Federal District Judge Grants Temporary Preliminary Injunction of STOCK Act

Senior Exec. Ass’n v. United States By Mary Grinman – Edited by Charlie Stiernberg Senior Exec. Ass’n v. United States, No. 8:12-cv-02297-AW (S.D. Md. Sept. 13, 2012) Slip opinion The United States District Court for the Southern District of Maryland granted a motion for a temporary preliminary injunction, enjoining the United States from executing any part of Section 11 of the Stock Trading on Congressional Knowledge Act of 2012 (“STOCK Act” or “Act”), and from obliging federal employees to divulge any financial information that is subject to Internet publication by federal agencies. Judge Williams ruled that the plaintiffs’ interests in protecting their privacy are more likely than not to outweigh the government’s interest in disclosing their financial information. Senior Exec. Ass’n, slip op. at 16. The court noted that privacy interests have become more significant in light of the “Information Age,” which makes it possible to rapidly assemble and spread immense quantities of information. Id. at 9. The Wall Street Journal Law Blog provides a brief overview of the case. Corporate Counsel provides additional background information on the STOCK Act. Joe Davidson of the Washington Post criticizes the Act as “rushed,” and discusses the impact of the Act and the court’s ruling on individual federal employees. The STOCK Act’s stated purpose is to prohibit members and employees of Congress from using nonpublic information, obtained through their legislative positions, to their financial benefit. One way the Act prevents this behavior is by mandating extensive public disclosure of federal employees’ financial information, including assets, income, financial transactions, liabilities and more. Id. at 1–2. Senior executive branch employees had previously been subject to financial disclosure obligations under the Ethics in Government Act (“EGA”). Id. at 2. However, the STOCK Act differs from the EGA in many aspects. For example, it allows federal agencies to make employees’ financial information available on a searchable database without requiring a written application. Id. at 3, 10. The Plaintiffs asserted four claims against the government: (1) violation of the constitutional right to privacy; (2) violation of due process; (3) violation of the Administrative Procedure Act; and (4) declaratory relief. Id. at 1. The court held the first claim sufficient to grant the motion for a temporary preliminary injunction, and declined to address the other claims in the interest of judicial economy. Id. at 8. To obtain a temporary preliminary injunction, a plaintiff must prove four elements: (1) a likelihood of success on the merits; (2) a likelihood of irreparable harm without the injunction; (3) a favorable balance of equities; and (4) that the injunction is in the public interest. Id. at 7. The court found that the plaintiffs satisfied all four elements. Success on the Merits — In holding that the plaintiffs were likely to succeed on the merits, the court noted that the Supreme Court has recognized the right to privacy in personal information, and that the Fourth Circuit has explicitly held that right to encompass financial information. Id. at 8–9. The court invoked a balancing test to determine that the plaintiffs’ privacy interests outweighed the government’s compelling interest in disclosure (to deter corruption and conflicts of interest). Id. at 9, 16. The court noted that the disclosure requirement applies to particularly vulnerable positions in military, law enforcement and diplomatic arenas, and agreed with federal officials’ concerns that the disclosed information could be used to “harass, intimidate and blackmail them.” Id. at 4, 13. The court also found that the plaintiffs’ interests “assume[] added importance in the Information Age.” Id. at 9. Eliminating the EGA’s application process in favor of Internet publication and a searchable database “maximizes the chances that [disclosed financial information] will fall into the hands of miscreants.” Id. at 3, 15. Irreparable Harm — In order for harm to be irreparable, it must be actual and imminent. Id. at 16. In this case, the court held that the harm is clearly imminent since, without the injunction, the plaintiffs will have their financial information disclosed within the month. Id. The court also held that the harm is actual, because monetary damages are not a suitable remedy for a privacy violation and because denial of a constitutional right should be considered an irreparable harm. Id. Additionally, since there is no way to reverse public disclosure of information, the harm would be permanent. Id. Balance of Equities — The loss to the government if the temporary injunction were granted would be a one-month delay in disclosure. On the other hand, if the injunction were denied, the plaintiffs would suffer an irreparable harm. The court concluded that an objective balance of these two outcomes clearly demonstrated that the loss to the plaintiffs would be greater than the loss to the government. Id. at 17–18. Public Interest — The court found that disclosure of detailed financial information would provide an opportunity for adversaries of the government to specifically target individuals who either have access to classified information, or the ability to affect the direction of legislation. Id. at 4. Such parties could use this information to compromise the integrity of the country’s executive officers. The court also stated that upholding the constitutional rights of individuals is in the public interest. Id. at 19. This case pits both privacy and national security concerns against the public’s interest in preventing corruption in the government. Although Judge Williams has not yet made a definitive ruling about which interest will prevail, his conclusion that the plaintiffs are more likely than not to succeed on the merits suggests that he is leaning towards ultimately enjoining the Act.