FEDERAL OPEN MARKET COMMITTEE v. MERRILL

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Argument of Kenneth S. Geller

Chief Justice Warren E. Burger: We will hear arguments next in Federal Open Market Committee v. Merrill.

Mr. Geller, I think you may proceed when you are ready.

Mr. Kenneth S. Geller: Thank you Mr. Chief Justice, may I please the Court.

This case arises under the Freedom of Information Act, but unlike the other cases this court has considered involving the Act, here the government is not contending that certain agency documents are not disclosable to the public.

Well, we are contending is that the Act grants the District Court discretion in an appropriate case to delay the public release of agency documents for a reasonable period of time, just like in civil discovery, where the immediate of those documents would prevent or impair the effectuation of an important governmental policy.

We also contend of course that this is an appropriate case for the exercise of that discretion.

And the particular documents and agency involved here are the so called Domestic Policy Directives.

Justice William H. Rehnquist: Let me ask you a question Mr. Geller about the discretion contention.

Here the District Court simply required the production of the documents.

Mr. Kenneth S. Geller: Yes.

Justice William H. Rehnquist: So I take it your contention is that the discretion could only be exercised in one way in this particular case.

Mr. Kenneth S. Geller: No, the District Court took the position that it had no discretion, because the Act required immediate disclosure.

It viewed the Act does not allowing it to weigh the interests of the government in a temporary withholding of the documents against the interest of the public in gaining immediate access to those documents.

It’s our position that the Act does grant the District Court that discretion, and indeed we assume that if this Court adopts that submission, the appropriate disposition would be a remand to the District Court for determination whether to exercise that discretion in this case.

Justice William H. Rehnquist: So, you don’t claim that it comes under any of the exemptions?

Mr. Kenneth S. Geller: No, we do, we claim that it falls clearly within Exemption 5 and we construe Exemption 5 to a Court at District Court discretion as I have said in an appropriate case to decide whether or not to release otherwise disclosable documents where the government is made a showing of harm from the immediate release.

Justice Potter Stewart: You said exclusively on Exemption 5.

Mr. Kenneth S. Geller: That’s correct.

Justice Potter Stewart: Not on 4 or 8.

Mr. Kenneth S. Geller: No, the only exemption we’re relying on this Court is Exemption 5.

Justice William H. Rehnquist: The section that you are dealing with the exemptions beginning this section does not apply to matters that are, and then 5 says inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than the agency and litigation with the agency.

Mr. Kenneth S. Geller: Yes.

Justice William H. Rehnquist: Now, where does the District Court’s discretion stand from?

Mr. Kenneth S. Geller: We believe it comes from the language would not be available to a party in litigation with the agency, which we think what Congress intended was to mirror the practice under civil discovery.

I think this Court is held that on several occasions.

Now I hope to get to that a little later in the argument.

And of course, since civil discovery the court would get engage frequently in a balancing process when it’s not dealing with documents that are subject to an absolute privilege or documents not subject to any privilege whatsoever, there is a whole middle ground in which you has to weigh the competing interests.

We claim that the same analysis should apply under the Freedom of Information Act.

Justice Potter Stewart: Mr. Geller, why we have to interrupt it, there is a stay order still in effect.

Mr. Kenneth S. Geller: The stay order is still in effect, that’s correct.

Now before turning to the specific FOIA exemption that we claim is applicable in this case, which is Exemption 5, I’d like begin by briefly explaining the importance of the open market committees policy functions, how the domestic policy directives relate to those functions and why the premature release of these sensitive documents would severely frustrate implementation of the committee’s policies.

Federal Reserve System is of course the nation’s central bank, and it helps to achieve the country’s economic goals through its influence on monitory policy that is the availability and cost of bank reserves, bank credit and money.

System essentially has three main goals and three main tools with which to accomplish these goals.

First is the setting of the discount rate, which is the rate that charge member banks on borrowing from the regional Federal Reserve Bank.

The second tool is the Board’s power to change reserve requirements that is the percentage of reserves that member banks must hold in back of deposits.

The finally monitory tool of the system and the one that concern us here today is the power to engage and so called open market operations, that is the purchase or sale of large amounts of securities, principally United States Government Securities in the open market.

Simply stated, when the Federal Reserve System buy securities, it increases the total volume of bank reserves, because the Fed’s payment for the securities is ordinarily deposited in the seller’s bank account and it’s credited to that bank’s reserve account in its regional reserve bank.

Conversely, when the system sells securities, the sales price typically is deducted from the reserve account of the buyer’s bank, and this decreases the volume of reserves held by that bank.

Now these changes in the volume of the bank reserves obviously influence the ability of these banks to make loans and investments, which in turn has a substantial effect on the availability of money and the level of interest rates.

The open market operations tool is by far the Federal Reserve System’s most important monitory policy instrument.

Open market operations are extremely flexible unlike the other tools that I’ve mentioned and they need to be used to the extent and only to the extent necessary to accomplish the system short or long-term monitory policy goals.

As a result, while the discount rate and reserve appointments are changed only occasionally, the Fed enters the market on virtually every business today and either buys or sells millions of dollars worth of securities depending upon what monitory goal it’s trying to accomplish.

Now the organ of the Federal Reserve System that’s responsible for directing these open market operations is the petitioner in this case, the Federal Open Market Committee.

Committee is composed of 12 members, the 7 Governors of the Federal Reserve board and 5 representatives of the Regional Reserve Banks.

Committee meets approximately once a month.

Its meetings begin with a run down of general economic developments and a consideration of what economic developments might arise in the immediate future.

At the end of the meeting, the system decides what its plans for the open market operations in the upcoming month should be.

These plans are embodied in the domestic policy directive, the subject of this litigation, which is adopted by the open market committee at the conclusion of its monthly meeting.

Chief Justice Warren E. Burger: Who can under your theory, legitimately have access to that information now?

Mr. Kenneth S. Geller: During the one month period that the domestic policy directive is in effect, only employees of the Federal Reserve System with the need of access to that directive have access to that directive, which would be the Account Manager who actually does the buying and selling of the open market – of securities in the open market.

Chief Justice Warren E. Burger: In the area (Voice Overlap) how many people?

Mr. Kenneth S. Geller: I would say it’s just a handful of people and generally high officials of the Federal Reserve System.

It’s a very small number of people that have actual access to domestic policy directive during the one month of its effectiveness.

