The opinion
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
DANIEL L. JUNK, : 19cv385 (DLC)
:
Plaintiff, : OPINION AND ORDER
:
-v- :
:
BOARD OF GOVERNORS OF THE FEDERAL :
RESERVE SYSTEM, :
Defendant. :
:
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APPEARANCES:
For plaintiff:
Frank J. Dito, Jr.
Law Offices of Frank J. Dito, Jr.
1610 Richmond Road
Staten Island, NY 10304
(718) 701-2776
For defendant:
Monica Pilar Folch
United States Attorney's Office
Southern District Of New York
86 Chambers Street, Third Floor
New York, NY 10007
(212) 637-6559
DENISE COTE, District Judge:
On January 14, 2019, Daniel Junk (“Junk”) filed this action
against the Board of Governors of the Federal Reserve System
(the “Board”) under the Freedom of Information Act (“FOIA”) to
compel production of records relating to three loans made by the
Federal Reserve Bank of New York (the “FRBNY”). The Board
rejected Junk’s FOIA request, concluding that the records in
question were records of the FRBNY. The Board now moves to
dismiss this action for lack of subject matter jurisdiction and
improper venue. The parties have also filed cross-motions for
summary judgment. The Board’s motion to dismiss is denied. The
Board’s motion for summary judgment is granted in part, as is
Junk’s motion for summary judgment.
BACKGROUND
The following facts are undisputed. The Federal Reserve
System was created by Congress in 1913 pursuant to the Federal
Reserve Act. 12 U.S.C. § 222. The Federal Reserve System is
composed of the Board, located in Washington, D.C., and twelve
regional Federal Reserve Banks (“FRBs”). 12 U.S.C. §§ 222, 224.
The Board supervises the operations of the FRBs. 12 U.S.C. §
224.
On April 3, 2018, Junk submitted a FOIA request to the
Board for “any records from Maiden Lane LLC, Maiden Lane II LLC,
and Maiden Lane III LLC [(the “Maiden Lane LLCs”)] containing
the . . . nine-digit, alphanumeric CUSIP number 40431LA9.” The
Maiden Lane LLCs were limited liability companies created by the
FRBNY during the 2008 financial crisis. In 2008, pursuant to
Section 13(3) of the Federal Reserve Act, the Board authorized
the FRBNY to issue loans to the Maiden Lane LLCs, which the
Maiden Lane LLCs used to purchase assets from certain financial
institutions. See 12 U.S.C. § 343 (1991) (as amended 2010). In
closing out the Maiden Lane LLCs in August 2012, the FRBNY sold
eight residual securities that, according to the FRBNY’s
website, “had been factored to zero and consequently dropped
from [its] portfolio holding report.” Junk believes that among
these residual securities was a security with CUSIP number
40431LA9.
On June 6, the Board denied Junk’s request. The Board
concluded that its “duty to search records [was] not triggered
because the Board is not reasonably likely to have information
responsive to [Junk’s] request.” The Board further explained
that because the FRBNY had issued loans to the Maiden Lane LLCs
under its own authority, the FRBNY maintained the records
related to the Maiden Lane LLCs.1
On January 14, 2019, Junk initiated the instant action. On
April 29, the Board filed a motion to dismiss for lack of
subject matter jurisdiction and improper venue, or for summary
judgment. Junk opposed the Board’s motions and cross-moved for
summary judgment on May 29. The motions were fully submitted on
July 15.
1 On June 25, Junk emailed the Board “appeal[ing]” his FOIA
request, which the Board denied on January 22, 2019.
DISCUSSION
I. Subject Matter Jurisdiction
The Board moves to dismiss this action for lack of subject
matter jurisdiction. It reasons that, because FOIA only
provides courts with jurisdiction upon a showing that an agency
has withheld “agency records,” and the records at issue are
housed at the FRBNY, there is no subject matter jurisdiction
over this lawsuit.
FOIA grants district courts “jurisdiction to enjoin the
agency from withholding agency records . . . improperly withheld
from complainant.” 5 U.S.C. § 552(a)(4)(B). As the Second
Circuit has explained, the term jurisdiction in the statute
refers to the court’s “remedial power, not subject matter
jurisdiction.” Main St. Legal Servs., Inc. v. Nat’l Sec.
Council, 811 F.3d 542, 566 (2d Cir. 2016). The Board’s motion
to dismiss for lack of subject matter jurisdiction is therefore
denied.
II. Summary Judgment
The parties have cross-moved for summary judgment on Junk’s
FOIA request. Summary judgment may not be granted unless all of
the submissions taken together “show[] that there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a).
