Judicial Watch, Inc. v. U.S. Department of Treasury

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

JUDICIAL WATCH, INC.,

Plaintiff,

v. Civil Action No. 10-00302 (BAH)

U.S. DEPARTMENT OF THE TREASURY,

Defendant.

MEMORANDUM OPINION

Plaintiff Judicial Watch, Inc. brought this case to compel the U.S. Department of the

Treasury to respond to a Freedom of Information Act (“FOIA”) request. The plaintiff’s FOIA

request sought documents related to the Treasury’s Troubled Asset Relief Program (“TARP”).

Specifically, the requests relate to three meetings involving Kenneth Feinberg, an official who

served as Special Master for Executive Compensation under TARP. The FOIA generally

requires the disclosure, upon request, of records held by a federal government agency unless the

records are protected from disclosure under one of nine FOIA exemptions. In this case, the

Treasury Department has produced 44 pages of responsive documents to the plaintiff and has

also withheld, in whole or in part, other documents that the Treasury claims fall under one or

more of the FOIA exemptions. The plaintiff claims that the Treasury improperly withheld or

redacted seven of these documents because, according to the plaintiff, these seven documents are

not subject to any FOIA exemptions. The Treasury has moved for summary judgment seeking a

determination that it has fulfilled its obligations to respond to the plaintiff’s FOIA request and

that the seven documents in question properly fall under FOIA exemptions. The plaintiff filed a

cross-motion for summary judgment seeking a determination that the asserted exemptions are not applicable and that the documents should be released. For the reasons explained below, the

Court grants summary judgment to the Treasury for all disputed documents and denies summary

judgment to the plaintiff, except that the Court finds that one document contains some

reasonably segregable material that should have been released.

I. BACKGROUND

On November 23, 2009, Plaintiff Judicial Watch, Inc. submitted a FOIA request to

Defendant U.S. Department of the Treasury seeking documents related to TARP, a federal

program designed to assist troubled banks. Compl. ¶ 5. The plaintiff is a private foundation that

regularly serves requests on government entities under the Freedom of Information Act, 5 U.S.C.

§ 552, and shares its findings with the public. Compl. ¶ 3.

Congress created TARP as part of the Emergency Economic Stabilization Act (“EESA”),

which was enacted on October 3, 2008 during a time of great financial turmoil. Emergency

Economic Stabilization Act of 2008, Pub. L. No. 110-343, 122 Stat. 3765 (2008). The EESA

established the Office of Financial Stability (“OFS”) within the Treasury, and authorized OFS to

implement TARP. See 122 Stat. at 3767. Congress’s intention in creating TARP included

stabilizing the financial markets quickly and effectively, bolstering the housing market by

avoiding preventable foreclosures and supporting mortgage finance, and protecting taxpayers.

See 122 Stat. at 3765-66, 3770.

Section 111 of EESA prescribes certain standards for compensation and corporate

governance for recipients of financial assistance under TARP. Def.’s Mem. in Supp. of Mot. for

Summ. J. (“Def.’s Mem.”) at 3. To assist with the implementation of Section 111, the Treasury

appointed Kenneth R. Feinberg as Special Master for TARP Executive Compensation (the

“Special Master”) and established the Office of the Special Master for TARP Executive

Compensation (the “Office”). Id. at 3-4. One of the Special Master’s primary responsibilities is

reviewing and approving compensation payments and structures of executives of entities

designated as “Exceptional Assistance Recipients,” including, as relevant here, the large

insurance company known as the American International Group or AIG. Id.

Additionally, the Treasury published an Interim Final Rule under Section 111 of EESA

(the “Interim Final Rule”), which provided guidance on the compensation and corporate

governance provisions. Id. Under the Interim Final Rule, Exceptional Assistance Recipients,

such as AIG, must obtain approval from the Special Master for the compensation structures and

payments to their “Top 25 executives” and for the compensation structures of “Covered

Employees 26-100.” Id. The Special Master is tasked with determining whether these

compensation structures are inconsistent with Section 111 of EESA or TARP, or otherwise

contrary to the public interest. Id. The Special Master’s determinations are presented in

memoranda, which describe the analysis and rationale behind the Special Master’s conclusions.

Id.

In preparing these written determinations, the Office officially requests data from each

Exceptional Assistance Recipient regarding the historical and proposed compensation structures.

Based on this information, the Special Master is required to issue his initial determination

regarding approval of the compensation structure. Id. at 4-5. Exceptional Assistance Recipients

may then request reconsideration of the initial determination. Id. at 5. Subsequently, the Special

Master must provide a final determination. Id.

Throughout this process, the staff of the Office maintain regular communication with

Exceptional Assistance Recipients regarding both procedural matters and substantive concerns

about proposed compensation structures. Id. Additionally, Office staff review the data

submissions from the Exceptional Assistance Recipients and produce an issues list for the

Special Master’s consideration. Id. The Special Master and members of his staff also regularly

interact with Exceptional Assistance Recipients, including formal, in-person meetings with a

recipient’s senior executives, to discuss proposed compensation structures. Id. at 6.

On November 23, 2009, the plaintiff submitted a FOIA request to the Treasury seeking

records related to these formal, in-person meetings involving the Special Master and Exceptional

Assistance Recipients, in particular, AIG. Id.; Compl. ¶ 5. Specifically, the plaintiff’s request,

in its entirety, sought the following documents:

1. Any and all records, including agendas, briefing papers, memoranda, minutes, notes, presentations, and/or summaries of the meeting on November 4, 2009 between Kenneth Feinberg, the special master for TARP executive compensation of the U.S. Treasury, Robert Benmosche, the CEO of the American International Group, and AIG’s Board of Directors.

2. Any and all records, including agendas, briefing papers, memoranda, minutes, notes, presentations, and/or summaries of the meeting on November 12, 2009 between Kenneth Feinberg, the special master for TARP executive compensation of the U.S. Treasury, and William Dudley, president of the New York Federal Reserve Bank.

3. Any and all records, including agendas, briefing papers, memoranda, minutes, notes, presentations, and/or summaries of the meeting on November 17, 2009 between Kenneth Feinberg, the special master for TARP executive compensation of the U.S. Treasury, and Robert Benmosche, the CEO of the American International Group. Compl. ¶ 5.

The plaintiff brought this case on February 25, 2010 to compel the defendant’s response

to its FOIA request. See Compl. The defendant subsequently produced 44 pages of responsive

documents, with certain information redacted based on various statutory exemptions to FOIA’s

disclosure requirements. Def.’s Mem. at 9. The defendant also withheld in full an additional 19

pages based on various statutory exemptions to FOIA’s disclosure requirements. Id.

The plaintiff challenges the defendant’s withholding or redaction of seven of these

documents (“disputed documents”) based on two of the nine statutory FOIA exemptions:

Exemption 4, which protects privileged and confidential trade secrets and commercial or

financial information; and Exemption 5, which protects documents that would not ordinarily be

available through discovery to a litigant in a civil suit with the agency. See Pl.’s Mem. in Opp’n

to Def.’s Mot. for Summ. J. and in Supp. of Pl.’s Cross Mot. for Summ. J. (“Pl.’s Mem.”) at 3;

see also 5 U.S.C. §§ 552(b)(4) and (b)(5). The disputed documents all concern the November 3,

2009 meeting between the Special Master and the AIG Board of Directors, during which AIG

provided a summary of its employee retention programs and an overview of its business recovery

and stability, as well as raised issues related to compensation structures.1 Def.’s Mem. at 4-6.

The plaintiff is interested in disclosure of the disputed documents because, according to the

plaintiff, it is “time to shed light on AIG, a corporation owned largely by the federal government,

and thus, owned largely by the public.” Pl.’s Mem. at 21.

The seven disputed documents are described below:2

a. Four e-mail strings, redacted in part: The emails strings, dated November 2, 2009,

are between Treasury Staff and Treasury Legal regarding Special Master Feinberg’s

anticipated meeting with AIG scheduled for November 3, 2009 (Bates numbers 35-

36, 37, 38, and 39-40);

b. Three attachments, withheld in full:

1. “Current Draft Talking Points,” dated November 2, 2009 (Bates numbers

W1-9);

1 The November 4, 2009 meeting mentioned in Plaintiff’s FOIA request actually took place on November 3, 2009. Def.’s Mem. at 3 n.1. The records that relate to the November 12 and 17, 2009 meetings are no longer in dispute. Id. at 6 n.2. 2 The Court will refer to the documents by their Bates stamp numbers, omitting any initial zeroes. Some documents contain several pages. For ease of reference, the Court will refer to each multi-page document as a single document.

