Natrural Resources Defence Council, Inc. v. United States Department of Interior et al
Filing
90
OPINION & ORDER re: 73 MOTION for Summary Judgment on Government's Withholding of Qualitative Analyses Under FOIA Exemption 5. filed by Natural Resources Defense Council, Inc., 82 MOTION for Summary Judgment Regarding FOIA Exemp tion 5 Withholdings. filed by United States Department of Interior, Bureau of Land Management. For the foregoing reasons, the Court hereby grants the Government's motion for summary judgment as to the FOIA Exemption 5 claims. The Clerk of Court is respectfully directed to terminate all pending motions and to close this case. (Signed by Judge Paul A. Engelmayer on 12/11/2014) (djc)
following reasons, the Court now grants summary judgment for the Government as to this point,
i.e., as to the balance of the redactions made pursuant to Exemption 5.
I.
Background1
A.
Factual Background
The facts of this case are reviewed in detail in the Court’s August 5, 2014 opinion. See
Dkt. 59, reported at Natural Res. Def. Council, Inc. v. U.S. Dep’t of Interior, No. 13 Civ. 942
(PAE), 2014 WL 3871159 (S.D.N.Y. Aug. 5, 2014). In brief, the Mineral Leasing Act
authorizes the Secretary of the Interior to lease public lands for coal-mining operations. See 30
U.S.C. § 201(a)(1). These public lands include almost all of the Powder River Basin, which
contains one of the largest coal deposits in the world. Pl. 56.1 ¶¶ 1–2. Since 1990, 28 tracts
have been offered in competitive lease sales in the Powder River Basin, 27 of which have been
leased. Hageman Decl. ¶ 5. There are currently seven lease sales pending in the Powder River
Basin, for a total of more than four billion tons of coal. Pl. 56.1 ¶ 9.
Under the Mineral Leasing Act, BLM cannot accept less than fair market value (“FMV”)
for the sale of a coal lease. 43 CFR § 3422.3–2(b). Fair market value is defined under federal
regulations as the cash value at which a knowledgeable owner would sell or lease the land to a
knowledgeable purchaser. Id. § 3400.0–5(n). Before every lease sale, BLM estimates the fair
market value of the coal lease in a document called an “appraisal report.” Pl. 56.1 ¶ 16. The
appraisal report, in turn, incorporates information from three other BLM-prepared reports: an
1
The Court’s account of the facts is derived from the parties’ submissions in support of and in
opposition to the motions for summary judgment, including NRDC’s Local Rule 56.1 Statement,
Dkt. 14 (“Pl. 56.1”), the Declaration of Elizabeth Forsyth, Dkt. 17 (“Forsyth Decl.”), and the
Declaration of Steven Hageman, Dkt. 24 (“Hageman Decl.”).
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economic report, an engineering report, and a geologic report. Hageman Decl. ¶ 8. BLM’s
estimate of fair market value is kept confidential. Pl. 56.1 ¶ 17.
Following a competitive bidding process, BLM awards the lease to the company that
submitted the highest bid as long as the company is qualified to hold the lease, and the bid meets
or exceeds BLM’s confidential estimate of fair market value. 43 CFR § 3422.3–2(b). In 23 of
the 28 Powder River Basin coal lease sales conducted during the past 20 years, BLM has
received only one bid; in the remaining five cases, BLM received two bids. Hageman Decl.
¶ 10; Pl. 56.1 ¶ 14. In lease sales where there is only one bid, the vast majority of lease sales,
BLM’s confidential estimate of fair market value effectively supplies the sole price competition
for the applicant.
B.
Procedural History
To determine whether BLM has complied with the Mineral Leasing Act, NRDC
submitted a FOIA request on September 21, 2012, seeking (1) “all information and analysis
documents used to appraise” each of the Powder River Basin tracts that BLM had leased since
1990, and (2) “[a]ny Interior [D]epartment guidance, handbooks, manuals or similar documents
with information on estimating the value of coal tracts.” Forsyth Decl. Ex. A. The Government
did not, at that time, respond to NRDC’s requests. Pl. 56.1 ¶ 34.
