Court: Court of Appeals for the D.C. Circuit; April 19, 1994; Federal Appellate Court
Appellants, plaintiffs in a Pennsylvania class action lawsuit against First Eastern Bank and its officers, sought to enforce a subpoena for documents from an independent management consultant, Furash Company, retained by federal regulators. The district court granted the Bank's motion to quash the subpoena, citing a 'qualified privilege' against disclosure. The appellants alleged that the defendants misrepresented the Bank’s financial condition, resulting in inflated stock prices and investor losses. The OCC had required First Eastern to engage Furash for an independent management review, which resulted in a confidential report shared with the Bank's directors and the OCC. The Bank and Furash moved to quash the subpoena on grounds of privilege.
The Bank initially argued for a self-evaluative privilege but failed to raise this claim in the district court, leading the appellate court to refuse consideration of it due to a lack of exceptional circumstances. The Bank also claimed the Furash report was protected under OCC regulations, which the court noted only apply to examination reports prepared by the OCC, not third-party materials. Consequently, the appellate court reversed the district court's ruling to quash the subpoena.
Appellants recognize that they can only acquire the OCC reports of examination directly from the OCC and have issued a subpoena for this purpose. They seek materials prepared by Furash, which are not covered by existing regulations. The Bank cites several unpublished opinions asserting that reports and related information are protected due to the confidentiality of the regulatory process. However, these opinions lack precedential value and pertain to regulations from other bank regulatory agencies that offer broader protections. The Bank argues that a previous case, Feinberg v. Hibernia Corporation, supports the view that OCC regulations align with those of other agencies, but the court merely noted in dictum that the OCC regulations 'track' those of the Federal Reserve and FDIC. The OCC’s regulations are narrower and may not be questioned unless there is a claim of unreasonable statutory interpretation. Notably, the OCC has established that violations of its disclosure prohibition can lead to statutory penalties, which suggests a deliberate limitation of its regulatory scope due to potential liabilities. Additionally, the Bank relies on the governmental deliberative process privilege, which safeguards documents that reflect agency decision-making. This privilege applies even to materials prepared by outside experts, promoting candor in the agency's operations without fear of public exposure.
The deliberative process privilege can include materials generated at an agency's request, not just those prepared by government consultants. In this case, Furash, retained by First Eastern and representing the Bank, is distinct from situations in prior cases where consultants worked directly for the government. The Office of the Comptroller of the Currency (OCC), which required the Bank to hire the consultant, did not assert privilege in the current proceedings, which limits evaluating whether the privilege extends to First Eastern's claims. The district court's ruling was reversed and remanded, with emphasis on federal courts being cautious in creating evidentiary privileges. A qualified privilege has only been recognized in limited public health and safety contexts. Additionally, examination reports are confidential and cannot be disclosed outside official channels. The court highlighted that even if a privilege existed, it would not be absolute, and factors such as evidence relevance, availability of alternatives, litigation seriousness, government involvement, and potential chilling effects on employees should be considered. The district court failed to address the Bank's argument regarding the subpoena's breadth and its request for confidential proprietary information.
