126 F.3d 1138 (9th Cir. 1997), 96-55259, F.D.I.C. v. Garner

Docket Nº:96-55259.
Citation:126 F.3d 1138
Party Name:D.A.R. 12,068 FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for American Commerce National Bank, Anaheim, California, Plaintiff-Appellee, v. Gerald J. GARNER; Joan Garner; Scott B. Garner; Craig Garner; Daniel Garner; Robin Garner Zimmett; Keith Zimmett, Esq., Ltd.; Keith Zimmett, Agent, et al., Defendants-Appellants.
Case Date:September 19, 1997
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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126 F.3d 1138 (9th Cir. 1997)

D.A.R. 12,068

FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for

American Commerce National Bank, Anaheim,

California, Plaintiff-Appellee,

v.

Gerald J. GARNER; Joan Garner; Scott B. Garner; Craig

Garner; Daniel Garner; Robin Garner Zimmett;

Keith Zimmett, Esq., Ltd.; Keith

Zimmett, Agent, et al.,

Defendants-Appellants.

No. 96-55259.

United States Court of Appeals, Ninth Circuit

September 19, 1997

Argued and Submitted Aug. 6, 1997.

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Craig Boyd Garner, Los Angeles, California, for defendants/appellants.

Daniel Glenn Lonergan, Counsel, Federal Deposit Insurance Corporation, Washington, D.C., for plaintiff/appellee.

Appeal from the United States District Court for the Central District of California; George H. King, District Judge, Presiding. D.C. No. CV-95-05944-GHK.

Before: BROWNING, BRUNETTI, and TROTT, Circuit Judges.

BRUNETTI, Circuit Judge:

This appeal concerns the district court's summary enforcement of administrative subpoenas duces tecum. The Federal Deposit Insurance Corporation, acting as receiver for the American Commerce National Bank, subpoenaed Bank Directors, family members of the Directors, and organizations affiliated with the Directors. The FDIC petitioned for the subpoenas pursuant to an investigation of financial improprieties allegedly committed by the Bank Directors. We must determine the appropriate standards for the issuance of subpoenas duces tecum to bank directors, their family members, and affiliated businesses.

We affirm the district court's enforcement of the subpoenas duces tecum.

I. FACTS

On April 30, 1993, the Office of the Comptroller of the Currency ("OCC") declared the American Commerce National Bank ("Bank") to be in an unsafe and unsound condition to transact business and in imminent danger of default. The OCC also appointed the Federal Deposit Insurance Corporation ("FDIC") as receiver for the Bank. In July, the FDIC issued an Order of Investigation delineating the purposes of its inquiry:

to determine whether (1) such former officers, directors, employees and others who provided services to or were otherwise associated with [the Bank] may be liable as a result of any actions or failures to act which may have affected [the Bank]; (2) pursuit of such litigation would be cost effective, considering the extent of the potential defendants' ability to pay a judgment in any such litigation; (3) the FDIC should seek to avoid a transfer of any interests or an incurrence of any obligation; (4) the FDIC should seek an attachment of assets.

Gerald Garner, his wife, Joan Garner, and Galal Gough served on the Bank's Board of Directors. In July and August of 1993, the FDIC issued subpoenas duces tecum to Gough, the Garners, their children, Scott Garner, Craig Garner, and Robyn Garner Zimmet, Gerald's brother Harvey, and Robyn's husband Keith Zimmet. The FDIC also issued subpoenas to three companies for which Gerald Garner served as president: Board of Coast Plaza Doctors Hospital, Seepeedee, Inc., and Associated Partners of Coast Plaza. The FDIC also subpoenaed the Montebello Women's Medical Group, where Galal Gough served as president.

In November, Appellants provided some corporate and individual records in response to the FDIC's request. They withheld other documents, however, arguing that the subpoenas were overbroad and violated their right to privacy. In August 1995, after nearly two years of discussion between the parties concerning the remaining documents, the FDIC filed a Petition for Summary Enforcement of Administrative Subpoenas Duces Tecum. In support of the motion, the FDIC submitted the Declaration of Pamela Playdon, a FDIC senior attorney. The Playdon Declaration provided the factual basis and rationale for the FDIC's requests.

Playdon's Declaration detailed the FDIC's extensive review of the Bank's financial records and outlined the alleged illegal activities perpetrated by Appellants. These improprieties included: losses sustained by the Bank resulting from insider loans to "Gerald and Joan Garner, as well as the family trusts for their children Robyn, Scott, and Craig, for which Mrs. Garner served as Trustee"; and checking overdrafts covered by the Bank involving the Garners and entities they controlled "which may have been used to funnel money for the personal benefit of institution insiders." Estimated losses to the Bank exceeded five million dollars. According to the Declaration, the Bank executed many of these illegal transactions after federal regulators and the OCC informed the

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Bank Directors that their lending practices were unsafe and unsound, thereby resulting in "unnecessary risk of loss to the institution in violation of federal regulations." The Declaration stated that

[f]rom the information presently available it appears that the directors, including Galal Gough, Gerald Garner, and Joan Garner, may have been grossly negligent, may have violated their fiduciary duties of loyalty and due care in making, approving, ratifying, or initiating certain loans, and may have engaged in flagrant self-dealing.

Finally, the Declaration provided the rationale for the subpoena requests. The FDIC subpoenaed the business entities

to determine whether or not any of the officers, directors or other borrowers of the institution had an undisclosed ownership interest in one or more of these entities, obtained loans by fraudulent practices, or transferred assets under circumstances in which the FDIC should seek to attach any assets of the individuals; and whether litigation by the FDIC against those having an (indirect or direct) ownership interest in the borrower entities would be cost-effective.

The FDIC subpoenaed the Bank Directors and their family members

to determine whether or not these individuals benefitted directly or indirectly at the expense of the institution; whether any of them transferred assets under circumstances in which the FDIC should seek to attach any of their assets; and whether litigation against any of these individuals would be cost-effective.

After Appellants opposed the FDIC's petition...

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