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SECURITY FINANCIAL LIFE INSURANCE COMPANY v. DEPT. OF TREASURY

United States District Court for the District of Columbia


April 12, 2005.

SECURITY FINANCIAL LIFE INSURANCE COMPANY, Plaintiff,
v.
DEPARTMENT OF TREASURY, Defendant.

The opinion of the court was delivered by: SUZANNE CONLON, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Security Financial Life Insurance Company requested documents relating to a line item on the 2000 and 2001 federal budgets from the Department of Treasury under the Freedom of Information Act, 5 U.S.C. § 552 ("FOIA"). As a result of the Department's failure to respond to its request, First Security sued the Department for declaratory and injunctive relief under FOIA.*fn1 After First Security initiated this action, the Department produced some documents and withheld others, claiming exemption from disclosure under FOIA. Security Financial moves for summary judgment with respect to a limited number of withheld documents. The Department moves for summary judgment with respect to all withheld documents.*fn2 BACKGROUND

Both parties filed statements of undisputed material facts in support of their summary judgment motions. The Department's statement of facts ("Facts") is supported by citations to the record as required by Local Rule 7.1(h). Security Financial's statement of facts is not. Accordingly, the court disregards Security Financial's statement of facts. See Local Rule 7.1(h). Moreover, Security Financial failed to respond to the Department's statement of facts. Local Rule 7.1(h) provides: "[i]n determining a motion for summary judgment, the court may assume that facts identified by the moving party in its statement of material facts are admitted, unless such a fact is controverted in the statement of genuine issues filed in opposition to the motion." The Department's statement of facts is deemed admitted. See Local Rule 7.1(h); Ramey v. Darkside Productions, Inc., 2004 U.S. Dist. LEXIS 10107, at *3 (D.D.C. May 17, 2004).

  I. Security Financial's FOIA Request

  On May 13, 2002, Security Financial sent the Department a FOIA request seeking agency records related to a $1.359 billion estimate for the line item in the FY 2000 and FY 2001 federal budgets for the proposal to limit pre-funding of welfare benefits of ten or more employer plans. Facts ¶ 1. Security Financial's FOIA request was assigned an internal tracking number and forwarded for processing to the office determined most likely to have responsive records, the Office of Tax Policy ("OTP"). Id. at ¶ 2. On June 19, 2002, the Department sent Security Financial a letter acknowledging receipt of its FOIA request. Id. at ¶ 3. The Department's June 19, 2002 letter explained that OTP was experiencing a backlog of FOIA requests and that Security Financial's request would be processed as soon as possible. Id. OTP interviewed Department employees to identify the possible locations of responsive documents. Id. at ¶ 4. Based on information from those interviews, OTP conducted manual searches of the office files of current and former employees in the Office of Tax Legislative Counsel ("TLC"), the Office of Benefits Tax Counsel ("BTC"), and the Office of Tax Analysis ("OTA") (which includes the Revenue Estimating Division). Id. OTP also conducted various keyword searches on individual employees' hard-drives and email files and BTC's CD-ROM files. Id. at ¶ 5. OTP's searches yielded 268 pages of agency records with responsive material, including 23 pages that originated either in the Office of Management and Budget or the Internal Revenue Service. Id. at ¶ 6. The Department reviewed the materials for responsiveness, privilege and segregability. Id.

  II. The Department's Response

  On January 16, 2004, the Department produced 108 pages of agency records. Id. at ¶ 7. Thirty-three pages were redacted to protect information the Department claimed was exempt from disclosure under FOIA. Id. The Department withheld an additional 149 pages of agency records claiming they fell under FOIA exemptions 3 and 5. Id.

  The Department withheld 55 agency records in whole or in part, claiming exemption from disclosure under the deliberative process privilege. Id. at ¶ 8. The Department produced a Vaughn index to Security Financial that lists the date, document type, author/recipient, number of pages, and a description of each document withheld.*fn3 Security Financial Motion, Ex. 1. The Department served a revised Vaughn index with its summary judgment motion. Department Motion, Ex. A. The revised index provides titles for each author and recipient of a document.*fn4 Id.

  The withheld documents fall into the following categories: revenue estimates; drafts/draft comments; emails; notes; and talking points. Id. Forty-four documents were withheld in their entirety under a claim of deliberative process privilege. Id. at ¶ 16. Of those 44 documents, 25 were also claimed exempt under the attorney-client privilege.*fn5 Id. Security Financial concedes some of the documents were properly withheld. Security Financial Motion at 3, n. 1.

  III. The Documents at Issue

  Security Financial only seeks a limited category of documents: those that contain the Department's calculations and assumptions underlying the budget line item entitled "Limit prefunding of welfare benefits for 10 or more employer plans" ("budget line item") for fiscal years 2000 and 2001. Security Financial Motion at 3, 11; Security Financial Opposition at 5, 6, 8. More specifically, Security Financial seeks production of Vaughn index entries A1-A6, A8-A10, A12, A13, A15-A19, A24, A28-A34, A36-A43, C5-C9, C11 ("the withheld documents") on the Vaughn index. The revised Vaughn index contains the following descriptions of the withheld documents:*fn6 Index No. Description

 

A1 This document contains notes of an internal meeting between OTP staff (including Louis Epstein-Associate Tax Legislative Counsel, OTP) and IRS staff (including James Holland, Mark Schwimmer, and Mike Roach) relating to TOLI, COLI, and VEBAs.
A2 This document contains handwritten notes outlining a meeting between Louis Epstein (Associate Tax Legislative Counsel, OTP) and Mike Pincus, a private sector attorney, about his suggestions for additional pension benefits.
 
