[Federal Register Volume 61, Number 108 (Tuesday, June 4, 1996)]
[Rules and Regulations]
[Pages 28020-28028]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-13814]



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[[Page 28021]]

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 747


Uniform Rules of Practice and Procedure

AGENCY: National Credit Union Administration.

ACTION: Final rule.

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SUMMARY: The National Credit Union Administration (NCUA) is amending 
its regulatory provisions implementing the Uniform Rules of Practice 
and Procedure (Uniform Rules). The final rule is intended to clarify 
certain provisions and to increase the efficiency and fairness of 
administrative hearings.

EFFECTIVE DATE: June 5, 1996.

FOR FURTHER INFORMATION CONTACT: Steven W. Widerman, Trial Attorney, 
Office of General Counsel, 703/518-6557, National Credit Union 
Administration, 1775 Duke Street, Alexandria, VA 22314.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 916 of the Financial Institutions Reform, Recovery and 
Enforcement Act of 1989 (FIRREA), Pub. L. 101-73, 103 Stat. 183 (1989), 
required the NCUA, the Office of the Comptroller of the Currency (OCC), 
the Office of Thrift Supervision (OTS), the Federal Deposit Insurance 
Corporation (FDIC), and the Board of Governors of the Federal Reserve 
System (Board) (agencies) to develop uniform rules and procedures for 
administrative hearings. The agencies each adopted final Uniform Rules 
in August 1991.\1\ Based on their experience in using the rules since 
then, the agencies have identified sections of the Uniform Rules that 
should be modified. Accordingly, the agencies proposed amendments to 
the Uniform Rules on June 23, 1995 (60 FR 32882).\2\
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    \1\ The agencies issued a joint notice of proposed rulemaking on 
June 17, 1991 (56 FR 27790). The agencies issued their final rules 
on the following dates: NCUA on August 8, 1991 (56 FR 37767); OCC on 
August 9, 1991 (56 FR 38024); Board on August 9, 1991 (56 FR 38052); 
FDIC on August 9, 1991 (56 FR 37975); and OTS on August 12, 1991 (56 
FR 38317).
    \2\ On December 30, 1994, NCUA proposed an amendment to the 
provision of the Uniforms Rules which restricts ex parte 
communications, Sec. 747.9 (59 FR 67655). The other agencies each 
issued a similar notice of proposed rulemaking in November and 
December 1994. The amendment makes clear that the scope of 
Sec. 747.9 conforms to that of the Administrative Procedure Act. 
NCUA received two comments on this proposal, both of which are 
addressed below. This final rule implements the amendment to 
Sec. 747.9.
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    The NCUA received four comments on the proposal. All commenters 
generally supported the proposal, but each suggested improvements or 
further revisions.
    The final rule implements the proposal with certain changes, 
including revisions responsive to some of the concerns expressed by the 
commenters. The following section-by-section analysis summarizes the 
final rule and highlights the changes from the proposal that the NCUA 
made in response to the commenters' suggestions.
    The OCC, OTS, FDIC and Board have published separate final rules, 
effective June 5, 1996, that are substantively identical to the NCUA's 
final rule (61 FR 20330 et seq.), except as noted below in regard to 
Secs. 747.1 and 747.9.

II. Section-by-Section Summary and Discussion of Amendments to the 
Uniform Rules

Section 747.1  Scope

    The proposal added a statutory provision to the list of civil money 
penalty provisions to which the Uniform Rules apply. The added 
provision was enacted by section 125 of the Riegle Community 
Development and Regulatory Improvement Act of 1994 (CDRI), Pub. L. 103-
325, 108 Stat. 2160, which amended section 102 the Flood Disaster 
Protection Act of 1973 (FDPA) (42 U.S.C. 4012a). Section 102 now gives 
each ``Federal entity for lending regulation'' authority to assess 
civil money penalties against a regulated lending institution if the 
institution has a pattern or practice of committing violations under 
the FDPA or the notice requirements of the National Flood Insurance Act 
of 1968 (NFIA) (42 U.S.C. 4104a). Under the FDPA, the term ``Federal 
entity for lending regulation'' includes the agencies and the Farm 
Credit Administration.
    CDRI section 525 also gave the agencies authority to require a 
regulated lending institution to take remedial actions that are 
necessary to ensure that the institution complies with the requirements 
of the national flood insurance program if: (1) The institution has 
engaged in a pattern and practice of noncompliance with regulations 
issued pursuant to the FDPA and NFIA; and (2) has not demonstrated 
measurable improvement in compliance despite the assessment of civil 
money penalties. The final rule adds a new paragraph to the scope 
section that reflects this additional authority.\3\
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    \3\ Another provision of the CDRI, section 406, amended the Bank 
Secrecy Act (BSA) (31 U.S.C. 5321) to require the Secretary of the 
Treasury to delegate authority to the Federal banking agencies, as 
defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 
1813), to impose civil money penalties for BSA violations. The 
definition of Federal banking agencies includes the other agencies, 
but does not include NCUA. Therefore, while each of the other 
agencies has inserted this provision in its final rule, NCUA has 
not.
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    The NCUA received no comments on this section, which is adopted as 
proposed.

