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   [8023] In the Matter of Gary A. Dorris, Bank of Arizona, Scottsdale, Arizona, Docket No. FDIC-92-128jj (12-3-92).

   FDIC Executive Secretary, under authority delegated by FDIC Board, denies interlocutory review of pre-hearing ruling that discovery is not allowed in Section 32 proceeding. Presiding Officer had denied request for documents other than those that enforcement counsel relied on to support his determination that applicant should not serve as an officer or director at a troubled institution.

   [.1] Practice and Procedure—Discovery—When Permitted
   The grant of certain powers to the Presiding Officer for FDIC hearings, including the authority to issue subpoenas, is not a grant of authority to conduct pre-hearing discovery, which is specifically barred in Section 32 proceedings.

   [.2] Practice and Procedure—Interlocutory Review—Criteria
   Interlocutory review is inappropriate where subsequent modification of the contested ruling would be an adequate remedy for applicant. Since the hearing has already been held, the FDIC Board can remedy error by ordering remand if it finds error in its review of the entire record.

In the Matter of
GARY A. DORRIS
BANK OF ARIZONA
SCOTTSDALE,ARIZONA
(Insured State Nonmember Bank)
DECISION AND ORDER ON
REQUEST FOR INTERLOCUTORY
REVIEW

FDIC-92-128jj

INTRODUCTION

   This matter is before the Executive Secretary of the Federal Deposit Insurance Corporation, acting pursuant to authority delegated by the Board of Directors of the Federal Deposit Insurance Corporation ("FDIC") and at the advice and recommendation of the General Counsel, upon a Request for Interlocutory Review filed by Respondents Gary A. Dorris and Bank of Arizona, Scottsdale, Arizona ("Respondents"). Respondents request review of a pre-hearing ruling of Presiding Officer Daniel H. Hanscom's ("Presiding Officer") denial of applications for the issuance of subpoenas duces tecum. The request arises in a proceeding under section 32 of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. § 1831i. The FDIC is required under section 32 to issue a notice of disapproval if an application to add an individual to the board of directors or to employ an individual as a senior executive officer of an insured depository institution {{2-28-93 p.I-73}}submitted to the FDIC indicates that the applicant lacks the requisite "competence, experience, character or integrity" and that it is not "in the best interest of the public to permit the individual to be employed by, or associated with, the depository institution...." 12 U.S.C. § 1831i(e).

BACKGROUND1

   On June 22, 1992, Respondent Gary A. Dorris was served with notice of the FDIC's denial of Respondent's appeal from a Notice of Denial of Appeal From Notice of Disapproval and Notice of Hearing ("Notice"). The FDIC's Notice stated that the FDIC was unable to find favorably under the section 32 criteria with respect to service of Respondent Gary A. Dorris as senior vice president, chief lending officer, and director of the Bank of Arizona. Respondents requested a hearing before a presiding officer pursuant to 12 C.F.R. § 308.154. On July 7, 1992, the FDIC designated Daniel H. Hanscom as the Presiding Officer for the hearing. In its July 7, 1992, letter to the Presiding Officer, the FDIC states in part:

