United States District Court, District of Columbia
MITCHELL J. STEIN Plaintiff,
U.S. SECURITIES AND EXCHANGE COMMISSION, Defendant.
D. BATES United States District Judge
the Court are  and  cross-motions for summary
judgment in this Freedom of Information Act (FOIA) case.
Plaintiff Mitchell Stein is the subject of both a criminal
and a civil judgment entered against him related to various
fraud and securities violations. He seeks records developed
in the civil enforcement action brought against him by
defendant Securities and Exchange Commission (SEC). For the
reasons that follow, Stein's motion will be denied, and
the SEC's motion will be granted in part and denied in
2011, the SEC filed a civil enforcement action against Heart
Tronics, Inc., a medical device manufacturing company, naming
Stein and several other individuals and corporate officers
associated with the company as co-defendants. See
Donnelly Decl. [ECF No. 10-2] ¶ 14; see also
Complaint, SEC v. Heart Tronics, Inc., et al., No.
8:11-1962 JVS (ANx) (C.D. Cal.) [ECF No. 1]. Stein was the
purported outside counsel to the company, and his wife,
Tracey Hampton-Stein, was the majority shareholder. The SEC
alleged that Stein and his co-defendants engaged in a series
of fraudulent schemes, masterminded by Stein, to drive up the
price of Heart Tronics stock, including repeatedly creating
false sales orders and including these in Heart Tronics'
SEC filings, and issuing false press releases and other
public broadcasts. Donnelly Decl. ¶ 14. Meanwhile, Stein
continuously directed the sale of his and Hampton-Stein's
Heart Tronics stock, netting more than $5.8 million in
profit. Id. Stein was convicted in 2013 on charges
of securities fraud, mail fraud, wire fraud, conspiracy to
commit mail and wire fraud, and conspiracy to obstruct
justice. Id. ¶ 16. In 2015, the district court
in the Heart Tronics case entered judgment against
Stein based on the collateral estoppel effect of his related
criminal conviction. See id. ¶ 15; see
also Judgment, SEC v. Heart Tronics, Inc. et
al., No. 8:11-1962 JVS (ANx) (C.D. Cal.) [ECF No. 277].
His criminal conviction was affirmed in January 2017 by the
Eleventh Circuit, although his sentence was vacated and that
case remanded to the Southern District of Florida for
resentencing. See United States v. Stein, 846 F.3d
1135, 1156 (11th Cir. 2017). His appeal of the judgment
entered against him in the Heart Tronics case, which
was stayed during the appeal of the criminal case, is still
ongoing in the Ninth Circuit. See Gov't Supp.
Br. [ECF No. 19] at 2-3; see also Mar. 3, 2017 Clerk
Order, SEC v. Heart Tronics, Inc., et al., No.
15-155506 (9th Cir.) [ECF No. 35] (lifting stay).
submitted a FOIA request to the SEC in March 2015, seeking
two categories of documents: all documents and information
described in the privilege log prepared by the SEC in the
Heart Tronics case, and all documents and
information relating to the SEC's investigation into
individuals named Yossi Keret, Tony Nony/Nonoy, Avi Cohen,
Ari Cohen, and Marina Orita. See Compl., [ECF No. 1]
Ex. B. Stein was accused of inventing several of the names in
the latter category for use in false purchase orders. The SEC
responded in June 2015, withholding the privilege log records
under FOIA Exemption 7(A), which permits the withholding of
records that may interfere with law enforcement activities.
See Compl., Ex. D at 1; see also 5 U.S.C.
§ 552(b)(7)(A). The SEC also asserted that other
exemptions may apply, and reserved the right to raise those
exemptions when Exemption 7(A) was no longer applicable.
