Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-08-05014/USCOURTS-caDC-08-05014-0/pdf.json

Parties Involved:
Fannie Mae Securities Litigation

Document Text:

United States Court of Appeals 

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 10, 2008 Decided January 6, 2009 

No. 08-5014 

IN RE: FANNIE MAE SECURITIES LITIGATION, 

Appeal from the United States District Court 

for 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. With 

him on the brief were Kevin M. Downey, Steven M. Salky, 

Eric R. Delinsky, and David S. Krakoff. 

Before: TATEL and KAVANAUGH, Circuit Judges, and 

SILBERMAN, Senior Circuit Judge. 

Opinion for the Court filed by Circuit Judge TATEL. 

TATEL, Circuit Judge: The Office of Federal Housing 

Enterprise Oversight (OFHEO) appeals a district court order 

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holding it in contempt for failing to comply with a discovery 

deadline to which it agreed. Though we appreciate OFHEO’s 

efforts to comply, we conclude that it ultimately failed to do 

so and find no abuse of discretion in the district court’s 

contempt finding or choice of sanction. 

I. 

Appellant Office of Federal Housing Enterprise 

Oversight regulates the Federal National Mortgage 

Association (“Fannie Mae”) and the Federal Home Loan 

Mortgage Corporation (for some reason “Freddie Mac”)—

both government-sponsored enterprises participating in the 

secondary mortgage market. This case concerns OFHEO’s 

responsibilities for Fannie Mae. 

In 2003 OFHEO opened a special review of Fannie 

Mae’s accounting and financial practices, ultimately 

concluding that the enterprise had departed from generally 

accepted accounting principles in order to manipulate its 

reported earnings and inflate executive compensation. 

Although OFHEO has since closed its investigation and 

concluded its enforcement actions, its preliminary 

investigation report prompted several private civil actions 

against Fannie Mae, its senior executives, and others. These 

actions have been consolidated into multidistrict litigation in 

the United States District Court for the District of Columbia. 

Although OFHEO is not itself a party to the multidistrict 

litigation, the parties have subpoenaed records it collected in 

performing its oversight functions and preparing its 

investigation report. This appeal concerns a dispute over 

subpoenas issued by appellees, three individual defendants in 

the multidistrict litigation who were senior executives at 

Fannie Mae: former chairman and CEO Franklin Raines, 

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former CFO J. Timothy Howard, and former senior vice 

president and controller Leanne Spencer. 

In the summer of 2006, Howard and Raines subpoenaed 

over thirty categories of documents from OFHEO. See Fed. 

R. Civ. P. 45(c)(2)(B)(ii) (governing subpoenas to nonparties). They claimed that the documents would aid their 

defense by showing that they “had been completely 

transparent with OFHEO,” Appellees’ Br. 5; that “OFHEO 

had approved Fannie Mae’s accounting and compensation 

practices,” id.; and that OFHEO’s investigation “was 

politically motivated and biased,” id. at 6. Arguing that 

Howard and Raines should have instead sought these 

documents pursuant to its disclosure regulations, OFHEO 

moved to quash the subpoenas, and the individual defendants 

moved to compel compliance. On November 6, 2006, the 

district court ruled for the individual defendants and directed 

OFHEO to comply during the next four months. 

Although OFHEO began producing documents, it asked 

Howard and Raines (now joined by Spencer, the third 

appellee) to limit their requests for electronically stored 

information in order to minimize the burden on OFHEO. 

Responding by letter dated February 18, 2007, the individual 

defendants revised their initial requests for such information, 

limiting them for the time being to certain email 

communications stored on OFHEO’s network and backup 

tapes. Shortly thereafter, OFHEO filed a motion with the 

district court seeking an approximately one-month extension 

of the time to comply. Representing that the parties had 

“agreed that the Court’s November 6, 2006 Order did not 

apply to the ESI [i.e., electronically stored information],” 

OFHEO’s motion proposed extending the deadline only for 

paper documents. OFHEO’s Mot. for Extension 4, Mar. 9, 

2007. OFHEO explained that it was providing electronically 

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stored information voluntarily and not pursuant to the court’s 

order. 

