Thursday, July 23, 2015

FSOC Fights Document Production in MetLife SIFI-Designation Case

By Amy Leisinger, J.D.

In MetLife, Inc.’s ongoing action challenging its designation as a systemically important financial institution (SIFI), the Financial Stability Oversight Council (FSOC) has moved the D.C. federal district court to deny MetLife’s motion to compel disclosure of withheld and redacted materials. According to FSOC, disclosure of documents provided by state insurance regulators is precluded by the confidentiality protections of Dodd-Frank Act coupled with state law privileges (MetLife, Inc. v. Financial Stability Oversight Council, July 20, 2015).

Background. MetLife was designated a SIFI in December 2014, based on FSOC’s determination that material financial distress at the company could threaten financial stability. MetLife asked the court to overturn the designation, arguing (with the support of the Chamber of Commerce) that FSOC relied on weak economic assumptions to back its findings and that MetLife was not given a chance to rebut the Council’s reasoning because key data used to label MetLife as a nonbank SIFI was not made available.

On May 8, 2015, FSOC provided MetLife with an administrative record of more than 80,000 pages of information, noting that “certain documents or portions of documents have been redacted or withheld.” The excluded documents were ones provided to FSOC by state insurance regulators who had informed the council that the documents were sensitive and confidential and should not be disclosed to MetLife. Following a protective order entered by the court on June 12, 2015, FSOC produced the majority of the redacted and withheld documents with the permission of the state regulators, but the regulators requested that the council continue to withhold in full or redact in part a set of documents due to the particularly sensitive, privileged nature of the material. MetLife continues to move for production of all of the documents.

Deny motion to compel. FSOC moved to deny MetLife’s motion to compel, stating that it is required to withhold the documents pursuant to its obligations under Dodd-Frank Act Section 112, which provides that FSOC must “maintain the confidentiality of any data, information, and reports submitted.” In addition, according to FSOC, the state regulators that submitted the materials have informed FSOC that the materials are protected by state law privileges that preclude their disclosure, and the Dodd-Frank Act provides that submission of materials to FSOC does not constitute a waiver of any privilege under state law to which the information is subject. As such, FSOC argues, information protected by state law privilege transmitted to the council retains its privileged nature. This is particularly important given the possibility that disclosure of materials could have a chilling effect on candid participation in confidential regulatory discussions, FSOC claimed.

The existing record in this case is sufficient, and, if necessary, an in camera review would confirm that maintaining confidentiality of the withheld and redacted information would not cause undue prejudice, FSOC concludes.

The case is No. 15-cv-00245 (RMC).