A3 This document is an email from Sonia Conly (Financial Economist. Office of Tax Analysis ("OTA")) to Platt (Director of Revenue Estimates, OTA) copied to Amy Null (Attorney-Advisor, Office of Benefits Tax Counsel ("OTB") concerning a phone call Conly received from member of Congress relating to the development of OTP's revenue estimates for the Section 419A proposal for the FY 2001 budget.
A4 This draft document written by an unknown OTP staff person outlines possible revenue raisers or limitations of benefits under I.R.C. Section 419A(f)(6) for the FY 2000 budget.
 
A5 This document entitled "Revenue Estimates: Revenue Raising Options Preliminary" is an internal working paper written by an OTA staff member listing preliminary revenue estimates for a ten-year period from FY 2000 to FY 2009 for possible revenue raisers for the FY 2001 budget. Only one line item in this document is responsive to Plaintiff's FOIA request.
A6 This document consists of the following drafts of the description of the Section 419A(f)(6) proposal for the "General Explanations of the Administration's Revenue Proposals for FY 2000." Document was written by Null (Attorney-Advisor, BTC) to Mark Iwry (Benefits Tax Counsel, BTC).
 
A8 This document contains a draft description of the Section 419A(f)(6) proposal for the "General Explanations of the Administration's FY 2000 Revenue Proposals" and an analysis of the "Reasons for Change" section. It was written by Null (Attorney-Advisor).
A9 This document contains Q&As on the Section 419A(f)(6) proposal for the FY 2000 budget that was used in preparation for congressional testimony regarding the FY 2000 budget. It was written by Donald Lubick (Assistant Secretary of Tax Policy). A10 This draft document contains preliminary revenue estimates for the Section 419A(f)(6) proposal for the FY 2000 budget as well as handwritten and typewritten assumptions. Conly (Financial Economist, OTA) typed "Corrected" in the upper left corner of the document.
 
A12 This document consists of the following drafts of the one-paragraph description of the Section 419A(f)(6) proposal for the FY 2000 budget:
a) Draft 1:40 p.m. 1/12/99
b) January 14, 1999 draft
c) Undated draft; Last modified March 5, 1999
d) Draft 4:45 1/11/99
Only one paragraph in each draft is responsive to Plaintiff's FOIA request.
(Note: the final published version was produced). Document was written by unknown BTC staff member.
A13 This email discusses a proposed revision to language in the description of the Section 419A proposal and its possible effect on the revenue estimate. Null (Attorney-Advisor, BTC) wrote email to Iwry (Benefits Tax Counsel, BTC) and other BTC counsel, discussing and analyzes a potential conflict between the current Section 419A proposal and another proposal for the FY 2000 budget then under development by OTP staff.
 
A15 This email by Null (Attorney-Advisor) to Iwry (Benefits Tax Counsel), and other counsel, discusses proposed revisions to the description of the Section 419A proposal and analyzes two drafts (one by IRS staff and one by OTP staff) of the Section 419A language and the implications of those revisions.
A16 This draft document contains preliminary revenue estimates tables for the President's FY 2000 budget that span the 11 year period FY 1999 to FY 2009. Only the line item related to the Section 419A(f)(6) proposal is responsive to Plaintiff's FOIA request. The document was prepared in connection with providing advice and recommendations to Administration decision makers as to the contents of the President's FY 2000 budget.
 
A17 This working document intermingles assumptions from both FY 2000 and 2001 with preliminary estimates spanning the ten-year period from FY 2001 through FY 2010 that were used by Conly in preparing revenue estimates for the I.R.C. Section 419A(f)(6) proposal for the FY 2001 budget. The document was prepared for Conly's supervisor Joel Platt's (Director of Revenue Estimates, OTA) review and approval.
A18 This document compares the I.R.C. Section 419A(f)(6) proposal with the small business health plan proposal in the FY 2000 budget. The document was used in preparation for congressional testimony and was prepared by David Brazell (Financial Economist, OTA). A19 This email from Conly to Null entitled "Pre-funding of certain employee benefits" requests a comparison and analysis of the Administration's FY 2000 budget proposal and a legislative amendment to H.R. 984.
 
A24 This document prepared by Null for Talisman in preparation for congressional testimony on the FY 2000 budget contains a description of the I.R.C. Section 419A(f)(6) proposal as well as talking points for discussing the Administration's position.
A28 This document contains talking points concerning the Administration's I.R.C. Section 419A(f)(6) proposal for the President's FY 2000 budget and outlines two alternative legislative proposals. The document was created in preparation for testimony before the Senate Finance Committee.
 
A29 This working document prepared by OTA staff contains preliminary revenue estimates that span FY 2000 to FY 2009 for possible revenue offset options for the President's FY 2001 budget. Only the line item "Impose Limitations on Pre-funding of Certain Employee Benefits" is responsive to Plaintiff's FOIA request. The document was prepared in connection with providing advice and recommendations to Administration decision makers as to the contents of the President's FY 2001 budget.
A30 This document consists of two draft descriptions of the I.R.C. Section 419A(f)(6) proposal for the "General Explanations of the Administration's FY 2001 Revenue Proposals." One draft contains a handwritten comment in the margin by Conly. (Note: the final version of the description was produced).
 
