Edelman v. Securities and Exchange Commission ( 2018 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
RICHARD EDELMAN,
Plaintiff,
v. Civil Action No. 14-1140 (RDM)
SECURITIES AND EXCHANGE
COMMISSION,
Defendant.
MEMORANDUM OPINION
Plaintiff Richard Edelman operates a website on which he publishes information relating
to the transfer of “ownership of the Empire State Building” to the Empire State Realty Trust
(“ESRT”). Edelman v. SEC, 172 F. Supp. 3d 133, 138 (D.D.C. 2016) (Edelman I). Following
the formation of the ESRT, investors in the Empire State Building “bec[a]me investors in the
ESRT.” Dkt. 39-2 at 1 (Pl.’s SUMF ¶ 2). In 2014, Edelman lodged six requests for records
under the Freedom of Information Act (“FOIA”), 5 U.S.C. § 552, with the Securities and
Exchange Commission (“SEC”), seeking documents relating to the SEC’s “review of the . . .
transaction.” Edelman I, 172 F. Supp. 3d at 138. Among other records, Edelman requested “a
set of complaints submitted by Empire State Building investors to the SEC.” Id. at 140.
Dissatisfied with the SEC’s response, Edelman filed this FOIA action. Dkt. 1. The Court has
already resolved two rounds of dueling motions for summary judgment, see Edelman I, 172 F.
Supp. 3d 133; Edelman v. SEC, 239 F. Supp. 3d 45 (D.D.C. 2017) (Edelman II), and the matter
is now before the Court on the third—and final—round of summary judgment motions, see Dkt.
37; Dkt. 39.
The only question that remains is whether the SEC may withhold the identities of thirty-
six investors (or associated parties) in the Empire State Building who contacted the SEC to voice
concerns regarding the creation of the ESRT. The answer turns on whether the complainants’
privacy interest outweighs the public interest in knowing their identities. Applying this
balancing test, the Court concludes that the SEC is not required to disclose the identities of the
thirty-six complainants. The Court, accordingly, will GRANT the SEC’s motion for summary
judgment, Dkt. 37, and will DENY Edelman’s cross-motion for summary judgment, Dkt. 39.
I. BACKGROUND
The factual background and procedural history of this case have been described at length
in the Court’s earlier memorandum opinions. See Edelman I, 172 F. Supp. 3d at 138–42;
Edelman II, 239 F. Supp. 3d at 49–50. As relevant to the motions currently before the Court, the
SEC produced 1,447 pages of consumer complaint documents. Dkt. 37-1 at 1–2 (Second Barss
Decl. ¶ 4). In doing so, however, the SEC redacted the names of seventy individuals “who had
communicated their concerns . . . about the ESRT transaction” to the SEC. Id. (Second Barss
Decl. ¶ 4). The seventy complainants “included individual investors in the [Empire State
Building], relatives of investors, and trustees of family trusts that hold . . . shares” in the
property. Id. (Second Barss Decl. ¶ 4).
The last time this case was before the Court, the SEC invoked Exemption 6 to justify the
redactions. Exemption 6 “protects information about individuals in ‘personnel and medical files
and similar files’ when its disclosure ‘would constitute a clearly unwarranted invasion of
personal privacy.’” Shapiro v. U.S. Dep’t of Justice, 153 F. Supp. 3d 253, 257 (D.D.C. 2016)
(quoting 5 U.S.C. § 552(b)(6)). The SEC asserted that Exemption 6 permitted it “to shield [the]
complainants from being harassed or ridiculed by any person they may have criticized in their
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complaints.” Edelman II, 239 F. Supp. 3d at 55 (internal quotation marks and citation omitted).
Edelman countered that their privacy interest was “not particularly strong because the complaints
are commercial in nature and because several of the complainants have . . . agreed to the
disclosure of their identities.” Id. In Edelman II, the Court denied both motions for summary
judgment on this point. Id. at 57. The Court explained its reasoning as follows:
Given the fact-intensive nature of the required inquiry, the Court cannot accept the
SEC’s invitation to sustain its application of Exemption 6 to all identifying
information about all of the complainants. This is not to say, however, that the SEC
cannot make a sufficient showing that the identities of some of the complainants
implicate privacy interests that outweigh the public interest in disclosure. But
because the current record lacks sufficient information for the Court to conduct the
required balancing, and because the SEC . . . should conduct the relevant balancing
in the first instance, the Court will deny summary judgment at this time.
