Robert M. Krasne, Esq.
Williams & Connolly
725 Twelfth Street, NW
Washington, DC 20005
Re: Freedom of Information Act Appeal
(Your April 22, 1996 Letter)
Dear Mr. Krasne:
On November 15, 1995, you wrote to Richard Schulman, NCUA's Freedom
of Information Act (FOIA) Officer, requesting documents in seven
different categories pursuant to the FOIA. Responsive documents
were provided to you in letters dated November 27, 1995 and January
26, 1996. You appealed the determination on your FOIA request
on February 14, 1996. With your agreement, the February 14 appeal
was treated as a continuance of your November 15 FOIA request
since there were additional documents that had not been provided
with Mr. Schulman's earlier responses. You received additional
documents from Mr. Schulman in a letter dated March 22. On April
17, 1996, documents previously withheld pursuant to exemption
4 were released to you after submitters of the information had
the opportunity to comment on its release. On April 22, 1996,
you wrote to reassert your appeal as noted in your February 14,
1996 letter. We note that many documents and portions of documents
that were originally either not identified as responsive to your
request or withheld pursuant to various exemptions at the time
you filed your appeal (February 14, 1996) have since been identified
and released. Your appeal is denied pursuant to exemptions 4,
5, and 8 of the FOIA. Each exemption is discussed separately
below.
Exemption 4
The information withheld pursuant to exemption 4 consists mostly
of documents (or portions of documents) responsive to categories
1. and 2. of your initial FOIA request - that is information concerning
corporate credit union waiver requests and NCUA action on such
requests. Materials submitted with waiver requests include current
credit union investments, fixed assets, reserves, and borrowings;
strategies and projections involving those areas and their impact
on the financial well being of the credit unions; and additional
commercial and financial information about the submitting credit
unions. Exemption 4 of the FOIA covers two categories of information:
(1) trade secrets; and (2) information which is commercial or
financial, obtained from a person and privileged or confidential.
5 U.S.C. 552(b)(4). All of the information withheld is commercial/financial,
no trade secrets are involved. Some of the information is withheld
only pursuant to exemption 4, other information is withheld pursuant
to exemption 4 as well as exemptions 5 and/or 8.
The courts have interpreted what is included as commercial/financial
information broadly. Courts have held that the term "commercial"
includes anything "pertaining or relating to or dealing with
commerce." American Airlines, Inc. v. National Mediation
Board, 588 F.2d 863, 870 (2d Cir. 1978). The information
withheld is clearly commercial/financial information. The courts
have also interpreted the term "person" broadly. Information
obtained from a corporation is included as information obtained
from a person. Goldstein v. HHS, No. 92-2013, slip op.
at 4 (S.D. Fla. May 21, 1993). All commercial/financial information
withheld has been obtained from a "person" in accordance
with exemption 4.
According to the court in Critical Mass Energy Project v. NRC,
975 F.2d 871 (D.C. Cir. 1992), cert. denied, 113 S. Ct.
1579 (1993), voluntarily submitted information is afforded broader
protection under exemption 4 of the FOIA than information that
is required by an agency to be submitted. The court held that
voluntarily provided information is " 'confidential' for
the purpose of exemption 4 if it is of a kind that would customarily
not be released to the public by the person from whom it was obtained."
Critical Mass, at 879. The credit union submitters of
the exemption 4 documents have specifically requested that the
information remain confidential. It is clear that the exemption
4 information would not be customarily released to the public
by the submitters. Hence, voluntarily submitted information remains
exempt from disclosure.
The Critical Mass court also held that information required
to be submitted is confidential if it meets one of the two prongs
of National Parks & Conservation Association v. Morton,
498 F.2d 765 (D.C. Cir. 1974). The information is confidential
under National Parks if its release would (1) impair the
Government's ability to obtain necessary information in the future;
or (2) cause substantial harm to the competitive position of the
person from whom the information was obtained. National Parks
at 770. We believe that release of the commercial/financial information
withheld meets both of the tests of National Parks. It
is not necessary to determine whether the documents withheld pursuant
to exemption 4 were voluntarily submitted or were required to
be submitted. The standards for both voluntarily submitted information
and NCUA required information have been met. The documents
withheld under exemption 4 continue to be exempt from disclosure.
Exemption 5
Exemption 5 of the FOIA protects "inter-agency or intra-agency memorandums or letters which would not be available by law to a party ... in litigation with the agency."
5 U.S.C. 552(b)(5). Information withheld pursuant to exemption
5 in this case includes several memoranda to the NCUA Board concerning
corporate credit union waiver requests; various closed NCUA Board
meeting minutes and a merger proposal and counterproposal concerning
CapCorp Federal Credit Union; an audit of a proposed merger partner
for CapCorp FCU; and additional documents concerning CapCorp FCU
and its conservatorship. All of the CapCorp documents were withheld
pursuant to exemption 8 in addition to exemption 5.
The courts have interpreted exemption 5 expansively to include
documents generated outside of an agency. Documents generated
by consultants outside an agency are typically found to qualify
for protection under exemption 5 because agencies have a special
need for the opinions and recommendations of temporary consultants.
