Freedom of Information Act Guide, May 2004
Exemption 8 of the FOIA protects matters that are "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." (1)
This exemption received little judicial attention during the first dozen years of the FOIA's operation. The only significant decision during that period was M.A. Schapiro & Co. v. SEC, in which the District Court for the District of Columbia held that national securities exchanges and broker-dealers are not "financial institutions" within the meaning of the exemption. (2) Fourteen years later, after passage of the Government in the Sunshine Act (3) -- the legislative history of which broadly defines the term "financial institutions" -- that same court disavowed its early narrow interpretation of the term and held that stock exchanges qualify as "financial institutions" under Exemption 8. (4) As a result, subsequent attempts by FOIA requesters to have courts rely on the ruling in M.A. Schapiro have been unsuccessful. (5)
Instead, courts interpreting Exemption 8 have largely declined to restrict the "particularly broad, all-inclusive" scope of the exemption. (6) The Court of Appeals for the District of Columbia Circuit has led the way by declaring that "if Congress has intentionally and unambiguously crafted a particularly broad, all-inclusive definition, it is not [the courts'] function, even in the FOIA context, to subvert that effort." (7) As another court has stated: "Exemption 8 was intended by Congress -- and has been interpreted by courts -- to be very broadly construed." (8)
The D.C. Circuit even has gone so far as to state that in Exemption 8 Congress has provided "absolute protection regardless of the circumstances underlying the regulatory agency's receipt or preparation of examination, operating or condition reports." (9) Similarly, in a major Exemption 8 decision, the D.C. Circuit broadly construed the term "financial institutions" and held that it is not limited to "depository" institutions. (10) In turn, the District Court for the District of Colorado relied upon that D.C. Circuit decision when ruling that an "investment advisor company" is a "financial institution" under Exemption 8, observing that "investment advisors, as a matter of common practice, are fiduciaries of their clients who direct, and in reality make, important investment decisions." (11) The District Court for the Northern District of California, "following the logic" of these earlier cases, broadly held "that the term 'financial institutions' encompasses brokers and dealers of securities or commodities as well as self-regulatory organizations, such as the [National Association of Securities Dealers]." (12)
In examining the sparse legislative history of Exemption 8, courts have discerned two major purposes underlying it: (1) "to protect the security of financial institutions by withholding from the public reports that contain frank evaluations of a bank's stability," and (2) "to promote cooperation and communication between employees and examiners." (13) Accordingly, different types of documents have been held to fall within the broad confines of Exemption 8.
First and foremost, the authority of federal agencies to withhold bank examination reports prepared by federal bank examiners has not been questioned. (14) Further, matters that are "related to" such reports -- that is, documents that "represent the foundation of the examination process, the findings of such an examination, or its follow-up" -- have also been held exempt from disclosure. (15) Likewise, Exemption 8 has been employed to with-hold portions of documents -- such as internal memoranda and policy statements -- that contain specific information about named financial institutions. (16)
Bank examination reports and related documents prepared by state regulatory agencies have been found protectible under Exemption 8 on more than one ground. The purposes of the exemption are plainly served by withholding such material because of the "interconnected" purposes and operations of federal and state banking authorities. (17) In one case, a state agency report, transferred to a federal agency strictly for its confidential use and thus still within the control of the state agency, was held as a threshold matter not even to be an "agency record" under the FOIA subject to disclosure. (18) In general, "all records, regardless of the source, of a bank's financial condition and operations [that are] in the possession of a federal agency 'responsible for the regulation or supervision of financial institutions,' are exempt." (19)
Indeed, even records pertaining to banks that are no longer in operation can be withheld under Exemption 8 in order to serve the policy of promoting "frank cooperation" between bank and agency officials. (20) The exemption protects even bank examination reports and related memoranda relating to insolvency proceedings. (21) Documents relating to cease-and-desist orders that issue after a bank examination as the result of a closed administrative hearing are also properly exempt. (22) Also, reports examining bank compliance with consumer laws and regulations have been held to "fall squarely within the exemption." (23)
Moreover, in keeping with the expansive construction of Exemption 8, courts have generally not required agencies to segregate and disclose portions of documents unrelated to the financial state of the institution. As one court has observed, "an entire examination report, not just that related to the 'condition of the bank' may be properly withheld." (24) Although some courts have declined to extend the protection of Exemption 8 to "purely factual material," (25) the District Court for the Eastern District of Virginia permitted its withholding, reasoning that "facts cannot be considered in isolation " and instead "must be considered with respect to the overall context of the documents in which they are contained." (26)
Lastly, it should be noted that a provision of the Federal Deposit Insurance Corporation Improvement Act of 1991 explicitly limits Exemption 8's applicability with respect to specific reports prepared pursuant to it. (27) That statute requires all federal banking agency inspectors general to conduct a review and to make a written report when a deposit insurance fund incurs a material loss with respect to an insured depository institution. (28) The statute further provides that, with the exception of information that would reveal the identity of any customer of the institution, the federal banking agency "shall disclose the report upon request under [the FOIA] without excising . . . any information about the insured depository institution under [Exemption 8]." (29)
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1. 5 U.S.C. § 552(b)(8) (2000).