Compl., Ex D. at 1. With respect to the second category of
documents, the SEC did not discuss these in its response,
except to conclude in a footnote that “to the extent
the records [Stein was] seeking . . . exist” they had
either already been made available to Stein in the Heart
Tronics litigation, or were included in the privilege
log category of documents. Id. at n.1.
filed an administrative appeal of the SEC's decision,
insisting that the agency turn over “all of the
requested documents, ” and arguing that Exemption 7(A)
did not apply because the civil and criminal actions against
him had concluded. Compl., Ex. E at 1-2. The SEC's Office
of General Counsel (OGC) responded, concluding that the FOIA
officer had correctly withheld the requested records under
Exemption 7(A), because claims brought against Stein's
co-defendants in the Heart Tronics case were still
proceeding, and because Stein had appealed the civil judgment
against him to the Ninth Circuit. See Gov't Mot.
for Summ. J., Ex. 2 [ECF No. 10-3] at 1-2. Therefore, the OGC
concluded that release of the records could still interfere
with ongoing enforcement proceedings. Id. at 2.
filed this suit in September 2015, bringing claims under both
FOIA and the Privacy Act, 5 U.S.C. § 552a, seeking the
production of all records responsive to his request. Both
parties have moved for summary judgment.
judgment is appropriate where “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). Evidence is construed in the light most
favorable to the non-moving party; however, factual
assertions made in the moving party's declarations may be
accepted as true unless the opposing party submits
affidavits, declarations, or documentary evidence to the
contrary. See, e.g., Sample v. Bureau of
Prisons, 466 F.3d 1086, 1087 (D.C. Cir. 2006); Neal
v. Kelly, 963 F.2d 453, 456 (D.C. Cir. 1992).
cases typically and appropriately are decided on motions for
summary judgment.” Georgacarakos v. FBI, 908
F.Supp.2d 176, 180 (D.D.C. 2012) (internal quotation marks
omitted) (quoting Defenders of Wildlife v. U.S. Border
Patrol, 623 F.Supp.2d 83, 87 (D.D.C. 2009)). FOIA
provides a “‘statutory right of public access to
documents and records' held by federal agencies.”
Citizens for Responsibility & Ethics in Wash. (CREW)
v. U.S. Dep't of Justice, 602 F.Supp.2d 121, 123
(D.D.C. 2009) (quoting Pratt v. Webster, 673 F.2d
408, 413 (D.C. Cir. 1982)). As the Supreme Court has
explained, FOIA is “a means for citizens to know what
their Government is up to.” Nat'l Archives
& Records Admin. v. Favish, 541 U.S. 157, 171-72
(2004) (internal quotation marks omitted). Thus, FOIA
requires federal agencies to make their records available to
the public upon request, unless the requested information
falls under one of nine statutory exemptions to disclosure.
See 5 U.S.C. §§ 552(a)-(b).
courts review de novo an agency's decision to withhold
requested documents under a statutory exemption, and the
agency “bears the burden of proving the applicability
of claimed exemptions.” Am. Civ. Liberties Union
(ACLU) v. U.S. Dep't of Defense, 628 F.3d 612, 619
(D.C. Cir. 2011); 5 U.S.C. § 552(a)(4)(B). To satisfy
its burden, the agency may submit supporting declarations of
responsible agency officials and, where necessary, an index
of the documents withheld, known as a Vaughn index.
See ACLU, 628 F.3d at 619; Vaughn v. Rosen,
484 F.2d 820, 827-28 (D.C. Cir. 1973). “If an
agency's affidavit describes the justifications for
withholding the information with specific detail,
demonstrates that the withheld information 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. (some internal quotation marks omitted) (quoting
Larson v. U.S. Dep't of State, 565 F.3d 857, 862
(D.C. Cir. 2009).
raises three main issues in his motion for summary judgment
and in his opposition to the government's motion for
summary judgment: he challenges the adequacy of the
government's search for responsive records, the
agency's withholding determinations, and the agency's
segregability determinations. See Stein Mot. for
Summ. J. [ECF No. 11] at 10-13, 16-18; Stein Opp'n to
Gov't Mot. for Summ. J. (hereinafter “Stein
Opp'n”) [ECF No. 14] at 5-10. The government argues
that Stein failed to exhaust his administrative remedies with
respect to the second category of requested documents and
with respect to his Privacy Act claims. Furthermore, in
addition to claiming that the requested documents are exempt
from disclosure under FOIA Exemption 7(A), the government
also raises arguments under Exemptions 3, 5, 6, and 7(C).
