Professional Documents
Culture Documents
VERN MCKINLEY,
Plaintiff-Appellant,
v.
TONY WEST
Of counsel: Assistant Attorney General
TABLE OF CONTENTS
Page
STATUTES. ............................................................................................................. 2
I. Background. ......................................................................................... 5
ARGUMENT. ......................................................................................................... 21
CONCLUSION....................................................................................................... 36
ii
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TABLE OF AUTHORITIES
Cases: Page
EPA v. Mink,
410 U.S. 73 (1973)............................................................................................. 31
FBI v. Abramson,
456 U.S. 615 (1982)........................................................................................... 12
* Authorities upon which Appellee chiefly relies are market with astericks.
iii
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Morley v. C.I.A.,
508 F.3d 1108 (D.C. Cir. 2007). ........................................................................ 20
Reuss v. Balles,
584 F.2d 461 (D.C. Cir. 1978). ............................................................................ 6
iv
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Statutes:
5 U.S.C. § 552......................................................................................................... 12
12 U.S.C. § 241......................................................................................................... 6
12 U.S.C. § 248(a)(1)................................................................................................ 8
12 U.S.C. § 248(f)..................................................................................................... 7
12 U.S.C. § 302................................................................................................... 7, 27
12 U.S.C. § 307......................................................................................................... 7
12 U.S.C. § 321....................................................................................................... 27
12 U.S.C. § 325......................................................................................................... 8
12 U.S.C. § 338......................................................................................................... 8
12 U.S.C. § 341......................................................................................................... 6
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12 U.S.C. § 483......................................................................................................... 8
12 U.S.C. § 485......................................................................................................... 7
12 U.S.C. § 1844(c)(2).............................................................................................. 8
28 U.S.C. § 1291....................................................................................................... 1
28 U.S.C. § 1331....................................................................................................... 1
Regulations:
Rules:
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Legislative Materials:
H.R. Rep. No. 1497, 89th Cong., 2nd Sess. (1966). ............................................... 34
Other Authorities:
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No. 10-5353
VERN MCKINLEY,
Plaintiff-Appellant,
v.
JURISDICTIONAL STATEMENT
§ 552(a)(4)(B), and invoked the jurisdiction of the district court under 28 U.S.C.
§ 1331. Joint Appendix (“JA”) 9. The district court entered a judgment in favor of
the defendant on September 29, 2010. JA 146. Plaintiff noticed this appeal on
October 19, 2010, within the period specified by Fed. R. App. P. 4(a)(1). JA 147.
the Federal Reserve Board and the Federal Reserve Bank of New York were properly
STATUTES
The pertinent statutory provisions are reproduced in the addendum to this brief.
Around March 10, 2008—in the midst of the recent crisis in the U.S. financial
Board” or “Board”) learned that The Bear Stearns Companies Inc. (“Bear Stearns”)
was experiencing severe liquidity pressures. Three days later, on March 13, the
Board learned that Bear Stearns was about to file for bankruptcy protection. See
District Court Memorandum Opinion of Sept. 29, 2010 (“Op.”) 3 (JA 122).
information and recommendations from various sources, including the Securities and
Exchange Commission and the Federal Reserve Bank of New York, one of the twelve
2
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regional banks in the Federal Reserve System. Ibid. On March 14, 2008, the Board
determined that the “sudden disorderly failure” of Bear Stearns threatened significant
harm to the nation’s economy and financial stability. Id. at 4 (JA 123). The Board
therefore authorized the Federal Reserve Bank of New York to make a short-term
emergency loan to Bear Stearns through JP Morgan Chase & Company. Ibid. The
minutes of the Board’s March 14 meeting explained that this “temporary emergency
financing” was the “best available alternative” “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
Information Act (“FOIA”) request to the Federal Reserve Board seeking documents
related to its March 14, 2008 loan authorization decision. “In particular,” plaintiff
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
minutes.” JA 44. Further, plaintiff filed suit to compel the Board to make “the
3
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documents, the Board produced 195 pages of responsive materials – 167 full pages
and 28 partially redacted pages – and withheld 163 pages. Thro Decl. ¶¶ 9-10 (JA
33). The Board explained that the items withheld, in full or in part, were subject to
Exemptions 4, 5, 6, or 8. Ibid.
