Main Reply Brief by Defendant Board of Governors in Support of Summary Judgment (Lawsuit #1)

Case 1:09-cv-01263-ESH Document 33 Filed 04/22/10 Page 1 of 47
UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA
)
VERN McKINLEY, )
)
Plaintiff, )
)
v. ) Case. No. 1:09-CV-1263
)
FEDERAL DEPOSIT )
INSURANCE ) Judge Ellen S. Huvelle
) (ESH)
CORPORATION, )
)
and )
)
BOARD OF GOVERNORS OF )
THE FEDERAL RESERVE )
SYSTEM, )
Defendants. )
)
REPLY BRIEF IN SUPPORT OF SUMMARY JUDGMENT MOTION OF

DEFENDANT BOARD OF GOVERNORS OF THE FEDERAL RESERVE
SYSTEM AND OPPOSITION TO PLAINTIFF’S SUMMARY JUDGMENT
MOTION
KATHERINE H. WHEATLEY TONY WEST

DC Bar No. 359037 Assistant Attorney General
Associate General Counsel JOHN R. TYLER
JOHN L. KURAY Assistant Branch Director, Federal Programs
Senior Counsel Branch
YVONNE F. MIZUSAWA C. LEE REEVES
Senior Counsel Trial Attorney, Department of Justice, Civil
Board of Governors of the Federal Division, Federal Programs Branch
Reserve System 20 Massachusetts Avenue, N.W.
20th and C Streets, N.W. Washington, D.C. 20530
Washington D.C. 20551 Tel: (202) 514-4805
(202) 452-3436 Fax: (202) 616-8470
Fax (202) 736-5615 lee.reeves@usdoj.gov
Attorneys for Defendant Board of

Governors of the Federal Reserve System
TABLE OF CONTENTS
PRELIMINARY STATEMENT ..................................................................................................1
ARGUMENT ..................................................................................................................................4
I. THE BOARD’S EXEMPTION 5 ASSERTIONS ARE PROPER...............................4
A. The Board Properly Asserted Exemption 5 For All Of The Withheld Material At
Issue ............................................................................................................................4
1. Communications Between the Board And The FRBNY Constitute Intra-

Agency Communications ....................................................................................4
2. The Board Properly Withheld Documents Under Exemption 5 Because These

Documents Are Predecisional And Deliberative ................................................7
3. The Board Properly Withheld Factual Material That Was Itself

Deliberative .......................................................................................................10
B. The Board Properly Asserted Exemption 5 Over A Draft Affidavit

Prepared By FRBNY Attorneys ...............................................................................13
II. THE BOARD’S EXEMPTION 8 ASSERTIONS ARE PROPER ...........................17
III. THE BOARD’S EXEMPTION 4 ASSERTIONS ARE PROPER .........................26
A. The Board’s Exemption 4 Assertions Were Proper As To Material

Provided By Firms Outside The Supervisory Context .............................................27
B. The Board Has Met Its Exemption 4 Burden Regarding Confidential Commercial
Information The Federal Reserve Received From Supervised Financial
Institutions.................................................................................................................31
IV. PLAINTIFF’S OBJECTIONS TO THE BOARD’S DECLARATIONS AND

VAUGHN INDEX ARE MERITLESS .......................................................................34
CONCLUSION ........................................................................................................................... 42
i
TABLE OF AUTHORITIES
CASES
Africa Fund v. Mosbacher,
1993 U.S. Dist. LEXIS 7044 (S.D.N.Y. May 26, 1993)................................................... 33
Badwar v. U.S. Dep’t of the Air Force,

829 F.2d 182 (D.C. Cir. 1987) ............................................................................................ 6
Bloomberg, L.P. v. SEC,

357 F. Supp. 2d 156 (D.D.C. 2004) .................................................................................. 22
CNA Fin. Corp. v. Donovan,

830 F.2d 1132 (D.C. Cir. 1987) .......................................................................................... 6
CREW v. U.S. Dep’t. of Homeland Sec.,

514 F. Supp. 2d 36 (D.D.C. 2007) ...................................................................................... 6
Campaign For Responsible Transplantation v. U.S. Food & Drug Admin.,

219 F. Supp. 2d 106 (D.D.C. 2002) .................................................................................. 34
Center for Auto Safety v. Nat’l. Highway Traffic Safety Admin.,

244 F.3d 144 (D.C. Cir. 2001) .................................................................................... 29, 30
*Consumers Union of U.S., Inc. v. Heimann,

589 F.2d 531 (D.C. Cir. 1978) ................................................................................... passim
*Critical Mass Energy Project v. Nuclear Reg. Comm’n,

975 F.2d 871 (D.C. Cir. 1992) ................................................................................... passim
Dudman Communications Corp. v. Dep’t of Air Force,

815 F.2d 1565 (D.C. Cir. 1987) .................................................................................. 10, 12
Elec. Priv. Info. Ctr. v. DHS,

No. 1:04cv1625 (D.D.C.) (Dec. 22, 2006).......................................................................... 9
Gallant v. NLRB,
26 F.3d 168 (D.C. Cir. 1994) ............................................................................................ 36
*Gregory v. Fed. Deposit Ins. Corp.,

631 F.2d 896 (D.C. Cir. 1980) ........................................................................ 21, 23, 24, 25
ii
Hanson v. U.S. Agency for Intern. Development,

372 F.3d 286 (4th Cir. 2004) ............................................................................................ 15
Hoover v. Dep’t. of the Interior,

611 F.2d 1132 (5th Cir. 1980) ............................................................................................ 6
Judicial Watch, Inc. v. Export-Import Bank,

108 F. Supp. 2d 19 (D.D.C. 2000) .................................................................................... 33
Judicial Watch v. FDA,

449 F.3d 141 (D.C. Cir. 2006) .......................................................................................... 41
King v. U.S. Dep’t of Justice,

830 F.2d 210 (D.C. Cir. 1987) .................................................................................... 40, 41
Mead Data Central, Inc. v. U.S. Dep’t of the Air Force,

566 F.2d 242 (D.C. Cir. 1977) .......................................................................................... 34
Montrose Chem. Corp. of California v. Train,

491 F.2d 63 (D.C. Cir. 1974) ............................................................................................ 12
N. Dartmouth Prop., Inc. v. HUD,

984 F. Supp. 65 (D. Mass. 1997) ........................................................................................ 9
Nat’l Community Reinvestment Coalition v. Nat'l Credit Union Admin.,

290 F. Supp. 2d 124 (D.D.C. 2003) .................................................................................. 24
*Nat’l Institute of Military Justice v. U.S. Dept. of Defense,

512 F.3d 677 (D.C. Cir. 2008) ...................................................................................... 6, 13
*Nat’l Parks and Conservation Association v. Morton,

498 F.2d 765 (D.C. Cir. 1974) ................................................................................... passim
Paisley v. CIA,
F.2d 686 (D.C. Cir. 1983) ................................................................................................. 40
*Parker v. Bureau of Land Management,

141 F. Supp. 2d 71 ................................................................................................ 29, 30, 33
People for the American Way v. Nat’l. Park Service,

503 F. Supp. 2d 284 (D.D.C. 2007) .................................................................................. 36
Public Citizen, Inc. v. Office of Management and Budget,

598 F.3d 865 (D.C. Cir. 2010) ............................................................................................ 8
iii
Quarles v. Dep’t of Navy,

893 F.2d 390 (D.C. Cir. 1990) .......................................................................................... 10
Rockwell Int’l Corp. v. Dep't of Justice,

235 F.3d 598 (D.C. Cir. 2001) .......................................................................................... 14
Ryan v. DOJ,
617 F.2d 781 (D.C. Cir. 1980) ............................................................................................ 5
Soucie v. David,
448 F.2d 1067 (D.C. Cir. 1971) .......................................................................................... 6
Tax Analysts v. IRS,

410 F.3d 715 (D.C. Cir. 2005) .......................................................................................... 41
Tigue v. U.S. Dep’t of Justice,

312 F.3d 70 (2d Cir. 2002).................................................................................................. 7
United States v. AT&T Co.,

642 F.2d 1285 (D.C. Cir. 1980) ........................................................................................ 14
United States v. Thompson,

562 F.3d 387 (D.C. Cir. 2009) .......................................................................................... 14
Washington Post v. U.S. Dep’t of Health and Human Svcs.,

690 F.2d 252 (D.C. Cir. 1982) .......................................................................................... 32
Wolfe v. Dep’t of Health and Human Services,

