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Cavanaugh v. Wainstein

June 4, 2007

FRANCIS X. CAVANAUGH, PLAINTIFF,
v.
KENNETH L. WAINSTEIN, DEFENDANT.



The opinion of the court was delivered by: Gladys Kessler United States District Judge

MEMORANDUM OPINION

Plaintiff, Francis Cavanaugh, seeks the depositions of four United States Department of Justice ("DOJ") attorneys. He argues that these depositions are vital to a related civil case, Cavanaugh v. Saul, No. 03-111 (D.D.C., filed Jan. 24, 2003) ("Underlying Action"), against members of the Federal Retirement Thrift Investment Board ("Board") for breach of fiduciary duty. The defendants in that related case have asserted an "advice of counsel" defense, claiming reliance on the advice of, inter alia, the four DOJ attorneys whose depositions Plaintiff seeks. The DOJ, through Defendant in this case, Kenneth Wainstein,*fn1 denied Plaintiff's demand to depose those DOJ attorneys. Defendant based his decision on the grounds that the demand failed to indicate the relevance of the testimony sought, was duplicative and burdensome, sought testimony protected by the attorney work product and deliberative process privileges, and sought testimony of a high-level government official without the requisite showing of need.

Plaintiff properly challenges Defendant's denial in this Court pursuant to the Administrative Procedure Act ("APA"), 5 U.S.C. § 701 et seq. He claims that Defendant arbitrarily and capriciously denied his demand.

This matter is before the Court on Plaintiff's Motion for Summary Judgment [Dkt. No. 15], Defendant's Cross Motion for Summary Judgment [Dkt. No. 16], and Defendant's Renewed Motion for Summary Judgment [Dkt. No. 30]. Upon consideration of the Motions, Oppositions, Replies, and the entire record herein, and for the reasons stated below, Plaintiff's Motion for Summary Judgment is hereby granted in part and denied in part, Defendant's Cross Motion for Summary Judgment is hereby denied, Defendant's Renewed Motion for Summary Judgment is denied, and Count III of Plaintiff's Amended Complaint is dismissed as moot.*fn2

I. FACTS AND PROCEDURAL HISTORY*fn3

Plaintiff filed this suit to challenge Defendant's denial of his demand to depose four DOJ Civil Division attorneys: Stuart Schiffer ("Schiffer"),*fn4 Thomas Bondy ("Bondy"),*fn5 Michael Hertz ("Hertz"), and Brian Simkin ("Simkin") (collectively, the "DOJ Attorneys").*fn6 He sought those depositions in connection with the Underlying Action.

Plaintiff in this case is the named plaintiff in the Underlying Action.*fn7 The defendants in the Underlying Action are Andrew Saul, Thomas Fink, Alejandro Sanchez, and Gordon Whiting, who are members of the Federal Retirement Thrift Investment Board. The Board administers the government's Federal Employees' Thrift Savings Plan ("Plan"), a retirement savings plan for current or former United States Government employees and for members of the uniformed services, which was created by the Federal Employees' Retirement System Act ("FERSA"), 5 U.S.C. §§ 8401, et seq. Also named as defendants in the Underlying Action are Elizabeth Woodruff, the General Counsel of the Board, and Gary Amelio, the Board's Executive Director.

In the Underlying Action, Plaintiff alleges that Saul, Fink, Sanchez and Whiting breached their fiduciary duties by coercing the resignation of the former Executive Director of the Board and by settling litigation between the Board and American Management Systems, Inc. ("AMS"), a vendor to the Board. Mehle v. American Management Systems, Inc., No. 01-1544 (D.D.C., filed July 17, 2001) ("AMS Action"). Plaintiff, on behalf of the Board, brought a civil suit against AMS in connection with a contract between AMS and the Board that required AMS to provide a record software system. The Board had cancelled the contract prior to its completion, citing numerous problems with timeliness and quality, and subsequently sued AMS for fraud. Outside counsel, principally Gibson, Dunn and Crutcher LLP, also represented the Board in that suit.