A31 This email by Conly to Platt entitled "Section 419A(f)(6) and Section 419A(f)(5)" attaches a draft description of the Administration's FY 2001 budget proposal dated January 5, 2000 and a working document that contains assumptions and preliminary estimates for the FY 2000 and FY 2001 budgets. Only the first paragraph of the transmittal email is responsive to plaintiff's FOIA request.
A32 This document contains a draft description of revenue raisers for the FY 2001 budget. "AAN draft of 1/13" is typed in the upper right-hand corner of the first is responsive to Plaintiff's request. (Note: the final version of the Section 419A(f)(6) proposal was published in the "Federal Receipts" chapter of the "Analytical Perspective" volume of the Administration's FY 2001 budget. A copy was produced). Null prepared the document. A33 This document entitled "Revenue Estimates: FY 2001 Proposals Affecting Receipts" contains estimates over an 11 year period and handwritten comments. Only one line item is responsive to plaintiff's FOIA request. The document was prepared by OTA staff in connection with providing advice and recommendations to the Administration's decision makers as to the contents of the President's FY 2000 budget.
 
A34 This document contains a draft description of the Administration's I.R.C. Section 419A(f)(6) proposal and attaches Q&A in preparation for testimony before a congressional committee on the Administration's FY 2001 budget.
A36 This document prepared by Joel Platt to Mary Barth ("OMB") attaches draft preliminary revenue estimates that span the 11 year period FY 1999 to FY 2009 and contains OMB proposals for the President's FY 2000 budget. Only the line item relating to Section 419A(f)(6) is responsive to Plaintiff's FOIA request. This document was prepared in connection with providing advice and recommendations to the Administration's decision makers as to the contents of the President's FY 2000 budget.
 
A37 This document contains draft revenue estimates that span the 11 year period for the President's FY 2000 budget. The document contains handwritten revisions by Joseph Mikrut, the Tax Legislative Counsel. Only the line item showing the revenue estimates for the I.R.C. Section 419A(f)(6) proposal is responsive to plaintiff's FOIA request. The document was prepared in connection with providing advice and recommendations to the Administration's decision makers as to the contents of the President's FY 2000 budget.
A38 This document contains draft versions of "Table 303 Effect of Proposals on Receipts" which contains estimates that span the six-year period FY 1999-FY 2004. The document also contains draft OMB proposals. Only one line item in the document is responsive to plaintiff's FOIA request. The document was prepared in connection with providing advice and recommendations to the Administration's decision makers as to the contents of the President's FY 2000 budget and was exchanged between OMB and OTP staff during the development of the President's FY 2000 budget. (Note: the final published version of the table was produced). Document contains Mikrut's handwritten notes.
 
A39 This document prepared by Conly is entitled "Estimate of Denial of Deduction for Prefunding Severance and Whole Life Insurance Benefits Under 419(f) exception" contains calculations and assumptions for the FY 2000 budget and OMB projections for FY 2000 to FY 2009. The document was prepared in connection with providing advice and recommendations to the Administration's decision makers as to the President's FY 2000 budget. A40 This document contains draft revenue estimate tables that span the 11 year period FY 2000 to FY 2000 for the FY 2001 budget. Only the line item for the estimates of the Section 419A(f)(6) proposal is responsive to plaintiff's FOIA request. The document was prepared in connection with providing advice and recommendations to the Administration's decision makers as to the contents of the President's FY 2001 budget. Fax from Platt to Barth; margin notations by Mikrut.
A41 This draft document contains calculations and assumptions that span the period FY 2001 to 2010 for the Section 419A(f)(6) proposal for the FY 2001 budget. The document also contains forecasts of OMB and OTP assumptions and estimates for FY 2000 and FY 2001 for an alternative legislative proposal. This document was prepared in connection with providing advice and recommendations to the Administration's decision makers as to the President's FY 2001 budget. Document prepared by Conly.
 
A42 This email from Tim Hanford (Tax Counsel to Ways and Means Committee) to Brigen Winters (Ways and Means Committee staff person) is entitled "Springing Cash Value" and suggests clarifying language for the I.R.C. Section 419A report and contains handwritten comments by Epstein expressing her opinion and suggestions on the legislative proposal for I.R.C. Section 419A.
A43 This document consists of draft pages from the "Federal Receipts" chapter of the "Analytical Perspectives" volume of the Administration's FY 2000 budget. Joseph Mikrut's (Tax Legislative Counsel) handwritten comments appear on the only portions of this document that are responsive to plaintiff's FOIA request. The comments are dated January 20 and 21, 1999. OMB originated the document.
 
B1 This document contains data Sonia Conly received from James Holland (IRS) and Ed Sypher (IRS) in response to an inquiry from OTA for information to estimate the effect of a law change. The information was used to estimate the line item "Limit the Prefunding of Welfare Benefits for 10 or More Employer Plans" in the President's FY 2000 and FY 2001 budgets. The document contains calculations, assumptions and opinions by Conly.
C5 This draft document authored by Conly contains assumptions and preliminary revenue estimates for the period FY 2000 through FY 2009 for the I.R.C. Section 419A(f)(6) proposal in the FY 2000 budget that show the revenue impact of the Administration's I.R.C. Section 419A(f)(6) proposal. One copy of the document has handwritten margin notes as well as the notations "99/01" and "used." The document was prepared for Conly's supervisor's (Joel Platt) review and approval. C6 This document compares three revenue estimates spanning the 10-year period FY 2000 to FY 2009:
a) preliminary, unpublished revenue estimates and assumptions by the Office of Tax Analysis relating to the provision in "The Financial Freedom Act of 1999" (H.R. 2488) entitled "Impose Limitation on Prefunding of Certain Employee Benefits."
b) preliminary estimates from the Office of Tax Analysis for I.R.C. Section 419A(f)(6) for FY 2000 to FY 2009. (Note: The estimates for FY 2000-FY 2004 were published in the FY 2000 budget).
c) Joint Tax Committee revenue estimates from JCX-43-99 (for H.R. 2488). The document was prepared in connection with providing advice to Treasury and Administration decision makers on whether to support the proposed legislation.
C7 This document drafted by Null contains descriptions of various proposals for the Administration's FY 2001 budget. Only one paragraph in the document is responsive to plaintiff's FOIA request. (Note: a redacted copy of the Section 419A(f)(6) description and final published version were produced).
 
