[Federal Register Volume 61, Number 108 (Tuesday, June 4, 1996)]
[Rules and Regulations]
[Pages 28020-28028]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-13814]
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[[Page 28021]]
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 747
Uniform Rules of Practice and Procedure
AGENCY: National Credit Union Administration.
ACTION: Final rule.
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SUMMARY: The National Credit Union Administration (NCUA) is amending
its regulatory provisions implementing the Uniform Rules of Practice
and Procedure (Uniform Rules). The final rule is intended to clarify
certain provisions and to increase the efficiency and fairness of
administrative hearings.
EFFECTIVE DATE: June 5, 1996.
FOR FURTHER INFORMATION CONTACT: Steven W. Widerman, Trial Attorney,
Office of General Counsel, 703/518-6557, National Credit Union
Administration, 1775 Duke Street, Alexandria, VA 22314.
SUPPLEMENTARY INFORMATION:
I. Background
Section 916 of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 (FIRREA), Pub. L. 101-73, 103 Stat. 183 (1989),
required the NCUA, the Office of the Comptroller of the Currency (OCC),
the Office of Thrift Supervision (OTS), the Federal Deposit Insurance
Corporation (FDIC), and the Board of Governors of the Federal Reserve
System (Board) (agencies) to develop uniform rules and procedures for
administrative hearings. The agencies each adopted final Uniform Rules
in August 1991.\1\ Based on their experience in using the rules since
then, the agencies have identified sections of the Uniform Rules that
should be modified. Accordingly, the agencies proposed amendments to
the Uniform Rules on June 23, 1995 (60 FR 32882).\2\
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\1\ The agencies issued a joint notice of proposed rulemaking on
June 17, 1991 (56 FR 27790). The agencies issued their final rules
on the following dates: NCUA on August 8, 1991 (56 FR 37767); OCC on
August 9, 1991 (56 FR 38024); Board on August 9, 1991 (56 FR 38052);
FDIC on August 9, 1991 (56 FR 37975); and OTS on August 12, 1991 (56
FR 38317).
\2\ On December 30, 1994, NCUA proposed an amendment to the
provision of the Uniforms Rules which restricts ex parte
communications, Sec. 747.9 (59 FR 67655). The other agencies each
issued a similar notice of proposed rulemaking in November and
December 1994. The amendment makes clear that the scope of
Sec. 747.9 conforms to that of the Administrative Procedure Act.
NCUA received two comments on this proposal, both of which are
addressed below. This final rule implements the amendment to
Sec. 747.9.
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The NCUA received four comments on the proposal. All commenters
generally supported the proposal, but each suggested improvements or
further revisions.
The final rule implements the proposal with certain changes,
including revisions responsive to some of the concerns expressed by the
commenters. The following section-by-section analysis summarizes the
final rule and highlights the changes from the proposal that the NCUA
made in response to the commenters' suggestions.
The OCC, OTS, FDIC and Board have published separate final rules,
effective June 5, 1996, that are substantively identical to the NCUA's
final rule (61 FR 20330 et seq.), except as noted below in regard to
Secs. 747.1 and 747.9.
II. Section-by-Section Summary and Discussion of Amendments to the
Uniform Rules
Section 747.1 Scope
The proposal added a statutory provision to the list of civil money
penalty provisions to which the Uniform Rules apply. The added
provision was enacted by section 125 of the Riegle Community
Development and Regulatory Improvement Act of 1994 (CDRI), Pub. L. 103-
325, 108 Stat. 2160, which amended section 102 the Flood Disaster
Protection Act of 1973 (FDPA) (42 U.S.C. 4012a). Section 102 now gives
each ``Federal entity for lending regulation'' authority to assess
civil money penalties against a regulated lending institution if the
institution has a pattern or practice of committing violations under
the FDPA or the notice requirements of the National Flood Insurance Act
of 1968 (NFIA) (42 U.S.C. 4104a). Under the FDPA, the term ``Federal
entity for lending regulation'' includes the agencies and the Farm
Credit Administration.
CDRI section 525 also gave the agencies authority to require a
regulated lending institution to take remedial actions that are
necessary to ensure that the institution complies with the requirements
of the national flood insurance program if: (1) The institution has
engaged in a pattern and practice of noncompliance with regulations
issued pursuant to the FDPA and NFIA; and (2) has not demonstrated
measurable improvement in compliance despite the assessment of civil
money penalties. The final rule adds a new paragraph to the scope
section that reflects this additional authority.\3\
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\3\ Another provision of the CDRI, section 406, amended the Bank
Secrecy Act (BSA) (31 U.S.C. 5321) to require the Secretary of the
Treasury to delegate authority to the Federal banking agencies, as
defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C.
1813), to impose civil money penalties for BSA violations. The
definition of Federal banking agencies includes the other agencies,
but does not include NCUA. Therefore, while each of the other
agencies has inserted this provision in its final rule, NCUA has
not.
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The NCUA received no comments on this section, which is adopted as
proposed.
Section 747.6 Appearance and Practice in Adjudicatory Proceedings
The proposal permitted the administrative law judge (ALJ) to
require counsel who withdraws from representing a party to accept
service of papers for that party until either: (1) A new counsel has
filed a notice of appearance; or (2) the party indicates that he or she
will proceed on a pro se basis.