“Summary judgment is appropriate when the record taken as a
whole could not lead a rational trier of fact to find for the
non-moving party.” Smith v. Cnty. of Suffolk, 776 F.3d 114, 121
(2d Cir. 2015) (per curiam) (citation omitted). “In order to
prevail on a motion for summary judgment in a FOIA case, the
defending agency has the burden of showing that its search was
adequate.” Carney v. U.S. Dep't of Justice, 19 F.3d 807, 812
(2d Cir. 1994). “Affidavits or declarations supplying facts
indicating that the agency has conducted a thorough search . . .
are sufficient to sustain the agency’s burden” and “are accorded
a presumption of good faith.” Id. (citation omitted).
Absent a relevant exemption, FOIA requires a federal agency
to disclose “agency records” in its possession. See 5 U.S.C. §
552(a)(4)(B). Under FOIA, documents are “agency records” if:
“(1) the agency created or obtained the relevant records, and
(2) the agency is in control of the documents at the time of the
FOIA request.” Fox News Network, LLC v. Bd. of Governors of
Fed. Reserve Sys., 601 F.3d 158, 160 (2d Cir. 2010).
The Secretary of the Board is the official custodian of
“all Board records, including records that are in possession or
control of the Board, any [FRB], or any Board or Reserve Bank
employee.” 12 C.F.R. § 261.3(a). Federal regulations define
which records of the Board are “agency records” for purposes of
FOIA. See Fox News Network, 601 F.3d at 161. Those regulations
define the “Records of the Board” to include records of the FRBs
in two circumstances. The regulations provide that Records of
the Board include:
(i) In written form, or in nonwritten or machine-
readable form; all information coming into the
possession and under the control of the Board,
any Board member, any Federal Reserve Bank, or
any officer, employee, or agent of the Board or
of any Federal Reserve Bank, in the performance
of functions for or on behalf of the Board that
constitute part of the Board's official files; or
(ii) That are maintained for administrative reasons in
the regular course of business in official files
in any division or office of the Board or any
Federal Reserve Bank in connection with the
transaction of any official business.
12 C.F.R. § 261.2(i)(1)(i)-(ii) (emphasis supplied).
Under this definition, FRB records are Board records either
(1) “when they are created pursuant to the ‘performance of
functions for or on behalf of the Board,’” or (2) “when they
‘are maintained for administrative reasons in the regular course
of business in official files in any division or office of the
Board or any [FRB] in connection with the transaction of any
official business.’” Fox News Network, 601 F.3d at 161 (quoting
12 C.F.R. § 261.2(i)(1)(i)-(ii)).
In Fox News Network, the Second Circuit considered
whether records of certain lending activity by the FRBs would
constitute Board records under either prong of the regulation,
12 C.F.R. § 261.2(i)(1)(i) (“prong one”) or (ii) (“prong two”).
601 F.3d at 161. It held that FRB records relating to loans
which “the Board neither issues nor authorizes” are not covered
by prong one. Id. Based on the “statutory scheme that enacted
the Federal Reserve System,” the court concluded, loans neither
issued nor authorized by the Board are made neither “on ‘behalf
of the Board’” nor under its “delegated authority.” Id.
At the same time, the Court of Appeals held that FRB
records concerning the loans at issue there could constitute
Board records under prong two of the regulation. Id. at 162.
To the extent such records were “maintained for administrative
reasons in the regular course of business in official files in
any division or office of the Board or any [FRB] in connection
with the transaction of any official business,” they were Board
records under 12 C.F.R. § 261.2(i)(1)(ii). Fox News Network,
601 F.3d at 161.
In this case, Junk has requested records relating to loans
issued pursuant to Section 13 of the Federal Reserve Act, 12
U.S.C. § 343. 12 U.S.C. § 343 (1991) (amended 2010). As it
then stood,2 Section 343 empowered the Board “by the affirmative
vote of not less than five members,” “[i]n unusual and exigent
circumstances, . . . [to] authorize any [FRB]” to extend
emergency loans to “any individual, partnership, or
2 The statute was amended by the Dodd-Frank Wall Street Reform
and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat.
1376, as of July 21, 2010 (the “Dodd-Frank Act”).
corporation.” Id. Thus, the records sought by Junk concern
loans that the FRBNY issued with Board authorization.3
The Board authorized the loans in question during the 2008
financial crisis, under conditions of severe economic distress.
Their issuance resulted in information coming into the
possession of the Board and/or an FRB “in the performance of
functions for or on behalf of the Board.” 12 C.F.R. §
261.2(i)(1)(i). As such, under prong one of the regulation,
records in “the possession and under the control of” the FRBNY
concerning these loans are Board records. Id.
Defending its decision not to conduct any search, the Board
maintains that these records are not Board records under prong
one because Board staff confirmed that such records are “housed”
at the FRBNY. But, under the plain language of the regulation
the location of records does not determine whether records are
records of the Board. Assuming the other requirements of the
regulation are met, Board records include “all information
coming into the possession and under the control of . . . any
Federal Reserve Bank . . . or any officer, employee, or agent of
. . . any Federal Reserve Bank.” 12 C.F.R. § 261.2(i)(1)(i).
