Uniform Rules of Practice and Procedure

[[Page 28021]]

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 747

Uniform Rules of Practice and Procedure

AGENCY: National Credit Union Administration.

ACTION: Final rule.

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SUMMARY: The National Credit Union Administration (NCUA) is amending

its regulatory provisions implementing the Uniform Rules of Practice

and Procedure (Uniform Rules). 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: Steven W. Widerman, Trial Attorney,

Office of General Counsel, 703/518-6557, National Credit Union

Administration, 1775 Duke Street, Alexandria, VA 22314.

SUPPLEMENTARY INFORMATION:

I. 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 NCUA, the Office of the Comptroller of the Currency (OCC),

the Office of Thrift Supervision (OTS), the Federal Deposit Insurance

Corporation (FDIC), and the Board of Governors of the Federal Reserve

System (Board) (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).\2\

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

June 17, 1991 (56 FR 27790). The agencies issued their final rules

on the following dates: NCUA on August 8, 1991 (56 FR 37767); OCC on

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

FDIC on August 9, 1991 (56 FR 37975); and OTS on August 12, 1991 (56

FR 38317).

\2\ On December 30, 1994, NCUA proposed an amendment to the

provision of the Uniforms Rules which restricts ex parte

communications, Sec. 747.9 (59 FR 67655). The other agencies each

issued a similar notice of proposed rulemaking in November and

December 1994. The amendment makes clear that the scope of

Sec. 747.9 conforms to that of the Administrative Procedure Act.

NCUA received two comments on this proposal, both of which are

addressed below. This final rule implements the amendment to

Sec. 747.9.

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The NCUA received four comments on the proposal. All commenters

generally supported the proposal, but each suggested improvements or

further revisions.

The final rule implements the proposal with certain changes,

including revisions responsive to some of the concerns expressed by the

commenters. The following section-by-section analysis summarizes the

final rule and highlights the changes from the proposal that the NCUA

made in response to the commenters' suggestions.

The OCC, OTS, FDIC and Board have published separate final rules,

effective June 5, 1996, that are substantively identical to the NCUA's

final rule (61 FR 20330 et seq.), except as noted below in regard to

Secs. 747.1 and 747.9.

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

Uniform Rules

Section 747.1 Scope

The proposal added a statutory provision to the list of civil money

penalty provisions to which the Uniform Rules apply. The added

provision was enacted by section 125 of the Riegle Community

Development and Regulatory Improvement Act of 1994 (CDRI), Pub. L. 103-

325, 108 Stat. 2160, which amended section 102 the Flood Disaster

Protection Act of 1973 (FDPA) (42 U.S.C. 4012a). Section 102 now gives

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 under

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 section 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 NFIA; and (2) has not 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.\3\

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\3\ Another provision of the 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

definition of Federal banking agencies includes the other agencies,

but does not include NCUA. Therefore, while each of the other

agencies has inserted this provision in its final rule, NCUA has

not.

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

proposed.

Section 747.6 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.

The NCUA received one comment on this section. The commenter

suggested that the proposal did not adequately address certain

situations: for example, when counsel withdraws because of a lack of

payment of legal fees that is caused by an agency asset freeze, 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 that 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 proceedings 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, and the NCUA 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. This section is otherwise

adopted as proposed.

Section 747.8 Conflicts of Interest

The proposal sought to improve in two ways the provisions governing

the conflicts of interest that may arise when

[[Page 28022]]

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 each

non-party 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 NCUA Board believes that the

former provision was superfluous because the responsibility for

identifying potential conflicts resides with counsel.

The NCUA received one comment on this section. The 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 NCUA'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 NCUA is unpersuaded by the argument that the

conflicts provision grants the agencies significant advantage in a

proceeding. Persons and entities may be well and vigorously represented

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

Therefore, the NCUA adopts this section as proposed.

Section 747.9 Ex parte Communications

The proposal sought to clarify that the restriction on ex parte

communications parallels the requirements of the Administrative

Procedure Act (APA). The current Sec. 747.9(b) prohibits ex parte

communications between a party, the party's counsel, or another

interested person, and the NCUA Board or other decisional employee

regarding the merits of an adjudicatory proceeding.

The agencies' intention when adopting the Uniform Rules in 1991 was

that Sec. 747.9 conform to, but not exceed, the scope of the APA

provisions restricting ex parte communications. The APA prohibits ex

parte communications between agency decisionmakers and ``interested

persons outside the agency'' regarding the merits of an adjudicatory

proceeding. 5 U.S.C. Sec. 557(d). It also prohibits enforcement staff

within the agency from participating or advising in the decision,

recommended decision, or agency review of an adjudicatory matter except

as witness or counsel. 5 U.S.C. Sec. 554(d). The APA does not prohibit

agency enforcement staff from seeking approval to amend a notice of, or

to settle or terminate, a proceeding.

