Petition for Writ of Certiorari — Clearing House Ass'n v. Bloomberg L.P.

supreme Court, U.S.

No._\“ _Sup EILED

16°35 43 OCT 2¢ 7010

IN THE OFFICE OF THE CLERK

Supreme Court of the United States

ie i a

THE CLEARING HOUSE ASSOCIATION L.L.C.,

Petitioner,

V.

BLOOMBERG L.P. and THE BOARD OF GOVERNORS

OF THE FEDERAL RESERVE SYSTEM,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

PAUL SALTZMAN ROBERT J. GIUFFRA, JR.

JOSEPH R. ALEXANDER Counsel of Record

THE CLEARING HOUSE H. RODGIN COHEN

ASSOCIATION L.L.C. MICHAEL M, WISEMAN

450 West 33rd Street EREZ J. DAVY

New York, New York 10001 SULLIVAN & CROMWELL LLP

(212) 613-0100 125 Broad Street

New York, New York 10004

(212) 558-4000

giuffrar@sullcrom.com

Altorneys for Petitioner

The Clearing House Association L.L.C.

QUESTIONS PRESENTED

Kxemption 4 of the l'reedom of Information

Act authorizes a federal agency to withhold “[1] trade

secrets and commercial or financial information [2]

obtained from ae person and [3] privileged or

confidential.” 5 U.S.C. § §52(b)(4). The Second

Circuit ruled that this exemption does not authorize

the Board of Governors of the Federal System (the

“Board”) to withhold reports disclosing the identities

of banks that obtained loans through the Federal

Reserve System, along with the amounts and

durations of such loans. In doing so, the Second

Circuit held that (1) the highly confidential bank

information in these reports was not “obtained from”

the borrowing banks; and (2) the Board could not

withhold this information on the basis that its

disclosure would impair the effectiveness of its

lending programs.

ry .

The questions presented are:

|. Whether the identity of, and highly

confidential terms on which, a third party transacts

with a federal agency is information “obtained from”

that party and, therefore, within the scope of FOIA

Kxemption 4?

2. Whether information is “confidential” under

FOIA Exemption 4 when its disclosure would impair

the effectiveness of federal agency programs?

LIST OF PARTIES AND RULE 29.6

STATEMENT

The petitioner is The Clearing’ House

Association L.L.C The respondents are Bloomberg

L.P. and the Board of Governors of the Federal

Reserve System

The Clearing House Association L.L.C. has no

corporate parents, and no _ publicly-held company

owns 10% or more of the stock of The Clearing House

Association L.L.C.

TABLE OF CONTENTS

QUESTIONS PRESENTED ...

APPENDIX CONTENTS ..........:.ccssccssevses

OPINIONS BELOW

JURISDICTION

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

STATEMENT OF THE CASE ..........ccccscccccccecccsscoesees 3

A. Factual Background. ................ eB Eee nes Serenes .8

1. The Discount Window and the Mechanics

of Discount Window Lending..................... 8

2. The Longstanding “Stigma” of Financial

Weakness Attributed to Banks That

Borrow from the Discount Window. .......... 9g

3. The Board’s Longstanding Confidentiality

Policy for Discount Window Lending and

the Disclosure Regime Established by the

Dodd-Frank Act................ eiceeires eRe 1]

CMCC TE viii Sos vdscin cc caownseance onus cases 13

1. Bloomberg’s FOIA Request and Its

Adjudication in the District Court........... 13

2. Fox News’s FOLTA Request and Its

Adjudication in the District Court

3. Proceedings Before the Second Circuit. .. 17

REASONS FOR GRANTING THE PETITION ...... 20

I. THE SECOND CIRCUIT'S ERRONEOUS

“OBTAINED FROM A PERSON” RULING

THREATENS NUMEROUS AGENCY

PROGRAMS THAT DEPEND ON

MAINTAINING THE CONFIDENTIALITY

OF COMMERCIAL TRANSACTIONS WITH

Fe Pe I. a nts cee espnnasevsanavasnssvsecnkapersdieess Zi

A. Courts Have Long Held That mxemption 4

Protects Commercially Sensitive Details of

Third Parties’ Commercial Transactions

with Federal Agencies. ...............c.ccscccesesesceees 21

B. The Second Circuit's Ruling Contravenes

the Established Principle That an Agency

May Withhold “Inextricably Intertwined”

Exempt and Non-Exempt Data..................... 5

ll. THE SECOND CIRCUIT OPENLY SPLIT

WITH THE D.C. AND FIRST CIRCUITS IN

HOLDING THAT EXEMPTION 4 DOES

NOT PROTECT “CONFIDENTIAL”

INFORMATION WHOSE DISCLOSURE

WOULD IMPAIR THE EFFECTIVENESS

OF PEE RALs PROTERADIC.. ..cccsccseccscssscsserscessess 29

eM IN 6s: ie usc: ssscdnscpiycassoucenceeccaceesendocinsecsecess en aaa

1V

APPENDIX CONTENTS

Opinion of the United States Court of Appeals

for the Second Circuit, entered on March

19, 2010

Orders of the United States Court of Appeals

for the Second Circuit, entered on

I SE EE ian cuccksoneusceenchaccuenesindsisssbanne . 16:

Opinion of the United States District Court

for the Southern District of New York,

entered on August 24, 2009 ................cccececeeeee

5 U.S.C. § 552(b).... eee eee

TABLE OF AUTHORITIES

P uge(s)

CASES

9 to 5 Org. for Women Office Workers v. Bd. of

Governors of the Fed. Reserve Sys.,

721 F.2d 1 (1st Cir. 1983) ........ 5, 31-32

Am. Fed'n of Musicians v. Wittstetin,

¢) 9S Beet g | .° ) ne BR,

Andrews v. Veterans Admin

838 F.2d 418 (10th Cir. 1988)..... pode naanan .28

Bloomberg, L.P. v. Bd. of Governors of the Fed.

Reserve Sys.,

601 F.3a 143 (2a Cir. 2010) .........0.....00000000. DASSEM

Bloomberg L.P. v. Bd. of Governors of the Fed.

Reserve Sys.,

649 F. Supp. 2d 262 (S.D.N.Y. 2009)............ .14

Canadian Commercial Corp. v. Dept of the Air

Force,

514 F.3d 37 (D.C. Cir. 2008)................eseseseeee 2O°LO

Church of Scientology Intl v. U.S. Dep't of

Justice,

BO Be Se C1 Ot Cir. BODE) .cccccscvcsescccsevcsseses 1 20

Clarke v. U.S. Dep't of Treasury,

No. 84-1873, 1986 WL 1234 (E.D. Pa. Jan.