Now the directive takes the form of instructions to the system’s Account Manager in New York.

He is an official of the Federal Reserve Bank of New York and he does the actual buying and selling of the securities in the open market.

These instructions state what the Federal Open Market Committee’s general monitory policy goals for the upcoming month are and what’s more important; the directive also specifically notes what the committee’s objectives are for the rate of growth of the nation’s money supply and what the permissible fluctuation of the so called Federal Funds Rate in the upcoming months is according to the committee.

The Federal Funds Rate is the interest rate that member banks charge each other for overnight loans and it’s an extremely sensitive of an accurate parameter of tightness or ease in the economy in regard to the availability of the money.

The Account Manager begins to implement the directive immediately upon its adoption.

The committee has always kept these domestic policy directives confidential during the one month period of their effectiveness.

The current practice is to delay disclosure of the directive until a few days following the next month’s committee meeting.

Justice Potter Stewart: Mr. Geller, do you think that knowledgeable observers of the market reactions will know what‘s going on after a few days however when the Fed gets into the market?

Mr. Kenneth S. Geller: I don’t think so, they can make -- knowledgeable market observers can make educated guesses based upon the Account Manager’s buying or selling of securities in the open market on a daily basis, but there is a certain level of uncertainty that attaches to their observations.

This uncertainty that wouldn’t exist if the directive was made public, and that uncertainty is very important because it dampens the economic activity and it prevents these market observers from entering the market in a major way.

But more important, I don’t think they’re just looking at the Account Manager’s daily buying or selling would give you an accurate picture of what the directive is likely to be, because most of Account Manager’s daily buying or selling may not pursuant to the directive.

In other words, it may not be for the purpose of accomplishing the goals set forth in the directive; it may be simply a response to something that’s happened that day in the market.

Let me give an example.

Let’s assume that for a number of reasons there is a temporary glut of money in the market and may be because of the changes in treasury balances at the Federal Reserve Banks or because of the float.

There is more money in the market than the Fed expected.

Now when that happens, interest rates might be expected to drop, because more money is available.

The Account Manager seeing these developments might well decide to sell securities; in other words, to take money out of the market.

Now, this would not be for the purpose of raising interest rates.

It would be merely to keep interest rates constant in a situation in which they might otherwise drop, so that if someone merely looked at what the Account Manager did in the market that day which is to sell large amounts of securities; he might get the impression that the directive is telling the Account Manager to attempt to raise interest rates whereas that wouldn’t be an accurate picture, the Account Manger is merely attempting to meet developments that have occurred in the market.

Now as I was saying, the directive is kept secret until a few days following the next month’s meeting.

At that point, the directive for the month just ended is made available to the public and it’s published in the federal register.

That’s for example; the domestic policy directive adopted at the committee’s meeting on October 17th 1978, was released to the press on November 24th 1978, and was sent to the federal register on November 29th 1978.

Primary reason for this delay in publication has always been the committee’s concern that advance public notice of its open market policy decisions would create excessive reactions or other disturbances in the securities market that would interfere with the committee’s ability to implement its open market decisions.

There would be a so called announcement effect as market participants attempted to realize financial gains in anticipation of the committee’s purchases or sales of securities in the upcoming month.

Now this is spelled out a greater length in our brief and in the affidavits made to the District Court, but let me give it quick just one example.

The Federal Open Market Committee each month buys or sells literally billions of dollars worth of government securities.

Let’s assume that it was known that in the month to follow, the committee intended to attempt to raise the federal funds rate, which as I said is the interest rate at which banks lend money to each other on an overnight basis.

Market investors could reasonably assume if they had access to this directive, that to raise the federal funds rate, the committee would seek to decrease the available reserves, which would mean that the Fed would be engaging in the sale of large amounts of securities.

On with this knowledge, it’s likely that many investors would react immediately by also selling government securities.

And this would tend to depress securities’ prices and to inflate interest rates unnaturally.

So I have explained in our brief these sudden movements in securities’ prices and interest rates might be larger than the committee contemplated, and might even be beyond the ability of the committee to control on occasion, but the very least, these market reactions would make it immeasurably harder for the committee to accomplish gradually what it set out to do that month.

Justice Potter Stewart: Mr. Geller, of course that’s the view of the agency, but it’s not a universally help you, is it?

Mr. Kenneth S. Geller: It’s -- well, the --

Justice Potter Stewart: For example, Milton Friedman would disagree.

Mr. Kenneth S. Geller: Excuse me.

Justice Potter Stewart: Milton Friedman would disagree, I guess?

Mr. Kenneth S. Geller: The respondents have never rebutted that showing.

Justice Potter Stewart: Milton Friedman would disagree with this.

Mr. Kenneth S. Geller: Excuse me, I am sorry.

Justice Potter Stewart: Milton Friedman would disagree.

Mr. Kenneth S. Geller: Yes, Milton Friedman’s, the statements that respondents have quoted from time to time from Milton Friedman really relates to the committee’s claim that the immediate disclosure of these domestic policy directives would allow market speculators to make immense profits on just profits.

Now there is some dispute as to that, but there is I think not a great amount of dispute that the immediate release of these domestic policy directives might well hinder the committee’s ability to carry out its monitory policy goals which is of course a separate point.

Justice Potter Stewart: I suppose these are sophisticated people dealing with the economic forces.

I suppose if it were given, if we are promised that these policy directives would be disclosed, then the policy directive might be a little different in order to achieve the result that was desired.

Mr. Kenneth S. Geller: Well, it may not.

Justice Potter Stewart: Knowing that the public would know about this and that they would augment the effect and therefore the policy directives would discount that.

Mr. Kenneth S. Geller: I think that that’s not as easily done as --

Justice Potter Stewart: Well, listen, this is all difficult as far as I am concerned but I am assuming we are dealing with experts.

Mr. Kenneth S. Geller: But I think Justice Stewart that your example is an excellent reason of why this type of information falls within Exemption 5.

Exemption 5 as this Court said in Sears was meant to protect the ability of federal agencies to make decisions, and that ability may be hindered not only by the release of pre-decisional materials, but if someone want to get to in a minute, it can be hindered by the premature release of final decisions themselves.

I think as you correctly assess if the committee knew that these directives are going to be made public prematurely in their view.

They would take a lot of other measures that might well skew their decision making process.

