McKinley v. Board of Governors of the Federal Reserve System , 647 F.3d 331 ( 2011 )


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  •  United States Court of Appeals
    FOR THE DISTRICT OF COLUMBIA CIRCUIT
    Argued April 21, 2011                   Decided June 3, 2011
    No. 10-5353
    VERN MCKINLEY ,
    APPELLANT
    v.
    BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM ,
    APPELLEE
    Appeal from the United States District Court
    for the District of Columbia
    (No. 1:09-cv-01263)
    Michael Bekesha argued the cause for the appellant. Paul
    J. Orfanedes was on brief.
    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.
    2
    Opinion for the Court filed by Circuit Judge HENDERSON .
    KAREN LE CRAFT HENDERSON , Circuit Judge: In December
    2008 Vern McKinley (McKinley) submitted a request pursuant
    to the Freedom of Information Act (FOIA), 
    5 U.S.C. § 552
    , to
    the Board of Governors of the Federal Reserve System (Board)
    seeking information related to the Board’s March 14, 2008
    decision to authorize the Federal Reserve Bank of New York
    (FRBNY) to provide a temporary loan to The Bear Stearns
    Companies Inc. (Bear Stearns) through an extension of credit to
    JPMorgan Chase & Co. (JP Morgan). The Board produced
    documents in response to McKinley’s request but withheld
    others pursuant to FOIA Exemptions 4, 5, 6 and 8. McKinley
    filed suit in district court to compel disclosure of the withheld
    documents. He now appeals the district court’s entry of
    summary judgment in favor of the Board.
    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 (Reserve Banks). The Board,
    composed of seven members appointed by the President and
    confirmed by the Senate, is the central supervisory authority of
    the Federal Reserve System. 
    12 U.S.C. § 241
    . There are
    currently twelve Reserve Banks, each located and operating
    3
    within a specific region of the country.1 A bank organized under
    the laws of any State or the District of Columbia may apply to
    the Board to join the Federal Reserve System. 
    12 U.S.C. § 321
    .
    On joining, the bank purchases stock of the Reserve Bank
    responsible for the region of the country where the bank is
    located and thereby becomes a member bank. 
    Id.
     Additionally,
    all national banks, that is, banks chartered under the National
    Bank Act of 1864 (formerly Act of June 3, 1864, ch. 106, 
    13 Stat. 99
    ) (codified as amended in scattered sections of 12
    U.S.C.); see Indep. Ins. Agents of Am., Inc. v. Hawke, 
    211 F.3d 638
    , 640 (D.C. Cir. 2000) (“The National Bank Act of 1864 . . . ,
    as amended, provides for the chartering of national banks.”),
    must join the Federal Reserve System by purchasing stock of the
    Reserve Bank located in its district. 
    12 U.S.C. § 222
    . The
    Reserve Banks, then, “are private corporations whose stock is
    owned by the member commercial banks within their districts.”
    Comm. for Monetary Reform v. Bd. of Governors of Fed.
    Reserve Sys., 
    766 F.2d 538
    , 540 (D.C. Cir. 1985). Accordingly,
    they have the power to make contracts, to sue and be sued, to
    appoint a president and vice presidents, to prescribe bylaws and
    to perform other acts consistent with a private corporation. 
    12 U.S.C. § 341
    .
    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, 
    12 U.S.C. § 302
    ; the Board approves the
    compensation a Reserve Bank pays to its directors, 
    id.
     § 307; the
    Board approves each Reserve Bank’s selection of its president
    and first vice president, id. § 341; the Board can suspend or
    remove any officer or director of a Reserve Bank, id. § 248(f);
    1
    The Board can readjust the federal reserve districts, subject to
    the requirement that there be at least eight and no more than twelve.
    
