Bloomberg L.P. v. Board of Governors of the Federal Reserve System, No. 09-4083 (2d Cir. 2010)

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09-4083-cv; 09-4097-cv Bloomberg L.P. 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 31 32 33 34 35 36 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 2009 (Argued: January 11, 2010 Decided: March 19, 2010) Docket No. 09-4083-cv; No. 09-4097-cv (CON) - - - - - - - - - - - - - - - - - - - -x BLOOMBERG, L.P., Plaintiff-Appellee, - v.BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, Defendant-Appellant, and THE CLEARING HOUSE ASSOCIATION L.L.C., Intervenor-Appellant. - - - - - - - - - - - - - - - - - - - -x Before: JACOBS, Chief Judge, LEVAL and HALL, Circuit Judges. Defendant Board of Governors of the Federal Reserve 37 System appeals from a judgment entered August 24, 2009 in 38 favor of plaintiff Bloomberg, L.P., by the United States 39 District Court for the Southern District of New York 1 (Preska, Ch.J.) compelling disclosure under the Freedom of 2 Information Act of information about loans made by the 3 Federal Reserve Banks. 4 information sought does not fall within the Act s Exemption 5 4. We affirm, holding that the 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 31 32 33 34 35 36 37 38 THOMAS H. GOLDEN, Willkie Farr & Gallagher LLP, New York, NY; (Charles J. Glasser, Jr., Global Media Counsel, Bloomberg News, New York on the brief), NY for Plaintiff-Appellee. 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 DefendantAppellant. ROBERT J. GIUFFRA, JR. (H. Rodgin Cohen, Michael M. Wiseman, William J. Snipes, Patrice A. Rouse, Erez J. Davy on the brief), Sullivan & Cromwell LLP, New York, NY, for Intervenor-Appellant. Melanie Sloan, Anne L. Weismann, Citizens for Responsibility and Ethics in Washington, Washington, D.C., for Amicus Curiae Citizens for Responsibility and Ethics in 2 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 31 32 33 34 35 36 37 38 39 40 41 42 Washington in support of Plaintiff-Appellee. David A. Schulz, Alia L. Smith, Levine Sullivan Koch & Schultz, LLP, New York, NY for Amici Curiae Advanced Publications, Inc., American Society of News Editors, Dow Jones & Company, Inc., Gannett Company, Inc., Hearst Corporation, Magazine Publishers of America, Inc., National Newspaper Association, Reports Committee for Freedom of the Press, Reuters America LLC, The Association of Alternative Newsweeklies, The Associated Press, The National Conference of Editorial Writers, and the New York Times Co. ( Press Amici ) in support of PlaintiffAppellee. Cory L. Andrews, Daniel J. Popeo, Washington Legal Foundation, Washington, D.C., for Amici Curiae Washington Legal Foundation and Allied Educational Foundation in support of Plaintiff-Appellee. C. Dawn Causey, Gregory Taylor, American Bankers Association, Washington, D.C., for Amicus Curie American Bankers Association in support of Defendant-Appellant and Intervenor-Appellant. DENNIS JACOBS, Chief Judge: The Federal Reserve System--the central bank of the 3 1 United States--is composed of twelve regional Federal 2 Reserve Banks and the defendant-appellant Board of Governors 3 of the Federal Reserve System ( Board ), in Washington, D.C. 4 The Board is a federal agency that (among other things) 5 supervises the operations of the twelve Federal Reserve 6 Banks. 7 Plaintiff Bloomberg, L.P., a news organization, 8 submitted Freedom of Information Act ( FOIA ) requests to 9 the Board in April and May 2008. The requests sought (in 10 relevant part) detail about loans that the twelve Federal 11 Reserve Banks made to private banks in April and May 2008 at 12 the Discount Window and pursuant to ad hoc emergency lending 13 programs (described in the margin 1 ). 1 Bloomberg asked, loan Bloomberg sought information about loans conducted at the Discount Window, the Primary Dealer Credit Facility ( PDCF ), the Term Securities Lending Facility ( TSLF ), and the Term Auction Facility ( TAF ). The Discount Window is the long-standing program through which the twelve Federal Reserve Banks make short-term loans (often overnight) to depository institutions, and it can serve as an emergency, back-up source of liquidity for borrowing depository institutions that lack other options. Decl. of Brian F. Madigan ¶ 18. In the financial crisis of 2007, the Board authorized the Federal Reserve Banks to implement the TAF, a form of Discount Window lending that provides longer-term loans to depository institutions in amounts and at rates set by auction. In response to the continuing financial crisis, in 2008 the Board authorized the Federal Reserve Bank of New York to lend to primary dealers (certain banks and broker dealers) through the PDCF and TSLF. The PDCF expands Discount Window-style lending to primary dealers. The TSLF 4 1 by loan, for the name of the borrowing bank, the amount of 2 the loan, the origination and maturity dates, and the 3 collateral given. 