access to information concerning an individual's financial affairs for the purpose of discerning a defendant's ability to satisfy a judgment, reasoning that such material is irrelevant to the subject matter of the suit. See, e.g., Bogosian v. Gulf Oil Corp., 337 F. Supp. 1228, 1230 (E.D. Pa. 1971). Although the rules of civil procedure do not apply to restrict or control administrative subpoenas,
even the broad statutory powers afforded the RTC are insufficient to justify this extreme and unprecedented invasion of personal privacy.
In Federal Trade Commission v. Turner, 609 F.2d 743, 744, reh'g denied, 614 F.2d 294 (5th Cir. 1980), the Fifth Circuit Court of Appeals considered "the question of the power of the Federal Trade Commission ["FTC"] . . . to use an investigational subpoena to ascertain whether the subject of a cease and desist order has sufficient financial resources to make worthwhile a civil damage action for consumer redress." In denying the FTC's request, the Court reasoned that "the amount of Turner's assets is not relevant to an inquiry into whether a violation of the law exists." Id. at 745. In addition, the Court expressly rejected the FTC's claim that "Turner's wealth is germane because its investigation was instituted to determine the practical feasibility of the consumer redress action against Turner." Id. As that Court concluded, "Because the subpoenaed information is not reasonably relevant to any authorized F.T.C. inquiry, the public need for this information does not justify the pretrial invasion of Turner's privacy." Id. at 746.
In the instant case, the financial status of respondents is irrelevant to the RTC's stated inquiry. The clearly articulated purpose of its investigation is "to determine whether such former directors, officers, accountants, attorneys, appraisers and escrow agents may be liable to the RTC, in its corporate capacity, or as receiver for Sun State, as a result of their actions as directors, officers, accountants, attorneys, appraisers and escrow agents or as a result of the services they performed for Sun State." Exh. 1 to RTC Petition. The Order of Investigation nowhere states, nor does it even suggest, that the RTC intends to investigate respondents to determine whether they have sufficient assets to satisfy a judgment -- in the event an action is filed -- and the issue of respondents' liability is entirely distinct from the questions of whether, and how much, respondents could pay.
Moreover, the Court cannot conclude, as RTC urges, that the agency has been granted the authority to conduct an investigation of respondents' financial status solely to determine the cost-effectiveness of bringing a claim.
The fact that the RTC is directed to "minimize the amount of any loss realized in the resolution of cases"
cannot be read to mean that, in the instant action, the RTC can roam through respondents' personal, confidential, financial records only to determine whether it is worthwhile to pursue civil litigation.
In effect, the RTC is asking this Court to endorse a process whereby the government entity may arbitrarily discriminate between rich and poor, for implicit in the RTC's summary request is the suggestion that if the respondents are wealthy, the RTC will initiate civil actions against them, and if they are not cost-analysis worthy, the RTC will forego its right to pursue such claims. Even affording the agency the deference it is due, the Court cannot countenance a process that wholly ignores culpability or responsibility and focuses entirely on an individual's ability to pay.
Finally, the cases on which the RTC relies are inapposite. For example, in RTC v. American Casualty Co., Misc. No. 92-0054 (D.D.C. March 25, 1992), the agency sought extensive information regarding possible insurance coverage for the officers and directors of eleven failed savings associations nationwide. In the instant case, respondents have already provided that information to the RTC and are withholding entirely different, personal material. By the same token, RTC v. Ernst & Young, Misc. No. 91-398 (D.D.C. Jan. 29, 1992), involved a large accounting partnership,
and the subpoenas issued in that case were the result of a stipulation between the parties, prohibited the release of tax returns, and ordered disclosure of only the most current financial statements.
The Court certainly recognizes the magnitude of the savings and loan scandal and the RTC's corresponding responsibilities in pursuing misconduct. Nonetheless, in light of the breadth of the subpoenas, RTC's own Order of Investigation, and the governing legislation and caselaw, RTC's petition for emergency enforcement of the subpoenas duces tecum must be denied.
Accordingly, for the reasons expressed above, it is hereby
ORDERED that RTC's petition for expedited summary enforcement of administrative subpoenas duces tecum is denied.
IT IS SO ORDERED.
June 4, 1992.
JOYCE HENS GREEN
United States District Judge