    Under Section 308.155 of the FDIC's rules and regulations, your role as presiding officer is to make recommendations to the FDIC's Board of Directors on the merits of the case, and you are authorized to call witnesses, require the production of documents, administer oaths, take or cause to be taken depositions, and to issue, revoke, quash, or modify subpoenas and subpoenas duces tecum.
   On July 24, 1992, Respondents served on FDIC Enforcement Counsel a Request for Production of Documents. On August 4, 1992, FDIC Enforcement Counsel filed a motion with the Presiding Officer to strike Respondents' Request for Production of Documents. On August 7, 1992, this motion was granted in part and denied in part. The Presiding Officer required FDIC Enforcement Counsel to produce only those documents specifically referenced in the Notice, and the documents upon which counsel for FDIC Enforcement Counsel would rely in support of the FDIC finding that the competence, experience, character, and integrity of Respondent Gary A. Dorris are inconsistent with service by him as an officer and/or director of the Bank of Arizona. Other documents included in Respondents' request included documents related to the Resolution Trust Corporation's ("RTC") termination of Respondent Dorris's position with Sun State Savings and Loan Association, FSA, Phoenix, Arizona, complete loan files including comment sheets, collateral registers, notes, security agreements, loan agreements, etc., for each loan referenced by the FDIC in support of the Notice, and all examiner line sheets, work papers, etc., related to any loan referenced by the FDIC in support of the Notice. The Presiding Officer denied these document requests on the basis that these demands constituted discovery which is not provided for in the Rules governing a hearing procedure under 308.155(c) (4).
   On August 10, 1992, Respondents requested that the Presiding Officer issue a subpoena duces tecum to the FDIC pursuant to 12 C.F.R. § 308.155(c)(6). Other than the documents required to be produced pursuant to the Presiding Officer's August 7, 1992, ruling, the Presiding Officer denied Respondents' request for issuance of the subpoena duces tecum, stating in part:
    Accordingly, the demand for the issuance of a Subpoena Duces Tecum directed to the FDIC for the production of the documents listed in Specifications 8 through 15 is denied. The basis for this denial is that Rule 308.155(c)(4) states that there shall be no discovery in proceedings under this subpart, which is Subpart L which governs this proceeding.
    In denying the document demands of Specifications 8 through 15 based on Rule 308.155(c)(4), however, there is no implication that were it not for Rule 308.155(c)(4), [Respondents'] document demand would necessarily constitute proper or appropriate discovery.
    Counsel for [Respondents] point out that Rule 308.155(c)(6) authorizes the Presiding Officer in a proceeding of this nature to issue subpoenas duces tecum and that the letter of the FDIC assistant secretary dated July 7, 1992, also authorized the issuance of subpoenas duces tecum and

1 The information contained in this section was generated solely from information supplied in [Respondents'] Procedural Background and exhibits submitted by Respondents. Enforcement Counsel for the Federal Deposit Insurance Corporation ("FDIC Enforcement Counsel") did not submit a procedural background, nor did either side include a Statement of Facts in the materials submitted.

    {{2-28-93 p.I-74}}granted power to require the production of documents. However, I read these grants as essential for the conduct of a hearing and do not see them as overriding the provision of Rule 308.155(c)(4) that there shall be no discovery in this proceeding.
   Presiding Officer Hanscom's Denial of Application for Issuance of Subpoena Duces Tecum Directed to FDIC Enforcement Counsel, dated August 13, 1992.
   On August 19, 1992, Respondents requested that the Presiding Officer issue thirdparty subpoenas duces tecum to the custodian of the records for the RTC, the Office of the Comptroller of the Currency ("OCC"), the Office of Thrift Supervision ("OTS") and Republic National Bank, Phoenix, Arizona. On August 20, 1992, the Presiding Officer denied Respondents' request for the issuance of these subpoenas, stating in part:
    As stated in my ruling on August 13, 1992, on [Respondents'] Request for the issuance of subpoenas duces tecum to the FDIC, I read the foregoing grant in 308.155(c)(6) as conferring power necessary to enable the Presiding Officer to conduct a hearing, for example, to compel the attendance of witnesses. Based on this reading, I do not see 308.155(c)(6) as overriding 308.155(c)(4) and in effect nullifying it.
   Presiding Officer Hanscom's Denial of Request of [Respondents] for Issuance of Subpoenas Duces Tecum to the RTC, the OCC, the OTS and the Republic National Bank, dated August 20, 1992. It is from these denials of Respondents' application for issuance of subpoenas duces tecum that Respondents appeals.

DISCUSSION

   Requests for interlocutory review are governed by Rule 28 of the Uniform Rules of Practice and Procedure, 12 C.F.R. § 308.28.2

The FDIC concludes, upon a review of the record and the reasons proffered by Respondents in their request, that the Respondents have failed to satisfy any of the criteria for interlocutory review pursuant to that Rule. Accordingly, the FDIC denies the request.
   Rule 28 provides that the FDIC may grant interlocutory review of an Administrative Law Judge ruling if:

    (1) The ruling involves a controlling question of law or policy as to which substantial grounds exist for a difference of opinion;
    (2) Immediate review of the ruling may materially advance the ultimate termination of the proceeding;
    (3) Subsequent modification of the ruling at the conclusion of the proceeding would be an inadequate remedy; or
    (4) Subsequent modification of the ruling would cause unusual delay or expense.
   12 C.F.R. § 303.28(b). Respondents contend that they meet all four criteria. The FDIC disagrees.