2. Two “draft issues list” memoranda, dated November 2, 2009 (Bates numbers

W10-12, W13-15).3

Vaughn Index, Exhibit A to the Declaration of Joseph J. Samarias, dated September 28, 2010.

The defendant asserts that these disputed documents or the redacted portions of them fall

under the following FOIA exemptions:

1. Exemption 4 (privileged and confidential commercial information): All disputed

documents.4

2. Exemption 5 (documents that would not be available in civil discovery): All

disputed documents except “Current Draft Talking Points.”

Def.’s Mem. at 14, 23-24;

On September 28, 2010, the defendant moved for summary judgment on the disputed

documents pursuant to Rule 56 of the Federal Rules of Civil Procedure. Along with its summary

judgment filing, the defendant has provided a Vaughn index and four declarations that describe

the basis for its assertion that each of the disputed documents is covered by an exemption. See

Declaration of Joseph J. Samarias, dated September 28, 2010 (“Samarias Decl.”); Samarias

Decl., Exhibit A (“Vaughn Index”); Declaration of Eric Litzky, dated September 28, 2010

(“Litzky Decl.”); Declaration of Jeffrey Hurd, dated September 28, 2010 (“Hurd Decl.”);

3 Although the Vaughn Index refers to these two documents as “draft issue list” memoranda, the Court’s in camera inspection reveals that the title of the document is actually “Issues List.” Therefore, the Court will refer to these two documents as “draft issues list” memoranda. Additionally, the Court’s in camera review indicates that the two “draft issues list” memoranda are identical except for the revision indicated in the e-mail string (Bates number 37) accompanying the revised draft issue list memorandum (Bates numbers W13-15). 4 Although the redacted information in the e-mail string labeled with Bates number 37 is not marked with Exemption 4 in the version produced for in camera inspection, the Vaughn Index, the Declaration of Joseph J. Samarias, and the defendant’s motion papers all state that information in this e-mail string is also properly redacted under Exemption 4. Vaughn Index; Samarias Decl. ¶ 16; Def.’s Mem. at 23-24. The Court assumes that the discrepancy is attributable to an error in marking the redaction on the e-mail string and not in the rest of the defendant’s submitted materials. Following the Court’s in camera review, the information in the e-mail string appears to be financial information that would fall under Exemption 4. Even if the information were redacted only under Exemption 5, the information would still be properly withheld, as the Court explains below, due to the deliberative process privilege.

Supplemental Declaration of Joseph J. Samarias, dated November 22, 2010 (“Suppl. Samarias

Decl.”).

On October 29, 2010, the plaintiff filed a cross-motion for summary judgment alleging

that the defendant has failed to meet its burden in demonstrating the applicability of both FOIA

Exemptions 4 and 5. Pl.’s Mem. at 3, 21. The plaintiff does not challenge the adequacy of the

defendant’s search for documents responsive to its request. Id. at 3. The sole issue before the

Court is whether the defendant properly withheld the disputed documents under FOIA

Exemptions 4 and 5.

On July 19, 2011, the Court directed the defendant to provide unredacted versions of the

disputed documents for in camera inspection. The defendant submitted the documents for in

camera inspection on July 25, 2011.

II. DISCUSSION

A. Standard of Review

Congress enacted FOIA to promote transparency across the government. See 5 U.S.C. §

552; Quick v. U.S. Dep’t of Commerce, Nat’l Inst. of Standards & Tech., No. 09-02064, 2011

WL 1326928, at *3 (D.D.C. April 7, 2011) (citing Stern v. FBI, 737 F.2d 84, 88 (D.C. Cir.

1984). The Supreme Court has explained that FOIA is “a means for citizens to know ‘what their

Government is up to.’ This phrase should not be dismissed as a convenient formalism. It

defines a structural necessity in a real democracy.” Nat’l Archives & Records Admin. v. Favish,

541 U.S. 157, 171-172 (2004) (internal quotations and citations omitted). “The basic purpose of

FOIA is to ensure an informed citizenry, vital to the functioning of a democratic society, needed

to check against corruption and to hold the governors accountable to the governed.” NLRB v.

Robbins Tire & Rubber Co., 437 U.S. 214, 242 (1978). The strong interest in transparency must

be tempered, however, by the “legitimate governmental and private interests [that] could be

harmed by release of certain types of information.” United Techs. Corp. v. U.S. Dep’t of

Defense, 601 F.3d 557, 559 (D.C. Cir. 2010); see also Critical Mass Energy Project v. Nuclear

Regulatory Comm’n, 975 F.2d 871, 872 (D.C. Cir. 1992). Accordingly, Congress included nine

exemptions permitting agencies to withhold information from FOIA disclosure. 5 U.S.C. §

552(b). “These exemptions are explicitly made exclusive, and must be narrowly construed.”

Milner v. Dep't of the Navy, 131 S. Ct. 1259, 1262 (2011) (internal quotations and citations

omitted) (citing FBI v. Abramson, 456 U.S. 615, 630 (1982)); see also Pub. Citizen, Inc. v. Office

of Management and Budget, 598 F.3d 865, 869 (D.C. Cir. 2010).

Summary judgment is appropriate when “there is no genuine dispute as to any material

fact.” Fed. R. Civ. P. 56. At the summary judgment stage, all justifiable inferences must be

drawn in favor of the non-moving party to the extent supportable by the record. Scott v. Harris,

550 U.S. 372, 380 n.8 (2007); see also United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)

(per curiam). In reviewing motions for summary judgment regarding FOIA exemptions, the

district court must conduct a de novo review of the record. 5 U.S.C. § 552(a)(4)(B).

The government agency has the burden to demonstrate that the documents requested are

exempt from disclosure. See Assassination Archives & Research Ctr. v. CIA, 334 F.3d 55, 57

(D.C. Cir. 2003); Budik v. Dep’t of Army, 742 F. Supp. 2d 20, 29 (D.D.C. 2010). Because the

agency is in the unique position of “[p]ossessing both the burden of proof and all the evidence,”

the agency must provide the Court and the challenging party “a measure of access without

exposing the withheld information,” which would “compromis[e] its original withholdings.”

Judicial Watch, Inc. v. FDA, 449 F.3d 141, 146 (D.C. Cir. 2006). Therefore, “[t]o enable the

Court to determine whether documents properly were withheld, the agency must provide a

detailed description of the information withheld through the submission of a so-called ‘Vaughn

Index,’ sufficiently detailed affidavits or declarations, or both.” Hussain v. U.S. Dep’t of

Homeland Sec., 674 F. Supp. 2d 260, 267 (D.D.C. 2009). The Vaughn Index:

[F]orces the government to analyze carefully any material withheld, [ ] enables the trial court to fulfill its duty of ruling on the applicability of the exemption, and [ ] enables the adversary system to operate by giving the requester as much information as possible, on the basis of which he can present his case to the trial court.

Judicial Watch, Inc. v. FDA, 449 F.3d at 146.

A defendant is entitled to summary judgment in a FOIA case if it demonstrates that no

material facts are in dispute, it has conducted an adequate search for responsive records, and

each responsive record, which is located, was either produced to the plaintiff or is exempt from

disclosure. Weisberg v. U.S. Dep’t of Justice, 627 F.2d 365, 368 (D.C. Cir. 1980). To meet its

burden, the defendant may rely on relatively detailed, non-conclusory declarations. McGehee v.