C8 This document contains notations and legal opinions by Epstein related to the welfare benefit fund plans sent to Epstein by Pincus, a private sector attorney. (Note: a redacted copy was produced).
C9 This document consists of Mikrut's notes and legal opinions on the published and a draft copy of JCX-99. The draft copy was faxed to Mikrut on June 10, 1999 from the Joint Tax Committee. (Note: redacted copies of the document were produced).
 
C11 This document contains Jonathan Talisman's (Deputy Assistant Secretary) comments on JCX-20-00. (Note: a redacted copy was produced).
Security Financial Motion, Ex. A; Department Motion, Ex. A.
  The Department claims each document is exempted from FOIA production in whole or in part under the deliberative process privilege embodied in FOIA Exemption 5. Facts ¶ 8. After each document description, the Vaughn index contains an explanation why the Department believes the document is exempted by the deliberative process privilege. Security Financial Motion, Ex. A.

  The Department submits a declaration of Gregory F. Jenner, the Acting Assistant Secretary of the Treasury (Tax Policy), in support of its motion. Jenner is in charge of the Office of Tax Policy for the Department. Jenner Decl. ¶ 1. Jenner's declaration attests that each withheld document contains predecisional and deliberative agency records that reveal preliminary estimates, opinions, recommendations, or mental impressions formulated during the development of the Administration's FY 2000 and FY 2001 federal budget. Jenner Decl. ¶ 12, 22 a-e. Jenner's declaration also attests that the withheld documents were created in connection with the deliberative process that produced the federal budgets for fiscal years 2000 and 2001. Id. at ¶ 12. Jenner attests none of the withheld documents represents a statement of agency policy or a final agency decision. Id. at ¶ 21.

  IV. The Budgetmaking Process

  The federal budget is generally released each year on the first Monday of February. Facts ¶ 11. Potential tax policy proposals to be included in the federal budget may be identified at any time during the preceding year. Id. The process of considering, refining, and deciding budget proposals is most intense during the several months before the budget's release. Id. The development of budget proposals is an iterative process. Id. at ¶ 12. Proposals are suggested, analyzed, and often revised depending on their impact on the overall budget. Id. The Assistant Secretary of the Department of Treasury or one of the Deputy Assistant Secretaries determines which proposal revisions are studied. Id. This process continues until a decision is made either to include or exclude the proposal in the budget. Jenner Decl. ¶ 15. The final decision to include a budget proposal ultimately is made by the President, although his decision-making authority may be delegated to others.*fn7 Id. The Department's role in the budgetmaking process is advisory to the Office of Budget and Management ("OMB"), which in turn, has an advisory role to the President on the federal budget. Jenner Second Decl. ¶ 3.*fn8 In connection with the study of a particular budget proposal, OTP might create written analyses and materials, including but not limited to revenue estimates, explanations, descriptions, legislative histories for budget proposals, and talking points. Facts ¶ 13. Only final revenue estimates, Treasury Blue Book write-ups, and budget proposal explanations are ever published. Id. OTP generally does not prepare statutory language for budget proposals. Jenner Decl. ¶ 17. However if a member of Congress or congressional committee decides to include a budget proposal in legislation, OTP is typically involved in several ways. Id. The Assistant Secretary, the Deputy Assistant Secretaries, and/or OTP staff members may be consulted as the legislation is developed and drafted. Id. OTP staff members may generate revenue estimates, analyze revenue estimates, and compare and analyze proposals. Id. If a budget proposal progresses beyond introduction in Congress, the proposal may be revised in congressional committee and on the floor of both houses of Congress. Facts ¶ 14. OTP's involvement at this stage of the process might include preparing analyses and other written materials similar to those created during the Department's study of a budget proposal. Id. The process continues until a determination is made to include the proposal in the budget. Id.

  If Congress ultimately passes the budget proposal, OTP might be asked to analyze it for use during the President's consideration of the legislation. Id. at ¶ 15. If the President signs the legislation into law, OTP might be asked to prepare written materials on the new law for public release or for use in congressional testimony or to facilitate the development of regulations pursuant to the new law. Id. The long-standing policy of the President and OMB is to keep confidential such written materials exchanged within agencies and between agencies and OMB and the President in connection with the budgetmaking process. Id. at ¶ 13.

  DISCUSSION

  I. Standard of Review

  Summary judgment is appropriate when the moving papers and affidavits show there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Kaempe v. Myers, 367 F.3d 958, 966 (D.C. Cir. 2004). A party seeking summary judgment bears the initial responsibility of informing the court of the basis for its motion, and identifying evidence that demonstrates the absence of a genuine issue of material fact. The non-moving party must then come forward with evidence and designate specific facts that establish there is a genuine triable issue. Kingman Park Civic Ass'n. v. Williams, 348 F.3d 1033, 1041 (D.C. Cir. 2003). A genuine issue of material fact exists when the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Waterhouse v. District of Columbia, 298 F.3d 989, 992 (D.C. Cir. 2002).