839 F.2d 768 (D.C. Cir. 1988) .......................................................................................... 10
Young v. CIA,
972 F.2d 536 (4th Cir. 1992) ............................................................................................ 37
STATUTES
5 U.S.C. § 551(2) ............................................................................................................................ 5
5 U.S.C. § 552(a)(4) ...................................................................................................................... 37
5 U.S.C. § 552(b)(4) ..................................................................................................................... 26
12 U.S.C. § 1844(c) ...................................................................................................................... 20
12 U.S.C. § 248(a) ........................................................................................................................ 20
12 U.S.C. § 325 ............................................................................................................................. 20

iv
PRELIMINARY STATEMENT
In this Freedom of Information Act case, Plaintiff Vern McKinley seeks
various documents related to the March 14, 2008 decision by Defendant Board of
Governors of the Federal Reserve System (“Board” or “Federal Reserve”) to
authorize the extension of a loan to Bear Stearns & Co. (“Bear Stearns”) through
JP Morgan Chase & Co. The Board produced various documents, and withheld
others in whole or in part pursuant to pursuant to Exemption(s) 5, 8, and/or 4.
Plaintiff challenges each and every claim of exemption the Board asserts.
The documents withheld consisted largely of e-mails and documents
exchanged between the Board and the Federal Reserve Bank of New York
(“FRBNY”) in the period of time immediately preceding the Board’s March 14,
2008 decision to authorize a loan to Bear Stearns. Regarding Exemption 5,
Plaintiff advances three primary arguments. First, Plaintiff argues that materials
exchanged by or communications between the Board and the FRBNY do not
qualify as “inter-agency or intra-agency” memoranda because the FRBNY is a
private corporation, not an agency. In so arguing, Plaintiff fails to acknowledge
that the D.C. Circuit has repeatedly construed Exemption 5 to cover advice,
opinions, and recommendations provided to an agency by personnel or entities
outside the agency under the “consultant corollary” to Exemption 5, which applies
1
to this case. Second, Plaintiff argues that the Board has improperly withheld
purely factual information, such as the names of financial institutions with
exposure to Bear Stearns and the amount of such exposure. This argument, too, is
mistaken, as it fails to perceive that the very act of the Board (or in certain cases,
the Securities & Exchange Commission) reaching out to request specific financial
information from specific institutions was itself a part of the deliberative process.
Third, Plaintiff argues that certain memoranda could not have been pre-decisional
or deliberative as they were created after the Board’s decision on March 14. The
Board’s declarations make clear, however, that these documents contained
arguments that were presented to the Board in advance of, and in conjunction with,
its decision to authorize the Temporary Loan, and were only committed to writing
later because of the exigencies of time in the days and hours leading up to the
March 14 Board meeting.
Regarding the Board’s Exemption 8 assertions, Plaintiff essentially ignores
both the law and the facts. He addresses none of the Exemption 8 case law the
Board cited that binds this Court, nor does he credit the various declarations
explaining the basis for the Board’s Exemption 8 assertions. Instead, he launches
what amounts to a policy attack on the exemption itself, claiming that the Board’s
withholding are overbroad and inimical to the policy goals that animate FOIA.
2
Neither Exemption 8’s text, nor caselaw applying Exemption 8, nor the pertinent
legislative history provide any support for Plaintiff’s assertion.
The Board also withheld certain confidential commercial information
pursuant to Exemption 4. On this front, the parties’ dispute is whether the Federal
Reserve has met its burden to show that the withheld information was “privileged
or confidential” and thus exempt from FOIA. With respect to information
voluntarily provided by firms the Federal Reserve does not supervise, the Federal
Reserve demonstrated that the withheld information was “of a kind that would
customarily not be released to the public by the person from whom it was
obtained.” Critical Mass Energy Project v. Nuclear Reg. Comm’n, 975 F.2d 871,
879 (D.C. Cir. 1992). As to material provided on a compulsory basis by financial
institutions the Federal Reserve does supervise, the Board demonstrated that it
could show that disclosure would likely impair the Board’s ability to gather such
information in the future. Accordingly, the Board has met its Exemption 4 burden
under the “impairment” test of National Parks and Conservation Association v.
Morton, 498 F.2d 765, 770 (D.C. Cir. 1974).
Finally, although Plaintiff strenuously attempts to identify purported
deficiencies in or inconsistencies between the Board’s declarations and Vaughn
3
index, review of these documents makes clear that the Board has met its burden to
sustain its withholding determinations.
ARGUMENT
I. THE BOARD’S EXEMPTION 5 ASSERTIONS ARE PROPER 1
A. The Board Properly Asserted Exemption 5 For All Of The

Withheld Material At Issue
1. Communications Between the Board And The FRBNY

Constitute Intra-Agency Communications
In our opening brief (“FR Br.”), we established that Exemption 5 of FOIA
applies to all of the documents withheld in this case, consisting largely of “e-mails
and documents exchanged in the period of time immediately preceding the Federal
Reserve Board’s March 14, 2008 decision to authorize a loan to Bear Stearns,”
because they discussed data “gathered by Board and FRBNY examiners
concerning financial institutions the Board was supervising at that time and these
institutions’ exposure to Bear Stearns.” FR Br. at 14. “This information was
gathered for, communicated to, and discussed by Board members and Board and
FRBNY staff in the days leading up to the Board‘s decision to authorize the
Temporary Loan ‘because it bore on the significant issue of the potential
1
Because the Board has asserted Exemption 5 for every document the withholding of which
Plaintiff has challenged, this Court need not reach the Board’s alternative Exemption 8 or
Exemption 4 arguments to the extent it sustains the Board’s Exemption 5 claims.
4
consequences of a Bear Stearns bankruptcy on individual financial institutions and
firms and then-fragile financial markets.’” Id. (quoting Thro Decl., ¶ 17). Given
that Plaintiff specifically requested “supporting memos or other information” that
formed the basis of the Board’s conclusions underlying the need for the Temporary
Loan, it is hardly “bold” that the Board would consider all of this material to be
pre-decisional and deliberative. Cf. Pl’s. Br. at 28.
Plaintiff responds that materials exchanged by or communications between
the Board and the FRBNY do not qualify as “inter-agency or intra-agency
memorandums or letters” because the FRBNY “is not a government agency, but
instead is a separate and distinct, private corporation.” Pl’s. Br. at 27. However,
the fact that the FRBNY is a person,2 not an agency, does not preclude a
determination that exchanges between the Board and FRBNY qualifies as “intra-
agency” for Exemption 5 purposes.
Because “Congress apparently did not intend ‘inter-agency or intra-agency’
to be rigidly exclusive terms,” Ryan v. DOJ, 617 F.2d 781 790 (D.C. Cir. 1980),
the D.C. Circuit has long recognized that Exemption 5 applies to advice, opinions,
and recommendations provided to an agency by personnel or entities outside the
2
FOIA generally defines “person” to “include[] an individual, partnership, corporation,
association, or public or private organization other than an agency.” 5 U.S.C. § 551(2).
5
agency. “The Government may have a special need for the opinions and
recommendations of temporary consultants, and those individuals should be able to
give their judgments freely without fear of publicity.” Soucie v. David, 448 F.2d
1067, 1078 n.44 (D.C. Cir. 1971) (holding that report created for agency by
outsider “should therefore be treated as an intra-agency memorandum of the
agency which solicited it”). Because such expert advice can “play[] an integral
function in the government’s decisionmaking,” Hoover v. Dep’t. of the Interior,
611 F.2d 1132, 1138 (5th Cir. 1980), “it is clearly preferable that [agencies] enlist
the help of outside experts skilled at unraveling their knotty complexities.” CNA
Fin. Corp. v. Donovan, 830 F.2d 1132, 1162 (D.C. Cir. 1987). For this reason,
courts in this jurisdiction have repeatedly upheld Exemption 5 assertions generated
by a wide range of outside consultants and experts. See, e.g., Badwar v. U.S. Dep’t
of the Air Force, 829 F.2d 182, 184-185 (D.C. Cir. 1987) (upholding Exemption 5
assertion to material furnished by outside contractors); CREW v. U.S. Dep’t. of
Homeland Sec., 514 F. Supp. 2d 36, 44 (D.D.C. 2007) (documents prepared for
FEMA by contractors protected by Exemption 5); Nat’l Institute of Military Justice
v. U.S. Dept. of Defense, 512 F.3d 677, 681 (D.C. Cir. 2008) (“Exemption 5
extends to documents received from private, nongovernmental parties.”). 3 These
3
Other courts have reached the same result. See, e.g., Tigue v. U.S. Dep’t of Justice, 312 F.3d
6
cases make clear that Plaintiff’s proffered interpretation of Exemption 5 is directly
contrary to binding D.C. Circuit precedent, and therefore must be rejected.
Here, the FRBNY acted as a lender in the transaction and provided data and
analysis to the Board to assist in its decision on how best to respond to the rapidly
deteriorating financial situation at Bear Stearns. Stefansson Decl., ¶¶ 8, 12; Thro
Decl., ¶ 19. 4 Because the FRBNY was acting as a consultant to the Board in
responding to news of Bear Stearns’ impending bankruptcy, communications
between the Board and FRBNY staff are “intra-agency” and protected by
Exemption 5.
2. The Board Properly Withheld Documents Under