On February 8, 2013, NRDC filed this lawsuit. Dkt. 1. The Government then produced
the requested handbooks and manuals. As to the requested reports, however, the Government
produced versions with extensive redactions. Pl. 56.1 ¶ 39. The Government cited Exemption 4
and/or Exemption 9 in support of some of its redactions and invoked Exemption 5 in support of
each of its redactions. On July 2, 2013, NRDC objected to all redactions and withholdings, and
to the adequacy of the Vaughn Indices. Pl. 56. ¶ 41. After releasing a small subset of the
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redacted material, the Government refused to produce fully unredacted copies of the reports, to
produce the computer models, or to revise its Vaughn Indices. Pl. 56.1 ¶ 42.
Between September 11, 2013 and January 15, 2014, the parties briefed cross-motions for
summary judgment. Dkt. 11–46. On August 5, 2014, the Court issued an opinion granting each
party’s summary judgment motion in part. Dkt. 59.
Exemption 4 protects “trade secrets and commercial or financial information obtained
from a person and privileged or confidential.” 5 U.S.C. § 552(b)(4). Information is
“confidential” if “disclosure would have the effect either: ‘(1) of impairing the government’s
ability to obtain information—necessary information—in the future, or (2) of causing substantial
harm to the competitive position of the person from whom the information was obtained.’”
Inner City Press/Cmty. on the Move v. Bd. of Governors of Fed. Reserve Sys., 463 F.3d 239, 244
(2d Cir. 2006) (citation omitted). The Court found that the Government’s conclusory assertions
regarding both elements were insufficient to satisfy its burden and, therefore, granted summary
judgment for NRDC on Exemption 4. See Dkt. 59, at 23–32.
As to Exemption 9, that exemption protects from disclosure “geological and geophysical
information and data, including maps, concerning wells.” 5 U.S.C. § 552(b)(9). The
Government argued that “wells” should be read to include “drill holes.” See Dkt. 59, at 47.
Based on the plain text of the statute, the Court rejected that argument and granted summary
judgment for NRDC on Exemption 9. See id. at 47–49.
Finally, 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 “encompasses traditional discovery privileges,”
Wood v. F.B.I., 432 F.3d 78, 83 (2d Cir. 2005) (Sotomayor, J.) (citing, inter alia, Dep’t of
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Interior v. Klamath Water Users Protective Ass’n, 532 U.S. 1, 8 (2001)), and “incorporates a
qualified privilege for confidential commercial information,” Fed. Open Mkt. Comm. of Fed.
Reserve Sys. v. Merrill, 443 U.S. 340, 360 (1979). The privilege thus exists, in part, to prevent
the Government from being “placed at a competitive disadvantage.” Id.
The Court found that BLM uses a common methodology for determining fair market
value, and that methodology has been durable over time. See Dkt. 59, at 44–45. Accordingly,
the Court granted the Government’s motion for summary judgment under Exemption 5 as to
(1) the Government’s pricing model and (2) its fair market value estimates. Id. at 46. The Court
reasoned that disclosure of that information “would effectively enable a coal company to derive,
or come unacceptably close to deriving, the number it must beat in order to lease the next tract
for mining.” Id. at 45.
As to the Government’s “qualitative reasoning process,” however, the Court determined
that it lacked sufficient information to grant summary judgment for either party. Id. at 46. On
the record then established, “the Court simply [could not] tell whether or not revealing BLM’s
qualitative reasoning process would work a substantial harm on the Government’s interest in
securing an optimal price for coal-mining leases.” Id. at 47. The Court therefore directed the
Government to submit supplemental declarations “concretely explaining why the qualitative
statements that have been withheld would, if revealed, work ‘significant[] harm.’” Id. (quoting
Merrill, 443 U.S. at 363).