See Gov't Mot for Summ. J. [ECF No. 10-1] at
1-2; 5 U.S.C. §§ 552(b)(3), (5), (6), (7)(C). The
Court will address each argument in turn.
a plaintiff may bring an action under FOIA, he must first
exhaust his administrative remedies. See Hidalgo v.
FBI, 344 F.3d 1256, 1258-59 (D.C. Cir. 2003) (noting
that exhaustion under FOIA is a prudential requirement).
Failure to administratively appeal an adverse determination
may bar judicial review of a FOIA claim. See Wilson v.
U.S. Dep't of Transp., 730 F.Supp.2d 140, 150
(D.D.C. 2010) (citing Hidalgo, 344 F.3d at 1259-60).
Likewise, Privacy Act claims are subject to an administrative
exhaustion requirement-and exhaustion under the Privacy Act
is a jurisdictional requirement. See Barouch v. U.S.
Dep't of Justice, 962 F.Supp.2d 30, 67 (D.D.C. 2013)
(citing cases); see also 5 U.S.C. §§
552a(d)(1)-(3), (g)(1). “A person seeking judicial
review of an agency's handling of his or her Privacy Act
request must actually exhaust the available administrative
remedies.” Barouch, 962 F.Supp.2d at 67
(internal quotation marks omitted) (quoting Makuch v.
FBI, No. Civ. A 99-1094 RMU, 2000 WL 915640, at *4
(D.D.C. Jan. 5, 2000)).
has clearly failed to exhaust any Privacy Act claims-there is
no mention of the Privacy Act in his initial request for
documents or in his administrative appeal letter. See,
e.g., Compl., Ex. B at 1 (“This is a request under
the Freedom of Information Act (5 U.S.C. Section
552).”). Indeed, the first and only time any mention of
the Privacy Act is made is in his complaint-he makes no
argument with respect to the Privacy Act in his motion for
summary judgment or in any of the other briefs filed here.
See, e.g., Compl. at 5, 8-9. Accordingly, Stein's
Privacy Act claims are dismissed for failure to exhaust.
See, e.g., Barouch, 962 F.Supp.2d at 67- 68
(dismissing Privacy Act claims for failure to exhaust
administrative remedies); Mulhern v. Gates, 525
F.Supp.2d 174, 187 (D.D.C. 2007) (same).
also argues that Stein has failed to exhaust his FOIA claim
with respect to the second category of requested documents,
those relating to various named individuals. See
Compl., Ex. B at 1 (Stein's FOIA request). The SEC argues
that, because Stein's appeal letter did not contest the
SEC's determination that the records in the second
category had either already been produced to him or were
included in the privilege log, Stein failed to
administratively appeal the SEC's determination with
respect to this group of documents. Gov't Mot. for Summ.
J. at 6.
true that Stein did not specifically contest this point in
his appeal letter. He disputed the SEC's withholding
decision under Exemption 7(A)-which, according to the SEC,
was also the exemption under which the SEC was withholding
some documents related to the second document category.
See Compl., Ex. D at 1 n.1. But his appeal letter
also specifically demanded- twice-“all of the requested
documents, ” not just documents related to the first
category. See Compl., Ex. E at 1-2. The government
is obligated to construe FOIA requests-and appeals-
liberally, where a request is “reasonably susceptible
to the broader reading.” See LaCedra v. Executive
Office for U.S. Attorneys, 317 F.3d 345, 347-48 (D.C.