In February 2010, the Board moved for summary judgment on the ground that
plaintiff had been given all responsive materials not subject to FOIA exemptions. In
support of its motion, the Board supplied declarations from senior personnel of the
Federal Reserve Board and Securities and Exchange Commission (“SEC”). Plaintiff
filed a cross-motion for summary judgment, urging that Exemptions 4, 5, and 8 were
improperly claimed.1
In September 2010, the district court granted the Board’s motion and denied
plaintiff’s cross-motion. The court held that the disputed materials were “‘inter-
privilege or, in the case of one item, attorney work product privilege, and therefore
subject to FOIA Exemption 5. Op. 9-21 (JA 128-40). The court further held that the
1
Plaintiff did not pursue a challenge to the Board’s Exemption 6 withholdings.
4
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I. Background
central bank.” Comm. for Monetary Reform v. Bd. of Governors of Federal Reserve
System, 766 F.2d 538, 539 (D.C. Cir. 1985). Its principal functions include
“supervising and regulating banking institutions to ensure the safety and soundness
of the nation’s banking and financial system,” and “maintaining the stability of the
financial system and containing systemic risk that may arise in financial markets.”
Board of Governors of the Federal Reserve System, The Federal Reserve System
Purposes and Functions 1 (9th ed. June 2005) (“Purposes and Functions”);3 see, e.g.,
12 C.F.R. § 201.1 (“The Federal Reserve System extends credit with due regard to the
2
Having found that all of the materials at issue were properly withheld, the
court did not address the Board’s assertion that some materials were also subject to
FOIA Exemption 4. Op. 26 (JA 145).
3
The Board’s Purposes and Functions publication, available at
http://www.federalreserve.gov/pf/pdf/pf_complete.pdf, has been relied upon by courts
to explain the Federal Reserve System’s operations. See, e.g., Fed. Open Markets
Comm. v. Merrill, 443 U.S. 340, 342 n.2 (1979).
5
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basic objectives of monetary policy and the maintenance of a sound and orderly
financial system.”).
The Federal Reserve System’s central body is the Federal Reserve Board – a
confirmed by the Senate. 12 U.S.C. § 241; see Reuss v. Balles, 584 F.2d 461, 462
(D.C. Cir. 1978). Twelve regional Federal Reserve Banks and their branches serve
subject to the supervisory authority of the Board. Purposes and Functions 10, 6; see
“monetary and fiscal agents of the United States.” First Agric. Nat’l Bank v. States
Tax Comm’n, 392 U.S. 339, 356 (1968) (Marshall, J., dissenting). “To aid in
achieving Congress’s goal of insulating them from political pressure, the Federal
Reserve Banks are formed as corporations,” Fasano v. Fed. Reserve Bank of New
York, 457 F.3d 274, 277 (3d Cir. 2006), and operate under various grants of
independent authority, such as the power to sue and be sued in their own names, to
make contracts, and to hire and fire at-will employees. 12 U.S.C. § 341.
At the same time, as the Reserve Banks are “intimate parts of the Government’s
fiscal structure,” Fasano, 457 F.3d at 278, their operations and activities are
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supervised by the Federal Reserve Board. E.g., 12 U.S.C. §§ 248(j), 485. The
Board’s oversight responsibilities include, for example, appointing three of the nine
members of each Bank’s board of directors, id. § 302; approving the selections of
director, id. § 248(f); and reviewing and approving the salaries paid to Reserve Bank
institutions on an ongoing basis. See Purposes and Functions 46-49. “In unusual and
exigent circumstances,” the Federal Reserve Board may – in accordance with section
13(3) of the Federal Reserve Act – authorize a Federal Reserve Bank to extend credit
extending the credit, the Reserve Bank must obtain evidence that the institution is
12 U.S.C. § 343(A).5
4
Section 343(A) describes the conditions in which the Board, “by the
affirmative vote of at least five members,” may authorize such lending. Section
248(r)(2) describes additional criteria that must be satisfied for the Board to act with
fewer than five members available.
5
In 2010, section 13(3) was substantially amended by section 1101 of the
Dodd-Frank Wall Street Reform and Consumer Protection Act. These amendments
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The Board and the Reserve Banks, through examiners the Board selects or
U.S.C. §§ 248(a), 325, 338, 1844(c)(2), 3105©.6 For the most part, this authority is
carried out by examiners at the Federal Reserve Banks under the coordination and
oversight of the Board. See 12 U.S.C. § 222 note (providing in the Rules of
“coordinates the bank supervisory functions of the System and evaluates the
examination procedures of the Reserve Banks”). In addition, the Reserve Banks must
“at all times furnish to the Board of Governors of the Federal Reserve System such
within the district of the said Federal reserve bank.” 12 U.S.C. § 483.
