Petition for Writ of Certiorari — Clearing House Ass'n v. Fox News Network, LLC
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Supreme Court, U.S.
FILED
No.
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ac O OFFICE OF THE CLERK
IN THE
Supreme Court of the United States
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THE CLEARING HOUSE ASSOCIATION L.L.C.,
Petitioner,
Fox NEws NEtwork, LLC, 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
Attorneys for Petitioner
The Clearing House Association L.L.C.
QUESTIONS PRESENTED
Exemption 4 of the Freedom of Information
Act authorizes a federal agency to withhold “[1] trade
secrets and commercial or financial information [2]
obtained from a person and [8] privileged or
confidential.” 5 U.S.C. § 552(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 Iederal
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.
The questions presented are:
1. 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
The respondents are Fox News
Association L.L.C
of the
Network, LILC, and the Board of Governors
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 PRESEN 1 BD) ...........00.000000.
LIST OF PARTIES AND RULE 29.6
EE PES iit eatin |
APPENDIX CONTENTS
OPINIONS BELOW
JURISDICTION
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED
STA TEMG Cle Ee Se vicivercsersssiscsserccccnnes ©
A. Factual BaCherOand., 0. +. <6cesscisecsscxncescscccsvssvess 12
1. The Discount Window and the Mechanics
&)
of Discount Window Lending................... 12
2. The Recognized “Stigma” of Financial
Weakness Attributed to Banks That
Borrow from the Discount Window. ........ 13
3. The Board’s Longstanding Confidentiality
Policy for Discount Window Lending and
the New Dodd-Frank Disclosure Regime. 15
Proceedings Below in Bloomberg and Fox.... 17
1. Bloomberg’s FOIA Request and Its
Adjudication in the District Court
2. Fox's FOIA Request and Its Adjudication
in the District Court
2)
3. Proceedings Before the Second Circuit in
Bloomer BING FOG. incccsiscinescciecécenscsenceesss 20
REASONS FOR GRANTING THE PETITION
I. THE SECOND CIRCUITS ERRONEOUS
“OBTAINED FROM A PERSON” RULING
THREATENS NUMEROUS FEDERAL
AGENCY PROGRAMS THAT DEPEND ON
MAINTAINING THE CONFIDENTIALITY
OF COMMERCIAL TRANSACTIONS WITH
ee Pe aro ba ce rone cana cs er pr tov sersicncenseennsces 2!
A. Courts Have Long Held That FOIA
Exemption 4 Protects Commercially
Sensitive Details of Third Parties’
Commercial Transactions with Federal
pO RN RA AS ARIE aA LO eRe eee mee Serr eee a0
. The Second Circuit’s Ruling Contravenes
the Established Principle That an Agency
May Withhold “Inextricably Intertwined”
Exempt and Non-Exempt Data..................... :
. 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. .........0ccssseseceseecceses i
EE ae IEE vncsandsnassnreissiwenenanens PR cie tasted seconde 37
APPENDIX CONTENTS
Order of the United States Court of Appeals
for the Second Circuit, entered on
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Order of the United States Court of Appeals
for the Second Circuit, entered on
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Order of the United States Court of Appeals
for the Second Circuit, entered on August
UE ec te ta oa ad ee ed A-5
Opinion of the United States Court of Appeals
for the Second Circuit, entered on March
De ee ch widaiinccvnbabcoancsncsaenteekeepeeermianeeavaaaraieel A-7
Opinion of the United States District Court
for the Southern District of New York,
CNCSVER OF DUlY BO, DIS oniccvcccccccesscssnsseacsssecaed A-17
A Fe, © GR coco ncasocacevvcesanecsusepccces ecco
TABLE OF AUTHORITIES
Page(s)
CASES
9 to 5 Org. for Women Office Workers v. Bd. of
Governors of the Fed. Reserve Sys.,
TOt FB FE CIS Civ. BOGS) cacccececccccccneees 9, 34-35, 36
Andrews v. Veterans Admtin.,
ee Fee OLS CIGEE CAP. BBBG) onesie cseccscsscsecsceeses 39
Bloomberg, L.P. v. Bd. of Governors of the Fed.
Reserve Sys.,
ee ee Ee Ce CB. BOLO) 055 ccccivccesesccessece passim
Bloomberg L.P. v. Bd. of Governors of the Fed.
Reserve Sys.,
649 F. Supp. 2d 262 (S.D.N.Y. 2009).................. 18
Canadian Commercial Corp. v. Dept of the Air
Force,
ee ee ee CEs, C288, BOI ceccisecevivessssesvccsoseeeeess 29
Church of Scientology Int'l v. U.S. Dep't of
Justice,
te ee Oe CED cig co sessvccccsectsaveccecevtoncs OO
Clarke v. U.S. Dep’t of Treasury,
No. 84-1873, 1986 WL 1234 (E.D. Pa. Jan.
aa aakhawenitqenekubers .... 28°29, 36
Comstock Intl (U.S.A.), Inc. v. Export-Import
Bank of the U.S..,
e646 ©. Supe. 604 D.C. 1979).................... 27, 31
_y}-
Cont’ Stock Transfer & Trust Co. v. SEC,
Ge Ce Te Ce Ga, IT OP cca vcavivecectcrsececessscusess 34
Contract Freighters, Inc. v. Sec'y of U.S. Dept
of Transp..,
260 F.3d 86S (Sth Cir. ZO01)........cccscccssscesscess <cices Ml
Critical Mass Energy Project v. NRC,
975 F.2d 871 (D.C. Cir. 1992) (en banc).... 9-10, 36
Cuomo v. The Clearing House Ass'n, LLC,
1260 &. CE. B71) CAD on vevcsccas watssad lily laatecanlubes ciuane- ae
Flightsafety Servs. Corp. v. Dept of Labor,
S26 F.S0 GOT (GED Cir. DOCG) ain ivicnsscocescesscscessss 32
FOMC vy. Merrill,
ee ee cdvuncuetauessexiuves os Sd
Fox News Netwerk, LLC v. Bd. of Governors of
the Fed. Reserve Sys.,
GOL Fee 1OS 0 Cl. BIG vase ssvcsesiccerscossecss passim
Fox News Network, LLC v. Bd. of Governors of
the Fed. Reserve Sys.,
639 F. Supp. 2d 384 (S.D.N.Y. 2009)................ 19
Fox News Network, LLC v. U.S. Dep't of the
Treasury,
--- F. Supp. 2d ---, 2010 WL 3705283
CS.TOLIN. FT. SOG. BF, BOI) viv sedsvcccccscvesesss en 25-26
Gen. Elec. Co. v. Dep't of Air Force,
648 F. Supp. 2d 95 (D.D.C. 2009)..........-....-+- vase BO
Hunt v. Wash. State Apple Adver. Comm'n,
Oe Be, ee Ce oiicciecnes akan ite tc
-V1l-
Inner City Press/Community on the Move v.
Bd. of Governors of the Fed. Reserve Sys.,
463 F'.8G ZOO C2 Car. ZOAID cscescccsisccdccavcsssesensssses 4
_S
bo
John Doe Agency v. John Doe Corp.,
4B8 US. TAG CIGD vvssccsscncnessccceseveteeee 11, 33-34, 37
Judicial Watch, Inc. v. Export-Import Bank,
108 F. Supp. 2d 19 (D.D.C. 2000)....... 26-27, «
~]
\eAe!
———
ee
'
we
be
McDonnell Douglas Corp. v. NASA,
180 F.3d 308. G).U. Cie. TG shcsséssscsieccumeson ‘suns BO
Mead Data Cent., Inc. v. U.S. Dep't of the Air
Force,
566 F.2d 242 {2.0 Cor. 167s 31
Miccosukee Tribe of Indians of Fla. v. U.S..,
16 F.3d 1235 (11th CAar. ZOOS) nicccscsscesesicnescucn 3]
Missouri Coalition for Enut'l Found. v. Army
Corps of Engrs,
542 F Aa 1204 (Sth Cir. DOOR) ...+<cccscsuccmen 31-32
Nat’! Parks & Conservation Ass'n v. Morton,
498 F.2d 765 (D.C, Car. 1ST) ....ccececseccrccovess passim
Patterson v. IRS,
BG F.3d SSS CFU Gre. Be vec occseccnncssnscicacencvencs cin hee
Pub. Citizen Health Research Group v. NIH,
209 F. Supp. 2d 37 (D.D.C. 2002)........... 28, 30, 36
Rein v. Patent & Trademark Office,
553 F.3a SBS €GGR Civ, Bi cccncecancstcpnccseaavserenes ol
-V1l1-
Renegotiation Bd. v. Bannercraft Clothing Co.,
@15 U.S. 1 (1974)........... : | 10
Willamette Indus., Inc. v. U.S.,
689 F.2d 865 (9th Cir. 1982) 32
STATUTES AND RULES
5 U.S.C. § 552(a(4)(B) .... |]
6 U.S.C. § 552(d)...... epee 1, 24, 31
5 U.S.C. § 552(b)(4) .... passim
ee 3
Dodd-Frank Wall Street Reform and
Consumer Protection Act, Pub. L. No. 111
203, 124 Stat. 1376 (2010)... .. 0-9, 15-16, 2
Sup. Ct. R. 10(a) ......
MISCELLANEOUS
Brian F. Madigan & William R. Nelson,
Proposed Revision to the Federal Reserve's
Discount Window Lending Program,
88 Fed. Res. Bull. 313 (2002)........... 15
Frequently Asked Questions—Discount
Window Lending Program,
http://www.frbdiscountwindow.org/dwfaqs
eras a Lehcnpecsneesesteusxes: | 16
Treasury Committee, The Run on the Rock,
Se On.
IN THE
Supreme Court of the Anited States
THE CLEARING HOUSE ASSOCIATION L.L.C.,
Petitioner,
lox NEWS NETWORK, LLC,
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
Petitioner The Clearing House Association
L.L.C. (“The Clearing House”)! respectfully petitions
' Established in 1853, The Clearing House is the United
States’ oldest banking association and payments company. It 1s
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 House
Association is a nonpartisan advocacy organization
representing through regulatory comment letters, amicus
briefs, and white papers the interests of its member banks on a
variety of systemically important banking issues. Its affiliate,
The Clearing House Payments Company L.L.C., provides
payment, clearing, and settlement services to its member banks
(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 1s reported
at 601 F.3d 158 (2d Cir. 2010). The August 20, 2010
Order of the Second Circuit denying rehearing is
unreported. (A-5-6.)?- The August 27, 2010 Order of
the Second Circuit granting the Board of Governors
of the Federal Reserve System (the “Board”) a 60-day
stay of the mandate is unreported. (A-3-4.) The
November 16, 2010 Order of the Second Circuit
sranting ‘The Clearing House _ post-yudgment
intervention and a stay of the mandate pending the
filing of this Petition is unreported. (A-1-2.) The
decision of the District Court is reported at 639 F
Supp. 2d 384 (S.D.N.Y. 2009).
JURISDICTION
The Second Circuit entered its judgment on
March 19, 2010, and denied the Board's petition for
panel and en banc rehearing on August 20, 2010. By
order dated August 27, 2010, the Second Circuit
sranted the Board a 60-day stay pending the filing of
a Petition for a Writ of Certiorari. On October 26,
2010. after the Solicitor General declined to grant
(footnote continued)
and other financial institutions, clearing almost $2 trillion daily
and representing nearly half of the automated clearing-house,
funds-transfer, and check-image payments made in the U.S
See www.theclearinghouse.org (last visited on Nov. 17, 2010)
All citations to “A- _” are to the Appendix to this Petition
the Board’s request for permission to file a Petition
for a Writ of Certiorarnn, The Clearing House
promptly moved to intervene as a party and to stay
the mandate. By order dated November 16, 2010
the Second Circuit granted The Clearing House's
intervention motion and granted The Clearing House
a seven-day stay of the mandate pending the filing of
the instant Petition. (A-1-2.) This Petition, timely
filed within 90 days of the Second Circuit's August
20. 2010 denial of rehearing, invokes this Courts
yurisdiction under 28 U.S.C. § 1254(1)
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED
The statutory provision involved is fxemption
1 of the Freedom of [nformation Act, 5 U.S.C
S 552(b)( 1)
STATEMENT OF THE CASE
The instant Petition seeks review of the
Second Circuit’s judgment in ox News Network,
LLC v. Board of Governors of the Federal Reserve
System, 601 Fo8d 158 (2d Cir. 2010) (“ox”), based on
the same questions presented by The Clearing House
in its earher Petition for a Writ of Certiorari, filed
with this Court on October 26, 2010, to review the
judgment in the companion appeal of Bloomberg,
L.P. v. Board of Governors of the Federal Reserve
System, 601 F.3d 148 (2d Cir. 2010) ( Bloomberg’),
petition for cert. filed, 79 U.S.L.W. 8271 (U.S. Oct
26, 2010) (No. 10-543)
lor the Court's convenience, The Clearing
House largely incorporates in this Petition the
substance of the arguments advanced 1n_ its
Bloomberg Petition, with specific citations to the
record on appeal in Fox and additional discussion of
the procedural posture of the Fox action.
