Uniform Rules of Practice and Procedure

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 509

[No. 96-30]

RIN 1550-AA79

Uniform Rules of Practice and Procedure

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Final rule.

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SUMMARY: The Office of Thrift Supervision (OTS) is amending its Rules

of Practice and Procedure in Adjudicatory Proceedings. The final rule

is intended to clarify certain provisions and to increase the

efficiency and fairness of administrative hearings.

EFFECTIVE DATE: June 5, 1996.

FOR FURTHER INFORMATION CONTACT: Karen A. Osterloh, Counsel (Banking

and Finance), Regulations and Legislation Division, Chief Counsel's

Office, (202) 906-6639, or Eliot Goldstein, Counsel, Division of

Enforcement, Chief Counsel's Office, (202) 906-7162, Office of Thrift

Supervision, 1700 G Street, NW., Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

A. Background

Section 916 of the Financial Institutions Reform, Recovery and

Enforcement Act of 1989 (FIRREA), Pub. L. 101-73, 103 Stat. 183 (1989),

required the OTS, the Office of the Comptroller of the Currency (OCC),

the Board of Governors of the Federal Reserve System (Board), the

Federal Deposit Insurance Corporation (FDIC) and the National Credit

Union Administration (NCUA) (agencies) to develop uniform rules and

procedures for administrative hearings. The agencies each adopted final

Uniform Rules in August, 1991.1 Based on their experience in using

the rules since then, the agencies have identified sections of the

Uniform Rules that should be modified. Accordingly, the agencies

proposed amendments to the Uniform Rules on June 23, 1995 (60 FR

32882). These changes affect OTS Uniform Rules at 12 CFR Part 509

(Subpart A). The OTS also proposed amendments to its agency-specific

procedural rules at 12 CFR Part 509 (Subpart B) (Local Rules).

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\1\ The agencies issued a joint notice of proposed rulemaking on

Monday, June 17, 1991 (56 FR 27790). The agencies promulgated their

final rules on the following dates: OCC on August 9, 1991 (56 FR

38024); Board on August 9, 1991 (56 FR 38052); FDIC on August 9,

1991 (56 FR 37975); OTS on August 12, 1991 (56 FR 38317); and NCUA

on August 8, 1991 (56 FR 37767).

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The OTS received one comment which expressed general approval of

the proposal and suggested specific improvements. The OTS has also

considered comments submitted to the other agencies on the proposed

rule.

The final rule implements the proposal with minor changes. The

following section-by-section analysis summarizes the final rule and

highlights the changes that the OTS has made after considering the

commenters' suggestions.

The OCC, FDIC, Board and NCUA are publishing separate final rules

that are substantively identical to the OTS's final rule. The OCC,

FDIC, and Board rules appear elsewhere in this Federal Register.

B. Section-by-Section Summary and Discussion of Amendments to the

Uniform Rules

Section 509.1 Scope

The proposal added two statutory provisions to the list of civil

money penalty provisions to which the Uniform Rules apply. The two

provisions were enacted by the Riegle Community Development and

Regulatory Improvement Act of 1994 (CDRI), Pub. L. 103-325, 108 Stat.

2160.

The first provision, CDRI section 406, amended the Bank Secrecy Act

(BSA) (31 U.S.C. 5321) to require the Secretary of the Treasury to

delegate authority to the Federal banking agencies (as defined in

section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)) to

impose civil money penalties for BSA violations.

The second provision, CDRI section 525, amended section 102 of the

Flood Disaster Protection Act of 1973 (FDPA) (42 U.S.C. 4012a) to give

each ``Federal entity for lending regulation'' authority to assess

civil money penalties against a regulated lending institution if the

institution has a pattern or practice of committing violations of the

FDPA or the notice requirements of the National Flood Insurance Act of

1968 (NFIA) (42 U.S.C. 4104a). Under the FDPA, the term ``Federal

entity for lending regulation'' includes the agencies and the Farm

Credit Administration.

CDRI Sec. 525 also gave the agencies authority to require a

regulated lending institution to take remedial actions that are

necessary to ensure that the institution complies with the requirements

of the national flood insurance program if: (1) the institution has

engaged in a pattern and practice of noncompliance with regulations

issued pursuant to the FDPA; and (2) has not

[[Page 20351]]

demonstrated measurable improvement in compliance despite the

assessment of civil money penalties. The final rule adds a new

paragraph to the scope section that reflects this additional authority.

The OTS received no comments on this section, which is adopted as

proposed.

Section 509.6 Appearance and Practice in Adjudicatory Proceedings

The proposal permitted the administrative law judge (ALJ) to

require counsel who withdraws from representing a party to accept

service of papers for that party until either: (1) a new counsel has

filed a notice of appearance; or (2) the party indicates that he or she

will proceed on a pro se basis.