Justice Potter Stewart: Well, the directive would be published in -- it would be decided upon and then it would become a directive in the light of the fact, it would be public knowledge and therefore the directive would be different in substance.

Mr. Kenneth S. Geller: Well, I think there is a limit to have different the directive can be and still accomplish the goals, which the directive now accomplished.

Justice Potter Stewart: Instead of this committee buying $X billions, they’d buy one half of excess, so we will assume that public and the speculators will buy the other half.

Mr. Kenneth S. Geller: I think it wouldn’t work quite --

Justice Potter Stewart: Nearly, not that simple.

Mr. Kenneth S. Geller: Yes. [Laughter].

Chief Justice Warren E. Burger: Is it enough for your case, enough for your case that no body, no one can predict with any uncertainty what would be the consequences of disclosure.

Mr. Kenneth S. Geller: Well that’s correct.

Chief Justice Warren E. Burger: What if there are serious consequences, is that enough for you?

Mr. Kenneth S. Geller: I think that is uncertainly one major part of our argument.

It’s not the end of our argument, but I think it’s certainly the main – the beginning of our argument that they would -- there is likely to be some deleterious consequences to the policy decisions of the Federal Open Market Committee if there was a premature disclosure.

I should add at this point that the regulations of the committee 12 CFR 271.5 that allow for this delayed access to the domestic policy directives.

We’re not promulgated in response to the Freedom of Nation Act.

We’re promulgated in response to the suit, they date back -- we will be able to face them back in publish form to 1946.

I am sure they date back even ten years earlier to when the committee was formed.

There’s been a consistency of view among the many hundreds of members of the committee and at the Federal Reserve Avoid, that secrecy is an essential element of the Federal Open Market Committee’s ability to carry out of its statutory goals.

Justice Potter Stewart: But it’s also true that some alumni will disagree.

Mr. Kenneth S. Geller: Well, I think there may well be some confusion here.

There is more disagreement that I think about the so-called memoranda of discussion, which were really minutes of the meeting, of the each Federal Open Market Committee meeting and which the Federal Open Market Committee was releasing on a five year delay.

Justice Potter Stewart: No, I am confining -- just announcement of the specific policy would be followed during the ensuing 30 days.

Is it not correct that there is expert opinion that -- although there would be consequences from immediate disclosure, those consequences would be beneficial; there is a respectable body of opinion that way, and that may be it doesn’t control it.

Mr. Kenneth S. Geller: That’s true’ there are certain economists who have taken that view.

Basically --

Justice Potter Stewart: Including alumni of the Federal Reserve Board.

Mr. Kenneth S. Geller: Well, there is Governor Mizell.

Justice Potter Stewart: Last one

Mr. Kenneth S. Geller: Alright.

Of course the District Court and the Court of Appeals decided this case on the assumption that there would be harm to the Federal Open Committee.

Justice Potter Stewart: I understand that.

This is something the Chief Justice suggested.

Do your argument would be the same and even if you’d acknowledge that there could be a legitimate difference of opinion on this point.

Mr. Kenneth S. Geller: I think that’s --

Justice Potter Stewart: Therefor I don’t understand why you are spending so much time trying to convince us of one side or the other of the newer element debate.

Mr. Kenneth S. Geller: Well, I that if the argument that there would be harm here was totally fanciful, it might be a different situation, but let me get to this lawsuit, which began in May 19.

Justice Byron R. White: Mr. Geller, can I ask you one more question.

Suppose this group met weekly instead of monthly and the lag were only seven days instead of 30, would you might be making the same argument?

Mr. Kenneth S. Geller: We would be making the same argument although perhaps the need for secrecy.

No one is suggesting that it has to be announced the minute it’s adopted.

There has some way of a publication time and if the time between meetings was sufficiently small, then perhaps the current directive would never have to be published in the federal register meeting (Inaudible) upon adoption.

Justice Byron R. White: I suppose your opposition would say still that it affected its academic needs as the obligation made.

Mr. Kenneth S. Geller: I’m sure it would.

The issue in this case then is whether the Freedom of Information Act invariably requires a government agency to divulge its policy decision as soon as they’ve been adopted, even in instances where immediate disclosure would prevent those decisions from ever being successfully carried out.

It’s the government’s position that the act does not require that harsh result and that a District Court has discretion under Exemption 5 to delay the release of agency documents in such a situation for a reasonable period of time, even though the documents may embody a final policy decision that might at some point have to be disclosed.

The courts below rejected this contention, primarily because they viewed Exemption 5 as directed only to pre-decisional agency memoranda.

The District Court and the Court of Appeals view the domestic policy directive not as pre-decisional, but as the committee’s final policy decision.

But while it’s certainly true that the prime motivation for the exemption was to prevent public access to internal, non-final communications, the disclosure of which would injure an agency’s decision making process.

We believe it’s equally true that, that was not the exemption’s only purpose.

Prior to the passage of the FOIA, a number of federal agencies complaint to Congress that their policy decisions could be adversely affected, not only by the release of pre-decisional materials, but also by the premature release of the final agency decisions themselves.

For instance, one example that was given by the Defense Department and the General Services Administration is that those agencies on occasion issue instructions to their employees on how much for example, to pay, what the maximum to pay would be for the materials or real estate or things like that.

The agencies were afraid that if they had to release those decisions after they were made, but before they would carry out; that is before the sales, the purchases were consummated, but their plans would be severely frustrated, and it’s not hard to imagine why.

It’s also of more than passing interest here today that Congress at that time was also informed of the serious problems that were likely to occur if the Federal Open Market Committee’s policy decisions concerning purchase or sales of securities in the open market had to be prematurely disclosed.

Now the House and Senate Committee reports on the FOIA state that Exemption 5 was drafted to meet those concerns.

The reports indicate that premature disclosure of final agency plans and not just the disclosure of internal agency materials generated before an agency’s plans were finalized.

We meant to be covered by the exemption.

This congressional intent is also clearly reflected we think in the language of the exemption itself.

Exemption 5 has finally drafted, permits the non-disclosure of quote, inter-agency or intra-agency memorandums or letters, which would not be available to a party in litigation with the agency.

Congress had been concerned only with preventing public access to pre-decisional memoranda.

This obviously would have been a rather peculiar way of achieving that result.

Justice William H. Rehnquist: Well, it’s a rather peculiar way of achieving any result, isn’t that? [Laughter].

