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OCCIDENTAL PETROLEUM CORP. v. SEC

May 15, 1987

Occidental Petroleum Corporation, Plaintiff,
v.
Securities And Exchange Commission, Defendant



The opinion of the court was delivered by: GESELL

 This is a reverse-Freedom of Information Act ("FOIA") case. Occidental seeks to enjoin the SEC from disclosing to a FOIA requestor many documents from its files which Occidental had previously submitted in confidence to the SEC during its investigation of Occidental's alleged illicit payments to certain domestic and foreign officials. Occidental claims that the documents should not be disclosed primarily because they contain confidential commercial information protected from disclosure by FOIA exemption four, 5 U.S.C. § 552 (b)(4) (1982). Following administrative proceedings, which will later be described in detail, its claims were rejected as to many of the documents and this suit followed. The issues are now before the Court on the SEC's motion to dismiss or, alternatively, for summary judgment. The motion and opposition are both thoroughly documented with various in camera and public filings. On the Court's insistence the content of the administrative record was finally established and thereafter the Court heard full argument and reviewed all materials filed. The matter is now ripe for resolution of the motion.

 SEC published a report of its Occidental investigation and required the company to file more informative Form 8-K public reports concerning its conduct. These filings attracted two sweeping FOIA requests that came into focus in this case. Initially, in December, 1981, Mr. John W. Shaver Nava filed a FOIA access request seeking disclosure of documents and testimony in SEC files concerning the involvement of Occidental or its officials with "corrupt or unlawful activities abroad or the making of payments or bribes to officials of foreign governments." The SEC FOIA Officer determined that about 8,000 pages of material in the Commission's investigative file would be responsive. He then notified Occidental and invited it to substantiate its earlier request for confidential treatment of the material made at the outset of the investigation.

 While this FOIA request was being processed, the SEC received another FOIA request in November, 1985, from Mr. Steven Weinberg. His request was substantially broader than the Shaver Nava request but comprehended all of the papers Shaver Nava had previously requested.

 The SEC General Counsel issued decisions on the Shaver Nava materials in letter form on May 7, 1986 and August 11, 1986, withholding some documents from disclosure and ordering many other documents released. Suit in this Court to enjoin disclosure of any documents was instituted by Occidental on May 16, 1986, in Civil Action No. 86-1351. Subsequently, Shaver Nava settled his private controversy with Occidental and dropped his FOIA request, thus temporarily mooting the case. The SEC apparently realized it would still take it several years fully to process the entire Weinberg request. It therefore decided to make a partial response to him by releasing the Shaver Nava materials it had already processed. This decision reactivated the lawsuit, which now focuses on what constitutes a partial response to the Weinberg FOIA request.

 Before proceeding, the Court directed the SEC to consider some in camera declarations previously submitted by Occidental in No. 86-1351 which purported to contain new information bearing on confidentiality, arising from matters occurring after the SEC completed its processing of the Shaver Nava request. This resulted in a slight modification of the SEC's position, announced by General Counsel letter dated March 17, 1987. After the administrative record was established, this matter advanced to the present stage requiring the Court to review an SEC final decision represented by the three letters from the General Counsel dated May 7, 1986, August 11, 1986 and March 17, 1987.

 Proceedings before the SEC relating to the FOIA are governed by a specific regulation found at 17 C.F.R. § 200.83 (1986). The basic procedure contemplated may be readily summarized. When the SEC receives a FOIA request for disclosure of papers in its files which were turned over to it under a claim for confidential treatment, it advises the party which supplied the papers of the FOIA request. The FOIA Officer then asks for written substantiation of the claim for confidentiality. 17 C.F.R. § 200.83 (d)(1). Upon receiving such substantiation, the FOIA Officer, without explanation, rules and the party seeking confidential treatment is notified. If the ruling is adverse to confidentiality in any respect an appeal to the General Counsel is available. 17 C.F.R. § 200.83 (e)(1). This again is a written appeal. After receiving factual and legal advice from his staff the General Counsel, who may reverse any aspect of the FOIA Officer's determination, rules on the appeal. 17 C.F.R. § 200.83 (e)(2) & (3).