Section 747.6  Appearance and Practice in Adjudicatory Proceedings

    The proposal permitted the administrative law judge (ALJ) to 
require counsel who withdraws from representing a party to accept 
service of papers for that party until either: (1) A new counsel has 
filed a notice of appearance; or (2) the party indicates that he or she 
will proceed on a pro se basis.
    The NCUA received one comment on this section. The commenter 
suggested that the proposal did not adequately address certain 
situations: for example, when counsel withdraws because of a lack of 
payment of legal fees that is caused by an agency asset freeze, or 
withdraws because the client discharged him or her. The commenter's 
implication is that it is unfair to require counsel to continue to 
accept service in these situations. Moreover, the commenter expressed 
concern that the administrative proceeding may become involved in a 
dispute between the client and counsel when the ALJ requires counsel to 
continue to accept service after a client discharges counsel. The 
commenter suggested that the rule should require that service be given 
to both the unreplaced counsel and the party.
    The proposal was intended to ensure that a lawyer is always 
available to receive service in order to prevent a party from halting 
the administrative proceedings simply by evading service. The 
regulatory text is clear, however, that the ALJ has the discretion 
whether to require former counsel to continue to accept service. 
Fairness to counsel is among the factors the ALJ would consider in 
exercising this discretion, and the NCUA therefore believes that the 
provision as proposed is sufficiently flexible to accommodate the 
concerns raised by the commenter.
    The final rule changes the proposal's reference from ``service of 
process'' to ``service'' to clarify that this section applies to all 
papers that the party is entitled to receive. This section is otherwise 
adopted as proposed.

Section 747.8  Conflicts of Interest

    The proposal sought to improve in two ways the provisions governing 
the conflicts of interest that may arise when

[[Page 28022]]

counsel represents multiple persons connected with a proceeding.
    First, the proposal sought to protect the interests of individuals 
and financial institutions by expanding the circumstances under which 
counsel must certify that he or she has obtained a waiver from each 
non-party of any potential conflict of interest. The former rule 
required counsel to obtain waivers only from non-party institutions 
``to which notice of the proceedings must be given.'' The proposal 
required counsel to obtain waivers from all parties and non-parties 
that counsel represents on a matter relevant to an issue in the 
proceeding. It thus ensured that all appropriate party and non-party 
individuals and institutions are informed of potential conflicts.
    Second, the proposal simplified this provision by eliminating the 
requirement for counsel to certify that each client has asserted that 
there are no conflicts of interest. The NCUA Board believes that the 
former provision was superfluous because the responsibility for 
identifying potential conflicts resides with counsel.
    The NCUA received one comment on this section. The commenter noted 
that the proposal may inhibit multiple representation that otherwise 
complies with applicable ethics rules. The commenter suggested that the 
proposal could inappropriately tilt the proceeding in favor of the 
agencies.
    The provision does not limit the right of any party to 
representation by counsel of the party's choice. Rather, it ensures 
that all interested persons are informed of potential conflicts so that 
they may avoid the conflict if they choose. In the NCUA's view, it is 
reasonable to establish a baseline standard requiring the affirmative 
waiver of conflicts by all affected persons or entities in order to 
ensure the integrity of the administrative adjudication process. State 
rules of professional responsibility that impose more stringent ethical 
standards are unaffected by this requirement.
    In addition, the NCUA is unpersuaded by the argument that the 
conflicts provision grants the agencies significant advantage in a 
proceeding. Persons and entities may be well and vigorously represented 
even if they are not all represented by the same counsel.
    Therefore, the NCUA adopts this section as proposed.

Section 747.9  Ex parte Communications

    The proposal sought to clarify that the restriction on ex parte 
communications parallels the requirements of the Administrative 
Procedure Act (APA). The current Sec. 747.9(b) prohibits ex parte 
communications between a party, the party's counsel, or another 
interested person, and the NCUA Board or other decisional employee 
regarding the merits of an adjudicatory proceeding.
    The agencies' intention when adopting the Uniform Rules in 1991 was 
that Sec. 747.9 conform to, but not exceed, the scope of the APA 
provisions restricting ex parte communications. The APA prohibits ex 
parte communications between agency decisionmakers and ``interested 
persons outside the agency'' regarding the merits of an adjudicatory 
proceeding. 5 U.S.C. Sec. 557(d). It also prohibits enforcement staff 
within the agency from participating or advising in the decision, 
recommended decision, or agency review of an adjudicatory matter except 
as witness or counsel. 5 U.S.C. Sec. 554(d). The APA does not prohibit 
agency enforcement staff from seeking approval to amend a notice of, or 
to settle or terminate, a proceeding.
    The current Sec. 747.9(b) could in practice be misinterpreted to 
expand the prohibition on ex parte communications beyond the scope of 
the APA to prohibit communications between enforcement staff and the 
NCUA Board regarding approval to amend or to terminate existing 
enforcement actions. To insure against such an unintended result, the 
proposed amendment clarifies that the section is intended to conform to 
the provisions of the APA by limiting the prohibition on ex parte 
communications to communications to or from ``interested persons 
outside the agency,'' 5 U.S.C. 557(d), and by incorporating explicitly 
the APA's separation of functions provisions, 5 U.S.C. 554(d). This 
approach is consistent with the most recent Model Adjudication Rules 
prepared by the Administrative Conference of the United States (ACUS). 
ACUS, Model Adjudication Rules (December 1993).
    The NCUA received two comments on this section. One commenter 
supported the proposal provided that it is limited to intra-agency 
communications concerning amending a notice of charges or settling or 
terminating a proceeding. The other commenter claimed that ``NCUA has 
not stated any compelling need for [the amendment], and we view the 
proposed rule as inconsistent with the fundamental principles of 
fairness built into our legal system.'' This commenter fails to 
recognize that the proposed amendment allows ex parte communications 
with the NCUA Board only on nonadjudicatory matters, such as when NCUA 
enforcement staff seeks NCUA Board approval to amend a notice of 
charges or to settle or terminate an existing enforcement proceeding. 
Other parties to the proceeding are not entitled to participate in such 
a decision.
    Accordingly, the NCUA adopts this section as proposed. -

