Kelley v. BMO Harris Bank N.A., as successor to M&I Marshall and IIsley Bank

Background

The court considered Defendant BMO Harris Bank N.A.’s motion to exclude evidence under the bank examination privilege. The privilege arises from federal banking regulations and is a qualified privilege protecting certain agency opinions or recommendations, and banks’ responses to them, from disclosure during discovery.

In 2017, the bankruptcy court ordered BMO Harris to produce documents that BMO Harris and the Federal Reserve claimed were protected by the privilege. That court found the information relevant, determined that the privilege belonged to the Federal Reserve, and found that the Federal Reserve had not met its burden to establish the privilege’s existence and applicability. The 2017 order was not appealed, and the documents were disclosed during discovery.

Analysis

The court held that any attempt to invoke the privilege to prevent discovery was moot because disclosure had already occurred. It also concluded that the privilege protects against disclosure during discovery, not the admission of evidence at trial after discovery has occurred. BMO Harris raised the issue for the first time after trial had begun and did not cite authority supporting use of the privilege to exclude evidence at that stage. The court therefore found the motion untimely and misplaced.

The court separately explained that, even if the privilege applied to trial admissibility, it belonged to the relevant regulatory agency rather than BMO Harris. The Federal Reserve had not asserted the privilege in this court, and neither BMO Harris nor a federal agency provided evidence establishing the privilege or identified the specific evidence that should be excluded. The court also noted that the Trustee represented he would not present evidence explicitly revealing whether a Suspicious Activity Report had been filed and would redact portions of exhibits containing that information.

Finally, the court agreed with the bankruptcy court’s finding that good cause supported overriding the privilege as to deliberative material. The court identified additional good-cause considerations, including prejudice to the Trustee and wasted trial time resulting from BMO Harris’s late assertion of the issue. It also reiterated that the privilege belonged to the applicable federal agency, which had not sought relief despite notice of the issue.

Disposition

Judge Wilhelmina M. Wright denied BMO Harris’s motion to exclude evidence pursuant to the bank examination privilege. The court stated that it would not entertain further evidentiary objections on that basis, while clarifying that the parties could agree to redact exhibits to address BMO Harris’s concerns.