The NCUA received one comment on this section. The commenter
suggested that the proposal did not adequately address certain
situations: for example, when counsel withdraws because of a lack of
payment of legal fees that is caused by an agency asset freeze, or
withdraws because the client discharged him or her. The commenter's
implication is that it is unfair to require counsel to continue to
accept service in these situations. Moreover, the commenter expressed
concern that the administrative proceeding may become involved in a
dispute between the client and counsel when the ALJ requires counsel to
continue to accept service after a client discharges counsel. The
commenter suggested that the rule should require that service be given
to both the unreplaced counsel and the party.
The proposal was intended to ensure that a lawyer is always
available to receive service in order to prevent a party from halting
the administrative proceedings simply by evading service. The
regulatory text is clear, however, that the ALJ has the discretion
whether to require former counsel to continue to accept service.
Fairness to counsel is among the factors the ALJ would consider in
exercising this discretion, and the NCUA therefore believes that the
provision as proposed is sufficiently flexible to accommodate the
concerns raised by the commenter.
The final rule changes the proposal's reference from ``service of
process'' to ``service'' to clarify that this section applies to all
papers that the party is entitled to receive. This section is otherwise
adopted as proposed.
Section 747.8 Conflicts of Interest
The proposal sought to improve in two ways the provisions governing
the conflicts of interest that may arise when
[[Page 28022]]
counsel represents multiple persons connected with a proceeding.
First, the proposal sought to protect the interests of individuals
and financial institutions by expanding the circumstances under which
counsel must certify that he or she has obtained a waiver from each
non-party of any potential conflict of interest. The former rule
required counsel to obtain waivers only from non-party institutions
``to which notice of the proceedings must be given.'' The proposal
required counsel to obtain waivers from all parties and non-parties
that counsel represents on a matter relevant to an issue in the
proceeding. It thus ensured that all appropriate party and non-party
individuals and institutions are informed of potential conflicts.
Second, the proposal simplified this provision by eliminating the
requirement for counsel to certify that each client has asserted that
there are no conflicts of interest. The NCUA Board believes that the
former provision was superfluous because the responsibility for
identifying potential conflicts resides with counsel.
The NCUA received one comment on this section. The commenter noted
that the proposal may inhibit multiple representation that otherwise
complies with applicable ethics rules. The commenter suggested that the
proposal could inappropriately tilt the proceeding in favor of the
agencies.
The provision does not limit the right of any party to
representation by counsel of the party's choice. Rather, it ensures
that all interested persons are informed of potential conflicts so that
they may avoid the conflict if they choose. In the NCUA's view, it is
reasonable to establish a baseline standard requiring the affirmative
waiver of conflicts by all affected persons or entities in order to
ensure the integrity of the administrative adjudication process. State
rules of professional responsibility that impose more stringent ethical
standards are unaffected by this requirement.
In addition, the NCUA is unpersuaded by the argument that the
conflicts provision grants the agencies significant advantage in a
proceeding. Persons and entities may be well and vigorously represented
even if they are not all represented by the same counsel.
Therefore, the NCUA adopts this section as proposed.
Section 747.9 Ex parte Communications
The proposal sought to clarify that the restriction on ex parte
communications parallels the requirements of the Administrative
Procedure Act (APA). The current Sec. 747.9(b) prohibits ex parte
communications between a party, the party's counsel, or another
interested person, and the NCUA Board or other decisional employee
regarding the merits of an adjudicatory proceeding.
The agencies' intention when adopting the Uniform Rules in 1991 was
that Sec. 747.9 conform to, but not exceed, the scope of the APA
provisions restricting ex parte communications. The APA prohibits ex
parte communications between agency decisionmakers and ``interested
persons outside the agency'' regarding the merits of an adjudicatory
proceeding. 5 U.S.C. Sec. 557(d). It also prohibits enforcement staff
within the agency from participating or advising in the decision,
recommended decision, or agency review of an adjudicatory matter except
as witness or counsel. 5 U.S.C. Sec. 554(d). The APA does not prohibit
agency enforcement staff from seeking approval to amend a notice of, or
to settle or terminate, a proceeding.
The current Sec. 747.9(b) could in practice be misinterpreted to
expand the prohibition on ex parte communications beyond the scope of
the APA to prohibit communications between enforcement staff and the
NCUA Board regarding approval to amend or to terminate existing
enforcement actions. To insure against such an unintended result, the
proposed amendment clarifies that the section is intended to conform to
the provisions of the APA by limiting the prohibition on ex parte
communications to communications to or from ``interested persons
outside the agency,'' 5 U.S.C. 557(d), and by incorporating explicitly
the APA's separation of functions provisions, 5 U.S.C. 554(d). This
approach is consistent with the most recent Model Adjudication Rules
prepared by the Administrative Conference of the United States (ACUS).
ACUS, Model Adjudication Rules (December 1993).