The court granted OFHEO’s motion, but the individual 

defendants objected, claiming that they had never agreed that 

the order left out electronically stored information. At an 

April 2007 status conference, the district court confirmed that 

its November 6, 2006 order covered such information and 

that, in approving OFHEO’s proposed extension order, it 

hadn’t intended to limit the new deadline to paper documents. 

It granted OFHEO’s request for a further one-month 

extension to produce the outstanding information. 

During the summer of 2007, OFHEO reported to the 

court that it had produced all documents requested by the 

February letter. But skeptical of the limited production, the 

individual defendants sought and obtained a Rule 30(b)(6) 

deposition, which confirmed that OFHEO had failed to search 

all of its off-site disaster-recovery backup tapes. See Fed. R. 

Civ. P. 30(b)(6) (providing for depositions of organizations 

through designated representatives). According to OFHEO, it 

never understood the February letter’s request for 

communications on backup tapes to apply to its disasterrecovery backup tapes, but nonetheless voluntarily undertook 

to search them for certain of the requested documents. 

In August of 2007, the individual defendants moved to 

hold OFHEO in contempt. In response, the district court, 

stating that it had “no doubt” that the OFHEO disasterrecovery backup tapes were “going to be looked at,” 

scheduled a contempt hearing in order to assess the burden 

that examination of such tapes would impose on OFHEO. 

Hr’g Tr. at 76 (Sept. 19, 2007). Following the first day of the 

hearing, OFHEO and the individual defendants entered into a 

stipulated order that held the contempt motions in abeyance 

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and required OFHEO to conduct searches of its disasterrecovery backup tapes and provide all responsive documents 

and privilege logs by January 4, 2008. In language central to 

the issue before us, the stipulated order’s fifth paragraph 

states: 

OFHEO will work with the Individual Defendants to 

provide the necessary information (without 

individual document review) to develop appropriate 

search terms. By October 19, 2007, the Individual 

Defendants will specify the search terms to be used. 

Stipulated Order ¶ 5, Sept. 27, 2007. 

Pursuant to the stipulated order, the individual defendants 

submitted over 400 search terms, which covered 

approximately 660,000 documents. OFHEO objected on the 

grounds that the stipulated order limited the individual 

defendants to “appropriate search terms,” but the district court 

disagreed, ruling on November 2, 2007 that the stipulated 

order gave the individual defendants sole discretion to specify 

search terms and imposed no limits on permissible terms. 

Although the district court made this ruling in an off-therecord chambers conference, the parties agree on its meaning. 

OFHEO undertook extensive efforts to comply with the 

stipulated order, hiring 50 contract attorneys solely for that 

purpose. The total amount OFHEO spent on the individual 

defendants’ discovery requests eventually reached over $6 

million, more than 9 percent of the agency’s entire annual 

budget. 

On November 29, 2007, the day before an interim 

deadline for production of several categories of material, 

OFHEO informed the district court that it would be unable to 

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meet that deadline and moved for an extension until 

December 21, assuring the court that it could meet that 

extended deadline. The court granted the motion, but two 

days before the extended deadline, OFHEO informed the 

court not only that its previous assurances had been based on 

insufficient data, but also that it had only recently hired the 

necessary number of contract attorneys. OFHEO told the 

court that it would be unable to comply with the extended 

interim deadline, and that although it could produce all nonprivileged documents by the ultimate January 4, 2008 

deadline, it would be unable to produce all the required 

privilege logs until February 29. 

The individual defendants renewed their motions to hold 

OFHEO in contempt. On January 22, the district court 

granted the motions. The court recognized OFHEO’s efforts 

at compliance, but deemed them “not only legally insufficient, 

but too little too late,” stating: 

[T]he Court is cognizant of the large number of 

attorneys, contract attorneys, and OFHEO personnel 

working to comply with the subpoenas and the 

resulting costs of this compliance. Nevertheless, 

OFHEO has treated its Court-ordered deadlines as 

movable goal posts and has repeatedly miscalculated 

the efforts required for compliance and sought 

thereafter to move them. 

