The First Casualties of Emergency Relief Programs
This post discusses the media plaintiffs’ prospect in WP Co. LLC v. U.S. Small Business Administration, seeking information about government disbursement of funds under two programs being used to address the severe economic dislocations attendant the coronavirus pandemic.
“In war, truth is the first casualty.” Aeschylus
“Not Now!:” FOIA Requests and the Small Business Administration’s Response
It is said that truth is the first casualty of war.[1] In the same vein, perhaps transparency and safeguards to prevent waste, fraud, and abuse are the first casualties of emergency relief programs, such as the Paycheck Protection Program and the Economic Injury Disaster Loan Program (“EIDL program”) administered by the U.S. Small Business Administration (“the SBA”).
Since the COVID-19 virus began, agencies have given secondary importance to satisfying their FOIA obligations in a timely manner,[2] and frankly federal agencies had persistent backlogs long before anyone heard of the coronavirus (at least in its novel form).
But the U.S. Small Business Administration has been providing billions of dollars in financial assistance through the Paycheck Protection Program (more than $525 billion to date) and the EIDL Program (up to $12 billion dollars), while putting off FOIA requests for basic information regarding the loans and loan recipients from at least five news organizations, the Washington Post, Bloomberg News, the Wall Street Journal, Pro-Publica, and the New York Times.
For example, the Washington Post has sought:
(i) “Names and commercial street and email addresses of recipients of approved loans”; (ii) “Date of loan approval and date of disbursement (if available)”; (iii) “Names of officers, directors, stockholders or partners of recipient firms”; (iv) “Kinds and amounts of loans, loan terms, interest rates, maturity dates, general purpose”; and (v) “Identity and location of participating banks.”
In response to the myriad requests, SBA has asserted:
“At this time, the Agency is focusing its efforts on assisting small business during the unprecedented disruption of the economy due to the coronavirus (COVID-19) outbreak. The agency recognizes the need to balance the interests of transparency with the privacy and confidentiality issues release of loan information raises. In the future, we will be able to turn our efforts to providing loan specific data to the public but hope that all understand the need for the Agency to focus its efforts fulfilling the needs of small business. The information will be added to the SBA.gov website when it becomes available.”
WP Co. LLC v. U.S. Small Business Administration, Complaint, Dkt. No. 20-cv-1240 ¶¶36, 56 (D.D.C.)(filed May 12, 2020). The same boilerplate language occurs on SBA’s own frequently requested documents page.[3]
Five major news organizations have brought suit to obtain such information. Complaint, WP Co. LLC v. U.S. Small Business Administration, Complaint, Dkt. No. 20-cv-1240 (D.D.C.)(filed May 12, 2020). (The complaint can be accessed either at the law360.com website (subscription required) or the Washington Post website.) This post will briefly discuss two aspects of the suit. The first is obvious, can the SBA put off providing information of the type the media requesters are seeking to focus on its programmatic objectives? The second, whether the SBA can withhold some of the information sought, is a bit less obvious.
Can the Need to Focus on Taking Quick Action Justify Failure to Provide the Information Sought?
The media plaintiffs allege that to date not only has SBA failed to produce any records responsive to their requests, Complaint, ¶37, the agency has not satisfied the requirements, set forth in Citizens for Responsibility & Ethics in Washington v. FEC, 711 F.3d 180 (2013)(Kavanaugh, J.)(“CREW”), for making a “determination” regarding their requests. CREW requires that an agency gather and review the documents and determine and communicate the scope of the documents it intends to produce and withhold, and the reasons for withholding any documents within the applicable 20- to 30-day time frame for making a “determination.” Id. at 186, 188. Plaintiffs alleged that the SBA has neither “informed any of the Plaintiffs as to the scope of the records that the agency will produce” nor “the scope of responsive records that the agency will withhold pursuant to any FOIA exemption(s).” Complaint, ¶¶38-40.