 These regulations do not adequately allow for problems a reviewing court will encounter in a reverse FOIA case. Moreover, in its practical applications this procedure presents insurmountable problems in heavily documented, complex cases where thousands of interrelated pages are involved. A document may have relevance both to other papers within the group of papers to be released and, where the SEC proceeds in stages, to the many thousands of other pages covered by the same FOIA request which have not yet been examined or processed. This was such a case and without particularized rulings identifying specific documents, review becomes meaningless.

 The SEC's FOIA regulation places upon a person claiming confidential treatment of commercial information the continuing fear that papers required to be filed in substantiation of such a claim will themselves be made public even before the merits of the underlying confidentiality claim itself have been adjudicated. In this instance, the requestor also sought access to any substantiations of confidentiality received in the reverse-FOIA agency proceedings. The FOIA regulation makes no provision for advance assurance of confidentiality. All that is allowed is a right for the opponent of disclosure to indicate that it believes a substantiation "should be afforded confidential treatment," 17 C.F.R. § 200.83 (d) (viii). In accordance with the regulation, the FOIA Officer processed Occidental's submission for immediate disclosure at the same time it was still entertaining Occidental's various submissions to substantiate confidentiality for the underlying documents. Thus, the more Occidental revealed the injury to it that it believed release from confidentiality would entail, the more it stood at immediate hazard of revealing to the FOIA requestor himself the significance of interrelated materials. It was forced by the regulation and SEC practice, over its protest, to draw a road map leading to the points of greatest damage to itself. This "Catch 22" dilemma was never satisfactorily resolved, the agency temporized, and bitter misunderstandings developed.

 Occidental declined to file a detailed written substantiation backed by factual affidavits. After two specific requests by the FOIA Officer for a written submission, Occidental filed a short, general substantiation letter. The FOIA Officer ordered disclosure of this and the other limited written submissions Occidental furnished. It was agreed, however, that a representative of both Occidental and the SEC FOIA Office would orally together review each page of the thousands of pages involved, to identify Occidental's particularized concerns. Regular meetings were held over many months, both before and after filing of Occidental's substantiation letter. The administrative record fails to disclose what in fact was said or done during this review of the documents.

 Occidental apparently understood that the FOIA Officer would eventually respond to Occidental's supplementary oral submissions and would give specific reasons for exempting or not exempting documents from disclosure. This, in turn, would focus issues for appeal. The FOIA Officer, however, ultimately gave no reasons in his two-page denial of confidentiality.

 This may have breached an oral agreement but was in accord with the regulation and illustrates a further defect in the Commission's procedures. When an appeal was taken to the General Counsel pursuant to 17 C.F.R. § 200.83 (e), there was nothing but a flat denial as to the hundreds of pages of papers ordered disclosed which Occidental claims contain confidential commercial information. Occidental had no information as to why it had not prevailed, although it had by its written and oral submissions made a positive showing that there were grounds for continued confidential treatment.

 Still wary of disclosure of its full reasons and after being denied the opportunity to make oral presentations to the General Counsel, Occidental declined to file a detailed substantiation with affidavits in support of its appeal. Rather, it filed a lengthy general memorandum. It then devised an elaborate system in which the various grounds for confidentiality discussed in the memorandum were correlated with colored tags affixed to the documents, which were not otherwise identified. It also provided six volumes of work sheets for the General Counsel's convenience listing each document or category of documents and the color-coded argument or arguments for confidentiality, and provided space for comments and conclusions. During the appeal Occidental stated its objection to the lack of specificity of the FOIA Officer's determination, which it correctly felt hindered its ability to take an appeal on a reasoned basis.

 The SEC's General Counsel then obtained full written factual and legal advice from his staff, none of which is part of the administrative record or otherwise revealed to Occidental or the Court. Thereafter, he gave his generalized rulings without examining the papers himself and ...


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