Mr. Kenneth S. Geller: I think it’s a rather sensible way Mr. Justice Rehnquist because Congress couldn’t anticipate every situation that might arise in which a Plaintiff under the FOIA might seek access to some internal governmental memorandum.

But Congress did as this court said in EPA against Mink, legislate against the backdrop of the enormous case law under civil discovery procedures and therefore --

Justice William H. Rehnquist: What analogy do you draw?

You talk about litigation with an agency, you have to envision some hypothetical case in which the agency is a defendant and someone else is a Plaintiff.

You have no idea what the subject matter the litigation is.

Do you limit it just to privileges that are recognized in every discovery situation or do you interpret in terms of a rule to compel disclosure under rule 26?

Mr. Kenneth S. Geller: Yes, we think that Congress had said as much.

Justice William H. Rehnquist: Well, the question was most adjunctive.

Mr. Kenneth S. Geller: This court said in EPA against Mink and in subsequent cases, that Congress wanted to adopt that Exemption 5, legislate against the backdrop of civil discovery law.

It meant to allow the government to take advantage of any recognized privilege available and derive the case law or statute and utilize in civil discovery.

And that district court should and let me quote what the court said in EPA against Mink, "the exemption wrote the quote contemplates that the publics’ access to internal memoranda will be governed by the same flexible common sense approach that is long governed private parties discovery of documents involved in litigation with government agencies."

Chief Justice Warren E. Burger: Does that go beyond claims of privilege at common law that would be recognized in discovery?

Mr. Kenneth S. Geller: Yeah.

I think that with Congress, there are three types of documents.

There are documents that would always be discoverable in litigation with the government; they are not to subject to any privilege whatsoever.

There are other types of documents that you could never discover in litigation against the document because there is an absolute privilege that attaches to them.

Now, there is a large body of materials that fall somewhere in between, that may or may not be discoverable in litigation against the government depending upon the relative needs of the Plaintiff and the defendant, if the defendant is government agency.

Now, we think that what Congress intended and we think there is much in the legislative history and in this court’s opinions construing Exemption 5, which supports this.

What Congress intended that the District Court would engage in the same sort of balancing process when confronted with an FOIA request for that type of material?

What he would balance is the government’s need, the government’s need for secrecy and I should emphasize here that the government is not contending that these documents need never be disclosed.

We are only suggesting that because of important government interest, they needn’t be disclosed immediately, but rather should only be disclosed four weeks after they are adopted.

What would be weighed against the interest that the government puts forward in support of limited non-disclosure would be the public interest, not the interest of the individual FOIA litigant in gaining access to these particular documents.

It’s clear that under the FOIA, you are not allowed to inquire into the interest of the particular Plaintiff who has made the FOIA request.

But I think it’s clear that you have to inquire in order to engage in this balancing process into what the public interest is.

Justice William H. Rehnquist: Well, this hypothecates the government being on one side and the public interest being on the other.

Mr. Kenneth S. Geller: I think that’s what the FOIA contemplates under Exemption 5 when dealing with a document, which is not subject to an absolute privilege or not totally unprivileged when it falls in this middle ground.

I think the court said in Bannercraft that the focus of the FOIA is surely on disclosure, but it’s not disclosure for the benefit of the particular Plaintiff who has made the FOIA request; it’s a disclosure for the benefit of the public.

Justice Byron R. White: Well, Mr. Geller, suppose the Court of Appeals was wrong in saying that 26(c)(7) doesn’t apply to any kind of a governmental entity, which I guess they decided, isn’t it?

Mr. Kenneth S. Geller: Yes.

Justice Byron R. White: Suppose it’s wrong in that and we say that the government in an FOIA case can take advantage of 26(c)(7), then the other litigate can take advantage.

Suppose it was decided that this was not confidential commercial information.

Mr. Kenneth S. Geller: I think if the --

Justice Byron R. White: Suppose it was decided that way, you wouldn’t nevertheless argue that it would be non-discoverable under some other rule.

Would you?

Mr. Kenneth S. Geller: Yes, I think -- well, you have to -- just as in civil litigation, you needn’t pick only one discovery provision and rely totally and that if it’s any –

Justice Byron R. White: I know, but when you move to some other rule, the part of your argument is the need for secrecy.

And that were decided that 26(c)(7) wouldn’t protect it.

It seems to me your argument is utterly destroyed, but I am not suggesting the 26(c)(7) would be decided that way.

Mr. Kenneth S. Geller: We are not, but there are other provisions of section 26 like section 26(c)(2) for example.

Justice Byron R. White: What about it?

Mr. Kenneth S. Geller: We suggest section 26(c)(2) grants a District Court discretion in civil engage.

Justice Byron R. White: I know, but the heart argument there is a need for secrecy.

Mr. Kenneth S. Geller: The heart of our argument is that the District Court is under the FOIA, when a claim under Exemption 5 is raised, just like in civil discovery, the District Court must assess the relative benefits to the public from immediate disclosure and we’re not talking here again about total non-disclosure, just a delay, a short delay in disclosure against the government’s interest in limited temporary non-disclosure.

Now, if that arose in the context of a civil litigation in a suit by Mr. Merrill against the Federal Open Market Committee and civil litigation not filed in FOIA, the court might well decide under Rule 26(c)(2), which allows a District Court to delay disclosures for short periods of time, not to order the immediate release of the domestic policy directed because of the serious government harms that wouldn’t suit.

Justice Byron R. White: Because of the need for secrecy?

Mr. Kenneth S. Geller: Temporary secrecy.

Justice Byron R. White: Well, then which advantage you would think that he would protect it under (c)(7) a fortiori?

Mr. Kenneth S. Geller: It may not fall within (c)(7).

We are not here to litigate the --

Justice Byron R. White: What?

It is the confidential commercial information?

Mr. Kenneth S. Geller: Well, the Court of Appeal suggests that, that’s not available to the government.

We are suggesting that, that’s correct.

All we’re suggesting here is that --

Justice Byron R. White: As a matter of fact, I thought you are suggesting is incorrect.

Mr. Kenneth S. Geller: We have put forward a number of privileges that would be available to the government in civil discovery.

Justice Byron R. White: Including that one?

Mr. Kenneth S. Geller: Including that one, and what we are suggesting is that the District Court should have viewed this case, as if it arose in a context of a civil litigation in which the Plaintiff sort discovery of materials.

