Court Opinion

ID: 7838390
Source: CourtListenerOpinion
Date Created: 2022-09-08 16:44:51.106781+00
Date Added: 2024-06-11T15:56:12.773579
License: Public Domain

Dissenting opinion filed by Circuit Judge McGOWAN.
PER CURIAM:
This appeal concerns an affirmative defense asserted in the answer of appellants White & Case and Epley as their Fifteenth Defense to a complaint by the Securities and Exchange Commission. That defense alleges:
*58[T]he Securities and Exchange Commission violated its own rules, procedures, and directives and the United States Constitution by instituting this action without informing . . . [appellants] that they were “prospective defendants or targets” of the Commission investigation prior to the institution of the suit, and without affording . . . [appellants] or their counsel an opportunity to present their contentions to the Commission or the Commission staff as to why they should not be sued.
Amended Answer of Defendants White & Case and Marion Jay Epley, III, to the first Amended Complaint, April 9, 1973, ¶ 50; J.A. at 105.
The Commission moved to strike the Fifteenth Defense as legally insufficient. In response, appellants pointed to an internal, non-public memorandum of September 1, 1970, from the Commission to its senior staff, by which
the Commission requested] that the staff memoranda to the Commission recommending the particular action set forth separately any arguments or contentions as to either the facts or the law involved in the case which have been advanced by the prospective respondents and which countervail those made by the staff in its memoranda as a basis for the recommendation.
SEC Memorandum to All Division Directors and Office Heads, Re: Procedures Followed in the Institution of Enforcement Proceedings, September 1, 1970; J.A. 1-3. Appellants assert that this language embodies the directive which the Fifteenth Defense alleges the staff to have violated, and that the staff’s departure from this procedure constitutes grounds for dismissal of this action.
The district court struck the Fifteenth Defense as legally insufficient, holding that the 1970 Memorandum was not designed for protection of prospective defendants’ rights, but later vacated its decision and reinstated the Fifteenth Defense without prejudice to the Commission to renew its motion to strike. The latter order was based on the court’s determination to ensure that no evidence relevant to the Commission’s intent in issuing the 1970 Memorandum had been overlooked in the earlier ruling.
Appellants then requested production of various documents, including memoranda prepared by individual Commissioners and agency staff members. The Commission responded by producing the only document issued by the Commission itself that referred to the 1970 Memorandum and related to the circumstances of its issuance, a minute of the Commission approving issuance of the 1970 Memorandum and dissemination to the staff. The Commission moved for a protective order respecting 67 other internal Commission documents that fell within the scope of the request and submitted the documents to the court for in camera inspection. The Commission contended that these internal documents were protected from disclosure by the intragovernmental privilege and that, in any case, none was relevant to the intent, reason or purpose of the Commission in issuing the 1970 Memorandum. At the same time, the Commission renewed its motion to strike the Fifteenth Defense on March 18, 1975. The district court granted the Commission's motions, concluding that none of the documents contained interpretive material or tended to support petitioners’ claim that the 1970 Memorandum constituted a procedural directive or that noncompliance with the discretionary procedure could be a basis for dismissal. This appeal followed.
We affirm the order of the district court, satisfied that the court was correct in concluding that the Commission documents are “protected from disclosure by reason of the privilege for internal governmental memoranda containing advice or opinions,” and that the privilege should not be overridden in this instance because “none of the requested documents [examined in camera ] is relevant to the intent behind the 1970 directive.” By way of explanation, the court further stated that none of the documents could indicate agency intent, since internal documents authored by agency staff or individual Commissioners “cannot *59be considered as an official expression of the will and intent of the Commission.” The “great bulk of the documents requested are not ‘Commission-authored’ but rather . . . consist, with few exceptions, of memoranda among individual Commissioners, their legal assistants and Commission staff.” Consequently, the court concluded that such documents could not be relied upon as indicators of agency intent.
At best, the documents indicate that there was a practice of notification, at the discretion of the staff, where such notification would not impede the investigation. There is no indication that the practice was regularly followed or that any such policy was ever established by the Commission. Given the novel nature of this case, we see no procedural infirmity, Constitutional or statutory, in the decision of the staff not to inform the prospective defendants that they were under investigation or to solicit their arguments as to why they should not be sued. Mandating such a procedure would seriously burden the Commission’s enforcement procedure, already characterized by adequate due process safeguards. See 15 U.S.C. § 78u (1970). Had the Commission intended to establish a procedural rule which, if breached, would require dismissal of a complaint, we think it would have said so in language far clearer and more direct than that found in the 1970 Memorandum.
For these reasons, we affirm the action of the district court in striking the Fifteenth Defense.