Hr’g Tr. at 19 (Jan. 22, 2008). As a sanction, the court 

ordered production of all documents withheld on the sole 

basis of the qualified deliberative process privilege and not 

logged by the January 4, 2008 deadline. Contrary to the 

individual defendants’ requests, however, the court made 

clear that production was to be made only to counsel and 

would not waive the privilege. Although OFHEO says that it 

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provided the non-privileged documents by January 4 and the 

privilege logs by the end of February, the individual 

defendants claim that approximately 20,000 documents 

remain unaccounted for. 

OFHEO appeals the contempt finding, arguing that the 

stipulated order limited the individual defendants to 

specifying “appropriate” search terms and did not 

unambiguously compel it to process inappropriate terms. In 

the alternative, OFHEO argues that it substantially complied 

with the stipulated order, rendering a finding of contempt 

inappropriate, and that in any event the district court abused 

its discretion by compelling compliance with the subpoenas in 

the first place. OFHEO also appeals the district court’s 

choice of sanction, which this court stayed pending appeal. 

Exercising our appellate jurisdiction due to the finding of 

contempt, see U.S. Catholic Conference v. Abortion Rights 

Mobilization, Inc., 487 U.S. 72, 76 (1988), we review both the 

contempt finding and the sanction for abuse of discretion, 

Food Lion, Inc. v. United Food & Commercial Workers Int’l 

Union, AFL-CIO-CLC, 103 F.3d 1007, 1016 (D.C. Cir. 1997). 

II. 

We begin with OFHEO’s principal argument: that 

paragraph five of the stipulated order limits the individual 

defendants to specifying only “appropriate” search terms, and 

that by transgressing this limitation, the individual defendants 

relieved OFHEO of its obligation to process the search terms 

and to produce the corresponding documents and privilege 

logs by the stipulated order’s deadline. We disagree. 

Although OFHEO characterizes paragraph five’s use of 

the phrase “appropriate search terms” as a protection it 

bargained for, it presented no extrinsic evidence for this 

claim. As a consequence, we interpret the meaning of the 

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stipulated order based on the document itself. See Segar v. 

Mukasey, 508 F.3d 16, 22 (D.C. Cir. 2007) (“[C]onstruction 

of a consent decree is essentially a matter of contract law.” 

(internal quotation marks omitted)). On its face, paragraph 

five’s first sentence uses the phrase “appropriate search 

terms” to describe an obligation on OFHEO, not the 

individual defendants, and its second reserves full discretion 

to the individual defendants to specify search terms: 

OFHEO will work with the Individual Defendants to 

provide the necessary information (without 

individual document review) to develop appropriate 

search terms. By October 19, 2007, the Individual 

Defendants will specify the search terms to be used. 

Stipulated Order ¶ 5. OFHEO describes paragraph five as 

“[c]onfining defendants to ‘appropriate search terms,’” 

Appellant’s Opening Br. 23, but it quotes neither sentence in 

full and its opening brief never so much as mentions the 

second sentence. This omission is striking given that on its 

face the second sentence imposes no limitation on the terms 

the individual defendants may specify. To defeat such a clear 

statement, the remainder of the stipulated order would need to 

provide a correspondingly persuasive indication that the 

individual defendants are somehow limited in their choice of 

search terms. It does not. 

Paragraph five’s reference to “appropriate search terms,” 

on which OFHEO exclusively relies, imposes no limitation on 

the individual defendants. The paragraph directs OFHEO and 

the individual defendants to work together, but only to 

facilitate OFHEO’s provision of information to assist in 

developing search terms. The phrase “to develop appropriate 

search terms” indisputably modifies “the necessary 

information”; it is not an independent obligation on the 

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parties. See Stipulated Order ¶ 5 (“OFHEO will work with 

the Individual Defendants to provide the necessary 

information . . . to develop appropriate search terms.”). That 

is, the phrase serves only to define the type of information 

OFHEO must provide—that information necessary for the 

development of appropriate search terms. Nothing in 

paragraph five’s text gives OFHEO any role in actually 

developing those search terms. 