The Companion Bloomberg and Fox
Appeals. The Petitions filed by The Clearing House
in Bloomberg and Fox arise from closely related
appeals. Both appeals concern Board reports
reflecting highly confidential information about the
identities of banks that borrowed through certain
Board lending programs, along with the loan-by-loan
details of their borrowings (specifically, the Board
reports at issue in Bloomberg are a subset of the
broader span of reports at issue in Fox); were heard
in tandem by the same Second Circuit panel; and
were decided by separate opinions issued on the
In its Bloomberg decision, the Second Circuit
ruled that the Board was not authorized under
Exemption 4 of the Freedom of Information Act
(“FOIA”) to withhold the identities of financial
institutions that borrowed from certain Federal
Reserve lending programs and the amounts and
durations of their loans, because (1) this highly
confidential information was not “obtained from” the
borrowing institutions; and (2) assuming this
information was “obtained from a person” (the panel
was referring here to the Federal Reserve Banks
(“FRBs”) that supplied the raw lending data to the
Board), Exemption 4 did not authorize a federal
All citations to “Fox JA” are to the Joint Appendix submitted
{
‘ircuit in Fos \ll citations to “Bloomberg
JA” a©r to the Joint \ppendi.x submitted pelore tne : cond
agency to withhold information, even the most highly
confidential information, on the basis that its
disclosure would impair the effectiveness of its
programs.
The Second Circuit then apphed its Bloomberg
holdings to require the Board to release the
information at issue in Fox. See Fox, 601 F.3d at 160
(‘For the reasons stated in the tandem case,
| Bloomberg], 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.”). In Fox, the
Second Circuit then proceeded to address the issue
not relevant to the instant Petition—of whether the
Board had adequately searched for additional agency
records held at the FRBs. See td. at 160-63.
Because the only aspect of the fox decision
that The Clearing House asks this Court to review 1s
derivative of the Second Cuircuit’s holdings in
Bloombderg, all references below to the Second
Circuit’s rulings in Bloomberg apply equally to this
Petition.
The Separate Certiorar. Petitions in
Bloomberg and Fox. The reason why The Clearing
House is filing the instant Fox Petition separately
from its Petition in Bloomberg is procedural.
In Bloomberg, The Clearing House was
eranted post-judgment intervention at the District
Court level. This ruling authorized The Clearing
House to participate as a party throughout the
appeal before the Second Circuit, including moving
for a 60-day stay of the mandate to file a certiorari
petition on October 26, 2010, that is, within the time
period of that stay.
Unlike in Bloomberg, The Clearing House did
not—and had no reason’ to—intervene_ after
judgment was rendered at the District Court level in
Fox. The Board was the prevailing party before the
District Court and, unlike in Bloomberg, thus did not
require the Solicitor General's approval to defend the
District Court’s ruling on appeal in Fox. As a result,
the Board was in a position to protect The Clearing
House’s interests in its members’ highly confidential
information as reflected in the Board reports at
issue.
On appeal in fox, the Board in tact defended
The Clearing House’s interests before and after
judgment, including by obtaining Solicitor General
approval to file a petition for en banc rehearing on
May 3, 2010 on the same two issues presented by
The Clearing House in this Petition
)
It was only on October 22, 2010, when counsel
for the Board informed counse] for The Clearing
House that the Solicitor General did not authorize
the Board to file a petition for certiorarn in either
Bloomberg or Fox, that the Board no _ longer
adequately protected The Clearing House's interest
in 1ts members’ highly confidential information at
issue 1n the Fox appeal.
This notification prompted The Clearing
House to move shortly thereafter, on October 26,
2010, to seek post-judgment intervention in Fox in
order to stay the mandate in Fox pending the
disposition of its Petition in Bloomberg; or,
-6-
alternatively, pending the filing of a separate
Petition for a Writ of Certiorari in Kox that would
present the two same two questions of law presented
in The Clearing House’s Bloomberg Petition. This
intervention motion was necessary, because, absent
a stay of the Second Circuit’s mandate in Fox, the
disclosure of the highly confidential bank
information at issue in Fox (of which the information
in Bloomberg is a subset) would have mooted The
Clearing House’s pending Petition for a Writ of
Certiorari in Bloomberg.
On November 16, 2010, the Second Circuit
sranted The Clearing House’s intervention and stay
motions. (A-2.) In doing so, the Second Circuit
conferred upon The Clearing House party status in
Fox to afford it “an opportunity to file a petition for
the Writ of Certiorari to the United States Supreme
Court.” (/d.) This Petition followed.
The Bloomberg Rulings Upon Which the
Fox Decision is Based. The rulings in the
Bloomberg decision, in which the Second Circuit
openly split with the D.C. and First Circuits, stem
from an unprecedented FOIA request by Bloomberg
(later copied by an even broader FOIA request by
Fox) demanding that the Board disclose highly
confidential reports containing the identities of
banks that borrowed from the Discount Window (a
permanent lending program of the FRBs) during the
recent financial crisis, along with the amounts and
durations of such loans.’
The request also demanded that the Board disclose such
information for the now-discontinued Primary Dealer Credit
(footnote continued)
The request 1s unprecedented because, since
the establishment 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 experiencing
liquidity problems and react by withdrawing their
funds from the bank or discontinuing to extend
credit. When borrowing from the Discount Window,
banks had understood that their identities and
individual borrowings would be kept confidential.
Indeed, the FRBs’ public Discount Window website
then stated that “the Federal Reserve does not
publish information about individual institutions’
borrowings.”
The Dodd-Frank Act now requires the Board
to disclose the identities of banks that borrow from
(footnote continued)
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(c). Accordingly, the portion of this
case about those facilities will be moot as of that date
Brief of Intervenor-Appellant The Clearing House
\ssociation L.L.C., Nov. 6, 2009, at 14, No. 09-4083-ev (2d Cir.)
the Discount Window, along with other transaction-
level details of their borrowing, approximately two
years after such borrowing occurs. See infra at 15-
16. 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 13-14.
In both Bloomberg and Fox, the Board sought
to protect this Discount Window lending information
by invoking FOIA Exemption 4, which authorizes a
federal agency to withhold “[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 likely “(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.” Natl Parks & Conservation Assn v.
Morton, 498 F.2d 765, 770 (D.C. Cir. 1974) (footnote
omitted). The D.C. and 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 Fed. Reserve
Sys., 721 F.2d 1, 10 (1st Cir. 1983); accord Critical
-o.
Mass Energy Project v. NRC, 975 F.2d 871, 879 (D.C.
Cir. 1992) (en banc).
In Bloomberg, the Second Circuit recognized
the Board’s and the banks’ “plausible” and
“forceful[]” showing that disclosure of the
information sought by Bloomberg “would harm the
banks that borrowed” and “the banking system as a
whole.” Bloomberg, 601 F.3d at 151. Nevertheless,
the Second Circuit held—as a matter of law—that (1)
the FRBs’ “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 supphed 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 rulings will disrupt
“long-established procedures” of numerous federal
agencies. See Renegotiation Bd. v. Bannercraft
Clothing Co., 415 US. 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
-10-
on assuring third parties that details of their
commercial transactions with federal agencies wil!
remain confidential.
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). This is especially important in thai
many of the nation’s leading media companies are
located in the Southern District of New York.
The line 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
31-33. This rule applies fully when third parties
transact with a federal agency.
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
Exemption 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
11-
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.
A. Factual Background.
l. 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.” (Kox JA-127 4 6; Bloomberg JA-67 § 6.) In
performing this lending function, the Discount
Window can serve “as an emergency, back-up source
of liquidity for institutions that may not have access
to ordinary, market sources of funding on a short
term basis.” (Fox JA-138 4 23; Bloomberg JA-74
A bank eligible to borrow from the Discount
Window requests a Discount Window loan by
contacting its lecal 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
‘he Mechanics of Borrowing, http://www.frbdiscount
window.ore/mechanics/cfm?hdrI D=14 (last visited on Nov
2010)
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.”
(Fox JA-133 § 16; Bloomberg JA-70 4 11.)
The FRBs, in turn, provide data concerning
completed loans to the Board’s Division of Monetary
Affairs. (Fox JA-155 § 15; Bloomberg JA-38 4 11.)
Then, the Monetary Affairs staff use these data to
generate “Remaining Term Reports’—the Reports at
issue in this appeal—that reflect (1) the names of the
borrowers; (11) the amount of individual loans; and
(111) the origination and maturity dates of each loan
(ld
2. The Recognized “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
from it, market participants, ustomers, and
counterparties may infer that the bank is
experiencing “an underlying capital or lhquidity
probiem.” (Fox JA-138 4 23; Bloomberg JA-74 4 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. (Fox JA
1388s § Zo; Bloomberg JA-74-75 Y4 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 analyst a drop in. the
institution’s stock price, and a withdrawal of market
sources of liquidity.” (Fox JA-137-38 J 22;
Bloomberg JA-74 417.) “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. (fox JA-138-39 4 24;
Bloomberg JA-75 4 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 ettfects of th) stiyma vere furthe)
evidenced in the early 1990s, when rumors that
Citibank was borrowing at the Discount Window
sparked runs at some of its offices in Asia. (fox JA
140 4 27: Bloomberg 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, 49 1, 147.’
Available at http /IWWW publi ation part nent.ut
200708/cmselect/emtreasury/56/561.pdf (last visited Nov ag
2010)
3. The Board’s Longstanding
Confidentiality Policy for
Discount Window Lending and
the New Dodd-Frank
Disclosure Regime.
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
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 agvregate data pubh hed b. the l'ederal
Reserve.” /Id
The Dodd-Frank Act establishe 1 new
disclosure regime for Discount Window loans mad
after the Acts enactment The Board 1s now
required to disclose the identities of banks that
borrow from the Discount Window, along with other
transaction-level details of their borrowing
approximately two years alter uch borrowing
occurs See Dodd-Frank Act § 1103(b) (amending
Federal Reserve Act to require disclosure of post
enactment Discount Window lending-—a_ tvpe_ ol
“covered transaction”—"“on the last day of the eighth
calendar quarter following the calendar quart
1s
which the covered transaction was conducted ) 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”)
Or importance to thi Petition, the Dodd
‘rank Act does not require disclosure of Discount
Window lending information prior to its enactment
Specifically, Section 1103(b) of the Act, which adds a
new section to the Federal Reserve Act, expressly
provides 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 hi
isnificant. because, dumng the recent financial
Crisl bank relied upon the Board confidentiality
pohe' whe} obt wWnInY Discount Window loan in
imounts and at intervals that would permit th
ublic to draw inferences—whether fal not
bout their current fina ul lit
req 1 Wu ) na
i r im bAQ ‘= ( hed | rve i]
ublicly disclose | pproximate A certal
formation on dis¢ t window {on or after Jul
2010 http vw.irbdi A tmp
B. Proceedings Below in Bloomberg
and Fox.
l Bloomberg’s FOLIA Request and
Its Adjudication in the District
Court.
On May 21, 2008, Bloomberg sent a FOTA
request to the Board, asking for eleven categories ot!
documents relating to securities posted as collateral
for Discount Window and other loans made between
April 4, 2008 and May 20, 2008. (Bloomberg JA-50
51.) The Board determined that the Report
contained information responsive to the request
specifically, the nam of borrowe) and thi
amounts and term of individual loans—but
concluded that thi niormation wa exempt tron
(ii closure (Rloombergs JA-62 }
Qn November 7 POO8. Bloomberg tiled a FOLA
wction in the Southern District of New York. The
Board wae Bloombe re each moved tor SUITDITLAPY
judgment ubmitting ipporting declaration
Specifically the Koard ubmiutted 4 pages ol
declaration Irom a enmior Board olficral and two
fficers of the Federal Reserve Bank of New Yort
respon sible for operational details for the Discount
Window and the other lending facilities at sue. ott
those declaration 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 detailed
evidence demonstrating the recognized “stigma
associated with Discount Window lending
(On \uvust A 20049 the District (Court
ranted bloomberv cro motion for ummary
judgment, dismissing the Board’s evidence of
competitive harm as “speculative” or “conjectural”
and declining to recognize, as an additional! basis for
non-disclosure, the Board’s interest in advancing its
lending programs. Bloomberg L.P. v. Bd. of
Governors of the Fed. Reserve Sys., 649 F. Supp. 2d
262, 280 (S.D.N.Y. 2009). The District Court also
held that some of the information contained in the
Reports—that is, the amounts and terms of
individual loans—was not “obtained from” the
borrowing banks, reasoning that the FRBs’
“senerati[on] [of] the information contained in the
[Reports] [was] sufficient to vitiate the applicability
of Exemption 4 with respect to that information.” Jd.
at 278. At the same time, the District Court
recognized that “the borrowers’ names,” also
contained in the Reports, were “obtained from” the
borrowing banks. Id.
After this ruling, The Clearing House moved
to intervene for purposes of appeal, arguing, among
other things, that the Board might not adequately
protect its interests, because the Board had not yet
received Solicitor General authorization to pursue an
appeal. The District Court granted The Clearing
House’s intervention motion, and The Clearing
House participated as a party in the appeal to the
Second Circuit.
2. Fox’s FOIA Request and Its
Adjudication in the District
Court.
Following Bloomberg’s lead, on November 10,
2008, Fox News Network, LLC, (“Fox”) filed a FOIA
request (which it subsequently clarified and then
-18-
supplemented with another) seeking “the names of
institutions receiving Federal Reserve lending” from
eleven named programs and “any other Federal
Reserve lending facility,” as well as “an accounting of
the collateral provided by these institutions in
exchange for the lending” from August 8, 2007
through November 17, 2008. (ox JA-169-71.) In
response, the Board identified, among _ other
responsive documents, two types of reports, called
“Origination Reports” and “Remaining Term
Reports.” These reports contained the identities of
banks that borrowed from the Discount Window,
along with the amounts and durations of the loans
they obtained. (Fox JA-29-31.) The Origination
Reports contained information for the business days
of August 20, 2007 to November 14, 2008; the
Remaining Term Reports covered an overlapping
period of business days from February 11, 2008 to
November 14, 2008. (Ud.) In other words, the reports
sought by Fox included the shorter span of reports
sought by Bloomberg, which covered the period from
April 4, 2008 to May 20, 2008. The Board withheld
these reports on the ground that they were exempt
under Exemptions 4 and 5 and contained no
reasonably segregable non-exempt information. (/d.)
