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Ball v. Board of Governors of The Federal Reserve System

United States District Court, D. Columbia.

March 31, 2015

LAURENCE M. BALL, Plaintiff,
v.
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, Defendant

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For LAURENCE M. BALL, Plaintiff: Adina Rosenbaum, PUBLIC CITIZEN LITIGATION GROUP, Washington, DC.

For BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, Defendant: Benton Gregory Peterson, LEAD ATTORNEY, U.S. ATTORNEY'S OFFICE, Civil Division, Washington, DC.

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MEMORANDUM OPINION

TANYA S. CHUTKAN, United States District Judge.

In this Freedom of Information Act case, Plaintiff Laurence Ball seeks four

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documents from the Federal Reserve System's Board of Governors (the " Board" )--two memorandums analyzing the Federal Reserve's legal justification for extending loans to Bear Stearns/JPMorgan and American International Group (" AIG" ) during the 2008 financial crisis, and two spreadsheets listing the collateral securing those loans. The parties have filed cross-motions for summary judgment. Upon consideration of the motions, the oppositions and the replies thereto, the entire record, and for the following reasons, Plaintiff's motion is denied and Defendant's motion is granted.

I. BACKGROUND

a. Overview of the Federal Reserve System

Congress created the United States Federal Reserve System through passage of the Federal Reserve Act in 1913. The System is comprised of the Board and twelve regional Federal Reserve Banks (" FRBs" ). Each FRB operates within its own region of the United States. The Board is composed of seven members appointed by the President and confirmed by the Senate, and acts as the central supervisory authority of the Federal Reserve System. 12 U.S.C. § 241. It is responsible for overseeing the operation of the system and promulgating and administering regulations, and plays a key role in supervising and regulating the United States banking system. See McKinley v. Bd. of Governors of the Fed. Reserve Sys., 849 F.Supp.2d 47, 52 (D.D.C. 2012). The FRBs are considered the " operating arm" of the Reserve System. They engage in both public and private functions by carrying out federal monetary policy while also holding deposits and making loans to private banks.

As a result of the Great Depression, in 1932 Congress amended the Federal Reserve Act and added paragraph 3 to section 13. Section 13(A) allows the Board, " [i]n unusual and exigent circumstances," and " by the affirmative vote of not less than five members," to " authorize any [FRB]" to extend emergency loans to individuals, partnerships, and corporations. 12 U.S.C. § 343(A). The FRB must conduct an independent investigation into whether the potential loan's recipient is able to first " secure adequate credit . . . from other banking institutions." Id. Between 1932 and 1936, FRBs were authorized to make approximately 123 loans totaling $1.5 million. (Pl. Mot. 4). FRBs made no loans pursuant to section 13(A) again until 2008. ( Id. ).

b. Bear Stearns and AIG

Beginning with the deterioration of the U.S. housing market in late 2007 and 2008, financial markets experienced substantial uncertainty that resulted in severe liquidity pressures upon various financial institutions. (Def. Mot. 4). In early March 2008, the Board became aware that Bear Stearns, one of the companies experiencing liquidity problems, might soon declare bankruptcy. The Board became increasingly concerned about the potential impact of a Bear Stearns bankruptcy on broader financial markets. ( Id. ). As a result, it began collecting real-time data on, among other things, various financial institutions' exposure to Bear Stearns in an effort to assess the gravity of the potential bankruptcy. Bear Stearns did not qualify as a depository institution and was therefore ineligible to borrow through the Federal Reserve's regular short-term lending program. As a result, on March 14, 2008, the Board authorized the Federal Reserve Bank of New York (" FRBNY" ), pursuant to section 13(A), to extend an emergency, temporary loan to Bear Stearns through JPMorgan Chase & Co. ( Id. at 5). On

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March 16, 2008, the Board authorized the FRBNY to make a second emergency transaction to JPMorgan in order to facilitate its acquisition of Bear Stearns. Under this authorization, the FRBNY made a non-recourse loan to a limited liability company, later named Maiden Lane LLC (the " Maiden Lane Loan" ), with the loan secured by the Bear Stearns assets that Maiden Lane acquired. ( Id. ).

