*1 Chicago, Nathan, (G. Richard Ill. E. Chicago, Cook, Ill., Fer Bradford David al., Appellees, et Frank FRANKEL Washington, Macchiaroli, ber, Michael A. C., brief), appellants. D. on AND EXCHANGE COM- SECURITIES OAKES, al., Appellants. Before Circuit HAYS et MISSION Judge CLARIE, Judges, and District 533, Docket No. 71-2213. Connecticut, sitting the District designation. Appeals, United States Court Second Circuit. Argued Feb. 1972. Judge: HAYS, Circuit May 4,
Decided Exchange Commis- The Securities appeals order from an United
sion District Southern States Court enjoining the District of New York withholding certain from Commission relying on appellees, documents that the Act, of Information 5 U.S. Freedom sought inspect C. § court, F.Supp. copy. The district documents,, held that the compiled in an investi- Commission gation and used civil persons parties ac- are not to this who tion, exempt from disclosure were under the Freedom Information 552(b) (7) (1970) “inves- U.S.C. § tigatory files,” because the Commission apparently did not intend to commence proceedings in used. We which the documents would be reverse.
I. The Facts November, 1970, Commission began nonpublic of Occi- Corporation and some dental Petroleum Com- of its officers and directors. The sought to determine whether mission of, and omissions certain statements state, relating es- to various real facts transactions, filed in documents tate press Commission leases, Securities violated § Exchange 15 U.S.C. § 10b-5, C.F.R. 78j(b) (1970) Rule During the course 10b-5 Commission testimony wit- least 23 heard docu- numerous Kaplan, City nesses and Robert New York N. Occidental, individuals (Dermot Foley, Kaplan, ments Kilsheimer & G. corporation, and third brief), ap- Foley, City nected with that York New amassed persons. Commission pellees. *2 totaling every over 7000 “. . . and document file [E]ach any by employee pages testimony relat- of the documents written or of and to Exchange ing indi- Commission of and and affairs Occidental Securities the discussing supports it, corporations any facts which viduals connected allegations dealt, and third in the SEC com- which Occidental the [sic] ” plaint. of information persons. basis . . On . the investigation, during the the appellees’ The at- Commission notified action a civil commenced Commission being torneys request the was against president, Ar- and its Occidental by staff. On sidered the Commission’s 4, in the Hammer, mand on March appellees’ attorneys April 22, the the for District States Court United request documents. the for the newed The District of New York. Southern 27, ruling May having no on On received alleged complaint and that Occidental appellees requests, their the commenced 10(b) Rule and Hammer violated § seeking injunctive relief action sought injunc- 10b-5; the Commission withholding against of the continued against of relief further violations tive alleged appellees The documents. Rule. March the and the On statute withholding was the Commission and the defendants the Commission provisions in documents violation agreed decree, upon both a and consent Act. the Freedom of Information suit were term- and the vari- answer set forth Commission’s judgment when court entered inated including defenses, ous affirmative on decree. the basis of the consent the documents were not defenses Appellees subject mandatory public disclo- in this action are sharehold- They requirements commenced Freedom of In- of Occidental. ers damages against by class Occi- “investi- action for Act virtue formation alleging Hammer, gatory exemption, various vi- § dental and files” U.S.C. 552(b) (7) (1970), securities laws. secrets” olations the “trade alleged (1970), 552(b) (4) com- exemption, facts in their source of the 5 U.S.C. § complaint plaint apparently intra-agency “inter-agency memo- 552(b) by suit exemption, the Commission its filed 5 U.S.C. randums” § against (5) exemption for docu- Occidental and Hammer. and the “specifically exempted dis- ments 1971, appellees’ attor- March On 552(b) statute,” § closure U.S.C. “seeking neys wrote Commission (3) (1970). moved for The Commission allega- documentary support for” summary judgment. requested complaint, tions of their and inspect permitted appellees Ruling copy: II. The District Court Commis- court denied the every The district each violation “[a]s judgment summary motion for sion’s . . Section 10b . and/or granted part appellees’ motion ., oc- 10(b)-5 . which . Rule against January injunction continued during period an curred withholding The dis- documents. 