Fox, like Bloomberg, filed an action in the
Southern District of New York challenging the
Board’s decision to withhold these reports. On July
30, 2009, the District Court ruled against Fox,
holding, first, that the information in the reports at
issue reflected “information that originated with the
borrower” and _ therefore “obtained from’ the
borrower.” Fox News Network, LLC v. Bd. of
Governors of the Fed. Reserve Sys., 639 F. Supp. 2d
384, 399 (S.D.N.Y. 2009). The District Court also
-19-
ruled that this information was “confidential”
because (1) the Board had sustained its burden of
showing “specific and substantial harms to borrowers
if the information about Discount Window loans were
disclosed”; and (2) disclosure of the reports “would
compromise the Board’s effective execution of its
statutory responsibilities.” /d. at 400-02.
The District Court subsequently amended and
filed its final judgment on September 2, 2009. (Fox
JA-6.) Fox appealed from this judgment on
September 9, 2009, i.e., the same day that The
Clearing House moved to intervene in Bloomberg.
(fox JA-6; Bloomberg JA-6, entries nos. 34, 39, 40.)
3. Proceedings Before the Second
Circuit in Bloomberg and Fox.
The Bloomberg and Fox appeals were heard
and decided in tandem, by the same panel and on the
same day.
In Bloomberg, the Second Circuit rendered the
“obtained from a person” and “program effectiveness”
rulings described above. In Fox, the Second Circuit
applied its Bloomberg holding to rule, in relevant
part, 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, 601 F.3d at
160.
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
-20-
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(j), 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.
The Board and The Clearing House then moved to
stay the Second Circuit’s mandate in Bloomberg
pending the filing of a Petition for a Writ of
Certiorari. 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 appeals.
On October 22, 2010. counsel for the Board
informed The Clearing House that the Solicitor
General had denied the Board’s request to file a
certiorari petition. Shortly thereafter, on October 26,
2010, The Clearing House filed its Petition for a Writ
of Certiorari in Bloomberg. See Bloomberg, 601 F.3d
143, petition for cert. filed, 79 U.S.L.W. 3271 (U.S.
Oct. 26, 2010) (No. 10-543).
The Clearing MHouse’s Post-Judgment
Intervention and Stay Motions in Fox. Also on
October 26, The Clearing House moved before the
Second Circuit in Fox (1) to intervene as a party; and
(2) to stay the mandate in Fox, pending either the
disposition of The Clearing House’s certiorari
petition in Bloomberg, or to enable The Clearing
House to file a separate certiorari petition in Fox. In
®” See Letter from Matthew M. Collette to Catherine O'Hagan
Wolfe, dated August 3, 2010, No. 09-4083 (2d Cir.); No. 09-3795
(2d Cir.).
'
INO
pe
doing so, The Clearing House demonstrated that it
had associational standing to intervene and _ to
petition for certiorari, because disclosure of the
Origination and Remaining Term Reports at issue
(which reflected the Discount Window borrowings of
certain Clearing House members) threatened its
members with a concrete injury-in-fact!; that
intervention was timely because sought within the
90-day period to petition for certiorari, and just two
business after being notified by the Board that the
Board would not file a petition for certiorari; and
that intervention was appropriate to allow The
Clearing House to move to stay the Fox mandate to
prevent its Bloomberg Petition from becoming moot
(because the broader span of reports at 1ssue in Fox
included the shorter span of reports at issue in
Bloomberg).
The Clearing House further argued that a stay
was appropriate, because there was a “reasonable
probability” of obtaining this Court’s review and a
“fair prospect” that this Court would reverse the
Second Circuit's judgment in Bloomberg on one or
both of the grounds raised in the Bloomberg Petition.
10 See generally Hunt v. Wash. State Apple Adver. Comm'n, 432
U.S. 333, 343 (1977) (association has standing where “{a) its
members would otherwise have standing to sue in their own
right; (b) the interests it seeks to protect are germane to the
organization’s purpose; and (c) neither the claim asserted nor
the relief requested requires the participation of individual
members in the lawsuit.”); see also, e.g., Cuomo v. The Clearing
House Ass’n, LLC, 129 S. Ct. 2710, 2714 (2009) (reviewing
challenge by The Clearing House to New York Attorney
General's investigation of lending practices of certain of its
members and other national banks).
Notably, in opposing both motions, even Fox
conceded that The Clearing House’s Petition in
Bloomberg arose from “a case that has broad
implications for agencies beyond the Federal Reserve
system.”!!
By order dated November 16, 2010, the Second
Circuit granted The Clearing House’s intervention
motion and stayed the Court’s mandate “to afford
{The Clearing House] an opportunity to file a petition
for the Writ of Certiorari to the United States
Supreme Court.” (A-2.) The instant Fox Petition
followed.
REASONS FOR GRANTING THE PETITION
This Court should grant this Petition for two
reasons.
First, uf left undisturbed, the Second Circuit's
“obtained from a person” ruling will undo a long line
of cases authorizing federal agencies to withhold
sensitive details concerning a_ third party's
commercial transactions with the government. This
line of cases protects numerous critical federal
programs—such as the ability of the Export-Import
Bank to extend loans and insurance, and that of the
NIH to license government inventions—that depend
on assuring third parties that details of these
commercial transactions will not be disclosed. These
cases follow the principle, codified in 5 U.S.C.
1! See Fox News Network, LLC’s Memorandum of Law in
Opposition to the Motion by The Clearing House Association
L.L.C. to (1) Intervene and (2) Stay the Issuance of This Court’s
Mandate, Nov. 2, 2010, at 18, No. 09-3795-cv (2d Cir.).
-23-
§ 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, the Second Circuit’s ruling presents a
question of first impression in this Court of
undeniable importance to FOIA law, and one over
which the Circuits are now plainly 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 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.
24-
I. THE SECOND CIRCUIT’S ERRONEOUS
“OBTAINED FROM A PERSON” RULING
THREATENS NUMEROUS FEDERAL
AGENCY PROGRAMS THAT DEPEND
ON MAINTAINING THE
CONFIDENTIALITY OF COMMERCIAL
TRANSACTIONS WITH SUCH
AGENCIES.
A. Courts Have Long Held That FOIA
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.
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
-25.-
ya)
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,
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 sub‘ect to Exemption 4 protection—
Loans and Insurance Extended by the
Export-Import Bank. The Export-Import Bank is a
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.” Jd. 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”
.96.
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.” Jd. 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
and conditions under which [the Export-Import
Bank] and [a private bank]” extended credit. Jd. 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
-27-
government subsequently licenses to third parties.
During the licensing process, the government
“negotiates” a final royalty rate with hcensees. See
Pub. Citizen Health Research Group v. NIH, 209 F.
Supp. 2d 37, 44 (D.D.C. 2002). Neither the licenses
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 licensee’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 date[s],” were “[u]nquestionably
obtained from persons outside the government.” /d.
at *2. That ruling enabled the Treasury Department
to maintain its “long tradition of confidentiality of
the ownership of United States Treasury securities,”
OQ
-Z0-
breach of which would have enabled market
participants to gain a “significant competitive
advantage” by learning the positions of other
bondholders. /d. 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 303,
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 Dougias, 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 hkewise
observed that negotiated line-item prices between
McDonnell Douglas and the Air Force “flell] within
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.'4
2 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.” /d. at 41 n.?
(footnote continued)
29
The Second Cuircuit’s ruling cannot be
reconciled with this line of case: If the FRBs'
“axecutive action” here—which consisted only of
approving Discount Window loans—were enough to
eliminate Exemption 4 protection, Ixxemption 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 Circuits
ruling would impair numerous federal programs that
depend on assuring third parties that details of their
commercial transactions with the government will
remain confidential. If federal agenmes cannot
provide these assurances, third parties will turn
away from these programs, impairing the programs
effectiveness and the national interests they serve.'’
(footnote continued)
Subsequently, ino a similar case involving unit-pricing
information, the District Court for the District of Columbia
stated that “the parties agree that the information ts
‘commercial or financial information obtained from a person.’
Gen. Klec. Co. v Dep't of Au Force, 648 F Supp 2d 95, 10)
(D.D.C. 2009). In doing so, the court noted that, in light of the
1).C. Cireuit’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
lsuch information] could be shown to be confidential.” /d. at
101 n.o.
13) See Pub. Citizen, 209 F. Supp. at 538 (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, 10% F. Supp. 2d at 30 ([I*Joreagn
(footnote continued)
30)
B. The Second Circuit’s Ruling
Contravenes the Established
Principle That an Agency May
Withhold “Inextricably
Intertwined” Exempt and Non
Exempt Data.
The Second Circuit’s ruling, if not reviewed by
this Court, will impair numerous federal programs
See supra at 25-30. It also will wreak havoc on FOIA
law by undermining the settled principle, codified in
5 U.S.C. § 552(b), and recognized across the Cireuat
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
can be “reasonably sevreyalted|” from that which 1:
exempt).'4
(footnote continued)
purchasers may seck financing outside of the United Stat
if subjected to the risk of disclosure of their confidential
commercial or financial information.”); Clarke, 1986 WL 12:4
at *2-% (releasing the requested information would harion the
national mpterest because investors would be less likely to
purchase povernment bonds in the future’), Comstock Intl, 464
I’ Supp. at 408 (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: )
4 See also Mead Data Cent., Inc. v. U.S. Dept of the Atr bore
566 K.2d 242, 260 (D.C. Cir. 1977) CGapeney may withhold non
exempt information if “inextricably intertwined” with exempt
information); tein v. Patent & Trademark Office, 5538 F.8d 3853
374 (4th Cir. 2009) (same); Missourt Coaltlion for Enotl hound
(footnote contlimmed
This rule apples fully here. By any measure,
the terms on which banks applied 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 FRBs
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
intertwined with the information “generated” by the
FRBs. Thus, the Reports “contained no reasonably
segregable non-exempt information,” as the Board
explained when detailing its reasons for denying
Bloomberg’s and Fox’s FOIA requests. (Bloomberg
JA-57; Fox JA-30-31.)
(footnote continued)
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); Inner City
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);
Flightsafety Servs. Corp. v. Dept 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 (ist Cir. 1994) (same): Andrews v.
Veterans Admin., 838 F.2d 418, 422 (lOth Cir. 1988) (same);
Willametie Indus., Inc. v. U.S., 689 F.2d 865, 867 (9th Cir
1982) (same).
The Second Circuit’s legal conclusion that the
information in the Reports was not “obtained from”
vorrowing 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 apply
even if disclosure of the Reports would harm the very
third parties (here, banks) that Exemption 4 was
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’ banks _ 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.
If. 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 conflict with
the D.C. and First Circuits, refused to interpret the
term “confidential” to include information whose
disclosure would impair federal programs. ‘The
Second Circuit did so on the erroneous basis that
such an interpretation (1) finds “no basis” in the
statute and (2) would represent an unbounded
expansion of Exemption 4. See Bloomberg, 601 F.3d
at 150-51.
This split is on an undeniably important
I
question of FOIA law: What is the governing test to
ee
~
determine whether information is “confidential”
within the meaning of Exemption 4, and whether
this test allows an agency to withhold information
when its disclosure would harm agency programs.
The National Parks definition of the term
“confidential” is well established and should be
endorsed by this Court. See Contract Freighters, Inc.
v. Sec'y of U.S. Dep’t of Transp., 260 F.3d 858, 861
(8th Cir. 2001) (observing that “the National Parks
test” has been “widely recognized and applied by the
circuit courts when construing Exemption 4.”
(collecting authority)). Recognizing that FOIA
“contains no definition of the word ‘confidential,” the
National Parks court looked—properly—to the
“legislative purpose” underlying the exemption in
order to interpret it meaningfully. 498 F.2d at 767.
This approach is fully consistent with this Court's
instruction to interpret FOIA exemptions practically,
by “looking to the reasons for [the] exemption” and
“apply[ing] 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 Agency,
493 U.S. at 157.
The Second Circuit erred when, though it has
long endorsed the National Parks interpretation of
Exemption 4, see Cont’ Stock Transfer & Trust Co. v.
SEC, 566 F.2d 373, 375 (2d Cir. 1977), it nonetheless
refused to read National Parks to protect an agency's
interest in advancing its programs. The First Circuit
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
-34-
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.” /d.
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.” Nattonal 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.
Unlike 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 isa
“trade secret[]’ or “commercial or financial!” in
nature. 5 U.S.C. § 552(b)(4). Those requirements
ensure that the test can be invoked only in a
commercial setting when the government interacts
with third parties that supply presumptively
sensitive business information in such transactions
-30-
Even in this limited 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.!®
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.!®
In all, the program-effectiveness 1s consistent
with National Parks’ approach to interpreting
15 See, e.g., 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)).
16 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
confidentiality {of royalty information] very seriously because
every licensing agreement contains a confidentiality clause’).
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
granted.
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) 613-9106 125 Broad Street
New York, NY 10004
(212) 558-4000
November 18, 2010
’
mo
APPENDIX
A-1
UNITED STATES COURT OF APPEALS
SECOND CIRCUIT
FOR THE SE
Docket No. 09-3795-cv
November 16, 2010
At a Stated Term of the United States Court of
Appeals for the Second Circuit, held at the Daniel
Patrick Moynihan United States Courthouse, 500
Pearl Street, in the City of New York, on the 16th
day of November, two thousand and ten.
Before: Dennis Jacobs,
Chief Judge,
Pierre N. Leval,
Peter W. Hall,
Circuit Judges.
