UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE. Chapter 11

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1 UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE In re: OPEN RANGE COMMUNICATIONS INC., Debtor, Case No.: KJC Chapter 11 Hearing: February 2, 2012, 1:00 p.m. Objections: January 27, 2012, 5:00 p.m. Hon. Kevin Carey Relates to: Docket No. 505 UNITED STATES OPPOSITION TO MOTION TO COMPEL The United States opposes the Motion of the Official Committee of Unsecured Creditors to Compel the United States to Produce the Evidence Requested in Connection with the Court Approved Investigation ( Motion ). INTRODUCTION The Committee seeks to transform the quick, targeted, informal and cooperative investigation contemplated by the Final DIP Order 1 into an open-ended, unbounded, formal and adversarial investigation neither contemplated nor authorized by any Court order, local rule or federal rule of civil procedure. The Court authorized the Investigation with the consent of the United States and permitted the Committee to request documents and witnesses but gave no authority to the Committee to compel the United States to produce documents or witnesses as part of the Investigation. The only potential sources for any such authority are the Final DIP Order, which authorized the Investigation, and the Clawback Order. 2 Nothing in these orders permits compelled discovery except under the limited conditions described in the Clawback Order, not 1 Final Order Pursuant to 11 U.S.C. 105(a), 361, 362, 363(b), 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1) and 364(e) and Fed. R. Bankr. P. 2002, 4001, 9014 and 9019 Authorizing the Debtor to Obtain Postpetition Secured Financing (Dkt. No. 203). 2 Clawback and Protective Order Connected With Investigation of Certain Possible Claims of Estate (Dkt. No. 321).

2 applicable here. Rule 26 of the Federal Rules of Civil Procedure does not apply because the Committee has not yet filed claims. The formal requirements of discovery under Rule 26 are thus inapplicable. Indeed the Committee recognized this at the beginning of the Investigation by styling its discovery requests as informal. The distinction between informal and formal discovery would be rendered meaningless if the Committee is permitted retroactively to require the full panoply of obligations under formal discovery after initially propounding only informal requests. Moreover, the United States consent to the Investigation was limited to the terms of the Final DIP Order and the Clawback Order. 3 Again, those orders which were the subject of careful negotiation do not authorize compelled compliance with informal requests from the Committee. This means that the Investigation was, and is, subject to the cooperation of the United States until actual claims are filed and formal discovery under the ordinary rules of procedure begins. If the Committee could demonstrate which it cannot that the United States did not cooperate with the Investigation, its sole remedy is to file a motion seeking to prevent the release of Debtor claims, which would otherwise occur under the Final DIP Order at the end of the Challenge Period. It does not possess a right to convert an informal information gathering process into a formal discovery process, absent initiation of actual litigation with actual claims that can provide bounds of relevance to specific, colorable claims. Under the Committee s conception of its investigatory powers, each document and each witness provided leads inevitably to a demand for more witnesses and more documents. In the Motion, the Committee now demands that the Secretary of the Agriculture and the Chairman of the FCC along with other high-ranking Agriculture and FCC witnesses appear before it. The Committee also now signals that its investigation may lead into other parts of the government, beyond RUS and the FCC. Such an investigation would have no end as the Committee could 3 Furthermore, the Committee has failed to comply with the confidentiality provisions of the Clawback Order. The Committee publicly revealed confidential documents in Exhibit B of the Motion. This violation heightens the United States concerns about producing additional documents to the Committee. 2

3 always argue that one more witness or one more document might lead to the existence of some new, currently unfathomable, potential claim the Debtor may have against the United States. The United States does not consent to further new discovery, primarily because it is now apparent that further investigation would be futile. The United States has repeatedly asked the Committee to identify possible claims against RUS and the FCC that might be uncovered by further investigation, and the Committee has failed to identify any such colorable claims. Bringing suit against the United States is more difficult than against private parties in part because of jurisdictional obstacles such as sovereign immunity. This is particularly true with regard to the tort claims that the Committee may seek to bring against the FCC, whose only connection to the Debtor was as a regulator. Perhaps of more immediate concern to the Court, the Motion may be premature and its resolution now, unnecessary. As the United States informed the Committee before it filed the Motion, the United States anticipates making a supplemental production of documents responsive to the Committee s first informal request. This supplemental production may moot some of the issues raised in the Motion. BACKGROUND Pre-Bankruptcy Operations of the Debtor In 2004, Open Range Communications, Inc. ( ORC ) was formed as a Delaware corporation to construct a wireless broadband network to provide broadband services in rural areas. ORC planned to provide high speed internet service using radio and satellite spectrum licensed by the FCC. On October 31, 2007, ORC secured use of essential licensed spectrum by executing a lease with GlobalStar Licensee, LLC ( GlobalStar ), a satellite communications provider. ORC planned to use GlobalStar s spectrum in conjunction with its own WiMAX network. In March 2008, the Rural Utilities Service ( RUS ) conditionally approved ORC s application for a $267 million loan from the United States, subject to ORC obtaining private 3

