Case No. VFA-0295, 26 DOE ¶ 80,192

June 12, 1997

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Appeal

Name of Petitioner: Information Focus on Energy, Inc.

Date of Filing: May 14, 1997

Case Number: VFA-0295

On May 14, 1997, Information Focus on Energy, Inc. (IFOE) filed an Appeal from a determination issued to it by the Department of Energy's (DOE) Deputy General Counsel for Litigation (hereinafter referred to as "the Deputy Counsel"). This determination was issued on April 7, 1997 in response to a request for information submitted under the Freedom of Information Act (FOIA), 5 U.S.C. § 552, as implemented by the DOE in 10 C.F.R. Part 1004. The Appeal, if granted, would require that a document that was released to IFOE in redacted form be released in its entirety.

The FOIA generally requires that documents held by the federal government be released to the public upon request. However, Congress has provided nine exemptions to the FOIA that set forth the types of information agencies are not required to release. Under the DOE's regulations, a document that is exempt from disclosure under the FOIA shall nonetheless be released to the public whenever the DOE determines that disclosure is in the public interest. 10 C.F.R. § 1004.1.

I. Background

In its FOIA request, IFOE sought access to copies of DOE Office of General Counsel litigation summaries for 1995 and 1996 which identify litigation activities and DOE costs. In his response, the Deputy Counsel provided copies of the General Counsel Outside Contractor Litigation Cost reports for fiscal years 1995 and 1996. These reports detail costs incurred by DOE contractors in lawsuits stemming from performance of their contractual obligations. The information deleted from the copies provided to IFOE consists of the individual lawsuit settlement amounts.

In his determination, the Deputy Counsel withheld the settlement amounts pursuant to Exemption 5 of the FOIA, 5 U.S.C. § 552(b)(5). Specifically, the Deputy Counsel stated that the amounts are exempt from mandatory disclosure because they are privileged as attorney work product and as information relating to settlement. The Deputy Counsel also found that release of the individual settlement amounts would not be in the public interest. In this regard, the Deputy Counsel stated that disclosure of the information could compromise future settlement negotiations and inhibit communications between the government and contractor legal counsel. The Deputy Counsel added that such disclosure could also subject the DOE to legal sanctions, because the terms of at least four of the settlement agreements in question prohibit disclosure of the settlement amount.

In its appeal, IFOE argues that the Deputy Counsel's determination regarding the scope of Exemption 5 is not supported by legal precedent, and that disclosure would serve the public interest because the public has a right to know how government funds are being spent. IFOE therefore contends that the individual settlement amounts should be released unless such disclosure is proscribed by the terms of the settlement agreement.

II. Analysis

The federal courts have recognized public policy considerations favoring settlement of disputes over litigation, and the inhibiting effect that disclosure of settlement materials can have on the negotiating process. County of Madison v. United States Dep't of Justice, 641 F.2d 1036, 1042 (1st Cir. 1981); Murphy v. Tennessee Valley Authority, 571 F.Supp. 502 (D.D.C. 1983)(Murphy). In Murphy, the court stated that revealing settlement information "would decrease the likelihood that future claims . . . will be resolved by negotiation rather than by litigation, and would therefore defeat the public policy which favors compromise over confrontation." 571 F.Supp. at 506 (citations omitted). For the reasons that follow, we find that the Deputy Counsel properly determined that the withheld settlement amounts are exempt from mandatory disclosure pursuant to Exemption 5.

A. Applicability of Exemption 5

Exemption 5 protects from mandatory disclosure "inter-agency or intra-agency memorandums or letters which would not be available to a party other than an agency in litigation with the agency." 5 U.S.C. § 552(b)(5). The U.S. Supreme Court has held that this exemption incorporates every civil discovery privilege which the government enjoys under statutory and case law. United States v. Weber Aircraft Corp., 465 U.S. 792, 799 (1984); FTC v. Grolier, 103 S. Ct. 2209 (1983) (Grolier). See also Peter T. Torell, 15 DOE ¶ 80,127 (1987) (Torell). Therefore, any material that is privileged in civil discovery is also shielded from mandatory disclosure under Exemption 5. Accordingly, if the settlement amounts fall within a civil discovery privilege, they may be withheld under Exemption 5.