Justice Byron R. White: I understand that.

Now, suppose you are right that (c)(7) does apply in the government like this.

Mr. Kenneth S. Geller: Yes.

Justice Byron R. White: To the government in case like this and suppose that the government shows its confidential commercial information, is the District Court nevertheless privileged then to say, well, I am going to balance a little bit here.

Mr. Kenneth S. Geller: No, if there is an absolute privilege available to the government, there is no --

Justice Byron R. White: Well, the (c)(7) absolute or isn’t it, if it’s confidential?

Mr. Kenneth S. Geller: Well, the language of Section (c)(7) suggests that it --

Justice Byron R. White: So there is not any more room for balancing, if (c)(7) applies and there is confidential commercial information.

Mr. Kenneth S. Geller: No, then we have to look at the preface to Section 26 (c), which suggests that all of the 1-8 or whatever it is in section 26 (c) privileges may or may not be applied by the court based on the balancing of a number of different considerations, not enumerated in this specific subject.

Argument of Victor H. Kramer

Chief Justice Warren E. Burger: Very well Mr. Geller.

Mr. Kramer.

Mr. Victor H. Kramer: Mr. Chief Justice, may I please the court.

I would like to begin my presentation by talking about the law of this case and the posture of that law as we stand here today.

This case has been briefed in three courts and as a result the issue for decision by this court, the legal issue for decision is quite narrow.

We originally wanted the memoranda of discussion of the members of the Federal Open Market Committee at which the domestic policy directive was formulated.

We abandoned that demand in the District Court because we became convinced; particularly, after a close examination of this court’s opinion in the series case that, that was precisely the type of document that Exemption 5 is designed to protect from disclosure.

How any agency achieves its opinion, its order or its policy statement is beyond discovery under the Freedom of Information Act, but what the order is, what the opinion says, and what the policy is disclosable and Exemption 5 does not apply to such type of document.

That does not make --

Chief Justice Warren E. Burger: What if -- under which discussion, they follow the practice of not under any statute, it’s just the practice of saying this is subject to reexamination every Thursday afternoon at our meeting and until the final day of announcement, then ordered be open?

Mr. Victor H. Kramer: No, Your Honor.

The domestic policy directive is adoptive at this meeting and occasionally --

Chief Justice Warren E. Burger: I am proposing that they don’t adopt it, but they say, ‘here is what we think we are going to do but we’ll meet every Thursday at 3’o clock and sort of listen to the wind and what’s going on in the market and what’s going in Iran and Zurich and Montana and take another look?

Mr. Victor H. Kramer: That would not be covered by subsection (a)(2)(b) of the act.

In another words, that is not this case, it might or might not --

Chief Justice Warren E. Burger: Would it be available on your theory?

Mr. Victor H. Kramer: It would not be available on our theory.

It might be available on some other theory applying the Freedom of Information Act, but that is not the theory on which we seek these documents and if that was how the domestic policy --

Chief Justice Warren E. Burger: What I really meant was would it be available at all, necessarily just on your view of the matter?

Mr. Victor H. Kramer: I think it might be, I would have to know --

Chief Justice Warren E. Burger: Even though, it’s not a final action.

Mr. Victor H. Kramer: That’s right.

It would be available not as a policy, it would available as the prevailing rules as to any piece of government.

Chief Justice Warren E. Burger: There is no ruling yet.

In my terms, it’s tentative, preliminary, not final, subject to review.

Mr. Victor H. Kramer: If court please Mr. Chief Justice. I am saying it would not be available under the first subsection of the act, which directs that all policy statements be made available, but it might be discoverable, you couldn’t require the government to publish it, but it might be discoverable by a citizen asking for it the next day or the next year that was all I was talking about.

Chief Justice Warren E. Burger: The answer would be no decision has been made, nothing is final, we are still talking about it.

Mr. Victor H. Kramer: Well, I think that you contain under the Freedom of Information Act, lots of papers that do not constitute final decisions that was all I was saying, but it is not our case here and our case here depends solely upon the concession by the government that this is the policy statement of the Federal Open Market Committee.

Chief Justice Warren E. Burger: Well, my hypothetical resemblance it’s what the government might do if you prevail and --

Mr. Victor H. Kramer: I understand that Mr. Chief Justice and I want to keep my options open too.

I don’t know what they are going to do if Your Honor, it’s affirmed as we say.

They might turn to that, they might not have it in writing, and then of course, the Freedom of Information Act wouldn’t apply because it only applies to records.

Turning now if I may to the legal posture of the case, it’s important to bear in mind that the sole defense in this court advanced by this defendant here today is that the Freedom of Information Act permits an agency to differ disclosure of a policy statement until that policy is no longer in effect.

If disclosure would seriously impair implementation of the policy and it says moreover that the sole basis for that disclosure is to be found in Exemption 5.

We respectfully disagree with that contention because we say that this court in the series case said that Exemption 5 was designed to protect agency deliberations, a kind of specialized application if you will of the document of executive privilege.

What we seek is the statement in writing of the policy itself, not how it came to be adopted.

Justice William H. Rehnquist: Mr. Kramer, supposing that in a federal torque claims that case, which the government is defending, so presumably it’s not under the law enforcement exemption, the Section Chief after conference with his associates in the department sends a letter of instruction to the US attorney in the field saying, ‘reject the Plaintiff’s offer a $50,000, make a counteroffer to him of $35,000 and try to settle for $40,000’.

Now that decision has been made, the US attorney in the field was simply caring out instructions.

Do you think the Freedom of Information Act, Plaintiff could come in and ask to see a copy of that letter before the settlement conference was over?

Mr. Victor H. Kramer: I dislike not answering questions categorically Mr. Justice Rehnquist, but the only answer is that this case has nothing to do with that type of document.

This case --

Justice William H. Rehnquist: It does have something to do with your insistence that Sears, Roebuck case limited to pre-decisional conferences because the policy is already adopted, it simply hasn’t been effectuated.

Mr. Victor H. Kramer: My argument is confined to statements of agency policy.

And I am saying that they are not protected by Exemption 5.

Now, I recognize the difficulty with Exemption 5 and I am flattered by these questions, but I cannot settle the meaning of that exemption.

Today, I can only tell you what its application is to government policy statements and that’s why I am hesitant to answer your question.