The NCUA received two comments on this section. One commenter
supported the proposal provided that it is limited to intra-agency
communications concerning amending a notice of charges or settling or
terminating a proceeding. The other commenter claimed that ``NCUA has
not stated any compelling need for [the amendment], and we view the
proposed rule as inconsistent with the fundamental principles of
fairness built into our legal system.'' This commenter fails to
recognize that the proposed amendment allows ex parte communications
with the NCUA Board only on nonadjudicatory matters, such as when NCUA
enforcement staff seeks NCUA Board approval to amend a notice of
charges or to settle or terminate an existing enforcement proceeding.
Other parties to the proceeding are not entitled to participate in such
a decision.
Accordingly, the NCUA adopts this section as proposed. -
Section 747.11 Service of Papers
The proposal changed this section by permitting parties, the NCUA
Board, and ALJs to serve a subpoena on a party by delivering it to a
person of suitable age and discretion at a party's place of work.
The NCUA received one comment on this section. The commenter
supported the intent of the proposal, but asserted that the provision
permitting service at a person's place of work was too broad to be
effective, particularly where a financial institution has numerous
branches.
The NCUA interpreted the phrase ``person's place of work'' as used
in the proposal to mean the physical location at which an individual
works and not as any office of the corporation or association that
employs the person. To avoid confusion, the NCUA has added specific
reference to physical location to the regulatory text. In addition, the
final rule states expressly that only an individual, not a corporation
or association, may be served at a residence or place of work.
The same comment points out, however, that the former Uniform Rules
did not expressly permit certain methods of service that are useful for
serving a corporation or other association. The final rule, therefore,
permits service on a party corporation or other association by delivery
of a copy of a notice to an officer, managing or general agent, or to
any other agent authorized by appointment or by law to receive service
of process. Even though a credit union technically may not satisfy the
definition of a corporation or other association, it is to be treated
as such for purposes of service under this rule.
The final rule also provides that, if the agent is one authorized
by a statute to receive service and the statute so requires, the
serving party must also mail a copy to the party. The final rule also
restructures this provision for clarity.
Section 747.12 Construction of Time Limits
The proposal clarified that the additional time allotted for
responding to papers served by mail, delivery service, or electronic
media transmission under Sec. 747.12(c) is not included in determining
whether an act is required to be performed within ten
[[Page 28023]]
days. The proposal also clarified that additional time allotted for
responding to papers served by mail, delivery, or electronic media
transmission is counted by calendar days and, therefore, a party must
count Saturdays, Sundays, and holidays when calculating a time
deadline.
The NCUA received one comment on this section, asserting that
Saturdays, Sundays and holidays should be excluded when calculating a
time deadline because small credit unions and U.S. Post Offices
frequently are not open on those days. This comment addresses time
deadlines generally, whereas the proposed amendment counts Saturdays,
Sundays and holidays only when calculating extra time added under
Sec. 747.12(c) for responding to papers served by mail, delivery, or
electronic media transmission. The proposed amendment does not affect
the current rule excluding those days from deadlines of ten days or
less, and including them in deadlines of more than ten days. NCUA
adopts the section as proposed.
Section 747.20 Amended Pleadings
The proposal changed this section to permit a party to amend its
pleadings without leave of the ALJ and to permit the ALJ to admit
evidence over the objection that the evidence does not fall directly
within the scope of the issues raised by a notice or answer.
The NCUA received one comment on this section. The commenter
asserted that the change could unduly prejudice a party if a notice
were amended to add or delete allegations immediately prior to the
hearing. The commenter expressed concern that the amendment would give
a party insufficient time to seek additional discovery or file for
summary judgment.
The regulatory text gives the ALJ discretion to revise the hearing
schedule to ensure that no prejudice results from last minute
amendments to a notice. The NCUA believes this approach is adequate to
avoid prejudice to a party and, therefore, the NCUA adopts this section
as proposed.
Section 747.24 Scope of Document Discovery
The former Uniform Rules were silent on the use of interrogatories.
The proposal expressly prohibited parties from using interrogatories on
grounds that other discovery tools are more efficient and less
burdensome and therefore more appropriate to administrative
adjudications. NCUA received two comments on this subsection. One urged
that interrogatories not be expressly prohibited so that they would be
available for use on a limited basis. The other urged that
interrogatories be expressly permitted without limitation. Both
comments are effectively moot in failing to recognize that NCUA's
current Local Rule of Practice and Procedure, with a single narrow
exception, already expressly prohibits all forms of discovery other
than production of documents. 12 CFR 747.100.
The proposal also sought to focus document discovery requests so
that they are not unreasonable, oppressive, excessive in scope, or
unduly burdensome to any of the parties. Accordingly, the proposal
preserved the former rule's limitation on document discovery by
permitting discovery only of documents that have material relevance.
However, the proposal specifically provided that a request should be
considered unreasonable, oppressive, excessive in scope, or unduly
burdensome if, among other things: (1) It fails to include justifiable
limitations on the time period covered and the geographic locations to
be searched; (2) the time provided to respond in the request is
inadequate; or (3) the request calls for copies of documents to be
delivered to the requesting party and fails to include the requestor's
written agreement to pay in advance for the copying, in accordance with
Sec. 747.25.
Under the proposal, the scope of permissible document discovery is
not as broad as that allowed under Rule 26(b) of the Federal Rules of
Civil Procedure (28 U.S.C. app.). Historically, given the specialized
nature of enforcement proceedings in regulated industries, discovery in
administrative proceedings has not been as expansive as it is in civil
litigation.