4 equity and GlobalStar obtaining FCC approval of ORC s use of its spectrum. ORC proposed to serve over 500 communities. In May 2008, GlobalStar applied to the FCC for a temporary waiver of the FCC s performance requirements applicable to its satellite network and for other modifications to its authority in order to implement its arrangements with Open Range. The waiver and modifications were granted in 2008, subject to certain conditions, including compliance with the FCC s performance requirements by July 1, On January 9, 2009, ORC and RUS closed on the $267 million loan, with certain conditions related to ORC s business plans and intention to use the GlobalStar spectrum in its operations. On December 14, 2009, having encountered difficulties in meeting the FCC s conditions, GlobalStar applied to the FCC to extend its performance deadlines. On June 2, 2010, the RUS Administrator warned ORC of its intention to exercise its rights to suspend advances to ORC, if GlobalStar did not meet the FCC requirements by July 1, On June 25, 2010, ORC filed its own application with the FCC seeking a Special Temporary Authority ( STA ), which would permit ORC to continue to use the GlobalStar spectrum pending action by the FCC on the GlobalStar extension request. The FCC granted GlobalStar a 45 day extension of the July 1, 2010 deadline for satisfying the FCC performance requirements, permitting GlobalStar and ORC to continue operations. On July 14, 2010, because ORC had not obtained assurance of the critical spectrum, RUS suspended advances of funds and notified ORC that the loan would be terminated unless an acceptable spectrum plan was submitted. Without using spectrum from a third party, ORC could not operate. On August 23, 2010, RUS authorized ORC to draw down up to $18 million in loan funds, with certain conditions. On September 10, 2010, RUS asked the FCC to grant ORC s request for temporary authority to use GlobalStar frequencies to operate. On September 14, 2010, the FCC denied GlobalStar s December 14, 2009 request for extension of a waiver of performance deadlines. It did grant ORC a 60 day STA to continue to use the essential spectrum but only for 264 markets. 4

5 The number of approved markets was based on representations made to the FCC by ORC regarding markets served and markets it believed it would place in service by the end of the year. On September 23, 2010, the FCC extended the temporary authority to ORC until January 31, RUS notified ORC that a feasible plan for operating in only 264 markets must be developed before additional funds could be advanced. On October 8, 2010, RUS approved a new ORC business plan to serve 264 approved markets and lifted restrictions on advancing funds. On January 19, 2011 and February 4, 2011, however, ORC again submitted a request to modify its business plan, by reducing the 264 markets to 153. On February 18, 2011, RUS rejected ORC s new plan and advised that no funds would be advanced until a new spectrum plan and an acceptable 153 market business plan was submitted. The FCC granted two additional temporary extensions to ORC, permitting use of spectrum through September 28, Throughout March and April 2011, RUS and ORC continued to discuss the need for an approved business plan, incorporating new spectrum partner arrangements. On April 29, 2011, ORC and RUS modified the loan agreement to include a new agreement with the principal private investor, OEP Open Range Holdings, LLC ( OEP ). ORC experienced operational problems during the summer of 2011, but its temporary spectrum authority, set to expire on September 28, 2011, was extended for 180 days through March 12, ORC s temporary use of spectrum had not expired before ORC filed for bankruptcy. The Bankruptcy and the Investigation On October 6, 2011 (the Petition Date ), the Debtor filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. On October 19, 2011, the United States Trustee appointed the Committee. On November 3, 2011, this Court entered the Final DIP Order, which authorized the Committee and the Debtor to conduct a joint investigation to determine whether any viable claims exist against (1) OEP and any Lender Affiliate (as defined in the Final DIP Order), and/or 5

6 (2) RUS, the FCC, and/or a Federal Affiliate (as defined in the Final DIP Order). Pursuant to the Final DIP Order, the Debtor and/or the Committee were required to bring an adversary proceeding or contested matter against the Lender and/or the United States (a Challenge ) no later than January 3, 2012 (the Challenge Period ). Final DIP Order 13. At 7:59 p.m. on Friday, November 11, 2011, a federal holiday, the Debtor and the Committee sent the United States the First Informal Joint Request for the Production of Documents to the United States Department of Justice, Et Al. (the Informal Request ), attached as Exhibit A to the Motion. The fourteen-page Informal Request asked for production to be made within 30 days of service of this request. Informal Request at 1. The Informal Request made 41 broad requests. Id Finally, the Informal Request asked for all documents on or after January 1, Id. 24. The broad Informal Request implicated a large number of sensitive and confidential documents. Accordingly, the United States could not produce documents without an agreement between the parties on confidentiality and privilege, among other things. To facilitate the Committee s Investigation, however, RUS agreed to an abbreviated and rolling production with a partial privilege review. This agreement, the Clawback Order, permitted producing entities, such as RUS and the FCC, to claw back privileged documents inadvertently produced. 4 The Court entered the Clawback Order on November 28, On December 2, 2011, almost two weeks before scheduled witness interviews, RUS produced 21,748 pages of documents to the Committee and the Debtor in response to the Informal Request. On December 5, 2011, RUS produced another 2,797 pages in response to the Informal Request. 4 Under the Clawback Order, RUS initially identified privileged documents using search terms, including the term Deliberative Process, as opposed to a document-by-document review. Clawback Order at 2 and A. Post-production, the Clawback Order specifically preserved the producing parties right to subsequently assert a privilege or protection, and noted such privilege or protection is not waived by such disclosure or production. Clawback Order at 3, 1. The Clawback Order provided a mechanism by which an inadvertently produced document could be clawed back. See Clawback Order

