McKinley v. Bd. of Governors of the Fed. Reserve Sys.

• Decision Date: 29 March 2012
• Docket Number: Civil Action No. 1:10–cv–00751 (ABJ).
• Citation: 849 F.Supp.2d 47
• Parties: Vern McKINLEY, Plaintiff, v. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, Defendant.
• Court: U.S. District Court — District of Columbia

849 F.Supp.2d 47

Vern McKINLEY, Plaintiff,

v.BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, Defendant.

Civil Action No. 1:10–cv–00751 (ABJ).

United States District Court, District of Columbia.

March 29, 2012.

Michael Bekesha, Paul J. Orfanedes, Judicial Watch, Inc., Washington, DC, for Plaintiff.

Jeremy S. Simon, U.S. Attorney's Office, Washington, DC, for Defendant.

MEMORANDUM OPINION

AMY BERMAN JACKSON, District Judge.

This action involves two requests under the Freedom of Information Act (“FOIA”), 5 U.S.C. § 552 (2006), made by plaintiff Vern McKinley (“McKinley”), seeking documents related to deliberations undertaken by the Board of Governors of the Federal Reserve System (“Board”) concerning what systemic effect, if any, the failure of American International Group (“AIG”) and Lehman Brothers might have on financial markets. McKinley seeks a declaratory judgment that the Board violated FOIA by failing to fulfill his requests for non-exempt responsive records and an injunction compelling the Board to comply with the FOIA requests. Compl. ¶¶ 14–15. The parties have cross-moved for summary judgment [Dkt. # 13, 17, and 19]. Because the Court finds that the Board conducted adequate searches and properly invoked FOIA exemptions, the Court will grant both of the Board's motions for partial summary judgment [Dkt. # 13 and 17] and will deny McKinley's cross-motion [Dkt. # 19].

I. Background

The Federal Reserve System is composed of the Board and twelve regional Federal Reserve Banks (“FRBs”). The Board is the central supervisory authority of the Federal Reserve System. 12 U.S.C. § 241 (2006). It oversees the operation of the system, promulgates and administers regulations, and plays a major role in the supervision and regulation of the United States banking system. The Board is “authorized and empowered ... (1) [t]o examine at its discretion the accounts, books, and affairs of each Federal reserve bank and of each member bank and to require such statements and reports as it may deem necessary” and (2) “[t]o require any depository institution specified in this paragraph to make, at such intervals as the Board may prescribe, such reports of its liabilities and assets as the Board may determine to be necessary or desirable to enable the Board to discharge its responsibility to monitor and control monetary and credit aggregates.” 12 U.S.C. § 248 (2006). Most pertinent to this case, section 13(3) of the Federal Reserve Act, as it was in effect in 2008, gives the Board the power to authorize, in unusual and exigent circumstances, any FRB to extend credit to any individual, partnership, or corporation that is secured to the satisfaction of the lending FRB and meets other specified criteria. 12 U.S.C. § 343 (2008), amended byPub.L. No. 111–203, § 1101(a), 124 Stat. 2113 (2010). However, before the Board may authorize a FRB to make a loan, the FRB must make an independent determination concerning whether adequate credit is available from other banking institutions and whether the target institution has sufficient lendable collateral to support a loan of the magnitude required to meet its expenses. Mosser Decl. ¶ 7.

A. The Board's Response to the Financial Crisis and the Worsening Liquidity Problems of AIG and Lehman Brothers.

AIG and Lehman Brothers were among several institutions facing severe capital and liquidity problems toward the end of 2008. Thro Decl. ¶ 11. At that time, the Board became increasingly concerned about the effects that a possible AIG or Lehman Brothers bankruptcy would have on financial markets and individual financial institutions, including on large complex banking organizations (“LCBOs”). Foley Decl. ¶ 6. As a result, the Board undertook to determine whether or not to authorize the Federal Reserve Bank of New York (“FRBNY”) to extend a loan to either or both institutions under section 13(3) of the Federal Reserve Act. In making this determination, the Board sought information from the FRBNY concerning the real-time exposures of certain counterparties to AIG and Lehman Brothers.¹Id. In addition to the information supplied by FRBNY examiners, the Board also exchanged information with domestic and foreign banking supervisors to assess the potential impact of AIG's and Lehman Brothers' funding difficulties on regulated financial institutions and markets. Id.

Over the weekend of September 13, 2008, the Board, FRBNY, U.S. Department of the Treasury, and Securities and Exchange Commission brought together leaders of major financial firms in an attempt to craft a private sector solution to address Lehman Brothers' worsening capital and liquidity shortfalls. Thro Decl. ¶ 11. No solution could be crafted and Lehman Brothers declared bankruptcy on September 15, 2010. Id. “Convinced,” however, “that the failure of AIG would be catastrophic for a financial system already in acute distress,” the Board invoked section 13(3) and authorized the FRBNY to loan up to $85 billion to AIG. Mosser Decl. ¶ 6. The FRBNY, in turn, approved the loan. Id.