    12 U.S.C. § 222
    .
    4
    and the Board can “examine at its discretion the accounts,
    books, and affairs of each Federal reserve bank and of each
    member bank and . . . require such statements and reports as it
    may deem necessary,” 
    id.
     § 248(a)(1). The Reserve Banks are
    authorized to lend money to member banks. Id. § 343. “In
    unusual and exigent circumstances, the [Board] . . . may
    authorize any Federal reserve bank” to lend money to a non-
    member institution. Id. § 343(A). Before doing so, however,
    the Reserve Bank must “obtain evidence that [the institution] is
    unable to secure adequate credit accommodations from other
    banking institutions.” Id.
    B. Bear Stearns Financing and FOIA Request
    In early March 2008 the Board became 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
    Exchange Commission (SEC), not the Board. Winter Decl.
    ¶¶ 10-11.3 Moreover, because Bear Stearns was not a depository
    institution, it was ineligible to borrow through the Federal
    Reserve’s regular short-term lending program. Stefansson Decl.
    ¶ 7. The tools with which the Board could respond to Bear
    Stearns’s liquidity problems were accordingly limited.
    Believing that a Bear Stearns bankruptcy would have far-
    2
    Coryann Stefansson is an Associate Director of the Board’s
    Division of Banking Supervision and Regulation, a position she has
    held since May 2007. Previously she was an FRBNY Assistant Vice
    President in Bank Supervision and Regulation from 1998 until 2007.
    Stefansson Decl. ¶ 1.
    3
    Margaret Winter is the FOIA and Privacy Act Officer of the
    United States Securities and Exchange Commission. Winter Decl. ¶ 1.
    5
    reaching and negative effects on financial markets, however, the
    Board and Reserve Bank staff surveyed those institutions subject
    to the Board’s regulation to assess their exposure to Bear
    Stearns. Id. ¶ 8. In particular, they sought to ascertain the
    exposure of large complex banking organizations (LCBOs).4 Id.
    On March 13, 2008 the SEC notified the Board and the FRBNY
    that Bear Stearns had inadequate resources to meet its
    obligations and planned to declare bankruptcy the following
    morning. Id. ¶ 7 The Board met the following day—March
    14—and determined “that, given the fragile condition of the
    financial markets at the time, the prominent position of Bear
    Stearns in those markets, and the expected contagion that would
    result from the immediate failure of Bear Stearns, the best
    alternative available was to provide temporary emergency
    financing to Bear Stearns through an arrangement with
    JPMorgan Chase & Co.” Thro Decl. Ex. A (minutes of Board
    3/14/08 meeting).5 The Board accordingly authorized the
    FRBNY to extend credit to JP Morgan to allow JP Morgan to
    provide a temporary loan to Bear Stearns. The FRBNY, in turn,
    approved the loan.6 The loan allowed Bear Stearns to avoid
    4
    “LCBOs are characterized by the scope and complexity of their
    domestic and international operations; their participation in large
    volume payment and settlement systems; the extent of their custody
    operations and fiduciary activities; and the complexity of their
    regulatory structure, both domestically and in foreign jurisdictions.
    To be designated as an LCBO, a bank holding company or foreign
    banking organization supervised by the Federal Reserve must meet
    specified criteria to be considered a significant participant in at least
    one critical or other key financial market.” Stefansson Decl. ¶ 3.
    5
    Alison Thro is “the most senior attorney in the Board’s Legal
    Division responsible for reviewing FOIA requests.” Thro Decl. ¶ 1.
    6
    The FRBNY made the loan through JP Morgan because Bear
    Stearns was not a depository institution and therefore was not eligible
    6
    filing for bankruptcy but, on March 16, the Board and the
    FRBNY authorized a second loan to JP Morgan to facilitate JP
