Director, Office of Thrift Supervision v. Vinson & Elkins, LLP

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 8, 1997 Decided October 10, 1997

No. 96-5341

Director, Office of Thrift Supervision,

Appellant

v.

Vinson & Elkins, LLP, et al.,

Appellees

Appeal from the United States District Court

for the District of Columbia

(96ms0196)

Kenneth J. Guido, Jr., Special Enforcement Counsel, Office
of Thrift Supervision, argued the cause for appellant, with
whom Bryan T. Veis, Special Counsel, was on the briefs.

Charles D. Tetrault argued the cause for appellees, with
whom John K. Villa, Mary G. Clark, and J. Andrew Keyes
were on the brief.

Before: Silberman, Rogers, and Tatel, Circuit Judges.

Opinion for the Court filed by Circuit Judge Silberman.

Silberman, Circuit Judge: Appellant Office of Thrift Su-
pervision (OTS) asked the district court to enforce adminis-
trative subpoenas issued to the law firm of Vinson & Elkins
and two lawyers of that firm. The district court denied
enforcement. We affirm.

I.

Barry Munitz sat on the boards of both the United Savings
Association of Texas (Association) and its parent company,
United Financial Group. After the Association declared
bankruptcy, the Federal Deposit Insurance Corporation in-
terviewed Munitz about his role in the failed savings and loan.
C. Michael Buxton and Timothy A. Nelson, two lawyers from
Vinson & Elkins, represented Munitz at the interview. Mun-
itz's testimony, which was neither transcribed nor under oath,
was recorded only in the notes taken by Buxton, Nelson, and
three FDIC lawyers.

Several years later, OTS began formally investigating the
Association.1 OTS deposed Munitz, this time under oath and
with a court reporter. One of OTS' main concerns was the
relationship between the Association and its direct and indi-
rect shareholders, including MCO Holdings (later MAXXAM),
Federated Development Company, and The Drexel Burnham
Lambert Group. Charles Hurwitz was Chairman and CEO of
both MCO and Federated, which, combined, owned the larg-

__________
1 FDIC and OTS are not interchangeable agencies, but this is a
situation where their power overlaps a bit. As receiver, FDIC
stands in the shoes of the insolvent institution and can sue officers
or directors for damages under state law. 12 U.S.C.
s 1821(d)(13)(B)(i) and s 1821(k) (1994). OTS, on the other hand,
has independent authority to bring enforcement actions and can
require restitution if it proves unjust enrichment or reckless disre-
gard for the law. 12 U.S.C. s 1818(b)(6)(A) (1994). Here, because
of the overlap of authority, the two agencies were cooperating, and
FDIC let OTS take the lead.

est block of stock in the Association's parent company. OTS
suspected that Hurwitz might have pressured the Association
to buy "junk bonds" to benefit his own business interests
rather than those of the Association. The following inter-
change took place between OTS and Munitz:

Q: Did Hurwitz ever mention to you that [the Associa-
tion's] purchase of junk bonds from Drexel was helpful to
MCO's relationships with Drexel?

A: No.

Q: Did anyone ever tell you that?

A: No one ever told me that. People have asked me
that, but no one has ever told me that.

Before the deposition, OTS obtained notes of Munitz's prior
testimony from two of the three FDIC lawyers who had been
present at the FDIC interview. The FDIC attorney notes
suggest that Munitz may have answered the same question
somewhat differently in his FDIC interview:

Hurwitz Motivations--

1. Peer group pressure--"who was going down & who
was still alive."

2. Did not want to hurt his reputation among peers and
Milken [a former officer of Drexel].

3. Concern about net worth maint. risk--to MAXXAM.

4. [Association] was "ticket to ride" with Drexel.

Because of the purported inconsistency, OTS ordered Buxton,
Nelson, and Vinson & Elkins to produce all documents relat-
ing to the FDIC interview.