2. 339 F. Supp. 467, 470 (D.D.C. 1972).
3. 5 U.S.C. § 552b (2000).
4. Mermelstein v. SEC, 629 F. Supp. 672, 673-75 (D.D.C. 1986).
5. See Feshbach v. SEC, 5 F. Supp. 2d 774, 781 (N.D. Cal. 1997) (rejecting argument that court should follow M.A. Schapiro definition of term "financial institutions" because "the same district court [had] noted [in Mermelstein] that [M.A. Schapiro] was no longer good law"); Berliner, Zisser, Walter & Gallegos v. SEC, 962 F. Supp. 1348, 1351 n.5 (D. Colo. 1997) (likewise rejecting cramped reading of term "financial institutions" because court in Mermelstein had noted that "subsequent passage of the Sunshine Act" rendered decision in M.A. Schapiro "no longer good law").
6. Consumers Union of United States, Inc. v. Office of the Comptroller of the Currency, No. 86-1841, slip op. at 2 (D.D.C. Mar. 11, 1988); McCullough v. FDIC, No. 79-1132, 1980 U.S. Dist. LEXIS 17685, at **2-3 (D.D.C. July 28, 1980) (observing that "Congress has left no room for a narrower interpretation of Exemption 8"). But see Forest Guardians v. United States Forest Serv., No. 99-615, slip op. at 51 (D.N.M. Jan. 29, 2001) (declaring that Exemption 8 does not "shield everything banking institutions accumulate . . . that might be reviewed in the process of a bank examination," and opining that "[s]uch a vague and sweeping definition of what Exemption 8 encompasses can only be regarded as antithetic to . . . FOIA's disclosure requirements").
7. Consumers Union of United States, Inc. v. Heimann, 589 F.2d 531, 533 (D.C. Cir. 1978); see also Sharp v. FDIC, 2 Gov't Disclosure Serv. (P-H) ¶ 81,107, at 81,270 (D.D.C. Jan. 28, 1981); McCullough, 1980 U.S. Dist. LEXIS 17685, at **2-3.
8. Pentagon Fed. Credit Union v. Nat'l Credit Union Admin., No. 95-1475, slip op. at 8 (E.D. Va. June 7, 1996); accord Attorney General's Memorandum for Heads of All Federal Departments and Agencies Regarding the Freedom of Information Act (Oct. 12, 2001), reprinted in FOIA Post (posted 10/15/01) (emphasizing importance of protecting institutional and commercial information); FOIA Post, "New Attorney General Memorandum Issued" (posted 10/15/01) (discussing the need for agencies to fully, deliberately, and carefully consider the institutional, commercial, and personal privacy interests that can be implicated by any disclosure of government information).
9. Gregory v. FDIC, 631 F.2d 896, 898 (D.C. Cir. 1980); see also Clarkson v. Greenspan, No. 97-2035, slip op. at 14-15 (D.D.C. June 30, 1998) (extending Exemption 8 protection to records of examinations conducted by Federal Reserve Banks for Board of Governors of Federal Reserve System), summary affirmance granted, No. 98-5349, 1999 WL 229017 (D.C. Cir. Mar. 2, 1999).
10. Public Citizen v. Farm Credit Admin., 938 F.2d 290, 293-94 (D.C. Cir. 1991) (holding that National Consumer Cooperative Bank (NCCB) is "financial institution" for purposes of Exemption 8 and that exemption protects audit reports prepared by Farm Credit Administration (FCA) for submission to Congress regarding NCCB, even though FCA does not regulate or supervise NCCB).
11. Berliner, 962 F. Supp. at 1352 (relying on the "legislative history of the [Government in the] Sunshine Act" in the absence of any "unambiguous definition of financial institutions provided in FOIA's text or legislative history").
