*1 Presently before the Court are Plaintiff's Motion to Compel, (doc. 104), and non-parties' Board of Governors of the Federal Reserve System's (the “Board”) and Federal Deposit Insurance Corporation's (the “FDIC”) Motion to Intervene for the Limited Purpose of Asserting Bank Examination Privilege and Opposing Plaintiff's Motion to Compel, (doc. 109). Plaintiff, Defendants, and the non-parties have filed numerous Responses and Replies. (Docs. 106–08, 110, 112–116, 118.) For the reasons that follow, the Court GRANTS the Board's and the FDIC's Motion to Intervene and DISMISSES AS MOOT Plaintiff's Motion to Compel. Additionally, the Court ORDERS the Board and the FDIC to produce to the parties, within fourteen (14) days of the date of this Order, a privilege log for the documents or portion of the documents that they wish to withhold on the basis of privilege or protection.

Patterson Bankshares, Inc. (“PBI”)—a holding company of First Southern Bank (the “Bank”)—issued certain trust preferred securities (“TruPS”) to meet the Tier 1 capital requirements laid out by the Federal Reserve Bank in order for PBI to operate the Bank. (Doc. 75, pp. 4–5.) Plaintiff purchased said TruPS via Patterson Bankshares Capital Trust I (the “Trust”). Under this arrangement, PBI would essentially make payments on the TruPS via the Trust. (Id. at pp. 6–7.) Plaintiff alleges that PBI intentionally structured the TruPS in such a way to depend on PBI's financial ability—backed by its 100% interest in the Bank—to satisfy repayment. (Doc. 49, p. 11.)

In 2009, the FDIC conducted various safety and soundness examinations, ultimately resulting in the FDIC and Georgia Department of Banking and Finance (the “DBF”) issuing a Consent Order in 2010. In June of 2010, PBI separately entered into a Consent Agreement with the Federal Reserve Bank of Atlanta and the DBF establishing certain obligations and limitations for PBI—including ensuring that the Bank complied with the FDIC and DBF's Consent Order. (Id. at pp. 32–37; Doc. 49, p. 14.) However, PBI and the Bank's financial condition continued to decline. (Doc. 49, pp. 14–15.)

In 2013, the Bank issued new shares to the current holders of PBI's stock—effectively transferring over PBI's interest in the Bank. (Id. at p. 16.) As a result, PBI's interest in the Bank decreased “from 100% to less than 1%” leaving PBI with “no real assets and no way to repay its liabilities” on the TruPS and consequently, to Plaintiff. (Id. at p. 17.) PBI filed for bankruptcy on May 5, 2014. (Doc. 24-1.)

Plaintiff filed this action on November 14, 2014, and after the Court's Order addressing Defendants' Motions to Dismiss, the only claims remaining in this action are Plaintiff's claim of damages for: fraudulent transfer against PBI and the Bank; tortious interference with contract against Community Capital Advisors, Inc.; breach of fiduciary duty against Barnard, Hughes, and Thomas; aiding and abetting said breach of fiduciary duty against Community Capital; breach of the Indenture against PBI; and conspiracy to effect fraudulent transfer against PBI and the Bank. (Doc. 75.)[1]

*2 Following that Order, the parties engaged in discovery. However, in February 2016, Defendants notified Plaintiff that they would be unable to produce certain responsive documents, including among others, e-mails between Defendants and the regulators and meeting minutes regarding the Bank's issuance of stock. Defendants explained that these documents contained “confidential supervisory and exempt information” and would require approval from the FDIC, the Board, and the DBF prior to production. (Doc. 104, p. 2.) After a series of exchanges with the regulators, Defendants ultimately received permission from the FDIC to produce 4 heavily redacted documents out of the several hundred submitted for consideration. (Doc. 104, p. 13.) The Board denied Defendants' request to produce all the documents to Plaintiffs and instead instructed Defendants to “not produce Federal Reserve examination reports, supervisory correspondence, emails or other communications between PBI or the Bank and the Federal Reserve, or internal Bank or PBI documents describing or discussing supervisory communications.” (Id.; Doc. 106-3, p. 6.)

Subsequently, Plaintiff filed this Motion to Compel, arguing that this “bank examiner's privilege” should not exempt Defendants from providing “discovery materials ordered to be produced by a Court.”[2] (Doc. 104, p. 15.) Plaintiff also contends that Defendants lack standing to assert the bank examiner's privilege and that the Board and the FDIC must instead assert the privilege themselves. (Id. at pp. 16–18.) Additionally, Plaintiff argues that even if the documents are privileged, it is a qualified privilege and that there is good cause in this case for the Court to order production. (Id. at pp. 18–21.)

Defendants filed Responses, (docs. 106–08), and the Board and the FDIC filed a Motion to Intervene and a Response to the Motion to Compel, (docs. 109, 110), to which the parties filed Responses and Replies, (docs. 112–18). The Court will address the Board and the FDIC's Motion to Intervene for the Limited Purpose of Asserting Bank Examination Privilege and Opposing Plaintiff's Motion to Compel, (doc. 109), before considering Plaintiff's Motion to Compel, (doc. 104).

