SafeCard Services, Inc. v. S.E.C.

• Decision Date: 01 March 1991
• Docket Number: No. 89-5374,89-5374
• Citation: 926 F.2d 1197
• Parties: , Fed. Sec. L. Rep. P 95,811 SAFECARD SERVICES, INC., Appellant, v. SECURITIES AND EXCHANGE COMMISSION.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1197

926 F.2d 1197

288 U.S.App.D.C. 324, Fed. Sec. L. Rep. P 95,811

SAFECARD SERVICES, INC., Appellant, v. SECURITIES AND EXCHANGE COMMISSION.

No. 89-5374.

United States Court of Appeals District of Columbia Circuit.

Argued Sept. 17, 1990.

Decided March 1, 1991.

Appeal from the United States District Court for the District of Columbia; Joyce Green, Judge.

Robert R. Belair, with whom Cherif Sedky and Marian G. Dent were on the brief, Washington, D.C., for appellant.

Kathleen Cody, Atty., S.E.C., with whom Richard M. Humes, Asst. Gen. Counsel, and Paul Gonson, Sol., S.E.C., were on the brief, Washington, D.C., for appellee. Daniel L. Goelzer, Atty., S.E.C., Washington, D.C., also entered an appearance, for appellee.

Before WILLIAMS, D.H. GINSBURG and HENDERSON, Circuit Judges.

Opinion for the Court filed by Circuit Judge D.H. GINSBURG.

D.H. GINSBURG, Circuit Judge:

Appellant SafeCard Services, Inc. sued the Securities and Exchange Commission, under the Freedom of Information Act, 5 U.S.C. Sec. 552, to obtain certain documents relating to that agency's investigation into the manipulation of SafeCard stock. The district court granted the SEC summary judgment with respect to 44 documents for which it claimed the attorney work product or deliberative process privileges of Exemption 5, or invoked the personal privacy provision of Exemption 7(C). 5 U.S.C. Sec. 552(b)(5) & (7)(C). The district court denied SafeCard's motion for discovery into the circumstances surrounding the destruction of 127 other documents and the loss of seven files covered by the company's FOIA request. We affirm the district court rulings regarding discovery and the work product and privacy exemptions. We remand for further proceedings with respect to the documents withheld pursuant to the deliberative process privilege.

I. BACKGROUND

In the early 1980s, the SEC initiated a series of investigations into potentially illegal trading in SafeCard's stock. After the SEC had closed most of those investigations, SafeCard requested all documents relating to 33 individuals and organizations that the agency had suspected of manipulating SafeCard's stock. After several years of negotiation, SafeCard sued the SEC; thereafter the parties reached a framework agreement, pursuant to which the SEC released approximately 75,000 pages of material. The parties remain in dispute, however, over three groups of documents.

The first group is composed of 127 documents that were among those mistakenly destroyed when the SEC's contract cleaning service discarded the box in which Denise Dishman, an SEC paralegal, was keeping them. Sixteen of these documents were the subject of a motion for summary judgment pending at the time they were destroyed; hence we shall call them the "MSJ documents." The parties have denominated the other 111 the "non-responsive documents," although they, too, were the subject of a later motion for summary judgment.

The second group of documents in dispute comprises the contents of seven files that the SEC located but, according to the agency's records, sent to the Federal Records Center during a two year hiatus in this litigation. The FRC has not been able to retrieve these files.

The third group is the 44 documents for which the SEC claims an exemption from the FOIA. It asserts that six documents are exempt under the privilege for attorney work product, which is incorporated into Exemption 5; that seven documents (including one of the foregoing six) are exempt under the deliberative process privilege, also incorporated into Exemption 5; and that 32 other documents contain names and addresses that come within Exemption 7(C) because their release would constitute an unwarranted invasion of personal privacy.

II. DISCOVERY

SafeCard moved for discovery in order to inquire into the circumstances surrounding the SEC's loss of documents and the adequacy of its efforts either to locate or to recreate the lost documents. The district court held that the SEC's affidavits were sufficient to justify summary judgment on the adequacy of its efforts, and therefore denied discovery. This court will overturn the district court's exercise of its broad discretion to manage the scope of discovery only in unusual circumstances. Brune v. IRS, 861 F.2d 1284, 1288 (D.C.Cir.1988).

In order to establish the adequacy of a search, agency affidavits must be, as the district court correctly noted, "relatively detailed and non-conclusory, and ... submitted in good faith." Ground Saucer Watch, Inc. v. CIA, 692 F.2d 770, 771 (D.C.Cir.1981) (citations and quotation marks omitted). Agency affidavits are accorded a presumption of good faith, which cannot be rebutted by "purely speculative claims about the existence and discoverability of other documents." Id.