Cir. 2003) (holding that a FOIA request should be read to
seek all documents covered by a catchall). While Stein's
appeal letter could have been more specific, it is reasonably
apparent based on his references to all of the
documents he requested that he intended to appeal the
SEC's decision with respect to his entire request, not
merely some portion of it. Moreover, it is unclear to the
Court how, exactly, Stein was supposed to credibly contest
the SEC's conclusion that the documents responsive to the
second category had either already been turned over to him or
were included in the privilege log, as the agency did not
explain in its response letter how it reached this
conclusion, and Stein did not have access to the documents
listed on the privilege log or to any other documents in the
SEC's possession to confirm what had been given to him.
The Court therefore finds that Stein sufficiently exhausted
his administrative remedies with respect to the second
category of requested documents.
Adequacy of the Search
also argues that the government's search for responsive
records was inadequate. Where a FOIA plaintiff challenges the
adequacy of an agency's search for responsive documents,
the agency “must show beyond material doubt . . . that
it has conducted a search reasonably calculated to uncover
all relevant documents.” Morley v. CIA, 508
F.3d 1108, 1114 (D.C. Cir. 2007) (some internal quotation
marks omitted) (quoting Weisberg v. U.S. Dep't of
Justice, 705 F.2d 1344, 1351 (D.C. Cir. 1983));
Steinberg v. U.S. Dep't of Justice, 23 F.3d 548,
551 (D.C. Cir. 1994). The relevant question, moreover,
“is not whether other responsive documents may exist,
but whether the search itself was adequate.”
Wilson, 730 F.Supp.2d at 149 (citing
Steinberg, 23 F.3d at 551). “[T]he agency must
show that it made a good faith effort to conduct a search for
the requested records, using methods which can be reasonably
expected to produce the information requested.”
Oglesby v. U.S. Dep't of the Army, 920 F.2d 57,
68 (D.C. Cir. 1990). Summary judgment may be granted if the
agency's declarations provide “sufficiently
detailed information for a court to determine if the search
was adequate.” Students Against Genocide v. U.S.
Dep't of State, 257 F.3d 828, 838 (D.C. Cir. 2001)
(internal quotation marks omitted). Stein raises a number of
objections to the agency's search methods, most of which
relate to the agency's search-or lack thereof-for his
second category of requested documents.
Search for documents responsive to Stein's first
category of requests
respect to the privilege log documents, i.e., documents
responsive to Stein's first category of requests, the
agency listed on the Vaughn index all of the
documents identified individually on the privilege log,
identified the handwritten notes and legal research that was
listed categorically on the privilege log, and searched for
privileged emails that were also identified categorically on
the privilege log. Donnelly Decl. ¶¶ 5, 7-8, 12-13.
Stein does not challenge the agency's search for either
the individual documents identified on the privilege log or
the handwritten notes and legal research identified on the
privilege log, but he does contest the agency's search
for relevant privileged emails.
objects to the search terms the agency used for identifying
privileged emails that were listed categorically on the
Heart Tronics privilege log. Stein Opp'n at 5-8;
see also Privilege Log, Ex. B. to Stein Decl. [ECF
No. 11-1] at 1. The privilege log lists two categories of
documents containing privileged emails dated between May 2009
and December 19, 2011: internal SEC attorney and staff
accountant emails discussing the Heart Tronics
litigation (entry 1), and emails between the SEC and various
other government agencies that assisted with the
investigation, including attorneys at DOJ, the FBI, and the
IRS (entry 4). See Privilege Log at 1; see
also Donnelly Decl. ¶¶ 7-8. In gathering these
emails for purposes of FOIA review, the SEC's Office of
Information Technology (OIT) searched for (1) emails dated
between May 3, 2009 and December 19, 2011, the period of the
formal investigation; (2) sent to or from named SEC staff who
were assigned to the investigation; (3) and which contained
any of the following terms: Stein, Heart Tronics, Inc.,
Martin Carter, Willie Gault, J. Rowland Perkins, Mark
Nevdahl, Ryan Rauch, Yossi Keret, Tony Nony/Nonoy, Avi Cohen,
Ari Cohen, or Marina Orita, the last five names of which were
identified in Stein's second category of requests.