One commenter suggested that the proposal does not adequately

address certain situations: for example, when counsel withdraws because

of lack of payment of legal fees or withdraws because the client

discharged him or her. The commenter's implication is that it is unfair

to require counsel to continue to accept service in these situations.

Moreover, the commenter expressed concern that the administrative

proceeding may become involved in a dispute between the client and

counsel when the ALJ requires counsel to continue to accept service

after a client discharges counsel. The commenter suggested that the

rule should require service be given to both the unreplaced counsel and

the party.

The proposal was intended to ensure that a lawyer is always

available to receive service in order to prevent a party from halting

the administrative process simply by evading service. The regulatory

text is clear, however, that the ALJ has the discretion whether to

require former counsel to continue to accept service. Fairness to

counsel is among the factors the ALJ would consider in exercising this

discretion. The OTS, therefore, believes that the provision as proposed

is sufficiently flexible to accommodate the concerns raised by the

commenter.

The final rule changes the proposal's reference from ``service of

process'' to ``service'' to clarify that this section applies to all

papers that the party is entitled to receive. The section is otherwise

adopted as proposed.

Section 509.8 Conflicts of Interest

The proposal sought to improve in two ways the provisions governing

conflicts of interest that arise when counsel represents multiple

persons connected with a proceeding.

First, the proposal sought to protect the interests of individuals

and financial institutions by expanding the circumstances under which

counsel must certify that he or she has obtained a waiver from non-

parties of any potential conflict of interest. The former rule required

counsel to obtain waivers only from non-party institutions ``to which

notice of the proceedings must be given.'' The proposal required

counsel to obtain waivers from all parties and non-parties that counsel

represents on a matter relevant to an issue in the proceeding. It thus

ensured that all appropriate party and non-party individuals and

institutions are informed of potential conflicts.

Second, the proposal simplified this provision by eliminating the

requirement for counsel to certify that each client has asserted that

there are no conflicts of interest. The OTS believes that the former

provision was superfluous because the responsibility for identifying

potential conflicts resides with counsel.

One commenter noted that the proposal may inhibit multiple

representation that otherwise complies with applicable ethics rules.

The commenter suggested that the proposal could inappropriately tilt

the proceeding in favor of the agencies.

The provision does not limit the right of any party to

representation by counsel of the party's choice. Rather, it ensures

that all interested persons are informed of potential conflicts so that

they may avoid the conflict if they choose. In the OTS's view, it is

reasonable to establish a baseline standard requiring the affirmative

waiver of conflicts by all affected persons or entities in order to

ensure the integrity of the administrative adjudication process. State

rules of professional responsibility that impose more stringent ethical

standards are unaffected by this requirement.

In addition, the OTS is unpersuaded by the argument that the

conflicts provision grants the agencies significant advantage in a

proceeding. Persons and parties may be well and vigorously represented

even if they are not all represented by the same counsel.

Therefore, the OTS adopts this section as proposed.

Section 509.11 Service of Papers

The proposal changed this section by permitting parties, the

Director, and ALJs to serve a subpoena on a party by delivering it to a

person of suitable age and discretion at a party's place of work.

One commenter supported the intent of the proposal, but asserted

that permitting service on a person at a person's place of work was too

broad to be effective, particularly where an institution has numerous

branches.

The OTS interpreted the phrase ``person's place of work'' as used

in the proposal to mean the physical location at which an individual

works and not as any office of the corporation or association that

employs the person. To avoid confusion, the OTS has added specific

reference to physical location to the regulatory text. In addition, the

final rule states expressly that only an individual, not a corporation

or association, may be served at a residence or place of work.

The same commenter points out, however, that the former Uniform

Rules do not permit certain methods of service that are useful for

serving a corporation or other association. The final rule, therefore,

permits service on a party corporation or other association by delivery

of a copy of a notice to an officer, managing or general agent, or to

any other agent authorized by appointment or by law to receive service

of process. The final rule also provides that, if the agent is one

authorized by statute to receive service and the statute so requires,

the serving party must also mail a copy to the party. The final rule

also restructures this provision for clarity.

Section 509.12 Construction of Time Limits

The proposal clarified that the additional time allotted for

responding to papers served by mail, delivery service, or electronic

media transmission under Sec. 509.12(c) is not included in determining

whether an act is required to be performed within ten days. The

proposal also clarified that additional time allotted for responding to

papers served by mail, delivery, or electronic media transmission is

counted by calendar days and, therefore, a party must count Saturdays,

Sundays, and holidays when calculating a time deadline.