SRR Rn Rane RR RO 20, 2, 32-39

Comstock Intl (U.S.A.), Inc Export-Import

Bank of the U.S.,

464 F. Supp. 804 (D.D.C. 1979)...

Contl Stock Transfer & Trust Co. v. SEC,

DGG FS SIS CEG CT. LET AD vccnscccsvccccscceces

Contract Freighters, Inc. v. Sec’y of U.S. Dep't

of Transp..,

260 F.3d 858 (8th Cir. 2001)..

Critical Mass Energy Project v. NRC,

975 F.2d 871 (D.C. Cir. 1992) (en banc)..

Cuomo v. The Clearing House Assn, LLC,

eee le Sea ee Br Cin cn ikea suriensvcccevaces :

Flightsafety Servs. Corp. v. Dep't of Labor,

326 F.3d 607 (5th Cir. 20038)..............

FOMC v. Merrill,

443 U.S. 340 (1979)..........

Fox News Network, LLC v. Bd. of Governors of

the Fed. Reserve Sys.,

601 F.3d 158 (2d Cir. 2010) ....................

Fox News Network, LLC v. Bd. of Governors of

the Fed. Reserve Sys..,

639 F. Supp. 2d 384 (S.D.N.Y. 2009)

Fox News Network, LLC v. U.S. Dep't of the

Treasury,

--- F. Supp. 2d ---, 2010 WL 370528:

(S.D.N.Y. Sept. 3, 2010)

Gen. Elec. Co. v. Dep't ef Air Force,

648 F. Supp. 2d 95 (D.D.C. 2009)..

Hunt v. Wash. State Apple Adver. Comm'n,

fo gk OTe) yy) a

Inner City Press/Community on the Move v

Bd. of Governors of the Fed. Reserve Sys..,

163 F.3d 239 (2d Cir. 2006) .........

John Doe Agency v. John Doe Corp..,

493 U.S. 146 (1989)..... aedaceatednas 7, 29-30, 3:

Judicial Watch, Inc. v. Export-Import Bank,

108 F. Supp. 2d 19 (D.D.C. 2000)......

McDonnell Deuglas Corp. v. NASA,

180 F.3d 303 (D.C. Cir. 1999)......

Mead Data Cent., Inc. v. U.S. Dep’t of the Air

Force,

566 F.2d 242 (D.C. Cir. 1977).

Cc ’

Miccosukee Tribe of Indians of Fla. v. U.:

516 F.3d 1235 (11th Cir. 2008).........

Missouri Coalition for Envtl Found. v. Army

Corps of Engrs,

542 F.3d 1204 (8th Cir. 2008)...........

Nat'l Parks & Conservation Ass'n v. Morton,

498 F.2d 765 (D.C. Cir. 1974)......................passim

Patterson v. IRS.

56 F.3d 832 (7th Cir. 1995)....

Pub. Citizen Health Research Group v. NIH,

209 F. Supp. 2d 37 (D.D.C. 2002) 24, 27

Reading Co. v. Brown,

391 U.S. 471 (1968).................

Rein v. Patent & Trademark Office,

553 F.3d 353 (4th Cir. 2009)...

Renegotiation Bd. v. Bannercraft Clothing Co.,

415 U.S. 1 (1974)

Willamette Indus., Inc. v. U.S..,

689 F.2d 865 (9th Cir. 1982)

STATUTES AND RULES

5 U.S.C. § 552(a)(4)(B)

5 U.S.C. § 552(b) ....cccecccccceesceceeees

5 U.S.C. § 552(b)(4) | passim

28 U.S.C. § 1254(1)

Dodd-Frank Wall Street Reform and

Consumer Protection Act, Pub. L. No. 111

203, 124 Stat. 1376 (2010) 3-4, 1]

Sup. Ct. R. 10(a)...

Sup. Ct. R. 10(c)

MISCELLANEOUS

Brian F. Madigan & William R. Nelson,

Proposed Revision to the Federal Reserves

1X

‘>

Discount Window Lending Program

88 Fed. Res. Bull. 313 (2002) 11

'requently Asked Questions—Discount

Window Lending Program

http://www.frbdiscountwindow.org/dwflaq

cfm#ps 1] Q-11

Treasury Committee. The Run on the Roc!

2007-08, H.C. 56-1]

IN THE

Supreme Court of the Anited States

THE CLEARING HOUSE ASSOCIATION L.L.C

Petitioner,

BLOOMBERG 1L..P

and THE BOARD OF GOVERNORS OF THE FEDER

RiSERVE SYSTEM

Respondents

ON PETITION FOR A WRIT OF CERTICRARI

ro THE UNITED STATES COURT OF APPEAI

FOR THE SECOND CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

Petitioner The Clearing House Association

1..C. “The Clearing House”)! respectfully petition

' Established in 1853, The Clearing House is the United

States’ oldest banking association and payments company. It}

owned by the world’s largest commercial banks, which

collectively employ 1.4 million people in the United States and

hold more than half of all U.S. deposits. The Clearing Hou

Association iS uu nonpartisan advocacy organization

representing through regulatory comment letters, amuicu

briefs, and white papers the interests of its member banks on a

variety of systemically important banking issue Its affiliate

The Clearing House Payments Company U..1L.C., provide

payment, clearing, and settlement services to its member bank

(footnote continued)

for a writ of certiorari to review the March 19, 2010

judgment of the United States Court of Appeals for

the Second Circuit.

OPINIONS BELOW

The decision of the Second Circuit is reported

at 601 F.3d 148. The orders of the Second Circuit

denying rehearing are unreported. The decision of

the District Court is reported at 649 F. Supp. 2d 262

JURISDICTION

The Second Circuit entered its judgment on

March 19, 2010, and demied the Board's and ‘The

Clearing House's petitions for panel and en banc

rehearing on August 20, 2010. By orders dated

August 27, 2010, the Second Circuit pranted the

Board and The Clearing House a 60-day stay

pending the filing of a petition for a writ of certiorar!

This Court’s jurisdiction is invoked under 28 U.S.C

& 1254(1)

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The statutory provision involved is Exemption

4 of the Freedom of Information Act, 5 U.S.C

§ 552(b)(4)

(footnote continued)

and other financial institutions, clearing almost $2 trillion daily

and representing nearly half of the automated clearing house,

funds-transfer, and check-imape payments made in the U.S

See www. .theclearinghouse.org (last visited on Oct. 20, 2010)

STATEMENT OF THE CASE

The Second Circuit’s decision below, which

openly split with the D.C. and First Circuits, stems

from an unprecedented FOIA request by Bloomberg

L.P. (“Bloomberg”) demanding that the Board of

Governors of the Federal Reserve System (the

“Board”) disclose highly confidential reports

containing the identities of banks that borrowed

from the Discount Window (a permanent lending

program of the Federal Reserve Banks) during the

recent financial crisis, along with the amounts and

durations of such loans.?

