Frank LLP v. Consumer Fin. Prot. Bureau

• Decision Date: 14 December 2017
• Docket Number: Case No. 16–cv–00670 (CRC)
• Citation: 288 F.Supp.3d 46
• Court: U.S. District Court — District of Columbia
• Parties: FRANK LLP, Plaintiff, v. CONSUMER FINANCIAL PROTECTION BUREAU, Defendant.

288 F.Supp.3d 46

FRANK LLP, Plaintiff,

v.CONSUMER FINANCIAL PROTECTION BUREAU, Defendant.

Case No. 16–cv–00670 (CRC)

United States District Court, District of Columbia.

Signed December 14, 2017

Gregory A. Frank, Frank LLP, New York, NY, for Plaintiff.

William Mark Nebeker, U.S. Attorney's Office, Washington, DC, for Defendant.

MEMORANDUM OPINION

CHRISTOPHER R. COOPER, United States District Judge

Frank LLP, a New York law firm specializing in consumer class actions, seeks records from the Consumer Financial Protection Bureau ("CFPB" or "Bureau") related to the Bureau's enforcement action against a debt collector. The firm made two requests under the Freedom of Information Act ("FOIA"), which the Bureau denied based on several of FOIA's nine exemptions. Frank challenges those denials and, in addition, seeks to invalidate two of the Bureau's policies with respect to withholding documents under FOIA Exemptions 4 and 8. In its motion seeking dismissal or summary judgment, the Bureau defends its decision to withhold documents, it contends that Frank lacks standing to challenge its FOIA policies, and it claims that, in any event, the challenged policies are valid on the merits.

With respect to all except one of Frank's claims, the Court will grant summary judgment in the Bureau's favor and deny Frank's cross-motion. The Court agrees that the Bureau properly withheld the documents Frank sought in its first request under FOIA Exemptions 5 and 7(E). As for the second FOIA request, Frank has not properly exhausted its administrative remedies because the request was remanded to the Bureau's FOIA Office after an administrative appeal and Frank has yet to pay the Bureau's processing fees. The Court finds that Frank has standing to challenge the Bureau's FOIA policies with respect to Exemptions 4 and 8. And it finds that, while the challenged Exemption 8 policy is valid, Frank is entitled to summary judgment on its Exemption 4 policy claim.

I. Background

A. First FOIA Request

The CFPB filed a consent order in September 2015 concluding that Encore Capital Group—one of the nation's largest purchasers and collectors of consumer debt—filed misleading affidavits in hundreds of thousands of debt-collection lawsuits claiming ownership of certain debts, despite having not substantiated those claims. See Consent Order ¶¶ 78–79, In re Encore Capital Group, Inc., No. 2015–CFPB–0022 (Sept. 9, 2015), https://perma.cc/VB3F-58NQ. The order also cited "approximately 35,600 identified Consumers" who paid on debts after Encore filed such an affidavit. Id. ¶ 145.

Shortly after the Bureau publicized the consent order, Frank filed its first FOIA request, seeking documents "that the Bureau relied on in identifying these approximately 35,600 lawsuits." Decl. Raynell Lazier Supp. Def.'s Mot. Summ. J. ("Lazier Decl.") Ex. A, at 1 (ECF No. 19). In reply, the Bureau's FOIA Office informed Frank that it had located responsive documents but was withholding them under Exemption 4 of FOIA, which protects confidential commercial information. Id. Ex. B, at 1; see 5 U.S.C. § 552(b)(4). Frank appealed to the Bureau. Lazier Decl. Ex. C. The Bureau denied the appeal, but relied on a different FOIA exemption than the FOIA Office. It concluded that the documents were properly withheld under Exemption 7(E), which covers certain "records or information compiled for law enforcement purposes." 5 U.S.C. § 552(b)(7)(E) ; see Lazier Decl. Ex. D. Frank filed suit in April 2016 challenging the Bureau's denial.

B. Second FOIA Request

While the parties sought to resolve Frank's first suit through mediation, the firm filed a second FOIA request with the Bureau in July 2016. Suppl. Compl. ¶¶ 34–35 (ECF No. 13 Ex. 1). This second request sought (1) records supporting the Bureau's findings in its consent order regarding Encore's litigation practices and (2) records related to the compliance requirements imposed on Encore by the consent order. See Lazier Decl. Ex. E. The Bureau's FOIA Office denied Frank's second request, invoking Exemptions 4 and 7(E), as well as Exemption 8, which protects 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) ; see Lazier Decl. Ex. F.

Frank then filed an administrative appeal, which the Bureau granted. Lazier Decl. Exs. G, H. In remanding Frank's request to the FOIA Office, the Bureau explained that it was unclear from the denial determination whether the FOIA Office had properly assessed the responsive records to determine if any "non-exempt" and "reasonably segregable portion" of those records could be produced, 5 U.S.C. § 552(b) ; see Lazier Decl. Ex. H, at 3. "To guide the FOIA Office's analysis on remand," the appellate decision also analyzed the applicability of Exemptions 4, 7(E), and 8 to the information Frank requested, and suggested that at least some of the information sought was properly withheld under those exemptions. Lazier Decl. Ex. H, at 3–5.