The NCUA received one comment on this subsection, urging that the
Federal Rule 26(b) standard in the current subsection be retained. The
agencies' experience with document discovery in their administrative
proceedings has been that substantial time and resources are squandered
on extraneous document discovery. A standard somewhat more restrictive
than that of Federal Rule 26(b) is needed to reasonably confine
document discovery. Accordingly, the NCUA adopts this subsection as
proposed.
Section 747.25 Request for Document Discovery From Parties
The NCUA proposed several changes to Sec. 747.25. First, the
proposal sought to reduce unnecessary burden by permitting a party to:
(1) Respond to document discovery either by producing documents as they
are kept in the ordinary course of business or by organizing them to
correspond to the categories in a document request; and (2) identify
similar documents by category when they are voluminous and are
protected by the deliberative process, attorney-client, or attorney
work-product privilege.
The proposal also amended Sec. 747.25 to permit a party to require
payment in advance for the costs of copying and shipping requested
documents; and clarified that, if a party has stated its intention to
file a timely motion for interlocutory review, the ALJ may not release,
or order a party to produce, documents withheld on grounds of privilege
until the motion for interlocutory review has been decided.
The NCUA received two comments on this section. One comment
suggested that a request for interlocutory review should automatically
stay the proceeding. Under Sec. 747.28(d) of the Uniform Rules, a party
may request that a proceeding be stayed during the pendency of an
interlocutory review, and the ALJ has the discretion to decide whether
a stay is appropriate. The NCUA believes that this procedure adequately
protects the parties. For this reason and to avoid adding unnecessary
delays in the administrative proceedings, the NCUA declines to provide
for an automatic stay whenever a party requests interlocutory review.
The second comment asserted that permitting the NCUA to require
payment in advance for document copying and shipping costs would give
the NCUA an advantage over other creditors if the party is bankrupt
following the administrative hearing. The commenter does not assert
that it is a violation of the bankruptcy laws for the NCUA or any other
creditor to require prepayment for products or services. Moreover, the
NCUA believes that the situations causing the commenter's concern would
be very rare. Accordingly, the NCUA adopts this section as proposed.
Section 747.27 Deposition of Witness Unavailable for Hearing
The proposal clarified that a party may serve a deposition subpoena
on a witness who is unavailable by serving the subpoena on the
witness's authorized representative. The final rule does not include
this proposed change because, in Sec. 747.11(d), the final rule
expressly permits a party to serve a subpoena by delivering the
subpoena to an agent, which includes delivery to an authorized
representative. The proposed change to Sec. 747.27 would be redundant.
The NCUA received no comments on
[[Page 28024]]
this section. The final rule does not, therefore, change this
provision.
Section 747.33 Public Hearings
The proposal changed this section to specify that a party must file
a motion for a private hearing with the NCUA Board, and not the ALJ,
but must serve the ALJ with a copy of the motion.
The NCUA received no comments on this section, which is adopted as
proposed.
Section 747.34 Hearing Subpoenas
The former Uniform Rules did not specifically require that a party
inform all other parties when a subpoena is issued to a non-party. The
proposal required that, after a hearing subpoena is issued by the ALJ,
the party that applied for the subpoena must serve a copy of it on each
party. Under the proposal, any party may move to quash any hearing
subpoena and must serve the motion on each other party.
The NCUA received no comments on this section, which is adopted as
proposed.
Section 747.35 Conduct of Hearings
The proposal limited the number of counsel permitted to examine a
witness and clarified that hearing transcripts may be obtained only
from the court reporter. The former Uniform Rules were silent on these
issues.
The NCUA received no comments on this section, which is adopted as
proposed.
Section 747.37 Post-hearing Filings
The proposal changed the title of this section from ``Proposed
findings and conclusions'' to ``Post-hearing filings'' to describe more
accurately the content of the section.
The proposal also moved, from Sec. 747.35(b) to Sec. 747.37(a), the
provision that requires the ALJ to serve each party with notice of the
filing of the certified transcript of the hearing (including hearing
exhibits). The proposal added a requirement that the ALJ must use the
same method of service for this notice for each recipient.
Finally, the proposal clarified that the ALJ may, when appropriate,
permit parties more than the allotted 30 days to file proposed findings
of fact, proposed conclusions of law, and a proposed order.
The NCUA received no comments on this section, which is adopted
with a minor technical change.
Section 747.38 Recommended Decision and Filing of Record
Under the former Uniform Rules, the ALJ was not required to file an
index of the record when he filed the record with the NCUA Board. The
proposal added this requirement and reorganized this section to improve
its clarity.
The NCUA received no comments on this section, which is adopted as
proposed.
Technical Changes
The final rule makes several technical changes to the proposal that
make the final rule specific to the NCUA. These changes appear
throughout the rule text. For example, bracketed references to the
``agency head'' have been replaced with ``the NCUA Board'' and the
blank part designation before each section number has been filled in
with ``747.''