7 On December 6, 2011, the United States notified the Committee and the Debtor that documents responsive to the Informal Request were available at the publically available FCC docket for filings in a 2010 proceeding. As discussed above, it was in this 2010 proceeding that the FCC reviewed, and granted, the Debtor s request for Special Temporary Authority to continue using the GlobalStar spectrum. On December 9, 2011, three days before the interviews began, the FCC produced 1,032 pages in response to the Informal Request. 5 On December 12, 13, and 14, 2011, the Committee and the Debtor conducted interviews of six RUS witnesses. The Committee asked to interview six individuals, including the head of the RUS, Administrator Jonathan Adelstein. In response, the United States, waiving its usual regulations, provided all those individuals for interviews. These interviews were conducted at the Committee s Washington D.C. office, for the time period selected by the Committee (3.5 hours), on the dates selected by the Committee, and on topics selected by the Committee. Though the Committee asked for documents after the interviews were conducted, the Committee never requested any further interviews of RUS employees, FCC employees, or follow-up interviews with the United States witnesses already interviewed. On January 3, 2012, the Committee moved to extend the Challenge Period. After conducting a hearing on January 11, 2012, the Court extended the Challenge period until February 16, Order of January 13, 2012 (Dkt. No. 493). On January 13, 2012, the Committee sent the United States a letter demanding additional discovery ( Demand or Demand Letter ). 6 The Committee demanded depositions of five new witnesses, including the Secretary of Agriculture, the Chairman of the FCC and other highranking FCC and Department of Agriculture witnesses, and demanded the right to re-interview the RUS witnesses on any matter where the deliberative process privilege had been raised during 5 The United States produced 27,082 pages to the Committee and Debtor during the Challenge Period. The remaining documents were produced on December 14, 2011, and December 28, 2011, in response to the Informal Request, Committee requests made during the interviews, and Committee requests made after the interviews concluded. 6 In the Motion, the Committee strangely dubs its January 13 demand letter a Golden Rule Letter without explaining how the Golden Rule does, or could, apply to its demand. 7

8 the original interviews. The Committee also demanded that the United States confirm that all responsive documents have been produced and demanded a privilege log of any responsive documents withheld on the basis of privilege. Without agreement that the United States would comply with all of its demands, the Committee filed the Motion on January 17, ARGUMENT I. THE MOTION TO COMPEL IS PREMATURE AND MAY BE UNNECESSARY The Committee s demand that the United States confirm that it has produced all responsive documents is reasonable and by telephone, and in a January 17, 2012 letter ( Response Letter ) to the Committee, responding to its Demand Letter, the United States notified the Committee that it had found additional, potentially responsive documents. See 1/17/12 Letter, attached as Exhibit 1. The United States proposed a 30 day deadline freeze extending both the time to file any motion to compel and the end of the Challenge Period by 30 days to allow the United States to review this collection and to produce any responsive nonprivileged documents. Id. The Committee rejected this proposal without a coherent explanation. The supplemental production may moot some of the issues in the Motion. Consequently, the United States proposes that the Court suspend consideration of the Motion until after the United States has supplemented its production. II. THE COMMITTEE CITES NO AUTHORITY TO COMPEL THE UNITED STATES TO COMPLY WITH THE INFORMAL REQUEST FOR DOCUMENTS AND THE INFORMAL REQUEST TO INTERVIEW WITNESSES If the Court decides to address the Motion now, however, it lacks merit and should be denied. Nothing in the Final DIP Order or Clawback Order requires the United States to produce documents or witnesses in response to the informal requests from the Committee. The production was based on the consent and the cooperation of the United States. The Final DIP 8

9 Order and Clawback Order are silent on the Committee s remedy if it is unhappy with the production. 7 So that the Committee could complete its extraordinary investigation within the time frames specified in the Final DIP Order, the United States cooperated fully with the Committee s investigation: it voluntarily produced thousands of documents in response to the Committee s broad informal discovery request, timely complied with the Committee s additional informal discovery requests, offered for interviews all the witnesses that the Committee requested during the Challenge Period, and permitted the Committee to conduct broad-ranging discovery without requiring compliance with court rules or the United States normal regulatory requirements. But even if the Committee could somehow show a lack of cooperation, neither the Final DIP Order nor the Clawback Order authorizes compelled production of the documents asked for in an informal request. The usual source for a motion to compel discovery is, of course, Rule 37 of the Federal Rules of Civil Procedure. But nothing in the Final DIP Order or the Clawback Order indicates that the formal rules of procedure would apply. And rightfully so, because Rule 26 and the formal rules of discovery cannot apply to this Investigation. 8 One of the bedrock standards of Rule 26 limits discovery to matters that are relevant to any party s claim or defense. Fed. R. Civ. P. 26(b)(1). The Committee has not yet asserted any claim against the United States and, thus, would be entitled to no discovery under Rule 26. The very nature of the requests, which are styled informal, confirms that this was understood when the Investigation began. Nevertheless, the Committee seeks to transform the Investigation and retroactively to apply the formalities of the Federal Rules of Civil Procedure. The Committee does not identify in the Motion the source of any purported authority to compel production. The United States 7 One possible remedy is to move for relief from the release of claims provided in the Final DIP Order, if the Committee thinks it can demonstrate sufficient cause. 8 The Committee has not filed a Rule 2004 application, but obviously Rule 2004 would not apply retroactively to the Investigation. 9

