Merrill v. Federal Open Market Committee of Federal Reserve System, 76-1379

• Decision Date: 10 November 1977
• Docket Number: No. 76-1379,76-1379
• Citation: 565 F.2d 778
• Parties: , 3 Media L. Rep. 1579 David R. MERRILL et al. v. FEDERAL OPEN MARKET COMMITTEE OF the FEDERAL RESERVE SYSTEM, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 778

565 F.2d 778

184 U.S.App.D.C. 203, 3 Media L. Rep. 1579

David R. MERRILL et al. v. FEDERAL OPEN MARKET COMMITTEE OF the FEDERAL RESERVE SYSTEM,

Appellant.

No. 76-1379.

United States Court of Appeals, District of Columbia Circuit.

Argued Sept. 28, 1976.

Decided Nov. 10, 1977.

Leonard Schaitman, Atty., Dept. of Justice, Washington, D.C., with whom Rex E. Lee, Asst. Atty. Gen., Earl J. Silbert, U.S. Atty., and Thomas G. Wilson, Atty., Dept. of Justice, Washington, D.C., were on the brief, for appellant.

Victor H. Kramer, Washington, D.C., with whom Charles E. Hill and Rangeley Wallace, Washington, D.C., were on the brief, for appellee.

Before McGOWAN, LEVENTHAL and ROBB, Circuit Judges.

Opinion for the Court filed by Circuit Judge McGOWAN.

McGOWAN, Circuit Judge:

Appellee instituted in the District Court a Freedom of Information Act (FOIA) suit in order to challenge a regulation, 12 C.F.R. § 271.5 (1975), under which appellant Federal Open Market Committee (FOMC) of the Federal Reserve System delays disclosure of certain of its records. On cross motions for summary judgment, the District Court held that the monthly instructions given by the Committee to the Manager of its Systems Open Market Account, which guide his dealing in securities, do not fall within any exemption of the Act, and therefore must be made publicly available upon adoption.

The issue on appeal is the scope of Exemption 5 of FOIA, 5 U.S.C. § 552(b)(5) (1970). ¹ That exemption affords civil discovery privileges to intra-agency memoranda, such as the documents in dispute in this case, which would otherwise be subject to disclosure under FOIA. ² We conclude that the materials sought by appellee are not encompassed by the government's "executive" or deliberative process privilege. Since appellant is unable to assert any other privilege which would exempt these materials from civil discovery, we hold that they are not within the purview of Exemption 5; and affirm the judgment of the District Court.

I

The Federal Open Market Committee (FOMC), composed of the Board of Governors of the Federal Reserve System and five representatives of Federal Reserve Banks, has responsibility under the Federal Reserve Act for directing Federal Reserve Bank purchases and sales of securities in the domestic securities market. 12 U.S.C. § 263 (1970). The Committee's authority to direct open-market operations is to be utilized "with a view to accommodating commerce and business and with regard to their bearing upon the general credit situation of the country." Id. § 263(c). To implement this regulatory responsibility, FOMC has established a Systems Open Market Account, which is a combined investment pool for all Reserve Banks. An Account Manager, appointed by FOMC, conducts open market operations in accordance with instructions from FOMC. These instructions are received in the form of a Domestic Policy Directive, supplemented by a statement of objectives for rates of growth of monetary aggregates (and for the federal funds interest rate) expressed in terms of tolerance ranges. ³ A Directive is issued after each meeting of FOMC, which typically takes place once a month. On occasion, changing conditions require FOMC to amend its Directive or tolerance ranges before its next monthly meeting.

The Directive guides the Account Manager in his open-market operations by stating, for example, whether growth in monetary aggregates (which is achieved by open-market purchases) ⁴ should be moderate or rapid. In addition to the Directive and tolerance ranges, the Account Manager's operations are guided by daily communication with at least one member of FOMC. However, the Account Manager has discretion as to the method of implementing FOMC policy. He has authority to purchase or sell any quantity of a variety of securities, or he may decide to undertake no transactions at all.

Appellee, by means of a letter dated March 7, 1975, requested access under FOIA to 1) records of policy actions ⁵ taken by FOMC at its meetings in January 1975 and February 1975, including instructions to the Account Manager, and 2) Memoranda of Discussion at these meetings. ⁶ The FOMC Secretary replied on March 21, 1975 that records of policy action would be made publicly available 45 days after their adoption, pursuant to 12 C.F.R. § 271.5 (1976). ⁷ While the reply did not respond to appellee's contention that this deferred disclosure violated FOIA, it did state that FOMC considered its Memoranda of Discussion to be exempt under Exemption 5 from FOIA's disclosure requirements.

