Linde Thomson Langworthy Kohn & Van Dyke, P.C. v. Resolution Trust Corp.

• Decision Date: 05 October 1993
• Docket Number: No. 93-5131,93-5131
• Parties: , 62 USLW 2209, 26 Fed.R.Serv.3d 1330, 37 Fed. R. Evid. Serv. 1119 LINDE THOMSON LANGWORTHY KOHN & VAN DYKE, P.C., Appellant, v. RESOLUTION TRUST CORPORATION, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1508

5 F.3d 1508

303 U.S.App.D.C. 316, 62 USLW 2209,

26 Fed.R.Serv.3d 1330,

37 Fed. R. Evid. Serv. 1119

LINDE THOMSON LANGWORTHY KOHN & VAN DYKE, P.C., Appellant, v. RESOLUTION TRUST CORPORATION, Appellee.

No. 93-5131.

United States Court of Appeals District of Columbia Circuit.

Argued Sept. 8, 1993.

Decided Oct. 5, 1993.

Appeal from the United States District Court for the District of Columbia (93ms00105).

R. Frederick Walters, Kansas City, MO, argued the cause and filed the briefs, for appellant. Deborah J. Jeffrey and Stephen H. Glickman, Washington, DC, entered appearances, for appellant.

James E. Topinka, San Francisco, CA, argued the cause, for appellee. With him on the brief were John H. Korns and Paul M. Laurenza, Washington, DC.

Before: MIKVA, Chief Judge, WALD and SILBERMAN, Circuit Judges.

Opinion for the Court filed by Circuit Judge WALD.

WALD, Circuit Judge:

Linde Thomson Langworthy Kohn & Van Dyke, P.C. ("Linde Thomson"), a former Kansas City law firm, appeals the district court's order enforcing a subpoena duces tecum issued by the Resolution Trust Corporation ("RTC"). Linde Thomson alleges that the district court erred in refusing to privilege certain communications with its insurer and in ordering production of documents that were irrelevant to the RTC's investigation and unduly burdensome to produce. Linde Thomson also argues that the civil suit filed by the RTC on May 3, 1993 terminated its investigation, thus rendering the subpoena enforcement proceedings moot. We affirm the district court's order enforcing the subpoena and hold that the supervening civil complaint did not terminate the RTC's investigation.

I. BACKGROUND

This case is set against a backdrop of calamity in the savings and loan industry of startling proportions. In an attempt to superimpose order upon the mounting chaos of thrift insolvency, Congress created the RTC in the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub.L. No. 101-73, 103 Stat. 183 (codified as amended at 12 U.S.C. Secs. 1441a, 1811 et seq.). Pursuant to its statutory authority, the RTC acts as receiver for hundreds of failed thrifts, succeeding to the entirety of each association's rights, assets, and obligations. ¹ 12 U.S.C. Sec. 1821(d)(2)(A), (B) (1989). The RTC is charged with maximizing the net present value of thrift assets, minimizing the impact of its transactions on local real estate and financial markets, and making efficient use of funds obtained from the government. 12 U.S.C. Sec. 1441a(b)(3)(C) (1993). In its capacity as receiver, the RTC may, inter alia, avoid fraudulent asset transfers, 12 U.S.C. Sec. 1821(d)(17) (1993), assert claims against the association's directors and officers, 12 U.S.C. Sec. 1821(k) (1989), collect money due the association, 12 U.S.C. Sec. 1821(d)(2)(B)(ii) (1989), and place the institution in liquidation, 12 U.S.C. Sec. 1821(d)(2)(E) (1989). To facilitate the RTC's pursuit of such broad objectives, Congress empowered the RTC to issue administrative subpoenas when it conducts an investigation "for purposes of carrying out any power, authority or duty" under the statute. 12 U.S.C. Secs. 1818(n), 1821(d)(2)(I) (1989).

On May 4, 1990, the Office of Thrift Supervision appointed the RTC receiver of the First Savings Bank & Trust ("FSB & T"), a Missouri savings and loan association. The RTC commenced an investigation into the failure of the thrift by an order of November 20, 1992. The order set forth the purposes of the investigation to determine whether (1) former owners, officers, directors, accountants, attorneys, appraisers and others who provided services to, or otherwise dealt with FSB & T, its predecessors, successors or affiliates may be liable as a result of any actions, or failures to act, in connection with or which may have affected FSB & T, its predecessors, successors or affiliates; (2) the RTC should seek to avoid a transfer of any interests or an incurrence of any obligations; (3) the RTC should seek an attachment of assets; and (4) pursuit of such litigation would be cost-effective, considering the extent of the potential defendant's ability to pay a judgment in any such litigation.

