You are on page 1of 8

Case 1:10-cv-00751-ABJ Document 22

Filed 11/16/11 Page 1 of 8

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA VERN McKINLEY, ) ) Plaintiff, ) ) v. ) ) BOARD OF GOVERNORS OF ) THE FEDERAL RESERVE SYSTEM, ) ) ) Defendant. ) ____________________________________)

Case No. 10:0751 (ABJ)

PLAINTIFFS REPLY IN SUPPORT OF ITS CROSS-MOTION FOR SUMMARY JUDGMENT Plaintiff Vern McKinley, by counsel and pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, respectfully submits this reply in support of his cross-motion for summary judgment. As grounds thereof, Plaintiff states as follows: I. Introduction. McKinley sent two Freedom of Information Act (FOIA) requests to Defendant Board of Governors of the Federal Reserve System (the Board) seeking information about the potential systemic effect on financial markets of not intervening in the failure of two large financial institutions during the financial crisis of 2008. Specifically, McKinley sought all records relating to the information relied upon or used by the Board when it decided to authorize the Federal Reserve Bank of New York (FRBNY) to extend credit to American International Group (AIG) as well as the information it relied upon or used when it determined that it would not authorize the FRBNY to extend credit to Lehman Brothers. Currently at issue is whether the Board has conducted adequate searches for responsive records, whether the Board continues to

Case 1:10-cv-00751-ABJ Document 22

Filed 11/16/11 Page 2 of 8

improperly withhold 17 records that are readily available to the public, and whether the Board continues to improperly withhold 67 records under claims of FOIA Exemptions 4, 5, and 8. II. Argument. A. The Board has failed to conduct adequate searches for responsive records.

The Board does not dispute that it did not search for responsive records located at the FRBNY. Nor does the Board dispute that the FRBNY created records pursuant to the performance of functions for or on behalf of the Board. Yet, the Board continues to assert that it was not required to search for responsive records located at the FRBNY even though, pursuant to the Boards own regulations, records of the FRBNY become records of the Board when they are created pursuant to the performance of functions for or on behalf of the Board. 12 C.F.R. 261.2(i)(1)(i) (Records of the Board include . . . all information coming into the possession and under control of . . . any Federal Reserve Bank, in the performance of functions for or on behalf of the Board.); see also Fox News Network, LLC v. Board of Governors of the Federal Reserve System, 601 F.3d 158, 161 (2nd Cir. 2010). In an attempt to justify its assertion, the Board states that, regardless of the plain meaning of its regulation, 12 C.F.R. 261.2(i)(1)(i) should be interpreted to mean that only records created by the FRBNY under delegated authority of the Board are Board records. In support of its interpretation, the Board submits the Supplemental Declaration of Alison M. Thro, executed April 17, 2009, filed in Fox News Network, LLC v. Board of Governors, No. 09-cv-00272 (AKH) (SDNY). In addition, the Board cites to and relies on the Second Circuits opinion in Fox News Network v. Board of Governors, 601 F.3d. 158, 161 (2d Cir. 2010) (Fox). Yet, the Fox opinion not only does not support the Boards position in the instant matter, but it also raises doubts as to the Boards interpretation of its own statute.

-2-

Case 1:10-cv-00751-ABJ Document 22

Filed 11/16/11 Page 3 of 8

First, in Fox, the plaintiff submitted a FOIA request for the names of all the private banks that received loans from the twelve Federal Reserve Banks as well as the names of the borrower banks, the amount they borrowed, and the collateral pledged to all loans made by the twelve Federal Reserve Banks during September and October 2008. Fox, 601 F.3d at 159. In other words, the plaintiff sought records related to the specific actions taken by the FRBNY and the other Federal Reserve banks. The plaintiff was not seeking records related to the decisionmaking of the Board. Therefore, the Second Circuit concluded that the records sought by the plaintiff were not records of activities performed on behalf of or under the delegated authority of the Board. Id. at 161 (emphasis added). Contrary to what the Board claims, the Second Circuit did not hold that the records of the Federal Reserve Banks at issue were not records of the Board because they were not created under the delegated authority of the Board. The Second Circuit instead determined that the requested records were not created on behalf of the Board. This distinction is not one without a difference. McKinley is not arguing that the Board delegated authority to the FRBNY and the FRBNY subsequently created records. McKinley instead has asserted that the FRBNY created records on behalf of the Board and the Board has not disputed that assertion. Defendants Combined Reply in Support of its Motion for Summary Judgment and Opposition to Plaintiffs Cross Motion for Summary Judgment (Defs Reply) at 8 ([T]he FRBNY assisted and advised the Board in its decisionmaking process.). Second, the Second Circuit did not find Thros declaration persuasive at all. The Court stated: A declaration submitted by the Attorney for the Board in charge of processing FOIA requests states that the Board interprets the qualifier for or on behalf of the Board to describe a function performed by the Federal Reserve Bank under a delegated authority from the Board. The Board cites no written or published