The OTS received no comments on this section, which is adopted as

proposed.

Section 509.20 Amended Pleadings

The proposal changed this section to permit a party to amend its

pleadings without leave of the ALJ and to permit the ALJ to admit

evidence over the objection that the evidence does not fall directly

within the scope of the issues raised by a notice or answer.

One commenter asserted that the change could unduly prejudice a

party if a notice were amended to add or delete allegations immediately

prior to the hearing. The commenter expressed

[[Page 20352]]

concern that the amendment would give a party insufficient time to seek

additional discovery or file for summary judgment.

The regulatory text gives the ALJ discretion to revise the hearing

schedule to ensure that no prejudice results from last minute

amendments to a notice. The OTS believes this approach is adequate to

avoid prejudice to a party and, therefore, adopts this section as

proposed.

Section 509.24 Scope of Document Discovery

The former Uniform Rules were silent on the use of interrogatories.

The proposal expressly prohibited parties from using interrogatories on

grounds that other discovery tools are more efficient and less

burdensome and, therefore, more appropriate to administrative

adjudications.

The proposal also sought to focus document discovery requests so

that they are not unreasonable, oppressive, excessive in scope, or

unduly burdensome to any of the parties.

Accordingly, the proposal preserved the former rule's limitation on

document discovery by permitting discovery only of documents that have

material relevance. However, the proposal specifically provided that a

request should be considered unreasonable, oppressive, excessive in

scope, or unduly burdensome if, among other things: (1) it fails to

include justifiable limitations on the time period covered and the

geographic locations to be searched; (2) the time provided to respond

in the request is inadequate; or (3) the request calls for copies of

documents to be delivered to the requesting party and fails to include

the requestor's written agreement to pay in advance for the copying, in

accordance with Sec. 509.25.

Under the proposal, the scope of permissible document discovery is

not as broad as that allowed under Federal Rule of Civil Procedure

26(b) (28 U.S.C. app.). Historically, given the specialized nature of

enforcement proceedings in regulated industries, discovery in

administrative proceedings has not been as expansive as it is in civil

litigation.

The OTS received no significant comments on this section and,

therefore, adopts it as proposed.

Section 509.25 Request for document discovery from parties

The OTS proposed several changes to Sec. 509.25. First, the

proposal sought to reduce unnecessary burden by permitting a party to:

(1) respond to document discovery either by producing documents as they

are kept in the ordinary course of business or by organizing them to

correspond to the categories in a document request; and (2) identify

similar documents by category when they are voluminous and are

protected by the deliberative process, attorney-client, or attorney

work-product privilege.

The proposal also amended Sec. 509.25 to permit a party to require

payment in advance for the costs of copying and shipping requested

documents; and clarified that, if a party has stated its intention to

file a timely motion for interlocutory review, the ALJ may not release,

or order a party to produce, documents withheld on grounds of privilege

until the motion for interlocutory review has been decided.

The agencies received two comments on this section. One commenter

sought guidance on when, how, and to whom a party must express an

``intention'' to file a timely motion for interlocutory review.

Because the ALJ may not release or order a party to produce

documents, it was implicit in the proposed regulatory text that a party

must make the intention to seek interlocutory review known to the ALJ.

For clarity's sake, the final rule adds language to this effect.

Another commenter suggested that a request for interlocutory review

should automatically stay the proceeding.

Under Sec. 509.28(d) of the Uniform Rules, a party may request that

a proceeding be stayed during the pendency of an interlocutory review.

The ALJ has the discretion to decide whether a stay is appropriate. The

OTS believes that this procedure adequately protects the parties. For

this reason and to avoid adding unnecessary delays in the

administrative proceedings, the OTS declines to provide for an

automatic stay whenever a party requests interlocutory review.

One commenter asserted that permitting the OTS to require payment

in advance for document copying and shipping costs would give the OTS

an advantage over other creditors if the party is bankrupt following

the administrative hearing. The OTS finds that this situation is rare

and therefore does not outweigh the OTS's need to ensure that it

receives payment. Moreover, the provision does not preclude other

creditors from requiring prepayment for products or services.

Accordingly, the OTS adopts this section as proposed.

Section 509.27 Deposition of witness unavailable for hearing

The proposal clarified that a party may serve a deposition subpoena

on a witness who is unavailable by serving the subpoena on the witness

or the witness's authorized representative. The OTS received no

comments on this section.

As amended, section 509.11(d) expressly permits a party to serve a

subpoena by delivering the subpoena to an agent, which would include

delivery to an authorized representative. The proposed change to

section 509.27 is, therefore, redundant and has not been included in

the final rule.

