Response to FOIA Appeal 2020-APP-00002

May 14, 2020

SENT BY E-MAIL

XXXX
XXXX

Dear XXXX:

Re: 2020-APP-00002

On March 13, 2020, you submitted by email a Freedom of Information Act (FOIA) request. You requested a copy of the sale agreement and any supporting documents related to the February 19, 2020 taxi medallion loan sale to Marblegate Asset Management LLC (Marblegate).

By letter of April 14, 2020, a senior attorney advisor in the National Credit Union Administration’s (NCUA) Office of General Counsel responded to your request and advised that the documents you requested were issued or received by the NCUA Board as liquidating agent, and its agents; therefore, the requested documents are not agency records subject to the Freedom of Information Act (FOIA). Further, we advised that, even if considered subject to the FOIA and responsive, the documents you requested would be withheld as exempt from public release under one or more of the FOIA exemptions at 5 U.S.C. § 552(b)(4), (5), and (8). The senior attorney advisor’s response explained that exemption 4 protects trade secrets and commercial or financial information obtained from a person that is privileged or confidential. Exemption 5 protects inter-agency or intra-agency memoranda or letters which would not be available by law to a party other than an agency in litigation with the agency. Exemption 8 protects matters that are contained in or related to examination, operating, or condition reports prepared by, on behalf of, or for the use of an agency responsible for the regulation or supervision of financial institutions. As a courtesy, however, we referred you to two publicly available related releases1 and provided you with three additional pages of related, released records, for your interest.

You appealed this determination in a correspondence dated April 16, 2020.2 Your appeal is denied, as discussed more fully below.

In your appeal, you asserted that our denial is illegitimate because your request seeks public information about a public transaction, and the cited exemptions do not apply. We disagree. In fact, the entirety of the transaction was conducted by the liquidating agent, not by the NCUA in its agency capacity.

The FOIA establishes a statutory framework for public requests for “agency records” and imposes requirements on agencies to make such records promptly available.3 The FOIA applies to agencies within the Executive Branch of the federal government, independent regulatory agencies, and some components within the Executive Office of the President.4

The Federal Credit Union Act5 (Act) establishes the NCUA under the management of the NCUA Board. The Act sets forth the powers and duties of the NCUA and the NCUA Board in relation to credit unions whose share accounts are insured by the National Credit Union Share Insurance Fund (NCUSIF). Similar to the Federal Deposit Insurance Corporation in relation to insured banks, the NCUA operates as both regulator/insurer for insured credit unions (i.e., the NCUA’s agency capacity)6 and, in relevant circumstances, as conservator or liquidating agent for insured credit unions (i.e., the NCUA Board’s capacity as conservator or liquidating agent).7 The NCUA Board has delegated complete authority to act as liquidating agent to the President of the Asset Management and Assistance Center (AMAC).8

In its agency capacity, the NCUA conducts examinations of insured credit unions, administers the NCUSIF, and funds payment on insured shares when federally insured credit unions are liquidated. In contrast, in its capacity as conservator or liquidating agent, the NCUA Board steps into the shoes of the insured credit union, similar to a trustee in bankruptcy, and by operation of law succeeds to “all rights, titles, powers, and privileges of the credit union….”9 Thus, the NCUA’s agency capacity and the NCUA Board’s capacity as conservator or liquidating agent are legally distinct roles governed in some circumstances by separate statutory provisions and regulations. Courts have repeatedly and consistently demarcated these distinct dual capacities with respect to the NCUA and the FDIC.10

The Marblegate loan sale that is the subject of your request was conducted by the liquidating agent for Melrose Credit Union and LOMTO Federal Credit Union, which were both liquidated in 2018. Thus, as the agency’s April 14 letter responding to your March 13 FOIA request correctly noted, to the extent that the subject transaction was conducted by the NCUA in its capacity as liquidating agent, the requested documents are not agency records subject to the FOIA. While this point is entirely dispositive of the issue on appeal, as we further noted in our April 14 letter, even if considered subject to the FOIA and responsive, exemptions 4, 5, and 8 of the FOIA remain available.

Your appeal argued, without further detail, that the FOIA exemptions do not apply. However, this argument is misguided because if the requested records are, as you contend, agency records subject to the FOIA then those records would also be subject to the FOIA’s exemptions, if applicable.