Id.
In accordance with Edelman II, the SEC subsequently disclosed the names of thirty-four
of the seventy complainants. Those complainants, the SEC explained, had (1) “stated in
affidavits . . . that their names need not be withheld;” (2) “given interviews about the ESRT
transaction;” (3) “posted their concerns on [the] [I]nternet;” or (4) “appeared as parties [or]
counsel [in] lawsuits against the ESRT trustees.” Dkt. 37-1 at 2 (Second Barss Decl. ¶ 5). The
remaining thirty-six complainants, however, do not appear to have engaged in any such public
activity. Id. (Second Barss Decl. ¶ 6). The SEC, accordingly, has continued to withhold their
names on the grounds that this information falls within Exemption 6. See id. (Second Barss
Decl. ¶ 6). The SEC has now renewed its motion for summary judgment, Dkt. 37, and Edelman
has renewed his cross-motion, Dkt. 39.
II. LEGAL STANDARD
FOIA cases are typically resolved on motions for summary judgment under Federal Rule
of Civil Procedure 56. See, e.g., Beltranena v. U.S. Dep’t of State, 821 F. Supp. 2d 167, 175
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(D.D.C. 2011). To prevail on a summary judgment motion, the moving party must demonstrate
that there are no genuine issues of material fact and that he or she is entitled to judgment as a
matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986); Fed. R. Civ. P. 56. In a
FOIA action, the agency may meet its burden by submitting “relatively detailed and non-
conclusory” affidavits or declarations, SafeCard Servs., Inc. v. SEC, 926 F.2d 1197, 1200 (D.C.
Cir. 1991), and an index of the information withheld, Vaughn v. Rosen, 484 F.2d 820, 826–28
(D.C. Cir. 1973); Summers v. Dep’t of Justice, 140 F.3d 1077, 1080 (D.C. Cir. 1998). Because
“it is the function, not the form, of the [Vaughn] index that is important,” Keys v. U.S. Dep’t of
Justice, 830 F.2d 337, 349 (D.C. Cir. 1987), an agency may submit a declaration “in lieu of the
index itself,” so long as the declaration adequately identifies the records withheld and the
agency’s reasons for doing so, Judicial Watch, Inc. v. Food & Drug Admin., 449 F.3d 141, 146
(D.C. Cir. 2006). An agency “is entitled to summary judgment if no material facts are in dispute
and if it demonstrates ‘that each document that falls within the class requested either has been
produced . . . or is wholly exempt from the [FOIA’s] inspection requirements.’” Students
Against Genocide v. U.S. Dep’t of State, 257 F.3d 828, 833 (D.C. Cir. 2001) (quoting Goland v.
CIA, 607 F.2d 339, 352 (D.C. Cir. 1978)). The Court reviews the agency’s decision de novo, and
the agency bears the burden of sustaining its action. 5 U.S.C. § 552(a)(4)(B).
III. ANALYSIS
The Freedom of Information Act “mandates that an agency disclose records on request,
unless they fall within one of nine [exclusive] exemptions.” Milner v. Dep’t of Navy, 562 U.S.
562, 565 (2011). All that remains at issue in this third round of cross-motions for summary
judgment is Exemption 6.
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Exemption 6 provides that an agency need not disclose “personnel and medical files and
similar files the disclosure of which would constitute a clearly unwarranted invasion of personal
privacy.” 5 U.S.C. § 552(b)(6). The parties—and the Court—agree that the information at issue
here—the identities of the complainants—is contained in “similar files” and thus satisfy
Exemption 6’s threshold requirement. See Dkt. 37 at 4; Dkt. 39-1 at 2 n.2; see also Edelman I,
239 F. Supp. 3d at 54–55; People for the Am. Way Found. v. Nat’l Park Serv., 503 F. Supp. 2d
284, 303 (D.D.C. 2007). The more difficult question is whether disclosure of the thirty-six
complainants’ identities “would constitute a clearly unwarranted invasion of personal privacy.”
