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Citizens For Responsibility and Ethics in Washington v. U.S. Securities and Exchange Commission

United States District Court, District Circuit

January 17, 2013

CITIZENS FOR RESPONSIBILITY AND ETHICS IN WASHINGTON, Plaintiff,
v.
U.S. SECURITIES AND EXCHANGE COMMISSION, et al., Defendants

MEMORANDUM OPINION

JAMES E. BOASBERG United States District Judge

Plaintiff Citizens for Responsibility and Ethics in Washington, a nonprofit organization that makes government records available to the public, has filed hundreds of Freedom of Information Act requests with federal agencies, including the SEC. In response to increased media and Congressional attention on the SEC's document-retention policies, CREW submitted several FOIA requests for documents regarding the SEC's decisions not to take further action in a number of closed preliminary investigations. Before receiving the SEC's response, CREW brought this suit against the Commission and its Chairman, Mary L. Schapiro, under the Federal Records Act.

Plaintiffs Complaint contends that Defendants failed to comply with the FRA through 1) the SEC's improper policy relating to the destruction of preliminary investigative materials and 2) its failure to undertake efforts to recover and restore records destroyed pursuant to the policy. Given the SEC's recent reversal of that policy, the Court previously granted its motion to dismiss counts related to the first issue. The parties have now brought cross-motions for summary judgment on counts raising the second issue. Because - to the extent the SEC was under any restoration duty at all - the agency did not abuse its discretion regarding the manner in which it fulfilled its obligations, the Court will grant Defendants' Motion as to CREW's Administrative Procedure Act claim. Likewise, because any duty the agency was under was discretionary and because Plaintiff had an adequate remedy available through the APA, the Court will also grant summary judgment for the SEC as to CREW's mandamus claim.

I. Procedural Background

Both the facts of this case and the relevant statutory background are set forth in detail in this Court's Opinion granting in part and denying in part the SEC's earlier motion to dismiss. See Citizens for Responsibility and Ethics in Washington v. U.S. Securities and Exchange Commission (CREW I), 858 F.Supp.2d 51, 55-56 (D.D.C. 2012). To summarize, CREW is challenging the SEC's policy of destroying records relating to the preliminary work the agency undertakes prior to the commencement of a formal investigation. See Compl., ¶¶16-17. In addition, CREW independently asserts that the SEC has not sought to recover records destroyed pursuant to that policy. See id., ¶ 22. CREW thus alleges that it was denied "present and future access to important documents that would shed light on the conduct of public officials and the actions and effectiveness of the SEC's Enforcement Division" as a result of the SEC's failure to comply with the FRA. See id., ¶ 62; see also id., ¶¶ 42, 51, 56, 69. Plaintiffs suit does not seek review of an agency's denial of a particular FOIA request; instead, its claims challenge Defendants' failure to comply with their duties regarding the agency's retention of documents, as set forth in the FRA.

In September 2011, CREW filed a FOIA request with the SEC seeking

all records explaining or describing in any way the SEC's reasons for not proceeding with any closed preliminary investigations, including but not limited to Matters Under Inquiry ("MUI"), of: Bernard L. Madoff; Goldman Sachs trading in AIG credit default swaps in 2009; financial fraud at Wells Fargo and Bank of America in 2007 and 2008; and insider trading at Deutsche Bank, Lehman Brothers, and SAC Capital.

Id , ¶ 5; PI. Opp. to Motion to Dismiss (ECF No. 8), Exh. B (September 14, 2011, FOIA Request). Before the SEC responded, CREW brought this suit against the Commission and its Chairman, alleging violations of the FRA, 44 U.S.C. §§2101 et seq., 3101 et seq., 3301 et seq. The Complaint asserted five causes of action. Three of these were dismissed in the earlier Opinion, which concluded that the SEC's abandonment of its document-destruction policy rendered certain claims moot. See CREW I, 858 F.Supp.2d at 63. Two other claims remain: Count III seeks a declaratory order under the APA, 5 U.S.C. § 706(1), compelling Defendants to initiate action to restore destroyed records, and Count IV seeks a writ of mandamus ordering the same relief. When this Court denied Defendants' motion to dismiss as to these counts, it "allow[ed] the parties to develop the record as to the efforts undertaken by Defendants, which may inform the Court's future decision." Id at 64. Having done so, the parties then filed cross-motions for summary judgment, which the Court now considers.

