The opinion of the court was delivered by: GASCH
This Freedom of Information Act (FOIA), 5 U.S.C. § 552, case is presently before the Court on the parties' cross-motions for summary judgment following remand from the United States Supreme Court. Federal Open Market Committee v. Merrill, 443 U.S. 340, 99 S. Ct. 2800, 61 L. Ed. 2d 587 (1979). Only one fairly narrow issue remains for determination by this Court; that is, does FOIA Exemption 5 authorize the Federal Open Market Committee (FOMC) to delay publication of its "Domestic Policy Directive" (DPD) until after the month in which it is effective. The parties have filed a joint statement of material facts as to which there is no genuine issue.
The FOMC consists of the seven members of the Board of Governors of the Federal Reserve and five individuals selected from among the ranks of the executive officers of the various Federal Reserve banks. 12 U.S.C. § 263(a). The FOMC is responsible for directing the sales and purchases of government securities by Federal Reserve members in the open market. 12 U.S.C. § 263(b). The statute further requires that these transactions "be governed with a view to accommodating commerce and business and with regard to their bearing upon the general credit situation in the country." 12 U.S.C. § 263(c). The purchase and sale of government securities by Federal Reserve Banks is centrally managed by the FOMC manager at the Federal Reserve Bank in New York.
The purchase and sale of securities is one way in which the Federal Reserve seeks to regulate the growth and tenor of the economy. In conjunction with reserve requirements established by the Federal Reserve Board, 12 U.S.C. § 461, FOMC activities affect the availability of funds in the economy. Financial institutions, including commercial banks, are required to hold as reserves an amount of uninvested funds equal to a proportion of their deposits. Id. When the FOMC desk buys securities, it credits the reserve accounts of the commercial banks (either as sellers or sellers' depositories) and thereby frees funds for use as loans or investments.
Sales by the FOMC desk obviously have the opposite effect, decreasing the availability of funds.
Thus FOMC activity is the major tool by which the Federal Reserve implements monetary policy in the economy. Moreover, any profit derived from FOMC operations is paid into the U.S. Treasury.
By statute, the FOMC is required to meet at least four times a year. 12 U.S.C. § 263(a). In practice, the FOMC meets approximately ten times a year. At these meetings, the committee considers the state of the economy and what actions will be desirable in the coming month for the purpose of attaining long term economic goals. The FOMC is required to keep detailed records of what transpires at these meetings for the purpose of making an annual report to Congress. 12 U.S.C. §§ 225a & 247a. The complete record of each meeting, the Record of Policy Actions, does not exist in final form until after the next monthly meeting at which time it is published in the Federal Register and otherwise made generally available.
At the monthly meeting, the FOMC also adopts the Domestic Policy Directive which is the subject of this action. The DPD embodies the FOMC's instructions to the account manager for executing transactions in the open market account during the coming month. The DPD typically contains a general expression of short term economic goals as well as specific tolerance ranges for certain economic indicators, the "federal funds rate" and various "monetary aggregates."
The manager's discretion in the daily conduct of transactions between monthly meetings is guided by the DPD and a daily conference call with the staff and at least one member of the FOMC.
The DPD, unlike the Policy statement, is prepared immediately after each meeting. It is not, however, made publicly available until it appears in the Record of Policy Actions the following month. This is in accordance with FOMC policy of maintaining the confidentiality of the DPD among a select group of individuals until it has been replaced by a more recent directive. 12 C.F.R. § 271.5.
In May 1975, plaintiff commenced this action seeking declaratory and injunctive relief in regard to the FOMC's policy of delayed disclosure. On cross-motions for summary judgment, the late Judge Waddy of this Court held that the DPD's were "statements of general policy" not within any exemption and 5 U.S.C. § 552(a)(1)(D) required their current publication in the Federal Register. Merrill v. FOMC, 413 F. Supp. 494, 505 (D.D.C.1976). On appeal, the United States Court of Appeals reached the same conclusion. Merrill v. FOMC, 184 U.S. App. D.C. 203, 565 F.2d 778, 787 (D.C.Cir.1977). Both courts rejected the FOMC's argument that the DPD was protected from disclosure by FOIA Exemption 5 in the month that it was current and operative. They concluded that the DPD embodied the final and operative policy of the FOMC for the coming month and could not be considered predecisional and deliberative. 565 F.2d at 785; 413 F. Supp. at 505. Both courts also rejected the invitation to expand Exemption 5 in such a way as to protect the DPD from current disclosure. 565 F.2d at 787; 413 F. Supp. at 506.
The Supreme Court, however, reached a different conclusion holding that a privilege from disclosure, analogous to the qualified privilege for confidential commercial information available in civil discovery under Rule 26(c)(7), Fed.R.Civ.P., was available under Exemption 5. FOMC v. Merrill, 443 U.S. at 359, 99 S. Ct. at 2811. Rule 26(c)(7) provides that a person or party may be granted an order "that a trade secret or other confidential research, development, or commercial information not be disclosed or only be disclosed in a designated way." Recognizing that the analogy was not exact,
the Court went on to note that, should the Court conclude that any form of protection would be warranted in the discovery context, it should find that the FOMC's delayed disclosure policy was justified by this exemption. 443 U.S. at 362 n.24, 99 S. Ct. at 2813 n.24.
Having concluded that the DPD's were potentially within the scope of this new exemption, the Court framed the remaining inquiry as follows:
Nevertheless, the sensitivity of the commercial secrets involved, and the harm that would be inflicted upon the government by premature disclosure, should continue to serve as relevant criteria in determining the applicability of this Exemption 5 privilege. Accordingly, we think that if the Domestic Policy Directives contain sensitive information not otherwise available, and if immediate release of these Directives would significantly harm the government's monetary functions or commercial interests, then a slight delay in the publication of the Directives, such as that authorized by 12 C.F.R. § 271.5, would be permitted under Exemption 5.
If the District Court on remand concludes that the Directives would be afforded protection, then it should also consider whether the operative portions of the Domestic Policy Directives can feasibly be segregated from the purely descriptive materials therein, and ...