    Morgan’s acquisition of Bear Stearns.
    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 the meeting minutes.” Id.
    After having received no response from the Board by July
    2009, McKinley filed a complaint in district court seeking a
    declaratory judgment that FOIA entitles him to disclosure of the
    information he requested and seeking disclosure of that
    information. Compl. ¶¶ 36-47. The Board then produced 120
    pages of previously released or publicly available documents on
    August 11, 2009. McKinley v. FDIC, 
    744 F. Supp. 2d 128
    , 133
    (D.D.C. 2010). On September 30, 2009 the Board produced an
    additional forty-eight pages in full and twenty-seven pages with
    information redacted. 
    Id.
     It also identified and withheld 163
    pages pursuant to FOIA Exemptions 4, 5, 6 and 8. 
    Id.
     Eight of
    the 163 withheld pages originated with the SEC and the Board
    referred the disclosure determination regarding those documents
    to receive funds directly from the FRBNY’s discount window.
    Stefansson Decl. ¶ 7. “The Discount W indow is the long-standing
    program through which the twelve Federal Reserve Banks make short-
    term loans (often overnight) to depository institutions, and it can serve
    as an emergency, back-up source of liquidity for borrowing depository
    institutions that lack other options.” Bloomberg, L.P. v. Bd. of
    Governors of Fed. Reserve Sys., 
    601 F.3d 143
    , 145-46 n.1 (2d Cir.
    2010) (internal quotation marks omitted).
    7
    to the SEC.7 
    Id.
     The remaining withheld pages contain
    information collected and used by the Board and the FRBNY to
    assess the exposure of regulated financial institutions to Bear
    Stearns as well as communications between Board and FRBNY
    personnel. See Thro Decl. ¶¶ 17-23 (describing withheld
    documents); Stefansson Decl. ¶¶ 12-14 (same). On January 7,
    2010 the SEC informed McKinley that it was withholding the
    eight documents referred to it by the Board pursuant to FOIA
    Exemptions 5 and 8. Winter Decl. ¶ 5.
    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.
    7
    McKinley does not discuss the SEC documents on appeal and
    has thus waived any challenge to the withholding of those documents.
    See New York v. EPA, 
    413 F.3d 3
    , 20 (D.C. Cir. 2005) (argument not
    raised in opening brief waived).
    8
    McKinley’s complaint originally included FOIA claims against
    the Federal Deposit Insurance Corporation but they were ultimately
    dismissed as moot. McKinley, 
    744 F. Supp. 2d at
    131 n.1 (internal
    citations omitted).
    8
    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 material 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 
    5 U.S.C. § 552
    . The
    exemptions are narrowly construed so as not to “ ‘obscure the
    basic policy that disclosure, not secrecy, is the dominant
    objective of the Act.’ ” Klamath, 
    532 U.S. at 8
     (quoting Dep’t
    of Air Force v. Rose, 
    425 U.S. 352
    , 361 (1976)). The relevant
    exemption is Exemption 5, which allows an agency to withhold
    disclosure of a record if the record meets two requirements: (1)
    it is an “inter-agency or intra-agency memorandum[] or letter[]”
    that (2) “would not be available by law to a party other than an
    agency in litigation with the agency.”9 
    5 U.S.C. § 552
    (b)(5).
    McKinley argues the withheld material fails to satisfy both
    requirements.
    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
    9
    Because we conclude that Exemption 5 shields from disclosure
    all of the withheld documents, we do not reach the applicability vel
    non of Exemption 8, which allows an agency to withhold disclosure
    of a record “contained in or related to examination, operating, or
    condition reports prepared by, on behalf of, or for the use of an agency
    responsible for the regulation or supervision of financial institutions.”
    