Exemption 5 Because These Documents Are Predecisional
And Deliberative
Contrary to Plaintiff’s argument, Pl’s. Br. at 30, Exemption 5 does not
require defendant to establish that disclosure would injure the agency’s
deliberations. Rather, as Plaintiff concedes, see Pl’s. Br. at 28, to come within the
deliberative process privilege under Exemption 5, the Board need only show that
the withheld material was “predecisional” and “deliberative.” Public Citizen, Inc.
70, 77-78 (2d Cir. 2002), cert. denied, 538 U.S. 1056 (2003) (recognizing that “agencies may
require assistance from outside consultants in formulating policy ….”).
4
Accord Pl’s. Br. at 3 (describing regional reserve banks, including the FRBNY, as “the
operational arm of the nation’s central banking system”).
7
v. Office of Management and Budget, 598 F.3d 865, 874 (D.C. Cir. 2010). These
standards are easily met here.
First, the materials withheld were unquestionably part of the Board’s
deliberative process regarding the Temporary Loan determination. Ms.
Stefansson—who was present at the meeting at which the Board decided to
authorize the FRBNY to make the Temporary Loan—states that Board members
and staff considered this information in making the decision to authorize the
Temporary Loan to Bear Stearns. Stefansson Decl., ¶ 11; see also Thro Decl., ¶¶
17-19. Based in part on this information, the Board determined that “a sudden,
disorderly failure of Bear Stearns would have had unpredictable, but severe,
consequences on the functioning of financial markets.” Id., ¶ 10.
The fact that some of the documents were prepared after the Board’s
decision does not alter the conclusion that they are “pre-decisional.” Documents
26, 27, 29, and 34 consist of draft memoranda, and comments on one of them,
created shortly after the March 14 decision that set down on paper the arguments
presented orally by staff to the Board regarding the decision taken. Ms. Thro’s
declaration explains that the author based these memoranda on his participation in
telephone calls that occurred on the evening of March 13 and the early morning of
March 14, 2008, involving Board and Reserve Bank officials and staff, and which
8
led to the Board’s decision to authorize the Temporary Loan. Thro Decl. ¶ 19.
The documents were prepared after the fact because of the extremely compressed
time period in which the Board acted, but they reflected the deliberations that
occurred before that decision. The same is true for Documents 35 and 36, which,
as attested to by Ms. Stefansson, recount and summarize information and
arguments presented to the Board before the decision but which, because of “the
exigencies of time,” were only set down on paper afterwards. Stefansson Decl. ¶
12. Because these documents recount arguments and information provided to the
Board as part of its deliberations, they are clearly pre-decisional and deliberative
despite the fact that they were created after the decision itself. See Elec. Priv. Info.
Ctr. v. DHS, No. 1:04cv1625 (D.D.C.) (Dec. 22, 2006) (Dkt. # 21) (e-mail
generated after agency decision that recounted deliberations preceding decision
deemed pre-decisional and protected by Exemption 5); N. Dartmouth Prop., Inc. v.
HUD, 984 F. Supp. 65, 68 (D. Mass. 1997) (protecting under Exemption 5
document “generated after the agency’s decision was made, but which nonetheless
reiterated the agency‘s pre-decisional deliberations”).
9
3. The Board Properly Withheld Factual Material That Was

Itself Deliberative
The Board noted in its opening brief that material withheld under the
deliberative process privilege “includes certain factual material that is itself is
deliberative.” See FR Br. at 15 (citing Thro Decl., Ex. F, Item 8) As we showed,
under established D.C. Circuit precedent, factual material falls within the
deliberative process privilege if disclosure “would ‘expose an agency’s
decisionmaking process in such a way as to discourage candid discussion within
the agency and thereby undermine the agency’s ability to perform its functions.’”
Quarles v. Dep’t of Navy, 893 F.2d 390, 392 (D.C. Cir. 1990) (quoting Dudman
Communications Corp. v. Dep’t of Air Force, 815 F.2d 1565, 1568 (D.C. Cir.
1987)). The D.C. Circuit has recognized that courts “cannot mechanically apply
the fact/opinion test. Instead, we must examine the information requested in light
of the policies and goals that underlie the deliberative process privilege.” Wolfe v.
Department of Health and Human Services, 839 F.2d 768, 774 (D.C. Cir. 1988).
Here, to the extent withheld material could be characterized as “factual,” it
very plainly reveals the Board’s decisionmaking process in such a way that would
discourage candid discussions, thereby undermining the Board’s ability to perform
its functions. For example, Vaughn index Item 8 describes the Board’s
10
withholding of “the identities of two financial firms and one regulated financial
institution ….” Thro Decl., Ex. F, Item 8). The Board withheld these names
because they “reveal[] the identities of institutions that FRS staff considered to be
systemically important or whose failure could have systemic consequences to the
financial system . . . .” Id. (emphasis added). In other words, there were certain
financial institutions whose failure (possibly prompted by a Bear Stearns
bankruptcy) the Board believed could have ripple effects across the financial
system at large. The possible impact of a Bear Stearns bankruptcy on these
institutions played an important part in the Board’s deliberations leading to its
decision to authorize the Temporary Loan, see Stefansson Decl., ¶ 8, and revealing
their names would be tantamount to revealing the Board’s decision making
process.
Plaintiff argues that “the Board simply has not demonstrated that disclosure
of the factual material at issue—financial statistics, pricing and exposure data, and
the identities of various financial institutions—by itself will reveal any
deliberations or judgment calls by Board officials.” Pl’s. Br. at 29. But this is
precisely what the Board has demonstrated. The work of Board and FRBNY staff
in reaching out and culling certain financial statistics and exposure data, and the
identities of certain financial institutions, for consideration by the Board from the
11
mass of data available to it is itself deliberative. As the D.C. Circuit has observed,
“[t]he work of the assistants in separating the wheat from the chaff is surely just as
much part of the deliberative process as is the later milling by running the grist
through the mind of the administrator.” Montrose Chem. Corp. of California v.
Train, 491 F.2d 63, 71 (D.C. Cir. 1974).
Moreover, the deliberative nature of this material is determined by the
content of Plaintiff’s FOIA request. Plaintiff did not ask for any statistical
information the Board might happen to have about the exposure of firms to Bear
Stearns, but rather for information “detail[ing] the ‘expected contagion’” that
would result from a Bear Stearns bankruptcy and supporting the Board’s
“conclusion” that the Temporary Loan was necessary to mitigate serious harm to
the economy. Thro Decl., Ex. A (FOIA request quoting minutes of Board
meeting). In other words, Plaintiff asked for supporting materials—factual or
not—underlying the Board’s decision. The D.C. Circuit has held that, where the
requester asked “not for particular factual material, but for the draft in which [he]
thought the material could be found,” materials that might be factual in another
context are plainly deliberative and protected by Exemption 5. Dudman, supra,
815 F.2d at 1569. Here, the Plaintiff asked for materials supporting the Board’s
decision to authorize the Temporary Loan, and cannot now characterize as
12
“factual” what he defined as deliberative. Disclosure is therefore inappropriate,
and the Board’s Exemption 5 deliberative process privilege withholdings should be
sustained.
B. The Board Properly Asserted Exemption 5 Over A Draft

Affidavit Prepared By FRBNY Attorneys
The Board also withheld a draft affidavit (Item 38) prepared by FRBNY
attorneys pursuant to the attorney work product privilege. As the Board explained,
this affidavit “was prepared by FRBNY attorneys in anticipation of litigation by
Bear Stearns shareholders related to the Board’s authorization to extend credit to
[Bear Stearns] indirectly through [JP Morgan Chase].” Thro Decl., Ex. F, Item 38.
Plaintiff offers two responses. First, he claims that the Board cannot assert
attorney work product over materials prepared by the FRBNY. Pl’s. Br. at 32. As
explained previously, FRBNY personnel were acting as consultants to the Board,
and therefore come within the ambit of Exemption 5. See supra, at 5-7. As the
D.C. Circuit recognized in National Institute of Military Justice v. U.S. Dept. of
Defense, Exemption 5 applies to communications between an agency and
“individual non-government lawyers” pursuant to the “consultant corollary”
principle. 512 F.3d at 684-85 & n.10 (citations omitted).
13
Moreover, the D.C. Circuit has recognized that attorney work product may
be shared with third parties without waiver of the privilege, “[s]o long as transferor
and transferee anticipate litigation against a common adversary on the same issue
or issues ….” United States v. AT&T Co., 642 F.2d 1285, 1299 (D.C. Cir. 1980).
“Common interest should not be construed as narrowly limited to co-parties.” Id.
Rather, disclosure waives work product privilege only “if ‘such disclosure, under
the circumstances, is inconsistent with the maintenance of secrecy from the
disclosing party’s adversary.’” United States v. Thompson, 562 F.3d 387, 393
(D.C. Cir. 2009) (quoting Rockwell Int’l Corp. v. Dep’t of Justice, 235 F.3d 598,
605 (D.C. Cir. 2001). Here, where the Board and the FRBNY were working
together in anticipation of litigation against one or both of them relating to their
shared responsibilities, there is no basis to argue that the Board cannot assert the
work product privilege over the FRBNY’s draft affidavit. As the Fourth Circuit
has correctly observed in sustaining an attorney work product assertion pursuant to
FOIA Exemption 5:
The government has the same right to undisclosed legal advice in