   [.1] The Presiding Officer's ruling denying Respondents' request for issuance of subpoenas duces tecum ("Ruling") does not present any controlling question of law or policy as to which substantial grounds exist for a difference of opinion. As the Presiding Officer found, the FDIC Regulations provide that no discovery shall occur in a section 32 proceeding. 12 C.F.R. § 308.155(c) (4). The grant of certain powers to the Presiding Officer under 12 C.F.R. § 308.155(c) (6), including the authority to issue subpoenas, is not a grant of authority to conduct pre-hearing discovery.
   The FDIC is also unconvinced that immediate review of the Ruling will materially advance the ultimate termination of the proceeding. Respondents contend that if the Board immediately reviews the Presiding Officer's denial of the subpoenas and determines that the subpoenas should be issued, Respondents will be able to review and present the subpoenaed documents at the hearing. Since the hearing took place on September 1, 1992, this issue is moot.
   [.2] Finally, the FDIC does not agree with Respondents' argument that subsequent modification of the Ruling would be an inadequate remedy or cause unusual delay or expense. The material utilized by the FDIC to


2 Counsel for each party points out that the provision of the FDIC Rules of Practice and procedure ("FDIC Rules") covering interlocutory review does not apply to hearings under section 32. See 12 C.F.R. § 308.28. FDIC Enforcement Counsel argues, therefore, that there can be no interlocutory review. This reading of the Board's power is too narrow. The Board may conduct an interlocutory review pursuant to its broad general grant of authority to carry out the provisions of the FDI Act. 12 U.S.C. § 1819(a) Seventh. See also FDIC-91-246jj, 2 P-H FDIC Enf. Dec. P 8014 (1992).
{{2-28-93 p.I-75}}support its decision below (i.e. the documents specifically referenced in the Notice) as well as any documents upon which FDIC Enforcement Counsel relied in support of that decision have been produced to Respondents by order of the Presiding Officer. If the Presiding Officer had determined that additional documents were relevant or should have been produced he would have ordered their production during the course of the proceeding. Moreover, the FDIC in its discretion may remand this proceeding back to the Presiding Officer if it determines, upon review of the record, that the documents sought should have been produced for review by the Presiding Officer in reaching his decision. Therefore, subsequent modification of the ruling is an adequate remedy and would not cause unusual delay or expense.
   In sum, Respondents' Request for Interlocutory Review fails to satisfy the criteria contained in Rule 28. Accordingly, the Request is hereby denied.

ORDER

   For the reasons set forth above, it is hereby ORDERED that Respondents' Request for Interlocutory Review is DENIED.
   Dated at Washington, D.C., this 3rd day of December, 1992.
   Pursuant to delegated authority, upon the advice and recommendation of the General Counsel.

_________________________________________
RECOMMENDED DECISION

In the Matter of
Gary A. Dorris
Bank of Arizona
Scottsdale,Arizona
(Insured State Nonmember Bank)
Denial of Application
for Issuance of
Subpoena Duces Tecum
Directed to FDIC