Bloomberg’s request is unprecedented

because, since the estabhshment of the Discount

Window program in 1914, the Board has never

disclosed the identities of borrowing banks or the

loan-by-loan details of their borrowings. (The Board

has historically published such information weekly

on an aggregate basis.) That longstanding policy of

borrower confidentiality rests on the recognized

concern that depositors, counterparties, and market

participants may infer (perhaps erroneously) that a

bank that borrows from the Discount Window is

The request also demanded that the Board disclose such

information for the now-discontinued Primary Dealer Credit

Facility (‘PDCF’), Term Securities Lending Facility (““TSLF”),

and Term Auction Facility (“TAF”). Under the Dodd-Frank

Wall Street Reform and Consumer Protection Act (the “Dodd-

Frank Act’), Pub. L. No. 111-203, 124 Stat. 1376 (2010), the

Board will be required to disclose transaction-level details of

loans made through the PDCF, TSLF and TAF, including the

identities of borrowing entities, on or before December 1, 2010.

See Dodd-Frank Act § 1109(ce). Accordingly, the portion of this

case about those facilities will be moot as of that date.

experiencing liquidity problems and_ react’ by

withdrawing their funds from the bank = or

discontinuing to extend credit.

The Dodd-Frank Act now requires the Board

to disclose the identities of banks that borrow from

the Discount Window, along with other transaction-

level details of their borrowing, approximately two

years after such borrowing occurs. See infra at 12-

13. But the Act does not require the Board to

disclose information concerning Discount Window

lending that took place prior to the Act’s enactment.

Allowing the Board to withhold this pre-enactment

Discount Window lending information is important,

because disclosure of this information threatens to

harm the borrowing banks by allowing the public to

observe their borrowing patterns during the recent

financial crisis and draw _ inferences—whether

justified or not—about their current financial

conditions. See infra at 10-11.

The Board here sought to protect this pre-

enactment Discount Window lending information by

invoking Exemption 4 of the Freedom of Information

Act (“FOIA”), which authorizes a federal agency to

withheld “|{1] trade secrets and commercial or

financial information [2] obtained from a person and

[3] privileged or confidential.” 5 U.S.C. § 552(b)(4).

Numerous circuit courts have held that information

is “confidential” when its disclosure is hkely “(1) to

impair the Government’s ability to obtain necessary

information in the future; or (2) to cause substantial

harm to the competitive position of the person from

whom the information was obtained.” Nat'l Parks &

Conservation Ass'n v. Morton, 498 F.2d 765, 770

(D.C. Cir. 1974) (footnote omitted). The D.C. and

4

First Circuits have further held that information is

“confidential” when its disclosure would impair an

agency's ability to “carry|| out [its] mandate.” 9 to 5

Org. for Women Office Workers v. Bd. of Governors of

the Ked. Reserve Sys., 721 F.2d 1, 10 (1st Cir. 1983);

accord Critical Mass Energy Project v. NRC, 975

* 2d 871, 879 (D.C. Cir. 1992) (en banc).

The Second Circuit below did not question the

Board’s and the banks’ “plausible” and “forcefulf]”

showing that disclosure of the information sought by

Bloomberg “would harm the banks that borrowed”

and “the banking system as a whole.” Bloomberg,

L.P. v. Bd. of Governors of the Fed. Reserve Sys., 601

i’.3d 143, 151 (2d Cir. 2010). Instead, the Second

Circuit held—as a matter of law—that (1) the

Federal Reserve Banks’ (“FRB”) “executive action” in

approving the Discount Window loans meant that

the highly confidential bank information was _ not

“obtained from a person” outside the government,

and therefore not subject to Exemption 4 protection

at all, id. at 149; and (2) even assuming that such

bank information was “obtained from a person” (the

Court here was referring to the FRBs that supplied

the raw lending data to the Board), Exemption 4

does not allow an agency to withhold information

when doing so “serves a valuable purpose and is

useful for the effective execution of its statutory

responsibilities,” id. at 150.

These important rulings of law warrant this

Court’s review for two reasons.

First, the Second Circuit's ruling will disrupt

“long-established procedures” of numerous federal

agencies. See Renegotiation Bd. v. Bannercraft

Clothing Co., 415 U.S. 1, 11 (1974) (grant of

)

certiorari to analyze “the impact of the FOIA upon

long-established procedures of the Renegotiation

Board”). Many government programs, such as the

Export-Import Bank’s’ provision of loans and

insurance and the National Institutes of Health’s

(“NIH”) licensing of government inventions, depend

on assuring third parties that details of their

commercial transactions with federal agencies will

remain confidential. In these other commercial

transactions, the government typically transacts

with third parties in ways that are more extensive

than the loan-approval process at issue here.

Nonetheless, courts have uniformly held or assumed

that details of these commercial transactions are

subject to Exemption 4 protection.

The Second Circuit’s holding that the FRBs’

“executive action” in approving Discount Window

loans eliminates Exemption 4 protection for this

highly confidential bank information conflicts with

this line of cases and threatens to harm the

government programs they protect. The harm here

is magnified, because any FOIA requester that

resides in the Second Circuit will be able to bind a

federal agency to that Court’s law. See 5 U.S.C.

§ 552(a)(4)(B) (vesting jurisdiction over FOIA actions

in, among other venues, “the district court of the

United States in the district in which the

complainant resides, or has his principal place of

business”). This 1s especially important in that many

of the nation’s leading media companies (e.g., The

New York Times, The Wall Street Journal, and Time

magazine) are located in the Southern District of

New York.

6

The lne of cases that the Second Circuit's

ruling will disrupt is consistent with the bedrock

principle, codified in 5 U.S.C. § 552(b) and recognized

across the Circuits, that an agency is authorized to

withhold information in its entirety where the

information consists of exempt data and non-exempt

data that are “inextricably intertwined.” See infra at

28-30. ‘This rule apples fully when third parties

transact with an agency: Because information

concerning the completed transaction is~ an

indivisible product of exempt data (the terms on

which the third party entered into the transaction)

and non-exempt data (the terms on which the

government approved the transaction), the agency is

authorized to withhold such information in its

entirety. Certiorari is appropriate to correct the

Second Circuit’s error and prevent its ruling from

harming numerous agency programs far beyond the

lending programs at issue here.

Second, the Second Circuit's ruling “conflict[s]

with the decision of another United States court of

appeals on the same important matter.” Sup. Ct. R.