The district court in the AMS Action found against Plaintiff and the Board on the question of whether Plaintiff, as the Board's Executive Director, had independent litigating authority to bring suit against AMS without authorization from the DOJ. Mehle v. American Management Systems, Inc., 172 F. Supp. 2d 203 (D.D.C. 2001). Plaintiff, on behalf of the Board, appealed ("AMS Appeal"). The United States intervened in the AMS Appeal to oppose the Board's position that Plaintiff, as the Board's Executive Director, had independent litigating authority. Ultimately, the parties dismissed the AMS Appeal by stipulation on August 11, 2003. In the Underlying Action, Plaintiff claims that this decision to settle the AMS Appeal constituted a breach of fiduciary duty. He seeks the depositions of the DOJ Attorneys he contends were involved in providing advice to the Board regarding that settlement.

While the AMS Appeal was pending, Saul invited Schiffer to attend a Board meeting scheduled for April 28, 2003. The Board sought Schiffer's recommendations concerning its future course of action in the AMS Appeal, as well as in a related suit pending against the United States in the U.S. Court of Federal Claims, American Management Systems, Inc. v. United States, No. 01-586C, dismissed per stipulation (Ct. Cl. July 2, 2003) (the "Court of Claims Suit"). At the April 28, 2003 Board meeting, the DOJ Attorneys met in person with members of the Board, as well as its General Counsel and Acting Executive Director. The meeting was closed to the public.

At the time of the meeting, Bondy represented the United States in the AMS Appeal. Simkin represented the United States in the Court of Claims Suit. Woodruff, the Board's General Counsel, had also asked Hertz for advice regarding a counterclaim in the Court of Claims Suit.

In a June 13, 2003 letter to Woodruff, Hertz recommended acceptance of a proposed settlement of the AMS litigations. On June 16, 2003, in a Board meeting closed to the public, Woodruff submitted the proposed settlement to the Board and its newly appointed Executive Director, and recommended its acceptance in a memorandum of that date. On or about June 17, 2003 the Executive Director initiated a telephone conference with Hertz and Simkin regarding the proposed settlement.

On June 20, 2003, in a meeting closed to the public, the Executive Director informed the Board members that he had decided to accept the proposed settlement. After that meeting, the Executive Director and representatives of AMS and DOJ executed a settlement agreement.

All six defendants in the Underlying Action are represented by attorneys from the Civil Division of the DOJ. All of those defendants, except for the Board's General Counsel, have indicated their intent to assert an "advice of counsel" defense, including the argument that they relied on the settlement recommendation in Hertz's June 13, 2003 letter. Neither the DOJ nor the DOJ Attorneys are parties in the Underlying Action.

In connection with the Underlying Action, on December 2, 2004, Plaintiff Mehle submitted to Defendant a demand to take the depositions of the DOJ Attorneys. Am. Compl. Ex. A. In his affidavit attached to the demand letter, Mehle specified four subject areas for which he sought testimony: the DOJ Attorneys' (1) interactions and communications with, and their advice to, defendants in the Underlying Action concerning the AMS Appeal and Court of Claims Suit; (2) negotiations for settlement of the AMS Appeal and Court of Claims Suit; (3) interactions and communications with the Board's private outside counsel; and (4) interactions and communications with each other and others at the DOJ.

In response to the demand, the DOJ initiated an inquiry into the nature of the DOJ Attorneys' involvement in the issues raised in the Underlying Action. On January 10, 2005, Assistant United States Attorney Alan Burch sent a memorandum ("Burch Memorandum") to Craig Lawrence. The Burch Memorandum recommended denying the demand for depositions and instead providing a declaration explaining the scope of the advice to the Board and authenticating the transcript of the April 28, 2003 Board meeting and the June 13, 2003 letter to the Board's General Counsel.

Based on the Burch Memorandum, Defendant denied each of the demanded depositions in a January 10, 2005 letter to Mehle ("Denial Letter"). Am. Compl. Ex. B. The Denial Letter provided the following rationales: (1) Mehle failed to demonstrate the relevance to the advice of counsel defense of three of the four subject areas demanded; (2) the third and fourth subject areas were covered by the attorney work product privilege and the fourth by the deliberative process privilege; (3) Mehle failed to make a sufficient showing of need to require the testimony of Schiffer, a high government official; (4) Bondy only participated in the April 2003 Board meeting, for which a transcript is available; and (5) Simkin's testimony would be duplicative of the transcript and June 13, 2003 letter.