App. 2. Pursuant to this investigative order, the RTC issued a document subpoena on November 27, 1992 to Linde Thomson, a law firm with numerous connections to the failed thrift. Linde Thomson refused to comply with certain parts of the subpoena that requested information on asset transfers and liability insurance coverage and claims. ²

On March 31, 1993, the RTC filed a petition in the United States District Court for the District of Columbia to enforce the subpoena. The district court ordered Linde Thomson to produce the requested insurance information, denying its assertion of an insured-insurer privilege under either state or federal law. The court permitted Linde Thomson to create a privilege log for documents arguably falling under the attorney-client privilege or work-product doctrine. The court also required production of the asset transfer information, disallowing Linde Thomson's objections on relevancy and burdensomeness grounds.

Linde Thomson appealed the district court's order, filing a motion for emergency stay with this court that was denied on May 4, 1993. Linde Thomson subsequently produced those documents pertaining to asset transfers that it had previously challenged on relevancy and burdensomeness grounds and, pursuant to this court's order, created a privilege log for documents within the scope of its asserted insured-insurer privilege.

On May 3, 1993, while Linde Thomson's appeal was pending before this court, the RTC filed suit against Linde Thomson and other parties associated with FSB & T in the United States District Court for the District of Missouri on a complaint alleging fraud, breach of fiduciary duty, and breach of contract. The RTC refused Linde Thomson's subsequent written request to withdraw the investigative subpoenas and to close its investigation.

At issue on appeal are the documents containing communications with Linde Thomson's insurer, which have yet to be produced, and the asset transfer documents, which have been produced, but which Linde Thomson seeks to recover.

II. DISCUSSION

Linde Thomson challenges the district court's enforcement of the administrative subpoena on several grounds. First, it urges that the district court erred in refusing to apply Missouri law of privilege, under which many of the insured-insurer communications would be insulated from production as part and parcel of the attorney-client privilege. See generally State ex rel. Cain v. Barker, 540 S.W.2d 50 (Mo.1976). In the alternative, should federal law properly apply to the proceeding, Linde Thomson makes two very different arguments. It urges as an initial matter that principles of comity and the need for vertical uniformity require the application of the Missouri privilege as a matter of federal law, because the state privilege may be employed without cost to federal policies. Next, Linde Thomson argues that, irrespective of Missouri law, the general federal attorney-client privilege encompasses the insured-insurer communications at issue in this case. Linde Thomson argues that these documents are also protected under the federally recognized work-product doctrine. Second, Linde Thomson attempts to recover documents pertaining to asset transfers produced pursuant to the district court's order on the grounds that the documents are irrelevant to the RTC's investigation and the requests were unduly burdensome. Third, Linde Thomson contends that the RTC's supervening civil complaint terminates its investigation and thus compels vacation of the district court's order. We consider these arguments in turn.

A. Insured-Insurer Communications

1. Application of State Privilege

We assume at the outset that the Missouri law of attorney-client privilege would insulate some of Linde Thomson's insurance communications from production. ³ The issue for this court in evaluating Linde Thomson's claim that the state privilege applies to this subpoena enforcement proceeding is one of characterization. Federal Rule of Evidence 501 ⁴ mandates the application of state privileges in civil actions or proceedings for which state law supplies the rules of decision and federal privileges for issues or proceedings arising under federal law. See FED.R.EVID. 501. Federal Rule of Evidence 1101(c) states that "[t]he rule with respect to privileges applies at all stages of all actions, cases, and proceedings." FED.R.EVID. 1101(c).

Linde Thomson argues, pursuant to Rule 1101(c), that an administrative investigation is merely a stage of subsequent litigation. According to this view, Missouri law of privilege controls in this particular subpoena enforcement proceeding, because the ultimate claims pursued by the RTC, as evidenced by its suit filed in the Missouri District Court, sound in state law violations. This argument rests on several assumptions. First, it presumes that a complaint will follow, inevitably, from the issuance of an administrative subpoena. Second, it assumes that the RTC directed its investigation only to the identification of possible state law violations, and that this intent was either manifest or somehow ascertainable. Finally, it equates the administrative investigation with a civil discovery mechanism. We disagree with Linde Thomson's underlying premises, and thus reject its conclusion.

Linde Thomson's claim suggests that the sole permissible purpose of RTC investigations is the determination of the existence of legal claims under state law. However, the RTC faces no such limitation. An investigation conducted by the RTC may conceivably neither culminate in litigation, nor be initially designed to inspire it. See FTC v. Texaco, Inc., 555 F.2d 862, 874 (D.C.Cir.) (en banc), cert. denied, 431 U.S. 974, 97 S.Ct. 2939, 53 L.Ed.2d 1072 (1977). We cannot abide by...