Fox News Network, LLC v. Board of Governors of the Federal Reserve System, No. 09-3795 (2d Cir. 2010)

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09-3795-cv Fox News Network, LLC v. Board of Governors of the Federal Reserve System 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 2009 (Argued: January 11, 2010 Decided: March 19, 2010) Docket No. 09-3795-cv - - - - - - - - - - - - - - - - - - - -x FOX NEWS NETWORK, LLC, Plaintiff-Appellant, - v.BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, Defendant-Appellee. - - - - - - - - - - - - - - - - - - - -x Before: JACOBS, Chief Judge, LEVAL and HALL, Circuit Judges. Plaintiff Fox News Network, LLC, appeals from a 31 judgment entered July 30, 2009 in favor of defendant Board 32 of Governors of the Federal Reserve System by the United 33 States District Court for the Southern District of New York 34 (Hellerstein, J.) in a suit brought to enforce a Freedom of 35 Information Act request for information relating to lending 36 conducted by the twelve regional Federal Reserve Banks. For 1 the reasons stated today in the tandem case, Bloomberg L.P. 2 v. Bd. of Governors of the Fed. Reserve Sys., ___ F.3d ___, 3 No. 09-4083-cv, (2d Cir. March 19, 2010), the disputed 4 information was not exempt from disclosure under Exemption 4 5 of the Freedom of Information Act . 6 the records of the twelve regional Federal Reserve Banks do 7 not automatically become records of the Board, certain 8 records of the Federal Reserve Banks are records of the 9 Board and must be searched. 10 We hold here that while The district court s judgment is vacated and the case is remanded. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 STEPHEN G. MINTZ (Terence W. McCormick, Lisabeth Harrison, Paul Ostensen on the brief), Mintz & Gold LLP, New York, NY, for Plaintiff-Appellant. MATTHEW M. COLLETTE (Tony West, Mark B. Stern on the brief), Department of Justice, Washington, D.C.; YVONNE F. MIZUSAWA (Richard M. Ashton, Katherine H. Wheatley on the brief), Board of Governors of the Federal Reserve System, Washington, D.C., for DefendantAppellee. Robert J. Giuffra, Jr., H. Rodgin Cohen, Michael M. Wiseman, William J. Snipes, Patrice A. Rouse, Erez J. Davy, Sullivan & Cromwell LLP, New 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 York, NY, for Amicus Curiae The Clearing House Association L.L.C. in support of DefendantAppellee. Melanie Sloan, Anne L. Weismann, Citizens for Responsibility and Ethics in Washington, Washington D.C., for Amicus Curiae Citizens for Responsibility and Ethics in Washington in support of Plaintiff-Appellant. DENNIS JACOBS, Chief Judge: The Federal Reserve System--the central bank of the 17 United States--is composed of twelve regional Federal 18 Reserve Banks and the defendant-appellee Board of Governors 19 of the Federal Reserve System ( Board ) in Washington, D.C. 20 The Board is a federal agency that (among other things) 21 supervises the operations of the twelve Federal Reserve 22 Banks. 23 Plaintiff Fox News Network, LLC, ( Fox News ) submitted 24 two Freedom of Information Act ( FOIA ) requests to the 25 Board in November 2008. 26 the private banks that received loans from the twelve 27 Federal Reserve Banks (under all of their lending programs) 28 from August 2007 to November 2008, and the collateral the 29 banks provided. The first sought the names of all The second sought the names of the 3 1 borrowing banks, the amount they borrowed, and the 2 collateral pledged as to all loans made by the twelve 3 Federal Reserve Banks during September and October 2008. 4 The Board denied these requests in January 2009, noting that 5 while it possessed some responsive records, it was 6 withholding the requested information under Exemptions 4 and 7 5 of FOIA. 8 the FOIA requests, the Board determined that it had no 9 information about the collateral used by borrowing banks to During its search for documents responsive to 10 secure specific loans, and that such information would be 11 held by the Federal Reserve Bank that made each loan. 12 since the Board is of the view that the relevant records of 13 the Federal Reserve Banks are not records of the Board, the 14 Board concluded that a FOIA request to the Board did not 15 require the Board to search for them--and no search was 16 conducted. 17 But Fox News brought suit in the United States District 18 Court for the Southern District of New York (Hellerstein, 19 J.) to compel disclosure of the Board s documents and a 20 search of documents in the hands of the Federal Reserve 21 Banks. 22 district court ruled in favor of the Board, holding both Following cross motions for summary judgment, the 4 1 that the records maintained by the Board are properly exempt 2 from disclosure under FOIA Exemption 4, and that the Board 3 was not required to search records maintained by the Federal 4 Reserve Banks. 5 the Fed. Reserve Sys., 639 F. Supp. 2d 384, 394, 401 6 (S.D.N.Y. 2009). 7 discuss Exemption 5, and on appeal the Board argues only the 8 applicability of Exemption 4. 9 Fox News Network, LLC v. Bd. of Governors of The district court s opinion did not For the reasons stated in the tandem case, Bloomberg 10 L.P. v. Board of Governors of the Fed. Reserve Sys., ___ 11 F.3d ___, No. 09-4083-cv, (2d Cir. March 19, 2010), the 12 information unambiguously at issue in the Fox News requests 13 --the identity of the borrowing bank, the dollar amount of 14 the loans, the collateral securing the loans, and the loan 15 origination and maturity dates --is not protected from 16 disclosure by Exemption 4. 