Federal Deposit Insurance Corporation v. Bank of America, N.A.MOTION Rule 56D.D.C.January 8, 2018 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. BANK OF AMERICA, N.A., Defendant. Case No. 1:17-cv-36-EGS REDACTED DEFENDANT’S RULE 56(d) MOTION TO DENY, OR DEFER CONSIDERATION OF, PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT EXPEDITED CONSIDERATION REQUESTED Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 1 of 24 i CONTENTS INTRODUCTION ......................................................................................................................... 1 I. FACTUAL AND PROCEDURAL BACKGROUND ............................................................... 4 II. THE COURT SHOULD ALLOW BANA TO CONDUCT DISCOVERY ............................. 7 A. BANA Seeks Particular Facts To Support Its Defense and Counterclaims. .......... 8 B. BANA Cannot Produce These Facts To Oppose The FDIC’s Motion. ............... 15 C. The Information Sought Is Discoverable. ............................................................ 17 CONCLUSION ............................................................................................................................ 18 LOCAL CIVIL RULE 7(m) STATEMENT................................................................................ 18 Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 2 of 24 TABLE OF AUTHORITIES Page(s) ii Cases Abtew v. DHS, 808 F.3d 895 (D.C. Cir. 2015) .................................................................................................18 * Am. Tower, L.P. v. City of Huntsville, Ala., No. 99-2933, 2000 WL 34017802 (M.D. Ala. Sept. 29, 2000) ...............................................16 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) ...................................................................................................................7 ATC Petroleum, Inc. v. Sanders, 860 F.2d 1104 (D.C. Cir. 1988) ...............................................................................................11 Berkeley v. Home Ins. Co., 68 F.3d 1409 (D.C. Cir. 1995) .............................................................................................7, 16 Carpenter v. Fed. Nat’l Mortg. Ass’n, 174 F.3d 231 (D.C. Cir. 1999) ...................................................................................................8 Celotex Corp. v. Catrett, 477 U.S. 317 (1986) ...................................................................................................................7 Chen v. Bell-Smith, 768 F. Supp. 2d 121 (D.D.C. 2011) ...................................................................................10, 15 Christopher v. SmithKline Beecham Corp., 567 U.S. 142 (2012) .....................................................................................................12, 14, 15 Columbia Plaza Corp. v. Sec. Nat’l Bank, 525 F.2d 620 (D.C. Cir. 1975) ...................................................................................................3 Commercial Drapery Contractors, Inc. v. United States, 133 F.3d 1 (D.C. Cir. 1998) .......................................................................................................3 * Convertino v. DOJ, 684 F.3d 93 (D.C. Cir. 2012) .....................................................................................7, 8, 16, 18 Daingerfield Island Protective Soc’y v. Lujan, 920 F.2d 32 (D.C. Cir. 1990) ...................................................................................................11 Donahue v. Tokyo Electron Am., Inc., No. 14-563, 2014 WL 12479285 (W.D. Tex. Sept. 2, 2014) ..................................................16 Donofrio v. Camp, 470 F.2d 428 (D.C. Cir. 1972) ...................................................................................................7 Falconi-Sachs v. LPF Senate Square, LLC, 142 A.3d 550 (D.C. 2016) .......................................................................................................10 Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 3 of 24 TABLE OF AUTHORITIES Page(s) iii Gates & Fox Co. v. Occupational Health & Safety Review Comm’n, 790 F.2d 154 (D.C. Cir. 1986) .................................................................................................12 * Gen. Elec. Co. v. EPA, 53 F.3d 1324 (D.C. Cir. 1995) ...............................................................................11, 12, 14, 15 Hazard Coal Corp. v. Ky. W. Va. Gas Co., 311 F.3d 733 (6th Cir. 2002) ...................................................................................................11 Humane Soc’y of United States v. Locke, 626 F.3d 1040 (9th Cir. 2010) ...................................................................................................3 Ikossi v. Dep’t of Navy, 516 F.3d 1037 (D.C. Cir. 2008) .................................................................................................7 United States ex rel. Landis v. Tailwind Sports Corp., 234 F. Supp. 3d 180 (D.D.C. 2017) .............................................................................10, 11, 15 In re Lorazepam & Clorazepate Antitrust Litig., 295 F. Supp. 2d 30 (D.D.C. 2003) .......................................................................................2, 14 McWay v. LaHood, 269 F.R.D. 35 (D.D.C. 2010) ...................................................................................................16 Patterson v. Whitman, No. 02-2213, 2003 