information” detailing the basis for the Federal Reserve Board’s decision on March
14, 2008, pursuant to section 13(3) of the Federal Reserve Act, to authorize the
8
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Federal Reserve Bank of New York (“FRBNY”) to make an emergency loan to avoid
The Board’s deliberations took place amid significant turmoil in the U.S.
financial markets. Beginning in the summer of 2007, the U.S. financial markets saw
of these assets dropped, various financial institutions – some of which held large
to each other, even against high-quality collateral. As a result, the liquidity pressures
Around March 10, 2008, the Federal Reserve Board began to receive
information that Bear Stearns was experiencing severe liquidity pressures and might
be forced to declare bankruptcy in the near term. Op. 3 (JA 122); see Thro Decl. ¶ 3
(JA 30). As a broker-dealer holding company, Bear Stearns was regulated by the
SEC, not by the Federal Reserve Board; and because Bear Stearns was not a
7
For a more detailed discussion of the dynamics of the financial crisis, see the
Statement by Timothy F. Geithner, President and Chief Executive Officer of Federal
Reserve Bank of New York, before the U.S. Senate Committee on Banking, Housing,
and Urban Affairs (Apr. 3, 2008), available at
http://banking.senate.gov/public/_files/OpgStmtGeithner4308Testimony.pdf.
9
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Bank’s regular lending program. Op. 4 (JA 123): see Winter Decl. ¶ 10 (JA 110)
Nonetheless, the threat of its collapse was of significant concern to the Board, given
the firm’s prominent position in various financial markets and the vulnerability of
difficulties, the Board quickly sought to assess the gravity of the situation and the
consequences Bear Stearns’ bankruptcy would hold for the U.S. financial markets.
Op. 3 (JA 122). To do so, the Board and Board staff (particularly those in the
market developments and the exposure of certain key financial institutions to Bear
Stearns. Stefansson Decl. ¶¶ 8-9 (JA 101-02). Consistent with the Federal Reserve
System’s structure and “well-established supervisory processes,” id. ¶9 (JA 102), the
Board relied heavily on Federal Reserve Bank staff and examiners to identify, in
Op. 3 (JA 122); see Stefansson Decl. ¶¶ 13-14 (JA 103-104); Thro Decl. ¶¶ 17, 19-21
(JA 37-41). The SEC also provided input on a confidential inter-agency basis based
10
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Entity program) with Bear Stearns. Danis Decl. ¶¶ 3-4 (JA 118); Winter Decl. ¶¶ 6-7,
On March 13, Bears Stearns’ liquidity declined to levels that were insufficient
to meet its maturing obligations, and staff of the SEC notified the Board and the
FRBNY that Bear Stearns would have to file for bankruptcy protection the next day.
Based on the targeted collection of information acquired by the Board with the
help of the FRBNY and the SEC, the Board concluded that the immediate failure of
Bear Stearns would have severe implications for the functioning of the financial
markets, particularly given the vulnerable state of the markets. Op. 4 (JA 123).
to a non-depository institution under 12 U.S.C. § 343, the Board found that the other
factors that must exist to authorize such a loan on the vote of fewer than five Board
members, id. § 248(r)(2), were also present.8 Minutes 2-3 (JA 46-47). The Board
found that adequate credit accommodations could not be secured from other sources,
and that the Board’s action was necessary to prevent, correct, or mitigate serious harm
8
This was necessary because one member of the Board of Governors was
unavailable to participate in the Board’s emergency meeting on March 14. Minutes
3 (JA 47).
11
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In light of its analysis, “the Board authorized the FRBNY to extend credit to
JP Morgan Chase to provide a temporary loan to Bear Stearns to enable it to meet its
financial obligations and to avoid filing for bankruptcy.” Op. 4 (JA 123). In turn, the
FRBNY approved the loan, and the transaction was completed. Ibid. Bear Stearns
did not file for bankruptcy, and, on March 16, a second loan was authorized to
disclosure, upon request, of records held by federal agencies, except to the extent
such records are protected by statutory exemptions. In enacting the FOIA, Congress
information and provided nine specific exemptions under which disclosure could be
refused.” FBI v. Abramson, 456 U.S. 615, 621 (1982) (internal quotations marks and
citation omitted); see also 5 U.S.C. § 552(b) (listing exemptions). Thus, the FOIA,
with its exemptions, “represents a balance struck by Congress between the public’s
right to know and the government’s legitimate interest in keeping certain information
confidential.” Ctr. for Nat’l Sec. Studies v. U.S. Dep’t of Justice, 331 F.3d 918, 925
12
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other than an agency in litigation with the agency.” 5 U.S.C. § 552(b)(5). Exemption
Defense, 512 F.3d 677, 682 (D.C. Cir. 2008) (quoting Dep’t of the Interior v.
to examination, operating, or condition reports prepared by, on behalf of, or for the
“all-inclusive,” Consumers Union of U.S., Inc. v. Heimann, 589 F.2d 531, 534 (D.C.
or condition reports.” Gregory v. Fed. Deposit Ins. Corp., 631 F.2d 896, 898 (D.C.