Section 509.33 Public Hearings

The proposal changed this section to specify that a party must file

a motion for a private hearing with the Director and not the ALJ, but

must serve the ALJ with a copy of the motion.

The OTS received no comments on this section, which is adopted as

proposed.

Section 509.34 Hearing Subpoenas

The former Uniform Rules did not specifically require that a party

inform all other parties when a subpoena to a non-party is issued. The

proposal required that, after a hearing subpoena is issued by the ALJ,

the party that applied for the subpoena must serve a copy of it on each

party. Under the proposal, any party may move to quash any hearing

subpoena and must serve the motion on each other party.

The OTS received no comments on this section, which is adopted as

proposed.

Section 509.35 Conduct of Hearings

The proposal limited the number of counsel permitted to examine a

witness and clarified that hearing transcripts may be obtained only

from the court reporter. The former Uniform Rules were silent on these

issues. The OTS received no comments on this section, which is adopted

as proposed.

Section 509.37 Post-Hearing Filings

The proposal changed the title of this section from ``Proposed

findings and conclusions'' to ``Post-hearing filings'' to describe more

accurately the content of the section.

The proposal also moved, from Sec. 509.35(b) to Sec. 509.37(a), the

provision that requires the ALJ to serve each party with notice of the

filing of the certified transcript of the hearing (including hearing

exhibits). The proposal added a requirement that the ALJ must use the

same method of service for this notice.

Finally, the proposal clarified that the ALJ may, when appropriate,

permit parties more than the allotted 30 days to file proposed findings

of fact, proposed conclusions of law, and a proposed order.

[[Page 20353]]

The OTS received no comments on this section, which is adopted with

a minor technical change.

Section 509.38 Recommended decision and filing of record

Under OTS Local Rule Sec. 509.104(h), the ALJ was required to file

an index of the record when he filed the record with the Director. The

proposal added this requirement to the Uniform Rules at Sec. 509.38,

and reorganized this section to improve its clarity.

The OTS received no comments on this section, which is adopted as

proposed.

C. Section-by-Section Summary and Discussion of Proposed Amendments to

the OTS Local Rules

Section 509.102 Discovery

The OTS proposed to revise its local rule at Sec. 509.102(g)(2)

which governs the service of discovery deposition subpoenas. The

current rule permits service of deposition subpoenas only by personal

service, certified mail, or overnight delivery service. The proposed

rule, however, would have permitted parties to serve deposition

subpoenas by any of the methods listed in Uniform Rule Sec. 509.11(d).

The OTS received no comments on this proposal. It is adopted without

change.

Current Sec. 509.102(g)(2) requires a party to serve a deposition

subpoena on ``the person named therein and a copy on that person's

counsel, or on that person's counsel.'' The OTS proposed to revise this

provision to require a party to serve a deposition subpoena on the

person named therein or on that person's counsel. The proposed change

would conform the OTS Local Rule to the OCC Local Rule at 12 CFR

19.171.

One commenter suggested that the OTS should require a party to

serve both the deponent and the deponent's counsel. The OTS rejects

this suggestion. Initially, a party may not be able to comply with the

commenter's proposed requirement. For example, where the witness to be

deposed is a non-party, the party issuing the subpoena may not know

whether the witness is represented by counsel and the identity of

counsel. Where a party is to be deposed, however, counsel of record

will always receive notice of the deposition under Sec. 509.102(a).

This commenter suggests that it may be a violation of an attorney's

ethics for counsel to serve a deponent, but not the deponent's

attorney. The OTS Local Rule does not limit the ability of any party to

make service upon a deponent's attorney where required by local ethics

rules. State rules of professional responsibility that impose more

stringent ethical standards are unaffected by this Local Rule.

The proposed changes to Sec. 509.102(g)(2) are adopted with certain

clarifying changes.

Section 509.104 Additional Procedures

As amended today, Sec. 509.38 incorporates OTS Local Rule at

Sec. 509.104(h). Accordingly, the local rule is deleted.

D. Regulatory Flexibility Act

Pursuant to section 605(b) of the Regulatory Flexibility Act, the

OTS hereby certifies that this final rule will not have a significant

economic impact on a substantial number of small entities. Accordingly,

a regulatory flexibility analysis is not required.

This final rule only imposes procedural requirements in

administrative adjudications. It contains no substantive requirements.

It improves the Uniform Rules of Practice and Procedure and facilitates

the orderly determination of administrative proceedings. The changes in

this final rule are primarily clarifications and impose no significant

additional burdens on regulated institutions, parties to administrative

actions, or counsel.

E. Executive Order 12866

The OTS has determined that this final rule is not a significant

regulatory action as defined in Executive Order 12866.