Although paragraph five defines the information OFHEO 

must provide, it nowhere limits the search terms the 

individual defendants ultimately specify to those based on this 

information. If the individual defendants wished to specify 

search terms based on information obtained from other 

sources at their disposal, nothing in the paragraph precludes 

that. Nor is there any logical reason why it would—after all, 

the individual defendants undoubtedly acquired voluminous 

information from the parties to the multidistrict litigation 

during discovery, and it’s quite unlikely that they and OFHEO 

would have ruled out search terms based on this wholly 

independent source of information. Thus the phrase 

“appropriate search terms,” which relates only to the 

information OFHEO must provide, imposes no restrictions on 

the search terms the individual defendants end up specifying, 

which may be based on wholly independent information. 

OFHEO argues that reading the stipulated order to allow 

the individual defendants full discretion to specify search 

terms would render the phrase “to develop appropriate search 

terms” surplusage. Again, we disagree. Clearly the whole 

phrase isn’t surplusage: without it, the agreement would only 

impose the maddeningly nebulous requirement that OFHEO 

“provide the necessary information,” giving no hint as to what 

type of information that might be. 

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Even if some variant of the phrase is essential, might the 

word “appropriate” still be surplusage under our plain 

reading? We think not. The word plays a valuable role: it 

sharpens OFHEO’s obligations to the individual defendants. 

Without that word, the “necessary information . . . to develop 

search terms” might consist of nothing more than minimally 

useful information, such as the technical specifications of 

OFHEO’s data retrieval software. But paragraph five requires 

OFHEO to provide more: it must furnish that information 

necessary to formulate search terms that are not just 

minimally sufficient, but actually appropriate to the task of 

retrieving relevant documents. See WEBSTER’S THIRD NEW 

INTERNATIONAL DICTIONARY 106 (1993) (defining 

“appropriate” as “specially suitable”). The inclusion of such 

detail is understandable given the difficulties OFHEO and the 

individual defendants experienced resolving their discovery 

disputes up to that point. 

The word “appropriate” would be surplusage only if the 

information necessary to develop appropriate search terms 

was of no value whatsoever to the individual defendants. In 

that case it would have made no sense for paragraph five to 

obligate OFHEO to do something that the individual 

defendants couldn’t possibly want. But of course such 

information is quite valuable to the individual defendants. 

They want to retrieve the relevant documents as efficiently as 

possible, and appropriate search terms, by definition, do so 

better than minimally adequate search terms. Since the first 

sentence’s requirement that OFHEO do something valuable 

for the individual defendants is hardly remarkable, we create 

no surplusage when we take at face value its plain text, which 

sets forth only OFHEO’s obligation to provide information at 

the outset, not any limitation on the individual defendants’ 

discretion to choose search terms. 

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The language surrounding paragraph five strongly 

supports this straightforward reading. Unlike paragraph five, 

the remainder of the stipulated order includes several 

provisions that unmistakably protect OFHEO. For example, 

paragraph six protects OFHEO from having to produce 

certain categories of documents by stating simply, “OFHEO 

will not produce the following documents,” and enumerating 

in detail three protected categories. Stipulated Order ¶ 6. 

Other provisions in the stipulated order expressly limit the 

individual defendants to identifying fifteen backup tape sets to 

restore out of over 1,000 backup tapes in OFHEO’s 

possession, id. ¶ 1; cap the number of OFHEO record 

custodians subject to the requests, id. ¶ 2; specify the relevant 

time period for the individual defendants’ requests, id. ¶ 3; 

and provide deadlines that effectively extend OFHEO’s time 

to comply by several months, id. ¶¶ 8–9. Tellingly, even the 

very sentence in paragraph five that contains the word 

“appropriate” unambiguously includes a specific protection 

for OFHEO: its obligation to provide information does not 

extend to “individual document review.” See id. ¶ 5 

(“OFHEO will work with the Individual Defendants to 

provide the necessary information (without individual 

document review) to develop appropriate search terms.”). 

Each of these protections is specifically set forth in the 

stipulated order and each clearly protects OFHEO. The 

contrast to the word “appropriate”—appearing without 

elaboration in a sentence defining OFHEO’s obligations—is 

revealing. 