The current Sec. 747.9(b) could in practice be misinterpreted to

expand the prohibition on ex parte communications beyond the scope of

the APA to prohibit communications between enforcement staff and the

NCUA Board regarding approval to amend or to terminate existing

enforcement actions. To insure against such an unintended result, the

proposed amendment clarifies that the section is intended to conform to

the provisions of the APA by limiting the prohibition on ex parte

communications to communications to or from ``interested persons

outside the agency,'' 5 U.S.C. 557(d), and by incorporating explicitly

the APA's separation of functions provisions, 5 U.S.C. 554(d). This

approach is consistent with the most recent Model Adjudication Rules

prepared by the Administrative Conference of the United States (ACUS).

ACUS, Model Adjudication Rules (December 1993).

The NCUA received two comments on this section. One commenter

supported the proposal provided that it is limited to intra-agency

communications concerning amending a notice of charges or settling or

terminating a proceeding. The other commenter claimed that ``NCUA has

not stated any compelling need for [the amendment], and we view the

proposed rule as inconsistent with the fundamental principles of

fairness built into our legal system.'' This commenter fails to

recognize that the proposed amendment allows ex parte communications

with the NCUA Board only on nonadjudicatory matters, such as when NCUA

enforcement staff seeks NCUA Board approval to amend a notice of

charges or to settle or terminate an existing enforcement proceeding.

Other parties to the proceeding are not entitled to participate in such

a decision.

Accordingly, the NCUA adopts this section as proposed. -

Section 747.11 Service of Papers

The proposal changed this section by permitting parties, the NCUA

Board, 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.

The NCUA received one comment on this section. The commenter

supported the intent of the proposal, but asserted that the provision

permitting service at a person's place of work was too broad to be

effective, particularly where a financial institution has numerous

branches.

The NCUA 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 NCUA 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 comment points out, however, that the former Uniform Rules

did not expressly 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. Even though a credit union technically may not satisfy the

definition of a corporation or other association, it is to be treated

as such for purposes of service under this rule.

The final rule also provides that, if the agent is one authorized

by a 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 747.12 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. 747.12(c) is not included in determining

whether an act is required to be performed within ten

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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 NCUA received one comment on this section, asserting that

Saturdays, Sundays and holidays should be excluded when calculating a

time deadline because small credit unions and U.S. Post Offices

frequently are not open on those days. This comment addresses time

deadlines generally, whereas the proposed amendment counts Saturdays,

Sundays and holidays only when calculating extra time added under

Sec. 747.12(c) for responding to papers served by mail, delivery, or

electronic media transmission. The proposed amendment does not affect

the current rule excluding those days from deadlines of ten days or

less, and including them in deadlines of more than ten days. NCUA

adopts the section as proposed.

Section 747.20 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.

The NCUA received one comment on this section. The 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 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 NCUA believes this approach is adequate to

avoid prejudice to a party and, therefore, the NCUA adopts this section

as proposed.

Section 747.24 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. NCUA received two comments on this subsection. One urged

that interrogatories not be expressly prohibited so that they would be

available for use on a limited basis. The other urged that

interrogatories be expressly permitted without limitation. Both

comments are effectively moot in failing to recognize that NCUA's

current Local Rule of Practice and Procedure, with a single narrow

exception, already expressly prohibits all forms of discovery other

than production of documents. 12 CFR 747.100.

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. 747.25.

Under the proposal, the scope of permissible document discovery is

not as broad as that allowed under Rule 26(b) of the Federal Rules of

Civil Procedure (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 NCUA received one comment on this subsection, urging that the

Federal Rule 26(b) standard in the current subsection be retained. The

agencies' experience with document discovery in their administrative

proceedings has been that substantial time and resources are squandered

on extraneous document discovery. A standard somewhat more restrictive

than that of Federal Rule 26(b) is needed to reasonably confine

document discovery. Accordingly, the NCUA adopts this subsection as

proposed.

Section 747.25 Request for Document Discovery From Parties

The NCUA proposed several changes to Sec. 747.25. 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. 747.25 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 NCUA received two comments on this section. One comment

suggested that a request for interlocutory review should automatically

stay the proceeding. Under Sec. 747.28(d) of the Uniform Rules, a party

may request that a proceeding be stayed during the pendency of an

interlocutory review, and the ALJ has the discretion to decide whether

a stay is appropriate. The NCUA believes that this procedure adequately

protects the parties. For this reason and to avoid adding unnecessary

delays in the administrative proceedings, the NCUA declines to provide

for an automatic stay whenever a party requests interlocutory review.