  Security Financial moved for summary judgment with respect to the withheld documents only. Its motion makes clear that it is not challenging the Department's asserted exemptions for any of the other documents on the Vaughn Index ("the unchallenged documents"). The Department moved for summary judgment with respect to all documents on its Vaughn Index. In its opposition, Security Financial makes clear that it is only seeking a limited category of documents: those that reflect the basis for the budget line item. Opposition at 5, 6, 8. Because the same documents are at issue in both motions, the court addresses the motions together. II. Sufficiency of the Department's Search for Documents

  The Department contends it conducted a reasonable search for documents responsive to Security Financial's FOIA request. Security Financial fails to respond to this argument and, thus, concedes the reasonableness of the Department's search. See Local Rule 7.1 (b); Buggs v. Powell, 293 F. Supp. 2d 135, 141 (D.D.C. 2003). In any event, the Department has established that it conducted a reasonable search for documents in response to Financial Security's FOIA request. In deciding whether an agency's document search is adequate, the issue is not whether other responsive records might possibly exist, but whether the search was adequate, judged by a reasonableness standard. Wilbur v. Central Intelligence Agency, 273 F. Supp. 2d 119, 124 (D.D.C. 2003). An agency may rely on affidavits to demonstrate the reasonableness of its search. Ferranti v. Bureau of Alcohol, Tobacco & Firearms, 177 F.Supp. 2d 41, 45 (D.D.C. 2001).

  As set forth in Jenner's declaration, the Department interviewed employees, manually searched through office files of TLC, BTC, and OTA current and former employees, and electronically searched for documents using key words. Facts ¶ 8. The undisputed evidence establishes that the Department's search was reasonable.

  III. Sufficiency of Vaughn Index

  Security Financial argues that the Department's Vaughn index lacks sufficient detail to support the claimed exemptions. Security Financial does not identify any particular entries it believes are insufficient. Rather, it argues the index is conclusory and contains cookie-cutter assertions of the deliberative process privilege. The Department counters that the index provides detailed descriptions of each document, and to the extent there is repetition, the repetition is logical because the same harm would stem from disclosure of the withheld documents. A Vaughn index must adequately describe each withheld document, state which exemption the agency claims for each withheld document, and explain the exemption's relevance. Johnson v. Executive Office for United States Attorneys, 310 F.3d 771, 774 (D.C. Cir. 2002). A Vaughn index must be sufficiently detailed so the court can review the applicability of the claimed FOIA exemptions on a document by document basis. Judicial Watch, Inc. v. United States Postal Service, 297 F.Supp.2d 252, 270 (D.D.C. 2004). When an agency invokes the deliberative process privilege to withhold a document, the Vaughn index must correlate facts in or about each document with the elements of the privilege (predecisional and deliberative). Id. at 260. An agency may submit other materials to supplement its Vaughn Index, such as affidavits, that give the court enough information to determine whether the claimed exemptions are properly applied. Id. at 257.

  The court must determine whether the Department's Vaughn index and Jenner's declarations provide the court enough information to determine whether the withheld documents are covered by the claimed FOIA exemptions. The Department asserts the deliberative process privilege for each withheld document and the attorney-client privilege for some of the withheld documents.

  IV. FOIA Exemption 5 — Deliberative Process Privilege

  The clear purpose of FOIA is to assure that the public has access to all government documents, subject to only nine narrowly interpreted limitations. Coastal States Gas Corp. v. Dept. of Energy, 617 F.2d 854, 862 (D.C. Cir. 1980). Under 5 U.S.C. § 552(b)(5) ("Exemption 5"), an agency may withhold "inter-agency or intra-agency memorandums or letters which would not be available by law to a party . . . in litigation with the agency." Exemption 5 encompasses the deliberative process privilege. Coastal States, 617 F.2d at 862. The deliberative process privilege protects confidential intra-agency advisory opinions when disclosure would be injurious to the consultative functions of government. Taxation with Representation Fund v. Internal Revenue Service, 646 F.2d 666, 677 (D.C. Cir. 1981). The deliberative process privilege has a number of purposes: it serves to assure that subordinates within an agency will be free to provide the decision-maker with their uninhibited opinions and recommendations without fear of later being subject to public ridicule or criticism; to protect against premature disclosure of proposed policies before they have been finally formulated or adopted; and to protect against confusing the issues and misleading the public by dissemination of documents suggesting reasons and rationales for a course of action that were not in fact ultimate reasons for the agency's actions. Coastal States, 617 F.2d at 866, citing Jordan v. U.S. Dep't of Justice, 591 F.2d 753, 772-774 (D.C. Cir. 1978).

  Exemption 5 does not apply to final agency actions that constitute statements of policy or final opinions that have the force of law, or that explain actions an agency has already taken. Taxation with Representation, 646 F.2d at 677. Nor does Exemption 5 protect communications that implement an established agency policy. Id. Documents that are covered by the privilege are those that would inaccurately reflect or prematurely disclose the agency views, suggesting as agency position that which is only a personal position. Coastal States, 617 F.2d at 866. For the deliberative process privilege to apply, a document must be both predecisional and deliberative. Id.

  A. Predecisional

  A document is predecisional if it was generated before the adoption of an agency policy. Coastal States, 617 F.2d at 866. Documents that are prepared to assist a decision-maker in arriving at a final decision are predecisional. Quarles v. Dep't of Navy, 893 F.2d 390, 392 (D.C. Cir. 1990). Security Financial does not dispute that the withheld documents were generated before the President approved the federal budgets. Indeed, the Vaughn index and Jenner declaration establish that the withheld documents pre-date the approved final budgets. Even where the documents are undated, the Vaughn index explains that they were predecisional. See, e.g., Vaughn index A1, A2, A5. The Department has met its burden of establishing that each withheld document is predecisional.