F. Unfunded Mandates Act of 1995

Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L.

104-4 (Unfunded Mandates Act) requires that an agency prepare a

budgetary impact statement before promulgating a rule that includes a

Federal mandate that may result in expenditure by State, local, and

tribal governments, in the aggregate, or by the private sector, of $100

million or more in any one year. If a budgetary impact statement is

required, Section 205 of the Unfunded Mandates Act also requires an

agency to identify and consider a reasonable number of regulatory

alternatives before promulgating a rule. As discussed in the preamble,

this final rule is limited in application to procedural amendments to

the rules of administrative practice before the OTS. The OTS has

therefore determined that the final rule will not result in

expenditures by State, local, or tribal governments or by the private

sector of more than $100 million. Accordingly, the OTS has not prepared

a budgetary impact statement or specifically addressed the regulatory

alternatives considered.

G. Effective Date

Section 302 of the Riegle Community Development and Regulatory

Improvement Act of 1994 delays the effective date of regulations

promulgated by the Federal banking agencies that impose additional

reporting, disclosure, or other new requirements to the first day of

the first calendar quarter following publication of the final rule. The

OTS believes that section 302 is not applicable to this final rule,

because the regulation does not impose any additional reporting or

other requirements not already contained in the current version of the

Uniform Rules or the Local Rules.

List of Subjects in 12 CFR Part 509

Administrative practice and procedure, Penalties.

For the reasons set out in the preamble, part 509 of chapter V of

title 12 of the Code of Federal Regulations is amended as set forth

below.

PART 509--RULES OF PRACTICE AND PROCEDURE IN ADJUDICATORY

PROCEEDINGS

1. The authority citation for part 509 is revised to read as

follows:

Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 1464, 1467, 1467a,

1468, 1817(j), 1818, 3349, 4717; 15 U.S.C. 78(l), 78o-5, 78u-2; 31

U.S.C. 5321; 42 U.S.C. 4012a.

Subpart A--Uniform Rules of Practice and Procedure

2. Section 509.1 is amended in paragraph (e)(7) by removing the

word ``and'' after the semicolon, adding paragraphs (e)(9) and (e)(10),

redesignating paragraph (f) as paragraph (g) and revising it, and

adding new paragraph (f) read as follows:

Sec. 509.1 Scope.

* * * * *

(e) * * *

(9) Any provision of law referenced in section 102 of the Flood

Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)) or any order or

regulation issued thereunder; and

(10) Any provision of law referenced in 31 U.S.C. 5321 or any order

or regulation issued thereunder;

(f) Remedial action under section 102 of the Flood Disaster

Protection Act of 1973 (42 U.S.C. 4012a(g)); and

(g) This subpart also applies to all other adjudications required

by statute to be determined on the record after opportunity for an

agency hearing,

[[Page 20354]]

unless otherwise specifically provided for in the Local Rules.

3. Section 509.6 is amended by revising paragraph (a)(3) to read as

follows:

Sec. 509.6 Appearance and practice in adjudicatory proceedings.

(a) * * *

(3) Notice of appearance. Any individual acting as counsel on

behalf of a party, including the Director, shall file a notice of

appearance with OFIA at or before the time that individual submits

papers or otherwise appears on behalf of a party in the adjudicatory

proceeding. The notice of appearance must include a written declaration

that the individual is currently qualified as provided in paragraph

(a)(1) or (a)(2) of this section and is authorized to represent the

particular party. By filing a notice of appearance on behalf of a party

in an adjudicatory proceeding, the counsel agrees and represents that

he or she is authorized to accept service on behalf of the represented

party and that, in the event of withdrawal from representation, he or

she will, if required by the administrative law judge, continue to

accept service until new counsel has filed a notice of appearance or

until the represented party indicates that he or she will proceed on a

pro se basis.

* * * * *

4. Section 509.8 is amended by revising paragraph (b) to read as

follows:

Sec. 509.8 Conflicts of interest.

* * * * *

(b) Certification and waiver. If any person appearing as counsel

represents two or more parties to an adjudicatory proceeding or also

represents a non-party on a matter relevant to an issue in the

proceeding, counsel must certify in writing at the time of filing the

notice of appearance required by Sec. 509.6(a):

(1) That the counsel has personally and fully discussed the

possibility of conflicts of interest with each such party and non-

party; and

(2) That each such party and non-party waives any right it might

otherwise have had to assert any known conflicts of interest or to

assert any non-material conflicts of interest during the course of the

proceeding.

5. Section 509.11 is amended by revising paragraphs (c)(2) and (d)

to read as follows:

Sec. 509.11 Service of papers.