Cir. 1980).
13
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information contained in the [March 14, 2008] minutes of the Board of Governors of
the Federal Reserve.” JA 44. He asked, “[i]n particular,” for “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
this suit to compel the Board to make “the requested information immediately
2008 Bear Stearns loans, see Thro Decl. ¶¶ 3-5 (JA 30-32), the Board produced 195
pages of responsive materials (167 full pages and 28 partially redacted pages) and
withheld 163 pages, id. ¶¶ 9-10 (JA 33-34). Plaintiff was informed that the withheld
and redacted materials – comprising 38 items in the Vaughn index – were protected
from release by one or more statutory exemptions under the FOIA. Op. 5 (JA 124);
see also Thro Decl. ¶ 10 (JA 33-34); Winter Decl. ¶ 5 (JA 108).
14
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1. The Board maintained that all of the materials sought by the plaintiff were
subject to Exemption 5, and the court agreed – holding that they were “‘inter-agency’
or, in the case of one item, attorney work product privilege. Op. 9-21 (JA 128-40).
employees of the FRBNY were outside the scope of Exemption 5. The court
acknowledged that the FRBNY is not a federal agency, but held that it was covered
in this case by the “consultant corollary.” See id. at 12 (JA 131). The court found
that the Board had shown, through declarations and documents, that the FRBNY’s
input was solicited for the purpose of aiding the Board’s deliberative process, id. at
10 (JA 129), and that the FRBNY “was not representing an interest of its own when
it advised the Board, but rather it was simply assisting the Board’s evaluation of the
9
The Board’s motion was accompanied by four declarations: one from the
Board’s Senior Counsel, Thro Decl. (JA 28); one from the Associate Director of the
Board’s Division of Banking Supervision and Regulation, Stefansson Decl. (JA 98);
one from the U.S. Securities and Exchange Commission’s FOIA and Privacy Act
Officer, Winter Decl. (JA 107); and one from a senior financial economist in the
Broker-Dealer Risk Office of the Division of Trading and Markets at the Securities
and Exchange Commission, Danis Decl. (JA 117). The Vaughn index, describing
each of the withheld items and the basis for the withholding, was included as Exhibit
F to the Thro Declaration (JA 58).
15
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Likewise, the court rejected plaintiff’s claim that factual information had been
wrongly withheld under Exemption 5, id. at 15-17 (JA 134-36), as the court was
“convinced that disclosure of the requested [information] ... would expose the
omitted). The court concluded, for example, that revealing the “specific institutions”
the staff of the Board and the FRBNY had reached out to and focused their attention
on, as well as the particular financial statistics that were requested and culled “from
the mass of data available” for the Board’s consideration, would reveal the agency’s
The court also addressed plaintiff’s suggestion that the Board had failed to
proffer evidence that each of the withheld items would, if released, cause harm to the
agency’s decisionmaking process. Id. at 17-18 (JA 136-37). The court observed that
basis” for declining to release certain information gathered from financial institutions
regulated by the Federal Reserve Board (or, in the case of information gathered from
16
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Bear Stearns, regulated by the SEC). Id. at 21 (JA 140). The court observed that the
obtained “as part of [the Board’s and the SEC’s] ‘continuous’ supervision’ of
at 23-24 (JA 142-43). Further, the court acknowledged that the information was
compiled under circumstances that demanded “fast moving, real-time” reporting. Id.
at 23 (JA 142). The court concluded, accordingly, that these records were “properly
SUMMARY OF ARGUMENT
March 2008 to authorize the Federal Reserve Bank of New York to make a short-
term emergency loan to Bear Stearns through JP Morgan Chase. Plaintiff seeks,
“[i]n particular, 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
10
As noted supra, the court did not address the applicability of Exemption 4 to
some of the materials. Op. 26 (JA 145).
