D. Ronald Ryland, Esq.
Sheppard, Mullin, Richter & Hampton
Seventeenth Floor
Four Embarcadero Center
San Francisco, CA 94111
Re: Freedom of Information Act - Appeal
(Your July 25, 1995 Letter Concerning
the Merger of Engineers and Lockheed
Federal Credit Unions)
Dear Mr. Ryland:
On May 23, 1995, Joseph Melchione (your co-counsel in this matter)
filed a Freedom of Information Act (FOIA) request for copies of
all documents filed by Lockheed Federal Credit Union (Lockheed
FCU) and/or Engineers Federal Credit Union (Engineers FCU) in
connection with the merger of the two credit unions. The FOIA
request was made on behalf of Public Works Credit Union and was
filed with NCUA's Region VI Office in Concord, California. On
June 29, 1995, NCUA's Region VI Director Daniel Murphy filed a
Declaration with the United States District Court, Northern District
of California, in the case of Public Works Credit Union v.
NCUA. Several of the documents responsive to the FOIA request
were attached as exhibits to the Declaration. By letter dated
July 5, 1995, Robert Blatner for Region VI Director Daniel Murphy,
responded to Mr. Melchione's FOIA request. Several responsive
documents were sent to Mr. Melchione. Fourteen documents were
withheld in full and one document was withheld in part under several
different exemptions to the FOIA. We received your July 25 appeal
on August 1, 1995. We note that your appeal was sent to the United
States Attorney in San Francisco rather than to NCUA's Office
of General Counsel as required by Section 792.6(a)(1) of the NCUA
Regulations (12 CFR 792.6(a)(1)). You have numbered the documents
withheld in Mr. Blatner's letter as items 1 -15. You have been
provided with items 1 - 3 as exhibits to the Declaration. You
are appealing the denial of eight of the fifteen documents withheld.
These documents are identified as items 4 - 10 and 15. Your
appeal is granted in part and denied in part. Some of the documents
originally withheld are released, others are released in part
with portions redacted. Other documents continue to be withheld
pursuant to exemptions of the FOIA. Newly released documents
are enclosed.
Each of the previously withheld documents is identified by the
number you assigned it and is discussed separately below.
4. Analyst's Merger Cover Sheet. This document was withheld
pursuant to exemption 2 of the FOIA. Upon review, we have determined
that the document does not contain exemptible information. The
merger cover sheet is enclosed.
5. SE (Supervisory Examiner) Johnson's Memorandum, dated May
16, 1995. This internal NCUA memorandum discusses assessment
of the merger and was withheld pursuant to exemptions 2 and 5
of the FOIA. Upon review, we have determined that portions of
this memorandum can be released. There are portions of the memorandum
that continue to be withheld pursuant to exemptions of the FOIA.
This document contains information on Engineers FCU's examination
rating and other examination related and financial condition information.
Such information is withheld pursuant to exemption 8 of the FOIA
(5 U.S.C. 552(b)(8)). Exemption 8 of the FOIA exempts information:
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.
The courts have discerned two major purposes for exemption 8 from
its legislative history: 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. See
Atkinson v. FDIC, 1 GDS 80,034, at 80,102 (D.D.C. 1980).
Either purpose is sufficient reason to withhold examination information.
The NCUA regulation implementing exemption 8 of the FOIA is found
at 12 C.F.R. 792.3(a)(8). Sections 792.3(a)(8) repeats exemption
(8) and states:
This includes all information, whether in formal or informal
report form, the disclosure of which would harm the financial
security of credit unions or would interfere with the
relationship between NCUA and credit unions.
Therefore examination information contained in this memorandum
has been withheld pursuant to exemption (8).
This memorandum is not a statement of final agency policy nor
is it a final agency decision. It contains information subject
to the deliberative process privilege (exemption 5 of the FOIA
- 5 U.S.C. 552(b)(5)). Credit union board members' as well
as the supervisory examiner's thoughts about the merger are reflected in this memorandum. The purpose of this privilege is "to prevent injury to the quality of agency decisions." NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 151 (1975). Disclosure of predecisional thoughts could cause such injury. Therefore, portions of the memorandum continue to be withheld pursuant to exemption 5 of the FOIA. We do not believe that exemption 2 is applicable to this memorandum.