-3-

Case 1:10-cv-00751-ABJ Document 22

Filed 11/16/11 Page 4 of 8

expression of this internal policy or interpretation, or any prior application of it. It is therefore uncertain how much deference it commands or deserves. Id. at 161. Since the Second Circuits decision, the Board has neither updated its regulations nor published any expression of this interpretation. Instead, the Board has submitted the very same declaration that was questioned by the Second Circuit. Therefore, regardless of whether the Second Circuit held that the specific records at issue in that case were not created during the performance of functions for or on behalf of the Board, the Fox opinion does not stand for the proposition that only records created by the FRBNY under the delegated authority of the Board are Board records. The Board also argues that even if records located at the FRBNY are Board records subject to FOIA, the records located at the FRBNY that did not reach members, officials, or staff of the Board are outside the scope of McKinleys FOIA requests. The Board specifically asserts, Documents and communications from the FRBNY that played a part in the Boards decision making process necessarily must have been communicated or conveyed at some point from the FRBNY to the Board or Board Staff. Defs Reply at 9. Yet, this argument fails because of the specific information McKinley seeks in his FOIA requests. McKinley sought all records relied upon or used by the Board when it decided to authorize the Federal Reserve Bank of New York (FRBNY) to extend credit to American International Group (AIG) as well as the information it relied upon or used when it determined that it would not authorize the FRBNY to extend credit to Lehman Brothers. In his opening memorandum, McKinley demonstrated, based on the Boards own declarations, that the Board made its determinations of whether to authorize the extension of credit based primarily on the information gathered and analyzed by the FRBNY. All information conveyed by the FRBNY to the Board was based upon the underlying information created or

-4-

Case 1:10-cv-00751-ABJ Document 22

Filed 11/16/11 Page 5 of 8

collected by the FRBNY pursuant to the performance of functions for or on behalf of the Board. These records therefore are not only Board records but records relied upon or used by the Board in its decisionmaking process with respect to both AIG and Lehman Brothers. Based on the plain meaning of the regulation and the Second Circuits opinion in Fox, records of the FRBNY become records of the Board when they are created pursuant to the performance of functions for or on behalf of the Board. The Board has not disputed McKinleys demonstration that the FRBNY collected data, analyzed information, and undertook other tasks to determine the condition of AIG and Lehman Brothers as well as of financial systems generally at the direction of and under the supervision of the Board. Nor has the Board disputed that it relied on or used that information during its decisionmaking with respect to AIG and Lehman Brothers. The Board solely argues that its own regulation does not mean what it says and that the responsive records have never reached members, officials, or staff of the Board. The Board therefore is required to conduct proper searches of Board records located at the FRBNY to discover records responsive to McKinleys requests, and McKinley is entitled to summary judgment regarding the inadequacy of the Boards original searches. Steinberg v. U.S. Dept of Justice, 23 F.3d 548, 551 (D.C. Cir. 1994), quoting Weisberg v. U.S. Dept of Justice, 745 F.2d 1476, 1485 (D.C. Cir. 1984). B. Defendant continues to withhold material that is readily-available to the public.