  Security Financial argues the documents lost their predecisional status because the recited agency positions were adopted formally or informally when the President approved the budget line item in the 2000 and 2001 budgets. The Department responds the documents did not lose their predecisional status because there is no evidence the President adopted as opposed to merely used the withheld documents in the federal budgetmaking process. Opposition at 8. Even if a document is predecisional at the time it is prepared, it can lose that status if it is adopted, formally or informally, as the agency position on an issue or is used by the agency in its dealings with the public. Coastal States, 617 F.2d at 866.

  1. Burden of Proof

  The parties dispute who carries the burden of showing that the withheld documents were not formally or informally adopted in the federal budget. Security Financial relies on United States v. Philip Morris USA, 218 F.R.D. 312, 317 (D.D.C. 2003) to argue that the Department carries the burden. The Department relies on Trans Union LLC v. Federal Trade Comm'n, 141 F.Supp. 2d 62, 20 (D.D.C. 2001), and Renegotiation Board v. Grumman Aircraft, 421 U.S. 168, 95 S.Ct. 1491 (1975), to argue that it does not carry the burden.

  In Renegotiation Board, plaintiff sought regional board reports and recommendations suggesting how the Renegotiation Board should resolve its cases. In each case, the Board reviewed the recommendation of the regional board before it entered a final decision. 421 U.S. at 185-86, 95 S.Ct. at 1500-01. The Court held the regional board reports were covered by Exemption 5 even when the Board agreed with the final conclusion of a regional board report. Because there was no evidence "to support the conclusion that the reasoning in the reports [was] adopted by the Board as its reasoning, even when it agree[d] with the conclusion of a report, [the Court] conclude[d] that the reports [were] not final opinions and [fell] within Exemption 5." 421 U.S. at 184-85; 95 S. Ct. at 1500.

  In Trans Union, plaintiff sought copies of memoranda containing recommendations from subordinate legal advisors to the FTC Commissioner regarding FTC responses to a legislative act. 141 F. Supp. 2d at 70. Plaintiff argued the documents should be disclosed even if they were predecisional because the agency failed to demonstrate they were not adopted in the final legislative rule. Id. Plaintiff's argument was rejected. Citing Renegotiation Board, the court held where it is unclear whether a recommendation provided the basis for a regulation, the recommendation is exempt from disclosure. Id. at 70-1.

  Security Financial relies on Philip Morris, 218 F.R.D. at 317, to support its argument that the Department carries the burden. Although Philip Morris stated that the government has the burden of establishing that a privileged document has not been adopted formally or informally, the court did not require the government to meet that burden. Id. at 318-9. As set forth in more detail below, the court rejected the special master's report and recommendation insofar as it required the government to show that certain OMB documents were not informally adopted as the working law of the government. Id. at 321-2. Indeed, the court held "the Government is correct that it is not required to demonstrate as to each challenged document that it was not `used' by a decision maker. . . . Mere `use' of predecisional, advisory materials does not amount to adoption of those materials." Id. at 318, citing, Renegotiation Board, 421 U.S. at 189, 95 S. Ct. 1491. Philip Morris does not support Security Financial's argument.

  Accordingly, consistent with Renegotiation Board and Trans Union, the Department does not carry the burden of proving that each withheld document was not adopted formally or informally by the President. Security Financial argues the withheld documents were either formally or informally adopted when the government approved the final budget line item in the 2000 and 2001 federal budgets. The Department counters that it does not know whether the President adopted the opinions and recommendations embodied in the withheld documents.

  2. Formal/Informal Adoption

  There is no evidence the withheld documents were expressly adopted as part of the 2000 and 2001 federal budgets. See, e.g., American Postal Workers Union v. Office of Special Counsel, 1986 U.S. Dist. LEXIS 31018, at **9-12 (D.D.C. June 24, 1986) (summary judgment granted for government where decision-maker did not expressly incorporate by reference the recommendations into his final decision). Security Financial argues the withheld documents were informally adopted and became the working law of the Department. Reply at 5.

  Cases that have addressed whether an agency informally adopted a predecisional document generally have focused on whether the documents are used by an agency as secret law or working law. See, e.g., Tax Analysts v. IRS, 294 F.3d 71, 81 (D.C. Cir. 2002); Taxation with Representation Fund v. IRS, 646 F.2d 666, 678 (D.C. Cir. 1981); Coastal States, 617 F.2d at 867-8. An agency will not be permitted to develop a body of secret law, used in the discharge of its regulatory duties and in its dealings with the public, but hidden behind a veil of privilege because it is not designated as "formal," "binding," or "final." Coastal States, 617 F.2d at 867. Documents that serve as agency working law are defined as interpretations of established policy on which the agency relies in discharging its regulatory responsibilities. Tax Analysts, 294 F.3d at 81. Where agency personnel rely on materials as established policy in discharging regulatory responsibilities, withholding those materials would serve no legitimate government policy interest. Coastal Services, 617 F.2d at 869.

  Courts consider a variety of factors to determine whether a document constitutes the working law of an agency. The most important factor is whether the agency staff itself treats the document as precedential guidance. Taxation with Representation, 646 F.2d at 683. Another factor the court must consider is the nature of the decision-making authority vested in the office or person issuing the disputed document. Id. at 679. If the person or body issuing the document has final authority over the decision, it is more likely that the document represents a final action of the agency, and must therefore be disclosed as agency working law. Id. at 680. A final factor for the court to consider is whether a challenged document is sent from a subordinate to a superior or vice versa. Philip Morris, 218 F.R.D. at 320.

