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Goldstein v. Federal Deposit Insurance Corporation

United States District Court, District Circuit

May 23, 2013

CHARLES R. GOLDSTEIN, Trustee for K Capital Corp., Plaintiff,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, Receiver of K Bank, Defendant.

MEMORANDUM OPINION

JOHN M. FACCIOLA, UNITED STATES MAGISTRATE JUDGE

This case was referred to me for full case management. Currently pending and ready for resolution is Plaintiff’s Motion to Quash Subpoena to Protiviti, Inc. [#1].[1]

BACKGROUND

Petitioner in this case, Charles Goldstein (“Petitioner-Trustee”), objects to a subpoena duces tecum and ad testificandum issued by this Court to Protiviti, Inc (“Protiviti”). Protiviti is a third party in an underlying bankruptcy dispute between petitioner-trustee and the Federal Deposit Insurance Corporation (“FDIC”) currently pending in the District Court for the District of Maryland. Defendant’s Memorandum (A) In Opposition to Plaintiff’s Motion to Quash Subpoena Issued to Protiviti, Inc. and (B) In Support of Cross-Motion to Compel Discovery Pursuant to the Subpoena [#7] at 3. That case concerns the relationship between and certain loans made by K Bank, a state-charted bank, and its parent bank holding company, K Capital, before K Bank was placed under receivership. Id.

FACTS AND PROCEDURAL HISTORY

K Bank was a wholly-owned subsidiary of K Capital, and “K Capital’s principal asset was its ownership interest in K Bank.” [#7] at 3. K Bank was placed into receivership in November 2010, and the FDIC was appointed its receiver. Id. At the same time, the assets of K Bank were sold to another bank, and documents related to K Bank’s loans were transferred to the new bank. Id. at 4. K Capital filed for bankruptcy a few days later, and Mr. Goldstein was appointed K Capital’s trustee. Id. The FDIC then transferred a large amount of documents to Mr. Goldstein in his capacity as trustee. Id. On January 11, 2011, Mr. Goldstein submitted an application to the bankruptcy court to employ Protiviti as “financial and tax advisors” to assist the trustee with the management of K Capital’s estate.[2] [#7-2] at 1. In February 2011, Mr. Goldstein, acting as trustee, filed a claim in the K Bank receivership proceedings, asserting that K Bank and K Capital had issued the loans jointly, and that “any recoveries from the K Bank loans should be treated pari passu between K Capital and K Bank.” [#7] at 5. The FDIC rejected this claim, and in response, the trustee filed the underlying complaint against the FDIC. Id.

“Extensive discovery” has taken place in the district court in Maryland. Id. The subpoena at issue was issued by the District Court for the District of Columbia in March of 2013. It requests that a representative from Protiviti appear for a deposition and bring with him or her various documents relating to Protiviti’s involvement in the trustee’s work on behalf of K Capital. See Subpoena to Testify at a Deposition in a Civil Action [#1-3]. On April 1, 2013, the petitioner brought the instant motion to quash. [#1]; [#7] at 6.

LEGAL STANDARD

Under Rule 26 of the Federal Rules of Civil Procedure, “[p]arties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action.” Fed.R.Civ.P. 26(b)(1). However, if the discovery is sought through a subpoena to a third party, and responding to the subpoena would “require[] disclosure of privileged or other protected matter, ” or “subject[] a person to undue burden, ” the third party may move to quash the subpoena under Rule 45. Fed.R.Civ.P. 45; see also In re Subpoena Goldberg, 693 F.Supp.2d 81, 83 (D.D.C. 2010). Although, in general, “a party [to a dispute] . . . lacks standing to challenge a subpoena issued to a third party, ” the party may do so on behalf of the third party if there is a viable “claim of privilege, proprietary interest, or personal interest in the subpoenaed matter.” Washington v. Thurgood Marshall Acad., 230 F.R.D. 18, 21 (D.D.C. 2005).

However, “the quashing of a subpoena is an extraordinary measure, and is usually inappropriate absent extraordinary circumstances.” Flanagan v. Wyndham Intern. Inc., 231 F.R.D. 98, 102 (D.D.C. 2005) (citing, among others, Salter v. Upjohn Co., 593 F.2d 649, 651 (5th Cir. 1979)). Indeed, “a court should loathe to quash a subpoena if other protection of less absolute character is possible.” Flanagan, 231 F.R.D. at 102. In the context of a subpoena duces tecum, “this Court has previously expressed its preference that a deposition proceed and the deponent assert her objections during the deposition, thus allowing the deposing party to develop circumstantial facts in order to explore the propriety of the . . . objection.” Id. at 103 (internal quotations omitted).

ANALYSIS

Petitioner-trustee asserts three arguments in favor of quashing the subpoena: 1) that the subpoena constitutes an impermissible attempt to gain discovery from Protiviti that was already precluded by the district court in the underlying action, 2) that the FDIC may not compel testimony or documents from Protiviti because Protiviti assisted the petitioner–trustee in his claim against the FDIC on behalf of K Capital, and therefore any information held by Protiviti is protected by either the attorney-client or work product privileges or both ([#1-1] at 1-2), and 3) that Protiviti was hired and used “solely for litigation support” and is therefore “akin to . . . a non-testifying expert” who cannot be deposed.[3]

Petitioner-trustee’s first argument applies only to the document production aspect of the subpoena; his remaining arguments apply to the deposition aspect as well. I will address each aspect of ...


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