EDD Update discusses the D.C. Court of Appeals affirming a contempt order against the Office of Federal Housing Enterprise Oversight (“OFHEO”) in In re: Fannie Mae Securities Litigation, 2009 U.S. App. LEXIS 9 (D.C. App. Jan. 6, 2009):

OFHEO handled the e-discovery very poorly, to put it mildly, and was held in contempt by the district court in Washington D.C. The agency had not complied with a prior order that their lawyers had consented to. Turns out the consent order allowed the requesting parties to specify any search terms they wanted, so they did. They specified 400 keyword terms which returned over 660,000 documents. The government lawyers clearly did not understand what they had agreed to.  Still, they went ahead with the search and spent $6,000,000 in the process [9% of the agency’s entire annual budget]. As is typical, the main costs were for privilege review.

Is it just to allow a single government lawyer’s goof to drain 9% of an agency’s total annual budget, a budget drawn from taxpayer funds?  Should the appellate court have considered an economic analysis of the situation in reaching its decision, and perhaps ruled differently in the face of a possible gross inefficiency? What happened to proportionality and Rule 26(b)(2)(C)? It seems that the court erred in ordering what amounts to a wanton waste of taxpayer funds.

It sounds outrageous, but it has to be viewed in context. OFHEO, though a third-party, was intimately tied to the facts here, and knew well that the defendants — the executives of Fannie Mae and Fannie Mac — would want extensive documentation from them. The defendants subpoened that information in the summer of 2006. OFHEO objected (not sure why, maybe just habit), lost, and was ordered to produce the information.

So, what did OFHEO do? Request several extensions and then claim electronically-stored information was not part of the original order.

The court disagreed and ordered them to produce more. Then granted another extension.

Then OFHEO claimed it had produced everything — which it transparently had not — so the defendants deposed a records custodian and found mountains which had not been produced.

The defendants moved for contempt, which OFHEO thwarted, at the hearing, by agreeing to the stipulated order at issue.

They then sat on the issue again, then finally hired some contract attorneys immediately prior to the deadline, then requested two more extensions, assured the Court each time they were almost done, then had the contempt order entered against them. Apparently, they still have not produced everything.

I have two thoughts.

First, approach discovery from a strategic, not tactical, perspective. What were all those contract lawyers doing? What "privilege" concerns does OFHEO have? Did they really have to spend taxpayer money to review every document, pre-production, for the possibility that taxpayer money was previously spent providing advice to a public agency? There wasn’t another way to do this production? They couldn’t have, say, entered into a production agreement permitting them to withdraw documents inadvertently produced? How damaging could they be?

Second, don’t play around with the Court, even if you’re "only" a third party. It’s quite clear that this incident was not a simple error by a lawyer, but rather months of deliberate neglect, even through multiple court events, until well after the last minute. Indeed, it seems that, though some of the language arguments were raised, the "cost" argument was not even raised until appeal itself. Prior to that, OFHEO did not even review the issue thoroughly enough to see how expensive it would be.

No wonder the Court called it "too little, too late."