Fox NEWS NETWORK, LLC,
Plaintiff-Appellant,
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM,
Defendant-Appellee.
o)
ORDER
The Clearing House Association, LLC’s motion
to intervene in Fox News Network, LLC v. Bd. of
Governors of the Fed. Reserve System. (09-3795-cv)
is GRANTED. The issuance of the mandate in Fox
News will be stayed for seven (7) days from the
date of this order to afford The Clearing House
Association, LLC an opportunity to file a petition
for the Writ of Certiorari to the United States
Supreme Court.
FOR THE COURT,
/s/ Catherine O'Hagan Wolfe
Catherine O’Hagan Wolfe, Clerk
Joy Fallek, Administrative Attorney
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
Docket No. 09-3795-cev
August 27, 2010
At a Stated Term of the United States Court of
Appeals for the Second Circuit, held at the Danie!
Patrick Moynihan United States Courthouse, 500
Pearl Street, in the City of New York, on the 27th
day of August, two thousand ten.
Before: Dennis Jacobs,
Chief Judge,
Pierre N. Leval,
Peter W. Hall,
Circuit Judges.
Fox NEWS NETWORK, LLC,
Plaintiff-Appellant,
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM,
Defendant-Appellee.
ORDER
It 1S HEREBY ORDERED that the motion by the
Board of Governors for the Federal Reserve Sys
tem for a 90 day stay of the mandate 1. GRANTED
in part. The issuance of the mandate is hereby
stayed for 60 days from the date of this order
FOR THE COUR’
/s/ Catherine O’Hagan Wolle
|
Catherine O’Hagan Wolfe, Clerk
lov Fallek. Administrative Attorne
(INITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
Docket No. 09-3795-c'
August 20, 2010
At a stated term of the United States Court ol
Appeals for the Second Circuit, held at the Daniel
Patrick Moynihan United States Courthouse, 500
Pearl Street, in the City of New York, on the 20th
day of August, two thousand ten
Fox NEwS NETWORK, LLC
Plaintiff-Appellant
BOARD OF GOVERNORS OF THI
FEDERAL RESERVE SYSTEM,
Defendant-Appellee
Joard of Governors of the Federal Reserve Sy:
tem having filed a petition for panel rehearing, or,
in the alternative, for rehearing en banc, and the
panel that determined the appeal having consid
ered the requ t or panel rehearins and the
active members of the Court haviny considered
the request for rehearing en bane
IT IS HEREBY ORDERED that the petition }
a nied
| ) hil ‘ rR]
Catherine O’Hagan Wolte
Catherine O’Hagan Wolfe,
rer]
[INITED STATES COURT OF APPEAI
FoR THE SECOND CIRCUIL'
Docket No. O9-4 79
\reued: January JL, Z01L0
Decided: March 19 POLO
Stephen (; Mintz (ls rence W Vic Clo! Til 1¢ k Ly) al
beth Harrison. Paul Ostensen on the brief), Mintz
& Gold LLP, New York, NY, for Plaintiff-Appel
lant
Matthew M. Collette (Tony West, Mark b. Stern
on the brief), Department of Justice, Washington,
D.C.: Yvonne F. Mizusawa (Richard M. Ashton,
Katherine Hl. Wheatley on the brief), Board of
Governors ol the Federal Re serve system Wash
ington, D.C., for Defendant- Appellee
A-8
Robert J. Giuffra, Jr., H. Rodgin Cohen, Michael
M. Wiseman, William J. Snipes, Patrice A. Rouse,
Erez J. Davy, Sullivan & Cromwell LLP, New
York, NY, for Amicus Curiae The Clearing House
Association L.L.C. in support of Defendant-
Appellee.
Melanie Sloan, Anne L. Weismann, Citizens for
Responsibility and Ethics in Washington, Wash
ington D.C., for Amicus Curiae Citizens for
Responsibility and Ethics in Washington in sup-
port of Plaintiff-Appellant.
Before JACOBS, Chief Judge, LEVAL and HALL,
Circuit Judges
DENNIS JACOBS, Chief Judge:
The Federal Reserve System—the central bank
of the United States—-is composed of twelve
regional Federal Reserve Banks and the defen
dant-appellee Board of Governors of the Federal
Reserve System (“Board”) in Washington, D.C.
The Board is a federal agency that (among other
things) supervises the operations of the twelve
Federal Reserve Banks.
Plaintiff Fox News Network, LLC, (“Fox News’)
submitted two Freedom of Information Act
(“FOIA”) requests to the Board in November 2008.
The first sought the names of all the private
banks that received loans from the twelve Federal
A-9
Reserve Banks (under all of their lending pro-
grams) from August 2007 to November 2008, and
the collateral] the banks provided. The second
sought the names of the borrowing banks, the
amount they borrowed, and the collateral pledged
as to all loans made by the twelve Federal Reserve
Banks during September and October 2008. The
Board denied these requests in January 2009, not-
ing that while it possessed some responsive
records, it was withholding the requested infor-
mation under Exemptions 4 and 5 of FOIA. Dur-
ing its search for documents responsive to the
FOIA requests, the Board determined that it had
no information about the collateral used by bor-
rowing banks to secure specific loans, and that
such information would be held by the Federal
Reserve Bank that made each loan. But since the
Board is of the view that the relevant records of
the Federal Reserve Banks are not records of the
Board, the Board concluded that a FOIA request
to the Board did not require the Board to search
for them-and no search was conducted.
Fox News brought suit in the United States Dis
trict Court for the Southern District of New York
(Hellerstein, J.) to compel disclosure of the
Board’s documents and a search of documents in
the hands of the Federal Reserve Banks. Follow-
ing cross motions for summary judgment, the dis-
trict court ruled in favor of the Board, holding
both that the records maintained by the Board are
properly exempt from disclosure under FOIA
Exemption 4, and that the Board was not required
to search records maintained by the Federal
Reserve Banks. Fox News Network, LLC v. Bd. of
Governors of the Fed. Reserve Sys., 639 F.Supp.2d
A-10
384, 394, 401 (S.D.N.Y.2009). The district court’s
opinion did not discuss Exemption 5, and on
appeal the Board argues only the applicability of
Exemption 4.
For the reasons stated in the tandem case,
Bloomberg L.P. v. Board of Governors of the Fed.
Reserve Sys., 601 F.3d 143, 2010 WL 986527 (2d
Cir.2010), the information unambiguously at issue
in the Fox News requests—the identity of the bor-
rowing bank, the dollar amount of the loans, the
collateral securing the loans, and the loan origi-
nation and maturity dates—is not protected from
disclosure by Exemption 4. The Board is therefore
required to disclose responsive records it had pre
viously deemed exempt; we vacate the district
court's judgment and remand to the district court
to order the Board to disclose the previously with-
held responsive information.
Still at issue is whether the Board adequately
searched its records and the records of the twelve
l’ederal Reserve Banks in response to these FOIA
requests. Fox News argues that: (1) the Board was
required to search the loan records of each of the
twelve Federal Reserve Banks, and (2) the Board
misconstrued Fox News’s FOIA requests in the
Board’s search of its own records.
As the district court concluded, not all lending
records of the twelve Federal Reserve Banks nec-
essarily become records of the Board. However,
Board regulations provide that some records at
the Federal Reserve Banks—those kept at the
Federal Reserve Banks under certain conditions
for “administrative reasons”—are records of the
Board; these must be searched. We remand to the
listrict court to order further searches and to
A-11
determine if the fruits of those searches must be
disclosed. The district court did not reach the
question of whether the Board misconstrued the
scope of the Fox News FOIA requests (the district
court having ruled these documents would be
exempt from disclosure in any instance); we
remand for further consideration of that question
as well.
Barring a relevant exemption, an agency must
disclose responsive “agency records” in order to
comply with a FOIA request. See 5 U.S.C.
§ 552(a)(4)(B); see also Carney v. U.S. Dep't of Jus-
tice, 19 F.3d 807, 812 (2d Cir.1994). Fox News
argues on appeal that all of the lending records of
the twelve Federal Reserve Banks are “agency
records” of the Board within the scope of FOIA.
See 5 U.S.C. § 552(a)(4)(B). Materials are agency
records under FOIA if: (1) the agency created or
obtained the relevant records, and (2) the agency
is in control of the documents at the time of the
FOIA request. U.S. Dep’t of Justice v. Tax Ana-
lysis, 492 U.S. 136, 144-45, 109 S.Ct. 2841, 106
L.Ed.2d 112 (1989). Under the Board’s regula-
tions, “[t]he Secretary of the Board ... is the offi-
cial custodian of all Board records, including
records that are in the possession or control of the
Board, any Federal Reserve Bank, or any Board or
Reserve Bank employee.” 12 C.F.R. § 261.3(a).
Since the Board is the “custodian” of “Board
records” that are in the hands of the Federal
Reserve Banks, such records must be searched by
the Board pursuant to FOIA. It remains to be
A-12
determined which Federal Reserve Bank records
are “Board records” that the Board must search.
Fox News argues that the responsive loan
records are among those records held at the Fed-
eral Reserve Banks that are also records of the
Board. By regulation, records of the Federal
Reserve Banks become records of the Board when
they are created pursuant to the “performance of
functions for or on behalf of the Board” or when
they “are maintained for administrative reasons
in the regular course of business in official files in
any division or office of the Board or any Federal
Reserve Bank in connection with the transaction
of any official business.” 12 C.F.R. § 261.2(0)(1)(Q-
11). (The full text of the regulation is set out in the
margin).!
A declaration submitted by the attorney for the
Board in charge of processing FOIA requests
states that the Board interprets the qualifier “for
or on behalf of the Board” to describe a function
performed by the Federal Reserve Bank “under
delegated authority from the Board.” Supp. Decl.
of Alison M. Thro 9 3. The Board cites no written
or published expression of this internal policy or
interpretation, or any prior application of it. It is
“Records of the Board include ... all tnformation
coming into the possession and under the control of the
Board, any Board member, any Federal Reserve Bank, or
any officer, employee, or agent of the Board or of any Fed
eral Reserve Bank, in the performance of functions for or on
behalf of the Board that constitute part of the Board’s offi-
cial files: or [records] /t/hat are maintained for adminis-
trative reasons in the regular course of business in offictal
files in any division or office of the Board or any Federal
Reserve Bank in connection with the transaction of any offi-
cial business.” 12 C.F.R. § 261.2(i)(1) G-it) (emphases added).
A-13
therefore uncertain how much deference it com-
mands or deserves.
In any event, it seems clear from the statutory
scheme that enacted the Federal Reserve System
that the lending activities of the Federal Reserve
Banks do not take place “on behalf of’ or under
the “delegated authority” of the Board. The Board
itself has no power to make a loan to any bank,
and does not authorize each loan made by the Fed-
eral Reserve Banks. The power to make loans is
explicitly granted by statute only to the Federal
Reserve Banks themselves. 12 U.S.C. § 347b(a). In
that way, “Congress divided the powers of the
Federal Reserve System between the Board, which
is a federal agency, and the [Federal Reserve
Banks], which were established as regional banks
.... The Federal Reserve [System] is structured to
empower local institutions to lend, while permit-
ting federal oversight.” Fox News Network, LLC v.
Bd. of Governors of the Fed. Reserve Sys., 639
F.Supp.2d 384, 396 (S.D.N.Y.2009). “It 1s evident
from the legislative history of the Federal Reserve
Act that Congress did not intend to give the fed-
eral-government direction over the daily operation
of the [Federal] Reserve Banks.” Lewis v. United
States, 680 F.2d 1239, 1241 (9th Cir.1982). Since
the Board neither issues nor authorizes the spe-
cific loans that Fox News seeks documentation of,
we agree that the Federal Reserve Banks did not
issue each loan on “behalf of the Board,” or under
the “delegated authority” of the Board.’
. Judge Leval does not concur in this paragraph. In his
view, it is unnecessary to answer in this appeal whether
lending by the Federal Reserve Banks is done “for or on
behalf of” the Board. Fox News has made clear that all it
A-14
However, “Records of the Board” also include
such records that “are maintained for adminis-
trative reasons in the regular course of business
in official files in any division or office of the
Board or any Federal Reserve Bank in connection
with the transaction of any official business.” 12
C.F.R. § 261.2(1)(1) (Gi). The Board argues briefly
that it interprets this regulation as well to include
only those records created “under delegated
authority from the Board.” This interpretation
does not withstand scrutiny. The context and
phrasing of the regulation gives no support for the
proposed limitation. As the district court held in
Bloomberg—without appeal from the Board on
that point—this regulation provides that certain
records of the twelve Federal Reserve Banks are
records of the Board and those records must be
searched. Bloomberg L.P. v. Bd. of Governors of
the Fed. Reserve Sys., 649 F.Supp.2d 262, 274
(S.D.N.Y.2009).
To fully comply with the Fox News FOIA
requests, the Board must search records of the
twelve Federal Reserve Banks that are main-
tained for administrative reasons, in the regular
course of business, in the Board's official files or
by any Federal Reserve Bank, and in connection
with the transaction of any official business. And
responsive documents identified in that search
seeks in its FOIA demand is the identifies of the borrowing
banks and the terms of the loans. All such information will
be contained in records “maintained for administrative rea-
sons in the regular course of business in official files in...
[a] Federal Reserve Bank.” Accordingly all the information
in the Federal Reserve Banks that is sought in this case is
contained in documents which are subject to production by
the Board.
A-15
must be produced unless shielded by some FOIA
exemption. We remand to the district court to
order the Board’s further searches and to deter-
mine if the results of those searches must be dis-
closed.
II
Fox News also argues that the Board improperly
narrowed the scope of its FOIA requests with
regard to collateral pledged by borrowing banks.