* * * * *

(c) * * *

(2) If a party has not appeared in the proceeding in accordance

with Sec. 509.6 of this subpart, the Director or the administrative law

judge shall make service by any of the following methods:

(i) By personal service;

(ii) If the person to be served is an individual, by delivery to a

person of suitable age and discretion at the physical location where

the individual resides or works;

(iii) If the person to be served is a corporation or other

association, by delivery to an officer, managing or general agent, or

to any other agent authorized by appointment or by law to receive

service and, if the agent is one authorized by statute to receive

service and the statute so requires, by also mailing a copy to the

party;

(iv) By registered or certified mail addressed to the person's last

known address; or

(v) By any other method reasonably calculated to give actual

notice.

(d) Subpoenas. Service of a subpoena may be made:

(1) By personal service;

(2) If the person to be served is an individual, by delivery to a

person of suitable age and discretion at the physical location where

the individual resides or works;

(3) By delivery to an agent, which in the case of a corporation or

other association, is delivery to an officer, managing or general

agent, or to any other agent authorized by appointment or by law to

receive service and, if the agent is one authorized by statute to

receive service and the statute so requires, by also mailing a copy to

the party;

(4) By registered or certified mail addressed to the person's last

known address; or

(5) By any other method reasonably calculated to give actual

notice.

* * * * *

6. Section 509.12 is amended by revising paragraphs (a), (c)(1),

(c)(2), and (c)(3) to read as follows:

Sec. 509.12 Construction of time limits.

(a) General rule. In computing any period of time prescribed by

this subpart, the date of the act or event that commences the

designated period of time is not included. The last day so computed is

included unless it is a Saturday, Sunday, or Federal holiday. When the

last day is a Saturday, Sunday, or Federal holiday, the period runs

until the end of the next day that is not a Saturday, Sunday, or

Federal holiday. Intermediate Saturdays, Sundays, and Federal holidays

are included in the computation of time. However, when the time period

within which an act is to be performed is ten days or less, not

including any additional time allowed for in paragraph (c) of this

section, intermediate Saturdays, Sundays, and Federal holidays are not

included.

* * * * *

(c) * * *

(1) If service is made by first class, registered, or certified

mail, add three calendar days to the prescribed period;

(2) If service is made by express mail or overnight delivery

service, add one calendar day to the prescribed period; or

(3) If service is made by electronic media transmission, add one

calendar day to the prescribed period, unless otherwise determined by

the Director or the administrative law judge in the case of filing, or

by agreement among the parties in the case of service.

7. Section 509.20 is revised to read as follows:

Sec. 509.20 Amended pleadings.

(a) Amendments. The notice or answer may be amended or supplemented

at any stage of the proceeding. The respondent must answer an amended

notice within the time remaining for the respondent's answer to the

original notice, or within ten days after service of the amended

notice, whichever period is longer, unless the Director or

administrative law judge orders otherwise for good cause.

(b) Amendments to conform to the evidence. When issues not raised

in the notice or answer are tried at the hearing by express or implied

consent of the parties, they will be treated in all respects as if they

had been raised in the notice or answer, and no formal amendments are

required. If evidence is objected to at the hearing on the ground that

it is not within the issues raised by the notice or answer, the

administrative law judge may admit the evidence when admission is

likely to assist in adjudicating the merits of the action and the

objecting party fails to satisfy the administrative law judge that the

admission of such evidence would unfairly prejudice that party's action

or defense upon the merits. The administrative law judge may grant a

continuance to enable the objecting party to meet such evidence.

8. Section 509.24 is amended by revising paragraphs (a) and (b) to

read as follows:

Sec. 509.24 Scope of document discovery.

(a) Limits on discovery. (1) Subject to the limitations set out in

paragraphs (b), (c), and (d) of this section, a party to a proceeding

under this subpart may obtain document discovery by serving a written

request to produce documents. For purposes of a request to produce

documents, the term ``documents'' may

[[Page 20355]]

be defined to include drawings, graphs, charts, photographs,

recordings, data stored in electronic form, and other data compilations

from which information can be obtained, or translated, if necessary, by

the parties through detection devices into reasonably usable form, as

well as written material of all kinds.

(2) Discovery by use of deposition is governed by Sec. 509.102 of

this part.

(3) Discovery by use of interrogatories is not permitted.

(b) Relevance. A party may obtain document discovery regarding any

matter, not privileged, that has material relevance to the merits of

the pending action. Any request to produce documents that calls for

irrelevant material, that is unreasonable, oppressive, excessive in

scope, unduly burdensome, or repetitive of previous requests, or that

seeks to obtain privileged documents will be denied or modified. A

request is unreasonable, oppressive, excessive in scope or unduly

burdensome if, among other things, it fails to include justifiable

limitations on the time period covered and the geographic locations to

be searched, the time provided to respond in the request is inadequate,

or the request calls for copies of documents to be delivered to the

requesting party and fails to include the requestor's written agreement

to pay in advance for the copying, in accordance with Sec. 509.25 of

this subpart.