10 does not consent. No existing order contains authority to compel production of the documents and witnesses informally requested during the Investigation. 9 III. FURTHER DISCOVERY IS FUTILE ABSENT A POSSIBILITY OF COLORABLE CLAIMS The United States has repeatedly asked the Committee to identify any potential claims against the government that it believes could be uncovered by further discovery. To date, the Committee has provided no such explanation, other than the draft complaint attached to its motion for standing. That draft complaint contained 10 counts but none clarified the Committee s position nor identified colorable claims, particularly with respect to the FCC. A litigant must satisfy special pleading requirements in order to bring a claim against the United States. A potential plaintiff must demonstrate not only a grant of jurisdiction over that claim but also an explicit waiver of the United States sovereign immunity. See, e.g., Federal Deposit Ins. Corp. v. Meyer, 510 U.S. 471, 475 (1994). The United States objects to further discovery during the Investigation as futile. The FCC The FCC and RUS have different relationships with the Debtor and are thus in different positions for purposes of any analysis on the futility of further discovery. As described above, the FCC s role was that of a regulator. The FCC, as required by statute, 10 made decisions on the spectrum applications of GlobalStar and the Debtor, which may have had an impact on the Debtor s business plans, but did not create colorable claims against the FCC. In the draft complaint, the Committee identified only two claims against the FCC tortious interference with contract and aiding and abetting a breach of fiduciary duty, neither of 9 This is particularly true with respect to the Committee s new document and witness requests. Under the Final DIP Order, the United States consent to the Investigation expired on January 3, The Communications Act of 1934 gives the United States control over all the channels of radio transmission and provides for the use of these channels for limited periods of time, under licenses granted by federal authority. 47 U.S.C The statute also gives the FCC the power to issue these licenses but only if the public convenience, interest, and necessity will be served. 47 U.S.C. 307(a); see also Globalstar, Inc. v. FCC, 564 F.3d 476, 480 (D.D.C. 2009) (description of FCC authority with respect to spectrum used for mobile satellite services). 10

11 which is colorable. Indeed, even the Debtor, on whose behalf the Committee seeks to bring these claims, concluded that neither of these claims against the FCC is colorable, and the Debtor did not even consider the sovereign immunity problems such claims would encounter. See Debtor s Limited Objection to the Committee s Motion for Standing, at 16, (Dkt. No. 469). The United States is immune from suit in tort unless it has consented to waive its sovereign immunity. In so doing, it defines the conditions upon which such actions may be brought. See, e.g., United States v. Sherwood, 312 U.S. 584 (1941). The conditions of the government s waiver of immunity must be strictly construed in favor of the United States. Reed v. Reno, 146 F.3d 392, 398 (6th Cir. 1998); Hurley v. United States, 624 F.2d 93 (10th Cir. 1980); Childers v. United States, 442 F.2d 1299, 1303 (5th Cir. 1971). The United States has not waived its sovereign immunity with respect to tort claims against the United States, except to the extent identified in the Federal Tort Claims Act. See 28 U.S.C et seq. The FTCA, however, is only a limited waiver of sovereign immunity. The FTCA is intended to compensate victims of certain tortious governmental conduct if, under similar circumstances, a private individual would be held liable. 28 U.S.C Congress has specified particular instances, however, for which sovereign immunity is not waived. These exceptions to the FTCA waiver are embodied in 28 U.S.C. 2680(a)-(h). In determining the parameters of these exceptions, federal law controls. United States v. Neustadt, 366 U.S. 696, (1961); Ramirez v. United States, 567 F.2d 854, 856 (9th Cir. 1977). Claims arising under interference with contract rights are expressly excluded from the FTCA s scope. 28 U.S.C. 2680(h); 11 see Cooper v. American Auto Ins. Co., 978 F.2d 602, 613 (10th Cir. 1992); Small v. United States, 333 F.2d 702, 704 (3d Cir. 1964); Dupree v. United 11 Section 2680(h) provides: The provisions of this chapter and section 1346(b) of this title shall not apply to * * * (h) Any claim arising out of assault, battery, false imprisonment, false arrest, malicious prosecution, abuse of process, libel, slander, misrepresentation, deceit, or interference with contract rights.... (emphasis added). 11

12 States, 264 F.2d 140, (3d Cir. 1959). If the conduct alleged falls within the statutory exception, the court lacks subject matter jurisdiction. Dalehite v. United States, 346 U.S. 15, 24 (1953); see Gibson v. United States, 457 F.2d 1391, 1392 n.1 (3rd Cir. 1972). The limited waiver of sovereign immunity in 11 U.S.C. 106 is insufficient to establish subject matter jurisdiction over such claims in bankruptcy. See, e.g., In re Supreme Beef Processors, Inc., 468 F.3d 248, (5th Cir. 2006); Franklin Sav. Corp. v. FDIC, 385 F.3d 1279, 1286 (10th Cir. 2004); In re Integrated Health Servs., Inc., 303 B.R. 577, (Bankr. D. Del. 2003). Similarly, claims against an agency grounded in the actions and decisions within the discretionary function of that agency in its role as a regulator are also barred by the FTCA. See United States v. Acorn Technology Fund, L.P., 429 F.3d 438, (3rd Cir. 2005) (claims against the Small Business Administration for breach of fiduciary duty not colorable under the FTCA). In addition, the Debtor never appealed the spectrum decisions of the FCC. The Debtor is not permitted to bring a collateral attack on these decisions under the Administrative Procedures Act, absent a timely administrative challenge to the FCC. The potential claims against the FCC identified to date by the Committee would not survive a motion to dismiss and are thus not colorable. The Committee has identified no other possible claims against the FCC. Accordingly, further discovery from the FCC would be futile and should not be permitted. RUS RUS, as a lender, is in a different relationship with the Debtor. However, many of the claims stated against RUS in the Committee s draft complaint face the same, fatal impediments. For example, it is likely that a bankruptcy court lacks jurisdiction over breach of contract claims against the United States. The sovereign immunity waiver for contract claims is found not in the FTCA but in the Tucker Act, 28 U.S.C Under the Tucker Act, exclusive jurisdiction is vested in the Court of Federal Claims and breach of contract claims may not be brought in bankruptcy. See 12