According to Fox News, it requested not only col-
lateral associated with specific loans (which is
held only by the Federal Reserve Banks), but also
general collateral information (which is held by
the Board itself).? The Board claims that while it
possesses some general information of this
sort—such as the collateral that depository inst1-
tutions have on deposit in “pledge accounts,”
which is eligible to be posted as collateral for a
Discount Window loan—it does not believe such
information was within the scope of the Fox News
requests. The Board argues that it properly inter-
preted the requests to seek only specific collateral
pledged for specific loans. That information is held
only at the Federal Reserve Banks.
2 The first Fox News request initially sought, in rele-
vant part, “an accounting of the collateral provided by these
[borrowing] institutions in exchange for lending.” This
request was later arguably broadened to “seek[ ] an account-
ing of the collateral provided by these [borrowing] institu-
tions” —a formulation that is less transaction specific. The
second Fox News request sought, in relevant part, “records
sufficient to identify all collateral pledged by each ... insti-
tution” that “participated in any Fed[eral Reserve System]
lending program.”
A-16
This issue was not decided below because the
district court ruled categorically that collateral
information is protected from disclosure by
Exemption 4. It is unclear if such general collat-
eral information was requested, or whether, under
Bloomberg L.P. v. Board of Governors of the Fed.
Reserve Sys., 601 F.3d 143, 2010 WL 986527 (2d
Cir.2010), such information could be withheld. We
decline to decide these questions in the first
instance and remand to the district court for judg-
ment on this point consistent with our opinion.
CONCLUSION
We vacate the district court’s judgment for the
foregoing reasons and those stated in the tandem
case, Bloomberg L.P. v. Bd. of Governors of the
Fed. Reserve Sys., 601 F.3d 143, 2010 WL 986527
(2d Cir.2010). We remand to the district court to
order the Board’s further disclosure and further
searches, and to determine if what is discovered in
further searches must be disclosed. We also
remand to the district court for initial considera-
tion as to whether the Board properly construed
the scope of the FOIA requests and searched its
own records in response, and whether materials
that may be found must be disclosed.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT NEW YORK
No. 09 Civ. 272 (AKH)
July 30, 2009
Fox NEWS NETWORK, LLC.
Plaintiff,
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM,
Defendan L.
Steven Glen Mintz. Terence William McCormick,
Paul Ostensen, Mintz & Gold LLP, New York City,
NY. for Plaintiff.
Yvonne Facchina Mizusawa, Board of Governors of
the Federal Reserve System, Washington, DC, for
Defendant.
A-18
OPINION AND ORDER SUBSTANTIALLY
GRANTING DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT AND
DENYING PLAINTIFF’S MOTION
FOR SUMMARY JUDGMENT
ALVIN K. HELLERSTEIN, District Judge:
In the summer of 2007, responding to a weak
ening national economy, the Board of Governors of
the Federal Reserve System (“the Board”) took
steps to provide much-needed liquidity to Ameri
can companies in search of funds. One major step
was to authorize the regional Federal Reserve
banks to issue loans at terms more favorable than
had been their longstanding practice.
Typically, the twelve regional Federal Reserve
Banks (“FRBs”) used their Discount Window to
make overnight loans to eligible depository insti-
tutions in their respective districts, as loans of
“last resort.”! As a temporary measure in August
2007, the FRBs reduced the rates for money lent
through the Discount Window and lengthened the
loan terms from overnight to as long as ninety
Until 2003, because the rate was lower than the tar-
get rate set by the Federal Reserve, borrowers had to show
that they had no other available source of borrowed money
before being permitted to borrow at the Discount Window.
Since then, no such showing has been required because the
Discount Window rate is set higher than the target rate.
Thus, one might expect that “institutions will use the Dis-
count Window as a backup rather than a regular source of
funding,” The Federal Reserve Discount Window, http://
www. {rb discount window. org/ discount window book. c{m,
or, more likely, when the liquidity needs of a financial insti
tution cannot be met by its regular sources of funding.
A-19
days. When the Board found that liquidity still did
not sufficiently improve, it authorized the FRBs,
in March 2008, to lend to additional entities,
including primary dealers, “to promote effectively
the goals of maximum employment, stable prices,
and moderate long-term interest rates,” 12 U.S.C.
§ 225a. The amount of money lent through the
Discount Windows at the twelve regional FRBs
increased dramatically, from an average of
approximately $1 million during the week of
August 8, 2007, to over $188 billion in the last
week of 2008. Pl. Memo 5.
Plaintiff Fox News Network (“I’ox”) is owner of
Fox Business Network, a cable news network. Pur
suant to the Freedom of Information Act (“FOIA”),
5 U.S.C. § 552 (2006), Fox seeks disclosure of bor
rowers’ names, loan amounts, and pledged collat
eral for the loans made under these new
programs. Fox argues that because taxpayer dol
lars are being dispersed to particularly troubled
institutions in economically perilous times, via
untested and unprecedented methods, the public
deserves transparency and the Federal Reserve
requires increased oversight.
The Board resists disclosure under FOJA, main-
taining that it already voluntarily releases
broader, aggregate information regarding these
lending facilities and that releasing transaction
level information would jeopardize the success of
the facilities. The Board argues that since the
public has long regarded the Discount Window as
providing mainly “loans of last resort” (along with
routine needs by stable banks for short-term
funds) publicizing this information would deter
borrowers from using the Discount Window, and
might induce depositors and investor to make pan
icky withdrawals from financial institutions that
borrowed from a Federal Reserve bank’s Discount
Window. If the court grants disclosure and those
dangers follow, great damage to the national ccon
omy would result.
Fox submitted to the Board two requests, pur
suant to FOIA. The Board conducted a search
compiled and reviewed the responsive materials,
and replied that all the documents that lox had
sought were exempted from required disclosure
rules under two exemptions of the Act, Kxemp
tions 4 and 5. 5 U.S.C. § 552(b)(4), (5). Both pat
ties move for summary judgment.
I rule that one document, which the Board
determined is not a record, is indeed, a record
The Board shall identify this document and either
produce it or claim an exemption. In all other
respects, I grant the Board’s motion and deny
Kox’s motion, finding that the Board performed an
adequate search and that hxemption 4 permits
the Board not to disclose the documents that Fox
seek >.
I. History of the Federal Reserve
The tension between federal power and states
rights, which so fundamentally shaped our bicam
eral legislature, the electoral college, the limited
jurisdiction of our federal courts, and other
aspects of the United States Constitution, also is
reflected in the national banking system: whether
to focus national monetary policy and power in
one or a few national banks, or to rely on the
banking systems of each state. Alexander Hamil
ton. the first Secretary of the Treasury, founded
the First Bank of the United States in 1791. The
bank was a private Company, created to service
commercial and private needs, but empowered
also to Issue a national currency, recelve tax pay
ments due to the United States, and monetize and
manage the national debt. The wealth it possessed
combined with its ties to the federal government
led to the bank’s rapid growth in national wealth
and power. However, the bank was opposed by
Thomas Jefferson and his Democratic-Republican
party who distrusted centralized federal powe1
and favored state banking systems.°
Congress let the bank’s charter lapse twenty
years after it was founded. A profusion of state
chartered banks arose to succeed to the functions
that the national bank had performed. The state
banks, with their powers to lend and to issue cur
reney, created a great spread of wealth, run-away
inflation, financial panic, and economic chaos. In
1816. to return the nation to solvency and stabil
ity, President James Madison signed into law a
Second Bank of the United States with larger cap
italization than the First Bank. Denounced by
President Andrew Jackson and his Democrats
party, the Second Bank suffered the same fate as
the first when its charter was allowed to lapse in
1836, and again was succeeded by state banks
casy money, multiple issues of currency, a spread
of wealth, inflation that irpassed bounds, and
financial chaos. which ushered in the Pantie olf
See penerally Alan Brinkley, The Untinished Nation
A Concise History of the American People 161-65 (2d ed
MeCiraw-Hill 1997). Elarry ‘orman & Harold C. Syrett, A
History of the American People 229 (Alfred \ Knopl RHYA
\ 29
1837.* Again, the nation rescued itself by an
increased centralization of banking functions ond
tighter regulations through the National Banking
Act of 1863, and its subsequent amendments in
1864 and 1865, which chartered myriad smaller
national banks and created a national currency.
This legislation enabled the North to fund and
equip the armies that won the Civil War.’ How-
ever, these measures were insufficient to establish
a truly centralized banking system. Once again,
the federal system declined and was eclipsed by
the state-chartered banks, leading again to run-
away inflation and a succession of financial pan-
ics culminating in the Panic of 1907.°
The fluctuations and compromises continue
until today between a central national bank, a
central bank mediated by partially autonomous
regional banks, and numerous state banks. The
current system owes its origin to the Federal
Reserve Act of 1913 (“FRA”), which capped the
federal reform effort that followed the Panic of
1907.° The FRA, signed into law by Woodrow
Wilson, created a number of substantially
See Brinkley, supra note 2, at 210-11, 222-23, 249-52,
256-57, 259; Carman & Syrett, supra note 2. at 352
See Carman & Syrett, supra note 2, at 627; Roger T.
Johnson, Historical Beginnings... The Federal Reserve 10-
12 (Public and Community Affairs Department, Federal
Reserve Bank of Boston 1999).
See Johnson, supra note 4, at 12-15; Robert F
Bruner & Sean D. Carr, The Panic of 1907: Lessons Learned
from the Market's Perfect Strom 1-7 (John Wiley & Sons,
Inc. 2007).
f
See Bruner & Carr, supra note 5, at 141
A-23
autonomous regional banks and a federal board of
governors, in charge of oversight and federal pol-
icy.’ The FRBs were to be “the monetary and fiscal
agents of the United States.” Fasano v. Fed.
Reserve Bank of N.Y., 457 F.3d 274, 277 (38rd
Cir.2006) (quoting First Agric. Nat'l Bank v. State
Tax Comm'n, 392 U.S. 339, 356, 88 S.Ct. 2173, 20
lL. Ed.2d 1138 (1968)).
The FRA provided that three government off)-
cials, the Secretaries of Treasury and Agriculture
and the Comptroller of the Currency, would select
the number of regional districts, draw the district
boundaries, and choose the city within each dis-
trict in which the bank would be located. Contro-
versy surrounded the number of regional banks
and the size and reach of the New York branch.
Other areas were concerned that a system so
firmly rooted in New York City would not be sym-
pathetic or attuned to their local needs, including
the financial demands peculiar to the regional
manufacturing and agricultural industries.
Congress instructed that “the districts shall be
apportioned with due regard to the convenience
and customary course of business and shall not
necessarily be coterminous with any State or
States.” FRA § 2(1). In the end, by selecting a rel-
atively large number of regions (twelve) each with
a federal bank, and by intentionally curbing the
power of the New York Federal Reserve branch,
the three officials insured that institutions
throughout the country might have access to fed-
eral funds from a receptive regional lender.®
See Brinkley, supra note 2, at 621-22, 705; 2 Carman
& Syrett, supra note 2, at 385, 524
S
See Johnson, supra note 4, at 16-37
A-24
The 1913 House Currency and Banking Com-
mittee Report, issued in conjunction with the Fed-
eral Reserve Act and expressing congressional
intent, comments that the FRBs are “individually
organized and individually controlled, each hold-
ing the fluid funds of the region in which it is
organized and each ordinarily dependent upon no
other part of the country for assistance.” H.R.Rep.
No. 69 63rd Cong., Ist Sess. 18 (1913). The FRA
requires each FRB, through its individual board of
directors, to:
administer the affairs of said bank fairly and
impartially and without discrimination in
favor of or against any member bank or banks
and may, subject’ to the provisions of law and
the orders of the Board of Governors of the
Federal Reserve System, extend to each mem-
ber bank such discounts, advancements, and
accommodations as may be safely and rea-
sonably made with due regard for the claims
and demands of other member banks, the
maintenance of sound credit conditions, and
the accommodation of commerce. industry,
and agriculture.
12 U.S.C. § 301. The twelve regional banks are
“operating arms of the central banking system.”
but at the same time substantially independent
and autonomous. The Federal Reserve System
Q
Purposes and Functions, 6 (9th ed.. June 2005).'
The Federal Reserve System Purposes and Functions
is a Board publication upon which courts have relied to
explain the workings of the Federal Reserve. See Fed. Open
Mkt. Comm. of Fed. Reserve Sys. v. Merrill, 443 U.S. 340.
ie S
Bn. 2,99 S.Ct. 2800. 61 L.Ed.2d 587 (1979)
>a
A-25
They are charged with carrying out “system func-
tions including operating a nationwide payments
system, distributing the nation’s currency and
coin, supervising and regulating member banks
and bank holding companies, and serving as
banker for the U.S. Treasury.” Jd. Each bank acts
“as a depository for the banks in its own district.”
“a lender to eligible institutions ..., anda clear-
ing agent for checks.” Jd. at 6, 11. The FRBs turn
all their profits over to the Department of Trea-
sury, id., and they operate. in part, under inde-
pendent grants of Congressional authority. See,
e.g., 12 U.S.C. § 341 (providing the power to sue
and be sued, make contracts, appoint officers, hire
and fire emplovees, pre: cribe by laws). However.
they are managed by their own boards of direc-
tors, with two-thirds majorities elected by the
banks in their regions, and enjoy considerable
autonomy with regard to their lending and deposit
policies, as long as they are not inconsistent with
the general propositions of national policy and
oversight.
The Board, in contrast to the FRBs, is a gov-
ernment agency composed of seven members
appointed by the President and confirmed by the
Senate, and a staff. 12 U.S.C. § 241. The Board
mav examine and report upon the FRBs’ activi-
ties, suspend or remove any FRB officer or direc-
tor, require the FRBs to write off losses, oversee
loans between FRBs, supervise the FRBs, and
issue rules and regulations for the FRBs. 12
U.S.C. § 248(a)-(r). The Board “exercises broad
responsibility over the nation’s paymenis system
. and plays a major role in supervision and reg-
ulation of the U.S. banking svstem.” See 12 U.S.C.