Sections of the memorandum subject to exemption 5 and 8 have been
redacted. The redacted memorandum is enclosed.
6. NCUA Merger Facts, dated 5/23/95. This internal NCUA memorandum
was withheld pursuant to exemption 2 of the FOIA. This memorandum
is a discussion of the financial condition of the credit union
and is withheld pursuant to exemption 8 of the FOIA, see
discussion above. Courts do not require agencies to segregate
and disclose those portions of documents that are unrelated to
the financial condition of the institution pursuant to exemption
8. See Atkinson. This document is withheld in
its entirety pursuant to exemption 8 rather than exemption 2.
7. RD Murphy's Memorandum, dated 5/25/95. This internal NCUA
memorandum was withheld pursuant to exemption 2 of the FOIA.
It continues to be withheld pursuant to exemption 5 rather than
exemption 2 of the FOIA. Although this memorandum was drafted
after the merger decision, we do not believe it should be released
as post-decisional. Rather, the memorandum concerns follow-up
issues and it is not a final agency decision. It is therefore
withheld pursuant to exemption 5, see above for discussion
of exemption.
8. NCUA Route Slip, dated 3/29/95. This document was withheld
pursuant to exemption 2 of the FOIA. Upon review, we have determined
that the document does not contain exemptible information. The
route slip is enclosed.
9. and 10. Examiner's Contact Information - Financial Performance Report and examination data summary for Lockheed FCU and Engineers FCU. These documents were withheld pursuant to exemption 8 of the FOIA. They contain financial condition and examination information and continue to be withheld in their entirety pursuant to exemption 8. See discussion above.
15. Lockheed's Response Letter, dated April 27, 1995. Portions
of this document were withheld pursuant to exemption 4 of the
FOIA. Exemption 4 of the FOIA covers two categories of information:
(1) trade secrets; and (2) information which is commercial or
financial, obtained from a person and privileged or confidential.
5 U.S.C. 552(b)(4). You question how the information withheld
could be a trade secret. The information withheld is not a trade
secret, rather it is commercial/financial information about the
credit union.
The courts have interpreted what is included as commercial/financial information broadly. Courts have held that the term "commercial" includes anything "pertaining or relating to or dealing with commerce." American Airlines, Inc. v. National Mediation Board, 588 F.2d 863, 870 (2d Cir. 1978). The information withheld is clearly commercial information. The information was obtained from a person as it is included in a letter to NCUA from the Regional Manager of Lockheed FCU. The court in Critical Mass Energy Project v. NRC, 975 F.2d 871 (D.C. Cir. 1992), cert. denied, 113 S. Ct. 1579 (1993), set forth different tests for confidentiality for information that is voluntarily submitted and information that is required by an agency to be submitted. It held that voluntarily provided information is " 'confidential' for the purpose of exemption 4 if it is of a kind that would customarily not be released to the public by the person from whom it was obtained." Critical Mass at 879. We do not believe that the commercial information would be released to the public by Lockheed FCU. The court held that information required to be submitted is confidential if it meets one of the two prongs of National Parks & Conservation Association v. Morton, 498 F.2d 765 (D.C. Cir. 1974). The information is confidential under National Parks if its release would (1) impair the Government's ability to obtain necessary information in the future; or (2) cause substantial harm to the competitive position of the person from whom the information was obtained. National Parks at 770. We believe that release of the information could impair NCUA's ability to obtain information in the future. Although we believe the information was submitted voluntarily, the standard for both voluntarily submitted information and NCUA required information is met in this instance. Hence we believe the redacted information should continue to be withheld pursuant to exemption 4.
Pursuant to 5 U.S.C. 552(a)(4)(B), you may seek judicial review
of this determination by filing suit to enjoin NCUA from withholding
the documents you requested and to order production of the documents.
Such a suit may be filed in the United States District
Court in the district where you reside, where your principal place
of business is located, the District of Columbia, or where the
documents are located (the Eastern District of Virginia.)
Sincerely,
James J. Engel
Acting General Counsel
Enclosures
GC/HMU:bhs
95-0803
SSIC 3212