Indeed, after CREW, a D.C. Circuit panel held that FOIA’s time deadlines imposed on agencies an affirmative obligation to organize their FOIA operations so as to enable it to comply with those deadlines. Judicial Watch, Inc. v. Dep’t of Homeland Security, 895 F.3d 770, 777 (D.C. Cir. 2018). The Court explained that the tight time deadlines and the statutory requirement that the agency “promptly respond” to FOIA requests had been “premised on agencies improving records management systems to enable ‘prompt’ responses.” Id. Indeed, “[u]pon a well-pleaded [‘pattern or practice’] complaint,” the Court held, a district court must determine whether “an agency has organized its records management systems to enable prompt determinations” and monitor “an agency’s progress in adjusting its records management systems to enable” FOIA compliance. Id. at 786.
When establishing administrative processing deadlines in 1974, Congress provided that “[i]f the Government can show exceptional circumstances exist and that the agency is exercising due diligence in responding to the request, the court may retain jurisdiction and allow the agency additional time to complete its review of the records.” Act of November 21, 1974 Pub. L. 93-502, §(c), 88 Stat. 1561, 1562 (1974)(adding 5 U.S.C. §552(a)(6)(C)).[4] The major precedent interpreting the provision, Open America v. Watergate Special Prosecution, 547 F.2d 605 (D.C. Cir. 1976), focuses on delays related to an unexpected volume of FOIA requests. And most cases discussing the provision focus on circumstances that involve an agency’s receipt of an unexpected volume of requests. E.g., Gatore v. United States Department of Homeland Security, 177 F. Supp. 3d 46, 55 (D.D.C. 2016). National Security Archive v. S.E.C., 770 F. Supp. 2d 6 (D.D.C. 2011); Electronic Frontier Foundation v. Department of Justice, 517 F. Supp. 2d 111, 116–17 (D.D.C. 2007); Electronic Frontier Foundation v. Department of Justice, 563 F. Supp. 2d 188 (D.D.C. 2008).
But the text is not limited to such circumstances, and presumably could include emergency circumstances in which programmatic responsibilities call for greater attention than normal.[5] In terms of published cases, the SEC seems to have come the closest to making such an argument in National Security Archive . There, the SEC pointed to unanticipated FOIA requests, “against the backdrop of the Bernie Madoff investigation, the financial crisis, and related regulatory reforms.” 517 F. Supp. 2d at 9.[6]
In 1996, in confirming Open America, Congress added specificity to exceptional circumstances.
(ii)For purposes of this subparagraph, the term “exceptional circumstances” does not include a delay that results from a predictable agency workload of requests under this section, unless the agency demonstrates reasonable progress in reducing its backlog of pending requests.
(iii)Refusal by a person to reasonably modify the scope of a request or arrange an alternative time frame for processing a request (or a modified request) under clause (ii) after being given an opportunity to do so by the agency to whom the person made the request shall be considered as a factor in determining whether exceptional circumstances exist for purposes of this subparagraph.
Electronic Freedom of Information Act Amendments of 1996, Pub. L. 104-231, §7, 110 Stat. 3048 (codified at 552(a)(6)(C)(ii)(iii).[7]
The SBA should not be able to invoke “exceptional circumstances” to justify delay in providing the records sought by the media organizations.
First, exceptional circumstances should not justify an agency’s failure to provide basic information regarding recipients of financial assistance programs to which billions in taxpayer funds are being devoted. An observation made by Judge Pillard in Judicial Watch, Inc. v. Dep’t of Homeland Security, 895 F.3d 770 (D.C. Cir. 2018)(“Judicial Watch v. DHS”), is particularly apt. There Judicial Watch sought travel receipts from the Secret Service relating to VIP travel. Judge Pillard observed that “any adequately functioning organization should be able to produce [such records] with dispatch.” Id. at 788 (Pillard, J., concurring).
Much like the Secret Service receipts in Judicial Watch, Inc. v. Dep’t of Homeland Security, any adequately functioning agency disbursing overseeing a government-assisted loan program should be able to provide basic information about the loans, lenders, and borrowers “with dispatch.” And as in Judicial Watch v. DHS, the plaintiff news organizations requests to the SBA do not appear to“involve any subtle relevance questions about where or how to search, or cumbersome inter-agency collaboration to identify what information is kept, and where it might be found.” Id. Moreover, the SBA has provided statistical summaries describing the loans made under the two programs,[8] summaries that it could hardly generate unless it maintained digitized data containing the basic information the media plaintiffs seek.