10(a); see also John Doe Agency v. John Doe Corp..,

493 U.S. 146, 151 (1989) (grant of certiorari in FOIA

Kxemption 7 case because of “the importance and

sensitivity of the issue [presented] and because of

different interpretations of the pertinent language of

[the exemption]”). Specifically, the Second Circuit's

ruling—now binding the financial and media capital

of the United States—split with the D.C. and First

Circuits on an important question of federal law:

Whether information is “confidential” within the

meaning of Exemption 4 when its disclosure would

impair the effectiveness of government programs

~

Underlying this issue is the fundamental

question whether this Court should adopt the

National Parks two-part definition of the term

“confidential,” from which the “program-

effectiveness” test rejected by the Second Circuit

emanates. See generally Sup. Ct. Rule 10(c)

(certiorarl may be appropriate where a “United

States court of appeals has decided an important

question of federal law that has not been, but should

be, settled by this Court”); see also Reading Co. v.

Brown, 391 U.S. 471, 475 (1968) (grant of certiorari

to resolve question of “first impression in [the

Supreme Court]” regarding bankruptcy

administration); Am. Ked’n of Musicians v. Wittstein,

379 U.S. 171, 175 (1964) (grant of certiorari to

resolve question of “first impression” under the

Labor Management Reporting and Disclosure Act).

A. Factual Background.

.. The Discount Window and the

Mechanics of Discount Window

Lending.

Authorized by the Federal Reserve Act, the

Discount Window “is a mechanism by which the

twelve Federal Reserve Banks lend funds on a short-

term basis, secured by collateral, to eligible

depository institutions within their respective

districts.” (JA-67 4 6.)° In performing this lending

function, the Discount Window can serve “as an

emergency, back-up source’ of liquidity — for

All citations to “JA” are to the Joint Appendix submitted

before the Second Circuit

institutions that may not have access to ordinary,

market sources of funding on a short term basis.”

(JA-74 4 18.)

A bank eligible to borrow from the Discount

Window requests a Discount Window loan by

contacting its local FRB. When doing so, the bank

supplies to the FRB, among other things, the bank’s

(i) “[nJame and location”; (11) “|[t}he amount [the bank

is] requesting”; and (iii) “|t]}he number of days that

funds will be needed.’ After a bank initiates a

Discount Window loan request, FRB staff “review the

request, verify collateral and, if approved, enter the

loan in the [FRB’s] loan and accounting systems.”

(JA-70 4 11.)

The FRBs, in turn, provide data concerning

completed loans to the Board’s Division of Monetary

Affairs. (JA-38 411.) Then, the Monetary Affairs

staff use these data to generate “Remaining Term

Reports’—the Reports at issue in this appeal—that

reflect (i) the names of the borrowers; (11) the amount

of individual loans; and (iil) the origination and

maturity dates of each loan. (d.)

3. The Longstanding “Stigma” of

Financial Weakness Attributed

to Banks That Borrow from the

Discount Window.

Because the Discount Window can serve an

emergency-lending function, when a bank borrows

The Mechanics of Borrowing, http://www.frbdiscount

window.org/mechanics/cfm?hdrID=14 (last visited on Oct. 20,

2010)

from it, market participants, customers, and

counterparties may infer that the bank is

experiencing “an underlying capital or liquidity

problem.” (JA-74 {| 18.) The public, in other words,

may interpret a bank’s Discount Window borrowing

as a sign of an undisclosed financial problem and

mistakenly stigmatize the bank as financially

unsound. (JA-74-75 {| 17-18.) That “stigma” can

“quickly place an institution in a weakened condition

vis-a-vis its competitors by causing a loss of public

confidence in the institution, a sudden outflow of

deposits (a ‘run’), a loss of confidence by market

analysts, a drop in the institution’s stock price, and a

withdrawal of market sources of liquidity.” (JA-74

4117.) “In extreme cases, such developments can

lead to closure of the institution.” Cd.)

During periods of financial distress, the

stigma associated with Discount Window borrowing

often intensifies, because market participants have

heightened concerns that banks may be experiencing

financial difficulties. (JA-75 " 19.) As a result,

during these periods (such as those experienced in

the early and late 1990s), banks paid higher rates in

the private federal funds market to avoid borrowing

from the Discount Window. (/d.)

The effects of this stigma were further

evidenced in the early 1990s, when rumors that

Citibank was borrowing at the Discount Window

sparked runs at some of its offices in Asia. (JA-76

§| 22.) Similarly, in September 2007, British bank

Northern Rock experienced a bank run after the

BBC reported that the Bank of England had

provided emergency financial support to the bank

See Treasury Committee, The Run on the Rock,

2007-08,-H.C. 56-1, 94] 1, 147.5

3. The Board’s Longstanding

Confidentiality Policy for

Discount Window Lending and

the Disclosure Regime

Established by the Dodd-Frank

Act.

Because of the recognized stigma associated

with accessing the Discount Window, banks have

been reluctant to access this lending facility, even

though the Board has long held “information about

borrowing by individual banks in the strictest

confidence.” Brian F. Madigan & William R. Nelson,

Proposed Revision to the Federal Reserve's Discount

Window Lending Program, 88 Fed. Res. Bull. 313,

315 (2002). ‘That historical reluctance stems from

the fact that, notwithstanding the Board's

longstanding non-disclosure policy, market

participants “have at times tried to infer which

banks might be borrowing |from the Discount

Window] through knowledge of which banks were

bidding for funds in the market late in the day and

from aggregate data published by the Federal

Reserve.” Jd.

The Dodd-Frank Act’ establishe

disclosure regime for Discount Window loans m:

after the Act’s enactment The Board is now

required to disclose the identitr {f banks that

Available at http://www.publicatior

200708/cmselect/emtreasury/56/561. pdt

()10))

borrow from the Discount Window, along with other

transaction-level details of their borrowing,

approximately two years after such _ borrowing

occurs. See Dodd-Frank Act § 1103(b) (amending

Federal Reserve Act to require disclosure of post-

enactment Discount Window lending—a type of

“covered transaction —‘on the last day of the eighth

calendar quarter following the calendar quarter in

which the covered transaction was conducted”).6 In

exchange, the Board is expressly authorized to

withhold such information under FOIA See id.

(providing that enumerated Discount Window

lending data “shall be confidential, including for

purposes of section 552(b)(3) of title 5”)

The Dodd-Frank Act, however, does _ not

require disclosure of Discount Window lending

information prior to its enactment Specificaily,

section 1103(b) of the Act, which adds a new section

to the Federal Reserve Act, includes a _ provision

stating that “[njothing in [the new section of the

Federal Reserve Act] is meant to affect any pending

litigation or lawsuit filed under [FOIA] on or before

the date of ‘the Act’s} enactment.” This is

significant, because, during the recent financial

crisis, banks relied upon the Board’s confidentiality

policy when obtaining Discount Window loans in

amounts and at intervals that would permit the

See also Frequently Asked Question Discount Window

Lending Program, FAQ #11 (“[T]he Federal Reserve will

publicly disclose, with approximately a two-year lay, certain

information on discount window loans extended on or after July

21, 2010.”), http://www.frbdiscountwindow.org/dwifaqs.ctm#ps1 }

(last visited Oct. 20, 2010)

pubhe to draw inferences—whether fairly or not

about their current financial condition

B. Proceedings Below.

Bloomberg’s FOIA Request and

Its Adjudication in the District

Court.

