Vern McKINLEY, Appellant v. BOARD OF GOVERNORS OF the FEDERAL RESERVE SYSTEM, Appellee.
No. 10-5353.
United States Court of Appeals, District of Columbia Circuit.
Argued April 21, 2011. Decided June 3, 2011.
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Samantha L. Chaifetz, Attorney, United States Department of Justice, argued the cause for the appellee. Tony West, Assistant Attorney General, Beth S. Brinkmann, Deputy Assistant Attorney General, Mark B. Stern, Attorney, Katherine H. Wheatley, Associate General Counsel, Board of Governors of the Federal Reserve System, and Yvonne F. Mizusawa, Senior Counsel, were on the brief. R. Craig Lawrence, Assistant United States Attorney, entered an appearance.
Before: HENDERSON, GARLAND and GRIFFITH, Circuit Judges.
Opinion for the Court filed by Circuit Judge HENDERSON.
KAREN LECRAFT HENDERSON, Circuit Judge:
In December 2008 Vern McKinley (McKinley) submitted a request pursuant to the Freedom of Information Act (FOIA),
I.
We begin with a brief overview of the Federal Reserve System before describing the events surrounding the Board‘s March 14, 2008 loan decision and McKinley‘s FOIA request.
A. Overview of Federal Reserve System
The Congress created the Federal Reserve System in 1913 to serve as the nation‘s central bank. It is not a single entity “but rather a composite of several parts, both public and private, organized on a regional basis with a central governmental supervisory authority.” Reuss v. Balles, 584 F.2d 461, 462 (D.C. Cir. 1978). Two of the parts are relevant here—the Board and the Federal Reserve Banks
Notwithstanding the foregoing powers, the Board exercises significant supervisory authority over the Reserve Banks. For example, the Board appoints three of the nine directors of each Reserve Bank,
B. Bear Stearns Financing and FOIA Request
In early March 2008 the Board beсame aware that Bear Stearns, an important participant in many financial markets, was experiencing severe liquidity problems and might soon declare bankruptcy. Stefansson Decl. ¶ 7.2 Bear Stearns was a holding company comprised partly of registered broker-dealers and, as such, was regulated by the United States Securities and Ex-
In December 2008 McKinley submitted to the Board a FOIA request for “further detail on information contained in the [March 14, 2008] minutes of the Board.” Thro Decl. Ex. A (FOIA request). He specifically sought “any supporting memos or other information that detail the ‘expected contagion that would result from the immediate failure of Bear Stearns’ and the related conclusion that ‘this action was necessary to prevent, correct, or mitigate serious harm to the economy or financial stability’ as described in thе meeting minutes.” Id.
After having received no response from the Board by July 2009, McKinley filed a
The Board moved for summary judgment on February 1, 2010 and McKinley filed a cross-motion for summary judgment. The Board produced a Vaughn index identifying the withheld material by document (rather than page), briefly describing the withheld material and listing the FOIA exemption pursuant to which the document was withheld. See Vaughn v. Rosen, 484 F.2d 820, 826-28 (D.C. Cir. 1973). McKinley does not challenge the Board‘s withholding of five documents pursuant to FOIA Exemption 6. He challenges only the Board‘s reliance on FOIA Exemptions 4, 5 and 8. The district court held that the withheld documents are protected from disclosure by FOIA Exemption 5 or, in the alternative, by Exemption 8 and granted summary judgment in favor of the Board. McKinley, 744 F. Supp. 2d at 135-45. The court did not address the applicability vel non of FOIA Exemption 4.8 Id. at 145. McKinley timely filed a notice of appeal.
II.
We review the district court‘s grant of summary judgment de novo. Sussman v. U.S. Marshals Serv., 494 F.3d 1106, 1111-12 (D.C. Cir. 2007). Summary judgment is proper if there is no genuine issue as to any mаterial fact and the moving party is entitled to judgment as a matter of law. Id.