Soucie v. David, 448 F.2d 1067 (D.C. Cir. 1971). Hence,
information provided by third parties at NCUA's request can be
withheld pursuant to exemption 5.
Included within exemption 5 is information subject to the deliberative
process privilege. The purpose of this privilege is "to
prevent injury to the quality of agency decisions." NLRB
v. Sears, Roebuck & Co., 421 U.S. 132, 151 (1975). Three
policy purposes have been held to constitute the bases for the
deliberative process privilege: (1) to encourage open, frank
discussions on matters of policy between subordinates and superiors;
(2) to protect against premature disclosure of proposed policies
before they are finally adopted; and (3) to protect against public
confusion that might result from disclosure of reasons and rationales
that were not in fact ultimately the grounds for an agency's action.
Russell v. Department of the Air Force, 682 F.2d 1045
(D.C. Cir. 1982).
The courts have established two fundamental requirements for the deliberative process privilege to be invoked. The communication must be predecisional and it must be deliberative. Mapother v. Department of Justice, 3 F.3d 1533 (D. C. 1993). The information withheld is both predecisional and deliberative. None of the information withheld under exemption 5 is contained in final opinions of the NCUA. Although exemption 5 does not always allow for entire documents to be withheld (factual information that is not deliberative in nature must be disclosed, see Mapother at 1538 - 40), as noted above, the CapCorp documents withheld pursuant to exemption 5 are also withheld pursuant to exemption 8. Exemption 8 does not require redaction of documents, see discussion below. Memoranda to the NCUA Board concerning corporate credit union waiver requests have not been withheld in full pursuant to exemption 5. Portions of those documents have been released.
We believe that all purposes and requirements of exemption 5 are
met in this case. Disclosure of predecisional thoughts included
in various memoranda, Board meeting minutes, draft agreements
and proposals, and audit recommendations could cause injury to
the quality of agency decisions. Therefore the information described
above continues to be withheld pursuant to exemption 5 of the
FOIA.
Exemption 8
Exemption 8 of the FOIA exempts information:
Contained in or related to examination, operating, or condition
reports prepared by, on behalf of, or for the use of an agency
responsible for the regulation or supervision of financial institutions.
5 U.S.C. 552(b)(8). Information withheld pursuant to exemption
8 includes the CapCorp material noted under exemption 5 above
as well as a chart noting CapCorp problems, a CapCorp fact sheet
and analysis of loss. You note in your appeal your concern that
exemption 8 is not applicable to the information requested. There
are many documents (or portions of documents) containing information
that are withheld pursuant to exemption 8. Most of this information
concerns CapCorp Federal Credit Union and its conservatorship
rather than the other corporate credit unions that requested various
waivers under the corporate credit union regulation. However,
some information in memoranda to the NCUA Board concerning other
corporate credit union waiver requests is exemption 8 information.
We reassert the applicability of exemption 8 to these documents.
The courts have discerned two major purposes for exemption 8 from
its legislative history: 1) to protect the security of financial
institutions by withholding from the public reports that contain
frank evaluations of a bank's stability; and 2) to promote cooperation
and communication between employees and examiners. See
Atkinson v. FDIC, 1 GDS 80,034, at 80,102 (D.D.C. 1980).
Either purpose is sufficient reason to withhold examination information.
The NCUA regulation implementing exemption 8 of the FOIA is found
at 12 C.F.R. 792.3(a)(8). Sections 792.3(a)(8) repeats exemption
(8) and states:
This includes all information, whether in formal or informal report
form, the disclosure of which would harm the financial security of
credit unions or would interfere with the relationship between
NCUA and credit unions.
Courts have interpreted exemption 8 broadly and have declined
to restrict its all- inclusive scope. Consumers Union of United
States, Inc. v. Heimann, 589 F.2d 531 (D.C. Cir. 1978). Examination
reports as well as matters that are related to such reports (the
findings of an examination and its follow-up) have been withheld
from disclosure. See Atkinson, at 80,102. Exemption
8 has been held to apply to internal memoranda that contain specific
information about named financial institutions. Wachtel v.
Office of thrift Supervision, No. 3-90-833, slip op. (M.D.
Tenn. Nov. 20, 1990). Records pertaining to a financial institution
no longer in operation can be withheld pursuant to exemption 8.
Gregory v. FDIC, 631 F.2d 896 (D.C. Cir. 1980). In addition,
courts have generally not required agencies to segregate and disclose
portions of documents unrelated to the financial condition of
the institution. See Atkinson, at 80,103. It is
appropriate to withhold entire documents pursuant to this exemption.
We believe that the purposes of exemption 8 are met, therefore
information contained in the above noted documents continues to
be withheld pursuant to exemption (8).
Pursuant to 5 U.S.C. 552(a)(4)(B), you may seek judicial review of this determination by filing suit to enjoin NCUA from withholding the documents you requested and to order production of the documents. Such a suit may be filed in the United States District
Court in the district where you reside, where your principal place of business is located,
the District of Columbia, or where the documents are located (the
Eastern District of Virginia.)
Sincerely,
Robert M. Fenner
General Counsel
GC/HMU:bhs
96-0434
SSIC 3212