anticipation of litigation as any private party. And there is nothing in
FOIA that prevents the government from drawing confidential counsel
from the private sector. Allowing disclosure here would impair an
agency’s ability to prepare effectively for litigation with private
parties and thereby thwart its ability to discharge its functions in the
public interest.
14
Hanson v. U.S. Agency for Intern. Development, 372 F.3d 286, 294 (4th Cir. 2004).
Plaintiff is therefore incorrect that the Board cannot assert attorney work product
over materials generated by FRBNY attorneys in connection with the Temporary
Loan.
Second, Plaintiff argues that the Board has not met its burden to show that
there was “some articulable claim, likely to lead to litigation.” Pl’s. Br. at 31
(quoting Coastal States v. Dep’t of Energy, 617 F.2d 854, 865 (D.C. Cir. 1980)).
It bears repeating that the Board’s decision to authorize extension of the
Temporary Loan to support a non-depository institution marked an extraordinary
departure from its traditional role of lending to banks and facilitating inter-bank
lending. Plaintiff, who acknowledges that the Board’s action constituted an
“extraordinary” exercise of “long dormant” statutory authority, Pl’s. Br. at 2;
Compl. ¶¶ 14-15, nonetheless maintains that the Federal Reserve had no reasonable
fear that its actions would likely lead to litigation. In specific part, Plaintiff argues
that it does not “seem likely that the shareholders of Bear Stearns, whose
investments would have been rendered completely worthless if the company had
declared bankruptcy on the morning of March 14, 2008, would sue the FRBNY,
much less the Board . . . for authorizing an emergency loan to Bear Stearns.” Pl’s.
15
Br. at 31-32. However, as non-exempt information provided to the Plaintiff shows,
stockholders of Bear Stearns had filed several lawsuits in March 2008 in the
Delaware Court of Chancery and in the Supreme Court of the State of New York
seeking to enjoin JP Morgan, Chase & Co.’s merger with Bear Stearns. (See
Attachment A, Joint Brief in Support of Defendants’ Motion to Dismiss or Stay
Delaware Actions). Indeed, the brief from the Delaware Chancery litigation
provided to the Plaintiff specifically mentions “critical actions by the Federal
Reserve Bank of New York” that led to the merger. Id. at 09-0164-000220. As a
result, it was entirely reasonable for the Board to anticipate that it, and/or the
FRBNY, might be drawn into litigation by Bear Stearns shareholders, and to
prepare for the possibility of litigation.
Furthermore, as Ms. Thro stated in her declaration, the Board’s concerns
were not limited to lawsuits initiated by Bear Stearns’ shareholders against the
FRBNY or the Board. 5 The Board’s concerns extended more broadly to “possible
litigation stemming from the Board’s decision to authorize the Temporary Loan.”
Thro Decl., ¶ 22. These concerns were well grounded: Having decided to exercise
5
The Board and the FRBNY are frequently third parties to litigation that bears some relation to
the Board’s exercise of its statutory authority and responsibilities. The Delaware shareholder
litigation referenced above is one possible example of the Board/FRBNY’s involvement in
litigation as a third party. Accordingly, Plaintiff wrongly presumes that the Board’s concerns
were limited to concerns about lawsuits in which the Board might be a party (i.e., in a lawsuit
filed by Bear Stearns’ shareholders against the Board or the FRBNY).
16
its authority to extend financial assistance to private parties again after 75 years,
the Board reasonably feared that any future decision not to extend financial
assistance to other entities who requested financial assistance would likely
engender litigation.
II. THE BOARD’S EXEMPTION 8 ASSERTIONS ARE PROPER
As explained at pages 22-26 of our opening brief, in addition to being
exempt under Exemption 5 (and sometimes 4), the Federal Reserve withheld under
FOIA Exemption 8 thirteen e-mails or tables (or portions thereof) that contained
information furnished to the Board (or SEC) by financial institutions regulated by
those agencies pursuant to their supervisory authority. See Thro Decl., ¶¶ 17-18
and corresponding Vaughn index entries. 6 The Board created or obtained these
documents as part of its “continuous” supervision of institutions it supervised, in
the hectic days and hours during which the Board and its staff strove to assess the
impact of a possible disorderly failure of Bear Stearns. See Stefansson Decl., ¶¶ 4-
5, 15; Thro Decl., ¶ 17. 7 The Board therefore properly withheld the information
6
As discussed in FR Br. at 24-25 and the Winter and Danis Declarations, the SEC separately
withheld documents obtained in connection with its supervision and regulation of Bear Stearns.
See Thro Decl., Ex. F (Items 10 and 11); Declaration of Michelle A. Danis, ¶¶ 4-5 (Attachment
C).
7
As we explained in our opening brief, the Board withheld within these documents under
Exemption 8 “the identity of institutions with exposure to Bear Stearns, the amount of such
17
pursuant to Exemption 8, which is “particularly broad” and “all inclusive.”
Consumers Union of U.S., Inc. v. Heimann, 589 F.2d 531, 533 (D.C. Cir. 1978)).
Notably, although Plaintiff challenges the applicability of Exemption 8, he
does not dispute that the Federal Reserve or the SEC obtained the withheld
information from institutions they supervise through the supervisory process.
Plaintiff also does not dispute the Board’s characterization of the days and hours
leading up to the Board’s decision to issue the Temporary Loan to Bear Stearns.
See Pl’s. Br. at 5, n.1 (adopting Board’s description of events as “fast-moving
[and] real-time”). Indeed, Plaintiff’s own description of the events leading up to
the Temporary Loan confirms the frenetic pace of activity during this time. See id.
at 5-10, 30 (characterizing this time as a “frantic scramble” for information).
Plaintiff also concedes, as he must, that Exemption 8 “was crafted broadly.” Id. at
32. See also FR Br. at 22-23 (discussing D.C. Circuit case law interpreting
Exemption 8).
Plaintiff, however, complains that the Federal Reserve “summarily
conclude[ed]” that Exemption 8 applies. Pl’s. Br. at 33. But, in so arguing,
Plaintiff simply ignores those portions of our opening brief and the Stefansson and
exposure, and/or the activities these institutions had taken to limit their exposure to Bear
Stearns.” FR Br. at 25 (citing Thro Decl., ¶ 17; Stefansson Decl., ¶ 15).
18
Thro Declarations setting forth in detail why Exemption 8 applies. See FR Br. at
23-24; Stefansson Decl., ¶¶ 14-15; Thro Decl. ¶ 17. As we explained, “Federal
Reserve examiners utilizing the Board‘s supervision authority obtained
information from various LCBOs regarding their exposure to Bear Stearns, in an
effort to gauge possible impact of a Bear Stearns bankruptcy on regulated financial
institutions.” FR Br. at 24 (citing Stefansson Decl., ¶ 14). In this way, the Federal
Reserve was receiving, in real-time, “examination, operating, or condition” reports
about individual supervised institutions and what financial significance a Bear
Stearns failure would have for a given institution and financial markets more
generally. See Stefansson Decl., ¶ 8 (one of Board’s purposes in surveying
supervised institutions was to gauge impact of Bear Stearns’ bankruptcy “on
individual LBCOs and smaller institutions supervised by the Board”). The
collective benefit of this information enabled the Federal Reserve to understand on
a broader level the potential implications of a Bear Stearns failure. See id., ¶ 8
(“Board members and Board staff were concerned about the effects a Bear Stearns
bankruptcy would have on financial markets given the prominent position of Bear
Stearns in those markets.”); id., ¶¶ 6-7 (discussing prospect of “risk of widespread
insolvencies and severe and protracted damage to the financial system and,
ultimately, to the economy as a whole”). Accordingly, Plaintiff’s assertion that the
19
Federal Reserve “fails to provide any basis in fact” for its Exemption 8 assertions
is demonstrably incorrect. Pl’s. Br. at 34.
Plaintiff also complains that the Board does not specify “the statute or
regulations under which the Board or SEC is authorized to prepare or receive such
reports.” Pl’s. Br. at 33 n.12. The Board’s statutory authority to supervise and
regulate certain types of financial institutions is broad and delineated in several
sections of the Federal Reserve Act, the Bank Holding Company Act, and other
statutes.8 This authority is not tied to a specific format or frequency of report, as
Plaintiff argues, Pl’s. Br. at 34, but enables the Board to “require such statements
or reports as it may deem necessary ….” 12 U.S.C. § 248(a) (emphasis added). As
shown above, by requiring supervised financial institutions (LCBOs) to provide
information about their exposure to Bear Stearns, the Board was requiring reports
regarding their financial condition and risks they faced in the event of a Bear
Stearns bankruptcy. As described by Ms. Stefansson, Board members and staff
were “concerned about the impact a Bear Stearns bankruptcy filing would have on
individual LCBOs and smaller institutions supervised by the Board …. [and] in
accordance with well-established supervisory processes … surveyed the LCBOs
8
See, e.g., 12 U.S.C. §§ 248(a), 325 (authorizing examinations of state member banks); 12
U.S.C. § 1844(c)(1)(A), (c)(2)(A) (authorizing examinations and reports from bank holding
companies).
20
for purposes of assessing the LCBOs’ real-time exposures to Bear Stearns.”
Stefansson Decl., ¶ 8. The Board’s receipt of real-time reports from supervised
financial institutions—reflected in the withheld emails and attachments—falls well
within the broad protections afforded by Exemption 8. Gregory v. Fed. Deposit
Ins. Corp., 631 F.2d 896, 898 (D.C. Cir. 1980) (“Congress looked to the nature and
source of the material and determined to provide absolute protection regardless of
the circumstances underlying the regulatory agency’s receipt or preparation of
examination, operating or condition reports”) (emphasis added).
In the absence of legal authority, Plaintiff retreats to what amounts to a
policy argument. Plaintiff argues that “it appears that the Board is claiming that
any financial information it obtains in its supervisory capacity from or about any
financial institution necessarily constitutes or relates to a ‘report’ for purposes of
Exemption 8.” Pl’s. Br. at 34. This expansive definition of “report,” Plaintiff
argues, cannot be what Congress intended. Id. Plaintiff is wrong.
Congress designed Exemption 8 “to insure the security and integrity of
financial institutions, for the sensitive details collected by Government agencies
which regulate these institutions, if indiscriminately disclosed, cause great harm.”
H.R. Rep., 89th Cong., 2nd Sess., No. 89-1497, at 32 (1966) (emphasis added).
Exemption 8 would be unduly limited if, as Plaintiff urges, the “sensitive details”
21
(i.e., non-public financial data) supervised institutions provided to the Federal
Reserve were not protected unless they were contained in or referenced by a
document with the word “REPORT” stamped at the top. See Pl’s. Br. at 34 n.14
(suggesting that Exemption 8 does not apply unless the Federal Reserve uses
specific “report forms”). It is therefore unsurprising that courts in this jurisdiction
have rejected the argument that Exemption 8 does not apply to material that is
factual in nature. See Bloomberg, L.P. v. SEC, 357 F.Supp.2d 156, 170 (D.D.C.
2004) (rejecting “distinction between factual versus analytical or deliberative
material,” sustaining withholding of material argued to be “simply factual in
nature”).
Any doubt that Exemption 8 applies to the information at issue here is put to
rest by Heimann, supra, which concerned a FOIA request for “documents
submitted to the Comptroller’s Office by national banks” concerning the banks’
compliance with the Truth-in-Lending Act and “any analysis or summary by the
Office of the Comptroller” of those documents. 589 F.2d at 532. Although the
request did not seek a specific document labeled “Report,” and the withheld
materials included “documents and answers submitted by” regulated banks to the
OCC, see id. at 537 n.10 (Wright, C.J., concurring), as well as the OCC’s own
analyses, the D.C. Circuit held “the wording of exemption 8 leaves no doubt that
22
the documents in issue fit precisely and exactly within the statutory definition.” Id.
at 533. Not only did the D.C. Circuit not tie Exemption 8 to any specific document
labeled “Report,” but it held that Exemption 8’s broad ambit extends to both
documents and materials submitted by regulated entities and regulators’ analyses
of those submissions.
Both Exemption 8’s text and legislative history support the Federal
Reserve’s argument that financial information it obtains through the supervisory
process from institutions it supervises is exempt from disclosure under FOIA.
Indeed, the D.C. Circuit has held that it is clear from the legislative history that
Exemption 8 “was drawn to protect not simply each individual bank but the
integrity of financial institutions as an industry.” Gregory, supra, 631 F.2d 898
(emphasis added). The Bear Stearns situation, where the Board was concerned not
only with contagion to individual institutions but the industry as a whole,
Stefansson Decl., ¶ 8, falls squarely within the zone of interests Congress intended
to protect in enacting Exemption 8.
Given that one purpose of Exemption 8 is “to safeguard the relationship
between the banks and their supervising agencies,” Heimann, 589 F.2d at 534, an
23
expansive interpretation of Exemption 8 makes sense. 9 “If details of the bank
examinations were made freely available to the public and to banking competitors,
. . . banks would cooperate less than fully with federal authorities.” Id. It is
therefore unsurprising that courts in this circuit have repeatedly construed
Exemption 8 so as not to threaten the free exchange of information the exemption
seeks to foster. See Nat’l Community Reinvestment Coalition v. Nat’l Credit
Union Admin., 290 F.Supp.2d 124, 135-36 (D.D.C. 2003) (observing that one
purpose of Exemption 8 is to “to ensure that [banks] continue to cooperate . . .
without fear that their confidential information will be disclosed.”) (citing
Heimann, supra, 589 F.2d at 534; Gregory, supra, 631 F.2d at 899 (observing that
Exemption 8 must be construed to ensure “frank cooperation” between bank
officials regulating entities). Plaintiff does not even attempt to argue otherwise,
nor could he credibly do so.
In the end, Plaintiff’s Exemption 8 arguments are most notable for what they
do not say. Plaintiff does not even attempt to explain what Congress intended the
scope of Exemption 8 to be (though he concedes that it is “broad”), nor does he
explain why an exemption the D.C. Circuit has described as “particularly broad”
9
Heimann finds firm support in FOIA’s legislative history. See S. Rep. No. 89-813 at 45 (1965)
(stating that Exemption 8 “is directed specifically to insuring the security of our financial
institutions”).
24
and “all inclusive” does not apply in this case. Plaintiff does not address—let
alone distinguish—any of the Exemption 8 cases the Federal Reserve cited. For
his part, Plaintiff cites not a single Exemption 8 case. Unsupported by law or
logic, Plaintiff asserts that Exemption 8 is not as broad as the Federal Reserve
would construe it, and somehow concludes from this that the Federal Reserve’s
Exemption 8 claims should be denied. Either unwilling or unable to articulate
what Congress actually intended regarding Exemption 8, Plaintiff’s argument is
essentially that Congress intended some interpretation that results in Plaintiff
getting the documents he wants.
The D.C. Circuit has recognized that in its current form, “the meaning of
exemption 8 [is] clear,” and therefore Exemption 8’s “broad, all-inclusive scope
should be applied as written since Congress had ‘intentionally and unambiguously’
so contemplated.” 10 Gregory, supra, 631 F.2d at 898 (quoting Heimann, 589 F.2d
at 535). As the D.C. Circuit has found, Congress “has left no room for a narrower
10
Rejecting the argument that an expansive interpretation of Exemption 8 “runs counter to the
spirit of FOIA,” the D.C. Circuit observed in 1978 that Congress had not amended FOIA in the
twelve years following its enactment. Heimann, 589 F.2d at 535. To the D.C. Circuit, Congress’
inaction was “significant.” Id. As Congress has not amended Exemption 8 in the 32 years since
Heimann, Congress’ inaction is even more noteworthy today.
25
interpretation of exemption 8,” Heimann, 589 F.2d at 535, and the Federal Reserve
is therefore entitled to the “absolute protection” Exemption 8 affords. Id. at 533.
III. THE BOARD’S EXEMPTION 4 ASSERTIONS ARE PROPER
In the alternative, the Federal Reserve declined to produce the identities of
financial institutions and/or their exposure to Bear Stearns, as well as bid/ask
spreads in select repo markets pursuant to FOIA Exemption 4. The dispute
between the parties over the application of this exemption is narrow. Plaintiff does
not contest that the financial institutions that furnished this information have a
commercial interest in it, nor does he challenge that these institutions qualify as
“persons” under FOIA’s broad definition. See FR Brief at 20; Pl’s. Br. at 20-26.
Plaintiff argues only that the Federal Reserve has not met its burden to show that
the information was “privileged or confidential” and thus exempt from FOIA. See
5 U.S.C. § 552(b)(4).
The Federal Reserve’s Exemption 4 burden differs based on whether
information was provided on a compulsory or a voluntary basis. For information
provided on compulsory basis, the Federal Reserve must show either that release of
the information would likely cause “substantial harm to the competitive position”
of the institution that furnished the information or likely impair the ability to gather
such information in the future, Nat’l Parks and Conservation Ass’n v. Morton, 498
26
F.2d 765, 770 (D.C. Cir. 1974) (footnote omitted) (National Parks I). For
information provided voluntarily, however, the Federal Reserve need only show
that the information provided “is of a kind that would customarily not be released
to the public by the person from whom it was obtained.” Critical Mass Energy
Project v. Nuclear Reg. Comm’n, 975 F.2d 871, 879 (D.C. Cir. 1992). FR Br. at
19-20.
A. The Board’s Exemption 4 Assertions Were Proper As To