Instead of the demanded depositions, Defendant provided the declaration of Michael Hertz, whom he identified as the individual who was most informed about DOJ's negotiations with AMS counsel and updates to the Board regarding those negotiations. He explained in the Denial Letter that "[i]n light of the completeness of the documentary evidence available regarding the legal advice to the Board by DOJ attorneys, release of [the April 28, 2003 transcript, June 13, 2003 letter, and Hertz declaration] should comprehensively respond to your request . . . . Providing live testimony would therefore be duplicative and unnecessarily burdensome." Denial Letter at 2.

Plaintiff filed this action nine days later, on January 19, 2005. He seeks an order setting aside Defendant's denial of the deposition demand as arbitrary and capricious and requiring the DOJ Attorneys to submit to depositions. He also seeks attorney's fees and costs. On February 3, 2006, Plaintiff filed an Amended Complaint, which substituted Cavanaugh for Mehle as Plaintiff.

This case is now before the Court on the parties' Cross Motions for Summary Judgment [Dkt. Nos. 15, 16]. Defendant renewed his summary judgment motion after Plaintiff filed the Amended Complaint [Dkt. No. 30].*fn8 No Opposition was filed to the renewed motion.

II. STANDARD OF REVIEW

Summary judgment should be granted if the pleadings, depositions, answers to interrogatories, and admissions on file, together with any affidavits or declarations, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56. Material facts are those that "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In this case, the parties agree that there are no disputed material facts and the case should be resolved on summary judgment.

The so-called "Federal Housekeeping Statute," 5 U.S.C. § 301, authorizes agencies to issue regulations regarding whether government employees or documents may be subpoenaed from the federal government. In Touhy v. Ragen, 340 U.S. 462 (1951), the Supreme Court affirmed the principle underlying these regulations, which are commonly referred to as "Touhy regulations." The DOJ has enacted Touhy regulations pursuant to 5 U.S.C. § 301. See 28 C.F.R. §§ 16.21 et seq.

"Under Touhy, neither state-court nor federal-court litigants may obtain a subpoena ad testificandum against an employee of a federal agency that has enacted a Touhy regulation." Houston Business Journal Inc. v. Office of the Comptroller, 86 F.3d 1208, 1212 n.4 (D.C. Cir. 1996) (internal citations omitted). Rather, a litigant must follow the agency's Touhy regulations to demand the employee's testimony. Once an agency has refused to produce testimony pursuant to its Touhy regulations, the plaintiff's "sole remedy . . . is to file a collateral action in federal court under the [Administrative Procedure Act ('APA')]." Id. at 1212. "[T]he federal court will review the agency's decision not to permit its employee to testify under an 'arbitrary and capricious' standard." Id. at 1212 n.4. Under the APA, an agency's action may be set aside only if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). "The arbitrary and capricious standard [of the APA] is a narrow standard of review." Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971). In reviewing an agency action, the Court "must consider whether the [agency] decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Id. This standard presumes the validity of agency action. See Ethyl Corp. v. EPA, 541 F.2d 1, 34 (D.C. Cir. 1976) (en banc). In particular, "a court is not to substitute its judgment for that of the agency." Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).

Despite this deferential standard, the Court will "intervene to ensure that the agency has 'examine[d] the relevant data and articulate[d] a satisfactory explanation for the action.'" Petroleum Communications, Inc. v. FCC, 22 F.3d 1164, 1172 (D.C. Cir. 1994) (quoting State Farm, 463 U.S. at 43). In making its determination, the reviewing court "must consider whether the [agency's] decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Marsh v. Oregon Natural Res. Council, 490 U.S. 360, 378 (1989) (internal quotations omitted). "At a minimum, the agency must have considered all relevant data and articulated an explanation establishing a 'rational connection between the facts found and the choice made.'" Aloha Care, Inc. v. Hawaii Dep't of Human Services, No. 04-498, 2005 U.S. Dist. LEXIS 41202, *24 (D.D.C. June 28, 2005) (citing Bowen v. Am. Hosp. Ass'n, 476 U.S. 610, 626 (1986)). Thus, our Court of Appeals has held that "[w]here ...


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