I. Motion to Intervene (Doc. 109)

The Board and the FDIC argue that they should be allowed to intervene because Plaintiff seeks communications relating to supervisory matters, reports or communications relating to reports of examinations and inspections of PBI and the Bank, and documents from PBI and the Bank that are responsive to “examiners' requests, discussing the examiners' concerns or findings, or otherwise describing or relating to confidential supervisory communications, and related supervisory information.” (Doc. 109, p. 6.)

Rule 24 of the Federal Rules of Civil Procedure allows a non-party to intervene in an ongoing action if certain conditions, laid out by the Rule, are met. Fed. R. Civ. P. 24. Relevantly, Rule 24(a)(2) permits a non-party to intervene as a matter of right when the applicant “claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest.” Fed. R. Civ. P. 24(a)(2). In other words, a third party moving for intervention of right must show:

*3 Huff v. Comm'r of IRS, 743 F.3d 790 (11th Cir. 2014)(citations omitted).

Here, the Board and the FDIC timely filed their motion to intervene on March 13, 2017. (Doc. 109.) They have an ownership interest in the documents Plaintiff seeks to produce. See 12 C.F.R. § 261.20(g) (“All confidential supervisory information or other information made available [to supervised financial institutions and financial institution supervisory agencies] shall remain the property of the Board.”); 12 C.F.R. § 309.6(a) (“[A]ll copies of [exempt records] shall remain the property of the [FDIC] ....”). Additionally, the Board and the FDIC are unable to protect their interest without intervention in this case because they cannot oppose the Motion to Compel, assert privilege, or appeal any adverse determination regarding that privilege. Finally, the existing parties would not be able to adequately represent the Board or the FDIC because the privilege belongs exclusively to the Board and the FDIC. See In re Bankers Trust Co., 61 F.3d 465, 472 (6th Cir. 1995) (“The bank examination privilege belongs to the Federal Reserve, and therefore, where a claim of the privilege is appropriate, the Federal Reserve must be allowed the opportunity to assert the privilege and the opportunity to defend its assertion.”); see also Schreiber v. Soc'y for Sav. Bancorp, Inc., 11 F.3d 217, 220 (D.C. Cir. 1993) (“The agency asserting the privilege has the burden of establishing its applicability to the documents at issue.”).

Accordingly, the Court GRANTS the Board and the FDIC's Motion to Intervene for the Limited Purpose of Asserting Bank Examination Privilege and Opposing Plaintiff's Motion to Compel.[3]

II. Motion to Compel (Doc. 104)

In its Motion to Compel, Plaintiff seeks production of documents Defendants withheld due to those documents containing potential confidential supervisory information. (Doc. 104.) These documents were related to the Bank's decision to engage in the stock offering and included minutes from the Bank's and PBI's Board of Directors and committee meetings, and correspondence relating to the stock offering, the TruPS, and the condition and future of the Bank. (Id. at p. 6.) Plaintiff argues that such documents should be produced because they are highly relevant to the case and because Defendants have indicated that they will rely on them for their defense. (Id. at p. 12.)

However, Defendants claim they must withhold the documents because of the Board and the FDIC's lack of approval. Specifically, Defendants point to letters from the Board and the FDIC denying Defendants' request to produce the withheld material to Plaintiff. (Doc. 106-3, pp. 2–11.) The Board's letter instructed Defendants to “not produce Federal Reserve examination reports, supervisory correspondence, emails or other communications between PBI or the Bank and the Federal Reserve, or internal Bank or PBI documents describing or discussing supervisory communications.” (Id. at p. 6.) Additionally the Board directed Defendants to redact any confidential supervisory information referenced in the Bank's internal documents and cited two meeting minutes as an example. (Id.) The FDIC letter only authorized Defendants to provide four redacted copies of the FDIC's Reports of Examination. (Doc. 106-3, p. 10.) Additionally, the FDIC directed Defendants to “not produce other FDIC exempt records, including supervisory correspondence, emails, or other communications between the Bank and the FDIC,” but allowed production of the Bank's business records. (Doc. 106-3, p. 11.)

*4 In their Response to Plaintiff's Motion to Compel, the Board and the FDIC attempt to assert privilege by citing the letters they sent to Defendants denying their original request to produce. (Doc. 110, pp. 10–11.) However, the Board and the FDIC indicated that they did not know whether Defendants had actually segregated non-privileged, internal business information from the agency's confidential supervisory information and provided it to Plaintiff. (Doc. 110, p. 11.) Only after Defendants filed their March 16, 2017, Response to the Motion to Compel, (doc. 112), do the FDIC and the Board indicate that they have knowledge of said segregation and production. (Doc. 118, p. 3.) At this point, the Board and the FDIC clarify that they “are asserting bank examination privilege ... [over] the approximately 743 documents defendants provided to the agencies, but excluding the four redacted FDIC examination reports ... and the internal business information that defendants segregated and produced to the Plaintiff.” (Doc. 118, p. 3.)

