Opinion ID: 319872
Heading Depth: 1
Heading Rank: 3

Heading: exemption 4: confidential or privileged financial information

Text: 16 The USDA argues that exemption 4 also protects the investigatory report from disclosure. This exemption applies to 'trade secrets and commercial or financial information obtained from a person and privileged or confidential.' 26 The trial court held that the exemption 'was designed to protect the privacy and competitive position of the individual 27 . . . and since the contents of this report do not fit the description in this exemption, it is inapplicable to the instant report. Since all names and other identifying features can be deleted, any remaining financial information will be in the nature of a statistical report.' 28 17 While it is true that exemption 4 is primarily a trade secrets exemption, it also protects individuals from disclosure of financial information which is privileged or confidential. This court has recently described the scope and meaning of 'confidential' in exemption 4 in National Parks & Conservation Association v. Morton. Judge Tamm concluded that, 18 commercial or financial matter is 'confidential' for purposes of the exemption if disclosure of the information is likely to have either of the following effects: (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. 29 19 As much of the information collected here related to loan applications, certainly some data is financial information which might merit confidential treatment. 30 Of course a bare claim by an interested government agency of confidentiality is not sufficient. 31 However, the listing of information obtained strongly suggests the accuracy of USDA's conclusion that the information is 'implicitly and unquestionably not the kind of information which would customarily be released to the public by the persons from whom it was obtained.' 32 Contrary to the trial court, we regard exemption 4 as applicable. 20 We therefore remand to the District Court to for reconsideration of exemption 4 for reasons similar to those discussed regarding exemption 6. While several of our Circuit's cases support the idea of deletions to permit disclosure of the remainder of the report, 33 we fear that the deletions made by the District Judge do not adequately deal with the rather detailed reasons of the Inspector General that the deletions are ineffective to protect the privacy and confidentiality of the individuals involved. 34 IV. EXEMPTION 7: INVESTIGATORY FILES 21 This provision exempts from disclosure 'investigatory files compiled for law enforcement purposes except to the extent available by law to a party other than an agency.' 35 The District Court held that USDA 'failed to make the requisite showing of imminent adjudicatory proceedings or the concrete prospect of enforcement proceedings,' 36 and hence the files were not protected by exemption 7. 22 Since this decision on 9 May 1973 this Circuit has extensively considered exemption 7 in two cases, Weisberg v. U.S. Department of Justice, 37 and Aspin v. Department of Defense. 38 We remand to the District Court for reevaluation of the applicability of exemption 7 in the light of these opinions and our comments hereafter. 23 The standard used by the District Judge is no longer proper under the Weisberg and Aspin decisions. In weisberg, where FBI materials concerning the investigation of President Kennedy's death were sought, we held in an en banc decision by Judge Danaher that the files were exempt from disclosure because they were investigatory files compiled for law enforcement purposes. 39 Despite the fact that no prosecution or other such method of law enforcement was undertaken or pending, the files remained exempt from disclosure. The focus was on 'how and under what circumstances the files were compiled . . ..' 40 24 In Aspin, decided one month after Weisberg, Judge Tamm's opinion for the court provided a more detailed analysis of exemption 7. The material at issue in Aspin was the report of the Peers Commission, which investigated the My Lai incident and subsequent Army investigation, with emphasis on evidence of possible offenses under the Uniform Code of Military Justice and possible future prosecution. Judge Tamm noted that the duty of the trial court was to 'examine the total record to determine 'whether the files sought . . . relate to anything that can fairly be characterized as an enforcement proceeding. 41 The Peers Commission Report, conducted with a view of court-martial proceedings, did meet this test and hence came within the exemption. 25 In Aspin the purposes of exemption 7 were identified: the prevention of premature disclosure of an investigation's results, and the maintenance of confidentiality of both the procedures of investigation and the witnesses' revelations. 42 These purposes compelled us there to conclude that the termination of enforcement proceedings was not a cause for withdrawal of exemption 7 protection. 43 Additionally, our decision in Weisberg has made clear that exemption 7 protection does not end 'when there is no longer any prospect for future enforcement proceedings (necessitated in Weisberg by the death of the only suspect) . . ..' 44 26 It is established now that the Government need not show 'imminent adjudicatory proceedings or the concrete prospect of enforcement proceedings.' What the Government is required to show is that the investigatory files were compiled for adjudicative or enforcement purposes. Whether the adjudication or enforcement has been completed is not determinative, nor is the degree of likelihood that the adjudication or enforcement may be imminent, as the District Judge here thought before Weisberg and Aspin. Here the investigation was undertaken to determine whether USDA's FmHA had engaged in racial discrimination. As a result of the investigation, USDA concluded that there had been no discrimination, and naturally there have been no enforcement proceedings. This result does not alter the basic inquiry when exemption 7 is claimed: was it an investigation 'for law enforcement purposes'? To put the question another way, with specific applicability to the case here: is an agency's internal monitoring to insure that its employees are acting in accordance with statutory mandate and the agency's own regulations an investigation 'for law enforcement purposes' within the meaning of exemption 7? 27 On its face, exemption 7's language appears broad enough to include all such internal audits. If this broad interpretation is accepted, however, we immediately encounter the problem that most information sought by the Government about its own operations is for the purpose ultimately of determining whether such operations comport with applicable law, and thus is 'for law enforcement purposes.' Any internal auditing or monitoring conceivably could result in disciplinary action, in dismissal, or indeed in criminal charges against the employees. But if this broad interpretation is correct, then the exemption swallows up the Act; exemption 7 defeats one central purpose of the Act to provide public access to information concerning the Government's own activities. 28 We think 'investigatory files compiled for law enforcement purposes' must be given the same meaning, or a meaning to achieve the same result, whether the subject of the files is a government employee or an ordinary private citizen. While Congress did not confront this problem specifically, the examples cited of 'investigatory files' and 'law enforcement purposes' point to this interpretation. 45 For the purpose of analyzing the application of exemption 7 in the instant and similar cases, it is therefore necessary to distinguish two types of files relating to government employees: (1) government surveillance or oversight of the performance of duties of its employees; (2) investigations which focus directly on specifically alleged illegal acts, illegal acts of particular identified officials, acts which could, if proved, result in civil or criminal sanctions. 46 The applicability of exemption 7 to each individual case is to be ascertained by making a careful distinction between these two categories. 47 29 The purpose of the 'investigatory files' is thus the critical factor. Was the purpose of the disputed report here to determine if grounds existed for bringing a civil rights action against the loan officer? If the purpose of the investigation was to consider an action equivalent to those which the Government brings against private parties, thus demonstrating that the 'law enforcement purpose' was not customary surveillance of the performance of duties by government employees, but an inquiry as to an identifiable possible violation of law, then such inquiry would have been 'for law enforcement purposes' whether the individual were a private citizen or a government employee. But was this the purpose of the investigation here? On this record we cannot say, and hence our consideration of the applicability of exemption 7 likewise calls for a remand to the trial court for inquiry as to this 48 and other relevant points. 30