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Sears, Roebuck and Co. v. Eckerd


decided: April 25, 1978.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 76 C 2444 - Frank J. McGarr, Judge.

Cummings and Tone, Circuit Judges, and Campbell, Senior District Judge.*fn*

Author: Cummings

CUMMINGS, Circuit Judge

In July 1976, Sears, Roebuck and Co. filed a verified complaint for declaratory judgment and injunction against the General Services Administration (GSA) and five federal officers.*fn1 Sears alleged that a portion of its business consists of contracts or subcontracts with federal agencies so that it complies with Executive Orders 11246 and 11375*fn2 and the Regulations thereunder*fn3 requiring Government contractors to submit equal employment opportunity reports and other information to the Department of Labor's Office of Federal Contract Compliance (OFCC) and its Compliance Agencies. According to the complaint, the GSA is Sears' Compliance Agency. Sears has been required to submit GSA Standard Form 100-s (EEO-1's) and Affirmative Action Programs (AAP's) to the Government covering Sears' entire corporate domestic operations and each of its individual domestic establishments. Sears had also supplied other documents on a confidential basis to the Government to demonstrate its compliance with the applicable Executive Orders and Regulations.

Sears also alleged that in February 1973, the Secretary of Labor issued regulations providing that EEO-1's and AAP's will be disclosed (with exceptions) to requesting persons. In February and March 1976, the GSA informed Sears that under the Freedom of Information Act (5 U.S.C. § 552), Father Charles W. Dahm of the Dominican Order had requested copies of Sears' 1974 AAP's for its corporate headquarters in the Sears Tower in Chicago, Illinois, and that GSA intended to furnish this information to him. He had also asked for headquarters EEO-1's and supporting documents (App. 28).

According to this reverse Freedom of Information Act complaint, in June and July 1974, the GSA's Chicago Field Contract Compliance Office, pursuant to a complaint of Women Employed, undertook a compliance review of plaintiff's Sears Tower facility, and Sears tendered to the GSA investigator its 1973 and 1974 EEO-1 reports and other employment statistics (presumably already in other Government files) for its national headquarters and was assured by the investigator that the data would remain confidential. Consequently, in late March 1976, Sears filed objections to the proposed disclosure with the GSA, but those objections were overruled by the GSA's Director of Contract Compliance, causing Sears to appeal his decision to the Director of the OFCC. However, on June 24, 1976, the OFCC Director upheld the decision to disclose the data, stating that it would be released on July 8, 1976.

The complaint was filed six days before that deadline and charged that 18 U.S.C. § 1905 prohibits the disclosure of such confidential statistical data and that exemption (b)(3) of the Freedom of Information Act (5 U.S.C. § 552(b)(3), note 5 infra) therefore exempts the data from disclosure.*fn4 Consequently, Sears sought appropriate declaratory and injunctive relief. On July 2, Sears was granted a temporary restraining order which was continued in effect until the hearing on its motion for a preliminary injunction.

After hearing five witnesses on August 6, 1976, the district court rendered oral findings of fact and conclusions of law in favor of Sears. Three weeks thereafter, the court handed down its formal findings of fact and conclusions of law and granted Sears a preliminary injunction. In its findings of fact, the court reiterated the principal contents of Sears' verified complaint and noted that on February 25, 1976, Sears had tendered Father Dahm "cumulative national and Chicago area statistical information concerning the racial and sexual composition of Sears' workingforce" but that Sears had declined to provide him with the requested Sears Tower headquarters data alone. The court also found that Sears classified the Sears Tower headquarters information as confidential.

The district court concluded that if this data were disclosed, Sears would suffer irreparable injury "both economically and in terms of its present and future public relations." The court noted that the defendants and Father Dahm would not be subjected to prejudice by the grant of a preliminary injunction because the data requested was out of date "and the national and Chicago area data voluntarily provided by Sears should be sufficient to assess Sears' equal employment commitment and progress."