FOIA requires federal agencies to disclose records upon request unless the records fall within one or more enumerated exemptions. Dep‘t of Interior v. Klamath Water Users Protective Ass‘n, 532 U.S. 1, 7 (2001); see
A. Inter-Agency or Intra-Agency Memoranda
The Board concedes that the Federal Reserve Banks, including the FRBNY, are not federal agencies and therefore the withheld documents are not inter-agency memoranda. The Board further concedes that the Reserve Banks are not components of the Board, which concession would appear to disqualify the withheld documents from constituting intra-agency memoranda or letters. Under the “consultant corollary” to Exemption 5, however, we interpret “intra-agency” “to include agency records containing comments solicited from nongovernmental parties.” Nat‘l Inst. of Military Justice v. U.S. Dep‘t of Defense (NIMJ), 512 F.3d 677, 680, 682 (D.C. Cir. 2008), cert. denied, 129 S. Ct. 775 (2008). “When an agency record is submitted by outside consultants as part of the deliberative process, and it was solicited by the agency, we find it entirely reasonable to deem the resulting document to be an ‘intra-agency’ memorandum for purposes of determining the applicability of Exemption 5.” Id. at 680 (quoting Ryan v. Dep‘t of Justice, 617 F.2d 781, 790 (D.C. Cir. 1980)). Thus we held in NIMJ that the consultant corollary protected opinions and recommendations submitted by non-governmental lawyers to the United States Department of Defense regarding the establishment of military commissions to try suspected terrorists after the September 11, 2001 attacks. Id. at 678-79.
McKinley does not dispute the “consultant corollary” but challenges its application to the withheld documents on two grounds. First, in reliance on the holding in Department of Interior v. Klamath Water Users Protective Ass‘n, 532 U.S. 1 (2001), he argues the Board failed to demonstrate that the FRBNY‘s interest is identical to that of the Board. At issue in Klamath was a FOIA request submitted to the United States Department of the Interior‘s Bureau of Indian Affairs (Bureau) seeking disclosure of communications between the Bureau and certain Indian tribes—namely, six documents prepared by Indian tribes at the Bureau‘s request and one document prepared by the Bureau, all of which related to the allocation of water rights among competing users/uses. Id. at 6. The United States Supreme Court held that the requested documents were not protected from disclosure under Exemption 5. The Court noted that in the “typical” case in which a court applies the consultant corollary, “the consultant does not represent an interest of its own, or the interest of any other client, when it advises the agency that hires it.” Id. at 11. “[The consultant‘s] only obligations are to truth and its sense of what good judgment calls for, and in those respects the consultant functions just as an employee would be expected to do.” Id. The Indian tribes, by contrast, “necessarily communicate with the Bureau
Unlike the Indian tribes, the FRBNY “[did] not represent an interest of its own, or the interest of any other client, when it advise[d] the [Board]” on the Bear Stearns loan. Id. at 11. As McKinley‘s counsel acknowledged at oral argument, the FRBNY is an “operating arm” of the Board. Oral Arg. 11:00-11:05. McKinley nonetheless claims that the FRBNY represented its own interest in its consultations with the Board regarding Bear Stearns because the FRBNY had an independent statutory duty to “obtain evidence that [Bear Stearns was] unable to secure adequate credit accommodations from other banking institutions” before making the loan. See
The deterioration of the U.S. housing market late in the summer of 2007 precipitated a sharp rise in uncertainty in financial markets about the value of structured or securitized assets. As demand for these products fell, funding pressures increased for a variety of financial institutions. As uncertainty grew over the magnitude of losses at financial institutions, these institutions became unwilling to lend to each other even against high-quality collateral, asset prices fell, аnd the availability of borrowing declined significantly. As a result, financial institutions faced severe liquidity pressures. These pressures accelerated rapidly between mid-January and mid-March 2008.... If left unabated, this dynamic posed a risk of widespread insolvencies and severe and protracted damage to the financial system and, ultimately, to the economy as a whole.
Id. ¶ 6. The Board thus found itself reacting to what it believed to be an emergency, as evidenced by its decision “to provide temporary emergency financing to Bear Stearns.” Thro Decl. Ex. A (minutes of Board 3/14/08 meeting) (emphasis added). “[A]s part of the Board‘s сonsideration of potential responses to Bear Stearns’ [sic] funding difficulties” and “in accordance with well-established supervisory processes, Board and Reserve Bank staff responsible for LCBO supervision surveyed the LCBOs for purposes of assessing the LCBOs’ real-time exposures to Bear Stearns.” McKinley, 744 F. Supp. 2d at 136 (quoting Stefansson Decl. ¶ 8). The monitoring of LCBOs and advising the Board of their financial condition “is administered at the Federal Reserve Banks.” Stefansson Decl. ¶ 2; see also
B. Deliberative Process Privilege
Intra-agency memoranda are exempt from disclosure under Exemption 5 only if they “would not be available by law to a party other than an agency in litigation with the agency.”
