Case: 19-31023 Document: 00515614992 Page: 1 Date Filed: 10/26/2020
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
October 26, 2020
No. 19-31023 Lyle W. Cayce
Clerk
Federal Deposit Insurance Corporation, as Receiver
for First NBC Bank,
Plaintiff—Appellee,
versus
Daniel Belcher,
Defendant—Appellant.
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:19-CV-12561
Before Stewart, Clement, and Costa, Circuit Judges.
Carl E. Stewart, Circuit Judge:
The Federal Deposit Insurance Corporation (“FDIC”) filed an action
in the district court seeking to enforce an administrative subpoena that
ordered Daniel Belcher to submit to a deposition. The court granted the
FDIC’s motion to enforce the subpoena. Belcher then filed this appeal
seeking to vacate the district court’s judgment. In the interim, the district
court denied Belcher’s request for a stay pending the outcome of this appeal.
Belcher sat for the deposition. Nevertheless, we now vacate the district
Case: 19-31023 Document: 00515614992 Page: 2 Date Filed: 10/26/2020
No. 19-31023
court’s judgment enforcing the FDIC’s subpoena and remand the case for
proceedings consistent with this opinion.
I.
This lawsuit is one of many related to the collapse of First NBC Bank
of New Orleans (“the Bank”). In 2013, Ernst & Young (“EY”) was hired to
audit the financial statements of First NBC Bank Holding Company (“the
Holding Company”). The Holding Company’s only asset was the Bank.
When the Bank began to struggle financially, the Public Company
Accounting Oversight Board (“PCAOB”) initiated an investigation into
EY’s audits of the Holding Company.
The subject of the PCAOB’s investigation was EY. As part of its
investigation, the PCAOB requested numerous documents from EY, which
turned them over under the impression that they were confidential and
privileged under federal law. See 15 U.S.C. § 7215(b)(5)(A). The PCAOB also
deposed several of EY’s auditors as part of its investigation. Those
depositions resulted in hundreds of pages of transcripts. EY also believed
those transcripts were confidential and privileged. Among the EY auditors
deposed by the PCAOB was Daniel Belcher.
When the Bank failed, the Louisiana Office of Financial Institutions
appointed the FDIC to serve as the Bank’s receiver. In this capacity, the
FDIC began its own investigation into EY’s audits of the Holding Company.
The FDIC ultimately sought to hold EY liable for significant monetary losses
resulting from the Bank’s failure. In search of evidence to use against EY, the
FDIC asked the PCAOB for documents it had because of its investigation
into EY. Among the documents sought by the FDIC were four days’ worth
of transcripts from Belcher’s deposition before the PCAOB. The PCAOB
gave the transcripts—and many other documents—to the FDIC.
2
Case: 19-31023 Document: 00515614992 Page: 3 Date Filed: 10/26/2020
No. 19-31023
After reviewing Belcher’s deposition testimony to the PCAOB, the
FDIC decided it also wanted to depose him. It served him with a pre-suit
administrative subpoena ordering him to submit to a deposition. On the
advice of EY’s lawyers, Belcher refused to comply with the subpoena. It was
their view that the FDIC’s lawyers committed a legal violation and an ethical
breach when they sought and obtained documents from the PCAOB that EY
believed were confidential and privileged under federal law.
The FDIC responded by filing a complaint against Belcher in the
district court seeking to enforce its administrative subpoena pursuant to 12
U.S.C. § 1818(n). The next day, the FDIC moved to enforce the subpoena.
Belcher responded with a motion seeking to quash the subpoena and
disqualify the FDIC’s counsel because of the alleged ethical violations. EY,
meanwhile, moved to intervene.
The district court granted the FDIC’s motion and denied Belcher’s
and EY’s. The court’s decisions turned on its holding that Belcher’s rights
under federal law were not violated when the PCAOB shared transcripts of
his deposition testimony with the FDIC. The court reasoned that even
though the material was confidential and privileged under 15
U.S.C. § 7215(b)(5)(A), the FDIC, in its capacity as the Bank’s receiver, was
entitled to receive the documents as “the appropriate Federal functional
regulator” of the Bank under
15 U.S.C. § 7215(b)(5)(B)(ii)(II).
Almost immediately, Belcher filed a notice of appeal. He also moved
to stay the district court’s order pending the outcome of the appeal. The
district court denied his request for a stay. Belcher sat for the deposition on
January 28, 2020. 1
1
The parties agree that Belcher’s compliance with the district court’s order did
not moot this appeal. But mootness is a jurisdictional question, and federal jurisdiction
3
Case: 19-31023 Document: 00515614992 Page: 4 Date Filed: 10/26/2020
No. 19-31023
II.