13 McGuire v. United States, 550 F.3d 903, (9th Cir. 2008); but see Quality Tooling v. United States, 47 F.3d 1569 (Fed. Cir. 1995). 12 The Committee has identified other claims in its draft complaint that it would like to bring against the United States on behalf of the Debtor, but again, even the Debtor has stated that these claims are not colorable. See Debtor s Limited Objection to the Committee s Motion for Standing. Thus, even if these other claims did not suffer from the same jurisdictional and sovereign immunity defects as the breach of contract claims, further discovery is futile. Further discovery on these already identified claims is also unnecessary because the entire purpose of the Investigation was to uncover potential claims. The Investigation was never intended as a device for gathering evidence on claims after they have been identified. IV. THE COMMITTEE S DISCOVERY DEMANDS ARE IMPROPER The United States agrees to comply with the Committee s demand that the United States confirm that all non-privileged documents responsive to the Informal Request have been produced and will provide a supplemental production to the extent it cannot confirm that all such documents have already been produced. The United States cooperated with the Committee s Investigation during the original challenge period and believes that production of responsive, non-privileged documents requested during that part of the Investigation is reasonable. The Committee s explanation of why it believes even more FCC documents must exist is unpersuasive. See Motion at 18. First, the Committee places significance on the smaller number of pages of documents produced by the FCC compared with RUS. Id. This discrepancy is meaningless, however, given the differing relationships each agency had with the Debtor. The FCC, in its more limited role of regulator, obviously would not be expected to have as many documents as RUS The United States reserves the right to raise, and more fully brief, jurisdictional and sovereign immunity arguments if any claims are actually brought against the United States. For purposes of the current discussion, the United States merely seeks to highlight the fatal defects of these claims and thus the futility of permitting discovery on claims which cannot be brought. 13 Moreover, Open Range did not become an FCC licensee until September 14,

14 Second, the Committee highlights a particular reflecting communications between RUS and the FCC and asserts that only RUS produced the . Motion at 18. Even if true, this would not prove that the FCC was withholding such documents, as each agency has different document retention practices and policies, and thus the preservation of such s by a RUS employee would not necessarily mean that the same had been preserved by the FCC. In any event, the Committee is mistaken with regard to the highlighted in its Motion. Both the FCC and RUS produced s on this topic. 14 Nevertheless, the United States will confirm that it has produced all non-privileged, responsive documents from RUS and the FCC. The Committee s other five demands in its Motion are improper. A. Privileged Documents The Committee argues that the United States has waived the deliberative process privilege, not as to any particular document, but instead as to any responsive document not yet produced. The Committee s argument reflects a fundamental misunderstanding of the law on assertion of deliberative process and also seeks to retroactively change the parameters of the United States response to the Informal Request. The United States has not waived the deliberative process privilege or any other privilege. The Committee s argument rests on three mistaken premises. First, the Committee assumes that the United States is required to do more than it has done as part of its voluntary agreement to provide documents. Second and this premise flows from the first the Committee assumes that the United States was required to identify at the time of production any responsive document being withheld on the basis of privilege. Third, the Committee asserts that the United States was required to produce a declaration from the appropriate agency head at the time that it withheld privileged documents. 14 See FCC

15 As discussed above, there is no legal basis to require the United States to produce documents in response to the Informal Requests. An important corollary is that the United States was not required to produce privileged documents. Indeed, the very structure of the negotiated terms of the Clawback Order confirms that the Committee understood that privileged documents would not be produced. It was understood that many documents were to be produced in a very short period of time and that, under these circumstances, search terms as opposed to a document by document review may be used to narrow the production and reduce the likelihood of the inadvertent production of privileged documents. Indeed, deliberative process was one of the agreed search terms. See Clawback Order at 2 and A. Post-production, the Clawback Order specifically preserved the producing parties right to subsequently assert a privilege or protection, and noted such privilege or protection is not waived by such disclosure or production. Clawback Order at 3, 1. The Clawback Order thus provided a mechanism by which an inadvertently produced document could be clawed back. See Clawback Order 2-8. Nothing in the Clawback Order, or the Final DIP Order, required the United States to assert the deliberative process or any other privilege, at the time of production. The United States thus cannot have waived the deliberative process privilege. Moreover, the Committee is mistaken on the applicable law regarding the time at which a declaration supporting assertion of the deliberative process privilege must be provided. The United States must supply a declaration asserting the privilege from an agency head only when a litigant moves to compel a specific document which the United States is otherwise required to produce but has withheld because of its assertion of the deliberative process privilege. See Huntleigh USA Corp. v. United States, 71 Fed. Cl. 726, 727 (2006) (procedural requirements for privilege assertion are satisfied through the production of a declaration or affidavit by the agency head in response to a motion to compel); Tri-State Hosp. Supply Corp. v. United States, 226 F.R.D. 118, 134 n.13 (D.D.C. 2005); In re Sealed Case, 121 F.3d 729, 741 (D.C. Cir. 1997) (White House was not obliged to formally invoke its [executive] privileges in advance of the 15

