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LEE v. FDIC

January 31, 1996

MATTHEW LEE, YVONNE SANTANA, VIELKA PEGUERO AND INNER CITY PRESS/COMMUNITY ON THE MOVE HOMESTEADERS ASSOCIATION, Plaintiffs, against FEDERAL DEPOSIT INSURANCE CORP. AND OFFICE OF THE COMPTROLLER OF THE CURRENCY, Defendants.


The opinion of the court was delivered by: MCKENNA

 McKENNA, D.J.

 I. BACKGROUND

 In order to challenge effectively the OCC's approval, Plaintiffs sought disclosure under the Freedom of Information Act ("FOIA"), 5 U.S.C. § 552 (1976), of the administrative record compiled by the OCC in the course of its approval process. The OCC released a significant portion of the administrative record to Plaintiffs but denied them access to certain documents in a letter dated April 25, 1995. Plaintiffs appealed this decision to the OCC by letter dated May 4, 1995. The OCC replied to the appeal on June 28, 1995 and agreed to release more, but not all, of the information requested.

 The OCC now requests that this Court issue a protective order sealing the portions of its record that it did not release to Plaintiffs on the grounds that the documents are exempt from disclosure under FOIA. Plaintiffs oppose this request.

 After reviewing in camera the documents which were not disclosed to Plaintiffs and conducting de novo review of the OCC's claims to exemptions under FOIA, the Court finds that the OCC improperly withheld the documents in question. Accordingly, these documents -- Documents 1, 64, 65, 66, 67, 68, and 69 of the Administrative Record -- must be disclosed to Plaintiffs.

 II. STANDARD OF REVIEW

 The purpose of the Freedom of Information Act is to open the records of federal agencies to the public in a manner which is consistent with the "general philosophy of full agency disclosure unless information is exempted under clearly delineated statutory language." NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 136, 44 L. Ed. 2d 29, 95 S. Ct. 1504 (1975) (quoting S. Rep. No. 813, 89th Cong., 1st Sess., 3 (1965)); see also EPA v. Mink, 410 U.S. 73, 79-80, 93 S. Ct. 827, 35 L. Ed. 2d 119 (1973). The Freedom of Information Act has been described as legislation which "attempt[s] to meet the demand for open government while preserving workable confidentiality in governmental decisionmaking." Chrysler Corp. v. Brown, 441 U.S. 281, 292, 60 L. Ed. 2d 208, 99 S. Ct. 1705 (1973).

 Under the Act, any person has a right of access to federal agency records, subject to nine enumerated exemptions to disclosure. An agency that seeks to withhold information must show that its refusal to disclose falls within one of the nine specific exemptions. 5 U.S.C. § 552(b)(2)-(9). As noted in Coastal States Gas Corp. v. Department of Energy, 199 U.S. App. D.C. 272, 617 F.2d 854, 861 (D.C. Cir. 1980) (Wald, J.) ("Coastal States"), the agency's burden of justification is substantial:

 
... conclusory assertions of privilege will not suffice to carry the Government's burden of proof in defending FOIA cases....
 
....
 
We remind the agencies, once again, that the burden is on them to establish their right to withhold information from the public and they must supply the courts with sufficient information to allow us to make a reasoned determination that they were correct.

 A person whose FOIA request has been denied in full or in part may appeal an agency's determination to a district court. See 5 U.S.C. § 552(a)(4)(B). FOIA specifies that a district court must conduct de novo review of an agency's claims to exemptions. Each exemption is to be narrowly construed with all doubts resolved in favor of disclosure. See 5 U.S.C. § 552 (a)(4)(B); Department of the Air Force v. Rose, 425 U.S. 352, 361-62, 48 L. Ed. 2d 11, 96 S. Ct. 1592 (1976). De novo review requires the court to reweigh the evidence compiled by the agency to determine whether the agency's findings are correct, not just whether they are reasonable.

 FOIA authorizes, but does not require, the district court to conduct in camera inspection of the documents in question. See 5 U.S.C. § 552(a)(4)(B). In camera inspection is appropriate when the number of documents to be reviewed is manageable. In the present case, the documents that were withheld are not so numerous as to make in camera review unduly burdensome. The court will examine each document in light of the objections to disclosure raised by the OCC.