WL 25901429 (D.D.C. June 9, 2003) .......................................................16 Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806 (1945) .................................................................................................................11 S. Constr. Co. v. United States ex rel. Pickard, 371 U.S. 57 (1926) .....................................................................................................................3 * Sagar v. Lew, 309 F.R.D. 18 (D.D.C. 2015) ...........................................................................................8, 9, 12 Salzer v. FCC, 778 F.2d 869 (D.C. Cir. 1985) .................................................................................................13 In re Sealed Case, 121 F.3d 729 (D.C. Cir. 1997) .................................................................................................18 Theodore Roosevelt Conservation P’ship v. Salazar, 616 F.3d 497 (D.C. Cir. 2010) ...................................................................................................3 United States v. Chrysler Corp., 158 F.3d 1350 (D.C. Cir. 1998) .........................................................................................11, 12 Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 4 of 24 TABLE OF AUTHORITIES Page(s) iv Vaughn v. Rosen, 523 F.2d 1136 (D.C. Cir. 1975) ...............................................................................................18 Wilson v. Hunam Inn, Inc., 126 F. Supp. 3d 1 (D.D.C. 2015) ...............................................................................................7 Statutes Administrative Procedure Act, 5 U.S.C. § 701 et seq......................................................................3 Rules Federal Rule of Civil Procedure 26(b)(1) ......................................................................................17 * Federal Rule of Civil Procedure 56(d) ..................................................................1, 4, 7, 8, 16, 18 Local Civil Rule 7(m) ....................................................................................................................18 Local Civil Rule 16.3 .......................................................................................................................6 Regulations 76 Fed. Reg. 10,627 (Feb. 25, 2011) ...............................................................................................4 77 Fed. Reg. 66,000 (Oct. 31, 2012) ................................................................................................4 79 Fed. Reg. 70,427 (Nov. 26, 2014)...............................................................................................4 Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 5 of 24 1 INTRODUCTION In this case where it seeks between $540 million and $1.125 billion in damages, Plaintiff Federal Deposit Insurance Corporation (“FDIC”) has moved the Court to grant it judgment on liability without ever allowing Defendant a chance to conduct discovery. From the FDIC’s perspective, it may well be preferable to obtain judgment in a billion-dollar case without ever opening itself to discovery. But so long as material facts relevant to the claims of the FDIC and to the defenses of Defendant Bank of America, N.A. (“BANA”) remain in dispute and unavailable to BANA, as they are now, the Court should deny, or defer ruling on the FDIC’s motion, under Federal Rule of Civil Procedure 56(d) to allow BANA the opportunity to conduct discovery into these and other critical factual questions. BANA respectfully requests expedited consideration of this Motion, in view of the January 16 deadline for its response on the merits to the FDIC’s Motion.1 The FDIC appears determined to avoid the full development of relevant facts through the natural course of this proceeding. For example, the FDIC’s suit is premised on the theory that BANA was not calculating its insurance “assessment payments” in the manner the FDIC now says was required. Further development of the record concerning the FDIC’s knowledge of that fact—including internal discussions it may have had then and since—is directly relevant to this case in at least two different ways. First, the FDIC claims that BANA was “unjustly” enriched, but there was no unjust 1 Under the Court’s minute order of November 9, 2017, BANA’s opposition to the FDIC’s motion for partial summary judgment and any cross-motion for summary judgment are due January 16. A decision granting this Rule 56(d) Motion would obviate the need for BANA to file by that date. Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 6 of 24 2 enrichment to the extent the FDIC had been informed, for years, of the methodology BANA was deploying and continued to provide insurance coverage with that knowledge.2 BANA seeks to develop that evidence further. Second, the FDIC’s knowledge of and reaction to BANA’s methodology at the time supports BANA’s argument that it lacked “fair notice” of the regulatory interpretation the FDIC advances now. Ex. C at 1 (emphasis added). Yet despite seeing—and approving— what BANA was doing, the FDIC seeks an immediate judgment on liability to prevent BANA from developing further evidence to help illustrate that there was not notice then of the interpretation the FDIC advances now. As one more example of the need for discovery: Sometime between 2011 and 2014 the FDIC realized that the regulation it