  Security Financial argues the withheld documents are agency working law because they contain the assumptions and calculations underlying the budget line item. In making this argument, Security Financial relies almost exclusively on American Society of Pension Actuaries v. IRS, 746 F. Supp. 188 (D.D.C. 1990). In American Society, plaintiff brought a FOIA claim to uncover the reasoning behind a revenue estimate contained in the President's proposed budget for fiscal year 1990. Id. at 189. The court entered judgment for plaintiff with respect to a limited number of documents that contained the assumptions and calculations that yielded the budget line item at issue. Id. at 191. Relying on Coastal States, the court determined because the documents "contain the analytic backup for the government estimate, they `embody the agency's effective law and policy' and therefore are not protected by Exemption 5." Id. The court acknowledged that simply because an intra-agency deliberative memorandum reaches the same conclusion as the ultimate decision-maker provides no guarantee that the memorandum represents the views actually adopted by the government. Id. Nevertheless, because the government stated the budget estimate with numerical specificity, the court held there was a minimal risk of misrepresenting the reasoning actually motivating the final decision. Id. at 192.

  The Department urges the court to reject American Society and to follow Philip Morris, 218 F.R.D. at 321. In Philip Morris, the court reviewed a report and recommendation from the special master that ordered the government to produce OMB documents consisting of emails and attachments relating to the Administration's plan to reduce teen smoking. Id. at 317, n. 12. The court rejected the special master's informal adoption analysis under the working law concept because OMB functioned in an advisory role to the President. The court held the OMB documents did not fall within the working law analysis because OMB did not use the documents to carry out its administrative functions. Rather, OMB is a policy office and its main role is to advise and assist the President in his supervision and oversight of the Executive Branch with respect to budget and management issues. Id. at 321. The court acknowledged that the existing cases involving informal adoption all turned on the working law analysis.*fn9 Id. Philip Morris crafted a new analysis for documents that did not fit the working law analysis: where the existing analysis for informal adoption is not applicable, the [court] should focus only on whether the documents [at issue] meet the two core requirements of the deliberative process privilege, that is whether they are predecisional and deliberative. This approach is consistent with the emphasis the courts have repeatedly placed on the `function and significance' of disputed documents within the context of a particular agency's decision making process.

 Id. at 322, citing, Taxation with Representation, 646 F.2d at 678.

  Similarly, as set forth in Jenner's declarations, the Department functions in an advisory role to the President with respect to federal budget decisions. Jenner Decl. ¶¶ 13-20; Jenner Second Decl. ¶¶ 1, 3, 5. Jenner's declarations describe the function and significance of the withheld documents in the context of the budgetmaking process. Like the OMB documents at issue in Philip Morris, the withheld documents were generated in the process of advising the President and his staff, including OMB, on budget issues including the budget line item, Jenner's declarations establish that the Department played an advisory role similar to OMB in the budgetmaking process. Jenner Second Decl. ¶ 3; Jenner Decl. ¶¶ 13-19. The court finds the reasoning in Philip Morris persuasive under these circumstances. The working law analysis is not meaningful as applied to the withheld documents. Instead, the court must focus on whether the withheld documents are predecisional and deliberative. As set forth above, the Department has satisfied its burden of establishing that the withheld documents are predecisional. The court must next consider whether they are deliberative.

  B. Deliberative

  A document is deliberative if it reflects the "give-and-take of the consultative process." Coastal States, 617 F.2d at 866. Material that is factual is not protected by the deliberative process privilege. Judicial Watch, Inc. v. United States Postal Service, 297 F.Supp.2d 252, 259 (D.D.C. 2004). Deliberative documents are those reflecting advisory opinions, recommendations and deliberations comprising part of a process by which governmental decisions and policies are formulated. Id. Recommendations, draft documents, proposals, suggestions, and other subjective documents that reflect the personal opinions of the writer rather than the policy of the agency are deliberative. Coastal States, 617 F.2d at 866. Advisory opinions prepared for the President are deliberative to the extent they contain opinions and recommendations. Id., citing, Environmental Protection Agency v. Mink, 410 U.S. 73, 93 S. Ct. 827 (1973).

  As set forth in the Jenner declaration, the withheld documents fall into five categories: revenue estimates (Vaughn Index Nos. A5, A10, A16-A17, A29, A31, A33, A36-A41, and C5-C6), drafts/draft comments (Vaughn Index Nos. A4, A6, A8, A12, A30-A34, A43, A45, and C7-C11), emails (Vaughn Index Nos. A3, A13, A15, A19, A31, A42), notes (Vaughn Index Nos. A1-A2, B1), and Q&As/talking points (Vaughn Index Nos. A9, A18, A24, A28, and B1).

  1. Revenue Estimates

  The revised Vaughn index provides detailed descriptions of each of these documents, setting forth the dates, authors, recipients, and a description of the content of each document. Jenner's declaration further describes these documents as "preliminary revenue estimates with assumptions, draft revenue estimate tables, possible revenue raising options with preliminary estimates, and underlying calculations, assumptions, and OMB's economic assumptions." Jenner Declar. ¶ 22(a). Jenner attests these records are drafts, some of which were sent to Department supervisors for approvals and were exchanged with OMB as part of the budget process. Id. This undisputed evidence establishes that the documents are deliberative. See Bureau of Nat'l Affairs v. United States Dep't of Justice, 742 F.2d 1484, 1496 (D.C. Cir. 1985) (EPA budget recommendations to President were predecisional and deliberative); Coastal States, 617 F.2d at 866. 2. Drafts/Draft Comments

  The revised Vaughn index provides detailed descriptions for each of these documents, setting forth the authors, recipients, and a description of each document. Jenner's declaration further describes these documents as "draft explanations of tax proposals and draft legislative histories as well as comments and edits thereto. These records were created by . . . attorneys. . . ." Jenner Decl. ¶ 22(b). Jenner attests that the draft documents were prepared in the course of the budgetmaking process and do not reflect final agency action or opinion. Id. The Department's Vaughn index and Jenner's declaration establish that the drafts and comments are deliberative. See Hamilton Sec. Group. Inc. v. Dep't of Housing & Urban Dev., 106 F.Supp.2d 23, 32 (D.D.C. 2000) (draft audit report that was not approved as final agency position was deliberative).