CIA, 697 F.2d 1095, 1102 (D.C. Cir. 1983). In the FOIA context, summary judgment is justified

if the affidavits or other documents describe the documents and “the justifications for

nondisclosure with reasonably specific detail, demonstrate that the information withheld

logically falls within the claimed exemption, and are not controverted by either contrary

evidence in the record nor by evidence of agency bad faith.” Larson v. Dep’t of State, 565 F.3d

857, 862 (D.C. Cir. 2009) (citing Miller v. Casey, 730 F.2d 773, 776 (D.C. Cir. 1984). See also

Military Audit Project v. Casey, 656 F.2d 724, 738 (D.C. Cir. 1981); accord Campbell v. Dep’t

of Justice, 164 F.3d 20, 30 (D.C. Cir. 1998). A court reviewing an agency’s motion for summary

judgment under FOIA is required to view the facts in the light most favorable to the FOIA

requester. See Burka v. U.S. Dep’t of Health and Human Servs., 87 F.3d 508, 514 (D.C. Cir.

1996); Chaplin v. Stewart, No. 10-0518, 2011 WL 65742, at *3 (D.D.C. Jan. 10, 2011). An

agency’s declarations, however, are “accorded a presumption of good faith, which cannot be

rebutted by purely speculative claims about the existence and discoverabilility of other

documents.” Negley v. FBI, 169 Fed. App’x 591, 594 (D.C. Cir. 2006) (citing SafeCard Servs.,

Inc. v. SEC, 926 F.2d 1197, 1200 (D.C. Cir. 1991)) (citation and internal quotation marks

omitted); Holt v. Dep’t of Justice, 734 F. Supp. 2d 28, 35-36 (D.D.C. 2010); see Matter of Wade,

969 F.2d 241, 246 (7th Cir. 1992) (“Without evidence of bad faith, the veracity of the

government’s submissions regarding reasons for withholding the documents should not be

questioned.”) (citation omitted).

B. Analysis

The defendant has invoked Exemptions 4 and 5 to withhold certain disputed documents

in their entirety and partially to redact others. See generally Vaughn Index. Based on a review

of the parties’ legal memoranda and the defendant’s declarations and in camera submissions, the

Court concludes that Treasury’s withholdings and redactions are proper, except that the “Current

Draft Talking Points” document contains some reasonably segregable material that should have

been released.

1. Analysis of Exemption 5 Claims

FOIA Exemption 5 protects “inter-agency or intra-agency memorandums or letters which

would not be available by law to a party other than an agency in litigation with the agency.” 5

U.S.C. § 552(b)(5). Exemption 5 provides the agency with the same privilege protections it

would ordinarily have in civil discovery. If a document requested through FOIA “would be

‘routinely’ or ‘normally’ disclosed [in civil discovery] upon a showing of relevance,” it must

also be disclosed under FOIA; conversely, information that is normally protected in discovery is

protected under Exemption 5. Burka, 87 F.3d at 516 (citing FTC v. Grolier, 462 U.S. 19, 26

(1983)). Put another way, Exemption 5 covers “those documents, and only those documents,

normally privileged in the civil discovery context.” Loving v. Dep’t of Defense, 550 F.3d 32, 37

(D.C. Cir. 2008) (citing NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 149 (1975)). The two

Exemption 5 privileges at issue in this case are the deliberative process privilege and the

attorney-client privilege.

a. Deliberative Process Privilege Was Properly Asserted.

The common-law “privilege regarding the government’s deliberative process” is one of

the privileges incorporated into Exemption 5. Judicial Watch, Inc. v. Dep’t of Energy, 412 F.3d

125, 129 (D.C. Cir. 2005) (citing Bureau of Nat’l Affairs v. Dep’t of Justice, 742 F.2d 1484,

1496 (D.C. Cir. 1984)). The inclusion of the deliberative process privilege in the FOIA statute

“reflect[s] the legislative judgment that the quality of administrative decision-making would be

seriously undermined if agencies were forced to ‘operate in a fishbowl’ because the full and

frank exchange of ideas on legal or policy matters would be impossible.” Tax Analysts v. IRS,

117 F.3d 607, 617 (D.C. Cir. 1997) (internal quotation omitted). The deliberative process

privilege is intended to protect “the decision making processes of government agencies.”

Judicial Watch, Inc. v. Dep’t of Justice, 365 F.3d 1108, 1113 (D.C. Cir. 2004) (citing Sears, 421

U.S. at 150). The privilege’s ultimate purpose is “to prevent injury to the quality of agency

decisions.” Id.

To come within the privilege, therefore, a document must be both “pre-decisional” and

“deliberative.” See Judicial Watch, Inc. v. FDA, 449 F.3d at 151. A document is pre-decisional

if it was generated before agency policy was adopted and deliberative if it “reflects the give and

take of the consultative process.” Id.

The defendant asserts that all of the disputed documents except the “Current Draft

Talking Points” were properly withheld or redacted pursuant to the deliberative process

privilege. The plaintiff does not dispute that the information is pre-decisional. The plaintiff,

however, disputes that this privilege was properly applied and asserts that the defendant has

“failed to satisfy its burden of proof to withhold information under the deliberative process

privilege.” Pl.’s Mem. at 14-15. Additionally, the plaintiff claims that the defendant has

improperly withheld factual materials, which the plaintiff contends are not covered by the

narrowly defined exception to the rule requiring disclosure of factual material.

i. The defendant has satisfied its burden of proof to withhold information under the deliberative process privilege.

The plaintiff states that in order to succeed on a deliberative process privilege claim

under Exemption 5, an agency must demonstrate that the withheld information “‘would actually

inhibit candor in the decision-making process if made available to the public.’” Pl.’s Mem. at 13

(quoting Army Times Pub. Co. v. Dep’t of the Air Force, 998 F.2d 1067, 1072 (D.C. Cir. 1993)).

According to the plaintiff, “an agency cannot meet its statutory burden of justification by

conclusory allegations of possible harm,” and that rather, “it must show by specific and detailed

proof that disclosure would defeat, rather than further, the purposes of the FOIA.” Id. (quoting

Mead Data Central, Inc. v. U.S. Dep’t of the Air Force, 566 F.2d 242, 258 (D.C. Cir. 1977)

(internal quotation omitted)). The plaintiff claims that the defendant merely offers “boilerplate

conclusory language that mimics the language of the case law” and states that the defendant has

failed to satisfy its burden. Id. at 14.

While it is true that affidavits parroting the case law are insufficient on their own, the

defendant in this case provides more than affidavits merely parroting the case law standards.

The plaintiff is correct that “[a]n agency cannot meet its statutory burden of justification by

conclusory allegations of possible harm. It must show by specific and detailed proof that

disclosure would defeat, rather than further, the purposes of the FOIA.” Mead Data, 566 F.2d at

258. However, by identifying the role in the deliberative process played by each of the

documents, the defendant has made the proper showing required in order to claim the

deliberative process privilege. See Judicial Watch, Inc. v. U.S. Postal Serv., 297 F. Supp. 2d

252, 259 (D.D.C. 2004) (requiring the agency to identify the role of a contested document in a

specific deliberative process to prove that disclosure would defeat the purposes of FOIA).

The four e-mail strings among Treasury Staff and Treasury Legal concern Special Master

Feinberg’s anticipated meeting with AIG scheduled for November 3, 2009. Vaughn Index. The

redacted portion of the email strings concern “proposed revisions to materials Treasury prepared

in anticipation of Special Master Feinberg’s meeting with AIG.” Id.

The two “draft issues list” memoranda were attached to two of the e-mail strings and also

relate to Special Master Feinberg’s anticipated meeting with AIG scheduled for November 3,

2009. Id. These two pre-decisional memoranda were drafted by a Treasury attorney and include

the proposed revisions referenced in the e-mail strings. Id.

The Samarias declaration states that these six documents include internal

communications among Treasury personnel reflecting a host of pre-decisional matters, including:

internal analyses of AIG’s data submissions related to its executive structures; internal

recommendations and proposals regarding possible approaches and actions to take with respect

to outstanding policy matters related to the Special Master’s ongoing review of AIG’s

compensation structures pursuant to the Interim Final Rule; candid internal discussions and legal

analysis between Treasury staff and/or Treasury attorney Jackson regarding such on-going

review; a “draft issue[s] list” memorandum prepared for the Special Master in anticipation of his

November 3, 2009 meeting with AIG; and discussions among Treasury staff about how to best

prepare the Special Master for that meeting. Samarias Decl. ¶¶ 43-44; see also Def.’s Mem. at

19-20. The Samarias declaration also states that these “records reflect pre-decisional discussions

between Treasury Officials, regarding (among other things) possible approaches to take with

respect to outstanding policy matters at issue related to the Special Master’s ongoing review of

AIG’s compensation structures pursuant to the Interim Final Rule, candid internal discussions

and legal analysis between Treasury staff and/or a Treasury attorney regarding such on-going

review, and recommendations for actions to policymakers from staff members and Treasury

counsel.” Samarias Decl. ¶ 44.