 III. THE SEVEN DOCUMENTS

 The OCC argues that the standard for determining whether the documents it claims are exempt should be disclosed varies depending upon whether the document was a required or voluntary submission to the agency. If the submission was voluntary, the OCC argues, citing Critical Mass Energy Project v. NRC, 298 U.S. App. D.C. 8, 975 F.2d 871, 880 (D.C. Cir. 1992) and National Parks & Conservation Ass'n v. Morton, 162 U.S. App. D.C. 223, 498 F.2d 765, 770 (D.C. Cir. 1974), the documents need not be disclosed if, 1) the information is customarily considered confidential; and 2) disclosure would likely impair the government's ability to obtain necessary information in the future. If the submission is mandatory, the document must be disclosed unless disclosure would cause substantial competitive harm to the submitter. See 12 C.F.R. 4.18(d)(1)(i).

 The OCC acknowledges that all of the submissions it categorized as "voluntary" were required to be submitted to the Federal Reserve Board ("FRB"). These documents were not submitted to the OCC as a result of Chase's desire to help the OCC more fully understand Chase's operations; the OCC had access to these documents because they were submitted to the FRB as a mandatory submission in the FRB approval process. Since FRB approval is required as a condition precedent to OCC approval, it is unclear to the court in what real sense these submissions were voluntary as the documents must be submitted before the OCC approval process can even begin.

 Even if these submissions were considered voluntary, disclosure would not be prohibited under the "voluntary submission" legal standard, as the second prong of the test -- a showing of a likely chilling of future submissions to the agency -- would not be satisfied since submitters would still need FRB and OCC approval of future transactions.

 The question remaining then is whether disclosure of any of the documents in question would cause substantial competitive harm to Chase. The Court will consider each document in turn.

 1. Document 1

 The OCC denied Plaintiffs access to documents marked Document 1 -- collectively entitled "Selected Pro Forma Financial and Capital Information" and the September 1994 Balance Sheets -- on the ground that the documents are exempt from disclosure under exemption 4 of FOIA, 5 U.S.C. § 552(b)(4). This section exempts from disclosure "trade secrets and commercial or financial information obtained from a person and privileged or confidential." The OCC argues that Document 1 contains "confidential projections regarding the impact that the merger would have on Chase Manhattan" and "contains confidential proprietary and commercial information of Chase Manhattan Bank, disclosure of which could cause substantial competitive harm to Chase Manhattan." (OCC Reply Memo at 3)

 The OCC has addressed the propriety of disclosing this document in some detail. In its reply to Plaintiffs' appeal of the OCC's denial of access to this document, the OCC agreed to release a portion of this document, specifically the historical data column. The OCC refused to release the information in the columns marked "Adjustments" and "Pro Forma." The OCC released the historical column information not upon their own determination that such information should be released but because Chase advised the OCC that they "would no longer assert that the historical data column...should be retained as confidential." (Serino Letter at 4) The OCC's attitude toward disclosure, as evidenced in their letter to Plaintiffs, appears to defer the determination of the propriety of disclosure to Chase. The OCC is required to determine for itself whether the information in question should be disclosed, with a strong agency-wide presumption favoring disclosure. Consultation with the financial institution in question, while appropriate as one step in the evaluation process, is not sufficient to satisfy the OCC's FOIA obligations.

 With this in mind, the Court must determine whether the remainder of Document 1 should be disclosed to Plaintiffs. The OCC claims that Chase would suffer substantial competitive harm if the information were disclosed, asserting that:

 
[the documents] contain financial information in pro forma balance sheet and chart form and explanatory notes. This information reflects the anticipated impact on CMC's and the Bank's balance sheet and capital position from the merger. The data is broken down in a different manner than is otherwise required for standard quarterly and annual bank reporting purposes. Furthermore, the FRB-directed Vol. II (in Appendix 4) includes certain agreements between CMC and U.S. Trust Corp. which are ...

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