United States District Court, District of Columbia
C. Lamberth United States District Court Judge.
April of 2019, plaintiffs Fairholme Funds, Inc., et
al. ("Fairholme") subpoenaed thirty- seven
requests for production of documents ("RFPs") from
the U.S. Department of the Treasury ("Treasury").
Treasury has refused to comply with the subpoena, so
Fairholme has filed a Motion to Compel Compliance with
Subpoena to the U.S. Treasury for certain RFPs. ECF No. 103.
For the reasons set forth below, the Court will grant
plaintiffs Motion to Compel and require Treasury to produce
RFPs 1-8, 10-14, 15(a)-(d), 16-26, and 29-30.
the economic crash in 2008, Congress enacted the Housing and
Economic Recovery Act of 2008. Pub. L. No. 110-289, 122 Stat.
2654. This statute created the Federal Housing Finance Agency
("FHFA") and empowered it to act as conservator or
receiver of the Federal National Mortgage Association
("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). The statute also
authorized Treasury to purchase securities issued by Fannie
Mae and Freddie Mac (collectively "the GSEs"). FHFA
exercised its statutory authority to place the GSEs into
conservatorship around the same time that Treasury entered
into Senior Preferred Stock Purchase Agreements
("PSPAs") pursuant to which Treasury invested
billions of dollars in the GSEs to keep them from defaulting
and to maintain their net worth at a positive level
("Net Worth Sweep"). See Perry Capital LLC ex
rel. Inv. Funds v. Mnuchin, 864 F.3d 591, 599 (D.C. Cir.
2017). In exchange for this investment, Treasury received
senior preferred stock with a liquidation preference,
warrants to purchase 79.9% of each enterprise's common
stock, commitment fees, and quarterly dividends as a
percentage of the liquidation preference of its senior
preferred stock. In 2012, Treasury and FHFA entered into the
Third Amendment to the PSPAs, thereby replacing the GSEs'
obligation to pay Treasury quarterly dividends at a fixed
rate with a variable dividend equal to the amount, if any, by
which the enterprises' net worth exceeds a 'capital
buffer. The Third Amendment also suspended the periodic
commitment fee that each GSE would otherwise owe to the
taxpayers for the remaining funding available to the GSEs for
as long as the variable dividend remains in effect.
Plaintiffs filed their original complaint challenging the
Third Amendment in 2013. ECF No. 1. This case is now on
remand following a decision from the United States Court of
Appeals for the District of Columbia, so only claims against
FHFA and the GSEs remain; Treasury is no longer a party to
this action. The ultimate issue in this case is whether
defendants are liable for breach of the implied covenant of
good faith and fair dealing.
Dispute Regarding Subpoena
served a third-party subpoena on Treasury on" April 9,
2019. Pursuant to an agreement between the parties, Treasury
responded via letter on May 10, 2019. The subpoena included
thirty-seven RFPs seeking information from July 1, 2008 to
January 31, 2014. Treasury determined that due to
Toughy regulations, Treasury and its employees could
not produce any documents without prior agency authorization.
See United States ex rel. Toughy v. Ragen, 340 U.S.
462 (1951). Treasury therefore denied the requests to produce
documents in response to thirty-six of the thirty-seven RFPs
as unduly burdensome, disproportionate to the needs of the
case, and/or seeking documents available from other sources.
In July of 2019, plaintiffs filed their Motion to Compel but
dropped RFPs 9, 15(e), 27-28, and 31-37. Their motion seeks
full compliance with the remainder of their Rule 45 subpoena.
Federal Rules of Civil Procedure ("Fed. R. Civ.
P.") govern discovery disputes, including disputes
regarding subpoenas. When a party files a motion to compel,
the first consideration is whether the discovery sought is
relevant to any party's claim or defense. See
Fed. R. Civ. P. 26(b)(1). Courts generally construe the
concept of relevance broadly, as disclosure is favored over
nondisclosure. See In re Denture Cream Prod. Liab.
Litig., 292 F.R.D. 120, 123 (D.D.C. 2013) ("For
purposes of discovery, relevance is liberally
construed."); Zelaya v. UNICCO Serv. Co., 682
F.Supp.2d 28, 32 (D.D.C. 2010). Although the low bar for
relevance remains the same for both parties and nonparties
alike, courts do attempt to be "generally sensitive to
the costs imposed on third parties." Watts v.
SEC, 482 F.3d 501, 509 (D.C. Cir. 2007).
materials sought are relevant, the Court must then determine
whether the subpoena would place "an undue burden"
on the person or entity from whom discovery is sought.
Watts, 482 F.3d at 508. In assessing whether a
discovery request imposes an undue burden, the Court must
analyze whether the request is "unreasonably cumulative
or duplicative," whether it "can be obtained from
some other source that is more convenient, less burdensome,
or less expensive," and "whether it is proportional
to the needs of the case." Fed.R.Civ.P. 26(b)(1);
Fed.R.Civ.P. 26(b)(2)(C). The person or entity
"resisting discovery" has the "burden ... to
show that the documents requested are ... unduly
burdensome[.]" In re Micron Tech., Inc. Sec.
Litig., 264 F.R.D. 7, 9 (D.D.C. 2010); see also
Buzzfeed, Inc. v. U.S. Dep't of Justice, 318
F.Supp.3d 347, 356 (D.D.C. 2018). Vague and conclusory
assertions are not sufficient; rather, a showing of undue
burden "must be specific" and concrete. See,
e.g., Flatow v. Islamic Republic of Iran, 196 F.R.D.
203, 207 (D.D.C. 2000). Assertions of an undue burden without
"specific estimates of staff hours needed to
comply" should be "categorically rejected."
Association of Am. Physicians & Surgeons v.
Clinton, 837 F.Supp. 454, 458 n.2 (D.D.C. 1993).
the entity objecting to the subpoena proves that there is
some burden, that burden must be balanced against other
factors before it can truly be considered undue. Fed.R.Civ.P.
26(b)(1) states that the proportionality inquiry considers
"the importance of the issues at stake in the action,
the amount in controversy, the parties' relative access
to relevant information, the parties' resources, the
importance of the discovery in resolving the issues, and
whether the burden or expense of the proposed discovery
outweighs its likely benefit." Therefore, the undue
burden test essentially considers the totality of the
circumstances rather than focusing on any one particular
explained in this Section of the Memorandum Opinion, the
Court finds that the materials sought do meet the low
threshold for relevance. The Court also finds that Treasury
has not demonstrated with the requisite specificity how
granting Fairholme's Motion to Compel would constitute an
undue burden. The Court will therefore grant the Motion to
Plaintiffs' Requested Materials are ...