A-26
§ 248(j). However, the degree of supervision and
control by the Beard is a function of the person-
alities at play and any current issues between
Congress and local banking interests. All this 1s
done in a tension with local powers and practices
exercised by the twelve regional banks and the
member banks that they serve.
Il. Procedural History
On November 10, 2008, Fox's Vice President
Bruce Becker submitted a FOIA request to the
Board, pursuant to 5 U.S.C. § 552, seeking “the
names of institutions receiving Federal Reserve
lending from programs including but not limited
to the following: Regular [Open Market Opera-
tions (“OMQ”) |]; Single-Tranche OMO Program;
Discount Window; Term Discount Window Pro-
sram; Term Auction Facility; Primary Dealer
Credit Facility: Transactional Credit Extensions;
ABCP Money Market [Mutual Fund] Liquidity
Facility; Securities Lending: Term Securities
Lending Facility; Term Securities Lending Facil-
ity Options Program; and any other Federal
Reserve lending facility not mentioned above.” for
the time period of August 8, 2007 through Novem-
ber 17, 2008.
On November 18, 2009, Fox’s Executive Vice
President Kevin Magee filed a second FOIA
request before Fox had received any response from
the Board. The second request sought records from
September ane October 2007 that identify the
names of the institutions that had received loans
under the programs listed in the first FOIA
request, as well as the loan amounts and collat-
eral pledged. The second request included an
A-27
application for expedited processing, under 5
U.S.C. § 552(a)(6)(E) (vA.
In response to the two requests, the Board con-
ducted a search of its records and engaged in dis-
cussions with its FRBs. The Board located 6,186
pages of agency records responsive to Fox's
requests. The information contained in these
pages related to the names and loan amounts of
Disceunt Window borrowers and other programs
mentioned in the requests. The Board found little
information regarding collateral. After reviewing
the responsive material, the Board determined
that all the documents contained exempt material
ard no reasonably segregable non-exempt infor-
mation. The Board denied the requests under
Exemptions 4 and 5, and, on February 19, 2009.
filed two indices pursuant to Vaughn v. Rosen, 484
F.2d 820 (D.C.Cir.1973) and supporting declara-
tions. The Board represented that the bulk of the
documents Fox sought were records of the FRBs in
New York and Boston, and that records of an FRB
are not records of the Board. as defined by the
Federal Reserve Act, aid do not have to be pro-
duced by the Board.
On March 27, 2009, the Board moved for sum-
mary judgment, arguing that no records have been
improperly withheld and that it 1s entitled to judg-
ment as a matter of law. Fox cross-moved, arguing
that (1) the Board conducted an inadequate
search, in part because it failed to search FRB
records, and (2) no exemptions apply to the
records. Alternatively, Fox seeks discovery, assert-
ing that the Board has demonstrated bad faith in
conducting the search.
A-28
lil. Discussion
A. Relevant Law
Congress enacted FOIA “to establish a general
philosophy of full agency disclosure unless infor-
mation is exempted under clearly delineated
statutory language.” Fed. Open Mkt. Comm. of
Fed. Reserve Sys. v. Merrill, 443 U.S. 340, 351-52,
99 S.Ct. 2800, 61 L.Ed.2d 587 (1979) (citing S.Rep.
No. 813, 89th Cong., 1st Sess.. 3 (1965)). There are
nine exclusive exemptions listed in § 552(b). “But
these limited exemptions do not obscure the basic
policy that disclosure, not secrecy, is the dominant
objective of the Act,” and each exemption “must be
narrowly construed.” Dept. of Air Force v. Rose,
425 U.S. 352, 361, 96 S.Ct. 1592, 48 L.Ed.2d 11
(1976).
Summary Judgment is granted when there is no
genuine issue of material fact and the moving
party is entitled to judgment as a matter of law.
Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477
U.S. 317, 330, 106 S.Ct. 2548, 91 L.Ed.2d 265
(1986). On a motion for summary judgment ina
FOIA case, “the agency must demonstrate beyond
material doubt that its search was reasonably cal-
culated to uncover ail relevant documents.” Nation
Magazine v. U.S. Customs Serv., 71 F.3d 885, 890
(D.C.Cir.1995) (internal quotations and citations
omitted). The agency also “must demonstrate that
each document that falls within the class
requested either has been produced, 1s unidentt1-
fiable, or is wholly exempt from the Act’s inspec-
tion requirements.” Ruotolo v. Dep't of Justice,
Tax Div., 53 F.3d 4, 9 (2d Cir.1995).
A- 29
The agency will sustain its burden by showing,
through “affidavits or declarations, ... that the
agency has conducted a thorough search for
responsive documents and has given reasonably
detailed explanations why any withheld docu-
ments fall within an exemption.” Carney v. U.S.
Dep't of Justice, 19 F.3d 807, 812 (2d Cir.1994).
The burden of proof rests with the agency on all
material issues related to the search’s adequacy
and the merits of exemptions. 5 U.S.C.
§ 552(a)(4)(B). Affidavits submitted by an agency
are “accorded a presumption of good faith.” Car-
ney, 19 F.3d at 812. In a FOIA case, the govern-
ment agency is not entitled to the deference
generally given under the Administrative Proce-
dure Act, and the district court should review the
agency's decision de novo. U.S. Dep't of Justice v.
Reporters Comm. for Freedom of Press, 489 U.S.
749, 755. 109 S.Ct. 1468, 103 L.Ed.2d 774 (1989).
“Discovery relating to [an] agency’s search and
the exemptions it claims for withholding records
eenerally is unnecessary if the agency's submis-
sions are adequate on their face.” Carney, 19 F.3d
at 812, demonstrating “that the withheld infor-
mation is clearly exempt and contains no segre-
sable, nonexempt portions.” Allen v. CIA, 636 F.2d
1287, 1298 (D.C.Cir.1980), overruled on other
grounds by Founding Church of Scientology of
Washington D.C., Inc. v. Smith, 721 F.2d 828
(D.C.Cir.1983). “Where the agency fails to meet
that burden, ... the court may employ a host of
procedures that will provide it with sufficient
information to make its de novo determination,
including ... discovery by the plaintiff.” Zd. If the
agency satisfies its burden, the plaintiff must then
A-30
demonstrate the agency's bad _ faith by
“impugn{[ing] the agency’s affidavits or declara-
tions, or provid[ing] some tangible evidence that
an exemption claimed by the agency should not
apply or summary judgment is otherwise inap-
propriate.” Carney, 19 F.3d at 813 (citation omit-
ted). Failing that, the court has the discretion to
“forgo discovery” to correborate the agency’s
claims and grant summary judgment in favor of
the agency. Jd. at 812
B. Adequate Search
A court must determine whether an agency has
adequately searched its records prior to analyzing
claims of exemption. See Carney, 19 F.3d at 812.
“*The factual question ...is whether the search
was reasonably calculated to discover the
requested documents, not whether it actually
uncovered every document extant. ” Grand Cent.
P’ship v. Cuomo, 166 F.3d 473, 489 (2d Cir.1999)
(quoting SafeCard Serus., Inc. v. SEC, 926 F.2d
1197, 1201 (D.C.Cir.1991)). However, “if the suf-
ficiency of the agency’s identification or retrieval
procedure is genuinely in issue, summary judg-
ment is not in order.” Founding Church of Scten-
tology of Wash., D.C., Inc. v. NSA, 610 F.2d 824,
837 (D.C.Cir.1979).
The Board has successfully carried its burden of
showing that it performed an adequate search.
Alison M. Thro, an attorney for the Board, was
responsible for processing Fox’s two FOIA
requests. She has ten years of experience pro-
cessing FOIA requests for the Board, five of those
years as its attorney in charge of such processing
requests. Ms. Thro submitted a declaration detail-
A-31
ing the Board’s general procedure for handling
FOIA requests and outlining her processing of
Fox’s requests.
Not long prior to receiving Fox’s requests, the
Board had received and processed nineteen dif-
ferent FOIA requests regarding substantially
overlapping information about Discount Window
lending and Special Credit and Liquidity Facili-
ties transactions, and it relied on this work in pro-
cessing Fox’s requests. In processing the first
nineteen requests, Thro had “contacted staff mem-
bers in the two divisions of the Board most likely
to have responsive records.” Thro Decl. 4 10. These
two divisions, the Division of Monetary Affairs
and the Division of Reserve Bank Operations and
Payment Systems, are the only departments
charged with overseeing the Reserve Banks’ lend-
ing under the relevant facilities and supplying
“data and statistics to the Board... relating to”
those facilities. Thro Decl. 4 22. Thro and her staff
contacted numerous senior and other staff mem-
bers at each division and discussed previous FOIA
requests in an effort to compile responsive docu-
ments. In total, thirteen staff members cooperated
with the legal team. Based on discussions with the
staff members, Thro concluded that it was not rea-
sonably likely that responsive documents were
kept in any other divisions of the Board. Thro and
her staff then had follow-up discussions with six
of the staff members to confirm that all appro-
priate documents had been searched.
In response to Fox’s FOIA requests, the Board's
legal staff reviewed documents it had compiled
while processing the many earlier requests, locat-
ing 6,008 pages of responsive documents. Thro
made further inquiries, including to the same two
departments, speaking with several — stall
members, seeking any remaining responsive infor
mation. These conversations led Thro to 178 addi
tional pages of responsive documents. In all, Thro
found 6,186 responsive pages of documents, all of
which the Board believed to be exempt from dis
closure under Exemptions 4 and 5
Fox argues that the Board’s submissions reveal
“positive indications of overlooked materials,” pre-
cluding a finding of summary judgment in the
Board’s favor, Founding Church of Scientology of
Wash., D.C., Inc. v. NSA, 610 F.2d at 837, and
entitling Fox to summary judgment because of
the inadequate search, Judicial Watch, Ine. v.
U.S. Dep’t of Commerce, 34 F.Supp.2d 28, 46
(D.D.C.1998). Alternatively, fox asks for discov
ery to test the competency of the Board’s search.
Carney, 19 F.3d at 812.
1 hold that Thro’s methodology was reasonably
calculated to identify all responsive documents
1. Federal Reserve Bank Records
ox argues that the Board failed adequately to
search its records because it did not search
records of the New York Federal Reserve Bank
(“FRBNY”) and the Boston Federal Reserve Bank
(“FRBB”), the instrumentalities that made the
Discount Window loans. The Board responds that
it is not required to search files maintained by the
FERBs. for the FRBs’ records are not the Board’s
records and, thus, the Board is under no obliga
tion to search them. Jone-Edwards v. NSA, 196
Med.Appx. 36. 388 (2d Cir.2006) (“An agency 1s not
obliged to conduct a search of records outside its
possession or control.” (citing Grand Cent, P ship,
166 I°.3d at 479)); see Dept. of Justice v. Tax Ana
lysts, 492 U.S. 136, 144-45, 109 S.Ct. 2841, LOG
LL.K&d.2d 112 (1989) (finding avency records are
those (_) created or obtained by the agency and (2)
under the agency’s control “at the time of the
FOIA request’)
The Board maintains that it has consistently
interpreted its regulations to require search only
of records generated by the Board, or by other
entities performing a function on behalf of the
soard. One regulation provides
Records of the Board include all informa
tion coming into the possession and under the
control of the Board, any Board member, any
Kederal Reserve fJank, or any. olficer
employee or agent of the Board or any Federal
Reserve Bank, in the performance of functions
for or on behalf of the Board that constitute
part of the Board's official file:
12 C.F.R. § 261.2(1)(1)Q). The Board interprets the
words “for or on behalf of the Board” to mean
“under delegated authority from the Board.’ Thro
Supp. Dec!. 43. This “longstanding practice of th
Board,” in interpreting its own regulations, 1d
‘becomes of controlling weight unless it 1s plainly
erroneous or inconsistent with the regulation
Bruh v. Bessemer Venture Partners Ill L.P., 464
F.3d 202. 207 (2d Cir.2006) (quoting Bowles |
Seminole Rock & Sand Co., 325 U.S. 410, 4134-14
65 5.Ct. 1215, 89 L.Ied. 1700 (19405))
The FRA. which established the IRBs, grant
independent authority to the FRBs to lend at the
Discount Window and determine required collat
|
eral. 12 U.S.C. § 347b(a) (“Any Federal Reserve
bank, undgr rules and regulations prescribed by
the Board may make advances to any member
hank on its time or demand notes having matur}
tics of not more than four months and which ar
secured to the satisfaction of such Federal Reserve
bank.”). The Board promulgates general rules and
regulations, but lacks the statutory authority to
lend. Thus, it cannot delegate lending authority to
the FRBs. Because the Ff RBs lend money pursuant
to their own mandate, records of their lending are
not Board records. Indeed, the five required form:
that a borrower completes when applying for a
loan at an FRB Discount Window indicate that the
loan is from the FRB and not the Board. These
forms make no mention of the Board, only of thi
relevant FRB.'"
