Kensington Research & Recovery v. United States Department of Housing & Urban Development

Citations: 620 F. Supp. 2d 908; 2009 U.S. Dist. LEXIS 39797; 2009 WL 1313185Docket: Case 08 C 1250

Court: District Court, N.D. Illinois; May 8, 2009; Federal District Court

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In the case Kensington Research. Recovery v. United States Department of Housing and Urban Development, the United States District Court for the Northern District of Illinois addressed cross-motions for summary judgment regarding a Freedom of Information Act (FOIA) request. The plaintiff, Kensington Research, sought a HUD-27050-B form on behalf of Eileen Trentz, who was due a refund of mortgage insurance premiums (MIPs) after paying off her FHA-insured mortgage. HUD initially mailed the form to Trentz, but she did not respond. Kensington, holding a Limited Power of Attorney from Trentz, requested the form from HUD but was denied under FOIA Exemption 2, which protects internal agency procedures.

HUD's rationale for withholding the form was that disclosing it to third parties could lead to misuse and circumvent regulations regarding MIP refunds. After an unsuccessful appeal process, Kensington filed a lawsuit claiming subject matter jurisdiction under 28 U.S.C. 1331 and 5 U.S.C. 552(a)(4)(B) to enforce its FOIA request. Ultimately, the court denied Kensington's motion for summary judgment and granted HUD's motion, reinforcing the agency's position on protecting its internal processes and ensuring compliance with the regulations governing MIP refunds.

Kensington seeks a court order to prevent HUD from withholding the HUD-27050-B form under FOIA, demands the release of Trentz's HUD-27050-B form, and requests a mandatory injunction for HUD to engage with Kensington as it would with homeowner principals when a power of attorney is submitted. Both parties claim there are no material facts in dispute and seek summary judgment. 

Summary judgment is warranted when no genuine issues of material fact exist, allowing the moving party to claim judgment as a matter of law. The court must view facts in favor of the non-moving party and must grant summary judgment against any party that fails to demonstrate the existence of an essential element of their case.

The parties mainly agree on the facts concerning the HUD-27050-B form and Trentz's entitlement to a MIPs refund but dispute whether HUD had any agency record to disclose, if it should recognize Kensington as attorney-in-fact, and if Exemption 2 applies to Trentz's refund application. HUD contends that Kensington cannot prevail because it has not shown that the record exists, asserting that it does not retain copies of the HUD-27050-B after mailing them. Kensington counters that HUD cannot evade disclosure by claiming it no longer has document control, referencing Justice Brennan's opinion in Kissinger v. Reporters Committee for Freedom of the Press.

HUD acknowledges it has control over the requested information but contends it is not obligated to create a duplicate document in response to a FOIA request. HUD cites Smilde v. Rossotti, where the court addressed requests for abstract information rather than specific documents, and NLRB v. Sears, Roebuck & Co., which held that an agency isn't required to produce or create documents it wouldn't normally generate. However, the current case differs because Kensington is requesting a specific document, the HUD-27050-B form, which HUD has previously created for Trentz. The minimal effort required to recreate this form, alongside HUD's admission of producing thousands annually, suggests that fulfilling the request would not impose an undue burden. HUD's claim that the HUD-27050-B form is not an "agency record" is dismissed, failing to support its motion for summary judgment against Kensington's request. Additionally, Kensington argues that HUD should have honored its power of attorney for Trentz, although HUD disputes the validity of the documents submitted and maintains it is not required to recognize power of attorney.

The court must ascertain the relevance of a power of attorney in a FOIA action. HUD argues that it is irrelevant, as FOIA pertains to public disclosure rather than disclosure to specific individuals, while Kensington contends that the power of attorney necessitates HUD's compliance with their document request. FOIA mandates that agencies make records available to any requester, irrespective of a power of attorney. Kensington's prior requests to HUD reveal that the conflict arose because HUD initially denied access based on Kensington's status as a non-homeowner and suggested pursuing FOIA instead. The court affirms that the power of attorney is not relevant to Kensington's FOIA claim, which does not rely on state law or supplemental jurisdiction. Furthermore, Kensington has not provided any legal basis, under the Administrative Procedure Act or HUD's regulations, that obligates HUD to acknowledge a power of attorney from someone who is not a licensed attorney. The court emphasizes that FOIA is designed to promote transparency, requiring narrow interpretations of exemptions. The burden rests with the government to justify any withholding of documents, and it must provide detailed affidavits outlining the justifications for nondisclosure to meet this burden.