III. Rationale for Expedited Effective Date
The effective date of NCUA's final rule, June 5, 1996, is less than
the thirty days from publication. The APA requires thirty days' notice
of effectiveness, but permits that requirement to be waived upon a
showing of good cause. 5 U.S.C. 553(d)(3). Good cause exists in this
case for making NCUA's final rule effective June 5. The Uniform Rules
were originally developed and recently revised jointly with the other
agencies. The purpose of the June 5 effective date for NCUA's final
rule adopting the revisions is to conform to the effective date of the
other agencies' final rules. No party to an NCUA administrative
proceeding governed by the Uniform Rules will be prejudiced by the June
5 effective date because the revisions adopted in the final rule apply
only to formal administrative proceedings commenced (through filing of
a notice of charges) after the effective date (see 58 FR 37766). Formal
administrative proceedings pending on or before the effective date will
not be affected by the revisions.
IV. Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act, the
NCUA hereby certifies that this final rule will not have a significant
economic impact on a substantial number of small entities. Accordingly,
a regulatory flexibility analysis is not required.
This final rule imposes only procedural requirements in
administrative adjudications. It contains no substantive requirements.
It improves the Uniform Rules of Practice and Procedure and facilitates
the orderly determination of administrative proceedings. The changes in
this final rule are primarily clarifications and impose no significant
additional burdens on regulated institutions, parties to administrative
actions, or counsel.
V. Executive Order 12612
This final rule, like the current part 747 it is replacing, will
apply to all Federally insured credit unions. The NCUA Board, pursuant
to Executive Order 12612, has determined, however, that this joint
proposed rule will not have a substantial direct effect on the states,
on the relationship between the national government and the states, or
on the distribution of power and responsibilities among various levels
of government. Further, this joint proposed rule will not preempt
provisions of state law or regulations.
VI. Effective Date
Section 302 of the Riegle Community Development and Regulatory
Improvement Act 1994 delays the effective date of regulations
promulgated by the Federal banking agencies that impose additional
reporting, disclosure, or other new requirements to the first date of
the first calendar quarter following publication of the final rule. The
NCUA believes that Section 302 is not applicable to this final rule,
because the regulation does not impose any additional reporting or
other requirements not already contained in the current version of the
Uniform Rules.
Text of the Final Rule
The text of the amendments to 12 CFR part 747 follows:
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 747
List of Subjects in 12 CFR Part 747
Administrative Practice and Procedure, Bank Deposit Insurance,
Claims, Credit Unions, Crime, Equal Access to Justice, Hearing
Procedures, Investigations, Lawyers, Penalties.
Authority and Issuance
For the reasons set out in the preamble, part 747 of chapter VII of
title 12 of the Code of Federal Regulations is amended as set forth
below:
PART 747--ADMINISTRATIVE ACTIONS, ADJUDICATIVE HEARINGS, RULES OF
PRACTICE AND PROCEDURE, AND INVESTIGATIONS
1. The authority citation for part 747 is revised to read as
follows:
Authority: 12 U.S.C. 1766, 1786, 1784 and 1787; and 42 U.S.C.
4012a.
[[Page 28025]]
Subpart A--[Amended]
2. In Sec. 747.1, paragraph (c)(2) is amended by removing ``and''
after the semicolon, paragraph (c)(3) is revised, paragraph (c)(4) is
added, paragraph (d) is redesignated as paragraph (e) and revised, and
new paragraph (d) is added to read as follows:
Sec. 747.1 Scope.
* * * * *
(c) * * *
(3) The terms of any final or temporary order issued under section
206 of the Act or any written agreement executed by the National Credit
Union Administration (``NCUA''), any condition imposed in writing by
the NCUA in connection with the grant of an application or request,
certain unsafe or unsound practices or breaches of fiduciary duty, or
any law or regulation not otherwise provided herein, pursuant to 12
U.S.C. 1786(k); and
(4) Any provision of law referenced in section 102(f) of the Flood
Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)) or any order or
regulation issued thereunder;
(d) Remedial action under section 102(g) of the Flood Disaster
Protection Act of 1973 (42 U.S.C. 4012a(g)); and
(e) This subpart also applies to all other adjudications required
by statute to be determined on the record after opportunity for an
agency hearing, unless otherwise specifically provided for in Subparts
B through J of this Part.
3. In Sec. 747.6, paragraph (a)(3) is revised to read as follows:
Sec. 747.6 Appearance and practice in adjudicatory proceedings.
(a) * * *
(3) Notice of appearance. Any individual acting as counsel on
behalf of a party, including the NCUA Board, shall file a notice of
appearance with OFIA at or before the time that the individual submits
papers or otherwise appears on behalf of a party in the adjudicatory
proceeding. The notice of appearance must include a written declaration
that the individual is currently qualified as provided in paragraph
(a)(1) or (a)(2) of this section and is authorized to represent the
particular party. By filing a notice of appearance on behalf of a party
in an adjudicatory proceeding, the counsel agrees and represents that
he or she is authorized to accept service on behalf of the represented
party and that, in the event of withdrawal from representation, he or
she will, if required by the administrative law judge, continue to
accept service until new counsel has filed a notice of appearance or
until the represented party indicates that he or she will proceed on a
pro se basis.
* * * * *
4. In Sec. 747.8, paragraph (b) is revised to read as follows:
Sec. 747.8 Conflicts of interest.