1971 referred 1966 March “investigatory court ruled that alleged complaint filed trict in the Infor- Freedom of provision of the Oc- suit its [Commission exempts each mation Act . . cidental and Hammer] only requirements every as includ- disclosure document [defined long agency] is actual- letters, telegrams, reports, ing “for so [the ‘all likely reasonably ly involved notes, lists, to be studies, memoranda, tabu- summaries, enforcement releases, lations, press took including court purposes. .” analyses writings, and other original investi- position that, explains since supports, drafts’] gation Hammer Occidental viola- discusses claimed such and/or entry on the date concluded tions. judgment, proceeding Hammer and consent and since enforcement successfully has taken no affirmative ac- were concluded on Commission March legitimate 1971; requested appellees cop- “to maintain the first file as ‘compiled enforce- ies of one the documents contained in the in- [current] ” vestigatory purposes,’ exemption from ment file March The Com- (7) provided any no mission has not commenced longer request- proceedings applied to the documents based on infor- during investiga- appellees. mation *3 ed The court further “18 Trade On the other held that tion. hand the Commis- [the U.S.C. § affirmatively an ex- sion has not does not establish decided that Act] Secrets emption no of Informa- the Freedom action will be taken 552(b) corporations (3)], or but individuals connected Act [under § merely penalizes a disclosure non-ex- with the transactions and occurrences investigated. empt court which material.” The deferred de- were appellees’ in- cision on motion for an The relevant of the sections Freedom junction pending receipt report Act,1 of Information U.S.C. § by special appointed of a master (1970), provide: court to review the voluminous file (b) This section Administra- [of the any report to whether or not of the re- agencies requiring tive Act Procedure quested fell documents within the cov- to make information available to the erage 552(b) exempts which § public] apply does not to matters that having agency an to disclose are— n “trade secrets and commercial or finan- person cial information obtained from a (3) exempted specifically from disclo- privileged confidential,” and § by statute; 552(b) (5) exempts “inter-agency intra-agency memorandums or letters (7) investigatory compiled for which would not available law to a be except purposes law enforcement to party agency other an than in party the extent available to a agency.” granted with the The court ” agency; other than an . appellees’ injunction motion for an re- quiring ap- the Commission to allow the The statute its face does not limit pellees inspect copy all “investigatory exemption files” records the Commission did not using agency currently files that exempt (4) claim to under be planning or is to use in a enforce- (b) proceeding. ment To assist us deter- mining statutory whether the “investigatory applies after III. proceedings have been ter- question presented The appeal legislative minated, we turn histo- is whether from disclo- ry of Act. “any person” sure to of “matter” con- “investigatory tained file” com- A. The Freedom of Information Act piled and utilized in an en- proceeding forcement applies after The Freedom of Information Act pro- and the enforcement marked the culmination of over ten ceeding congressional years study prac- terminated. Commis- sion’s procedures Occidental tices and of the executive discrepancies 1. The between the enacted of Title 5 of the United States Code. version of changes the Freedom of Information These were intended to Act, 89-487, Pub.L. any way 80 Stat. alter the substance of the the codified originally version are the result of law as enacted. See 1967 U. changes during S.C.Cong. p. made codification to con & Admin.N. form style the enacted version with the right areas, have a national all citizens in the administration branch Report know.” on the Act2 The Senate law. provisions of the prior stated that added). (emphasis at 5-6 Id. “full Procedure were Administrative citing Report, House several exam- after federal loopholes” often enabled agencies withholding ples information agencies improperly to administrative relating operations, their House Re- public information from the withhold port 5-6, states: government. lating operations of way life to vital to our reach “It agencies utilized sometimes Federal also right a workable balance between the privilege” 4to the doctrine of “executive public and the need to know bearing of information bar disclosure upon keep information the Government governmental process. necessary the extent confidence to permitting se- without indiscriminate behind intent The broad crecy. right of the individual to of Infor- Freedom enactment of the his able to find out Govern- how Report by the disclosed mation *4 just operating im- as can be ment is the of Committee the Senate right privacy portant to him as his to Report Judiciary1 of the House the and right his to confide in his Govern- and Operations,5 Committee on Government strikes a con- This