As the Court discussed in the Section above, only the Board and the FDIC may assert the bank examiner's privilege. Indeed, it is their burden to prove that the privilege applies to each document. Schreiber, 11 F.3d at 220. Here, it appears that the Board and the FDIC are attempting to shift this burden onto Defendants by relying on Defendants' ability to follow the directives provided in the agency letters and Defendants' interpretation of said directives.

The clearest evidence of this reliance is the FDIC's and the Board's attempt to summarily assert privilege over Defendants' “privilege log”—a privilege log the FDIC and the Board took no part in creating and were unaware existed until Defendants filed a Response. (Doc. 118, p. 3.) In fact, it is unclear whether the FDIC and the Board have even seen a copy of the privilege log Defendants ultimately provided to Plaintiff much less the documents produced to Plaintiff. The Board and the FDIC repeatedly cite to docket entry 106-2 as the privilege log provided to Plaintiff and over which they assert the bank examination privilege. (Doc. 118, pp. 4–5.) (“It would serve no purpose for the agencies to provide another log to the plaintiff when a Log [doc. 106-2] identifying the Confidential Information is already in its possession.”) However, Defendants, in their March 10, 2017, Response, explain that docket entry 106-2 contains “[l]ogs listing documents provided to the Federal Reserve and FDIC.” (Doc. 106, p. 7.) More specifically, the bottom of each page of the attached log states that “[t]hese documents were provided to the FDIC to obtain its permission to produce to Plaintiffs[ ]” or “[t]hese documents were produced to the Federal Reserve to obtain its permission to produce to Plaintiffs.” (Doc. 106-2.) In their March 16, 2017, Response, Defendants reiterate that these logs, (doc. 106-2), were not the final privilege logs provided to Plaintiff and in fact the logs provided to Plaintiff are a “narrow[er] group of documents[.]” (Doc. 112, p. 5.) Thus, it is clear that this log, (doc. 106-2), was not a “Final Log provided by defendants to plaintiff” as the Board and the FDIC attempt to argue. (Doc. 118, p. 4.) In view of that information, it would be improper for the Board and the FDIC to attempt to assert privilege over this log when it is clear that some of the documents listed in the log were in fact provided to Plaintiff. (Doc. 112, p. 5.)

Thus, the Court finds that the Board and the FDIC have yet to properly assert the bank examination privilege. Because the Board and the FDIC have not yet properly asserted the privilege, Plaintiff's Motion to Compel is premature. Accordingly, the Court ORDERS the Board and the FDIC to produce to the parties, within fourteen (14) days of the date of this Order, a privilege log for all the documents or portion thereof that they wish to withhold on the basis of privilege or protection. Consequently, the Court DISMISSES AS MOOT Plaintiff's Motion to Compel.

Additionally, within fourteen (14) days of the date of this Order, counsel for all parties, including the intervenors, shall meet and confer telephonically to discuss the status of discovery in this case. Moreover, the Court ORDERS counsel for all parties to appear telephonically on May 9, 2017 at 9:00 a.m. for a telephonic status conference before Judge Baker.

III. Resolution of Future Discovery Disputes[4]

*5 The Court hereby ORDERS that all parties undertake the following steps prior to filing any discovery motions including, but not limited to, a motion to compel, motion to quash, motion for protective order, or motion for sanctions.

For the reasons and in the manner set forth above, the Court GRANTS the Board and FDIC's Motion to Intervene, (doc. 109), and DISMISSES AS MOOT Plaintiff's Motion to Compel, (doc. 104). Additionally, the Court ORDERS the Board and the FDIC to produce to the parties, within fourteen (14) days of the date of this Order, a privilege log for the documents or portion of the documents that they wish to withhold on the basis of privilege or protection.

SO ORDERED, this 17th day of April, 2017.

The Court noted in its Order that, “As John Does 1–50 have not been identified and thus, have not received service of this action, there is no motion to dismiss pending as to them.” (Doc. 75, p. 27 n.3.) However, in its subject-matter jurisdiction analysis, the Court sua sponte dismissed any equitable claims against Defendant Does 1–50. (Id.)

Section 309.6 governing the FDIC provides that “no person shall disclose or permit the disclosure of any exempt records, or information contained therein, to any persons other than those officers, directors, employees, or agents of the Corporation who have a need for such records in the performance of their official duties.” 12 C.F.R. § 309.6. The Federal Reserve enacted a similar regulation in 12 C.F.R. § 261.22. Collectively, these sections governing disclosure of exempt records create the “bank examiner's privilege.”

Subpart B of the Board and the FDIC's Motion to Intervene includes a response to Plaintiff's Motion to Compel. (Doc. 109, pp. 9–25.) In fact, the Board and the FDIC's concurrently filed Response in Opposition to the Motion to Compel is identical to their Motion to Intervene. (Doc. 110.) Thus, the Court treats those arguments opposing the Motion to Compel as a Response and separate from the Motion to Intervene.

Judge Baker's revised Standard Rule 26 Instruction Order now orders the parties to take the following steps to resolve discovery disputes in every civil case. However, this case was filed prior to the revisions to the Instruction Order.

The parties may schedule such a conference by contacting the Magistrate Judge's Courtroom Deputy Clerk.