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Mark Cuban v. Securities and Exchange Commission

July 1, 2011

MARK CUBAN, PLAINTIFF,
v.
SECURITIES AND EXCHANGE COMMISSION, DEFENDANT.



The opinion of the court was delivered by: Reggie B. Walton United States District Judge

MEMORANDUM OPINION

This matter is currently before the Court on the defendant's Motion for Reconsideration pursuant to Federal Rule of Civil Procedure 54. See Defendant's Motion for Reconsideration ("Def.'s Mot. Recons."); Plaintiff's Memorandum in Opposition to Defendant's Motion for Reconsideration. ("Pl.'s Opp'n Mot. Recons.").*fn1 The defendant seeks reconsideration of the Court's September 22, 2010 decision holding that it failed to offer sufficient evidence to substantiate the adequacy of its search for records responsive to categories 7, 11, 12, and 13 of the plaintiff's Request Letter I or the propriety of its withholding of certain documents under Freedom of Information Act ("FOIA") Exemptions 2, 5, 6, 7(C), and 7(A).*fn2 Def.'s Mot. Recons. at 1-2; see September 22, 2010 Memorandum Opinion ("Sept. 22 Mem. Op."). For the reasons set forth below, the Court will grant in part and deny in part the defendant's Motion for Reconsideration.

I. BACKGROUND

The facts in this case were discussed in detail in the Court's September 22, 2010 Memorandum Opinion, and thus will only be reiterated here to the extent necessary to resolve the pending motion. See Sept. 22 Mem. Op. at 3-8. In brief, the plaintiff, Mark Cuban, brought this action against the defendant, the Securities and Exchange Commission ("SEC"), pursuant to the FOIA, 5 U.S.C. § 552 (2006), and the Privacy Act, 5 U.S.C. § 552(a) (2006), challenging the adequacy of the defendant's searches for responsive records and seeking to compel the release of records the defendant had refused to disclose. Complaint ("Compl.") ¶ 1. On September 22, 2010, the Court granted in part and denied in part both parties' cross-motions for partial summary judgment and denied without prejudice the motion to bifurcate and stay the proceedings in this case. Sept. 22 Mem. Op. at 48-49. The Court held that the SEC did not sufficiently substantiate either (1) the adequacy of its search for records responsive to categories 7, 11, 12, and 13 of Request Letter I, or (2) its withholding of certain documents under FOIA Exemptions 2, 5, 6, 7(C), and 7(A).*fn3 Id. In reaching these conclusions, the Court found that the reasons provided by the SEC for withholding certain documents were "minimally supported," "extremely limited," "vague," and "conclusory." Id. at 47 n.12. On November 5, 2010, the defendant filed its Motion for Reconsideration asking the Court to reconsider the September 22, 2010 ruling based on its Second Revised Vaughn Index and supplemental declarations. Def.'s Mot. Recons. at 1. On November 19, 2010, the plaintiff filed his Opposition to the Defendant's Motion for Reconsideration, arguing that the SEC's Second Revised Vaughn Index and supplemental declarations remained conclusory and that, at a minimum, in camera review of the contested documents is warranted. Pl.'s Opp'n Mot. Recons. at 1.

II. STANDARD OF REVIEW

The defendant's motion is brought pursuant to Federal Rule of Civil Procedure 54. Def.'s Mot. Recons. at 2. Rule 54 states that any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities.

Fed. R. Civ. P. 54(b). Court action that terminates fewer than all claims in a case is considered interlocutory rather than a final decision and subject to revision at any time. See Langevine v. District of Columbia 106 F.3d 1018, 1023 (D.C. Cir. 1997) (describing interlocutory orders as not subject to the law of the case doctrine and thus, the orders may always be reconsidered prior to final judgment); In Def. of Animals v. Nat'l Insts. of Health, 543 F. Supp. 2d 70, 75 (D.D.C. 2008). However, a motion for reconsideration is discretionary and should not be granted unless the movant presents either newly discovered evidence or errors of law or fact which need correction. Nat'l Trust for Historic Pres. v. Dep't of State, 834 F. Supp. 453, 455 (D.D.C. 1993); see also Bolden v. Ashcroft, 515 F. Supp. 2d 127, 135 (D.D.C. 2007) (providing that a motion for reconsideration will be considered when new facts are presented).

III. LEGAL ANALYSIS

A. Adequacy of the Defendant's Searches for Responsive Records

An agency to which a request for the production of documents is made is obligated to demonstrate the adequacy of its search for those documents by providing a "reasonably detailed affidavit, setting forth the search terms and the type of search performed, and averring that all files likely to contain responsive materials . . . were searched." Ogelsby v. U.S. Dep't of the Army, 920 F.2d 57, 68 (D.C. Cir. 1990). However, "[t]here is no requirement that an agency search every record system." Id.

