FRB: Orders Under FDI Act--Determinations on Interlocutory Review--September 16, 2005

UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, DC

In the Matter of

Jean Peyrelevade,
A former institution-affiliated party of
Credit Lyonnais,

Respondent

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DETERMINATION ON MOTION FOR INTERLOCUTORY REVIEW

03-041-CMP-I
03-041-B-I
03-041-E-I

DETERMINATION ON MOTION FOR INTERLOCUTORY REVIEW

Background

On December 18, 2003 , Board Enforcement Counsel initiated this proceeding against Respondent Jean Peyrelevade (“Peyrelevade”). In the Notice of Charges, Enforcement Counsel alleged that Peyrelevade participated in alleged violations of the Bank Holding Company Act of 1956 in his role as chairman of Credit Lyonnais, specifically with respect to Credit Lyonnais’s ownership and control over a California insurance business, Executive Life, and that Peyrelevade made false representations to the Federal Reserve Board in 2001 and 2002 regarding his knowledge of these alleged violations. Peyrelevade, who resides in France, is also currently under indictment in the United States District Court for the Central District of California for alleged conduct relating to the Executive Life matter, but has not appeared in the United States to defend the pending charges. France ’s extradition treaty with the United States does not permit French nationals to be extradited to the United States . See Article 3, Paragraph 1, 1996 U.S.T. LEXIS 53 (entered into force February 1, 2002, http://www.state.gov/documents/organization/38535.pdf (128 KB PDF) ).

On February 1, 2005, in response to the parties Joint Motion for the Issuance of Requests for International Judicial Assistance (“the Joint Motion”), the Administrative Law Judge (“ALJ”) issued Letters of Request and Commissions to a consular official under the Hague Convention for the Taking of Evidence Abroad authorizing testimony to be taken in Paris of thirteen French national witnesses proposed by the parties, including Peyrelevade. The Joint Motion noted that the parties were not asking the ALJ to determine at that point whether particular depositions were for discovery purposes or for preservation of testimony purposes. In fact, the Joint Motion specifically indicated Enforcement Counsel’s intention to file a motion with the ALJ regarding the proposed testimony of Respondent (as well as two other French witnesses of Respondent who were also named in the indictment charges in California), but that because of the lead time necessary to schedule the depositions in France, the parties agreed to submit their request to the ALJ, pending the outcome of Enforcement Counsel’s anticipated motion.¹

Accordingly, on February 18, 2005 , Board Enforcement Counsel filed a Motion in Limine, requesting, among other things, that the ALJ rule that Peyrelevade be permitted to testify only by appearing in person at the hearing in the United States , rather than by a deposition to be taken in France . In its Motion in Limine, Enforcement Counsel argued that Peyrelevade should not be considered “unavailable” under the Board’s Rules of Practice (“the Rules”) merely because he was residing overseas, given that he would be using the deposition testimony to substitute for live testimony in order to avoid arrest for the pending criminal indictment in California, and that in-person testimony is necessary to enable the ALJ to properly assess Peyrelevade’s credibility. After extensive briefing from Peyrelevade and Enforcement Counsel, on June 6, 2005, the ALJ issued an Order (“the June 6 Order”) finding that Peyrelevade’s residence abroad “does not … meet the standards of ‘unavailable’” and accordingly, that Peyrelevade’s deposition could not be taken to preserve his testimony under Rule 263.27 of the Board’s Rules or offered into evidence at the hearing under Rule 263.36 of the Board’s Rules.

On July 1, 2005 , Peyrelevade filed with the ALJ a Request for Interlocutory Review of the June 6 Order (“the Request”). In the Request, Peyrelevade contends that interlocutory review is appropriate and necessary in this case because the ALJ’s ruling improperly resolves a controlling issue of law by denying consideration of Peyrelevade’s deposition testimony and by barring Peyrelevade from preserving his testimony by way of a testimonial deposition pursuant to Rule 263.27 of the Board’s Rules, thereby eliminating his ability to “preserve a full and accurate record for the Board’s consideration.” Peyrelevade also contends that interlocutory review is appropriate in order to avoid the additional delay and expense of reinitiating the lengthy process of arranging and taking Peyrelevade’s deposition in France, which would be required in the event that the Board later modifies the ALJ’s June 6 Order.

Board Enforcement Counsel filed a response to Peyrelevade’s Request for Interlocutory Review, arguing that the Board has previously denied an almost identical request for interlocutory review in an earlier enforcement action and that Peyrelevade has failed to satisfy any of the elements necessary for the Board to find that the circumstances “are extraordinary enough” to merit interlocutory review. On July 22, 2005 , the ALJ, pursuant to Rule 263.28(c) of the Board’s Rules, referred Peyrelevade’s Request for Interlocutory Review to the Board for final disposition.²

Discussion

I. Applicable Standard

Rule 263.28 of the Board’s Rules provides that the Board may exercise interlocutory review of an ALJ’s ruling if the Board finds that:

the ruling involves a controlling question of law or policy as to which substantial grounds exist for a difference of opinion;
immediate review of the ruling may materially advance the ultimate termination of the proceeding;
subsequent modification of the ruling at the conclusion of the proceeding would be an inadequate remedy; or
subsequent modification of the ruling would cause unusual delay or expense.