4 The Board denied these requests (in relevant part) in 5 December 2008. 6 showing the loan information Bloomberg sought, with the 7 exception of the collateral; collateral information is held 8 by the lending Federal Reserve Banks. 9 that the responsive information in its possession--contained The Board conceded possession of records But the Board advised 10 in Remaining Term Reports --was exempt from disclosure 11 under FOIA Exemptions 4 and 5. 12 lending records of the twelve Federal Reserve Banks, 13 explaining that a request to the Board does not constitute a 14 request for information held by those institutions. 15 The Board did not search the Bloomberg brought this action in November 2008 (before 16 receiving the formal denial of both its requests) in the 17 United States District Court for the Southern District of 18 New York (Preska, Ch.J.) to compel disclosure of the 19 responsive documents and to compel the Board to conduct a 20 search of the records held at the Federal Reserve Bank of permits primary dealers to obtain Treasury Securities in exchange for a pledge of other types of securities; this is implemented through an auction administered by the Federal Reserve Bank of New York. 5 1 New York (which had granted many of the largest loans in the 2 relevant period). 3 judgment, the district court ruled that the Remaining Term 4 Reports were not exempt from FOIA disclosure under FOIA 5 Exemption 4 or 5, and that certain Federal Reserve Bank 6 records must be searched to respond adequately to the FOIA 7 request. 8 Reserve Sys., 649 F. Supp. 2d 262 (S.D.N.Y. 2009). 9 judgment was entered, the Clearing House Association (a Following cross-motions for summary See Bloomberg L.P. v. Bd. of Governors of the Fed. After 10 group of banks) was granted leave to intervene as a 11 defendant. 12 the records of the Federal Reserve Bank of New York had not 13 been searched, we need not decide here whether what may be 14 found must be produced. 15 The judgment was stayed pending this appeal. As The Board and the Clearing House appeal only on the 16 ground that a proper interpretation of FOIA Exemption 4 17 covers the requested material. 18 Exemption 5, or as to the scope of the Board s (disputed) 19 obligation to conduct a search of records at the Federal 20 Reserve Bank of New York. 21 as to Exemption 5, or either side had as to the scope of the 22 ordered search at the Federal Reserve Bank of New York is No contest is made as to Any argument that the Board had 6 1 therefore deemed waived. Norton v. Sam s Club, 145 F.3d 2 114, 117 (2d Cir. 1998). Whether certain records of the 3 twelve Federal Reserve Banks are records of the Board is an 4 issue that is decided in an opinion--filed simultaneously 5 with this opinion--in the appeal (heard in tandem with this 6 appeal) from the Southern District s decision in Fox News 7 Network, LLC v. Board of Governors of the Fed. Reserve Sys., 8 639 F. Supp. 2d 384 (S.D.N.Y. 2009). 9 LLC v. Bd. of Governors of the Fed. Reserve Sys, ____ F.3d 10 11 See Fox News Network, ____, No. 09-3795 (2d Cir. March 19, 2010). The only question decided in this opinion is whether 12 the Board may withhold the responsive Remaining Term Reports 13 under Exemption 4, which allows a federal agency (in this 14 case, the Board) to refuse disclosure of trade secrets and 15 commercial or financial information obtained from a person 16 and privileged or confidential. 17 Exemption Four applies if a tripartite test is satisfied: 18 (1) The information for which exemption is sought must be a 19 trade secret or commercial or financial in character; (2) it 20 must be obtained from a person; and (3) it must be 21 privileged or confidential. 22 (2d Cir. 1996) (emphasis added) (internal citations, 5 U.S.C. § 552(b)(4). Nadler v. FDIC, 92 F.3d 93, 95 7 1 alterations, and quotation marks omitted). 2 concedes that the information is financial in character: 3 That is why it wants it. 4 second and third parts are satisfied. 5 Bloomberg The parties dispute whether the We hold that the information at issue--the identity of 6 the borrowing bank, the dollar amount of the loans, the loan 7 origination and maturity dates, and the collateral securing 8 the loan --was not obtained from the borrowing banks within 9 the meaning of FOIA Exemption 4. We therefore do not reach 10 the question whether such information is privileged or 11 confidential as to the borrowing banks. 12 The Board s alternative argument is that the Board 13 obtained information from the Federal Reserve Banks, and 14 that the Federal Reserve Banks are persons. 