Exemption 2 of the Freedom of Information Act (FOIA) includes two categories of information: 'low 2', which pertains to trivial internal agency matters, and 'high 2', concerning more significant internal matters where disclosure could allow individuals to bypass legal requirements. The U.S. Department of Housing and Urban Development (HUD) claims that the HUD-27050-B form is exempt as 'high 2' because it pertains exclusively to internal personnel rules and practices. Kensington contests this, arguing that the form does not relate to internal matters, citing the Supreme Court case Department of the Air Force v. Rose, which interpreted Exemption 2 narrowly. However, Kensington's position overlooks that Rose did not address whether Exemption 2 could protect documents that risk circumvention of agency regulations. The D.C. Circuit's en banc decision in Crooker v. Bureau of Alcohol, Tobacco, Firearms established that Exemption 2 can safeguard documents whose disclosure poses a risk of circumventing agency regulations, provided they meet the 'predominant internality' test. The Seventh Circuit has endorsed this interpretation. The analysis now focuses on whether the HUD-27050-B form meets the 'predominant internality' criterion. Kensington's strict interpretation of Exemption 2 as limited to 'rules and practices' is countered by case law indicating that materials 'related' to agency practices can also be exempt. The HUD-27050-B form, which includes personal and mortgage information along with agency codes, functions similarly to a refund voucher and is designed to confirm HUD's disposition of refunds to homeowners.

The HUD-27050-B form is an internal document used by HUD to process refunds of mortgage insurance premium (MIP) monies to eligible homeowners. Although it is mailed to homeowners, it does not regulate public activities or set standards for agency personnel, thus satisfying the first part of the Crooker test. The second point of contention is whether disclosing the form poses a risk to agency regulations. HUD's regulations stipulate that refunds must be executed within six years of notifying the mortgagor of eligibility, and the HUD-27050-B form is essential for verifying a homeowner's identity and refund entitlement. HUD asserts that public access to this form would enable fraudulent claims for MIP refunds, as it functions similarly to an application form restricted to eligible homeowners. Release under the Freedom of Information Act (FOIA) would compromise the form’s integrity, undermining HUD's ability to fulfill its regulatory responsibilities. Despite Kensington's claims that disclosure would aid HUD's mission, they fail to provide evidence countering HUD's assertions about the risks of fraud or the necessity of safeguarding the form's distribution. Consequently, HUD's motion for summary judgment regarding the non-disclosure of the HUD-27050-B form under exemption 552(b)(2) is supported by the evidence presented.

The court determines that the HUD-27050-B form is classified as 'high 2' matter, thus exempt from disclosure under 5 U.S.C. 552(b)(2). The information on this form cannot be segregated for disclosure as it is closely related to the document's internal functions. Consequently, the plaintiff's motion for summary judgment is denied, while the defendant's motion is granted. 

The court addresses several objections raised by the parties regarding the opposing Rule 56.1 statements of material fact. Kensington's challenge to HUD's reliance on 'unsworn declarations' is deemed frivolous, as unsworn declarations are treated as valid under 28 U.S.C. 1746. Kensington's arguments questioning the declarants' expertise are mostly dismissed, given their long-standing roles at HUD and relevant experience. However, the court disregards statements that offer legal conclusions or are unrelated to HUD's operations. 

The court rules that it will consider the cross-motions for summary judgment together due to the similarity in arguments presented by both parties. Kensington's claim that the HUD-27050-B form contains information of significant public interest is noted, but the court clarifies that Kensington is not seeking general information about HUD's refunds, but rather the specific form itself, which is necessary for applying for mortgage insurance premium refunds for a particular homeowner.