663 F. 2d 120 - Exxon Corporation v. Federal Trade Commission

This appeal in a suit brought under the Freedom of Information Act1 presents two questions. The first is whether the district court erred by denying plaintiff Exxon Corporation's motion for discovery under Rule 56(f), Fed.R.Civ.P., concerning possible waiver by the Federal Trade Commission of its claimed exemption under the Act. Exxon contends that, as a result of that denial, the district court prematurely considered the FTC's motion for summary judgment solely on the basis of the Commission's affidavits. The second is whether the district court correctly granted summary judgment in favor of the FTC. Because we conclude that the court did not err on either point, we affirm.

* On July 18, 1973, the FTC issued an administrative complaint against the eight leading companies in the petroleum industry, including Exxon, alleging that the companies have monopolized the domestic refinery industry in violation of the Federal Trade Commission Act, 15 U.S.C. § 45 (1976). In preparing for the prosecution of the so-called "Exxon case,"2 which is presently in the pretrial discovery phase, the FTC has hired a number of economists who are furnishing advice and assistance on issues and strategic options relevant to the trial. Much of their advice has been placed on paper in a "Final Economic Report," which the FTC describes as an "in-depth evaluation of aspects of the theory of the case and the evidence supporting these aspects, discussions of possible future litigation strategies, and areas of possible inquiry for further economic analysis."3

Exxon, understandably anxious to obtain a copy of the Economic Report and to learn the identities of the six economists who prepared it, has pursued two routes attempting to achieve those ends: one in federal court and the other in the agency adjudicative proceeding. On October 25, 1977, Exxon made a Freedom of Information Act request for all materials relating to the Exxon case "which constitute, refer or relate to any oral or written communication made between January 1, 1977 to (October 25, 1977)": (a) between any Commissioner of the FTC (or any member of the Commissioner's staff) and any FTC employee, (b) between any Commissioner (or staff member) and any private party, and (c) between any FTC employee and any private party.4 In response, by letter from the Secretary of the FTC, partial access to the approximately eight hundred pages of responsive documents not in the public records was permitted. After Exxon appealed that decision within the agency, the Commission released additional documents. The remaining documents, which constitute approximately 375 pages or 47 percent of the responsive data not in the public records, were withheld by the FTC on the basis of Exemptions 5 and 7 of the Act.5 Following that decision of the FTC, on March 24, 1978, Exxon initiated this Freedom of Information Act litigation in the district court.

On April 17, 1978, the same day that the FTC was served with the federal complaint,6 Exxon filed a motion with the Administrative Law Judge in the FTC adjudicative proceeding seeking the issuance of a subpoena duces tecum to direct complaint counsel, Roger B. Pool, to produce the Economic Report. On June 2, 1978, the Administrative Law Judge denied the motion on the ground that the Economic Report constituted attorney work product and therefore not producible under the relevant discovery rules.

Meanwhile, in the district court, Exxon began a series of aborted discovery efforts. On April 19, 1978, Exxon served Michael Sohn, FTC General Counsel, and Carol Thomas, Secretary, with a first set of interrogatories; on May 4, 1978, Exxon served the FTC with a notice of the deposition of Kenneth Elzinga, an economics professor at the University of Virginia who, according to Exxon, was one of the contributors to the Economic Report. The FTC responded by moving for a protective order as to both the interrogatories and the deposition. On May 19, 1978, a hearing was held in the district court. At that time, Exxon stated it was attempting to discover information that might support a theory that the FTC had waived any protection under Exemption 5 of the Act for the Economic Report by disclosing portions of the document to a Commissioner in violation of the Commission's Rules of Practice. Rule 4.7 of the Commission's Rules of Practice, 16 C.F.R. § 4.7 (1980), prohibits ex parte communications concerning the merits of an agency adjudicative proceeding between the decisionmakers and interested persons outside of the agency. The rule also prohibits certain additional classes of communications from being made off the record. In an adjudicative proceeding, communications between members of the Commission and either investigating or prosecuting employees of the Agency or outside parties which relate to the merits of the proceeding may not be made ex parte. If such a communication does occur, the communication must be placed on the public record pursuant to Rule 4.7(c).7 According to Exxon, if such communications had occurred in this case, the Economic Report could no longer be protected from disclosure. No mention of this theory had appeared up to that time in court papers; nor had it been argued before the Administrative Law Judge. After the hearing, the district court denied the motion as to the interrogatories, but, although ordering that Professor Elzinga not be deposed at that time, did not decide plaintiff's right to a deposition after the FTC had filed its motion to dismiss or, in the alternative, for summary judgment. Exxon immediately moved to compel the General Counsel and Secretary to answer the interrogatories.