15 a fair question as to whether the Federal Reserve Banks are 16 persons or agencies, we conclude that disclosure of the 17 contested records would not cause the Federal Reserve Banks 18 to suffer the kind of harm contemplated by the privileged 19 or confidential requirement of Exemption 4. Putting aside 20 21 22 I The basic purpose [of FOIA] reflected a general 8 1 philosophy of full agency disclosure unless information is 2 exempted under clearly delineated statutory language. 3 Dep t of the Air Force v. Rose, 425 U.S. 352, 360-361 (1976) 4 (internal quotation marks omitted). 5 To implement this presumption for disclosure, FOIA 6 exemptions have been consistently given a narrow compass. 7 U.S. Dep t of Justice v. Tax Analysts, 492 U.S. 136, 151 8 (1989); see also Inner City Press/Cmty. on the Move v. Bd. 9 of Governors of the Fed. Reserve Sys., 463 F.3d 239, 244 (2d 10 Cir. 2006). 11 disclosure. 12 845 F.2d 1177, 1180 (2d Cir. 1988). 13 the agency to justify the withholding of any requested 14 documents. 15 (1991). 16 exempt from disclosure receives no deference; accordingly, 17 the district court decides de novo whether the agency has 18 sustained its burden. 19 of Justice v. Reporters Comm. for Freedom of the Press, 489 20 U.S. 749, 755 (1989). 21 Halpern v. FBI, 181 F.3d 279, 288 (2d Cir. 1999). 22 [A]ll doubts [are] resolved in favor of Local 3, Int l Bhd. of Elec. Workers v. NLRB, And the burden [is] on U.S. Dep t of State v. Ray, 502 U.S. 164, 173 The agency s decision that the information is 5 U.S.C. § 552(a)(4)(B) ; U.S. Dep t Appellate review is likewise de novo. The Board advances two distinct arguments to support 9 1 the proposition that the disputed information was obtained 2 from a person under Exemption 4: (1) the loan information 3 contained in the Remaining Term Reports was obtained from 4 the borrowing banks because the amount, terms, and 5 conditions of each loan to each borrower was in effect 6 determined by the loan request itself; and (2) the Federal 7 Reserve Banks that made the loans and passed the information 8 on to the Board are person[s] from which the Board 9 obtained the information. 10 II 11 12 Was the information in the Remaining Term Reports 13 obtained from a person? 14 including an individual, partnership, corporation, 15 association, or public or private organization other than an 16 agency. 17 borrowing banks are persons under this definition. 18 FOIA defines a person as 5 U.S.C. § 551(2). It is uncontested that the A completed loan application will ordinarily contain 19 considerable information, and when it is submitted to a 20 lender, the lender has obtained that information from the 21 applicant. 22 applications; it seeks documents that show what loans the But Bloomberg s FOIA request does not seek loan 10 1 Federal Reserve Banks actually made. 2 loan terms allows one to back into information about the 3 borrower; inferences may be drawn that the bank that got the 4 loan asked for it, that it got no more than it requested, 5 and that the other terms were acceptable to the borrower. 6 But the fact of the loan (and its terms) cannot be said to 7 be obtained from the borrower, however confident, 8 creditworthy, and presumptuous the borrower may be. 9 fact that information about an individual can sometimes be 10 inferred from information generated within an agency does 11 not mean that such information was obtained from that person 12 within the meaning of FOIA. 13 (FOIA exemptions are to be narrowly construed ). 14 True, disclosure of The Cf. Rose, 425 U.S. at 360-61 The information requested by Bloomberg was generated 15 within a Federal Reserve Bank upon its decision to grant a 16 loan. 17 until a Federal Reserve Bank made the decision to approve 18 the loan request. 19 information be obtained from a person to restrict the 20 exemption s application to data which have not been 21 generated within the Government. 22 Commodity Futures Trading Comm n, 627 F.2d 392, 403-04 (D.C. Like the loan itself, it did not come into existence [Courts] have read the requirement that 11 Board of Trade v. 1 Cir. 1980)); see also Judicial Watch, Inc. v. FDA, 449 F.3d 2 141, 148 (D.C. Cir. 2006) ( Unlike many other types of 3 information subject to an agency s control, materials 4 implicating Exemption 4 are generally not developed within 5 the agency. ). 6 involving a FOIA request to the Small Business 7 Administration, Judge Curtin concluded that the agency s 8 loan information was generated by the [Small Business 9 Administration] in the course of its involvement with its In an analogous case in this Circuit, 10 borrowers. 11 Admin., 666 F. Supp. 467, 469 (W.D.N.Y. 1987). 