Exemption 8

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This article is part of a series on Exemptions

Introduction

Exemption 8 applies to records related to financial institutions.

Text of Exemption 8

(b) This section does not apply to matters that are—[...]

(8) 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;

Applicability

For a record to be withheld under Exemption 8 it must satisfy three elements: 1) the institution at issue must be a “financial institution”; 2) the agency must have supervisory or regulatory responsibility over the financial institution; and 3) the withheld records must relate to “examination, operating, or condition reports prepared by, on behalf of, or for the use of” the agency.[1]

While courts have generally held that FOIA exemptions should be “narrowly construed,”[2] the scope of Exemption 8 is “particularly broad.”[3] Courts have therefore generally applied the exemption to “provide absolute protection regardless of the circumstances underlying the regulatory agency’s receipt or preparation of examination, operating or condition reports.”[4] As just one example, a requester unsuccessfully argued that the fact that the FOIA request was made two years after a financial institution was closed “abat[ed] any possible injury to the investment advisor industry.” [5] The court rejected that theory, reasoning that it would require a case-by-case determination of “when an appropriate amount of time has passed,” which the court did not find it had the authority to do under this exemption.[6]

Financial institutions

As the FOIA does not specifically define the term, courts have adopted various definitions. For example, the U.S. District Court in the District of Colorado looked to the legislative history of the Government in the Sunshine Act (the federal open meetings act), which defines the term as “intended to include banks, savings and loan associations, credit unions, brokers and dealers in securities or commodities, such as the New York Stock Exchange, investment companies, investment advisors, self-regulatory organizations . . . and institutional managers.”[7] Relying on that definition, the court held that the investment advisors at issue were financial institutions for Exemption 8 purposes.[8]

However, the U.S. Court of Appeals for the District of Columbia Circuit — relying on a dictionary definition — defined “financial institution” more broadly as any "organization authorized to do business under state or federal laws relating to financial institutions, including, without limitation, banks and trust companies, savings banks, building and loan associations, savings and loan companies or associations, and credit unions.”[9]

Agency responsible for regulation or supervision of financial institutions

The second requirement under Exemption 8 is that the agency at issue must be “responsible for the regulation or supervision of financial institutions.” One example of such an agency is the National Credit Union Administration, which regulates and examines chartered federal credit unions.[10]

However, the U.S. Court of Appeals for the District of Columbia Circuit has further held that Exemption 8 does not require that an agency “regulate or supervise the particular institution that is the subject of the report” for Exemption 8 purposes.[11] Where the Farm Credit Administration prepared annual credit examinations of the National Consumer Cooperative Bank — but did not directly regulate or supervise it — the court held that the agency’s examination reports on the bank were still exempt from disclosure.[12] The court reasoned that even though the agency did not regulate or supervise the bank, releasing examination reports discussing “the quality of the [bank’s] loans, internal controls, and management practice and structure” would be inconsistent with the purpose of Exemption 8. [13] That is, the release of the agency’s “frank evaluations” of the bank could “undermine public confidence and investment” in the bank and thereby “strain the cooperation between them” necessary to the examination process.[14]

Contained in or related to examination, operating, or condition reports

The third element of Exemption 8 is that the government must demonstrate that the information withheld is “contained in or related to examination, operating, or condition reports.” For example, the U.S. District Court in the District of Columbia held that an agency failed to meet this threshold when it withheld portions of a memo it described as “discussion[s]” of “condition of bank and options for improving conditions of bank,” “bank condition and risk issues,” and “bank condition, options for taking action, effect of not acting, and how bank condition affects other areas.”[15] The agency also had failed to outline the specific information the memoranda contained about the financial institutions that would require their withholding.[16] The court found that it could not determine — “[b]ased on the extremely limited information provided” — “whether the material withheld contains or is derived from any part of an examination, operating report or condition report.”[17]

In another case, the U.S. District Court for the District of New Mexico held that Exemption 8 does not apply to escrow waivers — “federal forms prepared by lenders at the request of the Forest Service to record the use of a federal grazing permit as collateral to secure a loan.”[18] The court held that “it is not correct that every piece of paper in a bank’s records are protected” under Exemption 8, and allowing the agency to use it to withhold information such as that which was contained in the waivers “would shield everything banking institutions accumulate if any possibility existed the information might be reviewed in the process of a bank examination.”[19]

In contrast, Exemption 8 has been held to apply to, for example, FDIC reports on a bank’s compliance with consumer laws and regulations.[20] A court also held that portions of an SEC inspection report detailing the Boston Stock Exchange’s “on-going . . . investigations of its members” fell within Exemption 8, as it could “be of value to the Commission in its supervision of the BSE.”[21]

Some courts have held that the government does not need to “identify a specific report to which the [withheld] information relates.”[22] The U.S. District Court for the District of Columbia held that the Board of Governors of the Federal Reserve could withhold e-mails and tables containing information provided by Board-regulated financial institutions even though the requester argued that the Board had failed to “identify[] the specific ‘report’ to which the information relates.”[23] The information related to the Board’s “real-time effort[s]” to monitor the impact of a possible bankruptcy filing of a financial holding company on Board-regulated financial institutions, and the court found its withholding would be consistent with one of the purposes of Exemption 8: ensuring “frank cooperation between bank officials and regulated entities.”[24]

Harm from Disclosure

In addition to these elements, courts often look to the harms Exemption 8 was intended to prevent in interpreting its scope.