Upon appeal to the agency, Robert Holland, a member of the Board of Governors of the Federal Reserve System, released the requested records of policy actions on April 23, 1975 (45 days having elapsed since their adoption), but affirmed the Secretary's decisions that such delay in public release of the records of policy action was warranted, and that the requested Memoranda of Discussion were exempt under Exemption 5. Holland's letter constituting final agency action, appellee then filed suit in the District Court, seeking declaratory and injunctive relief against the operation of 12 C.F.R. § 271.5, and an order directing FOMC to release the parts of the Memoranda of Discussion claimed by appellee to be nonexempt under FOIA.

In granting appellee's motion for summary judgment, the District Court rejected FOMC's contentions that the records of policy action (including Domestic Policy Directives) fell under the fifth FOIA exemption, and that release 45 days subsequent to adoption constituted "prompt" disclosure as required by (a)(2)(B) and (a)(3) of the Act. It therefore enjoined the operation of 12 C.F.R. § 271.5 insofar as it permitted delays in disclosure of FOMC policy actions. Holding that the Domestic Policy Directive is a statement of general policy within the meaning of 5 U.S.C. § 552(a)(1)(D), the court ordered FOMC to publish it in the Federal Register upon its adoption. Memorandum Opinion at 17-19. Statements and interpretations of other FOMC policy actions were ordered to be made publicly available upon adoption as statements and interpretations of policy, pursuant to 5 U.S.C. § 552(a)(2)(B), (a)(3). Id. at 19-21. ⁸

After the District Court entered its order, FOMC changed its deferral policy from that described in the challenged regulation. All records of policy action are now made available "within a few days" following the FOMC meeting the month after the Directive is adopted. ⁹ The parties agree that this constitutes compliance with the District Court's order only with respect to one of the requested documents, that entitled "Records of Policy Actions." This document, described in note 6 supra, is not completed and formally adopted until the meeting subsequent to the meeting to which it relates, and, according to appellant's new deferral policy, is disclosed within a few days of this formal adoption. ¹⁰

However, the District Court's order also requires separate and immediate disclosure, promptly after the meeting at which they are formulated, of statements and interpretations of FOMC policy, notably the Domestic Policy Directives and their accompanying tolerance ranges issued to the Account Manager. FOMC challenges on appeal that portion of the District Court's order directing it to disclose these documents upon their adoption. Appellant asserts that it may defer public availability of these records because they are encompassed by Exemption 5 of the Act.

II

FOIA provides for prompt mandatory disclosure of statements of policy and interpretations of policy, unless such matters fall within one of the specific exemptions of the Act. ¹¹ The agency carries the burden of showing that requested information falls within an exemption. 5 U.S.C. § 552(a)(4)(B).

Exemption 5 of FOIA protects from mandatory disclosure "intra-agency memorandums . . . which would not be available by law to a party other than an agency in litigation with the agency." This exemption incorporates the civil discovery law: if the document sought would be routinely available to a party in civil discovery, the fifth exemption will not protect it from prompt mandatory disclosure. Environmental Protection Agency v. Mink, 410 U.S. 73, 85-86, 93 S.Ct. 827, 35 L.Ed.2d 119 (1973). If a document is, however, privileged from civil discovery, it is exempted from mandatory disclosure under FOIA even if, in a particular case, a party in litigation could overcome the privilege by a showing of need. NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 149 n. 16, 95 S.Ct. 1504, 44 L.Ed.2d 29 (1975).

This exemption incorporates the familiar "executive" privilege attaching to predecisional communications which reflect the policymakers' deliberative processes. Id. at 150-51, 95 S.Ct. 1504. This privilege is based on the view that the quality of a decision would be adversely affected if deliberative processes were exposed to public view: such exposure would inhibit discussions by policymakers and their advisors. Id. See also Environmental Protection Agency v. Mink, supra, at 87, 89, 93 S.Ct. 827.

FOMC contends that the disputed materials (the Directives and the tolerance ranges) are predecisional records protected from disclosure by Exemption 5. It is argued that since the Account Manager has a choice in the method of implementing the policy guidelines contained in these documents, and since he consults daily with at least one FOMC member, the actual policy decision is not adopted until he acts, by buying or selling securities on the open market.

We remain unpersuaded that these documents are not FOMC's effective policy decisions until the dealing occurs. While the Account Manager retains considerable leeway in accomplishing the policy established by FOMC, he lacks authority in his position as a subordinate to disregard the Committee's policies. The Directive and tolerance ranges by practical necessity are general instructions to the Manager. That the...