Section 747.11  Service of Papers

    The proposal changed this section by permitting parties, the NCUA 
Board, and ALJs to serve a subpoena on a party by delivering it to a 
person of suitable age and discretion at a party's place of work.
    The NCUA received one comment on this section. The commenter 
supported the intent of the proposal, but asserted that the provision 
permitting service at a person's place of work was too broad to be 
effective, particularly where a financial institution has numerous 
branches.
    The NCUA interpreted the phrase ``person's place of work'' as used 
in the proposal to mean the physical location at which an individual 
works and not as any office of the corporation or association that 
employs the person. To avoid confusion, the NCUA has added specific 
reference to physical location to the regulatory text. In addition, the 
final rule states expressly that only an individual, not a corporation 
or association, may be served at a residence or place of work.
    The same comment points out, however, that the former Uniform Rules 
did not expressly permit certain methods of service that are useful for 
serving a corporation or other association. The final rule, therefore, 
permits service on a party corporation or other association by delivery 
of a copy of a notice to an officer, managing or general agent, or to 
any other agent authorized by appointment or by law to receive service 
of process. Even though a credit union technically may not satisfy the 
definition of a corporation or other association, it is to be treated 
as such for purposes of service under this rule.
    The final rule also provides that, if the agent is one authorized 
by a statute to receive service and the statute so requires, the 
serving party must also mail a copy to the party. The final rule also 
restructures this provision for clarity.

Section 747.12  Construction of Time Limits

    The proposal clarified that the additional time allotted for 
responding to papers served by mail, delivery service, or electronic 
media transmission under Sec. 747.12(c) is not included in determining 
whether an act is required to be performed within ten

[[Page 28023]]

days. The proposal also clarified that additional time allotted for 
responding to papers served by mail, delivery, or electronic media 
transmission is counted by calendar days and, therefore, a party must 
count Saturdays, Sundays, and holidays when calculating a time 
deadline.
    The NCUA received one comment on this section, asserting that 
Saturdays, Sundays and holidays should be excluded when calculating a 
time deadline because small credit unions and U.S. Post Offices 
frequently are not open on those days. This comment addresses time 
deadlines generally, whereas the proposed amendment counts Saturdays, 
Sundays and holidays only when calculating extra time added under 
Sec. 747.12(c) for responding to papers served by mail, delivery, or 
electronic media transmission. The proposed amendment does not affect 
the current rule excluding those days from deadlines of ten days or 
less, and including them in deadlines of more than ten days. NCUA 
adopts the section as proposed.

Section 747.20  Amended Pleadings

    The proposal changed this section to permit a party to amend its 
pleadings without leave of the ALJ and to permit the ALJ to admit 
evidence over the objection that the evidence does not fall directly 
within the scope of the issues raised by a notice or answer.
    The NCUA received one comment on this section. The commenter 
asserted that the change could unduly prejudice a party if a notice 
were amended to add or delete allegations immediately prior to the 
hearing. The commenter expressed concern that the amendment would give 
a party insufficient time to seek additional discovery or file for 
summary judgment.
    The regulatory text gives the ALJ discretion to revise the hearing 
schedule to ensure that no prejudice results from last minute 
amendments to a notice. The NCUA believes this approach is adequate to 
avoid prejudice to a party and, therefore, the NCUA adopts this section 
as proposed.

Section 747.24  Scope of Document Discovery

    The former Uniform Rules were silent on the use of interrogatories. 
The proposal expressly prohibited parties from using interrogatories on 
grounds that other discovery tools are more efficient and less 
burdensome and therefore more appropriate to administrative 
adjudications. NCUA received two comments on this subsection. One urged 
that interrogatories not be expressly prohibited so that they would be 
available for use on a limited basis. The other urged that 
interrogatories be expressly permitted without limitation. Both 
comments are effectively moot in failing to recognize that NCUA's 
current Local Rule of Practice and Procedure, with a single narrow 
exception, already expressly prohibits all forms of discovery other 
than production of documents. 12 CFR 747.100.
    The proposal also sought to focus document discovery requests so 
that they are not unreasonable, oppressive, excessive in scope, or 
unduly burdensome to any of the parties. Accordingly, the proposal 
preserved the former rule's limitation on document discovery by 
permitting discovery only of documents that have material relevance. 
However, the proposal specifically provided that a request should be 
considered unreasonable, oppressive, excessive in scope, or unduly 
burdensome if, among other things: (1) It fails to include justifiable 
limitations on the time period covered and the geographic locations to 
be searched; (2) the time provided to respond in the request is 
inadequate; or (3) the request calls for copies of documents to be 
delivered to the requesting party and fails to include the requestor's 
written agreement to pay in advance for the copying, in accordance with 
Sec. 747.25.
    Under the proposal, the scope of permissible document discovery is 
not as broad as that allowed under Rule 26(b) of the Federal Rules of 
Civil Procedure (28 U.S.C. app.). Historically, given the specialized 
nature of enforcement proceedings in regulated industries, discovery in 
administrative proceedings has not been as expansive as it is in civil 
litigation.
    The NCUA received one comment on this subsection, urging that the 
Federal Rule 26(b) standard in the current subsection be retained. The 
agencies' experience with document discovery in their administrative 
proceedings has been that substantial time and resources are squandered 
on extraneous document discovery. A standard somewhat more restrictive 
than that of Federal Rule 26(b) is needed to reasonably confine 
document discovery. Accordingly, the NCUA adopts this subsection as 
proposed.

