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Sandgrund v. U.S. Securities and Exchange Commission

August 23, 2002

AMY F. SANDGRUND, PLAINTIFF,
v.
U.S. SECURITIES AND EXCHANGE COMMISSION, DEFENDANT.



The opinion of the court was delivered by: John M. Facciola, United States Magistrate Judge

MEMORANDUM OPINION

This matter was referred to me by Judge Roberts. I herein resolve plaintiff's Motion for a Supplemental Vaughn Index [#10]. For the reasons stated below, I find that defendant's Vaughn index adequately describes some, but not all, of the nature of the documents withheld. Therefore, plaintiff's motion will be denied in part and granted in part.

BACKGROUND

Amy Sandgrund, ("Sandgrund" or "Plaintiff") brings this suit under the Freedom of Information Act ("FOIA"). *fn1 On November 2, 2000, Sandgrund submitted a request for documents held by the United States Securities and Exchange Commission ("Commission" or "Defendant"). On November 24, 2000, defendant denied plaintiff's request, claiming that the documents responsive to her request were exempt under exemptions 7(A) and 17 C.F.R.200.80(b)(7)(i)(A) as "records or information compiled for law enforcement purposes," the release of which "could reasonably be expected to interfere with enforcement proceedings." 5 U.S.C.A. 552(b)(7)(A). The Commission asserted other FOIA exemptions. *fn2

On February 28, 2001, plaintiff again sought the documents listed in her original request, and was rebuffed by defendant on the same grounds. On March 20, 2001, plaintiff appealed and on April 9, 2001, defendant denied plaintiff's appeal claiming that the application of exemption 7(A) was still appropriate because disclosure could reasonably be expected to interfere with its ongoing enforcement proceedings. On June 27, 2001, plaintiff brought this action seeking to enjoin defendant from withholding the requested documents.

The documents in question were originally gathered in connection with an investigation entitled In the Matter of Health Professionals, Inc., File No. HO-2641 ("HPI"), *fn3 where the Commission suspected unusual trading of the HPI stock. Defendant claims that its investigations quickly led to D.H. Blair ("Blair") and others as being responsible for virtually all the trading of HPI. Defendant's Motion for Summary Judgment ("Mot. Sum. J.") at 3. During the HPI investigations, the Commission developed evidence implicating Blair and others in possible securities law violations. In particular, the evidence indicated that Blair may have been complicit with HPI in committing these violations. Consequently, the Commission opened a separate investigation against Blair.

In the present motion, plaintiff seeks a supplemental Vaughn *fn4 index of documents responsive to its FOIA request. *fn5 Plaintiff claims that defendant submitted affidavits *fn6 describing the withheld documents in extremely broad, categorical terms, *fn7 thereby hampering her ability to substantively evaluate the claimed FOIA exemption. Consequently, according to plaintiff, defendant should be required to further identify the documents that corresponds to Categories A, B, C, and F *fn8 of defendant's Vaughn index. In addition, plaintiff seeks a more detailed statement justifying each of defendant's refusals to release the requested records.

ANALYSIS

Applicable Standards

The purpose of the Vaughn index is to identify the documents in dispute and to set forth the government's explanation of why it is withholding each particular document. The index can be useful to the plaintiff and to the court, as it precludes the need for in camera inspection of the documents. But, in order to advance the court's review process, the index must be detailed enough to permit "meaningful review" by the court. Students Against Genocide (SAGE) v. Department of State, 50 F.Supp.2d 20, 26 (D.D.C. 1999)(citing King v. Dept. of Justice, 830 F.2d 210, 217 (D.C. Cir. 1987)); See also Greenberg v. U.S. Dept. of Treasury, 10 F.Supp.2d 3, 14 (D.D.C. 1998).

In assessing the adequacy of a Vaughn Index, it is the function served, rather than the form, that is crucial. Ferranti v. Bureau of Alcohol, Tobacco and Firearms, 177 F.Supp.2d 41, 45 (D.D.C. 2001); See also Gallant v. NLRB, 26 F.3d 168, 173 (D.C. Cir. 1994)("the materials provided by the agency may take any form so long as they give the reviewing court a reasonable basis to evaluate the claim of privilege"). An agency may satisfy its Vaughn requirements by taking "a generic approach, grouping documents into relevant categories that are sufficiently distinct to allow a court to grasp 'how each category of . . . documents, if disclosed, would interfere with the investigation'." Bevis v. Department of State, 801 F.2d 1386, 1389 (D.C. Cir. 1986).

Although, agencies may rely on the declarations of its officials creating its Vaughn index, "the declarations must be clear, specific and adequately detailed; they must describe the withheld information and the reason for nondisclosure in a factual and non-conclusory manner." Ferranti v. Bureau of Alcohol, Tobacco and Firearms, 177 F.Supp.2d at 45.

In Bevis, the court explained that "the hallmark of an acceptable . . . category is [that which] allows the court to trace a rational link between the nature of the document and the alleged likely interference." 801 F.2d at 1389. Examples of categories that suffice are those identified as "the identities of possible witnesses and informants," "report on the location and viability of potential evidence," and "polygraph reports." Id. at 1390. On the other hand, examples of categories that do not suffice are those identified merely as "teletypes," "airtels," or "letters," since they provide no basis for judicial assessment of the claimed potential interference. Id. Essentially, the agency's index must not be drawn in conclusory terms that would frustrate or impede the court's ability to conduct a de novo review. Carter v. United States Dep't of Commerce, 830 F.2d 388, 393 (D.C. Cir. 1987). See also Allen v. CIA, 636 F.2d 1287, 1298 (D.C. Cir. 1980). Ultimately, the description and explanation the agency offers should reveal as much detail as possible as to the nature of the document, without actually disclosing information that deserves protection. King v. Dept. of Justice, 830 F.2d at 221-223.

Here, the affidavits submitted by the Commission proceeded on a categorical basis. As noted earlier, the Commission grouped the potentially responsive documents as follows: A) Documents Produced by Third Parties, B) Commission Correspondence with Third Parties, C) Testimony Transcripts, D) Attorney Notes and Trial Preparation Materials, E) Memoranda by Commission Staff, and F) Correspondence between the Commission and Self-Regulatory Organizations ("SROs"). Amparo Decl. at 4-7.

I will review the sufficiency of the disputed categories (A, B, C and F) separately to determine whether they are detailed enough to permit "meaningful review," allowing this court to "trace a rational link between the nature of the document and the alleged likely interference." Bevis v. Department of State, 801 F.2d at 1390.

Category "A" Documents Produced By Third Parties

Category A is subdivided into 28 different types of documents that were ...


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