FOIA Guide, 2004 Edition: Exemption 8

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Freedom of Information Act Guide, May 2004


Exemption 8

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)

    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).

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