The history and tructure of the Federal
Reserve. the Board, and the FRBs, bolster the
Board’s statutory interpretation. In the FRA
Congress divided the powers of the Federal
Reserve System between the Board, which 1s a
federal agency, and the FRBs, which were estab
lished as regional banks. Premised on this divi
ion, the Board interprets the statutory definition
of its record:
The Federal Reserve is structured to empowet
local institutions to lend, while permitting federal
oversight. The Board has the authority to pro
mulgate the rules and regulations to which thi
MRBs must adhere Aut. this authority does not
gost that loans made by an FRB. acting unde)
its own authority and discretion, are done on the
Roord’s behalf. “tas evident from the legislative
history of the Federal Reserve Act that Congr
did not intend to vive the federal government
direction over the daily operation of the Reserve
Banks.” Lewis v. U.S., 680 FF. Yd 1289, 1241 (Oth)
Cir. 1982) CUP} he reserve bank plan retains to the
(aovernment powe Over the exercise Qo] the
broader banking functions, while it leaves to ind)
viduals and privately owned institutions the
actual direction of routine.” (citing TER. Report
No. 69, 63 Cong. Ist Sess. 18-19 (19T8)))
lox ArFLUCS that the hhREss act on the Board
behalf when they implement the monetary policy
that the Board’s regulations permit, and that
records generated by the FRB in connection with
the facilities are Board records. However, to read
the statute as defining all FRB records as Board
records voes against the fundamental importance
of an FRB’s autonomy, autonomy which was the
cornerstone of the Federal Reserve System Tr
ese +.
The Board interprets other relevant regulation
consistently with this reading. ‘The record-keeping
revulation for the Board provides: “Ree ords of the
Board include lrecords| maintammed for admin
istrative rensons in the regular course of busine
in official files in any division or office of the
Roard or any Federal Reserve Bank in connection
with the transaction of any offieral busin Iv
CoRR, § Y61.20)01)a1). lt provides that the Board
may store its records of! ite nthe EFRBs only “for
administrative reason ld. Vhus, not all record
kept by the rMithiss are record ol the board: onl,
tha ( r fleeting delog ited Pury Linh) qo? tho ( bye la
at an FRB for the Board's “administrative
reasons.”
Section 261.3(a) provides that the Secretary of
the Board is the custodian of its records, whether
maintained at the Board or in an FRB. This reg-
ulation provides: “The Secretary of the Board...
is the official custodian of all Board records,
including records that are in the possession or
control of the Board, any Federal Reserve Bank, or
any Board or Reserve Bank emplovee.” Plaintiff
argues that this esta>dlishes that the Board’s Sec-
retary, and therefore the Board. has custody or
control over all records kept by all FRBs. How-
ever, as the Board maintains, this provision does
not extend the functions or powers of the Board's
Secretary beyond the limits of § 261.2(4)(1)Q).
Congress established the Board and the regional
FRBs as separate entities, reflecting the tension
between a centralized federal bank and generally
independent state and local banks. The Board
establishes national policy, but that policy is
implemented by each FRB. which maintains its
own banking relationship with the member banks
of its region. The Board’s interpretation of which
records belong to the Board and which belong to
the FRBs is consistent with the overall Federal
Reserve System structure established by statute.
Although the Board has the power “[t]o examine
at its discretion the accounts, books, and affairs of
each Federal reserve bank and of each member
bank and to require such statements and reports
as it may deem necessary.’ 12 U.S.C. § 248(a).
that oversight power does not change the balance
of the record-keeping functions described above.
In any event, for purposes of FOIA, what an
agency has an ability to obtain, but has not
obtained, is irrelevant. Forsham v. Harris, 445
U.S. 169, 182, 185, 186, 100 S.Ct. 977, 63 L.Bua.2d
293 (1980) (“FOIA applies to records which have
been in fact obtained, and not to records which
merely could have been obtained”): Ciba-Geigy
Corp. v. Mathews, 428 F.Supp. 423, 53]
(S.D.N.Y.1977) (holding that agency “should not
be compelled to acquire data it neither referred to
directly nor relied upon in making decisions’).
It may be. as Fox argues, that no FRB has a
FOIA office to which FOIA requests may be sub-
mitted, that the only FOIA office for the Federal
Reserve System is in the Board, and if Fox cannot
obtain documents from the Board, it will be
deprived of obtaining any meaningful documents
enabling a public accounting of the Board's Dis-
count Window loan program. Whether or not this
is so, 1t does not alter the fact that Fox served its
requests only upon the Board and that the defi-
nition of a Board record is limited by statute.
| hold that the Board's interpretations of its own
regulations are reasonable and consistent. I reject
Fox's argument that the interpretations are
unreasonably narrow and attenuated.
2. Additional Arguments for
Inadequate Search
Fox argues that additional aspects of the
Board’s search cause it to be inadequate. Fox
argues that the Board failed to account for records
obtained from the FRBNY and the FRBB in the
“daily data feed” from which the Board generates
its own reports; that the Board did net search
deleted files for responsive material: and that the
A-38
Board chose not to search an attachment to a
received e-mail that the recipient of the e-mail
had not and need not have opened.
The daily data feeds are daily reports sent elec-
tronically by the individual FRBs to the Division
of Monetary Affairs containing aggregate data
pertaining to FRB transactions. The Board gen-
erates three different weekly reports from the
data, and searched its weekly reports to respond
to Fox's FOIA request. Fox charges that the daily
data feeds mav have contained information that
was not incorporated into the Board’s weekly
reports and that t!e Board never searched the
unincorporated information.
Fox has no proof that any data was left out of
the Board's three weekly reports. The good-faith
presumption accorded to agency affidavits “cannot
be rebutted by ‘purely speculative claims about
the [possible] existence... of other documents. ~
Grand Cent. P’ship, 166 F.3d at 489 (quoting Safe-
Card Servus., Inc., 926 F.2d at 1200): Carney, 19
F.3d at 813 (“something more than [movant's]
bare allegations of ageneys concealment of
records is required). The daily reports themselves
are dvnamic. tne data changing with each days
business, and the Board does not retain hard
copies of each generation. To require the Board to
reconstruct the daily data feeds as of particular
dates would be unduly burdensome. Grand Cent.
P’ship. 166 F.3d at 489 (“an agency's search need
not be perfect. but rather need only be reason-
able”): Schrecker v. Dept. of Justice. 349 F.3d 657,
663 (D.C.Cir.2003) (The “adequacy of an agency s
search is measured by a standard of reasonable-
ness, and is dependent upon the circumstances of
the case.”); see Judicial Watch, Inc. v. Export
Import Bank, 108 F.Supp.2d 19, 27 (D.D.C.2000)
(“[I]t is the requester’s responsibility to frame
requests with sufficient particularity to ensure
that searches are not unreasonably burdensome
.... The rationale for this rule is that FOIA was
not intended to reduce government agencies to
full-time investigators on behalf of requesters.’)
(quotation and citation omitted).
As to deleted material, the issue arises with
regard to two Board members and one staff mem-
ber who had received weekly reports via e-maul
containing transaction-level ican information
None of these three individuals had used the
reports to perform Board duties and had routinely
destroyed all copies prior to Fox's FOIA request
Id. The Board's failure to use computer experts to
search for these files does not render the search
inadequate. Baker & Hostetler LLP v. U.S. Dept of
Commerce, 473 F.3d 312. 318 (D.C.Cir.2006)
(agency's FOIA response sufficient when its expla-
nation as to why it was unable to recover deleted
emails was adequate and unrebutted). The per-
sonnel routinely deleted such emails shortly after
receiving them because they did not need this
information to perform Board duties. See Wilbur v.
CIA, 355 F.3d 675, 678 (D.C.Cir.2004) (‘the fact
that responsive documents once existed does not
mean that thev remain in the jagency's] custody
today or that the [agency] had a duty under FOIA
to retain the records’): Yeager v. DEA. 678 F.2d
315, 321 (D.C.Cir.1982) ("A requester ts entitled
h
as in fact chosen
only to records that an agency
to create and retain.’ )
A-40
3. The Unopened Attachment
In one instance, the Board did not search an
attachment to an e-mail received by a number of
Board staff and Board members within the rele-
vant time period. The recipients had opened the e-
mail which contained responsive aggregate
information from the FRBNY regarding a relevant
lending facility. None of the recipients opened the
attachment until Thro asked them to do so as part
of the search. Thro determined that because the
attachment had not been opened, forwarded, used.
reviewed, or relied upon in the course of the recip-
icnts’ duties for the Board. it was not a Board
record. I disagree.
The attachment was both obtained by the
agency and within the agency's control “at the
time of the FOIA request.” Dept. of Justice, 492
U.S. at 144-45, 109 S.Ct. 2841. It was kept and
not deleted. Yeager, 678 F.2d at 321. That no staff
or Board member thought to open the attachment
does not negate its status as a record. Documents,
and their attachments, are records whether or not
an employee's eye passed over every section or
page.
| hold that the attachment is an agency record
and should be ineluded in the search. Thro’'s dec1-
sion, however flawed. was forthrightly presented
in her declaration and is not evidence of “bad
faith.” Alien, 636 F.2d at 1298. Fox's submissions
are “adequate on their face,” Carney, 19 F.3d at
812. regardless. and provide sufficient information
on which to make a de novo determination. See id.
at 813. The Board shall conduct the acditional
search. turn over all responsive and non-exempt
A-41
information, and submit an additional Vaughn
index, 1f necessary.
In spite of this deficiency. the search conducted
by the Board was thorough and reasonable. The
Board searched the two divisions reasonably likely
to have responsive documents (based on its nine-
teen prior similar FOIA requests). The Board con-
tacted thirteen staff members and had follow-up
discussions with six. The Board's FOIA attorney
personally reviewed the information. This process
vielded 6.008 pages of exempt information listed
on the Feb. 19, 2009 Vaughn indicies. A later,
additional search yielded 178 more pages listed on
supplemental Vaughn index. I find that the search
was adequate, no additional search (other than
that indicated above) is required, and no discovery
by Fox of the Board’s review process is warranted.
C. FOIA Exemptions
The Board argues that Exemptions 4 and 3d
exempt the responsive documents recovered in the
search. Exemption 4 applies to an agency s com-
mercial, financial, or trade secret information that
is obtained from a person and is privileged or con-
fidential. 5 U.S.C. § 552(b)(4). Exemption 5 apphes
to “inter-agency or intra-agency memorandums or
letters which would not be available by law to a
party other than an agency in litigation with the
agency.” 5 U.S.C. § 552(b)(5). I hold that Exemp-
tion 4 apphes and, thus. do not discuss whether
Exemption d applies.
lInder Exemption 4. an agency must demon
strate that the information sought is: (1) a “trade
secret” or “commercial or financial” in character,
(2) “obtained from a person.” and (3) “privileged or
A-42
confidential.” 5 U.S.C. §552(b)(4); Inner City
Press/Cmty. on the Move v. Bd. of Governors, 463
F.3d 239, 244 (2d Cir.2006). The parties agree
that the loan information sought is “commercial or
financial,” but dispute the other two elements.
1. Obtained from a Person
Documents within the scope of Exemption 4
must be “obtained from a person.” 5 U.S.C.
§ 552(b)(4). For the purposes of FOIA, a “ ‘person’
includes an individual, partnership, corporation,
association, or public or private organization other
than an agency.” 5 U.S.C. § 551(2). An “agency”
includes, inter alia, a “Government corporation
for] Government controlled corporation.” 5 U.S.C.
§ 552(f)(1). Fox wants the Board to disclose docu-
ments containing the borrowers names, loan
amounts, and pledged collateral for all the loans
made through the Discount Window and related
facilities. The Board contends that the informa-
tion that Fox seeks originated with and was
obtained by an FRB. from a borrower, and there-
fore was “obtained from a person.” Fox argues that
the information is obtained by the Board from the
FRBs. and that the loan information 1s generated
by the federal government, and does not implicate
raw information received directly from the bor-
rower. See Nadler v. FDIC, 899 F.Supp. 158, 164
(S.D.N.Y.1995) (‘The thrust of the FOIA 1s to cre-
ate a right of access to official information. Infor
mation generally acquires an ‘official’ character
either when it is generated by the agency itself or
is acquired from private parties whose activit’es
are substantively germane to the agency's ‘official’
miss*2n.”").
A-43
Exemption 4 aims squarely at protecting the
rights of individuals over their privileged or con-
fidential commercial information against FOIA’s
broad sweep. In recognizing this, courts look past
formalities to ensure that even indirect disclosure
does not jeopardize a person’s privacy. One court
exempted a “ratio calculated [by an agency] from
individual components all of which are obtained
from” individuals. OSHA Data/ClIH, Inc. v. U.S.
Dept °f Labor, 220 F.3d 153, 162 (3rd Cir.2000):
see Judicial Watch, Inc. u. Export-Import Bank,
108 F.Supp.2d 19 (D.D.C.2000) (exempting inior .
mation that the “Bank obtained ... from the
insurance applicants themselves”); Clarke v. U.S
Dep't of Treasury, 1986 WL 1234, 1986 U.S. Dist
LEXIS 29989 (E.D.Pa. Jan. 28, 1986) (holding
names and addresses of holders of a certain type
of bond are obtained from persons). Another held
that agency summaries and reformulations of a
“nerson’s” raw data are “obtained from a person.”
Philadelphia Newspapers, Inc. vu. HHS, 69
F.Supp.2d 63, 67 (D.D.C.1999). Because the bor
rower’s name, the amount it must borrow. and the
property it volunteers to provide as collateral 1s
information that originated with the borrower and
is reflected in the data Fox seeks. I hold that it
was “obtained from” the borrower.
One court found that a borrower's loan infor
mation was not “obtained from” the individual!
borrower, but “generated by” the lending agency,
and that, therefore, Exemption 4 did not apply
Buffalo Evening News v. Small Bus. Admin., 666
F.Supp. 467, 469 (W.D.N.Y.1987). The court in
Ruffalo Evening News addressed a request by
aintiff newspaper that the SBA disclose infor
l
A-44
mation pertaining to SBA loans made in the
wakes of a powerful ice storm and a blizzard that
damaged a host of small businesses in the region.
The SBA responded to an initial reyuest by dis-
closing a complete list of borrowers’ names, cities,
and states. Unsatisfied, the plaintiff requested
more detailed information, pursuant to FOIA. The
SBA made further disclosures, but refused to
reveal individual loan amounts or dispositions,
claiming that the information was obtained from
individuals and covered by Exemption 4.