Material Provided By Firms Outside The Supervisory Context
The Federal Reserve is entitled to summary judgment on its Exemption 4
withholdings as to information provided voluntarily to the Board outside of the
supervisory context.11 As the Federal Reserve stated in our opening brief, certain
11
Plaintiff complains that “it is not at all clear which information the Board is claiming was
provided voluntarily and which allegedly was provided involuntarily.” Pl’s. Br. at 21. The
distinction, which is evident from the Board’s declarations, relates to whether or not the Board
has supervisory authority over the submitter of the information. As explained in FR Br. at 20-21,
“the Board compelled financial entities it regulated to produce data regarding their financial
exposure to Bear Stearns.” For this mandatory information, enumerated in Thro Decl., ¶ 17 and
Stefansson Decl., ¶ 14 (Items 4, 5, 6, 9, 10, 13, 17, 18, 21, 22, and 24), the Board met its
Exemption 4 burden under National Parks I by showing disclosure is likely to impair the
Board’s ability to obtain such information in the future. FR Br. at 20-21 (and citations therein).
Ms. Stefansson’s declaration specifically stated that the information in those enumerated items
identified above “was required to be provided by the institutions that provided it.” Stefansson
Decl., ¶ 15. The Board also stated the self-evident proposition that “to the degree th[is]
information … could be said to be provided voluntarily ….,” the Board had met the lower burden
of showing the information was exempt under the Critical Mass test. FR Br. at 21.
The Thro Declaration identifies specifically those documents containing information provided to
the Board on a voluntary basis. See Thro Decl. at ¶¶ 20-21 (enumerating Items 7, 14, 15, 20, 30,
31, 32, 37A, 37B, and 38 as containing information provided “on a voluntary and strictly
confidential basis” or pursuant to voluntary contracts with FRBNY). For this information
27
“firms —not supervised by the Board—voluntarily produced to the Board
information regarding their financial exposure to Bear Stearns, Thro Decl., ¶ 20,
and two institutions voluntarily provided proprietary information regarding bid/ask
spreads in select repo markets. Id., ¶ 21.” FR Br. at 22 (emphasis added). In this
regard, Plaintiff inexplicably argues that “the Board does not claim that any of
these items are ‘of a kind that would customarily not be released to the public by
the person from whom it was obtained.’” Pl’s. Br. at 26. The Thro Declaration
expressly states that “these market participants do not customarily disclose this
type of information to the public.” See Thro Decl., ¶ 20 (explaining Exemption 4
basis for documents 7, 14, 15, 20, 30, 31 and 37A); see also id. at ¶ 21 (explaining
that Items 32 and 37B were obtained on a voluntary basis pursuant to contracts that
required the information provided be kept confidential). Citing the Declaration of
Dr. Jean Helwege, Plaintiff argues that “haircuts on the repos must be incorporated
“voluntarily provided by” entities “not supervised by the Board …,” the Board met its burden
under Critical Mass of showing the information would not customarily be released to the public
by the submitters. FR Br. at 22. Item 33 on the Vaughn index also meets the Critical Mass test
for information voluntarily provided to the government, and is described in the Vaughn index,
but not the Thro Declaration. As described in the Vaughn index (and released portions of the
document), Item 33 consists of two paragraphs of an e-mail from an FRBNY attorney to Board
attorneys “describ[ing] the method by which FRS staff obtains confidential financial information
from a subset of primary dealers.” Thro Decl., Ex. F, Item 33. That information was supplied to
FRS staff “on a voluntary basis … on the condition that the information would be kept
confidential … [and the information is] not customarily … disclosed to the public by the
submitter.” Id. As noted infra, page 39, Item 12 (for which exemption 4 is not claimed on the
Vaughn index) was mistakenly listed in ¶ 20 of the Thro Declaration.
28
into the [net asset value] and thus they are already available to the funds’
shareholders.” Helwege Decl. at ¶ 20.12 Consequently, Plaintiff argues, “this
information is customarily available to competitors and the public and its release
would not harm shareholders.” Id. This argument is flawed for at least two
reasons.
First, as evidenced by her use of the term “customarily available,” Dr.
Helwege wrongly conflates the issue of whether the information withheld is
“publicly available” with whether the information is “customarily disclosed,”
issues that are “entirely distinct.” Center for Auto Safety v. Nat’l. Highway Traffic
Safety Admin., 244 F.3d 144, 151 (D.C. Cir. 2001); Parker v. Bureau of Land
Management, 141 F. Supp. 2d 71, 79 (D.D.C. 2001) (Huvelle, J.) (citing Auto
Safety). Plaintiff seeks disclosure of information on the ground that such
information is already publicly available. As “the party favoring disclosure,”
Plaintiff “has the burden of demonstrating that the information sought is identical
to information already publicly available.” Parker, 141 F. Supp. 2d at 79 (quoting
Auto Safety, 244 F.3d at 151) (emphasis in original). Plaintiff’s argument based on
12
In plain English, Dr. Helwege is referring to repurchase agreements (called “repos” for short)
by which financial institutions often fund themselves. Under these agreements, a borrower sels a
security to a lender for case, and simultaneously agrees to buy the same security back at a fixed
price at a fixed later date. The “haircut” Dr. Helwege refers to is the discount from market value
the buyer of the asset is willing to give in the repo transaction. Accord Helwege Decl. ¶¶ 5-8.
29
net asset value fails: A fund’s net asset value reflects the aggregate value of the
fund’s holdings; it does not reveal the value of each (or any) individual asset. See
http://www.sec.gov/answers/nav.htm (net asset value is “a company’s total assets
minus its total liabilities”). Because Plaintiff has not met his burden to show that
the “identical” material he seeks is publicly available, Plaintiff’s challenge to the
subset of Exemption 4 material provided outside the supervisory context fails. 13
Second, and setting aside the public availability/customary disclosure
distinction, Plaintiff incorrectly frames the issue as whether the financial industry
as a whole ordinarily releases this information, rather than whether these specific
financial institutions whose information was withheld disclose such information
customarily. Helwege Decl. at ¶ 20. “The Court must look at [specific firms’]
customary treatment of this information, rather than how the industry as a whole
treats it.” Parker, at 141 F. Supp. 2d at 79 (citing Auto Safety, 244 F.3d at 148). It
is therefore irrelevant what other firms customarily disclose; all that matters is that
“these market participants” do not do so. Thro Decl. at ¶ 20 (emphasis added). 14
13
The same is true regarding Item 22. Although Plaintiff has identified a publicly-available
document that appears to contain similar information to that described for that item, Pl’s. Br. at
41, the information is not in fact the same, and as Ms. Stefansson’s declaration attests, the Board
obtained the withheld information in Item 22 through the supervisory process and not through
this publicly available source. See Stefansson Decl., ¶ 14.
14
In addition to being legally irrelevant, Dr. Helwege’s assertion is also incorrect. See
Stefansson Decl., ¶ 15. (“Supervised institutions frequently provide supervisors with detailed,
30
On this issue, neither Plaintiff nor Dr. Helwege have offered anything to rebut the
Federal Reserve’s evidence. Accordingly, the Federal Reserve’s Exemption 4
claim must be sustained as to Items 7, 14, 15, 20, 30-33, 37A, 37B, and 38.
B. The Board Has Met Its Exemption 4 Burden Regarding