Section 747.25  Request for Document Discovery From Parties

    The NCUA proposed several changes to Sec. 747.25. First, the 
proposal sought to reduce unnecessary burden by permitting a party to: 
(1) Respond to document discovery either by producing documents as they 
are kept in the ordinary course of business or by organizing them to 
correspond to the categories in a document request; and (2) identify 
similar documents by category when they are voluminous and are 
protected by the deliberative process, attorney-client, or attorney 
work-product privilege.
    The proposal also amended Sec. 747.25 to permit a party to require 
payment in advance for the costs of copying and shipping requested 
documents; and clarified that, if a party has stated its intention to 
file a timely motion for interlocutory review, the ALJ may not release, 
or order a party to produce, documents withheld on grounds of privilege 
until the motion for interlocutory review has been decided.
    The NCUA received two comments on this section. One comment 
suggested that a request for interlocutory review should automatically 
stay the proceeding. Under Sec. 747.28(d) of the Uniform Rules, a party 
may request that a proceeding be stayed during the pendency of an 
interlocutory review, and the ALJ has the discretion to decide whether 
a stay is appropriate. The NCUA believes that this procedure adequately 
protects the parties. For this reason and to avoid adding unnecessary 
delays in the administrative proceedings, the NCUA declines to provide 
for an automatic stay whenever a party requests interlocutory review.
    The second comment asserted that permitting the NCUA to require 
payment in advance for document copying and shipping costs would give 
the NCUA an advantage over other creditors if the party is bankrupt 
following the administrative hearing. The commenter does not assert 
that it is a violation of the bankruptcy laws for the NCUA or any other 
creditor to require prepayment for products or services. Moreover, the 
NCUA believes that the situations causing the commenter's concern would 
be very rare. Accordingly, the NCUA adopts this section as proposed.

Section 747.27  Deposition of Witness Unavailable for Hearing

    The proposal clarified that a party may serve a deposition subpoena 
on a witness who is unavailable by serving the subpoena on the 
witness's authorized representative. The final rule does not include 
this proposed change because, in Sec. 747.11(d), the final rule 
expressly permits a party to serve a subpoena by delivering the 
subpoena to an agent, which includes delivery to an authorized 
representative. The proposed change to Sec. 747.27 would be redundant. 
The NCUA received no comments on

[[Page 28024]]

this section. The final rule does not, therefore, change this 
provision.

Section 747.33  Public Hearings

    The proposal changed this section to specify that a party must file 
a motion for a private hearing with the NCUA Board, and not the ALJ, 
but must serve the ALJ with a copy of the motion.
    The NCUA received no comments on this section, which is adopted as 
proposed.

Section 747.34  Hearing Subpoenas

    The former Uniform Rules did not specifically require that a party 
inform all other parties when a subpoena is issued to a non-party. The 
proposal required that, after a hearing subpoena is issued by the ALJ, 
the party that applied for the subpoena must serve a copy of it on each 
party. Under the proposal, any party may move to quash any hearing 
subpoena and must serve the motion on each other party.
    The NCUA received no comments on this section, which is adopted as 
proposed.

Section 747.35  Conduct of Hearings

    The proposal limited the number of counsel permitted to examine a 
witness and clarified that hearing transcripts may be obtained only 
from the court reporter. The former Uniform Rules were silent on these 
issues.
    The NCUA received no comments on this section, which is adopted as 
proposed.

Section 747.37  Post-hearing Filings

    The proposal changed the title of this section from ``Proposed 
findings and conclusions'' to ``Post-hearing filings'' to describe more 
accurately the content of the section.
    The proposal also moved, from Sec. 747.35(b) to Sec. 747.37(a), the 
provision that requires the ALJ to serve each party with notice of the 
filing of the certified transcript of the hearing (including hearing 
exhibits). The proposal added a requirement that the ALJ must use the 
same method of service for this notice for each recipient.
    Finally, the proposal clarified that the ALJ may, when appropriate, 
permit parties more than the allotted 30 days to file proposed findings 
of fact, proposed conclusions of law, and a proposed order.
    The NCUA received no comments on this section, which is adopted 
with a minor technical change.

Section 747.38  Recommended Decision and Filing of Record

    Under the former Uniform Rules, the ALJ was not required to file an 
index of the record when he filed the record with the NCUA Board. The 
proposal added this requirement and reorganized this section to improve 
its clarity.
    The NCUA received no comments on this section, which is adopted as 
proposed.
Technical Changes
    The final rule makes several technical changes to the proposal that 
make the final rule specific to the NCUA. These changes appear 
throughout the rule text. For example, bracketed references to the 
``agency head'' have been replaced with ``the NCUA Board'' and the 
blank part designation before each section number has been filled in 
with ``747.''