As previously stated, the Deputy Counsel relied upon the attorney work product and settlement negotiations privileges in withholding the settlement amounts. The attorney work product privilege serves to "provide working attorneys with a ?zone of privacy' within which to think, plan, weigh facts and evidence . . . , and prepare legal theories." Coastal States Gas Corp. v. DOE, 617 F.2d 854, 864 (D.C. Cir. 1980). This privilege is applicable to material that was prepared by an attorney "in contemplation of litigation," id., including information relating to possible settlements of litigation. See, e.g., United States v. Metropolitan St. Louis Sewer Dist., 952 F.2d 1040, 1045 (8th Cir. 1992). The settlement amounts at issue here resolved cases in which DOE contractors were parties and for which contractors would ultimately seek reimbursement for costs related to the case from the DOE pursuant to contractual provisions. In some cases the DOE was also a named party to the litigation. In all cases, the contractual provisions required that to ensure reimbursement of the litigation costs and settlement amounts by the DOE, the contractor seek approval from the DOE of any settlement amounts and accordingly, share litigation and settlement strategies with DOE attorneys. We conclude that the amounts are clearly attorney work product.

The federal courts have also recognized a civil discovery privilege for information relating to settlement negotiations. See, e.g., Olin Corp. v. Insurance Co. of North America, 603 F. Supp. 445, 449 (S.D.N.Y 1985). The OHA has also determined that settlement negotiations materials are exempt from mandatory disclosure pursuant to Exemption 5. Torell, Cities Service Oil & Gas Corp., 17 DOE ¶ 80,104 at 80,508 (1988). In reaching this determination, we recognize that the privilege exists in considerable part to encourage full disclosure between the parties involved in order to promote settlements rather than protracted litigation. Id. We therefore conclude that the Deputy Counsel properly determined that the settlement amounts are exempt from mandatory disclosure.

B. Public Interest Determination

The fact that material requested falls within a statutory exemption does not necessarily preclude release of the material to the requester. The DOE regulations implementing the FOIA provide that "[t]o the extent permitted by other laws, the DOE will make records available which it is authorized to withhold under 5 U.S.C. § 552 whenever it determines that such disclosure is in the public interest." 10 C.F.R. § 1004.1.

We find that release of the withheld material would not be in the public interest. In its Appeal, IFOE argues that the withheld information should be released because the public has a considerable interest in knowing how much in federal funds was used to settle litigation. However, in his determination, the Deputy Counsel provided IFOE with the totals of the settlement amounts approved in both FY 1995 and FY 1996. In addition, the settlement amount in one case, Day v. NLO, was released to IFOE. (1) This amount, $20,000,000, accounts for more than 50 percent of the total expenditures for settlements during those two fiscal years. Therefore, the Deputy Counsel's response has substantially satisfied the public interest concerns regarding the expenditure of taxpayer funds.

Furthermore, the release of additional individual settlement amounts would result in foreseeable harm to the interests that are protected by the attorney work product and settlement negotiation privileges. See FOIA Update, U.S. Department of Justice, Office of Information and Privacy (Spring 1994); Memorandum from Janet Reno, Attorney General, to Heads of Departments and Agencies (October 4, 1993) (in order to withhold material, agency must first determine that release would foreseeably harm basic institutional interests that underlie Exemption 5). As Justice Brennan stated in Grolier, "It would be of substantial benefit to an opposing party (and of corresponding detriment to an agency) if the party could obtain work product generated by the agency in connection with earlier, similar litigation against other persons . . . [H]e could gain insight into the agency's general strategic and tactical approach to deciding . . . on what terms [lawsuits] may be settled." Grolier, 103 S. Ct. 2209 at 2216 (Brennan, J., concurring). The settlement amounts at issue here were negotiated in recent cases that involved issues that are the subject of frequent litigation involving the DOE (e.g., torts, labor relations and contractual disputes). The release of these amounts could compromise the DOE's efforts at negotiating future settlements in similar cases.

C. Conclusion

For the reasons set forth above, we find that the Deputy Counsel correctly determined that the settlement amounts are exempt from mandatory disclosure pursuant to Exemption 5, and that release of the information would not be in the public interest. IFOE's appeal will therefore be denied.

It Is Therefore Ordered That

(1) The Appeal filed by Information Focus on Energy, Inc. on May 14, 1997 is hereby denied.

(2) This is a final Order of the Department of Energy from which any aggrieved party may seek judicial review pursuant to 5 U.S.C. § 552(a)(4)(B). Judicial review may be sought in the district in which the requester resides or has a principal place of business, or in which the agency records are located, or in the District of Columbia.

George B. Breznay

Director

Office of Hearings and Appeal

Date: June 12, 1997

(1)*/ We were informed by the Office of General Counsel (OGC) that this information was provided to IFOE because it has been reported in the news media and is therefore already in the public domain. See memorandum of June 6, 1997 telephone conversation between Jane Taylor, OGC, and Robert Palmer, Staff Attorney, Office of Hearings and Appeals.