This week, U.S. District Judge John Bates ordered FERC to pay over $60K in legal fees to STS Energy Partners to reimburse them for their cost of suing the Commission to force the release of documents requested through FOIA. Although the lawsuit eventually inspired FERC to cough up the requested documents, Judge Bates found that FERC's document games should have been solved without STS Energy having to resort to filing a lawsuit and incurring legal fees.
FERC did show some recalcitrance and at least “appeared” to “withhold” the segregable portions of requested documents “merely to avoid embarrassment or frustrate the requester,” or simply to avoid the time-consuming work of separating information that could be properly withheld from information that could not.
STS Energy submitted two FOIA requests to FERC "seeking to 'shin[e] light on FERC’s recent and punitive efforts against small power market traders for engaging in legal and ubiquitous activity in the PJM Interconnection (“PJM”) wholesale electricity market'." FERC withheld some responsive documents. STS filed suit to seek release of the withheld documents, and eventually FERC settled with STS to release the information. However, attorneys for STS had to spend over $60K in legal fees to get to that point.
FOIA laws provide for the recovery of legal fees when the complainant prevails in a FOIA suit. The court examined whether STS was eligible to recover legal fees. The standard for the court is:
The D.C. Circuit has instructed this court “to consider at least four criteria in determining whether a substantially prevailing FOIA litigant is entitled to attorney’s fees: (1) the public benefit derived from the case; (2) the commercial benefit to the plaintiff; (3) the nature of the plaintiff’s interest in the records; and (4) the reasonableness of the agency’s withholding.”
On the second and third factors, FERC claimed that STS Energy, while not technically the subject of records requested, was “deeply intertwined with the entities that FERC is investigating,” including Powhatan Energy Fund, LLC. FERC reasoned that because STS Energy was "intertwined" with the Powhatan, the subject of one of its market manipulation investigations, the firm had a private interest in the disclosure of the records. FERC believed that the requests by STS were part of Powhatan's litigation strategy and that the company "used FOIA requests to circumvent the fact it has not been entitled to obtain discovery from FERC in the pending litigation." That's right, Powhatan was not entitled to any discovery while FERC was conducting its investigation. The first opportunity for discovery may have come after the investigation was completed, if the company had elected to try the matter before a FERC administrative law judge. Instead, Powhatan elected to try its case in court. Once at court, FERC claimed that the court was restricted to simply reviewing FERC's decision, and that Powhatan was not entitled to discovery or adjudication of the facts leading to FERC's assessment of penalty for market manipulation. That matter is still pending. However, back to the case at hand, where the court found that the two firms were "intertwined" and that there was a "private interest" in requesting the records.
On the final factor, the court found that FERC didn't have sufficient reason for withholding the documents. FERC defended its conduct in withholding as "good faith" because it eventually released the records without a court order. However, FERC did not release the records before legal fees were incurred.
This left the court with weighing four factors, two for, and two against. The court ultimately determined that the fourth factor carried the greatest weight. It was FERC's game playing trying to avoid release that caught them in the end.
Lawyers that go all broody over documents rarely win. And now it's going to cost FERC $60,168.19.