Ryan, 617 F.2d at 789-90; see also Klamath, 532 U.S. at 8-9 (“The deliberative process privilege rests on the obvious realization that officials will not communicate candidly among themselves if each remark is a potential item of discovery and front page news, and its object is to enhance the quality of agency decisions by protecting open and frank discussion among those who make them within the Government.” (internal quotation marks and citations omitted)); Judicial Watch, Inc. v. Dep‘t of Energy, 412 F.3d 125, 129 (D.C. Cir. 2005) (deliberative process privilege “reflect[s] the legislative judgment that the quality of administrative decision-making would be seriously undermined if agencies were forced to ‘operate in a fishbowl’ because the full and frank exchange of ideas on legal or poliсy matters would be impossible.” (alteration in original) (quoting Tax Analysts v. IRS, 117 F.3d 607, 617 (D.C. Cir. 1997))); Formaldehyde, 889 F.2d at 1125 (“[H]uman experience teaches that those who expect public dissemination of their remarks may well temper candor with a concern for appearances ... to the detriment of the decisionmaking process.” (ellipsis and emphasis in original) (quoting NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 150-51 (1975))); Coastal States Gas Corp. v. Dep‘t of Energy, 617 F.2d 854, 866 (D.C. Cir. 1980) (deliberative process privilege protects documents “which would inaccurately reflect or prematurely disclose the views of the agency“). Our role is not to second-guess that congressional judgment on a case-by-case basis. Attempting to do so, moreover, would prove impracticable:
Wolfe v. Dep‘t of Health & Human Servs., 839 F.2d 768, 775 (D.C. Cir. 1988) (en banc).
Moreover, the Board has demonstrated that disclosure of the withheld material would “discourage candid discussion within the agency and thereby undermine the agency‘s ability to perform its functions.” Formaldehyde, 889 F.2d at 1122 (internal quotation marks omitted). As part of the “bank supervisory process,” “[s]upervised institutions frequently provide [Board and Reserve Bank examiners] with detailed, highly sensitive commercial information ... that they do not customarily disclose to the publiс,” disclosure of which “is likely to cause substantial competitive harm to the LCBOs.” Stefansson Decl. ¶ 15. For example, an LCBO competitor could use the information “to assess sensitive trading relationships and credit relationships” and could “exploit the information ... to weaken a specific entity and cause weaknesses in its liquidity position” by “pull[ing] or accelerat[ing] funding facilities the competitor had outstanding to the LCBO.” Id. A competitor could also “use the data to underbid the LCBO in the private funding markets.” Id. Information that revealed the LCBO faced a “funding shortage” could “cause some retail and commercial custоmers to move their business to other banks and may cause analysts to downgrade the LCBO‘s stock.” Id. In short, information collected by the Board and Reserve Banks from supervised institutions could harm those institutions if disclosed to the public. For that reason, “[s]upervised institutions rely on bank supervisors to protect the confidentiality of information obtained through the supervisory process” and “are willing to provide this information because they know that the supervisors will maintain its confidentiality.” Id. The Board and Reserve Banks “rely on the willingness of supervised institutions to provide full information in order to assure a robust supervisory environment.” Id. If supervised institutiоns no longer believe the Board could or would maintain the confidentiality of information it collects through the supervisory process, they would be less willing to provide the Board with the information it needs “to assure a robust supervisory environment.” Disclosure of the type of information withheld here, therefore, “would impair the Board‘s ability to obtain necessary information in the future[] and could chill the free flow of information between the [supervised] institutions and the Board and Reserve Bank[s].” Id.; see also Winter Decl. ¶ 7 (“Release of this type of information would have an inhibitive effect upon the development of pоlicy and administrative direction. In my opinion, SEC employees would hesitate to offer their candid opinions to superiors or coworkers, as well as colleagues in other federal agencies, if they knew that their opinions of the moment might be made a matter of public record at some future date.“).
C. Attorney Work Product Privilege
The Board also withheld one document under Exemption 5 pursuant to the attorney work product privilege. See Judicial Watch, Inc. v. Dep‘t of Justice, 432 F.3d 366, 369 (D.C. Cir. 2005) (“FOIA Exemption 5 incorporates the work-product doctrine and protects against the disclosure of attorney work product.“). “The work-product doctrine shields materials ‘preparеd in anticipation of litigation or for trial by or for another party or by or for that other party‘s representative (including the other party‘s attorney, consultant, surety, indemnitor, insurer, or agent).‘” Id. (quoting
For the foregoing reasons, we affirm the district court‘s grant of summary judgment to the Board.
So ordered.