Judge McGarr held that 18 U.S.C. § 1905 prohibits the GSA from disclosing such information and that there is a reasonable probability that Sears will eventually prevail on its claim that the information is exempt from disclosure under exemption (b)(3) of the Freedom of Information Act. On December 7, 1976, Father Dahm was given leave to intervene as a plaintiff in this action. Thereafter he moved to dissolve the preliminary injunction, but his motion was denied on February 15, 1977, resulting in his taking this appeal. We vacate the order granting the preliminary injunction.

Sears seeks to justify the district court's order by contending that the (b)(3) exemption and 18 U.S.C. § 1905, taken together, forbid disclosure and provide a basis for an implied cause of action. We disagree with both contentions.

I. Is Disclosure Forbidden by Statute ?

Relying solely on the (b)(3) exemption in this Court,*fn5 Sears argues that the documents requested here are "specifically exempted from disclosure by statute" for purposes of that exemption because they consist of "confidential statistical data" forbidden from disclosure by 18 U.S.C. § 1905, a criminal statute restricting disclosure of confidential information by federal employees.*fn6 Section 1905 provides:

"Whoever, being an officer or employee of the United States or of any department or agency thereof, publishes, divulges, discloses, or makes known in any manner or to any extent not authorized by law any information coming to him in the course of his employment or official duties or by reason of any examination or investigation made by, or return, report or record made to or filed with, such department or agency or officer or employee thereof, which information concerns or relates to the trade secrets, processes, operations, style of work, or apparatus, or to the identity, confidential statistical data, amount or source of any income, profits, losses, or expenditures of any person, firm, partnership, corporation, or association; or permits any income return or copy thereof or any book containing any abstract or particulars thereof to be seen or examined by any person except as provided by law; shall be fined not more than $1,000, or imprisoned not more than one year, or both; and shall be removed from office or employment." (Emphasis Supplied.)

The federal defendants and the intervenor contend that the OFCC regulations*fn7 permitting the disclosure of these materials were clearly authorized under 5 U.S.C. § 301,*fn8 so that the projected disclosure is "authorized by law" and thus immunized from the prohibition of Section 1905. 5 U.S.C. § 301 provides:

"The head of an Executive department or military department may prescribe regulations for the government of his department, the conduct of its employees, the distribution and performance of its business, and the custody, use, and preservation of its records, papers, and property. This section does not authorize withholding information from the public or limiting the availability of records to the public."

Sears asserts that agency regulations valid under Section 301 do not constitute authorization by law for purposes of Section 1905. We disagree. Like Judge Lay's opinion for the Eighth Circuit in General Dynamics Corp. v. Marshall, 572 F.2d 1211 (1978), we follow the path charted by Chrysler Corp. v. Schlesinger, 565 F.2d 1172, 1186-1188 (3d Cir. 1977), certiorari granted, 435 U.S. 914, 98 S. Ct. 1466, 55 L. Ed. 2d 504, 46 U.S.L.W 3552,*fn9 and hold that regulations valid under 5 U.S.C. § 301 satisfy the "authorized by law" exception of Section 1905.*fn10 Since validly promulgated regulations have the force of law (see Public Utilities Commission of California v. United States, 355 U.S. 534, 542-543, 2 L. Ed. 2d 470, 78 S. Ct. 446; cf. Service v. Dulles, 354 U.S. 363, 1 L. Ed. 2d 1403, 77 S. Ct. 1152), 354 U.S. 363, 1 L. Ed. 2d 1403, 77 S. Ct. 1152, they satisfy the authorization requirement of 18 U.S.C. § 1905. Cf. Smith v. United States, 305 F.2d 197, 201-202 (9th Cir. 1962), certiorari denied, 371 U.S. 890, 9 L. Ed. 2d 124, 83 S. Ct. 189; Laughlin v. United States, 154 U.S. App. D.C. 196, 474 F.2d 444, 453, n. 12 (1972), certiorari denied, 412 U.S. 941, 37 L. Ed. 2d 402, 93 S. Ct. 2784. As the Chrysler opinion demonstrates, contrary to Sears' assertion and the opinion of the D.C. Circuit in Charles River Park "A", Inc. v. Department of Housing and Urban Development, 171 U.S. App. D.C. 286, 519 F.2d 935, 942-943 (1975), such a holding is consistent with the legislative history of the 1958 amendment to Section 301*fn11 (see 565 F.2d at 1187); in fact if there were doubt about Congress' purpose in Section 301 it could be argued that the second sentence of that statute, added in the 1958 amendment, punctures Sears' position about agencies' inability to authorize disclosure.