Such documents would reflect the give and take of the consultative process, and include

recommendations or opinions on legal or policy matters. See Vaughn v. Rosen, 523 F.2d 1136,

1143-44 (D.C. Cir. 1975) (finding that a document is deliberative if it “makes recommendations

or expresses opinions on legal or policy matters.”); see also Ctr. for Medicare Advocacy v. U.S.

Dep’t of Health & Human Servs., 577 F. Supp. 2d 221, 236 (D.D.C. 2008) (finding that

documents containing “advice, recommendations, and suggestions” are “protected from

disclosure under the FOIA's deliberative process exemption.”); Citizens for Responsibility &

Ethics in Wash. v. U.S. Dep’t of Homeland Sec., 514 F. Supp. 2d 36, 46 (D.D.C. 2007)

(protecting documents containing “solutions and approaches” pursuant to the deliberative

process privilege); Judicial Watch, Inc. v. U.S. Dep’t of Commerce, 337 F. Supp. 2d 146, 174

(D.D.C. 2004) (stating documents containing “talking points and recommendations on how to

answer questions” were properly withheld under the deliberative process privilege). Releasing

an internal, pre-decisional analysis would defeat the purpose of the deliberative process

privilege, which “rests on the obvious realization that officials will not communicate candidly

among themselves if each remark is a potential item of discovery and front page news.” Dep’t of

Interior v. Klamath Water Users Protective Ass’n, 532 U.S. 1, 8-9 (2001).

The defendant properly identified the harm that would result from the release of

information by noting that release would “have a chilling effect on open and frank discussions

within the Treasury.” Vaughn Index. The defendant further supports this claim through the

declaration of Mr. Samarias, stating that “release of these records would discourage open and

frank discussions among Treasury officials in the future, thereby threatening the confidence

needed to ensure the candor of future Treasury deliberations.” Samarias Decl. ¶ 47.

The defendant also properly identified the deliberative process that would be revealed if

these documents were not withheld or redacted. The defendant states these documents regard

“possible approaches to take with respect to outstanding policy matters at issue related to the

Special Master’s ongoing review of AIG’s compensation structures pursuant to the Interim Final

Rule.” Samarias Decl. ¶ 44. As such, they fall within the protection of the deliberative process

privilege. To the extent that the plaintiff argues an agency must prove that the withheld

information “would actually inhibit candor,” see Pl.’s Mem. at 13-14, the plaintiff overstates the

defendant’s required showing.5 The defendant only needs to demonstrate that the information

was pre-decisional and deliberative and that, therefore, the privilege is ultimately being invoked

“to prevent injury to the quality of agency decisions by allowing government officials freedom to

debate alternative approaches in private.” In re Sealed Case, 121 F.3d 729, 737 (D.C. Cir. 1997)

5 The plaintiff’s argument that the defendant must show that the withheld information “would actually inhibit candor” relies on a citation to Army Times Pub. Co. 998 F.2d at 1068-69. In that case, the FOIA defendant, the U.S. Air Force, withheld certain telephone poll results pursuant to deliberative process privilege while releasing other similar poll results to the public. 998 F.2d at 1068-69. The D.C. Circuit held that the poll results that had been released “contained purely factual information which could not threaten the Air Force’s deliberative process in any way,” and that “the affidavits submitted by the Air Force in support of its refusal to disclose [the other results] do not even hint that the poll results withheld are different from those released in any relevant respect.” Id. at 1068. In that context, the D.C. Circuit instructed that, on remand, “the Air Force must demonstrate that, unlike the released poll results, the withheld poll results would actually inhibit candor in the decision-making process if made available to the public.” Id. at 1072. Thus, the D.C. Circuit’s comment referring to the defendant’s requirement to show that the release of a document “would actually inhibit candor in the decision-making process” amounts to another way of saying that the defendant must show that the document is deliberative in nature. See id. at 1070 (“The propriety of the application of Exemption 5 [in Army Times] thus turns on whether the withheld documents were correctly characterized by the Air Force and the district court as deliberative.”).

(referring to the “two requirements” of the deliberative process privilege). The defendant has

demonstrated that the documents are both predecisional and deliberative. Thus, the documents

have been properly withheld or redacted pursuant to deliberative process privilege.

ii. Deliberative process privilege covers factual material presented in a form that would reveal agency deliberations.

The plaintiff states that these six documents contain factual material that is not exempt

pursuant to the deliberative process privilege. Pl.’s Mem. at 14-15. The plaintiff argues that the

agency has a duty to disclose any reasonably segregable, responsive factual information, and that

the agency has failed to demonstrate that disclosure of the factual information redacted or

withheld in the documents mentioned above would reveal any agency deliberations or bear on

the formulation or exercise of its judgment. See id. at 15.

In withholding a responsive record under one of FOIA’s enumerated exemptions, an

agency must nevertheless disclose any non-exempt information that is “reasonably segregable”

from the responsive record. 5 U.S.C. § 552(b). An agency need not, for instance, “commit

significant time and resources to the separation of disjointed words, phrases, or even sentences

which taken separately or together have minimal or no information content.” Schoenman v. FBI,

No. 04-02202, 2011 U.S. Dist. LEXIS 12560, at *76 (D.D.C. Feb. 9, 2011) (citations omitted).

To discharge its burden before the district court, the agency “must provide a reasonably detailed

justification rather than conclusory statements to support its claim that the non-exempt material

in a document is not reasonably segregable.” Id. (citations omitted).

Although purely factual information is generally not protected under the deliberative

process privilege, such information can be withheld when “the material is so inextricably

intertwined with the deliberative sections of documents that its disclosure would inevitably

reveal the government’s deliberations.” In re Sealed Case, 121 F.3d at 737. Such information is

protected in order to avoid allowing “the reader to probe too deeply into the thought processes of

the drafters” and thus to avoid “a chilling effect on communication between agency employees

regarding similar projects and the future.” Reliant Energy Power Generation, Inc. v. FERC, 520

F. Supp. 2d 194, 204 (D.D.C. 2007). Thus, factual material is protected under the deliberative

process privilege when disclosure would “expose an agency’s decision-making process in such a

way as to discourage candid discussion within the agency and thereby undermine the agency’s

ability to perform its functions.” Quarles v. Dep’t of the Navy, 893 F.2d 390, 392 (D.C. Cir.

1990) (citation omitted). Such material is protected because “Exemption 5 was intended to

protect not simply deliberative material, but also the deliberative process of agencies.” Montrose

Chemical Corp. of Ca. v. Train, 491 F.2d 63, 71 (D.C. Cir. 1974).

“An agency may withhold a factual portion of a document if, in creating the document,

the author undertook to separate significant facts from insignificant facts.” Reliant Energy

Power Generation, Inc., 520 F. Supp. 2d at 203 (citing Montrose Chem. Corp., 491 F.2d at 71).

The rationale for this rule is that the act of selecting facts for inclusion in a document

“constitutes an exercise of judgment by an agency.” Id. (quoting Montrose Chem. Corp., 491

F.2d at 71); see also Mapother v. Dep’t of Justice, 3 F.3d 1533, 1539 (D.C. Cir. 1993) (finding

factual information in a report protected when that “factual material was assembled through an

exercise of judgment in extracting pertinent material from a vast number of documents for the

benefit of an official called upon to take discretionary action.”); Judicial Watch, Inc. v. U.S.

Postal Serv., 297 F. Supp. 2d at 262 (noting that documents could arrange facts in such a way

that they reveal the policy judgments of the author and thus an agency’s deliberative process).