seeks to enforce here did not convey the meaning it now claims. We know this because in 2014 the agency amended and completely changed the relevant section of its rule. BANA seeks to discover further evidence of the FDIC’s own recognition that its 2011/2012 Rules did not say what it now claims. This will directly support BANA’s “fair notice” defense—since BANA cannot have had “fair notice” of a meaning the FDIC itself realized was not there—and it will support BANA’s defense to the unjust enrichment claim, since it was not “unjust” for BANA to fail to heed a regulatory meaning that the FDIC itself recognized was not properly set forth. See generally In re Lorazepam & Clorazepate Antitrust Litig., 295 F. Supp. 2d 2 BANA has also moved to dismiss the FDIC’s unjust enrichment claim (Dkt. 13). That motion is pending. The FDIC’s inability to bring a claim for unjust enrichment in the circumstances here is, of course, an added reason its summary judgment motion should be denied—and the facts that BANA’s motion remains pending, and that BANA has not even yet answered, are further reasons this summary judgment motion is premature. Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 7 of 24 3 30, 51 (D.D.C. 2003) (“Because of the doctrine’s equitable nature[,] [e]very unjust enrichment case is factually unique.”) (citation omitted). BANA has diligently attempted to begin discovery in this case, but the FDIC has aggressively sought to block it, even though the agency itself has essentially conducted discovery through use of its administrative subpoena power. BANA moved for the opportunity to conduct discovery in July 2017, but the FDIC opposed that motion and then— —the FDIC filed its Motion for Partial Summary Judgment on Liability (Dkt. 38). For these reasons and the additional reasons set forth below, BANA cannot adequately respond to the FDIC’s Motion without a full and fair opportunity for discovery.3 BANA therefore 3 The FDIC seeks judgment on the claims it has brought, as well as on BANA’s counterclaims challenging the pertinent FDIC regulations under the Administrative Procedure Act, 5 U.S.C. § 701 et seq. This Court should defer or deny the FDIC’s motion as to all claims, including the APA counterclaims. Although APA challenges to agency rules are usually decided on the record before the agency without discovery, discovery is permitted “when the record is so bare that it prevents effective judicial review.” Theodore Roosevelt Conservation P’ship v. Salazar, 616 F.3d 497, 514 (D.C. Cir. 2010) (quoting Commercial Drapery Contractors, Inc. v. United States, 133 F.3d 1, 7 (D.C. Cir. 1998)). This includes discovery regarding “apparent . . . inconsistenc[ies]” in an agency’s conduct. Humane Soc’y of United States v. Locke, 626 F.3d 1040, 1058 (9th Cir. 2010). Here, BANA seeks discovery regarding the FDIC’s inconsistent interpretation of its 2011 and 2012 Rules, and its recognition that those rules were flawed. Those matters support BANA’s APA claims, but are inadequately addressed in the record. Moreover, counterclaims are intended “‘to prevent multiplicity of actions and to achieve resolution in a single lawsuit of all disputes arising out of common matters.’” Columbia Plaza Corp. v. Sec. Nat’l Bank, 525 F.2d 620, 625 (D.C. Cir. 1975) (quoting S. Constr. Co. v. United States ex rel. Pickard, 371 U.S. 57, 60 (1926)). Here, after approving and acquiescing in BANA’s reporting methodology for years, the FDIC has brought an action to enforce its Rules, and BANA simultaneously challenges the lawfulness of the Rules in its counterclaims. Given the parallel and closely related nature of the FDIC’s claims and BANA’s counterclaims, it is appropriate to defer ruling on the APA claims until the Court and parties have the benefit of evidence developed in connection with the FDIC’s claims that may prove relevant to the Rules’ legitimacy. Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 8 of 24 4 moves the Court under Federal Rule of Civil Procedure 56(d) to allow BANA to conduct discovery and to deny, or in the alternative defer consideration of, the FDIC’s Motion for Partial Summary Judgment on Liability until discovery is completed. I. FACTUAL AND PROCEDURAL BACKGROUND This case concerns the FDIC’s attempt to obtain additional “assessment payments” for the insurance that it provides to BANA as an insured depository institution. In February 2011, the FDIC adopted a rule that established a formula for calculating the deposit-insurance assessments owed by the largest banks—or highly complex institutions (“HCIs”)—such as BANA. See Assessments, Large Bank Pricing, 76 Fed. Reg. 10,627 (Feb. 25, 2011). The FDIC required HCIs to provide a quarterly “Call Report” identifying their largest “counterparty exposure” and their top 20 counterparty exposures. Both the 2011 Rule, and the 2012 amended Rule, defined counterparty exposure as “the sum of Exposure at Default (EAD) associated with derivatives trading and Securities Financing Transactions (SFTs) and the gross lending exposure (including all unfunded commitments) for each counterparty or borrower at the consolidated entity level.” Id. at 10,721 (emphasis added); see also Assessments, Large Bank Pricing, 77 Fed. Reg. 66,000 (Oct. 31, 2012) (leaving this provision unchanged). This last, italicized phrase is at the heart of the parties’ dispute. In 2014 the FDIC replaced that phrase (“at the consolidated entity level”) with this very different instruction: “Exposures to entities that are affiliates of each other are treated as exposures to one counterparty (or borrower).” See Assessments, 79 Fed. Reg. 70,427, 70,438 (Nov. 26, 2014). This new language means that when an HCI has exposures to multiple counterparties that are corporate affiliates of one another— for example, two subsidiaries of Goldman Sachs—those exposures should be aggregated and treated as a single exposure. Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 9 of 24 5 This new provision of the 2014 Rule completely jettisons and replaces the term from the 2011 and 2012 Rules that is at issue in this case: “consolidated entity level.” Nonetheless, after adopting the 2014 Rule, the FDIC began contending that—in effect—its complete change in regulatory language was no change at all, and HCIs had been obligated since 2011 to treat all their exposures to related companies as a single exposure to one company. Am. Compl. (Dkt. 8-1) ¶ 37. The FDIC has invoiced Bank of America for twelve quarters of allegedly underpaid deposit- insurance assessments pursuant to that new interpretation of the 2011 and 2012 Rules, id. ¶¶ 76– 77, and also seeks to recover an unspecified amount in unjust enrichment, id. ¶¶ 91–94.4 In its Answer and Counterclaim, BANA asserts, among other things, that the 2011 and 2012 Rules failed to provide BANA fair notice of the FDIC’s current interpretation, and that the Rules were arbitrary, capricious, and contrary to law. See Answer & Countercl. (Dkt. 3) at 9, 15– 17. BANA contends that the FDIC knew BANA was not applying the 2011/2012 Rules as the FDIC contends was required, and accepted, approved, and acquiesced in that. BANA also contends that the FDIC knew, during the period at issue, that the 2011/2012 Rules did not contain the meaning the agency decided to give them, which is why the agency later began considering changes and subsequently adopted the 2014 Rule. Plaintiff’s initial complaint was filed in January 2017, seeking further assessment payments for seven quarters from 2013 and 2014. In April, the FDIC filed its Amended Complaint, adding a claim for unjust enrichment and seeking payments from BANA for an additional five quarters. Am. Compl. ¶¶ 91–94. BANA moved to dismiss the Amended Complaint in part or strike it in part, on the grounds that the unjust-enrichment claim was impermissibly duplicative of the FDIC’s 4 BANA does not dispute that the 2014 Rule clearly requires aggregation of exposure to affiliated entities. Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 10 of 24 6 statutory cause of action and the FDIC’s claim for the five additional quarters was untimely. See Mot. Dismiss Pl.’s Am. Compl. in Part or Strike in Part (Dkt. 13). That motion is still pending. On April 18, 2017, the parties filed a Joint Meet and Confer Statement pursuant to Local Civil Rule 16.3. See Joint Meet & Confer Statement (Dkt. 11). The parties “request[ed] that the Court order that discovery shall begin 40 days after the Court adjudicates any and all dispositive motions filed during the pleading stage of the case.” Id. at 2. They also “agree[d] that fact discovery will begin 40 days after the Court resolves any and all pre-discovery motions.” Id. at 4. The Court issued a minute order that set a schedule for filings regarding “pre-discovery dispositive motions” and explained that, after resolution of these motions, the parties are to again meet and confer to “address each of the matters listed in Local Civil Rule 16.3(c).” Apr. 20, 2017 Min. Order. g So that the FDIC would not be able to engage in one-sided discovery of central facts in this case, BANA filed a motion for leave to commence discovery (Dkt. 28). The FDIC opposed the motion, which remains pending (Dkt. 29-1). Notice of Changed Circumstances Warranting Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 11 of 24 7 Expedited Relief (Dkt. 43-2) at 2. Five days later, the FDIC moved for summary judgment on liability. II. THE COURT SHOULD ALLOW BANA TO CONDUCT DISCOVERY Federal Rule of Civil Procedure 56(d) prevents the nonmoving party from being “‘railroaded’ by a premature motion for summary judgment.” Celotex Corp. v. Catrett, 477 U.S. 317, 326 (1986). This is because, except in extraordinary circumstances, “summary judgment is premature unless all parties have ‘had a full opportunity to conduct discovery.’” Convertino v. DOJ, 684 F.3d 93, 99 (D.C. Cir. 2012) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986)); see also Wilson v. Hunam Inn, Inc., 126 F. Supp. 3d 1, 8 (D.D.C. 2015) (Sullivan, J.) (“Generally, courts are reluctant to consider a motion for summary judgment prior to discovery.”). Under Rule 56(d), “[i]f a nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition, the court may: (1) defer considering the motion or deny it; (2) allow time to obtain affidavits or declarations or to take discovery; or (3) issue any other appropriate order.” “The rules governing discovery, including [what is now Rule 56(d)], are to be construed liberally to prevent injustice,” Donofrio v. Camp, 470 F.2d 428, 431 (D.C. Cir. 1972), and a motion “requesting time for additional discovery should be granted ‘almost as a matter of course unless the non-moving party has not diligently pursued discovery of the evidence,’” Convertino, 684 F.3d at 99 (quoting Berkeley v. Home Ins. Co., 68 F.3d 1409, 1414 (D.C. Cir. 1995)). A Rule 56(d) declaration must “state[ ] with sufficient particularity” that three requirements are satisfied. Convertino, 684 F.3d at 99 (alterations adopted) (quoting Ikossi v. Dep’t of Navy, 516 F.3d 1037, 1045 (D.C. Cir. 2008)). “First, it must outline the particular facts [the non-movant] intends to discover and describe why those facts are necessary to the litigation.” Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 12 of 24 8 Id. “Second, it must explain ‘why [the non-movant] could not produce [the facts] in opposition to the motion.’” Id. (second alteration in original) (quoting Carpenter v. Fed. Nat’l Mortg. Ass’n, 174 F.3d 231, 237 (D.C. Cir. 1999)). “Third, it must show the information is in fact discoverable.” Id. at 100. All three requirements are met here, as reflected in this Motion and the attached Declaration of Jeffrey S. Rosenberg. See Ex. A. A. BANA Seeks Particular Facts To Support Its Defense and Counterclaims. A party seeking discovery under Rule 56(d) must “reasonably identif[y] factual issues on which discovery may aid [its] effort to withstand summary judgment.” Sagar v. Lew, 309 F.R.D. 18, 20 (D.D.C. 2015). BANA intends to establish that the FDIC knew that BANA did not report under the counterparty-exposure instructions as the FDIC now claims was required, but the FDIC accepted, approved, and acquiesced in BANA’s practice. BANA further intends to show that the FDIC did not provide adequate notice to BANA, or to other HCIs, of the interpretation it advances here. Finally, BANA seeks to prove that the FDIC was aware of the limitations of the regulatory language that it removed in 2014. To establish these facts, BANA seeks an opportunity for discovery regarding the FDIC’s awareness and acceptance of BANA’s practice in reporting counterparties; the practices of other HCIs; and the FDIC’s recognition of the limitations of its 2011 and 2012 Rules. First, BANA seeks discovery to establish that the FDIC knew of BANA’s practice under the 2011 and 2012 Rules and accepted it, approved it, and acquiesced in it. Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 13 of 24 9 BANA seeks discovery regarding the FDIC’s receipt, treatment of, and reaction to these spreadsheets. For example, the official who received the spreadsheet may have memorialized its contents in some manner, and may have forwarded it and discussed it with others—further embedding awareness within the agency of BANA’s approach to the Rules. It also is possible that FDIC officials concluded that BANA’s reporting under the 2011 and 2012 Rules was reasonable and then, later, revised the Rule in 2014 to insert the meaning the agency advances now. Indeed, the FDIC’s awareness of what BANA was doing—and its recognition that it was consistent with the wording of the 2011/2012 Rules—may be the reason it completely re-wrote the Rule in 2014. Moreover, the FDIC already has put in issue its awareness of BANA’s reporting methodology. In the Amended Complaint and its opposition to BANA’s Motion to Dismiss in Part, the FDIC “emphasiz[ed]” that it was not possible for it to have known that BANA was not aggregating exposures to all related companies, because the reports required by the Rules—the “Call Reports”—do not list “the identities of [an HCI’s] counterparties.” FDIC’s Mem. Opp’n Def.’s Mot. Dismiss Pl.’s Am. Compl. in Part or Strike in Part (Dkt 19-1) at 7 (quoting Am. Compl. ¶ 35). Putting aside that this statement was highly misleading—since the quarterly spreadsheets the FDIC regularly received did list “the identities of BANA’s counterparties”—the FDIC put this Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 14 of 24 10 fact in issue, and therefore cannot be heard to complain that its knowledge of BANA’s reporting method is irrelevant.5 The FDIC’s review and reaction to these spreadsheets is directly relevant to its unjust- enrichment claim. “Claims of unjust enrichment are heavily fact-dependent,” and “whether there has been unjust enrichment” often is determined by “the nature of the dealings between the recipient of the benefit and the party seeking restitution.” United States ex rel. Landis v. Tailwind Sports Corp., 234 F. Supp. 3d 180, 205 (D.D.C. 2017) (quoting Chen v. Bell-Smith, 768 F. Supp. 2d 121, 151 (D.D.C. 2011)). What the FDIC knew about BANA’s methodology, and how it viewed and responded to it, is highly revealing of the “nature of dealings” between the parties. The courts have recognized, moreover, that a particular consideration relevant to parties’ course of dealing—and therefore whether any “enrichment” was “unjust”—is whether the plaintiff conferred a benefit “in the face of a recognized uncertainty as to the existence or extent of the [plaintiff’s] obligation to the [defendant].” Falconi-Sachs v. LPF Senate Square, LLC, 142 A.3d 550, 559 (D.C. 2016) (emphasis added; quotation and emphasis omitted). The FDIC’s acquiescence in BANA’s method for calculating exposures shows that the FDIC was at least “uncertain” that it had a basis to withhold insurance coverage from BANA, since for years it knew BANA was not using the methodology the agency advocates now and provided the coverage without objection. All the foregoing is evidence that BANA seeks in order to show that the FDIC cannot establish the elements of unjust enrichment. But BANA has not even answered that claim yet; if 5 The FDIC also put these facts in issue by alleging that it “learned the full extent of Bank of America’s reporting failure in 2016,” Am. Compl. ¶ 9, and that it was “[u]nknown to the FDIC” that “Bank of America never consolidated its counterparty exposures when reporting the amounts of its counterparty exposures in any of its Call Reports for the second quarter of 2011 through the fourth quarter of 2014,” Am. Compl. ¶ 42 (emphasis omitted). Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 15 of 24 11 and when it does, it will have defenses. Those defenses include laches, which considers whether there has been “inexcusable delay,” Daingerfield Island Protective Soc’y v. Lujan, 920 F.2d 32, 37 (D.C. Cir. 1990) (emphasis added); unclean hands, which considers whether there has been “inequitableness or bad faith,” see Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945); acquiescence, which can be proven with facts showing that the FDIC “knowingly permit[ted] [BANA] to deal with the subject matter under the belief that the transaction ha[d] been recognized,” Hazard Coal Corp. v. Ky. W. Va. Gas Co., 311 F.3d 733, 740 (6th Cir. 2002) (emphasis added); and equitable estoppel, which may turn on whether the FDIC’s “purpose [was] to invite action by [BANA],” ATC Petroleum, Inc. v. Sanders, 860 F.2d 1104, 1111 (D.C. Cir. 1988). Simply, a “heavily fact-dependent” claim such as unjust enrichment, Landis, 234 F. Supp. 3d at 205, cannot be resolved without both sides getting discovery. The FDIC’s knowledge of BANA’s practice is also relevant to BANA’s constitutional defense that it lacked fair notice of the FDIC’s interpretation of the Rules. Fair notice requires that an agency “identify, with ascertainable certainty, the standards with which the agency expects parties to conform.” Gen. Elec. Co. v. EPA, 53 F.3d 1324, 1329 (D.C. Cir. 1995). “[A]n agency is hard pressed to show fair notice when the agency itself has taken action in the past that conflicts with its current interpretation of a regulation.” United States v. Chrysler Corp., 158 F.3d 1350, 1356 (D.C. Cir. 1998). Similarly, “it is unlikely that regulations provide adequate notice when different divisions of the enforcing agency disagree about their meaning.” Gen. Elec., 53 F.3d at 1332. The FDIC’s awareness of, and reaction to, BANA’s reporting establishes that the FDIC did not afford BANA fair notice of its new interpretation of the 2011 and 2012 Rules. Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 16 of 24 12 —and further evidence that BANA may discover surrounding it—illustrate at minimum that the FDIC “has taken action in the past that conflicts with its current interpretation,” Chrysler, 158 F.3d at 1356, and that “different [personnel] of the enforcing agency disagree about their [regulation’s] meaning”—both of which establish a lack of “adequate notice.” Gen. Elec., 53 F.3d at 1332.6 Much as the FDIC may wish to prevent it, BANA is entitled to discovery to support its fair-notice defense, as well as its defense to the FDIC’s “heavily fact-dependent” unjust- enrichment claim. Second, BANA seeks discovery to prove that other HCIs did not report counterparty exposure data according to the interpretation that the FDIC now espouses. Contrary to its assertion elsewhere, see FDIC’s Resp. BANA’s Notice of Changed Circumstances (Dkt. 45-1) at 4, the FDIC put that fact in issue in its Motion for Partial Summary Judgment by asserting (without any supporting evidence) that its new “interpretation . . . matches how the term is used by other financial . . . institutions.” FDIC’s Mem. Supp. Mot. Partial Summ. J. (Dkt. 40) at 2 (emphasis added). See also id. at 3–4 (similar); id. at 14–16 (similar). And see Sagar, 309 F.R.D. at 20 (it is 6 Fair notice is relevant not merely as a constitutional defense, but also to the question whether— as the FDIC claims—it is due deference to its interpretation of the 2011 and 2012 Rules. See FDIC’s Mem. Supp. Mot. Partial Summ. J. at 18–19 (claiming deference). Deference is not given to an agency’s interpretation when it would “impose potentially massive liability . . . for conduct that occurred well before that interpretation was announced.” Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 155–56 (2012). In such circumstances, deference “would seriously undermine the principle that agencies should provide regulated parties ‘fair warning of the conduct [a regulation] prohibits or requires’” and would “result in precisely the kind of ‘unfair surprise’ against which our cases have long warned.” Id. at 156 (quoting Gates & Fox Co. v. Occupational Health & Safety Review Comm’n, 790 F.2d 154, 156 (D.C. Cir. 1986)). Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 17 of 24 13 “unfair to require” a non-movant to oppose summary judgment “without any opportunity for discovery” when the movant “put a broad range of factual questions in issue”). The FDIC also acknowledged the relevance of evidence regarding other banks in its Amended Complaint, asserting that “[o]ut of all of the HCIs subject to the FDIC’s reporting requirement . . . [,] Bank of America is the only one that failed to consolidate its counterparty exposures in any manner whatsoever.” Am. Compl. ¶ 8; id. ¶ 52 (similar). Having repeatedly raised other banks’ practices as a relevant issue, the FDIC cannot now sprint toward summary judgment while stiff-arming BANA’s attempt to obtain discovery on that very issue. The FDIC’s squirrely circumlocutions in characterizing other banks’ practices also give weight to BANA’s request for discovery on