The defendants then filed objections to Exxon's interrogatories with the district court on the grounds that the individual defendants were not proper parties to the case under 5 U.S.C. § 552(a)(4)(B)8 and that the requested information enjoyed the work product privilege. Next, on June 15, 1978, the FTC moved for dismissal, or in the alternative, summary judgment. The motion was accompanied by supporting memoranda, an index to the responsive documents, and affidavits of the chief complaint counsel, Roger Pool, and the Secretary of the FTC, Carol Thomas.

Exxon responded to the FTC's motion with a motion for limited discovery under Rule 56(f), Fed.R.Civ.P.9 Although Exxon did not articulate in the motion a basis for its request, the purpose can be extracted from the depositions upon written questions that Exxon sought from each of the four Commissioners who held office at the time this litigation was initiated.10 The questions concerned the Commissioners' exposure, if any, to the Economic Report and oral communications between the Commissioners and any other person concerning issues in the Exxon case. Exxon also requested the depositions upon oral examination of Professor Elzinga, Keith Golden, an FTC paralegal who was primarily responsible for the search of the requested documents, and Roger Pool. The FTC then filed a motion for close of discovery or, in the alternative, for a protective order on the basis that "further discovery would at best only be cumulative and would be of no help to plaintiff in its further prosecution of the case."11 On July 31, 1978, Exxon again responded, this time more fully, to the FTC's motion for summary judgment, stating it was unable to respond to the motion without first obtaining facts.

Following the filing of the parties' motions, a hearing was held in district court. On August 11, 1978, the court stayed discovery pending a determination of the summary judgment motion. Exxon, tenacious in its discovery efforts, then filed two supplemental Rule 56(f) affidavits. The first contended that the FTC in the index to documents attached to its summary judgment motion admitted that ex parte communications had in fact occurred between the Commissioners and the staff with respect to the Exxon case-the substance of which had not been put in the public record. The second stated that its request for limited discovery was further justified on two grounds: (1) an article appearing in a private trade publication that revealed a meeting between Chairman Michael Pertschuk and several economists allegedly involved in the Economic Report during the period the economists were under contract to evaluate the Exxon case, and (2) a letter released to Exxon from the assistant director of the Bureau of Competition to a private citizen that mentioned the Exxon case and had a handwritten notation that the letter had been sent to the Office of the Chairman.

Despite the additional affidavits, the district court in its partial summary judgment order of November 17, 1978 rejected Exxon's argument that it was entitled to pursue discovery by written interrogatories and oral depositions under Rule 56(f). Exxon Corp. v. FTC, 466 F.Supp. 1088 (D.D.C.1978). Concerning the request to discover facts about any ex parte communications and possible waiver of the FTC's Exemption 5 claim, the district court specifically held that, "(p)laintiff ... has advanced no reasons for the conclusion that defendants have, by their actions, made the application of the work product privilege inappropriate." Id. at 1095. Turning then to the merits, the district court granted partial summary judgment in favor of the FTC. In regard to the Economic Report, the district court, following an in camera inspection of the document, concluded that the Economic Report fell within the scope of the attorney work product privilege, as defined in Fed.R.Civ.P. 26(b)(3), and thus was shielded from disclosure by Exemption 5. Id. at 1099. This appeal followed.12

The underlying issue raised by Exxon is that an alleged disclosure of the Economic Report to an FTC commissioner acting in a judicial capacity waived a claim of work product privilege that might attach to the document, and therefore, render unjustifiable the FTC's reliance on Exemption 5. This case, however, turns upon a threshold question: did the district court abuse its discretion by denying Exxon's request to discover facts relating to the alleged disclosure so that it could respond to the FTC's motion for summary judgment?

Exemption 5 of the Act protects from disclosure "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."13 The district court ruled that this exemption was applicable to the Economic Report because it constituted attorney work product:

The Final Economic Report was prepared by expert consultants, at the direction of and for the guidance of FTC lawyers, and discusses a large range of tactical and strategic issues and options relating to the presentation of the Exxon case....