We generally review the enforcement of an administrative subpoena
for abuse of discretion. See Consumer Fin. Prot. Bureau v. Source for Pub. Data,
L.P., 903 F.3d 456, 458 (5th Cir. 2018). Conclusions of law that underly the
enforcement of such a subpoena, however, are reviewed de novo.
Id.
III.
The issue of first impression squarely before us is whether the district
court erred by holding that the FDIC, in its capacity as the Bank’s receiver,
was “the appropriate Federal functional regulator” in this case, entitling it
to receive otherwise confidential and privileged documents from the
PCAOB. 2
15 U.S.C. § 7215(b)(5)(A) provides, in relevant part:
[A]ll documents and information prepared or
received by or specifically for the [PCAOB] . . .
in connection with . . . an investigation under this
cannot be conferred by an agreement between the parties. See Giannakos v. M/V Bravo
Trader, 762 F.2d 1295, 1298 (5th Cir. 1985). Nevertheless, we agree with the parties.
Because the district court on remand can “fashion some form of meaningful relief,” this
appeal is not moot. Church of Scientology of Cal. v. United States,
506 U.S. 9, 12 (1992).
Exactly what that relief might entail is beyond the scope of our concern. However, it is
undisputed by the parties that the district court could strike Belcher’s deposition testimony
before the FDIC.
2
The FDIC suggests this issue is not squarely before us. Instead, it posits that we
need not reach this statutory interpretation issue because we can affirm on the ground that
it is “undisputed” that the FDIC had the authority to seek the subpoena, its demand in the
subpoena was not too indefinite, and the information sought by it was reasonably relevant
to its ongoing investigation into the Bank. See United States v. Morton Salt Co., 338 U.S.
632, 652 (1950). As Belcher points out, the district court’s order enforcing the subpoena
and denying Belcher’s and EY’s motions as moot turned entirely on its interpretation of
15
U.S.C. §§ 7215 and 6809. Because the district court’s judgment was dependent on this
holding, Belcher’s request that we interpret the statutes de novo is properly within our
scope of review.
4
Case: 19-31023 Document: 00515614992 Page: 5 Date Filed: 10/26/2020
No. 19-31023
section, shall be confidential and privileged as an
evidentiary matter (and shall not be subject to
civil discovery or other legal process) in any
proceeding in any Federal or State court . . . .
The parties agree that the transcripts of Belcher’s deposition testimony to
the PCAOB fell within the purview of this statute because they were
documents prepared by the PCAOB in connection with an investigation
under 15 U.S.C. § 7215. What they disagree about is whether the FDIC, in its
capacity as receiver for the Bank, fits within an exception to this rule.
The applicable exception is provided by 15
U.S.C. § 7215(b)(5)(B)(ii)(II), which provides, in relevant part:
Without the loss of its status as confidential and
privileged in the hands of the [PCAOB], all
information referred to in subparagraph (A)
may—
...
(ii) in the discretion of the [PCAOB],
when determined by the [PCAOB] to be
necessary to accomplish the purposes of
this Act or to protect investors, be made
available to—
...
(II) the appropriate Federal
functional regulator (as defined in
section 6809 of this title), other
than the [Securities and Exchange]
Commission, and the Director of
the Federal Housing Finance
Agency, with respect to an audit
report for an institution subject to
the jurisdiction of such regulator[.]
5
Case: 19-31023 Document: 00515614992 Page: 6 Date Filed: 10/26/2020
No. 19-31023
The key language for our purposes appears in subsection (II): “the
appropriate Federal functional regulator . . . .” The FDIC argues that it is the
appropriate Federal functional regulator in this case. Belcher argues that it’s
not.
Because subsection (II) expressly incorporates the definition of a
Federal functional regulator from 15 U.S.C. § 6809, we turn now to
subsection (2) of that statute, which provides:
The term “Federal functional regulator”
means—
(A) the Board of Governors of the Federal
Reserve System;
(B) the Office of the Comptroller of the
Currency;
(C) the Board of Directors of the Federal Deposit
Insurance Corporation;
(D) the Director of the Office of Thrift
Supervision;
(E) the National Credit Union Administration
Board; and
(F) the Securities and Exchange Commission.