5 U.S.C. § 552(b)(6). To make that determination, the Court employs a two-step test. First, the
Court must decide whether “disclosure would compromise a substantial, as opposed to a de
minimis, privacy interest.” Nat’l Ass’n of Home Builders v. Norton, 309 F.3d 26, 33 (D.C. Cir.
2002) (internal quotation marks omitted). Second, if so, the Court must weigh “the private
interest involved (namely, the individual’s right of privacy) against the public interest (namely,
. . . to open agency action to the light of public scrutiny).” Judicial Watch, 449 F.3d at 153(internal quotation marks omitted).
With respect to the first step, the Court concludes that disclosure would compromise a
substantial privacy interest. To be sure, Exemption 6 “does not categorically exempt
individuals’ identities” from disclosure “because the privacy interest at stake may vary
depending on the context in which it is asserted.” Am. Immigration Lawyers’ Ass’n v. Exec.
Office of Immigration Review, 830 F.3d 667, 675 (D.C. Cir. 2016) (quoting Judicial Watch, 449
F.3d at 153). Here, however, the SEC—at least now—does not purport to assert a categorical
exemption. Rather, following the Court’s decision in Edelman II, the SEC engaged in a case-by-
case review of the privacy interests at stake, and it disclosed the identities of roughly half of the
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seventy complainants. Dkt. 37-1 at 2 (Second Barss Decl. ¶ 5). Those individuals, the SEC has
explained, had either previously indicated “that their names need not be withheld” or had made
public statements about the ESRT transaction or had appeared as parties or counsel in lawsuits
about the transaction. Id. (Second Barss Decl. ¶ 5). But, as to the remaining thirty-six
complainants, the SEC has concluded that disclosure of their identities “would interfere with a
general expectation that the public can complain to the government in privacy; could subject
them to retaliation, harassment[,] and ridicule; and could reveal information about their personal
financial interests.” Dkt. 37 at 4.
Edelman does not dispute that harms of this type may at times meet the substantial-
privacy-interest hurdle of Exemption 6. In his view, however, this is not such a case because the
SEC has erroneously “assum[ed] that the identities of [the] investors . . . [are] confidential and
not generally known.” Dkt. 39-1 at 5. That assumption is incorrect, according to Edelman,
because “[t]he list of former investors in the [Empire State Building] is not confidential.” Dkt.
39-3 at 1 (Edelman Decl. ¶ 4); see also Dkt. 39-4 (list of former investors). To Edelman, this
fact “negates many of the [SEC’s] claims that the . . . complainants’ privacy interest will be
violated by the release of their identities.” Dkt. 39-1 at 5.
Edelman’s argument is unavailing. First, the factual premise of the argument is incorrect.
As the SEC explains, it compared the list of former Empire State Building investors that
Edelman provided “against the names of the thirty-six complainants whose names were
withheld” and found that “[o]nly eight of those names were on [Edelman’s] list.” Dkt. 40-1 at 1
(Third Barss Decl. ¶ 4). But, even putting that significant factual limitation aside, Edelman’s
argument fails to join issue with the SEC’s principal concern: disclosing the identities of the
thirty-six complainants who have not publicly aired their objections “would interfere with a
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general expectation that the public can complain to the government in privacy” and could subject
those who filed complaints “to retaliation [and] harassment.” 1 Dkt. 37 at 4. That is, although the
identity of the Empire State Building investors may already be known, the complainants’ interest
lies in not being known as complainants, and that information is not public.
The SEC’s concerns about potential harassment, moreover, are not merely conjectural.