It is clear that the Final Economic Report was prepared after the complaint was issued in the Exxon case. It was prepared at the direction of the FTC's attorneys in aid of the FTC's prosecution of the Exxon case.

Exxon Corp. v. FTC, supra, 466 F.Supp. at 1099.

Before reaching that conclusion, the district court denied Exxon's request for limited discovery pursuant to Rule 56(f). Concerning Exxon's contention that discovery by written interrogatories was necessary to uncover facts about the possible waiver by the FTC of its Exemption 5 defense because of an ex parte disclosure to a commissioner, the district court stated:

Plaintiff's argument is misconceived ... in that it supposes the availability of Exemption (b)(5) to turn on the particular circumstances relevant to discovery between plaintiff and defendant in the Exxon case.... (T)he question (is) whether a private party, not a particular litigating plaintiff, would routinely be entitled to the documents through discovery.... (T)he claims of a particular litigant related to a particular lawsuit cannot affect the application of Exemption (b)(5) in an independent FOIA action.

Id. at 1096 (citations omitted). Based on this reasoning, the district court concluded that Exxon's request for limited discovery on the theory that the FTC waived the work product privilege was "unnecessary because it would be irrelevant." Id. We rule that the district court's decision to cut off discovery was not an abuse of discretion. Unlike the district court, however, we believe it is unnecessary to consider the tantalizing underlying conundrum presented by Exxon, because we find that the facts supporting the allegation that one or more of the economists might have disclosed the contents of the Economic Report to a commissioner are insufficient even to allow Exxon to pursue discovery of this matter.

Summary judgment is proper under Rule 56, Fed.R.Civ.P., only when "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Upon such a motion, the function of the district court is to determine whether any pertinent factual controversy exists, and in reviewing the record before it, the district court must give the party against whom the motion is made the most favorable view of the record if there is doubt as to the sufficiency of a factual showing.

In Freedom of Information Act cases, this court has held that the agency claiming an exemption from the duty to disclose information has the burden of proof and the district court should apply that burden with the knowledge that the plaintiff is at a distinct disadvantage in attempting to test the claims alleged by the agency. Schaffer v. Kissinger, 505 F.2d 389, 391 (D.C.Cir.1974). Furthermore, as stated in National Cable Television Association, Inc. v. FCC, 479 F.2d 183 (D.C.Cir.1973), a Freedom of Information Act case where the Government refused to release requested documents and we reversed the summary judgment for the Government:

To prevail, the defending agency must prove that each document that falls within the class requested either has been produced, is unidentifiable, or is wholly exempt from the Act's inspection requirements.

An agency may satisfy this burden with affidavits, Goland v. CIA, 607 F.2d 339, 352 (D.C.Cir.1978), and the opposing party then must controvert that showing.

Under Rule 56(f),14 the district court may defer ruling on a motion for summary judgment and "permit affidavits to be obtained or depositions to be taken or discovery to be had," so that the nonmoving party may obtain the information necessary to show an issue of fact in dispute. The district court may also deny summary judgment where the nonmoving party "shows the necessary facts exist but for some good reason he is unable to produce them on the motion." Donofrio v. Camp, 470 F.2d 428, 431 (D.C.Cir.1972). It is well settled that "(c)onclusory allegations unsupported by factual data will not create a triable issue of fact." Marks v. United States Dept. of Justice, 578 F.2d 261, 263 (9th Cir. 1978).

Exxon has persisted throughout the course of this litigation in its allegation that the FTC's staff might have made the contents of the Economic Report known to "third parties," e. g., one or more of the commissioners.15 In an affidavit attached to Exxon's Rule 56(f) motion, John S. Kingdon, counsel for Exxon, stated that this case presents genuine factual issues concerning whether any commissioners or members of their staffs "became aware of documents reflecting the subject matter of an economists' study regarding (the) pending (Exxon case)," but that without such discovery Exxon would not be able "to establish that defendants waived the exempt status of ... the Economists' Report, and are, therefore, without any legal right to withhold such documents from Exxon."16 We believe there are simply no facts in the record before us that justify Exxon's request to make discovery.