    5 U.S.C. § 552
    (b)(8).
    9
    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 non-
    governmental parties.” Nat’l Inst. of Military Justice v. U.S.
    Dep’t of Defense (NIMJ), 
    512 F.3d 677
    , 680, 682 (D.C. Cir.),
    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. 
    532 U.S. at 6
    . The United States
    Supreme Court held that the requested documents were not
    protected from disclosure under Exemption 5. The Court noted
    10
    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 with their
    own, albeit entirely legitimate, interests in mind.” 
    Id. at 12
    .
    Although that “fact alone distinguishes tribal communications
    from the consultants’ examples recognized by several Courts of
    Appeals,” the Court explained that the “distinction is even
    sharper, in that the [Indian] Tribes are self-advocates at the
    expense of others seeking benefits inadequate to satisfy
    everyone.” 
    Id.
     Lest there be any confusion, the Court restated
    the “dispositive point”: “that the apparent object of the Tribe’s
    communications is a decision by an agency of the Government
    to support a claim by the Tribe that is necessarily adverse to the
    interests of competitors.” 
    Id. at 14
    .
    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 
    12 U.S.C. § 343
    (A). That the FRBNY had to obtain such evidence before
    it could approve the loan authorized by the Board does not mean
    its interest diverged from the Board’s interest, however, and to
    claim otherwise, we believe, misconstrues the nature of the
    Federal Reserve System. The Board, together with the Federal
    11
    Open Market Committee—a body composed of the Board
    members and five presidents or first vice presidents of the
    Reserve Banks, 
    12 U.S.C. § 263
    —are statutorily mandated to
    “maintain long run growth of the monetary and credit aggregates
    commensurate with the economy’s long run potential to increase
    production, so as to promote effectively the goals of maximum
    employment, stable prices, and moderate long-term interest
    rates,” 12 U.S.C. § 225a. See Fasano v. Fed. Reserve Bank of
    N.Y., 
    457 F.3d 274
    , 277-78 (3d Cir. 2006) (“The individual
    Federal Reserve Banks serve as the foundation for the Federal
    Reserve System. . . . The individual Federal Reserve Banks
    carry out the monetary policy . . . formulated [by the Federal
    Open Market Committee]. The Board . . . loosely oversees the
    Federal Reserve Banks’ operations.”), cert. denied, 
    549 U.S. 1115
     (2007). Board regulations make clear that “[t]he Federal
    Reserve System extends credit with due regard to the basic
    objectives of monetary policy and the maintenance of a sound
    and orderly financial system.” 
    12 C.F.R. § 201.1
    (b). As noted,
    the Board and Reserve Banks work together “to assist in
    achieving national economic goals through [the Reserve
    System’s] influence on the availability and cost of bank
    reserves, bank credit, and money.” Reuss v. Balles, 
    584 F.2d 461
    , 462 (D.C. Cir. 1978). “The key to success of the [Reserve]
    System is harmonious interaction between and among [its]
    component parts.” 
    Id.
     Statutes, regulations and case law make
    clear, therefore, that the Board and the Reserve Banks share a
    common goal, namely “the maintenance of a sound and orderly
    financial system.” 
    12 C.F.R. § 201.1
    (b). That the Congress
    requires both the Board and the relevant Reserve Bank (here,
    FRBNY) separately to determine that the loan made to Bear
    Stearns through JP Morgan promotes the maintenance of a
    sound and orderly financial system does not mean that the
    Board’s and the FRBNY’s interests diverged in deciding to
    make the loan.
    12
    McKinley also claims the Board failed to show it solicited
    the withheld material from the FRBNY as our precedent
    requires. See, e.g., NIMJ, 
    512 F.3d at 680
     (“[A]n agency record
    . . . submitted by outside consultants as part of the deliberative
    process[] and . . . solicited by the agency [is] an ‘intra-agency’
    memorandum for purposes of determining the applicability of
    Exemption 5.” (emphasis added) (internal quotation marks
    omitted)); 
    id. at 681, 683
    ; Ryan, 
    617 F.2d at 790
     (withheld
    records “were generated by an initiative from the Department of
    Justice, i.e., the questionnaire sent out by the Department to the
    Senators”). The Stefansson declaration, however, adequately
    demonstrates that the Board solicited the material from the
    FRBNY. When news of Bear Stearns’s financial straits reached
    the Board, it began to focus on the effects of a Bear Stearns
    bankruptcy on the financial markets and particularly on LCBOs
    and other organizations supervised by the Board. Stefansson
    Decl. ¶ 8. The Board acted against a “backdrop” of significant
    turmoil and uncertainty in the financial markets. Id. ¶ 7.
    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, and 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.
    13
    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 consideration 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 
    12 U.S.C. § 248
    (a)(1) (Board may “examine at its discretion the accounts,
    books, and affairs of each Federal reserve bank and of each
    member bank and . . . require such statements and reports as it
    may deem necessary”); 
    id.
     § 325 (Federal Reserve member
    banks are “subject to examinations made by direction of the
    [Board] or of the Federal reserve bank by examiners selected or
    approved by the [Board]”); id. § 483 (“Every Federal reserve
    bank shall at all times furnish to the [Board] such information as
    may be demanded concerning the condition of any member bank
    within the district of the said Federal reserve bank.”). Thus, to
    aid in its deliberative process, the Board sought information
    from the FRBNY about the financial condition and exposures of
    institutions monitored by the FRBNY. The FRBNY did not
    simply provide the information, unprompted, to the Board.
    Accordingly, we conclude the withheld material constitutes
    “intra-agency memorandums or letters” under FOIA Exemption
    5. We turn now to the second prong of Exemption 5.
    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.” 5
    