The SEC notes, for example, that a number of the investors who voiced objections to the SEC
regarding the ESRT transaction “expressed their fear that ESRT management would retaliate
against them if ESRT discovered that they submitted complaints to the SEC regarding the
transaction,” and “a number of investors . . . asked for confidentiality.” Dkt. 37-2 at 2 (Second
Kluck Decl. ¶ 5). Although the SEC failed to maintain a list of those who requested
confidentiality, id. (Second Kluck Decl. ¶ 6), and although an agency’s promise of
confidentiality is not dispositive, see Wash. Post Co. v. U.S. Dep’t of Health & Human Servs.,
690 F.2d 252, 263 (D.C. Cir. 1982), these comments demonstrate that the SEC’s stated concerns
are not hypothetical and that at least some of the thirty-six complainants whose identities the
SEC has withheld fear retaliation or harassment. Their concerns, moreover, find some validation
in the fact that the transaction at issue remains the subject of litigation in which those in favor of,
and those opposed to, the transaction have been urged to take sides. See Shasha v. Malkin, No.
14-cv-9989 (S.D.N.Y). Indeed, by Edelman’s own account, all of the investors in the Empire
State Building “have already been contacted by the plaintiffs in that case to join as plaintiffs or
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The SEC also asserts that disclosure “could reveal information about [the complainants’]
personal financial interests.” Dkt. 37 at 4. On the present record, the Court cannot determine the
extent to which the financial information contained in the complaints overlaps with the
information that can be gleaned from Edelman’s list of purported former investors in the Empire
State Building. See Dkt. 42 at 3–4. But, given the Court’s conclusion that the risk of retaliation
and harassment is sufficient to establish a substantial privacy interest, the Court need not rely on
this additional basis for the SEC’s decision.
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witnesses.” Dkt. 39-3 at 2 (Edelman Decl. ¶ 8). It is not difficult to imagine that, armed with
complaints that could be tied to particular investors, those investors might be contacted again or
that others—such as investors’ family members—might be contacted.
Under other circumstances, courts have recognized that disclosing the identity of
complainants may implicate substantial privacy interests. In Wisdom v. U.S. Trustee Program,
for example, a FOIA requester objected to the redaction “of the names of individuals who [had]
complained to the agency about [a private bankruptcy trustee’s] demeanor” and “similar
identifying information.” 232 F. Supp. 3d 97, 123 (D.D.C. 2017). In sustaining the agency’s
invocation of Exemption 6, the court observed that, even where other “identifying information is
. . . available in public records, individuals may still retain a privacy interest in avoiding the
association of their names with complaints or other disciplinary actions.” Id. at 124. There, as
here, the agency asserted that disclosure of the complainant’s identities “could subject the
individuals involved to ‘unnecessary public attention, harassment, or embarrassment’” and could
“stymie the government’s efforts to obtain candid information.” Id. at 125. The court concluded
that this asserted privacy interest was substantial. Id. “Indeed,” the Wisdom court explained,
“courts have routinely upheld the withholding of complainants’ names on similar rationales.” Id.
(citing Lakin Law Firm, P.C. v. FTC, 352 F.3d 1122, 1125 (7th Cir. 2003)). Years earlier, Judge
Gesell touched on a similar theme in Center for Auto Safety v. National Highway Traffic Safety
Administration, stressing that “[t]he public interest . . . encompasses . . . the interests of citizens
generally to complain to their government in privacy.” 809 F. Supp. 148, 150 (D.D.C. 1993).
To be sure, that interest is not universal, and it does not categorically protect the identities
of those who complain to the government. In light of the particular facts of this case, however,
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the Court concludes that the privacy interests of the thirty-six complainants, who have not joined
the public debate over the wisdom or lawfulness of the ESRT transaction, are substantial.
The second step of the inquiry requires the Court to weigh this (substantial) privacy
interest against the public interest in disclosure. As the Supreme Court has explained, “the only
relevant ‘public interest in disclosure’ to be weighed . . . is the extent to which disclosure would
serve the ‘core purpose of the FOIA,’ which is ‘contributing significantly to public
understanding of the operations or activities of the government.’” U.S. Dep’t of Def. v. Fed.