B. The FOIA Requests

McKinley made two separate but related FOIA requests that give rise to this action. On March 21, 2010, McKinley submitted his first request (the “AIG request”) to the Board seeking “further detail on information contained on p. 3 of the [September 16, 2008] minutes of the Board of Governors of the Federal Reserve[.] ... The source of power referenced in the minutes is Section 13(3) of the Federal Reserve Act.” Ex. A to Thro Decl. McKinley specifically sought “any and all communications and records concerning or related to the Board's decision that detail that ‘the disorderly failure of AIG was likely to have a systemic effect on financial markets that were already experiencing a significant level of fragility’ ” as described in the meeting minutes. Id. The following week, McKinley submitted his second request (the “Lehman request”) to the Board seeking:

[A]ny and all communications and records regarding analysis undertaken regarding Lehman Brothers and the assessment in September 2008 or earlier of what ‘contagion’ might have flowed from Lehman Brother's filing of bankruptcy as the word contagion was used in the case of the Board of Governors' deliberations over Bear Stearns: or ‘systemic effect on financial markets' that might have flowed from a Lehman Brothers bankruptcy as those terms were used in the Board's deliberations over American International Group.

Ex. E to Thro Decl. “Th[is] analysis,” McKinley asserts in his request, “would likely have been undertaken in the context of considering whether to take action under Section 13(3) of the Federal Reserve Act to avoid a Lehman bankruptcy.” Id.

The Manager of the Freedom of Information Office at the Board acknowledged receipt of the AIG request on March 22, 2010 and the Lehman request on March 30, 2010. Thro Decl. ¶ 4, 8. On May 11, 2010, prior to the Board's review and release of the responsive documents, but after the statutorily prescribed waiting period for filing a FOIA action had expired, McKinley brought this suit. McKinley alleges a “violation of FOIA” as the sole count and seeks to compel the Board “to search for and produce” any and all non-exempt responsive records, and to enjoin the Board from “continuing to withhold” any and all non-exempt records responsive to the FOIA requests. Compl. ¶¶ 13–15.

Beginning in August 2010, attorneys at the Board conducted searches to identify any and all records responsive to McKinley's requests. Thro Decl. ¶¶ 15, 22. On November 9, 2010, the Secretary of the Board informed McKinley that staff had searched Board records, and had found a large number of documents responsive to the AIG and Lehman requests.²Id. ¶ 6, 10. In total, the Board released 2,388 pages of responsive documents to McKinley, with 575 pages provided in full, 751 pages provided in part, and 1062 pages withheld in full.³Id. The Board claims that the 751 pages provided in part and 1062 pages withheld in full contain exempt information subject to withholding under FOIA Exemptions 2, 4, 5, 6, or 8.⁴Id.

The Board filed motions for partial summary judgment on June 8, 2011 and on July 15, 2011 [Dkt. # 13, 17]. McKinley cross-moved for summary judgment on August 31, 2011 [Dkt. # 19]. McKinley challenges the adequacy of the Board's searches and maintains that the Board continues to improperly withhold information in eighty-three records. Specifically, McKinley asserts that the Board has improperly withhold seventeen records because they are readily-available to the public, and challenges the withholding of sixty-six records as improper under the Board's asserted FOIA exemptions. The Board contends that the searches conducted were adequate and that it is entitled to withhold the eighty-three disputed records under applicable FOIA exemptions.

II. Standard of Review

“FOIA cases are typically and appropriately decided on motions for summary judgment.” Moore v. Bush, 601 F.Supp.2d 6, 12 (D.D.C.2009). In the FOIA context, “the sufficiency of the agency's identification or retrieval procedure” must be “genuinely in issue” in order for summary judgment to be inappropriate. Weisberg v. DOJ, 627 F.2d 365, 370 (D.C.Cir.1980), quoting Founding Church of Scientology v. NSA, 610 F.2d 824, 836 (D.C.Cir.1979) (internal quotation marks omitted). However, a plaintiff “cannot rebut the good faith presumption” afforded to an agency's supporting affidavits “through purely speculative claims about the existence and discoverability of other documents.” Brown v. DOJ, 742 F.Supp.2d 126, 129 (D.D.C.2010), quoting SafeCard Servs., Inc. v. SEC, 926 F.2d 1197, 1200 (D.C.Cir.1991) (internal quotation marks and citations omitted).

In any motion for summary judgment, the Court “must view the evidence in the light most favorable to the nonmoving party, draw all reasonable inferences in his favor, and eschew making credibility determinations or weighing the evidence.” Montgomery v. Chao, 546 F.3d 703, 706 (D.C.Ci...