Urging us to find some contractual limitation on the 

individual defendants’ discretion, OFHEO argues that 

allowing the individual defendants to specify every word in 

the dictionary as a search term would be absurd. Indeed it 

would. But OFHEO’s protection against such an abusive list 

of search terms comes not from the word “appropriate” but 

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from the general contractual duty of good faith and fair 

dealing. See United States v. Jones, 58 F.3d 688, 692 (D.C. 

Cir. 1995) (noting that all contracts “include[] an implied 

obligation of good faith and fair dealing”). We have no doubt 

that even given the full discretion paragraph five affords the 

individual defendants, a request for every word in the 

dictionary would have been in bad faith and invalid. See id. at 

690, 692 (holding that a prosecutor’s decision whether to 

move for leniency could be reviewed for bad faith even where 

the plea agreement stated that the government “retain[ed] its 

discretion” regarding whether to make such a motion). 

OFHEO insists that the individual defendants’ list of 

search terms was tantamount to a request for the dictionary, 

resulting as it did in the retrieval of approximately 80 percent 

of the office’s emails. Oral Arg. at 30:20–:40. But far from 

showing bad faith, that figure may simply indicate that most 

of the emails actually bear some relevance, or at least include 

language captured by reasonable search terms. More 

fundamentally, OFHEO does not argue that the individual 

defendants exercised their contractual rights in bad faith; it 

argues only that they violated a textual limitation on those 

rights. As described above, however, that limitation appears 

nowhere in the stipulated order. 

As a fallback defense to contempt, OFHEO insists that 

the stipulated order is at least ambiguous, rightly emphasizing 

that contempt is appropriate only for violation of a “clear and 

unambiguous” order. Armstrong v. Executive Office of the 

President, Office of Admin., 1 F.3d 1274, 1289 (D.C. Cir. 

1993) (internal quotation marks omitted). To be sure, there 

may be some issues as to which the order might be 

ambiguous. For example, had OFHEO withheld some 

information on the ground that it was unnecessary for the 

development of appropriate search terms, the text might not 

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have unambiguously resolved that dispute. But paragraph 

five unambiguously resolves the dispute that is before us: its 

second sentence reserves to the individual defendants 

unrestricted discretion to “specify the search terms to be 

used,” Stipulated Order ¶ 5, and its first sentence 

unambiguously applies the phrase “appropriate search terms” 

only to OFHEO’s obligation to provide the individual 

defendants with information at the outset. Thus, whatever 

other ambiguities may lurk in the stipulated order, it 

unambiguously requires OFHEO to process the search terms 

the individual defendants specify. 

In sum, the stipulated order obligated OFHEO to process 

the search terms the individual defendants specified and to 

meet the corresponding deadlines, and the office violated the 

order by failing to produce privilege logs on time. 

III. 

OFHEO makes two additional challenges to the district 

court’s contempt finding: it argues that the district court 

abused its discretion by compelling compliance with the 

subpoenas in the first place, and that in any event it 

substantially complied with the stipulated order in good faith. 

We address each argument in turn. 

Federal Rule of Civil Procedure 45 requires courts to 

safeguard non-party subpoena recipients from significant 

expense resulting from compliance. See Watts v. SEC, 482 

F.3d 501, 509 (D.C. Cir. 2007). According to OFHEO, the 

district court violated Rule 45 by compelling compliance 

without considering cost-shifting, narrowing the scope of the 

requests, or “find[ing] that defendants demonstrated good 

cause for forcing OFHEO to retrieve its inaccessible data.” 

Appellant’s Opening Br. 31–32. Whatever the merits of these 

claims, OFHEO abandoned them by entering into the 

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stipulated order. Indeed, OFHEO’s trial counsel agreed to the 

stipulation in the middle of a hearing scheduled for the very 

purpose of considering OFHEO’s objections to the subpoenas. 

Had OFHEO wanted review of the district court’s initial order 

to compel compliance with the subpoenas, it could have 

completed the hearing and attempted to convince the court to 

reconsider. Failing that, it could have defied the adverse 

ruling and appealed any ensuing contempt finding. See U.S. 

Catholic Conference, 487 U.S. at 76. Instead, it chose to sign 

the stipulated order, which ended the hearing and 

unquestionably settled the discovery dispute. Having 

stipulated to a schedule for complying with the subpoenas, 

OFHEO can hardly complain now about being held to its 

agreement. 

