UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLUMBIA 

THE COLONIAL BANCGROUP, INC., 

As post-confirmation debtor, 

and KEVIN O'HALLORAN, as plan 

trustee acting for and on 

behalf of the debtor, 

Plaintiffs, 

v. 

PRICEWATERHOUSECOOPERS LLP, 

A United States limited 

liability partnership; CROWE 

HORWATH LLP, a United States 

limited liability partnership 

Defendants. 

FEDERAL DEPOSIT INSURANCE 

CORPORATION as receiver for 

COLONIAL BANK 

Plaintiff 

v. 

PRICEWATERHOUSECOOPERS, LLP 

and CROWE HORWATH, LLP, 

Defendants. 

Civil Action No. 15-mc-201 (GK) 

Civil Action No. 15-mc-213 (GK) 

MEMORANDUM OPINION 

The Board of Governors of the Federal Reserve System 

("Board"), the Federal Deposit Insurance Corporation ("FDIC"), and 

the Office of the Comptroller of the Currency ("OCC") have asked 

this Court to quash third party subpoenas served in connection 

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with litigation pending in the Middle District of Alabama1 (the 

"Alabama Actions"). 

On February 13, 2015, the OCC filed a Motion to Quash ("OCC 

Motion") [15-mc-201, Dkt. No. 1] with this Court, and on February 

19, 2015, the FDIC and Board filed a related Motion to Quash ("FDIC 

Motion") [15-mc-213, Dkt. No. 1] . On March 9, 2015, 

PricewaterhouseCoopers LLP ("PwC") filed its Opposition ("PwC 

Opp'n") [15-mc-201, Dkt. No. 11] to the OCC Motion. On March 10, 

2015, Crowe Horwath LLP ("Crowe") filed its Opposition ("Crowe 

Opp'n") [15-201, Dkt. No. 14; 15-mc-213, Dkt. No. 6] to both the 

OCC and FDIC Motions. On March 26, 2015, the OCC filed its Reply 

("OCC Reply") [15-mc-201, Dkt. No. 16] and the FDIC and Board filed 

their Reply ("FDIC Reply") [15-mc-213, Dkt. No. 9]. Crowe also 

filed a Sur-Reply ("Crowe Sur-Reply") [15-mc-201, Dkt. No. 22] on 

May 27, 2015. 

Upon consideration of the Motions, Oppositions, Reply, SurReply, the entire record herein, and for the reasons stated below, 

the OCC's Motion to Quash is granted in part and denied in part, 

and the FDIC's Motion to Quash is granted. 

1 The cases, which have been consolidated, are Colonial BancGroup, 

Inc., et al. v. PricewaterhouseCoopers LLP & Crowe Horwath LLP, 

Civ. No. 2:11-cv-00746-WKW (M.D. Ala.) and Federal Deposit 

Insurance Corporation v. PricewaterhouseCoopers LLP & Crowe 

Horwath LLP, Civ. No. 2:12-cv-00957-WKW (M.D. Ala.). 

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I . BACKGROUND 

The Alabama Actions involve claims stemming from the 2009 

failure of Colonial Bank, Montgomery, AL ("Colonial" or "Bank"), 

asserted by the FDIC as Receiver ("FDIC-R") against Crowe, 

Colonial' s former internal auditor, and PwC, Colonial' s former 

outside auditor (collectively, "Defendants"). OCC Mot. at 2. 

Colonial's failure was caused in part by a multi-year fraud in its 

Mortgage Warehouse Lending Division ("MWLD"). The FDIC-R alleges, 

inter alia, that the Defendants breached their professional duties 

by failing to discover the fraud. Id. The Board, FDIC, and OCC are 

not parties to the Alabama Actions. 

On November 26, 2014, Defendants served a subpoena duces tecum 

on the OCC (the "Document Subpoena") 2 • See OCC Mot. , Exhibit D. 

The Document Subpoena contains thirteen requests, which can be 

summarized as follows: 

• Request 1 relates to OCC's supervision of Colonial; 

• Request 2 relates to Colonial's internal audit function; 

• Request 3 relates to internal audit work performed by 

Crowe; 

• Request 4 relates to external audit work performed by PwC; 

• Request 5 relates to Colonial's charter change; 

2 Subpoenas duces tecum were also served on the Board and FDIC, 

but the Board and FDIC have not moved· to quash them, and they are 

not at issue here. Crowe Opp'n at 5. 