There is no denying that “the Board of Directors of the [FDIC]” is a Federal
functional regulator under 15 U.S.C. § 6809(2). The question for us is
whether the FDIC, acting in its capacity as the Bank’s receiver, as opposed
to its corporate or governing capacity, is the appropriate one in this case. See
15 U.S.C. § 7215(b)(5)(B)(ii)(II).
“Rules of grammar govern statutory interpretation unless they
contradict legislative intent or purpose.” Nielsen v. Preap, 139 S. Ct. 954, 965
(2019) (cleaned up). When Congress modified “Federal functional
regulator” with the definite article “the” and the adjective “appropriate,” it
6
Case: 19-31023 Document: 00515614992 Page: 7 Date Filed: 10/26/2020
No. 19-31023
made clear that there can only be one appropriate Federal functional regulator
“with respect to an audit report for an institution subject to the jurisdiction
of such regulator.” 15 U.S.C. § 7215(b)(5)(B)(ii)(II); see Rumsfeld v. Padilla,
542 U.S. 426, 434 (2004) (explaining that the appearance of the definite
article “the” before the word “person” in a statute indicated that there was
only one “person” who could fit the definition within the statute). The
FDIC, however, asks us to interpret this language in a way that would
establish two appropriate Federal functional regulators in this case: the FDIC,
as the appropriate Federal functional regulator of the Bank, and the Federal
Reserve, as the appropriate Federal functional regulator of the Holding
Company. 3 Such a conclusion would contravene the language of the statute.
The FDIC’s response is that because EY’s audit reports were “for”
the Holding Company and the Bank, 4 the statute permits multiple
appropriate Federal functional regulators in this case. Assuming that an audit
report can be “for” multiple entities, the FDIC is not the “appropriate”
Federal functional regulator here. That’s because the FDIC was acting in its
capacity as the Bank’s receiver when it acquired the confidential documents
from the PCAOB, not as the Bank’s regulator. See Fed. Deposit Ins. Corp. v.
Ernst & Young LLP, 374 F.3d 579, 581 (7th Cir. 2004) (explaining that “it is
helpful” to treat the FDIC as three different entities depending on whether
it acts in its corporate, receiver, or regulatory capacity).
The FDIC points us to subsections of 12 U.S.C. § 1821 as evidence of
Congress’s ability to distinguish between the FDIC in its various capacities
to show that its intent was not to do so here by referring only to “the Board
3
It is undisputed that the Holding Company is regulated by the Federal Reserve.
4
Although the Holding Company is the entity that engaged EY to complete the
audit reports, they were completed on a consolidated basis, and the Bank later submitted
the same reports to the FDIC to comply with various reporting requirements.
7
Case: 19-31023 Document: 00515614992 Page: 8 Date Filed: 10/26/2020
No. 19-31023
of Directors of the Federal Deposit Insurance Corporation” in 15
U.S.C. § 6809(2)(C). See, e.g.,
12 U.S.C. §§ 1821(d)(2)(K) (“In carrying out
its responsibilities in the management and disposition of assets from insured
depository institutions, as conservator, receiver, or in its corporate capacity,
the [FDIC] . . . .”); § 1821(d)(10)(B) (“The receiver may, in the receiver’s
sole discretion, pay dividends on proved claims at any time, and no liability
shall attach to the Corporation (in such Corporation’s corporate capacity or
as receiver) . . . .”). We recognize that Congress’s decision to specifically
address the FDIC’s different capacities in one statute can be evidence of its
intent not to differentiate among the capacities in another. See Marx v. Gen.
Revenue Corp.,
568 U.S. 371, 384 (2013) (relying on Congress’s use of certain
language in one statute to infer meaning of related language in another
statute).
Here, however, context is important. FCC v. AT & T Inc., 562 U.S.
397, 404 (2011) (“The construction of statutory language often turns on
context . . . .”).
15 U.S.C. § 6809(2) is a list comprised of regulatory bodies.
The Supreme Court has relied “on the principle of noscitur a sociis—a word
is known by the company it keeps—to ‘avoid ascribing to one word a meaning
so broad that it is inconsistent with its accompanying words, thus giving
unintended breadth to the Acts of Congress.’” Yates v. United States,
574
U.S. 528, 543 (2015) (quoting Gustafson v. Alloyd Co.,
513 U.S. 561, 575
(1995)). Applying that principle here buttresses our conclusion that the FDIC
is not “the appropriate” Federal functional regulator in this case.
“The appropriate Federal functional regulator” here is the Federal
Reserve, not the FDIC. Accordingly, it was improper for the PCAOB to
disclose to the FDIC, acting in its capacity as receiver for the Bank,
transcripts of Belcher’s deposition testimony before the PCAOB. See 15
U.S.C. § 7215(b)(5)(A).
8
Case: 19-31023 Document: 00515614992 Page: 9 Date Filed: 10/26/2020
No. 19-31023
IV.