In this case, the Vaughn Index indicates that all reasonably segregable portions of these

documents have been released, while portions of these documents have been redacted pursuant to

the deliberative process privilege. See Vaughn Index. The Samarias declaration also indicates

that the defendant performed a “document-by-document review” and that non-exempt

information in the withheld or redacted materials “is so inextricably intertwined with the exempt

information that any further separation of non-exempt information beyond the separation that

Treasury has already done would produce only incomplete, fragmented, unintelligible sentences

and phrases that are devoid of any meaning.” Samarias Decl. ¶¶ 53-54; see also Schoenman,

2011 U.S. Dist. LEXIS 12560, at *76 (explaining that the question of segregability is context-

specific and that an agency need not commit significant time and resources to the separation of

disjointed words, phrases, or sentences that would provide minimal informational content). The

defendant explained that it “redacted and withheld factual information regarding AIG’s historical

and proposed compensation payments and structures.” Def.’s Mem. at 20-21. According to the

defendant, these “facts were identified, extracted, and highlighted out of a larger group of

potentially relevant facts” and the defendant suggests that, through this process, “agency

employees were exercising their judgment as to what [factual information] would be important to

the [Special Master] in making his decision . . . [and] were making an evaluation of the relative

significance of facts.” Id.; see also Def.’s Mem. in Opp’n to Pl.’s Cross Mot. for Summ. J. and

Reply in Supp. of Def.’s Mot. for Summ. J. (“Def.’s Reply”) at 6 (quoting Montrose Chem.

Corp., 491 F.2d at 68) (internal quotations omitted) (alteration in original); Samarias Decl. ¶ 45.

The plaintiff objects to the defendant’s contention that deliberative process privilege

covers pre-decisional documents in which agency personnel have selected specific facts for

inclusion and consideration in a summary or memorandum for use in the agency decision-

making process. According to the plaintiff, “the case that appears to have given rise to [the]

proposition that, in certain limited circumstances, summaries of factual materials may be subject

to” exemption under deliberative process privilege is the D.C. Circuit’s 1974 ruling in Montrose

Chem. Corp. Pl.’s Reply to Def.’s Opp’n to Pl.’s Cross Mot. for Summ. J. (“Pl.’s Reply”) at 5.

The plaintiff then attempts to distinguish Montrose Chem. Corp. from this case, relying heavily

on dicta in Montrose in which the Court noted that “[w]here factual material is not already in the

public domain, a different result might be reached.” Id. at 6 (quoting Montrose Chem. Corp.,

491 F.2d at 71). Since the factual information at issue here includes confidential information

about AIG’s payment structure, rather than material “already in the public domain,” the plaintiff

contends that “this case thus presents precisely the type of situation in which disclosure . . .

should result.” Id. The problem with the plaintiff’s argument, however, is that subsequent D.C.

Circuit cases “make plain [that] the key to Montrose Chemical was not the relationship between

the requested [factual] summaries and the public record, but that between the summaries and the

decision announced by Agency.” Mapother, 3 F.3d at 1539. The D.C. Circuit has reached that

conclusion “notwithstanding [the Montrose court’s] suggestion that ‘a different result might be

reached’ in the case of information in the public domain.” Id. Thus, where factual material was

assembled into a summary or memorandum through an exercise of judgment in determining

which facts to highlight “for the benefit of an official called upon to take discretionary action,”

deliberative process privilege may properly be asserted. Id. Therefore, the factual material in

the disputed documents was properly redacted or withheld using the deliberative process

exemption here.

Following in camera inspection, the Court is satisfied that the four e-mail strings and the

“draft issues list” memoranda represent deliberative, pre-decisional communications regarding

the Special Master’s ongoing review of AIG’s compensation structures pursuant to the Interim

Final Rule and are therefore properly withheld and redacted under the deliberative process

privilege.

b. Attorney-Client Privilege Covers Confidential Communications Between Agency Staff and the Agency Legal Department.

In addition to deliberative process privilege, Exemption 5 also incorporates the attorney-

client privilege, which protects “confidential communications between an attorney and his client

relating to a legal matter for which the client has sought professional advice.” Mead Data, 566

F.2d at 252. In the FOIA context, the agency is the “client” and the agency’s lawyers are the

“attorneys” for the purposes of attorney-client privilege. See In re Lindsey, 148 F.3d 1100, 1105

(D.C. Cir. 1998) (citing Coastal States Gas Corp. v. Dep’t of Energy, 617 F.2d 854, 863 (D.C.

Cir. 1980)). To satisfy its burden, the defendant “must show that the withheld document (1)

involves confidential communications between an attorney and his client and (2) relates to a

legal matter for which the client has sought professional advice.” Wilderness Soc’y v. U.S. Dep’t

of the Interior, 344 F. Supp. 2d 1, 16 (D.D.C. 2004) (internal quotations omitted).

The defendant contends that all of the disputed documents except the “Current Draft

Talking Points” are properly withheld or redacted based on attorney-client privilege.6 Def.’s

Mem. at 15. The defendant states that the documents “contain privileged and confidential

communication between Treasury staff and Robert Jackson, an attorney within Treasury’s Office

6 These are the same documents that the defendant asserts are exempted by deliberative process privilege, and, therefore, the defendant states “[w]ith respect to these documents, the Court need only find one exemption applicable to grant summary judgment to [the] [d]efendant.” Def.’s Mem. at 14 n.4. The Court notes that there is a lack of precision regarding exactly which portions of these documents are withheld or redacted pursuant to attorney- client privilege. Initially, the defendant appeared to assert the two privileges coextensively, but, in its reply, the defendant appeared to clarify that it does not withhold certain factual material based on attorney-client privilege, but instead withholds this information solely under the deliberative process privilege and Exemption 4. See Def.’s Reply at 9. Since the Court has already determined that the deliberative process privilege shields all of the disputed information in these documents, the issue of the extent of the portions additionally protected by attorney-client privilege – and indeed the whole discussion of attorney-client privilege herein – is academic. Further, based on the Court’s in camera review, it appears that the documents are substantially covered by attorney-client privilege. The Court notes, however, that to the extent the defendant was not claiming attorney-client privilege over the entirety of a communication, it should have indicated the specific portions it contends are covered by the privilege more precisely.

of the Assistant General Counsel who was assigned to provide counsel to the Office of the

Special Master.” Id. According to the Samarias declaration, the redacted portions of the four e-

mail strings “reflect communication between [Office] staff [] and [attorney] Robert Jackson . . .

in anticipation of the Special Master’s upcoming meeting with AIG.” Samarias Decl. ¶ 39. The

two “draft issues list” memoranda were prepared by attorney Jackson and marked “Privileged

and Confidential.” Id. These drafts provide attorney Jackson’s “legal analyses of AIG’s

proposed compensation structures and the requirements of the Interim Final Rule, in furtherance

of the Special Master’s ongoing analysis of AIG’s compensation structures.” Id. The defendant

states that the legal advice provided in these documents was based upon facts provided

confidentially by Treasury staff to its attorney and thus was properly withheld. Id. ¶ 40; Def.’s

Mem. at 16.

The plaintiff disputes the application of attorney-client privilege because the withheld

materials contain legal discussion concerning information provided to the Treasury by AIG or

some other third party source and because the defendant has not demonstrated that the Treasury

staff who purportedly provided information to attorney Jackson were authorized to “speak for”

the defendant, which the plaintiff contends is a requirement for invoking attorney-client

privilege.7 See Pl.’s Mem. at 9-10.

7 The plaintiff also disputes the withholding of the two draft issues list memoranda because their titular description as “issues lists” does not seem compatible with the defendant’s description of them as “Jackson’s legal analyses of AIG’s proposed compensation structures and the requirements of the Interim Final Rule.” Pl.’s Mem. at 11. The defendant correctly responds, however, that it is the substance of the document that determines whether it is protected from disclosure under FOIA. Def.’s Reply at 8 (citing F.B.I. v. Abramson, 456 U.S. 615, 626 (1982)). The plaintiff also disputes the redaction in one of the e-mail strings (Bates number 39-40), as it appears to be a copy of another e-mail string (Bates number 35-36), with two extra sentences redacted. Pl.’s Mem. at 10. The defendant states that this inconsistency was inadvertent and has since corrected it by providing an updated production of the document to the plaintiff. Def.’s Reply at 11 n.3. The plaintiff contends that the inconsistencies in the redactions should undermine the defendant’s claim of attorney-client privilege and that the defendant’s claims of privilege be scrutinized carefully. Pl.’s Reply at 3-4. However, these mistakes do not imply bad faith nor do they rebut the presumption of good faith. See Fischer v. U.S. DOJ, 723 F. Supp. 2d 104, 108 (D.D.C. 2010).

i. When seeking legal advice concerning the agency’s own actions and legal interests, attorney-client privilege applies to communications containing third party facts.