The first of these harms is “to ensure the security of financial institutions” by preventing the “disclosure of examination, operation, and condition reports containing frank evaluations of the investigated banks [that] might undermine public confidence and cause unwarranted runs on banks.”[25] The second is “to safeguard the relationship between the banks and their supervising agencies” by preventing the release of “details of . . . bank examinations . . . to the public and to banking competitors,” which could in turn make banks less cooperative with federal authorities.[26]

Purely factual material

Some courts have analogized Exemption 8 to the bank examination privilege — a qualified discovery privilege under which “purely factual material” is not protected from release.[27] These courts have applied this distinction in the Exemption 8 analysis as well.[28] The party opposing release in these courts must demonstrate that the information contained in the documents sought to be withheld is “deliberative” — comprising “recommendation or opinions” — rather than “primarily factual.”[29]

For example, a court applied that distinction to deny an agency’s motion for summary judgment with respect to its Exemption 8 withholdings because “[m]uch of the most critical information sought” was “quite factual,” such as a calculation of a then-defunct credit union’s solvency and borrowing ratio, and could be segregated and released.[30]

Additionally, while at least two other U.S. District Courts have held that Exemption 8 does not apply to factual information, they have emphasized that the facts “must be considered with respect to the overall context of the documents in which they are contained,” and with the purposes of Exemption 8 in mind.[31]

The fact-opinion distinction been rejected by other courts .[32]

Government malfeasance

At least one court has held that Exemption 8 can be overridden where disclosure would “shed light on alleged government malfeasance.”[33]

Strategies for challenging Exemption 8 withholdings

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Recent district court opinions on Exemption 8

Recent district court cases regarding this topic from TRAC's FOIA Project. Visit their issue search page for more options.

See Also

External Links

References

  1. See Berliner, Zisser, Walter & Gallegos, P.C. v. Sec. & Exch. Comm’n, 962 F.Supp. 1348, 1350 (D. Colo. 1997).
  2. McKinley v. Fed. Deposit Ins. Corp., 744 F.Supp.2d 128, 143 (D.D.C. 2010) (quotingU.S. Dep’t of Justice v. Julian, 486 U.S. 1, 8 (1988) (internal quotation marks omitted)).
  3. McKinley, 744 F.Supp.2d at 143 (quoting Consumers Union of U.S., Inc., 589 F.2d at 533) (internal quotation marks omitted).
  4. McKinley, 744 F.Supp.2d at 143 (quoting Gregory v. Fed. Deposit Ins. Corp., 631 F.2d 896, 898 (D.C. Cir. 1980) (internal quotation marks omitted)).
  5. Berliner, Zisser, Walter & Gallegos, P.C., 962 F.Supp. at 1353.
  6. Id.
  7. Id. at 1351-52 (quoting S.REP. NO. 94-354, at 24 (1975)).
  8. Berliner, Zisser, Walter & Gallegos, P.C., 962 F.Supp. at 1352.
  9. Pub. Citizen v. Farm Credit Admin., 938 F.2d 290, 292 (D.C. Cir. 1991) (quoting BLACK’S LAW DICTIONARY 568 (5th ed. 1979)).
  10. Nat’l Cmty. Reinvestment Coal. v. Nat’l Credit Union Admin., 290 F.Supp.2d 124, 135 (D.D.C. 2003).
  11. Pub. Citizen, 938 F.2d at 293.
  12. Id.
  13. Id.
  14. Id.
  15. McKinley v. Fed. Deposit Ins. Corp., 756 F.Supp.2d 105, 115 (D.D.C. 2010).
  16. Id.
  17. Id.
  18. Forest Guardians v. U.S. Forest Serv., No. 99-615, slip op. at 3 (D.N.M. Jan. 29, 2001).
  19. Id. at 51-52.
  20. Atkinson v. F.D.I.C., No. 79-1113, 1980 WL 355660 at *2 (D.D.C. Feb. 13, 1980).
  21. Mermelstein v. Sec. & Exch. Comm’n, 629 F.Supp. 672, 673-75 (D.D.C. 1986).
  22. Judicial Watch, Inc. v. U.S. Dep’t of the Treasury, 796 F.Supp.2d 13, 37 (D.D.C. 2011).
  23. McKinley, 744 F.Supp.2d at 143.
  24. Id. at 143-44.
  25. Consumers Union of U.S., Inc. v. Heimann, 589 F.2d 531, 534 (D.C. Cir. 1978).
  26. Id.
  27. Lee v. F.D.I.C., 923 F.Supp. 451, 459 (S.D.N.Y. 1996) (quoting In re Subpoena Served Upon the Comptroller of Currency, and Sec’y of Bd. of Governors, 967 F.2d 630, 633-34 (D.C. Cir. 1992)).
  28. Lee, 923 F.Supp. at 458.
  29. Id. at 459.
  30. Pentagon Fed. Credit Union v. Nat’l Credit Union Admin., No. 95-1476, 1996 U.S. Dist. LEXIS 22841 at *11-12 (E.D. Va. June 7, 1996).
  31. Marriott Emps. Fed. Credit Union v. Nat’l Credit Union Admin., No. 96-478, 1996 WL 33497625, at *5 (E.D. Va. Dec. 24, 1996); Gavin v. S.E.C., No. 04-4522, 2007 WL 2454156 at *13 (D.Minn. Aug. 23, 2007).
  32. Bloomberg, L.P. v. U.S. Sec. & Exch. Comm’n, 357 F.Supp.2d 156, 170 (D.D.C. 2004).
  33. Pentagon Fed. Credit Union, 1996 U.S. Dist. LEXIS 22841 at *12.