We hold that the FDIC was not “the appropriate Federal functional
regulator” in this case. Accordingly, the PCAOB lacked the authority under
15 U.S.C. § 7215(b)(5)(B) to share transcripts of Belcher’s deposition
testimony before it with the FDIC. Because the district court’s judgment
rested on a contrary interpretation of the applicable statutory language, we
VACATE the judgment enforcing the FDIC’s administrative subpoena and
REMAND this case for proceedings consistent with this opinion. 5
5
At oral argument, it was brought to our attention that the FDIC, acting in its
capacity as the Bank’s receiver, recently filed an action against EY in the Eastern District
of Louisiana seeking to recover monetary damages based on EY’s alleged negligence in
auditing the Bank. We leave it to the district court on remand to determine whether there
are common issues between that case and this one that may warrant consolidation.
9
Case: 19-31023 Document: 00515614992 Page: 10 Date Filed: 10/26/2020
No. 19-31023
Gregg Costa, Circuit Judge, dissenting:
This is a strange appeal. The documents that are the subject of this
appeal were not turned over in this proceeding. The FDIC filed this case just
to enforce an administrative subpoena to depose Daniel Belcher. See 12
U.S.C. § 1818(n). After the district court enforced the subpoena, and we
refused to stay that decision, the deposition went forward. Because of the
controversy about the PCAOB’s earlier production of documents, the FDIC
did not ask about the documents during the deposition. With the deposition
complete and this case not being the source of the disputed production, it
seems odd that this appeal would be the vehicle for deciding if the PCAOB’s
action was lawful. The PCAOB is not even a party to this case.
In other words, the appeal seems moot. This case was a limited action
to enforce a deposition subpoena. That deposition has taken place. What
more can be done?
Belcher answers—and the FDIC agrees, though its concession does
not bind us because mootness is jurisdictional—that there is the possibility
of some remedy on remand if we conclude that the PCAOB should not have
turned over the documents. That would be true if this district court had
ordered production of the PCAOB documents. Even after a party produces
documents in response to a district court order, the appeal remains live
because a reversal can result in an order to return those documents. See, e.g.,
Church of Scientology of Cal. v. United States, 506 U.S. 9, 13–17 (1992) (holding
that appeal of district court order to turn over tape recordings to IRS was not
moot because a reversal could result in an order that “the Government []
return the records”); United States v. Chevron U.S.A., Inc.,
186 F.3d 644 (5th
Cir. 1999) (finding case remained “live” even though documents had been
produced because the government “would be required to return the
documents” the district court had ordered produced). But because the
10
Case: 19-31023 Document: 00515614992 Page: 11 Date Filed: 10/26/2020
No. 19-31023
district court did not order the PCAOB to produce the Belcher documents,
cases like Church of Scientology do not apply.
The same problem infects Belcher’s argument that there are
additional remedies, such as disqualification of the FDIC’s counsel, that the
district court could impose on remand following an appellate ruling that the
PCAOB should not have handed over the documents. Again, that might be
true if the documents had been wrongfully produced in this case. But they
were produced by the PCAOB before this limited proceeding to compel a
deposition began. And neither Belcher nor Ernst & Young has brought suit
against the PCAOB to challenge its administrative action turning over the
documents. What authority would the district court in this case have to
remedy alleged misconduct that did not happen before it?
Consider the following situation. In Lawsuit A, a court orders a
defendant to turn over documents to the plaintiff. In Lawsuit B filed years
later between the same parties, the plaintiff still possesses the documents
from Lawsuit A. I don’t see how the court presiding over Lawsuit B has the
authority to punish the plaintiff for “wrongfully” obtaining the documents
via a court order in Lawsuit A. To be sure, the court in Lawsuit B could limit
the use of the Lawsuit A documents in the new suit. A court always has
authority to decide what evidence is admissible. But I don’t see how Court
B can punish a party for something it did with Court A’s authorization.
Indeed, Belcher cites no authority allowing a trial court to sanction a
party because another legal authority erroneously gave it documents. Nor is
there any authority for striking this deposition based on a disclosure that
occurred outside this case (especially when the documents were not used in
this deposition). As a result, I see no reason to override what common sense
suggests: the appeal of an order requiring a deposition is moot once the
deposition is over.
11
Case: 19-31023 Document: 00515614992 Page: 12 Date Filed: 10/26/2020
No. 19-31023
I thus would not decide the difficult statutory questions about whether
the PCOAB should have turned over these documents. Now that the FDIC
has filed a malpractice action against Ernst & Young, the judge presiding over
that case could decide the statutory question in deciding whether the
documents are admissible.
12