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• Request 6 relates to Taylor Bean & Whitaker Mortgage Corp. 

("TBW") and Ocala Funding LLC; 

• Request 7 is for identification of OCC employees who 

examined Colonial; 

•· Request 8 relates to Colonial's activity after OCC's 

supervision ended; 

• Request 9 relates to documents the OCC produced or received 

in litigation in connection with Colonial or TBW; 

• Requests 10-12 are for internal and draft documents 

relating to the Interagency Policy Statement on the 

Internal Audit Function and Its Outsourcing, dated March 

17, 2003 (the "Interagency Policy Statement"); and 

• Request 13 relates to the FDIC Off ice of Inspector 

General's Material Loss Review ("MLR") of Colonial. 

In addition to the Document Subpoena, on February 4, 2015, 

Defendant Crowe served subpoenas ad testif icandum on four banking 

regulators (the "Deposition Subpoenas") : Arthur Lindo (Senior 

Associate Director for Policy, Division of Banking Supervision & 

Regulation, Board) , Doreen Eberley (Director, Di vision of Risk 

Management Supervision, FDIC) , Jennifer Kelly (Senior Deputy 

Comptroller and Chief National Bank Examiner, OCC), and Judith 

Dupre (FDIC employee and Executive Secretary of the Federal 

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Financial Institutions Examination Council). OCC Mot., Ex. E; FDIC 

Mot., Ex. 1. 

The OCC has only moved to quash Requests 1-7 and 10-12, and 

therefore Requests 8-9 and 13 are not at issue here. See OCC Mot. 

at 5, n. 1. After the Motions to Quash were filed, Defendants 

narrowed their Interagency Policy Statement requests to exclude 

all documents pre-dating the promulgation of the Interagency 

Policy Statement. Crowe Opp'n at 4-5, 24. In addition, Crowe is no 

longer pursuing Ms. Dupre's deposition in light of her declaration 

that she does not know any relevant facts. Crowe Opp'n at 31. 

II. Analysis 

"The quashing of a subpoena is an extraordinary measure, and 

is usually inappropriate absent extraordinary circumstances. A 

court should be loath to quash a subpoena if other protection of 

less absolute character is possible. Consequently, the movant's 

burden is greater for a motion to quash than if she were seeking 

more limited protection." U.S. Dep't of the Treasury v. Pension 

Benefit Guar. Corp.,. 301 F.R.D. 20, 25 (D.D.C. 2014) (internal 

citation omitted) . The OCC, FDIC, and Board have the burden of 

demonstrating that they are entitled to this extraordinary relief. 

Id. 

A party "may obtain discovery regarding any nonpri vileged 

matter that is relevant to any party's claim or defense . [or 

which] appears reasonably calculated to lead to the discovery of 

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admissible evidence." Fed. R. Ci v. P. 2 6 (b) ( 1) . " [T] he general 

policy favoring broad discovery is particularly applicable where 

the court making the relevance determination has jurisdiction 

only over the discovery dispute, and hence has less familiarity 

with the intricacies of the governing substantive law than does 

the court overseeing the underlying litigation." Jewish War 

Veterans of the United States of Am., Inc. v. Gates, 506 F. Supp. 2d 

30, 42 (D.D.C. 2007). 

A. The Document Subpoenas 

1. Requests 1-7 

The OCC argues that Requests 1-7 should be quashed because 

the documents sought are not relevant. See OCC Mot. at 11-18. The 

OCC states that Defendants seek the documents to "shield themselves 

from liability based on [] pre-receivership conduct of the OCC or 

another prudential regulator." OCC Mot. at 12. It is wellestablished that a defendant in an FDIC-R action cannot raise an 

affirmative defense based on the pre-receivership conduct of a 

banking regulator, and therefore, the OCC argues, Requests 1-7 are 

legally irrelevant. See id.; Grant Thornton, LLP v. FDIC, 535 F. 

Supp. 2d 676, 722 (S.D.W. Va. 2007), rev'd on other grounds sub 

nom. Ellis v. Grant Thornton LLP, 530 F.3d 280 (4th Cir. 2008) 

(collecting cases and concluding that "[c] ourts have uniformly 

held that claims or defenses based upon pre-receivership actions 

of regulators are legally insufficient") 

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Defendants respond that they are not seeking the documents to 

shield themselves from liability or to show that the OCC owed 

Colonial a duty. Rather, they are seeking the documents in order 

to respond to the Alabama plaintiffs' arguments that the fraud was 

easy to catch and that the accountants were negligent in not doing 

so. Crowe Opp'n at 8. 