* * * * *

9. Section 509.25 is amended by revising paragraphs (a), (b), (e),

and (g) to read as follows:

Sec. 509.25 Request for document discovery from parties.

(a) General rule. Any party may serve on any other party a request

to produce for inspection any discoverable documents that are in the

possession, custody, or control of the party upon whom the request is

served. The request must identify the documents to be produced either

by individual item or by category, and must describe each item and

category with reasonable particularity. Documents must be produced as

they are kept in the usual course of business or must be organized to

correspond with the categories in the request.

(b) Production or copying. The request must specify a reasonable

time, place, and manner for production and performing any related acts.

In lieu of inspecting the documents, the requesting party may specify

that all or some of the responsive documents be copied and the copies

delivered to the requesting party. If copying of fewer than 250 pages

is requested, the party to whom the request is addressed shall bear the

cost of copying and shipping charges. If a party requests 250 pages or

more of copying, the requesting party shall pay for the copying and

shipping charges. Copying charges are the current per-page copying rate

imposed under 12 CFR 502.7 for requests under the Freedom of

Information Act (5 U.S.C. 552). The party to whom the request is

addressed may require payment in advance before producing the

documents.

* * * * *

(e) Privilege. At the time other documents are produced, the

producing party must reasonably identify all documents withheld on the

grounds of privilege and must produce a statement of the basis for the

assertion of privilege. When similar documents that are protected by

deliberative process, attorney-work-product, or attorney-client

privilege are voluminous, these documents may be identified by category

instead of by individual document. The administrative law judge retains

discretion to determine when the identification by category is

insufficient.

* * * * *

(g) Ruling on motions. After the time for filing responses pursuant

to this section has expired, the administrative law judge shall rule

promptly on all motions filed pursuant to this section. If the

administrative law judge determines that a discovery request, or any of

its terms, calls for irrelevant material, is unreasonable, oppressive,

excessive in scope, unduly burdensome, or repetitive of previous

requests, or seeks to obtain privileged documents, he or she may deny

or modify the request, and may issue appropriate protective orders,

upon such conditions as justice may require. The pendency of a motion

to strike or limit discovery or to compel production is not a basis for

staying or continuing the proceeding, unless otherwise ordered by the

administrative law judge. Notwithstanding any other provision in this

part, the administrative law judge may not release, or order a party to

produce, documents withheld on grounds of privilege if the party has

stated to the administrative law judge its intention to file a timely

motion for interlocutory review of the administrative law judge's order

to produce the documents, and until the motion for interlocutory review

has been decided.

* * * * *

10. Section 509.33 is amended by revising paragraph (a) to read as

follows:

Sec. 509.33 Public hearings.

(a) General rule. All hearings shall be open to the public, unless

the Director, in the Director's discretion, determines that holding an

open hearing would be contrary to the public interest. Within 20 days

of service of the notice or, in the case of change-in-control

proceedings under section 7(j)(4) of the FDIA (12 U.S.C. 1817(j)(4)),

within 20 days from service of the hearing order, any respondent may

file with the Director a request for a private hearing, and any party

may file a reply to such a request. A party must serve on the

administrative law judge a copy of any request or reply the party files

with the Director. The form of, and procedure for, these requests and

replies are governed by Sec. 509.23 of this subpart. A party's failure

to file a request or a reply constitutes a waiver of any objections

regarding whether the hearing will be public or private.

* * * * *

11. Section 509.34 is amended by revising paragraphs (a) and (b)(1)

to read as follows:

Sec. 509.34 Hearing subpoenas.

(a) Issuance. (1) Upon application of a party showing general

relevance and reasonableness of scope of the testimony or other

evidence sought, the administrative law judge may issue a subpoena or a

subpoena duces tecum requiring the attendance of a witness at the

hearing or the production of documentary or physical evidence at the

hearing. The application for a hearing subpoena must also contain a

proposed subpoena specifying the attendance of a witness or the

production of evidence from any state, territory, or possession of the

United States, the District of Columbia, or as otherwise provided by

law at any designated place where the hearing is being conducted. The

party making the application shall serve a copy of the application and

the proposed subpoena on every other party.

(2) A party may apply for a hearing subpoena at any time before the

commencement of a hearing. During a hearing, a party may make an

application for a subpoena orally on the record before the

administrative law judge.