this point. The FDIC does not say, for example, that “the other banks understood and followed our interpretation,” but instead says that (allegedly) BANA “is the only one that failed to consolidate its counterparty exposures in any manner whatsoever.” Am. Compl. ¶ 8 (emphasis added); see also FDIC’s Mem. Opp’n Def.’s Mot. Dismiss Pl.’s Am. Compl. in Part or Strike in Part at 9 n.1 (“[O]f the nine HCIs subject to the 2011 Rule, [BANA] is the only one that failed to consolidate its counterparty exposures up to the ultimate parent level of each of its counterparties during the quarters at issue here.”) (emphases added). The implication is that other banks, also, did not read the FDIC’s Rule in the manner the FDIC now contends. This is directly relevant to BANA’s fair-notice defense—regardless whether the FDIC put this fact in issue (as it did) through its Amended Complaint and Summary Judgment Motion. As the D.C. Circuit has recognized, the understanding of other regulated parties is relevant to whether an agency provided adequate notice. In Salzer v. FCC, for example, which concerned the adequacy of notice to applicants that they were to file a particular supplement with the FCC, the court vacated Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 18 of 24 14 the agency’s order in part because 44 of 53 applicants “failed to file the required supplement” (and “agency counsel speculated at oral argument that those applicants who filed properly had done so because they had seen [an] unofficial notice”). 778 F.2d 869, 875 (D.C. Cir. 1985). So here, how other HCIs aggregated counterparty exposure data is highly relevant to the ascertainability of the FDIC’s current interpretation. And once again, a lack of fair notice is a defense to both counts of the Amended Complaint, Gen. Elec., 53 F.3d at 1329, and precludes deference to the FDIC’s interpretation of the 2011 and 2012 Rules, Christopher, 567 U.S. at 155–56. Evidence of how other HCIs applied the 2011/2012 Rules is also relevant to the unjust- enrichment claim. Unjust enrichment requires that the defendant have “accepted or retained [a] benefit under inequitable circumstances.” In re Lorazepam & Clorazepate, 295 F. Supp. 2d at 50 (emphasis added). The circumstances are not inequitable if the FDIC conferred the same purported benefit—deposit insurance—on other HCIs despite their failure to adhere to the FDIC’s new interpretation of the old Rules. Third, BANA needs discovery to prove that the FDIC knew about the limitations to the counterparty-reporting instructions in the 2011 and 2012 Rules that subsequently prompted the revision in 2014. In a comment filed with the FDIC on September 26, 2011, the American Bankers Association, Clearing House Association, and the Financial Services Roundtable told the FDIC that “there are different interpretations of the term ‘legal consolidated entity’, and there is no clear view as to how counterparty exposures are to be rolled up to the consolidated level.” AR01789. This comment provides strong reason to believe that the FDIC was aware that the counterparty- reporting instructions were unclear. This is relevant to BANA’s ability to prove that any “enrichment” was not unjust. As noted, “whether there has been unjust enrichment must be determined by the nature of the dealings Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 19 of 24 15 between the recipient of the benefit and the party seeking restitution.” Landis, 234 F. Supp. 3d at 205 (quoting Chen, 768 F. Supp. 2d at 151). Evidence that the FDIC was aware that its old rules did not ordain what it now claims would establish that any benefit was not unjustly retained by BANA. This evidence would also show that the FDIC did not provide fair notice. Since the mere fact of inconsistent interpretations by an agency establishes inadequate notice, supra 11–12, evidence the agency knew its instructions were unclear would provide an even more compelling demonstration it failed to provide fair warning. And it would mean, once again, that BANA cannot be liable under either count of the Amended Complaint, and that FDIC’s interpretation of its Rules is not entitled to deference. See, e.g., Gen. Elec. Co., 53 F.3d at 1329; Christopher, 567 U.S. at 156. Simply, the FDIC concluded that its 2011 and 2012 Rules fell short for a reason. Perhaps it was because it received BANA’s spreadsheets, reviewed them, and—despite initially assuring BANA that —it concluded based in full or part on BANA’s spreadsheets that the old regulatory language did not require what the FDIC now seeks. Or perhaps the FDIC looked at multiple banks’ practices (and perhaps multiple banks submitted spreadsheets too), and on the basis of broader uncertainty and confusion in the regulatory community, the agency concluded that its old Rules fell short. Whatever the reason, BANA is entitled to discovery, and this Court must reject the FDIC’s extraordinary effort to obtain judgment without permitting the Court or BANA to learn what’s hiding in its files. B. BANA Cannot Produce These Facts To Oppose The FDIC’s Motion. “As the Supreme Court and this Circuit have repeatedly held, summary judgment is ordinarily appropriate only after the plaintiff has been given an adequate opportunity to conduct Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 20 of 24 16 discovery.” McWay v. LaHood, 269 F.R.D. 35, 39 (D.D.C. 2010); accord Convertino, 684 F.3d at 99. This case is a clear example