bill balance ment. sidering give greater access the was electorate to interests.” all these concerning operations to information the government. ultimate The conclusion, of federal the House Re- at 6. the Id. purpose public to have port to enable the was observed: order to information sufficient able, genera- “In the time it takes one process, through to the electoral join grow up prepare to tion to intelligent, informed choices with make councils of Government—from the proce- respect scope, nature, to was de- 1966—the law which governmental activities.6 dure of federal signed provide public information be- about activities has Government Report the bill: of The said Senate major shield come the Government’s “ of the test eliminates [i]t secrecy. right to different shall have the who will S. 1160 correct situation. great majority For the information. necessary machinery to provides It public records, as different availability of Government assure the right its what to know has a whole necessary informed to an information doing. is, of There Government electorate.” course, for confidential- a certain need 12. Id. at aspects ity of Government in some indeed, legislative history, and, The protected operations and these are provisions of the disclosure various limited specifically; outside these but Congress the House a whole because as Cong., S.Rep.No.813, 2. 1st Sess. 89th printed Report until after (1965), Re- Senate hereinafter cited as passed bill and sent Senate port. v. L.N. See to the House. Getman Reynolds, 3. 345 U.S. See United States v. (D.C.Cir. B., n. 8 R. 450 F.2d (1953); L.Ed. 727 73 S.Ct. Davis, supra, at 762- See also Davis, A Prelim The Information Act: may suggestion merit this 63. Whatever inary Analysis, 34 U.Chi.L.Rev. respect sentences isolated have with 763-65 provisions specific dealing purpose behind Report broad the same 4. Senate at 2-3. provisions major and its a whole H.R.Report Cong., No. 2d 89th reports. in both is reflected Sess. hereinafter cited as House 10; Report 2-3, House Re- Report. at 6. Senate Some courts commentators port 5-6, 2, 3, Report suggested Senate legislative intent of better indicates the gen- Congress clearly Reports These indicate Act itself indicate that the enacting purpose purpose had a exemption of the Act was that two-fold eral processes investigatory public files: be informed about prevent government premature the electorate so disclosure investigation position pass results be in a of an so that would better gov- strongest operation present upon structure and Government can its keep in court, case and to ernment. confidential procedures by ducted which it “Investigatory Exemp- Files” B. these obtained information. Both confidentiality necessary forms are Reports House also Senate for effective law enforcement. general purpose for reveal exempting 552(b) (7) matter con- from disclosure conclusion the applies compiled even investigatory tained in files enforce purposes. after and an law proceeding ment supported have been terminated Report The Senate states: authority of both “Exemption ‘inves- No. deals by con cases under the Act and decided tigatory compiled for en- files policies underlying the sideration of purposes.’ forcement These are general inAct and the prepared agencies files Government particular. In Evans prosecute violators. Their dis- Department Transportation, 446 except files, closure such the ex- (5th Cir.), petition for 821, 824 F.2d pri- they law to tent available (U.S. filed, Nov. *5 cert. U.S.L.W. party, could vate harm the Govern- 24, 1971) (No. 71-698), said: court case in ment’s court.” opinion that of the further “We are Report portion at An earlier Senate Congress possibly in- not could have discussing gener- report, of the same be should tended that [matter] such purpose Act, said of need al investigation is com- disclosed once balancing for interests of so, pleted. were and disclosure If this confidentiality: a made, it would become were soon necessary very op- “It is also for the knowledge matter of common of our eration Government allow it any, individuals, if result few material, keep confidential certain forth embroil them- would come investigatory such files of the as controversy possible re- selves in Investigation.” Federal Bureau of by notifying [agency] crimination Report Senate at 3. something might justify in- vestigation.” Report, discussing the The House in “investigatory exemption, Co., 407 states: Bros. NLRB Clement See also (5th F.2d 1027 Cir. investigatory “This covers related to enforcement of all files investigatory agency’s were files If an laws, kinds labor and securities after the limitation without obtainable laws as well criminal laws. This investigation concluded, future prepared in would include files by the could enforcement efforts connection with related Government agency’s in- seriously hindered. The be proceed- litigation adjudicative procedures techniques vestigatory ings. give 1160 is intended to people S. not The names would be revealed. private party indirectly any earlier information who volunteered greater investigatory initially access to files investigation prompted directly during