(3) The administrative law judge shall promptly issue any hearing

subpoena requested pursuant to this section. If the administrative law

judge determines that the application does not set forth a valid basis

for the issuance of the subpoena, or that any of its terms are

unreasonable, oppressive, excessive in scope, or unduly burdensome, he

or she may refuse to issue the subpoena or may

[[Page 20356]]

issue it in a modified form upon any conditions consistent with this

subpart. Upon issuance by the administrative law judge, the party

making the application shall serve the subpoena on the person named in

the subpoena and on each party.

(b) Motion to quash or modify. (1) Any person to whom a hearing

subpoena is directed or any party may file a motion to quash or modify

the subpoena, accompanied by a statement of the basis for quashing or

modifying the subpoena. The movant must serve the motion on each party

and on the person named in the subpoena. Any party may respond to the

motion within ten days of service of the motion.

* * * * *

12. Section 509.35 is amended by redesignating paragraph (a)(3) as

paragraph (a)(4), by adding a new paragraph (a)(3), and by revising

paragraph (b) to read as follows:

Sec. 509.35 Conduct of hearings.

(a) * * *

(3) Examination of witnesses. Only one counsel for each party may

conduct an examination of a witness, except that in the case of

extensive direct examination, the administrative law judge may permit

more than one counsel for the party presenting the witness to conduct

the examination. A party may have one counsel conduct the direct

examination and another counsel conduct re-direct examination of a

witness, or may have one counsel conduct the cross examination of a

witness and another counsel conduct the re-cross examination of a

witness.

* * * * *

(b) Transcript. The hearing must be recorded and transcribed. The

reporter will make the transcript available to any party upon payment

by that party to the reporter of the cost of the transcript. The

administrative law judge may order the record corrected, either upon

motion to correct, upon stipulation of the parties, or following notice

to the parties upon the administrative law judge's own motion.

13. Section 509.37 is amended by revising the section heading and

paragraph (a)(1) to read as follows:

Sec. 509.37 Post-hearing filings.

(a) Proposed findings and conclusions and supporting briefs. (1)

Using the same method of service for each party, the administrative law

judge shall serve notice upon each party, that the certified

transcript, together with all hearing exhibits and exhibits introduced

but not admitted into evidence at the hearing, has been filed. Any

party may file with the administrative law judge proposed findings of

fact, proposed conclusions of law, and a proposed order within 30 days

following service of this notice by the administrative law judge or

within such longer period as may be ordered by the administrative law

judge.

* * * * *

14. Section 509.38 is revised to read as follows:

Sec. 509.38 Recommended decision and filing of record.

(a) Filing of recommended decision and record. Within 45 days after

expiration of the time allowed for filing reply briefs under

Sec. 509.37(b) of this subpart, the administrative law judge shall file

with and certify to the Director, for decision, the record of the

proceeding. The record must include the administrative law judge's

recommended decision, recommended findings of fact, recommended

conclusions of law, and proposed order; all prehearing and hearing

transcripts, exhibits, and rulings; and the motions, briefs, memoranda,

and other supporting papers filed in connection with the hearing. The

administrative law judge shall serve upon each party the recommended

decision, findings, conclusions, and proposed order.

(b) Filing of index. At the same time the administrative law judge

files with and certifies to the Director for final determination the

record of the proceeding, the administrative law judge shall furnish to

the Director a certified index of the entire record of the proceeding.

The certified index shall include, at a minimum, an entry for each

paper, document or motion filed with the administrative law judge in

the proceeding, the date of the filing, and the identity of the filer.

The certified index shall also include an exhibit index containing, at

a minimum, an entry consisting of exhibit number and title or

description for: Each exhibit introduced and admitted into evidence at

the hearing; each exhibit introduced but not admitted into evidence at

the hearing; each exhibit introduced and admitted into evidence after

the completion of the hearing; and each exhibit introduced but not

admitted into evidence after the completion of the hearing.

Subpart B--Local Rules

15. Section 509.102 is amended by revising paragraph (g)(2) to read

as follows:

Sec. 509.102 Discovery.

* * * * *

(g) * * *

(2) Service. The party requesting the subpoena must serve it on the

person named therein or upon that person's counsel, by any of the

methods identified in Sec. 509.11(d) of this part. The party serving

the subpoena must file proof of service with the administrative law

judge.

* * * * *

Sec. 509.104 [Amended]

16. Section 509.104 is amended by removing paragraph (h) and by

redesignating paragraph (i) as paragraph (h).

By the Office of Thrift Supervision.

Dated: April 4, 1996.

Jonathan L. Fiechter,

Acting Director.

[FR Doc. 96-10342 Filed 5-3-96; 8:45 am]

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