On May 21, 2008, Bloomberg sent a FOIA

request to the Board, asking for eleven categories of

documents relating to securities posted as collateral!

for Discount Window and other loans made between

April 4, 2008 and May 20, 2008. (JA-50-51.)) The

Board determined that the Reports contained

information responsive to the request -specifically

the names of borrowers, and the amounts and term

of individual loans—but concluded that th)

information was exempt from disclosure. (JA-62.)

On November 7, 2008, Bloombery filed th

instant FOIA action in the Southern District of New

York. The Board and Bloomberg each moved for

summary judgment, submitting supporting

declarations. Specifically, the Board submitted

pages of declarations from a senior Board official and

two officers of the Federal Reserve Bank of New York

responsible for operational details for the Discount

Window and the other lending facilities at issue. In

those declarations, the Board provided a detailed

assessment of the competitive harm likely to occur to

banks through disclosure of bank-by-bank, loan-by

loan information. The Board also provided evidence

demonstrating the recognized “stigma” associated

with Discount Window lending

Trantea

sudyment

competitive

ind declining t

non-discl

le ndings

tox News's FOLIA Kequest and

Its Adjudication tn the District

(-ourt

3. Proceedings Before the Second

Circuit.

The Bloomberg and Fox appeals were heard in

tandem, by the same panel and on the same day.

Both appeals concerned the same core issues: (1)

whether the identity of a borrowing bank and

transaction-level details of its borrowing was

information “obtained from a person”; and (2)

whether this information was “confidential” within

the meaning of Exemption 4.

The Ruling in Bloomberg. The Bloomberg

and Fox News appeals were also decided on the same.

day, by two separate opinions. In the Bloomberg

opinion—the one at issue in this_ petition—the

Second Circuit accepted the Board’s and The

Clearing House’s “plausible” and “forcefulf]”

arguments that disclosure of the Reports would

“harm the banks that borrowed” and “the banking

system as a whole.” Bloomberg, 601 F.3d at 150. The

Second Circuit nonetheless held that the highly

confidential bank information in the Reports was not

“obtained from” the borrowing banks—and thus not

within the class of information § protected by

Exemption 4—because the loans at issue “did not

come into existence until the Federal Reserve Bank

took executive action by granting the loan.” Id. at

149. In other words, the Court reasoned that the

FRBs’ “executive action” in “grant[ing]” the loans—

even if such approval were “automatic|]”—eliminated

any Exemption 4 protection irrespective of the

information’s commercial sensitivity. Id. at 150.

The Second Circuit further held that, even

assuming the information in the Reports was

17

obtained by the Board “from a person” (the panel was

referring here to the FRBs that supplied the raw

lending data to the Board),? Exemption 4 did not

authorize a federal agency to withhold information

where doing so “serves a valuable purpose and is

useful for the effective execution of its statutory

responsibilities.” Jd. at 150. The Court reasoned

that such an interpretation of the term “confidential”

(1) finds “no basis” in the statute; and (2) would “give

impermissible deference to the agency,” thereby

making it the “functional equivalent” of the “public

interest” standard rejected by this Court, for

purposes of Exemption 5, in FOMC v. Merrill, 443

U.S. 340 (1979). Bloomberg, 601 F.3d at 150-51.

The Ruling in Fox. The Court in Fox applied

the holding in Bloomberg to rule that “the

information unambiguously at issue in the Fox News

requests—the identity of the borrowing bank, the

dollar amount of the loans, the collateral securing

the loans, and the loan origination and maturity

dates—is not protected from disclosure by Exemption

4.” Fox News Network, LLC v. Bd. of Governors of

the Fed. Reserve Sys., 601 F.3d 158, 160 (2d Cir.

2010). It then proceeded to discuss, 1n an issue not

relevant to this petition, whether the Board had

adequately searched for additional agency records

held at the Federal Reserve Banks. See id. at 160-

63.

® The Second Circuit nowhere explained how the FRBs could

(1) be considered “agencies” when they approved Discount

Window loans and yet (2) be considered “persons” when they

supplied the raw lending data concerning these loans to the

Board.

18

Post-Judgment Developments. On May 3,

2010, the Board and The Clearing House filed timely

petitions for panel and en banc rehearing of the

decision in Bloomberg. The Board also filed a similar

petition for rehearing in Fox. While those petitions

were pending, the Board submitted a letter in both

appeals, pursuant to Federal Rule of Appellate

Procedure 28()), explaining that passage of the Dodd-

Frank Act did not moot the appeals.

On August 20, 2010, the Second Circuit denied

the rehearing petitions in both Bloomberg and Fox.

Both the Board and The Clearing House

subsequently moved to stay the Second Circuit’s

mandate in Bloomberg, arguing that there was “good

cause’ to do so and that a certiorari petition would

present a “substantial question” warranting this

Court’s review—in other words, that there was a

reasonable probability of obtaining this Court’s

review and a fair prospect of achieving reversal. The

Board filed a similar motion in Fox. By orders dated

August 27, 2010, the Second Circuit stayed its

mandates for 60 days in both Bloomberg and Fox to

enable the Board to obtain authorization from the

Solicitor General to file a certiorari petition and to

enable The Clearing House to file such a petition.

Notwithstanding the Board’s_ receipt of

Solicitor General approval to file a request for en

banc rehearing, and notwithstanding the Board’s

consistent position that the Bloomberg decision will

have negative and far-reaching ramifications for

banking and other agencies (as detailed in the

Board’s rehearing petitions), on October 22, 2010,

counsel for the Board informed The Clearing House

that the Solicitor Generali denied the Board’s request

19

to file a certiorari petition. This petition, which

names the Board as a respondent, followed.!"

REASONS FOR GRANTING THE PETITION

This Court should grant this petition for two

reasons.

First, if left undisturbed, the Second Circuit’s

ruling will undo a long line of cases authorizing

agencies to withhold sensitive details concerning a

third party’s commercial transactions with the

government. This line of cases is critical to protect

numerous government functions—such as the ability

of the Export-Import Bank to extend loans and

insurance, and that of the NIH to hcense

government inventions—that depend on assuring

third parties that details of these commercial

transactions will not be disclosed. These cases are

consistent with the principle, codified in 5 U.S.C.

§ 552(b) but ignored in the decision below, that an

agency is authorized to withhold information where

it consists of exempt and non-exempt data that are

inextricably intertwined.

