United States District Court, E.D. Louisiana
FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR FIRST NBC BANK
ORDER AND REASONS
the Court is a Motion to Stay Order on Motion for
Summary Enforcement of Administrative Subpoena (Rec. Doc.
68) filed by the Defendant Daniel Belcher. The
Plaintiff Federal Deposit Insurance Company
(“FDIC”) opposes this motion. (Rec. Doc. 76).
This motion, set for submission on January 8, 2020, is before
the Court on the briefs without oral argument.
NBC Bank Holding Company (“Holding Company”)
employed the public accounting firm Ernst & Young LLP
(“EY”) to perform audits over its issued
financial statements. (Rec. Doc. 23-23, p. 3, Belcher's
Opposition to the FDIC's Subpoena). Each opinion made by
EY was made with respect to the Holding Company and was
included in the Holding Company's yearly required 10-K.
Id. However, the Holding Company's only
significant asset was First NBC Bank (“Bank”).
(Rec. Doc. 49, p. 2, FDIC's Response Memorandum). Thus,
EY's annual audit was performed on a consolidated basis
and included the financial statements of both the Holding
Company and the Bank. Id.
the Bank's financial distress, the Public Company
Accounting Oversight Board (“PCAOB”) initiated a
confidential investigation relating to EY's audits of the
Holding Company and the Bank between 2013 and 2015. (Rec.
Doc. 23-27, Letter from EY). In connection with this
investigation, EY produced thousands of pages of documents to
the PCAOB, including audit workpapers, emails, proprietary
firm guidance and methodology, personnel files and reviews,
firm audit quality review documents, and other documents.
(Rec. Doc. 23-23, p. 6, Belcher's Opposition to the
FDIC's Subpoena). Further, eight EY auditors provided a
combined 28 days of testimony to the PCAOB, generating over
62, 000 transcript pages and using 390 exhibits. Id.
in May of 2017, the Holding Company declared bankruptcy, and
the Louisiana Office of Financial Institutions closed the
Bank and appointed the FDIC as its receiver. (Rec. Doc. 5-5,
p. 2, FDIC's Memorandum in Support). The FDIC
subsequently issued an Order of Investigation authorizing a
probe into the work performed by EY, and the FDIC began
requesting documents from the PCAOB. Id. at 3. After
the PCAOB's Board of Directors received this request, the
PCAOB's Board authorized the disclosure of particular
records to the FDIC, which included deposition transcripts
and other documents that it had received from EY. (Rec. Doc.
49, p. 4, FDIC's Response Memorandum). However, the PCAOB
never notified EY that it made these disclosures to the FDIC.
(Rec. Doc. 23-23, p. 6-7, Belcher's Opposition to the
FDIC's investigation developed, it subsequently issued
subpoenas for six administrative depositions of current and
former EY personnel. (Rec. Doc. 5-5, p. 3, FDIC's
Memorandum in Support). Of the six scheduled depositions, the
FDIC scheduled Mr. Belcher's first. Id. However,
three days before his deposition, Mr. Belcher notified the
FDIC that he would not be attending the deposition because
the PCAOB had improperly shared classified EY documents and
testimony with the FDIC. Id. Thus, the FDIC filed a
Motion for Summary Enforcement of Subpoena (Rec. Doc. 5) to
compel Mr. Belcher's deposition.
reviewing the FDIC's Motion, the Court granted the Motion
for Summary Enforcement and instructed Mr. Belcher “to
appear promptly for an administrative deposition.”
(Rec. Doc. 65, p. 11, Court's Order and Reasons). Instead
of complying with this Order, Mr. Belcher requested this
Court to stay its Order while the Fifth Circuit
“considers the significant questions of statutory
interpretation and privilege at issue.” (Rec. Doc.
68-3, p. 11, Belcher's Memorandum in Support). The Court
will now address the merits of Belcher's Motion to Stay.
stay pending appeal ‘simply suspends judicial
alteration of the status quo.'” Veasey v.
Perry, 769 F.3d 890, 892 (5th Cir. 2014) (citing
Nken v. Holder, 556 U.S. 418, 429 (2009)). A stay
may be automatic or discretionary. If the merits of the case
before the district court are directly involved in the merits
of an appeal, the district court's proceedings must be
stayed. Griggs v. Provident Consumer Discount Co.,
459 U.S. 56, 58 (1982) (per curiam). When an automatic stay
is not required by an appeal, the district court may
nevertheless grant a discretionary stay of the proceedings.