12. Feshbach, 5 F. Supp. 2d at 781.
13. Atkinson v. FDIC, No. 79-1113, 1980 U.S. Dist. LEXIS 17793, at *4 (D.D.C. Feb. 13, 1980); see Berliner, 962 F. Supp. at 1353 (delineating Exemption 8's "dual purposes" as "protecting the integrity of financial institutions and facilitating cooperation between [agencies] and the entities regulated by [them]"); see also Consumers Union, 589 F.2d at 534 (identifying primary reasons for adoption of Exemption 8 as protecting disclosure of examination, operation, and condition reports -- which, if disclosed, might undermine public confidence in financial institutions -- and safeguarding relationship between supervisory agencies and banks); Fagot v. FDIC, 584 F. Supp. 1168, 1173 (D.P.R. 1984) (recognizing purposes of Exemption 8 in protecting information containing frank evaluations which might undermine public confidence and relationship between financial institutions and supervisory agencies), aff'd in pertinent part & rev'd in part, 760 F.2d 252 (1st Cir. 1985) (unpublished table decision); cf. Feinberg v. Hibernia Corp., No. 90-4245, 1993 WL 8620, at *4 (E.D. La. Jan. 6, 1993) (noting Exemption 8's dual purpose of protecting operation and condition reports containing frank evaluations of investigated banks, and protecting relationship between financial institutions and supervisory government agencies) (non-FOIA case).
14. See Sharp, 2 Gov't Disclosure Serv. (P-H) at 81,270; Atkinson, 1980 U.S. Dist. LEXIS 17793, at **4-5; see also Clarkson, No. 97-2035, slip op. at 14-15 (D.D.C. June 30, 1998) (holding that Board of Governors of Federal Reserve System may withhold records of examinations prepared by Federal Reserve Banks); cf. Feinberg v. Hibernia Corp., No. 90-4245, 1992 WL 54738, at **6-7 (E.D. La. Mar. 9, 1992) (noting, in the context of a civil discovery dispute in a lawsuit unrelated to the FOIA, that "[t]here is no question that the bank examination reports themselves fall within the purview" of what would be protected by Exemption 8) (non-FOIA case).
15. Atkinson, 1980 U.S. Dist. LEXIS 17793, at **5-7; see, e.g., Parsons v. Freedom of Info. Act Officer, Office of Consumer Affairs SEC, No. 96-4128, 1997 WL 461320, at *1 (6th Cir. Aug. 12, 1997) (summarily holding that "all communication[s] between" SEC and National Association of Securities Dealers (NASD), including "any SEC audits" of NASD, "were exempt from disclosure"); Biase v. Office of Thrift Supervision, No. 93-2521, slip op. at 12 (D.N.J. Dec. 16, 1993); Teichgraeber v. Bd. of Governors, Fed. Reserve Sys., No. 87-2505, 1989 WL 32183, at *1 (D. Kan. Mar. 20, 1989); Consumers Union, No. 86-1841, slip op. at 2-3 (D.D.C. Mar. 11, 1988); Folger v. Conover, No. 82-4, slip op. at 6-8 (E.D. Ky. Oct. 25, 1983); Sharp, 2 Gov't Disclosure Serv. (P-H) at 81,271; cf. In re Knoxville News-Sentinel Co., 723 F.2d 470, 476 (6th Cir. 1983) (citing Exemption 8 as support for conclusion that agency's questioning of bank employees is to be shielded from civil discovery) (non-FOIA case). But see Forest Guardians, No. 99-615, slip op. at 51-52 (D.N.M. Jan. 29, 2001) (declining to extend Exemption 8 protection to escrow waivers, and ruling they are not "reports of or related to a bank examination").
16. Wachtel v. Office of Thrift Supervision, No. 3-90-833, slip op. at 19-20, 23, 26-28, 30, 33 (M.D. Tenn. Nov. 20, 1990) (protecting portions of documents containing information about two named financial institutions -- specifically, names of institutions, names of officers and agents, any references to their geographic locations, and specific information about their financial conditions).