than he would in such information or who contributed proceedings.” investigation would the course of disclo- possibility of such Report disclosed. House .818 severely voluminous, probably limit sure tend are would more than
agencies’ possibilities ninety-five leg- per for cent of useful history page these and enforcement of law since is islative found a ten large extent, agencies rely, report to a vol- Senate Committee and in a untary cooperation page and on information fourteen Committee re- House port. reports informants. . Committee not addressed to enacted version present would In the case disclosure the bill do not of Con- the intent show respect have but small effect gress enacting They the statute. general purposes better Congress what show the intent op- informing toas of the electorate would have if it had enacted government. con- On the erations of important pur- trary defeat bill it did would enact. not poses for Davis, The Information Act: Prelimi- A reverse. files. We therefore nary Analysis, 34 U.Chi.L.Rev. mean our does not Of course decision (1967). Unfortunately, nothing completely appellees are barred reports the two mentions Professor Davis obtaining information contained any light specific question sheds on the requested In their suit documents. whether, question us.2 before That is appel- Hammer Occidental and once an terminat- has been remedy of the usual lees are entitled to ed, and utilization of the files discovery discovery provisions under purposes reasonably the Federal Rules of Procedure. is Civil procedure discovery district likely, “investigatory compiled judge need will be balance able purposes” law enforcement U.S.C. [5 need for documents with the for the (7)] exempt from the disclo- fidentiality. requirements 552(a) of 5 U.S.C. § court The order district Indeed, question our narrower versed, with directions and remanded still, judge specifi- for a careful district summary judgment appellants. enter cally accompany- framed his order and ing preserve memorandum to Judge (dissenting): OAKES, Circuit SEC, through production, in camera *6 Legislative history a often be can (4), exemptions under 5 U.S.C. § judges helpful in the dark device for “commercial financial information ob- or seeking light, here.1 But the as arewe privileged person tained from a and legislative history In- the Freedom of of confidential,” “inter-agency (b) (5), and full extensive and so formation Act is so intra-agency or letters memorandums that Profes- of internal inconsistencies by has said of it: be law a sor Davis which would not available party agency in though an other than of records the var- Even the 3 hearings year period agency.” a ten ious over with the SEC, F.Supp. (S.D. Perhaps history should be 3. Frankel v. 336 675 subordinated, ; 5, only N.Y., 20, like it 1971 Nov. 1971 [mem.] utilized when is Oct. “principal narrowing act, By decree, [order]). the to the his words of the thus specific away deriving Judge intent of the force of the task of Lasker takes Congress sympathetic majority’s argument law en from a full and that future Cox, purpose.” by understanding hindered re its be of forcement efforts could Judge Interpreta- agency’s vealing tech Learned Hand 370, Statutes, niques procedures of tion of 60 Harv.L.Rev. names (1947). me that under 381-82 It seems to informants. (4) (b) (5) (b) ade subsections early report 2. An does indicate that Senate legitimate agency quate protection of these withholding “is not statute but Act a ” objectives Moreover, is assured. while . a disclosure statute Senate may privilege government not have a Rep. 813, Cong., 5 No. 1st Sess. 89th informers, identity (1965). of to disclose
819
Transportation,
Department
of
446
v.
us rea-
question before
the narrow
On
1971),
denied,
(5th
readily
I
F.2d 821
cert.
Cir.
judges may
differ.
sonable
918,
944,
L.Ed.2d
my
92
30
405 U.S.
S.Ct.
brethren
of
from the views
dissent
majority
(1972), upon
rel
which
788
un-
the Act contains
I think
because
FTC,
Bristol-Meyers
138
v.
ies.4
Co.
recognition
of
derlying
disclosure
that
935,
22,
de
U.S.App.D.C.
government
424 F.2d
cert.
workings
bureauc-
of a
46,
nied,
824,
L.Ed.
400 U.S.
91
27
long
S.Ct.
racy,
suffered
since has
which
(1970),
of
agen-
2d
Columbia
52
the District
bigness,”
can benefit
“curse of
Appeals
“in
that
responsibil-
Court of
declared
increasing
by
cy
of
its sense
vestigatory
files”
is available
of In-
ity
The Freedom
public.
adjudi
agency only
aim,
to the
“[i]f
in other
its
Act has as
formation
catory proceedings
imminent.”