The Kingdon supplemental affidavits17 rely on three pieces of evidence to support the argument raised in the Rule 56(f) request that there is a factual issue whether prohibited ex parte communications took place. We find nothing in this evidence that places in dispute the FTC's contention that the Economic Report is shielded from disclosure under Exemption 5.

Both in this court at oral argument and in the district court, Exxon relied most heavily on an article in FTC: WATCH,18 a private publication, as a basis for its Rule 56(f) request. Following a close reading of that entire paper, we conclude that it offers no support for Exxon's contention that a commissioner or a commissioner's staff received information, by written or oral communication, concerning the Economic Report from one or more of the authoring economists. The January 13, 1978 issue of FTC: WATCH states that the economists who worked on the Economic Report included F. Michael Scherer and Michael Mann of Northwestern University and Boston College, respectively. The same publication also reports in a subsequent article that these two persons met with Chairman Pertschuk during the summer of 1977. By means of disclosed documents, Exxon learned that the panel of economists worked on the Report during the summer of 1977. On the basis of this information, Exxon sought discovery by written interrogatories from the members of the FTC to uncover whether any prohibited ex parte communications relating to the Economic Report took place during the meeting. The language of the FTC: WATCH article itself, however, belies Exxon's claim that the article justifies limited discovery. First, the publication, when discussing the Pertschuk meeting, states it was "an event unrelated" to the earlier report concerning which economists were involved in the development of the Economic Report. According to the paper, "the session ... produced a theoretical discussion of areas of research available to the FTC's economic staff."19 Additionally, the credibility of the article's statement that Scherer and Mann were members of the panel that produced the Economic Report is suspect: the article merely states, "(i)t is understood" that those two economists were part of the group reviewing the Exxon litigation.20 The FTC has never revealed the identity of the panel.

Also relied on by Exxon and submitted with its Rule 56(f) request is a letter released to Exxon, dated January 8, 1977, from David J. Saylor, Assistant Director of the Bureau of Competition, to a private citizen who is a Mobil Corporation dealer.21 The portion of the letter specifically relied on by Exxon states that possible changes in dealer-supplier relationships in the gasoline industry

will have to come through either the Exxon case or legislation by Congress. Such changes might involve some form of divestiture of marketing outlets on the part of the oil companies. While divestiture in the areas of crude production and refining would be of the most value, such an action would nevertheless go a long way towards solving the problems increasingly confronted by dealers.22

A handwritten notation on the bottom of the letter indicates that the "Office of the Chairman" received a copy of the letter. Exxon requested discovery of the circumstances surrounding dissemination to the Chairman of the letter to support its ex parte communication argument. We have read the letter and find that any connection it might have with a dissemination to a commissioner of the Economic Report is too attenuated to support Exxon's request.

We also note that the statement "Office of the Chairman" does not automatically mean that the letter was read by the Chairman or even that it was directed to the Chairman personally. As the FTC pointed out in the district court, without dispute, the Office of the Chairman is the "repository for many of the historical files of the Commission":23

(The Saylor letter) could have been sent to these files for any number of reasons, and never have been seen by the Chairman or any of his attorney advisors.

In summary, the Saylor letter creates no real issue of fact in this case.

Lastly, the Kingdon affidavit points to a statement contained in the FTC's June 15, 1978 memorandum in support of summary judgment as a "clear admission" that ex parte communications occurred between the commissioners and the FTC with respect to the Exxon case. The portion of the FTC memorandum relied on by Exxon describes documents under "Category B" of defendants' index to responsive documents (papers prepared by FTC staff for the economic panel) as including "several communications between the staff and the Commissioners, containing advice, recommendations, and opinions, relating to other matters which also touched on the Exxon case."24 We are not persuaded that this statement, like the other material offered by Exxon, is sufficient to justify further discovery. The record reveals that the Economic Report is not a "Category B" document, but rather is included under "Category A" (papers prepared by economists). There is nothing in the statement offered by Exxon that relates to the Economic Report, which is in dispute here.

In summary, Exxon has failed to show that the requested discovery was necessary to oppose the FTC's summary judgment motion. It is not the intent of Rule 56 to preserve purely speculative issues of fact for trial, such as those raised in this case.25B.