17 to disclose responsive records it had previously deemed 18 exempt; we vacate the district court s judgment and remand 19 to the district court to order the Board to disclose the 20 previously withheld responsive information. 21 22 The Board is therefore required Still at issue is whether the Board adequately searched its records and the records of the twelve Federal Reserve 5 1 Banks in response to these FOIA requests. 2 that: (1) the Board was required to search the loan records 3 of each of the twelve Federal Reserve Banks, and (2) the 4 Board misconstrued Fox News s FOIA requests in the Board s 5 search of its own records. 6 Fox News argues As the district court concluded, not all lending 7 records of the twelve Federal Reserve Banks necessarily 8 become records of the Board. 9 provide that some records at the Federal Reserve Banks-- However, Board regulations 10 those kept at the Federal Reserve Banks under certain 11 conditions for administrative reasons --are records of the 12 Board; these must be searched. 13 court to order further searches and to determine if the 14 fruits of those searches must be disclosed. 15 court did not reach the question of whether the Board 16 misconstrued the scope of the Fox News FOIA requests (the 17 district court having ruled these documents would be exempt 18 from disclosure in any instance); we remand for further 19 consideration of that question as well. We remand to the district The district 20 21 22 I Barring a relevant exemption, an agency must disclose 6 1 responsive agency records in order to comply with a FOIA 2 request. 3 U.S. Dep t of Justice, 19 F.3d 807, 812 (2d Cir. 1994). 4 News argues on appeal that all of the lending records of the 5 twelve Federal Reserve Banks are agency records of the 6 Board within the scope of FOIA. 7 552(a)(4)(B). 8 (1) the agency created or obtained the relevant records, and 9 (2) the agency is in control of the documents at the time of See 5 U.S.C. § 552(a)(4)(B) ; see also Carney v. Fox See 5 U.S.C. § Materials are agency records under FOIA if: 10 the FOIA request. 11 492 U.S. 136, 144-45 (1989). 12 [t]he Secretary of the Board . . . is the official 13 custodian of all Board records, including records that are 14 in the possession or control of the Board, any Federal 15 Reserve Bank, or any Board or Reserve Bank employee. 16 C.F.R. § 261.3(a). 17 Board records that are in the hands of the Federal Reserve 18 Banks, such records must be searched by the Board pursuant 19 to FOIA. 20 Bank records are Board records that the Board must search. 21 22 U.S. Dep t of Justice v. Tax Analysts, Under the Board s regulations, 12 Since the Board is the custodian of It remains to be determined which Federal Reserve Fox News argues that the responsive loan records are among those records held at the Federal Reserve Banks that 7 1 are also records of the Board. 2 the Federal Reserve Banks become records of the Board when 3 they are created pursuant to the performance of functions 4 for or on behalf of the Board or when they are maintained 5 for administrative reasons in the regular course of business 6 in official files in any division or office of the Board or 7 any Federal Reserve Bank in connection with the transaction 8 of any official business. 9 (The full text of the regulation is set out in the margin). 1 10 By regulation, records of 12 C.F.R. § 261.2(i)(1)(i-ii). A declaration submitted by the attorney for the Board 11 in charge of processing FOIA requests states that the Board 12 interprets the qualifier for or on behalf of the Board to 13 describe a function performed by the Federal Reserve Bank 14 under delegated authority from the Board. 15 Alison M. Thro ¶ 3. 16 expression of this internal policy or interpretation, or any Supp. Decl. of The Board cites no written or published 1 Records of the Board include . . . all information coming into the possession and under the control of the Board, any Board member, any Federal Reserve Bank, or any officer, employee, or agent of the Board or of any Federal Reserve Bank, in the performance of functions for or on behalf of the Board that constitute part of the Board s official files; or [records] [t]hat are maintained for administrative reasons in the regular course of business in official files in any division or office of the Board or any Federal Reserve Bank in connection with the transaction of any official business. 12 C.F.R. § 261.2(i)(1)(i-ii) (emphases added). 8 1 prior application of it. 2 deference it commands or deserves. 3 It is therefore uncertain how much In any event, it seems clear from the statutory scheme 4 that enacted the Federal Reserve System that the lending 5 activities of the Federal Reserve Banks do not take place 6 on behalf of or under the delegated authority of the 7 Board. 8 bank, and does not authorize each loan made by the Federal 9 Reserve Banks. The Board itself has no power to make a loan to any The power to make loans is explicitly 10 granted by statute only to the Federal Reserve Banks 11 themselves. 12 divided the powers of the Federal Reserve System between the 13 Board, which is a federal agency, and the [Federal Reserve 14 Banks], which were established as regional banks. . . . 15 Federal Reserve [System] is structured to empower local 16 institutions to lend, while permitting federal oversight. 17 Fox News Network, LLC v. Bd. of Governors of the Fed. 18 Reserve Sys., 639 F. Supp. 2d 384, 396 (S.D.N.Y. 2009). 