Coastal States Gas Corp. v. Department of Energy, 79-2181

• Decision Date: 15 February 1980
• Docket Number: No. 79-2181,79-2181
• Citation: 617 F.2d 854,199 U.S.App.D.C. 272
• Parties: , 199 U.S.App.D.C. 272, Energy Mgt. P 26,192 COASTAL STATES GAS CORPORATION v. DEPARTMENT OF ENERGY, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 854

617 F.2d 854

54 A.L.R.Fed. 256, 199 U.S.App.D.C. 272,

Energy Mgt. P 26,192

COASTAL STATES GAS CORPORATION v. DEPARTMENT OF ENERGY, Appellant.

No. 79-2181.

United States Court of Appeals, District of Columbia Circuit.

Argued Jan. 17, 1980.

Decided Feb. 15, 1980.

Appeal from the United States District Court for the District of Columbia (D.C. Civil 76-1173).

Douglas N. Letter, Atty., Dept. of Justice, Washington, D.C., with whom Charles F. C. Ruff, U. S. Atty., Michael Kimmel and Burton D. Fretz, Attys., Dept. of Justice, Washington, D.C., were on the brief, for appellant.

J. Todd Shields, Houston, Tex., a member of the bar of the Supreme Court of Texas, pro hac vice, by special leave of Court with whom Clinton R. Batterton and Joseph T. Small, Jr., Washington, D.C., were on the brief, for appellee.

Before ROBB, WILKEY and WALD, Circuit Judges.

Opinion for the Court filed by Circuit Judge WALD.

WALD, Circuit Judge:

This case raises issues concerning the scope of Exemptions 5 and 7 to the general disclosure requirements of the Freedom of Information Act (FOIA), 5 U.S.C. § 552 (1976). In 1975 and 1976, plaintiff Coastal States Gas Corporation (Coastal States) filed Freedom of Information requests with the defendant, ¹ seeking copies of agency interpretations of its regulations which had not been made public. The plaintiff's requests were never processed, but after suit was filed some documents were released. The issue in this appeal is focused on memoranda from regional counsel to auditors working in DOE's field offices, issued in response to requests for interpretations of regulations within the context of particular facts encountered while conducting an audit of a firm. The plaintiff contends that these memoranda constituted a body of "secret law" which the agency was using in its dealings with the public and which must be disclosed, while DOE responds that the documents were properly withheld under Exemption 5, ² as documents which would not be subject to disclosure during discovery, ³ and in a few cases, under Exemption 7 ⁴ as documents within an investigatory file. The district court ordered, with a few specific exceptions, that the documents must be released under the FOIA. It rejected each of DOE's general claims of exemption, finding either that the rationale of the particular exemption did not apply to these documents, or that the agency had failed to demonstrate the prerequisites to proper invocation of the exemption. We agree, and affirm the decision of the district court in all respects.

I. The Facts : In order to determine whether the agency's claim that the documents were properly withheld is valid, an understanding of the function the documents serve within the agency is crucial. NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 95 S.Ct. 1504, 44 L.Ed.2d 29 (1975). In our explanation of the facts, we draw upon the district court's findings, which, of course, we are bound to accept unless they are clearly erroneous. We will note, however, those places at which DOE contends the district court has misconstrued the internal functioning of the agency.

After the 1973 oil embargo, a compliance program was established to assure the observance of petroleum pricing and allocation regulations. Ten regional offices were established within which regional counsel were located. Each regional office also employed auditors and other investigative personnel, whose job was auditing individual firms to assure compliance with the regulations. These audits were not "investigations;" at that point, no charge had been made nor was a violation necessarily suspected. According to the regional director of Region VI in Dallas, the auditor "begins the audit without any preconceived notion that there's a violation at that firm. He is auditing for compliance." Deposition of Larry White, Regional Director for Compliance, Region VI, at 22 (hereinafter White Dep.).