17. Atkinson, 1980 U.S. Dist. LEXIS 17793, at *4.
18. McCullough, 1980 U.S. Dist. LEXIS 17685, at **7-8.
19. Id. (quoting legislative history); see also Snoddy v. Hawke, No. 99-1636, slip op. at 2 (D. Colo. Dec. 20, 1999) (holding that electronic mail, notes, and correspondence pertaining to matters discussed by employees of Citibank and Office of Comptroller of Currency were properly withheld as "matters prepared by or for the [regulating] agency . . . [and pertaining to] examination, operating or condition reports"), aff'd on other grounds, 13 Fed. Appx. 768 (10th Cir. 2001), cert. denied, 535 U.S. 1039 (2002); Clarkson, No. 97-2035, slip op. at 15 (D.D.C. June 30, 1998) (finding that records of examinations conducted by Federal Reserve Banks for Board of Governors of Federal Reserve System were properly withheld because the "examinations were done by or for the agency responsible for regulating Reserve Banks"). But see Forest Guardians, No. 99-615, slip op. at 51 (D.N.M. Jan. 29, 2001) (finding to be "without merit" the agency's argument that because the Farm Credit Administration is a financial institution responsible for regulating Farm Credit Banks, and escrow waivers submitted by lenders contained information contained in or related to bank examination or condition reports, those escrow waivers fell within Exemption 8: "Were the argument to be taken as meritorious, it would shield everything banking institutions accumulate if any possibility existed the information might be reviewed in the process of examination.").
20. Gregory, 631 F.2d at 899; accord Berliner, 962 F. Supp. at 1353 (upholding applicability of Exemption 8 to documents relating to company that had "been defunct for at least four years" and declining to adopt argument that passage of time abated "need for confidentiality"). But cf. In re Sunrise Sec. Litig., 109 B.R. 658, 664-67 (E.D. Pa. 1990) (holding that Federal Home Loan Bank of Atlanta could not rely upon regulation implementing Exemption 8 as independent evidentiary "bank examination privilege," and even under more general "official information privilege," finding that there exists no absolute protection for internal working papers and other documents generated in government's examination of failed bank) (non-FOIA case).
21. See, e.g., Tripati v. United States Dep't of Justice, No. 87-3301, 1990 U.S. Dist. LEXIS 6249, at **2-3 (D.D.C. May 18, 1990).
22. See, e.g., Atkinson, 1980 U.S. Dist. LEXIS 17793, at **4-5.
23. Id.; see also Snoddy, No. 99-1636, slip op. at 2 (D. Colo. Dec. 20, 1999) (holding that e-mail, notes, and other correspondence pertaining to whether Citibank violated regulation fell within purview of Exemption 8); Consumers Union, No. 86-1841, slip op. at 2-3 (D.D.C. Mar. 11, 1988) (finding that reports fall within Exemption 8 "because they analyze and summarize information concerning consumer complaints"); cf. Consumers Union, 589 F.2d at 534-35 (concluding that Truth in Lending Act, 15 U.S.C. § 1601 (2000), does not narrow Exemption 8's broad language).
24. Atkinson, 1980 U.S. Dist. LEXIS 17793, at **4-5. But see Fagot v. FDIC, No. 84-1523, slip op. at 5-6 (1st Cir. Mar. 27, 1985) (finding that portion of document which does not relate to bank report or examination cannot be withheld); see also FOIA Update, Vol. XIV, No. 3, at 11-12 ("OIP Guidance: The 'Reasonable Segregation' Obligation").
25. Pentagon Fed., No. 95-1476, slip op. at 9 (E.D. Va. June 7, 1996) (declining to extend Exemption 8 protection to "purely factual material"); Lee v. FDIC, 923 F. Supp. 451, 459 (S.D.N.Y. 1996) (likewise denying protection for information found to be "primarily factual"), dismissed, No. 1:95 CV 7963 (S.D.N.Y. Sept. 15, 1997); cf. Schreiber v. Soc'y for Sav. Bancorp, Inc., 11 F.3d 217, 220 (D.C. Cir. 1993) (declaring, in context of civil discovery, that "bank examination privilege protects only agency opinions and recommendations from disclosure; purely factual information falls outside the privilege") (non-FOIA case); In re Subpoena, 967 F.2d 630, 634 (D.C. Cir. 1992) ("The bank examination privilege, like the deliberative process privilege, shields from discovery only agency opinions or recommendations; it does not protect purely factual material.") (non-FOIA case).
26. Marriott Employees' Fed. Credit Union v. Nat'l Credit Union Admin., No. 96-478-A, 1996 WL 33497625, at *5 (E.D. Va. Dec. 24, 1996) (protecting facts because "disclosure of this information would undermine the spirit of cooperation between banks and regulating agencies that Exemption 8 attempts to foster").
27. 12 U.S.C. § 1831o(k) (2000).
28. Id. § 1831o(k)(1).
29. Id. § 1831o(k)(4).