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

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_2650%3A1

## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2011
- **Citation:** 562 U.S. 1303

## Text

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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_2650%3A1. Public record. Not legal advice.