FDIC-92-128jj

   Petitioners by letter of August 10, 1992, request the issuance of a Subpoena Duces Tecum to the Executive Secretary and Custodian of the records of the FDIC. The Subpoena and its Specifications are attached hereto.
   By my ruling of August 7, 1992 (inadvertently dated July 7, 1992), I directed production of the documents called for in Specifications 1 through 3. These are documents specifically referenced in the Notice of Denial of Appeal from Notice of Disapproval issued June 17, 1992. The Notice of Denial stated that the FDIC was unable to find favorably under the criteria of Section 32 with respect to service of Petitioner Gary A. Dorris as senior vice president, chief lending officer, and director of the Bank of Arizona. Since these documents set out the basis for the FDIC's disapproval of Petitioner's service in the identified positions with the Bank of Arizona, I ruled that they should be produced so that Petitioners could know the specific allegations of the FDIC respecting Gary A. Dorris, the basis for them and what petitioners would have to meet at the hearing.
   Specifications 4, 5, 6, and 7 call for documents upon which Counsel for the FDIC will rely in support of the FDIC finding that the competence, experience, character and integrity of Petitioner Gary A. Dorris are inconsistent with service by him as an officer and/or director of the Bank of Arizona. I have ruled that Petitioners are entitled to have these documents prior to the hearing and directed that they be produced on or before August 11, 1992.
   Specifications 8, 9 and 10 call for documents related to the RTC's termination of Gary A. Dorris' position with Sun State Savings, for complete loan files including comment sheets, collateral registers, notes, security agreements, loan agreements, etc. for each loan referenced by the FDIC in support of the Notice, and for all examiner line sheets, work papers, etc. related to any loan referenced by the FDIC in support of the Notice. As stated in my prior ruling, these demands constitute discovery which is not provided for in the Rules governing this proceeding. See Rule 308.155(c)(4).
   Specifications 11 through 15 of the Subpoena Duces Tecum attached hereto likewise constitute discovery which is not provided for in the Rules governing this proceeding.
   Accordingly, the demand for the issuance of a Subpoena Duces Tecum directed to the FDIC for the production of the documents listed in Specifications 8 through 15 is denied. The basis for this denial is that Rule 308.155(c)(4) states that there shall be no
{{2-28-93 p.I-76}}discovery in proceedings under this subpart, which is Subpart L which governs this proceeding.
   In denying the document demands of Specifications 8 through 15 based on Rule 308.155(c)(4), however, there is no implication that were it not for Rule 308.155(c)(4), petitioners' document demands would necessarily constitute proper or appropriate discovery.
   Counsel for Petitioners points out that Rule 308.155(c)(6) authorizes the Presiding Officer in a proceeding of this nature to issue subpoenas duces tecum and that the letter of the FDIC assistant executive secretary dated July 7, 1992, also authorized the issuance of subpoenas duces tecum and granted power to require the production of documents. However, I read these grants as essential for the conduct of a hearing and do not see them as overriding the provision of Rule 308.155(c) (4) that there shall be no discovery in this proceeding.
   As described, I previously directed production by the FDIC of the documents called for in Specifications 1 through 3 for the reasons stated above. I see nothing anomalous or inconsistent in providing Petitioners with documentation setting out the grounds for the FDIC's disapproval of service by Petitioner Dorris with the Bank of Arizona, and denial of the demands for documents in Petitioners' Specifications 8 through 15 on the ground that the no-discovery provision of Rule 308.155(c)(4) governs.
   The arguments in Petitioners' Response to FDIC's Motion to Strike Petitioners' Request for the Production of Documents are largely directed to the propriety of Rule 308.155(c)(4). Such arguments are a matter for the FDIC not the Presiding Officer in this proceeding.
   I note, however, that broad and possible burdensome demands for the production of documents which might contradict the litigating position of the FDIC, or be exculpatory, or be useful to petitioners in some manner, are not normally granted on the basis of conjecture or speculation that such exist.
   The documents requested in Specifications 1 through 7 of the attached Subpoena Duces Tecum, as stated, have been ordered produced. It is unnecessary, therefore, in this ruling to again order the production of these documents.

_____________________________________________
RECOMMENDED DECISION

In the Matter of
Gary A. Dorris
Bank of Arizona
Scottsdale,Arizona
(Insured State Nonmember Bank)
FDIC-92-128jj

Denial of Request of Petitioners for Issuance of

Subpoenas Duces Tecum to the RTC, the OCC,

the OTS and the Republic National Bank

   Petitioners have requested me as the Presiding Officer in the above Matter to issue Subpoenas Duces Tecum returnable August 24, 1992, to the Resolution Trust Corporation as Receiver of Sun Savings and Loan Association, FSA, formerly known as Sun State Savings and Loan Association, Phoenix, Arizona, to the Office of the Comptroller of the Currency, to the Office of Thrift Supervision and to the Republic National Bank, Phoenix, Arizona.
   Copies of these Subpoenas Duces Tecum are attached hereto.
   Aside from any issue as to whether the documentation sought constitutes proper and allowable discovery, the Rules governing this proceeding do not allow discovery. This is a matter being conducted under Subpart L of the FDIC Rules and Section 308.155(c)(4) provides that "[T]here shall be no discovery in proceedings under this subpart".
   Petitioners ground their subpoena requests on the provision of Section 308.155(c) (6) granting the Presiding Officer in a proceeding of this nature power "to administer oaths and affirmations, to take or cause to be taken depositions of unavailable witnesses, and to issue, revoke, quash or modify subpoenas and subpoenas duces tecum."
   As stated in my ruling on August 13, 1992, on Petitioners' Request for the issuance of subpoenas duces tecum to the FDIC, I read the foregoing grant in 308.155(c)(6) as conferring power necessary to enable the Presiding Officer to conduct a hearing, for example, to compel the attendance of witnesses. Based on this reading, I do not see 308.155(c)(6) as overriding 308.155(c)(4) and in effect nullifying it.
   Accordingly, Petitioners' Request for the {{2-28-93 p.I-77}}issuance of the attached Subpoenas Duces Tecum is denied.

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