17
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I. The Federal Reserve Board properly withheld all the records at issue on
a. Plaintiff errs in asserting that the communications between the Board and
the Federal Reserve Bank of New York should not be treated as “inter-agency or
Banks are not government agencies. They are, however, critical components of
the Federal Reserve System, and the Board relies on input from the regional
Reserve Banks in exercising its regulatory authority, including input from the
Reserve Bank examiners who carry out the field examinations and inspections of
entities regulated by the Board. In responding to the Bear Stearns crisis, the Board
thus turned to the FRBNY for assistance in the “Board’s consideration of potential
Stefansson Decl. ¶ 8). The material prepared for the Board by the FRBNY
Military Justice v. Dep’t of Defense, 512 F.3d 677, 682, 685 (D.C. Cir. 2008)
18
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b. After reviewing the agency’s declarations and the Vaughn index, the
district court concluded that the records were pre-decisional and deliberative.
Plaintiff does not challenge that conclusion, but argues, that the district court
should have required additional detailed proof that disclosure would result in
specific harm to the agency’s deliberative process. This Court has never
disclosure would chill frank discussion of policies and issues. Agencies need not,
correct.
In any event, the agency’s declarations made quite clear that compelling
disclosure of the requested records would have the inhibiting impact to which
to discourage candid discussion within the agency and thereby undermine the
agency’s ability to perform its functions.” Op. 17 (JA 136) (internal quotations
19
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II. The district court correctly concluded that some of the requested records
or condition reports prepared by, or on behalf of, or for the use of an agency
§ 552(b)(8). Exemption 8 plainly protects from disclosure the e-mails or tables (or
portions thereof) that contained information obtained by the Board from financial
institutions subject to its regulation. The district court rightly concluded that the
STANDARD OF REVIEW
a FOIA case. See Morley v. C.I.A., 508 F.3d 1108, 1114 (D.C. Cir. 2007).
20
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ARGUMENT
available by law to a party other than an agency in litigation with the agency.” 5
U.S.C. § 552(b)(5). This exemption shields documents of the type that would be
NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 149 (1975); see Judicial Watch,
Inc. v. Dep’t of Justice, 365 F.3d 1108, 1113 (D.C. Cir. 2004).
process of an agency.” Russell v. Dep’t of the Air Force, 682 F.2d 1045, 1048
(D.C. Cir.1982) (citing Montrose Chemical Corp. v. Train, 491 F.2d 63, 71 (D.C.
Cir. 1974); see Ryan v. Dep’t of Justice, 617 F.2d 781, 790 (D.C. Cir. 1980)
21
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(explaining that “factual segments” are protected by Exemption 5 “if the manner
of selecting or presenting those facts would reveal the deliberate process, or if the
omitted).
Military Justice, 512 F.3d at 682 (quoting Dep’t of the Interior v. Klamath Water
Users Protective Ass’n, 532 U.S. 1, 10 (2001)); see id. at 680-81, 684 (discussing
Circuit precedent).
It is undisputed that Federal Reserve Banks, such as the FRBNY, are not
government agencies (or components thereof) for purposes of the FOIA. Ibid. As
the district court explained, however, the records at issue “‘play[ed] essentially the
personnel might have done[.]’” Op. 11 (JA 130) (quoting Nat’l Inst. of Military
22
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Justice v. Dep’t of Defense, 512 F.3d at 682 (quoting Klamath, 532 U.S. at 10)).
communications. Nat’l Inst. of Military Justice, 512 F.3d at 685 (quoting Ryan,
As the district court explained, that is precisely the role of the records
provided by the FRBNY to the Board at issue in this case. Upon learning of Bear
Stearns’ severe funding difficulties on or around March 10, 2008, the Federal
Reserve Board was faced with the pressing question of what steps, if any, to take
in response. It was critical to the Board’s decisionmaking to assess the effects that
a bankruptcy filing by Bear Stearns would have on the financial markets generally
and on certain institutions specifically. Op. 10, 17 (JA 129, 136). To that end, the
Board looked to the FRBNY to provide critical data points and recommendations.
Ibid.