Certainly, the statement you referred to, would I have to published, that’s --

Justice William H. Rehnquist: But in the lots of stuff as you pointed out in response to the Chief Justice, it doesn’t have to be published, but it’s nonetheless discovered.

Mr. Victor H. Kramer: That’s right.

I don’t for a minute suggest that Your Honor’s questions is not a deeply important one, I merely say that this case does not deciding this case, does not involve addressing that issue.

Justice William H. Rehnquist: But would not it be literally incredible to think that Congress intended the publication of the kind of letter I have in mind.

Mr. Victor H. Kramer: It would be difficult.

Incredible I think is too strong, but difficult, I would tell.

Chief Justice Warren E. Burger: How about irrational?

Mr. Victor H. Kramer: No, I don’t think it would be irrational if Your Honor please, any more than I think the Snail Darter case was irrational, although, I though it was extreme.

I mean the Snail Darter statute, excuse me, not the opinion. [Laughter]

Chief Justice Warren E. Burger: What is a $150 million compared with a $1 billion possibility of market problems?

$150 million is a small change?

Mr. Victor H. Kramer: Compared to the billions here?

Chief Justice Warren E. Burger: Yes.

Mr. Victor H. Kramer: Well, Your Honor please we simply don’t know what the effect would be.

Chief Justice Warren E. Burger: If you are going to find out?

Mr. Victor H. Kramer: If Your Honor would like me to address that subject, I’ll be happy to do so.

Chief Justice Warren E. Burger: Now, we probably better wait for freedom in for that.

Mr. Victor H. Kramer: [Laughter] Well, I didn’t mean addressing myself because I don’t know and I don’t see how the court can tell.

Justice Byron R. White: Well Mr. Kramer you are defending the Court of Appeals that, the Judgment opinion however says that the Federal Rule of several procedure 26 (c)(7) is not applicable to the defendant.

Mr. Victor H. Kramer: Yes and I agree with that.

Justice Byron R. White: Suppose it were?

Mr. Victor H. Kramer: Suppose it were?

Justice Byron R. White: Suppose the Court of Appeals is wrong, you can conceive that.

Mr. Victor H. Kramer: I can conceive of it as an academic question, yes.

In the first place, I don’t think this by any stretch of the imagination could be called commercial information.

Again I want to get back if I can to --

Justice Byron R. White: What we do if we are disagreed with the Court of Appeals on this issue?

Would we be remanded or would be decided here --

Mr. Victor H. Kramer: No, then you would have to -- if you disagree, move forth that it would subject to some recognized privilege and resumption.

Justice Byron R. White: Well, what if we just decided The Court of Appeals was wrong on 26 (c)(7)?

What if decided that it was available to the government in an appropriate case?

Mr. Victor H. Kramer: You would still say that none of these privileges applies to a policy statement.

Justice Byron R. White: Because policy statement can possibly be confidential commercial information.

Mr. Victor H. Kramer: Yes that’s one argument but no policy statement is exempted under Exemption 5.

Many government policy statements are exempt under the act if it would impair Foreign Relations International Security exempt under 1, if it relates to the internal pay policy of an agency solely, exempt under 2.

If it is specifically exempted by statute, exempt under 3, if it would impair the enforcement of a criminal prosecution, exempt under 7, my point is only the --

Justice Byron R. White: No policy can contain confidential information within the meaning of 26 (c)(7).

Mr. Victor H. Kramer: I am saying that no statement of policy can find any exemption under Exemption 5 from prompt publication.

That’s our position and I believe it to be sound.

Now the petitioner challenges our interpretation of the series opinion.

Justice Byron R. White: Is that the way you read the Court of Appeals opinion by the money?

Mr. Victor H. Kramer: No.

Justice Byron R. White: No it certainly is not.

Mr. Victor H. Kramer: No, it is not.

The Court of Appeals, this whole matter was argued in the Court of Appeals in part as I am arguing before you and the Court of Appeals and its wisdom chose to follow the more conservative course outlined in this opinion and that I rely very strongly if the Court please, I hope I am correct in doing so on Your Honor’s very carefully constructed opinion.

Justice Potter Stewart: Thank you very much.

Mr. Victor H. Kramer: You are welcome sir. [Applause].

In the Sears case, to me, to take an exemption as vague as Mr. Justice Rehnquist has pointed as Exemption 5 and to make the sense out of it that I think was made in the series case is a doctor --

Justice Byron R. White: Suppose as weigh if there in so far as Exemption if I pick some specific privilege available in civil litigation.

Mr. Victor H. Kramer: Well, the government of course here has not done that in our opinion, it hasn’t picked any specific privilege.

Furthermore it does not --

Justice Byron R. White: Thus it relies on 26 (c)(7)?

Mr. Victor H. Kramer: Yes but which one of 7 is that the commercial --

Justice Byron R. White: As specific as you can be as that -- that’s confidential commercial installation.

Mr. Victor H. Kramer: I believe that clear that the policies of a Federal agency are not to be denigrated to the --

Justice Byron R. White: That’s your only answer to that, I mean it’s certainly is not because of vagueness or anything, is there is a specific privilege?

Mr. Victor H. Kramer: They haven’t -- Yeah I also have an even more conservative answer Mr. Justice White, they have not been able to point to a single case where any government commercial information was privileged from production if it amounted to a government policy.

Justice Byron R. White: Well, may be that was never challenged.

Mr. Victor H. Kramer: Maybe that’s always possible but the older the public gets, more likely that it would have occurred.

Justice Byron R. White: Well, at least here is one.

Mr. Victor H. Kramer: You are right sir.

Here is one on either the more the Court of Appeals theory or a mine that you have to look at some other exemption.

When you are seeking to exempt from prompt publication, any agencies policy, not any agency’s decision, how much you are going to pay for real-estate?

Justice William H. Rehnquist: What about the agencies -- what about the Justice Department policy that we will under no circumstances certainly toward Claims Act Suit for more than $100,000, sent to all 93 US attorneys around the country?

Mr. Victor H. Kramer: That’s a closer one.

That might well not be protected under Exemption 5, now rather it would be protected under some other exemption I doubt, but I am not sure, where do a criminal --

Justice William H. Rehnquist: Federal Tort Claims Act (Voice Overlap).

Mr. Victor H. Kramer: Yes, not under exemption.

You are right Your Honor, not under Exemption 5.

If you conclude as I do hearing very briefly Your Honor’s description of the document, that is a statement of the government’s policy.