Second, this case presents a question of first

impression in this Court of undemable importance to

FOIA law, and one over which the Circuits are now

split: What is the governing test to determine

whether information is “confidential” within the

meaning of Exemption 4, and whether this test

authorizes an agency to withhold information whose

iO The Clearing House also intends to move to intervene in the

Fox appeal in order to stay that Court’s mandate pending the

disposition of this certiorari petition.

20

disclosure would impair a government program. The

Second Circuit, which has_ previously adopted

National Parks’ two-part definition of the term

“confidential,” improperly rejected the D.C. and First

Circuits’ extension of National Parks to protect an

agency’s ability to effectuate the purposes of its

programs. In doing so, the Second Circuit adopted

an overly restrictive textual interpretation of the

statute that fails to properly give effect to the

purpose behind the exemption.

I. THE SECOND CIRCUIT’S ERRONEOUS

“OBTAINED FROM A PERSON” RULING

THREATENS NUMEROUS AGENCY

PROGRAMS THAT DEPEND ON

MAINTAINING THE CONFIDENTIALITY

OF COMMERCIAL TRANSACTIONS

WITH SUCH AGENCIES.

A. Courts Have Long Held That

Exemption 4 Protects

Commercially Sensitive Details of

Third Parties’ Commercial

Transactions with Federal

Agencies.

The Second Circuit held that the highly

confidential bank information in the Reports was not

“obtained from” the borrowing banks because the

loans did not exist but for the FRBs’ “executive

action” in “grantin[g]” Discount Window loans, even

if such approval was “automatic[].” Bloomberg, 601

F.3d at 149.

This holding necessarily threatens to undo

Exemption 4 protection in numerous situations

where third parties transact with a federal agency.

21

That is because every commercial transaction by a

third party with the government reflects both third-

party and government action; the transaction

voluntarily entered into by the third party would not

exist but for government approval and involvement.

Indeed, one lower court has already applied

Bloomberg to require the Treasury Department to

disclose “the name of a commercial bank” that

applied for but subsequently withdrew its request for

funding through a ‘Treasury lending’ program,

reasoning that the bank’s name was not “obtained

from a person” because it was “generated within

[Treasury] upon its decision to grant a loan.” Fox

News Network, LLC v. U.S. Dep't of the Treasury, ---

F. Supp. 2d ---, 2010 WL 3705283, at *36-37

(S.D.N.Y. Sept. 3, 2010) (quoting Bloomberg, 601

F.3d at 148) (alteration in original).

This ruling is a harbinger of many others.

That is because federal agencies frequently interact

with third parties in ways far more extensive than

the straightforward loan-approval process at issue

here. Nonetheless, in these other situations,

numerous courts have held or assumed that a third

party's commercial dealings with the government

consist of information “obtained from a person,” and

are therefore subject to Exemption 4 protection—

Loans and Insurance Extended by the

Export-Import Bank. The Export-Import Bank isa

federal agency that “aid[s] in financing and

facilitating exports and the exchange of goods and

services between the United States and foreign

countries.” Judicial Watch, Inc. v. Export-import

Bank, 108 F. Supp. 2d 19, 24 (D.D.C. 2000). To

achieve that goal, the Bank “provide[s] guarantees,

insurances, and extensions of credit on competitive

terms to United States businesses that seek to export

goods and services to other countries.” Id. These

guarantees, insurances, and extensions do not exist

but for the Bank’s approval, and are subject to

negotiation between the Bank, exporters, and other

third parties. Parties insured by the Bank, for

instance, “often agree to additions to or deletions

from the Bank’s standard export insurance policy”

that may reflect “when the insured has made a

concession to the Bank.” Jd. at 29. The Bank also

“participat[es] in the negotiation process” with

respect to loan agreements that it finances.

Comstock Intl (U.S.A.), Inc. v. Export-Import Bank of

the U.S., 464 F. Supp. 804, 807 (D.D.C. 1979).

In Judicial Watch, 108 F. Supp. 2d 19, the

District Court for the District of Columbia held that

the Export-Import Bank properly withheld, inter

alia, “the amount of the insurance premium’” being

paid by the exporter to the Bank, since “a competitor

who is familiar with the way the Bank determines its

premium rates .. . could deduce the shipment

amount from the premium amount.” /d. at 31.

Before reaching that conclusion, the court

emphasized that the information sought by the FOIA

requester was obtained by the Export-Import Bank

“from the insurance’ applicants’ themselves,

commercial lenders of the applicant, or a purchaser

of the goods at issue.” /d. at 28.

In Comstock International, 464 F. Supp. 804,

the District Court for the District of Columbia

protected from disclosure a loan agreement to which

the Export-Import Bank was a party. The

agreement detailed, among other things, “the terms

23

and conditions under which [the Export-Import

Bank] and [a private bank]” extended credit. /d. at

806. Those details were protected from disclosure

even though “the information contained in the loan

agreement [was] not submitted to the government

but rather generated by it through Eximbank’s

participation in the negotiation process.” Id. at 807.

Royalty Rates Paid by Government

Licensees. The NIH develops inventions that the

government subsequently licenses to third parties.

During the licensing process, the government

“negotiates” a final royalty rate with licensees. See

Pub. Citizen Health Research Group v. NIH, 209 F.

Supp. 2d 37, 44 (D.D.C. 2002). Neither the hcenses

nor the rates set therein would exist but for

government approval.

In Public Citizen, 209 F. Supp. 2d 37, the

District Court for the District of Columbia held that

the negotiated final royalty rate is “obtained from a

person” and, therefore, subject to Exemption 4

protection. See id. at 44 (“Even though the final

royalty rate is arrived at through negotiation, this

does not alter the fact that the licensee is the

ultimate source of this information.”). The court

then refused to order disclosure of the negotiated

royalty rates, because competitors could use those

rates, to the hcensee’s competitive disadvantage, to

“make a rough calculation of [the licensee’s] profit

margin on a particular drug.” /d. at 47.

Treasury Bond Issuances. The Treasury

Department issues bonds to private entities in order

to finance the public debt.

In Clarke v. U.S. Dep’t of Treasury, No. 84-

1873, 1986 WL 1234 (E.D. Pa. Jan. 28, 1986), the

District Court for the Eastern District’ of

Pennsylvania held that “the names and addresses” of

a certain type of Treasury bond, along with details

concerning “the [bonds’] dollar amount, coupon and

maturity datels],” were “[u]nquestionably

obtained from persons outside the government.” Jd.

at *2. ‘That ruling enabled the Treasury Department

to maintain its “long tradition of confidentiality of

the ownership of United States Treasury securities,”

breach of which would have enabled market

participants to gain a “significant competitive

advantage” by learning the positions of other

bondholders. Jd. at *3.

