[Federal Register Volume 61, Number 88 (Monday, May 6, 1996)]
[Rules and Regulations]
[Pages 20350-20356]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10342]



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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]
BILLING CODE 6720-01-P