16 motion to compel; it was sufficient that it said, in response to a subpoena, that it believed the withheld documents were privileged. ); Abramson v. United States, 39 Fed. Cl. 290, 294 n.3 (1997) ( procedural requirements generally are satisfied through the production of a declaration or affidavit by the agency head... in response to a motion to compel ); Secs. & Exch. Comm n v. Downe, No. 92 Civ. 4092(PKL), 1994 WL 23141, at *5 (S.D.N.Y. Jan. 27, 1994) (government meets its obligation regarding affidavit by filing it with its papers opposing motion to compel); In re Consol. Litig. Concerning Int l Harvester s Disposition of Wis. Steel, Nos. 81 C 7076, 82 C 6895 & 85 C 3521, 1987 WL 20408, at *7 (N.D. Ill. Nov. 20, 1987) (rejecting assertion that agency head s affidavit must be submitted when privilege is first invoked). 15 In any event, because executive privilege exists to aid the governmental decisionmaking process, a waiver should not be lightly inferred. In re Sealed Case, 121 F.3d at 741 (quoting SCM Corp. v. United States, 473 F. Supp. 791, 796 (Cust. Ct. 1979)). Indeed, many cases suggest that the courts will not easily find a waiver. See, e.g., Public Citizen v. United States Dep t of State, 11 F.3d 198 (D.C. Cir. 1993) (FOIA); Sanchez v. Johnson, No. C CW (JCS), 2001 WL , at *3 (N.D. Cal. Nov. 19, 2001) (refusing to find waiver where government s initial assertion of privilege was inadequate and government was slow to correct problem because finding waiver would not achieve overriding fairness ). If the Court decides that the United States is required to identify all the documents it seeks to withhold based on the assertion of privilege, then, after the United States provides a log of such documents and the Committee moves to compel a particular document on that log, it is at that point that the United States would supply a declaration from an agency head supporting its assertion of the deliberative process privilege with respect to that document. 16 In the meantime, 15 In Alpha I, L.P. v. United States, 83 Fed. Cl. 279, 289 (2008), cited by the Committee, Motion at 22, the government had not produced a declaration at the time of the motion to compel, but rather sought to rely on a declaration from a prior case. 16 In addition, under the Clawback Order, if the United States notifies the Committee that it is clawing back a privileged document that was inadvertently produced and the Committee moves to compel the document, then the United States is required to produce a declaration in response to such a motion. 16

17 however, the United States has waived no privilege and should not be required to produce privileged documents. B. Privilege Log The Committee also demands that the United States produce a log of all documents responsive to the Informal Request for which the United States claims privilege. Motion at The Committee claims that a privilege log is required here but points to no applicable order or procedural rule to support its position. Instead, the Committee simply asserts that such logs are customarily produced in these types of investigations. Motion at 19. As discussed above, no applicable order requires a log and Rule 26 of the Federal Rules of Civil Procedure, the typical source for requiring a log, does not apply because the Committee has not yet asserted a claim against the United States and thus would not be entitled to discovery under Rule 26. Similarly, a privilege log is mentioned nowhere in the Final DIP Order or the Clawback Order. The Clawback Order discusses that search terms would be used to identify privileged documents but nowhere indicates that documents identified by this process need to be logged. Under these circumstances, the Committee s demand now for a privilege log should be denied. C. Attorney Work Product The Committee also demands production of a document that the Committee concedes was prepared at the direction of Department of Justice counsel after the bankruptcy petition was filed. 18 Motion at 20. The Committee argues that because the document contains facts, it should be permitted to obtain a document that would otherwise be protected attorney work product. Id. The United States acknowledges that the Committee would be entitled to the facts contained in the document under the ordinary rules of discovery. Of course, as discussed at 17 This demand contradicts the Committee s position that any privilege was waived even in the absence of such a log. 18 The Committee refers to this document as an Account Reconciliation. Motion at

18 length already, the ordinary rules of discovery do not apply to the Investigation. Moreover, as counsel for the Committee was informed when he first requested this attorney work product, the United States produced both the spreadsheet from which the facts were gathered and the RUS employee who gathered the facts at DOJ s request. The United States does not know why the Committee failed to ask that employee about the factual information contained in the document during his witness interview as opposed to belatedly asking for the privileged work product. The Committee is not entitled to obtain work generated by DOJ counsel when the Committee had precisely the same opportunity to obtain the information. 19 The Committee s demand to obtain DOJ attorney work product should be denied. D. Additional Witnesses The Committee also seeks to vastly expand its Investigation by demanding five more witness interviews, all from highly-ranked officials at the Department of Agriculture and the FCC, including the Secretary of Agriculture and the Chairman of the FCC. 20 The Committee s demand is improper on several levels and should be denied. High-ranking government officials cannot be deposed absent extraordinary circumstances that are not present here. [T]op executive department officials should not, absent extraordinary circumstances, be called to testify regarding their reasons for taking official actions. Simplex Time-Recorder Co. v. Secretary of Labor, 766 F.2d 575, 586 (D.C. Cir. 1985) (citing United States v. Morgan, 313 U.S. 409, 422 (1941)); see also Bogan v. City of Boston, 489 F.3d 417, 423 (1st Cir. 2007); In re United States, 197 F.3d 310, (8th Cir. 1999); In re FDIC, 58 F.3d 1055, 1060 (5th Cir. 1995); In re United States, 985 F.2d 510, 512 (11th Cir. 1993) (per curiam) ( the practice of calling high officials as witnesses should be discouraged ); In re Office 19 Moreover, after litigation with real claims has begun, the factual content of this work may be obtained through ordinary discovery, by interrogatory or otherwise. 20 At the hearing on January 11, 2012, the Committee indicated that it only wanted one or possibly two FCC witness interviews. The Committee did not mention additional Agriculture interviews apart from its request to re-depose witnesses to ask questions shielded by deliberative process privilege. The Committee certainly did not inform the Court when it asked to extend its Investigation that it intended to ask for the Secretary of Agriculture and the Chairman of the FCC. 18

