- No. 10-5353 (D.C. Cir. June 3, 2011)
- Affirming the District Court, the D.C. Circuit held that under Exception 5 of the Freedom of Information Act (the “FOIA”), the Board of Governors of the Federal Reserve System (the “Fed. Board”) could withhold certain documents containing information that the Fed. Board solicited from the Federal Reserve Bank of New York (the “N.Y. Fed.”) in connection with the March 2008 bailout of The Bear Stearns Companies Inc. (“Bear Stearns”). Under Exception 5, 5 U.S.C. §552(b)(5), an agency may withhold a “record if the record (1) 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.’ ” Apply the first prong, the D.C. Circuit noted the Fed. Board and the N.Y. Fed. were not government agencies, but rather private entities that Congress empowered with supervisory authority. The D.C. Circuit, however, found the withheld documents constituted “intra-agency memorandums or letters” under the “consultant corollary,” which “interpret[s] ‘intra-agency’ ‘to include agency records containing comments solicited from nongovernmental parties.’ ” Accordingly, the documents satisfied Exception 5’s first prong. Next, the documents satisfied the second prong because they were non-disclosable under the “deliberative process” privilege, which protects an agency’s documents if they are “both ‘predecisional’ and a part of the ‘deliberative process.’ ” Specifically, the D.C. Circuit reasoned that ordering disclosure would “discourage candid discussion within the [Fed. Board] and thereby undermine the [Fed. Board’s] ability to perform its functions.” Therefore, the D.C. Circuit concluded that the Fed. Board properly withheld the documents under Exception 5. Finally, the D.C. Circuit also held that the Fed. Board could withhold one document as attorney-work product because “Exemption 5 incorporates the work-product doctrine and protects against the disclosure of attorney work product.”
- Procedural context:
- Vern McKinley (“McKinley”) appealed the District Court grant of summary judgment in favor of the Fed.. The District Court held that under the Exception 5 of the FOIA, or alternatively Exception 8, the Fed. could withhold certain documents relating to its bailout of Bear Stearns from being disclosed to McKinley.
- In early March 2008, Bear Stearns, a major investment bank, experienced severe liquidity problems that put it on the verge of bankruptcy. On March 13, 2008, the SEC notified the Fed. Board and the N.Y. Fed. that Bear Stearns planned to file for bankruptcy the next morning because it could not meet its obligations. Not being a depository institution, Bear Stearns could not borrow through the Fed. Board’s short-term lending program. The next day, the Fed. Board 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” (“JPMorgan”). Accordingly, the Fed. Board authorized the N.Y. Fed. to extend credit to JPMorgan, who would then issue a temporary loan to Bear Stearns. Although the loan allowed Bear Stearns to avoid bankruptcy, on March 16, 2008, the Fed. Board authorized the N.Y. Fed. to finance JPMorgan’s acquisition of Bear Stearns. In December 2008, under the FOIA, McKinley requested that the Fed. Board disclose “further detail on information contained in the [March 14, 2008 meeting’s] minutes.” Specifically, McKinley 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.” After six months without a response, McKinley sued in District Court to compel disclosure from the Fed. Board. Although the Fed. Board then produced 195 pages of documents, it withheld 163 pages of documents, most containing communications between the Fed. Board and N.Y. Fed., under certain of the FOIA’s exceptions.
- Henderson, Garland and Griffith
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