III. Rationale for Expedited Effective Date

    The effective date of NCUA's final rule, June 5, 1996, is less than 
the thirty days from publication. The APA requires thirty days' notice 
of effectiveness, but permits that requirement to be waived upon a 
showing of good cause. 5 U.S.C. 553(d)(3). Good cause exists in this 
case for making NCUA's final rule effective June 5. The Uniform Rules 
were originally developed and recently revised jointly with the other 
agencies. The purpose of the June 5 effective date for NCUA's final 
rule adopting the revisions is to conform to the effective date of the 
other agencies' final rules. No party to an NCUA administrative 
proceeding governed by the Uniform Rules will be prejudiced by the June 
5 effective date because the revisions adopted in the final rule apply 
only to formal administrative proceedings commenced (through filing of 
a notice of charges) after the effective date (see 58 FR 37766). Formal 
administrative proceedings pending on or before the effective date will 
not be affected by the revisions.

IV. Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act, the 
NCUA hereby certifies that this final rule will not have a significant 
economic impact on a substantial number of small entities. Accordingly, 
a regulatory flexibility analysis is not required.
    This final rule imposes only procedural requirements in 
administrative adjudications. It contains no substantive requirements. 
It improves the Uniform Rules of Practice and Procedure and facilitates 
the orderly determination of administrative proceedings. The changes in 
this final rule are primarily clarifications and impose no significant 
additional burdens on regulated institutions, parties to administrative 
actions, or counsel.

V. Executive Order 12612

    This final rule, like the current part 747 it is replacing, will 
apply to all Federally insured credit unions. The NCUA Board, pursuant 
to Executive Order 12612, has determined, however, that this joint 
proposed rule will not have a substantial direct effect on the states, 
on the relationship between the national government and the states, or 
on the distribution of power and responsibilities among various levels 
of government. Further, this joint proposed rule will not preempt 
provisions of state law or regulations.

VI. Effective Date

    Section 302 of the Riegle Community Development and Regulatory 
Improvement Act 1994 delays the effective date of regulations 
promulgated by the Federal banking agencies that impose additional 
reporting, disclosure, or other new requirements to the first date of 
the first calendar quarter following publication of the final rule. The 
NCUA believes that Section 302 is not applicable to this final rule, 
because the regulation does not impose any additional reporting or 
other requirements not already contained in the current version of the 
Uniform Rules.

Text of the Final Rule

    The text of the amendments to 12 CFR part 747 follows:

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 747

List of Subjects in 12 CFR Part 747

    Administrative Practice and Procedure, Bank Deposit Insurance, 
Claims, Credit Unions, Crime, Equal Access to Justice, Hearing 
Procedures, Investigations, Lawyers, Penalties.

Authority and Issuance

    For the reasons set out in the preamble, part 747 of chapter VII of 
title 12 of the Code of Federal Regulations is amended as set forth 
below:

PART 747--ADMINISTRATIVE ACTIONS, ADJUDICATIVE HEARINGS, RULES OF 
PRACTICE AND PROCEDURE, AND INVESTIGATIONS

    1. The authority citation for part 747 is revised to read as 
follows:

    Authority: 12 U.S.C. 1766, 1786, 1784 and 1787; and 42 U.S.C. 
4012a.

[[Page 28025]]

Subpart A--[Amended]

    2. In Sec. 747.1, paragraph (c)(2) is amended by removing ``and'' 
after the semicolon, paragraph (c)(3) is revised, paragraph (c)(4) is 
added, paragraph (d) is redesignated as paragraph (e) and revised, and 
new paragraph (d) is added to read as follows:


Sec. 747.1  Scope.

* * * * *
    (c) * * *
    (3) The terms of any final or temporary order issued under section 
206 of the Act or any written agreement executed by the National Credit 
Union Administration (``NCUA''), any condition imposed in writing by 
the NCUA in connection with the grant of an application or request, 
certain unsafe or unsound practices or breaches of fiduciary duty, or 
any law or regulation not otherwise provided herein, pursuant to 12 
U.S.C. 1786(k); and
    (4) Any provision of law referenced in section 102(f) of the Flood 
Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)) or any order or 
regulation issued thereunder;
    (d) Remedial action under section 102(g) of the Flood Disaster 
Protection Act of 1973 (42 U.S.C. 4012a(g)); and
    (e) This subpart also applies to all other adjudications required 
by statute to be determined on the record after opportunity for an 
agency hearing, unless otherwise specifically provided for in Subparts 
B through J of this Part.
    3. In Sec. 747.6, paragraph (a)(3) is revised to read as follows:


Sec. 747.6  Appearance and practice in adjudicatory proceedings.

    (a) * * *
    (3) Notice of appearance. Any individual acting as counsel on 
behalf of a party, including the NCUA Board, shall file a notice of 
appearance with OFIA at or before the time that the individual submits 
papers or otherwise appears on behalf of a party in the adjudicatory 
proceeding. The notice of appearance must include a written declaration 
that the individual is currently qualified as provided in paragraph 
(a)(1) or (a)(2) of this section and is authorized to represent the 
particular party. By filing a notice of appearance on behalf of a party 
in an adjudicatory proceeding, the counsel agrees and represents that 
he or she is authorized to accept service on behalf of the represented 
party and that, in the event of withdrawal from representation, he or 
she will, if required by the administrative law judge, continue to 
accept service until new counsel has filed a notice of appearance or 
until the represented party indicates that he or she will proceed on a 
pro se basis.
* * * * *
    4. In Sec. 747.8, paragraph (b) is revised to read as follows:


Sec. 747.8  Conflicts of interest.

