[Federal Register Volume 61, Number 88 (Monday, May 6, 1996)]
[Rules and Regulations]
[Pages 20338-20344]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10890]



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FEDERAL RESERVE SYSTEM

12 CFR Part 263

[Docket No. R-0878]


Uniform Rules of Practice and Procedure

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule.

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SUMMARY: The Board of Governors of the Federal Reserve System (Board), 
as a result of an interagency review conducted by the Board, the Office 
of the Comptroller of the Currency (OCC), the Office of Thrift 
Supervision (OTS), the Federal Deposit Insurance Corporation (FDIC), 
and the National Credit Union Administration (NCUA), is amending its 
implementation of the Uniform Rules of Practice and Procedure for 
Administrative Hearings (Uniform Rules). The Board's review of the 
Uniform Rules was conducted in accordance with section 303 of the 
Riegle Community Development and Regulatory Improvement Act of 1994.
    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: Katherine H. Wheatley, Assistant 
General Counsel, Legal Division (202 452-3779), Douglas B. Jordan, 
Senior Attorney, Legal Division, (202 452-3787), or Ann Marie 
Kohlligian, Senior Counsel, Division of Banking Supervision and 
Regulation, (202/452-3528).

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 Board, OCC, FDIC, OTS, and NCUA (agencies) to develop 
uniform rules and procedures for administrative hearings. The agencies 
each adopted final Uniform Rules in August, 1991.1 Based

[[Page 20339]]

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).
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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 Board received two comments on the proposal. Both commenters 
expressed general approval of the proposal, and one suggested specific 
improvements. The Board has also reviewed the comments received by the 
other agencies.
    The final rule implements the proposal with minor changes. The 
following section-by-section analysis summarizes the final rule and 
highlights the changes from the proposal that the Board has made after 
considering the commenters' suggestions.
    The OTS, FDIC, OCC, and NCUA are publishing separate final rules 
that are substantively identical to the Board's final rule. The OTS, 
FDIC, and OCC rules appear elsewhere in this Federal Register. The 
process of amendment of the Uniform Rules and their adoption in 
identical form by the agencies also meets the requirements of section 
303 of the Riegle Community Development and Regulatory Improvement Act 
of 1994.

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

Section 263.1  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, CDRI section 525, amended section 102 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 of committing violations of the FDPA or the 
notice requirements of the National Flood Insurance Act of 1968 (NFIA). 
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.
    The Board received no comments on this section, which is adopted as 
proposed.

Section 263.6  Appearance and Practice in Adjudicatory Proceedings

    The proposal permitted the Administrative Law Judge (ALJ) to 
require counsel who withdraws after filing a notice of appearance on 
behalf of 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 Board received one comment on this section. The commenter 
suggested that the proposal does 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. 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 that ALJ would consider in 
exercising this discretion, and the Board 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 263.8  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 that counsel certify that each client has asserted that 
there are no conflicts of interest. The Board believes that the former 
provision was superfluous because the responsibility for identifying 
potential conflicts resides with counsel.
    The Board 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. State rules of professional 
responsibility that impose more stringent ethical standards are 
unaffected by this requirement.
    In addition, the Board is unpersuaded by the argument that the 
provision grants the agencies any significant advantage in a 
proceeding. Persons and institutions may be well and vigorously

[[Page 20340]]

represented even if they are not all represented by the same counsel.
    Therefore, the Board adopts this section as proposed.

Section 263.11  Service of Papers

    The proposal changed this section by permitting parties, the 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 Board received one comment on this section. The commenter 
supported the intent of the proposal, but asserted that permitting 
service at a person's place of work was too broad to be effective, 
particularly where a bank has numerous branches.
    The Board 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 at which 
a person works. To avoid confusion, the Board has added specific 
reference to physical location in 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 comment points out, however, that the former Uniform Rules did 
not permit certain methods of service that are useful for serving a 
corporation or other association and that are permitted under the 
Federal Rules of Civil Procedure. 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 263.12  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. 263.12(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 Board received no comments on this section, which is adopted as 
proposed.

Section 263.20  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 Board 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 Board believes this approach is adequate to 
avoid prejudice to a party and, therefore, adopts this section as 
proposed.

Section 263.24  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 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. 263.25.
    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 Board received no significant comments on this section and, 
therefore, adopts this section as proposed.

Section 263.25  Request for Document Discovery From Parties

    The Board proposed several changes to Sec. 263.25. 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 section 263.25 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 Board 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 
it is the ALJ who 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. 263.28(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 Board believes that this 
procedure adequately protects the parties. For this reason and to avoid 
unnecessary delays in the administrative proceedings, the Board 
declines to provide for an automatic stay whenever a party requests 
interlocutory review.
    One commenter asserted that permitting the Board to require payment 
in advance for document copying and shipping costs would give the Board 
an

[[Page 20341]]

advantage over other creditors if the party is bankrupt following the 
administrative hearing. The Board finds that this situation is rare and 
therefore does not outweigh the Board's need to ensure that it receives 
payment. Moreover, the provision does not preclude other creditors from 
requiring prepayment for products or services.
    The Board adopts this section as proposed.