3 In contrast, the loans at issue in Fox News Network were issued
under authority delegated to the FRBs under 12 U.S.C. § 347b.
601 F.3d at 161.
The Board also asserts that the records in question are not
Board records under prong one because they concern loans that
the FRBNY made under 12 U.S.C. § 343, which FRBNY staff have
stated were “not a Board-delegated function.” The staff
contends instead that it is the FRBs that have the statutory
authority to lend. While the § 343 loans may be made by the
FRBs, the FRBs must first obtain Board authorization for
issuance of the loans. Moreover, the definition of Board
records in prong one of the regulation does not hinge on whether
records were created pursuant to “Board-delegated” functions.
Instead, it provides that records created in the performance of
functions “for or on behalf of the Board” are Board records.
The authorization of a § 343 loan is the performance of a Board
function and the Board does not suggest otherwise. The records
sought by Junk are therefore Board records under prong one of 12
C.F.R. § 261.2(i)(1).
Finally, the Board asserts that the documents are not Board
records because it is the longstanding interpretation of the
staff of the Board and the FRBNY that they are not. While
regularity in practice is commendable, it does not relieve the
Board from strict adherence to the definition of Board records
contained in the Board’s regulations.
These records, however, are not Board records under the
regulation’s second prong. Under prong two, records kept “in
official files in . . . any [FRB] in connection with the
transaction of any official business” are Board records, but
only if they are “maintained for administrative reasons in the
regular course of business.” 12 C.F.R. § 261.2(i)(1)(ii).
Senior Special Counsel in the Board’s Legal Division declares
that records “maintained for administrative reasons” at the FRBs
“primarily relate to examination and supervisory activities,
certain data collection and reporting activities, and the
selection and appointment of FRB directors, and not to . . .
lending activities.” This declaration reasonably describes the
types of records that the Board is likely to maintain for
“administrative reasons.”4 Records concerning the Maiden Lane
LLCs are not managerial or supervisory documents that the Board
would maintain for “administrative reasons.”
Junk argues that the Board’s proposed reading of prong two
deserves no deference under Auer v. Robbins, 519 U.S. 452
(1997), because it is unreasonable to read the regulation not to
4 Although the Second Circuit in Fox News Network ordered the
Board to search FRB records relating to lending activities under
prong two of 12 C.F.R. § 261.2(i)(1), the Board did not argue
that records relating to the loans at issue there would not
constitute records kept for “administrative reasons.” 601 F.3d
at 162.
cover certain of the records he has requested. He points to his
request for daily data feeds from the FRBs to the Board about
the Maiden Lane LLCs lending activities, as well as Board
reports generated from these feeds and distributed to “select
Senior Staff at the [FRBNY].” This argument misses the mark.
While it is true that the Board employee’s declaration is not
entitled to Auer deference as an agency interpretation of its
own regulation, this is so because the declaration is not the
Board’s “‘authoritative’ or ‘official position’” of its
regulatory interpretation. See Kisor v. Wilkie, 139 S. Ct.
2400, 2416 (2018). The declaration is nonetheless entitled to a
“presumption of good faith.” Carney, 19 F.3d at 812. In any
event, the Board proposes a natural reading of prong two. The
Board has carried its burden of showing that the transactional
records concerning the Maiden Lane LLC loans that Junk requests
are not managerial or supervisory documents “maintained for
administrative reasons in the regular course of business.” 12
C.F.R. § 261.2(i)(1)(ii). Thus, they are not Board records
under prong two of the regulation and the Board need not conduct
a search for the requested documents among its administrative
records.
III. Venue
The Board moves to dismiss this case for improper venue.
FOIA’s venue requirements are set forth in 5 U.S.C. §
(a) (4) (B). See Akutowicz v. United States, 859 F.2d 1122,
1226 (2d Cir. 1988). It provides that district courts “in the
district in which the complainant resides, or has his principal
place of business, or in which the agency records are situated,
or in the District of Columbia,” may enjoin an agency from
improperly withholding agency records. 5 U.S.C. § 552(a) (4) (B)
(emphasis supplied).
Venue lies in this district. As discussed, the Board takes
the position that the records sought by Junk are located at the
FRBNY, which is in Southern District of New York.
CONCLUSION
The Board’s April 29, 2019 motion to dismiss is denied.
The Board’s April 29 motion for summary judgment is granted in
part. Junk’s May 29 motion for summary judgment is granted in
part. The Clerk of Court shall close the case.
Dated: New York, New York
August 29, 2019
United ftates District Judge
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