    14 U.S.C. § 552
    (b)(5). To satisfy the second requirement of
    Exemption 5, the record must be non-disclosable “under one of
    the established civil discovery privileges—here, under the
    ‘deliberative process’ privilege.” NIMJ, 
    512 F.3d at
    680 n.4
    (citing Klamath, 
    532 U.S. at 8-9
    ). “To qualify for Exemption 5
    protection under the deliberative process privilege, ‘an agency’s
    materials must be both “predecisional” and a part of the
    “deliberative process.” ’ ” 
    Id.
     (quoting Formaldehyde Inst. v.
    Dep’t of Health & Human Servs., 
    889 F.2d 1118
    , 1121 (D.C.
    Cir. 1989)). McKinley acknowledges that the withheld material
    is predecisional but argues that the record is “deliberative” only
    if its disclosure would harm the agency’s decisionmaking
    process. The Congress enacted FOIA Exemption 5, however,
    precisely because it determined that disclosure of material that
    is both predecisional and deliberative does harm an agency’s
    decisionmaking process. As we have explained, Exemption 5
    was created to protect the deliberative process of the
    government, by ensuring that persons in an advisory
    role would be able to express their opinions freely to
    agency decision-makers without fear of publicity. In
    the course of its day-to-day activities, an agency often
    needs to rely on the opinions and recommendations of
    temporary consultants, as well as its own employees.
    Such consultations are an integral part of its
    deliberative process; to conduct this process in public
    view would inhibit frank discussion of policy matters
    and likely impair the quality of decisions.
    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
    15
    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 policy 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:
    It would be impossible for courts to administer a rule
    of law to the effect that some but not all information
    about the decisional process may be disclosed without
    violating Exemption 5.         Courts would become
    enmeshed in a continual process of estimating or, more
    accurately, guessing about the adverse effects on the
    decisional process of a great variety of combinations of
    pieces of information. That would inevitably lead
    courts on some occasions to undercut legitimate
    Exemption 5 protections. Indeed, such a procedure
    would not result in a rule at all. Agencies would have
    to pass on requests wholly impressionistically, subject
    to the impressionistic second-guessing of the courts.
    16
    That is hardly a satisfactory or efficient way of
    implementing FOIA.
    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 public,” 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 customers 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
    17
    assure a robust supervisory environment.” 
    Id.
     If supervised
    institutions 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 policy 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
    ‘prepared 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 Fed. R. Civ. P.
    26(b)(3)). According to the Board, the withheld document “was
    prepared by FRBNY attorneys in anticipation of litigation by
    Bear Stearns shareholders related to the Board’s authorization
    to extend credit to [Bear Stearns] indirectly through [JP
    Morgan].” Vaughn Index Doc. No. 38 (Joint Appendix 97). On
    appeal, McKinley argues only that the FRBNY does not come
    18
    within the consultant corollary and for that reason the Board
    cannot claim the attorney work product privilege. Having
    concluded that the FRBNY did indeed act as a consultant to the
    Board, we reject McKinley’s argument. The FRBNY, acting as
    the Board’s consultant, prepared the withheld document for the
    Board in anticipation of litigation. 
    Id.
     Accordingly, the Board
    properly withheld the document under Exemption 5.10
    For the foregoing reasons, we affirm the district court’s
    grant of summary judgment to the Board.
    So ordered.
    10
    In Bloomberg L.P. v. Board of Governors of the Federal
    Reserve System, 
    601 F.3d 143
    , 145-46, 147 (2d Cir. 2010), the Second
    Circuit recently held that records regarding loans made by the twelve
    Reserve Banks to certain private banks in April and May
    2008—specifically “the name of the borrowing bank, the amount of
    the loan, the origination and maturity dates, and the collateral
    given”—cannot be withheld under FOIA Exemption 4. The Board
    argued before the district court that the withheld records were exempt
    from disclosure under Exemption 5 but declined to appeal the district
    court’s adverse ruling on Exemption 5. 
    Id. at 146
    . Thus, the Second
    Circuit did not address the applicability vel non of Exemption 5 to the
    requested records. 
    Id. at 146-47
    . Although the district court held the
    requested records were not protected under Exemption 5, it did not
    address the issues relevant here. The court accepted—because
    Bloomberg did not dispute— the Board’s assertion that the withheld
    records were inter-agency or intra-agency memorandums or letters.
    Bloomberg L.P. v. Bd. of Governors of Fed. Reserve Sys., 
    649 F. Supp. 2d 262
    , 280-81 (S.D.N.Y. 2009). Furthermore, the Board did
    not rely upon the deliberative process privilege. 
    Id. at 281-82
    .
    