While the regional counsel has many responsibilities, the particular task relevant to this case is that of providing interpretations of the pertinent regulations to the auditors at this early stage of compliance review. If the auditors should encounter a problem of regulatory interpretation, a request for advice would be sent to the regional counsel, couched in a specific factual context, either real or hypothetical. ⁵ The response would be a legal memorandum, interpreting any applicable regulations in light of those facts, and often pointing out additional factors which might make a difference in the application of the regulation. We set out, as an example, one of the fourteen documents submitted by the agency as "typical" of the memoranda at issue in this case. ⁶

The agency points out that these were not "formal" interpretations of the regulations, emphasizing that there is a published procedure for issuing such interpretations. Also, the agency insists that the interpretations were not "binding" on the audit staff; it contends that the agency staff "is free to reject the memorandum." ⁷ The district court found, however, that in fact the advice was regularly and consistently followed by the non-legal staff, a conclusion which we find to be fully supported by the evidence. ⁸ There is evidence in the record that agency staff failed to follow a regional counsel opinion only if it could be distinguished on the facts, or if the matter were referred to a higher authority within the agency. ⁹ Furthermore, in some of the offices the documents were indexed by subject matter and used as precedent in later cases; ¹⁰ they were circulated among the area offices and supplied to new personnel; ¹¹ they were at times "amended" or "rescinded," which would hardly be necessary if the documents contained merely informal suggestions to staff which could be disregarded; ¹² and on at least one occasion a regional counsel memorandum involving the audit of a different firm was cited to a member of the public as binding precedent. ¹³ The fourteen documents which are a part of the record are brief memoranda which explain the meaning of a particular regulation when applied to certain facts.

II. The District Court Opinion : Although the district court rejected each of DOE's general claims of exemption, the court did find that some documents were properly withheld. Those documents labeled as "drafts, proposals and recommendations" in the agency's index of documents were found to be deliberative documents within the scope of Exemption 5. A few documents were found to be protected by the attorney work-product privilege because the index revealed they were drafted at a time in the audit when litigation was likely because specific potential violations had been revealed. However, the agency's claim of attorney-client privilege was rejected as to all the documents because the agency had failed to establish that these documents had been treated with any measure of confidentiality within the agency.

As for the Government's Exemption 7 claim, the district court found that while it was asserted as to fifty-three documents, no attempt was made to indicate the present status of any investigation involving any of the documents. Since Exemption 7 only applies to concrete prospective or presently active investigations, ¹⁴ the district court ruled that the agency had failed to establish its entitlement to the exemption, but nevertheless as a precaution permitted very recent documents as to which Exemption 7 was claimed to be withheld.

On appeal, DOE contends that the district court was in error as to all documents which were ordered to be released. All of the documents, it argues, were properly withheld because they were "pre-decisional" or deliberative intra-agency memoranda, protected by the attorney-client or the attorney work-product privileges, or constitute part of an investigative file, and their disclosure would cause harm to compliance investigations. Coastal States does not challenge the district court decision to permit the continued withholding of the few documents which the district court found were protected by the exemptions.

III. The Vaughn Index : In lieu of in camera inspection, DOE submitted an index of the withheld documents, along with affidavits from regional counsel in support of its decision not to release the memoranda. The parties have referred to these materials as the Government's "Vaughn Index," but we wish to make clear that this index is not what we had in mind in our decision in Vaughn v. Rosen, 157 U.S.App.D.C. 340, 484 F.2d 820 (1973), cert. denied, 415 U.S. 977, 94 S.Ct. 1564, 39 L.Ed.2d 873 (1974) (Vaughn I ), in which we set out suggested procedures to allow the courts to determine the validity of the Government's claims without physically examining each document. We repeat, once again, that conclusory assertions of privilege will not suffice to carry the Government's burden of proof in defending FOIA cases. A typical line from the index supplied in this case identifies who wrote the memorandum, to whom it was addressed, its date, and a brief description of the memorandum such as "Advice on audit of reseller whether product costs can include imported freight charges, discounts, or rental fees. Sections 212.93 and 212.92." DOE claimed this document was "PD" (predecisional), "ATWP" (attorney work- product) and that "some" of it was in an investigatory file. That is all we are told, save for the affidavits submitted by the regional counsel which repeat in conclusory terms that all the documents withheld fall within one or another of the exemptions.

Such an index is patently inadequate to permit a court to decide whether the exemption was properly claimed, as will be discussed more fully in the course of this opinion. Contrast the index submitted by the agency and described in Mead Data Central, Inc. v. U. S. Dep't of the Air Force, 184 U.S.App.D.C. 350, 566 F.2d 242 (1977), which clearly describes the characteristics of the documents which the agency...