While the OCC has no responsibility for auditing banks, it 

has an enormous amount of responsibility for the supervision and 

monitoring of banks. PwC contends that the documents generated by 

and within the OCC are relevant because they "would reflect realtime observations, analyses, and assessments of bank management, 

the MWLD, risk factors, controls, audits, and other aspects of the 

bank that relate directly to the claims and defenses in the 

[Alabama Actions] , or at least reasonably could lead to information 

bearing on the issues in the [Alabama Actions]." PwC Opp'n at 11. 

Construing relevance liberally for purposes of discovery, 

Food Lion, Inc. v. United Food & Comm'l Workers Int'l Union, 103 

F.3d 1007, 1012 (D.C. Cir. 1997), the Court concludes that Requests 

1-7 are all relevant. 

Relevance is not the end of the inquiry though. The "undue 

burden" standard of Federal Rule of Civil Procedure 45 "requires 

district courts supervising discovery to be generally sensitive to 

the costs imposed on third parties." Watts v. S. E. C., 482 F. 3d 

501, 509 (D.C. Cir. 2007). Federal Rule of Civil Procedure 

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26 (b) (1) - (2) requires district courts to consider a number of 

factors pertaining to the question of undue burden, including: 

whether the discovery is "unreasonably cumulative or duplicative"; 

whether the discovery sought is "obtainable from some other source 

that is more convenient, less burdensome, or less expensive"; and 

whether "the burden or expense of the proposed discovery outweighs 

its likely benefit, taking into account the needs of the case, the 

amount in controversy, the parties' resources, the importance of 

the issues at stake in the litigation, and the importance of the 

proposed discovery in resolving the issues." Fed. R. Civ. Pro. 26; 

Watts, 482 F.3d at 509. 

The OCC has offered to provide . a breadth of documents to 

Defendants, and contends that these documents are "more than 

sufficient to meet the Defendants' needs" with regard to Requests 

1-7. The OCC argues that any further production would be an undue 

burden. OCC Mot. at 18. 

The OCC has offered to produce a copy of its "Transition 

Binder," which it compiled and provided to Colonial's new 

regulators "to give them an up-to-date and comprehensive 

understanding of the OCC's conclusions regarding [Colonial] from 

the time of the last completed OCC examination until the time of 

[Colonial] Bank's transition to the state charter." OCC Reply at 

8, n. 8. The OCC has also offered to not object to the FDIC-R's 

production of all OCC supervisory correspondence that was in 

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Colonial' s possession, as well as to supplement any ·advisory 

correspondence that is missing from Colonial's records. See id. 

The supervisory correspondence includes "the OCC's completed ROEs, 

Supervisory Letters, emails, and any other supervisory 

correspondence that the OCC routinely provided to Colonial during 

the time it was under the OCC's supervision." Id. 

According to the OCC, these documents constitute "the 

entirety of the OCC's considered conclusions and assessments of 

Colonial covering the duration of the OCC's supervision of the 

institution." OCC Mot. at 20. Defendants argue that the remaining 

documents, such as work papers, records of meetings, and email 

exchanges are relevant. PwC Opp'n at 12. 

The documents Defendants seek in addition to those already 

offered by the OCC are likely to be "unreasonably cumulative or 

duplicative," and, taking into account "the importance of the 

proposed discovery in resolving the issues," the burden and expense 

of the proposed discovery outweighs its likely benefit. Fed. R. 

Civ. Pro. 26(b) (2) (C). 

Therefore, the OCC's Motion to Quash the Document Subpoena 

with regard to Requests 1-7 is granted to the extent Defendants 

seek documents beyond those already offered by the OCC. The OCC 

shall provide the "Transition Binder" to Defendants and produce 

all correspondence with Colonial that occurred over the OCC' s 

secure email server for the relevant time period, as defined in 

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the Document Subpoena. 3 In addition, the OCC shall not object to 

the FDIC-R's production of all OCC supervisory documents in 

Colonial's possession. 

2. Requests 10-12 

The OCC also argues that information relating to the 

Interagency Policy Statement (Requests 10-12) 4 is irrelevant. OCC 

Mot. at 16-18. Defendants counter that the Interagency Policy 

Statement and related documents are relevant to defining the scope 

and nature of Defendants' duty to Colonial. Crowe Opp'n at 15-17. 