* * * * *
(b) Certification and waiver. If any person appearing as counsel
represents two or more parties to an adjudicatory proceeding or also
represents a non-party on a matter relevant to an issue in the
proceeding, counsel must certify in writing at the time of filing the
notice of appearance required by Sec. 747.6(a):
(1) That the counsel has personally and fully discussed the
possibility of conflicts of interest with each such party and non-
party; and
(2) That each such party and non-party waives any right it might
otherwise have had to assert any known conflicts of interest or to
assert any non-material conflicts of interest during the course of the
proceeding.
5. In Sec. 747.9, paragraphs (a) and (b) are revised and a new
paragraph (e) is added to read as follows:
Sec. 747.9 Ex parte communications.
(a) Definition. (1) Ex parte communication means any material oral
or written communication relevant to the merits of an adjudicatory
proceeding that was neither on the record nor on reasonable prior
notice to all parties that takes place between--
(i) An interested person outside the NCUA (including such person's
counsel); and
(ii) The administrative law judge handling that proceeding, the
NCUA Board, or a decisional employee.
(2) Exception. A request for status of the proceeding does not
constitute an ex parte communication.
(b) Prohibition of ex parte communications. From the time the
notice is issued by the NCUA Board until the date that the NCUA Board
issues its final decision pursuant to Sec. 747.40(c):
(1) No interested person outside the NCUA shall make or knowingly
cause to be made an ex parte communication to any member of the NCUA
Board, the administrative law judge, or a decisional employee; and
(2) No member of the NCUA Board, administrative law judge, or
decisional employee shall make or knowingly cause to be made to any
interested person outside the NCUA any ex parte communication.
* * * * *
(e) Separation of functions. Except to the extent required for the
disposition of ex parte matters as authorized by law, the
administrative law judge may not consult a person or party on any
matter relevant to the merits of the adjudication, unless on notice and
opportunity for all parties to participate. An employee or agent
engaged in the performance of investigative or prosecuting functions
for the NCUA in a case may not, in that or a factually related case,
participate or advise in the decision, recommended decision, or agency
review of the recommended decision under section 747.40, except as
witness or counsel in public proceedings.
6. In Sec. 747.11, paragraphs (c)(2) and (d) are revised to read as
follows:
Sec. 747.11 Service of papers.
* * * * *
(c) * * *
(2) If a party has not appeared in the proceeding in accordance
with Sec. 747.6, the NCUA Board or the administrative law judge shall
make service by any of the following methods:
(i) By personal service;
(ii) If the person to be served is an individual, by delivery to a
person of suitable age and discretion at the physical location where
the individual resides or works;
(iii) If the person to be served is a corporation or other
association, by delivery to an officer, managing or general agent, or
to any other agent authorized by appointment or by law to receive
service and, if the agent is one authorized by statute to receive
service and the statute so requires, by also mailing a copy to the
party;
(iv) By registered or certified mail addressed to the person's last
known address; or
(v) By any other method reasonably calculated to give actual
notice.
(d) Subpoenas. Service of a subpoena may be made:
(1) By personal service;
(2) If the person to be served is an individual, by delivery to a
person of suitable age and discretion at the physical location where
the individual resides or works;
(3) By delivery to an agent, which, in the case of a corporation or
other association, is delivery to an officer, managing or general
agent, or to any other agent authorized by appointment or by law to
receive service and, if the agent is one authorized by statute to
receive service and the statute so requires, by also mailing a copy to
the party;
(4) By registered or certified mail addressed to the person's last
known address; or
[[Page 28026]]
(5) By any other method reasonably calculated to give actual
notice.
* * * * *
7. In Sec. 747.12, paragraphs (a), (c)(1), (c)(2), and (c)(3) are
revised to read as follows:
Sec. 747.12 Construction of time limits.
(a) General rule. In computing any period of time prescribed by
this subpart, the date of the act or event that commences the
designated period of time is not included. The last day so computed is
included unless it is a Saturday, Sunday, or Federal holiday. When the
last day is a Saturday, Sunday, or Federal holiday, the period runs
until the end of the next day that is not a Saturday, Sunday, or
Federal holiday. Intermediate Saturdays, Sundays, and Federal holidays
are included in the computation of time. However, when the time period
within which an act is to be performed is ten days or less, not
including any additional time allowed for in Sec. 747.12(c),
intermediate Saturdays, Sundays, and Federal holidays are not included.
* * * * *
(c) * * *
(1) If service is made by first class, registered, or certified
mail, add three calendar days to the prescribed period;
(2) If service is made by express mail or overnight delivery
service, add one calendar day to the prescribed period; or
(3) If service is made by electronic media transmission, add one
calendar day to the prescribed period, unless otherwise determined by
the NCUA Board or the administrative law judge in the case of filing,
or by agreement among the parties in the case of service.
8. Section 747.20 is revised to read as follows:
Sec. 747.20 Amended pleadings.
(a) Amendments. The notice or answer may be amended or supplemented
at any stage of the proceeding. The respondent must answer an amended
notice within the time remaining for the respondent's answer to the
original notice, or within ten days after service of the amended
notice, whichever period is longer, unless the NCUA Board or
administrative law judge orders otherwise for good cause.