The second comment asserted that permitting the NCUA to require

payment in advance for document copying and shipping costs would give

the NCUA an advantage over other creditors if the party is bankrupt

following the administrative hearing. The commenter does not assert

that it is a violation of the bankruptcy laws for the NCUA or any other

creditor to require prepayment for products or services. Moreover, the

NCUA believes that the situations causing the commenter's concern would

be very rare. Accordingly, the NCUA adopts this section as proposed.

Section 747.27 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's authorized representative. The final rule does not include

this proposed change because, in Sec. 747.11(d), the final rule

expressly permits a party to serve a subpoena by delivering the

subpoena to an agent, which includes delivery to an authorized

representative. The proposed change to Sec. 747.27 would be redundant.

The NCUA received no comments on

[[Page 28024]]

this section. The final rule does not, therefore, change this

provision.

Section 747.33 Public Hearings

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

a motion for a private hearing with the NCUA Board, and not the ALJ,

but must serve the ALJ with a copy of the motion.

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

proposed.

Section 747.34 Hearing Subpoenas

The former Uniform Rules did not specifically require that a party

inform all other parties when a subpoena is issued to a non-party. 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 NCUA received no comments on this section, which is adopted as

proposed.

Section 747.35 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 NCUA received no comments on this section, which is adopted as

proposed.

Section 747.37 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. 747.35(b) to Sec. 747.37(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 for each recipient.

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.

The NCUA received no comments on this section, which is adopted

with a minor technical change.

Section 747.38 Recommended Decision and Filing of Record

Under the former Uniform Rules, the ALJ was not required to file an

index of the record when he filed the record with the NCUA Board. The

proposal added this requirement and reorganized this section to improve

its clarity.

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

proposed.

Technical Changes

The final rule makes several technical changes to the proposal that

make the final rule specific to the NCUA. These changes appear

throughout the rule text. For example, bracketed references to the

``agency head'' have been replaced with ``the NCUA Board'' and the

blank part designation before each section number has been filled in

with ``747.''

III. Rationale for Expedited Effective Date

The effective date of NCUA's final rule, June 5, 1996, is less than

the thirty days from publication. The APA requires thirty days' notice

of effectiveness, but permits that requirement to be waived upon a

showing of good cause. 5 U.S.C. 553(d)(3). Good cause exists in this

case for making NCUA's final rule effective June 5. The Uniform Rules

were originally developed and recently revised jointly with the other

agencies. The purpose of the June 5 effective date for NCUA's final

rule adopting the revisions is to conform to the effective date of the

other agencies' final rules. No party to an NCUA administrative

proceeding governed by the Uniform Rules will be prejudiced by the June

5 effective date because the revisions adopted in the final rule apply

only to formal administrative proceedings commenced (through filing of

a notice of charges) after the effective date (see 58 FR 37766). Formal

administrative proceedings pending on or before the effective date will

not be affected by the revisions.

IV. Regulatory Flexibility Act

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

NCUA 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 imposes only 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.

V. Executive Order 12612

This final rule, like the current part 747 it is replacing, will

apply to all Federally insured credit unions. The NCUA Board, pursuant

to Executive Order 12612, has determined, however, that this joint

proposed rule will not have a substantial direct effect on the states,

on the relationship between the national government and the states, or

on the distribution of power and responsibilities among various levels

of government. Further, this joint proposed rule will not preempt

provisions of state law or regulations.

VI. Effective Date

Section 302 of the Riegle Community Development and Regulatory

Improvement Act 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 date of

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

NCUA 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.

Text of the Final Rule

The text of the amendments to 12 CFR part 747 follows:

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 747

List of Subjects in 12 CFR Part 747

Administrative Practice and Procedure, Bank Deposit Insurance,

Claims, Credit Unions, Crime, Equal Access to Justice, Hearing

Procedures, Investigations, Lawyers, Penalties.

Authority and Issuance

For the reasons set out in the preamble, part 747 of chapter VII of

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

below:

PART 747--ADMINISTRATIVE ACTIONS, ADJUDICATIVE HEARINGS, RULES OF

PRACTICE AND PROCEDURE, AND INVESTIGATIONS

1. The authority citation for part 747 is revised to read as

follows:

Authority: 12 U.S.C. 1766, 1786, 1784 and 1787; and 42 U.S.C.

4012a.

[[Page 28025]]

Subpart A--[Amended]

2. In Sec. 747.1, paragraph (c)(2) is amended by removing ``and''

after the semicolon, paragraph (c)(3) is revised, paragraph (c)(4) is

added, paragraph (d) is redesignated as paragraph (e) and revised, and

new paragraph (d) is added to read as follows:

Sec. 747.1 Scope.