The Court agrees that while the Interagency Policy Statement 

is itself relevant, Defendants are seeking a broad range of 

documents related to it, many of which have little or no relevance 

to the Alabama Actions or Defendants' duty of care. Defendants 

clearly explain how the Interagency Policy Statement itself is 

relevant, but put forward very little explanation as to why the 

3 In its Sur-Reply, Crowe states that the OCC used a secure email 

program to correspond with Colonial during OCC's supervision of 

Colonial, and that these emails are either not available in the 

FDIC-R's production or are not easily accessible. See Crowe SurReply at 2. Given the difficulties in identifying, accessing, and 

authenticating the emails sent over the OCC's secure server, the 

Court cannot feel confident that the documents produced by the 

FDIC-R constitute the "the entirety of the OCC's considered 

conclusions and assessments of Colonial," OCC Mot. at 20, unless 

the OCC produces the correspondence sent using the secure email 

program. 

4 As noted previously, Defendants narrowed their requests so they 

now seek only "post-decisional documents concerning the 

implementation and interpretation df the Interagency Policy 

Statement." Crowe Opp'n at 26. 

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related documents they seek are relevant. See Crowe Opp'n at 15-

20. 

The OCC's position is that all relevant documents regarding 

the Interagency Policy Statement are publicly available, including 

the Interagency Policy Statement itself, published guidance 

regarding internal and external audits, news releases, and the 

Comptroller's Handbook: Internal and External Audits. OCC Reply 

at 11. The OCC states that there is no non-public OCC guidance 

with respect to the Interagency Policy Statement, nor have there 

been any OCC amendments or modifications to the Interagency Policy 

Statement since its issuance. Id. at 11. 

Given the attenuated relevance of any non-public Interagency 

Policy Statement documents, and the burden in producing them, OCC's 

Motion to Quash Requests 10-12 is granted. 

B. The Deposition Subpoenas 

In addition to documents, Defendant Crowe seeks the 

deposition testimony of three officials. It is undisputed that 

Crowe did not submit administrative requests to the Board, FDIC, 

or OCC prior to serving the Deposition Subpoenas, as required by 

the regulations of each respective agency. See United States ex 

rel. Touhy v. Ragen, 340 U.S. 462, 468 (1951) (discovery from a 

non-party federal agency is subject to the regulations promulgated 

by that agency); 12 C.F.R. § 4.31 et seq. (OCC regulations); 12 

C.F.R. § 261.22 (b) (Board regulations); 12 C.F.R. •§ 309.6 (FDIC 

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regulations). Crowe's explanation for this failure is that, 

because the agencies said they would never agree to any depositions 

concerning the Interagency Policy Statement, sending a formal 

letter "seemed an exercise in inevitable futility." Crowe Opp'n at 

31. 

The agencies' requirements to submit an administrative 

request for information prior to seeking relief from the court are 

clear. Counsel cannot independently decide that it need not comply 

with the regulations simply because it will be a losing 

proposition. 

The Supreme Court has long recognized the general rule that 

a party must exhaust· its administrative remedies before seeking 

relief from federal courts. See McCarthy v. Madigan, 503 U.S. 140, 

144-45 (1992). The exhaustion doctrine serves the interests of 

judicial economy, by offering an agency the opportunity to correct 

its own errors and to develop an administrative record, and 

separation of powers, by assuring that courts do not unduly intrude 

into the operations of executive branch administrative agencies. 

Id. 

While Crowe suggests that a party's failure to comply with 

Touhy is not always fatal to a subpoena, it provides limited 

support for this proposition. See Crowe Opp'n at 31 (citing 

Forstmann Leff Assocs. v. American Brands, 1991 WL 168002, at *2 

(S.D.N.Y. Aug. 16, 1991)); OCC Reply at 13. In any case, Crowe has 

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not presented exceptional circumstances that would warrant an 

exception to the requirement that it exhaust its administrative 

remedies. 

In light of Crowe's failure to comply with the OCC, FDIC, and 

Board's administrative requirements, the OCC and FDIC's Motions to 

Quash are granted with regard to the three Deposition Subpoenas. 

Because the Motions are quashed on other grounds, the Court need 

not determine whether the proposed deponents are protected under 

the high government official doctrine at this time. 

III. Conclusion 

For the foregoing reasons, Defendant's Motion to Quash 

shall be granted in part and denied in part. An Order shall 

accompany this Memorandum Opinion. 

June 8, 2015 

Judge 

Copies to: attorneys on record via ECF 

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