  3. Emails

  Again, the Vaughn index provides dates, names, and descriptions of the content of each email. Moreover, Jenner's declaration explains that the emails reflect "Department staff's discussions, opinions, and mental impressions about alternatives under consideration in developing the Administration's I.R.C. Section 419A(f)(6) proposal." Jenner Decl. ¶ 22(c). The Vaughn Index and Jenner declaration establish that the emails contain the Department staff members' personal opinions and impressions about the proposed legislation rather than the agency's final position on the proposed legislation. Based on this undisputed evidence, the emails are deliberative. See Trans Union, 141 F. Supp. 2d at 70 (email containing author's views of proposed legislation was deliberative). 4. Notes

  The revised Vaughn Index identifies the author and describes the contents of the notes. Jenner's declaration attests that the documents in this category are the "personal notes either of meetings with other federal employees related to alternative proposals to limit the pre-funding of welfare benefit plans or of mental impressions about the pros and cons of alternative legislative proposals." Jenner Decl. ¶ 22(d). The Department satisfied its burden of establishing that the personal notes are deliberative. See, e.g., Judicial Watch v. United States Dep't of Justice, 102 F. Supp.2d 6, 13-14 (D.D.C. 2000) (attorney general's notes were both predecisional and deliberative).

  5. Q & As/Talking Points

  The revised Vaughn Index identifies the author, and provides a description of the contents of each document in this category. Moreover, Jenner's declaration describes these documents as "Q&As and talking points prepared by TLC, OTA, and BTC staff that explain and compare alternative tax proposals for the FY 2000 and FY 2001 Budgets. Such records were used in preparing Department officials for testimony before congressional committees." Jenner Decl. ¶ 22 (e). Similar documents have been found to be deliberative. See, e.g., Hunt v. United States Marine Corp., 935 F. Supp. 46, 52 (D.D.C. 1996) (point papers used to assist decision-makers in making their final decision were deliberative). The undisputed evidence establishes that these documents are deliberative because they were generated for the purpose of comparing alternative tax proposals in the course of considering tax legislation.

  C. Substantial Need

  Security Financial argues the deliberative process privilege is qualified and it may overcome the privilege by showing a substantial need for the withheld documents. The Department argues the privilege is not qualified in FOIA cases. The Department is correct. See United States Dep't of Justice v. Julian, 486 U.S. 1, 12-14, 108 S. Ct. 1606, 1613-14 (1988); Durns v. Bureau of Prisons, 804 F.2d 701, 703-04 (D.C. Cir. 1986). Accordingly, Security Financial's alleged need for the documents cannot overcome the deliberative process privilege.

  D. Conclusion

  Security Financial provides no basis for the court to discredit the Department's Vaughn index and Jenner's declarations. The 31 page index and declarations are sufficiently detailed to allow the court to determine that the withheld documents are covered by the deliberative process privilege embodied in Exemption 5. Moreover, the Department has satisfied its burden of showing that all segregable information has been produced. Jenner Decl. ¶ 26. Accordingly, the Department's summary judgment motion must be granted and Security Financial's motion must be denied.

  V: Exemption 5: Attorney-Client Privilege

  The Department withheld numerous documents under the attorney-client privilege in addition to the deliberative process privilege. See Vaughn Index Nos. A1-A2, A4, A6-A9, A12-A13, A15, A21-A28, A30-A32, A34-A35, A42-A43. Security Financial argues the Department has not satisfied its burden of establishing these documents are covered by the attorney-client privilege. Exemption 5 protects from disclosure confidential communications between an attorney and his client. Coastal States, 617 F.2d at 862.

  The Department's revised Vaughn index lists the author and recipient, and provides a description of the content of each challenged document. See Department Motion, Ex. A. The revised Vaughn index identifies each of the challenged documents as authored by an attorney and containing attorney analysis and/or discussion relating to the matters set forth in the documents, with a few exceptions. The Department does not identify attorney authors or attorney recipients for document numbers A4, A9, A12, A21-A22, A23, A25, A30-A31 and A34-A35. However, the index describes these documents as containing attorney analysis and/or opinions. Moreover, Jenner's declaration attests that the challenged documents contain the "opinions, recommendations, and analyses of Department attorneys. . . ." Jenner Decl. ¶ 23. Considering the revised Vaughn index, as supplemented by Jenner's declaration, the Department has satisfied its burden of establishing that the challenged documents contain information protected in whole or in part by the attorney-client privilege, and that it has produced all segregable information. Jenner Decl. ¶¶ 9, 10, 26.

  VI: Exemption 3

  The Department claims document B1 contains the identity of a taxpayer. The Department claims the taxpayer's identity is exempt from disclosure under Exemption 3.5 U.S.C. § 552(b)(3). Security Financial agrees, but argues the document should be produced with the name redacted. As set forth above, the Department has satisfied its burden of showing document B1 is covered by the deliberative process privilege. Accordingly, the Department need not produce a redacted copy of document B1.

  CONCLUSION

  There are no disputed factual issues. The Department has established it is entitled to judgment as a matter of law. Accordingly, the Department's summary judgment motion must be granted and Security Financial's motion must be denied.


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