Exemption 4 protects commercial or financial information obtained from a person that is privileged or confidential. Information is widely accepted as being “commercial or financial” if it is related to business or trade. Courts have consistently declined to construe the term more narrowly in favor of applying to these words their “ordinary meanings.”11 Indeed, the term has been broadly interpreted to include anything “pertaining or relating to or dealing with commerce.”12 A sale agreement and other documents underlying a taxi medallion loan sale undoubtedly relate to business, trade, and commerce and would clearly fit within this broad definition. Under exemption 4, the term “person” refers to individuals as well as to a wide range of entities, including corporations and banks.13 The fact that information is “arrived at through negotiation” with the government does not necessarily preclude it from being regarded as obtained from a person for purposes of exemption 4.14 Further, under controlling case law, commercial or financial information voluntarily submitted to an agency is exempt from disclosure under the FOIA if “it is of a kind that the provider would not customarily release to the public.”15 In this case, information that could be considered responsive to your request was issued or received by the liquidating agent and in the possession of the agency as the result of it having been provided voluntarily by a party to the sale. Ordinarily, this kind of information would be kept confidential; in fact, here, the parties contractually agreed to confidentiality around the bidding process, negotiations, and the final contract. Since information involved in this case is of the type that would not customarily be released to the public, even if the requested documents were deemed subject to the FOIA, there would be a basis for withholding them under exemption 4.

Agency personnel considered and deliberated the subject taxi medallion loan sale. Documents relative to those deliberations include some material that is arguably responsive to your request. However, if the FOIA applied, exemption 5 of the FOIA would shield those deliberations from disclosure.16 Exemption 5 incorporates the privileges available to a governmental agency in civil litigation, notably the deliberative process privilege (sometimes called the executive privilege), the attorney-client privilege, and the attorney work product privilege.17 To qualify for the deliberative process privilege, an agency must show that the documents are both “pre-decisional” and “deliberative.” Documents are pre-decisional when they precede an agency decision and are prepared in order to assist an agency in arriving at its decision, and documents are deliberative when they comprise part of the process by which government decisions are made.18 If a document is generated as part of such a continuing process of agency decision-making, courts have found exemption 5 can be applicable.19 The rationale underlying the privilege is to allow agencies freely to explore alternative avenues of action and to engage in internal debates without fear of public scrutiny.20 Any communications among agency staff, including the liquidating agent, and its agents, deliberating the taxi medallion loan sale prior to its decision to execute the sales agreement would therefore qualify for withholding, if the requested records were subject to the FOIA.

Finally, as the April 14 letter correctly noted, exemption 8 of the FOIA would also be available. Exemption 8 provides for protection against release of 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.”21 Courts have interpreted exemption 8 broadly and have declined to restrict its all-inclusive scope.22 The fact that an institution has been closed for liquidation does not, in itself, render the exemption inapplicable.23 Indeed, courts have held that even records pertaining to institutions that are no longer in operation are protected under exemption 8 to serve the public policy of promoting “frank cooperation” between institution and agency officials.24 The transaction that is the subject of your request involved the sale of distressed assets of liquidated credit unions. Therefore, even if considered subject to the FOIA and responsive, information relative to the disposition of assets of liquidated institutions would be properly withheld under exemption 8.

Pursuant to 5 U.S.C. §552(a)(4)(B) of FOIA, you may seek judicial review of this determination by filing suit against the NCUA. Such a suit may be filed in the United States District Court 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).

The 2007 FOIA amendments created the Office of Government Information Services (OGIS) to offer mediation services to resolve disputes between FOIA requesters and Federal agencies as a non-exclusive alternative to litigation. Using OGIS services does not affect your right to pursue litigation. You may contact OGIS in any of the following ways:

Office of Government Information Services
National Archives and Records Administration
8601 Adelphi Road - OGIS
College Park, MD 20740-6001
E-mail: ogis@nara.gov
Web: https://ogis.archives.gov
Telephone: 202.741.5770; Toll-free: 877.684.6448
Fax: 202.741.5769

Sincerely,

/s/

Frank Kressman
Acting General Counsel


Footnotes


1 See https://www.ncua.gov/newsroom/press-release/2020/ncua-completes-taxi-medallion-loan-sale and https://www.ncua.gov/news/responding-collapse-new-york-city-taxi-medallion-market/ncuas-role-liquidating-agent.