19 of Inspector Gen., 933 F.2d 276, 278 (5th Cir. 1991) ( exceptional circumstances must exist before the involuntary depositions of high agency officials are permitted ). The primary basis for this rule was explained in Capitol Vending Co. v. Baker, 36 F.R.D. 45, 46 (D.D.C. 1964): If the head of a government agency were subject to having his deposition taken concerning any litigation affecting his agency or any litigation between private parties which may indirectly involve some activity of the agency, we would find that the heads of government departments and members of the President s Cabinet would be spending their time giving depositions and would have no opportunity to perform their functions. See also Community Fed. Sav. & Loan v. Fed. Home Loan Bank Bd., 96 F.R.D. 619, 621 (D.D.C. 1983) ( Considering the volume of litigation to which the government is a party, a failure to place reasonable limits upon private litigants access to responsible governmental officials as sources of routine pre-trial discovery would result in a severe disruption of the government s primary function ). As the Eighth Circuit has explained, [a]llegations that a high government official acted improperly are insufficient to justify the subpoena of that official unless the party seeking discovery provides compelling evidence of improper behavior and can show that he is entitled to relief as a result. In re United States, 197 F.3d at 314. Of course, no allegations of improper behavior exist here at all. Moreover, at a minimum, Plaintiffs must demonstrate that the witness sought to be deposed would possess information essential to [Plaintiffs ] case which is not obtainable from another source. Id.; see also Alexander v. FBI, 186 F.R.D. 1, 4 (D.D.C. 1998). For the reasons discussed above, further discovery from the FCC is inappropriate because the Committee has not identified potential colorable claims against the FCC. However, even if the FCC is required to participate further in this Investigation, the Committee should not be permitted to take depositions of the Chairman and Mr. de Sa, Chief of the Office of Strategic 19

20 Planning & Policy Analysis. 21 The Committee has not demonstrated and cannot show that it has the requisite extraordinary need for these particular depositions and that the precise information it seeks from these individuals is available from no other source. See Simplex, 766 F.2d at 587. This is especially true now, where no claims have been filed and there is no legal right to discovery from anyone, much less these officials. Similarly, the Committee is unable to demonstrate that it has the required extraordinary need for the depositions of the Secretary of Agriculture, Ms. Daschle, Confidential Assistant to the Secretary of Agriculture, and Mr. Villano, Assistant Administrator for Telecommunications, RUS. Indeed, given the circumstances of the Committee s Investigation which is merely searching for possible claims and not even seeking to discover evidence related to or in support of existing claims, the Committee cannot possibly demonstrate at this time that any information is relevant to its case, let alone essential. The Committee has also given no explanation for why it should be permitted to expand its Investigation beyond the RUS into the Department of the Agriculture at large. The Committee s demand for these additional depositions from five, highly-ranked officials should be denied. E. Re-Interview RUS Witnesses Finally, the Committee demands an opportunity to recall RUS witnesses that it has already interviewed in order to ask them about deliberations shielded by the deliberative process privilege. Motion at 25. The Committee s suggestion that the privilege was waived because an affidavit was not immediately provided in response to questions which it controlled is meritless, and the Committee does not support this argument with authority. The deliberative process privilege was raised in five of the six witness interviews. 22 The limited assertions of the deliberative process privilege during these interviews were proper. 21 Mr. de Sa has given notice that he will depart the FCC sometime in February. See 22 Jonathan Adelstein, Kenneth Kuchno, Deborah Jackson, Scott Steiner, and Anthony James Tindall. The deliberative process privilege was not raised during the interview of Farwa Naqvi. 20

21 When this privilege was raised, the instruction to the witness was generally qualified, permitting the witness to answer provided that he or she did not reveal privileged information. The argument regarding waiver is especially puzzling with regard to the interview of Mr. Adelstein. As the head of the RUS, he is the very official who provides a declaration asserting the privilege. Given that he was permitted to answer all of the Committee s questions under oath and that the decision was left to him as to what information he could not divulge without revealing matters protected by the deliberative process privilege, the United States fully complied with all procedural requirements regarding assertion of the privilege. Moreover, Mr. Adelstein has now provided a declaration asserting that the privilege was properly raised during his interview and during the interview of Mr. Kuchno. 23 Declaration of Jonathan S. Adelstein, attached as Exhibit 2. Deliberative Process Privilege Standards Disclosure of inter-agency and intra-agency deliberations and advice may impair the federal government s decision-making functions because it tends to inhibit the frank and candid discussion necessary for effective government. See NLRB v. Sears, Roebuck & Co., 421 U.S. 132, (1975); EPA v. Mink, 410 U.S. 73, 87 (1973). The deliberative process privilege serves as a safeguard against this danger. The privilege is an ancient [one]... predicated on the recognition that the quality of administrative decision-making would be seriously undermined if agencies were forced to operate in a fishbowl. Dow Jones & Co. v. United States Dep t of Justice, 917 F.2d 571, 573 (D.C. Cir. 1990) (quoting Wolfe v. United States Dep t of Health & Human Servs., 839 F.2d 768, 773 (D.C. Cir. 1988) (en banc)). The deliberative process privilege rests on the obvious realization that officials will not communicate candidly among themselves if each remark is a potential item of discovery and front page news, and its object is to enhance the quality of agency decisions, by protecting open and frank discussion among those who make them within the Government.... United States Dep t of the Interior v. 23 As discussed below, the United States is withdrawing assertion of the privilege to the extent raised in the Jackson and Steiner interviews. 21