* * * * *
    (b) Certification and waiver. If any person appearing as counsel 
represents two or more parties to an adjudicatory proceeding or also 
represents a non-party on a matter relevant to an issue in the 
proceeding, counsel must certify in writing at the time of filing the 
notice of appearance required by Sec. 747.6(a):
    (1) That the counsel has personally and fully discussed the 
possibility of conflicts of interest with each such party and non-
party; and
    (2) That each such party and non-party waives any right it might 
otherwise have had to assert any known conflicts of interest or to 
assert any non-material conflicts of interest during the course of the 
proceeding.
    5. In Sec. 747.9, paragraphs (a) and (b) are revised and a new 
paragraph (e) is added to read as follows:


Sec. 747.9  Ex parte communications.

    (a) Definition. (1) Ex parte communication means any material oral 
or written communication relevant to the merits of an adjudicatory 
proceeding that was neither on the record nor on reasonable prior 
notice to all parties that takes place between--
    (i) An interested person outside the NCUA (including such person's 
counsel); and
    (ii) The administrative law judge handling that proceeding, the 
NCUA Board, or a decisional employee.
    (2) Exception. A request for status of the proceeding does not 
constitute an ex parte communication.
    (b) Prohibition of ex parte communications. From the time the 
notice is issued by the NCUA Board until the date that the NCUA Board 
issues its final decision pursuant to Sec. 747.40(c):
    (1) No interested person outside the NCUA shall make or knowingly 
cause to be made an ex parte communication to any member of the NCUA 
Board, the administrative law judge, or a decisional employee; and
    (2) No member of the NCUA Board, administrative law judge, or 
decisional employee shall make or knowingly cause to be made to any 
interested person outside the NCUA any ex parte communication.
* * * * *
    (e) Separation of functions. Except to the extent required for the 
disposition of ex parte matters as authorized by law, the 
administrative law judge may not consult a person or party on any 
matter relevant to the merits of the adjudication, unless on notice and 
opportunity for all parties to participate. An employee or agent 
engaged in the performance of investigative or prosecuting functions 
for the NCUA in a case may not, in that or a factually related case, 
participate or advise in the decision, recommended decision, or agency 
review of the recommended decision under section 747.40, except as 
witness or counsel in public proceedings.
    6. In Sec. 747.11, paragraphs (c)(2) and (d) are revised to read as 
follows:


Sec. 747.11  Service of papers.

* * * * *
    (c) * * *
    (2) If a party has not appeared in the proceeding in accordance 
with Sec. 747.6, the NCUA Board or the administrative law judge shall 
make service by any of the following methods:
    (i) By personal service;
    (ii) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where 
the individual resides or works;
    (iii) If the person to be served is a corporation or other 
association, by delivery to an officer, managing or general agent, or 
to any other agent authorized by appointment or by law to receive 
service and, if the agent is one authorized by statute to receive 
service and the statute so requires, by also mailing a copy to the 
party;
    (iv) By registered or certified mail addressed to the person's last 
known address; or
    (v) By any other method reasonably calculated to give actual 
notice.
    (d) Subpoenas. Service of a subpoena may be made:
    (1) By personal service;
    (2) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where 
the individual resides or works;
    (3) By delivery to an agent, which, in the case of a corporation or 
other association, is delivery to an officer, managing or general 
agent, or to any other agent authorized by appointment or by law to 
receive service and, if the agent is one authorized by statute to 
receive service and the statute so requires, by also mailing a copy to 
the party;
    (4) By registered or certified mail addressed to the person's last 
known address; or

[[Page 28026]]

    (5) By any other method reasonably calculated to give actual 
notice.
* * * * *
    7. In Sec. 747.12, paragraphs (a), (c)(1), (c)(2), and (c)(3) are 
revised to read as follows:


Sec. 747.12  Construction of time limits.

    (a) General rule. In computing any period of time prescribed by 
this subpart, the date of the act or event that commences the 
designated period of time is not included. The last day so computed is 
included unless it is a Saturday, Sunday, or Federal holiday. When the 
last day is a Saturday, Sunday, or Federal holiday, the period runs 
until the end of the next day that is not a Saturday, Sunday, or 
Federal holiday. Intermediate Saturdays, Sundays, and Federal holidays 
are included in the computation of time. However, when the time period 
within which an act is to be performed is ten days or less, not 
including any additional time allowed for in Sec. 747.12(c), 
intermediate Saturdays, Sundays, and Federal holidays are not included.
* * * * *
    (c) * * *
    (1) If service is made by first class, registered, or certified 
mail, add three calendar days to the prescribed period;
    (2) If service is made by express mail or overnight delivery 
service, add one calendar day to the prescribed period; or
    (3) If service is made by electronic media transmission, add one 
calendar day to the prescribed period, unless otherwise determined by 
the NCUA Board or the administrative law judge in the case of filing, 
or by agreement among the parties in the case of service.
    8. Section 747.20 is revised to read as follows:


Sec. 747.20  Amended pleadings.