On September 29, 2014, the Government submitted a renewed motion for summary
judgment on Exemption 5, along with new declarations. Dkt. 69 (“Gov’t Br.”), 70 (“Perlewitz
Decl.”), 71 (“London Decl.”). On October 14, 2014, NRDC cross-moved for summary judgment
or, in the alternative, for discovery or in camera review of unredacted documents. Dkt. 73, 74,
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75 (“NRDC Br.”), 76 (“Kyle Decl.”), 77 (“Kern Decl.”). On October 21 and 22, 2014, the
Government filed its opposition and reply. Dkt. 79 (“Gov’t Reply Br.”), 82–86. On October 28
and 29, 2014, NRDC did the same. Dkt. 88 (“Spencer Decl.”), 89 (“NRDC Reply Br.”). On
November 26, 2014, the Court held argument. See Transcript (“Tr.”).
II.
Applicable Legal Standards
FOIA requires government agencies to “disclose records on request, unless they fall
within one of nine exemptions.” Milner v. Dep’t of Navy, 131 S. Ct. 1259, 1262 (2011). “These
exemptions are explicitly made exclusive, and must be narrowly construed.” Id. (citations and
internal quotation marks omitted). “The agency asserting the exemption bears the burden of
proof, and all doubts as to the applicability of the exemption must be resolved in favor of
disclosure.” Wilner v. Nat’l Sec. Agency, 592 F.3d 60, 69 (2d Cir. 2009). Courts review the
adequacy of the agency’s justifications de novo. Id.
“‘Summary judgment is the procedural vehicle by which most FOIA actions are
resolved.’” N.Y. Times Co. v. U.S. Dep’t of Def., 499 F. Supp. 2d 501, 509 (S.D.N.Y. 2007)
(quoting Jones-Edwards v. Appeal Bd. of NSA, 352 F. Supp. 2d 420, 423 (S.D.N.Y. 2005)). “An
agency that has withheld responsive documents pursuant to a FOIA exemption can carry its
burden to prove the applicability of the claimed exemption by affidavit.” Wilner, 592 F.3d at 73.
“‘Summary judgment is warranted on the basis of agency affidavits when the affidavits describe
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. Ultimately, an
agency’s justification for invoking a FOIA exemption is sufficient if it appears logical or
plausible.’” Id. (quoting Larson v. Dep’t of State, 565 F.3d 857, 862 (D.C. Cir. 2009)).
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“‘Summary judgment in favor of the FOIA plaintiff,’” by contrast, “is appropriate ‘when an
agency seeks to protect material which, even on the agency’s version of the facts, falls outside
the proffered exemption.” N.Y. Times, 499 F. Supp. 2d at 509 (quoting Petroleum Info. Corp. v.
U.S. Dep’t of Interior, 976 F.2d 1429, 1433 (D.C. Cir. 1992)).
III.
Discussion
As noted, Exemption 5 protects, among other things, “confidential commercial
information” that, if disclosed, would place the Government “at a competitive disadvantage.”
Merrill, 443 U.S. at 360. The Perlewitz Declaration, submitted by the Government in support of
its renewed motion for summary judgment, establishes that disclosure of the withheld qualitative
information in BLM’s appraisal reports and supporting documents “would significantly harm the
Government’s monetary functions or commercial interests,” id. at 363, by allowing bidders to
approximate the Government’s confidential floor price with substantially greater accuracy.2
First, the declaration clearly explains that BLM uses a common qualitative methodology
to estimate the fair market value of each tract of land. Disclosure of fully unredacted reports
would reveal the factors that BLM considers at each stage of the valuation process, how its
appraisers evaluate those factors, and the weight each factor is given. See Perlewitz Decl. ¶¶ 10,
2
NRDC argues that a prospective bidder could not “reverse engineer” BLM’s appraisal methods
and calculate the Government’s exact fair market value estimate. See NRDC Br. 1–4; NRDC
Reply Br. 1–4. But Exemption 5, in addition to protecting information that would reveal BLM’s
fair market value estimate, protects information that would facilitate meaningfully better
prediction of the Government’s figure. See Morrison-Knudsen Co. v. Dep’t of the Army of U.S.,
595 F. Supp. 352, 355 (D.D.C. 1984) aff’d 762 F.2d 138 (D.C. Cir. 1985) (“While the papers
being withheld will not reveal the precise bid to be made by the Army against M–K’s
prospective bid, the evidence shows that they will enable an informed bidder such as M–K to
make a closer approximation than would be possible on the basis of the information to be
released with the bid invitation and other available data.”); see also Raytheon Co. v. Dep’t of
Navy, 89 Civ. 2481 (JHG), 1989 WL 550581, at *6 (D.D.C. Dec. 22, 1989) (“Harm to [one’s]
competitive position can come from imperfect estimates as well as perfect ones.”).