Confidential Commercial Information The Federal Reserve
Received From Supervised Financial Institutions
The Federal Reserve withheld, pursuant to Exemption 4, the identities of
financial institutions and/or their exposure to Bear Stearns, as well as bid/ask
spreads in select repo markets. The Federal Reserve can prevail by showing either
that releasing such material (i) would likely impair the Federal Reserve’s ability to
gather such information in the future; or (ii) would likely cause substantial
competitive harm to the institution whose information was disclosed. Nat’l Parks
and Conservation Ass’n v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974).
The Federal Reserve demonstrated that releasing the withheld information
would likely impair the Federal Reserve’s ability to obtain financial information
going forward from institutions it supervises. As Ms. Stefansson explained in her
declaration:
Supervisors rely on the willingness of supervised institutions to

provide full information in order to assure a robust supervisory
environment, and supervised institutions are willing to provide this
highly sensitive commercial information—including [information pertaining to these institutions’

financial exposure to Bear Stearns]—that they do not customarily disclose to the public.”).
31
information because they know that the supervisors will maintain its
confidentiality. . . . It is likely that institutions would be significantly
less willing to provide bank supervisors, including the Board, with
this type of sensitive commercial information if they believed that the
information would be disclosed to the public. Thus, it is my view that
release of the information contained in the documents identified above
. . . could chill the free flow of information between the institutions
and the Board and Reserve Bank.
Stefansson Decl., ¶ 15 (emphasis added). Plaintiff dismisses the Federal Reserve’s
impairment argument out of hand, cavalierly asserting that “if, as the Board asserts,
regulated institutions are required to provide information, then their ‘willingness’
to provide the information is irrelevant.” Pl’s. Br. at 23. Plaintiff is mistaken: If
compulsion necessarily precluded impairment, National Parks’ impairment prong
would be meaningless, an impossible test no one could satisfy.
As the D.C. Circuit has recognized, public disclosure is likely to reduce the
quality and reliability even of information that supervised institutions can be
compelled to produce. See Critical Mass, 975 F.2d 878 (“When dealing with a
FOIA request for information the provider is required to supply, the governmental
impact inquiry will focus on the possible effect of disclosure on its quality.”);
Washington Post v. U.S. Dep’t of Health and Human Svcs., 690 F.2d 252, 269
(D.C. Cir. 1982) (“despite the compulsory nature of the disclosure,” court “cannot
dismiss the possibility” that submitters might “construe . . .[the] disclosure
32
requirement narrowly and thus may not disclose all possible conflicts of
interest”).15 Indeed, as this Court has recognized, the ability to compel information
does not somehow render voluntary cooperation unimportant. Parker, 141 F.
Supp. 2d 71, 78 n.6 (“[I]n certain circumstances an agency may decline to require
information that it has the authority to compel and instead pursue voluntary
compliance.”).
Disclosure would not merely harm the quality of financial information that
supervised institutions would provide, but in all likelihood also the speed with
which they were willing to provide it. If a supervised institution knew (or even
suspected) that the Federal Reserve might disclose information that would likely be
used by the institution’s competitors to its detriment, it is only logical that the firm
would, at a minimum, delay releasing this information to the Federal Reserve for
as long as possible. This delay would unquestionably impair the ability of
supervising institutions such as the Federal Reserve to respond to emergent
financial crises promptly and with the benefit of as much reliable, high-quality
information as possible. See Judicial Watch, Inc. v. Export-Import Bank, 108 F.
Supp. 2d 19, 30 (D.D.C. 2000) (“[t]he government has a compelling interest in