SafeCard no longer denies that Ms. Dishman's affidavit concerning efforts to locate copies of the 111 non-responsive documents is sufficiently detailed and non-conclusory to support the district court's judgment. Instead, it argues that Ms. Dishman's other affidavits, regarding the circumstances in which all 127 documents were destroyed, the SEC's search for and efforts to reconstruct the 16 MSJ documents, and its search for the seven lost files, were lacking in detail and conclusory. SafeCard also points to various inconsistencies in the SEC affidavits, which it claims raise enough uncertainty about the adequacy of the agency's search, or about its good faith, to warrant discovery. None of SafeCard's arguments is sufficiently weighty to justify the substitution of our judgment for that of the district court.

First, the SEC adequately investigated and described the circumstances surrounding the destruction of the 127 documents. Ms. Dishman interviewed the relevant employees of the cleaning company and recounted what she learned from those interviews. This, coupled with her unavailing room-to-room search for the box of missing documents, provides adequate assurance that the documents were in fact destroyed.

SafeCard objects to the second-hand nature of this affidavit, insofar as it describes what the cleaning crew told the affiant. The point is not well taken in circumstances such as these, however. Ms. Dishman was in charge of coordinating the SEC's search and recovery efforts, and therefore she is the most appropriate person to provide a comprehensive affidavit. See, e.g., Meeropol v. Meese, 790 F.2d 942, 951 (D.C.Cir.1986) (approving reliance upon affidavit of agency employee responsible for supervising search, although he necessarily relied upon information provided by staff members who actually performed search). In the case cited by SafeCard, Weisberg v. Department of Justice, 627 F.2d 365 (D.C.Cir.1980), an FBI agent stated only that "he believed the [spectrographic] plate [relating to the assassination of President Kennedy] was discarded in one of the periodic housecleanings by the laboratory." Id. at 369. His belief was not said to be based upon his or anyone else's actual knowledge that the plate was discarded. In this case, the very person who removed the box confirmed that fact for Ms. Dishman, and the supervisor of the cleaning crew explained to her that the trash would have been compacted and sent to a landfill. Therefore, Ms. Dishman's affidavit, although partly second-hand, is not at all speculative, as was the affidavit in Weisberg.

Second, Ms. Dishman's affidavits concerning the search for the 16 MSJ documents, while not as detailed as the affidavit concerning the 111 non-responsive documents, are sufficient to support summary judgment. As recounted in these affidavits, Ms. Dishman determined that 12 of the 16 documents were originals of a type that the SEC does not ordinarily copy or keep; for this reason, she made no further effort to locate any (presumably nonexistent) copies. SafeCard objects that her search was therefore inadequate, but we disagree. When a plaintiff questions the adequacy of the search an agency made in order to satisfy its FOIA request, the factual question it raises is whether the search was reasonably calculated to discover the requested documents, not whether it actually uncovered every document extant. Meeropol, 790 F.2d at 950-51; Weisberg v. Department of Justice, 705 F.2d 1344, 1357 (D.C.Cir.1983). Mere speculation that as yet uncovered documents may exist does not undermine the finding that the agency conducted a reasonable search for them. Weisberg v. Department of Justice, 745 F.2d 1476, 1486-87 (D.C.Cir.1984); Ground Saucer Watch, 692 F.2d at 771. The SEC's failure to make hopeless and wasteful efforts to locate copies that would never have been created in the normal course is not a ground for reversal of the district court.

Nor is the SEC required to recreate or to reacquire a document that it no longer has. Yeager v. Drug Enforcement Admin., 678 F.2d 315, 321 (D.C.Cir.1982). The FOIA provides a claimant with a remedy only against an agency that has "improperly withheld" a record. 5 U.S.C. Sec. 552(a)(4)(B); GTE Sylvania, Inc. v. Consumers Union of United States, Inc., 445 U.S. 375, 384, 100 S.Ct. 1194, 1200, 63 L.Ed.2d 467 (1980). If the agency is no longer in possession of the document, for a reason that is not itself suspect, then the agency is not improperly withholding that document and the court will not order the agency to take further action in order to produce it.

Third, SafeCard's objection to the absence of detail in Ms. Dishman's affidavits describing the search for the seven lost files is misdirected. Ms. Dishman repeatedly, over the course of several months, asked the FRC to search for the files that SafeCard had requested but that SEC records listed as being in the FRC's custody. The FRC recovered several of those files. Eventually, however, a Mr. Miller at the FRC told Ms. Dishman that a thorough three-month search had failed to turn up seven of the requested files.

Having taken all of the steps within its power to retrieve...