The opinion of the court was delivered by: PAUL FRIEDMAN, District Judge
Plaintiffs filed this action pursuant to Rule 45(c)(2)(B) of the
Federal Rules of Civil Procedure moving to compel John D. Hawke, Jr., the
Comptroller of the Currency and head of the Office of the Comptroller of
the Currency ("OCC"), to comply with a subpoena commanding the production
of documents and his appearance to give deposition testimony. The OCC
opposed plaintiffs' motion and filed a motion to quash the subpoena. The
Court heard oral argument on the motions on May 28, 2004, at which time
the Court announced certain findings of fact and conclusions of law
memorialized by separate Order issued that same day. The Court also
directed the OCC to submit to Chambers for in camera review the three
documents, which total 29 pages, that the OCC has withheld from
production. The remaining issues raised in the parties' motions are the
subject of this Opinion.
In their motion, plaintiffs assert that on May 13, 2004, they served a
subpoena on the OCC in connection with a federal securities class action
pending in the United States District Court for the Northern District of
California ("May 13 Subpoena"). In that class action, plaintiffs have
alleged that Providian Financial Corp. ("Providian") and certain
individual defendant officers (collectively, "defendants") engaged in a
course of conduct designed to mislead the investing public through the issuance of a series of false and misleading
public statements and through the failure to make timely mandated updates
and corrections. See Plaintiffs' Motion to Compel Compliance from the
Office of the Comptroller of the Currency with a Rule 45 Subpoena ("Pls.'
Mot.") at 1. Plaintiffs assert that "the Defendants engaged in this
fraudulent conduct to mask the serious deterioration of Providian's
credit card loan portfolio and to conceal their knowledge that
Providian's expected future managed net credit losses and managed net
credit loss rates would not meet projections." Id. at 1-2.
During the course of discovery in the underlying action, plaintiffs
determined that the OCC, the Federal Deposit Insurance Corp. ("FDIC"),
and the Utah Department of Financial Institutions ("UDFI") each had
examined Providian and two of its bank subsidiaries, Providian National
Bank ("PNB") and Providian Bank, for "safety and soundness," focusing on
the way in which Providian calculated its loan losses and on the adequacy
of its loan loss reserves. These investigations resulted in a consent
agreement entered into by PNB and the OCC on November 21, 2001 ("November
21 Agreement"), which required Providian to increase its loan reserves,
mandated charges to Providian's financial statements and restricted
Providian's operations. See Pls.' Mot. at 2. Plaintiffs assert that the
issues examined by the OCC, and memorialized in the consent agreement,
are at the heart of plaintiffs' securities class action. See id.
Plaintiffs submitted requests for testimony and documents to the OCC
on April 16 and April 19, 2004.*fn1 Specifically, plaintiffs sought
access to Reports of Examination and other correspondence that the OCC
may have sent to PNB or PNB's auditor, Ernst & Young, pertaining to the OCC's 2001 examination of PNB and the November 2001
Agreement. By letter of May 13, 2004, the OCC stated that it had located
three responsive documents, but denied plaintiffs' request on the grounds
that: (1) "none of the [responsive documents] was written by the close of
the class action period and so none pertains to OCC communications with
the Bank during the relevant period"; (2) "the parties already have
access to the [November 21 Agreement], Article VI of which reflects the
OCC's concerns with the Bank's allowance for loan and lease losses and
its instructions to the Bank as to how to calculate the allowance"; and
(3) "the factual information about the Bank's allowance, lending
function, and the deterioration in asset quality upon which the OCC based
its opinions is available in non-privileged documents generated by the
Bank and Ernst & Young." Motion of the Office of the Comptroller of the
Currency to Quash the Rule 45 Subpoena ("OCC Mot."), Ex. 1, Eetter of May
13, 2004 from Timothy W. Eong, Senior Deputy Comptroller to James E.
Evangelista, Esq. ("First OCC Denial Eetter").
By letter of May 14, 2004, plaintiffs responded to the OCC denial with
a lengthy argument and a request for reconsideration. See OCC Mot., Ex.
2, Letter of May 14, 2004 from J. Evangelista to T. Eong ("Pls.' OCC
Recon. Req."). Also in response to the OCC's denial, plaintiffs served
the May 13 Subpoena on the head of the OCC to obtain documents and
testimony related to the OCC's investigation of Providian. The subpoena
included eight document requests, seven of which concerned documents
related to the OCC and its examination of Providian, PNB and/or the
individual defendants. The remaining request sought the minutes of any
meetings of the Boards of Directors of Providian and PNB and any
committees thereof. See Pls.' Mot., Ex. A, May 13 Subpoena. The OCC
reiterated its denial by letter of May 21, 2004, and raised the additional ground for denial that the documents in
question were protected by the "bank examination privilege." See OCC
Mot., Ex. 3, Letter of May 21, 2004 from T. Long to J. Evangelista
("Second OCC Denial Letter").
For the reasons stated in open court at the conclusion of the May 28
hearing, the Court concludes that the proper standard of review in
considering the parties' motions is the "relevancy" standard articulated
in Rules 26 and 45 of the Federal Rules of Civil Procedure, not the
arbitrary and capricious standard of the Administrative Procedure Act.
Under the Federal Rules, discovery is broad, as "parties may obtain
discovery regarding any matter, not privileged, that is relevant to the
claim or defense of any party, including the existence, description,
nature, custody, condition, and location of any books, documents, or
other tangible things and the identity and location of persons having
knowledge of any discoverable matter." FED. R. CIV. P. 26(b)(1).
Discovery may be obtained from non-parties pursuant to Rule 45, but that
non-party can move to quash a subpoena by demonstrating that the subpoena
"requires disclosure of privileged or other protected matter and no
exception or waiver applies, or subjects [the non-party] to undue
burden." FED. R. CIV. P. 45(c)(3).
Plaintiffs assert that "the operative complaint in this action alleges
that by October 2000 Defendants knew that Providian's actual credit
losses would significantly exceed their loss projections for 2001, which
projections they nevertheless disseminated to the investing public." Plaintiffs' Reply Memorandum in Further Support of their Motion to
Compel. ("Pls.' Rep.") at 9. Plaintiffs' request to the OCC seeks access
to Reports of Examination and other correspondence that the OCC may have
sent to PNB or its auditor Ernst & Young, pertaining to the OCC's
2001 examination of PNB and the November 2001 Agreement.
1. Objection on the Basis of the Date of the Documents
The OCC objects to plaintiffs' document subpoena on several grounds.
First, the agency concluded that the three documents that address the
issues raised in plaintiffs' request portions of an Examination Report
pertaining to the November 21 Agreement and two related letters were not
written during the class period and therefore that plaintiffs have failed
to demonstrate their relevance. See First OCC Denial Letter at 1.
Plaintiffs respond that the materials were written to address defendants'
activities prior to and during the class period and therefore are
relevant. See Pls.' OCC Recon. Req. at 2-3. As a preliminary matter, the
Court concludes that the origination dates of the three documents is not
dispositive as to the relevance of the documents because the relevance
standard is so broad under the Federal Rules of ...