According to the plaintiff, the facts provided to Treasury attorney Jackson come from

“AIG or some other third party source” and therefore attorney-client privilege does not apply.

Id. The fact that a request for legal advice concerned information originating with a third party

does not necessarily defeat the claim of privilege, however. The four e-mail strings contain

communication between Treasury Staff and its attorney, acting in his capacity as a legal advisor

to the Treasury, and the two memoranda contain attorney Jackson’s legal analyses of AIG’s

compensation structure and the requirements of the Interim Final Rule. Vaughn Index; Def.’s

Mem. at 16. Such a request for legal advice concerns the agency’s own actions and legal

interests in connection with the Special Master’s ongoing analysis of AIG’s compensation

structure, and “when the Government is dealing with its attorneys as would any private party

seeking advice to protect personal interests, and needs the same assurance of confidentiality so it

will not be deterred from full and frank communications with its counselors, [Exemption 5]

applies.” Cuban v. SEC, 744 F. Supp. 2d 60, 78 (D.D.C. 2010) (quoting Coastal States, 617 F.2d

at 863) (alteration in Cuban).

The documents here differ from the type of documents addressed in a line of cases in this

Circuit that limit the applicability of attorney-client privilege for documents in which agency

lawyers have provided legal advice about the application of regulations or statutes to the

circumstances of third parties. See, e.g., Tax Analysts v. IRS, 117 F.3d 607, 619 (D.C. Cir.

1997); Schlefler v. United States, 702 F.2d 233, 245 (D.C. Cir. 1983). In Tax Analysts, the D.C.

Circuit held that legal memoranda from the IRS Office of the Chief Counsel to field personnel

advising the field officers of how to proceed on the situation of specific taxpayers were not

protected from FOIA disclosure under attorney-client privilege. Tax Analysts, 117 F.3d at 609,

619. The Court held that because the advice responded to requests and information transmitted

by taxpayers to the IRS regarding the taxpayers’ situations – and concerned no new or

confidential information regarding the agency – the advice was not protected under attorney-

client privilege. Id. at 619. The Court’s ruling hinged on the fact that the function of the IRS

legal memoranda at issue was to “create a body of private law, applied routinely as the

government’s legal position in its dealings with taxpayers.” Id.

Similarly, in Schlefler, the D.C. Circuit held that attorney-client privilege did not

preclude disclosure of similar memoranda from the Chief Counsel of the Maritime

Administration to Maritime Administration officials where the memoranda provided legal

opinions on how to rule on requests from third parties for loans, subsidies, or other similar

matters in accordance with relevant statutes, regulations, and agency policies. Schlefler, 702

F.2d at 236, 245.

In Tax Analysts and Schlefler, agency staff had requested legal advice regarding how to

apply relevant law in decisions that would affect the third party who provided the agency with

information or other similarly situated third parties. Although the legal advice does concern and

affect AIG in this case, the situation here is different. Here, the legal advice sought did not

concern how to apply a “body of agency law” in a manner analogous to Tax Analysts and

Schlefler. Instead, the communication concerned the agency’s own actions in its ongoing

evaluation of AIG under the Interim Final Rule. As such, the agency here is “dealing with its

attorneys as would any private party seeking advice to protect personal interests, and needs the

same assurance of confidentiality so it will not be deterred from full and frank communications

with its counselors.” Cuban, 744 F. Supp. 2d at 78. The agency staff sought legal advice “based

upon facts provided confidentially by Treasury to its attorney” and the communication “has been

held in confidence.” Samarias Decl. ¶ 40. Thus, the assertion of attorney-client privilege was

proper.

ii. The defendant has shown that the Treasury Staff are protected under attorney-client privilege.

The plaintiff also claims that the defendant needs to demonstrate that the Treasury staff

who provided information to attorney Jackson were authorized to “speak for” the defendant.

Pl.’s Mem. at 10. According to the plaintiff, “when an organization is the client, only ‘agents or

employees of the organization who are authorized to act or speak for the organization in relation

to the subject matter of the communication’ are protected by [attorney-client] privilege.” Id.

(quoting Hall v. CIA, 668 F. Supp. 2d 172, 192 (D.D.C. 2009)). One of the correspondents in the

e-mail strings is Camille Biros, who is not a regular Treasury employee, but rather a “special

government employee,” who is otherwise employed by a private entity. Id. at 10-11. Therefore,

the plaintiff argues that any communications involving Ms. Biros and other special government

employees like her are not protected under attorney-client privilege because these special

government employees should be treated as third parties, absent some more detailed showing

that these special employees are authorized to “speak for” the Treasury in relation to the subject

matter of the privileged communication. Id. at 10-11.

The Court disagrees that all special government employees should be treated as third

parties that break the agency’s claim of privilege. The plaintiff’s understanding of attorney-

client privilege is overly narrow. The defendant points out that the plaintiff’s privilege argument

relies on Hall v. CIA, a district court case which in turn relies on Mead Data, a 1977 case in

which the defendant contends the “D.C. Circuit adopted the so-called ‘control group test’ for

determining the scope of the attorney-client privilege when the client is an organization or

government agency.” Def.’s Reply at 10 (citing Mead Data, 566 F.2d at 253 n.24). The

defendant further argues that after Mead Data was decided, the Supreme Court rejected the

“control group test” for organizational privilege in Upjohn Co. v. United States. Id. (citing

Upjohn Co. v. United States, 449 U.S. 383, 390 (1981)).

Under the “control group test,” attorney-client privilege only protects communications

involving an organization’s senior management or “control group.” In Upjohn, the Supreme

Court rejected that test as overly narrow. The Supreme Court held that “it will frequently be

employees beyond the [organization’s] control group . . . [who will be] responsible for directing

[the company’s] actions in response to legal advice – who will possess the information needed

by the corporation’s lawyers. Middle-level – and indeed lower-level – employees can, by actions

within the scope of their employment, embroil the corporation in serious legal difficulties, and it

is only natural that these employees would have the relevant information needed by corporate

counsel if he is adequately to advise the client with respect to such actual or potential

difficulties.” 449 U.S. at 391 (internal quotation marks omitted). Accordingly, following

Upjohn, the defendant claims that it only needs to prove that the communication “concern[s]

matters within the scope of the employee’s [] duties.” Def.’s Reply at 10 (quoting Upjohn, 449

U.S. at 391, 394).

The Court finds that Mead Data, whose language is ultimately relied upon by the

plaintiff, never expressly endorsed the “control group” test. The D.C. Circuit in Mead Data

stated that “[w]here the client is an organization, the privilege extends to those communications

between attorneys and all agents or employees of the organization who are authorized to act or

speak for the organization in relation to the subject matter of the communication.” Mead Data

566 F.2d at 253 n.24. This statement may be viewed as consistent with Upjohn’s holding that an

employee’s communications with attorneys can be covered by privilege where the

communication “concern[s] matters within the scope of the employee’s [] duties.” Thus, to the

extent the plaintiff is attempting to invoke a different test, the plaintiff’s attempt is misguided.

Courts in this Circuit have routinely held that attorney-client privilege applies to

employees at varying levels of seniority in an agency or corporation. See Judicial Watch v.

Dep’t of the Army, 466 F. Supp. 2d 112, 121 (D.D.C. 2006) (stating attorney-client privilege

“applies to confidential communications made to an attorney by both high-level agency

personnel and lower-echelon employees”); Hornbeck Offshore Transp., LLC v. U.S. Coast

Guard, No. 04-1724, 2006 WL 696053, at *14 (D.D.C. Mar. 20, 2006) (explaining that because

“agency employees who do not have the ultimate authority to determine policy still might

possess information that is useful to the agency’s attorney, the Supreme Court has extended

FOIA protection to their communications with agency lawyers.”) (citing Upjohn, 449 U.S. 392-

97); Alexander v. FBI, 198 F.R.D. 306, 314 (D.D.C. 2000) (“[C]ommunications with counsel by

corporate employees are privileged, so long as the communications concerned matters within the

scope of the employees’ corporate duties, and the employees themselves were sufficiently aware

that they were being questioned in order that the corporation could obtain legal advice.”)