19 is evident from the legislative history of the Federal 20 Reserve Act that Congress did not intend to give the federal 21 government direction over the daily operation of the 22 [Federal] Reserve Banks. 12 U.S.C. § 347b(a). In that way, Congress The It Lewis v. United States, 680 F.2d 9 1 1239, 1241 (9th Cir. 1982). 2 nor authorizes the specific loans that Fox News seeks 3 documentation of, we agree that the Federal Reserve Banks 4 did not issue each loan on behalf of the Board, or under 5 the delegated authority of the Board. 2 Since the Board neither issues 6 However, Records of the Board also include such 7 records that are maintained for administrative reasons in 8 the regular course of business in official files in any 9 division or office of the Board or any Federal Reserve Bank 10 in connection with the transaction of any official 11 business. 12 briefly that it interprets this regulation as well to 13 include only those records created under delegated 14 authority from the Board. 15 withstand scrutiny. 16 regulation gives no support for the proposed limitation. 12 C.F.R. § 261.2(i)(1)(ii). The Board argues This interpretation does not The context and phrasing of the 2 As Judge Leval does not concur in this paragraph. In his view, it is unnecessary to answer in this appeal whether lending by the Federal Reserve Banks is done for or on behalf of the Board. Fox News has made clear that all it seeks in its FOIA demand is the identifies of the borrowing banks and the terms of the loans. All such information will be contained in records maintained for administrative reasons in the regular course of business in official files in . . . [a] Federal Reserve Bank. Accordingly all the information in the Federal Reserve Banks that is sought in this case is contained in documents which are subject to production by the Board. 10 1 the district court held in Bloomberg--without appeal from 2 the Board on that point--this regulation provides that 3 certain records of the twelve Federal Reserve Banks are 4 records of the Board and those records must be searched. 5 Bloomberg L.P. v. Bd. of Governors of the Fed. Reserve Sys., 6 649 F. Supp. 2d 262, 274 (S.D.N.Y. 2009). 7 To fully comply with the Fox News FOIA requests, the 8 Board must search records of the twelve Federal Reserve 9 Banks that are maintained for administrative reasons, in the 10 regular course of business, in the Board s official files or 11 by any Federal Reserve Bank, and in connection with the 12 transaction of any official business. 13 documents identified in that search must be produced unless 14 shielded by some FOIA exemption. 15 court to order the Board s further searches and to determine 16 if the results of those searches must be disclosed. And responsive We remand to the district 17 18 19 II Fox News also argues that the Board improperly narrowed 20 the scope of its FOIA requests with regard to collateral 21 pledged by borrowing banks. 22 requested not only collateral associated with specific loans According to Fox News, it 11 1 (which is held only by the Federal Reserve Banks), but also 2 general collateral information (which is held by the Board 3 itself). 3 4 general information of this sort--such as the collateral 5 that depository institutions have on deposit in pledge 6 accounts, which is eligible to be posted as collateral for 7 a Discount Window loan--it does not believe such information 8 was within the scope of the Fox News requests. 9 argues that it properly interpreted the requests to seek The Board claims that while it possesses some The Board 10 only specific collateral pledged for specific loans. 11 information is held only at the Federal Reserve Banks. 12 That This issue was not decided below because the district 13 court ruled categorically that collateral information is 14 protected from disclosure by Exemption 4. 15 such general collateral information was requested, or 16 whether, under Bloomberg L.P. v. Board of Governors of the 17 Fed. Reserve Sys., ___ F.3d ___, No. 09-4083-cv, (2d Cir. 3 It is unclear if The first Fox News request initially sought, in relevant part, an accounting of the collateral provided by these [borrowing] institutions in exchange for lending. This request was later arguably broadened to seek[] an accounting of the collateral provided by these [borrowing] institutions --a formulation that is less transaction specific. The second Fox News request sought, in relevant part, records sufficient to identify all collateral pledged by each . . . institution that participated in any Fed[eral Reserve System] lending program. 12 1 March 19, 2010), such information could be withheld. 2 decline to decide these questions in the first instance and 3 remand to the district court for judgment on this point 4 consistent with our opinion. We 5 6 7 CONCLUSION We vacate the district court s judgment for the 8 foregoing reasons and those stated in the tandem case, 9 Bloomberg L.P. v. Bd. of Governors of the Fed. Reserve Sys., 10 ___ F.3d ___, No. 09-4083-cv, (2d Cir. March 19, 2010). 11 remand to the district court to order the Board s further 12 disclosure and further searches, and to determine if what is 13 discovered in further searches must be disclosed. 14 remand to the district court for initial consideration as to 15 whether the Board properly construed the scope of the FOIA 16 requests and searched its own records in response, and 17 whether materials that may be found must be disclosed. 13 We We also

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