See Weingarten Realty Investors v. Miller, 661 F.3d
904, 908 (5th Cir. 2011). While a district court is granted
discretion in its decision on whether to grant a stay when a
stay is not required, “the exercise of that discretion
is not unbridled.” In re First South Sav.
Ass'n, 820 F.2d 700, 709 (5th Cir. 1987).
“[R]ather, the court must exercise its discretion in
light of what this court has recognized as the four criteria
for a stay pending appeal.” Id. Those four
traditional factors include: “(1) whether a stay
applicant has made a strong showing that he is likely to
succeed on the merits; (2) whether the applicant will be
irreparably injured absent a stay; (3) whether issuance of
the stay will substantially injure the other parties
interested in the proceeding; and (4) where the public
interest lies.” Weingarten Realty Investors,
661 F.3d at 910. Notably, the Supreme Court has held that the
“first two factors of the traditional standard are the
most critical.” Veasey, 769 F.3d at 892
(citing Nken, 556 U.S. at 434). Accordingly, there
is a “widely held view that a stay can never be granted
unless the movant has shown that success on appeal is
probable.” Ruiz v. Estelle (Ruiz I), 650 F.2d
555, 565 (5th Cir. 1981).
is, however, an exception where the heavy burden of the first
factor is not required. Under this exception to the
traditional rule, when a court is “confronted with a
case in which the other three factors strongly favor interim
relief, ” the court may lessen the burden of the first
factor from a strong showing of succeeding on the merits, to
a substantial case on the merits. Ruiz, 650 F.2d at
565 (citing Washington Metropolitan Area Transit
Commission v. Holiday Tours, Inc., 559 F.2d 841, 843
(D.C. Cir. 1977). Thus, when the three remaining factors
strongly favor interim relief and the exception applies,
“the movant need only present a substantial
case on the merits when a serious legal question is involved
and show that the balance of equities weighs heavily in favor
of granting a stay.” Ruiz, 650 F.2d at 565
(emphasis added) (citing Providence Journal v. Federal
Bureau of Investigation, 595 F.2d 889 (1st Cir. 1979);
U.S. v. Baylor University Medical Center, 711 F.2d
38 (5th Cir. 1983); see also In re Deepwater
Horizon, 732 F.3d 326, 345 (5th Cir. 2013) (citing
Weingarten Realty Investors, 661 F.3d at 910)
(stating “where there is a serious legal question
involved and the balance of equities heavily favors a stay .
. . the movant only needs to present a substantial case on
the merits.”)). If the moving party cannot demonstrate
this, then it must “make a more substantial showing of
likelihood of success on the merits in order to obtain a stay
pending appeal.” Id.
the analysis falls under the traditional approach or the
exception, the movant bears the burden of showing that a stay
is warranted. Weingarten Realty Investors, 661 F.3d
at 910. Where “there is even a fair possibility that
the stay . . . will work damage to someone else, ” the
party seeking a stay “must make out a clear case of
hardship or inequity in being required to go forward.”
Landis, 299 U.S. at 255; see Ind. State Police
Pension Tr. v. Chrysler LLC, 556 U.S. 960, 961 (2009)
(citation omitted) (“‘[A] stay is not a matter of
right, even if irreparable injury might result
otherwise.' It is instead an exercise of judicial
discretion, and the ‘party requesting a stay bears the
burden of showing that the circumstances justify an exercise
of that discretion.'”).
“Strong Showing of Succeeding on the Merits”
what constitutes a “likelihood of success, ” is
no easy task. As the Second Circuit has stated,
“[a]lthough courts have discussed and applied these
four criteria on numerous occasions, some uncertainty has
developed as to the first factor because of the various
formulations used to describe the degree of likelihood of
success that must be shown.” Mohammed v. Reno,
309 F.3d 95, 100 (2d Cir. 2002). While the analysis
“somewhat resembles the test applied in the district
court when evaluating a request for a preliminary injunction,
[ ] the differences in posture mean that the two tests are
not identical.” See FEDERAL PRACTICE AND
PROCEDURE § 3954 (citing National Treasury Employees
Union v. Von Raab, 808 F.2d 1057 (5th Cir. 1987)). Thus,
it is apparent that the circuits have, to a large degree,
chosen to engage in an ad-hoc decision-making process, rather
than a formulaic analysis when it comes to the first factor.
However, according to the Supreme Court, a sufficient
demonstration of a likelihood of success on the merits
“requires more than a mere possibility that relief will
be granted. Nken, 556 U.S. at 418. Even more
specifically, when determining the likelihood of a
movant's success, the Fifth Circuit has explicitly
considered the ...