Stearns defaulted were subject to the examination authority of the Board, which
exercises this authority through Reserve Bank examiners who conduct the field
4 (JA 99) (explaining that “large complex banking organizations” are subject to
23
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that the FRBNY surveyed financial institutions “for purposes of assessing [their]
real-time exposure to Bear Stearns’” and conveyed its findings to the Board to
supra, the relevant events unfolded quickly between March 10 and March 14,
condition, the Board sought to understand the gravity of the situation and the
impact Bear Stearns’ failure would have. Op. 3 (JA 122). The FRBNY provided
the Board with data and analyses, which “were considered by the Board and staff
advising the Board as part of the ongoing process of deliberation leading up to the
the Interior v. Klamath Water Users Protective Ass’n, 532 U.S. 1 (2001), in which
the Supreme Court held that communications between Indian Tribes and the
Bureau of Indian Affairs regarding water rights fell outside the scope of
Exemption 5. The Court held that, in communicating their views to the Bureau of
Indian Affairs, the tribes not only had “their own, albeit entirely legitimate,
interests in mind,” but more specifically were “seeking a Government benefit [i.e.,
24
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water rights] at the expense of other applicants.” Id. at 12 & n. 4. The Court
tribes because the “[t]ribes [we]re self-advocates at the expense of others seeking
benefits inadequate to satisfy everyone.” Id. at 12. The Court concluded that “the
Id. at 12 n.4. As the Court also explained, however, there is no requirement that a
consultant does not represent an interest of its own, or the interest of any other
client,” id. at 11. Indeed, without resolving the question, the Court acknowledged
that “consultants may be enough like the agency’s own personnel to justify calling
That description certainly applies here. Equally clearly, the FRBNY was
interests between the Board and FRBNY, plaintiff asserts that “FRBNY had its
own interests when it communicated with the Board because Section 13(3) [of the
Federal Reserve Act] gave FRBNY, not the Board, final decision making
authority.” Pl. Br. 10. By this plaintiff apparently means that the Board’s March
25
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14, 2008 decision authorized FRBNY to extend a temporary loan to benefit Bear
Stearns, but did not legally compel the bank to do so. Ibid.; see 12 U.S.C.
potential concern that the Board might require it to extend one contrary to its own
judgment.
Similarly, plaintiff points out that before extending the loan, FRBNY was
statutorily required to “make its own finding” that Bear Stearns could not “‘secure
(quoting 12 U.S.C. § 343(A)). Plaintiff does not explain why this would suggest
participation in the Board’s decisionmaking process. Id. at 14. Indeed, in the Bear
Stearns situation, the Board was required to, and did, make the very same
bank,” Pl. Br. 3, “engaged in the business of banking,” id. at 11, that makes
decisions about extending credit based on “what is best for FRBNY,” ibid., fails to
appreciate the FRBNY’s role as part of the Federal Reserve System. As discussed
supra, “Congress chartered the Federal Reserve Banks for a public purpose. ...
26
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[A]nd they combine both public and private elements in their makeup and
organization.” Purposes and Functions 10.11 Like the Board, the Reserve Banks
are key components of the Federal Reserve System, and that “System extends
credit with due regard to the basic objectives of monetary policy and the
Indeed, nowhere is coordination between the Federal Reserve Board and the
Reserve Banks more central and more apparent than in the extension of credit in
Reserve Act. The statute requires the Board and Federal Reserve Bank to act
together in order to make a loan. 12 U.S.C. § 343. And, indeed, as the plaintiff
notes, prior to issuing a loan authorized under Section 13(3), the Reserve Bank
must find that the borrower is “unable to secure adequate credit accommodations
11
While Reserve Banks are corporations, their stock is available only to
member banks, who are required by law to subscribe to it. 12 U.S.C. § 321. And
“holding of this stock ... does not carry with it the control and financial interest
conveyed to holders of common stock in for-profit organizations.” Purposes and
Functions 12 (explaining that Reserve Bank stock, which cannot be sold or pledged
as collateral, is “merely a legal obligation of Federal Reserve membership”); see, e.g.,
12 U.S.C. § 302 (providing that the Federal Reserve Board appoints three members
of each Bank’s board of directors). In any event, even if the FRBNY were a typical
private corporation, it could still come within the “consultant corollary” of the
deliberative process exemption. Nat’l Inst. of Military Justice, 512 F.3d at 681
(“Exemption 5 extends to documents received from private, nongovernmental
parties.”)
27
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advocating for any interest that differed from the interests of the Federal Reserve
documents prepared by agency personnel might have done.” Klamath, 532 U.S. at
10.
Plaintiff does not challenge the district court’s conclusion that the materials
withheld would – if disclosed – expose the process by which the Board formulated
its final decision. Op. 17 (JA 136).12 Rather, he argues that the court also should
12
After reviewing the Board’s declarations and the Vaughn index, the district
court concluded that the Board had established that the disclosures plaintiff sought
would expose the agency’s judgment calls and decisionmaking process. Op. 15-17
(JA 134-36). The court noted, for example, the Board’s testimony that revealing the
identities of financial institutions discussed in certain communications would reveal
which institutions the Federal Reserve System staff considered to be “‘systemically
important,’” id. at 15-16 (JA 134-35) (quoting Thro Decl., Ex. F, Item 8), and which
thus “played an important part in the Board’s deliberations.” Id. at 16 (JA 135). (...