Document Info

Docket Number: 10-5353

Citation Numbers: 396 U.S. App. D.C. 216, 647 F.3d 331, 2011 U.S. App. LEXIS 11357, 2011 WL 2162896

Judges: Henderson, Garland, Griffith

Filed Date: 6/3/2011

Precedential Status: Precedential

Modified Date: 11/5/2024

Authorities (17)

Bloomberg L.P. v. Board of Governors of the Federal Reserve ... , 649 F. Supp. 2d 262 ( 2009 )

Committee for Monetary Reform With Various Other v. Board ... , 766 F.2d 538 ( 1985 )

National Institute of Military Justice v. United States ... , 512 F.3d 677 ( 2008 )

Formaldehyde Institute v. Department of Health and Human ... , 889 F.2d 1118 ( 1989 )

Judicial Watch, Inc. v. Department of Justice , 432 F.3d 366 ( 2005 )

Bloomberg, L.P. v. Board of Governors of the Federal ... , 601 F.3d 143 ( 2010 )

Judicial Watch, Inc. v. Department of Energy , 412 F.3d 125 ( 2005 )

Tax Analysts v. Internal Revenue Service , 117 F.3d 607 ( 1997 )

Indep Ins Agct Amer v. Hawke, John D. Jr. , 211 F.3d 638 ( 2000 )

Robert G. Vaughn v. Bernard Rosen, Executive Director, ... , 484 F.2d 820 ( 1973 )

Sussman v. United States Marshals Service , 494 F.3d 1106 ( 2007 )

tom-w-ryan-jr-missouri-public-interest-research-group-v-department-of , 617 F.2d 781 ( 1980 )

Coastal States Gas Corporation v. Department of Energy , 617 F.2d 854 ( 1980 )

National Labor Relations Board v. Sears, Roebuck & Co. , 95 S. Ct. 1504 ( 1975 )

Sidney M. Wolfe v. Department of Health and Human Services , 839 F.2d 768 ( 1988 )

Department of the Interior v. Klamath Water Users ... , 121 S. Ct. 1060 ( 2001 )

McKinley v. Federal Deposit Insurance , 744 F. Supp. 2d 128 ( 2010 )

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