II. Legal Standard

Summary judgment may be granted if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 247-48 (1986); Holcomb v. Powell 433 F.3d 889, 895 (D.C. Cir. 2006). A fact is "material" if it is capable of affecting the substantive outcome of the litigation. Holcomb, 433 F.3d at 895; Liberty Lobby, Inc., 477 U.S. at 248. A dispute is "genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. See Scott v. Harris, 550 U.S. 372, 380 (2007); Liberty Lobby, Inc., 477 U.S. at 248; Holcomb, 433 F.3d at 895.

In a case involving review of a final agency action under the APA, however, the standard set forth in Rule 56(c) does not apply because of the limited role of a court in reviewing the administrative record. See Sierra Club v. Mainella, 459 F.Supp.2d 76, 89-90 (D.D.C. 2006) (citing Nat'l Wilderness Inst, v. United States Army Corps of Eng'rs, 2005 WL 691775, at *7 (D.D.C. 2005); Fund for Animals v. Babbitt 903 F.Supp. 96, 105 (D.D.C. 1995), amended on other grounds, 967 F.Supp. 6 (D.D.C. 1997)). "[T]he function of the district court is to determine whether or not as a matter of law the evidence in the administrative record permitted the agency to make the decision it did." Id (internal citations omitted). Summary judgment thus serves as the mechanism for deciding, as a matter of law, whether the agency action is supported by the administrative record and otherwise consistent with the APA standard of review. See Richards v. INS. 554 F.2d 1173, 1177 & n.28 (D.C. Cir. 1977), cited in Bloch v. Powell 227 F.Supp.2d 25, 31 (D.D.C. 2002), affd, 348 F.3d 1060 (D.C. Cir. 2003).

Where, as here, a plaintiff challenges an agency's inaction, judicial review is still more limited. An agency's failure to act is "simply the omission of an action without formally rejecting a request - for example, the failure to promulgate a rule or take some decision by a statutory deadline. The important point is that a 'failure to act' is properly understood to be limited ... to [failure to take] a discrete action." Norton v. Southern Utah Wilderness Alliance, (SUWA), 542 U.S. 55, 63 (2004) (emphasis in original). Where the agency has failed to take such a discrete action, '"[t]he reviewing court shall . . . compel agency action unlawfully withheld or unreasonably delayed.'" Id at 62 (quoting 5 U.S.C. § 706(1)) (alteration in original). In such circumstances, a court may only "compel an agency 'to perform a ministerial or non-discretionary act, ' or 'to take action upon a matter, without directing how it shall act.'" Id. at 64 (quoting Attorney General's Manual on the Administrative Procedure Act 108 (1947)) (emphasis in original).

III. Analysis

The SEC argues that it is entitled to summary judgment on CREW's remaining two claims for three reasons. First, it offers a new statutory-interpretation argument that the FRA's mandatory enforcement duty - the duty to request that the Attorney General initiate an enforcement action - pertains only to records physically removed from an agency's custody, not to those records that have been destroyed, as is the case here. See Mot. at 10. Because the FRA imposes no mandatory enforcement duty in the current circumstances, the SEC asserts that CREW's APA claim must fail. See id. at 14. Second, it contends that even assuming, arguendo, that the FRA does impose a mandatory enforcement duty, the SEC has satisfied its statutory obligations through its own internal efforts. SeeId. at 15. Finally, the SEC argues that ...


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