Buxton, Nelson, and Vinson & Elkins moved to quash the
administrative subpoena, claiming the protection of both the
attorney-client privilege and the work-product doctrine. In
accordance with its internal procedures, OTS designated a
Regional Enforcement Counsel to rule on the motion to
quash. After reviewing the documents in camera, the Re-
gional Enforcement Counsel determined that the majority of
the documents were protected, but ordered Vinson & Elkins
to produce portions of the notes Buxton and Nelson took of
Munitz's testimony during the FDIC interview. Vinson &

Elkins declined to produce the notes based on the work-
product privilege, and OTS filed a subpoena enforcement
action in district court. The district court refused to enforce
the subpoena.

Appellant argues that the district court erred in character-
izing the interview notes as "opinion work product." In
appellant's view, the district court owed deference to the
Regional Enforcement Counsel's determinations that the
notes were "fact work product" and that OTS had demon-
strated sufficient need to obtain them. Appellees counter
that, regardless of whether the notes represent facts or
opinions, OTS has failed to show sufficient need.

II.

Appellant's basic position is that the district court misap-
plied administrative law in not deferring to OTS' determina-
tion that the notes were only factual work product and that
the agency needed the notes. If that were so then we, in
turn, would owe no deference to the district court because its
error would be one of law. The difficulty with appellant's
theory is that it simply is using the wrong model.2 This is
not a case in which appellees have challenged agency action.
The agency instead has come to court in a subpoena enforce-
ment proceeding. To be sure, even in a subpoena enforce-
ment proceeding the district court is sometimes obliged, in
effect, to defer to an agency's determination even if it is only
a litigating position. If the dispute turns on the relevance of
the information sought by a government agency, we have said
that the district court should not reject the agency's position
unless it is "obviously wrong," and that the burden, as a
practical matter, is on the defendant to meet that test. FTC
v. Invention Submission Corp., 965 F.2d 1086, 1089 (D.C. Cir.
1992) (relying on United States v. Morton Salt Co., 338 U.S.

__________
2 For similar reasons the district court properly ignored, de-
spite appellant's objection, the Regional Enforcement Counsel's
"conclusion" after reviewing the notes in camera. The agency's
internal procedures in this situation simply do not bear on its case
in district court. The district court properly treated OTS' "ruling"
on the work-product doctrine as no more than a litigating position.

632 (1950)).3 We give the agency a wide berth as to relevance
because it need establish only that the information is relevant
to its investigation not to a hypothetical adjudication, and as
we have explained, the boundary of an investigation need
only, indeed can only, be defined in general terms. RTC v.
Walde, 18 F.3d 943, 946 (D.C. Cir. 1994); Invention Submis-
sion Corp., 965 F.2d at 1089. The scope of the investigation,
moreover, is very much dependent on the agency's interpreta-
tion and administration of its authorizing substantive legisla-
tion concerning which the agency may enjoy interpretative
deference. Chevron U.S.A. Inc. v. Natural Resources De-
fense Council, Inc., 467 U.S. 837 (1984).

This case, however, does not turn on the relevance of the
information sought, but rather on the question whether under
Fed. R. Civ. P. 26(b)(3) the work-product privilege must yield
to OTS' "showing of substantial need of the materials in the
preparation of [its] case and that [it] is unable, without undue
hardship, to obtain the substantial equivalent of the materials
by other means." Appellant does not claim that the scope of
the work-product privilege is somehow reduced if a govern-
ment agency seeks information. Therefore, it is not apparent
why a district judge should afford a government agency's
articulation of its need greater weight than it would a private
litigant.

III.