Line-Item Pricing in Government

Contracts. Agencies, such as NASA and the

Department of the Air Force, contract with private

parties for the provision of goods or services. In

doing so, those agencies may request “the submission

of proposed prices for certain contract line items.”

McDonnell Douglas Corp. v. NASA, 180 F.3d 308,

304 (D.C. Cir. 1999). The government contract is

then subject to “further negotiations on prices and

terms.” Jd. Neither the contract nor its specific

terms would exist but for government approval.

In McDonnell Douglas, the D.C. Circuit

concluded that “pricing information contained in a

contract” between McDonnell Douglas and NASA

was protected by Exemption 4. Jd. In Canadian

Commercial Corp. v. Dep't of the Air Force, 514 F.3d

37 (D.C. Cir. 2008), the D.C. Circuit likewise

observed that negotiated line-item prices between

McDonnell Douglas and the Air Force “ffell] within

25

Exemption 4 of the FOIA if [their] disclosure would

‘impair the government’s ability to obtain necessary

information in the future’ or ‘cause substantial harm

to the competitive position of the person from whom

the information was obtained.” Jd. at 40.1!

7+ @&

The Second Circuit’s ruling cannot be

reconciled with this line of cases. If the FRBs’

“executive action” here—which consisted only of

approving Discount Window loans—were enough to

eliminate Exemption 4 protection, Exemption 4

protection would be unavailable in these other

commercial settings, where the government is

typically more involved in setting the final terms of

the transaction.

Thus, if left to stand, the Second Circuit’s

ruling would impair numerous agency programs that

depend on assuring third parties that details of their

commercial transactions with the government will

1! The D.C. Circuit noted, but did not consider, the

Government’s unpreserved argument that “pricing information

is not ‘obtained from’ a contractor but rather emerges from

contract negotiations between the parties.” Jd. at 41 n.*.

Subsequently, in a similar case involving unit-pricing

information, the District Court for the District of Columbia

stated that “the parties agree that the information is

‘commercial! or financial information obtained from a person.”

Gen. Elec. Co. v. Dep't of Air Force, 648 F. Supp. 2d 95, 101

(D.D.C. 2009). In doing so, the court noted that, in light of the

D.C. Circuit’s ruling in Canadian Commercial, the Air Force no

longer disputed whether “unit pricing information could come

within the scope of Exemption 4 at all, regardless of whether

[such information] could be shown to be confidential.” Jd. at

101 n.5.

remain confidential. If federal agencies cannot

provide these assurances, third parties will turn

away from these programs, impairing the programs’

effectiveness and the national interests they serve.!2

B. The Second Circuit’s Ruling

Contravenes the Established

Principle That an Agency May

Withhold “Inextricably

Intertwined” Exempt and Non-

Exempt Data.

The Secund Circuit’s ruling, if left to stand,

will impair numerous government programs. See

supra at 22-26. It will also wreak havoc in FOIA law

by undermining the settled principle, codified in

5 U.S.C. § 552(b) and recognized across the Circuits,

that permits an agency to withhold information

where it consists of exempt and non-exempt data

that are “inextricably intertwined.” See 5 U.S.C.

§ 552(b) (requiring agencies to disclose non-exempt

information only to the extent that such information

12 See Pub. Citizen, 209 F. Supp. at 53 (crediting affidavit

stating that “licensees will not negotiate with NIH without an

expectation that the financial terms of the licenses will remain

confidential”); Judicial Watch, 108 F. Supp. 2d at 30 (“[Fjoreign

purchasers may seek financing outside of the United States .

if subjected to the risk of disclosure of their confidential

commercial or financial information.”); Clarke, 1986 WL 1234,

at *2-3 (“releasing the requested information would harm the

national interest because investors would be less likely to

purchase government bonds in the future”); Comstock Intl, 464

F. Supp. at 808 (crediting “specific, factual or evidentiary

material” demonstrating, inter alia, that disclosure would

make loan applicants “unwilling|] to subject themselves to the

possible risk of disclosure’).

“reasonably segrega|ted|” from that which is

exempt).!?

This rule apphes fully here. By any measure,

the terms on which banks apphed for Discount

Window loans existed prior to—and independent of

the loans’ approval. In other words, the Reports

summarize both the information “obtained from”

banks, most notably their identities, as even

Bloomberg did not dispute below, and the FRB's

decision to make loans on those terms. Similarly,

the Reports inextricably reflect the terms on which

banks accepted Discount Window loans

Because disclosing the terms on which FRB:

approved Discount Window loans necessarily reveals

(i) the terms on which each bank applied for these

loans, and (ii) the terms on which each bank accepted

these loans, the Reports” reflect information

“obtained from” the banks that is’ inextricably

\3 See also Mead Data Cent., Inc. v. U.S. Dep't of the Air Force,

566 F.2d 242, 260 (D.C. Cir. 1977) (agency may withhold non

exempt information if “inextricably intertwined” with exempt

information); Rein v. Patent & Trademark Office, 553 F.3d 353,

374 (4th Cir. 2009) (same); Missouri Coalition for Envtl Found.

v. Army Corps of Eng'rs, 542 F.3d 1204, 1212 (8th Cir. 2008)

(same); Miccosukee Tribe of Indians of Fla. v. U.S., 516 F.3d

1235, 1257 n.22 (11th Cir. 2008) (same); ZJ/nner Cily

Press/Community on the Move v. Bd. of Governors of the Fed

Reserve Sys., 463 F.3d 239, 249 n.10 (2d Cir, 2006) (same);

lightsafety Servs. Corp. v. Dep't of Labor, 326 F.3d 607, 613

(5th Cir. 2003) (same): Patterson v. IRS, 56 F.3d 832, 840 (7th

Cir. 1995) (same); Church of Scientology Intl v. U.S. Dept of

Justice, 30 F.3d 224, 228 (lst Cir. 1994) (same); Andrews v

Veterans Admin., 838 F.2d 418, 422 (0th Cir. 1988) (same);

Willamette Jndus., Inc. v. U.S., 689 F.2d 865, 867 (9th Ch

L982) (same)

intertwined with the information “generated by thi

“RBs Thus, the Report ; “contained no reasonably

segregable non-exempt information,” as the Board

explained when detailing its reasons for denying

Bloomberg's KOLA request (JA-57.)