Now my brother in his reply brief makes a distinction in attempting to distinguish the Sears opinion between legal policy and economic policy and he says that the court can writing the Sears case was thinking of legal policy and he points out and to an extent it’s play on the word direct but he does say with some, at least partial accuracy that the Federal over marked, I mean this policy does not have a direct impact on an identifiable individual.

I find that distinction, one without a difference, I can imagine no agency policy of any US agency having a greater impact on the lives of the citizens of this country, then none of the Federal Open Market Committee, that is the purpose of their policy statements to affect the interest grades in his country.

The Federal Open Market Committee’s operations or objectives are in the news papers constantly.

This is the matter that affects the value of the dollar, the value of the wage earner's money and the value of the investors accrued savings, so that I do not think we can dispose off the case by saying economic policy is to be distinguished from legal policy because legal policy refers to specified individuals whereas this is an different type of government activity.

I submit that the argument is being advanced here today by the Fed is but a highly camouflaged version of the argument that was made to withholded records under the act that preceded the Federal, the fruit of information act.

The argument is that it is contrived of the public interest to release these documents and then it was the very purpose of these amendments adopted in 1966.

If it’s thereby a purpose to get rid of the public interest type of argument and instead to have more precise exemptions to determine, what is to be disclosed and what is not.

Justice Potter Stewart: Well, those are purpose sort of to define the public interest, is not it?

Mr. Victor H. Kramer: That’s another way putting it, yes I accept that, yeah Mr. Justice Stewart and yes, Mr. Justice Powell?

Justice Lewis F. Powell: I suggest your answer Mr. Justice Stewart first and then back later.

Justice Potter Stewart: He did.

Mr. Victor H. Kramer: I am sorry, I did, yes.

Justice Lewis F. Powell: I was going to ask if whether Mr. Merrill is still a law student at Georgetown University?

Mr. Victor H. Kramer: No, he is not; he is a member of the Bar, the District of Colombia.

Justice Lewis F. Powell: What he is not interested in this information at this time?

Mr. Victor H. Kramer: I have not asked him because the act doesn’t require that I ask him but I assume that he has no great request from those persons in the organization would file amicus brief in this case.

At the time of course, he was still --

Justice Lewis F. Powell: Under your theory of the case, anyone without regard to whatever interest he has may bring cause of action request.

Mr. Victor H. Kramer: Under my theory of what the act provides, yes Mr. Justice Blackmun but all questions of standing and that sort of thing are out when it comes to privilege.

Chief Justice Warren E. Burger: This is what permits some enterprising people to collect a lot of government information, assemble it and classify and select under the act, there is no prohibition.

Mr. Victor H. Kramer: That’s right Your Honor, I assure you that --

Chief Justice Warren E. Burger: They can do it for ideal curiosity and even if they can understand the information after they get it.

Mr. Victor H. Kramer: That‘s absolutely true Your Honor.

Of course it is not true here, you can be sure that the financial page of every newspaper in the country well carry the open --

Chief Justice Warren E. Burger: Now addressing myself to the party in the case, the party need not be able even to understand it.

Mr. Victor H. Kramer: That’s correct Your Honor and by the way I am not sure and I want to very canned about, I am not sure even the Court can understand these domestic policy directives.

This one in the record reeling at page 60 and it’s very esoteric language but I am told that these words have meaning to monetarists and economists and to traders in the market and that they will know what they mean upon reading it at once.

Justice Byron R. White: Well, Suppose the neighbor board decides to order a regional directive to file a complaint and you write him a letter and say, we talk this all over and our policy now is so and so file is complain is, is that the, I mean is that, that’s exempted, isn’t it?

Mr. Victor H. Kramer: Well, it’s certainly not a statement of policy within the meaning subsection A.

Justice Byron R. White: So your answer is yes, it him -- your answer is that it’s within the Exemption5?

Mr. Victor H. Kramer: I believe so.

Justice Byron R. White: Because it doesn’t finally dispose of anything and it just sets the government on of a course of action mainly litigation.

Mr. Victor H. Kramer: Precisely.

Justice Byron R. White: So if the government adopts of -- it has meeting and it says we are going to start on a course -- we are going to embark on a course of action right now and here is what we are going to do, and we are going to order our open market operator for the next two or three months to do so and so.

Well it doesn’t finally dispose off any case.

It doesn’t finally dispose off any course of action.

It’s an initiation of a course of action.

Mr. Victor H. Kramer: I don’t read Subsection A to be in its phrase statements of policy to make a distinction between the type of policy.

Justice Byron R. White: Whether it’s a misnomer or not, you must agree that it is an initiation of a course of action by the government, these statements or policy or nothing?

Mr. Victor H. Kramer: I would prefer you look at the policy itself.

Justice Byron R. White: I know you do, but I am just asking you whatever you look at, doesn’t it set the government on a course of action?

Mr. Victor H. Kramer: Yes, but it --

Justice Byron R. White: And it doesn’t finish it, it just starts it.

Mr. Victor H. Kramer: Well, only in the sense that nothing is ever finished that any agency does if the court please.

Justice Byron R. White: No, that was just exactly the line that was drawn in the series case, which you think was so carefully constructed.

Mr. Victor H. Kramer: Yes, I do.

I do when I --

Justice Byron R. White: That’s exactly the line, that the opinions that finally dispose off a case, like opinions not to file a complaint, they are discoverable, but opinions in statements or policy if you want to call them that, saying file are not discoverable.

Mr. Victor H. Kramer: That’s correct Your Honor and I of course would not be foolish or I am not to going to arrogant to argue with the court as to the meaning of the opinion, but I do want to emphasize that in one sense, every government policy dictates a course of action that’s what a policy statement is, so that when we look closely, I think at the type of record that we are talking about and if you would turn to page 65 and look at one of these policy directive, this is an old one.

Justice Byron R. White: You have told to me I could not understand it anyway. [Laughter]

Mr. Victor H. Kramer: Well, you couldn’t understand the details but you certainly could understand that the Board is saying that this is their policy.

It is the policy of the Federal Open market Committee while resisting inflationary pressures and I am reading at the top of page 67, and working toward equilibrium in the country’s balance of payments to faster financial conditions conducive to the cushioning recessionary tendencies and stimulating economic recovery.

Chief Justice Warren E. Burger: It sounds like a statement from the White House Press Officer.

