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McCormac v. United States Dep't of the Treasury

May 14, 2007

JOHN E. MCCORMAC AND RICHARD H. MOORE, PLAINTIFFS,
v.
UNITED STATES DEPARTMENT OF THE TREASURY, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hughes, U.S.M.J.

MEMORANDUM OPINION

This matter is before the Court upon the Motion of Defendants United States Department of the Treasury, John W. Snow, Bureau of Public Debt and Van Zeck ("Defendants") for a Protective Order. Plaintiffs John E. McCormac and Richard H. Moore ("Plaintiffs"), Treasurers of New Jersey and North Carolina respectively, oppose the motion. This matter involves fully matured unclaimed United States Savings Bonds that New Jersey and North Carolina claim should be returned to the States as unclaimed property of New Jersey and North Carolina residents within the meaning of the New Jersey State Uniform Unclaimed Property Act (N.J.S.A. 46:30B-1, et seq.) and the North Carolina Escheat and Unclaimed Property Act (General Statute §§ 116B et seq.) (the "Acts"). The Court previously limited discovery to the issues of ripeness and final agency action. Defendants now move for a protective order limiting the Rule 30(b)(6) subject matter inquiries noticed by Plaintiffs. The Court reviewed the written submissions of the parties and conducted oral argument on May 10, 2007. For the reasons that follow, Defendants' motion for a protective order is granted in part, denied in part, and dismissed as moot in part.

I. BACKGROUND AND PROCEDURAL HISTORY

A. Factual Background and Procedural History

This case involves over $800 million in fully matured United States Savings Bonds that New Jersey and North Carolina assert are unclaimed property of State residents within the meaning of the New Jersey State Uniform Unclaimed Property Act (N.J.S.A. 46:30B-1, et seq.) and the North Carolina Escheat and Unclaimed Property Act (General Statute §§ 116B et seq.). (Pls.' Am. Compl. at ¶ 1). The Savings Bonds have remained in the custody of the Bureau of Public Debt, a division of the United States Treasury, for at least a year after maturity without any communication between the Savings Bonds' respective New Jersey and North Carolina resident owners and the Bureau. Id. Plaintiffs contend that the Acts require the Bureau to report and deliver the bonds to New Jersey and North Carolina for beneficial custody to be returned to the rightful owners to the extent possible. Id.

Under the Acts, all holders of unclaimed property must report and deliver to the New Jersey or North Carolina Treasurers such property whose owners have last known addresses in those respective States. Id. at ¶ 15. Therefore, for each Savings Bond sold by the United States Treasury Department, the Bureau of Public Debt issued and maintains a registration record which identifies the person or entity having ownership or beneficial custody of the bond. Id. at ¶ 2. New Jersey and North Carolina, through their Treasurers, assert that Defendants refuse to update registration records or make payment of bond proceeds to New Jersey and North Carolina as required under the Acts and by federal law. Id. Plaintiffs allege that if the Bureau maintained these records accurately, with the States named as registered custodians, the Bureau would pay New Jersey and North Carolina the proceeds of the Savings Bonds upon demand. Id. at ¶ 26.

Instead, Plaintiffs claim that Defendants, acting through the Bureau, have established a policy of refusing to recognize State escheat claims premised upon custody escheat statutes, while purportedly accepting State escheat claims premised upon title escheat statutes. Id. The Treasury sets forth its policy on its Internet website:

The Department of the Treasury will recognize claims by States for payment of United States securities where the States have actually succeeded to the title and ownership of the securities pursuant to valid escheat proceedings. The Department, however, does not recognize claims for payment by a State acting merely as custodian of unclaimed or abandoned securities and not as successor in title and ownership of the securities.

Id. Plaintiffs contend that Defendants' refusal to pay Savings Bond proceeds to States having custody escheat statutes, a policy that is set forth on its Internet website, fulfills any requirement for final agency action under 5 U.S.C. §§ 702 and 704. Id. at ¶ 34.