In its September 22, 2010 Memorandum Opinion, the Court explained why it was not convinced that the defendant had fulfilled its search obligations. Sept. 22 Mem. Op. at 12. The Court reached this conclusion because it found the supplemental declaration of Noelle L. Frangipane "woefully lacking of the detail necessary for the Court to assess the adequacy of the search." Id. Furthermore, the Court found that it was a "complete mystery" whether there are any reasonable search methods the defendant could employ. Id. at 14. Thus, the Court found that the information about the search supplied by the defendant lacked the requisite detail to merit granting summary judgment to the defendant and instead instructed the defendant to provide "more detail-specific declarations." Id. The Court will examine whether the defendant has complied with the Court's directive.

1. Category 7

Category 7 of the plaintiff's Request Letter I seeks information concerning SEC personnel who traded in Copernic, Inc. securities. *fn4 Def.'s Mot. Recons. at 2-3. In support of its motion for reconsideration, the SEC has submitted the declarations of Shira Pavis Minton and David Cunningham, which "describe the forms the SEC collected . . . about securities owned by SEC personnel, the efforts the SEC staff made to search those forms, and why a further search is not feasible."*fn5 Id. at 3; see id., Exs. 16 (Declaration of Shira Pavis Minton ("Minton Decl.")) & 17 (Declaration of David Cunningham ("Cunningham Decl.")).

The plaintiff asserts that the SEC's declarations submitted in support of its motion for reconsideration again demonstrate that the SEC's search for responsive documents was inadequate. Pl.'s Opp'n Mot. Recons. at 2. The plaintiff further contends that the SEC's assertion that a manual search for responsive documents is "not feasible" should be rejected, arguing that searching twelve drawers for the two types of documents not available electronically is not an unreasonable burden. Id. at 2-3 & n.6.

In the September 22, 2010 Memorandum Opinion, the Court emphasized that the declaration of William Lenox, which stated that "it is not possible to perform an electronic search of these records," was insufficient because it "d[id] not indicate with specificity how the employee files are maintained, how they could be searched, and why an electronic search of the files is not even feasible." Sept. 22 Mem. Op. at 13. Contrary to the plaintiff's assertions, the declarations of David Cunningham and Shira Pavis Minton now contain these details. The Cunningham declaration explains that the files can be searched electronically, and recognizes that the SEC did not realize this earlier. See Def.'s Reply at 1 n.1; Def's Mot. Recons., Ex. 17 (Cunningham Decl.) ¶ 3. As the SEC correctly points out, this new revelation has no bearing on the evaluation of the SEC's good faith. See Nat'l Inst. of Military Justice v. U.S. Dep't of Def., 404 F. Supp. 2d 325, 333-34 (D.D.C. 2005) ("While it now seems obvious that the defendant's initial search was inadequate, and it is clear that the defendant could have been more diligent in its initial response to the plaintiff's FOIA request, this does not demonstrate bad faith.").

The SEC has identified three forms routinely completed by SEC employees that may contain the "trading history by SEC personnel in Copernic securities" that the plaintiff's Request Letter I seeks to obtain with Category 7: the Confidential Financial Disclosure Report, the Public Financial Disclosure Report, and Form 681. See Def.'s Mot. Recons., Ex. 16 (Minton Decl.) ¶ 5; id., Ex. 17 (Cunningham Decl.) ¶ 6. The declaration of Shira Pavis Minton describes the Confidential Disclosure Report ("OGE 450") and the Public Financial Disclosure Report ("SF 278"). Id., Ex. 16 (Minton Decl.) ¶¶ 6-17. The OGE 450, which contains information concerning an employee's holdings, is "maintained exclusively in paper form for a period of six years." Id., Ex. 16 (Minton Decl.) ¶ 8. The SEC currently has paper copies of the OGE 450s as of 2004, and the files are organized alphabetically by the employees' surnames. Id., Ex. 16 (Minton Decl.) ¶¶ 8, 9. "These paper files are not organized, categorized, or indexed by [the name of the] security." Id., Ex. 16 (Minton Decl.) ¶ 9. The OGE 450 cannot be searched electronically for specific securities and can only be searched by a "manual page-by-page, line-by-line review of thousands of paper OGE 450s filed by every current and former SEC employee during the past six years." Id., Ex. 16 (Minton Decl.) ¶ 10. The files containing the OGE 450s "fill approximately two lateral cabinets with five drawers each." Id., Ex. 16 (Minton Decl.) ¶ 11. Similarly, the SF 278, a form disclosing all assets owned by an SEC employee, is maintained exclusively in paper form for six years, and the SEC currently has the SF 278s from October 2004 to the present. Id., Ex. 16 (Minton Decl.) ¶¶ 13, 14. These documents are also organized by the employees' surnames; they are similarly not organized, categorized, or indexed by security, and cannot be searched electronically. Id., Ex. 16 (Minton Decl.) ¶¶ 15, 16. Searching these documents would likewise require a "manual page-by-page, line-by-line review of . . . two lateral file cabinet drawers." Id., Ex. 16 (Minton Decl.) ¶¶ 16, 17.