Frank then filed a supplemental complaint challenging both the Bureau's denial of his second FOIA request and its administrative policies with respect to Exemptions 4 and 8. Specifically, Frank alleged that the Bureau improperly treats records produced by third parties in response to the Bureau's civil investigative demands as "voluntarily submitted" for purposes of Exemption 4, a treatment that would allow the Bureau to withhold those records more liberally. And it claims that the Bureau unlawfully treats debt buyers with at least $10 million in annual receipts (such as Encore) as "financial institutions" whose examination reports and related documents are thereby shielded from disclosure under Exemption 8. According to Frank, both of these policies conflict with FOIA and violate the Administrative Procedures Act ("APA"). Suppl. Compl. ¶¶ 55–76.

C. Procedural Posture

The Bureau has moved for summary judgment on Frank's claims, raised in both its original and supplemental complaints, that the Bureau improperly withheld records sought in the FOIA requests. The Bureau also has moved to dismiss Frank's claims, raised in its supplemental complaint, that the Bureau's FOIA policies are unlawful, contending that the firm lacks Article III standing to challenge them and that, in any event, the policies are lawful on the merits. In the alternative, the Bureau seeks summary judgment on the policy-based claims. Frank has filed a cross-motion for summary judgment.

II. Standard of Review

FOIA requires federal executive agencies to produce their records upon request unless one of the Act's nine exemptions applies. See 5 U.S.C. § 552(b). The exemptions aim "to balance the public's interest in governmental transparency against the ‘legitimate governmental and private interests [that] could be harmed by release of certain types of information.’ " United Techs. Corp. v. DOD, 601 F.3d 557 (D.C. Cir. 2010) (quoting Critical Mass Energy Project v. Nuclear Regulatory Comm'n, 975 F.2d 871, 872 (D.C. Cir. 1992) ). "But these limited exemptions do not obscure the basic policy that disclosure, not secrecy, is the dominant objective of the Act." Dep't of Air Force v. Rose, 425 U.S. 352, 361, 96 S.Ct. 1592, 48 L.Ed.2d 11 (1976). Thus, where a plaintiff challenges an agency's withholding of records, the agency bears the burden of showing that one of FOIA's exemptions applies. Am. Civil Liberties Union v. DOD, 628 F.3d 612, 619 (D.C. Cir. 2011).

FOIA disputes are generally resolved on cross-motions for summary judgment. In evaluating each motion, the Court must view the record in the light most favorable to the non-movant. The agency may satisfy its burden of showing that a FOIA exemption applies through an affidavit that "describes the justifications for withholding the information with specific detail, demonstrates that the information withheld logically falls within the claimed exemption, and is not contradicted by contrary evidence in the record or by evidence of the agency's bad faith." Am. Civil Liberties Union, 628 F.3d at 619.

In addition to seeking summary judgment, the Bureau moves to dismiss the challenges to its FOIA policies raised in Frank's supplemental complaint. A plaintiff may challenge an agency policy or practice as violating FOIA. See Payne Enters., Inc. v. United States, 837 F.2d 486, 494–95 (D.C. Cir. 1988). Dismissal of such a challenge is proper if the plaintiff lacks standing, Fed. R. Civ. P. 12(b)(1), or if the allegations, accepted as true, do not show that the agency policy or practice violates FOIA, Fed. R. Civ. P. 12(b)(6). But where an agency's policy or practice conflicts with FOIA's dictates, the statute gives the Court equitable power to enjoin enforcement of that policy or practice. See Citizens for Responsibility & Ethics in Wash. ("CREW") v. DOJ, 846 F.3d 1235, 1242 (D.C. Cir. 2017) ("This circuit's case law reflects the wide latitude courts possess to fashion remedies under FOIA, including the power to issue prospective injunctive relief."); Payne Enters., 837 F.2d at 494–95.

III. Analysis

A. First FOIA Request

1. Documents

The Bureau contends that the documents responsive to Frank's first request—those used to identify the 35,600 lawsuits referenced in the Consent Order in which Encore filed improper affidavits—fall within FOIA Exemption 7(E). That exemption covers "records or information compiled for law enforcement purposes" that "would disclose techniques and procedures for law enforcement investigations or prosecutions, or would disclose guidelines for law enforcement investigations or prosecutions if such disclosure could reasonably be expected to risk circumvention of the law." 5 U.S.C. § 552(7).

After reviewing the Bureau's description of the responsive documents, the Court agrees that they were properly withheld under Exemption 7(E). First, the documents were "compiled for law enforcement purposes." To...