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OFHEO in Contempt for Failing to Produce Docs

OFHEO in Contempt for Failing to Produce Docs

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Published by: ny1david on Oct 23, 2012
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12/04/2012

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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
 Argued November 10, 2008 Decided January 6, 2009No. 08-5014I
N RE
:
 
F
ANNIE
M
AE
S
ECURITIES
L
ITIGATION
,Appeal from the United States District Courtfor the District of Columbia(No. 04cv01639)
 Nicholas J. Bagley
, Attorney, U.S. Department of Justice,argued the cause for appellant. With him on the briefs were
Gregory G. Katsas
, Assistant Attorney General,
 Jeffrey A.Taylor 
, U.S. Attorney,
 R. Craig Lawrence
and
 John C.Truong
, Assistant U.S. Attorneys, and
 Mark B. Stern
and
 Michael S. Raab
, Attorneys.
Sarang V. Damle
and
 Mark R.Freeman
, Attorneys, entered appearances.
 Alex G. Romain
argued the cause for appellees. Withhim on the brief were
Kevin M. Downey
,
Steven M. Salky
,
 Eric R. Delinsky
, and
 David S. Krakoff 
.Before: T
ATEL
and K
AVANAUGH
,
Circuit Judges
, andS
ILBERMAN
,
Senior Circuit Judge
.Opinion for the Court filed by
Circuit Judge
T
ATEL
.T
ATEL
,
Circuit Judge
: The Office of Federal HousingEnterprise Oversight (OFHEO) appeals a district court order
 
2holding it in contempt for failing to comply with a discoverydeadline to which it agreed. Though we appreciate OFHEO’sefforts to comply, we conclude that it ultimately failed to doso and find no abuse of discretion in the district court’scontempt finding or choice of sanction.
I.
Appellant Office of Federal Housing EnterpriseOversight regulates the Federal National MortgageAssociation (“Fannie Mae”) and the Federal Home LoanMortgage Corporation (for some reason “Freddie Mac”)—both government-sponsored enterprises participating in thesecondary mortgage market. This case concerns OFHEO’sresponsibilities for Fannie Mae.In 2003 OFHEO opened a special review of FannieMae’s accounting and financial practices, ultimatelyconcluding that the enterprise had departed from generallyaccepted accounting principles in order to manipulate itsreported earnings and inflate executive compensation.Although OFHEO has since closed its investigation andconcluded its enforcement actions, its preliminaryinvestigation report prompted several private civil actionsagainst Fannie Mae, its senior executives, and others. Theseactions have been consolidated into multidistrict litigation inthe United States District Court for the District of Columbia.Although OFHEO is not itself a party to the multidistrictlitigation, the parties have subpoenaed records it collected inperforming its oversight functions and preparing itsinvestigation report. This appeal concerns a dispute oversubpoenas issued by appellees, three individual defendants inthe multidistrict litigation who were senior executives atFannie Mae: former chairman and CEO Franklin Raines,
 
3former CFO J. Timothy Howard, and former senior vicepresident and controller Leanne Spencer.In the summer of 2006, Howard and Raines subpoenaedover thirty categories of documents from OFHEO.
See
Fed.R. Civ. P. 45(c)(2)(B)(ii) (governing subpoenas to non-parties). They claimed that the documents would aid theirdefense by showing that they “had been completelytransparent with OFHEO,” Appellees’ Br. 5; that “OFHEOhad approved Fannie Mae’s accounting and compensationpractices,”
id.
; and that OFHEO’s investigation “waspolitically motivated and biased,”
id.
at 6. Arguing thatHoward and Raines should have instead sought thesedocuments pursuant to its disclosure regulations, OFHEOmoved to quash the subpoenas, and the individual defendantsmoved to compel compliance. On November 6, 2006, thedistrict court ruled for the individual defendants and directedOFHEO to comply during the next four months.Although OFHEO began producing documents, it askedHoward and Raines (now joined by Spencer, the thirdappellee) to limit their requests for electronically storedinformation in order to minimize the burden on OFHEO.Responding by letter dated February 18, 2007, the individualdefendants revised their initial requests for such information,limiting them for the time being to certain emailcommunications stored on OFHEO’s network and backuptapes. Shortly thereafter, OFHEO filed a motion with thedistrict court seeking an approximately one-month extensionof the time to comply. Representing that the parties had“agreed that the Court’s November 6, 2006 Order did notapply to the ESI [i.e., electronically stored information],”OFHEO’s motion proposed extending the deadline only forpaper documents. OFHEO’s Mot. for Extension 4, Mar. 9,2007. OFHEO explained that it was providing electronically

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