(internal quotations and citations omitted); Nakajima v. Gen. Motors Corp., 857 F. Supp. 100,

104 (D.D.C. 1995) (“[A] corporation’s attorneys’ conversations with corporate employees are

privileged if [] [t]he communications concern[] matters within the scope of the employees’

corporate duties . . . .”) (internal quotations and citations omitted).

The defendant states that the disputed documents contain communications between

attorney Jackson and Camille Biros, Mary Pat Fox, and Katherine Mueller and concern matters

within the scope of these employees’ duties. Def.’s Reply at 10-11. According to the

defendant’s declarations, Ms. Biros was “retained by Treasury as [a] ‘special government

employee[]’ to assist the Office of the Special Master” and she and Ms. Fox were “principally

involved in Treasury’s review of AIG’s compensation structures during the time frame at issue”

in this case. Samarias Decl. ¶ 34 & n.3. Ms. Mueller was employed as a Treasury “Executive

Compensation Specialist,” who was assigned to work with the Special Master during the relevant

time frame. Suppl. Samarias Decl. ¶ 3. In addition, one of the disputed documents was

forwarded to William Mulvey, who at the time, served as “Attorney Advisor in the Office of

Financial Stability at Treasury and was assigned to work with the Special Master.” Id. ¶ 4. The

defendant states that assisting with the review of AIG’s compensation structures was “clearly

within the scope of each of these employees’ duties and thus their communication with attorney

Jackson regarding this matter are exempt.” Def.’s Reply at 11. The Court agrees and, following

in camera review, finds the defendant’s assertion of attorney-client privilege to be proper.

2. Analysis of Exemption 4 claims

Exemption 4 exempts from agency disclosure “commercial or financial information [that

is] obtained from a person and [that is] privileged or confidential.” 5 U.S.C. § 552(b)(4). In this

Circuit, the terms “commercial” and “financial” are given their ordinary meanings. See Nat’l

Ass’n of Homebuilders v. Norton, 309 F.3d 26, 38 (D.C. Cir. 2002); Pub. Citizen Health

Research Group v. FDA, 704 F.2d 1280, 1290 (D.C. Cir. 1983). “Commercial” is defined

broadly to include “records that reveal basic commercial operations or relate to income-

producing aspects of a business” as well as situations where the “provider of the information has

a commercial interest in the information submitted to the agency.” Baker & Hostetler, LLP v.

U.S. Dep’t of Commerce, 473 F.3d 312, 319 (D.C. Cir. 2006) (internal quotation omitted).

Banks and other financial institutions are considered “persons” for the purposes of the

exemption. See 5 U.S.C. § 551(2) (“‘person’ includes an individual, partnership, corporation,

association, or public or private organization.”). Under National Parks and Conservation Ass’n

v. Morton, 498 F.2d 765 (D.C. Cir. 1974), commercial or financial information that is required to

be provided to the government is “confidential” if disclosure is likely either “(1) to impair the

Government’s ability to obtain necessary information in the future; or (2) to cause substantial

harm to the competitive position of the person from whom the information was obtained.” Id. at

770 (footnote omitted). On the other hand, information that is provided voluntarily is

confidential “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 Energy Project v. Nuclear Regulatory Comm’n, 975

F.2d 871, 879 (D.C. Cir. 1992). Some of the disputed documents were provided voluntarily and

some were required by the agency.8 The defendant contends that certain information in all of the

disputed documents was redacted or withheld pursuant to Exemption 4.

a. The Information Voluntarily Submitted by AIG to the Treasury was Properly Withheld.

The defendant claims that the entire document entitled “Current Draft Talking Points”

was provided voluntarily and withheld in full pursuant to Exemption 4. Def.’s Mem. at 23. For

a voluntary submission, the information is considered confidential 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, 975 F.2d at 879. The defendant may meet this burden “by supplying declarations as to

customary treatment.” Judicial Watch v. Dep’t of the Army, 466 F. Supp. 2d at 126. “Limited

8 The parties do not dispute which information was provided voluntarily and which information was required to be submitted. See Def.’s Mem. at 23-24; see Pl.’s Mem. at 16-20.

disclosures, such as to suppliers or employees, do not preclude protection under Exemption 4, as

long as those disclosures are not made to the general public.” Ctr. for Auto Safety v. Nat’l

Highway Traffic Safety Admin., 93 F. Supp. 2d 1, 17-18 (D.D.C. 2000) (citing Critical Mass, 975

F.2d at 880).

The defendant states that the “Current Draft Talking Points” document contains

confidential commercial or financial information obtained from AIG related to compensation and

retention matters. Vaughn Index. In support of its contention, the defendant also provides a

declaration from Eric Litzky, Vice President-Corporate Governance and Special Counsel and

Secretary to the board of Directors of AIG. Mr. Litzky explains that the “Current Draft Talking

Points” are “private, confidential materials related to corporate strategy and are not the type that

AIG would customarily disclose to the public.” Litzky Decl. ¶ 4. The defendant also claims that

the cover email indicates that the document “contained confidential information and was not to

be disseminated, distributed, or copied.” 9 Def.’s Reply at 14.

The plaintiff argues that the defendant failed to meet its burden because the document’s

cover email indicated that it was sent to a “great many individuals,” including persons at the

Federal Reserve Bank of New York and that, therefore, the information was not confidential.

Pl.’s Mem. at 17. The plaintiff contends that confidentiality is broken if a document is shared

with third parties, unless the defendant can “demonstrate that [such] dissemination was

‘necessary’ or that steps were taken to ensure that other recipients treated the draft talking points

as confidential.” Pl.’s Reply at 7-8 (citing Ctr. for Auto Safety, 93 F. Supp. 2d at 17-18). The

plaintiff also contends that the confidentiality legend in the cover e-mail is “boilerplate” and

insufficient. Id.

9 The parties do not dispute the redactions in the cover e-mail (Bates number 18) to “Current Draft Talking Points.” See Pl.’s Mem. at 3; Def.’s Mem. at 9.

Since “[l]imited disclosures . . . do not preclude protection under Exemption 4, as long as

those disclosures are not made to the general public,” a threshold question for the Court is

whether the disclosure of the information in the “Current Draft Talking Points” document was

widespread enough to defeat the exemption. Ctr. for Auto Safety, 93 F. Supp. 2d at 17-18; see

also Parker v. Bureau of Land Management, 141 F. Supp. 2d 71, 79 (D.D.C. 2001) (stating

“limited disclosures, not made to the general public, do not preclude Exemption 4 protection.”).

The Court finds that the limited disclosures reflected in the cover email do not suggest that it was

publicly distributed. Rather, the cover email is addressed to the AIG Board of Directors and the

email headers indicate distribution to what appear to be several internal AIG email recipients as

well as two outside addresses at the Federal Reserve Bank of New York (“FRBNY”). See ECF

No. 15, Ex. 1, at 19; see also Def.’s Reply at 14 (indicating the email was sent mainly to AIG

board members and staff). The FRBNY is a Congressionally-chartered banking institution that is

part of the Federal Reserve System, the central bank of the United States. Bloomberg L.P. v. Bd.

of Governors of Fed. Reserve Sys., 649 F. Supp. 2d 262, 265-66 (S.D.N.Y. 2009). As such, it

combines aspects of a private entity with aspects of a government agency. See id. For example,

the FRBNY can enter into its own contracts, but it also has a regulatory role in the banking

industry and provides all revenue in excess of expenses to the Treasury. Id. Given the

FRBNY’s role, the Court finds that the limited disclosures of information to the FRBNY are akin

to the type of limited disclosures, such as to suppliers or employees, that do not preclude

protection under Exemption 4. Here, the Litzky declaration explains that the information at issue

is not a type AIG customarily discloses to the public, and the cover email contained a

confidentiality legend, which warned the recipients of the e-mail that the information, including

the attachment, inside may be confidential and should not be disseminated, distributed, or

copied. Litzky Decl. ¶ 4; ECF No. 15, Ex. 1, at 19 (Cover Email). Therefore, the confidentiality

of this information is not waived due to public disclosure.