On September 8, 2004, Plaintiffs filed a complaint against the United States Department of the Treasury, John W. Snow, Bureau of Public Debt and Van Zeck seeking, in part, to have Defendants (1) transfer to the State of New Jersey all unclaimed United States Savings Bonds whose owners have last known addresses in the State and (2) provide adequate accounting of the amounts due to New Jersey. (See Dkt. no. 04-4368, entry no. 1). On September 14, 2004, Plaintiffs filed an Amended Complaint which included an additional Count seeking (1) the transfer to North Carolina of all unclaimed United States Savings Bonds whose owners have last known addresses in North Carolina and (2) an adequate accounting of the amounts due to North Carolina. (Pls.' Am. Compl. at ¶ 39).

On February 2, 2005, Defendants filed a Motion to Dismiss the Complaint for Lack of Jurisdiction or in the alternative to transfer the action to the Court of Federal Claims. (See Dkt. no. 04-4368, entry no. 9). The Motion to Dismiss was denied, but Defendants' motion to transfer the action to the Court of Federal Claims was granted on July 29, 2005. (See Dkt. no. 04-4368, entry no. 21 and 22). Plaintiffs appealed the Court's Order transferring the case to the Court of Federal Claims. (See Dkt. no. 04-4368, entry no. 26). On June 19, 2006, the United States Court of Appeals for the Federal Circuit held that the Court of Federal Claims did not have jurisdiction over this matter and remanded the case to this Court for further proceedings. (See Dkt. no. 04-4368, entry no. 31).

Subsequently, on October 27, 2006, Defendants filed an Answer to the Amended Complaint. (See Dkt. no. 04-4368, entry no. 40). The Court then conducted a Rule 16 Conference and filed a Scheduling Order on November 15, 2006 which limited discovery to ripeness and final agency action and set a deadline for discovery of February 28, 2007. (See Dkt. no. 04-4368, entry no. 41). The methods of discovery included one Rule 30(b)(6) deposition, interrogatories, and requests for production of documents. (Defs.' Mem. at 1). By stipulation, the parties limited the subject matters covered in the deposition. Id. The stipulation also stated that the language on the Treasury's website "is defendants' interpretation of federal savings bond regulations, [31 U.S.C. 3105 et seq and regulations, 31 CFR parts 315 et seq and 31 CFR parts 353 et seq] and reflects defendants' understanding of existing laws." Id. at 10. Now, Plaintiffs currently seek to cover several subject matters in the 30(b)(6) deposition to which Defendants object. Id.

Plaintiffs' subject matter requests three and four are similar and seek testimony regarding the Treasury's policy as stated on its web-site. Specifically, Plaintiffs' third request seeks testimony on "Treasury's Internet web site, with respect to the statement set forth in subject matter number 4, including policies and procedures for content, maintenance and changes of the website." Id. at 8. Plaintiffs' fourth request seeks testimony regarding

The following statement found on Treasury's Internet web site: "The Department of the Treasury will recognize claims by States for payment of United States securities where the States have actually succeeded to the title and ownership of the securities pursuant to valid escheat proceedings. The Department, however, does not recognize claims for payment by a State acting merely as custodian of unclaimed or abandoned securities and not as successor in title and ownership of the securities," including its drafting, review and revision, approval and placement on the site.

Id. at 10. Plaintiffs' fifth request seeks testimony on "[t]he money set aside to meet demands on federal obligations, including but not limited to those relating to savings bonds, related accounting policies and procedures." Id. at 5. Finally, Plaintiffs' tenth request seeks testimony on "Treasury's compliance with the states' unclaimed property laws in situations other than savings bonds." Id. at 11. Plaintiffs withdrew subject matter number five and therefore, Defendants are objecting only to subject matters three, four, and ten. (See Pls.' Opp. Mem. at 3).

B. Motion for Protective Order

On March 9, 2007, Defendants filed the present motion for a protective order to limit the third, fourth, and tenth Rule 30(b)(6) subject matter inquiries noticed by Plaintiffs. (See Dkt. no. 04-4368, entry no. 45). Defendants argue that these requests are irrelevant to ripeness and final agency action and overly burdensome. Id. at 9, 11-12. Defendants further argue that their responses are protected under the deliberative process privilege. Id. at 11. Plaintiffs argue in opposition that the discovery is reasonable and within the Court's Case Management Order limiting the scope of discovery. (Pls.' Opp. Mem. at 2). Plaintiffs further contend that the subject matters noticed are relevant to ripeness and final agency action and not unduly burdensome. Id. at 9-10. Plaintiffs argue that Treasury's stipulation ...


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