12 Buffalo Evening News, Inc. v. Small Business Some courts have extended the protection of Exemption 4 13 to information beyond the raw data gathered from persons by 14 the government. 15 Dep t of Labor, 220 F.3d 153, 162 n.23 (3d Cir. 2000) 16 (holding that disclosure of a ratio derived by an agency 17 from the numbers supplied by a person would disclose 18 commercial information obtained from a person and would thus 19 come within Exemption 4 if the information was 20 confidential); (Gulf & W. Indus., Inc. v. United States, 615 21 F.2d 527, 530 (D.C. Cir. 1979) (holding that disclosure of a 22 government report containing figures from which information See, e.g., OSHA Data/CIH, Inc. v. U.S. 12 1 obtained from a company could be extrapolated would disclose 2 information obtained from a person and came within Exemption 3 4). 4 where what is requested is not merely the information 5 collected and slightly reprocessed by the government, but 6 disclosure of the agency s own executive actions. 7 conclude that they do not provide a reason to extend 8 Exemption 4 to cover the information requested in this case. 9 The Board s chief argument is that, with respect to the 10 Discount Window and the other programs at issue, the Federal 11 Reserve Banks have no discretion in choosing whether to 12 grant the requested loans--so that in effect, it is the 13 borrowing bank that supplies to the Federal Reserve Bank the 14 particulars of the loan that the Federal Reserve Bank will 15 make as a matter of course. 16 Federal Reserve Banks did nothing but translate the loan 17 requests (information obtained from the borrowing banks) 18 into loan approvals for payout by compliant tellers. 19 other words, it argues, the information was generated by 20 the borrowers, not the Federal Reserve Banks. But these cases do not bear upon the present case, We According to the Board, the In 21 The Board s argument relies on the requested loans 22 being granted automatically; only in that way would the 13 1 information Bloomberg seeks be the same as the information 2 supplied by the borrowing banks and arguably not generated 3 or developed by the Federal Reserve Banks. 4 (even if it were decisive) is not supported by the record. 5 According to Dr. Brian Madigan, a Board economist who 6 submitted a declaration in this matter: Upon receipt of a 7 typical [Discount Window] borrowing request, the Federal 8 Reserve Banks would review the request, verify collateral 9 and, if approved, enter the loan in the Reserve Bank s loan This premise 10 and accounting system. 11 (emphasis added). 12 it follows that withholding approval would prevent it. 13 all the programs at issue, loans are made only upon the 14 presentation of collateral when the loan is sought. 15 Decl. of Brian F. Madigan ¶ 11 Since approval is required for the loan, In Id. Moreover, as Dr. Madigan also explained, apparently 16 with regard to all lending programs, the Federal Reserve 17 Banks lend only against acceptable collateral. 18 (emphasis added). 19 collateral coverage it will require, and some forms of 20 collateral are readily valued and presumptively acceptable; 21 but collateral is scrutinized, the decision as to adequacy 22 is made by the lender, and a loan is denied unless the Id. The Board may publish in advance the 14 1 collateral is acceptable. 2 may be readily anticipated by the borrower, and come as no 3 surprise to either party, but it is not information that the 4 borrower can be said to have generated or imparted to the 5 lender. 6 The acceptability of collateral In any case, even if the loans were granted 7 automatically, they did not come into existence until the 8 Federal Reserve Bank took executive action by granting the 9 loan. The only information sought is a summary report of 10 actions that were taken by the government. 11 said that the government obtained information as to its 12 own acts and doings from external sources or persons. And it cannot be 13 III 14 15 In the alternative, the Board argues that the 16 information at issue was obtained from the Federal Reserve 17 Banks, and that the Federal Reserve Banks themselves are 18 person[s] under FOIA. 19 Reserve Banks were defined as persons under FOIA,2 the However, even if the Federal 2 This would require a finding that a Federal Reserve Bank is not itself an agency: a person includes an individual, partnership, corporation, association, or public or private organization other than an agency. 5 U.S.C. § 551(2) (emphasis added). Because we reject the Board s argument on a different ground, we need not decide that 15 1 information passed from them to the Board would still be 2 subject to disclosure unless it is privileged or 3 confidential within the meaning of Exemption 4. 4 Nadler, 92 F.3d at 95. 