While the OGE 450s and the SF 278s cannot be searched electronically, Form 681 can be. The declaration of David Cunningham describes how "[e]very acquisition or sale of a security by an employee was required to be reported to [the Office of Human Resources] on Form 681." Def.'s Mot. Recons., Ex. 17 (Cunningham Decl.) ¶ 6. "The data from some Form 681s were entered and recorded on an electronic Access database . . . [, which] contains data from approximately 145,000 forms and represents a substantial subset of the data recorded and maintained . . . ." Id., Ex. 17 (Cunningham Decl.) ¶ 8. SEC personnel conducted electronic searches of the forms for the seven entities listed in the plaintiff's FOIA request, id., Ex. 17 (Cunningham Decl.) ¶ 10, and the Cunningham declaration lists the search terms used to conduct the electronic search, id., Ex. 17 (Cunningham Decl.) ¶ 11 (listing "copernic," "mamma," "intasys," "smartel," "calltech," "health," "care," "product," and "quartet" as the search terms used). The declaration also explains that the manner in which the search was conducted would have yielded results even where only a fragment of these search terms existed in a particular document. Id., Ex. 17 (Cunningham Decl.) ¶¶ 11, 12 ("By placing the . . . search terms . . . between asterisk marks, quotation marks, and a parentheses, preceded by the word 'Like,' the Form 681 Database was searched . . . for any instance where those words appeared as a word or word fragment."). Similar to OGE 450 and SF 278, the Form 681s are also maintained for six years in paper form. Id., Ex. 17 (Cunningham Decl.) ¶¶ 14, 15. The ability to search the SEC's current electronic system is compromised by the fact that "it is not clear which Form 681s are not contained in the electronic database" and thus, to search those Form 681s not in the electronic database the agency would have to search all of the Form 681s manually, even the 145,000 forms that already have been searched electronically. Id., Ex. 17 (Cunningham Decl.) ¶ 16. The paper copies of the Form 681s are stored in "approximately 260 linear feet of cabinet space." Id., Ex. 17 (Cunningham Decl.) ¶ 17.

The newly filed declarations of Shira Pavis Minton and David Cunningham provide the Court with the requested description of the forms, how the forms are maintained, and why the forms cannot feasibly or reasonably be searched further. The documents that could be searched electronically, the Form 681s, have already been searched, and although every single form may not have been searched, over 145,000 were searched with no results. See id., Ex. 17 (Cunningham Decl.) ¶ 8. As noted earlier, Category 7 requests "[r]ecords of any trading history by SEC personnel in Copernic securities." Def.'s Mot. for Recons., Ex. 7 (Declaration of Noelle Frangipane) at Ex. B (Request Letter). While the OGE 450s, the SF 278s, and the Form 681s not included in the electronic database could be searched manually, the electronic search of the Form 681s, which report all securities transactions by SEC employees since 2004, adequately assesses the trading history sought by the plaintiff in his FOIA request because agencies are only required to "conduct a good faith, reasonable search of those systems of records likely to possess the requested information," In't Veld v. Dep't of Homeland Sec., 589 F. Supp. 2d 16, 19 (D.D.C. 2008). And, because additional searches would "impose an unreasonable burden on the agency," Nation Mag. v. U.S. Customs Serv., 71 F.3d 885, 892 (D.C. Cir. 1995), the Court concludes that no further searches are necessary for documents requested in Category 7 of the plaintiff's Request Letter I.*fn6

2. Categories 11, 12, & 13

Categories 11, 12, and 13 of the plaintiff's Request Letter I "focused upon various allegations of misconduct by SEC employees in the course of investigations." Pl.'s Opp'n Mot. Recons. at 3 n.7. With regard to categories 11, 12, and 13, which request investigatory records from the Office of Inspector General ("OIG"), the SEC has submitted the supplemental declaration of Deputy Inspector General, Noelle Maloney (formerly Frangipane), who maintains that the defendant adequately describes the OIG's search for responsive documents. Def.'s ...


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