12 C.F.R. § 263.28(b). These provisions are similar to 28 U.S.C. §1292(b), which sets forth the circumstances under which federal appellate courts may exercise jurisdiction over interlocutory appeals. Thus, the Board has previously observed that “[w]hile section 1292(b) and case law governing interlocutory review in civil proceedings are not binding in this administrative proceeding, they provide useful guidance to the [agencies] in deciding procedural issues such as the one presented here.” In re Incus Co. Ltd, 86 Fed. Reserve Bull. 246 (2000) (citations omitted).

The Board has also repeatedly emphasized that interlocutory review is discretionary, and that “the scope within which such discretion should be exercised is extremely narrow.” Id. (citations omitted). The Board’s limitation on interlocutory review reflects a strong and longstanding federal policy against piecemeal appeals before a final judgment. Id . (citing Switzerland Cheese Ass’n, Inc. v. E. Horne’s Market, Inc., 385 U.S. 23, 24-25 (1966)). Accordingly, while a finding of one of the four circumstances set forth in Rule 263.28(b) is a necessary precondition to interlocutory review by the Board, it is not alone sufficient to require that the Board grant such review.” Id. All four of the prerequisites are to be used to guide the Board in the exercise of its discretion. Id. at 246.

Interlocutory appeals are generally disfavored because they undermine the independence of the trial judge, expose the parties to harassment and the burdensome costs of a succession of separate appeals, promote delay, and require the unnecessary expenditure of scare judicial resources. SeeFirestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 374 (1981); Catlin v. United States , 324 U.S. 229, 233-34 (1945). Thus, the Board has stated that a party seeking interlocutory review “has the burden of persuading the Board that exceptional circumstances justify a departure from the basic policy of postponing appellate review until after the entry of final judgment.” Incus, at 246-47, (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 475 (1978)).

For the reasons set forth below, the Board determines that Peyrelevade has failed to meet that burden, and his request for interlocutory review is denied.

II. Analysis of June 6 Order Under Standard of Rule 263.28(b)

A. Existence of Controlling Question of Law or Policy

Peyrelevade contends that the June 6 Order involves a “controlling question of law or policy as to which substantial grounds exist for a difference of opinion.” The Board has previously noted that “[p]retrial rulings on the admissibility of evidence are not ordinarily subject to interlocutory review.” In re Pharaon, Order Denying Motion for Interlocutory Review, Docket Nos. 91-037-E-I7 & 91-043-E-I7, p.3 (Sept. 12, 1995) (citing Coursen v. A.H. Robins Co., Inc., 764 F.2d 1329, 1342 (9 th Cir. 1985)). More specifically, the Board has determined, on nearly identical facts, that no controlling question of law or policy existed, where the ALJ issued a prehearing order ruling that a foreign national respondent subject to a related pending criminal indictment may not present his testimony at the hearing via a deposition taken abroad. Pharaon, Order Denying Motion for Interlocutory Review, at p.4. In denying the motion for interlocutory review in Pharaon, the Board observed that “[i]t is impossible to know whether and to what extent an in limine ruling on the admissibility of evidence would control the outcome of a proceeding absent the holding of the hearing, a ruling in the context of that hearing, and the issuance of a recommended decision.” Id .

Peyrelevade contends that the instant matter is distinguishable from Pharaon and does involve a controlling issue of law in that the ALJ has ruled not only that Peyrelevade may not introduce his deposition as testimony at the hearing, but also that his deposition cannot be taken to preserve his testimony pursuant to Rule 263.27, thereby eliminating his ability to “preserve a full and accurate record for the Board’s consideration.”³ The Board finds, however, that the ultimate impact of the ALJ’s ruling on the outcome of this case is still entirely speculative. For instance, Peyrelevade may ultimately decide to testify in person at the hearing despite his current position; or he could prevail in the hearing without recourse to his testimony. Either one of these outcomes would moot the questions presented at this stage. Moreover, it is entirely unclear at this stage what impact his deposition testimony, even if permitted, would have on the outcome of the hearing. As the Ninth Circuit noted in Coursen, “[i]n limine rulings are by their very nature preliminary. It is impossible to determine whether the movant will be prejudiced by such ruling absent a trial, a ruling in the context of trial, and the return of a verdict.” Coursen, 764 F.2d at 1342.

Even if the ALJ’s June 6 ruling did involve a “controlling question of law or policy,” Peyrelevade has failed to establish that “substantial grounds exist for a difference of opinion” on the issue of whether he has a right under these circumstances to testify at the hearing by deposition.⁴ To the contrary, the D.C. Circuit Court of Appeals upheld the ALJ’s decision in Pharaon, on nearly identical facts, that a foreign respondent was required to testify in person if he wanted his testimony considered at the hearing.