(b) Amendments to conform to the evidence. When issues not raised
in the notice or answer are tried at the hearing by express or implied
consent of the parties, they will be treated in all respects as if they
had been raised in the notice or answer, and no formal amendments are
required. If evidence is objected to at the hearing on the ground that
it is not within the issues raised by the notice or answer, the
administrative law judge may admit the evidence when admission is
likely to assist in adjudicating the merits of the action and the
objecting party fails to satisfy the administrative law judge that the
admission of such evidence would unfairly prejudice that party's action
or defense upon the merits. The administrative law judge may grant a
continuance to enable the objecting party to meet such evidence.
9. In Sec. 747.24, paragraphs (a) and (b) are revised to read as
follows:
Sec. 747.24 Scope of document discovery.
(a) Limits on discovery. (1) Subject to the limitations set out in
paragraphs (b), (c), and (d) of this section, a party to a proceeding
under this subpart may obtain document discovery by serving a written
request to produce documents. For purposes of a request to produce
documents, the term ``documents'' may be defined to include drawings,
graphs, charts, photographs, recordings, data stored in electronic
form, and other data compilations from which information can be
obtained, or translated, if necessary, by the parties through detection
devices into reasonably usable form, as well as written material of all
kinds.
(2) Discovery by use of deposition is governed by subpart I of this
part.
(3) Discovery by use of interrogatories is not permitted.
(b) Relevance. A party may obtain document discovery regarding any
matter, not privileged, that has material relevance to the merits of
the pending action. Any request to produce documents that calls for
irrelevant material, that is unreasonable, oppressive, excessive in
scope, unduly burdensome, or repetitive of previous requests, or that
seeks to obtain privileged documents will be denied or modified. A
request is unreasonable, oppressive, excessive in scope, or unduly
burdensome if, among other things, it fails to include justifiable
limitations on the time period covered and the geographic locations to
be searched, the time provided to respond in the request is inadequate,
or the request calls for copies of documents to be delivered to the
requesting party and fails to include the requester's written agreement
to pay in advance for the copying, in accordance with Sec. 747.25.
* * * * *
10. In Sec. 747.25, paragraphs (a), (b), (e), and (g) are revised
to read as follows:
Sec. 747.25 Request for document discovery from parties.
(a) General rule. Any party may serve on any other party a request
to produce for inspection any discoverable documents that are in the
possession, custody, or control of the party upon whom the request is
served. The request must identify the documents to be produced either
by individual item or by category, and must describe each item and
category with reasonable particularity. Documents must be produced as
they are kept in the usual course of business or must be organized to
correspond with the categories in the request.
(b) Production or copying. The request must specify a reasonable
time, place, and manner for production and performing any related acts.
In lieu of inspecting the documents, the requesting party may specify
that all or some of the responsive documents be copied and the copies
delivered to the requesting party. If copying of fewer than 250 pages
is requested, the party to whom the request is addressed shall bear the
cost of copying and shipping charges. If a party requests 250 pages or
more of copying, the requesting party shall pay for the copying and
shipping charges. Copying charges are the current per-page copying rate
imposed by 12 CFR part 4 implementing the Freedom of Information Act (5
U.S.C. 552). The party to whom the request is addressed may require
payment in advance before producing the documents.
* * * * *
(e) Privilege. At the time other documents are produced, the
producing party must reasonably identify all documents withheld on the
grounds of privilege and must produce a statement of the basis for the
assertion of privilege. When similar documents that are protected by
deliberative process, attorney work-product, or attorney-client
privilege are voluminous, these documents may be identified by category
instead of by individual document. The administrative law judge retains
discretion to determine when the identification by category is
insufficient.
* * * * *
(g) Ruling on motions. After the time for filing responses pursuant
to this section has expired, the administrative law judge shall rule
promptly on all motions filed pursuant to this section. If the
administrative law judge determines that a discovery request, or any of
its terms, calls for irrelevant material, is unreasonable, oppressive,
excessive in scope, unduly burdensome, or repetitive of previous
requests, or seeks to obtain privileged documents, he or she may
[[Page 28027]]
deny or modify the request, and may issue appropriate protective
orders, upon such conditions as justice may require. The pendency of a
motion to strike or limit discovery or to compel production is not a
basis for staying or continuing the proceeding, unless otherwise
ordered by the administrative law judge. Notwithstanding any other
provision in this part, the administrative law judge may not release,
or order a party to produce, documents withheld on grounds of privilege
if the party has stated to the administrative law judge its intention
to file a timely motion for interlocutory review of the administrative
law judge's order to produce the documents, and until the motion for
interlocutory review has been decided.
* * * * *
11. In Sec. 747.33, paragraph (a) is revised to read as follows:
Sec. 747.33 Public hearings.
(a) General rule. All hearings shall be open to the public, unless
the NCUA Board, in its discretion, determines that holding an open
hearing would be contrary to the public interest. Within 20 days of
service of the notice, any respondent may file with the NCUA Board a
request for a private hearing, and any party may file a reply to such a
request. A party must serve on the administrative law judge a copy of
any request or reply the party files with the NCUA Board. The form of,
and procedure for, these requests and replies are governed by
Sec. 747.23. A party's failure to file a request or a reply constitutes
a waiver of any objections regarding whether the hearing will be public
or private.