15
See also Africa Fund v. Mosbacher, 1993 U.S. Dist. LEXIS 7044 at **21-22 (S.D.N.Y. May
26, 1993) (claims that disclosure could not impair agency’s ability to obtain required information
“ignores the reality that confidentiality, which the government has promised, . . . fosters the
provision of full and accurate information.”).
33
ensuring that the information it receives is of the highest quality and reliability, and
disclosure of potentially sensitive commercial and financial information, even
where submissions of information are mandatory, would jeopardize the Bank’s
ability to rely on any such information that is submitted.”) (emphasis added)
Because the Federal Reserve has carried its burden to show that disclosure would
likely impair the Federal Reserve’s ability to gather information from financial
institutions, it has met its burden under the impairment prong of National Parks I,
its Exemption 4 assertions must be sustained. 16
IV. PLAINTIFF’S OBJECTIONS TO THE BOARD’S DECLARATIONS

AND VAUGHN INDEX ARE MERITLESS
Plaintiff is correct that the Federal Reserve must provide “a relatively
detailed justification specifically identifying the reasons why a particular
exemption is relevant and correlating those claims with the particular part of a
withheld document to which they apply.” Mead Data Central, Inc. v. U.S. Dep’t of
the Air Force, 566 F.2d 242, 251 (D.C. Cir. 1977). At the same time, the agency
resisting disclosure obviously need not provide detail that, if released, would
“defeat[] the purpose of the exemption.” Campaign For Responsible
Transplantation v. U.S. Food & Drug Admin., 219 F.Supp.2d 106, 114 (D.D.C.
16
For Exemption 4 purposes, the Board has elected to rely solely on its impairment justification
for information obtained from financial institutions the Board supervises.
34
2002). Additionally, “there is no set format for an [Vaughn] index.” Id. Here,
Plaintiff’s complaints notwithstanding, the Board’s submissions provide an
adequate basis for the parties and the Court to assess the Board’s basis for
withholding, and thus meet the Board’s obligations under Vaughn and its progeny.
On February 1, 2010, the Federal Reserve filed a final Vaughn index which,
together with the Federal Reserve’s declarations, “accurately identifies each
document or portion of a document withheld from disclosure … on the basis of a
FOIA exemption, describes the documents or portions withheld, and explains the
basis for the claimed exemption.” See Thro Decl. ¶ 15.17 The final index lists each
of the 190 pages of material wholly or partially withheld by number, bates range,
date, document type, author and recipient, subject, and exemption claimed, and
provides a description of the withheld material and the Federal Reserve’s basis for
withholding. See Thro Decl., ¶ 16 and Ex. F. In some cases, the Federal Reserve
separately describes different types of exempt information appearing on the same
page to provide additional clarity for the Plaintiff and the Court. 18 To further
clarify its claims of exemption, the Federal Reserve provided Plaintiff with a
17
The Vaughn index as filed was revised to address certain matters Plaintiff raised in response to
a draft he had been provided in an unsuccessful effort to narrow the issues in this case.
18
See Thro Decl., Ex. F (Vaughn index), pp. 6-7 (separately describing material withheld from
different portions of document bates numbered 000008); pp. 17-18 (same for document bates
numbered 0000034); pp. 26-28 (same for document bates numbered 000053).
35
spreadsheet listing each document on the Vaughn index by document number,
bates range, and exemption claimed. See Thro Decl., Ex. F, FOIA Exemption
Spreadsheet. Additional context is provided by the 168 responsive, non-exempt
pages and 27 partially redacted pages of information provided to the Plaintiff.
Thro Decl., ¶ 16.
Thus, the final Vaughn index is accurate and complete, and provides “’the
reviewing court a reasonable basis to evaluate the [Federal Reserve’s] claim of
privilege.” Gallant v. NLRB, 26 F.3d 168, 173 (D.C. Cir. 1994); accord People for
the American Way v. Nat’l. Park Service, 503 F. Supp. 2d 284, 294 (D.D.C. 2007)
(“’[t]o be adequate, a Vaughn Index … ‘must adequately describe each withheld
document or deletion from a released document,’ and … ‘must state the exemption
claimed for each deletion or withheld document, and explain why the exemption is
relevant.’”) ( internal quotations and citations omitted).
Plaintiff’s grievances regarding the Federal Reserve’s Vaughn index boil
down to two points, neither of which has merit. First, Plaintiff argues the Vaughn
index is inadequate because there are “substantial inconsistencies” between the
exemptions referenced on the documents provided to the Plaintiff on or around
September 30, 2009 and the final Vaughn index. Pl’s. Br. at 15. As a result,
Plaintiff argues that “claims of exemption referenced on the documents are not
36
accurate, and Plaintiff and the Court are forced to refer back-and-forth between the
Vaughn index and the documents ….” Pl’s. Br. at 16. The differences between the
exemptions listed on the documents provided to the Plaintiff in September 2009
and the final Vaughn index filed in February 2010 are not legally significant. As
Plaintiff concedes, id., the Federal Reserve’s declarations note that “[f]or a small
number of documents, the exemption claimed on the Vaughn index differs from the
exemption listed on the document provided to the plaintiff” and “the Vaughn index
reflects our final claim of exemption with respect to those documents.” Thro
Decl., ¶ 15.
Because the FOIA directs district courts to review agency actions de novo, 5
U.S.C. § 552(a)(4)(B), an agency is not barred from invoking a particular FOIA
exemption in litigation simply because the exemption was not cited in responding
to the request at the administrative level. Young v. CIA, 972 F.2d 536, 538-39 (4th
Cir. 1992) (“an agency does not waive FOIA exemptions by not raising them
during the administrative process”). Thus, the Federal Reserve properly made its
final claims of exemption in the Vaughn index filed with the Court, and it is not
bound by its claims of exemption at the administrative level. However, to aid the
Plaintiff’s review, the Federal Reserve will provide Plaintiff with a new set of
37
documents stamped with the exemptions claimed on the final Vaughn index, as the
Plaintiff requests. Pl’s. Br. at 16.
Second, Plaintiff argues that there are “discrepancies” between the Vaughn
index and the Federal Reserve’s declarations that render the Vaughn index
insufficient. Pl’s. Br. at 17. However, upon comparing the Vaughn index to the
declarations, it is apparent that there are no “discrepancies.” Rather, the
declarations contain broader descriptions of categories of documents while the
Vaughn index contains more specific information regarding each document or
portion of a document withheld. For example, Plaintiff states that “Ms. Thro
describes the various records and information withheld pursuant to Exemption 5,
including Items 7 and 8, as ‘market developments and analyses related to a
potential bankruptcy by Bear Stearns; proposed regulatory responses to the
situation; and arguments and considerations regarding the need for the Temporary
Loan.’” Pl’s. Br. at 18 (quoting Thro Decl., ¶ 19). Plaintiff argues this is
inconsistent with the Vaughn index entry for item 7, which describes the withheld
information as “‘identities and exposure of several large mutual funds with
exposure to [Bear Stearns],’” and the Vaughn index entry for Item 8, which
describes withheld information as the “‘identities of two financial firms and one
regulated financial institution.” Pl’s. Br. at 18 (quoting Vaughn index).
38
There is no inconsistency here. Paragraph 19 of the Thro Declaration
broadly describes some 17 Vaughn index entries as e-mails and attachments
conveying “market developments and analyses …” related to a potential Bear
Stearns bankruptcy and other information. Thro Decl., ¶ 19. Among these
“market developments” was the fact that several large mutual funds (whose names
and amount of exposure were withheld) and two financial firms and one regulated
financial institution (whose names were withheld) had exposure to Bear Stearns or
were considered systemically important by the Board, as described in Vaughn
index Items 7 and 8. The descriptions in the Vaughn index and Thro Declaration
are also supplemented by released portions of the documents, bates numbered
000011-13 (see Attachment B hereto). The only information redacted from these
documents was the names of the mutual funds and institutions and the mutual
funds’ exposure to Bear Stearns. Thus, Plaintiff can gain background and context
from the documents themselves.19
19
Plaintiff also takes exception to paragraph 20 of the Thro Declaration because it states that
Items 12, 14, and 15 were obtained from market participants on a “voluntary and strictly
confidential basis,” while the Vaughn index, he argues, does not make clear that this information
was obtained voluntarily under Exemption 4. Pl’s. Br. at 18. There is no need for the
declarations and the Vaughn index to repeat each other word for word; the two are meant to be
read together. Moreover, the Vaughn index’s description of Items 14 and 15 as not “customarily
released to the public by the submitter” makes clear that the Board is claiming Exemption 4
under the Critical Mass test for information voluntarily provided to the government. See supra,
page 27. Plaintiff is correct that Exemption 4 is not claimed for Item 12 on the Vaughn index,
39
Plaintiff claims paragraph 13 of the Stefansson Declaration, which lists 14
e-mails and attachments and describes them in general terms, contains “similar
deficiencies and inconsistencies.” Pl’s. Br. at 19 (citing Stefansson Decl., ¶ 13).
Of the four “inconsistencies” identified, three (Items 2, 3, and 19) involve
documents in which a limited amount of information is withheld under Exemption
6—which Plaintiff is not contesting. Id. The fourth, Item 16, describes 5
sentences redacted from an e-mail on Exemption 5 grounds because they describe
“a conversation” between the Board’s general counsel and a Board staff member
“regarding the projected regulatory response to [Bear Stearns’] funding position,
and a Board staff member’s subsequent contact with another federal agency
concerning the situation at [Bear Stearns].” Thro. Decl., Ex. F (Vaughn index),
Item 16. This supplements, but does not contradict, Ms. Stefansson’s general
description of this group of e-mails as containing, among other things, information
on “the potential impact on institutions of a Bear Stearns bankruptcy ….”
Stefansson Decl., ¶ 13.
The Board’s method of supplementing the Vaughn index with additional
information in the declarations and released portions of the documents is perfectly
and that Item was mistakenly included with other Items discussed in paragraph 20 of the Thro
Declaration. Cf. Pl’s. Br. at 18-19.
40
proper.20 The D.C. Circuit “focus[es] on the functions of the Vaughn index, not
the length of the document descriptions, as the touchstone of our analysis.”
Judicial Watch v. FDA, 449 F. 3d 141, 146 (D.C. Cir. 2006) (citing Tax Analysts v.
IRS, 410 F.3d 715, 719-20 (D.C. Cir. 2005)). An agency “may even submit other
measures” including affidavits or in camera review “in combination with or in lieu
of” the Vaughn index to meet its burden. Judicial Watch, supra, 449 F. 3d at 146.
The “released portion of each document” may satisfy an agency’s Vaughn burden
“by supplementing the corresponding Vaughn index entries …[and] illuminat[ing]
the nature of the redacted material … .” Id. at 145. Here, the Federal Reserve’s
final Vaughn index, read together with the declarations and released portions of
documents, easily satisfies its burden under FOIA.
20
Plaintiff cites King v. U.S. Dep’t of Justice, 830 F.2d 210, 224 (D.C. Cir. 1987) for the
proposition that a Vaughn index “should consist of ‘one document that adequately describes each
withheld record or deletion ….’” Pl’s. Br. at 15. The King decision, and Paisley v. CIA,712
F.2d 686, 690 n.12 (D.C. Cir. 1983), quoted in King, describe the contents of a proper Vaughn
index, but do not suggest that a Vaughn index cannot be supplemented by declarations and
released portions of documents. Indeed, in King, the D.C. Circuit recognized “in Vaughn, we
first insisted that agencies tender an index and affidavits as a precondition to review ….” 830
F.2d at 224 (emphasis added).
41
CONCLUSION
For the foregoing reasons, the Board’s motion for summary judgment should
be granted.
Dated: April 22, 2010 Respectfully submitted,
KATHERINE H. WHEATLEY TONY WEST