424
Congress
delegation
words,
a
“premature
subject
F.2d at
939. Prevention
power
federal courts
discovery by
purpose
perusal.
a defendant” is the
public
Be-
agency operations to
according
to the Fourth
policy
same
hind
are some
Hardin, 444
underpin
F.2d
Circuit. Wellford v.
freedom
considerations
(4th
Judge Higgin
21, 23
very
press;
Cir.
least
at the
put
purpose
possibility
has
it
is
expand
botham
intended to
premature
making
“to avoid a
of an
disclosure
“participation
decision
engaged
agency’s
en
case when
Emerson,
society.”
T.
all members
Cooney
forcement
activities.”
v. Sun
Expression 7
System
of Freedom
Shipbuilding
Drydock Co.,
F.
288
&
(1970).
(em
708,
(E.D.Pa.1968)
Supp.
711-712
surprising
therefore,
is,
It
phasis original). He looks at
the ex
respectable
have taken
other
courts
emptions,
practically,
quite
as
codifica
majority
differing
congres
existing
judically
view
today
Evans
sionally
exceptions.
Fifth Circuit
Id.
712.5
and of the
at
created
States,
59-
v. United
353 U.S.
1261
Roviaro
Texas L.Rev.
formation
point
L.Ed.2d
S.Ct.
Katz does make the
Ms.
already
(1957),
exceptions including
disclos
here the
“in-
SEC
that
vestigatory
—
gave
exception
the witnesses who
ed the names
“admin-
—are
testimony
through
loopholes
concedes that
it. The
SEC
which federal
istrative
(b) (5) exemp
(4)
escape
(b)
Id.
the subsection
with records intact.”
officials
goes
the material
cover much of
tions would
and see
She
1277-84.
investigative
concluded,
say
“[ojnee litigation
lest
worries
files but
their
Corp.
Engineering
required.”
impliedly
Aircraft
Grumman
Id. at
U.S.App.D.C.
Renegotiation Board, 138
And she adds :
Admittedly
may
it
will cause
F.2d
be dif-
sometimes
requirement
agency
of “suit
some work
itself
to know
ficult
each
able
deletions”
action will
whether
brought
protection
long
make the
document to
As
in the near future.
*7
exemption
prospect
mentary material person” Thus, “any mean grand if words investigation. Disclosure of an plaintiffs standing, person any example, or minutes, jury surely it. have here private involv cases antitrust dered City companies. judg- Atlantic ing opinion electric I would affirm Co., F. 313 Chance Electric A. B. v.Co. ment below. curiam) (min (per (2d 1963) 2d 431 Cir. plain to antitrust turned over utes tiff) ; accord, Co. Edison Consolidated Manufacturing Co., v. Allis-Chalmers (S.D.N.Y.1963). F.Supp. 36 See
217 Harper & Row Publish
also Illinois v.
(N.D.Ill.1969)
Inc.,
ers,
37
50 F.R.D.
suit).
(children’s
Docu
books antitrust
possessed by
Revenue
Internal
ments
disputed
upon
directly
that bear
Service
PICKERING, Appellant,
Frank L.
been disclosed
calculations
also
tax
by
v.
Bearing
Timken Roller
court order.
al.,
et
DANIEL J. KEATING CO.
(N.
States,
Co. United
v.
F.R.D.
Appellees.
1964); accord,
v.
United States
D.Ohio
No. 71-1205.
(D.Colo.1964);
Gates,
F.R.D.
Antonio Portland
United States v. San
Appeals,
United States
Court
Co.,
(W.D.Tex.
Cement
1963).
General investigative produce re for trustee regarding
ports conduct and control
foreign corporation; Zimmerman (D.Hawaii F.Supp.
Poindexter, 74 1947) (FBI produce investi ordered
gative plaintiff’s reports pertaining to
alleged wrongful imprisonment). am federal I view safeguard investigato- amply can
courts ry agency procedures and informants
in camera files in examination expo-
doubtful Thus the fear cases. underlying majority’s view groundless. argument
largely *8 may purposes the rocks of law en- has foundered include per- equivocal draftsmanship. exempt from re- One of its forcement should not be pinpointed quired failings tinent critical disclosure. Davis, Act: A Prelimi- Professor Davis: The Information faulty nary Analysis, The Act is in its use of un- 34 U.Chi.L.Rev. satisfactory term “files.” Much of the compiled contents of