Labor Relations Auth., 510 U.S. 487, 496 (1994) (emphasis omitted) (quoting U.S. Dep’t of
Justice v. Reporters Comm. for Freedom of Press, 489 U.S. 749, 775 (1989)). The SEC
previously produced 71 pages of attorney notes and 1,447 pages of consumer complaints to
Edelman, see Edelman II, 239 F. Supp. 3d at 50, and has now “produced the names of thirty-four
of the[] [c]omplainants,” Dkt. 37-1 at 2 (Second Barss Decl. ¶ 5). The “relevant question, then,
. . . is whether, given the information already disclosed by [the SEC], the ‘incremental value’
served by disclosing [the complainants’] name[s] outweighs [their] privacy interest.” Am.
Immigration Lawyers, 830 F.3d at 674.
When this case was last before the Court, the SEC asserted—without elaboration—that
disclosing the names of the complainants “would not shed light on how the government
operates.” Dkt. 26 at 11; see Dkt. 30 at 10. The Court rejected this conclusory assertion, noting
that it ignored the public interest (1) in “‘knowing who may be exerting influence on [SEC]
officials sufficient to convince them to’ approve or disapprove a transaction,” Edelman II, 239 F.
Supp. 3d at 55 (quoting People for the Am. Way Found., 503 F. Supp. 2d at 306); (2) in
“knowing whether the SEC gives ‘greater weight to the comments submitted by’ some
complainants than others,” id. (quoting All. for Wild Rockies v. Dep’t of Interior, 53 F. Supp. 2d
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32, 37 (D.D.C. 1999)); and (3) in “understanding whether particular complaints, which were
credited or rejected by the SEC, were based on personal knowledge, financial interests, or other
factors,” id. at 55–56.
In its renewed motion for summary judgment, the SEC has provided the Court with more
information on the SEC’s role with respect to the ESRT formation and the purposes for which it
considered the complaints. According to Samuel Kluck, a Legal Branch Chief in the Office of
Real Estate and Commodities of the SEC, the ESRT “filed the Form S-4 registration statement
that involved a consent solicitation to approve the consolidation of several properties, including
[the Empire State Building], into [the] ESRT[,] which would then qualify as a real estate
investment trust.” Dkt. 37-2 at 1 (Second Kluck Decl. ¶ 2). The SEC then “review[ed] [the]
ESRT’s registration statement and related filings” in order to “comment on any potential
disclosure deficiencies under the federal securities laws.” Id. at 2 (Second Kluck Decl. ¶ 4). The
SEC “did not make any policy determinations on whether the ESRT transaction was fair to
investors, nor [did the SEC] pass upon its merits, [its] fairness[,] or the accuracy of the
disclosure.” Id. (Second Kluck Decl. ¶ 4). The complaints, according to the SEC, played only a
limited role in its review of the registration statement: SEC personnel merely “considered
whether the complaints identified any legal issues about the ESRT transaction,” and, more
importantly, they “did not look to the complaints [for] policy guidance.” Dkt. 37 at 9. Edelman
has received the complaints, and he has now learned the identity of about half of the
complainants. Beyond that, he also knows that the remaining complainants were “individual
investors, relatives of investors, and trustees of family trusts that hold . . . shares” in the Empire
State Building and, thus, had an interest in the transaction. Id.
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With the benefit of this additional information, the Court agrees with the SEC that the
public interest in the identities of the thirty-six remaining complainants is minimal. Under
FOIA, the only relevant public interest is the interest in illuminating “the operations or activities
of the government.” Am. Immigration Lawyers, 830 F.3d at 674 (citation omitted). It is difficult
to discern what “incremental” insight into the work of the SEC the specific identities of the
thirty-six remaining complainants might convey. Edelman posits that this information would,
“when taken into account with the complaints themselves, show how the SEC evaluated and
weighed the communications on the ESRT issues.” Dkt. 39-1 at 8. But that conclusion is at
odds with the SEC’s description of both its limited role in the transaction and the even more
limited role of the complainants. Edelman has not offered any reason to think that the name
corresponding to a given complaint will reveal “how the SEC evaluated [or] weighed” that
complaint. Id.