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have required additional evidence “that the disclosure of the withheld material
would harm [the Board’s] decision making process.” Pl. Br. 15. As the district
court explained, however, “once it has been shown that a document is both
137).
Plaintiff nevertheless maintains that the Board must “‘show by specific and
detailed proof that disclosure would defeat, rather than further, the purposes of the
FOIA.’” Pl. Br. 17 (quoting Mead Data Central, Inc. v. U.S. Dep’t of the Air
Force, 566 F.2d 242, 258 (D.C. Cir. 1977)). As the district court explained,
plaintiff’s reliance on Mead Data is misplaced. The statement plaintiff quotes was
made by the Court “in considering whether Exemption 5 could ever apply to an
agency’s negotiation proceedings with an outside party - i.e., to material that was
indisputably not part of the agency’s internal deliberative process.” Op. 18 (JA
137) (citing Mead Data, 566 F.2d at 257-58). In that circumstance, the Court held
that Exemption 5 would be inapplicable unless the agency could show “that the
from dealing with the Government that agencies must be permitted to withhold
cont’d ...) Plaintiff has waived any challenge to that holding by failing to raise it in
his opening brief.
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contractual agreements.” Mead Data, 566 F.2d at 257-58. “In contrast,” the
district court observed, elsewhere in Mead Data, the Court “upheld the
internal processes] where the record established that those documents were both
‘predecisional’ and ‘part of the deliberative process.’” Op. 18 (JA 137); see Mead,
13
In a second decision involving the same parties, the Court held that “the
material withheld in this case mainly cost comparisons, feasibility opinions, and the
data relevant to how the personnel involved arrived at those comparisons” were
protected because they would reveal the process by which “different members of the
decisionmaking chain arrived at their conclusions and what those predecisional
conclusions are.” See Mead Data Central, Inc. v. U.S. Dep’t of the Air Force, 575
F.2d 932, 934 (D.C. Cir. 1978). The Court required no additional showing that
disclosure would jeopardize candor.
The same is true of cases cited by the plaintiff. See, e.g., Horwitz v. Peace
Corps, 428 F.3d 271, 277 (D.C. Cir. 2005) (holding that a “remarkably candid”
document was predecisional and deliberative and therefore exempt from disclosure,
without requiring the government to provide evidence of harm) (cited in Pl. Br. 15-
16); Dudman Communications Corp. v. Dep’t of Air Force, 815 F.2d 1565, 1569
(D.C. Cir. 1987) (Court observed that making a draft document public would provide
some insight into the Air Force’s internal editing process, but did not deem proof of
harm to the deliberative process necessary). Cf. Wolfe v. Dep’t of Health and Human
Services, 839 F.2d 768, 773 (D.C. Cir. 1988) (declining to “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”) (cited in Pl. Br. 16).
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greatly hampered,” and that the quality of the agency decisions would suffer as a
result. S. Rep. No. 813, 89th Cong., 1st Sess., 9 (1965); see, e.g., EPA v. Mink,
410 U.S. 73, 87 (1973) (explaining that the “importance of this underlying policy
was echoed again and again during legislative analysis and discussions of
and deliberative, an agency need not make additional specific showings regarding
In any event, after reviewing the declarations and the Vaughn index, the
district court correctly recognized that disclosure “‘would expose [the Board's]
the agency and thereby undermine the agency’s ability to perform its functions.’”
Op. 17 (JA 136) (quoting Quarles v. Dep’t of Navy, 893 F.2d 390, 392 (D.C. Cir.
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The district court concluded, in the alternative, that the Board properly
invoked FOIA Exemption 8 with regard to e-mails or tables (or portions thereof)
from financial institutions subject to its regulation. Op. 21-25 (JA 140-44); see
Thro Decl. ¶¶ 17-18 (JA 37-39).14 The information withheld consists of the
following: the identity of institutions with exposure to Bear Stearns, the amount of
such exposure, and/or the activities these institutions had taken to limit their
by, or on behalf of, or for the use of an agency responsible for the regulation or
noted, “it is well-established that Exemption 8’s scope is ‘particularly broad.’” Op.
22 (JA 141) (quoting Consumers Union of U.S., Inc. v. Heimann, 589 F.2d 531,
14
Exemption 8 was invoked with regard to thirteen items. For two of those
items, the SEC, rather than the Board, was the regulatory body collecting the
information. Both items were records obtained in connection with the SEC’s
supervision and regulation of Bear Stearns. See Thro Decl., Ex. F (Items 11 and 12)
(JA 70-71); Danis Decl. ¶¶ 4-5 (JA 118). Plaintiff’s brief does not discuss the SEC,
but the arguments here apply with equal force to the SEC’s two items.