Seeking to revive the dispute it settled, OFHEO objects 

to the district court’s off-the-record November 2, 2007 ruling 

interpreting the stipulated order. As OFHEO sees it, this 

ruling amounts to a second order compelling compliance with 

the subpoenas and shares the same flaws as the first. But in 

this ruling, the district court merely restated the obligations 

imposed by the stipulation. It didn’t determine anew that 

OFHEO had to provide documents; OFHEO already 

determined that by stipulating to do so. 

Alternatively, OFHEO insists that even if it was properly 

subject to the stipulated order, it substantially complied in 

good faith. The parties agree that contempt may be 

inappropriate when a party in good faith substantially 

complies with a court order. See Food Lion, 103 F.3d at 

1017. Here OFHEO undeniably made extensive efforts to 

produce the documents and privilege logs in accordance with 

the timetable set forth in the stipulated order. It hired 50 

contract attorneys, eventually spending a substantial portion 

of its budget attempting to comply with the subpoenas. 

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Were we deciding this matter in the first instance, we 

might not have held OFHEO in contempt. But our review is 

for abuse of discretion, and OFHEO has given us no basis for 

concluding that the district court abused its discretion by 

finding it in contempt for failing to comply with the stipulated 

order’s deadlines. As the district court explained, even two 

and a half weeks after the final deadline set forth in the 

stipulated order, OFHEO had produced just six of the required 

thirty-one privilege logs. Not until after the district court held 

OFHEO in contempt did it provide the remaining logs, and 

according to the individual defendants even these are 

incomplete. 

District judges must have authority to manage their 

dockets, especially during massive litigation such as this, and 

we owe deference to their decisions whether and how to 

enforce the deadlines they impose. See Berry v. District of 

Columbia, 833 F.2d 1031, 1037 n.24 (D.C. Cir. 1987). 

Though we recognize OFHEO’s strenuous efforts to comply, 

the district court found them to be “too little too late,” Hr’g 

Tr. at 19 (Jan. 22, 2008), and determined that the office’s 

compliance was inadequate, id. at 21. In making this 

assessment, the court placed great weight on the long history 

of the discovery dispute and on OFHEO’s repeated requests 

for extensions, ultimately concluding that OFHEO had 

requested one extension too many and that strict enforcement 

of its deadline was warranted. Given the district court’s 

intimate familiarity with the details of the discovery dispute, 

the scale of the production requested, and the progress of the 

multidistrict litigation as a whole, we are ill-positioned to 

second-guess that assessment. Were we on this record to 

overturn the district court’s fact-bound conclusion that 

OFHEO dragged its feet until the eleventh hour, we would 

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risk undermining the authority of district courts to enforce the 

deadlines they impose. 

IV. 

This brings us to OFHEO’s final argument: that even if 

contempt is appropriate, the district court abused its discretion 

in its choice of sanction. After finding that OFHEO’s failure 

to meet the deadline placed it in contempt of the stipulated 

order, the district court directed the office to provide the 

actual documents withheld on the basis of the deliberative 

process privilege and not logged by the deadline. The district 

court described the sanction as “designed to move the 

[d]iscovery process forward and to allow for [a] more 

targeted, and therefore more truncated, privilege litigation 

process.” Hr’g Tr. at 26 (Jan. 22, 2008). The district court 

therefore specified that the compulsory disclosure would not 

waive the privilege with respect to further disclosure; directed 

that the documents be provided only to individual defendants’ 

counsel; and created a mechanism for OFHEO to recover 

documents found to be privileged. 

The parties dispute whether the district court imposed the 

sanction pursuant to its contempt power or its inherent 

authority to levy discovery sanctions. This distinction matters 

because unlike discovery sanctions, civil contempt sanctions 

may not be punitive—they must be calibrated to coerce 

compliance or compensate a complainant for losses sustained. 

Compare Cobell v. Norton, 334 F.3d 1128, 1145 (D.C. Cir. 

2003) (civil contempt sanctions), with Webb v. District of 

Columbia, 146 F.3d 964, 971 (D.C. Cir. 1998) (discovery 

sanctions). 