* * * * *

(c) * * *

(3) The terms of any final or temporary order issued under section

206 of the Act or any written agreement executed by the National Credit

Union Administration (``NCUA''), any condition imposed in writing by

the NCUA in connection with the grant of an application or request,

certain unsafe or unsound practices or breaches of fiduciary duty, or

any law or regulation not otherwise provided herein, pursuant to 12

U.S.C. 1786(k); and

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

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

regulation issued thereunder;

(d) Remedial action under section 102(g) of the Flood Disaster

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

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

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

agency hearing, unless otherwise specifically provided for in Subparts

B through J of this Part.

3. In Sec. 747.6, paragraph (a)(3) is revised to read as follows:

Sec. 747.6 Appearance and practice in adjudicatory proceedings.

(a) * * *

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

behalf of a party, including the NCUA Board, shall file a notice of

appearance with OFIA at or before the time that the 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. In Sec. 747.8, paragraph (b) is revised to read as follows:

Sec. 747.8 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. 747.6(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. In Sec. 747.9, paragraphs (a) and (b) are revised and a new

paragraph (e) is added to read as follows:

Sec. 747.9 Ex parte communications.

(a) Definition. (1) Ex parte communication means any material oral

or written communication relevant to the merits of an adjudicatory

proceeding that was neither on the record nor on reasonable prior

notice to all parties that takes place between--

(i) An interested person outside the NCUA (including such person's

counsel); and

(ii) The administrative law judge handling that proceeding, the

NCUA Board, or a decisional employee.

(2) Exception. A request for status of the proceeding does not

constitute an ex parte communication.

(b) Prohibition of ex parte communications. From the time the

notice is issued by the NCUA Board until the date that the NCUA Board

issues its final decision pursuant to Sec. 747.40(c):

(1) No interested person outside the NCUA shall make or knowingly

cause to be made an ex parte communication to any member of the NCUA

Board, the administrative law judge, or a decisional employee; and

(2) No member of the NCUA Board, administrative law judge, or

decisional employee shall make or knowingly cause to be made to any

interested person outside the NCUA any ex parte communication.

* * * * *

(e) Separation of functions. Except to the extent required for the

disposition of ex parte matters as authorized by law, the

administrative law judge may not consult a person or party on any

matter relevant to the merits of the adjudication, unless on notice and

opportunity for all parties to participate. An employee or agent

engaged in the performance of investigative or prosecuting functions

for the NCUA in a case may not, in that or a factually related case,

participate or advise in the decision, recommended decision, or agency

review of the recommended decision under section 747.40, except as

witness or counsel in public proceedings.

6. In Sec. 747.11, paragraphs (c)(2) and (d) are revised to read as

follows:

Sec. 747.11 Service of papers.

* * * * *

(c) * * *

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

with Sec. 747.6, the NCUA Board 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

[[Page 28026]]

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

notice.

* * * * *

7. In Sec. 747.12, paragraphs (a), (c)(1), (c)(2), and (c)(3) are

revised to read as follows:

Sec. 747.12 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 Sec. 747.12(c),

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 NCUA Board or the administrative law judge in the case of filing,

or by agreement among the parties in the case of service.

8. Section 747.20 is revised to read as follows:

Sec. 747.20 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 NCUA Board 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.

9. In Sec. 747.24, paragraphs (a) and (b) are revised to read as

follows:

Sec. 747.24 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 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 subpart I 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 requester's written agreement

to pay in advance for the copying, in accordance with Sec. 747.25.

* * * * *

10. In Sec. 747.25, paragraphs (a), (b), (e), and (g) are revised

to read as follows:

Sec. 747.25 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 by 12 CFR part 4 implementing 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

[[Page 28027]]

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.

* * * * *

11. In Sec. 747.33, paragraph (a) is revised to read as follows:

Sec. 747.33 Public hearings.

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

the NCUA Board, in its discretion, determines that holding an open

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

service of the notice, any respondent may file with the NCUA Board 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 NCUA Board. The form of,

and procedure for, these requests and replies are governed by

Sec. 747.23. 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.

* * * * *

12. In Sec. 747.34, paragraphs (a) and (b)(1) are revised to read

as follows:

Sec. 747.34 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 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.

* * * * *

13. In Sec. 747.35, paragraph (a)(3) is redesignated as paragraph

(a)(4), a new paragraph (a)(3) is added, and paragraph (b) is revised

to read as follows:

Sec. 747.35 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.

14. In Sec. 747.37, the section heading and paragraph (a)(1) are

revised to read as follows:

Sec. 747.37 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.

* * * * *

15. Section 747.38 is revised to read as follows:

Sec. 747.38 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. 747.37(b), the administrative law judge shall file with and

certify to the NCUA Board, 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 NCUA Board for final determination the

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

the NCUA Board 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

[[Page 28028]]

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.

Dated: May 28, 1996.

Becky Baker,

Secretary of the Board, National Credit Union Administration.

[FR Doc. 96-13814 Filed 6-3-96; 8:45 am]

BILLING CODE 7535-01-P