Donnelly Decl. ¶ 8.
argues that these search terms were designed to
“confuse the Court and manipulate the facts” by
adding names that Stein did not ask for in his FOIA request,
i.e., those of his co-defendants and the SEC staff involved
in the investigation. Stein Opp'n at 7. According to
Stein, this is evidence of the SEC's bad faith, because
it is evidence that the SEC was trying to obscure or skew the
results of any search. Id. at 5-7. But Stein's
objections on this point make little sense. The SEC's
search terms with respect to the privileged emails were
reasonably calculated to identify privileged emails noted on
the Heart Tronics privilege log by identifying
relevant dates (the period of the investigation), custodians
(SEC attorneys and staff assigned to the investigation), and
subjects of or persons of interest in the investigation
(Stein, his co-defendants and other relevant names, including
Yossi Keret, Tony Nony, etc.). These search terms produced 2,
715 documents, which the SEC then reviewed, concluding that
1, 800 were privileged emails categorically identified on the
privilege log. Donnelly Decl. ¶¶ 8-10. There is no
evidence of bad faith. The Court is therefore satisfied that
the agency has fulfilled its search obligations with respect
to the first category of requested documents.
Search for documents responsive to the second category of
respect to the second category of documents, as the Court has
already noted, the agency concluded in its FOIA response
letter that documents responsive to this category had either
already been made available to Stein in the Heart
Tronics litigation or were included on the privilege
log. Compl., Ex. D. at 1 n.1. It is clear that the SEC did
not provide Stein the documents it already produced to him in
the Heart Tronics case in response to his FOIA
request, nor does the agency state that it ever conducted a
search through its records for documents specifically
responsive to Stein's second category of
requests-instead, it concluded that the only documents that
had not been made available to Stein in the previous
litigation were those identified on the privilege log.
never directly addresses the agency's argument that it
produced much of his requested information during the
Heart Tronics litigation. He does, however, object
generally to the agency's failure to search for documents
responsive to this second category of requests. Stein also
argues repeatedly that the SEC has a 200-million-file
database compiled during the investigation, containing vast
numbers of unprivileged documents, that the government never
produced to him in either the Heart Tronics
litigation or in United States v. Stein. Stein
Opp'n at 3, 9, 10, 12, 16. Stein argues that the
SEC's failure to search this database for documents
relating to his second category of requests is additional
evidence of the agency's bad faith. Id. at 3-10.
Heart Tronics discovery and the SEC's open file
the SEC maintains that Stein waived any objection to the
agency's findings with respect to category two of the
request, the SEC nevertheless provided the Court with
information about the basis for its conclusion that documents
responsive to category two were already provided to Stein in
the Heart Tronics litigation or were included on the
privilege log. See Gov't's Reply [ECF No.
16] at 4-6. The SEC relies on a declaration submitted by an
attorney in the Heart Tronics litigation in response
to Stein's motion to compel in that case, which explains
the SEC's “open file” discovery policy during
that investigation. Id. at 4; see also SEC
Am. & Supp. Resp. to Request for Produc. of Docs., Ex. A
to Gov't's Reply [ECF No. 16-1] ¶ 3; Nonaka
Decl., Ex. B to Gov't's Reply [ECF No.
to the Nonaka declaration, the SEC produced two million pages
of documents to Stein and his co-defendants during the
litigation, which constituted “all subpoenas and
voluntary document requests issued during the investigation,
all documents produced in response to such subpoenas and
requests, all investigation testimony given by any witness,
and all exhibits to all testimony.” Nonaka Decl.
¶¶ 5-6. The SEC also made available for review two
one-terabyte hard drives that were delivered to the SEC on
behalf of Heart Tronics, and which contained data from Heart
Tronics computers, as well as boxes of documents likewise
delivered by Heart Tronics (the “RenewData
materials”). Id. ¶¶ 7-8. The SEC
received these materials from RenewData, a third party
e-discovery vendor that Heart Tronics' one-time counsel,
Greenberg Traurig, LLP, had contracted with on Heart
Tronics' behalf to help manage the discovery process
during the SEC's investigation. The SEC received the ...