The Second Circuit's legal conclusion that thi

information in the Reports was not “obtained from’

borrowing banks is thus untenable. It also leads to a

result at odds with the statute: Under the Second

Circuit’s reasoning, Exemption 4 would not appl

even if disclosure of the Reports would harm the very

third parties (here, banks) that Ikxemption 4 wa

designed to protect. See Bloomberg, 601 F.3d at 150

(acknowledging the “plausible” and “forcefully made’

arguments that disclosure of the information sought

by Bloomberg would “harm the _ bank: that

borrowed’). This conclusion can only be the result of

a “nonfunctional” interpretation of the FOIA that

fails to give effect to the “reasons for _ [the]

exemption.” John Doe Agency, 493 U.S. at 157

IT. THE SECOND CIRCUIT OPENLY SPLIT

WITH THE D.C, AND FIRST CIRCUITS

IN HOLDING THAT EXEMPTION 4 DOES

NOT PROTECT “CONFIDENTIAL”

INFORMATION WHOSE DISCLOSURE

WOULD IMPAIR THE EFFECTIVENESS

OF FEDERAL PROGRAMS.

The Second Circuit, creating a conthet with

the D.C. and First Circuits, refused to interpret the

term “confidential” to include information whose

disclosure would impair government programs. The

Second Circuit did so on the basis that such an

interpretation (1) finds “no basis” in the statute and

9Q

v\ mula re*pore crit i il OO! ] a ("Al it} MT] Ol

MK nvotion | Ser [3/ MT} bers >) t Mdogat yt)

Thi plit 4 nm an undemably important

question of FOLIA law: Whatis the governing test to

determine whethe. information | contidential

within the meaning of exemption 4, and whether

this test allows an agency to withhold information

when its disclosure would harm ayvency programs

The National Parks definition of the term

confidential’ is well established and should’ be

endorsed by this Court. See Contract Ireivhters, Ine

v. Secy of U.S. Dept of Transp., 260 F.3d 858, 861

(Sth Cir. 2001) (observing that “the National Parks

test’ has been “widely recognized and applied by thr

circuit courts when construing Kkxemption Wy

(collecting authority)) Recoynizing that FOTLA

contains no definition of the word ‘confidential,” the

National Parks court looked properly tr the

“legislative purpose” underlying the exemy) oon in

order to interpret it meaningfully i986 2G at 767

This approach is fully consistent with this Court

Instruction to interpret FOTA exemptions practically

by “looking to the reasons for [the] exemption” and

“applyling| a workable balance between the interests

of the public in greater access to information and the

needs of the Government to protect certain kinds of

information from disclosure.” John Doe Apency,

1938 US. at 15%

he Second Circuit erred when, though it ha

long endorsed the National Parks interpretation of

Kxemption 4, see Contl Stock Transfer & Trust Co. v

SHC, 566 F.2d 8738, 3875 (2d Cir. 1977), it nonetheless

refused to read National Parks to protect an apency :

interest in advancing its program he First Circupt

rejected just such an “unduly _ restrictive”

interpretation of National Parks, recognizing that

National Parks “identified the two interests which

are most frequently threatened by the disclosure of

commercial or financial information,” but did not

impose a rigid limitation “on the number of

legitimate interests” which the exemption protects.

9 to 5, 721 F.2d at 1, 9 (emphasis added). Instead,

the National Parks test was designed to protect from

disclosure information whose release would harm

“an identifiable private or governmental interest

which the Congress sought to protect by enacting

exemption 4.” Jd. at 10. One of these interests is

that of the government in withholding information

“which would be particularly helpful to agency

officials in carrying out their mandate.” Jd. This

interest stems directly from Exemption 4’s legislative

history, in which “the problems of compliance and

program effectiveness are mentioned as

governmental interests possibly served by this

exemption.” National Parks, 498 F.2d at 770 n.17.

The Second Circuit further erred when it

reasoned that the program-effectiveness test

recognized by the D.C. and First Circuits would “give

impermissible deference to the agency.” Bloomberg,

601 F.3d at 150. This test is nothing like the “vague

‘public interest” standard rejected by this Court, for

purposes of Exemption 5, in Merrill, 443 U.S. at 354.

Unhke Exemption 5, Exemption 4 requires the

government to prove that the information sought to

be protected, in addition to being “privileged or

confidential,” is obtained from a third party and is a

“trade secret[]” or “commercial or financial” in

nature. 5U.S.C. § 552(b)(4). Those requirements

ensure that the test can be invoked only in a

3]

commercial setting when the government interacts

with third parties that supply presumptively

sensitive business information in such transactions.

Even in this lmited setting, the program-

effectiveness test is not toothless. To satisfy this

test, the government must still “identify the

particular interest [protected by the exemption], and

... demonstrate how that interest will be harmed by

public disclosure of the specific information which

has been requested.” 9 to 5, 721 F.2d at 10; accord

Critical Mass, 830 F.2d at 286. In practice, the

government must submit evidence, as the Board did

here, showing how disclosure will harm participants

in the identified government program—and therefore

discourage them from participating in the future—if

the requested information is released. !4

This evidence, moreover, is not something

generated ex post and subject to agency abuse; it

serves as the cornerstone for a confidentiality policy

that, as with the Discount Window, is typically in

longstanding use.!®

14 See, eg., Clarke, 1986 WL 1234, at *2-3 (crediting

government affidavit demonstrating that market participants

“with access to [bondholder|] data concerning the positions of

other participants would have a= significant competitive

advantage”); Pub. Citizen, 209 F. Supp. 2d at 53 (concluding

that disclosure of the requested information “would seriously

impair [the government’s ability] in carrying out its public

health responsibilities” (internal quotation marks omitted)).

15 See, e.g., Clarke, 1986 WL 1234, at *3 (crediting government

affidavit discussing “the long tradition of confidentiality of the

ownership of United States Treasury securities”); Pub. Citizen,

209 F. Supp. 2d at 53 n.9 (noting that the NIH “takes

(footnote continued)

32

In all, the program-effectiveness 1s consistent

with National Parks’ approach to _ interpreting

Exemption 4; fits within the exemption’s legislative

design; and appropriately balances the public’s

interest in disclosure against “the needs of the

Government to protect certain kinds of information.”

John Doe Agency, 493 U.S. at 157. This Court should

therefore grant this petition in order to provide a

definitive interpretation of the term “confidential”

the centerpiece of Exemption 4—that will resolve the

existing split in the circuits.

CONCLUSION

The petition for a writ of certiorari should be

eranted.

Respectfully submitted,

Paul Saltzman Robert J. Giuffra, Jr.

Joseph R. Alexander Counsel of Record

THE CLEARING HOUSE H. Rodgin Cohen

ASSOCIATION L.L.C. Michael M. Wiseman

450 West 33rd St. Krez J. Davy

New York, NY 10001 SULLIVAN & CROMWELL LLP

(212) 613-0100 125 Broad Street

New York, NY 10004

(212) 558-4000

October 26, 2010

(footnote continued)

confidentiality {of royalty information] very seriously because

every licensing agreement contains a confidentiality clause”).

30d