    (a) Amendments. The notice or answer may be amended or supplemented 
at any stage of the proceeding. The respondent must answer an amended 
notice within the time remaining for the respondent's answer to the 
original notice, or within ten days after service of the amended 
notice, whichever period is longer, unless the NCUA Board or 
administrative law judge orders otherwise for good cause.
    (b) Amendments to conform to the evidence. When issues not raised 
in the notice or answer are tried at the hearing by express or implied 
consent of the parties, they will be treated in all respects as if they 
had been raised in the notice or answer, and no formal amendments are 
required. If evidence is objected to at the hearing on the ground that 
it is not within the issues raised by the notice or answer, the 
administrative law judge may admit the evidence when admission is 
likely to assist in adjudicating the merits of the action and the 
objecting party fails to satisfy the administrative law judge that the 
admission of such evidence would unfairly prejudice that party's action 
or defense upon the merits. The administrative law judge may grant a 
continuance to enable the objecting party to meet such evidence.
    9. In Sec. 747.24, paragraphs (a) and (b) are revised to read as 
follows:


Sec. 747.24  Scope of document discovery.

    (a) Limits on discovery. (1) Subject to the limitations set out in 
paragraphs (b), (c), and (d) of this section, a party to a proceeding 
under this subpart may obtain document discovery by serving a written 
request to produce documents. For purposes of a request to produce 
documents, the term ``documents'' may be defined to include drawings, 
graphs, charts, photographs, recordings, data stored in electronic 
form, and other data compilations from which information can be 
obtained, or translated, if necessary, by the parties through detection 
devices into reasonably usable form, as well as written material of all 
kinds.
    (2) Discovery by use of deposition is governed by subpart I of this 
part.
    (3) Discovery by use of interrogatories is not permitted.
    (b) Relevance. A party may obtain document discovery regarding any 
matter, not privileged, that has material relevance to the merits of 
the pending action. Any request to produce documents that calls for 
irrelevant material, that is unreasonable, oppressive, excessive in 
scope, unduly burdensome, or repetitive of previous requests, or that 
seeks to obtain privileged documents will be denied or modified. A 
request is unreasonable, oppressive, excessive in scope, or unduly 
burdensome if, among other things, it fails to include justifiable 
limitations on the time period covered and the geographic locations to 
be searched, the time provided to respond in the request is inadequate, 
or the request calls for copies of documents to be delivered to the 
requesting party and fails to include the requester's written agreement 
to pay in advance for the copying, in accordance with Sec. 747.25.
* * * * *
    10. In Sec. 747.25, paragraphs (a), (b), (e), and (g) are revised 
to read as follows:


Sec. 747.25  Request for document discovery from parties.

    (a) General rule. Any party may serve on any other party a request 
to produce for inspection any discoverable documents that are in the 
possession, custody, or control of the party upon whom the request is 
served. The request must identify the documents to be produced either 
by individual item or by category, and must describe each item and 
category with reasonable particularity. Documents must be produced as 
they are kept in the usual course of business or must be organized to 
correspond with the categories in the request.
    (b) Production or copying. The request must specify a reasonable 
time, place, and manner for production and performing any related acts. 
In lieu of inspecting the documents, the requesting party may specify 
that all or some of the responsive documents be copied and the copies 
delivered to the requesting party. If copying of fewer than 250 pages 
is requested, the party to whom the request is addressed shall bear the 
cost of copying and shipping charges. If a party requests 250 pages or 
more of copying, the requesting party shall pay for the copying and 
shipping charges. Copying charges are the current per-page copying rate 
imposed by 12 CFR part 4 implementing the Freedom of Information Act (5 
U.S.C. 552). The party to whom the request is addressed may require 
payment in advance before producing the documents.
* * * * *
    (e) Privilege. At the time other documents are produced, the 
producing party must reasonably identify all documents withheld on the 
grounds of privilege and must produce a statement of the basis for the 
assertion of privilege. When similar documents that are protected by 
deliberative process, attorney work-product, or attorney-client 
privilege are voluminous, these documents may be identified by category 
instead of by individual document. The administrative law judge retains 
discretion to determine when the identification by category is 
insufficient.
* * * * *
    (g) Ruling on motions. After the time for filing responses pursuant 
to this section has expired, the administrative law judge shall rule 
promptly on all motions filed pursuant to this section. If the 
administrative law judge determines that a discovery request, or any of 
its terms, calls for irrelevant material, is unreasonable, oppressive, 
excessive in scope, unduly burdensome, or repetitive of previous 
requests, or seeks to obtain privileged documents, he or she may

[[Page 28027]]

deny or modify the request, and may issue appropriate protective 
orders, upon such conditions as justice may require. The pendency of a 
motion to strike or limit discovery or to compel production is not a 
basis for staying or continuing the proceeding, unless otherwise 
ordered by the administrative law judge. Notwithstanding any other 
provision in this part, the administrative law judge may not release, 
or order a party to produce, documents withheld on grounds of privilege 
if the party has stated to the administrative law judge its intention 
to file a timely motion for interlocutory review of the administrative 
law judge's order to produce the documents, and until the motion for 
interlocutory review has been decided.
* * * * *
    11. In Sec. 747.33, paragraph (a) is revised to read as follows:


Sec. 747.33  Public hearings.

    (a) General rule. All hearings shall be open to the public, unless 
the NCUA Board, in its discretion, determines that holding an open 
hearing would be contrary to the public interest. Within 20 days of 
service of the notice, any respondent may file with the NCUA Board a 
request for a private hearing, and any party may file a reply to such a 
request. A party must serve on the administrative law judge a copy of 
any request or reply the party files with the NCUA Board. The form of, 
and procedure for, these requests and replies are governed by 
Sec. 747.23. A party's failure to file a request or a reply constitutes 
a waiver of any objections regarding whether the hearing will be public 
or private.
* * * * *
    12. In Sec. 747.34, paragraphs (a) and (b)(1) are revised to read 
as follows:


Sec. 747.34  Hearing subpoenas.