In our view, even though the district court mentioned that 

the individual defendants had filed motions for discovery 

sanctions that were independent of their motions for 

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contempt, Hr’g Tr. at 21–22 (Jan. 22, 2008), the structure of 

the order makes clear that the sanction functioned as a 

contempt sanction. The district court’s consideration of the 

appropriate sanction followed hot on the heels of its contempt 

finding, making clear that it imposed the sanction for the 

contempt it found, not simply as a non sequitur. Id. at 21 

(“Thus, based on the foregoing, the Court finds that OFHEO 

is in civil contempt of the September 27th, 2007, stipulated 

order. What sanctions are appropriate?”). Perhaps the 

sanction served as both a contempt sanction and a discovery 

sanction, but the parties nowhere advance this interpretation. 

In any event, we have no need to consider it given that the 

district court had ample authority to impose the sanction 

under its contempt power alone. 

The sanction was a proper exercise of the district court’s 

contempt power because it coerced compliance with the 

stipulated order and compensated the individual defendants 

for the delay they suffered. The stipulated order required 

OFHEO to disclose all documents not in fact privileged and, 

as the district court pointed out, the non-disclosure of the logs 

prevented the individual defendants from challenging 

OFHEO’s privilege claims. Id. at 23. Accordingly, 

OFHEO’s tardiness in turning over the logs has delayed the 

resolution of disputes over its ultimate compliance with its 

obligation to produce all unprivileged documents. The 

district court found that it could mitigate this delay by 

requiring OFHEO to provide certain of the privileged 

documents themselves, but solely for the purpose of resolving 

whether they were in fact privileged. That is, by facilitating 

faster resolution of outstanding privilege disputes, the 

sanction not only coerced OFHEO’s compliance with its 

obligation to provide all documents not in fact privileged, but 

also compensated the individual defendants by ameliorating 

OFHEO’s delay in disclosing the privilege logs. As it did not 

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require wholesale waiver of the privilege, the sanction was 

non-punitive and fit comfortably within the district court’s 

civil contempt power. 

Though it imposes some burden on OFHEO, the sanction 

is not so disproportionate or unreasonable as to constitute an 

abuse of discretion. The district court considered various 

possible sanctions, ranging from OFHEO’s insistence on no 

sanction at all to the individual defendants’ request for a fine 

and wholesale waiver of the deliberative process privilege. 

Recognizing that it could not let OFHEO’s contempt go 

unaddressed, the district court nonetheless rejected fines on 

the grounds that they would ultimately be paid by Fannie 

Mae, a bystander to the discovery dispute. See 12 U.S.C. 

§ 4516(a) (providing funding for OFHEO through 

assessments on regulated entities). It also rejected wholesale 

waiver, choosing instead a middle ground calculated to 

facilitate prompt resolution of the dispute without impairing 

OFHEO’s ability to protect privileged communications from 

general disclosure. 

OFHEO gives us no reason to question the district court’s 

choice of sanction. Indeed, although insisting that the 

sanction amounted to an abuse of discretion, it has steadfastly 

refused—both in its briefs and at oral argument—to identify a 

single permissible sanction. And although OFHEO claims 

that the district court’s sanction “effectively” waives the 

deliberative process privilege, Appellant’s Opening Br. 37, its 

counsel conceded at oral argument that the court-ordered nonwaiver disclosure will allow OFHEO to assert privilege with 

respect to those documents in the future, Oral Arg. at 31:40–

32:09; cf. Fed. R. Civ. P. 26(b)(5)(B) (setting forth procedure 

for parties to retrieve inadvertently disclosed privileged 

material without allowing its use). Any documents disclosed 

to the individual defendants’ attorneys that turn out to be 

USCA Case #08-5014 Document #1157138 Filed: 01/06/2009 Page 18 of 19
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privileged will remain privileged and presumably will be 

returned to OFHEO. The district court thus took pains to 

ensure that the important governmental interests guarded by 

the deliberative process privilege remain fully protected. 

V. 

Seeing no abuse of discretion in the district court’s 

finding of contempt or choice of sanction, we affirm. 

So ordered. 

USCA Case #08-5014 Document #1157138 Filed: 01/06/2009 Page 19 of 19