The court in Buffalo Evening News ruled “that
‘In no way do these records implicate any financial
information provided to the government by the
borrower. ” /d. at 468 (citing Miami Herald Publ’g
Co. v. Small Bus. Admin., 670 F.2d 610 (5th
Cir.1982)). The plaintiff asserted:
(T]he only connection between the information
sought here and the information obtained
from the borrower is that a loan was granted
by the SBA presumably on the basis of the
financial records submitted by the borrower
and that nothing more or less is established
by the release of the requested records, much
less the contents of the records submitted by
the borrowers.
Id. at 468-69 (quotation omitted). The court held
“that all of the information sought by plaintiff
here has been generated by the defendant SBA in
the course of its involvement with its borrowers.”
Id. at 469. The court reiterated, “this information
In no way implicates any of the financial infor-
mation pvrovided by the borrowers to the govern
ment.” Jd.
A-45
The facts at issue here are markedly different
from those in Buffalo Evening News. In Buffalo
Evening News, the identities of the SBA borrowers
were already public, whereas the identities of the
Discount Window borrowers are not. The SBA
loans in Buffalo Evening News were generally
available to promote recovery in areas ravaged by
storms or other dramatic adverse conditions; the
Discount Window loans were focused on particular
companies in financial distress. There was no
quality of opprobrium in Buffalo Evening News;
that is in the case before me.
The discount window loans “implicate” poten-
tially “personal” and sensitive financial informa-
tion, unlike the loans in Buffalo Evening News.
The Board has legitimate concern that disclosure
of information about Discount Window loans can
damage them and do incalculable harm to the
national economy. As the Board’s economist
attests,
Some of these reasons, such as an unexpect-
edly large loan request from a customer or a
runoff in liabilities as a major depositor
makes payments to third parties, may result
from routine developments and may not indi-
cate an underlying capital or liquidity prob-
lem. However, the fact that an institution
borrowed from the [Discount Window] may
suggest to customers, creditors, analysts, or
the news media that its liquidity shortage
stems from a financial problem at the insti
tution that is not known by the public at
large.
\-46
McLaughlin Decl. 423. The SBA borrowers, on the
Other hand, clearly needed the loans because of
damage sustained in the storms. The SBA loans
Carried no further implications. Indeed, the court
In Buffalo Evening News made sure to clarify that
its holding was based in part on the fact that “this
Information in no way implicates any of the finan
Clal information provided by the borrowers to the
fSovernment.” Buffalo Evening News, 666 F.Supp.
at 469.
Because disclosure by the Board implicates the
borrower's financial information, and the parties
agree that the individual borrowing institutions
are “persons,” as defined by FOIA, it is not rele
Vant whether FRBs ought to be classified as
“persons” or “agencies.” 5 U.S.C. §551(2). Any
responsive document qualifies as exempt because
it contains information obtained from the bor
rower: names, amounts, and collateral
2. Privileged or Confidential
The other element of Exemption 4 1s whethe
the info sought is privileged or confidential. Infor
mation is “privileged or confidential” if it 1s not
Ordinarily released to the public and “its disclo
Sure would have the effect either (1) of impairing
the sovernment’s ability to obtain necessary
imformation in the future, or (2) of causing sub.
Stantial harm to the competitive position of the
Person from whom the information was obtained.”
Continental Stock Transfer v. S.E.C., 566 F.2d
3°73. 375 (2d Cir.1977). The agency has the burden
off showing that the information is privileged or
COnfidential and “must identify specific dangers
that disclosure will pose.” Nadler v. FDIC,
A-47
899 F.Supp. 158, 162 (S.D.N.Y.1995). “Actual com
petition and the likelihood of substantial]
competitive injury is all that need be shown,” Gulf
& W. Indus... Inc. v. U.S., 615 F.2d 527, 530
(D.C.Cir.1980), by proffering “evidence demon
strating the existence of potential economic
harm,” Jnner City Press, 380 F.Supp.2d at 219. In
addition, many courts have recognized a third
sround on which information may be found priv}
leged or confidential: if disclosure would unde
mine the agency’s “effective execution of its
statutory responsibilities.” 9 to 5 Org. for Women
Office Workers v Bd. of Governors, 721 ki2d 1, 10
(1st Cir.1983): Critical Mass Energy v. NRC, 9705
F.2d 871, 880 (D.C.Cir.1992) (en banc)
The Board has shown specific and substantial
harms to borrowers if the information about 11
count Window loans were disclosed. The Federal
Reserve Bank of Boston’s website reads, 1} part
“There will not be any public disclosure of the
individual borrowers participating in |the D1
count Window] or the amounts of individual
advances made to the borrowers. '' The institu
tions borrowing at the Discount Window, the Term
Auction Facility, and the Asset-Backed Comme:
cial Paper Money Market Mutual Fund Liquidity
Facility compete for retail and commercial bank
ing services in the marketplace “A primary deale)
would suffer competitive and reputational harm 11
its name and the relevant collateral it posted were
disclosed to the public,” for the public is likely to
draw inferences of its relative financial strength
and viability. Logan Decl. 9 34 Anonymity 1s cru
cial to primary dealers.” /d. 435
The Board’s concerns, that rumors are likely t
begin and runs on banks are lkely to develop
cannot be dismissed. Similarly, the Board's con
Cer is real that di » Lo puUESe would reveal Ppropri
etary trading information of borrowers, the
trading strategies and t he size and nature of thet
portfolios of asset: ‘he national economy 1s not
out of danger. and the frailty of banks so different
now then when their Discount Window borrowing
beran. as to make the Board concern academe
for all these reason that The Board
rrvument of exemption based on contident baalats
eritvoriou
(;sovernmental BKifectivene
Courts have recognized a third ground on wht
nformation may be found privileged and cont
dential that disclosure would undermine th
iwency eTreceilve Cxecucion | it tatutol
respons ibilits 910 5 Org. for Women Offi
Worke) [a O] (,overnors, ¢2Z t 2d | lO ¢Ist
(ur 1983): Criltcal Mass Inere. Vive O75 kk Yad
1 880 (D.C.Cir.1992) (en banc). Kxemption 4
also protect a rovernmental interest in adm)
istrative elfieirency and cllectivenes: (C'riticai
Mass knergey, 9d ht Yd at 8/%: see Nat'l Part A
(C‘fonservation ASs nt VUorton, 498 F.2d 765, 7701
17 (D.C.Cir.1974) GQndicating kxemption 4 ma
protect governmental interests) The Second O11
cult ha not affirmatively accepted this approach
Ol] explie ithy rejected it Nadler ' RDIC, 92 dd
8 OG (Yd Cir. 1996) “TW Ie do not reach the 1 Li ¢
vhether the district urt properl tf led reh
te the FDIC on the basi Ol thre ~proyram Clbav
tiveness” exemption derived from footnote seven
teen of National Parks.”). Nevertheless, judges in
this and other district have adopted the analysi
Africa Kund v. Mosbacher, 1998 WH 18387386 at's
1993 U.S. Dist. LEXIS 7044 at *21 (S.D.NLY. May
26. 1993) (holding confidential export mtormation
exempt from disclosure by the Department of
Commerce because the miormation 1 pravanluneadod
in making pohiey and mamtamming ellective export
controls”): Clarke vo. US. Dep tof Treasury, 1986
WI, 1234 at *1, 1986 I Dist. LEXIS 29989 at ’
(h.0.Pa. dan. 28, 1986
ln Clarke picaretill ought the name ol allown
ers of a particular type of | nited Stat Preasut
bond, a well a the bond Virbune mod maturit
diate lhe rroney declined to release the docu
nent for teat bnive tor would be biked :
ourehnase vovernment DOM in) Ghee future of th
knew the details of their 4 Chase Voulad be Tue
mech to pub disclosure fal 1 i OO | » Dist
LiexXtt MQGQGRYG at *F (citing delendant UnOpp
LILIGAVIT) mat Court found ‘a if | Cmplion
ipplied because i] ure Would prolate the 4
nase ( pectatro nfidentialit " i |
he trea ! Depart l rbyadat ! e Don
the future / it yey | Dist. Ll
CVO af Ih r hed { rdict
iffida tL ¢ hayn tf participa
ba cc » aat ( il |
ther participant ld? mil
yonit ( pdivanti / Cys, | :
mn IS 29989 af 1) rl
A-50
requests, do so with the understanding that the
loan is confidential. As in Clarke, the Board
asserts that borrowers would be less likely to use
their facilities, if the transactions were not con-
fidential. dd.
In another similar case, Comstock Int'l (U.S.A. ),
Inc. v. Export-Import Bank, 464 F.Supp. 804
(D.D.C.1979), the agency, “a banking corporation
that seeks to facilitate and finance exports and
imports between the United States and other
countries,” offers “loans, guarantees, and other
forms of financial assistance.” Id. at 805. The
agency withheld a loan agreement in which it was
a party, “maintain|ing] that disclosure would sig-
nificantly impair its ability to promote United
States exports.” /d. at 808. The agency argued
that it might lose applicants to foreign financial
institutions that do not disclose, and “that dis-
closure would ... impair its effectiveness by mak-
ing it more difficult to negotiate lean agreements.”
ld. It was concerned as well that disclosure “would
discourage commercial bank participation with
iximbank on joint loan agreements, thus impair-
ing Kkximbank’s ability to control overall financing
of transactions.” Jd. The court explained, “bor-
rowers would be less inclined to make concessions
that could be disclosed to a future lender.” /d.
Disclosing details of the facilities Fox identifies
would compromise the Board’s effective execution
of its statutory responsibilities. The Board is
charged with: (1) promoting goals of maximum
employment, stable prices, and moderate long-
term interest rates, 12 U.S.C. § 225a; (2) utilizing
its authority to permit lending by FRBs so as to
address unusual and exigent circumstances in the
A-51
domestic economy, 12 U.S.C. § 3438; and (3)
employing certain lending practices by FRBs as a
safety valve in reheving hquidity strains for indi-
vidual depository institutions and the banking
system, and to complement open market opera-
tions in achieving the target federal funds rate, 12
U.S.C. § 847b(b). In essence, borrowers would view
taking such last-resort, publicly disclosed loans as
unwise because it would stigmatize the company
and lead to a, perhaps false, behef that the com-
pany is in financial trouble. This would undermine
the Board’s mandate to provide stability to mar-
kets, especially during a financial crisis. Under
this rationale, withholding information regarding
even loans paid months ago is mandated by
IKxemption 4.
Conclusion
For the reasons stated above, | hold that
Kxemption 4 exempts disclosure of the responsive
documents that the Board located in its search.
Accordingly, I grant the Board’s motion for sum-
mary judgment and deny Fox's motion, except that
the Board must conduct an additional search of
the unopened attachment and make appropriate
disclosures.
The Clerk shall mark motions Nos. 8 & 13 as
terminated and close the case, subject to reopen-
ing within sixty days for matters relating to the
remaining search.
SO ORDERED.
A-52
5 U.S.C. § 552(b)
(b)
re Go
This section does not apply to matters that
(1) (A) specifically authorized under criteria
established by an Executive order to be kept
secret in the interest of national defense or
foreign policy and (B) are in fact properly clas-
sified pursuant to such Executive order;
(2) related solely to the internal personne}
rules and practices of an agency;
(3) specifically exempted from disclosure by
statute (other than section 552b of this title),
if that statute—
(A)QG) requires that the matters be with-
held from the public in such a manner as
to leave no discretion on the issue; or
(ii) establishes particular criteria for
withholding or refers to particular types
of matters to be withheld; and
(B) if enacted after the date of enactment
of the OPEN FOIA Act of 2009, specifi-
cally cites to this paragraph.
(4) trade secrets and commercial or financial
information obtained from a person and priv-
ileged or confidential:
(5) inter-agency or intra-agency memoran-
dums or letters which would not be avanlable
by law toa party other than an agency in ht-
igation with the agency;
(6) personnel and medical files and similar
files the disclosure of which would constitute
a clearly unwarranted invasion of personal
privacy;
(7) records or information compiled for law
enforcement purposes, but only to the extent
that the production of such law enforcement
records or information (A) could reasonably be
expected to interfere with enforcement pro-
ceedings, (B) would deprive a person of a right
to a fair trial or an impartial adjudication, (C)
could reasonably be expected to constitute an
unwarranted invasion of personal privacy, (D)
could reasonably be expected to disclose the
identity of a confidential source, including a
State, local, or foreign agency or authority or
any private institution which furnished infor-
mation on a confidential basis, and, in the
case of a record or information compiled by
criminal law enforcement authority in the
course of a criminal investigation or by an
agency conducting a lawful national security
intelligence investigation, information fur-
nished by a confidential source, (I) would dis-
close techniques and procedures for law
enforcement investigations or prosecutions, or
would disclose guidelines for law enforcement
investigations or prosecutions if such disclo-
sure could reasonably be expected to risk cir-
cumvention of the law, or (I*) could reasonably
be expected to endanger the life or physical
safety of any individual;
(8) contained in or related to examination,
operating, or condition reports prepared by, on
behalf of, or for the use of an agency respon-
A-54
sible for the regulation or supervision of
financial institutions: or
(9) geological and geophysical information and
data, including maps, concerning wells.
Any reasonably segregable portion of a record
shall be provided to any person requesting such
record after deletion of the portions which are
exempt under this subsection. The amount of
information deleted, and the exemption under
which the deletion is made, shall be indicated on
the released portion of the record, unless includ
ing that indication would harm an interest pro-
tected by the exemption in this subsection under
which the deletion is made. If technically feasible,
the amount of the information deleted, and the
exemption under which the deletion is made, shall
be indicated at the place in the record where such
deletion is made.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.