Contrary to Exxon's contention, we find that the materials upon which the FTC relied to support its summary judgment motion are adequate. The Commission provided a detailed index of documents withheld, and the affidavits of Pool and Thomas, which discuss the claim of exemption and attest to the adequacy of the search for response documents, are nonconclusory and relatively detailed. Additionally, the Thomas affidavit speaks to the question of ex parte contacts, revealing that "(a)ll documents located in any Commissioner's office were either public record documents or copies of internal memoranda also contained in the files of the Bureau of Competition or the Office of General Counsel."26 The FTC, in its supplemental memorandum in support of summary judgment, stated that any ex parte communications concerning the merits of the Exxon case had been placed in the public record.27 We further note that there are no allegations of bad faith by the FTC in the course of this litigation. In light of these circumstances, we reach the conclusion that the district court did not abuse its discretion by denying Exxon's discovery request and proceeding with the merits of the case. See Goland v. CIA, supra, 607 F.2d at 352.

Since we hold that the district court did not abuse its discretion by denying Exxon's Rule 56(f) motion, and that there is no material issue of fact present, the final question relates to the merits of the case. Is the Economic Report shielded from disclosure on the basis of Exemption 5? Our answer is yes.

The FTC asserts here, as it did in the district court, that the attorney work product privilege justifies the continued withholding of the document at issue. The district court, following an in camera inspection, agreed that the entire Economic Report was privileged attorney work product under Fed.R.Civ.P. 26(b)(3), and held that the document was shielded from mandatory disclosure on the basis of Exemption 5. Exxon Corp. v. FTC, supra, 466 F.Supp. at 1099.

As noted earlier, Exemption 5 of the Act protects from mandatory disclosure "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."28 As discussed in NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 149, 95 S.Ct. 1504, 1515, 44 L.Ed.2d 29 (1975), the Exemption is intended "to exempt (from disclosure) those documents, and only those documents, normally privileged in the civil discovery context." At least since the decision of the Supreme Court in that case, it has been settled that the attorney work product privilege as defined in Fed.R.Civ.P. 26(b)(3), falls within the parameters of Exemption 5. Id. at 155-56, 95 S.Ct. at 1518-1519. Thus, if a disputed agency document enjoys the work product privilege from discovery, it will also enjoy protection from disclosure by Exemption 5. In order to fall within the privilege, the withheld document must "relate to the conduct of either on-going or prospective trials; (it must) include factual information, mental impressions, conclusions, opinions, legal theories or legal strategies relevant to any on-going or prospective trial." Jordan v. United States Dept. of Justice, 591 F.2d 753, 775-76 (D.C.Cir.1978).

Applying these precedents to the record before us, we believe that the Economic Report falls squarely within the work product rule. The document is described by the FTC in the Index to Documents as an "in-depth evaluation of aspects of the theory of the case and the evidence supporting these aspects, discussions of possible future litigation strategies, and areas of possible inquiry for further economic analysis."29 Exxon has never disputed that characterization. Accordingly, we agree with the conclusion of the district court that the Economic Report is covered by Exemption 5.

We parenthetically note that even though the Freedom of Information Act does not provide relief for plaintiff in this case, a remedy may lie elsewhere. As indicated earlier,30 Exxon, in the course of the adjudicative proceeding, made a request for discovery of the disputed document in this case. The request was denied by the Administrative Law Judge on the basis of the work product privilege and that Exxon failed to establish that the Economic Report was unavailable from other sources as required by the Commission's Rules of Practice. That ruling, we believe, could be adequately considered by the Commission as part of a review of the Administrative Law Judge's final determination. Additionally, the questions whether the FTC may have waived its claim of privilege and whether the Commission failed to place on the public record the existence of any ex parte communications involving the Economic Report are ones better resolved not in this court under the guise of a Freedom of Information Act case, but in the administrative proceeding. The decision relating to those questions is, in turn, reviewable by the court of appeals on review of the final Commission order, if adverse to Exxon. See 15 U.S.C. § 45(c) (1976); Maremont Corp. v. FTC, 431 F.2d 124, 128 (7th Cir. 1970) (holding that collateral attack in a district court on various pretrial rulings by FTC hearing examiner and by Commission, including allegation of improper ex parte contact "are best resolved in (a) court of appeals when the final agency action is challenged").

The judgment of the district court is affirmed.