Section 263.27  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 Board does not include this 
proposed change because, in Sec. 263.11(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. 
Therefore, the proposed change to Sec. 263.27 would be redundant.
    The Board received no comments on this section, and makes no change 
to it.

Section 263.33  Public Hearings

    The proposal changed this section to specify that a party must file 
a motion for a private hearing with the Board and not the ALJ, but must 
serve the ALJ with a copy of the motion.
    The Board received no comments on this section, which is adopted as 
proposed.

Section 263.34  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 Board received no comments on this section, which is adopted as 
proposed.

Section 263.35  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 Board received no comments on this section, which is adopted as 
proposed.

Section 263.37  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. 263.35(b) to Sec. 263.37(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.
    The Board received no comments on this section, which is adopted 
with a minor technical change.

Section 263.38  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 Board. The 
proposal added this requirement and reorganized this section to improve 
its clarity.
    The Board received no comments on this section, which is adopted as 
proposed.

C. Regulatory Flexibility Act

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

List of Subjects in 12 CFR Part 263

    Administrative practice and procedure, Claims, Crime, Equal access 
to justice, Federal Reserve System, Lawyers, Penalties.

    For the reasons set out in the preamble, 12 CFR Part 263 is amended 
as set forth below:

PART 263--RULES OF PRACTICE FOR HEARINGS

    1. The authority citation for part 263 is revised to read as 
follows:

    Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 248, 324, 504, 505, 
1817(j), 1818, 1828(c), 1847(b), 1847(d), 1884(b), 1972(2)(F), 3105, 
3107, 3108, 3907, 3909, and 4717; 15 U.S.C. 21, 78o-4, 78o-5, and 
78u-2; 31 U.S.C. 5321; and 42 U.S.C. 4012a.

    2. In Sec. 263.1, paragraph (e)(9) is amended by removing ``and'' 
after the semicolon, new paragraphs (e)(11) and (e)(12) are added, 
paragraph (f) is redesignated as paragraph (g) and revised, and new 
paragraph (f) is added to read as follows:


Sec. 263.1  Scope.

* * * * *
    (e) * * *
    (11) 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; and
    (12) Any provision of law referenced in 31 U.S.C. 5321 or any order 
or regulation issued thereunder;
    (f) Remedial action under section 102(g) 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, unless otherwise specifically provided for in the Local 
Rules.
    3. In Sec. 263.6, paragraph (a)(3) is revised to read as follows:


Sec. 263.6  Appearance and practice in adjudicatory proceedings.

    (a) * * *
    (3) Notice of appearance. Any individual acting as counsel on 
behalf of a party, including the Board, 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. In Sec. 263.8, paragraph (b) is revised to read as follows:

[[Page 20342]]

Sec. 263.8  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. 263.6(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. 263.11, paragraphs (c)(2) and (d) are revised to read as 
follows:


Sec. 263.11  Service of papers.

* * * * *
    (c) * * *
    (2) If a party has not appeared in the proceeding in accordance 
with Sec. 263.6, the 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
    (5) By any other method as is reasonably calculated to give actual 
notice.
* * * * *
    6. In Sec. 263.12, paragraphs (a), (c)(1), (c)(2), and (c)(3) are 
revised to read as follows:


Sec. 263.12  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 Board or the administrative law judge in the case of filing, or by 
agreement among the parties in the case of service.
    7. Section 263.20 is revised to read as follows:


Sec. 263.20  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 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.
    8. In Sec. 263.24, paragraphs (a) and (b) are revised to read as 
follows:


Sec. 263.24  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 Sec. 263.53 of 
subpart B 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. 263.25.
* * * * *
    9. In Sec. 263.25, paragraphs (a), (b), (e), and (g) are revised to 
read as follows:

[[Page 20343]]

Sec. 263.25  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 261 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 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. In Sec. 263.33, paragraph (a) is revised to read as follows:


Sec. 263.33  Public hearings.

    (a) General rule. All hearings shall be open to the public, unless 
the Board, in the Board'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 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 Board. 
The form of, and procedure for, these requests and replies are governed 
by Sec. 263.23. 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.
* * * * *
    11. In Sec. 263.34, paragraphs (a) and (b)(1) are revised to read 
as follows:


Sec. 263.34  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.
* * * * *
    12. In Sec. 263.35, 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. 263.35  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

[[Page 20344]]

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. In Sec. 263.37, the section heading and paragraph (a)(1) are 
revised to read as follows:


Sec. 263.37  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 263.38 is revised to read as follows:


Sec. 263.38  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. 263.37(b), the administrative law judge shall file with and 
certify to the 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 Board for final determination the 
record of the proceeding, the administrative law judge shall furnish to 
the 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 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.

    By order of the Board of Governors of the Federal Reserve 
System, April 26, 1996.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 96-10890 Filed 5-3-96; 8:45 a.m.]
BILLING CODE 6210-01-P