The parties do not dispute that the interview notes are
attorney work product, but they argue at length about wheth-
er the notes represent facts or opinions. Appellant argues
that the notes are merely an historical account of Munitz's
testimony; appellees maintain that they also reveal the law-
yers' mental impressions and legal theories. A party can

__________
3 We have said that a district court's determination of relevance
is reviewable by us under the clearly erroneous test, FTC v.
Anderson, 631 F.2d 741, 746 (D.C. Cir. 1979) (quoting FTC v.
Lonning, 539 F.2d 202, 210 n.14 (D.C. Cir. 1976)). Applying a
deferential standard on appellate review does not mean that the
district court has authority to determine relevancy in the first
instance. To the contrary, we apply that standard in light of the
great deference the district court owes the agency.

discover fact work product upon showing a substantial need
for the materials and an undue hardship in acquiring the
information any other way. Opinion work product, on the
other hand, is virtually undiscoverable. Fed. R. Civ. P.
26(b)(3); Upjohn Co. v. United States, 449 U.S. 383, 401-02
(1981). Appellees argue, and the district court agreed, that a
lawyer's interview notes are always opinion work product,
undiscoverable without "extraordinary justification." But
this proposition goes too far. We recently observed that
under certain circumstances purely factual material embed-
ded in attorney notes may not deserve the super-protection
afforded to a lawyer's mental impressions. See In re Sealed
Case, No. 97-3006, slip op. at 13 (D.C. Cir. Aug. 29, 1997). At
some point, however, a lawyer's factual selection reflects his
focus; in deciding what to include and what to omit, the
lawyer reveals his view of the case. Id. Articulating the
degree of selection necessary to transform facts into opinions
and the standard of review we should employ of a district
court determination are difficult matters that we save for
another day. We affirm the district court's alternate holding,
that appellant has not shown sufficient need for the notes
under either standard.

Appellees argue and we agree that the district court's
assessment of appellant's "need" and "hardship" is reviewable
under the lenient abuse-of-discretion standard. That is so
because it calls for a judgment along a range on which
reasonable judges could differ. Therefore, the even more
deferential standard of review than "clearly erroneous" would
normally apply. Appellant urges, however, that in this case
de novo review is appropriate, at least insofar as the district
court's judgment is infected by the legal error of declaring
that attorney's notes are necessarily opinion work product,
see, e.g., FTC v. Texaco, 555 F.2d 862 (D.C. Cir. 1977) (en
banc). But that point does not bear at all on the question of
OTS' need. Appellant also suggests--and this argument
seems particularly strained--that it satisfies the need test as
a matter of law because the notes would be admissible at
trial. The government relies on dicta in a concurring opinion
in United States v. Nobles, 422 U.S. 225, 242-54 (1975).
Justice White observed that "even in the pretrial discovery

area ... work-product notions have been thought insufficient
to prevent discovery of evidentiary and impeachment materi-
al." Id. at 249. It might be that the party seeking a
subpoena in a particular case could show greater need for
material that would be introduced into evidence at trial than
for material that would provide investigative leads. But we
can imagine situations where the purely investigative material
would be thought more important. No matter. No court has
held that the party seeking the subpoena can brush aside the
work-product privilege--even one based only on factual mat-
ters--merely by establishing that the material would be
admissible in a hypothetical trial.

That brings us to appellant's claimed need. The govern-
ment explains that it needs the notes to explore the inconsis-
tencies in Munitz's FDIC and OTS interviews. But two of
the three government lawyers present at the FDIC interview
have already given their notes to OTS, and therefore the
Vinson & Elkins notes would serve only to reinforce supposed
inconsistencies about which OTS already knows. The govern-
ment also tells us that it needs to discover the facts surround-
ing the debacle of the Association, yet it has not identified
any new information that it hopes to find in the Vinson &
Elkins notes. Appellant's need, as we understand its posi-
tion, reduces to nothing more than its desire to find corrobo-
rating evidence. It is the rare case where corroborative
evidence can be thought "necessary." It is often thought
cumulative and, as such, a trial judge has wide discretion to
exclude it. If corroboration were sufficient need to overcome
the work-product protection, what would be left of the second
part of the standard, undue hardship? Undue hardship asks
whether the moving party can acquire the information any
other way; by definition, a party seeking corroborative evi-
dence has already found a way to get the same information.
In sum, we can hardly say that the district court's determina-
tion of insufficient need was "arbitrary, fanciful, or clearly
unreasonable."

* * *

The judgment of the district court is affirmed.