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534 (D.C. Cir. 1978) (“If the Congress has intentionally and unambiguously
the FOIA context, to subvert that effort.”)). See Gregory v. Fed. Deposit Ins.
Plaintiff does not dispute that the records at issue were “prepared by, on
behalf of, or for the use of” the Board, “an agency responsible for the regulation or
dispute that the information was properly obtained pursuant to the Board’s
supervisory authority. Finally, plaintiff does not dispute the exigent circumstances
Plaintiff nevertheless renews his contention that the Board failed to provide
court explained, the Board’s declarations establish that it obtained the documents
hectic days and hours during which the Board and its staff strove to assess the
impact of a possible disorderly failure of Bear Stearns.” Op. 23 (JA 142); see
Stefansson Decl. ¶¶ 4, 14-15 (JA 99-100, 104-05) (explaining that the “bank
regulation entities with their bank supervisors”); Thro Decl. ¶ 17 (JA 37). These
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monitor the possible impact of a Bear Stearns bankruptcy.” Op. 23 (JA 142). The
“could, if indiscriminately disclosed, cause great harm.” H.R. Rep. No. 1497, 89th
Cong., 2nd Sess. 11 (1966); see also S. Rep. No. 813, 89th Cong., 1st Sess. 10
(1965).
Plaintiff suggests that the emails and charts at issue cannot constitute or
relate to reports for purposes of Exemption 8, Pl. Br. 21, a proposition without
basis in the statutory text, this Court’s precedent, or common sense. The Board’s
broad authority includes the power to “require such statements and reports as it
established supervisory process – falls well within the broad protections afforded
by Exemption 8. Gregory, 631 F.2d at 898 (“Congress looked to the nature and
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The district court explained that plaintiff’s position would undermine the
“‘frank cooperation between bank officials and regulated entities’” that Exemption
8 seeks to protect. Op. 25 (JA 144) (quoting Gregory, 631 F.2d at 899); see also
Heimann, 589 F.2d at 534 (“If details of the bank examinations were made freely
available to the public and to banking competitors, ... banks would cooperate less
than fully with federal authorities.”). The district court correctly concluded that
the Board’s ability to gather information “in furtherance of its mission to regulate
15
Plaintiff cites no authority that supports his suggestion that the reports
covered by Exemption 8 must adhere to a particular standardized format. More
generally, plaintiff addresses no case law pertaining to Exemption 8.
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CONCLUSION
For the foregoing reasons, the district court’s ruling should be affirmed.
Respectfully submitted,
TONY WEST
Of counsel: Assistant Attorney General
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CERTIFICATE OF COMPLIANCE
I certify that this brief complies with the type-volume limitation of Fed. R.
App. P. 32(a)(7)(B). It has been prepared in Times New Roman, 14-point font.
The Corel WordPerfect 12 word count is 7808, excluding the parts of the brief
CERTIFICATE OF SERVICE
I hereby certify that on March 4, 2011 the foregoing brief was filed via the
CM/ECF system with the Court and served via the CM/ECF system to the
Paul J. Orfanedes
Michael Bekesha
Judicial Watch, Inc.
425 Third Street, S.W., Suite 800
Washington, D.C. 20024
ADDENDUM
The Board of Governors of the Federal Reserve System shall be authorized and
empowered:
...
(r)(1) Any action that this chapter provides may be taken only upon the
affirmative vote of 5 members of the Board may be taken upon the
unanimous vote of all members then in office if there are fewer than 5
members in office at the time of the action.
(2)(A) Any action that the Board is otherwise authorized to take under the
second paragraph of section 343 of this title may be taken upon the
unanimous vote of all available members then in office, if--
(I) at least 2 members are available and all available members
participate in the action;
(ii) the available members unanimously determine that--
(I) unusual and exigent circumstances exist and the borrower is
unable to secure adequate credit accommodations from other
sources;
(II) action on the matter is necessary to prevent, correct, or
mitigate serious harm to the economy or the stability of the
financial system of the United States;
(III) despite the use of all means available (including all
available telephonic, telegraphic, and other electronic means),
the other members of the Board have not been able to be
contacted on the matter; and
(IV) action on the matter is required before the number of
Board members otherwise required to vote on the matter can be
contacted through any available means (including all available
telephonic, telegraphic, and other electronic means); and
(iii) any credit extended by a Federal reserve bank pursuant to such
action is payable upon demand of the Board.
(B) The available members of the Board shall document in writing the
determinations required by subparagraph (A)(ii), and such written findings
shall be included in the record of the action and in the official minutes of the
Board ....