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The Last Word on the Document Tug of War?

U.S. Court of Federal Claims Judge Margaret Sweeney’s opinion in agreeing to Fannie and Freddie shareholders’ request for a “quick peek” review of an additional 1,500 documents at the center of a drawn-out discovery process should be the last word about the limits of government secrecy.

The suit by investors with Fairholme Funds, Inc. alleges the government deprived Fannie and Freddie shareholders of property without compensation in implementing the Net Worth Sweep of the companies’ profits and diverting the money to the federal Treasury. The discovery process in the suit started with over 12,000 documents.

Following a ruling granting the motion to compel the production of this batch of 1,500 documents made public earlier this month, Judge Sweeney’s full rationale painstakingly takes up each relevant assertion by lawyers for Fairholme Funds and lawyers for the government. Consistent with previous rulings in the tug of war that has gone on for over three years, Sweeney is thorough and fair-minded on each narrow consideration of law and procedure but insistent that the government’s reasons for denying access to documents have become less convincing at each turn. She wants to end the fight over documents so the case can proceed on actual facts and evidence.

“The court’s sole purpose in utilizing the procedure is to bring jurisdictional discovery to an end so that the case may move forward,” she wrote of the rules governing her court’s procedural discretion. “Given the court’s wide discretion to manage discovery pursuant to RCFC 26, and given the mutually agreed-to protective order already entered in this case, the court’s use of the quick peek procedure is eminently appropriate.”

Her ruling is the latest determination about the government’s unsupportable claim of various kinds of executive privilege to keep documents hidden. Generally, executive privilege is applied to matters of national security or other highly sensitive information. The motion to compel before Sweeney concerned “deliberative process” and “bank examination” privileges the government has asserted.

Sweeney pointed out that even the government has conceded its approach to handing over relevant documents has been “piecemeal.” The “quick peek” procedure will allow Fairholme’s lawyers to get a look at all of the 1,500 documents in a time and place the parties agree to. This will enable plaintiffs to see if there are additional pieces of information that could strengthen their case.  Sweeney has already ruled that in cases involving the unconstitutional taking of property, the law leans toward citizens. She is clearly eager to end the slow drip of information plaintiffs should be able to see. At each turn, the government has failed to provide a constitutionally acceptable reason why the documents should remain sealed – or why they should have in the first place.

Noting the protective order originated in July, 2014, she stressed it specifically stated that it was “not intended to address or govern claims of privilege that may otherwise be asserted by any of the parties…[but] rather, the express purpose of the protective order was to protect “proprietary, confidential, trade secret, or market-sensitive information, as well as information that is otherwise protected from public disclosure under applicable law.”

As strong in its depth and scope as her opinion is, even Sweeney had to acknowledge the law provides avenues to continue even discredited causes. Toward the end of her opinion, she instructs, “The parties shall then meet and confer in an effort to resolve their differences without further court involvement. If they are unable to do so, plaintiffs may file a renewed motion to compel those documents they contend are both relevant and not privileged.”

If presented with such a motion, no doubt, Sweeney will again apply rigorous scrutiny to both sides. However, she might justifiably wonder what the government’s lawyers do not understand about transparency in carrying out the people’s business.

To date, the Sweep has sent over $270 billion of Fannie and Freddie’s revenues to Treasury and more might be on the way amid speculation their profits for the third quarter of the year might be fairly robust.  Companies doing this well should not be wards of the state. They should be operating with sufficient reserve capital and returned to their shareholders.