The only argument about the interrelationship between Sections 301 and 1905 raised here that was not discussed fully in Chrysler is Sears' contention, supported by Westinghouse Electric Corp. v. Schlesinger, 542 F.2d 1190, 1215 (4th Cir. 1976), certiorari denied, 431 U.S. 924, 53 L. Ed. 2d 239, 97 S. Ct. 2199, that the holding in Chrysler would give Government officials "the unbridled freedom to redefine the scope of [their own] illegal conduct under Section 1905" (Supp.Br. 8) and leave submitters defenseless against disclosure. Therefore, Sears reasons, an independent statutory authorization should be necessary.

As a practical matter, however, Sears is not left defenseless against agency disclosure because affected persons can obtain review under the Administrative Procedure Act (5 U.S.C. § 701 et seq.). See 565 F.2d at 1190-1191. As a matter of interpreting whether Congress intended to allow agencies to define the bounds of legal conduct under Section 1905, we note two problems with Sears' position. First, Sears' argument that agencies would be allowed to redefine limits on their own conduct assumes without explanation or support the answer to the difficult and as yet unresolved question of whether Section 1905 was intended to restrict agency action as a whole in addition to individual employees of an agency. Obviously if the statute was aimed only at unwarranted actions by individual employees, allowing agencies using appropriate procedures to make clear what action was warranted would not defeat Congress' purposes. The parties did not discuss this question and it has not received significant attention with the exception of a passing reference by Attorney General Brownell, who in advising agency heads in a criminal context wrote that it could not be assumed that the statute might not be applied to agencies as a whole. 41 Op. Atty. Gen. 221, 223 (1955). While this may have been good advice in the context of cautious avoidance of potential areas of criminal liability, we think such caution was unnecessary because the legislative history of at least one of the predecessors of Section 1905 reveals that those who expressed concern about disclosure (rather than just the investigatory powers involved in the predecessor legislation) seemed to focus their concern not on regulated official agency action but rather on unwarranted and uncontrollable action by "poorly paid revenue agents." 26 Cong.Rec. 6893 (1894) (remarks of Senator Aldrich). See generally Clement, supra note 9 at 610. Even if the legislative history were unclear, limiting the statute's focus to actions by agency employees seems more consistent with the statutory scheme because the enforcement mechanism of the statute provides only penalties for guilty individuals and offers no restraint on agency action.

Second, Sears' insistence on an independent statutory authorization would mean that each time Congress wanted to except an item or class of items from Section 1905 it would have to do so by statute in a manner with sufficient specificity to avoid agency discretion. Given that Section 1905 if read literally could embrace "virtually every category of business information likely to be in the files of any federal agency" (565 F.2d at 1186), and that Congress in the FOIA has adopted a basic policy of disclosure (Department of the Air Force v. Rose, 425 U.S. 352, 361, 48 L. Ed. 2d 11, 96 S. Ct. 1592), certainly if a statute such as Section 1905 were passed today it would be unreasonable to infer a requirement of independent statutory authorization because of the tedious and difficult job that such a requirement would force Congress to undertake. Cf. Federal Aviation Administration v. Robertson, 422 U.S. 255, 265-266, 45 L. Ed. 2d 164, 95 S. Ct. 2140. Particularly in light of the precedent in 1948 for agency regulations limiting Section 1905 (see Clement, supra note 9 at 619 n. 136) and Congress' apparent desire not to alter the substantive scope of Section 1905 (see Clement, supra note 9 at 618), we similarly decline to impart to the 1948 Congress an intention to require an independent authorization for exempting any item from the broad confines of Section 1905. Thus Sears offers no persuasive reason for deviating from the holding in Chrysler that disclosure of the information requested here is not forbidden by Section 1905.