And indeed, the circumstances are “exceptional” for another reason — the extraordinary amount of funds being provided under the Paycheck Protection and EIDL programs. The exceptional nature of SBA’s expanded responsibilities (and their consequences for borrowers and their employees, as well as the economic health of the country) suggests a heightened need for transparency to uncover how the program is working and whether it is plagued by any fraud, waste, or abuse. Fraud, waste, and abuse is particularly likely to occur when an agency is operating at an unusual, indeed extraordinary, pace.
Second, the news organizations assert that the information they seek is “essentially the same information that the SBA has up until now routinely provided about the businesses that borrow funds under its Section 7(a) program – the program that the CARES Act expanded to create the PPP.” Complaint, ¶34; see, SBA FOIA Page, Frequently Requested Documents, “2010 – Present SBA 7(a) Loan Data” excel spread sheet. [9] Thus, the requests require the SBA to do little more than it has done in the past, as a part of its affirmative disclosure obligations.
Third, the SBA has made no effort to determine which, if any exceptions it will invoke, or even any principles it will apply in doing so, negotiate a limitation in the scope of the requests, nor offer a timeline for when such information would be made available. It has not explained why the undisputed urgency of getting the funds to borrowers expeditiously precludes the agency from compiling the requested data, even though the data is presumably largely digital. Because of the digital nature of the data, responding to the media plaintiffs’ inquiries should not be labor intensive. Thus, SBA has clearly not been diligent during the 20- to 30-day period it has had for administrative processing.
Can the Requested Information Be Withheld?
The SBA is also unlikely to prevail on any attempt to withhold the requested records.
In a somewhat analogous case, arising out of the Federal Reserve’s response to the 2008 financial crisis, the Second Circuit held that information regarding loans and borrower information, resembling that sought by the WP Co. v. SBA plaintifs, could not be withheld under FOIA Exemption 4. Bloomberg, L.P. v. Board of Governors of the Federal Reserve System, 601 F.3d 143 (2d Cir. 2010). There, the Court held that information regarding Reserve Bank loans to private banks during the crisis could not be withheld under Exemption 4 because the information had not been supplied by the borrowers. Id. at 148-49. Rather, information regarding the borrower’s identity, the loan’s amount, origination date and maturity date, and the collateral provided simply “disclos[ed] . . . the agency’s own executive actions.” Id. Thus, the government could not be viewed as having “obtained” information as to its own actions from external sources, Id. at 149, making Exemption 4 inapplicable. [10]
And courts have ordered similar information released despite the government’s invocation of FOIA’s privacy exemption, Exemption 6.[11] See, e.g., Checkbook Center for the Study of Services v. HHS, 554 F.3d 1046, 1051 (D.C. Cir. 2009) (physician’s Medicaid compensation); Multi Ag Media LLC v. Department of Agriculture, 515 F.3d 1224, 1232 (D.C. Cir. 2008)(agricultural subsidy and benefit programs); National Public Radio v. FEMA, 2017 WL 5633090 (D.D.C. Nov. 21, 2017)(identification of individuals from whom FEMA purchased property pursuant to its Hazard Mitigation Grant Program).
Of course, the U.S. Supreme Court recently radically revised Exemption 4 doctrine in Food Marketing Institute v. Argus Leader Media,, 139 S. Ct. 2356 (2019). In that case, the Court elided the issue of whether funds spent by the government or claims made under a government program by food stamp providers could be considered the business information of the recipient of the government funds, deciding sub silentio that it was. See, Bernard Bell, Oh SNAP!: The Battle Over ‘Food Stamp’ Redemption Data That May Radically Reshape FOIA Exemption 4 (Part II), 36 YALE J. ON REG.: NOTICE & COMMENT (Sept. 12. 2018) (Section I: Fiscal Transparency — “Follow the Money”).