    (a) Issuance. (1) Upon application of a party showing general 
relevance and reasonableness of scope of the testimony or other 
evidence sought, the administrative law judge may issue a subpoena or a 
subpoena duces tecum requiring the attendance of a witness at the 
hearing or the production of documentary or physical evidence at the 
hearing. The application for a hearing subpoena must also contain a 
proposed subpoena specifying the attendance of a witness or the 
production of evidence from any state, territory, or possession of the 
United States, the District of Columbia, or as otherwise provided by 
law at any designated place where the hearing is being conducted. The 
party making the application shall serve a copy of the application and 
the proposed subpoena on every other party.
    (2) A party may apply for a hearing subpoena at any time before the 
commencement of a hearing. During a hearing, a party may make an 
application for a subpoena orally on the record before the 
administrative law judge.
    (3) The administrative law judge shall promptly issue any hearing 
subpoena requested pursuant to this section. If the administrative law 
judge determines that the application does not set forth a valid basis 
for the issuance of the subpoena, or that any of its terms are 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
or she may refuse to issue the subpoena or may issue it in a modified 
form upon any conditions consistent with this subpart. Upon issuance by 
the administrative law judge, the party making the application shall 
serve the subpoena on the person named in the subpoena and on each 
party.
    (b) Motion to quash or modify. (1) Any person to whom a hearing 
subpoena is directed or any party may file a motion to quash or modify 
the subpoena, accompanied by a statement of the basis for quashing or 
modifying the subpoena. The movant must serve the motion on each party 
and on the person named in the subpoena. Any party may respond to the 
motion within ten days of service of the motion.
* * * * *
    13. In Sec. 747.35, paragraph (a)(3) is redesignated as paragraph 
(a)(4), a new paragraph (a)(3) is added, and paragraph (b) is revised 
to read as follows:


Sec. 747.35  Conduct of hearings.

    (a) * * *
    (3) Examination of witnesses. Only one counsel for each party may 
conduct an examination of a witness, except that in the case of 
extensive direct examination, the administrative law judge may permit 
more than one counsel for the party presenting the witness to conduct 
the examination. A party may have one counsel conduct the direct 
examination and another counsel conduct re-direct examination of a 
witness, or may have one counsel conduct the cross examination of a 
witness and another counsel conduct the re-cross examination of a 
witness.
* * * * *
    (b) Transcript. The hearing must be recorded and transcribed. The 
reporter will make the transcript available to any party upon payment 
by that party to the reporter of the cost of the transcript. The 
administrative law judge may order the record corrected, either upon 
motion to correct, upon stipulation of the parties, or following notice 
to the parties upon the administrative law judge's own motion.
    14. In Sec. 747.37, the section heading and paragraph (a)(1) are 
revised to read as follows:


Sec. 747.37  Post-hearing filings.

    (a) Proposed findings and conclusions and supporting briefs. (1) 
Using the same method of service for each party, the administrative law 
judge shall serve notice upon each party that the certified transcript, 
together with all hearing exhibits and exhibits introduced but not 
admitted into evidence at the hearing, has been filed. Any party may 
file with the administrative law judge proposed findings of fact, 
proposed conclusions of law, and a proposed order within 30 days 
following service of this notice by the administrative law judge or 
within such longer period as may be ordered by the administrative law 
judge.
* * * * *
    15. Section 747.38 is revised to read as follows:


Sec. 747.38  Recommended decision and filing of record.

    (a) Filing of recommended decision and record. Within 45 days after 
expiration of the time allowed for filing reply briefs under 
Sec. 747.37(b), the administrative law judge shall file with and 
certify to the NCUA Board, for decision, the record of the proceeding. 
The record must include the administrative law judge's recommended 
decision, recommended findings of fact, recommended conclusions of law, 
and proposed order; all prehearing and hearing transcripts, exhibits, 
and rulings; and the motions, briefs, memoranda, and other supporting 
papers filed in connection with the hearing. The administrative law 
judge shall serve upon each party the recommended decision, findings, 
conclusions, and proposed order.
    (b) Filing of index. At the same time the administrative law judge 
files with and certifies to the NCUA Board for final determination the 
record of the proceeding, the administrative law judge shall furnish to 
the NCUA Board a certified index of the entire record of the 
proceeding. The certified index shall include, at a minimum, an entry 
for each paper, document or motion filed with the administrative law 
judge in the proceeding, the date of the filing, and the identity of 
the filer. The certified index shall also include an exhibit index 
containing, at a minimum, an entry consisting of exhibit number and 
title or description for: Each exhibit introduced and admitted into 
evidence

[[Page 28028]]

at the hearing; each exhibit introduced but not admitted into evidence 
at the hearing; each exhibit introduced and admitted into evidence 
after the completion of the hearing; and each exhibit introduced but 
not admitted into evidence after the completion of the hearing.

    Dated: May 28, 1996.
Becky Baker,
Secretary of the Board, National Credit Union Administration.
[FR Doc. 96-13814 Filed 6-3-96; 8:45 am]
BILLING CODE 7535-01-P