Mr. Victor H. Kramer: Well it’s a -- [Laughter].

It might be but it certainly the Fed is of course is an open market -- in an independent agency with great powers, not to demeanor from those of the Chief Executive, but it certainly is a statement of policy on which future action is based.

Justice William H. Rehnquist: Are you claiming only under Subsection 2 here rather than under Subsection 3 as well?

Are you claiming that this is discoverable or available because of the statement of policy or are you claiming that it’s a record, which an agency has a copy of?

Mr. Victor H. Kramer: It’s both, we are claiming under both that we could have -- if a citizen or person ask for it, it must be produced, but --

Justice William H. Rehnquist: It wouldn’t have to be statement of policy to come under theory of --

Mr. Victor H. Kramer: That is correct Your Honor, precisely so.

We are --

Justice William H. Rehnquist: But they are both subject to Exemption Number 5?

Mr. Victor H. Kramer: Absolutely sir, absolutely.

And it is our position that any statement of an agency policy, which dictates future contact by the agency is cannot be exempt under 5 although it may be under 1, 2, 3, or 7.

Now, if the court please, I wonder -- perhaps reiterate but emphasize that if this court agrees that we must determine, whether a publication of the policy promptly would impair agency’s recommendation of that policy, then we will then have to have the case remanded for trial below.

You have the experts, whose opinions have been cited on the one side, and you have the Fed people very sincerely on the other and it is a matter I should think of great seriousness I suppose that we have introduced under the Freedom of Information Act.

A trial in District Courts every time an agency makes a claim that prompt publication of its policies will impede implementation because the other side, the Plaintiff will marshal his experts or her experts in an effort to prove that it will not impede the government policy.

So we will have introduced into the Federal Courts a new type of protracted complex litigation in which the agency is pitted -- the agency’s experts are pitted against the person, the newspaper man, the student, the corporations’ experts to determine whether in fact prompt publication --

Justice William H. Rehnquist: But this is an intra-agency memorandum, is it not or inter-agency?

Mr. Victor H. Kramer: Intra?

Justice William H. Rehnquist: Intra?

Mr. Victor H. Kramer: Yes Your Honor.

Justice William H. Rehnquist: So that it has to be tested anywhere by whether would be available in civil litigation.

Mr. Victor H. Kramer: That’s Exemption 5.

Justice William H. Rehnquist: Yes.

Mr. Victor H. Kramer: Yes Your Honor and they have the other side --

Justice William H. Rehnquist: Doesn’t that require a -- that’s going to require some litigation.

Mr. Victor H. Kramer: Well, I don’t think so, they haven’t said --

Justice William H. Rehnquist: You don’t have a law suite, other way you would normally observe that District Court can simply say a snap judgment, I have known about this law so it burdensome, I would not require not burdensome, I will require -- he has got almost hypothetical law suit with the same sort effects, that you say we would have to go back for a trial.

Mr. Victor H. Kramer: Not quite Your Honor, I was refering to the broad issues of the types cited in each sides brief in this case, in which their experts said what impede effective market regulation, our expert said, it would make for a better market to publish promptly, so on.

Chief Justice Warren E. Burger: Then your situation different the one hypothesized by Mr. Mr. Justice Rehnquist that in a law suit, there is a reason for trying to get information, presumably there is a reason.

You don’t spin your wheels trying to get your relevant information.

Here you have already said, it just ideal curiosity is enough to get --

Mr. Victor H. Kramer: No, I said that was the law but I didn’t say that our curiosity was ideal.

Chief Justice Warren E. Burger: No, no but if not that jurors, we will exempt present company, but Ideal curiosity is enough to support the claim by all other claimants.

Mr. Victor H. Kramer: Yes, I would assume however that ideal people, who file FLA reasons of ideal curiosity would not be able demand the type of offensive hearing that would be required if the government’s test and committee’s test in this case is adopted because you see there test is not absolute that they can differ Willy-nilly until a policy is no long in effect.

Their test is that if it would impair the implementation of the policy and that they have prove this is relevant, they have never had a chance to prove that because the District Court and the Court of Appeals said that’s irrelevant, but if it’s relevant, I would assume that we are not out of court, we go back to the District Court for a trial of some kind on that issue, which there will be a battle of experts, I can assure this court; theirs against ours.

It just strikes me, when you contemplate that is a solution, it seems to achieve result, which could not have been intended and certainly is not one of the objectives of the Freedom of Information Act.

If the Court please the act -- in some respects is fast achieving an importance that is part of the act to get in to some constitutional provisions.

One of the cardinal principles of the act as we read it is that all government policy statements, all agency policy statements, not specifically exempted by the act, are to be promptly published.

If the court please, it seems to me that, that’s a very good doctrine, seems to be that in a democratic society, the notion that the people governed have a right to know what the policies of the agencies’ governing them are, is that a reasonable doctrine and a good doctor and that’s all this case seeks.

Justice Potter Stewart: Even if we wholely disagreed with you and found of as really unreasonable.

We were – we are nonetheless duly found to follow the statute whatever it.

Mr. Victor H. Kramer: Oh, yes Mr. Justice Stewart and I am saying that I read and I believe with good cause.

Justice Potter Stewart: Well, the question whether we agree with you strongly or disagree with you strongly?

Question is what the statute provider requires?

Mr. Victor H. Kramer: Absolutely, that’s right.

Chief Justice Warren E. Burger: I take it to your reference to this Snail Darter case, and that you regard this statute as on the same level of wisdom as the statutes in this --?

Mr. Victor H. Kramer: No, I did not quiet Your Honor but I said that if it occurs to the Court as it does pass to government that the result reached under the statute in this case is not wise that this is the type of statute, that it is duty of the Congress to correct and of course we think the result reached below is very wise but if you different with this.

Justice Thurgood Marshall: We have no provision for remanding the case to Congress.

Mr. Victor H. Kramer: Congress has pending before it.

Let me assure Your Honor a bill which has gone nowhere while this case is pending, which would exempt under Exemption 3 this type of record, I can assure the court and my brother on the other side that the Congress will promptly consider that bail at the conclusion of the proceedings of this case.

Chief Justice Warren E. Burger: You are defending perhaps on what referred to --

Mr. Victor H. Kramer: If the Judge is a firm.

Chief Justice Warren E. Burger: Thank you Gentlemen.

The case is submitted.