22 Klamath Water Users Protective Ass n, 532 U.S. 1, 8-9 (2001) (quoting NLRB v. Sears, Roebuck & Co., 421 U.S. at 150). Courts have recognized that the deliberative process privilege generally serves three basic purposes: (1) it protects and promotes candid discussions within a government agency; (2) it prevents public confusion from premature disclosure of agency opinions before the agency establishes its final policy; and (3) it protects the integrity of an agency s decision. See, e.g., Tigue v. United States Dep t of Justice, 312 F.3d 70, 76 (2d Cir. 2002); Alexander v. FBI, 192 F.R.D. 50, 55 (D.D.C. 2000). As Justice Reed explained in a decision widely regarded as the genesis of the privilege in this country: Free and open comments on the advantages and disadvantages of a proposed course of governmental management would be adversely affected if the civil servant or executive assistant were compelled by publicity to bear the blame for errors or bad judgment properly chargeable to the responsible individual with power to decide and act. Kaiser Aluminum & Chem. Corp. v. United States, 157 F. Supp. 939, (Ct. Cl. 1958). To assert the deliberative process privilege in court, the head of the department having control over the requested information must (1) make a formal claim; (2) provide a detailed specification of the information for which the agency is claiming the privilege; and (3) base this assertion of the privilege on his or her actual personal consideration. See Landry v. FDIC, 204 F.3d 1125, 1135 (D.C. Cir. 2000) (citing Northrop Corp. v. McDonnell Douglas Corp., 751 F.2d 395, 399 (D.C. Cir. 1984)). The deliberative process privilege protects evidence from disclosure if it is both predecisional and deliberative in nature, containing opinions, recommendations, or advice about agency decisions. See Renegotiation Bd. v. Grumman Aircraft Eng g Corp., 421 U.S. 168, 184 (1975); Klamath Water Users Protective Ass n v. United States Dep t of the Interior, 189 F.3d 1034, 1043 (9th Cir. 1999), aff d, 532 U.S. 1 (2001); In re Sealed Case, 121 F.3d at (citing cases); Assembly of Cal. v. United States Dep t of Commerce, 968 F.2d 916, 920 (9th Cir. 1992); Coastal States Gas Corp. v. United States Dep t of Energy, 617 F.2d 854, 866 (D.C. Cir. 1980). Generally, a document is predecisional if it was generated before the adoption of an 22

23 agency policy and deliberative if it reflects the give-and-take of the consultative process. Judicial Watch, Inc. v. Food & Drug Admin., 449 F.3d 141, 151 (D.C. Cir. 2006) (quoting Coastal States, 617 F.2d at 866). Documents prepared for the purpose of assisting an agency decision-maker in arriving at a decision are predecisional. See Hopkins v. United States Dep t of Hous. & Urban Dev., 929 F.2d 81, 84 (2d Cir. 1991); Nat l Congress for Puerto Rican Rights v. City of N.Y., 194 F.R.D. 88, 92 (S.D.N.Y. 2000). However, the decision-maker need not actually review the privileged material so long as the material reflects advice, deliberations and recommendations that are part of the process by which policies are formulated. Moye, O Brien, O Rourke, Hogan & Pickert v. Nat l R.R. Passenger Corp., 376 F.3d 1270, (11th Cir. 2004). The deliberative process privilege covers recommendations, draft documents, proposals, suggestions, and other subjective documents which reflect the personal opinions of the writer rather than the policy of the agency. 29 Grand Cent. P ship, Inc. v. Cuomo, 166 F.3d 473, 482 (2d Cir. 1999); Nat l Wildlife Fed n v. United States Forest Serv., 861 F.2d 1114, (9th Cir. 1988). Deliberations must actually relate to the process by which the agency formulates its policies. See Hopkins, 929 F.2d at 84; Nat l Congress, 194 F.R.D. at 92. Thus, documents such as advisory opinions, recommendations and deliberations that comprise part of a process by which a government agency formulates its decisions and policies are protected by the deliberative process privilege. See Hopkins, 929 F.2d at 84-85; Nat l Congress, 194 F.R.D. at 92. The deliberative process privilege is not absolute. See Redland Soccer Club, Inc. v. United States Dep t of the Army, 55 F.3d 827, 854 (3rd Cir. 1995). After concluding that the privilege is properly invoked, a court must balance the public interest in nondisclosure against the individual need for the information as evidence. See id.; see also Comm. for Nuclear Responsibility, Inc. v. Seaborg, 463 F.2d 788, 791 (D.C. Cir. 1971); Carl Zeiss Stiftung v. V.E.B. Carl Zeiss, Jena, 40 F.R.D. 318, 327 (D.D.C. 1966), aff d, 384 F.2d 979 (D.C. Cir. 1967). To compel disclosure, the claimant must make a showing of necessity sufficient to outweigh the adverse effects the production would engender. Carl Zeiss, 40 F.R.D. at