Edelman also asserts that disclosure would “verify the statements about the government’s
action on the ESRT transaction stated in the Kluck Declaration.” Id. To the extent that Edelman
is suggesting that the averments in the Kluck Declaration are unreliable, it suffices to note that
“declarations provided by agencies are generally ‘accorded a presumption of good faith, which
cannot be rebutted by purely speculative claims.’” Spataro v. Dep’t of Justice, 279 F. Supp. 3d
191, 204 (D.D.C. 2017) (quoting SafeCard, 926 F.2d at 1200). And Edelman has failed to
present any reason to doubt the veracity of the Kluck Declaration.
Edelman contends that “the Court has [already] found . . . [that] there is a public interest
in the withheld information.” Dkt. 39-1 at 8; see Dkt. 42 at 6. As explained above, however, the
Court in Edelman II simply concluded that the SEC had failed to substantiate its assertion that
the public interest would not be served by disclosure based on the record before the Court at that
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time. In contrast, the SEC’s renewed motion for summary judgment and the accompanying
Kluck Declaration demonstrate that disclosing the identities of the complainants would reveal
little, if anything, about the SEC’s efforts to identify disclosure defects in the ESRT’s
registration statement. As the Supreme Court has explained, FOIA’s objectives are “not fostered
by disclosure of information about private citizens that is accumulated in various governmental
files but that reveals little or nothing about an agency’s own conduct.” Reporters Comm. for
Freedom of Press, 489 U.S. at 773. In this case, disclosing the identities of the thirty-six
complainants “would not shed any [meaningful] light on the conduct of [the SEC].” Id.On the other side of the scale, moreover, the Court has already concluded that the
unidentified complainants have a substantial privacy interest in maintaining the confidentiality of
their submissions. That interest might, of course, diminish over time. For present purposes,
however, there is no reason to doubt the SEC’s implicit representation that the interest remains
live, and the pending litigation over the ESRT transaction provides some confirmation of that
premise. Finally, neither Edelman nor the SEC identified any “other tools” that the SEC might
employ to prevent harassment of the complainants. See Edelman II, 239 F. Supp. 3d at 56 (citing
Bd. of Trade v. Commodity Futures Trading Comm’n, 627 F.2d 392, 400 (D.C. Cir. 1980)).
Because the complainants’ privacy interest in nondisclosure is substantial and the public
interest in disclosure is de minimis, disclosing the identities of the complainants “would
constitute a clearly unwarranted invasion of personal privacy.” 2 5 U.S.C. § 552(b)(6). The
2
Edelman contends that the SEC must produce a Vaughn index “listing each of the 36 instances
where the identities of the complainant is withheld.” Dkt. 39-1 at 4. As the D.C. Circuit has
explained, the agency need only “give the reviewing court a reasonable basis to evaluate the
claim of privilege.” Gallant v. NLRB, 26 F.3d 168, 173 (D.C. Cir. 1994). Here, “[i]t would
make little sense . . . for the [SEC] to address each of the [complainants] separately; the [Kluck]
[D]eclaration makes clear that all [thirty-six complainants’ identities] are being withheld for the
very same reasons.” Judicial Watch, Inc. v. U.S. Dep’t of State, 2017 WL 3913212, at *5
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Court will, accordingly, GRANT the SEC’s motion for summary judgment, Dkt. 37, and will
DENY Edelman’s cross-motion for summary judgment, Dkt. 39.
A separate Order will issue.
/s/ Randolph D. Moss
RANDOLPH D. MOSS
United States District Judge
Date: March 23, 2018
(D.D.C. Sept. 6, 2017). Furthermore, a Vaughn index in these circumstances would have little, if
any, value. As the SEC explains, “[t]he only reason Edelman provides for seeking a Vaughn
index is [that] he believes that the SEC [should indicate] which [c]omplainants sought
confidentiality.” Dkt. 40 at 3. But the fact that only some of the complainants sought
confidentiality does not alter the Court’s conclusion that all of them have a substantial privacy
interest in the nondisclosure of their identities.
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