2 In your April 16, 2020 appeal, you indicated that in addition to an appeal, you were filing a new records request asking for responses to six questions. On the same date, you submitted via separate email a new FOIA request asking for responses to the same six questions, as well as again “requesting a copy of the sale agreement and any supporting documents related to the 2/19/20 taxi medallion loan sale to Marblegate Asset Management LLC.” Your new FOIA request is being processed separately from this appeal and is currently pending.

3 5 U.S.C. § 552(a)(3)(A).

4 See 5 U.S.C. § 552(f)(1). Amtrak is also subject to the FOIA by statute. See 49 U.S.C. § 24301(e).

5 12 U.S.C. § 1751 et seq.

6 See, e.g., 12 U.S.C. §§ 1756; 1781 to 1785 (describing the NCUA Board’s authority as regulator and insurer).

7 See, e.g., 12 U.S.C. § 1787(b)(2) (describing the NCUA Board’s authority as conservator and liquidating agent).

8 See NCUA Delegation of Authority AMAC 2.

9 § 1787(b).

10 See, e.g., FDIC v. Hatmaker, 756 F.2d 34, 36 n. 2 (6th Cir.1985) (“In its capacity as receiver, the FDIC is obligated to marshal the assets of the failed bank for the benefit of the bank’s creditors and shareholders. In its corporate capacity, the FDIC is obligated to insure the failed bank’s deposits.”); see also Veluchamy v. FDIC, 706 F.3d 810, 812 (7th Cir. 2013) (separately referring to the “FDIC—Corporate” (the equivalent of NCUA’s agency or regulator/insurer capacity) and the “FDIC—Receiver” (the equivalent of the NCUA Board’s liquidating agent capacity)).

11 Pub. Citizen Health Research Grp., 704 F.2d at 1290 (citing Wash. Post Co. v. HHS, 690 F.2d 252, 266 (D.C. Cir. 1982); Bd. of Trade v. Commodity Futures Trading Comm'n, 627 F.2d 392, 403 (D.C. Cir. 1980))

12 Am. Airlines, Inc. v. Nat'l Mediation Bd., 588 F.2d 863, 870 (2d Cir. 1978).

13 See 5 U.S.C. § 552(b)(4); 44 5 U.S.C. § 551(2) (defining "person" as "an individual, partnership, corporation, association, or public or private organization other than an agency"); see also, e.g., Nadler v. FDIC, 92 F.3d 93, 95 (2d Cir. 1996) (stating that term "person" includes "'an individual, partnership, corporation, association, or public or private organization other than an agency'" (quoting definition found in Administrative Procedure Act, 5 U.S.C. § 551(2) (2006)).

14 Pub. Citizen Health Research Grp. v. NIH, 209 F. Supp. 2d 37, 44 (D.D.C. 2002).

15 Critical Mass Energy Project v. NRC, 975 F. 2d 871, 879-880 (D.C. Cir. 1992), cert. denied, 507 U.S. 984 (1993).

16 See 5 U.S.C. §552(b)(5).

17 Id.

18 Phillips v. Immigration and Customs Enforcement, 385 F. Supp. 2d 296 (S.D. N.Y. 2005).

19 See, e.g., ACLU of Wash. v. DOJ, No. 09-0642, 2011 WL 887731, at *5 (W.D. Wash. Mar. 10, 2011).

20 See Assembly of State of Cal. v. United States Dep't of Commerce, 968 F.2d 916, 920 (9th Cir. 1992).

21 5 U.S.C. §552(b)(8).

22 See Consumers Union of United States, Inc. v. Heimann, 589 F. 2d 531 (D.C. Cir. 1978).

23 See Gregory v. FDIC, 631 F. 2d 896, 899 (D.C. Cir. 1980).

24 Id.; see also Berliner, Zisser, Walter & Gallegos v. SEC, 962 F. Supp. 1348, 1353 (D. Colo. 1997).

Last modified on
06/02/20