AIG, the world's largest provider of life, health, and casualty insurance, was also experiencing the effects of similar market pressures in 2008. ( Id. at 5-6). On September 12, 2008, the Board became aware of AIG's impending liquidity crisis. As a result, it encouraged AIG to pursue private sector options and began to analyze the broader implications of AIG's crisis. ( Id. at 6). On September 16, 2008, after determining that " a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to . . . materially weaker economic performance," (Pl. Mot. 5), the Board again invoked section 13(A) and authorized the FRBNY to lend up to $85 billion to AIG (the " AIG Loan" ). (Def. Mot. 7). The FRBNY established the AIG Revolving Credit Facility, which was secured by nearly all of AIG's assets, in order to provide direct financial support to AIG. ( Id. ).

c. Ball's FOIA Request

On October 10, 2012, Plaintiff Ball, an economics professor at Johns Hopkins University, submitted to the Board a FOIA request seeking documents related to the Bear Stearns and AIG loans. Ball sought two legal memorandums prepared by Board staff addressing the Board's section 13(A) authority--one for the Maiden Lane Loan (" Document 1" ) and one for the AIG Loan (" Document 2" ). (Caperton Decl. Ex. A). Ball also sought two bank examination spreadsheets identifying the assets pledged as collateral for the Maiden Lane Loan (" Document 3" ) and the AIG Loan (" Document 4" ). (Pl. Mot. 7).

On December 20, 2012, the Board denied Ball's FOIA request in full, stating that the requested documents consisted of exempt information pursuant to FOIA Exemptions 4, 5, and 8. Ball appealed the Board's denial, and on January 31, 2013, the Board, while reversing its prior decision on some of the previously invoked exemptions, ultimately denied Ball's appeal and continued to withhold the four documents in their entirety. Ball then filed the instant suit.

II. LEGAL STANDARD

a. Motion for Summary Judgment

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, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Holcomb v. Powell, 433 F.3d 889, 895, 369 U.S.App.D.C. 122 (D.C. Cir. 2006). Summary judgment may be rendered on a " claim or defense . . . or [a] part of each claim or defense." Fed.R.Civ.P. 56(a). " A party asserting that a fact cannot be or is genuinely disputed must support the assertion by citing to particular parts of materials in the record." Fed.R.Civ.P. 56(c)(1)(A). " A fact is 'material' if a dispute over it might affect the outcome of a suit under governing law; factual disputes that are 'irrelevant or unnecessary' do not affect the summary judgment determination." Holcomb, 433 F.3d at 895 (quoting Liberty Lobby, 477 U.S. at 248). An issue is " genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. See id. The party seeking summary judgment " bears the heavy burden of establishing

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that the merits of his case are so clear that expedited action is justified." Taxpayers Watchdog, Inc., v. Stanley, 819 F.2d 294, 297, 260 U.S.App.D.C. 334 (D.C. Cir. 1987).

In considering a motion for summary judgment, " [t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Liberty Lobby, 477 U.S. at 255; see also Mastro v. Potomac Elec. Power Co., 447 F.3d 843, 850, 371 U.S.App.D.C. 68 (D.C. Cir. 2006). The nonmoving party's opposition, however, must consist of more than mere unsupported allegations or denials, and must be supported by affidavits, declarations, or other competent evidence, setting forth specific facts showing that there is a genuine issue for trial. Fed.R.Civ.P. 56(e); Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The nonmovant is required to provide evidence that would permit a reasonable jury to find in his favor. Laningham v. U.S. Navy, 813 F.2d 1236, 1242, 259 U.S.App.D.C. 115 (D.C. Cir. 1987).

b. FOIA

" FOIA provides a 'statutory right of public access to documents and records' held by federal government agencies." Citizens for Responsibility & Ethics in Washington v. DOJ, 602 F.Supp.2d 121, 123 (D.D.C. 2009) (quoting Pratt v. Webster, 673 F.2d 408, 413, 218 U.S.App.D.C. 17 (D.C. Cir. 1982)). FOIA requires that federal agencies comply with requests to make their records available to the public, unless such " information is exempted under clearly delineated statutory language." Id. (internal quotation marks omitted); see also 5 U.S.C. § 552(a), (b).

