A. G. Becker Inc. v. Board of Governors of the Federal Reserve System

502 F. Supp. 378, 1980 U.S. Dist. LEXIS 17392
CourtDistrict Court, District of Columbia
DecidedNovember 26, 1980
DocketCiv. A. 80-2175
StatusPublished
Cited by7 cases

This text of 502 F. Supp. 378 (A. G. Becker Inc. v. Board of Governors of the Federal Reserve System) is published on Counsel Stack Legal Research, covering District Court, District of Columbia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
A. G. Becker Inc. v. Board of Governors of the Federal Reserve System, 502 F. Supp. 378, 1980 U.S. Dist. LEXIS 17392 (D.D.C. 1980).

Opinion

MEMORANDUM OPINION

JOYCE HENS GREEN, District Judge.

Pending before the Court is the plaintiff’s motion for a preliminary and final injunction seeking various forms of relief in order to remedy alleged violations by the defendants of the Government in the Sunshine Act, 5 U.S.C. § 552b (1976) (“Sunshine Act”). The defendants have moved to dismiss the plaintiff’s complaint, or, in the alternative, for summary judgment. After plaintiff’s motion for a temporary restraining order was denied on August 27, 1980, the parties agreed, with the approval of the Court, to consolidate this proceeding with an action on the merits of this dispute.

*380 Plaintiff, A. G. Becker, Inc., (“Becker”) a Delaware corporation with its principal headquarters in Chicago, Illinois, is a broker and dealer in securities and is registered with the United States Securities and Exchange Commission. Named defendants include the Board of Governors of the Federal Reserve System, its Chairman, Paul A. Volcker, and the other six individuals who serve on the Board, referred herein collectively as “the Board” or the defendants. Defendants are primarily responsible for regulating the nation’s banking system and for making policy determinations concerning the governmental effort to monitor and manage the American economy. Becker claims that the defendants violated the Sunshine Act when the Board met on two separate occasions in the summer of 1980 to consider a matter raised by the plaintiff and another interested party, the Securities Industry Association (“SIA”), concerning the alleged illegal sale of commercial paper by a state member bank in the Federal Reserve System, Bankers Trust Company of New York, New York, 1 (Bankers Trust).

This controversy began in mid-1978, when Bankers Trust initiated a new service to corporations and investors by placing with interested investors several commercial paper issues. In November, 1978, the Board’s General Counsel discussed with representatives of Becker and SIA the factual, legal, and policy implications of Bankers Trust’s activities. The General Counsel suggested that both parties submit material on the matter, and Becker responded on November 29, 1978, with a detailed petition to the Board outlining its concerns about the actions of Bankers Trust and requesting the Board to make factual findings concerning the sale of commercial paper by state member banks of the Federal Reserve System. On January 31, 1979, Becker submitted a detailed memorandum concerning Bankers Trust’s sale of commercial paper and discussing the implications of Bankers Trust’s pursuits in the commercial paper field. The petition also requested the Board “to advise Bankers Trust that its current commercial paper marketing activities are inappropriate as a matter of law and policy, and should cease.” (Mem. of PI. to the staff of the Bd. of Govs., Nov. 29, 1978 at 3). During this time, the Board also requested from Bankers Trust various submissions dealing with its sale of commercial paper, and additionally, the SIA submitted materials as a representative of the securities industry.

On June 28, 1979, the Board’s General Counsel concluded that Bankers Trust, and state member banks generally, may sell commercial paper as an agent for the issuer, subject to certain limitations. In letters to Becker and the SIA on June 29, the General Counsel invited both parties to request that he bring the matter to the attention of the Board of Governors. On July 26, 1979, SIA submitted to the Board a formal petition asking review of the entire matter and that the Board order Bankers Trust to cease and desist from all commercial paper activities on behalf of third parties. Becker indicated by letter of August 22, 1979, that it intended to submit a petition to the Board challenging Bankers Trust’s activities pending the resolution of its request pursuant to the Freedom of Information Act (“FOIA”) for materials in the Board’s possession concerning the sale by member banks of commercial paper. The Board granted in part the plaintiff’s FOIA request, and on September 7, 1979, plaintiff appealed that part of the Board’s decision denying access to certain materials. Subsequently, the Board partially granted and partially denied the appeal; Becker did not seek judicial review of the Board’s action.

The General Counsel advised the plaintiff on November 6 that he was prepared to present the SIA petition to the Board and inquired as to when plaintiff would submit *381 its petition. One month later, on December 6, plaintiff informed the General Counsel that it did not intend at that time to present additional materials to the Board, but reserved the right to do so in the future. Finally, on January 31, 1980, Becker indicated to the General Counsel that it desired that the documents it originally submitted in November 1978 and January 1979 be considered with the SIA petition. The Board’s staff then began to investigate the matter preparatory to the Board’s consideration of the question.

The Board intended to address the question presented by the SIA and the Becker petitions on July 14,1980, but did not reach the matter in that meeting. (Defendant’s Reply Memorandum, exhibit E). On July 16, it met to consider the petitions. At the beginning of the meeting, the Board voted to close the meeting to the public pursuant to three exemptions of the Sunshine Act, exemption four for commercial and financial information, 5 U.S.C. § 552b(c)(4), 2 exemption eight for reports prepared for the use of an agency responsible for regulating financial institutions, id. at § 552b(c)(8), 3 and exemption ten, for meetings which concern an agency’s initiation or participation in adjudicatory proceedings, id. at § 552b(c)(10). 4 After taking and recording the vote, the Board released at 3:00 p. m. on the same day the record of the vote and a notice of the meeting in the public reading room of the Federal Reserve System.

On August 21, 1980, the plaintiff’s counsel protested the closing of the July 16 meeting, and sought opportunity for oral argument at the next meeting in which the Board would consider the Becker and SIA petitions. The next morning, August 22, a member of the Board’s staff telephoned Becker’s counsel to advise him that the Board would consider his request for an open meeting and that the Board intended that day to take up the matter presented by the Becker and SIA petitions. (Aff. of James H. Schropp in PI. Motion for Temp. Rest. Order, ¶ 3). The Board met on August 22, voted to close the meeting, and followed the same procedures regarding recordation of the vote and notice of the meeting as occurred on July 16. As an accommodation to Becker, the Board voted to provide a transcript of the discussion of the Bankers Trust matter, subject to appropriate deletions under the exemptions of the Sunshine Act. The Board further informed the plaintiff on August 29 that it would make available minutes of the July 16 meeting, also with appropriate deletions.

This dispute centers around three issues under the Sunshine Act.

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502 F. Supp. 378, 1980 U.S. Dist. LEXIS 17392, Counsel Stack Legal Research, https://law.counselstack.com/opinion/a-g-becker-inc-v-board-of-governors-of-the-federal-reserve-system-dcd-1980.