In his opening memorandum, McKinley demonstrated that the Board continues to withhold 17 responsive records that have been disclosed, are preserved in a permanent public record, and are readily available at http://fcic.law.stanford.edu/resource. Therefore, with respect to only these 17 records, McKinley asserts that the Board has waived its claims of exemptions with respect to these records and requests that the Court order the Board to produce these 17 records in

-5-

Case 1:10-cv-00751-ABJ Document 22

Filed 11/16/11 Page 6 of 8

their entirety to McKinley. McKinley does not assert that the Board has waived its claims of exemptions with respect to any other records or that the Court should order the Board to produce all records responsive to his requests. The Boards reliance on Rockwell Intl Corp. v. U.S. Department of Justice, 235 F.3d 598 (D.C. Cir. 2001) and Murphy v. Department of the Army, 613 F.2d 1151 (D.C. Cir. 1979) is therefore misplaced. There is no concern that the production of the 17 readily available records will lead to future disclosure of other records. McKinley only asserts that the 17 records have lost their protective cloak because they have been disclosed and preserved in a permanent public record. Cottone v. Reno, 183 F.3d 550, 554 (D.C. Cir. 1999). In addition, whether the Financial Crisis Inquiry Commission improperly released the 17 records into the public domain is irrelevant. The Board has officially acknowledged that the 17 records are true and accurate copies of agency records. See Declaration of David C. Caperton at 12-15. The Board consequently has waived its claims of FOIA exemptions with respect to these 17 records. Military Audit Project v. Casey, 656 F.2d 724, 749 (D.C. 1981); see also Thompson v. Exec. Office for United States Attys., 587 F. Supp. 2d 202, 206-207 (D.D.C. 2008) (An agency may not rely on a FOIA exemption to withhold information that has been officially acknowledged.); Antonelli v. BATFE, 571 F. Supp. 2d 38, 41 (D.D.C. 2008). Therefore, McKinley requests that the Court order the production of these 17 records. C. The Board continues to improperly withhold 67 records under claims of FOIA Exemptions 4, 5, and 8.

As McKinley demonstrated in his opening memorandum, the Board has failed to satisfy its burden of proof under FOIA with respect to claims of exemption on 67 specific, responsive records. In its response, the Board noted that it does not object to in camera review of the 67 records. Defs Reply at 15-16. McKinley agrees that an in camera review of the 67 records may

-6-

Case 1:10-cv-00751-ABJ Document 22

Filed 11/16/11 Page 7 of 8

assist the Court in making its determination. Juarez v. DOJ, 518 F.3d 54, 59-60 (D.C. Cir. 2008); Allen v. Central Intelligence Agency, 636 F.2d 1287, 1298 (D.C. Cir. 1980) (Where the agency fails to meet that burden, a not uncommon event, the court may employ a host of procedures that will provide it with sufficient information to make its de novo determination, including in camera inspection.) In addition, the D.C. Circuit has held, [I]n camera review may be particularly appropriate when . . . the agency affidavits are insufficiently detailed to permit meaningful review of exemption claims. Quinon & Strafer v. Federal Bureau of Investigation, 86 F.3d 1222, 1228 (D.C. Cir. 1996). Moreover, the Court has explained that when the dispute turns on the contents of the withheld documents, and not the parties interpretations of those documents, in camera review may be more appropriate. Id. Finally, in instances in which sufficiently detailed justifications are impossible because they would reveal the very information sought to be protected, in camera inspection permits the courts . . . to fulfill their statutory obligation to conduct a meaningful de novo review. Id. Therefore, if the Court believes that it does not have sufficient information to determine whether the 67 records are being properly withheld under claims of FOIA exemptions, McKinley requests that the Court conduct an in camera review of the records. III. Conclusion. For the reasons set forth in McKinleys opening memorandum and the additional reasons set forth above, the Boards motion for summary judgment should be denied and McKinleys cross-motion for summary judgment should be granted. In addition, McKinley respectfully requests that the Court order the Board to conduct searches reasonably calculated to uncover all relevant documents, to produce the 17 withheld records that are publicly available, and produce all

-7-

Case 1:10-cv-00751-ABJ Document 22

Filed 11/16/11 Page 8 of 8

non-exempt, segregable material. Dated: November 16, 2011 Respectfully submitted, Paul J. Orfanedes (D.C. Bar No. 429716) /s/ Michael Bekesha Michael Bekesha (D.C. Bar No. 995749) JUDICIAL WATCH, INC. 425 Third Street, S.W., Suite 800 Washington, DC 20024 (202) 646-5172 Counsel for Plaintiff

-8-