" 'FOIA cases typically and appropriately are decided on motions for summary judgment.'" Georgacarakos v. FBI, 908 F.Supp.2d 176, 180 (D.D.C. 2012) (quoting Defenders of Wildlife v. U.S. Border Patrol, 623 F.Supp.2d 83, 87 (D.D.C. 2009)). The district court conducts a de novo review of the government's decision to withhold requested documents under any of FOIA's specific statutory exemptions. 5 U.S.C. § 552(a)(4)(B). The burden is on the agency to show that nondisclosed, requested material falls within a stated exemption. Petroleum Info. Corp. v. U.S. Dep't of the Interior, 976 F.2d 1429, 1433, 298 U.S.App.D.C. 125 (D.C. Cir. 1992) (citing 5 U.S.C. § 552(a)(4)(B)). In cases concerning the applicability of exemptions and the adequacy of an agency's search efforts, summary judgment may be based solely on information provided in the agency's supporting declarations. See, e.g., ACLU v. U.S. Dept. of Def., 628 F.3d 612, 619, 393 U.S.App.D.C. 384 (D.C. Cir. 2011); Students Against Genocide v. Dept. of State, 257 F.3d 828, 838, 347 U.S.App.D.C. 235 (D.C. Cir. 2001). " If an agency's affidavit describes the justifications for withholding the information with specific detail, demonstrates that the information withheld logically falls within the claimed exemption, and is not contradicted by contrary evidence in the record or by evidence of the agency's bad faith, then summary judgment is warranted on the basis of the affidavit alone." ACLU, 628 F.3d at 619. " Ultimately, an agency's justification for invoking a FOIA exemption is sufficient if it appears 'logical' or 'plausible.'" Id. (internal quotation marks omitted) (quoting Larson v. Dep't of State, 565 F.3d 857, 862, 385 U.S.App.D.C. 394 (D.C. Cir. 2009)). However, a motion for summary judgment should be granted in favor of the FOIA requester " [w]hen an agency seeks to protect material which, even on the agency's version of the facts, falls outside the proffered exemption." Coldiron v. DOJ, 310 F.Supp.2d 44, 48 (D.D.C. 2004) (citing Petroleum Info. Corp., 976 F.2d at 1433).

The FOIA requires that " [a]ny reasonably segregable portion of a record shall be provided to any person requesting

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such record after deletion of the portions which are exempt." 5 U.S.C. § 552(b). More specifically, " [i]t has long been a rule in this Circuit that non-exempt portions of a document must be disclosed unless they are inextricably intertwined with exempt portions." Mead Data Central, Inc. v. U.S. Dep't of the Air Force, 566 F.2d 242, 260, 184 U.S.App.D.C. 350 (D.C. Cir. 1977). In order to withhold a record or portion thereof under a FOIA exemption, " the Government must make that showing in its Vaughn index and in such affidavits as it may submit therewith." Kimberlin v. DOJ, 139 F.3d 944, 950, 329 U.S.App.D.C. 251 (D.C. Cir. 1998). " The purpose of a Vaughn index is to permit adequate adversary testing of the agency's claimed right to an exemption, and those who contest denials of FOIA requests -- who are, necessarily, at a disadvantage because they have not seen the withheld documents -- can generally prevail only by showing that the agency's Vaughn index does not justify withholding information under the exemptions invoked." Schiller v. NLRB, 964 F.2d 1205, 1209, 296 U.S.App.D.C. 84 (D.C. Cir. 1992) (internal quotation marks and citations omitted), abrogated on other grounds by Milner v. Dep't of Navy, 562 U.S. 562, 131 S.Ct. 1259, 179 L.Ed.2d 268 (2011).

III. ANALYSIS

a. Adequacy of the Search

The parties dispute the adequacy of the Board's search with respect to one document--the collateral spreadsheet for the AIG Loan. Ball argues that the Board should have searched the FRBNY's files in addition to the Board's own files, and this failure resulted in the Board only locating a partial list of the collateral pledged for the AIG Loan. The Board responds that under its own regulations and the FOIA, it was not required to search the FRBNY's files, and therefore the search of its own files was adequate.

In ruling on the adequacy of an agency's search in response to a FOIA request, " [t]he question is not whether there might exist any other documents possibly responsive to the request, but rather whether the search for those documents was adequate. The adequacy of the search, in turn, is judged by a standard of reasonableness and depends, not surprisingly, upon the facts of each case. In demonstrating the adequacy of the search, the agency may rely upon reasonably detailed, nonconclusory affidavits submitted in good faith." Steinberg v. DOJ, 23 F.3d 548, 551, 306 U.S.App.D.C. 240 (D.C. Cir. 1994) (internal citations omitted). An agency may prove the reasonableness of its search via the declaration of a responsible agency official, so long as the declaration is reasonably detailed and not controverted by contrary evidence or evidence of bad faith. Military Audit Project v. Casey, 656 F.2d 724, 738, 211 U.S.App.D.C. 135 (D.C. Cir. 1981). There is no requirement that an agency search every record system, but the agency must conduct a good faith, reasonable search of those systems of records likely to possess the requested information. Oglesby v. Dep't of Army, 920 F.2d 57, 68, 287 U.S.App.D.C. 126 (D.C. Cir. 1990). The agency declaration can demonstrate reasonableness by " setting forth the search terms and the type of search performed, and averring that all files likely to contain responsive materials (if such records exist) were searched." Sanders v. Obama, 729 F.Supp.2d 148, 155 (D.D.C. 2010), aff'd sub nom. Sanders v. DOJ, 10-5273, ...


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