And, as I have observed previously, Food Marketing may also undermine the privacy exemption cases, by allowing the government to invoke Exemption 4 instead. Rather than having to show that grant or loan recipients’ privacy interest outweigh the public interest in disclosure of the government’s expenditure of taxpayer funds, the government may only need to show that the grant recipient or borrower keeps the information “closely-held.” Food Marketing Institute: A Preliminary Assessment (Part II), YALE J. ON REG.: NOTICE & COMMENT (July 8, 2019) .[12]
But the media plaintiffs seem to have anticipated a potential Exemption 4 objection. The Supreme Court, in Food Marketing, left open the question of whether establishing information’s confidentiality not only requires a showing that the business imparting the information regards it as secret, but also a showing that the recipient government agency had provided assurances that it would keep the information secret. Food Marketing, 139 S.C.t at 2363. The Justice Department’s Office of Information Policy (“OIP”) has nevertheless directed agencies to proceed on the assumption that both elements are required. Exemption 4 after the Supreme Court’s Ruling in Food Marketing Institute v. Argus Leader Media. Moreover, OIP has explained, agency statements can negate any argument that the government has agreed to keep the information provided confidential. Id. [13] In their complaint, plaintiff media organizations note that on the application itself the SBA advises applicants that:
Subject to certain exceptions, SBA must supply information reflected in agency files and records to a person requesting it. Information about approved loans that will be automatically released includes, among other things, statistics on our loan programs (individual borrowers are not identified in the statistics) and other information such as the names of the borrowers (and their officers, directors, stockholders or partners), the collateral pledged to secure the loan, the amount of the loan, its purpose in general terms and the maturity.
Complaint, Ex. A at 1; Paycheck Protection Act Borrower Application Form, 4 (SBA Form 2483 04/20).
Moreover, the FOIA Improvement Act of 2016, Pub. L. No. 114-185, 130 Stat. 538 (2016) (“the FOIA Improvements Act”), amended FOIA to require agencies to release documents protected by exemptions unless the release would result in “foreseeable harm.” The standard requires release of such records, unless their release is prohibited by law or would not harm any interest served by the exemption.[14] There is an argument that the protection mandated by the Trade Secrets Act, 18 U.S.C. §1905, is coterminous with Exemption 4 of FOIA, meaning that the “foreseeable harm” standard would have no applicability when documents fall within Exemption 4’s scope. See, Food Marketing Institute: A Preliminary Assessment (Part II), YALE J. ON REG.: NOTICE & COMMENT (July 8, 2019). But it will be difficult for the SBA to explain why release of information regarding agency’s financial commitments that it has routinely provided over the years with apparently little ill effect will now produce foreseeable harm warranting withholding the information.
Conclusion
Perhaps this is one of those lawsuits that will likely never result in a judicial decision. The suit may well get the SBA’s attention and prompt it to provide the information before the litigation progresses much further. If that prediction proves erroneous, it seems likely that the media plaintiffs will prevail.
[1] For more contemporary uses of the phrase, see here.
[2] Congressional Research Service, Freedom of Information Act (FOIA) Processing Changes Due to COVID-19: In Brief (March 27, 2020)(Report R46292); Editorial Board, No, Your FOIA Request Cannot Wait ‘Until This Emergency Is Over,’ N.Y. TIMES (May 12, 2020)(agencies “from the Air Force to the F.B.I. to the Department of Health and Human Services and the Federal Emergency Management Agency are either changing policies regarding FOIA requests or are not responding to them.”); Reporters’ Committee for Freedom of the Press, Public Records and Open Meetings Measures related to COVID-19 (reporting on 39 federal Departments, agencies, or components within Departments)(last accessed May 17, 2020); Carrie McGuire, COVID-19 and FOIA: Observations andUseful Links, FOIA OMBUDSMAN (Office of Government Information Services April 7, 2020).
[3] General FOIA Information, Frequently Requested Records. More generally, the SBA issued the following advisory with regard to FOIA requests made during the coronavirus outbreak:
“Please be aware that due to COVID-19, SBA’s response time to certain FOIA requests may be delayed. Given the work flexibilities at the agency, some or all of SBA’s employees may be working off-site. If a record responsive to a request is only available in hard-copy format that record’s availability will be limited until further notice. Additionally, in an effort to balance the need of completing its mission-critical work, SBA has adjusted its response time to all requests made to the Disaster Loan Program.”