* * * * *
12. In Sec. 747.34, paragraphs (a) and (b)(1) are revised to read
as follows:
Sec. 747.34 Hearing subpoenas.
(a) Issuance. (1) Upon application of a party showing general
relevance and reasonableness of scope of the testimony or other
evidence sought, the administrative law judge may issue a subpoena or a
subpoena duces tecum requiring the attendance of a witness at the
hearing or the production of documentary or physical evidence at the
hearing. The application for a hearing subpoena must also contain a
proposed subpoena specifying the attendance of a witness or the
production of evidence from any state, territory, or possession of the
United States, the District of Columbia, or as otherwise provided by
law at any designated place where the hearing is being conducted. The
party making the application shall serve a copy of the application and
the proposed subpoena on every other party.
(2) A party may apply for a hearing subpoena at any time before the
commencement of a hearing. During a hearing, a party may make an
application for a subpoena orally on the record before the
administrative law judge.
(3) The administrative law judge shall promptly issue any hearing
subpoena requested pursuant to this section. If the administrative law
judge determines that the application does not set forth a valid basis
for the issuance of the subpoena, or that any of its terms are
unreasonable, oppressive, excessive in scope, or unduly burdensome, he
or she may refuse to issue the subpoena or may issue it in a modified
form upon any conditions consistent with this subpart. Upon issuance by
the administrative law judge, the party making the application shall
serve the subpoena on the person named in the subpoena and on each
party.
(b) Motion to quash or modify. (1) Any person to whom a hearing
subpoena is directed or any party may file a motion to quash or modify
the subpoena, accompanied by a statement of the basis for quashing or
modifying the subpoena. The movant must serve the motion on each party
and on the person named in the subpoena. Any party may respond to the
motion within ten days of service of the motion.
* * * * *
13. In Sec. 747.35, paragraph (a)(3) is redesignated as paragraph
(a)(4), a new paragraph (a)(3) is added, and paragraph (b) is revised
to read as follows:
Sec. 747.35 Conduct of hearings.
(a) * * *
(3) Examination of witnesses. Only one counsel for each party may
conduct an examination of a witness, except that in the case of
extensive direct examination, the administrative law judge may permit
more than one counsel for the party presenting the witness to conduct
the examination. A party may have one counsel conduct the direct
examination and another counsel conduct re-direct examination of a
witness, or may have one counsel conduct the cross examination of a
witness and another counsel conduct the re-cross examination of a
witness.
* * * * *
(b) Transcript. The hearing must be recorded and transcribed. The
reporter will make the transcript available to any party upon payment
by that party to the reporter of the cost of the transcript. The
administrative law judge may order the record corrected, either upon
motion to correct, upon stipulation of the parties, or following notice
to the parties upon the administrative law judge's own motion.
14. In Sec. 747.37, the section heading and paragraph (a)(1) are
revised to read as follows:
Sec. 747.37 Post-hearing filings.
(a) Proposed findings and conclusions and supporting briefs. (1)
Using the same method of service for each party, the administrative law
judge shall serve notice upon each party that the certified transcript,
together with all hearing exhibits and exhibits introduced but not
admitted into evidence at the hearing, has been filed. Any party may
file with the administrative law judge proposed findings of fact,
proposed conclusions of law, and a proposed order within 30 days
following service of this notice by the administrative law judge or
within such longer period as may be ordered by the administrative law
judge.
* * * * *
15. Section 747.38 is revised to read as follows:
Sec. 747.38 Recommended decision and filing of record.
(a) Filing of recommended decision and record. Within 45 days after
expiration of the time allowed for filing reply briefs under
Sec. 747.37(b), the administrative law judge shall file with and
certify to the NCUA Board, for decision, the record of the proceeding.
The record must include the administrative law judge's recommended
decision, recommended findings of fact, recommended conclusions of law,
and proposed order; all prehearing and hearing transcripts, exhibits,
and rulings; and the motions, briefs, memoranda, and other supporting
papers filed in connection with the hearing. The administrative law
judge shall serve upon each party the recommended decision, findings,
conclusions, and proposed order.
(b) Filing of index. At the same time the administrative law judge
files with and certifies to the NCUA Board for final determination the
record of the proceeding, the administrative law judge shall furnish to
the NCUA Board a certified index of the entire record of the
proceeding. The certified index shall include, at a minimum, an entry
for each paper, document or motion filed with the administrative law
judge in the proceeding, the date of the filing, and the identity of
the filer. The certified index shall also include an exhibit index
containing, at a minimum, an entry consisting of exhibit number and
title or description for: Each exhibit introduced and admitted into
evidence
[[Page 28028]]
at the hearing; each exhibit introduced but not admitted into evidence
at the hearing; each exhibit introduced and admitted into evidence
after the completion of the hearing; and each exhibit introduced but
not admitted into evidence after the completion of the hearing.
Dated: May 28, 1996.
Becky Baker,
Secretary of the Board, National Credit Union Administration.
[FR Doc. 96-13814 Filed 6-3-96; 8:45 am]
BILLING CODE 7535-01-P