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12, 14, 17, 20, 22, 24, 26, 28, 29, 42, 45, 50, 51, 53, 57, 65. For example, the redacted
information includes “the method of statistical distribution BLM uses to simulate changes in
future coal prices and, ultimately, to better predict the economic value of the coal lease tract.”
Id. ¶ 42. With that statistical model, bidders could ascertain the Government’s estimate of future
coal prices, a “significant input variable.” Id. ¶ 43. Although courts have sometimes required
the Government to disclose single factors relevant to multi-factor analyses—see, e.g., Acumenics
Research & Tech. v. U.S. Dep’t of Justice, 843 F.2d 800, 807–08 (4th Cir. 1988) (unit prices);
News Grp. Boston, Inc. v. Nat’l R.R. Passenger Corp., 799 F. Supp. 1264, 1269 (D. Mass. 1992)
(labor costs)—NRDC has not identified, and the Court has not found, authority that would
require the Government to disclose every factor it considers and its method for evaluating those
factors. Given the “limited number of factors BLM uses to determine value,” disclosure of this
information would allow bidders to “more closely predict BLM’s FMV estimate.” Perlewitz
Decl. ¶ 22.
Second, the declaration clarifies that some of the salient information is identical for every
fair market value estimate. See id. ¶¶ 16, 34, 36, 37, 39, 40, 41, 48, 54, 60, 61, 70. To provide
just a few examples, the Government redacted “a chart depicting Powder River Basin coal
demand forecasts,” id. ¶ 34, “the estimated range of cash costs for various mines in the region,”
id. ¶ 39, “charts depicting historical real price distribution,” id. ¶ 41, and a model containing
“BLM’s interpretation of data from nearly 5000 exploratory drill holes spanning thousands of
acres of surface,” id. ¶ 70. Because this data remains static across reports, at least for some
period of time, disclosure would provide bidders with the exact information BLM will use to
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estimate fair market value for future lease sales.3 In addition, BLM redacted the “specific
publications, reports, articles, subscriptions, and databases referenced and used,” id. ¶ 48, and
“the identity of the commercial software used,” id. ¶ 54. With that information, bidders could
acquire even more of the precise information BLM will use to value future leases.4 And bidders
would, naturally, “use [that information] to determine how BLM would value the tracts in future
lease sales.” Id. ¶ 48.
Third, as the Court’s August 5, 2014 decision anticipated might be the case, see Dkt. 59,
at 46, the declaration demonstrates that the qualitative and quantitative data are inextricably
intertwined. The appraisers consider “both quantitative and qualitative factors” in the course of a
unified analysis. Perlewitz Decl. ¶ 25. At argument, for instance, the parties discussed BLM’s
qualitative analyses of which quantitative data to use. See Tr. 4 (economist makes a subjective,
qualitative determination as to which price projections to use); Tr. 26 (economist makes a
subjective, qualitative decision as to which discount rate to apply). Moreover, access to
qualitative narratives in unredacted reports would allow prospective bidders to determine at least
some of the numeric figures BLM uses to reach its fair market value estimates. For example, the
3
The NRDC argues that “much if not all of the information” in BLM’s analyses is
“commercially stale.” NRDC Br. 3. That characterization, even if accurate, does not preclude
the information from Exemption 5 protections. As long as BLM relies on such information,
disclosure will harm the Government’s commercial interests. See Dkt. 59, at 45 & n.12; cf.
Bloomberg L.P. v. Bd. of Governors of Fed. Reserve Sys., 649 F. Supp. 2d 262, 282 (S.D.N.Y.
2009), aff’d 601 F.3d 143 (2d Cir. 2010) (Exemption 5 does not protect “historic data”).
