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Federal Deposit Insurance Corporation v. Coleman Law Firm

United States District Court, N.D. Illinois, Eastern Division

July 29, 2014



DANIEL G. MARTIN, Magistrate Judge.

This matter is before the Court on Plaintiff Federal Deposit Insurance Corporation's Motion to Compel [97]. For the reasons and to the extent stated below, Plaintiff's Motion to Compel [97] is granted.


On February 19, 2010, the Federal Deposit Insurance Corporation ("FDIC") was appointed receiver of George Washington Savings Bank ("GWSB"). The FDIC, as receiver of GWSB, filed this lawsuit on December 13, 2011 seeking to recover $250, 000 that GWSB prepaid to Defendants pursuant to Advance Payment Retainer Agreements ("Retainer Agreements"). Defendants are law firms who currently represent various former officers and directors of GWSB. The parties to the Retainer Agreements are: (i) GWSB; (ii) certain former directors and officers of GWSB (collectively, "D/Os"); and (iii) Defendant, The Coleman Law Firm ("Coleman"), or Defendant, Kevin Flynn & Associates ("Flynn"). Per the Retainer Agreements, Coleman and Flynn agreed to "advise, counsel and defend the D/Os in connection with: any action, suit or proceeding, whether civil, criminal, or administrative or investigative, in which [the D/Os] are made, or are threatened to be made, a party to, or witness in, such action, suit or proceeding by reason of the fact that he is or was an officer, director or employee of [GWSB]...." (Doc. 1-1 at 2, 6).

The FDIC-R alleges that GWSB's prepayments to Coleman and Flynn violated 12 U.S.C. § 1828(k)(3) of the Federal Deposit Insurance Act, which prohibits prepayment of legal expenses on behalf of institution-affiliated parties, such as a financial institution's officers or directors, if such payments are: (i) made in contemplation of the institution's insolvency; and (ii) the payments have the purpose or effect of preventing proper application of the assets of the institution to its creditors or preferring one creditor over another. According to the FDIC-R, the prepayment provisions of the Retainer Agreements were and are void ab initio, and under Illinois law, the FDIC-R can recover for GWSB's prepayments. Defendants Coleman and Flynn have denied material aspects of the FDIC-R's claims.

This case was originally assigned to District Judge Milton I. Shadur and Magistrate Judge Arlander Keys and then reassigned to District Judge Thomas M. Durkin on January 14, 2013. (Doc. 62). On May 14, 2014, Judge Keys extended the non-expert fact discovery cut-off to August 31, 2014. (Doc. 101). When Magistrate Judge Keys retired from the bench, the case was reassigned to the undersigned Magistrate Judge effective May 30, 2014. The FDIC-R's current motion to compel is fully briefed and resolution of the motion is within the scope of the referral order, which includes discovery supervision. (Doc.73).


In its motion, the FDIC-R seeks production of documents relating to the negotiation and/or execution of the Coleman and Flynn Retainer Agreements. The FDIC-R argues that such documents constitute "Bank Documents, " which Magistrate Judge Keys previously ordered Defendants to return to the FDIC-R. The FDIC-R also asserts that there are documents which Defendants have improperly withheld on the basis of attorney-client privilege or as attorney work-product. After reviewing the briefing, the Court now rules as follows.

A. Bank Documents

On October 8, 2013, Judge Keys granted the FDIC-R's motion for entry of confidentiality order and ordered Defendants to return "Bank Documents" to the FDIC-R. (Doc. 85). Judge Keys held that the "Bank Documents are the property of FDIC-R and should be returned." (Doc. 85 at 14). The FDIC-R asserts that Magistrate Judge Keys' order is the "law of the case." The FDIC-R argues that the universe of Bank Documents is defined by federal statue, and that federal statute is controlling. See 12 U.S.C. § 1821(d)(2)(A). The FDIC-R explains that it merely used the phrase "Bank Documents" to "describe certain documents the Federal Deposit Insurance Corporation took ownership of, as a matter of law, when it was appointed receiver of GWSB." (Doc. 108 at 3). Judge Keys adopted and entered the FDIC-R's proposed version of the Confidentiality Order. The Confidentiality Order defines Bank Documents as "any document or any portion of a document that belonged to George Washington Savings Bank, or that one of their clients acquired due to his/her former role as a director and/or officer of George Washington Savings Bank." (Doc. 86 at 2).

Defendants represent that they returned Bank Documents as defined in the Confidentiality Order. Defendants also state that they have produced communications with the law firm that represented GWSB prior to the Receivership and all documents reflecting communications with GWSB's then counsel related to the Retainer Agreements. Defendants contend that none of the groups of documents sought by the FDIC-R are Bank Documents as defined by the Court.

It is clear from the record and logical to conclude that Judge Keys intended Defendants to return any documents that fall within the statutory definition of Bank Documents. While Judge Keys did not explicitly state that the universe of Bank Documents is defined by Section 1821(d)(2)(A), this point was part of the FDIC-R's briefing on the motion for entry of confidentiality order, which was granted in full. See (Doc. 81 at 8) (FDIC-R explaining that its definition of "Bank Documents" "encompasses the very same documents that Section 1821(d)(2)(A) defines as belonging to FDIC-R."). As Judge Keys specifically noted, Section 1821(d)(2)(A) of the Federal Deposit Insurance Act, in relevant part provides that upon appointment as receiver, the Federal Deposit Insurance Corporation succeeds to, among other things:

(i) all rights, titles, powers, and privileges of [GWSB], and of any stockholder, members, accountholder, depositor, officer, or director of such institution with respect to the ...

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