General FOIA Information, Response Times.
[4] In addition, Congress adopted an “unusual circumstances” provision that allowed the agency to extend its time to respond to a request from 20 to 30 days, when responding to the request required the need to research and collect documents from field offices, the need to collect voluminous documents, or the need to consult with other agencies regarding the request. Id. (adding 5 U.S.C. §552(a)(6)(B)).
[5] The House, which initially prescribed a 10-day deadline, seemed to contemplate the exception circumstances would involve a need to get records from regional officers. H. Rep. No. 93-876 at 126. This House’s concern was ultimately addressed by permission of a 10-day extension for “unusual” circumstances.
The Senate committee explained that “an agency with records in hand should not be able to use interminable delay to avoid embarrassment, to delay the impact of disclosure, or to wear down and discourage the requester.” And it explained that “[w]here there are exceptional circumstances the court may retain jurisdiction and allow the agency additional time to complete its review of the records.” (Emphasis added.) It noted however, such exceptional circumstances will not be found where the agency had not, during the period for administrative processing, “committed all appropriate and available personnel to the review and deliberation process.” S. Rep. No. 93-854 at 178. The conference committee retained the Senate’s language regarding “exceptional circumstances.” H. Rep. No. 93-1380 at 228.
[6] More generally, exceptional circumstances could quite readily include an unprecedented pandemic that requires agency employees to work from home without ready access to paper records, and could justify delayed responses to requests for paper records.
[7] The Senate Report focuses on cases involving agency backlogs, and largely explains the congressional response to Open America. S. Rep. 104-272 at 28-29.
[8] E.g., Paycheck Protection Program (PPP) Report: Second Round Approvals from 4/27/2020 through 05/08/2020.
[9] From 2010 to the present, SBA has provided an excel spread sheet for each loan identifying: (a) SBA Program; (b) Borrower Name & Address; (c) Lending Bank Name & Address; (d) Gross Approval amounts and SBA Guaranteed Approval amount, (e) Approval Date; (f) Fiscal year the loan was approved, (g) First Disbursement Date, (h) Specific delivery method loan was approved under; (i) Subprogram description; (j) Initial Interest Rate; (k) Length of the Loan Term; (l) North American Industry Classification System (NAICS) code and description of the borrower; (m) Franchise Code and Name; (n) Project County and State; (o) responsible SBA District Office; (p) Congressional District; (q) Borrower Business Type (i.e., Individual, Partnership, or Corporation); (r) Loan Status; (s) Date SBA charged off the loan; (t) loan balance charged off; and (u) jobs supported. For a glossary of the headings, see “SBA 7(a) & 504 Loan Data Dictionary” on the same webpage.
[10] See, Bernard Bell, Food Marketing Institute: A Preliminary Assessment (Part II), YALE J. ON REG.: NOTICE & COMMENT (July 8, 2019) (1. Fiscal Transparency: Is Transactional Information Obtained From A Private Party?).
[11] Technically, FOIA contains two privacy exemptions. The second, Exemption 7(C), is within the law enforcement exemption, and applies only to law enforcement records.
[12] There can be an intermixture of personal and business matters, see Humane Society v. Animal and Plant Health Inspection Service,[12] 386 F. Supp. 3d 34, 45 (D.D.C. June 3, 2019), such as when an individual’s business address is also that individual’s home address. But generally federal financial assistance to business entities should not be considered confidential commercial information of the recipient or information in which individual has an overwhelming privacy interest that allows the government to withhold the information.
[13] For my analysis of OIP’s guidance, see Bernard Bell, Food Marketing Institute: Office of Information Policy Guidance Released, 36 YALE J. ON REG.: NOTICE & COMMENT (Oct. 18, 2019).
[14] 5 U.S.C. § 552(a)(8)(A) (“[a]n agency shall . . . withhold information under this section only if [ ] (I) the agency reasonably foresees that disclosure would harm an interest protected by [a FOIA] exemption described in [5 U.S.C. § 552(b) (2012)]; or (II) disclosure is prohibited by law[.]”).