DC Bar No. 359037 Assistant Attorney General
Associate General Counsel
JOHN L. KURAY /s/ C. Lee Reeves_________________
Senior Counsel JOHN R. TYLER
YVONNE F. MIZUSAWA Assistant Branch Director, Federal Programs
Senior Counsel Branch
Board of Governors of the Federal C. LEE REEVES
Reserve System Trial Attorney, Department of Justice, Civil
20th and C Streets, N.W. Division, Federal Programs Branch
Washington D.C. 20551 20 Massachusetts Avenue, N.W.
(202) 452-3436 Washington, D.C. 20530
Fax (202) 736-5615 Tel: (202) 514-4805
Fax: (202) 616-8470
lee.reeves@usdoj.gov
Attorneys for Defendant Board of

Governors of the Federal Reserve System
42

Main Reply Brief by Defendant Board of Governors in Support of Summary Judgment (Lawsuit #1)

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Main Reply Brief by Defendant Board of Governors in Support of Summary Judgment (Lawsuit #1)

Hochgeladen von

Copyright:

Verfügbare Formate

Case 1:09-cv-01263-ESH Document 33 Filed 04/22/10 Page 1 of 47

UNITED STATES DISTRICT COURT

REPLY BRIEF IN SUPPORT OF SUMMARY JUDGMENT MOTION OF

KATHERINE H. WHEATLEY TONY WEST

Attorneys for Defendant Board of

I. THE BOARD’S EXEMPTION 5 ASSERTIONS ARE PROPER...............................4

1. Communications Between the Board And The FRBNY Constitute Intra-

2. The Board Properly Withheld Documents Under Exemption 5 Because These

3. The Board Properly Withheld Factual Material That Was Itself

B. The Board Properly Asserted Exemption 5 Over A Draft Affidavit

II. THE BOARD’S EXEMPTION 8 ASSERTIONS ARE PROPER ...........................17

III. THE BOARD’S EXEMPTION 4 ASSERTIONS ARE PROPER .........................26

A. The Board’s Exemption 4 Assertions Were Proper As To Material

IV. PLAINTIFF’S OBJECTIONS TO THE BOARD’S DECLARATIONS AND

Badwar v. U.S. Dep’t of the Air Force,

Bloomberg, L.P. v. SEC,

CNA Fin. Corp. v. Donovan,

CREW v. U.S. Dep’t. of Homeland Sec.,

Campaign For Responsible Transplantation v. U.S. Food & Drug Admin.,

Center for Auto Safety v. Nat’l. Highway Traffic Safety Admin.,

*Consumers Union of U.S., Inc. v. Heimann,

*Critical Mass Energy Project v. Nuclear Reg. Comm’n,

Dudman Communications Corp. v. Dep’t of Air Force,

Elec. Priv. Info. Ctr. v. DHS,

*Gregory v. Fed. Deposit Ins. Corp.,

Hanson v. U.S. Agency for Intern. Development,

Hoover v. Dep’t. of the Interior,

Judicial Watch, Inc. v. Export-Import Bank,

Judicial Watch v. FDA,

King v. U.S. Dep’t of Justice,

Mead Data Central, Inc. v. U.S. Dep’t of the Air Force,

Montrose Chem. Corp. of California v. Train,

N. Dartmouth Prop., Inc. v. HUD,

Nat’l Community Reinvestment Coalition v. Nat'l Credit Union Admin.,

*Nat’l Institute of Military Justice v. U.S. Dept. of Defense,

*Nat’l Parks and Conservation Association v. Morton,

*Parker v. Bureau of Land Management,

People for the American Way v. Nat’l. Park Service,

Public Citizen, Inc. v. Office of Management and Budget,

Quarles v. Dep’t of Navy,

Rockwell Int’l Corp. v. Dep't of Justice,

Tax Analysts v. IRS,

Tigue v. U.S. Dep’t of Justice,

United States v. AT&T Co.,

United States v. Thompson,

Washington Post v. U.S. Dep’t of Health and Human Svcs.,

Wolfe v. Dep’t of Health and Human Services,

5 U.S.C. § 552(a)(4) ...................................................................................................................... 37

5 U.S.C. § 552(b)(4) ..................................................................................................................... 26

12 U.S.C. § 1844(c) ...................................................................................................................... 20

12 U.S.C. § 248(a) ........................................................................................................................ 20

12 U.S.C. § 325 ............................................................................................................................. 20

In this Freedom of Information Act case, Plaintiff Vern McKinley seeks

Governors of the Federal Reserve System (“Board” or “Federal Reserve”) to

others in whole or in part pursuant to pursuant to Exemption(s) 5, 8, and/or 4.

The documents withheld consisted largely of e-mails and documents

2008 decision to authorize a loan to Bear Stearns. Regarding Exemption 5,

exchanged by or communications between the Board and the FRBNY do not

qualify as “inter-agency or intra-agency” memoranda because the FRBNY is a

private corporation, not an agency. In so arguing, Plaintiff fails to acknowledge

opinions, and recommendations provided to an agency by personnel or entities

purely factual information, such as the names of financial institutions with

Board’s declarations make clear, however, that these documents contained

March 14 Board meeting.