5 See We have stated that one way in which information is 6 confidential for the purposes of Exemption 4 [is] if its 7 disclosure would have the effect . . . of causing 8 substantial harm to the competitive position of the person 9 from whom the information was obtained. 10 Press/Cmty. on the Move, 463 F.3d at 244. 11 not undertake to show that the Federal Reserve Banks are 12 subject to competition, or that the disclosure of the 13 requested information would cause competitive injury to the 14 Federal Reserve Banks. 15 (information must be privileged or confidential to be 16 withheld under Exemption 4). Inner City The Board does Cf. Nadler, 92 F.3d at 95 17 The only prejudice or harm claimed by the Board for 18 itself (and the only issue of prejudice or harm we consider) 19 is that disclosure would impair its mission--to furnish 20 critical infusions to distressed banks on a confidential 21 basis--and thereby prevent loss of confidence, bank runs, question. 16 1 fluctuations of bank stock, and rippling harm to the banking 2 system. 3 Exemption 4 to encompass the so-called program 4 effectiveness test, adopted by the First and District of 5 Columbia Circuits , which allows agencies to withhold 6 information as confidential under Exemption 4 if they 7 believe that withholding it serves a valuable purpose and 8 is useful for the effective execution of its statutory 9 responsibilities. We are therefore asked to extend the reach of 9 to 5 Org. for Women Office Workers v. 10 Bd. of Governors of Fed. Reserve Sys., 721 F.2d 1, 11 (1st 11 Cir. 1983); see also Critical Mass Energy Project v. Nuclear 12 Regulatory Comm n, 830 F.2d 278, 287 (D.C. Cir. 1987) 13 (adopting program effectiveness test), overruled on other 14 grounds by Critical Mass Energy Project v. Nuclear 15 Regulatory Comm n, 975 F.2d 871, 879 (D.C. Cir. 1992) (in 16 banc). 17 The program effectiveness test, if applied as the 18 Board invokes it, would give impermissible deference to the 19 agency, and would be analogous to the public interest 20 standard rejected by the Supreme Court in the context of 21 Exemption Five. 22 Sys. v. Merrill, 443 U.S. 340, 354 (1979). See Fed. Open Market Comm. of Fed. Reserve 17 In that case, 1 the agency s principal argument [was] that Exemption 5 2 confers general authority upon an agency to delay disclosure 3 of intra-agency memoranda that would undermine the 4 effectiveness of the agency s policy if released 5 immediately. 6 Court rejected that argument in terms that are instructive: 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Id. at 353 (emphasis added). The Supreme [T]he [agency s] argument proves too much. Such an interpretation of Exemption 5 would appear to allow an agency to withhold any memoranda . . . whenever the agency concluded that disclosure would not promote the efficiency of its operations or otherwise would not be in the public interest. This would leave little, if anything, to FOIA s requirement of prompt disclosure, and would run counter to Congress repeated rejection of any interpretation of the FOIA which would allow an agency to withhold information on the basis of some vague public interest standard. Id. at 354 (emphasis added). The public interest standard rejected in Merrill is 24 the functional equivalent of the program effectiveness 25 test, as the Board invokes it: the agency gets to withhold 26 whatever it deems harmful to disclose--and an agency s 27 decision as to its own mission and effectiveness is the kind 28 of thing that ordinarily commands deferential review. 29 Board and the Clearing House undertake to show that 30 disclosure would harm the banks that borrowed (by disclosing 18 The 1 their prior distress) and the banking system as a whole 2 (because banks under stress may hesitate to seek relief or 3 rescue), and that these harms will reduce the effectiveness 4 of measures critical to the banking system . 5 are plausible, and forcefully made. 6 an agency to deny disclosure because the agency thinks it 7 best to do so (or convinces a court to think so, by logic or 8 deference) would undermine the basic policy that 9 disclosure, not secrecy, is the dominant objective of 10 11 [FOIA]. The arguments But a test that permits See Rose, 425 U.S. at 361. The requirement of disclosure under FOIA and its proper 12 limits are matters of congressional policy. 13 written by Congress sets forth no basis for the exemption 14 the Board asks us to read into it. 15 such an exemption would better serve the national interest, 16 it should ask Congress to amend the statute. The statute as If the Board believes 17 18 19 20 * * * For the foregoing reasons, the judgment of the district court is affirmed. 19

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