In his June 6 Order, the ALJ ruled that because Peyrelevade’s testimony will involve “significant determinations regarding credibility,” it is “both important and proper that [Peyrelevade] be required … to appear in person at hearing if he intends to testify.” The D.C. Circuit, in explaining its conclusions with respect to the ALJ’s ruling in Pharaon, noted that “[g]iven the significance of personal observation to credibility determinations, we cannot say that [the ALJ’s] ruling amounted to an abuse of discretion.” Pharaon v. Board of Governors of the Federal Reserve System, 135 F.3d 148 (D.C. Cir. 1998), cert. denied, 525 U.S. 947 (1998). Particularly in absence of authority to the contrary, this opinion demonstrates that no substantial grounds exist for a difference of opinion with regard to the June 6 Order.

B. Other Rule 263.28(b) Criteria

Additionally, the Board does not find that immediate review of the June 6 Order would materially advance the ultimate termination of the proceeding or that subsequent modification of the Order would be an inadequate remedy or cause unusual delay or expense. Peyrelevade combines his arguments with respect to these three criteria, contending only that because the June 6 Order precludes the taking of Peyrelevade’s deposition for the purpose of preserving testimony, unusual and unnecessary delay and expense will result if review and modification of the June 6 Order are deferred until the conclusion of the proceedings before the ALJ. Peyrelevade argues that because such delay and expense can be avoided through the Board’s exercise of interlocutory review, the ultimate termination of this proceeding would be materially advanced by the Board’s decision to exercise review.

In Pharaon, the Board determined that immediate review of the ALJ's similar in limine ruling would not materially advance the ultimate termination of the proceeding and, moreover, that subsequent modification of the ALJ’s ruling would not lead to unusual expense or delay. The Board specifically rejected Pharaon’s argument that the entire proceeding would have to be repeated if the Board subsequently decided that Pharaon should have been permitted to testify by deposition. See In re Pharaon, Order Denying Motion for Interlocutory Review, Docket Nos. 91-037-E-I7 & 91-043-E-I7, p.4 ( Sept. 12, 1995 ). Peyrelevade points out that the Board’s decision denying interlocutory review in Pharaon assumed that Enforcement Counsel in that proceeding would take Pharaon’s deposition for discovery purposes and expressly anticipated that the ALJ would transmit the deposition transcript to the Board along with any other rejected exhibits. This was not, however, the controlling basis for the Board’s denial of interlocutory review in Pharaon and does not warrant a different outcome with respect to the ALJ’s June 6 Order in this matter.⁵ Even if the Board ultimately determines that the June 6 Order is improper and that Peyrelevade should be permitted to testify by deposition, the Board can simply remand the matter for consideration of a deposition of Peyrelevade by the ALJ. While Peyrelevade and Enforcement Counsel disagree on the amount of delay that would be caused by rescheduling Peyrelevade’s deposition, it seems unlikely at this point that any substantial delay or expense would result even if it is ultimately necessary to re-request authorization for Peyrelevade’s deposition, given that the French Ministry of Justice authorized the requested depositions (including Peyrelevade’s) on August 26, 2005. Therefore, as the Board noted in Pharaon, “the extent to which subsequent modification would result in any delay and expense, let alone unusual delay and expense, is wholly speculative.” Id. (emphasis in original).

As set forth herein, the arguments advanced by Peyrelevade fail to provide an appropriate basis upon which the Board may grant interlocutory review of the ALJ’s Order. Peyrelevade has not demonstrated the exceptional circumstances necessary to justify a departure from the Board’s basic policy of postponing review until the conclusion of the hearing and the close of the record. Accordingly, the Board declines Peyrelevade’s request for interlocutory review of the ALJ’s June 6, 2005 Order.

By Order of the Board of Governors, this 16th day of September, 2005.

BOARD OF GOVERNORS OF THE
FEDERAL RESERVE

SYSTEM
(signed)

________________________________________
Jennifer J. Johnson
Secretary of the Board

Footnotes

1. Notably, on August 26, 2005 , the French Ministry of Justice authorized the requested depositions. Return to text

2. On August 15, 2005 , the ALJ granted a request by Peyrelevade for leave to file an additional reply in support of his Request for Interlocutory Review. Accordingly, Peyrelevade’s additional reply was transmitted to the Board on August 15, 2005. Return to text

3. Peyrelevade is listed on his own witness list but not on Enforcement Counsel’s. While Enforcement Counsel could take Peyrelevade’s deposition under the Board’s discovery rules, 12 C.F.R. § 263.53, Enforcement Counsel have indicated that they do not intend to do so. Return to text

4. Unless he has that right, the issue of whether he is “unavailable” within the meaning of the Board’s rules is ultimately unimportant. Return to text

5. The Board notes that Pharaon ultimately declined to appear for a deposition in that matter.
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October 5, 2005