of the reason for that rule. The facts described above are in the possession of the FDIC (and other third parties), but BANA has had no opportunity to obtain discovery. The principle that “summary judgment should not be granted when major factual contentions are in dispute and the parties have not yet conducted pretrial discovery” is “particularly applicable where a court has stayed discovery pending the disposition of pre-discovery motions.” Am. Tower, L.P. v. City of Huntsville, Ala., No. 99-2933, 2000 WL 34017802, at *21 (M.D. Ala. Sept. 29, 2000) (noting that, “[a]t the parties’ request, the court stayed the commencement of formal discovery” pending the resolution of dispositive motions based on the administrative record). Judges of this District and other districts routinely deny or defer motions for summary judgment filed before discovery has begun. See, e.g., McWay, 269 F.R.D. at 39 (Urbina, J.); Patterson v. Whitman, No. 02-2213, 2003 WL 25901429, at *4 (D.D.C. June 9, 2003) (Huvelle, J.); Donahue v. Tokyo Electron Am., Inc., No. 14-563, 2014 WL 12479285, at *9 (W.D. Tex. Sept. 2, 2014); Am. Tower, 2000 WL 34017802 at *21. That principle applies squarely to this case, in which the parties agreed to defer discovery pending motions to dismiss, the Court approved such a stay, a motion to dismiss remains pending, and BANA has never even answered the Amended Complaint. The lack of discovery is not due to a failure of diligence on BANA’s part. Cf. Berkeley, 68 F.3d at 1414 (what is now Rule 56(d) “is not properly invoked to relieve counsel’s lack of diligence”). , BANA filed its motion to clarify or modify the scheduling order and allow it to conduct discovery. The FDIC has opposed that Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 21 of 24 17 motion for three months. A movant cannot simultaneously obstruct the non-movant’s efforts to obtain discovery, while claiming the non-movant did not diligently seek discovery. C. The Information Sought Is Discoverable. Finally, the information that BANA seeks is discoverable. Under Federal Rule of Civil Procedure 26(b)(1), “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to the 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.” All of these factors weigh in favor of discovery. First, the information is relevant. As discussed above, see supra Part II.A, information about the backup spreadsheets submitted by BANA, other HCIs’ interpretations, and the FDIC’s understanding of the flaws in its Rules is relevant to BANA’s defense to the claim of unjust enrichment, BANA’s fair-notice defense to both counts of the Amended Complaint, the issue of deference, and BANA’s counterclaims. Second, the information is proportional to the needs of the case. It involves the meaning of Rules at the center of a dispute over more than a billion dollars. See Am. Compl. ¶ 75 (amount of relief requested). The information sought by BANA is in the control of the FDIC, and the FDIC—as an instrumentality of the federal government—has considerable resources to produce it. For the reasons discussed throughout this Motion and the attached Declaration, discovery is indispensable to BANA’s defense to the FDIC’s Motion for Partial Summary Judgment. Relative to BANA’s legitimate needs, any burden on the FDIC is slight. Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 22 of 24 18 Finally, none of the information sought by BANA is privileged. Cf. Convertino, 684 F.3d at 100 (considering Fifth Amendment privilege under Rule 56(d)). The FDIC may claim that the “deliberative process privilege” applies to its internal communications about its 2011 and 2012 Rules, but those communications are neither “pre-decisional” nor “deliberative.” In re Sealed Case, 121 F.3d 729, 737 (D.C. Cir. 1997). Documents about the limitations of the 2011/2012 Rules once adopted are post-decisional, non-deliberative documents that are not “part of the agency give-and-take—of the deliberative process—by which the decision itself is made.” Abtew v. DHS, 808 F.3d 895, 899 (D.C. Cir. 2015) (quoting Vaughn v. Rosen, 523 F.2d 1136, 1144 (D.C. Cir. 1975)). And, in all events, regular process would require the FDIC to examine particular documents otherwise responsive to discovery requests before claiming any privilege, rather than advancing a blanket assertion that would in effect claim that privilege for every document in the agency’s records. CONCLUSION The Court should deny, or in the alternative defer its consideration of, the FDIC’s Motion for Partial Summary Judgment (Dkt. 38), and allow time for discovery. LOCAL CIVIL RULE 7(m) STATEMENT Pursuant to Local Civil Rule 7(m), counsel for BANA conferred with counsel for the FDIC in a good-faith effort to determine whether there is any opposition to the relief sought and to narrow the areas of any disagreement. The FDIC objects to and opposes this motion. Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 23 of 24 19 Dated: November 30, 2017 Respectfully submitted, /s/ Eugene Scalia Eugene Scalia (DC Bar No. 447524) Jeffrey S. Rosenberg (DC Bar No. 995893) GIBSON, DUNN & CRUTCHER LLP 1050 Connecticut Avenue, N.W. Washington, DC 20036 Telephone: 202.955.8500 Facsimile: 202.467.0539 Gabrielle Levin (admitted pro hac vice) GIBSON, DUNN & CRUTCHER LLP 200 Park Avenue New York, NY 10166 Telephone: 212.351.4000 Facsimile: 212.351.4035 Attorneys for Defendant Case 1:17-cv-00036-EGS-RMM Document 50 Filed 01/08/18 Page 24 of 24