Following in camera review, however, the Court finds that the “Current Draft Talking

Points” documents contains information that is both reasonably segregable and not confidential

in nature—namely: the entirety of the first page through the top bullet point on page two; the

third page from the line “Here are some of the things we would like from you . . .” to the end of

the page; and the fourth page from the line “Summary of Retention Programs” to the end of the

page. Even when an agency establishes that it has properly withheld a document under a FOIA

exemption, “it must nonetheless disclose all reasonably segregable, nonexempt portions of the

requested record(s).” Roth v. U.S. Dep’t of Justice, 642 F.3d 1161, 1167 (D.C. Cir. 2011)

(internal citations omitted); see also Mead Data, 566 F.2d at 260 (stating that “[t]he focus of the

FOIA is information, not documents, and an agency cannot justify withholding an entire

document simply by showing that it contains some exempt material.”). “The ‘segregability’

requirement applies to all documents and all exemptions in the FOIA.” Ctr. for Auto Safety v.

EPA, 731 F.2d 16, 21 (D.C. Cir. 1984).

The Samarias declaration indicates that the non-exempt information in the documents is

so “inextricably intertwined with the exempt information that any further separation of non-

exempt information beyond the separation that the Treasury has already done would produce

only incomplete, fragmented, unintelligible sentences and phrases that are devoid of any

meaning.” The apparently non-exempt information in the “Current Draft Talking Points”

document that the Court has identified above, however, is easily separable from the exempt

portions and would not produce incomplete sentences devoid of any meaning. Accordingly, the

defendant must release the portions of the “Current Draft Talking Points” indicated above.

b. The Required Information Obtained from AIG was Properly Withheld.

Commercial or financial information that is required to be provided to the government is

“confidential” if disclosure is likely either “(1) to impair the Government’s ability to obtain

necessary information in the future; or (2) to cause substantial harm to the competitive position

of the person from whom the information was obtained.” National Parks, 498 F.2d at 770. If

either one of these two prongs of the National Parks standard is satisfied, the information is

deemed confidential and may be properly withheld under Exemption 4.

The defendant states that the two “draft issues list” memoranda and the four e-mail

strings were required submissions because the documents were provided by AIG to Treasury

pursuant to AIG’s data submission obligations under the Interim Final Rule. Def.’s Mem. at 23.

According to the defendant, the two “draft issues list” memoranda contain “confidential business

information received from AIG” and that the four e-mail strings “reference or cite confidential

business information received from AIG regarding AIG’s compensation structures and retention

programs. Id. at 23-24. The defendant does not claim that the information in the disputed

documents is likely to “impair the Government’s ability to obtain necessary information in the

future.” Instead, the defendant states that these six documents are exempt because they would

“cause substantial harm to the competitive position of the person from whom the information

was obtained.” Id. at 25-26.

To support this claim, the defendant provides an affidavit from Jeffrey Hurd, Senior Vice

President of Human Resources and Communications for AIG. Mr. Hurd states that there is “a

very real risk that competitors will use the apparently detailed and specific figures and structural

descriptions in [the disputed documents] to poach valuable AIG employees.” Hurd Decl. ¶ 5.

Mr. Hurd further states that the “loss of employees is particularly damaging in the insurance and

financial services business, in which relationships and contacts are particularly important. The

loss of a key employee often means the loss of key customers, to the clear competitive

disadvantage of AIG.” Id. ¶ 7. Additionally, Mr. Hurd contends that the “disclosure of [this

information] could decrease morale . . . because employees are not typically informed about how

their colleagues are compensated.” Id. ¶ 6.

The plaintiff argues that the defendant has failed to meet its burden because “Mr. Hurd

provides no evidence that employee desertions will cause AIG to suffer ‘substantial’ competitive

harm much less that such harm is ‘imminent.’” Pl.’s Mem. at 20. The plaintiff also points out

that “Mr. Hurd has not even seen the withheld documents at issue.” Id. (emphasis in original).

The plaintiff also states that competitive harm should “be limited to harm flowing from the

affirmative use of proprietary information and ‘should not be taken to mean’ harms such as

‘employee disgruntlement.’” Id. at 19 (quoting Public Citizen, 704 F.2d at 1291 n.30).

The defendant, however, is not required to prove “imminent” harm. The agency must

only show that release of the withheld documents “is likely to… cause substantial harm to the

competitive position of the person from whom the information was obtained.” Nat’l Parks, 498

F.2d at 770 (emphasis added). Nor is the fact that Mr. Hurd has not “even seen” the withheld

documents dispositive. The defendant claims that Mr. Hurd has not seen the disputed documents

because they are protected under the deliberative process and attorney-client privileges. Def.’s

Reply at 14. The defendant, however, states that Mr. Hurd was “aware of the nature of the

information withheld” and that it was “AIG that provided the information at issue to Treasury” in

the first place. Id. at 15. Therefore, the key issue is whether this information, if released, would

cause substantial harm to the competitive position of AIG.

The plaintiff is correct in stating that “competitive harm does have to be a result of the

affirmative use of proprietary information.” Therefore, Mr. Hurd’s statement that releasing the

information could cause decreased morale is irrelevant. See Public Citizen, 704 F.2d at 1291

n.30 (“[T]he important point for competitive harm in the FOIA context . . . is that it be limited to

harm flowing from the affirmative use of proprietary information by competitors. Competitive

harm should not be taken to mean simply any injury to competitive position, as might flow from

customer or employee disgruntlement.”).

Mr. Hurd’s assertion that competitors can use the information affirmatively to “poach

valuable AIG employees” is more relevant to the court’s inquiry, however. The defendant

argues that release of this information could harm the competitive position of AIG because it

would allow competitors to more accurately poach employees. While the defendant does not

point to any cases that directly address this form of alleged competitive injury, revealing AIG’s

compensation structures may cause harm by revealing AIG’s business strategy and cost

structure. On the other hand, the release of compensation structures would likely result in less

substantial and directly competitive harm than, say, revealing unit pricing in a contract. Cf.

Essex Electro Eng’rs, Inc. v. U.S. Sec’y of the Army, 686 F. Supp. 2d 91, 94 (D.D.C. 2010)

(finding that revealing unit prices in a contract would cause substantial competitive harm

because they would reveal business strategy and cost structure). Compensation is only one of

many factors that would persuade someone to leave for another company, and competitors could

already poach AIG’s employees by making them favorable salary offers without knowing their

current compensation information – although a detailed picture of AIG’s compensation structure

would certainly making poaching easier. Cf. McDonnell Douglas Corp. v. U.S. Dep’t of the Air

Force, 375 F.3d 1182, 1189 (D.C. Cir. 2004) (withholding contract information under

Exemption 4 because it would “significantly increase the probability [that] competitors would

underbid [] in the event the Air Force rebids the contract.”).

In any event, this Court does not need to decide whether the defendant has proved that

the release of information would cause substantial harm to AIG because the same information is

exempt under Exemption 5, as discussed supra.

3. Segregability

As discussed above, if a record contains both exempt and non-exempt material, all non-

exempt material that is reasonably segregable must be released. See Roth, 642 F.3d at 1167.

Based on the Court’s in camera review of the disputed documents, the Court concludes that the

agency has produced all reasonably segregable responsive portions of all documents at issue,

except for the “Current Draft Talking Points” document identified above.

III. CONCLUSION

For the foregoing reasons, defendant’s motion for summary judgment is granted except

as to the “Current Draft Talking Points” document. On or before August 26, 2011, the defendant

shall produce to the plaintiff copies of the “Current Draft Talking Points” document that do not

redact the non-exempt and reasonably segregable information discussed above or, alternatively,

the defendant shall file a renewed motion demonstrating why this information is exempt or not

reasonably segregable. In all other respects, the defendant’s motion is granted and the plaintiff’s

motion is denied.

DATED: August 16, 2011 /s/Beryl A. Howell BERYL A. HOWELL United States District Judge