II. Does the Submitter of Information Have a Cause of Action ?

Even if Section 1905 did forbid disclosure, we agree with the Chrysler opinion that neither Section 1905 nor the FOIA itself permits this cause of action. See 565 F.2d at 1185, 1188. As Chrysler held, the proper avenue to secure judicial review is through the Administrative Procedure Act, using 28 U.S.C. § 1331 or § 1337 as a basis for jurisdiction.*fn12 See 565 F.2d at 1191-1192; see also Clement, supra note 9 at 626-633. Defendant federal officials agree that APA review is appropriate, but Sears seeks review under Section 1905 or the FOIA because the APA would not allow de novo review. See 565 F.2d at 1191; 5 U.S.C. § 706(2)(A).

Applying the four tests established in Cort v. Ash, 422 U.S. 66, 78,*fn13, 45 L. Ed. 2d 26, 95 S. Ct. 2080 to determine whether a civil remedy is available first under Section 1905 indicates that on balance Section 1905 should not be interpreted to imply a private cause of action. Beginning with the second of the Cort tests, Sears points to nothing in the legislative history indicating an intent to create such a remedy;*fn14 the only apparent relevant item of history is that at least as to one of Section 1905's predecessors it was at one time argued that the criminal penalty provision was "valueless," but no attempt was made to compensate with a civil action. See Clement, supra note 9 at 611 n. 102. Thus if any inference can be drawn from the legislative history it is that Congress did not think a civil action was appropriate. As to the third test, we agree with Judge Gibbons in Chrysler that implying a civil action would not be consistent with the purpose of the statute, especially since the APA already provides a remedy. See 565 F.2d at 1188.*fn15

The remaining tests are not so unfavorable to the plaintiff. Because the civil action sought would involve enjoining federal agencies, it of course is not an action traditionally relegated to state law and thus no federalism interest would be affected if a cause of action were implied. Turning to the first Cort test, the history of at least one of Section 1905's predecessor statute does indicate that one of its motivations may have been an effort to protect the privacy of taxpayers who submitted information to the Government. See Clement, supra note 9 at 608, 610. Even assuming that all submitters of information are therefore "one of the class for whose especial benefit the statute was enacted" (422 U.S. at 78), we would hold that on balance it is not appropriate to imply a cause of action based on the weight that the Supreme Court appears to give to the third factor of whether the requested cause of action is necessary to ensure the fulfillment of Congress' purposes. See Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 477, 51 L. Ed. 2d 480, 97 S. Ct. 1292.*fn16

Judge Gibbons' opinion in Chrysler clearly demonstrates why an implied cause of action under the FOIA would not satisfy the second and third prongs of the Cort test. 565 F.2d at 1185-1186. As to the remainder of the test, our analysis of the proposed cause of action under Section 1905 is applicable to the FOIA claim as well, except that under the FOIA Sears' claim to be one of the especial beneficiaries of the statute seems considerably weaker. Without denying that the FOIA reflects some degree of Congressional concern about disclosing private information (see 565 F.2d at 1184), it is clear that the primary beneficiaries of the Act are the requesters. See Department of the Air Force v. Rose, 425 U.S. 352, 361, 48 L. Ed. 2d 11, 96 S. Ct. 1592. Whether or not submitters therefore should be lumped with indirect and secondary beneficiaries of other statutes (see Cort v. Ash, 422 U.S. at 81), their claim as especial beneficiaries is undercut since only requesters have been given a cause of action by the Congress. 5 U.S.C. § 552(a)(4)(B). Thus the claim of a cause of action under the FOIA is even weaker than the claim under Section 1905 and must be rejected similarly. See 565 F.2d at 1191-1192; see also Clement, supra note 9 at 626-633.

Since Sears has posited its case upon 18 U.S.C. § 1905, and since that statute would not warrant the grant of the relief sought, the complaint must be dismissed. There is no need for a further hearing because the present record supports the projected disclosure. See App. 2-10. The purpose of the Freedom of Information Act was to foster "the fullest responsible disclosure." S.Rep. No. 813, 89th Cong., 1st Sess. 3 (1965). Plaintiff has not persuaded us or the officials in charge that this disclosure would be irresponsible. Accordingly, the order granting the preliminary injunction is vacated and the cause is remanded to the district court with directions to dismiss the complaint.

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