4
This would be a significant revelation: In an effort to demonstrate that “much of the
information” in BLM’s geologic reports is publicly available, NRDC provided a list of 25
“public sources for coal-lease valuation information.” Kern Decl. ¶ 7 & App’x; see also id. ¶ 14
(discussing the sources the BLM appraisers “most likely” use); id. at ¶ 15 (listing various “public
sources for . . . economic data”). Accordingly, without the unredacted reports, potential bidders
apparently will not know which of the many available sources of information the BLM uses in
reaching its fair market value estimates.
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appraisal reports contain “staff interpretations of geologic data, BLM modeling assumptions, and
mineability considerations.” Perlewitz Decl. ¶ 13. Even if the Government redacted BLM’s
numeric estimate of the recoverable coal in a particular tract, that figure is “a direct result of
BLM’s geologic models,” which would be disclosed. Id. Similarly, “[t]he engineering report
briefly describes the mining cost model BLM uses and how, using the cost model, BLM
generates input for the [discounted cash flow] model.” Id. ¶ 59. The reports also contain “the
results of BLM’s economic valuation,” just one step removed from the confidential floor price
itself. Id. ¶ 47.
The Court’s August 5, 2014 opinion explained why disclosure of BLM’s pricing model
and fair market value estimates would harm the Government’s commercial interests. Dkt. 59, at
44–46. The Court then considered the possibility of distinguishing between qualitative and
quantitative information. Id. at 46–47. However, while the Government’s previously submitted
Hageman Declaration focused on the quantitative information withheld from BLM’s appraisal
reports, the Perlewitz Declaration makes clear that disclosure of the qualitative information
would be independently harmful and, in any event, that such information is not “reasonably
segregable.” 5 U.S.C. § 552(b). The Government’s justification for withholding the redacted
information is, therefore, “logical or plausible.” Wilner, 592 F.3d at 73. Accordingly, the Court
grants the Government’s motion for summary judgment as to FOIA Exemption 5.5
IV.
Discovery and In Camera Review
As an alternative to summary judgment, NRDC requests that the Court permit discovery
or review unredacted versions of the reports in camera. NRDC Br. 1, 5; NRDC Reply Br. 5.
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As the Government agreed at argument, however, BLM’s commercial interests do not preclude
disclosure of the names of the authors of the various reports. See Tr. 31–34.
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“Affidavits submitted by an agency are accorded a presumption of good faith; accordingly,
discovery relating to the agency’s search and the exemptions it claims for withholding records
generally is unnecessary if the agency’s submissions are adequate on their face.” Carney v. U.S.
Dep’t of Justice, 19 F.3d 807, 812 (2d Cir. 1994) (citation omitted). “In order to justify
discovery once the agency has satisfied its burden, the plaintiff must make a showing of bad faith
on the part of the agency sufficient to impugn the agency’s affidavits or declarations, or provide
some tangible evidence that an exemption claimed by the agency should not apply or summary
judgment is otherwise inappropriate.” Id. (citations omitted).
Similarly, “‘[i]n camera review is considered the exception, not the rule.’” Am. Civil
Liberties Union v. FBI, No. 11 Civ. 7562 (WHP), 2014 WL 4979251, at *3 (S.D.N.Y. Oct. 6,
2014) (quoting Local 3, Int’l Bhd. of Elec. Workers v. NLRB, 845 F.2d 1177, 1180 (2d Cir.
1988)). It is appropriate only in unusual circumstances, such as where “‘there is evidence of
agency bad faith,’” id. (quoting Carter v. U.S. Dep’t of Commerce, 830 F.2d 388, 393 (D.C. Cir.
1987)), or “[w]here the record is vague or the agency claims too sweeping,” Hopkins v. U.S.
Dep’t of Hous. & Urban Dev., 929 F.2d 81, 86 (2d Cir. 1991) (citation omitted).
NRDC does not allege that the Perlewitz Declaration was written or submitted in bad
faith, and the Court finds the declaration adequate on its face. Discovery and in camera review
are, therefore, inappropriate in this case.
CONCLUSION
For the foregoing reasons, the Court hereby grants the Government’s motion for
summary judgment as to the FOIA Exemption 5 claims. The Clerk of Court is respectfully
directed to terminate all pending motions and to close this case.
SO ORDERED.
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