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Case 1:13-cv-00465-MMS Document 39 Filed 03/27/14 Page 1 of 5

IN THE UNITED STATES COURT OF FEDERAL CLAIMS


FAIRHOLME FUNDS, INC., et al.,
Plaintiffs,
v.
THE UNITED STATES,
Defendant.

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No. 13-465C
(Judge Sweeney)

REPLY IN SUPPORT OF DEFENDANTS PROPOSED PLAN FOR DISCOVERY


The United States respectfully submits this reply to the opposition filed by Fairholme
Funds, Inc. et al. to the discovery plan filed by the Government on March 21, 2014.1
In its opposition, Fairholme argues, for the first time, that the administrative records
compiled in the parallel, District Court litigation are irrelevant to satisfying the Courts order
permitting limited discovery to respond to our motion to dismiss. Fairholme Opp. at 4-6.
Fairholmes argument mischaracterizes the administrative records and demonstrates Fairholmes
desire for open-ended discovery. Fairholme asks the Court to lose sight of the fact that we
remain at the very outset of this litigation, and that Fairholme sought discovery for the limited
purpose of responding to the arguments raised in the motion to dismiss. The Court should
conclude that absent some particularized showing to the contrary the administrative records,
when supplemented by the discovery described in the Governments proposed plan, more than
satisfy this Courts order regarding motion-to-dismiss related discovery.
Fairholme argues (1) that the 8,000 + pages of administrative records in the District Court
cases are not adequate, and (2) that the Court should grant Fairholme access to every potentially

We note that Fairholmes opposition is improper in that plaintiffs did not seek leave of
Court to submit an opposition.

Case 1:13-cv-00465-MMS Document 39 Filed 03/27/14 Page 2 of 5

relevant document instead of, under the stricter APA standard, those documents that were
directly or indirectly considered by the [agencys] decision makers. Id.
The existing administrative records, alone, satisfies Fairholmes needs, because they are
pursuing similar challenges in both District Court litigation and in this Court: that FHFA and
Treasury improperly entered into the Third Amendment to the Stock Agreements (Third
Amendment or Net Worth Sweep). Fairholme cannot explain why it needs wide-ranging
discovery far broader than the documents considered by the agency decision makers in entering
into the Third Amendment in order to respond to the motion to dismiss. In addition, our
proposed discovery plan provides for four depositions and related document discovery beyond
the administrative records this additional, extra-record discovery clearly suffices at this stage of
the proceedings. Proceeding in the manner described in our proposed plan, which includes
reliance on the existing administrative records, does not prejudice Fairholme.
For example, the Court permitted limited discovery into the potential future profitability
of Fannie Mae and Freddie Mac. Documents already in Fairholmes possession, including SEC
filings, Conservators Reports, and other documents in the administrative record, address this
point head on. Similarly, the Court permitted discovery into Fannie Maes and Freddie Macs
financial condition at the time FHFA placed the Enterprises into conservatorships. Once again,
multiple sources in the administrative records contain this information, including SEC filings and
other documents showing when the Enterprises began drawing on the Treasury commitment.
Fairholmes claim that it needs every potentially relevant document on these subjects
contravenes the Courts order permitting limited discovery to respond to the Governments
motion to dismiss. Because the Court did not order discovery on the merits of Fairholmes
claims, exhaustive discovery should not be allowed.

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Limiting discovery to the plan described in the Governments March 21, 2014 filing
ensures that discovery is no broader than necessary to fulfill the threshold issues identified by the
Court. Fairholme concedes that, with respect to the administrative records, the Government has
devoted considerable resources to compiling information and materials relevant to the decision to
impose the Net Worth Sweep, and that the information in the administrative records is relevant
to the subset of subjects as to which the Court has authorized discovery. Fairholme Opp. at 6.
This being uncontested, Fairholme cannot demonstrate why these materials are insufficient for
purposes of the limited discovery ordered here especially if supplemented by the discovery
described in our March 21, 2014 filing.
Fairholme contends that the administrative records are far from extensive and
voluminous because the records contain many publicly available documents. Fairholme Opp. at
5. This misses the point. Whether the documents in the administrative record originated from
public sources has no bearing at all on whether they satisfy the limited discovery the Court has
ordered here. Indeed, Fairholme admits that, in its motion for discovery, it cited to documents
from the administrative records. Fairholme Opp. at 5. Regardless of their origin, these records
clearly have value. Fairholme cannot have it both ways. It cannot rely upon administrative
record documents that are favorable (when arguing that Fairholme needs discovery), but then ask
the Court to ignore the existence of these administrative records when Fairholme wants to claim
it has too little information to prepare a meaningful opposition.2

Plaintiffs attach to their opposition in this Court their 38-page District Court
motion to supplement the administrative record. The Court should note that both Treasury and
FHFA filed responses to this motion, explaining that the administrative records are sufficient.
See Fairholme Funds, Inc. v. FHFA, No. 13-1053 (D.D.C.) (Dkt. 33, 34). The District Court has
not ruled on plaintiffs motion.
3

Case 1:13-cv-00465-MMS Document 39 Filed 03/27/14 Page 4 of 5

Fairholme also seeks to obscure the breadth of discovery it hopes to obtain. Fairholme
argues that because it has yet to serve discovery demands, the Court cannot assess the breadth of
the discovery it seeks. This argument is both inaccurate and unnecessary. First, Fairholmes
own, sworn statements identify the open-ended discovery it intends to seek. See, e.g., Fairholme
Mot., Ex 1 at 4 (discovery of emails, strategy documents, internal analyses and projections, and
other communications regarding the expected future profitability of Fannie and Freddie).
Moreover, if there is confusion, then it is because Fairholme has chosen not to notify the Court
what type of discovery will be sought. Fairholmes silence on the breadth of its planned
discovery speaks volumes, and demonstrates the accuracy of the analysis in our discovery plan.3
CONCLUSION
Given the limited discovery ordered by the Court, the ample documentary materials
already available to Fairholme, and the enormous burden posed by Fairholmes proposed plan,
the Court should adopt the United States discovery plan.
Respectfully submitted,
STUART F. DELERY
Assistant Attorney General
s/ Robert E. Kirschman, Jr.
ROBERT E. KIRSCHMAN, JR.
Director
s/ Kenneth M. Dintzer
KENNETH M. DINTZER
Acting Deputy Director
3

Fairholme mischaracterizes the communications between the parties leading to the


filing of the parties discovery plans. Fairholme Opp. at 1. As Exhibit 1 to Fairholmes
opposition demonstrates, we responded to each of Fairholmes emails and provided our proposed
discovery plan to Fairholme the day after the court denied the Governments motion for
reconsideration. The fact is that, because the discovery plans were so fundamentally different,
the parties were unable to reach agreement on a joint proposed discovery schedule. See 3/21/14
Joint Status Report.
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Case 1:13-cv-00465-MMS Document 39 Filed 03/27/14 Page 5 of 5

Commercial Litigation Branch


Civil Division
U.S. Department of Justice
P.O. Box 480 Ben Franklin Station
Washington, D.C. 20044
(202) 616-0385
(202) 307-0972 fax
KDintzer@CIV.USDOJ.GOV
Attorneys for Defendant
March 27, 2014

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